BASIC POLICY REGARDING INTERNAL CONTROL

2.System for the preservation and management of information related to the execution of director’s duties

1. The Company establishes a ‘Document Management Regulations’ and appropriately preserves and manages important documents (including electronic records), including minutes of important meetings, related to the execution of director’s duties in accordance with the provisions of said regulations.
2. Stored documents shall be maintained in a state where they can be promptly accessed if a request for viewing is made by directors and auditors.
3. The Company establishes various regulations regarding information security and manages and protects information assets.

3.Provisions and other systems for managing the risk of loss

1. Directors recognize the importance of understanding various risks associated with the Company’s business and, with this recognition, strive to grasp, evaluate and manage various risks comprehensively.
2. Based on internal regulations such as the ‘Risk Management Regulations,’ the Company clarifies the roles of each department and implements risk management under the supervision of the officer in charge of management planning.
3. Each internal department understands and manages various risks associated with its responsibilities and reports the risk management status to the President and the officer in charge of management planning regularly or as necessary.
4. In preparation for unforeseen events such as disasters and accidents, the Company establishes a ‘Contingency Plan.’

4.System to ensure the efficient execution of duties by directors and employees

1. The Board of Directors operates based on the ‘Articles of Incorporation’ and the ‘Board of Directors Regulations,’ holding regular monthly meetings and additional meetings as necessary.
2. Directors and employees conduct close exchanges of opinions and share information to execute their duties efficiently, effectively, and promptly.
3. To ensure the efficient execution of duties by directors and employees, the Company establishes ‘Organizational Regulations,’ ‘Division of Duties Regulations,’ ‘Authority Regulations,’ and ‘Approval Regulations.’

5.System for ensuring the proper conduct of business in a corporate group consisting of XYZ corporation and its parent and subsidiary companies

The President attends the monthly regular meetings of the parent company’s Board of Directors and reports on the business and operational status.

6.Matters related to employees for whom the Audit Committee has requested assistance in performing their duties, independence of such employees from directors and ensuring the effectiveness of instructions to such employees

1. The Audit Committee may request the Board of Directors to appoint employees who shall comply with the instructions of the Audit Committee (hereinafter referred to as “Assistants to the Audit Committee”).
2. Personnel transfers, evaluations and disciplinary actions regarding Assistants to the Audit Committee require the prior approval of the Audit Committee.
3. The Audit Committee may request the Board of Directors to ensure the independence of Assistants to the Audit Committee from directors.
4. The Audit Committee may request the Board of Directors to ensure the effectiveness of instructions to Assistants to the Audit Committee.

7.Reporting system to the Audit Committee

1. Directors and employees (including Assistants to the Audit Committee) promptly report to the Audit Committee not only on statutory matters but also on matters that may have a significant impact on the Company and its Group, matters resolved in important meetings, compliance and risk management matters, the status of the whistleblower system and the status of internal audits.
2. Directors and employees (including Assistants to the Audit Committee) promptly report the status of their operations to the Audit Committee upon request.

8.System to ensure that individuals reporting to the Audit Committee are not treated disadvantageously

1. Directors and employees (including Assistants to the Audit Committee) shall not treat individuals unfavorably for reporting to the Audit Committee.
2. The whistleblower system shall be formalized to ensure that whistleblowers are not treated unfairly, retaliated or discriminated as well as their privacy and human rights are protected.

9.Matters regarding the advance payment or reimbursement of expenses arising from the execution of the duties of the Audit Committee, as well as policies related to the handling of expenses or debts arising from the execution of such duties

1. In accordance with the “Audit Committee Audit Standards” stipulated by our parent company, Traders Holdings Co., Ltd., the Audit Committee may decide on the audit policy, audit methods, budget for audit expenses and other necessary matters deemed necessary to fulfill its duties by the Audit Committee.
2. The Audit Committee may request reimbursement from the company for expenses incurred urgently or temporarily in the execution of its duties.

10.Other measures to ensure the effective conduct of the Audit Committee’s audits

1. The Audit Committee shall hold regular meetings with the representative directors to facilitate mutual understanding.
2. The Audit Committee may seek the assistance of lawyers, certified public accountants and other experts as needed.
3. The Audit Committee shall regularly and, as necessary, hold discussions with the Internal Audit Department of the parent company, Traders Holdings Co., Ltd., to enhance coordination.
4. The Audit Committee shall have the authority to attend meetings and submit agenda items and topics for discussion at the company’s meetings as an observer.