Establishing JIC Private Equity

2020.9.9(C) JIC. All Rights Reserved.

１．Introduction

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Our Philosophy

JIC aims to generate a virtuous cycle of risk capital to support
next-generation industries in Japan. To achieve this vision, JIC
promotes open innovation as a means of supporting growth andenhancing international competitiveness of businesses. JIC
approaches these challenges by stimulating private sector
investments in open innovation together with JIC’s own
investment while fostering investment professionals.

(C) JIC. All Rights Reserved.

3

Our Mission(1) Enhance the growth of next-generation companies and competitiveness

Growth investment in companies creating
new markets and next-generationindustries

Investments aimed at enhancing
competitiveness in global markets(2) Build a foundation for the establishment of a virtuous cycle of risk capital in Japan

Stimulateprivate sector
investment

Serve as aninvestmentknowledge platform(C) JIC. All Rights Reserved.

Foster thedevelopment ofinvestment
professionals

4Our Fund Investment Strategy•••

JIC invests in funds established under JIC’s initiative and in private sector funds
JIC PE is established under JIC’s own initiative
JIC will continue to consider investments based on its funds’ strategy and its principle ofcomplementing the private sector.

Privatesectorinvestors
Established under JIC’s initiative(over 50% LP investment)

Growth-stage
startups
JIC VGI

Buyouts, large
growthJIC PE

Specificareas,
strategies

Broad coverage

LP investment in private fundFunds that invest inareas with insufficientprivate investment

Funds with proven trackrecord （complementing
private investment）

Focus on addressing policy
issuesAddress policy issues and complement
the supply of risk capital when market
environment degrades

Each fund is under the control of a management company entrusted with the fund’s individual investment decisions

company(C) JIC. All Rights Reserved.

company

company

company

company5

JIC Private Equity Overview•

JIC Private Equity (JIC PE) aims to create new businesses and industries to realize Society 5.0,
enhance the international competitiveness of Japanese industries by promoting structural reform ofindustries, and supply risk capital to establish next-generation social infrastructure for promoting
digital transformation.

Limited supply of risk capital from themedium-to long-term and industry policy
perspective

Issues common to the industry, such as DX,
sustainable society, and capturing overseas
markets

JIC PE investment targets
Investment in “emerging sectors”, driving creation of new industries
Investment in “maturing sectors”, driving large-scale business consolidation(C) JIC. All Rights Reserved.

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JIC Capital Management•

Shogo Ikeuchi, CEO of JIC Capital, Ltd., the management company of JIC PE, is experienced in
implementing business model transformation through DX and in investing in new business areas atboth domestic and international companies. He and his team will be in charge of executing fundinvestments.
Bio:
Graduated from Kyoto University Graduate School of Engineering• 1988: Joined Recruit Co., Ltd. (currently Recruit Holdings Co., Ltd.)• 2005: (as above) Executive Officer - Corporate planning and Corporate strategy• 2012: (as above) Board Member and Executive Officer - Asia at Global Headquarters, Corporate Planning and HR
Support• 2012: (as above) Board Member and Executive Officer - Global Headquarters, Corporate Planning, R&D, HR• 2013: (as above) Board Member and Executive Director - Medium- to Long-term Strategy, International Business, R&D,
Corporate Planning and HR• 2014: (as above) Board Member and Executive Director - International Business and R&D• 2015: (as above) Board Member and Executive Director - R&D, Corporate Planning and HR• 2016: (as above) Board Member and Senior Executive Director - Corporate Planning, HR and R&D• 2017: (as above) Board Member and Senior Executive Director - Corporate Planning and HR
Shogo Ikeuchi• 2017: (as above) Board Member and Senior Executive Director - Corporate Planning (CSO) and HR (CHRO)
Representative Director, • 2019: (as above) Board Member and Senior Executive Director - HR and General Affairs (CHRO)• 2020: (as above) Advisor (current position)
President & CEO
Experience:
Experienced in new business development and overseas expansion at a global company. Has held senior positions inmanagement planning and human resources. Possesses deep management insights.
Other positions and memberships:• Outside Director, Sony Financial Holdings Inc. (current position)• Outside Director, AnyMind Group (current position)• Member, Cabinet Office Structural Reform Evaluation Report Task Force• Member, METI HR Management Study Group for Strengthening Management Competitiveness(C) JIC. All Rights Reserved.

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２．About JIC PE

8JIC PE Fund Overview•

JIC PE aims to achieve both a financial return and policy objectives of creating new
businesses and new industries to realize Society 5.0, enhancing the international
competitiveness of Japanese industries, and structural reform of industries through the
supply of large-scale, long-term, neutral capital.

◼ Size of fundJPY 200bn(in addition, a separate JPY 200bn coinvestment fund with JIC is established)◼ Structure

Investment LPS◼ Governing law

Limited Partnership Act for Investment◼ General Partner(GP)

JIC Capital, Ltd.

◼ Limited Partners(LP)- Japan Investment Corporation (JIC)- PEF1 Officers and Employees
Investment Limited Partnership (“PEF1OEILP ”)◼ Management
period10 years(two one-year extensions possible
subject to LP agreement)◼ Investment
period5 years(shorter term possible subject to LP
agreement)

Investment
strategy- Buyout (industry consolidation, carveout, acquisition)- Growth- Next-generation social infrastructure

Investment method Direct investment

No. of investments

Approx. 10 investments

Averageinvestment amountper deal

JPY 10bn to 40bn*
Will also consider investments of JPY
100bn scale by drawing on the coinvestment fund

*Investment committed by the main fund (excludes investment by co-investment fund)(C) JIC. All Rights Reserved.

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Buyouts - Overview••

JIC PE will pursue majority acquisitions with a view to industry restructuring and businessportfolio transformation in post investment phase(primarily within Japan).
JIC PE will also engage in joint overseas acquisitions to promote the global growth ofJapanese companies.

＜Japan＞Promote industry transformation to a robust structure through selection and concentration• Promote business portfolio transformation through business carve-outs from and/or supporting postacquisition roll-up in domestic industries with many incumbents,• Aim for future structural reform of industries and integration• Consider joint investment with domestic companies and private-sector funds on large-scale
investments＜Overseas＞Support the global growth of Japanese companies through joint investment in overseas
business resources• Support the development of global leaders by strengthening the global competitiveness of Japanesecompanies and promoting consolidation and restructuring both domestically and internationally.
＜Target companies＞→ Companies with a large potential of improving efficiency by consolidation in crowded/maturedomestic markets→ Business units/subsidiaries of conglomerates with growth potential, but which are currently not
positioned as core business and thus do not get sufficient resources allocated (HR, funding)→ Companies with potential to strengthen their international competitiveness through overseas M&A,
but hesitant to engage in M&A alone due to lack of funding/M&A experience and concerns aroundrisks.
(C) JIC. All Rights Reserved.

10Growth Investments - Overview•

JIC PE will pursue minority investments in high-growth Japanese and overseas companies
with the aim of creating global leading companies with Japanese origin, bringing overseas
business resources to Japan, and supporting the global expansion of Japanese companies.

＜Japan＞◼ Create global leading companies of Japanese origin with superior technology and businessmodels• Support the organic growth of companies and businesses with large-scale capital need and theinorganic growth of portfolio companies through roll-up M&A of foreign and domestic companies＜Overseas＞◼ Bring leading overseas business resources to Japan to strengthen its industrial base• Main targets are B2B players with digital or decarbonization / energy saving technologies orbusiness models that can contribute to the realization of Society 5.0◼ Promote business collaboration between Japanese companies and start-up companies overseas
through joint investments• Provide overseas expansion opportunities to Japanese companies, in particular SMEs with little orno experience in going overseas and to manufacturing companies with critical need for new
technologies / business models(1) Carve-outs: Non-core business units / subsidiaries of conglomerates with growth potential andcapital needs, that receive limited resource allocation (HR and capital) from the group(2) Medium-sized companies in need of growth capital / restructuring of its shareholder base(3) Growth companies at the growth or pre-IPO stage(C) JIC. All Rights Reserved.

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Next-Generation Infrastructure Investments••

JIC PE will pursue investment that aims to establish new social infrastructure in areas suchas telecommunications and renewable energy where risk capital is currently limited.
JIC PE also aims to support the overseas expansion of Japanese companies.

＜Domestic＞Development of robust, next-generation social infrastructure• Support Japanese companies seeking risk capital for the development and operation of a newlayer of social infrastructure• Investment focus will be 1) telecommunications (data centers, etc.) where domestic demand is
expected to grow due to digitalization including 5G, IoT, etc. and 2) important areas of government
growth strategies such as renewable energy＜Overseas＞Support the global growth of Japanese companies through joint investments inoverseas business resources• Support Japanese companies to capture new overseas markets, acquire know-how and expertisein advanced business models employed overseas• Main target areas include 1) telecommunication (data centers, etc.), 2) areas where overseas
players are leading the industry with superior technologies/resources e.g. renewable energy
related businesses and 3) other areas targeted as a part of the global strategy of Japanesecompanies(C) JIC. All Rights Reserved.

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Why is JIC PE needed?
•

The supply of risk capital remains limited from the perspective of industrial policy and of
medium- to long-term enhancement of industrial competitiveness in Japan. Somechallenges are industry-specific, while others are common across industries.

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Industry-specific challenges

Structural issues due to limited large-scale,
long-term risk capital supply(Ex.)• Changes needed in IT services industry‒

Lagging behind overseas peers in advanced
technologies and business models• Changes needed in mobility industry‒

Cross-industry challenges

Common challenges among Japanese industriesare ‘Realization of Society 5.0’ (as per thegovernment’s growth strategy), society levelissues such as ESGs, and overseas expansionof mid-sized companies(Ex.)• Promotion of digital transformation‒

Industry transformation is needed to staycompetitive in the CASE era• Structural changes needed in manufacturing
and chemical materials industries‒

2

The industry is overcrowded both in SME andlarge cap, making it inefficient. Structuralchanges would be needed to enable growth• Development of socio-economic
infrastructure; harnessing innovation(C) JIC. All Rights Reserved.

Promote the shift from price competition tocompeting on added value by incorporating
cutting edge digital technology and digitalplatform companies• Realization of a sustainable society‒

Realize a positive cycle of environment andgrowth, including decarbonization, throughbusiness-led, discontinuous innovation• Capture overseas markets‒

Capture overseas demand through overseas
business development by SMEs

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JIC PE’s company philosophy
Make an impact to society

Purpose◼ Create new business and new industries to realize Society 5.0◼ Strengthen international competitiveness and restructure businesses of Japanese industry

Focus areas (Where / What)

Value
Proposition• Creation of Japanese global leaderswith superior technology / BM
• Accelerate structural reform ofindustry through selection andconcentration• Development of new social
infrastructure

Value creation pattern (How)• JIC’s strengths in sourcing, deals,value creation to achieve the ‘What’in the left column• Acquire expertise and capability

Measures to provide
stakeholder returns (How)• KPIs, impact, magnitude ofoutcomes (MOC, industry
restructuring, etc.)

Required talent and capabilities (talent necessary to establish value provision pattern)
Operating processes (sourcing, deal, value creation)

OperatingModel

Governance and management structures and systems(decision-making, external experts, etc.)
Infrastructure, business processes, etc.

(C) JIC. All Rights Reserved.

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Reference15

Background of JIC’s Establishment
Global DX* trends*

Resolution of domestic and global
social issues

Enhance Japan’s industrial competitivenessto ensure the sustainable development of theeconomyIndustrial and economic revitalization is needed
Creation of new growth companies andbold business restructuring

Domestic challenges

JIC’s role

The supply of risk capital in Japan is highly insufficient compared to other countries

Secure the funds and investment talent and to generate a virtuous cycle ofrisk capital＊DX (Digital Transformation): Companies are responding to disruptive changes in the external ecosystem (customers, markets) and driving the transformation of theinternal ecosystem (organization, culture, employees), while using the Third Platform (cloud, mobility, big data/ analytics, social technology) to create value and establish
a competitive advantage by transforming the customer experience both online and offline through new products and services and new business models.
(Sources: METI Study Group for Digital Transformation, DX Report: Overcoming the IT System cliff in 2025 and Full-scale Deployment of DX, September 7, 2018; Japan IT Market Top 10
Predictions for 2018; Transforming into a Digital Native Company, Dramatically Expanding Innovation in the DX Economy, IDC Japan Press Release, December 14, 2017)(C) JIC. All Rights Reserved.

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JIC’s Code of Conduct••

Executives and employees of JIC and authorized funds strive for top-level performance,
maintaining a high standard of ethics and adhering to the Code of Conduct below.
General partners jointly investing with JIC are also expected to respect this Code of Conduct.

Integrity & Discipline

Excellence & Professionalism

Accountability & Responsibility

Respect & Teamwork(C) JIC. All Rights Reserved.

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Types of Investments pursued by JIC
Investment
candidatesLP
investment
stake

Broad coverage

One VC and one
PE fundFirst fund: JIC
100%
Second fundonwards: JIC +External
investors

Specific areas,
strategies

Considersmultiple areas

Less than100％

Manager

Investment
managementcompany
establishedunder JIC’s
initiative

Strategy

Sectors andstrategies where
private investment
is insufficient

Private-sector
investment
managementcompanies

Ex: Life sciences,materials,
manufacturing,regional areas, etc.

All areas in which
JIC invests(C) JIC. All Rights Reserved.

Funds that can
expect to receive
capital frominstitutional
investors now
and in the futureFunds with aproven trackrecord(address
reduction in newcommitments by
LPs)

Complementation ofprivate sector
investment

Investment
amount per fund

VC: JPY120 bn,
PE: JPY 200 bn(+joint investment
fund JPY 200 bn)•

Follow policy
issues and invest
in sectors, stages,
and strategies
where private
investment isinsufficient•

Invest in areas
where private
investment isinsufficient
Supply risk capitalto proven funds toaddress theshrinking of LP
capitalComplement andserve as a catalyst
for private sector
investment

JPY10s of billions•
Evaluated on acase-by-case
basis

JPY10s to
JPY100s ofbillions•

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