■New Medium-Term Management Plan 1. Long-term Management Policy "ND For The Next 2030" In the future, it is expected that new buildings in the booming air conditioning equipment-related business will not expand much more than the current level in the long term, as it will no longer be an era like this where new buildings are built one after another against the background of population decline. On the other hand, it is expected that large buildings that reach the time of renovation will increase with the passage of years, but few companies are able to respond to renovation. Moreover, it is predicted that the environmental business market will steadily expand toward the realization of a decarbonized society based on Japan's energy policy*, with particular efforts being made in the construction industry to achieve ZEB the ultimate energy-saving of buildings. Therefore, the demand for Nihon Denshitsu's (1723) "Instrumentation Engineering" technology that achieves energy-saving and labor-saving is expected to increase further. In the industrial system-related business, the digitalization (smart factoryization) of factories utilizing DX technologies such as AI, IoT, and ICT in the medium to long term is expected to be a tailwind, expanding the market significantly. In particular, an increase in demand related to the renewal of factory equipment and the construction of production management systems, such as process automation and factory automation, is expected. From the above, we consider the air conditioning equipment-related business to be a stable source of income that supports the company and the industrial system-related business to be a growth driver. In the short to medium term, we will accumulate profits from new construction projects that lead to existing projects in the booming air conditioning equipment-related business, promote the independence of the industrial system-related business, and further accumulate existing projects while actively investing management resources in the industrial system field with ample room for expansion, in order to give momentum to the growth of the industrial system-related business. *1 The country aims to achieve carbon neutrality by 2050 and to reduce greenhouse gas emissions by 46% from fiscal year 2013 by fiscal year 2030. *2 ZEB: Net Zero Energy Building.

Towards the improvement of corporate value.

We consider improving corporate value as a challenge and will continue to manage with an awareness of capital cost. Therefore, we have set ROE as the target management indicator for the entire company, aiming for achievement of 10% with a lower limit of 8% exceeding the estimated capital cost of 6%. In addition, we have set ROIC (return on invested capital) as the business unit management indicator, and regularly monitor ROIC and WACC (weighted average cost of capital) by business unit to promote management based on ROIC for allocation of business unit management resources, determining whether to invest or not, etc. Although Nippon Denshi ＜1723＞ currently has a PBR (price to book ratio) of more than 1, we are responding to the request from the Tokyo Stock Exchange (TSE) to work towards management with an awareness of capital cost and share price, aiming to create sustainable corporate value that is continually evaluated by the market through the implementation of a growth strategy and improvement of capital profitability. Therefore, we are also considering taking measures such as strengthening shareholder returns (mentioned below), revising to incentive-based compensation, investment for improved profitability, further efforts towards sustainability, strengthening and improving IR, as well as flexible acquisition of treasury stock and review of DOE※2.

TSE request ※1: TSE requests companies with PBR less than 1 to manage with an awareness of share price.

DOE※2 (dividend on equity ratio): An indicator that shows how much dividend a company is paying to its equity shareholders.

(Author: FISCO guest analyst Nobumitsu Miyata)