Internal Control System

In addition to striving to further strengthen corporate governance, the HOYA Group also works toward the development of sound internal control systems with the objective of ensuring appropriate and efficient business management.

Each business division and facility develops and improves the control environment, evaluates and responds to risk, and verifies and improves the control processes to ensure that the control systems that operate within each division and facility are the most appropriate for their operating environment. The head of each business division has managerial authority and is responsible for improving the business results. Each head is also obligated to seek to further improve internal control systems, with the objectives of maintaining compliance, effectiveness and efficiency of work practices, the reliability of financial reporting and the integrity of management assets.

The Audit Department at HOYA Group Headquarters is responsible for the regular auditing and verification of administrative processes for each division and business office from an independent standpoint. It conducts operational audits, checks that internal control systems are functioning as they should, ensures that there is no dishonesty, and checks for areas for potential improvement. Problems that come to light as a result of audit procedures become the subject of a recommendation for improvement. Particularly important matters are reported to the Audit Committee and the Board of Directors, as well as to the executive officers. The executive officers decide upon and issue directives for speedy, appropriate responses.

Frameworks and Policies Concerning Internal Control Systems

(1) System for Ensuring Adequacy of Operations

Contents of the resolutions the Board of Directors of the Company made with regard to internal control systems set out in (b) and (e) of first item, first paragraph, Article 416 of the Companies Act and Article 112 of the Ordinance for Enforcement of the Companies Act are as follows:

①Important matters in the execution of duties by the Audit Committee
  1. Matters concerning Directors and employees assisting the Audit Committee in its duties
    ・The Audit Committee Office shall be established to assist the Audit Committee in its duties.
  2. Matters concerning independence from the Executive Officers of Directors and employees stated in the above item
    ・The regulations of the Company shall prescribe that the Audit Committee has the power to appoint and dismiss staff members of the Audit Committee Office.
  3. Systems required for reports to the Audit Committee, including reports by Executive Officers and employees
    ・The Board of Directors Regulations were amended to require reporting of all important matters to the Board of Directors, where Outside Directors comprise the majority of Board members. As a result, reports to the Board of Directors cover all important matters. For this reason, no special stipulations are established regarding matters that need to be reported to the Audit Committee.
  4. Other systems to ensure the effectiveness of audits by the Audit Committee
    ・The Company shall position the Internal Audit Division under the Audit Committee. The Internal Audit Division shall conduct audits focusing on onsite audits according to the audit policies and plans adopted or approved by the Audit Committee, and shall report to the Audit Committee as the occasion demands.
    ・Each internal organization shall promptly report information it retains or manages at the request of the Audit Committee or the Internal Audit Division.
②Matters required for ensuring the adequacy of operations
  1. Systems concerning the storage and management of information about the execution of duties by Executive Officers
    ・Efforts shall be made to adequately store and manage important matters, including documents, records and minutes relating to applications for internal approval, in accordance with laws, regulations and other standards.
  2. Regulations and other systems concerning the management of the risk of loss
    ・Each organ and division shall try to identify and manage risks, and shall aim for improvements as the occasion demands, taking into consideration the instructions of the Internal Audit Division, etc.
  3. Systems for ensuring the efficiency of duty performance by Executive Officers
    ・Each division shall carry out its operations according to the annual plan and the quarterly budget adopted at meetings of the Board of Directors.
    The HOYA Group shall ensure the efficiency of Group management by evaluating the levels of target achievement every quarter and working to make improvements as the occasion demands.
    ・Executive Officers shall be timely and precise in performing their duties based on the decision-making system for their execution of duties, which covers their standards for approving important matters.
  4. Systems for ensuring compliance with laws, ordinances and the Articles of Incorporation of the way duties are performed by Executive Officers and employees
    ・The HOYA Group shall secure systems relating to the HOYA Business Conduct Guidelines that need to be observed by Directors and employees of the HOYA Group.
  5. Systems for ensuring the adequacy of Group operations, including a given company, its parent and its subsidiaries
    ・The HOYA Group shall observe across its organization the HOYA Business Conduct Guidelines established based on the Management Policy and Management Principles of the Group, and shall undertake educational activities as required.
    ・The HOYA Group will reinforce the effectiveness of such activities with the HOYA Help Line, an intra-Group system for reporting and counseling. The Group shall operate this system not only in Japan but also overseas to ensure the soundness of Group activities.
③System for ensuring reliability of financial reporting

The HOYA Group shall establish and manage a system of internal controls for financial reporting and build a system for evaluating its financial reporting to ensure the reliability of its financial reporting and valid, appropriate submission of internal control reports as prescribed in the Financial Instruments and Exchange Act.

(2) Basic Policy against Anti-Social Forces

The Company’s Board of Directors has passed the following resolution about basic policy concerning anti-social forces.
The Company shall have no relationship with anti-social forces and will confront such forces resolutely in association with professional organizations, in opposition to any unreasonable demands of those forces.

Internal Control Reporting System (J-Sox)

HOYA has completed the creation of a system for visualizing the status of internal controls over financial reporting for the Group´s key operating divisions. The Group has also created a framework for evaluation of these controls. In the fiscal year under review, the Group will begin conducting verifications of the effectiveness of internal controls. Items that do not conform or for which internal controls are found to be inappropriate or insufficient will be improved, and HOYA will continue its efforts to ensure the reliability of financial reporting.

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