Internal Control System

Establishment of a corporate structure to ensure the proper conduct of business (internal control systems)

In its efforts to establish a lawful and efficient corporate structure, the Company maintains and operates a structure to ensure that executive officers comply with laws and the Articles of Incorporation in the execution of their operations, and other structures to ensure the proper conduct of the business of the Company and the businesses of the Company group made up of the Company and its subsidiaries, as follows.

1.Corporate structure to ensure legal compliance and compliance with the Articles of Incorporation in the execution of operations by executive officers and employees of the Company

  • The Company elects external directors as independent officers to reinforce the supervisory functions of the Board of Directors and Audit Committee.
  • The Company has established a “Code of Conduct,” “Standards for Behavior of Heiwa Real Estate Group,” and “Compliance Regulations,” and steps are taken to ensure that all of its members are fully aware of their contents. Accordingly, executive officers, managing officers, and employees of the Company are requested to maintain fair and high ethical principles and strictly adhere to laws, regulations, and the Articles of Incorporation, in order to secure a management structure on which the community can rely.
  • Based on its “Internal Reporting Regulations,” “External Whistleblowing Regulations,” and other relevant regulations, the Company has established a compliance hotline and other systems as contact points for notification and consultation from people in or outside of the Company, including business partners, when problems or other matters related to compliance occur, and detects and responds to any such problems as promptly as possible.
  • The Company responds firmly against antisocial forces that jeopardize the order and safety of the civil society.

2.System for the storage and maintenance of information in relation to the performance of duties by the executive officers of the Company

  • The Company properly records the decision-making documents at the general shareholders' meetings, Board of Directors’ meetings, Meetings of Executive Officers, and other important meetings, approval documents, and information related to the performance of duties by executive officers, and properly stores and maintains these documents in accordance with the relevant laws and “Criteria for the Storage and Disposal of Documents.”
  • Directors and executive officers may access these documents at any time.

3.Rules of the Company related to the management of the risk of loss and other systems

  • In recognition of the importance of risk management as a management issue, the Company has established a set of “Risk Management Rules,” has established a “Risk Management Committee” under the rules, and endeavors to secure the effectiveness of risk management by defining the targeted risk and the responsibility for management of the risk.
  • The “Risk Management Committee” reports on the matters under its management to the Board of Directors and the Board of Statutory Auditors, as necessary.

4.System to ensure the efficient performance of duties by the executive officers of the Company

  • For its organizational structure, the Company has selected a structure with a nomination committee, etc., and delegates significant authority for making decisions on business execution to executive officers, endeavoring to use the system to segregate the functions and responsibilities of management and business execution and to accelerate the process of decision-making, hence achieving more efficient management.
  • Through the system for allocating directors-in-charge, the system for job authorization, and the system for decision-making provided in various in-company regulations, including the “Regulations of the Board of Directors’ Meetings,” the “Regulations of the Meetings of Executive Officers,” and the “Rules on the Division of Authorities,” the Company works to achieve the efficient execution of duties by its executive officers.
  • By formulating annual business plans and other plans, the Company establishes company-wide objectives to promote the efficient execution of business.

5. System to ensure the proper execution of business by the Company group made up of the Company and its subsidiaries

  • The Company manages the planning of strategy related to the Company Group, guidance and monitoring related to subsidiaries and other matters pertaining to business administration, financial operations, and administration related to consolidated accounting, the improvement and operation of internal control related to financial reporting and administration related to the evaluation of effectiveness, and administration related to the operation of business.
  • The “Code of Conduct,” the “Standards for Behavior for Heiwa Real Estate Group,” and the “Compliance Regulations” prescribed by the Company also apply to the Company Group, and the Company takes steps to ensure that all members of the Group are fully aware of their contents. Accordingly, the Company requests the officers and employees of the Company Group to maintain fair and high ethical principles and strictly adhere to laws, regulations, and the articles of incorporation so as to secure a management structure on which the community can rely.
  • In recognition of the importance of risk management as a management issue, the Company endeavors to secure the effectiveness of risk management by defining the targeted risk and the responsibility for management of the risk in the Company Group in accordance with a set of “Risk Management Rules” prescribed by the Company.
  • In accordance with a set of “Administrative Rules on Subsidiaries and Affiliates,” the Company made mandatory for subsidiaries to report important matters related to subsidiaries in advance, in principle.
  • The Company dispatches its personnel to serve as Directors and Statutory Auditors of major subsidiaries. The Directors of the Company oversee the performance of the duties of the Directors of the subsidiaries, and the Statutory Auditors of the Company oversee the execution of business of the subsidiaries.
  • In order to report and discuss matters related to consolidated group management, the Company has established a management conference among subsidiaries and affiliates and an administrative contact committee among subsidiaries and affiliates to share ownership of business policies, management information, etc., and reports important matters related to subsidiaries to the Board of Directors.
  • The Company has formulated a set of “Basic Principles for the Maintenance and Operation of Internal Control Related to Financial Reporting,” in order to secure reliable financial reporting. The Company has also established an “Internal Control Liaison Committee Related to Financial Reporting” to maintain a cooperative structure that cuts across the whole Company Group for the purpose of realizing the aforesaid principles.

6.Matters concerning relevant personnel when the Audit Committee of the Company requests the deployment of directors or employees to assist the committee in its work, matters related to the independence of those personnel from executive officers of the Company, and matters to secure the effectiveness of instructions from the Audit Committee of the Company to those personnel

  • The Company shall establish an Audit Committee Office and assign employees to it. Employees assigned to the Audit Committee Office shall assist the Audit Committee in its duties.
  • Employees assigned to the Audit Committee Office shall follow the instructions and orders of the Audit Committee when assisting the Audit Committee in its duties, and shall not be subject to instructions or orders from executive officers.
  • Appointment or transfer of employees assigned to the Audit Committee Office shall require the consent of the Audit Committee, and the evaluation of these employees shall sufficiently respect the opinions of the Audit Committee.

7.Policy for handling expenses, etc. incurred from the performance of duties by the members of the Company's Audit Committee

If an Audit Committee member, in the course of performing their duties, requests the Company to pay expenses in advance pursuant to Article 404, Paragraph 4 of the Companies Act, the Company shall promptly pay such expenses or debts unless such expenses or debts are determined not to be necessary for the performance of duties by the Audit Committee member.

8.System for reporting to the Audit Committee of the Company, system to ensure that a person so reporting is not treated unfavorably because of the reporting, and other systems to ensure effective auditing by the Audit Committee of the Company

  • The statutory Audit Committee member presents at important conferences, including the Meeting of Executive Officers, expresses their views, and obtains copies of the minutes of meetings and approval documents. The statutory Audit Committee member also requests to be briefed on these matters. Further, the statutory Audit Committee member regularly holds meetings with the Representative Executive Officer, the Internal Audit Office, and the independent auditors.
  • If a director or executive officer discovers any matters that may cause material damage to the Company, they shall immediately notify the Audit Committee and/or its members of those matters.
  • The Company reports to the Audit Committee and/or its members on important matters, including matters pertaining to the subsidiaries reported at the management conference among subsidiaries and affiliates and the administrative contact committee among subsidiaries and affiliates, the results of internal audits of subsidiaries, the contents of notifications by the compliance hotline, and other matters.
  • The Company prohibits unfavorable treatment of the officers and employees of the Company Group who report to the Audit Committee and/or its members due to such reporting, and keeps all of the officers and employees of the Company Group well informed of the prohibition.
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