Internal Control

Basic Policy of Internal Control

The Board of Directors of JMS Co., Ltd. resolved the following Basic Policy of Internal Control.
(Established on May 11, 2006, Revised on April 21, 2015)

1. System to secure execution of duties by directors and employees are in compliance with laws and regulations, and the articles of incorporation

(1) The Board of Directors shall elect a director in charge of compliance, and under the supervision and direction of the director, it shall establish a company-wide, horizontal compliance system and also receive report on a regular basis.
(2) We strengthen the Board of Directors’supervisory function in regard to the execution of operations by Board of Directors by appointing outside directors who do not engage in the execution of operations.
(3) Corporate auditors shall conduct audits on execution of operations by directors, including the status of establishment of internal control systems, from an independent standpoint.
(4) Internal audit division, independent from operating divisions, shall conduct audits on the status of establishment of internal control systems, and shall give instructions for improvements as the needs arise.
(5) The Company shall prepare an ordinary reporting route for reporting violations of laws and regulations, or company rules, and also it shall establish a consultation and internal reporting contact point with thorough protection of internal reporters to strive to early discover facts which violate or may violate laws and regulations, etc.
(6) The Company shall have no involvement in any anti-social forces and organizations which pose a threat to the order and safety of civil society, and it shall cooperate with police and other outside professional institutions against unreasonable demands in order to make responses in a resolute attitude and shall organizationally work towards exclusion of anti-social forces and organizations.

2. System for preservation and management of information concerning execution of duties by directors

(1) Documents, minutes of important meetings, RINGI (draft plans circulated to obtain approval), contracts and related referential materials, etc. required to be preserved by laws and regulations shall be recorded in writing or electromagnetic media and be appropriately preserved and managed based on company rules. Directors and corporate auditors may inspect these documents.
(2) Personal information and important trade secrets shall be appropriately and safely preserved and managed based on company rules.
(3) Information systems shall be safely managed and monitored, and be maintained by making appropriate responses to contingencies.

3. Rules and other systems concerning management of risk of loss

(1) With respect to various anticipated risks in promoting business, such as quality, compliance, disaster, environment and information security, the Company and its subsidiaries shall appropriately manage them and make necessary responses based on company rules, having mainly the responsible divisions take the central roles.
(2) In cases where an unexpected event occurred or may occur which may have a material impact on the management of the Company and its subsidiaries, it shall be promptly reported to the Board of Directors, and also a responsible person shall be appointed as the needs arise and prompt responses shall be made organizationally under the direct direction of the president of the Company.

4. System for securing efficient execution of duties by directors

(1) The Board of Directors shall establish company-wide targets shared by directors and employees as well as efficient ways to attain such targets, and strive to attain such targets.
(2) The Board of Directors shall clarify responsibilities and authorities concerning decision making and execution of duties by directors and employees, shall prepare company rules and shall secure appropriate division of roles and cooperation among organizations.
(3) The Board of Directors shall review results of decision making and execution of duties by directors and employees on a regular basis, shall take improvement or other measures to avoid or mitigate disincentives and shall enhance the accuracy of attainment of targets.

5. System for securing appropriate operations of the Company and of the Corporate Group consisted of the Company’s subsidiaries

(1) The Company shall, while respecting independence of each of the Company’s subsidiaries, require each of its subsidiaries to report their business descriptions at the Board meeting on a regular basis and also to obtain approval from the Board of Directors after prior discussions with respect to important matters.
(2) The Company shall establish standards concerning organizational matters in the subsidiaries, such as division of duties, chain of command, authorities and decision making, and shall have each of its subsidiaries establish a system in accordance with such standards.
(3) The Company shall establish corporate mission common to all the Company’s subsidiaries and shall have each of its subsidiaries appoint a director in charge of compliance and shall ensure a thorough idea of observation of laws and regulations and improvement of corporate ethics together with directors and employees of the Company’s subsidiaries as a whole.
(4) In cases where a material violation of laws and regulations or other important fact relating to compliance is identified in the Company’s subsidiaries by director or employee of its subsidiaries, the said fact occurred shall be reported to the president, the director in charge of compliance and corporate auditors of the Company through a responsible director of the Company, and a person in charge shall be appointed under a direct instruction of the Company’s president as the needs arise, and the situation shall be appropriately resolved, measures for prevention of recurrence shall be drawn up and reporting shall be made to the Board of Directors.

6. System for securing transparency and reliability in relation to financial reporting

For the purpose of securing transparency and reliability in relation to financial reporting, basic policy shall be established, and a system to ensure effective internal controls over financial report shall be built, maintained and continuously reviewed.

7. Matters concerning the said employees in cases where corporate auditors request employees be appointed to assist them

In cases where corporate auditors request employees be appointed to assist them, employees fit for the duties shall assist the duties of corporate auditors.

8. Matters concerning independence from directors of employees described in the preceding Article

(1) Employees who have received orders necessary for audit operations from corporate auditors shall, with respect to such orders, receive no instructions and orders from directors and shall perform the duties, being independent of directors.
(2) With respect to transfer of employees, explanation shall be given to corporate auditors in advance.

9. Matters concerning securing of effectiveness of instructions of corporate auditors to employees described in Article 7

Employees who have received orders necessary for audit operations from corporate auditors shall follow instructions and orders of corporate auditors exclusively. Also, employees shall attend necessary meetings (including attendance in lieu of a corporate auditor) at the instruction of a corporate auditor.

10. System for directors and employees to report to corporate auditors and other systems for reporting to corporate auditors

A system shall be established for directors and employees to promptly report to corporate auditors matters which has a material impact on the Company and its subsidiaries, the status of implementation of internal audits, etc. in addition to matters specified by laws and regulations as well as matters requested by corporate auditors.

11. System for ensuring that reporting persons do not receive any disadvantageous treatment for reason of having made the said report to corporate auditors

The Company shall prohibit giving disadvantageous treatment to directors and employees who have reported to corporate auditors for reason of having made the said reporting and shall ensure it is thoroughly disseminated to directors and employees of its subsidiaries.

12. Matters concerning procedures for advance payments or their reimbursements arising from execution of duties by corporate auditors and concerning policy for other expenses or treatment of debts arising from execution of the said duties

(1) In cases where a corporate auditor requests to the Company advance payment, etc. for their execution of duties, the responsible division shall make deliberations, and unless the expenses or debts of the request is recognized unnecessary for execution of duties of the said corporate auditor, it shall promptly handle the said expenses or debts.
(2) For the purpose of making payments for execution of duties by corporate auditors, a certain amount of budget shall be established every year.

13. Other systems for securing the audits by corporate auditors are effectively performed

The Company shall hold meetings for the purpose of exchanging opinions between corporate auditors and directors as well as between corporate auditors and accounting auditors on a regular basis. Also, corporate auditors shall inspect major RINGI (draft plans circulated to obtain approval) and may request directors and employees to give their explanations regarding such RINGI, and may attend important meetings to express their opinions as the needs arise to smoothly promote their audit operations.

Initiatives for enhancing internal control.

In order to further enhance the internal control system and increase its effectiveness, we have set up the Internal Control Committee and the Internal Auditing Office. The Internal Control Committee is an organizational structure that oversees promotion committees concerning internal control. It debates individual tasks defined in the internal control program, manages their progress, and reports its findings to the Board of Directors. It exchanges information with auditors to assist the auditor functions and reinforces the functionality of internal control assessment.

We have developed a structure for effective internal control over financial reporting, and continues to work on its administration and review.

We have been granted “Privacy Mark” from the Japan Information Processing Development Corporation in recognition of our compliance management.