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Basic Capital Policy/Shareholder Return Policy/Cross-Shareholdings

Basic Capital Policy

The Company believes that any increase in free cash flows 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” for the purpose of hedging against possible 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” to achieve an increase of profitable sales and a “finance strategy (encompassing the capital policy)” that heightens the rate of return on invested capital are essential elements with respect to improving free cash flows and ROE. In addition, we believe it is crucial that we maximize our operating profit and continually improve our operating margin by strengthening our core businesses and concentrating management resources on initiatives such as business field expansion and active development of new businesses.
In monitoring our key financial indicators through efforts to realize our new Group Vision, we focus primarily on ROE for capital efficiency, consolidated operating profit for business profitability, free cash flows for profitability and stability, and ratio of equity attributable to owners of parent to total assets (equity ratio) for financial soundness.

Shareholder Return Policy

The Company’s basic policy is to duly return profits to shareholders. Hence, while maintaining and enhancing its sound financial standing, the Company strives to provide stable dividends and target a consolidated dividend payout ratio of no less than 30%, taking such factors as profit levels, future capital investment and free cash flow trends into consideration.The Company also gives consideration to the option of purchasing its own shares as appropriate, in accordance with aims that include improving capital efficiency and implementing a flexible capital policy.

Changes in annual dividend per share (Yen)


Holding Polic

In principle, the Group will not newly acquire cross-shareholdings (listed 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. For example, if there is a request to hold shares from a community administrative body or company in the context of promoting our Urban Dominant Strategy, which is one of our focused strategies, we may hold such shares after fully considering the appropriateness of the holding by executives in terms of our "coexistence with local communities" efforts, one of our major ESG tasks. As for such shares already held, if we judge that there is no rationality of holding them, we will negotiate with relevant corporate customers and business partners and reduce them as appropriate after obtaining agreement on the method and period of sale.

Verification of rationality of 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 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 26 issues of shares as of end of FY2019 (end of February 2020).

Changes in 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 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.
Specifically, in regard to proposals that we consider to be of high priority with respect to strengthening corporate governance, such as proposals relating to the corporate governance system (selection of company officers), proposals relating to shareholder return (appropriation of surplus), and proposals that have an effect on shareholder value (introduction of takeover defense measures), we establish policies upon which to base 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 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 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