On May 14, 2024, Nihon Kagaku Sangyo Co., Ltd. announced in its press release that it had received a shareholder proposal from ESG Investment Partnership, for its 99th Ordinary General Meeting of Shareholders. The proposals are as follows, 1. The abolition of the basic policy (the person who controls decisions on the company's financial and business policies), 2. amendments to the articles of incorporation (takeover defense measures), 3. Amendments to the articles of incorporation (sale of cross-shareholdings), 4. Separate withdrawal of reserve funds, 5. Amendments to the articles of incorporation (disposal of surplus), 6. Disposal of surplus funds. The Board of directors opposes all shareholder proposal for the following reasons:- (1) The Company's Board of Directors has determined that the first shareholder proposal does not meet legal requirements and is illegal as a shareholder proposal, and therefore has decided not to include it as an agenda item for this general meeting of shareholders, It is stipulated that a general meeting of shareholders of a company with a board of directors may only pass resolutions on matters stipulated in the Companies Act or the Articles of Incorporation (Article 295, Paragraph 2 of the Companies Act).

Since the abolition of the basic policy regarding who should control decisions on financial and business policies does not fall under the purpose of the general meeting of shareholders of the company as stipulated in the Companies Act or the Articles of Incorporation, (2) the company mentions that it will continue to do what is necessary for shareholders, including providing sufficient and appropriate disclosure in accordance with laws and regulations. As providing information in a timely and appropriate manner, we do not believe it is necessary to set forth provisions such as this shareholder proposal in the articles of incorporation, (3) considering the cost of capital and the business relationship with the holding company, the company mentions that it has verified and reviewed profitability from the start, and in order to further improve capital efficiency, the company will continue to reduce cross-shareholdings based on the purpose of the Corporate Governance Code, (4) the company has changed to determining the amount of dividends by considering the level of shareholder equity that is less affected by business performance and the amount of increase in shareholder equity. To continue stable shareholder returns in accordance with the shareholder return policy, the company believe that it is necessary to accumulate a reserve fund, (5) Company mentions that in order to achieve even more stable shareholder returns and to meet the expectations of the shareholders, the company has decided to change the shareholder return policy and apply the revised shareholder return policy for the year-end dividend from the fiscal year ending March 2024.

return policy stipulates to pay stable dividends while comprehensively considering the level of main capital and the amount of increase in stockholders' equity and make a comprehensive decision by taking into account comparisons with other investment projects, capital efficiency, and financial status (6) The content of the last proposal is to pay out the higher of the dividend payout ratio of 100% or the amount equivalent to DOE 7% for the fiscal year ending March 2024. company believe that this may hinder the achievement of medium- to long-term management goals and may also raise concerns that it will be difficult to provide stable returns to shareholders in the future.