Notice Regarding Shelf Registration with Respect to
Issuance of Series 2 Bond-Type Class Shares

Ⅰ. Purpose of and Reasons for Shelf Registration

Since its founding, the Company has sought to harness the Information Revolution to contribute to the wellbeing of people and society by upholding its corporate philosophy of “Information Revolution — Happiness for everyone.” The Company is working to maximize corporate value based on its “Beyond Carrier” growth strategy, whereby it aims to achieve sustainable growth in the telecommunications business, while going beyond just being a telecommunications carrier to actively roll out new businesses in the information and technology field.

On May 10, 2023, the Company announced a Medium-term Management Plan aimed at rebuilding its business foundation during the three-year period from the fiscal year ended March 31, 2024 to the fiscal year ending March 31, 2026 to achieve its long-term vision of becoming a company that provides next-generation social infrastructure essential for the development of a digital society. The Company is convinced that going forward, next-generation digital services utilizing AI will be integrated into daily life, making people's lives richer and more convenient, and this is also a goal the Company is aiming to achieve. At the same time, as it is expected that AI will generate enormous data processing and electricity demand, next-generation social infrastructure must be structured to reconcile with a sustainable society. Therefore, the Company will work over the medium- to long-term to advance telecommunications and IT technologies and develop and procure renewable energy sources, as well as realize the following initiatives to build next-generation social infrastructure: “distributed AI data centers” that can geographically distribute and balance AI data processing and electricity consumption; a “super-distributed computing infrastructure” (xIPF: cross Integrated PlatForm) that can view the distributed AI data centers virtually as if they were a single system; services using generative AI (artificial intelligence capable of generating a variety of content, including text, images, and program code); and more.

Since the listing in December 2018, the Company has expanded and grown its business in non-telecommunications areas based on its “Beyond Carrier” growth strategy, including the acquisition of Yahoo Japan Corporation as a subsidiary, the acquisition of LINE Corporation as a subsidiary through the integration of Z Holdings Corporation and LINE Corporation^*, and the launch of the “PayPay” cashless payment service. During this period, the Company has financed these growth investments internally and with debt financing, while continuing to provide a high level of shareholder returns. As a result, the Company's consolidated total assets have grown to over 15 trillion yen, and its consolidated net interest-bearing debt has surpassed 4 trillion yen.

[Note]

1. *
   On October 1, 2023, the Company completed the procedures for an intra-group reorganization involving mainly Z Holdings Corporation, LINE Corporation and Yahoo Japan Corporation, where Z Holdings Corporation was the surviving company. On the same day, Z Holdings Corporation changed its trade name to LY Corporation.

In order to continue to balance growth investment with a high level of shareholder returns while making growth investments related to advanced telecommunications and IT technologies and next-generation social infrastructure, the Company believes that it would be desirable to enhance its capital and reinforce its financial base by incorporating equity financing in addition to debt financing.

Based on this belief, through approval of the General Meeting of Shareholders of the Company held on June 20, 2023, the Company amended its Articles of Incorporation to authorize five new series of bond-type class shares (i.e., Series 1 Bond-Type Class Shares through Series 5 Bond-Type Class Shares, individually or collectively, “Bond-Type Class Shares”) and issued the Series 1 Bond-Type Class Shares in November 2023. The Company further believes that, for the purpose of continuing growth investments in generative AI-related fields that have achieved a significant global evolution since 2023, it is necessary and appropriate to issue the Series 2 Bond-Type Class Shares in addition to the Series 1 Bond-Type Class Shares.

The Company believes that the following features of the Bond-Type Class Shares make them a financing method to increase equity capital that would minimize the impact on the interests of existing holders of Common Shares as much as possible, and that would meet the needs of a wide range of investors, including retail investors:

• No dilution of the rights to vote, as the holders of the Bond-Type Class Shares do not have the rights to vote at General Meetings of Shareholders or to convert the Bond-Type Class Shares into Common Shares. (The Bond-Type Class Shares are considered ill-suited to takeover protection measures by their nature owing to the lack of the rights to vote at General Meetings of Shareholders and the lack of the rights to convert them into Common Shares, irrespective of the ownership ratio, and are not anticipated to be used in that manner.)
• As “non-participating” class shares, no dividend is paid beyond the preferred dividend initially set, and only holders of Common Shares have the right to participate in dividends beyond that.
• Although the Company's equity capital will increase when the Bond-Type Class Shares are issued, the impact on the ROE, EPS, and the similar measures pertaining to Common Shares will be limited.
• Because the Bond-Type Class Shares are non-participating shares and the capital cost is equivalent to the annual dividend rate to be determined at the time of issuance, the capital cost is expected to be lower than that of an equivalent public offering of Common Shares.^*

[Note]

1. *
   Assuming that the annual dividend rate for the period from the fiscal year in which the issuance date of the Series 2 Bond-Type Class Shares falls to the fiscal year in which the date five years after that issuance date falls is consistently determined to be within the range of 2 to 4%, as stated in the shelf registration statement for the Shelf Registration

Based on its belief that it is important to increase the flexibility of its financial strategy in order to respond to any situation, the Company pursues flexible financing options and therefore resolved to make the Shelf Registration.

Ⅱ. Product Nature of the Series 2 Bond-Type Class Shares

The Company anticipates that the product nature of the Series 2 Bond-Type Class Shares will be similar to the Series 1 Bond-Type Class Shares based on the following expected terms.

Ⅲ. Schedule

The issuance conditions, total issuance amount, specific timing of issuance, and certain other conditions of the Series 2 Bond-Type Class Shares have not yet been determined. However, there is a possibility that the issuance of the Series 2 Bond-Type Class Shares may be resolved as early as during the first half of the fiscal year ending March 31, 2025, and, if it is resolved, the Board of Directors of the Company will determine the issuance in light of the Company's capital policy and market conditions.

Ⅳ. Summary of Shelf Registration

The Summary of the Shelf Registration is as follows.