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Basic Policy on Internal Control


Basic Policy on Internal Control

SATO Group has established a basic policy to ensure sound and appropriate business operations with an internal control system as follows:

  1. System to ensure that the execution of duties by directors and employees of the company and its subsidiaries complies with laws, regulations and the Articles of Incorporation
    We shall set down the necessary compliance policies to foster awareness of legal compliance under a common set of corporate values shared across group companies. Using Teiho (OIP Report), our very own knowledge management system, we shall maintain and enhance a transparent framework that involves the participation of all employees in business management, based on our culture of information sharing and reporting. We shall also establish points of contact for group employees to whistleblow any potential compliance violations.
    The Group’s Audit Office shall conduct audits on subsidiaries to ensure compliance with laws/regulations and internal rules.

  2. System to store and manage information related to the execution of duties by the company’s directors
    Minutes of important meetings and records of important resolutions shall be stored and managed properly in accordance with document control standards and internal approval regulations. We shall also establish an in-house system enabling the accurate and timely disclosure of company information.

  3. System and supporting processes to manage the risk of loss at the company and its subsidiaries
    The Group’s Risk Management Committee shall meet regularly to ensure proactive risk management across subsidiaries. The committee shall identify risks, determine preventive measures to hedge risks, and discuss and decide on the necessary responses should such risks occur or become likely to occur.

  4. System to ensure the efficient execution of duties by directors of the company and its subsidiaries
    We shall drive the understanding of and compliance with the Group’s medium-term management plan that is formulated under a long-term basic strategy. The plan shall be translated into tangible strategies with their progress monitored regularly.
    Such information on plan implementation status shall be shared at meetings attended by directors and management executives of the company and its key group companies to facilitate the execution of their duties.

  5. System for directors, employees who execute business operations, and persons who perform roles as stipulated in Article 598, Paragraph 1 of the Companies Act (or equivalent) at SATO Group’s subsidiaries to report matters concerning the execution of their duties to SATO Holdings Corporation, the holding company
    Group companies must report financial conditions/results and other important matters of business management regularly to the holding company, which shall make important decisions as necessary in accordance with subsidiary management rules and other internal regulations.

  6. Matters concerning staffing requests from the company’s auditors
    Should the corporate auditors request, we shall discuss about and decide on assigning employees to assist them in their auditing duties.

  7. Matters on ensuring the independence of the company’s auditing support staff and the effectiveness of instructions given to these staff
    Transfers, performance evaluations, or other personnel-related actions for employees assisting corporate auditors shall be decided respecting the opinion of the Group’s Audit & Supervisory Board to ensure their independence from company directors and executive officers. These employees shall follow the instructions and directions of corporate auditors when assisting with auditing duties.

  8. System for reporting to corporate auditors
    (1) System for reporting to corporate auditors—applicable to directors and employees of the holding company
    The Group’s Audit Office has the power to audit all subsidiaries, and shall report auditing results to corporate auditors as necessary based on internal audit rules. Directors shall report promptly on matters pertaining to the execution of business operations when requested by corporate auditors.

    (2) System for reporting to corporate auditors—applicable to members of SATO Group’s subsidiaries, including directors, auditors, employees who execute business operations, persons who perform roles as stipulated in Article 598, Paragraph 1 of the Companies Act, any who are of equivalent responsibility, and any who receives reports from them.
    Corporate auditors shall have the right to request directors or employees of the company or its group’s companies to report to and provide explanation at the Audit & Supervisory Board when necessary.

  9. System to ensure fair treatment of members who report issues (as described in the preceding item) to corporate auditors
    In accordance with internal whistleblowing rules, we prohibit anyone from giving disadvantageous treatment to whistleblowers. Corporate auditors shall handle and manage reported information in an appropriate manner.

  10. Matters concerning the processing of advance payment or reimbursement for expenses or payables resulting from the execution of duties by corporate auditors
    Audit expenses shall be budgeted annually to a certain amount, and payment claims from corporate auditors shall be processed promptly to facilitate the execution of their duties.

  11. Other frameworks to ensure effective audits by corporate auditors
    Corporate auditors shall have the right to attend important meetings to listen to reports on the execution of business operations by directors and employees, and at the same time, peruse meeting minutes and records of important resolutions. They shall have full authority over the auditing of group companies.

  12. Basic stance concerning the exclusion of anti-social forces and the development of corresponding frameworks
    The Group shall act in accordance with laws and not yield to anti-social forces, taking a resolute stance in refusing any relationships with them by establishing necessary internal regulations as part of our corporate social responsibility. We shall set up a department that handles such matters, and collect information from related government agencies and external specialists. We shall work closely with these parties as we conduct thorough in-house education to ensure that issues concerning anti-social forces are dealt with as quickly as possible.