Notice Regarding Issuance of
Series 2 Bond-Type Class Shares
and Reduction of Common Stock
and Additional Paid-in Capital

Background and Purpose of the Financing

As announced in its release entitled “Notice Regarding Shelf Registration with Respect to Issuance of Series 2 Bond-Type Class Shares” dated July 25, 2024, 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 believes that Bond-Type Class Shares would be a useful option as a financing method to increase equity capital that would minimize the impact on the interests of existing holders of Common Shares of the Company as much as possible, and would meet the needs of a wide range of domestic investors, including retail investors.

Then, the Company now 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. Therefore, the Company passed a resolution at the Board of Directors meeting and filed a shelf registration statement with respect to the Series 2 Bond-Type Class Shares on July 25, 2024. Now, the Board of Directors has passed a resolution to issue the Series 2 Bond-Type Class Shares after determining that the current environment for issuing the Series 2 Bond-Type Class Shares is appropriate, based on comprehensive consideration of the market environment, the development of the Company's business environment, and other factors.

The Series 2 Bond-Type Class Shares are expected to be provided with equity credits for an amount equal to 50% of the funds raised by certain credit rating agencies.
To balance growth investment with shareholder returns, the Company views continuous capital-raising and a strong financial base as crucial. Therefore, when the Company acquires the Series 2 Bond-Type Class Shares through the exercise of the call option, etc., it anticipates to replace the amount to be called with securities or borrowings that credit rating agencies consider as equivalent or greater in terms of equity credits, except in the case where certain financial criteria^* are met, and such acquisition does not affect the Company's financial conditions and its rating, etc.

[Note]

1. *
   Certain financial criteria: The Adjusted Net Leverage Ratio is not more than what it was as of the end of June 2024, and the Adjusted Consolidated Equity Capital is not less than 2,432 billion yen (Each of “Adjusted Net Leverage Ratio” and “Adjusted Consolidated Equity Capital” as defined in the terms of the Series 2 Bond-Type Class Shares.).

In order to enable agile and flexible capital policy in the future based on the Offering, the Company has passed a resolution to reduce its common stock and additional paid-in capital, in each case as shown on its statement of financial position, by the amount of the increase in common stock and additional paid-in capital as a result of the issuance of the Series 2 Bond-Type Class Shares through the Offering, as of the Payment Date, subject to that payment taking place, and to transfer the full amount of both to “other capital surplus.”