Profile of Various Institutions

Board of Directors

The Board of Directors meets each month to decide on basic management policies and other important business matters, with the aim of maximizing corporate value. This meeting is, in principle, attended by all directors and auditors. The Board is of a scale and composition that emphasize lively debate, consisting of ten internal directors, who each serve for one-year term.

Management Meeting

The Management Meeting is held once a month to deliberate and decide on important business matters. It is attended by all directors, operating officers, and standing corporate auditors.

Operations Structure

The operations structure is the basic framework for the conduct of business, centered on the operating officers (currently twenty-seven officers, eight of whom also serve as directors), who have been given explicit authority and responsibility by the Board of Directors. The conduct of operations is considered and debated at the monthly meeting of the Operating Officers Board.

Board of Corporate Auditors

The Board of Corporate Auditors consists of four corporate auditors (of which, one is a standing corporate auditor), and includes two outside auditors. Corporate auditors attend meetings of the Board of Directors and other important meetings, through which they audit the legality and appropriateness of the business operations of the Board of Directors.

Internal Auditing Structure

Verification of the effectiveness of internal auditing is conducted through the Auditing Department, consisting of four persons, and headed directly by the president of the Company. Coordination meetings among the Board of Corporate Auditors, Auditing Department, and account auditors are held as appropriate, as part of the Company's effort to ensure effective auditing.

Current State of the Internal Control Systems and their Basic Policies

Yamazen believes that internal control is a vital managerial issue. So, all organizations within the group work together under the Chief Operating Officer (COO) for the purposes of ensuring the effectiveness and efficiency of operations and the reliability of financial reporting, as well as compliance with relevant laws and ordinances. The current state of the internal control systems is explained below:

1. Systems for Ensuring Compliance with Laws of Incorporation

Yamazen, recognizing the grave importance of corporate social responsibility and in regarding legal compliance as a crucial managerial issue, has set forth the Charter for the Corporate Behavior of the Yamazen Group, which includes the following:

Yamazen and its group companies aspire to become global companies capable of contributing to countries around the world as well as to local communities as good corporate citizens by maintaining high ethical standards, upholding human rights and complying with laws, internal rules and the spirit thereof.

In order to achieve the principles described above, the directors of Yamazen shall take the lead in promoting, throughout the entire Group, compliance with laws and full awareness of corporate ethics and in providing education and training. The full enforcement of and familiarization with the Charter for the Corporate Behavior of the Yamazen Group, which serves as a code of conduct for its employees, are primarily driven by the CSR Promotion Committee, which administers education and enlightenment on a planned basis.

In an effort to prevent corporate misdemeanors, Yamazen has set up a window within the Company through which company members can report suspicious activities (a system for internal reporting). The system is also designed to ensure the protection of informants with due cause and help corporate ethics take root.

2. Systems for Preservation and Management of Information Related to Directors' Performance

Systems based on Yamazen's document control rules and other relevant company regulations are in place to ensure the preservation and management of information concerning the execution of the directors' duties, which may be viewed by the directors and the corporate auditors at any time.

3.Rules and Systems for Management of Risks Against Losses

The sharing of functions and responsibilities, operational flows and operational rules (control procedures) with respect to the identification of important risks inherent in the Company and the avoidance and minimization thereof, have been defined and placed in order (documented) in the form of rules and regulations, which are to be followed when performing any important processes.

Corporate Planning Department, which doubles as secretariat for the CSR Promotion Committee, is tasked with the duties of providing oversight with respect to risks as assistant to the COO, who also serves as the chairman of the CSR Promotion Committee. Risk management over product liabilities, intellectual properties, quality control and export control is administered by the Credit & Legal Department.

To ensure the effectiveness of the systems, including, among others, the degree of implementation of business processes, the Auditing Department performs periodic audits on the committees and staff divisions and reports findings to the COO. The COO, based on results of such audits, prepares a summary of deficiencies and issues with respect to the systems as well as responses and measures, and submits it to the Board of Directors.

4. Systems for Ensuring Efficient Performance of Directors' Duties

Authority exercisable by the directors in the course of performing their duties has been explicitly defined upon taking into account managerial risks and the scope thereof and upon further clarification of the assignment of duties to the directors.

The Operating Officers Board and other committees undertook deliberations with respect to important issues ahead of formal decision-making to facilitate prompt and proper decisions by the directors.

5. Systems for Ensuring Proper Business Operations within the Yamazen Group

In an effort to ensure proper business operations at Yamazen's Japanese and overseas affiliate companies, systems will be implemented at respective locations commensurate with their sizes and in conformance with the provisions concerning the seconding of officers, rules governing authority (sharing of authority between Yamazen and its affiliates), business reporting, document storage, internal auditing, risk management and education.

6. Provisions Concerning Assistance of Corporate Auditors'

More than one staff member with a prescribed level of knowledge of and experience in accounting or auditing ("Staff of the Corporate Auditors") are assigned to the Corporate Auditors to assist them in performing their duties.

7. Provisions of Independence from Directors of Individuals Assisting Corporate Auditors

All matters concerning the Staff of the Corporate Auditors are subject to approval of the Board of Corporate Auditors.

8. Systems for Reporting to Corporate Auditors and Systems for Reporting to Outside Auditors

Directors and employees are required to immediately report to the corporate auditors in accordance with the internal rules, if they become aware of an incident that has caused or might cause significant damage to the Company or a violation of any law or of the Articles of Incorporation.

9. Systems for Ensuring Effective Auditing by Outside Auditors

The Board of Corporate Auditors holds periodic meetings with representative president in an attempt to confirm the management principles of the Company and to exchange opinions regarding challenges that need to be met by the Company, risks surrounding the Company, the state of the auditing environment for audits by corporate auditors, and significant auditing issues, among others, for better mutual communication.

The Board of Corporate Auditors makes efforts to share views and thoughts with the Audit Department and the account auditors to deepen mutual understanding by maintaining an appropriate relationship and coordination with the Audit Department and by holding periodic discussions with the account auditors.

The standing corporate auditor makes efforts to keep abreast of the developments of the Company by attending management and other important meetings and by reading conference minutes, reports and documents supporting decision-making, among others, and reports to the Board of Corporate Auditors as needed.

Documents whose disclosure is required by law are subject to reporting to and inspection by the Board of Corporate Auditors in advance of such disclosure.

Yamazen's outside auditors (one attorney at law and one certified public accountant) shall dispense active advice from their respective professional positions.

Governance Structure

A diagram of Yamazen's corporate governance structure is as follows.

Diagram of the Corporate Governance Structure