This document is an English translation of the official Japanese version of the Press Release (the“Official Japanese Version”). This English translation was prepared for your reference, to help you
understand what is stated in the Official Japanese Version. In the event of any discrepancy between the
Official Japanese Version and the English translation, the Official Japanese Version will prevail.
January 21, 2021
To Whom It May Concern,

Company name:
Representative:
Stock listing:Code number:Contact:
Telephone:

Nippon Steel Corporation
Eiji Hashimoto, Representative Director and President
First Section of the TSE, First Section of the NSE, FSE, and SSE
5401
Shinnosuke Arita, General Manager, Public Relations Center+81-3-6867- 2135, 2146, 2977, 3419

Notice regarding the Commencement of a Tender Offer
for Tokyo Rope Mfg. Co., Ltd.’s Shares (Securities Code: 5981)
Nippon Steel Corporation (“NSC” or the “Tender Offeror”) hereby announces that today its board of
directors adopted a resolution to acquire the shares of common stock (the “Target Company Shares”)
of Tokyo Rope Mfg. Co., Ltd. (securities code: 5981, First Section of the Tokyo Stock Exchange, Inc.
(“TSE”); the “Target Company”) through a tender offer (the “Tender Offer”) under the Financial
Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended; the “Act”), as follows.

1.

Purpose of the Purchase(1)

Overview of the Tender Offer

As of today, NSC owns 1,610,964 shares of the Target Company Shares listed on the First Section of
the TSE (ownership ratio (Note): 9.91%). As a shareholder of the Target Company, NSC is concernedthat although the Target Company has been facing management issues, such as dysfunction of its
governance system, it has not taken any effective measures against them and its business performanceremains deteriorated, and recognizes this situation can no longer remain as it is. Based on thisrecognition, today the board of directors of NSC adopted a resolution to conduct the Tender Offer inorder to increase its commitment to improvement of the Target Company’s corporate value by
acquiring additional Target Company Shares, to promote restructuring of the Target Company’s
management and governance systems which is necessary to recover and improve the Target
Company’s corporate value, thereby contributing to the recovery and improvement of its corporate
value.
(Note) “Ownership ratio” refers to the ratio against the number of shares (16,255,173 shares) bydeduction of the number of treasury shares owned by the Target Company (13,069 shares) as
of September 30, 2020, as stated in the Second Quarterly Report for the 222nd Fiscal Yearsubmitted by the Target Company on November 13, 2020 (the “Target Company Quarterly
Report”) out of the total number of issued shares as of the same date (16,268,242 shares) (anyfraction is rounded off to two decimal places, hereinafter the same).
As stated in “(2) (I) D. (A) Poor Business Performance and Worsened Financial Soundness” below,business results of the Target Company on a consolidated basis have been almost consistently below
the level of previous years in term of net sales from the fiscal year ended March 2016 until the fiscal
year ended March 2020, except for the year ended March 2019 showing a slight year-on year increaseof 0.7%; operating income has also been consecutively below the level of previous years, from thefiscal year ended March 2017 until the fiscal year ended March 2020, and a decline in income
continues. Furthermore, the Target Company recorded a net loss of approximately 2.6 billion yen in
the fiscal year ended March 2020, and NSC recognizes that the Target Company is in a very severe
condition. In addition, when considering the Tender Offer, NSC examined the publicly available
materials regarding the Target Company, and with such information, it was confirmed that in January
4, 2021, a mortgage on factory foundation was created over the land and buildings in a key plant of theTarget Company, the Tsuchiura facility, for its nine banks to secure their total of 1 billion yen in loans;thus, NSC considers that it is clear that the Target Company’s financial standing is further
deteriorating. Despite that, the Target Company has failed to take effective measures against its
management issues, and NSC is concerned that if the Target Company continues to adhere to thecurrent management policies, its corporate value will further deteriorate and it is likely tounreasonably harm the interests of its shareholders, customers and employees, as well as eachstakeholder in the Target Company.
As a shareholder of the Target Company, NSC continuously held dialogue with the Target Company’s
management team from mid May 2017 until mid February 2020, just before the spread of COVID-19,
and encouraged them to improve their business, including pointing out management issues to beaddressed. Further, since the annual shareholders meeting of the Target Company held on June 27,
2017, NSC has also continuously cast votes against the proposal for the appointment of more than one
directors (including inside and outside directors) of the Target Company. Nevertheless, themanagement team of the Target Company has displayed neither a sense of crisis with respect to thedamage to the Target Company’s corporate value nor an intention to take measures regarding themanagement issues. Therefore, no specific discussions toward recovery and improvement of the Target
Company’s corporate value have been developed since the conversations held in mid May 2017 todate.
As stated in “(2) (I) D. (B) Dysfunction of Governance System” below, NSC considers that thissituation, in which the Target Company’s corporate value has continuously been damaged, is causedby the dysfunction of the governance system in the Target Company including the evaluation of theTarget Company’s management team by outside directors and the appointment and reappointment
process thereunder. Also, as stated in “(2) (I) D. (C) Status of Compliance by the Target Company”
below, with respect to Tokyo Rope International, Inc. (“Tokyo Rope International”), a subsidiary of
the Target Company, it has given no public notice of its profit and loss statement or a summary thereofsince it became a large company under the Companies Act (Act No. 86 of 2005, as amended;hereinafter the same) as a result of the capital increase in March 2020. As illustrated by this, the Target
Company is in a situation where its subsidiary did not properly perform its basic obligations under theCompanies Act. Taking these circumstances into account, NSC determined in late September 2020 that
the Target Company was in an urgent need to quickly reconsider its current management policies andpromptly implement measures to recover and improve its corporate value. NSC began to consider
additional acquisition of the Target Company Shares, as a specific measure for facilitating the
restructuring of the Target Company’s management and governance systems, which is necessary torecover and improve the Target Company’s corporate value, by increasing its commitment toimprovement of its corporate value, and by having in-depth discussions with or present necessary
proposals to the management team of the Target Company as a shareholder. NSC recognizes that it
would take a certain amount of time to rebuild the Target Company’s management in light of its
serious business downturn, and some shareholders of the Target Company might not intend to holdtheir shares in the mid- and long-term. Thus, NSC considers providing an appropriate opportunity forthe shareholders who desire to sell their Target Company Shares through a tender offer at a price addedby an appropriate premium to the latest market price to be a method to be appreciated by generalinvestors. With this recognition, today, NSC adopted a resolution to conduct the Tender Offer.
The Target Company has consecutively posted losses in the new product development businesspromoted under the current management policies since the fiscal year ended March 2017; in themeantime, its key business focusing on the wire rope and wire (Note) related business has maintained-2-

a certain level of competitiveness and secured a certain level of profitability. As such, NSC believes
that if the current management policies of the Target Company are appropriately reconsidered, itwould be possible for the Target Company to recover and further improve its corporate value in themid- and long-term. In addition, when effectuating such recovery and improvement of the Target
Company’s corporate value, NSC considers it desirable for the Target Company to remain independent
as a listed company, develop an appropriate governance system, and then utilize internal humanresources who are familiar with the Target Company’s business in shaping a new management team to
restructure the Target Company’s management.
(Note) “Wire rope and wire” refers to wire rope products used for elevators, cranes, ropeways, etc.;
wire products used to reinforce submarine optical cables and electric wires; and fiber ropes
and networks for fishery and marine use.
As stated in “(2) (II) Post-Tender Offer Management Policies” below, if the Target Company requests
support to recover and improve its corporate value, NSC is ready to build a cooperative relationshipwith the Target Company and then to develop and promote high-value added products and moresophisticated products through joint product development. However, NSC believes that independenceof the Target Company’s management should be maintained as it considers that by developing
management and governance systems whereby they can fully demonstrate its inherent technologicalcapabilities and brand power, the Target Company’s current management policies can be appropriately
reconsidered and its corporate value can be recovered and improved on its own, thereby serving theinterests of shareholders of the Target Company..
NSC intends to maintain independence of the Target Company while increasing its commitment toimprovement of the Target Company’s corporate value by acquiring additional Target Company Sharesthrough the Tender Offer. NSC, as a shareholder of the Target Company, also intends to havediscussions with the Target Company’s management team regarding appointment of new internal
persons as directors of the Target Company and about a structure for the board of directors which
would ensure independence and diversity, and present necessary proposals to it based on suchdiscussions, with a view to restructuring of the management and governance systems of the Target
Company, which is necessary to recover and improve its corporate value. NSC considers that for such
restructuring of the management and governance systems of the Target Company, the support of its
shareholders is indispensable, and thus NSC will take necessary measures to obtain its shareholders’
understanding, including providing explanation for NSC’s thoughts and/or information regarding theTarget Company.
NSC is a shareholder of the Target Company and also a base material manufacturer supplying wirerod, a raw material for the Target Company’s key products. Specifically, as stated in “2. (1) (viii)
Relationship Between the Tender Offeror and the Target Company” below, the Target Company has abusiness relationship in which it procures various wire rods and base materials for processing on
consignment from NSC. As stated in “(2) (I) C. Relationship Between the Parties” below, NSC
recognizes that NSC is able to contributes to the enhancement of the competitiveness and corporate
value of the Target Company, which in turn leads to further growth of both NSC and the Target
Company by providing a stable supply of high-quality wire rod compatible with the features of theTarget Company’s products and, in conjunction with the advanced processing technology for wire ropeand wire products possessed by the Target Company, satisfying customers’ demand based on a better
understanding of the respective technologies and products of NSC as a base material manufacturer, theTarget Company as a processing manufacturer, and product customers through exchange of opinions
and joint research and development among them; namely, by making efforts to deepen the“combination of wire rods and processing technology” considering customers’ needs. Based on thisrecognition, NSC has tied with and built a cooperative relationship with the Target Company for
improving its corporate value, including providing technical and capital supports, since 1963.
However, NSC considers that if the Target Company sticks to the current management policies whichcause deteriorating financial conditions and under which they consecutively posted losses of-3-

approximately 600 million yen for the fiscal year ended March 2017, approximately 400 million yen
for the fiscal year ended March 2018, approximately 700 million yen for the fiscal year ended
March 2020, and approximately 200 million yen for the fiscal year ended March 2020 in the new
product development business promoted thereunder, it would pose a question on the part of NSC andcustomers on the Target Company as a reliable business partner and could impede the continuation of
joint research and development with the Target Company that may involve disclosure of intellectual
properties, including important knowhow owned by NSC and customers. NSC is concerned that underthese circumstances, even the key business that has supported the Target Company’s management
through its poor business results may lose competitiveness. When the Target Company’s current
management policies are reconsidered and such situation is improved, NSC intends to contribute toincreasing the Target Company’s competitiveness and corporate value once again by more proactively
promoting joint research and development between NSC, the Target Company and customers.
As stated above, NSC considers it essential to restructure the management and governance systems of
the Target Company in order to recover and improve its corporate value. To realize this, as ashareholder of the Target Company, NSC intends to have discussions with the Target Company’s
management team regarding appointment of new internal persons as directors of the Target Company
and about a structure for the board of directors which would ensure independence and diversity, andpresent necessary proposals to it based on such discussions; to begin with, NSC aims to increase its
commitment to improvement of the Target Company’s corporate value by acquiring additional Target
Company Shares through the Tender Offer. As stated above, NSC believes that by maintaining theindependence of the Target Company’s management and developing management and governancesystems whereby the Target Company can fully demonstrate its inherent technological capabilities andbrand power, the current management policies can be appropriately reconsidered and its corporate
value can be recovered and improved. Accordingly, NSC intends to set the maximum number ofshares to be purchased at the number obtained by acquiring ownership ratio of 10.00%, in addition to1,610,964 shares already held by NSC (ownership ratio: 9.91%), with the intent to increase as much as
possible its commitment to improvement of the Target Company’s corporate value by acquiring
additional Target Company Shares, while taking into account various considerations including
maintaining the independence of the Target Company’s management by avoiding making the Target
Company an equity-method affiliate (see Note) of NSC as well as the rationality of the investment
amounts necessary for NSC to conduct the Tender Offer. As a result, NSC decided to set the maximum
number of shares to be purchased at 1,625,500 shares (ownership ratio: 19.91%).
(Note) Under the international accounting standards adopted by NSC, if a company has less than 20%of the voting rights of another company, the latter company, in general, does not fall under thedefinition of an equity-method affiliate of the former company unless the company inpossession of those rights has an obviously significant influence on the latter company.
However, this analysis depends on individual circumstances, and as of today, it is not yet
determined how the Target Company will eventually be treated.
If the total number of shares tendered in response to the Tender Offer (“Tendered Shares”) exceeds
the maximum number of shares to be purchased (1,625,500 shares), NSC will not purchase the excess
in whole or in part, and the shares will be delivered and other settlement procedures for their purchaseusing the pro rata method as specified in Article 27-13, paragraph (5) of the Act and Article 32 of the
Cabinet Office Ordinance on Disclosure Required for Tender Offer for Share Certificates, etc. by
Person Other Than Issuer (Ordinance of the Ministry of Finance No. 38 of 1990, as amended; the“Cabinet Office Ordinance”). On the other hand, since (a) NSC considers it meaningful to increase
the current ownership ratio as much as possible in light of the purpose of the Tender Offer (i.e., toincrease its commitment to improvement of the Target Company’s corporate value), and (b) given that
it would take a certain amount of time to rebuild the Target Company’s management in light of its
business downturn and the fact that the Target Company’s shareholders may include those who do notintend to hold the shares over the medium-to-long term, NSC expects that the Tender Offer will also
serve to provide the Target Company’s shareholders who want to sell their shares with an appropriate
opportunity to do so. Thus, no minimum number of shares to be purchased will be set for the Tender-4-

Offer; accordingly, if the total number of Tendered Shares is equal to or less than the maximum limitof shares to be purchased (1,625,500 shares), NSC will purchase all the Tendered Shares.
As stated above, NSC, as a shareholder of the Target Company, has continuously held dialogue with
the Target Company’s management team from mid May 2017 until mid February 2020, just before thespread of COVID-19, and encouraged them to improve the business, including by pointing out
management issues to be addressed. Further, since the annual shareholders meeting of the Target
Company held on June 27, 2017, NSC has continuously casted votes against the proposals for theappointment of more than one directors of the Target Company (including inside directors and outside
directors). Nevertheless, the management team of the Target Company has displayed neither a sense ofcrisis with respect to the damage to the Target Company’s corporate value nor an intention to takemeasures for the management issues. Therefore, no specific discussions toward recovery andimprovement of the corporate value of the Target Company have been developed since theconversation held in mid May 2017 to date. As such, because the management team of the Target
Company has not exhibited an intention to take measures for the management issues, NSC cannot
expect any constructive discussions even if NSC discusses the implementation of the Tender Offer
with the Target Company in advance. Accordingly, NSC has not held any prior discussions on theTender Offer with the Target Company to date. Therefore, as of today, NSC has not received the Target
Company’s support for the Tender Offer.
As of today, although NSC has not received the Target Company’s support for the Tender Offer, NSC
anticipates the Target Company’s management to fully understand the significance of the Tender Offerand resolve to support the Tender Offer. NSC believes that the restructuring of management andgovernance systems of the Target Company, which is one of the purposes of the Tender Offer, will
recover and improve its corporate value and serve the interests of all stakeholders including the Target
Company’s shareholders, customers and employees. The Target Company’s business is deteriorating
and it will take a certain time to rebuild its management in the future. Given that the Target Company’s
shareholders may include those who do not intend to hold the shares over medium-to-long term, andthat the Tender Offer will provide the Target Company’s shareholders who want to sell their shareswith an appropriate opportunity to do so, NSC expects that the Target Company will recognize theimportance of constructive dialogue with its shareholders and will support the Tender Offer.
The Tender Offer is not intended to delist the Target Company Shares, and the listing of the Target
Company Shares will be maintained after the Tender Offer.
(2)

Background Regarding the Decision to Conduct, Purposes of, and Decision-Making Process
for, the Tender Offer, and Post-Tender Offer Management Policies(I)

Background Regarding the Decision to Conduct, Purposes of, and Decision-Making Process
for, the Tender Offer

A.

Overview of NSC

NSC was formed through the merger of Yawata Iron & Steel Co., Ltd. and Fuji Iron & Steel Co., Ltd.
(both established on April 1, 1950) on March 31, 1970, and was renamed to Nippon Steel Corporation(Shin-nippon Seitetsu Kabushiki Kaisha). After its business integration with Sumitomo Metal
Industries, Ltd. (established in 1949) on October 1, 2012, the company was renamed to Nippon Steel& Sumitomo Metal Corporation; then, it was renamed in April 2019 to the current trade name, Nippon
Steel Corporation (Nippon Seitetsu Kabushiki Kaisha). Most recently, Nippon Steel Corporation was
merged with Nippon Steel Nisshin Co., Ltd. in April 2020. NSC went public on the TSE and Nagoya
Stock Exchange, Inc. on October 2, 1950, on Securities Membership Corporation Fukuoka Stock
Exchange on October 5, 1950, and then on Securities Membership Corporation Sapporo Securities
Exchange on January 21, 1952, respectively. At present, shares of NSC are listed on the First Section-5-

of TSE, the First Section of Nagoya Stock Exchange, Fukuoka Stock Exchange, and Sapporo
Securities Exchange, respectively.
NSC’s corporate philosophy is to pursue world-leading technologies and manufacturing capabilities,
and contribute to society by providing excellent products and service. Using the three key drivers of“technology,” “cost,” and “being global,” NSC has steadily made investments to enhance its businessfoundation and achieve growth, as a step toward the realization of a firm position as the “Best
Steelmaker with World Leading Capabilities.”
B.

Overview of the Target Company

On the other hand, according to the securities reports and the website of the Target Company, theTarget Company was founded in 1887 in Azabu, Tokyo as Tokyo Rope Co., Ltd. and commenced
manufacturing of industrial Manila hemp rope. Thereafter, it was renamed to the current trade name,Tokyo Rope Mfg. Co., Ltd. due to the enactment of the Commercial Code in 1893, and went public on
the TSE in 1896 and has remained public to date. As of November 13, 2020, the Target Company
group consists of the Target Company, twenty-eight subsidiaries, and six affiliates which are engaged
in manufacturing and sales of wire rope and wire, steel cord (Note 1), product development, and others(such as industrial machinery, powder metallurgical products, and oil products) and real estate leasing,as well as logistics, processing and other service activities related to each business segment.
(Note 1) “Steel cord” refers to cord used as reinforcing materials for radial tires.
C.

Relationship between the Parties

In January 1970, NSC’s predecessor, Fuji Iron & Steel Co., Ltd., took a stake in the Target Company
as a shareholder (although the acquisition method and the number of shares acquired cannot be
confirmed) because it has had a business relationship with it at that time. Thereafter, the thenshareholders of the Target Company, the Asahi Bank, Ltd. and the Mitsubishi Trust and Banking
Corporation, intended to sell their Target Company Shares, and the Target Company requested that
NSC increase its stake therein. Accordingly, in order to strengthen the ties between the parties, NSC
additionally acquired 5,321,000 shares of the Target Company, totaling 11,388,000 shares (the thenownership ratio: 7.00% (Note 2)) in March 2001. Furthermore, when the Target Company made Toko
Steel Cord Co., Ltd. its wholly owned subsidiary, a share exchange was conducted as of January 20,
2006, and as consideration thereof, NSC acquired 116,000 shares of the Target Company (the thenownership ratio: 0.07% (Note 3), resulting in 11,504,000 shares (the then-ownership ratio: 7.36%(Note 4)). In addition, although the acquisition time and acquisition method cannot be confirmed, NSC
acquired 640 shares of the Target Company during the above time. Thereafter, the Target Company
conducted a share consolidation as of October 1, 2016 at a ratio of 10 shares of common stock to one
share of common stock; as a result, NSC owns 1,150,464 shares of the Target Company. By
strengthening such capital relationship, NSC has further deepened its cooperative relationship with theTarget Company, as stated below. Thereafter, NSC acquired the Target Company Shares from themarket on January 6 and 14, 2021; as a result, NSC owns 1,610,964 shares (ownership ratio: 9.91%)
as of today.
(Note 2) “Then-ownership ratio” refers to the ratio against the number of shares (162,679,286 shares)
by deduction of the number of treasury shares owned by the Target Company (3,134 shares)
as of March 31, 2001, as stated in the Securities Report for the 202nd Fiscal Year submitted
by the Target Company on June 28, 2001 out of the total number of issued shares as of thesame date (162,682,420 shares) (any fraction is rounded off to two decimal places,
hereinafter the same)(Note 3) “Then-ownership ratio” refers to the ratio against the number of shares (156,348,741 shares)
by deduction of the number of treasury shares owned by the Target Company (6,333,679
shares) as of March 31, 2006, as stated in the Securities Report for the 207th Fiscal Year-6-

submitted by the Target Company on June 29, 2006 out of the total number of issued shares
as of the same date (162,682,420 shares) (any fraction is rounded off to two decimal places,
hereinafter the same).
(Note 4) “Then-ownership ratio” refers to the ratio against the number of shares (156,348,741 shares)
by deduction of the number of treasury shares owned by the Target Company (6,333,679
shares) as of March 31, 2006, as stated in the Securities Report for the 207th Fiscal Yearsubmitted by the Target Company on June 29, 2006 out of the total number of issued shares
as of the same date (162,682,420 shares) (any fraction is rounded off to two decimal places,
hereinafter the same).
NSC is also a base material manufacturer supplying wire rod, a raw material for the Target Company’s
key products, and is confident that it has contributed to increasing competitiveness and businessgrowth of the Target Company since 1963 through stable supply of wire rod, as well as technologicalcollaboration, joint product development, and personnel assistance. Bar and wire rod products
supplied by base material manufacturer including NSC are seldom used directly by customers as final
products, and most of them require processing treatment such as drawing-out, heat treatment, andsurface (plating) treatment. As such, in addition to the quality of wire rod supplied by base material
manufacturers including NSC and the processing technology owned by processing manufactures
including the Target Company per se, the “combination of wire rods and processing technology” asstated in “(1) Overview of the Tender Offer” above is also an important factor to determine thecompetitiveness of products.
NSC has made efforts to deepen the “combination of wire rods and processing technology” by joint
product development in the steel cord-related business among NSC, the Target Company, andcustomers, or joint research and development in the wire rod and wire-related business between NSC
and the Target Company, and believes it has contributed to increasing the competitiveness of theTarget Company. One of the reasons that the Target Company’s products have been selected by end
users thus far is, in addition to the high-quality wire rod supplied by NSC and the Target Company’s
processing technology, the efforts to deepen the “combination of wire rods and processing technology”
of both parties through their joint research and development, and NSC believes that this is the sourceof competitiveness of the Target Company.
Furthermore, NSC has built an appropriate inventory control and efficient delivery system for highquality wire rod. When an operation issue occurred in the Target Company’s plant, NSC cooperated
with the Target Company in investigation of the cause thereof and development of business solutions;in addition, NSC has worked on achieving more efficiency (such as by improvement of plant operationand more efficient drawing-out and heat treatment, and reduction in burnout ratio) of their plants byproviding guidance from its engineers. In this way, NSC believes it has contributed to the stablesupply of products by the Target Company. NSC considers that such stable supply system is afoundation for the Target Company to earn and maintain customer trust and the Target Company has
succeeded in business growth so far by flexibly customizing products in response to end users’ needs,
though the “combination of wire rods and processing technology” stated above.
However, as stated in “D. (B) Dysfunction of Governance System” below, the Target Company isfacing management issues, such as dysfunction of governance system. In the Former Mid-Term
Management Plan, the Target Company stated its group numerical targets for the fiscal year ended
March 2020 as follows: consolidated net sales of 90.0 billion yen; consolidated operating income of
7.8 billion yen; consolidated EBITDA of 10.7 billion yen; and capital adequacy ratio of 35%.
However, the actual results for the fiscal year ended March 2020 were consolidated net sales of 63.0
billion yen, consolidated operating income of 0.3 billion yen, consolidated EBITDA of 2.9 billion yen,
and capital adequacy ratio of 24%, and the Target Company underperformed the numerical targets
above in all indices for which actual results were published. Accordingly, NSC considers that theTarget Company’s business has been continuously deteriorating since 2015. The Target Company
recorded losses in the new product development business it has promoted as follows: approximately-7-

0.6 billion yen in the fiscal year ended March 2017; approximately 0.4 billion yen in the fiscal year
ended March 2018; approximately 0.7 billion yen in the fiscal year ended March 2019; andapproximately 0.2 billion yen in the fiscal year ended March 2020. NSC considers that if the Target
Company sticks to the current management policies which cause deteriorating financial conditions andunder which they consecutively posted losses in the new product development business promoted
thereunder, it would pose a question on the part of NSC and customers on the Target Company as areliable business partner and could impede the continuation of joint research and development with theTarget Company that may involve disclosure of intellectual properties, including important knowhow
owned by them. NSC is concerned that under these circumstances, even the key business that has
supported the Target Company’s management through its poor business results may losecompetitiveness. Therefore, as a shareholder of the Target Company and also a base material supplierand a joint development partner, NSC considers that the Target Company is in an urgent need toquickly reconsider the current management policies which damage their corporate value and promptly
introduce appropriate measures to recover and improve its corporate value.
D.

Present Status of and Issues at the Target Company(A)

Poor Business Performance and Worsened Financial Soundness(i)

Non-Achievement of Former Mid-Term Management Plan

The Target Company announced on May 22, 2015 a five-year medium-term management plan “TCTFocus2020” covering the fiscal year ended March 2016 as the first year and that ended March 2020 as
the last year (the “Target Company’s Former Mid-Term Management Plan”). In that plan, theTarget Company set its group numerical targets for the fiscal year ended March 2020 as follows:
consolidated net sales of 90.0 billion yen; consolidated operating income of 7.8 billion yen; andconsolidated EBITDA of 10.7 billion yen. Thereafter, according to the press release “Notice regarding
Revision of Medium-Term Management Plan ‘TCT-Focus2020’” submitted by the Target Company on
May 12, 2017, the Target Company revised the numerical target of consolidated net sales in the lastyear of the Former Mid-Term Management Plan downward to 80.0 billion yen; it also revised
consolidated operating income to 8.0 billion yen and consolidated EBITDA to 10.8 billion yen.
Nevertheless, the Target Company’s consolidated net sales in the fiscal year ended March 2020 was
approximately 63.0 billion yen, a shortfall of approximately 17.0 billion even below such downwardly
revised amount. The Target Company also underperformed other numerical targets; namely,
consolidated operating income of approximately 0.3 billion yen (approximately 7.7 billion less), andconsolidated EBITDA of approximately 2.9 billion yen (approximately 7.9 billion less). In addition,
the capital adequacy ratio moved at a level below 35%, the target in the Target Company’s Former
Mid-Term Management Plan, resulting in 24% in the fiscal year ended March 2020. Given various
changes in external environment, NSC becomes suspicious about the current management policies of
the Target Company, having underperformed the numerical targets stated in the Target Company’s
Former Mid-Term Management Plan in all indices for which actual results were published.
Revised Target
Company’s Former
FY ended March 2020
Mid-Term
Management Plan
90. 0 billion yen
80.0 billion yen
63.0 billion yen

Target Company’s
Former Mid-Term
Management Plan
Consolidated Net
Sales
Consolidated
Operating Income
Consolidated
EBITDA
Capital AdequacyRate

7.8 billion yen

8.0 billion yen

0.3 billion yen

10.7 billion yen

10.8 billion yen

2.9 billion yen

35%

35%

24%

-8-

(ii)

Continued Poor Business Performance and Failed BusinessBusiness results of the Target Company for the past five years on a consolidated basis are as statedbelow: net sales have been almost consistently lower each year in terms of net sales from the fiscal
year ended March 2016 until the fiscal year ended March 2020; operating income has also beenconsecutively lower each year, from the fiscal year ended March 2017 until the fiscal year ended
March 2020, and the decline in income continues. Furthermore, the Target Company recorded a net
loss of approximately 2.6 billion yen in the fiscal year ended March 2020, and NSC recognizes that
the Target Company is in a very severe condition. In addition, when considering the Tender Offer,
NSC examined the publicly available materials regarding the Target Company, and with suchinformation, it was confirmed that in January 4, 2021, a mortgage on factory foundation was createdover the land and buildings in a key plant of the Target Company, the Tsuchiura facility, for its ninebanks to secure their total of 1 billion yen in loans; thus, NSC considers that it is clear that the Target
Company’s financial standing is further deteriorating.
(Unit: inmillion yen)
Net Sales(year-on-year)
Operating
Income(year-on-year)
Current Net
Income or Net
Loss (△)(year-on-year)

FY ended
FY ended
FY ended
FY ended
FY ended
March
March
March
March
March
2016
2017
2018
2019
2020
65,28164,99363,53763,96763,090(89.0%)(99.6%)(97.8%)(100.7%)(98.6%)
4,303
3,492
3,094
854
319
(109.0%)(81.2%)(88.6%)(27.6%)(37.4%)
2,694(70.1%)

1,903(70.6%)

2,543(133.6%)153(6.0%)△2,653(－)

As a result, as shown in <The Target Company’s Stock Price Movement> below, the Target
Company’s relative stock prices compared from April 1, 2015 until December 30, 2020 have been
below the Tokyo Stock Price Index (TOPIX) (by 26.4 points in terms of the average of such period;and by 77.7 points in terms of the closing price on December 30, 2020) and the TOPIX Sector Indicesfor metal products (by 19.5 points in terms of the average of such period; and by 57.9 points in termsof the closing price on December 30, 2020). The Target Company’s stock prices are considered toreflect harsher criticism in the market; accordingly, as a shareholder of the Target Company, NSC isdeeply concerned about the Target Company’s present status.

-9-

<The Target Company’s Stock Price Movement>(%)
140.0%

120.0%

TOPIX
118.0%

100.0%

金属製品
98.2%
Metal
Products

80.0%

60.0%

Tokyo
Rope
東京製綱
40.3%

40.0%

20.0%

0.0%

東京製綱
Tokyo
Rope

TOPIX

金属製品
Metal
Products(Note) Setting the stock price as of April 1, 2015 as 100, the stock prices of the Target Company, theTOPIX, and the TOPIX Sector Indices (Metal Products) through December 30, 2020 werecompared.
Further, according to the press release “Regarding New Mid-Term Management Plan ‘TCTFocus2020’” published by the Target Company on May 22, 2015, the Target Company positioned thebusiness of manufacture and sale of cable fiber composite cable (Note 5) products (the “CFCC
Business”) as the business boosting the growth strategy of the Target Company during the five years
from the fiscal year ended March 2016 until that ended March 2020, and has proactively made capital
investment and research and development investment since the fiscal year ended March 2016.
Nevertheless, as stated below, sales in the CFCC Business did not increase and failed to realize areturn on its investments.
According to the press release “Regarding Formation of a New Production Base for Carbon Fiber
Composite Cable (CFCC)” published by the Target Company on November 27, 2017, the Target
Company invested 1.5 billion yen and did construction work for a new production base in Kitakamishi, Iwate Prefecture, within an intention to increase the production capacity of the CFCC Business.
Then, in order to accelerate the growth strategy in the Target Company’s Former Mid-Term
Management Plan, the Target Company demerged the CFCC Business and the Overseas Disaster
Management Business in December 2017, and established Tokyo Rope International. According to thebriefing material for Financial Results of Second Quarter of Fiscal Year Ended March 2018 announced
on November 30, 2017, the Target Company set the targets for the fiscal year ended March 2020 as
follows: net sales of 13.0 billion yen and operating income of 2.5 billion yen for Tokyo Rope
International. Furthermore, according to the briefing material for the Financial Results of Fiscal Year
Ended March 2019 announced by the Target Company on May 30, 2019, in addition to the 1.5 billion
yen of capital investment to increase the production capacity of the CFCC Business (establishment of
Kitakami Plant) above, it has made 1.3 billion yen of capital investment in the CFCC production
facilities (establishment of North America Plant and purchase of land and buildings) of Tokyo Rope
USA, Inc., a North American subsidiary of the Target Company in the fiscal year ended March 2017

- 10 -

and fiscal year ended March 2018. Nevertheless, despite such capital investments, in the briefing
material for Financial Results of Fiscal Year Ended March 2019 published by the Target Company on
May 30, 2019, the Target Company admitted that in net sales and operating income at Tokyo Rope
International in the fiscal year ended March 2019, “there was a major gap from its forecast” (net salesof 13.0 billion yen and operating income of 2.5 billion yen in the fiscal year ended March 2020) andstated that it “would consider follow-up measures.” Thus, apparently, the Target Company evaluatedthat it needed additional measures. Furthermore, according to the briefing material for Fiscal Year
Ended March 2020 published by the Target Company on May 29, 2020, the Target Company recorded
an impairment loss (△1,775 million yen) at the Kitakami Plant engaged in the CFCC Business in thefiscal year ended March 2020, the last year of the Target Company’s Former Mid-Term Management
Plan. In addition, since the fiscal year ended March 2017, the Target Company’s product development
business including the CFCC Business has continued to post a deficit.
In the press release “Our CFCC (Carbon Fiber Composite Cable) Was Adopted in the Hampton Roads
Bridge-Tunnel Expansion Project” published by the Target Company on November 26, 2020, (the“Target Company’s Press Release Dated November 26, 2020”), the Target Company announced
that the CFCC manufactured by Tokyo Rope International was adopted for the Hampton Roads
Bridge-Tunnel Expansion Project under way in the U.S. and its total construction cost amounted to as
much as approximately 400 billion yen. However, according to the material distributed at a briefing
for Financial Results for Second Quarter of Fiscal Year Ended March 2021 held on November 27,
2020, which was published later, net sales expected from such adoption would be approximately 4.0
billion yen throughout the four-year construction period; and the amount of expected operating income
was not disclosed; as such, NSC cannot confirm that a return on investments so far is achieved (NSC
considers it a problem from the standpoint of appropriate disclosure that no reference was made tosuch expected net sales in the Target Company’s Press Release Dated November 26, 2020). According
to the Target Company’s Press Release Dated November 26, 2020, the Target Company expects that
the CFCC will expand; however, taking into account that the Target Company seems not to haveobtained a return despite the Target Company’s constant investments since the fiscal year ended March
2016, NSC believes that the Target Company needs to reevaluate the profitability of the CFCC andbuild a system to appropriately manage overseas business risks.
(Note 5) CFCC is an abbreviation of “Carbon Fiber Composite Cable” and is a registered trade markof the Target Company. It refers to a structure reinforcing cable developed through newcomposite technology utilizing carbon fibers and thermosetting resins, by forming into astandard shape cable.
Another example includes a failure of business in Tokyo Rope (Changzhou) Co., Ltd. (“Tokyo RopeChangzhou”). According to the press release “Regarding Establishment of a Company Dealing in
Steel Cords for Tires in China” announced by the Target Company on April 27, 2005, in June 2005,
the Target Company established Tokyo Rope Overseas Business Investments Co., Ltd., whosebusiness purpose is to manage business activities of operating companies, and established, throughTokyo Rope Overseas Business Investments Co., Ltd., Tokyo Rope Changzhou in Changzhou,
Jiangsu, China, with capital of approximately 6 billion yen, to supply high quality and costcompetitive steel cords to users in and out of China, due to a prospect for an expansion of steel corddemand arising from prevalence of radial tires as a result of rapid development of highway networks,
and expansion of Japanese and foreign tire manufactures into Chinese market and their production
increases. Subsequently, from 2007 through 2009, Tokyo Rope Changzhou had gradually expanded
production due to an increase in orders from Japanese tire manufactures, but it was not able toeliminate the deficit, as sales to foreign tire manufactures were lower than initial forecasts. In such asituation, Tokyo Rope Changzhou launched manufacture of saw wires (Note 6) for photovoltaic power
generators, whose production demand was high in China at that time. From 2010 through 2011, thanks
to the success of production expansion of saw wires, Tokyo Rope Changzhou returned to profitability.
However, in 2012, the first saw wire trend ended due to the rise of competitors engaged in
manufacturing saw wires for photovoltaic power generators in China at the same time and a decreasein demand, which was the primary supply destination, and thus, Tokyo Rope Changzhou posted large- 11 -

losses again. Thereafter, in 2014, the second saw wire trend came, but Tokyo Rope Changzhou
improved performance only to the extent that the deficit was reduced.
Subsequently, according to the press release “Regarding Offer of Voluntary Retirement at theCompany’s Subsidiary” announced by the Target Company on May 11, 2020, at the board of directors
meeting held on the same date, the Target Company resolved to solicit voluntary retirement in Tokyo
Rope Changzhou. That was because, in addition to a decrease in sales associated with market
environmental changes, as the Target Company stopped production in response to a further drop inorders due to shutdowns of customers resulting from the impact of the current new coronavirus
pandemic, as of the same date, there were still little prospects to stably restart production through arecovery in orders. Eventually, according to the press release titled “Notice Concerning Transfer of theCompany’s Consolidated Subsidiaries (Including Chinese Sub-Subsidiaries)” announced by the Target
Company on June 26, 2020, as it determined that it was difficult to continue the steel cord business in
China due to low prospects for stably restarting production, the Target Company transferred 100% of
the shares in Tokyo Rope Changzhou, together with Tokyo Rope Overseas Business Investments Co.,
Ltd., the wholly-owning parent company of Tokyo Rope Changzhou, to Dalian Koushin EnterpriseGroup Co., Ltd., a Chinese company. As such, since 2012, even though Tokyo Rope Changzhou
posted losses each year, the Target Company decided to withdraw from the business finally in 2020.
Accordingly, it must be said that the Target Company’s decision to withdraw from the business was
too late.
When Tokyo Rope Changzhou was established, Nippon Steel Corporation (Shin-nippon Seitetsu
Kabushiki Kaisha), which is the predecessor of NSC, partly invested, as a business partner, in Tokyo
Rope Overseas Business Investments Co., Ltd., which is the parent company of Tokyo RopeChangzhou. Since the establishment of Tokyo Rope Changzhou in 2005, NSC had made efforts to
support Tokyo Rope Changzhou by providing manufacturing technical assistance. However, in 2018,
NSC sold all of its shares in Tokyo Rope Changzhou to the Target Company, taking into account their
historical returns and other conditions.
(Note 6) Saw wires refer to high intensity brass plating steel wire products.
Given the circumstances above, NSC has to be skeptical of the Target Company’s current management
policies. NSC is concerned that further continuation of the Target Company’s current management
policies would further damage the Target Company’s corporate value and could unreasonably impede
the interests of the Target Company’s shareholders, business partners, employees, and eachstakeholder surrounding the Target Company.
As a shareholder of the Target Company, NSC has constantly held conversations with the Target
Company’s management team since mid May 2017, and encouraged them to improve the business,
including by pointing out management issues to be addressed. Further, since the annual shareholders
meeting of the Target Company held on June 27, 2017, NSC has also continuously cast votes against
the proposal for the appointment of more than one directors (including inside and outside directors) of
the Target Company. Nevertheless, the management team of the Target Company has displayed neither
a sense of crisis with respect to the damage to the Target Company’s corporate value nor an intention
to take measures regarding the management issues in order to recover and improve its corporate value.
(B)

Dysfunction of Governance System

NSC considers that the continuous damage to the Target Company’s corporate value is caused by thedysfunction of the governance system in the Target Company including, in particular, the evaluation of
the Target Company’s management team by outside directors and the appointment and reappointment
process thereunder. The board of directors of the Target Company has not displayed an intention toreconsider the management executed by the management team under the current management policies,
while being aware of the business downturn of the Target Company and non-achievement of the Target
Company’s Former Mid-Term Management Plan above. NSC considers that the Target Company’s- 12 -

governance system lost its ability to appropriately supervise the management team of the Target
Company. The board of directors of the Target Company is not sufficiently independent, i.e., the termof office as representative director of Representative Director and Chairman Tanaka has been as longas about 20 years; meanwhile, there are only two outside directors out of the nine of the Target
Company who should supervise the management team in a position independent thereof, and one ofthem has a tenure of about 10 years. Further, in the Corporate Governance Report published on
November 30, 2020, the Target Company states that “it is a future issue to be addressed whether thecomposition of the board of directors should be changed from the viewpoint of gender and diversity”,
and recognizes a lack of diversity in its board of directors.
In addition, the Target Company has a nomination and compensation committee as a consultative bodyto the board of directors to nominate candidates for director, appoint management executives, andverify the appropriateness of remuneration for directors. Although said committee is expected toperform the function of appropriately supervising nomination of candidates for director of the Target
Company, the committee consists of four directors in total: Representative Director and Chairman,
Representative Director and President, and the two outside directors above. According to the Target
Company’s corporate governance reports, even though the Target Company’s business downturn isgetting more serious year by year as stated above, the committee has continued determining that it isreasonable to nominate the Representative Director and Chairman and the Representative Director andPresident as candidates for director on the ground that they “have contributed to the improvement of
the corporate value,” consistently since 2017. In 2019, although the briefing material for the Financial
Results of Fiscal Year Ended March 2019 announced on May 30, 2019 explained that “it turned outthat (the Target Company’s Former Mid-Term Management Plan) goals cannot be achieved due toenvironmental changes, delay in launch, and lack of progress,” the committee has unthinkingly
maintained the evaluation that the Representative Director and Chairman and the Representative
Director and President “have contributed to the improvement of the corporate value.” Amid thebusiness downturn becoming serious, the committee has not questioned the responsibility of the
management team as managers but rather continued appointing the Representative Director andChairman and the Representative Director and President on the ground that they “have contributed tothe improvement of the corporate value” which objectively contradicts the facts. Accordingly, it mustbe said that the committee is completely dysfunctional.
Although outside directors account for half of the nomination and compensation committee members,
amid concerns in terms of independence as stated above, it is clear that those outside directors havenot been able to fulfill their expected supervisory function. Accordingly, NSC believes that it isurgently necessary to drastically restructure the Target Company’s governance system.
(C)

Status of Compliance by the Target Company

Under applicable laws and regulations, a stock company is obligated to give public notice of its
balance sheet or a summary thereof for the financial statements approved by a shareholders meeting(Article 440, paragraph (1) of the Companies Act). Moreover, a stock company which is a large
company is obligated to give public notice of its balance sheet and profit and loss statement orsummaries thereof for the financial statements reported or approved in the annual shareholders
meeting without delay after the conclusion of the annual shareholders meeting (Article 440,
paragraph (1) of the Companies Act). However, with respect to Tokyo Rope International, a subsidiaryof the Target Company, there is no evidence that it has given public notice of its balance sheet or asummary thereof, which is the obligation under the Companies Act above, since 2017, in which it wasestablished. Even after it became a large company as a result of capital increase in March 2020, there
is no evidence that it has given public notice of its profit and loss statement or a summary thereof. As
stated above, the Target Company admitted that in net sales and operating income at Tokyo Rope
International in the fiscal year ended March 2019, “there was a major gap from its forecast” (net salesof 13.0 billion yen and operating income of 2.5 billion yen in the fiscal year ended March 2020).
Meanwhile, according to Tokyo Rope International’s commercial registration, the capital wasincreased from 100 million yen to 2.6 billion yen as of March 27, 2020, and it was expected that at- 13 -

least 2.5 billion yen of money flowed into from the Target Company. The content of the financial
statements of Tokyo Rope International is a major concern for the shareholders. Nevertheless, theTarget Company has failed to give public notice of the relevant financial statements, which is a basic
obligation under the Companies Act. Thus, it is unavoidable to suspect that the Target Company
intends to conceal the financial and business condition of Tokyo Rope International. Similarly, withrespect also to Tokyo Rope Technos Kabushiki Kaisha, a subsidiary of the Target Company, there is noevidence that it has given public notice of its financial results.
Under such circumstances, NSC is preparing to request that the Target Company properly perform its
obligations to disclose the financial statements of its subsidiaries, and also NSC intends to exercise its
rights under the Companies Act, such as exercising the right to request inspection of the financial
statements against Tokyo Rope International.
As stated above, even though the Target Company faces business problems, it has not taken any
effective measures for those problems and continued damaging the Target Company’s corporate value.
NSC is concerned that if the Target Company’s current management policies are maintained without
being changed, it will be difficult to recover and improve the Target Company’s corporate value.
Meanwhile, the Target Company’s current governance system does not properly work, and at this rate,
reformation cannot be expected to be promoted by the Target Company itself. In light of suchcircumstances, NSC determined that, in order to promptly reconsider the Target Company’s current
management policies that damage the corporate value, the Target Company was in an urgent need torestructure the Target Company’s management and governance systems. As a specific measure to
realize the restructuring of the Target Company’s management and governance systems, which isnecessary to recover and improve the Target Company’s corporate value, NSC began to consider
additional acquisition of the Target Company Shares in late September 2020, to increase its
commitment to improvement of the Target Company’s corporate value by, as a shareholder, having
discussions with the Target Company’s management team regarding appointment of new internal
persons as its directors and a structure for the board of directors which would ensure independence anddiversity, and presenting necessary proposals to it based on such discussions. NSC recognizes that it
would take a certain amount of time to rebuild the Target Company’s management in light of its
business downturn, and some shareholders of the Target Company might not intend to hold theirshares in the mid- and long-term. Thus, NSC considers that conducting a tender offer at a price addedby an appropriate premium to the latest market price in order to provide an appropriate opportunity forthe shareholders of the Target Company who desire to sell their Target Company Shares would be amethod to obtain understanding from general investors. With this recognition, today, NSC adopted aresolution to conduct the Tender Offer. As stated above, the Target Company faces a business
downturn, and it would take a certain amount of time to rebuild the Target Company’s management in
the future. In addition, comprehensively taking into account that since the products manufactured andsold by the Target Company include equipment for the Ministry of Defense, it is believed that support
by foreign capital, which is subject to restrictions under the Foreign Exchange and Foreign Trade Act(Act No. 228 of 1949, as amended), is constrained to a certain extent, NSC believes that it is ashareholder who can support the restructuring of the Target Company, i.e., there is no one but NSC
who is a base material supplier and joint development partner.
(II)

Post-Tender Offer Management Policies

The Target Company consecutively posted losses in the new product development business promoted
under the current management policies since the fiscal year ended March 2017; in the meantime, thekey business focusing on the wire rope and wire related business has maintained a certain level ofcompetitiveness and secured a certain level of profitability. As such, NSC believes that if the current
management policies of the Target Company are appropriately reconsidered, the Target Company will
be able to recover and further improve its corporate value in the mid- and long-term as the Japan’s top
wire rope manufacturer. Specifically, as disclosed by the Target Company, NSC understands that thesource of corporate value of the Target Company includes the following:- 14 -

1)

Flexible technical skills to develop derivative and applied products centered on the wire rope
manufacturing technology, and a varied business structure and subsidiaries supporting suchskills:Since the Target Company launched manufacturing of wire ropes for the first time in Japan in
1898, it has created many derivative and applied products through manufacturing wire ropes,
including application development of guard cables, cables for long-span bridges, and rock fall
prevention facilities; manufacturing of steel cords for tires and saw wires for cutting silicone
wafers, which are ultra fine steel wire ropes manufactured using wire-drawing technology andstranded-wire technology; development of carbon fiber composite cables that is a newmaterial; manufacturing of cemented carbide, which was derived from the development of
manufacturing tools.

2)

Brand power acquired over its long history
Since its foundation, the Target Company has acquired the “brand power” of trust by
supplying products and always putting the priority on quality and safety, and thereby steadily
accumulating good evaluations for the products from users and general public.

3)

Long-term strong collaboration with upstream and downstream trading partners
The Target Company has maintained and continued stable and amicable business relationships
with materials manufactures which are suppliers of raw materials for the products, and user
companies which are supply destinations, for a long period of time, and also built
collaboration relationship regarding various technologies.

When effectuating such recovery and improvement of the Target Company’s corporate value, NSC
considers it desirable for the Target Company to remain independent as a listed company, develop an
appropriate governance system, and then appoint internal persons who are familiar with the Target
Company’s business to restructure the management of the Target Company as a new management
team. From this point of view, NSC, as a shareholder of the Target Company, intends to havediscussions with the Target Company’s management team regarding appointment of new internal
persons as its directors and a structure for the board of directors which would ensure its independence
and diversity, and present necessary proposals to it based on such discussions after completion of theTender Offer, in furtherance of the restructuring of the Target Company’s management and governancesystems, which is necessary to recover and improve the Target Company’s corporate value.
Furthermore, NSC considers that for such restructuring of the management and governance systems of
the Target Company, the support from its shareholders is indispensable, and thus NSC will takenecessary measures to obtain its shareholders’ understanding.
In addition, if the Target Company requests, NSC is prepared to support recovery and improvement of
the Target Company’s corporate value. As of today, an overview of the measures that NSC considers
feasible under the new collaborative relationship with the Target Company, is as follows:
•
•
•
•
•

Provision of knowhow for optimization of inventory management, reduction in production
cost, and improvement of production efficiency through shared use of a supply chain
management system
Cost reduction, quality improvement and stable production through operational tie-ups
Promotion of development of high-value added products and high functional products throughjoint product development among NSC, the Target Company, and customers, andstrengthening of the competitiveness of the Target Company based thereon
Reinforcement of domestic and overseas sales by utilizing NSC group’s information gathering
capabilities and network
Careful examination of the profitability of the CFCC business and strengthening of theoverseas business risk management, by utilizing NSC’s management knowhow- 15 -

However, as stated above, NSC has not discussed the Tender Offer with the Target Company inadvance, and thus, information regarding the Target Company currently available to NSC is limited.
NSC intends to execute those measures after it sufficiently discuss the timing, methods, and otherspecific details to implement those measures with the management team of the Target Company, after
restructuring the management and governance systems of the Target Company, which is necessary torecover and improve the Target Company’s corporate value. After the successful completion of theTender Offer, upon request pursuant to the regulations under the Act on Prohibition of Private
Monopolization and Maintenance of Fair Trade (Act No. 54 of 1947, as amended), NSC might
implement measures, if the specific content of such request so requires.
(3)

Matters Regarding Material Agreements for Tendering Shares in the Tender Offer Between
NSC and the Target Company

Not applicable.
(4)

Planned Acquisition of Additional Shares After the Tender Offer

As stated in “(1) Overview of the Tender Offer” above, as of today, NSC believes that it is appropriate
to acquire the Target Company Shares until the ownership ratio reaches 19.91%. Therefore, in theTender Offer, if the number of shares tendered reaches the maximum number of shares to bepurchased, and NSC comes to own the ownership ratio of 19.91%, NSC does not currently expect toacquire additional shares of the Target Company after the Tender Offer.
Meanwhile, in the Tender Offer, if the number of shares tendered does not reach the maximum numberof shares to be purchased, and as a result, NSC does not come to hold the ownership ratio of 19.91%,
although no specific response policy has been determined at present, NSC currently plans to acquire
additional Target Company Shares through market transactions or other methods within the scope ofthe number of shares it is short of the maximum number of shares to be purchased, comprehensively
taking into account the market trends.
(5)

Likelihood of Delisting and Reasons Therefore

As of today, the Target Company Shares are listed on the First Section of the TSE. The Tender Offer is
not intended to delist the Target Company Shares, and NSC will implement the Tender Offer with the
maximum number of shares to be purchased being 1,625,500 shares. Therefore, the ownership ratio of
the Target Company Shares to directly or indirectly be owned by NSC after successful completion of
the Tender Offer will be limited up to 19.91%, and the listing of the Target Company Shares on theFirst Section of the TSE is intended to be maintained after the Tender Offer.
2.

Overview of the Purchase(1)

Overview of the Target Company

(i)
(ii)

Name
Location
Name and Title ofRepresentative

(iii)

(iv)

Description ofBusiness Activities(v)

CapitalTokyo Rope Mfg. Co., Ltd.
Nihonbashi Front, 3-6-2 Nihonbashi Chuo-ku, Tokyo
Masaya Asano, Representative Director and President
Manufacturing and sales of wire rope, wire, steel cord, and Carbon
Fiber Composite Cable (CFCC); design and construction of roadsafety devices such as rock fall prevention net, environment
protection products such as acrylic sound insulation walls, andbridges and cable-suspended bridges; manufacturing and sales ofvarious industrial machinery and metal fiber
1,000 million yen (as of September 30,2020)- 16 -

(vi)

(vii)

(viii)

Date of
Establishment

April 1, 1887

The Master Trust Bank of Japan, Ltd. (Trust Account)
7.19%
Nippon Steel Corporation
7.08%
Custody Bank of Japan, Ltd. (Trust Account)
3.02%
Tokyo Rope Kyoeikai
2.74%
HI-LEXCORPORATION
2.46%
Major Shareholders
and Ownership
Morgan Stanley MUFG Securities Co., Ltd.
1.91%
Percentage (as ofCustody Bank of Japan, Ltd. (Trust Account 5)
1.80%
September 30, 2020) KOREA SECURITIES DEPOSITORY-SHINHANINVESTMENT (Standing proxy: Citibank, N.A., Tokyo
1.66%
Branch)The Yokohama Rubber Co., Ltd.
1.64%
KSD-NH (Standing proxy: Citibank, N.A., Tokyo Branch) 1.59%
Relationship Between the Tender Offeror and the Target Company
NSC owns 1,610,964 shares of the Target Company Shares
Capital Relationship(ownership ratio: 9.91%) as of date hereof.
Personnel
Not applicable.
Relationship
Business
The Target Company procures various wire rods and base materials
Relationshipfor consignment processing from NSC.
Status as Related
Not applicable.
Parties(2)

Schedule, etc.

(I)

Schedule

Date of Resolution by the Board of
Directors

Thursday, January 21, 2021

Date of Public Notice ofCommencement of the Tender
Offer

Friday, January 22, 2021
Public notice will be given electronically and notice thereof
will be posted in the Nihon Keizai Shimbun.
(Electronic public notice website: https://disclosure.edinetfsa.go.jp/)

Date of Submission of the Tender
Offer Statement

Friday, January 22, 2021

(II)

Purchase Period as of the Time of Filing the Tender Offer Statement

From Friday, January 22 2021 to Monday, March 8, 2021 (30 business days)(III)

Possibility of Extension upon the Target Company’s Request

Not applicable.
(3)

Purchase Price

1,500 yen per share of common stock- 17 -

(4)Basis for the Calculation of the Purchase Price, etc.

(I)

Basis for the Calculation

In determining the Tender Offer Price, NSC asked Daiwa Securities Co., Ltd. (“Daiwa Securities”),
acting as a financial advisor which is a third-party valuation organization independent of NSC and theTarget Company, to calculate the share value of the Target Company Shares in late December 2020.
Daiwa Securities is not a related party of NSC or the Target Company, nor does it have a materialinterest in the Tender Offer.
After considering the calculation method that should be used to calculate the share value of the Target
Company Shares from among several share value calculation methods, and based on the considerationthat it is appropriate to evaluate the value of the Target Company Shares on the premise of the Target
Company being a going concern in a multifaceted manner, Daiwa Securities calculated the share valueof the Target Company Shares using the following calculation methods: a market share price analysis,
which considered the trend in the market price of the Target Company Shares, and a discounted cash
flow analysis (the “DCF Analysis”), which considered the financial results, forecasts and other aspectsof the Target Company. NSC obtained a share valuation report (the “Share Valuation Report”) from
Daiwa Securities on January 18, 2021. NSC has not obtained any written opinion regarding thefairness of the Tender Offer Price (i.e., fairness opinion) from Daiwa Securities.
According to the Share Valuation Report, the adopted methods and the range of the per-share value of
the Target Company Shares calculated based on these methods are as follows:
Market share price analysis:
DCF Analysis:

615 yen to 930 yen
825 yen to 1,607 yen

Under the market share price analysis, the base date was set as January 15, 2021. The market shareprice analysis resulted in a per share value of the Target Company Share ranging from 615 yen to
930 yen based on 930 yen which was the closing price of the Target Company Shares on the First
Section of the TSE on the base date, 823 yen (rounded off to the second decimal place; hereinafter
the same applies to a simple average of closing prices (yen)) which is the simple average of theclosing prices of in the month prior to the base date, 690 yen which is the simple average closing
prices in the three months prior to the base date, and 615 yen which is the simple average closing
prices in the six-months prior to the base date.
Under the DCF Analysis, it resulted in a per share value of the Target Company Shares ranging from
825 yen to 1,607 yen by evaluating the corporate value and share value, which were calculated byusing the amount of the free cash flow that the Target Company is expected to generate after the fiscal
year ended March 2021 and then it derived the present value of that amount using a fixed discountrate. This free cash flow was prepared by NSC in consideration of various factors, such as the businessplan in the six fiscal year for the Target Company from the fiscal year ended March 2021 through that
ended March 2026 based on its knowledge of the Target Company’s business, the Target Company's
past and recent performance and publicly disclosed information etc. Please note that the foregoing
business plan used by Daiwa Securities to calculate the share value of the Target Company under the
DCF Analysis includes fiscal years in which a significant increase/decrease in profit is expected. Morespecifically, due to a decrease in demand affected by COVID-19, operating loss is expected for the
fiscal year ending March 2021; for the following fiscal year ending March 2022, given a potential
recovery of the demand affected by COVID-19, a significant increase in operating income is expected.
Furthermore, the business plan includes the expectation of a certain level of improvement in the
management by appropriately reconsidering the management policies through the Tender Offer and thesubsequent restructuring of the management and governance systems.

- 18 -

Based on the calculation results stated in the Share Valuation Report obtained from Daiwa Securities,
and comprehensively taking into account (i) the trend of the market price for the Target Company
Shares; (ii) actual examples of premiums granted in tender offers premised upon the maintenance oflisting which were conducted by non-issuers in the past; and (iii) the prospects for shares being
tendered in the Tender Offer, NSC determined that it would be reasonable to offer a price obtained byadding appropriate premiums to the market price of the Target Company Shares, and today, NSC
ultimately decided to set the Tender Offer Price at 1,500 yen per share.
The Tender Offer Price of 1,500 yen is the amount obtained by adding a premium of 36.49% (rounded
off to the second decimal place; hereinafter the same applies to a premium (%) to a share price) to
1,099 yen, which was the closing price of the Target Company Shares on the First Section of the TSE
on January 20, 2021 (the business day immediately before the announcement date of theimplementation of the Tender Offer); 76.68% to 849 yen, which is the simple average of the closing
prices in the previous one month (from December 21, 2020 to January 20, 2021): 109.50% to 716 yen,which is the simple average of the closing prices in the previous three months (from October 21, 2020
to January 20, 2021); and 139.62% to 626 yen, which is the simple average of the closing prices in theprevious six months (from July 21, 2020 to January 20, 2021).
The Tender Offer Price (1,500 Yen) is 480 yen to 660 yen higher than the acquisition unit price of theTarget Company Shares acquired by NSC in the market between January 6, 2021 and January 14,
2021 (840 yen to 1,020 yen per share), with an added premium of 47.06% to 78.57% respectively. The
reason why there is a difference between the previous acquisition price and the Tender Offer Price isthat the former was determined by the market price at each acquisition time in the market transactions(840 yen to 1,020 yen per share), and the latter is the price obtained by adding the premium of 36.49%
to 1,099 yen, which was the closing price for the Target Company Shares on the First Section of theTSE on January 20, 2021, which is the business day immediately before the announcement date of theTender Offer, done after the considerations described above.
(II)

Background of the Calculation(Background Leading to the Determination of the Tender Offer Price)
As stated in “1. Purpose of the Purchase” above, NSC, as a shareholder of the Target Company, hasconstantly held conversations with the Target Company’s management team from mid May 2017 until
mid February 2020, just before the spread of COVID-19 and encouraged them to improve its business,
including by pointing out management issues to be addressed. Further, since the annual shareholders
meeting of the Target Company held on June 27, 2017, NSC has continuously cast votes against the
proposals for the appointment of more than one directors of the Target Company (including insidedirectors and outside directors). Nevertheless, the management team of the Target Company has
developed neither a sense of crisis with respect to the damage to the Target Company’s corporate value
nor an intention to take measures for the management issues. Therefore, no specific discussions
toward recovery and improvement of the corporate value of the Target Company have been developedsince the conversation held in mid May 2017 to date.
As stated in “1. Purpose of the Purchase,” “(2)(I)D.(B) Dysfunction of Governance System” above,
NSC considers that this situation, in which the Target Company’s corporate value has continuously
been damaged, is caused by the dysfunction of the governance system in the Target Company; namely,that aspects such as the evaluation of the Target Company’s management team by outside directors andthe appointment and reappointment process thereunder do not properly function. Also, as stated in“1. Purpose of the Purchase,” “(2)(I)D.(C) Status of Compliance by the Target Company” above, withrespect to Tokyo Rope International, a subsidiary of the Target Company, it has given no public noticeof its profit and loss statement or a summary thereof since it became a large company under theCompanies Act as a result of the capital increase in March 2020. As illustrated by this, the Target
Company is in a situation where its subsidiary does not properly perform its basic obligations under
the Companies Act. Taking these circumstances into account, in late September 2020, NSC determined- 19 -

that the Target Company was in an urgent need to quickly reconsider its current management policies
and promptly implement measures to recover and improve its corporate value. As a specific measurefor facilitating the restructuring of the Target Company’s management and governance systems, which
is necessary to recover and improve the Target Company’s corporate value, NSC began to consider
additional acquisition of the Target Company Shares to increase its commitment to improvement of theTarget Company’s corporate value by, as a shareholder, having discussions with the Target Company’s
management team regarding appointment of new internal persons as directors of the Target Company
and a structure for the board of directors that would ensure its independence and diversity, andpresenting necessary proposals to it based on such discussions. NSC recognizes that it would take acertain amount of time to rebuild the Target Company’s management in light of its serious business
downturn, and some shareholders of the Target Company might not intend to hold their shares in themid- and long-term. Thus, in order to provide an appropriate opportunity for the shareholders who
desire to sell their Target Company Shares, conducting a tender offer at a price including anappropriate premium added to the latest market price is a viable method to obtain understanding fromthe general investors. With this recognition, NSC adopted a resolution to conduct the Tender Offer
today.
(a)Name of the Third Party from Whom NSC Obtained Opinions in the Calculation

In determining the Tender Offer Price, NSC asked Daiwa Securities, acting as a financial advisor
which is a third-party valuation organization independent of NSC and the Target Company, tocalculate the share value of the Target Company Shares, and NSC obtained the Share Valuation Reportfrom Daiwa Securities on January 18, 2021. Daiwa Securities is not a related party of NSC or theTarget Company, nor does it have a material interest in the Tender Offer. NSC has not obtained any
written opinion regarding the fairness of the Tender Offer Price (i.e., fairness opinion) from Daiwa
Securities.
(b)

Outline of the Opinion

According to the Share Valuation Report, the adopted methods and the range of the per-share value of
the Target Company Shares calculated based on these methods are as follows:
Market share price analysis:
DCF Analysis:(c)

615 yen to 930 yen
825 yen to 1,607 yen

Background Leading to the Determination of the Tender Offer Price Taking into Consideration
the Opinion

Based on the calculation details and results stated in the Share Valuation Report, and comprehensively
taking into account (i) the trend of the market price for the Target Company Shares; (ii) actual
examples of premiums granted in tender offers premised upon the maintenance of listing which wereconducted by non-issuers in the past; (iii) the prospects for shares being tendered in the Tender Offer;and (iv) the fact that the calculation results stated in the Share Valuation Report indicated that the priceexceeds the upper limit of the calculation results under the market share price analysis and falls within
the ranges of the calculation results under the DCF Analysis, NSC determined that it would bereasonable to offer a price obtained by adding appropriate premiums to the market price of the Target
Company Shares, and today, 2021, NSC ultimately decided to set the Tender Offer Price at 1,500 yen
per share.
(III)

Relationship with the Valuation Organization

Daiwa Securities, NSC’s financial advisor, is not a related party of NSC or the Target Company, nor isit materially interested in the Tender Offer.

- 20 -

(5)Number of Shares to Be Purchased
Number of Shares
to Be Purchased

Minimum Number of Shares
to Be Purchased

1,625,500 shares

Maximum Number of Shares
to Be Purchased- shares

1,625,500 shares(Note 1) If the aggregate number of the Tendered Shares does not exceed the number of shares to bepurchased (1,625,500 shares), all the Tendered Shares will be purchased. If the aggregate
number of the Tendered Shares exceeds the maximum number of shares to be purchased(1,625,500 shares), the excess will not be purchased in whole or in part, and the shares will
be delivered and other settlement procedures for their purchase will be implemented using the
pro rata method as specified in Article 27-13, paragraph (5) of the Act and Article 32 of the
Cabinet Office Ordinance.
(Note 2) Shares in quantities of less than one unit are also subject to the Tender Offer. If a right todemand the purchase of shares in quantities of less than one unit is exercised by a shareholderof the Target Company pursuant to the Companies Act, the Target Company may purchasethose shares during the purchase period for the Tender Offer (the “Tender Offer Period”) in
accordance with the procedures under the applicable laws and regulations.
(Note 3) NSC does not intend to acquire treasury shares owned by the Target Company through theTender Offer.
(6)

Changes in the Ownership Ratio of Shares as a Result of the Purchase

Number of voting rights pertaining
to shares owned by the Tender
Offeror before the purchase
Number of voting rights pertaining
to shares owned by specially relatedparties before the purchase
Number of voting rights pertaining
to shares owned by the Tender
Offeror after the purchase
Number of voting rights pertaining
to shares owned by specially relatedparties after the purchase
Number of voting rights of allshareholders of the Target Company

16,109 voting rights(Ownership ratio of shares before
the purchase 9.91%)

0 voting rights(Ownership ratio of shares before
the purchase 0.00%)

32,364 voting rights(Ownership ratio of shares after
the purchase 19.91%)

0 voting rights(Ownership ratio of shares after
the purchase 0.00%)

161,823 voting rights(Note 1) The “number of voting rights pertaining to shares owned by the Tender Offeror after thepurchase” is the number obtained by adding the number of the voting rights pertaining to thenumber of shares to be purchased in the Tender Offer to the “number of voting rights
pertaining to shares owned by the Tender Offeror before the purchase.”(Note 2) The “number of voting rights pertaining to shares owned by specially related parties before
the purchase” is the sum of the number of voting rights pertaining to shares owned by eachspecially related party (however, among the specially related parties, those excluded from thedefinition of specially related party under Article 3, paragraph (2), item (i) of the Cabinet
Office Ordinance for the purpose of calculating the ownership ratio of shares as set forth in
the items of paragraph (1) of Article 27-2 of the Act shall be excluded). Since the shares
owned by specially related parties are also subject to the Tender Offer, the “number of voting
rights pertaining to shares owned by specially related parties after the purchase” is stated as- 21 -

0 voting rights. In addition, after confirming the shares of the Target Company owned by
specially related parties, if amendment is required, NSC will promptly disclose theamendment.
(Note 3) The “number of voting rights of all shareholders of the Target Company” is the number of thevoting rights of all shareholders as of September 30, 2020 as stated in the Target Company
Quarterly Report submitted by the Target Company on November 13, 2020 . However, sinceshares in quantities of less than one unit are also subject to the Tender Offer, for the purposeof calculating the “ownership ratio of shares before the purchase” and the “ownership ratio ofshares after the purchase,” the “number of voting rights of all shareholders of the Target
Company” is the number of voting rights (162,551 voting rights) pertaining to the number ofshares (16,255,173 shares), which is obtained by deducting the number of treasury shares
owned by the Target Company as of September 30, 2020 (13,063 shares) from the total
number of issued shares as of September 30, 2020 as stated in the Target Company Quarterly
Report (16,268,242 shares).
(Note 4) With regard to the “ownership ratio of shares before the purchase” and the “ownership ratioof shares after the purchase,” any fraction is rounded off to two decimal places.
(7)

Purchase Price

2,438,250,000 yen(Note) “Purchase price” consists of the amount obtained by multiplying the number of shares to bepurchased in the Tender Offer (1,625,500 shares) by the Tender Offer Price per share(1,500 yen).
(8)

Settlement Method(I)

Name and Location of Head Office of the Financial Instruments Business Operator/Bank
Which Will Handle Settlement of the Purchase

Daiwa Securities Co., Ltd.
9-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo(II)

Settlement Commencement Date

Monday, March 15 2021
(III)

Settlement Method

Written notice of the purchase through the Tender Offer will be sent by mail to the addresses or
locations of the tendering shareholders (or, in the case of foreign shareholders, their standing proxies)
after the end of the Tender Offer Period, without delay.
The purchase will be made with cash. Without delay after the settlement commencement date and inaccordance with the tendering shareholders’ instructions, the purchase price for the shares purchased
will be remitted by the tender offer agents to the place designated by the tendering shareholders (or, inthe case of foreign shareholders, their standing proxies) (remittance fees may be charged) or will be
paid to the tendering shareholders’ accounts that were used when the tender offer agents accepted theirapplications.

- 22 -

(IV)Return Method of Shares

If it is determined that all or part of the shares will not be purchased pursuant to the conditions statedin “(I) Whether There Are Conditions Set Forth in Items of Paragraph (4) of Article 27-13 of the Act
and Details Thereof” or “(II) Whether There Are Conditions for Tender Offer Withdrawal, Details
Thereof, and Disclosure Method of Withdrawal” in “(9) Other Conditions and Methods of thePurchase” below, the shares that need to be returned will be returned without delay on or after twobusiness days following the last day of the Tender Offer Period (or, the day of such withdrawal if theTender Offer is withdrawn) by restoring the state of the tendering shareholders’ accounts opened withthe tender offer agents to the state as at the time of tender.
* Along with taking preventative measures against COVID-19, during the Tender Offer Period, special
measures may be taken such as temporarily suspending services provided by the tender offer agent inperson at branch offices. For details, please contact the head office or domestic branch offices of thetender offer agent. Furthermore, with respect to the special measures and the branch offices subject toit, etc., please also refer to the tender offer agent’s website (https://www.daiwa.jp/).
(9)

Other Conditions and Methods of the Purchase(I)

Whether There Are Conditions Set Forth in Items of Paragraph (4) of Article 27-13 of the Act
and Details Thereof

If the aggregate number of the Tendered Shares does not exceed the maximum number of shares to bepurchased (1,625,500 shares), NSC will purchase all the Tendered Shares. If the aggregate number ofTendered Shares exceeds the maximum number of shares to be purchased (1,625,500 shares), NSC
will not purchase the excess in whole or in part, and the shares will be delivered and other settlement
procedures for their purchase using the pro rata method as specified in Article 27-13, paragraph (5) of
the Act and Article 32 of the Cabinet Office Ordinance (if the number of Tendered Shares of atendering shareholder includes shares in quantities of less than one unit (100 shares), the number ofshares to be purchased from the tendering shareholder that is calculated using the pro rata method shallbe up to the number of Tendered Shares of the tendering shareholder).
If the total number of shares to be purchased from the tendering shareholders that is calculated byrounding off the number of shares in quantities of less than one unit arising from the calculation using
the pro rata method is less than the maximum number of shares to be purchased, an additional unit (if,as a result of purchasing an additional unit of shares from a tendering shareholder, the sum exceeds thenumber of Tendered Shares of the tendering shareholder, then the number short of the number ofTendered Shares of the tendering shareholder) of the Tendered Shares will be purchased from eachtendering shareholder serially in order of the number of their shares rounded down, until the sum
reaches or exceeds the number of shares to be purchased. However, if, as a result of purchasing one
unit of Tendered Shares from all the tendering shareholders of which the number of shares rounded
down is equal in accordance with this arrangement, the sum exceeds the maximum number of shares
to be purchased, the tendering shareholders whose Tendered Shares will be purchased will be
determined from among those tendering shareholders in a draw to the extent that the sum will not fall
below the maximum number of shares to be purchased. If the total number of shares to be purchasedfrom the tendering shareholders that is calculated by rounding off the number of shares in quantities ofless than one unit arising from the calculation using the pro rata method exceeds the maximum numberof shares to be purchased, the number of shares to be purchased will be reduced by one unit (if thenumber of shares to be purchased that is calculated using the pro rata method includes shares inquantities of less than one unit, this means the number of shares in quantities of less than one unit) of
those shares for each tendering shareholder serially in order of the number of their shares rounded up
to the extent that the total number of shares to be purchased will not fall below the maximum numberof shares to be purchased. However, if, as a result of reducing the number of shares to be purchasedfrom all the tendering shareholders of which the number of shares rounded up is equal in accordancewith this arrangement, the total number of shares to be purchased is short of the maximum number ofshares to be purchased, the tendering shareholders whose shares purchased will be reduced will be- 23 -

determined from among those tendering shareholders in a draw to the extent that the total number ofshares to be purchased will not fall below the maximum number of shares to be purchased.
(II)

Whether There Are Conditions for Tender Offer Withdrawal, Details Thereof, and Disclosure
Method of Withdrawal

If any of the circumstances set forth in Article 14, paragraph (1), item (i), sub-items (a) through (i) and(l) through (s); item (iii), sub-items (a) through (h) and (j); and paragraph (2), items (iii) through (vi)of the Order for Enforcement of the Financial Instruments and Exchange Act of Japan (Cabinet OrderNo. 321 of 1965, as amended; the “Enforcement Order”) arise, NSC may withdraw the Tender Offer.
If (i) the management decision-making organ of the Target Company decides to pay a dividend fromsurplus with a record date prior to the settlement commencement date pertaining to the Tender Offer(excluding a dividend, where the amount of money or other properties to be delivered to theshareholders is expected to less than the amount equivalent to 10% of the book value of the net assets
on the balance sheet as of the end of the most recent fiscal year of the Target Company(1,770,100,000 yen (Note))) (including where it decides to set a record date for a dividend fromsurplus prior to the settlement commencement date pertaining to the Tender Offer, without indicating
any specific amount of the dividend from surplus), or (ii) the management decision-making organ of
the Target Company decides to acquire treasury shares (excluding acquisition, where the amount ofmoney or other properties to be delivered in exchange for acquisition of shares is expected to be lessthan the amount equivalent to 10% of the book value of the net assets on the balance sheet as of theend of the most recent fiscal year of the Target Company (1,770,100,000 yen (Note))), then, NSC may
withdraw the Tender Offer by considering that the events above are those that fall under the “mattersequivalent to those set forth in sub-items (a) through (r)” specified in Article 14, paragraph (1),item (i), sub-item (s) of the Enforcement Order. In addition, in the Tender Offer, the “facts equivalent
to those set forth in sub-items (a) through (i)” specified in Article 14, paragraph (1), item (iii), subitem (j) of the Enforcement Order means (i) events where it has turned out that there were false
statements regarding material matters in, or omissions of material matters that should have been statedin, statutory disclosure documents filed by the Target Company in the past, and where NSC did notknow, and in the exercise of reasonable care could not have known, that there was such false
statements or omissions, and (ii) events where the facts listed in sub-item (a) through (g) of the same
item has occurred in major subsidiaries of the Target Company.
If NSC intends to withdraw the Tender Offer, it will give public notice electronically and will post
notice thereof in the Nihon Keizai Shimbun. However, if it is difficult to give the public notice by thelast day of the Tender Offer Period, NSC will announce such withdrawal by the method set forth in
Article 20 of the Cabinet Office Ordinance and will give the public notice immediately thereafter.
(Note) Reference: If a dividend from surplus is paid, where the amount of money or other properties
to be delivered to the shareholders is equivalent to 10% of the book value of the net assets on
the non-consolidated balance sheet as of the end of the most recent fiscal year of the Target
Company, when assuming that the total number of issued shares and the number of treasury
shares of the Target Company as of the record date for the dividend coincide with those thatare stated in this press release, the amount of dividend per share is equivalent to 109 yen(Specifically, this amount was calculated by dividing (i) 1,770,100,000 yen, which is theamount equivalent to 10% (rounded down to the nearest million yen) of the amount of net
assets (17,701 million yen) on the non-consolidated balance sheet of the Target Company asof March 31, 2020 as stated in the annual securities report for the 221st fiscal year submitted
by the Target Company on June 26, 2020, by (ii) the number of shares (16,255,173 shares),which was obtained by deducting the number of treasury shares owned by the Target
Company as of September 30, 2020 (13,069 shares) from the total number of issued shares of
the Target Company as of September 30, 2020 as stated in the Target Company Quarterly
Report (16,268,242 shares), with any fractions of less than one yen rounded up.).

- 24 -

(III)

Whether There Are Conditions for Lowering the Purchase Price, Details Thereof, andDisclosure Method Thereof

Pursuant to Article 27-6, paragraph (1), item (i) of the Act, if the Target Company conducts an act
falling under any of those acts set forth in Article 13, paragraph (1) of the Enforcement Order during
the Tender Offer Period, NSC may lower the purchase price in accordance with the standards set forthin Article 19, paragraph (1) of the Cabinet Office Ordinance. If NSC intends to lower the purchaseprice, it will give public notice electronically and will post notice thereof in the Nihon Keizai Shimbun.
However, if it is difficult to give public notice by the last day of the Tender Offer Period, NSC will
announce such lowering by the method set forth in Article 20 of the Cabinet Office Ordinance and will
give public notice immediately thereafter. If the purchase price is lowered, the Tendered Sharestendered prior to the day on which such public notice is made will be purchased at the lowered
purchase price.
(IV)

Matters Regarding the Rights of the Tendering Shareholders to Cancel Contracts

A tendering shareholder may cancel a contract for the Tender Offer at any time during the Tender
Offer Period.
If a tendering shareholder cancels a contract, he/she is required to deliver or send a writtencancellation (a tender offer application receipt and a document stating his/her intention to cancel acontract for the Tender Offer) to the tender offer agent at its head office or Japanese branches that
accepted his/her tender by 16:00 on the last day of the Tender Offer Period. However, in the case of
sending a written cancellation, the written cancellation must arrive by 16:00 on the last day of theTender Offer Period.
Person/Entity Having Authority to Receive Written Cancellations:
Daiwa Securities Co., Ltd.
9-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo(other domestic branches of Daiwa Securities Co., Ltd.)NSC will not request that the tendering shareholders pay damages or penalties in connection with theircancellation of contracts, and the expenses required for returning the Tendered Shares will be borne by
NSC. If a cancellation is proposed, the Tendered Shares will be returned promptly after completion ofprocedures by the method stated in “(IV) Return Method of Shares” in “(8) Settlement Method”
above.
* Along with taking preventative measures against COVID-19, during the Tender Offer Period, special
measures may be taken such as temporarily suspending services provided by the tender offer agent inperson at branch offices. For details, please contact the head office or domestic branch offices of thetender offer agent. Furthermore, with respect to the special measures and the branch offices subject toit, etc., please also refer to the tender offer agent’s website (https://www.daiwa.jp/).
(V)

Disclosure Method in the Case of Changes to the Purchase Conditions

During the Tender Offer Period, NSC may change the purchase conditions unless prohibited under
Article 27-6, paragraph (1) of the Act and Article 13, paragraph (2) of the Enforcement Order.
If NSC intends to change the purchase conditions, it will give public notice regarding the details of thechanges electronically and will post notice thereof in the Nihon Keizai Shimbun. However, if it isdifficult to give public notice by the last day of the Tender Offer Period, NSC will announce suchchanges by the method set forth in Article 20 of the Cabinet Office Ordinance and will give public
notice immediately thereafter.

- 25 -

If any changes are made to the purchase conditions, the Tendered Shares prior to the day on whichsuch public notice is made will be purchased on the changed purchase conditions.
(VI)

Disclosure Method Where an Amended Statement Is Submitted

Where NSC submits an amended statement of the Tender Offer Statement to the Director General of
the Kanto Local Finance Bureau (excluding cases as set forth in the proviso to Article 27-8,
paragraph (11) of the Act), it will immediately announce the information stated in the amended
statement that pertain to matters in the public notice of commencement of the Tender Offer by themethod set forth in Article 20 of the Cabinet Office Ordinance. In addition, NSC will immediately
amend the Tender Offer Explanatory Document, and for the tendering shareholders to whom theTender Offer Explanatory Document has been already delivered, it will make such amendment by
delivering the amended Tender Offer Explanatory Document to them. However, if the scope of theamendment is limited, NSC will make such amendment by means of preparing a document stating thereasons for the amendment, the amended matters, and the content after amendment and deliveringsuch document to the tendering shareholders.
(VII)

Disclosure Method of the Results of the Tender Offer

NSC will announce the results of the Tender Offer by the method set forth in Article 9-4 of the
Enforcement Order and Article 30-2 of the Cabinet Office Ordinance on the day following the last dayof the Tender Offer Period.
(VIII) Others
The Tender Offer is not directly or indirectly conducted within the United States or aimed at theUnited States, does not use the U.S. postal mail services or other interstate or international commercial
methods or means (including, but not limited to, facsimile, e-mail, Internet communication, telex, andtelephone), and is not conducted through stock exchange facilities within the United States. No
shareholder will be permitted to tender shares in the Tender Offer using the above methods or means,through the above facilities, or from within the United States.
Furthermore, this press release and the related purchase documents are not and shall not be sent or
distributed within, to, or from the United States using postal mail or other methods. Any tenders in theTender Offer that violate the above restrictions directly or indirectly shall not be accepted.
When tendering their shares in the Tender Offer, tendering shareholders (or standing proxies in thecase of foreign shareholders) may be required to provide the following representations and warranties
to the tender offer agent:
•
•
•

•

(10)

The tendering shareholders are not located in the United States at the time of both applying for
the Tender Offer and sending a tender offer application form.
The tendering shareholders have not directly or indirectly received or sent any information(including the copies) related to the Tender Offer within, to, or from the United States.
The tendering shareholders did not use directly or indirectly the U.S. postal mail services orother interstate or international commercial methods or means (including, but not limited to,
facsimile, e-mail, Internet communication, telex, and telephone) or stock exchange facilities
within the United States, to purchase, or to sign and deliver the tender offer application form.
The tendering shareholders are not persons who act as an agent, trustee, or mandatary, without
discretion, of another person (except where such other person gives all instructions related tothe purchase from outside the United States).
Date of Public Notice of Commencement of the Tender Offer

Friday, January 22, 2021

- 26 -

(11)Tender Offer Agent

Daiwa Securities Co., Ltd.
9-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo
3.

Policies After the Tender Offer and Future Prospects(1)

Policies After the Tender Offer

With respect to the policies after the Tender Offer, please see “(2) Background to Decision to Conduct,
Purposes of, and Decision-Making Process for, the Tender Offer, and Post-Tender Offer Management
Policies,” “(4) Planned Acquisition of Additional Shares after the Tender Offer” and “(5) Likelihood ofDelisting and Reasons Therefore” in “1. Purpose of the Purchase” above.
(2)

Future Prospects

The impact of the Tender Offer on the earnings forecast for the current fiscal year will be minor.
4.

Others(1)

Whether There Is an Agreement Between NSC and the Target Company or Its Officers, andthe Details Thereof

Not applicable.
(2)

Other Information that Is Considered to Be Necessary When Investors Determine Whether toTender an Offer to PurchaseNot applicable.
End- 27 -

[Restriction on Solicitation]
This press release is a news statement to publicly release the Tender Offer, and was not prepared forthe purpose of soliciting a tender for a sale. If you intend to tender an offer to sell the shares in theTender Offer, please make sure that you refer to the Tender Offer Explanatory Document regarding theTender Offer in advance, and tender for it at your own discretion. This press release is not a tender for,or a solicitation for a tender for, a sale or purchase of securities, and does not constitute a part of theforegoing. In addition, this press release (or any part of it) and any distribution hereof will not be thebasis for any agreement concerning the Tender Offer, nor will it be relied upon when executing any
such agreement.
[Prediction of the Future]
NSC does not promise that the projections expressed or implied as “forward-looking statements” will
ultimately be accurate. The “forward-looking statements” in this press release have been preparedbased on information available to NSC as of the date hereof, and unless otherwise required by law or
regulation, NSC will not be responsible for updating or otherwise revising such forward-looking
statements in order to reflect any future event or circumstances.
[Regulations of the United States]
Unless the Tender Offer can be implemented in compliance with applicable laws and various
regulations in the United States, NSC will not conduct the Tender Offer for the United States or to a
United States person (within the meaning of “United States person” provided in Regulation S of the
Securities Act of 1933; hereinafter the same in this section). In this case, applications for shares of theTarget Company related to the Tender Offer by any means, usage or method, or through any facility,cannot be conducted from the United States, within the United States, or by those existing or residing
the United States, or by any person acting by calculation of a United States person or for the profit of a
United States person.
[Other Countries]
In certain countries or regions, the announcement, issue or distribution of this press release may be
restricted by laws or regulations. In such cases, you are required to be aware of such restrictions andcomply with them. This press release does not constitute any solicitation of an offer to sell or offer topurchase shares in relation to the Tender Offer, and shall be considered as a mere distribution of
informative materials.

- 28 -