Corporate Governance

J. Front Retailing Group Philosophy
The philosophy system of J. Front Retailing Group consists ofbasic philosophy,business operation policy,
commitments to stakeholders and our principles of action.
●Basic Philosophy（１）We aim at providing high quality products and services that meet thechanging times and satisfying customers beyond their expectations.
（２）We aim at developing the Group by making a broad
contribution to society as a fair and trusted business entity.
●Business Operation Policy（１）Realizing high quality management that provides thehighest customer satisfaction at the lowest cost.

■Corporate Bodies and Internal Control Systems
J. Front Retailing has the Board of Corporate Auditors. Its corporate
bodies include Shareholders Meeting, the Board of Directors, ththeBoard of Corporate Auditors and independent auditors as stipulatedin the Corporate Law. In addition, the Company adopts a corporcorporateoﬃcer system as a body to perform operations. It also has aCompliance Committee, which is chaired by CEO and consists of acorporate lawyer and Directors and Corporate Auditors named by thechairman, as an advisory body to the Board of Directors and adoadopts
a whistle-blowing system to solve compliance issues.
Corporate governance organizationand internal control system
Shareholders Meeting

Compliance Committee（２）Thoroughly pursuing high quality, freshness and hospitality.
●Commitments to Stakeholders
They represent the Group's commitments to customers,
shareholders, business partners, employees and communities.

Board of Directors

Chairman and CEO

Board of Corporate Auditors

President

Corporate Auditors

Internal Audit Division●Our Principles of Action
They represent the principles of action that every person working for thecompanies of JFR Group should try to follow concerning customer
perspective, challenge to innovation, speed and thorough implementation,communication, respect for diverse individuality and ethics and fairness.

Corporate Oﬃcer
Management Planning Unit

Department store businessSupermarket businessCorporate Oﬃcer
Administration Unit

Wholesale business

Other businesses

Group Vision■ Meetings of the Board of Directors and Outside Directors

We will establish a status as a leading Japanese retail company both interms of quality and quantity with the department store business as our core.

The Board of Directors as a management decision-making bodyconsists of seven Directors (including two outside directors) andgenerally meets once a month under the chairmanship of Chairman andCEO and with the attendance of Corporate Auditors to discuss andresolve the matters required by laws or prescribed by the articles ofincorporation as well as the matters stipulated in the rules andregulations of the Board of Directors.
During ﬁscal 2010, the Board of Directors had 15 meetings todiscuss and resolve the closure of Hakata Daimaru Nagasaki store andthe acquisition of shares in StylingLife Holdings Inc., as well as
approving budgets and settlements.
J. Front Retailing has invited Takayama Tsuyoshi and Takeuchi Isaoas highly independent outside directors who can judge independently
from the top management and appropriately determine the decisions
and supervisory actions made by the Board of Directors. They are bothin an objective position independent from the management teamperforming operations. We expect Takayama as an executive of abusiness entity and Takeuchi as an executive of a ﬁnancial institution
and a business entity to reﬂect their rich experience, achievements andinsights in the management of J. Front Retailing.

■ Basic Concepts
As the core of the uniﬁed governance of the Group, J. Front Retailing positions
the strengthening of corporate governance as one of the most importantbusiness challenges to ensure the transparency, soundness and compliance ofthe management of the whole Group and thoroughly fulﬁll its accountability toits stakeholders (including customers, shareholders, employees, suppliers andcommunities).
To this end, we have two units (Management Planning Unit andAdministration Unit) in the company organization to clarify roles, responsibilities
and authorities, thereby improving supervisory function and the internal control
systems of the whole Group. In addition, a corporate oﬃcer system is in place
to separate between decision-making and execution of the management, whichenables more speedy decision-making and implementation.
The term for Directors and Corporate Oﬃcers is one year and they are
remunerated based on their individual annual performance to clarify their
responsibilities for the enhancement of management and business results.

■Audit Function
In order to support the soundness of its management structure, J. Front
Retailing has ﬁve Corporate Auditors (including three outside auditors) todetermine its audit policy and approach, while having a system that enables
their views concerning important audit matters to be reﬂected in the Board ofDirectors. The Company also has Internal Audit Division reporting directly toPresident to verify the appropriateness and eﬀectiveness of the businessprocess of daily routine and ﬁnancial operations of J. Front Retailing and J.
Front Retailing Group according to the annual audit plan. Important matters are
duly reported to the Board of Directors and the Board of Corporate Auditors.

■Internal Control Systems
J. Front Retailing develops internal control in line with the Basic Policy to Build
Internal Control Systems. With respect to internal control over ﬁnancial reporting, theGeneral Aﬀairs Division of Administration Unit that has the function of overseeinginternal control and the Internal Audit Division that has the function of independent
assessment clarify their roles and authorities and discuss to make a fair assessment.
During ﬁscal 2010, we reviewed and redeveloped the internal control of Daimaru
Matsuzakaya Department Stores, which was formed by merger in March.

■Risk Management
With President and Executive General Managers of two units as responsiblesupervisors, each division assesses and manages risks in a manner suiting the divisionand reports the management status of important risks to the Board of Directors on aregular basis. With respect to particularly signiﬁcant business risk factors thus identiﬁed,
policies dealing with them are discussed and determined at the Group s strategy
meetings and concerned divisions implement them to prevent such risks from arising.
In response to increasingly diverse and complex business risks and growing social
demands for companies to react quickly and accurately when risks occur, the Risk
Management Guidelines were developed in March 2011 to set out the basic policy andframework for risk management and the Emergency Headquarters headed by President
is responsible for handling crises in case of emergencies.

■Practice of Compliance under Company
Regulations and Operation Manuals
J. Front Retailing develops company regulations and various operation manuals
to ensure the implementation of the Group philosophy on the job, while setting
its own strict standards on quality control and the protection and management ofpersonal information to thoroughly carry out daily compliance activities.

■Preparation of Compliance Manual
J. Front Retailing prepared a compliance manual to demonstrate its structure,
principles of action and code of conduct to implement compliance management.
The manual provides that the basic framework of the compliance system is abinary structure consisting of all companies and divisions voluntarycompliance with laws and corporate ethics in conducting business andtraining, supervision and strict audit by compliance divisions, operational audit

divisions and others. It also sets compliance principles of action and code of
conduct consisting of four perspectives to be followed by all oﬃcers andemployees of J. Front Retailing Group.
The Group ensures thorough compliance activities on a daily basis by posting
compliance self-check lists in each company, which enable employees tocheck their own everyday behavior.

Food Quality Control
Sanitary supervisors are placed in the food departments of all locationsof Daimaru Matsuzakaya Department Stores and aﬃliated department
stores to ensure the high level of quality expected of department
stores. For customers security and safety, they periodically inspect
the conditions of quality control in cooperation with Consumer Product
End-Use Research Institute based on the Food Sanitation Law,
Quality Control Regulations and rules for running.

Protection of Personal Information
In order to ensure the protection of personal information, J. Front RetailingGroup established the basic principles and the code of conduct andcontinuously provides employee training and checks the management
status in all companies of the Group. JFR Information Center Co., Ltd. andJFR Card Co., Ltd., which handle all the customer information data ofDaimaru Matsuzakaya Department Stores, acquired the Privacy Markcertiﬁcation to protect the personal information of customers.

Customer Consultation Service
Major stores of Daimaru and Matsuzakaya have Consultation
Corners for Consumers and consultants certiﬁed as advisory
specialists for consumers aﬀairs oﬀer consultation for customers.
Customer complaints about products are sent online to Consumer
Product End-Use Research Institute for scientiﬁc quality
inspection. Consultants inform customers of the results. These
test results are also provided to stores and manufacturers toprevent recurrence and improve quality.

■Monitoring of Implementation
Persons in charge in each business place provide on-site guidance
and inspection to check the steady implementation of compliancepolicies and rules. In case an accident should happen, it will bereported immediately to the Compliance Committee and remedialactions will be taken under the leadership of the Committee.