Internal Control System

Internal Control Report

Sony Financial Holdings filed internal control reports with Ministry of Finance.

Internal Control Report (Summary) (Filed with MOF on June 24, 2009)(PDF / 19KB)

Basic Policy on Establishing an Internal Control System

1. System to ensure that the execution of duties by directors and employees are legally compliant and the in accordance with the Articles of Incorporation

   1. The Board of Directors has established a code of conduct as a basic policy for compliance and made this code clear to Sony Financial Holdings' executives, employees and subsidiaries.
   2. The Board of Directors has created a compliance manual that provides specific compliance guidelines, and a compliance program that defines specific plans.
   3. The Board of Directors has created a compliance supervisory department to promote its compliance program. The compliance supervisor department regularly reports to the Board of Directors on the progress of the compliance program.
   4. The Board of Directors has formulated the Basic Group Policy on Eradicating Anti-Social Influences. This policy describes the firm stance the group takes to counter anti-social influences and build the structure necessary to fulfill this policy.
   5. The Board of Directors has established an internal hotline system and informed Sony Financial Holdings executives, employees and subsidiaries about the system. This system allows employees or other who become aware of business policies, operations or other activities that contravene (or are in danger of contravening) laws and regulations to report directly to a hotline desk. The system prohibits any action from being taken against employees or others who provide such notification.
   6. The Board of Directors has established an internal audit supervisory department, which is independent from other operating departments. The supervisory department liaises and cooperates with the statutory auditors and the accounting auditor; monitors and verifies, from independent and an objective viewpoint, the implementation and operational status of the internal control system; and report regularly to the Board of Directors the status of internal audits.
   7. The Board of Directors has formulated Internal audit regulations, which define the basic policy regarding internal audits, and informed Sony Financial Holdings' executives and employees and subsidiaries.
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2. System for preserving and managing information related to the execution of duties by directors

   Sony Financial Holdings has established Record Management Regulations to ensure that documents pertaining to the execution of duties by directors, such as at Board of Directors meetings and Executive Committee meetings. All records of approvals are appropriately preserved and managed in accordance with these laws and regulations.
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3. Systems on regulations related to the management of danger of loss and other

   1. The Board of Directors has formulated the fundamental principles for risk management activities as basic policy for group risk management and informed Sony Financial Holdings' executives, employees and subsidiaries.
   2. The Board of Directors has established a risk management supervisory department to manage risks appropriately for Sony Financial Holdings and its subsidiaries, in accordance with each entity's scale, characteristics and type of business. This department reports regularly to the Board of Directors on the status of risk management.
   3. The Board of Directors evaluates its subsidiaries' capital adequacy to ensure that their levels of capitalization are sufficient in light of the risks directly facing the Sony Financial Holdings Group and to implement appropriate capital allocations. If necessary, the Board of Directors takes measures designed to strengthen capital bases.
   4. The Board of Directors formulated contingency plans to build a system that enables the Sony Financial Holdings Group to respond rapidly to a crisis and take measures to minimize the impact of these risks. The Board of Directors makes these plans known to Sony Financial Holdings' executives, employees and subsidiaries.
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4. Systems to ensure the efficient execution of duties by directors

   1. The Board of Directors formulates approval regulations, organizational and task-sharing regulations and other internal provisions and created an appropriate structure for the efficient execution of duties.
   2. The Board of Directors has formulated business plan control regulations, which are employed to control non-consolidated and consolidated medium-term business plans and annual business plans.
   3. The departments in charge of business planning reports regularly to the Board of Directors regarding the progress of groupwide plans.
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5. System to ensure the appropriateness of operations by Sony Financial Holdings and the corporate group, including Sony Financial Holdings' parent company and subsidiaries

   1. In addition to exercising shareholder rights, as a financial holding company Sony Financial Holdings ensures the appropriateness of its subsidiaries' operations by exercising management control in accordance with the management control agreements made between Sony Financial Holdings and its subsidiaries.
   2. Sony Financial Holdings deliberates and examines the appropriateness and compliance of groupwide transactions, alliances or new business by subsidiaries that have the potential to significantly impact the management of the group, before the commencement of those transactions. Such issues are resolved at or reported to the Board of Directors.
   3. Sony Financial Holdings' Audit Department takes responsibility for ensuring that its subsidiaries have appropriate internal control systems in place and monitors and verifies the results of internal and third-party audits of subsidiaries.
   4. Sony Financial Holdings and its subsidiaries submit management information about the group as needed to Sony Financial Holdings' parent company and interact with the parent company's internal audit departments.
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6. Items pertaining to employees who assist statutory auditors in their duties

   If directors receive requests by statutory auditors for employees to be allocated to assist them in their duties, the directors assign such personnel without delay.
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7. Independence from directors of employees assigned as mentioned directly above

   Statutory auditors must agree to the appointment, removal and evaluations of employees assigned to assist them in their duties.
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8. System for directors and employees to report to statutory auditors, and other reporting system

   1. If directors or employees are requested to provide business reports to statutory auditors, they do so without delay.
   2. If directors or employees receive notice via the internal hotline system, they report immediately to the statutory auditors.
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9. Other systems to ensure the effectiveness of audits by statutory auditors

   Representative directors endeavor to forge and deepen relationships with statutory auditors based on mutual understanding and trust by foster the environment that is necessary for audits by statutory auditors.

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