Basic Policy of Establishing Internal Control Systems

1. System for the Retention and Management of Information Related to Directors' Execution of Duties

(1) We shall retain and manage information in accordance with laws and regulations, the Document Management Regulations, the Information Security Implementation Manual, and other internal regulations.
(2) The Representative Director shall appoint, from among the Directors, a person responsible for company-wide supervision of the retention and management of information related to Directors' execution of duties.
(3) The Director in charge of supervision shall retain and store information related to Directors' execution of duties as records, in accordance with internal regulations.
(4) Stored records shall be retained and stored in a highly searchable manner for perusal by Directors, Audit and Supervisory Board Members, and the Financial Auditor.
(5) We shall establish appropriate systems for the retention, management, and transmission of information, similar to those established under the Basic Policy on Information Security, the Privacy Mark, and the Information Security Management System (ISMS).

2. Regulations and other systems concerning management of risk of loss

(1) We shall establish a management system, classifying events (risks) that may have a significant impact on the purpose of our company and its business purposes into the following categories.
Financial reporting risks
Quality risks
Information security risks
Labor risks
Legal risks
Environmental risks
Business continuity risks
Human resources risks
Financial risks
(2) We shall organize a Risk Management Committee responsible for supervising our financial reporting risk management system, in order to assess financial risks, and take measures to avoid and mitigate risks in accordance with the Risk Management Regulations.
(3) In order to prevent misconduct caused by employees through information leakage, we shall establish Confidentiality Management Regulations and Disciplinary Action Regulations, and in addition, shall have employees submit written pledges of compliance with internal regulations.
(4) With regard to risk management related to digital information, we shall establish systems to appropriately identify information leakage routes, and enhance our prevention capabilities through implementation of in-house training.

3. System for ensuring that Directors execute their duties efficiently

(1) We shall hold a regular Board of Directors meeting once a month and extraordinary Board of Directors meetings as necessary to make decisions on important matters and supervise the status of business execution by Directors.
(2) All Directors shall be assigned responsibilities for specific domains of our business, appropriately monitor business progress, and strive to improve the efficiency of business execution thereof.
(3) With regard to business operations, we shall develop medium-term management plans and annual budgets for each fiscal year, taking future business environment and other factors into consideration, and set company-wide targets.
(4) Each department shall plan and implement specific measures to achieve its targets.
(5) In order to ensure efficient execution of duties, the scope of duties and authority necessary for business execution shall be clearly defined in the Regulations on Segregation of Duties and the Regulations on Delegation of Authority.
(6) We shall flexibly implement organizational changes to respond to changes in the environment.

4. System for ensuring that the execution of duties by Directors and employees is in conformity with laws and regulations and the Articles of Incorporation

(1) We shall review our internal regulations from time to time to comply with laws and regulations and the Articles of Incorporation, and provide internal education as necessary to raise employees' awareness of the importance of compliance in their business execution.
(2) We shall define the systems to ensure proper execution of business in the Board of Directors Regulations, Regulations of the Audit and Supervisory Board, and Rules of Employment.
(3) In order to firmly maintain the legal compliance system, employees shall be required to submit written pledges of compliance with internal regulations with their signatures and seals affixed.
(4) We shall establish a compliance whistleblowing system, and in regard to promoting compliance with laws and regulations and the Articles of Incorporation, provide guidance through training and other means to officers and employees, etc., so that they conduct business operations from their respective positions taking compliance as their own issue.
(5) We shall establish an internal audit system to audit legal compliance of our business execution.

5. System for ensuring the appropriateness of business operations within our corporate group

A. System for ensuring that matters related to the execution of duties by directors, etc., of subsidiaries are reported to our company

(1) The Director in charge of the business related to the relevant affiliated company (Director-in charge) is responsible for the reporting from the subsidiary in accordance with the Affiliated Company Management Regulations.
(2) The Director-in-charge shall request submission of documents, etc., from affiliated companies as necessary and keep abreast of the management status of the affiliated companies.

B. Rules and other systems for managing risk of loss of subsidiaries

(1) We shall ensure accounting is carried out in accordance with the Accounting Regulations, and receive accounting reports on a monthly basis.
(2) Affiliated companies are required to report on the implementation status and effectiveness of measures to mitigate financial reporting risks to the Risk Management Committee, and we shall evaluate such reports in accordance with the Risk Management Regulations.

C. System for ensuring that Directors, etc., of subsidiaries execute their duties efficiently

(1) Management of affiliated companies shall be based on coexistence and co-prosperity based on mutual trust, while respecting their autonomy.
(2) Important matters shall be subject to prior consultation with the Board of Directors of our company.

D. System for ensuring that the execution of duties by Directors, etc., and employees of subsidiaries is in conformity with laws and regulations and the Articles of Incorporation

(1) We shall appoint a Director who shall be responsible for supervision of the business of the corporate group. We shall also give subsidiaries the mandate and responsibility to establish their own systems to ensure compliance with laws and regulations.
(2) Our Administration Headquarters shall promote and supervise, across all subsidiaries, the systems they establish to ensure compliance with laws and regulations.
(3) In the case of conducting audits as part of the supervising role stipulated in (2) above, our Internal Audit Regulations shall be applied mutatis mutandis.

6. Matters concerning employees who are requested by Audit and Supervisory Board Members to assist them in the performance of their duties

(1) Employees to assist the duties of Audit and Supervisory Board Members shall be nominated from employees of the Internal Auditor’s Office.

7. Matters related to the independence from Directors of employees assisting the duties of Audit and Supervisory Board Members

(1) Personnel changes, appraisals, and disciplinary actions regarding employees of the Internal Audit Office shall be subject to the prior consent of the Audit and Supervisory Board Members.

8. Matters related to ensuring the effectiveness of instructions given by Audit and Supervisory Board Members to the employees assisting in the Audit and Supervisory Board Members' duties

(1) Audit and Supervisory Board Members shall be authorized to guide and instruct employees assisting in their duties to the extent necessary to perform their audit duties.

9. System for reporting to the Audit and Supervisory Board Members

A. System for reporting from Directors and employees to Audit and Supervisory Board Members

(1) Directors are obligated to immediately report to Audit and Supervisory Board Members in accordance with laws and regulations and internal regulations, should they become aware of any matters that could cause significant damage to our company.
(2) The Internal Audit Office shall conduct internal audits of identified risks, and report the results thereof to the Audit and Supervisory Board.
(3) The Risk Management Committee, responsible for monitoring financial reporting, shall assess financial reports, and report the results thereof to the Audit and Supervisory Board.
(4) Whistleblowing reports from employees shall be reported by the Compliance Committee, responsible for investigation of such reports, to the Risk Management Committee.

B. System for reporting to the Audit and Supervisory Board Members by a person receiving reports from Directors, etc., and employees of subsidiaries, or other persons equivalent thereto

(1) Directors in charge of subsidiaries are obligated to immediately report to Audit and Supervisory Board Members should they become aware of any matters that could cause significant damage to our company.
(2) The Risk Management Committee, responsible for monitoring financial reporting, shall assess financial reports of subsidiaries based on reports from the division in charge of each subsidiary, and report the results thereof to the Audit and Supervisory Board.
(3) Whistleblowing reports shall be reported by the Compliance Committee, responsible for investigation of such reports, to the Risk Management Committee.

10. System for ensuring that persons reporting to the Audit and Supervisory Board Members are not treated disadvantageously for having made such reports

(1) In accordance with the Compliance Whistleblowing Regulations, we shall prohibit any disadvantageous treatment, including dismissal of persons making reports, and in addition, take measures to prevent any deterioration in the work environment of such employees.
(2) Employees of subsidiaries shall also be protected against disadvantageous treatment, etc., in the same manner as (1) above.

11. Matters related to the policies on the procedures for advance payment or reimbursement of expenses arising from the execution of duties of Audit and Supervisory Board Members, or any other processing of expenses or obligations arising from the execution of such duties

(1) The Audit and Supervisory Board shall be allocated budgets in advance for expenses deemed necessary for the execution of duties.
(2) Audit and Supervisory Board Members may ask our company for advance payment of any urgent or extraordinary expenses, as well as reimbursement of incurred expenses.
(3) We shall be mindful of the efficiency and appropriateness of each expenditure with regard to incurring audit expenses.

12. Other systems for ensuring that audits by Audit and Supervisory Board Members are executed efficiently

(1) We shall establish Standards for Audits by Audit and Supervisory Board Members and Internal Audit Regulations, in order to ensure the effectiveness of audits by Audit and Supervisory Board Members.
(2) Audit and Supervisory Board Members shall monitor the process of important decision-making and the status of business execution of our company, including those conducted by the Board of Directors.
(3) Audit and Supervisory Board Members shall attend important company meetings, review major approval documents and other important documents related to business execution, and request explanations from Directors and employees as necessary.
(4) We shall endeavor to maintain a deep understanding of the significance and purposes of the three types of audits (internal audit, audit by the Audit and Supervisory Board Members, and audit by the Financial Auditor), and shall promote collaboration and mutual complementation between the three audits.

Established on May 19, 2006
Revised on June 13, 2016