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Summary of Corporate Governance

■Transition to Company with Audit & Supervisory Committee

At the 36th Ordinary General Meeting of Shareholders, held on September 28, 2016, a resolution was passed to amend the Articles of Incorporation so that Pan Pacific International Holdings could transition to a company with an audit & supervisory committee. On the same date, the Company duly transitioned from a company with an audit & supervisory board to a company with an audit & supervisory committee. The establishment of the Audit & Supervisory Committee and the granting of voting rights to directors, who are audit & supervisory committee members, at the Board of Director's meetings is intended to strengthen the audit and supervisory functions of the Board of Directors, enhance corporate governance and improve corporate value.

■Merits of Transitioning to Company with Audit & Supervisory Committee

● Separate duties for execution of operations from those for supervision by adding several outside directors who do not execute operations of their own
● Strengthen the audit and supervisory functions of the Board of Directors by granting directors, who are audit & supervisory committee members, the right to vote at Board of Director's meetings
● Promote prompt decision-making through the delegation of some key decisions on execution of operations to directors in charge of business execution

■Details of the Organization

Board of Directors The highest decision-making body, with regard to the execution of operations, is the Board of Directors, which meets at least once a month to discuss and determine important issues concerning business activities. As of January 31, 2019, the Board of Directors comprised fourteen members. Nine of them are directors (excluding those who are audit & supervisory committee members),of whom none are from outside the Company. The other five members are directors (audit & supervisory committee members), of whom four are from outside the Company.
The execution of duties by directors are audited by the Audit & Supervisory Committee and, when necessary, the Audit & Supervisory Committee will work with the independent auditor to facilitate the execution of audits. In addition, management has designated all outside directors as independent directors, who contribute broad-based knowledge from an objective position free from any conflicts of interest with general shareholders. Such input is applied to issues important from a corporate administration perspective, such as the formulation of companywide business strategies, and management therefore believes that the current Board of Directors structure is conducive to suitable decision-making processes.
Internal Audit Department The Internal Audit Department, under the direct authority of the Board of Directors, is separate from divisions that execute operations. This department provides a point of contact, as necessary, between the independent auditor and audit & supervisory committee members and undertakes audits, based on an auditing plan, to ascertain the legality and appropriateness of activities undertaken by each division and Group subsidiary. In addition, the department applies an internal control perspective to its monitoring of key business practices in all divisions, at stores, as well as at subsidiaries.
Outside Directors The Company has four outside directors. The outside directors are appointed on the expectation that the individuals will offer opinions and point out issues helpful to management from an external perspective, based on specialized knowledge and experience in corporate management, and thereby contribute to enhanced management soundness and transparency. Outside Director Jumpei Nishitani, as a professor of a university's faculty of business administration, has a high level of specialized knowledge, and possesses considerable insight regarding finance and accounting. All Outside Directors are deemed to present no risk of a conflict of interest with general shareholders, and were designated independent directors in accordance with rules set by the Tokyo Stock Exchange, to which notifications were submitted.
The Company has no clear-cut criteria or policies regarding the independence of individuals appointed as outside directors. However, in the appointment process, a candidate for outside director is evaluated on the ability to maintain a sufficient degree of separation to perform assigned duties independent of the management team.
Compliance Committee Members of this committee are primarily outside experts, including lawyers and outside directors. Their duties include formulating fraud prevention measures, drafting monitoring and auditing plans, examining the results of such investigations and audits, and sharing information on fraud cases that have occurred at other companies and verifying facts as a way to preclude such incidents from happening to the PPIHグループ.

■Corporate Governance Structure

Corporate Governance Structure

As of January 31, 2019