Internal Control

Fundamental Policy for Establishment of Internal Control
System (Excerpt)
The Company has formulated a fundamental policy concerning theestablishment of an internal control system to ensure appropriateness ofoperations pursuant to a resolution of the Board of Directors. An outline of thepolicy is as follows.

1. System ensuring that the execution of duties by Directors
conforms to applicable laws, regulations and the Articles ofIncorporation(1)	Directors shall execute their duties based on the Group’s Corporate Code ofConduct, which sets forth the Group’s corporate ethics, and the Guidelines
for the Conduct of Group’s Clerks, which must be taken into account in thecourse of duties, and comply with the Rules for Directors, which codify
basic considerations for directors. In principle, Board of Directors meetings
shall be held once a month, and on other occasions as required, to promote
communication among directors and enable mutual supervision of theexecution of duties. The Board shall be operated in accordance with theBoard of Directors Regulations in order to prevent violations of laws and theArticles of Incorporation by ensuring proper business activities. The
Company is a company with an Audit & Supervisory Committee system,
wherein each Audit & Supervisory Committee Member audits the progressof the execution of duties by directors according to the policy and thedivision of tasks set forth by the Audit & Supervisory Committee and, whennecessary, voices opinion, prohibits action by a director and/or devises
other appropriate measures.
(2)	The Board of Directors shall establish systems to cut off and resolutely
eliminate any and all relationships with anti-social forces.

2. System for retaining and maintaining information regarding
the execution of duties by Directors
With respect to information concerning the execution of duties by Directors, theCompany shall retain the minutes of the Board of Directors meetings, along withother relevant materials, for a period of 10 years in accordance with the Boardof Directors Regulations, and maintain them in a state that renders themaccessible as needed. Other important documents shall also be maintained in
an appropriate manner, depending on the storage medium, in accordance with
the Information Asset Management Standards and internal regulations, andshall be maintained in a state that renders this information accessible asneeded.

3. Regulations and other systems concerning managing
exposure to loss(1)	The Company recognizes (a) credit risks, (b) market risks, (c) liquidity risks,(d) operational risks and (e) other risks which could have a serious impact
to the business as key risks involved in the execution of the Group’soperations. Specific risks shall be identified and managed, and acomprehensive risk management system established. A detailed definitionof each risk shall be provided in the Group’s basic risk management rules.
(2)	The Company shall establish an equity capital management system and an
asset evaluation management system to ensure the soundness andappropriateness of the Group’s operations through sufficient capital
adequacy proportionate to the risks.
(3)	Each type of risk shall be managed in accordance with the Group’s basic
risk management policy set forth in the Group’s basic risk management
rules and other regulations pertaining to risk management. The Corporate
Administration Department shall be responsible for the comprehensive

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CHUGIN FINANCIAL GROUP, INC.

management of the Group’s risks, a responsible department shall beassigned to each type of risk and such committees as the Risk
Management Committee shall be established to ensure appropriate riskmanagement.
(4)	A risk management plan shall be created when formulating strategic
objectives, such as business plans or the Medium-Term Management Plan.
The management status of each type of risk shall be reported to the Boardof Directors on a regular basis.
(5)	The Company shall establish necessary systems, including the Emergency
Countermeasures Headquarters in the event of unforeseen circumstances,and respond appropriately to prevent the spread of damage in accordancewith the Risk Management Manual.

4. System to ensure the efficient execution of duties bydirectors(1)	Matters that impact the Group’s operations, deemed to be significant
matters requiring the resolution of the Board of Directors, shall bediscussed and deliberated on in advance in the presence of the Audit &Supervisory Committee Members by the Group Management Committee,
which is comprised of the chairman, vice chairman, president, vicepresident, senior managing director and managing directors.
(2)	Business execution pursuant to a resolution of the Board of Directors shallbe in accordance with the decision-making authority and procedures
stipulated in the Rules Defining the Extent of Job Authority and various
other rules.

5. System ensuring that the execution of duties by employees
conforms to applicable laws, regulations and the Articles ofIncorporation(1)	The Company shall establish the Group’s Corporate Code of Conduct, theGuidelines for the Conduct of Group’s Clerks, the Rules on Compliance withLaws and Regulations etc., and the Compliance Manual in order to ensure
a compliance framework. The contents of employment regulations andother rules, as well as guidelines for the handling of business affairs andother guidelines, shall be in compliance with all pertinent laws and theArticles of Incorporation.
(2)	T he Group Compliance Committee chaired by the president shall beestablished to foster a corporate culture that emphasizes compliance,enhancing compliance systems and monitoring the status of legal
compliance. The Corporate Administration Department shall be responsible
for overall compliance management and shall examine various measuresrelated to the compliance.
(3)	V arious measures shall be taken in a systematic manner in order toestablish a compliance framework, such as the formulation and review of
the annual Compliance Program, which serves as the Group’s basic
compliance policy and implementation plan, as well as periodic
compliance-related checks and compliance training.
(4)	The Audit & Inspection Department shall be established as an internal audit
department independent from the business execution departments, andshall perform audits to ensure that employee duties are in compliance withlaws, regulations, the Articles of Incorporation and other obligations.
(5)	Should legal violations or other compliance-related facts be detected, anappropriate response shall be taken in accordance with employee
regulations via the Management Help Line and other means as an internalreporting system.

6. System ensuring the appropriateness of operations
throughout the Chugin Financial Group(1)	Chugin Financial Group Management Regulations shall be formulated inorder to ensure appropriateness of business operations and effective
business management with respect to each company of the Chugin
Financial Group. Each Group company shall formulate its own rules inaccordance with the Company’s rules and establish systems befitting its
business content and organizational structure to ensure the appropriatenessof its business operations.
(2)	The Company shall formulate standards related to deliberation andreporting for each company in the Chugin Financial Group and shallmanage the business of the Group companies based on a system formaking final decisions and receiving reports in accordance with said
standards. Of the final decisions and reporting matters to the Company,
those of importance shall be reported to the Company’s Audit & Supervisory
Committee Members. The Company shall conclude an audit agreementwith each Group company and conduct internal audits.
(3)	Each group company shall formulate the Group’s basic risk management
rules to assess and manage each type of risk as well as to establish thesystem of a comprehensive risk management while they deliberate andreport the predetermined matters in accordance with the Chugin Financial
Group Management Regulations. The Company shall respond appropriately
to prevent the spread of damage in accordance with the Risk Management
Manual in the event of unforeseen circumstances.
(4)	Business execution pursuant to a resolution of the Board of Directors ineach Chugin Financial Group company shall be in accordance with thedecision-making authority and procedures stipulated in the Rules Defining
the Extent of Job Authority and various other rules.
(5)	The Company shall establish the Group’s Corporate Code of Conduct, theGuidelines for the Conduct of Group’s Clerks and the Compliance Manual toensure a compliance framework. The contents of employment regulations
and other rules shall be in compliance with laws, regulations and theArticles of Incorporation.
(6)	The Chugin Financial Group shall formulate regulations concerning theManagement Help Line, an internal reporting system whereby employees
can report any wrongdoing directly to top management in order to maintainthe sound operation thereof.
(7)	E ach Group company shall report any legal violations in business
management or content of management guidance by the Company as wellas any other compliance-related issues to the Company’s Audit &Supervisory Committee Members.
(8)	The Chugin Financial Group shall comply with all laws, standards and otherobligations concerning accounting practices and establish an internalcontrol system to ensure the appropriateness of the Group’s financial
reporting.

7. Provisions for hiring assistants to the Audit & Supervisory
Committee Members, if required, their independence fromdirectors (excluding directors who are the Audit &Supervisory Committee Members) and ensuring of theeffectiveness of directions to the assistants by theCommittee Members

Supervisory Committee Members with their duties.
(2)	Employees who are to assist the Audit & Supervisory Committee Members
shall be stipulated to perform investigation, planning, management andinstruction concerning the audits of the Committee Members, which isordered by the Members, without performing additional work related to theexecution of duties by directors. The Audit & Supervisory Committee
Members shall be consulted and their agreement obtained before adecision is made regarding the evaluation, appointment and reassignmentof employees who are to assist the Audit & Supervisory Committee
Members with their duties to ensure independence from directors(excluding directors who are the Audit & Supervisory Committee Members.)

8. System for reporting to the Audit & Supervisory CommitteeMembers(1)	In accordance with the Standards of Reporting to Audit & Supervisory
Committee Members, directors and employees shall report to the Audit &Supervisory Committee Members matters that may have a significant
impact on the Company’s business and other matters essential to report ina timely manner. Notwithstanding the foregoing, the Audit & Supervisory
Committee Members may also request reports from directors andemployees as required.
(2)	In accordance with the Chugin Financial Group Management Regulations,those who are reported from directors, Audit & Supervisory Board Members
and the others in the subsidiaries shall report to the Audit & Supervisory
Committee Members important matters which may have impact on theCompany’s business and other matters essential to report, to the Audit &Supervisory Committee Members in a timely manner.
(3)	The Company and the subsidiaries shall not give any disadvantageous
treatment such as dismissal to directors and employees who reported thematter due to the report.

9. Matters for policies for procedures for advance payment
or reimbursement of expense incurred from the execution ofduties by the Audit & Supervisory Committee Members andfor handling of the other expense or debt incurred regarding
the execution of the duties
In accordance with the Auditing Standards for Audit & Supervisory Committee,
the Company shall include a budget in advance for the expenses acknowledgedby the Audit & Supervisory Committee to be necessary for the execution ofduties. Expenses expended urgently or temporary may be claimed to theCompany for reimbursement after the event.

10. System to ensure that audits of the Audit & Supervisory
Committee Members are implemented effectively
The Company works to ensure the effectiveness of the audits performed by theAudit & Supervisory Committee Members by having them attend meetings
where decisions that have a significant impact on business management aremade, as well as through the circulation of important documents to them andtheir collaboration with the Internal Audit Department, certified publicaccountants and outside certified public accountants in accordance with theAudit & Supervisory Committee Regulations and the Auditing Standards forAudit & Supervisory Committee. Representative Directors shall exchange
opinions with the Audit & Supervisory Committee on a regular basis, andenhance mutual awareness of such matters as to the issues to be addressed by
the Company and improvement of the environment for Audit & Supervisory
Committee Members.

(1)	The Company shall place assistants to the Audit & Supervisory Committee
Members in the Secretariat as employees who are to assist the Audit &CHUGIN FINANCIAL GROUP, INC.

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