Basic Principles Concerning the Internal Control System
Yokowo Co., Ltd.
Yokowo has instituted the following basic principles regarding the establishment of thesystems that are stipulated under the Company Law and its enforcement regulations.
(Basic Principles Concerning the Internal Control System)
In accordance with the Company Law, the Financial Instruments and Exchange Law,
and their associated laws and regulations, Yokowo, as set out below, establishes aninternal control system and ensures that all Directors, Audit & Supervisory Board
Members, and employees comply with all applicable laws and regulations and act in afair and transparent manner in their corporate activities. Also, Yokowo makes every
effort to maximize corporate value and stakeholders’ interests.
(System Establishment)
1 ． A system to ensure that, in performing their required duties, all Directors andemployees comply with all applicable laws, regulations, and the Articles ofIncorporation.
(1) Directors institute the Policy on Corporate Social Responsibility (CSR) and theCompliance Rules, and make them known to all officers and employees so that theexecution of duties by Directors and employees complies with laws, regulations, andthe Articles of Incorporation. Directors also ensure the legal appropriateness ofcorporate business, the credibility of financial statements, and compliance, etc. The
Compliance Rules shall stipulate an internal hotline system to identify and correct at
an early stage activities that infringe on a law, regulations, and Articles ofIncorporation, and/or associated regulations.
(2) The Policy on CSR shall stipulate that Directors are required to take a resolute
attitude against anti-social forces that threaten social order and sound corporate
activities and to have no relation with them, and to familiarize officers and employeeswith these rules. In the event that an officer or employee receives an unlawful demand
from such an antis-social force, the Personnel and Administration Department at theinstruction of the Representative Director and based on the Management Crisis
Control Rules shall cooperate closely with the police, lawyers, and other professional
bodies to reject the demand.
(3) Directors instruct the section in charge of internal audits that audits the operations ofdepartments to identify and prevent unlawful acts and to provide departments withadvice on improving their operating processes.
2. A system to ensure the credibility of financial statements
The President and Executive Officer shall create an internal control system to ensure
the credibility of financial statements and appoint the section in charge of internal
audit to take charge of internal auditing, assessing the implementation of the system,- 1 -and correcting imperfections.
3．Systems related to storage of information and maintenance about Directors’ BusinessConduct(1) In accordance with relevant laws, regulations, and the internal rules of Yokowo,
Directors ensure appropriate storage and maintenance of information related to theirbusiness activities. Any Director or Audit & Supervisory Board Member has a right toaccess the information at any time.
(2) To ensure the appropriate storage and maintenance of the information, Directors
appoint an accountable person in each section who maintains and manages theinformation organizationally and systematically, and periodically monitors the statusof storage and maintenance.
4．Regulations and Other Systems related to Risk Management(1) Yokowo shall institute and develop a Risk Management System (RMS) that identifies
and analyzes diverse risks of loss, and shall conduct preparations, execution,improvements, and reviews as necessary for more stable and smoother businessactivities.
(2) The Risk Management Rules will define risk management policies and risk
management action guidelines to achieve continuous improvement of the RMS.
(3) Yokowo will establish the Risk Management Committee in which the President andExecutive Officer assumes chairmanship and the Personnel and Administration
Department takes charge of the secretariat. In addition, Yokowo will appoint a risk
manager to each of the Headquarters and Business Divisions and a risk management
promotion member to each of the departments for the Company-wide implementationof risk management.
5. Systems to ensure the efficient performance of Directors of their business activities(1) Directors approve the corporate vision, mid-term management plan, and annualmanagement plan. Based on the periodical review and evaluation of the plans,management strategies, such as resource allocations, are determined.
(2) Each Director’s authorities and responsibilities are clearly defined andimplementation of the duties is supervised by Board of Directors.
(3) Through an Executive Officer System built on a departmental structure, the duties,
responsibilities, and authorities of Executive Officers are clearly defined. Operationalauthorities are delegated to the Executive Officers from Corporate President forefficient and speedy decision-making as well as implementation.
6．A system to ensure appropriate operations throughout the Yokowo Group, including
headquarters and subsidiaries.
(1) Based on the Code of Kansayaku Auditing Standards, Audit & Supervisory Board
Members conduct internal audits, improvements, and instruction to all of the Yokowo
Group companies including consolidated subsidiaries so that our organizational
system ensures comprehensive corporate governance.

- 2 -(2) Yokowo implements the necessary measures, instructions, and support required toenhance the effectiveness of internal control system in our consolidated subsidiaries.
(3) Yokowo’s section in charge of internal audit conducts periodical internal audits ofheadquarters and consolidated subsidiaries and reports the audit results to Yokowo’s
Board of Directors as well as presidents of consolidated subsidiaries.
7．Regulations regarding the employees who are requested to support the audit by Audit &Supervisory Board Members in implementing their duties and regarding theindependence of the employees from Directors.
(1) If Audit & Supervisory Board Members request certain employees to support theirduties, dedicated personnel are appointed in the section in charge of internal audits.
(2) The personnel transfer and performance evaluation of employees who supports Audit& Supervisory Board Members are to be decided under the consensus of Audit &Supervisory Board Members so that independence of the employees from Directors issecured.
8．A standard for Directors and dedicated employees in the Internal Audit Department toreport to the auditors, a standard for other employees to report to Audit & Supervisory
Board Members, and a standard to ensure that audits are effectively conducted byAudit & Supervisory Board Members.
(1) Audit & Supervisory Board Members attend meetings of the Board of Directors andother meetings where major decisions are made and request periodical reporting about
important subjects including the status of business activities to Directors andemployees. The necessary information is exchanged at these meetings.
(2) Not only in the periodical reporting mentioned above, Audit & Supervisory BoardMembers have a right to request Directors and employees to report necessary
information at any time.
(3) In addition to the legally stipulated subjects, Directors and employees must report toAudit & Supervisory Board Members the acknowledgement of any incident or possible
emergence of an incident that could have a critical impact on the operation of Yokowo
or consolidated subsidiaries.
(4) Audit & Supervisory Board Members periodically exchange opinions withRepresentative Director (Corporate President) regarding the major issues indicatedfrom the audits.
(5) Audit & Supervisory Board Members maintain close relationship with the section in
charge of internal audits and, if necessary, request the section to conduct
investigations.
(6) Audit & Supervisory Board Members periodically exchange information withaccounting auditors and, if necessary, request accounting auditors to provide
explanations or reports.

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