Internal Control System

１．System to ensure that the execution of duties by directors and employees complies with laws, regulations, and the Articles of Incorporation

1. The Company and each of its Group companies establish Authority Rules and Schedules of Authority, and a system is in place under which the Company deliberates on matters involving Group companies according to their level of significance.
2. To ensure compliance with laws, the Articles of Incorporation, and internal regulations, the Company formulates the ALCONIX Director and Employee Compliance Manual and the Compliance Handbook. The Compliance Handbook is distributed to all officers and employees, including those of Group companies, and training is provided.
3. The Company establishes internal audit regulations and internal audit implementation guidelines to monitor and improve the performance of duties by each organization and Group company.

２．System for the storage and management of information related to the execution of directors' duties

Information related to the execution of duties by directors shall be recorded in writing or on electromagnetic media and stored and managed in accordance with laws, regulations, and internal regulations.

３．Regulations and other systems for managing the risk of loss

1. The Company and its Group companies stipulate a method for reviewing internal authorization forms in the Authority Rule and Schedule of Authority. For important decisions, the Company establishes a system to monitor and control decision-making across the entire Group.
2. The Company identifies various risks that could lead to losses across the entire Group, establishes internal regulations and responsible departments to prevent the occurrence of losses, and minimizes the impact of losses when they occur.
3. Internal regulations are continuously reviewed from the perspective of efficiency and effectiveness in response to changes in circumstances and the environment.

４．System to ensure the efficient execution of duties by directors

1. The Board of Directors holds a regular meeting once a month and convenes extraordinary meetings as necessary.
2. Matters to be resolved by the Board of Directors are specified in the Board of Directors regulations.
3. Items to be presented to the Board of Directors are discussed in advance at the Management Committee, the Internal Control Committee, the Risk Management Committee, and other relevant bodies, in order to enhance the functions and efficiency of the Board.
4. The Company formulates a medium-term management plan and annual budgets, and each organization and Group company establishes and executes plans to achieve these objectives.

５．System to ensure the proper conduct of business within the corporate group consisting of the Company and its subsidiaries

1. The Company dispatches full-time directors, executive officers, and other employees to each Group company to serve as part-time directors who directly participate in Group company management and provide advice.
2. In addition to part-time directors, the Company designates a management officer for each Group company, establishes internal regulations for each company, and appropriately understands the current situation through attending the Board of Directors meetings of each company as an observer, thereby providing necessary guidance.
3. To ensure the Company recognizes the risks in the decision-making of Group companies, the Company deliberates on important internal authorization matters based on the Authority Rule and Schedule of Authority of each Group company.
4. The Company and its Group companies ensure the proper conduct of business by distributing the ALCONIX Director and Employee Compliance Handbook to officers and employees and providing training on its contents.
5. Based on standard guidance and guidelines related to sustainability, we identify the risks and opportunities facing the Company and its Group companies and work to enhance corporate value.

６．Matters related to employees who assist with the duties of the Audit & Supervisory Board members

1. The Company establishes an Audit & Supervisory Board Member Office to support the duties of the Audit & Supervisory Board members and assigns dedicated employees to this office.
2. The appointment, evaluation, transfer, etc., of such employees requires the consent of the Audit & Supervisory Board, and the system ensures that these employees remain independent from the Board of Directors.

７．System for reporting to the Audit & Supervisory Board members

1. If a director or employee recognizes that there is a risk of significant loss to the Company, they shall immediately report it to the Audit & Supervisory Board members.
2. Full-time Audit & Supervisory Board members shall attend meetings of the Board of Directors and other important meetings, review important documents such as internal authorization forms, request explanations from directors and employees as necessary, and express their opinions.
3. Misconduct and cases of legal violations reported to both internal and external reporting channels, domestically and internationally, established in accordance with the internal reporting system, are reported by the department responsible for the internal reporting system to the Audit & Supervisory Board members through the Compliance Committee, including the number of cases and the details of significant incidents.
4. In the internal reporting system, it is explicitly stated that no disadvantageous treatment shall be given for making such a report.

８．System to ensure the effective execution of audits by the Audit & Supervisory Board members

1. The Company bears the costs necessary for the proper and appropriate execution of duties by the Audit & Supervisory Board members.
2. The director in charge of internal control and the Audit Department hold regular meetings with the Audit & Supervisory Board and report on the status of the internal control system.
3. The Audit Department consults with the full-time Audit & Supervisory Board members in formulating the audit plan and strives for proper and efficient internal audits.