Annual Report 2008 Fiscal Year Ended February 20, 2008 Profi Le

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Annual Report 2008 Fiscal Year Ended February 20, 2008 Profi Le Fully Global, Truly Local Annual Report 2008 Fiscal year ended February 20, 2008 Profi le Focus on synergy and profi ts Made up of 169 group companies, Aeon engages in comprehensive retail business with shopping mall development and operation at its core, realizing synergy by operating from a strong management base. Aeon offers a lineup of stores, goods and services that are all characterized by a distinctive local level of customer and community partnership, on the one hand, and by global breadth and sophistication of services, on the other. Aeon is now embarking on a new era of sustainable growth, revamping its business structure from the ground up to increase the agility with which it refl ects the customer’s point of view. In August 2008, Aeon will adopt a pure holding company structure, which will facilitate the creation of a new growth-oriented business model and enable selective centralization and decentralization of management tasks for optimum effi ciency and increased corporate value. Annual Report 2008 Contents 1 2 6 Highlights for the year The President’s message 4 Remodeling the business structure to enhance corporate The Chairman’s message value Aeon’s continuing evolution as an enterprise dedicated to customer 11 satisfaction Adopting a pure holding company structure 20 12 Review of operations Special feature 1 22 GMS and other retail Building profi ts store operations group-wide with 26 Specialty store synergy and scale operations New companies to centralize 28 SC development common functions and operations give operating companies more fl exibility 29 Service and other operations 38 32 Social contribution activities Special feature 2 Partnering with customers and the earth for greener, more effi cient retailing Working with customers on issues of social and environmental impor- tance affecting us all 41 47 Board of directors and Financial section executive offi cers 86 42 Corporate history Corporate governance 91 44 Major group companies Compliance 91 46 Shareholder information Risk management Annual Report 2008 2 Highlights for the year Financial highlights The growing dynamism of the Group’s business activities was refl ected in record revenues. For the year under review, consolidated operating income declined for the fi rst time in 10 years, mainly due to the short-term costs of strategic adjustments at certain subsidiaries. Years Ended February 20, ’04 ’05 ’06 ’07 ’08 ’08 Total revenues (¥ billion) 3,546 4,195 4,430 4,824 5,167 ($ billion) 47.8 Operating income (¥ billion) 132 146 166 189 156 ($ billion) 1.4 Net income (¥ billion) 55 62 28 57 43 ($ billion) 0.4 Equity (¥ billion) 479 632 676 1,200 1,167 ($ billion) 10.8 Basic net income per share (¥) 83.1 88.7 39.6 77.3 55.7 ($) 0.5 Notes: 1. For convenience only, U.S. dollar amounts were translated at the rate of ¥108=$1, the rate of exchange at February 20, 2008. Such translations should not be construed as representa- tions that the Japanese yen amounts could be converted into U.S. dollars. 2. Japanese yen figures less than a billion yen are rounded down to the nearest billion yen, except for per share data. 3. According to a new accounting standard for presentation of equity, which is effective for fiscal years ending on or after May 1, 2006, stock acquisition rights, minority interests and any deferred gain or loss on derivatives under hedge accounting are presented as components of equity. Accordingly the amounts of equity as of February 20, 2007 and 2008 are not direct- ly comparable to shareholders’ equity of prior years, stated above. Forward-looking statements Statements contained in this report with respect to Aeon’s plans, strategies and beliefs that are not historical facts are forward-looking statements about the future performance of Aeon which are based on management’s assumptions and beliefs in light of the information currently available to it. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Aeon’s actual results, perfor- mance or achievements to differ materially from the expectations expressed herein. Annual Report 2008 3 Operating highlights Revenues and operating income by industry segment Performance that mirrors Aeon’s comprehensive product and service offering Revenues Operating income GMS and other retail store operations 73% GMS and other retail store operations 44% Specialty store operations 11% Specialty store operations 0% SC development operations 3% SC development operations 23% Service and other operations 13% Service and other operations 33% Revenues and operating income by geographical segment Growing diversity through measured expansion Revenues Operating income Japan 89% Japan 88% North America 5% North America –1% Asia and Others 6% Asia and Others 13% Annual Report 2008 4 The Chairman’s message Everything Aeon does is for the sake of our customers. This perspective is the basis for our timely and appropriate adaptation to the ever-changing business environment, and for our continuing evolution as an enterprise dedicated to customer satisfaction. On August 21, 2008, we will prepare the entire Aeon Group for even greater growth with our transition to a pure holding company structure. This process of continuing reform will be guided by our abiding commitment to Aeon’s Basic Principles. Strengthening corporate governance We formulated the Aeon Declaration and the Aeon Code of Conduct as practical, everyday expressions of our unchanging principles. Corporate governance reform is also a vital element of our work to assure continual improvement in corporate value. Aeon has adopted the “Company with Committees” governance system that draws a clear line between the supervisory role of the directors and the management functions of executive offi cers. Executive offi cers are granted substantial authority to make timely decisions that will achieve our medium- to long-term goals. This governance structure promotes high management transparency by strengthening the supervisory powers of the Board of Directors. To ensure that decisions are reasonable and appropriate, directors are subject to rigorous accountability regarding their duties and actions. Another way we maintain transparency is by appointing a majority of outside directors to the Audit, Nomination and Compensation committees. Aeon Co., Ltd. will retain the Company with Committees system after its transition to a pure holding company in August. Sterling behavior by employees and suppliers The Aeon Code of Conduct guides the daily behavior of all employees. By fostering a corporate culture of good faith and innovation, we seek the lasting trust of the community. All employees are continually coached in the standards defined by our Code of Conduct. We also provide regular compliance education as part of a compliance structure based on up-to-date knowledge of laws and regulations. Annual Report 2008 Aeon Basic Principles Peace 5 Peace : Aeon is a corporate group whose operations are dedicated to the pursuit of peace through prosperity. People : Aeon is a corporate group that respects human dignity and The values personal relationships. Customer Community : Aeon is a corporate group rooted in local community life and dedicated to making a continuing contribution to the community. People Community Aeon’s Topvalu private brand goods are manufactured we transfer to the government each year free of charge. We under contract by over 500 suppliers worldwide. We work are also contributing to environmental protection through the with companies under the Aeon Supplier Code of Conduct, establishment of Eco-Stores featuring advanced environmental which requires them to comply with laws and regulations technologies and systems. As of February 2008, there are four and be environmentally responsible. The Code of Conduct Eco-Stores in Japan. includes 13 requirements relating to human rights, work The Aeon Environment Foundation sponsors tree-planting environments, corporate ethics and environmental protection. projects in Japan and overseas and supports environmental To assure compliance, we maintain our own extensive NGOs. The Foundation is also implementing a fi ve-year program monitoring programs. to plant an additional one million trees near the Great Wall of China. This initiative was launched in 2007 on the 35th Environmental protection and social contribution anniversary of the normalization of relations between Japan and Aeon takes its corporate social responsibilities very China. Currently, there are 13 tree-planting projects in Japan seriously. We aim to fulfill those responsibilities and and overseas, including Qingdao and Hong Kong in China and continually improve corporate value by balancing a global a project in Cambodia. The “Aeon Hometown Forests” program perspective and a fi rm commitment to local communities, all sponsors additional projects, bringing the cumulative total underscored by highly proactive environmental protection through Aeon’s initiative to around eight million trees. and social contribution activities. The Aeon 1% Club works in partnership with UNICEF to Aeon is the first retail organization in Japan to set support school construction in other countries. To date, we specific numerical targets for reducing CO2 emissions. have helped build 149 schools in Cambodia, 57 in Nepal and On March 14, 2008, we adopted the Aeon Manifesto on 62 in Laos. The Aeon 1% Club supported the construction the Prevention of Global Warming, under which we pledge of the newly opened Preah Norodom Sihanouk Angkor to maintain corporate growth while also reducing the Museum, near the Angkor Wat World Heritage site, to environmental load. We aim to cut CO2 emissions by 30% house and exhibit 274 historically precious Buddhist statues from the fi scal 2006 level by fi scal 2012. excavated at the Banteay Kdei Temple. One of the ways we are involving customers with this goal In 2008, we will celebrate Aeon’s 250th anniversary. is through a new policy reducing on store-provided plastic Through continual improvement based on our “customer shopping bags. We introduced it at the Jusco Higashiyamanijo first” philosophy, we aim to become the leader in customer Store in Kyoto in January 2007.
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