KDDI : Sustainability Integrated Report

At KDDI, our mission is to connect.

KDDI's work of connecting is more than just connecting distant

locations with communication lines.

We connect much larger things-people's lives, day-to-day lives,

and hearts and minds.

Connecting and Protecting Lives

This means ensuring communications during disasters with our resilient infrastructure.

It means implementing ICT technology to reduce environmental impact, helping our precious planet.

Connecting Day-to-Day Lives

This means helping resolve issues in communities, cities, and developing nations by bringing together new technologies and partners.

It involves developing human resources today, so that we can help create better lives tomorrow.

Connecting Hearts and Minds

This means implementing initiatives aimed at creating a digital society characterized by affluence and peace of mind. A society where diversity displaces isolation and all can enjoy healthy, fulfilling lives. In this age of living beyond 100, this is more important than ever.

Thus, KDDI will evolve our "Power to Connect" into an era in which new values will be generated as a result of the "blending" of telecommunications into all kinds of scenes.

Our power to make connections will help create a brighter future for all.

KDDI Integrated Sustainability and Financial Report 2023

Contents

Editorial Policy

Disclosure of Financial and Non-Financial Information

This report integrates the "Integrated Report" and the "Sustainability Report" into the "Integrated Sustainability and Financial Report" from FY23.3 to offer investors and other stakeholders a better understanding of KDDI's basic information, financial data, management strategies, and sustainability information. Additional sustainability and research & development (R&D) information that is not contained in this report can be found on KDDI's website.

KDDI has applied International Financial Reporting Standards (IFRS) since FY16.3. For this report, unless otherwise stated, figures up to FY14.3 are based on Japanese GAAP and figures for FY15.3 onward are based on IFRS. This report is based on multiple guidelines and frameworks, including the principles outlined by the Value Reporting Foundation (VRF, which was launched through the merger of IIRC and SASB).

Disclaimer Regarding Forward-Looking Statements

Statements contained in this report concerning KDDI's plans, strategies, beliefs, expectations, or projections about the future, and other statements other than those of historical fact, are forward-looking statements based on management's assumptions in light of information currently available and involve risks and uncertainties. Actual results may differ

Vision

14-19 CEO Message

20-23 Value Creation Story

22-23 Satellite Growth Strategy:

5G Communications and Focus Areas

24-29 The Future We Aim for by Enhancing

97-105 Materiality 5

Human Resources First

97-105 Values We Embrace (8)

Advancement of Professional Human Resources

and Engagement Improvement

106-109 Materiality 6

materially from these statements. Potential risks and uncertainties include, but are not limited to overseas economic conditions; fluctuations in currency exchange rates, particularly those affecting the U.S. dollar, euro, and other overseas currencies in which KDDI or KDDI Group companies do business; and the ability of KDDI and KDDI Group companies to continue developing and marketing services that enable them to secure new customers in the telecommunications market-a market characterized by rapid technological advances, the steady introduction of new services, intense price competition, and others.

the "Power to Connect"

30-33 CFO Message

34-37 Human Capital Supporting "Connecting"

Material Issues

38-47 Materiality

38-41 Message from the General Manager of the Sustainability Management Division

42-43 Six Material Issues/Process for Identifying Material Issues

44-45Mid-Term Sustainability Targets (FY23.3-FY25.3)

46-47 Sustainability Promotion Framework

48-60 Materiality 1

Promotion of Innovation Centered on

Telecommunications

48-51 Values We Embrace (1)

Molding Future Society

Advancing Stakeholder Engagement

110 Issuing Sustainability Bonds

110-111 Visualization of Non-Financial Activities to

Improve Activities

111 Third-Party Evaluation

TCFD/TNFD

112-115 Disclosure based on TCFD Recommendations

116-121 Disclosure based on TNFD Recommendations

Governance

122-123 Board Members

124-126 Messages from Outside Directors

127-138 Corporate Governance

About the cover design

The cover design features a depiction of diverse individuals, including various ages and genders, connecting their hands as if playing a cat's cradle. This design builds upon the previous fiscal year's cover design that represented diversity, but it further emphasizes KDDI's "power to connect" and the

creation of new value through "partnering" by connecting hand to hand with strands of light. Simultaneously, it symbolically represents KDDI's commitment to Sustainability Management.

Positioning of This Report

Experts and Institutional Investors

52-60 Values We Embrace (2)

Realization of Sustainable Industrial

/Infrastructure Environment

61-70 Materiality 2

Realization of Safe, Secure,

and Prosperous Society

61-66 Values We Embrace (3)

Regional Co-Creation

67-70 Values We Embrace (4)

Eliminating Regional and Economic Disparities

Globally

139-141 Intellectual Property Management

142-144 Risk Management and Internal Controls

145-149 Compliance

Data

150-163 Financial and Non-Financial Data

150-151 Consolidated Financial Highlights

152-163 Financial and Non-Financial Highlights

164-233 Consolidated Financial Statements

1. Disclosure and IR
2. Corporate Overview/Stock Information
3. External Assurance

Website Information

KDDI ▲https://www.kddi.com/english/

KDDI Brand Book ▲https://brand.kddi.com/

KDDI Tobira (Japanese only)▲https://tobira.kddi.com/

Framework for Mid-Term Management Strategy

The "Mid-Term Management Strategy (FY23.3-FY25.3)" is centered on "Sustainability Management," which aims for the sustainable growth in society and the corporate value improvement achieved together with our partners. As part of this strategy, we will also promote our "Satellite Growth Strategy," which aims to advance the 5G-driven evolution of our telecommunications business and the expansion of focus areas with telecommunications at the core, while strengthening our management base to

support this strategy.

The Mid-Term Management Strategy is positioned within the framework of the KDDI Group Mission Statement, Brand

Message, and Company Vision as well as the "KDDI VISION 2030,"

and is based on the "The KDDI Group Philosophy," which forms

the foundation of KDDI's operations.

The KDDI Group Mission Statement

The KDDI Group values and cares about the material and emotional

well-being of all its employees, and delivers a thrilling customer experience by always going further than expected with the ultimate goal of achieving a truly connected society.

Brand Message

Explore the extraordinary

Company Vision

1. The company the customer can feel closest to
2. A company that continues to produce excitement
3. Contributing to the sustainable growth of society

The creation of a society in which anyone can make their dreams a reality, by enhancing the power to connect.

→ P10

5G-driven evolution of the telecommunications business and expansion of focus areas with telecommunications at the core

Satellite Growth Strategy → P16, 22

→ P85

Strengthening of management base that contributes to the sustainable growth in society and

the corporate value improvement

Strengthening the group management

Carbon neutralbase through progressing governance

Human resources

first

The KDDI Group Philosophy

The KDDI Group Philosophy consists of the corporate credo, the KDDI Group Mission Statement, and five chapters with 38 items, which express the attitudes, values, and behavior that all employees need to exhibit in order to achieve sustainable growth for the Company and society. The KDDI identity and KDDI vision that we must embrace as a telecommunications operator are incorporated throughout.

The Philosophy is the foundation of our Sustainability Management and is the basic stance KDDI employees must adopt. By putting the

KDDI Group Philosophy into practice, we aim to be a company admiredKDDI Group Philosophy Pocketbook and trusted by all stakeholders.

History of the KDDI Group Philosophy

In 2000, when three companies merged to form KDDI, the KDDI Group Philosophy was established with the aim of fostering a corporate culture in which employees from various backgrounds share common values. After being revised in 2013, it evolved into the current KDDI Group Philosophy.

Background of Revision

On March 11, 2011, the Great East Japan Earthquake struck, and KDDI's communications network suffered tremendous damage. The earthquake made KDDI strongly reaffirm its significance of existence and mission as a telecommunications company that plays a key role in social infrastructure. To fulfill the mission, it is necessary to unite the hearts and minds of all KDDI Group employees. To this end, we felt it necessary to revise the KDDI Group Philosophy into a new set of guiding principles. In revising the Philosophy, we have indicated what kind of company KDDI aims to be and what kind of attitudes and values we should act with, and have reflected the lessons learned from the Great East Japan Earthquake as well as content that can be applied to our own operations in all divisions. The KDDI Group Philosophy is filled with our aspirations for what we want to be as employees of KDDI.

In the Publication of the Revised KDDI Group Philosophy

KDDI has indicated that it will thoroughly pursue the following two objectives as part of its management based on the KDDI Group Philosophy.

• We will achieve the sustainable growth of the Group by ensuring all employees share and practice the Group's vision and management guidelines, and improving employee and organizational capabilities.
• Each employee learns the correct code of conduct and standards of judgment as a good person and earnestly engages in their work, thereby improving their personality and leading a meaningful life.

KDDI Group Philosophy Initiatives

KDDI believes that it is important for every employee to practice the KDDI Group Philosophy in order to permeate the KDDI Group Mission Statement, the KDDI VISION 2030, and KDDI's Sustainability Management. Accordingly, KDDI organizes study sessions for all employees to learn about the Philosophy from the very foundation, and is promoting initiatives to make employees in each organization aware of the connection between their activities and the Philosophy. By bringing all employees together under a common set of values, we aim to build on the strengths of KDDI's sustainable growth in the future.

Every employee practices the KDDI Group Philosophy

to permeate the KDDI Group Mission Statement,

the KDDI VISION 2030, and KDDI's Sustainability Management.

KDDI Group Philosophy as the Foundation of Sustainability Management

KDDI Group Philosophy and KDDI Code of Business Conduct

Employee awareness

Employee satisfaction

Employee actions

Creating innovations

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CEO Message

KDDI makes achieving a truly connected society part of the KDDI Group Mission Statement.

Telecommunications are an integral part of modern society and form the basis for life, indus- try, and social activities. Therefore, the stability and reliability of telecommunications have become even more critical. As a telecommunications carrier, we play an important role in society, maintaining telecommunications 24 hours a day, 365 days a year. We also recognize that promoting efforts toward creating a resilient future society that achieves both economic progress and the resolution of social issues is a vital issue and should be undertaken actively.

To achieve such a future society, we formulated the "KDDI VISION 2030" in May 2022.

"The creation of a society in which anyone can make their dreams a reality, by enhancing the power to connect."

Our mission is to connect and protect lives, connect day-to-day lives, and connect hearts and minds. We will enhance our power to connect, and we hope to create a resilient future society in which anyone can make their dreams a reality.

Under the Mid-Term Management Strategy (FY23.3 to FY25.3), we will promote "Business Strategy" and the "Strengthening of Management Base" with Sustainability Management-which is based on a virtuous cycle of corporate value improvement and the sustainable growth in society-at the core.

In our Business Strategy, we will pursue a

"Satellite Growth Strategy" that expands growth areas by deepening the existing businesses and maximizing synergies. With 5G communications as the center of the satellite, we will position growth areas around this core and take on challenges in various transformations to promote business.

Regarding Strengthening of Management Base, we aim to achieve carbon neutrality-anenvironmental issue on the global scale-by fiscal 2030 for KDDI (non-consolidated) and by fiscal 2050 for the KDDI Group. We will also actively pursue transformation into a company that puts human resources first as well as promoting unified group management.

We expect changes to accelerate in the fu-

ture-both changes in the business environment brought about by new technologies as well as changes in the social environment due to the global situation. The KDDI Group will unite as one to respond to these changes and promote sustainable growth.

We look forward to your continued support and guidance as we work on these initiatives to meet the expectations of our customers and society.

KDDI CORPORATION

President,

Representative Director,

CEO

Looking Back on FY23.3

On Conclusion of the First Year of the Mid-Term Management Strategy

Under the current Mid-Term Management Strategy, we aim to achieve both sustainable profit growth and enhanced shareholder returns.

Our consolidated operating revenue for FY23.3 increased 4.1% year on year to 5,671.8 billion yen, while consolidated operating income was up 1.4% year on year to 1,075.7 billion yen. Against factors such as the impact of price reduction

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and fuel price hikes, we were able to increase our operating income through steady growth in the focus areas of digital transformation (DX) and financial business, pursuing cost efficiency, and other efforts.

We are steadily advancing efforts toward achieving our goals for business growth: ARPU revenue increase due to 5G promotion, profit growth of 100 billion yen or more in focus areas, and cost efficiency at the level of 100 billion yen.

KDDI VISION 2030

To achieve our ideal future society, we set out a new vision, "KDDI VISION 2030: The creation of a society in which anyone can make their dreams a reality, by enhancing the power to connect" in May 2022.

To contribute to building a resilient social infrastructure that withstands environmental changes, we will connect and protect lives, connect day-to-day lives, and connect hearts and minds to create a society in which anyone can make their dreams a reality through businesses with our partners while utilizing technology.

Aiming for "a platformer supporting society" that can add value to every industry and life scene, we will promote "business transformation centered on 5G" with a view of the year 2030.

The creation of a society in which anyone can make their dreams a reality, by enhancing the power to connect.

Sustainability Management and Medium-Term Targets

We have established the "materiality (material issues)" centered on the interests of diverse stakeholders such as long-term investors as well as our vision and enterprise impact. With this in mind, we position Sustainability Management at the core and promote reinforcement of the business strategy and the underlying management base.

By doing so, we will aim for the sustainable growth in society and the corporate value improvement with our partners. Our goal is to create a virtuous cycle in which society's growth is fed back on the subsequent business strategies, and the business growth is reflected in society.

Business Strategy/Satellite Growth Strategy

In our Business Strategy, we are pursuing our business growth strategy in the focus areas centered on 5G, which is expected to prosper with the Stand-Alone (SA), under the name "Satellite Growth Strategy." With telecommunications- which is the power to connect-at the center, we will make new expansions into business areas that are positioned like satellites. For the core service of 5G communications, we will undertake all kinds of efforts to enhance the power to connect. We will also focus on 5G network building, provision of various services and penetration of 5G-compatible handsets so that multi-brand communications ARPU revenues, will increase in FY25.3 compared to FY22.3.

At the center of new business expansion are DX and life transformation (LX). For corporate customers, we will work on offering DX solutions that support the use of digital technologies to transform their businesses into becoming capable of sustainable growth. As for consumers, in an era of diversifying values, we will deliver an exciting world-both in the physical space and in cyberspace-through LX, which is represented by the metaverse.

In addition, we will expand our financial business. Telecommunications and finance will become closely linked in our future day-to-day lives. In an era where telecommunications and finance blend into our lives, we will develop financial services to become more closely tied to the lives of our customers by maximizing synergy between telecommunications and various financial services.

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Mid-Term

Management

Strategy

Defining new materiality and promoting the Mid-Term Management Strategy

Sustainability

Management

Satellite

Growth

Strategy

Summary of

Efforts in Focus

Areas

Highlight 1

"KDDI Digital Twin for All"

Modern society is characterized by the prominent changes in the environment arising from various internal and external factors. To overcome such dramatic changes and achieve "the creation of a society in which anyone can make their dreams a reality" that is stated in KDDI VISION 2030, we have developed a concept called "KDDI Digital Twin for All." DX for corporate customers and LX for individual customers form the two pillars of this concept.

Under "KDDI Digital Twin for All," we will transform people's lives to make them better by transferring data generated in the physical space where people live to the virtual cyberspace, conducting sophisticated simulations digitally in real time, and feeding back the results to the physical space.

A Society in which anyone can make their dreams a reality. KDDI Digital Twin for All

Highlight 2

"Competition and Collaboration"

To achieve advanced technological innovation required in the era of Beyond 5G as well as promote Sustainability Management while increasing social and environmental values, it will be important to define the areas for competition and those for collaboration with competitors, and implement a balanced investment strategy. As an area for collaboration, in March 2023, we signed a basic agreement for global standardization of optical network technologies with Nippon Telegraph and Telephone Corporation toward deploying and standardizing innovative communication technologies centered on all-photonic networks. Through this agreement, the two companies will seek to achieve a sustainable high- capacity optical network using the telecommunications technologies and experiences they have developed so far.

In addition, 5G JAPAN Corporation-which started business in 2020-is contributing to the sustainable growth in society by promoting infrastructure sharing based on the mutual use of base station assets held by KDDI and SoftBank Corp. and accelerating the rollout of 5G in rural Japan. Furthermore,

through providing roaming services to Rakuten Mobile, Inc. via our 4G network, we will promote the expansion of area coverage nationwide in Japan by driving the effective use of our 4G infrastructure and focusing on the rollout of our 5G network.

Going forward, we will continue to collaborate with both telecommunications operators as well as various other partners around the world to achieve a truly connected society.

Initiatives for Strengthening of Management Base

To strengthen the our management base that supports our Sustainability Management, we will also promote initiatives to deal with major social issues such as carbon neutrality, transforming ourselves into a company that puts human resources first, respect for human rights, and enhancement of our group governance.

We are also actively addressing carbon neutrality, which is a major issue on a global scale, and KDDI (non- consolidated) is aiming to achieve net-zero CO2 emissions by fiscal 2030. Ahead of this, we aim to achieve the same goal at our data centers worldwide under the TELEHOUSE brand by fiscal 2026, while the KDDI Group as a whole aims to achieve net-zero CO2 emissions by fiscal 2050. In addition to the commercialization of renewable energy generation, we will proactively promote energy efficiency and shift to renewable energy for mobile phone base stations and telecommunications equipment to achieve these goals.

In addition, to ensure ongoing sustainable growth amid a business environment that is undergoing constant and profound change, it is essential to transform into a company that puts human resources first, which promotes innovation and encourages a high degree of autonomy and growth for employees and organizations. In promoting innovation, we will strengthen R&D and capital investment for 5G and beyond 5G. And we will accelerate efforts for business creation, R&D, AI and advanced security technology efforts based on our Satellite Growth Strategy and will deepen partnerships such as collaboration with startups.

Progress of Mid-Term Management Strategy

In our Mid-Term Management Strategy, we aim to achieve both business growth and shareholder returns. Besides sustainable profit growth, we will undertake capital expenditures and strategic business investments in 5G and focus areas. Based on a financial policy that aims for a dividend payout ratio of over 40% as shareholder returns, we will also consider flexible repurchasing of our shares.

As we move forward together, I would like to express my sincere appreciation for your continued support and guidance for the KDDI Group.

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