Annual Securities Report(Report in accordance with Article 24, paragraph (1) of
the Financial Instruments and Exchange Act)The 14th fiscal year (from March 1, 2020 to February 28, 2021)

J. FRONT RETAILING Co., Ltd.
E03516

Table of Contents
Annual securities report for the 14th fiscal year
Cover pageA.

Company Information .........................................................................................................................................4I.

Overview of the Company ............................................................................................................................. 4
1.

Summary of business results...................................................................................................................... 4

2.

Company history........................................................................................................................................ 7

3.

Description of business .............................................................................................................................. 94.

Overview of subsidiaries and associates ...................................................................................................11

5.

Information about employees .................................................................................................................. 13

II.

Overview of Business .................................................................................................................................. 14
1.

Management policy, management environment, issues to be addressed, etc........................................... 14

2.

Business risks........................................................................................................................................... 21

3.

Management analysis of financial position, operating results and cash flows......................................... 56

4.

Critical contracts for operation ................................................................................................................ 64

5.

Research and development activities ....................................................................................................... 64

III. Information About Facilities ........................................................................................................................ 65
1.

Overview of capital expenditures, etc...................................................................................................... 65

2.

Major facilities ......................................................................................................................................... 65

3.

Planned additions, retirements, etc. of facilities ...................................................................................... 67

IV. Information About Reporting Company ...................................................................................................... 68
1.

Company’s shares, etc. ............................................................................................................................ 682.

Acquisition and disposal of treasury shares ............................................................................................. 73

3.

Dividend policy ....................................................................................................................................... 74

4.

Status of corporate governance, etc. ........................................................................................................ 75

V.

Financial Information ................................................................................................................................ 128
1.

Consolidated Financial Statements, etc. ................................................................................................ 129

2.

Non-consolidated Financial Statements, etc. ......................................................................................... 202

VI. Outline of Share-Related Administration of Reporting Company ............................................................. 212
VII. Reference Information of Reporting Company ......................................................................................... 215

B.

1.

Information about parent company, etc. of reporting company ............................................................. 215

2.

Other reference information................................................................................................................... 215

Information About Reporting Company’s Guarantor, Etc. .............................................................................216

Independent Auditor’s ReportCover page
Document title

Annual Securities Report

Clause of stipulation

Article 24, paragraph (1) of the Financial Instruments and Exchange Act

Place of filing

Director-General of the Kanto Local Finance Bureau

Filing date

May 28, 2021

Fiscal year

The 14th fiscal year (from March 1, 2020 to February 28, 2021)

Company name

Ｊ.フロントリテイリング株式会社 (J. FRONT RETAILING
Kabushiki Kaisha)Company name in English

J. FRONT RETAILING Co., Ltd.

Job title and name of representative

YOSHIMOTO Tatsuya, President and Representative Executive Officer

Address of registered headquarters

10-1, Ginza 6-chome, Chuo-ku, Tokyo(Above is the address registered as the location of the head office of theCompany. Actual business operations are conducted at the following“Nearest place of contact.”)

Telephone number+81-3-6895-0179 (from overseas)

Name of contact person

IWATA Yoshimi, Executive Officer, Senior General Manager of
Accounting and Tax Affairs Division of Financial Strategy Unit

Nearest place of contact

4-1, Nihonbashi 1-chome, Chuo-ku, Tokyo

Telephone number+81-3-6895-0179 (from overseas)

Name of contact person

IWATA Yoshimi, Executive Officer, Senior General Manager of
Accounting and Tax Affairs Division of Financial Strategy Unit

Place for public inspection

Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi Kabutocho, Chuo-ku, Tokyo)
Nagoya Stock Exchange, Inc.
(8-20, Sakae 3-chome, Naka-ku, Nagoya)

A.

Company Information

I. Overview of the Company
1. Summary of business results(1) Business results of the GroupInternational Financial Reporting Standards (IFRS)

Term

10th fiscal year

11th fiscal year

12th fiscal year

13th fiscal year

14th fiscal year

February 2017

February 2018

February 2019

February 2020

February 2021

452,505

469,915459,840

480,621319,079

Profit (loss) before tax(Millions of yen)

42,60848,271

42,126

37,161(28,672)

Profit (loss) attributable toowners of parent(Millions of yen)

27,052

28,48627,35821,251(26,193)

Comprehensive income
attributable to owners of parent(Millions of yen)

31,39334,45025,631

19,259(27,296)

Equity attributable to owners ofparent(Millions of yen)

368,571395,519

412,700

387,188352,171

1,005,069

1,022,348

1,029,573

1,240,308

1,263,722

1,409.20

1,511.91

1,576.68

1,479.07

1,344.91

103.43108.92104.5581.19(100.03)103.43108.86104.52

81.17–

Ratio of equity attributable toowners of parent to total
assets
(%)

36.7

38.7

40.1

31.2

27.9

Profit/equity attributable toowners of parent (ROE)

7.6

7.5

6.8

5.4

(7.1)

Price earnings ratio (PER)(Times)

16.69

17.91

11.79

14.13

–

Net cash provided by (used in)operating activities(Millions of yen)

33,76457,07934,87073,35856,471

Net cash provided by (used in)investing activities(Millions of yen)

(27,952)(19,030)(26,836)(49,559)(20,870)

Net cash provided by (used in)financing activities(Millions of yen)

(2,097)(31,048)(21,274)(14,829)58,727

Cash and cash equivalents at endof period(Millions of yen)

31,86738,88325,65934,633

128,925

6,871

6,723

6,695

6,579

6,528

[3,861][3,706][3,581][3,265][3,107]

Fiscal year-end
Sales revenue(Millions of yen)

Total assets(Millions of yen)
Equity attributable to owners ofparent per share(Yen)
Basic earnings (loss) per
share

(Yen)

Diluted earnings per share
(Yen)

(%)

Number of employees(Persons)[Separately, average number of
temporary employees]
Notes:

1.
2.
3.
4.
5.
6.

The Company has adopted the International Financial Reporting Standards (IFRS) from the 11th fiscal year.
Amounts have been rounded down to the nearest one million yen.
Sales revenue does not include consumption taxes.
The average number of temporary employees includes dedicated employees and fixed-term employees.
Diluted earnings per share for the 14th fiscal year are not presented because there were no potential shares that havedilutive effects.
The price earnings ratio (PER) for the 14th fiscal year is not presented because a loss attributable to owners of parent
was recorded.

-4-

Japanese GAAP

Term

10th fiscal year

11th fiscal year

February 2017

February 2018929,546

947,879

44,42541,032

Profit attributable to owners ofparent(Millions of yen)

26,95026,110Comprehensive income(Millions of yen)

33,42536,695465,839493,713

1,050,109

1,066,480

1,553.60

1,651.46

103.0499.83

103.04

–

38.7

40.5

6.8

6.2

Price earnings ratio (PER)(Times)

16.75

19.54

Net cash provided by (used in)operating activities(Millions of yen)

36,23957,001

Net cash provided by (used in)investing activities(Millions of yen)

(30,353)(18,719)

Net cash provided by (used in)financing activities(Millions of yen)

(2,189)(31,280)

Cash and cash equivalents at endof period(Millions of yen)

31,84638,863

6,871

6,723

[3,861][3,706]

Fiscal year-end
Net sales(Millions of yen)
Ordinary profit(Millions of yen)

Net assets(Millions of yen)
Total assets(Millions of yen)
Net assets per share(Yen)
Basic earnings per share(Yen)
Diluted earnings per share(Yen)
Equity ratio(%)
Return on equity (ROE)(%)

Number of employees(Persons)[Separately, average number of
temporary employees]
Notes:

1.
2.
3.

4.

5.

Net sales do not include consumption taxes.
The average number of temporary employees includes dedicated employees who shifted to non-fixed term contracts
and fixed-term employees.
Effective from the 10th fiscal year, the Company changed the presentation of tenant sales in the PARCO Business fromgross to net, and the presentation of store operating expenses borne by tenants from the method of deducting the itemfrom “Selling, general and administrative expense” to including it in “Net sales.” In addition, the Company haschanged the presentation of store operating expenses from the method of including that item in “Selling, general andadministrative expense” to that of including it in “Cost of sales.”The Company has applied the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September
13, 2013) and other accounting standards. Accordingly, “Profit” is represented as “Profit attributable to owners ofparent” from the 10th fiscal year.
The figures for the 11th fiscal year are based on Japanese GAAP and were not subject to an audit pursuant toprovisions of Article 193-2, paragraph (1) of the Financial Instruments and Exchange Act.

-5-

(2) Business results of the reporting company
Term

10th fiscal year

11th fiscal year

12th fiscal year

13th fiscal year

14th fiscal year

Fiscal year-end

February 2017

February 2018

February 2019

February 2020

February 2021

13,646

14,776

18,77034,116

13,812

9,750

9,892

13,98728,163

8,849

8,702

8,579

13,897

27,948

7,487

30,00031,974

31,974

31,974

31,974

268,119,164

270,565,764

270,565,764

270,565,764

270,565,764

305,105

305,802

310,329

328,871329,351434,921421,361

415,927

531,341

675,917

1,166.55

1,169.25

1,186.13

1,256.46

1,258.07

28.00

35.00

35.00

36.00

27.00

[14.00][16.00][17.00][18.00][9.00]

33.27

32.80

53.12

106.80

28.60

33.27

–

–

–

–

70.2

72.6

74.6

61.9

48.7

2.86

2.81

4.51

8.74

2.28

51.88

59.48

23.21

10.74

35.56

84.15

106.71

65.89

33.71

94.41

97

99

132

147

133

[13]

[15]

[19]

[17]

[17]

133.3

153.0

101.0

97.3

89.5

[120.9][142.2][132.2][127.3][161.0]

1,792

2,190

1,944

1,612

1,175

1,010

1,426

1,184

1,116

600

Operating revenue(Millions of yen)
Ordinary profit(Millions of yen)
Profit(Millions of yen)
Share capital(Millions of yen)
Total number of issued
shares(Shares)

Net assets(Millions of yen)
Total assets(Millions of yen)
Net assets per share(Yen)
Dividends per share(Yen)[Interim dividends per share]
Basic earnings per share(Yen)
Diluted earnings per share(Yen)
Equity ratio(%)
Return on equity (ROE)(%)
Price earnings ratio (PER)(Times)Dividend payout ratio(%)
Number of employees(Persons)[Separately, average number of
temporary employees]
Total shareholder return(%)[Benchmark index: Dividendincluded TOPIX](%)
Highest share price(Yen)
Lowest share price(Yen)
Notes:

1.
2.
3.

Operating revenue does not include consumption taxes.
The dividends per share of ¥35 for the 11th fiscal year include a commemorative dividend of ¥2.
The highest and lowest share prices were those recorded on the first section of the Tokyo Stock Exchange.

-6-2. Company history
Apr. 9, 2007

May 24, 2007

Sept. 3, 2007

Nov. 1, 2007
Sept. 1, 2008

Jan. 1, 2009
Mar. 1, 2009
Dec. 1, 2009
Mar. 1, 2010

Sept. 1, 2010

Mar. 1, 2011

Mar. 30, 2011
Jan. 4, 2012
Mar. 23, 2012
Aug. 20, 2012
Aug. 27, 2012

Sept. 3, 2012

Apr. 1, 2013
Aug. 31, 2013
Dec. 20, 2013

The Daimaru, Inc. and Matsuzakaya Holdings Co., Ltd. resolve at their meetings of theBoard of Directors to jointly establish a holding company through a share transfer,
subject to the approval at their respective Annual Shareholders Meetings, and at the sametime to prepare a “Share Transfer Plan” and conclude an “Agreement on Business
Integration.” The details of the proposals regarding the share transfer to be submitted to
the respective Annual Shareholders Meetings are resolved at the meetings of the Boardsof Directors of both companies.
At the Annual Shareholders Meetings of both companies, it is resolved that the twocompanies would become the holding company’s wholly owned subsidiaries by way of
joint share transfer.
The two companies establish the Company by way of a share transfer.
The Company’s common shares are listed on Tokyo Stock Exchange, Inc., Osaka
Securities Exchange Co., Ltd., and Nagoya Stock Exchange, Inc.
The Company merges with and absorbs Matsuzakaya Holdings Co., Ltd.
Daimaru Design & Engineering Co., Ltd. merges with three other companies, Daimaru
Mokko Co., Ltd., Matsuzakaya Seiko Co., Ltd., and Refex Japan, Inc., and changes thecompany name to J. Front Design & Construction Co., Ltd. Dimples’ Co., Ltd. merges
with and absorbs Daimaru Sales Associates Co., Ltd.
Matsuzakaya Co., Ltd. merges with and absorbs Yokohama Matsuzakaya Co., Ltd.,
which ceased its operations on October 26, 2008.
Restaurant Peacock Co., Ltd. merges with and absorbs Shoei Foods Co., Ltd. andchanges the company name to J. Front Foods Co., Ltd.
JFR Service Co., Ltd. (renamed from Matsuzaka Services Co., Ltd. on September 1,2009) merges with and absorbs Daimaru Lease & Service Co., Ltd.
Matsuzakaya Co., Ltd. merges with and absorbs The Daimaru, Inc. and changes thecompany name to Daimaru Matsuzakaya Department Stores Co. Ltd.
J. Front Design & Construction Co., Ltd. merges with and absorbs DHJ Co., Ltd.
The Company establishes JFR Consulting Co. Ltd.
The Daimaru Tomonokai, Inc. merges with and absorbs Matsuzakaya Tomonokai Co.,
Ltd. and changes the company name to Daimaru Matsuzakaya Tomonokai Co., Ltd.
The Daimaru Home Shopping, Inc. takes over part of the direct marketing business split
off from Daimaru Matsuzakaya Department Stores Co. Ltd. and changes the company
name to JFR Online Co. Ltd.
The Company acquires shares of StylingLife Holdings Inc. and makes it an associateaccounted for using the equity method.
Daimaru Kogyo, Ltd. establishes Daimaru Kogyo (Thailand) Co., Ltd.
The Company acquires shares of PARCO Co., Ltd. and makes it an associate accounted
for using the equity method.
The Company establishes JFR PLAZA Inc.
The Company acquires additional shares of PARCO Co., Ltd., making PARCO Co., Ltd.
and its five subsidiaries consolidated subsidiaries of the Company, and also making two
subsidiaries and one associate of PARCO Co, Ltd. associates accounted for using theequity method.
The Company splits off the commissioned sales business operated by Dimples’ Co., Ltd.,and Daimaru Matsuzakaya Sales Associates Co. Ltd., which established the saidbusiness, takes over the business.
On the same day, Dimples’ Co., Ltd. transfers all of its shares in Daimaru Matsuzakaya
Sales Associates Co. Ltd. to Daimaru Matsuzakaya Department Stores Co. Ltd., andDaimaru Matsuzakaya Sales Associates Co. Ltd. becomes a subsidiary of Daimaru
Matsuzakaya Department Stores Co. Ltd.
The Company transfers all shares in Peacock Store Ltd. to Aeon Co., Ltd.
Liquidation of Imabari Daimaru Co., Ltd. is completed.
The Company acquires shares of Forest Co., Ltd. and makes it a consolidated subsidiary.
-7-

Feb. 24, 2014
Aug. 18, 2014
Jan. 7, 2015
Apr. 22, 2015
May 7, 2015
Dec. 17, 2015
Sept. 1, 2016

Mar. 1, 2017
Aug. 31, 2017
Dec. 31, 2017
Feb. 26, 2018

Jul. 2, 2019
Dec. 9, 2019

Mar. 1, 2020Feb. 26, 2021

Liquidation of Central Park Building Co., Ltd. is completed.
Liquidation of Parco Consulting (Suzhou) Co., Ltd. is completed.
Daimaru Kogyo, Ltd. establishes Taiwan Daimaru Kogyo, Ltd.
The Company acquires shares of Senshukai Co., Ltd.
The Company acquires additional shares of Senshukai Co., Ltd. and makes it an associateaccounted for using the equity method.
Daimaru Matsuzakaya Department Stores Co. Ltd. transfers all shares of Hakuseisha Co.,
Ltd. to AEON DELIGHT CO., LTD.
Daimaru Matsuzakaya Department Stores Co. Ltd. merges with and absorbs Daimaru
COM Development Inc.
JFR Service Co. Ltd. merges with and absorbs JFR Office Support Co., Ltd. and JFRConsulting Co. Ltd.
JFR Online Co. Ltd. transfers all its business operations to Feel Life Inc., a wholly
owned subsidiary of Senshukai Co., Ltd.
The Company transfers all shares of Forest Co., Ltd. to EDION Corporation.
Liquidation of JFR PLAZA Inc. is completed.
Senshukai Co., Ltd. is excluded from the scope of associates accounted for using theequity method due to the Company’s agreement upon the purchase of treasury shares by
Senshukai Co. Ltd.
Liquidation of JFR Online Co. Ltd. is completed.
Daimaru Matsuzakaya Department Store Co., Ltd. acquires a part of the preferred sharesof Ginza 6-chome Kaihatsu Tokutei Mokuteki Kaisha (G6TMK) through Ginza 6-chome
Shogyo Godo Kaisha and makes it an associate accounted for using the equity method.
Daimaru Matsuzakaya Department Stores Co. Ltd. merges with and absorbs The
Shimonoseki Daimaru, Inc.
The Company transfers all shares in J. Front Foods Co., Ltd. to Dancin’ Diner co., ltd.

-8-

3. Description of business
The corporate group, of which the Company is the pure holding company, consists of 38 companies (including theCompany). Its principal business is the Department Store Business, and its other businesses include the PARCO
Business, the Real Estate Business, the Credit Finance Business, wholesaling, commissioned back-office service,leasing, parking, design and construction contracting, etc.
The Company is a specified listed company. As a result of falling under the category of specified listed company,
the criteria for insignificant material events under the insider trading regulations will be determined based on
consolidated figures.
Description of business, etc.

Names of major Group companies

Number of companies

Department Store Business

Daimaru Matsuzakaya Department Stores Co. Ltd., The
Hakata Daimaru, Inc., and Kochi Daimaru Co., Ltd.

Consolidated subsidiaries: 3

Real Estate Business

Daimaru Matsuzakaya Department Stores Co. Ltd. andPARCO Co., Ltd.

Consolidated subsidiaries: 3
Associates: 3

PARCO Business

PARCO Co., Ltd., PARCO (SINGAPORE) PTE LTD,NEUVE A Co., Ltd., PARCO SPACE SYSTEMS Co., Ltd.,PARCO Digital Marketing Co., Ltd., and JAPAN RETAILADVISORS Co., Ltd.

Consolidated subsidiaries: 6
Associates: 2

Credit Finance Business

JFR Card Co., Ltd.

Consolidated subsidiaries: 1

Wholesale Business

Daimaru Kogyo, Ltd., Daimaru Kogyo International Trading(Shanghai) Co., Ltd., Daimaru Kogyo (Thailand) Co., Ltd., Consolidated subsidiaries: 4
and Taiwan Daimaru Kogyo, Ltd.

Commissioned back-officeservice, real estate leasing,parking and leasing

JFR Service Co. Ltd. and Angel Park Co., Ltd.

Consolidated subsidiaries: 2
Associates: 1

Design and construction
contracting

J. Front Design & Construction Co., Ltd.

Consolidated subsidiaries: 1

Other

Dimples’ Co., Ltd., Consumer Product End-Use ResearchInstitute Co., Ltd., JFR Information Center Co., Ltd.,
Daimaru Matsuzakaya Sales Associates Co. Ltd., andDaimaru Matsuzakaya Tomonokai Co., Ltd.

Consolidated subsidiaries: 5
Associates: 2-9-Our business structure is shown below.

Notes:

1.
2.
3.
4.

Companies marked with an asterisk (*) are equity method associates.
In segment information, wholesaling, design and construction contracting, parking, leasing, etc. are shown together as“Other.” The other businesses are categorized in accordance with the segments.
Daimaru Matsuzakaya Department Stores Co. Ltd. merged with and absorbed The Shimonoseki Daimaru, Inc. on
March 1, 2020.
The Company transferred all shares of J. Front Foods Co., Ltd. on February 26, 2021.

- 10 -

4. Overview of subsidiaries and associates
Ratio of voting
rights holding(held)(%)

Address

Capital(Millions ofyen)

Major businesses

Daimaru Matsuzakaya
Department Stores Co. Ltd.
(Notes 3 and 4)

Koto-ku, Tokyo

10,000Department StoreBusiness, Real EstateBusiness

100.0

The Hakata Daimaru, Inc.

Chuo-ku, Fukuoka

3,037

Department StoreBusiness

69.9[69.9]

Kochi Daimaru Co., Ltd.

Kochi, Kochi

300

Department StoreBusiness

100.0[100.0]PARCO Co., Ltd.
(Notes 3 and 4)

Toshima-ku, Tokyo

34,367

PARCO Business,
Real Estate Business

100.0

Name

Relationship(Consolidated subsidiaries)

PARCO (SINGAPORE) PTE
Singapore
LTD

Millions ofSingapore
PARCO Businessdollars
4

Interlocking of
officers: 5 persons
Lending of funds

Interlocking of
officers: 4 persons
Lending of funds

100.0[100.0]NEUVE A Co., Ltd.

Shibuya-ku, Tokyo

100

PARCO Business

100.0[100.0]PARCO SPACE SYSTEMS
Co., Ltd.

Shibuya-ku, Tokyo

490

PARCO Business

100.0[100.0]PARCO Digital Marketing
Co., Ltd.

Shibuya-ku, Tokyo

10

PARCO Business

100.0[100.0]JAPAN RETAIL ADVISORS
Shibuya-ku, Tokyo
Co., Ltd.

10

PARCO Business

100.0[100.0]JFR Card Co., Ltd.

Takatsuki, Osaka

100

Credit FinanceBusiness

100.0Interlocking of
officers: 3 persons
Lending of funds

Daimaru Kogyo, Ltd.

Chuo-ku, Osaka

1,800

Other (Wholesale)

100.0Interlocking of
officers: 2 persons

Daimaru Kogyo International
Shanghai, China
Trading (Shanghai) Co., Ltd.

Millions of US
dollars Other (Wholesale)2

100.0[100.0]

Daimaru Kogyo (Thailand)Co., Ltd.

Millions of Thaibaht Other (Wholesale)
202

99.9
[99.9]

Millions of New
Taiwan dollars Other (Wholesale)
60

100.0
[100.0]

Bangkok, Thailand

Taiwan Daimaru Kogyo, Ltd. Taipei, Taiwan
J. Front Design &Construction Co., Ltd.

Chuo-ku, Osaka

100

Other (Design andconstruction
contracting)

100.0Interlocking of
officers: 3 persons

Dimples’ Co., Ltd.

Chuo-ku, Osaka

90

Other (Staffing
service)

100.0Interlocking of
officers: 2 persons

Consumer Product End-Use
Research Institute Co., Ltd.

Nishi-ku, Osaka

100

Other (Merchandise
test and quality
control)

100.0Interlocking of
officers: 1 person

Angel Park Co., Ltd.

Naka-ku, Nagoya

400

Other (Parking)

50.2[49.8]

Interlocking of
officers: 2 persons

JFR Service Co. Ltd.

Koto-ku, Tokyo

100

Other (Commissioned
back-office service,
parking and leasing)

100.0Interlocking of
officers: 1 person
Lending of funds

JFR Information Center Co.,Ltd.

Tennoji-ku, Osaka

10

Other (Information
service)

100.0Interlocking of
officers: 1 person

Daimaru Matsuzakaya Sales
Associates Co. Ltd.

Koto-ku, Tokyo

90

Other (Commissioned
sales and store
operations)100.0[100.0]Interlocking of
officers: 1 person- 11 -

Address

Capital(Millions ofyen)

Major businesses

Ratio of voting
rights holding(held)(%)

Chuo-ku, Osaka

100

Other
(Specified prepaid
transaction service)

100.0[100.0]Shinsaibashi Kyodo Center
Building, K.K.

Chuo-ku, Osaka

50

Real Estate Business(Real estate leasing)

50.0[50.0]

StylingLife Holdings Inc.

Shinjuku-ku, Tokyo

100

Other (Generalretailing)

49.0

Real Estate Business(Services related tothe acquisition of
specified assets andtheir management anddisposal, etc.)

33.3[33.3]Name

Daimaru Matsuzakaya
Tomonokai Co., Ltd.

Relationship(Equity method associates)

Ginza 6-chome Kaihatsu
Tokutei Mokuteki Kaisha

Chuo-ku, Tokyo

6,320

HMK LOGI SERVICE Co.,Ltd.

Chuo-ku, Osaka

34

Other (Freighttransportation)

32.4[32.4]

Wakamiya Park Co., Ltd.

Naka-ku, Nagoya

1,063

Other (Parking)

20.9[20.9]

Yaesu shopping mall Co., Ltd. Chuo-ku, Tokyo

100

Real Estate Business(Real estate leasing
and tenant leasing)

28.3[28.3]

Apparel-web, Inc.

Chuo-ku, Tokyo

590

PARCO Business

20.3[20.3]

SAN-A PARCO, Inc.

Ginowan, Okinawa

10

PARCO Business

49.0[49.0]

Notes:

1.
2.
3.
4.

Interlocking of
officers: 3 persons

The names in the “Major businesses” column are the segment names.
The figures in brackets in the “Ratio of voting rights holding (held)” column indicate the percentage of indirectownership.
Falls under the category of specified subsidiary.
For Daimaru Matsuzakaya Department Stores Co. Ltd. and PARCO Co., Ltd., the ratio of sales revenue (excludinginternal sales revenue among consolidated companies) to consolidated sales revenue exceeds 10%. The main profit andloss information of Daimaru Matsuzakaya Department Stores Co. Ltd. and PARCO Co., Ltd. is as follows:(Millions of yen)
Daimaru Matsuzakaya
Department Stores Co. Ltd.

PARCO Co., Ltd.

(i)

Sales revenue

161,818(ii)

Profit before tax(20,339)

48,971(8,743)(iii)

Profit(13,067)(10,460)(iv)

Total equity

144,270

142,302(v)

Total assets

475,963

429,489- 12 -

5. Information about employees(1) Consolidated companies
As of February 28, 2021
Number of employees(Persons)

Segment name
Department Store Business

2,232

[532]

PARCO Business

1,575

[514]

Real Estate Business

47

[7]

Credit Finance Business
Other
Corporate (shared)
Total
Notes:

1.
2.

182

[40]

2,359

[1,997]

133

[17]

6,528

[3,107]

The number of employees indicates the number of working employees.
Figures in brackets in the “Number of employees” column (not included in number of employees) represent
dedicated employees and fixed-term employees.

(2) Reporting company
As of February 28, 2021
Number of employees(Persons)
133[17]
Segment name

Average age(Years old)

4.

19.4

7,140,164

Number of employees(Persons)

Total
1.
2.
3.

Average annual salary
(Yen)

45.7

Corporate (shared)
Notes:

Average length of service(Years)

133

[17]

133

[17]

The number of employees indicates the number of working employees.
Average annual salary includes bonuses and surplus wages.
Figures in brackets in the “Number of employees” column (not included in number of employees) represent
dedicated employees and fixed-term employees.
The Company’s employees are seconded from Daimaru Matsuzakaya Department Stores Co. Ltd. and othergroup companies. The average years of service of employees is calculated by aggregating the employee’s
number of years of service at each company.

(3) Status of labor union
The Group includes the J. Front Retailing Group Federation of Labor Union which is a member of UA
ZENSEN.
As the relationship between the Company and the union is favorable and based on mutual trust, there areno significant matters to report.

- 13 -

II. Overview of Business
1. Management policy, management environment, issues to be addressed, etc.
Forward-looking statements in this Annual Securities Report are based on the Company’s management decisions
and forecasts made according to information available as of the filing date of this document (May 28, 2021).
(1) Management policy
Under a holding company structure, the Group will strive to enhance the competitiveness and profitabilityof the Department Store Business, the PARCO Business and all constituent companies by optimizing andmaking an effective use of management resources including the store network and customer bases of
Daimaru, Matsuzakaya and PARCO as well as responding appropriately to changing times, maximizing
customer satisfaction and operating in the most efficient way.
In addition, with the aim of realizing the Group Vision “Create and Bring to Life ‘New Happiness,’” wewill restructure our business portfolio by allocating resources to areas with greater potential so that it
consists of highly competitive and profitable businesses in a balanced manner.
(2) Management target
On April 13, 2021, the Group formulated the FY2021-FY2023 Medium-term Business Plan.
From fiscal 2021, the Group will have four business segments: the Department Store Business, the SC(Shopping Center) Business, the Developer Business, and the Payment and Finance Business.
1. Key performance indicator targets
ROIC (Return on Invested Capital) will be applied as the indicator to manage the capital’s profitability
from this medium-term business plan.
For fiscal 2023, we will aim to achieve consolidated operating profit of ¥40,300 million, profit/equity
attributable to owners of parent (ROE) of 7%, Return on Invested Capital (ROIC) of 5%. In addition, as
sustainability targets, we will aim to achieve a reduction in greenhouse gas (GHG) emissions of 40%
and a ratio of women in management positions of 26%.
FY2019 results

FY2020 results

FY2023 targets

40,286(24,265)

40,300

5.4

(7.1)

7.0

Consolidated operating profit (IFRS)(Millions of yen)
Consolidated ROE(%)

Consolidated ROIC(%)–

GHG emissions*(%)(16.3)

Ratio of women in management positions

(%)

16.6

–
(under calculation)
19.9

5.0
(40)
26

* Compared with fiscal 2017 Scope 1 (direct GHG emissions from the business operators) and Scope 2 (indirectemissions from the use of electricity, heat, and steam supplied by other companies); fiscal 2020 results are currently
being calculated.

2. Financial policy
We will generate operating cash flow of ¥190,000 million or more (including depreciation of right-ofuse assets) over three years, ¥90,000 million of which will be injected into the growth and capital
investments. Until fiscal 2023, investment allocation will be made giving priority to projects that
contribute to profit and the “developer strategy.”
We will reduce interest-bearing debt (excluding lease liabilities) to ¥260,000 million by the end of
fiscal 2023.
We will provide shareholder returns on the basis of maintaining a consolidated dividend payout ratio ofat least 30% and also consider the option of purchasing treasury shares as appropriate.

- 14 -

(3) Priority operational and financial issues that the Company should address
1. Preparation of the Medium-term Business Plan
The Group positioned the period of the previous Medium-term Business Plan starting in fiscal 2017 asa phase of changing its structure towards transforming its business portfolio. Under the Group Vision,“Create and Bring to Life ‘New Happiness’,” we have steadily worked to expand our business domain
and transform the business models of our existing businesses, as well as promoting ESG management
and so forth. Further, the Group established a system enabling the Group-wide initiatives to beundertaken to evolve fundamental but flexible portfolios by making PARCO a wholly owned
subsidiary and consolidating the Real Estate Business.
Meanwhile, the spread of COVID-19 has had a significant impact on social and economic activities inJapan and overseas, and the Group was obliged to record heavy losses in its operating results for the
fiscal 2020. With these and other factors, the Group faces a severe situation.
There are ongoing trends such as the declining birthrate and aging population, population decline, andtechnology advancement. Moreover, consumer awareness and behavior have changed due to the
COVID-19 pandemic, creating a “new normal.” We recognize that the environment surrounding
management will not return to its pre-COVID-19 state.
However, such times of great uncertainty in the future all the more provide a good opportunity for theGroup to reexamine the values that it considers important and the significance of its existence amidchanges in society and the times.
In preparing the Medium-term Business Plan, we have formulated specific strategies and measures that
the Group should focus on for the three-year period to achieve early recovery of earnings andimprovement of financial position. The strategies and measures have been formulated by developing
the Group’s vision toward 2030 and a strategic direction for achieving it.
2. Basic policy

Promoting sustainability management

The spread of COVID-19 has provided people with opportunities to rethink their lives and work andremind themselves of the importance of health, safety and security, and the connection between people.
Corporations are strongly called for to play a role and fulfill their responsibilities to tackle and address
issues over the environment, society, and human rights through business activities, alongside economic
values.
We have set seven materiality issues, with the newly added “realization of customers’
healthy/safe/secure life” and “promotion of circular economy,” in order to position sustainability at thecore of management and embody it in Group-wide corporate activities, with a view to realizing theGroup Vision. By promoting business activities based on these materiality issues, we will work torealize “Well-Being Life” for all of our stakeholders.

3. Management direction looking ahead to 2030
(1) Corporate vision“A corporate group producing fulfilling lifestyles and unique urban development in coexistence withlocal communities”
When we consider management direction looking ahead to 2030, the Group’s values to date will
become even more important. These are “respect for human thought and individuality,” “coexistencewith local communities,” and “passing on traditional culture and communicating a cutting-edge- 15 -

culture.” The Group has developed business with the commercial field at its core, such as the
Department Store Business and Shopping Center Business (PARCO Business). Looking forward, we
will expand our business portfolio beyond the commercial field into areas such as the Real EstateBusiness, and provide consumers with cultural and fulfilling lifestyles through the Group’s distinctive
unique urban development in coexistence with local communities.

(2) Strategic direction
For business environment looking ahead to 2030, we consider the following external environmental
changes will have a significant impact on the Group: 1) the “resilience of the urban commercial area”
amid a shrinking national population, 2) the “fusion of real and digital,” in which information received
through “people” and its reliability are reevaluated, and 3) “continued polarization of income andconsumption.”
Moreover, we recognize that the Group’s four strengths are 1) store real estate assets in major
Japanese cities such as Tokyo, Nagoya, and Osaka, 2) commercial production capabilities developed
through store and urban development, 3) partners such as suppliers and specialist stores with excellent
content and original creators, and 4) a high quality customer base that enjoys active lifestyles.
1) Three key strategies - Shift to a developer strategy We have taken these long-term environmental changes as an opportunity to carry out businessstructure reforms and create new businesses. We have reconfigured the Group’s four strengths anddetermined the Groups’ three key strategies: “developer strategy,” “real x digital strategy,” and“prime life strategy,” to make full use of them across the Group. Among these, the “developer
strategy” is positioned as a growth driver for regrowth of the Group, and we will concentrate ourallocation of management resources in this area as our top priority strategy.
(i) Developer strategy

We will maximize the value of the Group’s real estate assets. In complex redevelopment andso forth, we will adjust the scale of department stores and PARCO and make use of therelaxed floor-area ratio. We will increase the share of non-commercial applications to increase
profitability.

In the development of large-scale complexes in key areas, we will contribute to lively towns
through attractive urban development that respects individuality of the towns, while seeking
to increase our share of consumer sentiment.



We will diversify multiple revenue streams by acquiring and developing new real estate,organizing private subscription investment funds, and engaging in asset management. In
addition, we will expand our development area to include suburban areas.

(ii) Real x digital strategyWith use of digital technology inspired by stores, we will transform the business model into
one that provides new experience value beyond time and space.



We will increase the sophistication of customer data analysis and use of digital tools todeepen the relationships with customers putting “people” at the start.



In addition to sales revenue, we will diversify multiple revenue streams, such as rental
revenue and commission revenue through the use of digital technology.

- 16 -

(iii) Prime life strategy

We will further strengthen our proposals for consumers who value culture and arts and enjoy
fulfilling, sustainable lifestyles.

We will enhance our content by utilizing the Group’s entertainment and arts, as well as
developing new products and service that provide premium experiences through allianceswith companies outside the Group.

We will promote the acquisition of customers beyond department store gaisho, such as the
new rich in Japan and wealthy classes overseas in Asia, including through alliances with othercompanies.



We will expand our pool of loyal customers by offering new payment methods anddeveloping high added value financial services through customer life planning.

2) Area strategy bringing together the three key strategies
In Shinsaibashi district, Osaka and Sakae district, Nagoya, in which our department stores and
PARCO are adjacent, we will bring together the three key strategies to promote unique urban
development in coexistence with local communities.
Our area customer strategy will be advanced by utilizing the integrated customer database acrossmultiple businesses such as department stores, PARCO, and new commercial and non-commercial
facilities, and by promoting links with JFR Card customer services.
3) Alliances, M&As, and wing expansion
We will realize long-term, highly important Group strategies, such as alliances with othercompanies and business acquisitions with a view to expanding the scale and increasing the speed ofour key strategies.

(3) Pursue Group synergies with strategy committees
The three key strategies shall each have a newly established committee comprising members fromacross the Group to guide the proposal and execution of plans from an optimal Group perspective.

(4) Approach to long-term profit growth and business portfolio
From fiscal 2024 onward, through annualized profit growth of over 10%, we will aim to achieve
consolidated operating profit of ¥80,000 million and ROE of 10% for fiscal 2030. We will increase
the shares of the Developer Business and the Payment and Finance Business in consolidated operating
profit in the business portfolio in 2030 to 40% from 20% in fiscal 2019.

4. FY2021-FY2023 Medium-term Business Plan
(1) Positioning of the Medium-term Business Plan - Complete recovery and start on regrowth This Medium-term Business Plan aims to achieve “complete recovery” from the COVID-19 pandemic
by returning our financial figures to fiscal 2019 levels in the final fiscal year of the plan, fiscal 2023,
while at the same time positioning this period as one for getting back on track for “regrowth” fromfiscal 2024 onward.
Aiming for early recovery in profitability, we will concentrate our efforts at the renovation of flagshipstores and digital investment under a key strategy, the “real x digital,” as well as solid customer baseunderpinned by the department store gaisho under the “prime life strategy.” At the same time, we will
- 17 -

steadily promote efforts to achieve “management structure reforms” as the most important measure
for complete recovery.
In the “developer strategy,” we will increase our investment allocation in advance, starting during theperiod of this plan as a medium- to long-term growth driver.

(2) Framework for the medium-term business planKey strategies
1) Real x digital strategy<Department Store Business>(i) Increase the attractiveness of stores and content


We will focus on expanding the categories in which department stores have strengths, such as
by further enhancing luxury, centered on flagship stores, and delving deep into cosmetics,
watches, art and other item groupings that have a high share within the industry, aiming toestablish a competitive advantage in each location.



We will work to increase the value of the customer experience by increasing the attractivenessof stores, through efforts such as developing new content and sales floors that utilize a varietyof customer contact points, such as physical stores, gaisho and e-commerce, improving the
comfortable sales floors and store environment that are exclusive to physical stores, anddeveloping high-quality service menus.

(ii) Expand businesses that utilize online spaces

We will increase the attractiveness of our stores and develop original OMO sales spaces(merging physical stores with online) for cosmetics, art, and so forth, inspired by physicalstores. In tandem with this, we will enrich and expand product lineups such as foods and gifts
and rebuild department stores’ websites to develop brands and the like.

(iii) Conduct business activities from a CSV (Creating Shared Value) perspective

We will develop business activities connected with increasing social value, such as
development and sale of limited products created with local communities, entry into thesubscription business that utilizes online spaces, and collaboration with suppliers to contributeto decarbonized society.

<SC (Shopping Center) Business>(i) Rebuild the PARCO store brand value

We will combine elements form our development of the Shibuya PARCO and Shinsaibashi
PARCO stores with the local culture of each store’s area to rebuild the original brand value
provided by each store.

(ii) Pursue a digital SC platform・ Through a digital SC platform developed in collaboration with our business partners, we will
promote the construction of PARCO’s proprietary OMO sales spaces, including the mutualtransfer of customers between the physical world and online based on the stores’ power ofcommunication.
(iii) Develop alliance-based sales floors and new content
・ We will work to develop sales floors, zones, and content that provide experience value such as“health,” “beauty,” “food,” and “learning” through real x digital.

- 18 -

(iv) Develop content from a CSV perspective
・ We will work to enhance online events for art, theatrical performance, and music, hold cultural
events in cooperation with towns, and develop businesses that cater to new values and lifestyles
such as wellness and shared offices.
2) Prime life strategy(i) Develop solution services
・ Based on department store gaisho, we will deepen our mainstay categories while also taking
steps to provide content and experience value beyond the conventional framework by
developing new categories and services, and so forth.
(ii) Evolve communication with customers
・ We will work to strengthen online communication, such as promoting digitalization in
department store gaisho activities and enhancing remote sales services.
・ We will work to increase the sophistication of CRM (Customer Relationship Management)
activities, including strengthening relationships with customers through full use of our customer
database and retaining overseas customers who visit Japan.
(iii) Enhance products in the Payment and Finance Business・ We will develop new products aligned with customers’ life stages, such as insurance andfinancial services while collaborating with Department Store Business to strengthen thecustomer base.
3) Developer strategy(i) Work on diverse applications that are not limited to the commercial field・ In addition to the commercial field, we will work on development of residences, offices, hotels,
and complexes that include combinations of them by working together with other companies.
(ii) Promote CRE (Corporate Real Estate) strategies
・ We will work to improve profitability through measures such as asset sales and asset
replacement.
(iii) Start operation of a circular investment scheme
・ We will organize a private subscription fund and start a circular investment scheme.
Furthermore, we will diversify multiple revenue streams by entering the asset managementbusiness.
(iv) Expand into suburban areas
・ We will work to develop complex facilities in suburban areas where needs for closely situated“work, living, and commercial” facilities are expected to increase.
(v) Promote key area development
・ We will work to develop large-scale complexes in the Group’s key areas such as Shinsaibashi,
Osaka and Sakae, Nagoya, looking ahead to 2030.
Management structure reforms
1) Reduction of fixed costs through structure reforms
We will reduce fixed expenses by ¥10,000 million in fiscal 2023 compared with fiscal 2019 andlower our break-even point.
- 19 -

(i) Organizational and personnel structure reforms
・ We will promote organizational and personnel structure reforms, including business model
reforms in each business as well as revision of store operation methods and areas for businessprocess outsourcing.
(ii) Cost structure reforms
・ We will promote cost reductions, such as streamlining offices through work style reforms, useof digital media for advertising and promotion, and Group purchasing of material andsupplies.
2) Increase management efficiency and asset efficiency
We will narrow down our businesses based on the future and growth potential of each businessto increase the efficiency of management. We will also increase asset efficiency by identifying
non-business assets.

Strengthening of management foundation
1) Group financial strategy
We will respond flexibly to ensure liquidity of funds while monitoring the impact of the
COVID-19 pandemic on business. In addition, we will perform new fund procurement topromote ESG investment. In addition, we will strengthen the governance in accordance with
the Group’s tax policies, and promote optimization of tax costs.
2) Group human resource strategy
We will strengthen human resource management through measures such as skill development
for employees who will carry out the key strategies and boosted recruitment of specialists. To
become a People Development Company where employees can demonstrate their fullindividuality and capabilities, we will conduct various measures such as encouragement ofactive participation of women, work style reforms, employment of people with disabilities, andinitiatives related to LGBT issues.
3) Group IT strategy
To increase the sophistication of management and administration, we will work to rebuild
backbone systems. We also aim to improve productivity through efforts such as revising ourbusiness processes. Furthermore, we will promote IT governance including optimization of IT
investment and strengthening of information security.
4) Sophistication of corporate governanceTo expedite management decision-making and execution, we will work to increase thesophistication of corporate governance, such as further delegating business execution authority
to executive officers and clarifying responsibilities, while strengthening the supervisionfunction in the Board of Directors.

- 20 -

2. Business risks
The matters recorded in the annual securities report concerning the overview of business, financial information,etc., include following key risks that are recognized by the management as having the potential to exert material
impact on the financial position, operating results, and cash flows of consolidated companies.
Forward-looking statements in this Annual Securities Report represent the judgement of the Group as of the filingdate of this document (May 28, 2021).

(1) Definition of risk and risk management system
・ Definition of risk
The Group defines risk as “uncertainties that have both potential positive and negative sides that could
have an impact on the achievement of targets by a company’s management.” We think a company willgrow in a sustainable way if the positive side and the negative side of risk are addressed properly.

・ Risk management system
The Company has established the Risk Management Committee as an advisory body to the President
and Representative Executive Officer. The committee is chaired by the President and Representative
Executive Officer and comprises Executive Officers and others. The committee has established asecretariat headed by an officer in charge of risk management. The secretariat shares important
decisions of the committee with operating companies, and promotes enterprise risk management(ERM).
Moreover, by positioning risk as the starting point of strategy and linking it to strategy, we are striving
to make risk management contributes to corporate value increase.

- 21 -

(2) Risk management process
The Group promotes risk management through the following processes. Specifically, we are striving toensure that risks of high importance to the Group are not overlooked, under the external and internal
environmental analysis, and based on the recognition of the management team, including Directors, and thepersons responsible for practical operation.
Over the medium-term, we have positioned “corporate risks” as having extremely high importance for theGroup’s management, and have used these as starting points for the Group Medium-term Business Plan.
Furthermore, the risks for the fiscal year identified from “corporate risks” are summarized in the Group risk
list, evaluated using a risk map, then ranked by priority before implementing countermeasures.

(3) Corporate risks *Risks that are highly important to the Group’s management and form the starting point
for strategies.
In fiscal 2020, we updated our “corporate risks,” which form the starting point for the Fiscal 2021-23 Group
Medium-term Business Plan. In doing so, to prevent falling into short-term thinking, we started with longterm mega-trend projections for 2030 and added the impacts of the COVID-19 pandemic, then considered therisks using back-casting.

- 22 -

・ Long-term megatrends for 2030
The trends with the greatest impact are technology, such as the acceleration of DX, and environmental issues,
such as global warming. Technology is set to cause dramatic changes to lifestyles and business over the next
10 years, while environmental issues will depend on the success of global initiatives going forward.
Stakeholder capitalism is expected to penetrate society steadily over the next 10 years.
Geopolitical・ US-China struggle for supremacy, leadership vacuum
・ Emergence of state capitalist countries
・ Increasing incidence of pandemics

Economic・ Advance of globalization
・ Shift towards Asia of the global economy
・ Entrenchment of stakeholder capitalism

Social・ Population growth in emerging countries
・ Advance of population aging
・ Increasing wealth and status inequality

Technological・ Acceleration of DX through 6G・ Practical implementation of autonomous driving
・ Formation of digital economic zones

Environmental

・ Global warming
・ Accelerated transition to renewable energy
・ Resource depletion- 23 -

・ Impact of COVID-19
The current COVID-19 pandemic has had a significant impact on the long-term megatrends, and the impact
is expected to continue going forward. In particular, the development of a “new normal” in the values andconsumption patterns of private individuals is likely to have a significant impact on the Group’s business.
・ Economic slump due to prolonging of COVID-19 pandemic
Short-term ・ Increased concerns over unemployment and inflation
・ Evaporation of demand and supply
Economy andbusiness

Society andindividuals

・ Financial crises occurring in reaction to continuation ofmonetary easing policies
・ Increased demands on management emphasizing sustainability
Long-term ・ Exponential evolution of technology
・ Rebuilding of global supply chains
・ Change in urbanization
・ Paradigm changes in organization and work styles
・ Increased unemployment, decreased incomes, and uncertainty
over the future
・ Avoidance of the three C’s (closed spaces, crowded places,
Short-termclose-contact settings)
・ Consumption trends started by COVID-19 (stay-at-homeconsumption, neighborhood consumption)
・ Increased awareness of realizing a sustainable society
・ Investment in safety and security such as healthcare andinsurance
・ Increase in the importance of local regions
Long-term
・ Increase in virtual consumption and virtual communication
・ Increase in the importance of the physical world (connections
with people and places)
・ Shift to a new normal that includes epidemics and disasters

Through the above analysis we have identified the following “corporate risks.” Among these, “6. Decline ofexisting business models,” “1. Advanced sustainability management,” and “2. Response to increasingly
accelerated digitalization” could potentially have an extremely large impact on the Group’s management, andhave therefore been positioned as the priority concerns in formulating the medium-term business plan.

- 24 -

(4) Recognition of recent environmental changes and risks
After its unprecedented impact on the Group’s management, the COVID-19 pandemic has begun to spreadagain through variants of the virus. Recently the Group has faced an extremely adverse management
environment as a third state of emergency declaration was issued, requiring suspension of operations atcommercial facilities and other customer attractions in the relevant areas, aimed at broadly suppressing flowsof people.
This year it is certain that business activities will continue to be placed under pressure amid an uncertain
future. During the first state of emergency declaration, we strove to secure customer contact through online
channels, as our connection with customers was severed for a long period. Going forward, however, we havea strong sense of crisis that a next-level transformation will be needed.
Thus far, the Group has overcome crises that have impacted its businesses, such as the Global Financial
Crisis and the Great East Japan Earthquake. However, the COVID-19 pandemic has had an incomparably
broader and deeper impact, and the Group is truly facing a crisis of survival.
Changes in people’s values toward consumption and consumer behavior and changes in the value required of
the retail business caused by the COVID-19 pandemic have been progressing more quickly than anticipated.
Work styles, people’s lifestyles, and even the way that cities function are all changing dramatically due toremote working and so forth. Amid this rapidly changing environment, our existing business models, such as
the core department store business, have been significantly affected, and now they urgently need to undergo adramatic transformation.
In the Group’s transformation, there are things that must not change as well as things that must change.
Things that must not change are our corporate credo “Service before profit” and “Abjure all evil and practice
all good,” as well as the Group Vision, “Create and Bring to Life ‘New Happiness’.” On the other hand,- 25 -

things that must change include the transformation of our existing business model and a pivot towards
sustainable management.
Looking ahead, we will hold steadfastly to our principle of things that must not change and things that mustchange, as we continue our journey towards sustainable growth.

The corporate risks identified based on these environmental changes are considered risks that could have an
impact on investors’ decisions as of the filing date of the annual securities report. In line with the Group’s
risk definition (uncertainties that have both potential positive and negative sides that could have an impact on
the achievement of targets by a company’s management), we present our risk recognition andcountermeasures below.

- 26 -

6

Decline of existing business models
ImpactVery severe

Outlook for next fiscal
year

Under the state of emergency declaration due to the COVID-19 pandemic, the Group’s corelarge-scale store retail business experienced a severing of customer contact points, and received
a significant blow, including other businesses that are deeply involved with the stores.
The Company’s The Group’s reliance on physical large-scale stores was already an issue to be addressed, butrisk recognition reforms to the business model were delayed as operating results remained strong, partly
supported by inbound tourism.

Negative side
Positive side

While continuing to use the existing business model is a significant risk, we recognize thepotential to restart growth by taking this event as an opportunity to engage in transformation.
• Decreased vitality of the entire Group due to weak performance of core business• Regrowth by radical change of core business model
While there are risks to continuing the business model of large-scale store-based retailbusiness, our large-scale stores in city centers are important Group assets.
We will make it our first priority to enhance the attractiveness of large-scale stores in city
centers, which are our important assets. To achieve this, we will promote efforts to enhance theappeal of store content, fuse physical stores with digital ones, and enhance the environmental
value of stores. To enhance the appeal of store content, we will compress zones in existingsales floors where customer support is fading, and develop and introduce new-category
products and services adapted to customer needs.

Measures

Specifically, in addition to our existing retail functions, we will also enhance the media
function for communicating various information, the gallery function for introducing highvalue goods and services, entertainment functions, and solutions functions, among others,
thereby enhancing their synergistic appeal with the retail function.
In fusing physical stores with digital ones, we will launch an online-merged with offline(OMO) shopping structure that connects stores and sales staff with customers online, enablingthem to purchase products while enjoying the same level of communication that they receive
when shopping in-store.
In terms of enhancing the environmental value of stores, we will continue to promote
environmental awareness at stores as part of our sustainability management. We believe thatenhancing the environmental value of stores will attract customers who share these values andlead to store openings by leading business partners with a strong environmental awareness.
The Group will not achieve a complete recovery without transforming the business model of its
core businesses. Through these efforts, we will transform our existing business models andincrease the maximum potential value of our large-scale store assets in city centers.

- 27 -

1

Advanced sustainability management
ImpactVery severe

Outlook for next fiscal
year

The global tide of business is turning from conventional shareholder capitalism to stakeholder
capitalism. This sea change is being accelerated by the impact of COVID-19. Going forward,
The Company’s
management will be examined regarding whether it is preparing for sustainability rather thanrisk recognition
short-term gains, and whether it has a clear vision for the Company’s purpose for existence andfuture growth. This risk is therefore recognized as one of the highest priority.
Negative side • Defection of investors and shareholders, lower rating due to delay in taking action
Positive side
• Sustainable growth by steady action
The Company’s sustainability management goal is to realize “Well-Being Life.” Towards
realizing this goal, we will pursue the creation of shared value (CSV) through the solving ofsocial issues by Group companies conducting their businesses, guided by seven materiality
issues. The seven issues comprise our original five issues: “realization of decarbonizedsociety,” “promotion of diversity & inclusion,” “realization of work-life integration,”“coexistence with local communities,” and “management of the entire supply chain,” with the
new addition of another two: “realization of customers’ healthy/safe/secure life” and“promotion of circular economy.”
Measures
The highest priority among these is “realization of decarbonized society,” and we will aim toachieve the target values not only through the Group’s internal efforts, but in cooperation with
our stakeholders as well. Regarding the new materiality issue, “realization of customers’
healthy/safe/secure life,” we will engage in encouraging ethical consumption, wellness
business, and creating store environments with efforts made to prevent disasters and epidemics.
In addition, with regard to the newly added “promotion of circular economy,” we will engage
in expanding waste reduction, the “ECOFF” initiative to collect and recycle disused products,
and the fashion subscription business. Through all of these initiatives, we will realize “WellBeing Life.”- 28 -

2

Response to increasingly accelerated digitalization
ImpactVery severe

Outlook for next fiscal
year

The wave of digitalization was already growing steadily, but it has been expanding much more
rapidly than we expected due to restrictions on going out during the COVID-19 pandemic. The
The Company’s Company is also under pressure from the need to dramatically revise its business and work
risk recognition styles, and we recognize that the speed and method of our response to digitalization, which islikely to continue accelerating going forward, is a risk that will affect the Group’s overall
growth.
Negative side • Sluggish growth of the entire Group• Declining competitivenessPositive side
• Changing the business models of existing businesses• Renewing awareness of real connection with people
A response to digitalization is essential for growth, and we are proceeding to transform bothour business models and our operations.

Measures

Regarding business model transformation, we see digitalization as a means rather than an end,
and we are promoting the use of digitalization to create added value using the Company’s
strengths. Customers are at the center of every business, and we are working to maximize
customer experience value through OMO (online merges with offline), to diversify payment
methods, and so forth. While digitalization proceeds, the value of human connections
increases. We will therefore emphasis face-to-face customer contact and increase the level ofcommunication through both physical and digital channels. While the Group’s response todigitalization to date has not been entirely adequate, transformation of the business modelthrough use of digital technology is the key to transitioning from recovery to sustainablegrowth. Therefore, we will strengthen the organization structure and increase the speed of
execution.
With regard to transformation of business operations, we are promoting the expansion of
teleworking and online meetings, the digitalization of authentication and approval operations,and so forth, increasing the productivity of operations as well as the flexibility of work styles.
This also helps to realize one of the Company’s seven materiality issues, “realization of worklife integration.”- 29 -

3

Urban decentralization (Rebalancing between urban and rural areas)
ImpactSevereOutlook for next fiscal
year

Until 2020, we recognized “return to cities and shrinkage of local regions and suburbs” as arisk, but the COVID-19 pandemic has caused this flow to reverse, and we have thereforechanged our view of this risk.
The population has continued to flow out of cities, and we expect this flow to continue at arelaxed pace even after the COVID-19 pandemic.

The Company’srisk recognition From our business environment analysis, real estate values in city center locations are seen to
be firm, but the condition in cities is beginning to change due to changes in work styles andconsumer behavior. In regional cities and suburbs, which had been in decline, the population
outflow has stopped, and revitalization is now expected.

Negative side
Positive side

Measures

The Company has real estate assets dotted all over the country, and it will be of key importanceto develop each business while focusing on rebalancing between cities and local regions.
• Decline in conventional urban commercial facilitiesʼ ability to attract customers• Business in response to urban decentralization
As customers grow less attracted to commercial facilities in central city locations, stores in city
centers has strengthened their epidemic prevention measures in response to concerns about
infection, and strengthened contactless services such as payment methods.
The Company has had some measure of success in making effective use of its real estate
assets, mainly by developing large-scale commercial facilities in city centers. Now, theCompany will respond to changes in cities and engage in development for multiple purposes,
not only commercial, also targeting suburban areas as well as city centers.
In particular, the Company has designated Shinsaibashi, Nagoya, and the Fukuoka district as
key areas where department stores and PARCO are adjacent, and will promote complex
redevelopments aiming to coexist with the local community, propose diverse urban lifestyles,
and create attractive urban development.

- 30 -

4

Changes in consumer behavior after COVID-19
ImpactSevereOutlook for next fiscal
year

The COVID-19 pandemic has sparked dramatic changes in consumer values and consumer
behavior. Awareness of infection prevention has driven a marked increase in the rate of online
purchases, while there is also a clear trend towards reducing spending in response to lower
incomes.
The Company’s
On the other hand, consumption of products and services that satisfy individuals’ exacting
risk recognition
requirements or help to resolve environmental and social issues is growing steadily.

Negative side
Positive side

Measures

The Group operates businesses that handle a diverse range of products and services, whichmeans it must always be sensitive to changes in consumer behavior, which are a significant
risk that could represent either an opportunity or a threat.
• Poor performance due to failure to meet consumer needs• New market development
The online purchase rate for commodities (general goods mainly selected based on price andavailability) is increasing due to convenience. We are reviewing the development of thisbusiness on an appropriate scale. Although the Group does not have a large share of the ecommerce market by any means, it is growing due to the COVID-19 pandemic. Therefore, theGroup plans to strengthen the market share.
However, as the competition environment becomes more intense, rather than simply
strengthening e-commerce, the Group must strengthen OMO customer contact points in orderto keep pace with changes in consumer behavior. Cosmetic products are a leader in thisinitiative. The Group will provide stress-free, highly satisfying purchase experiences using new
contactless sales methods, such as live streaming and online counseling, and in-store customer
service.
In addition, we will strengthen markets that are expected to grow, mainly through enhancing
art and culture, with a view to satisfying customers’ exacting requirements, and through thedevelopment of ethical products and wellness business, with a view to solving environmental
and social issues.
We will continue to eliminate misalignments with consumer needs through internal andexternal data analysis, constantly developing and providing new content based on a grasp ofchanges in consumer values and behavior. In this way, we expect to increase customer
satisfaction.

- 31 -

5

Accelerated reorganization and M&A beyond industry boundaries
ImpactSevereOutlook for next fiscal
year

The COVID-19 pandemic has increased momentum for reorganization of industry andbusinesses restructuring for the sake of survival. Aided by upgraded laws and the financial
environment, M&As have been on the increase. Full-scale acceleration of M&As is only now
The Company’s about to start, but they are certainly becoming more necessary and important in corporaterisk recognition management.

Negative side
Positive side

Measures

We recognize the acceleration of M&A activity as an important risk to be monitored from bothoffensive and defensive perspectives.
• Hostile takeover of the Group• Overhaul of business portfolio• Corporate growth using M&A
The Group has optimized the balance between business that are highly responsive to theeconomic climate and businesses that are not easily affected by it, aiming to increase theresilience of its portfolio in order to secure its corporate value and strengthen its position
against hostile takeovers.
Meanwhile, as an offensive measure, the Group has utilized its customer data and management
resources, which are shared assets of the Group, and focused on creating new businesses
around the periphery of its core businesses. We believe that in creating new businesses, weshould engage in open innovation, which is superior to independent in-house initiatives interms of both speed and economic rationality. To this end, the Company is examining M&As
and business alliances with companies that seem likely to produce synergies with our businessfields.

- 32 -

7

Increasing importance of financing management
ImpactSevereOutlook for next fiscal
year

In regard to fund procurement, the Company had recognized a continuing favorable fundprocurement environment and adequate preparation to secure funding commitments; however,
The Company’s the COVID-19 pandemic gave rise to the need to prepare further funding measures, making
risk recognition fund procurement a higher risk for the Group.
We recognize that, for building a foundation to support the growth of the overall Group, theimportance of fund procurement management will continue to become more important.
Negative side • Business failure due to lack of funds• Sluggish growth due to financing on unfavorable terms
Positive side
• Business development by investing in growth areas and securing funds
Regarding funds procurement, the Group subsidiaries do not procure funds from financial
institutions, but instead we promote centralized and streamlined means of procuring funds bymeans of intra-Group financing using a cash management system.

Measures

During the COVID-19 pandemic, we procured funds to increase cash on hand with a view tosecuring liquidity on hand and safety, and we increased our fund-procurement limits, such ascommitment lines. Going forward, we will work to reduce interest-bearing debt in accordancewith the status of control over the COVID-19 pandemic, while paying close attention to safety.
At the same time, we will adjust our commitment lines to an appropriate level in stages.
Furthermore, we will diversify our fund procurement methods mainly by conducting ESG
procurement, including the issuance of sustainability bonds, and implementing asset finance.
These initiatives will support the promotion of sustainability management and growthstrategies.

- 33 -

8

Need for cost structure that can respond to environmental changes
ImpactVery severe

Outlook for next fiscal
year

Since the COVID-19 pandemic, all of our core businesses have received a major shock, andtheir operating results continue to be extremely unfavorable. The business environment is
expected to remain adverse for some time.

The Company’srisk recognition Improving our earnings structure, which is highly susceptible to crises, reducing our highbreak-even point, and building a structure that can cope with environmental changes are
essential for the Group’s full recovery and change back to a growth trajectory, and we
recognize this risk is of the highest priority in the short term.
Negative side • Business survival crisis• Delay in performance recovery
Positive side
• Business portfolio realignment• Investment in growth businesses
The Company established the Structural Reform Promotion Division in October 2020 topromote fixed cost reductions throughout the Group and strengthen the business foundation.

MeasuresManagement structural reforms are based on two themes: “Reduce costs via business model
reform” and “Narrow business base.” In “Reduce costs via business model reform,” in addition
to cost structure reforms such as office reorganization and Group bulk procurement, we will
also conduct staff structural reforms following a revision of business operations. In “Narrowbusiness base,” we will examine selling non-business assets and rehabilitating or withdrawing
from non-performing businesses, and reorganize our business portfolio.
Our goal is to reduce the break-even point and achieve structural improvements to ensure ourcompetitive survival in the future. We will accelerate initiatives to build resilience and return to
growth going forward.

- 34 -

9Frequent natural disasters / epidemics
ImpactVery severe

Outlook for next fiscal
year

Pandemics such as COVID-19 are said to be once-in-100-year events; however, considering
the global environment and globalization of the world economy, we believe we must assume
that such an event could occur again in the near future.

The Company’srisk recognition Major disasters such as typhoons, torrential rains, and earthquakes have also been increasing infrequency and scale of damage year by year. We recognize the risk of frequent natural disasters
and epidemics as an extremely serious one, that could threaten the survival of the Company
going forward.
Negative side • Damage to the lives of customers and employees• Business continuity crisis
Positive side
• Contribution to ensuring the safety and security of local communities
Over the past few years, the Group has been focusing on its response to natural disasters,
which are increasingly recognized as a risk. These efforts include working to strengthen its
business continuity plan (BCP) in anticipation of the occurrence of disasters. We have also
started a sweeping revision of our countermeasures against epidemics, prompted by the
COVID-19 pandemic.

Measures

To prepare against natural disasters that threaten business continuity, we have prepared a“Business Continuity Manual,” and have been continuously implementing BCP training forcontinuing important services (financial services and system maintenance) and rapidly
recovering from a disaster and restarting operations.
In response to the COVID-19 pandemic, we quickly established an emergency response
headquarters and are continuing to rigorously implement organizational measures to prevent
infection. At the same time, we are reexamining our countermeasures to date and working toprepare an “Infectious Disease Response Manual” for any new pandemic that may arise in the
future.
Going forward, we aim to realize highly disaster resistant business activities and contribute toensuring safety and security for local communities.

- 35 -

10

Work styles in new normal era, progress of HR/organization reforms
ImpactSevereOutlook for next fiscal
year

Working from home expanded rapidly with the state of emergency declaration. Even in the eraof the new normal after the COVID-19 pandemic subsides, we expect that a hybrid work styleof working from home and attending the office will become well established.
The Company’s Increasing fluidity of human resources such as second jobs and mid-career hiring, as well as
risk recognition company transformations using human resources with different corporate cultures are also
becoming increasingly common.

Negative side
Positive side

Measures

The Group also needs to undertake major business reforms, and it recognizes this risk as
having an increased priority going forward.
• Talent drain• Losing the war for talent• Creating innovation by changing corporate culture
In human resources, we are stepping up our employment of working mothers (mid-career hireof women who want to balance highly specialized careers with childcare) and mid-career hiresof specialists needed to execute our digital strategies and so forth. With regard to work styles,
we are enabling diverse work styles such as expanding use of teleworking, in which people areallowed to work outside of the office or their homes.
In addition, we are promoting the use of childcare leave, paid leave, and so forth, as we create
systems that enable people to work flexibly depending on their life stage. Through these
initiatives, we are preparing for an increasingly tough competition for human resources.
To create a sustainable organizational structure, we are working to reform our hiring, training,
evaluation, and promotion systems from the perspectives of “diversity & inclusion” and“work-life integration.” With these organizational reforms, we aim to break free from a
conservative corporate culture and spark innovation.

- 36 -

11

Accelerated income polarization
ImpactSevereForecast of next fiscal
year

The COVID-19 pandemic has exacerbated the continuing polarization in incomes that was
already occurring. While purchasing power has been decreasing for the middle classes, it has
The Company’s been increasing for the wealthy, buoyed by rising stock prices and so forth.
risk recognition Going forward, continued implementation of monetary easing policies is expected to continue
driving increases in the assets of the wealthy. We recognize that without a policy-based
correction of inequality, the polarization of incomes will increase even further.
Negative side • Poor performance due to shrinkage of volume market
Positive side
• Emergence of new affluent markets
As income polarization accelerates, volume price-range products and services show prominentmarket contraction, centered on fashion, and we continue to review their development to an
appropriate scale.

MeasuresOn the other hand, the markets for the wealthy are expanding, and we have been expanding
products and services for these in each business. Previously the Group has served wealthy
customers mainly through face-to-face services provided by out-of-store sales (gaisho) staff.
However, during the COVID-19 pandemic, we have strengthened our relations with customers
through use of digital channels, such as using a website to provide product introductions andlive shopping for gaisho customers.
Furthermore, to increase customer lifetime value (LTV), we will develop solution services forthe wealthy, such as asset formation.
Moreover, since developing new customers is vital for strengthening the market, we are
striving to strengthen our ties with organizations whose customers are primarily the wealthy,
and to acquire customers among the young wealthy class.

- 37 -

12

Changes in customers, particularly low birthrate / longevity
ImpactSevereOutlook for next fiscalyear

In 2020, the number of births in Japan reached a record historical low, and the trend ofbirthrate decline and population aging is accelerating more than expected. Since the number of
weddings in Japan is also decreasing due to the impact of COVID-19, the decline in birthrate is
expected to continue.
The Company’s
Meanwhile, due to increased awareness of hygiene, the number of deaths in Japan is declining.
risk recognition
Healthcare has also advanced with digitalization, and further increases in longevity are
expected along with longer healthy lifespans.

Negative side
Positive side

Measures

Population trends are deeply connected with consumption, and they are always an importantrisk in the Group’s strategy.
• Shrinkage of domestic markets• Expansion of senior markets
While the number of children in Japan is decreasing due to the declining birthrate, the amountof consumption per child is increasing, partly due to assistance from grandparents. The markets
for luxury children’s apparel and accessories and for early childhood education and childcare
remain strong. The Group entered the education business with a special focus on English
language education several years ago, and is also focusing on high quality children’s clothing
and accessories. Going forward, we will continue to strengthen our efforts towards developing
future customers based on market analysis.
At the same time, as the concept of a “life shift” (transition to an era of 100 year life-spans)
gradually approaches reality, the retirement age is being extended and the number of seniors
with financial power is increasing. We believe that stores will continue to be the main channel
for serving the senior market, and we are working to create stores where seniors can shop withconfidence with environments that have excellent epidemic and disaster prevention measures, asystem for booking consulting customer services before visiting a store, and so forth. In
addition, we aim to strengthen categories of high interest to seniors, such as art, culture, andwellness, focus on providing services as well as products, and support the achievement of“Well-Being Life” for seniors.

- 38 -

13

Uncertainty about non-Japanese market
ImpactSevereOutlook for next fiscal
year

The COVID-19 pandemic has delivered a huge blow to inbound tourism consumption, which
had been driving sales in the department store business. However, while the situation remains
unclear, inbound tourism consumption is expected to recover gradually following the
The Company’s relaxation of border controls as measures to tackle COVID-19 progress going forward.
risk recognition
On the other hand, market analysis shows firm demand for Japanese products among
foreigners. How to respond to the increasingly opaque non-Japanese market is a significant
risk affecting the Group’s operating results.
Negative side • Prolonged significant decrease in inbound sales
Positive side
• Acquisition of foreign demand with new approach
It will take considerable time for inbound tourism consumption to recover. However, themarket is expected to expand over the medium to long term. Inbound tourists remain thecentral core of the Group’s foreigner market. We are gathering information regarding theoutlook for recovery in visitors to Japan and preparing new sales promotion strategies so that
we can launch them without delay when flights to Japan increase.
MeasuresMoreover, after reflecting that there have been some biases in the countries that we focused on
appealing to, the stores that strengthened their response to inbound tourism, and the productsthat we proposed, we are revising our strategies to eliminate such biases.
Furthermore, using our experience from the recent COVID-19 pandemic, we will strengthen
our cross-border e-commerce and live commerce in Asia, as a method of opening markets thatis free from geographic and time restraints, and are expanding the lineup of products.

- 39 -

14

Increasing importance of information security
ImpactSevereOutlook for next fiscal
year

Following the digitalization of business and operations, and the expansion of remote working,the incidence of confidential and personal information leakage due to unauthorized access andso forth are increasing.

The Company’srisk recognition Furthermore, with rising awareness of consumer privacy protection, the use of customer datarequires the introduction of more robust systems and system security measures. Digitaltransformation (DX) through use of data is essential for business growth; but we recognize thatbusiness growth and information security risk are inextricably linked.
Negative side • Loss of social credibility and operating loss due to the leakage of important information• Delay/stagnation of operations• Increased cost of security measures
Positive side
• Promotion of smooth DX (digital transformation)
We continuously strengthen information security as our highest priority. However, incidents
are becoming more diverse and complex year by year, and we believe that further initiatives
are needed in both hard and soft measures.

Measures

In hard measures, we have established an “Information Security Policy” and “IT Governance
Policy” and so forth, and we are strengthening our check system for implementation of new
systems and the like. We also conduct vulnerability diagnostic tests. In addition, we areproceeding to migrate our systems to the cloud to reduce risks that could occur due to the aging
of existing systems, the expansion of remote working, and so forth.
With regard to soft measures, we are working to increase the level of information literacy
among all employees, including awareness raising using e-learning based on information about
the latest incidents, and conducting targeted attack email training.
Robust information security is essential for accelerating DX using integrated Group customer
databases, and we will strengthen it in tandem with DX.

- 40 -

・ List of Group “corporate risks”
Category

Item

Decline of existing
business models

Advancedsustainability
management
Response toincreasingly
accelerated
digitalization

Strategy risk
Finance risk

Outlookfor next
fiscal year

Negative side

Positive side

MeasuresVery severe・ Decreased vitality of the・ Regrowth by radical
entire Group due to weakchange of core
performance of corebusiness modelbusiness

・ Increasing store appeal and asset valueof large-scale stores in city centers due
to increase in content appeal, fusing withdigital technology, and increasing
environmental value

Very severe

・ Defection of investors
and shareholders, lower ・ Sustainable growth
rating due to delay inby steady action
taking action

・ Realizing Well-Being Life by promoting
7 materiality issues including“realization of decarbonized society”

Very severe

・ Sluggish growth of theentire Group・ Declining
competitiveness・ Changing the・ Changing business models throughbusiness models of
OMO
existing businesses
・ Improving communication physically・ Renewing awarenessand digitallyof real connection
・ Changing operations by digitalization
with people

Severe・ Strengthening epidemic prevention and・ Decline in conventional
contactless services in urban stores・ Business in response
urban commercial
to urban・ Real estate development in urban andfacilitiesʼ ability todecentralization
semi-urban areas for not only
attract customers
commercial but mixed use

Severe・ Poor performance due to
・ New market
failure to meet consumer
development
needs

Accelerated
reorganization and
M&A beyond
industry boundaries

Severe・ Hostile takeover of theGroup・ Overhaul of business ・ Increasing resilience of businessportfolio
portfolio
・ Corporate growth・ Creating new businesses by M&A andusing M&A
business alliance with other companies

Work styles in newnormal era, progress of
HR/organization
reforms

Severe・ Talent drain
・ Losing the war for talent・ Creating innovation ・ Strengthening mid-career employment
by changing
・ Improving flexibility in work styles
corporate culture
・ Changing to sustainable organization

Accelerated income
polarization

Severe・ Poor performance due to・ Emergence of new
shrinkage of volume
affluent markets
marketChanges in customers,
particularly low
birthrate / longevity

Severe・ Shrinkage of domestic
markets

・ Deep cultivation of high quality
childrenʼs markets
・ Expansion of seniormarkets
・ Creation of safe and secure environment
・ Strengthening art/culture/wellness

Uncertainty about nonJapanese market

Severe・ Prolonged significant
decrease in inbound sales

・ Review of inbound strategy
・ Acquisition offoreign demand with ・ Strengthening cross-border EC and live
new approachcommerce

Urban decentralization(Rebalancing between
urban and rural areas)

Hazard risk

ImpactChanges in consumer
behavior after COVID19

Increasing importanceof financing
management

SevereNeed for cost structurethat can respond to
Very severe
environmental changes
Frequent natural
disasters / epidemics

Very severe

Increasing importanceof information security

Severe・ Rightsizing commodities
・ Enhancing customer satisfaction through
OMO・ Strengthening art, culture and ethicalproducts

・ Rightsizing products/services in volume
price ranges
・ Deep cultivation of affluent markets
with diverse approaches

・ Business failure due to ・ Businesslack of funds
・ Centralizing the Groupʼs financing anddevelopment byimproving fund efficiency
investing in growth・ Sluggish growth due tofinancing on unfavorable areas and securing ・ Diversifying financing methods
funds
terms
・ Business portfolio
・ Business survival crisis
・ Cost reduction by business model
realignment
reform・ Delay in performance
・ Investment in growthrecovery・ Narrowing down business basebusinesses
・ Contribution to・ Damage to the lives of・ Development of manuals for “businessensuring the safety
customers and employees
continuity” and “response to infections”
and security of local
・ Business continuity crisis
・ Continuously conducting BCP training
communities
・ Development of Information Security
・ Loss of social credibility
Policy and IT Governance Policy
and operating loss due to・ Promotion of smooththe leakage of important
・ Promotion of transition to cloud-based
DX (digital
information
systemstransformation)
・ Delay/stagnation of・ Improvement of information literacy
operations
through education/training- 41 -

(5) Information disclosure in line with TCFD recommendations(i) Sustainability management that the Group aims for
Recently, the business environment has become increasingly uncertain. In addition, in the society that has
transitioned to the new normal of living with COVID-19, companies should understand social value andcarry out sustainability management.
We believe that we will be able to obtain a “framework for sustainable management” for future growth byincorporating the concept of sustainability into our corporate strategies and business strategies.
Our strength (core competence) is the ability to connect (discover / dig up, curate) “makers” and “users.” We
have defined unique new affluence as Well-Being Life based on a perspective that combines “sustainability”
with our unique characteristics of “beauty,” “health,” “high quality,” “culture,” and “trust” and our strengthof the “ability to connect makers and users.” Well-Being Life is the goal of our Group Vision that we haverebuilt from a perspective of sustainability, and we will disseminate it to our stakeholders as an initiative toresolve environmental and social issues.

・ Overview of sustainability management(ii) Strengthening materiality issues under the new Medium-term Business Plan
To ensure corporate growth, the Group believes that we must identify effective materiality issues forsustainable growth, incorporate these into its vision and business plans, which are the core of its corporate
management, and execute them.
The Group has taken account of environmental issues, external environmental changes due to the COVID-19
pandemic, etc., the balance of existing materiality issues, and contribution to the SDGs, which areinternational sustainable development goals for 2030. Backcasting from 2030, we have newly added“realization of customers’ healthy/safe/secure life” and “promotion of circular economy” to the materiality
issues to be addressed during the three years of the next Medium-term Business Plan. Furthermore, to reflect
the evolution of our initiatives, the names of certain existing materiality issues have been changed from“contribution to a low-carbon society,” “promotion of diversity,” and “realization of work-life balance” to“realization of decarbonized society,” promotion of diversity & inclusion,” and “realization of work-life
integration.”- 42 -

The Group has set key goal indicators (KGIs) for the newly identified seven materiality issues, as well as key
performance indicators (KPIs) for fiscal 2023 and fiscal 2030, clarifying the vision for the Group to achieve
by fiscal 2030. The whole Company will work together as one to achieve these.

- 43 -

・ The Group’s newly identified seven materiality issues
The Group’s commitment
to realizing a sustainable society
In order to pass on the irreplaceable environment of the
Leading a carbon-freeearth to the next generation, we will contribute to theRealization ofsociety and creating a global
realization of a decarbonized society by working together
decarbonized society
climate for the next
as one to expand procurement of renewable energy andgeneration
rigorously implement energy-saving measures, etc.
Realizing a sustainableglobal environment for the
We will cooperate with our suppliers and customers toPromotion of circular future and growth as acreate innovative business models for generating new
economycompany through theenvironmental value and capture competitive advantages
promotion of circularin the circular economy.
economyWe will share our thinking on sustainability with our
Realizing sustainable supply suppliers and work together with them to fulfill our social
chain created along withresponsibilities, thereby contributing to the creation of a
suppliers
sustainable society for the future through our entire supply
chain.
We will engage in procurement, etc., of environmentally
Realizing decarbonizationconsiderate products and services with our suppliers,
throughout the entire supply while also working to shift to renewable energy andManagement of thechain created along withenergy saving so that we can contribute to the realization
entire supply chain
suppliersof a decarbonized society throughout the entire supply
chain.
Realizing Well-Being inwhich we, along with
We will work with our suppliers to create working
suppliers, protect the human environments in our supply chain in which the humanrights and health of therights of workers are protected, and in which people canpeople working along thecontinue to work healthily.
supply chain
We will contribute to the creation of sustainable
Together with local
communities that utilize local assets by working with local
communities, creating
communities, governments, NGOs and NPOs, centered on
Coexistence with local prosperous future-oriented
our stores. Moreover, we will provide exciting newcommunities
communities where people
experiences for the people who gather in communities bygather, centered on our
discovering and disseminating the appeal of the local
storesregion.
We will propose personally adapted Well-Being andRealizing a future-oriented
abundant and exciting futures to each customer by
Well-Being Life thatproviding high quality, comfortable products and services
satisfies the mind and body
conducive to lifestyles of healthy mind and body andof customers
peace of mind.
Realization of
We will increase the resilience of our stores by addressing
customers’
disaster-prevention and epidemic risk, and businesshealthy/safe/secure life
Creating safe, secure, andcontinuity plans (BCPs). Moreover, at the same time we
resilient stores with an eye
will build operations that make use of digital technology
on the future
to create new customer contact points that consider safety
and security as we promote the creation of stores that meetsociety’s expectations.
Materiality issues

KPIs for FY2030- 44 -

The Group’s commitment
to realizing a sustainable society
Based on the themes of diversity and flexibility, we willvalue the different individuality and perspectives of all our
Realizing a highly
stakeholders, which form the essence of diversity, anddiversified society where
create a company where diverse abilities can be
Promotion of diversity everyone recognizes eachdemonstrated. We will also aim to grow our business in& inclusion
other’s diversity and flexibly
line with diverse customers’ expectations by driving
demonstrates his/her
innovation through the mutual interaction andindividuality
complementary functions of diverse individualities andabilities (inclusion).
We will promote work styles that reflect the concepts ofRealizing Well-Being for thediversity and flexibility as the new work styles for the new
employees and their families
Realization of worknormal era, and at the same time preserve mental andthrough new work styles forlife integration
physical health. In this way, we will realize the Wellthe future to realize diversity
Being of employees and their families, which will lead toand flexibility
improved productivity in our organization.
Materiality issues

KPIs for FY2030- 45 -

(iii) Action on climate change
Recently, environmental issues such as climate change have been growing more serious globally. Japan has
also experienced a significant impact from abnormal weather, including multiple large-scale natural disasters.
Companies today cannot ignore climate change.
Amid these circumstances, the Group considers climate change as the most important issue for sustainability
management and recognizes that climate risks and opportunities have a significant impact on its businessstrategies. Of the seven materiality issues newly identified by the Group in fiscal 2021, we consider“realization of decarbonized society” to be the most important, and we are actively making efforts to reduce
Scope 1 and 2 GHG emissions, such as introducing renewable energy-derived electricity and reducing energy
consumption. Furthermore, at this juncture we added “promotion of circular economy” as a new materiality
issue for resolving environmental issues.
On the other hand, as the Group is centered on the retail business, we recognize that it is extremely importantto reduced Scope 3 emissions in cooperation with our business partners who are suppliers and our customers
who are consumers. We are therefore engaging in “management of the entire supply chain” as one of ourmateriality issues.

(iv) Information disclosure in line with the four disclosure items recommended by the TCFD
The Task Force on Climate-related Financial Disclosures (TCFD) has recommended that all companies makedisclosures based on four items: governance, risk management, strategy, and metrics and targets. The Group
discloses climate-related information in line with the four disclosure items of the TCFD recommendations.
Disclosure
items

Specific disclosures(a)Governance

(b)
(a)

Risk
management

Strategy(b)(c)

How the processes are integrated into the organization’s overall risk management(a)

Detailed risks and opportunities the organization has identified over the short, medium
and long term
Description of risks and opportunities and their degree of impact on the organization’s
business, strategy and financial planning
Risks, opportunities and financial impacts based on relevant scenarios, and strategies andresilience against it

(b)
(c)

Metrics andtargets

Process by which the Board of Directors receives reports on climate-related issues,frequency with which these issues are tabled for discussion, and monitored items
Responsibility of management for climate-related issues, process for receiving reports(committees, etc.), and method of monitoring
Detailed processes for identifying and assessing climate-related risks, and method for
determining importance
Detailed processes for management of important climate-related risks, and method ofprioritizing them(a)The metrics used to manage climate-related risks and opportunities(b)

GHG emissions (Scope 1, 2 and 3)(c)

The targets used by the organization to manage climate-related risks and opportunities
and performance against targets
Source: Recommendations of the Task Force on Climate-related Financial Disclosures (final report), 2017

- 46 -

<Governance (Governance concerning environmental issues)>(a) Process by which the Board of Directors receives reports on climate-related issues, frequency with whichthese issues are tabled for discussion, and monitored items
In the Group, the Group Management Meeting, which is the highest decision-making body in businessexecution, discusses and makes decisions on specific measures related to environmental issues in order topromote sustainability management across the Group in a cross-organizational manner. Furthermore, theSustainability Committee, which meets once every six months, shares the policies for responding toenvironmental issues discussed and decided by the Group Management Meeting, formulates action plans for
the Group’s environmental issues, and monitors their progress.
The Board of Directors receives reports on the discussions and decisions made by the Group Management
Meeting and the Sustainability Committee, then discusses and oversees the Group’s policies for responding
to environmental issues and its action plans and so forth.

(b) Responsibility of management for climate-related issues, the process for receiving reports (committees,etc.), and method of monitoring
The President and Representative Executive Officer chairs the Group Management Meeting, also serves as
the chairperson of the Risk Management Committee and the Sustainability Committee, both of which areadvisory committees under his direct supervision, and assumes the ultimate responsibility for businessdecisions related to environmental issues. The matters discussed and resolved by the Group Management
Meeting and the Sustainability Committee are finally reported to the Board of Directors.

・ Environmental management structure of the Group- 47 -

・ Meeting bodies and their roles in the environmental management structure
Meeting body and structure

Role(i) Board of Directors

Supervises the progress of environment-related initiatives discussed andapproved in business execution. Meets monthly.

(ii) Group Management
Meeting

Discusses and decides on the measures related to the group-wide management
including specific environment-related initiatives.
The decisions are reported to the Board of Directors. Held weekly.

Extracts comprehensive risks, and discusses and decides on the measures against
them. Monitors the progress of operating companies, and the decisions arereported to the Board of Directors. Meets as needed.
Discusses and decides on the policy to address environmental issues discussed at
the Group Management Meeting. Formulates the long-term plans and(iv) Sustainability Committee KGIs/KPIs related to environmental issues and monitors the progress ofoperating companies. The decisions are reported to the Board of Directors.
Meets semiannually.
Promotes the group-wide response to environmental issues. Collects(v) ESG Promotion Division environment-related information and reports to the Group Management
Meeting, the Sustainability Committee and the Risk Management Committee.
(iii) Risk Management
Committee<Risk management>(a) Detailed processes for identifying and assessing climate-related risks, and method for determining
importance
The Group considers risk to be an inspiration for strategy, and we have defined it as “uncertainty that affects
the corporate management’s achievement of goals, having both a positive and a negative side.” We believethat appropriate handling of risk leads companies to sustainable growth.
The Sustainability Committee conducts more detailed examinations of the environmental risks and shares theresults with operating companies. Operating companies incorporate climate actions into their action plans.
They discuss and confirm the progress of the action plans at the meetings chaired by their presidents. The
Group Management Meeting, the Risk Management Committee and the Sustainability Committee monitor
the progress, and finally, report to the Board of Directors.
(b) Detailed processes for management of important climate-related risks, and method of prioritizing themWith the recognition that climate risks and opportunities have a great impact on its business strategies, theGroup identified climate risks and opportunities through the process below and assessed their importance.
Firstly, the Group extracted climate risks and opportunities exhaustively for each activity item of supply
chain process: “product procurement,” “transportation and customer movement,” “sales in stores,” “use of
products and services” and “disposal.” Next, we identified important climate risks and opportunities for theGroup from among the exhaustively extracted climate risks and opportunities. Finally, we assessed theimportance of the identified climate risks and opportunities based on two assessment criteria including the“degree of impact on the Group and the probability of occurrence” and the “degree of impact on
stakeholders.”
The Group reflects, under the supervisory system of the Board of Directors, the climate risks andopportunities rated as particularly important through the above process in its strategies as its corporate risks
to address them.

- 48 -

(c) How the processes are integrated into the organization’s overall risk management
The Group has established the Risk Management Committee based on the importance of building a structure
for managing risk companywide. The Risk Management Committee identifies and assesses corporate risks,
including environmental risks, based on external environment analysis, narrows them down to the risks thatneed to be preferentially addressed, and monitors progress on them. The matters discussed and approved by
the Risk Management Committee are reflected in the Group’s strategy and implemented under thesupervisory system by the Board of Directors.

・ Risk management process

・ Risk management system
Risk management
process

Meeting body in charge
・ Board of Directors

・ Identification/asses
sment/narrowing
down of risks

・ Response to risks

・ Group Management Meeting
・ Risk Management Committee(Overall management risk)
・ Sustainability Committee(Environmental risks)・ Operating companies
・ Board of Directors
・ Group Management Meeting・ Monitoring/report

・ Risk Management Committee(Overall management risk)
・ Sustainability Committee(Environmental risks)- 49 -

<Strategy>(a) Detailed risks and opportunities the organization has identified over the short, medium and long term
The Group considers it important to examine environmental risks at the appropriate milestone occasions
because of the potential impact of environmental risks on its business activities over the long term. The
Group has conducted an examination* of the physical risks such as the risk of abnormal weather brought
about by climate change and the transition risks such as the risk of policy regulation introduction by
governments and the risk of changes in market needs, looking ahead to fiscal 2021–fiscal 2023 as theexecution phase of the Medium-term Business Plan and fiscal 2030 as the Science Based Targets (SBT)
setting fiscal year, and the risks and opportunities identified as a result have been reflected in the Group’s
strategies and implemented.
*Listed in table of (b) “Overview of the Group’s risks and opportunities and their impact on business andfinance”

・ Definition of the periods for consideration of climate-related risks and opportunities in the Group
PeriodDefinition

Medium-term

FY2021 to FY2023

Execution period of the FY2021-FY2023 Medium-term
Business Plan

Long-term

Until FY2030

Period until the SBT setting fiscal year for the Group’s Scope
1, 2 and 3 GHG emissions(b) Description of risks and opportunities and their degree of impact on the organization’s business, strategy
and financial planning
The Group conducts scenario analysis in order to understand the risks, opportunities, and impacts of climatechange for the Group and to examine the resilience of the Group’s strategies envisaging the world in 2030,
and the necessity of further measures.
In the scenario analysis, we referenced multiple existing scenarios announced by the International Energy
Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). We then considered two world
scenarios: one that envisages the achievement of the goal of the Paris Agreement to limit the increase in the
global average temperature to 2℃ above pre-industrial levels (the below 2℃ scenario); and one thatenvisages the increase in global GHG emissions beyond the present based on achieving already announced
policies and regulations without the introduction of new policies and systems (the 4℃ scenario).
To realize our most important materiality issue, “realization of decarbonized society,” we analyzed theimpacts of climate change on the Group’s business activities, assuming the above scenarios, then examined
our countermeasures to verify the Group’s strategy resilience.

・ Existing scenarios taken into consideration
Possible world
Below 2˚C scenario

4˚C scenario

Existing scenarios“Sustainable Development Scenario (SDS)” (IEA, 2019, 2020)“Representative Concentration Pathways (RCP2.6)” (IPCC, 2014)“Stated Policy Scenario (STEPS)” (IEA, 2019, 2020)“Representative Concentration Pathways (RCP6.0, 8.5)” (IPCC, 2014)- 50 -

・ Impact on the Group’s business and finances in the below 2˚C scenario and the 4˚C scenario estimated for2030
Overview of the Group’s risks and opportunities in two scenarios and their impact on business and financeare as follows. The degree of impact on business and finance is shown qualitatively by the slope of thearrows in the table in three stages.

・ Overview of the Group’s risks and opportunities and their impact on business and finance

Type of risk andopportunity

MarketRisk

Transition risk

Policyregulation

Overview of the Group’s risks and opportunities

・ Increase in operation costs associated with the introduction ofpolicies to control GHG emissions, such as carbon taxes(carbon pricing) and the strengthening of regulations.
・ Increased disclosure obligations related to GHG emissions
and the risk of fines due to inadequate response
・ Loss of growth opportunities due to a delay in response tomarket changes such as increased demand for low-carbon(carbon neutral) products resulting from diversification of
consumer behavior and increased customer awareness ofenvironmental issues

Physical risk

・ Loss of growth opportunities due to a delay in response torisk of infectious diseases (COVID-19, etc.) caused byclimate change
・ Loss of sales opportunities for products and services resulting
from disruption of procurement and logistics routes due tonatural disasters caused by climate change
Acute・ Damage to stores and offices and suspension of operations
due to natural disasters caused by climate change
・ Loss of sales opportunities in stores due to increased risk ofinfectious diseases (COVID-19, etc.) caused by climatechange- 51 -

Impact on businessand finance
Below
4˚C
2˚C
scenario
scenarioType of risk andopportunity

Opportunity

Energy source

Products andservices

Overview of the Group’s risks and opportunities

Impact on businessand finance
Below
4˚C
2˚C
scenario
scenario・ Reduction in energy procurement costs associated with thedevelopment and use of new policies and systems related torenewable energy
・ Avoidance of energy procurement risks associated with the
expansion of renewable energy, strengthening of energy
saving, and introduction of energy creation
・ Increase in sales revenue due to an increase of demand forreuse products and recycled products
・ Decrease in Scope 3 emissions due to expansion in sales ofreuse and recycling products
・ Expansion of new growth opportunities through new entry
into the sharing and upcycling businesses

Market・ Improvement in profitability due to rebuilding of businessportfolio across the framework of the retail business andentry into and expansion in the market for low carbon (carbon
neutral) products associated with diversification of consumer
behavior and increased customer awareness of environmental
issues.
・ Expansion of new growth opportunities by response toincreased infectious disease risk (such as COVID-19) causedby climate change: The impact on the Group’s business and finance is expected to be very large.
: The impact on the Group’s business and finance is expected to be slightly large.
: The impact on the Group’s business and finance is expected to be negligible.

(c) Risks, opportunities and financial impacts based on relevant scenarios, and strategies and resilience againstitAround 90% of the Group’s GHG emissions originate from the use of electricity. We therefore believe it isimportant that the Group’s initiatives to reduce GHG emissions emphasize procurement of renewable energyderived electricity. In light of such current situation, the Group believes that, among the business andfinancial impacts estimated for 2030 in the two scenarios, the introduction of a carbon tax* and fluctuations
in renewable energy-derived electricity rates in Japan, in particular, will be important parameters (indicators).
Therefore, for the two parameters in the below 2˚C scenario and the 4˚C scenario, we quantitatively estimate
the financial impacts on the Group.
*Taxes levied on CO2 emissions, which is the main cause of climate change- 52 -

・ Financial impacts on the Group estimated for 2030
Important parameter(indicator)
Carbon tax
Renewable energyderived electricity
rates

・
・
・
・

Financial impacts on the Group estimated for 2030
Below 2˚CItem
4˚C scenario
scenario10
3.3
Carbon tax (thousand yen/t-CO2)
Increase in costs due to carbon tax (millions
770
254
of yen)Increase in renewable energy-derived
1-4electricity rates (yen/kWh)Increase in procurement costs of renewable
196-784
energy-derived electricity (millions of yen)

(Assumptions for 2030)
・ Carbon tax price*1: $100/t-CO2 (below 2°C scenario), $33/t-CO2 (4°C scenario)*2*1:

Based on “Stated Policy Scenario (STEPS)” (IEA 2019).

*2:

Tentatively calculated assuming that carbon tax will have been introduced in Japan as of 2030,
based on the EU carbon tax price under the 4°C scenario.

・ The Group’s GHG emissions: Approximately 77,000 t-CO2 (60% reduction vs. fiscal 2017)
・ Renewable energy-derived electricity rate: Increase of 1 to 4 yen/kWh (vs. electricity rate other thanrenewable energy)
・ The Group’s usage of renewable energy-derived electricity: 196,000 MWh (ratio of renewable energy:
60%)

Under either the below 2°C scenario or the 4°C scenario, the Group will strengthen its high strategic
resilience from a medium- to long-term perspective. For this reason, in the business strategies and theMedium-term Business Plans, we will formulate appropriate measures to avoid negative risks, while forpositive opportunities, we will aim to capture new growth opportunities such as responding actively tomarket changes and so forth.

- 53 -

<Metrics and targets>(a) The metrics used to manage climate-related risks and opportunities
The Group has established two metrics for managing climate-related risks and opportunities: Scope 1, 2 and3 GHG emissions and the ratio of renewable energy within electricity used in business activities.

(b) GHG emissions (Scope 1, 2 and 3)
The Group started calculating the total GHG emissions for the Group in fiscal 2017. The Group’s Scope 1
and 2 GHG emissions in fiscal 2020 are forecast at approximately 136,000 t-CO2 (down 16.3% from fiscal
2019). Further, the Group’s Scope 3 GHG emissions in fiscal 2020 are forecast at approximately 2,830,000 tCO2 (down 25.2% from fiscal 2019).
Since fiscal 2017, the Group has acquired third-party assurance of its GHG emissions. It expects to acquire
third-party assurance for its fiscal 2020 GHG emissions as well.

・ The Group’s Scope 1, 2 and 3 GHG emission results and forecast(Unit: t-CO2, %)GHG emission results
FY2017FY2018GHG emission forecast
FY2019FY2020Vs. FY2019

Total Scope 1 and 2 emissions

194,154*

182,565*

162,508*

136,000(16.3)

Scope 1 emissions

16,052*

15,960*15,214*13,000(14.6)

Scope 2 emissions

178,102*

166,605*

147,294*

123,000(16.5)

3,075,130

3,123,238

3,782,555*

2,830,000(25.2)Breakdown

Total Scope 3 emissions* Obtained third-party assurance from Lloyd’s Register Quality Assurance Limited(c) The targets used by the organization to manage climate-related risks and opportunities and performanceagainst targets
The Group has set long-term GHG emission reduction targets since fiscal 2018 aimed at achieving the global
target of keeping temperature increase to below 2°C. The Group has set a target of reducing Scope 1 and 2
and Scope 3 GHG emissions by 40% (compared to fiscal 2017) by 2030 and it was approved by the SBT
initiative (SBTi)*1. Following the evolution of its initiatives to date, the Group has revised its Scope 1 and 2
GHG emissions reduction target to a more ambitious target of a 60% reduction (compared to fiscal 2017) by
2030. In addition, the Group has set a target of reducing Scope 1 and 2 GHG emissions to zero by 2050, as it
aims to realize carbon neutrality.
To achieve these long-term targets, the Group has started procuring renewable energy-derived electricity for
its facilities since fiscal 2019. In October 2020, we joined RE100*2. We will continue to expand our
procurement of renewable energy-derived electricity, aiming to achieve carbon neutrality.
*1:

Established by a collaboration between four organizations including CDP, the UN Global Compact,
World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) in 2015 for the
purpose of promoting the achievement of science-based GHG emissions reduction targets to limit thetemperature increase to below 2˚C compared to pre-industrial levels.

*2:

A global initiative that aims to source 100% renewable energy to power business operations by 2050

- 54 -

・ The targets used by the Group to manage climate-related risks and opportunities
Metrics

GHG emissions

Ratio of renewable energy
in electric power used inbusiness activities

Target year
2050
2030

2050
2030

Details of targets
Zero Scope 1 and 2 GHG emissions
60%*1 reduction of Scope 1 and 2 GHG emissions (vs. FY2017)
Aiming for 40% reduction of Scope 3 GHG emissions (vs.
FY2017)*2*1: The reduction rate approved by the SBTi is 40%.
*2: Approved by SBTi
100% ratio of renewable energy in electric power used in businessactivities*3*3: Joined RE100 in 2020
60% ratio of renewable energy in electric power used in businessactivities(v) Future efforts
Recently, the conventional “linear economy” premised on the one-time use and disposal of natural resources
and products has brought about serious climate change, such as natural resource depletion due to large-scale
extraction, global warming due to emissions of GHGs, and ocean pollution due to large quantities of waste.
The Group believes it is important to respond to these climate risks and opportunities using the strength ofcorporate group with retail at its core. Therefore, we will strive to:・ Realize a strong supply chain by strengthening the measures against physical climate risks;・ Contribute to local communities by creating sustainable stores through CSV initiatives with stores at thecore;
・ Realize new business opportunities through promoting “circular economy”; and・ Actively provide low-carbon products and services that respond to changes in consumers’ consumption
behavior.
Going forward, the Group will promote strengthening of governance in environmental management under thesupervisory system of the Board of Directors and promote companywide initiatives such as the formulation ofaction plans for achieving medium- to long-term targets.

- 55 -

3. Management analysis of financial position, operating results and cash flows(1) Financial position and operating results(i) Operating results for the current fiscal year
In the fiscal year under review, the Japanese economy was significantly affected by the spread of COVID-19.
Although the economy bottomed out after it registered a record negative real GDP growth rate at the beginningof the fiscal year under review, and subsequently showed signs of picking up, it ended up with only a moderate
recovery due to the rebound of the epidemic in the latter half of the fiscal year. While corporate earnings wererobust in certain industries, many businesses were forced to control investments and reduce employment andwages. Despite a gradual recovery from a slump in the early fiscal year under review, personal spending
remained weak mainly due to the declaration of another state of emergency in the late fiscal year.
Amid the unprecedented business environment, the Group strove to operate its respective businesses in
response to the changing circumstances, with the highest priority given to ensuring the safety and security ofcustomers and employees, as well as the viability of its business. At the same time, with an eye to the future, we
promoted efforts to contribute to a sustainable society and to achieve the Group’s medium- and long-term
growth.
As part of “countermeasures against COVID-19” to adequately respond to the unprecedented businessenvironment caused by the pandemic, the Group set up the Emergency Response Headquarters in the earlystage of the infection spread and implemented a range of measures to ensure safety and security with thoroughhygiene management as well as its business continuity and management stability.
In our sales activities, we suspended store operations or shortened operating hours taking into account demandsby the Japanese government and each local government. For sales, we endeavored to prevent the spread of
COVID-19 by taking such measures as creating a safe in-store environment, where customers can feel secure
while shopping, by carrying out in-store disinfection, ensuring safe traffic flows for customers and adequate air
circulation, and reviewing event plans. Also, while providing suppliers with sales support through theutilization of the Company’s website, we worked to improve the work environment through meticulous hygiene
management for sales staff at stores, including rest areas and lockers, and by encouraging remote work andstaggered working hours and utilizing online meetings for back-office departments.
At the same time, from the perspective of ensuring business continuity and management stability, we took early
actions to brace for a situation where the impact of COVID-19 becomes even more severe than expected,
including controlling investments, cutting expenses, accumulating cash on hand and increasing the amount ofcredit lines for financing so as to ensure financial stability and liquidity.
Meanwhile, we promoted the use of digital technologies in our sales activities to adapt to new lifestyles amid
the spread of self-curfew. Specifically, we worked on enhancing the selection of products in the online stores ofour department stores and offering a remote sales service by providing online customer service and distributing
videos from the department stores. In addition, as part of “Think LOCAL,” which was launched in September
as support for manufacturers in various regions, we introduced, on our website, local specialties in areas where
our stores are located. In the PARCO Business, we also moved forward with our efforts toward the integrationof brick-and-mortar stores with the online store by implementing measures such as distributing a virtual tour
video of Shinsaibashi PARCO and strengthening online sales in cooperation with suppliers.
As part of “initiatives toward the achievement of medium- and long-term growth,” we implementedorganizational reforms and consolidation of the Real Estate Business as part of necessary structural adjustments
following the conversion of PARCO into a wholly-owned subsidiary. In the organizational reforms, we set up
the “Organizational Structure Review Committee” and built a new structure which allows PARCO to be
dedicated to strengthening its own business by restructuring and integrating head office functions for theholding company and PARCO from the perspective of promptly generating the Group synergies and facilitating
highly efficient management. As for the consolidation of the Real Estate Business, we transferred the Daimaru
Matsuzakaya Department Store’s real estate business to PARCO in September to concentrate the Group assets
and centralize operation, supervision and development functions.

- 56 -

As part of our efforts to generate the Group synergies, we also opened Shinsaibashi PARCO in November.
Shinsaibashi PARCO is a new commercial facility that embodies sustainability management and fusion of ourdepartment stores and PARCO, which are what the Group promotes, and aims to expand the area customer basethrough coexisting with local communities and contributing to generating the prosperity of the Shinsaibashi
area together with Daimaru Shinsaibashi store, with which its management was integrated, and by attracting
new customers. After the opening, Shinsaibashi PARCO has been visited by a broad range of customers, and its
synergy with Daimaru Shinsaibashi store has been demonstrated.
Along with such efforts to reinforce our foundation toward the achievement of medium- and long-term growth,
we worked on the formulation of a new Medium-term Business Plan starting from fiscal 2021. Regarding thereform of management structure that is included in the plan, we aim to work on improving revenue by
accelerating the transformation of business models and streamlining business operations by restructuring theGroup’s business to quickly build a future growth platform, while taking a serious look at the future
survivability and growth potential of each of our businesses. As part of such efforts, in light of environmental
changes in each of our businesses and the future survivability of the market, we decided to close Tsudanuma
PARCO and Shintokorozawa PARCO in the PARCO Business (on February 28, 2023, and February 29, 2024,
respectively), and excluded J. Front Foods Co., Ltd., which is engaged in the restaurant business, from thescope of consolidated subsidiaries by transferring all the shares in the company in February.
As for consolidated revenue for the fiscal year under review, the spread of infectious disease caused thestagnation in both domestic and inbound spending, which impacted, among others, our core Department StoreBusiness. Despite various measures including those mentioned above, sales revenue was ¥319,079 million,
down 33.6% year on year.
In this environment, despite securing a profit of ¥2,366 million in business profit as a result of controllinginvestments and reducing expenses throughout the fiscal year, operating loss was ¥24,265 million (operating
profit of ¥40,286 million in the previous fiscal year) as a result of reclassification of fixed costs primarily due tosuspending store operations, and the recording of expenses, such as those for store closures and impairment
loss. Loss before tax was ¥28,672 million (profit before tax of ¥37,161 million in the previous fiscal year), andloss attributable to owners of parent was ¥26,193 million (profit attributable to owners of parent of ¥21,251
million in the previous fiscal year) due to an increase in expenses as a result of reversing the deferred tax assetsof subsidiaries.
Regarding dividends, given the unprecedented business environment as well as severe earnings forecasts andfinancial conditions, the Company paid an interim dividend of ¥9 per share (¥18 in the previous fiscal year), butfrom the perspective of ensuring stable dividend payments to shareholders, has decided to pay a year-end
dividend of ¥18 per share, which is the same as the previous fiscal year. As a result, the annual dividend is ¥27
per share.

Business results by segment<Department Store Business>
Due to the spread of COVID-19, we downsized operations at each of our department stores from March. Afterthe declaration of state of emergency in April, we suspended operations at almost all the stores, excluding thefood sales floors. Despite successively restarting operations in the middle of May, both the number ofcustomers visiting stores and sales decreased significantly throughout the year, reflecting self-curfew and thereconsideration of the events and sales from the perspective of avoiding “Three Cs” (closed spaces, crowded
places, and close-contact settings) and overseas travel restrictions.
Meanwhile, we promoted the enhancement of product lineups in the “Daimaru Matsuzakaya Online Shopping”
to meet stay-at-home demand; the offering of remote sales services, through which customers can enjoy
shopping at home; and sales activities using digital technologies such as the visit reservation system. In
addition, we carried out new activities amid the COVID-19 pandemic, such as the installment of non-contact
collection boxes of used clothing for the “ECOFF Recycle Campaign,” in which customers can participate.
- 57 -

Besides that, customers were invited to the Daimaru Shinsaibashi store in conjunction with the opening of
Shinsaibashi PARCO, and a mutual customer referral campaign using both Daimaru’s and PARCO’s housecards was implemented.
As part of the restructuring of regional suburban department stores, we brought Shimonoseki Daimaru under
direct management. Then, we re-opened the Daimaru Shimonoseki store in March. In addition, we proceededwith creating community-based stores at the Daimaru Ashiya store and the Daimaru Suma store.
Despite our efforts including capital investments and reduction of expenses throughout the fiscal year, coupledwith various measures such as those mentioned above, sales revenue decreased significantly to ¥164,024
million, down 37.8% year on year, partly due to the stagnation in both domestic and inbound spending, andoperating loss was ¥22,199 million (operating profit of ¥17,625 million in the previous fiscal year) partly due tothe recording of impairment loss.

<PARCO Business>
As a result of the impact of the spread of COVID-19, we suspended store operations and shortened operating
hours, and were forced to restrict entrance to entertainment venues, which caused both the number of customers
visiting stores and tenant transaction volume to decrease significantly. In this environment, in order to further
progress customer communication, we worked on new digital measures, such as strengthening the “PARCOONLINE STORE” in cooperation with suppliers, holding online exhibitions, promoting live commerce andimplementing e-commerce services for overseas.
Additionally, in November, we opened Shinsaibashi PARCO, the first store for PARCO to open in Shinsaibashi,
Osaka in approximately nine years. Despite opening in the midst of the rebound of the pandemic, the store has
been visited by a broad range of customers and maintained sales exceeding expectations.
Despite securing a profit of ¥2,062 million in business profit as a result of initiatives, such as cutting capital
investments, cost of sales and expenses, in addition to various measures such as those mentioned above, sales
revenue was ¥68,861 million, down 38.6% year on year, partly due to a rebound following the sales of reserve
floor space in the Shibuya redevelopment project in the previous fiscal year. Furthermore, operating loss was¥6,895 million (operating profit of ¥10,823 million in the previous fiscal year) partly due to the recording ofstore closure-related expenses.

<Real Estate Business>
As was the case with the Department Store Business and the PARCO Business, rental income decreased due toa drop in tenant sales impacted by self-curfew as well as being forced to suspend the operations of facilities andshorten operating hours of facilities. On the other hand, we promoted the development in the Nagoya Sakaearea to make the area more appealing to customers by working with the Matsuzakaya Nagoya store and Nagoya
PARCO. Specifically, in July, we entered into a basic agreement for the “development of Nishiki 3-chome
District 25,” which is scheduled to complete and open in 2026, and opened “BINO SAKAE” in November.
Despite various measures such as those mentioned above, sales revenue was ¥15,372 million, down 13.6% year
on year, partly due to the impact of rent concessions on fixed rent income during the suspension period anddecreased percentage rents, and operating profit was ¥1,986 million, down 70.5% year on year, due to arebound following the recording of gain on sale of property in the previous fiscal year.

<Credit Finance Business>
In order to strengthen business, we updated Daimaru Matsuzakaya Card in January to enhance services andintroduced a new point program “QIRA POINT.” We also started the offering of a personal card loan service“QIRA LOAN - BRIGHT LIFE -” in February.
- 58 -Despite various measures such as those mentioned above, sales revenue was ¥9,035 million, down 15.7% year
on year, partly due to decreased transaction volume at department stores and increased costs associated with theupdate of the card, and operating profit was ¥421 million, down 77.9% year on year.

<Other>
The electronic devices division of Daimaru Kogyo, which is engaged in the wholesale business, had strong
performance. Despite this, sales revenue was ¥95,722 million, down 22.4% year on year, and operating profit
was ¥2,852 million, down 39.3% year on year, as a result of a reactionary drop in the design and construction
contracting business engaged by J. Front Design & Construction, following the special demand associated withthe renovation of the main building of the Daimaru Shinsaibashi store in the previous fiscal year; and an
adverse impact on Dimple’s personnel recruitment business resulting from the suspension of operations at its
client facilities.
(ii) Financial position
Total assets as of February 28, 2021 was ¥1,263,722 million, up ¥23,414 million compared with February 29,
2020. Total liabilities was ¥899,378 million, up ¥58,751 million compared with February 29, 2020. Interestbearing debt (including lease liabilities) was ¥562,815 million, up ¥84,042 million compared with February 29,
2020. Total equity was ¥364,343 million, down ¥35,338 million compared with February 29, 2020.

(iii) Cash flows
The balance of cash and cash equivalents (hereinafter “cash”) as of February 28, 2021 was ¥128,925 million, up¥94,292 million compared with February 29, 2020. This was due to an increase in cash on hand to secure
financial stability.
Cash flow positions in the current fiscal year and the factors for these are as follows.
Net cash provided by operating activities was ¥56,471 million. In comparison with the previous fiscal year,
cash provided decreased by ¥16,887 million, largely due to the recording of loss before tax.
Net cash used in investing activities was ¥20,870 million. In comparison with the previous fiscal year, cashused decreased by ¥28,689 million, largely reflecting a decrease in purchase of property, plant and equipment.
Net cash provided by financing activities was ¥58,727 million. In comparison with the previous fiscal year,
cash provided increased by ¥73,556 million, largely reflecting issuances of commercial papers.

(iv) Production, orders received and sales
1) Production
Production by segments for the current fiscal year are as follows.
Production(Millions of yen)Segment name
Other
Notes:

756
1.
2.

Consumption taxes are not included in the amounts above.
No items to report for segments other than above.

- 59 -

Year-on-year comparison
(%)
84.5

2) Orders received
Orders received by segments for the current fiscal year are as follows.
Orders received(Millions of yen)Segment nameYear-on-year comparison(%)

PARCO Business

7,798

79.4

Other

31,80953.3

Notes:

1.
2.

Consumption taxes are not included in the amounts above.
No items to report for segments other than above.

3) SalesSales by segments for the current fiscal year are as follows.
Segment name

Department StoreBusiness

Breakdown

Year-on-year comparison(%)

Daimaru Matsuzakaya
Department Stores Co. Ltd.

149,602

63.3

The Hakata Daimaru, Inc.

11,15359.8

Kochi Daimaru Co., Ltd.

3,269

71.9

164,024

62.2

Shopping center business

42,82958.5

Specialty store business

11,873

66.4

Space engineering andmanagement business

10,68074.0

Other business

3,478

51.8

Total

PARCO Business

Sales(Millions of yen)

68,861

61.4

Real Estate Business

Real estate leasing and tenantleasing

Total

15,372

86.4

Credit FinanceBusiness

Issuance and administration of
credit cards

9,035

84.3

Wholesale34,826

115.8

Design and construction
contracting

24,137

53.9

Other

Staffing service

15,634

70.4

Other

21,124

80.5

95,722

77.6

Total

Notes:

1.
2.
3.

Adjustments(33,937)–

Total

319,079

66.4

Adjustments for inter-segment transactions are made in the adjustments column.
Sales amount shows sales revenue.
Consumption taxes are not included in the amounts above.

(2) Management’s analysis and discussion of operating results
Analysis and discussion of the Group’s financial position and operating results are, in principle, content
that has been analyzed based on the consolidated financial statements.
Items in the text below that concern the future were determined as of the end of the current fiscal year.
(i) Significant accounting policies and estimates
The Group’s consolidated financial statements are prepared in accordance with the International
Financial Reporting Standards. The preparation of the consolidated financial statements requires
selection and application of accounting policies by management and accounting estimates that affectthe reported amounts and disclosures of assets, liabilities, revenues and expenses. Although the
management makes reasonable judgments for these estimates based on past results and current- 60 -

circumstances, actual results may differ from these estimates due to uncertainties unique to theestimation.
The significant accounting policies for preparation of the Group’s consolidated financial statements
are described in “V. Financial Information, 1. Consolidated Financial Statements, etc., Notes toConsolidated Financial Statements, 3. Significant Accounting Policies.”
In addition, accounting estimates used in the preparation of the consolidated financial statements andassumptions used in those estimates are described in “V. Financial Information, 1. Consolidated
Financial Statements, etc., Notes to Consolidated Financial Statements, 4. Significant Accounting
Estimates and Judgments.”(ii) Perception, analysis and discussion of operating results, etc. for the current fiscal year
1) Operating results, etc.
Information by segment is described in (1) Financial position and operating results (i) Operating
results for the current fiscal year.
a) Sales revenue
Sales revenue decreased by ¥161,542 million from the previous fiscal year to ¥319,079
million, reflecting a decline in revenue across all segments caused by a drop in consumption
due to the impact of the spread of COVID-19.
b) Operating profit
Operating profit decreased by ¥64,551 million from the previous fiscal year to operating lossof ¥24,265 million.
c) Profit before tax
Profit before tax decreased by ¥65,833 million from the previous fiscal year to loss before taxof ¥28,672 million.
d) Profit attributable to owners of parent
Profit attributable to owners of parent decreased by ¥47,444 million from the previous fiscal
year to loss attributable to owners of parent of ¥26,193 million.
e) Financial position
Total assets as of February 28, 2021 was ¥1,263,722 million, up ¥23,414 million comparedwith February 29, 2020 mainly due to accumulating cash on hand. Total liabilities was¥899,378 million, up ¥58,751 million compared with February 29, 2020. Interest-bearing debt(including lease liabilities) was ¥562,815 million, up ¥84,042 million compared with
February 29, 2020 mainly due to loans from financial institutions and issuances ofcommercial papers.
Total equity was ¥364,343 million, down ¥35,338 million compared with February 29, 2020.
As a result, operating profit/total assets (ROA) was (1.9)%, profit/equity attributable toowners of parent (ROE) was (7.1)%, and the ratio of equity attributable to owners of parent tototal assets was 27.9%.
f) Cash flows
Net cash provided by operating activities was ¥56,471 million. Net cash used in investing
activities was ¥20,870 million and net cash provided by financing activities was ¥58,727
million.
As a result, cash and cash equivalents as of February 28, 2021 was ¥128,925 million, up¥94,292 million compared with February 29, 2020.
Looking forward, the Group plans to provide appropriate distribution of profit and capital
investment, giving consideration to the level of profit, cash flow trends, among other factors.
- 61 -

g) Liquidity and capital resources(Basic capital policy)
The Company believes that any increase in free cash flow and improvement in ROE should
help to ensure its sustainable growth and increase corporate value over the medium to longterm. To such ends, the Company promotes a capital policy that takes a balanced approach toundertaking strategic investment, enhancing shareholder returns, and expanding net worth
being equipped to address risks.
Moreover, in procuring funds through interest-bearing debt, we aim to achieve an optimal
structure of debt to equity in a manner cognizant of our funding efficiency and cost of capital,
carried out on the basis of having taken into consideration our capacity for generating free
cash flows and our balance of interest-bearing debt.
A business strategy where higher sales are accompanied by profits and a financial strategy(encompassing the capital policy) that heightens profitability of invested capital are essential
elements with respect to improving free cash flows and ROE. In addition, we believe it is
crucial that we achieve maximization of the operating profit and sustainable improvement of
the operating profit margin by strengthening our core businesses and concentrating
management resources on initiatives such as business field expansion and active developmentof new businesses.
(Status of procurement)
The Group’s basic policy is to source funds needed for business activities using internallygenerated funding. Moreover, when the need arises for business investment or otherexpenditures, such funds are procured mainly by issuing bonds and borrowing from financial
institutions, with consideration placed on maintaining financial soundness.
The Group subsidiaries do not procure funds from financial institutions, but instead we
promote centralized and streamlined means of procuring funds by means of intra-Groupfinancing using a cash management system. PARCO also completed centralizing fundprocurement timed to coincide with it becoming a wholly owned subsidiary to generate theGroup synergies and facilitate the highly efficient management.
For the current fiscal year, based on the above policy, funds were procured in the following
ways to prepare for a shortage of funds resulting from the spread of the infectious disease andsecure sufficient cash on hand. They consisted of procuring ¥82,000 million in non-current
borrowings and ¥47,000 million in current borrowings from financial institutions, and¥66,000 million through commercial papers. In addition to the redemption of the third
unsecured straight bonds of ¥10,000 million, after having repaid current borrowings of¥60,000 million and non-current borrowings of ¥23,400 million, the interest-bearing debt
(excluding lease liabilities) increased by ¥101,700 million compared to the end of theprevious fiscal year to ¥359,900 million, and the balance of cash and deposit stood at¥128,900 million. The commitment line of ¥300,000 million was also set in preparation for acash shortage possibly caused by the unexpectedly lingering spread of infectious disease.
Details on risks associated with financing are mentioned in “II. Overview of Business, 2.
Business risks.”(Financial policy)
Financial policies under the “FY2021-FY2023 Medium-term Business Plan” are described in“II. Overview of Business, 1. Management policy, management environment, issues to beaddressed, etc.”- 62 -(Dividend policy)
The Company’s basic policy on dividends of surplus and dividend results for the current fiscal
year are described in “IV. Information About Reporting Company, 3. Dividend policy.”2) Achievement status of management goals
Since the “FY2017-FY2021 Medium-term Business Plan” finished in fiscal 2020, statements on theachievement status of key performance indicator targets set for fiscal 2021 have been omitted.
As noted in “II. Overview of Business, 1. Management policy, management environment, issues to beaddressed, etc.,” the Company has formulated the “2021-2023 Medium-term Business Plan.” Throughthis Medium-term Business Plan, we aim to recover our financial figures to fiscal 2019 levels by
fiscal 2023, the final year of the plan, achieving “complete recovery” from the COVID-19 pandemic.
In addition, we will strive to achieve our targets, having positioned this period as a period for gettingback on track for “regrowth” from fiscal 2024 onward.

- 63 -

4. Critical contracts for operation<Consolidated subsidiaries>
Agreements relating to leases
Company name

Office name

Daimaru Osaka
Umeda store

Leasedproperty

LessorOsaka Terminal
Building Co., Ltd.

Area
(m2)

Rent

Building(1) Fixed portion of rent
expenses¥6,186 million per annum
95,101 (2) Variable portion of rent
expenses
1.5% of net sales amount inexcess of ¥85,000 million

Daimaru
Matsuzakaya
Department Stores
Co. Ltd.
Daimaru Tokyo
store

Tetsudo Kaikan Co.,Ltd.

Building(1) Fixed portion of rent
expenses¥5,330 million per annum(2) Variable portion of rent
64,657
expenses
1% of the amount in excessof the highest annual net
sales in the most recent threefiscal years.

Main Building

The Nishinippon
Shimbun Building
Inc.
KAMIYOFUDOSAN CO. LTD

Building

31,258 ¥1,266 million per annum

East hall (ELLEGALA)

The Nishinippon
Shimbun Building
Inc.

Building

15,155 ¥1,041 million per annum

The Hakata Daimaru,
Inc.

5. Research and development activities
There are no significant matters to report.

- 64 -

III. Information About Facilities
1. Overview of capital expenditures, etc.
In the current fiscal year, total capital expenditures of ¥29,996 million were made, mainly in the Department StoreBusiness and PARCO Business.
The breakdown by segment is as follows:
Capital expenditures(Millions of yen)Segment name
Department Store Business

11,785

PARCO Business

13,455

Real Estate Business

4,246

Credit Finance Business

149

Other

796

Adjustments

(436)
Total

Notes:

1.
2.

29,996

Guarantee deposits for store opening, etc. are included in the amounts above.
Newly acquired right-of-use assets are included in the amounts above.

Mainly, in the Department Store Business this included building of the north wing of the Daimaru Shinsaibashi
store, and in the PARCO Business this included asset purchases associated with new opening of Shinsaibashi
PARCO.
The funds required for these expenditures were appropriated from funds on hand and borrowings.
2. Major facilities
Major facilities of the Group are as follows:(1) Reporting company
As of February 28, 2021
Office name
(Location)

J. FRONTRETAILING Co.,Ltd.
(Chuo-ku, Tokyo)

Notes:

1.
2.

Carrying amounts(Millions of yen)Segment name

Corporate(Shared)Facilities

Buildings
andstructures

Right-of-use
Land
assets[Area in m2]

Other

Total

–
Office, etc.

90

[–]

Number of
employees(Persons)

133
387

21

499

[17]

Consumption taxes are not included in the amounts above.
The number in brackets in the “Number of employees” column (not included in number of employees) refers to theyearly average number of fixed-term employees.

- 65 -

(2) Domestic subsidiaries
As of February 28, 2021

Company
nameCarrying amounts(Millions of yen)

Office name
(Location)

Segment
nameFacilities

Daimaru Osaka
Shinsaibashi store(Chuo-ku, Osaka)

Department
Store
Business

Daimaru Osaka Umeda
store(Kita-ku, Osaka)

Number of
employees(Persons)

Buildings
andstructures

Land[Thousandsof m2]

Right-ofuse assets

Other

Total

Store, etc.

31,414

7,919[11]

12,065

1,018

52,417177[42]

Department
Store
Business

Store, etc.

10

26,648–26,65865[2]

Daimaru Tokyo store(Chiyoda-ku, Tokyo)

Department
Store
Business

Store, etc.

3,395

31,071

114

34,581

67[6]

Daimaru Kyoto store(Shimogyo-ku, Kyoto)

Department
Store
Business

Store, etc.

10,023

8,759
[9]

3,417

31

22,232140[28]

Daimaru Kobe store(Chuo-ku, Kobe)

Department
Store
Business

Store, etc.

7,720

1,693
[11]

7,906

87

17,408159[27]

Daimaru Suma store(Suma-ku, Kobe)

Department
Store
Business

Store, etc.

922

649

2

1,575

13
[2]

Daimaru Ashiya store(Ashiya, Hyogo)

Department
Store
Business

Store, etc.

–

945

–

945

7
[1]

Department
Store
Business

Store, etc.

7,340

12,696
[8]

156

75

20,26898[13]Store, etc.

2,253

1,408
[11]

54

137

3,854

53
[34]

Daimaru Sapporo store
Daimaru(Chuo-ku, Sapporo)
Matsuzakaya
Department
Daimaru Shimonoseki
Stores Co.
Ltd.
store
(Shimonoseki,
Yamaguchi)

–
[–]

–
[–]

–
[–]

–
[–]

Department
Store
Business

Matsuzakaya Nagoya
store(Naka-ku, Nagoya)

Department
Store
Business

Store, etc.

16,97765,919
[19]

6,417

377

89,691

304[26]

Matsuzakaya Ueno store(Taito-ku, Tokyo)

Department
Store
Business

Store, etc.

5,017

27,718
[7]

843

68

33,647119[15]

Matsuzakaya Shizuoka
store(Aoi-ku, Shizuoka)

Department
Store
Business

Store, etc.

3,659

6,628
[7]

83

182

10,55461[4]Matsuzakaya Takatsuki
store(Takatsuki, Osaka)

Department
Store
Business

Store, etc.

1,750

3,738
[5]

6

10

5,505

8
[3]

Matsuzakaya Toyota
store(Toyota, Aichi)

Department
Store
Business

Store, etc.

–

–

–

–

7
[1]

Head office/Others(Koto-ku, Tokyo, andother locations)

Department
Store
Business

Office, etc.

17,81987,082
[41]

4,983

669

110,554

608
[185]

Total

–

–

108,305

223,564[134]

95,2482,775

429,894

1,886
[389]

- 66 -–[–]

Company
nameSegment
nameFacilities

Daimaru Fukuoka
Department
The Hakata Tenjin store, etc.
Store
Daimaru, Inc. (Chuo-ku, Fukuoka, andBusinessother locations)
Kochi
Kochi Daimaru store
Daimaru Co.,
(Kochi, Kochi)
Ltd.
Ikebukuro PARCO, etc.
PARCO Co.,
(Toshima-ku, Tokyo,Ltd.
and other locations)

Notes:

1.
2.
3.

Office name
(Location)

Carrying amounts(Millions of yen)

Number of
employees(Persons)

Buildings
andstructures

Land[Thousandsof m2]

Right-ofuse assets

Other

Store, etc.

5,616

7,101
[8]

10,489248

23,456262[109]

Department
Store
Business

Store, etc.

1,199

414
[3]

744

64

2,423

94
[38]

PARCO
Business
Real EstateBusiness

Store, etc.

114,590

190,856[118]

80,1003,322

388,870

554
[99]

Total

Consumption taxes are not included in the amounts above.
The number in brackets in the “Number of employees” column (not included in number of employees) refers to theyearly average number of dedicated employees, fixed-term employees, etc.
Of the major facilities, the ones rented from external sources are listed in “Agreements relating to leases” under “4.
Critical contracts for operation” in “II. Overview of Business.”

3. Planned additions, retirements, etc. of facilities
Planned additions, retirements, etc. of significant facilities are as follows:(1) Additions, etc. of significant facilities
Planned investment amountCompany name

Office name
(Location)

Segment nameFacilities

Matsuzakaya
Daimaru
Nagoya store,
Matsuzakaya etc.
Department
Sales floor
Department(Naka-ku,
Store Business renovation, etc.
Stores Co. Ltd. Nagoya, andother locations)
PARCO Co.,
Ltd.

Note:

Chiyoda,Nagoya(Naka-ku,
Nagoya)PARCO
Business

Sales floor
renovation, etc.

Total
(Millions ofyen)Amountalready paid
(Millions of
yen)

Funds
procurement
methodFunds on hand

7,732

36 and borrowings

3,853– and borrowings

Consumption taxes are not included in the amounts above.

(2) Retirements, etc. of significant facilities
There are no significant matters to report.

- 67 -

Funds on hand

Start

Scheduledcompletion

March 2021

February 2022

March 2021

Summer 2023

IV. Information About Reporting Company
1. Company’s shares, etc.
(1) Total number of shares(i) Authorized shares
Number of shares authorized(Shares)Class
Ordinary shares

1,000,000,000
Total

1,000,000,000(ii) Number of issued shares

Class

Number of issued
shares as of fiscal
year end(Shares)(As of February 28,
2021)

Number of issued
shares as of filingdate(Shares)(As of May 28,
2021)

Ordinary shares

270,565,764

270,565,764

Total

270,565,764

270,565,764

Name of financial instruments
exchange on which securities
are listed or authorized
financial instruments businessassociation to which securities
are registered

Details

First section of the Tokyo Stock The number of
Exchange
shares per shareFirst section of the Nagoya
unit
Stock Exchange
100 shares––(2) Share acquisition rights(i) Employee share option plans
No items to report.
(ii) Rights plans
No items to report.
(iii) Share acquisition rights for other uses
No items to report.
(3) Exercises of moving strike convertible bonds, etc.
No items to report.
(4) Changes in number of issued shares, share capital and legal capital surplus

Date

July 24, 2017
(Note)

Note:

Change in the total Balance of the total
number of issued
number of issued
sharesshares(Thousands of(Thousands ofshares)shares)
2,446

270,565

Change in sharecapitalBalance of sharecapitalChange in legal
capital surplus

Balance of legal
capital surplus(Millions of yen)

(Millions of yen)

(Millions of yen)

(Millions of yen)

1,974

31,974

1,974

9,474

Third-party allotment
Price of issue: ¥1,614
Amount to be included in capital: ¥807
Allottee: The Master Trust Bank of Japan, Ltd. (Trust account for officer remuneration BIP trust)- 68 -

(5) Shareholding by shareholder category
As of February 28, 2021
Shareholding status (Number of shares per share unit: 100 shares)
Foreign investors, etc.

Public sector

Financial
institutions

Financial
instruments
business
operators

Other
corporations

Number ofshareholders(Persons)

–

62

35

Number ofshares held
(Units)–1,012,013

Shareholding
ratio (%)

–

37.49

Category

Notes:

1.

2.

Shares lessthan one unit
(Shares)Companies,
etc.

Individuals

Individuals
and others

895

302

133

132,497

133,924–

173,722

165,344

520,342389

827,764

2,699,574

608,364

6.44

6.12

19.28

0.01

30.66

100.00–Total

The 6,596,977 treasury shares include 65,969 share units under “Individuals and others” and 77 shares under “Sharesless than one unit.” In addition, the 6,596,977 treasury shares are the shares listed on the shareholder register, and thisis the same as the actual number of treasury shares owned as of the end of the fiscal year.
The number of units under “Other corporations” includes 94 share units registered in the name of Japan Securities
Depository Center, Incorporated.

(6) Status of Major Shareholders
As of February 28, 2021
Name / Company Name

Address

Number of shares
held(Thousands ofshares)Shareholding ratio(excluding treasury
shares)(%)

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

2-11-3 Hamamatsucho, Minato-ku,
Tokyo24,946

9.45

Custody Bank of Japan, Ltd.
(Trust Account)

1-8-12 Harumi, Chuo-ku, Tokyo

14,201

5.37

Nippon Life Insurance Company

1-6-6 Marunouchi, Chiyoda-ku,
Tokyo

9,828

3.72

SMBC Nikko Securities Inc.

3-3-1 Marunouchi, Chiyoda-ku,
Tokyo

8,491

3.21

J. Front Retailing Kyoei Supplier
Shareholding Association

Nihonbashi 1-Chome Mitsui
Building,
1-4-1 Nihonbashi, Chuo-ku, Tokyo

6,353

2.40

The Dai-ichi Life Insurance Company,
Limited

1-13-1 Yurakucho, Chiyoda-ku,
Tokyo

5,470

2.07

MUFG Bank, Ltd.

2-7-1 Marunouchi, Chiyoda-ku,
Tokyo

4,373

1.65

Custody Bank of Japan, Ltd.
(Trust Account 9)1-8-12 Harumi, Chuo-ku, Tokyo

4,326

1.63

GOLDMAN SACHS & CO.REG(Standing proxy: Goldman Sachs Japan Co.,Ltd.)

200 WEST STREET NEW YORK,
NY, USA(6-10-1 Roppongi, Minato-ku,
Tokyo)

4,325

1.63

Custody Bank of Japan, Ltd.
(Trust Account 5)

1-8-12 Harumi, Chuo-ku, Tokyo

3,740

1.41

86,056

32.60

Total
Notes:

1.
2.

—

J. Front Retailing Kyoei Supplier Shareholding Association is a shareholder association comprised of business partnersof the Group.
In addition to the above, there are 6,596,000 treasury shares (the percentage of number of treasury shares owned tototal number of issued shares is 2.43%), and the shareholding ratio is calculated after excluding those treasury shares.
Treasury shares do not include shares held by the officer remuneration BIP trust.

- 69 -

(7) Voting rights(i) Issued shares
As of February 28, 2021
Number of shares(Shares)Category

Number of voting
rights(Rights)

Details

Shares without voting rights

–

–

–

Shares with restricted voting rights(Treasury shares, etc.)

–

–

–

Shares with restricted voting rights(Other)

–

–

–

–

–

Shares with full voting rights (Treasury
shares, etc.)(Treasury shares)
Ordinary shares

6,596,900

Shares with full voting rights (Other)

Ordinary shares

263,360,500

2,633,605–

Shares less than one unit

Ordinary shares

608,364––

Total number of issued shares

270,565,764––

Total number of voting rights–

2,633,605–

Notes:

1.

2.

Figures under “Shares with full voting rights (Other)” include 2,178,300 shares of the Company held by the officer
remuneration BIP trust (21,783 voting rights) and 9,400 shares registered in the name of Japan Securities Depository
Center, Incorporated (94 voting rights).
The number of “Shares less than one unit” includes 77 treasury shares held by the Company and 3 treasury shares heldby the officer remuneration BIP trust.

(ii) Treasury shares, etc.
As of February 28, 2021
Name of shareholder(Treasury shares)
J. FRONT RETAILING
Co., Ltd.
Total
Note:

Address of shareholder

10-1, Ginza 6-chome,
Chuo-ku, Tokyo–

Number of shares Number of shares
held under own
held under thenamename of others(Shares)(Shares)

Total number ofshares held
(Shares)

Shareholding
ratio (%)

6,596,900–

6,596,900

2.43

6,596,900–

6,596,900

2.43

Treasury shares do not include shares of the Company held by the officer remuneration BIP trust.

(8) Share ownership plan for directors (and other officers) and employees(i) Performance-linked share-based payment plan
1) Overview of performance-linked share-based payment plan
At the meeting of the Remuneration Committee held on June 28, 2017, the Company resolved to
introduce an Officer Remuneration BIP (Board Incentive Plan) Trust (hereinafter, the “BIP Trust”)
for officers of the Company and Daimaru Matsuzakaya Department Stores, which is one of the
major subsidiaries of the Company, as follows. This is to ensure, among eligible directors of
eligible companies, steady execution and promotion of the Medium-term Business Plan forrealizing the new Group Vision.
The BIP Trust, which is similar to performance share plans and restricted stock plans in the U.S.
and Europe, is a system of granting the Company’s shares to officers (in certain cases, theCompany’s shares are converted into cash within the trust and cash in the amount equivalent totheir conversion value is paid) in accordance with the officers’ rank and level of achievement of
the Medium–term Business Plan, etc.

- 70 -

2) Overview of the trust agreement
 Trust category:Monetary trust other than a specific individually operated
monetary trust (third-party benefit trust) Trust objective:

To provide incentive to Executive Officers of the Company
and Directors and Executive Officers of the Company’s
subsidiaries, and to have non-executive directors of theCompany engage in management as representatives of
stakeholders from a medium- to long-term perspective andfrom a standpoint that is different from that of Executive
Officers

 Settlor:

The Company

 Trustee:

Mitsubishi UFJ Trust and Banking Corporation(Joint Trustee: The Master Trust Bank of Japan, Ltd.) Beneficiaries:

Executive Officers of the Company and Directors andExecutive Officers of the Company’s subsidiaries who meet
the beneficiary requirements, and non-executive directors of
the Company who meet the beneficiary requirements Trust administrator:

Third party with no relationship of interest with the Company(certified public accountant) Date of trust agreement:

July 14, 2017

 Trust period:

July 14, 2017 – August 31, 2022 (planned)

 Class of shares acquired:

Ordinary shares of the Company

 Total amount of shares acquired:¥3,948,812,400

 Acquisition period of shares:

July 24, 2017

 Method of acquiring shares:

Acquisition of the Company’s shares by third-party allotment(issuance of new shares by third-party allotment)- 71 -

3) The structure of the BIP Trust(1) Resolutions by Remuneration Committee(1) Resolutions by
Shareholders(3) Contribution of
Meetingfunds

Eligible subsidiaries[Settlor]
The Company(8) Gratis transfer
andcancellation ofresidualshares(9) Delivery ofresidualassets(4) Shares(3) Trustof theestablishment
Company(5) Dividends (4) Payment[Trustee]
Mitsubishi UFJ Trust and Banking Corporation(Joint Trustee: The Master Trust Bank of Japan, Ltd.)BIP Trust
The Company’s shares and cash benefits(7) Delivery of theCompany’s
shares andcash benefits(6) Instruction on non-exercise of voting rights, etc.

Trust administrator- 72 -(2) Establishmentof ShareDelivery Policy[Beneficiaries]
Eligible corporate
officers

2. Acquisition and disposal of treasury sharesClass of shares, etc.

Acquisition of ordinary shares under Article 155, item (vii) of the Companies Act(1) Acquisitions by resolution of Shareholders Meeting
No items to report.
(2) Acquisition by resolution of Board of Directors meeting
No items to report.
(3) Acquisition not based on resolution of Shareholders Meeting or Board of Directors meeting
Number of shares(Shares)Category
Treasury shares acquired during the current fiscal year

4,859

4,129,444

883

943,343

Treasury shares acquired during the period from March 1,
2021 to the filing date of this Annual Securities Report
Note:

Total value(Yen)

The figure for treasury shares acquired during the period from March 1, 2021 to the filing date of this Annual
Securities Report does not include the number of shares arising from purchases of shares less than one unit fromshareholders upon request during the period from May 1, 2021 until the filing date of this Annual Securities
Report.

(4) Disposal of acquired treasury shares and number of treasury shares held
Fiscal year ended February 28, 2021
Category

From March 1, 2021 until the filing date ofthis Annual Securities Report

Number of shares(Shares)

Total disposal value(Yen)

Number of shares(Shares)

Total disposal value(Yen)

Acquired treasury shares offered forsubscription

–

–

–

–

Acquired treasury shares that were
disposed

–

–

–

–

Acquired treasury shares transferred
for merger, share exchange, sharedelivery and company split

–

–

–

–

Other (Decrease due to shareconsolidation)

–

–

–

–

342,350–––

6,597,860–

Other (Decrease due to sales ofshares less than one unit toshareholders upon request)
Treasury shares held
Note:

214
6,596,977

The “Treasury shares held” includes the number of shares from purchases of shares less than one unit. The figure does notinclude the number of shares from purchases of shares less than one unit from May 1, 2021 until the filing date of thisAnnual Securities Report.

- 73 -

3. Dividend policy
The Company’s basic policy is to appropriately return profits. Hence, while maintaining and enhancing its soundfinancial standing, the Company strives to provide stable dividends and target a consolidated dividend payout
ratio of no less than 30%, taking profit levels, future capital investment, free cash flow trends and other suchfactors into consideration. The Company also gives consideration to the option of purchasing its own shares asappropriate, in accordance with aims that include improving capital efficiency and implementing a flexible capital
policy.
With respect to internal reserves, the Company intends to enhance corporate value by using them for such
purposes as investing in store refurbishments and business expansions to strengthen sales, as well as strengthening
the Company’s financial standing.
The Company has paid an annual dividend of ¥27 per share for the current fiscal year, comprising an interim
dividend of ¥9 per share and a year-end dividend of ¥18 per share.
The Company’s basic policy on dividends of surplus is to pay a dividend twice a year, in the form of an interim
dividend and a year-end dividend, and the Articles of Incorporation stipulate that the Company may pay dividends
based on resolution of a Board of Directors meeting.
Note:

Dividends of surplus with record dates falling in the current fiscal year are as follows:
Resolution date

Total amount of dividends(Millions of yen)

October 13, 2020
Resolution of the Board of Directors
April 13, 2021
Resolution of the Board of Directors- 74 -

Dividends per share
(Yen)
2,375

9.0

4,751

18.0

4. Status of corporate governance, etc.
(1) Overview of corporate governance(i) Overview of corporate governance system and reasons for adopting the system
The Company has established Corporate Governance Guidelines that set out the role of corporate
governance in the Company and its subsidiaries (the “Group”). The aims of the Guidelines are to
realize our best possible corporate governance practices in order to ensure the sustainable growth of
the Group and increase corporate value over the medium to long term.
The Company is a pure holding company and, with the exception of authority for important mattersrelating to business of the Group, it accordingly delegates authority to its respective businesssubsidiaries with respect to matters involving business execution by the business subsidiaries, in orderto speed up business decisions and to make managerial responsibilities clear.
The roles and responsibilities of the Company, as a pure holding company, are as described below.
Accordingly, the Company:
 Establishes corporate governance practices for the entire Group; Plans and formulates the Group Vision, Group Management Strategy and Group Business Plan andtracks the progress and results thereof; Optimally allocates the Group’s management resources;
 Establishes Group-wide risk management system and is involved in internal audits; Makes decisions on important matters of business execution relating to management of the Group;and Provides advice and approval for management policy and management strategy of respective
operating companies, and oversees and evaluates progress thereof.
The Company has five supervisory units (Management Strategy Unit, Group Digital Strategy Unit,
Financial Strategy Unit, Human Resources Strategy Unit and Administration Unit) as management
bodies of the Company to clarify each unit’s roles, responsibilities and authorities, thereby reinforcing
the supervisory function and improving the internal control systems of the entire Group.
The Company has adopted the organizational structure of a company with three committees(nomination, audit and remuneration committees). This is for the purpose of carrying out initiatives tofurther strengthen corporate governance from the following perspectives:
 Strengthening of the management oversight function by separating oversight from execution
The Company will strengthen the oversight function for business execution of the Board of
Directors by separating oversight from execution. In addition, the Company aims to promotesophistication of strategy by having the Board of Directors actively include the insights of external
persons in order to hold rigorous discourse on important strategic issues relating to the Groupmanagement.
 Greater clarity of authority and responsibility in business execution and promotion of agile
management
The Company will enable decisions of business execution to be delegated to Executive Officers
and carry out speedy management decision making.
 Improvement of transparency and objectivity of management
The Company will improve the transparency and objectivity of management by adopting thestructure of a company with three committees (nomination, audit and remuneration committees).
The majority of the members of each of these committees are independent Outside Directors.
 Building an organizational structure compatible with global perspectives
The Company will build a governance structure that is easy to understand from global perspectives,
such as those of overseas investors.

- 75 -

1) Organization of the Company
A. Board of Directors
Directors who are appointed by the shareholders and are entrusted with management of theCompany are to carry out the roles and responsibilities in the Board of Directors as listed below.
They are to do so in accordance with of their fiduciary responsibility and accountability toshareholders, and with the aim of realizing the Group Vision. Accordingly, these roles andresponsibilities include: Indicating the overall direction that Group management is to take, by engaging in constructive
discussions with respect to the Group Vision, Group Medium-term Business Plan, GroupManagement Policy and other fundamental management policies, and carrying out multifacetedand objective deliberations that include evaluation of risks with respect to the aforementioned;
 Appropriately making decisions in terms of overall policy and plans pertaining to Groupmanagement on the basis of the direction noted above and overseeing progress and results ofthe plans; Developing an environment conducive to encouraging offense-oriented management geared toachieving discontinuous growth; Taking steps to build and develop internal control systems of the Group overall, and otherwise
overseeing the operational status of such systems; Overseeing conflicts of interest between related parties; and On the basis of summary reports furnished by the Nomination Committee, overseeing progressof senior management team succession planning, personnel assignment plans pertaining tomanagerial talent and management team training, as delegated to the Nomination Committee.
The Board of Directors of the Company is to be composed of an appropriate number of Directors,
but not more than 15, as stipulated in the Articles of Incorporation. The number of Directors iscurrently twelve (12) (including six (6) independent Outside Directors), and the term of office is
one year. From the standpoint of separating supervision and execution and ensuring theeffectiveness of the Board of Directors’ discussions, more than half of Directors are independent
Outside Directors and a majority of Directors are independent Outside Directors and/or internallypromoted Directors who do not execute business. The chairperson of the Board of Directors is
chosen from among internally promoted Directors who do not execute business from thestandpoint of separating supervision and execution and ensuring the smooth operation of theBoard of Directors.
We take steps to ensure diversity when nominating candidates for positions of Director, upongiving consideration to bringing about a balance of knowledge, experience and abilities within the
Board of Directors as a whole.
Members of the Board of Directors are as follows.
Internal Directors:

YAMAMOTO Ryoichi (Chairperson), HAMADA Kazuko,
YOSHIMOTO Tatsuya, SAWADA Taro, MAKIYAMA Kozo, and
WAKABAYASHI Hayato.

Outside Directors:

YAGO Natsunosuke, HAKODA Junya, UCHIDA Akira, SATO Rieko,
SEKI Tadayuki, and KOIDE Hiroko.

- 76 -

B. Three Committees(Nomination Committee)
The Nomination Committee is composed of three (3) independent Outside Directors andchairperson of the Board of Directors who does not execute business. The chairperson is chosenfrom among independent Outside Directors from the standpoint of ensuring transparency andobjectivity. The Nomination Committee determines the contents of proposals on the nominationand dismissal of Directors submitted to shareholders meetings and reports to the Board of
Directors upon consultations from the Board of Directors regarding the nomination and dismissalof Executive Officers as well as the chairpersons and members of individual statutory committees,
and other matters.
Members:

YAGO Natsunosuke (Chairperson), UCHIDA Akira, KOIDE Hiroko, andYAMAMOTO Ryoichi(Audit Committee)
To maintain and improve audit accuracy, the Audit Committee is composed of three (3)independent Outside Directors and one (1) internal full-time Director who does not executebusiness and is well informed about internal information. The chairperson is chosen from among
independent Outside Directors from the standpoint of ensuring transparency and objectivity. In
addition, at least one of the Audit Committee members must have appropriate knowledge offinance and accounting. In accordance with the overall policy and plan determined by the Boardof Directors, the Audit Committee audits the execution of business by Directors and Executive
Officers, important matters submitted to the Board of Directors, and other individual matters the
Audit Committee considers necessary, as well as the status of establishing and implementing
internal controls, and then prepares audit reports.
To ensure the reliability of accounting information, the Audit Committee also oversees the
Accounting Auditor, and determines the contents of proposals on the nomination and dismissal ofsuch Auditor and other matters submitted for discussion at shareholders meetings.
Members:

HAKODA Junya (Chairperson), SATO Rieko, SEKI Tadayuki, and HAMADA
Kazuko(Remuneration Committee)
The Remuneration Committee is composed of three (3) independent Outside Directors andchairperson of the Board of Directors who does not execute business. The chairperson is chosenfrom among independent Outside Directors from the standpoint of ensuring transparency andobjectivity. The Remuneration Committee determines the policy on deciding the contents ofindividual remuneration to management personnel of the Company and its subsidiaries, and thecontents of individual remuneration to management personnel of the Company.
Members:

UCHIDA Akira (Chairperson), YAGO Natsunosuke, KOIDE Hiroko, andYAMAMOTO Ryoichi

C. Governance Committee
The Governance Committee is an advisory body for the Board of Directors, and its membership iscomprised of the chairperson of the Board of Directors, all the independent Outside Directors, and
the President and Representative Executive Officer. The committee serves as a place to discuss
the shape of the Board of Directors and the Group’s governance that can best support the robust
growth of the entire Group through such efforts as strengthening the composition and supervisory
function of the Board of Directors in the future.

- 77 -

Shareholders Meeting
Appoint andDismiss

Chairperson

GovernanceCommittee

Oversight

ReportExecution Control Function

Consult

ReportRisk
Management
Committee

ReportSustainability
Committee

Accounting
Auditor

Audit
Committee

President andRepresentative
Executive Officer

Consult

Compliance
Committee

Consult

Group
Management
Meeting

Audit

Remuneration
Committee

Audit

Audit

Board of Directors

Cooperate,
ReportCooperate, Report

Nomination
Committee

Cooperate, Report

Governance (oversight)
Function

2) Corporate governance structure

ReportInternal Audit
Division

Direct

Audit

Operating UnitsManagement
Strategy Unit

Group Digital
Strategy Unit

Financial
Strategy Unit

Human
Resources
Strategy Unit

Administration
Unit

Companies in the Group(ii) Status of internal control system
The Board of Directors of the Company adopted the following resolution (Basic Policy to Build
Internal Control System) concerning “the matters prescribed by Ministry of Justice Order as thosenecessary for the execution of the duties of the audit committee” (Article 416, paragraph (1), item (i)(b) of the Companies Act), and “the development of systems necessary to ensure that the execution ofduties by executive officers complies with laws and regulations and the articles of incorporation, andother systems prescribed by Ministry of Justice Order as systems necessary to ensure the propernessof operations of a Stock Company and of operations of a group of enterprises consisting of the Stock
Company and its Subsidiary Companies” (Article 416, paragraph (1), item (i) (e) of the Companies
Act).
Basic Policy to Build Internal Control System
A. Group management system
Regarding the group management system, the Board of Directors shall perform an oversight function
by monitoring the Executive Officers’ and Directors’ execution of business. The Board of Directors
shall discuss and resolve matters defined in the Companies Act and/or the Articles of Incorporation, as
well as the Group Vision, Group Medium-term Business Plan, overall policy and plan for Groupmanagement, M&As, Group financing plans, and other individual matters relating to Groupmanagement. In order to speed up business decisions and execution, matters involving businessexecution other than the above shall be delegated to execution, with the exception of matters whichhave a material impact relating to Group management.
- 78 -

Regarding a management execution framework, the Company shall clearly separate management
oversight and execution and strengthen the Board of Directors’ oversight function while delegating
authority for execution to enable swift management decision-making.
B. Risk management system
Regarding the risk management, the Company shall establish the Risk Management Committee. The
committee is chaired by the President and Representative Executive Officer and comprises Executive
Officers and others. For risks involved in business operations, the Risk Management Committee shallcarry out evaluations and management, and for important risks, the committee shall periodicallyreport on the risk management status to the Board of Directors.
In addition, under the direction of President and Representative Executive Officer, the Company shallassign full-time staff to the ESG Promotion Division in the Management Strategy Unit to strengtheninternal control over execution. The person responsible shall develop and manage the control
environment at the Company and the operating companies.
Regarding crisis risk response, crisis management shall be controlled by the “Emergency Response
Headquarters,” which is headed by the President and Representative Executive Officer, for crisis
events such as large-scale earthquakes, fires and accidents.
C. Legal compliance system
Regarding the legal compliance system, the Company shall establish the Compliance Committee. The
President and Representative Executive Officer shall be the chairperson and the members of thecommittee shall be corporate lawyers, Executive Officers and others. The Compliance Committee
shall work to develop the foundations of compliance management such as internal company rules,
operation management manuals and formulation of management systems. In addition, the committee
shall periodically formulate and track progress on compliance penetration activities such as elearning, through departments in charge of promotion of compliance of respective operatingcompanies.
In addition, regarding a whistle-blowing system, the Company shall establish the “JFR Group
Compliance Hotline” as the whistle-blowing system of the Group that also extends beyond companies(to a corporate lawyer), which may be used by all persons working at the Company and operatingcompanies. For hotline reports concerning management personnel, the Company shall build astructure whereby the reports are submitted directly to the Audit Committee and subjected todirections from the Audit Committee so as to secure an independent reporting route.
D. Internal audit structure
Regarding the internal audit structure, the Company shall establish an independent Internal Audit
Division (9 persons) under the President and Representative Executive Officer. In accordance withinternal audit rules and under the direction of the President and Representative Executive Officer, theInternal Audit Division shall audit the operations of the Company and operating companies orproperly report the results of audits of operations, examine the properness and effectiveness of theprocesses for their operations, and provide guidance, advice and proposals to all departments at theCompany and to operating companies.
E. Structure of the Audit Committee
Regarding the structure of the Audit Committee, the Audit Committee shall audit the legality andsuitability of the execution of duties by the Executive Officers and Directors. The Audit Committee
shall have periodic meetings with the President and Representative Executive Officer to share
information. Moreover, the Company’s Executive Officers and Directors may be asked to attend Audit
Committee meetings to provide reports and opinions as necessary.
The Audit Committee Secretariat has been established as an organization in charge of assistance for
the Audit Committee’s duties. Regarding personnel affairs related to the Audit Committee Secretariat
organization and staff members, the Audit Committee’s advance approval is required to ensure
independence.
F. OtherFor documents relating to the execution of duties by Executive Officers and Directors, in accordancewith the rules on confidential information management, each responsible department shall carry out- 79 -

document storage and management during the stipulated period and shall develop a system to enable
inspections of such documents at any time.
Regarding digital information security, Senior Executive General Manager of the Group Digital
Strategy Unit shall control digital information management of the Company based on the IT
Governance Policy, and shall report periodically and whenever necessary on the status of digital
information management and related matters to the Board of Directors, the Audit Committee, theManagement Meeting and the President and Representative Executive Officer.
(iii) Overview of limited liability agreement
The Company concludes a limited liability agreement with each Director who does not executebusiness pursuant to the provisions of Article 427, paragraph (1) of the Companies Act so that
Directors who do not execute business can adequately fulfill their expected roles. The limited liability
agreement stipulates that the maximum amount of liability for damages due to negligence of duties by
a Director who does not execute business shall be the higher of twelve million (12,000,000) yen or theamount fixed by laws and regulations; however, the limitation of liability is applicable only when theduties that caused the liability were executed by the Director who does not execute business in goodfaith and without gross negligence.
(iv) Number of Directors
The Articles of Incorporation stipulate that the number of Directors of the Company shall be fifteen(15) or fewer.
(v) Requirements for a resolution to elect Directors
The Articles of Incorporation stipulate that a resolution to elect a Director of the Company shall be
adopted by a majority of the voting rights of shareholders present at the meeting where theshareholders holding at least one-third of the voting rights of the shareholders entitled to exercise theirvoting rights are present, and such resolution shall not be held by cumulative voting.
(vi) Requirements of special resolution of a shareholders meeting
The Articles of Incorporation stipulate that a special resolution of a shareholders meeting provided forin Article 309, paragraph (2) of the Companies Act shall be adopted by at least two-thirds of thevoting rights of the shareholders present at the meeting where the shareholders holding at least onethird of the voting rights of the shareholders entitled to exercise their voting rights are present. The
purpose of this is to facilitate the operation of the shareholders meeting by providing an easier quorum
requirement for special resolutions at shareholders meetings.
(vii) Organizational body to determine dividends of surplus, etc.
To implement even more flexible dividend measures, the Company provides in the Articles ofIncorporation that matters regarding dividends of surplus, including matters prescribed in the items of
Article 459, paragraph (1) of the Companies Act, shall be determined by a resolution of a Board of
Directors without obtaining a resolution at a shareholders meeting unless otherwise provided for bylaws and regulations.
(viii) Basic policy regarding control of the Company
1) Contents of basic policy
The Company believes it is necessary for the party controlling the Company’s financial and business
policy decisions to be a party who sufficiently understands the financial and business details of theGroup and the sources of the Group’s corporate value, continuously and sustainably ensures that thecorporate value of the Group and, by extension, the common interests of shareholders are served,
and enables further improvement in this area.
As the Company is a listed enterprise, the Company’s policy regarding its shareholders is that, ingeneral, they are determined through free market transactions on the financial instruments market.
Furthermore, even in the case of a purchase of shares of the Company above a certain scale byspecific shareholders or specific groups (hereinafter “Large-Scale Purchase”), if this Large-Scale
Purchase will contribute to the corporate value of the Group and, by extension, the common interestsof its shareholders, the Company believes that this should not be rejected outright and that,
ultimately, the decision on whether to accept or reject it should be left to the discretion of theCompany’s shareholders.
- 80 -

Nevertheless, a Large-Scale Purchase that involves a serious risk of causing damage to the corporate
value of the Group may be envisaged. This may include a Large-Scale Purchase that, in view of its
purpose and other factors, would demonstrably harm the Group’s corporate value; one with thepotential to involve substantial coercion of shareholders to sell shares of the Company; or one thatwould not provide sufficient time and information for the Company’s Board of Directors andshareholders to consider factors such as the details of the large-scale purchaser’s proposal, or for theCompany’s Board of Directors to make an alternative proposal.
A party attempting this kind of Large-Scale Purchase, which would not contribute to the corporate
value of the Group and, by extension, the common interests of its shareholders (hereinafter, the“Large-Scale Purchaser”), would not be appropriate as a party controlling the Company’s financial
and business policy decisions. Accordingly, the Company believes that it is the duty of theCompany’s Board of Directors, which is entrusted by the shareholders to manage the Company, torespond to this kind of Large-Scale Purchase by ensuring that processes such as provision of
information by the Large-Scale Purchaser and considerations and evaluations by the Company’s
Board of Directors are carried out, and securing sufficient time for the Company’s Board of
Directors and shareholders to consider the details of the Large-Scale Purchaser’s proposal in order toprevent damage to the corporate value of the Group and, by extension, the common interests of its
shareholders.
2) Frameworks contributing to realization of basic policy
Since the foundation of Daimaru and Matsuzakaya, the Group has been engaged in businesses ofkimono fabric stores and department stores for many years based on the corporate philosophies andtraditional spirits of these businesses, which are: “Service before profit (those who place service
before profit will prosper),” “Abjure all evil and practice all good” and “In doing good to others, we
do good to ourselves.”
The Company believes that the sources of the Group’s corporate value are the relationships of trust it
has established with customers and with society, which have been refined on the basis of thesephilosophies and spirits.
Accordingly, in order to exemplify the principles of “customer-first principle” and “contribution tosociety,” which are in common with these philosophies and spirits, the Company has established thefollowing basic philosophies of the Group: “to aim at providing high quality products and services
that meet the changing times and satisfying customers beyond their expectations” and “to aim atdeveloping the Group by making a broad contribution to society as a fair and trusted business entity.”
Based on these basic philosophies, the Company established “Create and Bring to Life ‘New
Happiness’” as the Group’s vision and implements a wide range of measures in order to make acontribution to securing and enhancing the corporate value of the Group and, by extension, thecommon interests of shareholders.
3) Framework to prevent parties deemed inappropriate in light of basic policy from controlling thefinancial and business policy decisions of the Company
At present, the Company has not specifically stipulated a concrete framework for a case in which a
Large-Scale Purchaser appears, commonly known as takeover defense measures.
Nevertheless, the Company believes that, in order to prevent damage to the Group’s corporate value
if a Large-Scale Purchaser appears, it is necessary to carefully examine the impact a Large-Scale
Purchase would have on the Group’s corporate value after ascertaining certain information about theLarge-Scale Purchaser. Such information would include the nature of the Large-Scale Purchaser, thepurpose of the Large-Scale Purchase, the Large-Scale Purchaser’s proposed financial and business
policies and their policy for handling shareholders, the Group’s customers, business partners,
employees, the communities that surround the Group and other stakeholders.
Accordingly, if this occurs, the Company will establish an independent committee composed of
Outside Directors and experts with viewpoints that are independent from the Company’s Internal
Directors. If the Company judges that the said Large-Scale Purchaser is inappropriate in light of theaforementioned basic policy after considering advice and opinions from the committee, theCompany will act to secure the Group’s corporate value and, by extension, the common interests ofshareholders by taking necessary and appropriate measures.

- 81 -

4) Judgment of the Company’s Board of Directors regarding concrete framework and reasons forsuch judgment
Various measures formulated by the Group are formulated based on the Group’s basic philosophy,
and are intended to further build up the relationships of trust with customers and with society, which
are the sources of the Group’s corporate value. Therefore, the Company believes that these measures
are in line with the contents of the basic policy and contribute to securing and enhancing thecorporate value of the Group and, by extension, the common interests of shareholders.
Furthermore, if the Company takes necessary and appropriate measures against a Large-Scale
Purchaser judged to be inappropriate in light of the basic policy, the fairness, neutrality and rationalityof this judgment will be ensured by making it in consideration of advice and opinions from an
independent committee whose independence from the Internal Directors of the Company is assured.
Accordingly, the Company believes that these measures would not damage the corporate value of theGroup or the common interests of shareholders, and that they are not intended to maintain thepositions of the officers of the Company.

- 82 -

(2) Information about officers(i) List of officers
Officers include 17 males and 3 females. (Percentage of female officers: 15.00%)(1) Directors
Title and
position

Name

Date of birth

Career summary
April 1973

Joined The Daimaru, Inc.

May 2003

President and COO and General
Manager of Department StoreOperations, Group Headquarters

September
2007

Director of J. FRONTRETAILING Co., Ltd.
In charge of Sales Reform andOut-of-Store Sales (gaisho)
Reform Promotion

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)

95

Executive General Manager ofDepartment Store Operations
Headquarters and Planning
Office for New Umeda Store,
Head Office of The Daimaru,
Inc.
Director
Chairpersonof Board of
Directors

Director of Matsuzakaya Co.,Ltd.
YAMAMOTO
RyoichiMarch 27,
1951

March 2008

Executive General Manager ofSales Headquarters, Head Officeof The Daimaru, Inc.

March 2010

President of Daimaru
Matsuzakaya Department Stores
Co. Ltd.

September
2012

President of Daimaru
Matsuzakaya Department Stores
Co. Ltd. and President of
Daimaru Matsuzakaya Sales
Associates Co. Ltd.

April 2013

President and Representative
Director of J. FRONTRETAILING Co., Ltd.

May 2017

Director, President andRepresentative Executive
Officer

May 2020

Director, Chairperson of Boardof Directors (present)- 83 -

Title andposition

Director

Name

HAMADA Kazuko

Date of birth

Career summary
April 1985

Joined PARCO Co., Ltd.

September
2000

General Manager of Marketing
Department of SalesManagement Division

March 2002

Deputy General Manager ofKichijoji PARCO

March 2005

General Manager of Kichijoji
PARCO

September 6, March 2007
1962
March 2010

General Manager of
Shintokorozawa PARCO
Executive Officer (Personnel)

March 2013

Executive Officer(Administration and Personnel)

March 2015

Executive Officer (Group Audit
Office)May 2020

AuditorMay 2021

Director of J. FRONTRETAILING Co., Ltd. (present)- 84 -

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)–

Title andposition

Director

Name

YAGO
Natsunosuke

Date of birth

Career summary
April 1977

Joined EBARACORPORATION

June 2002

Executive Officer

April 2004

Senior Executive Officer, Group
Executive of Precision
Machinery Group of EBARACORPORATION,
Representative Director andChairman of Ebara Precision
Machinery Europe GmbH,
Representative Director andChairman of Ebara Technologies
Inc. and Chairman of Ebara
Precision Machinery Shanghai
Inc.

June 2004

Director of EBARACORPORATION

April 2005

Director of EBARACORPORATION and Chairmanof Ebara Precision Machinery
Taiwan Inc.

June 2005

Director, President of Precision
Machinery Company andGeneral Manager of Fujisawa
Operation of EBARACORPORATION

May 16, 1951 April 2006

Director and Managing
Executive Officer
President of Precision
Machinery Company

April 2007

President and Representative
Director

May 2007

President and Representative
Director and General Manager
of Internal Control Promotion
Department

July 2009

President and Representative
Director and General Manager
of Internal Control Department

April 2013

Chairman & Director

October 2017

Representative Director of The
Ebara Hatakeyama Memorial
Foundation (present)

March 2019

Retired from the office ofChairman & Director of EBARACORPORATION

June 2019

Outside Director of SUBARUCORPORATION (present)

May 2020

Outside Director of J. FRONTRETAILING Co., Ltd. (present)

May 2021

Director of PARCO Co., Ltd.
(present)- 85 -

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)2

Title andposition

Director

Name

HAKODA Junya

Date of birth

July 10, 1951

Career summary
April 1974

Joined Mitsubishi Rayon Co.,
Ltd. (present Mitsubishi
Chemical Corporation)

November
1980

Joined Pricewaterhouse CPA
Office(Reorganized as Aoyama Audit
Corporation in June 1983)

April 1984

Registered as Certified Public
Accountant

April 2000

Partner at the merged firm,
ChuoAoyama Audit
Corporation/PricewaterhouseCo
opers

August 2006

Representative of Arata Audit
Corporation/Partner ofPricewaterhouseCoopers

April 2008

Eminent Professor of Graduate
School of Keio University(internal audit theory)

September
2009

Member of the Agreement
Monitoring Committee of theJapan External Trade
Organization (JETRO)

September
2010

Director of Japan Internal
Control Research Association

December
2014

Outside Corporate Auditor of
Schroder Investment
Management (Japan) Limited(present)

March 2015

Director of Institute ofCorporate Governance, Japan(present)

June 2015

Outside Corporate Auditor of
Yamaha Corporation

June 2015

Outside Director of AEON
Financial Service Co., Ltd.

June 2017

Outside Director andChairperson of the Audit
Committee of Yamaha
Corporation

September
2019

Member of the Ethics
Committee of the JapaneseInstitute of Certified Public
Accountants (present)

August 2020

Vice Chairperson of theCommittee on Training andResearch for Outside Officers(present)

May 2021

Outside Director of J. FRONTRETAILING Co., Ltd. (present)- 86 -

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)–

Title andposition

Name

Date of birth

Career summary
April 1975

Joined Toray Industries, Inc.

June 1996

Executive Vice President of
Toray Industries (America), Inc.

June 2000

General Manager on Special
Assignment of Corporate
Strategic Planning Division 1,
General Manager on Special
Assignment of Corporate
Communications Dept. of Toray
Industries, Inc.

June 2004

Counsellor of Corporate
Strategic Planning Division, andCounsellor of Investor Relations
Dept.

June 2005

Member of the Board, General
Manager of Finance andController’s Division

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)

3

President, Toray Holding (USA),Inc.
June 2009
Director

UCHIDA Akira

October 4,
1950

Senior Vice President (Memberof the Board), General Manager
of Finance and Controller’s
Division
President, Toray Holding (USA),Inc.

June 2012

Senior Vice President (Memberof the Board), in charge of CSR;
General Manager of General
Administration and Legal
Division, Investor Relations
Dept., Corporate
Communications Dept., andAdvertising Dept., Tokyo Head
OfficeJune 2016

AdviserMarch 2019

Retired from Adviser

May 2019

Outside Director of J. FRONTRETAILING Co., Ltd. (present)

June 2019

Outside Director of Yokogawa
Electric Corporation (present)

May 2020

Director of Daimaru
Matsuzakaya Department Stores
Co. Ltd. (present)- 87 -

Title andposition

Name

Date of birth

Career summary
April 1984

Director

SATO Rieko

November28, 1956

Number ofshares held(Thousandsof shares)(Note 2)

1

Registered as attorney at law

August 1989

Shearman & Sterling LLP

July 1998

Partner of Ishii Law Office(present)

June 2004

External Audit & Supervisory
Board Member of AjinomotoCo., Inc.

June 2012

Outside Corporate Auditor of
NTT DATA CORPORATION

June 2015

Outside Director of The Dai-ichi
Life Insurance Company,
Limited

October 2016

Outside Director (Audit andSupervisory Committee
Member) of Dai-ichi Life
Holdings, Inc. (present)

May 2018

Outside Director of J. FRONTRETAILING Co., Ltd. (present)

May 2019

Director of Daimaru
Matsuzakaya Department Stores
Co. Ltd. (present)

June 2020

Outside Director (Member of the
Audit and Supervisory
Committee) of NTT DATACORPORATION (present)
Outside Audit & Supervisory
Board Member of Mitsubishi
Corporation (present)- 88 -

Term ofofficeTitle andposition

Director

Name

SEKI Tadayuki

Date of birth

Career summary
April 1973

Joined ITOCHU Corporation

June 1998

General Manager, Finance
Division, ITOCHU International
Inc. (Stationed in New York)

June 2004

Executive Officer of ITOCHU
Corporation, CFO of Food
Company

April 2007

Managing Executive Officer,
General Manager of Finance
Division

June 2009

Representative Director,
Managing Director, Chief
Officer for Finance, Accounting,
Risk Management and CFO

April 2010

Representative Director, Senior
Managing Executive Officer

May 2011

Representative Director, Senior
Managing Executive Officer and
CFO

April 2013

Representative Director,
Executive Vice President and
CFO

December 7,
April 2014
1949

Representative Director,
Executive Vice President,
Executive Advisory Officer,
CFO & CAO

April 2015

Adviser

May 2016

External Director of PARCO
Co., Ltd.

June 2016

Outside Director of NIPPONVALQUA INDUSTRIES, LTD.
(present VALQUA, LTD.)(present)

April 2017

Advisory Member of ITOCHU
Corporation (present)

June 2017

Outside Director of JSR
Corporation (present)

July 2017

Outside Statutory Auditor of
Asahi Mutual Life Insurance
Company (present)

May 2020

Outside Director of J. FRONTRETAILING Co., Ltd. (present)
Director of PARCO Co., Ltd.
(present)- 89 -

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)0

Title andposition

Director

Name

KOIDE Hiroko

Date of birthAugust 10,
1957

Career summary
September
1986

Joined J. Walter Thompson
Japan K.K. (present J. Walter
Thompson Japan G.K.)

May 1993

Joined Nippon Lever K.K.
(present Unilever Japan K.K.)

April 2001

Director

April 2006

General Manager of Marketing
Management Division ofMasterfoods Ltd. (present Mars
Japan Limited)

April 2008

Chief Operating Officer

November2010

President and Representative
Director of Parfums ChristianDior Japon K.K.

January 2013

Outside Director of Kirin Co.,Ltd.

April 2013

Senior Vice President of Global
Marketing of Newell
Rubbermaid Inc. (U.S.) (present
Newell Brands Inc.)

June 2016

Outside Director of Mitsubishi
Electric Corporation (present)

April 2018

Director of Vicela Japan Co.,Ltd.

June 2019

Outside Director of Honda
Motor Co., Ltd (present)
Outside Director of J-OILMILLS, Inc. (present)

May 2021

Outside Director of J. FRONTRETAILING Co., Ltd. (present)- 90 -

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)–

Title andposition

Director

Name

YOSHIMOTO
Tatsuya

Date of birth

April 13,
1956

Career summary
April 1979

Joined The Daimaru, Inc.

March 2000

Senior Manager of Preparatory
Office for Opening Sapporo
Store of Planning Office for
Sapporo Store, Head Office

January 2008

General Manager of Tokyo StoreMay 2008

Corporate Officer, General
Manager of Tokyo Store

January 2010

Corporate Officer, General
Manager of Sales Planning
Promotion Division andMarketing Planning Promotion
Division of Department Stores
Coordination Division of J.
FRONT RETAILING Co., Ltd.

March 2010

Corporate Officer of Daimaru
Matsuzakaya Department Stores
Co. Ltd.
Senior General Manager ofManagement Planning Division

May 2012

Director and Corporate Officer

April 2013

President of Daimaru
Matsuzakaya Department Stores
Co. Ltd. and President of
Daimaru Matsuzakaya Sales
Associates Co. Ltd.

May 2013

Director of J. FRONTRETAILING Co., Ltd. (present)

May 2017

Representative Managing
Executive Officer

May 2020

Director, President andRepresentative Executive
Officer (present)- 91 -

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)75

Title andposition

Director

Name

SAWADA Taro

Date of birth

Career summary
April 1983

Joined The Daimaru, Inc.

June 2004

Department Manager of Sales
Promotion Department, Sales
Planning & CS Promotion
Division of Kobe StoreMarch 2010

Division Manager ofManagement Planning Divisionof Daimaru Matsuzakaya
Department Stores Co. Ltd.

January 2011

Executive Store Manager of
Daimaru Kobe

May 2011

Corporate Officer

May 2012

Executive Store Manager of
Daimaru Osaka Shinsaibashi

September
2015

Executive Store Manager of
Daimaru Osaka Shinsaibashi
and Executive General Managerof Shinsaibashi New Store
Planning Office

July 2016

Executive General Manager ofManagement Planning Unit

March 2017

Executive General Manager ofManagement Planning Unit,
Senior General Manager ofManagement Planning Division
and Executive General Manager
of Future Standard Laboratory

January 17,
1960
May 2017

Director and Managing
Executive Officer

May 2018

Director of J. FRONTRETAILING Co., Ltd.
Managing Executive Officer
Senior Executive General
Manager of Management
Strategy Unit and in charge of
Risk Management

March 2019

Senior General Manager of New
Business Division

May 2020

Director of J. FRONTRETAILING Co., Ltd. (present)
Senior Managing Executive
Officer of J. FRONTRETAILING Co., Ltd. (present)
President of Daimaru
Matsuzakaya Department Stores
Co. Ltd. (present)
President and Representative
Director of Daimaru
Matsuzakaya Sales Associates
Co. Ltd. (present)- 92 -

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)20

Title andposition

Director

Name

MAKIYAMA
Kozo

Date of birthAugust 28,
1958

Career summary
April 1981

Joined PARCO Co., Ltd.

March 2004

Executive Officer, Executive
General Manager of StoreOperation Division

March 2007

Managing Executive Officer,
Executive General Manager ofStore Management Division

March 2008

Senior Executive Officer, Senior
Executive General Manager ofStore Operation Headquarters
and Executive General Manager
of Store Management Division

May 2008

Director and Senior Executive
OfficerMarch 2009

Supervisor of Store Operation
Division

March 2010

In charge of Store Management

March 2011

In charge of Business
Management

May 2011

Director, President andRepresentative Executive
Officer

May 2013

Director of J. FRONTRETAILING Co., Ltd. (present)

May 2017

Managing Executive Officer

May 2020

Representative Director,
President and Executive Officer
of PARCO Co., Ltd. (present)
Senior Managing Executive
Officer of J. FRONTRETAILING Co., Ltd. (present)- 93 -

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)26

Title andposition

Director

Name

WAKABAYASHI
HayatoDate of birthAugust 31,
1961

Career summary
April 1985

Joined Matsushita ElectricIndustrial Co., Ltd. (present
Panasonic Corporation)

April 1998

President of Panasonic Financial
Center Malaysia Co., Ltd.

April 2007

Director and Chief Executive
Officer of Matsushita Electric(China) Finance Limited

February 2009

Finance Planning Team Leader(Manager), Headquarters
Finance & IR Group of
Panasonic Corporation

July 2013

General Manager, Finance & IR
Group, Corporate Strategy
Division and Finance Strategy
Team Leader of Panasonic
Corporation (Director)

May 2015

Joined J. FRONT RETAILING
Co., Ltd.
In charge of Finance Policy,
Administration Unit

September
2015

Executive Officer
In charge of Financial Strategy
and Policy, Administration Unit

March 2016

Senior Executive General
Manager of Financial Strategy
Unit and in charge of Finance
PolicyMay 2016

Director (present)

March 2017

In charge of Financing and
Finance Policy

May 2017

Managing Executive Officer(present)

May 2018

Senior General Manager ofFinancing and Finance Policy
Division

May 2020

Director of PARCO Co., Ltd.
(present)

June 2020

Senior Executive General
Manager of Financial Strategy
Unit of J. FRONT RETAILING
Co., Ltd. (present)

Total
Notes:

1.
2.

Term ofofficeNumber ofshares held(Thousandsof shares)(Note 2)12237

Directors YAGO Natsunosuke, HAKODA Junya, UCHIDA Akira, SATO Rieko, SEKI Tadayuki, and KOIDE Hiroko
are Outside Directors.
The term of office will be from the conclusion of the Annual Shareholders Meeting for the fiscal year ended February
28, 2021 to the conclusion of the Annual Shareholders Meeting for the fiscal year ending February 28, 2022.

- 94 -

2) Executive officers
Number ofshares held(Thousands ofshares)Date of birth

Career summary

Term ofofficePresident and
YOSHIMOTO
Representative
TatsuyaExecutive Officer

April 13,
1956

(Note 1)

(Note 2)75

Senior Managing
SAWADA Taro
Executive Officer

January 17,
1960(Note 1)

(Note 2)20

Senior Managing
Executive Officer

MAKIYAMA
Kozo

August 28,
1958(Note 1)

(Note 2)

26

Managing
Executive Officer
Senior Executive WAKABAYASHI
HayatoGeneral Manager
of Financial
Strategy Unit

August 31,
1961(Note 1)

(Note 2)

12

Title and positionName- 95 -

Title and position

Managing
Executive Officer
Senior Executive
General Manager
of Management
Strategy Unit

Name

HIRANO
Hidekazu

Date of birth

Career summary
April 1981

Joined PARCO Co., Ltd.

March 2004

Executive Officer, General
Manager of Nagoya PARCO

March 2005

Executive Officer (Corporate
Planning Office)March 2007

Managing Executive Officer,
General Manager of Corporate
Planning Office

March 2008

President and Representative
Executive Officer

May 2008

Director, Chairman of theBoard, President andRepresentative Executive
Officer

May 2011

Senior Executive Officer(Business Administration)

March 2012

Senior Executive Officer(Affiliated Business)

May 2013

Director and Senior Executive
Officer (Business Strategy
Division and Related BusinessGroup)March 2015

Director and Senior Executive
Officer (Business Strategy
Division, New Business
Planning Group and Related
Business Group)

June 27, 1958
March 2016

Director and Senior Executive
Officer (Business Strategy
Division, Restaurant Business
Development Group, New
Business Planning Group andRelated Business Group)

March 2017

Director and Senior Executive
Officer (Related Businesses
Division and Related BusinessGroup)March 2019

Director, Senior Executive
Officer and General Manager ofRelated Business GroupMay 2020

Director and Senior Executive
Officer (Related Businesses
Division)Managing Executive Officer of
J. FRONT RETAILING Co.,
Ltd. (present)
Senior Executive General
Manager of Management
Strategy Unit and in charge of
Risk Management
Director of Daimaru
Matsuzakaya Department Stores
Co. Ltd. (present)- 96 -

Term ofofficeNumber ofshares held(Thousands ofshares)(Note 2)1

Title and position

Managing
Executive Officer
Senior Executive
General Manager
of HumanResources
Strategy Unit andAdministration
Unit

Name

MATSUDA
Hirokazu

Date of birth

Career summary
April 1983

Joined The Daimaru, Inc.

April 2005

General Manager in charge ofLabor, Personnel Department,
Administration Division, Group
Headquarters

January 2008

General Manager of Personnel
Department, Administration
Division, Group Headquarters

March 2010

General Manager of
Administration Headquarters
and in charge of Personnel
Structure Reform, Head Officeof Daimaru Matsuzakaya
Department Stores Co. Ltd.

March 2014

General Manager of Personnel
Department of Administration
Headquarters, in charge of
Personnel Structure Reform, andin charge of Personnel Planningand Labor, Head Office

May 2014

Corporate Officer and in chargeof Group Organizational andPersonnel Policy, Management
Strategy Unit of J. Front
Retailing Co., Ltd.
Corporate Officer and General
Manager of Personnel
Department, Administration
Headquarters of Daimaru
Matsuzakaya Department Stores
Co. Ltd.

March 29,
1960

January 2015

Senior Executive General
Manager of Administration
Headquarters and in charge ofCompliance and Risk
Management

May 2015

Director and Corporate Officer

May 2017

Director and Corporate
Executive Officer

May 2018

Corporate Executive Officer

March 2021

Managing Executive Officer,
Senior Executive General
Manager of Human Resources
Strategy Unit andAdministration Unit and in
charge of Compliance (present)- 97 -

Term ofofficeNumber ofshares held(Thousands ofshares)(Note 2)12

Title and position

Managing
Executive Officer
Senior Executive
General Manager
of Group Digital
Strategy Unit

Name

NAKAYAMA
TakashiDate of birth

Career summary
April 1992

Joined Mitsubishi Corporation

April 1998

General Manager of New
Business Development
Department of eCubeNet. com
Co., Ltd.

April 2003

Executive Officer Partner of
Eupholink Co., Ltd.

April 2004

Vice President and COO

April 2008

Distribution Trading Company
Sector Partner of SIGMAXYZ
Inc.

April 2015

Leader of Process Engineering
Unit, IT Planning Dept. of
Mitsubishi Corporation

March 2017Retired from Mitsubishi
Corporation

April 2017

Joined J. FRONT RETAILING
Co., Ltd.
Senior General Manager ofGroup Digital Strategy Division
and Senior General Manager of
New Business Division,
Management Strategy Unit

October 14,
1966
September
2017

Executive Officer, Senior
General Manager of Group
Digital Strategy Division,
Management Strategy Unit andSenior General Manager of New
Business Division

March 2019

Executive Officer and Senior
General Manager of Group
Digital Strategy Division,
Management Strategy Unit

May 2020

Executive Officer, Senior
Executive General Manager ofGroup Digital Strategy Unit andSenior General Manager of
Digital Promotion Division

May 2021

Managing Executive Officer andSenior Executive General
Manager of Group Digital
Strategy Unit (present)- 98 -

Term ofofficeNumber ofshares held(Thousands ofshares)(Note 2)5

Title and position

Executive Officer

Name

IMAZU
Takahiro

Date of birth

Career summary
April 1995

Joined The Daimaru, Inc.

March 2013

General Manager of Sales
Division 2, Tokyo store of
Daimaru Matsuzakaya
Department Stores Co. Ltd.

September
2013

General Manager of Sales
Promotion Department, Daimaru
Tokyo store

September
2014

Senior General Manager ofManagement Strategy Unit andin charge of Management
Planning of J. FRONTRETAILING Co., Ltd.

May 2015

Corporate Officer, Senior
General Manager ofManagement Strategy Unit andin charge of Management
Planning

March 2016

Senior Executive General
Manager of Management
Strategy Unit and in charge ofGroup Management Strategy
Promotion

March 2017

Senior Executive General
Manager of Group Digital
Strategy Division, Senior
General Manager ofManagement Strategy Unit andSenior General Manager of New
Business Division

July 31, 1971 April 2017

Senior General Manager ofManagement Planning Division,
Management Strategy Unit

May 2017

Executive Officer

January 2018

Corporate Officer and Executive
Store Manager of Daimaru
Osaka Umeda of Daimaru
Matsuzakaya Department Stores
Co. Ltd.

January 2020

Executive Officer of J. FRONTRETAILING Co., Ltd.
Senior General Manager ofManagement Planning Division
and Group Communication
Promotion Division,
Management Strategy Unit

May 2020

Executive Officer (present)
Senior General Manager ofManagement Planning Division
and Group Communication
Promotion Division, and Senior
General Manager of New
Business Division, Management
Strategy Unit

March 2021

Senior General Manager ofManagement Planning Division
and Group Communication
Promotion Division,
Management Strategy Unit
(present)- 99 -

Term ofofficeNumber ofshares held(Thousands ofshares)(Note 2)11

Title and position

Executive Officer

Executive Officer

Name

IWATA
YoshimiONO Keiichi

Date of birth

Career summary
April 1987

Joined Matsuzakaya Co., Ltd.

March 2013

Senior General Manager ofFinance Division and in chargeof Finance, Administration Unitof J. FRONT RETAILING Co.,Ltd.

March 2016

In charge of Finance andAccounting and General
Manager of Finance
Department, Financial Strategy
Unit

March 2017

Corporate Officer, Senior
General Manager of Financial
Strategy Unit and in charge of
Budget and Management
SupportApril 27,1963
May 2017

Executive Officer, Senior
General Manager of Financial
Strategy Unit and in charge of
Budget and Management
SupportMay 2018

Executive Officer and Senior
General Manager of Budget andManagement Support Division,
Financial Strategy Unit

March 2021

Executive Officer and Senior
General Manager of Accounting
and Tax Affairs Division,
Financial Strategy Unit (present)

April 1998

Joined The Daimaru, Inc.

September
2016

General Manager of Sales
Promotion Department, Daimaru
Kyoto store of Daimaru
Matsuzakaya Department Stores
Co. Ltd.

March 2018

Executive Officer of J. FRONTRETAILING Co., Ltd.

August 2,
1975

President and Representative
Director of Dimples’ Co., Ltd.
October 2020

- 100 -

Executive Officer and Senior
General Manager of Structural
Reform Promotion Division,
Financial Strategy Unit of J.
FRONT RETAILING Co., Ltd.
(present)

Term ofofficeNumber ofshares held(Thousands ofshares)(Note 2)13

(Note 2)3

Title and position

Executive Officer

Name

NINOBE
MamoruDate of birth

October 13,
1961

Career summary
April 1986

Joined Japan Office of American
Express International, Inc.

August 2000

Representative Director andVice President of The Sumitomo
Bank Amex Service, Limited

November
2000

Vice President of Global
Network Service in Japan/South
Korea Areas, Japan Office ofAmerican Express International,
Inc.

October 2003

Representative Director andPresident of Amex Card Service
Co., Ltd.

April 2004

Vice President of Global
Network Service in Japan andAsia Franchise Areas (Vietnam,
Sri Lanka, Pakistan, Maldivesand Brunei)

August 2005

Vice President of Traveler’s
Check & Prepaid Service
Director of Amex Prepaid Card
Co., Ltd.

September
2007

General Manager of Cartier
Retail Division of RichemontJapan Limited

September
2011

Head of Business Development
II of Visa Worldwide Japan Co.,
Ltd.

October 2015

Representative of Business
Advisory Service (Settlement
and Financial Services)

February 2017

Advisor of Origami Inc.

March 2018

Executive Officer of J. FRONTRETAILING Co., Ltd. (present)
President and Representative
Director of JFR Card Co., Ltd.
(present)- 101 -

Term ofofficeNumber ofshares held(Thousands ofshares)(Note 2)3

Title and position

Executive Officer

Name

KONDO
Yasuhiko

Date of birth

Career summary
April 1985

Joined Matsuzakaya Co., Ltd.

September
2011

Executive Store Manager of
Matsuzakaya Toyota store of
Daimaru Matsuzakaya
Department Stores Co. Ltd.

February 2013

General Manager of Sales
Promotion Department,
Matsuzakaya Nagoya store

January 2014

Executive Store Manager of
Matsuzakaya Ueno store

February 14,
January 2016
1963

Corporate Officer and Executive
Store Manager of Matsuzakaya
Nagoya store

January 2018

Corporate Officer and in chargeof Special Assignments fromPresident

March 2018

Executive Officer of J. FRONTRETAILING Co., Ltd. (present)

Term ofofficeNumber ofshares held(Thousands ofshares)(Note 2)

14

President and Representative
Director of J. Front Design &Construction Co., Ltd. (present)
Total
Notes:

1.
2.

200

Described in “(1) Directors” in “(i) List of officers” in “(2) Information about officers.”
The term of office of an Executive Officer shall expire at the end of the first meeting of the Board of Directors held
after the end of the Annual Shareholders Meeting that relates to the latest business year that ending within one (1) year
after his/her election to office.

(ii) Outside officers
The Company has six Outside Directors.
The basic views of the Company under the corporate governance structure with three committees arethat more than half of the Board of Directors must be independent Outside Directors and a majority ofmembers must be independent Outside Directors and/or internally promoted Directors who do not
execute business. By doing so, the Company aims to separate supervision and execution, ensure theeffectiveness of the Board of Directors’ discussions, and maintain and improve transparency andobjectivity. Two internal Directors who do not execute business, and are well informed about internal
information because of their extensive business experience in businesses of the Group companies,
fulfill their roles as chairperson of the Board of Directors and as Audit Committee member, and six
independent Outside Directors, who have extensive external management experience or in-depth
knowledge in specialized areas, fulfill their roles as chairperson of any of the Nomination, Audit andRemuneration Committee, or members of the three committees, so that the effectiveness of
independent and objective management supervision can be ensured.

- 102 -

1) Relationship with the Company and appointment of Outside Directors
Name

YAGO Natsunosuke

HAKODA Junya

Important concurrent positions(As of May 28, 2021)

Relationship with the Company and appointment

Outside Director of SUBARUCORPORATIONYAGO Natsunosuke has been involved in top-level company
management for many years, and has abundant experience instrengthening financial bases and in compliance management. He
also possesses highly specialized knowledge of internal control andcorporate governance gained through his experience of being
involved in the transition to a company with three committees(nomination, audit and remuneration committees). He has
contributed to improving the effectiveness of the Board of Directors
by actively and assertively providing advice on the overallmanagement strategy of a holding company, including approaches tosetting appropriate targets for structural reform, how to identify
issues for the formulation of medium-term business plans, the ideal
form of management in matrix management, and how to set andassess materiality and specific promotion measures thereof.
Moreover, he has contributed to strengthening the management
personnel function by providing necessary advice as appropriate ontransparent and fair decision making of officer personnel
appointment plan and when deliberating on the Nomination
Committee’s operational policies focusing on succession plan as amember of the Nomination Committee, as well as facilitating
deliberation on specific remuneration amounts and revisions to theofficer remuneration system, etc. as a member of the Remuneration
Committee. In light of his track record, abundant experience andhigh level of insight, the Company expects him to contribute greatly
to management of the Group, and has accordingly appointed him as
an Outside Director. The Company has no interest in or relationshipwith him.

Member of the Ethics Committeeof the Japanese Institute ofCertified Public Accountants;
Vice Chairperson of theCommittee on Training andResearch for Outside Officers,
Japanese Institute of Certified
Public Accountants

HAKODA Junya was involved in accounting audits, management
consulting, and internal audits of auditing firms, etc. as a certified
public accountant for many years at PricewaterhouseCoopers, also
served as an eminent professor teaching internal audit theory at
Graduate School of Keio University, and therefore has abundant
experience and high-level expertise in corporate auditing. He also
has a high level of expertise in corporate governance andmanagement auditing, having served as the Chairperson of the Audit
Committee of Yamaha Corporation when the company changed its
organizational design to a company with three committees(nomination, audit, and remuneration committees). In light of his
track record, abundant experience and high level of insight, theCompany expects that he will apply them to the appropriate
supervision of management in the Group, and has accordingly
appointed him as an Outside Director. The Company has no interestin or relationship with him.

- 103 -

Name

Important concurrent positions(As of May 28, 2021)

Relationship with the Company and appointment

Outside Director of Yokogawa
Electric Corporation

UCHIDA Akira possesses broad experience and knowledge in thecorporate division, as a manager in charge of management planningand IR, and as the person responsible for the finance and accounting
division. He has contributed to improving the effectiveness of theBoard of Directors by actively and assertively providing advice andoversight with respect to how to strengthen collaboration amongorganizations that will lead to group synergies, clarify the chain ofcommand in promoting structural reforms and digital initiatives, andformulate and communicate visions and strategies expected bystakeholders, as well as approaches to ESG and CSV managementthat will lead to increased corporate value. Moreover, he has
contributed to strengthening the management personnel function, byfacilitating deliberation on specific remuneration amounts andrevisions to the officer remuneration system, etc., as the Chairpersonof the Remuneration Committee, as well as by providing necessary
advice as appropriate on transparent and fair decision making of
officer personnel appointment and when deliberating on the
Nomination Committee’s operational policies focusing on
succession plan as a member of the Nomination Committee. In lightof his track record and abundant insight, the Company expects him
to contribute greatly to management of the Group, and has
accordingly appointed him as an Outside Director. The Company has
no interest in or relationship with him.

SATO Rieko

Partner of Ishii Law Office;Outside Director (Member of the
Audit and Supervisory Committee)of NTT DATA CORPORATION;
Outside Director (Audit &Supervisory Committee Member)of Dai-ichi Life Holdings, Inc.;
Outside Audit & Supervisory
Board Member of Mitsubishi
Corporation

SATO Rieko possesses abundant experience as an outside director
and outside audit & supervisory board member at other companies,in addition to having made a career in handling many projects within-depth and specialized knowledge as an attorney at law
specializing in corporate legal affairs. She has contributed to
improving the effectiveness of the Board of Directors by providing
active advice and oversight from legal perspectives on how topromote structural reforms, points to keep in mind in conducting
them, the importance of analyzing the future environment inmedium- to long-term strategies, and what digital-based services
customers expect, etc. Moreover, as a member of the Audit
Committee, she has endeavored to strengthen the audit function byauditing the execution of duties by Directors and Executive Officersof the company with three committees (nomination, audit, andremuneration committees), while engaging in discussions from theperspective of legality and appropriateness related to items submitted
to the Board of Directors and items judged to require monitoring by
the Audit Committee. In light of her track record and abundantinsight, the Company expects her to contribute greatly to
management of the Group, and has accordingly appointed her as an
Outside Director. The Company has no interest in or relationshipwith her.

SEKI Tadayuki

SEKI Tadayuki was involved in international business management
and risk management at a general trading company for many years,
and has extensive experience in finance and accounting as CFO, aswell as abundant experience as an outside director and outside
corporate auditor of multiple companies. He has contributed to
improving the effectiveness of the Board of Directors by actively
and affirmatively providing advice to the Board of Directors on how
to promote structural reforms, how the Payment and FinanceBusinesses and new businesses should be structured in the MediumOutside Director of VALQUA, LTD.; term Business Plan, and how to formulate capital cost-conscious
Outside Director of JSR Corporation; financial strategies, etc. As a member of the Audit Committee, he has
Outside Statutory Auditor of Asahi
contributed to strengthening the audit function by auditing the
Mutual Life Insurance Company
execution of duties by Directors and Executive Officers of thecompany with three committees (nomination, audit, andremuneration committees), while engaging in discussions from theperspective of legality, appropriateness, etc. related to items
submitted to the Board of Directors and items judged to requiremonitoring by the Audit Committee. In light of his track record andhigh level of insight, the Company expects him to contribute greatly
to management of the Group, and has accordingly appointed him as
an Outside Director. The Company has no interest in or relationshipwith him.

UCHIDA Akira- 104 -

Important concurrent positions(As of May 28, 2021)

Name

Outside Director of Mitsubishi
Electric Corporation;
KOIDE Hiroko

Outside Director of Honda MotorCo., Ltd;
Outside Director of J-OILMILLS,
Inc.

Relationship with the Company and appointment
KOIDE Hiroko served as an officer at foreign companies for many
years, also engaged in corporate management as the head ofmarketing at the head office of a U.S. company, and therefore hasabundant experience in global management and knowledge based onher extensive experience in the marketing field. She also has wideranging insight as an outside director of multiple listed companies.
In light of her track record, abundant experience, and deep
knowledge, the Company expects that she will apply them to theappropriate supervision of management in the Group, and has
accordingly appointed her as an Outside Director. The Company has
no interest in or relationship with her.

(iii) Coordination between supervision by the Outside Directors, the internal audits and accounting audit, andrelationship with the internal control department
The Company’s Outside Directors, as members of the Board of Directors, make decisions on the basic
policy for management policy and management strategy of the Group, and execution of othermanagement-related operations, and fulfill the highly effective oversight function over the
management from the standpoint independent from the execution of operations. As stated in “(3)Status of audit” below, the Audit Committee conducts audits for the legal compliance andappropriateness of the execution of operations by Directors and Executive Officers by cooperatingwith the Accounting Auditor and utilizing internal organizations in accordance with the audit policy
and plan developed by the Audit Committee.
(3) Status of audit(i) Status of audit by Audit Committee
1) Organization, members and procedures of Audit Committee
The Audit Committee consists of four Audit Committee Members (as of the filing date of theannual securities report; one full-time member and three outside members).
Chairperson of the Audit Committee, HAKODA Junya, has a wealth of experience as a Certified
Public Accountant and extensive expertise in corporate accounting. Audit Committee Member
SEKI Tadayuki has served as CFO at Itochu Corporation and possesses considerable insight infinance and accounting. Moreover, Audit Committee Member SATO Rieko has a wealth ofexperience and extensive expertise as an attorney in the field of corporate law.
In the current fiscal year, the Audit Committee Members clearly documented in the Rules of Audit
Committee the right of approval of the Audit Committee concerning appointments and transfers of
Audit & Supervisory Board Members in the Group companies to strengthen the auditing functionin accordance with points made regarding the effectiveness evaluation of the Board of Directors,
and working to enhance the auditing systems of organizations, the Audit & Supervisory Board
Members in the Group companies concurrently serve on the Audit Committee Secretariat.
In accordance with the audit policy and plan developed by the Audit Committee, the Audit
Committee conducts audits for the legal compliance and appropriateness of the execution ofoperations by Directors and Executive Officers by cooperating with the Accounting Auditor andutilizing internal organizations, and prepares an audit report.

- 105 -

2) Activities of Audit Committee
In the current fiscal year, the Company held a total of 18 meetings of the Audit Committee. The
attendance of each Audit Committee member at the meetings is as follows.
Attendance at the meetings of theCategory

Audit Committee

Name(Note 1)Chairperson of Audit Committee(outside)

NISHIKAWA Koichiro(Note 2)Chairperson of Audit Committee(outside)

HAKODA Junya

Audit Committee Member (full-time)
Audit Committee Member (full-time)
Audit Committee Member (full-time)
Audit Committee Member (outside)
Audit Committee Member (outside)
Audit Committee Member (outside)
Notes:

1.
2.
3.
4.
5.

(Note 3)
TSUTSUMI Hiroyuki(Note 2)
MURATA Soichi(Note 2)
HAMADA Kazuko(Note 3)
SATO Rieko

18/18
–
18/18
18/18
–
18/18

UCHIDA Akira(Note 4)
SEKI Tadayuki(Note 5)

5/5
13/13

Based on the number of meetings held during officers’ terms of office.
Retired on May 27, 2021.
Assumed office on May 27, 2021.
Retired on May 28, 2020.
Assumed office on May 28, 2020.

As for the Audit Committee’s activities in the current fiscal year, the Audit Committee madefurther efforts to ascertain the current state through interviews and exchange of opinions with
Executive Officers and Directors at the Audit Committee Meetings (held 16 times) established in
the previous fiscal year, which are distinct from the meetings of the Audit Committee (held 18
times), as well as through attendance by full-time Audit Committee members at important
meetings such as the Group Management Meeting, the Compliance Committee meetings and the
Risk Management Committee meetings, in examining the status of the execution of business by
Executive Officers and Directors and the status of improvement and operation of the internal
control system. Moreover, the Audit Committee worked closely to share auditing problem
recognition and exchange opinions through regular meetings with the Internal Audit Division,
Accounting Auditor and Audit & Supervisory Board Members, and made points and proposals in
the form of “audit findings” on matters considered particularly important, in addition to periodical
audit report to the Board of Directors.
(ii) Status of internal audit
1) Organization, members and procedures of internal audit
The Company has established an independent Internal Audit Division (nine members) under the
President and Representative Executive Officer. The Internal Audit Division verifies and evaluates
the legality and effectiveness of systems of corporate governance, risk management andcompliance management, in addition to performing audits on business operations of the Company
and the Group companies.
The Company shall adopt a double-reporting system where both the President and Representative
Executive Officer and the Audit Committee shall receive reports, and audit results andimprovement measures related to audit findings are regularly reported on. As for orders related to
improvement measures from management, issues are promptly handled in collaboration with theaudited departments.
- 106 -

2) Coordination between the internal audits, auditing by the Audit Committee members andaccounting audit, and their relationship with the internal control department
In addition to the contents described in “(i) Status of audit by Audit Committee,” when theInternal Audit Division prepares its audit policy and plan, it submits the relevant report in advanceto the Audit Committee. In addition, its audit results are regularly reported to President andRepresentative Executive Officer and the Audit Committee. The Audit Committee is authorized tomake requests to the Internal Audit Division on the execution of additional audits, or directly
conduct audits if necessary. Regarding personnel appointment and changes related to the
Executive General Manager of the Internal Audit Division, the Audit Committee’s advanceapproval is required.
(iii) Status of accounting audit
1) Name of audit firm
Ernst & Young ShinNihon LLC
2) Consecutive audit period
69 years
Note: The Company is a holding company jointly established by The Daimaru, Inc. andMatsuzakaya Holdings Co., Ltd. through transfer of shares in 2007, and the above
consecutive audit period includes the consecutive audit period of The Daimaru, Inc.
3) Certified public accountants who executed the audit duties
TAKENOUCHI Kazunori (Consecutive audit period: 3 years)
SHIBAYAMA Yoshihisa (Consecutive audit period: 4 years)
MATSUURA Hiroshi (Consecutive audit period: 4 years)
4) Breakdown of support staff for audit operations
Support staff for financial audit operations consist of 28 certified public accountants and 36
others.
5) Policies and reasons for selecting audit firm
The Audit Committee draws up criteria in advance for selecting and evaluating the Accounting
Auditor, that is composed of matters relating to the auditor’s independence, expertise and otheraspects of executing the audit, with the aim of ensuring that the Accounting Auditor properly
carries out the audit. On the basis of that criteria, the Audit Committee takes into account theopinions of the management team, and then makes decisions on proposals for election, dismissal
and non-reappointment of the Accounting Auditor that are submitted to the Shareholders Meeting.
The Audit Committee is to take necessary measures that include dismissing the Accounting
Auditor upon resolution of the committee, or otherwise making a decision on proposals to dismissor not reappoint the Accounting Auditor submitted to the Shareholders Meeting, in the event that
the Audit Committee deems it appropriate to dismiss or otherwise not reappoint the Accounting
Auditor either if there are grounds for dismissal as provided for in Article 340, paragraph (1) of
the Companies Act of Japan, or if a situation arises whereby the audit of the Company has beensignificantly impeded such as would be the case if the supervisory authorities were to issue anorder requiring suspension of auditing activities.
6) Assessment of audit firm by Audit Committee
The Audit Committee assesses the appropriateness and validness of audit activities by the
Accounting Auditor based on the Accounting Auditor Evaluation Standards established by the
Audit Committee.

- 107 -

(iv) Details of audit fee, etc.
1) Remuneration to certified public accountants, etc. for audits
Previous fiscal year
Fees for audit
certification services(Millions of yen)

Category

Current fiscal year

Fees for non-audit
services(Millions of yen)

Fees for audit
certification services(Millions of yen)

Fees for non-audit
services(Millions of yen)

Reporting company

125

23

102

10

Consolidated
subsidiaries

104

7

143

–

230

31

245

10

Total
Note:

The content of non-audit service for the Company is consulting service for the International Financial Reporting Standards(IFRS), etc. for the consolidated accounting of the previous fiscal year and accounting support for real estate transfers in the
consolidated accounting of the current fiscal year.

2) Remuneration to companies which are comprised of the same network of certified public
accountants, etc. for audits (Ernst&Young).
Previous fiscal year
Fees for audit
certification services(Millions of yen)

Category

Current fiscal year

Fees for non-audit
services(Millions of yen)

Fees for audit
certification services(Millions of yen)

Fees for non-audit
services(Millions of yen)

Reporting company

–

17

–

3

Consolidated
subsidiaries

3

13

5

4

3

30

5

7

Total
Note:

The content of non-audit service for the Company is due-diligence service for the consolidated accounting of the previous
fiscal year and accounting support for taxes of real estate transfers for the consolidated accounting of the current fiscal year.
The content of non-audit service for consolidated subsidiaries is system-related support service, etc.

3) Details of remuneration for other significant audit certification services
PARCO Co., Ltd., a consolidated subsidiary of the Company, and its subsidiaries were audited by
KPMG AZSA LLC. up until the previous fiscal year and the amount of remuneration for audit
certification services to the said auditing firm was ¥97 million.
4) Policy on determining audit fee
The fee is determined in view of the audit system, the number of days for audit, and other factors.
5) Rationale for Audit Committee’s agreement on remuneration of the Accounting Auditor, etc.
The Audit Committee furnished its agreement with respect to the amount of remuneration, etc.
provided to the Accounting Auditor, which has been deemed appropriate upon conducting areview regarding audit appropriateness with respect to the Accounting Auditor’s audit plan, its
execution of duties, the basis used for calculating remuneration estimates and other factors.
(4) Remuneration, etc. for officers(i) Matters regarding the policy on determination of the amounts of compensation paid to officers and thecalculation method thereof
The Company developed and released the Officer Remuneration Policy (hereinafter, the “Policy”) in
April 2017, but reviewed the content afresh upon the formulation of the new Medium-term Business
Plan on April 13, 2021.
The Company has also designed the officer remuneration to function as incentive for achieving andpromoting sustainability management. An overview of the Policy is provided below.
1) Basic policy for officer remuneration
The Company’s officer remuneration system is operated under the following basic policy with aview to realizing and promoting sustainability management (pay for purpose). The same basic- 108 -

philosophy is also established by Daimaru Matsuzakaya Department Stores and PARCO, which
are major subsidiaries of the Group.
 Contribute to the sustainable growth and increase of the corporate value of the Group over the
medium to long term, and also be compatible with its corporate culture Establish a remuneration system that facilitates the achievement of duties (mission) based on
management strategies of professional corporate managers.
 Remuneration levels that can secure and retain human resources who have the desirable
managerial talent qualities required by the Company.
 Increase shared awareness of profits with shareholders and awareness of shareholder-focusedmanagement.
 Enhanced transparency and objectivity in the remuneration determining process.
2) How to determine remuneration levels
To make quick responses to changes in the external environment and the market environment, theCompany refers to objectively verifiable remuneration survey data from specialist externalorganizations (such as from “Manager Remuneration Survey” of Human Resources Governance
Leaders Co., Ltd.), adopts the officer remuneration levels of companies in the same industry(department stores / retailers) and companies of a comparable size (selected based on market
capitalization and consolidated operating profit) in other industries as a benchmark, and compares
the remuneration levels of its Executive Officers and Directors with the benchmark every year. In
principle, the peer group should comprise 30 to 50 companies (including portions that aresupermarkets and drugstores). The same treatment shall apply to the Directors and Executive
Officers of Daimaru Matsuzakaya Department Stores and PARCO.
3) Composition of remuneration<Executive Officer>
Remuneration for Executive Officers shall comprise (i) basic remuneration (monetary
remuneration) in accordance with mission grade, (ii) bonuses (monetary remuneration) based on
individual evaluations conducted each business year, and (iii) performance shares linked to theconsolidated performance achievement rate, etc. provided in the Medium-term Business Plan as astock-based remuneration system (trust-type stock-based remuneration).
With regard to the composition of remuneration for Executive Officers, the ratio of performancelinked remuneration and of stock-based remuneration is set with an awareness of its function as ahealthy incentive to help achieve sustainable growth.

- 109 -

Type ofremuneration

Payment basis

Basicremuneration(fixed)Determined separately for each mission grade

Payment
methodComposition of remuneration(%)
President

Officers otherthan President

Monthly
payment in cash

38.5

45.4

Annual payment
in cash

23.0

27.3

38.5

27.3

Base amount by mission grade × Rate of change*1*1. The rate of change is based on a calculation of scores using thequantitative and qualitative evaluations below.
Evaluation
weights (%)

Details
Quantitative evaluation Fiscal year’s
financial<70%>
evaluation

Consolidated
operating profit*2

70

Level ofachievement ofaction plan forachieving fiscal
year’s financial
evaluation

Bonuses(variable)

20

Qualitative evaluation Fiscal year’s
non-financial Level of<30%>
achievement ofevaluation
action plan forachieving nonfinancial targets inline with materiality
issues10[Short term: 40%] Base amount by mission grade × Performance achievement
factor*3*3. Calculated based on the following measures of achievement*4
Annual payment
Evaluation
weights (%)

Details
Consolidated operating profit

in stocks*5100

grade × Performance
Performance- [Medium to long term: 60%] Base amount by mission
achievement factor*3
linked stock*3. Calculated based on the following measures of achievement*4
based
remuneration(variable)

Evaluation
weights (%)

Details
Financial indicators<80%>
Non-financial
indicators<20%>

Consolidated operating profit

40

ROE

40

GHG reductions (Scope 1 & 2
emissions)

10

Goal achievement for ratio of womenin management positions

10

At theexpiration of theterm of each
Medium-term
Business Plan instocks*5*2. In principle, the target figures are based on consolidated financial indicators but if an officer is in charge of a certain business,target figures for that business are used.
*4. The performance-linked factor for performance-linked stock-based remuneration is calculated by the following calculation
method: The rate of change for ratio of women in management positions is evaluated using fiscal 2020 results as the reference.
Actual results = Results - fiscal 2020 results, Target = 26% - fiscal 2020 results
Performance target achievement
200% or more
0% or more, but less than 200%
Less than 0%

Performance-linked factor
2
Actual results ÷ Target
0*5. In principle, the equivalent of 50% of the Company’s shares to be issued is converted and paid as cash to provide funds forpayment of tax.
However, in cases where there are undisclosed material facts in the Company, the Company’s shares will not be converted.

(Basic remuneration)
Basic remuneration is positioned as a fixed remuneration, and is decided for each mission grade
based on the size (weight) of the responsibility borne by each officer. Payments are made every
month in the form of money.
- 110 -

(Bonuses)
Bonuses are paid as performance-linked remuneration to facilitate the achievement of goals set foreach fiscal year as milestones for the Medium-term Business Plan, and evaluation for the bonuses
is carried out using the fiscal year’s financial indicators, serving as quantitative evaluation, andthe fiscal year’s non-financial indicators, which include qualitative evaluation. For the fiscal
year’s financial indicators, the Company evaluates the level of achievement against target figures
set for consolidated financial indicators announced after resolution by the Board of Directors at
the start of each fiscal year (where the officer is in charge of a certain business, the target figures
for that business are used). For the fiscal year’s non-financial indicators, the Company evaluates
the level of achievement of the action plan for achieving financial indicators for each fiscal year
and the action plan for achieving non-financial targets in accordance with each officer’s mission
based on the Company’s materiality issues. Taking the weighting of the fiscal year’s financial andnon-financial indicators as 70:30, one-third of the fiscal year’s non-financial indicators (10% of
the total weight) is taken as the evaluation of the action plan for achieving the Company’s
materiality issues. For the fiscal year’s financial indicators, the evaluation is made based on theachievement level of the fiscal year’s target, using the forecast figure of the consolidated
operating profit announced at the start of the fiscal year (IFRS based). Where the officer is incharge of a certain business, the target figures for operating profit for that business decided by theCompany’s Board of Directors at the start of the fiscal year are used. The Company selected theindicators referred to above because they are linked to the respective indicators mentioned in theMedium-term Business Plan. For the fiscal year’s non-financial indicators, the President, who isthe evaluator, conducts an interview with each Executive Officer (the Chairman of the Board of
Directors conducts an interview with the President) at the start of the fiscal year to formulate an
action plan based on each Executive Officer’s mission.
(Performance share (Performance-linked stock-based remuneration))
Performance-linked stock-based remuneration is issues of the Company’s shares linked to theconsolidated performance achievement rate, etc. provided in the Medium-term Business Plan.
This remuneration is designed to help the Group achieve sustainable growth and increase
corporate value over the medium to long term. When the shares are issued, in principle theequivalent of 50% of the Company’s shares to be issued is converted and paid as cash to provide
funds for payment of tax. However, in cases where there are undisclosed material facts in the
Company, the Company’s shares will not be converted. Under this system, 60% of the entire
amount of performance-linked stock-based remuneration will be issued in a single issuance at theend of the Medium-term Business Plan, with the remaining 40% to be issued each year in order topromote management from the shareholders’ perspective. Of the portion issued at the end of theMedium-term Business Plan, 80% is evaluated by financial indicators and is weighted so that 40%
is evaluated based on consolidated operating profit and 40% on ROE, being the numerical targetsof the Medium-term Business Plan (IFRS based) announced following a resolution of the Boardof Directors. The remaining 20% is evaluated based on non-financial indicators. For non-financial
targets, the system bases evaluation on a weighting of 10% for GHG reductions (scope 1 & 2
emissions) and 10% for raising the ratio of women in management positions. Regarding the
portion issued each year, the level of achievement with respect to figures announced in the initial
forecast (IFRS based) following a resolution of the Board of Directors will be evaluated based
only on consolidated operating profit. The fluctuation range for remuneration in accordance withthe performance achievement rate is between 0% and 200%.

- 111 -

[Performance-linked stock-based remuneration targets]
Target figures for medium tolong term

KPI
Profitability(i)Efficiency

(ii)
(iii)

Nonfinancial(iv)

Consolidated operating profit(¥ million)
ROE(%)
GHG reductions (Scope 1 & 2 emissions)(%)
Raise the ratio of women in management
positions(%)

40,300(FY2023)(at the end of7

FY2023)(compared with(40)

FY2017)(at the end of
FY2023)26

Note:

KPI stands for Key Performance Indicator.

Note:

For the short term, only (i) consolidated operating profit is used. The target figure used is the forecast
figure (IFRS based) for the fiscal year announced in the Company’s financial results reports each year
in April.

(Targets and results of indicators for performance-linked remuneration in the current fiscal year
(from March 2020 to February 2021))(Millions of yen)Type of remuneration
Bonuses
Performancelinked stockbased
remuneration

Financial
perspective
Short-term
Medium-term

TargetResults

Consolidated revenue

411,000

319,079

Consolidated operating profit

12,000(24,265)

ROE (%)

1.3

(7.1)

Consolidated operating profit

12,000(24,265)

Basic earnings per share (Yen)

19.10(100.03)––

Consolidated operating profit
Basic earnings per share (Yen)<Director>
Non-executive Directors’ remuneration shall consist only of fixed remuneration, which shall be (i)basic remuneration (monetary remuneration) in accordance with responsibilities and (ii) restricted
stock (non-performance-linked stock-based remuneration, which is trust-type stock-based
remuneration), which is not linked to performance, as part of the stock-based remuneration
system.
4) Remuneration determination process
To ensure the appropriateness of the level and amount of remuneration, and the transparency ofdecision-making processes, decisions are made by deliberation and resolution of theRemuneration Committee comprising independent Outside Directors and a non-executive
Chairman of the Board of Directors, and headed by an independent Outside Director. Since themembers of the Company’s Remuneration Committee and its Nomination Committee are thesame, they can coordinate together in activities related to the areas of nomination andremuneration of management, including selection and evaluations. The Remuneration Committee
determines the policy for deciding the content of individual remuneration for officers of theCompany, Daimaru Matsuzakaya Department Stores Co. Ltd. and PARCO Co., Ltd. (Directors,
Executive Officers and Corporate Officers), as well as deciding the content of individual
remuneration for Directors and Executive Officers of the Company. The Committee alsodeliberates and resolves internal regulations and other rules for remuneration of the Company’s
Directors and Executive Officers. The remuneration details for individual officers of Daimaru
Matsuzakaya Department Stores and PARCO are deliberated by the nomination and remunerationcommittees (whose members include independent Outside Directors of the Company), which areestablished at the discretion of each company, and are decided by each company’s Board of- 112 -

Directors, after being resolved by each company’s Annual Shareholders Meeting if such approvalis required.
It is planned that the Remuneration Committee shall meet at least four times a year. Revisions of
the officer remuneration system will be undertaken based on Medium-Term Business Plan
periods. The Company will revise the level of basic remuneration during the Medium-term
Business Plan if it is necessary to significantly revise basic remuneration due to extreme changes,
etc. in the external environment. In the current fiscal year, the Remuneration Committee held 15
meetings.
In addition, the Company appoints an external remuneration consultant (Human Resources
Governance Leaders Co., Ltd.) with a view to introducing objective viewpoints from outside theCompany and expertise on officer remuneration systems. With its support, the Company reviews
its remuneration levels and remuneration system in light of external data, economic environment,
industry trends, business conditions and corporate culture, among others.
5) Forfeiture of remuneration, etc. (clawback/malus clauses)
With regard to bonuses and stock-based remuneration, in cases where the Board of Directors has
resolved that serious accounting errors or fraudulent adjustments after the settlement of accounts
have occurred, or in cases where serious infringements of the delegation agreement, etc. between
the Company and an officer have taken place, or in cases where a person has resigned for theirown reasons during their tenure against the wishes of the Company, the right to be paid/issued
remuneration may be forfeited, and the Company may demand the repayment of remuneration
already paid or issued.
Furthermore, if a significant change occurs in the management environment, and so forth, theRemuneration Committee may deliberate reducing the amount of officer remuneration in cases
where it receives a submission from Executive Officers and Directors volunteering to reduce theirremuneration.
6) Stock acquisition and holding
Any shares of the Company acquired by Executive Officers as stock-based remuneration shallcontinue to be held by respective Executive Officers at least for three years from the grant date of
the shares (or at least for one year after they retire from the office of Executive Officer). The
purpose of this requirement is to deepen the common interest of shareholders and officers. In
particular, the purpose of granting shares of the Company to Executive Officers who areresponsible for business execution as remuneration through performance-linked stock-based
remuneration is to provide additional incentive to them to work for the improvement of thefinancial performance and corporate value of the Company from the medium- to long-term
perspective.
Directors and Executive Officers of Daimaru Matsuzakaya Department Stores and PARCO shalladopt the same policy for their acquisition and holding of the Company’s shares.
(ii) Total amount of remuneration, etc. by each category of Directors and Executive Officers, total amount of
remuneration, etc. by type, and number of Directors and Executive Officers to be paid

Category of
officer

Director[of which,OutsideDirector]
Executive
Officer
Total
Notes:

1.

Total amount of remuneration, etc. by type(Millions of yen)

Number ofrecipientdirectors (andother officers)(Persons)

Total amount of
remuneration,
etc.
(Millions of yen)Basicremuneration

Performancelinked bonuses

Performancelinked stockbased
remuneration

Nonperformancelinked stockbased
remuneration

221

167

–

–

53

12

[99]

[80]

[–]

[–]

[18]

[8]

252

229

23

–

–

14

474

397

23

–

53

26

Other than the above, the total amount of remuneration, etc. received by Outside Directors from subsidiaries of theCompany in the current fiscal year is ¥12 million.

- 113 -

2.

3.

4.
5.

6.

7.

In the above table, the remuneration, etc. for Directors of ¥221 million includes ¥21 million (including nonperformance-linked stock-based remuneration) paid to three Directors who held the post between March 1 and May 28,
2020.
Given the deterioration in earnings performance and downward revisions made in earnings and dividends forecasts
impacted by the spread of COVID-19 infectious disease, the Company reduced the basic remuneration amount of
Directors (including Outside Directors) and Executive Officers, from July to September 2020, by 10% (they returned
10% of their basic remuneration) with the approval of the Remuneration Committee that received the proposal from
Executive Directors and Inside Directors. The amount affected by the reduced (or returned) basic remuneration amountis recorded in other operating income. The total amount of remuneration, etc., and basic remuneration do not reflect theeffect of the reduced (or returned) basic remuneration amount.
The remunerations, etc. that are paid as compensation for the performance of duties during the term of the Executive
Officers is shown in the Executive Officer row.
Beginning in the fiscal year ended February 28, 2018, to ensure steady execution of the Medium-term Business Planfor realizing the Group Vision, the Company has adopted the stock-based remuneration system using a trust for officers(a system of granting the Company’s shares to officers (in certain cases, the Company’s shares are converted into cash
within the trust and cash in the amount equivalent to their conversion value is paid) in accordance with the officers’
rank and level of achievement of the Medium-term Business Plan, etc.) The stock-based remuneration in the above
chart corresponds to monetary remuneration in the Companies Act and is the total recorded as expenses for the period
under review according to Japanese accounting standards. It is divided into performance-linked stock-based
remuneration corresponding to degree of achievement of single fiscal year results and degree of achievement of theMedium-Term Business Plan targets, as well as non-performance-linked stock-based remuneration for Directors who
do not execute business.
The figure in the “Performance-linked bonuses” column represents an amount recognized as a provision (expense),
factoring in the results of performance evaluation for the fiscal year ended February 28, 2021. The actual amounts to be
paid after factoring in the earnings performance assessment of each Executive Officer will be determined by a meetingof the Remuneration Committee scheduled for or after April 2021.
The “Performance-linked stock-based remuneration” column reflects the reversal of a provision of ¥65 million for
short-term incentives recorded in the first quarter of the fiscal year ended February 28, 2021 as the performance-linked
factor was set to zero. As the performance-linked factor was set to zero, a provision of ¥356 million was also reversed
for performance shares that are the medium- and long-term incentives of performance-linked stock-based
remuneration.

- 114 -

(iii) Total amount of consolidated remuneration, etc. per Director and Executive Officer
Total amount of remuneration, etc. by type
Total amount ofconsolidated
remuneration, etc. Category of officer

Name(Millions of yen)
Category ofcompany(Millions of yen)

PerformanceBasic
Performance- linked stockremuneration linked bonuses
based
remuneration

Nonperformancelinked stockbased
remuneration

YAMAMOTO
Ryoichi60

Director

Reporting company

44

–

–

16

TSUTSUMI
Hiroyuki

34

Director

Reporting company

25

–

–

9

MURATA Soichi

34

Director

Reporting company

25

–

–

9

ISHII Yasuo

20

Director (Note 1) Reporting company

17

–

–

3

UCHIDA Akira

19

Director (Note 1) Reporting company

16

–

–

3

NISHIKAWA
Koichiro

16

Director (Note 1) Reporting company

13

–

–

3

SATO Rieko

19

Director (Note 1) Reporting company

16

–

–

3

SEKI Tadayuki

17

Director (Note 1) Reporting company

14

–

–

3

YAGO Natsunosuke

12

Director (Note 1) Reporting company

9

–

–

3

YOSHIMOTO
Tatsuya48

Executive Officer Reporting company

43

5

–

–

MAKIYAMA Kozo

62

Executive Officer Reporting company

44

–

–

18

WAKABAYASHI
Hayato23

Executive Officer Reporting company

21

2

–

–

SAWADA Taro

38

Executive Officer Reporting company

34

4

–

–

HIRANO Hidekazu

21

Executive Officer Reporting company

20

1

–

–

ARISAWA Hisashi

22

Executive Officer Reporting company

20

2

–

–

NAKAYAMA
Takashi17

Executive Officer Reporting company

16

1

–

–

IMAZU Takahiro

17

Executive Officer Reporting company

16

1

–

–

IWATA Yoshimi

17

Executive Officer Reporting company

16

1

–

–

NINOBE Mamoru

26

Executive Officer Reporting company

25

1

–

–

KONDO Yasuhiko

17

Executive Officer Reporting company

16

1

–

–

ONO Keiichi

17

Executive Officer Reporting company

16

1

–

–

Notes:

1.
2.
3.
4.

Independent Outside Director.
Lists only those who were officers as of the shareholders meeting of May 27, 2021.
Directors who concurrently serve as officers are listed in the “Executive Officer” column.
In the case of Executive Officers who serve concurrently at operating companies, remuneration paid by each company
is included.

- 115 -

(5) Ownership of shares(i) Classification criteria and approaches for investment shares
The Company and the Group have defined the classification of investment shares held for the purposeof pure investment and investment shares held for purposes other than pure investment (crossshareholdings) as follows.
(Investment shares held for the purpose of pure investment)
Shares held exclusively for the purpose of profiting through fluctuations in share prices or from thereceipt of dividends(Investment shares held for any purpose other than pure investment)
Shares held because the Group judged that they are necessary for the promotion of the Group’sbusiness strategy, and that the holding of such shares will contribute to the increase of corporate value
in the medium to long term(ii) Ownership of shares in the Group
1) Investment shares held for any purpose other than pure investment
A. Holding policy and the method to verify the reasonableness of the holding, as well as detailsof such verification by the Board of Directors concerning the appropriateness of the holdingof the respective stocks
The Group has prescribed the holding policy and method for validation of rationale of crossshareholdings, etc. in the Corporate Governance Policy as follows, and the Board of Directors
decides whether or not the holding is appropriate.
(Holding policy)
 Shares will not be newly acquired in principle. However, this does not apply to shares where it
has been recognized that they are necessary for the promotion of the Group’s business strategy,
and that the holding of such shares will contribute to the increase of corporate value in themedium to long term through the validation of rationale for holding them.
 If shares that are already held are judged to “not be rational” based on the results of thevalidation of the rationale of holding, which occurs every year, the Group will negotiate withcorporate customers and business partners, and reduce them as appropriate upon receiving
consent regarding sale method, period, etc.
(Method for validation of rationale)
The Group periodically validates the rationale of holding individual issues from the following
perspective.
 Qualitative validation
The perspective relating to business strategies such as maintaining harmonious and favorable
business relationships with corporate customers and business partners, and securing supply
chains Quantitative validation
The perspective relating to whether profitability by holding shares, including related trading
profits and dividends, exceed capital costs, etc.
(Details of verification by the Board of Directors concerning the appropriateness of the holding of
the respective stocks)
 The results of the above validation that takes place based on the holding policy, judgment
regarding the continuation or disposal of held shares, and reduction plan are discussed at themeeting of the Board of Directors held every August, and the Group confirms the reduction
result at the meeting of the Board of Directors held the following March.
As a result, the Group maintained cross-shareholdings (listed shares excluding deemedshareholdings) in 23 issues as of February 28, 2021, a reduction by 37 issues (down by 61%)
over the five years starting from fiscal 2016.
- 116 -



Process for validation of rationale Validation is conducted with a focus on continued qualitative rationality in accordance with the
purpose at the time of acquisition.



Schedule for validation of rationale, negotiation and reduction*

Implementation
periodContent of
implementation

X

First half

AugustX + 1 year
Secondhalf

MarchFirst half

Operating unit

Validation of rationale
Development of reduction
plan

Board ofDirectors

Negotiation/reduction

Decision on
Discussion continuation/
reduction
Confirmation: Efforts in : Year X (first year),

Negotiation/
reduction result- 117 -

August: X + 1 year,: X + 2 years

X +2 years
Secondhalf

MarchFirst half

AugustSecondhalf

B. Number of issues and consolidated statement of financial position amount (IFRS)(Shares not listed)
Previous fiscal
year

Current fiscal
year

Decrease

138

2

(1)

–

139

21,421100(49)(3,203)

18,269

Increase

Decrease

Increase or
decrease inmarket value

26

–

(3)

–

23

4,005

–

(105)

527

4,427

Increase

Decrease

Increase or
decrease inmarket value

11

–

(4)

–

7

10,769–(3,376)

457

7,850

Number of issues(security titles)
Consolidated
statement of financial
position amount(Millions of yen)

Increase or
decrease inmarket value

Increase

Reason for increasein number of shares

Acquisition
mainly aiming toacquire know-how
for newbusinesses,
strengthen
existing
businesses, etc.

(Shares other than those not listed)
Previous fiscal
year
Number of issues(security titles)*Consolidated
statement of financial
position amount(Millions of yen)

Current fiscal
year

Reason for increasein number of shares–(Deemed shareholdings)
Previous fiscal
year
Number of issues(security titles)*Consolidated
statement of financial
position amount(Millions of yen)

Current fiscal
year

Reason for increasein number of shares–* Of the issues, one issue is included in both shares other than those not listed and deemed shareholdings.

Changes in the number of cross-shareholdings (listed shares excluding deemed shareholdings)(Billions of yen)

(Issues)

15.0

70

Amount recorded on
consolidated balance sheet(Billions of yen)

60
48
10.0

Number of issues held (Issues)

60
50

41
40

11.2
9.9

26
8.6

5.0

23

30
20

4.0

4.4
10

0.0

0
FY2016FY2017FY2018- 118 -FY2019FY2020(iii) Ownership of shares in the reporting company (Japanese GAAP)
As for the reporting company, the ownership is as follows.
1) Investment shares held for any purpose other than pure investment
A. Number of issues and carrying amount(Shares not listed)
Previous fiscal
year

Increase

Decrease

Year-end
valuation

Current fiscal
year

Number of issues(security titles)

6

–

(1)

–

5

Carrying amount(Millions of yen)

1,196

–

(48)

(17)

1,131

Increase

Decrease

Increase or
decrease inmarket value

Reason for increasein number of shares–(Shares other than those not listed)
Previous fiscal
year

Current fiscal
year

Number of issues(security titles)

1

–

–

–

1

Carrying amount(Millions of yen)

32

–

–

(4)

28

Reason for increasein number of shares–

B. Information on the number of shares and carrying amount by issue of specified investment
shares and shares subject to deemed shareholding(Specified investment shares)
The Company validates the rationale of all cross-shareholdings based on the qualitative
perspective, which relates to business strategies such as maintaining harmonious and favorable
business relationships with corporate customers and business partners, and securing supply
chains, as well as the quantitative perspective, which relates to whether profitability by holding
shares, including related trading profits and dividends, exceed capital costs, etc.
The quantitative effects of shareholdings have not been provided from the viewpoint of trade
secrets, etc.

Issue nameCurrent fiscal year

Previous fiscal year

Number of shares(Shares)Number of shares(Shares)

Carrying amount(Millions of yen)

Carrying amount(Millions of yen)

Purpose of holding

Quantitative effects ofshareholding

Reason forincrease in
number ofsharesHolding of theCompany’s
shares–None(Quantitative standard)・ Not met

12,00012,000(Purpose of holding)・ Made judgment tocontinue to holdtaking into
consideration the factthat this company is
・ Promotion of arts andindispensable forculturedeveloping art andculture in the area inwhich the reporting
company’s storesexist.
・ Contribution tocommunity
development

Misonoza Theatrical
Corporation

28

32(Comprehensive
judgment)- 119 -

(iv) Ownership of shares in Daimaru Matsuzakaya Department Stores Co. Ltd. (Japanese GAAP)
As for Daimaru Matsuzakaya Department Stores Co. Ltd. of which the carrying amount of investment
shares on the balance sheet is the largest among the Company and consolidated subsidiaries (company
with the largest holdings), the ownership of shares is as follows.
1) Investment shares held for any purpose other than pure investment
A. Number of issues and carrying amount(Shares not listed)
Previous fiscal
year

Increase

Decrease

Year-end
valuation

Current fiscal
year

Number of issues(security titles)

93

6

–

–

99

Carrying amount(Millions of yen)

2,683

26

–

–

2,709

Reason for increasein number of shares
Absorbed and merged
The Shimonoseki
Daimaru, Inc. inMarch 2020, andtook over theshareholdings(Shares other than those not listed)
Previous fiscal
year

Increase

Decrease

Increase or
decrease inmarket value

Current fiscal
year

Number of issues(security titles)*

17

2

(2)

–

17

Carrying amount(Millions of yen)

3,564

18

(70)

479

3,991

Increase

Decrease

Increase or
decrease inmarket value

Reason for increasein number of shares
Absorbed and merged
The Shimonoseki
Daimaru, Inc. inMarch 2020, andtook overshareholdings(Deemed shareholdings)
Previous fiscal
year

Current fiscal
year

Number of issues(security titles)*

11

–

(4)

–

7

Carrying amount(Millions of yen)

10,769–(3,376)

457

7,850

Reason for increasein number of shares–* Of the issues, one issue is included in both shares other than those not listed and deemed shareholdings.

B. Information on the number of shares and carrying amount by issue of specified investment
shares and shares subject to deemed shareholding(Specified investment shares)
The Group validates the rationale of all cross-shareholdings based on the qualitative perspective,
which relates to business strategies such as maintaining harmonious and favorable business
relationships with corporate customers and business partners, and securing supply chains, as wellas the quantitative perspective, which relates to whether profitability by holding shares, including
related trading profits and dividends, exceed capital costs, etc.
The quantitative effects of shareholdings have not been provided from the viewpoint of trade
secrets, etc.

- 120 -

Current fiscal Previous fiscal
year
year

Issue name

Number ofshares(Shares)Number ofshares(Shares)

Carrying
amountCarrying
amount(Millions ofyen)(Millions ofyen)

222,893

222,893(Segment)(Quantitative standard)

310,400(Comprehensive judgment)

Stable merchandise sales

Maintaining goodbusiness relationships

821

310,400

200,000(Quantitative standard)(Comprehensive judgment)Stable merchandise sales

Maintaining goodbusiness relationships(Quantitative standard)

Department storeContribution tocommunity development

Promotion of arts andcultureMisonoza Theatrical

476

Made judgment tocontinue to hold taking
into consideration the factthat this is a corecompany in the area inwhich stores of Daimaru
Matsuzakaya Department
Stores exist, and therecognition that it hascontinuously contributed
to a stable level of profit.

(Segment)

200,000 (Purpose of holding)547- 121 -

–

Yes

–

Yes

–

None

Not met(Purpose of holding)541

Corporation

Made judgment tocontinue to hold taking
into consideration the factthat this is a corecompany in the area inwhich stores of Daimaru
Matsuzakaya Department
Stores exist, and therecognition that it hascontinuously contributed
to a stable level of profit.

(Segment)
Department store

Reason for Holding ofincrease inthenumber of Company’s
sharesshares

Not met

OSAKA GAS CO., LTD.

591

Department store(Purpose of holding)Toho Gas Co., Ltd.

1,395

Quantitative effects ofshareholding

Purpose of holding

Not met(Comprehensive judgment)Made judgment tocontinue to hold taking
into consideration the factthat this company is
indispensable fordeveloping art and culturein the area in which storesof Daimaru Matsuzakaya
Department Stores exist.

Current fiscal Previous fiscal
year
year

Issue name

Number ofshares(Shares)Number ofshares(Shares)

Carrying
amountCarrying
amount(Millions ofyen)(Millions ofyen)

171,337

171,337

Hakuyosha Co., Ltd.

402

568,205(Segment)(Quantitative standard)(Comprehensive judgment)

Maintaining goodbusiness relationships(Quantitative standard)

Department store(Comprehensive judgment)Advertisement including
public relations activities

Maintaining goodbusiness relationships

329

82,200 

Department store

–

Yes

–

Yes

–

None

–

None

Not met(Purpose of holding)(Segment)
82,200Made judgment tocontinue to hold taking
into consideration the factthat it is indispensable formaintaining customer
service.

(Segment)

LTD.

313

Provision of services tocustomers

Reason for Holding ofincrease inthenumber of Company’s
sharesshares

Not met

CHUBU-NIPPONBROADCASTING CO.,Department store(Purpose of holding)433

568,205

Quantitative effects ofshareholding

Purpose of holding

Made judgment tocontinue to hold taking
into consideration the factthat this is a corecompany in the area inwhich stores of Daimaru
Matsuzakaya Department
Stores exist, and therecognition that it hascontinuously contributed
to a stable level of profit.

(Quantitative standard)Met(Purpose of holding)
ANA HOLDINGS INC.
209

144,803

238

Stable merchandise sales

Maintaining goodbusiness relationships(Segment)(Quantitative standard)

Department store

144,803 (Purpose of holding)

Meiko Trans Co., Ltd.

166





Stable merchandise sales

Maintaining goodbusiness relationships

159- 122 -

Not met(Comprehensive judgment)Made judgment tocontinue to hold taking
into consideration the factthat this is a corecompany in the area inwhich stores of Daimaru
Matsuzakaya Department
Stores exist.

Current fiscal Previous fiscal
year
year

Issue name

Number ofshares(Shares)Number ofshares(Shares)

Carrying
amountCarrying
amount(Millions ofyen)(Millions ofyen)

52,00052,000YOMEISHU SEIZO CO.,LTD.
98

(Segment)(Quantitative standard)

Department store(Comprehensive judgment)Stable merchandise sales

Maintaining goodbusiness relationships

98

42,500 

Department store

Made judgment tocontinue to hold taking
into consideration therecognition that it hascontinuously contributed
to a stable level of profit.

71

79,200

Securing supply chain

79 

Maintaining goodbusiness relationships

79,200

WASHINGTON HOTELCORPORATION
66

6,600





6,600

(Comprehensive judgment)Stable merchandise sales

Maintaining goodbusiness relationships

Made judgment tocontinue to hold taking
into consideration therecognition that it hascontinuously contributed
to a stable level of profit.

(Segment)(Quantitative standard)(Comprehensive judgment)Stable merchandise sales

Maintaining goodbusiness relationships- 123 -

*1

–

None

–

None

Not met(Purpose of holding)

59

Yes

Not met(Purpose of holding)

65

OKAYA & CO., LTD.

59–

(Quantitative standard)

Department store

Yes

Met

(Segment)
Department store–(Quantitative standard)(Purpose of holding)Toppan Printing Co., Ltd.

Reason for Holding ofincrease inthenumber of Company’s
sharesshares

Not met(Purpose of holding)(Segment)
42,500Quantitative effects ofshareholding

Purpose of holding

Made judgment tocontinue to hold taking
into consideration the factthat this is a corecompany in the area inwhich stores of Daimaru
Matsuzakaya Department
Stores exist, and therecognition that it hascontinuously contributed
to a stable level of profit.

Current fiscal Previous fiscal
year
year

Issue name

Number ofshares(Shares)Number ofshares(Shares)

Carrying
amountCarrying
amount(Millions ofyen)(Millions ofyen)

57,973

79,173

ISEWAN TERMINALSERVICE CO., LTD.

(Segment)(Quantitative standard)

24,00024,000(Comprehensive judgment)

Stable merchandise sales

Maintaining goodbusiness relationships

21,750
THE ROYAL HOTEL,LIMITED
28

26,620(Quantitative standard)(Comprehensive judgment)Stable merchandise sales

Maintaining goodbusiness relationships(Quantitative standard)(Comprehensive judgment)Stable merchandise sales

Maintaining goodbusiness relationships

25(Segment)–  Department store(Purpose of holding)

Ltd.


– 

1,155 


12

8 

–

None

–

None

*2

None

–

Yes

(Quantitative standard)Met

Maintaining goodbusiness relationships

Department store(Purpose of holding)Rinnai Corporation

Made judgment tocontinue to hold taking
into consideration therecognition that it hascontinuously contributed
to a stable level of profit.

Stable merchandise sales(Segment)
1,155

None

Not met(Purpose of holding)Hayashikane Sangyo Co.,
16

Made judgment tocontinue to hold taking
into consideration therecognition that it hascontinuously contributed
to a stable level of profit.

(Segment)
Department store–

Not met(Purpose of holding)39

21,750Made judgment tocontinue to hold taking
into consideration therecognition that it hascontinuously contributed
to a stable level of profit.

(Segment)
Department store

Reason for Holding ofincrease inthenumber of Company’s
sharesshares

Not met

61

Sangetsu Corporation

36

Department store(Purpose of holding)*341

Quantitative effects ofshareholding

Purpose of holding

Stable merchandise sales
Maintaining goodbusiness relationships- 124 -

(Quantitative standard)MetCurrent fiscal Previous fiscal
year
year

Issue name

Number ofshares(Shares)Number ofshares(Shares)

Carrying
amountCarrying
amount(Millions ofyen)(Millions ofyen)(Segment)
5,000

– 

Department store(Purpose of holding)

Inc.



TOKYO SOIR CO., LTD.

–61,200*4–

47

CHITA KOGYO CO., LTD.

–

11,000

*4

–

7



Met

Stable merchandise sales– 

Reason for Holding ofincrease inthenumber of Company’s
sharesshares(Quantitative standard)

Yamaguchi Financial Group,3

Quantitative effects ofshareholding

Purpose of holding

*2

None

Maintaining goodbusiness relationships

–

–

–

Yes

–

–

–

Yes

*1. Held by Toppan Printing Co., Ltd. and its subsidiary TOPPAN FORMS CO., LTD.
*2. Daimaru Matsuzakaya Department Stores Co. Ltd. absorbed and merged with The Shimonoseki Daimaru, Inc. in March 2020,
and took over shareholdings*3. Partially sold in the current fiscal year upon reaching an agreement.
*4. Fully sold in the current fiscal year upon reaching an agreement.

(Deemed shareholdings)
Shares of which the holding is considered by the Company to contribute to the increase of
corporate value in the medium to long term have been contributed to the retirement benefit trust
for the purpose of achieving sound pension financing in Daimaru Matsuzakaya Department Stores
Co. Ltd., a subsidiary of the Company.
The right of instructions for the exercise of voting rights is possessed by Daimaru Matsuzakaya
Department Stores Co. Ltd.
Furthermore, the quantitative effects of shareholdings have not been provided from the viewpointof trade secrets, etc.

Issue nameCurrent fiscal Previous fiscal
year
year
Number of
Number ofsharesshares(Shares)(Shares)
Carrying
Carrying
amountamount(Millions of (Millions of
yen)
yen)

(Purpose of holding)
4,913,000

4,913,000


Mitsubishi UFJ Financial

Financial transactions
and collection ofbusiness information
Maintaining goodbusiness relationships

Group, Inc.

2,741

Quantitative effects ofshareholding

Purpose of holding

2,613- 125 -

Reason for Holding ofincrease inthenumber of Company’s
sharesshares(Quantitative standard)

Not met(Comprehensive judgment)Made judgment tocontinue to hold taking
into consideration therelationship with thecompany whose shares
we hold, and therecognition that it hascontinuously contributed
to a stable level of profit.

–

Yes
*1

Issue nameCurrent fiscal Previous fiscal
year
year
Number of
Number ofsharesshares(Shares)(Shares)
Carrying
Carrying
amountamount(Millions of (Millions of
yen)
yen)

(Purpose of holding)670,500

Financial transactions
and collection of

670,500

business information


Sumitomo Mitsui Trust

Quantitative effects ofshareholding

Purpose of holding

Holdings, Inc.

Reason for Holding ofincrease inthenumber of Company’s
sharesshares(Quantitative standard)

Not met(Comprehensive judgment)Made judgment to

Maintaining goodcontinue to hold taking

business relationships

into consideration the–relationship with thisYes
*2company, and the
2,348

2,480

recognition that it hascontinuously contributed
to a stable level of profit.
(Purpose of holding)

280,000

280,000



Sumitomo Mitsui Financial

Financial transactions(Quantitative standard)Metand collection ofGroup, Inc.

–

business information
1,047

975



Yes
*3

Maintaining goodbusiness relationships(Segment)
270,000

Department store

270,000 (Purpose of holding) Securing supply chain
YAMATO HOLDINGS CO.,LTD.

(Quantitative standard)

Not met(Comprehensive judgment)Made judgment to

Maintaining goodcontinue to hold taking

business relationships

into consideration the

–

Yes

–

Yes

fact that it is756

indispensable for459

maintaining customer
service.
(Segment)

Department store(Purpose of holding)
300,000

300,000(Quantitative standard)

Not met(Comprehensive judgment)Stable merchandise sales

Maintaining goodcontinue to hold taking

business relationships

into consideration theMade judgment tofact that this is a core

OSAKA GAS CO., LTD.

company in the area inwhich stores of Daimaru
Matsuzakaya Department
571

Stores exist, and the523

recognition that it hascontinuously contributed
to a stable level of profit.

- 126 -

Issue nameCurrent fiscal Previous fiscal
year
year
Number of
Number ofsharesshares(Shares)(Shares)
Carrying
Carrying
amountamount(Millions of (Millions of
yen)
yen)

(Segment)
115,000OUG Holdings Inc.

269

Reason for Holding ofincrease inthenumber of Company’s
sharesshares(Quantitative standard) Department store
115,000 (Purpose of holding)324

Quantitative effects ofshareholding

Purpose of holding

Stable merchandiseNot met(Comprehensive judgment)Made judgment topurchasing

continue to hold taking

Maintaining good

into consideration thebusiness relationships

recognition that it has

–

None

–

None

continuously contributed
to a stable level of profit.
(Purpose of holding)
33,00033,000Financial transactions
and collection ofbusiness information

The Nanto Bank, Ltd.

59

(Quantitative standard)

Not met(Comprehensive judgment)Made judgment to

Maintaining goodcontinue to hold taking

business relationships

into consideration therelationship with the70

company whose shares
we hold.

Tokio Marine Holdings, Inc.

–

300,000

*6

–

1,740

Asahi Group Holdings, Ltd.

–

200,000

*6

–

830

OBAYASHI–

440,000

*6

–

479

Takeda Pharmaceutical–

87,000–327

CORPORATION

Company Limited
*6

Yes

–

–

–

–

–

–

–

–

–

None

–

–

–

None

*4
Yes
*5

*1. Held by Mitsubishi UFJ Financial Group, Inc.’s subsidiaries MUFG Bank, Ltd. and Mitsubishi UFJ Trust and Banking
Corporation.
*2. Held by Sumitomo Mitsui Trust Holdings, Inc.’s subsidiary Sumitomo Mitsui Trust Bank, Limited.
*3. Held by Sumitomo Mitsui Financial Group, Inc.’s subsidiaries Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui
Card Company, Limited.
*4. Held by Tokio Marine Holdings, Inc.’s subsidiary Tokio Marine & Nichido Fire Insurance Co., Ltd.
*5. Held by Asahi Group Holdings, Ltd.’s subsidiary ASAHI BREWERIES, LTD.
*6. Fully sold in the current fiscal year upon reaching an agreement.

- 127 -

V. Financial Information
1. Basis of preparation of the consolidated and non-consolidated financial statements(1) Pursuant to the provisions of Article 93 of the “Ordinance on Terminology, Forms, and Preparation
Methods of Consolidated Financial Statements” (Ordinance of the Ministry of Finance No. 28 of 1976;
hereinafter referred to as the “Ordinance on Consolidated Financial Statements”), the consolidated
financial statements of the Company have been prepared in compliance with International Financial
Reporting Standards (“IFRS”).
(2) The non-consolidated financial statements of the Company have been prepared in accordance with the“Ordinance on Terminology, Forms, and Preparation Methods of Financial Statements” (Ordinance of the
Ministry of Finance No. 59 of 1963; hereinafter referred to as the “Ordinance on Financial Statements”).
The Company meets the criteria of a company allowed to file specified financial statements under the
Financial Instruments and Exchange Act and prepares non-consolidated financial statements pursuant to
the provisions of Article 127 of the Ordinance on Financial Statements.
(3) The amounts presented in this report are rounded down to the nearest million yen.
2. Note on independent audit
The consolidated financial statements for the fiscal year (from March 1, 2020 to February 28, 2021) and thenon-consolidated financial statements for the fiscal year (from March 1, 2020 to February 28, 2021) wereaudited by Ernst & Young ShinNihon LLC in accordance with Article 193-2, paragraph (1) of the Financial
Instruments and Exchange Act.
3. Special efforts to ensure the appropriateness of the consolidated financial statements, etc. and development ofa system for appropriate preparation of the consolidated financial statements, etc. in accordance with IFRSThe Company makes special efforts to ensure the appropriateness of the consolidated financial statements, etc.
and develops a system for appropriate preparation of the consolidated financial statements, etc. in accordancewith IFRS. The details of such are as follows:(1) To develop a system for ensuring correct understanding of accounting standards, etc. and appropriate
responses to any changes in accounting standards, etc., the Company has joined the Financial AccountingStandards Foundation and attends seminars, etc. held by the foundation and others.
(2) For the adoption of IFRS, the Company keeps up with the latest accounting standards by obtaining press
releases and standards published by the International Accounting Standards Board as needed. To prepare
appropriate consolidated financial statements under IFRS, the Company has developed accounting
policies of the Group in compliance with IFRS and performs accounting procedures based on thesepolicies.

- 128 -

1. Consolidated Financial Statements, etc.
(1) Consolidated Financial Statements
1) Consolidated Statement of Financial Position
Notes

As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

AssetsCurrent assets
Cash and cash equivalents

6

34,633

128,925

Trade and other receivables
Other financial assets

7,27
9,36

144,244
5,095

113,414
5,841

Inventories
Other current assets

8
10

19,1695,281

20,684
4,739

208,424

273,605

11,20

473,167

493,644

Right-of-use assets
Goodwill

13
12

179,632523

157,819
523

Investment property
Intangible assets

14
12

219,354
5,662

188,879
5,752

Investments accounted for using equity method
16
Other financial assets
9,20,36

37,43991,37937,81586,870

Deferred tax assets
Other non-current assets

9,988
14,734

6,751
12,061

Total current assets
Non-current assets
Property, plant and equipment

18
10

Total non-current assets
Total assets- 129 -

1,031,883

990,116

1,240,308

1,263,722

Notes

As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

Liabilities and equity
Liabilities
Current liabilities
Bonds and borrowings

19,20

108,400

145,151

Trade and other payables
Lease liabilities

21
13

144,020
29,493

121,937
29,799Other financial liabilities

13,19,
20,36

30,19930,211

4,349
999

1,957
914

Income tax payables
Provisions

23

Other current liabilities

24,27

Total current liabilities

56,42759,953373,889

389,926

Non-current liabilities
Bonds and borrowings
Lease liabilities

19,20
13

149,876
191,003214,779
173,085

Other financial liabilities

13,19,
20,36

41,08739,237Retirement benefit liabilities
Provisions

22
23

20,175
4,909

19,781
10,534

Deferred tax liabilities
Other non-current liabilities

18
24

58,829855

51,301
731

466,737

509,451

840,627

899,378

Total non-current liabilities
Total liabilities
EquityCapitalShare premium

25
25

31,974
189,340

31,974
188,542

Treasury shares
Other components of equity

25
25(14,974)
11,641(14,830)
9,578

Retained earnings

25

169,206

136,906

387,188352,171

Total equity attributable to owners of parent
Non-controlling interests

12,493

12,171

Total equity

399,681364,343

1,240,308

1,263,722

Total liabilities and equity- 130 -

2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income
Notes

Sales revenue
Cost of sales

Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Millions of yen

Millions of yen

27
29

Gross profit

480,621(273,667)

319,079(184,711)

206,953

134,368

Selling, general and administrative expense

30(161,590)(132,001)

Other operating income
Other operating expense

28
31

8,663
(13,740)

5,711(32,343)

40,286(24,265)

1,091(5,862)962(6,086)

Share of profit (loss) of investments accounted forusing equity method

1,644

717

Profit (loss) before tax

37,161(28,672)(13,767)

2,251

Profit (loss)

23,393(26,421)

Profit (loss) attributable to:
Owners of parent

21,251(26,193)

Non-controlling interests

2,141

(227)

Profit (loss)

23,393(26,421)

81.19
81.17

(100.03)–

Operating profit (loss)
Finance income
Finance costs

Income tax expense

32
32

18

Earnings per share
Basic earnings (loss) per share (Yen)
Diluted earnings (loss) per share (Yen)34
34- 131 -

Consolidated Statement of Comprehensive Income
Notes

Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Millions of yen
23,393

Millions of yen(26,421)33,36(2,318)(2,106)

33

256

1,107

33

(37)

(94)

(2,099)(1,093)

33

0

13

33

24

(26)

33

1

3

26

(9)

Profit (loss)
Other comprehensive income
Items that will not be reclassified to profit or loss
Financial assets measured at fair value throughother comprehensive income
Remeasurements of defined benefit plans
Share of other comprehensive income ofentities accounted for using equity method
Total items that will not be reclassified to profit orloss
Items that may be reclassified to profit or loss
Cash flow hedges
Exchange differences on translation of foreign
operations
Share of other comprehensive income ofentities accounted for using equity method
Total items that may be reclassified to profit orloss
Other comprehensive income, net of tax(2,073)(1,102)

21,320(27,523)

Owners of parent
Non-controlling interests

19,2592,060(27,296)(226)

Comprehensive income

21,320(27,523)

Comprehensive income
Comprehensive income attributable to:- 132 -

3) Consolidated Statement of Changes in Equity
Equity attributable to owners of parent
Other components of equity
Notes

Exchangedifferences ontranslation offoreign
operations

Cash flow
hedgesFinancial assets
measured at fairvalue throughothercomprehensive
incomeMillions of yen

Millions of yen

Millions of yen

CapitalShare premium

Treasury shares

Millions of yen

Millions of yen

Millions of yen

31,974

212,210(15,090)

(83)

(5)

14,834

–

–

–

–

–

–

31,974

212,210(15,090)

(83)

(5)

14,834

Profit (loss)

–

–

–

–

–

–

Other comprehensive income

–

–

–

24

1

(2,237)

–

–

–

24

1

(2,237)

Balance at March 1, 2019
Effect of changes inaccounting policies
Balance reflecting changes inaccounting policies

Total comprehensive
incomePurchase of treasury shares

25

–

–

(7)

–

–

–

Disposal of treasury shares

25

–

(0)

0

–

–

–

Dividends

26

–

–

–

–

–

–

–

(23,106)

–

(6)

(0)

84

–

236

122

–

–

–

–

–

–

–

–

(970)

–

(22,870)

115

(6)

(0)

(885)

31,974

189,340(14,974)

(65)

(3)

11,710

Profit (loss)

–

–

–

–

–

–

Other comprehensive income

–

–

–

(24)

15

(2,107)

–

–

–

(24)

15

(2,107)

–

–

(3)

–

–

–

Changes in ownership interestsin subsidiaries
Share-based paymenttransactions
Transfer from othercomponents of equity toretained earnings
Total transactions withownersBalance at February 29, 2020

Total comprehensive
incomePurchase of treasury shares

25

Disposal of treasury shares

25

–

(0)

0

–

–

–

Dividends

26

–

–

–

–

–

–

–

(796)

148

–

–

–

–

–

–

–

–

53

–

(797)

144

–

–

53

31,974

188,542(14,830)

(89)

11

9,656

Share-based paymenttransactions
Transfer from othercomponents of equity toretained earnings
Total transactions withownersBalance at February 28, 2021

- 133 -

Equity attributable to owners of parent
Notes

Balance at March 1, 2019
Effect of changes inaccounting policies
Balance reflecting changes inaccounting policies
Profit (loss)
Other comprehensive income
Total comprehensive
incomeOther components of equity
Remeasurements of defined
benefit plans

Total

Millions of yen

Retainedearnings

Total

Non-controllinginterests

Total

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Millions of yen–

14,745

168,861

412,700

55,784

468,485––(12,675)(12,675)(1,914)(14,590)–

14,745

156,185

400,025

53,869453,895––

21,251

21,251

2,141

23,393219(1,992)–(1,992)(80)(2,073)219(1,992)

21,251

19,2592,060

21,320Purchase of treasury shares

25

–

–

–

(7)

–

(7)

Disposal of treasury shares

25

–

–

–

0

–

0

Dividends

26

–

–

(9,419)(9,419)(972)(10,392)–

77–(23,028)(42,465)(65,494)

–

–

–

359

–

359

(219)

(1,189)

1,189

–

–

–

(219)

(1,111)(8,230)(32,096)(43,437)(75,534)–

11,641

169,206

387,188

12,493399,681

Changes in ownership interestsin subsidiaries
Share-based paymenttransactions
Transfer from othercomponents of equity toretained earnings
Total transactions withownersBalance at February 29, 2020
Profit (loss)
Other comprehensive income
Total comprehensive
incomePurchase of treasury shares

25

–

–

(26,193)(26,193)(227)(26,421)

1,013(1,103)–(1,103)0(1,102)

1,013(1,103)(26,193)(27,296)(226)(27,523)

–

–

–

(3)

–

(3)

Disposal of treasury shares

25

–

–

–

(0)

–

(0)

Dividends

26

–

–

(7,066)(7,066)(94)(7,161)

–

–

–

(648)

–

(648)

(1,013)

(959)

959

–

–

–

(1,013)(959)(6,107)(7,719)(94)(7,813)–

9,578

136,906

352,171

12,171

364,343

Share-based paymenttransactions
Transfer from othercomponents of equity toretained earnings
Total transactions withownersBalance at February 28, 2021

- 134 -

4) Consolidated Statement of Cash Flows
Notes

Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Millions of yen

Millions of yen

Cash flows from (used in) operating activities
Profit (loss) before tax

37,161(28,672)

50,95350,361

2,496(1,091)

14,122
(962)

5,862

6,086

(1,644)(717)

Loss (gain) on sales of non-current assets(2,832)0Loss on disposals of non-current assets

3,576

1,260

Decrease (increase) in inventories

20,173(1,522)

Decrease (increase) in trade and other receivables(6,899)26,608

Increase (decrease) in trade and other payables(4,071)(12,720)

Increase (decrease) in retirement benefit liabilities(8,828)(267)

Decrease (increase) in retirement benefit assets

776

2,988

Other, net

364

5,666

Depreciation and amortization expense
15

Impairment loss
Finance income
Finance costs
Share of loss (profit) of investments accounted forusing equity method

95,99562,232

Interest received

Subtotal

111

110

Dividends received

275

232

Interest paid

(5,894)(6,028)

Income taxes paid
Income taxes refund(19,783)
2,654(6,251)
6,176

Net cash flows from (used in) operating activities

73,35856,471

Purchase of property, plant and equipment(33,073)(14,729)

Proceeds from sales of property, plant andequipment

930

7(2,759)(3,813)

Cash flows from (used in) investing activities

Purchase of investment property
Proceeds from sales of investment property
Purchase of investment securities

3,257

–

(19,574)(1,401)

Proceeds from sales of investment securities

4,558

1,480

Other, net(2,898)(2,413)

Net cash flows from (used in) investing activities(49,559)(20,870)- 135 -

NotesFiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Millions of yen

Millions of yen

Cash flows from (used in) financing activities
Net increase (decrease) in current borrowings

19

53,480(13,000)

Net increase (decrease) in commercial papers

19

4,000

66,001

Proceeds from non-current borrowings

19

10,30082,000

Repayments of non-current borrowings

19(13,800)(23,400)

Proceeds from issuance of bonds

19

29,864–

Redemption of bonds

19–(10,000)

Repayments of lease liabilities

13,19(29,241)(29,254)

Purchase of treasury shares
Dividends paid
Dividends paid to non-controlling interests

(10)

(3)

(9,396)(7,056)

(972)

(94)

(59,042)(6,471)

Payments from changes in ownership interests in
subsidiaries that do not result in change in scopeof consolidation
Other, net
Net cash flows from (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period

6Effect of exchange rate changes on cash and cash
equivalents
Cash and cash equivalents at end of period6- 136 -

(10)

6

(14,829)58,727

8,970

94,32825,65934,633

4(37)

34,633

128,925

Notes to Consolidated Financial Statements
1. Reporting Entity
J. FRONT RETAILING Co., Ltd. (the “Company”) is the ultimate parent of the Company group (the “Group”)
and a company located in Japan. The registered address of its head office is Chuo-ku, Tokyo.
The Company’s consolidated financial statements for the fiscal year ended February 28, 2021 comprise theCompany and its subsidiaries’ interests in the Group’s associates.
For the Group’s major business activities, please refer to “5. Segment Information.”
2. Basis of Preparation(1) Compliance with IFRSThe consolidated financial statements of the Group have been prepared in compliance with International
Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board.
Pursuant to the provisions of Article 93 of the “Ordinance on Terminology, Forms, and Preparation
Methods of Consolidated Financial Statements” (Ordinance of the Ministry of Finance No. 28 of 1976),
the consolidated financial statements of the Group have been prepared in compliance with IFRS since theCompany qualifies as a “Specified Company Complying with Designated International AccountingStandards” prescribed in Article 1-2 of the Ordinance.
(2) Basis of measurement
The Group’s consolidated financial statements have been prepared on a historical cost basis except for
certain financial instruments, etc. measured at fair value as stated in “3. Significant Accounting Policies.”(3) Functional currency and presentation currency
The Group’s consolidated financial statements are presented in Japanese yen, which is the Company’sfunctional currency, and figures are rounded down to the nearest million yen.
(4) Changes in accounting policies(Application of amendments to IFRS 16 “Leases”)
The Group has applied the amendment “Covid-19-Related Rent Concessions” (issued in May 2020,
amended in March 2021) to IFRS 16 “Leases” early from the fiscal year ended February 28, 2021.
For leases as lessee, the Group has selected to apply the practical expedient and not to assess whether rent
concessions are lease modifications if the rent concession is a direct consequence of the COVID-19
pandemic and all of the conditions of IFRS 16 paragraph 46B are met.
As a result, the reduced rent expenses were recognized as other operating income in the consolidated
statement of income for the fiscal year ended February 28, 2021, but the impact was immaterial.
3. Significant Accounting Policies
Significant accounting policies are applied consistently for all periods presented in these consolidated financial
statements, except as otherwise provided.
(1) Basis of consolidation
1) Subsidiaries
Subsidiaries are entities controlled by the Group. Control means the power to govern the financial andoperating policies of the entity so as to obtain benefits from its business activities.
The financial statements of subsidiaries are included in the consolidated financial statements of theGroup from the date when the Group gains control until the date when it ceases to control thesubsidiary.
In cases where the accounting policies applied by a subsidiary are different from those applied by theGroup, adjustments are made to the subsidiary’s financial statements, if necessary. All intergroupbalances, transactions and unrealized gains or losses arising from transactions within the Group are
eliminated in preparing the consolidated financial statements.
When the Company retains control when there has been partial disposal of ownership interest in a
subsidiary, the partial disposal is accounted for as an equity transaction. Any difference between the- 137 -

amount by which the non-controlling interests are adjusted and the fair value of the consideration paidor received is recognized directly in equity attributable to owners of the parent.
The additional acquisition of non-controlling interests is accounted for as a capital transaction, andtherefore no goodwill is recognized with respect to such transactions.
Non-controlling interests in consolidated subsidiaries are identified separately from the Group’s
equity therein. Comprehensive income of subsidiaries is attributed to owners of the parent company
and to the non-controlling interests even if this results in the non-controlling interests having anegative balance.
When subsidiaries’ fiscal year end is not the end of February, which is the fiscal year end of theCompany, because the legal system of the region where the subsidiaries are located does not allow
them to have the same fiscal year end as that of the Company, or for other reasons, adjustments are
made by additionally preparing their financial statements as of the fiscal year end of the Company orother means.
2) Associates
An associate is defined as an entity over which the Group has significant influence on financial andoperating policies but does not have control.
Associates are recognized at cost at the time of the acquisition, and are accounted for by the equity
method thereafter. Goodwill recognized on acquisition (less accumulated impairment) is included ininvestments in associates.
In cases where the accounting policies applied by an associate are different from those applied by theGroup, adjustments are made to the associate’s financial statements, if necessary.
For associates whose fiscal year end is not the end of February, which is the fiscal year end of theCompany, due to relationships with other shareholders or other reasons, adjustments are made byadditionally preparing their financial statements as of the fiscal year end of the Company or othermeans.
3) Joint control
A joint arrangement is a contractual arrangement of which two or more parties have joint control.
The Group classifies its involvement in joint arrangements as joint operations (when the Group hasrights to assets and assumes obligations for liabilities in association with the arrangement) and joint
ventures (when the Group only has rights to net assets of the arrangement), depending on rights andobligations of the parties to the arrangement.
In the case of joint operations, the Group recognizes its own assets, liabilities, income and expenses aswell as the amount equivalent to its share when the Group jointly holds or assumes them. Joint
ventures are recognized at cost at the time of the acquisition and are subsequently accounted for using
the equity method.
(2) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition ismeasured as the aggregate of the acquisition date fair value of the assets transferred, liabilities assumed
and equity instruments issued by the Company in exchange for control of the acquiree. Any excess of theconsideration transferred over the fair value of identifiable assets and liabilities is recognized as goodwill
in the consolidated statement of financial position. Conversely, any deficit is immediately recognized asincome in the consolidated statement of income.
The Group elects to measure non-controlling interests at fair value, or at the proportionate share of therecognized amounts of identifiable net assets, on a transaction-by-transaction basis.
Acquisition-related costs are expensed as incurred.
(3) Foreign currency translation
1) Foreign currency transactions
Each entity of the Group has set its own functional currency as the currency of the primary economic
environment in which the entity operates. Transactions of each entity are measured at the functional
currency.
- 138 -

When each entity prepares non-consolidated financial statements, transactions in currencies other thanits functional currencies are translated using the exchange rate prevailing at the dates of transactions.
Foreign currency monetary assets and liabilities at the end of the reporting period are translated using
exchange rates at the end of the reporting period.
Exchange differences arising from translation or settlement are recognized as profit or loss. However,when gains or losses on non-monetary items are recorded in other comprehensive income, exchange
differences are also recorded in other comprehensive income.
2) Financial statements of foreign subsidiaries and associates
Assets and liabilities of foreign subsidiaries and associates are translated into Japanese yen at theexchange rate prevailing at the end of the reporting period. Income and expenses of foreignsubsidiaries and associates are translated into Japanese yen at the average exchange rate for theperiod, unless there is significant change in the exchange rate during the period. When there issignificant change in the exchange rate, the income and expenses are translated using the exchange
rate at the transaction date.
Exchange differences arising from translation of the financial statements of foreign subsidiaries andassociates are recognized in other comprehensive income. Exchange differences for foreignsubsidiaries and associates are recognized as profit or loss in the period during which the foreignsubsidiaries and associates are disposed of.
(4) Financial instruments
1) Non-derivative financial assets
Trade and other receivables are initially recognized on the date when they are incurred. All otherfinancial assets are initially recognized on the trade date when the Group becomes a party to thecontractual provisions of the financial instruments.
An overview of classification and measurement model of non-derivative financial assets is as follows.
(i) Financial assets measured at amortized cost
With regard to investments in debt instruments, when the contractual cash flows consist ofprincipal and interest paid on specified dates, and the Group holds such investments based on abusiness model whose objective is to hold the instrument to collect contractual cash flows, thedebt instruments are measured at amortized cost. Transaction cost directly attributable toacquisition of financial assets measured at amortized cost is included in the amount of initial
measurement.
After the initial recognition, amortization cost is measured using the effective interest method, andimpairment losses are deducted when recognized. Interest revenue, foreign exchange gains andlosses and impairment losses on financial assets measured at amortized cost are recognized in
profit or loss.
(ii) Financial assets measured at fair value through other comprehensive income (financial assets at
FVTOCI)
With regard to investments in debt instruments, when the contractual cash flows consist ofprincipal and interest paid on specified dates, and the Group holds such investments based on abusiness model whose objective is both to collect contractual cash flows and to sell the financial
assets, the debt instruments are measured at fair value. In this case, interest revenue, foreignexchange gains and losses and impairment losses measured using the effective interest method arerecognized in profit or loss, and changes in the fair value excluding them are recognized in othercomprehensive income. The cumulative amount recognized in other comprehensive income as at
the time of derecognition of the financial asset is reclassified to profit or loss.
For investments in equity instruments that are not held for sale, the Group may make anirrevocable election at initial recognition to measure them at fair value and recognize any changes
in the fair value in other comprehensive income. In this case, changes in the fair value arerecognized in other comprehensive income (not reclassified to profit or loss). The cumulative
amount recognized as other comprehensive income is transferred to retained earnings when thefinancial asset is derecognized. Dividends are recognized in profit or loss unless they obviously
represent a partial recovery of the cost of the investment.
- 139 -

Transaction cost directly attributable to acquisition of financial assets at FVTOCI is included in
the amount of initial measurement.
(iii) Financial assets measured at fair value through profit or loss (financial assets at FVTPL)
Financial assets other than the above are measured at fair value with changes in fair value
recognized in profit or loss. Transaction cost directly attributable to acquisition of financial assets
at FVTPL is recognized in profit or loss as incurred.
The Group does not designate any debt instrument as measured at fair value through profit or loss
to eliminate or significantly reduce an accounting mismatch.
(iv) Impairment of financial assets
The Group recognizes impairment of debt instruments measured at amortized cost or at fair value
through other comprehensive income based on its evaluation at the end of each reporting period of
whether there has been a significant increase in credit risk of financial assets or groups offinancial assets since initial recognition. Specifically, when there has been no significant increasein the credit risk since initial recognition, 12-month expected credit losses are recognized asallowance for credit losses. On the other hand, when there has been a significant increase in credit
risk since initial recognition, lifetime expected credit losses of the financial assets are recognized
as allowance for credit losses. Whether credit risk has significantly increased or not is determinedbased on changes in default risk.
For trade receivables arising from the ordinary course of business of the Group, since the period
up to the collection is short, expected credit losses of such trade receivables are recognized overtheir remaining lives from the inception simply based on historical credit loss experience.
(v) Derecognition of financial assets
The Group derecognizes a financial asset when the contractual rights to the cash flows from thefinancial asset expire, or the contractual rights to receive cash flows from the financial asset aretransferred in a transaction where substantially all the risks and rewards incidental to ownership ofthe financial asset are transferred. Any interests in transferred financial assets that are created orcontinuously retained by the Group are recognized as a separate asset or liability.
2) Non-derivative financial liabilities
The Group recognizes financial liabilities at the date of transaction when the Group becomes a party
to the contract for the financial instrument.
The Group derecognizes a financial liability when the financial liability is extinguished, i.e. when thecontractual obligation is discharged or cancelled or expires.
The Group principally has borrowings, bonds, trade payables, other short-term payables, common gift
certificates for department stores nationwide, deposits received, etc. as non-derivative financial
liabilities. These financial liabilities are initially recognized at fair value and subsequently measured atamortized cost based on the effective interest method.
3) Presentation of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is presented in the consolidated statementof financial position only when the Group has a legally enforceable right to offset the recognizedamounts and intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
4) Derivatives and hedge accounting
The Group uses derivatives to hedge interest rate fluctuation risk and foreign exchange fluctuation
risk. Derivatives used by the Group primarily include forward exchange contracts and interest rate
swaps.
At the time of initial designation of the hedge, the Group documents the relationship between thehedging instrument and the hedged item, the risk management objective, the strategy for
implementation of the hedge transaction, the hedging instrument and the hedged item, the nature ofhedged risk, the method for assessing effectiveness of the hedge relationship and the method of
measuring the effective portion and ineffective portion.
- 140 -

The Group assesses whether the hedging instrument is expected to be highly effective in achieving
offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk
throughout the period for which the hedge is designated, at the inception of the hedge and on an
ongoing basis.
To apply cash flow hedges to forecast transactions, the forecast transaction must be highly probable.
Derivatives are initially recognized at fair value and the transaction costs are recognized in profit orloss as incurred. After initial recognition, derivatives are measured at fair value, and any changes in
the fair value are accounted for as follows.
(i) Cash flow hedges
When a derivative is designated as a hedging instrument to hedge changes in cash flows
attributable to certain risks related to highly likely forecast transactions that could affectrecognized assets and liabilities or profit or loss, the effective portion of the hedge in changes infair value of the derivative is included in other components of equity as “cash flow hedges.” Thebalance of cash flow hedges is deducted from other comprehensive income in the consolidated
statement of comprehensive income and transferred to profit or loss under the same item as thehedged item in the same period as the period in which cash flows of the hedged item affect profit
or loss. The ineffective portion of the hedge in changes in fair value of the derivative isimmediately recognized in profit or loss.
When the hedge no longer meets the criteria for hedge accounting, the hedging instrument expires
or is sold, terminated or exercised, or the designation of the hedge is revoked, the application ofhedge accounting, is discontinued prospectively.
If hedge accounting is discontinued, the Group continues to record the balance of cash flow
hedges that have already been recognized in other comprehensive income until the forecast
transaction affects profit or loss. When forecast transactions are no longer expected to occur, thebalance of cash flow hedges is immediately recognized in profit or loss.
(ii) Fair value hedges
Changes in fair value of derivatives that are hedging instruments are recognized in profit or loss.
Carrying amounts of hedged items are measured at fair value. For gains or losses on hedged items
attributable to hedged risk, any changes in the fair value are recognized in profit or loss.
(5) Cash and cash equivalents
Cash and cash equivalents consist of cash, demand deposits, and short-term investments with maturities ofthree months or less from the date of acquisition that are readily convertible to cash and subject toinsignificant risk of change in value.
(6) Inventories
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimatedselling price in the ordinary course of business less the estimated costs necessary to make the sale. The
acquisition cost is calculated mainly using the specific identification method, and includes all costs ofpurchase and other costs incurred in bringing the inventories to their present location and condition.
(7) Assets held for saleIf the carrying amounts of non-current assets are recovered principally through a sale transaction rather
than through continuing use, these assets (or disposal groups) are classified under “assets held for sale.”
The condition for classifying an asset under “assets held for sale” is only met by an asset whose sale ishighly probable and which is available for immediate sale in its present condition. Management must havecommitted to the execution of a sale plan for that asset, and the sale of the asset must be scheduled to becompleted within one year from the day it is classified as an asset held for sale.
An asset held for sale is measured at the lower of its carrying amount and fair value less cost to sell. Afterproperty, plant and equipment, intangible assets and investment property have been classified under“assets held for sale,” depreciation or amortization will not be applied to these assets.
(8) Property, plant and equipment
Property, plant, and equipment is measured using the cost model and is carried at cost less accumulated
depreciation and accumulated impairment.
- 141 -

The acquisition cost includes costs directly attributable to the acquisition of the asset, costs related todisassembly, retirement and site restoration, and borrowing costs that should be capitalized.
Depreciation of assets other than land and construction in progress is recognized using the straight-line
method over the estimated useful lives of the assets. The estimated useful lives of major components ofproperty, plant and equipment are as follows:• Buildings and structures• Machinery and vehicles• Furniture and fixtures

3 to 50 years
2 to 20 years
2 to 20 years

The estimated useful lives, depreciation methods, etc. are reviewed at the end of the fiscal year, and if
there are any changes made, those changes are applied prospectively as a change in an accounting
estimate.
(9) Goodwill
The Group measures goodwill at the amount calculated by deducting the net recognized amount (usually,
fair value) of identifiable assets acquired and liabilities assumed at the date of acquisition from the fairvalue of the consideration for the transfer including the recognized amount of non-controlling interests inthe acquiree, which is measured at the date of acquisition.
Goodwill is not amortized. Instead, it is tested for impairment annually, or whenever there are indicationsof impairment.
Impairment losses of goodwill are recognized in the consolidated statement of income, and not reversed
subsequently.
In addition, goodwill is carried at cost less accumulated impairment on the consolidated statement offinancial position.
(10) Intangible assets
Intangible assets are measured using the cost model and stated at cost less accumulated amortization andaccumulated impairment.
Intangible assets acquired separately are measured at cost at initial recognition.
After initial recognition, intangible assets other than goodwill are amortized using the straight-line method
over respective estimated useful lives, except for intangible assets with indefinite useful lives. Estimateduseful lives of major intangible assets are as follows. In addition, the Group has no intangible assets withindefinite useful lives.
• Software

5 years

The estimated useful lives, residual values and amortization methods are reviewed at the end of the fiscal
year, and if there are any changes made, those changes are applied prospectively as a change in an
accounting estimate.
(11) Right-of-use assets
The Group confirms a right-of-use asset on the lease commencement date and initially measures it at its
acquisition cost. The aforementioned acquisition cost consists of the amount of the lease liability, theamount of lease payments made before the lease commencement date adjusted to exclude any received
lease incentives, and the initial direct cost that was incurred.
After the initial measurement, right-of-use assets are depreciated using the straight-line method over thelease term. The lease term is determined based on the non-cancellable term of the lease, taking into
consideration any term for which there is reasonable certainty of extension and any term for which there isreasonable certainty of non-cancellation. In cases where a right-of-use asset is impaired, the impairment
loss is deducted from the carrying amount of the right-of-use asset.
(12) Lease liabilities
Lease liabilities are initially measured at the present value of the lease payments to be paid in the future
over the lease term on and after the lease commencement date. When calculating the present value, if theinterest rate implicit in the lease can be readily determined, that is used, and if it cannot, the lessee’s
incremental borrowing rate is used.
- 142 -

The lease payments used in the measurement of lease liabilities mainly include the fixed lease payments,
the lease payments of the extended term if the lease term reflects the exercise of a lease extension option,and the cancellation fees if the lease term reflects the exercise of a lease cancellation option.
After the initial measurement, lease liabilities are measured at the amortized cost using the effective
interest method. Moreover, if changes in future lease payments arise due to changes in indexes or rates, or
if changes in the assessment regarding the potential for execution of an extension option or a cancellation
option arises, the Group remeasures the lease liabilities.
If remeasuring the lease liabilities, the carrying amount of the right-of-use asset is also adjusted using theremeasured amount of the lease liabilities. However, if the decrease in liabilities due to remeasurement of
the lease liabilities is larger than the carrying amount of the right-of-use asset, the amount remaining after
impairing the right-of-use asset to zero is recognized as a net profit.
(13) Investment property
Investment property is property held to earn rentals or for capital appreciation or both.
Investment property is measured using the cost model and stated at cost less accumulated depreciation andaccumulated impairment (For the depreciation method and useful lives, please refer to “(8) Property, plantand equipment”).
When the investment property portion of a property cannot be accounted for separately from otherportions of a property, the entire property is accounted for as investment property only if the owneroccupied portion is insignificant.
(14) Impairment of non-financial assets
The Group determines at the end of every reporting period whether there is any indication that carrying
amounts of the Group’s non-financial assets excluding inventories and deferred tax assets may be
impaired. If any indication exists, the recoverable amount of the asset is estimated. For goodwill andintangible assets that have indefinite useful lives or not yet available for use, the recoverable amount isestimated at the same time each year.
The recoverable amount of an asset or a cash-generating unit is the larger of its value in use and fair valueless cost of disposal. In calculating value in use, the estimated future cash flows are discounted to theirpresent value using a pretax discount rate that reflects the time value of money and the risks specific to theasset. The cash-generating unit is the smallest group of assets that generates cash inflows, fromcontinuous use, that are largely independent of the cash inflows from other assets or groups of assets.
To test goodwill for impairment, cash-generating units to which the goodwill is allocated are integrated sothat impairment is tested reflecting the smallest unit related to the goodwill. Goodwill acquired in abusiness combination is allocated to cash-generating units that are expected to benefit from the synergiesof the combination.
Since the Group’s corporate assets do not generate independent cash inflows, the recoverable amount ofcash-generating units to which the corporate assets are attributed is determined if there is any indicationthat corporate assets are impaired.
An impairment loss is recognized as profit or loss, if the carrying amount of an asset or cash-generating
unit exceeds the recoverable amount. The impairment loss recognized in association with a cashgenerating unit is first allocated to reduce the carrying amount of goodwill allocated to this unit, and thenthe carrying amounts of other assets in the cash-generating unit are reduced on a pro rata basis.
Impairment losses related to goodwill are not reversed. With regard to other assets, for previously
recognized impairment losses, the Group assesses whether there is any indication that the loss has
decreased or been extinguished at the end of the reporting period. An impairment loss is reversed when
there has been a change in the estimates used to determine the recoverable amount. An impairment loss isreversed up to the carrying amount that would have been determined had no impairment loss beenrecognized, net of necessary depreciation and amortization.
(15) Employee benefits
The Group has established defined benefit plans (such as a corporate pension fund plan and lump-sum
retirement benefit plan) as employee retirement benefit plans, and certain consolidated subsidiaries haveadopted defined contribution plans.

- 143 -

The projected unit credit method is used to determine the present value of defined benefit obligation,
related current service cost and past service cost.
The discount rate is determined by reference to market yields at the end of the fiscal year on high quality
corporate bonds corresponding to the discount period established based on the period to the date when the
future benefits for each fiscal year are to be paid.
Net defined benefit liability or asset is determined as the present value of defined benefit obligation lessthe fair value of plan assets.
Remeasurements of net defined benefit liability or asset are recognized as other comprehensive income
and immediately transferred from other components of equity to retained earnings. Remeasurements
consist of actuarial gains and losses on defined benefit obligation, return on plan assets (excluding theamount of interest revenue on plan assets) and others.
Past service costs are immediately accounted for as profit or loss.
Costs for defined contribution benefits are recognized as expenses when the contributions are made.
(16) Share-based payment
The Company has adopted an officer remuneration BIP (Board Incentive Plan) trust (hereinafter referred
to as the “BIP Trust”) as a performance-linked, share-based payment to ensure steady execution of theMedium-term Business Plan aimed at realizing the Group Vision.
The BIP Trust is a system of granting the Company’s shares to officers (in certain cases, the Company’s
shares are converted into cash within the trust and cash in the amount equivalent to their conversion value
is paid) in accordance with the level of achievement of the Medium-term Business Plan, etc. The
consideration for the services received is calculated using the fair value of the Company’s shares on the
grant date. This value is expensed over the vesting period from the grant date, and a corresponding
amount is recognized as an increase in equity.
(17) Provisions
A provision is recognized when the Group has a present legal or constructive obligation as a result of apast event, when it is probable that an outflow of financial resources will be required to settle theobligation and when a reliable estimate can be made of the amount of the obligation. To determine theamount of a provision, when the effect of the time value of money is material, the estimated future cash
flows are discounted to their present value using a pretax discount rate that reflects the time value ofmoney and the risks specific to the liability. Unwinding of the discount over time is recognized in financecosts.
Asset retirement obligations
Asset retirement obligations are recorded at the estimated amount of restoration costs for leased stores,
offices, etc. for which the Group has obligations to restore them to the original state at the time when thelease is terminated.
Provision for loss on business liquidation
Legal or constructive obligations are recorded for the cost of store dismantlement, etc. that is expected to
be borne in the future as a result of business liquidation, store closure and store rebuilding.
(18) Sales revenue
Based on the following five-step approach, the Group recognizes revenue as the amount of consideration
to which the Group expects to be entitled in exchange for the transfer of goods or services promised tocustomers.
Step 1:

Identify the contract(s) with a customer

Step 2:

Identify the performance obligations in the contract

Step 3:

Determine the transaction price

Step 4:

Allocate the transaction price to the performance obligations in the contract

Step 5:

Recognize revenue when the entity satisfies a performance obligation

The Group, under a holding company structure, develops businesses such as the PARCO Business, Real
Estate Business and Credit Finance Business, with the Department Store Business at its core. The- 144 -

Department Store Business carries out the sale of clothing, general goods, household goods, food products
and others. With regard to these sales of goods, since performance obligations are deemed to be satisfied
at the time of delivery of goods when customers gain control of such goods, the Group mainly recognizes
revenue at the time of delivery of such goods. Furthermore, revenue is measured at the amount ofconsideration promised in contracts between customers, less any discounts, rebates and sales returns, etc.
1) Revenue recognition by business segmenti)

Department Store Business
The Department Store Business carries out the sale of clothing, general goods, household goods,
food products and others. With regard to these sales of goods, since performance obligations are
deemed to be satisfied at the time when goods are delivered to customers, the Group recognizes
revenue at the time of delivery of such goods. Payments for goods are received at the time ofdelivery of the goods, which is the time when the performance obligation is satisfied.

ii) PARCO Business
The PARCO Business operates the shopping center business, in which it undertakes development,
management, supervision and operation of shopping centers; the specialty store business, in which
it sells personal belongings, general goods and others; the space engineering and managementbusiness, in which it undertakes design, operation, etc. of interior decorating work; and otherbusinesses.
With regard to services in the shopping center business, because these services are provided on acontinuous basis and thus performance obligations are deemed to be satisfied over a certain periodof time, revenue is recognized as the services are rendered.
With regard to the sale of personal belongings, general goods and others, since performanceobligations are usually deemed to be satisfied at the time when goods are delivered to customers,
revenue is recognized at the time of delivery of such goods. Payments for goods are received at
the time of delivery of the goods, which is the time when the performance obligation is satisfied.
With regard to the design and operation of interior decorating work in the space engineering andmanagement business, if the outcome of a work contract can be estimated reliably, revenue isrecognized according to the stage of completion of the performance obligation. If the outcome ofa work contract cannot be estimated reliably, revenue is recognized only to the extent that it isprobable that the contract costs incurred will be recoverable.
iii) Real Estate Business
The Real Estate Business mainly carries out development of the Group’s own properties focusedon areas surrounding each store of Daimaru Matsuzakaya Department Stores, expansion of rental
space by leasing and acquiring external properties, management and operation of such properties,
and others.
Revenue from lease of real estate and others is recognized in the period in which it is earned, in
accordance with IFRS 16.
iv) Credit Finance Business
The Credit Finance Business undertakes issuance and administration of credit cards.
In the Credit Finance Business, annual membership fees from cardholders, fees from department
stores and external affiliated stores, and interest from installment sales are recognized as revenue.
2) Interest revenue
Interest revenue is recognized using the effective interest method.
3) Dividends
Divided income is recognized when the right to receive dividends is established.
4) Gross and net presentation of revenue
When the Group conducts transactions as a principal, revenue is presented at the gross amount ofconsideration received from customers. When the Group conducts transactions as an agent for the
benefit of a third party, revenue is presented at the net amount calculated by deducting the amount- 145 -

collected for the benefit of the third party from the gross amount of consideration received from
customers.
The following indicators are taken into account in the determination of whether the Group conducts atransaction as a principal or an agent:• Whether the entity is primarily responsible for fulfilling a contract• Whether the entity has inventory risk before or after the customer order, during shipping or on
return• Whether the entity has discretion in establishing prices(19) Government grants
Government grants are measured and recognized at fair value, if the conditions attaching to them arecomplied with, and there is reasonable assurance that the grants will be received. Grants for expenses
incurred are recorded as income in the same fiscal year as the fiscal year in which the expenses are
incurred. Grants related to acquisition of an asset are recorded as other operating income on a systematic
basis over the useful life of the asset, and unearned government grants are recorded in liabilities asdeferred income.
(20) Income tax
Income tax consists of current taxes and deferred taxes. Income tax is recognized as profit or loss, except
for taxes related to business combinations and taxes related to items that are recognized directly in equity
or in other comprehensive income.
1) Current taxes
Current taxes are measured in the amount of the expected tax payables to or receivables from thetaxation authorities. Calculation of the amount of tax is based on the tax rates and tax laws enacted or
substantively enacted by the end of the reporting period in countries where the Group conducts
business and earns taxable profit.
2) Deferred taxes
Deferred taxes are recognized for temporary differences between the carrying amounts of assets or
liabilities in the statement of financial position and its tax base, and for unused tax losses and unused
tax credits.
No deferred tax assets and liabilities are recognized on the following temporary differences:• Temporary differences arising from the initial recognition of goodwill• Temporary differences arising from initial recognition of assets and liabilities from transactions thatare not business combinations and affect neither accounting income or taxable profit• Taxable temporary differences associated with investments in subsidiaries and associates for which
the Group is able to control the timing of the reversal of the temporary difference and it is probablethat the temporary difference will not reverse in the foreseeable future
A deferred tax liability is recognized for all taxable temporary differences in principle, and a deferred
tax asset is recognized for all deductible temporary differences to the extent that it is probable thattaxable profit will be available against which deductible temporary differences can be utilized.
Carrying amount of deferred tax assets is reassessed at the end of each reporting period and reduced tothe extent that it is no longer probable that sufficient taxable profit will be available to use all or partof the benefit of the deferred tax assets. Unrecognized deferred tax assets are reassessed each period
and are recognized to the extent that it has become probable that future taxable profit will allow thedeferred tax assets to be recovered.
Deferred tax assets and liabilities are measured at the tax rates and by the tax laws that are expected toapply to the period when the assets are realized or the liabilities are settled, based on the statutory tax
rates and tax laws enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to offset
current tax assets against tax liabilities and income taxes are levied by the same taxation authority on
the same taxable entity.
- 146 -

(21) Earnings per share
Basic earnings per share are calculated by dividing profit (loss) attributable to ordinary equity holders of
the parent entity by the weighted average number of shares outstanding during the period, adjustingtreasury shares. Diluted earnings per share are calculated by adjusting for the effects of all dilutive
potential shares.
(22) Operating segments
Operating segments are components of entities that engage in business activities that earn revenue andincur costs including transactions with other operating segments. Operating results of all the operating
segments, for which the financial information is separately available, are reviewed periodically by the
Board of Directors for the purpose of allocating management resources to each segment and assessing
performance.
(23) Treasury shares
Treasury shares are assessed at acquisition cost and deducted from equity. No gain or loss is recognizedon the purchase, sale or cancellation of the Company’s treasury shares. Any difference between the
carrying amount and consideration received on the sale of treasury shares is recognized as share premium.
(24) Borrowing costs
The Group includes borrowing costs directly attributable to the acquisition, construction or production ofan asset that necessarily takes a substantial period of time to get ready for its intended use or sale, that is, aqualifying asset as part of the acquisition cost until the asset is substantially ready for its intended use orsale.
All borrowing costs other than those above are recognized as profit or loss in the fiscal period in which
they are incurred.
4. Significant Accounting Estimates and Judgments
In the preparation of consolidated financial statements, management is required to make judgments, estimates andassumptions that affect application of accounting policies as well as amounts of assets, liabilities, revenue andexpenses. Actual results may differ from these estimates.
The estimates and their underlying assumptions are reviewed on an ongoing basis. The effects of changes inaccounting estimates are recognized in the fiscal period in which the estimates are changed and in future periods
that are affected.
As a result of the global spread of COVID-19, the Group has been impacted by the deterioration in businessresults due to temporary closures of stores and other factors. Although the second state of emergency was lifted,
the future impact is uncertain as it is difficult at this time to predict when the pandemic will end and when there
will be a recovery in consumption. Given these circumstances, the Group assumes that there will be a recovery
from the impact of COVID-19 around 2023 and has made reasonable estimates that reflect the situation as of theend of the reporting period. If uncertainty further increases, the Group may revise the carrying amounts of assets
and liabilities in future accounting periods.
Estimates and judgments made by management that significantly affect the amounts in the consolidated financial
statements are as follows.
(1) Property, plant and equipment, goodwill, intangible assets and investment property
The Group conducts impairment tests if there is an indication that property, plant and equipment,
goodwill, intangible assets and investment property may be impaired.
Impairment tests are performed by comparing the carrying amount and the recoverable amount of theasset. If the recoverable amount is less than the carrying amount, an impairment loss is recognized.
In calculating the recoverable amount, the Group estimates the discounted present value of future cash
flows generated from use of the asset and the discounted present value of future cash flows generated
from ultimate disposal of the asset. These estimates are based on management’s best estimates, but may
differ from actual results due to effects of changes in uncertain future economic conditions.

- 147 -

(2) Useful lives of property, plant and equipment and investment property
The useful lives of property, plant and equipment and investment property are reviewed at the end of the
fiscal year, and if any changes are required, those changes are applied prospectively as a change in an
accounting estimate.
If revisions to the useful lives become necessary, such revisions could have a material effect on theamounts recognized in the consolidated financial statements in the next fiscal year and beyond.
(3) Recoverability of deferred tax assets
The Group recognizes deferred tax assets to the extent that it is probable that taxable profit will beavailable against which deductible temporary differences can be utilized, and the judgment of therecoverability is made on the basis of an estimate of taxable profit for each future fiscal year determinedbased on the Group’s business plan. The estimate of taxable profit for future fiscal years may be affectedby changes in uncertain future economic conditions.
(4) Provisions
The Group recognizes asset retirement obligations and provision for loss on business liquidation asprovisions in the consolidated statement of financial position.
The amount recognized as provisions is estimated based on best estimates which take into accounthistorical and other information on the reporting date for expenditures necessary to settle current
obligations, but may differ from actual results.
(Change in estimate of asset retirement obligations)
PARCO Co., Ltd., a subsidiary of the Company, reviewed and examined its business continuity andwithdrawal strategies, and formulated a new Medium-term Business Plan. Considering the new plan andother factors including the most recent store closures, the Group determined that it would likely incur
additional removal costs, and therefore recorded additional ¥1,809 million in asset retirement obligations.
This change in estimate has no impact on profit or loss for the fiscal year ended February 28, 2021
because the Group changed the estimate at the end of the fiscal year.
(5) Post-employment benefits
The Group has defined benefit and defined contribution post-employment benefit plans for employees andretirees. Present value of defined benefit obligations, service costs and others are determined based on
various actuarial assumptions. For actuarial assumptions, a variety of factors, such as discount rates,
future payment of salaries, those who withdraw from the plan in the future and life expectancy ofmembers, are estimated. These estimates are made based on management’s best estimates, but may differ
from actual results due to effects of changes in uncertain future economic conditions and amendment or
promulgation of relevant laws and regulations.
(6) Determination and revision of lease periods
The Group determines the lease periods based on the non-cancellable term of the lease, taking into
consideration any term for which there is reasonable certainty of extension and any term for which there isreasonable certainty of non-cancellation. Specifically, the Group estimates the period for which there isreasonable certainty considering changes in rent expenses resulting from extension or shortening of thelease period, the existence of cancellation penalties, and the payback period for investments in significant
fixtures, facilities, etc. for rental properties.
For real estate leases in which the Group is the lessee in the Department Store Business, there may berevisions to the lease period for the flagship store or properties tied to the flagship store coinciding with
the next individual-store large-scale renovation plan or when the next Medium-term Business Plan isdecided. If revisions to the lease periods become necessary, such revisions could have a material effect on
the amounts recognized in the consolidated financial statements in the next fiscal year and beyond.
5. Segment Information(1) Overview of reportable segments
The reportable segments of the Group are constituent units of the Group for which separate financial
information is obtainable. These segments are periodically examined by the Board of Directors for the
purpose of deciding the allocation of management resources and evaluating business results.
- 148 -

The Group is comprised, under a holding company structure, of the reportable segments “Department
Store Business,” “PARCO Business,” “Real Estate Business” and “Credit Finance Business,” with the
Department Store Business at its core.
The Department Store Business carries out the sale of clothing, general goods, household goods, foodproducts and others. The PARCO Business undertakes development, management, supervision andoperation of shopping centers. The Real Estate Business carries out development, supervision, operation,etc. of real estate. The Credit Finance Business undertakes issuance and administration of credit cards.
(2) Segment revenue and business results
Revenue and business results by reportable segments of the Group are as follows. Inter-segment
transactions are generally based on prevailing market prices.
Fiscal year ended February 29, 2020
Reportable segments
Other

Total

Millions ofyenMillions ofyenMillions of
yen

6,872

398,519

82,101

480,621–

480,621

1,148

3,846

5,954

41,17347,128(47,128)–

112,212

17,793

10,719404,474

123,275

527,749(47,128)

480,621

10,823

6,725

1,908

37,082

4,700

41,783(1,496)40,286

Department
Store
Business

PARCO
Business

Real EstateBusiness

CreditFinanceBusiness

Total

Millions ofyenMillions ofyenMillions ofyenMillions ofyen

263,388

111,614

16,644

360

598

Total

263,748

Segment profit

17,625External revenue
Inter-segment revenue

Adjustments Consolidated

Millions ofyenMillions ofyen

Finance income

1,091

Finance costs(5,862)

Share of profit (loss)of investments
accounted for using
equity method

1,644

Profit before tax

37,161

Segment assets

471,955

344,162

264,663

78,5891,159,370

139,143

1,298,514(58,205)1,240,308

Depreciation andamortization expense

29,04315,8044,753

107

49,707

1,987

51,695(741)

50,953

Impairment loss

1,167

1,234

–

–

2,401

94

2,496

–

2,496

Investments accounted
for using equity
method3,141

40

18,474–

21,657

164

21,821

15,61837,439

Capital expenditures

24,578

14,5495,180

538

44,8462,414

47,260(331)

46,929Other items

Notes:

1.

The “Other” category is an operating segment not included as a reportable segment. It includes wholesaling, design and construction
contracting, manufacture and sale of furniture, parking, leasing, etc.

2.

Capital expenditures are the amount of the increase in property, plant and equipment, right-of-use assets, investment property andintangible assets.

3.

Adjustments are made as follows.
(1) The adjustment for segment profit includes an inter-segment elimination and corporate income and expenses not attributable toany operating segment. Corporate income and expenses are mainly income and expenses of the company submitting
consolidated financial statements that are not attributable to any operating segment.
(2) The adjustment for segment assets includes elimination of segment receivables, unrealized adjustments on non-current assets,
and assets of the company submitting consolidated financial statements that are not attributable to any operating segment.
(3) The adjustment for depreciation and amortization expense consists of inter-segment transfers.
(4) The adjustment for amounts invested in entities accounted for using equity method consists of investments accounted for using
equity method of the company submitting consolidated financial statements that are not attributable to any operating segment.
(5) The adjustment for capital expenditures consists mainly of inter-segment unrealized profit.

4.

Segment profit is adjusted to operating profit in the consolidated financial statements.

- 149 -

Fiscal year ended February 28, 2021
Reportable segments
Other

Total

Millions ofyenMillions ofyenMillions ofyenMillions ofyenMillions of
yen

5,952

252,287

66,792

319,079–

319,079

1,011

3,083

5,007

28,93033,937(33,937)–

68,861

15,372

9,035

257,294

95,722353,017(33,937)

319,079(6,895)

1,986

421

(26,687)

2,852(23,835)(430)(24,265)

Department
Store
Business

PARCO
Business

Real EstateBusiness

CreditFinanceBusiness

Total

Millions ofyenMillions ofyenMillions ofyenMillions ofyen

163,667

68,307

14,360

357

553

Total

164,024

Segment profit (loss)(22,199)

External revenue
Inter-segment revenue

Adjustments Consolidated

Finance income

962

Finance costs(6,086)

Share of profit (loss)of investments
accounted for using
equity method

717(Loss) before tax
Segment assets(28,672)
457,519

343,870

217,249

70,165

1,088,806

120,6121,209,418

54,303

1,263,722

Depreciation andamortization expense

27,974

16,341

4,691

133

49,141

2,079

51,220(859)

50,361

Impairment loss

10,357

3,175

–

–

13,533245

13,778343

14,122

Investments accounted
for using equity
method3,317

45

18,640–22,003

158

22,161

15,65337,815

Capital expenditures

19,59913,402

4,039

149

37,191

789

37,980(8,620)29,360

Other items

Notes:

1.

The “Other” category is an operating segment not included as a reportable segment. It includes wholesaling, design and construction
contracting, parking, leasing, etc.

2.

Capital expenditures are the amount of the increase in property, plant and equipment, right-of-use assets, investment property andintangible assets.

3.

Adjustments are made as follows.
(1) The adjustment for segment profit (loss) includes an inter-segment elimination and corporate income and expenses not
attributable to any operating segment. Corporate income and expenses are mainly income and expenses of the company
submitting consolidated financial statements that are not attributable to any operating segment.
(2) The adjustment for segment assets includes elimination of segment receivables, unrealized adjustments on non-current assets,
and assets of the company submitting consolidated financial statements that are not attributable to any operating segment.
(3) The adjustment for depreciation and amortization expense consists of inter-segment transfers.
(4) The adjustment for amounts invested in entities accounted for using equity method consists of investments accounted for using
equity method of the company submitting consolidated financial statements that are not attributable to any operating segment.
(5) The adjustment for capital expenditures consists mainly of an inter-segment elimination and inter-segment unrealized profit.

4.

Segment profit (loss) is adjusted to operating profit (loss) in the consolidated financial statements.

(3) Information by geographical area
Sales revenue from external customers
This information has been omitted, as sales revenue from external customers in Japan accounts for a large
percentage of sales revenue recorded on the consolidated statement of income.
Non-current assets
This information has been omitted, as the amount of non-current assets located in Japan accounts for alarge percentage of the amount recorded on the consolidated statement of financial position.

- 150 -

6. Cash and Cash Equivalents
The breakdown of cash and cash equivalents is as follows:
As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

Cash
Deposits (including time deposits with deposit
terms of three months or less)
Total

3,619

4,031

31,013

124,893

34,633

128,925

7. Trade and Other Receivables
The breakdown of trade and other receivables is as follows.
All these receivables have been classified as financial assets measured at amortized cost.
As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

Notes receivable - trade
Accounts receivable - trade
Accounts receivable - other
Contract assets
Other

2,783
69,962
60,237
6,494
4,765

2,342
53,512
49,990
3,280
4,289

Total

144,244

113,414

8. Inventories
The breakdown of inventories is as follows:
As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

Merchandise and finished goods
Work in process
Supplies
Total

18,622221
324

20,061
127495

19,16920,684

The amount of inventories that were recognized as expenses was ¥258,867 million in the fiscal year ended
February 29, 2020 and ¥155,579 million in the fiscal year ended February 28, 2021.
The amounts of write-down of inventories recognized as expenses are as follows:
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Millions of yen
Amounts of write-down

Millions of yen
388- 151 -

205

9. Other Financial Assets
The breakdown of other financial assets is as follows:
As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

Financial assets measured at amortized cost
Time deposits with deposit terms of morethan three months
Lease and guarantee deposits
Loans receivable
Other
Financial instruments measured at fair value
through profit or loss
Derivative financial assets
Financial assets measured at fair value throughother comprehensive income
Shares and investments in capital
Total
Total current assets
Total non-current assets

5,544

4,918

56,837
2,143
5,984

56,820
1,693
5,860

8

27

25,95723,391

96,47592,711

5,095
91,3795,841
86,87010. Other Assets
The breakdown of other assets is as follows:
As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

Prepaid expense
Advance payments - trade
Suspense payments
Retirement benefit assets
Other

2,310
974
599
12,086
4,044

2,368
618
382
9,098
4,332

Total

20,016

16,8005,281
14,734

4,739
12,061Other current assets
Other non-current assets- 152 -

11. Property, Plant and Equipment(1) Schedule of changes
Changes in acquisition costs and accumulated depreciation and impairment of property, plant andequipment are as follow:
Acquisition costs
MachineryandvehiclesMillions ofyen

Furnitureand fixtures

Constructionin progress

Total

Millions ofyen

Buildings
andstructures
Millions ofyenMillions ofyenMillions ofyenMillions ofyen

239,541

438,797

4,106

18,45470,433

771,333–(4,032)(483)(3,280)–(7,796)

239,541434,764

3,623

15,17470,433

763,536

Acquisitions

259

12,555373

2,908

19,61535,713

Sales or disposals(589)(12,674)(53)(1,115)–(14,432)

Transfer among line items

32,67347,69821

1,117(89,212)(7,701)

Balance as of February 29, 2020

271,884

482,344

3,965

18,085835

777,115

Acquisitions–

11,742

39

939

1,033

13,754

Sales or disposals–(5,014)

(26)

(608)

–

(5,648)15,831

20,339252(674)(1,597)34,150

–

(497)

–

(125)

–

(623)

287,715

508,914

4,229

17,617271

818,748

Land

Balance as of March 1, 2019
Effect of changes in accounting
policies
Balance as of March 1, 2019

Transfer among line items
Other
Balance as of February 28, 2021

- 153 -

Accumulated depreciation and impairment
Land

Buildings
andstructures

MachineryandvehiclesFurnitureand fixtures

Constructionin progress

Total

Millions ofyenMillions ofyenMillions ofyenMillions ofyenMillions ofyenMillions of
yen

(487)

(283,927)(2,679)(13,000)–(300,094)

–

117

127

1,534

–

1,779

(487)

(283,809)(2,551)(11,466)–(298,314)

Depreciation expense–(15,803)(191)(1,147)–(17,142)

Impairment loss

–

(874)

(11)

(89)

–

(976)

Sales or disposals

5

10,750

50

1,053

–

11,860Transfer among line items

–

700

–

–

–

700

Other

–

(56)

–

(18)

–

(75)

(481)

(289,092)(2,704)(11,669)–(303,947)

Depreciation expense–(15,471)(236)(1,333)–(17,041)

Impairment loss–

(8,240)

(25)

(234)

–

(8,500)

Sales or disposals

–

4,701

24

588

–

5,314

(18)

(1,825)

79

251

–

(1,513)

–

476

–

107

–

583

(499)

(309,452)(2,863)(12,289)–(325,104)

Land

Buildings
andstructures

MachineryandvehiclesFurnitureand fixtures

Constructionin progress

Total

Millions ofMillions ofMillions ofMillions ofMillions ofMillions of

yen

yen

yen

yen

yen

yen

Balance as of March 1, 2019

239,054

154,870

1,427

5,453

70,433471,238

Balance as of February 29, 2020

271,403

193,252

1,260

6,415

835

473,167

Balance as of February 28, 2021

287,215

199,462

1,366

5,328

271

493,644

Balance as of March 1, 2019
Effect of changes in accounting
policies
Balance as of March 1, 2019

Balance as of February 29, 2020

Transfer among line items
Other
Balance as of February 28, 2021

Carrying amounts

Notes:

1.

The amount of depreciation expense for property, plant and equipment is included in “cost of sales,” “selling, general andadministrative expense” and “other operating expense” in the consolidated statement of income.

2.

Please refer to “28. Other Operating Income” for the gain on sales of non-current assets for the fiscal years ended February 29, 2020and February 28, 2021, and “31. Other Operating Expense” for the loss on disposals of non-current assets for the fiscal years ended
February 29, 2020 and February 28, 2021.

(2) Assets pledged as collateral
Please refer to “20. Bonds and Borrowings” for assets pledged as collateral.
(3) Commitments
Please refer to “39. Commitments” for commitments related to purchase of property, plant and equipment.

- 154 -

12. Goodwill and Intangible Assets(1) Schedule of changes
Changes in acquisition costs, accumulated amortization and impairment and carrying amounts of goodwill
and intangible assets are as follows:
Acquisition costs
Other intangible assets
Goodwill

Millions of yen
Balance as of March 1, 2019

Software

Other

Total

Millions of yen

Millions of yen

Millions of yen

568

9,226

571

9,797

–

(91)

–

(91)

568

9,135

571

9,706

Acquisitions

–

3,025

201

3,226

Sales or disposals–(1,170)(7)(1,178)Transfer among line items

–

177

(177)

(0)

568

11,167587

11,754

Acquisitions

–

2,426

1

2,428

Sales or disposals

–

(691)

(40)

(732)

Transfer among line items

–

147

(58)

88

Other

–

(12)

(4)

(16)

568

13,036

485

13,521

Effect of changes in accounting policies
Balance as of March 1, 2019

Balance as of February 29, 2020

Balance as of February 28, 2021

- 155 -

Accumulated amortization and impairment
Other intangible assets
Goodwill

Millions of yen
Balance as of March 1, 2019

Software

Other

Total

Millions of yen

Millions of yen

Millions of yen(44)(4,876)(432)(5,308)

–

41

–

41

(44)

(4,835)(432)(5,267)

Amortization expense–(1,627)(1)(1,628)

Impairment loss

–

(141)

–

(141)

Sales or disposals

–

946

–

946

Other

–

(0)

–

(0)

(44)

(5,658)(433)(6,092)

Amortization expense–(1,834)(1)(1,836)

Impairment loss

–

(451)

–

(451)

Sales or disposals

–

691

–

691

Transfer among line items

–

(93)

2

(91)

Other

–

10

–

10

(44)

(7,336)(432)(7,769)Effect of changes in accounting policies
Balance as of March 1, 2019

Balance as of February 29, 2020

Balance as of February 28, 2021

Carrying amounts
Other intangible assets
Goodwill

Millions of yen

Software

Other

Total

Millions of yen

Millions of yen

Millions of yen

Balance as of March 1, 2019

523

4,350

139

4,489

Balance as of February 29, 2020

523

5,508

153

5,662

Balance as of February 28, 2021

523

5,699

52

5,752

Note:

The amount of amortization expense for intangible assets is included in “cost of sales” and “selling, general and administrative expense” inthe consolidated statement of income.

(2) Impairment test on goodwill
Goodwill arising in business combinations is allocated to cash-generating units that benefit from thebusiness combination on the acquisition date. The breakdown of the carrying amount of goodwill bysegment is as follows:
As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

PARCO Business

523

523

Total

523

523

The Group tests goodwill for impairment each fiscal year, or whenever there is an indication of
impairment.

- 156 -

To test goodwill for impairment, cash-generating units to which the goodwill is allocated are integrated sothat impairment is tested reflecting the smallest units related to the goodwill. Goodwill acquired in abusiness combination is allocated to cash-generating units that are expected to benefit from the synergiesof the combination.
In calculating the recoverable amount, the Group estimates the discounted present value of future cash
flows generated from use of the asset and the discounted present value of future cash flows generated
from ultimate disposal of the asset. These estimates are based on management’s best estimates, but may
differ from actual results due to effects of changes in uncertain future economic conditions.
There is a risk that impairment may arise if major assumptions used for impairment test are changed.
However, the value in use sufficiently exceeds the carrying amount of the cash-generating unit or thegroup of cash-generating units, and the Group considers value in use unlikely to fall below the carrying
amount even if major assumptions used for impairment tests change within a reasonably foreseeable
range.
13. Leases(1) As lessee
The Group enters into lease contracts for real estate, various facilities, etc. in the Department StoreBusiness mainly for the purpose of ensuring flexibility relating to asset replacement, reducing theadministrative burden relating to asset management, and efficiently operating funds. In cases where such acontract transfers the right to control the use of an identified asset for a period of time in exchange forconsideration, the contract is deemed to be a lease or to contain a lease, and the right-of-use assets andlease liabilities are recognized on the date of the commencement of the lease. However, for short-termleases and leases for which the underlying asset is of low value, the Group may recognize the lease
payments related to the lease as an expense using the straight-line method over the lease term.
In some lease contracts among those aforementioned agreements, an option for the lessee to extend thelease period is attached.
The Group exercises the option to extend a lease if it judges it necessary to exercise that option after
comprehensively considering the profitability of the underlying asset of the agreement, changes to theenvironment of the neighborhood market and the exercise conditions of the option. However, in cases
where there is no reasonable certainty that the option will be exercised on the start date of the lease, thecorresponding extension period is not included in the lease period and the lease payment for that period is
not included in the measurement of lease liabilities.
For both the option to extend the lease period and the option to cancel the lease, the Group reviews thepossibility of exercising the option each period.
The total amount of agreements that contain contingent rents or residual value guarantee, or the total
amount of leases that have not yet started regardless of whether the agreement has been concluded are
immaterial.
The breakdown of right-of-use assets is as follows:(Millions of yen)Type of underlying assets
Intangible assets,
other

Total

Buildings andstructures

Machinery, tools
and fixtures

As of February 29, 2020

151,134

3,101

23,6491,746

179,632

As of February 28, 2021

131,651

2,221

22,400

1,546

157,819- 157 -

Land

Profit or loss related to right-of-use assets
Costs related to leases and cash outflow are as follows.
(Millions of yen)
Fiscal year ended

Fiscal year ended

February 29, 2020

February 28, 2021

Depreciation expense of right-of-use assets (Note)
Items with buildings and structures as the underlying

23,63323,092

946

988

1,168

1,161

166

165

Total depreciation expense of right-of-use assets

25,91425,408Interest expenses related to lease liabilities

4,793

4,445

Costs related to Current lease obligations

522

428

Costs related to leases of low-value assets

943

1,053

Contingent rents not included in the measurement oflease liabilities

1,054

576

Total (net) of costs related to leases

7,314

6,504

Repayments of lease liabilities

29,241

29,254

Income from subleasing (Note)

16,885

11,720194–

19,47524,038assets
Items with machinery, tools and fixtures as theunderlying asset
Items with land as the underlying asset
Items with intangible assets, other as the underlying asset

Profit or loss from sale and leaseback transaction
Cash outflow related to leases
Note:

Right-of-use assets that fall under the definition of investment property are excluded.

Lease liabilities
A maturity analysis for lease liabilities is as follows.
(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Contractual undiscounted cash flows
Due within one year

33,70933,137

Due after one year through two years

30,90630,347

Due after two years through three years

29,14328,048Due after three years through four years

27,044

26,518Due after four years through five years

25,733

21,676

Due after five years

110,491

90,376

Balance of lease liabilities before discount257,030

230,103

Current

29,49329,799Non-current

191,003

173,085- 158 -

(2) As lessor
The Group mainly leases investment property and tenant space inside commercial facilities using financial
lease or operating lease transactions.
These lease assets are exposed to the risk of being damaged due to the use by the lessee that is above andbeyond regular use, or as a result of intentional acts or gross negligence. To avoid and mitigate such risks,
the Group requires in accordance with lease contracts that lessees provide a lease or guarantee deposit of acertain amount, and if the asset is actually damaged, the lease or guarantee deposit is used to fund thecosts required for repair.
1) Finance leases (As lessor)
The information has been omitted due to its immateriality.
2) Operating leases (As lessor)
Revenue related to operating leases is as follows:
Fiscal year ended
February 29, 2020

(Millions of yen)
Fiscal year ended
February 28, 2021

Lease revenue (other than contingent rents)

23,244

26,372

Lease revenue (contingent rents)

27,805

21,628The maturity analysis for lease payments relating to operating leases is as follows:
As of February 29, 2020

(Millions of yen)
As of February 28, 2021

Due within one year
Due after one year through two years
Due after two years through three years
Due after three years through four years
Due after four years through five years
Due after five years

20,002
18,23917,137
16,674
15,599131,101

21,93919,507
18,945
17,612
15,876
120,612

Total

218,754214,493- 159 -

Changes in the carrying amount, acquisition cost, and accumulated depreciation and impairment ofunderlying assets of operating leases recorded under property, plant and equipment in the consolidated
statement of financial position are as follows:
Carrying amount(Millions of yen)
Buildings and structures

Land
Balance as of March 1, 2019

77,95060,553Acquisitions
Acquisition due to business combinations
Sales or disposals
Transfer among line items
Depreciation expense
Impairment loss
Exchange differences on translation of foreign
operations
Other

34,932
–
(410)
–
–
–

22,909–(210)
0(4,827)
(41)

–

–

–

–

Balance as of February 29, 2020

112,472

78,383–––

13,493–(66)

21,3096,288

14,100–(263)

12,837(6,364)(1,141)––

Acquisitions
Acquisition due to business combinations
Sales or disposals
Changes due to commencement and expirationof leases
Transfer among line items
Depreciation expense
Impairment loss
Exchange differences on translation of foreign
operations
Other
Balance as of February 28, 2021

(49)

–

147,569

103,431

Acquisition costs(Millions of yen)
Buildings and structures

Land
Balance as of March 1, 201978,171

146,266

Balance as of February 29, 2020

112,687

168,111

Balance as of February 28, 2021

148,048

206,992

Accumulated depreciation and impairment(Millions of yen)
Buildings and structures

Land
Balance as of March 1, 2019221

85,713

Balance as of February 29, 2020

215

89,727

Balance as of February 28, 2021

478

103,561- 160 -

14. Investment Property(1) Schedule of changes
Changes in acquisition costs, accumulated depreciation and impairment and carrying amounts ofinvestment property and fair values as of the end of each fiscal year are as follows:
Acquisition costs
Self-owned assets

Right-of-use assets

Total

Millions of yen

Millions of yen

Millions of yen

211,197–

211,197

Effect of changes in accounting policies(1,570)29,487

27,917

Balance as of March 1, 2019

209,627

29,487239,115

Acquisitions
Sales or disposals
Transfer among line items
Other

2,233
(2,132)
2,704
–

5,388
–
–
(3,597)

7,622(2,132)
2,704(3,597)

Balance as of February 29, 2020

212,433

31,278

243,711

Acquisitions
Sales or disposals
Transfer among line items
Other

4,569
(185)
(34,227)
(726)

4,193
–
(251)
(132)

8,763
(185)
(34,479)(859)

Balance as of February 28, 2021

181,86235,088

216,950

Balance as of March 1, 2019

Accumulated depreciation and impairment
Self-owned assets

Right-of-use assets

Total

Millions of yen

Millions of yen

Millions of yen(14,035)–(14,035)

Balance as of March 1, 2019
Effect of changes in accounting policies

104(6,022)(5,917)

Balance as of March 1, 2019(13,930)(6,022)(19,953)

Depreciation expense
Impairment loss
Sales or disposals
Transfer among line items
Other(2,598)
(15)
1,288
(700)
(5)

(3,002)
(265)
–
–
896

(5,601)
(280)
1,288
(700)
890

Balance as of February 29, 2020

(15,962)(8,394)(24,356)

Depreciation expense
Impairment loss
Sales or disposals
Transfer among line items
Other(2,322)
(130)
54
1,509
216

(3,118)
(47)
–
6
116

(5,441)
(177)
54
1,516
332

Balance as of February 28, 2021

(16,634)(11,436)(28,071)

Carrying amounts and fair values(Millions of yen)
As of February 28, 2021

As of February 29, 2020
Carrying amount
Investment property

Fair value219,354317,782

Carrying amount
188,879

Fair value
266,687

Fair value of investment property is based on real-estate appraisal by an external real-estate appraiser withrecent experience in appraisal for the region where the property is located and the type of the property to
be valued who holds certified professional qualifications and others. The appraisal is based on market
evidence reflecting the transaction price of similar assets in accordance with valuation standards of thecountry where the property is located.

- 161 -

(2) Income and expenses from investment property(Millions of yen)
Fiscal year ended
February 28, 2021

Fiscal year ended
February 29, 2020
Rental income
Direct operating expense

20,21011,856

16,027
10,271

The amounts of rental income from investment property and accompanying direct operating expense areincluded in “sales revenue” and “cost of sales,” respectively, in the consolidated statement of income.
(3) Commitments
Please refer to “39. Commitments” for commitments related to purchase of investment property.
15. Impairment of Non-financial Assets
Non-financial assets are grouped based on the smallest cash-generating unit (principally stores) that generates
cash inflows largely independent of those of other assets.
Impairment losses are recorded in “other operating expense” in the consolidated statement of income.
The breakdown of the assets for which impairment losses were recognized by segment is as follows:
Fiscal year ended February 29, 2020
Segment

Department StoreBusiness

Company name (Location)
Daimaru Matsuzakaya Department Stores
Co. Ltd.
(Toyota, Aichi)

Store, etc.

Type
Buildings and structures436
11

Furniture and fixtures

1

Right-of-use assets

296

PARCO Co., Ltd.
(Hiroshima, Hiroshima, etc.)

PARCO Business NEUVE A Co., Ltd.
(Shibuya-ku, Tokyo, etc.)

PARCO SPACE SYSTEMS Co., Ltd.
(Odawara, Kanagawa, etc.)

J. Front Foods Co., Ltd.
(Taito-ku, Tokyo, etc.)

4

Buildings and structures
Office, Parking

Store, etc.

Store, etc.

Hotel businessStore, etc.

(Millions of yen)
Impairment loss

Machinery and vehicles

Other
Kochi Daimaru Co., Ltd.
(Kochi, Kochi)

Other

Use

Furniture and fixtures

180
3

Other

231

Buildings and structures

12

Furniture and fixtures

0

Right-of-use assets

33

Software1

Investment property

280

Buildings and structures

131

Furniture and fixtures

80

Right-of-use assets

512

Software139

Buildings and structures

27

Furniture and fixtures

1

Right-of-use assets

12

Software0

Buildings and structures

85

Furniture and fixtures

2

Right-of-use assets
Total

7
2,496

1) With regard to the Department Store Business, an impairment loss (¥750 million) was recorded as loss
on business liquidation in connection with the decision to cease operations of Matsuzakaya Toyota.
The recoverable amount of the cash-generating unit was measured at value in use, and was calculatedby discounting future cash flows by 4.1%, which was the weighted average cost of capital (WACC) at
the time of measurement, taking into account the future profitability and other factors. For Kochi
Daimaru Co., Ltd., following the decision to sell the Pianta Building, which had been used as an
office by said company, the carrying amount of the respective assets was reduced to zero, and the- 162 -

amount of the reduction (¥183 million) and the loss on business liquidation (¥231 million) wererecorded as impairment losses.
2) With regard to the PARCO Business, the amount invested is not expected to be recovered due to thedecreased profitability of shopping centers such as Hiroshima ZERO GATE, etc., and accordingly the
carrying amount of the cash-generating unit was reduced to the recoverable amount and the reduction
was recognized as an impairment loss (¥329 million). With regard to specialty stores, the amountinvested is not expected to be recovered due to decreased profitability, and accordingly the carrying
amount of the cash-generating unit was reduced to the recoverable amount and the reduction wasrecognized as an impairment loss (¥862 million). The recoverable amount of the cash-generating unit
was measured at value in use, and was calculated by discounting future cash flows by 3.6%, which
was the WACC at the time of measurement, taking into account the future profitability and otherfactors.
There was no reversal of impairment losses recorded in the fiscal year ended February 29, 2020.
Fiscal year ended February 28, 2021
Segment

Company name (Location)

Daimaru Matsuzakaya Department Stores
Department Store
Co. Ltd.
Business(Kita-ku, Osaka, etc.)

Use

Store, etc.

Type
Buildings and structures

6,883

Machinery and vehicles

2

Furniture and fixtures

41

Right-of-use assets

3,386

Other

PARCO Co., Ltd.
(Matsumoto, Nagano, etc.)

Store, etc.

PARCO Business
NEUVE A Co., Ltd.
(Shibuya-ku, Tokyo, etc.)

PARCO SPACE SYSTEMS Co., Ltd.
(Tokorozawa, Saitama, etc.)
J. Front Foods Co., Ltd.
(Chuo-ku, Tokyo, etc.)

Store, etc.

Office, etc.

Office, etc.

Other
Daimaru Kogyo, Ltd.
(Chuo-ku, Osaka, etc.)
Adjustments(corporate)

J. FRONT RETAILING Co., Ltd.
(Chuo-ku, Tokyo)

Office, etc.

Other

(Millions of yen)
Impairment loss

44

Buildings and structures

1,171

Machinery and vehicles

7

Furniture and fixtures

24

Right-of-use assets

1,204

Investment property

54

Buildings and structures

146

Furniture and fixtures

156

Right-of-use assets

341

Software

56

Other

7

Furniture and fixtures

2

Right-of-use assets

5

Buildings and structures

138

Furniture and fixtures

3

Software

5

Other

13

Buildings and structures

16

Machinery and vehicles

16

Furniture and fixtures

6

Software46

Software

343
Total

14,122

1) With regard to the Department Store Business, principally because of decreased profitability of
Daimaru Matsuzakaya Department Stores Co. Ltd.’s Daimaru Umeda store, the carrying amount ofbuildings and structures, etc. was reduced to the recoverable amount and the reduction of ¥9,534
million was recognized as an impairment loss. The recoverable amount of the cash-generating unit
was measured at value in use, and was calculated by discounting future cash flows by 3.7%, which
was the WACC at the time of measurement, taking into account the future profitability and otherfactors.
2) With regard to the PARCO Business, principally because of decreased profitability of PARCO Co.,
Ltd.’s Matsumoto PARCO, the carrying amount of buildings and structures, etc. was reduced to the- 163 -

recoverable amount and the reduction of ¥783 million was recognized as an impairment loss. The
recoverable amount of the cash-generating unit was measured at value in use, and was calculated bydiscounting future cash flows by 3.6%, which was the WACC at the time of measurement, taking into
account the future profitability and other factors.
In addition, with regard to PARCO Co., Ltd.’s Tsudanuma PARCO for which the decision to cease
operations was made, an impairment loss (¥925 million) was recorded as loss on business liquidation.
The recoverable amount of the cash-generating unit was measured at value in use, and was calculatedby discounting future cash flows by 3.4%, which was the WACC at the time of measurement, taking
into account the future profitability and other factors.
There was no reversal of impairment losses recorded in the fiscal year ended February 28, 2021.
16. Investments Accounted for Using the Equity Method
Investments in associates
The carrying amount of investments in associates that are not individually material is as follows:
As of February 29, 2020
Total carrying amount

37,439(Millions of yen)
As of February 28, 2021
37,815The Group’s share of comprehensive income of associates that are not individually material is as follows:(Millions of yen)
Fiscal year ended
February 28, 2021

Fiscal year ended
February 29, 2020
Share of profit

1,644

Share of other comprehensive income
Share of comprehensive income

717

(35)

(91)

1,608

626

17. Joint Operations
In the Group, Daimaru Matsuzakaya Department Stores Co. Ltd., a subsidiary, works on the joint operation of
GINZA SIX, a commercial facility located at Ginza 6-chome 10, running the joint operation with partners,
namely L Real Estate S.C.A SICAR and SUMITOMO CORPORATION. With regard to revenue and expenses
related to the operation of this commercial facility, including profit and loss based on tenant agreements, theamount corresponding to the ownership ratio of Daimaru Matsuzakaya Department Stores Co. Ltd. (68%),
determined according to the ownership category of the commercial facility and other factors, was recognized.

- 164 -

18. Income Tax(1) Deferred tax assets and liabilities
The breakdown of and changes in deferred tax assets and liabilities by major cause are as follows:
Fiscal year ended February 29, 2020
(Millions of yen)
Balance as ofMarch 1, 2019
Deferred tax assets
Retirement benefit liabilities
Allowance for credit losses
Non-current assets
Other financial assets
Asset retirement obligations
Tax loss carryforwards
Gain on adjustment of accounts
payableLong-term unearned revenue
Prepaid expense (Land leasehold
right)
Lease liabilities
Other
Total

Adjustment due
to application of
IFRS 16

Recognized in
profit or loss

Recognized inothercomprehensive
incomeBalance as ofFebruary 29,
2020

8,062
628
3,679
–
917
150

–
–
–
–
–
–

(2,263)
36
2,220
–
143
(120)

12
–
–
–
–
–

5,810
665
5,900
–
1,061
30

4,761

–

(47)

–

4,714

910

–

(806)

–

104

2,961

–

11

–

2,972

–
10,057

72,673–(10,203)
1,615

–
0

62,46911,67332,12872,673(9,412)

12

95,40175,540
7,729
–
1,033

–
–
67,048
–

(864)
(286)
(4,602)(53)–(1,000)–(300)

74,6766,442
62,445678

Total

84,30367,048(5,807)(1,301)

144,243

Net amount of deferred tax
assets(52,174)5,624(3,604)

1,313(48,841)

Deferred tax liabilities
Non-current assets
Securities
Right-of-use assets
Other- 165 -

Fiscal year ended February 28, 2021
(Millions of yen)
Balance as ofMarch 1, 2020

Recognized in
profit or loss

Recognized inothercomprehensive
income

5,810
665
5,900
–
1,061
30

1,534
(50)
(527)
85
883
5,457

(164)
–
–
(31)
–
–

–
–
–
6
–
–

7,180
614
5,372
60
1,944
5,487

4,714

520

–

–

5,235

104

1

–

–

106

Other (Note)

Balance as ofFebruary 28,
2021

Deferred tax assets
Retirement benefit liabilities
Allowance for credit losses
Non-current assets
Other financial assets
Asset retirement obligations
Tax loss carryforwards
Gain on adjustment of accounts
payableLong-term unearned revenue
Prepaid expense (Land leasehold
right)
Lease liabilities
Other

2,972

–

–

–

2,972

62,46911,673(2,885)(1,594)

–
(294)

–
–

59,584
9,784

Total

95,401

3,425

(490)

6

98,34374,6766,442
62,445
678

4,612
(781)
(6,208)
1,727

–
(786)
–
611

(384)
–
(3)
(134)

78,903
4,873
56,233
2,882

Total

144,243

(650)

(175)

(522)

142,893

Net amount of deferred tax
assets(48,841)

4,076

(314)

529

(44,550)

Deferred tax liabilities
Non-current assets
Securities
Right-of-use assets
Other

Note:

Changes, etc. due to the sale of a consolidated subsidiary are included in “Other.”

Deferred tax assets and liabilities in the consolidated statement of financial position are as follows:(Millions of yen)
As of February 28, 2021

As of February 29, 2020
Deferred tax assets
Deferred tax liabilities
Net amount

9,988
58,8296,751
51,301(48,841)(44,550)

In recognizing deferred tax assets, the Group takes into account the possibility that tax loss carryforwards
or deductible temporary differences can be utilized against future taxable profit. In the recoverability ofdeferred tax assets, the Group considers the scheduled reversal of deferred tax liabilities, projected futuretaxable profit and tax planning.
Based on the result of the above assessment of recoverability of deferred tax assets, some of the Group’s
subsidiaries have not recognized deferred tax assets for certain tax loss carryforwards and deductible
temporary differences. Tax loss carryforwards and deductible temporary differences for which deferred
tax assets have not been recognized are as follows:(Millions of yen)
As of February 28, 2021

As of February 29, 2020
Tax loss carryforwards
Deductible temporary differences
Total- 166 -

10,893
43,793

12,31054,097

54,686

66,408

The deferral period of tax loss carryforwards for which deferred tax assets have not been recognized is asfollows:(Millions of yen)
As of February 29, 2020

As of February 28, 2021

1st year––

2nd year––

3rd year––

4th year35–

10,857

12,31010,893

12,310

5th year and after
Total

As of February 29, 2020 and February 28, 2021, the total amount of temporary differences forinvestments in subsidiaries that were not recognized as deferred tax liabilities were ¥168,970 million and¥140,938 million, respectively.
(2) Income tax
The breakdown of income tax is as follows:(Millions of yen)
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Current taxes:
Current period

10,135

1,910

Prior periods

27

(86)

10,162

1,824

678(9,692)

2,925

5,616

–

–

3,604

(4,076)

13,767(2,251)

Total current taxes
Deferred taxes:
Origination and reversal of temporary
differences, etc.
Changes in unrecognized deferred tax assets
Changes in tax rates, etc.
Total deferred taxes
Total- 167 -

(3) Reconciliation between effective tax rates
Differences between the effective statutory tax rate and average effective tax rate are as follows:
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021%%

Effective statutory tax rate

30.6

30.6

Entertainment expense

0.8

(0.3)

Bonuses for directors (and other officers)

0.2

(0.0)

Dividend income

(0.0)

0.0

Share of profit (loss) of investments accounted
for using equity method

(1.4)

0.8

Unrecognized deferred tax assets

7.3(23.2)

Other

(0.6)

(0.1)

Average effective tax rate

37.1

7.9

19. Cash Flow Information(1) Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities are as follows:
Fiscal year ended February 29, 2020
Changes that do not affect cash flows
Adjustment Balance as of
Balance as of
Changes that New leases
Balance as of
Changes inMarch 1,due toOther
February 29,
affect cash and changes
March 1,
fair values
2019
application of2020
in agreements
flows
2019
(Adjusted)
IFRS 16
Millions of Millions of Millions of Millions of Millions of Millions of Millions of Millions of
yen
yen
yen
yen
yen
yen
yen
yen
Current borrowings

17,520–17,52053,480–––71,000Commercial papers

–

–

–

4,000

–

–

–

4,000

Non-current
borrowings

107,010–

107,010(3,500)–––103,510

Bonds

49,848–49,84829,864––54

79,766

Lease liabilities

10,301

228,414238,715(29,241)

11,023––

220,497

Derivatives

14

–

14

–

–

–

(14)

–

Total

184,694

228,414413,108

54,602

11,023–39

478,773

Derivatives are held in order to hedge interest rate fluctuation risk and foreign exchange fluctuation risk.

- 168 -

Fiscal year ended February 28, 2021
Changes that do not affect cash flows
Balance as of
Changes that
March 1, 2020 affect cash flows

New leases andChanges in fairchanges invaluesagreements

Balance as ofFebruary 28, 2021

Other

Millions of yen Millions of yen Millions of yen Millions of yen Millions of yen

Millions of yen

Current borrowings

71,000(13,000)–––

58,000Commercial papers

4,000

66,001–––70,001

Non-current borrowings

103,51058,600–––162,110

Bonds

79,766(10,000)––

52

69,819Lease liabilities

220,497(29,254)

11,701–(59)

202,885

Total

478,773

72,346

11,701–(6)

562,815(2) Non-cash transactions
Right-of-use assets acquired through leases are as follows:
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Millions of yen

Millions of yen
11,409Right-of-use assets acquired through leases

10,883

20. Bonds and Borrowings(1) Breakdown of financial liabilities
The breakdown of “bonds and borrowings” and “other financial liabilities” is as follows:
As of February 29, 2020

As of February 28, 2021

Averageinterest rate
(Note 1)Millions of yen

Millions of yen%

Repayment
deadline

Current borrowings

94,40075,1500.30–

Commercial papers

4,000

70,001––

Non-current borrowings

80,110144,960

0.38

Bonds (Note 2)

79,766

69,819

Guarantee deposits received

40,81439,555

–

–

Other

30,47229,893

–

–

Total

329,563

429,379––

Current liabilities

138,599

175,363––

Non-current liabilities

190,964

254,016––

Notes:

1.

(Note 2)

From March 2022
to March 2035
(Note 2)

The average interest rates are weighted-average interest rates based on the contract interest rates and the closingbalances for each borrowing.

- 169 -

2.

Summary of issuing conditions of bonds is as follows:(Millions of yen)
Bond nameDate of issue

As of February
29, 2020

As of February
28, 2021

Interest
rate(%)

Maturity date

3rd series of
unsecured bonds

August 5, 2015

10,000–0.30

August 5, 2020

August 5, 2015

5,000

5,000

0.46

August 5, 2022

August 4, 2017

15,00015,0000.16

August 4, 2022

6th series of
unsecured bonds

August 4, 2017

20,00020,0000.43

August 4, 2027

7th series of
unsecured bonds

May 22, 2019

20,00020,0000.20

May 22, 2024

May 22, 201910,00010,0000.37

May 22, 2029

80,00070,0000.30

Company name

J. FRONTRETAILING Co.,Ltd.
J. FRONTRETAILING Co.,Ltd.
J. FRONTRETAILING Co.,Ltd.
J. FRONTRETAILING Co.,Ltd.
J. FRONTRETAILING Co.,Ltd.
J. FRONTRETAILING Co.,Ltd.

4th series of
unsecured bonds
5th series of
unsecured bonds

8th series of
unsecured bonds

Total

Agreements on some of borrowings of the Group require the maintenance of specific financial ratios and net assets at a
certain level.
The Group has complied with all the agreements on borrowings.

(2) Assets pledged as collateral
The Group has pledged corporate properties as collateral for borrowings, etc. Secured creditors have theright to receive the payment of their claims prior to other unsecured creditors with regard to the Group’s
properties.
Assets pledged as collateral for borrowings, etc. are as follows:(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Land

5,290

5,290

Buildings and structures

2,442

2,288

Other financial assets

221

241

–

83

7,953

7,903

Inventories
Total- 170 -

The corresponding obligations are as follows:(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Long-term borrowings

525

225

Trade and other payables

200

110

725

335

Total

21. Trade and Other Payables
The breakdown of trade and other payables is as follows.
These are all classified as financial liabilities measured at amortized cost.
(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Notes payable - trade

4,339

2,276

Accounts payable - trade73,03561,741

Accounts payable - other

39,35932,495

Deposits received

26,031

22,893

Other

1,254

2,530

144,020

121,937

Total

22. Employee Benefits
The Group has established defined benefit plans (such as a corporate pension fund plan and lump-sum
retirement benefit plan) as employee retirement benefit plans, and certain consolidated subsidiaries haveadopted defined contribution plans. In addition, the Group may pay extra retirement payments whenemployees retire before their normal retirement date. Certain consolidated subsidiaries have instituted aretirement benefit trust.
In regard to the corporate pension fund plan, the Group has obligations including paying contributions to thecorporate pension fund under the Defined-Benefit Corporate Pension Act, etc. Directors of the fund have
responsibilities including a duty of loyalty to faithfully execute operations related to managing and operating
funds in the interests of the fund. In addition, it is stipulated that directors are forbidden from entering into any
asset management contract aimed at serving the interests of a third party, and rules of conduct that include
forbidding acts that create a conflict of interest are clarified.
The plan is mainly operated by a corporate pension fund that is independent from the Group. The board ofrepresentatives comprises the same number of representatives elected from among the employers (elected
representatives) and representatives elected from among employees (mutually elected representatives), and thechairperson (president) of the board of representatives is elected from among the employers.
Decisions of the board of representatives are made by a majority of members in attendance, but in the case ofa tie, the President, who is the Chairperson, has the authority to make a decision. However, it is stipulated thatdecisions related to particularly important matters shall be determined by a majority in excess of the above.
The board of representatives holds the authority to make decisions about all important matters, such as
investment policies. Actual asset management is conducted by a managing trustee under an investment service
agreement, and directions from the board of representatives regarding investment in individual securities, etc.
are forbidden by laws and regulations.
The Company is required to pay contributions to the corporate pension fund and contributions are regularly
reviewed within the range permitted by laws and regulations. While the Company is obligated to makecontributions stipulated by the fund into the future, in addition to these contributions, it also funds a retirement
benefit trust on a voluntary basis.
- 171 -

With regard to the lump-sum retirement benefit plan, the Company is obligated to pay benefits directly to thebeneficiaries. There are no statutory requirements regarding funding.
(1) Defined benefit plans
The relationship between the present value of the defined benefit obligations and the fair value of the plan
assets and the amounts recognized in the consolidated statement of financial position is as follows:(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Present value of funded defined benefit
obligations

28,44025,291

Fair value of plan assets(39,253)(36,043)(10,812)(10,752)

18,90021,435

8,088

10,683Retirement benefit liabilities

20,175

19,781Retirement benefit assets

12,086

9,098

8,088

10,683

SubtotalPresent value of unfunded defined benefit
obligations
Liabilities of defined benefit plans
Amounts in the consolidated statement offinancial position

Net defined benefit liability or asset in the
consolidated statement of financial position

Changes in the present value of the defined benefit obligations are as follows:(Millions of yen)
Fiscal year ended
February 29, 2020
Present value of defined benefit obligations at

Fiscal year ended
February 28, 2021
60,20747,341

1,891

1,652

104

79

132

(146)

(952)

802

Past service cost

(4,128)–Benefits paid

(6,766)(2,877)

Other(3,148)(125)

Present value of defined benefit obligations at
end of period

47,341

46,726

beginning of period
Service cost
Interest expense
Remeasurements
Actuarial gains and losses arising from changes
in demographic assumptions
Actuarial gains and losses arising from changes
in financial assumptions

Note:

Past service costs of negative ¥4,128 million in the previous fiscal year were incurred as a result of retirement payments and pension
system reform of Daimaru Matsuzakaya Department Stores Co. Ltd.

- 172 -

Changes in the fair value of the plan assets are as follows:(Millions of yen)
Fiscal year ended
February 29, 2020
Fair value of plan assets at beginning of period

Fiscal year ended
February 28, 2021
44,06739,25380

60Return on plan assets

(436)

2,268

Contributions by employer

876

819

(3,111)(2,360)–(4,000)Other(2,223)

2

Fair value of plan assets at end of period

39,25336,043

Interest revenue
Remeasurements

Benefits paid
Return of trust assets

The fair value of each item of plan assets is as follows:
As of February 29, 2020
(Millions of yen)
Assets with quoted market
prices in active markets

Assets without quoted
market prices in active
markets

Cash and cash equivalents

4,322

–

4,322

Domestic shares

14,465–

14,465

Overseas shares

2,384

–

2,384

–

933

933

Domestic bonds

345

7,226

7,571

Overseas bonds

128

1,601

1,730

Jointly operated trusts(public and corporate bonds)

–

1,738

1,738

General accounts of life insurancecompanies

–

5,365

5,365

Other

–

740

740

21,646

17,60639,253

Items of plan assets

Jointly operated trusts(shares)

Total- 173 -Total

As of February 28, 2021
(Millions of yen)
Assets with quoted market
prices in active markets

Assets without quoted
market prices in active
markets

Cash and cash equivalents

1,704

–

1,704

Domestic shares

11,085238

11,323

Overseas shares

3,888

249

4,137

–

684

684

Domestic bonds

353

7,758

8,112

Overseas bonds

120

2,588

2,708

Jointly operated trusts(public and corporate bonds)

–

1,149

1,149

General accounts of life insurancecompanies

–

5,444

5,444

Other

–

778

778

17,151

18,891

36,043

Items of plan assets

Jointly operated trusts(shares)

Total

Total

The Group’s management of plan assets is aimed at ensuring the necessary income over the long-term toreliably make pension and lump-sum payments into the future. Its investment policy to achieve this isfundamentally to make diversified investments after analyzing characteristics of risks and returns for each
asset and taking into account correlations between respective assets.
Specifically, the Group develops the policy asset mix that is the optimal combination now and in the
future after taking into account the expected rate of return and risks on eligible investments, and the
managing trustee manages assets accordingly.
In regard to plan assets, the status of asset management is managed primarily by regularly reviewing thefinancial position of the plans, formulating long-term management policies, and monitoring the status ofasset allocation.
The Group’s pension funding is determined after taking into consideration various factors such as theallowable limit of deductible expenses under tax laws, the funding status of plan assets and actuarial
calculations. Contributions to plan assets are intended to cover benefits for services already rendered, in
addition to benefits for services to be rendered in future.
In accordance with the provisions of the Defined-Benefit Corporate Pension Act, the rules of the corporate
pension fund stipulate that the amount of contributions shall be recalculated every three to five years witha record date of the fiscal year end, in order to preserve a balanced budget into the future. During therecalculation, the basic rates related to contributions (expected interest rates, expected mortality rates,
expected withdrawal rates, expected salary increase indexes, expected number of new participants, etc.)
are reviewed, and the appropriateness of the contributions is reverified.
The Group plans to pay contributions of ¥732 million in the fiscal year ending February 28, 2022.
The weighted average duration of the defined benefit obligations as of February 29, 2020 was 10.22 years.
The weighted average duration of the defined benefit obligations as of February 28, 2021 was 9.48 years.

- 174 -

The main actuarial assumptions used to calculate the present value of the defined benefit obligations are
as follows:
As of February 29, 2020

As of February 28, 2021%%

Discount rate

Mainly 0.1

Mainly 0.3

Anticipated rate of salary increase

Mainly 4.6

Mainly 4.6

The sensitivity analysis is conducted based on changes in assumptions that are reasonably possible, as ofthe end of the fiscal year.
The sensitivity analysis is based on the premise that all actuarial assumptions remain constant other than
the actuarial assumption that is the focus of the analysis, but in reality there is a possibility that changes inother actuarial assumptions may affect the sensitivity analysis.
If there are no other changes to assumptions, the sensitivity of defined benefit obligations at the end ofeach fiscal year to changes in the discount rate is as follows. Furthermore, the Group does not expect any
changes in the anticipated rate of salary increase.
(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Changes in discount rate
0.5% increase(2,295)(2,094)

0.5% decrease

2,484

2,266

Amounts recognized as retirement benefit expense are as follows:(Millions of yen)
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Service cost

1,891

1,652

Net interest

24

19(3,929)76(2,013)

1,748

Other
Total
Note:

The retirement benefit expenses for the fiscal year ended February 29, 2020 decreased significantly due mainly to the revision of theretirement benefit plan.

(2) Defined contribution plans
The amount recorded as expenses in relation to defined contribution plans is ¥5,817 million for the fiscal
year ended February 29, 2020 and ¥4,575 million for the fiscal year ended February 28, 2021, andincluded in “cost of sales” and “selling, general and administrative expense” in the consolidated statementof income. The above amounts include the amount of the employer’s contribution to welfare pension
insurance premiums.
(3) Extra retirement payments
Extra retirement payments may be provided when an employee retires prior to the normal retirement date.
The amount recorded as expenses in relation to extra retirement payments was ¥3,056 million in the fiscal
year ended February 29, 2020 and ¥101 million in the fiscal year ended February 28, 2021, and included
in “other operating expense” in the consolidated statement of income.

- 175 -

(4) Employee benefit expenses
The amount of employee benefit expenses was ¥70,742 million in the fiscal year ended February 29, 2020and ¥61,307 million in the fiscal year ended February 28, 2021, and included in “cost of sales” and“selling, general and administrative expense” in the consolidated statement of income.
23. Provisions
The breakdown and changes of provisions are as follows:(Millions of yen)
Asset retirement
obligations

Provision for loss on
business liquidation

Total

Balance as of March 1, 2019

3,377

3,651

7,028

Increase during the period

556

706

1,263

Discounted interest expenses for theperiod

43

–

43

(165)

(2,134)(2,299)

–

(266)

(266)

139

–

139

Balance as of February 29, 2020

3,952

1,956

5,908

Increase during the period

3,024

3,637

6,661

43

–

43

(118)

(505)

(623)

–

(102)

(102)

Other

(192)

(245)

(438)

Balance as of February 28, 2021

6,708

4,740

11,449Decrease during the period (use)Decrease during the period (reversal)
Other

Discounted interest expenses for theperiodDecrease during the period (use)Decrease during the period (reversal)

The breakdown of provisions in the consolidated statement of financial position is as follows:(Millions of yen)
As of February 29, 2020
Current liabilities
Non-current liabilities
Total

As of February 28, 2021
999

914

4,909

10,534

5,908

11,449(1) Asset retirement obligations
Asset retirement obligations are recorded at the estimated amount of restoration costs for rented stores,
offices, etc. for which the Group has obligations to restore to original state at the time when the leaseagreement is terminated. These expenses are expected to be mainly paid after one year or longer has
passed from the end of the fiscal year, and will be affected by future business plans, etc.
(2) Provision for loss on business liquidation
An amount of loss is recorded for the cost of store dismantlement, etc. that is expected to be borne in the
future as a result of business liquidation, store closure and store rebuilding. These expenses are expected
to be mainly paid after store closure or rebuilding (within four years from the end of the fiscal year), butwill be affected by changes in the surrounding environment and other factors.

- 176 -

24. Other Liabilities
The breakdown of other liabilities is as follows:(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Accrued bonuses

5,509

3,794

Accrued paid absences

3,511

3,389

Advances received

1,590

1,594

441

434

Contract liabilities

35,411

41,341Other accrued expense

7,890

6,949

Other

2,928

3,182

57,28360,68556,42759,953

855

731

Deferred income (Note)

Total
Other current liabilities
Other non-current liabilities
Note:

The breakdown of deferred income in the fiscal year ended February 29, 2020 was ¥441 million in government grants.
The breakdown of deferred income in the fiscal year ended February 28, 2021 is ¥434 million in government grants.

25. Equity and Other Equity Items(1) Capital and share premium
Changes in the number of authorized shares, number of issued shares, and the balances of capital, etc. are
as follows:

As of March 1, 2019
Changes during the period
As of February 29, 2020
Changes during the period
As of February 28, 2021
Note:

Number of
authorized shares(Shares)Number of issued
shares (Shares)

Capital(Millions of yen)

Share premium(Millions of yen)

1,000,000,000

270,565,764

31,974

212,210–––(22,870)

1,000,000,000

270,565,764

31,974

189,340

–

–

–

(797)

1,000,000,000

270,565,764

31,974

188,542All shares issued by the Company are ordinary shares with no restrictions and no par value. Issued shares are fully paid.

(2) Treasury shares
Changes in the number and balance of treasury shares are as follows:
Number of shares (Shares)
As of March 1, 2019

Amount (Millions of yen)

8,933,064(15,090)

Changes during the period(70,697)115

As of February 29, 2020

8,862,367(14,974)

Changes during the period(87,087)144

As of February 28, 2021

8,775,280(14,830)

Note:

Treasury shares include shares of the Company owned by the officer remuneration BIP trust.

- 177 -

(3) Nature and purposes of share premium and retained earnings
1) Share premium
It is stipulated in the Companies Act of Japan (“Companies Act”), that at least 50% of the payment ofcertain issues of common shares shall be credited to capital. The remainder of the payment shall becredited to legal capital surplus included in share premium. In addition, the Companies Act permits,upon approval of the shareholders meeting, the transfer of amounts from legal capital surplus tocapital.
2) Retained earnings
Under the Companies Act, 10% of the amount paid as dividends from surplus shall be reserved aslegal capital surplus (an item of share premium) or legal retained earnings (an item of retained
earnings), until the total amount of legal capital surplus and legal retained earnings reaches 25% ofcapital. The legal retained earnings may be used to eliminate or reduce a deficit, or may be reversedby resolution of the shareholders meeting.
(4) Nature and purposes of other components of equity
Exchange differences on translation of foreign operations
Exchange differences on translation of foreign operations represent the translation differences that
occurred when consolidating financial statements denominated in a foreign currency for companies
including foreign subsidiaries.
Cash flow hedges
The Group uses derivatives to hedge the risk of fluctuations in future cash flows. Cash flow hedges
represent the effective portion of changes in fair value of derivative transactions designated as cash flow
hedges.
Financial assets measured through other comprehensive income
Financial assets measured at fair value through other comprehensive income represent the changes in fairvalue of financial assets measured at fair value through other comprehensive income.
Remeasurements of defined benefit plans
Remeasurements of defined benefit plans are the effect of difference between actuarial assumptions as at
the beginning of the period and actual results in defined benefit plans and the effect of changes in actuarial
assumptions. They are recognized in other comprehensive income when incurred and immediatelytransferred from other components of equity to retained earnings.
26. Dividends(1) Dividends paid
Fiscal year ended February 29, 2020
Resolution
Board ofDirectors meeting
held on April 9,
2019
Board ofDirectors meeting
held on October 8,
2019
Note:

Class of shares

Total amount ofdividends(Millions of yen)

Dividends per
share
(Yen)

Ordinary shares

4,751

Ordinary shares

4,751

Record date

Effective date18.00

February 28, 2019

May 7, 201918.00

August 31, 2019

November 11,
2019

Total amount of dividends resolved at the Board of Directors meeting held on April 9, 2019 includes ¥42 million of dividends paid on the
Company’s shares held by the officer remuneration BIP trust.
Total amount of dividends resolved at the Board of Directors meeting held on October 8, 2019 includes ¥40 million of dividends paid on
the Company’s shares held by the officer remuneration BIP trust.

- 178 -

Fiscal year ended February 28, 2021
Resolution
Board ofDirectors meeting
held on April 10,
2020
Board ofDirectors meeting
held on October
13, 2020
Note:

Class of shares

Total amount ofdividends(Millions of yen)

Dividends per
share
(Yen)

Ordinary shares

4,751

Ordinary shares

2,375

Record date

Effective date18.00

February 29, 2020

May 8, 2020

9.00

August 31, 2020

November 11,
2020

Total amount of dividends resolved at the Board of Directors meeting held on April 10, 2020 includes ¥40 million of dividends paid on the
Company’s shares held by the officer remuneration BIP trust.
Total amount of dividends resolved at the Board of Directors meeting held on October 13, 2020 includes ¥19 million of dividends paid on
the Company’s shares held by the officer remuneration BIP trust.

(2) Dividends whose effective date belongs to the following fiscal year
Fiscal year ended February 29, 2020
Resolution

Class of shares

Total amount ofdividends(Millions of yen)

Dividends per
share
(Yen)

Board ofDirectors meeting
held on April 10,
2020

Ordinary shares

4,751

18.00

Note:

Record date

Effective dateFebruary 29, 2020

May 8, 2020

Total amount of dividends resolved at the Board of Directors meeting held on April 10, 2020 includes ¥40 million of dividends paid on the
Company’s shares held by the officer remuneration BIP trust.

Fiscal year ended February 28, 2021
Resolution

Class of shares

Total amount ofdividends(Millions of yen)

Dividends per
share
(Yen)

Board ofDirectors meeting
held on April 13,
2021

Ordinary shares

4,751

18.00

Note:

Record date

Effective dateFebruary 28, 2021

May 7, 2021

Total amount of dividends resolved at the Board of Directors meeting held on April 13, 2021 includes ¥39 million of dividends paid on the
Company’s shares held by the officer remuneration BIP trust.

27. Sales Revenue(1) Disaggregation of revenue
In accordance with the IFRS 8 Operating Segments, the Group reports information about its four
segments, namely “Department Store Business,” “PARCO Business,” “Real Estate Business” and “Credit
Finance Business.” These reportable segments are periodically examined by the Board of Directors for the
purpose of deciding the allocation of management resources and assessing business results. Furthermore,the “Other” category is an operating segment not included as a reportable segment. It includes design andconstruction contracting, manufacture and sale of furniture, wholesaling, parking, leasing, etc.
The Group considers that the categories of these reportable segments can be used to meet the objective forthe disaggregation disclosure requirement in paragraph 114 of IFRS 15. The following table shows thedisaggregation of revenue in accordance with the above categories and includes the reconciliation
representing how disaggregated revenue relates to each segment.
Revenue arising from these businesses is recorded in accordance with contracts with customers, and theamount of sales revenue related to variable consideration, etc. is immaterial. In addition, the amount ofpromised consideration does not include any material financial component.

- 179 -

Segment

Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Millions of yen

Millions of yen

Daimaru
Osaka Shinsaibashi store

39,857

17,613

Osaka Umeda store

24,354

14,298

Tokyo store

25,495

12,650

Kyoto store

22,164

14,362

Kobe store

24,296

17,974

Sapporo store

22,63913,084

Matsuzakaya
Nagoya store

41,18430,054

Ueno store

20,944

16,93842,811

27,047

(360)

(357)

Other stores
Elimination of inter-segment revenue
Department Store Business

263,388

163,667

Shopping center business

73,186

42,798Specialty store business

17,885

11,873

Space engineering and managementbusiness

14,431

10,680

Other businesses

6,709

3,509

Elimination of inter-segment revenue

(598)

(553)

111,61468,307

Real Estate Business

17,793

15,372Elimination of inter-segment revenue(1,148)(1,011)PARCO Business

Real Estate Business

16,644

14,360Credit Finance Business

10,7199,035

Elimination of inter-segment revenue(3,846)(3,083)

6,872

5,952

Other

123,275

95,722Elimination of inter-segment revenue(41,173)(28,930)

82,101

66,792

480,621319,079

Revenue from contracts with customers

424,362

270,895

Revenue arising from other sources

56,25848,183

480,621319,079

Credit Finance Business

Other
Total

Sales revenue
Note:

1)

The categories of “Department Store Business,” “PARCO Business” and “Real Estate Business” include lease income under
IFRS 16, and lease income is included in “Revenue arising from other sources.” The “Other” category is a business segment notincluded as a reportable segment. It includes wholesaling, design and construction contracting, manufacture and sale offurniture, parking, leasing, etc.

Department Store Business
The Department Store Business carries out the sale of clothing, general goods, household goods, foodproducts and others. With regard to these sales of goods, since performance obligations are deemed to besatisfied at the time when goods are delivered to customers, the Group recognizes revenue at the time ofdelivery of such goods. Payments for goods are principally received at the time of delivery of the goods,
which is the time when the performance obligation is satisfied.
This business was greatly affected by shortened operating hours of stores, voluntary business restrictions
and other factors due to the spread of COVID-19, thus resulting in a significant decline in sales revenue.

2)

PARCO Business
The PARCO Business operates the shopping center business, in which it undertakes development,
management, supervision and operation of shopping centers; the specialty store business, in which it sells- 180 -

personal belongings, general goods and others, the space engineering and management business, in which
it undertakes design, operation, etc. of interior decorating work, and other businesses.
With regard to services in the shopping center business, because these services are provided on acontinuous basis and thus performance obligations are deemed to be satisfied over a certain period oftime, revenue is recognized as the services are rendered.
With regard to the sale of personal belongings, general goods and others, since performance obligations
are usually deemed to be satisfied at the time when goods are delivered to customers, revenue isrecognized at the time of delivery of such goods. Payments for goods are received at the time of deliveryof the goods, which is the time when the performance obligation is satisfied.
With regard to the design and operation of interior decorating work in the space engineering andmanagement business, if the outcome of a work contract can be estimated reliably, revenue is recognizedaccording to the stage of completion of the performance obligation. If the outcome of a work contract
cannot be estimated reliably, revenue is recognized only to the extent that it is probable that the contract
costs incurred will be recoverable.
This business was greatly affected by temporary closures and shortened operating hours of PARCO stores,
temporary closures of entertainment facilities and other factors due to the spread of COVID-19, thus
resulting in a significant decline in sales revenue.
3)

Real Estate Business
The Real Estate Business mainly carries out development of the Group’s own properties focused on areas
surrounding each store of Daimaru Matsuzakaya Department Stores, expansion of rental space by leasing
and acquiring external properties, management and operation of such properties, and others.
Revenue from lease of real estate and others is recognized in the period in which it is earned, in
accordance with IFRS 16.
A portion of this business was transferred from Daimaru Matsuzakaya Department Stores Co. Ltd. to
PARCO Co., Ltd. on September 1, 2020.

4)

Credit Finance Business
The Credit Finance Business undertakes issuance and administration of credit cards.
In the Credit Finance Business, annual membership fees from cardholders, fees from department storesand external affiliated stores, and interest from installment sales are recognized as revenue.

5)

Other
Within Other, regarding the design and operation of interior decorating work in the design andconstruction contracting business, if the outcome of a work contract can be estimated reliably, revenue isrecognized according to the stage of completion of the performance obligation. If the outcome of a work
contract cannot be estimated reliably, revenue is recognized only to the extent that it is probable that thecontract costs incurred will be recoverable.

(2) Balance of contracts
Balance of contracts of the Group is as follows:
Fiscal year ended February 29, 2020
As of March 1, 2019
Receivables from Contracts with Customers

101,676(Millions of yen)
As of February 29, 2020
105,283

Contract assets

1,935

6,494

Contract liabilities

42,72135,411

Fiscal year ended February 28, 2021
As of March 1, 2020
Receivables from Contracts with Customers(Millions of yen)
As of February 28, 2021

105,283

87,602Contract assets

6,494

3,280

Contract liabilities

35,411

41,341- 181 -

Notes:

1.

2.

3.

Receivables from Contracts with Customers
Receivables from contracts with customers primarily consist of receivables in association with the use of credit cards
issued by the Group, and the amount includes the amount collected on behalf of third parties as agent transactions. The
collection period of these receivables is mainly within one to two months.
Contract assets
Contract assets are related to rights to considerations arising when the Group is to receive payments from customers inline with a series of performances, and are recognized mainly in association with contracted work agreements. For thecompleted part of work, the Group recognizes contract assets in advance, and they are transferred to trade receivablesat the time when the customer conducts acceptance inspection and the invoice is sent.
Contract assets are included in trade and other receivables in the consolidated statement of financial position.
Contract liabilities
Contract liabilities are related to consideration received prior to performance under contracts and transferred to revenue
at the time when the Group performs obligations under contracts.
Contract liabilities are included in other current liabilities in the consolidated statement of financial position.

Of contract liabilities at the end of the previous period, the amount recognized in revenue in the fiscal year
ended February 28, 2021 was ¥13,509 million.
The decrease in contract assets in the fiscal year ended February 28, 2021 is mainly due to a decrease of¥3,214 million resulting from a decline in construction orders received.
The increase in contract liabilities in the fiscal year ended February 28, 2021 is mainly due to a drop in
usage of gift certificates relative to the amount of gift certificates issued resulting from lower sales during
the COVID-19 pandemic.
Regarding performance obligations satisfied or partially satisfied in prior periods, no amount wasrecognized in sales revenue in the fiscal year ended February 28, 2021.
(3) Transaction price allocated to the remaining performance obligations
With regard to transaction price allocated to the remaining performance obligations, the Group willrecognize revenue in accordance with progress toward completion of construction work, the actual use ofgift certificates and points, and performance of services from membership fees. The total amount oftransaction price allocated to the remaining performance obligations and the timing when revenue is
expected to be recognized are as follows:
As of February 29, 2020
Due within one year
Due after one year through two years
Due after two years
Total(Millions of yen)
As of February 28, 2021

30,7205,249
3,783

31,7704,175
5,184

39,753

41,13028. Other Operating Income
The breakdown of other operating income is as follows:
Fiscal year ended
February 29, 2020
Gain on sales of non-current assets
Subsidies for employment adjustment
Compensation income
Other
Total
Note:

(Millions of yen)
Fiscal year ended
February 28, 2021

2,832
–
3,649
2,181

0
2,574
5
3,131

8,663

5,711

The Company was eligible for subsidies for employment adjustment and other special measures due to the impact of
COVID-19.

- 182 -

29. Cost of Sales
The breakdown of cost of sales is as follows:
Fiscal year ended
February 29, 2020
Cost of goods sold
Personnel expense
Depreciation expense
Other
Total

(Millions of yen)
Fiscal year ended
February 28, 2021

230,093
16,01920,1037,450

143,158
12,713
19,737
9,101

273,667

184,711

30. Selling, General and Administrative Expense
The breakdown of selling, general and administrative expense is as follows:
Fiscal year ended
February 29, 2020
Personnel expense
Depreciation and amortization expense
Advertising expense
Rent expense
Operational costs
Other
Total

(Millions of yen)
Fiscal year ended
February 28, 2021

56,88030,601
11,7292,389
9,296
50,693

48,627
25,135
7,996
2,105
6,117
42,018

161,590132,001

31. Other Operating Expense
The breakdown of other operating expense is as follows:
Fiscal year ended
February 29, 2020
Loss on disposals of non-current assets
Impairment loss
Costs associated with temporary closures
Loss on business liquidation
Business structuring expenses
Revitalization plan expenses
Other
Total
Notes:

1.

2.

(Millions of yen)
Fiscal year ended
February 28, 2021

3,576
1,745
–
870
2,173
1,075
4,298

1,260
13,196
11,473
4,663
–
–
1,748

13,74032,343

Costs associated with temporary closures for the fiscal year ended February 28, 2021 are fixed costs (depreciation,
personnel expense, etc.) that arose, primarily at Daimaru Matsuzakaya Department Stores Co. Ltd. and PARCO
Co., Ltd., during the temporary closures of stores that closed temporarily due to the impact of the spread of
COVID-19.
The main factors resulting in the loss on business liquidation for the fiscal year ended February 28, 2021 are¥1,843 million in costs related to store closures (removal costs, sales reparations, etc.) and ¥925 million in
impairment losses that were recorded following the decision to cease operations at PARCO Co., Ltd.’s Tsudanuma
PARCO in the PARCO Business.

- 183 -

32. Finance Income and Finance Costs
The breakdown of finance income is as follows:(Millions of yen)
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Interest income
Financial assets measured at amortized cost

816

759

275

203

1,091

962

Dividend income
Equity financial assets measured at fair value
through other comprehensive income
Total

The breakdown of finance costs is as follows:(Millions of yen)
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Interest expense
Financial liabilities measured at amortized
cost
Interest expenses related to lease liabilities
Other
Total

- 184 -

859

1,135

4,793

4,445

209

505

5,862

6,086

33. Other Comprehensive Income
The amount arising during the period and reclassification adjustments to profit or loss for each item of othercomprehensive income and tax effect are as follows:(Millions of yen)
Fiscal year ended

Fiscal year ended

February 29, 2020

February 28, 2021

Financial assets measured at fair value through othercomprehensive income
Amount arising during the period(3,319)(2,564)

1,000

457

(2,318)(2,106)

Amount arising during the period
Tax effect

384
(127)

1,520
(412)

Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted for

256

1,107

(57)

(143)

19

49

(37)

(94)

(2,099)(1,093)Tax effectFinancial assets measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans

using equity method
Amount arising during the period
Tax effect
Share of other comprehensive income of entities accounted forusing equity method
Total items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss
Cash flow hedges
Amount arising during the period

019Reclassification adjustments
Before tax effect

–
0

–
19

Tax effectCash flow hedges

(0)
0

(6)
13

Amount arising during the period
Reclassification adjustments

24
–

(26)
–

Before tax effectTax effect

24
–

(26)
(0)

Exchange differences on translation of foreign operations

24

(26)

using equity method
Amount arising during the period

23Reclassification adjustments
Before tax effect

–
2

–
3

Tax effect
Share of other comprehensive income of entities accounted for

(0)

(0)

1

3

26

(9)

(2,073)(1,102)

Exchange differences on translation of foreign operations

Share of other comprehensive income of entities accounted forusing equity method
Total items that may be reclassified to profit or loss
Total other comprehensive income- 185 -

34. Earnings Per Share
Fiscal year ended
February 29, 2020
Profit (loss) attributable to owners of parent (Millionsof yen)Fiscal year ended
February 28, 2021
21,251(26,193)––

21,251(26,193)261,763,803

261,842,400

46,778–261,810,581

261,842,400

Basic earnings (loss) per share (Yen)

81.19(100.03)

Diluted earnings per share (Yen)

81.17

–

Adjustment to profit
Profit (loss) used to calculate diluted earnings per share(Millions of yen)
Average number of ordinary shares during the period(Shares)
Increase in the number of ordinary shares:
Officer remuneration BIP trust (Shares)
Average number of diluted ordinary shares during theperiod (Shares)

Notes:

1.

2.

The calculation of basic earnings (loss) per share and diluted earnings per share excludes the number of the Company’s
shares owned by the officer remuneration BIP trust from the average number of ordinary shares during the period
because such shares are treated as the Company’s treasury shares.
Diluted earnings per share for the fiscal year ended February 28, 2021 is not presented because there were no potential
shares that have dilutive effects.

35. Share-Based Payment(1) Share-based payment plan1) Details of share-based payment plan
The Group has adopted an officer remuneration BIP (Board Incentive Plan) trust (hereinafter the “BIP
Trust”) as a performance-linked share-based payment for officers of the Company and Daimaru
Matsuzakaya Department Stores Co. Ltd. to ensure steady execution and progress of the Mediumterm Business Plan. The BIP Trust, which is similar to performance share plans and restricted stockplans in the U.S. and Europe, is a system of granting the Company’s shares to officers (in certain
cases, the Company’s shares are converted into cash within the trust and cash in the amountequivalent to their conversion value is paid) in accordance with the officers’ rank and level ofachievement of the Medium-term Business Plan, etc. In addition, PARCO Co., Ltd. has introduced a
Share Distribution Trust as a share-based payment for Executive Officers.
2) Number of points granted during the period and weighted average fair value of the points
In the assessment of fair value, a calculation is made based on the market price of shares adjusted
after taking into account expected dividends. The number of points granted during the period andweighted average fair value of the points are as follows:
Fiscal year ended February 29, 2020
BIP Trust
Short-term PS

Medium- to long-term
PS

Share Distribution
Trust

RS

Number of points granted during theperiod84,733

128,585

32,64686,387Weighted average fair value (yen)

1,521

1,500

1,500

1,850

- 186 -

Fiscal year ended February 28, 2021
BIP Trust
Short-term PS
Number of points granted during theperiodWeighted average fair value (yen)Notes:

1.

2.
3.

Share Distribution

Medium- to long-term
PS

Trust

RS

37,560126,490

33,491

59,981

1,483

1,475

1,475

1,850

PS (Performance Share) is a share-based payment plan under which shares are granted when a predetermined
performance target for a certain period is achieved. The Company’s shares are granted to officers according to the levelof annual achievement in performance each year for short-term PS and according to the level of achievement of theMedium-term Business Plan (five years) after the completion of the Medium-term Business Plan for medium- to longterm PS.
RS (Restricted Stock) is a share-based payment plan under which shares that have restrictions on transfer for a certain
period are granted at the time of retirement in accordance with rank.
The Share Distribution Trust is a system of distributing shares at the time of retirement and paying the amount of cash
equivalent to their conversion value.

(2) Share-based payment expense
The amounts recognized as share-based payment expense, which were included in the consolidated
statement of income, were ¥553 million in the fiscal year ended February 29, 2020 and ¥(537) million in
the fiscal year ended February 28, 2021.
36. Financial Instruments(1) Capital management
The Group works to increase productivity and managerial efficiency as a group and conducts capitalmanagement with the aim of achieving sustained improvement in corporate value.
One of the major indicators monitored in the Group’s capital management is the D/E ratio, andmanagement uses this for monitoring and confirmation. Furthermore, the Group is not subject to any
material capital regulations.
D/E ratio is as follows:(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Interest-bearing debt

478,773

562,815

Equity attributable to owners of parent

387,188352,171

1.24

1.60

D/E ratio (%)(2) Financial risk management policy
In the course of its business activities, the Group is exposed to financial risks (credit risk, liquidity risk,
foreign currency risk, and interest rate risk), and engages in risk management to reduce these financial
risks.
The Group uses derivative transactions to avoid foreign currency fluctuation risk or interest rate
fluctuation risk and, in accordance with its policy, does not carry out any speculative transactions.
1) Credit risk management
Credit risk is the risk that a business partner will default on contractual obligations and cause theGroup to incur a financial loss.
To address this risk, each Group company carries out due date management and balance management
for each business partner and seeks early identification and mitigation of collectability concerns.
The Group’s receivables are from a number of business partners in a wide range of industries andregions.
The Group does not have credit risks overly concentrated in a single counterparty or a group to which- 187 -

the counterparty belongs.
The maximum exposure to credit risk on financial assets is the carrying amount after impairment
presented in consolidated financial statements. The Group does not hold any properties as collateral orother credit enhancements in regard to exposure to these credit risks.
The Group considers whether or not there has been a significant increase in credit risk from the dateof initial recognition, and establishes an allowance for credit losses. Specifically, when there is no
significant increase in credit risk since initial recognition, expected credit losses for 12 months aremeasured as allowance for credit losses.
On the other hand, when there is a significant increase in credit risk since initial recognition, lifetime
expected credit losses are measured as allowance for credit losses. Whether credit risk hassignificantly increased or not is determined based on changes in default risk. Regardless of the above,
for trade receivables, lease receivables, etc. without a significant financing component, allowance for
credit losses is measured at an amount equal to lifetime expected credit losses.
In the measurement of these expected credit losses, reasonable and supportable information that isavailable at the fiscal year end is used for past events, current situations and projection of future
economic conditions such as credit loss experience in past years, status of delinquent receivables andfinancial conditions of creditors. Expected credit losses on financial assets for which credit risk has
not increased significantly and trade receivables, etc. without a significant financing component are
set altogether as a group and collectively assessed based on historical credit losses because they havelargely homogeneous credit risk characteristics.
Expected credit losses on financial assets for which credit risk has increased significantly and creditimpaired financial assets are individually assessed, taking into account historical credit loss
experience, future estimated collectible amount and others.
If a debtor does not make a payment within 90 days after the due date, the situation is considered as
default.
When financial assets are assessed as fully or partially uncollectible and the Group determines, as aresult of credit research, that it is appropriate to write off the assets, the Group directly writes off thecarrying amount of the credit-impaired financial assets.

- 188 -(i)Changes in allowance for credit losses
The Group considers whether or not there has been a significant increase in credit risk from thedate of initial recognition, and establishes an allowance for credit losses.
Changes in allowance for credit losses are as follows:(Millions of yen)
Credit-impaired
financial assets(Lifetime
expected credit
losses)12-month
expected credit
lossesLifetime expectedcredit losses(Assessed
collectively)

Lifetime expectedcredit losses(Assessed
individually)

Balance as of March 1, 2019

151

64

2,167

914

Transfer to lifetime expected credit losses

(30)

–

74

(43)

Transfer to credit-impaired financial assets
Transfer to 12-month expected credit losses

(71)
0

–
–

(102)
(0)

173
(0)

Changes due to new arising and collectionof financial assets

113

2

940

295

Financial assets that were derecognized
during the period

–

(2)

–

(36)

Direct write-off
Changes in model/risk variables

(0)
–

–
–

(92)
–

(375)
–

Balance as of February 29, 2020

163

65

2,987

927

Transfer to lifetime expected credit losses
Transfer to credit-impaired financial assets

(25)
(86)

–
–

78
(147)

(52)
233

Transfer to 12-month expected credit losses
Changes due to new arising and collection

0

–

(0)

(0)

78

1

265

266

–

(5)

–

(1)

(0)

–

(98)

(379)

of financial assets
Financial assets that were derecognized
during the period
Direct write-off
Changes in model/risk variables

–

–

–

–

Balance as of February 28, 2021

131

61

3,085

994

(ii) The carrying amounts of financial assets by risk type (before deducting allowance for credit
losses) are as follows:
As of February 29, 2020

As of February 28, 2021

Millions of yen

Millions of yen

Financial assets measured at amortized cost, etc.
(12-month expected credit losses)
Trade and other receivables(Lifetime expected credit losses)
Financial assets whose credit risk has increased
significantly since initial recognition (Lifetime expectedcredit losses)
Credit-impaired financial assets(Lifetime expected credit losses)

133,240

121,407

80,63560,402

4,056

4,136

968

1,032

2) Liquidity risk management
Liquidity risk is the risk of failure to make payments on the due date when the Group is required tofulfill its payment obligations for financial liabilities due.
The Group manages liquidity risk with methods such as preparing monthly cash flow management
plans at all companies, and securing sufficient liquidity on hand through commitment line contracts
and overdraft contracts with its main financing banks.
- 189 -

The balance of financial liabilities (other than lease liabilities, etc.) by payment due date is as follows:(Millions of yen)
Carrying
amountContractual
amountDue within
one year

Due after
one yearthrough
two years

Trade and other payables

144,020

144,020

144,020

–

–

–

–

–

Current borrowings

94,40094,48894,488

–

–

–

–

–

Commercial papers

4,000

4,000

4,000

–

–

–

–

–

Non-current borrowings

80,11081,491

302

16,945

14,901

12,737

12,09024,513

Bonds

79,76681,317

10,226211

20,187

164

20,14430,384

Other financial liabilities

71,286

71,26230,203

3

10

19

16

41,009Forward exchange

–

–

–

–

–

–

–

–

Interest rate swaps

–

–

–

–

–

–

–

–

473,583

476,579

283,240

17,16035,09912,92032,25095,907

As of February 29, 2020

Due after
two years
throughthree years

Due after
three years
throughfour years

Due after
four years
throughfive years

Due after
five years

Non-derivative financial liabilities

Derivative financial liabilities

Total

Notes:

1.
2.

Current borrowings include the current portion of non-current borrowings.
Receivables and liabilities resulting from derivative transactions are presented on a net basis.
(Millions of yen)
Carrying
amountContractual
amountDue within
one year

Due after
one yearthrough
two years

Trade and other payables

121,937

121,937

121,937

–

–

–

–

–

Current borrowings

75,15075,33475,334

–

–

–

–

–

Commercial papers

70,00170,00070,000

–

–

–

–

–

Non-current borrowings

144,960

148,100

498

15,68830,012

12,844

26,76462,292

Bonds

69,81971,091

211

20,187

164

20,144124

30,260

Other financial liabilities

69,44969,44530,211

82

1,094

620

26

37,410Forward exchange

–

–

–

–

–

–

–

–

Interest rate swaps

–

–

–

–

–

–

–

–

551,317555,909298,194

35,95731,27133,60826,915

129,963

As of February 28, 2021

Due after
two years
throughthree years

Due after
three years
throughfour years

Due after
four years
throughfive years

Due after
five years

Non-derivative financial liabilities

Derivative financial liabilities

Total

Notes:

1.
2.

Current borrowings include the current portion of non-current borrowings.
Receivables and liabilities resulting from derivative transactions are presented on a net basis.

- 190 -

If funds are temporarily insufficient for the payment of trade payables, etc., the Group procures fundswith the following financing methods. Fund procurement methods and the status of procurement ineach fiscal year were as follows:(Millions of yen)
As of February 29, 2020

As of February 28, 2021

Commitment line
Used

–

–

25,200300,000

25,200300,000

Used

68,00040,000

Unused150,730

141,030

218,730

181,030

Used

4,000

70,000

Unused66,00030,00070,000100,000

UnusedTotal
Overdraft limit

Total
Commercial paper issuance limit

Total3) Foreign currency risk management
The Group conducts transactions denominated in foreign currencies and is exposed to the risk offluctuations in exchange rates of foreign currencies against the Japanese yen, but this has immaterial
effect on profit before tax.
4) Interest rate risk management
The Group is exposed to various interest rate fluctuation risks in the course of its business activities.
Particularly, fluctuations in interest rates greatly affect borrowing costs.
To mitigate such interest rate fluctuation risks, the Group hedges the risks by conducting interest rate
swap transactions and other means.
(3) Fair value of financial instruments
1) Calculation method of fair value(Cash and cash equivalents, trade and other receivables, other financial assets (current), trade andother payables, and other financial liabilities (current))
The carrying amount is used as the fair value of these instruments, given that the fair value is almost
the same as the carrying amount, as they are mostly settled in a short period of time.
Derivatives are measured as financial assets or liabilities measured at fair value through profit or loss
based on prices presented by the counterparty financial institutions. Carrying amount and fair value ofmajor financial instruments by type are as follows.
(Other financial assets (non-current), and other financial liabilities (non-current))
The fair value of listed shares is measured based on market prices at the last date of a fiscal year. The
fair value of unlisted shares is measured by discounted future cash flows, valuation model based on
profit and net assets, comparable company analysis method or the like.
Other financial assets or other financial liabilities measured at amortized cost mainly consist of leaseand guarantee deposits paid or lease and guarantee deposits received, and their fair value is measured
at present value calculated by discounting future cash flows at rates such as the current market interest
rate.
- 191 -

(Bonds and borrowings)
Bonds and borrowings are measured by present value obtained by discounting future cash flows at
interest rates that would be charged for a new similar borrowing.
2) Financial instruments measured at amortized cost
The carrying amounts and fair values of financial instruments measured at amortized cost are as
follows.
Financial instruments measured at fair value and financial instruments whose carrying amount closely
approximates fair value are not included in the following table.
As of February 29, 2020

As of February 28, 2021

Carrying amount

Fair value

Carrying amount

Fair value

Millions of yen

Millions of yen

Millions of yen

Millions of yen

65,902

70,17563,893

66,96765,902

70,17563,893

66,967

Borrowings

174,510

174,994

220,110220,018

Bonds

79,76680,426

69,81969,387

Other financial liabilities (non-current)

41,087

41,244

39,23739,189295,364

296,665

329,166

328,595

Financial assets:
Other financial assets (non-current)
Total
Financial liabilities:

Total3) Fair value measurement
In regard to financial instruments measured at fair value, the fair value amounts measured are
categorized into three levels, from Level 1 to Level 3, in accordance with the observability andmateriality of inputs used in measurement.
Level 1:Market prices for identical assets or liabilities in active markets

Level 2:

Fair value, other than Level 1, that is determined by directly or indirectly using anobservable price

Level 3:

Fair value that is determined using a valuation technique including unobservable inputs

The fair value of financial instruments measured at fair value is as follows.
Any transfer between levels in the fair value hierarchy is recognized on each reporting date. In thefiscal year ended February 29, 2020, there were transfers from Level 3 to Level 1 due to the listing ofshares held. There were no other transfers. In the fiscal year ended February 28, 2021, there was notransfer between Level 1, Level 2 and Level 3.

- 192 -

As of February 29, 2020
Financial assets measured at fair value on a recurring basis
Level 1

Level 2

Level 3

Total

Millions ofyenMillions ofyenMillions ofyenMillions of
yen

–

8

–

8

4,005

–

21,471

25,4774,005

821,471

25,485

–

–

–

–

–

–

–

–

Assets:Financial assets measured at fair value through profit orloss
Derivative financial assets
Financial assets measured at fair value through othercomprehensive income
Other financial assets (non-current)
Total
Liabilities:
Financial liabilities measured at fair value through profit
or loss
Derivative financial liabilities
Total

As of February 28, 2021
Financial assets measured at fair value on a recurring basis
Level 1

Level 2

Level 3

Total

Millions ofyenMillions ofyenMillions ofyenMillions of
yen

–

27

–

27

4,427

–

18,54922,9764,427

27

18,54923,004

–

–

–

–

–

–

–

–

Assets:Financial assets measured at fair value through profit orloss
Derivative financial assets
Financial assets measured at fair value through othercomprehensive income
Other financial assets (non-current)
Total
Liabilities:
Financial liabilities measured at fair value through profit
or loss
Derivative financial liabilities
Total- 193 -

4) Changes, from the beginning to the end of the period, in financial instruments whose fair value
measurement is categorized within Level 3
Changes, from the beginning to the end of the period, in financial instruments whose fair value
measurement is categorized within Level 3 are as follows:
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Millions of yen

Millions of yen

Balance at beginning of period

23,62021,471Other comprehensive income (Note)(2,198)(3,022)

Purchase

100

100

Sale

(37)

(0)

Other

(12)

–

21,471

18,549Balance at end of period
Note:

Gains or losses included in other comprehensive income relate to financial assets measured at fair value through othercomprehensive income as of the reporting date. These gains or losses are included in “financial assets measured at fair value
through other comprehensive income” in the consolidated statement of comprehensive income.

Financial instruments classified as Level 3 principally consist of unlisted shares. Fair value of unlisted
shares is measured by the Group’s department in charge using the latest figures available for eachquarter in accordance with the Group’s accounting policies and others, and reported together with thebasis for changes in fair value to superiors and to management where necessary.
Illiquidity discount that is a significant unobservable input used for the measurement of fair value
classified as Level 3 in the fair value hierarchy is 30% in the calculation.
A significant increase (decrease) in this input will cause a significant decrease (increase) in the fairvalue.
(4) Fair value hierarchy for assets and liabilities that are not measured at fair value but of which fair value has
been disclosed
Fair values of financial instruments measured at amortized cost are as follows.
Financial instruments measured at fair value and financial instruments whose carrying amount closely
approximates fair value are not included in the following tables.
(Millions of yen)
As of February 29, 2020

Level 1

Level 2

Level 3

Total

Assets:Financial assets measured at amortized cost
Other financial assets (non-current)

–

8,985

61,19070,175–

8,985

61,19070,175

Borrowings–

174,994–

174,994

Bonds–

80,426–80,426

Other financial liabilities (non-current)––

41,244

41,244–

255,420

41,244

296,665

Total
Liabilities:
Financial liabilities measured at amortized cost

Total

- 194 -

(Millions of yen)
As of February 28, 2021

Level 1

Level 2

Level 3

Total

Assets:Financial assets measured at amortized cost
Other financial assets (non-current)

–

7,931

59,036

66,967–

7,931

59,036

66,967

Borrowings–

220,018–

220,018

Bonds–

69,387–

69,387

Other financial liabilities (non-current)––

39,18939,189–289,406

39,189328,595

Total
Liabilities:
Financial liabilities measured at amortized cost

Total(5) Financial assets measured at fair value through other comprehensive income
The Group designates investments in equity instruments held in order to maintain and strengthen business
relationships as financial assets measured at fair value through other comprehensive income in the light of
the holding purpose.
1) Fair value of securities
In regard to investments in equity instruments designated as financial assets measured at fair value
through other comprehensive income, the fair value of the main securities is as follows:
As of February 29, 2020
(Millions of yen)AmountSecurities
Asahi Properties Inc.

6,490

Takenaka Corporation

5,471

Chunichi Shimbun Co., Ltd.

995

Toho Gas Co., Ltd.

821

Nagoya Dome Company, Limited

652

Nagashima Resort Co., Ltd.

652

MBS MEDIA HOLDINGS, INC.

650

Misonoza Theatrical Corporation

580

OSAKA GAS CO., LTD.

541

TOKAI TELEVISION BROADCASTING Co., Ltd.

517

- 195 -

As of February 28, 2021
(Millions of yen)AmountSecurities
Asahi Properties Inc.

4,875

Takenaka Corporation

4,243

Toho Gas Co., Ltd.

1,395

Chunichi Shimbun Co., Ltd.

986

Nagashima Resort Co., Ltd.

697

Nagoya Dome Company, Limited

682

MBS MEDIA HOLDINGS, INC.

638

OSAKA GAS CO., LTD.

591

TOKAI TELEVISION BROADCASTING Co., Ltd.

536

Misonoza Theatrical Corporation

5042) Dividend income(Millions of yen)
Fiscal year ended
February 29, 2020

Fiscal year ended
February 28, 2021

Investments derecognized during theperiod57

2

Investments held at end of period

217

200

275

203

Total

3) Financial assets measured at fair value through other comprehensive income derecognized during theperiodThe Group sells financial assets measured at fair value through other comprehensive income for the
purpose of periodic portfolio revisions, management of risk assets and others. The fair value on thedate of sale thereof and cumulative gain or loss on the sale (before tax) are as follows:(Millions of yen)
Fiscal year ended
February 28, 2021

Fiscal year ended
February 29, 2020
Fair value on the date of sale

3,479

77

Cumulative gain (loss) on sale

1,438

1

4) Transfer to retained earnings
The Group transfers cumulative gain or loss caused by fluctuations in the fair value of financial assets
measured at fair value through other comprehensive income to retained earnings when the asset isderecognized. In the fiscal years ended February 29, 2020 and February 28, 2021, cumulative gain orloss (after tax) in other comprehensive income transferred to retained earnings were ¥970 million and¥(53) million, respectively.
(6) Derivatives and hedges
1) Cash flow hedges
Cash flow hedges are hedges to avoid the risk of fluctuations in future cash flows. The Company
utilizes forward exchange contracts to hedge fluctuations in cash flows for forecast transactions, andinterest rate swaps and currency swaps to hedge fluctuations in cash flows related to floating-rateborrowings. Changes in fair value of derivative transactions designated as cash flow hedges arerecognized as other comprehensive income, included in other components of equity, and transferred to
profit (loss) when the hedged item is recognized as profit (loss).

- 196 -

The details of hedging instruments designated as cash flow hedges are as follows:
As of February 29, 2020

Foreign currency
risk
Forward exchange
contracts

Line item in the
consolidated statement offinancial position

Changes in fair value used
to calculate the ineffective
portion of the hedge

ContractvalueWith term
exceeding
one year

AssetsLiabilities

Millionsof yenMillions ofyenMillions ofyenMillions of
yen

2,394

–

8

–

Other financial assets

–

–

–

–

–

Other financial
liabilities–

Carrying amountMillions of yen

Interest rate risk
Interest rate swaps

As of February 28, 2021

Foreign currency
risk
Forward exchange
contracts

With term
exceeding
one year

AssetsLiabilities

Millionsof yenMillions ofyenMillions ofyenMillions of
yen

2,163

–

27

–

Other financial assets

–

–

–

–

–

Other financial
liabilities–

Carrying amountLine item in the
consolidated statement offinancial position

Changes in fair value used
to calculate the ineffective
portion of the hedge

Contract
value

Millions of yen

Interest rate risk
Interest rate swaps(7) Transfer of financial assets
The Group securitizes certain trade receivables through the transfer of shares. However, some of suchsecuritized receivables impose an obligation to pay on the Group retrospectively if the debtor does notmake a payment. Since these securitized receivables do not meet requirements for derecognition offinancial assets, they are not derecognized.
As of February 29, 2020 and February 28, 2021, such transferred assets were recorded in “trade and otherreceivables” and the amount of money received arising at the time when the assets were transferred as
related liabilities was recorded in “bonds and borrowings,” at ¥3,000 million in the fiscal year ended
February 29, 2020 and ¥18,000 million in the fiscal year ended February 28, 2021.

- 197 -

37. Subsidiaries
Status of subsidiaries is as follows:
Equity ratio (%)
Name

Location

Reportable segment

As ofFebruary 29,

As ofFebruary 28,

2020

2021

Department Store
Daimaru Matsuzakaya Department Stores Co. Ltd.

Japan

Business
Real Estate Business

The Hakata Daimaru, Inc.

Japan

Kochi Daimaru Co., Ltd.

Japan

PARCO Co., Ltd.

Japan

PARCO (SINGAPORE) PTE LTD

Singapore

PARCO Business

100.0

100.0

NEUVE A Co., Ltd.

Japan

PARCO Business

100.0

100.0

Department StoreBusiness
Department StoreBusiness
PARCO Business
Real Estate Business

100.0

100.0

69.9

69.9

100.0

100.0

100.0

100.0

PARCO SPACE SYSTEMS Co., Ltd.

Japan

PARCO Business

100.0

100.0

PARCO Digital Marketing Co., Ltd.

Japan

PARCO Business

100.0

100.0

JAPAN RETAIL ADVISORS Co., Ltd.

Japan

PARCO Business

100.0

100.0

JFR Card Co., Ltd.

Japan

Credit FinanceBusiness

100.0

100.0

Daimaru Kogyo, Ltd.

Japan

Other (Wholesale)

100.0

100.0

Daimaru Kogyo International Trading (Shanghai)Co., Ltd.

China

Other (Wholesale)

100.0

100.0

Daimaru Kogyo (Thailand) Co., Ltd.

Thailand

Other (Wholesale)

99.9

99.9

Taiwan Daimaru Kogyo, Ltd

TaiwanOther (Wholesale)

100.0

100.0

100.0

100.0

100.0

100.0

test and quality
control)

100.0

100.0

Other (Parking)

50.2

50.2

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Other (Design and
J. Front Design & Construction Co., Ltd.

Japan

Dimples’ Co., Ltd.

Japan

construction
contracting)
Other (Staffing
service)
Other (Merchandise

Consumer Product End-Use Research Institute Co.,
Ltd.

Japan

Angel Park Co., Ltd.

Japan

Other
(Commissioned
JFR Service Co. Ltd.

Japan

back-officeservice/parking andleasing)

JFR Information Center Co., Ltd.

Daimaru Matsuzakaya Sales Associates Co. Ltd.

Japan

Japan

Other (Information
service)
Other(Commissioned sales
and store operations)

Daimaru Matsuzakaya Tomonokai Co., Ltd.

Japan

Other (Specified
prepaid transaction
service)- 198 -

38. Related Parties(1) Transactions with related parties
Notes related to transactions with related parties (excluding those eliminated in the consolidated financial
statements) have been omitted because there were no significant transactions, etc.
(2) Remuneration for key management personnel
Description of the remuneration for Directors and other key management personnel of the Group is asfollows:(Millions of yen)
Fiscal year ended
February 29, 2020
Officer remuneration

Fiscal year ended
February 28, 2021
1,939

1,685

Retirement benefit

1

1

Share-based payment

553

(537)

2,494

1,149

Total

39. Commitments
Commitments related to expenditures after the reporting date are as follows:(Millions of yen)
As of February 29, 2020
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of investment property
Total

As of February 28, 2021
3,522

1,987

405

3

3,578

–

7,506

1,990

40. Contingent Liabilities
Amount of guarantee obligations
The Group has provided guarantee for transactions, etc. between its employees and financial institutions asfollows:(Millions of yen)
As of February 29, 2020
Debt guarantees for employees
Total

As of February 28, 2021
3

2

3

2

41. Subsequent Events(Resurgence of COVID-19)
Due to the resurgence of COVID-19, the Government of Japan declared a state of emergency on April 23,
2021 for the four prefectures of Tokyo, Kyoto, Osaka and Hyogo. In light of the state of emergency
declaration and requests from the prefectural governors, the Group adopted measures starting on April 25,
2021, including temporarily closing stores in the affected areas, excluding some sales areas, and reducing thescope of operations and operating hours. Due to such circumstances, there will be a considerable adverse
effect on the Group’s business results in the following fiscal year. However, it is difficult to reasonably
calculate the extent of this effect at present.
- 199 -(Issuance of bonds)
Based on a resolution approved at the Board of Directors meeting held on February 24, 2021, the Company
decided on May 19, 2021 to issue the 9th and 10th series of bonds and issued the bonds on May 26, 2021.
An overview is as follows.
9th series of unsecured bonds of J. FRONT RETAILING Co., Ltd. (with inter-bond pari passu clause;sustainability bonds)
1. Total issue amount:¥15,000 million

2. Issue price:¥100 per bond with face value of ¥100

3. Interest rate:

0.170% per year

4. Maturity date:

May 26, 2026

5. Payment date (Issue date):

May 26, 2021

6. Use of funds:

To be used to allocate funds for loans to the Company’s subsidiaries,
which will use the funds for expenditures necessary for construction, etc.
at the main building of the Daimaru Shinsaibashi store and at Shibuya
PARCO, purchasing electricity generated from renewable energy sources,
switching to LED lighting, purchasing electric vehicles for Company use,leasing the former foreign settlement in Kobe, and initiatives forpromoting active participation of women

10th series of unsecured bonds of J. FRONT RETAILING Co., Ltd. (with inter-bond pari passu clause)
1. Total issue amount:¥15,000 million

2. Issue price:¥100 per bond with face value of ¥100

3. Interest rate:

0.470% per year

4. Maturity date:

May 26, 2028

5. Payment date (Issue date):

May 26, 2021

6. Use of funds:

To be used as part of the funds for redemption of commercial papers

42. Approval of Consolidated Financial Statements
These consolidated financial statements were approved by the President and Representative Executive Officer
Tatsuya Yoshimoto on May 28, 2021.

- 200 -

(2) Other
Quarterly financial information, etc. for the current fiscal year
(Cumulative)

First three months

First six months

First nine months

Current fiscal year

Sales revenue (Millions of yen)

63,459147,471

230,699

319,079

Loss before tax (Millions of yen)

(28,492)(22,760)(21,593)(28,672)

Loss attributable to owners ofparent (Millions of yen)

(20,334)(16,311)(15,632)(26,193)

Basic loss per share (Yen)(77.66)(62.30)(59.70)(100.03)(Quarterly)
Basic earnings (loss) per share(Yen)First quarter

Second quarter(77.66)15.36- 201 -

Third quarter
2.59

Fourth quarter(40.33)

2. Non-consolidated Financial Statements, etc.
(1) Non-consolidated Financial Statements
1) Non-consolidated Balance Sheet(Millions of yen)
As of February 29, 2020

As of February 28, 2021

14,327

117,810

56,24526,2446,378(180)
76,7722,050(340)
145,764

104
24
129

90
21
111

505
505

205
205

1,229
371,288

1,159
377,358

81,175151,000

508(500)
453,701
454,335

636(500)
529,654529,972

233
233
531,341180
180675,917

AssetsCurrent assets
Cash and deposits
Short-term loans receivable from subsidiaries andassociates
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Other
Total property, plant and equipment
Intangible assets
SoftwareTotal intangible assets
Investments and other assets
Investment securities
Shares of subsidiaries and associates
Long-term loans receivable from subsidiaries
and associates
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Deferred assets
Bond issuance costs
Total deferred assets
Total assets- 202 -

(Millions of yen)
As of February 29, 2020

As of February 28, 2021

82,9904,000
10,000546
135
16456,92570,001
–
626
135
106

106

23

136
490
98,569–1,883
129,701

70,00031,735674

70,000144,960
106

10

–

1
1,480
103,901
202,470

3
1,794
216,864
346,565

31,974

31,974

9,474
239,601
249,075

9,474
239,601
249,075

62,03862,038(14,210)
328,878

62,39862,398(14,066)
329,382

(7)

(30)

(7)
328,871
531,341(30)
329,351
675,917

Liabilities
Current liabilities
Short-term borrowings
Commercial papers
Current portion of bonds
Accrued expenses
Income taxes payable
Provision for bonuses
Provision for bonuses for directors (and otherofficers)
Provision for officer remuneration BIP trust
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term borrowings
Provision for officer remuneration BIP trust
Provision for loss on business of subsidiaries andassociates
Deferred tax liabilities
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surpluses
Retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings
Treasury shares
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets- 203 -

2)

Non-consolidated Statement of Income(Millions of yen)
Fiscal year ended
February 29, 2020

Operating revenue
Dividend income
Consulting fee income
Total operating revenue
General and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Interest on bonds
Amortization of bond issuance costs
Provision of allowance for doubtful accounts
Commitment fee
OtherTotal non-operating expenses
Ordinary profit
Extraordinary losses
Loss on valuation of shares of subsidiaries andassociates
Loss on sales of shares of subsidiaries and associates
Impairment loss
Provision for loss on business of subsidiaries andassociates
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Profit*1*1*1, *2

*1
*1

*1

*3

*4

*7

- 204 -

Fiscal year ended
February 28, 2021

29,0405,076
34,116
5,228
28,888

*1

468
179
28
676

*1

231
224
54
680
46
165
1,402
28,163

*1

199

*4

763

–
–

*5

241
343

*1

*2

*1

*3

*6

9,210
4,602
13,812
4,264
9,547
677
158
90
926
644
223
52
200
415
88
1,624
8,849

10

–

210
27,9526(1)
4
27,948

1,348
7,500
15
(1)
13
7,487

3)

Non-consolidated Statement of Changes in Equity

Fiscal year ended February 29, 2020
(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings

Legal
capitalsurplus

OthercapitalsurplusTotal
capitalsurplusOtherretainedearnings
Retainedearnings
brought
forward9,474

239,601

249,075

43,593

43,593

Dividends ofsurplus(9,503)(9,503)(9,503)

Profit27,94827,94827,948SharecapitalBalance at beginning of
period31,974

Total
retainedearnings

TreasurysharesTotalshareholders’equity(14,326)

310,317

Changes during period

Purchase oftreasury shares
Disposal of treasury
sharesNet changes in
items other thanshareholders’ equity
Total changes during
periodBalance at end of
periodBalance at beginning of
period

(0)

(0)

(7)

123

123

–

–

(0)

(0)

18,44518,445

115

18,56031,974

9,474

239,601

249,075

62,03862,038(14,210)

328,878

Valuation and translation
adjustments
Valuation
Total
difference
valuationonandavailabletranslation
for-saleadjustments
securities

Total net
assets12

12

310,329

Changes during period
Dividends ofsurplus(9,503)

Profit27,948Purchase oftreasury shares
Disposal of treasury
sharesNet changes in
items other thanshareholders’ equity
Total changes during
periodBalance at end of
period

(7)

(7)
123
(19)

(19)

(19)

(19)

(19)

18,541(7)(7)

328,871- 205 -

Fiscal year ended February 28, 2021
(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings

Legal
capitalsurplus

OthercapitalsurplusTotal
capitalsurplusOtherretainedearnings
Retainedearnings
brought
forward9,474

239,601

249,075

62,03862,038Dividends ofsurplus(7,127)(7,127)(7,127)

Profit

7,487

7,487

7,487

Share
capitalBalance at beginning of
period31,974

Total
retainedearnings

TreasurysharesTotalshareholders’equity(14,210)

328,878

Changes during period

Purchase oftreasury shares
Disposal of treasury
sharesNet changes in
items other thanshareholders’ equity
Total changes during
periodBalance at end of
periodBalance at beginning of
period

(0)

(0)

148

148

–

(0)

(0)

360

360

144

504

31,974

9,474

239,601

249,075

62,39862,398(14,066)

329,382

Valuation and translation
adjustments
Valuation
Total
difference
valuationonandavailabletranslation
for-saleadjustments
securities

Total net
assets(7)(7)

328,871

Dividends ofsurplus(7,127)

Profit7,487

Total changes during
periodBalance at end of
period(4)–

Changes during period

Purchase oftreasury shares
Disposal of treasury
sharesNet changes in
items other thanshareholders’ equity

(4)

(4)
148
(23)

(23)

(23)

(23)

(23)

480

(30)

(30)

329,351- 206 -

Notes to Non-consolidated Financial Statements(Notes on premise of going concern)
No items to report.
(Significant accounting policies)
1. Basis and method of valuation of assets(1) Shares of subsidiaries and associates
Stated at cost using the moving-average method(2) Available-for-sale securities
Securities with available fair market values
Stated at fair value based on the market prices at the fiscal year-end (Valuation differences are included in
net assets; cost of securities sold is determined by the moving-average method)
Securities without available fair market values
Stated at cost using the moving-average method
2. Basis and method of valuation of derivatives
Derivatives
Stated at fair value
3. Basis and method of valuation of inventories
Supplies
Stated at cost using the FIFO method (the book value is written down based on the decreased profitability)
4. Depreciation method of non-current assets(1) Property, plant and equipment (excluding leased assets)
Straight-line method(2) Intangible assets (excluding leased assets)
Straight-line method
Internal use software is amortized using the straight-line method over the internally expected useful life (5years).
(3) Leased assets
Leased assets in finance leases that do not transfer ownership are depreciated using the straight-line
method with zero residual value assuming the lease periods as useful lives.
5. Accounting method for deferred assets
Bond issuance costs
Amortized using the straight-line method over the period until redemption
6. Accounting policy for provisions(1) Allowance for doubtful accounts
To prepare for losses from bad debt, an estimated uncollectible amount is provided.
(2) Provision for bonuses
To prepare for the payment of bonuses to employees, the amount expected to be paid is provided.

- 207 -

(3) Provision for bonuses for directors (and other officers)
To prepare for the payment of bonuses to corporate officers, the amount expected to be paid is provided.
(4) Provision for officer remuneration BIP trust
To prepare for the granting of the Company’s shares through an officer remuneration BIP trust, theamount equivalent to the value of shares in proportion to the number of points awarded to officers inaccordance with the Stock Benefit Rules is provided.
7. Hedge accounting method(1) Hedge accounting method
Exceptional treatment is applied to interest rate swaps that satisfy the requirements for exceptional
treatment.
(2) Hedging instruments and hedged items(i) Hedging instruments
Interest rate swaps(ii) Hedged items
Borrowings and interest expenses on borrowings(3) Hedging policy
Based on the risk management policy, hedging is undertaken to hedge interest rate fluctuation risk.
(4) Method for assessing the hedge effectivenessAt the end of each fiscal year, hedge effectiveness with respect to the hedged items and hedging
instruments is assessed for each hedging transaction. This annual assessment excludes any transaction
where important terms and conditions such as principal, interest rate, and duration are identical between
the assets or liabilities of hedged items and hedging instruments.
8. Accounting treatment for consumption taxes
Consumption tax and local consumption tax are accounted for under the tax exclusion method.
Of consumption tax on assets that are not qualified for tax deductions, deferred consumption taxes stipulated
under tax law are recorded in long-term prepaid expenses and amortized on a straight-line basis during a fiveyear period.
(Changes in presentation)(Notes to non-consolidated statement of income)“Commitment fee,” which was included in “other” in “non-operating expenses” in the previous fiscal year,
has been separately presented in the current fiscal year as its quantitative materiality increased. The nonconsolidated financial statements of the previous fiscal year have been reclassified to reflect this change inpresentation.
As a result, ¥212 million presented in “other” in “non-operating expenses” in the non-consolidated
statement of income for the previous fiscal year has been restated as ¥46 million for “commitment fee”
and ¥165 million for “other.”- 208 -

(Notes to non-consolidated statement of income)*1. Transactions with subsidiaries and associates(Millions of yen)
Fiscal year ended
February 29, 2020
Operating transactions
Operating revenue
General and administrative expenses
Non-operating transactions

Fiscal year ended
February 28, 2021

34,116556
650

13,812591
833*2. Major components of general and administrative expenses(Millions of yen)
Fiscal year ended
February 29, 2020
Officer remuneration
Employees’ salaries
Provision for bonuses
Provision for bonuses for directors (and other officers)
Retirement benefit expenses
Welfare expenses
Taxes and dues
Depreciation
Rent expenses
Miscellaneous expenses

Fiscal year ended
February 28, 2021

602
934
164
106
66
265
284
93
336
1,338

156
871
106
23
63
225
334
103
317
1,182

*3. Provision of allowance for doubtful accounts
Fiscal year ended February 29, 2020
Loans to the subsidiary and associate JFR Kodomo Mirai Co., Ltd. were recognized as provision of allowance for
doubtful accounts.
Fiscal year ended February 28, 2021
Loans to the subsidiary and associate JFR Kodomo Mirai Co., Ltd. were recognized as provision of allowance for
doubtful accounts.
*4. Loss on valuation of shares of subsidiaries and associates
Fiscal year ended February 29, 2020
Loss on valuation was recognized for shares of the subsidiary and associate JFR Kodomo Mirai Co., Ltd.
Fiscal year ended February 28, 2021
Loss on valuation was recognized for shares of the subsidiary and associate J. Front Foods Co., Ltd.
*5 Loss on sales of shares of subsidiaries and associates
Fiscal year ended February 28, 2021
Loss on sale was recognized in association with the sale of shares in the subsidiary and associate J. Front Foods
Co., Ltd.
*6 Impairment loss
Fiscal year ended February 28, 2021
Impairment losses pertaining to software were recognized.

- 209 -

*7 Provision for loss on business of subsidiaries and associates
Fiscal year ended February 29, 2020
The estimated amount of loss to be borne by the Company is recognized giving consideration of the financial
position of the subsidiary and associate JFR Kodomo Mirai Co., Ltd.
(Notes on securities)
Shares of subsidiaries and associates
As of February 29, 2020
(Millions of yen)
Category

Carrying amount

Fair value

Difference

Shares of subsidiaries

132,734

180,31447,579

Total

132,734

180,31447,579

Note:

Shares of subsidiaries and associates whose fair values are deemed to be extremely difficult to determine(Millions of yen)
Category

Carrying amount

Shares of subsidiaries
Shares of associates

228,406
10,147

These items are not included in “Shares of subsidiaries” in the table above, because they have no market prices and theirfair values are deemed to be extremely difficult to determine.

As of February 28, 2021
(Millions of yen)
Category

Carrying amount

Fair value

Difference

Shares of subsidiaries

–

–

–

Total

–

–

–

Note:

Shares of subsidiaries and associates whose fair values are deemed to be extremely difficult to determine(Millions of yen)
Category
Shares of subsidiaries
Shares of associates

Carrying amount
367,211
10,147- 210 -

(Notes on tax effect accounting)
1. The breakdown of deferred tax assets and liabilities by major cause(Millions of yen)
As of February 29, 2020

As of February 28, 2021

50
7
39
1,769
208
61
120
–
69

32
5
41
2,250
257
61
32
105
65

2,325
(2,325)–2,848(2,848)
–

(4)
3

(3)
–

Total deferred tax liabilities

(1)

(3)

Net amount of deferred tax assets

(1)

(3)

Deferred tax assets
Provision for bonuses
Accrued insurance expenses
Accrued enterprise tax
Tax loss carryforwards
Allowance for doubtful accounts for subsidiaries and associates
Loss on valuation of shares of subsidiaries and associates
Provision for officer remuneration BIP trust
Loss on impairment of non-current assets
Other
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Asset retirement obligations
Valuation difference on available-for-sale securities

2. Reconciliation of significant difference between effective statutory tax rate and effective income tax rate after
application of tax effect accounting(Millions of yen)
As of February 29, 2020
Effective statutory tax rate(%)
(Adjustments)
Permanent non-taxable income for tax purposes (e.g. dividend
income)Permanent non-deductible expenses for tax purposes (e.g.
entertainment expenses)
Per capita inhabitant tax
Valuation allowance
Other
Effective income tax rate after application of tax effect accounting

30.6(31.9)
0.2

As of February 28, 2021
30.6
(37.7)
0.0

0.0
2.4
(1.2)

0.0
6.6
0.6

0.0

0.0

(Notes on business combinations)
No items to report.
(Significant subsequent events)(Resurgence of COVID-19)
This has been omitted as the same content has been described in “1. Consolidated Financial Statements,
etc., Notes to Consolidated Financial Statements, 41. Subsequent Events.” There may be a considerable
adverse effect on the Company’s business results in the coming fiscal year. However, it is difficult toreasonably calculate the extent of this effect at present.
(Issuance of bonds)
Based on the resolution at the Board of Directors meeting held on February 24, 2021, the Company
decided to issue ninth and tenth series bonds on May 19, 2021, and carried out the issuance on May 26,
2021. The overview of this issuance is as described in “1. Consolidated Financial Statements, etc., Notes toConsolidated Financial Statements, 41. Subsequent Events.”- 211 -

(iv) Annexed detailed schedules[Annexed detailed schedule of property, plant and equipment, etc.](Millions of yen)
Category

Balance at
beginning of
periodIncrease during
the period

Buildings andstructures

104

–

–

13

90

44

Other

24

1

–

5

21

16

129

1

–

19

111

61

505

127

64

205

–

505

127

64

205

–

Type of assets

Property, plantand equipment

Total
SoftwareDecrease during
Amortization Balance at end of
the period
during the period
period362(343)

Intangible assets
Total

362
(343)

Accumulated
depreciation

Note: The figures in the parentheses in “Decrease during the period” represent the amount of impairment losses
recorded, and are included in the figures immediately above.
[Annexed detailed schedule of provisions](Millions of yen)

Category

Balance at
beginning of
periodAllowance for doubtful accounts

680

200

40

840

Provision for bonuses

164

106

164

106

Provision for bonuses for directors (and otherofficers)

106

23

106

23

Provision for officer remuneration BIP trust

810

288

992

106

Provision for loss on business of subsidiaries andassociates

10

–

10

–

Increase during
the period

Decrease during
the period(2) Components of major assets and liabilities
The information has been omitted as the consolidated financial statements are prepared.
(3) Other
No items to report.
VI. Outline of Share-Related Administration of Reporting Company
Fiscal year

From March 1 to the last day of February

Annual Shareholders Meeting

May

Record date

Last day of February

Record dates for dividends of surplus

Last day of February
August 31

Number of shares per share unit

100 shares

Purchase of shares less than one unit
Office for handling business

Shareholder register administrator

Forwarding officeHandling charge for purchase(Special account)
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation
Stock Transfer Agency(Special account)
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation–
No charge- 212 -

Balance at end of
periodMethod of public noticeSpecial benefits for shareholders

The public notices of the Company shall be given by electronic means. Provided,
however, in case of unavoidable circumstances such as an accident which preventthe use of the public notice by electronic means, they shall be placed in “TheNikkei” newspaper.
(i)

For shareholders owning at least 100 shares as of the last day of
February and new shareholders owning at least 100 shares as ofAugust 31, the “Daimaru Matsuzakaya shopping courtesy card”
which entitles cardholders to a 10% discount when shopping at
marked price at department stores operated by Daimaru
Matsuzakaya Department Stores Co., Ltd. (Daimaru Shinsaibashi
store, Daimaru Umeda store, Daimaru Tokyo store, Daimaru
Kyoto store, Daimaru Kobe store, Daimaru Suma store, Daimaru
Ashiya store, Daimaru Sapporo store, Daimaru Shimonoseki
store, Matsuzakaya Nagoya store, Matsuzakaya Toyota store,
Matsuzakaya Takatsuki store, Matsuzakaya Ueno store,
Matsuzakaya Shizuoka store), The Hakata Daimaru, Inc.
(Fukuoka Tenjin store), Kochi Daimaru Co., Ltd. and The Tottori
Daimaru, Inc.(*), will be issued on the following basis.
For shareholders as of the last day of February, the courtesy cards will be
issued in May, with an annual spending limit set according to the number ofshares owned as described below. (Valid from mid-May (the date ofdelivery) until May 31 the following year)(*) Validity at Tottori Daimaru is until May 31, 2021.
Number of shares owned
as of the end of February

Spending limit
Duration of ownership:
Less than 3 years

Duration of ownership: 3
years or more

100 to 499 shares¥0.5 million per year

¥1.5 million per year

500 to 999 shares¥1.0 million per year

¥2.0 million per year

1,000 to 3,999 shares

Additional ¥1.0 million for Additional ¥1.0 million forevery 1,000 shares
every 1,000 shares

4,000 shares or more

¥5.0 million per year
(upper limit)¥6.0 million per year
(upper limit)

For new shareholders as of August 31, the courtesy cards will be issued in
November, with an annual spending limit according to the number of shares
owned set at half of the above amounts. (Valid from mid-November (the dateof delivery) until May 31 the following year)(ii)

By presenting the “Daimaru Matsuzakaya shopping courtesy card,”
shareholders may gain entry free of charge for themselves and a guest to
cultural events subject to admission fees held at facilities operated by
Daimaru Matsuzakaya Department Stores Co., Ltd. and PARCO CO., LTD.
(gallery spaces in Sapporo, Shibuya, Nagoya, Shinsaibashi, Fukuoka, etc.).
Note: Complementary admission may not apply to all cultural events.

(iii)

Note:

The Company will issue the “PARCO shopping courtesy card” (credit card)
upon request from shareholders owning at least 100 shares of the Company
as of the end of February and August 31. The credit card will entitle theholder to a 5% discount (excluding some shops, products, services, etc.) atpoint of purchase for shopping at stores in Japan operated by PARCO Co.,
Ltd. (Sapporo PARCO, Sendai PARCO, Urawa PARCO, Shintokorozawa
PARCO, Tsudanuma PARCO, Shibuya PARCO, Ikebukuro PARCO,
Kinshicho PARCO, Hibarigaoka PARCO, Kichijoji PARCO, Chofu PARCO,
Shizuoka PARCO, Nagoya PARCO, Matsumoto PARCO, Shinsaibashi
PARCO, Hiroshima PARCO, Fukuoka PARCO and PARCO_ya UENO) andvia the PARCO ONLINE STORE e-commerce platform. (Valid from thedate of delivery until May 31 the following year)

The Company stipulates the rights regarding shares less than one unit in its Articles of Incorporation. According to the
stipulation, the holders of shares less than one unit shall not be entitled to exercise the rights of shareholders in connection
with such shares less than one unit other than those rights listed below:(1) Rights set forth in items of Article 189, paragraph (2) of the Companies Act;
(2) Right to make a demand pursuant to the provisions of Article 166, paragraph (1) of the Companies Act;
(3) Right to receive an allotment of offered shares and offered share acquisition rights in proportion to the number ofshares held by the shareholder; and- 213 -

(4)Right to demand the purchase of additional shares less than one unit.

- 214 -

VII. Reference Information of Reporting Company
1. Information about parent company, etc. of reporting company
The Company does not have a parent company, etc. as prescribed in Article 24-7, paragraph (1) of the Financial
Instruments and Exchange Act.
2. Other reference information
From the beginning of this fiscal year until the filing date of this Annual Securities Report, the Company has filed
the following documents.
(1) Annual Securities Report and Attached Documents, and Written Confirmation
Fiscal year

13th fiscal year (from March 1, 2019 to February 29, 2020)

Filed to Director-General of Kanto Local Finance Bureau on May 29, 2020.
(2) Internal Control Report
Filed to Director-General of Kanto Local Finance Bureau on May 29, 2020.
(3) Quarterly Securities Reports and Written ConfirmationsFirst quarter of the 14th fiscal year (from March 1, 2020 to May 31, 2020)
Filed to Director-General of Kanto Local Finance Bureau on July 14, 2020.
Second quarter of the 14th fiscal year (from June 1, 2020 to August 31, 2020)
Filed to Director-General of Kanto Local Finance Bureau on October 14, 2020.
Third quarter of the 14th fiscal year (from September 1, 2020 to November 30, 2020)
Filed to Director-General of Kanto Local Finance Bureau on January 13, 2021.
(4) Extraordinary Securities Reports
Filed to Director-General of Kanto Local Finance Bureau on May 29, 2020.
Extraordinary Securities Report based on Article 19, paragraph (2), item (ix)-2 (Results of Exercise of
Voting Rights at the Shareholders Meeting) of the Cabinet Office Ordinance on Disclosure of Corporate
Affairs, etc.
(5) Amended Shelf Registration Statements
Filed to Director-General of Kanto Local Finance Bureau on May 29, 2020.
Amended Shelf Registration Statements pertaining to Shelf Registration Statement filed on January 30,
2020.
Filed to Director-General of Kanto Local Finance Bureau on April 13, 2021.
Amended Shelf Registration Statements pertaining to Shelf Registration Statement filed on January 30,
2020.
(6) Shelf Registration Supplements (shares, corporate bonds, etc.)
Filed to Director-General of Kanto Local Finance Bureau on May 19, 2021.
Shelf Registration Supplements pertaining to the Shelf Registration Statement filed on January 30, 2020.

- 215 -

B.

Information About Reporting Company’s Guarantor, Etc.

No items to report.

- 216 -

Independent Auditor’s Report

The Board of Directors
J. FRONT RETAILING Co., Ltd.
OpinionWe have audited the accompanying consolidated financial statements of
J. FRONT RETAILING Co., Ltd. and its subsidiaries (the Group), which comprise the consolidated
statement of financial position as at February 28, 2021, and the consolidated statements ofincome, comprehensive income, changes in equity, and cash flows for the year then ended, andnotes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at February 28, 2021, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and the Audit Committee for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with IFRSs, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by IFRSs, mattersrelated to going concern.
The Audit Committee is responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial
statements.

As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation inaccordance with IFRSs.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the financial statements inJapan, and to communicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

Ernst & Young ShinNihon LLC
Tokyo, JapanMay 28, 2021

/s/ Kazunori Takenouchi
Kazunori Takenouchi
Designated Engagement Partner
Certified Public Accountant