Internal Control System

Basic Approach to the Internal Control System and Implementation Status

The following is an overview of the decisions of the Prestige International Group regarding systems to ensure that directors carry out assigned duties in compliance with laws, regulations, and the Articles of Incorporation of the Group, and that other corporate business activities are also carried out appropriately.

Systems to ensure that Prestige International Group directors and employees carry out assigned duties in compliance with laws, regulations, and the Articles of Incorporation

In accordance with the Code of Conduct, the Prestige International Group (hereinafter referred to as “the Group”) enacted compliance regulations; endeavors to prevent any infringements of laws, regulations, or the company’s Articles of Incorporation by directors; and seeks the advice of external experts as necessary. Furthermore, directors play a central role in strengthening the Group monitoring system through mutual complementation among directors. In addition, the Group has established a Risk Management and Compliance Committee, which acts as an advisory body to the Board of Directors, and promotes the creation of internal controls related to risks and compliance matters affecting the Group overall.

Systems for Storing and Managing Information Related to the Execution of the Duties of Company Directors

Under regulations for handling documents, information related to the Prestige International Group directors’ execution of duties is overseen by the department stipulated under the regulations, which stores and manages the information appropriately.

Prestige International Group Regulations and Other Systems Related to Loss and Risk Control

The Prestige International Group has established the Risk Management and Compliance Committee—an advisory body to the Board of Directors—as an organ for comprehensively and exhaustively managing risk for the Group. The Committee develops the risk management policies, enacts risk management regulations, verifies the status of regulation implementation, responds to crisis situations, and oversees other matters related to risk management overall.

Systems to Ensure that the Duties of Group Directors are Executed Efficiently

As the foundation for systems to ensure that the duties of Prestige International Group directors are executed efficiently, regular meetings of the Board of Directors are held once a month and ad hoc meetings of the Board of Directors are held as necessary, creating a system that enables swift decision-making.

Systems for Ensuring the Appropriateness of Group Business Activities

In accordance with the Group Code of Conduct, the Prestige International Group not only endeavors to build compliance systems for the entire Group but also enacts Group Company Management Regulations to ensure that the effectiveness and appropriateness of the internal control systems, thereby managing and guiding Group company operations.
Group company directors and other employees comply with the Group Company Management Regulations and make appropriate reports of matters related to the execution of duties. In addition, the Internal Audit Office carries out regular audits of the status of Group business activities.

Matters Regarding Suitable Employees to Assign to Assist Auditors

At Prestige International, when it is necessary to assign employees to assist auditors or the Board of Auditors with assigned duties, an Auditing Office is immediately established as a department to assist the auditors and/or Board of Auditors. Auditing Office personnel are responsible for performing the duties of the auditors and/or Board of Auditors as assistants to the auditors and/or Board of Auditors and are selected on the basis of discussions among auditors, the Board of Auditors, and the Prestige International Group’s Management Administrative Headquarters.

Matters Related to the Aforementioned Employees’ Independence from Directors and Effectiveness of Instructions from Auditors

To ensure the independence of Auditing Office personnel from company directors, when the relevant staff are being transferred and evaluated, the Group Management Administrative Headquarters is consulted beforehand, and importance is placed on the opinions of auditors and members of the Board of Auditors. In accordance with the instructions of the auditors and the Board of Auditors, the Auditing Office staff are granted the authority to conduct audits within the Prestige International Group as necessary.

System for Group Directors and Employees to Report to Company Auditors and Other Systems to Ensure that Auditing Activities Are Effective

When there are facts that could severely damage the company or when such facts are discovered, or if a company director’s actions infringe—or there is thought to be a risk that their actions could infringe—any laws, regulations, or Prestige International’s Articles of Incorporation, the situation must be immediately reported directly to the company’s auditors and/or Board of Auditors. Furthermore, in accordance with the auditing regulations, Prestige International established internal controls and systems for reporting to the company’s auditors and/or Board of Auditors to ensure that matters to be reported to the auditors and the Board of Auditors are reported effectively and expeditiously. Moreover, to ensure that those who make reports to the company’s auditors are not treated unfairly because of the report in question, Prestige International’s internal reporting system prohibits detrimental treatment to them.

Matters Related to Policies on Debt Disposal or Procedures for Advance Payment/Reimbursement of the Costs for the Course of Auditors Executing Duties or Other Relevant Duties

When the auditors or Board of Auditors seek payment of the necessary costs incurred for seeking the advice of lawyers, certified public accountants, or other external experts or for commissioning surveys, appraisals, or other work, these expenses are processed appropriately in accordance with the requests of the auditors and the Board of Auditors.

Systems for Ensuring the Reliability of Financial Reports

Prestige International created and operates the systems necessary to ensure the reliability and appropriateness of financial reports and the submission of the appropriate internal control reports in accordance with the Financial Instruments and Exchange Act. The effectiveness of these systems is regularly evaluated, and the evaluation results reported to the Board of Directors.

The PI Group Basic Policy for the Elimination of Antisocial Forces

(1) The Prestige International Group basic policy towards antisocial forces is to sever all relationships with them, including business transactions, and to ensure the effectiveness of this policy the Group has compiled a Manual Against Antisocial Forces. The Group implements measures to exclude antisocial forces from management activities and prevents attacks on individual employees, while at the same time cooperating appropriately with external specialist legal organizations and the police.

(2) Within Prestige International, the General Affairs Department at Corporate Headquarters handles matters related to antisocial forces. The company appointed full-time unreasonable demand prevention officers, endeavors to maintain good relations with the police stations with local jurisdiction even during ordinary times, and undertakes to sever relationships with antisocial forces.