1. Establishing a system for ensuring that the execution of duties by Group Directors and employees is in compliance with all laws, regulations, and the Articles of Incorporation

  1. The Ryoyo Group Code of Conduct has been established as a standard for Directors and employees of the Group to act in compliance with relevant laws, the Articles of Incorporation and social norms. To ensure thorough compliance, the CSR Department oversees compliance initiatives group-wide.
  2. By treating the development of an internal control system as an important management issue, the Group has established the following rules to ensure appropriate organizational management: Board of Directors Regulations, Division of Duties Regulations, Job Authority Regulations, and Approval Regulations.
  3. Through regular meetings of the Board of Directors, the members mutually verify individual progress in the execution of duties.
  4. The Internal Auditing Department regularly checks the appropriateness and efficiency of operations conducted by each department, and, in cooperation with the CSR Department, audits their compliance status. These activities are regularly and appropriately reported directly to the Representative Director, President & Chief Executive Officer, the Board of Directors, and the Audit & Supervisory Board.
  5. The Ryoyo Group Compliance Hotline has been established as a means for employees to directly submit information regarding internal activities that may infringe upon laws and regulations.
  6. The Group takes a resolute stance against anti-social forces (organized crime) and groups that threaten the order and safety of civil society. It also works closely with the police and specialized lawyers, and ensures that the Group has no ties to such individuals or groups.

2. Creating a system for the storage and management of information related to the execution of duties by Directors

Information related to the duties of directors is stored and managed in accordance with the Document Management Regulations. Directors and Audit & Supervisory Board Members must be able to view these documents at any time.

3. Establishing rules and other systems for containing the risk of damages to the Group

For risks related to compliance, the environment, natural disasters, information security, quality, foreign exchange fluctuations, and financial reporting, etc., each department establishes appropriate management systems overseen by employees who are responsible for risk management. In the event that a significant risk materializes, each department concerned responds quickly and effectively to minimize damage, under the direction of relevant employees responsible for risk management.

4. Maintaining a system for ensuring the efficient execution of duties by Group Directors

  1. The Board of Directors decides matters in line with laws and regulations and the Articles of Incorporation, as well as important matters related to management (including important matters concerning subsidiaries). The number of directors is set appropriately so that decisions can be made quickly and accurately based on sufficient discussion, thereby enhancing the board’s function.
  2. The Board of Directors is a management decision-making and supervisory body, operating and making decisions separately from the business execution function. This system enables flexible business execution by the President and Chief Executive Officer and Executive Officers.
  3. In order to enhance objectivity in the nomination and remuneration for Directors and Executive Officers, the Group has established a Nomination and Remuneration Committee. A majority of the members are independent Outside Directors, and the committee reports the results of its deliberations to the Board of Directors.

5. Setting up a system for ensuring the appropriateness of operations undertaken by the corporate group consisting of Ryoyo Electro and its subsidiaries and for facilitating reporting to the Company with regard to the execution of duties by directors and key individuals at subsidiaries

  1. The Ryoyo Group has established Domestic Subsidiaries Management Regulations and Overseas Subsidiaries Management Regulations. Subsidiaries are obliged to report their financial status and other important matters to Ryoyo Electro on a regular basis, and the companies within the Group must work together to ensure beneficial cooperation and sound business development.
  2. In order to ensure the reliability of financial reporting in accordance with the provisions of Japan’s Financial Instruments and Exchange Act, the Group has established Regulations of Internal Control Over Financial Reporting. The Group has also implemented an internal control system, and regularly evaluates its effectiveness.
  3. Working with the departments in charge of operations at each Group company, the CSR Department regularly ascertains the status of internal controls and provides guidance for improvement, as necessary.
  4. The Internal Auditing Department regularly conducts internal audits of each Group company, checks the status of compliance with laws and regulations, and provides necessary guidance.

6. Establishing a framework concerning employees requested by the Audit & Supervisory Board Members to serve as assistants, the independence of these employees from Directors, and ensuring the effectiveness of the orders issued to such employees by Audit & Supervisory Board Members

Based on the Division of Duties Regulations, the Internal Auditing Department conducts internal audits based on requests by the Audit & Supervisory Board, and reports the results back to the same board. In order to ensure the independence of its activities, the Internal Auditing Department does not take orders from Directors.

7. Implementing a system concerning reports submitted by Directors and employees of the Company and by Directors, Audit & Supervisory Board Members, and employees of subsidiaries to the Audit & Supervisory Board Members of the Company; other systems concerning reports submitted to the Audit & Supervisory Board Members; and systems for ensuring that individuals issuing such reports do not suffer disadvantageous treatment due to reporting

  1. The directors and employees of Ryoyo Electro and the directors, auditors and employees of its subsidiaries must promptly report to Audit & Supervisory Board Members any matters, in addition to statutory matters, that could cause significant damage to the Group, along with important management information, the status of internal audits, and the content and status of reports made using the Compliance Hotline.
  2. Any director or employee of Ryoyo Electro or any director, auditor, or employee of its subsidiaries who submits information to the Audit & Supervisory Board is protected from potential disadvantageous treatment that could arise in the workplace after taking such an action. Such retaliation is prohibited, and this fact is communicated to officers and employees of the Group.

8. Establishing a process related to policies concerning the procedures through which Audit & Supervisory Board Members may receive reimbursement, prior to or after the fact, for expenses incurred during the execution of their duties as well as the treatment of other expenses and liabilities incurred as part of the execution of duties

When an Audit & Supervisory Board Member requests advance payment or similar measure for the execution of their duties, the payment shall be processed in accordance with that request, except in cases where such payment is deemed unnecessary for the performance of duties by the member concerned.

9. Creating other systems for ensuring effective auditing by the Audit & Supervisory Board Members

Regular meetings are held for discussion between Audit & Supervisory Board Members and the Representative Director, President & Chief Executive Officer. When necessary, the Audit & Supervisory Board may seek audit-related advice from specialized lawyers and accounting auditors.




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