The Basic Policy regarding Internal Control

NEG approved the basic policy regarding internal control at its board of directors meeting as follows.
*Issues that may have major impacts on investor decisions are listed under “Major risks concerning business operations, etc.”

(1)Systems to ensure that the execution of duties by Directors and employees shall comply with laws and regulations and the Articles of Incorporation of the Company and its subsidiaries

The Company has established the Compliance Committee as a specialized body that continuously ensures compliance with laws and regulations as well as corporate ethics within the NEG Group, and the committee shall implement the following: 1) planning of revision of “Corporate Philosophy”, “The NEG Group Code of Conduct” and “Principles of Activities,” and planning, preparing and implementing various measures to disseminate them throughout the NEG Group companies; 2) collecting and analyzing information about compliance including movement of social conditions, relevant laws and regulations at home and abroad, and providing training; and 3) operating an Internal Reporting System (Liaison Offices: Compliance Committee and a law firm). The details of these implemented actions shall be regularly reported to the Board of Directors and the Corporate Auditors.

The Internal Auditing Department (the Auditing Division) shall implement internal auditing of each division and Group companies from an independent position based on internal auditing regulations and the auditing plan, and shall report the status of implementation to the President as necessary.

(2)Systems for storage and management of information related to execution of duties by Directors

Documents concerning execution of duties by Directors (approval documents and other decision-making documents, minutes of meetings, etc.) shall be kept and managed appropriately in compliance with laws and regulations as well as the document management rules and other rules set by the Company.

(3)Regulations and other systems concerning risk management for loss

The Company assesses risks periodically, identifies any management risks and takes necessary measures to mitigate or eliminate them.

Risks of businesses of the Company which it recognizes as important (such as compliance, finance, environment, disaster, control of trade, information management, quality, product safety, safety and health) shall be overseen by the responsible departments or by specialized committees through means such as establishing regulations and guidelines, providing training and preparing manuals as the need arises.

As for risks that have newly arisen, the President will promptly determine the personnel responsible for them and implement countermeasures.

Issues of particular importance to management shall be discussed at and reported to the Board of Directors Meeting and the Management Committee.

(4)Systems to ensure efficient execution of duties by Directors

The Company has introduced the Executive Officer System and business group system approach in order to clarify management targets and efficiently operate businesses, and will set an annual budget (business plan) by business group and on a company-wide basis at the Board of Directors Meeting. In addition, the Company shall manage business achievements on a monthly basis and discuss and examine important management issues from various perspectives at the Board of Directors Meeting, Management Committee and meetings of business groups.

In order to make sure that necessary information is conveyed to interested parties and an appropriate decision is made on a timely basis, information technology such as electronic approval systems is utilized.

(5)Systems to ensure the appropriateness of operations of the NEG Group comprising the Company and its subsidiaries

The Company shall establish and ensure compliance with the “The Group Code of Conduct” and the “Principle of Activities”, which will be the standards for judgment and behavior of Directors and employees of the NEG Group, and will also operate the Internal Reporting System.

Furthermore, to ensure the appropriateness of the NEG Group’s financial reporting, the Company and its Group companies shall establish and operate the necessary organizational systems and the Internal Auditing Department (the Auditing Division) shall evaluate the validity of such systems.

In addition, the Company sends directors and corporate auditors to its subsidiaries and establishes a system for business consultation by designating the executive officers in charge at each subsidiary. The Head Office’s administration departments or relevant production divisions also exchange information regularly with the subsidiaries. In this way, the Company gains a full understanding of the management issues faced by the subsidiaries and resolves them. The Company also regularly carries out risk surveys of the Company and its subsidiaries to ascertain the risks faced by the Group and minimizes them appropriately. In particular, the Company prepares lists of the matters that its foreign subsidiaries should report to the Company, such as serious natural disasters, and when problems do occur, the Company ascertains the situation and promptly responds. The top management of the Company and its subsidiaries shall hold meetings to improve management efficiency as the need arises.

The Company utilizes Group finance and a shared Group accounting system to improve the efficiency of Group operations.

(6)Matters related to employees assigned to assist Corporate Auditors in their duties and independence of such employees from Directors in the event Corporate Auditors’ request such employees

Employees who belong to the Administrative Division shall assist the duties of Corporate Auditors as the need arises. In the meantime, opinions of Corporate Auditors concerning transfer, etc. of such employees shall be respected.

(7)Systems concerning reporting to Corporate Auditors

Directors and employees shall report without delay before or after the fact on matters that would have an important influence on the NEG Group. In addition, responsible personnel shall report the status of operation of the Internal Reporting System and the status of implementation of internal auditing as deemed appropriate.

Directors and employees shall report promptly when requested by the Board of Corporate Auditors.
Corporate Auditors collaborate with the subsidiaries’ Corporate Auditors in order to ascertain auditing problems in the subsidiaries.

(8)Systems to ensure that person reporting to Corporate Auditors is not treated unfairly because of such reporting

The status on the use of the Internal Reporting System is reported appropriately to the Corporate Auditors, and internal regulations prohibit any discriminatory treatment of the person using the Internal Reporting System for reasons of his/her report, such as loss of his/her job.

(9)Items related to policies on procedures for advance payment or redemption of expenses and other treatment of expenses or debts incurred in Corporate Auditors’ performance of his/her job

Procedure for payment of expenses incurred in the Corporate Auditors’ execution of his/her duties will be implemented upon the request of the Corporate Auditor.

(10)Other systems to ensure that auditing by Corporate Auditors will be performed effectively

The Corporate Auditors shall exchange opinions with the Representative Director, Independent Auditor and the Auditing Division as deemed appropriate.

  • Revised on May 1, 2015