Internal Control Systems

Basic Policies on Internal Control Systems and Implementation of Policies

Our basic policy, systems for developing internal control systems and the implementation status are as follows:

1. The Approach to Basic Policy Development

Asteria will continue to take on new challenges to provide value worldwide with three core corporate missions — “Challenge for Ideas”, “Global Perspective” and “Chain of Happiness”.

Based on these corporate missions, we are making continuous efforts to enhance corporate governance and develop effective internal control systems by ensuring transparency, fairness and efficiency in the execution of business operations. The aim is to increase corporate value. With this in mind, we adopt the following basic policies:

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 act in compliance with laws, regulations, the articles of incorporation, and social norms. In order to ensure thorough compliance, the company shall provide compliance education, etc., and the department in charge of internal control shall check the status of compliance. 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 and receives advice and recommendations from outside experts, which are used for the overall group management.

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 concerning reporting of violations of laws and regulations. It also has set up internal and external contact points for reporting such violations. The whistleblower will not be treated unfairly as a result of having made a report.

2-6.
The company shall have no relationship, including business relationships, with antisocial forces, and the entire organization shall take a resolute response to any unreasonable demands from antisocial forces.

3. Systems Related to the Retention and Management of Information Pertaining to the Execution of the Duties of Directors

Minutes of the Board of Directors’ meetings and other important meetings, documents and other records related to the execution of duties by directors are stored and managed in accordance with laws, regulations, and internal 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 a department involved in the business activties and discussed by a company-wide decision-making body as necessary. The responsible department shall take appropriate measures with other departments related to the business to improve the effectiveness of risk management.

4-2.
In case a new significant risk arises, the Board of Directors shall meet in a timely manner to promptly appoint a person responsible for responding to the risk.

4-3.
The department in charge of internal control is responsible for identifying and monitoring risks across the organization and reporting regularly to the president on matters related to risk management.

5. Systems to Ensure That the Duties of Directors Is Performed Efficiently

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 be in charge of certain areas of the company’s business operations. Executive officers execute business based on policies determined by the Board of Directors and under the direction 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. They also set goals in business plan that are shared with directors and employees and work to spread these goals. In addition, the Board of Directors supervises the execution of business by assessing the extent to which these targets are achieved.

5-4.
The Group Management Committee and the Management Committee have been established to unify decision maker’s opinions on the execution of business, and 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 internal control systems for financial reporting and improve its effectiveness .

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

7. System to Ensure the Appropriateness of Business Operations in 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.
Through the participation of directors, executive officers, and employees in the decision-making bodies of subsidiaries, the company strives to establish appropriate internal control systems at subsidiaries.

7-3.
While respecting the autonomy of subsidiaries, the company emphasizes consolidated management in view of strengthening the overall Asteria Group’s governance. Important issues related to subsidiary management are brought up for discussion at the meetings of the Asteria’s Board of Directors. Moreover, subsidiaries are required to make regular reports so that the company can gain a better understanding of their management.

7-4.
Transactions among group companies shall be appropriate in light of laws, accounting principles, tax laws and other social norms.

8. Matters Related to Employees Who Are Requested by the Audit & Supervisory Board Members to Assist Them in Their Duties and Matters Related to Ensuring That Employees Are Independent from Directors

8-1.
Employees belonging to the Internal Control Department assist the duties of the Audit & Supervisory Board members. Upon the Audit & Supervisory Board members’ request, appropriate personnel are assigned to assist them.

8-2.
Employees who receive necessary orders from the Audit & Supervisory Board members shall faithfully carry out such orders and shall not be subject to the direction of directors or others.

8-3.
Personnel changes of employees assisting the duties of the Audit & Supervisory Board members shall be determined after taking into account the opinions of he Audit & Supervisory Board members.

9. Systems for Directors and Employees of the Company and Its Group Companies to Report to the Audit & Supervisory Board Members and Other Systems for Reporting to the Audit & Supervisory Board Members

9-1.
Directors, executive officers, or employees of the company or the Group, who discovered any serious violation of laws, regulations, or the articles of incorporation, any wrongful act, or any fact that may cause significant damage to the company or the Group, are required to immediately report such fact to the Audit & Supervisory Board.

9-2.
The basic policy is that reports to the Audit & Supervisory Board should be made in good faith and without omission. Reports should also be made regularly and without delay whenever necessary.

9-3.
Directors, executive officers, employees, and those in charge of executing operations of the company and its group companies shall make reports on matters concerning the execution of operations to the Audit & Supervisory Board members upon receiving their request.

9-4.
The company shall ensure that any person who made a report to the Audit & Supervisory Board is not subject to discriminatory treatment for doing so.

9-5. The Audit & Supervisory Board members regularly exchange information with internal audit personnel and accounting auditors, and request the attendance of directors at the meetings of the Audit & Supervisory Board to receive reports on the status of business execution by directors.

10. Other Systems to Ensure That Audits by the Audit & Supervisory Board Are Conducted Effectively

10-1.
The president and the Audit & Supervisory Board members shall hold regular meetings to maintain interactive communication. Directors shall maintain 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 the Audit & Supervisory Board members request prepayment of expenses in connection with the performance of their duties, the company shall not reject such a request unless it is deemed to be unnecessary for the performance of their duties.

Basic Stance and Measures to Eliminate Antisocial Forces

The company believes that having a relationship with antisocial forces would significantly reduce its corporate value and that it is important from the perspective of fulfilling its social responsibility to sever any relationship with antisocial forces. Therefore, the company’s basic policy regarding internal control stipulates that the company shall have no relationship whatsoever with antisocial forces, including business relationships, and that the entire organization shall take a resolute response to any unreasonable demands from antisocial forces.

-The Current Measures to Eliminate Antisocial Forces

1) The department in charge of business administration shall take charge of dealing with antisocial forces, and in cooperation with the Corporate Strategy Office, the department will consult with relevant administrative agencies and legal advisors as necessary, and receive advice and guidance from them.

2) In order to prevent involvement of antisocial forces in its management activities, the company investigates its business partners to ensure that they have no relationship with antisocial forces through a private investigation organization in principle.

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