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Corporate Governance

Internal Control System

Basic Policy on Internal Control System and Status of Its Development

The Board of Directors of the Company has adopted the following “Basic Policy on Internal Control”.
(Initial resolution passed on May 11, 2006, revised on June 27, 2023)


1) System to ensure that the execution of duties by directors and employees complies with laws, regulations, and the Articles of Incorporation

(1) The Board of Directors shall appoint a Director in charge of compliance and, under his/her direction and supervision, establish a company-wide compliance system and receive regular status reports.
(2) The Board of Directors' supervisory function over business execution shall be strengthened by appointing outside directors who do not engage in business execution.
(3) Audit and Supervisory Committee Members shall audit the execution of Directors' duties from an independent standpoint, including the status of the Internal Control System.
(4) The Internal Audit Department, which is independent from the business execution divisions, shall audit the status of the internal control system and encourage improvements as necessary.
(5) Establish normal reporting channels for reporting violations of laws and regulations or internal rules, as well as a consultation and reporting desk with thorough protection of whistleblowers, in order to detect violations of laws and regulations or facts that may lead to such violations at an early stage.
(6) The Company shall not have any relationship with antisocial forces or groups that threaten the order and safety of civil society, and shall respond to any unreasonable demands in a resolute manner in cooperation with external specialized agencies such as the police, and shall make systematic efforts to eliminate antisocial forces and groups.


2) System for storage and management of information related to directors' performance of their duties

(1) Documents required to be preserved under laws and regulations, minutes of important meetings, approval documents, contracts, and related materials shall be recorded in writing or on electromagnetic media in accordance with internal regulations, and shall be properly preserved and managed. In addition, directors may inspect these documents.
(2) Personal information and important trade secrets shall be stored and managed appropriately and safely in accordance with internal rules.
(3) Information systems shall be safely managed and monitored, and maintained with appropriate contingency measures.


3) Regulations and other systems for loss risk management

(1) The Company and its group companies shall appropriately manage and take necessary actions against various risks assumed in the promotion of business such as quality, compliance, disaster, environment, and information security, etc., mainly by the department in charge, in accordance with internal rules and regulations.
(2) In the event of the occurrence or threat of the occurrence of unforeseen circumstances that may have a significant impact on the management of the Company and its group companies, the Company shall promptly report such circumstances to the Board of Directors and, under the direct supervision of the President of the Company, appoint a responsible person as necessary to respond promptly and in an organized manner.


4) System to Ensure Efficient Execution of Duties by Directors

(1) The Board of Directors shall establish company-wide goals shared by Directors and employees and efficient methods for achieving them.
(2) The Board of Directors shall clarify the responsibilities and authority for decision-making and business execution by Directors and employees, and shall maintain internal regulations to ensure appropriate division of roles and coordination among organizations.
(3) The Board of Directors shall periodically review the results of decision-making and business execution by Directors and employees, and shall take corrective measures and policies to eliminate or reduce impediments and increase the certainty of achieving goals.


5) System to ensure the appropriateness of operations of the corporate group consisting of the Company and its subsidiaries

(1) While respecting the independence of each Group company, the Company shall require regular reporting of business activities at meetings of the Board of Directors, and shall require the approval of the Board of Directors for important matters based on prior discussions.
(2) The Company shall establish standards for the division of duties, chain of command, authority, decision-making, and other organizational matters within the Group, and shall have its subsidiaries establish systems in accordance with such standards.
(3) The Company shall establish a common corporate philosophy for each Group company and have each Group company appoint an officer in charge of compliance to ensure that all Group directors and employees are united in their commitment to compliance with laws and regulations and to improve corporate ethics.
(4) In the event that an officer or employee of a Group company discovers a serious violation of laws and regulations or other important compliance-related fact in the Group, the Company shall report the occurrence to the President of the Company, the Director in charge of compliance, and the Audit and Supervisory Committee Member via the director in charge of each such fact, and shall also appoint a responsible person as necessary under the direct supervision of the President of the Company. In addition, under the direct supervision of the President of the Company, a responsible person shall be appointed as necessary to take appropriate action to remedy the situation, formulate measures to prevent recurrence, and report the matter to the Board of Directors. 6.


6) System to ensure transparency and reliability of financial reporting

In order to ensure transparency and reliability in financial reporting, the Company shall establish a basic policy and establish, maintain, and continually review a system for effective internal control over financial reporting.


7) Matters Concerning Directors and Employees Assisting the Audit and Supervisory Committee Member in the Performance of His or Her Duties

In the event that the Audit and Supervisory Committee Member requests an employee to assist the Audit and Supervisory Committee Member in the performance of his/her duties, an appropriate employee shall assist the Audit and Supervisory Committee Member in the performance of his/her duties.


8) Matters concerning the independence of the Directors and employees mentioned in the preceding paragraph from other Directors (excluding Directors who are Audit and Supervisory Committee Members)

(1) Employees who receive orders from the Audit and Supervisory Committee Member to perform audit duties shall not receive instructions or orders from Directors with respect to such orders, and shall perform their duties independently of Directors.
(2) The Audit and Supervisory Committee Member shall be given an explanation in advance regarding the transfer of employees, etc. as stipulated in Paragraph 7.


9) Matters Concerning Ensuring the Effectiveness of the Instructions of the Audit and Supervisory Committee Member to the Directors and Supervisory Committee Members under Paragraph 7

Employees who receive necessary orders from the Audit and Supervisory Committee Member shall exclusively follow the instructions of the Audit and Supervisory Committee Member. In addition, they shall attend necessary meetings (including attendance by proxy) as instructed by the Audit and Supervisory Committee Member. 10.


10) System for Reporting by Directors and Employees to the Audit and Supervisory Committee and Other Systems Related to Reporting to the Audit and Supervisory Committee

In addition to legally required matters, Directors and employees shall promptly report to the Audit and Supervisory Committee Members on matters that may have a material impact on the Company and the Group, the status of internal audits, and other matters as requested by the Audit and Supervisory Committee.


11) System to ensure that persons who report to the Audit and Supervisory Committee Member will not be subjected to any disadvantageous treatment because of such report

The Company shall prohibit any disadvantageous treatment of any director, officer, or employee of the Company Group who reports to the Audit and Supervisory Committee Member by reason of such report, and shall make such fact known to all directors, officers, and employees of the Company Group.


12) Matters concerning procedures for advance payment or reimbursement of expenses incurred in the performance of duties by Audit and Supervisory Committee Members (limited to those related to the performance of duties by the Audit and Supervisory Committee) and other policies related to the treatment of expenses or liabilities incurred in the performance of such duties

(1) In the event that an Audit and Supervisory Committee Member requests the Company for advance payment of expenses in connection with the execution of his/her duties, the relevant department in charge shall, after deliberation, promptly dispose of such expenses or obligations, unless such expenses or obligations are deemed not necessary for the execution of the duties of the Audit and Supervisory Committee Member in question.
(2) A certain amount of budget shall be set aside each year to pay for expenses, etc. incurred in the performance of duties by the Audit and Supervisory Committee Member.


13) Other Systems to Ensure Effective Audit and Supervisory Committee Member Audits

Meetings for the Audit and Supervisory Committee Members to exchange opinions with the Board of Directors (excluding Audit and Supervisory Committee Members) and meetings for the Audit and Supervisory Committee Members to exchange opinions with the Accounting Auditor shall be held on a regular basis. In addition, Audit and Supervisory Committee Members may inspect major approval documents and request explanations from Board of Directors or employees, and attend important meetings to express their opinions as necessary and facilitate the smooth promotion of auditing operations.


Efforts to Enhance Internal Controls

In order to further enhance and improve the effectiveness of the internal control system, the Company has established an "Internal Control Committee" and an "Internal Audit Office. The "Internal Control Committee" is an organizational body that oversees the Promotion Committee related to internal control, discusses individual issues stipulated in the Internal Control Program, manages the status of promotion, and reports the matters discussed by the Committee to the Board of Directors. In addition, the Committee exchanges information with the Audit and Supervisory Committee in the course of its activities to assist the Audit and Supervisory Committee Member in its functions and to strengthen the functions of the Internal Control Committee in its evaluation of internal control.


The Company has established a system for effective internal control over financial reporting, and is continuously working on its operation and review.


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