This document has been translated from the Japanese original for the convenience of non-Japanese shareholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail. Securities Code: 1951 June 5, 2017 To Our Shareholders: Fuminori Kozono President and Representative Director KYOWA EXEO CORPORATION 29-20, Shibuya 3-chome, Shibuya-ku, Tokyo
NOTICE OF THE 63rd ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 63rd Ordinary General Meeting of Shareholders of KYOWA EXEO CORPORATION (the "Company") on June 23, 2017, which will be held as described hereunder.
Meeting Details
1. Date and Time: Friday, June 23, 2017 at 10:00 a.m. (Japan time) (The reception will begin at 9:00 a.m.) 2. Venue: 29-20, Shibuya 3-chome, Shibuya-ku, Tokyo KYOWA EXEO CORPORATION 3F Conference Room 3. Purposes: Matters to be reported: Business Report and Consolidated Financial Statements for the 63rd Fiscal Year l. from April 1, 2016 to March 31, 2017 and Reports of Audit on the Consolidated Financial Statements by Accounting Auditor and Audit & Supervisory Board 2. Non-Consolidated Financial Statements for the 63rd Fiscal Year (from April 1, 2016 to March 31, 2017) Matters to be resolved: Appropriation of Surplus Proposal 1: Election of Ten (10) Directors Proposal 2: Issuance of Subscription Rights to Shares as Stock Options Proposal 3:
Reference Documents for the General Meeting of Shareholders
Proposals and Reference Information
Proposal 1: Appropriation of Surplus The Company regards profit distribution to shareholders as an important managerial issue, and regarding the appropriation of surplus, we set our target dividend on equity ratio (DOE) at 3% and our basic policy is to continue issuing stable dividends. Based on this policy, we propose the following year-end dividend for the fiscal year under review: Matters concerning the year-end dividend l. Type of dividend assets Cash 2. Matters concerning allocation of dividend assets and the total amount Dividend per common share of the Company: ¥23 Total amount of dividends: ¥2,195,561,899 The annual dividend for the current fiscal year, being the total of the interim and Note: year-end dividends, is ¥46 per share. 3. Effective date of dividend from surplus Monday, June 26, 2017 Election of Ten (10) Directors Proposal 2: The terms of office of all eleven (11) Directors will expire at the conclusion of this Ordinary General Meeting of Shareholders. In order to enhance the efficiency of the management system, the Company proposes to decrease the total number of Directors by one (1) and elect ten (10) Directors.
received a penalty requiring training in related legal compliance and had its business suspended for one month in January 2016 by the Ministry of Land, Infrastructure, Transport and Tourism for violations of the Construction Business Act in relation to foundation construction. Ms. Kitai had no prior knowledge of the incidents covered by the penalty and business suspension, and regularly made suggestions and offered opinions on strengthening the legal compliance system at meetings of the Board of Directors. After the incidents came to light, through deliberation at meetings of the Board of Directors and other important meetings, Ms. Kitai took full responsibility in proactively making suggestions and offering opinions to promote initiatives to strengthen the internal governance system, including thorough legal compliance and the creation of appropriate reoccurrence prevention policies. 3. Ms. Kumiko Kitai and Mr. Kazuteru Kanazawa are both candidates for Outside Director. Furthermore, Ms. Kumiko Kitai and Mr. Kazuteru Kanazawa are also candidates for Independent Officer provided for in the regulations of the Tokyo Stock Exchange, Inc. and the Company's regulations. Liability Limitation Agreements with Outside Directors 4. In order for our Outside Directors to more effectively perform in their expected roles, Article 39 of the current Articles of Incorporation of the Company provides that the Company may enter into agreements with its Outside Directors limiting their liability for failure to properly perform their respective duties. The candidates for Outside Director, Ms. Kumiko Kitai and Mr. Kazuteru Kanazawa have entered into an agreement with the Company that limits their liabilities for damages under Article 423, paragraph 1 of the Companies Act to the minimum amount prescribed by laws and regulations, and if their reelections are approved, the above liability limitation agreement will continue. Issuance of Subscription Rights to Shares as Stock Options Proposal 3: The shareholders are requested to approve the proposal to entrust the Board of Directors of the Company with the task of determining the terms of the Issuance of Subscription Rights to Shares as Stock Options to Directors (excluding Outside Directors), Operating Officers and employees of the Company, and Directors of the Company's subsidiaries (wholly owned subsidiaries) under the provisions of Articles 236, 238 and 239 of the Companies Act. The issuance of Subscription Rights to Shares to the Directors is within the annual limit of ¥20,000,000 Yen approved as Subscription Rights to Shares that may be offered as remuneration for the Directors at the Ordinary General Meeting of Shareholders held on June 21, 2013. If Proposal 2 is approved and adopted as proposed, the number of Directors of the Company to be subject to this Proposal will be seven (7). l. Reasons for Issuing the Subscription Rights to Shares on particularly favorable conditions The reason for issuing Subscription Rights to Shares as stock options free of charge to the Directors, Operating Officers and employees of the Company, and Directors of the Company's subsidiaries (wholly owned subsidiaries) is to provide an incentive to improve business performance, increase corporate value and enhance a management focus on shareholder interests. 2. Persons to whom Subscription Rights to Shares will be allotted Directors, Operating Officers and employees of the Company, and Directors of the Company's subsidiaries (wholly owned subsidiaries) will be allotted Subscription Rights to Shares. 3. (1) Details and maximum number etc. of the Subscription Rights to Shares for which offering terms may be determined based on the matters resolved at the Meeting Class and Number of Shares to be issued upon exercise of Subscription Rights to Shares The total number of shares subject to Subscription Rights to Shares shall not exceed 360,000 shares of common stock of the Company. Of which, the number of the Subscription Rights to Shares to be allotted to Directors of the Company shall not exceed 84,000 shares of common stock of the Company. If the Company makes any share split or share consolidation, the number of shares subject to Subscription Rights to Shares shall be adjusted using the following formula, provided that, such adjustment shall be made with regard to the number of the shares subject to Subscription Rights to Shares that have not been exercised at such time, and that if any fraction less than one (1) share arises as a result of such adjustment, such fraction shall be discarded:
Furthermore, if any unavoidable event other than those set forth above arises after the Allotment Date of the Subscription Rights to Shares that makes it necessary to adjust the number of shares, the Company shall make the necessary adjustment to the extent reasonable. (2) Number of Subscription Rights to Shares The number of the Subscription Rights to Shares to be issued shall not exceed 3,600 units, of which the number to be allotted to Directors of the Company shall not exceed 840 units. The number of shares for each Subscription Right to Shares (hereinafter referred to as the "Number of Granted Shares") shall be 100 shares; provided, however, if a share number adjustment set forth in "(1) Class and Number of Shares to be issued upon exercise of Subscription Rights to Shares" above is conducted, similar adjustment shall be applied to the Number of Granted Shares. (3) Amount to be paid in exchange for the Subscription Rights to Shares There shall be no requirement for payment in exchange for the Subscription Rights to Shares. (4) Value of property to be contributed when Subscription Rights to Shares are exercised Amount to be paid when Subscription Rights to shares are exercised shall be the paid amount per share that can be delivered by exercising the Subscription Rights to Shares (hereinafter referred to as the "Exercise Price"), multiplied by the Number of Granted Shares concerning the relevant Subscription Rights to Shares. The Exercise Price will be the average value of closing price in regular trading of the Company's common stock on the Tokyo Stock Exchange (hereinafter referred to as the "Closing Price") on each day of the previous month of the date when the Subscription Rights to Shares are allotted, multiplied by 1.05. Note that the date when the trade was not effective is not included. Fractions of less than one (1) Yen will be rounded up. However, in the case the amount is lower than the Closing Price of the Allotment Date (when no Closing Price is published on that day, Closing Price of the nearest previous date shall be applied), it will be the Closing Price on the Allotment Date. After the Allotment Date, in an event of a share split or share consolidation of the Company's common stock, it will be adjusted by the following formula, with fractions of less than one (1) Yen rounded up.
In addition, after the Allotment Date of the Subscription Rights to Shares, in an event where the Company issues new shares of common stock or disposes of treasury shares of common stock at a price lower than market price, the Exercise Price will be adjusted by the following formula, with fractions of less than one (1) Yen rounded up.
The "Number of outstanding shares" in the above formula shall be the total number of the shares of common stock issued less treasury shares of common stock owned by the Company, and in the case of disposition of treasury shares, the "Number of shares newly issued" shall read as "Number of treasury shares to be disposed of." In addition to the above, if any unavoidable event such as a merger, a company split or capital reduction of the Company arises after the Allotment Date where the Exercise Price must be adjusted, the Company may adjust the Exercise Price to a reasonable extent, subject to a resolution of the Board of Directors. (5) Period during which Subscription Rights to Shares can be exercised From July 1, 2019 to June 30, 2026. (6) l) Conditions for exercise of Subscription Rights to Shares Any person who has been allotted Subscription Rights to Shares (hereinafter referred to as a "Holder of Subscription Rights to Shares") must at the time of exercising such rights have a position in the Company as a Director, Operating Officer, or employee, or a Director of a subsidiary (wholly owned subsidiaries) of the Company. However this requirement does not apply in the case where the person concerned no longer has this position due to, in the case of Directors or Operating Officers of the Company or Directors of the Company's subsidiaries (wholly owned subsidiaries), expiry of his/her term of office, in the case of employees of the Company, retirement at mandatory retirement age, or other circumstances where it is justifiable that this requirement not apply. Other terms and conditions shall be as specified in the "Subscription Rights to Shares Allotment Agreement" to be entered into between the Company and holders of the Subscription Rights to Shares based on a resolution of the Board of Directors. 2) (7) Restriction on transfer of Subscription Rights to Shares The acquisition of Subscription Rights to Shares by transfer shall require approval by a resolution of the Board of Directors. (8) l) Reasons and conditions for acquisition of Subscription Rights to Shares If a proposal for the approval of a merger agreement under which the Company ceases to exist, a proposal for the approval of an agreement for an absorption-type split of the Company or a plan for an incorporation-type split of the Company, a proposal for the approval of a share exchange agreement or a share-transfer plan under which the Company becomes a wholly owned subsidiary is approved at the General Meeting of Shareholders (or at the Board of Directors if approval at the General Meeting of Shareholders is unnecessary), the Company may acquire the Subscription Rights to Shares without compensation 2) In the event that a Holder of Subscription Rights to Shares becomes no longer eligible to exercise his/her Subscription Rights to Shares, the Company may acquire the Subscription Rights to Shares without compensation. (9) l) Matters regarding capital and capital reserves that will be increased in cases where shares will be issued as a result of the exercise of Subscription Rights to Shares The amount of the capital to be increased by issuance of shares at the time of exercise of the Subscription Rights to Shares shall be half of the maximum amount of increase of the capital, etc. which is calculated in accordance with Article 17, paragraph 1 of the Corporate Accounting Rules, and any fraction less than one (1) Yen as a result of the said calculation shall be rounded up. 2) The amount of capital reserves to be increased by issuance of shares at the time of exercise of Subscription Rights to Shares shall be obtained by subtracting the capital being increased in 1) above from the maximum amount of increase of capital, etc. in l ) above. (10) Handling of Subscription Rights to Shares at the time of restructuring action If the Company is to engage in a merger (limited to cases where the Company ceases to exist as a result of such merger), absorption-type company split, incorporation-type company split, or subject to a share exchange or share transfer (all of which are collectively referred to as a "Restructuring Action"), Subscription Rights to shares in the company as listed under Article 236, paragraph 1, item 8 (a) through (e) of the Companies Act (such company limited hereafter referred to as the "Restructured Company") shall in each case be issued in accordance with applicable conditions below to holders of the Subscription Rights to Shares that remain in effect as of the effective date of the Restructuring Action (hereinafter referred to as the "Remaining Subscription Rights to Shares"). In this case, the Remaining Subscription Rights to Shares shall cease to exist, and the Restructured Company shall issue new Subscription Rights to Shares. However, such issuance shall be limited to the cases where issuance of the Subscription Rights to Shares of the Restructured Company under the following conditions is prescribed in the merger agreement, the absorption-type company split agreement, the incorporation-type company split plan, the share exchange agreement or the plan of the share transfer. Number of Subscription Rights to Shares to be issued by the Restructured Company The holders of the Remaining Subscription Rights to Shares shall be granted the Subscription Rights to Shares of which the number is equivalent to the number of such Rights held at the Restructured Company. l) 2) 3) Class and Number of Shares to be issued by the Restructured Company upon exercise of Subscription Rights to Shares The class of shares to be delivered upon exercise of the Subscription Rights to Shares shall be the common shares of the Restructured Company, and the number of the shares to be delivered upon exercise of Subscription Rights to Shares shall be determined in accordance with (1) above, taking into consideration the conditions, etc. of the Restructuring Action. Value of property to be contributed when Subscription Rights to Shares are exercised The value of property to be contributed upon exercise of each Subscription Right to Shares to be delivered shall be the amount obtained by multiplying the amount per share to be paid in after reorganization obtained by adjusting the Exercise Price set forth in (4) above by the number of shares to be delivered upon exercise of relevant stock acquisition rights as determined in accordance with 2) above, taking into consideration the conditions, etc. of the Restructuring Action. 4) Period during which Subscription Rights to Shares can be exercised The exercise period shall begin on either the first date of the exercise period for the Subscription Rights to Shares stipulated in (5) above, or on the date that the Restructuring Actions take effect, whichever comes later, and shall continue to the final date of the exercise period stipulated in (5) above. 5) Matters concerning acquisition of Subscription Rights to Shares To be determined in accordance with (8) above. 6) Restrictions on transfer of Subscription Rights to Shares Any acquisition of the Subscription Rights to Shares by transfer requires approval by a resolution of the Board of Directors of the Restructured Company. 7) Matters regarding capital and capital reserves that will be increased in cases where shares will be issued as a result of the exercise of Subscription Rights to Shares To be determined in accordance with (9) above. (11) Method of calculating the fair value of Subscription Rights to Shares The Black-Scholes model shall be used to calculate the fair value of the subscription rights to Shares based on the various conditions applicable on the Allotment Date. (12) Other requirements concerning Subscription Rights to Shares Other requirements concerning Subscription Rights to Shares may be decided by resolution at separately held meetings of the Board of Directors.