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  7. Notice on Conversion of Fujitsu Business Systems into Wholly Owned Subsidiary

Notice on Conversion of Fujitsu Business Systems into Wholly Owned Subsidiary

Fujitsu Limited,Fujitsu Business Systems Ltd.

Tokyo, May 21, 2009

Fujitsu Limited ("Fujitsu") and Fujitsu Business Systems Ltd. ("FJB") announced today that they have concluded an agreement to covert FJB into a wholly owned subsidiary of Fujitsu through an exchange of shares. The agreement was approved today by the boards of directors of both companies.

FJB will seek approval of the exchange of shares at its Annual Shareholders' Meeting on June 23, 2009. Following approval, the companies plan to carry out the exchange of shares on August 1, 2009. Fujitsu plans to carry out a simple exchange of shares, which, according to Article 796-3 of the Company Law, does not require the approval of shareholders at the Annual Shareholders' Meeting.

Prior to the planned effective date of the exchange of shares on August 1, procedures will be taken to delist FJB's common stock from the Tokyo Stock Exchange ("TSE"). The final expected trading date is July 27, 2009.

Details on the planned exchange of shares are as follows.

1. Purpose of Exchange of Shares

(1)The Fujitsu Group has positioned Technology Solutions, comprising platforms and IT solutions and services, as a core business. In Japan, Fujitsu, FJB and other Fujitsu Group companies are collaborating closely with sales partners to strengthen and expand this business.

In recent years, customers' IT needs have diversified, and as IT and network technologies evolve, the utilization of IT for business is also diversifying. To continue to grow under this business environment, the Fujitsu Group must accurately understand customers' changing needs and rapidly introduce new products and services meeting those needs. To accomplish this, the organizational structure of the entire Fujitsu Group requires reform to ensure its optimization.

As part of these required organizational reforms, the boards of directors of Fujitsu and FJB have decided to convert FJB into a wholly owned subsidiary in order to strengthen the Fujitsu Group's position in the medium-size business Technology Solutions market in Japan. The Technology Solutions market in Japan is divided broadly into the large-size business and medium-size business markets. Going forward, Fujitsu will focus on the large-size customers, while FJB will have responsibility for the medium-size business market. This will enable the Fujitsu Group to serve both markets with timely products and services consistent with customer needs. Until now, FJB has acted as one of Fujitsu's primary Technology Solutions sales companies in Japan for the medium-size business market, and has successfully strengthened and expanded its position. Through the conversion into a wholly owned subsidiary, Fujitsu will be able to consolidate all of its resources for the medium-sized business market into one company and position FJB as a core company for the planning, development, and operation of products and services for the medium-sized business market.

Fujitsu and FJB plan to complete the reorganization of FJB into the Fujitsu Group by October 1, 2009. The details of the planned reorganization are as follows:

1. Integrate sales functions for medium-size business market

Sales resources for the medium-sized business market, which have been divided between Fujitsu and FJB, will be consolidated into FJB in stages. Following the exchange of shares, the first step will be to swiftly integrate the sales functions and resources for the major geographical markets of Tokyo, Nagoya, and Osaka into FJB.

2. Integrate and consolidate product planning, commercialization functions

In the past, the planning and commercialization of products and services for the medium-sized business market were carried out by Fujitsu and other Fujitsu Group companies and then offered to FJB and other sales partners to sell to customers. After the conversion, these functions at Fujitsu will be integrated into FJB in order to develop and commercialize products closer to the medium-sized business customer.

As a first step, the ERP solution for the medium-sized business market, GLOVIAsmart, will be managed by FJB, including all of the product planning and commercialization functions.

Going forward, FJB will reinforce the solutions offerings for each vertical industry by marketing x86 server and other platforms, developing new solutions that integrate these platforms with key services, and SaaS and other applications.

3. Strengthen collaboration with partners

FJB will take responsibility for strengthening alliances with sales and product partners needed to expand the medium-sized business market. FJB will conduct joint marketing campaigns with sales partners and joint purchasing of third-party products, among other initiatives. With product partners, FJB will strengthen OEM and other types of collaboration. The results will benefits customers, partners, and the Fujitsu Group.

Through the conversion of FJB into a wholly owned subsidiary, Fujitsu will strengthen its position in the medium-sized business market and raise the corporate value of the Fujitsu Group. This will ensure that the expectations of FJB shareholders, who will become Fujitsu shareholders through the exchange of shares, will be met.

(2) Plan to Delist FJB

As a result of the exchange of shares, FJB will become a wholly owned subsidiary of Fujitsu on the effective date of August 1, 2009. In accordance with the exchange delisting rules, the common stock of FJB will be delisted from the TSE on July 28, 2009 (the final expected trading day will be July 27, 2009). After the delisting, FJB common stock will not be traded.

(3) Reason for Delisting FJB and Consideration of Alternatives

As stated in the "Purpose of Exchange of Shares" above, the conversion of FJB into a wholly owned subsidiary of Fujitsu is aimed at reforming the organizational structure of the Fujitsu Group in Japan in order to strengthen the Technology Solutions sales capabilities for the medium-sized business market. By enhancing and expanding their position in this market, Fujitsu and FJB will increase their corporate value. The purpose, therefore, is not to delist FJB.

After the delisting of FJB, shares of the company will no longer be traded on the TSE. In accordance with the agreement for the exchange of shares, however, Fujitsu plans to allot shares of Fujitsu common stock to FJB shareholders, with the exception of Fujitsu itself, in an equivalent value to the FJB shares held. For FJB shareholders owning 286 or more shares, in accordance with the exchange of shares, there is a possibility that a portion of the Fujitsu shares allotted over 1,000 shares will be odd-lot shares. Fujitsu believes, however, that the liquidity of its stock will be maintained.

For FJB shareholders owning fewer than 286 shares, the number of Fujitsu shares allotted will be odd-lot shares less than the current trading unit of 1,000 shares. These shareholders will have the option of using Fujitsu's odd-lot share purchasing system or the share increase system. Please refer to 2. (2), note 3 for more information.

(4) Measures to Guarantee Fairness

Since Fujitsu owns 53.15% of the shareholder voting rights of FJB, both Fujitsu and FJB have separately asked independent third parties to calculate the share exchange ratio in order to maintain fairness and appropriateness. Based on the results of the calculations, Fujitsu and FJB negotiated the agreement on the exchange of shares. The boards of directors of the companies have approved the agreed upon share exchange ratio.

Fujitsu and FJB have not requested a fairness opinion from an independent third-party organization regarding the fairness of the share exchange ratio.

(5) Measures to Prevent a Conflict of Interest

None of the board members of FJB serves as a member of the board, corporate executive officer, or part-time member of the board, with which there could be a conflict of interest. The approval by the board of directors of FJB represents an independent, unbiased judgment by the members. In addition, to avoid a conflict of interest, the two outside auditors of FJB who also serve as a board member and statutory auditor of Fujitsu, respectively, did not attend the FJB meeting of the board of directors to decide on the exchange of shares.

2. Exchange of Shares

(1) Schedule

May 21, 2009 Board of directors meetings approving exchange (Fujitsu/FJB)
May 21, 2009 Contract on exchange of shares finalized (Fujitsu/FJB)
June 23, 2009 (tentative) Shareholders' meeting to approve exchange (FJB)
July 28, 2009 (tentative) Delisting of stock (FJB)
August 1, 2009 (tentative) Exchange of shares (effective date)

Notes:

1. According to Article 796-3 of the Company Law, Fujitsu is not required to have the agreement on the exchange of shares approved at the Annual Shareholders' Meeting.

2. The effective date is subject to change based on the agreement of Fujitsu and FJB.

(2) Share exchange ratio

  Fujitsu
(Parent company)
FJB
(Wholly owned subsidiary)
Allotment of shares from share exchange 1 3.50
Total number of Fujitsu shares to be allotted in exchange 43,998,377 shares of Fujitsu common stock

Notes:

1. Allotment ratio

Under the contract, 3.50 shares of Fujitsu common stock will be allotted for each share of FJB common stock. Fujitsu will not exchange shares for the 13,922,590 shares of FJB it owns.

2. Number of shares allotted in the share exchange

Fujitsu plans to use treasury stock (2,836,664 shares held as of April 30, 2009) and acquisition of its own shares by the effective date of the exchange to carry out the exchange of shares and complete the allotment of 43,922,377 shares of its stock. Therefore, Fujitsu does not plan to newly issue shares to complete the exchange of shares.

Fujitsu will announce separately the plan to acquire its own shares.

In addition, the number of Fujitsu shares to be allotted may be revised at a later date if FJB were to retire its treasury stock, among other reasons.

3. Odd-lot shares

(a) Odd-lot share purchasing system (for shareholders to sell odd-lot shares of less than a 1,000-share unit)

In accordance with Article 192-1 of the Company Law, Fujitsu will directly purchase from shareholders blocks of its shares amounting to less than a trading unit of 1,000, which cannot be traded on the market.

(b) Share increase system (increase shares to a trading unit of 1,000 shares)

In accordance with Article 194-1 of the Company Law, shareholders may purchase shares from Fujitsu to increase their odd-lot shares to a full trading unit of 1,000 shares.

(3) Approach to Calculating the Share Exchange Ratio

(1.) Basis and Process Used in the Calculation

To ensure that the share exchange ratio used in this share exchange was fair and appropriate, Fujitsu and FJB each retained the services of independent advisors to calculate the share exchange ratio. Fujitsu retained the services of Mizuho Securities Co., Ltd. ("Mizuho Securities") and FJB retained the services of Nikko Cordial Securities Inc. ("Nikko Cordial Securities").

To calculate the value of Fujitsu shares, Mizuho Securities used market share price analysis. To calculate the value of FJB shares, Mizuho Securities used market share price analysis, discounted cash flow analysis ("DCF analysis"), and comparable companies analysis. In accordance with these valuation methods, the number of Fujitsu shares to be allocated per share of FJB was calculated as follows: using market share price analysis, between 2.42 shares and 3.06 shares; using DCF analysis, between 3.36 shares and 3.87 shares; and using comparable companies analysis, between 2.97 shares and 3.36 shares.

In applying market share price analysis, average stock prices were calculated for the following periods: the closing price on May 14, 2009; the one-month period from April 15, 2009 to May 14, 2009; the three-month period from February 16, 2009 to May 14, 2009; and the six-month period from November 17, 2008 to May 14, 2009.

Note: Mizuho Securities has prepared its share exchange ratio estimations on the assumption that the information received from Fujitsu and FJB and publicly available data used to make the estimations are accurate and complete, that there is no information that Fujitsu and FJB have not provided that would have a significant impact on the calculation of the share exchange ratio, and other assumptions. Mizuho Securities has not conducted an independent assessment of the value of the assets or liabilities of Fujitsu, FJB or their affiliates. In addition, with regard to FJB's financial forecasts, the estimations assume that these are best-effort forecasts as of the date the forecasts were made. The share exchange ratio stimulations reflect the corporate data and economic condition information available as of May 14, 2009.

Nikko Cordial Securities performed market share price analysis with respect to Fujitsu, and performed market share price analysis, DCF analysis, and comparable companies analysis with respect to FJB. In accordance with these valuation methods, the number of Fujitsu shares to be allocated per share of FJB was calculated as follows: using market share price analysis, between 2.30 shares and 2.41 shares; using DCF analysis, between 3.56 shares and 4.00 shares; and using comparable companies analysis, between 3.27 shares and 3.64 shares.

Market share price analysis is based on the closing price on May 14, 2009, and the average closing price between May 1, 2009 and May 14, 2009.

Note: In preparing its share exchange ratio estimations, Nikko Cordial Securities has not conducted an independent evaluation or appraisal of the assets and liabilities of Fujitsu or FJB, not has it received appraisals from a certified public accountant or other independent third-party specialist. The estimations are based on the assumption that the various information and documents used to make the estimations are accurate and complete, and that the future business plans and financial forecasts of FJB were created on a best-effort basis as of the time the forecasts were made. In addition, the estimations are based on the assumption that there is no information that has not been disclosed by Fujitsu or FJB that would have a significant impact on the estimations of the share exchange ratio.

Considering such factors as capital ties between Fujitsu and FJB, the exchange ratio of previous share exchanges of a similar nature, and each company's financial condition, and after negotiations and discussions, the share exchange ratio recorded above in section 2. (2) was applied and deemed to be in the best interest of each company's shareholders. At their respective boards of directors meetings held on May 21, 2009, the share exchange ratio for the share exchange was decided upon, and the two companies executed the share exchange contract.

The share exchange ratio is subject to change by the mutual agreement of Fujitsu and FJB if there are any significant changes in the terms and conditions underlying the calculations.

(2.) Relationships with Firms Used to Perform the Calculations

Neither Mizuho Securities nor Nikko Cordial Securities are considered a related party to Fujitsu or FJB.

(4) Treatment of Share Warrants and Bonds with Warrant Attached Issued by Wholly Owned Subsidiary Involved in Share Exchange

FJB has not issued any share warrants or bonds with warrant attached.

3. Summary Information on Companies Exchanging Shares

(As of March 31, 2009)

(1) Trade Name Fujitsu Limited (Consolidated)
[Company becoming wholly owning parent company]
Fujitsu Business Systems Ltd. (Consolidated)
[Company becoming wholly owned subsidiary]
(2) Principal Lines of Business Development, manufacture, sales and service of products in the fields of software and services, information processing, telecommunications equipment and electronic devices System integration specializing in communications and information, providing comprehensive services including consultation, equipment sales, software development, installation and maintenance
(3) Date of Incorporation June 1935 April 1947
(4) Registered Head Office 4-1-1 Kamikodanaka, Nakahara-ku, Kawasaki-shi, Kanagawa, Japan 7-27, Koraku 1-chome, Bunkyo-ku, Tokyo, Japan
(5) Representative Kuniaki Nozoe, President Kuniaki Suzuki, President
(6) Capitalization 324,625 million yen 12,220 million yen
(7) Shares Issued 2,070,018,213 shares 26,493,555 shares
(8) Net Assets (Consolidated) 925,602 million yen 62,705 million yen
(9) Total Assets (Consolidated) 3,221,982 million yen 109,959 million yen
(10) Fiscal Year-End March 31 March 31
(11) Employees (Consolidated) 165,612 3,351
(12) Major Customers Central government agencies, telecommunication carriers, manufacturers, distributors, and financial institutions Central government agencies, local government bodies, distributors, manufacturers
(13) Principal Shareholders and Ownership as of March 31, 2008 Japan Trustee Services Bank, Ltd. (Trust Account 4G) 5.94% Fujitsu Limited 52.55%
The Master Trust Bank of Japan, Ltd. (Trust Account) 5.42% UBS AG London Asia Equities 4.34%
Japan Trustee Services Bank, Ltd. (Trust Account) 4.86% Japan Trustee Services Bank, Ltd. (Trust Account) 2.86%
Fuji Electric Holdings Co., Ltd. 4.58% The Master Trust Bank of Japan, Ltd. (Trust Account) 2.72%
State Street Bank and Trust Company 4.11% Japan Trustee Services Bank, Ltd. (Trust Account 4G) 2.66%
(14) Major Banks Mizuho Corporate Bank, Ltd. Mitsubishi UFJ Trust and Banking Corp. Sumitomo Mitsui Banking Corp. --
(15) Relationship Between the Parties Capital Fujitsu owns 53.15% of FJB’s voting rights.
Personnel One of FJB's auditors is a Fujitsu board member and another is a Fujitsu statutory auditor.
Business 53.2% of FJB's inventories (equivalent to 53.4 billion yen as of March 31, 2009) is for Fujitsu.
Status FJB is a consolidated subsidiary of Fujitsu.
(16) Financial Results for the Three Most Recent Fiscal Years (Consolidated)
  Fujitsu Limited
(becoming wholly owning parent company)
(billion yen, except per share data)
Fujitsu Business Systems
(becoming wholly owned subsidiary)
(billion yen, except per share data)
Fiscal Year Ended March 2007 March 2008 March 2009 March 2007 March 2008 March 2009
Net Sales 5,100.1 5,330.8 4,692.9 158.6 148.8 152.0
Operating Income (Loss) 182.0 204.9 68.7 4.0 3.6 3.7
Ordinary Profit (Loss) 147.2 162.8 15.0 3.4 3.3 3.0
Net Income (Loss) 102.4 48.1 (112.3) 1.8 1.8 1.7
Net Income (Loss) per Share [Yen] 49.54 23.34 (54.35) 70.52 69.98 65.57
Annual Dividend per Share [Yen] 6 8 8 16 18 20
Net Assets per Share [Yen] 469.02 458.31 362.30 2,316.58 2,350.47 2,393.01

4. Situation Following Exchange of Shares

(1) Trade Name Fujitsu Limited
(2) Principal Lines of Business Development, manufacture, sales and service of products in the fields of software and services, information processing, telecommunications equipment and electronic devices
(3) Registered Head Office 4-1-1 Kamikodanaka, Nakahara-ku, Kawasaki-shi, Kanagawa, Japan
(4) Representative Kuniaki Nozoe, President
(5) Capitalization 324,625 million yen
(6) Total Assets (Consolidated) 3,221,982 million yen
(7) Net Assets (Consolidated) 925,602 million yen
(8) Fiscal Year-End March 31
(9) Summary of Accounting Procedure This transaction is expected to fall under the category of transaction with minority shareholders of the entity under common control. Negative goodwill is expected to be generated in conjunction with this transaction. Although the amount of negative goodwill has not yet been determined, it is estimated to be small.
(10) Impact on Financial Results As FJB is already a consolidated subsidiary of Fujitsu, the share exchange is expected to have negligible effect on both consolidated and unconsolidated operating results for the year ended March 31, 2010.

About Fujitsu

Fujitsu is a leading provider of IT-based business solutions for the global marketplace. With approximately 175,000 employees supporting customers in 70 countries, Fujitsu combines a worldwide corps of systems and services experts with highly reliable computing and communications products and advanced microelectronics to deliver added value to customers. Headquartered in Tokyo, Fujitsu Limited (TSE:6702) reported consolidated revenues of 4.6 trillion yen (US$47 billion) for the fiscal year ended March 31, 2009. For more information, please see: www.fujitsu.com.

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All other company or product names mentioned herein are trademarks or registered trademarks of their respective owners. Information provided in this press release is accurate at time of publication and is subject to change without advance notice.

Date: 21 May, 2009
City: Tokyo
Company: Fujitsu Limited, Fujitsu Business Systems Ltd., , , ,

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