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Management Policy

Situation of Corporate Governance

Basic Explanation of Firm Organization

AEON MALL established the Management Council to serve as an advisory body for the president and CEO. This council consists mainly of managing directors and higher, full-time members of the Audit & Supervisory Board, and individuals appointed by the president and CEO. The purpose of this council is to strengthen business strategy functions and ensure a more efficient decision-making process.
We bolster management and supervisory functions by holding at least one meeting of the board of directors per month, chaired by the president and CEO.
In addition to these mechanisms, we strive to disseminate information through committees led by general managers or other managers below the rank of representative director. The purpose of these committees is to ensure efficient business activities.
AEON MALL has adopted a corporate auditor system led by outside members of the Audit & Supervisory Board. The board works in coordination with outside financial statement auditors and the Management Auditing Department as part of a structure ensuring a sufficient audit function.
Each member of the Audit & Supervisory Board attend board of director meetings, while full-time members of the Audit & Supervisory Board is always present at meetings of the Management Council.

Analysis and Evaluations of the Effectiveness of the Board of Directors

The Company evaluates the effectiveness of the board of directors through self-assessments based on questionnaires. A third-party organization conducts analysis of questionnaire answers, while outside directors and others provide further opinions and feedback. The results of this investigation and analysis are examined and discussed at a meeting of the Company's board of directors.
At the board of director meeting in question, sufficient time was set aside for discussing board effectiveness.
After a lively exchange of varied opinions and experiences from directors and members of the Audit & Supervisory Board, the board of directors determined that the board functioned appropriately during fiscal 2017 and had improved in general compared to the prior fiscal year.
In particular, the board recognized improvements in monitoring the Company's medium- and long-term vision and in providing regular opportunities for outside directors and managers to exchange opinions.
On the other hand, the board identified matters for future investigation. These matters included ensuring greater objectivity and transparency in processes related to nominating director candidates and director remuneration, as well as the need to improve risk management in support of taking appropriate risks associated with global expansion.
The Company will continue to implement policies to improve board of director functions, striving for more robust board meeting deliberations and greater board effectiveness.

Basic Views on Internal Control System and the Progress of System Development

a. Information Storage and Management Essential for the Performance of Duties by Company Directors
Resolutions, board of directors meeting minutes, and other documents required by executive directors or other employees to perform their duties are prepared in accordance with internal company rules. These documents are stored in a proper and secure manner according to the type of storage media, facilitating search, retrieval, and review when necessary. Document management is performed by the organization assigned under the Rules on Administering Documents, which is also signed to prevent information leakage.

b. Rules and Structure for Managing Risk of Loss at the Company and Subsidiaries (“the Group”)
The representative director and president are the executive officer responsible for overall risk management. In addition, the director in charge of each business unit is responsible for risk management at the business unit level. This structure provides a system and environment ensuring business continuity and the safety of human life.
The Group has created Rules to Manage Business Risk Management (Risk Management Rules) to prevent crises or minimize damages in the event of a crisis. We have established departments to oversee risk by category, striving to improve corporate value by managing the risk of overall Group losses.
Aeon Mall has established the Risk Management Committee, chaired by the HQ general manager of administration, as an organization to deliberate overall Group risk management issues and responses. This committee reports its proceedings to the Management Council. Risks deemed important are escalated to the board of directors and included in annual reports.
To improve the effectiveness of risk management, the department in charge of internal audits prepares fiscal year audit plans and conducts internal audits based on Internal Audit Rules. Further, annual audit plans are reported to the board of directors.

c. Organizational Structures to Secure Efficient Performance of Duties by Directors of the Company and its Subsidiaries, Executive Officers, Employees with Executory Responsibilities, Individuals Performing Duties under Article 598, Section 1 of the Company Act, and Others of Equivalent Standing (“Subsidiary Directors”)
In addition to holding regular board of director meetings monthly, the Company convenes extraordinary meetings of the board of directors as deemed necessary. Decisions encompassing substantial risk threatening far-reaching impact on the Group are brought to the Management Council for discussion. These decisions are then approved by the CEO and/or by resolution of the board of directors. Executive authority is delegated along with clear management accountability according to Rules for Organization Management, Rules for Segregation of Duties, Rules of Jurisdiction, Rules for Approval Requests, and Rules for Management of Affiliates.
The Company’s board of directors approves medium-term plans, Driscoll-your performance goals, and allocations of funds for the Company and subsidiaries. This structure provides for the efficient execution of duties by Subsidiary Directors. Each quarter, subsidiaries verify their performance relative to corporate plans, reporting results and other important matters to the Company.

d. Structures Enabling Assurance that Performance of Duties by Company Directors, Employees, Subsidiary Directors and/or Subsidiary Employees are Compatible with Laws, Regulations, and Corporate Charter
The Company emphasizes compliance and respect for the AEON Code of Conduct, fostering improving relations with local communities and meeting the Company’s social responsibilities. Further, the Aeon Mall Group has prepared an internal system for training to prevent bribery, based on the Basic Rules for the Prevention of Bribery.
Aeon Mall has established the Compliance Committee, which is chaired by the HQ general manager of administration. The role of this committee is to confirm Group compliance with laws, regulations, corporate charter, and internal rules, identifying issues and deliberating measures for improvement. Reports of the proceedings of this committee are presented to the Management Council and matters of note are elevated to the board of directors and disclosed in annual reports.
The Company established a help line (Aeon Mall HR 110) to serve as an internal reporting tool. The Company’s labor union has likewise established its own Kumiai 110 help line. Company subsidiaries will establish their own help lines in conformance to Aeon Mall systems. We communicate thoroughly throughout our organization that we protect the privacy of individuals using this help line and that no such individuals shall be subjected to disadvantageous treatment. At the same time, we investigate any issues reported or notices received, taking actions necessitated based on internal rules for any confirmed wrongdoing. Measures to prevent recurrence in the future are instituted and adopted group-wide in addition to reports submitted to the Compliance Committee.

e. Structures to Assure Appropriate Business Management for the Corporate Group Consisting of the Company, its Parent, and Subsidiaries
The Management Council initiates discussions for any business transactions entered into by a director for a third party where conflicts of interest may occur between the parent and the Company, subsidiaries, or other Aeon Group companies or in those instances where the Company is essentially competing with the parent. Such transactions are only allowed to proceed upon approval by the board of directors.
Any transactions between the parent company, subsidiaries, or other Aeon Group companies shall be conducted under appropriate terms based on market prices to prevent harming the interest of the Company. Such transactions shall further be conducted by the department involved in accordance with the provisions of our Rules for Managing Related-Party Transactions. Transactions shall be approved following Authority Rules determined by the Company, and an annual report of increase or decrease percentages, etc. in yearly transactions between transacting companies shall be prepared to investigate the rationality and relevance of such transactions.
Any board of director resolutions related to transactions shall be conducted to ensure fair procedures. This includes the recusal of directors having special interests in the transaction in question.
The Company requires subsidiaries to report to the Management Council based the Rules on Management of Affiliates to ensure proper execution of duties by Subsidiary Directors.
The internal audit division determines whether the company and subsidiaries are managed appropriately. The division conducts audits of the Company and Company subsidiaries based on Rules for Internal Auditing, presenting the results in the format of an Internal Audit Report to the president and full-time members of the Audit & Supervisory Board. Audit results are also reported regularly to the board of directors.

f. Matters Related to Employees Requested to Assist Audit & Supervisory Board Members in the Execution of their Duties (“Assistants”); Matters Related to Assistant Independence From the Board of Directors; Matters Related to Ensuring Practicability of Instructions to Assistants
The Company selects and appoints assistants to the Audit & Supervisory Board, subject to negotiation with board members.
Assistants shall not receive orders or instructions from directors or other employees.
The performance of Assistants shall be evaluated through negotiations with the Audit & Supervisory Board. Any transfers or reprimands of Assistants are subject to prior approval of the Audit & Supervisory Board.

g. Structure for Reporting to the Audit & Supervisory Board Members
Company directors, employees, subsidiary directors, etc., and subsidiary employees report management performance, business status, financial status, internal audits, risk management, and compliance to board of director meetings attended by members of the Audit & Supervisory Board or to the Management Council.
Further, company directors, employees, subsidiary directors, and subsidiary employees, upon the discovery of facts of matters, illegal acts, or noncompliance representing potential material harm to the business results of the Company or Company subsidiaries, or individuals receiving a report from such an individual noted above, shall promptly report said matters to the Company’s Audit & Supervisory Board.
The Company and Company subsidiaries prohibit any punitive treatment of an individual making such reports. This policy is communicated clearly to members of the Audit & Supervisory Committee and employees, including Company directors, employees, and subsidiary directors, etc.

h. Policy on Matters Regarding Expense Prepayments, Redemptions, Other Expenses, or Disposition of Debt Resulting from the Execution of Duties by Members of the Company’s Audit & Supervisory Board
When a member of the Audit & Supervisory Board request that the Company prepays expenses per the provisions of Article 388 of the Companies Act, the Company shall promptly pay such expenses according to internal rules. The business unit in question shall provide for a budget necessary to pay such expenses every accounting period.

i. Other Structures to Ensure that Internal Audits by Members of the Audit & Supervisory Board are Performed Effectively
The internal audit division shall coordinate internal audit details with the Audit & Supervisory Board on a timely basis, working closely with members to ensure efficient audits conducted by the members of the Audit & Supervisory Board.

Basic Approach to Eliminating Anti-Social Forces

1. Basic Approach

The Company does not engage in relationships with anti-social forces, reflecting our total commitment to compliance and defense of our corporate entity. We respond resolutely in the face of unreasonable demands and recognize our social responsibility as a company to reject anti-social forces in any form.

2. Status of Efforts to Reject Anti-Social Forces

a. Unreasonable demands by anti-social forces are not dealt with as an individual, but rather as an organization working in close coordination with third-party specialists and investigative organizations, including civil and criminal proceedings.
b. The Company is a member of the Foundation for Chiba Prefecture’s Assembly for Expulsion of Anti-social Forces. We maintain close coordination with the police and anti-crime associations, participating in efforts to collect information on anti-social forces through the reach of our various business units. We use information gathered for educational purposes internally.
c. In accordance with the Rules on Managing Transactions, the Company conducts background checks to ensure business partners are not involved with anti-social forces. This is one more way in which we work toward the rejection of anti-social forces.

Status of Accounting Auditors

The Company employs the services of Deloitte Touch Tohmatsu LLC as our financial statement auditor. The certified public accountants and individuals assisting the financial statement audits are as provided below:

- Certified public accountants conducting audits:
Designated limited liability partners, executive partners:
Masahiko Tezuka, Shinji Hatano, Atsushi Miyashita

- Individuals assisting in the performance of financial statement audits:
Seven certified public accountants and 12 staff members

Status of Appointment of Outside Directors

Outside directors have a role of ensuring transparency of the Board of Directors by supervising inside directors and providing advice to management.
Audit & supervisory board members participate in meetings of the Board of Directors whilst maintaining arms-length distance from management.
As needed, they request detailed explanations regarding business operations so as to improve the efficacy of managerial supervision.

Relative to Company management, the independent outside directors are also requested to provide appraisals and advice based on the following vantage points:
1. the vantage point of customers and shareholders,
2. the medium to long-term vantage point not bound to near-term results,
3. the vantage point of rationality and appropriateness regarding Board decision-making
4. the third-party vantage point able to compare Company organizational practices versus others,
5. for female directors, the vantage point of women.

Activities of outside directors and outside auditors (FY 2018)

  Name No. of Meetings Attended Activities
Board of Directors Audit & Supervisory Board
Outside Director Mami Taira 13/14 - Ms. Taira possesses specialized knowledge of accounting and experience stemming from work as director and corporate auditor at other companies. She contributes this expertise and experience, providing insights other necessary remarks related to growth strategies and management issues in Japan and overseas from the standpoint of fairness and transparency.
Masao Kawabata 14/14 - Mr. Kawabata possesses a wealth of experience as a manager in posts overseas and in Japan. He contributes this experience, providing advice and other necessary remarks related to medium- and long-term business growth, employee training, and performance indicators of corporate value growth from the standpoint of the environment.
Outside Audit & Supervisory Board Member Maki Watanabe 14/14 15/15 Ms. Watanabe possesses a wealth of knowledge in accounting. She contributes this knowledge, providing insights and other necessary remarks related to proper internal controls from the standpoint of sound and appropriate corporate practices in corporate finance and accounting.
Yumiko Ichige 14/14 15/15 s. Ichige possesses legal expertise as an attorney and experience as a director and corporate auditor at other companies. She contributes this expertise and experience, providing insights and other necessary remarks related to medium-term management plan strategy from the standpoint of ESG.
Takao Muramatsu 13/14 13/15 Mr. Muramatsu possesses a wealth of expertise in tax law and experience as a director and corporate auditor at other companies. He contributes this expertise and experience, providing insights and other necessary remarks related to the cost of capital, the validity of investment profitability plans, and improving the soundness of governance from the view point of corporate value growth.

Holding of Concurrent Position of Outside Directors and Audit & Supervisory Board Members, Reasons for Election, etc. (as of end-May, 2019)

  Name Organization Position Relationship With AEON MALL Reasons for Election
Outside Director Mami Taira Certified Tax Accountants Hayakawa-Taira Partner No business relationship Ms. Taira contributes advice and oversight based on her expert opinion as a certified public accountant and tax accountant, as well as her experience as a director and member of the Audit & Supervisory Board at other companies. She continues to be involved in Aeon Mall management, offering practical advice on a variety of issues, including company diversity. We believe Ms. Taira qualifies as an independent officer having no relationships that may result in a conflict of interest. She is not a shareholder of Aeon Mall, nor does she have any personal relationships with major Aeon Mall transaction partners.
Suzuden Corporation Outside Director
Iseki & Co., Ltd. Outside Audit & Supervisory Board Member
Masao Kawabata Brainwoods Corporation, Ltd Advisor No business relationship Mr. Kawabata contribute advice and oversight stemming from his background in public relations, investor relations, and risk management capacities, as well as his international perspective and wealth of experience through management positions across several countries. He continues to be involved in Aeon Mall management, offering appropriate advice on a variety of issues. We believe Mr. Kawabata qualifies as an independent officer having no relationships that may result in a conflict of interest. He is not a shareholder of Aeon Mall, nor does he have any personal relationships with major Aeon Mall transaction partners.
The Institute of English Speaking Union of Japan Trustee
International Christian University Auditor
Outside Audit & Supervisory Board Member Maki Watanabe     No business relationship Ms. Watanabe has extensive expertise and experience in accounting at AEON Co. and has served as an Audit & Supervisory Board member at various Aeon Group companies. We believe she will continue to contribute her expertise and experience to Aeon Mall management.
Takao Muramatsu Muramatsu Tax Accountants President No business relationship Mr. Muramatsu contribute advice and oversight based on his extensive knowledge in tax matters stemming from his experience at the Regional Taxation Bureau, as well as his experience as a director and member of the Audit & Supervisory Board at other companies. He will continue to contribute his expertise and experience to Aeon Mall management. We believe Mr. Muramatsu qualifies as an independent officer having no relationships that may result in a conflict of interest. He is not a shareholder of Aeon Mall, nor does he have any personal relationships with major Aeon Mall transaction partners.
Besterra Co., Ltd
Serendip Consulting Co., Ltd
Outside Audit & Supervisory Board Member
Globeride, Inc. Outside Director (member of the Audit & Supervisory Board, etc.)
Emi Torii Nozomi Sogo Attorneys at Law Partner No business relationship Ms. Torii possesses experience and expertise as an attorney related to corporate law. We have selected her to contribute opinions and viewpoints to Aeon Mall management from the standpoint of legal matters. We believe Ms. Torii qualifies as an independent officer having no relationships that may result in a conflict of interest. He is not a shareholder of Aeon Mall, nor does he have any personal relationships with major Aeon Mall transaction partners.

Remuneration for Directors and Audit & Supervisory Board Members (FY2018)

a. Aggregate Remuneration by Director Category, by Remuneration Type, and Number of Applicable Directors

Director Classification

Total Compensation
(millions of yen)

Total Compensation by Category (millions of yen)

No. of Eligible Directors

Base Compensation

Stock Options

Director Bonuses

Directors (Excluding Outside Directors)

273

171

34

67

12

Members of the Audit and Supervisory Board (Excluding Outside Members)

Outside Directors

36

36

6

Note:
1. The above does not include one (1) director and two (2) corporate Audit & Supervisory Board Members (of which one retired at the conclusion of the regular general meeting of shareholders held on 16 May 2018) who were not paid compensation.
2. Resolved at the general meeting of shareholders:
Directors:
Monetary Compensation Ceiling JPY 700mn (17 May 2007)
Stock Option Compensation Ceiling JPY 100mn (17 May 2007)
Audit & Supervisory Board Members:
Compensation Ceiling JPY 50mn (8 May 2002)
3. The following is included in the above aggregate compensation numbers.
-Director bonuses of JPY 67mn (for the existing ten directors as of 28 February 2019 and does not include 2 directors and 2 outside directors not receiving compensation).
-Compensation made via stock options were JPY 34mn (for the existing 9 directors as of 10 May 2018 and does not include 1 director not receiving compensation).

b. Aggregate consolidated remuneration by director for submitting companies Omitted owing to lack of individuals with aggregate remuneration equal to or in excess of JPY 100 million.

c. Important items relating to remuneration of employees also serving as directors No relevant items.

d. Policy regarding director compensation decision-making
Director compensation is composed of a base and a performance component.
The ceiling amounts are determined at the general meeting of shareholders.
Actual payments to the directors are made within the ceilings based on such factors as responsibilities and business performance.
Compensation to the members of the Audit & Supervisory Board are made within ceiling levels as determined by the general meeting of shareholders.
Payment amounts are determined following discussions with the corporate Audit & Supervisory Board Members.

Number of Board of Directors, Selection Process of Board of Directors

The number of the Company's Board of Directors is stipulated within the Articles of Incorporation at 20 or below.
Resolution relating to the selection of the Board of Directors at the Company is conducted at the general meeting of shareholders.
It is stipulated within the Articles of Incorporation that of those shareholders able to exercise voting rights, those in possession of at least one-third of the voting rights attend the meeting, and that resolution be attained via a majority of those voting rights in attendance.
Noted that resolution relating to the selection of the Board of Directors is conducted on a non-cumulative basis.

Resolution Items of the General Meeting of Shareholders that can be Resolved by the Board of Directors

a. Decision Making Body Regarding Dividends of Surplus Cash
The Company's Articles of Incorporation stipulates that resolution for such items as the payment of dividends from surplus cash, as dictated in Section 1 of Article 459 of the Company Law and unless stated otherwise, can be implemented via resolution of the Board of Directors and not be dependent on resolution by the general meeting of shareholders.
By placing the likes of payment of dividends from surplus cash under the jurisdiction of the Board of Directors, the aim is to allow for expeditious payout of shareholder returns.

b. Share Repurchase (Buybacks) Based on Section 2 of Article 165 of the Company Law, the Company's Articles of Incorporation stipulates that share buybacks through such means as market transactions can be implemented via resolution of the Board of Directors. The aim here is to allow for expeditious implementation of capital policy.

Status of Equity Holdings

a. Investment Securities Held for Reasons Other than Pure Investment Purposes
Number of Companies
17 Companies
Aggregate Balance Sheet Value
JPY 2,359 million

b. Investment Securities Held for Reasons Other than Pure Investment Purposes: Company name, No. of Shares, Balance Sheet Value, Purpose of Holding (excludes non-publicly traded securities)

FY2017
Specific Investment Securities

Name No. of Shares Owned Amount Posted to Balance Sheet
(millions of yen)
Purpose of Share Holdings
HotLand Co.,Ltd 560,000 725 To encourage and maintain positive business relations
AEON Fantasy Co.,LTD 114,998 567 To encourage and maintain positive business relations
G-FOOT Co., Ltd. 520,000 400 To encourage and maintain positive business relations
AEON DELIGHT CO., LTD. 97,500 366 To encourage and maintain positive business relations
ÆON KYUSHU Co., Ltd. 120,000 234 To encourage and maintain positive business relations
MAXVALU NISHINIHON Co., Ltd. 58,460 105 To encourage and maintain positive business relations
DCM Holdings Company, Limited 80,850 85 To encourage smooth conduct of business activities
MINISTOP CO.,LTD. 14,641 32 To encourage and maintain positive business relations
Resona Holdings, Inc. 25,987 15 To encourage and maintain positive business relations
Mizuho Financial Group, Inc. 59,520 11 To encourage and maintain positive business relations
ZWEI CO., LTD. 10,000 7 To encourage smooth conduct of business activities
Saibo Co., Ltd. 1,000 0 To encourage and maintain positive business relations

FY2018
Specific Investment Securities

Name No. of Shares Owned Amount Posted to Balance Sheet
(millions of yen)
Purpose of Share Holdings
HotLand Co.,Ltd 560,000 798 To encourage and maintain positive business relations
AEON DELIGHT CO., LTD. 97,500 403 To encourage and maintain positive business relations
G-FOOT Co., Ltd. 520,000 344 To encourage and maintain positive business relations
AEON Fantasy Co.,LTD 114,998 304 To encourage and maintain positive business relations
ÆON KYUSHU Co., Ltd. 120,000 249 To encourage and maintain positive business relations
MAXVALU NISHINIHON Co., Ltd. 58,460 104 To encourage and maintain positive business relations
DCM Holdings Company, Limited 80,850 87 To encourage and maintain positive business relations
MINISTOP CO.,LTD. 14,641 27 To encourage and maintain positive business relations
Resona Holdings, Inc. 25,987 13 To encourage and maintain positive business relations
Mizuho Financial Group, Inc. 59,520 10 To encourage and maintain positive business relations
ZWEI CO., LTD. 10,000 7 To encourage and maintain positive business relations
Saibo Co., Ltd. 1,000 0 To encourage and maintain positive business relations

c. Investment securities held for pure investment purposes
No relevant items.

Auditor Remuneration Detail

1, Detail of Remuneration of Audit Certified Public Accountants

Category FY2017 FY2018
Compensation for Audit and Attestation Services
(millions of yen)
Compensation for Non-Audit Services
(millions of yen)
Compensation for Audit and Attestation Services
(millions of yen)
Compensation for Non-Audit Services
(millions of yen)
AEON MALL Co., Ltd. 78 4 82 15
Consolidated Subsidiaries 18 18
Total 96 4 100 15

2, Other Important Remuneration Items

(FY2017 and FY2018)
A number of the Company's consolidated subsidiaries makes payment of audit remuneration to member firms of Deloitte Touche Tohmatsu Limited which belongs to the same network of the Company's Audit Certified Public Accountant.

3, Detail of non-audit services provided by Audit Certified Public Accountants to submitting companies

(FY2017)
Payments by the Company to Audit Certified Public Accountants for non-audit services relate to preparation of comfort letters.

(FY2018)
Payments by the Company to Audit Certified Public Accountants for non-audit services relate to advice and guidance about International Financial Reporting Standard (IFRS) and preparation of comfort letters.

4, Policy on Determination of Auditor Remuneration

(FY2017 and FY2018)
Remuneration is determined by considering such factors as number of auditing days.