News Release: AEON DELIGHT CO., LTD.

(9787 TSE1)
July 22, 2019

Measures to Prevent Recurrence of Inappropriate Accounting at
Our Consolidated Subsidiary KAJITAKU CO., Ltd.
In response to the discovery of accounting problems at KAJITAKU CO., Ltd. (hereinafter"KAJITAKU") which is our consolidated subsidiary, on April 11, 2019 we established a special
investigation committee consisting of outside experts who do not have any interests with us,
and worked to grasp the whole situation, clarify the underlying cause of the situation, anddetermine the amount of impact on our consolidated financial statements. On June 27, 2019,
we received a report (*) from the Special Investigation Committee, which revealed that
KAJITAKU made inappropriate accounting over the past several years.
Based on the Proposals from the Special Investigation Committee on measures to prevent
recurrence, we have decided to strengthen the Group governance system and implement
measures to prevent recurrence, as described below.
Going forward, our Group will further strengthen its group management system bystrengthening group governance and thoroughly implementing these measures. We will work
to restore the trust of our shareholders and other stakeholders by accelerating the growthstrategy of the AEON delight Group.
*For a report on the investigation by the Special Investigation Committee, please refer to the“Notice of Disclosure of Investigation Report by Special Investigation Committee and Future

Response” dated June 28, 2019.
1. Underlying causes of the inappropriate accounting
The Investigation Report from the Special Investigation Committee pointed out thefollowing underlying causes of the inappropriate accounting: the underlying causes in
KAJITAKU and in our subsidiary management.
(1) Underlying cause in KAJITAKU① Sluggish performance of the Housekeeping Support Business, a corporate culture of
KAJITAKU that emphasizes budget fulfillment and sales② Lack of management and profit and loss management by division based on erroneous
financial information③ Lack of awareness of compliance and lack of self-purification function④ Concurrent role of director⑤ Absence of accurate and clear operating procedures(2) Underlying causes of subsidiary management① Inadequate group governance system② Subsidiary management system with emphasis on budget/performance management③ Insufficiency of management functions for risk and compliance of subsidiaries
12. Proposals from the Special Investigation Committee on measures to prevent recurrence
Based on the above 1, we received the following proposals from the Special Investigation
Committee as "Proposals for measures to prevent the recurrence of KAJITAKU" and"Improvements regarding our company’s subsidiary management."(1) Proposals for measures to prevent recurrence in KAJITAKU① To revamp the management team and increase the number of directors② Reforming corporate culture and raising awareness of compliance③ Strengthen the Administrative Headquarters (particularly the accounting department)④ Establishment of a compliance system and organizational reform⑤ Clarification of business procedures and business flows and thorough compliance withthem(2) Proposals for improvement regarding our company's subsidiary management① Reforming the awareness of our company's officers② Review of subsidiary management system with emphasis on budget/performance
management③ To clarify departments and officers in charge of compliance at subsidiaries④ Expansion of the Compliance Department, Affiliated Company Administration Department,
and Internal Audit Department⑤ Dispatch of full-time officers and staff to subsidiaries
3. Strengthening the group governance system and implementing measures to prevent
recurrence
Based on the proposals of the Special Investigation Committee mentioned in 2 above, wewill implement the following "Strengthening the group governance system" and "Measures toprevent recurrence."(1) Reinforcement of group governance system (See Chart ①)
Our traditional group governance system is based on the fact that our company’s share of
the overall business portfolio accounts for more than 80% of net sales. We have put ouremphasis on our company’s corporate governance, and this fact led the inadequacy of group
governance system for our subsidiaries. In order to resolve this issue, we believe it isnecessary to further expand Group governance functions, such as growth strategies forindividual companies, the associated reallocation of resources, and the internal control
system for the entire Group.
In response to the proposals of the Special Investigation Committee, we will once again
accelerate the growth strategy of the AEON DELIGHT Group as a whole and strengthen thegroup governance system by establishing 3 pillars of group governance: (1) budget
performance management; (2) individual growth strategy; and (3) internal control system.
Specifically, in addition to the budget and performance management that has already been
introduced, the Affiliated Companies Administration Department in Japan and theInternational Department overseas are responsible for growth strategies for each company.
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The Affiliated Companies Administration Department and the International Department will
work with Group companies to formulate individual growth strategies and reallocate
resources to implement those strategies. In addition, the Group Compliance Division has
been newly established as a new function (an executive officer has been appointed), and theGroup will establish a new Group governance system by linking them to the internal control
systems of each Group company. Along with these efforts, we will review the company-wideorganizational design and work to align the relevant division of duties.
In addition, the Board of Directors, the domestic Group Management Committee and theoverseas Group Management Committee, to which authority has been transferred, will
monitor whether these 3 pillars of Group governance are functioning systematically. In
addition, the Board of Corporate Auditors and the Group Management Audit Department will
decide to redistribute each company's resources, and will audit the effectiveness of these 3
pillars as a whole. Moreover, we have established the Recurrence Prevention Committee,
which includes lawyers, accountants, and other specialists. The committee conducts
quarterly monitoring of Group governance and whether measures to prevent recurrence arefunctioning.
The Group Strategy Division will continue to assume responsibility for the Group's overall
strategy, and by reallocating company-wide resources for the execution of the Group's
medium-to long-term growth strategy, we will reform our system to promote Group-wide
growth.
Chart ① New Conceptual Diagram of the Group Governance System for AEON delight3

(2) Recurrence Prevention Measures (See Figure (2))
We will implement measures to prevent recurrence in accordance with the basic policies
described below for each section of the Special Investigation Committee's proposals formeasures to prevent recurrence described in 2 above.
① Measures to prevent recurrence in KAJITAKU[Proposal (1)] To revamp the management team and increase the number of directors[Basic Policy (1)] Restructure the management team and announce the statements from thenew president emphasizing compliance[Action Plan (1)] The president of KAJITAKU has already been replaced by a director who isdispatched to us, and the general manager of the Administration Division and the ComplianceManager have also been placed under the supervision of a director who is dispatched to us.
In addition, 2 new directors have been appointed, and the Company's management has
already been revamped. In addition, the new president himself/herself continuously sends
messages of legal compliance both inside and outside the company. For the future being, we
will continue to dispatch full-time directors in charge of the Administration Division andCompliance to establish a system that enables mutual monitoring by avoiding the concurrent
role of directors in the business and administrative divisions, and will continue to make efforts
to maintain and improve the KAJITAKU compliance system.
[Proposal (2)] Reforming corporate culture and raising awareness of compliance[Basic Policy (2)] Reform corporate culture and raising awareness of compliance[Action Plan (2)] We will formulate operational procedures and manuals in accordance withthe contents of our businesses, while listening to the opinions of employees, us, and expertson the job site. We will ensure thorough compliance with these procedures. At the same time,
we will extract information and elements that could pose risks in each department, and will
share this information with management to take measures across departments, and will
establish a system for continual review. In addition, we will regularly plan and conduct training
for all employees on specific incidents involving misconduct at our company and othercompanies.
[Proposal (3)] Strengthen the Administrative Headquarters (particularly the accounting
department)[Basic Policy (3)] Secure the reliability of finance, accounting, and paymaster’s works, andvisualize operations[Action Plan (3)] We will share the financial accounting and supervisory operations of eachgroup company with the purpose of ensuring the reliability of the financial statements of eachgroup company, including KAJITAKU, and visualizing the financial and accounting
operations.
[Proposal (4)] Establishment of a compliance system and organizational reform[Basic Policy (4)] Establish a compliance system, compliance with company regulations[Action Plan (4)] As a result of the management team's renewal, the system of concurrent
appointments by a single officer has been dismantled so that the checks and balances
between the sales and administrative divisions will have their original functions. In addition,
we appoint compliance committee members who do not concurrently serve as officers at
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each group company. At the same time, we evaluate the appropriateness of our activities
based on the general manager of the Group Compliance Division, and appoint and dismissal
such committee members as appropriate. In addition, we will thoroughly familiarize
employees with the Group's whistle-blowing system and operate it independently of the
management team of each Group company.
[Proposal (5)] Clarification of business procedures and business flows and thoroughcompliance with them[Basic Policy (5)] Clarify business procedures and workflows, and compliance and thoroughadherence to them[Action Plan (5)] Clarify the work process and formulate a manual for each work. In addition,
the Internal Control Department of the Group will check the status of the development ofregulations and manuals for Group companies, including KAJITAKU, and if there is any
shortage, it will be prepared. In addition, the Group Management Audit Department, which will
be described later, will conduct audits to confirm whether operations are being carried out inaccordance with the manuals.

② Preventive measures in our subsidiary management[Proposal (1)] Reforming the awareness of our company's officer[Basic Policy (1)] Raise the awareness of our executives to further strengthen our compliancesystem[Action Plan (1)] We will reform the awareness of our directors and strengthen the
supervisory function of the Board of Directors for each Group company. Specifically, theBoard of Directors of each Group company reviews the implementation status of the Board of
Directors meetings of each Group company on a quarterly basis by the directors in charge ofeach company, clarifies not only the effectiveness of the review but also the management
issues faced by each company, and decides to reallocate resources for the Group as a whole.
Every fiscal year, the Valuation Advisory Committee, an advisory committee to the Board of
Directors, evaluates the effectiveness of the Board of Directors of each Group company. Our
Board of Corporate Auditors shall audit these Board of Directors and directors' initiatives.
[Proposal (2)] Review of subsidiary management system with emphasis on
budget/performance management[Basic Policy (2)] Review the subsidiary management system to support stable andsustainablegrowth of group companies
Action plan・ Share the financial and accounting operation
As described in ② -(1)-(3), we will share the financial accounting and supervisory
operations of each Group company in order to ensure the reliability of the financial
statements of each Group company and visualize the financial and accounting operations ofeach Group company.

5・ Appointment of Accounting Auditors or Accounting Advisors
We will establish an accounting auditor or an accounting advisor with certification as acertified public accountant according to the size of businesses of each company.
・ Strengthening the structure of overseas subsidiaries
In the Chinese business, we have appointed a representative corporate auditor and aninternal audit department under the supervision of the representative corporate auditor. In thisway, we have established a system for auditing major subsidiaries based on an annual audit
plan. Accounting auditors have already been appointed at each Chinese business company.
For each ASEAN business company, an internal audit department has been appointed ateach company to establish a system for conducting audits based on an annual audit plan.
Accounting auditors have already been appointed at each ASEAN business.
In addition, we will establish a compliance division and an internal reporting system in both
the ASEAN and Chinese businesses.
・ Group audits and risk management
In order to verify whether the above-mentioned governance systems have been
established and are functioning, and whether the measures taken by each group company
are appropriate, we will hold a risk management committee twice a year and examine andupdate the risk scenarios of each group company. In accordance with these risk scenarios,
our Group Management Audit Department will conduct audits of each company.
・ M&A due diligence (*1) checks and PMI (*2)
When conducting an M&A, we will appoint a PMI task team at our Board of Directors. In
addition to monitoring the status of improvement in response to events discovered throughdue diligence, the PMI Task Team will respond to issues that could not be discovered throughdue diligence. At the same time, we will clarify the business process flow of the company
concerned.
*1 Due Diligence: In making investments, investigate the value and risks of the company andinvestee in the investment*2 PMI(Post Merger Integration: Integration process to maximize integration effect after M&A(merger & acquisition). The scope of integration is diverse, such as management, operations
and awareness[Proposal (3)] To clarify departments and officers in charge of compliance at subsidiaries[Basic Policy (3)] Maintain the compliance system of group companies[Action Plan (3)] The head of our Group Compliance Management will be the director in
charge of compliance for the entire Group and the responsibility will be clarified. At the sametime, we will rename our conventional Compliance Division as the Group Compliance
Division and work with the Compliance Committee members newly appointed to each groupcompany to strengthen activities that contribute to raising awareness of compliance among
the managers and employees of each company.

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[Proposal (4)] Expansion of the Compliance Department, Affiliated Company Administration
Department, and Internal Audit Department[Basic Policy (4)] Support the sound management of group companies, ensure appropriatemonitoring, and enhance the organization for conducting audits from the viewpoint ofpreventing inappropriate actions
Action plan
・ Appointment and dismissal of directors and corporate auditors (including full-time directors)of Group companies
The Nomination and Compensation Committee, an advisory committee to the Board of
Directors, discusses the appointment and dismissal of presidents and directors of Group
companies, and proposes the contents to the Board of Directors. In addition, the Board of
Corporate Auditors of each group company discusses the contents of corporate auditors andproposes them to our Board of Directors. A full-time statutory auditor shall be appointed forimportant subsidiaries to monitor whether the management of each group company isoperating in a sound manner.
・ Strengthening management auditing
Our traditional Internal Audit Department is the Group Internal Audit Department, and wewill conduct audits in accordance with risk scenarios that are selected for each Group
company's business. In addition, we will strengthen our auditing functions by assigningpersonnel with literacy in fields other than operational audits, such as accounting and IT. In the
future, we will also organize an audit team dedicated to international divisions, subject
overseas business companies.
・ To reinforce internal control
The internal control function for each group company is strengthened, and when creating
the business process flow for each group company, our Group Internal Control Department
will provide guidance and support for the creation of the business process flow for each groupcompany. Whether these processes are functioning or not will be checked by the Audit
Department of the Group Management Audit Department, and if necessary, corrections will
be made after receiving the indication, and a system will be put in place for a renewed check.
・ To strengthen compliance function
The former Compliance Department will be made into the Group Compliance Department,
and in collaboration with the Compliance Committee members newly appointed in eachGroup company, we will strengthen activities that contribute to raising compliance awarenessamong the managers and employees of each company.
・ Establishment of Group compliance and internal control systems
We will establish the Group Compliance Division, and the Group Internal Audit Department,
the Group Internal Control Department, and the Group Compliance Department will be
subordinated to the Group Compliance Division, in order to exercise the abovementioned
management audit, internal control, and compliance functions throughout the Group.

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・ Implementation of appropriateness assessment of accounting auditors
The Board of Corporate Auditors will evaluate the appropriateness of accounting auditors
and take measures, including changes, as necessary to strengthen the accounting audit
system.
[Proposal (5)] Dispatch of full-time officers and staff to subsidiaries[Basic Policy (5)] Dispatch full-time directors and staffs engaged in daily works, detect
inappropriate actions at an early stage through personnel exchanges, and improve thecorporate culture
Action plan・ Personnel transfers and personnel exchanges based on plans
The presidents and managers of the administrative divisions of each group company are
periodically transferred to other companies or changed in their duties, taking into account thesituation of each company. Employees other than liability personnel also exchange personnel
with us and other Group companies in order to understand each other's business models andto foster an organizational climate in which mutual opinions can be shared. We also manage
the personnel information of these Group companies and implement personnel transfers
based on plans to prevent fraud and revitalize the organization.

Chart ② Correlation Chart of Measures to Prevent Recurrence

AEON delight
1. AEON delight's board reform

AEON delight

2. Strengthening AEON delight's
Corporate Governance① Strengthening management auditing② To reinforce internal control③ To strengthen compliance④ Establishment of group complianceand internal control systems

KAJITAKU
Other groupcompanies

AEON delightGroup
3. Establishment of group
governance for the entire AEON
delight GroupDefenselines 1 to3

① Share the financial and accounting operation② Appointment of Accounting Auditors or
Accounting Advisors③ Strengthening the structure of overseas
subsidiaries④ Group audits and risk management⑤ M&A due diligence checks and PMI

4. Reconstruction of governance ofsubsidiaries of group companies,
including casitak companies

Defenselines 1 to3

① Review of Directors and Auditors(including Full-time Directors)② Clarification of business processes③ Personnel transfer and humanresources exchange based onplanning

Third
Defense line

SecondDefense line

First
Defense line

Ensure appropriateness.
Roles and responsibilities• Provide reasonable assurance to theBoard of Directors (Board of Corporate
Auditors) regarding the risk
management function and internal
control system from a standpoint
independent of the business execution
division, risk management division, etc.

Monitor risk management.
Roles and responsibilities• Monitor risks and their management
status from a standpoint independent
from the business execution divisions.
• Provide advice on risk management tobusiness execution divisions asnecessary.
• Design, maintain, and improve the risk
management framework.

Control risks as a risk owner
Roles and responsibilities• Identify risks and perform necessarycontrol procedures in day-to-day
operations.
• Design, maintain, and improve
operational policies and procedures.
• Responsible for outcomes arising fromrisk events.

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