Values and Vision

Value Creation

Management Strategy

Sustainability

Governance

Data

GovernanceCorporate GovernanceCorporate Governance
J. Front Retailing, which is a holding company, ensures
the transparency, soundness, and legal compliance of the
management of the entire Group, acting as the central
focus of governance for the Group, to realize the Group
Mission Statement. We strive to build trust relationships withstakeholders (customers, shareholders, business partners,
employees, and local communities) by means including
strengthening of information disclosure. And indicating
the overall direction that the Group management is to takeand building and developing internal control systems, andstrengthening corporate governance by overseeing theoperational status of such systems are placed at the top of
the management agenda. We have adopted a Company withThree Committees (Nomination, Audit, and Remuneration
Committees) system to further strengthen corporate governanceby: (i) strengthening the management oversight function by
separating oversight from execution; (ii) clarifying authorities

Our roles and responsibilities as a holding company are as
follows:
 o plan, formulate, and penetrate the Group Vision, the Group
T
Medium-term Business Plan, and the Group Management
Policy for the fiscal year and to track the progress and results
thereof;To set the business domains of the Group;
Business portfolio management (optimal allocation ofmanagement resources);To generate synergies between businesses;
To establish the Group-wide risk management system;
Organization design and operation of the entire Group;Human resource management of the entire Group;
Management of shareholders;To establish corporate governance practices for the entire Group;To makes decisions on important matters of businessexecution relating to the management of the Group; andTo provide advice and approval for management policy andmanagement strategy of respective operating subsidiaries andto oversee and evaluate the progress thereof.

and responsibilities in business execution and promoting flexible
management; (iii) improving the transparency and objectivity ofmanagement; and (iv) building a globally applicable governancesystem. With the aim of further strengthening the oversightfunction by separating it from business execution, we amended
the Articles of Incorporation to reduce the number of Directors
from “15 or fewer” to “11 or fewer” to optimize the number of
Directors at the Annual Shareholders Meeting held in May 2022.
In May 2023, the number of Outside Directors was increased
from “six” to “seven” to further strengthen the oversight function.

Overview of corporate governance system

We are a holding company, and in order to speed up
management decisions and clarify management responsibilities,
the authority for execution of business operations of operating
subsidiaries is delegated to respective operating subsidiaries
except for matters that affect the Group’s management.

Corporate governance system diagram

We have also established seven supervisory units (theManagement Strategy Unit, the CRE Strategy Unit, the Group
Digital Unit, the Group System Unit, the Financial Strategy Unit,
the Human Resources Strategy Unit, and the Administration
Unit) as our management organizations. We clarify the roles,
responsibilities, and authorities of each unit to strengthen
oversight function and enhance the internal control system of
the Group as a whole.

Shareholders Meeting
ReportOversight

Executive
sessionElection/removal

Bord of Directors
Audit

Directors
Nomination
Committee

ReportRemuneration
Committee

Audit Committee

ReportEvaluation

Accounting Auditor

Board of Directors(1) Roles and responsibilities of the Board of Directors

Cooperation
Oversight
Consultation

Risk Management
Committee

Consultation

Execution

Sustainability
Committee

ReportAudit

Representative Executive
Officer

Consultation
ReportCompliance Committee

Executive Officers
ReportReportDirectors appointed and entrusted with the managementof the Company by shareholders fulfill the following roles andresponsibilities at the Board of Directors in order to realize
the Group Vision, based on their fiduciary responsibility andaccountability to shareholders.

Cooperation

ReportInstruction

Internal Audit Division o indicate the overall direction that the Group management isT
to take, by engaging in constructive discussions with respect to
the Group Vision, the Sustainability Policy, the Group Mediumterm Business Plan, the Group Management Policy for theGroup Management Meeting
Audit

Each execution division

Audit

fiscal year, and other basic management policies and carryingout multifaceted and objective deliberations that include theevaluation of risks with respect to the aforementioned;
To appropriately make decisions in terms of overall policy
and plans pertaining to the Group management based on the
direction noted above and to oversee the progress and resultsof the plans;To develop an environment conducive to encouraging offenseoriented management geared to achieving discontinuous
growth;To take steps to build and develop internal control systems of
the Group overall and to oversee the operational status of such
systems;
To oversee conflicts of interest between related parties; andBased on summary reports furnished by the Nomination
Committee, to oversee the progress of the President andRepresentative Executive Officer succession planning,
personnel assignment plans pertaining to management humanresources, and Executive Officer training, about which theNomination Committee was consulted.

(2) Composition of the Board of Directors
7 Outside Directors

4 Inside Directors

Woman Woman

Woman
Non-executive

Ratio of Outside Directors

Ratio offemale Directors

Executive

64%

27%

In selecting candidates for Director, the Board of Directors
shall consist of human resources with experience and knowledge
necessary to appropriately oversee the promotion of sustainability
management (execution of business strategies aimed at resolving theseven materialities) in order for the Board of Directors to effectively
fulfill its roles and responsibilities. In selecting candidates for Outside
Directors, the Company selects persons who maintain a high degreeof independence in light of the independence criteria establishedby the Company, and from the point of view of board diversity, whohave experience as managers not only in the retail industry that is

History of the Company’s corporate governanceJapan’s Stewardship Codewas formulated

2014

Corporate Governance Codewas adopted

2015

2016
 tarted to evaluate
S
the Board of Directors
Established the Corporate
Governance GuidelinesFormed the GovernanceCommittee
Started to evaluate
managerial talents

Company with an Audit &Supervisory Board

68

Corporate Governance
Code was revised

2017
 tudied an optimal
Sorganizational structure
Reviewed criteria for proposals
to the Board of Directors
The Board of Directors retreat(once a year)
Started to reduce crossshareholdings

2018 oluntarily applied IFRSVReviewed criteria for proposals to
the Board of Directors
Formulated the Officer Remuneration Policy
Added “matters to be consulted” tothe Board agenda
Opened the JFR Business
Management School

Corporate Governance
Code was revised

2019Initiatives to strengthen group
governanceRevised the Corporate Governance
Guidelines
Response to each cross-shareholding
partner based on our policy for the
exercise of voting rights

Company with Three Committees(Nomination, Audit, and Remuneration Committees)

2020
Established the Management
Advisory BoardA ppointed an Outside Director as the
Chairperson of the Audit Committee
Reviewed criteria for proposals to
the Board of Directors
Increased the number of
Outside Directors from 5 to 62021
 ade Parco a wholly-ownedMsubsidiaryRevised the Remuneration Policy
Established the GovernanceCommittee
Reviewed criteria for proposals to
the Board of Directors

2022
 aised the ratio of Outside
R
Directors to 50%
Revised the Remuneration Policy2023
 evised the Corporate GovernanceR
Guidelines
Raised the ratio of Outside Directors
to more than 50%

Increased the number of
Outside Directors from 6 to 7

Company with Three Committees(Nomination, Audit, and Remuneration Committees)69

Values and Vision

Value Creation

Management Strategy

Sustainability

Governance

Data

GovernanceCorporate Governance(3) Major matters discussed at the Board of Directors
meetings and efforts to solve issues

the core business of the Group but in non-retail industries, or who
have expertise in legal and other fields, a marketing perspective, andextensive experience related to finance and accounting. With regard
to candidates for non-executive Inside Directors, the Company selects
persons who have wide-ranging practical experience within theGroup and knowledge of audit and other matters. As for a candidate
for Director who concurrently serves as Executive Officer, theCompany has selected a person responsible for its financial division
whose high level of knowledge will facilitate the execution of thestrategic finance policies demanded by shareholders and investors,
as well as by the President and Representative Executive Officer.

In fiscal 2022, the second year of the FY2021 to FY2023
Medium-term Business Plan, the Board of Directors placed thefollowing items on its agenda and discussed them. In addition,
the Board of Directors worked to solve issues by managing
progress using the issue tracking sheets of the Board of
Directors and the Audit Committee.
Major agenda items
Revision of the Corporate Governance Guidelines

Skill matrix (Skills expected of Directors)
Management
strategies

Name

Finance

Marketing

Human resource& organization
development

Legal affairs &compliance

IT & digital

E: Environment

S: Society

G: Governance

YAMAMOTO RyoichiR evision of the Corporate Governance ReportO perational status of the Basic Policy to Build Internal Control
System and the results of evaluation of internal controls overfinancial reportingR evision of the Basic Policy to Build Internal Control SystemR esults of evaluation of the effectiveness of the Board of Directors
T he Group's future visionP rogress of the current Medium-term Business PlanT he Group Management Policy for FY2023
S ustainabilityE stablishment of a developer business company
C RE strategy
Investment in new businessesV alidation of rationale for cross-shareholdingsM atters related to financial results

Nomination Committee, Audit Committee, andRemuneration Committee

HAMADA Kazuko
YAGO Natsunosuke
HAKODA Junya

Committee
Chair

UCHIDA Akira

OutsideSATO Rieko
SEKI Tadayuki
KOIDE Hiroko
KATAYAMA Eiichi
YOSHIMOTO Tatsuya
WAKABAYASHI Hayato
Management
strategies

The Company appoints Directors who have management experience
as well as knowledge and experience related to management
strategies, such as making strategy proposals that lead to theincrease of corporate value and formulating methods to identify
issues for the formulation of the Medium-term Business Plan.
Finance
The Company appoints Directors who have extensive knowledge
and experience related to finance and accounting and knowledge
and experience in the field of finance, such as increasing corporate
value through the establishment of a strong financial base andmaking capital cost-conscious finance strategy proposals.
Marketing
The Company appoints Directors who have a wealth of knowledge
and experience in activities that bring about customer satisfaction
and continual improvement in corporate value through discovering
customer problems, creating products and services to solve those
problems, communicating information, and offering added value.
Human resource & The Company appoints Directors who have knowledge andexperience that lead to improvement of corporate value over theorganization
medium to long term through bringing out the maximum value ofdevelopment
human resources and organization development, including thepromotion of diversity.
Legal affairs &Recognizing that legal and appropriate execution of corporate
compliancemanagement is the basis for sustainable improvement of corporate
value, the Company appoints Directors who have high-level andexpert knowledge in corporate legal affairs and knowledge andexperience in promoting compliance management.

IT & digital

E: Environment

S: Society

G: Governance

The Company appoints Directors capable of grasping the latest
trends in IT and providing, from the customer perspective,
supervision of ICT application assistance and new businessdevelopment for the purpose of realizing the promotion of the digitaltransformation of existing businesses.
The Company appoints Directors capable of providing appropriate
supervision of specific action plans, regular reviews and the status
of initiatives for continual improvement regarding environmental
plans including the setting of medium- to long-term targets forsolving environmental problems through business activities.
The Company appoints Directors capable of providing appropriate
supervision of initiatives for coexistence with local communities andinitiatives concerning respect for human rights and consideration forworking environments in business activities.
Recognizing the establishment of appropriate governance systems isthe basis for sustainable improvement of corporate value, theCompany appoints Directors who have knowledge and experience incorporate governance aimed at improving the effectiveness of thesupervisory function of the Board of Directors.

Activities of Outside Directors
Name

Advice, statements, etc. at the Board of Directors and others

YAGO Natsunosuke

He has contributed to improving the effectiveness of the Board of Directors by providing advice and oversight, particularly on the direction to be specified in
the medium- to long-term strategies and key points at the time of their formulation, the desired form of a new developer business company, the approach toasset holdings in our financial strategy, and the approach to monetizing customer data. He chairs the Nomination Committee and serves on the Remuneration
Committee.

HAKODA Junya

He has contributed to improving the effectiveness of the Board of Directors by providing advice and oversight, particularly in terms of the consistency of themedium- to long-term financial plans and medium- to long-term strategies, pursuing new business initiatives, the approach to human resource development,
and points of focus in formulating an international business strategy. He chairs the Audit Committee.

UCHIDA Akira

He has contributed to improving the effectiveness of the Board of Directors by providing advice and oversight, particularly in terms of the necessary KPI
perspectives the Company should have when formulating the Medium-term Business Plans, the concepts for funding plans when promoting business portfoliotransformation, the Group coordination and the approach to governance as a holding company, the acquisition and development of specialists, and points offocus in supporting initiatives aimed at new business initiatives. He chairs the Remuneration Committee and serves on the Nomination Committee.

SATO Rieko

She has contributed to improving the effectiveness of the Board of Directors by providing advice and oversight particularly in terms of the clarification of thepath to creating corporate value and achieving profit targets, specific policies on decarbonization and diversity and inclusion that lead to sustainability
management, the strategic use of customer data, and the legal position on reducing cross-shareholdings. She serves on the Audit Committee.

SEKI Tadayuki

He has contributed to improving the effectiveness of the Board of Directors by providing advice and oversight particularly on such issues as the approach tobusiness and asset holdings to promote business portfolio transformation, alignment of strategy with core competencies and resources, and risk awareness in
new business initiatives. He serves on the Audit Committee.

KOIDE Hiroko

70

She has contributed to improving the effectiveness of the Board of Directors by providing advice and oversight, particularly in terms of the approach toformulating medium- to long-term strategies based on robust strategic discussions, the importance of a marketing-oriented way of thinking such as identifying
target and needs, and aspirations for the new developer business company. She serves on the Nomination Committee and the Remuneration Committee.

InsideNomination Committee
Director
Director
The Nomination Committee determines the content of proposals
on the nomination and dismissal of Directors to be submitted
to Shareholders Meetings and reports to the Board of Directors
upon consultations from the Board of Directors regarding thenomination and dismissal of Executive Officers, as well as the
Chairperson of the Board of Directors and the chairpersons andmembers of individual statutory committees, and other matters.
Major agenda itemsB oard of Directors frameworkC onfirmation of the skill matrixE lection for candidates for DirectorsN omination of candidates for Executive Officers and Representative
Executive Officer to be proposed to the Board of DirectorsN omination of candidates for the Chairperson of Board of Directors
and the chairpersons and members of individual committees to be
proposed to the Board of Directors
M anagement structure of each JFR Group company
F ormulation of the succession planR eappointment of the President and Representative Executive
Officer and Executive OfficersR esponse to the evaluation of the effectiveness of the Board of
Directors
Committee
Chair

OutsideInsideAudit Committee
Director
Director
The Audit Committee effectively audits whether Executive
Officers and Directors execute their duties efficiently incompliance with the laws and the Articles of Incorporationand in accordance with the Basic Mission Statement of theCompany and the Group Vision and makes necessary advice
and recommendations. It also conducts audits on the status of
the construction and operation of internal control and prepares
audit reports. To ensure the reliability of accounting information,
the Audit Committee also monitors and verifies the status ofwork executed by the Accounting Auditor, and determines
the content of proposals on the nomination and dismissal ofsuch Auditor to be submitted for discussion at Shareholders
Meetings.
Major agenda items
Audit policy and audit plan, appointment of Audit Committee
members to be appointed by the Audit Committee and specified
Audit Committee members
Report on the structure of audit & supervisory board members of
the Group companiesR eport of the Internal Audit Division on audit planR
 eport of the Accounting Auditor on audit plan, approval for the
Accounting Auditor’s remuneration

Report on the operational status of the Basic Policy to Build

Internal Control System and the results of the evaluation of internal
controls over financial reportingAudit report of audit & supervisory board members of the Group
companies, audit findings of the Audit CommitteeA udit report of the Internal Audit DivisionR eport on the Accounting Auditor’s review, report on audit resultsReport on management letters of Accounting Auditor
Criteria for selecting the candidate for the Accounting Auditor
Entrustment of non-assurance services to the Accounting Auditor group
KAM (Key Audit Matters)Report of the Compliance Committee
Operating company phase management report
Committee
Chair

OutsideInsideRemuneration Committee Director
Director
The Remuneration Committee decides on the policy for
determining the remuneration details for individual Directors
and Executive Officers of the Company and individual eligible
officers of major subsidiaries of the Group, and on the
remuneration details for individual Directors and Executive
Officers of the Company.
Major agenda items
Results of officer evaluations, total amount of officer bonuses,
amount of individual officer bonuses

The performance-linked factor and number of points provided
for a stock-based remuneration system for officers (short-term
performance share)M ission grade and individual remuneration amountR eview of officer remuneration system
Verification of officer remuneration levels and composition using
external dataIntroduction of a stock-based remuneration system to the Group’s
major subsidiaries

Revision of the Officer Remuneration Policy and revision of theofficer remuneration rules, etc.

FY2022 (March 2022 to February 2023)
Board ofDirectors
Number ofmeetings
Attendance
Average duration
per meeting

15

Nomination
Committee

Audit
Committee

Remuneration
Committee

13

22

12

100%

100%

100%

100%

2 hours
12 minutes

1 hour46 minutes

1 hour23 minutes

45 minutes

71

Values and Vision

Value Creation

Management Strategy

Sustainability

Governance

Data

GovernanceCorporate Governance

Executive session

Executive sessions are exclusive meetings of independent
Outside Directors for free exchange of opinions and sharing
of information. Participants debate on matters that require
the attention of supervisors, such as issues in the Board of
Directors or problems to be addressed in order to improvethe effectiveness of the Board of Directors (Lead director is
Ms. SATO Rieko, an independent Outside Director). At therequest of the lead director, the President and Representative
Executive Officer also participates in discussions.

Succession planning[Selection of the President and Representative Executive Officer]

Selection of the President and Representative Executive
Officer is a critical aspect of strategic decision-making,and accordingly the Company regards drawing up andimplementation of succession plans as matters of particularimportance in terms of management strategy. The Company
clarifies the selection process and ensures transparency andobjectivity through repeated deliberations conducted by the
Nomination Committee, which consists of three independent
Outside Directors and the Chairperson of Board of Directors,
who is a non-executive Director elected from inside theCompany. The Board of Directors focuses on realizing the Basic
Mission Statement and the Group Vision, selects the President
and Representative Executive Officer, and plays a supervisoryrole based on proposals received from the Nomination Committee.
[Dismissal of the President and Representative Executive Officer]

A proposal for dismissal of the President and Representative
Executive Officer is discussed and determined by the Boardof Directors after being discussed and resolved by the
Nomination Committee based on the goals set, expected
and actual results (e.g. annual performance and strategy
execution status), and the status of performance of duties
achieved by successor candidates who are selected under
the succession plan resolved by the Nomination Committee.
[Qualities required of successors]
For the President and Representative Executive Officerof the Company and people who assume the managementof the Group, the Company clearly defines the necessary
values, capabilities, and behavioral traits in the form of
qualities required of an officer under the “Desirable qualities
required of JFR Group managerial talent” and the “Discernible
capabilities required of JFR President and Representative
Executive Officer” in accordance with the Basic Mission
Statement and the Group Vision.
Desirable qualities required of JFR Group managerial talent
Strategic mindset

Reform-oriented leadership

Tenacity to achieve results

Organization development strengths

Human resource
development strengths
Discernible capabilities required of JFR President andRepresentative Executive Officer
Capacity to conceive a business vision

Capacity to communicate a vision

Persistence andcapacity to achieve results

Moral character andcharisma

The Nomination Committee will have discussions on
succession planning in a planned and consistent manner inview of changes in environments and situations surrounding theCompany, the progress of strategies formulated, etc. Election
and dismissal of Executive Officers are deliberated by the
Nomination Committee and its proposals are deliberated anddetermined by the Board of Directors, as in the case of the
President and Representative Executive Officer.

Evaluation of the effectiveness of the Board of
Directors

The Company’s evaluation of the effectiveness of the Boardof Directors by a third-party organization has been conductedannually since 2015.
In the eighth evaluation of the effectiveness of the Boardof Directors, conducted between September and October
2022, it was reported that the Company strives to resolve theissues pointed out in fiscal 2021, and that the effectiveness of
the Board of Directors and the three statutory committees isgenerally ensured. At the same time, we recognized issues andconfirmed the actions to be taken as shown below.

Issues, evaluations, and actions to be taken in the evaluation of the effectiveness of the Board of Directors
FY2021
Issues

Evaluations

IssuesActions to be taken

 larify the roles of the holding
C
company and its Board of Directors
Concentrate on strategic important
proposals and discussions in the
Board of Directors meetings
Review the composition of theBoard of Directors
Further strengthen the functionsof the Board of Directors
Secretariat

 he Group supervisory functionT
improved through strengtheningof the holding company’splanning function.
The ratio of independent Outside
Directors is now more than half,
and the position of the Board of
Directors is clearly defined.

 trengthen monitoring of theScurrent Medium-term BusinessPlanEnsure thorough discussion on
robust growth strategies
Further improve the effectivenessof the three statutory committees

 larify the key performanceC
indicators (KPIs) for the FY2023
Group Management Policy andstrengthen monitoring of the
progress of the current
Medium-term Business Plan
Discuss robust growth strategies
that indicate the Group’s major
direction in the process of
formulating the next Medium-term
Business Plan. In addition, also
appropriately determine the KPIs
for promoting key measures in thenext Medium-term Business Plan.
Work to further improve theeffectiveness of the three statutory
committees by strengthening thecommittees’ information sharing
with the Board of Directors andother means【Items evaluated】
About 40 items including:○	The Board of Directors’ contribution to theentire Group;○ Composition of the Board of Directors;○ Operational status;○ Content of deliberations; and○	Effectiveness of activities of the Nomination,
Remuneration, and Audit Committees

72

FY2022【Evaluation methodology】○ Advance questionnaire for Directors○	“Individual interviews” conducted by a third-party organization based on theadvance questionnaire (about one hour)○	Direct observation of deliberations by attending the meetings of the Board of
Directors and the committees○ Inspection of discussion materials for the Board of Directors, etc.
↓
Deliberated by the Board of Directors based on the report made by collating andanalyzing the above

Officer remuneration system

In April 2017, we formulated and announced an Officer
Remuneration Policy, which includes a stock-based remuneration
system for officers in order to steadily implement the Mediumterm Business Plan toward realizing the Group Vision. In
formulating the new Medium-term Business Plan, we reviewed
the content and revised it in April 2021. In conjunction with therevision of the policy, the scope of stock-based remuneration has
been expanded to include the officers of the Company’s major
subsidiaries: the Directors and Executive Officers of Daimaru
Matsuzakaya Department Stores, the Executive Officers of
Parco, and the Representative Directors of JFR Card, J. Front
City Development, and J. Front Design & Construction as well as
the Directors and Executive Officers of the Company. Regarding
disclosure of remuneration, etc. of the reporting company's
officers (including remuneration, etc. received as the officers ofmajor consolidated subsidiaries, if any) in the Annual Securities
Reports, the Company has disclosed it since fiscal 2020
without limiting to those whose total amount of consolidated
remuneration, etc. is 100 million yen or more.
(1) Basic policy on officer remuneration
Our officer remuneration system is based on the following
basic policy, aiming to realize and promote sustainability
management (pay for purpose). Furthermore, the same
basic policy shall apply to the officers of the Company’s
major subsidiaries: the Directors and Executive Officers of
Daimaru Matsuzakaya Department Stores and Parco and theRepresentative Directors of JFR Card, J. Front City Development,
and J. Front Design & Construction.
 o contribute to the sustainable growth of the Group and theTmedium- to long-term improvement of corporate value and beconsistent with our corporate culture;A compensation system that encourages professional managers tocarry out their roles (missions) based on the management strategy;Remuneration levels that enable the Company to secure andretain human resources who have the “desirable managerial talentqualities” required by the Company;
To increase awareness of profits shared with shareholders andawareness of shareholder-focused management; andEnhanced transparency and objectivity in the process fordetermining remuneration(2) Process for determining remuneration
In order to ensure the appropriateness of the level andamount of remuneration and the transparency of the decisionmaking process, the specific remuneration amount is decided byresolution of the Remuneration Committee, which consists of amajority of independent Outside Directors and the Chairperson ofBoard of Directors who does not execute business and is chairedby an independent Outside Director. Revisions of the officer
remuneration system will be undertaken based on the Mediumterm Business Plan periods. In April 2021, we revised the
Officer Remuneration Policy in line with the FY2021 to FY2023
Medium-Term Business Plan, and have continuously discussed
and revised it as appropriate after that. We will revise the levelof basic remuneration during the Medium-term Business Plan
period if it is necessary to significantly revise it due to extremechanges in the external environment and other reasons.
[Forfeiture of remuneration] (clawback and malus)

Regarding Executive Officers’ bonuses and stock-based
remuneration, in the event that a resolution is passed by the

Board of Directors regarding the post-revision of financial
results due to serious accounting errors or improprieties, in theevent that there has been a serious breach of the appointment
contract, etc. between the Company and an officer, or in theevent that an officer has voluntarily retired for his/her own
reasons during his/her term of office against the will of theCompany, the Company may request the forfeiture of the rightto pay or grant remuneration or the refund of remuneration thathas already been paid or granted to the officer.
(3) Remuneration composition for Executive Officers
and non-executive Directors
The remuneration for Executive Officers consists of (a) “basic
remuneration” (monetary remuneration) in accordance with themission grade, (b) “bonus” (monetary remuneration) based on theindividual evaluation, etc. for each fiscal year, and (c) “performance
share (performance-linked stock-based remuneration)” (trusttype stock-based remuneration) linked to the achievement rate of
consolidated performance, etc. as set forth in the Medium-term
Business Plan. The remuneration for non-executive Directors
consists of only fixed remuneration: (a) “basic remuneration”(monetary remuneration) based on job responsibilities and(d) “restricted stock (non-performance-linked stock-based
remuneration)” (trust-type stock-based remuneration) that is not
linked to performance as a stock-based remuneration system.

Executive Officers

Basic remuneration

Remuneration, etc.
for Executive Officers

Bonuses
Performance shares

Proportion of remuneration by type for Executive Officers of each rank
[President]

Basic remuneration
38.5%

Bonuses
23.0%

Monetary remuneration
61.5%
Fixed remuneration
38.5%

Performance shares
38.5%
Stock-based remuneration
38.5%

Performance-linked remuneration
61.5%[Executive Officers excluding President]
Basic remuneration
45.4%
Monetary remuneration
72.7%
Fixed remuneration
45.4%

Bonuses
27.3%

Performance shares
27.3%
Stock-based
remuneration 27.3%

Performance-linked remuneration
54.6%

Note: The above figure represents the case of a bonus for a standard ranking where theperformance achievement rate for stock-based remuneration is 100%.
Note: The Directors and Executive Officers of Daimaru Matsuzakaya Department Stores
and Parco and the Representative Directors of JFR Card, J. Front City Development,
and J. Front Design & Construction shall have the same remuneration composition
as “Executive Officers excluding President” in the above figure.

(a) Basic remuneration (monetary remuneration)
Basic remuneration is positioned as fixed remuneration and isdetermined by mission grade for Executive Officers and by thetable for non-executive Directors in accordance with the size
(weight) of each officer’s responsibilities.
(b) Bonuses (monetary remuneration)
The bonus paid to Executive Officers is performance-linked
remuneration that encourages them to achieve the goals for eachfiscal year, which are milestones in the Medium-term Business
Plan. They are evaluated using the “fiscal year’s financial
indicators,” serving as quantitative evaluation, and the “fiscal year’s
non-financial indicators,” which include qualitative evaluation.

73

Values and Vision

Value Creation

Management Strategy

Sustainability

Governance

Data

GovernanceCorporate Governance(c) Performance share(performance-linked stock-based remuneration)

Performance-linked stock-based remuneration targets
and evaluation weights
KPIs

Targets for medium
to long term

Evaluation
weights

Consolidated operating
Profitability (i)profit¥40.3 billion (FY2023)

40%

7% (at the end of FY2023)

40%

40% (vs. FY2017)10%

Efficiency
Nonfinancial(ii) ROE(iii)

GHG (Scope 1 & 2)
emissions reduction

Raising the ratio of(iv) women in management 26% (at the end of FY2023)
positions10%

Note: KPI stands for Key Performance Indicator.
Note: For the short term, only (i) consolidated operating profit is adopted. The initial
forecasts for the fiscal year announced in the Consolidated Financial Results
every April (IFRS basis) are used for the relevant target. The target for FY2023 is
38.5 billion yen.

Factor
2.0

The Company’s basic policy is to appropriately return profits.
Hence, while maintaining and enhancing its sound financial
standing, the Company strives to provide stable dividends andtarget a consolidated dividend payout ratio of no less than 30%,
taking profit levels, future capital investment, free cash flow
trends, and other such factors into consideration. The Company
also considers the option of purchasing its own shares asappropriate in order to improve capital efficiency and flexibly
implement a capital policy.

1.0

Cross-shareholdings

Method to calculate a performance-linked factor
Performance achievement rate

Performance-linked factor

200% or more

20% or more but less than 200%

Actual results ÷ Target

Less than 0%0Illustrative graph of changes in a performance-linked factor

0

0%

100%

200% Performance achievement rate

Note: When performance achievement rate is 0, the performance-linked factor is 0 (0%),
and when performance achievement rate is 200% or more, the performancelinked factor is 2.0 (200%).

Non-executive Directors
Remuneration, etc.
for non-executive Directors

Basic remuneration
Restricted stock(d) Restricted stock (non-performance-linked
stock-based remuneration)

In order for non-executive Directors to strengthen ouraggressive and defensive governance from a different standpointfrom executives as the representatives of stakeholders and toengage in management from a medium- to long-term perspective,
we have adopted a restricted stock system in which our sharesare issued in a manner that is not linked to performance, and theshares are issued upon their retirement from office.

Basic capital policy

The Company believes that any increase in free cash flow
and improvement in ROE should help to ensure its sustainablegrowth and increase corporate value over the medium to long74

Shareholder return policy(1) Holding policy
In principle, the Group will not newly acquire crossshareholdings (cross-shareholdings are holdings of listed andunlisted shares other than those of subsidiaries and associates
which are not held for pure investment purposes). However,this does not apply to shares where it has been recognized that
Changes in the number of cross-shareholdings(listed shares excluding deemed holdings)
Amount recorded in the consolidated statement of financial position (market value)
Number of stocks held(¥100 million)(No. of stocks)

100

50

41

80

40

60
40

86

20
0

40
2018

30

26

2019

23
44

2020

21

33
2021

16
29
2022

20
10
0

they are necessary for the promotion of the Group’s businessstrategies and that the holding of such shares will contributeto the increase of corporate value in the medium to long term
through the validation of rationale for holding them. For example,
in the case where we were requested to hold shares for the
purpose of local revitalization, from the perspectives of initiatives
for “coexistence with local communities,” which is one of ourmaterialities for the promotion of sustainability management, we
would consider holding such shares upon sufficient examinationof the suitability of holding them by the executive team and mighthold them. Among the shares already held by the Company, forlisted shares (including retirement benefit trust shares) for which
there is judged to be no rationale for holding upon validation, we
will negotiate with corporate customers and business partners andappropriately reduce them upon reaching a consensus regarding
sale method, period, etc. For unlisted shares, the executive teamdiscussed whether or not to continue holding them with a viewto selling and reducing holdings. Since fiscal 2021, we haveconfirmed the suitability of holding all shares in the same way aslisted shares from both qualitative and quantitative perspectives
and strengthened our efforts to reduce holdings.

(2) Validation of rationale for holding
Every year, the Board of Directors validates the rationale forholding individual stocks from both quantitative and qualitative
perspectives. The qualitative perspective relates to businessstrategies such as maintaining harmonious and favorable
business relationships with corporate customers and business
partners and securing supply chains. The quantitative perspective
relates to whether revenue from holding shares, including related
trading profits and dividends, exceeds capital costs, etc.
(3) Policy on exercising voting rights
We determine whether to exercise our voting rights
considering both whether such exercise will contribute to thesustainable growth and the medium- to long-term enhancementof corporate value of the company whose shares we hold andwhether such exercise will contribute to the sustainable growth
and the medium- to long-term enhancement of corporate
value of the Group. Particularly, in regard to proposals that we
consider to be of high priority with respect to strengthening
corporate governance, such as proposals relating to thecorporate governance system (selection of officers), proposals
relating to shareholder return (appropriation of surplus), andproposals that have an impact on shareholder value (introductionof takeover defense measures), we will establish policies uponwhich to base judgment of our exercise of voting rights, andacting as the Group as a whole, we will respond to them in linewith such policies. We will engage in dialogue with companies
whose shares we hold if necessary.
Qualitative
validation
To be reduced

The Company issues its shares to Executive Officers inconjunction with the consolidated performance achievement
rate set forth in the Medium-term Business Plan in order toachieve sustainable growth of the Group and increase corporate
value over the medium to long term. Sixty percent of the total
performance-linked stock-based remuneration is to be issued
in a single issuance at the end of the Medium-term Business
Plan and the remaining 40% is to be issued annually in order topromote management from the shareholders’ perspective.

term. To such ends, the Company promotes a capital policy thattakes a balanced approach to “undertaking strategic investment,”“enhancing shareholder returns,” and “expanding equity capital”
after taking into consideration the business environment and risk
readiness. Moreover, our basic policy is to procure funds throughinterest-bearing liabilities by taking into account the ability togenerate free cash flow and the balance of the interest-bearing
liabilities and we aim to achieve an optimal structure of debt
to equity in a manner cognizant of our funding efficiency andcost of capital. A “business strategy” where we achieve sales
growth with profitability and a “financial strategy (encompassing
the capital policy)” that increases return on invested capital(ROIC) are essential to improve free cash flow and ROE. In
addition, we believe it is important to maximize operating profit
and sustainably improve operating margin by strengthening
our core businesses and concentrating management resources
on initiatives such as business field expansion and active
development of new businesses. As the key financial indicators
for the achievement of the Medium-term Business Plan, we
focus on ROE for capital efficiency, consolidated operating profit
and ROIC for business profitability, free cash flow for profitability
and safety, and the ratio of equity attributable to owners ofparent (equity ratio) for financial soundness.

Quantitative
validation

Comprehensive
judgement

Continue to hold

There isrationale
There isno rationale

Improvement of Shareholders Meetings

In order to engage in constructive dialogue with shareholders,the Company posts the materials of the Shareholders
Meetings on the websites of the Company and financial
instruments exchanges, etc., as soon as practicable prior tothe commencement date of electronic provision measures as
stipulated in the Companies Act (three weeks prior to the dateof the Shareholders Meeting or the date of dispatch of the noticeof convocation, whichever is earlier), so that shareholders havesufficient time to consider the proposals for exercising theirvoting rights. The materials for the 16th Annual Shareholders
Meeting were disclosed on the websites of financial instruments
exchanges and the Company approximately five weeks prior
to the date of the meeting. In addition, for the convenienceof shareholders, including domestic and foreign institutional
investors, in exercising their voting rights, the Company has
introduced voting via the Internet and other means, as well
as utilizing an electronic voting platform. In addition, we have
prepared English translations of the materials of the Shareholders
Meetings and disclose them on our website and electronic voting
platform so that foreign shareholders can exercise their voting
rights appropriately. We also strive to ensure that shareholders,
including those living in remote areas, have opportunities
to participate in and observe the Shareholders Meetings bylivestreaming them and accepting questions in advance online.

Major dialogue activities with investors in FY2022
Dialogue opportunity
Financial results presentations for institutional investors
and analysts (Q2, Q4)

No. of times
2

Remarks
Video conferences and conference calls. Videos are available in both Japanese and English on
demand on the Company’s website. The summaries of their Q&A sessions are also available in both
Japanese and English.
Conference calls. The summaries of their Q&A sessions are also available in both Japanese andEnglish.

Earnings calls for institutional investors and analysts(Q1, Q3)

2

Small meetings for institutional investors and analysts

12

Hybrid of physical and video conferences for the sell side, video conferences for others

Outside Directors small meeting for institutional investors

1

Video conference

Business strategy presentation for institutional investors
and analysts

1

ESG presentation for institutional investors and analysts

1

Overseas IR

27

Video conference

Conferences for overseas investors hosted by securities
companies

28

Video conferences hosted by 4 securities companies

Meetings for individual institutional investors

152

Some were physical meetings, but mainly video conferences and conference calls

Store tours

2

At GINZA SIX

Presentations for individual investors3

Two video conferences and one physical presentation

Video conference. Video is available in both Japanese and English on demand on the Company’s
website. The summary of its Q&A session is also available in both Japanese and English.
Video conference. Outside Director also gave a presentation. Video is available in both Japanese andEnglish on demand on the Company’s website. The summary of its Q&A session is also available inboth Japanese and English.

75Values and Vision

Value Creation

Management Strategy

Sustainability

Governance

Data

GovernanceCorporate Governance

External recognition for IR activities

Disclosure and IR activities

The Company was awarded the Runner-up Grand Prix at the
NIKKEI Integrated Report Award 2022 (sponsored by Nikkei Inc.).

Risk management

We have a Compliance Committee (whose members
include a corporate lawyer) to ensure proper handlingof issues on the Group’s compliance management. The
committee is chaired by the President and Representative
Executive Officer. Working closely with the divisions
in charge of promotion of compliance, the committee
builds the foundation of the compliance structure andoversees the status of operation on a continuous basis,and promotes compliance with laws, the corporate ethics,
and other rules. In serious non-compliance cases, thecommittee sets a policy on how to respond to them. The
matters discussed by the committee are reported to the
Audit Committee on a regular and timely basis.

JFR Group Risk List

JFR Group Compliance Hotline

We have a whistleblowing system that enables all officers
and employees of the Group and all individuals working
for the Group (including part-time workers and temporary
staff from suppliers) to notify the Compliance Committee
directly of any compliance issues and seek corrective action.
We have points of contact for whistleblowers both insideand outside (a corporate lawyer) the Company. Regarding
this whistleblowing system, the Group’s internal rules
include rigorous provisions ensuring the protection of thewhistleblower’s privacy and prohibiting disadvantageous
treatment of the whistleblower.
Types of reports
Breach of rules

Harassment

Finance risk

Labor affairs(No. of reports)

50

9

40

5

30
20
10
0

13

10

21

9

8
6
2018

5

22

10

10

15

2019

2020

2021

18

Hazard risk

The Group defines risk as “uncertainties that have both
positive and negative sides that could have an impact on
the achievement of business management goals.” We havepositioned risk management as an “activity that increases
corporate value by managing risks by reasonable and optimal
methods from a company-wide perspective” to achievesustainable corporate growth by addressing the positive andnegative sides of risk properly. The Company has established
the Risk Management Committee as an advisory body to the
President and Representative Executive Officer. The committee
discusses important matters, including the extraction andevaluation of risks and the determination of risks to be reflectedin strategies, and utilizes risk management for management
decision-making. The committee also reports details of its
deliberations to the Board of Directors in a timely manner.
Furthermore, in order to effectively perform risk management, wehave established the following three lines.
(i) First line: Business execution divisions such as operating
subsidiaries. These divisions identify risks andtake the necessary measures on their own.
(ii) Second line: The holding company’s divisions. Each division
provides support, guidance, and monitoring
regarding risk management from a perspective
which is independent of the business execution
divisions.
(iii) Third line: Internal audit division. This division oversees
the validity of the risk management functions
and the internal control system from aperspective which is independent of thebusiness execution divisions and each divisionof the holding company.
While identifying “corporate risks” (see page 33), which serve asa starting point for the FY2021 to FY2023 Group Medium-term
Business Plan, the risks for the fiscal year identified in response
are summarized in the JFR Group Risk List.

Compliance

Strategy risk

Based on the Basic Mission Statement that we aim atdeveloping the Group by contributing to society at large as afair and reliable corporation, we seek to maintain and advancetrustworthy relationships with shareholders, investors,
and other stakeholders. To this end, we disclose important
information relevant to the Company in an accurate, clear, fair,timely, and appropriate manner in order to raise managementtransparency and deepen understanding of the Company.
This is what we aim for in carrying forward IR activities. We
disclose any important information of the Company which is
subject to the Timely Disclosure Rules via the Tokyo Stock
Exchange’s Timely Disclosure network (TDnet) and make its
content available on our website, etc. as soon as possible.
For any information which is not subject to the Timely
Disclosure Rules but which we think will help deepen
understanding of the Company, we try to make suchinformation widely known by posting it on our website,
publicizing Integrated Reports, and by other means. We
disclose information timely and appropriately by using TDnet,
EDINET, Sustainability Reports, and our website according
to the nature of information to be disclosed. To ensure
the fairness of information disclosure, we prepare English
translations and disclose them for: the Notices of Convocationof Shareholders Meeting, Integrated Reports, Annual
Securities Reports, timely disclosure information, financial
results information, Sustainability Reports, and our website.
We disclose on our website as soon as possible
presentation videos, materials, and Q&A summary texts
for financial results presentations, business strategy
presentations, ESG presentations, etc. and Q&A summary
texts for earnings calls, both in Japanese and English. In
addition to the provision of information through timely
disclosure, our website, and others, we organize a rangeof briefings and meetings and respond to inquiries fromshareholders and investors on a daily basis, seeking toenhance communication with them.
Opinions and requests from shareholders and investors areshared widely at the Company and relevant companies in theGroup through feedback opportunities from the IR divisionand other means, and we use them for reference in corporate
management toward increasing corporate value.

18

Audit Committee

Internal Audit Division

Consultation/report

Risk Management Committee

Compliance Committee

Management Planning Division(responsible for internal control/risk management)

Cooperation

JFR Group Compliance Hotline
Contact: Internal/corporate lawyer

Legal Division(responsible for the Group compliance)
Report/response

Workers including those from suppliers

76

The Group companies

Instruction/report

Instruction/report

Operation risk

President and Representative
Executive Officer

Manifestation of geopolitical and geoeconomic risks

2

Combination of COVID-19 measures and economic normalization

3

Changes in economic conditions

4

Transformation of existing businesses using technologies

5

Sophistication of marketing with use of data

6

Need for a cloud-native development and operation environment

7

Advancement of cashless payment

8

Streamlining of operations through digitalization

9

Demand for corporate value enhancement by realizing CSV

10Communication and dissemination of the Basic Mission
Statement and the Group Vision11

Progress of corporate governance reform

12

Response to environmental issues such as climate change

13

Response to social issues such as human rights risk

14

Paradigm shift in work style and organizational structure

15

Acceleration of open innovation

16

Acquisition, development, placement, and use of strategicallyfit professional human resources

17

Engagement with investors through IR/SR activities

18

Effectiveness of public relations activities

19

Increase in ROIC and study on optimal capital structure

20

Securing funds for strategic investments

21

Fraud or error in financial statements, delay in timely disclosure

22

Asset impairment and response to tax effect accounting

23

Response to tax reforms and new accounting standards

24

Normalization of natural disasters, buildings hit by disasters,
breakdown of infrastructure

25

Increasing severity and shortening of spread of epidemics

26

Accidents or equipment failure such as fire and electric leakage,
substandard safety management of buildings and equipment

27

Food poisoning, injury, and accident (as either offender or victim)

28

System failure and unauthorized access through cyberattack

29

Troubles with system managed by third party

30

Shortfall and delay in Business Continuity Management (BCM)

31

Non-compliance with reporting lines and inadequate public
relations management when important matters happen

32

Lack of proper labor management such as employee healthmanagement (including non-Japanese and disabled employees)

33

Aggravated operation of retirement benefits and pension systems

34

Transactions with antisocial forces

35

Transactions and operations in non-compliance with laws andregulations such as the Subcontract Act and the Anti-Monopoly Act

36

Fraudulent or illegal acts by officers and employees
Flaw in compliance system, including deterioration of ethics

37

Improper handling of personal information, leakage ofconfidential information

38

Leakage of insider information

39

Inadequate management of the quality of products andservices and procurement costs

40

Inadequate outsourcing management

41

Shortcomings in contract management

42

Bankruptcy and default of suppliers and customers

2022

Risk management and compliance system diagram
Board of Directors

177