Internal Control System

Internal control system basic policy

1.Business operations basic policy

Duskin and its subsidiaries (referred to as the Duskin Corporate Group below) have followed a philosophy of unifying business and morals as our core business value. To actualize this management philosophy, we have formulated the following Code of Conduct Statement to serve as a compass and the Duskin Code of Conduct to define concrete standards of conduct for our business operations.

Code of Conduct Statement

Aiming to be "a trustworthy and reliable company"

• 1. We always think of customers in everything we do.
• 2. We observe the law in all that we do.
• 3. We are ethical in all our actions.
• 4. We take pride in everything we do.

2.Our framework for ensuring that the execution of duties by Board Directors and employees of the Duskin Corporate Group complies with laws and regulations and the Articles of Incorporation

• (1) We strive for thorough notification and awareness of the Code of Conduct among Board Directors and Operating Officers (referred to as Directors, etc. below) and employees. In addition to implementing yearly compliance training aimed at Directors, etc., and employees, every division and subsidiary conducts business in accordance with safety and security standards they set themselves in addition to complying with laws and regulations.
• (2) The Duskin Corporate Group takes a firm stance against antisocial forces or groups that threaten the order or safety of civil society. We resolutely refuse any improper pressure, financial demands, etc. from these forces or groups and formulate and maintain a fundamental framework of having absolutely no business transactional or any other type of relationship with them.
• (3) Based on Compliance Committee rules, we maintain a Compliance Committee as an advisory body to the Board of Directors which includes external lawyers as well. In addition to deliberating on frameworks, rules, annual plans, training plans, etc. related to compliance for the entire Duskin Corporate Group, this Committee also discusses the hotline/whistleblowing system operation.

3.Our framework concerning the preservation and managing of information related to duty execution by Duskin Corporate Group Directors

In accordance with the Board of Directors rules of each company, the Duskin Corporate Group holds Board of Directors meetings in compliance with laws and regulations and the Articles of Incorporation. Therein, the Duskin Corporate Group drafts and stores meeting minutes. Additionally, concerning information regarding the duty execution of Directors, etc., the Board drafts, handles, stores, preserves, and disposes of documents (including electromagnetic records) according to the document management rules. Concerning these documents and electromagnetic records, the Board sets information system security rules and conducts appropriate operations concerning the handling, storage, and security of information.

4.Our rules related to controlling the risk of loss to the Duskin Corporate Group, and related frameworks

• (1) Based on the Basic Risk Management Regulations established regarding risk management for the overall Duskin Corporate Group, we have a secretariat, risk management departments, and managers of these departments. The secretariat oversees all operations and affairs related to risk management and comprehensively manages risk for the entire Duskin Corporate Group. One risk management department is maintained for each business group. It promotes risk management activities that each business group implements on its own. Furthermore, the Risk Management Committee meets regularly to discuss and report on the risk management framework, annual plans, and important issues related to risk management for the entire Duskin Corporate Group.
• (2) We install risk management supervisors in our subsidiaries according to factors including size and business conditions, and promote the risk management of each company. If a risk manifests at a subsidiary, it engages in countermeasures together with the risk management department.
• (3) We work within quality control rules to provide safe, secure, and environmentally friendly products and services. We deliberate over quality assurance-related measures and policy in regularly held Quality Assurance & Environment Committee meetings. And, based on that policy, we conduct necessary checks for the entire process from planning and development to market introduction for the products and services we provide, and strive to ensure safety.
• (4) We maintain a business continuity plan (BCP) to ensure business continuity for the Duskin Corporate Group in the event of unforeseen circumstances or a crisis.
• (5) We have established a hotline/whistleblowing system based on Hotline Rules with an expanded target range including everyone up to Duskin Corporate Group part-time employees and temporary employees, and operate it with the Corporate Compliance office as an internal-company reception office for whistleblowing reports and a legal office as an external reception office for whistleblowing reports.

5.Our framework for ensuring efficiency in duty execution by Duskin Corporate Group Directors

• (1) The Duskin Corporate Group holds regular Board of Directors meetings to make decisions on important matters and to supervise the execution of business by having each Director report on items including the progress of business target achievement and efforts for the resolution of issues.
• (2) We set medium-term management plans that take into account the future business environment, formulate budgets pertaining to each division and subsidiary for each fiscal year, and both formulate and enforce concrete measures aimed at achieving those targets.
• (3) In order to manage the progress of important business plans and the actual performance of budgets, we hold regular Budget Meetings to monitor the progress of management figures for each division and subsidiary and make appropriate revisions.
• (4) In addition to harnessing the delegation of authority by the Board of Directors to increase speed for decisions and action pertaining to business execution, we also employ an Operating Officer System in order to further strengthen the Board's decision-making and supervisory function.

6.Our framework for ensuring appropriateness in business for the Duskin Corporate Group

• (1) We respect the autonomy of our subsidiaries, while also providing guidance and assistance to facilitate the achievement of their business goals. Additionally, in order to increase mutual benefits, and in relation to handling and reports pertaining to important business, we establish affiliate company management rules and install an oversight department to ensure Group management solidarity. Furthermore, we provide guidance designed to achieve smooth business deployment and give direction for maintaining an array of rules in each subsidiary that are consistent with our company, such as rules for approval requests and information system security.
• (2) The Auditing department conducts regular subsidiary internal audits.
• (3) We hold liaison meetings with subsidiaries that are attended by overseeing Directors, etc., and mandate the regular issuance of reports to us regarding management figures and other important information. The oversight departments perform checks and give guidance as necessary.

7.Our framework for ensuring the reliability of financial reports

• (1) The Duskin Corporate Group takes a management stance that is thoroughly transparent and just. In order to draft reliable financial reports, we sustain a robust internal company framework that includes maintaining related rules.
• (2) Duskin Corporate Group Directors, etc. and employees construct and operate internal controls and draft financial reports based on appropriate accounting processes. The Auditing department regularly and continuously evaluates the effectiveness of such, and reports to the Representative Director, Audit and Supervisory Board Members, and the Board of Directors.

8.Matters pertaining to the ensuring of independence from Directors for employees who assist with Audit and Supervisory Board Member duties and the effectiveness of directions given to those employees

Audit and Supervisory Board Members can order employees in the Auditing department or elsewhere to assist with their duties. Additionally, we employ a framework that allows Audit and Supervisory Board Members to instruct employees to conduct their tasks in independence from Directors, etc. when required for duty execution.

9.Our framework for enabling reports to Audit and Supervisory Board Members from Duskin Corporate Group Directors, Audit and Supervisory Board Members, employees, and individuals receiving reports from such

• (1) In order to assess the decision-making process for important matters and business execution status, in addition to Board of Directors meetings, Audit and Supervisory Board Members also attend important meetings and committee sessions such as the Operating Officers' Board Meeting and Budget Meeting, view approval requests and other important documents related to business execution, and request explanations as necessary from Duskin Corporate Group Directors, etc., Audit and Supervisory Board Members, or employees (referred to collectively as officers and employees below). Officers and employees issue appropriate reports promptly.
• (2) We maintain a framework for prompt reporting to an Audit and Supervisory Board Member or the Audit and Supervisory Board when a Duskin Corporate Group officer or employee discovers conduct in violation of the law, regulations, etc., or facts indicating the possibility of significant damage to us or one of our subsidiaries.
• (3) When a Duskin Corporate Group officer or employee reports to an Audit and Supervisory Board Member, we prohibit adverse treatment towards that officer or employee on the basis of having issued that report. We also thoroughly notify Duskin Corporate group officers and employees of this.

10.Our framework to ensure that Audit and Supervisory Board Member audits are performed effectively

• (1) The Representative Director holds regular meetings with the Audit and Supervisory Board to give and hear opinions regarding important audit issues and issues that should be addressed. Additionally, the Representative Director also holds regular meetings with Accounting Auditors to give and hear opinions.
• (2) Audit and Supervisory Board Members maintain close linkage with the Auditing department and can also request assistance as necessary from Accounting, General Affairs, Legal Affairs & Corporate Compliance and other departments.
• (3) If an Audit and Supervisory Board Member issues to us any requests for advance payment of expenses, etc. concerning their duties pursuant to Article 388 of the Companies Act, the request is first deliberated in the related department. Then, unless the expenses or debts pertaining to the request are deemed unnecessary to the execution of that Audit and Supervisory Board Member's duties, the expenses or debts are processed promptly.

• Established: May 11, 2006
• Revised: April 1, 2019

Internal audits

We maintain an Auditing department as an internal audit department under the direct supervision of the President and CEO. To ensure the reliability of audit-plan-derived Duskin Corporate Group audits (business, accounting, systems) and financial reports, this department maintains internal controls and evaluates operations as well as regularly reporting to the President and CEO. It also reports important discoveries to all Board Directors, Audit and Supervisory Board Members, Operating Officers, and all heads of related departments. Additionally, with the goal of sharing information, the Auditing department (1) holds a liaison meeting with Audit and Supervisory Board Members once every month, (2) performs an audit report meeting with Accounting Auditors every quarter, (3) reports internal control operation evaluation results to the Operating Officers' Board and Board of Directors three times per year.

Internal audits are principally on-site audits. They audit the status of compliance with various rules by checking forms, vouchers, contracts, physical assets, etc. using an audit process form. After the completion of an audit, the Auditing department summarizes the summary of the audit results in the audit report and promptly issues a report to the department being audited. It requests responses (improvement measures) for matters needing improvement, holds an auditing deliberation meeting if needed, and deliberates the effectiveness of the responses. We also maintain a "self-assessment" system and strive for the continuation of appropriate business operations.