Basic Policy for Internal Control

In accordance with the Companies Act and the Ordinance for Enforcement of the Companies Act, this policy sets forth the provisions necessary to establish an internal control system to ensure the appropriateness of operations within the corporate group comprising the Company and its affiliated companies (hereafter, the "OYO Group," including the Company).

1. System to ensure compliance with laws, regulations, and the Articles of Incorporation in the execution of duties by directors and employees of OYO Group companies (Compliance System)

  1. In accordance with the OYO Group's Corporate Code of Conduct and Business Conduct Guidelines, which are based on its management philosophy and vision, the Group shall promote sound corporate activities by ensuring compliance with laws and social norms.
  2. To ensure the thorough implementation of the Corporate Code of Conduct and Business Conduct Guidelines, the Group shall establish a compliance department. This department shall provide compliance education to directors and employees of OYO Group companies as needed, in accordance with the compliance regulations and compliance handbook, to foster a culture of compliance management.
  3. The Group shall inform its directors, corporate auditors, and employees about the establishment and operation of the internal whistleblowing and consultation system. It shall also implement strict measures to ensure that whistleblowers and those seeking consultations do not face any disadvantageous treatment as a result of reporting or seeking advice.
  4. The Group shall take a firm stance against anti-social forces and organizations that threaten social order and safety, working in cooperation with law enforcement and other relevant authorities.
  5. The Company's internal audit department shall conduct regular internal audits of the Company and its affiliated companies and report the results to the Board of Directors and the Audit & Supervisory Committee.

2. System for retaining and managing information related to directors' execution of duties (Information Retention and Management System)

  1. The Group shall properly manage and retain documents, electronic records, and other information related to the execution of duties by directors (including Board of Directors meeting minutes, Executive Officer meeting minutes, committee meeting minutes, approval documents, and contracts; hereafter, "Governance Records") in accordance with document management regulations and other relevant policies.
  2. The Group shall review operational status and revise regulations as necessary.
  3. Directors shall have access to Governance Records as necessary.

3. Regulations and systems for managing risk of loss (Risk Management System)

  1. The Group shall prevent and mitigate risks in accordance with risk management regulations, which define a systematic approach to risk management.
  2. The Representative Director and President shall serve as the head of risk management, with a designated department overseeing risk management.
  3. Business office managers shall formulate a risk prevention plan at the beginning of each fiscal year and implement the plan.
  4. The risk management department shall develop and disseminate an emergency business continuity manual, outlining response measures for emergencies, including natural disasters.

4. System to ensure efficient execution of duties by directors (Efficient Business Execution System)

  1. In accordance with the Board of Directors regulations, the Board of Directors shall make decisions on important management matters and supervise the execution of duties by directors.
  2. By implementing an executive officer system that clearly defines the delegation of business execution authority and accountability, the Company shall enable directors to focus on their management functions.
  3. To clarify business execution authority and areas of responsibility, the Company has established Board of Directors regulations, organizational regulations, authority regulations, and approval regulations. In accordance with these regulations, the Company shall strive to accelerate decision-making through a proper and efficient business execution framework.
  4. The Company shall formulate a medium-term management plan and set annual management targets for the entire Group and each Group company to achieve the plan's objectives. It shall also appropriately manage progress toward these targets.

5. System to ensure the appropriateness of operations within the OYO Group (OYO Group Management System)

  1. The Company shall require its affiliated companies to submit regular reports in accordance with the Domestic and Overseas Affiliate Management Regulations and to report and seek approval as stipulated in the Domestic and Overseas Affiliate Reporting Standards.
  2. The Company shall hold regular management meetings with its affiliated companies, receiving reports on their business performance and exchanging information on overall Group management.
  3. The Company shall require its affiliated companies to establish risk management regulations and related frameworks to enable each company to prevent or mitigate risks.
  4. The Company shall require its affiliated companies to implement regulations and related frameworks similar to those outlined in Section 4, Efficient Business Execution System, tailored to their size and business model to support the efficient execution of duties by directors.

6. Matters related to employees assigned to assist the Audit & Supervisory Committee, their independence from other directors (excluding those who are Audit & Supervisory Committee members), and measures to ensure the effectiveness of instructions given to these employees

  1. The Board of Directors shall promptly respond to requests from the Audit & Supervisory Committee for the appointment of assisting employees. The number of assisting employees and their selection shall be determined through consultation with the Audit & Supervisory Committee.
  2. Any appointment or transfer of assisting employees requires prior consent from the Audit & Supervisory Committee.
  3. Assisting employees shall perform their duties under the instructions of the Audit & Supervisory Committee and shall not be subject to direction or orders from directors (excluding those who are Audit & Supervisory Committee members).
  4. The Company shall ensure that appointed assisting employees fully understand the importance and independence of their duties, as instructed by the Audit & Supervisory Committee, by providing appropriate guidance and training before they begin their duties.

7. System for reporting to the Company's Audit & Supervisory Committee by directors (excluding those who are Audit & Supervisory Committee members), corporate auditors, and employees of OYO Group companies, and recipients of their reports, as well as other reporting systems to the Audit & Supervisory Committee

  1. Directors (excluding those who are Audit & Supervisory Committee members) and corporate auditors of OYO Group companies shall provide timely reports on their management conditions upon request from the Company's Audit & Supervisory Committee. If they identify a material compliance violation or an issue that could cause significant harm in the execution of their duties, they must report it to the Audit & Supervisory Committee immediately.
  2. Directors (excluding those who are Audit & Supervisory Committee members) or the heads of the compliance departments at OYO Group companies shall regularly report to the Company's Audit & Supervisory Committee on the operational status of their internal whistleblowing systems and any reported or consulted matters. Significant whistleblowing or consultation matters must be reported to the Company's Audit & Supervisory Committee immediately.
  3. No individual who submits a report under Item 1 shall face disadvantageous treatment as a result of doing so. The Audit & Supervisory Committee shall ensure the confidentiality of the whistleblower's identity and any related information.
  4. Directors (excluding those who are Audit & Supervisory Committee members), corporate auditors, and employees of OYO Group companies shall provide explanations regarding their business execution at any time upon request from the Company's Audit & Supervisory Committee.

8. Matters related to the payment of expenses incurred in the execution of duties by Audit & Supervisory Committee members (limited to duties related to the Audit & Supervisory Committee)

  1. If an Audit & Supervisory Committee member requests an advance payment or reimbursement of expenses incurred in the execution of their duties (limited to duties related to the Audit & Supervisory Committee), the Company shall promptly process such expenses or liabilities, unless it determines that the requested expenses are unnecessary for the execution of the Audit & Supervisory Committee's duties.

9. Other systems to ensure the effective execution of audits by the Audit & Supervisory Committee

  1. Audit & Supervisory Committee members may attend important meetings, such as the Executive Officer meeting, and express their opinions.
  2. The Representative Director and President shall hold regular meetings with the Audit & Supervisory Committee to exchange opinions.
  3. The Audit & Supervisory Committee shall hold regular meetings with the accounting auditor and outside directors to exchange opinions.
  4. The Audit & Supervisory Committee may instruct the internal audit department to conduct investigations or other necessary actions as needed.

10. System to ensure the accuracy and reliability of financial reporting (Evaluation and Reporting System for Internal Controls over Financial Reporting)

  1. The Group shall establish the necessary framework to ensure the accuracy and reliability of financial reporting within the OYO Group.
  2. The Group shall periodically assess the effectiveness of the above system and report the evaluation results to the Board of Directors.
  • Date of Establishment: May 12, 2006
  • Last Revised Date: March 26, 2025
Internal Control System

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Governance

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Code of Conduct