GROWING IN STRENGTH AND NUMBERS

This Annual Report cover refl ects AEON CO. (M) BHD.’s (AEON or the Company) plans of expanding the corporation’s reach across Malaysia. The main visual is a view of our MaxValu Supermarket at Desa ParkCity which represents AEON’s plans to reinvent and constantly reach out to its customers. This is complemented by various images which refl ect on the Company’s continuing success; its trademark of quality products (Jusco Selection), obliging customer services, and the tree planting ceremonies as part of its Corporate Social Responsibility. These visuals summarise all the highlights associated with the Company in moving towards its goal of becoming the No.1 Retailer in Malaysia. TABLE OF CONTENTS

• Grand Opening of AEON Bukit Tinggi Shopping Centre ...... 4 • Grand Opening of JUSCO Bandar Sunway ...... 5 • Introducing Pasar Raya MaxValu ...... 6 Pasar Raya MaxValu Kota Kemuning • Pasar Raya MaxValu Desa ParkCity ...... 7 Pasar Raya MaxValu Ampang • Renovations ...... 8 • Jusco Selection ...... 9 • AEON Bukit Tinggi Shopping Centre Tree Planting Ceremony ...... 10 • 20th Anniversary Tree Planting Progress ...... 11 Replanting at AEON Woodland • Corporate Social Responsibility ...... 12 • “With All Our Hearts” Malaysian JUSCO Foundation ...... 14 • Human Resource Management ...... 15 • An Introduction to ÆON ...... 16 • Corporate Information and Directory ...... 17 • Share Price ...... 18 Revenue Profi t Attributable to Shareholders • Five Years Financial Highlights ...... 19 • Board of Directors ...... 20 • Directors’ Profi les ...... 21 • Senior Management ...... 23 • Chairman’s Statement ...... 24 • Review of Operations ...... 27

CORPORATE GOVERNANCE • Statement on Corporate Governance ...... 34 • Terms of Reference of the Audit Committee ...... 38 • The Audit Committee ...... 40 • Statement on Internal Control ...... 41 • Other Information ...... 42

FINANCIAL STATEMENTS • Directors’ Report ...... 44 • Balance Sheet ...... 48 • Income Statement ...... 49 • Statement of Changes in Equity ...... 50 • Cash Flow Statement ...... 51 • Notes to the Financial Statements ...... 52 • Statement by Directors ...... 72 Statutory Declaration • Reports of the Auditors ...... 73

OTHERS

• Analysis of Shareholdings ...... 74 Substantial Shareholdings Directors’ Interests • List of 30 Largest Shareholders ...... 75 • Particulars of Properties ...... 77 • JUSCO Stores, Shopping Centres & MaxValu ...... 78 • Milestones ...... 80 • Notice of Annual General Meeting ...... 82 • Notice of Dividend Payment ...... 84 Statement Accompanying Notice of Twenty-Third Annual General Meeting • Proxy Form ...... 85 GRAND OPENING OF AEON BUKIT TINGGI SHOPPING CENTRE

AEON Bukit Tinggi Shopping Centre opened for business on 24 November 2007. The grand opening of AEON’s 14th shopping centre and 18th JUSCO store was held on 31 January 2008 and was offi ciated by His Royal Highness Sultan Sharafuddin Idris Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj, Sultan of Selangor. Exciting activities that took place during the event, much to the delight of enthusiastic shoppers, included product samplings, special offers, mascot appearances and cultural shows.

In conjunction with the celebration, the “With All Our Hearts” Malaysian JUSCO Foundation donated Ringgit Malaysia Five Thousand worth of books to each of the fi ve (5) selected schools – Sekolah Kebangsaan Kampung Pendama, Sekolah Kebangsaan Kampung Idaman, Sekolah Jenis Kebangsaan (Cina) Chuen Min, Sekolah Jenis Kebangsaan (Tamil) Ladang and Sekolah Menengah Kebangsaan Rantau Panjang.

With approximately 745,000 square feet of net lettable area, AEON Bukit Tinggi Shopping Centre is AEON’s largest shopping centre in Malaysia. The shopping centre houses 3 levels of exciting shopping space with over 5,000 car parking bays. At AEON Bukit Tinggi Shopping Centre, shoppers are able to experience all-in-one shopping which includes entertainment convenience. The shopping centre currently accommodates about 200 tenants, each offering a multitude of products, services, cuisines and conveniences for eager shoppers.

Attractions for both entertainment and dining include the Green Box Karaoke, a TGV 10-screen Cineplex and the two fl oors Restaurant Street that are fi lled with local and international cuisines. JUSCO Bukit Tinggi offers the best in shopping conveniences with fresh produce, high-quality merchandise, household goods, local and imported brands, including our high quality in-house brand, Jusco Selection and so much more!

The AEON Bukit Tinggi Shopping Centre truly embodies the ideal shopping experience with its unique blend of shopping, food and entertainment, all readily accessible under one roof. It also strives to understand and adapt to the ever-changing needs, wants and preferences of our valued customers.

4 Annual Report 2007 GRAND OPENING OF JUSCO BANDAR SUNWAY

JUSCO Bandar Sunway opened for business on 29 September 2007. The grand opening was offi ciated by Y.B. Dato’ Seri Rafi dah Aziz, the then Minister of International Trade and Industry of Malaysia on 8 January 2008. The momentous occasion also marked the offi cial opening for AEON’s 17th JUSCO store in Malaysia.

In conjunction with the celebrations, the “With All Our Hearts” Malaysian JUSCO Foundation donated Ringgit Malaysia Five Thousand worth of books to each of the fi ve (5) selected schools – Sekolah Kebangsaan Puchong Perdana, Sekolah Kebangsaan Bandar Sunway, Sekolah Jenis Kebangsaan (Tamil) Puchong, Sekolah Jenis Kebangsaan (Cina) Yuk Chai and Sekolah Kebangsaan Puchong Jaya.

Covering approximately 225,000 square feet, JUSCO Bandar Sunway is designed with the brands signature style in mind. It boasts an impressive contemporary interior design, bright lighting, wide walkways and exciting merchandise presentation. These essential elements create a unique shopping experience that is both convenient and enjoyable for Bandar Sunway shoppers.

With 4 fl oors packed with shopping and children entertainment, shoppers will have no qualms over product variety. The outlet provides a wide array of products, such as menswear, ladies apparel, childrenswear, household items, groceries and so much more. There is also a charming Candy Kid’s Playground section where kids can have fun and be creative.

JUSCO Bandar Sunway also offers a host of items and services which cater towards shoppers’ health and beauty concerns. There is the new organic food range, which offers shoppers healthy alternatives when they shop for groceries. The new concept AEON Wellness department carries a comprehensive range of health and beauty products. Items such as food supplements, health equipment and fragrances are readily available here.

The new JUSCO Bandar Sunway outlet truly embodies customers’ preference and need for quality, variety and depth in their shopping experience. Coupled with outstanding service and a strategic location, JUSCO Bandar Sunway is set to be the ideal shopping destination.

Annual Report 2007 5 INTRODUCING PASAR RAYA MAXVALU

Old New

Rebranding with Pasar Raya MaxValu AEON recently announced the new MaxValu name, which is to be adapted for all D’HATI supermarkets. Originating from AEON Group Japan, the new name refl ects on AEON’s concept of providing ‘maximum value’ in terms of quality of goods, value-for- money prices, product freshness, assortment, and customer service to our customers. A variety of high-quality yet affordable products and fresh daily necessities are not the only criterias that attracts customers. Our signature warm and friendly customer services will also ensure a good shopping experience, and keep them coming back for their daily needs. And in order to provide convenience, all Pasar Raya MaxValu are strategically situated in densely populated neighbourhoods, hence the tagline “Your Neighbourhood Convenience Store”. We strive to continually make our customers’ needs our top priority, and with each improvement we make upon our stores and services, we strive towards enhancing our customers’ shopping experience.

PASAR RAYA MAXVALU KOTA KEMUNING

AEON CO. (M) BHD. opened its third supermarket outlet in Kota Kemuning, Shah Alam on 28 September 2007.

Strategically located within both a residential and commercial area, Pasar Raya MaxValu (formerly known as D’HATI) provides a convenient and rewarding shopping experience for the residents of the surrounding communities.

Customers have access to a wide range of merchandise that includes fresh produce, grocery items, household needs, our AEON Wellness food supplement’s health products & equipment and lots more.

Its constant commitment to deliver affordable and quality goods to shoppers makes Pasar Raya MaxValu (formerly known as D’HATI) Kota Kemuning a much needed asset to the neighbourhood.

6 Annual Report 2007 PASAR RAYA MAXVALU DESA PARKCITY

The 4th Pasar Raya MaxValu offi cially opened on 8 December 2007 at Desa ParkCity. Located within the bustling residential area, Pasar Raya MaxValu Desa ParkCity intends to continue to live up to the expectations of providing convenient shopping to the surrounding neighbourhood communities. We intend to provide both superior service and merchandise and affi rms our status as “Your Neighbourhood Convenience Store”. We hope that our presence will benefi t both the neighbourhood and the residents of Seri Damansara and Kepong.

PASAR RAYA MAXVALU AMPANG

On 15 December 2007, the 5th Pasar Raya MaxValu offi cially opened in Ampang, Selangor. The outlet is strategically located in Taman Dato’ Ahmad Razali, providing both convenience and affordable prices merchandise to the surrounding communities and live up to our convenient neighborhood supermarket’ label.

Annual Report 2007 7 RENOVATIONS

JUSCO Permas Jaya

Renovation works at JUSCO Permas Jaya was completed in September 2007. The outlet now boasts a fresh and more contemporary image. Shoppers can benefi t from the wide aisles and bright lights specifi cally designed for shoppers’ convenience. With the extra shelf space, customers can also look forward to a more extensive variety of products. Pasar Raya MaxValu Pearl Point

The Pasar Raya MaxValu (formerly known as D’HATI) Pearl Point outlet underwent renovations in July 2007 to expand its selling area. By expanding the outlet, MaxValu (formerly known as D’HATI) Pearl Point is able to increase its product range. All MaxValu outlets are well stocked with various products including fresh produce, groceries and household items; all at reasonable prices.

8 Annual Report 2007 SUPERIOR QUALITY AND VALUE

Our in-house brand, renowned for its superior quality and value, showcases a wide range of products from the Home, Food and Personal Care categories as well as new items that have been developed. With best- of-its kind availability and unique packaging, is our commitment to bringing our customers the very best in lifestyle products at competitive prices. We pride ourselves in using the best quality sourced from around the world to create the best products for our valued customers. The following features top selling items.

SWEETENED CREAMER This is a basic ingredient of “Teh Tarik”, a popular Malaysian beverage. Jusco Selection Sweetened Creamer is the biggest contributor in the section.

WHEAT FLOUR Enriched with vitamins and protein. An essential ingredient used for cooking and baking treats such as cookies, pound cake, crackers, pies and murtabak.

CHICKEN FRANKFURTER 340G Made of 100% skinless chicken meat and devoid of MSG. Comes in an attractive package and sells at a very affordable price.

TOMATO & CHILLI SAUCE

Our sauce is specially formulated for dipping and cooking purposes. We believe in using only the freshest chillies and tomatoes to enhance the taste. Contain no additives or preservatives. Tasty, versatile, and is now available in two types of packaging: conventional bottle and easy-squeeze bottle.

BUTTER COOKIES

A sweet tooth’s favourite – delectable cookies with a savoury, buttery fl avour that tastes as authentic as a traditional homemade recipe. Sealed within a reusable tin, these cookies contain neither eggs nor preservatives.

SUNFLOWER COOKING OIL 3KG

A healthier alternative as it contains high-levels of both vitamin E and essential fatty acids called polyunsaturated fats. Ideal for health conscious consumers.

READY MEAL RANGE

Features several items: Jusco Selection Premium Pizza was developed to appeal to local tastes. It’s available in 7 varieties of which 3 are vegetarian. Product is devoid of MSG and preservatives. Jusco Selection Premium Burger includes lamb, chicken and beef patties. Although domestically produced, its quality equals those from premium and international brands, and doesn’t contain MSG or preservatives. Jusco Selection Mexican Range has 4 enticing fl avours – Albondiquitas (Chicken Bites and Tomato Sauce), Hungarian (Chicken Goulasch Soup), Enchiladas (Minced Chicken and Tomato in Tortilla Wrap), and Chicken Patties in Mushroom Sauce. Perfect for those on the go. Jusco Selection Footlong Sausages are meaty and savoury, with no added MSG, colouring or preservatives.

FRUIT CONCENTRATE For those who love their drinks, indulge in Jusco Selection Fruit Concentrates - the perfect drink for any occasion. Enjoy its natural, rich fl avors on a hot day or after a long day at work.

Annual Report 2007 9 AEON BUKIT TINGGI SHOPPING CENTRE TREE PLANTING CEREMONY

On 27 October 2007, around 1000 volunteers consisting of AEON CO. (M) BHD.’s employees, students, guests and community members gathered at AEON Bukit Tinggi Shopping Centre in Klang to plant 5,085 seedlings. The State Secretary YB Dato’ Ramli Mahmud on behalf of the then Menteri Besar of Selangor YAB Datuk Seri Dr. Haji Mohammad Khir Bin Toyo were there to offi cially launched the event. Also present at the launch were the Chairman of AEON CO. (M) BHD., Dato’ Abdullah bin Mohd Yusof and the Managing Director, Mr. Nagahisa Oyama. Before the tree- planting session began, a short explanation on tree planting procedure was given by Vice-Chancellor of Universiti Putra Malaysia, Prof. Dr. Mustafa Kamal Mohd Shariff. To date, AEON CO. (M) BHD. has successfully planted more than 331,030 trees at 14 of our shopping centres as well as at Paya Indah Wetlands in Dengkil, Selangor. AEON continues its efforts on environment conservation by always involving local members of the community.

10 Annual Report 2007 20TH ANNIVERSARY TREE PLANTING PROGRESS: AEON WOODLAND AT PAYA INDAH WETLANDS CONTINUES TO THRIVE

2004 2007 On 15 September 2004, AEON CO. (M) BHD. held a special tree planting ceremony at the Paya Indah Wetlands in Dengkil, Selangor to commemorate AEON’s 20 years in Malaysia. The volunteers included AEON staff members, invited customers, business associates and 1000 volunteers from Japan. This event was sponsored by the AEON Environment Foundation of Japan, which has sponsored the planting of over 5 million trees around the world. Representatives of the Foundation have paid regular visits to the site, deemed as the Malaysia-Japan Friendship Forest, at AEON Woodland. It is now a beautiful tract of thriving greenery.

REPLANTING AT AEON WOODLAND

On 30 June 2007, the Company successfully organised a tree replanting event at AEON Woodland from 8am to 12pm.The objective of the event was to encourage the participants to do environmental conservation and conserve the earth for future generations. 775 trees were successfully planted in three different zones by staffs from AEON CO. (M) BHD., AEON Credit Service (M) Berhad and Jabatan Perlindungan Hidupan Liar Dan Taman Negara (Perhilitan). The Managing Director and senior management of AEON CO. (M) BHD., representatives from AEON Credit Service (M) Berhad and Principal Assistant Director of Paya Indah Wetlands, were present at the meaningful event.

Annual Report 2007 11 CORPORATE SOCIAL RESPONSIBILITY

AEON’s commitment to our communities is a vital part of the Company’s Social Responsibility Mission. It is the Company’s goal to promote healthy, peaceful, interactive activities with the communities in locations where its stores operate. The Company strives to be more socially aware of its responsibility to act as a responsible corporate citizen in all its ventures. As a corporate citizen, AEON continually conducts activities which seek to provide opportunities that encourage environmental conservation, promotes educational opportunity as well as social responsibility and healthy living among the communities. These may take on various forms including philanthropic initiatives, in-kind donations and volunteerism. Activities organised during the year include the following:– – AEON organised a “Mega Gotong-Royong” on 24 and 25 January 2007 to assist victims affected by the fl ash fl oods at Kg. Kangkar Tebrau, Johor Bahru. A total of 210 staffmembers from headquarters and outlets at Malacca, Taman Universiti, Permas Jaya and Tebrau City participated in this project. During the event, essential supplies such as clothes, blankets, towels, curtains, pots, pans and cooking utensils were donated by AEON employees from the country which was then presented by the General Manager of Corporate Affairs, Tuan Hj A Rashid Hj Adam to Raja Zarith Sofi a Sultan Idris, the Patron of the Johor State’s Malaysian Red Crescent.

– To develop and maintain good relationship with the local community, AEON staff participated in cleaning, painting, repairing, planting trees and others at more then 63 locations (16 schools, 25 special homes, 9 recreational areas and 13 housing areas). AEON contributed more than RM 75,000 during this event both in-kind and cash.

– AEON contributed books and magazines towards the National Reading Campaign held on 9 February 2007. The Minister of Education, YB Dato’ Sri Hishammuddin Tun Hussein was present as the guest of honor.

– The Blood Donation Campaign held on 6 to 8 July 2007 managed to collect 2,799 blood bags. The event was launched by the then Serdang’s Member of Parliament, YB Dato’ Yap Pian Hon.

12 Annual Report 2007 – AEON treated 1,600 children from several local orphanages to a special Ramadhan feast. To commemorate the event, each child received an exclusive gift. Esteemed guests included the Prime Minister of Malaysia Y.A.B. Dato’ Seri Abdullah Hj. Ahmad Badawi.

– AEON’s continues its support towards promoting local “Buatan Malaysia” products by organising a roadshow with government agencies in 2007 to market local SIME products. The roadshow involved 12 AEON Shopping Centres.

– Since 2005 the Company has started contributing to the Reduction of CO2 Emission to the Environment issue. Energy saving systems have been installed at some of our outlets to reduce electricity consumption and also the use of bio- degradedable plastic bags at all our outlets since 2004 are among others, AEON’s drive and commitment to make the environment a much more friendlier place for the future generations.

Energy Saving System

– AEON also received several prestigious accolades in 2007. The awards are:

• MHR Occupational Safety & Health Gold Award 2006 • MDTCA “Kedai Pilihan Pengguna” 2007 Award for JUSCO outlets in Taman Maluri, Wangsa Maju, Mid Valley, Bukit Raja in Klang, Queensbay in Penang, Air Keroh in Melaka, Taman Universiti and Permas Jaya in Johor.

AEON CO. (M) BHD. also continues to provide assistance and contribute to the society in the form of donations, sponsorships and gifts through the “With All Our Hearts” Malaysian JUSCO Foundation.

Annual Report 2007 13 “WITH ALL OUR HEARTS” MALAYSIAN JUSCO FOUNDATION

Ambulance Fundraising Campaign The Malaysian JUSCO Foundation organised an ambulance fundraising campaign for the Malaysian Red Crescent (MRC) between 15 December 2007 and 15 March 2008. Customers were encouraged to make their donations into specially designed coin boxes placed at all JUSCO Stores and AEON Shopping Centres. In addition, Charity Bazaars were also held during the “fundraising carnival” to generate more funds for the campaign.

Glamour for a worthy cause at WAOH Charity Gala Dinner 2007 Launch of WAOH Mini Coin Box Dato’ Siti Nurhaliza was the star of the night during the WAOH Charity Gala Dinner 2007, held on 15 August at the On 25 August 2007, Dato’ Siti Nurhaliza, Ambassador of Grand Ballroom of Sunway Lagoon Resort Hotel. The Charity the “With All Our Hearts” Malaysian JUSCO Foundation, Gala Dinner is held yearly to raise funds for the WAOH attended the launch of the “WAOH Mini Coin Box” at Malaysian JUSCO Foundation. The foundation strives to help AEON Taman Equine Shopping Centre. The coin box, needy Malaysian children and youth. This year’s funds will go which shoppers can purchase for RM1 each, was designed towards building a second Rumah Tunas Harapan welfare in support of the WAOH Charity Drive. home for underprivileged children. Dato’ Siti Nurhaliza, who The songstress performed for shoppers and 40 children is the foundation’s ambassador, enthralled worthy guests from Rumah Kebajikan Anbu Illam, Pertubuhan Rumah Amal with renditions of her latest hit songs, while Phua Chu Kang Cahaya Tengku Ampuan Rahimah (RACTAR) and Rumah and Moe Alkaff drew guffaws of laughter with their hilarious Charis. The children has the opportunity to get close and performances. More than 1,300 business associates and personal with Dato’ Siti Nurhaliza. management staffs attended the function.

14 Annual Report 2007 HUMAN RESOURCE MANAGEMENT

New Leaders Development Programme The New Leaders Development Programme was created in 2006 Education – AEON People Is with an objective to cultivate potential leaders for the Company. ‘Core Assets’ Candidates will undergo a 10-month long training programme that focuses on the enhancement of leadership qualities as well AEON CO. (M) BHD. continues to invest in its employees. as retail operation knowledge. Since commencement, many AEON believes that education is essential in cultivating the skills participants have been promoted to higher positions in the of its team members, thus providing opportunities in building and Company. developing a career in the Company. AEON Business School AEON And OUM The AEON Business School was created in 2006 as part On 2 September 2007, AEON was given the “OUM – Industry of AEON’s expansion plan. There are 5 specially designed 2007 Human Capital Development Award” by the Institute of courses for each target group: Professional Development (IPD) at Open University Malaysia 1) Store Manager Course (OUM) for its dedication in developing human potentials. 2) Shopping Centre Manager Course 3) Line Manager Course AEON in collaboration with OUM provides academic 4) Merchandiser Course qualifi cations to its staff and interested students in selected courses 5) Security Course – Certifi cate in Retail Operations, Diploma in Management The courses were designed to help raise the standards, skills and (Retailing) and Executive Diplomas in Business Management, business insight of the AEON team in order to retain its competitive Human Resources Management, Security Management and edge. This attributes towards the Company’s policy and commitment Retail Management. on placing customers fi rst and serving them better. The Company has since witnessed 366 AEON staff members graduating with excellent results, and another 132 is expected to graduate in 2008.

Human Resource Development Centre (HRDC) Programme The HRDC Programme is based at the JUSCO Taman Maluri store and was developed in 2006 for graduates. The 6-month Japan Trainee Programme long graduate trainee programme includes: 1) Theoretical & practical knowledge of retail operations and The Japan Trainee Programme is a yearly basis training management programme that was designed to expose potential leaders 2) On and Off job training to advanced retail environments in Japan. The programme The programme has successfully developed 60 Section Leaders, has since generated a number of potential leaders from the 2 Assistant Merchandisers and 6 Japan Trainees since its Management Trainee/Retail Trainee programme to cope with commencement. This number is expected to increase in 2008, the growth of the company. with 3 batches of Management Trainees intakes. The chosen candidates would undergo a 6-month long training With great support from the respective leaders, trainees were stint in AEON Japan for the On Job Training that includes retail motivated to overcome challenges such as juggling between operations and management – people, sales area, backroom work and studies. and inventory. Annual Report 2007 15 AN INTRODUCTION TO ÆÆONON

AEON CO. (M) BHD. is a leading retailer in Malaysia with ÆÆONON Basic Peace a total revenue of RM2.89 billion in the fi nancial year under Principles: review. The Company was incorporated on 15 September 1984. AEON CO. (M) BHD. was set up in response to the The Customer Malaysian Government’s invitation to ÆON Japan to help modernise the retailing industry in Malaysia. The ‘JUSCO’ People Community name today is well established among Malaysians as well as foreigners, especially due to its association with Peace: ÆON is a corporate group whose operations the international ÆON group of companies. AEON has are dedicated to the pursuit of peace through established itself as a leading chain of General Merchandise prosperity. Stores. AEON’s constant interior refurbishment of stores to project an image designed to satisfy the ever changing People: ÆON is a corporate group that respects human needs and desires of consumers is clear evidence of this. dignity and values personal relationships. The Company’s performance has been further enhanced by the management’s acute understanding of target market needs Community: ÆON is a corporate group rooted in local and the provision of an optimal product-mix. AEON’s stores community life and dedicated to make are mostly situated in suburban residential areas, catering to a continuing contribution to the community. Malaysia’s vast middle income group. Our Strategy The ÆON group of companies consists of ÆON Co., Ltd., and more than 150 consolidated subsidiaries and affi liated ÆON follows two strategies for continuos growth: Organic companies. In addition to its core General Merchandise Growth and Company Tie-ups. Its core business of shopping Stores (GMS) plus its supermarket and convenience store centre operations includes General Merchandise Stores and operations, ÆON is also active in specialty store operations Supermarkets. ÆON builds complementary operations such and shopping centre development, operations, credit card as specialty stores and shopping centre development and business and services. The ÆON group of companies is an services, and works to create synergies among these diverse integrated Japanese retailer and is active not only in Japan but businesses. ÆON also aspires to be one of the top retailers in also throughout Southeast Asia, China and North America. At the world in terms of both revenues and operating income by all times, in every market, ÆON’s activities are guided by its the end of fi scal 2011. unchanging ‘Customer First’ philosophy. Its aim is to surpass expectations by combining excellent products with unique Our Goal personal services that enhance the shopping experience to make customers smile every time they shop. ÆON’s goal is to operate as an “international-scale retailing group”, recognised for excellence not only in Japan, but also Our Principles in other nations. The international recognition we are working to achieve is not one which can be measured merely in The fundamental principle of ÆON is its “Customer Centred quantifi able terms of size, growth and profi tability. We hope Approach”. AEON’s mission is and always will be to contribute to be competitive at the global level in intangible aspects to the customers. such as customer satisfaction and corporate citizenship. We are dedicated to the idea of “quality management” to further ÆON’s most basic and abiding principles are the pursuit of enhance our capabilities. peace, respect for humanity and contribution to local communities through customer-centred initiatives. Under these principles, we are determined to achieve global management standards while being the best serving retailer in the local community.

16 Annual Report 2007 CORPORATE INFORMATION AND DIRECTORY

Board of Directors Stock Exchange Listing • Dato’ Abdullah bin Mohd Yusof (Chairman) The Company is a public listed company, incorporated and • Mr. Tsutomu Kajita domiciled in Malaysia and listed on the Main Board of the • Mr. Nagahisa Oyama Bursa Malaysia Securities Berhad. • Datuk Ramli bin Ibrahim • Brig. Jen (B) Dato’ Mohamed Idris bin Saman Homepage • Datuk Zawawi bin Mahmuddin • Dato’ Chew Kong Seng http://www.jusco.com.my • Mr. Naruhito Kuroda Principal Bankers Secretaries • Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad (302316-U) • Tai Yit Chan (MAICSA 7009143) • Malayan Banking Berhad (3813-K) • Wong Lai Kuan (MAICSA 7032123) • CIMB Bank Berhad (13491-P) (formerly known as Bumiputra Commerce Bank Berhad) Registered Offi ce and Head Offi ce 3rd Floor, JUSCO Taman Maluri Shopping Centre, Jalan Jejaka, Taman Maluri, CORPORATE CALENDAR Cheras, 55100 Kuala Lumpur. Tel: 03-9207 2005 Notice of Annual 2 April 2007 Fax: 03-9207 2006/2007 General Meeting Auditors Annual General Meeting 24 April 2007 KPMG Desa Megat & Co. (AF0759) Payment of Dividend Book Closure Chartered Accountants, - 4 May 2007 Wisma KPMG, Payment Jalan Dungun, Damansara Heights, - 24 May 2007 50490 Kuala Lumpur. Quarterly Results 1st Quarter Registrars Announcement - 17 May 2007

Tenaga Koperat Sdn. Bhd. (118401-V) 2nd Quarter 20th Floor, Plaza Permata, - 14 August 2007 Jalan Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur. 3rd Quarter Tel: 03-4047 3883 - 22 November 2007 Fax: 03-4042 6352 4th Quarter Date of Incorporation - 21 February 2008 15 September 1984 Annual Report 2007 17 SHARE PRICE

Stock Code: 6599 Stock Name: AEON 2007 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec High (RM) 7.40 8.70 8.60 9.50 10.30 10.30 9.60 10.30 10.50 10.60 10.30 10.90 Low (RM) 7.00 7.30 7.90 8.30 9.25 9.40 9.10 9.10 9.80 9.50 9.60 10.00 Volume (‘000) 3,859.6 1,671.7 1,116.0 383.5 1,528.5 627.5 1,781.2 1,857.1 778.1 1,212.1 844.7 441.0

REVENUE

RM million 2,886.2 3,000

2,750

2,500

2,250

1,962.4 1,941.4 2,000 1,784.6

1,750 1,523.8

1,500

1,250

Financial Year Feb’ 04 Feb’ 05 Feb’ 06 Dec’ 06 Dec’ 2007 (10 months) PROFIT ATTRIBUTABLE TO SHAREHOLDERS

RM million 120 105.1 110 103.2

100

90

80 73.2 64.2 70 63.6

60

50

40

30

20

10

Financial Year Feb’ 04 Feb’ 05 Feb’ 06 Dec’ 06 Dec’ 2007 (10 months) 18 Annual Report 2007 FIVE YEARS FINANCIAL HIGHLIGHTS

31/12/07 31/12/06 28/2/06 28/2/05 29/2/04 (10 months) RM’000 RM’000 RM’000 RM’000 RM’000 INCOME STATEMENT Revenue 2,886,220 1,941,431 1,962,445 1,784,564 1,523,781 Retailing 2,640,341 1,763,283 1,807,753 1,648,475 1,406,242 Property Management Services 245,879 178,148 154,692 136,089 117,539 Profi t before tax 159,006 140,741 112,198 99,010 96,288 Profi t after tax 105,176 103,246 73,204 64,247 63,588 Net dividend 29,098 20,498 18,954 15,163 12,636

BALANCE SHEET Assets Property, plant and equipment 1,069,027 942,252 845,248 628,950 575,673 Prepaid lease payment 126,365 127,269 126,008 127,385 117,177 Investments 1,075 1,075 1,075 175 175 Current assets 526,007 367,777 239,161 258,336 259,344

Total assets 1,722,474 1,438,373 1,211,492 1,014,846 952,369

Equity Share capital 175,500 175,500 175,500 175,500 87,750 Revaluation reserve 32,700 33,217 33,648 34,165 34,682 Share Premium 20,609 20,609 20,609 20,609 108,488 Retained earnings 562,012 476,817 392,094 333,536 281,408 Total equity attributable to 790,821 706,143 621,851 563,810 512,328 shareholders of the company

Liabilities Deferred tax liabilities 23,829 29,113 29,281 24,429 24,322 Current liabilities 907,824 703,117 560,360 426,607 415,719

Total equity and liabilities 1,722,474 1,438,373 1,211,492 1,014,846 952,369

STATISTICS

Net earnings per share (sen) 59.9 58.8 41.7 36.6 *36.2

Gross dividend per share (%) **21 16 15 12 20 Net assets per share (RM) 4.51 4.02 3.54 3.21 5.84

* Earnings per share has been calculated based on the number of ordinary shares of 175,500,000. Comparative earnings per share information has been restated after adjusting for the bonus issue undertaken by the Company. ** Gross dividend per share is inclusive of the 4% special tax exempt dividend.

Annual Report 2007 19 BOARD OF DIRECTORS

(Seated from left to right) (Standing from left to right)

Mr. Tsutomu Kajita Dato’ Chew Kong Seng Non-Independent Non-Executive Independent Non-Executive Director Vice Chairman Datuk Ramli bin Ibrahim Dato’ Abdullah bin Mohd Yusof Non-Independent Non-Executive Director Non-Independent Non-Executive Chairman Mr. Naruhito Kuroda Non-Independent Non-Executive Director Mr. Nagahisa Oyama Managing Director Datuk Zawawi bin Mahmuddin Independent Non-Executive Director

Brig. Jen (B) Dato’ Mohamed Idris bin Saman Independent Non-Executive Director

20 Annual Report 2007 DIRECTORS’ PROFILES

Dato’ Abdullah bin Mohd Yusof (69) (Malaysian) Non-Independent Non-Executive Chairman

Dato’ Abdullah bin Mohd Yusof was appointed the Chairman of AEON CO. (M) BHD. on 26 October 1984. He holds a Bachelor of Law (Honours) from University of Singapore, which he obtained in 1968. He has more than thirty fi ve (35) years of experience as an Advocate & Solicitor. He started his career with Skrine & Co., as a Legal Assistant in 1968 before starting his own partnership under the name of Tunku Zuhri Manan & Abdullah, Advocates & Solicitors in 1969 and subsequently renamed the law fi rm to Abdullah & Zainuddin, Advocates and Solicitors. He sits on the Board of Directors of MMC Corporation Berhad, Zelan Berhad, Tradewinds Corporation Berhad and AEON Credit Service (M) Berhad, all of which are companies listed on Bursa Malaysia Securities Berhad. He also sits on the Board of Directors of THR Hotel (Selangor) Bhd and several private limited companies. He is a member of the Remuneration & Nomination Committee of the Board. Dato’ Abdullah bin Mohd Yusof has attended all the seven (7) Board meetings held in the fi nancial year. He holds 268,000 ordinary shares directly in the Company and 786,900 ordinary shares indirectly in the Company.

Mr. Tsutomu Kajita (54) (Japanese) Non-Independent Non-Executive Vice Chairman

Mr. Tsutomu Kajita was appointed Non-Executive Director of AEON CO. (M) BHD., on 16 May 2007 and appointed as Non-Executive Vice Chairman on 14 August 2007. He holds a MBA from Babson College, Massachusetts, USA. He joined Mitsubishi Corp, Japan as an Assistant Manager in the Exporting Power System Group in 1979 and in 1985 as Manager, Power System Development. In 1989 he joined Diamond Energy Inc. Los Angeles, USA, a subsidiary of Mitsubishi Corp., as Vice President and in 1993 he was transferred to be Assistant General Manager of Power & Traffi c Project Development. In 2000, he became Executive Vice President & Treasurer of Diamond Generation Corporation and joined Ripplewood Holdings, L.L.C., New York in 2002 as Senior Advisor. Mr. Tsutomu Kajita joined ÆON Co., Ltd., Japan as General Manager, Mergers & Acquisitions of International Operation Division in 2005 and is now the Senior Vice President, International Operations of ÆON Co., Ltd., Japan. He is the Chairman & Representative Director of Warner Mycal Corporation, President of AEON (USA), Inc. and sits on the Board of 9 ÆON Companies worldwide. Mr. Tsutomu Kajita is also the Chairman of the Nomination and Remuneration Committees of the Board. Mr. Tsutomu Kajita has attended two (2) out of four (4) Board meetings held during his term of offi ce in the fi nancial year. He does not hold any shares in the Company.

Mr. Nagahisa Oyama (53) (Japanese) Managing Director

Mr. Nagahisa Oyama was appointed the Managing Director of AEON CO. (M) BHD. on 22 June 2005. He holds a Bachelor's Degree in Business Management from Kinki University, Japan, which he obtained in 1977. He joined ÆON Co., Ltd. in 1977 as a Management Trainee and was promoted to be Softline Merchandiser in 1980. He was seconded to Siam JUSCO, Thailand to set up the GMS Merchandising Division. Following his appointment at Siam JUSCO, Thailand, from 1989 to 1991, he was promoted to General Manager of Tonami Regional Shopping Centre in 1991. Mr. Oyama was next appointed as the General Manager of Kaga Regional Shopping Centre in 1996. He served as General Manager of Kochi Regional Shopping Centre from 2000 to 2002. In 2002, he was promoted to Regional General Manager of Higashi Mikawa and Shizuoka Prefecture, Japan, where he was in charge of the overall planning, opening and operations of three (3) new Regional Shopping Centres and the operations of seven (7) existing Regional Shopping Centres in the Shizuoka Prefecture. Mr. Nagahisa Oyama has attended all the seven (7) Board meetings held in the fi nancial year. He does not hold any shares in the Company.

Datuk Ramli bin Ibrahim (67) (Malaysian) Non-Independent Non-Executive Director

Datuk Ramli bin Ibrahim was appointed Non-Executive Director of AEON CO. (M) BHD. on 20 August 1996. He is a member of the Malaysian Institute of Accountants and a Fellow of the Australian Institute of Chartered Accountants. He was attached to KPMG Peat Marwick (now known as KPMG) in Australia, United Kingdom and Malaysia from 1959 to 1995. He was appointed a Partner of KPMG Malaysia in 1971. In 1989, he was made the fi rst bumiputera Senior Partner of KPMG Malaysia. He also served on the Boards of KPMG International and KPMG Asia Pacifi c from 1990 to 1995. He retired from KPMG Malaysia in 1995. From December 1995 to December 2000, he served as the Executive Chairman of Kuala Lumpur Options & Financial Futures Exchange Berhad. Currently, he sits on the Board of Directors of Ranhill Berhad, Measat Global Berhad, BCT Technology Berhad, AEON Credit Service (M) Berhad and several other unlisted public and private limited companies including HSBC Bank Malaysia Berhad and Yayasan Tuanku Syed Sirajuddin. He is also a member of the Audit and Remuneration Committees of the Board. Datuk Ramli bin Ibrahim has attended six (6) out of seven (7) Board meetings held in the fi nancial year. He holds 280,000 ordinary shares indirectly in the Company.

Note: Save as disclosed in this annual report, all the Directors mentioned on page 21 to 22 have no confl icts of interest with AEON CO. (M) BHD. or any family relationship with any Director and/or substantial shareholder nor have they any convictions for offences within the past 10 years, except for traffi c summons, if any. Annual Report 2007 21 DIRECTORS’ PROFILES

Brig. Jen (B) Dato’ Mohamed Idris bin Saman (63) (Malaysian) Independent Non-Executive Director

Brig. Jen (B) Dato’ Mohamed Idris bin Saman was appointed Non-Executive Director of AEON CO. (M) BHD. on 16 June 2000. He holds a Post Graduate Diploma in Management Studies from the Slough College, United Kingdom which he obtained in 1980. He was a graduate of the Air Command & Staff College, Maxwell, USA and the Armed Forces Defence College, Kuala Lumpur. He joined the Royal Malaysian Air Force as a Pilot Offi cer and served for thirty-fi ve (35) years, in various executive positions within its Logistic Branch. He retired from the Royal Malaysian Air Force in 2000 as Assistant Chief of the Air Force (Material). He is a Director of Affi n Fund Management Bhd. He is also a Fellow of the Malaysian Institute of Logistics. Brig. Jen (B) Dato’ Mohamed Idris bin Saman is a member of the Audit and Nomination Committees of the Board. Brig. Jen (B) Dato’ Mohamed Idris bin Saman has attended all the seven (7) Board meetings held in the fi nancial year. He does not hold any shares in the Company.

Datuk Zawawi bin Mahmuddin (62) (Malaysian) Independent Non-Executive Director

Datuk Zawawi bin Mahmuddin was appointed Non-Executive Director of AEON CO. (M) BHD. on 23 July 2001. He holds a Bachelor of Arts (Honours) Degree from the University of Malaya, which he obtained in 1968. Datuk Zawawi joined the Administrative and Diplomatic Service and began his career as an Administrative Offi cer in the Ministry of Transport in 1968. From 1970 to 1975 he served as private secretary to the Deputy Prime Minister and thereafter held various positions in the Cabinet Secretariat of the Prime Minister’s Department from 1975 to 1990. His subsequent appointments were as follow:- Federal Secretary in Sarawak (1990 – 1992), Deputy Secretary General 1, Ministry of Home Affairs (1992 – 1994), Secretary General, Ministry of Information (1994 – 2000). Datuk Zawawi was formerly on the Board of Syarikat Explosive Malaysia Sdn. Bhd. (SME), National Film Development Corporation (FINAS), Governing Council, Bernama and Sukom Ninety Eight Bhd. Besides being Chairman of Northport Distripark Sdn. Bhd., he also sits on the Board of a few private limited companies. He is also a member of the Nomination Committee of the Board. Datuk Zawawi bin Mahmuddin has attended all the seven (7) Board meetings held in the fi nancial year. He does not hold any shares in the Company.

Dato’ Chew Kong Seng (70) (Malaysian) Independent Non-Executive Director

Dato’ Chew Kong Seng was appointed Non-Executive Director of AEON CO. (M) BHD. on 23 July 2001. He is a Fellow of Institute of Chartered Accountants in England and Wales, a Member of the Malaysian Institute of Accountants and the Malaysian Institute of Certifi ed Public Accountants. He was a tax offi cer in the Inland Revenue Department in the United Kingdom and then joined Stoy Hayward & Co. in the United Kingdom from 1964 to 1970. He returned to Malaysia and joined Turquand Young & Co. (now known as Ernst & Young) and was subsequently transferred to Sarawak offi ce as Manager in-charge and later as Partner in-charge. He was appointed as the Managing Partner of Ernst & Young from 1990 to 1996. Currently, Dato’ Chew Kong Seng is a Director and Audit Committee Chairman of Petronas Dagang Berhad, Industrial Concrete Products Bhd, PBA Holdings Berhad and Bank of America Malaysia Berhad, as well as a Director and a member of the Audit Committee of Petronas Gas Berhad and GuocoLand (Malaysia) Berhad. He is also a Director of Encorp Berhad and Great Wall Plastic Industries Berhad. Dato’ Chew Kong Seng is the Chairman of the Audit Committee and a member of the Nomination Committee of the Board. Dato’ Chew Kong Seng has attended all the seven (7) Board meetings held in the fi nancial year. He does not hold any shares in the Company.

Mr. Naruhito Kuroda (45) (Japanese) Non-Independent Non-Executive Director

Mr. Naruhito Kuroda was appointed Non-Executive Director of AEON CO. (M) BHD., on 16 May 2007. He holds a Bachelor’s Degree in English Literature from Kansai University of Foreign Studies, Japan, which he obtained in 1984. He joined ÆON Co., Ltd. in 1984 and was transferred to AEON Credit Japan of Marketing and subsequently seconded to AEON Credit Service (Asia) Co., Ltd. Hong Kong, as a Senior Manager. In 1995 he was appointed a director of AEON Thana Sinsap (Thailand) PLC and also the Deputy Managing Director of ACS Capital Corporation, which he held from 1998 to 1999. Mr. Naruhito Kuroda was appointed a Director of AEON Credit Service (ASIA) in Hong Kong in 1999 and appointed the Managing Director of AEON Credit Service (M) Berhad in 2001. He currently sits on the Board of Directors of PT AEON Credit Service Indonesia. Mr. Naruhito Kuroda has attended all the four (4) Board meetings held during his term of offi ce in the fi nancial year. He holds 16,000 ordinary shares directly in the Company.

22 Annual Report 2007 SENIOR MANAGEMENT

(Seated from left to right) (Standing from left to right)

Ms. Audrey Lim Suan Imm Mr. Poh Ying Loo Assistant General Manager Marketing General Manager Finance

Puan Nur Qamarina Chew Mr. Tomio Yokoyama General Manager New Business Development Assistant General Manager SC Development

Mr. Nagahisa Oyama Tuan Hj. A. Rashid Hj. Adam Managing Director General Manager Corporate Affairs

Puan Noryahwati Mohd. Noh Lt. Col (R) Yaacob bin Mahmud General Manager Human Resource, General Manager Supply Chain Management Administration and Security, Safety & Health Mr. Takanori Yonezawa Ms. Chong Swee Ying Assistant General Manager Human Resource -Special Task General Manager Store Operations Mr. Mitsuru Nakata Assistant General Manager Merchandising

Annual Report 2007 23 CHAIRMAN’S STATEMENT

a sales and leaseback transaction which if excluded would have resulted in a profi t after tax growth of 16.7% over the previous fi nancial period. These splendid results contributed to higher earnings per share of 59.9 sen for the year. In addition, AEON’s balance sheet as at 31 December 2007 remained healthy with no gearing and a net asset value of RM4.51 per share.

REVIEW OF OPERATIONS 2007 was indeed a good year for the economy of Malaysia and consequently the retail industry. Consumption related measures and events such as Visit Malaysia Year 2007 and salary hike for civil servants boosted further growth of the retail industry.

For this year, the retail sales of AEON contributed RM2.640 billion to the total revenue. The growth of 24.8% in retail sales over the previous corresponding period of January to December 2006 was contributed by both the existing same stores growth of 10.1% as well as contribution of 12.3% from On behalf of the Board of Directors, I am pleased to the new JUSCO stores at Taman Equine, Cheras Selatan and present AEON CO. (M) BHD.’s (AEON) Annual Report and Queensbay, all of which operated for a full year in 2007. Audited Financial Statements for the fi nancial year ended 31 The year also saw the opening of two new stores at Bandar December 2007. Sunway and Bukit Tinggi, Klang on 29 September 2007 and 24 November 2007 respectively and they contributed about 2.5% to the total retail sales. FINANCIAL REVIEW For the fi nancial year under review (the year), AEON achieved The performance of the existing stores was also good. yet another good set of results owing to the continuing good JUSCO stores in Taman Maluri, Wangsa Maju, Melaka, performance from its core business of retailing and property Ipoh, Permas Jaya, Bandar Utama, Bandar Baru Klang and management services. For the twelve months ended 31 Bandar Puchong, recorded higher growth of between 5.0% December 2007, AEON achieved revenue of RM2.886 to 10.0% over the previous corresponding period whereas billion which is 48.7% higher than that of the previous newer JUSCO stores at Metro Prima, Seremban 2 and corresponding fi nancial period from March to December Tebrau City recorded even stronger growth from 13.1% to 2006 which was a shorter period due to the change in 16.9%. JUSCO Mid Valley and JUSCO Taman Universiti, accounting year end from February to December. Comparing which underwent renovation in 2006 and did not operate in on the same period basis, the revenue of RM2.886 billion is full in the previous corresponding period, registered 17.0% 24.7% higher when compared to the previous corresponding and 21.0% growth respectively for the year. period from January to December 2006. To further tap into and create a niche in providing convenience The strong revenue growth had enabled AEON to also shopping to identifi ed neighbourhood areas, AEON had register a strong profi t before tax of RM159.0 million and a also during the year further opened three new supermarkets profi t after tax of RM105.2 million for the year. These profi ts at Kota Kemuning, Desa ParkCity and Ampang, all of which represent increases of 12.9% and 1.8 % respectively from are located within highly populated residential areas. These the profi ts before tax of RM140.7 million and profi t after new supermarkets together with the existing supermarkets tax of RM103.2 million recorded in the previous fi nancial at Damansara Damai and Pearl Point shopping centre offer period of March to December 2006. However the previous varieties of groceries, perishables, fresh produce, bakery and fi nancial period’s profi ts had also included a gain of RM33.9 delicatessen. Although the contribution of these supermarkets million from the disposal of its Kinta City Shopping Centre in are still marginal, AEON considers their role as important

24 Annual Report 2007 in complementing its existing stores and to enable AEON to preserve the environment in which we live in through to further establish itself in food and related sector of the planting of trees. During the year, AEON together with retail industry. The supermarkets have been rebranded from Jabatan Perlindungan Hidupan Liar dan Taman Negara D’Hati to MaxValu, to project maximum value for the goods (Perhilitan) carried out tree planting activities at Paya Indah and services offered. MaxValu is also the name of AEON Wetlands whereby approximately 755 trees were planted. Group of Japan’s supermarket chain. 5,000 trees were planted at a tree planting ceremony at AEON Bukit Tinggi Shopping Centre at which the staff of AEON, invited guests, school children and local community AEON’s property and management services also continued participated. Tree planting ceremony is a traditional to do well for the year. AEON with its well managed shopping ceremony which has been practised by AEON before each centres that provides good tenant mix, undoubtedly attract new shopping centre opening. AEON has since planted and retain tenants as was evidenced by the high level of more than 310,000 seedlings around its shopping centres average occupancy rate of 99 % for its shopping centres. throughout the country. The property management services have achieved revenue of RM245.9 million, an impressive growth of 16.5% against the previous corresponding period of January to December Apart from tree planting activities, AEON has also organised 2006. Same shopping centres basis showed growth of 5.2% a series of community services such as educational visits by for the year whereas the new shopping centres at AEON school children to JUSCO, visiting orphanages, recycling Taman Equine Shopping Centre and AEON Cheras Selatan projects, blood donations drives and other community projects Shopping Centre, which operated throughout the year, in which staff of AEON and local residents participated. contributed 9.3% to the growth. In November 2007, AEON These activities will continue to be carried out by AEON with opened its 14th shopping centre at Bukit Tinggi, Klang which the objective of fostering a spirit of cooperation and helping is the largest AEON shopping centre in Malaysia offering one another among the local community. approximately 745,000 square feet of net lettable area and is expected to contribute signifi cantly to the growth of AEON AEON has also contributed to the Reduction of CO2 in the years to come. Emmission to the Environment through the implementation of energy saving systems at some of its outlets to reduce During the year, AEON purchased two parcels of land at electricity consumption and also the use of bio degradable Ampang, Kuala Lumpur and Bukit Indah, Johor Bahru for plastic bags at its outlets since 2004 which further refl ect the purpose of constructing thereon a shopping centre each. AEON’s drive and commitment to make the environment a Construction of the shopping centres is currently in progress much more friendlier place for the future generations. and is expected to be completed by end of 2008 or beginning of 2009. AEON is also currently waiting for the completion During the year, “WITH ALL OUR HEARTS” Malaysian JUSCO of another shopping centre in Seberang Prai, Penang, which Foundation, a charitable foundation which AEON supports AEON will lease from the owner. The shopping centre in which involves in fund-raising activities and events for the Seberang Prai is expected to be opened for business before benefi t of all underprivileged children, has successfully raised the end of 2008. more than RM750,000 through its annual Charity Gala Dinner. The objectives of the fund raising event were, among others, CORPORATE SOCIAL RESPONSIBILITY to set up a second welfare home “Rumah Tunas Harapan” to provide shelter for underprivileged children. Donations were Rapid economic development and urbanisation have also made to various other deserving causes. inevitably sacrifi ced our natural environment causing serious consequences of global warming and climate change phenomenon. These issues have prompted AEON to play its AEON always takes the lead and looks for sustainable part in preserving the natural environment and contribute to initiatives to encourage greater participation from the making our world a better place to live in. communities in supporting activities such as preserving the natural environment, charitable events and community services, thereby propagating positive effects on AEON’s To this end, “Planting the Seeds of Growth to Serve Our corporate social responsibility. Community” is a continuous mission for AEON Group

Annual Report 2007 25 PROSPECTS AND CHALLENGES a special tax exempt dividend of 4%, for the year ended 31 December 2007 at the forthcoming Annual General Despite concerns of impact on our economy from external Meeting. factors such as impending US economy slowdown, fuel prices and other geopolitical factors, the outlook of our economy remains positive with the expected growth to be driven mainly ACKNOWLEDGEMENT by the domestic demand and private consumption. The series During the fi nancial year ended 31 December 2007, AEON of economic initiatives by the government such as the Ninth bade farewell to three of its directors, namely Mr. Toshiji Malaysia Plan and the economic corridors are also expected Tokiwa, the Non-Executive Vice Chairman, Mr. Tatsuichi to further spur our economy. Yamaguchi, the Non-Executive Director and Mr. Masato Yokoyama, the Executive Director. On behalf of the Board, I While the economy is expected to remain stable, the coming would like to take this opportunity to thank Mr. Toshiji Tokiwa, year will still be very challenging for AEON as it grows in Mr. Tatsuichi Yamaguchi and Mr. Masato Yokoyama for their size and the competition increases. The opening of new contribution in strengthening the position of AEON as the hypermarkets and the expansion of existing and opening leading retailer in Malaysia. of new malls with new formats and themes further increases competition in the retail industry. On behalf of the Board, I would also like to welcome our new directors, Mr. Tsutomu Kajita as Non-Executive Vice Chairman To this end, AEON with its established presence and brand and Mr. Naruhito Kuroda as Non-Executive Director. I strongly name continues to formulate plans and measures to respond believe that with their vast experiences, AEON will achieve to competition and changing consumer tastes and demands even greater heights in the years to come. through enhancing its competitive edges in customer services, merchandise assortments and pricing, shopping I would also like to express my gratitude to the management centre ambience and good tenant mix. Renovation plans are and staff for their untiring and relentless efforts in steering also in hand to refurbish the existing stores and shopping AEON throughout the challenging years. Finally, I would centres in order to provide customers with new and fresh also like to thank our valued customers, business associates, environment and ensure that every shopping experience is full bankers, government authorities and our valued shareholders of excitement and joy. for their continuous support.

On its expansion plan, AEON will be opening two stores in the coming year at Seberang Prai, Penang and Ampang, Selangor. Besides, more strategic locations within the neighbourhood will be identifi ed for expansion of its MaxValu supermarkets to further establish itself in the food and related sector category.

DIVIDEND The Board of Directors is recommending for your approval, Dato’ Abdullah bin Mohd Yusof a fi rst and fi nal dividend of 17% less 26% income tax and Chairman

26 Annual Report 2007 REVIEW OF OPERATIONS

The Malaysian economy has further strengthened in the year 2007, by registering a growth of 6.3%, as compared with the 5.9% growth in the previous year. The strong growth was due to the robust domestic demand, driven by strong private consumption spending and investment activities. This is evidenced through the growth in the services sector which registered double digit growth in the wholesale, retail trade, accommodation and restaurant as well as the finance, insurance, real estate and business services sub sectors. A slew of domestic initiatives like the Ninth Malaysia Plan, economic corridors, private finance initiatives and incentives for the property market had further allowed the domestic economy to withstand external uncertainties such as the US sub prime issue, high oil price and domestic inflation worries.

In line with the economic growth and buoyant consumer spending, AEON has also achieved an impressive set of results for both its core business activities of retail sales and property management services. Total revenue for the financial year ended 31 December 2007 was RM2.886 billion, representing a growth of 24.7% above the previous corresponding period from January to December 2006. The retail sales segment posted RM2.640 billion whereas the property management services registered RM245.9 million in revenue for the year under review (the year).

Annual Report 2007 27 RETAIL SALES JUSCO stores in Taman Equine, Queensbay and Cheras Selatan, all of which were opened in the previous financial Amidst the competitive challenges in the retail sector which period and operated for a full year in 2007, performed saw several new shopping malls open during the year, with commendable results, contributing about 3% to 5% the retail sales of AEON, assisted by good marketing each to the total retail sales. strategies, continues to record envious results. The retail sales of RM2.640 billion represented an increase of 24.8% over the previous corresponding period from January to Though the contribution is still marginal, the growth in retail December 2006. sales was also contributed by the MaxValu supermarkets whose combined total sales was approximately RM30.0 million in the year. MaxValu supermarkets, the brand name The growth in retail sales came from the continuing good which originates from AEON Group’s supermarket chain in performance of the existing stores, the contributions of stores Japan, offer customers a wide range of quality and affordable that opened in 2006 and operated for a full year in 2007, daily necessities such as vegetables, local and imported fruits, as well as contributions of new stores that opened in 2007. frozen food, daily products, dry grocery items, household Same store growth when comparing against previous goods and stationery, under the concept of “convenience corresponding period of January to December 2006 was neighbourhood store”. The supermarket was rebranded 10.1%, with the existing individual store’s performance from “D’HATI” to “MaxValu” in January 2008. There are fi ve growth ranging from 5% to 21%. JUSCO stores in Taman MaxValu supermarkets in operation by the end of 2007 with Maluri, Melaka, Wangsa Maju, Bandar Utama, Bandar three new MaxValu stores located at Kota Kemuning, Desa Baru Klang, Ipoh and Bandar Puchong recorded growth ParkCity and Ampang. These new supermarkets provide of between 5% to 10%. JUSCO stores at Metro Prima, opportunities for the Company to further establish itself in the Seremban 2 and Tebrau City, whose growth was further food and household necessities sector. assisted by the completion of the infrastructure and housing developments around the respective stores recorded growth of between 13% to 17%. JUSCO stores at Mid Valley and During the year, the Company also opened two new Taman Universiti, both of which underwent refurbishment stores in Bandar Sunway and Bukit Tinggi, Klang on 29 in the previous year for a fresher and more attractive look, September 2007 and 24 November 2007 respectively. registered growth of 17% and 21% respectively in the year. JUSCO Bandar Sunway, covering approximately 225,000 JUSCO Permas Jaya which was successfully refurbished in square feet, is the anchor tenant in the newly opened, 2007 into a family oriented store with an amusement centre expanded second phase of Sunway Pyramid Shopping for kids registered growth of 5% despite the disruptions in Centre. JUSCO Bukit Tinggi, which occupies a net lettable business during the renovation. space of approximately 300,000 square feet is the anchor

28 Annual Report 2007 tenant in AEON Bukit Tinggi Shopping Centre, the largest shopping centre that the Company manages in Malaysia. The opening of these two new stores has enabled the Company to strengthen its penetration in residential areas with high disposable income and strong spending power.

The Company continuously looks for innovative sales strategies to attract customers to shop in its stores and supermarkets. Towards this objective, the Company always ensures that it is quick to respond to the ever-changing customers’ needs and wants through its services, selling floor and merchandise management. In addition, the Company took measures to further promote its private brands during the year among others, are Jusco Selection, Orange Sorbet and Crème. More Jusco Selection assortments of household staples and groceries which offer quality and value-for- money, and more fashion collections of Orange Sorbet and Crème were introduced. In response to customers’ changing lifestyles aimed towards health and beauty consciousness, the Company had also in the year, expanded and innovated its health and beauty care category into a new separate division called AEON Wellness in order to provide the best quality and widest selections of health and beauty products such as nutritional supplements, medical equipment, dental care products, traditional and modern medicines; all essential items necessary for optimal health and beauty fulfillment available at affordable prices to the customers. It offers customers the convenience of a unique health and beauty service program available under one roof.

Annual Report 2007 29 In its continuous efforts to provide a clean and hygienic shopping environment for its customers especially with regards to its foodcourt, bakery, delicatessen, respective kitchens, backrooms and processing centres, the year also witnessed the Company’s selected stores embarking on a mission to achieve the Hazard Analysis & Critical Control Point (HACCP) certification, to put the Company’s selected supermarkets’ food quality system on par with the international standard in food safety compliance. In 2008, JUSCO supermarkets at Taman Maluri and Taman Equine, and also the AEON Central Kitchen, were granted the HACCP certification by SGS, the international certification body, through its Malaysian office, SGS (Malaysia) Sdn Bhd. This is an excellent and proud achievement for the Company for it marks the first for a retailer in Malaysia to be granted such a certification.

Besides hygiene, the Company continued to emphasise on its customer service and merchandise assortment to differentiate itself from the competition. Through its “Show & Tell Cashier Contest”, an annual contest which provides customers the opportunity to nominate the best cashier, the attitude of good customer service is inculcated into the cashiers to always ensure that they provide prompt, courteous, personalised and reliable services to all customers at all times. The “5 Star Campaign”, another innovative customer service campaign, was also carried out in the year to remind all staff on the importance of having a high- level of awareness and positive attitude towards customer service. The efforts to enhance and maintain consistent level of customer service had enabled the Company to win numerous awards. In the year under review, the Company received the Silver Award in the prestigious “2007 Retail Asia Pacific Top 500 Award”. In the same year, JUSCO stores of Taman Maluri, Permas Jaya and Queensbay also received the “Customer Choice Shop 2007/2008 Award” organised by the Ministry of Domestic Trade and Consumer Affairs.

The Company’s loyalty program continued to be a major marketing tool with the membership reaching approximately 700,000 members for the year. On average, J CARD members contributed about 60% of the monthly retail sales. J CARD Members’ Days and J CARD Privilege Shopping Days continue to be favoured shopping days as members look forward to enjoying the privilege of shopping with special discounts at all JUSCO stores. The number of J CARD members is expected to grow in tandem with the expansion and growth of JUSCO stores and MaxValu supermarkets.

PROPERTY MANAGEMENT SERVICES The year under review was a very challenging year for the property management services division of the Company with increased in shopping space from the opening of new shopping centres and expansion of existing ones. The new and expanded shopping centres also bring new thematic

30 Annual Report 2007 concepts to entice customers and tenants alike. Despite AEON Bukit Tinggi Shopping Centre has also attracted such challenges, the Company continued to record strong exclusive tenants, amongst which are Harvey Norman, and steady growth in its property management services. MNG, Guess, Esprit, Padini Concept Store, Bonia and TGV Cinemas. With the varied retail-mix planning, AEON Bukit Tinggi Shopping Centre has been enjoying good stream of For the financial year ended 31 December 2007, the customers since the shopping centre opened. Company’s property management services division has registered an income of RM245.9 million, which is 16.5% above the previous year’s performance of January to In order to continually attract customers to patronise December 2006. Besides the impressive same shopping its shopping centres and to cater to higher expectations centres growth of 5.2%, the high growth was also due to and demands, the Company constantly reviews its tenant the full year operation of its shopping centres in Taman mix, carries out refurbishment and maintenance works on Equine and Cheras Selatan. its shopping centres as well as continuously strategises to create memorable shopping experiences for its customers through excellent customer service, comfort and ambience During the year, AEON added another shopping centre to coupled with exciting events throughout the year. its property management services division with the opening of AEON Bukit Tinggi Shopping Centre on 24 November 2007. AEON Bukit Tinggi Shopping Centre which has PROSPECTS AND CHALLENGES a net lettable space of approximately 745,000 square feet, houses about 200 tenants and more than 5,000 car While there are concerns over the impact on the economy parking bays, is the largest shopping centre operated by the from external factors such as the US economy, fuel prices Company in Malaysia. Besides having the JUSCO general and other geopolitical factors, Malaysia’s economy is merchandise store and supermarket as its anchor tenant, expected to remain stable and resilient in the coming year

Annual Report 2007 31 against these external factors, mainly due to sustainable Despite these, the Company is confident that with its domestic demands and private consumption amidst the established brand name and presence, competitive edges various economic measures put in place by the Government and expansion plans, it will be able to continue to enjoy such as the Ninth Malaysia Plan and the economic corridors growth in the coming year. The Company continuously which will ensure the economic outlook remains positive for strives to ensure that it maintains its operational efficiency the country. and its ability to respond quickly to customers’ needs and desires as well as the increasing competition. To this end, customer services and conveniences, good ambience For the Company, the new financial year will be a challenging environment, merchandise assortments and pricing remain year as it seeks to continue its growth in strength and size utmost priorities for the Company’s business besides core in an increasingly competitive environment which has areas such as human resource and information technology witnessed development and opening of new hypermarkets development. On its private brands, the Company seeks to and malls with different varieties, formats and themes. continue developing and promoting its in-house brands of

32 Annual Report 2007 Jusco Selection, and specialty shops such as ti: zed, Orange Sorbet and Jeans Studio in order to increase the awareness of customers on these brands which are high in quality yet available at affordable prices. The Company is looking into innovative ideas to enhance the benefits of J CARD memberships including tie-ups with more business associates so as to continuously enhance customer loyalty and distinguish the Company from its competitors.

On its property management division, besides ensuring safety, security and comfortable shopping centres for the tenants and customers alike, the Company will also be increasing its efforts to develop suitable promotions and events for each of its shopping centre in entirety. Reorganisation of the tenants and tenant mix including new categories of business will also be carried out so as to ensure that its tenant mix is always attractive for the shoppers.

On its expansion plan, the Company aims to further establish its presence in new locations and townships besides Klang Valley with new and more ecologically friendly shopping centre formats. In the coming year, the Company had targeted to open at least two new shopping centres. AEON Seberang Prai City Shopping Centre which the Company will lease from the owner and manage entirely is expected to be completed before the end of 2008. AEON AU2 Shopping Centre, which is currently under construction on a land which the Company purchased during the year, is expected to open by the end of 2008. The shopping centre in Bukit Indah, Johor Bahru is expected to be completed by the first quarter of 2009. The Company is also currently seeking more potential locations to expand its MaxValu supermarket operations.

With the expansion and increasing number of outlets, the Company is confident it will be able to achieve its aim of being the retailer of choice for the consumers in terms of merchandising depth and breadth as well as quality of the overall shopping experience.

Annual Report 2007 33 STATEMENT ON CORPORATE GOVERNANCE

Board Responsibilities The Directors bring a wide range of expertise and experience in various fi elds such as economics, public services, The Board of Directors, in recognising the importance of accounting and fi nance, legal, human resource, banking, corporate governance, is committed to ensuring that the marketing, taxation, general management, retail management Company’s business and operations are in line with the and property management services. All Board members principles and best practices advocated in the Malaysian participated and deliberated on the issues and matters Code on Corporate Governance. affecting the Company. The profi le of each Director is presented on page 21 to page The Board of Directors assumes responsibilities in corporate 22 of the Annual Report. governance and has established various processes and committees to assist the Board in discharging of these responsibilities. Among others, the Company’s strategies and directions, shareholders and Supply Of Information investors’ relationship, annual budget, major capital expenditure, The Company Secretary ensures that all Board meetings are signifi cant fi nancial matters, and the adequacy and integrity furnished with proper agendas. Board papers and reports of internal controls including risk assessment are within the providing updates on fi nancial, operational and corporate responsibilities of the Board of Directors. developments including matters such as the Company’s The following paragraphs set out the Company’s application corporate social responsibility program and staff welfare matters of the principles and best practices of the Malaysian Code on are circulated prior to the meetings to all Directors for them to Corporate Governance. discharge their duties effectively. The Directors have full access to the advice and services of the Company Secretary. In addition, A) Directors the Directors, if necessary, may also seek professional advice, at the Company’s expense. The Directors may also consult Board Balance the Chairman and other Board members prior to seeking any independent professional advice. The proceeding of meetings The Board of Directors consists of eight (8) members; comprising were properly recorded by the Company Secretary. one (1) Non-Executive Chairman, one (1) Non-Executive Vice Chairman, one (1) Executive Director, and fi ve (5) Non-Executive Directors. Of the fi ve (5) Non-Executive Directors, three (3) are Board Meetings Independent Directors. The Board met seven (7) times during the fi nancial year ended Dato’ Chew Kong Seng is the Senior Independent Non- 31 December 2007. The details of attendance of each Director Executive Director to whom concerns on matters relating to at the Board meetings held during the fi nancial year are as the corporate governance of the Company could be conveyed to. table below: -

Number of meetings attended/ No Name of Directors held during the Director’s term in offi ce

1 Dato’ Abdullah bin Mohd Yusof 7/7 2 Mr. Tsutomu Kajita (appointed on 16 May 2007) 2/4

3 Mr. Nagahisa Oyama 7/7

4 Datuk Ramli bin Ibrahim 6/7

5 Brig. Jen (B) Dato’ Mohamed Idris bin Saman 7/7

6 Datuk Zawawi bin Mahmuddin 7/7

7 Dato’ Chew Kong Seng 7/7

8 Mr. Naruhito Kuroda (appointed on 16 May 2007) 4/4

9 Mr. Toshiji Tokiwa (resigned on 14 August 2007) 4/4

10 Mr. Tatsuichi Yamaguchi (resigned on 16 May 2007) 3/3

11 Mr. Masato Yokoyama (resigned on 16 May 2007) 3/3

34 Annual Report 2007 Directors’ Training Tatsuichi Yamaguchi on 16 May 2007. The Committee is made up of Non-Executive Directors whose other members are All the Directors have attended the Directors’ Mandatory Dato’ Abdullah bin Mohd Yusof and Datuk Ramli bin Ibrahim. Accreditation Programme and the continuing Education The duties of the Committee shall be to recommend to the Programme organised by Bursa Malaysia Securities Berhad and Board the remuneration of all Directors in all its forms. Executive are also provided with updates from time to time on relevant Directors play no part in decision-making or determining their new laws and regulations affecting their directorship. own remuneration. Directors also from time to time visited existing stores and/or In the fi nancial year under review the Committee met one (1) new sites to have a thorough understanding of the Company’s time to determine the remuneration packages of all Directors’ operational matters. including the Non-Executive Chairman and Non-Executive Vice Chairman. The determination of the remuneration packages Board Committees is a matter for the Board as a whole to approve. Individual The Board of Directors is assisted by its Committees, which Directors concerned do not participate in the discussion on their have been established under defi ned terms of reference. The own remuneration. Committees are the Nomination Committee, the Remuneration Committee and the Audit Committee. The Audit Committee The Board is also assisted by the Audit Committee whose The Nomination Committee members, terms of reference and activities for the fi nancial Mr. Tsutomu Kajita, who was appointed a Non-Executive year under review are stated on page 38 to 40 of the Annual Director on 16 May 2007 was also appointed the Chairman Report. of the Nomination Committee after the resignation of Mr. Tatsuichi Yamaguchi on 16 May 2007. The Committee is Re-election made up of Non-Executive Directors whose other members are In accordance with the Company’s Articles of Association, all Dato’ Abdullah bin Mohd Yusof, Dato’ Chew Kong Seng, Brig. Directors retire every year. Jen (B) Dato’ Mohamed Idris bin Saman and Datuk Zawawi bin Mahmuddin. The Committee met one (1) time in the fi nancial year under review. The duties and responsibilities of the Committee, among others, are to recommend to the Board, candidates for directorship, directors to fi ll seats on Board Committees and to review annually the required mix of skills and experience of the Board including the effectiveness of the Board as a whole and the contribution from each Director. The Board, through the Nomination Committee, on 15 February 2007 conducted the annual assessment of the Directors’ performance and contribution, and reviewed the required mix of skills and experience of the Board to function competently and effi ciently as a whole.

The Remuneration Committee Mr. Tsutomu Kajita who was appointed a Non-Executive Director on 16 May 2007 was also appointed the Chairman of the Remuneration Committee after the resignation of Mr.

Annual Report 2007 35 B) Directors Remuneration The breakdown of the remuneration of the Directors during the fi nancial year under review is as follow: -

1) Aggregate remuneration of the Directors categorised into appropriate components:

Executive Directors Non-Executive Directors Total RM RM RM

Fees 245,500 875,000 1,120,500

Salaries 465,324 - 465,324

Benefi ts-in-kind 30,850 17,400 48,250

Other emoluments 113,820 - 113,820

855,494 892,400 1,747,894

2) The number of Directors whose total remuneration fall within the following bands:

Number of Directors

Range of Remuneration Executive Non-Executive Total

less than RM50,000 - 2 2

RM50,001 to RM100,000 - 5 5

RM100,001 to RM150,000 - - -

RM150,001 to RM200,000 - 1 1

RM200,001 to RM250,000 1 1 2

RM250,001 to RM300,000 - - -

RM300,001 to RM350,000 - - -

RM350,001 to RM400,000 - - -

RM400,001 to RM450,000 - - -

RM450,001 to RM500,000 - - -

RM500,001 to RM550,000 - - -

RM550,001 to RM600,000 - - -

RM600,001 to RM650,000 1 - 1

2 9 11

36 Annual Report 2007 C) Shareholders ensure that the fi nancial statements comply with the Companies Act, 1965. The Directors have a general responsibility for Investors and Shareholders Communication taking such steps as is reasonably open to them to safeguard the assets of the Company, to prevent and detect fraud and It has always been the Company’s practice to maintain other irregularities. good relationship with its shareholders. Major corporate developments and happenings in the Company have always Going Concern been duly and promptly announced to all shareholders, in line with Bursa Malaysia Securities Berhad’s objectives of ensuring The Board of Directors confi rms that the Company has transparency and good corporate governance practices. adequate resources to continue its business in the foreseeable future. For this reason, they continue to adopt the going The Company’s fi nancial performance, major corporate concern basis for preparing the fi nancial statements. developments and other relevant information are promptly disseminated to shareholders and investors via announcements State Of Internal Control of its quarterly performance, annual report, corporate announcements to Bursa Malaysia Securities Berhad and The Statement on Internal Control set out on page 41 of the press conferences. Further update of the Company’s activities Annual Report provides an overview of the state of internal and operations are also disseminated to shareholders and control within the Company. investors through dialogue with analysts, fund managers, investors and the media. Relationship With The External Auditors Besides highlighting retail business promotional activities, the The Board of Directors with the assistance of the Audit Company’s website www.jusco.com.my provides an update of Committee maintains a formal and transparent relationship the Company’s latest performance released to Bursa Malaysia with the Company’s External Auditors through the Audit Securities Berhad as well as other corporate information to Committee, Board and formal meetings whereby issues are the public. discussed. During the Annual General Meeting, shareholders are usually The relationship between the Board and the External Auditors given a presentation on the Company’s performance and is also formalised through the Audit Committee’s terms of major activities that were carried out by the Company for the reference. period under review. During the meeting, shareholders have the opportunity to enquire and comment on the Company’s Compliance With Malaysian Code On Corporate performance and operations. Governance D) Accountability And Audit The Board of Directors is pleased to state that the Company was in compliance with all the principles and best practices as Financial reporting advocated in the Malaysian Code on Corporate Governance In its fi nancial reporting via quarterly announcements of results, during the fi nancial year under review, except on disclosure annual fi nancial statements and annual report presentation of each individual Director’s remuneration. including the Chairman’s Statement and Review of Operations, the Board of Directors always provides a comprehensive assessment of the Company’s performance and prospects for the benefi ts of shareholders, investors and interested parties. The Audit Committee also assists the Board in overseeing the Company’s fi nancial reporting processes.

Directors’ responsibility statement in respect of the preparation of the audited fi nancial statements The Board of Directors is responsible for the preparation of the fi nancial statements for the fi nancial year of the Company, which gives a true and fair view of the state of affairs of the Company and its results and cash fl ow for the fi nancial year ended. The Board of Directors has ensured that the fi nancial statements have been prepared in accordance with applicable approved accounting standards in Malaysia, the requirements of the Companies Act, 1965, Bursa Malaysia Securities Berhad and other regulatory bodies. In preparing the fi nancial statements, the Board of Directors has ascertained that accounting policies and reasonable prudent judgement and estimates have been consistently applied. The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the fi nancial position of the Company and to enable them to

Annual Report 2007 37 TERMS OF REFERENCE OF THE AUDIT COMMITTEE

Audit Committee Designation

Dato’ Chew Kong Seng Chairman (Independent Non-Executive Director)

Datuk Ramli bin Ibrahim Member (Non-Independent Non-Executive Director)

Brig. Jen (B) Dato’ Mohamed Idris bin Saman Member (Independent Non-Executive Director) Constitution Quorum

The Board hereby resolves to establish a Committee of the A quorum shall consist of a majority of committee members Board to be known as the Audit Committee with the following present at the meeting who are Independent Directors. In terms of reference. the absence of Chairman, the members present shall elect a Chairman for the meeting from amongst the members present. Composition Of Audit Committee Attendance At Meetings The Committee shall be appointed by the Board from among its members and shall consist of not less than 3 members of whom The Head of Finance, the Head of Internal Audit, the Company a majority shall be Independent Directors and all shall be Non- Secretary, the Senior Finance Manager and a representative of Executive Directors. the External Auditors shall normally attend meetings. However, the Committee may invite any person to be in attendance to The Committee shall include at least one person who is a assist it in its deliberations. member of the Malaysian Institute of Accountants (MIA) or alternatively a person who must have at least 3 years’ working Non-member directors shall not attend unless specifi cally invited experience and have passed the examinations specifi ed in Part to by the Committee. I of the First Schedule of the Accountants Act 1967 or is a member of one of the associations specifi ed in Part II of the said Schedule or fulfi ls such other requirements as prescribed or Secretary To Audit Committee approved by Bursa Malaysia Securities Berhad. The Company Secretary shall be the secretary of the committee No Alternate Director shall be appointed as a member of the and shall be responsible for drawing up the agenda in Committee. consultation with the chairperson. The agenda together with the relevant explanatory papers and documents shall be circulated The Committee shall elect a chairperson from amongst its to the committee members prior to each meeting. members. In the event that a member of the audit committee resigns, dies or for any other reason ceases to be a member, The secretary shall be responsible for recording attendance of with the result that the number of members is reduced to below all members and invitees, keeping the minutes of the meeting three, the Board of Directors shall, within three months of of the Committee, circulating them to committee members that event, appoint such number of new members as may be and to the other members of the Board of Directors and for required to make up the minimum number of three members. ensuring compliance with Bursa Malaysia Securities Berhad’s requirements. The Board shall review the terms of offi ce and performance of Committee members at least once in every three years. Reporting Procedures

Meetings The Committee shall prepare an annual report to the Board that provides a summary of the activities of the Committee for The Committee shall meet at least four times a year. In addition, inclusion in the Company’s annual report. the chairperson shall convene a meeting of the Committee if requested to do so by any member, the management or the The Committee shall assist the Board in preparing the following internal or external auditors to consider any matter within the for publication in the Company’s annual report: scope and responsibilities of the Committee. - Statement of the Company’s application of the principles set out The Committee shall meet at least two times a year with the in Part I of the Malaysian Code on Corporate Governance. External Auditor and/or the Internal Auditor without the presence of any Executive Board members, management or employees. - Statement on the extent of compliance with the Best Practices

38 Annual Report 2007 in Corporate Governance set out in Part II of the Malaysian - To review with the External Auditors their audit plan, scope Code on Corporate Governance, specifying reasons for any and nature of audit for the Company. areas of non-compliance (if any) and the alternatives adopted in such areas. - To review and discuss the External and Internal Auditors’ audit reports, areas of concern arising from the audit and any other - Statement on the Board’s responsibilities for preparing the matters the External and Internal Auditors may wish to discuss annual audited fi nancial statements, and in the absence of management, if necessary.

- Statement on the state of Internal Control of the Company. - To assess the adequacy and effectiveness of the system of internal controls and accounting control procedures of the Where the Committee is of the view that a matter reported by company by reviewing the External and/or Internal Auditors’ it to the Board of Directors has not been satisfactorily resolved management letters and management responses. resulting in a breach of the Listing Requirements of Bursa Malaysia Securities Berhad, the Committee shall promptly - To discuss problems and reservations arising from the audits report such matter to Bursa Malaysia Securities Berhad. and any matters the auditors may wish to discuss in the absence of management, if necessary.

Authority - To review the internal audit plan, consider the major fi ndings of Internal Audit, fraud investigations and actions and steps The Committee is authorised by the Board to: taken by management in response to audit fi ndings.

- Investigate any activity within its terms of reference. - To review the adequacy and relevance of the scope, functions and resources of Internal Audit and the necessary authority to - Have resources, which are reasonably required to enable it carry out its work, including any appraisal or assessment of to perform its duties. the competency of the internal audit function.

- Have free access to all information and documents it requires for - To take cognisance of resignations of Internal Audit staff the purpose of discharging its functions and responsibilities. members and provide the resigning staff member an opportunity to submit his reasons for resigning. - Have direct communication channels with the External Auditors, the Internal Auditor and Senior Management of the - To review any related party transactions and confl ict of interest company. situations that may arise within the Company.

- Obtain outside legal or other independent professional - To consider the appointment of the External Auditors, the advice and secure the attendance of outsiders with relevant terms of reference of its appointment and any question of experience and expertise if it considers this necessary. resignation and dismissal before making a recommendation to the Board. - Convene meetings with the External Auditors, excluding the attendance of the Executive Board Members, whenever - To undertake such other responsibilities as may be agreed to deemed necessary. by the Committee and the Board.

- To report to the Board its activities, significant results and Duties and Responsibilities findings.

The duties and responsibilities of the Committee shall be: Overseeing The Internal Audit Function - To review the Terms of Reference at least annually, or as conditions dictate. The Committee shall oversee all internal audit functions and is authorised to commission investigations to be conducted by - To review any fi nancial information for publication, including Internal Audit as it deems fi t. The Head of Internal Audit shall quarterly and annual fi nancial statements before submission report directly to the Committee and shall have direct access to to the Board. the Chairman of the Committee.

- The review shall focus on: All proposals by management regarding the appointment, . Any changes in accounting policies and practices. transfer or dismissal of the Head of Internal Audit shall require . Major judgmental areas. the prior approval of the Committee. . Signifi cant audit adjustments from the External Auditors. . The going concern assumption. . Compliance with accounting standards. . Compliance with stock exchange and legal requirements.

Annual Report 2007 39 THE AUDIT COMMITTEE

The Audit Committee comprises the following members: Dato’ Chew Kong Seng (Chairman) Independent Non-Executive Director Datuk Ramli bin Ibrahim Non-Independent Non-Executive Director Brig Jen (B) Dato’ Mohamed Idris bin Saman Independent Non-Executive Director Terms Of Reference Of The Audit Committee During the fi nancial year under review, there were changes to the terms of reference of the Audit Committee to include new best practices described in the Revised Code on Corporate Governance. Meetings During the fi nancial year under review, the Audit Committee convened four (4) meetings. The attendance records of the member of the Audit Committee are as follow:

Number of meetings attended/ Name of Directors held during the member’s term in offi ce Dato’ Chew Kong Seng (Chairman) 4/4 Datuk Ramli bin Ibrahim 4/4 Brig Jen (B) Dato’ Mohamed Idris bin Saman 4/4

The meetings were structured through the use of agendas, which i. Reported to the Board on its activities and signifi cant fi ndings and were distributed to members with suffi cient notifi cation. results of the External and Internal Audit recommendations. The Company Secretary was present in all the meetings. A In the fi nancial year under review, the Audit Committee held two representative of the External Auditors, Messrs KPMG Desa (2) meetings with the External Auditors without the presence of the Megat & Co., the Head of Finance, the Head of Internal Audit management, to allow the auditors to discuss any issues arising and the Senior Finance Manager attended the meetings, and from the audit exercise or any other matters, which the External related management personnel attended the meetings upon Auditors wished to raise. invitation. During the year under review, the Internal Audit Department carried Summary Of The Audit Committee’s out the following activities: Activities During The Year Under Review a. Presented and obtained approval from Audit Committee, the annual internal audit plan, its audit strategy and audit scope of work. During the year under review, the Audit Committee carried out its duties b. Reviewed and analysed certain key business processes in accordance with its terms of reference as follows: identifi ed in the annual audit plan, reported ineffective and inadequate controls, and made recommendations to improve a. Reviewed the quarterly unaudited fi nancial result and annual their effectiveness. audited fi nancial statements before submission to the Board for consideration and approval. c. Monitored and ensured management implemented corrective b. Reviewed the External Auditors’ scope of work and audit plan action plans. for the year. d. Monitored compliance with policies and procedures. c. Reviewed and discussed the External Auditors’ audit report and e. Reviewed the adequacy and effectiveness of the internal control areas of concern. structures of the Company. d. Considered the appointment of the External Auditors and the f. Assisted the Board of Directors and Management on compliance terms of reference of their appointment. matters required by the Malaysian Code on Corporate e. Reviewed the internal audit plan, considered the major fi ndings Governance. of Internal Audit, fraud investigations and actions taken by management in response to the audit fi ndings. g. Assisted the Board of Directors and Management by reviewing f. Assessed the adequacy and effectiveness of the system of the risk policy and control strategies in the organisation. internal controls and accounting control procedures of the h. Carried out investigative assignments. Company by reviewing the External and Internal Auditors’ i. Continued inculcating good risk management practices management letters and management responses. throughout the Company. g. Reviewed the adequacy and relevance of scope, functions and resources of Internal Audit and that it has the necessary authority to carry out its work. h. Reviewed related party transactions.

40 Annual Report 2007 STATEMENT ON INTERNAL CONTROL

- The management structure of the Company formally defi nes Board’s Responsibilities lines of responsibility and delegation of authority for all aspect of the Company’s affairs. Senior management The Board of Directors recognises its responsibilities over the and business unit’s managers submit and present their Company’s system of internal controls, covering all its fi nancial operational performance reviews as well as business and operating activities to safeguard shareholders’ investment plans and strategic measures in regularly held Executive and the Company’s assets. Committee and Management Meetings.

The Board has an established on-going process for identifying, - The Board approves the annual budget and reviews key evaluating and managing the signifi cant risks encountered by business variables and monitors the achievements of the the Company. The Board through its Audit Committee regularly Company’s performance on a quarterly basis. reviews this process. - The authorisation limits and approvals authority threshold In view of the limitations inherent in any system of internal of the Company encompasses internal control procedures. controls, the system is designed to manage, rather than to These procedures are subject to review by the management eliminate the risk of failure to achieve the Company’s corporate to incorporate changing business risks and operational objectives. effi ciency.

The Audit Committee assists the Board to review the adequacy - The Audit Committee is responsible for reviewing the and integrity of the system of internal controls in the Company statutory annual fi nancial statements and the quarterly and to ensure that an appropriate mix of techniques is used to announcements to Bursa Malaysia Securities Berhad and obtain the level of assurance required by the Board. The Audit recommends to the Board for approval prior to submission Committee presents its fi ndings to the Board. to Bursa Malaysia Securities Berhad.

- The Internal Audit Department periodically monitors the Internal Audit Function effectiveness and evaluates the proper functioning of the internal control system on an on-going basis to ascertain The Audit Committee, assisted by the Internal Audit Department, compliance with the control procedures and policies of provides the Board with the assurance it requires on the the Company. The Head of Internal Audit reports to Audit adequacy and integrity of the system of internal controls. Committee on the status of internal control system on a The Internal Audit Department independently reviews the risk quarterly basis. identifi cation procedures and control processes implemented by the management, conducts audits that encompass reviewing - Project teams are set up from time to time to address business critical areas that the Company faces, and reports to the Audit and operational issues to meet the business objectives and Committee on a quarterly basis. operational requirements of the Company.

The Internal Audit Department also carried out internal control All the above mentioned processes have been in place and reviews on key activities of the Company’s business on the provide reasonable assurance on the effectiveness of the basis of a three-year audit plan that was presented and internal control system. approved by the Audit Committee. The internal audit function adopts a risk-based approach and prepares its audit strategy and plan based on the risk profi les of the major business units Conclusion of the Company. The Board of Directors reviewed the adequacy and integrity of the system of internal controls that provides reasonable System Of Internal Controls assurance to the Company in achieving its business objectives. As the development of sound system of internal controls is an The Board of Directors is responsible for managing the key on-going process, the Board and the management maintain business risks of the Company and implementing appropriate an on-going commitment and continue to take appropriate internal control system to manage those risks. The Board measures to strengthen the internal control environment of the reviewed the adequacy and integrity of the system of internal Company. controls as it operated during the period. The following are the key elements of the Company’s system of internal controls:

Annual Report 2007 41 OTHER INFORMATION

Material Contracts Involving Directors And purchase of the additional J CARD points from the Company. Substantial Shareholders During the year under review, the total additional J CARD points purchased by AEON Credit Service (M) Berhad was RM310 Material contracts entered into by the Company which involve thousand. The Company further agreed to appoint AEON Directors’ and major shareholders’ interests and still subsisting Credit Service (M) Berhad as the sole acquirer of the card at the end of the fi nancial year ended 31 December 2007, transaction transacted using AEON Credit Service (M) Berhad’s or entered into since the end of the previous fi nancial year, issued cards. comprise the following: On 29 December 2005, the Company entered into a credit On 12 October 2000 and through a supplementary agreement card merchant agreement with AEON Credit Service (M) on 1 January 2006, the Company entered into a Technical Berhad whereby the Company’s goods sold on credit through Service Agreement with ÆON Co., Ltd. whereby the Company credit cards issued by AEON Credit Service (M) Berhad, is granted the exclusive right by ÆON Co., Ltd. to use their AEON Credit Service (M) Berhad will purchase from the trademark in relation to goods and services. The Company is Company all such transaction receipts. The purchase of the also granted the non-exclusive right to use the information and transaction receipts will be net of the credit card commission know-how, employed or developed by ÆON Co., Ltd. for the payable and upon terms and conditions as stated in the management and operation of retail stores, wholesale business merchant agreement. The total value of the transaction receipts and related supporting activities. The total cash consideration purchased by AEON Credit Service (M) Berhad in the year payable by the Company to ÆON Co., Ltd. for the year under under review was RM40.33 million and the total commission review amounted to RM16.96 million. ÆON Co., Ltd. is the payable is RM588 thousand. Dato’ Abdullah bin Mohd Yusof, holding company of the Company. Datuk Ramli bin Ibrahim and Mr. Naruhito Kuroda, all Directors of AEON CO. (M) BHD. are also Directors and shareholders On 1 July 1997, the Company entered into a Factoring in AEON Credit Service (M) Berhad. ÆON Co., Ltd. has an Agreement with a related company, AEON Credit Service indirect interest in AEON Credit Service (M) Berhad through (M) Berhad whereby the Company’s goods sold on credit AEON Credit Service Co. Ltd. under its easy payment scheme are factored to AEON Credit Service (M) Berhad. The debts sold to AEON Credit Service On 1 February 2004, the Company entered into an agreement (M) Berhad are at full value of the goods and upon the with AEON Fantasy Co., Ltd. to provide consultancy services terms and conditions as stated in the factoring agreement. to the Company’s indoor amusement centre business. AEON The total value of the debts sold to AEON Credit Service Fantasy agreed to provide consultation and advice on the shop (M) Berhad in the year under review amounted to RM7.10 design, the assortment and strategy of game machines, on skill million. Dato’ Abdullah bin Mohd Yusof, Datuk Ramli bin training in respect of advertisement, promotion and training to Ibrahim and Mr. Naruhito Kuroda, all Directors of AEON the operation staff. The total cash consideration payable by the CO. (M) BHD. are also Directors and shareholders in AEON Company to AEON Fantasy Co., Ltd. for the year under review Credit Service (M) Berhad. ÆON Co., Ltd. has an indirect amounted to RM472 thousand. ÆON Co., Ltd.is the holding interest in AEON Credit Service (M) Berhad through AEON company of AEON Fantasy Co., Ltd. and the Company. Credit Service Co. Ltd. On 23 June 2005, the Company entered into a JUSCO Credit Non-Audit Fees Card Agreement with AEON Credit Service (M) Berhad to set out The amount of non-statutory audit fees paid to External Auditor the terms and conditions for the issuance of a credit card called and its affi liates during the period under review is RM 139,950 JUSCO Credit Card by AEON Credit Service (M) Berhad, in comprising of mainly advisory, review and tax services. affi liation or association with the Company, to further promote and enhance AEON Credit Service (M) Berhad’s credit card business and the Company’s retailing business. The Company Revaluation Policy On Landed Properties permits AEON Credit Service (M) Berhad to promote JUSCO There is no revaluation policy on the Company’s landed Credit Card to consumers in return for allowing the consumers to properties. The Company adopted the transitional provisions use JUSCO Credit Card for the purchase of goods and services issued by Malaysian Accounting Standards Board (MASB) offered by the Company. JUSCO Credit Card holders who to retain the carrying amount on the basis of their previous are also J CARD members will enjoy additional J CARD loyalty revaluation as stated in page 54 of this Annual Report. points provided by AEON Credit Service (M) Berhad through

42 Annual Report 2007