Pan Pacific International Holdings Corporation

Pan Pacific International Holdings Corporation

Internal Control Structure

 Pan Pacific International Holdings' internal control structure was established and is maintained in accordance with the Companies Act of Japan and its Ordinance for Enforcement, to ensure the appropriateness of the Company's business operations.

1.System ensuring the execution of duties by directors complies with the Company's Articles of Incorporation and prevailing laws and regulations

  • Directors must consistently ensure that the Company's business activities are undertaken in compliance with laws and regulations and must take the initiative to promote awareness of compliance practices at the Company and at each subsidiary.
  • To ensure appropriate execution of duties by directors, the Company continues to appoint outside directors to its Board of Directors and strives to enhance the supervision of duties executed by directors. In addition, the Audit & Supervisory Committee, which has the participation of outside directors, conducts thorough audits to ensure fairness and transparency from a position independent of influence of directors (excluding those who are audit & supervisory committee members).
  • To coordinate issues related to legal compliance and internal controls, the Company appoints a Compliance Officer. In addition, the officer above works closely with the Compliance Committee, members of which are primarily external professionals, such as lawyers, and ensures that business activities follow a highly ethical code of conduct and that the corporate governance structure and execution of associated practices conform to legal standards.

2.System for storing and managing information related to the execution of duties by directors

  • The minutes of shareholder's meetings, Board of Director's meetings and other important meetings along with any and all related materials are stored and managed by a designated department and retained for a period of 10 years under conditions that facilitate examination whenever necessary.
  • The Company utilizes tools to improve the security of in-house information networks and performs careful and timely reviews of its Rules for Information Security Management. Concurrently, the Company encourages information sharing within the organization and maintains systems to prevent leaks of confidential information.

3.System for administering rules for managing the risk of loss

  • The Compliance Officer and the Compliance Committee analyze and evaluate lateral risks from a compliance standpoint for the entire Group and consider measures to deal with such risks.
  • Efforts are made to swiftly and accurately systemize rules and instruction manuals and standardize business practices to minimize operational risk.
  • Organizational and operating structures are swiftly and effectively established to control risks associated with administrative procedures, including financial accounting, purchasing, sales, store operation and legal issues, which serve to minimize operational risk.

4.System ensuring efficient execution of duties by directors

  • Rules related to organizational structures are reviewed and updated in a timely and appropriate manner to clarify the division of director's duties and respective oversight authority.
  • Organizational and administrative systems are revised as the occasion arises to meet changes in the business environment.

5.System ensuring the execution of duties by employees complies with the Company's Articles of Incorporation and prevailing laws and regulations

  • The Compliance Officer promotes compliance and ensures thorough adherence to stated practices, in accordance with resolutions by the Board of Directors.
  • The Compliance Committee, in conjunction with the Compliance Officer, formulates plans that include education on issues related to compliance, and the Compliance Office handles the administrative aspect of these activities, based on instructions from the Compliance Committee.
  • The Company maintains a whistleblower system, dubbed Compliance Hotline, that enables employees and business partners of the Group to directly report questionable conduct̶that is, possible violations of the law or regulations or in-house rules̶to an outside entity or an in-house point of contact, with complete confidentiality. Concerted efforts are made to promote awareness of this system to ensure that it continues to function effectively. The Company makes it a top priority to protect individuals who report an actual or possible violation from any sort of disadvantage for bringing potential infractions to light.

6.System ensuring the appropriateness of operations at the Company and at its subsidiaries

  • Timely and accurate reports on the status of operations̶that is, progress in the execution of operations̶at each Group company must be submitted to the Board of Directors of the Company.
  • To confirm the proper execution of operations at Group companies, the Internal Audit Department works with each company to determine progress in establishing internal controls. To further improve the internal control system, the Compliance Committee provides instruction and support as required, based on a shared understanding of internal control measures within the Group.
  • To confirm the proper execution of operations at Group companies, the Company has prepared "Rules for Management of Affiliated Companies."These rules provide guidelines for monitoring business activities at Group companies.

7.Issues pertaining to employees who assist the Audit & Supervisory Committee when such assistance is required

The Company established an office of the Audit & Supervisory Committee (Auditor's Office) with staff exclusively dedicated to assisting the Audit & Supervisory Committee in its duty as required.

8.Matters related to the independence of employees who are to assist the Audit & Supervisory Committee with its duty from directors (excluding those who are audit & supervisory committee members) and matters related to ensuring the effectiveness of instruction from the Audit & Supervisory Committee to such employees

  • Any personnel matters (including treatment and disciplinary action) pertaining to Auditor's Office staff must be reported first to the Audit & Supervisory Committee.
  • If a staff member of the Auditor's Office concurrently performs administrative tasks in another division, priority shall be given to requests from the Audit & Supervisory Committee when the instructions are deemed necessary in the course of auditing activities. In addition, the supervisor in the other division where the individual with concurrent duties is assigned will extend the necessary support if requests are made to facilitate implementation of the Audit & Supervisory Committee s' instructions.

9.System for submitting reports to the Audit & Supervisory Committee, which includes the system for directors and employees to report to the Audit & Supervisory Committee

  • The Internal Audit Department provides the Audit & Supervisory Committee with timely and accurate updates on the implementation of internal controls.
  • Directors and employees of the Company and companies within the Group shall immediately inform the Audit & Supervisory Committee of any important issues that impact, or may impact, the operations of the Company or any company within the Group.
  • Directors and employees of the Company and companies within the Group must respond immediately when asked by the Audit & Supervisory Committee or the Auditors 'Office to provide information about the status of operations, assets or other corporate matters.
  • The Company prohibits unfavorable treatment of anyone on the basis of a report given to the Audit & Supervisory Committee concerning information related to the aforementioned matters.

10.Other: ensuring effectiveness of audits by the Audit & Supervisory Committee

  • Opportunities are made for the Audit & Supervisory Committee to communicate with directors (excluding those who are audit & supervisory committee members) of the Company as well as the directors and audit & supervisory board members of Group companies to make audits as effective as possible. The Audit & Supervisory Committee keeps close ties with the Internal Audit Department and looks over internal audit reports to complement standard audits performed in line with in-house rules. Also, when the independent auditor submits an audit report, the Audit & Supervisory Committee confirms the appropriateness of the content therein.
  • The Audit & Supervisory Committee is informed on a regular basis of how the Compliance Hotline is operating.
  • Payment of costs incurred in the process of executing the required duties of a director who is an audit & supervisory committee member shall be addressed immediately upon submission of a request for payment.

Measures to Prevent Transactions with Antisocial Forces

 Pan Pacific International Holdings' basic position-and one to which the entire Group subscribes-with regard to antisocial forces is to eliminate any and all relationships with such elements. An internal structure has been established to ensure this process, as follows:

  • Neither the Company nor any Group company will respond to inappropriate requests or any other form of request from antisocial forces and will cancel business dealings if the counterparty is found to be an individual, business, organization or any other type of entity with ties to antisocial forces.
  • To deal with any persistent approach by antisocial forces to engage in inappropriate activity, the Company established the Crisis Management Department to oversee measures to prevent relationships with antisocial forces and undertakes in-house training to address any questionable activities.
  • The Crisis Management Department collects information through its close ties with the police, legal counsel and other external organizations specialized in dealing with antisocial forces. In addition, a special position has been set up within the Company to deal with inappropriate requests and an internal structure is in place, along with intranet, to expedite responses in the event a situation arises.

As of September 25, 2019