February 10, 2022
Engagement Agenda“Takeover Defense Measures”(Requesting disclosure on necessity of “Takeover Defense Measures” which may depress theevaluation of the company in the capital market.)

Status of Engagement Dialogues for Companies Whose Takeover Defense Measures
Expired at Their General Meeting of Shareholders in 2021, And
Sending of Letters to Companies Whose Takeover Defense Measures Expire at Their
General Meeting of Shareholders in 2022

The Institutional Investors Collective Engagement Forum (hereinafter referred to as “IICEF”)
serving as a coordinator/secretariat, together with the seven companies participating in IICEF’s
collective engagement program, namely The Dai-ichi Life Insurance Company, Limited, Meiji Yasuda
Asset Management Company Ltd., Mitsubishi UFJ Trust and Banking Corporation, Pension FundAssociation, Resona Asset Management Co., Ltd., Sumitomo Mitsui DS Asset Management Company,
Limited and Sumitomo Mitsui Trust Asset Management Co., Ltd. (in alphabetical order; hereinafterreferred to as the “Participating Investors”), has sent letters to companies which have introduced
countermeasures against large-scale purchase (hereinafter referred to as “Takeover Defense
Measures”). In the letters, we explained views of the Participating Investors on various arguments
concerning Takeover Defense Measures, and also requested such companies to, if they are to submit
a proposal to keep the Takeover Defense Measures at a future general meeting of shareholders,
disclose information concerning the necessity of keeping the Takeover Defense Measures in light ofrisks of depressing the evaluation in the capital market in their convocation notice and/or timely
disclosure material.

1. Overview of this agenda(1) Participating Investors’ Recognition of Takeover Defense Measures
Investors who invest broadly in Japanese shares including passive managers like theParticipating Investors have viewpoints of, so to speak, a universal owner of “Japan CompanyLimited.” They take a position to support an increase in corporate value through sustainablegrowth with an approach of super-long term investment, and do not pursue near-term
shareholder returns. Accordingly, they do not support abusive takeover actions by a short-term
investor who sacrifices medium- to long-term corporate value.
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First of all, while there is a view that the legal system in Japan has not yet been sufficiently
established, the TOB rule prescribed in the Financial Instruments and Exchange Act regulates
transactions in which control is acquired through circumvention and requires purchase of allshares, and companies are allowed to request information concerning the acquirer, securing oftime for reviewing the offer and information disclosure by submitting the position statement
report.
Moreover, in terms of takeover actions to acquire control through in-market transactions,which have been noted earlier, while the legal measures remain incomplete, there have been
judicial precedents permitting the introduction and invocation of Takeover Defense Measuresthrough the approval of the majority of the shareholders, excluding the acquirer in question,
and with such circumstances in mind, we understand that a certain level of measures has beentaken. And considering the soar in stock prices accompanying the in-market purchase, takeovers
are never an easy task. If acquisition of control through in-market purchases is possible in spiteof such price hikes, it is nothing else that the share price was extremely low from the acquirer’sviewpoint. In this respect, it should not be tolerated that a company introduces Takeover
Defense Measures as though justifying stagnant share price.
There was also a case where a Takeover Defense Measure was once abolished but a proposalof emergency invocation submitted to the general meeting of shareholders was approved andvoted for. With regard to the emergency introduction of Takeover Defense Measures, inparticular, its scope of legality has been more clearly demarcated than before, and in the eventof the inception of a takeover that truly damages the common interests of the shareholders, it
has become possible to invoke Takeover Defense Measures as emergency introduction byseeking the intent of the shareholders. Accordingly, we, as the Participating Investors, believethat the necessity of continuation of the currently-adopted, advance-warning-type Takeover
Defense Measures is diminishing.
In some cases, Takeover Defense Measures are allegedly introduced in order to prevent
outflows of important confidential technologies to overseas. However, basically, what can beprevented by Takeover Defense Measures is abusive acquisition, while strategic acquisitions
with reasonable purpose by competitors, etc., cannot be blocked. It is unlikely for an acquirer todeclare its takeover action as an abusive acquisition trial. It will not be possible to invoke
Takeover Defense Measures only because the acquirer is a foreigner or a foreign company, either.
If a company intend to block strategic acquisitions by foreign companies that have shown fair2

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purposes, because of overseas outflow concerns, that should be beyond the scope of Takeover
Defense Measures.
In other cases, Takeover Defense Measures are introduced based on the notion that they canbe used as “weapons” for negotiating higher acquisition price. But whether the TOB price is low
or high should be up to the shareholders’ decision, and even if the company considers theproposed TOB price is low and a hostile takeover occurs due to a failure to reach an agreementin the negotiation, the company should just express the reasons and opinions on its view of such
low price. Trying to invoke Takeover Defense Measures insisting that the TOB price is too low
deprives of opportunities for shareholders who believe the TOB price is sufficient or high enoughto take profits. Therefore, in our view, the idea that Takeover Defense Measures can be used as“weapons” in price negotiations is very questionable.
Most importantly, Takeover Defense Measures have the aspect of weakening the selfdiscipline of the management team, as they limit the shareholders’ rights to bring about changes
in management teams that have not produced satisfactory achievements. The participating
investors suspect that there is misunderstanding among the management teams that they canprevent acquisition proposals which they do not want to accept, including those with reasonablestrategic purposes, by introducing Takeover Defense Measures. Such misunderstanding should
weaken the management team’s sense of tension toward entrustment of shareholders and bringcomplacency into management. In certain instances, it may result in neglecting faltering shareprice. As such, introducing or keeping Takeover Defense Measures will lead to investors’
concerns over the management’s entrenchment, which will also grow their distrust of themanagement.
In this way, introducing and keeping Takeover Defense Measures can lower the investors’
confidence as well as appraisal of governance and corporate value, and may also depress theevaluation in the capital market.

Most listed companies are making efforts on information

disclosure and IR activities and the like in order to build a relationship of trust with investors,
and to get proper evaluation of corporate value to form fair stock valuation. However, if acompany tries introducing/keeping Takeover Defense Measures, it is difficult for investors to findconvincing reason for the company’s decision of introducing/keeping the program, taking suchrisks of lower investor confidence and poorer evaluation of corporate value.
From the standpoint of the Participating Investors, if we had to, we might be able to consider
a proper reason for introducing Takeover Defense Measures in the case where the management
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team “recognizes that there are management issues/challenges at the time, has already started
implementing management reforms aiming for medium- to long-term growth and wants grace
for the time being as it will still need some more time before it sees the outcomes produced anda fair stock price formed.” In such a case, we would like the management team to clarify themanagement issues recognized by the team, the reform policies and plans, the goals and target
time of achievements, the expected change of corporate value at the time of the achievements.
If the explanations of these points are satisfactory enough, we may possibly regard theintroduction/keeping of such Takeover Defense Measures with limited duration as reasonable.
(2) Request for information disclosure concerning the necessity of Takeover Defense Measures
Companies with Takeover Defense Measures have in-detail explanations of the schemes intheir disclosure materials, but unfortunately, their discussions of the necessity of the programs
are not sufficiently satisfactory to investors. As the purposes of the introduction, many of thesecompanies argue that the measures should prevent abusive acquisitions such as damaging
important management resources and hindering long-term business, and that they are effective
in securing information-gathering time for shareholders judgments. However, these reasons are
not convincing from the investors’ viewpoint, considering the risk of lowering the evaluation in
the capital market.
If a company plans to propose to keep its Takeover Defense Measures at a future general
meeting of shareholders, we would like the company to disclose information concerning thenecessity of keeping the Measures in light of risks of depressing the evaluation in the capital
market such as the following in their convocation notice and/or timely disclosure material as
supplementary information to the proposal.
2. Status of engagement dialogues with companies whose Takeover Defense Measures Expired attheir General Meeting of Shareholders in 2021
We selected 13 companies with market capital of 100 billion yen or more from among thecompanies whose Takeover Defense Measures were to expire at their general meeting ofshareholders to be held between March and June 2021 and sent letters to them. Among thecompanies which received the letters, 6 companies decided to discontinue the Takeover Defense
Measures and 7 companies submitted a proposal to keep the Measures to their general meetingof shareholders.
Unfortunately, among the 7 companies which submitted the proposal to keep the Measures,
there were no companies which provided sufficiently satisfactory reasons for the Participating4

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Investors. However, developments of the framework to objectively determine the acceptabilityof the invocation of the Takeover Defense Measures made progress such as increasing thenumber of outside directors and enhancing the board independence.
3. Starting to send letters to companies whose Takeover Defense Measures expire at their general
meeting of shareholders between March and June 2022
We selected some companies which we determined appropriate to contact from among thecompanies whose Takeover Defense Measures were to expire at their general meeting ofshareholders to be held between March and June 2022, after excluding the companies that
already publicly announced abolition of the Measures, and started to send letters requesting todescribe the reasons for keeping the Takeover Defense Measures, if that is the case, in theirconvocation notice and/or timely disclosure material, as we did in the past years.
***Contact information
Institutional Investors Collective Engagement Forum
Directors in charge: Yuki Kimura, Chairman; Naomi Yamazaki, Administration Manager; andRyusuke Ohori and Hiromitsu Kamata, Executive Director
Address: Tokyo Entre Salon, Shinmaki-chou Building Annex 1, 3-2-14, Nihonbashi, Chuo-ku,
Tokyo 103-0027 JAPANE-mail: info@iicef.jp

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