December 26, 2019
For Immediate Release
Company Name: PARCO CO., LTD.
Company Representative: Kozo Makiyama
President, Representative Executive Officer
Stock code: 8251 (TSE 1st Section)
Inquiries: Mika Kusakawa
General Manager, Public Relations and Investor Relations Team
(Telephone: 03-3477-5710)

Announcement of Opinion in Support of Tender Offer for Our Shares to be Conducted by J.
FRONT RETAILING Co., Ltd., a Controlling Shareholder, and Recommendation for Our
Shareholders to Tender Their Shares in Tender Offer
PARCO CO., LTD. (the “Company”) hereby announces that the Board of Directors resolved, at its
meeting held today, to express its opinion in support of a tender offer (the “Tender Offer”) conducted by J.
FRONT RETAILING Co., Ltd. (the “Tender Offeror”), a controlling shareholder of the Company, for theCompany’s common shares (the “Company Shares”) and to recommend that the Company’s shareholders
tender their Company Shares in the Tender Offer, as set forth below.
The above resolution by the Board of Directors was adopted under the premise that the Tender Offeror
intends to make the Company into a wholly-owned subsidiary of the Tender Offeror through the Tender
Offer and a series of subsequent procedures and that the Company Shares will be delisted.
1. Outline of Tender Offeror(1) Name

J. FRONT RETAILING Co., Ltd.

(2) Address

10-1, Ginza 6-chome, Chuo-ku, Tokyo(3) Title and name of representative

Ryoichi Yamamoto, President and Representative Executive
Officer(4) Description of businessBusiness planning and management of subsidiaries andgroup companies that engage in the department store andother businesses, and other business related thereto(5) Capital

31,974 million yen (as of August 31, 2019)(6) Date of establishment

September 3, 2007

(7) Major shareholders and shareholding
ratios (as of August 31, 2019)

The Master Trust Bank of Japan, Ltd. (Trustaccount)

10.10%

Japan Trustee Services Bank, Ltd. (Trustaccount)

6.14%

Nippon Life Insurance Company

3.72%

J.
Front
Retailing
Kyoei
Shareholding Association1

Supplier

2.36%

The Dai-ichi Life Insurance Company, Ltd.

2.17%

Japan Trustee Services Bank, Ltd. (Trustaccount 5)

1.87%

MUFG Bank, Ltd.

1.65%

JP MORGAN CHASE BANK 385151

1.53%Japan Trustee Services Bank, Ltd. (Trustaccount 9)

1.41%

HSBC TRINKAUS AND BURKHARDT AG
RE:DE-CLTS A/C RE AIF

1.40%(8) Relationship between the Company andTender Offeror

Capital relationship

As of today, the Tender Offeror owns 65,922,614 shares of
the Company, equal to 64.98% (rounded down to two
decimal places) (Note 1) of the total number of issued
shares of the Company (101,462,977 shares).

Personnel relationship

As of today, the Director, President and Representative
Executive Officer of the Company concurrently serves as a
Director and Managing Executive Officer of the Tender
Offeror, and a Managing Executive Officer of the Tender
Offeror concurrently serves as a Director of the Company.
In addition, an employee of Daimaru Matsuzakaya
Department Stores Co., Ltd. (“Daimaru Matsuzakaya”), a
wholly-owned subsidiary of the Tender Offeror, is being
seconded to the Company, and an employee of theCompany is being seconded to GINZA SIX RetailManagement Co., Ltd., a subsidiary of Daimaru
Matsuzakaya, which is a wholly-owned subsidiary of theTender Offeror.
There is no business relationship between the Tender
Offeror and the Company that needs to be stated.

Business relationship

The Company Group (Note 2) recorded 563 million yen ofoperating revenue from its interior construction contract
business, real estate leasing business and other businesswith the Tender Offeror Group (in the fiscal year ended
February 28, 2019). On the other hand, the Tender Offeror
Group recorded 342 million yen of sales revenue from its
real estate leasing business and other business with theCompany Group (in the fiscal year ended February 28,2019).

The Tender Offeror is a parent company of the Company
and, therefore, constitutes a related party of the Company.
Note 1: “Ownership ratio” means the ratio of (a) the number of the shares owned to (b) 101,456,830 shares,
which is (i) the total number of shares issued by the Company (101,462,977 shares) as of November 30,
2019, as stated in the Consolidated Financial Results for the Nine Months of the Fiscal Year Ending
February 29, 2020 <under IFRS> (the “Quarterly Report”) announced by the Company on December 25,
2019, less (ii) the number of treasury shares currently owned by the Company (6,147 shares), as of
Status as a related party

2

November 30, 2019 (which is the number obtained by deducting (x) the number of the Company Shares,
included in the number of treasury shares below, owned by the Board Benefit Trust for Executive Officers
as of November 30, 2019 (358,756 shares) from (y) the number of treasury shares stated in the Quarterly
Report (364,903 shares)) (figures are rounded to two decimal places; the same applies hereinafter).
Note 2: “Company Group” means the Company and its subsidiaries and affiliates, and the “Tender Offeror
Group” means the Tender Offeror and its subsidiaries and affiliates.
2. Price of Tender Offer
1,850 yen per common share (the “Tender Offer Price”).
3. Details of and Grounds and Reasons for Opinion Concerning Tender Offer(1) Details of Opinion concerning Tender OfferAt the Board of Directors meeting held today, the Company adopted a resolution, based on the
grounds and reasons stated below in “(2) Grounds and Reasons for Opinion Concerning Tender
Offer,” to express an opinion supporting the Tender Offer and recommending that the Company’s
shareholders tender their shares in the Tender Offer. This opinion and recommendation are basedon determinations that the transactions, which are intended to make the Company into awholly-owned subsidiary of the Tender Offeror (including the Tender Offer; the “Transactions”),
will contribute to the enhancement of the Company’s corporate value and that the Tender Offer
provides the Company’s shareholders with a reasonable opportunity to sell their shares.
The above Board of Directors resolution was adopted by the method described below in “ (e)Unanimous Approval of all Non-interested Directors of Company” in “(6) Measures to Ensure
Fairness of Tender Offer Including Measures to Ensure Fairness of Tender Offer Price andMeasures to Avoid Conflicts of Interest.”(2) Grounds and Reasons for Opinion Concerning Tender Offer(a) Outline of Tender Offer
The following is an outline of the Tender Offer as explained to the Company by the Tender
Offeror.
The Tender Offeror, as of today, holds 65,922,614 shares of the Company’s common shares(ownership ratio: 64.98%) listed on the First Section of the Tokyo Stock Exchange, Inc. (the“Tokyo Stock Exchange”) and the Company is a consolidated subsidiary of the Tender Offeror.
The Tender Offeror, at a meeting of its board of directors held on December 26, 2019, resolved tomake the Tender Offer for all of the Company’s issued shares (excluding, however, the Company
Shares already owned by the Tender Offeror and treasury shares owned by the Company; the same
applies hereinafter) with the objective of converting the Company into a wholly-owned subsidiaryof the Tender Offeror.
In the Tender Offer, since the Tender Offeror is planning to make the Company into awholly-owned subsidiary, the Tender Offeror has set the minimum number of shares to bepurchased at 1,715,286 shares (ownership ratio: 1.69%), and if the total number of share certificates,etc. tendered for sale, etc. in response to the Tender Offer (the “Tendered Share Certificates, Etc.”)
falls short of the minimum number of shares to be purchased, the Tender Offeror will not purchaseany of the Tendered Share Certificates, Etc. However, the Tender Offeror has not set any
maximum limit on the number of shares to be acquired, and will purchase all of the shares tendered
if the total number of shares tendered is equal to or greater than the minimum number of shares tobe purchased.
The minimum number of shares to be purchased has been set so that, if the Tender Offer isconcluded, the total number of voting rights of the Company owned by Tender Offeror will be atleast two-thirds of the voting rights of the Company (1,014,568 voting rights pertaining to the3number of shares (101,456,830 shares) found by subtracting the number of treasury shares currently
owned by the Company (6,147 shares), as of November 30, 2019, as stated in the Quarterly Report(which is the number obtained by deducting (x) the number of the Company Shares, included in thenumber of treasury shares below, owned by the Board Benefit Trust for Executive Officers as ofNovember 30, 2019 (358,756 shares) from (y) the number of treasury shares stated in the Quarterly
Report (364,903 shares)).
The Tender Offeror has entered into agreements regarding tendering in the Tender Offer as statedbelow, but the Tender Offeror considered that if the Tender Offeror establishes a minimum numberof shares to be purchased in the Tender Offer taking into consideration the number of shares to be
subject to such agreements, it would cause the conclusion of the Tender Offer to be unstable and, if
anything, would have the possibility of not benefitting the ordinary shareholders who wish to tenderin the Tender Offer. Thus, the Tender Offeror has set the minimum number of shares to bepurchased as stated above.
In making the Tender Offer, as of December 26, 2019, the Tender Offeror has entered into anagreement with the Company’s second-largest shareholder, Aeon Co., Ltd. (number of shares held:
8,272,900; ownership ratio: 8.15%; “Aeon”) to tender in the Tender Offer for all of the Company
Shares owned by Aeon and all of the Company Shares for which Aeon has authority to dispose(number of shares with authority to dispose: 1,860,900 shares; ownership ratio: 1.83%) under theSpecified Comprehensive Trust Agreement dated October 29, 2010 with Sumitomo Mitsui Trust
Bank, Limited. In addition, as of the same date the Tender Offeror has entered into an agreementwith the Company’s third-largest shareholder, Credit Saison Co., Ltd. (number of shares held:
7,771,500; ownership ratio: 7.66%; “Credit Saison”; together with Aeon, individually orcollectively, the “Accepting Shareholders”) to tender in the Tender Offer for all of the Company
Shares owned by Credit Saison (the agreements on accepting the Tender Offer entered into with
Aeon and Credit Saison are referred to hereinafter individually or collectively as the “Offer
Acceptance Agreements”). In the Offer Acceptance Agreements, the Accepting Shareholders haveagreed to tender in the Tender Offer for all of the Company Shares owned by the Accepting
Shareholders or for which the Accepting Shareholders have authority to dispose (the total numberof shares owned: 17,905,300 shares, the total ownership ratio: 17.65%). Please refer to “4. Matters
Relating to Material Agreements Between Tender Offeror and Company’s Shareholders concerning
Tendering Shares in Tender Offer” for more details of the Offer Acceptance Agreements.
If the Tender Offer is concluded, the Tender Offeror intends to receive a loan of up to 67 billion
yen (the “Purchase Loan”) from Nomura Capital Investment Co., Ltd. (“NCI”), the proceeds ofwhich the Tender Offeror intends to apply to funds for settlement of the Tender Offer and expenses
ancillary thereto. The financing conditions of the Purchase Loan are to be stipulated in a financing
agreement pertaining to the Purchase Loan through separate discussions with NCI.
Because the Tender Offeror’s objective is to convert the Company into a wholly- owned
subsidiary of the Tender Offeror, in the event it is not possible to acquire all of the issued shares of
the Company in the Tender Offer, the Tender Offeror intends to acquire all of the issued shares of
the Company by implementing the Transactions described in “(5) Policy on Organizational
Restructuring, Etc. after Tender Offer (Matters Relating to So-called “Two-Step Acquisition”)”.
(b) Background and Purpose of, and Decision-Making Process for, Tender Offeror That Led to Its
Decision to Implement Tender Offer, and Its Management Policy after Tender Offer
The following is an explanation of the background and purpose of, and the decision-making
process for, the Tender Offeror that led to its decision to implement the Tender Offer, and the
management policy by the Tender Offeror after the Tender Offer, as explained to the Company by
the Tender Offeror.

4

(i)

Background of Tender Offer
The Tender Offeror is a holding company that was established in September 2007 by amanagement integration between The Daimaru, Inc. and Matsuzakaya Holdings Co., Ltd. and at thetime of its establishment, was listed on the First Section of the Tokyo Stock Exchange, the First
Section of the Osaka Securities Exchange, Co. Inc., and the First Section of the Nagoya Stock
Exchange, Inc. (as a result of the integration of the spot markets of the Tokyo Stock Exchange andthe Osaka Securities Exchange, Co. Inc., in July 2013, the Tender Offeror is currently listed only on
the First Section of the Tokyo Stock Exchange and the First Section of the Nagoya Stock Exchange,Inc.). The Tender Offeror Group currently consists of the Tender Offeror itself as a pure holding
company, 32 subsidiaries, and 7 affiliates (40 companies in total). With a focus on the department
store business, the Tender Offeror Group is developing the PARCO business, real estate business,credit and finance business, and other businesses (including temporary staffing business, interior
construction business, and wholesale business). Under a stated Group Vision of “Create and Bringto life ‘New Happiness’”, and based on the FY2017–2021 JFR Group Medium-term Business Plan(the “Tender Offeror Group’s Medium-Term Business Plan”) announced on October 5, 2016, theTender Offeror Group is aiming to become a ‘multi-service retailer’ (Note 3) that transcends the
traditional boundaries of the retail business by working to further strengthen the competitivenessand earnings capabilities of its established businesses while also stepping-up efforts in three key
businesses (credit and finance business, temporary staffing business, and interior construction
business).
Note 3: The Tender Offeror explains that “Multi service retailer” means, having promoted on the
one hand the strengthening of competitiveness and earning power in the Tender Offeror
Group as a multi retailer (i.e., a hybrid retailing business) such as by reforming the existing
business model, including the establishment of a new department store model, the strategy
of currently expanding the business domain to the services domain based on thedetermination that growth in the retail industry alone will be difficult.
In the two years following the formulation of the Tender Offeror Group’s Medium-TermBusiness Plan, the Tender Offeror has steadily pursued initiatives designed to reform its businessportfolio, including by opening unprecedented new multi-purpose retail facilities like GINZA SIX,
the largest retail space in the Ginza area (approximately 47,000 m2) boasting stores from 241 brands,
122 of which are flagship stores with the power to send their messages, at the time of the opening,
April 2017, and Ueno Frontier Tower, large-scale multi-purpose facility with a shopping spacecomprising Matsuzakaya Ueno, PARCO_ya, and a multiplex cinema, and an office space in the
Ueno Okachimachi area.
At the same time, as described in “(ii) Background and Purpose of Tender Offeror That Led to Its
Decision to Implement Tender Offer” below, the Tender Offeror recognizes a need to take steps tocontinue achieving growth across the Tender Offeror Group overall even amidst future changes in
the operating environment, such as the declining population and the shrinking of the fashion retailmarket. To ensure achievement of the earnings target (consolidated operating profit) set out by theTender Offeror Group’s Medium-Term Business Plan for its third year, fiscal 2019, the Tender
Offeror recognizes a need to step up the speed at which it is addressing the achievement of dramatic
growth and the realization of a growth strategy designed to reform its business portfolio.
Moreover, a core management issue for the Tender Offeror is ESG (Note 4) initiatives directed tosustainable business growth and the realization of a sustainable society. In that context, the Tender
Offeror recognizes that it is required to act with ESG perspectives in mind in all aspects of its
operations.
Note 4: “ESG” is an acronym for “Environment”, “Social” and “Governance”

5Meanwhile, the Company was established as Ikebukuro Station Building Co., Ltd. in February
1953, changed its trade name to Marubutsu Co., Ltd. in May 1957, and again changed its tradename to PARCO CO., LTD. in April 1970. The Company was listed on the Second Section of theTokyo Stock Exchange in January 1987 and transferred to the First Section of the Tokyo Stock
Exchange in August 1988. As of today, the Company Group is comprised of the Company, fivesubsidiaries and two affiliates (eight companies in total), and it currently engages in the Shopping
Complex Business, as its core business, operating PARCO commercial facilities, primarily in theTokyo metropolitan region and other major cities throughout Japan, including Nagoya, Sapporo andFukuoka, and it also engages in other businesses, including Retail Business, Space Engineering andManagement Business, Digital Marketing Business, Entertainment Business and Overseas Business.
The Company believes that the Company Group possesses outstanding business know-how relating
to the operation and development of advanced and culturally valuable urban commercial facilities.
With “A Business Group that Prospers in Urban Markets” as its long-term vision, the Company
announced as of April 6, 2017 the Company’s Medium-term Business Plan (FY2017-2021) (the“Medium-term Business Plan”) based on such vision, and aims, under its three social roles, i.e.,“Incubation,” “Urban Revitalization,” and “Trends Communication,” to promote business selection
and concentration and realize growth by increasing the unique value it provides to urban areas.
With regard to the relationships between the Company and the Tender Offeror, based on the
belief that the two companies can improve each other's corporate value by effectively utilizing theirstore bases and customer basis each other, in March 2012, the Tender Offeror acquired 27,400,000
shares of the Company Shares (an ownership ratio of 33.22% based on the total number of issued
shares at that time), and made the Company an equity-method affiliate. Subsequently, in July
2012, based on the decision that the collaborative pursuit of both companies’ businesses under astronger capital relationship will lead to the seamless use of management resources of bothcompanies, the two companies concluded a capital and business alliance agreement. In August
2012, the Tender Offeror acquired the Company Shares through a tender offer by the Tender
Offeror (after the acquisition, the number of the Company Shares held by the Tender Offeror is
65,922,614 shares (ownership ratio: 64.98%)) and the Company became a consolidated subsidiaryof the Tender Offeror.
The Company Group positioned the period for the Medium-term Business Plan as the businessportfolio reform period and adopted three strategies: “Evolve the store brands,” “Produce
commercial real estate” and “Expand soft content.” Recently, the Company Group has beensteadily taking various measures based on these three strategies, including undertaking large-scale
projects, such as the new Shibuya PARCO, Kinshicho PARCO and SAN-A Urasoe West Coast
PARCO CITY, developing low to medium-rise shopping complexes, such as Kyoto ZERO GATE,
Harajuku ZERO GATE and Kawasaki ZERO GATE, and making the decision to close unprofitablelocations in the Retail Business and close the Utsunomiya PARCO and Kumamoto PARCO.
In fiscal 2019, the third year of the Medium-term Business Plan, the Company is aware that itneeds to confirm the progress and results of the Medium-term Business Plan, accelerate businessportfolio transformation to achieve financial results targets (operating revenue, operating profit,
profit attributable to owners of parent, EBITDA and ROE), and aim to achieve further growth bywidening the value provided through business in urban areas. Furthermore, in 2019, the Company
marked its 50th anniversary of the opening of the Ikebukuro PARCO, the first store of the Company,
and the Company reaches a significant milestone for deepening deliberations on the next long-termbusiness vision.
(ii) Background and Purpose of Tender Offeror That Led to Its Decision to Implement Tender
Offer
The Tender Offeror made the Company a subsidiary of Tender Offeror through the following
6transactions for the purpose of strengthening its competitiveness and improving corporate value
through collaboration with the Company, which has excellent know-how in the business domainthat is the development and operation of urban commercial facilities. Firstly, in March 2012, theTender Offeror acquired 27,400,000 of the Company Shares (33.22% of issued shares at that time)from Mori Trust Co., Ltd. and made the Company an equity-method affiliate. Subsequently, in
July 2012, the Tender Offeror and the Company entered into a capital and business allianceagreement, and in August 2012 the Tender Offeror implemented a tender offer for the Company
Shares, thereby acquiring 38,522,614 the Company Shares (ownership ratio: 37.97%) and bringing
its holding of Company Shares to 65,922,614 shares (ownership ratio: 64.98%).
Through that tender offer the Tender Offeror became the parent company of the Company, andover the seven years or so since that tender offer settlement date, that has been a catalyst for efforts
between the two companies in a broad range of areas designed to boost the corporate value and thebrand value of the Tender Offeror Group, including the Company. Examples include
strengthening the business foundation as a retail business group, enhancing the competitiveness ofretail facilities by sharing and deploying expertise, and improving sales activities by making mutual
use of each other’s customer bases.
More specifically, in addition to the two companies having jointly developed stores in Ueno
Frontier Tower, which opened in November 2017, and in the north wing of Daimaru Shinsaibashi, aproject which is still ongoing, they have achieved business synergies in many areas such as throughjoint sales promotions that make use of both companies’ customer bases, with the Nagoya arealeading the list. The Tender Offeror believes that the growth of the Tender Offeror Group, theCompany included, has benefited from the realization of the alliance in a broad range of areas,
including the development of a greater mutual understanding through personnel exchanges and thesharing of business connections.
The environment surrounding the Tender Offeror Group is expected to become ever morechallenging in the future due to the October 2019 consumption tax increase and the uncertain
outlook for the economy in the wake of the 2020 Tokyo Olympics and Paralympics, as well as due
to having to confront market transformations such as the declining population and the shrinking of
the fashion retail market, changes to the operating environment for established businesses,
particularly physical stores, as a result of the rise of EC (Note 5), advances in ICT (Note 6), and theincreasing diversity of people’s lifestyles and values.
Note 5: “EC” is an abbreviation for Electronic Commerce.
Note 6: “ICT” is an abbreviation for Information and Communications Technology.
With such major shifts in environment expected, further improvements in the companies’
corporate value and brand value will require flexible adaptation to ever-changing consumer needs.
Further collaboration than ever is therefore considered essential. In the current capital relationshipbetween the Tender Offeror and the Company, with respect to the collaborations already pursued todate, in joint store development and sales promotion, consolidation of group resources andunification of management and development functions cannot be sufficiently conducted. Also
because the Tender Offeror and the Company are listed, and each management has a certain degreeof independence, it takes time for Tender Offeror Group to make decisions, and transformation ofits business portfolio cannot be sufficiently conducted across business units at the group level.
The Tender Offeror believes that in order to move ahead with a thorough and flexible
transformation of the Tender Offeror Group’s business portfolio with a sense of speed backed by
rapid decision-making, it will be necessary to further deepen the alignment between the twocompanies and to concentrate management resources and for this purpose, it is necessary to makethe Company into a wholly-owned subsidiary of the Tender Offeror.
The Tender Offeror believes that by making the Company into a wholly-owned subsidiary of the7Tender Offeror, the Tender Offeror and the Company will be united, enabling swift and flexible
decision-making, and additionally, as stated in (A) through (D) below, it will be possible to generate
and maximize business synergies that result from alignment with the Company more rapidly and toa greater extent, to pursue the vision of the Tender Offeror Group as a multi service retailer, andtherefore contribute to further increases in the corporate value and the brand value of bothcompanies.
In addition, the Tender Offeror Group is considering growth by strengthening each business suchas its “life solutions and lifestyle business” and “future pathways business,” which makes inroads to
new markets as well as its “department store business,” “shopping center real-estate business,” and“credit finance business.” Making the Company into a wholly-owned subsidiary of the Tender
Offeror will enable a thorough and flexible transformation of the Tender Offeror’s group’s businessportfolio, thereby the Tender Offeror will create synergies with the Company in each business andestablish a business foundation that can respond to any changes. Through these initiatives, theTender Offeror Group, including the Company, will accelerate the group transformation aiming toachieve the Group Vision of “Create and Bring to life ‘New Happiness.’”(A) Strengthening the Business Base as a Retail/Real Estate Business GroupIn jointly developing stores, including large-scale multi-purpose facilities that the Company
would find it difficult to handle alone, we believe that in addition to working together to promote
development, it will be possible for the Company make effective use of the land and properties
owned by the Tender Offeror.
As part of these efforts, once the Company has become a wholly-owned subsidiary of theTender Offeror, by transferring the real estate business of Daimaru Matsuzakaya, Tender
Offeror’s consolidated subsidiary, to the Company which has superior business expertise in the
management and development of urban commercial facilities and seeking to consolidate group
resources and unify management and development functions. The Tender Offeror anticipatesthat the Company will basically take the lead in running the Tender Offeror Group’s real estatebusiness. By doing so, the Tender Offeror Group intends to fully utilize the Company’s
superior business expertise and strengthen its business bases as a retail and real estate group.
In addition, it is anticipated that customer data of both companies will be mutually utilized tofurther strengthen sales capabilities of the Tender Offeror Group, including the Company.
(B) Strengthening Related Businesses Aimed at Development as a Multi-Service Retailer
In addition to store development, it is expected to be possible to promote cooperation in similar
related businesses such as interior construction contract business, across business units at thegroup level. By enabling full utilization of the Company’s superior business expertise in areas
like the entertainment business on the Tender Offeror side as well, it will be possible to expand
the scope of the service and business offerings of the Tender Offeror Group overall.
(C) Improving Management Efficiency
Faced with a need to address the increasing diversification of lifestyles, the group will pursue
integrated new business development at the group level and thereby attain improvements inmanagement efficiency. It is expected that integrating back-office functions, including
investor-related operations, financing operations, and general shareholders meeting convocationand management operations and implementing systems investments across the Tender Offer
Group will generate substantial efficiency improvements.
(D) Enhancement of Competitiveness by Sharing Expertise through Personnel Exchange
Because it will allow the promotion of an even greater degree of cross-business-unit personnel
8exchange, it will be possible to share the varied expertise on which the Tender Offeror Group andthe Company have built their competitiveness, which will help with the provision of a broad
range of services to meet increasingly diverse customer needs. In this way, the enhancement ofcompetitiveness of the entire Tender Offeror Group, including the Company, will be realized.
After becoming the Company’s parent company, the Tender Offeror has continuously discussed
business cooperation and the form of the group structure with the Company. With respect tomeasures to help boost the corporate value of the two companies even further, in late August 2019,
the Tender Offeror judged that further strengthening cooperation with the Company and pursuingthorough and flexible transformations of the Tender Offeror Group’s business portfolio necessitatedfurther deepening the alliance of the two companies and concentrating management resources bymaking the Company into a wholly-owned subsidiary of the Tender Offeror and. The Tender
Offeror appointed Nomura Securities Co., Ltd. (“Nomura Securities”), which is independent fromthe Tender Offeror and the Company, as a financial advisor and third-party appraiser and Miura &Partners as a legal advisor, and the Tender Offeror deliberated the Transactions. After carrying outthat deliberation, the Tender Offeror, on August 28, 2019, informed the Company that it wished tocommence deliberations and discussions of the Transactions. The Tender Offeror subsequently
engaged in due diligence to look carefully at the feasibility of the Tender Offer from mid-October
2019 and early December 2019, while continuing to negotiate in parallel with the Company on theterms and conditions of the Transactions, including the Tender Offer. In addition, since
mid-November, 2019, the Tender Offeror has held several rounds of discussions and negotiations
with the Company regarding the Tender Offer Price. Specifically, in mid-November 2019, theTender Offeror submitted an initial proposal (1,750 yen per share) regarding the Tender Offer Price,
comprehensively taking into consideration examples of premiums offered when determining theprice in purchases, etc. in examples of past tender offers for share certificates, etc. by parties otherthan the issuer (example cases of tender offers aimed at making a company a wholly-owned
subsidiary), whether the Company’s Board of Directors will approve the Tender Offer, trends in themarket share price for the Company Shares, and forecasts regarding the number of shares to betendered in the Tender Offer. Thereafter, through several rounds of discussions and negotiations
with the Company, in late November 2019, the Tender Offeror increased the initial offer price andmade the final proposal (1,850 yen per share) for the Tender Offer to the Company and continued
discussions and negotiations with the Company.
As described above, the Tender Offeror considers that in order to fully realize the aforementioned
synergies stated in (A) through (D) above, it will be necessary to move ahead with a thorough andflexible transformation of the Tender Offeror Group’s business portfolio with a sense of speed
backed by rapid decision making by making the Company into a wholly-owned subsidiary. As aresult, in today’s meeting of its board of directors, the Tender Offeror determined that by making
the Company into a wholly-owned subsidiary of the Tender Offeror it will be possible to deepenalignment with the Company further and to concentrate management resources, and thereby
increase the corporate value and the brand value of the Tender Offeror Group, including theCompany, and allow the creation of a corporate group that can draw a bright future, thus
accelerating progress toward the Tender Offeror Group’s vision of a multi-service retailer thatexceeds the limits of retail business, and resolved to commence the Tender Offer.
(iii) Management Policy after Tender Offer
The Tender Offeror believes the Company’s group has been able to realize its ability to develop
and operate progressive urban retail facilities with highly cultural values that find support fromlarge numbers of customers thanks to the advanced corporate culture, atmosphere, and personnel
that the Company’s group has fostered. Based on this view, although the specific management9policy of the Company after the Tender Offer will be decided through consultation between theTender Offeror and the Company. After the Company becomes a wholly-owned subsidiary of theTender Offeror, the Tender Offeror intends to strengthen the alignment between the Company and
the Tender Offeror, and to maintain the independent management approaches, trade names, andstore brands established by the Company in order to avoid damaging the unique identity of the
progressive corporate culture, atmosphere, and personnel of the Company. Meanwhile, thefunctions and roles of the Tender Offeror as a pure holding company will be made explicit,
including through revision of the Group Management Rules, and those functions that can be mademore efficient by unification, primarily back-office functions, will be transferred to the Tender
Offeror pursuant to a consultation process that takes the Company’s opinion into account. This isintended to improve the corporate value and brand value of the Tender Offeror Group, including theCompany.
Currently, Mr. Kozo Makiyama, the Director, Chairman of the Board, President andRepresentative Executive Officer of the Company concurrently serves as a Director and Managing
Executive Officer of the Tender Offeror, and Mr. Taro Sawada, a Managing Executive Officer of
the Tender Offeror concurrently serves as a Director of the Company. Regarding themanagement structure after the conversion of the Company into a wholly-owned subsidiary of theTender Offeror, The Tender Offeror plans that the Company’s current management team willcontinue to take responsibility for management, but that the details will be worked out throughconsultation with the Company, taking into account also the management structures of companies
in the Tender Offeror Group. In terms of the organizational design of the Company, it isanticipated that there will be a transition from a Company with a Nominating Committee, etc. to a
Company with Auditors. The Tender Offeror also plans that there will be personnel exchanges
between the Tender Offeror and the Company. Ther Tender Offeror does not plan to change,
among others, the terms and conditions of employment of the Company Group employees.
(c) Background and Reasons of Company That Led to Its Decision to Support Tender Offer
The Company received a proposal concerning the Transactions from the Tender Offeror on
August 28, 2019. In light of the structural potential conflicts that may arise in the course of thereview of the Transactions by the Company due to the fact that the Tender Offeror is a controllingshareholder of the Company and two of the Company’s Directors also serve as Executive Officersof the Tender Offeror, as described in “(6) Measures to Ensure Fairness of Tender Offer Including
Measures to Ensure Fairness of Tender Offer Price and Measures to Avoid Conflicts of Interest,”
in order to ensure the fairness of the Transactions, the Company determined, by resolution of its
Board of Directors meeting on August 29, 2019, to appoint Mitsubishi UFJ Morgan Stanley
Securities Co., Ltd. (“Mitsubishi UFJ Morgan Stanley Securities”) as its financial advisor andthird-party valuation institution independent from the Tender Offeror and the Company and to
appoint Nagashima Ohno & Tsunematsu as its legal advisor, also independent from the Tender
Offeror and the Company, and requested that Mitsubishi UFJ Morgan Stanley Securities as thethird-party appraiser submit a valuation report concerning the Company Shares (the “Company’s
Share Valuation Report”). On the same day, the Company’s Board of Directors adopted aresolution to establish a special committee (the “Special Committee”) consisted of independent
third-party members to avoid conflicts of interest, establishing a structure for conducting
deliberations and negotiations regarding the Transactions. For details regarding the compositionof the Special Committee and details of its specific actions, refer to “(d) Establishment of a Special
Committee of Company and Receipt of Report from Special Committee” in “(6) Measures to
Ensure Fairness of Tender Offer Including Measures to Ensure Fairness of Tender Offer Price andMeasures to Avoid Conflicts of Interest” below.
Subsequently, on August 29, 2019, the Company determined that the proposal concerning the10

Transactions by the Tender Offeror dated August 28, 2019 would enable the Company to pursue
further increase of the corporate value of the Company by the Company becoming a wholly-owned
subsidiary of the Tender Offeror and undertaking integrated business development on the basis of astronger capital relationship, and the Tender Offeror and the Company commenced concretedeliberations and discussions on whether and how the Transactions should be implemented. After
undergoing the Tender Offeror’s due diligence from mid-October to early December 2019, theCompany conducted continuous discussions with the Tender Offeror.
As a result, on December 26, 2019, the Company determined that, as described in “(iii)Management Policy after Tender Offer” in “(b) Background and Purpose of, and Decision-Making
Process for, Tender Offeror That Led to Its Decision to Implement Tender Offer, and Its
Management Policy after Tender Offer” in “(2) Grounds and Reasons for Opinion Concerning
Tender Offer” above, considering that (A) it is expected that the Tender Offeror will manage theCompany not to avoid damaging the Company’s unique identity, such as its corporate culture,
natural atmosphere and human resources, and (B) a certain understanding and consideration for thesources of the Company's corporate value are expressed, no significant disadvantage can be foundas a result of the Transactions, and further increase in its corporate value can be expected bycarrying out the following through the Transactions.
i. Acceleration of Growth of Entire Company Group
By becoming a wholly-owned subsidiary of the Tender Offeror, which is the holding companyof the Company, through the Transactions, the Company will be able to accelerate the future
growth it envisions by leveraging the Tender Offeror’s management resources, increasing thefeasibility of such growth and expanding the growth areas themselves. This will enable theCompany to take on challenges in new fields transcending the boundaries of the Company’sbusiness development to date, such as large-scale real estate development in urban areas,small-scale real estate development other than ZERO GATE stores, which are low to
medium-rise shopping complexes in prime urban locations, and development of new businesses
corresponding to diverse consumption. In addition, stock listing and back-office costs andoperations will be streamlined, creating an environment in which the Company can concentrateon business expansion as an operating company.
ii. Reinforcement of Bases of Real Estate Business and Diversification of Real Estate
Development
The real estate business of Daimaru Matsuzakaya, a consolidated subsidiary in the Tender
Offeror Group, is scheduled to be transferred to the Company following the Company becoming
a wholly-owned subsidiary of the Tender Offeror. This will enable the Company (a) to takecharge of income-generating properties, in particular, the prime locations in major urban areas,such as Osaka, Kyoto and Nagoya, which are currently managed by the real estate business of
Daimaru Matsuzakaya, and (b) to acquire new commercial bases, including those in the areas
where the Company has not yet opened stores.
In addition, since the Company will take the lead in the real estate business of the Tender
Offeror Group, the Company will be able to make the maximum use of financial resources,
networks, and intelligence assets of the Tender Offeror in the development of real estate. This
will enable the Company to establish a business foundation that will lead to the diversification of
the Company’s development strategies, including business development that goes beyond thescope of commercial development that has been conducted independently by the Company todate, and expansion of opportunities for mixed-use development in major urban areas anddevelopment of new business formats. The Company believes that it will be able to provide
new commercial facilities and value beyond its existing business formats (i.e., PARCO stores and11

ZERO GATE), and thereby contribute to the improvement of the corporate value of the Company
Group.
iii. Increase of Value to be Provided by Existing Stores and Improvement of Their
Competitiveness
The Company and Daimaru Matsuzakaya will be able to link together the customers andcustomer data possessed by both companies more than ever before, which will enable theCompany to approach customer segments that had no contact with the Company and also
improve the accuracy of its marketing activities.
Furthermore, by utilizing Daimaru
Matsuzakaya’s business partners and networks, the Company will be able to have new business
partners open their stores in the Company’s commercial facilities, such as existing PARCO stores,
and develop new business formats. This will enable Daimaru Matsuzakaya and the Company toprovide customers who visit their stores with new retail shops and products that they have neverexperienced as well as mutual services and information, thereby providing increased value tocustomers.
In addition, the Company believes that the competitiveness of existing stores of the twocompanies will increase in major urban areas where both companies operate stores in the same
districts, and that the Company will be able to offer additional value, such as Daimaru
Matsuzakaya's products, retail shops and services, in the areas where only the Company operates
stores.
iv. Evolution of Related Businesses and Establishment of a Position in Industry
The expansion of real estate development as described in ii. above will increase thecommercial spaces which the Company manages, and as a result, will also expand the scale,bases and domains of the related businesses of the Company (i.e., Space Engineering andManagement Business, Retail Business, Digital Marketing Business and Entertainment Business),
as well as collaboration within the Tender Offeror Group. The Company believes that this willlead to the evolution of each related business and the increase of opportunities for expansion ofbusiness into new customer segments and sales channels (including overseas expansion) andcollaboration with new business partners, and therefore the Company will be able to the further
establish its position within the industry.
v. Realization of New Businesses
By combining the customer data owned by both parties, such as the customer data for
Department Store Business of the Tender Offeror Group and that for Shopping Complex
Business of the Company Group, it will be possible to provide value to a wide range of customers
and provide new services and products tailored to the various life stages of the relevant
customers.
Also, in addition to combining the above customer data, the financial resources of the Tender
Offeror and the alignment of the R&D Functions (Note 7) of the Company and the Tender
Offeror will lead to the development of new businesses in business areas where it would behighly difficult to do so by the Company itself, and to the acceleration and increase of thelikelihood of the realization of new businesses.
Note 7: R&D (Research and Development) Functions means the functions, among others, related tothe scientific research or the technological development of a company.
vi. Contribution to Development of Business Partners of Company
The Company believes that, through the aforementioned business expansion and enlargementof business domains, the Company will be able to provide more opportunities for tenants and12business partners, who are equal partners of the Company, to open new stores or develop new
businesses.
vii. Provision of New Stages of Performance for Employees of Company GroupFor employees, who are a source of the corporate value of the Company Group, the Company
believes that the evolution and expansion of each business of the Company will enable them toreach new stages of performance and obtain diverse growth opportunities, which will lead to theself-fulfillment of each employee.
Furthermore, in mid-November 2019, the Tender Offeror and the Company commenced concretedeliberations and discussions concerning the terms and conditions of the Transactions including theTender Offer Price and engaged in ongoing discussions and negotiations.
On December 26, 2019, the Company determined that the Tender Offer provides the Company’s
shareholders a reasonable opportunity to sell their shares based on the fact that: (a) the Tender Offer
Price exceeds the upper end of the calculation results pursuant to the market price analysis in the
Company’s Share Valuation Report and is within the range of the calculation results pursuant to thediscounted cash flow analysis (“DCF Analysis”) as described in “(b) Overview of Calculation” in“(3) Matters Relating to Valuation” below; (b) the Tender Offer Price represents a premium of
35.63% (here and hereafter in relation to calculation of premiums, rounded to two decimal places)
over 1,364 yen, which was the closing price of the Company Shares on the First Section of theTokyo Stock Exchange on December 25, 2019, a premium of 37.55% over 1,345 yen (here andhereafter in relation to calculation of simple averages of closing prices, rounded to the nearest
whole yen), which is the simple average of closing prices during the one-month period ending on
December 25, 2019, and a premium of 40.47% over 1,317 yen, which is the simple average ofclosing prices during the three-month period ending on December 25, 2019, a premium of 46.94%
over 1,259 yen, which is the simple average of closing prices during the six-month period ending on
December 25, 2019; (c) consideration was given to the interests of minority shareholders when
determining the Tender Offer Price including the adoption of measures to ensure the fairness of theTender Offer such as measures to avoid conflicts of interests as described below in“(6) Measures to
Ensure Fairness of Tender Offer Including Measures to Ensure Fairness of Tender Offer Price andMeasures to Avoid Conflicts of Interest”; (d) after taking the measures described above, the Tender
Offeror and the Company engaged in discussions and negotiations on multiple occasions to thesame extent as discussions and negotiations for a transaction between independent parties, and more
specifically, the Tender Offer Price was proposed as the result of sincere and ongoing discussions
and negotiations conducted while taking into consideration the valuation results for the share valueof the Company Shares by Mitsubishi UFJ Morgan Stanley Securities as well as the deliberations of
the Special Committee; and (e) the Special Committee expressed an opinion to the effect that theterms and conditions of the Tender Offer including the Tender Offer Price are appropriate.
Based on the above, the Company determined that the Transactions will contribute to theenhancement of the Company’s corporate value and that the Tender Offer provides the Company’s
shareholders with a reasonable opportunity to sell their shares, and at a meeting held today, theCompany’s Board of Directors adopted a resolution expressing an opinion supporting the Tender
Offer and recommending that the Company’s shareholders tender their shares to the Tender Offer.
For details of the method of the above resolution by the Board of Directors, refer to “(e)Unanimous Approval of all Non-interested Directors of Company” in “(6) Measures to Ensure
Fairness of Tender Offer Including Measures to Ensure Fairness of Tender Offer Price andMeasures to Avoid Conflicts of Interest” below.
(3) Matters Relating to Valuation
13

(a) Name of Appraiser and its Relationship with Company and Tender Offeror
When reviewing the Tender Offer Price presented by the Tender Offeror and expressing an
opinion on the Tender Offer, to ensure fairness, the Company requested that Mitsubishi UFJ
Morgan Stanley Securities, a third-party appraiser independent from the Company and the Tender
Offeror, calculate the value of the Company Shares and received from Mitsubishi UFJ Morgan
Stanley Securities the Company’s Share Valuation Report dated December 26, 2019. Mitsubishi
UFJ Morgan Stanley Securities is not a related party of the Company or the Tender Offeror and has
no material interests relating to the Transactions.
(b) Overview of Calculation
As a result of its examination of the valuation methods used for the Tender Offer, Mitsubishi UFJ
Morgan Stanley Securities adopted the following valuation methods, and calculated the value of theCompany Shares, with the assumption that the Company is a going concern and based on a belief
that a multifaceted valuation is appropriate with regard to the value of the Company Shares: since
the Company is listed on the First Section of the Tokyo Stock Exchange and has a market value,market price analysis; and the DCF Analysis in order to reflect assessment of intrinsic value basedon the status of future business activities. The Company has not received an opinion concerning
the fairness of the Tender Offer Price (a fairness opinion) from Mitsubishi UFJ Morgan Stanley
Securities.
The following are the ranges of values per share of the Company Shares calculated according toeach of the valuation methods indicated above.
Market price analysis:
DCF Analysis:

1,259 yen to 1,364 yen
1,548 yen to 2,008 yen

The range of the value per share of the Company Shares obtained from market price analysis isfrom 1,259 yen to 1,364 yen with December 25, 2019 being the calculation reference date; based on
1,364 yen, which is the closing price of Company Shares quoted on the First Section of the Tokyo
Stock Exchange on the reference date; 1,345 yen, which is the simple average of closing prices
during the most recent one-month period; 1,317 yen, which is the simple average of closing prices
during the most recent three-month period; and 1,259 yen, which is the simple average of closing
prices during the most recent six-month period.
The range of the value per share of the Company Shares obtained from the DCF Analysis is from1,548 yen to 2,008 yen, which is based on the corporate value and share value of the Company
calculated by discounting, to the current value at a certain discount rate, the free cash flow that theCompany is expected to generate in and after the fiscal year ending February 29, 2020, taking into
consideration the business plan prepared by the Company for the period from the fiscal year ending
February 29, 2020 to the fiscal year ending February 28, 2023, recent performance trends,
information publicly disclosed by the Company, and other factors. The discount rates used for the
calculation range from 3.25% to 3.75%, the multiple method was used to calculate the going
concern value, and the EBITDA multiples used for the calculation range from 9.0 times to 11.0
times.
The business plan for the period from the fiscal year ending February 29, 2020 to the fiscal year
ending February 28, 2023, which has been prepared by the Company and used by Mitsubishi UFJ
Morgan Stanley Securities for the DCF Analysis, includes business years in which a significant
increase or decrease in revenues or profits is expected. Specifically, a substantial increase inoperating profit is expected in the fiscal year ending February 29, 2020 as a result of recovery fromthe store closing related expenses that arose in the fiscal year ended February 28, 2019, and asubstantial increase in operating profit is expected in the fiscal year ending February 28, 2022 as a14

result of the opening of Shinsaibashi PARCO. These financial forecasts do not take into accountthe synergy effects that can be expected to be realized through the Transactions, because it isdifficult to specifically estimate such synergy effects at present .
(million yen)
FY 2020
FY 2021
FY 2022
FY 2023
Operating revenue
114,100
107,314
115,166
115,445
Operating profit
10,80011,28914,764
14,773
EBITDA
18,066
19,78923,664
23,691
Free cash flow
13,371
3,115
9,275
8,888
(fiscal year ending in February)
Furthermore, Mitsubishi UFJ Morgan Stanley Securities performed a calculation using
comparable company analysis as reference values. The range of the value per share of theCompany Shares obtained from comparable company analysis is as indicated below.
Comparable company analysis:

480 yen to 1,174 yen

Comparable company analysis calculated the Company’s corporate value and share value bycomparison with, among others, the market prices and other financial indices indicating profitabilityof the listed companies that engage in the business relatively comparable to the business of theCompany. In light of the fact that there are certain limitations to the comparability of theCompany’s business and that of other listed companies, the analysis results are intended as
reference values only. The listed companies determined to be relatively comparable are J.
FRONTRETAILING Co., Ltd., Isetan Mitsukoshi Holdings Ltd., Takashimaya Company, Limited,
and AEON Mall Co., Ltd. The calculation was performed using EBITDA multiples and the rangeof the value per share of the Company Shares obtained from comparable company analysis is from
480 to 1,174 yen.
Note 8: The analysis by Mitsubishi UFJ Morgan Stanley Securities, and the analysis of value of theCompany Shares that serves as its basis, is intended only to contribute to the reference of theCompany. The analysis does not constitute a financial opinion or recommendation by
Mitsubishi UFJ Morgan Stanley Securities or its affiliates and does not express an opinion
or make any recommendation concerning any actions of shareholders of the Company or theTender Offeror in relation to the Tender Offer, or any exercise of voting rights byshareholders in relation to any general meeting of shareholders regarding the Transactions.
When performing its analysis, Mitsubishi UFJ Morgan Stanley Securities relied on
information that has been publicly disclosed or was obtained by provision by the Company
or other means with the assumption that information is accurate and complete, andMitsubishi UFJ Morgan Stanley Securities makes no independent verification concerning
the accuracy or completeness of that information. Furthermore, Mitsubishi UFJ Morgan
Stanley Securities assumed that financial forecasts were reasonably prepared and producedby the Company reflecting the best available forecasts and determinations available as ofDecember 25, 2019 relating to the Company’s future financial standing. Mitsubishi UFJ
Morgan Stanley Securities did not perform any independent evaluation or examination of
the Company’s assets and liabilities (including contingent liabilities). The analysis by
Mitsubishi UFJ Morgan Stanley Securities is based on financial, economic, currency, market,
and other conditions as of December 25, 2019 and information obtained by Mitsubishi UFJ
Morgan Stanley Securities as of December 25, 2019. Events occurring after the said date
may have an impact on the analysis by Mitsubishi UFJ Morgan Stanley Securities and theassumptions used in the preparation of its valuation report, but Mitsubishi UFJ Morgan
15

Stanley Securities is not obligated to update, amend, or reconfirm the valuation report oranalysis.
The preparation of the valuation report and its underlying analysis are complex processes,
and they may not necessarily be suitable for partial analysis or summary descriptions. The
valuation range based on the specific analyses identified in the said valuation report may not
be construed as an assessment by Mitsubishi UFJ Morgan Stanley Securities of theCompany’s actual value.
Mitsubishi UFJ Morgan Stanley Securities provided the service as the Company’s financial
advisor in relation to the Transactions and will receive the fees as consideration for the
relevant service. Receipt of a substantial portion of those fees is conditioned on the publicannouncement and completion of the Transactions.
(4) Possibility of and Reasons for Delisting
As of today, the Company Shares are listed on the First Section of the Tokyo Stock Exchange,
but the Tender Offeror is not establishing a maximum number for the share certificates, etc. that it
will purchase in the Tender Offer. Therefore, depending on the result of the Tender Offer, theCompany Shares may be delisted through the prescribed procedures in accordance with the delisting
standards set out by the Tokyo Stock Exchange. In addition, even if the Company Shares does not
fall under those standards at the time of completion of the Tender Offer, if each of the procedures
described in “(5)Policy on Organizational Restructuring, Etc. after Tender Offer (Matters Relating
to So-called “Two-Step Acquisition”)” below are carried out after concluding the Tender Offer, theCompany Shares will fall under the delisting standards, and will be delisted through the prescribed
procedures. Further, after delisting the Company Shares, the Company Shares will no longer beable to be traded on the Tokyo Stock Exchange.
(5) Policy on Organizational Restructuring, Etc. after Tender Offer (Matters Relating to So-called“Two-Step Acquisition”)
If the Tender Offeror cannot acquire all of the Company Shares under the Tender Offer as
detailed in “(a) Outline of Tender Offer” in “(2) Grounds and Reasons for Opinion Concerning
Tender Offer” above, the Tender Offeror plans to implement procedures for the purpose of
acquiring all of the Company Shares using the following methods after the completion of theTender Offer.
(a) Demand for Share Cash-Out
If the total number of voting rights of the Company owned by the Tender Offeror comes to 90%
or more of the number of voting rights of all shareholders of the Company as a result of thecompletion of the Tender Offer, the Tender Offeror plans to demand from all shareholders of theCompany (excluding the Tender Offeror and the Company) to sell all shares of the Company Sharesthat they own (the “Demand for Share Cash-Out”) in accordance with Article 179 of the Companies
Act (Act No. 86 of 2005; as amended; hereinafter the same) promptly after the completion of thesettlement of the Tender Offer. In the Demand for Share Cash-Out, the Tender Offeror plans to
stipulate that it will deliver to the Company’s shareholders (excluding the Tender Offeror and theCompany) the same amount of money as the Tender Offer Price as consideration per share of theCompany Shares. In that case, the Tender Offeror shall notify the Company to that effect and seek
approval of the Demand for Share Cash-Out from the Company. If the Company approves the
Demand for Share Cash-Out by a board of directors resolution, the Tender Offeror shall acquire allof the Company Shares owned by all of the Company’s shareholders (excluding the Tender Offeror
and the Company) from those Company’s shareholders on the acquisition date set out in the
Demand for Share Cash-Out without requiring the individual consent of the Company’s
16

shareholders in accordance with the procedures set out in the relevant laws and regulations. It isplanned that if the Tender Offeror makes the Demand for Share Cash-Out, the Company’s board of
directors will approve such Demand for Share Cash-Out. If the Demand for Share Cash-Out iscarried out, the Company’s shareholders may petition for a court to determine the sale price of theCompany Shares that they own in accordance with Article 179-8 of the Companies Act or any otherrelevant laws and regulations.
If the Transactions are forecasted to be completed in the period until May 31, 2020 as a result of
the Demand for Share Cash-Out, the Tender Offeror plans to demand to the Company that, on thecondition of the completion of the Transactions, the Company partially amend its Articles ofIncorporation to the effect of abolishing the provisions for the record date for voting rights at theannual shareholders meeting in order to make the shareholders after completion of the Transactions(meaning the Tender Offeror) the shareholders who are entitled to exercise their rights at the annual
shareholders meeting of the Company for the period ending February 29, 2020 (the “Annual
Shareholders Meeting”). Therefore, even if a shareholder is entered or recorded in the Company’s
shareholder register on February 29, 2020, that shareholder may not be entitled to exercise its rights
at the Annual Shareholders Meeting.
(b) Share Consolidation
If the total number of voting rights of the Company owned by the Tender Offeror after thecompletion of the Tender Offer is less than 90% of the number of voting rights of all shareholdersof the Company, the Tender Offeror plans to demand as an agenda item for discussion at the Annual
Shareholders Meeting for the Company to consolidate the Company Shares in accordance with
Article 180 of the Companies Act (the “Share Consolidation”) and to amend the Articles ofIncorporation to the effect that the provisions regarding share units will be abolished on thecondition that the Share Consolidation is effected. The Tender Offeror plans to approve the above
agenda item at the Annual Shareholders Meeting.
If the agenda item for the Share Consolidation is approved at the Annual Shareholders Meeting,on the date that the Share Consolidation becomes effective, the Company’s shareholders will own
the number of Company Shares that is in proportion to the ratio for the Share Consolidation
approved at the Annual Shareholders Meeting. If due to the Share Consolidation there is a fraction
less than one share in the number of shares, the cash obtained by selling the Company Sharesequivalent to the total number of fractional shares (if there is a fraction less than one share in the
total number of fractional shares, that fraction will be rounded down; hereinafter the same) to theCompany or the Tender Offeror in accordance with the procedures set out in Article 235 of theCompanies Act and other relevant laws and regulations will be delivered to the shareholders of theCompany. With regard to the sale price of the Company Shares equivalent to the total number offractional shares, after establishing that the amount of cash to be delivered to the shareholders of theCompany who did not tender in the Tender Offer (excluding the Tender Offeror and the Company)
as a result of the sale will be the same as the price obtained by multiplying the Tender Offer Priceby the number of shares of the Company Shares owned by each such shareholder, the Tender
Offeror plans to demand that the Company file for permission for sale by private contract with thecourt. In addition, the ratio for consolidation of the Company Shares has not been established asof today, but it is planned that the number of shares of the Company Shares owned by shareholdersof the Company who did not tender in the Tender Offer (excluding the Tender Offeror and theCompany) will be determined as a fraction that is less than one share so that only the Tender
Offeror owns all of the Company Shares (excluding treasury shares owned by the Company).
If the Share Consolidation is carried out and due to carrying out the Share Consolidation there isa fraction less than one share in the number of shares, it is provided under the Companies Act to theeffect that, in accordance with Article 182-4 and Article 182-5 of the Companies Act and other17relevant laws and regulations, the Company’s shareholders who did not tender in the Tender Offer(excluding the Tender Offeror and the Company) may demand that the Company purchase all of thefractional shares less than one share of the shares that they own at a fair price, and they may file apetition with the court to determine the price of the Company Shares. Further, the Tender Offer is
not at all for soliciting approval by all of the Company’s shareholders at the Annual Shareholders
Meeting.
It is possible that depending on the revision or enforcement of relevant laws and regulations orinterpretations by the relevant authorities, time will be required for implementation or changes in
the method of implementation will arise with respect to the procedures set forth in (i) and (ii) above.
However, even in that case, if the Tender Offer is concluded, it is planned that a method fordelivering cash to the Company’s shareholders who do not tender in the Tender Offer (excluding
the Tender Offeror and the Company) will finally be adopted, and the amount of money to bedelivered to those Company’s shareholders in that case is planned to be calculated to be the same as
the price obtained by multiplying the Tender Offer Price by the number of shares of the Company
Shares that were owned by those Company’s shareholders. However, if there is a petition for adecision for the sale price regarding the Demand for Share Cash-Out or a petition for a shareappraisal with regard to the Share Consolidation, the sale price for shares of the Company Shares or
the price regarding the share appraisal will be finally determined by the court.
It is planned that the Company will make a public announcement promptly after the decision is
made, with respect to the specific procedures and timing for implementation in each of the cases
above after discussions with the Tender Offeror. Further, each of the Company’s shareholders are
personally responsible for confirming with a tax specialist the handling of taxes in relation to thesubscription to the Tender Offer or the above procedures.
(6) Measures to Ensure Fairness of Tender Offer Including Measures to Ensure Fairness of Tender Offer
Price and Measures to Avoid Conflicts of Interest
The Tender Offeror and the Company have implemented the following measures as measures toensure the fairness of the Tender Offer including measures to ensure the fairness of the Tender Offer
Price and measures to avoid conflicts of interest, in light of the Company being a consolidated subsidiaryof the Tender Offeror and the Transactions, including the Tender Offer, constituting a materialtransaction with a controlling shareholder, and the continued personnel and business relationshipbetween the Tender Offeror and the Company. Further, Mr. Kozo Makiyama, Director, President andRepresentative Executive Officer of the Company, serves concurrently as the director and Managing
Executive Officer of the Tender Offeror, and Mr. Taro Sawada, Director of the Company, servesconcurrently as the Managing Executive Officer of the Tender Offeror.

(a) Procurement by Company of a Share Valuation Report from an Independent Third-Party Appraiser
To ensure fairness in the decision-making process concerning the Tender Offer Price presented
by Tender Offeror, the Company procured the Share Valuation Report from Mitsubishi UFJ
Morgan Stanley Securities, the Company’s financial advisor, as a third-party appraiser that is
independent from the Company and the Tender Offeror. For a summary of Company’s Share
Valuation Report, refer to “(b) Overview of Calculation” in “(3) Matters Relating to Valuation”
below.
(b) Procurement by Tender Offeror of a Share Valuation Report from an Independent Third-Party
Appraiser
When determining the Tender Offer Price, in order to ensure the fairness of the Tender Offer Price, the18Tender Offeror requested that Nomura Securities, a financial advisor, calculate the share value of theCompany, as a third-party appraiser independent from the Tender Offeror and the Company. Nomura
Securities is not a related party of the Tender Offeror or the Company and has no material interest
relating to the Tender Offer.
As a result of considering the calculation method for the Tender Offer, Nomura Securities carried out
the calculation using the average market price method because the Company Shares are listed on theFirst Section of the Tokyo Stock Exchange, the comparable company comparison method because there
are listed companies that are comparable to the Company and it is possible to infer the share value of theCompany Shares using the comparable company comparison method, and the discounted cash flow
method (the “DCF Method”) to reflect the situation regarding future business activities in the calculation,and the Tender Offeror obtained the share valuation report (the “Tender Offeror Valuation Report”) from
Nomura Securities on December 26, 2019. Further, the Tender Offeror has not obtained an opinion
regarding the appropriateness of the Tender Offer Price (known as a fairness opinion) from Nomura
Securities.
According to Nomura Securities, the results of the calculation of the share value per share of theCompany Shares are as follows:
Average market price method:
1,259 yen to 1,364 yen
Comparable company comparison method: 831 yen to 1,188 yen
DCF Method:
1,470 yen to 2,040 yen
The calculation under the average market price method demonstrates that the range of the share value
per share of the Company Shares is between 1,259 yen and 1,364 yen, on the basis that the closing priceof regular transactions for the Company Shares on the First Section of the Tokyo Stock Exchange on therecord date of December 25, 2019 was 1,364 yen, the simple average of the closing prices on theprevious five business days was 1,355 yen, the simple average of the closing prices in the most recent
one month was 1,345 yen, the simple average of the closing prices in the most recent three months was
1,317yen, and the simple average of the closing prices in the most recent six months was 1,259yen.
Under the comparable company comparison method, the share value of the Company is calculated bycomparison with the market price and, among others, financial indicators showing profitability of listedcompanies that conduct business that is comparatively similar to the Company’s business, and the rangeof the share value per share of the Company Shares is calculated as being between 831 yen and 1,188
yen.
The calculation under the DCF Method demonstrates that the range of the share value per share of theCompany Shares is between 1,470 yen and 2,040 yen, as a result of analyzing the corporate value andthe share value of the Company by discounting the free cash flow that is expected to be generated by theCompany in and after the fiscal year ending February 29, 2020 to the current value using a certain
discount rate, based on various factors such as revenues and investment plans in the business plan for theperiod from the fiscal year ending February 29, 2020 to the fiscal year ending February 28, 2023 of theCompany and information publicly available.
The business plan period from the for the fiscal year ending February 29, 2020 to the fiscal year
ending February 28, 2023 of the Company, which was used by Nomura Securities for the DCF Method,
includes fiscal years in which significant increases in revenues or profits are expected. Specifically, inthe fiscal year ending February 29, 2020, a significant increase in operating profits is expected resulting
from rebound from the store closing related expenses that arose in the fiscal year ended February 28,
2019, and in the fiscal year ending February, 28 2022, a significant increase in operating profits is
expected resulting from the opening of Shinsaibashi PARCO. Additionally, the financial forecasts do
not take into account the synergy effects that can be expected to be realized through the Transactions,because it is difficult to specifically estimate such synergy effects at present.

19

The Tender Offeror has referred to the calculation results for each method detailed in the Tender
Offeror Valuation Report obtained from Nomura Securities, considering the price is within the range ofthe calculation results for DCF Method, and finally determined the Tender Offer Price of 1,850 yen per
share through a resolution at a meeting of the board of directors held on December 26, 2019,
comprehensively taking into consideration examples of premiums offered when determining the price inpurchases, etc. in examples of past tender offers for share certificates, etc. by parties other than the issuer(example cases of tender offers aimed at making a company into a wholly-owned subsidiary of theTender Offeror), whether the Company’s Board of Directors will express its opinion in support of theTender Offer, trends in the market share price for the Company Shares, and forecasts regarding thenumber of shares to be tendered in the Tender Offer, and based on the results of consultations andnegotiations with the Company.
Further, the Tender Offer Price of 1,850 yen per share is the amount obtained by adding a premium of,respectively, 35.63% to 1,364 yen, which was the closing price for regular transactions for the Company
Shares on the First Section of the Tokyo Stock Exchange on December 25, 2019, which is the business
day before the announcement day for the implementation of the Tender Offer, 37.55% to 1,345 yen,which is the simple average of the closing prices for regular transactions in the one month prior to thesame date (i.e., from November 26, 2019 to December 25, 2019), 40.47% to 1,317 yen, which is thesimple average of the closing prices for regular transactions in the three months prior to the same date(i.e., from September 26, 2019 to December 25, 2019), and 46.94 % to 1,259 yen, which is the simple
average of the closing prices for regular transactions in the six months prior to the same date (i.e., from
June 26, 2019 to December 25, 2019).
Note 9: In calculating the Company’s share value, Nomura Securities has assumed that public

information and all information provided to it are accurate and complete, and it has notindependently verified the accuracy or completeness thereof. Nomura Securities has notindependently evaluated, appraised or assessed, or requested that any third-party
organization appraise or assess, any assets or liabilities (including financial derivatives,
off-balance sheet assets and liabilities, and other contingent liabilities) of the Company or its
affiliated companies, including analyzing and evaluating their individual assets and liabilities.
The Company’s financial forecast (including profit plans and other information) is assumed
to have been reasonably examined or prepared based on the best, bona-fide forecast anddecision-making that are presently available to the Company’s management. Calculations
by Nomura Securities reflect the information and economic conditions obtained by Nomura
Securities up to and including December 25, 2019. Further, calculations by Nomura
Securities are solely for reference purposes for the Tender Offeror’s board of directors toconsider the Company’s share value.
(c) Advice to Company from an Independent Law Firm
To ensure fairness and appropriateness in the decision-making methods and process by theCompany’s Board of Directors in relation to the Transactions including the Tender Offer, theCompany obtained legal advice from Nagashima Ohno & Tsunematsu, a legal advisor that is
independent from the Tender Offeror and the Company, on the decision-making methods andprocess by the Company’s Board of Directors in relation to the Transactions including the Tender
Offer. Nagashima Ohno & Tsunematsu is not a related party of the Tender Offeror or theCompany, and has no material interests to be described relating to the Transactions.
(d) Establishment of a Special Committee of Company and Receipt of Report from Special Committee
In light of the facts that the Company is a consolidated subsidiary of the Tender Offeror and theTransactions including the Tender Offer constitute material transactions with the controllingshareholder, the Company’s Board of Directors established the Special Committee on August 29,
20

2019 consisting of three members, Mr. Hiroshi Takahashi (External Director of the Company; an
independent officer), Ms. Noriko Nakamura (External Director of the Company; an independent
officer), and Mr. Tadayuki Seki (External Director of the Company; an independent officer), in
order to avoid arbitrariness in the Company’s decision-making relating to the Transactions
including the Tender Offer and to ensure fairness, transparency, and objectiveness in thedecision-making process. The Board of Directors consulted with the Special Committee on: (A)whether the Transactions are appropriate as transactions contributing to enhancement of theCompany’s corporate value and (B) whether the Transactions including the Tender Offer are
disadvantageous to the Company’s minority shareholders upon consideration of (x) the
appropriateness of the Tender Offer Price and other terms and conditions of the Tender Offer,premised upon the conduct of the Transactions, and (y) the fairness of negotiations and otherprocedures leading up to the Transactions (collectively, the “Consultation Matters”) and requested
the Special Committee to submit a report. The membership of the Special Committee has notchanged since its establishment, and the members elected Mr. Hiroshi Takahashi as committee
chairman from among the members. Each member of the Special Committee will be paid a fixedamount of remuneration in exchange for his/her duties, besides his/her remuneration as an External
Director.
The meetings of the Special Committee were held 10 times in total during the period from
September 25, 2019 to December 24, 2019, at which the members engaged in serious deliberationand discussion on the Consultation Matters. Specifically, at the first meeting of the Special
Committee, the committee confirmed that it shall operate in the following manner: Proposals,
questions, and other opinions from the Special Committee shall be conveyed via the Company to
the Tender Offeror; if there is a request from the Special Committee to provide an opportunity fordirect discussions with the Tender Offeror, the Company shall make its best effort to secure such an
opportunity; the Special Committee shall receive timely reports from the Company on the status of
discussions with the Tender Offeror; the Special Committee shall establish, as necessary, policies
concerning negotiation with the Tender Offeror about the terms and conditions of the Transactions;and the Special Committee may express its opinions on material matters. In addition, the Special
Committee confirmed that with regard to Mitsubishi UFJ Morgan Stanley Securities, which theCompany selected as its financial advisor and third-party appraiser, and Nagashima Ohno &Tsunematsu, which the Company selected as its legal advisor, there are no doubt on their expertiseand independence, and accordingly, the Special Committee has no objection to receiving
professional advice from these advisors and also, when the Special Committee deems it necessary,
the Special Committee may independently appoint attorneys, certified public accountants, and otheradvisors and seek their advice at the Company’s expense. Subsequently the special Committee
received an explanation from the Company concerning the background of receiving the proposal for
the Transactions from the Tender Offeror, the purpose of the Transactions, the status and future
outlook of the Company’s and the Tender Offeror’s business, synergy effects that can be expectedfrom the Transactions, and other topics, and the Company responded to questions from the Special
Committee. The Special Committee also received a report from the Company on the structure for,background of, and details of deliberations and negotiations concerning the Transactions between
the Tender Offeror and the Company and discussed those details. In addition, upon the
Company’s preparation of the business plan containing the financial forecasts, which will be
disclosed to the Tender Offeror, or which Mitsubishi UFJ Morgan Stanley Securities will use for thebasis of calculation of the share value of the Company Shares, the Special Committee has received
explanations from the Company and Mitsubishi UFJ Morgan Stanley Securities about, among
others, details and preparation process of the proposed business plan, and the material assumptions,and the Company and Mitsubishi UFJ Morgan Stanley Securities responded to questions from theSpecial Committee. Upon receiving those explanations and answers to such questions, the Special
21

Committee has confirmed the reasonableness of the details and the preparation process of thedefinitive business plan. Furthermore, the Special Committee received an explanation from
Mitsubishi UFJ Morgan Stanley Securities on the calculation of the value of the Company Shares
and an explanation from Nagashima Ohno & Tsunematsu on the Transactions including measuresthat should be taken to mitigate or prevent conflicts of interest in the Transactions, and each
responded to questions from the Special Committee. In light of these details, the Special
Committee had repeated discussions with Mitsubishi UFJ Morgan Stanley Securities andNagashima Ohno & Tsunematsu and deliberated and discussed on the purpose of the Transactions,the decision-making process for the Transactions, and the terms and conditions of the Transactions
including the Tender Offer Price.
Through this process and as a result of in-depth deliberation and discussion concerning theConsultation Matters, on December 26, 2019, upon a resolution adopted unanimously by theSpecial Committee members the Special Committee submitted to the Company’s Board of
Directors the report summarized as follows (the “Report”).
i. Opinion of Special Committee
The Special Committee believes that:(i)the Transactions are appropriate since they contribute to enhancing the Company’s
corporate value;(ii)
the Transactions including the Tender Offer are not disadvantageous to the Company’s
minority shareholders since (x) tender offer price and other terms and conditions of theTender Offer as a part of the Transactions are believed to be appropriate, and (y) thenegotiations and other procedures leading up to the Transactions are believed to be fair;
and
(iii)
in addition, it is appropriate that the Company’s Board of Directors makes decision (a)to express its opinion to support the Tender Offer and recommend shareholders of theCompany to tender shares in response to the Tender Offer and (b) to approve theDemand for Share Cash Out or the Share Consolidation implemented as part of theTransaction after the Tender Offer, since each decision contributes to enhancing theCompany’s corporate value and is not disadvantageous to the minority shareholders of
the Company.
ii. Whether Transactions are appropriate as they contribute to enhancing Company’s corporate value(Consultation Matter (A))
The significance and objectives of the Tender Offeror’s carrying out the Transactions, theexpected synergies for the Tender Offeror from the Transactions, and the management policies after
the Transactions and other factors of the Tender Offeror in the Transactions are described generally
above in “(ii) Background and Purpose of Tender Offeror That Led to Its Decision to Implement
Tender Offer” and “(iii) Management Policy after Tender Offer” in “(b) Background and Purpose of,and Decision-Making Process for, Tender Offeror That Led to Its Decision to Implement Tender
Offer, and Its Management Policy after Tender Offer” of “(2) Grounds and Reasons for Opinion
concerning Tender Offer”. Further, the value that the Company expects to achieve through theTransactions is described generally above in “(c) Background and Reasons of Company That Led toIts Decision to Support Tender Offer” in “(2) Grounds and Reasons for Opinion concerning Tender
Offer”.
In addition, since the Company’s human resources and corporate cultures are particularly
important elements for the purpose of maintaining and developing the source of the Company’s
corporate value, the Special Committee believes it is an important factor for judging whether theTransactions are appropriate as transactions contributing to enhancing the Company’s corporate22

value that such human resources and corporate culture will not be impaired after the Transactions.
With respect to this point, since the commencement of full blown negotiation between the Tender
Offeror and the Company, both parties have engaged in ongoing discussions. Furthermore, as
described above in “(iii) Management Policy after Tender Offer” in “(b) Background and Purposeof, and Decision-Making Process for, Tender Offeror That Led to Its Decision to Implement Tender
Offer, and Its Management Policy after Tender Offer” in “(2) Grounds and Reasons for Opinion
concerning Tender Offer,” the Tender Offeror will operate the Company in a manner that does not
impair the Company’s unique characteristics, such as its corporate culture, environment and humanresources, which indicates a certain level of understanding and consideration by the Tender Offeror.
The Special Committee engaged in in-depth deliberations and discussions, taking into
consideration the above, and concluded that the abovementioned explanations from the Tender
Offeror and the Company achieved a certain degree of specificity and further concluded that there
were no contradictions between the explanations provided by the Tender Offeror and the
explanations provided by the Company, nor was there any inconsistency in their understanding.
Moreover, the Special Committee has no particularly doubts about the Company’s understanding of
the management environment and the relevant values the Company intends to realize through theTransactions, and the Special Committee concluded that while there are many multiple advantages
to be found in the Transactions, there is no particularly significant disadvantages in respect of theTransactions.
Accordingly, the Special Committee believes that the Transactions are appropriate since they
contribute to enhancing the Company’s corporate value. In addition, it is appropriate that theCompany’s Board of Directors makes decision (a) to express its opinion to support the Tender Offerand recommend shareholders of the Company to tender shares in response to the Tender Offer and(b) to approve the Demand for Share Cash Out or resolve the Share Consolidation implemented aspart of the Transaction after the Tender Offer, since each decision contributes to enhancing theCompany’s corporate value.
iii. Appropriateness of tender offer price and other terms and conditions of Tender Offer based on
Transactions (Consultation Matter (B)(x))
The Company conducted negotiations concerning the Tender Offer Price with the advice from
Mitsubishi UFJ Morgan Stanley Securities, and the Special Committee expressed an opinion on thenegotiations after receiving explanations concerning the status of negotiations from Mitsubishi UFJ
Morgan Stanley Securities and the Company. The Company presented the Tender Offeror with atender offer price that the Company considered to be fair by taking into consideration the opinion of
the Special Committee. Furthermore, the final Tender Offer Price agreed by the parties isadequately and reasonably higher than the price initially offered by the Tender Offeror to theCompany. In light of the above, the Special Committee believes that the Tender Offer Price wasdetermined as a result of negotiations based on objective and consistent discussions between the
Company and the Tender Offeror on an arm’s length basis.
Moreover, the Tender Offer Price exceeds the upper limit value of the calculation results basedon the market price analysis conducted by Mitsubishi UFJ Morgan Stanley Securities, a third-party
appraiser, based on the business plan prepared by the Company, the content and preparation process,among others, of which were determined by the Special Committee to be reasonable. Further, theTender Offer Price is within the price range of the calculation results based on the DCF analysis andexceeds the median value of such price range. Furthermore, it exceeds the price range of thecalculation results based on the comparable company analysis, although it is only a reference value.
Additionally, the Tender Offer Price includes a premium at a level comparing well with premiums
in recent similar cases.
It is also believed that the transaction terms and conditions of the Tender Offer other than the23

Tender Offer Price, including the matters set forth in paragraph iv below, are equivalent to the terms
and conditions of transactions of similar type and scope.
Therefore, the Special Committee believes that tender offer price and other terms and conditionsof the Tender Offer as a part of the Transactions are appropriate.
iv. Fairness of negotiations and other procedures leading up to Transactions (Consultation Matter(B)(y))The Special Committee believes that necessary and adequate measures to ensure the fairness of
the Transactions have been taken and that those measures to ensure fairness have actually beeneffectively implemented since (i) when deliberating on the Transactions, the Company establishedthe Special Committee, and various measures taken to enhance the effectiveness of the Special
Committee are deemed adequate in light of the policies set out in “Fair M&A Guidelines:
Enhancing Corporate Value and Securing Shareholders’ Interests” dated June 28, 2019, which wasformulated by the Ministry of Economy, Trade and Industry, and are comparable to those in recent
similar cases, (ii) the Directors who may have interests in the Transactions are not expected toparticipate in relevant deliberations and resolutions of the Company’s Board of Directors, and, withrespect to the negotiations regarding the Transactions thus far, structural conflicts of interest havealso been handled with prudence in light of the relationship between the Tender Offeror, as acontrolling shareholder, and the Company, as a controlled company, (iii) the Company received
advice from attorneys with Nagashima Ohno & Tsunematsu, which the Company appointed as its
legal advisor independent from the parties involved in the Transactions, and received theCompany’s Share Valuation Report from Mitsubishi UFJ Morgan Stanley Securities, which theCompany appointed as a third-party appraiser independent from the parties involved in theTransactions, (iv) it is believed that a so-called indirect market check is being conducted by taking
measures to secure an opportunity for other offerors to carry out a tender offer and otheropportunities, (v) it is recognized that the Company is providing sufficient information to theshareholders of the Company so that the shareholders have significant decision-making materials
that will contribute to determining, among others, the appropriateness of the transaction terms andconditions, and (vi) it is believed that measures to eliminate coerciveness have been taken in
relation to the Transactions, and so on. It should be noted that no “majority-of-minority” condition
has been set in relation to the minimum number of shares to be purchased by the Tender Offer, but
it is considered that this should not necessarily be interpreted as an indicator that the measures toensure fairness are inadequate.
Therefore, it is believed that due consideration has been given to the interests of the Company’s
minority shareholders through fair procedures in the Transactions.
Whether Transactions including Tender Offer are disadvantageous to Company’s minority
shareholders (Consultation Matter (B))
As examined in detail above in iii. and iv., the Special Committee believes that the fairness of theoverall terms and conditions of the Transaction, including the Tender Offer Price, has been ensured
from the perspective of the Company’s minority shareholders and due consideration has been given
to the interests of the Company’s minority shareholders through fair procedures.
Based on the above, the Special Committee believes that the Transactions including the Tender
Offer are not disadvantageous to the Company’s minority shareholders. In addition, it isappropriate that the Company’s Board of Directors makes decision (a) to express its opinion to
support the Tender Offer and recommend shareholders of the Company to tender shares in responseto the Tender Offer and (b) to approve the Demand for Share Cash Out or resolve the Share
Consolidation implemented as part of the Transaction after the Tender Offer, since each decision is
not disadvantageous to the minority shareholders of the Company.

v.

24

(e) Unanimous Approval of all Non-interested Directors of Company
Upon the grounds and reasons discussed in “(c) Background and Reasons of Company That Led
to Its Decision to Support Tender Offer” in “(2) Grounds and Reasons for Opinion Concerning
Tender Offer” above, at the meeting of the Company’s Board of Directors held today, out of the six
Directors (including three External Directors), with unanimous votes by the four Directors,
excluding the two Directors who did not participate in the deliberations and resolutions relating to
the Transactions including the Tender Offer for the reasons set forth below, the Company resolved
to express an opinion in support of the Tender Offer, and to recommend that the Company’s
shareholders tender their shares in the Tender Offer. Among the Company’s directors, Mr. Kozo
Makiyama is also a Director and Managing Executive Officer of the Tender Offeror, and from theperspective of avoiding conflicts of interest, Mr. Makiyama did not participate in the deliberation
and resolution by the Board of Directors, when the above-stated resolution in support of the Tender
Offer was adopted. However, in light of the fact that (i) as the Company’s Representative
Executive Officer and President, Mr. Makiyama has irreplaceable knowledge and experience thatwill be essential for deliberating and negotiating the Transactions from the perspective of enhancing
the Company’s corporate value; and (ii) Mr. Makiyama handles “PARCO business” at the Tender
Offeror as well, Mr. Makiyama participated in the discussions and negotiations relating to theTransactions from the Company’s perspective, while he did not participate at all in the discussions
and negotiations or the Board of Directors deliberations or resolutions relating to the Transactions
from the perspective of the Tender Offeror. Furthermore, among the Company’s Directors, Mr.
Taro Sawada is also a Managing Executive Officer of the Tender Offeror, and from the perspectiveof enhancing the fairness, transparency, and objectiveness of the Company’s Board of Directors
decision making and avoiding conflicts of interest in relation to the Tender Offer, Mr. Sawada did
not participate in the deliberations and resolutions by the Board of Direcotrs relating to the Tender
Offer including the above-stated resolution in support of the Tender Offer and did not participate in
the discussions and negotiations with the Tender Offeror from the Company’s perspective.
(f) Measures to Secure Acquisition Opportunities for Other Purchasers
The Tender Offeror has set a relatively long period of 30 business days as the purchase, etc. period
in the Tender Offer (the “Tender Offer Period”), when the minimum period set out in laws andregulations is 20 business days. The establishment of a relatively long Tender Offer Period isintended to ensure an appropriate opportunity for all shareholders of the Company to decide
whether to tender in the Tender Offer and to ensure parties other than the Tender Offeror an
opportunity to carry out a counter purchase, etc., thereby ensuring the appropriateness of the Tender
Offer Price. Further, the Tender Offeror and the Company have not formed any agreement, etc.
with details that restrict contact between a party making a counter purchase offer and the Company,
such as any agreement containing a deal protection provision that prohibits contact by the Company
with a party making a counter purchase offer, and by establishing the above Tender Offer Period
and ensuring the opportunity for a counter purchase, etc., consideration has been given to ensuring
the fairness of the Tender Offer.
Further, as described in “1. Outline of Tender Offeror” above, because the Tender Offeror owns
65,922,614 shares (64.98% ownership ratio) of the Company Shares as of today, establishing aminimum number of shares to be purchased of a so-called Majority of Minority in the Tender Offer
would cause the formation of the Tender Offer to be unstable and is, if anything, considered to havethe possibility of not benefitting the ordinary shareholders who wish to tender in the Tender Offer,and therefore a minimum number of shares to be purchased of a so-called Majority of Minority has
not been established, however the Tender Offeror believes that sufficient consideration has been
25

given to the interests of the Company’s minority shareholders by establishing the measures in (a)through (f) above with regard to the Tender Offeror and the Company.
4．Matters Relating to Material Agreements Between Tender Offeror and Company’s Shareholders
Concerning Tendering Shares in Tender Offer
As detailed in “(a) Outline of Tender Offer” in “(2) Grounds and Reasons for Opinion Concerning
Tender Offer” above, the Tender Offeror enters into the Offer Acceptance Agreements with the
Accepting Shareholders as of December 26, 2019, whereby Accepting Shareholders agree to tender in
the Tender Offer all of the Company Shares owned, or for which the rights of disposition are held, by
Accepting Shareholders (the total number of shares owned, or for which the rights of disposition are held,by the Accepting Shareholders: 17,905,300 shares, the total ownership ratio: 17.65%).
The Offer Acceptance Agreements prescribe as conditions precedent to tendering the Company Sharesin the Tender Offer by Accepting Shareholders that (i) the Tender Offer by the Tender Offeror is duly
and validly commenced in accordance with the applicable laws and regulations. and has not been
withdrawn, (ii) the representations and warranties (Note 10) by the Tender Offeror are true and accurate
in all material respects, and (iii) there is no significant breach by the Tender Offeror of the obligations
under the Offer Acceptance Agreements (Note 11). However, even if all or part of the above conditions
precedent are not satisfied, there are no restrictions on Accepting Shareholders waiving those conditions
precedent at their own discretion and tendering its Company Shares in the Tender Offer.
Note 10: In the Offer Acceptance Agreements, the Tender Offeror sets out its representations andwarranties regarding (a) its duly establishment and valid existence, (b) the holding of thenecessary capacity and the performance of the necessary procedures to execute and perform
Offer Acceptance Agreements, (c) the enforceability, (d) the acquisition of authorizations
and permissions, (e) the non-existence of any violation of any law or regulation, (f) having
sufficient funds required for a purchase, etc. on the commencement date of the settlement
regarding the Tender Offer, and (g) the non-existence of a relationship with antisocial
forces.
Note 11: In the Offer Acceptance Agreements, the Tender Offeror bears the obligation to implement
the Tender Offer, the obligation to carry out the required procedures for the Tender Offer,the compensation obligation, the obligation to pay its taxes, public dues and other expenses,
the confidentiality obligation, and the obligation regarding no-assignment of contractual
rights and obligations.
5．Details of Benefits Received from Tender Offeror or Parties with Special Relationships with Tender
OfferorNot applicable.
6．Response Policy with Respect to Basic Policies Relating to Control of Company
Not applicable.
7．Questions to Tender Offeror
Not applicable.
8．Requests for Extension of Tender Offer Period
Not applicable.
9．Future Prospects
Refer to “(b) Background and Purpose of, and Decision-Making Process for, Tender Offeror That Led
to Its Decision to Implement Tender Offer, and Its Management Policy after Tender Offer” and “(c)26Background and Reasons of Company That Led to Its Decision to Support Tender Offer” in “(2)Grounds and Reasons for Opinion Concerning Tender Offer,” “(4) Possibility of and Reasons for
Delisting” and “(5) Policy on Organizational Restructuring, Etc. after Tender Offer (Matters Relating to
So-called “Two-Step Acquisition”)” in “3. Details of and Grounds and Reasons for Opinion Concerning
Tender Offer” above.
10．Matters Relating to Transactions with Controlling Shareholder(1) Transactions with Controlling Shareholder and Status of Conformity with Policy on Measures toProtect Minority Shareholders
The Tender Offeror is the Company’s controlling shareholder, and therefore, the expression of an
opinion concerning the Tender Offer by the Company’s Board of Directors constitutes a materialtransaction with a controlling shareholder. The Policy on Measures to Protect Minority
Shareholders in Conducting Transactions with Controlling Shareholder indicated in the Corporate
Governance Report disclosed on the Company on October 4, 2019 is as follows.
“As a Company with Committees with the aim of implementing a highly transparent corporate
governance framework, PARCO appoints independent officers (External Directors) to over half thepositions on the Board of Directors in order to ensure objectivity in the management of the business.
This ensures that a degree of autonomy is exercised in PARCO’s management, with transactions
entered into with the controlling shareholder determined by way of a fair and appropriate process.”
As discussed in above “(6) Measures to Ensure Fairness of Tender Offer Including Measures to
Ensure Fairness of Tender Offer Price and Measures to Avoid Conflicts of Interest” in “3. Details ofand Grounds and Reasons for Opinion Concerning Tender Offer,” with respect to the Transactions
including the Tender Offer, the Company has (i) obtained the Company’s Share Valuation Reportfrom an independent third-party appraiser, (ii) obtained advice from an independent law firm, (iii)established the Special Committee to avoid arbitrariness in decision-making and ensure fairness,transparency, and objectiveness in the Company’s decision-making process and received the Reportto the effect that the Transactions are not disadvantageous to the Company’s minority shareholders,and (iv) obtained unanimous approval of the Company’s non-interested Directors. Accordingly,
the Company believes that adequate independence from the controlling shareholders in the
Company’s decision-making has been ensured and that these measures are consistent with the above
policy.
(2) Details of Measures to Ensure Fairness and Measures to Avoid Conflicts of Interest
Refer to “(6) Measures to Ensure Fairness of Tender Offer Including Measures to Ensure
Fairness of Tender Offer Price and Measures to Avoid Conflicts of Interest” in “3. Details of andGrounds and Reasons for Opinion Concerning Tender Offer.”(3) Overview of Opinion Obtained from a Party with No Interests in Controlling Shareholder StatingThat Transactions Would Not Be Disadvantageous to Minority Shareholders
On December 26, 2019, the Company received from the Special Committee the Report to theeffect that it is appropriate that the Company’s Board of Directors makes decision (a) to express its
opinion to support the Tender Offer and recommend shareholders of the Company to tender sharesin response to the Tender Offer and (b) to approve the Demand for Share Cash Out or resolve theShare Consolidation implemented as part of the Transaction after the Tender Offer, since eachdecision is not disadvantageous to the minority shareholders of the Company. For details, refer to“(d) Establishment of a Special Committee of Company and Receipt of Report from Special
Committee” in“(6) Measures to Ensure Fairness of Tender Offer Including Measures to Ensure
Fairness of Tender Offer Price and Measures to Avoid Conflicts of Interest” in “3. Details of andGrounds and Reasons for Opinion Concerning Tender Offer.” The Report includes the opinion
27

that the procedures aiming at the acquisition of all of the Company Shares following the completionof the Tender Offer as described above in “(5) Policy on Organizational Restructuring, Etc. after
Tender Offer (Matters Relating to So-called “Two-Step Acquisition”)” in “3. Details of andGrounds and Reasons for Opinion Concerning Tender Offer” would not be disadvantageous to theCompany’s minority shareholders.
11．Revision of Dividend Forecast for Fiscal Year Ending February 29, 2020 and Elimination of
Shareholder Rewards System
At the Board of Directors meeting held today, the Company adopted, subject to the completion of theTender Offer, a resolution to (i) revise its dividend forecast for the fiscal year ending February 29, 2020,
which was announced in the Quarterly Report, so that the Company will not pay a year-end dividend forthe fiscal year ending February 29, 2020 or a commemorative dividend for the 50th anniversary of
PARCO, and (ii) eliminate its shareholder rewards system effective as of the fiscal year ending February
29, 2020. For details, refer to the Announcement Concerning Revision of Year-End Dividend Forecast
for Fiscal Year Ending February 29, 2020 and Elimination of Shareholder Rewards System dated
December 26, 2019.
[End]

28