Note: This document has been translated from a part of the Japanese original for reference purposes only. In the event of any
discrepancy between this translated document and the Japanese original, the original shall prevail.

Securities code: 4362
June 8, 2023
To our shareholders:
Hiroshi Yano
Representative Director, President
NIPPON FINE CHEMICAL CO., LTD.
4-9, Bingomachi 2-chome, Chuo-ku, Osaka

Notice of the 155th Annual General Meeting of Shareholders
We are pleased to announce that the 155th Annual General Meeting of Shareholders of NIPPON FINE CHEMICAL
CO., LTD. (the “Company”) will be held as set forth below.
The Company takes measures for providing information that constitutes the content of reference documents for thegeneral meeting of shareholders, etc. (excluding voting form) in electronic format, so kindly access the Company’s
website below to review the information.
The Company’s website: https://www.nipponseika.co.jp/ (in Japanese)
Please access the above website and select “IR” and then “General Meeting of Shareholders” to review.
For items subject to measures for electronic provision, the Company also posts this information in electronic format
on the website of the Tokyo Stock Exchange (TSE).
To access this information from the latter website, access the TSE website (Listed Company Search) by using theinternet address shown below, enter “NIPPON FINE CHEMICAL” in the “issue name (company name)” or “4362[half-width characters]” in securities “code,” and click “Search,” and then click “Basic information” and select“Documents for public inspection/PR information.”
TSE website (Listed Company Search):https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show (in Japanese)
If you are unable to attend on the day of the meeting, you can exercise your voting rights via postal mail or the internet
in advance, so please refer to the following Reference Documents for the General Meeting of Shareholders and send
the enclosed voting form or exercise voting rights on the internet, etc., by no later than Thursday, June 22, 2023, at
5:40 p.m. (JST) in accordance with the following guidance.

1. DateFriday, June 23, 2023, at 10:00 a.m. (JST)

2. Venue

Nihon Mengyo Club (Cotton Industry House) New Building 7th Floor
5-8, Bingomachi 2-chome, Chuo-ku, Osaka

3. Purposes
Matters to be reported
1. The Business Report, the Consolidated Financial Statements and the Audit Results Report of the Financial
Auditor and the Audit & Supervisory Board on the Consolidated Financial Statements for the 155th fiscal
year (from April 1, 2022 to March 31, 2023)
2. Report on the Non-Consolidated Financial Statements for the 155th fiscal year (from April 1, 2022 to March
31, 2023)-1-

Matters to be resolved< Company proposals >Proposal No. 1

Appropriation of Surplus

Proposal No. 2

Election of Six Directors

Proposal No. 3

Election of One Audit & Supervisory Board Member< Shareholder Proposals >Proposal No. 4

Revision of Amount of Remuneration for Restricted Share-Based Remuneration Plan

Proposal No. 5Purchase of Treasury Shares

Proposal No. 6

Amendment of Articles of Incorporation Regarding Number of Outside Directors

4. Matters Decided upon Convocation
1. If there is no indication of approval or disapproval for each proposal, it will be treated as an indication of
approval for the Company’s proposal and an indication of opposition to the shareholder’s proposal.
2. If you exercise your voting rights both in writing and via the internet, etc., we will treat the exercise of yourvoting rights via the internet, etc. as valid. In addition, if you exercise your voting rights multiple times via
the internet, etc., we will treat the last exercise as the valid exercise of your voting rights.

When attending this meeting in person, please submit the enclosed voting form at the reception.

Regarding this General Meeting of Shareholders, regardless of whether or not there is a request for documentary delivery, we have
uniformly sent a document that describes the items subject to measures for electronic provision.

Of the items subject to measures for electronic provision, “Notes to the Consolidated Financial Statements” and “Notes to the NonConsolidated Financial Statements” are not included in the documents we send under the provisions of laws and regulations andArticle 16 of the Articles of Incorporation of the Company. Therefore, the documents we will send are part of the documents auditedby the Audit & Supervisory Board Members and the Financial Auditor when preparing the audit report.



If revisions to the items subject to measures for electronic provision arise, a notice of the revisions and the details of the items before
and after the revisions will be posted on the Company’s website and the TSE website described above (Japanese only).



We do not provide souvenirs to shareholders attending this General Meeting of Shareholders. Your understanding will be highly
appreciated.

-2-

Reference Documents for the General Meeting of Shareholders
Proposals and References< Company Proposals (Proposals No. 1 through 3) >Proposal No. 1

Appropriation of Surplus

Returning profits to shareholders is one of the Company’s important priorities. In this regard, the Company seeks toincrease the consolidated basic earnings per share. The Company targets a basic policy to achieve a benchmark DOE(dividend on equity) of 3.0%, and aim to improve and stabilize the level of dividends to pay dividends of surplus.
Based on the dividend policy, the year-end dividend shall be paid in cash and the dividend of ¥29 per share (aggregate
amount of ¥661,463,813) shall be paid to shareholders at the end of the fiscal year under review. Accordingly,
including the interim dividend of ¥28 per share, the annual dividends per share will be ¥57.
The effective date (starting date of payments) of the year-end dividend will be Monday, June 26, 2023.

-3-

Proposal No. 2

Election of Six Directors

The term of office of all six Directors will expire at the conclusion of this meeting. Therefore, the Company proposes
the election of six Directors (including two Outside Directors).
The candidates for Director are as follows.
The Nomination and Remuneration Committee where Independent Outside Directors hold a majority has discussed
the nomination of candidates for Director in order to capitalize on the knowledge and advice of Independent Outside
Directors as well as to ensure the fairness, transparency and objectiveness of the procedures.
Candidate
No.

Name(Date of birth)

Hiroshi Yano
(June 29, 1964)

1

2

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Apr. 1989
Sept. 2006
June 2010
Apr. 2011
June 2015

Apr. 2017
June 2020

Joined the Company
General Manager of Planning Office
Corporate Officer
General Manager of Corporate Planning OfficeDirector
Senior General Manager of Fine Chemicals
Department
General Manager of Lipid Division
Representative Director, President (current
position)
Senior General Manager of Lipid Division

Number of theCompany’s shares
owned

36,761 shares

Oct. 2021(Reasons for election)
Mr. Hiroshi Yano has worked on strengthening the Company’s governance structure through leading and supervising
the Company’s overall management as Representative Director, President since 2020 after assuming the position of
Corporate Officer in 2010. He also has experience serving as Director, Corporate Officer. The Company has judged thatit can hope that he will be able to contribute to enhancing the Company’s sustained corporate value based on theseabundant experience and in-depth insight about the overall businesses and therefore nominated him as a candidate for
Director for another term.
Apr. 1978
Joined the Company
Apr. 2000
General Manager of Pharmaceutical
Manufacturing Department
Nov. 2002
General Manager of Pharmaceutical Plant
June 2003
Corporate Officer
Deputy Senior General Manager of
Manufacturing & Technology Division andGeneral Manager of Takasago Plant
Susumu Yano
78,641 shares
June 2004
Director(April 19, 1955)
Senior General Manager of Manufacturing &Technology Division
June 2006
Representative Director, President
June 2020
Representative Director, Chairman
June 2022
Director, Chairman (current position)(Significant concurrent positions outside the Company)
Outside Director of NICHIRIN CO., LTD.
(Reasons for election)
Mr. Susumu Yano has made a significant contribution to enhancing the corporate value of the Company Group (the“Group”) and has worked on strengthening the Group’s governance structure through leading and supervising theGroup’s overall management since the time when he assumed the position of Representative Director, President in2006, Representative Director, Chairman in 2020, then Director, Chairman in 2022, serving as chairman of the Board of
Directors. The Company has judged that it can hope that he will be able to contribute to enhancing the Company’ssustained corporate value based on these abundant experience and in-depth insight about the overall businesses andtherefore nominated him as a candidate for Director for another term.

-4-Candidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Apr. 1974
Mar. 2005
June 2008
Oct. 2008

Masanobu Kawabayashi(September 5, 1955)

3

4

June 2010
June 2015
June 2017

Joined the Company
General Manager of Takasago Plant
Corporate Officer
Senior General Manager of Manufacturing &Technology Division
Director (current position)
Director, Executive Corporate Officer (current
position)Group Company Production Management(current position)

Number of theCompany’s shares
owned

32,000 shares(Reasons for election)
Mr. Masanobu Kawabayashi has reflected knowledge and experience gained so far for the Company’s overallmanagement as Director as well as supervised the manufacturing technology area after assuming Corporate Officer in
2008, serving as Director, Corporate Officer in 2010, and then assuming the position of Director, Executive Corporate
Officer in 2015. The Company has judged that it can hope that he will be able to contribute to enhancing theCompany’s sustained corporate value based on these abundant experience and in-depth insight about the overallbusinesses and therefore nominated him as a candidate for Director for another term.
Sept. 2000
Joined the Company
Sept. 2005
General Manager of Cosmetic Ingredients
Research Laboratory Office
June 2006
General Manager of Cosmetic Ingredients
Research Laboratory Department (current
position)
June 2008
Corporate Officer
Apr. 2009
Deputy Senior General Manager of ResearchLaboratory Division
Yukihiro Ohashi
65,789 shares(July 26, 1960)
Apr. 2011
Senior General Manager of Cosmetics
Ingredients Division
June 2011
Director (current position)
May 2013
General Manager of Research Laboratory(current position)
June 2021
Director, Senior Corporate Officer (current
position)
Apr. 2023
Senior General Manager of ResearchLaboratory Division (current position)(Reasons for election)
Mr. Yukihiro Ohashi has reflected knowledge and experience gained so far for the Company’s overall management as
Director as well as supervised the cosmetic ingredients area, and then the R&D area as a result of the organizational
reforms in April 2023, after assuming Corporate Officer in 2008, serving as Director, Corporate Officer in 2011, andthen assuming the position of Director, Senior Corporate Officer in 2021. The Company has judged that it can hope that
he will be able to contribute to enhancing the Company’s sustained corporate value based on these abundant experienceand in-depth insight about the overall businesses and therefore nominated him as a candidate for Director for another
term.

-5-

Candidate
No.

Name
(Date of birth)

Chihiro Murase(June 17, 1945)[Outside]
56(Notes)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Mar. 1968
June 1992
June 2000
Apr. 2002
June 2002
June 2008
June 2009

Joined Daito Chemix Corporation
Director
Managing Director
Representative Director and President
Representative Director and President & Chief
Executive Officer
Director of the Company (current position)
Retired from Representative Director andPresident & Chief Executive Officer of Daito
Chemix Corporation

Number of theCompany’s shares
owned

0 shares(Reasons for election and outline of expected role)
Mr. Chihiro Murase has abundant knowledge and experience about corporate management. The Company has
considered it as his expected role to present a long-term vision and give proper opinions from a perspective different
from the Company’s previous idea regarding the Company’s management as well as to seek to reinforce the supervisory
function of the Board of Directors with high independence and therefore nominated him as a candidate for Outside
Director for another term.
Apr. 1975
Joined Toray Industries, Inc.
June 2006
Director of Toray Industries (Malaysia) Sdn.
Bhd, and President of Penfibre Sdn. Bhd
June 2013
CEO & COO of Kansai TEK Co., Ltd.
Susumu Ota
Jan. 2015
CEO & COO of Toray Engineering Co., Ltd.
(October 13, 1952)
0 shares
June 2019
Advisor[Outside]
June 2021
Director of the Company (current position)(Significant concurrent positions outside the Company)
Outside Audit & Supervisory Board Member of YMC CO.,LTD.
(Reasons for election and outline of expected role)
Mr. Susumu Ota has abundant knowledge and experience about corporate management. The Company has considered it
as his expected role to present a long-term vision and give proper opinions from a perspective different from theCompany’s previous idea regarding the Company’s management as well as to seek to reinforce the supervisory functionof the Board of Directors with high independence and therefore nominated him as a candidate for Outside Director for
another term.
1. There is no special interest between any of the candidates and the Company.
2. Candidates Mr. Chihiro Murase and Mr. Susumu Ota are candidates for Outside Director.
3. The Company has submitted notification to the Tokyo Stock Exchange that candidates Mr. Chihiro Murase and Mr. Susumu
Ota have been designated as independent officers as provided for by the aforementioned exchange. If these candidates are
reelected, they will continue to be independent officers.
4. At the conclusion of this meeting, candidate Mr. Chihiro Murase’s tenure as Outside Director of the Company will havebeen 15 years, and candidate Mr. Susumu Ota’s tenure as Outside Director of the Company will have been 2 years.
5. Limited liability agreements with Outside Directors
The Company specifies that the liability of Outside Directors can be exempted within the range provided for by theCompanies Act so that they can properly perform their expected duties as well as stipulates in its current Articles ofIncorporation that the Company can enter into agreements with Outside Directors to limit their liability for damages for theCompany caused by negligence of their duties within a certain range to make it more smoothly to bring in competent humanresources suitable for Outside Directors. The Company has entered into a limited liability agreement with candidates for
Outside Director Mr. Chihiro Murase and Mr. Susumu Ota. If these candidates’ reelections are approved, the Company
plans to continue the said limited liability agreement with them.
The outline of this agreement is as follows:(i) This agreement limits liabilities provided for by Article 423, paragraph (1) of the Companies Act to the total of theamounts stipulated in each item of Article 425, paragraph (1) of the aforementioned Act.
(ii) The aforementioned limitation of liability shall apply only when an Outside Director performs duties that have caused
the liability in good faith and without gross negligence.

-6-6. The Company has entered into a directors and officers liability insurance (D&O insurance) policy with an insurancecompany as stipulated in Article 430-3, paragraph (1) of the Companies Act. Under the said insurance policy, legal
compensation for damages and damages for litigation expenses to be shouldered by the insured shall be supplemented.
The insured on the said insurance policy shall be Directors and Audit & Supervisory Board Members of the Company andits subsidiaries (excluding its overseas subsidiaries). If the election of each candidate for Director is approved under this
proposal, each candidate will continue to be the insured. The Company plans to renew the said insurance policy inNovember 2023.

-7-

Proposal No. 3

Election of One Audit & Supervisory Board Member

Among four Audit & Supervisory Board Members, the term of office of Mr. Kiyoshi Horie will expire at the conclusionof this meeting. Therefore, the Company proposes the election of one Audit & Supervisory Board Member.
The consent of the Audit & Supervisory Board has been obtained for this proposal. The candidate for Audit &Supervisory Board Member is as follows.
Name(Date of birth)

Career summary, position in the Company, and significant
concurrent positions outside the Company
Apr. 1979
Jan. 2000
Mar. 2000
Sept. 2001
Apr. 2004

Kiyoshi Horie(August 7, 1952)

June 2004
Sept. 2005
June 2006

June 2008

Apr. 2009

June 2011

Joined the Company
General Manager of the Household Products
Research Laboratory
General Manager of Kobe Plant
General Manager of the Industrial Chemicals
Laboratory
General Manager of Industrial Chemicals
Division
Corporate Officer
General Manager of Development Laboratory
Deputy Senior General Manager of
Manufacturing & Technology Division andGeneral Manager of Material Technology
Department
Senior General Manager of Manufacturing &Technology Division and General Manager of
Kakogawa-Higashi Plant
Deputy General Manager of Manufacturing &Technology Division and General Manager of
Kakogawa-Higashi Plant
Standing Audit & Supervisory Board Member(current position)

Number of theCompany’s shares
owned

14,441 shares(Reasons for election)
Mr. Kiyoshi Horie has strived to enhance the effectiveness of audit mainly by giving proper recommendations based on
physical inspection on the site, while capitalizing on abundant knowledge and experience about the Company’sbusinesses after assuming Standing Audit & Supervisory Board Member in 2011. The Company has nominated him as a
candidate for Audit & Supervisory Board Member for another term to capitalize on his abundant experience and broad
insight for the Company’s audits.
(Notes) 1. There is no special interest between the candidate and the Company.
2. Limited liability agreements with Audit & Supervisory Board Members
The Company specifies that the liability of Audit & Supervisory Board Members can be exempted within the range provided
for by the Companies Act so that they can properly perform their expected duties as well as stipulates in its current Articles
of Incorporation that the Company can enter into agreements with Audit & Supervisory Board Members to limit their
liability for damages for the Company caused by negligence of their duties within a certain range. The Company has enteredinto a limited liability agreement with candidate Mr. Kiyoshi Horie, and if his reelection is approved, the Company plans tocontinue the said limited liability agreement with him.
The outline of this agreement is as follows:(i)This agreement limits liabilities provided for by Article 423, paragraph (1) of the Companies Act to the total of theamounts stipulated in each item of Article 425, paragraph (1) of the aforementioned Act.

(ii) The aforementioned limitation of liability shall apply only when an Audit & Supervisory Board Member performs
duties that have caused the liability in good faith and without gross negligence.
3. The Company has entered into a directors and officers liability insurance (D&O insurance) policy with an insurancecompany as stipulated in Article 430-3, paragraph (1) of the Companies Act. Under the said insurance policy, legal
compensation for damages and damages for litigation expenses to be shouldered by the insured shall be supplemented.
The insured on the said insurance policy shall be Directors and Audit & Supervisory Board Members of the Company andits subsidiaries (excluding its overseas subsidiaries). If the election of the candidate is approved under this proposal, the-8-candidate to be reelected will continue to be the insured. The Company plans to renew the said insurance policy in November
2023.

-9-

(Reference)

Candidate for Audit & Supervisory
Board Member and Audit &Supervisory Board Members

Candidates for director

Skill matrix of candidates for Director and Audit & Supervisory Board Member and Audit & Supervisory Board
Members
Manufacturing,
technology andresearch

Name

Corporate
management

ESG andsustainability

Hiroshi Yano〇〇

Susumu Yano〇〇

Masanobu Kawabayashi〇〇

Yukihiro Ohashi

Sales andmarketing

Finances andaccounting

Internationality anddiversity

Legal affairs
and riskmanagement

〇

〇

〇

〇

〇

〇
〇

〇

〇

〇

〇

Chihiro Murase

〇

〇

〇

〇

〇

〇

Susumu Ota

〇

〇

〇

〇

〇

〇

〇

〇

〇

Kiyoshi Horie
Masanori Mitsuki〇

Tetsuo Masuda〇

Kazufumi Suzuki

〇

〇
〇

〇

〇

- 10 -〇〇〇

< Shareholder Proposals (Proposals No. 4 through 6) >Each shareholder proposal is provided as written on the shareholder proposal form submitted by the shareholder who
submitted the proposal.

Proposal No. 4(1)

Revision of Amount of Remuneration for Restricted Share-Based Remuneration Plan

Outline of the Proposal
The maximum amount of remuneration for Directors of the Company was approved as ¥250 million per year,
and separately from this, introduction of a restricted share-based remuneration plan for Directors other than
Outside Directors, with the total number of monetary claims provided based on the plan being within ¥50
million, and the total number of shares of common stock newly issued or sold by the Company being up to
100,000 shares per year, at the Annual General Meeting of Shareholders held on June 23, 2022. Now, in orderto add Outside Directors to the Directors of the Company that are target of the restricted share-based
remuneration plan (all Directors including Outside Directors shall be hereinafter referred to as the “Target
Directors”), provide even more incentive to sustainably enhance the corporate value of the Company andpromote the further sharing of value between the Target Directors and shareholders, monetary remuneration
claims shall be newly granted for granting restricted shares up to a maximum of ¥250 million per year or
100,000 shares to the Target Directors. The transfer restriction period shall be three years from the time of
granting. The specific timing of payment and allocation shall be determined by the Board of Directors, but it
shall be designed to function as a performance-linked incentive plan, and the design shall also be such that, if
business performance criteria are satisfied, restricted shares equivalent to three times cumulative fixed
remuneration shall be granted in three years’ time.

(2)

Reasons for the Proposal
The Company has introduced a restricted share-based remuneration plan (“Plan”), but the amount is extremely
small, and Outside Directors are excluded from being Target Directors. It cannot be said that the purpose of
the restricted share-based remuneration system, which is to share value between Directors and shareholders,is sufficiently achieved.
The standard for effective share-based remuneration to share value between directors and shareholders is
considered to be equivalent to three times fixed remuneration. In the 154th term (April 1, 2021 to March 31,2022) of the Company, fixed remuneration of approximately ¥102 million was paid annually to theCompany’s Directors (including Outside Directors). Therefore, even if remuneration under the restricted
share-based remuneration plan were ¥50 million, it would only be about 50% of fixed remuneration. At thispace, it will take six years to reach the equivalent of three times fixed compensation, which is considered aneffective target of share-based compensation for sharing value with directors and shareholders. Restricted
share-based compensation is meaningless unless it is granted during the term of office of Directors, so it isnecessary to grant a certain amount in a shorter period of time.
In addition, it is believed that the Company should establish shareholding guidelines for the restricted sharebased remuneration plan, and has set the target for officers to acquire treasury stock during their term of office
to be equivalent to three times their fixed basic compensation, and disclose the acquisition status of its treasury
shares by individual officers in its Corporate Governance Report submitted to the Tokyo Stock Exchange.

Opinion of the Board of Directors of the Company Regarding Proposal No. 4(1)

Opinion of the Board of Directors of the Company
The Board of Directors of the Company opposes this shareholder proposal.

(2)

Reasons for Opposition
Regarding the determination of the amount of remuneration for Directors, based on the policy of increasing
the motivation of senior management and Directors to improve business performance, and to contribute to the- 11 -

increase of corporate value over the medium to long term, the Company has held continued discussions
through the Nomination and Remuneration Committee, where Independent Outside Directors make up amajority, and submitted a proposal for introduction of a share-based remuneration plan using restricted sharesin order to give incentives aiming at sustainable improvement of corporate value and promote sharing of value
with shareholders to the Annual General Meeting of Shareholders in June 2022, after passing a resolution at
the Board of Directors meeting. In introducing the plan, we examined the appropriateness of introducing theplan by analyzing the overall compensation level and the ratio of each type of compensation, etc., referring
to executive compensation survey data from an external research organization.
Remuneration for the Company’s Directors (excluding Outside Directors) consists of basic remuneration
determined according to position and responsibilities, performance-linked bonuses aimed at increasingawareness of improving business performance each fiscal year, and restricted share-based remuneration thatprovides incentives for sustained improvement of corporate value.
Basic remuneration is calculated in consideration of the required roles and responsibilities. The performancelinked bonus is calculated based on an assessment of comprehensive contribution to the Company, including
the level of achievement against targets and growth rate compared with results in the previous fiscal year forconsolidated EBITDA (operating profit before depreciation and amortization) and consolidated profit, resultsfor DOE (dividend on equity), the performance of departments supervised, and the level of progress toward
ESG targets. In addition, the total amount of monetary claims to be paid to the target Directors for granting
restricted shares shall be up to ¥50 million per year, and the total number of common shares newly issued orsold by the Company shall be up to 100,000 shares per year, which has been approved at the Annual General
Meeting of Shareholders held in June 2022.
Under the share-based remuneration plan based on this shareholder proposal, the total amount of remuneration
for Directors subject to the restricted share-based remuneration plan is set at up to ¥250 million per year, anddesigned to grant restricted shares equivalent to three times the fixed remuneration in three years.
In the remuneration system introduced by the Company, when 100% of the evaluation indicators, etc. areachieved, the benchmark ratio is “basic remuneration: performance-linked bonus: stock remuneration =55:35:10.” This benchmark ratio is the result of careful consideration based on the actual circumstances of
the Company, in order to achieve a good balance of short-term and medium- to long-term incentives, and assuch, it is believed to be appropriate.
On the other hand, the shareholder proposal lacks balance between basic remuneration and performancelinked bonuses, deviates significantly from the Company’s basic policy on remuneration for Directors, and isconsidered an excessive remuneration framework.
In addition, while the shareholder proposal states that a restricted share-based remuneration plan will be
introduced for all Directors, including Outside Directors, from the viewpoint that the Company appointed
Independent Outside Directors with the aim that the managerial and supervisory functions of the Board of
Directors would be reinforced, the policy is thus not to include them in the restricted share-based remunerationplan.

- 12 -

Proposal No. 5(1)

Purchase of Treasury Shares

Outline of the Proposal
Pursuant to the provisions of Article 156, paragraph (1) of the Companies Act, the Company shall purchase a
total of up to 2,281,000 ordinary shares of the Company for a maximum total purchase amount of¥5,702,500,000 in exchange for the delivery of cash, within one year from the conclusion of this Annual
General Meeting of Shareholders.

(2)

Reasons for the Proposal
By resolution of the Board of Directors on December 19, 2022, the Company resolved to acquire treasury
stock by December 20, 2022, with a maximum number of 950,000 shares to be acquired and at a maximum
acquisition price of ¥2,184,050,000, and, based on the resolution, the Company acquired 819,800 shares oftreasury stock at a purchase price of ¥1,884,720,200 on December 20, 2022, which, from the viewpoint that
the Company has implemented measures for enhancement of shareholder returns and improvement of capitalefficiency, is to some extent commendable. Although the Company’s stock price has been on a gradual upward
trend since December 20, 2022, it can be said that the market perceives the Company’s countermeasures as
still insufficient. Therefore, in order to enhance shareholder returns and improve capital efficiency further, it
is believed that the Company should purchase approximately 10% of the total number of issued shares(excluding treasury shares) as treasury shares, and take measures to cancel them pursuant to the provisions ofArticle 178 of the Companies Act.

Opinion of the Board of Directors of the Company Regarding Proposal No. 5(1)

Opinion of the Board of Directors of the Company
The Board of Directors of the Company opposes this shareholder proposal.

(2)

Reasons for Opposition
The Company recognizes that the purchase of treasury shares is effective for enhancing capital efficiency andshareholder returns, as well as the execution of flexible capital policies in response to changes in the
management environment. Recently, pursuant to a resolution at a meeting of the Board of Directors held in
December 2022, the Company acquired a total of 819,800 of its own shares for a total purchase amount of¥1,884,720,200 on the Tokyo Stock Exchange off-auction own share repurchase trading system (ToSTNeT3) on December 20, 2022. In addition, we have continued to work to improve shareholder returns byincreasing the dividend per share as follows.
〇 Changes in dividends per share
FY2017
Actual amount¥28/share

FY2018Actual amount¥30/share

FY2019Actual amount¥33/share

FY2020
Actual amount¥35/share

FY2021
Actual amount¥54/share

FY2022
Planned¥57/share

The Company has set ROIC (return on invested capital) of 8.0% (FY2022: 7.9%) as a target indicator for the
final year of the medium-term management plan (FY2026) starting in April 2023. In the medium-term
management plan, we plan to make more aggressive investments, including capital expenditures, for further
growth, and by setting an ROIC target, we will also aim at growth that emphasizes capital efficiency. In
addition, by changing the DOE from the current target of 3.0% to a target of 3.5%, we will work to further
enhance shareholder returns. Furthermore, setting a goal of reducing the ratio of cross-shareholdings to 17%
or less by the end of FY2026 (FY2022: about 25%), we will meet the expectations of our stakeholders bysecuring the funds obtained from the sale of cross-shareholdings to maintain financial stability, while also
allocating in a well-balanced manner to growth investments and shareholder returns.
The Company believes that, taking into consideration the liquidity of the Company’s shares, the purchase of¥5,702,500,000 of treasury shares in one year on the market is not realistic, and if a proposal like this is passed,
there is not only a risk that the financial resources for growth investment would be harmed and the medium- 13 -

to long-term growth and enhancement of corporate value of the Company would stall, there is also a risk that
financial stability would be harmed, which could harm shareholders’ interests as a result. The Company
believes that the purchase of treasury shares should be performed at an appropriate time, while taking into
consideration the balance with investment for future growth, based on the status of trading in the Company’s
shares and the share price.

- 14 -

Proposal No. 6(1)

Amendment of Articles of Incorporation Regarding Number of Outside Directors

Outline of the Proposal
Article 19 of the Company’s Articles of Incorporation shall be amended as follows in order to make theCompany’s Outside Directors a majority.
Before amendment

After amendment(Number of Directors)(Number of Directors)

Article 19

Article 19
1. The Company shall have not more than 9
The Company shall have not more than 9 Directors.
Directors.
2 [Newly established]
2 The majority of the Directors of the Company shallbe Outside Directors as stipulated in Article 2,paragraph (1), item (xv) of the Companies Act.

(2)

Reasons for the Proposal
Principle 4-8 of the Corporate Governance Code states, “Independent directors should fulfill their roles andresponsibilities with the aim of contributing to sustainable growth of companies and increasing corporate
value over the mid- to long-term. Companies listed on the Prime Market should therefore appoint at least onethird of their directors as independent directors that sufficiently have such qualities. Irrespective of the above,
if a company listed on the Prime Market believes it needs to appoint the majority of directors as independent
directors based on a broad consideration of factors such as the industry, company size, business characteristics,
organizational structure and circumstances surrounding the company, it should appoint a sufficient number of
independent directors.” In addition, Principle 4-7 of the Corporate Governance Code states that, one of theroles and responsibilities of an independent outside director is “appropriately representing the views ofminority shareholders and other stakeholders in the boardroom from a standpoint independent of the
management and controlling shareholders.”
Of its six Directors, two are Outside Directors, and thus the Company meets the requirements for a ratio of
one-third or greater. However, we believe that we can increase capital efficiency, return profits to shareholders
and establish a governance system that contributes to the sustainable growth of the Company and theimprovement of corporate value over the medium to long term by assertively appointing a majority of Outside
Directors.
In addition to the aspect of number of Outside Directors, as for the quality thereof, we need personnel capableof contributing to the sustainable growth of the Company and the improvement of corporate value over the
medium to long term, and we believe that the hiring of skilled analysts with experience should be considered.
It is believed that the appointment of “personnel with extensive experience and skills as analysts” brings theperspective of outside investors and shareholders to the Board of Directors, and at the same time is an effectivemeans of contributing to the enhancement of corporate value through sound risk-taking. While the board of
directors and investors/shareholders of listed companies originally share the same goal of improving corporate
value over the long term, unfortunately in Japan they are often seen as being in an adversarial relationship.
The participation of Directors with the above experience and skills in the discussions and decision-making of
the Board of Directors will contribute to building an inherently positive and constructive relationship between
the Board of Directors and the stock market through sound risk-taking, capital allocation, and better
communication with the market. The explanation is often given that people with bank backgrounds andaccountants are responsible for the finance part of the skills matrix of directors, but from the perspective of
encouraging “sound risk-taking,” expertise in accounting and debt markets alone is insufficient. We believe
this is the significance of appointing equity market experts.

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Opinion of the Board of Directors of the Company Regarding Proposal No. 6(1)

Opinion of the Board of Directors of the Company
The Board of Directors of the Company opposes this shareholder proposal.

(2)

Reasons for Opposition
The Company has established a Nomination and Remuneration Committee, in which Independent Outside
Directors make up the majority, as an advisory body to the Board of Directors in order to ensure thetransparency and fairness of the Company’s decision-making regarding the election and dismissal of senior
management and the nomination of candidates for Director and Audit & Supervisory Board Member. Whenappointing directors, the Nomination and Remuneration Committee holds discussions on diversity and thenumber of persons and candidates that the Company considers proper, based on skills and experience thatshould be emphasized in light of the Company’s business environment and business characteristics, thensubmits these to the Board of Directors for decisions, and then these are submitted to the general meeting ofshareholders.
The Company has appointed Outside Directors who have a wealth of knowledge and experience in businessareas of the Company, who have been giving us great advice about management overall from broad
viewpoints. In addition, they have a high degree of independence in relation to the interests of the Company,
and are working to strengthen our supervisory functions from the perspective of general shareholder
protection.
We believe that the Board of Directors composed of candidates of the Directors proposed by the Company
has an optimal composition with expertise in line with the business environment and characteristics of theCompany.
On the other hand, we believe that the inclusion of a provision like this shareholder proposal in the Articles
of Incorporation may rather restrict the scope of election of Director candidates and hinder the formation ofan optimal Board of Directors.

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