Exhibit 99.2

To Our Shareholders

Nippon Koshuha Steel Co., Ltd (the “Company”) would like to express our sincere gratitude for your continued support.
The Company is pleased to announce the convening of the 100th Annual General Shareholders Meeting and would like to report and propose the following matters to our shareholders.
Our group has been striving for the sustainable enhancement of corporate value.
The Company has now entered into a share exchange agreement with Kobe Steel, Ltd. (hereinafter referred to as "Kobe Steel") and ask for your deliberation. As a result, the Company will become a wholly owned subsidiary of Kobe Steel and will be delisted.
We are confident that this share exchange will contribute to the long-term value creation of both the special steel and cast iron businesses.
We kindly ask for your understanding.

May 29, 2025 Nippon Koshuha Steel Co., Ltd. President and Representative Director Daisuke Ogur

To All Shareholders

Notice of the 100th Annual General Shareholders Meeting

Dear Shareholders,
Thank you very much for your continued patronage.
We are pleased to inform you that the 100th Annual General Shareholders Meeting of the Company will be held as follows.

For this convocation, information such as the reference documents for the General Meeting of Shareholders (matters subject to electronic provision) is provided electronically and posted on the following websites. Please access one of the websites to confirm the information.

[Company Website] https://www.koshuha.co.jp/ir/syousyu/

[Shareholders Meeting Materials Website]  https://d.sokai.jp/5476/teiji/

[Tokyo Stock Exchange Website(Tokyo Stock Exchange Listed Company Information Service.)]    https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show

(Please access the above TSE website, enter "Nippon Koshuha Steel" in the "Company Name" field or "5476" in the "Code" field, search, select "Basic Information" and "Documents for Public Inspection/PR Information" in order, and check "Notice of Convocation of General Meeting of Shareholders/Shareholders Meeting Materials" in the "Documents for Public Inspection" section.)

If you are unable to attend the meeting, you may exercise your voting rights via the Internet or in writing. After reviewing the reference documents, please exercise your voting rights by 5:45 p.m. on Monday, June 23, 2025.

Sincerely,

Details

 

3．	Matters for the General Meeting of Shareholders
	Reports	i.       Business Report, Consolidated Financial Statements, and Financial Statements for the 100th Fiscal Year (April 1, 2024 to March 31, 2025) ii.      Report on the Audit Results of the Consolidated Financial Statements by the Accounting Auditor and the Board of Auditors for the 100th Fiscal Year
	Matters to be Resolved	Proposal 1: Approval of the Share Exchange Agreement between the Company and Kobe Steel, Ltd. Proposal 2: Election of Seven Directors Proposal 3: Election of One Substitute Auditor

END

If you attend the meeting, please bring and submit the voting form sent together with this notice at the reception. 

If there are any corrections to the matters subject to electronic provision, such corrections and the matters before and after correction will be posted on the above websites.

 Shareholders who have requested written delivery will also receive a written document containing the matters subject to electronic provision, except for the following items in accordance with laws and Article 14 of the Articles of Incorporation: 

Therefore, the business report, consolidated financial statements, and financial statements described in the written document are only part of the documents audited by the accounting auditor and the auditors.

On the day of the meeting, we will be in light attire (Cool Biz), so we appreciate your understanding.

Guidance on Exercising Voting Rights

Instructions for Exercising Voting Rights   Voting rights at the general meeting of shareholders are important rights of shareholders.   Please read the Reference Documents for General Meeting of Shareholders below before exercising your voting rights.   There are three ways to exercise your voting rights, which are illustrated below:

	Exercising your voting rights in writing (by mail)				Exercising your voting rights via the Internet				Attending the General Meeting of Shareholders
	Please express your approval or disapproval of the proposal on the enclosed Voting Rights Exercise Form, and mail it.				Please indicate your approval or disapproval of the proposal in accordance with the instructions on the next page.				When attending the meeting, please submit the enclosed Voting Rights Exercise Form at the reception of the venue.
	Voting Dateline				Voting Dateline				Date and Time
	The exercise form must be received by 5:45 p.m., Monday, June 23, 2025.				The entry must be completed by 5:45 p.m., Monday, June 23, 2025.				10:00 a.m., Tuesday, June 24, 2025. (The reception desk will open at 9:00 a.m.)

•       If you exercise your voting rights both by mail and via the Internet, the Internet vote will be considered valid. If you vote multiple times via the Internet, the last vote will be considered valid. 

•       If you exercise your voting rights by mail and do not indicate approval or disapproval for a proposal, it will be treated as approval.

Reference Documents for the General Meeting of Shareholders

Proposals and Reference Matters

Proposal 1: Approval of the Share Exchange Agreement between the Company and Kobe Steel, Ltd.

Kobe Steel, Ltd. (hereinafter referred to as “Kobe Steel”) and the Company (hereinafter, Kobe Steel and the Company are collectively referred to as the “Both Companies”) have each resolved at their respective Board of Directors meetings held on May 12, 2025, to implement a share exchange (hereinafter referred to as the “Share Exchange”) in which Kobe Steel will become the wholly owning parent company in the share exchange and the Company will become the wholly owned subsidiary in the share exchange. On May 12, 2025, the Both Companies entered into a share exchange agreement (hereinafter referred to as the “Share Exchange Agreement”).

Accordingly, the Company is seeking your approval of the Share Exchange Agreement in this proposal.

If this proposal is approved, prior to the effective date of the Share Exchange (scheduled for February 2, 2026), the common shares of the Company (hereinafter referred to as “Company Shares”) are scheduled to be delisted from the Standard Market of the Tokyo Stock Exchange, Inc. (hereinafter referred to as the “Tokyo Stock Exchange”) on January 29, 2026 (with the final trading day being January 28, 2026).

In addition to the above, on May 12, 2025, at the Board of Directors meetings of the Both Companies, it was resolved, subject to the effectiveness of the Share Exchange, that all issued shares of Koshuha Foundry Co., Ltd. (hereinafter referred to as “Koshuha Foundry”) held by the Company (hereinafter referred to as “Koshuha Foundry Shares”) and assets related to the cast iron business held by the Company will be distributed in kind (hereinafter referred to as the “In-Kind Distribution”) from the Company to Kobe Steel. At the same time, at the Board of Directors meeting of Kobe Steel, it was resolved, subject to the effectiveness of the Share Exchange, the implementation of the In-Kind Distribution, and the obtaining of the necessary clearances (as defined below), that Kobe Steel will transfer all of the Company Shares held by Kobe Steel to Daido Steel Co., Ltd. (hereinafter referred to as “Daido Steel”) (hereinafter referred to as the “Share Transfer”), and on May 12, 2025, Kobe Steel and Daido Steel entered into a share transfer agreement.

Furthermore, regarding the Share Transfer, which will be executed subject to the effectiveness of the Share Exchange, it is anticipated that Daido Steel will need to obtain approvals and permits from the Japan Fair Trade Commission and other relevant domestic and foreign authorities (hereinafter referred to as the “Clearances”). Therefore, the Share Exchange is also subject to the obtaining of such Clearances. Kobe Steel will conduct the

Share Exchange through a simplified share exchange procedure that does not require approval by a resolution of the general meeting of shareholders, pursuant to Article 796, Paragraph 2 of the Companies Act (Act No. 86 of 2005, as amended; the same shall apply hereinafter). The Company, on the other hand, will seek approval of the Share Exchange Agreement at this Annual General Meeting of Shareholders, and the Share Exchange is scheduled to take effect on February 2, 2026.

As a result, after the execution of the Share Exchange and the Share Transfer, it is expected that the Company’s cast iron business will be operated by Kobe Steel, and the Company’s special steel business will be operated by Daido Steel, respectively.

The reasons for conducting the Share Exchange and an outline of the Share Exchange Agreement are as follows.

Recently, the environment surrounding the special steel and casting industries has become increasingly challenging due to such factors as the medium to long term decline in domestic demand caused by the declining birthrate and aging population, the entry of overseas manufacturers offering low-cost products, and rapid changes in the product mix driven by the shifting trend towards vehicle electrification in the automobile industry, which is a key customer. In addition, difficulties in maintaining continued business growth at the Company are further increasing due to labor shortages and recruitment challenges resulting from the shrinking labor force and diversified working styles, rises in the minimum wage and logistics and energy costs, and the soaring prices of raw materials caused by the depreciation of the yen.

According to Kobe Steel, in light of the abovementioned challenges, Kobe Steel has engaged in extensive discussions internally regarding the strategy and future path of the Company’s business. Points of deliberation included alignment with Kobe Steel’s business strategy, potential synergies between the Companies, the impact on minority shareholders of the Company, and the financial implications for Kobe Steel and the impact on the interests of its shareholders. During this process, Kobe Steel has considered fundamental management reforms, including making the Company a wholly owned subsidiary, aimed at enhancing the corporate value of the Company by realizing a more integrated group management, such as effective utilization of management resources through further strengthening of collaboration and optimal allocation of management resources by eliminating overlapping functions.

To date, Kobe Steel and the Company have been working on improving the profitability of the Company and streamlining the mold and tool business by strengthening their collaboration to enhance the corporate value of the Company. According to Kobe Steel, while certain results have been achieved through these efforts, it has become increasingly clear that the synergies between the Company’s special steel business and the business portfolio of Kobe Steel are rather limited. However, despite efforts aimed at enhancing corporate value of the Company, a net loss attributable to owners of the parent was recorded for the fiscal years ended March 2020, March 2021, and March 2023. In the fiscal year ended March 2024, although net income attributable to owners of the parent temporarily recovered due to a special gain from the transfer of fixed assets by Koshuha Precision Co., LTD, a subsidiary of the Company, the Company still recorded operating and ordinary losses. Furthermore, in the fiscal year ended March 2025, in addition to operating and ordinary losses, a net loss attributable to owners of the parent was again recorded (Note). As such, the Company has not yet achieved stable profitability. According to Kobe Steel, as a result of these findings, Kobe Steel has been determined that, in order for the Company to further improve its profitability and achieve stable business operations, it is necessary to aim for

improved profitability and the reconstruction of a stable business management system through a capital alliance with a third party that can provide strong support in building a business foundation, with the Company’s special steel business as its core business, rather than continuing independent business operations as a listed company.

(Note) For details, please refer to the Company’s press release “Notice Regarding the Differences Between the Forecasted Consolidated Financial Results and Actual Results for the Fiscal Year Ended March 2025, and Differences Between the Actual Non-Consolidated Financial Results and the Previous Fiscal Year’s Actual Result” announced on May 12, 2025.

According to Kobe Steel, in this context, Kobe Steel started discussions and considerations regarding the transfer of the Company’s special steel business with Daido Steel, with which Kobe Steel had prior contacts. Through a series of discussions with Daido Steel and deliberations within Kobe Steel based on the results of such discussions, Kobe Steel decided that the best option for enhancing the corporate value of Kobe Steel and the Company was to transfer the Company’s special steel business to Daido Steel, which has strong expertise and extensive experience in the special steel business, positioning it as its core operation, and to operate the iron casing business as part of the KOBELCO Group (which refers to the corporate group centering around Kobe Steel; hereinafter the same). According to Kobe Steel, as a result, Kobe Steel and Daido Steel entered into detailed discussions regarding going private of the Company and acquisition of the special steel business of the Company by Daido Steel, and examine the feasibility of such transaction and explore a potential transaction structure.

Kobe Steel and Daido Steel continued to engage in discussions, and on May 31, 2024, Kobe Steel and Daido Steel proposed to the Company the privatization of the Company and the acquisition of the Company’s special steel business by Daido Steel (the “Transaction”). Although it had not been determined at the time of the proposal as of such date which of Kobe Steel or Daido Steel would take the Company private, one of the potential structures for taking the Company private was a public tender offer for the Company Shares followed by a squeeze-out procedure.

As described in “3．Overview of the Content of the Matters Listed in Each Item of Article 184, Paragraph 1 of the Ordinance for Enforcement of the Companies Act” of “(1) Matters Concerning the Appropriateness of the Consideration for the Share Exchange” of “C Matters taken into consideration to ensure that the interests of our shareholders are not harmed” below, the Company considered the specifics of establishing an independent reviewing structure necessary for the review of the Transaction to ensure the fairness of the Transaction since the proposal for the Transaction was made by Kobe Steel, its parent company and controlling shareholder. After appropriately establishing such reviewing structure, the Company commenced a specific review of the Transaction. Specifically, prior to commencing the review of the Transaction, the Company established a special committee on August 27, 2024 consisting of independent members who have no conflict of interest with Kobe

Steel, the controlling shareholder, or Daido Steel (the “Special Committee;” details of which are provided in “3．Overview of the Content of the Matters Listed in Each Item of Article 184, Paragraph 1 of the Ordinance for Enforcement of the Companies Act” of “(1) Matters Concerning the Appropriateness of the Consideration for the Share Exchange” of “C Matters taken into consideration to ensure that the interests of our shareholders are not harmed” below) to ensure fairness, transparency, and objectivity of the decision-making process of, and to eliminate arbitrary decision making by, the Company’s board of directors. the Company also retained external experts to further develop the structure for the specific review. As described in “3．Overview of the Content of the Matters Listed in Each Item of Article 184, Paragraph 1 of the Ordinance for Enforcement of the Companies Act” of “(1) Matters Concerning the Appropriateness of the Consideration for the Share Exchange” of “C Matters taken into consideration to ensure that the interests of our shareholders are not harmed” below, the Special Committee retained K.K. Stand by C (“Stand by C”) as its own financial advisor on September 24, 2024.

Subsequently, as a result of the due diligence conducted by Kobe Steel and Daido Steel on the Company, more detailed review on their respective acquisition targets, and discussions between Kobe Steel and Daido Steel, it was agreed among Kobe Steel, Daido Steel, and the Company that, to facilitate the transfer of the Company’s special steel business to Daido Steel, Kobe Steel would first take the Company private, since it is already the parent company of the Company. According to Kobe Steel, while Kobe Steel considered a tender offer followed by a squeeze-out procedure as a method of taking the Company private, as proposed on May 31, 2024, it was determined that making the Company a wholly owned subsidiary through a share exchange using Kobe Steel’s common shares (“Kobe Steel Shares”) as consideration would be a more desirable approach for the interest of minority shareholders of the Company as a way to take the Company private. The reason behind this decision was that: (i) by holding Kobe Steel Shares, minority shareholders of the Company would be able to enjoy the benefits expected by Kobe Steel through the Transaction and profits to be generated through Kobe Steel’s overall strategy, including the optimization of the business portfolio; and (ii) by continuing to hold Kobe Steel Shares, minority shareholders of the Company would be able to cash out Kobe Steel Shares any time if they wish as Kobe Steel Shares are listed on the Prime Market of TSE and due to Kobe Steel Shares’ ensured liquidity.

In view of the above, Kobe Steel engaged in further discussions with Daido Steel regarding the method of taking the Company private and, having reached an agreement with Daido Steel on making the Company a wholly owned subsidiary through a share exchange using Kobe Steel Shares as consideration, proposed the Share Exchange to the Company on April 3, 2025 as the method of taking the Company private for the Transaction.

After receiving the proposal for the Share Exchange, the Company confirmed to maintain the reviewing structure and the engagement of external experts as described in “3．Overview of the Content of the Matters

Listed in Each Item of Article 184, Paragraph 1 of the Ordinance for Enforcement of the Companies Act” of “(1) Matters Concerning the Appropriateness of the Consideration for the Share Exchange” of “C Matters taken into consideration to ensure that the interests of our shareholders are not harmed” below in order to consider the Share Exchange. Additionally, the Company consulted certain matters related to the Share Exchange with the Special Committee and engaged in the review of the Share Exchange.

As a result of deliberations and discussions among Kobe Steel, the Company, and Daido Steel, it has been concluded that the Transaction will be beneficial for enhancing the corporate value of Kobe Steel and the Company. The Transaction will strengthen the competitiveness and improve the profitability of the special steel business of the Company by leveraging the management know-how of the Daido Steel Group (which refers to the corporate group centering around Daido Steel; hereinafter the same) in the special steel business and pursuing synergies, as well as allow the iron casting business to leverage the management resources of the KOBELCO Group and expand production volumes by collaborating with and receiving purchase orders from the KOBELCO Group companies. Also, Kobe Steel will be able to focus its management resources on the core areas of its growth strategy by restructuring its business portfolio through the Transaction.

Specifically, the Companies and Daido Steel believe that the Transaction will unlock the following synergies: 

The Company and Daido Steel will be able to improve production efficiency and expand production volumes and production lots by utilizing surplus capacity through the optimization of production allocation and layout. Additionally, by suppressing redundant investments, cash flow will be improved, which is expected to enhance the competitiveness of the Company’s special steel business. 

The Company Group and the Daido Steel Group can enhance their presence and acquire new customers in their domestic business by sharing their sales networks. In the overseas business, the Company Group (which refers to the Company and its four subsidiaries; hereinafter the same) will be able to promote the sales of the Company Group’s products by leveraging the Daido Steel Group’s extensive overseas network which will contribute to sales increase and improvement of services of the Company Group. 

The plan is to optimize resources in the sales, research, procurement, logistics, and corporate functions of the Company Group and the Daido Steel Group. Also, the two groups are considering integrating their distribution functions over the medium to long term, to promote the efficient operation of the two groups as well as to improve services and reduce costs.

Following the Transaction, the Company will be delisted, which may result in losing certain benefits typically associated with being listed, such as diversified methods of financing with the use of equity financing, enhanced

credibility and positive effect on recruitment activities due to strong name recognition, and increased reliability on its finances by undergoing accounting audits. However, the disadvantages to the Company of being delisted is limited while the benefits gained from the Transaction are greater. This is because the Company has not engaged in equity financing since April 2000 and the disadvantage of losing access to equity financing is considered negligible. Also, the name recognition of the Company is already sufficiently strong due to its long history and business performance, and the risk of losing name recognition is low even if it is delisted, with little adverse effects on recruitment. Further, the financial reliability of the Company will be maintained as the Company will be subject to accounting audits for the consolidated financial reports of Kobe Steel and Daido Steel after the Transaction.

The Company understands that, normally, shareholders of a wholly owned subsidiary in a share exchange can indirectly enjoy the fruits of the subsidiary’s enhanced corporate value through their investment in the parent company. However, in this Transaction, since the special steel business will be transferred to Daido Steel, this relationship does not hold, and the investment will be forcibly terminated.

In practice, transaction scheme involving forced termination of investment include a cash tender offer (for the purpose of privatization) or a share exchange. the Company asked on this point but Kobe Steel responded that, due to the uncertain business environment of the Company, it would be difficult to acquire shares from shareholders for cash. Additionally, the Company learned that Daido Steel is not considering acquiring the iron casting business and wishes to privatize the Company, so acquiring only the Company Shares owned by Kobe Steel through a partial tender offer is also not feasible.

Given these points, the Company, on the premise that changing the scheme is difficult, examined the appropriateness of the scheme including the Share Exchange, and the Company found no unreasonable points in the transaction scheme or type of consideration, deeming it appropriate for the following reasons:

Subsequent to comprehensive discussions between the Companies and Daido Steel based on the above, they agreed that transferring the special steel business of the Company to Daido Steel would lead to enhancing competitiveness and improving profitability of the special steel business. To achieve this, on May 12, 2025,: (a) the boards of directors of the Companies have decided to execute the Share Exchange Agreement to make the Company a wholly owned subsidiary of Kobe Steel through the Share Exchange; (b) the boards of directors of the Companies have decided to implement the In-Kind Dividend subject to the effectuation of the Share Exchange; and (c) the board of directors of Kobe Steel has decided to implement the Share Transfer (including the execution of a share transfer agreement relating to the Share Transfer) to Daido Steel subject to the effectuation of the Share Exchange, the implementation of the In-Kind Dividend, and the Regulatory Clearances.

On May 12, 2025, the Company and Kobe Steel, Ltd. have entered into a memorandum of understanding (the “MOU”) with Daido Steel regarding matters related to the management and other aspects of the Company following the completion of this Transaction. The MOU sets forth the following agreements:

For details on the Share Transfer, please refer to Daido Steel’s press release “Notice Regarding the Acquisition of All Shares of the Company Co., Ltd. (Making It a Wholly Owned Subsidiary) and Changes to Specified Subsidiaries” announced on May 12, 2025.

<Structure of the Transaction>

The structure of the Transaction will be as follows:

Subject to the Regulatory Clearances, the Share Exchange will be consummated by Kobe Steel through a simplified share exchange that does not require approval by a resolution of its shareholders’ meeting and by the Company after obtaining approval at its annual shareholders’ meeting. Kobe Steel will become the wholly owning parent company and the Company will become the wholly owned subsidiary through the Share Exchange.

	(Before the Share Exchange)	(After the Share Exchange)

(Note 1) The percentages indicated in the diagram represent the ratio of voting rights held out of the total number of voting rights (hereinafter the same applies to the percentages mentioned in the following diagrams in <Structure of the Transaction>.

Subject to the effectuation of the Share Exchange, the Company will implement the In-Kind Dividend of the Koshuha Foundry Shares and the assets of the Company relating to its iron casting business, to Kobe Steel.

	(Before the In-Kind Dividend)	(After the In-Kind Dividend)

Subject to (i) the effectiveness of the Share Exchange and (ii) the implementation of the In-Kind Dividend, and the Regulatory Clearances, Kobe Steel will transfer all of its the Company Shares to Daido Steel. There are no capital relationship between Kobe Steel and Daido Steel as of May 12, 2025, and there are no plans to establish any capital relationship after the Share Transfer.

	(Before the Share Transfer)	(After the Share Transfer)

2. Summary of the Share Exchange Agreement

The contents of the share exchange agreement entered into by both companies on May 12, 2025, are as follows.

Share Exchange Agreement (Copy)

Kobe Steel, Ltd. (hereinafter referred to as “Party A”) and Nippon Koshuha Steel Co., Ltd. (hereinafter referred to as “Party B”) hereby enter into the following share exchange agreement (hereinafter referred to as “this Agreement”) as of May 12, 2025 (hereinafter referred to as the “Date of Execution”).

Article 1: Share Exchange 

In accordance with the provisions of this Agreement, Party A and Party B shall conduct a share exchange (hereinafter referred to as the “Share Exchange”) whereby Party A becomes the wholly owning parent company in the share exchange and Party B becomes the wholly owned subsidiary in the share exchange. Party A shall acquire all of the issued shares of Party B (excluding the shares of Party B already owned by Party A; the same shall apply hereinafter) through the Share Exchange.

Article 2: Trade Names and Addresses 

The trade names and addresses of Party A and Party B are as follows: 

Party A (Wholly Owning Parent Company in the Share Exchange) 

Trade Name: Kobe Steel, Ltd. 

Address: 2-2-4 Wakinohama Kaigan-dori, Chuo-ku, Kobe, Hyogo, Japan 

Party B (Wholly Owned Subsidiary in the Share Exchange) 

Trade Name: Nippon Koshuha Steel Co., Ltd. 

Address: 1-10-5 Iwamotocho, Chiyoda-ku, Tokyo, Japan

Article 3: Shares to be Delivered and Their Allocation in the Share Exchange 

In the Share Exchange, Party A shall, in exchange for the shares of Party B held by the shareholders of Party B (excluding Party A, and after the cancellation of treasury shares by Party B pursuant to Article 9, hereinafter referred to as the “Allotted Shareholders”) as of the point in time immediately prior to Party A’s acquisition of all issued shares of Party B (hereinafter referred to as the “Reference Time”), deliver to such shareholders a number of Party A’s common shares calculated by multiplying the total number of Party B’s common shares held by such shareholders by 0.26.

2. In the Share Exchange, Party A shall allocate to each Allotted Shareholder 0.26 shares of Party A’s common

stock for each share of Party B’s common stock held by such shareholder.

3. If, as a result of the above, the number of Party A’s common shares to be allocated to an Allotted Shareholder includes a fraction of less than one share, Party A shall handle such fraction in accordance with Article 234 of the Companies Act and other relevant laws and regulations.

Article 4: Matters Concerning Capital and Capital Reserve

The amount of capital and capital reserve to be increased by Party A as a result of the Share Exchange shall be as follows:

(1) Amount of capital: 0 yen

(2) Amount of capital reserve: An amount separately determined by Party A in accordance with Article 39 of the Company Accounting Regulations

(3) Amount of retained earnings reserve: 0 yen

Article 5: Effective Date

The date on which the Share Exchange becomes effective (hereinafter referred to as the “Effective Date”) shall be February 2, 2026. However, if necessary due to the progress of procedures for the Share Exchange or other reasons, Party A and Party B may, upon mutual consultation and agreement, change this date.

Article 6: Shareholders’ Meeting for Approval of the Share Exchange Agreement

Party A shall implement the Share Exchange without obtaining approval by resolution of a shareholders’ meeting as stipulated in Article 795, Paragraph 1 of the Companies Act, in accordance with Article 796, Paragraph 2 of the Companies Act. However, if approval by resolution of a shareholders’ meeting becomes necessary pursuant to Article 796, Paragraph 3 of the Companies Act, Party A shall seek such approval by the day before the Effective Date.

2. Party B shall seek approval by resolution of a shareholders’ meeting as stipulated in Article 783, Paragraph 1 of the Companies Act for this Agreement by the day before the Effective Date.

Article 7: Management of Company Assets, etc.

From the Date of Execution until the Effective Date, each of Party A and Party B shall execute its business and manage and operate its assets with the care of a prudent manager, and shall cause its subsidiaries to do the same. Except for acts separately stipulated in this Agreement, if either party intends to take any action (or cause its subsidiaries to take any action) that may have a material impact on its assets or rights and obligations, or that may have a material impact on the execution or conditions of the Share Exchange, such action shall be taken only after prior consultation and agreement between Party A and Party B.

Article 8: Distribution of Surplus, etc.

Party A may, with March 31, 2025 as the record date, distribute surplus up to 55 yen per share, and may also, with September 30, 2025 as the record date, distribute surplus up to 55 yen per share.

2. Party A may, pursuant to a resolution of its Board of Directors held on May 12, 2025, acquire its own shares as follows:

(1) Type of shares to be acquired: Party A’s common shares

(2) Total number of shares to be acquired: 1.9 million shares

(3) Total acquisition price: 3.9 billion yen

(4) Acquisition period: May 13, 2025 to June 9, 2025

(5) Method of acquisition: Market purchase

3. Except as provided in the preceding two paragraphs, neither Party A nor Party B shall, from the Date of Execution until the Effective Date, distribute surplus with any date as the record date or acquire its own shares with any date as the acquisition date (except where required to acquire its own shares in response to the exercise of shareholders’ rights under applicable laws and regulations).

Article 9: Handling of Treasury Shares 

By resolution of its Board of Directors held by the day before the Effective Date, Party B shall cancel all treasury shares it holds as of the Reference Time (including treasury shares acquired in response to share purchase requests by dissenting shareholders under Article 785, Paragraph 1 of the Companies Act).

Article 10: Amendment and Termination of the Agreement 

If, between the Date of Execution and the day before the Effective Date, there is a material change in the financial or business condition of either Party A or Party B, if a situation arises or becomes apparent that would significantly hinder the execution of the Share Exchange, or if a situation arises or becomes apparent that makes it difficult to achieve the purpose of this Agreement, Party A and Party B may, upon mutual consultation and agreement, amend the conditions of the Share Exchange or other contents of this Agreement, or terminate this Agreement.

2. If, between the Date of Execution and the day before the Effective Date, either party breaches any provision of this Agreement, the other party may, after giving notice to cure the breach within a reasonable period, terminate this Agreement if the breach is not cured within such period.

Article 11: Effectiveness of the Agreement

If, by the day before the Effective Date, approval by resolution of Party A’s shareholders’ meeting as stipulated in the proviso to Article 6, Paragraph 1 (only if such approval is required under Article 796, Paragraph 3 of the Companies Act), or approval by resolution of Party B’s shareholders’ meeting as stipulated in Article 6, Paragraph 2, is not obtained, or if the necessary approvals, etc. from relevant domestic and foreign authorities required for the execution of the Share Exchange (including the effectiveness of filings with relevant authorities, but not limited thereto) are not obtained, or if this Agreement is terminated pursuant to the preceding Article, this Agreement shall lose its effect.

Article 12: Governing Law and Jurisdiction 

This Agreement shall be governed by and construed in accordance with the laws of Japan.

2. In the event of any dispute arising in connection with the performance or interpretation of this Agreement, the Tokyo District Court shall have exclusive jurisdiction as the court of first instance.

Article 13: Matters for Consultation 

Any matters not provided for in this Agreement or any matters necessary in connection with the Share Exchange shall be determined by sincere consultation and agreement between Party A and Party B in accordance with the spirit of this Agreement. If any question arises regarding the interpretation of this Agreement, Party A and Party B shall resolve it through sincere consultation and agreement.

As evidence of the execution of this Agreement, two copies of this Agreement have been prepared, and each of Party A and Party B shall sign and seal one copy and retain it.

May 12, 2025

Party A: 2-2-4 Wakinohama Kaigan-dori, Chuo-ku, Kobe, Hyogo
Kobe Steel, Ltd.
President and Representative Director: Yoshihiko Katsukawa

Party B: 1-10-5 Iwamotocho, Chiyoda-ku, Tokyo
Nippon Koshuha Steel Co., Ltd.
President and Representative Director: Daisuke Ogura

A. Matters Concerning the Total Number of Consideration for the Share Exchange and the Appropriateness of the Allocation

(Note 1) Share allotment ratio. 

Kobe Steel will allot and deliver 0.26 shares of its stock for each share of the Company Shares. However, no shares will be allotted in the Share Exchange with respect to the Company Shares held by Kobe Steel as of the Reference Date (as defined below). The above allotment ratio in the Share Exchange (the “Share Exchange Ratio”) is subject to change upon mutual discussion and agreement between the Companies in the event of any material change to the assumptions on which the calculation of the Share Exchange Ratio is based.

(Note 2) Number of Kobe Steel Shares to be delivered in the Share Exchange 

Upon the Share Exchange, Kobe Steel will deliver Kobe Steel Shares to the shareholders of the Company as of the time immediately prior to Kobe Steel’s acquisition of all of the issued shares of the Company through the Share Exchange (the “Reference Date”), excluding the Company Shares held by Kobe Steel, in the number obtained by multiplying the total number of the Company Shares held by the shareholders after cancellation of treasury shares by the Company as described below (excluding Kobe Steel) by the Share Exchange Ratio, in exchange for the Company Shares held by such shareholders.

Kobe Steel plans to use the treasury shares held by Kobe Steel as of May 12, 2025 and a part of the treasury shares newly repurchased by Kobe Steel after May 12, 2025 for such delivery of its shares. Currently, there is no plan to issue new shares for the allotment of shares in the Share Exchange. For details on the repurchase of treasury shares by Kobe Steel after May 12, 2025, please refer to Kobe Steel’s press release “Notice on Determination of Matters Related to Repurchase Treasury Shares (Repurchase of Treasury Shares Based on the Articles of Incorporation Pursuant to Article 459, Paragraph 1 of the Companies Act” announced on May 12, 2025.

By a resolution of the Company’s board of directors meeting to be held on or before the day immediately preceding the effective date of the Share Exchange, the Company plans to cancel on the Reference Date

all of the treasury shares held as of the Reference Date, including the treasury shares to be acquired by the Company through purchase of shares demanded by dissenting shareholders in connection with the Share Exchange under Article 785, Paragraph 1 of the Companies Act. The number of shares to be allotted and delivered in the Share Exchange is subject to change due to the cancellation of treasury shares by the Company.

(Note 3) Handling of shares less than one unit 

In accordance with the Articles of Incorporation and the Share Handling Regulations of Kobe Steel, the shareholders of the Company who will hold shares less than one unit (i.e., less than 100 shares) in Kobe Steel as a result of the Share Exchange, will be entitled to use the following programs concerning Kobe Steel Shares as shares less than one unit cannot be sold on the financial instruments exchange market. 

Under Article 194, Paragraph 1 of the Companies Act and the Articles of Incorporation of Kobe Steel, shareholders who hold shares less than one unit in Kobe Steel may purchase from Kobe Steel the number of shares that, together with the number of shares less than one unit held by such shareholders, will make up one unit.

Under Article 192, Paragraph 1 of the Companies Act, shareholders who hold shares less than one unit in Kobe Steel may request that Kobe Steel buy back their shares less than one unit. 

(Note 4) Handling of fractional shares 

If any shareholder of the Company is to receive a fraction of less than one share of Kobe Steel Shares in connection with the Share Exchange, Kobe Steel will, pursuant to Article 234 of the Companies Act and other relevant laws and regulations, sell Kobe Steel Shares in a number equivalent to the total sum of such factional shares (any fraction of less than one share in the total number will be rounded down) and deliver the sales proceeds to such shareholders in proportion to their fractional shares.

Nomura Securities Co., Ltd. (“Nomura Securities”) conducted a valuation of Kobe Steel using the average market share price analysis since Kobe Steel Shares are listed on the Prime Market of the TSE and a market share price is available. Based on the valuation base date of May 9, 2025, the closing price at the TSE on the valuation base date and the simple average of the closing prices for the five business days, one month, three months, and six months up to the valuation base date were used for the average market share price analysis.

As for the Company, Nomura Securities conducted a valuation using the average market share price analysis since the Company Shares are listed on the Standard Market of the TSE and a market share price is available. Based on the valuation base date of May 9, 2025, the closing price at the TSE on the valuation base date and the simple average of the closing prices for the five business days, one month, three months, and six months up to the valuation base date were used for the average market share price analysis. In addition, the comparable company analysis, since the Company has more than one comparable listed

companies, making it possible to estimate its equity value using the comparable company analysis, and the discounted cash flow analysis (the “DCF Analysis”), to reflect the future business activities in the valuation, were used for the valuation.

The results of the share exchange ratio calculation under each valuation method, when using 1 as the equity value per share of Kobe Steel Shares, are as follows.

In calculating the share exchange ratio, Nomura Securities assumed that public information and all information provided to Nomura Securities were accurate and complete and did not independently verify the accuracy and completeness of such information. Nomura Securities also did not perform any independent valuation, appraisal, or assessment of the assets or liabilities (including financial derivatives, off-balance sheet assets and liabilities, and other contingent liabilities) of the Companies and their affiliates, including analysis and valuation of individual assets and liabilities, nor did Nomura Securities request a third party institution to conduct an appraisal or assessment of such assets or liabilities. It was assumed that the Company’s financial forecasts and other forward-looking information were reasonably considered or prepared by the management of the Company based on the best possible estimates and judgments available at the time. Nomura Securities’ valuation reflects the information obtained by Nomura Securities and the economic conditions existing up to May 9, 2025. The sole purpose of Nomura Securities’ valuation is to be used as a reference by the board of directors of Kobe Steel to consider the Share Exchange Ratio.

The financial forecast of the Company used by Nomura Securities to perform the valuation based on the DCF Analysis includes a fiscal year in which a significant increase or decrease in earnings is expected. Specifically, a significant increase in profits compared to the previous fiscal year due to increased sales in the iron casting business and an improvement in the operating profit margin is expected in the fiscal year ending March 31, 2026. The implementation of the Share Exchange is not reflected in such financial forecast.

Yamada Consulting Group Co., Ltd. (“Yamada Consulting”) conducted a valuation of Kobe Steel using the market price analysis since Kobe Steel Shares are listed on the Prime Market of the TSE and a market share price is available. Based on the valuation base date of May 9, 2025, the closing price at the TSE on the valuation base date and the simple average of the closing prices for the one month, three months, and six months up to the valuation base date were used for the market price analysis.

As for the Company, Yamada Consulting conducted a valuation using the market price analysis since the Company Shares are listed on the Standard Market of the TSE and a market share price is available. Based on the valuation base date of May 9, 2025, the closing price at the TSE on the valuation base date and the

simple average of the closing prices for the one month, three months, and six months up to the valuation base date were used for the market price analysis. In addition, the comparable company analysis, since the Company has more than one comparable listed companies, making it possible to estimate its equity value using the comparable company analysis, and the DCF Analysis, to reflect the future business activities in the valuation, were used for the valuation.

The results of the share exchange ratio calculation under each valuation method, when using 1 as the equity value per share of Kobe Steel Shares, are as follows.

In calculating the share exchange ratio, Yamada Consulting assumed that public information and all information provided by the Company were accurate and complete and did not independently verify the accuracy and completeness of such information. Yamada Consulting also did not perform any independent valuation, appraisal, or assessment of the assets or liabilities (including financial derivatives, off-balance sheet assets and liabilities, and other contingent liabilities) of the Companies and their affiliates, including analysis and valuation of individual assets and liabilities, nor did Yamada Consulting request a third party institution to conduct an appraisal or assessment of such assets or liabilities. It was assumed that the Company’s financial forecasts and other forward-looking information were reasonably prepared by the management of the Company based on the best possible estimates and judgments available at the time of its valuation. Yamada Consulting’s valuation reflects the information obtained by Yamada Consulting and the economic conditions existing up to the time of its valuation. The sole purpose of Yamada Consulting’s valuation is to be used as a reference by the board of directors of the Company and the Special Committee to consider the Share Exchange Ratio.

The financial forecast of the Company used by Yamada Consulting to perform the valuation based on the DCF Analysis includes a fiscal year in which a significant increase or decrease in earnings is expected. Specifically, for the fiscal year ending March 2026, improvements in product mix and quality, as well as reductions in operating costs, are expected to increase both sales and operating profit margins in the special steel business and iron casting business, with operating profit projected to reach 850 million yen (compared to a loss in the previous fiscal year). For the fiscal year ending March 2027, the special steel business is expected to continue improving its product mix, resulting in a higher gross profit margin and an operating profit of 1,290 million yen (51.7% increase compared to the previous fiscal year). The implementation of the Share Exchange is not reflected in such financial forecast.

B. The reason for choosing Kobe Steel Shares as the consideration for the Share Exchange.

The Company has chosen Kobe Steel Shares as the consideration for the Share Exchange.

The Company understands that, normally, shareholders of a wholly owned subsidiary in a share exchange can indirectly enjoy the fruits of the subsidiary’s enhanced corporate value through their investment in the parent company. However, in this Transaction, since the special steel business will be transferred to Daido Steel, this relationship does not hold, and the investment will be forcibly terminated.

In practice, transaction scheme involving forced termination of investment include a cash tender offer (for the purpose of privatization) or a share exchange. the Company asked on this point but Kobe Steel responded that, due to the uncertain business environment of the Company, it would be difficult to acquire shares from shareholders for cash. Additionally, the Company learned that Daido Steel is not considering acquiring the iron casting business and wishes to privatize the Company, so acquiring only the Company Shares owned by Kobe Steel through a partial tender offer is also not feasible.

Given these points, the Company, on the premise that changing the scheme is difficult, examined the appropriateness of the scheme including the Share Exchange, and the Company found no unreasonable points in the transaction scheme or type of consideration, deeming it appropriate for the following reasons:

C　 Matters taken into consideration to ensure that the interests of our shareholders are not harmed

As of May 12, 2025, Kobe Steel holds 7,575,300 shares of the Company Shares (which represent 51.69% of 14,653,932 shares, calculated by subtracting the number of treasury shares of the Company (33,685 shares) from the total number of issued shares as of March 31, 2025 (14,687,617 shares), which makes the Company a consolidated subsidiary of Kobe Steel. Therefore, Kobe Steel and the Company have determined that it is necessary to avoid conflicts of interest and ensure fairness of the Share Exchange, and have implemented the following measures to ensure fairness (including measures to avoid conflicts of interest):

To ensure fairness in the calculation of the share exchange ratio to be used in the Share Exchange, Kobe Steel retained Nomura Securities, a third-party valuation firm independent of the Companies and Daido Steel, and obtained a valuation report regarding the share exchange ratio on May 9, 2025, and the Company retained Yamada Consulting, a third-party valuation firm independent of the Companies and Daido Steel, and obtained a valuation report regarding the share exchange ratio on May 9, 2025.

Summaries of the above-mentioned valuation reports are provided in “A. Matters Concerning the Total Number of Consideration for the Share Exchange and the Appropriateness of the Allocation” of ”(2) Overview of the calculation” above. Neither of the Companies has obtained a written opinion (fairness opinion) from their third-party valuation firms to the effect that the Share Exchange Ratio is fair to the shareholders of Kobe Steel or the Company from a financial viewpoint.

Kobe Steel retained ishimura & Asahi (Gaikokuho Kyodo Jigyo) (“Nishimura & Asahi”) as its legal advisor for the Transaction and received legal advice regarding the procedures for the Transaction and the method and process of decision making by its board of directors. Nishimura & Asahi is independent of the Companies and Daido Steel and does not have any material interest in the Companies.

The Company retained Anderson Mori & Tomotsune (Gaikokuho Kyodo Jigyo) (“Anderson Mori & Tomotsune”) as its legal advisor for the Transaction and received legal advice regarding the procedures for the Transaction and the method and process of decision making by its board of directors. Anderson Mori & Tomotsune is independent of the Companies and Daido Steel and does not have any material interest in the Companies or Daido Steel.

On August 27, 2024, in considering the Transaction, the Company established the Special Committee in order to ensure the fairness of the terms and conditions of the Transaction; eliminate arbitrary decision making with respect to the Transaction; ensure fairness, transparency, and objectivity of the decision making process of the Company; avoid conflicts of interest; and confirm that a decision by the Company to pursue the Transaction would not cause any disadvantage to the general shareholders of the Company. The Special Committee is comprised of Mr. Tetsuya Miyajima and Mr. Hiroyuki Nagano, who are both outside directors of the Company and are registered as independent directors with the TSE, and Mr. Waichiro Takao, an outside company auditor of the Company, none of which has any conflict of interest with Kobe Steel or Daido Steel. (The remuneration of the members of the Special Committee will be a fixed amount to be paid as consideration for their duties, regardless of the contents of the written report, and does not include any contingency fee to be paid subject to the closing of the Transaction.)

On April 3, 2025, in considering the Transaction, the board of directors of the Company consulted with the Special Committee on (i) whether the purpose of the Transaction is legitimate, including whether the Transaction will contribute to enhancing the corporate value of the Company; (ii) whether the fairness and appropriateness of the terms and conditions of the Transaction, including the share exchange ratio for the Share Exchange, are ensured; (iii) whether due consideration has been given to the interests of the Company’s shareholders through fair procedures in connection with the Transaction; and (iv) in addition to (i) through (iii) above, whether the Transaction is considered not to cause any disadvantage to the minority shareholders ((i) through (iv), collectively, the “Matters of Consultation”). (Since the Transaction was initially contemplated as being a tender offer followed by a squeeze-out procedure as the method of taking the Company private, the matters of consultation at the time the Special Committee was established on August 27, 2024 have been revised based on the new structure of implementing a share exchange as the method of taking the Company private).

The Special Committee held 15 meetings in total during the period from September 4, 2024 to May 9, 2025 for approximately 17.5 hours. In addition, the Special Committee collected information and held discussions from time to time as necessary to carefully consider the Matters of Consultation.

Specifically, the Special Committee confirmed that there were no issues with the independence and expertise of Yamada Consulting, the financial advisor and third-party valuation firm appointed by the Company, and Anderson Mori & Tomotsune, its legal advisor, and approved such appointment. Further, on September 24, 2024, the Special Committee retained Stand by C as its own financial advisor, independent of the Companies and Daido Steel. The Special Committee has confirmed that Stand by C does not constitute a related party of either of the Companies or Daido Steel and does not have any material interest in the Companies or Daido Steel.

The Special Committee then received explanations from the Company on the purpose of the Share Exchange, the background and process leading up to the Share Exchange, the preparation procedures and contents of the Company’s business plan used for calculating the Share Exchange Ratio, the reviewing structure and decision making method for the Share Exchange. Also, after sending a list of questions to Kobe Steel regarding the purpose of the Transaction, the Special Committee received explanations from Kobe Steel on the purpose of the Transaction, the background and process leading up to the Transaction, details of the synergies to be generated by the Transaction and specific measures to generate such synergies, the reason for selecting the structure of the Transaction, the management plan and treatment of employees after the Transaction, the Share Exchange Ratio, and other terms and conditions of the Transaction, and held a question and answer session. Additionally, the Special Committee received advice from Anderson Mori & Tomotsune, the legal advisor of the Company, with respect to the method and process of decision making by the board of directors of the Company for the Transaction, the operation of the Special Committee, and measures to ensure the fairness of the procedures for the Transaction and measures to avoid conflicts of interest. Further, the Special Committee received explanations from

Yamada Consulting, the financial advisor and third-party valuation firm of the Company, on the method and results of the calculation of the Share Exchange Ratio and held a question and answer session, followed by advice from Stand by C, its own financial advisor, from a financial viewpoint, to conduct its review.

Having received timely reports on the process and details of the discussions and negotiations between Kobe Steel and the Company concerning the Transaction, the Special Committee held a series of discussions on the negotiation policy and other matters and gave its opinions to the Company until a final proposal on the Share Exchange Ratio was received from Kobe Steel. As such, the Special Committee was substantially involved in the negotiation process with Kobe Steel.

Through these procedures, the Special Committee conducted careful discussions and consideration on the Matters of Consultation. On May 12, 2025, the Special Committee submitted a written report to the board of directors of the Company to the effect that the Transaction will not cause disadvantage to the general shareholders of the Company with the unanimous consent of all members. A summary of the written report submitted by the Special Committee is provided below.

(a)       Details of the written report

(b)       Reasons for the Recommendation

1. Whether the Purpose of the Transaction is Legitimate and Reasonable (Including Whether the Transaction Contributes to the Enhancement of the Company’s Corporate Value)

The Special Committee conducted hearings and confirmed the background and process leading to this Transaction, its purpose, and the synergies expected to be obtained from it, with the Company, Daido Steel, and Kobe Steel.

The summary of these findings is as follows:

A) To date, Kobe Steel and the Company have been working on improving the profitability of the Company and streamlining the mold and tool business by strengthening their collaboration to enhance the corporate value of the Company. 

B) Consequently, Kobe Steel has reached a conclusion that, in order to further enhance the corporate value of the Companies, a capital alliance should be formed between the Company and a third party capable of providing strong support for building the Company’s business foundation centered on its special steel business. 

C) In this context, Kobe Steel started discussions and considerations regarding the transfer of the Company’s special steel business with Daido Steel, with which Kobe Steel had prior contacts. Through a series of discussions with Daido Steel and deliberations within Kobe Steel based on the results of such discussions, Kobe Steel decided that the best option for enhancing the corporate value of Kobe Steel and the Company was to transfer the Company’s special steel business to Daido Steel, which has strong expertise and extensive experience in the special steel business, positioning it as its core operation, and to continue to operate the iron casing business as part of the KOBELCO Group. 

D) Kobe Steel and Daido Steel continued to engage in discussions, and on May 31, 2024, Kobe Steel and Daido Steel proposed to the Company the privatization of the Company and the acquisition of the Company’s special steel business by Daido Steel. 

E) Although methods such as a tender offer and subsequent squeeze-out procedures were considered for privatization, it was ultimately determined that making the Company a wholly owned subsidiary through a share exchange with Kobe Steel Shares as consideration would allow minority shareholders of the Company to benefit from the overall corporate strategy of Kobe Steel, including the expected optimization of its business portfolio, and to enjoy the liquidity of Kobe Steel Shares, which are listed on the Tokyo Stock Exchange Prime Market. Kobe Steel considers this approach is desirable as it serves the interests of minority shareholders of the Company.

According to the Company, the expected synergies from this Transaction are as follows:

(i)       Cost reduction and expansion of production volumes through optimization of production allocation and layout and suppression of redundant investments

the Company and Daido Steel will be able to improve production efficiency and expand production volumes and production lots by utilizing surplus capacity through the optimization of production allocation and layout. Additionally, by suppressing redundant investments, cash flow will be improved, which is expected to enhance the competitiveness of the Company’s special steel business.

(ii)       Enhanced presence and increased sales by leveraging the Daido Steel Group’s extensive domestic and overseas network

The the Company Group and the Daido Steel Group can enhance their presence and acquire new customers in their domestic business by sharing their sales networks. In the overseas business, the the Company Group will be able to promote the sales of the Company Group’s products by leveraging the Daido Steel Group’s extensive overseas network which will contribute to sales increase and improvement of services of the the Company Group

(iii)       Optimization of resources by sharing and consolidating various functions and integration of distribution functions 

The plan is to optimize resources in the sales, research, procurement, logistics, and corporate functions of the the Company Group and the Daido Steel Group. Also, the two groups are considering integrating their distribution functions over the medium to long term, to promote the efficient operation of the two groups as well as to improve services and reduce costs.

Following the Transaction, the Company will be delisted, which may result in losing certain benefits typically associated with being listed, such as diversified methods of financing with the use of equity financing, enhanced credibility and positive effect on recruitment activities due to strong name recognition, and increased reliability on its finances by undergoing accounting audits. However, according to the Company, the disadvantages to the Company of being delisted is limited while the benefits gained from the Transaction are greater. This is because the Company has not engaged in equity financing since April 2000 and the disadvantage of losing access to equity financing is considered negligible. Also, the name recognition of the Company is already sufficiently strong due to its long history and business performance, and the risk of losing name recognition is low even if it is delisted, with little adverse effects on recruitment. Further, the financial reliability of the Company will be maintained as the Company will be subject to accounting audits for the consolidated financial reports of Kobe Steel and Daido Steel after the Transaction.

Based on the above explanations regarding the background, management issues, purpose, and expected synergies of the Transaction, there are no particularly unreasonable points, and the process is recognized as the result of reasonable consideration. Therefore, this Transaction can be evaluated as contributing to the enhancement of the Company’s corporate value, and its purpose is legitimate and reasonable.

2. Whether the Terms of This Transaction (Including the Share Exchange Ratio for Share Exchange) are Considered to Ensure Fairness and Appropriateness

(1) Appropriateness of the Transaction Scheme

Normally, shareholders of a wholly owned subsidiary in a share exchange can indirectly enjoy the fruits of the subsidiary’s enhanced corporate value through their investment in the parent company. However, in this Transaction, since the special steel business will be transferred to Daido Steel, this relationship does not hold, and the investment will be forcibly terminated.

In practice, transaction scheme involving forced termination of investment include a cash tender offer (for the purpose of privatization) or a share exchange. Kobe Steel responded that, due to the uncertain business environment of the Company, it would be difficult to acquire shares from shareholders for cash. Additionally, Daido Steel is not considering acquiring the iron casting business and wishes to privatize the Company, so acquiring only the Company Shares owned by Kobe Steel through a partial tender offer is also not feasible.

Given these points, the Special Committee, on the premise that changing the scheme is difficult, examined the appropriateness of the scheme including the Share Exchange, and found no unreasonable points in the transaction scheme or type of consideration, deeming it appropriate for the following reasons:

(2) Examination of the Share Exchange Ratio

The Special Committee considers the Share Exchange Ratio of 1:0.26 (0.26 Kobe Steel Shares for each the Company share) to be fair and reasonable for the following reasons:

proposal of 1:0.22 to the final proposal of 1:0.26, following sincere negotiations. 

2024 and March 2025, indicating instability in business profitability, making it difficult to expect a significant premium. Furthermore, the Company plans to announce on May 12, 2025, a “Notice Regarding the Recording of Extraordinary Losses (Impairment Losses),” and is scheduled to record an impairment loss of 7,364 million yen related to special steel production facilities and sales bases for special steel business (the “Impairment”). If this announcement is made, there is a possibility that the Company Shares price will decline accordingly, so approving a share exchange proposal that includes a certain premium based on the market price of the Company Shares before such announcement can be considered reasonably justifiable from the perspective of shareholder interests of the Company.

(Note) According to the Company, the Impairment is unrelated to the negotiations for this Transaction and was initiated based on the business situation and the auditor’s indication, with no intention to influence the Share Exchange Ratio.

Considering the above, the terms of the Transaction, including the share exchange ratio, are considered appropriate.

3. Whether Due Consideration Has Been Given to the Interests of the Company’s Shareholders Through Fair Procedures

The Company has taken the following measures to ensure the fairness of the procedures, eliminate arbitrariness and conflicts of interest in the decision-making process, and protect the interests of minority shareholders. Considering these comprehensively, it is recognized that due consideration has been given to the interests of shareholders through fair procedures.

(1) Establishment of the Special Committee 

the Company established the Special Committee in connection with the consideration of this Transaction. The purpose of this committee was to eliminate any arbitrariness or risk of conflicts of interest in the decision-making process of the Company’s Board of Directors and to ensure the fairness of the process. As described below, the special committee was composed of independent members, and practical measures were taken to enhance the effectiveness of the committee. From the standpoint of increasing corporate value and protecting the interests of general shareholders, the Special Committee examined and made judgments regarding the appropriateness of the Transaction, the reasonableness of the Transaction terms, and the fairness of the procedures.

(a) Composition of Member of the Special Committee and Independence

The members of the Special Committee consist of two outside directors and one outside auditor of the Company. These members are independent from the Company, Kobe Steel and Daido Steel, and the outcome of the Transaction itself. Furthermore, their compensation consists solely of a fixed remuneration that is paid regardless of whether the Transaction is completed or not; there is no success fee contingent upon the announcement or completion of the Transaction.

In light of the above, it is considered that the independence of each member of this Special Committee is duly ensured.

(b) Granting Authority to Participate in Negotiations

The board of the Company granted the Special Committee the authority to negotiate Transaction terms with Kobe Steel and Daido Steel.

(c) Authority to Appoint External Advisors

The board of the Company allowed the Special Committee to use external advisors appointed by the Company or to appoint its own independent advisors at the Company’s expense. The Special Committee appointed Stand by C as its independent financial advisor after confirming its independence.

(d) Treatment of the Special Committee’s Judgment by the Board

The Board of Directors of the Company, in resolving to establish the Special Committee, also resolved that, with respect to decision-making regarding this Transaction, the Board would give the utmost respect to the judgments of the Special Committee. In particular, if the Special Committee determines that the terms of the Transaction are not appropriate, the Board of Directors of the Company will resolve not to approve the Transaction under such terms.

(2) Obtaining Independent Expert Advice 

(a) Acquisition of a Valuation Report on the Share Exchange Ratio from a Third-Party Valuation Institution

the Company appointed Yamada Consulting as a financial advisor and third-party valuation institution independent from the Company, Kobe Steel, Daido Steel, and the outcome of the Transaction. the Company requested Yamada Consulting to calculate the Share Exchange Ratio for this Share Exchange, and obtained a valuation report regarding the share exchange ratio.

(b) Acquisition of Legal Advice from a Legal Advisor

the Company appointed Anderson Mori & Tomotsune as a legal advisor independent from Kobe Steel, Daido Steel, the Company, and the outcome of the Transaction. the Company received legal advice

from Anderson Mori & Tomotsune regarding the process and method of decision-making by the board of directors of the Company in relation to this share exchange, as well as other points to consider in making decisions regarding this share exchange. In addition, the Company received a legal due diligence report on Kobe Steel from Anderson Mori & Tomotsune and was provided with an explanation of its contents.

(c) Acquisition of Due Diligence Results from an Accounting and Tax Advisor

the Company appointed Yamada & Partners Tax Corporation as an accounting and tax advisor independent from the Company, Kobe Steel, Daido Steel, and the outcome of the transaction. the Company received an accounting and tax due diligence report on Kobe Steel from Yamada & Partners Tax Corporation and was provided with an explanation of its contents.

(3) Absence of Undue Influence by Kobe Steel-Related Parties in Negotiations

Of the directors of the Company, the deliberation regarding this Transaction at the board of directors is being conducted by the four directors other than President and Representative Director Daisuke Ogura (who transferred from Kobe Steel to the Company in April 2023), Director Kiyohisa Kotani (who transferred from Kobe Steel to the Company in April 2024), and Director Masahito Shoji, Director (who has served as an employee of Kobe Steel and as a director of the Company since 2024 June). In addition, among the auditors of the Company, Auditor Michitaka Tanigawa (who transferred from Kobelco Construction Machinery Co., Ltd., a subsidiary of Kobe Steel, to the Company in June 2022) did not participate in the deliberation.

Furthermore, these directors and the auditor are also not expected to participate in the deliberation or resolution of the board of directors meeting to be held on May 12, 2025, regarding this Transaction.

Moreover, in order to avoid the effects of structural conflicts of interest and information asymmetry in this Share Exchange, in addition to President and Representative Director Daisuke Ogura, Director Kiyohisa Kotani, and Director Masahito Shoji, Auditor Michitaka Tanigawa has not participated in the examination, discussions, or negotiations regarding this Transaction from the standpoint of the Company.

On the other hand, with respect to the formulation of the Company’s business plan, President and Representative Director Daisuke Ogura and Director Kiyohisa Kotani were necessarily involved due to personnel circumstances at the Company, at the Company’s request. Their involvement in the process of formulating the business plan was confirmed through questions and answers with Yamada Consulting and Stand by C regarding the content and background of the business plan, and no particular issues have been pointed out.

Therefore, there appear to be no particular issues to be noted regarding the involvement of President and Representative Director Daisuke Ogura and Director Kiyohisa Kotani in the formulation of the business plan.

(4) Negotiations by the Company 

the Company, in accordance with the negotiation policy pre-approved by this Special Committee, has engaged in substantive discussions and negotiations with Kobe Steel on multiple occasions regarding the Share Exchange Ratio for this Share Exchange, in order to ensure fairness from the perspective of protecting the interests of minority shareholders.

Furthermore, during these discussions and negotiations, the Special Committee has received timely reports from the Company regarding the progress and details of these discussions and negotiations. The Special Committee has also discussed policies and expressed its opinions, thereby being substantially involved in the negotiation process with Kobe Steel.

(5) Market Check 

There are no agreements or arrangements between the Company and Kobe Steel that would restrict counterproposals from potential acquirers. On the other hand, at present, Kobe Steel is the controlling shareholder, holding more than 50% of the shares of the Company, and as the proposer of this Transaction, Kobe Steel is promoting the execution of the Transaction. Therefore, it cannot be said that there is a strong necessity for the Company to actively conduct a market check, and it is not considered unreasonable that no measures related to an active market check have been implemented.

(6) Majority-of-Minority Condition 

the Company has not taken measures such as setting a condition for termination of the share exchange agreement in the event that, at the shareholders’ meeting, a certain number of votes (specifically, a majority of the voting rights of shareholders other than Kobe Steel) are not cast in favor of the Share Exchange—this is known as a “majority of the minority” condition.

However, in M&A transactions where the acquirer holds a high percentage of the target company’s shares, such as in the acquisition of a subsidiary by a controlling shareholder, it has been pointed out that setting a majority of the minority condition may hinder M&A transactions that contribute to the enhancement of corporate value.

With respect to this Share Exchange as well, since Kobe Steel is the controlling shareholder holding more than 50% of the total voting rights of the Company, there are concerns that setting a majority of the

minority condition could have the aforementioned hindering effect. Therefore, it is not considered unreasonable that such a condition has not been set.

(7) Enhanced Information Disclosure and Process Transparency

The press release regarding the Share Exchange will provide appropriate disclosure in accordance with laws and Tokyo Stock Exchange regulations, and sufficient information will be disclosed to allow general shareholders to judge the appropriateness of the Transaction terms.

4. Whether the Decision by the Company to Carry Out the Transaction is Not Disadvantageous to Minority Shareholders

As described above, (i) the Transaction can be evaluated as contributing to the enhancement of the Company’s corporate value and is legitimate and reasonable, (ii) the terms of the Transaction, including the share exchange ratio, are fair and appropriate, and (iii) sufficient consideration has been given to the interests of minority shareholders through fair procedures. Therefore, the decision by the Company to carry out the Transaction is not considered disadvantageous to minority shareholders.

The meeting of the board of directors of the Company held on May 12, 2025 to resolve the proposal regarding the Transaction was attended by four of the seven directors of the Company, which excluded Mr. Daisuke Ogura, President and Representative Director (who was permanently transferred from Kobe Steel to the Company in April 2023), Mr. Kiyohisa Kotani, Director (who was permanently transferred from Kobe Steel to the Company in April 2024), and Mr. Masahito Shoji, Director (who has served as an employee of Kobe Steel and as a director of the Company since June 2024). Deliberations were held and a resolution for the Transaction was passed with unanimous approval. In addition to Mr. Daisuke Ogura, President and Representative Director, Mr. Kiyohisa Kotani, Director, and Mr. Masahito Shoji, Director, Mr. Michitaka Tanigawa, Company Auditor (who was permanently transferred from Kobelco Construction Machinery Co., Ltd., a subsidiary of Kobe Steel, to the Company in June 2022), did not participate in the consideration, discussion, or negotiation of the Transaction as a member of the Company. On the other hand, President and Representative Director Daisuke Ogura and Director Kiyohisa Kotani have been involved in the formulation of the Company’s business plan. This involvement was deemed essential due to personnel circumstances concerning the Company’s officers and employees. Therefore, with the approval of the Special Committee and at the request of the Company, they have participated in the formulation of the business plan.

As stated in “iii. Establishment of Special Committee with No Conflict of Interest and Obtaining of Written Report by the Company” above, the Special Committee retained Stand by C as its own financial advisor, independent of the Companies and Daido Steel, and received advice from Stand by C regarding the calculation of the Share Exchange Ratio and relevant matters. Stand by C is not a related party to the Companies and Daido Steel and does not have any material interest in the Companies or Daido Steel.

As a result of this Share Exchange, the amount of capital and reserves to be increased for Kobe Steel will be determined separately by Kobe Steel in accordance with the provisions of Article 39 of the Company Accounting Regulations. We have comprehensively considered and examined this treatment in light of Kobe Steel's financial condition, capital policy, and other relevant circumstances, and have determined that it is appropriate and has been decided within the scope permitted by laws and regulations.

(1) Provisions of Kobe Steels Articles of Incorporation

The Articles of Incorporation of Kobe Steel stipulate, in accordance with laws and Article 14 of the Company’s Articles of Incorporation, that information is omitted from the written documents delivered to shareholders who request such delivery (documents describing matters provided electronically). However, this information is posted on the Company’s website (https://www.koshuha.co.jp/ir/syousyu/), the website for materials for the General Meeting of Shareholders (https://d.sokai.jp/5476/teiji/), and the Tokyo Stock Exchange website (https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show).

(2) Matters Regarding the Method of Monetizing the Exchange Consideration

(i) Market Where the Exchange Consideration Is Traded

Kobe Steel Shares are traded on the Prime Market of the Tokyo Stock Exchange.

(ii) Parties Who Mediate, Broker, or Act as Agents for Transactions of the Exchange Consideration

Kobe Steel Shares. are mediated, brokered, etc., by financial instruments business operators (such as securities companies) nationwide.

(iii) Restrictions on the Transfer or Other Disposal of the Exchange Consideration

　N.A.

(3) Matters Regarding the Market Price of the Exchange Consideration

Based on the business day immediately preceding the date of execution of this share exchange agreement (May 12, 2025), the average closing prices of Kobe Steel, Ltd. shares on the Prime Market of the Tokyo Stock Exchange for the periods of one month, three months, and six months (rounded to the nearest yen) are as follows:

(4) Contents of the Balance Sheets for Each Fiscal Year Ended in the Past Five Years for Kobe Steel, Ltd.

Since Kobe Steel, Ltd. submits securities reports pursuant to Article 24, Paragraph 1 of the Financial Instruments and Exchange Act, this information is omitted.

5.       Matters Regarding the Appropriateness of Provisions on Stock Acquisition Rights Related to This Share Exchange

N.A.

6. Matters Regarding Financial Statements, etc.

(1) Contents of Financial Statements, etc. for the Most Recent Fiscal Year of Kobe Steel, Ltd.

The contents of the financial statements, etc. for the most recent fiscal year of Kobe Steel, Ltd. (fiscal year ending March 2025) are posted on the Company’s website (https://www.koshuha.co.jp/ir/syousyu/), the website for materials for the General Meeting of Shareholders (https://d.sokai.jp/5476/teiji/), and the Tokyo Stock Exchange website (https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show), in accordance with laws and Article 14 of the Company’s Articles of Incorporation.

(2) Details of Important Disposals of Assets, Assumption of Significant Liabilities, and Other Events Affecting the Company’s Assets After the End of the Most Recent Fiscal Year of Kobe Steel, Ltd. and the Company

(i) Kobe Steel, Ltd. 

a. At the Board of Directors meeting held on May 12, 2025, Kobe Steel, Ltd. resolved to conduct a share exchange, making Kobe Steel, Ltd. the wholly owning parent company and the Company the wholly owned subsidiary, and entered into this share exchange agreement on the same day. The contents of this share exchange agreement are as described above in “2. Overview of the Share Exchange Agreement.”

(ii) Company 

Proposal 2: Approval of the Election of Seven Directors

All seven directors will complete their terms at the close of this General Meeting, and therefore, the election of seven directors is proposed.
The candidates for director are as follows.

N.A.

April 1986: Joined Kobe Steel, Ltd.

July 2012: Appointed General Manager, Equipment Department, Kakogawa Works, Steel Business, Kobe Steel, Ltd.

June 2014: Appointed General Manager, Planning Office, Kobe Works, Steel Business (concurrently serving as General Manager, Equipment Department, Kakogawa Works, Steel Business), Kobe Steel, Ltd.

April 2015: Appointed General Manager, Planning & Administration Department, Kakogawa Works, Steel Business, Kobe Steel, Ltd. October 2018: Appointed General Manager, Equipment Department, our company

June 2019: Appointed Director and Deputy General Manager, Toyama Works (concurrently serving as General Manager, Equipment Department, Toyama Works), our company

June 2020: Appointed Executive Officer, responsible for Group Quality Assurance and Deputy General Manager, Toyama Works (concurrently serving as General Manager, Equipment Department, Toyama Works), our company

April 2021: Appointed Senior Executive Officer, responsible for Group Quality Assurance and Manufacturing, and Deputy General Manager, Toyama Works (concurrently serving as General Manager, Technology Department, Toyama Works), our company

April 2023: Appointed Executive Managing Officer, responsible for Group Quality Assurance and General Manager, Toyama Works, our company

June 2023: Appointed Director and Executive Managing Officer, responsible for Group Quality Assurance and General Manager, Toyama Works, our company (Current position)

President & CEO (part-time), NK Seiko Co., Ltd.

At Kobe Steel, Ltd., the parent company, this individual has mainly been engaged in the equipment and planning management departments. At our company, after serving as the Equipment Department Manager and Technical Department Manager at the Toyama Plant, he is currently the Director and Senior Executive Officer, as well as the General Manager of the Toyama Plant. With extensive knowledge and experience in overall manufacturing, he is expected to fulfill the role of a management executive at the Toyama Plant and to provide oversight in areas such as sales, general affairs, and planning. For these reasons, he has been nominated again as a candidate for Director

April 1987: Joined the Company

April 2010: General Manager, Section Steel Sales Department, Sales Division

April 2011: Manager, Section Steel Sales Department, Sales Division

June 2016: Manager, Tool Steel Sales Department, Sales Division

April 2017: Manager, Tool Steel Sales Department, Sales Division (also serving as Executive Officer)

June 2018: Director, Deputy General Manager of Sales Division (concurrently serving as Osaka Branch Manager)

June 2020: Executive Officer, in charge of Tool Steel-related Business and Deputy General Manager of Sales Division (concurrently serving as Osaka Branch Manager)

April 2021: Executive Officer, General Manager of Sales Division (concurrently serving as Osaka Branch Manager)

June 2021: Director and Executive Officer, General Manager of Sales Division (concurrently serving as Osaka Branch Manager)

April 2022: Director and Senior Managing Executive Officer, General Manager of Sales Division (concurrently serving as Osaka Branch Manager)

April 2025: Director and Executive Vice President, General Manager of Sales Division (concurrently serving as Osaka Branch Manager) (Current position)

President and Representative Director, KAMS Co., Ltd. (part-time)

Chairman, MICROFINE TRADING (SHANGHAI) CO.,LTD (part-time)

Since joining the company, he has mainly been engaged in the sales division, serving as General Manager of the Bar Steel Sales Department, General Manager of the Tool Steel Sales Department, and Deputy General Manager of the Sales Headquarters. He is currently serving as Director and Senior Managing Executive Officer, Head of Sales Headquarters. Due to his extensive experience within the company and his insight into the steel industry, he has been nominated again as a candidate for Director.

April 1992: Joined Kobe Steel, Ltd.

January 2007: Senior Staff Member, Welding Systems Department, Welding Company, Kobe Steel, Ltd.

April 2019: General Manager in charge, Planning and Administration Department, Welding Business Division, Kobe Steel, Ltd.

April 2022: Assigned to the Planning and Administration Department, Welding Business Division, Kobe Steel, Ltd. (Seconded to Hanshin Welding Equipment Co., Ltd.)

August 2023: Assigned to the Steel & Aluminum Business Division, Kobe Steel, Ltd. (General Manager in charge, Administration Department, General Administration & Planning Headquarters, our company)

April 2024: Executive Officer, General Manager, Administration Department, General Administration & Planning Headquarters, our company

June 2024: Director and Executive Officer, responsible for Group Compliance, responsible for Audit Office, and General Manager, General Administration & Planning Headquarters (concurrently serving as General Manager, Administration Department, same headquarters), our company

January 2025: Director and Executive Officer, responsible for Group Compliance, responsible for Audit Office, and General Manager, General Administration & Planning Headquarters, our company (Current position)

N.A.

Currently, he serves as Director and Executive Officer in charge of Group Compliance, Head of the Audit Office, and General Manager of the General Affairs and Planning Division. He possesses comprehensive knowledge of our Company’s finance and overall management. We have determined that he can be expected to fulfill the functions of an executive in the General Affairs and Planning Division, as well as the supervisory functions of a director over areas such as sales and manufacturing. For these reasons, we have continued to nominate him as a candidate for director.

April 1988: Joined Kobe Steel, Ltd.

January 2004: Senior Staff Member, Steel Division, Steel General Affairs Department, Kobe Steel, Ltd.

April 2018: General Manager, Planning and Administration Department, Steel Business Division (concurrently General Manager, Compliance Department), Kobe Steel, Ltd.

April 2019: General Manager, Planning and Administration Department, Steel Business Division (concurrently Group Leader, Risk Management Group, and General Manager, Compliance Department), Kobe Steel, Ltd.

April 2021: General Manager, Administration Department, Steel & Aluminum Business Division (concurrently Group Leader, Risk Management Group, and General Manager, Internal Control & Audit Department), Kobe Steel, Ltd.

April 2024: General Manager, Planning and Administration Department, Steel & Aluminum Business Division (concurrently General Manager, Internal Control & Audit Department) (current position), Kobe Steel, Ltd.

June 2024: Director (part-time) of our company (current position)

General Manager, Planning and Administration Department, Steel & Aluminum Business Division, Kobe Steel, Ltd. (concurrently serving as General Manager, Internal Control & Audit Department)

Director (Part-time), Shinko Wire Company, Ltd.

Audit & Supervisory Board Member (Part-time), Shinko Logistics, Ltd.

After gaining experience in the administrative departments of the Steel Business Division at Kobe Steel, Ltd., the parent company, he has successively served as General Manager of the Planning and Administration Department and Head of the Risk Management Group in the Steel & Aluminum Business Division of the same company. He is currently serving as General Manager of the Planning and Administration Department (concurrently as General Manager of the Internal Control & Audit Department) in the Steel & Aluminum Business Division of the same company, as well as Director of our company. Given that he is expected to fulfill a supervisory function over the overall business operations of our company, we have continued to nominate him as a candidate for Director.

April 1997: Registered as an attorney (Dai-ichi Tokyo Bar Association)

Joined Kajitani General Law Office

(Currently still in this position)

April 2014: Auditor, Dai-ichi Tokyo Bar Association

June 2016: Outside Director (part-time) of our company

(Currently still in this position)

December 2020: Outside Director, Nippon Chori-ki Co., Ltd.

December 2022: Outside Director and Audit & Supervisory Committee Member, Nippon Chori-ki Co., Ltd.

(Currently still in this position)

Attorney, Kajitani General Law Office

Outside Director and Audit & Supervisory Committee Member, Nippon Chori-ki Co., Ltd.

Attorney, Kajitani General Law Office

Outside Director and Audit & Supervisory Committee Member, Nippon Chori-ki Co., Ltd.

He does not have direct experience in business management; however, by utilizing his expertise as a lawyer, we expect him to provide supervision and advice on our business execution from a professional perspective, particularly with regard to strengthening the supervisory function of corporate management and promoting compliance management. For these reasons, he has been continuously nominated as a candidate for outside director.

April 1978: Joined Matsushita Electric Industrial Co., Ltd. (now Panasonic Holdings Corporation)

April 2009: President and Representative Director, Panasonic Plasma Display Co., Ltd.

April 2012: Specially Appointed Professor, Department of Business Engineering, Graduate School of Engineering, Osaka University

April 2013: Professor, Organization for Research Promotion and Collaboration, University of Hyogo June 2016: Outside Director, ESPEC Corporation

June 2020: Outside Director (part-time), the Company (Current position)

April 2021: Specially Appointed Professor, Organization for Research Promotion and Collaboration, University of Hyogo

April 2024: Specially Appointed Professor, Organization for Social Value Creation, University of Hyogo (Current position)

Hyogo Prefectural University, Organization for the Creation of Social Value, Specially Appointed Professor

Based on experience in company management and as an outside director, we expect this person to provide expert advice on strengthening the supervisory functions of company management and on business operations from a technical perspective. For this reason, we have continued to consider this person as a candidate for outside director.

(Note)

1. There are no special interests between each director candidate and the Company.

2. Kobe Steel, Ltd. is a specified affiliated business entity (parent company) of the Company. The positions and responsibilities at Kobe Steel, Ltd. of candidates who are executive officers of that company or who have been executive officers within the past ten years are as stated in their respective career summaries.

3. Mr. Tetsuya Miyajima and Mr. Hiroyuki Nagano are candidates for outside director.

4. The Company has entered into a directors and officers liability insurance contract as stipulated in Article 430-3, Paragraph 1 of the Companies Act with an insurance company. The insured under this insurance contract are the Company’s directors, auditors, and executive officers, and the Company bears the full amount of the insurance premiums. The insurance contract covers litigation costs and damages, etc., that the insured may be required to bear as a result of company lawsuits, third-party lawsuits, shareholder derivative lawsuits, and similar actions. However, as a measure to ensure the proper execution of duties by the insured, damages arising from criminal acts or similar conduct by the insured are excluded from coverage. If each candidate is elected and assumes office as a director, they will become insured under this insurance contract. The Company also plans to renew this insurance contract with the same terms at the next renewal.

5. The Company has entered into a contract with Mr. Tetsuya Miyajima and Mr. Hiroyuki Nagano to limit their liability for damages as stipulated in Article 427, Paragraph 1 of the Companies Act, with the limit of liability set at the minimum liability amount prescribed by Article 425, Paragraph 1 of the Companies Act. If the reappointment of both individuals is approved, the Company plans to continue this contract with them.

6. The Company has designated Mr. Tetsuya Miyajima and Mr. Hiroyuki Nagano as independent directors as defined by the Tokyo Stock Exchange, and if their reappointment is approved, they will continue to serve as independent directors. The Company has entered into an advisory contract with Kajitani Law Office, to which Mr. Tetsuya Miyajima belongs, but the amount of remuneration paid by the Company to the office in the most recent fiscal year was minimal, and it has been determined that there is no issue with Mr. Miyajima’s independence.

7. The term of office of Mr. Tetsuya Miyajima as an outside director of the Company will be nine years as of the conclusion of this General Meeting.

8. The term of office of Mr. Hiroyuki Nagano as an outside director of the Company will be five years as of the conclusion of this General Meeting.

In addition, regarding matters to be stated in proposals for the election of directors as prescribed in Article 74 of the Ordinance for Enforcement of the Companies Act, there are no other special matters to be noted.

Proposal 3: Approval of One Substitute Auditor

The effectiveness of the appointment of Mr. Naoki Haruyama, who was elected as a substitute Audit & Supervisory Board Member at the 99th Annual General Meeting of Shareholders held on June 21, 2024, is set to expire at the commencement of this General Meeting. Therefore, in preparation for the possibility that the number of outside Audit & Supervisory Board Members required by law may not be met, we hereby request the election of one substitute Audit & Supervisory Board Member.

Please note that, with respect to this appointment, it may be revoked by a resolution of the Board of Directors with the consent of the Audit & Supervisory Board, provided that such revocation occurs before the appointee assumes office.

Furthermore, the consent of the Audit & Supervisory Board has been obtained regarding this proposal.

The candidate for substitute Audit & Supervisory Board Member is as follows.

October 1990: Joined Asahi Shinwa Accounting Firm (now KPMG AZSA LLC)

March 1993: Registered as a Certified Public Accountant

April 2004: Financial Services Agency, Certified Public Accountants and Auditing Oversight Board, Inspector of Certified Public Accountant Audits

May 2007: Employee (now Partner) at AZSA LLC (now KPMG AZSA LLC)

July 2022: Director, Haruyama Certified Public Accountant Office (current position)

February 2024: Outside Audit & Supervisory Board Member, Noda Corporation (current position)

June 2024: Auditor, Novartis Foundation (current position)

Director, Haruyama Certified Public Accountant Office Outside Audit & Supervisory Board Member, Noda Corporation Auditor, Novartis Foundation for the Promotion of Science

Although he does not have direct experience in company management, he possesses extensive experience and knowledge gained from many years of working at an audit firm as a certified public accountant. We have therefore determined that he is capable of appropriately performing audit duties regarding the execution of our company’s operations, and have nominated him as a substitute candidate for Outside Audit & Supervisory Board Member.

 Notes: 

1. There are no special interests between the candidate and the Company. 

2. Mr. Naoki Haruyama is a substitute candidate for Outside Audit & Supervisory Board Member. 

3. If Mr. Naoki Haruyama assumes the position of Audit & Supervisory Board Member, the Company plans to enter into a contract with him to limit his liability for damages as stipulated in Article 427, Paragraph 1 of the Companies Act, with the limit of liability for damages under such contract set at the minimum liability amount prescribed in

Article 425, Paragraph 1 of the Companies Act. 

4. The Company has entered into a directors and officers liability insurance contract with an insurance company as stipulated in Article 430-3, Paragraph 1 of the Companies Act. The insured persons under this insurance contract are the Company’s directors, Audit & Supervisory Board Members, and executive officers, and the Company bears the full amount of the insurance premiums. This insurance contract covers litigation expenses and damages, etc., that the insured persons may be required to bear as a result of company lawsuits, third-party lawsuits, derivative lawsuits, and similar actions. However, as a measure to ensure the proper execution of duties by the insured persons, damages arising from criminal acts or similar conduct by the insured persons are excluded from coverage. If Mr. Naoki Haruyama assumes the position of Audit & Supervisory Board Member, he will be included as an insured person under this insurance contract. The Company also plans to renew this insurance contract with the same content at the next renewal.

END

(For Reference) The Board Structure and Main Experience of Each Officer in the Event the Proposal for the Election of Directors and Audit & Supervisory Board Members is Approved.

Note: The above table does not represent all of the expertise possessed by each individual.

Business Report

1. Matters Concerning the Current State of the Group

(1) Progress and Results of Business

During the fiscal year under review, the Japanese economy continued to recover moderately, with improvements in the employment and income environment and a recovery in capital investment. On the one hand, the outlook remains uncertain, with continued inflation and concerns about an economic slowdown due to the impact of U.S. tariff policy.

In this economic environment, sales in Our Group remained low due to sluggish demand in key sectors such as automobiles and construction machinery, and changes in the external environment such as inventory adjustments in the supply chain. In addition to falling prices of raw materials and fuels, we continued our efforts to improve sales prices and reduce fixed costs, but demand remained weak and the profit and loss situation remained severe.

As a result, net sales for the fiscal year under review were 36,774,000,000 yen (up 0.4% from the previous fiscal year), business loss 787 million yen (1635 million yen for business loss in the previous fiscal year), and ordinary loss was 728 million yen (1585 million yen for ordinary loss in the previous fiscal year). In addition, Our Company and Kams Co., Ltd, a consolidated subsidiary, recorded an impairment loss on non-current assets, resulting in a net loss attributable to owners of parent of 7738 million yen (6612 million yen of net income attributable to owners of parent in the previous fiscal year).

We regret to inform you that we will not pay dividends for the current fiscal year in consideration of our business performance and financial position. We sincerely apologize to our shareholders for any inconvenience caused. Thank you for your understanding.

Business results by business segment are as follows.

(i) Status by Business Unit

[Specialty Steel Division]

Although sales volume of tool steel and special alloys increased and sales volume of bearing steel and special alloys decreased, and the variety composition of tool steel and special alloys deteriorated, net sales increased by 3.2% to \28,616,000,000. In terms of profit or loss, business loss stood at \849 million (business loss stood at \1508 million in the previous fiscal year), falling short of covering the decrease in volume of bearing steel and the deterioration in the variety composition of tool steel and special alloys, despite reductions in fixed costs and a decline in raw material and fuel prices.

[Cast Iron Division]

Net sales in the automotive and construction machinery sectors decreased by 8.3% year-on-year to 8158 million yen. In terms of profit and loss, despite a decrease in sales volume, operating profit's sales amounted to ¥62 million (compared to ¥127 million in business loss in the previous fiscal year) due to an improvement in sales prices, a reduction in fixed costs and a decrease in raw material and fuel prices.

(ii) Sales by Business Unit

(2) Issues to be addressed 

Our Group has formulated the Group Medium-Term Management Plan "Contributing to the creation of a society in which people and the environment are harmonious by providing attractive products" based on the management philosophy (FY 2024 to FY 2026) to ensure sustainable business continuity.

We assume that the business environment surrounding us will continue to be uncertain due to concerns about the declining birthrate and aging population, rising geopolitical risks, and declining demand due to the impact of inflation and monetary tightening. We will strive to strengthen our management base to achieve sustainable growth despite the rapidly changing business environment.

Our Company is committed to the following three basic policies. 

*Portfolio Transformation 

In the Specialty Steel segment, in addition to maintaining a solid market share in the mature tool steel market, we will focus our management resources on our distinctive feature, “small-lot and multi-variety support, ” and expand sales of high-performance materials used in the "semiconductors, healthcare, energy, defense space" segment, which is expected to grow in the future, to strengthen our earning power. 

In the Cast Iron segment, we aim to expand orders for high-difficulty, high-value-added products by further enhancing our “technical and proposal capabilities, ” building partnerships with customers and jointly resolving issues. 

*Strengthening the Business Base 

To enhance quality and cost competitiveness, we will promote the enhancement of special melting, automation of manufacturing facilities, capital investment in inspection equipment, etc., and digitization of operating results. In addition, we will accelerate portfolio transformation by developing new products, manufacturing technology for difficult-to-process materials, and improving facility productivity. 

*Promoting Sustainable Management 

Aiming to achieve carbon neutrality by 2050, we will reduce CO2 emissions. In addition, we will contribute to the sustainability management of our customers by recycling raw materials and making environmentally friendly products and by supplying attractive products. 

In addition, we will strengthen our safety activities, environmental protection, disaster prevention measures, and risk management systems, keeping in mind the KOBELCO Group Corporate Philosophy, "KOBELCO's Three Commitments and Six Pledges." In addition, we will create an environment in which diverse human resources can exercise their abilities, and we will also improve operational efficiency and productivity through digitalization.

We look forward to your continued support.

(3) Changes in Assets and Income

(i) Assets and Income of the Group

(ii) Status of Assets and Profit and Loss of Our Company

(4) Capital Expenditures 

The total amount of capital expenditures by the Group during the fiscal year under review was 968 million yen, mainly comprising 59 million yen for the expansion of automated centerless machines in Our Company.

(5) Status of Financing 

Capital investment funds of the Group during the current fiscal year were used for own funds and borrowings. The Group did not raise funds by capital increase, debenture issue, etc.

(6) Main Business (as of March 31, 2025)

(7) Principal offices and factories (as of March 31, 2025) 

(8) Employees (as of March 31, 2025)

(i) Employees of the Group

(ii) Status of Our Company Employees

Note: The above number of employees does not include 26 seconded employees.

(9) Significant Subsidiaries and Parent Companies (as of March 31, 2025)

(i) Status of Parent Company

The parent company of Our Company is Kobe Steel, Ltd., which owns 51.69% of Our Company. We purchase raw materials from the company and sell special steel products to the company.

The purchase of raw materials is determined by negotiating prices in consideration of prevailing market prices.

The sale of specialty steel products is determined by negotiating prices in consideration of market prices and total costs.

Our Company Board of Directors has determined that these transactions were undertaken in the final decision making independently of the parent company and would not harm the interests of Our Group.

In addition, one director has been appointed from the Company.

(ii) Significant Subsidiaries

Notes: 1. The significant subsidiaries listed above, excluding MICROFINE TRADING (SHANGHAI) CO.,LTD are consolidated subsidiaries. 

Tohoku Core Center Co., Ltd. is an indirect subsidiary through Koshuha Foundry Co., Ltd., and the ratio of voting rights as an indirect subsidiary is shown in parentheses.

(10) Major lenders and loan amounts of Our Company (as of March 31, 2025)

(11) Other Important Matters Concerning the Current State of the Group

The company, at the extraordinary meeting of the Board of Directors held on May 12, 2025 (hereinafter referred to as "the said date"), resolved to implement a share exchange (hereinafter referred to as "this Share Exchange") with Kobe Steel, Ltd. (hereinafter referred to as "Kobe Steel") and our company (hereinafter, Kobe Steel and our company are collectively referred to as "both companies"), whereby Kobe Steel will become the wholly owning parent company and our company will become the wholly owned subsidiary through the share exchange, scheduled for February 2, 2026. On the same day, both companies entered into a share exchange agreement (hereinafter referred to as "this Share Exchange Agreement").

Additionally, on the same day, at the meetings of the Boards of Directors of both companies and Daido Steel Co., Ltd. (hereinafter referred to as "Daido Steel"), it was decided, subject to the effectiveness of this Share Exchange, that our company will make an in-kind dividend (hereinafter referred to as "this In-kind Dividend") to Kobe Steel, consisting of the common shares of Koshuha Foundry Co., Ltd., a consolidated subsidiary of our company, and assets held by our company related to the cast iron business. Furthermore, it was decided, subject to the effectiveness of this Share Exchange and the implementation of this In-kind Dividend, that Kobe Steel will transfer shares of our company to Daido Steel, and on the same day, Kobe Steel and Daido Steel entered into a share transfer agreement.

It should be noted that this Share Exchange is subject to obtaining approvals and permits from the Japan Fair Trade Commission and other relevant domestic authorities. For Kobe Steel, the share exchange will be conducted through a simplified share exchange procedure that does not require approval by a resolution of the general meeting of shareholders, pursuant to Article 796, Paragraph 2 of the Companies Act (Act No. 86 of 2005, including subsequent amendments). For our company, a proposal regarding this Share Exchange Agreement is scheduled to be submitted at the 100th Annual General Meeting of Shareholders to be held on June 24, 2025.

Furthermore, prior to the effective date of this Share Exchange (scheduled for February 2, 2026), the common shares of our company are scheduled to be delisted from the Standard Market of the Tokyo Stock Exchange on January 29, 2026 (with the final trading day being January 28, 2026).

2. Overview of Our Company (as of March 31, 2025)

(1) Matters relating to Shares

(Excluding 33,785 shares of treasury stock) 

(Note) The number of treasury stock includes 100 forgotten shares.

(iv) Major shareholders

Note: Shareholding ratios are calculated after deducting treasury stock (33000 shares) and are rounded down to the second decimal place.

(2) Status of Company Officers 

(i) Directors and Audit & Supervisory Board Members (as of March 31, 2025)

Notes: 1. Tetsuya Miyajima and Hiroyuki Nagano are outside directors as stipulated in Article 2, Item 15 of the Companies Act.

(ii) Remuneration, etc. of Directors and Corporate Auditors

a. Policy on Determining the Details of Remuneration for Officers, etc.

At the Board of Directors meeting held on February 18, 2021, Our Company resolved the policy on determining the details of remuneration, etc. for each individual Director, and confirmed that the remuneration, etc. for each individual Director for the relevant business year is consistent with the said policy.

The details of the policy on determining the details of remuneration, etc. for each individual Director are as follows.

1. Basic Policy

Our Company's basic policy is to clarify responsibilities for results in terms of performance, fluctuate according to profit levels so as to function as an incentive for the sustainable improvement of corporate value, and set an appropriate level of remuneration system based on each position. Specifically, the remuneration for executive directors consists of basic remuneration and performance-linked remuneration in accordance with business performance. Outside directors and non-executive directors who perform supervisory functions have only basic remuneration in view of their duties.

2. Policy on Determining the Amount of Compensation for Each Individual in Basic Remuneration (Monetary Remuneration) (including policies on determining the timing or terms of compensation awards.)

The basic remuneration for the directors of Our Company is fixed monthly remuneration, which shall be determined based on advice from independent outside directors by comprehensively taking into consideration the level of other companies, the size of Our Company, the level of salaries for employees, whether they are full - time or part - time workers, and their status as directors as well as other relevant factors, depending on the position.

3. Policy on Determining the Contents and the Calculation Method of Performance-linked Remuneration (Monetary Remuneration) (including policies on determining the timing or terms of compensation awards.)

The performance-linked remuneration for executive directors of Our Company will be paid as monthly remuneration in an amount calculated based on the ordinary profit and loss of Our Company in the previous fiscal year, for the purpose of raising awareness about the improvement in business performance in each fiscal year. The target amount, etc. shall be set based on the Medium-term Management Plan, etc., and revised as appropriate based on the advice of the Independent Outside Directors in response to changes in the environment.

More specifically, the base amount of remuneration for each position, which was established by comprehensively taking into consideration the business size and performance level of Our Company as well as the position, responsibilities, and salary of the employee, will be set as performance-linked remuneration after establishing a certain range of base profits and increasing it by a certain percentage (2% to 10%) in accordance with the level of the previous year's profit exceeding the said base profit, or decreasing it by a certain percentage (△5%) or more if it is lower than the said base profit.

4. The ratio of the amount of basic remuneration and performance-linked remuneration to the amount of remuneration for each individual Director is as shown in the following table.

*Base ratio of basic remuneration to performance-linked remuneration

5. Matters concerning determination of the content of remuneration, etc. for each individual director 

The remuneration for each individual director shall be proposed to the Board of Directors by the Representative Director and President, taking into consideration the above various policies and advice of Independent Outside Directors, and shall be determined by a resolution of the Board of Directors.

a. The amount of remuneration, etc. for directors and auditors pertaining to the current business year

Notes: 1. The above figures include one (1) Director and one (1) Corporate Auditor who retired at the conclusion of the 99 Ordinary General Meeting of Shareholders held on June 21, 2024. 

(3) Matters relating to Outside Officers 

(i) Status of Material Concurrent Positions. of other corporations and the relationship between Our Company and the relevant other corporation

*Tetsuya Miyajima, an Outside Director, is an attorney at law of partner Corporation of Kajitani Sogo law firm Co., Ltd., and is an Outside Director and Audit & Supervisory Committee Member of Nihon Chouki Co., Ltd. Our Company has entered into an advisory contract with Kajitani Sogo law firm Co., Ltd. However, the amount of remuneration paid by Our Company is insignificant compared to the size of this firm, and there are no matters that affect the independence of Outside Officers. There is no special relationship between Nippon Koshuha Steel Co., Ltd and Our Company 

*Outside Director Hiroyuki Nagano is a specially appointed professor at the Institute for the Creation of Social Value, Hyogo Prefectural University. There is no special relationship between the University and Our Company. 

*Mr. Waichiro Takao, Outside Audit & Supervisory Board Member, is a partner lawyer at Nagasawa General law firm. There is no special relationship between Nagasawa Sogo law firm and Our Company.

(ii) Main Activities during the Fiscal Year 

(4) Independent Auditor 

(i) Name KPMG AZSA LLC 

(ii) Amount of Remuneration, etc. 

(Note) In the audit agreement between Our Company and the accounting auditor, the amount of audit fees for audits conducted based on the Companies Act and audits conducted based on the Financial Instruments and Exchange Act are not separated, nor can they be substantially separated. Therefore, the above amounts are the total of these amounts. 

(iii) Reasons for the Board of Corporate Auditors' Agreement on Compensation for Accounting Auditors 

KPMG AZSA LLC, the accounting auditor, explained the audit hours and the basis for the calculation of the amount of compensation estimated from the distribution plan related to the audit plan for the current fiscal year, which were determined to be reasonable in light of the detailed and clear relationship between the audit services and the compensation.

(iv) Description of non-audit services 

N.A. 

(v) Policy for Determining Dismissal or Refusal to Reelect Accounting Auditors 

Our Company's Board of Corporate Auditors dismisses an accounting auditor with the unanimous consent of all corporate auditors if the accounting auditor is deemed to fall under any of the items described in Article 340, Paragraph 1 of the Companies Act. 

If the accounting auditor is deemed to be unable to perform the accounting audit appropriately or otherwise deems it necessary, the Board of Corporate Auditors shall determine the contents of the proposal for dismissal or refusal of reappointment of the accounting auditor.

Consolidated Balance Sheet

Consolidated Statements of Loss

Balance Sheet

(As of March 31, 2025)