Internal Control

To ensure appropriate business operations, the Board of Directors has adopted a resolution on the “Basic Policy for Establishing Internal Control System,” and the Company is currently operating an internal control system based on this policy. Our “Basic Policy for Establishing Internal Control System” is outlined below.

Systems to ensure that the execution of duties by directors and employees of the Company and its subsidiaries (hereinafter referred to as the Group companies) complies with laws, regulations and the Articles of Association.

1. The Company shall establish the "Corporate Philosophy" and the "Code of Conduct" and have directors and employees comply with them to ensure that the execution of their duties conforms to laws, regulations, and the Articles of Association.
2. The Company shall establish internal rules and regulations, including “Board of Directors Regulations,” which all directors and employees shall comply with.
3. The Business Management Group, as the department in charge of compliance, will establish an appropriate education and training system for directors and employees and conduct lectures and training programs by inviting outside experts.
4. The Internal Audit Department shall conduct internal audits under the “Internal Audit Regulations” to ensure that directors and employees perform their duties properly. The Internal Audit Department also exchanges information with accounting auditors, audit corporations, or Audit and Supervisory Committee members as necessary to conduct efficient internal audits.

System for the storage and management of information relating to the performance of duties by directors of the Company and Group companies.

1. Information related to directors’ performance of their duties shall be recorded in documents or electromagnetic media and retained and managed appropriately under internal regulations such as “Document Management Regulations.”
2. Directors and Audit and Supervisory Committee members shall have access to these documents and information as necessary under the above regulations and rules.

Regulations and other framework for managing the risk of loss of the Company and its group companies

1. The Board of Directors shall have the responsibility and authority to establish a risk management system and develop a framework to prevent various risks to the greatest extent possible and minimize damage to corporate value in the event of crises.
2. The Business Management Group under the Board of Directors shall be responsible for monitoring cross-organizational risks and taking company-wide actions, while each department in charge of each division shall be responsible for managing risks associated with their operations.
3. Directors of each division shall report the profit and loss, and business execution of the division in charge at meetings of the Board of Directors. If they detect any material matter that may affect the profit and loss of the Company, they shall set up a task force led by CEO or a director appointed by CEO, and organize an external advisory team including lawyers and certified public accountants if necessary, to take prompt actions, prevent damage expansion, and minimize such damage.

Framework for ensuring directors of the Company and its group companies execute their duties efficiently

1. The Company's Board of Directors shall hold regular meetings once a month and extraordinary meetings as necessary to ensure prompt and appropriate decision-making.
2. The Business Management Meeting shall be established under the Board of Directors to facilitate the decision-making of the Board of Directors. This meeting shall review matters to be discussed at the Board of Directors in advance and inform its participants of instructions and decisions made by the Board of Directors in accordance with policies and plans decided by the Board of Directors.
3. A Management Committee shall be established under the Board of Directors, consisting of director and managers in charge of each division, to review the various risks reported by the divisions to prevent them as much as possible. CEO shall explain the current management status to director and managers in charge of each division, and the director and managers shall report on the business execution status of their respective divisions.
4. To ensure that the duties on a daily basis will be executed efficiently based on decisions made by the Board of Directors, authorities shall be delegated in accordance with the "Administrative Authority Rules" and other internal rules, and business operations shall be shared among persons in charge at each level in line with decision-making rules.

Framework for ensuring the appropriate operations of the corporate group consisting of the Company and its subsidiaries

1. The Manager of the Business Management Group shall provide guidance to and assist in managing the subsidiaries
2. The Company's directors shall participate in the Board of Directors meetings at the subsidiary to provide direction and guidance. In addition, the appropriateness of business operations of a subsidiary shall be ensured by requiring matters subject to reporting at the subsidiary’s Board of Directors to be reported to the Board of Directors of the Company as well.
3. The overall business activities of subsidiaries shall be subject to internal audit and the appropriateness of business operations shall be ensured by establishing an internal control system as a group.

Matters related to employees requested by the Audit and Supervisory Committee to assist them in performing their duties, matters associated with the independence of such employees from directors, and matters related to ensuring the effectiveness of instructions given by the Audit and Supervisory Committee to such employees.

1. If the Audit and Supervisory Committee request to assign employees to assist them in their duties, the Board of Directors may, upon consultation with the committee, appoint employees to assist the committee.
2. During the period for assistance designated by the Audit and Supervisory Committee, the authority to direct the assigned employees shall be delegated to the Audit and Supervisory Committee, and such authority shall not be subject to the direction of the Directors.
3. Personnel-related matters, such as personnel transfers, performance evaluations, and awards and penalties concerning assigned employees, require the consent of the Audit and Supervisory Committee.

Framework for reporting to the Audit and Supervisory Committee, including reporting from directors and employees of the Company and its group companies to the Audit and Supervisory Committee

1. Directors and employees shall report on the business execution status and provide necessary information upon request of the Audit and Supervisory Committee.
2. Important matters subject to reporting and information provision shall be as follows:
   • Matters resolved at important internal meetings
   • Matters that may cause significant damage to the Company
   • Important monthly management matters
   • Important matters related to internal audit status and risk management
   • Serious violation of laws, regulations, or the Articles of Association
   • Material accounting policies, accounting standards, and their changes
3. Directors and employees may provide information or report directly to the Audit and Supervisory Committee when necessary, such as when they identify an act violating the law.

Framework to ensure that persons reporting to the Audit and Supervisory Committee are not treated unfavorably because of the reports

The Company shall prohibit any disadvantageous treatment of the Company’s directors, Audit and Supervisory Committee, and employees that have reported to the Audit and Supervisory Committee because of reporting or consulting about concerns and shall protect those who report.

Matters concerning the policy for prepayment of expenses or handling of liabilities incurred in performing the duties of Audit and Supervisory Committee members

When an Audit and Supervisory Committee member requests the Company for prepayment of necessary expenses, etc. in performing their duties, the Company shall promptly pay such expenses or debts unless those are deemed unnecessary for performing their duties.

Additional framework for ensuring that Audit and Supervisory Committee conducts their audits effectively

1. The Audit and Supervisory Committee shall meet regularly with CEO to exchange information and opinions on important audit issues.
2. Audit and Supervisory Committee members may attend important internal meetings as necessary.
3. The Audit and Supervisory Committee shall meet regularly with an audit corporation or accounting auditor to exchange information and opinions and request reports from the audit corporation or accounting auditor as necessary.

Framework for ensuring the reliability of financial reporting

To ensure the reliability of financial reporting, the Company shall establish a framework for financial reporting based on the basic policy for internal control for financial reporting and enhance and operate company-wide control activities and control activities for each business process.

Basic policy and framework for eliminating antisocial forces

1. Basic approach of eliminating relationships with antisocial forces
   • The Company's internal rules and regulations shall provide a clear rationale for eliminating antisocial forces, and all members, including CEO, shall work as one to eliminate antisocial forces.
   • We do not have any relationships, including business relationships, with antisocial forces and reject any unreasonable demands from them.
2. Status of taking measures to eliminate transactions with antisocial forces
   • The “Regulations for Countermeasures for Anti-Social Forces” stipulating the fundamental policy against anti-social forces shall serve as a guideline for all employees.
   • Appoint the Business Management Group as the supervisory management division to promote the elimination of antisocial forces and assign a person in charge of handling unjustified demands.
   • Establish the Regulations for Countermeasures for Anti-Social Forces” and other related regulations and build a system for eliminating antisocial forces.
   • Check the relationship with antisocial forces concerning business partners.
   • Collect information on antisocial forces from external authorities to determine whether any antisocial organizations are involved.
   • Establish close collaborative relationships with external professional organizations, including the police, the National Center for Removal of Criminal Organizations, and lawyers in preparation for unjustified demands from antisocial organizations.