Shareholdings

As of June 25, 2020

Criteria and rationale for the classification of investment stocks

The Company shall, insofar as its holdings of shares in other companies than itself are a result of acquisition in pursuit of maximum profit gained therefrom with a focus on the change in their value as well as the distribution of surpluses, determine if such shares ought to be classified as investment stocks held the purpose of portfolio investment, by evaluating whether such shares are continuously held for such purpose alone, through verifying the significance of such holdings, to classify them as investment stocks held for purposes other than portfolio investment. As at the end of the current fiscal year, and at the date of submitting this report, the Company holds no investment stocks held for the purpose of portfolio investment.

Investment stocks held for purposes other than portfolio investment

a. Policy for holding, method for verifying the reasonableness of holding, and the verification process at the Board of Directors, etc. to determine whether to keep holding individual stocks

The Company may strategically hold listed stocks mainly of its business partners, based on the overall consideration of its business strategies and trade policies, with a view to enhancing its corporate value over the medium to long term. In such case, the Company shall, with respect to the strategically held listed shares, monitor the status of management of the investee, verifying on an annual basis the significance and reasonableness of continuously holding such shares, and if it is determined that continuous holding can no longer be justified given the latest circumstance such as fading necessity thereof, disposal including sales thereof shall be considered in view of the share price and other trends in the stock market. Matters related to the strategically held shares including the detail of the verification of the appropriateness of holding, and the description of the disposal of such shares if such decision is made, shall be reported to the Board of Directors annually or as appropriate.

The Company shall promote transactions based on ESG principles and economic reasonableness, and shall not require any customers or business partners to hold shares in the Company, as a condition for the transactions with the Group. Also, the Company shall not require any business partners currently holding shares in the Company, to keep such holdings, as a condition for the continuous transactions with the Group.

The Company is striving to reduce such strategic holdings of listed shares as a general rule, while holding stocks only if justifiable as a critical prerequisite to carrying out its important business strategies. As a result of the stock-by-stock verification of strategic holdings for the significance and reasonableness of continuous holding thereof, mainly through comparing the gains taking into consideration changes in fair value thereof as well as cumulative dividends therefrom over a certain period, with the targeted capital cost, all the current holdings are justified with their contribution to maintaining and strengthening the relationship with the investees.

In exercising voting rights, the Company shall determine whether to approve or reject particular proposals, through comprehensively evaluating whether the vote contributes to an increase in its corporate value over the medium to long term and the Total Shareholders Return (TSR), taking into account matters such as the Company’s objectives of holding, the investee’s business performance, management policies and governance structure.

b. Number of stocks and Amounts recorded on the balance sheet

(The number of shares increased in 2019)

(The number of shares decreased in 2019)

Not applicable

c. Information concerning the number of stocks and amounts recorded on the balance sheet by stock name for special investment stocks as well as deemed shareholdings

Special investment stocks

(Note 1) In light of the execution of the Company Group’s operations, these stocks are held to sustain or strengthen the relationship with the relevant companies.

Deemed shareholdings

(Note 1) The Company has contributed the stocks in the above stated company to the employee pension trust and possesses the right to instruct the exercise of voting rights granted to the stocks in the relevant company, held as the trust fund by the Company.

Investment stocks held for the purpose of portfolio investment

Not applicable

Basic principles for exercising rights to vote regarding cross-shareholdings and shares held as cross-shareholdings

In order to enhance corporate value over the mid to long term, the Company, in some cases, strategically holds shares of other listed companies, mainly its business partners. All factors of its business and marketing strategies, etc. are taken into account. In such cases, the Company verifies the significance and reasonableness of keeping the shares of other listed companies held as cross-shareholdings and regularly reports to the Board of Directors. When exercising the Company’s rights to vote pertaining to the shares held as cross-shareholdings, the Company comprehensively makes a decision to vote for or against a resolution by taking into consideration management policies and governance structure of the relevant listed company and from the viewpoint of enhancing the Company’s corporate value over the mid to long term.