Basic Approach and Status of the Internal Control System

The Fujitec Group has enacted the Basic Policy on Internal Control by a resolution of the Board of Directors based on the Global Mission Statement, the Fujitec Philosophy of Human Resource Management and the Fujitec Corporate Action Rules. Based on this policy, Fujitec has an Internal Control Department to promote related activities. That Department also responds to evaluations and audits of the internal control system by working to understand the operation processes of each business execution division and upgrading the internal control system. We have also established dedicated committees for compliance, risk management and information management systems, and these provide the necessary guidance and management for effective business execution.

Basic Policy on Internal Control Systems

• Systems to ensure that the execution of duties by directors and employees of the Company and its subsidiaries complies with laws, regulations, and the Company’s Articles of Incorporation
  (1) The Company shall establish the “Fujitec Global Mission Statement”, “Fujitec Philosophy of Human Resource Management”, and “Fujitec Corporation Action Rules” and shall provide them to the Company and its subsidiaries in order to promote compliance across the entire corporate group in its operation and management.
  (2) Directors and corporate officers of the Company and its subsidiaries shall take the initiative to carry out and comply with the “Fujitec Global Mission Statement”, “Fujitec Philosophy of Human Resource Management”, and “Fujitec Corporate Action Rules”, and shall work towards establishing and maintaining a robust corporate culture as a member of society by conforming to social norms and ethics.
  (3) The Company’s Board of Directors shall supervise the execution of the duties of the directors, in addition to making decisions concerning important business operations of the Company in accordance with laws, regulations, and the Company’s Articles of Incorporation.  In the decision-making process, the Company’s Board of Directors will listen to opinions of outside experts as necessary, and make a proper and reasonable judgment based on the fair and objective advice and opinions of outside directors and auditors.
  (4) The Company’s Directors shall report immediately to the Company’s Board of Directors if they find any problem with respect to compliance with laws, and regulations or the Company’s Articles of Incorporation in the course of the execution of their duties.
  (5) The Company shall establish the “Internal Audit Office” as a department independent from the executive department. In order to achieve effective management targets, the Internal Audit Office shall, pursuant to the “Basic Rules on Internal Control,” examine the effectiveness of the risk management, control and governance processes of the Company and its subsidiaries, and based on this evaluation, shall provide opinions, advice, recommendations and support for improvement, and shall make reports to the Company’s Board of Directors on a regular basis.
  (6) In order to promote compliance on a group-wide basis, the Company shall establish the “Compliance Committee” to formulate and oversee the implement the Company’s compliance program which shall include guidance and education for employees.
  (7) The Company shall promote, on a group-wide basis, including its main subsidiaries, the establishment and utilization of the “Compliance Hotline” to collect information from employees that would not usually be collected through the organizational ladder and to conduct investigations into such information and, if the Company identifies a violation or suspected violation of laws and regulations, to take appropriate measures to rectify or remedy such violation or suspected violation.
  (8) In order to prevent damage to the Company that may be inflicted by anti-social forces, the Company shall decide on a company policy which, among others, provides that the Company must never accept unreasonable claims from anti-social forces, and the Company shall keep every director, auditor, and employee informed about this company policy.

• Systems regarding the preservation and management of information pertaining to the execution of duties by directors
  (1) The Company shall establish rules regarding management, preservation method, and preservation period for various types of documents and records pertaining to the execution of the duties of directors of the Company in accordance with the Company’s Rules on Document Management, and shall make such rules available for inspection at any time.
  (2) In order to properly preserve and manage information, prevent the leakage of information, and detect the risk of leakage at an early stage, the Company shall establish an Information Security Policy, make it known on a group-wide basis, and shall establish the “Information Security Committee” to implement measures to properly preserve and manage information in accordance with the Information Security Policy.

• Rules and other systems related to the management of the risks of loss on the Company and its subsidiaries
  (1) The Company shall establish the “Regulations for Fujitec Group Risk Management” stipulating the risk controls over the Company and its subsidiaries, and generally manage the group wide risks hereunder.
  (2) The Company shall establish the “Risk Management Committee”, to be chaired by the president, to effectively implement group-wide risk management systems for the purpose of achieving early detection and prevention of the risks of loss to the Company and its subsidiaries. In addition, the Company shall establish the “Risk Management Operation Committee” as an advisory body to the “Risk Management Committee” to ensure the effectiveness of the group-wide risk management systems.
  (3) If it is likely that there is a risk of damage to the Company or its subsidiaries caused by sudden events of natural disaster or others, the Company shall establish the “Task Force Headquarters”, as necessary, to take prompt measures to prevent or avoid damage according to the “Risk Management Regulations” and other internal rules.

• Systems to ensure the efficient execution of duties by directors of the Company and its subsidiaries
  (1) The Company shall establish the group mid-term business plan every multiple fiscal years and, in accordance herewith, set focused business targets and budget allocation on an annual basis.
  (2) The Board of Directors may delegate its authority to corporate officers, clarifying the scope of their authority and responsibilities in accordance with the resolution of the Board of Directors and the Company’s internal regulations, to ensure adequate and efficient execution of duties by corporate officers.
  (3) Corporate officers shall provide and share information with the ”Executive Committee” and ”Management Committee” with respect to important matters to achieve the Company’s management goals, and shall make a report or submit a proposal to the Board of Directors as necessary after having reviewed and deliberated on various measures related to the matters referred to the committee.
  (4) The Company shall facilitate the smooth and prompt transfer of information pertaining to the execution of the duties of directors, mutual communication between directors, and the deliberation of directors, by making effective use of its information communication equipment, such as the company intranet and online conferencing systems.

• Systems related to reports to the Company on the execution of duties by directors of the Company’s subsidiaries and other systems to ensure the proper operation of the corporate group comprising the Company and its subsidiaries
  (1) Pursuant to the internal rules and regulations, the Company shall receive periodic reports from its subsidiaries on their operating results, financial condition and personnel and other important business matters, and, if it is likely that there is a risk of damage to a subsidiary caused by sudden events of natural disaster or others, occurrence based reports on such situations. Based on such reports, if corporate officers consider that there are important issues to achieve the management goals for the entire corporate group, the Company’s corporate officers concerned shall review and deliberate on various measures related to the issues of the ”Executive Committee” and ”Management Committee”, and, as necessary, conduct monitoring, supervision and instruction on the status of business operation of the subsidiaries.
  (2) Only if the Company finds it is particularly necessary for the business operation of subsidiaries, the Company shall transfer or dispatch its directors or corporate officers to the subsidiaries in order to conduct supervision or execution of business operation of the subsidiaries.

• Matters regarding employees assisting with corporate auditors, ensuring the independence from directors of those employees and the effectiveness of directions to those employees
  The Company shall assign personnel who are exclusively responsible for assisting with the duties of the corporate auditors to an office which is independent from the management department, and require those personnel to follow orders from the corporate auditors according to the office regulations. The opinions of the corporate auditors shall be fully respected in relation to personnel evaluations, transfers, and disciplinary action.

• Systems for directors and employees of the Company to report to corporate auditors, systems for directors, corporate auditors, executive members of its subsidiaries, other people who are equivalent to these people, employees, or people who received reports from these people to report to corporate auditors, systems regarding reporting to corporate auditors, and systems to ensure the effective audit by corporate auditors
  (1) Directors shall immediately report to corporate auditors in the event that they recognize any problem concerning compliance of laws and regulations or the Company’s Articles of Incorporation during the course of the execution of their duties.
  (2) Corporate auditors shall attend meetings of the “Board of Directors” and the ”Executive Committee” and ”Management Committee”, to understand the status of business operations regarding important matters and issues set forth in Article 5 (1) of this policy. Corporate auditors shall have the right to inspect the minutes of important meetings and other important documents relating to the management of the business, and to request an explanation from directors and corporate officers on any matter.
  (3) Corporate auditors shall regularly receive explanations from accounting auditors and the “Internal Audit Office” regarding their respective audit polices and the status of any audits, and shall exchange information with them.
  (4) The “Internal Audit Office” shall report to corporate auditors periodically or in a timely manner on the status of internal audits etc. regarding, among other things, compliance, risk control, the Compliance Hotline of the Company and its subsidiaries.

• Systems to ensure that persons who provide information to corporate auditors of the Company do not and will not receive unfair treatment for providing such information
  The Company shall, according to internal rules and regulations, prohibit unfair treatment against executives and employees of the Company and its subsidiaries who provide information to corporate auditors of the Company for providing such information and conduct proper information management regarding the identity of those executives and employees and the contents of any provided information.

• Matters regarding policies for handling expenses or debts arising from the execution of duties by corporate auditors, including procedures for obtaining advance payment or reimbursement of expenses arising from the execution of duties by corporate auditors
  (1) To contribute to the smooth execution of an audit plan by corporate auditors, the Company shall beforehand calculate the expenses necessary to perform the duties required by such plan, and post the annual budget.
  (2) When corporate auditors request the Company to make an advance payment, reimbursement or payment to creditors for expenses set forth in each item of Article 388 of the Japanese Companies Act arising from the execution of duties by corporate auditors, the Company shall, through screening by its relevant department, pay such requested expenses without delay except in case where it proves that the expense relating to such request is not necessary for the execution of the duties of corporate auditors.
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To reduce various operating risks, the company has established the Risk Management Committee, chaired by the CEO. The Committee works to promote compliance, including risk management at all group companies, and information security measures, as well as to achieve early detection of risk factors that could have a major social impact, such as ensuring product safety, and countermeasures for those factors. Underneath the Committee there are standing committees that investigate and study each risk factor. The Risk Management Operation Committee collects information swiftly and accurately and ensures proper direction and the management of business execution to ensure that risk management functions effectively throughout the company.

The Compliance Committee promotes compliance with the laws, regulations and corporate ethics necessary for promoting appropriate corporate activities and disseminates these to group employees and other concerned persons as cohesivery as possible. The Committee formulates the Compliance Action Plan every year and promotes compliance activities. As part of these activities, in addition to group training for all employees or on-demand education through e-learning, the company holds seminars for employees according to their position and department as deemed necessary to ensure that laws and regulations are made known to employees together with carrying out activities to raise employee awareness. The company has also established an internal reporting system to curb fraud. This includes a Compliance Consultation Desk as an internal reporting system related to compliance that allows all employees to consult directly regardless of organizational lines and which will receive employee reports.