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| Our company is setting basic principles and schemes for the CSK HOLDINGS CORPORATION and CSK Group internal control system. |
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Basic principles for the CSK HOLDINGS and CSK Group internal control system |
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1. | A scheme to ensure that the exercise of function by all directors and employees conforms to laws and regulations as well as the articles of incorporation: |
| (1) |
A "Charter of Conduct for CSK Group Companies" and a "Code of Conduct for Directors and Employees of CSK Group Companies" should be established to drive home to each and every director and employee of CSK group companies that every business activity should be premised on compliance, and other relevant rules and regulations necessary for their adherence to laws and regulations as well as the articles of incorporation should be put in place and be pounded into the heads of these people; |
| (2) |
A risk and compliance committee shall be set up as the body controlling compliance for the entire group. The chairman of the risk and compliance committee shall have the responsibility and authority to manage the improvement of the compliance system for the entire group; |
| (3) |
In collaboration with group companies, a scheme should be emplaced to ensure prompt and proper response in the event of noncompliance; in addition, a "CSK Group Helpline" should be emplaced and operated to prevent and/or solve any noncompliance early; |
| (4) |
The compliance promotion department shall perform activities for the promotion, education, and enlightenment of compliance for the entire group. The department shall also conduct a compliance consciousness survey regularly and monitor the penetration of compliance. |
| (5) |
The CSK Group in its entirety shall resolutely handle undue claims by antisocial forces and organizations, which are menaces to the civil society, and establish a system that has no relation including any business relation with antisocial forces. |
| (6) |
To ensure that the internal control system for financial reporting is compatible with the provisions of the Corporation Law, Financial Products and Exchange Law, Rules of the Tokyo Stock Exchange, a dedicated department shall be established and operated. |
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2. | A scheme relating to storage and management of information on the exercise of function by directors: |
| (1) |
In accordance with the document control procedures, information on the exercise of function by directors should be recorded and stored on written documents and/or electromagnetic media; |
| (2) |
The department in charge of such storage and management should be designated on a document basis, and the storage period should be set forth in a Schedule of Document Storage Periods; and, |
| (3) |
In accordance with the document control procedures, directors and corporate auditors should have access to these records at any time. |
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3. | Rules relating to the risk of loss and other schemes: |
| (1) |
For the purpose of promoting the comprehensive risk management for the entire group, a risk and compliance committee shall be set up to control group-consolidated risk management activities performed by CSK HOLDINGS and each of the group companies. If any event that may impair the corporate value occurs, the committee shall collect information related to such event and report to the Board of Directors, which is the supreme decision making organization; |
| (2) |
Based on the Group information security policy, procedures for confidential information management and procedures for personal information protection should be established to further tighten control of confidential information and to properly protect personal information, and efforts should be made to increase the awareness of the importance of information security for these procedures to penetrate group companies by providing training and education programs and by distributing a handbook; and, |
| (3) |
The Insider Trading Prevention Committee should carry out a prior check of proposed trades of shares of CSK HOLDINGS, group companies and client companies by directors and employees of CSK HOLDINGS and group companies, and perform positive education activities, to prevent insider trading. |
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4. | A scheme to ensure the efficiency in the exercise of function by directors: |
| (1) |
The board of directors should operate in accordance with the rules for the board of directors and the articles of incorporation, extraordinary meetings should be held in addition to ordinary meetings as the need arises, and discussions on matters on the agenda and briefing of important issues should be made at the board of directors meetings; and corporate auditors should also attend any of these meetings; |
| (2) |
Matters for inclusion in the board meeting agenda should be adequately discussed and reviewed in advance so that the exercise of function may be efficiently made by directors; and, |
| (3) |
The board of directors should formulate business plans and define goals to achieve, check the progress of implementation thereof on a regular basis (i.e., monthly, quarterly, semi-annually, and annually), and take necessary countermeasures, including revision thereof. |
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5. | A scheme to ensure appropriate management of operations in a business group: |
| (1) |
In addition to the group liaison meetings of presidents and those of corporate auditors, a cross-group consultation body should be formed to give life to information sharing among group companies. |
| (2) |
The Internal Audit department should carry out its internal audit of group company operations at regular intervals to evaluate their risk control in terms of legal conformance and rationality. |
| (3) |
The legality and appropriateness of businesses of the group companies shall be secured through agreements among the group companies. |
| (4) |
The rules shall be unified and standardized in the entire group for further standardization and efficiency. |
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6. | In case a corporate auditor(s) requests appointment of an employee(s) to assist him/her, matters relating to a scheme relating to the appointment of such an employee(s) and to the independence of such an employee(s) from the board of directors: |
| (1) |
CSK HOLDINGS should appoint a captive assistant to the corporate auditor(s); and, |
| (2) |
The internal transfer, personnel evaluation, and disciplinary disposition of such assistant should be subject to approval of the corporate auditors. |
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7. | A scheme in which directors and employees report to corporate auditors, and other schemes which involve reporting to corporate auditors: |
| (1) |
In addition to legally required matters, Directors and employees should promptly report any matter that is likely to have a serious social effect, the state of internal audits performed, and the state of reporting made through the helpline to corporate auditors; the methodology of reporting should be as agreed following due consultation by the board of directors and corporate auditors. |
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8. | Other schemes to ensure the effectiveness of auditing: |
| (1) |
Opportunities for a corporate auditor(s) to attend important internal meetings and to have a hearing from directors and key employees should be secured, and a meeting for exchange of opinions with the representative director(s) and with an audit firm, respectively, should be held on a regular basis. |
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