Board of Directors, Board of Corporate Auditors

Board of Directors' Meetings

The Company's Board of Directors comprises 12 directors (10 are male and two are female, and three are outside directors) and 6 auditors (five are male and one is female, and four are outside corporate auditors) who make decisions regarding important matters affecting the Company's business operations at the monthly (in principle) meetings of the Board of Directors and perform supervisory duties. FamilyMart UNY Holdings has adopted the executive officer system to speed up the making of decisions concerning operations and their execution.

Outside Director and Outside Corporate Auditor

The Company has three outside directors and four outside corporate auditors. From the position of an outsider with specialized knowledge, the outside director makes decisions regarding important matters affecting the Company's business operations and monitors directors' performance of their duties by attending Board of Directors' meetings. The outside director also fulfills a certain role to improve corporate governance and raise enterprise value. From their position as outsiders with specialized knowledge, outside corporate auditors monitor directors' performance of their duties by attending Board of Directors' meetings. Outside corporate auditors also play a role in raising the effectiveness of management oversight and in improving the Company's corporate governance and raising enterprise value.

Reasons for Appointing Outside Directors and Outside Corporate Auditors

Outside Directors

NameIndependent DirectorReason for appointmentAttendance rate at fiscal 2018 Board of
Directors' meetings
Tadashi Izawa Tadashi Izawa has abundant experience acquired through his years of experience as a deputy director-general of the Ministry of Economy, Trade and Industry, a board member of the Japan International Cooperation Agency, an executive vice president of Japan External Trade Organization, and an ambassador. We have determined that Mr. Izawa can be expected to provide valuable opinions and advice based on these experiences and his deep knowledge. 15/16
(93%)
Mika Takaoka Mika Takaoka possesses a wealth of specialized insight and knowledge regarding business administration accumulated through her experience as a university professor. She served as an outside corporate auditor of the Company as well as an outside director at other companies. We have thus determined that Ms. Takaoka can be expected to provide valuable opinions and advice based on her abundant experience and knowledge. --
Chikako Sekine Chikako Sekine has held positions such as the heads of international marketing and many other divisions as executive officer of a major cosmetics company. Later, she served as a representative director and an outside director at other companies. We have thus determined that Ms. Sekine can be expected to provide valuable opinions and advice based on her abundant experience and knowledge. --

Outside Corporate Auditors

Outside Corporate AuditorsIndependent AuditorReason for appointmentAttendance rate at fiscal 2018 Board of Directors' meetingsAttendance rate at fiscal 2018 Board of Corporate Auditors' meetings
Yasuhiro Baba Yasuhiro Baba has been engaged in accounting and finance tasks at another company for many years. We have thus determined that Mr. Baba can be expected to perform rigorous audits of the Company's management based on his wealth of experience and insight into the accounting and finance fields. 21/21
(100%)
12/12
(100%)
Takayuki Aonuma Takayuki Aonuma has a wealth of experience and insight as a legal specialist. We have thus determined that Mr. Aonuma can be expected to perform rigorous audits of the Company's management. 16/16
(100%)
10/10
(10%)
Ichiro Uchijima Ichiro Uchijima has held positions such as general manager of the corporate planning divisions and many other divisions as a director at a major oil company. He has abundant experience and sophisticated insight. We have thus determined that Mr. Uchijima can be expected to perform rigorous audits of the Company's management. -- --
Yoshio Shirata Yoshiko Shirata has expertise in finance, accounting, and management gained as a university professor, and she has served as outside director at other companies, accumulating abundant experience and sophisticated insight. We have thus determined that Ms. Shirata can be expected to perform rigorous audits of the Company's management. -- --

Note: Mika Takaoka and Chikako Sekine were elected to the Board of Directors, respectively, at the 38th Ordinary General Meeting of Shareholders on May 28, 2019.

Note: Ichiro Uchijima and Yoshiko Shirata were elected to the Board of Corporate Auditors, respectively, at the 38th Ordinary General Meeting of Shareholders on May 28, 2019.

Policies and Procedures for the Appointment of Senior Management and the Nomination of Directors and Corporate Auditor Candidates

The Company selects and nominates candidates for positions as directors and executive officers based on the balance of their traits with consideration comprehensively paid to experience, performance, specialty, diversity, and other factors. Candidates for positions as corporate auditors are nominated based on an assessment of the balance of their insight into the Company's business; financial, accounting, legal, and other knowledge and experience; and the diversity of perspectives they will bring to corporate management.

Representative directors and other relevant directors examine potential candidates based on the above policy, and final nomination decisions are made by the Board of Directors.

Should a director or corporate auditor engage in conduct that violates laws, the Company's articles of incorporation, or internal regulations or be judged by the Board of Directors to have failed to fulfill their expected duties or responsibilities, the Company will propose their dismissal at the general meeting of shareholders.

Criteria Concerning the Independence of Outside Officers

With the goal of defining the criteria for certifying outside directors and outside corporate auditors as independent directors or auditors of the Company, the Company has established the Criteria Concerning the Independence of Outside Officers with the approval of the Board of Directors. When considering candidates for outside director and outside corporate auditor positions, their independence based on said criteria is a prerequisite for the position.

The Criteria Concerning the Independence of Outside Officers are as follows.

【Criteria Concerning the Independence of Outside Officers】

1. Purpose

These criteria have been established with the goal of clearly defining the criteria for certifying outside directors and outside corporate auditors as independent directors or independent auditors.

2. Independent Directors and Independent Auditors

1) Independent directors and independent auditors are defined as outside directors or outside corporate auditors that do not present the risk of conflicts of interest with general shareholders and that meet the conditions described in 2) or 3) below.

2) Independent directors and independent auditors should not be applicable under any of the following items.

(1) A person involved in the operation of the parent company of the Company or of a subsidiary of the parent company of the Company

"A person involved in the operation" is defined as a director (other than an outside director), an accounting advisor (or the employee of an accounting advisor if the accounting advisor is a juridical person), or an executive officer (referred collectively as "directors, etc.," hereinafter) or another manager or employee that is responsible for the execution of operations.

(2) An entity or a person involved in the operation of an entity that has a significant business relationship with the Company

"An entity that has a significant business relationship with the Company" is defined as an entity that fulfills one of the following conditions.

a. A person or entity that provides products or services directly or indirectly to the Company or its subsidiaries (including the affiliates of subsidiaries, the same definition applies to item (3), a. below) and for which product or service transactions with the Company or its subsidiaries through manufacturing, wholesale, or other services provided by the supplier or, if the supplier is a juridical person, the supplier or its consolidated subsidiary represented more than 2% of the total consolidated net sales of the entity in question in the most recently completed fiscal year.

b. A creditor of the Company or its subsidiaries for which the total amount of credit extended to the Company or its subsidiaries by the creditor or, if the creditor is a juridical person, the creditor or its consolidated subsidiary represented more than 2% of the total consolidated total assets of the entity in question at the end of the most recently completed fiscal year.

(3) An entity or a person involved in the operation of an entity with which the Company has a significant business relationship

"An entity with which the Company has a significant business relationship" is defined as an entity that fulfills one of the following conditions.

a. A person or entity to which the Company or its subsidiaries provide products or services directly or indirectly and for which product or service transactions through manufacturing, wholesale, or other services provided by the Company or its subsidiaries represented more than 2% of the total consolidated net sales of the Company in the most recently completed fiscal year.

b. A debtor of the Company or its subsidiaries for which the total amount of credit extended by the Company or its subsidiaries represented more than 2% of the total consolidated total assets of the Company in question at the end of the most recently completed fiscal year.

(4) A consultant, an accounting specialist, or a legal specialist receiving large amounts of monetary payments or other financial assets from the Company or its subsidiaries that are separate from the compensation paid for services as a director or a corporate auditor (a member of the applicable organization if the recipient of the financial assets is a juridical person, association, or other organization)

"A consultant, an accounting specialist, or a legal specialist receiving large amounts of monetary payments or other financial assets from the Company or its subsidiaries that are separate from the compensation paid for services as a director or a corporate auditor" is defined as an individual that received financial assets from the Company or its subsidiaries that are separate from the compensation paid for services as a director or a corporate auditor and that exceeded 10 million yen or 2%, whichever is larger, of the individual's total net sales or income in the most recently completed fiscal year.

A person or entity that was applicable under items (1)-(4) above in the past three years

(6) A close relative (one's spouse or second-degree relatives) of an individual that fulfills one of the following conditions

a. An individual applicable under items (1)-(5) above

For the purpose of this item, "a person involved in the operation" in items (1)-(3) above is limited to directors, etc., and employees ranked division manager or above ("an important person involved in the operation") and "a member of the applicable organization" in item (4) above is limited to an important person involved in the operation of the applicable organization or a certified public accountant, attorney, or other individual with specialized qualifications if the applicable organization is an auditing firm, law firm, or other specialized organization.

b. An important person involved in the operation of the Company or its subsidiaries

c. A person that was applicable under item b. above in the past three years

3) Even if an individual fulfills the requirements described in 2) above, the Company may choose not to designate them as an independent director or independent auditor if they are a major shareholder or a person involved in the operation of the Company, if they have been applicable under one of the items in 2) above in the past, or if they are otherwise judged not to be sufficiently independent from the management of the Company.

3. Notification

Independent directors and independent auditors should endeavor to maintain their state of independence as described by these criteria for the duration of their terms. If an independent director or independent auditor loses their state of independence as described by these criteria, they are expected to provide prompt notification to the Company.

4. Establishment, Amendment, and Abolishment

The establishment, amendment, and abolishment of these criteria shall be decided by resolution of the Board of Directors.

Evaluation of Board of Directors' Effectiveness

With the aim of further enhancing corporate governance, the Company evaluates the effectiveness of the Board of Directors. The effectiveness evaluation conducted in 2018 found that the Board of Directors was generally functioning properly, with "appropriate" or "more or less appropriate" accounting for the majority of answers to the evaluation's questions.

Further, the previous fiscal year's evaluation pointed out issues related to the Board of Directors with respect to the schedule for convening meetings and the content of documents provided. Based on comparison with the previous fiscal year's evaluation, the most recent evaluation confirmed that the Company has made improvements with respect to enhancing and revising management of the Board of Directors in regard to these issues. Meanwhile, most recent evaluation pointed out issues related to the composition of the Board of Directors, such as the number of directors and the percentage of outside directors, and issues related to the enhancement of the content of the agenda items of the Board of Directors, including plans for successors to representative directors and the nomination and dismissal of members of senior management. In light of the evaluation, the Board of Directors will consider improvements and revisions and continue efforts to enhance its effectiveness.

Executive Compensation System

The Company provides compensation to directors and corporate auditors within predetermined monetary limits approved by the general meeting of shareholders.
Directors receive fixed compensation, which is a monthly salary, and bonuses. Fixed compensation is a monetary amount based on internal regulations and position. Bonuses are performance-based compensation and are linked to consolidated net profit attributable to owners of parent. Further, the Company provides a portion of fixed compensation and bonuses to directors through the Company's management stock ownership plan as stock price-linked compensation. During directors' terms of office, the Company requires directors to keep shares they have acquired.
Part-time directors only receive fixed cmpensation in the form of a monthly salary.
Corporate auditors only receive fixed compensation in the form of a monthly salary.

Executive Compensation for FY2018

Total paid (million yen)Total paid in various forms (million yen)No. of payments
Basic salaryStock optionsBonusesRetirement benefit recipients
Directors
(excluding outside directors)
241 115 - 126 - 11
Corporate auditors
(excluding outside corporate auditors)
27 27 - - - 1
Outside directors 22 22 - - - 3
Outside corporate auditors 38 38 - - - 5

Note: The above figures include one director who retired as of the close of the 37h Ordinary General Meeting of Shareholders held on May 24 2018 and three directors who retired on February 28, 2019.

Policy Regarding Cross-Shareholdings

In consideration of changes in the business environment associated with Japan's Corporate Governance Code as well as the risks of stock price fluctuations, the basic policy of the Company is to refrain from engaging in cross-shareholdings. Exceptions may be made in cases in which these holdings are deemed to be meaningful for maintaining or strengthening business relationships or for forming strategic business alliances.
The Board of Directors periodically verifies the purpose of such holdings, and those holdings that have been judged to have lost their meaningfulness will be sold as appropriate while considering the potential impact on the market.

Takeover Defense Measures

We have not adopted takeover defense measures.