9SPECIAL FEATURE 1

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

SPECIAL FEATURE 1
At Factories

Contributing
to Disaster
Recovery

Piping to Protect Underground Cables
This piping is strong, corrosion-resistantand offers superior chemical resistance,
providing robust protection forimportant cables. Pipes are long andflexible, which reduces labor
requirements during installation andshortens construction times.

We support the building of
infrastructure, chiefly byproviding low- to
ultrahigh-voltage power cables.

In Temporary Housing
Insulation Materials for Metal Roofs
Closed-port construction lends these materials excellent resistanceto heat and moisture, as well as providing durability.
Cables for Interior Wiring
As temporary housing must be constructed quickly, we worked tomeet sudden production requests and shorten delivery lead times.

At Thermal Power
Generation Plants
Ultrahigh-Voltage Power Cables
To counter power shortages, we expediteddelivery of the ultrahigh-voltage cable used totransmit power from generators at thermal power
generation plants undergoing facility expansion.

In Buildings
Cables for Internal Wiring in Buildings
We are providing many types of cables for a broad
range of applications to speed building andplant restoration.

Restoration Following
the Great East Japan Earthquake
The Great East Japan Earthquake caused massive destruction, centered on eastern Japan, which remains deeply
scarred from the disaster. To facilitate rapid recovery in the stricken region, the Furukawa Electric Group swiftly
dispatched products needed to restore electricity transmission infrastructure and temporary housing. At thesame time, we supplied energy-saving products in anticipation of the future need to conserve electricity.

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

SPECIAL FEATURE 1

10

In Shinkansen
TrainsLeaky Coaxial Cable
This type of cable is installed as antennas
along rails to allow communications
between terrestrial direction centers andrailcars. This helps ensure the safety of
fast-moving shinkansen trains.

In Residential Neighborhoods
Optical Fiber Cable
Ensuring safety and security requires information to
be gathered accurately and promptly. Accordingly,
we are putting every effort into the early recovery of
optical fiber networks that had broken down.

Contributing
to Further
Electricity
Savings

In Offices and Shops
E
ORST

Microcellular Reflective Sheetfor Lighting and Signage
Our proprietary microcellular foaming technology
provides excellent reflectivity. Combining our reflective
sheet with highly efficient inverters for fluorescentlamps reduces usage in fluorescent lighting and signs
by around 50%.

We are mounting companywide
efforts to save electricity andenergy in preparation for future
electric power shortages.

For Photovoltaic Systems
Storage Batteries
Power generated by natural energy sources andnighttime generation can be accumulated instorage batteries for discharge during the day,thereby reducing peak energy requirements.
Batteries can be configured into durable,
long-lasting and space-saving units.

In Front of Stations
Automated Sprinkling Systems
Rainwater stored in underwater cisterns is pumped
into water storage blocks, which help tocontinuously alleviate the heat island effectthrough evaporation.

At Data Centers
Ultrahigh-Speed Optical
Transmission Module
Cooling accounts for nearly half theenergy consumed by data centers.
Converting communications between
devices over to the use of high-speed,
high-capacity and compact opticaltransmission systems reduces heatemission and frees up space, thereby
boosting cooling efficiency and greatly
reducing power requirements.

11

SPECIAL FEATURE 2

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

BrazilSouth America
SPECIAL FEATURE 2

Argentina

Reaching and Expanding Market Presence in South America

FISA will continue togrow steadily in tandemwith the economy of the region
FISA (FURUKAWA INDUSTRIAL S.A. Produtos Eletricos) is a wholly-owned
subsidiary of our Group that manufactures and sells telecom cables, LAN-related
products, etc. in South America. It operates in Brazil, where its headquarters arelocated, as well as in Argentina and Chile. FISA is particularly strong incommercial-use LAN cables capable of transmission rates of 1GB/second, and is theleader for that product in Brazil, where it holds a greater than 50% market share.
FISA has planted firm roots in South American markets over the nearly 40 years
since it was established in June 1974, especially in Brazil. The company willcontinue to grow steadily in tandem with the economy of the region.

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

SPECIAL FEATURE 2

12

Optical fiber cable market
expands in Brazil ahead of theWorld Cup and Olympics
Brazil is expanding its presence in the global economy as theleading emerging economy in South America. Internet use
has exploded in popularity in recent years in Brazil, as websites
such as Twitter, Facebook, and YouTube have become evermore popular.
Although broadband was in use by only 10% of Internet
users in Brazil as of 2010, its use is expected to expand rapidly
in advance of the holding in Brazil of the World Cup in 2014
and the Olympics in 2016. The optical fiber cable market in
Brazil is also expected to rapidly grow in conjunction with this.

Broadband connection rates in Brazil, by region

Number of connections and penetration rates by region in December 2010
(estimate)
Total population: 190,732,694
Overall broadband penetrationin Brazil: 9.98%

North

502,704 (3.17%)

Northeast

1,957,116 (3.69%)

Middlewest

1,662,786 (11.84%)

South

3,417,501 (12.48%)

Southwest

4,223,967 (11.95%)

São Paulo

7,272,459 (16.15%)© 2010 IDC

Optical fiber demand forecast (Brazil)(f-km)
5,000
3,906 4,399
4,000
3,352
2,889
3,000
2,544
2,015 2,290
2,000
1,010 1,100
1,000
02008 2009 2010 2011 2012 2013 2014 2015 2016

By 2016 themarket will be
doubled192% UP
Source: CRU

FISA: Increasing competitiveness in
the Brazilian telecom market, with
optical fiber cable solutions and LAN
solutions as the core businesses
FISA’s operations in Brazil revolve around two core businesses,
optical fiber cable and LAN-related equipment.
FISA’s optical fiber cable focuses on telecommunications
carriers, and despite being a major business tends to fluctuate
according to the economy. In contrast, LAN business serving
companies and general users is growing more steadily in
conjunction with the growth of demand for the Internet, evenif business clients are themselves small.
FISA seeks to increase sales in the Brazilian market, which
continues to experience 4-5% GDP growth, by creating agood balance between these two business segments.
The key to doing so is to develop “solutions businesses”
by providing total support for the resolution of issues
confronted by customers, rather than simply supplying
products. In practice this means offering network design,
construction and similar technical services when providing aclient with cable or network linking equipment. The provision

C o l u m nStandardization of environmentally-friendly, eco-label products.
FISA displays market competitiveness, including in the data center market.
FISA advocates the “Green IT Program” for collecting and recycling unneeded LAN cable. This
reduces environmental impact for the customer, and it also enables FISA to cut materials
procurement costs by separating and reusing the plastic and copper from the discarded cable.
FISA is enhancing market competitiveness by working with local public agencies to proceedwith standardization of the use of “eco-label” certified environmentally-friendly products andservices, through means such as the Green IT Program, the use of RoHS-compliant products, etc.

FISA headquarters

13

SPECIAL FEATURE 2

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

FISA’s optical fiber plantof such services leads to greater customer satisfaction and amarket share that grows every year.
One sector that has been experiencing rapid growth inrecent years is the data center market. While FISA’s market
share was less than 1% in fiscal 2008, by fiscal 2011 it had
grown to 20%, and is expected to continue to increase.

FISA operates its own network ofagencies, providing solid service andtimely response capabilities thatenhance customer satisfaction
The reasons FISA has demonstrated such a high level ofcompetitiveness in Brazil are its service capabilities in areas
such as technical support and after service, and timely
response capability for prompt delivery.
FISA’s establishment of local manufacturing plants
underlies these capabilities.
FISA is not only capable ofresponding more quickly
than competitors thatsource their products fromoverseas, it also has theparts and staff on hand thatmake it easy to provide

technical support.
Major additional strength is provided by FISA’s own
network of agencies, in which great experience in local
business has been accumulated over many years. These
agencies have developed solid relationships of trust throughfair and open trading, as well as technical support provided bytraining centers. This enables FISA to respond to demandthroughout the broad expanses of Brazil, as well as to respondindividually to customers in a timely and respectful manner.

Improving competitive position inSouth America through measures
such as plant-building in Argentina
and buying up companies in Brazil
Regional optical fiber cable markets in South America are
expected to continue growing, and greater capacity will be
required to meet that demand.
Therefore, FISA established an optical fiber cable plant inRealizing speedy, on-time delivery throughstrict inventory controls

Argentina plant
Argentina offices

SPECIAL FEATURE 2
Reaching and Expanding Market Presence in South America

FISA will continue togrow steadily in tandemwith the economy of the region

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

SPECIAL FEATURE 2

14

C o l u m n
FISA focuses on advanced CSR activities.
Its brand strength serves to motivate employees.
FISA’s CSR activities are focused on four areas: environmental
conservation, workplace environment enhancement, contribution to local communities, and building sound relationships withmarkets and trading partners. One of FISA’s CSR programs is the“Bringing Up Local Children Project,” which offers children in theregion opportunities to become independent adults. This project
has received high marks, and will help provide FISA with highquality personnel in the future.

neighboring Argentina in June 2008. This plant supplies not
only Brazil, but also meets the needs of South America’s No. 2
market, Argentina.
In March 2011, FISA acquired MetroCable, a manufacturer
and seller of optical fiber cable in Brazil. MetroCable is one ofBrazil’s leading manufacturers of optical fiber cable, and isparticularly strong in the fiber network subscriber-use sector.
Through this acquisition FISA will not only strengthen its
production capacity, but also can be expected to produce avariety of synergistic effects, such as enhancing quality and costeffectiveness through supply of Furukawa Electric’s fiber cable,
and improving productivity by combining the two company’s
overlapping production lines.
By strengthening
competitiveness in theSouth American opticalfiber cable market throughsuch measures we seek
even greater expansion of
our business in that region.

Safety Education

proposing the use in the region of optical ground wires(OPGW)*, which have combined powertransmission/telecommunications functions.
The use of OPGW when laying power transmission cable
also provides for the simultaneous spread oftelecommunications infrastructure, allowing for efficient
provision of infrastructure for two
closely-connected functions.
FISA seeks to contribute to thegrowth of social infrastructure in
South America by actively offering
products with high functionality
and added value.
*OPGW (Optical Fiber Composite Overhead
Ground Wire): A type of multipurpose
electrical cable that combines optical fiber
cable telecommunications transmissionfunction with overhead ground wire, so as to OPGW (Optical Fiber Composite
protect against lightning induction.
Overhead Ground Wire)

MetroCable headquarters

In the future FISA will introduce
products such as OPGW that combine
power transmission with
telecommunications
Demand in the growing markets of South America will not be
confined to the telecommunications infrastructure, but will
also include power network and energy infrastructure
demand. As a new business in the region, FISA is therefore

Bringing Up Local Children Project

Business Strategy Conference

15

CORPORATE GOVERNANCE

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

CORPORATE GOVERNANCE
Basic Philosophy

Reinforcing Internal Controls

The Furukawa Electric Group strives to enhance its
performance by promptly responding to changes in thebusiness environment and the market through efficientmanagement based on timely decision making. At thesame time, we ensure sound management practices under
our internal control system. We uphold the basic policyof seeking to expand and develop our operations on asustainable basis and to raise corporate value throughthese efforts.
While pursuing compliance best practices across theGroup, we also provide society with excellent products andtechnologies that enrich people’s lives while maintaining
harmony with the environment. We fulfill our corporatesocial responsibility to develop solid relationships with all
stakeholders, including shareholders, business partners, local
communities and employees, and to remain a company
that benefits society.

Furukawa Electric establishes, develops and operates its
internal controls based on the following five principles:(1) Efficient execution of responsibilities(2) Compliance system(3) Risk management system(4) Information management system(5) Group company management(6) Sound, reliable financial statements

Management Organization
Furukawa Electric’s organizational structure incorporates
internal auditors, with emphasis on the independentfunctioning of Auditors and a Board of Auditors separate
from the Board of Directors. We are also tuning theoperations of our Board of Directors to strengthen
monitoring and supervision of business execution and toaccelerate decision making.

Compliance
The Furukawa Electric Group defines compliance as
extending beyond adherence to laws, to encompass
actions in accordance with the ethical standards andvalues required of a corporate citizen that is a contributing
member of society. We strive to ensure that all employees
follow compliance best practices in line with the Furukawa
Electric Group Action Guidelines that lay out our basic
philosophies on compliance.
Our compliance activities, including internal
educational programs and inspections for legal violations,take place centered around the Central Compliance
Committee with the president as chief officer in charge.
Compliance directors and compliance promotion officers,
placed under the company president and chief officerof each business division, further ensure the effective
implementation of activities.

External Board Members

Tetsuo Yoshino

Takasuke Kaneko

Sumitaka Fujita

Former Chairman and President of
Furukawa Co., Ltd.

Former Vice President of The Dai-ichi
Kangyo Bank, Ltd., President of Dai-ichi
Kangyo Shoken K.K., and Chairman of theBoard of Mizuho Securities Co., Ltd.

Former Vice President and subsequent Vice
Chairman of Itochu Corporation

Tetsuo Yoshino has an extensive executive
background in the non-ferrous metals sector.
With knowledge and experience covering
all aspects of management, including
operations, he brings valuable insightand direction to the Board of Directors.

With years of management experience inthe financial services industry, Takasuke
Kaneko provides vital knowledge of financial
strategies and risks to the Board of Directors.

Sumitaka Fujita’s strong foundationof knowledge and experience as a
trading company top executive brings
perspectives on global management
to the Board of Directors.

External Corporate Auditors

Yuzuru Fujita

Tadashi Kudo

Kenji Koroyasu

Former Chairman and President of Asahi
Mutual Life Insurance Co.

Former President of Mizuho Bank, Ltd.

Former Prosecutor for the Supreme Public
Prosecutors Office

With experience as a financial institution top
executive and as an external board member
for other firms, Yuzuru Fujita’s knowledge andbackground inform the Board of Directors
on effective and legally-compliant Groupmanagement practices from a risk management
and institutional investor perspective.

Tadashi Kudou has accumulated a broadbase of knowledge and experience as afinancial institution top executive and as
an external board member for other firms.
He strengthens the Board of Directors withinsights into effective and legally-compliant
Group management practices from a risk
management perspective.

Kenji Koroyasu possesses far-reachinginsight as a long-serving legal professional.
With knowledge of corporate legal affairs
and corporate management gained as
an external board member and external
corporate auditor for other firms, he isuniquely suited to advise the Board of
Directors on effective and legally-compliant
Group management practices.

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

In particular, Furukawa Electric has strengthened
controls over meetings with other firms in the industry andover the price-setting process to prevent the reoccurrenceof cartel violations, and has enhanced the monitoringprocess through regular guidance from external complianceexperts. We have also set up an anonymous internal“whistleblower” hotline to identify compliance violations as
early as possible.
Furthermore, our CSR Division, which also functions as
an internal audit division, closely monitors the executionof work processes in each business unit to verify whether
internal control systems, including the compliance system,
are functioning effectively. The Internal Audit Division reports
its findings to the executive management team, ensuring
appropriate internal disclosure and transparency.

Risk Management
Furukawa Electric’s risk management structure and control
methods are stipulated in its Risk Management Basic
Rules & Regulations. We have established a CSR and Risk

CORPORATE GOVERNANCE

16

Management Committee, consisting of the chairman,
president, chief officers, and company presidents underthe Board of Directors as a key component of our risk
management system. The Committee assesses all businessand operational risk of the Group and verifies the validity ofthis assessment and control methods.
The CSR and Risk Management Committee alsoestablishes information security systems in all businessdivisions and affiliate companies, and prepares our business
continuity plan in case of natural disaster.
In addition, information security has been positioned
as one of the highest priority risks facing the Company
today. As a countermeasure against counterfeit goods
and industrial espionage of intangible assets at Group
companies overseas, the Committee conducts ongoing
follow up activities through interviews at our overseas
offices. We have also began a second reexamination of ourmanagement practices concerning confidential proprietarybusiness information, in order to respond to revisions madeto the Unfair Competition Prevention Act.

Corporate Governance Organization Chart
Shareholders’ Meeting
Monitoring andSupervision

Appoints

Appoints

Board of Directors

Appoints

Audits accounts

12 Directors
Board of Auditors
Three external board members (including two independent members)
Submits reports,
Five corporate auditors
Delegates
attends(Three external corporate
meetings
Compensation Committee
auditors, including two
and audits
independent
members) Assistants
Three or more members from the Board of Directors and theto the corporate auditors
Board of Auditors (including one or more external members)

Delegates

business reports•Reviewing
Examines status of operations•andassetsCommittee members as of submission date of this reportThree board members (including one external board member)
One external corporate auditor

CSR and Risk Management Committee•Development and enhancement of internal control systems•Promotion of CSR activities
Chairman: CSRO (Chief Social Responsibility Of f icer)
Members: Chairman, president, chief officers, and company presidents

of critical matter relating•toDecisionbusiness operation•Supervises business operation

Submitreports

Accounting
Auditors
Screen reports•relatingtoaccounting•Examine status
Collaboration between of operations
auditsand assets

Submit reports

Monitors
Appoints

Business Operation

Chairman, PresidentManagement Committee•Deliberation and decision making on key issues inoperational execution
Chairman, President, Chief Of f icers,
Company Presidents

Direction

Internal Audits(CSR Division)

Chief Officers
Group-wide management, strategy, and business resource allocation
CSO (Responsible for corporate governance, Group strategy, personnel, and legal matters)
CFO (Responsible for finance, accounting, and investor relations)
CMO (Responsible for marketing)
CPO (Responsible for production technologies, purchasing, cost control, and quality control)
CSRO (Responsible for internal controls, compliance, internal auditing, export controls, safety and theenvironment, risk management, and CSR)
CTO (Responsible for R&D and intellectual properties)

Provide support and guidanceBusiness
Operations

Company Presidents
Telecommunications Company, Energy and Industrial Products Company,
Metals Company, Electronics and Automotive Systems Company
Affiliate Companies

Furukawa-Sky Aluminum Corporation
Light Metals Company
Other Af filiate Companies

17

CSR ACTIVITIESFurukawa Electric Co., Ltd. ANNUAL REPORT 2011

CSR ACTIVITIES
Fundamental Philosophy
The Furukawa Electric Group recognizes the corporate
responsibility it bears toward society: providing products
and services that contribute to social development
and improving people’s lives, while emphasizing public
regulations and corporate ethics, product safety, the safetyof employees and the local community, and reduced
environmental impact from business activities.
To meet these social responsibilities, the Group
formulated the Furukawa Electric Group Basic Policy on
CSR in February of 2007, thereby establishing a structure forreinforcing CSR efforts across the entire Group.
Under this structure, we plan to conduct corporate
activities that effectively balance the three factorsof business, environmental protection, and social

contribution, by deepening communication with our
stakeholders and further advancing and developing the
CSR activities of the Group.

CSR Basic Policy
We fully recognize the responsibilities of the Furukawa
Electric Group to society and will strive to maintainand improve on solid, friendly relationships with allof our stakeholders and contribute to the sustainable
development of society through corporate,environmental and social activities.

CSR Management
The Furukawa Electric Group has established theCSR Division, a specialized organization in charge ofpromoting CSR activities, and has appointed a Chief
Social Responsibility Officer. Through this initiative we will
ensure a uniform Company-wide approach to CSR while
applying a CSR perspective to the monitoring of corporate
activities, including internal controls, compliance, risk
management, safety, environmental conservation, andsocial contributions.
In addition, we maintain a framework for taking any
necessary action should problems arise, for example
investigating allegations and the causes of problems,
instituting remedial or preventive measures and releasingstatements, to deal with all eventualities quickly andappropriately.

CSR Promotion Framework
Board of Directors
Submit Proposals and Reports

CSR and Risk Management Committee

President

Compliance Committee
Central Committee forEnvironmental Management

CSRO
Collaboration

CPO
Collaboration

CSR Division

Central Safety and Health Committee
Central Quality Control Committee

In-House Companies

Promotion
Monitoring

Domestic Affiliate Companies

Other Chief Officers
Collaboration

Quality Promotion
Department

Each Corporate
Division

Collaboration

International Affiliate Companies

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

CSR ACTIVITIES

Aiming to Further Strengthen Management
The
Environment

The Furukawa Electric Group aims toproperly meet its responsibilities to ahost of shareholders that view theGroup from different perspectives.
To achieve this, we are monitoring
our business activities and enacting
initiatives to improve them.

Stakeholder
Customers

Suppliers

Customers

Local
Communities

Suppliers
Group
Employees

Shareholders andOther Investors

Principal Responsibilities

Communication Methods
Dialog through everyday transactions
Websites and CSR reports● Dialog through technology exhibitions andtrade shows

Maintain or improve the quality of our products,
businesses and services● Provide products and services that are useful
to society● Resolve the issues that customers face throughwide-ranging technologies and expertise●

Form sound relationships through fair transactions
that conform with laws and regulations● Realize CSR throughout the supply chain byimplementing CSR Procurement Guidelines for Partners

●

●

●

●

Partner meetings
Dialog through everyday transactions● CSR surveys● Feedback interviews on the results of partner evaluations●

Shareholders
and Other
Investors●

Provide appropriate returns
Ensure timely and appropriate disclosure● Enhance corporate value

●

●

●

Employees●

Respect human rights
Cultivate and appropriately value and reward
human resources● Promote health, including occupation health andsafety, as well as mental health● Support diversity of working styles and awork-life balance

●

●

●

Promote sporting and cultural activities; cultivate
the next generation● Cooperate with and sponsor traditional events● Support the activities of and collaborate withlocal NPOs●

Reduce emission of gases that contribute to
global warming● Promote energy conservation and recycling● Protect biodiversity● Curtail industrial waste● Manage and reduce harmful chemical substances

●

Local
Communities●

The Environment●

Annual reports, general meetings of shareholders
Shareholder reports● Management briefings and results presentations● Investor visits● Shareholder factory tours
Internal newsletter, intranet
Heart-to-heart communication between president
and employees● Management briefings

Factory tours
Hosting of Japanese dance and otherregional events● Social contribution activities, such as employee
participation in community clean-ups●

Conformance with various types of laws
and regulations● Conformance with the Kyoto Protocol on global
warming and the Nagoya Protocol on biodiversity● Environmental activities promoted by the Ministryof the Environment● Research and information sharing through JBIB on
preserving biodiversity

18

19

DIRECTORS AND AUDITORS

Furukawa Electric Co., Ltd. ANNUAL REPORT 2011

DIRECTORS AND AUDITORS

Hiroshi Ishihara
Chairman

Masao Yoshida
President

Tetsuo Yoshino

Takasuke Kaneko

Sumitaka Fujita

Hideo Sakura

Masahiro Yanagimoto

Tetsuya Satou

Director (Outside)

Director
Chief Financial Officer

Director (Outside)

Director
President of theElectro-nics andAutomo-tive Systems
Company

Director (Outside)

Director
Chief Social
Responsibility Officer

Statutory Auditors
Takahiko Ito
Kaoru Yabuki
Yuzuru Fujita (Outside)
Tadashi Kudo (Outside)
Kenji Koroyasu (Outside)
Hisaharu Yanagawa
President of theTelecommunications
Company

Nozomu Amano

Director
Chief Strategy Officer

as of June 29, 2011

Mitsuyoshi Shibata

Director
President of the Metals
Company

Tohru Shirasawa
Director
Chief Production
Officer