AEON Mall : Corporat e Governance Report

Corporate Governance Report

Last Update: April 8, 2022

Aeon Mall Co., Ltd.

President & CEO Yasutsugu Iwamura

Contact: Strategy Dept, IR Group

Securities Code: 8905https://www.aeonmall.com/en/ir/index.html

This document describes corporate governance at Aeon Mall Co., Ltd ("Aeon Mall" or "the Company").

I. Basic Approach to Corporate Governance, Capital Structure, Corporate Profile and Other Basic Corporate Information

1. Basic Approach

Aeon Mall is a Life Design Developer, creating the future of community living as we pursue our basic principle that the customer comes first. Life Design extends beyond the framework of the shopping mall. Life Design addresses functions associated with different community customer life stages, including not only shopping, but also interaction with other people, cultural development, and other features contributing to future lifestyles.

We develop malls localized to the characteristics of each community we serve in Japan and around the world. In this way, we contribute to better individual lifestyles and community growth. Through growth initiatives in our long-term vision and medium-term management plans, we will continue to provide solutions to regional and social issues, establishing our position through social infrastructure functions to be a central facility for the local community. We recognize the importance of corporate governance in accomplishing this vision and we work continually improve our corporate governance structure.

Basic Stance for Corporate Governance

(1) We provide a consistent and fair environment to support shareholder rights and the execution of said rights. We work in cooperation with shareholders toward the goal of sustainable growth.

(2) Our board of directors and senior management exercise proper leadership in fostering a corporate culture that respects the rights and perspectives of customers, communities, employees, partner corporations, and stakeholders, conducts business activities ethically, and engages in a positive approach to sustainability. (3) We have created a Disclosure Policy and Rules for Managing Information Disclosure to address disclosure of financial and nonfinancial information. Guided by these policies, we ensure transparency and fairness through appropriate and clear information disclosure.

(4) Our board of directors consists of individuals with diverse experience and expertise, helping Aeon Mall capitalize on our background as a retail developer. We appoint independent outside directors to strengthen our supervisory function and conduct highly transparent business. Our board of directors determines important strategies and measures to achieve our long-term vision and medium-and long-term plans.

(5) We incorporate feedback and input received through constructive dialogue with shareholders to improve our corporate value.

The Shareholder and Investor Information pages on the Aeon Mall corporate website provide more information related to our basic stance for corporate governance.https://www.aeonmall.com/en/ir/index.html

Reasons for Non-Compliance With the Principles of the Corporate Governance Code

Aeon Mall adopts and implements every principle defined under the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code]

[Principle 1-4. Cross-Shareholdings]

The Aeon Mall policy on cross-shareholding is to hold shares for the purpose of contributing to improved Aeon Mall Group corporate value over the medium and long term. This policy considers a number of factors including business strategy and business relationships.

Our board of directors meets to review individual cross shareholdings on an annual basis, considering the purpose for holding shares, risks involved in holding shares, the cost of capital, and other economic rationale on a comprehensive basis, determining the reasonableness for cross-shareholdings. We consider selling shareholdings when deemed as having little significance, considering the impact of such sales on the markets. We disclose the results of such sales publicly.When exercising voting rights of cross-held shares, we verify whether each proposal contributes to the medium- and long-term improvement in Aeon Mall corporate value and whether said proposal holds the potential to damage our corporate value. As necessary, we hold discussions with the issuing company as part of our overall decision-making process.

[Principle 1-7. Related-Party Transactions]

Aeon Mall has established a system to ensure transactions with officers or major shareholders (related-party transactions) do not infringe on the interests of the Company or our shareholders.

1. We engage in prior deliberations via the Governance Committee, consisting of independent outside directors, and carefully consider in board of director deliberations whether competitive transactions by directors and transactions involving conflicts of interest between directors and Aeon Mall infringe on the interests of the Company and our shareholders. Our investigations include consulting with experts regarding the reasonable nature of the transactions in question. The Company ensures fairness in this process through a number of means, including recusing directors having special interests in transactions with the Company from voting in the resolution.

2. When the company enters into transactions with related parties, we clarify the identity of such parties in our Related Party List according to the provisions of our Rules for Managing Related-Party Transactions. We ensure objectivity in transaction terms through rules that include providing comparison tables in period-end financial reports that show examples of transactions with non-related parties. According to the importance and nature of the transaction in question, we comply with our Authority Rules in soliciting opinions from outside directors and members of the Audit & Supervisory Board during board of director meetings regarding the rationality (business purpose) and reasonable nature of the transaction terms. On an annual basis, we investigate the rationality and reasonableness of transactions, issuing a report on the annual increase or decrease in transactions with related-party companies.

[Principle 2-4. Ensuring Diversity, Including Empowering Women]

Aeon Mall respects human rights and is committed to diversity management that allows each individual, regardless of gender or nationality, to fully express their abilities, and we aim to secure higher levels of diversity within our organization. In this context, we strive to create a system that empowers women. Specifically, we encourage an awareness of internal and external systems for female employees from maternity leave to recommencement of work, we expand the presence of AEON Yume-Mirai Nursery Schools within our facilities, and increase training and other educational opportunities to foster motivation and career aspirations for women. In addition to encouraging women, we also encourage male employees to take childcare leave. We urge male employees to report to their supervisors or the Human Resources Department when their spouse is pregnant and for such male employees to take leave. We strive to eliminate the stereotyped roles of men and women, pursuing the empowerment of women by spreading an understanding among superiors and in workplaces regarding the advancement of women to executive positions. These efforts have earned us Kurumin award as a company that actively supports balance between work and child-rearing. We have also been selected as a Nadeshiko Brand company that excels in empowering women.

[Supplementary Principle 2-4-1. Ensuring Diversity in Core Personnel Hiring]

We believe that human resources are the greatest management resource for sustainable growth. Based on this belief, we strive to become an organization that leverages diversity for strength, where all employees are healthy and can continue to grow and express their abilities without limit.

In particular, we are convinced that we will develop creative business models through the exchange of opinions from different perspectives in response to changes in society and employee needs. At the same time, we pursue diversity management, facilitating a diverse based of human resources to play active roles in our organization. To this end, we have established a variety of human resource development and education programs to support employee growth. Within this context, we describe our progress in empowering women in Principle 2-4. In conjunction with the globalization and digitalization of our business, we actively recruit mid-career professionals, particularly those with experience working overseas and who are fluent in digital technologies. Our basic policy for human resources overseas is to engage in management tied to local communities by hiring local staff overseas who have a deep understanding of the Aeon Mall philosophy. We promote individuals to management positions who have a record of achievement, regardless of their nationality.

[Principle 2-6. Functions as a Corporate Pension Asset Owner]

Aeon Mall is a member of the Aeon Corporate Pension Fund. This fund is managed to ensure the total income required over the long-term, within the scope of acceptable risks, to provide pension benefits and lump-sum payments to beneficiaries over the future. Policy asset allocation structures are created in regulator reviewed in consideration of the financial status of the plan and opinions of outside experts. An Asset Management Committee consisting of individuals assigned to our finance department and outside specialists has been established for this fund, which selects investment products and provides quarterly monitoring of performance. Decisions are made by a committee of delegates to maximize beneficiary returns and manage conflicts of interests in an appropriate manner. This committee of delegates includes one delegate from Aeon Mall.

[Principle 3-1. Full Disclosure]

(i) We formulated a current medium-term management plan (FY2020-FY2022), which we launched in fiscal 2020. This plan outlines four growth policies: (1) Achieve high profit growth overseas; (2) Achieve stable growth in Japan; (3) Build a financing mix and governance structures supporting growth; and (4) Pursue ESG-based management. We aim to achieve sustainable growth together with local communities through ESG-oriented management from the perspective of creating social, environmental, and economic value. We have identified management issues and our aspirations for the future in our pursuit of growth initiatives: (1) achieve profitable growth in overseas businesses and accelerate new mall openings, (2) maximize the appeal of brick-and-mortar malls by creating customer experiences (CX), (3) build next-generation malls and pursue the urban shopping center business, (4) promote digital transformation (DX), and (5) plan and pursue medium-term strategies, while accelerating reforms based on ESG perspectives. Through these efforts, we will continue to provide solutions to regional and social issues, establishing our position through social infrastructure functions to be a central facility for the local community.

See our corporate website for more about our management philosophy, management vision, and medium-term management plan:https://www.aeonmall.com/en/ir/index.html

(ii) For our basic views on corporate governance, see 1. Basic Approach in this report.

The Aeon Co., Ltd. Corporate Governance Basic Policy defines the basic stance of Aeon Mall and the rest of the Aeon Group related to corporate management and control.

(iii) Aeon Mall director compensation is determined by resolution of the board of directors in consideration of job responsibilities, company performance, and other factors, subject to deliberations of the Nomination and Compensation Committee (consisting mainly of independent directors) regarding director performance evaluations and compensation levels. Compensation is paid within the scope determined by resolution at the annual general shareholders' meeting.

Compensation for members of the Audit & Supervisory Board is determined according to negotiation with said members, subject to the scope determined by resolution at the annual general shareholders' meeting. (iv) The president and CEO suggests director candidates for nomination. The Nomination and Compensation Committee then discusses the candidates. Having listened to the opinions of independent directors, the board of directors resolves to submit said candidate for approval by the annual general shareholders' meeting.

Director Candidate Nomination Standards

- Individual possesses a character and sense of ethics appropriate for a director

- Individual possesses a deep knowledge of business management and ability to make objective judgments, as well as superior foresight and insight

• - Individual has no interests or business relationships that may affect their execution of duties as a director

• - Individual possesses a global perspective and philosophy necessary for international business expansion

• - In addition, individual must possess those qualities demanded of a director from an aspect of corporate governance designed to ensure sound management and improved transparency for a publicly traded company

Nominations of candidates for member of the Audit & Supervisory Board are proposed by the president and chief executive officer according to the standards as provided below. Nominations are determined by Board resolution after discussion with the Audit & Supervisory Board, and are presented to the annual general shareholders' meeting for approval.

Audit & Supervisory Board Member Candidate Nomination Standards

• - Individual possesses an unbiased and fair attitude, conducting themselves according to their own beliefs

• - Individual possesses a knowledge of business management and ability to make objective judgments

• - Individual is aware of business issues from experience in general business management

• - Individual has no interests or business relationships that may affect their execution of duties as a member of the Audit & Supervisory Board

- Individual has considerable knowledge of finance and accounting, or has skills, expertise, and experience in a specialized field

Individuals judged objectively and rationally as not meeting the nomination standards above, and for whom executing duties as a candidate for director is deemed to be difficult, shall be dismissed.

In addition, we have established the Nomination and Compensation Committee, consisting mainly of independent directors, which studies training plans, etc. to provide managers (including manager candidates) with the necessary standards, career development, and training content, which are then submitted for deliberation to the board of directors to ensure highly transparent and fair procedures.

(V) Aeon Mall provides the reasoning behind appointment of each candidate for outside director and outside member of the Audit & Supervisory Board in Directors, Outside Director Relationship with the Company (2) and Audit & Supervisory Board Members, Outside Director Relationship with the Company (2). We disclose the reasoning behind the appointment of each internal candidate for director and member of the Audit & Supervisory Board in reference materials provided to the annual general shareholders' meeting.

[Supplementary Principle 3-1-3. Sustainability Initiatives]

To achieve sustainable growth, we address management strategically from an ESG perspective, creating economic, social, and environmental value for stakeholders, while implementing a variety of related measures. We are proactive in sharing information both internally and externally, striving to enhance Aeon Mall branding and the awareness of our executives and employees.

Aeon Mall human resources are the most important management resources for sustainable growth. Based on this policy, we pursue growth strategies by investing in our human resources, aiming to be a company that fosters diverse human resources who are healthy and have the opportunity to exercise their talents. We pursue diversity management to create new business models to adapt to the changes in society and the diversification of employee needs. This management style allows a diverse base of human resources to exercise their talents. At the same time, we are developing various human resources training and education programs to support human resources development. These efforts to invest in human capital have been well received among external organizations. Recognitions include selection as a Nadeshiko Brand company excelling in empowering women, as well as certification as a Certified Health and Productivity Management Outstanding Organization, confirming our excellent practices in health management.

We believe that our greatest intellectual property is the practice of management based on the principle that The Customer Comes First, as described in our basic philosophy. Aeon Mall belongs to a corporate group headed by Aeon Co., Ltd. (pure holding company. The Aeon Basic Principles defines the group position of "Pursuing peace, respecting humanity, and contributing to local communities, always from the customer's point of view," and we engage in activities guided by the Aeon Code of Conduct (codified in April 2003) to build a brand of trust. We manage and operate approximately 200 facilities in Japan and overseas based on these Aeon brands and values Our unique strengths include our overwhelming scale of operations and ability to attract approximately 1.2 billion customers annually, a strong network of approximately 8,000 specialty store companies, mutual cooperation with local governments through disaster-response agreements, and operational expertise to provide customers safety, security, and comfort.

As part of our decarbonization efforts in conjunction with AEON Decarbonization Vision 2050, we aim to reduce the total amount of our CO2 emissions in Japan to zero by 2040. To date, we have streamlined air-conditioning operations, introduced high-efficiency and energy-saving equipment, installed solar systems on mall rooftops, and installed LED lighting, targeting a 50% reduction in energy consumption for 2020 as compared to 2010. In 2020, we achieved a 55.1% reduction in energy consumption (per unit of floor space) compared to 2010. In addition to continuing these reduction measures, we have set a new goal of operating all AEON MALL locations in Japan (all major facilities) with effectively CO2-free electricity by FY2025. We will accomplish this goal by procuring electricity from off-site renewable energy sources and by pursuing direct renewable energy contracts in each region. Since the majority of CO2 emissions are generated by electricity use, this goal will result in an 80% reduction of total domestic CO2 emissions for AEON MALL in 2025 as compared to 2013. In addition, we will accelerate our efforts to achieve a decarbonized society in Japan and overseas, aiming to reduce the total amount of CO2 and other emissions from all our business activities to zero.

In June 2020, we declared our support for the Task Force on Climate-related Financial Disclosures (TCFD), a task force for information disclosure of business risks and opportunities posed by climate change. Referencing the climate change scenarios under the Fifth Assessment Report of the United Nations Intergovernmental Panel on Climate Change (UN IPCC), we have selected the 2°C and 4°C scenarios. The time frame of our analysis encompasses the impact of climate change in the year 2050. We are conducting scenario analyses based on these assumptions to estimate the impact of climate change. To identify risks and opportunities, we used outside information to organize the major climate change risks and opportunities in Japan, China, and parts of ASEAN where we conduct our mall business. We then collected future forecast data in connection with each risk and opportunity. Based on this analysis, we examined the risks and opportunities associated with the transition to a decarbonized society. We also examined the physical risks and opportunities arising from climate change. In this way, we identified the key risks and opportunities that could affect our business as we head toward the year 2050. As we conduct further scenario analyses in the future, we will address not only qualitative assessments, but also quantitative impact assessments to understand the extent of financial impact due to climate change. Based on these analyses, we will strive for appropriate information disclosure.

We communicate these specific efforts through ESG reports, integrated reports, ESG data books, and IR materials for investors.

[Supplementary Principal 4-1-1. Board of Director Roles and Responsibilities (1) (Scope of Delegation of Authority to Management)]

The Company clearly defines matters to be discussed at meetings of the Board of Directors based on Board of Director Rules and in accordance with relevant laws and regulations. Aeon Mall defines detailed responsibilities and procedures for directors, clearly assigning management responsibilities and granting authority and responsibility for directors to execute their respective duties, according to Rules for Organization Management, Rules for Segregation of Duties, Rules of Jurisdiction, and Rules for Approval Requests.

[Supplementary Principle 4-3-1. Board of Director Roles and Responsibilities (3) (Appointment and Dismissal of Management)]

To ensure active deliberations and rapid decision-making, the Aeon Mall board of directors consists of not more than 20 members according to the Company's corporate charter. At present, five of the total 13 board members are independent outside directors.

The president and CEO suggests director candidates for nomination. The Nomination and Compensation Committee then discusses the candidates. Having listened to the opinions of independent directors, the board of directors resolves to submit said candidate for approval by the annual general shareholders' meeting.

[Principle 4-9. Independence Standards and Qualification for Independent Outside Directors]

The Company complies with the independence standards set by the Tokyo Stock Exchange for the election of independent outside directors. We have designated five independent directors from outside directors who qualify as independent directors, providing notification to the Tokyo Stock Exchange.

[Independence Standards for Outside Directors]