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Basic Policies on Organizing Internal Control Structure

I. Structure to ensure that execution of the duties of the directors and employees conforms to the laws and statutes

  1. 1.The directors (including those who are the audit and supervisory committee members) of our company and our company's subsidiaries (hereafter collectively referred to as "our company group"), operating officers who are delegated authority to operate our company's business, and employees (hereafter collectively referred to as "officers and employees") shall, in addition to conformance to the laws and statutes, owe responsibility to behave based on the social code of ethics. Based on this consensus, our company shall define the group philosophies and the corporate code of ethics as the fundamental rules to put them into practice, and provide regular education to ensure thorough practice. Also, we shall maintain a proper organization to secure trust of the financial report of our company group. Against criminal or antisocial organizations, our company group shall address them with a resolute attitude in accordance with the corporate code of ethics that denies any relationship with them.
  2. 2.The audit and supervisory committee members of our company where the audit and supervisory committee is located shall attend the board of directors and other important conferences and audit the business operation status by the officers and employees of our company group against the laws and statutes by regularly conducting on-site audits on the business operation status of each department of our company group based on the audit policies defined by the audit and supervisory committee, and then shall regularly report the results at our company's board of directors meeting.
  3. 3.Our company shall hold the board of directors meeting once a month or more often according to the "Board of Directors Rules." Directors including the audit and supervisory committee members shall grasp and supervise duty execution status of directors and business operation status by the operating officers by attending the board of directors meeting and other conferences.
  4. 4.The most important matters including our company group's management policies shall be determined by our company's board of directors based on concrete standards defined in the "Board of Directors Rules" and other related rules.
  5. 5.The directors and operating officers operating out company's business shall owe responsibility on their duties and operate business in accordance with the "Decision Maker's Rules" and other related internal rules. The employees shall also owe responsibility on their duties and operate business in accordance with the "Decision Maker's Rules" and other related internal rules, and their superior directors and operating officers shall supervise their activities.
  6. 6.The audit and supervisory committee shall handle and address reports from the officers and employees of our company and domestic subsidiaries via the "Corporate Ethics Hotline" (internal report system), that is independent of the regular reporting path, to enhance the corporate ethics practice structure of our company group.
  7. 7.The internal audit department shall monitor the business operation status by the officers and employees of our company group in accordance with the "Internal Audit Rules," and regularly report conformance to the laws and internal rules and other audit results to our company's CEO and the audit and supervisory committee as well as direct the officers and employees as necessary. If the audit and supervisory committee finds any problem with the business operation status by an officer or employee of our company group, the committee shall state an opinion and request him or her for establishing an improvement plan.

II. Structure related to storage and management of information concerning execution of duties by directors

  1. 1.Our company's directors and operating officers shall create and properly store and manage the stockholders' general meeting minutes, board of directors minutes, settlement documents, and other necessary documents in accordance with the laws and internal rules.
  2. 2.Our company's management conference minutes and other important information and decisions related to management and duty execution shall be created by the governing department and properly stored and managed in accordance with the "Information Management Basic Rules" and other internal rules. The internal audit department shall regularly check the storage and management status of such information.

III. Other structures and rules related to loss risk management

  1. 1.To manage loss risks accompanying our company group's corporate activities, the "Risk Management Rules" shall be established as the internal rules which prioritize risks and define procedures and structures to prevent their occurrences and countermeasures against risks which have occurred. These rules shall define management methods for "management strategy risks and "business risks," and establish the "risk management committee" with the CEO as the chairperson under the direct control of our company's the board of directors to properly manage business risks and to regularly determine countermeasures against them. The risk management committee shall report important risk incidents to our company's board of directors.
  2. 2.Loss risks related to the whole our company group shall be managed by the risk management committee and our company's management head office from the whole company's point of view. Also, cross-sectional check mechanism and check-and-balance structures including those for preparing the business continuity plan (BCP), structure to conform to the export control laws and antitrust law, as well as structure to secure trust of the financial report shall be organized to prevent inappropriate business operations against the laws.
  3. 3.At our company's board of directors meeting, management conference, and other important meetings, the operating directors, operating officers, and executive officers shall regularly report important matters without omission related to our company group's business operation.
  4. 4.When an emergency occurs at a subsidiary, our company and the subsidiary shall cooperate with each other to discuss and determine the countermeasure and take the determined countermeasure quickly and properly, in accordance with the "Standards for Establishment of Company-Wide Risk Countermeasures Headquarters and for Initial Responses" defined by our company.

IV. Structure to secure efficient execution of director duties

  1. 1.Our company adopts the executive officer system to clarify functional share related to management and accelerate decision making and business operation by delegation of authority. A director who operates business also shall hold the post of operating officer. Each operating officer shall operate business under the control and supervisory of the CEO in accordance with the management policies decided by the board of directors.
  2. 2.For our company's CEO's final decisions, to secure judgment and ensure transparency in decision making, the management conference shall be held once a month as a principle for sufficient advance discussion on the matter.
  3. 3.Our company shall make efforts to improve efficiency of business of the whole our company group through report of our company group's business operation status by each operating officer as well as exchange of management information at the management conference with the CEO as the chairperson.
  4. 4.Information related to our company group's production, sales, and gain and loss shall be provided to the directors and operating officers including those who are also company's audit and supervisory committee members quickly and accurately via IT systems.

V. Structure to secure fairness of business of the corporate group consisting of our company and subsidiaries

  1. 1.To secure fairness of business of subsidiaries, systems conforming to our company's corporate governance and compliance organization shall be introduced to the subsidiaries and made penetrate into the subsidiaries.
  2. 2.Our company's executive officer shall be assigned as the managing officer of each subsidiary and each managing officer shall regularly report the business status of each subsidiary to our company's board of directors.
  3. 3.The subsidiaries shall be managed properly in accordance with the "Group Affiliate Companies Management Rules" that clarifies how our company shall be involved in decision of important matters which can influence management.
  4. 4.The director who is also our company's audit and supervisory committee member shall also hold a post of the auditor of the subsidiary as necessary, and attend the board of directors meeting and other important conferences of the subsidiary to state appropriate opinions as necessary to maintain substantial management of the subsidiary.

VI. Structure related to an employee who supports the duty of the audit and supervisory committee as determined by the committee

When the audit and supervisory committee requests for an employee to be assigned to support its duty, one of the employees of our company shall be chosen and assigned.

VII. Independency of the employee assigned in the previous article from the directors (except for the audit and supervisory committee members)

When an employee is assigned as defined in the previous article to support the audit and supervisory committee, independency of the employee from the directors (except for the audit and supervisory committee members) shall be secured.

VIII. Structure for the directors and employees to report to our company's audit and supervisory committee and other audit and supervisory committees

  1. 1.The officers and employees of our company group shall report matters and methods subject to report to our company's audit and supervisory committee in accordance with the related rules.
  2. 2.The audit and supervisory committees shall request officers and employees of our company group operating business for report.
  3. 3.The audit and supervisory committee shall request each member who is not the audit and supervisory committee member of our company to submit the confirmation document related to his or her duty execution status at the end of each fiscal year.
  4. 4.The directors who are not the audit and supervisory committee members of our company, executive officers, and employees shall send invitation to important conferences related to business operation to the audit and supervisory committee members, and the audit and supervisory committee members shall attend the conferences as necessary.
  5. 5.The department in charge of the "Corporate Ethics Hotline" (internal report system) shall regularly report matters and issues consulted or reported to this system to the audit and supervisory committee.

IX. Structure to protect officers and employees who reported to the audit and supervisory committee from retaliatory actions

  1. 1.Our company shall inhibit any retaliatory actions against officers and employees of our company group for making good faith reporting to our company's audit and supervisory committee, and shall make this policy well known to the officers and employees of our company group. Officers and employees of our company group who made good faith reporting to the "Corporate Ethics Hotline" (internal report system) shall also be protected against any retaliatory actions.
  2. 2.The audit and supervisory committee shall monitor to check if officers and employees of our company group who made good faith reporting to the committee are treated unfairly in personnel changes or assessment, and shall request our company group's director for the reason of personnel changes or assessment as necessary.

X. Matters related to processing costs or redemption accompanying execution of duties of the audit and supervisory committee member, including advance payment or redemption procedures

When the audit and supervisory committee member requests for advance payment or redemption of a cost accompanying execution of his or her duty, the request shall be processed immediately except when such a request is judged to be unnecessary for executing the duty of the audit and supervisory committee.

XI. Miscellaneous structure to secure effective execution of audit by the audit and supervisory committee

The audit and supervisory committee shall regularly exchange opinions with our company's CEO, internal audit department and accounting auditor, as well as officers and employees of our company group, and regularly request the officers and employees of our company group to submit reports related to business operation.