We have established an internal control system, as described below, in order to ensure that operations are conducted in a manner that is both appropriate and in compliance with laws, regulations, and articles of incorporation.

Maintenance and Management of Information

As regards records of directors’ decision-making, under the internal rules of ÆON MALL, directors create and appropriately maintain records relating to the execution of their duties, including approval documentation, minutes of meetings, and other information that the internal rules stipulate, in accordance with these same internal rules. Moreover, in managing these records the department that is responsible under our rules takes the necessary measures to prevent leakage of such information to third parties.

Effi cient Execution of Duties

We hold meetings of the Board of Directors once a month and additional board meetings in a timely manner as necessary. For approval matters that involve material risk requiring approval by the President or higher authority, we established the Executive Committee, which mainly comprises directors of managing director rank or higher and full-time auditors, as an advisory body for the President, enabling joint discussion of the matters from a wide range of viewpoints before the President makes approval or the Board of Directors passes a resolution.

For execution of duties we have established “rules for job position management,” “rules for the division of duties,” “rules for authority,” and “rules for asking approval,” that govern allocation of necessary authority for execution and clarify management responsibility as well as setting out details of responsibilities and execution procedures.

System for Ensuring That Execution of Duties by Directors Conforms to Laws, Regulations and Articles of Incorporation

We put great importance on management in compliance with the ÆON Code of Conduct to build better relations with local communities and fulfi ll our social responsibility as a good corporate citizen.

In our internal reporting system, we have established a Compliance Committee as an organization subordinate to the Executive Committee, and have set up Helpline ÆON MALL “Employee’s 110 hotline.” A similar hotline has also been established for our labor union: “Union 110.” In the event that a person uses the hotline to report information that they have received, the Compliance Committee examines the details and, if an infringement is recognized, takes required measures as prescribed by internal rules. The Compliance Committee also formulates measures to prevent a reoccurrence of the infringement and the relevant departments then implement these measures company-wide.

The Compliance Committee reports material matters to the Board of Auditors.

Ensuring Appropriate Business Operations by the Corporate Group Comprising the Company, its Parent Company, and Subsidiaries

When there is any possibility of the interests of the parent company and the Company coming into confl ict over a transaction with the parent company or over carrying out business in competition with the parent company, the details of such matters are reviewed and referred to the Board of Directors for approval before proceeding. The Company, moreover, manages subsidiaries based on the “rules for managing affi liate companies” and establishes a system of cooperation to ensure appropriate operations of subsidiaries. Transactions between ÆON Group companies are conducted according to appropriate conditions based on market prices. When it is possible to obtain an objective valuation based on values set by a third-party valuation, the Group companies will endeavor to obtain such a valuation.

Auditing and Monitoring Structure

For the internal audit we have established the Management Auditing Department, a body of seven members under the direct management of the President. The Management Auditing Department undertakes an operating audit of every department in the Company. It thus helps to ensure that internal controls are functioning properly and to verify their effi cacy. The Management Auditing Department reports results of these operating audits to the President each time, and makes regular reports to the Executive Committee and to the auditors. The Company does not appoint any of its employees as staff members to assist in the operation of auditors. Full-time auditors directly undertake auditing operations, including formulation of an audit plan and audit budget as well as actual auditing, and strive to ensure the effectiveness of auditing operations by regularly receiving and reviewing reports on internal auditing as well as reports from independent audits carried out by the Management Auditing Department. The Management Auditing Department’s auditing role is to closely cooperate with the Board of Auditors and help the auditors conduct effi cient audits such as by discussing with them the content of internal auditing on a timely basis. Directors are also obliged to report to the Board of Auditors without delay matters that could have an infl uence on the Company’s business and/or earnings performance, violations of law, and other compliance-related problems when such matters involve the discovery of facts that potentially pose material risk of loss to the Company. Furthermore, when directors are requested by the auditors to submit reports concerning execution of duties, such requests must be given precedence over other matters and promptly and honestly responded to.

To address business risks such as those related to disaster or loss, the environment, or compliance, we have established a risk management committee, as an organization subordinate to the Executive Committee, to serve as the company-wide risk management entity. The committee identifies risks throughout the company, collects information, and prepares policies for formulating responsive measures. The various departments prescribed as responsible by our rules for the division of duties, use these policies to create regulations and handling procedures etc., and periodically conduct a review of existing regulations and procedures. To ensure the above regulations and handling procedures are made known throughout the Company, we take thorough measures to communicate necessary information to all employees such as through periodic internal company training and electronic bulletin boards. If imminent and serious risk of loss becomes apparent, we shall appropriately transmit information and carry out approval based on our Management Crisis Management Regulations and take appropriate responsive action such as by making efforts to minimize damage.

Fundamental Policies

Based on our commitment to thorough compliance management and from the viewpoint of defending our company, we hold no relationships with antisocial forces. We recognize that it is our social responsibility as a corporation to eliminate antisocial forces by responding resolutely against any unjust demands.

Measures Regarding Antisocial Forces

In the event that we receive unjust demands from antisocial forces, the Company’s response will not be made through an individual; rather, the response will be an organizational one structured on close cooperation with outside specialists and investigative bodies, including a legal response based on both civil law and criminal law. The Company is a member of the Bouryokudan Tsuihou Chiba Kenminkaigi (Chiba Prefectural Citizen Committee Against Organized Crime Groups) and works closely with the police and anticrime groups to collect information regarding antisocial forces. We centrally manage Company-wide information including that of each of our business offices by forwarding the information to the responsible department in order to maintain awareness throughout the Company of such matters.

Other Corporate Governance Structures

We have established the ÆON MALL Social Responsibility (SR) Council to promote policies for corporate activities from social, environmental, and ethical aspects. We also formulated codes of conduct and standards for environmental protection and contributions to society in addition to legal compliance, and we work to make sure that the rules relating to these codes and standards are known and observed in every part of our organization.