These documents have been translated from Japanese originals for reference purposes only. In the event ofany discrepancy between these translated documents and the Japanese originals, the originals shall prevail.

May 10, 2016

NIHON KOHDEN CORPORATION (6849)
Stock Exchange Listing: 1st section Tokyo Stock Exchange
Head Office: Tokyo
Representative: Hirokazu Ogino, President and COO
Contact: Takashi Seo, Operating Officer, General Manager, Corporate Strategy Dept.
Phone: +81 / 3-5996-8003

Nihon Kohden Announces Renewal of Policy toward
Large-Scale Purchases of the Company’s Shares
The Company adopted the policy toward large-scale purchases of the Company's shares (hereinafterreferred to as the "Former Basic Rule") based on the shareholder approval at the 56th General Meeting of
Shareholders held on June 28, 2007, and its renewal with partial amendment was approved at the 59th and62nd General Meeting of Shareholders held on June 29, 2010 and June 26, 2013. However, the effective
period of the Former Basic Rule will expire at the conclusion of the 65th General Meeting of Shareholders
to be held on June 28, 2016 (hereinafter "this General Meeting of Shareholders").
Before the Former Basic Rule expires, the Company resolved at the Board of Directors meeting held on
May 10, 2016 to renew the Former Basic Rule as a measure to prevent decisions on the Company’s
financial and business policies from being controlled by persons deemed inappropriate (as set forth in
Article 118, Paragraph 3 (b) (2) of the Ordinance for Enforcement of the Companies Act), subject toapproval at this General Meeting of Shareholders (hereinafter the amended policy shall be referred to as the“Basic Rule”).
The Basic Rule shall remain in effect from the expiration of the Former Basic Rule until the conclusionof the General Meeting of Shareholders for the last fiscal year ending within three years after this General
Meeting of Shareholders..
The Basic Rule is not revised from the Former Basic Rule and Independent Committee members arechanged. Overview of the Basic Rule is added and there is a minor change of expression or addition ofwords.

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I. Basic Principles regarding persons who control decisions on the Company's financial and business
policies
The Company believes that persons involved in financial and operational decision-making processes
should demonstrate an adequate understanding of the Company's corporate philosophy, the diversity ofsources of corporate value, and the importance of maintaining the trust and confidence of the many
stakeholders who constitute the foundations of the Company, and should also have the ability and capacity
to enhance the corporate value of the Company and in turn the common interests of the shareholders overthe medium to long term.
The Company believes that its shareholders should make the final decision as to whether to accept a
Large-Scale Purchase. The Company does not necessarily reject Large-Scale Purchases if they would
contribute to the corporate value and the common interests of the shareholders. However, the Company
cannot rule out the possibility of an inappropriate Large-Scale Purchase that may harm corporate value andbenefits for all shareholders. Some examples are, but not limited, the following:
・ those with a purpose that would apparently harms corporate value and common interests of theshareholders ;・ those with the potential to practically coerce shareholders to sell shares; or・ those that do not provide sufficient disclosure of information on the proposal given to and sufficient
time allowed for the Board of Directors and shareholders to review the proposal.
A person who proposes a Large-Scale Purchase or equivalent undertaking that would not contribute to
the corporate value of the Company or the common interests of the shareholders shall be deemed unsuitablefor involvement in the financial and operational decisions of the Company. A necessary and appropriate
response shall be applied to the actions of such persons in order to preserve the corporate value andcommon interests of the shareholders.
II. The Source of Corporate Value of the Company and Special Initiatives for Realization of the Basic
Principles
1. The Source of Corporate Value of the Company
Founded in 1951 under the vision of Fighting Disease with Electronics, Nihon Kohden has supplied
medical institutions with various medical devices across the globe as one of the top medical electronicequipment manufacturers. The Company provides an extensive line-up of medical equipment using
advanced technology, ranging from physiological measuring equipment such as EEGs and ECGs, patientmonitors and treatment equipment such as defibrillators and AEDs to basic healthcare devices and home
medical appliances.
In the industry of medical equipment, it is essential to identify needs of customers such as doctors, nurses,
engineers and patients adhering tightly to actual medical care scene and to continue to develop and provide
timely user-oriented products. Given that medical equipment has a direct bearing on human lives, it is vitalto maintain the highest standards of quality and safety and to provide full customer service and support sothat products can be used with total confidence.
Nihon Kohden believes that the Company’s main sources of corporate value include technology
development in collaboration with end users in clinical practice; a loyal clientele base in Japan and aroundthe world; a commitment to quality products and services backed by development, production, sales andservice teams; and a solid brand reputation established over many years in the industry.

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The Company has been nurturing expertise and know-how and wealth of experience accumulated since
its foundation and has been maintaining good cooperative relationship with domestic and overseas
customers established through collaboration between industry, government and academia, all of which
helped the Company strengthen capability of technological development and provide high-value added
products with high international competitiveness. And the confidence the Company gained from its
customers, clients and other stakeholders through many years of business activities is now the valuableassets of the Company, or, Nihon Kohden brand, which cannot be replaced by anything else.
2. Measures for the Enhancement of Corporate Value(1) Corporate Philosophy and Mid-to Long-Term Management Strategy
Nihon Kohden’s corporate philosophy is "we contribute to the world by fighting disease and improving
health with advanced technology, and create a fulfilling life for our employees." as a medical electronics
manufacturer. Based on its corporate philosophy, the Company aims at achieving sustained group growthand enhancement of the Company's corporate value.
In 2010, the Company set out a long-term vision, The CHANGE 2020 –The Global Leader of Medical
Solutions–, for the next ten years. The vision describes a future where the Company aims to (1) lead theworld in the development of revolutionary breakthrough technology, (2) achieve the highest level of quality
in the world, and (3) attain top share in applicable global markets. The target for the period ending March
2020 is sales of ¥200 billion, operating income of ¥25 billion and overseas sales ratio of 35%.
Nihon Kohden implements its four-year mid-term business plan, Strong Growth 2017, towards realizing
its long-term vision. The Company aims to achieve sustainable growth in Japan under the Japanese
government’s future vision to reorganize the medical and nursing care systems by 2025 and achieve strong
growth in international markets. The Company will aggressively execute the following six key strategies
and enhances its operation base to ensure growth.
a. Pursue the highest level of quality in the world
Nihon Kohden will enhance its credibility as a leading medical equipment manufacturer by ensuring
quality in every activity of every division across the entire Nihon Kohden Group, from development anddesign to production, logistics, sales and services, to keep its customers satisfied and ensure that customers
around the world recognize Nihon Kohden for its superior quality products, sales and services.
b. Strengthen technological development capabilities
Nihon Kohden will further reinforce its technological strength and speed of development processes. To
this end, the Company will strengthen its R&D organization to address the needs of clinical practice swiftlyand flexibly. The Company will also promote industry-government-academia collaboration as well as
collaboration with other companies both inside and outside Japan.
c. Strengthen business expansion by region
Nihon Kohden will strive to achieve strong growth internationally and take steps to reinforce its businessexpansion in the Americas, Europe and Asia. Specifically, the Company will focus initiatives on
strengthening business activities in Japan, the U.S. and emerging markets including BRICs.
d. Achieve further growth in core businesses
Nihon Kohden will take steps to achieve further growth in its core businesses both inside and outside
Japan in order to expand its global market share and establish a stable and consistent revenue base.

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e. Develop new businesses
Nihon Kohden aims to develop new core businesses by in-house development, alliances, M&A and othermeasures. The Company will pursue the development and introduction of medical equipment designed to
improve medical safety, address lifestyle-related diseases, dementia, and intractable diseases. The Company
will also pursue solutions for an integrated community care system.
f. Consolidate corporate fundamentals
In order to adapt to changes in the business environment and become the world’s leader in medical
equipment, Nihon Kohden will foster a more robust business structure that is globalized, efficient,profitable and fast-paced as well as implement CSR activities aimed at sustainable growth and strengthen
its human resource development initiatives.
Nihon Kohden continues to enhance the corporate value of the Company and in turn the common
interests of the shareholders as well as contribute to the society through addressing the challenge ofhealthcare by technological development and providing customers with safety and security.
(2) Target Management Indices
Nihon Kohden aims to increase ROE to enhance corporate and shareholder value. The Company sets its
target consolidated ROE at 13.5% in its four-year mid-term business plan, Strong Growth 2017.
In order to achieve the target, the Company will focus on increasing sales and profits by implementing
Strong Growth 2017. The Company will also improve efficiency of assets by measures such as reduction of
inventories as well as enhance shareholder return.
(Reference) Consolidated ROE
FY2013

FY2014FY2015

15.0%

11.9%

10.7%

3. Strengthening of Corporate GovernanceTo realize its corporate philosophy, Nihon Kohden aims at achieving sustained growth and establishingreliance as a company that is highly evaluated by the customers, shareholders, clients and society in all
aspects including products, service, technology, financial strength, quality of employees, and other points.
In order to realize this basic policy and increase corporate value over the mid-to long-term, the Company
recognizes that enhancing corporate governance, by establishing a management structure aiming at
improving the soundness, transparency and efficiency of management, is an important management issue.
As part of the Company's commitment to better Corporate Governance, the Company has introduced an
operating officer system that provides a clear segregation between managerial decision making andsupervisory functions on directors and the execution of operations on operating officers. The Company also
appoints two highly independent Outside Directors to strengthen the management supervisory functions at
the Board.
Nihon Kohden decided the transition to a Company with Audit & Supervisory Committee to further
enhance corporate governance. The transition is subject to the approval at this General Meeting of
Shareholders. The Company will also establish a nominations and remuneration advisory committee, of
which the majority of members are Outside Directors, as voluntary advisory committee of the Board.

4III. Purpose and Contents of the Basic Rule
1. Purpose of the Basic Rule
The Basic Rule has been introduced as a measure to prevent decisions on the Company's financial andbusiness policies from being controlled by persons deemed inappropriate (as defined in the Basic Principles
described in I above).
Based on the perspective of protecting and increasing corporate value and benefits for all shareholders,the purpose of the Basic Rule is, (i) to clarify the procedures that should be taken by a Large-Scale
Purchaser when conducting Large-Scale Purchase of shares of the Company, (ii) to ensure necessary andsufficient information and time that allow shareholders to make appropriate judgment, and (iii) to ensure
opportunity to the Company to negotiate with the Large-Scale Purchaser and offer shareholders alternativeplans.
Currently the Board of Directors is not received any proposal regarding Large-Scale Purchases of theCompany's share certificates or other securities by specific third parties. The Company’s major
shareholders as of March 31, 2016 are listed in Reference Material (5).
2. Contents of the Basic Rule
(1) Overview of the Basic Rule
The flowchart of an outline of the Basic Rule is described in Reference Material (1). Other overview of
the Basic Rule is as follows:
Effective Period

3 years

Targeted Holding Ratio

20%

Deliberation Period

Purchase via a cash: 60 days
Others: 90 days

Deliberation Body

Independent Committee

Decision making on Trigger

The Board of Directors makes decision, fully respecting the opinionof Defense Measuresof the Independent Committee

Shareholders’ Meeting

Convened when the Independent Committee recommends

Defense Measures

Gratis allotment of stock acquisition rights(2) Targeted Large-Scale Purchase
The Basic Rule will be applied to cases where there is Large-Scale Purchase that falls under (a) or (b)below; or any similar action (except where the action has been previously approved by the Board of
Directors of the Company). Hereafter a person or a company intending to conduct a Large-Scale Purchaseshall be referred to as "Large-Scale Purchaser" and referred to as "Large-Scale Purchaser Group" combinedwith persons in special relationship as defined in Paragraph 7, Article 27-2 of the Financial Instruments andExchange Act.
(a)

A purchase or other acquisition that would result in the holding ratio (*1) of share certificates (*2)
of a holder and its joint holder (*3) amounting to 20% or more of share certificates or othersecurities issued by the Company; or(b)

A tender offer (*4) that would result in the ownership ratio of share certificates (*5) of a tender
offerer (*6) and persons in special relationship (*7) totaling 20% or more of share certificates or5other securities issued by the Company (*8).
The Large-Scale Purchaser Group must follow the procedures set out in the Basic Rule, and may notcommence a Large-Scale Purchase until the Board of Directors of the Company decides whether or not to
implement the gratis allotment of stock acquisition rights as a Defense Measure (see (6) below) inaccordance with the Basic Rule.
Notes:(*1) Holding Ratio as defined in Paragraph 4, Article 27-23 of the Financial Instruments and ExchangeAct.
(*2) Share certificates or other securities as defined in Paragraph 1, Article 27-23 of the Financial
Instruments and Exchange Act.
(*3) Holder includes persons described as a holder in Paragraph 3, Article 27-23 of the Financial
Instruments and Exchange Act; joint holder as defined in Paragraph 5, Article 27-23 of the Financial
Instruments and Exchange Act, including persons considered to be joint holders in Paragraph 6,
Article 27-23 of the Financial Instruments and Exchange Act.
(*4) Tender Offer as defined in Paragraph 6, Article 27-2 of the Financial Instruments and Exchange Act.
(*5) Ownership ratio as defined in Paragraph 8, Article 27-2 of the Financial Instruments and ExchangeAct.
(*6) Tender offerer as defined in the text of Paragraph 1, Article 27-2 of the Financial Instruments andExchange Act.
(*7) Persons in special relationship as defined in Paragraph 7, Article 27-2 of the Financial Instruments
and Exchange Act.
(*8) Share certificates or other securities as defined in Paragraph 1, Article 27-2 of the Financial
Instruments and Exchange Act.
(3) Submission of a Statement of Intent of Purchasea.

A Large-Scale Purchaser Group, prior to making a Large-Scale Purchase, must first submit a
proposal of Large-Scale Purchase which includes the following items and a written statement
containing a pledge to comply with the Basic Rule (together with a proposal of Large-Scale
Purchase, referred to as a "Statement of Intent of Purchase") to the Board of Directors. Statement ofIntent of Purchase and additional information described in C below must be made in the Japanese
language.
i)

An overview of the Large-Scale Purchaser Group, including the Large-Scale Purchaser's name,address, governing law for incorporation, structure of the ownership, contact information in
Japan, description of business, financial conditions, etc.

ii)

The purpose, method and terms of the Large-Scale Purchaseiii)

Purchase price of the Company's shares and the basis for its determination thereofiv)

Source of funds for the purchase, including names of the lenders and repayment plan in case ofborrowingv)

When the Large-Scale Purchase is not made in cash, type of considerations and basis for its
evaluation thereofvi)Management policies, business plans, capital policies, and dividend policies for the Company that6the Large-Scale Purchaser intends to adopt after the completion of the Large-Scale Purchasevii)

Policies on the treatment of employees, clients, customers, and other stakeholders that theLarge-Scale Purchaser intends to adopt after the completion of the Large-Scale Purchaseviii)

Any other information that the Board of Directors or the Independent Committee reasonably
considers necessaryb. The Board of Directors will disclose the information as regards to the fact that a Large-Scale
Purchase has been proposed as well as the information included in the Statement of Intent ofPurchase submitted to the Board of Directors in a timely manner, when deemed appropriate.
c.

Upon receipt of the Statement of Intent of Purchase, the Board of Directors of the Company shallimmediately forward the document to the Independent Committee. Should the Board of Directors
and the Independent Committee determine that the contents included in the Statement of Intent ofPurchase are deemed insufficient or unclear, they may set a reply period and require the Large-Scale
Purchaser Group to provide additional information directly or via the Board of Directors to thereasonable extent. The Board of Directors and Independent Committee may continue to require
additional information until such time as necessary and sufficient information has been provided,
subject to a maximum response period of 60 days from the initial receipt of the Statement of Intent
of Purchase. If, however, the Large-Scale Purchaser Group reasonably explains why it is difficult toprovide parts of the additional information requested by the Board of Directors of the Company andthe Independent Committee, the Independent Committee may finish the negotiations regarding
information provision with the Large-Scale Purchaser Group and begin deliberation as described in(4) below before all of the information requested has been provided in full.

(4) Deliberation made by the Independent Committeea.

To eliminate arbitrary decisions by the Board of Directors and to ensure fair judgment as regards tothe compliance with the Basic Rule by the Large-Scale Purchaser Group and as regards to whether
Defense Measures should be triggered, the Company establishes the Independent Committee, in
accordance with resolution at the Board of Directors, comprised of three or more Independent
Committee members. Those members are appointed by the Board of Directors from Outside
Directors or Independent Outside Advisors (See Reference Material (3) for the outline of the
Independent Committee, and Reference Material (4) for candidates for members of the Independent
Committee).

b. The Board of Directors shall, after a Large-Scale Purchase or Large-Scale Purchase proposal,
promptly requests the Independent Committee to be convened.
c.

The Independent Committee shall, as an advisory body of the Board of Directors, review andexamine the contents of the Statement of Intent of Purchase and alternative plans (if such alternativeplans are submitted by the Board of Directors) and submit an opinion as regards to whether Defense
Measures should be triggered to the Board of Directors attached with basis of such opinion.
Deliberation made by the Independent Committee, shall be disclosed in a timely and appropriatemanner. The Independent Committee shall deliberate on the following items:i)Status of compliance with the Basic Rule by the Large-Scale Purchaser Groupii)

Examination as to whether the information provided in the Statement of Intent of Purchase isdeemed necessary and sufficient in light of items described in 2. (3) a.

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iii)

Request to the Large-Scale Purchaser Group for additional information or conduct aninterview with the Large-Scale Purchaser Groupiv)

Examination of contents included in the Statement of Intent of Purchase and information
additionally provided

v)

Examination of alternative plans submitted by the Company

vi)

Evaluation of results of discussions and negotiations conducted by the Board of Directors
with the Large-Scale Purchaser Groupvii)

As to whether to convene a General Meeting of Shareholders in relation to the use of Defense
Measuresviii)

As to whether Defense Measures should be triggeredix)

As to whether Defense Measures should be cancelledx)

Other items that should be determined by the Board of Directors, among which are consulted
to the Independent Committeed. The Independent Committee, when it deems necessary to compare the details of the relevant
Large-Scale Purchase proposal described on the Statement of Intent of Purchase with the Company's
business plans, may set a reasonable reply period (up to 60 days) and request that the Board of
Directors present (i) an opinion on the contents of proposal of the relevant Large-Scale Purchase, (ii)supporting materials and alternative proposal (if any), and (iii) any other information or materials
that the Independent Committee considers necessary and appropriate.
e.

The Board of Directors of the Company shall provide the above information and other materials asrequested by the Independent Committee. The Board of Directors may, when necessary, discuss andnegotiate with the Large-Scale Purchaser Group and offer shareholders alternative plans.

f.

Should the Independent Committee determine that sufficient and necessary information regarding
the Large-Scale Purchase has been provided, it will notify the relevant Large-Scale Purchaser of thefact that it has commenced a process of the Deliberation on the prospective Large-Scale Purchaseproposal. Then the Independent Committee makes Deliberation within a set period of time(hereinafter referred to as "Deliberation Period"). Such Deliberation Period shall be either (i) or (ii)below, depending on the difficulty level for reviewing the Large-Scale Purchase proposal.
i)

A 60-day period shall be granted for a prospective Large-Scale Purchase in which all shares of
the Company are to be purchased via a cash offer in Japanese yenii)

A 90-day period shall be granted for any prospective Large-Scale Purchase other than (i) aboveg. The Independent Committee may, at the expense of the Company, seek advice from independent
outside experts which include financial advisors, certified public accountants, attorneys, academic
experts, etc. to ensure that its decision ensures and enhances the Company's corporate value andcommon interests of its shareholders.
(5) Recommendations by the Independent Committeea.

Recommendation for the triggering of a Defense Measure
The Independent Committee shall, where it adjudges that the Large-Scale Purchase falls into any
one of the following categories, recommend the implementation of Defense Measures in the form ofgratis allotment of stock acquisition rights to the Board of Directors, except where it is deemednecessary to obtain further information from or conduct further negotiations or discussions with the8Large-Scale Purchaser.
The Independent Committee may, if it is uncertain whether the Large-Scale Purchase will fall
into the categories ii) through iv), recommend the implementation of Defense Measures subject tothe approval of a General Meeting of Shareholders in advance (hereinafter referred to as the"Shareholders' Meeting").
i)

If the Large-Scale Purchaser Group does not comply with the Basic Rule (including the case inwhich a written statement containing a pledge to comply with the Basic Rule is not submitted)

ii)

Cases in which it is clear that the relevant Large-Scale Purchase damages common interests ofshareholders of the Company which includes:
・ Buying out the Company's share certificates in order to require such share certificates to becompulsorily purchased by the Company or the parties concerned with the Company at an
inflated price (so-called "green mailer" case)・ Management that achieves an interest for the Large-Scale Purchaser Group to the detrimentof the Company, such as temporarily taking control of the Company in order to acquire
important assets of the Company (including intangible assets such as intellectual properties,
know-how, and customer base, etc.) at low prices
・ Diverting the Company's assets as collateral for or repayment of debts of the Large-Scale
Purchaser Group・ Temporary control of the Company's management to dispose the assets of the Company sothat the Large-Scale Purchaser may cause the Company to temporarily distribute highdividends or sell the shares at a temporarily higher price as a result of the high dividendsiii) Cases that threaten to have the effect of forcing the Company's shareholders into selling theirshares, such as coercive two-tiered tender offers (meaning acquisitions of shares including
tender offers that do not offer to acquire all shares in the initial acquisition, and set unfavorable
acquisition terms for the second stage or do not set clear terms for the second stage)iv) In the event that conditions for the purchase (including the amount and type of considerations, thepurchase schedule, legality, probability of the purchase, post-purchase management policies andbusiness plans) are significantly insufficient or inappropriate from the Company's intrinsic value
b. Recommendation for the non-triggering of a Defense Measure
In the event that the Independent Committee does not consider the Large-Scale Purchase to
warrant the use of Defense Measures, it shall recommend to the Board of Directors that Defense
Measures should not be used. Such a recommendation may be made regardless of the expiry of the
Deliberation Period.
(6) Resolution of the Board of Directorsa.

The Board of Directors make the decision as to whether Defense Measures should be triggered, fully
respecting the opinion of the Independent Committee, except where a Shareholders' Meeting is held
as described in (7) below, in which case the decision of the Board of Directors shall be based on the
resolution adopted at the Shareholders’ Meeting.

b. The Board of Directors may, when necessary, discuss and negotiate with the Large-Scale PurchaserGroup even after the triggering of the Defense Measures. Such discussions or negotiations may
result in material change in matters which were the basis of the judgment made by the Board of9

Directors to trigger a Defense Measure, which includes the Large-Scale Purchaser Group proposing
any change in matters that may affect the basis of the Large-Scale Purchase. In such circumstances,
the Company, in accordance with resolution at the Board of Directors, may cancel the Defense
Measures after consulting with the Independent Committee on the condition. (The announcement ofsuch cancellation shall be disclosed in a timely and appropriate manner in accordance with therelevant legislation and the regulations of Financial Instruments Exchanges). Specifically, theCompany may stop the gratis allotment of stock acquisition right, or acquire all of the allocatedstock acquisition free of charge.
(7) Convocation of the Shareholders' Meeting
If the Independent Committee recommends the implementation of Defense Measures subject to theapproval of the Shareholders' Meeting in advance as described in (5) a. above, the Board of Directors may
promptly convene the Shareholders' Meeting in accordance with the law on the issue of gratis allotment ofstock acquisition rights in accordance with the Basic Rule.
(8) Information disclosure
The Company shall provide information in a timely and appropriate manner regarding the status andprogress of procedures set out in the Basic Rule (including receipt of the Statement of Intent to Purchaseand commencement of the Deliberation Period) as well as summaries of recommendations provided by the
Independent Committee, decisions made by the Board of Directors, resolutions approved by the
Shareholders' Meeting, and any other information deemed appropriate by the Independent Committee or
the Board of Directors, in line with the Basic Rule and in accordance with the relevant legislation and theregulations of Financial Instruments Exchanges.
(9) Gratis allotment of stock acquisition rights
Where a gratis allotment of stock acquisition rights is implemented as a Defense Measure in accordancewith the Basic Rule, the implementation thereof shall be undertaken as detailed in Reference Material (2).
(10) Effective term and abolition or amendment of the Basic Rulea.

Basic Rule shall remain in effect from the introduction thereof after being adopted at this General
Meeting of Shareholders until the conclusion of the General Meeting of Shareholders for the last
fiscal year ending within three years after this General Meeting of Shareholders. Continuance of theimplementation of the Basic Rule shall be presented again to the General Meeting of Shareholders of
the Company for approval.

b. The Basic Rule may be changed or revised at the Board of Directors before the expiration of theeffective term to reflect possible revisions of laws and ordinances and rules of financial instruments
exchanges, or other reasons, on the condition that such changes or revisions are not inconsistent withthe resolution of this General Meeting of Shareholders. The Basic Rule shall be abolished when (a) a
General Meeting of Shareholders of the Company passes a resolution to abolish the Basic Rule, or(b) the Board of Directors passes a resolution to abolish the Basic Rule. When the Basic Rule isamended or abolished, timely and appropriate disclosure of the fact that such amendment or
abolishment shall be made by the Board of Directors.

10(11) Interpretation of the laws and ordinances
The provisions of the laws and ordinances referred in the Basic Rule are based on the laws andordinances effective as of May 10, 2016. If the meanings of the provisions or terms as set forth in each item
referred therein are required revisions due to the enactment, amendment or abolishment of laws andordinances after May 10, 2016, the Board of Directors may interpret the meanings of the provisions orterms as set forth in each item therein to the reasonable extent as required, taking into consideration of the
purposes of such enactment, amendment or abolishment.
IV. Impact on shareholders and investors
1. Impact on shareholders and investors upon introduction of the Basic RuleAt the time of introduction of the Basic Rule, no actual gratis allotment of stock acquisition rights will be
implemented. Accordingly, it is expected that the introduction of the Basic Rule will have no economic
impact on shareholders and investors.
2. Impact when Defense Measures are triggered
When the Board of Directors implements Defense Measures with the purpose of protecting the common
interest of its shareholders, a gratis allotment of stock acquisition rights will be implemented on theregistered shareholders of the Company as of the Allotment Date that will separately be determined by the
Board of Directors, at a ratio of one stock acquisition right per one share held. In order to exercise stockacquisition rights, shareholders are required to pay 1 Japanese Yen for each stock acquisition right during
the prescribed period in addition to performing prescribed procedures. If the shareholders do not performthe aforementioned procedure during the prescribed period, the shares they hold in the Company will be
diluted. If the stock acquisition rights are issued with the condition that such rights may be compulsorily
acquired by the Company, the shareholders receive the Company's shares as consideration for acquired
stock acquisition rights. In such cases, shareholders are not required to make any payment and the shares
they hold in the Company will not be diluted.
3. Impact upon the cancellation of the Defense Measures
In the event that the Company either cancels the gratis allotment of stock acquisition rights or purchases
the allocated rights on a gratis basis after the registered shareholders of the Company as of the Allotment
Date are confirmed, the shares they hold in the Company will not be diluted. In such cases, subsequent
fluctuations in the share price could potentially disadvantage investors who have purchased or sold stock on
the expectation of dilution of the price per share.
V. Rationale of the Basic Rule
1. Fully satisfying the requirements of the Guidelines Regarding Takeover Defense
The Basic Rule fully satisfies the three principles, "Principle of protecting and enhancing corporate value
and shareholders’ common interests", "Principle of prior disclosure and shareholders’ will" and "Principleof ensuring the necessity and reasonableness" set out in the "Guidelines Regarding Takeover Defense for
the Purposes of Protection and Enhancement of Corporate Value and Shareholders' Common Interests"
released by the Ministry of Economy, Trade and Industry and the Ministry of Justice on May 27, 2005.

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2. Respecting the intent of shareholders
The Basic Rule will be introduced subject to the approval at this General Meeting of Shareholders. As
the term of Directors is 1 year (the term of Directors serving as an Audit & Supervisory Committee
Member is 2 years, if the transition to a Company with Audit & Supervisory Committee is approved by this
General Meeting of Shareholders), intention of the shareholders regarding the Basic Rule may be reflected
through election of board members that takes place every year. If the General Meeting of Shareholders
makes a resolution to abolish the Basic Rule after its introduction, the Basic Rule will be abolished at thattime to reflect the intent of the shareholders.
3. Elimination of arbitrary decisions by the Board of Directors
To eliminate arbitrary decisions by the Board of Directors and to ensure fair judgment as regards tocompliance with the Basic Rule by the Large-Scale Purchaser Group and as regards to whether Defense
Measures should be triggered, the Company establishes the Independent Committee, in accordance with theresolution at the Board of Directors. The Board of Directors makes the decision as to whether Defense
Measures should be triggered, fully respecting the opinion of the Independent Committee. The Board of
Directors also complies with the resolution of the Shareholders’ Meeting, if the Independent Committee
recommends the implementation of Defense Measures subject to the approval of the Shareholders’ Meetingin advance.
By disclosing outlines of the Deliberation to the shareholders, the Independent Committee ensures a
structure which contributes to the corporate value of the Company and the common interests of its
shareholders.
4. Establishing reasonably objective requirements for the triggering of the Defense Measures
As set out in III 2. (5) a., Defense Measures established by the Basic Rule will not be triggered unlesspre-determined reasonable and objective requirements have been satisfied, which ensures a structure toeliminate arbitrary triggering of the Defense Measures by the Board of Directors.
5. No dead-handed or slow-handed takeover defense measures
The Basic Rule may be abolished by a meeting of the Board of Directors composed of Directors who areelected at the Company's General Meeting of Shareholders in accordance with a person who acquired alarge quantity of share certificates or other securities of the Company. Accordingly, the Basic Rule is not adead-handed takeover defense measure (a takeover defense measure in which even if a majority of themembers of the Board of Directors are replaced, the triggering of the measure cannot be stopped).
Further, since the appointment terms of the Directors are not staggered, the Basic Rule is not a slow-handedtakeover defense measure (a takeover defense measure that requires a considerable period of time to repeal
because the Directors cannot all be replaced at once).

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Reference Material (2): Terms and Conditions of the Stock Acquisition Rights
1. Total number of stock acquisition rights to be issued
The maximum number of stock acquisition rights is the number of outstanding shares of the Company(excluding the number of shares of the Company held by the Company at that time) on a date that isdetermined as an allotment date by a resolution at the Board of Directors regarding issuance of the stockacquisition rights (hereinafter referred to as the "Allotment Date").
2. Shareholders to whom the stock acquisition rights are granted and terms and conditions of allotment
thereofOne stock acquisition right will be granted for each share held by shareholders, other than the Company,
who are recorded in the last register of shareholders of the Company as of the Allotment Date.
3. Class and number of shares issued upon the exercise of stock acquisition rights
Class of shares subject to stock acquisition rights is common stock and the number of shares issued upon
the exercise of stock acquisition rights shall be one share for each stock acquisition right. If the Company
conducts a stock split or reverse stock split after the issuance of stock acquisition rights, number of sharesissued will be adjusted.
4. Issue price of stock acquisition rights
Stock acquisition rights are issued without considerations as they are allotted to shareholders without
considerations.
5. Amount to be paid upon exercising the stock acquisition rights
The amount required to be paid to exercise a stock acquisition right is one Japanese Yen for eachcommon stock of the Company. If the stock acquisition rights are issued with the condition that such rights
may be compulsorily acquired by the Company, the shareholders receive the Company's shares as
considerations for acquired stock acquisition rights. Accordingly the shareholders are not required to makeany payment.
6. Restriction on transfer of stock acquisition rights
Any transfer of stock acquisition rights shall be subject to the approval of the Board of Directors.
7. Conditions for the exercise of the stock acquisition rights
Except where previously agreed by the Board of Directors, persons affiliated with a Large-Scale
Purchaser Group which has an intent to acquire 20% or more of the total voting rights of the Company are
not generally permitted to exercise their stock acquisition rights. Further details of this requirement will be
determined separately by the Board of Directors.
8. Exercise period of the stock acquisition rights
The period for exercising stock acquisition rights and other terms and conditions shall be determined
separately by the Board of Directors. The Board of Directors may impose conditions that gives it the rightto obtain stock acquisition rights from holders thereof (except from those holders who are not permitted toexercise their stock acquisition rights as described in 7. above) and to issue one share per acquisition rightthus obtained.

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Reference Material (3) Outline of the Independent Committeel. The Independent Committee shall be comprised of three members or more. The members of the
Independent Committee shall be elected from Outside Director of the Company or outside experts(including attorneys, licensed tax accountants, certified public accountants, academic experts,
experienced corporate managers, and parties with knowledge of the investment banking industry) andmay not be those included in the following categories (1) to (5). The Chairman of the Independent
Committee shall be elected by mutual election by the members of the Committee.
(1)Major shareholders (shareholders holding over 5% of the outstanding shares of the Company), a
person in special relationship (as defined in Paragraph 7, Article 27-2 of the Financial
Instruments and Exchange Act) with the major shareholders, or a person representing the interest
thereof(2)
A person who is or was a Director or an employee of an affiliate of the Company (An affiliate
refers to a company in which the Company holds the majority of voting rights and includes acompany in which a subsidiary or a sub-subsidiary of the Company holds the majority of voting
rights).
(3)
A person who is a Director, an Executive Officer or an employee of a company which has asignificant business relationship with the Company or a company which had a significant
business relationship with the Company in the past 3 years. (A company which has a significant
business relationship with the Company refers to a company which has paid to the Company or
has received from the Company a total amount which exceeds the higher of the ¥100 million peryear or 2% of annual consolidated sales of the relevant company in consideration of goods orservices.)(4)
A person who receives or received in the past 3 years a substantial amount of compensation (¥10
million or higher per year) as an advisor to the Company (including a corporate attorney and amanagement consultant, etc. and excluding an Outside Director)(5)
Close relatives of a person described in (1) to (4) above (relatives within 2 degrees of relationshipor relatives living together)
2. The term of office of members of the Independent Committee shall be 3 years provided that theirre-appointment shall not be prevented.
3. The Independent Committee shall review and examine the contents of the Statement of Intent ofPurchase and alternative plans (if such alternative plans are submitted by the Board of Directors) andsubmit an opinion as regards to whether Defense Measures should be triggered to the Board of Directors
attached with basis of such opinion. The Independent Committee shall deliberate on the following
items:
i)
Status of compliance with the Basic Rule by the Large-Scale Purchaser Groupii)
Examination as to whether the information provided in the Statement of Intent of Purchase isdeemed necessary and sufficient in light of items described in 2. (2) a.
iii)
Request to the Large-Scale Purchaser Group for additional information or conduct an interview
with the Large-Scale Purchaser Groupiv)
Examination of contents included in the Statement of Intent of Purchase and information
additionally provided
v)
Examination of alternative plans submitted by the Company
vi)
Evaluation of results of discussions and negotiations conducted by the Board of Directors with
the Large-Scale Purchaser Groupvii) As to whether to convene a General Meeting of Shareholders in relation to the use of Defense
Measuresviii) As to whether Defense Measures should be triggeredix)
As to whether Defense Measures should be cancelledx)
Other items that should be determined by the Board of Directors, among which are consulted to
the Independent Committee
4. As a general rule, a resolution shall be adopted with the attendance of all members of the Independent
Committee and by the majority of voting rights. Under a circumstance which is deemed unavoidable, aresolution may be adopted with a majority of voting rights when a majority of the members of the
Independent Committee holding the voting rights as regards to the relevant resolution are in attendance.

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Reference Material (4): Candidates for members of The Independent Committee
Masaya Yamauchi
Born in 1960
(Career Summary)
April 1988
Registered as an attorney (Tokyo Bar Association)
September 1993 Established Nakagawa & Yamauchi Law Office
August 2001
Integrated into Hibiki-Sogo Law Office (current position)
June 2010
Director of the Company (current position)
June 2010
Member of the Independent Committee of the Company (current position)•
Mr. Masaya Yamauchi is the current Company’s Outside Director and a candidate (reappointment) for
an Outside Director at this General Meeting of Shareholders.
•
The Company has filed with the Tokyo Stock Exchange a notification to establish that Mr. Yamauchi
is an independent officer as provided by the Exchange, because he satisfies the requirements therefor.
•
No material conflict of interest exists between the Company and Mr. Yamauchi.
Minoru Obara
Born in 1947
(Carrier Summary)
April 1986
Assistant Professor at Dept. of Electrical Engineering, Faculty of Science andTechnology, Keio University
April 1993
Professor at Dept. of Electrical Engineering (Current Dept. of Electronics and ElectricalEngineering), Faculty of Science and Technology, Keio University
June 2012
Director of the Company (current position)
April 2013
Professor Emeritus at Keio University (current position)•
Mr. Minoru Obara is the current Company’s Outside Director and a candidate (reappointment) for an
Outside Director at this General Meeting of Shareholders.
•
The Company has filed with the Tokyo Stock Exchange a notification to establish that Mr. Obara is anindependent officer as provided by the Exchange, because he satisfies the requirements therefor.
•
No material conflict of interest exists between the Company and Mr. Obara.
Masahiro Kawamura
Born in 1949
(Career Summary)June 1977
Registered as a Tax Accountant
March 1979
Register as a Certified Public Accountant
August 1979
Joined Kawamura Tax Accounting Office (current position)
June 2010
Outside Corporate Auditor of the Company (current position)
June 2010
Member of the Independent Committee of the Company (current position)•
Mr. Masahiro Kawamura is the current Company’s Outside Corporate Auditor and a candidate for an
Outside Director serving as an Audit & Supervisory Committee Member at this General Meeting of
Shareholders.
•
The Company has filed with the Tokyo Stock Exchange a notification to establish that Mr. Kawamura
is an independent officer as provided by the Exchange, because he satisfies the requirements therefor.
•
No material conflict of interest exists between the Company and Mr. Kawamura.
Shigeru Kawatsuhara
Born in 1952
(Career Summary)
April 1975
Joined TOKO, INC.
April 2002
Senior Manager of Sales Department 1, Sales Operations, TOKO, INC.
April 2004
General Manager of Sales Center, TOKO, INC.
June 2005
Corporate Director and General Manager of Sales Center, TOKO, INC.
April 2008
President of TOKO, INC.
May 2014
Chairman of TOKO, INC.
March 2015
Senior Advisor of TOKO, INC.
April 2016
Part-time Advisor of TOKO, INC. (current position)•
Mr. Kawatsuhara is a candidate for an Outside Director serving as an Audit & Supervisory Committee
Member at this General Meeting of Shareholders.
•
The Company will file with the Tokyo Stock Exchange a notification to establish that Mr.
Kawatsuhara is an independent officer as provided by the Exchange, because he satisfies therequirements therefor.
•
No material conflict of interest exists between the Company and Mr. Kawatsuhara.

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Reference Material (5): Major Shareholders as of March 31, 2016

Shareholders

Number of Shares

Shareholding
Ratio (%)

State Street Bank and Trust Company 505223

9,459,240

11.04%The Master Trust Bank of Japan, Ltd. (trust account)

5,899,500

6.88%

4,476,562

5.22%

Saitama Resona Bank, Ltd.

4,193,750

4.89%

Japan Trustee Service Bank, Ltd. (trust account 9)2,704,400

3.15%

Japan Trustee Service Bank, Ltd. (trust account)

2,556,300

2.98%

THE BANK OF NEW YORK, NON-TREATY JASDEC ACCOUT

2,253,600

2.63%

Fujitsu Ltd.

1,857,758

2.16%

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1,325,130

1.54%

Nihon Kohden employee shareholding association

1,251,192

1.46%

STATE STREET BANK AND TRUST, BOSTON AS TRUSTEEFOR MAWER INVESTMENT MANAGEMENT LTD.

Note: The above list excludes Nihon Kohden’s treasury stock of 4,073,033 shares. The shareholding ratio is
calculated after deduction of the Company’s treasury stock.

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