A securities analyst and an AEON MALL outside director conducted an interview-style discussion regarding the current status and issues in the AEON MALL management structure and strategy.

Activities of the Nomination and Compensation Committee

Yoshihiro Hashimoto: The markets expect outside directors to play a role in supervising Company management. Director Koshizuka, how are you involved in management oversight at AEON MALL, and what is your opinion of the management team? Please begin by describing the activities of the Nomination and Compensation Committee, which you chair.

Kunihiro Koshizuka: Under the rules of the Nomination and Compensation Committee, five outside directors provide independent assessments of the appropriateness of performance-based remuneration for the president and each director in light of individual tasks and KPIs established at the beginning of the fiscal year. Then, we compare the results of each outside director's assessments.
In our experience, the assessments are often in agreement. We submit a final report to the board of directors after a last discussion with the president, but the draft advisory report respects the assessments of the outside directors.
In this time of VUCA, we conduct rigorous assessments based on a comparison of targets and results in the event of a miscalculation of a business environment that is far beyond the scope of an individual's capacity. In light of the purpose of a compensation plan to motivate employees, we consider whether the system is fair and accurate, and a reflection of the shareholder perspective. We also want to continue discussions on whether to separate evaluation periods into much shorter time frames to account for unforeseen circumstances.
Apart from these assessments, the Nomination and Compensation Committee discusses succession plans and policies for developing candidates for director positions. We also meet directly with candidates to provide advice that enhances their perspective. Until last year, the Nomination and Compensation Committee had served as an advisory body to the president. Beginning this fiscal year, the committee is now an advisory body to the board of directors. The substance of our activities has not changed, but the structure has improved in terms of transparency, fairness, and rationality.

The AEON MALL Medium- to Long-Term Strategy

Hashimoto: How does the board of directors discuss AEON MALL strategy from a medium- to longterm perspective among the management team? Are these discussions in response to the activities of the Management Strategy Advisory Committee? And how do you make recommendations on business strategy,especially from your expert perspective of DX?

Koshizuka: The Management Strategy Advisory Committee and the board of directors have been discussing medium- to long-term strategy since fiscal 2022. Outside directors and members of the Audit & Supervisory Board provide advice from different perspectives, and the bodies I just mentioned deliberate from a viewpoint somewhat distant from the management team.
As an example, I was a specialist in DX and technology at my previous job. I provide this experience and expertise by speaking at meetings of the Management Strategy Advisory Committee and board of directors.
I also engage in dialogue directly with the younger leaders of the departments for which I am responsible.
I train newly appointed executive officers and share ideas as a person with experience from a different background. AEON MALL is in a position fighting as Japan's champion in mega-competition with renowned global companies. To trigger innovation and secure competitive advantage will require the Company to truly raise its sights, backcast from observations about the future, and continue to evolve its vision.

Transactions With AEON Group Companies

Hashimoto: What is your view as an outside director on the advantages and disadvantages of intragroup transactions? This question includes the fact that AEON Group general merchandise companies are anchor tenants. Do you think the Group enjoys synergistic relationships?

Koshizuka: There are advantages and disadvantages.
The first advantage is AEON Group general merchandise companies and other group subsidiaries such as AEON Card, WAON, and private brands increase the potential for one-stop services for AEON MALL as a stand-alone publicly listed company. In particular, the general merchandise companies are important strategic partners in that they create a significant incentive for weekday trips to the mall and drive customer traffic.
The Group relationship also facilitates speedy decision-making and scalability, fostering social contributions that include making malls disaster relief facilities in the event of an emergency, venues for vaccinations, and early voting poll stations. To go further, the AEON Group name is what generates brand power overseas.
Conversely, we can say the same for the presence of AEON MALL in each AEON Group company.
Although part of a larger group, each company is independent to ensure transparency, rationality, and fairness for group development and mutual growth. I understand that AEON MALL offers tremendous value as both a subsidiary and an independent operator.

In this era of global war among corporate giants, companies will survive or fail depending on how they use data and AI. The conglomerate advantage of the AEON Economic Bloc is a significant weapon for competing in Asia and globally. Data is the Company's lifeline, and AEON MALL must leverage data even further while using the Group's comprehensive strengths to generate new customer value, digital innovation, and other tangible competitive advantages.
One disadvantage is the energy required to provide detailed explanations and maintain transparency, fairness, and rationality on behalf of customers, tenants, shareholders, and other interested parties. We are not aware of any unfair favoritism or pressure on or from AEON Group companies. But constant vigilance and supervision will continue to be necessary, even if the majority of board members consists of outside directors.

Future Outlook

Hashimoto: Various issues emerged during the COVID-19 pandemic. Now that the pandemic is winding down, customer lifestyles are returning to normal, including fewer customers wearing masks, even in Japan.
It seems that many reasons are returning that will make AEON MALL a good investment from the investor's point of view. What is your future outlook?

Koshizuka: Speed is the key to overseas business. While we must account for the situation in each country, there appears to be room for growth through increased profits. AEON MALL covers Japan to a certain extent, but the Company believes in the need for more market share in its market areas, adding greater depth of value, attracting the support of greater numbers of customers and becoming the overwhelmingly dominant mall in each region. We also recognize that customer needs are changing. We must discuss medium- to long-term strategy in the context of whether the winning formula of expansion via new suburban malls will remain relevant.
In pursuit of the 2030 Vision of co-creating with our communities, AEON MALL desires to contribute to communities as a central hub. The Company must become a Life Design Developer that provides wellbeing for local customers beyond the so-called commercial agglomeration functions. So it is important to look beyond the shopping mall itself, viewing the mall from a higher perspective as a community hub offering services truly needed by customers, supporting local production for local consumption, providing renewable energy, education, and jobs, and even disaster relief. AEON MALL must always consider the value it can provide to address the concerns and issues faced by its communities. The idea underlying the 2030 Vision is to rethink AEON MALL in the context of local communities. AEON MALL management will grow the Company overseas at a higher speed to generate profits. In Japan, we will see the Company establish an overwhelmingly dominant presence in every region. Demonstrating this aggressive stance in concrete terms and making the Company more attractive as an investment will lead to share price recovery and, by extension, higher levels of corporate value.

Hashimoto: Thank you for your time today.

Koshizuka: Thank you for the opportunity.