Basic Policy on the Establishment of Internal Control Systems

1. The Sustainability Committee and the Risk Management Committee, both chaired by the representative director, president and executive officer, shall work in close coordination to oversee compliance in general.
    
2. To promote compliance, the Company shall enact a Human Rights Policy, D&I Policy, Basic Environmental Policy, Procurement Policy & Procurement Guidelines, Anti-Corruption Policy, Disclosure Policy, Basic Policy on Information Security, Personal Information Protection Policy, Product Safety Voluntary Action Guidelines, Code of Conduct, and other groupwide policies. The Company shall also provide guidance through ongoing training and other means to ensure that all officers and employees of the Company and its subsidiaries recognize compliance as an issue that concerns them in their respective positions, and conduct their business operations accordingly.
    
3. To address any compliance-related incidents, the Company shall establish a system whereby the details of the incident and measures to handle it shall be reported to top management, the Board of Directors, the Board of Executive Officers, and the Audit and Supervisory Committee through the chief compliance officer (the executive officer appointed under the sustainability promotion framework).
4. The Company shall formulate whistleblower system operating standards and establish a contact point for consultations and reports on organizational and individual violations of laws and regulations, and introduce a whistleblower system that specifically stipulates that whistleblowers will not be treated unfavorably on the grounds that they have consulted or made a report.
    
5. The Company shall not have any relations with antisocial forces and groups which threaten the order and safety of civil society. The Company shall also thoroughly educate all employees in accordance with the Basic Policy on Exclusion of Antisocial Forces and the Joshin Group Code of Conduct to resolutely respond to such forces and groups, and shall establish a system to deal with such forces and groups.

1. The Company shall store and manage information and documents related to the execution of duties by directors in accordance with the Company’s internal regulations and related manuals, etc. The Company shall also verify the status of operation and review the regulations, etc. as needed.
    
2. The Company shall establish information security management standards and personal information management standards for the management of information.

 

1. The Company shall establish a Risk Management Committee chaired by the representative director, president and executive officer as an organization for managing the risk of loss, and shall promote the development of a risk management system responsible for identifying, analyzing and evaluating various risks around the corporate group consisting of the Company and its subsidiaries, and implementing appropriate measures.
    
2. The Risk Management Committee shall have a Compliance Unit, which oversees compliance in general; an Internal Control Unit, which handles the internal control system; a Personal Information Protection Unit; an Information Security Unit; and a BCMS Promotion Unit, which develops and promotes the Business Continuity Management System (BCMS) to effectively ensure business continuity in the event of an emergency. The Company shall also establish other committees, etc. for each individual business based on necessity, and through these activities, shall manage the risks facing the corporate group.
    
3. In the event of an unforeseen incident, the Disaster (Accident) Countermeasures Committee shall be convened in accordance with the Risk Management Rules to prevent the spread of damage.
    
4. The Company shall establish an Audit Department under the direct jurisdiction of the president and executive officer, and the department shall be in charge of internal auditing of the Company and its subsidiaries. The Audit Department shall conduct internal audits on a regular basis according to the Internal Audit Regulations in coordination with the Audit and Supervisory Committee. The Audit Department shall periodically review targets, methods, and other aspects of audit implementation, and shall operate with approval from the Audit and Supervisory Committee.
    
5. The executive officer in charge of internal control shall report to the Board of Directors on the status of internal control operations in the Company and its subsidiaries on a quarterly basis.

1. The Board of Directors shall hold regular meetings at least once a month to make decisions on important matters and to supervise the execution of duties by directors and executive officers.
    
2. The authority to make decisions on business execution shall be transferred to executive officers based on the Board of Directors regulations, executive officer regulations, regulations on the division of duties, and rules for decision-making; and efforts shall be made to enhance the monitoring functions of the Board of Directors.
    
3. Directors and executive officers shall report the status of their duties to the Board of Directors on a quarterly basis.
    
4. The Company shall appoint independent outside directors to further vitalize deliberations by the Board of Directors and enhance its management supervision functions.
    
5. The term of office for directors shall be a period of one year in order to enable prompt responses to the rapidly changing business environment.
    
6. Operation plans shall be managed based on the annual and medium-term management plans formulated each year under our management philosophy, and each business line shall work to achieve its goals. The Sustainability Committee shall manage the progress.
    
7. The Company shall promote digitalization in order to improve operational efficiency.

1. The Company shall appoint subsidiary directors from among the executive officers and other senior management of the Company.
    
2. The Company shall appoint subsidiary auditors from among the directors serving full time on the Audit and Supervisory Committee of the Company. If there are no directors serving full time on the Audit and Supervisory Committee, the Company shall appoint subsidiary auditors from among those with experience in senior management of internal control departments or sales departments.
    
3. The Company and each of its subsidiaries shall appoint a person in charge of compliance promotion, and the chief compliance officer of the Company shall oversee and promote compliance among its subsidiaries.
    
4. Regarding the management of subsidiaries, the Company shall periodically request subsidiaries to report on their business activities, and shall discuss important matters with them in advance, while respecting their autonomy.
    
5. Paragraphs 5, 6, and 7 under Item (4) shall apply mutatis mutandis to the subsidiaries as a system to ensure efficient execution of duties by their directors, etc.

1. The Company shall assign employees to assist with the duties of the Audit and Supervisory Committee. Such employees shall work solely for the Audit and Supervisory Committee, and shall prioritize duties relating to the Audit and Supervisory Committee even if they concurrently work for other departments.
    
2. Specific personnel matters relating to such employees shall be determined by the Board of Directors with the consent of the Audit and Supervisory Committee. Performance evaluations of such employees shall be conducted by the Audit and Supervisory Committee.

1. If any director (excluding directors serving on the Audit and Supervisory Committee), executive officer, or other employee discovers a fact that could significantly damage the Company, he or she shall immediately report it to the Audit and Supervisory Committee in accordance with laws and regulations.
    
2. Directors (excluding directors serving on the Audit and Supervisory Committee), executive officers, and other employees shall prepare the necessary reports and provide information in response to requests from the Audit and Supervisory Committee as stipulated by the Audit and Supervisory Committee.
    
3. Directors, auditors, and employees of the Company’s subsidiaries shall promptly prepare the appropriate reports when requested by the Audit and Supervisory Committee of the Company and report on matters related to the execution of business.
    
4. The Company shall prohibit any disadvantageous treatment of its directors (excluding directors serving on the Audit and Supervisory Committee), auditors, executive officers, and other employees, as well as those of its subsidiaries who have reported to the Audit and Supervisory Committee on the grounds of making such reports, and shall inform all directors (excluding directors serving on the Audit and Supervisory Committee), auditors, executive officers, and other employees of the Company and its subsidiaries to that effect.
    
5. Paragraphs 1 through 4 above shall apply mutatis mutandis to outside directors to ensure the effective performance of their duties.

1. Directors serving on the Audit and Supervisory Committee shall attend meetings of the Board of Directors and other important meetings, inspect major documents requiring managerial approval and other important documents related to the execution of business, and request explanations from directors (except for directors serving on the Audit and Supervisory Committee), executive officers, and other employees as needed.
    
2. The Audit and Supervisory Committee shall receive reports from accounting auditors regarding details of the accounting audit, exchange information, and actively collaborate with accounting auditors to enhance the effectiveness of audits as needed.
    
3. The Audit and Supervisory Committee shall receive reports from the Audit Department on the details of internal audits of the Company and its subsidiaries, and may provide instructions and give orders to enhance the effectiveness of audits as needed. In the event that instructions and orders to the Audit Department issued by the President and Executive Officer differ from those issued by the Audit and Supervisory Committee, the instructions and orders from the Audit and Supervisory Committee shall be prioritized.
    
4. In the event that a director serving on the Audit and Supervisory Committee requests the Company to prepay or provide reimbursement for expenses in connection with the execution of his or her duties, the Company shall promptly process such expenses or debts following deliberation by the department in charge, unless the expenses or debts related to the request are proven not to be necessary for the performance of the director’s duties.
    
5. Paragraphs 1 through 4 above shall apply mutatis mutandis to outside directors to ensure the effective performance of their duties.

(Supplementary Provisions)

Date of Establishment: May 6, 2006

Date of Revision: June 24, 2025

 

Amendment or Abolition of the Basic Policy: Any change to this Basic Policy shall require a resolution at a meeting of the Board of Directors.