Internal Control Systems

Basic Policy on Internal Control and Its Implementation Status

Our basic policy on internal controls, the framework for establishing them, and their current implementation are outlined below.

1. Approach to Basic Policy Development

Asteria continues to pursue its goal of becoming a company that delivers value worldwide, based on its three corporate missions: “Challenge for Ideas,” “Global Perspective,” and “Chain of Happiness”.

Based on these corporate missions, the Company aims to enhance corporate value by ensuring transparency, fairness and efficiency in its operations, and by strengthening corporate governance through effective internal control systems. With this in mind, the following basic policies have been established.

2. Systems to Ensure That the Execution of Duties by Directors and Employees Complies with Laws and Regulations and the Articles of Incorporation

2-1. The Company shall establish regulations concerning the compliance system, which serves as a code of conduct for directors and employees to adhere to with laws, regulations, the articles of incorporation, and social norms. To ensure thorough implementation, the Company shall conduct compliance education and the internal control department shall audits compliance status. The results of these activities will be regularly reported to the Board of Directors and the Audit & Supervisory Board.

2-2. The company is strengthening the management oversight function of the Board of Directors by inviting outside directors and ensuring transparency and fairness in management.

2-3. The Company has established the Advisory Board as an advisory body to the Board of Directors. It receives advice and recommendations from outside experts, which are used to support the overall management of the Group.

2-4. Asteria established the Nomination & Compensation Advisory Committee as an advisory body to the Board of Directors. The committee comprises four members, including three Outside Directors and Audit & Supervisory Board members, and is chaired by an Outside Director to ensure its independence.

2-5. The Company has established regulations for reporting violations of laws and regulations, and has set up internal and external reporting channels. Whistleblowers will not be subject to adverse treatment for making a report.

2-6. The Company shall have no relationship, including business relationships, with antisocial forces, and shall respond resolutely as an organization to any unreasonable demands from such groups.

3. Systems for the Retention and Management of Information Concerning the Execution of the Directors’ Duties

Minutes of the Board of Directors and other important meetings, documents as well as records related to the execution of duties by directors are stored and managed in accordance with laws, regulations, and internal company rules.

4. Rules and Other Systems Related to Management of the Risk of Loss

4-1. Various risks associated with business activities shall be addressed by the respective departments in charge, and discussed by a company-wide decision-making body as necessary. The responsible department shall take appropriate measures with other related departments to improve the effectiveness of risk management.

4-2. In case a new significant risk arises, the Board of Directors shall promptly convene and appoint a person responsible for responding.

4-3. The Internal Control Department is responsible for identifying and monitoring cross-organizational risks and regularly reporting risk management-related matters to the President.

5. Systems to Ensure Effecient Execution of Directors’ Duties

5-1. The company has established regulations governing the operation of the Board of Directors meetings, which are held every month in principle and held flexibly as needed.

5-2. Executive officers are appointed by resolution of the Board of Directors to manage certain areas of business operations. They conduct business based on policies determined by the Board of Directors and under the instructions of the president.

5-3. The Board of Directors clarifies the responsibilities of each director in accordance with the Organization Regulations, the Regulations on Division of Duties, and the Regulations on Administrative Authority, etc. The Board sets shared goals for directors and employees in the business plan, and works to ensure these goals are communicated throughout the Company. The Board of Directors also supervises business execution by evaluating the extent to which these targets are achieved.

5-4. The Group Management Committee and the Management Committee have been established to ensure alignment in decision-making regarding the execution of business. Each of these committees meets once a month in principle.

5-5. Through the appropriate use of IT, the company strives to achieve both management efficiency and risk management.

6. Systems to Ensure the Reliability of Financial Reporting

6-1. In order to ensure proper accounting procedures and improve the reliability of financial reporting, the Company has established accounting regulations and other rules, and is working to develop and improve its internal control systems for financial reporting.

6-2. The Company strives to maintain appropriate internal control by having each department conduct self-assessments of the development and operation status of business processes related to financial reporting.

7. System for Ensuring Proper Operations across the Corporate Group

7-1. The company appoints managers responsible for the business of each group company. The appointed managers shall establish legal compliance systems and risk management systems in accordance with their respective duties, and conduct business management of the group companies.

7-2. The company strives to establish appropriate internal control systems at its subsidiaries through the participation of directors, executive officers, and employees in the subsidiaries’ decision-making bodies.

7-3. The Company’s emphasizes consolidated management to strengthen governance across the Asteria Group’s while respecting the autonomy of each subsidiary. Important subsidiary matters are raised and discussed by the Asteria’s Board of Directors. Subsidiaries also provide regular reports to ensure appropriate oversight.

7-4. Transactions between group companies shall be conducted in accordance with applicable laws, accounting principles, tax regulations and other relevant social norms.

8. Matters Concering Employees Who Assist the Audit & Supervisory Board Upon Request and Ensuring Employees’ Independence from Directors

8-1. Employees of the Internal Control Department support the duties of the Audit & Supervisory Board members. Appropriate personnel are assigned to assist them upon request.

8-2. Employees who receive instructions from the Audit & Supervisory Board members that are necessary for audit-related duties shall faithfully carry out such orders and shall not be subject to the instruction of directors or other personnel.

8-3. Personnel transfers of employees assisting the duties of the Audit & Supervisory Board members shall be determined with due respect to the opinions of the Audit & Supervisory Board.

9. Systems for Directors and Employees of the Company and its Group to Report to the Audit & Supervisory Board

9-1. Directors, executive officers, and employees of the Company and its Group shall promptly report to the Audit & Supervisory Board any material violation of laws, regulations, or the articles of incorporation, misconduct, or matters that may cause significant harm to the company or its Group.

9-2. Reports to the Audit & Supervisory Board shall be made in good faith, in full, and in addition to regular reporting, be submitted promptly whenever necessary.

9-3. Directors, executive officers, employees, and personnel involved in business operations of the Company and its Group shall cooperate when the Audit & Supervisory Board request reports regarding business matters.

9-4. Persons who report to the Audit & Supervisory Board shall be protected from any retaliation.

9-5. The Audit & Supervisory Board members regularly exchange information with internal audit personnel and accounting auditors. They also request that directors attend Audit & Supervisory Board meetings and provide reports on their business execution.

10. Other Systems to Ensure the Effectiveness of Audits by the Audit & Supervisory Board

10-1. The President and the Audit & Supervisory Board Members shall hold regular meetings to facilitate mutual communication. Directors shall establish an environment that allows the Audit & Supervisory Board Members to collaborate with outside specialists, such as lawyers and certified public accountants, when deemed necessary in the execution of their duties.

10-2. In addition to the meetings of the Board of Directors, the Audit & Supervisory Board members attend important meetings such as the Management Committee and express their opinions accordingly.

10-3. If Audit & Supervisory Board members request advance payment of expenses to perform of their duties, the Company shall grant such requests unless the expenses are deemed unnecessary.

Basic Policy and Measures to Eliminate Antisocial Forces

Maintaing relationships with antisocial forces significantly reduces corporate value. Severing any relationship with such forces is therefore essential to fulfilling the Company’s social responsibilities. Accordingly, the Company’s basic internal control policy stipulates that it shall have no dealings with antisocial forces, including business transactions, and that the entire organization shall respond resolutely to any unreasonable demands from antisocial forces.

-Status of Systems to Eliminate Antisocial Forces

1) The Corporate Administration Department is responsible for responding to antisocial forces and serves as the central coordinating department. In cooperation with the Corporate Planning Office, it consults with relevant administrative authorities and legal counsel, and receives their advice and guidance as necessary.

2) To prevent the involvement of antisocial forces in its business activities, the Company conducts due dilligence on its business partners. As a general rule, it uses private investigative agencies to ensure that its business partners have no ties to antisocial forces.