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 Compliance of Directors and Employees with Laws, Regulations, and the Articles of Incorporation

(1) The Board of Directors shall appoint a Director responsible for compliance and, under the Director's supervision, establish a company-wide compliance system and receive regular reports on its operation.
(2) The supervisory function of the Board of Directors over the execution of business shall be strengthened by appointing Outside Directors who do not engage in business execution.
(3) The Audit and Supervisory Committee shall audit the execution of duties by Directors, including the status of the Internal Control System, from an independent standpoint.
(4) The Internal Audit Department, which is independent of the business execution divisions, shall audit the status of the Internal Control System and promote improvements as necessary.
(5) The Company shall establish ordinary reporting channels for reporting violations of laws, regulations, or internal rules, as well as consultation and whistleblowing channels that provide thorough protection for whistleblowers, in order to facilitate the early detection of actual or potential violations of laws, regulations, or internal rules.
(6) The Company shall have no relationship whatsoever with antisocial forces or organizations that threaten the order and safety of civil society. The Company shall respond firmly to any unjust demands in cooperation with external specialist organizations, including the police, and shall take organization-wide measures to eliminate such antisocial forces and organizations.

2) System for the Storage and Management of Information Related to the Execution of Directors' Duties

(1) Documents required to be retained by laws and regulations, minutes of important meetings, approval documents, contracts, and related materials shall be recorded in written or electronic form and appropriately stored and managed in accordance with internal regulations. Directors shall have access to such documents.
(2) Personal information and important trade secrets shall be appropriately and securely stored and managed in accordance with internal regulations.
(3) Information systems shall be securely managed and monitored and maintained through appropriate contingency measures.

3) Regulations and Other Systems for Risk Management

(1) The Company and its Group companies shall appropriately manage and address various business risks, including those related to quality, compliance, disasters, the environment, and information security, in accordance with internal regulations, primarily through the departments responsible for each area.
(2) If any unforeseen event that may have a significant impact on the management of the Company or its Group companies occurs or is likely to occur, the matter shall be promptly reported to the Board of Directors. Under the direct leadership of the President, a person responsible shall be appointed as necessary, and the matter shall be addressed promptly and in an organized manner.

4) System to Ensure the Efficient Execution of Directors' Duties

(1) The Board of Directors shall establish company-wide goals to be shared by Directors and employees, together with efficient methods for achieving those goals.
(2) The Board of Directors shall clearly define the responsibilities and authority for decision-making and business execution by Directors and employees, establish internal regulations, and ensure appropriate division of responsibilities and coordination among organizations.
(3) The Board of Directors shall periodically review the results of decision-making and business execution by Directors and employees, implement measures to eliminate or reduce factors that impede operations, and improve the likelihood of achieving the established goals.

5) System to Ensure the Appropriateness of Operations throughout the Corporate Group Consisting of the Company and Its Subsidiaries

(1) While respecting the independence of each Group company, the Company shall require regular reports on business operations to the Board of Directors. Important matters shall require the approval of the Board of Directors following prior consultation.
(2) The Company shall establish standards governing the division of duties, reporting lines, authority, decision-making, and other organizational matters within the Group, and shall require its subsidiaries to establish systems in accordance with those standards.
(3) The Company shall establish a common corporate philosophy throughout the Group and require each Group company to appoint an officer responsible for compliance in order to promote compliance with laws and regulations and enhance corporate ethics among all Directors and employees of the Group.
(4) If any officer or employee of a Group company discovers a serious violation of laws or regulations or any other significant compliance-related matter within the Group, the matter shall be reported through the responsible Director to the President, the Director responsible for compliance, and the Audit and Supervisory Committee. Under the direct leadership of the President, a person responsible shall be appointed as necessary to appropriately resolve the matter, formulate measures to prevent recurrence, and report the matter to the Board of Directors.

6) System to Ensure the Transparency and Reliability of Financial Reporting

To ensure the transparency and reliability of financial reporting, the Company shall establish a basic policy and develop, maintain, and continuously review a system to ensure the effectiveness of internal control over financial reporting.

7) Matters Concerning Directors and Employees Assisting the Audit and Supervisory Committee in the Performance of Its Duties

If the Audit and Supervisory Committee requests that Directors an employee assist in the performance of its duties, the Company shall assign Directors an employee with appropriate qualifications to assist the Audit and Supervisory Committee.

8) Matters Concerning the Independence of the Directors and Employees Specified in the Preceding Item from Other Directors (Excluding Directors Who Are Audit and Supervisory Committee Members)

(1) Directors and employees who receive instructions from the Audit and Supervisory Committee regarding audit duties shall perform such duties independently and shall not be subject to the direction or supervision of Directors with respect to those duties.
(2) The Audit and Supervisory Committee shall be consulted in advance regarding the transfer, reassignment, or other personnel changes of the employees, and other relevant matters concerning the Directors, referred to in Item 7.

9) Matters Concerning Ensuring the Effectiveness of Instructions Given by the Audit and Supervisory Committee to Directors and Employees Referred to in Item 7

Directors and employees who receive instructions from the Audit and Supervisory Committee shall perform their duties exclusively under the direction and supervision of the Audit and Supervisory Committee. They shall also attend meetings as instructed by the Audit and Supervisory Committee, including attendance by proxy where appropriate.

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 matters required by law, the Company shall establish a system under which Directors and employees promptly report to the Audit and Supervisory Committee any matters that may have a significant impact on the Company or the Group, the status of internal audits, and any other matters requested by the Audit and Supervisory Committee.

11) System to Ensure That Persons Reporting to the Audit and Supervisory Committee Are Not Subject to Disadvantageous Treatment

The Company shall prohibit any disadvantageous treatment of Directors, officers, or employees of the Company and its Group companies on the grounds that they have made a report to the Audit and Supervisory Committee, and shall ensure that this policy is fully communicated throughout the Group.

12) Matters Concerning Policies for the Advance Payment or Reimbursement of Expenses Incurred in the Performance of Duties by Directors Who Are Audit and Supervisory Committee Members (Limited to Matters Relating to the Duties of the Audit and Supervisory Committee) and the Treatment of Other Expenses or Liabilities Incurred in the Performance of Such Duties

(1) If a Director who is an Audit and Supervisory Committee Member requests the advance payment or reimbursement of expenses incurred in the performance of their duties, the relevant department shall promptly process such expenses or liabilities after due review, unless it is determined that the expenses or liabilities are unnecessary for the performance of those duties.
(2) The Company shall allocate a fixed annual budget to cover expenses incurred in connection with the performance of the duties of the Audit and Supervisory Committee.

13) Other Systems to Ensure the Effectiveness of Audits by the Audit and Supervisory Committee

Meetings for the exchange of opinions between the Audit and Supervisory Committee and Directors (excluding Directors who are Audit and Supervisory Committee Members), as well as meetings between the Audit and Supervisory Committee and the Independent Auditor, shall be held regularly. In addition, the Audit and Supervisory Committee may inspect important approval documents, request explanations from Directors or employees, attend important meetings, express opinions whenever necessary, and otherwise promote the effective performance of audit activities.

Efforts to Enhance the Internal Control System

To further strengthen and enhance the effectiveness of the Internal Control System, the Company has established an Internal Control Committee and an Internal Audit Office. The Internal Control Committee serves as the organization responsible for overseeing the committees promoting internal control initiatives. It discusses individual issues specified in the Internal Control Program, manages the progress of related initiatives, and reports the results of its deliberations to the Board of Directors. The Committee also exchanges information with the Audit and Supervisory Committee in the course of its activities, thereby supporting the Committee's functions and enhancing the effectiveness of internal control evaluation.

The Company has established a system to ensure the effectiveness of internal control over financial reporting and continuously reviews and improves its operation.

As a result of its commitment to compliance management, the Company has obtained the PrivacyMark certification granted by the Japan Institute for Promotion of Digital Economy and Community (JIPDEC).