NTTYY Nippon Telegraph and Telephone Corporation (PK)

Reference Materials for the Ordinary General Meeting of Shareholders

Resolutions and matters for reference

Nippon Telegraph and Telephone Corporation (the “Company”) proposes that earned surplus be appropriated as follows.

In addition to increasing corporate value over the medium- and long-term, the Company has identified the return of profits to shareholders as an important management goal.

In determining the level of dividends for the current annual period, the Company, while giving consideration to stability and sustainability, takes into account a full range of factors, including business performance, financial standing and dividend payout ratio.

In addition, NTT plans to reverse 531 billion yen of “Other reserves” and to reclassify this amount as “Accumulated earned surplus” in order to provide for a flexible capital policy in the future.

The Company is seeking approval for the election of eleven Corporate Directors following the expiration of the term of office of all current Corporate Directors at the conclusion of this Ordinary General Meeting of Shareholders.

The candidates for Corporate Director are as follows:

The Company is seeking approval for the election of two Corporate Auditors following the resignation of two of its current Corporate Auditors, Mr. Toru Motobayashi and Mr. Yoshitaka Makiya, at the conclusion of this Ordinary General Meeting of Shareholders.

Audit & Supervisory Board Members support this proposal.

The candidates for Corporate Auditors are as follows.

Candidate No.		Name (date of birth)		Resume, position, responsibility and description of concurrent positions				Number of shares of     the Company held
1				April 1977:		Joined Nippon Telegraph and Telephone Public Corporation
				June 2003:		General Manager of Customer Services at NTT DOCOMO Inc.
				September 2004:		Concurrently General Manager of Customer Services and General Manager of Information Security at NTT DOCOMO Inc.
				June 2005:		General Manager of Customer Services at NTT DOCOMO Inc.
				April 2006:		General Manager of Corporate Citizenship Department at NTT DOCOMO Inc.
				June 2006:		Executive Director and General Manager of Corporate Citizenship Department at NTT DOCOMO Inc.		100
		Akiko Ide		July 2008:		Executive Director and General Manager for China at NTT DOCOMO Inc.
		(February 28, 1955)		June 2012:		Executive Director and Director of Information Security at NTT DOCOMO Inc.
				June 2013:		Executive Director and Senior Manager in Charge of Commerce Business Promotion (expected to resign on June 19, 2014)
				June 2013:		President and Chief Executive Officer at Radishbo-ya Co., Ltd. (expected to resign on May 29, 2014)
Candidate No.		Name (date of birth)		Resume, position, responsibility and description of concurrent positions				Number of shares of     the Company held
2				April 1974:		Registered as an attorney (Second Tokyo Bar Association) and joined Mori Sogo Law Offices (currently Mori, Hamada and Matsumoto Law Offices) (retired December 31, 2011)
				April 1991:		Deputy Chairman of the Second Tokyo Bar Association (resigned March 31, 1992)
				April 1997:		Executive Director of the Japan Federation of Bar Associations (resigned March 31, 1998)
				April 2006:		Chairman of the Second Tokyo Bar Association (resigned March 31, 2007)		1,000
				April 2006:		Deputy Chairman of the Japan Federation of Bar Associations (resigned March 31, 2007)
				January 2012:		Established Kowa Law Office (present post)
		Takashi Iida		June 2012:		Auditor for Shimadzu Corporation (present post)
		(September 5, 1946)		June 2013:		Auditor for JAFCO Co., Ltd. (present post)
				June 2013:		Director at Alps Electric Co., Ltd. (present post)

Notes:

BUSINSS REPORT (For the Fiscal Year From April 1, 2013 to March 31, 2014)

This report describes the conditions of the corporate group (“NTT Group”) including Nippon Telegraph and Telephone Corporation (“NTT”)

		Business Progress and Results of NTT Group

n  Business Environment

With respect to the global economy, in the fiscal year ended March 31, 2014, while the US economy was buoyant and there were also indications of recovery in Europe, there was only modest growth overall due to a slowdown in China and other emerging countries’ economies. Against a backdrop of government and other policy stimulus measures, the Japanese economy continued to make a gentle recovery, centered around domestic demand.

In the information and telecommunications market, optical broadband services, LTE services and Wi-Fi speeds have all increased, and smartphones, tablets and other devices have gained widespread market acceptance, together with the increased use of social media and cloud services . There has also been a worldwide trend of various new participants, in addition to telecommunications companies, entering the market, and rapid growth in the variety and sophistication of services.

n  Business Conditions

In light of these circumstances, NTT Group has worked to expand its Global Cloud Services and strengthen its network service competitiveness in accordance with its Medium-Term Management Strategy formulated in November 2012, entitled “Towards the Next Stage.”

NTT Group worked to expand Global Cloud Services by taking advantage of its strengths as a corporate group to provide comprehensive cloud services from the information and telecommunications platforms such as data centers and the IP backbone , to ICT management and applications .

As a result of the above efforts, NTT Group’s consolidated operating revenues for the fiscal year ended March 31, 2014 were 10,925.2 billion yen (an increase of 2.1% from the previous fiscal year). Consolidated operating expenses were 9,711.5 billion yen (an increase of 2.2% from the previous fiscal year). As a result, consolidated operating income was 1,213.7 billion yen (an increase of 1.0% from the previous fiscal year), consolidated income before income taxes was 1,294.2 billion yen (an increase of 8.1% from the previous fiscal year), and consolidated net income attributable to NTT was 585.5 billion yen (an increase of 12.2% from the previous fiscal year).

		Issues Facing the Corporate Group

n Future Outlook of Business Environment

In terms of the overall global economy, the trend of gradual recovery is expected to continue, with the United States and China expected to stage a gradual recovery, and Europe also expected to move toward recovery. The recovery of the Japanese economy is also expected to continue, underpinned by the positive effects of various government policy measures.

A number of both domestic and foreign companies have entered the information and telecommunications market. In addition, the variety and sophistication of services and devices has increased and changes in the market, centered on cloud services , are expected to accelerate going forward. Moreover, fierce market competition above and beyond existing business sector boundaries is expected to further intensify.

n Business Developments Pursuant to the Medium-Term Management Strategy

Based on the Medium-Term Management Strategy “Toward the Next Stage,” NTT Group is committed to creating new services and generating business opportunities through collaboration with a wide range of market players with the aim of becoming a “valued partner” that customers continue to select.

As a result of the above efforts, NTT Group expects to further reduce costs related to fixed-line and mobile communications services which it cut by ¥412.0 billion as of the end of the fiscal year ended March 31, 2014 compared with the fiscal year ended March 31, 2012. NTT Group will continue to comprehensively strengthen the competitiveness of its existing network services.

In addition, NTT Group aims to reduce its Capex to Sales ratio, which was 16.7% at the end of the fiscal year ended March 31, 2014, to 15% by the fiscal year ending March 31, 2016 through drastic streamlining of capital investments. NTT Group will aim to effectively utilize the funds generated through increased efficiency in areas such as M&A activity focused on cloud -related business and on returns to shareholders.

Through these efforts, NTT Group will work toward EPS growth of 60% or more (compared with the fiscal year ended March 31, 2012) by the fiscal year ending March 31, 2016.

n NTT’s Efforts as a Holding Company

In order to implement the measures described above, NTT will promote group management that utilizes the advantages of a holding company structure, such as the agile and flexible distribution of management resources and the centralization of fundamental research and development. NTT will also provide necessary advice and coordination to each of its group companies and work to achieve efficient capital procurement.

With respect to fundamental research and development, NTT will commit itself to the provision of safe and secure cloud services and highly competitive network services. NTT will also actively promote the steady commercialization of the results of its research and development, and spread the use of such results both in and outside Japan.

Changes in Consolidated Assets and Consolidated Income of NTT Group

n Overview

In its capacity as the holding company of the NTT Group companies, during the past fiscal year, NTT continued work on planning of group-wide strategies and redistribution of managerial resources in line with changes in the business environment. NTT also conducted fundamental research and development and provided the results to each group company so they could be broadly disseminated, while planning and promoting the commercialization of fundamental technologies. Furthermore, NTT exercised voting and other shareholder rights at the general shareholders’ meetings of each group company.

During fiscal 2013, NTT repurchased 48,737,200 shares of its common stock for an aggregate amount of 250 billion yen pursuant to a resolution passed at its board of directors’ meeting held on May 10, 2013. In addition, on November 15, 2013, NTT cancelled 186,500,000 shares held as treasury stock pursuant to a resolution passed at its board of directors’ meeting held on November 8, 2013, and repurchased a further 26,556,800 shares of its common stock for an aggregate of 156.5 billion yen pursuant to a resolution passed at its board of directors’ meeting held on February 6, 2014.

NTT plans to set its annual dividends at 170 yen per share for the fiscal year ended March 31, 2014.

n Provision of Advice and Intermediary Services to Group Companies

NTT continues to provide appropriate and timely advice and intermediary services to group companies to facilitate the performance of their business activities in line with group policies and objectives.

Specifically, NTT Group provided advice and intermediary services aimed at expanding its provision of Global Cloud Services and strengthening its network service competitiveness in line with its Medium-Term Management Strategy “Towards the Next Stage.” As compensation for these services, NTT received 18.4 billion yen in group management and administration revenues for the fiscal year ended March 31, 2014 (a decrease of 2.6% from the previous fiscal year).

n Fundamental Research & Development Activities

Pursuant to its Medium-Term Management Strategy “Towards the Next Stage,” NTT has worked on research and development on fundamental technologies that contribute to the provision of safe and secure cloud services , the realization of a superior user experience for each and every user, and the provision of highly competitive network services, to contribute toward realizing a more comfortable and enriched society serviced by a wide range of devices connected to the cloud . NTT worked to achieve technological development based on market trends and formulate business plans through the “General Production System” to promptly commercialize the results of its research and development. In addition, to create new value, NTT promoted open innovation through collaboration with external organizations and engaged in research on advanced technologies for the future.

As a result of these research and development activities, NTT’s total expenditures on research and development during the fiscal year ended March 31, 2014 were 119.9 billion yen (a decrease of 5.6% from the previous fiscal year), and NTT received fundamental research and development revenues of 114.4 billion yen (a decrease of 5.4% from the previous fiscal year) as compensation for these research and development activities.

n Share Ownership and Exercise of Voting Rights

NTT exercises its rights as a shareholder based on the principle that each group company should conduct its business activities in line with NTT Group’s policies and objectives, while maintaining its independence and autonomy. When exercising voting rights as a shareholder at the general shareholders’ meetings of each group company during the fiscal year ended March 31, 2014, NTT determined that the business practices, financial conditions, retained earnings, and other conditions during the previous consolidated fiscal year (the fiscal year ended March 31, 2013) were appropriate and, accordingly, NTT voted to approve the appropriation of earned surplus, the election of members of the board and audit & supervisory board members and other matters based on proposals from each group company. As a result, NTT received 288.1 billion yen in dividends (an increase of 1.9% from the previous fiscal year).

n Changes in Non-Consolidated Assets and Non-Consolidated Income of NTT

n Overview

NTT East and NTT West worked to secure solid revenue streams with collaborating with other business operators, expanding their respective “ FLET’S Hikari ” service offerings, promoting fiber-optic and IP -related services through the expansion of their “ FLET’S Hikari ” services and opportunities for use of Hikari utilizing Wi-Fi , and improving support services to increase customer retention. The main initiatives are set out below.

n Number of Subscriptions for Major Services

n Promotion of Fiber-optic and IP-related Services

n Improving Customer Service

n Overview

Pursuant to its “Vision 2015” business strategy, NTT Communications worked to become a true leading global player (Global ICT Partner) that global customers select as their optimal business partner. For corporate clients, NTT Communications worked to provide total global ICT outsourcing services unique to telecommunications providers that combine networks, data centers , applications , security and other services. For individual customers, NTT Communications worked to provide more convenient applications and a wide variety of contents, enabling new lifestyles. The main initiatives are set out below.

n Number of Subscriptions for Major Services

n Development of Global Business

n Development of Services for Corporate Clients

Service				Description
Biz Hosting Enterprise Cloud		On-premises connection		Cloud migration service that provides for smooth and flexible migration from a client’s premises to the cloud via a virtual network
		Colocation connection		A service connecting NTT Communications’ specified cloud and colocation in the same segment via a virtual network
		WideAngle Professional Services		Highly specialized security services provided by security consultants and engineers with extensive experience in security

n Development of Services for Individual Customers

Service		Description
		An LTE -compatible mobile data communications service that allows the user to select the best option for accommodating his or her communication volume and speed

n Overview

NTT DATA formulated the Medium-Term Management Plan for the fiscal years 2012 to 2015, with the aim of “becoming a Global Top 5 player (over 1.5 trillion yen in net sales)” and “achieving EPS of 200 yen”* by evolving into a corporate group that can efficiently provide diverse ICT services worldwide. In line with this plan, NTT DATA is concentrating on the plan’s primary strategies, namely “Expansion of New Fields and Reinforcement of Product Competitiveness,” “Expansion, Enhancement and Reinforcement of Global Business” and “Pursuit of Overall Optimization.” The main initiatives are set out below.

n Status of Implementation of Management Policies

n Status of Implementation of Business Activities

n Overview

Based on its medium-term management policy, “Medium-Term Vision 2015: Shaping a Smart Life,” NTT DOCOMO strove to boost its comprehensive strengths by focusing on the four key areas of “devices (handsets),” “network,” “services” and “billing plans and sales channels,” and to expand new services in its “dmarket,” to encourage even more customers to choose NTT DOCOMO as their “Partner for a Smart Life.” The main initiatives are set out below.

n Number of Subscriptions to Major Services

To meet a wide range of customer needs and encourage even more customers to use NTT DOCOMO’s unique services, NTT DOCOMO started carrying Apple Inc.’s iPhone to respond to the diverse needs of our customers, and launched various NTT DOCOMO-proprietary services for the iPhone in an attempt to allow a greater number of users to utilize these services, and worked to expand its smartphone lineup.

Service				Description
				A service for displaying and offering for purchase items such as accessories and novels created by aspiring artists and writers, etc.
				A dedicated fashion e-commerce site operated jointly with MAGASeek Corporation, an online fashion retailer
				A service offering educational content such as picture books and illustrated reference books for kids
				A service provided in partnership with JTB Corporation offering comprehensive support to customers from the trip-planning stage to the trip itself
docomo mail				A service that allows for the storing of sent and received emails on the cloud and the use of the same email address from multiple devices
				A service that allows users to check their pet’s health condition or location by attaching a tag with built-in communication capabilities

n Expansion of Service Area

n Efforts in New Business Fields

External Financing

NTT Group raised capital for capital investment and other purposes in the form of long-term funding in the amount of ¥637.3 billion.

The details of the long-term funding are as follows:

   Of the aggregate of ¥637.3 billion of long-term funding raised, NTT raised ¥321.0 billion from long-term funding to be used by NTT for the purpose of making loans to NTT East, NTT West and NTT Communications for their capital investments and by NTT as funds for stock repurchases.

Capital Investment

NTT Group made a total of ¥1,892.8 billion in consolidated capital investments (a decrease of 3.9% from the previous fiscal year), focused on responding to customer demands for services such as “ FLET’S Hikari ” and “Xi” ( LTE service), among others.

Capital investments by NTT and its main subsidiaries were as follows:

Number of employees of NTT and its main subsidiaries:

Material Subsidiaries

Total number of shares authorized to be issued by NTT:

6,192,920,900 shares

Total number of shares issued and outstanding:

1,136,697,235 shares (treasury stock: 26,650,807 shares)

Number of shareholders at end of fiscal year ended March 31, 2014:

1,041,008

Principal Shareholders