Basic Policy on Internal Control

1. System to ensure that the execution of duties by Directors and Employees complies with laws and regulations and the articles of incorporation.

1. The Company and its Group Companies shall establish TSUBAKI SPIRIT as our corporate philosophy, and in order to realize this, shall create a system to ensure that the execution of duties by Directors, Executive Officer and employees complies with laws and regulations and the articles of incorporation.
2. The Company and its Group Companies shall establish Corporate Work Ethics which clarify the ethics and code of conduct for Directors, Executive Officers and employees, shall provide them with training sessions for enhancement and full dissemination of this sense of ethics, and shall report to the Board of Directors regarding these activities.
   The Company and its Group Companies shall also establish the Ethics Committee to consider and implement measures for prevention of recurrence of violations of the code of ethics, and also shall decide on disciplinary actions as the need arises against violators in order to bolster the compliance system.
3. The Company and its Group Companies shall establish a consultation desk, or similar, such as the Corporate Ethics Hotline, as a whistleblowing system, so that employees of the Company and its Group Companies can consult and notify with respect to violations of the Corporate Work Ethics.
4. The Company and its Group Companies shall establish Internal Control Regulations and develop a system for promotion of Internal Control by establishing a department responsible for promotion of Internal Control, and shall, carry out compliance with laws and regulations and corporate ethics and risk management in executing businesses as activities compulsory for everyone, shall ensure the credibility of the Documents on Financial Calculation and shall pursue efficiency of operations.

2. System relating to retention and management of information concerning execution of duties by Directors

The Company and its Group Companies shall, based on laws and regulations as well as in-house rules, retain and manage documents, etc., and also shall, with respect to management of information, establish in-house rules concerning information security and apply them accordingly.

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

The Company and its Group Companies shall, based on the Basic Risk Management Strategy, ascertain and understand risk factors on a continuous basis, and shall endeavor to minimize losses. For this purpose, under the supervision of the Sustainability Committee, the Company and its Group Companies shall implement various measures focusing on prevention of risks, such as establishment of committees and also shall ensure full dissemination of such measures to the Company and its Group Companies.

4. System to ensure the efficient execution of duties by Directors

1. The Company shall hold regular Board of Directors’ meetings once per month and also on an as needed basis shall hold extraordinary Board of Directors’ meetings to deliberate and make decisions on certain matters as required by laws and regulations as well as other important matters concerning management of the Company and its Group Companies, and Directors shall sequentially report on and supervise the status of the execution of their duties.
2. The Company shall conduct the Strategy Committee, defined as the next highest decision-making organ following the Board of Directors, which shall deliberate, make decisions on, and report on important business strategies, management policies, etc. of the Company and the Group companies. Also, the Company shall conduct the Management Committee and report on management situations, issues, and matters decided on and reported by the Board of Directors and the Strategy Committee.
3. The Company shall, for the purpose of enhancing transparency and objectivity of management, appoint Outside Directors.
4. The Company shall introduce the executive officer system for the purposes of enhancement and acceleration of the process of decision making by the Board of Directors, enforcement of business execution and supervisory functions, and improvement of management efficiency.

5. System to ensure the properness of operations of the business group comprised of the Company and its Group Companies

1. The Company and its Group Companies shall, for the purpose of ensuring that the business group’s operations are in compliance with laws and regulations and articles of incorporation, redefine various standards and rules as Group Companies Management Rules.
2. Group Companies shall report to the Company pursuant to Group Companies Management Rules.
3. The Company shall resolve important Group company matters at the Company’s Board of Directors or the Strategy Committee. Further, in order to enforce group management, the Company shall hold regular meetings, etc. of the Company’s top management in order to share business objectives and resolve managerial issues.
4. The Internal Audit Department of the Company shall discuss various issues that may be required from time to time with Audit & Supervisory Board members of the Company as well as with independent auditors, and shall endeavor to implement efficient audits. Also, the Internal Audit Department of the Company shall audit the Company and its Group Companies with regard to Internal Control and compliance and development of the risk management systems of such companies, shall propose to those companies specific resolution measures for new issues and shall confirm improvement in their status afterward on a regular basis.

6. Matters concerning the said employees in the event where an Audit & Supervisory Board member requested to have employees assist the Audit & Supervisory Board member’s duties, matters concerning independence of the employees from the Directors of the Company, and matters concerning securing workability of instructions to the said employees from the Audit & Supervisory Board member of the Company

1. The Company shall appoint Audit & Supervisory Board staff to assist the Company’s Audit & Supervisory Board member work. The Company’s Audit & Supervisory Board members shall, on an as needed basis, give operational instructions to the Audit & Supervisory Board staff and Internal Audit Department.
2. In order to ensure the independence of the Audit & Supervisory Board staff and Internal Audit Department, the opinion of the Company’s Audit & Supervisory Board members regarding personnel performance evaluation, personnel transfers, etc. of the Audit & Supervisory Board staff and employees assigned to the Internal Audit Department shall be listened to.
3. Directors, Audit & Supervisory Board members and Executive Officers of the Company and its Group Companies shall not undermine the independence of Audit & Supervisory Board staff and employees of the Internal Audit Department who were specifically instructed to act on behalf of Audit & Supervisory Board members by placing undue restriction to such employees’ execution of such instructions.

7. System for Directors and employees of the Company and its Group Companies to report to Audit & Supervisory Board members of the Company and systems related to other reports to Audit & Supervisory Board members

1. Directors, Audit & Supervisory Board members and Executive Officers of the Company and its Group Companies shall, on an as needed basis, report to Audit & Supervisory Board members of the Company not only those matters which are required by statute, but also other matters that may have a significant impact on the Company and its Group Companies, and the status of conduction of internal audits, etc. Further, employees shall promptly report, if requested by Audit & Supervisory Board members of the Company, with respect to matters concerning execution of their duties.
2. Persons in charge of the whistleblowing systems of the Company and its Group Companies, such as the Corporate Ethics Hotline, shall report the content of reports received to the Audit & Supervisory Board members.
3. The Company shall prohibit mistreating whistleblowers who have duly reported to the Audit & Supervisory Board members pursuant to the whistleblowing system or any of its equivalents.

8. Other systems to ensure the effective conduct of audits by Audit & Supervisory Board members

1. Corporate Auditors of the Company shall attend the Board of Directors’ meetings, the Strategy Committee, and the Management Committee, and when they find it necessary, they shall state their opinions.
2. At least one (1) of the Outside Audit & Supervisory Board members shall be a lawyer or certified public accountant.
3. Expenses necessary for Audit & Supervisory Board members of the Company to execute their duties shall be borne by the Company.

9. Basic concept and ongoing development of system for excluding antisocial forces

The Company and its Group Companies shall, based on the policy of “Rejection of All Ties to Anti-Social Forces” posted in the Corporate Work Ethics, eliminate any relation with antisocial forces and shall ensure the below as a system to reject any undue demands in a decisive manner.

1. Executive Officer in charge of general affairs of the Company or its Group Companies shall be the chief director of rejection of undue demands, and the chief of the general affairs department of each company shall execute such rejection.
2. The Company and its Group Companies shall gather information concerning antisocial forces on a regular basis through information exchange with outside experts and neighboring companies, such as police and corporate lawyers, and also shall ensure strengthening and promotion of relations with those experts.
3. The Company and its Group Companies shall implement appropriate ethics training sessions and the like as a means to educate about the exclusion of antisocial forces. The Company shall implement awareness raising activities, such as Corporate Ethics Awareness Month, on a regular basis to raise awareness of antisocial forces among Directors, Executive Officers and employees.