Basic Policy on Establishment of Internal Control System

As a member of the Fujitsu Group, we must pursue management efficiency and control the risks that arise from our business activities in order to continually improve the corporate value of the Transtron Group. With this basic understanding, the directors, who have been entrusted with the Company’s management by the shareholders, shall implement and instill the FUJITSU Way, which is the fundamental principle of the Fujitsu Group’s activities. At the same time, they shall present the basic policy on what system and rules will be used in pursuit of management efficiency and to control the risks arising from business activities in our approach to management to the shareholders.

（１）Decisions on business and affairs of the corporation and business operation system

1. The Company shall have executive officers (hereinafter, representative directors and executive officers are referred to collectively as “the management”) sharing authority over business execution with the president and representative director, and these executive officers shall engage in decision-making and business execution according to the segregation of duties.
2. The Company shall establish a management meeting comprised of representative directors and executive officers in order to assist the president and representative director in decision-making.
3. The president and representative director shall establish the system and rules (management meeting rules, various decision/request systems, etc.) necessary for the management or employees to whom the management has delegated authority to make decisions.
4. The president and representative director shall provide financial and business reports at every ordinary meeting of the board of directors and shall report regularly to the board of directors on the implementation status of the “Basic Policy on Establishment of Internal Control System” to obtain confirmation that it is being implemented appropriately.

（２）System for promoting business efficiency

1. The Company shall establish an organization for promoting improved productivity and cost and expense reduction through reform of the Transtron Group’s business processes and shall pursue management efficiency.

（１）System for managing general risk of loss

1. The Company shall establish a target of achieving business continuity, improvement of corporate value and sustainable development of business activities of the Transtron Group. In order to address the risks that may impede achievement of this target, the Company shall establish a Risk Management and Compliance Committee to preside over risk management throughout the Transtron Group and specify departments in charge of each risk in order to establish a system for implementing appropriate risk management.
2. The Risk Management and Compliance Committee shall continuously evaluate and verify the risks that may cause the Transtron Group to suffer loss. Accordingly, the committee shall implement risk control such as the establishment of preventive measures for recognized risks to business execution and carry out activities to minimize loss.
3. In order to keep losses arising out of manifestation of risks to a minimum, the Risk Management and Compliance Committee shall regularly analyze risks that have manifested through the system described in 1. above, report to the board of directors and engage in activities to prevent the recurrence of similar risks.

（２）System for managing individual risks of loss

1. Risk management system related to product and service defects or deficiencies
   Develop a quality assurance system for verifying product and service defects or deficiencies in the Transtron Group and preventing recurrence.
2. OEM project management system
   Develop a system for managing the promotion of business talks and execution of projects in order to prevent the occurrence of unprofitable OEM projects.
3. Security system
   Establish an organization to deal with cyberterrorism, unauthorized use and leaks of various confidential information held by the Company.

（３）Addressing of management risks

1. Financial risk management system
   The vice president and representative director shall oversee financial risks.
2. Management system for other management risks
   Each division shall handle market trends, price competition and other management risks according to the segregation of duties set forth in the Regulations Concerning the Disposition of Business.

（１）Compliance system

1. The management shall observe the Code of Conduct set forth in the FUJITSU Way as the basic principles of compliance, including compliance with the law and the Articles of Incorporation, and actively work to promote compliance throughout the Group based on management ethics.
2. The Risk Management and Compliance Committee shall oversee compliance within the Transtron Group and perform the following duties.
   • Promote thorough compliance with the Code of Conduct set forth in the FUJITSU Way among employees of the Transtron Group through the implementation of continuous education.
   • Clarify the legal regulations related to business activities of the Transtron Group, establish the internal rules, education and monitoring system necessary for compliance with such regulations and promote compliance throughout the Group.
   • In the event that an actual or potential material compliance violation is recognized in relation to the performance of duties, the management and employees are to report it to the Risk Management and Compliance Committee immediately through the normal business lines.
   • A whistleblower system that includes a system for protecting whistleblowers shall be established and operated in order to enable early discovery of compliance problems and proper response through a communication route that is separate from the normal business lines.
   • The Risk Management and Compliance Committee shall report to the board of directors immediately in the event that an actual or potential material compliance violation is discovered.

（２）System for ensuring the appropriateness of financial reporting

1. In addition to an organization for preparing financial reports under the vice president and representative director, the Company shall establish an organization for overseeing the preparation, implementation and assessment of internal controls related to the financial reporting of the Transtron Group in order to ensure the effectiveness and reliability of financial reporting.
2. Establish rules for the preparation, implementation and assessment of internal controls related to the Fujitsu Group’s uniform accounting policy and financial reporting at each applicable organization.
3. The organization overseeing the preparation, implementation and assessment of internal controls related to financial reporting of the Transtron Group shall regularly report the results of assessments regarding the effectiveness of internal controls to the board of directors.

（３）Internal audit system

1. The Company shall establish an organization (hereinafter, “internal audit organization”) that conducts internal audits in relation to business execution and ensure its independence.
2. The internal audit organization shall establish internal audit rules and conduct audits based on those rules.
3. The internal audit organization shall conduct internal audits of the entire Transtron Group.
4. The results of the internal audits shall be reported regularly to the presidents and corporate auditors of the Company and the audited group companies.

1. The management shall assign a person responsible for storage and engage in appropriate storage and management of the documents below related to the execution of duties (including electromagnetic records; the same applies hereinafter) and other important information based on the internal rules.
   • Meeting minutes of the general meeting of shareholders and related documents
   • Meeting minutes of the board of directors and related documents
   • Meeting minutes of other important decision-making meetings and related documents
   • Approval-granting documents approved by the management and related documents
   • Other important documents related to the execution of duties by the management
2. The documents set forth in 1. above are to be accessible at any time so that board members and corporate auditors can verify the status of execution of duties, and the persons responsible for storing each document shall establish a system allowing anytime access by request of board members and corporate auditors.

1. The Company shall develop and establish the aforementioned systems and rules for the Transtron Group and establish a system for accepting reports from the management of each group company related to the execution of duties. The Company shall also provide guidance, support and supervision for the establishment of a system for the efficient, lawful and appropriate execution of group company business operations.
2. The Company shall establish common rules for decision-making authority and processes related to important matters at group companies and other delegation of authority by the president and representative director to group companies.
3. The president and representative director shall assign responsibility for divisions at each group company, and the executive officers in charge of the execution of business operations by the divisions to which they are assigned shall verify implementation and compliance related to 1. and 2. above through the president, CEO, etc. of the group company in question.
4. The management of the Company and each group company shall share issues with each other and collaborate to achieve the targets of the Transtron Group’s management policy through regular coordination meetings and other means.

1. The management shall check issues related to achievement of the targets of the Fujitsu Group’s management policy through regular coordination meetings and other means. Corporate auditors verify issues in the Fujitsu Group from an auditing perspective through Fujitsu Group corporate auditor coordination meetings and other means.
2. The management shall implement the measures necessary to solve issues related to achieving management targets identified through the above after engaging in sufficient discussions and report to Fujitsu or obtain approval procedures as necessary.

（１）Matters related to ensuring independence

1. When requested by corporate auditors to assign staff to assist with their duties, the board of directors shall make a decision following discussion with the corporate auditors, and appropriate human resources shall be considered that possess the knowledge and skills required by the corporate auditors.
2. In order to ensure the independence of corporate auditor staff and the effectiveness of instructions given by corporate auditors to the staff, the management shall obtain consent of the corporate auditors for human resources-related matters like assignments, transfers and pay for corporate auditor staff.
3. In principle, the management shall not assign corporate auditor staff to concurrent positions with other organizations.
   However, in the event that it is necessary to have an employee possessing specialist knowledge serve in concurrent capacities at the request of corporate auditors, consideration shall be made to ensure the independence of 2. above.

（２）Matters related to reporting system

1. The management of the Company and group companies shall provide corporate auditors with the opportunity to attend important meetings.
2. In the event that a risk arises that will impact management or business performance or an actual or potential material compliance violation related to the execution of duties is recognized, the management of the Company and group companies shall immediately report the matter to the corporate auditors.
3. The management of the Company and group companies shall report to the corporate auditors regularly on the status of the execution of duties.
4. The management of the Company and group companies shall not treat members of the management or employees unfavorably on the ground that they make reports on 2. or 3. above.

（３）Matters related to ensuring effectiveness

1. The management of the Company and group companies shall exchange information with the corporate auditors regularly.
2. Costs arising from the execution of corporate auditor duties shall be based on Article 388 of the Corporations Act, and the management shall establish procedures related to claims made in accordance with the article.
3. The internal audit organization shall report to the corporate auditors regularly on the results of audits.

END

[Revision History]
Established on May 23, 2007
Revised on September 29, 2015