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Internal Control

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Pursuant to the Companies Act and the enforcement regulations of the Companies Act, we establish the systems we use to ensure that operations of the company are appropriate (hereinafter referred to as "internal controls") as follows:

1. System for ensuring that the company's directors and employees and the directors, etc. and employees of the company subsidiaries carry out their duties in compliance with laws and regulations and the articles of incorporation

In the event that divisions in charge of internal audits at the company and at the company subsidiaries discover suspected violations of laws and regulations and/or the articles of incorporation or misconducts, etc., the director in charge of internal audits is required to report to the President and to recommend the Board of Directors to take appropriate action following deliberations, as necessary.

Divisions in charge of internal audits are responsible for establishing rules and for clarifying related work processes with regard to the procedures, etc. necessary for internal audits at the company and at company subsidiaries.

To this point, the company has taken a consistent and resolute stance against anti-social forces and groups that threaten the order and safety of society. It has established the internal systems needed to eradicate transactional relationships with anti-social forces and groups and to refrain from any interactions whatsoever with such forces or groups.

2. System for retaining and managing information related to the execution of duties by the company's directors

The company stipulates retention periods and the divisions in charge of retaining each type of document (and magnetic media) and makes such documents available for review based on director request in accordance with the Regulations Governing the Handling of Documentation.

In principle, if there is a request by a director for review, it is clarified in the rules that the document may be reviewed.

3. Rules and other systems for managing risk of loss to the company and to company subsidiaries

The company has established rules for managing the risk of loss, assigned divisions responsible for each risk category under the rules, and established a risk management system. Group CRO is responsible for taking appropriate action to build appropriate risk management systems related to administration and for reporting the results to the company's Board of Directors.

In addition, Group CRO is required to audit the status of risk management at company subsidiaries and to report to the company's Board of Directors on such matters on a regular basis.

4. System for ensuring that the company's directors and the directors, etc. of the company subsidiaries effectively discharge their duties

Executives in charge of business execution at the company and the company subsidiaries are required to determine effective methods for achieving the policies specified under the company's medium-term business plan. The company's Board of Directors is assigned responsibility for reporting on the financial status and operating results of the company and of company subsidiaries on a regular basis. Depending on the situation, the company may promote appropriate measures to move closer to targets and review the corresponding plans at half-year intervals.

5. System for reporting to the company on items related to the execution of duties by directors, etc. at the company subsidiaries; other systems for ensuring proper administration at the corporate group consisting of the company and company subsidiaries

The division in charge of business management of the company subsidiaries is required to undertake measures to improve the effectiveness of internal controls and provide instruction to and support for the company subsidiaries, as necessary.

The company has also established the group company management regulations. Company subsidiaries are required to report profits, assets, and other important information to the company at regular intervals. For certain items at the company subsidiaries, they are required to be approved by or reported to the company's Board of Directors or at Management Conference. General meetings and Management Conference must be held to disseminate information on policies related to group management and to share information on important issues.

6. Items related to employees who shall assist the company's Audit & Supervisory Committee

The company shall operate an office of Audit & Supervisory Committee staffed by one or more dedicated employees charged with providing assistance with audit duties. Personnel transfers, personnel evaluations, and disciplinary action related to employees who assist Audit & Supervisory Committee are to be implemented following consultations with Audit & Supervisory Committee.

Employees who assist Audit & Supervisory Committee shall not work as employees of other divisions and shall act in accordance with instructions and orders issued by Audit & Supervisory Committee.

7. System for reporting to the company's Audit & Supervisory Committee

The company has established a system whereby directors and employees of the company and the company subsidiaries promptly report to Audit & Supervisory Committee on legal matters and on the following items that may materially affect the company and the company subsidiaries:

  1. Items posing the risk of serious damage to the company and/or its subsidiaries
  2. Important items related to status of implementing internal audits and risk management
  3. Other important items related to compliance

The company shall not subject directors or employees of the company or company subsidiaries to unfavorable treatment or any disadvantages due to reports such directors or employees may submit to the company's Audit & Supervisory Committee.

8. Other systems for ensuring that the company's Audit & Supervisory Committee perform effective audits

Members of Audit & Supervisory Committee shall attend meetings of the Board of Directors and other important meetings, or review meeting minutes, etc., to grasp the processes whereby important decisions are made and the status of business execution. When necessary, auditors shall enjoin directors who are not auditors and other company employees to provide explanations.

In addition, opportunities shall be established at least once a year to conduct individual interviews with directors who are not auditors, with executive officers, and with key employees. Discussions with the President and with audit firms shall occur at regular intervals.

At the same time, regular meetings of the Board of Group Auditors and Large Company Auditors’ Liaison Meetings shall be held to improve auditing levels at the company subsidiaries through information exchange and seminars, etc. related to auditing.

Should auditors ask the company to prepay expenses, etc. in connection with the execution of their duties, based on Article 399-2, Paragraph 4 of the Companies Act, the company shall consult with the division in charge and promptly process the expenses or obligations in question, unless the expenses or obligations are deemed not necessary for the execution of the auditors' duties.

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