Basic Policy on the Development of Internal Control Systems

Pursuant to the Companies Act and the Ordinance for Enforcement of the Companies Act, the Company has stipulated the following policy with respect to "the development of systems necessary to ensure that the execution of the duties by the directors complies with the laws and regulations and the articles of incorporation, and other systems prescribed by Ministry of Justice Order as systems necessary to ensure the properness of operations of a Stock Company and operations of the group of enterprises consisting of the Stock Company and its Subsidiary Companies". Under this policy, the Company will build an internal control system and an efficient and lawful corporate structure.

1. Systems necessary to ensure that the execution of the duties by the directors complies with the laws and regulations and the articles of incorporation

(i) The Board of Directors regards the Onward Group Compliance Regulations as a basic policy to thoroughly ensure that directors and employees comply with applicable laws and regulations as well as internal regulations.
(ii) The Board of Directors established the Onward Group Compliance Committee as a supervisory organization for the Group's compliance system, and the Representative Director was appointed as chairman of the committee as an officer responsible for the same. The Compliance Division is a unit that oversees compliance, and it promotes efforts to build and develop a compliance system for the Onward Group in accordance with the Compliance Manual under the Onward Group Compliance Regulations.
(iii) The Onward Group Compliance Committee works to instill the compliance system.

2. Systems for the storage and management of information on the execution of duties by directors

(i) The Board of Directors stores and manages information appropriately in accordance with the Regulations on Management of Regulations and the Document Management Regulations.
(ii) Directors properly store and manage documents on the execution of their duties as well as important information in a manner appropriate for their duties.
(iii) The Compliance Division is a unit that oversees information management.

3. Regulations and other systems for managing risk of loss

(i) To build a risk management system, the Board of Directors develops and operates a management system conforming to the Onward Group Risk Management Regulations.
(ii) The Compliance Division is a unit that oversees the risk management system.
(iii) The Compliance Division devises a plan for the development of the risk management system, identification of problems, and the risk management system, reports the plan to the Board of Directors, and develops a system appropriate for natural disaster risks, information system risks, and other risks that affect the continuation of our business in a highly significant manner.
(iv) The Board of Directors shall cooperate with outside experts, etc. as necessary and take appropriate risk measures.

4. System to ensure the efficient execution of duties by directors

(i) The Board of Directors strives to raise the efficiency of the execution of duties by directors, executive officers and employees in accordance with the Officer Work Regulations and the Duty Authority Regulations.
(ii) To execute its duties efficiently, the Board of Directors appoints executive officers and performs supervision appropriately in accordance with the Onward Group Ringi Processing Regulations.
(iii) In order to reinforce the supervisory function of the Board of Directors and further enhance the corporate governance system, the Company has established the Nomination and Compensation Committee, the majority of which consists of independent outside directors, as an advisory body to the Board of Directors, and ensures the transparency and objectivity of the evaluation and decision process for the nomination and remuneration of directors.

5. System to ensure that the execution of duties by employees complies with laws and regulations and the Articles of Incorporation

(i) The Onward Group Compliance Committee appoints operating company compliance officers.
(ii) The Onward Group Compliance Committee engages in appropriate education and awareness raising activities in collaboration with the Compliance Division, works to instill the Compliance Manual, enhances our compliance system so it functions properly, and checks it.
(iii) In accordance with the Onward Group Whistleblowing Regulations, the Company has established and operates communication and whistleblowing desks internally and externally (the Onward Group Whistle Line).
(iv) The Internal Control Office formulates a plan to build a business execution system so that the business of each division is executed appropriately and efficiently in accordance with laws and regulations, the Articles of Incorporation, regulations, manuals, and internal notices, and reports to the Board of Directors.

6. Systems necessary to ensure the properness of operations of the Company and operations of the group of enterprises consisting of the Company and its Subsidiary Companies

The Board of Directors receives regular reports on the business activities of the Company and Onward Group companies and reviews and deliberates on important matters while respecting the autonomy of their business management for the purpose of ensuring the properness of their business activities.

(1) System for reporting information on the execution of duties by directors of subsidiaries to the Company

(i) If any decision important for our business management is intended to be made, it must be reported to the Company in accordance with the Onward Group Ringi Processing Regulations.
(ii) Business performance must be reported to the Company on a regular basis.
(iii) In the event of any important matter for our operations, it must be reported to the Company on an ad hoc basis.

(2) Regulations and other systems for managing risk of loss by subsidiaries

(i) To build a risk management system, the Board of Directors develops and operates a management system conforming to the Onward Group Risk Management Regulations.
(ii) The Compliance Division of the Company is a unit that oversees the risk management systems of subsidiaries.
(iii) The Compliance Division of the Company devises a plan for the development of the risk management systems of its subsidiaries, identification of problems, and the risk management systems, reports the plan to the Board of Directors, and develops a system appropriate for natural disaster risks, information system risks, and other risks that affect the continuation of our business in a highly significant manner.
(iv) The Board of Directors addresses risks appropriately by working closely with external experts as required.

(3) System to ensure the efficient execution of duties by subsidiary directors

(i) The Board of Directors strives to raise the efficiency of the execution of duties by directors, executive officers and employees of subsidiaries in accordance with the Officer Work Regulations and the Duty Authority Regulations for subsidiaries.
(ii) The Board of Directors of each subsidiary appoints executive officers and performs supervision appropriately in accordance with the Onward Group Ringi Processing Regulations in order for subsidiary directors to execute their duties efficiently.

(4) System to ensure that the execution of duties by directors and employees of subsidiaries complies with laws and regulations and the Articles of Incorporation

(i) The Onward Group Compliance Committee appoints operating company compliance officers at subsidiaries.
(ii) The Onward Group Compliance Committee engages in appropriate education and awareness raising activities for subsidiaries in collaboration with the Compliance Division, works to instill the Compliance Manual, enhances our compliance system so it functions properly, and checks it.
(iii) In accordance with the Onward Group Whistleblowing Regulations, the Company has established and operates communication and whistleblowing desks internally and externally (the Onward Group Whistle Line).
(iv) The Internal Control Office of the Company formulates a plan to build a business execution system so that the business of the divisions at its subsidiaries is executed appropriately and efficiently in accordance with laws and regulations, the Articles of Incorporation, regulations, manuals, and internal notices, and reports to the Board of Directors.

7. Matters on an employee appointed to assist with the duties of an audit & supervisory board member when so required by an audit & supervisory board member.

If needed by an audit & supervisory board member, an employee required to assist him/her will be appointed as the secretariat of the Audit & Supervisory Board.

8. Matters on the independence from directors of the employee set forth in the preceding item

(i) Prior approval of the audit & supervisory board member must be obtained for appointing or transferring an employee required to assist him/her and for deciding matters on the authority to manage personnel affairs.
(ii) A personnel evaluation of an employee required to assist an audit & supervisory board member is conducted by the audit & supervisory board member himself/herself.

9. Matters on ensuring the effectiveness of instructions given by audit & supervisory board members to employees required to assist with their duties

(i) An assistant employee must comply with the instructions and orders of each audit & supervisory board member.
(ii) Directors and employees must cooperate for developing the audit environment so that the duties of assistant employees are performed smoothly.
(iii) An assistant employee is allowed to obtain advice on audit operations from external experts, as required.

10. System for reporting to audit & supervisory board members

(1) System for directors and employees of the Company to report to audit & supervisory board members

(i) The Representative Director and directors in charge report on our business execution as well as important issues that affect our business management at important meetings such as a meeting of the Board of Directors.
(ii) Directors, executive officers, and employees report to audit & supervisory board members promptly and appropriately if so requested by them.

(2) System for directors, audit & supervisory board members, and employees of a subsidiary and persons who have received a report from them to report to audit & supervisory board members

Directors, audit & supervisory board members, and employees of a subsidiary and persons who have received a report from them must report promptly and appropriately on the subsidiary's business execution and important issues that affect the subsidiary's business management.

11. A system to ensure that a person who has made a report as set forth in the preceding item is not treated disadvantageously on account of having made such report.

The Company and its subsidiaries prohibit any person who has made a report from being treated disadvantageously on account of having made such report, and make directors, officers and employees of the Group fully aware of such prohibition.

12. Matters on policies for procedures for advance payment or reimbursement of expenses arising from the execution of duties by audit & supervisory board members and for processing expenses or obligations arising from the execution of such duties

When an audit & supervisory board member requests an advance payment of expenses arising from the execution of his/her duties, reimbursement of expenses paid or payment of an obligation incurred by him/her, the Company complies with the request unless it is proven that such expenses have not been incurred in relation to the execution of his/her duties.

13. System to ensure that audits by audit & supervisory board members are conducted effectively

(i) The Audit & Supervisory Board has a meeting with the Representative Director regularly and exchanges information and opinions.
(ii) The Audit & Supervisory Board utilizes external experts as required in conducting an audit.

14. System to exclude organized crime groups

The Group refrains from having any relationship, including a business relationship, with organized crime groups (commonly referred to in Japan as "Anti-social Forces"). The entire organization will respond resolutely upon receiving any unreasonable demand from any Anti-social Forces.

15. System to ensure the reliability of financial reporting

Under the direction of the Board of Directors, the Internal Control Office promotes efforts to build and develop an internal control system for financial reporting pursuant to the Financial Instruments and Exchange Act and other applicable laws and regulations in order to ensure the properness of documents and other information on financial accounting.

Established: May 12, 2006
Revised: April 13, 2007
Revised: April 11, 2008
Revised: May 8, 2015
Revised: February 26, 2021