NOTICE OF THE 149TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

Transcription

1 This document is a translation of the Japanese language original for information purposes and is prepared as a guide for non-japanese shareholders. In the event of a discrepancy, the Japanese original version shall prevail. May 30, 2014 NOTICE OF THE 149TH ORDINARY GENERAL MEETING OF SHAREHOLDERS Dear Shareholder: It is our pleasure to invite you to the 149th Ordinary General Meeting of Shareholders of Nitto Denko Corporation (hereinafter the Company ) to be held as indicated below. If you are unable to attend the meeting in person, you may exercise your voting rights in writing or electronically (e.g. over the Internet). Please review the attached reference materials for the general meeting of shareholders and exercise your voting rights as per the instructions from page 4. Sincerely, Hideo Takasaki, President Nitto Denko Corporation Shimohozumi, Ibaraki, Osaka, Japan (Head Office: 4-20, Ofuka-cho, Kita-ku, Osaka, Japan ) Date: Place: June 20, 2014 (Friday) at 10:00 a.m. (Reception desk is scheduled to open at 9:00 a.m.) 1-5 Senri-Banpaku-Koen, Suita, Osaka, Japan Orbit Hall, Hotel Hankyu Expo Park - 1 -

2 Meeting Agenda Items to be reported: 1. The Business Report, the Consolidated and Non-Consolidated Financial Statements for the 149th term (from April 1, 2013 to March 31, 2014) 2. Auditing results of consolidated financial statements by Accounting Auditors and the Board of Corporate Auditors Items to be resolved: Item 1: Approval of the proposed dividends from surplus Item 2: Approval of the payment of bonus for Directors Item 3: Election of seven Directors Item 4: Determination of the amount of compensation provided as stock options to Directors and related details - 2 -

3 Decisions previously made for convocation (1) If you exercise your voting rights by writing (Voting Rights Exercise Form), please post it so that it arrives by 5:00 p.m. of Thursday, June 19, (2) If you exercise your voting rights electronically (e.g. over the Internet), please complete it by 5:00 p.m. of Thursday, June 19, (3) When you exercise your voting rights by the Voting Rights Exercise Form and you do not indicate your approval or disapproval, this will be handled as approval. (4) In the event of multiple voting via the Internet or by the Voting Rights Exercise Form, the final vote shall be considered as the effective exercise of your voting rights. (5) In the event of voting via the Internet, even if the Voting Rights Exercise Form is returned, the online vote shall be considered as the effective exercise of your voting rights. - Any revisions for reference materials for the general meeting of shareholders, Business Report, consolidated financial statements and financial statements shall be reported in our IR Information website ( - This English translation of this notice can be referred on our IR Information website (English version) at [ - When attending, you must present the enclosed Voting Rights Exercise Form to the receptionist at the meeting. We also ask you to bring this notice with you to the meeting as a way of saving resources. - The Cool Biz (light clothing) dress code will be followed at the meeting. Shareholders are encouraged to wear clothing made of lighter materials

4 Instructions Concerning the Exercise of Voting Rights You may exercise your voting rights by using any of the following three methods: 1 Attending the meeting Please present the Voting Rights Exercise Form to the receptionist at the meeting. Date of the meeting: June 20, 2014 (Friday) at 10:00 a.m. 2 Mailing the Voting Rights Exercise Form Please mail the Voting Rights Exercise Form after indicating your approval or disapproval of each item. Deadline for mail arrival: June 19, 2014 (Thursday) at 5:00 p.m. 3 Voting by Internet (Personal computer or mobile phone) Please input approval or disapproval of each item on the Site for the Exercise of Voting Rights: (Japanese only). Deadline for voting: June 19, 2014 (Thursday) at 5:00 p.m. To institutional investors: The Company participates in the voting right electric exercise platform operated by ICJ Co., Ltd. If a nominal owner including a management trust bank (including a standing proxy) previously applies for the use of this platform, this platform may also be used in addition to the exercise of voting rights via above-mentioned Internet as a method to exercise voting rights by electric means for the general meeting of shareholders of the Company

5 * Instructions concerning the exercise of voting rights via the Internet If you wish to vote via the Internet, you may do so by accessing the following Site for Exercise of Voting Rights designated by the Company by using a personal computer or mobile phone. URL of the Site for the Exercise of Voting Rights: (Japanese only) The site is unavailable during the hours of 2:00 a.m. to 5:00 a.m. each day. Please note that any costs arising from using the Site for the Exercise of Voting Rights, including connection fees to Internet providers and telecom rates charged by telecommunications carriers, will be the burden of the shareholder. If you have any questions regarding the exercise of voting rights via the Internet, please contact the following number. Mitsubishi UFJ Trust and Banking Corporation Corporate Agency Division (Help Desk) Tel: (toll-free) Office hours: 9:00 a.m. to 9:00 p.m

6 Reference Materials for the General Meeting of Shareholders Item 1: Approval of the proposed dividends from surplus The Company places the stable profit return to shareholders as one of the most important management issues, and before providing dividends, we comprehensively assess the profit conditions and the dividend payout ratio, and also consider the improvement of the financial conditions, prior investment for technical innovation and business development, and retained earnings. Proposed dividends for the 149th term is as shown below. Since we have paid interim dividends of 50 yen per share, the amount of dividends per year shall be 100 yen per share, the same amount as the previous term. Matters concerning year-end dividends (1) Type of dividends assets Money (2) Matters concerning distribution of dividends assets and the total amount 50 yen per share of our common stock: total amount of 8,250,094,950 yen (3) Effective date of distribution of dividends June 23, 2014 Item 2: Approval of the payment of bonus for Directors The Company proposes to provide the total amount of 183 million yen as bonus based on the results of this business year for six Directors of eight Directors excluding two Outside Directors as of the end of this business year. The Company would like to ask the shareholders to leave the specific amount for each person and payment date and method to the Board of Directors

7 Item 3: Election of seven Directors At the close of this Ordinary General Meeting of Shareholders, the tenures of all eight present members of the Board of Directors will expire. Hence, we propose the appointment of seven Directors except Mr. Kaoru Aizawa who will retire at the close of this meeting. The candidates for the positions, all of whom are candidates for reelection, are as follows: Number of Candidate Name Brief profile, position, areas of responsibility and other important Company s number (Date of birth) posts concurrently held shares owned April 1971 Joined Nitto Denko Corporation June 1998 Director June 2001 Executive Managing Director Yukio Nagira June 2003 Director, Executive Vice President 1 (January 28, 1948) June 2007 Director, Senior Executive Vice President 24,900 For reelection April 2008 Representative Director, President April 2014 Representative Director, Chairman (present) There is no conflict of interest between the Company and the candidate for the Director. April 1978 Joined Nitto Denko Corporation June 2008 Director, Vice President, General Manager of Optical Business Headquarters June 2011 Director, Executive Vice President 2 3 Hideo Takasaki (August 11, 1953) For reelection Yoichiro Sakuma (September 4, 1955) For reelection June 2012 Director, Executive Vice President, General Manager of Sales Sector, in charge of Functional Base Products and Information Fine Materials April 2013 Director, Executive Vice President, General Manager of Corporate Sector June 2013 Director, Senior Executive Vice President, General Manager of Corporate Sector April 2014 Representative Director, President (present) There is no conflict of interest between the Company and the candidate for the Director. April 1980 Joined Nitto Denko Corporation June 2006 Vice President, Vice General Manager of Industrial Business Headquarters June 2010 Director, Vice President June 2011 Director, Senior Vice President April 2012 Director, Senior Vice President, General Manager of Functional Base Products Sector, in charge of America Area Business, Europe Area Business and South Asia Area Business June 2012 Director, Senior Vice President, in charge of Information & Communication Technology and Corporate Business Development (present) June 2013 Director, Executive Vice President, in charge of Medical and Membrane (present) There is no conflict of interest between the Company and the candidate for the Director. 9,200 5,

8 Candidate number 4 5 Name (Date of birth) Toshihiko Omote (December 3, 1958) For reelection Toru Takeuchi (January 1, 1959) For reelection Brief profile, position, areas of responsibility and other important posts concurrently held April 1983 Joined Nitto Denko Corporation June 2007 Vice President, General Manager of Core Technology Center, Corporate Technology Sector June 2011 Director, Senior Vice President April 2013 Director, Senior Vice President, CTO, General Manager of Corporate Technology Sector, in charge of Intellectual Property, Functional Base Products and Information Fine Materials (present) June 2013 Director, Executive Vice President, CTO, in charge of Manufacturing Engineering (present) Oct Director, Executive Vice President, CTO, in charge of Automotive Products (present) *CTO: Group Chief Technology Officer There is no conflict of interest between the Company and the candidate for the Director. April 1981 Joined Nitto Denko Corporation June 2010 Vice President, General Manager of Corporate Accounting Division Corporate Sector June 2011 Director, Vice President, CFO (present) June 2012 Director, Vice President, CFO, in charge of America Area Business, Europe Area Business and South Asia Area Business (present) April 2014 Director, Vice President, CFO, General Manager of Corporate Sector, General Manager of Corporate Finance & Accounting Division (present) *CFO: Group Chief Financial Officer There is no conflict of interest between the Company and the candidate for the Director. Number of Company s shares owned 3,600 5,

9 Candidate number 6 Name (Date of birth) Yoichiro Furuse (November 4, 1941) For reelection Candidate for Outside Director Independent Director Brief profile, position, areas of responsibility and other important posts concurrently held April 1964 Joined Sumitomo Bank, Ltd. June 1989 Director of Sumitomo Bank, Ltd. Oct Executive Director of Sumitomo Bank, Ltd. (retired in June 1996) June 1996 Senior Managing Director of Mazda Motor Corporation (retired in June 2000) June 2001 Director of Sanyo Electric Co., Ltd. June 2002 Representative Director and Vice President of Sanyo Electric Co., Ltd. (retired in October 2005) Jan Representative Director of Evanston Corporation (present) June 2007 Director of Nitto Denko Corporation (present) Sep Director of Akindo Sushiro Co., Ltd. (present) There is no conflict of interest between the Company and the candidate for the Director. Notes for the candidate for the Outside Director 1) Reason for nomination as a candidate for the Outside Director In this fiscal year, Mr. Furuse participated in all of the Board of Directors meetings (12 times) and made useful comments based on his deep insight about management, which was cultivated through his service as director and representative director at listed companies, and extensive experience. The Company believes that his insight and experience can continue to be reflected in the management of the Company. Hence, we propose the appointment of him as an Outside Director. 2) Number of years in service The tenure of Mr. Furuse as Outside Director of the Company will be 7 years at the close of this Ordinary General Meeting of Shareholders. 3) Limited Liability Agreement The Company has executed an agreement with Mr. Furuse to limit his liability to the limit stipulated in laws and regulations, and the Company intends to extend the agreement when he is reappointed. Number of Company s shares owned 2,

10 Candidate number 7 Name (Date of birth) Koshi Mizukoshi (September 1, 1938) For reelection Candidate for Outside Director Independent Director Brief profile, position, areas of responsibility and other important posts concurrently held April 1961 Joined Kobe Steel, Ltd. June 1989 Director of Kobe Steel, Ltd. April 1999 President of Kobe Steel, Ltd. April 2004 Chairman of Kobe Steel, Ltd. Nov Chairman of the Kobe Chamber of Commerce and Industry (retired in November 2010) May 2005 Vice Chairman of Kansai Economic Federation (retired in May 2010) June 2009 Senior Adviser of Kobe Steel, Ltd. April 2011 Honorary Adviser of Kobe Steel, Ltd. (present) June 2011 Director of Nitto Denko Corporation (present) There is no conflict of interest between the Company and the candidate for the Director. Notes for the candidate for the Outside Director 1) Reason for nomination as a candidate for the Outside Director In this fiscal year, Mr. Mizukoshi participated in Board of Directors meetings (11 times out of 12 times) and made useful comments based on his deep insight about management, which was cultivated through his service as representative director at listed companies and as Chairman of the Kobe Chamber of Commerce and Industry, and extensive experience. The Company believes that his insight and experience can continue to be reflected in the management of the Company. Hence, we propose the appointment of him as an Outside Director. 2) Number of years in service The tenure of Mr. Mizukoshi as Outside Director of the Company will be 3 years at the close of this Ordinary General Meeting of Shareholders. 3) Limited Liability Agreement The Company has executed an agreement with Mr. Mizukoshi to limit his liability to the limit stipulated in laws and regulations, and the Company intends to extend the agreement when he is reappointed. Number of Company s shares owned

11 Item 4: Determination of the amount of compensation provided as stock options to Directors and related details In 2004, the Company abolished retirement benefits paid in cash to Directors and Corporate Vice Presidents and introduced an equity-based compensation stock option system as a replacement. As the stock options are granted as a way to effectively grant stocks in kind, those who are qualified can set aside an amount equal to the grant during a year while they are in service and acquire the stock by exercising their right after retirement. With respect to the above-mentioned grant, it is proposed that the amount and related details of the equity-based compensation stock options that are planned to be granted to Directors in the current fiscal year be approved. Further, those who are granted the Warrants will not include the Outside Directors. (1) Amount of compensation provided as stock options The compensation for Directors is up to 30 million yen per month (out of which up to 2 million yen is allocated to Outside Directors), as determined at the 143rd Ordinary General Meeting of Shareholders held in Separate from this maximum compensation amount, Warrants up to 105 million yen (this will be the amount calculated by the fair value at the time of issuing the Warrants) will be issued as equity-based compensation stock options for a period of 1 year from the date of this Ordinary General Meeting of Shareholders. The number of Directors eligible to receive the Warrants will be 5, excluding the number of Outside Directors, on condition that Item 3 is approved. (2) Details of Warrants as stock option compensation The details of the Warrants to be issued as equity-based compensation stock options within the extent of the above amount shall be as follows, and the specific matters concerning the issuance shall be determined by a resolution of the Board of Directors regarding the issuance of Warrants. 1) Total number of the Warrants and class and number of underlying shares that are subject to the Warrants Total number of the Warrants: Up to 214 units Class and number of underlying shares that are the subject of Warrants: 100 shares of common stock per Warrant (Maximum total number of shares: 21,400 shares) In the event that the Company merges, undergoes corporate separation, or splits or consolidates its common stock and it becomes appropriate to change the number of shares, the Company shall make any adjustment deemed necessary. 2) Amount to be paid upon exercise of the Warrants The amount to be paid for one underlying share of the Warrants (exercise value) shall be 1 yen. 3) Period during which the Warrants can be exercised The Company shall separately determine the period of 30 years or less from the day following the issue date of the Warrants. 4) Conditions for the exercise of the Warrants Regardless of the provisions described in 3) above, in principle, a holder of the Warrants shall be able to exercise these Warrants only for a period separately determined from the day following the holder s retirement from the position as Director of the Company

12 Business Report for the 149th Fiscal Term For Fiscal Year of 2013 (April 1, 2013 to March 31, 2014) 1. Overview of business operations of the Nitto Denko Group (1) Operating progress and results During the fiscal year ended March 31, 2014, overseas, the U.S. economy continued to recover at modest pace due to private-sector demand, such as for housing, while the European economy also picked up gradually. On the other hand, the pace of growth in China declined and weakened. The Japanese economy remained on a recovery trend, driven by improved corporate earnings and a rise in consumer spending. Under such an economic environment, the Group positioned the fiscal year as a Year to Enter the New Phase in the lead up to its first centennial anniversary in 2018, and every employee worked unflinchingly, boosting their level of awareness to achieve the capability to compete squarely in the world arena. To support and facilitate this, the Group newly formulated its shared values and standards of conduct into a corporate philosophy, and strove to make this known to every staff member. Furthermore, we changed the brand name to Nitto to globally raise our profile and recognition, and increased business process efficiency by relocating and integrating the Head Office and the Nitto Denko Osaka Sales Branch. Looking at the Group s business performance, in the Group s mainstay market, the electronics industry, the Group responded to growth in the smartphone and tablet PC markets by launching new products and increasing production capacity for touch panel materials. In the automobile industry, the Group tapped into growth in automobile production volumes, expanding the range of materials used by existing customers and developing new customers around the world. As a result, consolidated net sales increased 11.7% from the previous year (changes hereafter are in comparison with the previous year) to 749,835 million yen. Operating income increased 5.5% to 72,254 million yen, ordinary income increased 6.7% to 71,658 million yen, and net income increased 16.8% to 51,018 million yen

13 (2) Summary of operations by segment Sales by business segment were as follows: (Unit: millions of yen) Business segment FY2013 (149th term) FY2012 (148th term) Sales (year-on-year change) Sales Industrial Tape 283,059 (up 12.3%) 252,049 Optronics 452,543 (up 10.2%) 410,600 Medical & Membrane 37,745 (up 11.8%) 33,753 Eliminations and corporate (23,513) (25,149) Total 749,835 (up 11.7%) 671,253 [Industrial Tape] Sales to the automobile industry were favorable, supported by the effects of the correction to the yen s appreciation as well as an increase in the number of automobiles produced worldwide and further productivity improvements at overseas production bases. Sales to the electronics industry were firm, with sales of double sided adhesive tape and sealing products growing steadily driven by market expansion for smartphones and tablet PCs and efforts to expand adoption by new customers. Sales of conventional double sided adhesive tape, which is used for a broad range of industry applications, and fluoroplastics products, were firm overall. In the housing industry, sales of protection film were brisk due to a surge in demand ahead of the consumption tax hike. As a result of the above, net sales were 283,059 million yen (up 12.3%) and operating income was 17,330 million yen (up 41.9%). [Optronics] In information fine materials, although sales of panels for LCD TV s were impacted by the termination of a subsidy scheme for energy-efficient home appliances in China. However, demand sprang back suddenly from the end of the year, making the situation difficult to read. In addition, sales were weak impacted by a greater-than-expected decline in the price of panels. On the other hand, sales for smartphones and tablet PC panels were strong not only on account of increases in production of these products but also because the adoption of our transparent conductive film for touch panels increased due to its widely recognized advantages of being thinner, lighter and durable compared with the competing transparent conductive glass and because the Group boosted aggressively its production capacity to achieve strong sales. Sales of flexible printed circuits grew steadily. For use in smartphones, the Group managed to expand the customer base throughout the fiscal year, and for use in hard disk drives (HDD), the end of Windows XP support in the second half of the year sparked PC replacement buying that drove a recovery in demand. In processing materials, sales of integrated tape used for both process and structural materials were

14 favorable, reflecting firm demand from makers of semiconductors primarily used in smartphones and tablet PCs. As a result of the above, net sales were 452,543 million yen (up 10.2%) and operating income was 52,415 million yen (down 7.1%). [Medical & Membrane] In medical products, the shipments of Bisono tape got under way after receiving approval for manufacture and marketing. Bisono is a type of transdermal therapeutic patch for the treatment of hypertension. In addition, orders for small-scale synthesis of oligonucleotides were firm at a U.S. Group company in the oligonucleotide field. In membrane products (reverse osmosis membranes), market conditions were difficult in emerging markets such as China and India due to slowing demand; however, sales were firm overall, supported by the impact of the correction to the yen s appreciation and project orders received in Mexico and other new markets. As a result of the above, net sales were 37,745 million yen (up 11.8%) and operating income was 1,867 million yen (up 436.1%)

15 (3) Trends in operating results and assets Item FY2009 (145th term) FY2010 (146th term) FY2011 (147th term) FY2012 (148th term) FY2013 (149th term) Net sales (million yen) 601, , , , ,835 Operating income (million yen) 56,086 85,245 56,491 68,482 72,254 Ordinary income (million yen) 58,833 85,143 58,436 67,182 71,658 Net income (million yen) 37,570 55,743 31,066 43,696 51,018 Net income per share (yen) Dividend payout ratio (%) ROA (Return on total assets) (%) ROE (Return on equity) (%) Operating income to net sales (%) Total assets (million yen) 624, , , , ,352 Net assets (million yen) 388, , , , ,299 Net assets per share (yen) 2, , , , , Shareholders equity to total assets (%) Depreciation and amortization (million yen) ,810 39,940 36,806 36,467 43,188 Capital investment (million yen) 37,147 26,882 33,758 49,807 75,814 Research and Development Costs (million yen) 20,876 21,949 25,003 27,573 28,573 Exchange rate (average rate) (yen / 1 US dollar) Note: Effective from this consolidated accounting fiscal year, the Company and some of its consolidated subsidiaries changed the method of recognition of revenue to the one based on the time of delivery to customers from the prior one based mainly on the time of shipment. The figures for the fiscal year ended March 31, 2013, are those after the retrospective application of the change. (4) Capital investment The Group invested a total of 75,814 million yen in plant and equipment during the fiscal year under review. Of this total, 48,641 million yen was invested on a domestic basis for capital investment to improve production facilities for information fine materials at the Kameyama Plant and the Onomichi Plant and to improve production facilities for industrial tape at the Toyohashi Plant. For overseas group companies, a total of 27,172 million yen was invested in production facilities for information fine materials in South Korea and China, production facilities for industrial tape and membrane in the Americas, and other investments

16 (5) Financing During the fiscal year under review, as our businesses grew overseas, mainly in emerging countries, short-term loans payable by local affiliates increased. Meanwhile, we repaid the long-term loans payable, which the Head Office procured to boost cash on hand five years ago amid the uncertainty of the financial conditions immediately after the Lehman Shock, as the due date arrived. As a result, group-wide interest-bearing debts decreased by 1,920 million yen. The straight bonds totaling 50.0 billion yen, which were issued at the time of uncertain financial conditions as mentioned above, will be redeemed when they mature in the first quarter of the fiscal year ending March 31, (6) Key issues to be addressed In the rapidly changing and diversifying economy and market, the Group will strive for global growth evolving from the Nitto Denko Group to the Nitto Group, with constant attention to the three keywords of sense of crisis, speed and communication (the Group calls these keywords C.S.C. ) in the realization that we must soundly turn business chances into results. With this resolve, the Group is globally developing its fundamental Sanshin (Three-New) Katsudo marketing activities, in which it aims to cultivate new applications, to develop new products, and to create new demands, to ensure that the Group continues responding swiftly to changing customer needs and markets. At the same time, the Group will build optimum business models in new target areas. The Group will implement the following priority initiatives in each business segment: - Industrial Tape In the functional base products business, the Group will work to increase sales by strengthening the Sanshin Activities, while focusing efforts on strategies in growth fields to further grow business in the medium to long term. Specifically, in the automotive products, the Group introduced a new organizational system, which is called the global account management system, to provide borderless support to customers in global markets. Through these measures, the Group is pursuing ways to provide higher values to customers

17 - Optronics In the information fine materials business, the Group will respond to the lower cost trends in the smartphone and tablet PC markets by undertaking cost-cutting activities and other measures to increase profitability. In the semiconductor materials, flexible printed circuits and processing materials business, the Group will continue to supply the smartphone and tablet PC markets, while promoting further business development for data centers, where demand is growing. - Medical & Membrane In the medical business, the Group will seek to deliver solid results in existing businesses and strengthen pipelines to support future growth. In the membrane business (reverse osmosis membrane), the Group will continue to build a strong business base, while targeting development for new applications through global activities. (7) Main business of the Group (as of March 31, 2014) Business segment Industrial Tape Optronics Medical & Membrane Major products Functional base products (e.g. Bonding and joining products, Protection products), Automotive products Information fine materials, Semiconductor related materials, Flexible printed circuits, Processing materials Medical related products, Membrane products

18 (8) Status of major subsidiaries (as of March 31, 2014) Corporate name Capital Company s stake Nissho Corporation in million yen % Nitto Europe NV in thousand euro 87, Nitto Americas, Inc. in thousand US dollars 1, Nitto Denko (China) in thousand RMB Investment Co., Ltd. 925, Nitto Denko (Suzhou) Co., in thousand RMB Ltd. 370,902 (65.8) Taiwan Nitto Optical Co., in thousand NT$ Ltd. 568,003 (3.6) Korea Nitto Optical Co., Ltd. in million won 84, Korea Optical Hightech Co., in million won Ltd. 22, Nitto Denko (HK) Co., Ltd. in thousand HK$ 13, Shanghai Nitto Optical Co., in thousand RMB Ltd. 89,981 (24.5) Nitto Denko Material (Thailand) Co., Ltd. in thousand Thai Baht ,000 (39.4) Main business Production, processing and sales of industrial tapes Production, processing and sales of industrial tapes Administration of the Group companies in the U.S. Administration of the Group companies in China Production, processing and sales of optronics Production, processing and sales of optronics Production, processing and sales of optronics Production, processing and sales of optronics Sales of industrial tapes, optronics Production, processing and sales of optronics Production, processing and sales of optronics Note: Figures in parenthesis in Company s stake indicate the percentage of indirect stake

19 (9) Principal offices of the Group (as of March 31, 2014) Nitto Denko Corporation Nissho Corporation Nitto Europe NV Nitto Denko (Suzhou) Co., Ltd. Taiwan Nitto Optical Co., Ltd. Korea Nitto Optical Co., Ltd. Korea Optical Hightech Co., Ltd. Nitto Denko (HK) Co., Ltd. Shanghai Nitto Optical Co., Ltd. Nitto Denko Material (Thailand) Co., Ltd. Head office Offices (Plants / Laboratory) Branches Kita-ku, Osaka Kita-ku, Osaka Genk, Belgium Suzhou, China Taichung, Taiwan Pyeongtaek, South Korea Gumi, South Korea Hong Kong, China Shanghai, China Ayutthaya, Thailand Tohoku Plant (Osaki, Miyagi), Kanto Plant (Fukaya, Saitama), Toyohashi Plant (Toyohashi, Aichi), Kameyama Plant (Kameyama, Mie), Shiga Plant (Kusatsu, Shiga), Ibaraki Laboratory (Ibaraki, Osaka), Onomichi Plant (Onomichi, Hiroshima) Tokyo Sales Branch (Shinagawa-ku, Tokyo), Nagoya Sales Branch (Naka-ku, Nagoya), Osaka Sales Branch (Kita-ku, Osaka), Kyushu Sales Branch (Hakata-ku, Fukuoka) (10) Employees of the Group and the Company (as of March 31, 2014) Number of employees Changes from the end of the previous year Group 26,614 +1,138 Company 5, Note: The number of employees does not include Directors (those who are classified as employees) and temporary workers. (11) Major creditors (as of March 31, 2014) (Unit: millions of yen) Creditor Balance at the end of the fiscal year The Bank of Tokyo-Mitsubishi UFJ, Ltd. 5,490 Nippon Life Insurance Company 3,

20 2. Shareholders equity (as of March 31, 2014) (1) Number of shares authorized to be issued: 400,000,000 shares (2) Number of shares issued 173,758,428 shares (Number of treasury stock held) 8,756,529 shares (3) Number of shareholders 55,009 (4) Major shareholders (Top 10) Name Number of shares held Ownership percentage The Master Trust Bank of Japan, Ltd. (Trust Account) Thousands of shares % 16, Japan Trustee Services Bank, Ltd. (Trust Account) 14, BNP Paribas Securities (Japan) Limited 3, Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) THE CHASE MANHATTAN BANK, N. A. LONDON SECS LENDING OMNIBUS ACCOUNT 2, , CBNY-SCOUT INTERNATIONAL FUND 2, Nippon Life Insurance Company 2, Sompo Japan Insurance Inc. 2, CITIBANK, N.A.-NY, AS DEPOSITARY BANK FOR DEPOSITARY SHARE HOLDERS 2, STATE STREET BANK WEST CLIENT - TREATY 1, Notes: 1. The Company holds treasury stock totaling 8,756,529 shares, but is not included in the above major shareholding parties. 2. The ownership percentage has been calculated based on the number of shares issued excluding treasury stock. 3. Although the reports on large scale shareholdings have been submitted as follows, the Company lists major shareholders above according to the shareholder register as of March 31, A total of three shareholders composed of Sumitomo Mitsui Trust Bank, Limited and its joint holders 9,719,200 shares (as of September 30, 2013) A total of five shareholders composed of Mitsubishi UFJ Financial Group, Inc. 8,691,754 shares (as of November 11, 2013) A total of nine shareholders composed of BlackRock Japan Co., Ltd. 9,406,152 shares (as of December 31, 2013) A total of three shareholders composed of Nomura Securities Co., Ltd. 8,853,124 shares (as of February 14, 2014)

21 3. Matters concerning the Warrants (1) Summary of Warrants issued as compensation for executing duties and responsibilities owned by Directors at the end of this business year Number of the Warrants issued: 1,363 units (100 shares of common stock per unit) Class and number of underlying shares that are the subject to the Warrants: Company s common stock: 136,300 shares Classified total of Warrant units held by Directors Classification Type 1 Type 2 Exercise value (payment amount 100 yen 100 yen per unit at the time of exercise) Exercise period 20 years from the day following the issuing date 6 years from the day following the day they no longer serve as Directors, Corporate Vice Presidents, Corporate Auditors, Advisers or specific staff members (in principle) Number of owners and units by classification 30 years from the day following the issuing date 10 days from the day following the day they no longer serve as Directors Directors 2 persons 6 persons 94 units 1,269 units Notes: 1. Following the discontinuation of traditional retirement benefit in cash approved at the 139th ordinary general meeting of shareholders, issue of the above equity-based compensation stock options was approved as its replacement at the 139th ordinary general meeting of shareholders and onward. 2. Type 1 was approved at the 139th and 140th ordinary general meetings of shareholders under the former Commercial Code. Type 2 was approved at the 141st ordinary general meeting of shareholders and onward. 3. Directors of the Company hold the following warrants as general stock options, in addition to the above warrants. The general stock options system has been already abolished. Number of Warrants (general stock options) issued: 340 units (100 shares of common stock per unit) Class and number of underlying shares that are the subject to Warrant: Company s common stock: 34,000 shares Exercise value (payment amount per unit at the time of exercise): 329,100 yen Exercise period: January 1, 2012 through December 31, 2014 Number of owners and units by Directors and Directors 5 persons 330 units Corporate Auditors: Corporate Auditors 1 person 10 units 4. Outside Directors and Corporate Auditors are not eligible for the Warrants (stock options of equity-based compensation and general stock options). The Warrants (general stock options) held by Corporate Auditors were granted when they were employees prior to assuming office as Corporate Auditors

22 (2) Summary of Warrants issued as compensation for executing duties and responsibilities to the employees of the Company and the Directors and the employees of the subsidiaries during this business year Name Number of the Warrants issued Class and number of underlying shares that are the subject to the Warrants Exercise value (payment amount per unit at the time of exercise) Warrants issued in August 2013 (stock option of equity-based compensation) Company s common stock: 167 units (100 shares of common stock per unit) 16,700 shares 100 yen Exercise period August 2, 2013 through August 1, days from the day following the day when the Corporate Vice President of the Company no longer serves as Corporate Vice President ( Right Exercise Starting Day ). Provided, however, that if the Warrant owner is the Corporate Vice President of the Company and has an employment contract with the Company, the later of the day following the day the Warrant owner no longer serves as Corporate Vice President or the day following the said employment contract expires shall be the Right Exercise Starting Day. Classified number of persons and units issued Employees of the Company (excluding those who also serve as Directors of the Company) 12 persons 167 units Note: The Warrants issued in August 2013 were approved by the Board of Directors of the Company to grant to the Directors and the Corporate Vice Presidents as a replacement of the traditional Directors retirement benefit in cash, the discontinuation of which was approved at the 139th ordinary general meeting of shareholders

23 4. Executives (1) Directors and Corporate Auditors (as of March 31, 2014) Name Yukio Nagira Kaoru Aizawa Representative Director President Representative Director Director Position, duties and significant concurrent positions CEO, COO Senior Executive Vice President General Manager of Quality, Environment & Safety Management Sector, General Manager of Export Control Center, in charge of Environment Management Strategy, CSR and Corporate Governance Hideo Takasaki Director Senior Executive Vice President General Manager of Corporate Sector Yoichiro Sakuma Director Executive Vice President, in charge of Information & Communication Technology, Medical, Membrane and Corporate Business Development Toshihiko Omote Director Executive Vice President CTO General Manager of Corporate Technology Sector, in charge of Intellectual Property, Functional Base Products, Automotive Products, Information Fine Materials and Manufacturing Engineering Toru Takeuchi Director Vice President CFO General Manager of Corporate Accounting Division Corporate Sector, in charge of America Area Business, Europe Area Business and South Asia Area Business Yoichiro Furuse Outside Director Koshi Mizukoshi Outside Director Kenji Ueki Yoshihiro Taniguchi Masashi Teranishi Masakazu Toyoda Mitsuhide Shiraki Corporate Auditor (full-time service) Corporate Auditor (full-time service) Outside Corporate Auditor Outside Corporate Auditor Outside Corporate Auditor

24 Notes: 1. Directors duties were changed as follows on April 1, Name Yukio Nagira Hideo Takasaki Representative Director Chairman Representative Director President CEO, COO Duties Toru Takeuchi Director Vice President CFO General Manager of Corporate Sector, General Manager of Corporate Finance & Accounting Division, in charge of America Area Business, Europe Area Business and South Asia Area Business 2. Yoshihiro Taniguchi, the full-time Corporate Auditor, has had experiences in the Company s accounting and auditing departments over the years, having a broad range of knowledge in finance and accounting. 3. The Company designated all of the Outside Directors and Outside Corporate Auditors as Independent Directors/Auditors stipulated by Tokyo Stock Exchange and reported them to the Exchange. 4. The Company adopts the executive officer system. Addition to the aforementioned Directors, the following 13 persons take on the duties as indicated. Name Position and Duties Hongin Kim Executive Vice President Korea Business Masami Kanzaki Executive Vice President IT, Logistics and Customer Support & Sales Management Masahiko Arimoto Executive Vice President East Asia Business Michio Yoshimoto Senior Vice President Legal, General Affairs and Export Control Toshio Yamamoto Senior Vice President Human Resources, Education and Japan Plant Management Toshiyuki Umehara Senior Vice President Corporate Strategy Management and Procurement Kageshi Maruyama Vice President Corporate Business Development Kazuyuki Okada Vice President Functional Base Products Yasuhito Oowaki Vice President Automotive Products Tsutomu Nishioka Vice President Corporate Technology (R&D) Tomoo Sakamoto Vice President Manufacturing Engineering Yasushi Nakahira Vice President Functional Base Products Tatsuya Osuka Vice President Information & Communication Technology

25 (2) Compensation, etc. paid to Directors and Corporate Auditors (Unit: millions of yen) Category Director (including Outside Director) Number of payees Amount of payment Outside Director Number of payees Amount of payment Corporate Auditor (including Outside Corporate Auditor) Number of payees Amount of payment Outside Corporate Auditor Number of payees Amount of payment Compensation in cash Bonus paid to Directors Stock Purchase/Subscription Warrants (Equity-based compensation stock options) Total Notes: 1. The above includes 1 Director who retired upon the closure of the 148th general meeting of shareholders held on June 21, The amount of employee s salary (including bonus) for a Director who also holds an employee post is paid separately the above-mentioned compensation. Meanwhile, the amount of employee s salary (including bonus) was not paid for the current term. 3. The limit of compensation for Directors is 30 million yen per month (approved at the 143rd general meeting of shareholders) and that for Corporate Auditors is 12 million yen per month (approved at the 139th general meeting of shareholders). 4. Bonus for Directors is a tentative amount and its payment is subject to the approval of the Item 2 for the 149th general meeting of shareholders as proposed. 5. Matters related to the Warrant (stock option of equity-based compensation) were approved at the 148th ordinary general meeting of shareholders. (3) Summary of policy to determine amount or calculation method of compensation for Directors and Corporate Auditors 1) Compensation for Directors Compensation in cash, bonus and compensation by the Warrant, of Directors, are determined by the Representative Director(s) in accordance with the duties, responsibilities and performances of each Director within the range of the total amount approved by the general meetings of shareholders. 2) Compensation for Corporate Auditors Compensation for Corporate Auditors is determined by consultation among Corporate Auditors in accordance with the duties and responsibilities of each Corporate Auditor within the range of the total amount of compensation for Corporate Auditors approved by the general meetings of shareholders

26 (4) Outside Directors and Outside Corporate Auditors (as of March 31, 2014) 1) Major activities of Outside Directors and Outside Corporate Auditors Name 1. Outside Directors Yoichiro Furuse Koshi Mizukoshi Participation Major comments Participation 2. Outside Corporate Auditors Masashi Teranishi Masakazu Toyoda Mitsuhide Shiraki Major comments Participation Major comments Participation Major comments Participation Major comments Major activities Board of Directors: 100% (12 times out of 12 times) He mainly makes comments from the viewpoint of experienced corporate executive. Board of Directors: 92% (11 times out of 12 times) He mainly makes comments from the viewpoint of experienced corporate executive. Board of Directors: 100% (12 times out of 12 times) Board of Corporate Auditors: 100% (12 times out of 12 times) He mainly makes comments based on his experience at financial institutions over many years and deep financial knowledge. Board of Directors: 100% (12 times out of 12 times) Board of Corporate Auditors: 92% (11 times out of 12 times) He mainly makes comments based on his broad insight and extensive experience in the field of economy, trade and industry. Board of Directors: 100% (12 times out of 12 times) Board of Corporate Auditors: 100% (12 times out of 12 times) He mainly makes comments based on his broad insight as a person with relevant knowledge and experience. 2) Liability limitation agreement of Outside Directors and Outside Corporate Auditors The Company has executed agreements with all of the Outside Directors and Outside Corporate Auditors to limit the compensation liability provided in Paragraph 1, Article 423 of the Companies Act, and the compensation limitation amount under these agreements are the amount determined under laws and regulations

27 The Company s View on Independence of Outside Directors and Outside Corporate Auditors In order to ensure the independence of Outside Directors and Outside Corporate Auditors, the Company has established its Criteria for election of Outside Directors and Outside Corporate Auditors as described below: 1 The Outside Director/Outside Corporate Auditor is not, nor has been an executing person (Director, Corporate Auditor, Corporate Vice President or any other employee) of the Company or the Group. 2. The Outside Director/Outside Corporate Auditor is not an important executing person (director, corporate auditor, accounting advisor, executive officer or executive director, or any other important employee) of a major shareholder of the Company (a shareholder holding 10% or more of the voting rights of the Company). 3. The Outside Director/Outside Corporate Auditor is not an important executing person of a company of which the Company is a major shareholder. 4. The Outside Director/Outside Corporate Auditor is not an important executing person of a major counterparty of the Company (a counterparty for which the amount of payment or receipt for transactions with the Company for the latest fiscal year exceeds 2% of consolidated gross sales). 5. The Outside Director/Outside Corporate Auditor is not an important executing person of a major financial institution of the Company (a financial institution to which the Group s aggregate amount of loans payable for the latest fiscal year exceeds 2% of consolidated total assets). 6. The Outside Director/Outside Corporate Auditor is not a legal professional, accounting and tax professional, consultant, or research and education specialist who receives a large amount of compensation or donation (for the latest fiscal year, 10 million yen or more in the case of an individual and more than 2% of consolidated gross sales in the case of a corporation or an organization) from the Company. 7. The Outside Director/Outside Corporate Auditor does not have a kinship (being a relative within the third degree of kinship or a relative living together) with an executing person of the Company or the Group. 8. In addition to the above, the Outside Director/Outside Corporate Auditor does not have any interest that is reasonably considered to give rise to any doubt on the independence as an outside director or outside corporate auditor or to a conflict of interest with shareholders of the Company

28 5. Accounting auditors (1) Name of accounting auditor: KPMG AZSA LLC (2) Amount of compensation for accounting auditor (Unit: millions of yen) 1) Amount of compensation as an accounting auditor for this business year 151 Total amount of money and other asset interests to be paid by the Company and 2) the subsidiaries of the Company 207 Notes: 1. The compensation for auditing as an accounting auditor under the Companies Act and the compensation for auditing under the Financial Instruments and Exchange Act have not been differentiated in the auditing agreement between the Accounting Auditor and the Company, and also cannot be materially differentiated, so the above figure is the total of these compensations. 2. The Company entrusts to the accounting auditor support and advisory services, etc. for the introduction of IFRS (International Financing Reporting Standards), which are services other than those stipulated in Paragraph 1, Article 2 of the Certified Public Accountants Act (non-auditing work). (3) Policy to determine dismissal or non-reelection of the accounting auditor In addition to the dismissal of the Accounting Auditors by the Board of Corporate Auditors in accordance with the provision of Article 340 of the Companies Act, in principle, the Company does not reelect the Accounting Auditor, elects another relevant accounting auditor and brings the accounting auditor election agenda to the general meeting of shareholders upon consent or request of the Board of Corporate Auditors when the relevant execution of the business by the Accounting Auditor is deemed difficult or when problems are found for eligibility or creditworthiness of the Accounting Auditor based on the auditing standards. The Company also intends to determine election or non-election of the Accounting Auditor based on the number of years continued for auditing in addition to the factors mentioned above

29 6. Internal Controls and Policies of the Company (1) Controls to ensure that the exercise of duties by Directors complies with legal provisions and the Articles of Incorporation, and controls to secure appropriateness of operations The Company, in accordance with the provisions of Article 362 of the Companies Act and of Article 100 of the Ordinance for Enforcement of the Companies Act, defined the Company s fundamental policies on a system to secure appropriateness of operations (hereafter referred to as internal controls ) at its Board of Directors meeting held on May 26, Since then the Company has regularly checked how our internal controls are working and revised them to the fundamental policies as needed. The policies as of the end of this fiscal year were defined as described below. 1) Internal controls to ensure that the exercise of duties by Directors and the employee complies with legal provisions and the Articles of Incorporation i) As the basis of a compliance system, corporate vision and guiding principles and a code of business conducts aimed at ensuring compliance with legal and ethical standards as an action standard are defined, and the code is issued and enforced to the entire staff not only of the Company but also of the whole Group. Directors take the lead in complying with legal and ethical standards. ii) In order to promote CSR activities, including the establishment of compliance and risk management system, a CSR Director is appointed and a CSR Committee chaired by the appointed Director is set up. In addition, an outside director system is adopted. By doing this, we will increase the transparency of the whole management system including the process of corporate decision-making. We will also establish a system to ensure the reasonableness, validity and effectiveness of the operational process and our businesses in general, including the internal control to maintain confidence in financial reporting. iii) Audit department, as an internal audit division, is established for conducting internal audits on each division of the Company and the Group companies to measure reasonableness and other aspects of operational processes and operations in general. In addition, departments specializing in environment, safety, quality and export management are established for coordinating with the audit department when conducting audits. iv) Under the internal reporting system for handling legal violations and ethical standards, a reporting channel is established in which to secure anonymity of informants, the direct recipient of information is an external institution. In addition, the Company establishes an in-house hotline window as well as a Corporate Ethics Committee including the CSR Director and Corporate Auditors, for handling non-compliance matters and preventing reoccurrence of any act of noncompliance