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Corporate Governance

Basic Policy on Corporate Governance

1- Purpose and Significance of the Basic Policy on Corporate Governance

The Basic Policy on Corporate Governance sets out the Aeon Group’s (hereafter “Aeon”) basic stance on corporate management and corporate governance and pure holding company (hereafter the “Company”) policy concerning its corporate governance system and serves as a guideline for all corporate activities. Institution, amendment, and abolition of this policy shall be subject to approval of the Company’s Board of Directors.

2- The Company that Aeon Aspires to Be

Ever since its founding, Aeon has remained customer focused and adhered to the conviction that unstinting contribution to customers and local communities and realization of employee happiness are the timeless mission of the retail industry.

In keeping with these values, Aeon has set forth the Basic Principles of “pursuing peace, respecting humanity, and contributing to local communities, always with the customer’s point of view as its core” and used it as a guideline for all corporate activities.

As expressed in the Basic Principle, Aeon believes that the retail industry is a “peace industry,” a “people industry,” and a “community industry” whose core is the customer, and the entire Aeon Group strives to realize this principle.

The term “peace industry”expresses our belief that the retail industry must continually pursue peace because its very existence depends on peace and that the prosperity of the retail industry is a symbol of peace.
The term “people industry”indicates that retailing is an industry that respects people, believes in the potential of people, and places importance on human ties and bonds and, above all, is an industry whose most important asset is people, namely, employees.
By “community industry,” we mean that the retailing industry must play an essential role in local communities by taking into account local culture, history, and climate, taking root in people’s daily lives, and contributing to the development of communities and maintenance of a healthy natural environment.

On the basis of this unwavering principle, we aspire to be a “corporate group with its ever-lasting innovative spirit.”To realize this, we have emphasized and fostered a corporate culture of continuously taking on challenges without fear of risk and flexibly adapting to change.

At a time when Aeon’s business scale and business domains are expanding and the number of countries and regions in which Aeon does business is increasing, all of the group’s businesses, including retailers, developers, financial services companies, and service providers are working in unison to put this Basic Principle into practice over time through ceaseless innovation.

The pace and degree of change will continue to increase in the coming business environment. Aeon believes that in such an environment a spirit of growing and developing together with all stakeholders, taking customers as the starting point, will become all the more important.

Customers find greater value in the realization of a sense of well-being than in satisfaction of physical needs: examples of this are the desire to live in physical and mental health and the desire to engage in work rooted in their local communities and to live comfortably in those communities. Companies must now respond to such new customer values. At the same time, local communities are grappling with various issues, such as energy and environmental problems and economic disparity, and the role companies play insolving these problems facing local communities is becoming increasingly important.

To respond to new customer and community expectations towards companies and the increased importance of responsibilities that companies are expected to fulfill, companies must not only pursue profits, but also contribute more than ever to the realization of prosperity and a sense of well-being for communities as a whole from a long-term, sustained perspective as caring corporate citizens.

On the basis of this recognition, we have set forth the basic concept of values, management stance and corporate governance to be emphasized in Aeon’s corporate governance in the following Basic Stance on Corporate Governance and have enacted and published the Basic Policy on Corporate Governance, with the Basic Stance at its core,in order to continue into the future to practice management grounded in a long-term perspective built on the Basic Principle and Aeon’s DNA of innovation.

Basic Stance on Corporate Governance

Value Creation through Customer Orientation and Frontline Focus At Aeon, we consider realization of a sense of well-being for customers our most important mission. We pursue optimal value creation adapted to changing customer needs by focusing tightly on the frontline of the business, our point of contact with customers, and by always thinking with customers as the starting point.

Respect for People, Our Most Important Management Resource By respecting employees, placing importance on diversity, and actively providing education opportunities in keeping with the conviction that people are the most important management resource, Aeon aspires to be a company made up of employees who strive for self-growth, are linked by strong bonds, and find their greatest pleasure incontributing to customers.

A Posture of Developing Together with Local Communities As a member of local communities and a caring corporate citizen, Aeon seeks to develop together with our fellow community members, namely our customers, employees, shareholders, and business partners, and to contribute to the prosperity of local communities, sustainability of the natural environment, and peace.

Sustained Growth Based on a Long-Term Perspective and Ceaseless Innovation To continue to meet the expectations of customers and local communities, Aeon strives for sustained growth accompanied by value creation from a long-term perspective and management focused on sustained value enhancement for the entire group by undertaking ceaseless innovation to cope with a changing business environment.

Pursuit of Transparent, Disciplined Management Aeon strives for transparent and disciplined management by seeking proactive dialogue with customers and other stakeholders, taking their evaluation seriously, and being self-disciplined at all times.

3- Management Stance Based on Aeon’s Basic Principles

Business Activities

  • ・Aeon has established and ensures groupwide adherence to the Aeon Code of Conduct to enable employees to behave in accordance with the Basic Principles in every aspect of business activities.
  • ・As a pure holding company, the Company formulates management policies to which the group should aspire, optimizes allocation of management resources, and creates cross-business synergies for the purpose of transcending the framework of the group’s businesses and companies and putting into practice the value creation for customers and local communities articulated in the Basic Principles.

Employees and Human Resources

  • ・Aeon respects its employees, the Group’s most important management resource, who are responsible for creating value for customers.
  • ・Aeon respects the human rights of employees, never discriminates based on nationality, ethnicity, gender, academic background, religion, physical or mental disability, or other reason, provides fair and equitable evaluation, and uniformly provides opportunities for employees to learn, grow, and demonstrate their abilities.
  • ・Aeon promotes the cultivation and utilization of human resources, including workforce diversity, to practice innovative management that takes advantage of diverse values.

Environmental and Social Contributions

  • ・Aeon contributes to local communities through its businesses.
  • ・To promote sustainable management, Aeon has instituted the Aeon Sustainability Principle and engages in initiatives for realization of a low-carbon society, conservation of biodiversity, effective use of resources, and addressing social issues as particularly important tasks.

Internal Control and Risk Management

  • ・To fulfill its responsibilities to all stakeholders, Aeon will ensure management transparency and fairness,strive to practice sustainable and stable management, and constantly progress development of internal control-related systems, compliance and risk management as mechanisms to support this management.
  • ・With regard to internal control initiatives, Aeon develops thorough check system in the Internal Audit Office and promotes the most suitable organizational operation. Aeon strives to ensure the practice of compliance through inculcation of compliance learning and practice among all employees, including executive management, and compliance status monitoring and reporting to the Audit Committee by the Internal Audit Office.
  • ・The Representative Executive Officers and all other Executive Officers take responsibility for leading risk management. Aeon has set up the Risk Management Committee, which led by Chief Administration Officer of Risk Management, as an organization in charge of risk management under the control of the Aeon Management Committee and prepared against a variety of risks and crises by developing a cross-business management system. In addition, we have established the Basic Business Continuity Plan, which includes preparation of a supply system for relief supplies under a cooperative framework with business partners and utilization of business sites as community disaster management bases and strive to strengthen business continuity in response to risks.

Stakeholder Communications

  • ・In the interest of practicing sustainable management that develops together with all stakeholders, and enhancing corporate value from a long-term perspective, Aeon is highly transparent in providing information to stakeholders and engages in constructive stakeholder dialogue.
  • ・Aeon considers the views of customers the core of management and supports customers’ right to know through proactive dissemination of information and dialogue. We also ascertain customer expectations and requests towards Aeon and make good use of customer opinions in management.
  • ・In the interest of enhancing corporate value from a long-term perspective, for shareholders, Aeon’s partners in management, we practice highly transparent management through easy-to-understand, accurate, and prompt disclosure of information on matters such as management policies and the financial situation. We strive for open management that reflects the views of shareholders by arranging regular forums for dialogue in addition to the General Meeting of Shareholders.
  • ・Aeon respects its business partners, who are essential to the practice of innovative business development, and aims for mutual prosperity through fair trading based on appropriate procedures and trust.
  • ・Aeon strives to put into practice its Personnel Management Principles namely, “Listen to the aspirations of employees, know the hearts of employees, and bring out the best in employees” by arranging various opportunities to listen to the views of employees. We also ascertain the views of employees through dialogue with the labor union, which represents Aeon employees, and strive for management innovation that incorporates the views of employees.

Financial and Capital Policies

  • ・Aeon pursues corporate value enhancement through sustained growth and improvement in profitability and capital efficiency and strives to strengthen its financial base over the longterm.
  • ・Aeon aims to build a long-term partnership with shareholders and strives to provide shareholder returns through stable dividends and sustained corporate value enhancement.
4- Corporate Governance

Corporate Governance System

  • ・The Company has adopted a “company with a nomination committee and other committees system” as the optimal corporate governance system to practice management based on a Basic Principle that incorporates a groupwide perspective, management that is transparent, sustainable, and stable, and ceaseless innovation with customers as the core.
  • ・The Company segregates management oversight and business execution and has instituted a governance system that realizes expeditious management decision-making through delegation of significant authority to Executive Officers. We have established the Nomination Committee, Audit Committee, and Compensation Committee, each consisting of a majority of Outside Directors, to ensure management transparency and objectivity.
  • ・The Company constantly aspires to optimal corporate governance and continually examines and reviews the governance system.

Role and Structure of the Board of Directors

  • ・The Board of Directors resolves matters stipulated by law as the Company’s management decision-making body, decides and approves basic management policies and important matters relating to business execution, and supervises the performance of duties by the Directors and Executive Officers.
  • ・To increase the effectiveness of the Board of Directors, the Board consists of an appropriate number of directors who have a broad range of experience, abilities, and professional knowledge.
  • ・To strengthen the oversight function of the Board of Directors, a majority of the directors are Outside Directors.

Operation of the Board of Directors

  • ・The chairman of the Board of Directors prepares a framework that makes possible vigorous discussion, appropriate judgment, and fair-minded oversight by the Board of Directors.
  • ・The Company reflects the insights and objective views of Outside Directors in operation of the Board of Directors by providing sufficient information to the Outside Directors by means including advance distribution of Board of Directors meeting materials, advance explanations as necessary, and sharing of important information on all aspects of management.
  • ・The Company arranges separate opportunities for discussion of the medium-term management plan, important policies, and other important issues that require intensive discussion and secures sufficient time for discussion by the directors in preparation of deliberation by the Board of Directors.
  • ・The Board of Directors discusses the previous business year’s activities and results at the meeting held after the end of the business year, shares the discussion results with the management team, and discloses a summary of the results.

Three Committees

  • ・The Nomination Committee, Audit Committee, and Compensation Committee each consists of a majority of Outside Directors and operates more objectively and transparently by electing an Outside Director as the committee chairperson.
  • ・The Audit Committee, which consists entirely of Outside Directors and is completely segregated from business execution, performs oversight to ensure that the duties of the directors and Executive Officers are performed lawfully and appropriately. The Audit Committee strives to enhance its functions through assistance from the Internal Audit Office, which is independent from the operating units, and cooperation with the external accounting auditor.

Executive Officers

  • ・The Representative Executive Officers represent the Company, deciding all matters and performing all business-related actions delegated by the Board of Directors. The Executive Officers decide matters and perform management execution delegated by resolution of the Board of Directors under the orders and direction of the Representative Executive Officers.

Decision-Making Related to Business Execution

  • ・The Company engages in more expeditious decision-making by delegating to the Representative Executive Officers the authority of the Board of Directors,except for matters requiring resolution of the Board of Directors under the Companies Act and the Articles of Incorporation.
  • ・The Representative Executive Officers decide business execution policies and important matters following referral and discussionin the Aeon Management Committee, consisting of theRepresentative Executive Officers and other executive managers.
  • ・The Representative Executive Officers endeavor to clarify the responsibility structure and expedite management decisions by clearly defining the duties and authority of each Executive Officer.

Development of Management Personnel, Provision of Information to and Support for Executive Managers

  • ・The Company selects the next generation of management personnel from all group companies, decides a development policy for each individual in the Management Skill Planning Committee, and develops management personnel through work assignments and education in accordance with the policy.
  • ・Aeon provides executive education for Directors, Executive Officers, and Corporate Auditors of all group companies to enable them to acquire the knowledge required of managers, including seminars for newly appointed corporate officers.
  • ・To enable the Outside Directors to properly perform their function, the Company continually provides information on the Group’s strategies, businesses, organizations, finances, and other matters when and after they assume office. Furthermore, the Outside Directors deepen their understanding of Aeon’s group management by inspecting stores in Japan and overseas, participating in policy discussion forums and group internal policy announcements, engaging in tree planting and other Aeon social contribution activities, and other means.

Establishment and Supervision of the Internal Compliance Reporting System

  • ・The Company has instituted an internal compliance reporting system and set up Aeon Code of Conduct Hotline. The Internal Audit Office oversees the status of development and operation of the internal compliance reporting system and reports to the Aeon Management Committee and Audit Committee.
  • ・Aeon has established the Operational Rules for the Aeon Code of Conduct Hotline and strives for its appropriate operation, including protection of whistleblowers and persons who cooperate in investigations.

Role and Selection of the External Accounting Auditor

  • ・The Company recognizes that the external accounting auditor plays an important role in ensuring the reliability of financial reporting and maintains a system that enables the accounting auditor to conduct appropriate audits.
  • ・The Audit Committee determines criteria for the appointment, evaluation, and reappointment of the external accounting auditor, conducts an evaluation each year based on the criteria, and reappoints or appoints the external accounting auditor based on the evaluation.
Enacted on April 13, 2016
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Situation of Corporate Governance

1- Corporate Governance Framework

To build a foundation for continuous enhancement of corporate value, Aeon continuously addresses three key management priorities: corporate governance reform, group management reform, and the fulfillment of corporate social responsibility.

Aeon has adopted a “company with a nomination committee and other committees system” under the Companies Act of Japan as part of corporate governance reform. We realize timely management decision-making by clearly segregating the management supervision and business execution functions, assigning responsibility for supervision to the directors and for execution to the executive officers, and delegating to the executive officers wide-ranging authority to work toward the realization of our medium-term and long-term goals. At the same time, we have established an Audit Committee, Nomination Committee, and Compensation Committee, each consisting of a majority of outside directors, to ensure the transparency and objectivity of management decisions and thereby increase returns to shareholders.

In addition, in August 2008 Aeon transitioned to a pure holding company structure for the purpose of enhancing corporate value by developing a new growth model for the Group, restructuring its business operations and further strengthening efforts to centralize and delegate.

1-1 Reason for adopting a company with a nomination committee and other committees system

The Company has adopted a “company with a nomination committee and other committees” system. We consider this system as currently best suited to practice corporate governance at the Company, which pursues management based on Basic Principles that incorporate a groupwide perspective, management that is transparent, sustainable, and stable, and ceaseless innovation with customers as the core.

1-2 Business execution framework

Since Aeon is a company with a nomination committee and other committees, we have adopted a system under which the Board of Directors delegates substantial authority for business execution to the executive officers and timely decisions are made. Among matters delegated to the executive officers by resolution of the Board of Directors, particularly important decisions on business execution are discussed and decided in the Aeon Management Committee.

1-3 The Company has established as its governing bodies the Board of Directors, consisting of directors elected at the General Meeting of Shareholders, and, since Aeon is a company with a nomination committee and other committees, the Audit Committee, Nomination Committee, and Compensation Committee, each consisting of a majority of outside directors.
【The Principal Roles of Each Governing Body】

Board of Directors →The Board of Directors resolves matters stipulated by law as the Company’s management decision-making body, decides and approves basic management policies and important matters relating to business execution, and supervises the performance of duties by the Directors and Executive Officers.

Audit Committee →The Audit Committee audits the execution of duties by the directors and executive officers, prepares audit reports and decides the details of resolutions for submission to the General Meeting of Shareholders concerning the appointment, dismissal and non-reappointment of independent auditors.

Nomination Committee →The Nomination Committee decides the details of resolutions for submission to the General Meeting of Shareholders concerning the appointment and dismissal of directors.

Compensation Committee →The Compensation Committee decides policies concerning and details of compensation of individual directors and executive officers.

1-4 Corporate Governance Schematic Diagram

1-4 Corporate Governance Schematic Diagram

(as of March 1, 2016)

1-5 Internal Control Systems

To fulfill its responsibilities to all stakeholders, Aeon is committed to transparent, fair, sustainable and stable management. In order to effectively put this management into practice, we constantly strive to establish and enhance appropriate systems for internal controls, compliance and risk management.
We are further developing our internal control systems, primarily by reinforcing the framework for promoting corporate ethics, which is the foundation of internal controls. In keeping with the Aeon Code of Conduct, which summarizes the basic guidelines for day-to-day conduct and judgment criteria, we are working to disseminate and instill good corporate ethics in all Group employees. We also provide employee education programs on an ongoing basis to improve compliance awareness and improve understanding of Aeon’s Basic Principles.
Additionally, in an effort to prevent non-compliance or detect it at an early stage, we have established internal and external helplines for employees to report a suspected case and share information. Reported cases will be investigated by the relevant divisions to confirm facts, and based on the results, improvement measures will be carried out to prevent recurrence.
The Internal Audit Office oversees the development and operation of internal control systems and reports the status to the Aeon Management Committee and Audit Committee.

1-6 Risk Management System

The risk management system has been developed with the Risk Management Committee, which is led by the Chief Administration Officer of Risk Management, at its center. The Committee holds meetings to select important risks based on assessment results, discuss control measures and share the monitored effects.
In order to eliminate contact with anti-social forces, we have established internal rules, including concrete action guidelines, and disseminate them to organizational heads through various seminars. In addition, we have participated in the public Special Violence Prevention Measures Association (Tokubouren), as a measure to protect against possible claims for unjust gains.

2- Organization for Internal Audits and Audits by the Audit Committee

At Aeon, a company with a nomination committee and other committees, the Board of Directors and Audit Committee play central roles in the management supervision function. All members of the Audit Committee are outside directors, and their independence from business execution has been more clearly established. We have also established the Internal Audit Office, an assistant body for the Audit Committee. The Office consists of 28 dedicated members, ensuring its independence from the business units. Its major roles include performing internal audits on the Group’s management as well as assisting with duties of the Audit Committee, particularly by serving as secretariat and in cooperation with the independent auditors. Personnel transfer of the Office requires the consent of the Audit Committee. The Audit Committee approves the annual audit plan of the independent auditors and receives a financial audit report from the independent auditors on a quarterly basis or more frequently as needed. The Audit Committee members exchange opinions and information periodically or as necessary, and work together to strengthen collaboration in order to enhance audit effectiveness. The Audit Committee receives an explanation from the corporate control and accounting units about audit compensation for the independent auditors and approves the compensation.

3- Relationships with Outside Directors

At Aeon, to ensure that the Board of Directors will effectively perform the management supervision function, five out of the nine members of the Board are outside directors. All the five outside directors have been registered with the Tokyo Stock Exchange as independent directors, indicating that the Company has no interest relationship with them. Outside directors also comprise a majority of the Nomination Committee and the Compensation Committee (three out of the four members, respectively) as well as the Audit Committee (all four members), and each of the Three Committees is chaired by an outside director. These are a measure to ensure management transparency. Outside directors are selected properly based on two internal regulations: Outside Directors Nomination Standards that describe requirements for supporting Aeon’s Basic Principles and Code of Conduct and having built appropriate management experience and expertise; and Outside Directors Independence Standards that define independent positions to be able to make impartial decisions against the management.

4- Stockholdings
4-1 Stocks held for purposes other than pure investment
Number of Issues 104 issues
Total Sum of Reported Number on Balance Sheets 144,102million yen
4-2 Holding category, issue, number of shares, balance sheet amount, and purpose of investment shares held for purposes other than pure investment
Specified Equity Investment in FY2016
Number of Issues Number of Issues
(Share)
Number on Balance Sheet
(Millions Yen)
Purpose of Holding
TSURUHA HOLDINGS INC. 6,313,600 65,661 To build, maintain and strengthen business relationships and collaboration
PARCO CO., LTD. 10,133,800 11,826 To build, maintain and strengthen business relationships and collaboration
Marubeni Corporation 13,997,000 10,173 To build, maintain and strengthen business relationships and collaboration
DCM Holdings Co., Ltd. 5,876,396 5,870 To build, maintain and strengthen business relationships and collaboration
Mizuho Financial Group, Inc. 10,107,101 2,119 To build, maintain and strengthen business relationships and collaboration
Keiyo Co., Ltd. 3,551,600 2,056 To build, maintain and strengthen business relationships and collaboration
WACOAL HOLDINGS CORP. 1,257,000 1,773 To build, maintain and strengthen business relationships and collaboration
ITOHAM FOODS Inc. 1,072,620 1,199 To build, maintain and strengthen business relationships and collaboration
Mitsubishi UFJ Financial Group, Inc. 1,521,110 1,123 To build, maintain and strengthen business relationships and collaboration
The Chiba Bank, Ltd. 1,252,272 983 To build, maintain and strengthen business relationships and collaboration
LAURA ASHLEY HOLDINGS PLC 35,220,606 764 To build, maintain and strengthen business relationships and collaboration
THE HACHIJUNI BANK,LTD. 721,245 512 To build, maintain and strengthen business relationships and collaboration
DAIWA HOUSE INDUSTRY CO., LTD. 100,000 308 To build, maintain and strengthen business relationships and collaboration
THE HYAKUGO BANK,LTD. 505,910 238 To build, maintain and strengthen business relationships and collaboration
Sumitomo Mitsui Financial Group. 54,226 237 To build, maintain and strengthen business relationships and collaboration
THE SHIZUOKA BANK,LTD. 166,485 164 To build, maintain and strengthen business relationships and collaboration
Panasonic Corporation 126,500 155 To build, maintain and strengthen business relationships and collaboration
Sumitomo Mitsui Trust Holdings, Inc. 30,536 123 To build, maintain and strengthen business relationships and collaboration
Resona Holdings, Inc. 185,700 116 To build, maintain and strengthen business relationships and collaboration
Takihyo Co.,LTD. 237,600 109 To build, maintain and strengthen business relationships and collaboration
THE MIE BANK,LTD. 43,259 104 To build, maintain and strengthen business relationships and collaboration
The Nanto Bank,Ltd. 18,795 85 To build, maintain and strengthen business relationships and collaboration
The Yamagata Bank,Ltd. 169,075 81 To build, maintain and strengthen business relationships and collaboration
OKASAN SECURITIES GROUP INC. 100,000 74 To build, maintain and strengthen business relationships and collaboration
Katakura Industries Co., Ltd. 48,000 73 To build, maintain and strengthen business relationships and collaboration
Ogaki Kyoritsu bank Ltd. 188,150 69 To build, maintain and strengthen business relationships and collaboration
The Chugoku Bank, LTD. 36,000 64 To build, maintain and strengthen business relationships and collaboration
The 77 Bank, Ltd. 95,796 50 To build, maintain and strengthen business relationships and collaboration
The Hokkoku Bank, Ltd. 100,000 46 To build, maintain and strengthen business relationships and collaboration
The Chiba Kogyo Bank,Ltd. 67,592 42 To build, maintain and strengthen business relationships and collaboration

※Although the amounts for Mizuho Financial Group, Inc. and the companies below it on the list do not exeed 1% of the amount of capital on the balance sheet, the top thity issues are presented.

Specified Equity Investment in FY2017
Number of Issues Number of Issues
(Share)
Number on Balance Sheet
(Millions Yen)
Purpose of Holding
TSURUHA HOLDINGS INC. 6,313,600 97,987 To build, maintain and strengthen business relationships and collaboration
PARCO CO., LTD. 10,133,800 15,170 To build, maintain and strengthen business relationships and collaboration
Marubeni Corporation 13,997,000 11,473 To build, maintain and strengthen business relationships and collaboration
DCM Holdings Co., Ltd. 5,876,396 6,199 To build, maintain and strengthen business relationships and collaboration
Keiyo Co., Ltd. 3,551,600 2,177 To build, maintain and strengthen business relationships and collaboration
Mizuho Financial Group, Inc. 10,107,101 2,015 To build, maintain and strengthen business relationships and collaboration
WACOAL HOLDINGS CORP. 628,500 1,998 To build, maintain and strengthen business relationships and collaboration
Mitsubishi UFJ Financial Group, Inc. 1,521,110 1,159 To build, maintain and strengthen business relationships and collaboration
The Chiba Bank, Ltd. 1,252,272 1,112 To build, maintain and strengthen business relationships and collaboration
ITOHAM YONEKYU HOLDINGD INC. 1,072,620 970 To build, maintain and strengthen business relationships and collaboration
THE HACHIJUNI BANK,LTD. 721,245 468 To build, maintain and strengthen business relationships and collaboration
DAIWA HOUSE INDUSTRY CO., LTD. 100,000 397 To build, maintain and strengthen business relationships and collaboration
THE HYAKUGO BANK,LTD. 505,910 267 To build, maintain and strengthen business relationships and collaboration
Sumitomo Mitsui Financial Group. 54,226 254 To build, maintain and strengthen business relationships and collaboration
THE SHIZUOKA BANK,LTD. 35,220,606 250 To build, maintain and strengthen business relationships and collaboration
Sumitomo Mitsui Trust Holdings, Inc. 166,485 180 To build, maintain and strengthen business relationships and collaboration
LAURA ASHLEY HOLDINGS PLC 30,536 132 To build, maintain and strengthen business relationships and collaboration
Resona Holdings, Inc. 185,700 113 To build, maintain and strengthen business relationships and collaboration
Takihyo Co.,LTD. 47,520 106 To build, maintain and strengthen business relationships and collaboration
THE MIE BANK,LTD. 43,259 99 To build, maintain and strengthen business relationships and collaboration
The Yamagata Bank,Ltd. 33,815 78 To build, maintain and strengthen business relationships and collaboration
OKASAN SECURITIES GROUP INC. 100,000 69 To build, maintain and strengthen business relationships and collaboration
Katakura Industries Co., Ltd. 48,000 67 To build, maintain and strengthen business relationships and collaboration
The Nanto Bank,Ltd. 18,795 55 To build, maintain and strengthen business relationships and collaboration
Ogaki Kyoritsu bank Ltd. 18,815 52 To build, maintain and strengthen business relationships and collaboration
The 77 Bank, Ltd. 19,159 51 To build, maintain and strengthen business relationships and collaboration
The Chugoku Bank, LTD. 36,000 47 To build, maintain and strengthen business relationships and collaboration
The Hokkoku Bank, Ltd. 10,000 44 To build, maintain and strengthen business relationships and collaboration
CROSS PLUS INC. 50,000 44 To build, maintain and strengthen business relationships and collaboration
NAGAHORI CORPORATION 164,225 42 To build, maintain and strengthen business relationships and collaboration

※Although the amounts for Keiyo Co., Ltd. and companies below it on the list do not exceed 1% of the amount of capital on the balance sheet, the top thirty issues are presented.

4-3 Stocks held for pure investment purposes

Not applicable

5- Accounting Audits

The certified public accountants who performed the Company’s financial audits are Messrs. Masahiko Tezuka, Shigeru Omori, Yuki Higashikawa and Kentaro Ishiyama of Deloitte Touche Tohmatsu LLC. 10 certified public accountants and 4 assistant certified public accountants assisted in the auditing work.
※As all of the above persons have been auditing the Company for less than seven years, consecutive years of auditing experience has been omitted.

6-Others
6-1 Limitation of liability agreement

To enable the recruitment of talented people as outside directors, the Company has entered into limitation of liability agreements with all of the outside directors to limit their respective liabilities for damages to the Company under Article 423, paragraph 1 of the Companies Act of Japan when there is no willful misconduct or gross negligence in the performance of their duties to the higher of \15 million or the amount prescribed by law and indemnify the outside directors for damages in excess of this limit.

6-2 Number of directors

The Company’s Articles of Incorporation stipulate that the number of directors of the Company shall be twelve or fewer.

6-3 Requirements for resolutions for the election of directors

The Company’s Articles of Incorporation stipulate that a resolution for the election of directors must be passed by a two-thirds (2/3) or more majority vote at a meeting in which one-third (1/3) or more of the shareholders entitled to exercise voting rights are present; provided, however, that the election of directors shall not be by cumulative voting.

6-4 Decision-making body on payment of dividends from retained earnings

By approval of the Ordinary General Meeting of Shareholders held in May 2003, it was decided that the Company would transition to a company with committees (now company with a nomination committee and other committees) system and shareholder dividends and other matters would be approved by the Board of Directors pursuant to the provisions of the former Act on Special Measures for the Commercial Code. However, accompanying the coming into effect of the Companies Act of Japan in May 2006, the Articles of Incorporation stipulate that with respect to the matters relating to dividends from surplus, etc. provided in the items in paragraph 1 of Article 459 of the Companies Act  of Japan shall be decided by a resolution of the Board of Directors without a resolution of the General Meeting of Shareholders unless otherwise stipulated by Law.

6-5 Requirements for special resolutions of the General Meeting of Shareholders

In order to lower the required quorum for a special resolution of the Ordinary General Meeting of Shareholders to facilitate the operation of such meetings, the Company’s Articles of Incorporation stipulate that a special resolution of the General Meeting of Shareholders pursuant to Article 309, paragraph 2 of the Companies Act of Japan must be passed by a two-thirds (2/3) or more majority vote at a meeting in which one-third (1/3) or more of the shareholders entitled to exercise voting rights are present.

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Details of Audit Compensation, etc.

1- Details of compensation for auditing certified public accountants, etc.
Category Fiscal 2016
(Year ended Feb. 28, 2017)
Fiscal 2017
(Year ended Feb. 28, 2018)
Compensation for auditing and certification services (Millions of yen) Compensation for non-auditing services (Millions of yen) Compensation for auditing and certification services (Millions of yen) Compensation for non-auditing services (Millions of yen)
Submitting company 114 33 114 111
Consolidated subsidiaries 1,705 234 1,833 99
Total 1,819 268 1,947 210
2- Details of other significant compensation

The Company and some of its consolidated subsidiaries paid for auditing and certification services and non-auditing services such as tax consulting to a Deloitte Touche Tohmatsu member firm belonging to the same network as Deloitte Touche Tohmatsu LLC, the Company’s independent auditors.

3- Details of non-auditing services provided by auditing certified public accountants, etc. to the submitting company

The non-audit services provided by the auditing certified public accountants, etc. for which the Company paid compensation are advice and guidance concerning International Financial Reporting Standards (IFRS).

4- Policy on determining audit compensation

The Company determines the amount of audit compensation for the auditing certified public accountants, etc. taking into account such factors as the scale and characteristics of the Company’s business operations and the number of days of auditing work.

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