Basic Policy of Internal Control System

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

The compliance status shall be controlled wherein the compliance committee shall establish compliance regulations and practices and shall supervise its status throughout the company in order to ensure the directors and employees are in full compliance. In addition, the Internal Auditing Office shall perform regular internal audits related to compliance, and shall report the results of those audits appropriately to the president and auditor. Furthermore, an internal consultation and reporting service shall be established as a means for employees to provide information directly concerning suspicious actions that contravene the laws and regulations.

2. System to preserve and control information concerning the execution of duties by directors.

Information concerning the execution of duties by directors shall be preserved and controlled appropriately in documents in accordance with the regulations related to the handling of corporate documents.

3. Regulations and other systems to manage the risk of loss.

In order to set up a risk management system, measures concerning risk management shall be drawn up and promoted wherein the risk management committee shall establish risk management regulations and supervise its status throughout the company. In addition, as a contingency plan, a countermeasures task force shall be established to respond swiftly and appropriately to prevent further loss.

4. System to ensure that the execution of duties by directors is performed effectively.

The board of directors shall regularly meet once a month to supervise the status of operations and to give decisions on priority issues. Special board meetings shall also convene to give decisions on pressing matters, when necessary. In addition, the board of directors shall establish a mid-term business plan and fiscal budget in order to specify the duties and responsibilities of each director and optimize the execution of their duties.

5. System to ensure the appropriateness of duties performed in the company, its parent company, subsidiaries and any corporate group or organization that is made from the company, parent company or its subsidiaries.

Regulations shall be established to manage the affiliate companies so as to carry out prior consultation with related parties to discuss all important matters and to provide regular reports on business operations, while also maintaining the autonomy and independence of the subsidiaries. In addition, the company directors or employees shall be dispatched as directors of the subsidiary to monitor, supervise and audit the operations of the subsidiary in order to ensure the appropriateness of the work duties. Furthermore, the company auditor and Internal Auditing Office shall also work in conjunction with the dispatched employees/directors and the subsidiary in order to audit the execution of duties for the subsidiary.

6. Items related to employees who are requested by the auditor to be assigned to help with work duties.

An Executive Office for the Board of Corporate Auditors shall be established and additional staff (more than one) shall be assigned a concurrent post with the Internal Auditing Office in order to provide assistance to the auditor.

7. Items related to the autonomy from directors for employees in clause 6.

Employees assigned to the Executive Office for the Board of Corporate Auditors are subject to the instructions or orders given directly from the auditor and shall directly report to the auditor. In addition, prior consent shall be obtained from the Board of Corporate Auditors for any personnel changes concerning employees assigned to the Executive Office for the Board of Corporate Auditors.

8. System for directors and employees to report to the company auditor and other auditors.

The directors and employees shall report the following items to the auditor.

• Immediately report cases that are discovered that may cause significant loss to the company.
• Report when directors and employees engage in actions that violate the law or the articles of incorporation, or when it is suspected that they may engage in such actions.
• Report items that the auditor requests, or other items that are determined to be useful to the audit.

9. System to ensure that the audit of other auditors is performed effectively

Regular meetings shall be convened between the Board of Auditors and the managing director or president. In addition, when requested by the auditor, meetings for notification purposes shall be convened between the auditor/the certified public accountant and the Internal Auditing Office.