Internal Control System

Basic Policy on System of Internal Controls

Based on the regulations of Article 362, Section 5 of Companies Act, the Board of Directors of the Company will construct an internal control system, as provided for in Article 362, Section 4, Item 6 of the Companies Act and Article 100, Sections 1, each Item and Section 3 of the Ordinance for Enforcement of the Companies Act as follows.

  1. System for ensuring that Directors and employees carry out their duties in accordance with laws, regulations, and the Articles of Incorporation
    1. Under the following corporate governance system, the Company shall ensure management transparency and soundness.
      • To clarify management responsibilities and respond rapidly to changes in the operating environment, the term of office of Directors of Fuji Electric companies shall be one year.
      • To strengthen management supervision and management audit functions, and ensure the appropriateness of managerial decisions related to the execution of important business, the Company will invite outside directors and outside auditors with relevant qualities.
    2. Managers at Fuji Electric companies are required to repeatedly explain and ensure full awareness of management principles applicable to the entire Fuji Electric, as well as the spirit behind the Criteria of Corporate Behavior, which serves as a code of behavior for all executives and employees.
    3. The Company will establish and promote a compliance system as follows, based on internal regulations, to ensure the transparency and soundness of business execution.
      • The Compliance Promotion Committee is chaired by the Representative Director of the Company. It will ensure full compliance with laws, regulations, and social norms pertaining to Fuji Electric companies.
      • The Company will establish a compliance program that systematizes roles and responsibilities in terms of internal rules, daily monitoring, auditing, education, and other areas for each law and regulation, and carry out the program in accordance with the annual plan.
      • Compliance training is conducted for all full-time executives of Fuji Electric companies.
      • The Company will establish an internal reporting system that facilitates communication between Fuji Electric company employees and the President of the Company, using a route that is independent of normal lines of communication. This is intended to prevent actions that violate laws, regulations, Articles of Incorporation, or internal rules before they occur, and aid the early discovery of such actions.
      • The establishment and promotion of the above systems will also enable each Fuji Electric company to provide an organized response aimed at rejecting antisocial forces and groups that threaten public order and the safety of private citizens.
    4. Internal auditing divisions of the Company under the jurisdiction of the respective company presidents conduct audits of the Company and subsidiaries. In addition, to ensure effective internal auditing, information on various activities is shared within the committee, which consists of members of internal auditing divisions of the Company and subsidiaries.
  2. System for retaining and managing information pertaining to the performance of Directors

    Internal regulations will be formulated to ensure accurate retention and management of records of important business executed by Fuji Electric companies and to ensure that Directors and Auditors acquire knowledge of records. The regulations establish procedures for Directors, Auditors, and managers involved in saving and storing records regarding access to information.
    The Company’s Auditors are also consulted in advance with regard to formulating, amending, or eliminating regulations.

  3. Regulations for managing loss-related risk and other systems
    1. The internal regulations will be formulated to systematically manage operational risks faced by Fuji Electric. Based on these regulations, Fuji Electric companies will establish appropriate risk management systems, and a system for managing specific group-wide risks will be established for Fuji Electric as a whole. The system involves the designation of departments within the Company to manage each category of risk.
    2. The Company will establish an emergency response manual to minimize damage incurred at the time of a crisis, such as a major disaster. The manual will prescribe the directors in charge of crisis management and establishment of a conference system and response headquarters to be activated when an emergency occurs.
    3. The internal auditing division audits the progress of risk management at companies and subsidiaries and reports the results to the president.
  4. System for ensuring effective execution of business by Directors
    1. The Company will adopt the executive officer structure to separate management and execution, and accelerate decision-making procedures. The division of duties of each executive officer will be clarified by a resolution of the Board of Directors.
      In addition, the internal regulations that prescribe the duties and authority of executive officers and employees will be formulated to clarify decision-making authority and locus of responsibilities with regard to business execution.
    2. A management meeting will be established as a permanent corporate body to advise the Company’s president. It will comprise the Company’s executive officers and other individuals, and will deliberate on important matters pertaining to the management of Fuji Electric as a whole and formulate reports. The Company’s Representative Director will communicate the deliberations and reports of the management meeting to the Company’s Board of Directors as necessary.
    3. To formulate annual and medium-term management plans for Fuji Electric and to share information within Fuji Electric, the management meeting and the Company’s Board of Directors will confirm, evaluate, and review progress for each business division on a monthly basis.
  5. System to ensure reliable financial reporting

    The Company will formulate internal regulations to ensure the appropriateness of documents and other information related to financial settlements as stipulated by the Financial Instruments and Exchange Law of Japan. Based on these regulations, each Fuji Electric company will build internal controls for financial reporting, appropriately conduct evaluations and reporting, and report the results of evaluations to its Board of Directors.

  6. System for ensuring the appropriate administration of the Company and Fuji Electric companies
    1. The Company will formulate internal regulations that prescribe authority and responsibilities. Based on these regulations, each Fuji Electric company will ensure systematic and efficient management.
    2. The Company will enhance systems to ensure appropriate administration from the perspective of Fuji Electric as a whole for the items discussed above, to maximize the corporate value of Fuji Electric.
      In addition, the Company will request the formulation of a basic policy on the establishment of a system that ensures subsidiaries and affiliates conduct appropriate business activities as stipulated by the Companies Act, and will ensure the effectiveness of such systems.
  7. Matters pertaining to employees assisting Auditors and their independence from Directors

    Auditors may request the assistance of employees from internal auditing divisions or management planning divisions as necessary. Employees carrying out this work may do so independently of instructions or orders from Directors.

  8. System for reporting to Auditors by Directors and employees and other matters pertaining to reporting to Auditors

    Internal regulations will be established to ensure Auditors acquire sufficient information for them to fulfill their duties. The regulations establish specific methods for ensuring Auditors have opportunities to attend important meetings where decisions are made on business execution, for distributing regular reports and important documents to Auditors, and for making it possible for Auditors to otherwise collect information on the performance of duties by Directors.

  9. Other systems to ensure audits are conducted efficiently by Auditors
    1. The Company recruits outside auditors who understand the management of the Fuji Electric and have expertise and experience necessary to conduct audits.
    2. A committee comprising Auditors from the Company and subsidiaries, which are large companies as defined by the Companies Act, and a committee comprising Auditors, members of internal audit divisions, and accounting auditors work to strengthen communication among all auditing bodies and ensure the effectiveness of auditing practices for Fuji Electric companies as a whole.

Basic Policy on Control of the Company

  1. Details of the basic policy

    In implementing the Corporate philosophy and continue to improve corporate value, Fuji Electric to amass unique technologies, experience and know-how, and strives to develop and maintain good relations with various stakeholders, including customers, partners, communities, and employees.

    These are the Fuji Electric’s precious tangible and intangible assets, the Fuji Electric’s DNA, and resources that support the creation of corporate value for Fuji Electric.

    Based on that philosophy, the Company strives to manage in line with changes in the environment. The Company recognizes that the most effective countermeasures against share purchases that could damage the corporate value of Fuji Electric are increasing corporate value in the mid-to-long term vision and further raising the share of profits to shareholders, and strives to realize those aims.

    Furthermore, the Company is actively engaging in a range of IR activities to ensure that the Fuji Electric’s stock price is properly understood. The Company will strive to further deepen understanding of Fuji Electric by issuing reports on its performance including quarterly financial reports and holding plant tour programs for the shareholders.

    The Board of Directors recognizes that the free trade of shares by shareholders is a reality as a listed company, and believes that the question of whether or not large-scale purchases of shares in the Company by specific individuals should be permitted is a matter that should ultimately be delegated to the shareholders.

    However, corporate acquisitions undertaken to profit unduly from selling a company’s stock at the highest price do occur. The Board of Directors does not believe that any party who engages in any such large-scale share purchases of the Company’s shares or tables proposals which do not contribute to the corporate value of Fuji Electric or the mutual benefit of the shareholders are suitable parties to control the Company’s finances and the determination of its business policy.

    At this point in time, no specific threat related to large-scale purchases of the Company’s shares has emerged. Moreover, the Company has not yet put in place any specific preventative measures (so-called “poison pill”) against the emergence of a takeover threat.

    However, the Board of Directors will, as a managerial duty to the shareholders, establish an internal system to install measures against any large-scale purchases of the Company’s shares that threaten the corporate value of Fuji Electric or the mutual benefit of the shareholders.

  2. The Fuji Electric’s measures to realize the Basic Policy
    (1) Initiatives to improve corporate value of Fuji Electric
    As our basic strategy for sustainable growth, Fuji Electric aims to create growth on the global market based on our power electronics technologies cultivated over many years, which handle electrical energy universally, backed by energy and environmental investments projected to take place in many countries.
    To realize this, we will rapidly shift our managerial resources to the field of “energy and the environment,” aiming to maximize our corporate value and create CSR management as a “company that contributes to the global society through business.”
    (2) Measures to prevent control of the Company by undesirable parties as described in the Basic Policy
    The Company will, based on 1. Details of the Basic Policy above, strive to establish an internal system in view of any potential or actual purchases of the Company’s shares that threaten the corporate value of Fuji Electric or the mutual benefit of the shareholders.
    Specifically, the Company will very carefully monitor daily trading movements and shareholder changes and at the same time put in place a first-response manual for contingencies, and establish a framework for collaboration with external experts. The Company will determine specific preventative measures in a timely and appropriate manner, and strive towards the enhancement of internal systems.
    Furthermore, the Company will continue to consider the introduction of a “poison pill,” from the viewpoints of ensuring and increasing the corporate value of Fuji Electric or the mutual benefit of the shareholders, based on the opinions and judgments of the legal system and the relevant authorities, social trends, and the opinions of our stakeholders.
  3. The decisions and rationale of the Board of Directors regarding the measures above

    Because the measures referred to in 2 above are means: (1) to maintain and enhance the corporate value of the Company over the mid-term, and (2) to establish internal systems to respond to large-scale purchases of the Company’s shares that threaten the corporate value of Fuji Electric or mutual benefits of shareholders, the Board confirmed and resolved at a meeting of the Board of Directors that these measures comply with the basic policy in 1, and neither measure represents a threat to the mutual benefits of the shareholders or is a means to maintain the members of the current top management team in their positions.
    Further, the resolution was unanimously agreed upon at a Board of Auditors meeting, provided that the specific operations of the measures described in 2 above are conducted properly.

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