1System to Ensure That Directors and Employees Perform Their Duties in Compliance with Laws, Regulations, and the Articles of Incorporation

1. Corporate Governance

   1. The Board of Directors makes decisions on important matters and supervises directors’ execution of their duties that follow all applicable laws, regulations, the Articles of Incorporation, Corporate Governance Guidelines, and Board of Directors Regulations.
   2. Directors perform their work following all applicable laws, regulations, the Articles of Incorporation, resolutions by the Board of Directors, and internal regulations.
   3. Directors who are Audit and Supervisory Committee Members audit the appropriateness of execution of Directors based on the Audit and Supervisory Committee Regulations, the Audit and Supervisory Committee Auditing Standards, and the Implementation Standards for Audit and Supervisory Committee Audits of the Internal Control System.

2. Compliance

   1. Directors, Executive Officers and employees are expected to be guided by the Company’s corporate philosophy of Meiko Washin (“Always Bright and Friendly”) and the Code of Conduct for Executives and Employees.
   2. The Company has established a chief compliance officer, a compliance committee, a compliance division manager, and a compliance secretariat office, and promotes setting up similar structures at subsidiaries to improve compliance across the consolidated group.
   3. The Company has established and maintains mechanisms to increase the effectiveness of compliance, including an internal reporting system, and makes every effort to heighten awareness among all employees through various training programs and in other ways.
   4. The Company will not have any relationship, including any business transactions, with antisocial forces and will reject all demands from them.

3. Financial Reporting

   1. The Company has established an officer in charge of internal control over financial reporting, and a division head. In addition, the Company has established internal regulations for preparing financial statements that follow all applicable laws, regulations, and accounting standards, and makes every effort to strengthen this system for effective and on-time disclosure of financial information.
   2. The Company has established a secretariat office for internal control over financial reporting and works to improve the maintenance and operation of systems for ensuring the effectiveness of financial reporting.

4. Internal Audits

   The Company has established an Internal Auditing Department directly under the President. The Internal Auditing Department regularly conducts internal audits of the general business operations of organizations and subsidiaries based on the Internal Audit Regulations to ensure that these audits follow all applicable laws, the Articles of Incorporation, and internal regulations, as well as the rationality of these operations.

2System for Preserving and Managing Information Related to Directors’ Performance

Directors preserve and manage significant documents related to the performance of their duties, including minutes of the general meeting of shareholders and minutes of Board of Directors meetings, which will be available for viewing at all times in accordance with laws and regulations, document handling regulations, document retention standards and other internal regulations. In addition, a department responsible for disclosure of important Company information has been established, and the Directors will collect information to be disclosed and then disclose this information as required by laws and regulations.

3Regulations Concerning the Risk of Loss and Related Risk Management Systems

The Company has established risk categories as well as departments responsible for managing each type of risk, defines risk management methods in internal regulations, and maintains related management systems. In addition, the Company has established a risk management system and risk management methods, including setting up internal committees, as necessary.

4Systems to Ensure the Efficient Performance of Directors

1. Board of Directors

   The number of Directors must be enough to allow for substantive discussions, and the Board of Directors must supervise Directors to ensure that their duties are performed correctly, including assessing their efficiency as managers.

2. Executive Officer System

   The Company has adopted an executive officer system to strengthen the decision-making and supervisory roles of the Board of Directors and improve the efficiency of business execution. Executive Officers perform the duties that have been delegated to them by the Board of Directors.

3. Business Division Structure

   The Company has adopted a business division structure. Each business division has a division manager and manages its business responsibilities following all applicable laws, regulations, the Articles of Incorporation, and internal regulations. Divisions set their own numerical targets, and their achievement of those targets is verified by the Board of Directors.

4. Clearly Defined Scope of Authority and Responsibility

   The Company has established internal regulations that clearly define the authority and responsibility of each executive so that they can perform their duties effectively and efficiently.

5System to Ensure the Appropriateness of Operations of the Meiwa Group (Meiwa Corporation and Subsidiaries)

1. Subsidiary Management and Reporting System

   1. The Company specifies departments responsible for each subsidiary, and in principle, the Company sends Directors and Corporate Auditors to each subsidiary to ensure the effectiveness of the subsidiary’s operations.
   2. The Company has set management rules for business investments and for important management issues at subsidiaries, and decides and states, in principle, which important management matters of subsidiaries require the prior approval of or reporting to the Company in the rules.
   3. For subsidiaries that the Company owns indirectly through directly owned subsidiaries, the Company will make every effort to ensure the effectiveness of operations by, in principle, having directly owned subsidiaries provide management administration and managerial guidance to indirectly owned subsidiaries.

2. Rules and Other Systems to Manage the Risk of Loss at Subsidiaries

   Departments responsible for subsidiaries define in their internal regulations how the subsidiaries should manage risk, then work to bolster their risk management systems by promoting the development and improvement of risk management systems and approaches.

3. System to Ensure the Efficient Performance of Duties by Directors and Other Executives of Subsidiaries

   Departments responsible for subsidiaries prepare a business plan for the subsidiaries for each fiscal year and provide management administration and guidance to the subsidiaries to support achievement of the plan.

4. System to Ensure Compliance by Directors and Employees of Subsidiaries to Laws, Regulations, and the Articles of Incorporation

   1. In principle, the Company sends directors and auditors to subsidiaries to supervise and audit the performance of duties at subsidiaries to ensure that directors and employees of subsidiaries are performing their duties following all laws, regulations, and the Articles of Incorporation.
   2. The Company has set management rules for business investments and for important management issues at subsidiaries, and decides and states, in principle, which important management matters of subsidiaries require the prior approval of or reporting to the Company in the rules.
   3. For subsidiaries that the Company owns indirectly through directly owned subsidiaries, the Company will every make effort to ensure the appropriateness of operations by, in principle, causing directly owned subsidiaries to provide management administration and guidance to indirectly owned subsidiaries.

6Directors’ and Employees’ Support for the Audit and Supervisory Committee in Performing Its Duties

1. Setting Up Support Personnel

   The Company has established an Audit and Supervisory Committee Office and assigns employees, called support personnel, to aid the Audit and Supervisory Committee in its duties.

2. Selection of Support Personnel

   Selecting support personnel is done based on consultations with the Audit and Supervisory Committee or its full-time members, taking into account the knowledge and abilities necessary to perform the duties of the Audit and Supervisory Committee.

3. Supporting Directors

   Directors are not assigned to support the Audit and Supervisory Committee in its duties.

7Independence of the Audit and Supervisory Committee Support Personnel from Directors Who Are Audit and Supervisory Committee Members and Ensuring the Effectiveness of Instructions to Audit and Supervisory Committee Support Personnel

1. Command and Order to Support Personnel

   Support personnel do not receive instructions and orders regarding the duties of the Audit and Supervisory Committee from Directors who are not Audit and Supervisory Board Members, but rather follow the instructions and orders of the Audit and Supervisory Committee.

2. Personnel matters of Support Personnel

   The Audit and Supervisory Committee has the right to give consent on personnel issues, including transfers, evaluations, and disciplinary action of support personnel, and these issues are implemented after prior consultation with the Audit and Supervisory Committee.

8System for Reporting to the Audit and Supervisory Committee

1. Interviews on the Execution of Duties

   Audit and Supervisory Committee Members attend the Executive Committee and other important meetings, where they are able to interview directors and employees on the execution of their duties and to inspect related documents.

2. Reporting by Directors

   Directors report directly to the Audit and Supervisory Committee on anything required by laws and regulations as well as issues that could have a significant impact on the Company’s financial position or business operations.

3. Reporting by Employees

   Employees report any facts that could cause significant damage to the Company directly to the Audit and Supervisory Committee.

4. Reporting of Subsidiaries

   1. Directors and Corporate Auditors of subsidiaries report any facts that could cause significant damage to the subsidiary directly to the Company’s Audit and Supervisory Committee.
   2. Directors and employees of the Company report to the Audit and Supervisory Committee any issues they receive from executives or employees of subsidiaries regarding facts that could cause significant damage.

9System for Ensuring That People Are Not Treated Disadvantageously for Reporting to the Audit and Supervisory Committee

The Company prohibits disadvantageous treatment of Directors and employees of the Company or Directors, Corporate Auditors, and employees of subsidiaries who have made reports to or consulted with the Audit and Supervisory Committee in retaliation for making the report or consultation and makes this policy known throughout the Group.

10Policy for Treatment of Expenses or Debts Arising in Relation to Audit and Supervisory Committee Members’ Execution of Their Duties

To provide payment of expenses arising for performance of their duties by Audit and Supervisory Committee Members, the Company budgets a fixed amount each fiscal year based on the application submitted by the Audit and Supervisory Committee. This budget is used to pay expenses related to taking any actions and to the performance of the duties of the Audit and Supervisory Committee.

11Other Systems to Ensure the Efficiency of Audits Conducted by the Audit and Supervisory Committee

1. Maintaining the Audit Environment

   The Company fully recognizes the importance and usefulness of Audit and Supervisory Committee audits, as defined in the Audit and Supervisory Committee Audit Standards, and maintains the environment for Audit and Supervisory Committee audits.

2. Internal Auditing Division

   The Audit and Supervisory Committee gives audit instructions to the Internal Auditing Department, which is an internal audit unit under the direct control of the President, and formulates internal audit plans for the Internal Auditing Department, while maintaining close coordination and information sharing on internal audit results and other items.

3. Accounting Auditors

   The Audit and Supervisory Committee cooperates closely with the Company’s accounting auditors when exchanging information and opinions to improve the quality and efficiency of audits.

4. Corporate Division

   The Audit and Supervisory Committee can instruct corporate or other divisions to cooperate with audits, as needed.