Note: This document has been translated from a part of the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.
Translation
June 25, 2025
Company name: Kyosan Electric Manufacturing Co.,Ltd. (Securities code: 6742; Tokyo Market)
Name of representative: Ryoji Kunisawa
Representative Director, President
Inquiries: Yuichiro Saito
Strategy Planning Headquarters General Manager of Affairs & Legal Dept.
Telephone: +81-45-503-8100
Regarding Partial Revision of the Basic Policy on Internal Control SystemThe Company regularly reviews the Basic Policy on Internal Control System. We hereby notify you that necessary revisions were made and resolved at the meeting of the Board of Directors held on June 25, 2025 as follows, while the basic approach remains unchanged.
The revised parts are indicated with underlines.
Basic Approach to Corporate Governance
The Company believes that excellent governance means operating businesses that enhance the corporate value of the Company for all stakeholders, through fair and open businesses managed from a long-term perspective as a going concern that balances both environmental and social considerations, while aiming to maximize shareholder value. Based on this principle, we strive to establish healthy and functional corporate governance, and to build a corporate ethics system that ensures the transparency and soundness of corporate activities.
Overview of Corporate Government System
The Company has adopted the structure of a company with Audit & Supervisory Board Members, aiming at maintaining and improving its corporate governance system by strengthening the functions of the Board of Directors while utilizing the supervisory function of Audit & Supervisory Board Members.
The Company has also adopted an executive officer system. This system enhances and revitalizes the functions of the Board of Directors, which is the highest level of the Company's decision-making bodies and is in charge of supervising the Company's management, while improving and accelerating the execution of business by Executive Officers. Meanwhile, the Company has appointed Outside Directors and Outside Audit & Supervisory Board Members to reinforce the supervising and monitoring functions of its management.
Directors are appointed to terms of one year in order to ensure strong management practices by clarifying their management accountability and to flexibly develop a management system that can respond quickly to changes in
the operating environment.
Board of Directors
The Board of Directors consists of seven Directors (including four Outside Directors). The Board of Directors holds a regular meeting once a month, in principle, and an extraordinary meeting as necessary to deliberate, approve, and decide on matters provided by laws and regulations, matters related to management plans, and other important matters related to the organization, systems, personnel affairs, financial affairs, facilities, and labor agreements, as well as supervises the execution of business.
In addition, the Nomination and Remuneration Committee has been established as a voluntary advisory body to the Board of Directors to strengthen the supervisory function of the Board of Directors by ensuring objectivity, fairness, and transparency in the procedures for nominating Directors and determining their remuneration.
Corporate Strategy Council
The Corporate Strategy Council is chaired by the President and consists of General Managers of Headquarters and Divisions, etc.
The Corporate Strategy Council holds a meeting once a month, in principle, and an extraordinary meeting as necessary to discuss and decide on management issues that span the entire company or multiple departments, issues related to sustainability, and the status of execution of matters decided by the Corporate Strategy Council.
Executive Committee
The Executive Committee is chaired by the President and consists of Executive Officers, Full-Time Audit and Supervisory Board Members, and other persons designated by the President.
The Executive Committee holds a meeting once a month, in principle, and an extraordinary meeting as necessary
to discuss and decide on matters related to business execution to be brought before the Board of Directors, matters related to the execution of decisions made by the Board of Directors or the Corporate Strategy Council, matters related to business execution by each department based on management plans, and important matters related to sales, technology, and production.
Audit & Supervisory Board
The Audit & Supervisory Board consists of four members (including two Outside Audit & Supervisory Board Members).
The Audit & Supervisory Board decides audit policies, receives reports on audits from each Audit & Supervisory Board Member, and receives reports on audits from the Accounting Auditors as needed. The Audit & Supervisory Board works closely with Accounting Auditors, the Internal Auditing Office, and Audit & Supervisory Board Members of subsidiaries to keep track of the operational status of internal control.
Audit & Supervisory Board Members attend the Board of Directors' meetings and other important meetings related to management to check the soundness of management and transparency of the decision-making process. The Audit & Supervisory Board Members also primarily verify the legality, appropriateness and validity of Directors' execution of duties through reports from Directors and the review of critical corporate authorization documents. Full-Time Audit & Supervisory Board Members attend Executive Committee meetings and report the details thereof at Audit & Supervisory Board meetings.
Enhancement of the Internal Control System and Risk Management
As a company that is engaged in businesses deeply linked to public needs, public interests and community safety, we believe that it is essential to have a strong sense of responsibility, integrity and ethics, while complying with laws, regulations and community standards. Based on this belief, we have created and are operating an internal control system for the Company, including its subsidiaries.
Compliance
The Company has appointed the President as the chief administrator of compliance (Compliance Officer).
The Company and its subsidiaries strive to fully comply with laws, regulations, rules, social and corporate standards of ethics and the Code of Conduct.
Risk Management
The Company has appointed the President as the chief administrator of risk management (Risk Management Officer).
To strengthen risk management, the Company and its subsidiaries have established a risk management system based on the "Risk Management Regulations."
Internal Audit
The Audit & Supervisory Board evaluates the status of development and operation of the internal control system, as well as assesses risks related to the business execution of the Company and its subsidiaries and requests improvements and makes proposals based on audits regarding the effectiveness, efficiency and legality of business operations.
Resolutions Concerning the Internal Control System
Systems to ensure that the execution of duties by Directors and employees of the Company and directors, etc. (directors and other individuals equivalent thereto) and employees of its subsidiaries complies with laws and regulations and the Articles of Incorporation
(Article 362, Paragraph (4), Item (vi) of the Companies Act; Article 100, Paragraph (1), Item (iv) of the Regulations for Enforcement of the Companies Act)
Audit & Supervisory Board Members primarily audit the legality, appropriateness and fairness of the execution of duties by Directors. In the event of any act that violates or may violate laws and regulations or the Articles of Incorporation at the Company or its subsidiaries, Audit & Supervisory Board Members shall take the necessary measures, such as providing Directors with recommendations and advice.
All officers and all employees of the Company and its subsidiaries shall practice the Code of Conduct that prescribes specific rules to be observed in the pursuit of corporate objectives, and comply with the Basic Compliance Regulations as guidelines for compliance with laws, regulations and the Articles of Incorporation and respect for corporate ethics.
Officers in charge of the General Affairs & Legal Dept. shall ensure thorough dissemination of the Code of Conduct and the Basic Compliance Regulations to all officers and all employees of the Company and its subsidiaries as guidelines for compliance with laws, regulations and the Articles of Incorporation and respect for corporate ethics.
The General Affairs & Legal Dept. shall conduct compliance education for all officers and all employees of the Company and its subsidiaries based on the Basic Compliance Regulations.
The Compliance Committee shall deliberate on significant compliance issues of the Company and its subsidiaries, and report them to the chief administrator of compliance (President), the Board of Directors and the Audit & Supervisory Board.
The General Affairs & Legal Dept. shall raise awareness and promote the use of compliance consultation & whistleblowing desks (Helpline) available for all officers and all employees of the Company and its subsidiaries.
All officers and all employees of the Company and its subsidiaries shall take a firm stance against anti-social forces.
Systems for retention and management of information relating to the execution of duties by Directors (Article 100, Paragraph (1), Item (i) of the Regulations for Enforcement of the Companies Act)
The Company shall establish the "Information Security Policy" as well as "Information Management Regulations," "Documents Management Regulations" and other relevant rules and regulations to develop and operate appropriate information management systems.
The Company shall manage documents and information relating to the execution of duties of Directors appropriately in accordance with laws and regulations and internal regulations.
Regulations and other systems for management of the risk of loss of the Company and its subsidiaries (Article 100, Paragraph (1), Item (ii) of the Regulations for Enforcement of the Companies Act)
The Company has established a risk management system based on the "Risk Management Regulations," and the chief administrator of risk management (President) shall oversee and manage the management risks of the Company and its subsidiaries.
The Company shall establish the "Risk Management Committee" to recognize, analyze and control management risks of the Company and its subsidiaries. Under the Risk Management Committee, the "Management & Financial Risks Committee," "Disaster Risk Committee" and "Information Risk Committee" shall be established as individual risk committees. The operation status of such individual risk committees shall be reported to the Risk Management Committee promptly by the head of each individual risk committee, and shall be further reported to the chief administrator of risk management at the discretion of the head of the Risk Management Committee.
Systems to ensure that the execution of duties of Directors and directors, etc. of subsidiaries is performed efficiently
(Article 100, Paragraph (1), Item (iii) of the Regulations for Enforcement of the Companies Act)
Directors and directors, etc. of subsidiaries shall develop specific items to be implemented for the achievement of management targets based on the annual management plan and ensure their implementation.
The Board of Directors shall confirm the execution status of duties of Directors and directors, etc. of subsidiaries, and make necessary decisions.
Systems to ensure the appropriateness of operations of the Company and its subsidiaries
(Article 100, Paragraph (1), Item (v) of the Regulations for Enforcement of the Companies Act)
The Company shall endeavor to ensure the appropriateness of business operations by communicating its management policies and other important matters at the Board of Directors' meetings and other meetings, and by holding liaison meetings with its subsidiaries.
The Corporate Planning & IR Dept. shall receive reports on important matters from subsidiaries on the execution status, etc., periodically or as necessary to confirm the appropriateness of business operations based on the "Affiliated Companies Management Regulations."
Both the Company and its subsidiaries shall be subjected to audits by the Internal Auditing Office, which shall audit their business and evaluate the status of development and operation of their internal control systems.
The Company shall establish and operate common compliance consultation & whistleblowing desks (Helpline) internally and externally for both the Company and its subsidiaries.
The Company shall, in accordance with relevant regulations, refrain from treating any person disadvantageously as a result that such person has contacted the Helpline described in Paragraph (4) above for consultation or whistleblowing.
Matters concerning employees appointed to assist the duties of Audit & Supervisory Board Members at their request
(Article 100, Paragraph (3), Item (i) of the Regulations for Enforcement of the Companies Act)
At the request of Audit & Supervisory Board Members, the Company shall assign dedicated or concurrent staff to assist them in their duties. Further, when appointing and/or removing such staff for Audit & Supervisory Board Members, the Company shall obtain the consent of the Audit & Supervisory Board Members.
When assigning dedicated or concurrent staff as Audit & Supervisory Board Members, the Company shall ensure the independence of such staff from any person executing operations relating to the services of such staff for the Audit & Supervisory Board Members. Further, in order to ensure the effectiveness of instructions from Audit & Supervisory Board Members, the staff for Audit & Supervisory Board Members shall not receive
directions or orders from the Company.
Systems for reporting to Audit & Supervisory Board Members and systems to ensure that persons who have made such reports are not treated disadvantageously due to making such reports
(Article 100, Paragraph (3), Item (ii) of the Regulations for Enforcement of the Companies Act)
All officers and all employees of the Company and its subsidiaries shall report any risk that could have a material impact on the Company or its subsidiaries to Audit & Supervisory Board Members. Further, the head of the Compliance Committee shall report the content of any reporting made through the Helpline and the results of investigations thereof to Audit & Supervisory Board Members in accordance with relevant regulations.
The Company shall refrain from treating any person disadvantageously as a result that such person has made the report as described in Paragraph (1) above.
Audit & Supervisory Board Members shall attend important meetings and express their opinions, and also shall regularly exchange information and collaborate closely with the Internal Audit Office.
Systems to ensure that audits of Audit & Supervisory Board Members are performed effectively (Article 100, Paragraph (3), Item (iii) of the Regulations for Enforcement of the Companies Act)
Audit & Supervisory Board Members shall hold meetings with Representative Directors regularly to exchange opinions on management policies, issues and risks to be addressed by the Company, progress status on the improved audit environment of Audit & Supervisory Board Members, important auditing issues, and other matters. Audit & Supervisory Board Members shall also exchange information with other Directors, Executive Officers, and Accounting Auditors, etc., regularly, and request a report as appropriate and necessary.
Audit & Supervisory Board Members may make use of external experts in the performance of their duties as necessary.
When an Audit & Supervisory Board Member requests advance payment, etc. of expenses arising with regard to execution of his/her duties, the Company shall process such expenses or obligations unless it is deemed unnecessary for the execution of the duties of such Audit & Supervisory Board Member.