(1) Purpose of Internal Control

①Officers and employees of Nihon Dempa Kogyo Co., Ltd. (hereinafter referred to as the "Company") and its subsidiaries (hereinafter collectively referred to as the "NDK Group") shall, based on the "Corporate Ethics Regulations" and the "Compliance Regulations," deeply recognize the social responsibility of the NDK Group, comply with relevant laws and regulations, and strive to practice behavior consistent with social ethics in the execution of daily operations.

②The Company aims to implement management measures from the perspective of stakeholders and to enhance its medium- to long-term corporate value.

(2) Basic Approach to Internal Control

To achieve this purpose, the NDK Group has established and publicly disclosed the NDK Group CSR Guidelines. The Company positions compliance with the CSR Guidelines as an important element of compliance in the NDK Group.

The basic principles of the CSR Guidelines are as follows:

①We will pursue the contribution to best interests of our customers according to our Mission that is based on our Founding Principles. At the same time, we will uphold high ethical standards and fulfill our social responsibility of helping to create a sustainable society.

②We will comply with relevant laws and regulations and the like in all our business activities.

③We are aware of our mission and responsibility as one of the world's leading manufacturers. We will, therefore, make best effort to develop and offer useful, safe and reliable products and services that benefit society, to earn trust and confidence of consumers and customers, and to increase their satisfaction.

④We are dedicated to free competition and fair trade, and will strive to maintain sound and normal relationships with political organizations and administrative authorities.

⑤We will uphold and respect human rights, diversity, individuality, and personal characteristics, and provide a safe and pleasant workplace.

⑥We are committed to and responsible for proactively and continuously undertaking initiatives to protect the global environment.

⑦We will disclose or provide corporate information to stakeholders in a timely and appropriate manner.

⑧We will take appropriate security measures to ensure that any information we may obtain in the course of business, including personal or customer information, is properly protected and managed.

⑨We will make effort not to have any involvement with social forces or organizations.

⑩We will respect the cultures and customs of the countries in which we operate, and strive to contribute to the development of such countries and our local communities.

(3) Corporate Philosophy

The NDK Group adopts "Wave Motion Tech Moves Our Future!" as its corporate philosophy and positions the "Four Commitments" and "Four Core Values" as its foundation.

①Four Commitments

We will continue to take on the challenge of a sustainable future

We will continue to refine our world-leading research and technological capabilities

We will aim to create new value and promote co-creation with industry, government, and academia

We will put respect for each individual at the core of our activities

②Four Core Values

Quality: Focus on Quality in our thoughts and actions

Challenge: Challenge yourself to create the future, and never give up

Teamwork: Bring together the strongest Teamwork

Initiative: Aspire, and refine your Initiative

(4) Information Disclosure

The Company shall comply with the Companies Act, the Financial Instruments and Exchange Act, and other applicable laws and regulations, as well as the rules of the Tokyo Stock Exchange, and shall disclose corporate information in a timely and appropriate manner in accordance with the Corporate Information Disclosure Management Regulations.

(1) For the purpose of complying with corporate ethics required of the NDK Group by society, including laws and ethics, the Company has established the "Corporate Ethics Regulations," the "Compliance Regulations," and the "CSR Guidelines," and has made them known to officers and employees of the NDK Group.

(2) The Company has established an independent advisory committee that submits recommendations to the Board of Directors regarding proposals on the nomination, disciplinary action, dismissal, and compensation of directors and executive officers that are resolved by the Board of Directors. The independent advisory committee is chaired by an independent outside director, and a majority of its members consist of independent outside directors.

(3) The Board of Directors has established a system to strengthen supervision over the executive side, including thorough compliance. In order to achieve this purpose, regulations that constitute the foundation of internal control incorporate a management review mechanism, and the status of operation is deliberated regularly by the Board of Directors.

(4) A compliance committee chaired by an executive officer has been established, and efforts are being made to thoroughly disseminate compliance and to develop a legal register. In addition, requirements under laws identified in the legal register are reflected in the CSR Guidelines and are incorporated into operational procedures, thereby reducing the risk of violations of compliance.

(5) Each department of the NDK Group consults with the legal affairs department as necessary in the execution of its duties, and the legal affairs department consults with external experts such as attorneys as necessary.

(6) The Internal Audit Office, which reports directly to the President and Representative Director, conducts periodic audits of major business sites of the NDK Group, confirms that compliance is being observed, and reports to the President and Representative Director, the Board of Directors, and the Audit & Supervisory Board.

(7) The Company has established internal whistleblowing regulations as a reporting system for cases where acts in violation of compliance are conducted or are about to be conducted, in order to enable early detection, and has developed a whistleblowing system applicable to the entire NDK Group, and has ensured that it is continuously made known to officers and employees. The NDK Group thoroughly enforces prohibition of disadvantageous treatment, prohibition of identifying the whistleblower, and exclusion of interested parties with respect to such reports.

(8) Corporate auditors (audit & supervisory board members) have adopted a system to audit the appropriateness of the execution of duties by directors based on the Rules of the Board of Corporate Auditors and the auditing standards for corporate auditors.

(9) The Company allocates appropriate personnel and develops and promotes the establishment and operation of internal control systems to ensure the reliability of reporting.

(10) Regarding the reliability of financial reporting, the Company conducts effective development and operation of company-wide internal control and business process control based on the internal control reporting system under the Financial Instruments and Exchange Act.

(11) The Company thoroughly severs relationships with antisocial forces and organizations and does not maintain any relationship with them, taking a firm stance against antisocial forces to avoid involvement in antisocial acts. The Company does not respond to any unjust demands from antisocial forces and takes a firm stance as an organization as a whole. Each company of the NDK Group makes efforts to ensure the safety of officers and employees in responding to antisocial forces. For this purpose, when we identify situations that may involve antisocial forces, we must promptly report to supervisors or relevant departments.

(1) The Company strengthens the function of the secretariat of the Board of Directors, enhances the content of agenda items for the Board of Directors, and provides support so that discussions at meetings of the Board of Directors become more active.

(2) The Company records important information related to the execution of duties by directors, including statutory documents such as minutes of shareholders meetings and minutes of meetings of the Board of Directors, as well as approval documents, in documents or electronic media, and stores and manages such information appropriately in accordance with laws and regulations and internal rules.

(3) The Company conducts, as necessary, verification of the status of storage and management, responses to requests for inspection from directors and corporate auditors, and review of rules as appropriate.

(1) Based on risk management-related regulations, the Company has established a Risk Management Committee chaired by the President and Representative Director, Executive Officer, and conducts identification, assessment, response, and management of various risks pertaining to the NDK Group.

(2) As a result of risk identification and assessment, key risks are specified and responses are implemented across departments.

(3) In response to environmental, social, and governance risks, the Company has established a sustainability team and is promoting the development of systems for responding to risks.

(4) In response to information security risks, the Company has established an Information Security Committee and has established a system to strengthen information security measures, including the acquisition of information security certifications.

(5) In each decision-making process, appropriate risk assessments are conducted, and it is required that risk response measures be taken in advance.

(6) For major risks that are anticipated, appropriate business continuity plans are formulated, and response capabilities are enhanced through regular training.

(7) The Internal Audit Office, in cooperation with the Risk Management Committee, audits the status of risk management in each department and reports the results periodically to the President and Representative Director, the Board of Directors, and the Board of Corporate Auditors.

(8) Events in which risks have actually materialized (hereinafter referred to as "materialized risks") shall be handled based on risk management-related regulations. Depending on the scale of the materialized risk, reports are made to the President and Representative Director, Executive Officer. The President and Representative Director forms an appropriate response team according to the content of the materialized risk.

(9) Uncertainties that contribute to the creation of business opportunities and growth shall be reflected in strategies and measures through the department in charge of corporate planning, and the Risk Management Committee shares information with the department in charge of corporate planning.

(1) The Company separates supervision and execution, and the Board of Directors allocates time to deliberation on medium- to long-term management issues, while delegating substantial authority to the executive side with respect to ordinary management issues.

(2) The Board of Directors develops a system to supervise the status of operation of the internal control system in order to carry out the delegation of authority described above. In order to ensure the effectiveness of this supervision, regulations that constitute the foundation of internal control, including the approval regulations, are made matters to be resolved by the Board of Directors. The departments responsible for each regulation confirm the status of operation of each regulation and report to the Board of Directors.

(3) In order to deliberate on medium- to long-term management issues, the Company provides deliberation items in the agenda of the Board of Directors.

(4) The executive side, which has received the delegation of authority, establishes an Executive Officers' Meeting as an advisory body centered on executive officers, deliberates on important management issues, and submits recommendations to the President and Representative Director.

(5) In order to ensure proper and efficient execution of duties by directors and employees, the Company develops internal control-related regulations such as the organizational regulations, regulations on division of duties, regulations on authority and responsibility, and approval regulations, and clarifies the authority and responsibility of each position, and also continuously improves decision-making processes.

(1) The Company has established regulations for the management of affiliated companies for the purpose of smoothly conducting management under close mutual cooperation and promoting the comprehensive development of business by defining the basic operations for the management of affiliated companies. Under these regulations, production headquarters is the supervising department for production-related companies and sales service headquarters is the supervising department for sales-related companies, while at the same time, matrix management is conducted in which the relevant departments of the Company manage the operations of affiliated companies across functions.

(2) The Company manages affiliated companies based on the basic principle of fulfilling social responsibility required of the NDK Group, including strengthening internal control, and promoting the development of business from the perspective of maximizing the profit of the NDK Group, so that both can develop together.

(3) Regarding the Company's various regulations, the Company clearly distinguishes between regulations that should be operated under the same standards within the NDK Group, such as the Corporate Ethics Regulations, risk management-related regulations, and compliance-related regulations, regulations that define the standards to be secured by the NDK Group in areas such as labor and occupational safety and health, and regulations that should be left to the discretion of affiliated companies, and deploys such regulations.

(4) Regarding matters to be decided by affiliated companies, while it is a basic principle to leave such matters to the discretion of affiliated companies, the Company clearly distinguishes matters to be decided at its own discretion, matters requiring its approval, and matters requiring reporting to it, and reflects these in the regulations of affiliated companies.

(5) The Risk Management Committee, the Compliance Committee, the Information Security Committee, and others also address issues of the NDK Group. In addition, the internal whistleblowing regulations apply to the entire NDK Group.

(6) With respect to decision-making processes of affiliated companies, the Company has established a function for managing affiliated companies within the administration division and conducts appropriate monitoring.

(7) Corporate auditors and the Internal Audit Office conduct audits of the status of each company of the NDK Group.

When corporate auditors require employees to assist in their duties, corporate auditors may request assistance from relevant departments. In such case, such employees shall follow the instructions and orders of the corporate auditors when assisting their duties.

With respect to personnel matters such as the appointment and transfer of employees who assist the duties of corporate auditors, prior consent of a full-time corporate auditor shall be obtained, and with respect to duties assisting corporate auditors, performance evaluation of such employees shall be conducted by the full-time corporate auditor.

(1) Directors and employees of the NDK Group shall immediately report to the Board of Corporate Auditors of the Company when they discover facts that may cause significant damage to the NDK Group.

(2) Directors and employees of the NDK Group shall immediately report to corporate auditors of the Company, in addition to matters stipulated by laws and regulations, facts that may have a significant impact on the finance and business of the NDK Group, and details of decisions.

(3) In order to enable early detection of matters in which the execution of duties by directors and employees does not comply with laws and regulations and the Articles of Incorporation, the Company has established internal whistleblowing regulations and has developed and operates an internal whistleblowing system applicable to the entire NDK Group.

(4) Internal whistleblowing under the internal whistleblowing regulations ensures protection of whistleblowers and prevention of identification of whistleblowers, and the content of whistleblowing from directors and employees of the NDK Group and the status of responses are reported to corporate auditors of the Company in a timely manner.

(5) The NDK Group shall not treat in any disadvantageous manner any person who has made reports under the preceding three paragraphs for the reason of having made such reports.

(6) Corporate auditors attend important meetings such as meetings of the Board of Directors and meetings of executive officers in order to understand the process of important decision-making and the status of execution of operations.

(1) Corporate auditors conduct regular exchanges of information and opinions with the President and Representative Director and maintain close coordination with the Internal Audit Office, share information mutually, and conduct effective audits concerning the operations and assets of the Company and other matters.

(2) Corporate auditors also maintain close coordination with the accounting auditor, exchange opinions and information regarding audit results of financial statements, and conduct rigorous and efficient audits.

(3) When corporate auditors request the Company for advance payment of expenses, etc. pursuant to Article 388 of the Companies Act in connection with the execution of their duties, the Company shall deliberate such request in the relevant department and promptly process such expenses or liabilities unless it is recognized that such expenses or liabilities are not necessary for the execution of duties of such corporate auditors.

Directors shall conduct self-evaluations of their performance as directors in order to continuously improve the effectiveness of the Board of Directors and shall submit the results to the Board of Directors.

Based on the self-evaluations of each director, the Board of Directors shall analyze and evaluate the overall effectiveness of the Board of Directors each year and shall disclose a summary of the results and measures to improve its effectiveness.