Notice Regarding Repurchase through Tender Offer

July 28,2023

KDDI Corporation

At the board of directors' meeting held today, as stated below, as a specific method of repurchasing treasury shares pursuant to the provisions of Article 156 of the Companies Act (Act No. 86, 2005, including subsequent revisions, the "Companies Act") as applied mutatis mutandis pursuant to the provisions of Article 165, Paragraph 3 of the Companies Act and the Company's articles of incorporation, the Company resolved to conduct a tender offer of treasury shares (the "Tender Offer").

1. Objective of the Tender Offer

In order to realize a desirable future society while responding to changes in our business environment, the Company has created "KDDI VISION 2030: The creation of a society in which anyone can make their dreams a reality, by enhancing the power to connect," and aims to become by 2030 "a platformer supporting society," namely, a presence that can provide added value to all industries and life situations.
In the Mid-Term Management Strategy for the fiscal year ending in March 2023 to March 2025, with a view to 2030, the Company will be promoting "business transformation centered on 5G," and aims to strengthen both sustainable profit growth and shareholder return. From this perspective, in addition to turnaround in communications ARPU revenue and profit growth centered on focus areas, the Company will make capital expenditures and strategic business investments in 5G and its focus areas, continue stable dividends in the form of shareholder returns under its financial policy of a dividend payout ratio of over 40%, and conduct share repurchases in a flexible manner in consideration of its investment for growth status.
Furthermore, the Company's basic policy is to pay dividends from surplus twice a year, an interim dividend, as well as a year-end dividend. For the fiscal year ended March 2023, the Company paid an interim dividend of 65 yen per share and a year-end dividend of 70 yen per share, resulting in an annual dividend of 135 yen per share (consolidated dividend payout ratio: 43.5%).
Additionally, pursuant to Article 165, Paragraph 2 of the Companies Act, the Company provides in its articles of incorporation that it may repurchase its treasury shares by a resolution of the board of directors, and has repurchased its ordinary shares as follows up to now, in order to enhance profit returns to its shareholders:

• (Note)

  The Company conducted (i) a share split at a ratio of 100 shares per ordinary share of the Company effective as of October 1, 2012, (ii) a share split at a ratio of 2 shares per ordinary share of the Company effective as of April 1, 2013, and (iii) a share split at a ratio of 3 shares per ordinary share of the Company effective as of April 1, 2015. Figures in parentheses in the above table reflect the effects of the above share splits.

The Company has continued to repurchase treasury shares. However, as a result of the Company aiming for further strengthening shareholder returns and conducting deliberations from early April to early May of 2023, on the increase of its acquisition cost for repurchasing shares, the board of directors resolved during its meeting held on May 11, 2023 to repurchase treasury shares from June 1, 2023 to May 31, 2024, with the upper limit of total shares being 92,000,000 shares and the upper limit of the total acquisition cost being 300 billion yen (the "Share Repurchase Based on BOD Resolution of May 11, 2023").
On the other hand, on April 10, 2023, Toyota Motor Corporation ("Toyota Motor"), the Company's third shareholder (the number of shares held as of the end of March 2023 (when the Company could ascertain its shareholding status immediately before April 10, 2023) was 316,794,400 shares (holding ratio (Note 1): 14.69%)) informed the Company of its intention to sell a portion of the Company's ordinary shares that it currently holds (the "Shares Offered for Sale").

• (Note 1)

  "Holding ratio" refers to the percentage of the number of shares (2,157,121,379 shares) obtained by subtracting the number of treasury shares that the Company holds as of the end of March 2023 (145,590,929 shares) (including 1,319,384 shares held in the name of other persons made as trust assets of the executive compensation BIP Trust account) by the total number of shares issued by the Company as of the same day (2,302,712,308 shares), described in the Securities Report for the 39th Fiscal Year that the Company submitted on June 22, 2023 (rounded to the second decimal place).

Toyota Motors entered the communications business in the 1980s, during the trend towards liberalization of the communications sector, and became the Company's major shareholder after the launch of the Company in October 2000. From 2002 onward, the Company and Toyota Motors collaborated on Toyota Motors' connected service (Note 2), among others. While the "tsunagaru-ka (connectivity)" of automobiles to the internet progressed, the Company and Toyota Motors accelerated measures to provide safety and comfort through the integration of automobiles and communications.
An example of this is the joint development of a global communications platform that does not depend on conventional roaming services, etc., in order to secure high quality and stable global communications between in-vehicle communication systems and the cloud, which has been promoted since 2016. After the announcement of the strengthening of the business and capital alliance in October 2020, the Company disposed of 18,301,600 treasury shares to Toyota Motors (the number of shares held as of the end of September 2020 (when the Company could ascertain its shareholding status immediately before January 2021) was 298,492,800 shares (holding ratio (Note 3): 12.98%)).

• (Note 2)

  "Connected service" is the collective name of safe, secure, comfortable and convenient services provided through communication of automobiles.

• (Note 3)

  "Holding ratio" refers to the percentage of the number of shares (2,300,062,466 shares) obtained by subtracting the number of treasury shares that the Company holds as of the end of September 2020 (4,117,084 shares) described in the Financial Results for the Second Quarter of the Fiscal Year Ending March 2021 [IFRS] (Consolidated) submitted on October 30, 2020 (including 4,117,083 treasury shares held by trust assets of the executive compensation BIP Trust account and the stock-granting ESOP Trust account) by the total number of shares issued by the Company as of the same day (2,304,179,550 shares), described in the Report for Second Quarter of the 37th Fiscal Year that the Company submitted on November 5, 2020 (rounded to the second decimal place).

According to Toyota Motors, Toyota Motors is currently engaged in becoming a mobility company, in order to win against strong competition and to realize mid- to long-term growth. It is focused on the effective use of assets and the reduction of cross-shareholding, as a large number of investments with themes of "electrification," "intelligence," and "diversification" will be necessary.
Under such circumstances, Toyota Motors deliberated on optimal capital relationship with the Company, and offered the sale of a portion of the Company shares.
In response, separate from the deliberations on the expansion of acquisition costs for the treasury shares above, the Company deliberated on the response measures for the offer of a sale of a portion of the Company shares from Toyota Motors over the course of May 17, 2023.
Specifically, the Company decided that it would be appropriate to repurchase shares from Toyota Motors in light of the effects on the market price of the Company's shares when Shares Offered for Sale are released into the market considering the fact that since Toyota Motors holds 316,794,400 ordinary shares of the Company (as of the end of March 2023), if it intends to sell those ordinary shares of the Company, the number to be sold is expected to be reasonably large even if the sale is only for a part of those shares held. While previous share repurchases were made mainly through market purchases, considering the fact that on May 11, 2023, the board of directors decided to increase the amount of share repurchases, and to repurchase a total of 92,000,000 shares with the ceiling of the total amount of share repurchases of 300 billion yen during the period from June 1, 2023 to May 31, 2024, the Company decided that it would be desirable to also purchase treasury shares partly from the market even in the case of repurchasing shares from Toyota Motors. Accordingly, the Company specifically deliberated over the purchase of treasury shares from Toyota Motors, while purchasing treasury shares from the market, as a part of the Share Repurchase Based on BOD Resolution of May 11, 2023.
As a result of deliberations, and in light of the number of shares held by Toyota Motors and the fact that share repurchases in the market for at least approximately 50 billion yen were made every time a resolution for the repurchase of treasury shares was passed from the fiscal year ended March 2016 onward, the Company concluded that it would be appropriate to repurchase shares of around 250 billion yen from Toyota Motors, while purchasing treasury shares of around 50 billion yen from the market, from the 300 billion yen total set for the Share Repurchase Based on the BOD Resolution of May 11, 2023.
Furthermore, the Company concluded that a tender offer would be appropriate as the specific method when repurchasing shares from Toyota Motors in light of the following factors: (i) equality among the shareholders; (ii) transparency of the transaction; (iii) since it would be possible to purchase ordinary shares of the Company at a price discounted to a certain extent from the market price, if a purchase is indeed made at that discounted price, a tender by shareholders other than those of Toyota Motors is expected to be limited from the perspective of economic rationality as a result of a divergence from the price at which the shares are sold on the market, ensuring that the Company would repurchase all of Toyota Motors' Shares Offered for Sale, and therefore, control over outflow of Company assets outside the Company; and (iv) securing the opportunity to tender shares in light of the trend in market price after providing shareholders other than Toyota Motors with a certain deliberation period.
The Company plans to allocate all funds for the Tender Offer from its own capital. According to the Financial Statements Summary for the Year ended March 31, 2023 [IFRS] (consolidated) that the Company submitted on May 11, 2023 (the "Financial Statements Summary for the Year ended March 31, 2023"), the Company's consolidated on-hand liquidity (cash and cash equivalents) as of the end of March 2023 was approximately 480.3 billion yen (liquidity on hand ratio: 1.0 month) (Note 4). Even taking into consideration that it would require approximately 250 billion yen in order to conduct the Tender Offer, the Company's consolidated on-hand liquidity is still expected to be around 230.3 billion yen (on-hand liquidity ratio: 0.5 month). In light of the fact that the funds required for the Tender Offer will be necessary on and after the date of commencement of settlement for the Tender Offer (scheduled for September 20, 2023), in addition to the Company's consolidated on-hand liquidity as of the last day of March 2023, since cashflow generated from the Company's business is expected to increase (consolidated cashflow from business activities for the fiscal year ended March 2023 was 1,078.9 billion yen), the Company concluded on May 17, 2023 that it will be able to secure sufficient funds for its business operations, and that even if it repurchases treasury shares of considerable value, there will be little effect on the Company's financial situation and distribution policy.

• (Note 4)

  This was obtained by dividing cash and cash equivalents as of the end of March 2023 stated in the Financial Statements Summary for the Year ended March 31, 2023 by monthly operating revenue (namely, the figure obtained by dividing operating revenue for the fiscal year ended March 2023 by 12).

In light of the above deliberations, on May 18, 2023, the Company informed Toyota Motors that with respect to the Shares Offered for Sale, it wishes to repurchase the Company's ordinary shares worth approximately 250 billion yen as treasury shares, and proposed that it repurchase such shares by way of tender offer. On May 31, 2023, Toyota Motors indicated its intention to deliberate on the Company's proposal in a forward looking manner.
In deciding the purchase price of the Tender Offer (the "Tender Offer Price"), the Company took into consideration the fact that the Company's ordinary shares are listed on financial instruments exchanges and this is often conducted by market purchases through financial instruments exchanges because listed companies are able to purchase treasury shares in a flexible manner in line with share price levels formed based on market supply and demand. Therefore, the Company assessed the clarity and objectivity of the base price of the purchase and decided that the base price should be the market price of the Company's ordinary shares. Furthermore, in order to respect the interests of shareholders who choose not to tender in the Tender Offer and continue to hold the Company's ordinary shares, the Company decided that it would be desirable to make the purchases at a price that is discounted to a certain extent from the market price of the Company's ordinary shares in order to prevent assets from flowing outside the Company to the extent possible.
The Company analyzed 40 tender offer cases for treasury shares which were resolved on or after January 1, 2021 and for which the tender offer period ended before the end of May 2023 in order to enable the Company to grasp the range of the discount rate for a certain number of recent similar projects. Out of the 40 confirmed tender offer cases, 33 cases were conducted using the discount rate (the "Cases"),. Among the Cases, the discount rate of approximately 10% (9% to 10%) had the most cases with a total of 21 and the Company decided that even taking into consideration volatility in the share price of the Company's ordinary shares, it would still be appropriate to set the discount rate at 10%. Furthermore, with respect to the price of the Company's ordinary shares which is the basis of the discount, the Company considered that a certain point in time as the base price, adopting a levelled value of the average share price over a certain period of time, would enable the elimination of special factors such as temporary share price fluctuations, and secure objectivity and reasonableness as the basis of calculation. On the other hand, the Company considered that the Company's latest performance would be more fully reflected in the share price if a more recent share price is used. Accordingly, the Company determined on July 20, 2023 that, instead of the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 3 months and 6 months prior to the business day immediately preceding the date of the board of directors' resolution, it would be more appropriate to use, as the basis for the calculation, a shorter period of time; namely, the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month prior to the business day immediately preceding the date of the board of directors' resolution.
Subsequently, on July 21, 2023, in light of the trend in the share price of the Company's ordinary shares, the Company proposed to Toyota Motors to make the Tender Offer Price the price calculated by applying the 10% discount rate to the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month before July 27, 2023, the business day immediately preceding July 28, 2023, the date of the board of directors' meeting to determine whether to conduct the Tender Offer. On July 27, 2023, Toyota Motors (as of the date of submission of this notice, holding 316,794,400 shares (Holding Ratio (Note 5): 14.68 %) responded by stating that it would tender for the Tender Offer, for the number of shares obtained by dividing 250 billion yen by the Tender Offer Price and rounding off any fractions falling short of 100 shares (the "Intended Tendering Shares"), if the Company conducts the Tender Offer under such terms.

• (Note 5)

  "Holding Ratio" refers to the percentage of shares (2,157,313,544 shares) obtained by subtracting the number of treasury shares that the Company holds as of the end of June 2023(145,398,764 shares) (including 1,127,219 treasury shares held by the executive compensation BIP Trust account) by the total number of shares issued by the Company as of the same day (2,302,712,308 shares), as recorded in the Financial Results for the First Quarter of the Fiscal Year Ending March 2024 [IFRS] (Consolidated) (the "Financial Results for the First Quarter of the Fiscal Year Ending March 2024") that the Company submitted on July 28, 2023 (rounded to the second decimal place).

Considering the above, at the board of directors' meeting held on July 28, 2023, the Company resolved: to repurchase treasury shares pursuant to the provisions of Article 156, Paragraph 1 of the Companies Act as applied mutatis mutandis pursuant to the provisions of Article 165, Paragraph 3 of the Companies Act and the Company's articles of incorporation; to conduct the Tender Offer as the specific method thereof; and to set the Tender Offer Price at 3,900 yen, which will be calculated by applying a 10% discount rate to 4,333 yen (rounded to the nearest yen; hereinafter the same for calculating the simple average value of the closing price), which is the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month by July 27, 2023, the business day immediately preceding July 28, 2023, the date of the board of directors' meeting at which a resolution was made to conduct the Tender Offer (rounded to the nearest yen; hereinafter the same for calculating the Tender Offer Price). It was decided that the number of share certificates planned for purchase in the Tender Offer would be 64,102,500 shares, which is the number of shares obtained by the total acquisition cost of 250 billion yen divided by the Tender Offer Price of 3,900 yen (any fractions falling short of 100 shares shall be rounded off), as well as to conduct a market purchases on the Tokyo Stock Exchange Prime Market within the total acquisition cost obtained by subtracting the total acquisition cost of the Company's ordinary shares repurchased by the Tender Offer from the total acquisition cost (300 billion yen) for the Share Repurchase Based on the BOD Resolution of May 11, 2023, during the period from the business day following the day of commencement of settlement for the Tender Offer, namely, September 21 2023, to May 31, 2024.
The Company's board of directors is composed of twelve directors. Mr. Keiji Yamamoto, the Company's director, concurrently holds the position of Toyota Motors' Senior Fellow; and in order to eliminate arbitrariness in the Company's decision making processes with respect to deliberating over and making decisions on the Tender Offer, he did not participate in any deliberations or resolutions concerning the Tender Offer proposal during the board of directors' meeting held on July 28, 2023 or in any discussions and negotiations with Toyota Motors in the capacity of the Company.
The Tender Offer Price of 3,900 yen is as follows: (i) 4,314 yen, the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market on July 27, 2023, the business day immediately preceding July 28, 2023, the date of the board of directors' meeting at which a resolution was made to conduct the Tender Offer, minus 9.60% discount (rounded to the second decimal place; hereinafter the same with respect to the calculation of the discount); (ii) 4,333 yen, the simple average value of the closing price of the Company's ordinary shares for the past 1 month before July 27, 2023 (rounded to the nearest yen; hereinafter the same with respect to the calculation of the simple average value of the closing price) minus 9.99% discount; (iii) 4,379 yen, the simple average value of the closing price of the Company's ordinary shares for the past 3 months before July 27, 2023 minus 10.94% discount; and (iv) 4,214 yen, the simple average value of the closing price of the Company's ordinary shares for the past 6 months before July 27, 2023 minus 7.45% discount.
In addition, the Company plans to conduct a market purchase on the Tokyo Stock Exchange Prime Market, within the total acquisition cost obtained by subtracting the total acquisition cost of the Company's ordinary shares repurchased by the Tender Offer from the total acquisition cost (300 billion yen) for the share repurchase based on the BOD resolution of May 11, 2023, during the period from the business day following the commencement date of settlement for the Tender Offer, namely, September 21 2023, to May 31, 2024. From the viewpoint of economic reasonableness due to the divergence from the price traded on the market, it was considered that the tender by shareholders other than Toyota Motors towards the Tender Offer conducted at the price discounted from the market price will be restrictive. Therefore, after the mutual consultation with Toyota Motors, the number of share certificates planned for purchase in the Tender Offer is made the same as the number of shares of the Intended Tendering Shares. The Intended Tendering Shares is 64,102,500 shares, which will be obtained by dividing 250 billion yen by 3,900 yen and rounding down to the nearest 100 shares.
If the total number of share certificates tendered in the Tender Offer exceeds the number of share certificates planned for purchase, the purchase will be made using a pro rata method, and the Company will repurchase part of the Intended Tendering Shares. On July 27, 2023, the Company received an answer from Toyota Motors to the effect that if as a result of the total number of share certificates tendered in the Tender Offer exceeding the number of share certificates planned for purchase, a purchase is made using a pro rata method, and not all 64,102,500 shares of the Intended Tendering Shares are purchased, it will continue to hold the Company's ordinary shares that the Company was unable to repurchase.
In addition, on July 27, 2023, the Company and Toyota Motors concluded that Toyota Motors will remain as the major shareholder of the Company, and that their amicable business relationship will continue, and the Company received an answer from Toyota Motors to the effect that currently, it will continue to hold 252,691,900 shares of the Company's ordinary shares that Toyota Motors holds other than the Intended Tendering Shares held by Toyota Motors (holding ratio: 11.71%). With regard to the strengthening of business capital alliance with Toyota Motors announced in October 2020, both companies are steadily progressing research and development, and are engaged in order to incorporate the results thereof into development of next-generation global communication platform, and the Company and Toyota Motors confirmed to continue to cooperate and promote for the purpose of enhancement of corporate values of both companies, and for further contribution towards the society.
The plan for the treatment of the treasury shares that will be repurchased through the Tender Offer and market purchases made after the Tender Offer has not been decided at present.

2. Details of the resolution of the board of directors on the acquisition of treasury shares (disclosed on May 11, 2023)

• (1)

  Details of resolution

  Type of share certificates	Total	Total acquisition cost
  Ordinary shares	92,000,000 shares (Upper limit)	300,000,000,000 yen (Upper limit)

  • (Note 1)

    Total number of shares issued: 2,302,712,308 shares (As of July 28, 2023)

  • (Note 2)

    Percentage of the number of share certificates planned for purchase to the total shares issued: 4.00% (rounded to the second decimal place)

  • (Note 3)

    Acquisition period: From Thursday, June 1, 2023 to Friday, May 31, 2024

  • (Note 4)

    Among the total acquisition cost, for portions that were not repurchased through the Tender Offer, the Company decided to conduct a purchase on the Tokyo Stock Exchange Prime Market during the period beginning on Thursday, September 21, 2023, which is the business day immediately following the date of commencement of the settlement of the Tender Offer, and ending on Friday, May 31, 2024.

• (2)

  Listed share certificates relating to own shares already repurchased based on the resolutions

  There are no relevant matters.

3. Tender Offer outline

• (1)

  Schedule, etc.

  1) Date of Resolution of Board of Directors	Friday, July 28, 2023
  2) Publication date for commencing the Tender Offer	Monday, July 31, 2023 Electronic public notice will be posted, and the posting of the electronic public notice will be published in the Nihon Keizai Shimbun. (Internet address for electronic public notice: https://disclosure2.edinet-fsa.go.jp/ (in Japanese only))
  3) Filing date for the tender offer registration statement	Monday, July 31, 2023
  4) Period of the Tender Offer	From Monday, July 31, 2023 to Monday, August 28, 2023 (20 business days)

• (2)

  Tender Offer Price

  3,900 yen per share of ordinary shares

• (3)

  Basis for Calculation of Tender Offer Price

  • 1)

    Basis for Calculation

    In deciding the Tender Offer Price, the Company took into consideration the fact that the Company's ordinary shares are listed on financial instruments exchanges and this is often conducted by market purchases through financial instruments exchanges because listed companies are able to purchase treasury shares in a flexible manner in line with share price levels formed based on market supply and demand. Therefore, the Company assessed the clarity and objectivity of the base price of the purchase and decided that the base price should be the market price of the Company's ordinary shares. Furthermore, in order to respect the interests of shareholders who choose not to tender in the Tender Offer and continue to hold the Company's ordinary shares, the Company decided that it would be desirable to make the purchases at a price that is discounted to a certain extent from the market price of the Company's ordinary shares in order to prevent assets from flowing outside the Company to the extent possible.
    With respect to the discount rate, among the Cases, the discount rate of approximately 10% (9% to 10%) had the most cases with a total of 21. Therefore, the Company decided that even taking into consideration volatility in the share price of the Company's ordinary shares, it would still be appropriate to set the discount rate at 10%. Furthermore, with respect to the price of the Company's ordinary shares which is the basis of the discount, the Company considered that a certain point in time as the base price, adopting a levelled value of the average share price over a certain period of time) would enable the elimination of special factors such as temporary share price fluctuations, and secure objectivity and reasonableness as the basis of calculation. On the other hand, the Company considered that the Company's latest performance would be more fully reflected in the share price if a more recent share price is used. Accordingly, the Company determined on July 20, 2023 that, instead of the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 3 months and 6 months prior to the business day immediately preceding the date of the board of directors' resolution, it would be more appropriate to use, as the basis for the calculation, a shorter period of time; namely, the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month prior to the business day immediately preceding the date of the board of directors' resolution.
    Subsequently, on July 21, 2023, in light of the trend in the share price of the Company's ordinary shares, the Company proposed to Toyota Motors to make the Tender Offer Price the price calculated by applying the 10% discount rate to the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month before July 27, 2023, the business day immediately preceding July 28, 2023, the date of the board of directors' meeting to determine whether to conduct the Tender Offer. On July 27, 2023, Toyota Motors responded by stating that it would tender for the Tender Offer if the Company conducts the Tender Offer under such terms.
    Considering the above, at the board of directors' meeting held on July 28, 2023, the Company resolved: to repurchase treasury shares pursuant to the provisions of Article 156, Paragraph 1 of the Companies Act as applied mutatis mutandis pursuant to the provisions of Article 165, Paragraph 3 of the Companies Act and the Company's articles of incorporation; to conduct the Tender Offer as the specific method thereof; and to set the Tender Offer Price at 3,900 yen, which will be calculated by applying a 10% discount rate to 4,333 yen, which is the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month by July 27, 2023, the business day immediately preceding July 28, 2023, the date of the board of directors' meeting at which a resolution was made to conduct the Tender Offer. It was decided that the number of share certificates planned for purchase in the Tender Offer would be 64,102,500 shares, which is the number of shares obtained by the total acquisition cost of 250 billion yen divided by the Tender Offer Price of 3,900 yen (any fractions falling short of 100 shares shall be rounded off), as well as well as to conduct a market purchases on the Tokyo Stock Exchange Prime Market within the total acquisition cost obtained by subtracting the total acquisition cost of the Company's ordinary shares repurchased by the Tender Offer from the total acquisition cost (300 billion yen) for the Share Repurchase Based on the BOD Resolution of May 11, 2023, during the period from the business day following the day of commencement of settlement for the Tender Offer, namely, September 21 2023, to May 31, 2024.
    The Tender Offer Price of 3,900 yen is as follows: (i) 4,314 yen, the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market on July 27, 2023, the business day immediately preceding July 28, 2023, the date of the board of directors' meeting at which a resolution was made to conduct the Tender Offer, minus 9.60% discount; (ii) 4,333 yen, the simple average value of the closing price of the Company's ordinary shares for the past 1 month before July 27, 2023 (rounded to the nearest yen; hereinafter the same with respect to the calculation of the simple average value of the closing price) minus 9.99% discount; (iii) 4,379 yen, the simple average value of the closing price of the Company's ordinary shares for the past 3 months before July 27, 2023 minus 10.94% discount; and (iv) 4,214 yen, the simple average value of the closing price of the Company's ordinary shares for the past 6 months before July 27, 2023 minus 7.45% discount.
    In addition, based on the resolution of the board of directors meeting held on May 13, 2022, the Company repurchased the Company's ordinary shares by way of purchase on the market at the Tokyo Stock Exchange (number of acquired shares: 47,864,700 shares, purchase period: from June 1, 2022 to March 23, 2023,total amount of purchase: 199,999,972,200 yen). The simple average value of the acquisition price per share at the time of acquisition was 4,178 yen (rounded to the whole number), and there is a difference of 278 yen from the Tender Offer Price of 3,900 yen. The foregoing is due to the fact that, while the acquisition price by way of purchase at the market was determined by the market price on respective acquisition date, the amount of 4,333 yen which is the simple average value of the closing price of the Company's ordinary shares at the Tokyo Stock Exchange Prime Market for the past 1 month up to July 27, 2023 is increased by 3.71% compared to simple average value of 4,178 yen of the acquisition price by way of purchase at the market conducted from June 1, 2022 to March 23, 2023 (rounded to the second decimal place), and the Tender Offer Price was the price discounted by 9.99% from the 4,333 yen which is the simple average value of the closing price of the Company's ordinary shares at the Tokyo Stock Exchange Prime Market for the past 1 month up to July 27, 2023.

  • 2)

    Calculation Background

    In deciding the Tender Offer Price, the Company took into consideration the fact that the Company's ordinary shares are listed on financial instruments exchanges and this is often conducted by market purchases through financial instruments exchanges because listed companies are able to purchase treasury shares in a flexible manner in line with share price levels formed based on market supply and demand. Therefore, the Company assessed the clarity and objectivity of the base price of the purchase and decided that the base price should be the market price of the Company's ordinary shares. Furthermore, in order to respect the interests of shareholders who choose not to tender in the Tender Offer and continue to hold the Company's ordinary shares, the Company decided that it would be desirable to make the purchases at a price that is discounted to a certain extent from the market price of the Company's ordinary shares in order to prevent assets from flowing outside the Company to the extent possible.
    With respect to the discount rate, among the Cases, the discount rate of approximately 10% (9% to 10%) had the most cases with a total of 21. Therefore, the Company decided that even taking into consideration volatility in the share price of the Company's ordinary shares, it would still be appropriate to set the discount rate at 10%. Furthermore, with respect to the price of the Company's ordinary shares which is the basis of the discount, the Company considered that a certain point in time as the base price, adopting a levelled value of the average share price over a certain period of time) would enable the elimination of special factors such as temporary share price fluctuations, and secure objectivity and reasonableness as the basis of calculation. On the other hand, the Company considered that the Company's latest performance would be more fully reflected in the share price if a more recent share price is used. Accordingly, the Company determined on July 20, 2023 that, instead of the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 3 months and 6 months prior to the business day immediately preceding the date of the board of directors' resolution, it would be more appropriate to use, as the basis for the calculation, a shorter period of time; namely, the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month prior to the business day immediately preceding the date of the board of directors' resolution.
    Subsequently, on July 21, 2023, in light of the trend in the share price of the Company's ordinary shares, the Company proposed to Toyota Motors to make the Tender Offer Price the price calculated by applying the 10% discount rate to the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month before July 27, 2023, the business day immediately preceding July 28, 2023, the date of the board of directors' meeting to determine whether to conduct the Tender Offer. On July 27, 2023, Toyota Motors responded by stating that it would tender for the Tender Offer if the Company conducts the Tender Offer under such terms.
    Considering the above, at the board of directors' meeting held on July 28, 2023, the Company resolved: to repurchase treasury shares pursuant to the provisions of Article 156, Paragraph 1 of the Companies Act as applied mutatis mutandis pursuant to the provisions of Article 165, Paragraph 3 of the Companies Act and the Company's articles of incorporation; to conduct the Tender Offer as the specific method thereof; and to set the Tender Offer Price at 3,900 yen, which will be calculated by applying a 10% discount rate to 4,333 yen, which is the simple average value of the closing price of the Company's ordinary shares on the Tokyo Stock Exchange Prime Market for the past 1 month by July 27, 2023, the business day immediately preceding July 28, 2023, the date of the board of directors' meeting at which a resolution was made to conduct the Tender Offer; and regarding the number of share certificates planned for purchase in the Tender Offer. It was decided that the number of share certificates planned for purchase in the Tender Offer would be 64,102,500 shares, which is the number of shares obtained by the total acquisition cost of 250 billion yen divided by the Tender Offer Price of 3,900 yen (any fractions falling short of 100 shares shall be rounded off).

• (4)

  Number of Share Certificates Planned for Purchase

  Type of share certificates	Number of share certificates planned for purchase	Number of share certificates planned to be in excess	Total
  Ordinary shares	64,102,500 shares	- shares	64,102,500 shares

  • (Note 1)

    If the total number of share certificates sold, etc. in response to the Tender Offer (the "Tendered Share Certificates") does not exceed the number of share certificates planned for purchase (64,102,500 shares), the Company will purchase all of the Tendered Share Certificates. If the total number of Tendered Share Certificates exceeds the number of share certificates planned for purchase (64,102,500 shares), the Company will not purchase all or some of the surplus. The Company will conduct delivery related to the purchase of share certificates and other settlements according to the pro rata method provided in Article 27-13, Paragraph 5 of the Financial Instruments and Exchange Act (Act No. 25 of 1948, including subsequent revisions, the "Act") that is applied mutatis mutandis pursuant to Article 27-22-2, Paragraph 2 of the Act, and Article 21 of the Cabinet Office Order on Disclosure Required for Tender Offer for Listed Share Certificates by Issuers (Ministry of Finance Order No. 95 of 1994, including subsequent revisions).

  • (Note 2)

    Even if the shares are less than one unit, such shares are also subject to the Tender Offer. If the shareholders exercise their right to demand purchase of shares less than one unit in accordance with the Companies Act, the Company may purchase its own shares during the period for purchase, etc. in the Tender Offer (the "Tender Offer Period") in accordance with the procedures under laws and regulations.

• (5)

  Funds Required for Tender Offer

  250,031,750,000 yen

  • (Note)

    Total of the purchase costs where all of the shares planned for purchase (64,102,500 shares) were purchased, plus the estimated total of purchase handling charges and other expenses (expenses required for the public notice regarding the Tender Offer, and various expenses such as printing expenses for the tender offer statement and other necessary documents).

• (6)

  Settlement Method

  • 1)

    Name and address of the head office of financial instruments business operator/bank that will conduct settlement of the Tender Offer

    (Tender Offer Agent)
    Daiwa Securities Co., Ltd., 1-9-1 Marunouchi, Chiyoda-ku, Tokyo

  • 2)

    Commencement Date of Settlement

    Wednesday, September 20, 2023

  • 3)

    Settlement Method

    When the Tender Offer Period ends, a written notice for purchase, etc. will be sent by mail without delay to the address or location of any person who consents to the application for the purchase, etc., or persons who apply for the sale, etc. of share certificates in relation to the Tender Offer (the "Tendering Shareholders") (standing proxies in the case of shareholders, etc. who are residents of foreign countries (including corporate shareholders, the "Non-Japanese Shareholders.")).
    The purchase will be made in cash. The amount after deducting the applicable withholding tax (Note) from the purchase price will be remitted to the place designated by Tendering Shareholders (standing proxies in the case of Non-Japanese Shareholders) by the tender offer agent, or paid at the tender offer agent's head office or each branch throughout Japan, where applications to tender for the Tender Offer were accepted, without delay after the commencement date of settlement.

    • (Note)

      Regarding tax-related matters on shares purchased through the tender offer
      Shareholders should make their own decisions after consulting a certified tax accountant or other professional regarding any specific questions and concerns on tax matters.

    (a) In the case of individual shareholders

    • (i)

      If the Tendering Shareholders are residents of Japan or non-residents holding permanent establishments in Japan

      If the amount of proceeds received through the application for the Tender Offer exceeds the amount corresponding to the attributable shares for the purchase out of the amounts of stated capital, etc. (the amounts of consolidated individual stated capital, etc. in the case of a consolidated corporation) of the Company, the amount of the excess portion shall be treated as dividend income, and taxed.
      As a general rule, the amount equivalent to 20.315% will be withheld for the amount deemed as such dividend income. (The tax rate of 20.315% comprising the income tax and the special income tax for reconstruction (pursuant to the "Act on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake," (Act No. 117 of 2011, including subsequent revisions) (the "Special Income Tax for Reconstruction")) of 15.315% and the 5% inhabitants tax) (Special collection of 5% inhabitants tax will not be made for non-residents holding permanent establishments in Japan.). Provided, however, that if the individual shareholder corresponds to a large shareholder (the "Large Shareholder") specified in Article 4-6-2, Paragraph 12 of the Order for Enforcement of the Act on Special Measures Concerning Taxation (Cabinet Order No. 43 of 1957, including subsequent revisions), the amount equivalent to 20.42% (income tax and Special Income Tax for Reconstruction only) will be withheld. In addition, the amount obtained by deduction of the amount deemed to be dividend income out of the amount of money to be delivered by tendering in the Tender Offer shall be the income from the transfer of share certificates. As a general rule, the amount after deducting the acquisition cost of shares from income from the transfer of shares is subject to separate self-assessment taxation.

      When applying for the Tender Offer with shares in the tax-free accounts (the "Tax-Free Accounts") provided in Article 37-14 (tax exemptions on income from transfers of small amounts of publicly-traded shares in the Tax-Free Accounts) of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957, including subsequent revisions), if the Tax-Free Accounts are accounts opened at Daiwa Securities Co., Ltd., which is a financial instruments business operator, as a general rule, tax will be exempted on income from the transfer of shares in the Tender Offer. In the case where the Tax-Free Accounts are accounts at financial instruments business operators other than Daiwa Securities Co., Ltd., the treatment may differ from the above.

    • (ii)

      In the case where the Tendering Shareholders are non-residents not holding permanent establishments in Japan

      For the amount deemed as dividend income, the amount of 15.315% (income tax and Special Income Tax for Reconstruction only) will be withheld. In the case of applicability as a Large Shareholder, the amount of 20.42% (income tax and Special Income Tax for Reconstruction only) will be withheld. Income incurred due to such transfer of shares shall not be taxed, as a general rule.

    (b) In the case of corporate shareholders
    Regarding taxation for a deemed dividend, for the portion of the Tender Offer Price exceeding the amount of stated capital, etc. per share, as a general rule, the amount equivalent to 15.315% of such difference (income tax and Special Income Tax for Reconstruction only) shall be withheld.
    Among the Non-Japanese Shareholders, shareholders wishing to receive a reduction or exemption of income tax and Special Income Tax for Reconstruction on the deemed dividend in accordance with the applicable tax treaty are requested to submit a registration document concerning the tax treaty, etc. to the tender offer agent by August 28, 2023.

• (7)

  Other

  • 1)

    The Tender Offer is not carried out within the United States or aimed at the United States, directly or indirectly, or implemented using United States mail or methods or means of interstate commerce or international commerce (including but not limited to telephone, telex, facsimile, electronic mail, and internet communication) or through securities exchange facilities in the United States. Application to the Tender Offer cannot be conducted by using the aforementioned methods or means or through the aforementioned facilities or from within the United States.
    In addition, the tender offer registration statement and related purchase documents will not be sent or distributed by mail or by other methods in, to, or from the United States, and such dispatch or distribution may not be conducted. Applications for the Tender Offer that violate the aforementioned restrictions directly or indirectly cannot be accepted.
    Any person applying for the Tender Offer may be requested to represent and warrant the following.
    Tendering Shareholders were not located in the United States either at the time of application for the Tender Offer or at the time of sending the tender offer application form. Tendering Shareholders did not receive or send any information or documents (including copies) related to the Tender Offer, directly or indirectly, in, to, or from the United States. Tendering Shareholders did not use United States mail or other methods or means of interstate commerce or international commerce (including but not limited to telephone, telex, facsimile, electronic mail, and internet communication) or securities exchange facilities in the United States, directly or indirectly, for the purchase or signing and delivering of the tender offer application form. Tendering Shareholders are not acting as proxies or entrusted persons/delegates without discretion for any principal in the United States (excluding cases in which the principal provides all of the instructions related to the Tender Offer outside of the United States).

  • 2)

    The Company obtained on July 27, 2023 from Toyota Motors an answer to the effect that Toyota Motors will tender in the Tender Offer, the 64,102,500 shares of the Intended Tendering Shares (holding ratio: 2.97%), if the Company resolved to implement the Tender Offer. Also, the Company obtained on July 27, 2023 from Toyota Motors an answer to the effect that if all of the Intended Tendering Shares are not purchased, as a result of the total number of share certificates tendered in the Tender Offer exceeding the number of shares planned to be purchased, and the purchase made using the pro rata method, Toyota Motors will continue to hold the Company's ordinary shares which the Company was unable to repurchase.

    In addition, on July 27, 2023, the Company and Toyota Motors concluded that Toyota Motors remains unchanged to continue to be the major shareholder of the Company, and may maintain amicable business relationship in the future, and the Company obtained an answer from Toyota Motors to the effect that regarding the policy for holding 252,691,900 shares of ordinary shares of the Company other than the Intended Tendering Shares (holding ratio: 11.71%), currently, Toyota Motors will continue to hold the shares. Also, regarding strengthening of business capital alliance with Toyota Motors announced in October 2020, both companies are steadily progressing research and development, and are engaged in order to incorporate the results thereof into development of next-generation global communication platform, and the Company and Toyota Motors confirmed to continue to cooperate and promote for the purpose of enhancement of corporate values of both companies, and for further contribution towards the society.

  • 3)

    On July 28, 2023, the Company announced: "Financial Results for the First Quarter of the Fiscal Year Ending March 2024." An overview of the Company's Financial Results for the First Quarter based on the relevant announcement is as follows. The details of the announcement have not been subject to a quarterly review by an audit firm in accordance with the provisions of Article 193-2, Paragraph 1 of the Act. See the relevant announcement for details.

    (a) Profit and loss (Consolidated)

    Accounting period	First quarterly consolidated accounting period (from April 1, 2023 to June 30, 2023)
    Operating revenue	1,332,576 million yen
    Operating income	266,668 million yen
    Profit for the period before income tax	276,838 million yen
    Profit for the period	191,284 million yen
    Profit for the period attributable to owners of the parent	176,943 million yen

    (b) Operating results per share (Consolidated)

    Accounting period	First quarterly consolidated accounting period (from April 1, 2023 to June 30, 2023)
    Basic quarterly earnings per share	82.02 yen

  (Reference) Status of treasury shares holdings as of June 30, 2023

  Total number of shares issued (excluding treasury shares):
  2,302,712,308 shares

  Number of treasury shares:
  145,398,764 shares

  • Number of treasury shares stated includes 1,127,219 shares of the Company's shares owned by the executive compensation BIP Trust account.

• The information contained in the articles is current at the time of publication.
  Products, service fees, service content and specifications, contact information, and other details are subject to change without notice.

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