Takeover Countermeasures

Whilst the Company’s shares are listed on financial instrument exchanges (stock exchanges) and can be freely bought and sold, groups intent on pursuing short-term profits may sometimes propose an acquisition that ultimately endangers the interests of shareholders. The Company believes the right to make decisions on whether to accept or reject proposals to acquire the Company rests with its shareholders. Accordingly, when such proposals arise, it believes that the shareholders must be given adequate and accurate information, as well as sufficient time, to make their decisions. Toward this end—and as a means of demanding that prescribed procedures are taken for the provision of sufficient documents and countering proposed acquisitions that it believes would clearly harm the interests of shareholders in general—the Company included a proposal for the “Continuation of policy concerning large-scale acquisitions of the Company’s shares (takeover defense measures)” among the matters to be resolved at its 96th Ordinary General Meeting of Shareholders held on May 26, 2021. Shareholder approval for this proposal was received.

This Policy is a policy for responding to purchases of the Company’s shares and other securities^*3 aiming at 20% or more of the Company’s voting rights^*2 by a group of shareholders (tokutei-kabunushi group)^*1, or purchases of the Company’s shares and other securities that would result in a group of shareholders (tokutei-kabunushi group) holding 20% or more of the Company’s voting rights (in both cases, with the exception of purchases agreed to in advance by the Board of Directors, and regardless of the specific purchasing method, whether on the open market, public offering or other means. Such purchases are referred to hereinafter as “Large-Scale Share Acquisitions” and a party carrying out or attempting a Large-Scale Acquisition is referred to as a “Large-Scale Share Acquirer”). This Policy is detailed below.

1. Basic policy regarding control of the Company
2. Details of the Rules
3. Policy for responding to a Large-Scale Share Acquisition
4. Measures to secure transparency and fairness
5. Impact etc. on shareholders and investors
6. Commencement of application of the Rules and the effective period thereof

1. Basic policy regarding control of the Company

AEON CO., LTD., and its Group companies　(hereinafter in this section 1(1), “AEON”),　while adhering to the unchanging ideals of　pursuing peace, respecting humanity, and　contributing to local communities, always with　the customer’s point of view as its core, has　succeeded in increasing corporate value by　practicing its “Customer-First” philosophy.　The retail industry, which is the primary　domain of the Group’s operations, is an　industry of peace and an industry of people,　which are only possible through peace. Our stores are visited by numerous customers every day, and we conduct our business operations in connection with various people, such as our employees who greet these customers and all of the numerous companies we trade with. Furthermore, the retail industry has functions as an infrastructure that support people’s daily life. It is also an industry of local community, which is rooted in people’s lives and is only possible through the support of everyone in the local community, particularly our customers. The global pandemic of COVID-19 has changed daily living throughout the world at a fundamental level. Accordingly, the mindset and lifestyles of individuals have changed significantly. While people’s awareness toward their health has grown, the widespread adoption of telework has led to the movement of people from urban areas to the country regions, which is increasing the value for consumers and local communities more and more. On top of this, concern over various issues related to the global environment, such as the recent effects from climate change, is weighing heavier on more and more people. In order to respond to the rising expectation that customers and local society is placing on companies and the rising importance of the responsibility that companies should fulfill, the Company is required, more than ever before, to contribute toward realizing affluence and a sense of well being for society as a whole, from a long-term and sustainable perspective, instead of merely pursuing profit.
At AEON, even while companies’ activities regarding social and environmental contribution in Japan were still not in full swing, we were keenly attentive to the changing times in society, and established the Aeon 1% Club Foundation, which uses profits received from our customers for the development of local communities, in 1989 and the Aeon Environmental Foundation, which conducts environmental activities including tree planting activities in Japan and overseas to protect the global environment, in 1990. Through these initiatives, we have been engaged in social contribution activities together with our customers. Furthermore, AEON cooperates with prefectural and municipal governments, and it currently has signed agreements for comprehensive collaboration with 125 prefectural and municipal governments (44 prefectures and 81 municipalities) for providing wider markets for locally produced products; for promoting disaster prevention, health, welfare, and environmental protection; and for contributing to the economic vibrancy of commercial trade and tourism using AEON’s infrastructure. AEON has additionally signed cooperation agreements on disaster prevention with 700 prefectural and municipal governments across Japan to ensure that AEON fulfils its function as daily-life infrastructure in local communities of each region in the event that a disaster occurs there. While forging a close relationship, centered on the retail sector, with local communities, AEON is posting operating revenue in excess of 8 trillion yen, placing it at No. 1 in the Japanese retail sector, and has 780,000 shareholders. AEON has grown into a group of 315 companies, including 19 publicly listed subsidiaries, in Japan and overseas. The Group operations, encompassing numerous businesses operating through approximately 20,000 stores in fourteen countries, mainly in Asia, include retail businesses, banking business that provides flexible and innovative services only possible with our retail expertise, a developer that specializes in retailing, and various other services. This management philosophy, which takes a long-term perspective and coexists with regions and societies, and this broad and complex business operation contribute to increasing the entire Group’s corporate value. At the same time, a substantial change in the management policy would have a significant impact on the Group while causing concern regarding the effect on local communities. This calls for the situation to be handled with care. The Company therefore believes that the people composing the management of the Group must not only be able to maintain the Group’s financial capital and the relationships built up with numerous stakeholders, but also sufficiently understand the value of the Group in terms of its human capital, its social relationship capital and its nature related capital, which are also important resources for the management that have taken years to build up. Therefore, individuals who control decisions about the Company’s financial and business policies should fully understand the Company’s finances and business operations as well as the sources of the Company’s corporate value, and make it possible to maintain and increase corporate value and, in turn, the common interests of its shareholders.
At the present time, the Financial Instruments and Exchange Act includes certain restrictions on abusive purchases, but it’s possible that these restrictions will not be effective enough for ensuring that shareholders are provided adequate information and time for consideration, etc. As such, the Company believes that the policy described above should continue to be implemented as a necessary and reasonable means to prevent large-scale acquisitions that are in pursuit of short-term gains and those that are capable of damaging corporate value.

1)
The kind of corporation AEON strives to be

AEON, with its unchanging basic principles and as a “corporate group with its ever-lasting innovative spirit,” has repeatedly implemented self-reform, rising to the challenges without fear of risk. At a time when AEON’s business scale and business domains are expanding and the number of countries and regions in which AEON does business is increasing, to conduct management grounded in a long-term perspective based on the AEON Basic Principles and DNA of innovation, AEON has adhered to the following Basic Stance on Corporate Governance, worked to implement its “Customer-First” philosophy, and is pursuing the maximization of corporate value.

Basic Stance on Corporate Governance
1. ⅰ.Value Creation through Customer Orientation and Frontline Focus
  At AEON, we consider realization of a sense of well-being for customers our most important mission. We pursue optimal value creation adapted to changing customer needs by focusing tightly on the frontline of the business, which is our point of contact with customers, and by always thinking with customers as the starting point.
2. ⅱ.Respect for People, Our Most Important Management Resource
  By respecting employees, placing importance on diversity, and actively providing education opportunities in keeping with the conviction that people are the most important management resource, AEON aspires to be a company made up of employees who strive for self-growth, are linked by strong bonds, and find their greatest pleasure in contributing to customers.
3. ⅲ.A Posture of Developing Together with Local Communities
  As a member of local communities and a caring corporate citizen, AEON seeks to develop together with our fellow community members, namely our customers, employees, shareholders, and business partners, and to contribute to the prosperity of local communities, sustainability of the natural environment, and peace.
4. ⅳ.Sustained Growth Based on a Long-Term Perspective and Ceaseless Innovation
  To continue to meet the expectations of customers and local communities, AEON strives for sustained growth accompanied by value creation based on a long-term perspective and management focused on sustained value enhancement for the entire group by undertaking ceaseless innovation to cope with a changing business environment.
5. ⅴ.Pursuit of Transparent, Disciplined Management
  AEON strives for transparent and disciplined management by seeking proactive dialogue with customers and other stakeholders, taking their evaluation seriously, and being selfdisciplined at all times.
2)
Growth Strategy

AEON, while continuing to build a value chain in various parts of Asia, has grown into top-class Asian super regional retailer. Under the Aeon Group Medium-term Management Plan, which is designed to prepare for FY2025, AEON will strive to radically change the business structure of the Group and transform into a corporate group that achieves high profitability by working on the “five transformations” (Acceleration and evolution of the shift to Digital Markets; Creating unique value with the supply chain concept; Evolution of Health & Wellness for a new era; Create AEON living zones; and Further accelerate the shift to Asian markets) as common strategic goals for the entire Group in order to build a business foundation that enables sustainable growth. At the same time, AEON aims to become a group of companies that lead in their respective regions and businesses by organically linking each business with a focus on the retail sector, which includes general merchandise stores and supermarkets.
3)
Sustainable Management

In order to fulfill its social responsibilities as a corporate citizen and sustain an increase in corporate value, Aeon is promoting sustainable management that simultaneously supports the realization of a sustainable society and the growth of the Group. Under the “Aeon Sustainability Principle,” the following are set as priority issues: the environmental issues of “Realization of a decarbonized society,” “Conservation of biodiversity,” and “Better use of resources”; and the social issues of “Creating products and stores that meet society’s expectations,” “Implementing fair business practices based on respect for human rights,”
and “Collaborating with communities.” With these priority issues in mind, Aeon is moving forward with initiatives that include conservation and creation of energy and reduction of waste at stores, the Tree Planting and Bring Your Own Shopping Bag Campaign undertaken together with customers, sustainable procurement across the supply chain, and Tohoku Restoration. Aeon also undertakes environmental and social contribution activities in various fields including education of the next generation and friendship and goodwill projects with a number of countries through the Aeon 1% Club Foundation, and Tree Planting and environmental activity assistance programs through the Aeon Environmental Foundation.
4)
Corporate Governance System

In response to the revision of the Commercial Code in 2003, the Company, aiming to realize a world standard class of open management, became an early adopter among Japanese corporations to transition to a Company with a Nomination Committee and Other Committees. In doing so, the Company established a governance system in which operational supervision and operational execution functions are explicitly divided and allocated to directors and executive officers, respectively. A number of outside directors from a range of fields were invited to join the Board of Directors, which works to further maintain and improve the transparency and fairness of governance and to increase returns to shareholders by ensuring that a majority, four out of seven, of the members of the Board of Directors are outside directors, and by having outside directors serve as the chairpersons of the Nomination Committee, Compensation Committee, and Audit Committee. Also, the Company is working to build a foundation for the continued enhancement of corporate value, which has included, as part of the Group management reforms, becoming a pure holding company in 2008 to move forward with building a new growth model for the Group, rebuilding the business structure, and further strengthening Centralization and Decentralization. In 2016, the Company established the “Basic Policy on Corporate Governance.” Based on the AEON Basic Principles and DNA of innovation, the Company has been implementing a style of management with a long-term outlook that transcends the current times.

Composition of the Board of Directors & the 3 Committees

All four outside directors meet the requirements for independent directors as stipulated by the Tokyo Stock Exchange and the Company has accordingly registered them as independent directors with the exchange.

Corporate governance highlights

We believe that when proposals are made to purchase the Company’s shares, the final decision as to whether or not to accept the proposals rests with the shareholders of the Company. We suppose that there may be also cases, however, where it is difficult for the shareholders to make an accurate and suitable decision about the impact on the shareholder value of the purchase within the time set forth by laws, etc. The Board of Directors will therefore compose the following rules (the “Rules”) regarding the provision of information by a Large-Scale Share Acquirer and the triggering of countermeasures, in order to secure sufficient information and time necessary for the shareholders of the Company to make a decision about the purchase proposal.

2. Details of the Rules

The Rules established by the Board of Directors 1) require a Large-Scale Share Acquirer to provide the Board of Directors with necessary and sufficient information prior to a Large-Scale Share Acquisition and 2) allow a Large-Scale Share Acquirer to commence a Large-Scale Share Acquisition only after the passage of a designated evaluation period required for the Board of Directors to examine said information.

When a Large-Scale Share Acquirer intends to make a Large-Scale Share Acquisition, it shall submit to the Company beforehand a declaration of intent, written in Japanese and indicating that the Acquisition will be in accordance with the Rules^*4. This declaration of intent shall include the name, address, laws with which the incorporation is in compliance, representatives’ names, and Japanese contact address^*5 of the Large-Scale Share Acquirer, and an overview of the Large-Scale Share Acquisition to be proposed (including the number of shares currently held and the number of shares targeted for acquisition by the Large-Scale Share Acquirer).

In order to receive necessary and sufficient information for the shareholders to make their decision and the Board of Directors to form an opinion (the “Required Information”) from the Large-Scale Share Acquirer, the Board of Directors shall, within five business days following the date of receipt of the declaration of intent stipulated in (1) above, deliver to the Large-Scale Share Acquirer an initial list of information to be provided, with a deadline stipulated. The specific content of this Required Information will vary depending on the attribute of the Large-Scale Share Acquirer or the details of the Large-Scale Share Acquisition, but the following items shall be included, in principle:

1) Detailed information about the Large-Scale Share Acquirer (including capital makeup constituted by all the members; financial status; businesses; directors and other officers’ names, summaries of personal histories and other concurrent directorships at other companies; experience in the Company’s and similar business fields; and marketing, management and labor policies implemented when management rights or businesses in other companies were acquired)
2) Background to decide the Large-Scale Share Acquisition
3) Purpose and details of the Large-Scale Share Acquisition (including the amount and type of consideration for acquisition, structure of related transactions and legality of the acquisition method)
4) Basis for calculation of the amount of consideration for acquisition of the Company’s shares (including facts and hypotheses underlying the calculation, the amount of anticipated synergies and basis for that calculation thereof)
5) Detailed explanation of funds to acquire the Company’s shares (including fund procurement method, structure of related transactions, and names of parties directly or indirectly providing funds or expected to do so)
6) Policies or plans that the Large-Scale Share Acquirer expects the Company and Group companies or plans by themselves after the Large-Scale Share Acquisition, such as management policy (including its position with respect to Aeon’s principles), corporate governance, management strategies, business plans, financial plans, capital policies, dividend policy, measures to use assets, and policies on CSR activities (“Post-Acquisition Management Policies, etc.”)
7) Policy toward the Company’s and Group companies’ customers, vendors, employees, local communities and other stakeholders
8) Other information deemed rationally necessary for the Board of Directors and the Independent Committee to examine and evaluate the appropriateness, legality and the like of the Large-Scale Share Acquisition

The Board of Directors shall closely examine the information initially provided, and if it is found insufficient, shall request additional information to be submitted by a specified time limit within the extent reasonable. (However, even when necessary and sufficient information has not been submitted, the time limit for the final reply shall be a maximum of 60 days beginning from the date the declaration of intent is received.) The Board of Directors shall promptly disclose the fact that a Large-Scale Share Acquisition has been proposed. In addition, in cases where the Board of Directors finds necessary for the decision-making of shareholders of the Company, it shall disclose all or part of the submitted Required Information when it is considered appropriate.

In order for the Rules to be carried out transparently and fairly, the Board of Directors shall establish the Independent Committee immediately upon receipt of the declaration of intent stipulated in (1) above.
The Independent Committee shall comprise 1) all of the Company’s outside directors (who shall elect a chairperson of the committee from among their members), and 2) at least one specialist committee member (in principle, one attorney at law and one university professor or other outside person with academic experience) recommended by the outside directors, in principle within ten business days following the day the declaration of intent is received, and appointed by the Board of Directors. The Independent Committee shall, however, commence its activities even prior to the appointment of the specialist committee members.

The primary mission of the Independent Committee prior to the commencement of the Board of Directors’ Evaluation Period stipulated in the following section (3), is to present to the Board of Directors their opinions and reasoning for 1) whether the materials received from the Large-Scale Share Acquirer is sufficient to serve as Required Information, 2) whether there is any additional material to be requested from the Large-Scale Share Acquirer, and if so, items to be requested and a time limit for submission, 3) whether the “Large-Scale Share Acquirer has failed to comply with the Rules” for reasons including the submission of insufficient materials, the contents of countermeasures to be implemented, including the allotment of stock acquisition rights without contribution, and whether the countermeasures are necessary or should be suspended, and 4) other items for which the Board of Directors requested their opinion.

The Board of Directors shall fully evaluate and examine the status of the submission of these materials and other matters on its own as well, while also carefully formulating an opinion of the Board of Directors giving maximum consideration to the opinion of the Independent Committee, and make a decision. In formulating this opinion, the Board of Directors may also seek advice from outside specialists including attorneys at law and certified public accountants. If it is found necessary for the shareholders of the Company to make their decision, moreover, the Board of Directors shall disclose all or part of the interim developments and the details of and reasons for the decisions when it is considered appropriate.

After a Large-Scale Share Acquirer has completed the submission of the Required Information to the Board of Directors as per the preceding section (2), the Large-Scale Share Acquisition may not commence for 90 days following the submission, if any of the following apply to the proposed acquisition, and for 60 days in other cases (the “Board Evaluation Period”).

1) The consideration for the Large-Scale Share Acquisition includes stock or other non-monetary items.
2) The consideration for the Large-Scale Share Acquisition is to be paid in money other than in Japanese yen.
3) The Large-Scale Share Acquirer’s planned management policy for after the acquisition includes major changes in the constitution of Group companies or businesses.

During the Board Evaluation Period, the Board of Directors shall first seek an evaluation of the Large-Scale Share Acquisition from the Independent Committee. Upon receiving the Required Information, the Independent Committee shall present to the Board of Directors their comprehensive evaluation and decision, with opinions and reasoning based on the Required Information and other materials, for 1) whether the Large-Scale Share Acquisition would damage the interests of all shareholders of the Company, 2) whether there is any additional information to be submitted from the Large-Scale Share Acquirer, and if so, items to be requested and a time limit for submission, 3) the contents of countermeasures to be implemented, including the allotment of stock acquisition rights without contribution, and whether the countermeasures are necessary or should be suspended, and 4) other items for which the Board of Directors requested their opinion.

The Board of Directors shall fully evaluate and examine the submitted Required Information on its own as well, while also carefully formulating an opinion of the Board of Directors giving maximum consideration to the opinion of the Independent Committee, and announce its opinion. In formulating this opinion, the Board of Directors shall also seek advice from outside specialists, including attorneys at law and certified public accountants. As necessary, the Board of Directors shall also negotiate with the Large-Scale Share Acquirer to improve the conditions of the Large-Scale Share Acquisition, and present alternative proposals to the shareholders of the Company. While the Board of Directors shall promptly disclose the commencement of the Board Evaluation Period, in cases where it finds necessary for the decision-making of shareholders of the Company, the Board of Directors shall disclose all or part of the interim developments and the details of and reasons for the decisions when it is considered appropriate.

3. Policy for responding to a Large-Scale Share Acquisition

If the Large-Scale Share Acquirer is in compliance with the Rules, there shall, in principle, be no countermeasures implemented with respect to the Large-Scale Share Acquisition. As noted in 2 (3) above, the Board of Directors shall fully evaluate and examine the submitted Required Information, carefully formulate an opinion of the Board of Directors giving maximum consideration to the opinion of the Independent Committee with regard to the evaluation of the purchase proposal and existence or nonexistence, contents, etc. of alternative proposals, and announce its opinion. In such cases, the shareholders of the Company shall consider the purchase proposal as well as the opinion and alternative proposals presented by the Company, and decide whether to accept the Large-Scale Share Acquirer’s purchase proposal.

If the Board of Directors’ opinion is that the Large-Scale Share Acquisition would cause significant damage to the interests of all shareholders of the Company^*6, however, or if the Independent Committee’s opinion is that the Large-Scale Share Acquisition would cause substantial damage to the interests of all shareholders of the Company, the Board of Directors, giving maximum consideration to that opinion and as per its members’ due care and diligence as directors, may adopt measures deemed appropriate to protect the interests of the shareholders of the Company^*7.
In this case, the contents and procedures of the countermeasures shall conform to those prescribed in (2) below.

If the Large-Scale Share Acquirer is not in compliance with the Rules, regardless of the specific purchase method, the Board of Directors may oppose the Large-Scale Share Acquisition by issuing stock acquisition rights or taking other countermeasures permitted under the Companies Act and other laws, as well as the Company’s Articles of Incorporation, for the purpose of protecting the interests of the Company and its all shareholders. The specific steps taken shall be those deemed most appropriate by the Board of Directors at the time. The specific countermeasure expected at the moment would, in principle, be an issue of stock acquisition rights without contribution allotted to shareholders as per Attachment 3 only if it is deemed appropriate, but possible countermeasures are not limited to this. If such stock acquisition rights were actually to be issued, exercise conditions, including making exercise conditional on not being a party belonging to a group of shareholders (tokutei-kabunushi group) with more than a designated percentage of voting rights, and an exercise period may be set to make the issue an effective countermeasure. Furthermore, in order to make flexible issuance of stock acquisition rights possible, the Company shall continue shelf registration of stock acquisition rights.

Next, if there is deemed to be significant concern of possible harm to the common interests of shareholders, and stock acquisition rights with differentiated exercise conditions that restrict the Large-Scale Share Acquirer’s exercising of rights are issued, the stock acquisition rights shall have clauses allowing for their acquisition by the Company. When stock acquisition rights that do not have clauses allowing for their acquisition by the Company attached are exercised, the shareholders of those stock acquisition rights shall follow procedures including the payment of the exercise amount, and this would be a great inconvenience for the more than 780,000 shareholders as of February 28, 2021. In order to avoid this inconvenient procedure, therefore, the Company shall have, by the resolution at a meeting of the Board of Directors, the right to acquire the stock acquisition rights of shareholders except the Large-Scale Share Acquirer, and deliver new shares to those shareholders in exchange therefor.

Because the details and adoption or rejection of such measures are considered an item to be determined by the Board of Directors in accordance with its members’ due care and diligence as directors, this decision shall, in principle, be made and implemented by the Board of Directors. If the Board of Directors determines that a decision by the shareholders should be made in view of the content, effect, etc. of the measure, however, the Board of Directors may exceptionally bring up the adoption of such measures as an agenda item for approval at a General Meeting of Shareholders of the Company. This would still be considered an item that is fundamentally a responsibility of the Board of Directors, so the Board of Directors would provide a full explanation at the General Meeting of Shareholders.

If the Board of Directors subsequently determines that the triggering of the countermeasure would not be appropriate in the event that the Large-Scale Share Acquirer withdraws or changes the Large-Scale Share Acquisition after the Board of Directors has passed a resolution for the allotment of stock acquisition rights without contribution, or in the similar event, the Board of Directors may cancel the allotment of stock acquisition rights without contribution. In principle, however, the allotment without contribution of these stock acquisition rights shall not be cancelled on or after the fourth business day (assuming the current fourth day settlement of the exchange, should this be changed, the date will change accordingly; the same shall apply hereinafter) prior to the “Record Date” (see definition in section 5 (2) below) for the allotment without contribution. If the Board of Directors determines that events requiring the cancellation of the countermeasure have emerged on or after the fourth business day prior to the “Record Date,” the Company shall, in principle, have the right to acquire the stock acquisition rights held by all shareholders, including the Large-Scale Share Acquirer, in exchange for shares of the Company, which would effectively have the same effect as a cancellation^*8. The Board of Directors may also cancel or review other countermeasures in a similar manner as appropriate.

4. Measures to secure transparency and fairness

The following measures are being taken to secure transparency and fairness in the Rules.

This Policy satisfies the three principles set out in the Guidelines Regarding Takeover Defense for the Purposes of Protection and Enhancement of Corporate Value and Shareholders’ Common Interests jointly released by the Ministry of Economy, Trade and Industry and the Ministry of Justice on May 27, 2005. (The three principles, as set out in the Guidelines, are 1) the principle of protecting and enhancing corporate value and shareholders’ common interests, 2) the principle of prior disclosure and shareholders’ will, and 3) the principle of ensuring the necessity and reasonableness.)
This Policy also takes into consideration the report “Takeover Defense Measures in Light of Recent Environmental Changes” released by the Corporate Value Study Group established in the Ministry of Economy, Trade and Industry on June 30, 2008 and other discussions and the like concerning takeover defense measures.
Furthermore, this Policy is in accordance with the purposes of principles, etc. concerning takeover defense measures established by the Tokyo Stock Exchange.

Approval by the shareholders at this Ordinary General Meeting of Shareholders shall be required for the revised Rules to become effective. After this approval, moreover, subsequent changes that would have a substantive impact on the shareholders of the Company, not including pro-forma changes necessitated by revisions of laws and regulations, etc., shall also be proposed as an agenda item for approval of the shareholders at a General Meeting of Shareholders. Even in the event that no changes are made, the period for which the Rules will remain in effect shall be restricted to three years. In other words, the Rules are structured so that their revision or abolition as well as continuation will fully reflect the intent of shareholders.

As noted in the preceding sections 1 and 2 (3), the purpose of the introduction of the Rules is to secure and enhance the Company’s corporate value and the common interests of shareholders in the event of a purchase proposal for the Company’s shares, by securing sufficient information and time required for the shareholders to make a decision on whether to accept the proposal and by securing conditions, including information and a period of time sufficient for the Board of Directors to present alternative proposals. The Rules shall not be used for the self-protection of management or any other purpose.

The Company has introduced a “company with a nomination committee and other committees” governance system, and it strives constantly to secure management transparency and fairness. In addition, the Company shall establish an Independent Committee to avoid arbitrary decisions by the Board of Directors as to whether the materials submitted by a Large-Scale Share Acquirer is sufficient, and whether to trigger countermeasures against a Large-Scale Share Acquisition, etc., and to secure objectivity and rationality in the Board of Directors’ decision-making and responses. The Independent Committee shall be independent of the management that executes the Company’s operations, and shall comprise all the Company’s outside directors and at least one specialist committee member (in principle, one attorney at law and one university professor or other outside person with academic experience) appointed each time by the Board of Directors based on recommendations from the outside directors. When formulating its opinion, the Independent Committee may also seek the opinions of other suitable outside specialists at the Company’s expense.

The Board of Directors shall also seek the advice of additional outside specialists, including attorneys at law and certified public accountants, when formulating its opinion.
The Company shall strive to disclose information quickly, except for information that would be misleading for the shareholders in their efforts to reach a decision. In addition, when the opinion of the Board of Directors is announced, the Board of Directors shall endeavor to provide as specific an explanation as possible, including the reasoning behind its decision.
These measures are designed to ensure that the Rules are carried out transparently, so that decisions by the Board of Directors will contribute to corporate value of the Company and the common interests of the shareholders thereof.

The stock acquisition rights to be issued as a countermeasure when the Rules have not been followed are, in principle, seen as having differentiated exercise conditions so as to restrict only the Large-Scale Share Acquirer’s ability to exercise rights. Even in the event that any other countermeasure is adopted, a countermeasure that will not cause unforeseen harm to shareholders and investors other than the Large-Scale Share Acquirer shall be selected.
These stock acquisition rights shall also contain clauses allowing for their acquisition by the Company, so as to cause as little inconvenience as possible to shareholders other than the Large-Scale Share Acquirer.

No special restrictions have been established regarding the cancellation of this Policy, and this Policy does not, therefore, constitute a “dead-hand” takeover defense measure (a defense measure that does not allow the triggering from being halted, even if a majority of the members of the Board of Directors have been replaced). Since the term of office of all the directors is one year, moreover, this Policy also does not constitute a “slow-hand” measure (a takeover defense measure that requires time for the triggering to be halted because the members of the Board of Directors cannot be replaced at the same time).

5. Impact etc. on shareholders and investors

The Rules are intended to disclose the information required for the shareholders of the Company to decide whether to accept a Large-Scale Share Acquisition, and the opinions of the Board of Directors currently responsible for managing the Company, to the shareholders of the Company, as well as to secure opportunities for the shareholders of the Company to receive presentation of alternative proposals. We believe this will make it possible for the shareholders of the Company to make an appropriate decision as to whether or not to accept a Large-Scale Share Acquisition, based on appropriate information, thereby preserving the interests of all shareholders of the Company.
As noted in section 3 above, the Company’s policy for responding to a Large-Scale Share Acquisition will differ depending on whether the Large-Scale Share Acquirer complies with the Rules. We therefore ask that the shareholders of the Company and investors pay careful attention to the actions and positions taken by the Large-Scale Share Acquirer.

The Board of Directors may implement countermeasures permitted under the Companies Act and other laws, as well as the Company’s Articles of Incorporation, for the purpose of protecting the Company and the interests of all shareholders of the Company, in the event that a Large-Scale Share Acquirer fails to comply with the Rules. The structure of such countermeasures is not expected to cause any particular harm to the shareholders of the Company (with the exception of the Large-Scale Share Acquirer that failed to comply with the Rules) economically or in terms of legal rights. In the event that the Board of Directors decides to implement a specific countermeasure, it will disclose that fact in a timely and appropriate manner according to applicable laws and regulations and securities exchange regulations.

With regard to the issuing of stock acquisition rights, one of the countermeasures envisioned, stock acquisition rights would, in principle, contain a clause attached to the stock acquisition rights that allow for their acquisition by the Company. In order to be able to proceed without the inconvenient procedure of paying the exercise amount necessary for exercising stock acquisition rights that do not contain clauses allowing for their acquisition by the Company, this clause shall make it possible for the Board of Directors, by its resolution, to acquire the stock acquisition rights of the shareholders, and to deliver new shares to the shareholders as consideration. The details of this procedure shall be announced separately, based on the relevant laws and regulations, when stock acquisition rights are actually issued. In such cases, in order to acquire the stock acquisition rights, it will be necessary for holders of book-entry stocks to have their common shares recorded in an account with a securities company, etc. on the date separately determined and announced by the Board of Directors on which the shareholders eligible to receive stock acquisition rights are to be fixed (the “Record Date”). This action will be taken to ensure that the holders of book-entry stocks will be included as the shareholders of record in the Company’s final shareholder registry. It will also be necessary to complete emergency measures for unregistered shares in special accounts.

6. Commencement of application of the Rules and the effective period thereof

In order to review the response policy regularly, this Policy shall be effective for a period of three years (until the conclusion of the Ordinary General Meeting of Shareholders for the final business year ending within three years of March 1, 2021).

Going forward, based on trends in relevant laws and regulations, including the Companies Act, and judicial rulings in the years ahead, the development of listing regulations stipulated by the Tokyo Stock Exchange and other developments, if any pro forma change to this response policy above is necessitated following revisions of laws and regulations or the like, this Policy shall be reviewed by the Board of Directors as necessary, with a prompt announcement of the details thereof. In the event the Board of Directors deems abolishing this Policy reasonable, the Company shall abolish this Policy by resolution of the Board of Directors, and the abolishing of this Policy and the reasons for doing so shall be disclosed. Changes in this Policy that have a substantive effect on the shareholders of the Company shall, however, be proposed as an agenda item for approval of the shareholders at a General Meeting of Shareholders. The Company’s directors serve terms of one year and are elected or reelected each year at the Ordinary General Meeting of Shareholders.
The existing takeover defense measures shall be abolished as of an affirmative vote on this proposal to approve this Policy at this Ordinary General Meeting of Shareholders. However, if a Large-Scale Share Acquirer has appeared and procedures including the submission of a declaration of intent or the provision of information under the existing takeover defense measures have begun as of that time, then following the approval of this Policy, the procedures shall be continued as per this Policy.

*1.A group of shareholders (tokutei-kabunushi group) is:
1. A holder, including a holder deemed as a holder pursuant to Article 27-23(3) of the Financial Instruments and Exchange Act (the same shall apply hereinafter), and a joint holder (a joint holder prescribed in Article 27-23(5) of the same Act, including a party deemed as a joint holder pursuant to paragraph 6 of the same Article; the same shall apply hereinafter) of the Company’s shares, etc. (share certificates, etc. prescribed in Article 27-23(1) of the same Act), or
2. A party that performs purchase, etc. (as prescribed in Article 27-2(1) of the same Act, including those made on a financial instruments exchange market) of the Company’s shares, etc. (share certificates, etc. as prescribed in Article 27-2(1) of the same Act), and a party in special relationship with the party conducting such purchase, etc. (a party in special relationship as prescribed in Article 27-2(7) of the same Act.)
*2.The percentage of voting rights is:
1. In cases where the group of shareholders (tokutei-kabunushi group) is as described in Note 1.^*1, the holding ratio of shares, etc. (holding ratio of share certificates, etc. prescribed in Article 27-23(4) of the Financial Instruments and Exchange Act; in this case the number of shares, etc. held by the joint shareholder (number of share certificates, etc. prescribed in the same paragraph), shall be added) of the shareholder, or
2. In cases where the group of shareholders (tokutei-kabunushi group) is as described in Note 2.^*1, the total of holding ratio of shares, etc. (holding ratio of share certificates, etc. prescribed in Article 27-2(8) of the same Act) of the Large-Scale Share Acquirer and the party in special relationship. In calculating each holding ratio of shares, etc., the total number of voting rights (as prescribed in Article 27-2(8) of the same Act) and the total number of shares issued (as prescribed in Article 27-23(4) of the same Act) may be found in the most recent issue of the Annual Securities Report, Semiannual Securities Report, Quarterly Securities Report, or the Share Buyback Report.
*3.Share certificates, etc., prescribed in Article 27-23(1) of the Financial Instruments and Exchange Act. The same shall apply hereinafter.
*4.The Company lists its shares on financial instruments exchange markets in Japan and, therefore, has an obligation for timely disclosure to Japanese shareholders and investors. The official versions of lists delivered by the Company, documents containing the Required Information prepared by the Large-Scale Share Acquirer, and the Company’s opinions regarding that information and requests for submitting additional materials should consequently be the written Japanese versions. Written documents include documents transmitted by e-mail or facsimile as well as those printed on paper. The written documents must use A4 or A3 size paper and be printed in characters of at least 10 points (as per JIS Z 8305) in size. The written documents must be prepared in Japanese by the party preparing them in its name, and the Company shall bear no responsibility for translating any written documents into any foreign language. Any characters and symbols not printed on paper for logical reasons, including being cut off on the facsimile paper or failing to appear due to the use of characters or symbols not registered in our system when received by the Company shall be deemed not to have been written. The same shall apply hereinafter.
*5.The contact address in Japan shown on this document shall be that of the sender of written documents that are sent pursuant to the relevant Rules of the Company.
*6.Such determination is expected to be made if there is an objective and rational basis for determining that the Large-Scale Share Acquirer would be inappropriate as the Company’ s controlling shareholder from the standpoint of public order and morals, specifically in cases where 1) a Large-Scale Share Acquirer purchases the Company’ s shares simply to force parties affiliated with the Company to buy them back at a higher price, for example, although those concerned do not intend to actually participate in the Company’ s management, 2) the Large-Scale Share Acquirer purchases the Company’ s shares for purposes of so-called “scorched-earth” management, by temporarily taking control of the Company in order to gain intellectual assets essential to the Company’ s management, experience, confidential corporate information, vendors, or customers, 3) the Large-Scale Share Acquirer purchases the Company’ s shares with the intention of using the Company’ s assets as collateral for or source of repayment of its own liabilities after taking control of management, 4) the Large-Scale Share Acquirer purchases the Company’ s shares to gain temporary control of management and sell high-value assets or the like such as real estate and securities not immediately related to the Company’ s business, in order to use the profit from the sale to pay a high dividend temporarily, or to use a temporary high dividend as a device to sharply raise the share price and sell its shares at a profit, 5) the purchase method proposed by the Large-Scale Share Acquirer is a two-tiered structure with second-tier purchase conditions that are less favorable than the first-tier conditions, or it is determined that there is a concern that the opportunity and freedom of shareholders to make decisions is restricted, or that they may virtually be forced to sell the Company’ s shares to their disadvantage, 6) the handling scheme and stock acquisition methods regarding the purchase of the Company’ s shares proposed by the Large-Scale Share Acquirer are extremely unreasonable from the standpoint of the common interests of shareholders, such as the price being very disadvantageous to shareholders or option rights carrying high risk, or 7) it is determined that any person of the management or major shareholders of the Large-Scale Share Acquirer has a relationship with antisocial elements, including organized crime groups or their members, as defined in Article 2 of the Act on Prevention of Unjust Acts by Organized Crime Group Members.
*7.Regardless of whether this Policy is adopted, in cases where a Large-Scale Share Acquisition as described in the preceding Note ^*6 would cause significant damage to the interests of all shareholders, the Board of Directors, in accordance with its members’ due care and diligence as directors, may implement emergency measures similar to measures taken to avoid clear and present danger to protect the interests of all shareholders of the Company. In order to guarantee objectivity and rationality in such a decision, the Large-Scale Share Acquirer and the specific details of the Large-Scale Share Acquisition (purpose, method, scope, type and amount of consideration for acquisition, etc.), and impact of the Large-Scale Share Acquisition on the interests of all shareholders of the Company shall be examined based on the Required Information, including the Post-Acquisition Management Policies, etc., submitted by the Large-Scale Share Acquirer. This shall be done with the advice of outside specialists or the like, including attorneys at law and certified public accountants, and with consideration given to the opinion of the Independent Committee.
*8.On the fourth business day prior to the Record Date for allotment of stock acquisition rights, financial instruments markets assume that the rights will be removed (shares subsequently traded will not have stock acquisition rights attached), and the theoretical share price in anticipation of the conversion of stock acquisition rights to shares is therefore expected to fall to, for example, approximately 50%-60% of the immediately preceding price. Nevertheless, if the Company subsequently cancels the triggering of the takeover defense measures in its entirety by acquiring the stock acquisition rights without contribution, the number of shares will return to that of the ex-rights date, and the temporarily depressed stock price will theoretically return to the immediately preceding price. Since this could possibly disrupt the market, the shares shall, in principle, be allotted for the stock acquisition rights after the ex-rights date.

Procedures and Decision-Making Flow of This Policy

Management Policies

Financial Information

Stock & Corporate Bonds

IR Library

Other

Takeover Countermeasures

1. Basic policy regarding control of the Company

(1) Basic policy and actions for its realizationOPENCLOSE

(2) Policy for responding to Large-Scale Share Acquisitions and rules to be observed with respect to Large-Scale Share AcquisitionsOPENCLOSE

2. Details of the Rules

(1) Submission of a declaration of intentOPENCLOSE

(2) Request to provide informationOPENCLOSE

(3) Period of examination by the Board of DirectorsOPENCLOSE

3. Policy for responding to a Large-Scale Share Acquisition

(1) If the Large-Scale Share Acquirer complies with the RulesOPENCLOSE

(2) If the Large-Scale Share Acquirer does not comply with the RulesOPENCLOSE

(3) Cancellation or the like after resolution of allocation of stock acquisition rights without contributionOPENCLOSE

4. Measures to secure transparency and fairness

(1) Satisfying the requirements of guidelines released by the Corporate Value Study Group, etc. in relation to takeover defense measuresOPENCLOSE

(2) Respect for shareholders’ willOPENCLOSE

(3) Introduction to secure and enhance the Company’s corporate value and the common interests of shareholdersOPENCLOSE

(4) Emphasis on the judgment of highly independent outside persons and information disclosureOPENCLOSE

(5) Not causing unforeseen harm to shareholders and investors other than the Large-Scale Share AcquirerOPENCLOSE

(6) Not a “dead-hand” or “slow-hand” takeover defense measureOPENCLOSE

5. Impact etc. on shareholders and investors

(1) Impact etc. of the Rules on shareholders and investorsOPENCLOSE

(2) Impact etc. on shareholders and investors when countermeasures are triggeredOPENCLOSE

6. Commencement of application of the Rules and the effective period thereof

Procedures and Decision-Making Flow of This Policy

Contents