CSR

Internal Control

Establishment: May 15, 2006 Resolution of Board of Directors
Revision: April 14, 2010 Extraordinary resolution of board of directors
Revision: April 25, 2012 Resolution of Board of Directors
Revision: April 27, 2015 Resolution of Board of Directors

Basic Policy Regarding the Internal Control System

MISI shall develop the following internal control systems, which are necessary to ensure that the execution by the directors of their duties complies with applicable laws and regulations and the Articles of Incorporation, and to ensure that the operations of MISI and the operations of the group of enterprises consisting of MISI and its subsidiaries is appropriate.

1. System to Ensure that the Execution by MISI’s Directors and Employees of their Duties is in Compliance with Applicable Laws and Regulations and the Articles of Incorporation (No. 6 of paragraph 4 of Article 362 of the Companies Act, No. 4 of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)

(1) Corporate Governance
  1. In making decisions involving important management issues and in supervising the execution by MISI’s Directors of their duties, the Board of Directors shall comply with applicable laws and regulations, the Articles of Incorporation, resolutions of Shareholders’ Meetings, the “Board of Directors Regulations”, “Philosophy”, “Vision” and the “Compliance System and Compliance Program (Observation Matters) for the MISI Group” (hereinafter the “Group Compliance Program”).
  2. MISI’s Directors shall execute their duties in compliance with applicable laws and regulations, the Articles of Incorporation, resolutions of the Board of Directors, the “Rules for Management Authority and Responsibility” and other internal rules and regulations, and shall report the status of the execution of their duties to the Board of Directors at least once every three months and whenever deemed necessary.
  3. An Executive Officer system shall be adopted to strengthen the function of decision-making and supervision by the Board of Directors. The Executive Officers shall be appointed by a resolution of the Board of Directors as important employees, and such appointed officers shall comply with decisions of the Board of Directors, and shall carry out their duties within the prescribed scope and under the instruction and supervision of the Representative Directors.
  4. MISI’s Corporate Auditors shall exercise their rights as set forth in applicable laws and regulations, and shall audit the appropriateness of MISI’s Directors’ execution of their duties by collaborating with MISI’s Audit Department and Accounting Auditor based on the “Rules of Corporate Auditors’ Board” and the “ Corporate Auditors’ Auditing Standards”.
(2) Compliance
  1. MISI’s Directors and employees shall act in accordance with the “Group Compliance Program”.
  2. MISI shall establish a Chief Compliance Officer and a Compliance Committee in accordance with the “Group Compliance Program”, and shall make efforts to further enhance its compliance system by appointing a Compliance Officer in each department, providing education and training programs regarding compliance, creating a whistle-blower system and establishing certain other systems.
(3) Establishment of System to Ensure the Appropriateness of Financial Reporting

MISI shall develop the “Commercial Transaction Regulations”, the “Accounting Regulations” and other internal regulations, and shall establish an internal system to ensure compliance with accounting standards and other relevant laws and regulations and to ensure the appropriateness of financial reporting. MISI shall also evaluate the design and operational status of such internal system periodically, and strive to make improvements.

(4) Internal Audit

MISI shall establish an Audit Department under the direct control of the President. The Audit Department shall conduct periodic internal audits of every aspect of MISI’s business operations, in accordance with the “Internal Audit Regulations”, in regard to matters such as the status of compliance with applicable laws and regulations, the Articles of Incorporation and internal regulations, and the appropriateness of the procedures and content of execution of duties. The Audit Department shall report the results of such audits to the President, and shall monitor the status of implementation of improvements regarding the matters identified by the internal audit as unsatisfactory and recommended for remediation.

2. System for the Preservation and Management of Information Related to the Execution by MISI’s Directors of their Duties (No. 1 of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)

(1) Preservation and Management of Information

MISI’s Directors shall appropriately preserve and manage legal documents, such as minutes of the Shareholders’ Meetings, minutes of the Board of Directors’ meetings and documents containing information about execution of important duties, together with the related materials, in accordance with the “Document Management Regulations”, the “Information Security Regulations” and other provisions set forth in the internal regulations.

(2) Access to Information

MISI’s Directors and Corporate Auditors shall be afforded access to the information referred to in the above paragraph at all times.

3. Regulations Concerning the Management of Risk of Loss for MISI and Other Relevant Risk Management Systems (No. 2 of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)

Recognizing that risk management is an important task for business operations, and in order to address market risks due to the fluctuation of exchange rates, interest rates, commodity markets and stock prices, credit risk, country risk, investment risk, compliance risk, information security risk and other various risks, MISI shall establish various internal committees such as the Management Committee, the Investment and Credit Committee, etc. and responsible departments, and shall establish necessary risk management systems and techniques by developing the “Credit Risk Management Rule” and the “Criteria for Investment”, setting risk limits and transaction limits and by installing reporting and monitoring systems, by which to control the entire company’s risks, both comprehensively and individually. Furthermore, periodic reviews shall be performed to assess the effectiveness of these management systems.
A business continuity plan has been established to correspond to the occurrence of serious incidents such as natural disasters.

4. System to Ensure the Efficient Execution by MISI’s Directors of their Duties (No. 3 of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)

(1) Management Committee and Various Internal Committees

To allow adequate and flexible decision-making in the execution of their duties, the Management Committee shall be established as a consultative body to the President, and comprehensive management policy, management program and other important matters regarding the execution of duties shall be discussed by the Management Committee. Additionally, circumspect discussion shall be facilitated concerning issues surrounding the management in various areas of business by establishing various internal committees, which implementation shall contribute toward decision-making by the President and the Board of Directors.

(2) Business Divisions and Each Administrative Department/Team

Under the Business Division System, MISI shall transfer the authority of the Board of Directors to the General Manager of each Business Division, who is serving as an Executive Officer, and thus implement a system that can execute swift decision-making both internally and externally concerning products to be handled by the relevant division. MISI shall also perform business management by setting up quantitative goals regarding the main items of the balance sheet and profit-and-loss statement for each business division, and by conducting periodic verification on the degree of attainment of the quantitative goals. In addition, MISI shall establish a system that will enable the execution of duties to be performed in an efficient manner by having each administrative department/team provide control, supervision and support to the Business Divisions in their respective specialized areas.

(3) Clarification of Official Authority/Responsibility

A system shall be established that will enable appropriate and efficient execution of duties by developing various internal regulations such as the “Regulations for Assignment of Duties” and the “Rules for Management Authority and Responsibility” and thus clearly defining the authority and responsibility of each Executive Officer and General Manager.

5. System to Ensure the Appropriateness of Operations of MISI and Operations of the Group of Enterprises Consisting of MISI and its Subsidiaries (No. 5 of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)

(1) System Concerning Reports Made to MISI regarding the Matters Pertaining to the Execution by the Directors of MISI’s Subsidiaries of their Duties (No. 5 (a) of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)
  1. Issues subject to MISI’s prior approval and issues reportable to MISI
    Based on the agreement between MISI and its subsidiaries, obtaining prior approval from MISI or making a report to MISI is required concerning important management matters of the subsidiaries.
  2. Designation of responsible departments, and Dispatch of directors and corporate auditors to each subsidiary
    MISI shall designate a certain department as a Controlling Department that is responsible for each subsidiary and dispatch a director and a corporate auditor to each subsidiary in principle. MISI shall cause all of its subsidiaries to make periodic reports to MISI regarding the subsidiaries’ operating results, financial position and other important information.
(2) Regulations and Other Systems Concerning Management of the Risk of Loss for the Subsidiaries of MISI (No. 5 (b) of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)
  1. Designation of responsible departments
    MISI shall establish a department that presides over all of the group companies including subsidiaries. Moreover, MISI shall designate a Controlling Department that is responsible for each subsidiary, and such departments shall perform business management and shall give management advice to each subsidiary in accordance with the “Consolidated Companies Management Control Regulations” and other internal regulations.
  2. Management Committee and various internal committees
    MISI shall cause its subsidiaries to make reports concerning important matters regarding market risk, credit risk, country risk, investment risk, compliance risk, information security risk and other various risks, and such reports shall be discussed at the Management Committee, various internal committees and other meetings of MISI.
  3. Internal audit
    All of the operations and activities of the subsidiaries are also subject to internal audits by MISI’s Audit Department. Further, MISI’s Audit Department shall promote establishment of an internal audit system for the MISI group, and shall strive to improve the quality of audits as a group by maintaining close coordination with the internal audit organizations within the group.
(3) System to Ensure the Efficient Execution by the Directors of MISI’s Subsidiaries of their Duties (No. 5 (c) of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)
  1. Consolidated medium-term management program
    MISI shall develop a group medium-term management program on a consolidated basis. In order to embody such plan, MISI shall set forth important management objectives and budget allocations, etc. for the entire group for each fiscal year.
  2. Management Committee and various internal committees
    Comprehensive management policies, management program, management issues and other important matters regarding the execution of duties of MISI’s subsidiaries shall be discussed at the MISI’s Management Committee or at other various internal committees.
  3. Group finance
    Group finance shall be implemented to enhance the efficiency of financing within the MISI group.
(4) System to Ensure that the Execution by the Directors and Employees of MISI’s Subsidiaries of their Duties is in Compliance with Applicable Laws and Regulations and the Articles of Incorporation (No. 5 (d) of paragraph 1 of Article 100 of the Ordinance for Enforcement of the Companies Act)
  1. Corporate Governance
    Pursuant to 1. (1) above, MISI shall instruct its subsidiaries to develop a system to ensure that the execution by such subsidiaries’ directors and employees of their duties complies with applicable laws and regulations and the Articles of Incorporation, according to the scale, etc. of each subsidiary.
  2. Compliance
    In accordance with the “Group Compliance Program”, MISI shall provide guidance to its subsidiaries concerning establishment of a compliance system such as establishment of a compliance program, a compliance committee, a compliance officer or other system in each subsidiary. MISI shall also provide compliance education and training to its subsidiaries and thus endeavor to bring about thorough compliance awareness throughout the entire group.
  3. Development of a system to ensure the appropriateness of financial reporting
    MISI shall recommend that all of its subsidiaries implement an audit by accounting auditors.
  4. Internal audit
    All of the operations and activities of the subsidiaries are also subject to internal audits by MISI’s Audit Department. Further, MISI’s Audit Department shall promote establishment of an internal audit system for the MISI group, and shall strive to improve the quality of audits as a group by maintaining close coordination with the internal audit organizations within the group.

6. Matters Concerning Employees who are Required to Assist with MISI’s Corporate Auditors’ Duties, Matters Concerning the Independence of Such Employees from MISI’s Directors and Matters Concerning Ensuring the Effectiveness of Instructions Given to Such Employees by MISI’s Corporate Auditors. (No. 1, No. 2, No. 3 of paragraph 3 of Article 100 of the Ordinance for Enforcement of the Companies Act)

Establishment of an employee to assist with the duties of MISI’s Corporate Auditors (including temporary establishment in special cases) shall be considered based on the request of the Corporate Auditors, and in the case of establishing such employee, the matters concerning such employee shall be in accordance with the provisions of applicable laws and regulations.

7. System for Reporting to MISI’s Corporate Auditors (No. 4 of paragraph 3 of Article 100 of the Ordinance for Enforcement of the Companies Act)

(1) System for Reporting by MISI’s Directors and Employees to MISI’s Corporate Auditors (No. 4 (a) of paragraph 3 of Article 100 of the Ordinance for Enforcement of the Companies Act)
  1. Attendance at important meetings
    In accordance with the audit plan and division of duties determined by the Board of Auditors, MISI’s Corporate Auditors may attend meetings of the Board of Directors, the Management Committee and various internal committees, as well as other important meetings, and may interview MISI’s Directors and other relevant persons regarding the execution of their duties and inspect relevant materials.
  2. Reporting by MISI’s Directors and employees
    1. MISI’s Directors, Executive Officers and the general managers of each administrative department shall regularly report to MISI’s Corporate Auditor about their performance.
    2. In addition to matters required by applicable laws and regulations, MISI’s Directors, Executive Officers and the general managers of each administrative department shall immediately report to MISI’s Corporate Auditors concerning the following matters if they arise (depending on the case, MISI’s Directors and Executive Officers may delegate the making of such report to a general manager, etc., under their supervision).
      • Matter that is in violation of applicable laws and regulations or the Articles of Incorporation, as well as contents of all the decisions that could have a major impact on the finances and business of MISI
      • Contents of announcements on operating results and further forecasts
      • Contents and results of internal audit
      • Status of information provision based on the internal report provision system
      • Contents of administrative penalties
      • Matters requested by MISI’s Corporate Auditors aside from the above items
    3. MISI’s Employees may report directly to MISI’s Corporate Auditors concerning the following matters:
      • Matter that could cause damage to MISI
      • Matter that is in violation of applicable laws and regulations or the Articles of Incorporation, or that has the potential to become a violation
  3. Establishment of Compliance Hotline
    For the purpose of (1) 2. iii. above, MISI shall establish a contact point for reporting to its Corporate Auditors.
(2) System for Reporting to MISI’s Corporate Auditors by MISI’s Subsidiaries’ Directors, Corporate Auditors and Employees and Persons Receiving Reports from Such Persons (No. 4 (b) of paragraph 3 of Article 100 of the Ordinance for Enforcement of the Companies Act)
  1. Reporting by MISI’s subsidiaries’ directors, corporate auditors and employees and persons receiving reports from such persons
    MISI’s subsidiaries’ directors, corporate auditors and employees and persons receiving reports from such persons shall report the following matters regarding such subsidiaries to MISI’s Corporate Auditors through the responsible department or department in charge, or shall report them directly.
    • Matter that could cause damage to the relevant MISI subsidiary
    • Matter that is in violation of applicable laws and regulations or the articles of incorporation, or that has the potential to become a violation
  2. Reporting by MISI’s Audit Department
    MISI’s Audit Department shall report to MISI’s Board of Corporate Auditors concerning the status and result of the internal audits conducted on its subsidiaries.
  3. Establishment of Compliance Hotline
    For the purpose of (2) 1. above, MISI shall establish a report-contact point to its Corporate Auditors. In addition, MISI’s subsidiaries’ employees may report directly to MISI’s Corporate Auditors through the Compliance-Hotline.

8. System to Ensure that Persons are not Treated Unfavorably for Submitting Reports to MISI’s Corporate Auditors (No. 5 of paragraph 3 of Article 100 of the Ordinance for Enforcement of the Companies Act)

MISI prohibits dismissal or any other unfavorable treatment of directors and employees of its group merely because such persons have made a report to MISI’s Corporate Auditors. MISI shall execute the uncompromising dissemination of this policy to the directors and employees of its group companies.

9. Matters Regarding Policies for Procedures on Advancement or Indemnification of Expenses and Other Expenses and Obligations Incurred with Respect to the Execution by MISI’s Corporate Auditors of their Duties (No. 6 of paragraph 3 of Article 100 of the Ordinance for Enforcement of the Companies Act)

(1) If the Corporate Auditors make up a budget for various auditing expenses, MISI shall prepare the corresponding budget.

(2) If the Corporate Auditors make a request for advancement, indemnification, etc. with respect to expenses paid as an emergency or temporary measure, MISI shall process such expenses in a prompt manner pursuant to Article 388 of the Companies Act.

10. Other Relevant Systems to Ensure that Audits by MISI’s Corporate Auditors are Conducted Effectively (No. 7 of paragraph 3 of Article 100 of the Ordinance for Enforcement of the Companies Act)

MISI’s Corporate Auditors shall hold regular meetings with the Representative Directors.
MISI’s Corporate Auditors shall receive audit plans in advance from the Audit Department and the Accounting Auditors, respectively, shall hold regular meetings and shall exchange opinions on the audit policy and report of audit results.
MISI’s Corporate Auditors shall exchange information from time to time with the full-time corporate auditors of MISI’s subsidiaries and shall solicit their opinions concerning the execution of duties within the subsidiaries.

MISI shall continue to review constantly its internal control system in order to improve it and make it more appropriate and efficient. To supervise such efforts, the Internal Control Administration Team shall be established.