Basic policy on internal control system(Revised on June 28, 2016)

1. Basic policy of management
The basic policy of Piolax, Inc. and its group companies ("Piolax Group") is, under themanagement principle of "Pioneer to create elasticity", to study "elasticity" of metal, resin,
and other various materials and to widely contribute to automobile, life-related, and medical
industries and the society.
In order to realize the basic policy, we set an action guide in conducting business in harmony
with shareholders, customers, employees, business partners, local communities, and otherconcerned parties in order to become a company which 1) gives priority to customer needs,
2) is development-oriented, 3) aims the best rather than the largest, 4) flexibly responds tochanges, and 5) has active corporate culture.

2. System to ensure the compliance of execution of duties by the directors
and employees with laws, regulations and articles of incorporation
As an organization to control overall compliance, "Compliance Committee" is establishedwhich the president chairs and in which directors who are Audit and Supervisory Committee
members take part.
The Compliance Committee designates a director in charge of compliance, and thesecretariat is placed in Planning & Management Dept.
The Compliance Committee prepares rules for building compliance system, creates manuals,
draws up practical measures for information system, etc., and transmits them to relevant
departments upon an approval of the board of directors and Audit and Supervisory
Committee.
The Compliance Committee also instructs directors and employees to perform the activities
adhering to laws, articles, and the basic policy of management.
In addition, reporting system is introduced in which any director or employee who notices

actual or possible violation of compliance reports to the head of Planning & Management
Department, head of Internal Audit Department, or directors who are Audit and Supervisory
Committee members.
An informant shall be protected free from any adverse action.

3. Rules and other systems to manage the risk of losses
In terms of risk management of compliance, product quality, technical information,environment, disaster, etc., relevant departments set rules and manuals, provide education,and prepare an internal audit system. Concerning quality and environment, they receive
periodic external audit by an international certification body for ISO, QS, etc.
Planning & Management Dept. manages accuracy of financial statement, operating results,
and other financial information and their timely disclosure based on laws and rules.
An integrated computer system (ERP) is also introduced to reinforce credibility andtraceability of risk management system.
Internal Audit Department, which is in charge of internal audit, audits adequacy of operations
and accuracy of accounting procedures in tandem with directors who are Audit andSupervisory Committee members and accounting auditors to report to the president.

4. System to ensure effective execution of duties by directors
The board of directors is regularly held once a month to decide basic management policies
and important matters, and monitor performance of directors.
In an adopted operating officer system, authority of business fields is assigned to president
and executive directors to speed up decision making process.
Management meeting has been newly established as a meeting structure to guide
appropriate management judgment, which is held monthly joined by directors and operating
officers to make a decision necessary for execution of operation based on management
policies determined by the board of directors.
Moreover, managerial information will be shared between the board of directors and themanagement meeting in order to thoroughly implement operation policies and establish thesystem sensitive to business risks.
After a mid-term management plan and then an annual policy and budget are drawn up, each
Strategic Business Unit (SBU) drafts its own budget and action plan and monitor its
performance based on them.

5. System to store and maintain information on director performance
Documents (including electronic records) are stored and maintained according to laws andthe company rules.
Directors can access them at any time.

6. System to ensure adequate operation in Piolax GroupThe Compliance Committee irons out differences in idea of compliance and controls
compliance in Piolax Group.
Piolax, Inc. dispatches its officers and employees to subsidiaries and major affiliates as
directors or auditors who supervise their performance on a constant basis.
Their performance is regularly reported in writing to the board of directors. Also, theirimportant managerial decisions basically require a prior approval of Piolax, Inc. based on thecompany rules.
Internal Audit Department audits subsidiaries in cooperation with directors who are Audit andSupervisory Committee members and accounting auditors based on the company rules.

7. System to eradicate antisocial forces
Piolax Group cope with undue claims by antisocial forces in a resolute attitude and never has
relation with them. In coalition with specialized agencies, relevant sections gather informationon them to share in-house through training, etc.

8. Matters concerning employees to support
Committeeanddirectors

whoareAudit andmembersofSupervisory

theCommittee,independence of such employees from directors (excluding directors whoare Audit and Supervisory Committee members), and securing
effectiveness of instructions to such employees by Audit and Supervisory
Committee and members of the Committee.
Appropriate employees are assigned to support Audit and Supervisory Committee andmembers of the Committee. The assigned employees are not imposed any constraint by adirector (excluding directors who are Audit and Supervisory Committee members) or other
employees in conducting assistant work requested by Audit and Supervisory Committee andmembers of the Committee.
If such employees are subject to personnel reshuffles or punishment, a prior approval ofAudit and Supervisory Committee is required. Directors who are Audit and Supervisory
Committee members have the right to comment on their personnel evaluation.

9. Systems to report to Audit and Supervisory Committee and to ensure
effective implementation of audit by Audit and Supervisory Committee andmembers of the Committee
Any director or employee who knows a fact which may bring significant damage on thecompany or a serious fact which is against laws or the company rules reports to Audit andSupervisory Committee immediately.
Directors and employees who make such reports shall not be subject to disadvantageous
treatment at Piolax Group due to making reports.
Directors who are Audit and Supervisory Committee members attend the board of directors
and other meetings in which major management decisions are made, screen important
documents on work performance, and, as needed, ask explanation to relevant directors(excluding directors who are Audit and Supervisory Committee members) and employees.
Audit and Supervisory Committee holds a periodic meeting to exchange opinions with thepresident and the accounting auditor.

10. Matters concerning policies on the handling of expenses or debts resulting
from the execution of the duties by the board of directors who are Audit andSupervisory Committee members.
If directors who are Audit and Supervisory Committee members request advance payment ofexpenses, etc. on their execution of duties in accordance with Paragraph 4 of Article 399-2 ofCompanies Act, Piolax Group shall pay the amount or debt promptly except that the case isrecognized as not necessary by the relevant department in charge.
If directors who are Audit and Supervisory Committee members request the hiring of outside
experts (lawyer, certified public accountant, etc.) who will serve as advisors to the them,
Piolax Group shall bear the expenses except in cases where it proves that such hiring is notnecessary for the execution of the duties.