Internal Control

Our internal control system is based on Japan’s Companies Act and utilizes basic policies decided upon by the Board of Directors in order to build a system that ensures proper business operations. We also have a system for ensuring appropriate financial reporting in compliance with the internal control reporting system, which is based on the Financial Instruments and Exchange Act. The status of financial reporting internal controls is evaluated by the internal control department of the Auditing Division, which reports directly to the president.

In the Internal Control Report released in March 2026, our financial reporting-related internal controls for fiscal 2025 were assessed as “effective.” A report by an outside auditing company also assessed the controls as being appropriate in all key aspects.

The Company approved the Basic Policy Regarding Internal Control at its Board of Directors meeting as follows.
Issues that may have major impacts on investor decisions are listed under “ Risk Management: Business Risks.”

The Company has established the Compliance Committee as a specialized body that continuously ensures compliance with laws and regulations as well as corporate ethics within the Group, and the committee shall implement the following: [1] planning of revision of Corporate Philosophy, Code of Conduct, and Principles of Activities, and planning, preparing, and implementing measures to disseminate such materials throughout the Group; [2] collecting and analyzing information about compliance including movement of social conditions, relevant laws and regulations in Japan and other countries, and providing training; and [3] operating a whistleblowing system. The details of these implemented actions are regularly reported to the Board of Directors and the corporate auditors.
If an illegal act or other misconduct involving a director or an executive officer of a Group company is reported, the Compliance Committee shall report the details to the corporate auditors in a timely manner.
The internal control department of the Auditing Division shall implement internal auditing of each division and all Group companies from an independent position based on internal auditing regulations and the auditing plan, and shall report on the status of implementation to the president and the corporate auditors as necessary.

Documents concerning execution of duties by directors, such as approval documents, decision-making documents, and meeting minutes, shall be kept and managed appropriately in compliance with laws and regulations as well as the document management rules and other rules set forth by the Company.

The Company conducts periodic risk assessments, identifies any management risks, and takes necessary measures to mitigate or eliminate them.

In cases involving any business risks that are deemed significant, such as pertaining to the procurement of materials, a natural disaster, accident, information security, or the environment, responsible divisions or specialized committees formulate regulations and guidelines, conduct training, prepare manuals, and undertake additional activities as deemed necessary.

The president promptly designates responsible personnel and initiates countermeasures for any newly identified risks that arise.

Issues of particular importance to management shall be discussed at and reported to the Board of Directors meetings and the Management Committee.

The Company uses an executive officer system and a business group structure to ensure the management goals are clear and operations are efficient. The Board of Directors sets annual budgets and business plans for each business division and for the Group as a whole. In addition, the Company shall manage business achievements on a monthly basis and discuss and examine important management issues from various perspectives at the Board of Directors meetings, Management Committee meetings, and business group meetings.

In order to make sure that necessary information is conveyed to interested parties and appropriate decisions are made on a timely basis, information technology such as electronic approval systems is utilized.

The Company has established and is ensuring compliance with the Code of Conduct and Principles of Activities, which comprise the standards for judgment and behavior of directors and employees of the Group, and it also operates the whistleblowing system. If an illegal act or other misconduct involving a director or an executive officer of a Group company is reported, the Compliance Committee shall report the details to the corporate auditors in a timely manner.

In addition, to ensure the appropriateness of the Group’s financial reporting, the Group has established and is operating the necessary organizational systems, and the internal control department of the Auditing Division) evaluates the validity of such systems.

Besides the above actions, the Company shall identify and resolve management issues of subsidiaries as deemed appropriate, by means such as dispatching directors and corporate auditors to subsidiaries, determining executive officers in charge of each subsidiary, establishing a system for accepting consultations regarding execution of businesses, and having the administration departments of the Head Office or relevant business groups exchange information regularly with subsidiaries. In addition, risk assessments of the Company and its subsidiaries shall be regularly conducted, and the Company shall identify the risks for the Group to take measures as deemed appropriate. The Company maintains a list of items that overseas subsidiaries must report in the event of a large-scale natural disaster or other incident. The Company also plays an active role in identifying issues and preparing countermeasures. The top management of the Company and subsidiaries shall hold meetings to improve management efficiency as the need arises.

The Group utilizes centralized financing and a common accounting system to ensure operational efficiency.

Employees who belong to the Administrative Division shall assist corporate auditors in their duties as the need arises. We also consider the opinions of corporate auditors regarding matters such as employee reassignment.

Directors and employees shall report to the corporate auditors without delay, either in advance or after the fact, any matters that could have a significant impact on the Group. In addition, responsible personnel shall report as appropriate on the status of operation of the whistleblowing system and the status of implementation of internal auditing. If an illegal act or other misconduct involving a director or an executive officer of the Company or the Group companies is reported, the Compliance Committee shall report the details to the corporate auditors in a timely manner.

Directors and employees shall promptly report to the corporate auditors when requested.

Corporate auditors shall cooperate appropriately with the corporate auditors of subsidiaries to understand issues related to subsidiary audits.

The operation status of the whistleblowing system is reported to corporate auditors when appropriate. Dismissals or other disadvantageous treatments against reporters under the whistleblowing system for the reason of such reporting shall be prohibited, as specified in rules set forth by the Company.

Regarding expenses arising from execution of duties of a corporate auditor, payment processing shall be made based on a request from the corporate auditors.

The corporate auditors shall exchange opinions with the representative director, accounting auditor, and the Auditing Division as deemed appropriate.