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Basic Capital Policy/Shareholder Return Policy/Cross-Shareholdings

Basic Capital Policy

The Company believes that ant increase in free cash flow and improvement in ROE should help to ensure its sustainable growth and increase corporate value over the medium to long term. To such ends, the Company promotes a capital policy that takes a balanced approach to "undertaking strategic investment," "enhancing shareholder returns," and " expanding net worth being " after taking into consideration the business environment and risk readiness.

Moreover, in procuring funds through interest-bearing liabilities, 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 liabilities.

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 development of new businesses.

The key financial indicators for the achievement of the Medium-term Business Plan are ROE for capital efficiency, consolidated business profit and ROIC for business profitability, free cash flow for profitability and safety, and equity ratio attributable to owners of the parent (equity ratio) for financial soundness.

Shareholder Return Policy

The Company's basic policy is to maintain and enhance its sound financial standing while appropriately returning profits by providing stable dividends and agile approach to purchasing its treasury shares in a manner that involves taking profit levels, future capital investment, free cash flow trends and other such factors into consideration.
In accordance with this policy, during the period of the current Medium-term Business Plan (FY 2024- FY 2026), the Company aims to optimize the amount of equity by maintaining a consolidated dividend payout ratio of 40% or more and conducting purchases of treasury shares.

*Annual dividend per share is shown on a post-share consolidation basis.
*The dividend for FY2017 includes a commemorative dividend of ¥2.


Holding Policy

In principle, the Group will not newly acquire cross-shareholdings (listed and unlisted shares held for reasons other than pure investment, not including shares in its subsidiaries and associates). However, this does not apply to cross-shareholdings that have been recognized as being indispensable to the promotion of the Group’s business strategy and contributing to increasing corporate value in the medium to long term through the validation of rationale. As for such shares already held (listed/unlisted), if we judge that there is no rationale of holding them, we will negotiate with companies whose sheres we hold and reduce them as appropriate after obtaining agreement on the method and period of sale.

Validation of Rationale for Holding

J. Front Retailing verifies the rationale of individual issues of shares cross-held by the Group periodically every year at the Board of Directors from both a qualitative perspective and a quantitative perspective. Qualitative verification pertains to business strategies such as maintaining harmonious and favorable business relationships with companies with which the Company makes up a community, corporate customers and business partners and securing supply chains. Quantitative verification pertains to whether profitability of holding shares including related trading profits and the dividend exceeds the capital costs, etc. As a result, the Group cross-holds 11 issues of shares (listed shares excluding deemed holdings) as of February, 29, 2024, which is a decrease of 49 issues or 82% over the seven years from fiscal 2016.

Number of cross-shareholdings
(listed shares excluding deemed holdings)

Policy on Exercising Voting Rights

Decisions with respect to voting on matters regarding cross-shareholdings are made from both of the following two perspectives:
(1) whether the cross-shareholdings will contribute to improving the sustainable growth and the corporate value over the medium to long term of the company whose shares are held;
(2) whether the cross-shareholdings will contribute to improving the Group’s sustainable growth and corporate value over the medium to long term.
Particularly, in regard to the proposals that we consider to be of high priority with respect to strengthening corporate governance, such as the proposals relating to the corporate governance system (selection of company officers), the proposals relating to shareholder return (appropriation of surplus), and the proposals that have an effect on shareholder value (introduction of takeover defense measures), we establish policies upon which to base the judgment of our exercise of voting rights, and acting as the Group as a whole, we take a response that is in line with such policies. We engage in dialogue with companies whose shares we hold if necessary when we exercise voting rights.

Handling of Requests from the Holders of Cross-held Shares Regarding the Sale of the Company's Shares

In case a company which holds the Company’s shares for the purpose of cross-shareholding (holders of cross-held shares) indicates its intention to sell the Company’s shares, the Company will never conduct activities to hinder the sale of cross-held shares by implying a reduction of business transaction, etc., and appropriately handle the sale, etc.

Corporate Governance