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Basic Policy on Internal Control System

Cybernet Systems continues to make the utmost effort to contribute to the realization of a more creative and affluent society by passionately supporting “Monozukuri” (manufacturing) of its customers through innovative digital engineering services, in line with its corporate massage, “Energy for your Innovation.”
In a bid to develop and enhance the internal control systems necessary to execute corporate activities appropriately and efficiently for realization of this Management Policy, Cybernet Systems will enact a basic policy on the establishment of systems to ensure the appropriateness of operations of the corporate group comprising Cybernet Systems and its subsidiaries (hereinafter “the Cybernet Group”) and to ensure that execution of duties conforms to laws and regulations and the Articles of Incorporation.

1. Systems to ensure that the execution of duties by Directors conforms to laws and regulations and the Articles of Incorporation

  1. The Company will enact the “Cybernet Group Compliance Policy Guidelines” as a corporate code of conduct, and will develop compliance regulations and seek their establishment.
  2. The Company will establish a Group Compliance Committee and a Rewards and Punishment Committee, and will promptly grasp relevant information and endeavor to deal with the situation if a violation of laws and regulations or the Articles of Incorporation occurs.
  3. The Company will establish a whistleblowing system in accordance with the “Regulations in Regards to the Protection of Whistle Blower,” and will prevent violations of laws and regulations and the Articles of Incorporation.
  4. To ensure the legality of execution of duties by Directors, and to avoid inappropriate risks of a contractual or other nature, the Company will establish a legal review system, and the legal department will cooperate with legal advisors and other outside experts and take action where necessary.
  5. The Company will seek to prevent and eliminate sexual harassment by establishing a dedicated consultation contact point within the Company in accordance with the “Sexual Harassment Prevention Rules.”
  6. The Company will enact the “Information Security Basic Policy” and related regulations, and will endeavor to strengthen information security and protect personal information.
  7. The Company will have the Internal Auditing Department that is independent from executive departments, and will report compliance violations discovered through audit operations to Directors and Audit & Supervisory Board Members.
  8. To ensure appropriate accounting procedures and to improve the credibility of financial reporting, the Company will enact regulations concerning accounting operations and will establish an Internal Control Committee and seek to develop the internal control environment and improve efficiency in relation to financial reporting.

2. System concerning storage and management of information related to execution of duties by Directors

  1. The Company will prepare, store, transfer and destroy important documents relating to management in general, documents relating to approvals and important meetings, financial and accounting documents, and important documents including information relating to the execution of duties by Directors in appropriate manner in accordance with the “Document Management Regulations” and “Information Security Regulations.”
  2. The Company will prescribe storage periods, persons responsible for different types of documents and management methods for the storage and destruction of documents, etc. (including electromagnetic records; the same shall apply hereafter) in the regulations stated in the previous item, and will apply these provisions.
  3. Directors and Audit & Supervisory Board Members may view the documents stored under the previous item at any time.
  4. The Company will enact “Personal Information Protection Regulations” and “Confidential Information Management Regulations,” and will store and manage personal information and important trade secrets appropriately and safely.

3. Regulations and other systems concerning management of the risk of loss

  1. The Company will prescribe systems for managing risks and mechanisms for maintaining risk management in the “Risk Management Basic Policy” and the “Risk Management Regulations,” and will grasp and assess various risks, on a regular basis and when necessary, and appropriately reflect these in the business plan for each fiscal year.
  2. The Company will have a Risk Management Committee as the organization in charge of risk management, which will plan, promote and advance risk management and deliberate any issues, etc.
  3. The Company will have a person responsible for handling risk for each area of jurisdiction prescribed in the regulations, etc., in Item 1 of this section, and will manage risk relating to the Company’s corporate activities in a comprehensive and integrated fashion.
  4. If an unforeseen situation occurs, the Company will establish a task force headed by Representative Director and take action swiftly to minimize damage and risk, in accordance with “Corporate Crisis Management Regulations.”

4. System to ensure efficient execution of duties by the Directors

  1. The Company will introduce an executive officer system, seek to strengthen the decision-making and supervisory functions of the Board of Directors, and clarify responsibility for the execution of such duties.
  2. The Company will conduct necessary deliberations of important matters relating to management policies and management strategies in advance at Executive General Manager meetings and management meetings.
  3. The Company will prescribe procedures for execution of duties in accordance with resolutions of the Board of Directors simply and clearly in the “Regulations for Segregations of Duties” and the “Regulations for Administrative Authority,” and will enable efficient and swift execution of duties.
  4. The Company will formulate medium-and long-term management strategies and will set and manage division-specific and subsidiary-specific goals each business year to actualize plans.
  5. The Company will conduct audits by the Internal Auditing Department to grasp the status of business operations and to seek improvement for greater efficiency.

5. Systems to ensure that the execution of duties by employees is in conformity with laws and regulations and the Articles of Incorporation

  1. The Company will enact the “Cybernet Group Compliance Policy Guidelines” as a corporate code of conduct, and will develop compliance regulations and seek their establishment.
  2. The Company will establish a Group Compliance Committee and a Rewards and Punishment Committee, and will promptly grasp relevant information and endeavor to deal with the situation if a violation of laws and regulations or the Articles of Incorporation occurs.
  3. The Company will establish a whistleblowing system in accordance with the “Regulations in Regards to the Protection of Whistle Blower,” and will prevent violations of laws and regulations and the Articles of Incorporation.
  4. To ensure the legality of execution of duties by Directors, and to avoid inappropriate risks of a contractual or other nature, the Company will establish a legal review system, and the legal department will cooperate with legal advisors and other outside experts and take action where necessary.
  5. The Company will seek to prevent and eliminate sexual harassment by establishing a dedicated consultation contact point within the Company in accordance with the “Sexual Harassment Prevention Rules.”
  6. The Company will establish a contact point for advice on various concerns faced by employees, including concerns related to working conditions and employment, and will ensure the appropriate execution of duties by employees.
  7. The Company will enact the “Information Security Basic Policy” and related regulations, and will endeavor to strengthen information security and protect personal information.
  8. The Company will have the Internal Auditing Department that is independent from executive departments, and will report compliance violations discovered through audit operations to Directors and Audit & Supervisory Board Members.
  9. To ensure appropriate accounting procedures and to improve the credibility of financial reporting, the Company will enact regulations concerning accounting operations and will establish an Internal Control Committee and seek to develop the internal control environment and improve efficiency in relation to financial reporting.

6. System to ensure the appropriateness of operations in the corporate group comprised of the Company and its subsidiaries

  1. Systems for reporting to the Company on matters relating to the execution of duties by Directors of subsidiaries
    1. The Company will ensure the appropriateness of management of subsidiaries by enacting the “Regulations for Management of Affiliated Companies” and establishing a system of approvals by the Company and reporting to the Company.
    2. The Company will prescribe a department in charge of subsidiaries for managing and liaising with affiliated companies in these regulations, and will receive important reports and reports on the business status of subsidiaries, and issue instructions and guidance where necessary.
  2. Regulations and other systems with regard to managing the risk of loss for subsidiaries
    1. The Company will prescribe systems for managing risk and mechanisms for maintaining risk management of the Cybernet Group in the “Risk Management Basic Policy” and the “Risk Management Regulations,” and will grasp and assess various risks, on a regular basis and when necessary, and appropriately reflect these in the business plan for each fiscal year.
    2. The Company will have a Risk Management Committee as the organization in charge of risk management of the Cybernet Group, which will plan, promote and advance risk management and deliberate any issues, etc.
    3. The Company will have a person responsible for handling risk for each area of jurisdiction, including subsidiaries, prescribed in these regulations, and will manage risk relating to the Cybernet Group’s corporate activities in a comprehensive and integrated fashion.
  3. Systems to ensure that the execution of duties by the Directors of subsidiaries is conducted efficiently
    1. The Company will regularly receive reports on the status of efficient execution of business in accordance with the authority and responsibility for execution of duties prescribed by subsidiaries in their internal regulations.
    2. The Company will formulate medium-and long-term management strategies and will set and manage division-specific and subsidiary-specific goals each business year to actualize plans.
    3. The Company will conduct audits of subsidiaries by the Internal Auditing Department and share information on the business execution status with subsidiaries and seek improvement through cooperation.
  4. Systems to ensure that the execution of duties by the Directors and employees of subsidiaries is in accordance with laws and regulations and the Articles of Incorporation
    1. The Company will enact the “Cybernet Group Compliance Policy Guidelines” applicable to the entire Cybernet Group, and will make these principles known to all Group employees.
    2. The Company will establish the Group Compliance Committee to deliberate important matters relating to the compliance of the entire Cybernet Group and to ensure the appropriateness of business at subsidiaries.
    3. The Company will establish a system for the Directors and employees of subsidiaries to report via the whistleblowing system or to the Group Compliance Committee if they discover important matters relating to compliance such as a violation of laws and regulations, the Articles of Incorporation or other ethical violation within the Group, or corporate management or guidance is found to be in violation of laws and regulations or the Articles of Incorporation or otherwise ethically questionable.
    4. The Board of Directors will receive reports through the department in charge of subsidiaries management on the status and outcome of procedures conducted in accordance with the Rewards and Punishments Regulations or other regulations of subsidiaries in the case of a violation stated in Item 3 above at subsidiaries.
    5. The Company ensure audits of subsidiaries in accordance with the Internal Audit Regulations through the Internal Auditing Department and prevent violations of laws and regulations and the Articles of Incorporation at subsidiaries, and will also take action to address any problems that are discovered.

7. Matters regarding the employees who support the tasks of the Audit & Supervisory Board Members if such employees are requested by the Audit & Supervisory Board Members

  1. The Company will appoint Assistant Audit & Supervisory Board Members from among the Company’s employees as employees who support the tasks of Audit & Supervisory Board Members if such employees are requested by Audit & Supervisory Board Members.
  2. The Company will, upon consultation with Audit & Supervisory Board Members over the number of persons needed as Assistant Audit & Supervisory Board Members and the required skills, appoint persons deemed suitable.

8. Matters regarding the independence of Assistant Audit & Supervisory Board Members from the Directors

  1. Assistant Audit & Supervisory Board Members will be full-time auditors who are not concurrently holding positions relating to business execution, and will not receive directions or orders from persons other than Audit & Supervisory Board Members.
  2. Decisions regarding matters such as the personnel transfer, personnel evaluation and discipline of Assistant Audit & Supervisory Board Members will require the consent of Audit & Supervisory Board Members.

9. Matters to ensure the effectiveness of the instructions given to the Assistant Audit & Supervisory Board Members by Audit & Supervisory Board Members

  1. Directors and employees will ensure the effectiveness of instructions given to Assistant Audit & Supervisory Board Members by Audit & Supervisory Board Members and will cooperate to enable audit operations to be conducted smoothly.

10. Systems for reporting to the Audit & Supervisory Board Members by Directors and employees

  1. The Directors will report to Audit & Supervisory Board Members immediately if they discover an important violation of laws and regulations or other important fact relating to compliance within the Group or an important fact that will impact on business results.
  2. The Company will ensure a system for the reporting of violations of laws and regulations and the Articles of Incorporation other ethical issues to Audit & Supervisory Board Members by the Company’s Directors and employees by establishing a whistleblowing system and various consultation contact points and operating these effectively.
  3. Audit & Supervisory Board Members may ask Directors and employees for reports on the execution status of business at any time where necessary.
  4. Audit & Supervisory Board Members may express opinions at meetings of the Board of Directors and demand the formulation of improvement measures if they recognize problems with the Company’s system of legal compliance.
  5. The Internal Auditing Department will regularly hold meetings for reporting to Audit & Supervisory Board Members, and will report on audit plans, results and the current status, including risk management status, at the Company.

11. Systems for reporting to the Company’s Audit & Supervisory Board Members by the Directors, Audit & Supervisory Board Members and employees of its subsidiaries and persons that have received reports from such persons (hereinafter “reporters”)

  1. The Company will ensure a system for the reporting of violations of laws and regulations and the Articles of Incorporation and other ethical issues to the Company’s Audit & Supervisory Board Members by reporters by establishing a whistleblowing system and Group Company consultation contact points and operating these effectively.
  2. Reporters will report to the Company’s Audit & Supervisory Board Members or the Group Compliance Committee immediately if they discover an important violation of laws and regulations or other important fact relating to compliance within the Group.

12. Systems to ensure that the persons who undertake the reporting will not suffer from any disadvantageous treatment due to their submission of the reports

  1. The Company will establish the following provisions to ensure that the persons who undertake the reporting will not suffer from any disadvantageous treatment.
    1. Employees will not suffer from any legal or actual disadvantageous treatment, including dismissal, discipline or reassignment, due to their submission of reports.
    2. Whistleblowers will be treated with strict confidence.
  2. The matters stated in the previous items will be included in the “Cybernet Group Compliance Policy Guidelines” and will be made known to the Group.

13. Matters related to the policy on advance payments or reimbursement processes for expenses incurred as a result of the execution of duties of the Audit & Supervisory Board Members and other processes for expenses or debts incurred as a result of the execution of such duties

  1. The Company will promptly comply with requests for the advance payment or reimbursement of expenses incurred as a result of the execution of duties of the Audit & Supervisory Board Members, except for expenses that are clearly recognized as unrelated to the execution of duties of the Audit & Supervisory Board Members.

14. Other systems to ensure that audits are carried out effectively by the Audit & Supervisory Board Members

  1. The Company will ensure that Audit & Supervisory Board Members have the opportunity to attend meetings of the Board of Directors and other important meetings so that they can grasp the status of execution of duties by Directors and important internal issues and express opinions where necessary.
  2. Audit & Supervisory Board Members will maintain close cooperation with the internal audit department and receive reports as appropriate on the implementation status of internal audits.
  3. Audit & Supervisory Board Members may receive advice on audit operations from attorneys-at-law, certified public accountants and other external experts if deemed necessary for audits.

Supplementary Provisions

  1. Established on April 25, 2006.
  2. Revised and in effecton March 30, 2010.
  3. Revised and in effecton June 17, 2011.
  4. Revised and in effecton April 1, 2012.
  5. Revised and in effecton January 1, 2014.
  6. Revised and in effecton August 29, 2014.
  7. Revised and in effecton January 1, 2015.
  8. Revised and in effecton May 1, 2015.