Basic Policy on Internal Control Systems

System to ensure that the Company’s Directors and employees perform their duties in compliance with laws and regulations and the Company’s Articles of Incorporation

1. In accordance with the Code of Conduct for the Board of Directors, the Company conducts its business management in a fair, transparent, and independent manner to meet the trust placed in it by shareholders, customers, employees, and society. The Company also establishes the systems necessary for internal control and complies with applicable laws, regulations, and internal rules.
2. The Company ensures that all officers and employees are fully aware of the HIMACS Corporate Code of Conduct and act in accordance with applicable laws and sound corporate ethics, thereby contributing to the realization of a prosperous society.
3. The Company has established a Compliance Committee to provide guidance and monitoring on legal compliance.
4. The Company has established an Internal Control Promotion Committee to ensure the reliability of financial reports by developing internal control over financial reporting, enabling the Company to submit proper internal control reports in accordance with the Financial Instruments and Exchange Act. In addition, the Company strives to continuously operate and evaluate its internal control system and improve its effectiveness.
5. The Audit Office conducts internal audits to assess the legality and appropriateness of business operations.
6. The Company has established its Whistleblowing Rules as a framework for appropriately handling consultations and reports regarding conduct that may raise legal concerns, thereby enhancing legal compliance.
7. The Company maintains a basic policy of severing all relationships with antisocial forces. It has designated a responsible department and established a structure that enables prompt reporting to and consultation with external specialized organizations and legal experts in the event of an emergency.

System to store and manage information concerning the performance of duties by the Company’s Directors

1. Information concerning the performance of duties by the Directors is stored and managed in the manner and for the period provided in the Document Retention Rules.
2. Such information is maintained in a manner that allows the Directors, the Auditors, the Accounting Auditor, and other relevant parties to access it as necessary.

Regulations and other systems concerning the management of the risk of loss to the Company

1. With respect to the management of risks of loss associated with business activities, each Director and Executive Officer deliberates on matters within their respective areas of responsibility at meetings of the Board of Directors and the Board of Executive Officers in accordance with applicable rules. The Company also seeks to prevent or minimize risks of loss in advance by establishing committees with relevant expertise as necessary.
2. In the event of an urgent and significant risk of loss, the Company establishes an emergency response headquarters, headed by the President, in accordance with the Crisis Management Rules, and promptly takes the necessary action.

System to ensure the efficient performance of duties by the Company’s Directors

1. The Company has introduced an Executive Officer system to separate the Board of Directors’ roles in management decision-making and supervision of business execution from the Executive Officers’ role in business execution, thereby accelerating decision-making and clarifying responsibilities.
2. The Board of Directors meets at least once a month, and Auditors attend these meetings and participate in discussions to strengthen management oversight. To enhance operational efficiency and accuracy, the Company clearly defines the division of duties and standards for approval authority.
3. The Board of Executive Officers meets at least once a month, and the Executive Directors, Executive Officers, and other officers attend to develop and implement business plans in accordance with the basic management policy and strategy approved by the Board of Directors.
4. The Business Execution Meeting meets at least once a month, and the Executive Directors, Executive Officers, and other officers attend to ensure day-to-day operational control and management.

System for reporting to the Company on matters related to the performance of duties by subsidiary directors and others

1. The Company appoints Directors responsible for overseeing subsidiaries and provides supervision and guidance on their business operations in accordance with the HIMACS Group Basic Governance Rules. The Company also establishes a system under which prior consultation with the Company and other necessary procedures are conducted in accordance with these Rules when important management decisions are made.
2. Representatives of subsidiaries also attend meetings of the Board of Executive Officers and the Business Execution Meeting to report on and discuss the progress of business operations and other matters, and to take appropriate action.
3. Regulations and other systems concerning the management of the risk of loss at subsidiaries
   
   1. (1) In the event of an urgent and significant risk of loss at a subsidiary, the Company establishes an emergency response headquarters headed by the President in accordance with the Crisis Management Rules and promptly takes necessary action.
4. System to ensure the efficient performance of duties by subsidiary directors and other officers
   
   1. (1) The Company formulates a Medium-Term Management Plan for the Group and develops annual plans aligned with the Plan.
   2. (2) The Company takes charge of subsidiaries’ financial and accounting operations to enable prompt monitoring of the Group’s financial performance and other management indicators.
5. System to ensure that subsidiary directors, officers, and employees perform their duties in compliance with laws and regulations and the Company’s Articles of Incorporation
   
   1. (1) Each subsidiary establishes a Board of Directors’ Code of Conduct equivalent to the Company’s Board of Directors’ Code of Conduct, and conducts its business management in a fair, transparent, and independent manner to meet the trust placed in it by shareholders, customers, employees, and society.
   2. (2) The Compliance Committee, which is also attended by subsidiary directors, provides guidance and monitors the Group’s legal compliance.
   3. (3) Directors of subsidiaries also attend meetings of the Internal Control Promotion Committee, which establishes and maintains internal controls over financial reporting for the Group.
   4. (4) The Audit Office conducts internal audits of subsidiaries to assess the legality and appropriateness of their business operations.
   5. (5) The Group establishes and maintains a whistleblowing system to enhance the effectiveness of compliance with applicable laws and regulations.

Matters concerning employees assisting the Company’s Auditors with their duties if the assignment of such employees is requested by the Auditors, matters concerning the independence of such employees from Directors, and matters concerning ensuring the effectiveness of directions to such employees

1. The Company assigns appropriate personnel to support Auditors in performing their duties.
2. The Company obtains the prior consent of the Auditors before making decisions regarding the appointment, transfer, evaluation, or other matters concerning employees who assist the Auditors in performing their duties.
3. Employees assisting Auditors in the performance of their duties are authorized to conduct investigations under the direction of the Auditors.

System for reporting by the Directors and employees to the Auditors

1. The Directors and employees report operational progress to the Auditors from time to time to the Board of Directors, the Board of Executive Officers and other management committees. The Auditors may request reports from the Directors and employees as needed.
2. The Directors and employees promptly report to the Auditors the discovery of any fact that may cause substantial damage to the Company, any misconduct in relation to the performance of duties, or any other material facts in violation of laws, regulations or the Articles of Incorporation.
3. The Audit Office promptly reports the status of whistleblowing cases under the Whistleblowing Rules.
4. System for reporting to the Company’s Auditors by subsidiary directors, auditors, officers, and employees engaged in business operations, and persons who have received a report from any such individuals
   
   1. (1) The Auditors may request reports from subsidiary directors and employees as needed.
   2. (2) The Directors and employees of the Group promptly report to the Auditors the discovery of any fact that may cause substantial damage to the Company, any misconduct in relation to the performance of duties, or any other material facts in violation of laws, regulations or the Articles of Incorporation.
   3. (3) The Audit Office promptly reports to the Auditors the status of whistleblowing cases under the Whistleblowing Rules of the Group.

System to ensure that the whistleblower in the preceding item is protected from any disadvantageous treatment due to their whistleblowing

1. The Company prohibits any disadvantageous treatment of officers and employees of the Group on the grounds that they have reported matters to the Auditors.
2. The Group’s Whistleblowing Rules explicitly prohibit dismissal or any other disadvantageous treatment of whistleblowers on the grounds of making such a report.

Matters concerning a policy on the handling of expenses or liabilities incurred in the performance of duties by the Company’s Auditors

1. The Company allocates a budget for expenses incurred in the Auditors’ performance of duties.
2. The Company bears any expenses incurred when Auditors consult, as necessary, with external experts, including the Accounting Auditor and legal counsel.

System to ensure the effectiveness of audits by the Auditors

1. The Auditors hold regular meetings with the President and CEO to deepen mutual understanding.
2. The Auditors collaborate with the Accounting Auditor by receiving reports on their audit plans, observing their audits and exchanging opinions and information in a timely manner.
3. The Auditors closely collaborate with the Audit Office to improve audit efficiency.