INTERNAL
CONTROL SYSTEM

Development Status of Internal Control Systems

At a meeting held on August 20, 2019, the Board of Directors resolved to set forth an "Internal Control Policy,” in relation to internal control systems for enhancing management transparency and ensuring thorough compliance. The Company currently operates its internal control systems in accordance with this policy. An outline of these systems is as follows.

  • Systems to ensure that the execution of duties by Directors and employees of the Group complies with laws and regulations and the Articles of Incorporation

    • The Group has established basic rules to ensure compliance with laws, regulations, the Articles of Incorporation, and social norms, and strives to enhance the Company's compliance systems and practice compliance.
    • The Risk Compliance Committee was established in order to create and maintain compliance systems.
    • The Group provides compliance education and training for officers and employees of the Group as appropriate to maintain and improve compliance awareness.
    • To ensure sound corporate management, the Group does not associate in any way with anti-social forces and resolutely rejects unreasonable demands.
  • Systems for the storage and management of information on the execution of duties by Directors

    • The Company has established rules concerning the storage of documents, etc., and appropriately stores and manages important documents, etc., including the minutes of important meetings, etc., and information on the execution of duties by Directors, in accordance with the provisions of these rules.
    • Directors and Audit & Supervisory Board Members are able to view these documents, etc., at any time.
  • The Group's rules concerning risk management for loss and other systems

    • The Company has established “Risk Management Rules,” and has determined departments, organizations, and persons responsible for addressing various expected risks in relation to the Company's business activities, as part of efforts to create a system for appropriately assessing and managing risk.
    • The Risk Compliance Committee has been established to strengthen systems to prevent and mitigate various risks associated with the Group's business activities.
    • In the event of a crisis, the Company will establish an emergency response system and respond appropriately and promptly to the crisis, including appropriately communicating information both within the Company and externally.
  • Systems to ensure efficient execution of duties by Directors of the Group

    • The Group has established the “Board of Directors Rules,” the “Rules on the Division of Duties,” and the “Rules on Duties and Authority,” to clarify the duties, authority, and responsibilities of Directors and expedite business operations.
    • The Board of Directors holds regular meetings once a month for reports on the status of the execution of duties by Directors, and also holds other meetings as necessary.
    • The Company ensures that Group companies establish systems necessary for Directors to execute their duties efficiently, with reference to the Company’s systems or adjusted for the organization of the Group company.
  • Matters concerning employees who are requested by Audit & Supervisory Board Members to assist them in their duties, matters concerning the independence of such employees from Directors, and matters related to ensuring the effectiveness of instructions given to such employees

    • If an Audit & Supervisory Board Member requests that one or more employees be assigned to assist with his or her duties, the Company appoints any employees required following consultation with the Audit & Supervisory Board Member, and establishes systems to ensure that supporting duties can be performed without issue. In addition, such employees report to the Audit & Supervisory Board Members and maintain a position independent from Directors.
  • Systems for Directors and employees of the Group to report to Audit & Supervisory Board Members and other systems for reporting to Audit & Supervisory Board Members

    • Audit & Supervisory Board Members may attend meetings of the Board of Directors and other important meetings, and may request reports on the status of the execution of duties from Directors and employees.
    • If a Director or employee of the Company, or a Director, Audit & Supervisory Board Member, or employee of a Group company discovers any violation of laws or regulations or any facts that may cause significant harm to the Company, he or she shall promptly report the matter to an Audit & Supervisory Board Member.
    • Directors and employees of the Company, as well as the Directors, Audit & Supervisory Board Members, and employees of Group companies, shall promptly provide reports on matters related to business execution when requested by an Audit & Supervisory Board Member.
    • The Company has established “Whistleblowing Rules,” and has established a system for providing reports on the matters described above, etc.
  • Systems to ensure persons making reports to Audit & Supervisory Board Members are not treated unfavorably for the reason of having made the report

    • The Company has established provisions in the “Whistleblowing Rules” that prohibit any officer or employee of the Group who has made a report to an Audit & Supervisory Board Member from being treated unfavorably for having made the report, and takes steps to ensure widespread knowledge of these rules among all officers and employees of the Group.
  • Matters concerning the procedures for advance payment or reimbursement of expenses incurred in the execution of duties by Audit & Supervisory Board Members and other policies pertaining to the processing of expenses or obligations incurred in the execution of said duties

    • If an Audit & Supervisory Board Member requests that the Company pay expenses in advance, etc., in relation to the execution of his or her duties, the relevant expenses or obligations pertaining to the request are processed promptly after deliberation by the department in charge, unless it is deemed that the relevant expenses or obligations are not necessary for the execution of the duties of the Audit & Supervisory Board Member.
    • If an Audit & Supervisory Board Member requests independent outside experts (lawyers, certified public accountants, etc.), the Company bears the costs thereof, unless deemed unnecessary for the execution of duties by the Audit & Supervisory Board Member.
  • Other systems to ensure that audits by Audit & Supervisory Board Members are performed effectively

    • The Audit & Supervisory Board includes Outside Audit & Supervisory Board Members to ensure fairness and transparency, in accordance with laws and regulations.
    • Audit & Supervisory Board Members regularly exchange opinions with the CEO and Director to promote the mutual sharing of information.
    • Audit & Supervisory Board Members regularly exchange information with the Accounting Auditor and employees responsible for internal audits, as part of measures to promote mutual cooperation.
    • Audit & Supervisory Board Members may obtain information concerning the views of lawyers, certified public accountants, and other experts at the Company's expense, if it is deemed necessary for duties related to audits.
  • Systems to ensure the reliability of financial reporting

    • To ensure appropriate and timely financial reporting, the Company appoints a manager responsible for accounting, prepares financial statements in accordance with laws, regulations, and accounting standards, and establishes systems for disclosure after deliberation, consideration, and confirmation, in accordance with regulations on information disclosure.
    • In order to ensure systems for reporting on internal controls, as provided for in the Financial Instruments and Exchange Act, are appropriately implemented as a kind of internal control pertaining to financial reporting, the Company establishes systems for evaluation and improvement by the Company and third parties, based on identifying and recording the status of company-wide internal controls, business processes at important business sites, etc.
    • In order to ensure the reliability of financial reporting, the Company strengthens company-wide control activities and control activities for each business process, under the direction of the Representative Director, and builds systems for the implementation of such activities.
  • Systems for eliminating anti-social forces

    • The Group's basic policy is to not associate in any way with anti-social forces, organizations, or individuals, and to reject any unjust or illegal demands. The Group has established "Rules for Addressing and Preventing Anti-social Forces," and takes steps to ensure widespread knowledge of these rules among all officers and employees of the Group.
    • The Group determines departments in charge of this issue and endeavors to collect information from relevant administrative institutions, etc. In the event of any incident, the Group will work closely with the relevant administrative institutions and legal experts to develop systems that enable the Group as whole to promptly address the issue.

Outline of Agreement Limiting Liability

Pursuant to the provisions of Article 427, paragraph (1) of the Companies Act, the Company has entered into agreements with non-executive Directors and Audit & Supervisory Board Members to limit their liability for damages under Article 423, paragraph (1) of the same. The maximum amount of liability for damages under such agreements shall be the amount stipulated by laws and regulations.