J Front Retailing : Corporate Governance Report　(552.8 KB)

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Corporate Governance Report

Last Update: June, 9, 2016

J. FRONT RETAILING Co., Ltd.

Representative: Ryoichi Yamamoto, President Inquiries: Takayuki Makita, Executive Officer, Senior General Manager of Corporate Governance Promotion, Management Strategy Unit

(TEL: +81-3-6895-0178 (from overseas)) Securities Code: 3086, First Section of the Tokyo Stock Exchange and Nagoya Stock Exchange

http://www.j-front-retailing.com/english/ The corporate governance of J. FRONT RETAILING Co., Ltd. (the "Company") is described below.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

   The Company has established Corporate Governance Guidelines (the "Guidelines") that set out the role of corporate governance in the Company and its subsidiaries (the "JFR Group"). The aims of the Guidelines are to realize our best possible corporate governance practices in order to ensure the sustainable growth of the JFR Group and increase corporate value over the medium to long term.

   For "Basic Ideas on Corporate Governance," please refer to "Chapter 1. General Provisions" of the Guidelines appended at the end of this report.

   The Guidelines remain unchanged from those of the last update of this report (December 25, 2015).

   Update

   [Reasons for Non-compliance with the Principles of the Corporate Governance Code]

   Recognizing the need to carry out all of each principle of the Corporate Governance Code in order to achieve the sustainable growth of the JFR Group and increase corporate value over the medium to long term, the Company has begun taking initiatives to implement all of each principle.

   Based on the "comply or explain" rule, the Code requiring disclosure in this column, "Reasons for Non-compliance with the Principles of the Corporate Governance Code," and the next column, "Disclosure Based on the Principles of the Corporate Governance Code," is limited to the following:

   • Any principles that are currently not implemented

   • The 11 principles that require disclosure as stipulated by financial instruments exchanges

     The Company, however, discloses the following matters in recognition that the disclosure ("comply and explain") leads to promoting constructive dialogue with shareholders and investors.

   • Principles that are currently implemented but for which the Company only recently began the initiatives for the implementation.

   • Principles for which policies, ideas, etc. have been in place by convention but have not been explicitly

     stated or announced.

   • Principles that have been implemented conventionally but for which the Company considers further enhancement of substance is necessary.

   • Current status of the Company's efforts regarding corporate governance

     【Principle 2-3, Supplementary Principle 2-3-1】 Sustainability

     With the aim of ensuring sustainable growth of the JFR Group and increasing corporate value over the medium to long term, the JFR Group makes efforts to build and deepen relationships of trust with all stakeholders (customers, shareholders, business partners, employees, local communities, etc.) through various corporate activities based on the Group Philosophy and takes proactive steps in dealing with social and environmental issues and challenging issues relating to sustainability.

     In order to further contribute to the development of local communities as a good corporate citizen, the JFR Group will formulate policies on sustainability by about FY2017 centered on providing safe and secure products and services and promoting to create a safe and secure store environment, contributing to the development of a recycling-oriented society and pursuing activities that support the next generation and women. After formulating these policies, we will take initiatives to tackle these issues based on our policies.

     【 Principles 3-1(iii), 4-2, Supplementary Principle 4-2-1 】 Policy and Procedures for Determining Remuneration for Directors, Audit & Supervisory Board Members and Executive Officers

     The policy for determining remuneration for Directors, Audit & Supervisory Board Members and Executive Officers has been revised as follows beginning from the payment of June 2016, as resolved by a meeting of the Board of Directors, and on the basis of details reported by the Human Resources and Remuneration Committee in April 2016.

     Remuneration of Internal Directors

   • The Company has increased the proportion of bonuses for Directors and Audit & Supervisory Board Members (performance-based remuneration) in terms of total remuneration, with monthly compensation at 60% and bonuses for Directors and Audit & Supervisory Board Members at 40% (standard ranking), in order to provide incentives both for accomplishing objectives set under management strategies and business plans,

     and for achieving targets with respect to corporate performance.

     Remuneration of Outside Directors and Audit & Supervisory Board Members (both internal and outside)

   • The Company will discontinue bonuses for Directors and Audit & Supervisory Board Members and provide monthly compensation only.

     In conjunction with that, with the aim of ensuring that the Group achieves sustainable growth and increases corporate value over the medium to long term, the Company aims to introduce remuneration for Internal Directors linked to their medium- to long-term performance (stock-based remuneration, etc.) beginning in fiscal 2017, and will forge ahead in reviewing such options.

     【Supplementary Principle 4-1-3】Succession Planning

     Selection of the Chief Executive Officer is a critical aspect of strategic decision making, and accordingly the Company regards drawing up and implementation of plans regarding successors (next senior management team) as matters of particular importance in terms of management strategy.

     Going forward, the Human Resources and Remuneration Committee will move ahead with successive initiatives that include drawing up selection policies that take the "Desirable qualities required of JFR Group managerial talent" into account, selecting successor candidates based on such policies, and drawing up and implementing plans for developing respective successor candidates.

     【Principle 4-6】 Use of Directors Who Do Not Execute Business

     We continually review options for adopting optimal systems with respect to the Company's organizational structure (involves selecting a corporate governance structure among options that include the company with an Audit & Supervisory Board, company with supervisory committee, and company with three committees

     {nomination, audit and remuneration committees} structures) and with respect to making use of Internal Directors who do not execute business, in order to further heighten the effectiveness of our corporate governance, and to help the JFR Group achieve sustainable growth while increasing corporate value over the medium to long term.

     【Principle 4-14, Supplementary Principles 4-14-1, 4-14-2】 Training

     We continuously provide opportunities to Directors, Audit & Supervisory Board Members and Executive Officers to acquire and update knowledge they need to fulfill their roles and responsibilities with respect to oversight, auditing, business execution and other tasks.

     We provide Internal Directors, Internal Audit & Supervisory Board Members, and Executive Officers with useful information regarding corporate governance, compliance and Group management. Furthermore, we establish and implement training plans tailored to individuals, taking into account results of managerial talent evaluations performed by a third-party organization.

     We arrange briefings for Outside Directors and Outside Audit & Supervisory Board Members, when they are appointed as well as on a continuous and regular basis, providing details on the Group Philosophy, Vision,

     management strategies and business plans, and also featuring content that includes details of JFR Group

     operations, its performance, financial standing and operational status.

     Update

     [Disclosure Based on the Principles of the Corporate Governance Code]

     Recognizing the need to carry out all of each principle of the Corporate Governance Code in order to achieve the sustainable growth of the JFR Group and increase corporate value over the medium to long term, the Company has begun taking initiatives to implement all of each principle.

     Based on the "comply or explain" rule, the Code requiring disclosure in the previous column, "Reasons for Non-compliance with the Principles of the Corporate Governance Code," and this column, "Disclosure Based on the Principles of the Corporate Governance Code," is limited to the following:

     • Any principles that are currently not implemented

     • The 11 principles that require disclosure as stipulated by financial instruments exchanges

       The Company, however, discloses the following matters in recognition that the disclosure ("comply and explain") leads to promoting constructive dialogue with shareholders and investors.

     • Principles that are currently implemented but for which the Company only recently began the initiatives for the implementation.

     • Principles for which policies, ideas, etc. have been in place by convention but have not been explicitly

       stated or announced.

     • Principles that have been implemented conventionally but for which the Company considers further enhancement of substance is necessary.

• Current status of the Company's efforts regarding corporate governance

【Supplementary Principle 1-1-1】 Analysis of Voting Results

For the analysis of voting results, please refer to "1. Shareholders Meetings, (3) Analysis of Voting Results" in "Chapter 2. Relationships with Shareholders" of the Guidelines.

With respect to voting on proposals put forward at the 9th Annual Shareholders Meeting (Year Ended February 29, 2016) held on May 26, 2016, between 96.56% and 97.48% of the votes submitted were cast in favor of the first proposal (election of Directors), and 95.14% of votes submitted were cast in favor of the second proposal (payment of fiscal year bonuses to Directors and Audit & Supervisory Board Members).

【Supplementary Principle 1-2-1】 Content of Convocation Notices

For the policy on the content of convocation notices for shareholders meeting, please refer to "1. Shareholders Meetings, (2) Developing an Environment Appropriate for Exercising Voting Rights and Other Rights of Shareholders, (iii)" in "Chapter 2. Relationships with Shareholders" of the Guidelines.