7 – Eleven Inc.

Corporation Governance Report

Prepared by:
Apolonio, Christine L.
Fernandez, Karylle C.
Pabutawan, Gerha Marie B.
Suan, Judy Ann A.

.
II COMPANY’S PROFILE

The chain was founded in 1927 as an ice house storefront in Dallas Texas. It was named
Tote’m Stores between 1928 and 1946. After 70% of the company was acquired by an affiliate
Ito-Yokado in 1991, it was recognized as a wholly owned subsidiary of Seven & I Holding.
Philippine seven corporation (“PSC”) was registered with the Securities and Exchange
Commission (“SEC”) on November 23, 1982. It acquired from southland Corporation (now
Seven Eleven, Inc. or “SEI”) of Dallas, Texas the license to operate 7- Eleven stores in the
Philippines in December 13 1982. Operations commenced with the opening of its first store in
February 29, 1984 at the corner of Kamias Road and EDSA Quezon City, Metro Manila.
Considering the country’s economic condition at that time, the Company grew slowly in its first
few years of existence.

In July 28, 1988,PSC transferred the Philippine area license to operate 7- Eleven stores to
its affiliate, Phil-Seven Properties Corporation (“PSPC”), together with some of its store
properties. In exchange thereof, PSC received 47% of PSPC stock as payment. Concurrent with
the transfer ,PSC entered into a sublicensing agreement with PSPC to operate 7- Eleven stores
in Metro Manila and suburbs. As part of PSPC’s main business, it acquired or leased
commercial properties and constructed retail store buildings, leasing the building to PSC on long
term basis together with the most of the capital equipment used for store operations. In effect,
PSC concentrated on managing its stores and effectively took the role of a pure retailer. In May
2, 1996,the stockholders of both PSC and PSPC approved the merger of the two companies to
advance PSC group’s expansion. In October 30,1996,SEC approved the merger and PSPC was
then absorbed by PSC as surviving entity. With the consolidated of the respective lines of
business of PSC and PSPC ,PSC, PSC’s retailing strengths were complemented by PSPC’s
property and franchise holdings. Their management as a single entity enhanced operational
efficiency and strengthened ability to raise capital for growth. PSC listed its shares ( SEVN) in
the Philippines stock Exchange and had its initial public offering in February 04, 1998. The
shares were offered at the price of P4.40 per shares from its par value of P1.00 per share. In
September 17, 1998, PSC established Convenience Distribution Inc. (“CDI”), a wholly owned
subsidiary, to provide logistic planning and services to its 7- Eleven stores. With the effectivity of
the Retail Trade Liberalization Act (R.A.8762) on May 25, 2000, foreign entities were allowed to
invest in an existing retail company subject to the requirements of the law. President Chain
store (Labuan) Holding, Ltd. (PCSL),a Malaysian investment holding company, purchased
119,575,008 common shares of PSC or 50.4% 0f PSC’s outstanding capital stock at the price of
P8.30 per share. The purchase was made under a tender offer during October 9 to November 7,
2000. PSCL is affiliated with President chain store Corporation, which is also the 7- Eleven
licensee in Taiwan. This provided source for technical support to strengthen PCS’s
organizational structure and operating systems and pursue store expansion plans. A new
Affiliate, store sites Holding Inc., was also established on November 9, 2000, as the entity to
own land properties. These land properties as leased to PSC by SSHI.

PSC’s area license to operate 7- Eleven stores in the Philippines was renewed in august 31,
2007 for another term of 20 years, renewable every 10 years.
 Ethical issues get arise in a business due to unfollow the rules and regulations which frame
by government and management. It is a duty to manager to perform every task in an adequate
manner through which chances of these issues get decline .This report is based on ethical
issues which arise in 7 eleven is a convenience store which founded in 1927 and operate their
working as a partnership firm. It’s a subsidiary company whose parent entity is 7 eleven japan
Co., Ltd. The organization is operating their business all around the 18 major countries with
more than 56000 stores. Company provides quality products. According to a report they have
more than 600 stores in Australia and 30 stores in Melbourne. But several issues lead to get
arise in a company which affect their working as well as stakeholders of a company. As there all
are considering as ethical issues of 7 eleven (Boom, 2011).

One of the major issue which arose in 7 eleven was ripping off, of workers of a company by
not providing them adequate wages. It was considered as a wage fraud of company which was
exposed by Fairfax media. According to them, company pay full amount to their workers but
later take back half amount from them in the name of betterment of company. By this company
made a fraud of million dollars which was later exposed. As managers already follow the
legislative dilemma but then take half amount from their employees as well. Thousands of
under- payments claims are still being settled by a company out of which they already paid 26
million to 680 workers. Both the parties have to face many issues by this because such people
do not operates their regular activities in an adequate manner as well as company have to bear
the loss of brand image (7-Eleven: Investigation exposes shocking exploitation of convenience
store workers.2017)
 VISION

7 – Eleven vision is becoming the best convenient retailer. The company management believes
that being the best retailer will enable the employee to brighten the customers’ day as well as
make their lives much easier. This can be achieved by smiling while serving the customers at
the store or making sure that the food available at the store are fresh throughout. Therefore, the
company always pays attention to the customers and sometimes change so as to meet the
changing need of its end- users.

MISSION

The company’s mission is becoming not just close, but also convenient. The company seeks to
make life a bit simple for its customers by ensuring the organization is where it is where they
need it. All the company’s personnel work hard to ensure that 7 Eleven meet the needs of its
store guests with friendly, reliable and fast services as well as the desired products.

OBEJECTIVES

To make daily life easier by providing modern convenience.

CORE VALUES

•Teamwork

We foster an environment of synergy to attain the goals of the organization through active
participation and mutual respect.

•Integrity

We are honest and trustworthy to our fellow employees ,customers and business partners.

•Reality

We deliver what we promise

•Customer Focus

We deliver our customers first.

•Data – driven

We make decisions based on data.

 STATEMENTS OF FINANCIAL POSITION

December 31

____________________________________________________________________________

ASSETS 2021 2020

___________________________________________________________________________

Current Assets

Cash and cash equivalent (Notes 4, 28 and 29) P5, 376, 107, 427 P5, 137, 144, 792

Short- term investment (Notes 4, 28, and 29) 11, 535, 504 11, 493, 502

Receivables (Notes 5, 25, 28 and 29) 2, 530, 951,369 3, 674, 543, 057

Inventories (Notes 6 and 18) 4,328,438, 056 4, 243,099,966

Prepayments other current assets (Notes 7, 28 and 29) 1, 975, 685, 212 830,512,756

Total Current Assets 14, 222,717,568 13, 896, 794,073

Noncurrent Assets

Property and equipment (Notes 8) 5, 274, 409, 357 6, 336, 643, 785

Right-of-use Assets (Notes 25) 6,176, 929, 871 6, 975, 912, 246

Deposits (Notes 9,28 and 29) 1,051,630,239 1,055,456,946

Goodwill and other noncurrent assets (Notes 10 and 29 397, 716, 013 462, 636, 786

Receivables – net of current portion (Notes 5, 10, 28 and 29) 311, 198, 635 58, 024, 244

Deferred tax assets – net (Notes 26) 983, 862,984 963, 539, 389

Total Noncurrent Assets 14, 195, 747,099 15, 852 213, 396

TOTAL ASSETS P28, 418, 464, 667 P29, 749, 007,469

LIABILITIES AND EQUITY

Current Liabilities

Bank loans(Notes 11, 28 and 29) P100,000,000 P830,000,000

Current portion of long- term debt (Notes 11, 28 and 29) 666,690,058 241,690,058

Accounts payable and accrued expenses (Notes 12, 28 and 29) 6,627,172,856 5,954,411,302

Lease liabilities- current (Notes 25) 1,953,775,783 2, 125,633,197

Current portion of contract liabilities(Notes 13) 777, 961,799 510, 441,833

Income tax payable 123, 400 266, 514

Other current liabilities (Notes 14, 24 and 29) 2, 842,458,614 4, 201,875,385

Total Current Liabilities 12, 968, 182,510 13, 864, 318,289

Noncurrent Liabilities

Long-term debt- net of current portion (Notes 11, 28 and 29) 925, 035,088 1,091,725,146

Lease liabilities- net of current portion (Notes 25) 6,657,293,108 6,487,085,252

Deposits payable (Notes 15) 363, 885, 563 361, 995, 615

Contract liabilities- net of current portion (Notes 13) 125,857,840 141,915,647

Net retirement obligations (Notes 23) 400,794,633 442,099,746

Cumulative redeemable preferred shares (Notes 16, 28 and 29) 6,000,000 6,000,000

Total Noncurrent Liabilities 8,478,866,232 8,530, 821, 406

Total Liabilities P21,447,048,742 P22,395,139,695

III. Corporate Governance Principles

3.1- Board's Governance Responsibilities

Principle 1: Establishing a Competent Board

We found out that Seven Eleven Corporation is compliant to the principle 1.

*Composition of the Board

PSC's board of directors is composed of 11 directors, the majority of whom are non-
executive directors, while 3 are independent directors in conformity with the Securities
Regulation Code (SRC) Provisions and Revised Corporation Code (RCC)

*Board Training

Integrated into PSCs CG Manual and Board Charter is its policy on training directors it
provides a training/ orientation program for first-time directors and annual continuing training to
all directors. It conducts a business overview and provides an exposure tour of 7-Eleven stores
and a trade-check of other retail business formats. It also provides recent trade analysis or
industry benchmarking together with recent industry surveys

PSC provides yearly training on Corporate Governance to its directors and key officers.
This year, the directors and key officers participated in the PSC Corporate Governance training
focused on effective enterprise-wide risk management (EWRM) including crisis management
which was conducted in partnership with the Good Governance Advocates & Practitioners of the
Philippines (GGAPP) The new directors of PSC Mr. Ching-Feng Kup and Mr. Tsung- Halen Lee
attended the Corporate Governance Orientation Program conducted by the Institute of
Corporate Directors last November 09-10, 2021.

*Board Diversity Policy

PSC values the importance of board diversity that encourages its members to have an
active role in providing optimal decision-making and formulation of corporate rules, regulations,
and policies. It shall embrace board diversity, as much as practicable, which is not limited in
terms of age, gender, culture. skills, competence, and knowledge. The directors of PSC also
have diversified business experience in retail, finance, banking, property, IT, and
communications.

Principle 2:Establishing Clear Roles and Responsibilities of the Board

We found out that Seven Eleven Corporation is compliant to the principle 2.

*Succession Planning

PSCS CG Manual and Board Charter provide that the Board shall ensure the adoption of
an effective succession planning program for directors, key officers, and management to ensure
growth and promote dynamism in the Corporation and continued Increase in the shareholders'
value.

PSC started a Leadership Academy and Mentors Leadership Training Program in 2012. It
aims to train and develop management and officers in line with the Corporation's succession
planning program. PSC will also be incorporating Advancing Candidates for Excellence (ACE)
Program in the roster of its training and development programs Leadership and business
management training are also provided each year to build the competency of the management
team and officers in strategic decisions, business modeling, and effective execution. Succession
planning principles provide for each Division to hone the skills of at least two section managers
as potentially next in line successors and are provided with training/exposure.

*Nomination and Election of Directors

The election of directors is held annually during the stockholders' meeting and conducted
in a manner provided by the RCC Each director will hold office until the next annual meeting
held after his/her election and until his/her successor has been duly chosen and qualified, or
until he/she has resigned PSC set its qualification standards for selection according to
applicable laws and its polices through its Corporate Governance Committee (CG Com), which
reviews the qualifications of nominees. In addition to the qualifications for membership in the
Board provided for in the RCC, SRC and other relevant laws, and the Bylaws of the
Corporation, the Board may provide for additional qualifications which include, among others,
the following

a. Shall be at least college education graduate or equivalent academic degree or have sufficient
experience in managing the business to substitute for such formal education:

b Practical understanding of the business of the Corporation:

c. Membership in good standing in relevant industry, business or professional organizations,

and

d. Previous business experience or shall be proven to possess the appropriate level of skill in
line with the strategic plans and goals of the Corporation.

No person shall qualify or be eligible for nomination or election to the Board of Directors of the
Corporation if he is engaged in a business which directly competes with or is antagonistic to that
of the Corporation as provided in the PSC Code of Bylaws

Principle 3: Establishing Board Committee

We found out that Seven Eleven Corporation is compliant to the principle 3.

Board establishes board committees that focus on specific board functions to aid in the optimal
performance of its roles and responsibilities.
PSC's Board established board committees focusing on the specific board function. PSC has an
Audit & Risk Committee (ARC), Corporate Governance Committee (CG Com), and
Compensation Committee (CompCom)which are indicated in the PSC's CG Manual, Annual
Report (SEC Form 17.A), Definitive IS and in PSC Website portion on Board Committees.

Principle 4: Fostering Commitment

We found out that Seven Eleven Corporation is compliant to the principle 4.

The Directors attend and actively participate in all meetings of the Board, Committees and
shareholders in person or through tele-/videoconferencing conducted in accordance with the
rules and regulations of the Commission.

* PSC's Directors attends and actively participate in the Board, Board Committee and
shareholder's meetings in person or through tele- videoconferencing conducted in accordance
with the rules and regulations of the Commission. Details of the director's attendance in Board
and Shareholders' Meetings are disclosed in PSC's Annual Report (SEC Form 17-A) and
Definitive IS.

Principle 5: Reinforcing Board Independence

We found out that Seven Eleven Corporation is compliant to the principle 5.

None of the directors is a former CEO of the company in the past 2 years.

* Mr. Jose Victor P. Paterno has been the CEO of PSC since 2005.

Principle 6: Assessing Board Performance

We found out that Seven Eleven Corporation is compliant to the principle 6.

Board conducts an annual self- assessment of its performance as a whole.

* Item I.6 of the PSC's CG Manual provides that the best measure of the Board's effectiveness
is through an assessment process. The Board shall regularly carry out evaluations to appraise
its performance as a body, and assess whether it possesses the right mix of backgrounds and
competencies. This is also provide din PSCs Board Charter. Minutes of Meetings provides that
self-assessment of the performance of the Board and the Directors were conducted by the
board of directors as disclosed in Annex "C" of Definitive IS.

Principle 7: Strengthening Board Ethics

We found out that Seven Eleven Corporation is compliant to the principle 7.

Board adopts a Code of Business Conduct and Ethics, which provide standards for professional
and ethical behavior, as well as articulate acceptable and unacceptable conduct and practices
in internal and external dealings of the company.

* The Board has a Code of Business Conduct and Ethics to strengthen our commitment
towards Corporate Governance and to provide thorough guidelines for actions of employees. It
articulates acceptable and unacceptable conduct for internal and external dealings of the
company. It can be accessed at the PSC Website portion on Code of Business Conduct &
Ethics.

3.2 - Disclosure and Transparency

Principle 8: Enhancing Company Disclosure Policies and Procedures

We found out that Seven Eleven Corporation is compliant to the principle 8.

Board establishes corporate disclosure policies and procedures to ensure a comprehensive,

accurate, reliable and timely report to shareholders and other stakeholders that gives a fair and
complete picture of a company's financial condition, results and business operations.

* To ensure a comprehensive, accurate, reliable and timely reporting to shareholders and other
stakeholders with a fair and complete picture of the Corporation's financial condition, results and
business operations, PSC's board established the Reportorial Compliance Policy. It seeks to
ensure that reportorial compliance reports required by the Securities and Exchange
Commission, Philippine Stock Exchange (PSE) and other regulatory agencies are submitted on
time for eventual disclosure for the benefit of the investing public. It establishes among others a
mechanism for close coordination between concerned departments in the preparation,
publication and submission of the said reports and other disclosures of vital corporate
information. These are provided in the PSC Website portion on Company's policies.

Principle 9: Strengthening the External Auditor’s Independence and Improving Audit Quality
.
We found out that Seven eleven Is compliant to principle 9.

The appointment, reappointment, removal, and fees of the external auditor is recommended by
the Audit Committee, approved by the Board and ratified by the shareholders.

* Re-appointment of PSC's external auditor was recommended by the ARC, approved by the
Board of Directors or the ExeCom and ratified by the stockholders during the Annual
Stockholders' Meeting. 94.17 % of the shareholders ratified the re-appointment of SGV as
external auditor PSC in the Annual Stockholders Meeting held last July 5, 2021.

Principle 10. Increasing Focus on Non-Financial and Sustainability Reporting

We found out that Seven eleven is compliant to Principle 10.

Board has a clear and focused policy on the disclosure of non-financial information, with
emphasis on the management of economic, environmental, social and governance (EESG)
issues of its business, which underpin sustainability.

* The Corporation, guided by the GRI Standards and the UN SDGS, commenced its
documentation and reporting process of sustainability practices, through a workshop facilitated
by a GRI representative with key officers/employees from its business units, subsidiaries, and
affiliates. Material topics, important stakeholders, and the Corporation's policies to respond to
their concerns were determined. Engagement sessions with key officers/employees who deal
directly with external stakeholders were also made.

Principle 11: Promoting a Comprehensive and Cost-Efficient Access to Relevant Information

We found out that Seven eleven is compliant to principle 11.

Company complies with SEC- prescribed website template.

* PSC's corporate website complies with SEC-prescribed website template. The contents of the
Corporate tab in PSC website is patterned after the contents suggested under SEC Memo 11-
2014. PSC Website link https://www.7-eleven.com.ph/corporatel

Principle12. Strengthening the Internal Control System and Enterprise Risk Management
Framework

We found out that Seven eleven Is compliant to Principle 12.

Company has an adequate and effective internal control system in the conduct of its business.

* Internal Audit group is governed by its internal audit charter which is in line with the functions
and responsibilities as stated in the CG Manual and the ARC Charter. Internal Audit reports
functionally to the ARC and administratively to the President. Based on the Internal Audit plans
and scope the audit activities conducted is being reviewed and submitted regularly by the
Internal Audit Group to the ARC during ARC meetings. The internal control system is being
reviewed annually.

Principle 13. Promoting Shareholders rights

We found out that Seven eleven is compliant to principle 13.

Company's common share has one vote for one share.

* PSC's common share has one vote for one share. As provided in Section 7 of the PSC's
Amended By-Laws, "The stockholders may vote at all meetings the number of shares registered
in their respective names either in person or by proxy duly appointed as herein provided or by
remote communication or in absentia as maybe allowed by law or as applicable." PSC's
Definitive IS Item 19 provides for the voting procedures.

Principle 14. Respecting Right of stakeholders and effective Redress for Violation of
Stakeholder's Rights

We found out that Seven eleven is Compliant to Principle 14.

Company establishes an alternative dispute resolution system so that conflicts and differences
with key stakeholders is settled in a fair and expeditious manner.

* PSC's CG Manual, Item IV.13.4, provides that as far as practicable, the Board shall make
available, at the option of a shareholder, an alternative dispute mechanism to resolve intra-
corporate disputes in an amicable and effective manner. A shareholder has the option to avail of
the mechanisms under the Alternative Dispute Resolution Act .of 2004 .
Principle 15

PSC implemented various methods and policies to ensure health and safety, as well as
alleviate the effects of the pandemic on its employees. These methods and policies include, but
are not limited to, work from home (WFH) and other alternative work arrangements, body
temperature monitoring, provision of a cooperate vehicle to those who are part of the skeletal
workforce, granting of cash advance and hazard pay, motorcycle and bicycle loan program,
Employees can also protect their rights and interests, as well as those of the Corporation, as
governed by the Employees Code of Discipline relating to their job conduct. Violations hereof
shall be dealt with accordingly. Also, a Whistle Blowing Policy was created as a channel to
report incidences of misconduct that could lead to future damage to the Corporation. Reports
are then investigated to validate their authenticity.

Principle 16

*Sustainability

PSC'S Sustainability is anchored on our commitment to continuously operate as a

associate responsible brand. Guided by best EESG principles, PSC is dedicated to being the
best retailer of convenience for emerging markets, aligning our business practices with global
EESG frameworks, including UN SDGS. PSC to impart a comprehensive and effective
sustainable development. Economic Performance PSC Contributes to the economic growth of
the localities where our stores operate, by providing employment and business opportunities for
local enterprises and individuals, PSC also recognizes the growing customer preference toward
Innovation and convenience, and focuses Our market development plan on opening new stores
In different parts of the country, diversifying our sales channels and service offerings,
technology innovation, and expanding our digital relationship with our current and new
customers.

VI: Findings and Conclusion

7 eleven Incorporation are compliant to all Corporate Governance Principles, under the board of
governance responsibility, establishing Clear and Responsibilities of the Board, Disclosure and
Transparency, Internal Control System and Risk Management Framework, Cultivating a Synergic
Relationship with the Shareholders and Duties of Stakeholders.

Therefore, it has been concluded that the company complied all the recommendations required in
anticipated State Commission that is important in the IACGR and they practice a good corporate
governance.
V. References

Bustamante, John Renier B., (2015). 7- Eleven Om Ba 187 Company Background, pp. 1-3.,
Available at: https://www.scribd.com/document/293011361/7-Eleven-Om-Ba-187-Company-
Background

Copyright 2016 Philippine Seven Eleven Corporation. Available at: https://www.7-

eleven.com.ph/corporate/corporate-governance-head/corporate-governance/

Annual Report (SEC Form 17-A), p.12-18 Available at:

https://drive.google.com/file/d/1C4BtJdwUfwKWXUN8wwDXEyliUPK5n2-Q/view

PSC CG Manual, p. 6 Available at: http://www.7-eleven.com.ph/wp-content/uploads/2016/08/F-

PSC-NEW-CG-MANUAL-2017-PSE.pdf

PSC Website portion on Company's Policies Available at:

https://drive.google.com/file/d/116T716Nfeh7 pG0Q yQGTfsZOrgtfeLN/view

PSC Website portion on Other Disclosures Available at:

https://drive.google.com/file/d/1MBW3ZRGF1iThazOhKNXJbPFbjF15W1C1/view

PSC Website portion on Other Disclosures. Available at:

https://drive.google.com/file/d/1aLYIMI86hwWXj0dKY7X0iGx0jOdwlZ s/view
Vl. Appendix

SEC FORM-I-ACGR

INTEGRATED ANNUAL CORPORATE GOVERNANCE REPORT

1. For the fiscal year ended December 31, 2021

2. SEC Identification Number 108476

3. BIR Tax Identification No. 000-390-189-000

4. Exact name of issuer as specified in its charter PHILIPPINE SEVEN CORPORATION

5. PHILIPPINES 6. (SEC Use Only)

Province, Country or other jurisdiction Industry Classification Code:[

of incorporation or organization

7. 7th Floor, The Columbia Tower, Ortigas Avenue, Mandaluyong City 1550

Address of principal office Postal Code

8. (632) 8724-4441 to 53

Issuer's telephone number, including area code

9. N/A

Former name, former address, and former fiscal year, if changed since last report.

https://drive.google.com/file/d/1wWx52iWqEoniGaFzZt0GY1FOxga8RI8E/view
 Board of Directors

Director Position

Jose T. Pardo Chairman of the Board & Independent Director

Jui-Tien Huang Vice-Chairman & Director

Jose Victor P. Paterno President/CEO & Director

Wen-Chi Wu Director

Ching-Feng Kuo Director

Tsung-Hsien Lee Director

Yung-Wei Lu Director

Jorge L. Araneta Director

Maria Cristina P. Paterno Director

Antonio Jose U. Periquet, Jr. Director

Michael B. Zalamea Director