Creating New Values for Local Communities

2019 Annual Report
Fiscal Year Ended March 31, 2019

Valor Holdings Co.,Ltd.

Our Journey in Creating Corporate Values

We will create new values in response to changing
social needs by making a transition to a more competitive
format and strengthening our connection with customers
leveraging Group management resources.
The Valor Group is making a transition to competitive formats in our three core businesses ofsupermarkets, drugstores and home improvement centers. “Enhancing the appeal of products” and“developing human resources” are necessary elements for a successful transition. We are improving ourbusiness models that optimize the entire process from sourcing to retailing, and are focusing on
developing human resources to advance this effort.

Enhancing the appeal of products

P4-13

To enhance the appeal of products that make up product categories that would motivate customers to visit our stores, weare building our capabilities for sourcing and selling fresh fruits and fish as well as fresh meat. In the home improvement
center business, we also intend to achieve economies of scale in sourcing and improve the quality of private labels.

VisionTransition to a more competitive format

P8-17

In an operating environment where there is an excessive number of stores, rather than provide stores that offer an
average assortment of goods, we are transitioning to a store format that offers enticing product categories that would
attract customers far and wide. We are also developing new businesses to strengthen our connection with customers,such as the “Delica Kitchen”, a delicatessen specialty shop catering to diverse social needs and changing lifestyles.

Human resources development

P6-13, 23-25

At the newly opened Human Resources Development Center, we offer knowledge-based and technical training toemployees who are tasked with conveying the appeal of the products to customers at our stores. We also have managerial
programs for store managers and next-generation managerial positions with the aim of fostering self-motivating leaders.

Valor Holdings Co., Ltd. Annual Report 20191

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.
History/Vision

Financial Information

Foundation

Our Journey in Creating Corporate Values…… 1

CONTENTS

VisionMessage from CEO ……………………………… 8
Medium-term Strategic Plans …………………… 12
Results

Sustainability Management ………………………18
Corporate Governance ………………………… 19
Compliance and Risk Management Systems … 22
Society (Human Resources Development) …… 23
The Environment ……………………………… 26

11-year Summary of Financial Results ………… 28…………………… 30
FY2018 Financial Review
Consolidated Financial Statements (Summary) … 32

69

79

Corporate Data

Corporate Data/Shares Information …………… 36

Segment Overview/Segment Information ……… 14
Segment Financial Review ……………………… 16

Revenues Growth(Revenues from operations)Supermarket Business
Drugstore Business
Home Improvement Center BusinessSports Club BusinessDistribution-related operations
Others

1958

59

1960

61

62

63

64

65

66

67

68

1970

71

72

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 2019

73

74

75

76

77

78

1980

81

82

83

84

85

86

87

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

88

89

History(Revenues fromoperation)

6,000

Exceeded500

VisionFY2016billion 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

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

(forecast)(FY)

2015- Further Optimization of Business

Processes and Next Step for Growth
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 20193

Our Journey in Creating Corporate Values

The Valor Group Business Models
Corporate
Philosophy

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

MissionStatements

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

Imbalance between Food Supply and
DemandIntense competition between formats
Aging and lack of successors in regional agriculture
Possible impact of trade policies on local suppliers

1

Business Process Integration
optimizing supply chains

Changes in Labor Market
Aging and decline in workforce
Changing labor-related policies
Labor shortage and increasing labor costs

Procurement& Production

2
Supermarket

Changing Consumers & Retail Market
Aging and declining population
Impact of IT innovation on shopping behavior
Decreasing local suppliers serving local
communities

Changing Global Environment

Multi-format
Retailing
response to various
needs ofcommunities andenhancementof shareDrugstore
Home Improvement
CenterPet ShopSportsClub

Impact of global warming and climatechanges on supply of produces

1

Business Process Integration

In the food distribution industry, the Valor Group has
struggled for lean margins, which were shared by many
intermediates. To achieve “increasing returns” type growth,
we have been striving to secure the margins by optimizing
the entire process from sourcing to retailing. As many of ourstores were located in areas with lower population density,
we also consider it crucial to reduce the break-even point
and pursue operational efficiency through establishing andutilizing infrastructures including manufacturing bases anddistribution centers. As a leading initiative in the fresh meat
4

Valor Holdings Co., Ltd. Annual Report 2019category, we have secured intermediate margins byproviding stores with packaged meat from our processing
centers, which source raw materials from Chubu Meat Co.,
Ltd., a wholesale subsidiary. Additionally, by transferring
processing operations such as trimming and cutting atstores to the processing centers, manufacturing productswith standardized skills and at a high hygienic level, andallocating existing staff to other departments, we are
reducing capital expenditures per store by eliminating theneed for processing equipment and space.

VisionOur Solutions
Stable Procurement
Collaboration with suppliers to secure astable supply of produces

Human Resource Development & Recruitment

Wholesale

Distribution

Maintenance

Retailing& Services

Creation of Group Synergies

Simplification of operational processes
by utilizing infrastructures
Professional development
Increasing diversity in the workplace

Local Communities

Maintenance of Living Environment
for Local Communities
Format development
Taking over functions performed by local
suppliers

Reduction of Environmental Impacts
Greenhouse gas emissions control
In-house power-generation initiatives
Reduction of food waste
Reduction of waste and recycling
encouragement

2

Multi-format Retailing

The Valor Group has met the demands by rolling out
multi-format retailing; drugstore in 1984, pet shop in
1988, home improvement center in 1990 and sports clubin 1998. Such format development is driven by not only
an economic motive for larger shares, but also a belief
that it is our corporate mission to bring richness topeople’s lifestyles.

In recent years, we have launched new types ofservices and service formats in response to changing
social needs such as life support services in our home
improvement center business and the delicatessen“ D e l i c a K i t c h e n ” . We a re c re a t i n g n e w v a l u e s b ystrengthening our connection with customers leveraging
Group management resources.

Valor Holdings Co., Ltd. Annual Report 20195

Our Journey in Creating Corporate Values

The Valor Group Sustainability Management
To enhance its medium- & long-term corporate values, the Valor Group is engaged in sustainability management
via two approaches, namely 1) sustainability of business activities and 2) management of the social andenvironmental impacts of business activities to realize a sustainable society.

Business Models and Reinforcement of Management Foundations

Procurement &Production

Wholesale

Distribution

Retailing &Services

MaintenanceBusiness Models

Response to Consumer Needs
Maintenance of Living
Environment for Local
Communities

Food Safety & Security

Compliance and Risk Management

Management
Foundations

Reduction of Environmental Impacts

Corporate Governance Systems

6

Human Resources Development
Corporate Governance Systems

P19-21

Human Resources Development

P23-25

Faster Decision-making and Strengthened Oversight

Supporting a Diversified Workforce

Upon the transition to a holding company structure in October
2015, the Company separated its management decision-making
and oversight system and business execution system, aiming forfaster business execution and strengthened oversight. For fasterbusiness execution, 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 andmanagement issues of operating companies are discussed.
At the 59th Ordinary General Meeting of Shareholders held on
June 30, 2016, a partial amendment to the Articles of Incorporation
was approved 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 oversightfunction of the Board of Directors and further strengthen corporate
governance.

Based on its corporate philosophy of “Creation, Advance &Challenge”, the Company seeks individuals who are ambitions
and undertake challenges. We are actively recruiting people withexpertise in such area as food production, processing anddistribution, in order to improve business models that optimize
the entire process from sourcing to retailing, as well as inpreparation for expansion of the scope of the supermarket,
drugstore and home improvement center business. We also
support people who are highly motivated and whose experienceand backgrounds are diverse through promoting female workers,
hiring of the disabled, post-retirement reemployment programand promotion to full-time employees. Thus we are developing
staff members as managerial resources.

Valor Holdings Co., Ltd. Annual Report 2019

Response to Consumer Needs

We have developed private labels, which offer fine quality, value for money and better margin than other national brands. They are sold under thebrand names of “V-Select”, comprising low-priced products, and “V-Quality”, comprising value-added products. In June 2014, we launched the
new brand, “V-Premium”, made from selected ingredients which are only available in certain seasons. We provide these brands to supermarkets,
drugstores, home improvement centers and other companies through V-Solution Co., Ltd., a wholesale subsidiary, which manages demandsupply mismatch risks by preparing highly accurate sales plans. We also take measures to reduce costs and improve quality.
V-Select

V-Quality

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

“V Quality” represents tasty food items madefrom carefully chosen ingredients. We deliver finequality at an affordable price.

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

Tea 500ml

VisionDevelopment of Private Labels

Sesame Dressing

Japanese Soy
Beans Tofu

Response to Consumer Needs

Foundation

Sliced Ham 160g

Black Pork
Dumplings

Food Safety and Security

Response to Customer Feedback

Process Control and Product Labeling

We have a Customer Relations Office, which receives customer
feedback via our toll-free number or inquiry emails on ourw e b s i t e . T h e O ff i c e s h a re s t h e f e e d b a c k w i t h re l a t e ddepartments to reflect them in product development. In
FY2018, the Office received 10,739 comments and other formsof feedback including 2,783 comments on products, of which
1,429 were comments concerning private labels. As for theplastic bottle of “Hida-no-Inochi Mineral Water”, we improved
the package to make it easier to peel off and sort for disposal.

Food safety is one of the risks involved in the business models that
optimize the entire process from sourcing to retailing. In developing
private labels, we have concluded agreements with manufacturingoutsourcing companies with regard to selection of ingredients andmanufacturing processes and carried out audits in areas such as
hygiene management and manufacturing process management at
manufacturing outsourcing plants. As for the information provided on
product packaging, we provide easy-to-understand displays using
icons for 7 ingredients of specified raw ingredients, which haveobligation of labeling as well as 20 ingredients equivalent to specified
raw ingredients. Furthermore, we disclose product information on the
Valor website (https://valor.jp/pb), when introducing new products or
improving existing products. In FY2018, we completed changes to
389 items subject to modification of product packaging to comply
with the Food Labeling Act, which has an interim measures period
until March 2020. We are also taking steady measures to comply
with the new display system of ingredients and origin for processed
foods, which was applied in September 2017.

Maintaining Service Levels for
Local Communities

Food Sales Truck Business
As Japanese society changes due to such things as the progression of aging and declining population and smaller
households, as well as the growing number of older people
who voluntarily surrender their driver’s licenses, it has
become a challenge to serve consumers who are physicallylimited when it comes to shopping outside. To deal with this,starting in April 2018 the Company launched a food sales
truck business based at three locations in Gifu Prefecture.
This has launched a business that takes full advantage of the Group’s management resources by alsooffering products sold at
our drugstores and home
improvement centers.

Reduction of Environmental Impacts

P26-27

Our Efforts to Eliminate Food Waste
In FY2018, food waste was down 15% over the previous fiscal year*

Food waste reduction having been raised as one of targets of
the United Nations Sustainable Development Goals (SDGs)
has highlighted food loss as a major global issue. Centered on
our supermarket business, the Company has also started tomake efforts aiming to eliminate food waste. We are continuing
our activities towards improving the selling-out rates of products at stores while providing backup support that improves
the accuracy of sales planning, and to this end, we
have expanded our automatic ordering system toinclude processed foods in
FY2 0 1 7 and bread products in FY2018.
*Volume of food waste generated forevery 1 million yen of net sales ofValor Co., Ltd.

Valor Holdings Co., Ltd. Annual Report 20197

Message from CEO

We will create new values in response to changing
social needs by strengthening our connection withcustomers leveraging Group management resources

Masami Tashiro
Chairman & CEO

8

Valor Holdings Co., Ltd. Annual Report 2019

contribute to quality improvement.
Looking to enhance the appeal of our products, we
also make use of M&As in the distribution of fresh
produce, for which scale merit does not have much of aneffect. A Group company since 2005, Tachiya Co., Ltd.
has as the bedrock of its strength the ability to purchaseand sell fresh produce, making it extraordinarily uniqueand which even draws customers from far away. Taking
this as a model case, in FY2018 we acquired Futabaya
Co., Ltd. and Sanko Co., Ltd., two supermarkets withexcellent know-how in the sourcing and sales of local
fresh products, to progress with sharing sourcing andsales know-how in the supermarket business as a whole.
On the other hand, the Company can enjoy the scale
merit in sourcing non-food items, such as those fordrugstores and home improvement centers. We believethat the integration of the home improvement center
business by a share exchange between Home Center
Valor Co., Ltd. and Alleanza Holdings Co., Ltd. will not
only create a synergistic effect in the purchasing anddevelopment of products, it will also become the footholdof a distribution network in Japan stretching from the
Tohoku Region to the Chugoku Region, and will
strengthen this business model through comprehensive
efforts to develop it.

Enhancing the appeal of our products—Making use of M&As and strategic partnerships
with other companies
I n o rd e r t o e s t a b l i s h a re s i l i e n t o r g a n i s a t i o n t oenvironmental changes, the Group has shared value of“Better products at lower prices” attained thourgh
business process integration. Amid customers’ changing
purchasing behavior such as a diversification of needs
and a clearer emphasis on quality, we have focued onenhancing our product categories with extraordinary traits
to attract customers far and wide and the appeal of thep ro d u c t s t h a t m a k e u p t h o s e c a t e g o r i e s . I n a nenvironment where there is an excessive number ofstores, there can be no outlook for sustainable growth
regardless of how many new stores are opened. Strong
products that foster the customer’s motivation to visit ourstores are now the point for remaining competitive.
Aware of this fact, in line with the basic policy “aparadigm shift from expanding standardized stores toenhancing the appeal of products” of the currently
unfolding FY2018-2020 strategic plans, we are moving
forward to boost profitability, mainly in our stores, througha medium-to-long-term initiative of “transition to a morecompetitive format with a focus on products.” Regarding
M&As and strategic partnerships with other companies,
our goal is not simply the expansion of sales volumes, butrather we focus on whether they will help us optimize theentire process from sourcing to retailing and whether they

Strengthen our connection with customers
leveraging our management resources
In the future as population decline accelerates mainly insuburban areas our customers’ lifestyles change, we
believe that an important point to drafting a growthstrategy for the Group will be looking at how to strengthen
the connection we have built with our customers largely
through supermarkets, and whether to limit thisconnection to just food products. In expressing theirneeds, some of our customers have told us, “I always
cook on my own, but sometimes I want to havesomething that was made for me.” By responding tothese needs with our delicatessen specialty shop Delica
Kitchen, we have started to see an expansion in thedevelopment of this business. In addition, the Valor Groupis more than just a supermarket company that mainly
supplies food. Another strength of the Group is our ability
to provide a diversified value through our management
resources such as drugstores, home improvement
centers, and sports clubs. We think that the questions as
to whether we can generate new business through ourconnection with customers and whether the value that theGroup provides will be able to keep up with a changing
age will be asked all the more.
Furthermore we believe that going forward, whether or
not to only open brick and mortar stores, and determining
how to go about positioning ourselves for online sales will
be key to our growth.

VisionThe limitations and the future ofchain store management
The management environment surrounding the food
distribution business, the Group’s main industry of
involvement, has changed greatly in the past few years.
Amid Japan’s population decrease, competition is fierce
not just with companies of the same format, but also withthose of other formats such as drugstores. The chain
store operations are becoming difficult to remaincompetitive although we have pursued operational
efficiency under the policy of concentrating the opening ofstandardized stores in an ceratin area..
In addition, the food distribution industry in Japan isless profitable on a worldwide level; the excessive numberof companies, overproduction in the manufacturingindustry, and excessive number of stores are cited as thereasons for this. Against a background of decreasing
consumption and working population due to the declining
birth rate and aging population, as well as amid a push to
improve productivity through corporate restructuring andthe narrowing down of products, the issues of theexcessive number of companies and overproduction are
expected to be resolved. However, we envisage thesituation of the excessive number of stores to continue forthe time being.

Valor Holdings Co., Ltd. Annual Report 20199

Message from CEO

Since we started online sales in the home improvement
center business, we have recognized that the greatest
value is convenience. From our experience of entering andleaving the home delivery business in the later-half of the
1990s, we feel that home delivery service is a difficult
prospect. However, against the background of changing
lifestyles and technological developments, in the summerof 2019 we will start offering an office-oriented delivery
service that uses a dedicated app to help working-age
people who are pressed for time. Going forward, we will
make use of the intrinsic strengths that the Internet offers,
and for newly generated business, we would like for theGroup’s management resources, including distribution, tobe put to even greater use.
Fostering self-motivated employees
Because strategies vary by company, employees must
think for themselves. Companies operating stores closer
to their customers than other businesses have the merit ofunderstanding their customers well. However, creating
business for the customers is a whole other matter.
Though the Company study tour to the United States with
its young employees, a challenge confronting real storeshas been revealed. It is whether the product that acustomer want is really available, and whether theemployees and the store as a whole are energeticallyconveying the appeal of the product from a location close
to the customer. In addition to making our products
attractive, we believe that response to the motivation of
our employees who think “I want to work at Valor” and “I
want a job worth doing” will be indispensable to our future
growth. Therefore, as a part of the 60th anniversary of thefounding of our business, we have established the Human
Resources Development Center. In addition to training for
product knowledge and skills acquisition, we intend toenrich management training targeting store managers andthe next generation of management, while at the sametime the Group will make use of the Human Resources
Development Center as infrastructure that creates selfmotivated employees. Moreover, in a time of diversifying
personal lives, where people want to work and care for
their children, or want to work and provide family care, theCompany create better places to work together with our
employees by offering a variety of work styles including
our work location selection system.
First year of the medium-term strategic plans:
Reactions to the refurbishment of existing stores
As a major policy of the medium-term strategic plans, in
our three main businesses of supermarkets, drugstores,
and home improvement centers, we have enhanced theappeal of product categories, strived to foster people’s
motivation for visiting our stores with the appeal of our

10 Valor Holdings Co., Ltd. Annual Report 2019

products, and executed “transition to competitive
formats.” In the supermarket business, we refurbished 26
Valor stores, and strengthened fresh food departmentswith fresh products such as meat, fish, and vegetables &fruits while highlighting the traits of these productcategories. By adopting the good practices of new stores
to the refurbishment of existing stores, we were able toenhance the appeal of our fresh food departments, andthe response to this has been that we are finallywitnessing a trend of recovery in the number ofcustomers. With regards to the development of ourdelicatessen specialty shop “Delica Kitchen,” weestablished our first street-facing deli in September of
2018, and in addition to lunches, we also introduced
products that will capture demand for evening meals.
In the drugstore business, focusing on the sale of medicines and cosmetics products that require consultations
to purchase, we have strived to improve store shelf management and customer service skills, but at the same time
have optimized operations and cut expense ratios byswitching all but a few categories to an automatic ordering basis. In the home improvement center business, wehave made a positive transition by expanding our lineup of
construction materials, tools, and hardware, while at thesame time strengthening categories that support people’s
living such as automobile tire replacement and outdoor
equipment. In addition, towards the establishment of a
new driver for growth, we have accelerated the opening of
the fitness gym “Sports Club AXTOS Will_G” by newly
opening 51 outlets to expand the year-end number of outlets to 146.
As a result of pushing ahead with these efforts,
revenues in FY2018 grew for the 24th consecutive year,
the higher profit of our three main businesses contributed
to the consolidated results, and the income at each phasealso increased. However, in the fourth quarter, expenses
increased mainly in personnel costs and the ratio of
ordinary income did not meet the planned figures.
Consequently, profitability remained an issue.
Enhancing corporate values
Based on the outlook that the integration of the home
improvement center business by Home Center Valor Co.,
Ltd. and Alleanza Holdings Co., Ltd. through a shareexchange will result in the expansion of scale in thisbusiness, and changes in segment earnings and asset
composition, the Group reset its targets for FY2020, thelast year of the FY2018-2020 strategic plans. Quantitative
targets for revenues from operation and for ordinary
income have been updated to ¥680.0 billion and ¥21.0
billion, respectively, and profit targets for ROA and ROE to
5.6% or more and 7.7% or more, respectively.
Regarding the generation of cash flow, thanks to ourVisionimproved profitability, we will generate a cumulative
operating cash flow of ¥90.0 billion in three years. As forprofit distribution, we plan for capital expenditure of ¥25.0
billion to ¥26.0 billion a year, of which 30% to 40% will beallocated for priority investment in existing outlets. In the
supermarket business, where we plan to refurbish 20 to
30 existing stores a year, we have thus far refurbishedmainly our large stores. However, we will start therenovation of medium-sized stores we have not worked
on yet and at the same time renovate stores in regions
outside of the Gifu and Aichi prefectures, and thereby
press forward with the improvement of store profitability.
With regard to investing in new store openings, these will
be centered on drugstores, which hold a role as drivers ofgrowth, and sports clubs, which we positioned as new
drivers of growth.
Moreover, with regard to dividends, we plan to ensurestable and continuous profit returns, targeting a dividend
payout ratio of 25% in accordance with our policy to date.
Based on the above policy, the year-end dividend for
FY2018 was ¥26 per share, a year-on-year increase of ¥2,
for a total annual dividend of ¥48 per share (a payout ratioof 31.4%), representing a year-on-year increase of ¥3 whencombined with the interim dividend. We expect to maintainthe increased dividend and raise total annual dividends to¥52 per share (interim ¥24, year-end ¥28) in FY2019.
As was the case in the previous fiscal year, in FY2018,
based on the accounting standard for impairment on noncurrent assets, we recorded a ¥2,707 million impairment
loss on noncurrent assets in extraordinary loss, resulting ina shortfall in our final earnings targets. It is necessary for
us to assume the various risks involved in this businessand to devise measures to mitigate these ahead of time.
The Board of Directors also has had discussions on risks.
However these include new elements that have emerged
as our social changes, such as: 1) the issue of the shortage of personnel attributable to the shrinking working-age
population; 2) the dispersion of production bases towards
maintaining stable supplies when a disaster strikes; and 3)
food safety and security, making us acutely aware that ouroperations cannot afford to ignore societal issues. The
Group will deal with risks associated with social changes
while at the same time taking this as a chance to create
new business opportunities and distinguish ourselvesfrom our competitors. We will of course steadily executethe policy of the medium-to-long-term growth strategy,
being aware of the sociability that a company possesses,
and aim to become a corporate group that develops
together with society.
In closing, I would like to ask our shareholders andinvestors for their understanding and support for ourbusiness operations as the Group forges ahead withefforts for the medium-to-long term.

Valor Holdings Co., Ltd. Annual Report 201911

Medium-term strategic plans

FY2018-2020 Strategic Plans
We have established and executed strategic plans to enhance medium- to long-term corporate values from FY2010 to FY2014,
and from FY2015 to FY2017. The FY2010-2014 strategic plans focused on “Expanding scale”, in which we accelerated store
expansion in supermarkets and drugstores, and enhanced logistics, manufacturing and processing functions to keep up withthe business expansion. In the FY2015-2017 plans, we aimed for “Improving efficiency” through reinforcement of existing storesand utilization of infrastructures, and continued vigorous openings of drugstores, placing drugstore business as a key driver of
the Group’s growth
During the period, the business environment has dramatically changed due to decreasing and aging consumers, labor
shortage, changes in consumer behavior and intensifying competitions. As we assume that store expansion throughconventional methods will not enhance corporate values, in the FY2018-2020 strategic plans, we will establish a foundation to
support next growth, while redesigning values that stores provide and improving systems supporting stores.
As advised in the “Announcement Regarding Update of Quantitative Targets for the FY2018-FY2020 Strategic Plans” issued
on May 9, 2019, we updated our quantitative targets in light of the expected growth of the home improvement center businessand the projected changes in segment revenues and operating income with the conversion of Alleanza Holdings Co., Ltd. into a
consolidated subsidiary. Going forward, we will work to improve capital efficiency in addition to creating synergies.

Basic Policy“Undertaking a paradigm shift from expanding standardized stores to enhancing the appeal of products”
Although we maintain growth-oriented corporate culture, setting “creation of a more competitive format
with a focus on products” as a medium-to long-term growth initiative, we intend to improve profitability
through enhancing frontline store competitiveness.

FY2010-2014 Strategic Plans

FY2015-2017 Strategic Plans

FY2018-2020 Strategic Plans

Strategic goals

Expanding scale

Improving efficiency

Undertaking a paradigm shift fromexpanding standardized stores toenhancing the appeal of products

Major policies

Expansion of store network(organic growth and M&As)
Enhancing functions of manufacturing
and processing

Establishment of competitive formats
Increase efficiency of infrastructures
Expansion of drugstore and home
improvement center businesses

Transition to competitive formats
Advancement of Business Process
Integration between manufacturing andretailing
Establishment of new axis for growth

Improvement of infrastructures tosupport expanding scale

Transition to a holding company structure(Enhancement of group management
and governance)increase recruitment of new graduates

Viewpoint onorganizational
structure

Medium- tolong-term
initiatives

Quantitative expansion ofstandardized stores

12 Valor Holdings Co., Ltd. Annual Report 2019

Improvement of asset efficiency
Enhance strategic functions of theholding company
From closed innovation to cooperation
Human resources development andimprovement of productivity

Transition to creation of amore competitive format
with a focus on products

Increase efficiency in the supermarket business
Strengthen existing stores and improve efficiency
of infrastructure utilization
Nurture key drivers for growth
Improvement of governance in the holding
company and development of human resources

Challenges

Results

Secured a scale of operations and improved
infrastructures
Improved profitability
Improved balance sheet
Enhanced corporate values

VisionFY2010-2014 Strategic Plans

FY2015-2017 Strategic Plans
Improvement of profitability
Improve profitability by enhancing the appeal
of products and frontline competitivenessImprovement of asset efficiency
Enhance strategic functions of the holding
company
From closed innovation to cooperation
Human resources development andimprovement of productivity

Challenges

Results

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

FY2018-2020 Strategic Plans(Millions of yen)

FY2017

FY2020 (plan)

Expanding scale

Improving efficiency

Undertaking a paradigm shift fromexpanding standardized stores toenhancing product offerings

344,900

470,564544,020680,000

Operating income

9,452

15,00013,470—Ordinary income

9,916

16,10814,93721,000Net income

3,945

9,214

7,570

—

6.4%

5.0%

7.7%

FY2009Basic Policy
Revenues from operations

FY2014

CAGR (Revenue from operations)
ROA

5.7%

6.7%

5.4%

above 5.6%

ROE

7.0%

10.7%

6.9%

above 7.7%

1.2

1.0

0.8

0.8

25.8%

18.4%

30.4%

25%

D/E ratio
Dividend payout ratio

Transition to competitive
formats

Advancement of Business
Process Integration between
manufacturing and retailing

Establishment of a new
driver for growth

Refurbish 30-40 stores of supermarkets and drugstores annually, and conduct relocation and reconstruction
Effectively utilize group competencies for improved asset efficiency, and close/transform underperforming stores

Realize product offerings selected by customers, and achieve service quality and cost competitivenessavailable for external sales

Accelerate store expansion of fitness gyms “Will_G”, which investment costs are relatively low andmembership fees are competitive
Utilize group competencies and develop new businesses in harmony with real stores

Valor Holdings Co., Ltd. Annual Report 201913

Segment Overview

Revenues from operations by segment and their distribution

Supermarket Business

Drugstore Business

62.4%

22.6%

Revenues from operations

Operating income

Revenues from operations

Operating income

billion yen

billion yen

billion yen

billion yen

353.3

9.4

127.7

3.4

Revenues
from operations

565.9
billion yen(FY2018)

Home Improvement
Center BusinessSports Club
Business

9.8%

Distribution-related
operations

2.3%

1.3%

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

55.1

2.6

Supermarket Business

13.1

0.6

No. of stores……………

290

10.2

Ave. floor space……………

2.9

1,788

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., and Sanko Co.,
Ltd.; 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 businessprocess from sourcing to retailing.
Beside opening new stores, the segment has expanded in scale through M&As. The operatingcompanies have shared knowledge and skills in sourcing and selling fresh foods through theconversion of Tachiya Co., Ltd. and Kohseiya Co., Ltd 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; Shokusenkan-Taiyo Co., Ltd. operates in
Shizuoka prefecture; Kohseiya Co., Ltd. has stores in Yamanashi prefecture; Futabaya Co., Ltd.
operates in Shiga prefecture; and Sanko Co., Ltd. has stores in Toyama prefecture.

14 Valor Holdings Co., Ltd. Annual Report 2019

Drugstore BusinessNo. of stores……………

379

Ave. floor space……………

790

m2

Chubu Yakuhin Co., Ltd. started to sell medicines after it was established in February
1984. Expanding its store network under the brand name of “V-drug”, the chain
reached 100 stores in 2003, 200 stores in 2012, and 300 stores in 2016. It extends
across nine prefectures, primarily in Aichi and Gifu. As a local medical support
provider, the chain has developed pharmacies and drugstores with pharmaceutical
functions, and has also increased food offerings for greater convenience.

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

36

Ave. floor space……………

Results

Business summary

5,912

m2

Business summary
The home improvement center business began its operations in August 1990 after thetransfer of assets 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 to meet customers’ lifestyle needs by offering a tire replacement and storage
service through “Tire Ichiba”. Operating mainly in Gifu prefecture, the chain is also
expanding into Aichi, Mie and Shizuoka prefectures. In February 2018, we acquired
shares of FIRST Co., Ltd., an online retailer of materials and tools, and used thecompany’s system as a platform for launching Home Center Valor’s EC site.

Sports Club BusinessNo. of stores……………

146

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, training gyms and tennis courts, began operating
the low-investment chain of “Sports Club AXTOS Will_G”, also accelerating its
franchise operations. The network of these sports clubs is mainly based in theprefectures of Aichi and Gifu, but is also expanding into other regions with higher
population densities such as the Kanto and Kansai regions.

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 201915

Segment Financial Review

Store Network
FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018

187
131
10
29
10
—
—
—
—
7
159
36
51
17
12
462

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

Supermarkets
Valor
Tachiya
Youth*
Shokusenkan-Taiyo
Kohseiya
Futabaya
Sanko
Varo Mart
Other
DrugstoresHome Improvement Centers
Sports Clubs
Pet Shops
OthersTotal

Note: *merged into Valor in October, 2013.

Store Network and Locations of infrastructures for the Supermarket,
Drugstore and Home Improvement Center businesses (FY2018)

The figures indicate the number of stores; the size of the pie charts
corresponds to the number of stores by prefectures.

3

Nanto-shi

17 14
Ishikawa

Toyama

1
3

1

5

Kyoto

10

10

Hyogo

10

Tajimi-shi

Shiga

25

Yokkaichi-shi

8

6
Nara

6

Mie

42

5

1

13

39

15

3

saitama4

Yamanashi

59

Shimada-shi

145

Aichi

Other locationsin Japan

5
9

7

Tokyo

14

9 7
Kanagawa

5
Chiba

5

16

67

253

Supermarket BusinessDistribution Centers :for chilled products
for ambient- temperature products
for chilled & ambient- temperature products
Processing Centers :for fresh meatfor fresh vegetables & fruits
for fresh fishfor prepared foodfor fresh bakery
for fish products
Production Bases :16 Valor Holdings Co., Ltd. Annual Report 20191

Shizuoka

4

29

14 10
4 14

Osaka

11

Toyota-shi
Ichinomiya-shi

Overseas

7

Kani-shi

Ogaki-shi

14

1

256

17

1

9

Gifu

5
3

9

130

41

1

1

2
76

Fukui-shi

51Nagano17 23

Niigata

62

2

23

1

Fukui

2

33 23

3

22

37

2

2

Supermarkets
DrugstoresHome Improvement Centers
Sports Clubs
Pet Shops
OthersDrugstore BusinessDistribution Centers
Distribution Centers (Shared with the Supermarket Business)
Home Improvement Center BusinessDistribution Centers

(Millions of yen)

FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018

Revenues fromoperations

240,138

269,918

293,505

303,521313,208

321,458

329,266

336,555

345,960

353,311

Operating income

7,683

9,580

10,783

11,028

8,443

9,760

9,887

9,738

8,518

9,433

Total assets

105,438

114,693

119,293

127,490

142,260

144,604

153,045

176,384

184,386

195,231

Capitalexpenditures

7,477

12,012

9,199

12,915

17,931

12,07810,506

11,887

12,574

13,376

Depreciation andamortization

5,283

5,430

5,978

6,346

6,826

7,381

7,556

7,339

7,490

7,633

Revenues fromoperations

48,37350,651

54,85062,49773,02880,47095,152

107,045

117,949

127,781

Operating income

1,009

1,357

2,294

1,934

2,449

1,961

2,736

2,692

2,532

3,488

Total assets

21,493

22,81426,501

29,06533,64938,55744,60252,01958,84958,725

Capitalexpenditures

947

1,400

2,547

3,134

3,893

4,333

5,776

8,087

5,359

4,622

Depreciation andamortization

817

860

979

1,183

1,454

1,780

2,114

2,588

2,927

3,104

Revenues fromoperations

36,91938,92841,734

43,81046,55946,556

48,62950,37353,55555,173Operating income

677

1,269

1,677

1,869

2,330

2,011

2,450

2,302

2,149

2,616

Total assets

17,633

17,47918,553

19,456

19,06822,43022,49923,942

25,562

31,020Capitalexpenditures

166

730

1,943

1,259

464

2,276

1,478

4,777

1,316

645

Depreciation andamortization

983

876

867

899

875

910

945

1,000

1,099

1,083

Revenues fromoperations

8,371

8,514

8,604

8,788

8,955

9,271

9,838

10,45911,397

13,157

Operating income

40

77

247

420

419

463

532

639

680

672

Total assets

13,023

12,00911,287

10,76010,382

10,611

10,634

10,776

13,05915,175

Capitalexpenditures

1,755

146

124

319

338

527

791

1,119

3,114

2,565

747

770

669

666

636

655

711

785

882

1,080

Revenues fromoperations

5,282

5,929

6,383

6,699

7,228

7,638

8,590

9,610

9,075

10,265

Operating income

1,943

2,410

2,761

3,062

2,995

3,395

3,647

3,699

3,725

2,910

Total assets

11,456

15,33917,51418,80922,351

24,082

23,961

24,894

27,23028,569

Capitalexpenditures

28

439

1,659

1,888

2,155

624

478

2,018

3,044

384

Depreciation andamortization

40

381

439

550

784

819

716

721

758

817

Results

Supermarkets

DrugstoresHome Improvement
Centers

Sports Clubs

Depreciation andamortization
Distribution-related
operations

Valor Holdings Co., Ltd. Annual Report 201917

Sustainability Management

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

Key issues

1. Managementtransparency

Activities to secure sustainabilityof business or activities to manage
impact of business

Organizational design

2. Faster decision-making

The Company’s characteristics and improvements

Related page

Transition to a company with audit &supervisory committee
Repot by the Nomination and Compensation
Committee

P.19-21

 ramework for decision-making concerningFbusiness execution (Group Management
Executive Committee)

P.19

Governance3. Risk management inrelation to the business
model

Society(HumanResources
Development)

Environment

Human resources
development to sustain
growthReduction ofenvironmental impacts

18 Valor Holdings Co., Ltd. Annual Report 2019

Internal control andcompliance systems

Relations with organs
Expansion of the scope of application to
include operating companies

P.22

Risk management systems

Integrated information management
Expansion of the scope of application to
include operating companies
Development and labeling of private labels

P.7

Recruitment

 haring of recruiting offices among the Group
S
companies
Support recruitment of part-time employees

P.23

Human resources
development

Enhanced training for acquiring knowledge
and skills

P.23-24

Supporting a diversified
workforce

Support of female workers, disabled workers andothers to enable them to maximize their capabilities

P.23-25

For better places to work

Introduction of work location selection system
Employer-provided child care services
Introduction of shop holidays

P.24

Greenhouse gas emission control
Development of renewable energy
Reduction and recycling offood waste
Reduction of waste andrecycling encouragement

Energy-saving delivery and fluorocarbon control
Installation of solar panels
Reduction of food waste and recycling offood waste
Reduction of waste plastics(Encouragement of “My Bag”)

P.26-27

Corporate Governance

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

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 strengthened 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.
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.

Foundation

Corporate Governance Systems

Overview of Valor’s Corporate Governance StructureInternal Control & Risk
Management

Nomination andCompensation Committee
Management
Advisory

Business Execution

Legal Counsel, Tax Accountant,and Other Specialists

Management,
Oversight and Audit

General Meeting of Shareholders
Appointment /Dismissal

ReportAppointment /Dismissal

Audit report

Board of Directors

Consult

Executive Directors

Audit / Supervision(13 Directors)
AdviseAppointment /Dismissal

ReportAudit & Supervisory Committee()

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

Audit report
Collaboration
Audit report

Appointment /Dismissal

Accounting Auditor
Ernst & Young ShinNihon LLC

Audit /
Supervision
ReportAccounting audit

Representative Director
Group Management Executive Committee

Collaboration· Executive Directors (13)· Representatives of Group’s core companies (5)· Audit & Supervisory Committee Member (1)Refer matters fordiscussion / Report

Instructions

Executive Directors
Operating Companies

Instructions /Collaboration

Instructions

Collaboration

Group Manager
Conference
Instructions and supervision

Audit

Audit Office

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

Risk Management Committee

Compliance 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
to evaluate the effectiveness of the structure of the Board of Directors and its discussion & consideration, monitoring etc. on ascale of one to five. Average scores are calculated, while some of them are compared with the previous year. In FY2018, the Boardof Directors scored 3.8 on average, the same as FY2017, which indicates that the Board of Directors is generally deemed to beeffective. Since much of the discussions in FY2018 focused on M&As, the effectiveness of M&A-related discussion & consideration
has been identified as an issue to be improved.

Valor Holdings Co., Ltd. Annual Report 201919

Corporate Governance

Policy and procedures for election of management executives by the Board of Directors and for nomination ofcandidates for Director, and explanation of reasons for election and nomination(1) Policy· Regarding Directors who are not Audit & Supervisory Committee Members, people with specialized knowledge and excellent management& decision-making capabilities or people who execute important businesses or are responsible for key operating companies are nominatedas 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 the Group’s business and diverse viewpoints about corporate management are nominated as candidates to ensure
accurate auditing of compliance and appropriateness of business execution.
(2) Procedures· Regarding Directors who are not Audit & Supervisory Committee Members, candidates shall be determined by the Board of Directors
after consideration by the Nomination and Compensation Committee consisting of two Executive Directors and two Outside Directors.
· Regarding Directors who are Audit & Supervisory Committee Members, candidates shall be determined by the Board of Directors after
consideration by the Nomination and Compensation Committee and subsequent consent of the Audit & Supervisory Committee.
(3) Explanation about election and nomination· Reasons for election of each candidate for Director are disclosed in the reference document for the General Meeting of Shareholders.
· Reasons for election of each candidate for Audit & Supervisory Committee Member are disclosed in [Directors] “Relations with Valor
Holdings Co., Ltd.(1)” and “Relations with Valor Holdings Co., Ltd.(2)” of ”II Management Organization and Other Corporate
Governance Systems Concerning Management Decision-Making, Execution and Supervision” in the Corporate Governance Report.

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

Policy for determining the amount of compensation and the calculation method(1) Basic policy
1 For Directors who are not Audit & Supervisory Committee Members· Compensation consists of basic compensation, bonuses and share-based compensation.
· Compensation shall be, in principle, provided in an amount that is adequate for securing (recruiting) excellent people as executives andshall 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 is paid in accordance with the Rules for Wages for Employees.
· The amount of bonuses shall be determined within the maximum amount of compensation approved at the General Meeting of
Shareholders in consideration of the previous amount of bonuses paid and the company’s financial results for the current year.
· The Company has a stock option program for the Company’s Executive Directors and employees, as well as the directors andemployees of the Company’s subsidiaries, in order to enhance their motivation for achieving better performance of the Group.
· The Share-based Compensation Plan for Directors (the Plan), which was implemented by a resolution of the 60th General Meeting of Shareholders,aims to enhance Directors’ motivation for contributing to mid-term and long-term improvement of financial results and corporate value. A trustee will
acquire shares of Valor Holdings Co., Ltd. in the stock market using the money contributed in establishment of the trust and deliver the shares to
Directors at their retirement based on the Company’s rules for the issue of shares. Points assigned to each rank will be awarded to Directors. The
number of shares to be delivered to each Director shall be determined by multiplying the number of the points assigned by 1.0. The initial period of thetrust shall be 5 years, and as funds necessary for the acquisition of stocks to be delivered to Directors during the trust period under the Plan, theCompany will contribute a maximum of 300 million yen during the target period (covering the 5 years from the fiscal year ending March 31, 2018 to
the fiscal year ending March 31, 2022), and the trustee will use these funds to acquire shares in bulk. The maximum points assigned to the Directors
are 50,000 points for one fiscal year.
2 For Directors who are Audit & Supervisory Committee Members· Compensation consists only of basic compensation, in view of their roles and independence.
(2) Procedures· The amount of compensation for Directors shall be an agenda item of the General Meeting of Shareholders and shall be determinedwithin the maximum amount approved at the General Meeting of Shareholders.
· Regarding the amount of compensation for Directors, in order to increase transparency and objectiveness, the Nomination andCompensation Committee, which is an advisory organ for the Board of Directors consisting of two Executive Directors and two Outside
Directors, shall examine and review the details, after which the amount of compensation for Directors who are not Audit & Supervisory
Committee Members shall be determined by the Board of Directors; the amount of compensation for Directors who are Audit &Supervisory Committee Members shall be determined by the Audit & Supervisory Committee Members.

20 Valor Holdings Co., Ltd. Annual Report 2019

Number of meetings of the Board of Directors and the Audit & Supervisory Board held and attendance status (FY 2018)
Meetings of the Board of Directors

Meetings of the Audit & Supervisory Board*

10

13

100%

100%

Number of meetings
Attendance of Outside Directors

Note: The figures are based on the number of meetings held from April 1, 2018 to March 31, 2019.

Dialogues with shareholders in FY2018
618 shareholders attended

Dialogues with institutional
investors

Direct dialogues: 101 times(In addition to business results presentations and small meetings attended by top management, includes
individual meetings, facility tours, teleconferences, etc.)
Foundation

61th Ordinary General
Meeting of Shareholders(Held June 28, 2018)

Directors (as of June 27, 2019)

12

13

11

16

17

10

9

15
14

8

Name

Title

7

3

1

2

4

5

6

Significant concurrent positions at major subsidiaries

1

Masami Tashiro

Chairman & CEO

2

Satoru Yokoyama

Executive vice-president

Chairman, AXTOS Co.,Ltd.
Executive vice-president, Valor Co.,Ltd.

3

Akira ShinohanaManaging Director

Chairman, Core Support Co., Ltd.

4

Yukihiko Shizu

Director, CFO

5

Katsuyuki Mori

Director

6

Satoshi Yoneyama

Director
General Planning & Policies and Luvit Cards

7

Masami Shidara

Director

Director, Sourcing & Merchandise, Valor Co.,Ltd.

8

Morisaku Wagato

Director

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

9

Takao Yamashita

Director
Non-store Retailing

10Motohiko Takasu

Director

11

Takayuki Koike

12

Hirokazu Tamai

Director
Logics, IT Strategies & Information Systems
Director
M&A Strategies

13

Shunichi Asakura

Director

14

Osamu Takasaki

15

Mutsuo Masuda

16

Hirofumi Hata

17

Tokimitsu Ito

Director
Audit & Supervisory Committee Member (full-time)
Outside Director
Audit & Supervisory Committee Member
Outside Director
Audit & Supervisory Committee Member
Outside Director
Audit & Supervisory Committee Member

Chairman, Tachiya Co., Ltd.
Senior Managing Director, Valor Co., Ltd.

CEO
Chubu Yakuhin Co.,Ltd.
CEO, Chubu Kosan Co., Ltd.

Chairman, Alleanza Holdings Co.,Ltd.

Valor Holdings Co., Ltd. Annual Report 201921

Compliance and Risk Management Systems

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

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

Reinforcement of whistleblowing system
The Company has established the rules for whistleblowing and adopted a whistleblowing system as part of internal control systems
concerning violations of the law and other compliance issues. Following the transition to the holding company structure in October 2015,
the Audit Office has thoroughly notified all operating companies of the whistleblowing system and extended its operation.
To ensure operational appropriateness of all the operating companies, manufacturing and processing sites established in recent years
are also subject to operational audits, in addition to the headquarters and stores. In accordance with expansion of the store network, theAudit Office has increased the number of stores that were subject to operational audits, and to ascertain whether or not daily operations
are being conducted appropriately, the audits are occasionally conducted without prior notice.

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

Business risks
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, competition, taxation on consumption, climate change, etc.)(2) Store opening policies (difficulty in securing land or premises satisfying the store opening criteria, regulatory restrictions, etc.)(3) Food safety (quality incidents such as food poisoning and contamination, erroneous food labeling, etc.)(4) Entry to new businesses (in the event that anticipated results cannot be achieved because of changes in the external
environment, etc.)(5) Natural disasters, etc.
(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. Accounting standard for impairment of fixed assets

22 Valor Holdings Co., Ltd. Annual Report 2019

Society (Human Resources Development)

Human resources development fuels medium- to long-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.
Amid drastic changes in the business environment, the Company set a basic policy of a paradigm shift from expanding standardized
stores to enhancing the appeal of products in the FY2018-2020 strategic plans. Given our aims of strengthening existing stores centeredon the supermarket stores, and of establishing business models that optimize the entire process from sourcing to retailing, there is anincreasing demand for product appeal and sales capabilities. We also regard Frontline Performance Development as a priority issue andwill focus on personnel development to support medium- to long-term growth.

Basic principle on human resources development

Until FY2017

Business models

From FY2018

Foundation

Growing through undertaking “challenges” for ambitious targets

Business process integration and multi-format retailingStore development strategy

Quantitative expansion of standardized storesTransition to a more competitive format with a focus on products

Key issues concerning humanresources development

Recruitment of human resources

Frontline performance development

Promoting diversified human resources

Recruitment of human resources
Against a backdrop of aging and decline in workforce, finding ways of securing human resources in response to business expansion anddiversification of the operational expertise has become an issue. To deal with this issue, although our recruiting interviews were previously
conducted in Tajimi, Gifu Prefecture, we added recruitment offices, which enabled recruitment staff to conduct interviews more frequently.
In April 2014, we opened the relatively accessible Valor Recruiting Office Meieki in Nagoya, Aichi prefecture. With the opening of theCompany’s Nagoya Headquarters in March 2016, we integrated the recruiting office into the Headquarters, and the office is currently
shared with the Group companies to conduct interviews.

Human resources development
We aim to strengthen our organizational competencies and improve corporate values by improving frontline capabilities through offeringon-the-job training and fostering self-motivating leaders who can identify problems and execute solutions. The Company’s humanresources development programs are based on Group-wide training programs plus training on the expertise needed at each operatingcompany. The Group-wide programs consist of position-based programs and programs for next-generation managerial positions. The
position-based programs focusing on Corporate Philosophy (DNA) education are mainly designed for those who have just joined theCompany or those who have been promoted. 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 programs fornext-generation managerial positions focus on competencies to achieve the organization’s goals while enhancing the motivation of
co-workers, with the Corporate Philosophy (DNA) as a base. Outcomes from the programs are shared with all employees at the Group’s
annual meeting.
In FY2018, we provided additional training aimed at improving frontline capabilities by holding seminars such as those for acquiringknowledge and sales skills related to fresh foods. We also introduced a human rights training program in which participants learn how
employee satisfaction leads to customer satisfaction by appropriately responding to various human rights issues in the workplace and in
business activities.

Valor Holdings Co., Ltd. Annual Report 201923

Society (Human Resources Development)

Human resources development program
FY2017FY2018

Total number of training participants

2,624

5,585

Number of employees

5,821

6,501

Contents
Training fornext generation
managerial
positions

Study tour to the United States“Foundation” training
Female leadership training
Valor Management School

Grasping industry trends overseas, meeting the challenges of management
From philosophy to practice, improving business performance, leadership
Lectures by female leaders working at other companies, discussion on ideal leadership traits, etc.
Grasping industry trends, understanding of the three financial statements, investment dicision

Position-based
training

Training for promoted
employees
Training for candidates ofstore manager promotions
New employee training

Philosophy (DNA), human rights, communication, human resources development,
meeting the challenges of management, improving business performance, etc.
Philosophy (DNA), CS, human rights, communication, human resources development,
meeting the challenges of management, improving business performance, etc.
Philosophy (DNA), human rights, basic knowledge of store operations, section study sessions

Chief training

Product knowledge/skills acquisition, support for qualification acquisition

Product knowledge/
technical training

Startup of the Human Resources Development Center
The Human Resources Development Center, which started operations in April 2019, is equipped with training rooms for fresh produce and bakery
product operations. Together with encouraging product knowledge and skills acquisition. It also houses the Valor Historical Museum and theCompany Founder Yoshimi Ito Memorial Gallery, which serve as venues for the philosophy (DNA) training included in the position-based training.

Valor Historical Museum recreates the Company’s first “Shufu-no-Mise”

Learning the attitude of challenge from history

Creating better places to work
The spread of operational areas accompanying the expansion of the Valor Group’s business operations in recent years has created more
opportunities for personnel relocation and greater diversity in working conditions. However, from the results of a questionnaire survey of
employees and the Group’s self-reporting system, it became clear that certain employees wish to develop their capabilities and improveskills, while they adopt lifestyles combining work with family responsibilities, notably childcare and care for the aged. Therefore, we
introduced a work region selection system in July 2017. Under the system, which covers non-managerial employees of Valor Holdings Co.,
Ltd., Valor Co., Ltd., Home Center Valor Co., Ltd., and Core Support Co., Ltd., each worker selects one of the two categories: National
employee, who are willing to work in any region; and Regional employee, who prefer to be based in a particular region. In September 2017,
to support employees who wish to combine work with childcare, we opened an on-site nursery school, “Smile Nest Valor Hiromi Nursery
School,” on the site of the Kani Office (Kani-shi, Gifu Prefecture) following the relocation of some headquarters functions.
In this way, we have made efforts centered on support policies that reflect diverse values with respect to work styles. In observance of
the “Work-Style Reform Bill,” which gradually came into enforcement starting in April 2019, and in order to promote this effort as a Group,
we newly introduced business holidays for all Valor Co., Ltd. stores in April 2019. In FY2019, all stores will close for four days during theyear. This will apply not just to Valor Co., Ltd., but also to all Group companies involved in manufacturing, distribution, and other functions,creating an environment that will make it easier for employees to have a day off. Prior to implementing this, the Group held a study session
aimed at its 500 managers and directed at work-style reform to deepen their understanding of the contents of the law amendment and theGroup’s efforts towards work-style reform.

24 Valor Holdings Co., Ltd. Annual Report 2019

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.
StatusHiring ofthe disabled

Aside from offering all our employees opportunities todisplay their personalities and their capabilities, we also
aim to enhance the workplace environment where female
workers can flourish in their careers. The key initiatives
are as follows:
1. Expansion of coaching and trainings for promoting theappointment of women- For better understanding of managers supervisingfemale staff and creation of a better workplaceenvironment
2. Development of potential candidates for managerial positions
3. Improvement of the workplace environment corresponding
to the phase of the individual’s life and career- Rising awareness about maternity leave, child careleave and family care leave- Creation of workplace environment that facilitateseasy return to work

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

We are actively recruiting people with disabilities whowish to work for regular companies and be independent.
The Gifu Prefectural Government established a registration system in November 2011 to enable companies tosupport the employment of people with disabilities incooperation 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 so thatthey can work at Valor for a long time, we intend topromote education and training of our store staff andwhile facilitating collaborations with regional recruitmentc e n t e r s a n d t h e s o c i a l w e l f a re d e p a r t m e n t s o fmunicipalities.

The rate of hiring people
with disabilities

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

Promotion to
full-time
employees

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

Number of
Employees

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
w o r k i n c l u d i n g p ro g r a m s f o r h u m a n re s o u rc e sdevelopment 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.

(The number of female managerial
personnel/The number of all
managerial personnel)

FY20185.3%

5.3%(23people/433people)(23people/437people)

Number of female workers
who took maternity leave or
child care leave
Maternity leave(Employees/Part-timers)

Child care leave(Employees/Part-timers)

135

people140people(56people/79people)

169

people179

people(66people/103people)(63people/77people)(71people/108people)

2.30*%

2.20%*

Foundation

Promotingfemaleworkers

FY2017

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

Usage rate of postretirement reemployment
program

90.0%

87.2%

Number of part-timeworkers promoted tofull-time employees

102

people122peopleNumber of employees

5,821

people6,501

people1,428

people1,739

people4,762

people(Average length of service)

Female workers(Average length of service)

Male workers(Average length of service)(9.1years)(5.8years)

4,393

people(10.2years)(9.0years)(5.6years)(10.2years)

Note*: The above figures are based on Valor Holdings Co.,Ltd., Valor Co.,Ltd., Tachiya Co.,Ltd., Shokusenkan-taiyo Co.,Ltd., Kohseiya Co.,Ltd., Sanko Co.,Ltd., Chubu Foods Co.,Ltd.,
Chubu Yakuhin Co.,Ltd., Home Center Valor 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.

Valor Holdings Co., Ltd. Annual Report 201925

The Environment

Environmental Policy

Issues to be tackled

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

1. Greenhouse gas emissions control
2. Development of renewable energy
3. Reduction and recycling of food waste
4. Reduction of waste and recycling encouragement

Recognizing challenges in the supply chain
The Group mainly belongs to the food distribution industry, and we view the reduction of food waste as a particularly important issue. Operatingcompanies involved in food distribution work to reduce food waste by manufacturing, producing, and selling products based on a plan (see page7).
In addition, we have positioned the reduction of greenhouse gas emissions as an important issue, and are working to curb them. The Group has
manufacturing and processing bases, distribution centers, stores such as supermarkets, drugstores, and home improvement centers, and eachlocation is connected by delivery trucks. In order to curb greenhouse gas emissions associated with delivery, we are working to improve distribution
routes and frequency of deliveries, as well as encouraging consolidation between different business categories and joint deliveries with othercompanies. In addition, we use small-lot container boxes for delivery to reduce the number of cardboard boxes used and improve loading efficiency.
Private label products are sold domestically and internationally through V-Solution Co., Ltd., which supervises the products. When we deliver
private label products to such places as the Tohoku or Kyushu regions, we make an effort to transport them using freight rather than trucks. With
the modal shift in mind, we will continue to study methods of shipping with less greenhouse gas emissions.

Greenhouse gas emissions in the supply chain
Electricity and gas

Gasoline and diese

The Valor Group
Sourcing andproduction

Wholesale

Distribution

Maintenance

Retail and service

Consumers

Greenhouse gas emissions 200,904 t-CO (down 20,589 t-CO compared with FY2017)2

2

Note: Calculation covers Valor Holdings Co., Ltd., Valor Co., Ltd., and Home Center Valor Co., Ltd.
For fuel, calculation covers all delivery vehicles including those owned by and chartered by Chubu Kosan Co., Ltd. The amount of gasoline consumption also includes
company-owned vehicles of the Group companies.

Development of renewable energy
The Kyoto Protocol was adopted in 1997, and the Paris Agreement was agreed at
the United Nations Framework Convention on Climate Change in 2015 (COP 21),
making global warming an international issue. The Group is also working to create
renewable energy to reduce the environmental impacts. Following Valor Co., Ltd.,
Chubu Yakuhin Co., Ltd. also began these efforts in FY2018. In addition to reducing
greenhouse gas emissions, the Company is encouraging energy-generating activities.
FY2018 results : installation of solar panels: 75 locations*,
total wattage generated: 4,515kW*
FY2020 target : total wattage generated by renewable energy sources: 15,000kW*
Note: Calculation covers Valor Holdings Co., Ltd., Valor Co., Ltd., Home Center Valor Co., Ltd., and Chubu Yakuhin Co., Ltd.
*Cumulative figures from FY2017

26 Valor Holdings Co., Ltd. Annual Report 2019

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.

Recycling encouragement

Reduction of waste

Reduction and recycling of food waste

Development of
renewable energy

Management items

Specific initiatives

FY2017 results

FY2018 targets

FY2018 results

Development of
power consumption

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

495.0[kWh/m2]

494.0[kWh/m2]

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

Compared with theprevious year
Driving distance:
119%
Amount of fuel used:
124%
Fuel economy improved:
100%

Reduction of
specified CFCs
emissionsReplacement of refrigerators
and air-conditioners
Regular facility inspections

Stores covered:

Development ofenergyInstallation of solar panels

Reduction offood waste

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

Recyclingencouragementof food waste

2

Total wattage
generated:
950kW
Business premises
covered:
5

Causes and Effects

FY2019 targets

468.6[kWh/m2]

I n t ro d u c e d e n e rgy-management
system. We will encourage energy
management bystore managers.

465.0[kWh/m2]

Fuel economy
improved
100% YoY

Compared with theprevious year
Driving distance:
105%
Amount of fuel used:
101%
Fuel economy improved:104%

Due to store openings, driving distance and fuel consumption increased,
but fuel economy
improved. We willcontinue to aim to
improve delivery efficiency.

Fuel economy
improved
100% YoY

60

Stores covered: 14*(Stores with all units replaced)

Continued replacement and regular facility inspections

Stores covered:Business premises
covered:15

Total wattage
generated:
3,352kWBusiness premises
covered:19

We will steadily install solar panels atstores where they
are installable, taking the durability ofthe panels into consideration.

Business premises
covered:15

49.0[kg/million yen]
(98% YoY)

Stores covered:

Evaluation

10

59.0
[kg/million yen]

58.0
[kg/million yen]
(99% YoY)

50.1[kg/million yen]
(85% YoY)

Amount of food waste
decreased significantly
compared with the previous year thanks toplanned production,and store shelf management. We will continue
to strive for zero waste.

Reduction of disposing
products
Expansion of stores to
conduct recycling
Expansion of the scope ofrecyclable products

Recycling rate:
53.5%
Number of stores
conducting recycling:
242

Recycling rate:
53.8%
Number of stores
conducting recycling:
247

Recycling rate:
50.9%
Number of stores
conducting recycling:240

Although the content of recycling increased, theamount of recycling andthe businesses recycling
decreased due to the closure of shops, etc. We will
strive to improve the recycling rate.

Recycling rate:
53.0%
Number of stores
conducting recycling:
242

Reduction ofwaste plastics

Charging for plastic bags

Proportion ofcustomers avoiding
use of plastic bags:
85.3%(All stores of Valor
Co., Ltd.)

Proportion ofcustomers avoiding
use of plastic bags:
85.1%(All stores of Valor
Co., Ltd.)

Each store will continue to encourge“My Bag.”

Reduction of plastic
products
Consideration ofalternatives

Recyclingencouragementof used paper

Sorting and storage of usedpaper at designated places
More stores to recycle usedpaper

Number of stores recycling
used paper:
121
Recycling volume:364,620 kg(371% YoY)

Number of stores recycling
used paper:
127
Recycling volume:
380,000 kg(104% YoY)

Number of stores recycling
used paper:
150
Recycling volume:711,461 kg(195% YoY)

We expanded thenumber of storescovered. Looking
ahead, we will ensure rigorous garbage-sorting andexpand the numberof stores covered.

Recycling encouragement
Sorting reinforcement

Installation of morerecycling boxes
Expansion of the scopeof recyclable items

Number of storeswith installation ofrecycling boxes
Milk cartons: 243
Aluminum/steel cans:
255
Plastic food trays:
238
PET bottles: 222

Increase in thenumber of stores withinstallation ofrecycling boxes

Number of storeswith installation ofrecycling boxes
Milk cartons: 240
Aluminum/steel cans:
250
Plastic food trays:
240
PET bottles: 225

We strove for expansion of the number of recyclingb a s e s a n d g a rbage-sorting. We
will further increase
recycling bases.

Recycling encouragement

Recyclingencouragementof containers
and packaging

Proportion ofcustomers avoiding
use of plastic bags:
86%(All stores of Valor
Co., Ltd.)Foundation

Reduction of greenhouse gas emission

Environmental Performance

Note: Calculation covers Valor Co., Ltd. and Home Center Valor Co., Ltd. *Rate of power consumption to sales floor space (Units)** Rate of food waste generated to net sales of Valor Co., Ltd. (Units)

Valor Holdings Co., Ltd. Annual Report 201927

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

FY2008FY2009FY2010FY2011For the year:
336,342

344,900

379,172410,577

Operating income

9,795

9,452

12,347

15,236

Ordinary income

10,186

9,916

12,817

16,020Net income

3,387

3,945

4,232

7,149

Total assets

170,328

176,440

190,065

199,774

Net assets

55,35458,57861,821

68,13454,56057,76060,99867,243

69,631

69,107

69,746

69,383

Cash flows from operating activities

11,40816,004

20,32419,190Cash flows from investing activities(15,929)(10,453)(14,428)(17,793)Free cash flows(4,520)

5,550

5,895

1,397

Cash flows from financial activities

6,150(5,291)(1,608)(2,283)

Cash and cash equivalents at the end of fiscal year

9,000

9,259

13,547

12,676

16,988

11,537

15,245

17,859for new store openings

13,072

8,267

8,995

11,230for refurbishing existing stores

2,562

2,663

5,007

4,114

for others

1,354

607

1,243

2,515

8,081

8,399

9,017

9,612

Net assets per share (BPS) (yen)1,071.19

1,134.05

1,197.67

1,320.33

Net income per share (EPS) (yen)

65.57

77.46

83.10

140.38

Revenues from operations

At year-end:

Net assets (excl. subscription rights to shares and non-controlling interests)
Interest-bearing debt
Cash Flows:

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

Depreciation and amortization (CF)Per Share data:

Cash dividends per share (yen)Dividend payout ratio

20

20

22

26

30.5%

25.8%

26.5%

18.5%

6.1%

5.7%

7.0%

8.2%

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

6.3%

7.0%

7.1%

11.2%

Shareholders’ equity ratio

32.0%

32.7%

32.1%

33.7%

1.3

1.2

1.1

1.0

Debt equity ratio (times)

Revenues from operations (millions of yen)

Operating income (millions of yen)

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

600,000

497,463
470,564

520,530

544,020565,900

450,000

20,000Net assets

400,000

16,68315,00015,000311,800

15,43913,47014,200300,000

245,386
300,000

10,000200,000

150,000

5,000

100,000

0

FY2014 FY2015 FY2016 FY2017 FY2018

28 Valor Holdings Co., Ltd. Annual Report 2019

0

FY2014 FY2015 FY2016 FY2017 FY2018

0255,916

269,488

90,881 99,027

285,947

107,727 113,167

125,300

FY2014 FY2015 FY2016 FY2017 FY2018

FY2013

FY2014FY2015FY2016FY2017FY2018431,218

454,180

470,564

497,463

520,530

544,020565,931

15,852

14,287

15,00016,683

15,43913,47014,21016,844

15,311

16,10817,586

16,762

14,937

16,091

8,184

9,162

9,214

10,75910,522

7,570

7,910

213,629

235,131245,386

255,916

269,488285,905

311,81375,46682,94990,881

99,027

107,727

113,167

125,395

74,887

82,39590,301

98,408107,057

112,365

124,599

75,67987,26586,88084,952

87,231

88,821

96,717

21,13919,19822,25722,991

22,27027,79027,369(20,961)(23,746)(15,660)(19,045)(21,569)(24,258)(31,621)

177(4,547)

6,596

3,945

700

3,531

(4,252)

2,914

5,983

(3,745)(6,758)(3,168)(3,223)

7,302

15,764

17,055

19,96017,103

14,65914,93817,938

22,101

25,226

20,22520,041

24,441

27,576

26,87814,414

12,851

12,763

11,62815,144

14,394

14,903

1,788

2,306

2,237

3,650

7,709

9,850

9,451

5,899

10,069

5,225

4,763

1,587

3,332

2,524

10,255

11,09012,168

12,683

13,125

13,952

15,163

1,454.43

1,600.25

1,751.57

1,925.45

2,093.74

2,196.89

2,320.53

159.56177.95178.91208.87205.83148.04153.06

29

31

33

36

40

45

48

18.2%

17.4%

18.4%

17.2%

19.4%

30.4%

31.4%

8.1%

6.8%

6.7%

7.0%

6.4%

5.4%

5.4%

11.5%

11.7%

10.7%

11.4%

10.2%

6.9%

6.7%

35.1%

35.0%

36.8%

38.5%

39.7%

39.3%

40.0%

1.0

1.1

1.0

0.9

0.8

0.8

0.8

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

Cash flows from investing activities

Free cash flows

30,00022,257 22,991 22,270

48

27,790 27,300

3,945

700

10.7

36
30.4

30

3,531

15

40

40

33
6,596

31.4

6.7
(4,200)-10,000-30,000(15,660)(19,045)(21,569)

20

18.4

17.2

19.4

11.4
10.2

10

0

-20,000

ROA

45

20,00010,000ROE

Dividend payout ratio

50

40,000

ROE∙ROA (%)

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

Financial Information(Millions of yen)

FY2012

5

7.0

6.4

6.9

6.7

5.4

5.4

10

(24,258)(31,600)-40,000

FY2014 FY2015 FY2016 FY2017 FY2018

0

FY2014 FY2015 FY2016 FY2017 FY2018

0

FY2014 FY2015 FY2016 FY2017 FY2018

Valor Holdings Co., Ltd. Annual Report 201929

FY2018 Financial Review

Summary of consolidated results and financial conditions
Launching the three-year strategic plans based on “a paradigm shift
from expanding standardized stores to enhancing the appeal of
products,” the Valor Group has focused on conversion to acompetitive format in its three main businesses of supermarkets,
drugstores, and home improvement centers The Group’s
supermarket and home improvement center businesses, whererefurbishment of existing stores is advancing, improved gross profit
ratio, mainly in the reinforcement division, and the drugstore
business, which maintained strong sales, reduced its expense ratio.
These factors contributed to the improvement in consolidated
results. In addition, the Group accelerated the opening of fitness
gyms in the sports club business to establish new vectors of growth.
Consolidated operating results for FY2018 were revenues fromoperations of ¥565,931 million, an increase of 4.0% year on year;
operating income of ¥14,210 million, an increase of 5.5%; ordinary
income of ¥16,091 million, an increase of 7.7%; and profit attributable to owners of parent of ¥7,910 million, an increase of 4.5%.
Although revenues from operations increased for the 24th consecutive year, operating income and income items below that increased
for the first time in three years.
The breakdown of the increase in revenues (¥21,910 million) was¥9,831 million for the drugstore business, ¥7,350 million for thesupermarket business. In the drugstore business, the growth rate ofexisting stores was strong at 3.8%, and high pace of new store
openings also contributed. In the supermarket business, stores
opened in FY2017 and FY2018 and Futabaya Co., Ltd., whichbecame a subsidiary in August 2018 and Sanko Co., Ltd., whichbecame a subsidiary in February 2019, contributed to higher revenues.
The breakdown of the increase in earnings of major segments(¥739 million) was ¥956 million for the drugstore business, ¥915
million for the supermarket business, and ¥466 million for the home
improvement center business. This indicates an improvement in
profitability in the three main businesses. However, based on theaccounting standard for impairment on noncurrent assets,
impairment loss on noncurrent assets of ¥2,707 million was recorded
as extraordinary loss, and the profit attributable to owners of parent
was less than the planned figure.
The gross profit ratio improved 0.1% from the previous year andthe expense ratio decreased 0.1%. As a result, the ratio of ordinary
income to revenues from operations improved from 2.7% for theprevious year to 2.8%. However, the total asset turnover rate
deteriorated from 2.0 times for the previous year to 1.9 times, ROA
was the same as the previous year at 5.4%, and ROE also
deteriorated from 6.9% for the previous year to 6.7%. The debtequity ratio was same as the previous fiscal year at 0.8 times,
maintaining its safety level.

Financial position
Total assets increased ¥25,908 million from the end of the previous year to ¥311,813 million. The main factors were an increaseof ¥1,002 million in inventories because of new store openings
and an increase of ¥11,361 million in property, plant and equipment mainly due to capital expenditure, and an increase of ¥6,894 million in investment securities mainly as a result of a capitaland business partnershps with Arcs Group Co., Ltd., Limited andRetail Partners Co., Ltd.

Total liabilities increased ¥13,679 million from the end of theprevious year to ¥186,417 million, mainly due to an increase of¥2,854 million in notes and accounts payable-trade, and anincrease of ¥7,663 million in loans payable. Net assets excluding
non-controlling interests and subscription rights to shares
increased ¥12,234 million from the end of the previous year to¥124,599 million, and the shareholders’ equity ratio was 40.0%.

Cash flows
Cash and cash equivalents at March 31, 2019, were ¥17,938 million, an increase of 20.1% year on year. Free cash flow (cash flow fromoperating activities minus cash flow from investing activities) was negative at ¥4,252 million, and cash flow from financing activities was
positive at ¥7,302 million.
Cash flows from operating activities
Net cash provided by operating activities amounted to ¥27,369 million, having decreased ¥420 million compared with the previous year (adecrease of 1.5% year on year). This was mainly attributable to income before income taxes amounting to ¥12,922 million, anddepreciation and amortization amounting to ¥15,163 million, despite an increase in inventories amounting to ¥626 million, a decrease inaccounts payable-other and accrued expenses amounting to ¥1,100 million, and income taxes paid amounting to ¥5,041 million.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥31,621 million, having increased ¥7,363 million compared with the previous year (anincrease of 30.4% year on year). The main factors were purchase of property, plant and equipment amounting to ¥22,844 million for new
store openings and refurbishment, purchase of investment securities amounting to ¥6,502 million, and payments for guarantee deposits
amounting to ¥1,132 million, despite proceeds from collection of guarantee deposits amounting to ¥1,152 million.
Cash flows from financing activities
Net cash used in financing activities amounted to ¥7,302 million, having increased ¥10,526 million compared with the previous year (theprevious year being minus ¥3,223 million). The main factors were proceeds from long-term debt amounting to ¥17,375 million, theproceeds from issuance of shares amounting to ¥3,386 million, and proceeds from sales of treasury stock amounting to ¥3,085 million,
despite repayments of long-term loans payable amounting to ¥14,637 million and repayments of finance lease obligations amounting to¥1,888 million, and cash dividends paid amounting to ¥2,356 million.

30 Valor Holdings Co., Ltd. Annual Report 2019

Policy on Profit Distribution and Dividends for FY2018
The Company’s basic policy is to ensure stable and continuous
returns of profit to shareholders while increasing the internal
reserves to strengthen its corporate structure in preparation forstable business development over the long term. In accordancewith this policy, our medium- to long-term target is to achieve a
consolidated payout ratio of 25%.

In view of the performance in FY2018, the Company increased
the year-end dividend by ¥2, compared with the previous year to¥26 per share. Combined with the interim dividend of ¥22 pershare, this resulted in total annual dividends for FY2018 of ¥48 pershare, ¥3 higher than for the previous year. The payout ratio was
31.4%.

Factors that prevent the food distribution industry, to which the
Valor Group mainly belongs, from being able to escape from low
profitability, include the excessive number of companies, overproduction in the manufacturing industry and excessive number ofstores. With the decline in consumption and working population
due to the declining birth rate and aging population, productivity
improvement is progressing by reorganizing companies and narrowing down of products, and excessive number of companies
and overproduction are expected to be resolved eventually, but
the situation of an excessive number of stores, is expected tocontinue for the foreseeable future. Under such circumstances, inline with the basic policy of “a paradigm shift from expanding
standardized stores to enhancing the appeal of products” of the
FY2018-2020 strategic plans ending in FY2020, the Valor Groupwill work to improve earnings by transitioning to a more competitive format with a focus on products in our three main businessesof supermarkets, drugstores and home improvement centers. In
addition, as a result of the integration of the home improvement
center business by implementing a share exchange between
Home Center Valor Co., Ltd. and Alleanza Holdings Co., Ltd., with
April 1, 2019 as the effective date, changes are expected in segment earnings and asset composition in FY2019. The Group will
therefore also take measures to improve asset efficiency in addition to creating synergies.

With regard to capital expenditure, we plan to refurbish 20 to30 supermarkets and drugstores and will continue to focus on
investing in existing stores. With regard to new store investment,
we plan to open a total of 130 stores, including six supermarkets,
30 drugstores, and three home improvement centers (including
specialized formats), 80 sports clubs, eight pet shops and threeother stores, focusing on the drugstore business, which plays a
key role as a driver of growth, and the sports club business,where we will accelerate the opening of fitness gyms as a newvector of growth. In addition, a total of 192 stores, including the
newly consolidated Alleanza Holdings Co., Ltd.’s 110 home
improvement center stores (including specialty business stores),
79 pet shops, and three other stores, will be added to the Group’s
store network.
Based on the above assumptions, forecasts for consolidated
financial performance for FY2019 are as follows: revenues fromoperations of ¥660.0 billion, an increase of 16.6% year on year;
operating income of ¥16.6 billion, an increase of 16.8%; ordinary
income of ¥18.3 billion, an increase of 13.7%; and profit attributable to owners of parent of ¥9.0 billion, an increase of 13.8%.
In accordance with the quantitative target revision of the
FY2018-2020 strategic plans, a part of the financial policy has
been revised as follows.

Financial Information

Forecasts for FY2019

Financial policy in the FY2018-2020 strategic plans
Generation of cash flow

Profit distribution

At least ¥90.0 billion in the three years from FY2018 (cumulative)

1) Capital
expenditure

Target of ¥25.0-26.0 billion a year in capital expenditure (allocate 30-40% for investments inexisting outlets)
Refurbishment: 30-40 supermarkets and drugstores per year
New openings: At least 200 fitness gyms (over the three years, including franchise operation)2) Dividend

Stable and continuous returns of profit, with a dividend payout ratio target of 25%

Financial commitment

Debt equity ratio of 0.8 times and shareholders’ equity ratio of 40%.

Valor Holdings Co., Ltd. Annual Report 201931

Consolidated Financial Statements (Summary)
Valor Holdings Co.,Ltd. and Subsidiaries
The financial year ended March 31, 2018 and 2019

Consolidated Balance Sheet(Millions of yen)

FY2017(Millions of yen)

FY2018FY2017FY2018Notes and accounts payable-trade

38,596

41,564

Short-term loans payable

17,123

20,54730

20(Liabilities)(Assets)

Current liabilities

Current assets
Cash and deposits

15,17818,494

Notes and accounts
receivable-trade

8,333

8,453

Current portion of bonds

Merchandise and finished goods

35,21636,14813,48813,013

Raw materials and supplies

720

790

Current portion of long-termloans payable
Lease obligations

1,681

1,872

11,09912,199

Income taxes payable

2,491

3,445

(6)

(89)

Provision for bonuses

2,694

2,794

Provision for directors’ bonuses

126

130

Provision for point card certificates

933

885

Provision for loss onrecollection of gift certificates

235

272

Asset Retirement Obligations

64

110

Provision for loss on store closing

—

285

Other
Allowance for doubtful accounts
Total current assets

70,54175,995

Noncurrent assets
Property, plant and equipment
Buildings and structures

214,437

229,436

Accumulated depreciation(109,523)(119,257)

Buildings and structures, net

104,914110,179

8,043

8,696

Noncurrent liabilities(5,376)(6,127)

Machinery, equipment
and vehicles
Accumulated depreciation
Machinery, equipment
and vehicles, net

2,666

2,569

Other

19,612

19,340Total current liabilities

97,079104,283

Bonds payable

10,03010,010Long-term loans payable

36,572

41,288

Lease obligations

9,894

9,965

Deferred tax liabilities

76

205

Provision for directors’
retirement benefits

440

500

Provision for retirement benefits

3,515

3,884

Land

39,42944,382

Lease assets

16,295

17,926

Accumulated depreciation(8,430)(10,284)

Lease assets, net

7,865

7,641

Asset retirement obligations

8,336

9,396

Construction in progress

2,883

3,755

Long-term deposits received

6,143

6,199

Other

33,85237,320Other(25,990)(28,865)

Total noncurrent liabilities

7,862

8,454

165,621

176,983

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

747

1,198

5

0

Other

8,524

8,547

Total intangible assets

9,278

9,746

2,076

8,953

898

Long-term loans receivable

Capital stock

11,916

13,609

Capital surplus

12,79915,543Retained earnings

89,89895,468(Net assets)
Shareholders’ equity(566)
124,054

Valuation difference on
available-for-sale securities

323

421

973

Deferred gains (loss) on hedges(2)0Foreign currency translation
adjustment

129

155

Remeasurements of defined
benefits plan

(90)

(33)

Total accumulated othercomprehensive income

359

544

Subscription rights to shares

113

101

Minority interests

688

693

113,167

125,395

285,905

311,813

Guarantee deposits

27,17627,451

Other

3,423

3,963

(273)

(227)

40,46349,086215,363

235,817285,905

311,813

32 Valor Holdings Co., Ltd. Annual Report 2019

186,417(2,608)

7,972

Total assets

172,737

Total liabilities

112,005

7,160

Total noncurrent assets

82,134

Total shareholders’ equity

Deferred tax assets

Allowance for doubtful
accounts
Total investments andother assets

684

75,658Treasury stock

Investments and other assets
Investment securities

647

Accumulated othercomprehensive income

Total net assets
Total liabilities and assets

Valor Holdings Co.,Ltd. and Subsidiaries(Fiscal years ended March 31, 2018 and 2019)

Consolidated Statement of Income(Millions of yen)

FY2017FY2018Net sales
Cost of sales

524,313394,399546,264
410,407
135,856

Gross profit

129,913

Operating revenues

19,707

19,666

Operating gross profit

149,621

155,523

Advertising expenses

7,055

6,296

Packaging expenses

112

112

Supplies expenses

942

768

Distribution expenses

416

932

2,573

3,075

Provision for point card certificates
Provision of allowance for doubtful accounts

3

2

445

494

Salaries and wages

52,036

53,693

Bonuses

4,064

4,237

Provision for bonuses

2,516

2,166

Provision for directors’ bonuses

126

557

Retirement benefit expenses

670

690

Provision for directors’ retirement benefits

43

32

8,194

8,757

Directors’ remuneration

Welfare expenses
Utilities expenses

8,326

8,742

Rent expenses

22,69523,522

Repair and maintenance

2,981

2,905

Depreciation

12,474

12,896

Amortization of goodwill

181

232

Other

10,289

11,194

Total selling, general and administrative expenses

136,150

141,313

13,47014,210Interest income

114

108

Dividend income

20

97

Office work fee

990

1,034

Rent income

680

769

Investment gain on equity method

—

32

Other

1,205

1,451

Total non-operating incomes

3,010

3,492

Interest expenses

693

686

Rent cost of real estate

524

612

Other

326

312

1,543

1,611

14,937

16,091

Operating income

Financial Information

Selling, general and administrative expenses

Non-operating income

Non-operating expenses

Total non-operating expense
Ordinary income
Extraordinary income
Subsidy income

193

179

Other

308

155

Total extraordinary income

502

334

Extraordinary loss
Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets
Impairment loss

0

5

150

106

2,943

2,707

Loss on reduction of noncurrent assets

169

144

Loss on valuation of investment securities

56

0Provision of allowance for doubtful accounts

60

—

Other

229

538

Total extraordinary loss

3,610

3,503

Income before income taxes

11,82912,922

Income taxes-current

5,312

5,700

Income taxes-deferred(1,087)(744)

Total income taxes

4,225

4,956

7,604

7,966

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

33

56

7,570

7,910

Valor Holdings Co., Ltd. Annual Report 201933

Consolidated Financial Statements (Summary)
Valor Holdings Co.,Ltd. and Subsidiaries(Fiscal years ended March 31, 2018 and 2019)

Consolidated Statements of Cash Flows(Millions of yen)

FY2017FY2018

Income before income taxes

11,82912,922

Depreciation and amortization

13,952

15,163

Impairment loss

2,943

2,218

Amortization of goodwill

181

232

Gain on bargain purchase

—

(27)

Increase (decrease) in allowance for doubtful accounts

47

40

Increase (decrease) in defined benefit liabilities

290

297

Increase (decrease) in provision for directors’ retirement benefits

(538)

(39)

Increase (decrease) in provision for point card certificates

285

(141)

Interest and dividends income paid

(134)

(205)

Interest expenses received

693

686

Loss on retirement of noncurrent assets

150

106

Loss on reduction of noncurrent assets

169

144

Loss (gain) on valuation of investment securities

560Equity in losses (earnings) of affiliates

91

(32)

Subsidy income

(193)

(31)

Decrease (increase) in notes and accounts receivable-trade

(883)

(49)

Decrease (increase) in inventories(1,273)(626)

Increase (decrease) in notes and accounts payable-trade

1,712

2,305

Cash flows from operating activities

Increase (decrease) in accrued consumption taxes
Increase (decrease) in accounts payable-other and accrued expenses
Other
SubtotalInterest and dividends income received
Interest expenses paid

(91)

826

4,177

(1,100)889

279

34,35732,971

34

112

(680)

(673)

Income taxes paid

(5,920)(5,041)

Net cash provided by operating activities

27,79027,369Payments into time deposits

(109)

(179)

Proceeds from withdrawal of time deposits

107

286

Purchase of property, plant and equipment(21,447)(22,844)

Cash flows from investing activities

Proceeds from sales of property, plant and equipment

187

120

(1,593)(762)

Purchase of investment securities(1)(6,502)

Proceeds from sales of investment securities

177

100

Payments of loans receivable

(112)

(151)

Purchase of intangible assets

Proceeds from collection of loans receivable

1

106(2,092)(1,132)

Proceeds from collection of guarantee deposits

872

1,152

Proceeds from guarantee deposits received

599

385

Repayments of guarantee deposits received

(387)

(454)

Purchase of investments in subsidiaries resulting in change in scope of consolidation(211)(1,354)

Subsidy income

193

31

Other

(443)

(424)

(24,258)(31,621)

Payments for guarantee deposits

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

(76)

2,402

Proceeds from long-term loans payable

19,897

17,375

Repayments of long-term loans payable(19,282)(14,637)

Redemption of bonds

(40)

(30)

(1,692)(1,888)Proceeds from issuance of common stock

—

3,386

Proceeds from payment of non-controlling shareholders

60

12Proceeds from sales of treasury stock

248

3,085

Purchase of treasury stock

(223)

(0)

Repayments of finance lease obligations

Proceeds from sales of investments in subsidiaries resulting in no change in scope of consolidation
Cash dividends paid

34—

(2,149)(2,356)

Dividends paid to non-controlling shareholders

—

(1)

Other

—

(45)

(3,223)

7,302

Net cash provided by financing activities
Effect of exchange rate change on cash and cash equivalents

(28)

(50)

Net increase (decrease)in cash and cash equivalents

278

2,999

Cash and cash equivalents at beginning of period

14,65914,938Cash and cash equivalents at end of period

14,93817,93834 Valor Holdings Co., Ltd. Annual Report 2019

Valor Holdings Co.,Ltd. and Subsidiaries(Fiscal years ended March 31, 2018 and 2019)

Consolidated Statements of Changes in Net Assets
FY2017(Millions of yen)

Shareholders’ equity

Balance, March 31,
2016

Accumulated other comprehensive income

CapitalStock

CapitalSurplusRetainedearnings

Treasury
stock

Total
shareholders’equity11,916

12,72284,442(2,558)106,522

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

364

—

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

139

30

534

96

Noncontrollinginterests

Total net
assets573

107,727

Equity transaction
with noncontrollinginterests

11

1

Dividends fromsurplus(2,159)(2,159)(2,159)Net income

7,570

7,570

7,570

(223)

(223)

(223)

173

248

248

45

45

Purchase oftreasury stock
Disposal oftreasury stock75

Increase in retained
earnings by decreasing
companies accounted
for using the equity
method45

Net changes of
items during theperiod

(41)

(2)

(9)

(121)

(175)

16

115

(43)

Total changes of items
during the period

—

77

5,456

(50)

5,482

(41)

(2)

(9)

(121)

(175)

16

115

5,439

Balance, March 31,
201711,916

12,79989,898(2,608)112,005

323

(2)

129

(90)

359

113

688

113,167

FY2018(Millions of yen)

Shareholders’ equity

Balance, March 31,
2017

Financial Information

Changes of items
during the period

Accumulated other comprehensive income

CapitalStock

CapitalSurplusRetainedearnings

Treasury
stock

Total
shareholders’equity11,916

12,79989,898(2,608)112,005

1,693

1,693

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

323

(2)

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

129

(90)

359

113

Noncontrollinginterests

Total net
assets688

113,167

Changes of items
during the period
Issuance ofcommon stock

3,386

3,386

Dividends fromsurplus(2,357)(2,357)(2,357)

Net income

7,910

7,910

7,910

(0)

(0)

(0)

2,042

3,093

3,093

17

17

Purchase oftreasury stock
Disposal oftreasury stock

1,051

Increase in retained
earnings by decreasing
companies accounted
for using the equity
method17

Net changes of
items during theperiod

97

2

26

57

184

(11)

5

178

Total changes of items
during the period

1,693

2,744

5,569

2,042

12,049

97

2

26

57

184

(11)

5

12,228

Balance, March 31,
201813,60915,543

95,468(566)

124,054

421

0

155

(33)

544

101

693

125,395

Valor Holdings Co., Ltd. Annual Report 201935

Corporate Data/ Share Information (as of March 31, 2019)

Share Information

Corporate Data
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

13,388Headquarters

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

Other companies 362 shareholders
13,848 thousands of shares 25.7%

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

Shareholder

Securities companies 26 shareholders
506 thousands of shares 0.9%

Foreign entities 235 shareholders
11,028 thousands of shares 20.4%

Ito Youth Scholarship Foundation

2,910

5.41%

Financial Institutions 51shareholders
18,809 thousands of shares 34.8%

Japan Trustees Services Bank, Ltd.(Trust Account)

2,745

5.10%

The Norinchukin Bank

2,542

4.72%

Individuals, others 12,714 of shareholders
9,794 thousands of shares 18.1%

The Juroku Bank

2,536

4.71%

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

2,255

4.19%

Masami Tashiro

1,554

2.89%

Shiunsha Co.,Ltd.

1,326

2.46%

Retail Partners Co.,Ltd.

1,260

2.34%

Arcs Group Co.,Ltd.

1,260

2.34%

MUFJ 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

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

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

36 Valor Holdings Co., Ltd. Annual Report 2019

Valor Group
Segment

Subsidiaries

Supermarkets

Valor Co.,Ltd.
Tachiya Co., Ltd.
Shokusenkan-Taiyo Co.,Ltd.
Kohseiya Co.,Ltd.
Futabaya Co.,Ltd.
Sanko Co.,Ltd.
Chubu Foods Co., Ltd.
Daien Foods Co., Ltd.
Honda Suisan Co., Ltd.
Ishinomaki Foods Co.,Ltd.

Furuya Sangyo Co., Ltd.
Keirinkaku Co., Ltd.
Shufu-no-Mise Shoji Chubu Honsha Co.,Ltd.
Fukui Chuo Tsukemono Co., Ltd.
V-Solution Co., Ltd.
Chubu Meat Co., Ltd.
Hida-Osaka Buna-Shimeji Co., Ltd.
Chubu Agri Co.,Ltd.
VARO Co., Ltd.

Drugstores

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

V-drug Hong Kong Co., Ltd.

Home Improvement CentersHome Center Valor Co., Ltd.
Morosada Agri Co., Ltd.

FIRST Co., Ltd.

Sports ClubsAXTOS Co., Ltd.

Distribution-related operations

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

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

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

Core Support Vietnam Co.,Ltd.
Valor Max Co., Ltd.
Valor Agency Co., Ltd.

Corporate Data

Note: *Pet Shop BusinessHistory
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.

2010

Established Ichinomiya distribution center in Ichinomiya- shi, Aichi.

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.

Valor Holdings Co., Ltd. Annual Report 201937

“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/