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.
A system to ensure that the execution of duties by directors and employees of the Company and group companies will conform to legislation and the Articles of Incorporation
Compliance regulations shall be established in accordance with the Code of Conduct of the Prestige International Group (hereinafter the “Group”) to prevent directors from violating legislation and the Articles of Incorporation; in addition, advice shall be sought from external experts on an as-needed basis. The monitoring function shall be enhanced through mutual monitoring of directors centered on the representative director. Furthermore, the Company provides a risk compliance committee as an advisory organ for the representative director to promote the development of internal control over risks faced by the entire Group and matters concerning compliance in general. Additionally, to contribute to the realization of a sustainable society, addressing sustainability issues shall be prioritized as a key management issue, and a framework to tackle them shall be established.
A system concerning the retention and management of information on the execution of duties of the Company’s directors
Information on the execution of the duties of directors shall be appropriately maintained and managed with the authority and responsibility undertaken by the department set forth in the document handling regulations.
A system for regulations on managing the risks of losses by the Company and group companies
To manage the risks of the entire Group in a comprehensive and unified manner, a risk
compliance committee shall be established as an advisory organ for the representative director. The committee shall determine the policies governing risk management, prepare risk management regulations, inspect the status of application, respond to any crisis, and organize other matters concerning risk management in general. In particular, ensuring the security of information assets and establishing an information security framework to address threats such as cyberattacks shall be positioned as priority matters and managed appropriately
A system to ensure that the duties of the directors of the Company and the group companies will be executed efficiently
As the basis for ensuring that the duties of directors will be executed efficiently, regular meetings of the board of directors shall be convened once a month, and special meetings of the board of directors shall be convened whenever necessary to develop a system for speedy decision making.
A system to ensure the appropriateness of operations of a corporate group, which consists of a stock company and parent and subsidiary companies
Efforts are made to develop a compliance system for the entire Group under the Code of Conduct of the Group. And, group company management regulations shall be established to manage and guide the administration of the group companies in order to ensure the effectiveness and appropriateness of the group companies’ internal control. Directors and other officers of the group companies shall report matters concerning the execution of their duties as appropriate in accordance with the group company management regulations. The internal audit office shall periodically audit the status of the business of the group companies. Furthermore, governance shall be conducted with due consideration to ensure the appropriateness of related-party transactions within group companies and to protect the interests of minority shareholders of subsidiaries.
Matters concerning employees assisting the performance of auditors’ duties when requested by auditors
If the auditors and the board of auditors request the appointment of employees to assist in their duties, the Company shall immediately establish an audit office as a department to assist the auditors and the board of auditors by having employees, as members of the office, assist the auditors and the board of auditors. Through consultation between the auditors and the board of auditors and the Group Management Supervisory Headquarters, the employees shall be appointed as auditor office members to handle the duties of the auditors and the board of auditors.
Matters concerning the independence of employees set forth in the preceding paragraph from directors and the effectiveness of instructions issued by auditors
In order to ensure the independence of employees from directors as audit office members, when the employees are transferred or evaluated, the Group Management Supervisory Headquarters shall consult the auditors and the board of auditors in advance and shall consider their opinions in granting authority to the employees to conduct audits of the Group on an as-needed basis in accordance with the instructions of the auditors and the board of auditors.
A system enabling directors/employees of the Company and the Group companies to make reports to the Company’s auditors and ensuring effectiveness of auditors’ audits
If there is any fact that causes or may cause significant damage to a company, or it is believed that an officer or employee violates or may violate legislation or the Articles of Incorporation, the person who discovered the fact shall immediately report directly to the auditors and the board of auditors of the Company. To ensure that any matters that need to be reported to the auditors and the board of auditors of the Company will be reported effectively and flexibly in accordance with the audit regulations, internal systems shall be coordinated, and a system for reports to the auditors and the board of auditors of the Company shall be established. Moreover, to enhance the effectiveness of the whistle-blowing system, an external reporting contact point operated by external specialized agencies or similar organizations shall be established in addition to the internal contact point, and the anonymity and confidentiality of whistle-blowers shall be strictly maintained. The whistle-blowing system shall prohibit disadvantageous treatment of whistle-blowers, so that a person who submits a report to the Company’s auditors will not experience disadvantageous treatment on the grounds of the report.
Policies on the procedure for advance payment and reimbursement of expenses for the execution of duties of company auditors and the handling of expenses and obligations incurred for the execution of duties
When expenses are incurred by an auditor or the board of auditors to seek the advice of lawyers, certified public accountants, or other external experts or to entrust an investigation, appraisal, or other business when conducting an audit, such expenses shall be appropriately handled at the request of the auditor or the board of auditors.
A system to ensure the trustworthiness of financial reporting
Necessary systems shall be developed and operated to ensure that financial reporting will be trustworthy and appropriate and that the proper internal control reports will be submitted pursuant to the Financial Instruments and Exchange Act. To this end, their effectiveness shall be periodically assessed with results of the assessment reported to the board of directors. In such development, operation, and assessment, internal controls over financial reporting shall be appropriately assessed, including the assessment of effectiveness taking into account fraud risks and controls over information technology (IT).
The basic idea for the elimination of antisocial forces
(1) The basic policy of the Company is terminate all transactions and other relationships with antisocial forces, and to ensure the effectiveness of such action, a manual against antisocial forces shall be prepared. The Company shall implement measures to prevent interference by antisocial forces in its business activities and any damage inflicted by them, while coordinating as appropriate with lawyers, the police, and external specialized agencies.
(2) The general affairs department shall take charge of measures against antisocial forces and shall collect information and share the said information with the relevant departments in dealing with them. Furthermore, a good relationship shall be maintained with the competent police authority by appointing a person responsible for preventing unreasonable demands and to terminate any relationships with antisocial forces.
Ensuring the effectiveness and periodic review of this Basic Policy
The board of directors shall continuously monitor the status of the development and operation of the internal control system based on this Basic Policy, and shall periodically assess its effectiveness. Furthermore, this Basic Policy shall be reviewed on an as-needed basis, taking into account revisions to legislation, changes in socioeconomic conditions, changes in the business activities of the Group, and other circumstances.
June 1, 2026