2023

INTEGRATEDREPORT

Contents

Issuance of
JAFCO INTEGRATED REPORT 2023

Section- 01

Section- 03

JAFCO Group’s Values

Business Strategies

03

Purpose38

Business Process04Mission / Identity / Brand Slogan

39

Venture Investment

05	
Applying Our Purpose:
JAFCO Group’s History

41

Buyout Investment

43

Business Development

06	
Applying Our Purpose:
JAFCO Group’s Strengths

45

Fund Management

47

Overseas Strategy

07

JAFCO Group’s Business Overview

Section- 02

JAFCO Group’s Value Creation

Guided by its Purpose of “Fueling perpetual
growth; investing in bold visions,” JAFCO Groupis committed to playing a role in realizing asustainable society. JAFCO INTEGRATED REPORT
2022 was the Company’s inaugural integrated
report, presenting a comprehensive overview
of the Company that encompassed its overall
operations, business model, and sustain­ability
approach.
JAFCO INTEGRATED REPORT 2023 offers
detailed explanations of our medium- to longterm growth strategy based on the Basic Policy
for Enhancing Corporate Value, which was
released in November 2022. The report also
provides expanded content about our humanresources—a major source of our value—andfeatures a discussion on our human resource
strategy.
By receiving candid feedback from ourstakeholders through dialogue based on thisreport, we will continue our pursuit of sustainable corporate value enhancement.


Corporate Officer
In charge of Administration



Hiroaki Matsuda

Editorial Policy
We have published this report to help our shareholders and investors understand thesocial value that JAFCO Group has created to date, our business model that supports
value creation, and our future growth direction. Seeking to further enhance our corporate
value through dialogue, we have positioned this report as a means of communication
with all of our stakeholders including shareholders and investors, our fund investors,
portfolio companies, and employees. In editing this report, we referenced theInternational Integrated Reporting Framework of the IFRS Foundation and the
Guidance for Collaborative Value Creation released by the Ministry of Economy, Tradeand Industry, and other resources.

09

CEO Message

13

Value Creation Process

Business Foundation for
Sustainable Growth51	Interview with the Independent
Directors

14	
Formulation of the Basic Policy for
Enhancing Corporate Value

54

Board of Directors

56

Corporate Governance15

Materiality

61

Compliance18

Sustainability

62

Risk Management21	Medium- to Long-Term Growth Strategy
21	Enhancing Corporate Value with
Our Eye on the Next 10 Years
22	Companywide Policies Focused on
Promoting Growth Strategy
23	Improving Capital Efficiency
for Realizing Medium- to­Long-Term Targets

Scope of Report
Scope: JAFCO Group Co., Ltd. and its Group companies (consolidated subsidiaries)
Reporting period: From April 1, 2022 to March 31, 2023
Note: Some information is based on activities that took place before or after this reporting period.

Note Concerning the Future Outlook
Information in this report relating to current plans, the future outlook, and strategies,
etc., has been determined based on the information available at the time the report
was prepared. Please be aware that various factors may cause actual future results todiffer significantly from the outlook. Risks and variables that may affect results include
macroeconomic trends surrounding the Company’s business environment, market
competition, exchange rates, taxation and various other regulations and systems, andinternal and external factors.

Section- 04

26

Section- 05

Corporate Data
66	
Review and Analysis of the Fiscal
Year Ended March 31, 2023
70

Financial Highlights

71

Non-Financial Highlights

24 E
 xternal Business Environment forPrivate Equity Investment

72

11-Year Summary

73

Changes in Fund Performance25	
Organizational Foundation for
Realizing Growth Strategy

74

ESG Data

75

Company Information

Source of Our Value Creation
26 Human Capital		27 The Value We Demonstrate
through Our Identity as a
Co-Founder
29 Intellectual Capital
30 Social Capital
31

CFO Message

34

Human Resource Strategy

76	
Shareholder/Investor Information

Section- 01      Section- 02   Section- 03   Section- 04   Section- 05  INTEGRATED REPORT 2023

03 Purpose
04 Mission / Identity / Brand Slogan
Applying Our Purpose:05	
JAFCO Group’s History
Applying Our Purpose:
06	
JAFCO Group’s Strengths
07 JAFCO Group’s Business Overview

Section- 01

JAFCO Group’s Values

02  INTEGRATED REPORT 2023

Section- 01      Section- 02   Section- 03   Section- 04   Section- 05

PURPOSE

Fueling perpetual growth;
investing in bold visions
Since its founding, JAFCO Group has consistently invested in bold visions. Supporting the creation of new businessmodels, products, and services involves a high level of uncertainty and always carries the risk of failure. For thatreason, we have sought to realize stable investment performance by raising investment capital through funds toExpansion of risk
capital supply

Economic growthand market expansion

Increase in entrepreneurs
pursuing bold visions

Creation of new businesses
and further growthdiversify risk. Throughout our many years of experience in venture investment, which is our founding business, wehave focused on enhancing our ability to repeat successes and steadily securing the funds necessary for investment
activities, even during times of significant fluctuations in the market. In our buyout investment, which we began in
1998, we primarily target businesses that can generate a stable level of cash flows. By expanding the domains of ourprivate equity investment activities, with a focus on business succession deals, we have fostered corporate rejuvenation. The achievements of our portfolio companies encourage the emergence of new entrepreneurs, and the returns
generated through these investments raise expectations for private equity investment, leading to a wider investor
base. By setting this virtuous cycle in motion, we facilitate the channeling of capital into the market, which helps
spur innovation, stimulate economic growth, and enrich people’s lives. This is precisely how we fuel perpetual growth.
To ensure our ability to fuel perpetual growth, we have focused our efforts on continuing to invest regardless ofmarket conditions, ensuring that employees from different divisions and with diverse experience contribute to thegrowth of portfolio companies with a sense of ownership and enhancing our ability to achieve repeat successes by
sharing individual expertise. The schemes and culture that we have cultivated in this manner to secure business
continuity have become significant strengths and features of the Company.
The structures of industries and businesses have undergone a significant transformation due to advancements
in technology and, as a result, issues involving the global environment and economy have become increasingly
complex. Guided by our firm belief that continuous investment is a catalyst for building a sustainable society, we
will continue to invest in bold visions that create unprecedented value and commit to the growth of our portfolio
companies. To that end, we are constantly pursuing business growth and investment success with the aim of fueling perpetual growth.

03Section- 01  
01      Section- 02   Section- 03   Section- 04   Section- 05

MISSION

IDENTITY

BRAND SLOGAN

Commit to new
business creationand jointly shape
the future

Co-FounderYour closest
partner

Since its founding, JAFCO Grouphas created a wide range of innovative products and services inpartnership with entrepreneurs.
Our Mission is to usher in a new
era through the creation of new
businesses that cater to the needsof society. In addition to our venture investment, which focuses on
startups, we engage in buyout
investment to help companies
realize a second start.
While social needs change withthe times, our Mission remains thesame. In our pursuit of realizing
our Purpose, we will also strive tofulfill this unchanging Mission.

JAFCO Group has always worked
side by side with cutting-edge
entrepreneurs. To enhance cor­porate value going forward, it isessential that we go beyond simply
being an investor and make a deep
commitment to the managementof our portfolio companies as a
“Co-Founder.”Our mindset, insight, and experience as a Co-Founder are further
refined by the self-directed thinking and self-determined actionsof our employees. Guided by our
Co-Founder identity, our investment
professionals and all other employees pursue bold visions together
with entrepreneurs and the
management teams of portfoliocom­panies. By doing so, we provide
greater value to our portfolio­companies and society as a whole.

Understanding and relating deeply
to the visions of entrepreneurs
enables us to share a common
vision of actualizing their businessgoals and working collaboratively
to confront and overcome challenges. This approach is integral
not only to venture investment,
our founding business, but also to
our buyout investment, which has
become our second cornerstone.
The mindset of working closelywith managers and employees of
portfolio companies looking toachieve a second start is deeply
embedded in our corporate
culture.
Realizing the unprecedented
visions of entrepreneurs as
their closest partner is the challenge that we as a company musttake on.

04

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

05

Applying Our Purpose: JAFCO Group’s History

We have continued to pursue bold visions
with entrepreneurs as their closest partner, thereby
contributing to sustainable social development.

Years ofinvestment:

Cumulative number of
portfolio companies:

50

4,142

United States: 39
Asia: 37

3,240 in Japan and902 overseas

Total funds undermanagement:¥1,227.8 billion

Note: All figures are as of March 31, 2023.

(Billionsof yen)
1,200

1,000
12,000Business expansion

Post-bubble economy

1973–1981

1982–1992

1993–1997

Established as a joint venture
by three companies*
Launched private equityi­ nvestment business

Utilized fund capital toexpand investment on the backof economic growth

Rolled out full-scale investment
in Asia, the United States,
and Europe

Commenced buyout investment
Began to focus venture investment on early-stage
IT investment

1982	Established Japan’s first

1997	Established Japan’s first1998	Established specialized

1973	Japan Associated FinanceCo., Ltd. was establishedventure capital fund, JAFCO
No. 1 Investment EnterprisePartnership1984	Established U.S. subsidiary,
JAFCO America Ventures Inc.
1986	Established JAFCO
Investment Inc. as firstbusiness base in Asia
1987	Registered as over-thecounter (OTC) stock withJapan Securities Dealers
Association

1981	Started new graduate

recruitment

800

8,000
600

Concentration on venture capitaland private equity investment

Launch* Nomura Securities Co., Ltd., Nippon Life
Insurance Company, and The Sanwa Bank,
Ltd. (now MUFG Bank, Ltd.)

400

200

1998–2002

industry–academia fund1997	Changed company name to

JAFCO Co., Ltd.

division for buyout
investment
2000	Established specialized
division for adding value tooverseas portfolio companies
2001	Listed on First Section ofTokyo Stock Exchange(TSE)
2001	Established specialized
division for investment inuniversity-originatedstartups

Full-line investment
2003–2009

Highly selective, intensive
investment
2010–

Extended coverage of the IPO
market by diversifying investments and increasing fund size

2004	Established specialized

division for adding value toportfolio companies inJapan2007	Registered as financial
instruments business
operator

Cumulative funds under management (left)
Annual investment amount (right)

Focused on achieving
performance resilient to market
conditions through highly
selective, intensive investment2010 hifted fully toward highlyS
selective, intensive investment
2015Transitioned to company witha board-audit committee
2017	Bought back and canceled
all shares held in Nomura
Holdings, Inc. and Nomura
Research Institute, Ltd.,eliminating the crossholding of shares2018	Introduced partnershipmodel to business structure2020	Changed company name to
JAFCO Group Co., Ltd.
2022	Transferred to TSE Prime
Market2023	Formulated our Purpose(Billionsof yen)
120

100

80

60

40

20

0

0

1973

1980

1990

2000

2010

2020

2023

1973
First oil crisis

1983
New OTC market opened

1987Black Monday

1991
End of Japan’s bubble
economy1997
Asian financial crisis
String of bankruptcies
among financial institutions

1999
 ct on Supporting BusinessA
Innovation of Small and MediumSized Enterprises entered force
TSE Mothers Market established2007
Financial Instruments andExchange Act entered force

2011
Great East Japan
Earthquake

2016
Bank of Japan introduced
negative interest rate
policy1976
Japan OTC Securities Co., Ltd.
established

1985
Rapid appreciation of yen
due to Plaza Accord

1989
Nikkei Stock Averagereached all-time high1994
Regulations eased for
dispatch of venture capital
directors and officers

1998
Limited Partnership Act for
Investment enacted

2001
Collapse of dot-com bubble

2008
Global financial crisis

2012
Inauguration of second Abeadministration (start of“Abenomics”)

2020
Global COVID-19 pandemicSection- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

PURPOSE

Applying Our Purpose: JAFCO Group’s Strengths

We fuel perpetual growth by harnessing the value
derived from our investment management capabilities,
fundraising capabilities, and underlying organizationalfoundation.

Fueling perpetual growth;
investing in bold visions

Investment Management
Capabilities
Our investment management capabilities stem from ourstrong deal-sourcing skills, the ability of our investment
professionals to contribute to the growth of portfolio
companies, and our organizational ability to share,gather, and complement the experience of individuals—
all of which have been continually passed down as partof our corporate culture. Leveraging these strengths,
we conduct investment activities based on our policy ofhighly selective, intensive investment. Having carefully
selected investment targets from among many candidate
companies, we acquire an influential stake in them andthen intensively provide them with management
resources to boost their corporate value. Amid significant changes in the business environment, we willfurther develop this policy to enhance our ability toreproduce successes.

Organizational
Foundation

Fundraising Capabilities

Investment
Management
Capabilities

Fundraising
Capabilities

While the success or failure of fundraising is significantly
affected by the economic environment and performance,
we have secured investment capital by conducting fundraising for flagship funds every three years. As the management of private equity investments requires a higher
than usual level of discipline and transparency, we haveenhanced our regular reporting and established a highlevel of trust with investors through support tailoredto their individual needs. We will continue to hone ourfundraising capabilities to increase our ability to provide
risk capital. Moreover, while deepening relationships
with existing investors, we will also expand the scopeof our activities to attract new ones.

Organizational Foundation
We have firmly established a unique model for recruiting and training new graduates to become investment
professionals, as well as a culture in which experienced senior personnel pass on their knowledge and mindset to younger team members. We are also bolstering mid-career recruitment of specialists, which has
allowed us to expand our investment domain and the scope of our involvement in the management of portfolio companies. We differentiate ourselves from other general venture capital and private equity fund management companies in having not only a dedicated fundraising division but also a back-office team well versed
in private equity investment and fund management, as well as sophisticated compliance and risk management systems. This organizational framework ensures that we continue to reproduce successful performance.

06Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

07

JAFCO Group’s Business Overview
Results for the Fiscal Year Ended March 31, 2023

JAFCO Group’s
Profit Structure

The Company conducts venture and buyout investment
through fund management. Our main income sources are

14.1 billion

Net Sales¥

management fees and success fees derived from fund operations and capital gains on direct investment in funds. The

3.0 billion

Ordinary Loss¥fund term is 10 years in principle, with a possible extensionof two years. The portfolio of a newly established fund isbuilt over a period of about three years following a fundlaunch. We believe that continually sourcing and investing in

Profit Attributable to JAFCOGroup Co., Ltd. Stockholders

regardless of the timing of a company’s establishment orbusiness sentiment. After investment, we deepen manage-

40.6 billion(Billions of yen)

40.6

38.5

promising companies based on our policy of highly selective,
intensive investment ensure stable investment performance,

¥

29.9

25.9

21.5

15.1

preneurs to achieve exits (sales) through IPOs, M&As, and

14.1

–3.0

2019.32020.32021.32022.3Fund Management Fees
Investors

and Partners(Financial institutions, business firms, etc.)

Management/success fees
Profit distribution

Capital commitments

Profit distribution

14.0

6
5

12.6

11.3

2

3.7

2.5

2.6

2.9

2023.3

Number of IPOs (domestic and overseas)

1.0 billion

Amount Subject toManagement Fees¥

(Billions of yen)419.2 billion
157.6 billion

451.5

433.9

359.1

5.3
4.5

2022.3

¥

7.4

3.6

2021.3

Capital Commitments
to Funds

6.2

Funds

2020.3

3.4 billion¥(Billions of yen)

2019.3

Capital gains¥

Success Fees

Capital commitments

6

15.4

2023.3

Net sales
Ordinary income
Profit attributable to JAFCO Group Co., Ltd. stockholders

JAFCO Group(Billions of yen / Number of IPOs)

4

18.4

11.7

5 companies

Number of IPOs
(domestic and overseas)

10.2

ment involvement and enhance corporate value with entreother means.

¥

27.7

17.0
11.8

13.4

3.7 billion

Capital Gains

419.2
332.3

4.4
1.0

2.6

Investment

Capital gains

0.8
1.8

Unlisted companies

2019.3

2.9

3.4
75.5

2020.3Fund management fees

2021.32022.32023.3

Success fees

Notes:
1. JAFCO’s interests in funds are excluded in calculation of fund management
fees and success fees.
2. F igures reflect the exclusion of the U.S subsidiary (JAV) from the scope of
consolidation.

2019.3129.0

2020.3132.0

2021.3

Capital commitments to funds

138.9

2022.3157.62023.3

Amount subject to management fees

Notes:
1. Amounts subject to management fees exclude JAFCO Group’s interest in
funds, Icon funds, and funds under extension.
2. Foreign currency denominated funds are calculated based on the exchange
rate at the end of each fiscal year. Exchange rate: US$1=¥133.53 (as ofMarch 31, 2023)

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05  INTEGRATED REPORT 2023

09 CEO Message
13 Value Creation Process
14	
Formulation of the Basic Policy for
Enhancing Corporate Value
15 Materiality
18 Sustainability
21	Medium- to Long-Term Growth Strategy
21	Enhancing Corporate Value with
Our Eye on the Next 10 Years
22	Companywide Policies Focusedon Promoting Growth Strategy
23	Improving Capital Efficiency
for Realizing Medium- to
Long-Term Targets
24	External Business Environmentfor Private Equity Investment
25	
Organizational Foundation for
Realizing Growth Strategy
26 Source of Our Value Creation
26 Human Capital		27	The Value We Demonstrate
through Our Identity as a
Co-Founder
29 Intellectual Capital
30 Social Capital
31 CFO Message
34 Human Resource Strategy

Section- 02

JAFCO Group’s Value Creation

08

Section- 01      Section- 02   Section- 03   Section- 04   Section- 05  INTEGRATED REPORT 2023

Create an Expansive Circle of Connections by Investingin Bold Visions to Enhance Our Corporate Value andContribute to the Realization of a Sustainable Society

Investing in Bold Visions without Fear of Failure
In February 2023, we established our Purpose, “Fueling perpetual growth; investing inbold visions,” to communicate JAFCO’s significance and values to our stakeholders andjointly forge the path forward for the next generation. In formulating our Purpose, we
carefully crafted its wording through repeated discussions with employees of diverse
backgrounds and varying years of service within the Company, ensuring that the statement properly conveyed our aspiration. In 2023, we celebrated our 50th anniversary,and I am confident that the words in our Purpose resonate with all those who have been
involved with JAFCO to date, including those who were with us many decades ago.
I attach special significance to “bold visions” in our Purpose. Contributing to people
pursuing bold visions is a bold vision in its own right. This perspective is shared by all

CEO
MESSAGEJAFCO employees. It goes without saying that failure is a part of pursuing bold visions.
Therefore, it is imperative to prepare for failure when taking on unprecedented challenges, including the creation of unprecedented business models or unique products andservices. By sharing our Purpose, I expect that our deeply rooted culture of fearlessness

Keisuke Miyoshi
President & CEO

will become even more entrenched in our DNA.
The role we play in the operating environment and society at large has been evolving
alongside the rapid changes of the times. I intend to maintain our stance of taking on
bold challenges without fear of failure by constantly reflecting on our Purpose.

09Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

CEO
MESSAGE

Creating an Expansive Circle of Connections

to be achieved over approximately the next 10 years.
Since our business activities center on investment inIn the same vein as taking on bold challenges, I place value on creating an expansive

unlisted securities, which have high volatility and low

circle of connections. In my 30 years since joining the Company, I have spent time col-liquidity, we had not disclosed our medium- to long-laborating closely with entrepreneurs and portfolio companies. Throughout my involve-

term management plans. However, we have reaf-

ment with them, there have been cases where we would invest in startups launched byfirmed that, to continue to invest through good times

managing members of past portfolio companies, where such members would move toand bad, it is imperative that the corporate value ofdifferent companies and then reach out to JAFCO for investment in their new ventures,

JAFCO is consistently seen in a positive light.

and where such members would introduce us to people interested in venture capital
investment who would then join the Company. These are just some examples of the manytimes I have experienced the connections that formed around JAFCO expand and lead tonew value creation.

Striving to Realize Our Medium- to
Long-Term Targets

My belief in expanding this circle of connections has become even stronger since I
became President & CEO. Over the past year in my new position, which differs greatly

To attain our medium- to long-term targets, we needfrom my role as an investment professional, I have been fortunate to have had theto promote our growth strategy by enhancing investment performance, increasing

opportunity to meet a wide range of new people. By forging links among this diverse

fund size in line with the expansion of target markets, and raising the external capitalarray of individuals, an even greater network of connections can be created. Viewing thiscontribution ratio. Given our track record, we believe that we are sufficiently equippedtask not only as my new responsibility but also as a source of pleasure, I aim to create

to enhance our investment performance, even if our performance may fluctuate ateven greater value for JAFCO and its stakeholders.

times due to market volatility. As such, we aim to achieve even higher levels of per­formance excellence. Meanwhile, concerning funds, we seek to raise the amount of
external capital commitments while reducing our own investment ratio in new funds

Pursuing a New Management Direction for Enhancing Corporate Valuefrom 40% to a target of 20% to enhance capital efficiency. Guided by our strong dedication to continued investment through good times and bad, and in light of the nature

We continue to invest through good times and bad, and our strong dedication to thisof fundraising, which is impacted by market fluctuations, we have thus far maintained

ideal is indispensable to fueling perpetual growth. To date, we have pursued efforts toa certain percentage of our own investment in funds to keep the fund size from con-build a robust financial base for making continuous investments even under adverse

tracting. Going forward, while continuing to maintain the level of our own investment

circumstances, such as the global financial crisis and dramatic changes in the eco-amount in view of profitability, we will reduce the percentage of our own investment

nomic environment. While this has been a necessary policy for continuous investment,by raising more funds externally, and increase the fund size in line with market

it has also led to a decline in our capital efficiency.

expansion.

To address this situation, we announced the Basic Policy for Enhancing Corporate

The most important objective for achieving our medium- to long-term targets isValue in November 2022. This policy lays out our management approach over theincreasing the size of our new fund series, which consists of multiple funds. Thismedium to long term, which is to focus on further enhancing capital efficiency whiletask requires us to establish a fund series that is greater in size than our most recent

explicitly stating and implementing our growth strategy. Under our medium- to long-series, and the key to doing so is establishing a constituent fund that specializes interm growth strategy, we have adopted an ROE of between 15% and 20% as a target

buyout investment. To that end, we established a constituent buyout fund in June10

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

CEO
MESSAGE

2022, separate from constituent venture investment funds, for the first time in 18

the trust-based relationships we have with entrepreneurs serve as our social capital,

years. By promoting the appeal of the Company’s buyout investment activities, we will

which is essential for our business activities.

acquire even greater investment opportunities and enhance investment performance.

Now more than ever before, we are striving to provide our stakeholders with informa-At the same time, we will increase the size of our fund series in line with the expan-

tion on our tangible and intangible assets across various forums, starting with oursion of target markets.

­integrated report. Through these efforts, we will not only communicate our corporate
value to stakeholders but also strengthen and enhance these assets continuously.

Understanding the Tangible and Intangible Assets Underpinning
Our Corporate Value

Ensuring Our Resilience to Market Fluctuations

While promoting a growth strategy and boosting capital efficiency are important ele-

I firmly believe that the market environment will provide a positive boost for thements in realizing corporate value enhancement, it is also important to communicate

Company over the medium to long term. For the Japanese economy to continue to grow,the value of JAFCO’s assets appropriately.

there is a need to transform business models through startups and business succes-

Corporate assets can be categorized into tangible and intangible assets. Our bal-

sions. Accordingly, the scale of the business model transition will likely expand in theance sheet, where tangible assets are listed, is extremely simple, consisting primarily

future. However, in the near term, it is extremely difficult to forecast how the market

of cash and the unlisted securities of portfolio companies (operational investment

will fluctuate. Looking back on the previous fiscal year, it was a period in which we

securities). By having our stakeholders learn more about our investment activities,

were once again reminded of the difficulty of ascertaining the direction of the market.

including the way we invest in unlisted securities and the kinds of challenges taken on

Our success in ensuring our resilience to market fluctuations depends on how weby entrepreneurs and portfolio companies, we seek to have them gain a better under-

invest, which company we invest in, how we provide management support, and how

standing of our asset value that does not appear on the balance sheet. In addition, we

we enhance our investment performance. To that end, we need to consider and care-

are working to establish rules for executing the fair value valuation of unlisted securi-

fully prepare for various scenarios. I believe that my most important role in this regard

ties—in other words, rules for determining fair market value and recording such value

is to maintain and enhance an organizational structure ensures that our solid businessin financial statements, since although international standards provide guidelines for

activities continue regardless of market fluctuations.

the fair value valuation of unlisted securities owned by venture capital companies,
such guidelines have yet to be established in Japan.
Meanwhile, our intangible assets comprise the intellectual capital, human capital,

Promoting Diversity as the Key to a Steadfast Organizationand social capital that provide the source of JAFCO’s long-cultivated asset value.
Investment in unlisted companies, which do not have strong business foundations,

Diversity is the most important element in establishing a solid organization, and I do

involves a high degree of uncertainty. As such, the performance of our investment

not say that based on recent social trends or demands. I am not the type of person

hinges on how we leverage our intellectual capital, including our know-how and expe-

who excels in a single area, even though I have been able to attain a certain level ofrience, to enhance our ability to reproduce success. Repeated successes, which areachievement. Recognizing this about myself at an early stage provided me with themade possible by our employees, or human capital, who represent the wellspring ofvalue system I apply to my work and with my overall outlook on life. The power of

the Company’s value creation, allow us to fuel perpetual growth. Furthermore, theeach person is essential to an organization, but everyone has their strengths andpartnerships we have with investors, who make our investment activities possible, andweaknesses, and there is a limit to what any one person can do on their own. That is11Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

CEO
MESSAGE

precisely why I believe that what is most important for a team or organization is

Furthermore, when working side-by-side with entrepreneurs, there are times when

having employees augment each other’s strengths to achieve a goal. Even if one

they require technologies and management resources to resolve issues. During such

employee were to have all the strengths you could imagine, the cooperation of atimes, we make every effort to consider how best to provide them with the resources

diverse group of employees who can complement each other’s strengths and weak-

they lack and how to create new value with them as a trusted business partner. We will

nesses would yield even greater improvements in both quality and speed, thereby

continue to pursue and invest in bold visions that create unprecedented value andenhancing overall organizational capabilities.

commit to ensuring their development, thereby fueling perpetual growth and helping to

Recently, talented personnel of various backgrounds have been joining the Company

realize a sustainable society.

as mid-career hires. In addition, our recruitment and development model for new
graduates, which we have had in place for many years, is unique in the venture capitalindustry. As a venture capital company engaged with both new graduates and mid-

Celebrating Our 50th Anniversary

career hires, as well as venture investment and buyout investment, we will establish aunique organizational foundation—one which cannot be easily imitated by ourThanks to the support of all of our stakeholders, we were fortunate enough to com-competitors—through an organic interaction of various personnel and business envi-

memorate our 50th anniversary in 2023. Over these 50 years, we have experienced aronments. Going forward, we will also pursue a framework in which a diverse pool ofvast range of hardships, including economic crises like the bursting of Japan’s asset

personnel aligns with shared values, and explore compensation systems andprice bubble and the global financial crisis, as well as the venture capital winter whenworkstyles that enable them to play more active roles.

many of our peers were driven out of business. I believe the reason we have been able
to overcome these various hardships and continue to prosper has been our approachof always pursuing new challenges and taking on calculated risks. The pursuit of chal-

Contributing to Sustainability through Our Investment Activities

lenge without fear of failure was embedded in the DNA of our organization well before
we defined our Purpose, and this DNA has been steadily passed down throughout

Supporting the ideals and ambitions of entrepreneurs and portfolio companies leads to the creation of new businesses that resolve social issues andour history.
Moving forward, the issues facing society will become more complicated than evercontributes to the sustainability of society as a whole. I also believe that we

before, and we will likely have to deal with even greater hardships. This is precisely

will be able to enhance our investment performance as a result. When engag-

the type of era in which there will be greater expectations for the creation of startups

ing in investment decision-making, we place our focus on whether or not

and the regrowth of small and medium-sized enterprises. Under these circumstances,

we can relate to the kinds of issues an entrepreneur wishes to resolve, who

we will continue to invest in bold visions, believing that creating an expansive circle ofthey wish to help and for what reasons, and the kind of steps they are look-connections with various stakeholders will lead to the sustainability of society and ouring to take to resolve these issues. Our Investment Committee, which makes

corporate value enhancement.

important investment decisions, examines the objectives and significance ofan entrepreneur’s business repeatedly with our investment professionals. If
the objectives and significance of a business are not properly thought through,there is a heightened risk of the business losing its clear direction in such
ways as prioritizing immediate short-term profits or withholding necessary
investments and expenditures that contribute to resolving issues.

October 2023

12

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Value Creation Process

Enhancing productivity
and regaining international
competitiveness in JapanPURPOSE

Fueling perpetual growth; investing in bold visions

MISSION

Commit to new business creation and jointly shape the future

INPUTS

Human capital
Climate change andother social issues

J AFCO’s unique investment professional training modelHybrid organization combining new
graduate/mid-career hires
Organizational investment structure
supporting strong talent

Emergence ofgeopolitical risks

PROCESSOUTPUTS

Portfolio companies

Cumulative numberof portfolio companies

Value-adding
supportDeal sourcing

Materiality
P.15

Japan’s demographic
aging and population
declineChange in values
and lifestyles

Social capital xtensive relationships of trust withE
entrepreneurs
Strong partnerships with fundinvestors
Expanding network of large­companies, etc.

¥419.2 billion

Promotion of industrial
rejuvenation(Capital commitments)

Funds

Track record of success and failure
in private equity investments
Fund formation/management
expertise cultivated over the years
Extensive knowledge based on an
unparalleled track record of IPO
support

P.29

4,142

Capital gains

Fund management, capitalcommitments

Intellectual capital

Advances in digitaltransformation

Investment inbold visions

Total funds undermanagement

P.26

External
environment
surrounding
JAFCO Group

Investment

OUTCOMES

Fund
management
fees, success fees

Financial indicators
Net sales¥14.1 billion
Information
disclosure,dividends

Fundraising,information
provision

Shareholders /Stock investors

Capitalcommitments

Creation/developmentof newbusinesses

Expansion ofrisk capital
supplyExpansion of
employment

Economic
growth

Distribution

Ordinary loss

¥3.0 billion

Fund investors

Profit attributable to
JAFCO Group Co., Ltd.
stockholders
Business process

P.38

P.30

¥40.6 billion
Note: All figures are for the fiscal
year ended March 31, 2023.

Expansion of management capital

Expansion of
the ecosystem forsustainable growth13Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Formulation of the Basic Policy for Enhancing Corporate Value
The Company Group places importance on continuous investment and market

JAFCO Group’s Unchanging Stance—Our Purpose

expansion and utilizes its funds to execute venture and buyout investments.

By boldly investing in and committing to visions that create

Group has emphasized. At the time of our founding, venture

To better share the results of our investment activities with our stakeholders,as-yet-unknown value, we fuel perpetual growth and contribute

capital investment was practically unheard of in Japan, andwe formulated the Basic Policy for Enhancing Corporate Value as a foundation

to the realization of a sustainable society. This is the unchanging

fundraising methods were extremely limited. After our founding,for promoting our growth strategy and improving capital efficiency.

stance of the Company Group, in line with which it has promoted

we became aware of limited partnership schemes, which had

its investment activities. In February 2023, we encapsulated thisbeen used as a means of fundraising by U.S venture capitalstance in our Purpose: “Fueling perpetual growth; investing incompanies, and established Japan’s first venture capital part-bold visions.” We believe that fueling the perpetual growth of thenership fund and began utilizing external capital. While main-market and society at large while collaborating with stakehold-taining a certain level of our own funds, we further accelerated

ers is the essence of the Company Group’s existence.

market growth with an expanded supply of risk capital, which

Background of the Policy’s Formulation
Our Purpose: Fueling perpetual growth; investing in bold visions

Continuous Investment

Market Expansion

Continuing to invest through good times
and bad to ensure stable performanceand business continuity

Growing the private equity market in
Japan while also utilizing our own capital

Striking a balance between management continuity and fundraising flexibility as both a listed company and afund management company
Enhancing shareholder value throughimproved fund performance andexpanded shareholder returns

Supporting and accelerating continuous
market growth by expanding the supplyof risk capital through the­establishment of funds
Increasing external fundraising andexpanding the supply of risk capital tocreate businesses that spur continuous
market expansion

Market expansion is another initiative that the Company

allowed us to obtain larger capital gains.
Initiatives for Realizing Our Purpose—Continuous Investment

To create businesses that can achieve disruptive growthand Market Expansion

through innovation, which will be an important role of the

To realize our Purpose amid the significant changes occurring

Company Group moving forward, we will accelerate efforts toin the social, economic, and global environment, the Company

perpetually expand the market. One such effort will be to further

Group has committed itself to continued investment throughexpand the supply of risk capital on a global basis by strengthen-good times and bad, with the aim of creating new businesses

ing our fundraising capabilities to secure the capital needed forand expanding markets, based on an understanding that market

continuous investment. Guided by the mindset of a Co-Founder,

expansion is the foundation for new business creation.

we will continue to invest our own capital to demonstrate ourContinuous investment is based on the premise that private

strong commitment while increasing external fundraising. Thisequity investment is a long-term business characterized by ain turn will set in motion a cycle of risk capital within the private

high degree of uncertainty and a time-intensive path to yield

equity market, thereby contributing to its expansion.

results. While startup investments, in particular, constitute a

Basic Policy for Enhancing Corporate Value
Portfolio
companies

Shareholders
Policy setting forth a pathfor returning value to stakeholders
to achieve our Purpose
Promotion of
growthstrategy

Fund investors

Improvementin capitalefficiency

market with high long-term growth expectations, such invest-

Position of the Basic Policy for Enhancing Corporate Valuements are highly volatile because many startup companies do

The Basic Policy for Enhancing Corporate Value, announced in

not have the necessary business foundations in place and theirNovember 2022, explicitly states the initiatives we are pursuingexits are easily impacted by stock market conditions. Taking

to realize our Purpose and outlines a basis for returning value tothese characteristics into consideration, we have emphasized

our stakeholders, including shareholders and fund investors.

business continuity based on our conviction to continue invest-

Improvement in fund performance and resultant high returns

ment through good times and bad. The listing of JAFCO Groupfacilitate external fundraising and boost our profitability, throughitself has supported the stability of its management, including inwhich we will strive to generate greater returns for ourterms of the Company’s organizational foundation comprising

shareholders.

diverse talent and its ability to conduct flexible fundraising.
Directors, officers,
and employees

By assessing private equity investment as a long-term, collaborative business with our stakeholders, we seek to expand
long-term profits by promoting our growth strategy and ongoing
improvement of capital efficiency.

14

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Materiality
JAFCO Group’s Approach to Materiality
Materiality concerns important medium- to long-term issues that must be
addressed to enhance corporate value and realize our Purpose of “Fuelingperpetual growth; investing in bold visions.”
Private equity investment, and venture investment in particular, havea direct impact on the resolution of social issues. For this reason, since
our founding 50 years ago, we have focused on private equity investment
based on our investment philosophy of continuing to invest through goodtimes and bad. Our belief that we can address social issues and enhanceprosperity by maintaining investment activities, creating new businesses,
and supporting the growth of companies, has remained unchanged since
our founding.
It is also important that we grasp changes in the external environmentand reflect them in management. We will do so by considering the perspectives of various stakeholders and continuing to engage them in dialogue toaccurately ascertain social demand.
Based on this unwavering belief and our flexible management approach,
we will maintain efforts to identify and resolve materiality in order toenhance corporate value and realize our Purpose.

Identifying Materiality Based on Stakeholder Feedback
In identifying materiality, we conducted surveys and interviews with stakeholders about the significance of our existence and their requests for JAFCOGroup. Specifically, we conducted in-depth interviews with five major institutional investors about the materiality we identified in the fiscal year ended
March 31, 2022, and our efforts and approach to materiality received solid
approval.
Further, in the fiscal year ended March 31, 2023, we incorporated expert
advice into our discussions of materiality from a medium- to long-term perspective with the aim of realizing our Purpose and examined issues from a
broad viewpoint. We identified the same materiality as that in the fiscal year
ended March 31, 2022, based on the axes of internal issues and external
demands. We also set targets for 2030 to enhance the effectiveness ofmateriality efforts.
Going forward, we will conduct periodic reviews of materiality to refine
the identification of important medium- to long-term issues facing
JAFCO Group.

STEP 1

STEP 2

STEP 3

STEP 4

Conducting interviews and surveys
with each stakeholder group

Identification of issues
from external andinternal perspectives

Assessment of issues

Identification ofmaterial issues

Interviews
Institutional investors
Interviewed five major institutional investors
Asked about their expectations and requests from theviewpoint of sustainability and the social value that theCompany has createdDirectors, officers, and employees
Interviewed 43 directors / independent directors / employees
Asked about the social value that the Company has created,current issues, and what should be addressed in the future

SurveyAdministered to 30 shareholders / institutional investors and248 fund investors

Identified a wide range of issues tobe addressed, including expectations
and requests of stakeholders (shareholders, investors, entrepreneurs,
and employees), and barriers to be
removed to achieve medium- tolong-term goals as a company andin each division.

From the perspectives of external
expectations and interests and ofimportance to our business, theidentified issues were assessed
through a bottom-up framework
centered on respective division
heads and in light of the expectations of each stakeholder group.

Based on the assessment of eachdivision, a final prioritization of issues
was conducted from a companywide
perspective, and six material issues
were identified. Four of them are
related to our market domain: (1)venture investment, (2) buyout
investment, (3) funds, and (4) ecosystem; and two are related to theCompany domain. Targets for 2030
were set based on the recognition
that identified materiality constitutes
medium- to long-term concerns.

Material Issues

1.

 reation of new businesses
C
that lead the way
in fulfilling social needs2.

 rowth of companiesGwith social value andsuccession to
the next generation

3.

Expansion of risk capital
supply in Japan4.

Establishment ofan ecosystem that
supports businesscreation and growth5.

Continuous organizational
development to promote
active roles of diverse
human resources

6.

Reduction of businessand management risks
through strengthening ofgovernance15Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Materiality

Material Issues and Medium- to Long-Term Initiatives
Material Issues

1.

2.

3.

Creation of
new businesses
that lead theway in fulfillingsocial needs

Growth ofcompanies withsocial value
and succession
to the next
generation

Expansionof risk
capital supply
in Japan

Efforts Focused on Long-Term Targets(FY March 2023)

Short-Term Execution
Indicators

Invested in businesses contributing to
the realization of sustainability
Invested in serial entrepreneurs
Created entrepreneurs through the EIR*
programExecuted proactive deal sourcing to ensure
contact with various entrepreneurs

 umber of investments
NNumber of investments insustainability contributions
Number of initial contacts
Number of contacts withpotential entrepreneurs
through EIRSocial Issues Surrounding the Company

Medium- to Long-Term Targets for 2030

Innovation is essential for the sustainable development of society andeconomic growth.
We must accelerate the creation of new businesses by increasing
the number of entrepreneurs while capturing actual and future social
demand.

Opportunities: Political support for startups and expansion of theentrepreneurial class
Risks: Increased competition and higher investment valuations due tomarket formation

We will contribute to the creation of new
businesses together with entrepreneurs
through investments that capitalize onchange.
We will encourage a variety of entrepreneurs to take on new challenges andcontribute to the expansion of the entrepreneurial class through ongoing investment
activities.

Amid a lack of successors, ongoing technological innovations, diversifying competition, and a variety of other challenges, the environment
surrounding companies is becoming increasingly complex.
This requires enhancing companies’ capacity for renewed growth andongoing employment protection by passing high-potential technologies
and assets to the next generation to maintain and increase their social
value.

Opportunities: M&A market expansion and growing interest in business succession
Risks: Inability to retain talented personnel in line with intensifying
competition among private equity funds

In acquiring more than 50% of a company’s
shares and taking control of management,
we are deeply committed to the growth of
portfolio companies and provide them with
opportunities to attract talented personnel,
establish comfortable work environments,
and develop skills.
Through efforts to ensure complianceand raise awareness of the SDGs, we aim
to enhance corporate value, facilitate succession to the next generation, and createsocial value.

 onducted compliance training at portfolio
C
companies after investment
Added ESG metrics to the due diligenceprocess
Ascertained portfolio companies’ awareness of the SDGs and set targets for themusing the SDGs Compass after investment
Promoted projects to formulate or sometimes revise the Misison, Vision, and Valuesof poftfolio companies after investment

 umber of investments
NNumber of portfolio­company employees
Portfolio company­personnel expenses

Creating new industries and enhancing companies’ capacity forrenewed growth are indispensable for Japan’s medium- to long-term
growth, and risk capital is essential for supporting these efforts.
As Japan continues to lack a sufficient supply of risk capital, there
is a need to expand the number of both domestic and foreign fundproviders in Japan’s private equity market.
Opportunities: Rising expectations for Japanese startups from­foreign institutional investors
Risks: An increase in competing funds

We will approach new fund investors inJapan and overseas, and through mutual
understanding, enhance the significance offund investments and investment activities
and increase the number of people who
relate to it to cultivate a new fund investor
base.
By realizing expected returns and improving customer satisfaction, we will achieve a
positive cycle of risk capital expansion andcontribute to an increase in the supply ofrisk capital in Japan.

 pproached new fund investor base, builtAand strengthened relationships
Diversified fund investor base and examined fund schemes in light of environmental changes
Utilized investor network to achieve strong
fund performanceImproved the accuracy of fair value valuation from a global perspective and in consideration of the unique characteristics of
the Japanese market

External fundraising
amount and fund size
Number and compositionof investors and average
investment amountNumber of participants ininvestor-related events* EIR: An initiative in which companies working to create
innovation employ or outsource work to people who arepreparing to start a business or are involved in new
business development as Entrepreneurs-in-Residence (EIR)16

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Materiality

Material Issues and Medium- to Long-Term Initiatives

Material Issues

4.

Establishmentof an ecosystemthat supportsbusiness creationand growth

5.

6.

Reduction ofbusiness andmanagement
risks throughstrengtheningof governance

Short-Term Execution
Indicators

Medium- to Long-Term Targets for 2030

The creation of new businesses and the reinvigoration of corporate
growth require a structure supported not only by specific companies
but also society as a whole.
An ecosystem must thus be created in which professionals withexpertise can work together to create a framework for supporting
enterprising personnel and form networks for boosting corporate
growth.

By systematizing past experiences, we will
increase the probability and reproducibilityof success to realize new business creationand corporate growth for our portfolio
companies.
In deepening alliances with large companies and external partner companies andpromoting market expansion initiatives, we
contribute to building an ecosystem for thecreation of new businesses and renewed
growth of companies.

 uilt an administrative system for portfolio
Bcompany growth, and organized and consolidated relevant knowledge
Strengthened recruitment focused on
C-level executives to accelerate businessgrowthHeld new business conferences and otherseminars to strengthen alliances between
large companies and startups
Conducted the Career Academy and Back
Office Academy in response to the increasing number of startup personnel

 umber of business firmNcontacts
Cumulative number ofworkshops and seminars
for startup personnel
Number of C-level executive (candidate) referrals
Cumulative number ofcompany consultations
Number of startup support partners

We maintain and develop an organizational
culture that enables diverse personnel tocontinue playing active roles regardlessof gender, nationality, and workstyle.
We will provide opportunities for diverse
personnel to grow and get more actively
involved and continue to evolve our management approach that encourages eachindividual to develop their skills, thereby
fulfilling our Purpose and enhancing
employee satisfaction.


Formulated
our Purpose and promoted
measures to instill our culturePromoted efforts to increase mid-careerhires and onboarding efficiency
Commenced examination of a new humanresource system facilitating the long-term
utilization of diverse personnel
Encouraged use of paid leave and healthcheckups to promote health management

 umber of new graduateN
hires
Number of mid-careerhires
Ratio of female
employees
Ratio of female managers
Ratio of mid-career hire
managers
Frequency of implementation and rate of participation in programs aimed
at instilling our Purpose

In addition to enhancing corporate governance and achieving high capital efficiency,
we will engage in ongoing dialogues withshareholders.
We will continue to respond to social
demand and reduce business and management risks by striving to strengthen the
Company’s ESG initiatives as well as thoseof our portfolio companies.

 ormulated and disclosed the Basic Policy
Ffor Enhancing Corporate Value
Promoted dialogues between independent
directors and institutional investors
Reviewed The Basic Policy on Sustainability
Promoted sustainability checks and awareness activities at portfolio companies

 atio of independentR
directors
Ratio of female managers
GHG emissions
Rate of participation incompliance-related
trainingOpportunities: An increase in companies supporting unlisted companies, particularly startups
Risks: Loss of competitive edge of the Company

Continuous
organizational
development topromote activeroles of diverse
human resources

Efforts Focused on Long-Term Targets(FY March 2023)

Social Issues Surrounding the Company

A combination of diverse perspectives and wide-ranging strengths isessential for the sustainable development of society.
Companies are expected to establish an environment in which
diverse personnel can work together and continue playing active roles
regardless of age, gender, and nationality to boost the creativity ofsociety as a whole.

Opportunities: Expanded investment opportunities in line with theretention of diverse personnel
Risks: Diluted corporate culture due to an increase in mid-career hires

As social issues become more complex, corporate responsibility andstakeholder expectations will increase.
In this environment, companies are expected to contribute to asustainable society by strengthening governance and actively pro­moting sustainability initiatives.

Opportunities: Differentiation from other venture capital firms
through stronger governance of portfolio companies
Risks: Increased administrative costs in line with growing governancerequirements

17Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

18

Sustainability
Our Approach Towards Sustainability

Sustainability Promotion Structure

Amidst substantial shifts in the global environment and social systems, we remain steadfast in ourinvestment activity and philosophy of continuing to invest through good times and bad, and we arededicated to realizing our Purpose of “Fueling perpetual growth; investing in bold visions” and contributing to the realization of a sustainable society. In June 2023, we established a basic policy
on sustainability to share our basic approach to sustainability as well as ESG-related issues andcoun­termeasures with our stakeholders. Going forward, we will continue to promote dialogue andcollaboration with our stakeholders on issues related to sustainability and ESG to create a better
future together.
Our sustainability initiatives focus on the following two points: contributing to sustainability throughour business activities and enhancing ESG as a company. Through our private equity investment business, we not only provide management support to enhance the sustainability of our portfolio companies but also actively participate to ensure that these businesses contribute to the sustainability ofsociety at large.

Addressing sustainability concerns, including ESG issues, is one of the Company’s highest management priorities. The Administration Division oversees the progress of companywide sustainability
initiatives and reports the status of these efforts at least once a year at a meeting of the Board of
Directors, which supervises the initiatives by checking progress and discussing specific activity
policies and promotion measures.
The Investment Committee primarily assesses business contributions to sustainability and examines
improvement measures. Established under the Board of Directors, the Committee deliberates onwhether to invest in candidate companies based on their ESG risks and growth potential incorporating
sustainability-related risks and opportunities. We have a system in which committee members arepromptly notified in the event of an incident that may have a significant impact on the sustainabilityof a portfolio company. We also conduct regular sustainability checks on portfolio companies, and we
examine and discuss risks affecting the entire portfolio once each quarter.

JAFCO Group Initiatives

Portfolio Company Initiatives

Investments in businesses that contribute to sustainability

Contributing to­sustainability throughbusiness

Identifying ESG risks at portfolio companies and promoting
appropriate initiativesP re-investment: Conducting due diligence and Investment Committee
assessments of businesses and entrepreneursP ost-investment: Strengthening portfolio companies through monitoring
and awareness-raising activities

Setting targets from an ESG perspective and conducting various
activities to achieve them
Enhancing ESG
efforts as a company

Environment
GHG emissions, resource conservation, etc.
SocialAdequate working environment, human capital, etc. GovernanceCompliance with laws and regulations, risk management, etc. 

P.26, 34
P.56

Contributing tosustainability
through businessEnhancing ESG
efforts as a company

Directly contributing to sustainability
 orking toward sustainability through businessW
Engaging in business that directly contributes to sustainability

Promoting appropriate corporate activities from an
ESG perspective
 romoting corporate activities with an awareness ofP
ESG perspectives
Reducing ESG risks impacting society

Contributing to a sustainable societyInvesting in businesses that directly contribute to sustainability(Please note that investments are not limited to specific businesses or
domains)

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Sustainability

JAFCO Initiatives

Contributing to Sustainability through Business

The essence of our business is strongly aligned with the concept of ESG investment. We incorporate ESG factors
throughout the investment process, starting from the identification of promising companies that aim to resolve social
issues, providing post-investment growth support, all the way to investment exit. We enhance our competitivenessand corporate value by contributing to sustainability through the business growth of our portfolio companies.
In assessing business potential, which is the first step in investment activities, risks and social needs from theperspectives of ESG and the SDGs are important factors to consider. Based on these assessments, we discuss
issues that also include the achievement of sustainable growth with the management of investment candidates andmake investment decisions. The next phase of our investment activities involves resolving issues through dialogue
and supporting growth through management involvement. While placing the highest priority on the launch of aportfolio company’s business, we also make sure to develop its administrative structure. Further, the Company
supports the establishment of sales, development, and management structures, including the hiring of humanresources appropriate for the portfolio company’s growth stage. Through these efforts, we contribute to the­realization of sustainability by cultivating companies that will have significant social impacts going forward.
Narrow down
investment targets

Identify investment opportunities leading to the realization of sustainability
Conduct negative screeningExamine business potential iscuss corporate structureDand governance with the
management team

JAFCO Initiatives

Regularly monitor progress

Review overall portfolio
Examine countermeasures

Supportsustainable growthP rovide management support
for organizational management and establishment ofinternal control systems

Sustainability checks

Portfolio meetings

 onduct regular checks toCunderstand actual status ofgovernance onfirm portfolio company
Cbusiness progress, financial
position, and valuation

Check list example • Check for legal violations and pending
disputes•C heck information management
system onfirm deposit and withdrawal•C
activities•C onfirm deposit balance semiannually heck improvement status ofCsustainability check results
and growth support
measuresP rovide sales support bypromoting collaborations withlarge companies and othermeasures

Investing in Businesses that Contribute to Sustainability
We believe that all JAFCO portfolio companies contribute to sustainability through their businesses. In identifying
promising candidates, we consider whether their businesses have social significance and whether they cancontribute to resolving social issues, as we believe achieving such social significance contributes to a sustainable society.
Based on our policy to not restrict investment targets to specific industries or domains, our investment targets
going forward will not be limited to companies that directly contribute to a low-carbon society and the resolutionof social issues from an ESG perspective. We aim to contribute to a sustainable society through our portfolio
companies by investing in businesses that identify untapped value in society and achieve social significance.

Identifying Portfolio Company Risks and Promoting Appropriate Initiatives
In many cases, the seed and early-stage startups in which we invest have limited management resources,
making it difficult for them to mitigate ESG risks on their own. For this reason, we help portfolio companies
identify their ESG risks and strengthen their ESG initiatives. In considering investments, we focus efforts on due
diligence to determine whether ESG risks are within a manageable range for entrepreneurs, companies, andbusinesses. Having formed a team dedicated to investment evaluation, we conduct thorough discussions at
Investment Committee meetings to ensure that we do not invest in companies with high ESG risks. After investment, we monitor the corporate activities of our portfolio companies and assist them in addressing ESG risks.
Every six months, we conduct sustainability checks of all portfolio companies to identify ESG-related risks
before they occur. For portfolio companies where potential risks are identified, we strive to minimize ESG risks
by conducting individual awareness-raising activities and providing various types of support.

Incorporate sustainability
perspectives into businessplans and growth scenarios

Enhancing ESG Efforts as a Company

We are committed to reducing energy usage and GHG emissions through efficient office operations and the proactive promotion of remote work. In May 2023, we made the decision to endorse the recommendations formulated by
the Task Force on Climate-related Financial Disclosures (TCFD). Additionally, as the essence of our business is investing in promising companies that resolve social issues and contributing to the development of a startup ecosystem,
we pursue human resource strategies focusing on the development of human resources and organizational infrastructure supporting these businesses. We have strengthened governance in stages each year, in terms of management
independence, sharing value with shareholders, improving capital efficiency, and promoting growth strategy. Specifically, since June 2015 when we became a company with a board-audit­committee, we have promoted initiatives such as increasing the ratio of independent directors on the Board of Directors, appointing a female director, and establishing the Nomination andRemuneration Committee. We are implementing the Basic Policy for Enhancing Corporate Value, which we formulated in November 2022.

19

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Sustainability

Portfolio Company Initiatives
Investing in businesses that willachieve social significanceContributing to Sustainability through Business
The sustainability value that portfolio companies realize through their business activities can be divided into three categories based on the three tiers of the SDGs “wedding cake”
model:* biosphere (contributes to resolving environmental issues), society (contributes to resolving social issues), and economy (contributes to industrial innovation and development).
* The SDGs wedding cake is a conceptual model developed by Professor Johan Rockstrom, co-founder and former director of the Stockholm Resilience Center at Stockholm University, Sweden.

Biosphere:
Contributing to Resolving Environmental Issues

Society:
Contributing to Resolving Social Issues

Economy:Contributing to Industrial Innovation and Development

Zeroboard Inc.

Asoview Inc.

Cuorips Inc.

Zeroboard develops and provides Zeroboard,a cloud service that calculates and visualizes
GHG emissions from corporate activities andsupply chains based on international standards. This service effectively facilitates theassessment and management of GHG emissions throughout the supply chain,
which had been difficult up until now. It also provides consulting services tosupport the design of calculation processes and the disclosure of information
requested by customers and investors. Through collaborations with over 100
companies, Zeroboard provides user companies with solutions tailored to theissues they face and assists them with reducing GHG emissions. Zeroboard
supports decarbonization management and contributes to the realization of alow-carbon society.

With the mission “Live life, play life,”
Asoview aims to realize a society centered around well-being, where leisure isconsidered as vital to enriching one’s life
as food, clothing, and shelter. The company provides asoview!, a convenient,economical leisure reservation service, as
well as a digital transformation solution service for tourism, leisure, and cultural
facilities. Asoview contributes to the revitalization of local industries by helping
to improve the productivity and ability to attract customers of local tourism
industries. It also develops hands-on tourism activities and sales channels,
leading to an increase in tourism spending.

Cuorips promotes the development andcommercialization of iPS cell-derived cardiomyocyte sheets. Its targets are patients who
have severe heart failure but for whom there
are no effective therapies other than hearttransplants or artificial heart implants, and for whom therapeutic effects, including
improving cardiac functions and helping the heart recover from heart failure, can be
expected. As of June 2023, the company has completed planned clinical trials for
implants on eight patients and it is now preparing to obtain approval for manufacturing and marketing. It is also developing a contract development and manufacturing organization (CDMO) service using a commercial facility with an integrated
laboratory for cultivating cells, and is expected to contribute to both the development of regenerative medicine and the improvement of people’s health throughout
the world.

Astroscale Holdings Inc.

TechMagic, Inc.

Astroscale is a private-sector company focusing
on on-orbit services including the removal ofspace debris, which continues to accumulate
in low-Earth orbit. The company currently
develops and verifies technologies that enable
on-orbit services such as the removal of deadsatellites and existing debris, satellite life extension, satellite orbit transfer, and observation and inspection conducted in space.
To date, the company has successfully launched ELSA-d, a satellite for demonstrating commercial debris removal technologies, and has verified the basic
technologies required for commercial services. Astroscale will contribute to therealization of long-term and sustainable space utilization by solving the problemof space debris. Such a solution is indispensable for the development of thespace business.

TechMagic develops and provides robotic
solutions that fully automate and streamline food preparation in restaurants andfood production facilities. The company
promotes the creation of next-generation
food infrastructure that utilizes cuttingedge technologies such as AI, machinelearning, and robotics. Leveraging know-how acquired through multiple introductions within major restaurant chains and food companies as well as throughrepeated verification of automated cooking at company-operated stores,
TechMagic is further accelerating the automation and efficiency of business
operations. The company will contribute to improving low-margin cost structures
and addressing the chronic labor shortages facing the food industry.

LayerX Inc.
LayerX develops SaaS, fintech, and privacy
tech businesses with the mission of digitalizing all economic activities. The company
develops and provides Bakuraku, a corporate expense management service that
integrates invoice processing, expense
reimbursement, and approval requests toimprove operational efficiency and legal compliance, as well as Anonify, a privacy
protection technology necessary for data utilization across companies and industries. By promoting optimal software implementation in all economic activities,
LayerX contributes to improving productivity, a growing challenge in Japan.

20Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Medium- to Long-Term Growth Strategy
Our Purpose

Enhancing Corporate
Value with Our Eye on
the Next 10 Years

Fueling perpetual growth; investing in bold visions

Our growth strategy centers on boosting investment­performance with robust investment management andEnhance corporate value in a bid to achieve ROE of 15%–20%

strengthening external fundraising capabilities. We aim
to expand our fund size in line with the growth of target
markets and achieve sustainable growth of our private
equity investment business. We believe that enhancing
corporate value requires the expansion of profits over thelong term through the promotion of our growth strategy
and the improvement of our capital efficiency.
Increase of Profits(Billions of yen)

Profit attributable to
JAFCO Group Co., Ltd.
stockholders
16.0–20.0

22.0–25.0

Improve capital efficiency

Social need for venture investment and buyout investment is on the rise.
It is essential that we fully capitalize on the market potential stemmingfrom said need to grow our business. In light of the expansion of ourtarget markets, we will continue to pursue growth by boosting our performance through stronger investment management capabilities andenhancing our fundraising capabilities.

While gradually expanding the size of new funds in line with the target
markets, we aim to gradually reduce our investment ratio in new funds to
as low as 20% over the next 10 years. The funds necessary for continued
investment activities will also be reduced accordingly, and share buybacks using any excess funds will be considered.

25%

15%

11.0

20%

Promote growth strategy

20%

15%
15%
70%

65%

6%

Approx.
15%

55%

Approx.
15%–20%Medium termLong term(five to six years) (approx. 10 years)

2022.9

Capital gains
Fund management fees
Success fees
ROE
Note: F igures for profit are the average over the past five years, excluding
extraordinary income

External fundraising ratio*1
ROI
Average of 2.5x or more

Reduction of Net Assets

135.0

89.0

95.0

43.5

40.0

2022.9Organizational foundation

P.25

External business environment

P.24

35.0

Medium termLong term(five to six years) (approx. 10 years)

Cash and deposits
Operational investment securities
Nomura Research Institute, Ltd. shares (after tax)

Total shareholder return ratio

60%–100% or more

¥250 billion
P.22

120.0
85.0

80%

Size of new funds*1,*2¥150 billion

Approx.
(Billions of yen) 190.0
61.2

60 %

P.23
*1 The figures on the left indicate actual results as of September 30, 2022, while thefigures on the right indicate targets to be achieved in approximately 10 years.
*2 These figures are totals for Japan, Asia, and the United States.

21

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

22

Medium- to Long-Term Growth Strategy

Companywide Policies Focused on Promoting Growth Strategy

Enhance corporate value
Promote growth strategy

At JAFCO Group, our investment management capabilities and external fundraising capabilities form the two pillars of profit growth. In linewith our investment policy of highly selective, intensive investment, we have identified promising companies at an early stage and proactively

ROI

strengthened management involvement to accelerate post-investment growth. Going forward, we will continue to enhance our fund performance by further honing our investment management capabilities and advancing our efforts in highly selective, intensive investment in each
investment process. We will also work to ensure continued capital commitments from existing investors and develop a new investor base.

External fundraising ratio

Total shareholder return ratio

Size of new funds

Organizational foundation
External business environment

External fundraising ratio

ROI

Highly Selective,
Intensive Investment

Improve capital efficiency

Size of new funds

Selective: Thoroughly identify highly promising investment targets from among the many startups that we encounterin the course of our extensive deal sourcing

Fund Management

Intensive: Acquire an influential stake in portfolio companies and strengthen management involvement by allocating
management resources necessary to accelerate business growthEstablish new funds and carry out

Venture Investment

fundraising approximately

Business Development

every three years

Evolve highly selective, intensive investments
Investment

GrowthExit

Outpace others in identifying
businesses with high potential

Further extend and deepen
our commitment with a senseof ownership

Achieve exits that maximize
the value of portfolio
companies

Provide support for key issues for

Obtain continued capitalbusiness launch, namely employee­commitments from existing investors

recruitment, customer acquisition,
P.39

and develop new investor baseand back-office development

Create an ecosystem that facilitates

Buyout Investment
Commit to the renewed growth of companies

Conduct venture buyouts in whichseeking a “second start” by incorporatingpromising early-stage companies are acquired

our expertise in venture investment intoand our value-adding know-how is used to

traditional majority investment

increase their corporate value
P.41

the creation of new businesses,

Develop relationships with investors­encompassing collaborations with large

through highly disciplined, transparent

companies and efforts to enhance

management and the provision of

the startup community

information tailored to individual needs

P.43

P.45

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Medium- to Long-Term Growth Strategy

Improving Capital Efficiency for Realizing
Medium- to Long-Term Targets

Enhance corporate value
Promote growth strategy

To improve capital efficiency, we will increase the size of new funds and external capital contribution in line with market trends while gradually
reducing our investment ratio. We have clarified the criteria for dividends to enable returns from funds to be appropriately distributed toshareholders.

Improve capital efficiency
External fundraising ratio

ROI

Total shareholder return ratio

Size of new funds

Organizational foundation
External business environment

Before November 2022

Measures to improve capital efficiency

After November 2022

2021

Share buybacks totaling

Net assets¥50 billion

easily influenced by market conditions

Necessary funds for continued investment

As of November 2022

Steadily increase the size of new funds in line

¥60 billion

Necessary funds for continued investment

with target markets while gradually reducing¥120 billion

March 2017

Disclosed our shareholder return policy

Dividends

Invest our own capital to ensure an appropriate
fund size in our fundraising activities, which are

3% of shareholders’ equity(average value at the beginning andend of the period)

our investment ratio

Continued to provide stable dividends bybuilding a solid financial base in light of profit
fluctuations common in our line of businessNote: Amount after deducting interest-bearing debt, accrued taxes, andexpected dividend payments at the end of March of each fiscal year. The
Company will continue to consider share buybacks for amounts in excessof the necessary funds.

The greater of either

3% of shareholders’ equity(average value at the beginning and end of the period)

Revised our dividend policy to strengthenorthe link between the Company’s profits and

50% of net income

shareholders’ interests

23Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

24

Medium- to Long-Term Growth Strategy

External Business Environment for Private Equity Investment

Enhance corporate value
Promote growth strategy

As social issues become increasingly complex and diverse, startups and small and medium-sized enterprises (SMEs), which have the ability totransform industry structures and give rise to innovation, are drawing greater interest as crucial drivers of Japan’s economic growth. Given thegrowth, companies are being required to raise the success rate of medium- to long-term investments by anticipating what lies ahead andSociety / Economy

External business environment

Climate change andother social issues

Emergence of geopolitical risks

Advances in digital transformation

Japan’s demographic aging andpopulation decline

Change in values and lifestyles

Increasing expectations for the creation of startups and the growth of SMEs for the role they play in invigorating and driving the renewed growth of the Japanese economy
Growth in Japan's startup investment market

Increasing number of small and medium-sized M&As in Japan

Need to secure funds from institutional investors forthe steady growth of the IPO market

Amount of funds raised by startups in Japan reached a record high in 2022

Stable number of carve-outs as a consequence ofdigital transformation and management reforms as well as need forbusiness succession due to the aging of business owners

Number of large-scale IPOs declined in 2022 due to deteriorating
global conditions and fundraising environment

Amount of funds raised*1 (CY) and number of companies raising funds*1 (CY)

Number of M&As related to Japanese companies*2 (FY)91

3,062 companies
1,348
companies

1,241
companies¥87.7
billion¥331.4billion2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1H of
2023

Amount of funds raised

Number of companies raising fundsJ apan remained strong in 2022, despite a global downtrendIncreasing number of new funds and investors, mainly businesscorporations and venture capital companies
Increased government support such as the Startup Development
Five-Year Plan
Large-scale fundraising activities in the private equity market are on
the decline and valuations have entered a correction phase

147
companies
528
companies
2,143
companies

2013
IN-IN

No. of IPOs in Japan’s stock markets*3 (CY) /No. of IPOs with VC holdings of more than 10% (FY)

54
329
54社
companies
companies
5社
5618
companies
companies
15社
15companies
3,997
companies
14
14社 companies¥945.9billionMarket / Competition

Total shareholder return ratio

Size of new funds

Organizational foundation

identifying signs of further growth.
Enhancing productivity and regaining
international competitiveness in Japan

External fundraising ratio

ROI

rising potential for market growth, which has been demonstrated over the past 10 years, and the expanding ecosystem for accelerating said

Improve capital efficiency

2014
IN-OUT

2015

2016

2017

2018

2019

2020

2021

2022

OUT-IN he number of private equity fund players is on the rise in Japan andToverseasIncreasing size of funds due to continuous monetary easing
Business succession deals related to the aging of business owners remainfavorable
Trend of expanding investment targets to encompass companies seeking
renewed growth through digital transformation

2013

91
companies
3
companies
14
companies
14
companies

2014

2015

2016

2017

2018

2019

2020

2021

2022

No. of IPOs in Japan’s stock markets
No. of IPOs with VC holdings of more than 10%:¥10.0 billion or more and less than ¥50.0 billion
 Less than ¥10.0 billion¥50.0 billion or more

IPO remains the main priority in startup investment exits
Undertaking of institutional reforms to create unicorn companies andachieve large-scale IPOs
Diversification of exit strategies, including trade sale of unlisted stocks
and M&As
Monitoring of trends of overseas investors in light of the global situation*1 Prepared by JAFCO based on Uzabase, Inc.’s 2023 1st Half Japan Startup Finance and 2022 Japan Startup Finance. Figures are sourced from INITIAL Inc. (as of January 19, 2023 for 2013 only and as of July 14, 2023 for 2014 onward).
*2 Prepared by JAFCO based on RECOF M&A DATABASE. Includes the figures in “M&As” and “Intra-group M&As.”   *3 Prepared by JAFCO based on publicly available information.

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Medium- to Long-Term Growth Strategy

Organizational Foundation for Realizing Growth Strategy
To pave the way for private equity investment businesses in Japan, JAFCO has continued to nurture investment professionals through its unique
recruitment and training model. Human capital, which includes our strong individual talent and the organizational structure underpinning ourinvestment process; intellectual capital, which helps us enhance our ability to reproduce success; and social capital, which includes robust relationships with fund investors and business firms, serve as not only the organizational foundation that has supported our growth but also theAs highly capable investment professionals serve as a
Businessfeatures­foundation of trust in our investment activities, it is essential
to build an organization that closely nurtures and supports
diverse and strong talent.

Mindset as a Co-Founder
Passing on the values of a Co-Founder while developing
the skills and experience of our investment professionals

Organizationalfoundation

Robust Organizational Foundation
Supporting Strong Individual Talent

Promote growth strategy

Improve capital efficiency
External fundraising ratio

ROI

Total shareholder return ratio

Size of new funds

Organizational foundation
External business environment

source of value creation within our growth strategy.

Human Capital

Enhance corporate valueIntellectual CapitalThe key to investing in unlisted companies without a strong
business foundation is having extensive insight andexperience that enhances our ability to reproduce success.

50 Years of Experience inBoth Investment Success and Failure
Insight gained via experience with investment successand failure in 4,142 companies

Know-How on Fund Establishment
and Management

Social CapitalThe key to accelerating the business growth of
portfolio companies is building relationships withvarious stakeholders that lead to customer referrals
and business collaborations.

Strong Partnerships with Fund Investors
Relationships with a broad range of fund investors,
involving not only fund supply but also collaboration
with portfolio companies

Large Corporations That Facilitate
Business Growth and Diverse Exits

Building an organization comprising personnel
highly ­specialized in portfolio company support,
fund management, corporate affairs, and other areas

Accumulated expertise in fund establishment/
management not overly impacted by near-term trends

Network of business firms that can be utilized fromvarious perspectives, including boosting the business growthof portfolio companies, M&As, and other exits

See page 26 for details on human capital.

See page 29 for details on intellectual capital.

See page 30 for details on social capital.

25Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

26

Source of Our Value Creation

Human Capital
Our people, or human capital, are the greatest source of value creation at JAFCOCASE STUDY 1

Group. The underlying foundation of our human capital is our investment profes-

Instructor Program for New Graduates

sional training model, which we have developed based on our long and consistentwhich include the Business Development Division, Fund Management Division,

The bedrock that enables investment professionals who join as new­graduates to work on their own at a relatively early stage is our instructor
program, in which senior investment professionals provide side-by-side
support. There is no template for investment in unlisted companies, andthe work itself is multifaceted. Accordingly, shortening the feedback cycle
for new graduates in their daily work is a shortcut to growth. Recently, we
have been enhancing the instructor program by increasing the number of
instructors per new graduate to identify and nurture strong talent, as wellas various training and other personnel development methods.

and Administration Division, were hired as new graduates and have prior invest-

CASE STUDY 2

policy of recruiting new graduates. Looking five to 10 years into the future, we nurture the strong talent of investment professionals through this training model. Manyof the investment professionals currently in the Investment Division joined JAFCO as
new graduates and built their careers entirely in private equity investment.
In addition, many members of our middle-office and back-office divisions,ment experience. Under our Co-Founder culture, we pass down the principles ofthoroughly considering what is truly valuable to private equity investment andacting accordingly throughout our organization.
Recently, in addition to our new graduate recruitment and training model, we
have been focusing on promoting mid-career hires. In this effort, we are committed
to building a hybrid organization that embraces a diverse range of expert personnel, not limited to those with investment experience. We have hitherto hired seasoned professionals with strong backgrounds in human resources, sales andCreation of lists of investment candidates
Pre-investment meetings andinterviews
Investment due ­diligenceand decision-making

Post-investment value-adding

Recruitment of Diverse Talent and Promotionof Their Active Involvement
To further enhance our organizational capabilities, we are working on
initiatives to recruit diverse talent and promote their active involvement.
In addition to enhanced efforts of each division to step up the mid-career
hiring of professionals with diverse expertise, we are establishing andenhancing programs that promote a more active role for female employees.
We are also advancing efforts on health management, including acquiring
the Excellent Health Company (Silver) certification from the Tokyo
Federation of Health Insurance Societies.

Excellent Health Company (Silver)marketing, back-office establishment, and IPO preparation, who can contribute toour business development activities as work-ready personnel. Additionally, we are
now adding members with corporate strategy, business planning, investor relations,and global experience, thereby further enhancing the diversity of our personnel.
All employees, leveraging their diverse experience and insight, put forth theirbest effort to realize growth for our portfolio companies, regardless of their division or age. This is a major feature and strength of the Company. By sharing the

Number of investment ­professionals with 10 or more
years of investment experience

20

Percentage of new graduatesand mid-career hires
New graduates

out of 50 companywide

goal of enhancing fund performance across the Company, we are able to build

establishment by our former employees. An organizational structure that not only
emphasizes individual talent but also provides back-up support for such talent isanother major strength of the Company.

As of March 31, 2023

24%

Private equity funds 15%
Accounting12%Mid-career hires

IT/systems

12%

Securities and­investment

9%

Healthcare

6%

professional training model, meanwhile, has contributed significantly to thedevelopment of the private equity investment market and industry, including fundConsulting

61.2%
38.8%

strong organizational and human resource capabilities. Our unique investment

Percentage of mid-career hires
from different industries

As of March 31, 2023

Advertising/media

6%

Other

18%
As of March 31, 2023

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Source of Our Value Creation

Human Capital

DIALOGUE

The Value We Demonstrate through Our Identity as a

Co-FounderIn this section, three employees working in different divisions discuss
their approach to their daily work, how they involve themselves in
portfolio companies, and JAFCO’s strengths, centered on the themeof JAFCO’s deeply rooted identity as a Co-Founder.

 ath Leading to JAFCO and Reasons forP
Joining the Company
Numata: When I was job hunting, I was mainly looking at jobs in the financial and consulting industries. During my search, I was intent on finding a job
where I could support the pursuits of people and corporations. With JAFCO’s
venture investment, the Company supports the business growth of portfolio
companies and only realizes a profit once these companies become listedon the stock exchange. Although the business requires a long-term commitment, I decided to join the company because I was attracted by the fact that
we work side-by-side with entrepreneurs, from the investment stage to IPO,
and that this contribution translates directly into profits for the Company.
Nakayama: Through my previous jobs, I gained over 20 years of experience inbuyout investment, including at a private equity fund. I began to search for anenvironment where I could be deeply involved in investment with a new perspective, and this search led me to JAFCO. I knew that JAFCO was involved inbuyout investment, but the scale of investment at the time was still relatively
small. I believed that I could draw on my experience to help the Company
expand its buyout investment, and that’s the reason why I joined theCompany. Another major reason was that I was fascinated by the characterand investment approach of JAFCO’s Partners during my interviews with them.
Setoyama: I worked as a certified public accountant at an auditing firm, omoko NumataT hief Capitalist
C
Investment Division
Tomoko Numata joined the Company in 2005 as a
new graduate. Since then, she has consistently been
involved in domestic startup investment and growth
support.

27

Hirogi Nakayama

Hiroki Setoyama

where I was involved in IPOs. With the onset of the COVID-19 pandemic, I

Managing Director
Structured Investment DivisionPrincipal
Business Development Division

saw how the world was undergoing dynamic change. This encouraged me

Hirogi Nakayama joined the Company in November 2020
after working for a foreign-owned financial institution
and an investment fund. He has been involved in buyout
fund management and buyout investment.

Hiroki Setoyama joined the Company in November
2020 after working at an auditing firm. He has been
involved in providing portfolio companies with IPO
support and back-office development assistance.

to pursue a new challenge where I could leverage the experience I had
gained up to that point, and it was at that time that I first came into contact
with JAFCO. Being extremely impressed with JAFCO’s history, track record,and organizational capabilities, which are leveraged to make new contributions to IPOs and the startup industry, I decided to join the Company.

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Source of Our Value Creation

Human Capital

DIALOGUE

The Value We Demonstrate through Our Identity as a Co-Founder
The Appeal of JAFCO

personally invested in the success of portfolio companies. Rather than

Handing Down and Entrenching the Co-Founder Identity

Numata: While venture investment has ablame the president or directors of a portfolio company when things do not

Numata: The Investment Division has a system where members who hadhigh rate of failure, I think JAFCO’s corpo-

go well, I always reflect on how I could have helped more or communicatedjoined the Company just a few years earlier would serve as instructors torate culture of accepting failure is attrac-

better. When I have to deliver a tough message, I make sure to step in andnew members, providing them with support over the course of their first two

tive. No matter what the situation, I am

engage in dialogue with the management of portfolio companies, and whenyears. These senior members work very closely with new members, taking

able to engage thoroughly with portfolio

things become challenging, I make sure to offer intensive support. This

them along to visit investment candidates and also coming along when newcompanies. Also, it is often the case thatkind of approach is what fosters trust-based relationships in which theymembers visit portfolio companies they were assigned to, in order to provide

employees who are not directly involved

consult with me first when any difficulties arise.

relevant feedback. Now I am in a position where I look after and support

in a particular investment kindly offer

Nakayama: My understanding of theyounger members, so I take great care in teaching them how to act as atheir help. In these ways, I am reminded

Co-Founder identity is essentially the

Co-Founder, including how to conduct themselves when visiting a portfolio

on a daily basis of the Company’s deeply

same. JAFCO has many investment pro-company and how to approach entrepreneurs.

rooted awareness of putting its portfolio companies first.

fessionals who work in concert with

Setoyama: There are many members

Setoyama: I also have a strong sense of JAFCO’s spirit of putting its portfolio

management teams of portfolio compa-

of the Business Development Divisioncompanies first. JAFCO greatly values the time of entrepreneurs and man­nies to resolve issues down to the very

who have an abundance of experience,

agement teams, and I believe this demonstrates the high level of respect

last detail. One way in which my interpre-and I feel that culture and identity as a

the Company has for its portfolio companies. I think this is precisely why thetation differs slightly from that of Ms.

Co-Founder are created through theirCompany has been able to achieve continued success over the past 50 years.

Numata is that, in the case of buyout

daily work and involvement with invest-

In addition, JAFCO ranks among the top in the industry in terms of its organi-investments, we invest in companies thatment professionals. As Ms. Numata said,zational capabilities and level of trust, which it has cultivated throughout its

have already established themselves to a certain degree, so our invest-

it is very important to transmit a culture

history. When JAFCO takes a leading role in making new plans, various parties

ment is positioned as a “second start” for such companies. To ensure thator identity through your own conduct. I

readily get involved, and there are many cases where I have witnessed thecompanies and their businesses built by their founders can achieve per-believe it is ideal for the Co-Founderpower of JAFCO’s long-cultivated trust.

petual growth, we establish various frameworks for recruitment and humanidentity to be handed down to the next generation in this way.

Nakayama: My feelings are very similar to those of Mr. Setoyama. JAFCO isresource development, as well as organizational foundations that allow us

Nakayama: The Structured Investment Division is currently focusing on

highly regarded by its existing and potential portfolio companies. Our invest-

to manage these companies as a team. Accordingly, while we work side by

mid-career hiring only, so we do not have an instructor system like that ofments are geared toward growth, and we therefore place importance onside at the beginning, it is important that we encourage them to take fullthe Investment Division. However, we hold a quarterly meeting for sharing

facilitating the growth of portfolio companies. Also, for work that requires

control over their operations somewhere along the way.

case studies and what was accomplished through such deals and thea high level of expertise, it is often the case that companies will outsource

Setoyama: I do not have that many opportunities to work directly with­processes. Since there are not many opportunities to communicate thesuch work to an external specialist or consulting company. However, themanagement teams of portfolio companies, as I am not an investment

Co-Founder identity in our division, I hope that we can increase company-

Business Development Division, to which Mr. Setoyama belongs, has a teamprofessional like Ms. Numata and Mr. Nakayama. However, when a portfolio

wide initiatives aimed at doing so.

of more than 20 specialists who can handle such work. It is very rare to see

company is dealing with a concern, I provide advice from the perspective

Numata: That is a good point. To date, we have primarily hired new graduates,

a fund that can enhance corporate value through the capabilities of itsof what I would do if I was in the same situation, rather than viewing theso the Co-Founder identity was something that just naturally became

internal talent, and this is a major part of JAFCO’s appeal.

matter as someone else’s issue. The same thing can be said about myentrenched through on-the-job training. With the increase in the number

colleagues. To me, this shows how JAFCO has firmly established a cor­of mid-career hires over the past several years, the situation has started toporate culture where employees think and act on their own initiative tochange. We formulated our Purpose in 2022 and have been rolling out various

cooperate when an issue arises with a portfolio company.

initiatives geared toward fostering our corporate culture. I hope that we canIdentity as a Co-FounderNumata: To me, Co-Founder means that we always approach things witha sense of ownership. To that end, it is extremely important that we feel28

draw on such efforts to further deepen understanding of JAFCO’s identity.

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Source of Our Value Creation

Intellectual Capital
Private equity investment is a highly uncertain business, meaning that we have

CASE STUDY 1

seen both investment success and failure over the years. We have systematically

Meeting Bodies for Transmitting Tacit Investment Knowledge

accumulated and shared this wealth of experience, so that our investment pro-Investment decision-making and portfolio company support need to be
determined on a case-by-case basis and are extremely difficult to categorize.
It is therefore imperative that we leverage and flexibly incorporate the experience and knowledge of our investment professionals in decision-making
settings. In each meeting body where discussions and decision-making areconducted pertaining to investment and management involvement at portfolio companies, we share tacit investment knowledge and update this knowledge based on changes in the operating environment.

fessionals are able to leverage the insight from the past in addition to their own
knowledge and experience to enhance the probability of success.
In terms of identifying investment targets, deal-sourcing know-how is shared
among our investment professionals. In addition, past interactions with investment candidates are recorded in our proprietary database, which can be viewed

Investment
Committee

See pages 56 and 57

Portfolio
meetings

See page 62

VA/Exit meetings** These meetings are primarily held by the Structured
Investment Division and expected returns, portfolio
status, and knowledge are shared among members.
VA stands for “Value Adding.”by all employees. Due diligence materials and detailed records of discussion
agenda items at the Investment Committee meetings are also shared with all
employees. All information pertaining to investment deals, including the key
points of focus and decision-making criteria of the Investment Committee,
serves as important intellectual capital for the Company.
In our post-investment value-adding activities, which include business growthand exit support, we constantly pursue the most effective approach to management involvement, and the details are shared on a companywide basis. To date,
we have invested in 4,142 companies and boast an overwhelming number of IPOs
(1,024). The successes and failures we have experienced in this regard enable us
to enhance the probability of success for current and future portfolio companies.
Outside of our investment activities, we have cultivated a wealth of insight into
overall business processes. For example, the know-how on fund establishment
and management that we have accumulated since 1982 is one of our unrivaled
strengths. Our highly experienced members work to acquire fund investors, cen-

CASE STUDY 2

Converting Independently Accumulated Knowledge and Insight
into Explicit Knowledge

Database

We hold numerous meetings with portfolio companies, investors, and investment candidates each year. The operating status and strategic policies ofeach company ascertained through these meetings, as well as the findings
and suggestions of investment professionals, are recorded in our proprietarydatabase. Referencing the latest information on each company and insightfrom past investments enables us to enhance our ability to reproduce success in investment decision-making and portfolio company support.

Information on portfolio
companies and fund investors
Investment
professionals

CASE STUDY 3

Know-How Accumulated through Investment and Exit Due Diligence
Our wide range of decision-making on investments and portfolio company
support is backed by a vast amount of research, analysis, and insight. By
making information on withdrawn deals and deals under due diligence available to all employees, we have established a framework for sharing various
case studies and insights as well as for collecting feedback.

Materials for sharing case studies

tered on business firms and financial institutions. We have put in place highly
transparent reporting systems and have accumulated abundant expertise in
information provision that caters to investor attributes and needs.
In these ways, the value of our intellectual capital is reflected in our ability toforecast issues related to investment activities and provide suggestions for theirsolution. Going forward, we will systematically and proactively utilize our intellectual capital to further enhance our ability to reproduce investment success.

Track record of success and failure
in private equity investments
Cumulative number of
portfolio companies

4,142

Fund establishment/
management expertise
cultivated over the years

Extensive knowledge
based on an unparalleled trackrecord of IPO support

Cumulative funds under management

Total number of IPOs

1,227.8 billion

1,024

¥

Note: All figures are as of the end of March 2023.

29

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Source of Our Value Creation

Social Capital
When pursuing private equity investment, it is important to collaborate closely

CASE STUDY 1

with stakeholders, such as fund investors and portfolio companies. The successAnnual Meetingof portfolio companies leads to enhanced fund performance and enables us to

We hold an annual meeting for investors in the funds we manage. In
addition to reports on fund management, this meeting features presentations by presidents of promising portfolio companies accompanied byinvestment team members. Accordingly, the annual meeting serves as an
excellent opportunity to deepen investors’ understanding of our fundactivities.

return a significant amount of profit back to our fund investors and shareholders.
This in turn boosts the appeal of both our funds as financial instruments and
JAFCO as an investment firm, and leads to higher expectations from our investors
and shareholders, allowing us to raise more risk capital that helps us contributeto the growth of new portfolio companies. We see it as essential to keep forging

Annual meeting

this cycle of growth with our stakeholders, viewing private equity investment as a

CASE STUDY 2

long-term collaborative business supported by the deep relationships with them.

New Business Conference

In addition to funding from fund investors, another significant source of value
is the collaboration between our portfolio companies and other business firms,
including large corporations. Our long-cultivated social capital provides value inthe form of sales channels and business collaborations, which contribute directly
to the growth of our portfolio companies. Our collaborations with business firms,
financial institutions, and other large corporations other than fund investors form
an indispensable network for increasing business and fundraising opportunities
for portfolio companies. Furthermore, we view our interactions with external business partners that support startups and personnel who go on to pursue careers at
startups as an important source of value that accelerates the growth of portfolio
companies. Through our various networks, starting with our network of portfolio
companies, we are introduced to promising investment candidates with highWe planned and operated a new business conference in which over 1,000
people participated, primarily from the divisions responsible for new
business development at major business firms. Through this conference,
we shared examples of initiatives by large corporations to create new
businesses. We also shared examples of our support for new businesscreation and facilitated collaborations between portfolio companies.
CASE STUDY 3

Investment policy

Corporate Venture Capital Seminar
We conduct a corporate venture capital seminar for business firms­interested in collaborating with startups. At this seminar, we sharethe insight and know-how that we have cultivated over the years. Heldonce a month, this seminar contributes to the expansion of the startup
ecosystem.

Investment decision-making
Investment contracts
Value adding

growth potential. In these ways, the networks formed around the startup andprivate equity investment industries are a vital part of our social capital.
To further reinforce such social capital, we regularly hold study sessions andseminars for business firms and other organizations interested in startups, covering topics such as collaboration with portfolio companies and new businessdevelopment. While enhancing our extensive networks, which function as a wellspring of growth for portfolio companies, by establishing contacts and deepening
our trust-based relationships with each stakeholder, we are expanding andstrengthening ecosystems for the future of the private equity market.

Extensive trust-based ­relationships with entrepreneurs
Number of contacts with investment
targets (within the past three years)

7,832

Robust partnerships
with fund investors
Number of investors to date

1,300

Continuous expansion of networkof business firms, etc.
Number of contacts(fiscal year ended March 31, 2023)

8,450

30

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

CFO
MESSAGE

Improving Capital Efficiency and Strengthening Our Financial
Foundation to Enhance Corporate Value and Fuel Perpetual Growth

A Difficult Year for Both the Market and
Our Performance

plunged to ¥3.7 billion (¥12.6 billion in the previous fiscal year)
and success fees decreased to ¥1.0 billion (¥4.5 billion in theprevious fiscal year). In addition, we recorded significant invest-

In the fiscal year ended March 31, 2023, a sense of nervousness

ment loss reserves in the fourth quarter in anticipation of acontinued to prevail over the stock market due to tightening

worsening financial situation and a slumping exit market due tomonetary policies across the globe and greater cautiousness

financial uncertainty in Europe and the United States, stemming

regarding adjustments to monetary policy in Japan. As thefrom the collapse of several U.S. banks in March 2023. As aoutlook for the global economy remained unclear, we faced aresult, our business results were disappointing, with net sales ofdifficult market environment as the number of large-scale IPOs

¥14.1 billion (¥27.7 billion in the previous fiscal year) and ancontinued to decline. As a result of the impact of this environ-ordinary loss of ¥3.0 billion (ordinary income of ¥18.4 billion inment and a slowdown in exits from our portfolio, capital gains

the previous fiscal year).
Although the market environment was difficult during the
fiscal year under review, there were still 10 IPOs in Japan with a

VC-Backed IPOs and JAFCO-Backed IPOs*1

market capitalization of more than ¥20.0 billion—a level we

Left: VC-backed IPOs in Japan
Right: Of which, JAFCO-backed IPOs

target. I believe that we must earnestly reflect on the fact that
we were not able to get involved in the IPOs of these companies.

36
33(Number of companies)

31
11

26
22

6

10

19
10

11

10

5
9

1

2019.36

32020.3

2
1

4

5
4

2021.315

Maintaining and Strengthening Our Financial
Foundation through Balance Sheet Management

7

11

14

4
3

5

1

4

2022.3*2

2023.3

1

1

Hiroaki Matsuda

First price-based market capitalization
Less than ¥10 billion¥10 billion–¥20 billion

Chief Financial Officer*1 VC-backed/JAFCO-backed IPOs: VCs (excluding direct investments by business
firms) holding a 10% or more stake immediately prior to the IPO*2 The number of newly listed companies includes the TSE listing of a portfolio­company of JAFCO Asia.

In charge of Administration

More than ¥20 billion

My most important role as CFO is to build up and maintain arobust financial foundation. The Company conducts its investment activities guided by its determination to continue investing
through good times and bad. However, to continue to invest in
highly volatile unlisted securities even in a slumping exit market,
the Company needs to be constantly supported by a robust
financial foundation.

31Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

CFO MESSAGE

To that end, we emphasize balance sheet management. Due tosurpluses to our shareholders. Guided by this policy, we imple-

the nature of our business, there will be a certain percentage ofmented two rounds of share buybacks totaling ¥50.0 billion andportfolio companies that we will have no choice but to sell at asold about 40% of our shares in Nomura Research Institute.

loss. As such, we make concerted efforts to assess the business

While this series of capital policies has garnered a degree ofsituation at portfolio companies as well as market trends and torecognition from the stock market, we announced the Basic Policy

reflect forecasts for future losses in the balance sheet in a timely

for Enhancing Corporate Value in November 2022, in which weand appropriate manner. At regular meetings held once every

adopted an ROE of between 15% and 20% as a medium- to long-

three months, we confirm the situation at all companies in ourterm target to further improve capital efficiency. As there are many

portfolio, and any significant changes concerning portfolio com-

uncertain factors involved in our business, our cost of shareholders’panies are reported in investment professionals’ meeting records,

equity is generally expected to be higher than the average cost ofwhich are updated daily, and at meetings of the Investment

equity. However, our capital efficiency and profits have not been

Committee and other bodies as necessary. In these ways, we

keeping pace with this higher cost of shareholders’ equity, and I

constantly assess risks to make sure there is no situation in

believe this is a major reason why our price-to-book ratio (P/B ratio)

which the value of our investments is impaired.

has remained below 1.0x. By pursuing profitability and capital effi-

The significant investment loss reserves of ¥5.5 billion recorded

ciency more than ever to achieve our targeted ROE, we will generate

in the fourth quarter were in consideration of the negative impact

returns that consistently exceed the cost of shareholders’ equity

on portfolio companies should the financial situation worsen

and enhance our corporate value over the medium- to long term.

To accomplish that, we must boost the external capital con­tribution ratio and increase the amount of funds raised fromdue to the March 2023 collapse of U.S. banks. The appropriate

external investors. This, of course, is no easy task. We conduct

recording of potential losses in the future encourages us to makefundraising activities about once every three years, and thesebold, proactive investments without fear of failure and helps us

Stabilizing and Expanding Profits

the time. The investment of our own capital in funds has made it

maintain and enhance our investment performance.

Improving ROE to Enhance Corporate Value

activities are greatly impacted by the conditions of the market at

To improve profitability, which is the numerator of ROE, we aim topossible to maintain funds of a certain size and continue invest-

raise the ratio of external capital commitments from its current

ment regardless of market conditions. Going forward, we will

60% to around 80% over the medium- to long term while sys-further accelerate efforts to cultivate new investors in order totematically increasing new fund size in accordance with target

steadily expand the amount of external capital commitments.

Due to a gradual buildup of retained earnings since around 2014,

markets. By doing so, we will be able to gradually increase thereflecting the success of our highly selective, intensive invest-

management fee component of our fund operation fees, which

ment policy since around 2010, and the increase in the share

currently account for 30% of profits (capital gains account for

price of Nomura Research Institute, Ltd., in which we had athe remaining 70%). At the moment, we continue to face a situa-

stake, we had been receiving suggestions from our shareholders

tion where we are unable to cover SG&A expenses with manage-

regarding the Company’s capital efficiency. To address thesement fees, our core income source, and as a result, our profits

To further enhance capital efficiency, we have reduced the level

suggestions, the Board of Directors held repeated discussions on

depend greatly on capital gains. We will therefore seek to expandof the necessary funds by half, to ¥60.0 billion, which is themeasures to improve capital efficiency, and in 2021, we decided­management fees to a level that exceeds SG&A expenses

equivalent of the amount we would invest in funds over three

on a policy to specify the amount of funds needed for continued

over the medium to long term, thereby stabilizing as well as

years. Over the medium to long term, we will gradually reduceinvestment activities (the “necessary funds”) and to return

expanding profits.

this amount even further. As I mentioned, we will increase theReducing Net Assets andMaintaining Financial Soundness32Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

CFO MESSAGE

ratio of external capital contribution from 60% to around 80%

level going forward. Regarding the targeted ¥120.0 billion in net

adhered consistently to the recruitment of new graduates toover the medium to long term. While doing so, we will steadily

assets, this is the lowest possible level required to maintain ourcultivate investment professionals with strong talent. Recently,

reduce cash on hand and increase financial leverage by boosting

financial soundness without becoming insolvent in the unlikely

however, we have also been recruiting mid-career professionals

the fund size in accordance with market expansion and raising

event that we are unable to realize returns on any of our invest-

who have a wide range of experience, including mid-career hires

the amount of external capital contribution. Of the cash wements. Meanwhile, our business involves investing in unlisted

for back-office roles that are not directly involved in investment

receive in the course of these activities over the medium to longsecurities with low liquidity and high volatility, and as such we

activities. As our employee base becomes more diversified, we

term, any amount that exceeds the necessary funds will be pro-will continue to invest our own capital going forward. With thatare working diligently to foster a unique corporate culture andactively allocated to shareholder returns.

said, taking into account what we experienced after the global

instill our Purpose on a companywide basis. Continuous invest-

With regard to our net assets, which primarily comprise cash

financial crisis when capital losses continued for roughly two

ment in human resources allows us to strengthen our organiza-

and deposits and operational investment securities, we aim to

years, we consider the utilization of debt to be an option totional capabilities and boost motivation across the Company

systematically reduce these assets to the ¥120.0 billion level

maintain our financial foundation.

while reducing the cost of capital through lower personnel-

over the medium to long term. As of March 31, 2023, we held

related risks, thereby making significant contributions to corpo-

unlisted operational investment securities of roughly ¥85.0 bil-

Revision to Shareholder Return Policy in December 2022

lion. With our intention to maintain the current level of our own

The Company will change its basic dividend policy from 3% ofinvestment in funds, we do not expect the amount of operational

shareholders’ equity (average of beginning and end of period) toinvestment securities to fluctuate significantly from its current

the greater of 3% of shareholders’ equity (average of beginningand end of period) or 50% of net income.

rate value enhancement.

Fulfilling My Mission as the CFO
to Fuel Perpetual GrowthThe Company will gradually reduce the necessary funds for

Reduction of Net Assets(Billions of yen)
Approx. 190.0

business continuity which is currently around ¥60.0 billion* andSince establishing “Fueling perpetual growth; investing in boldconsider the allocation of funds in excess of that amount tovisions” as our Purpose in February 2023, I have been focusing

shareholder returns, including share buybacks.

heavily on the word “perpetual.” By continuing to invest under all* Amount after deducting interest-bearing debts, accrued taxes, and expected
divided payments at the end of March each fiscal year

circumstances, we reinforce our ability to fuel perpetual growth.



61.2

135.0

95.0

85.0

Enhancing Corporate Value throughSustainability Initiatives
We will also focus on sustainability initiatives to reduce risk andrealize medium- to long-term growth. JAFCO Group’s sustain-

43.5

40.0

35.0

2022.9Medium termLong term(five to six years)(approx. 10 years)

Cash and deposits
Operational investment securities
Nomura Research Institute, Ltd. shares (after tax)

foundation, and my mission as CFO is to maintain and strengthen
this foundation. Going forward, I will continue to support the

120.0

89.0

For that reason, we need to be supported by a robust financial

ability initiatives fall into two categories: the contribution tosustainability through our business and enhancing ESG efforts as
a company. In terms of our own ESG initiatives, we place theutmost priority on recruiting and developing our personnel, who
serve as our greatest management resource. To date, we have

Company’s ability to fuel perpetual growth by promoting efforts
to continuously enhance our corporate value from a financial
perspective.

33

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Human Resource Strategy

Basic Approach
At JAFCO Group, we consider human resources to be the most important management resource for realizing our Purpose andenhancing corporate value. In addition to recruiting and training investment professionals, it is essential that we hire other highly
professional personnel and develop systems and schemes to support employees. While maintaining an unchanging companywide
culture of respecting entrepreneurs and portfolio companies, we will continue to pursue challenges as a Co-Founder by keeping afirm grasp on changes in society.

Aiming to Achieve a High Level of Performance with a
Co-Founder’s Mindset by Developing Strong Individual
Talent and Establishing an Organizational Foundation

Human Resource Strategy for Enhancing Corporate Value
Strengthening our workforce is vital to realizing our goals for growth: achieving our target ROE and improving
fund performance.
Due to the nature of its business, the Company’s growth is heavily dependent on investment professionals

Development ofstrong talent

Establishment ofan organizationalfoundation

Development of strong investment
professionals capable of making
quality investments

Maintenance of a robusto­ rganizational foundation that
supports strong talentand other such individual talent. For this reason, one of our major business challenges is how best to recruitand nurture talented individuals. In addition to the ongoing recruitment of new graduates, it is crucial that we
continue to hire people with broad-ranging experience, skills, and potential in order to secure a diverse groupof investment professionals. Furthermore, we will leverage our unique model for training investment profes­
sionals to nurture strong individual talent who can realize quality investments.
The business environment surrounding the Company and its portfolio companies is undergoing unprecedented change. As such, the development of professional human resources, systems, and schemes that can
support individual talent is essential. Alongside our efforts to hire and train personnel with expertise in various

Fostering and entrenchment of a culture that can preserve our strengths

fields, we are working to establish systems and schemes that allow our employees to continue to be highly
motivated and perform well while maintaining physical and mental health.
An indispensable undertaking for realizing both strong individual talent and an organizational foundation that
supports them is the fostering and permeation of a culture that preserves the Company Group’s strengths.
Leveraging our identity as a Co-Founder, we must foster and promote our long-cultivated culture.
Through these efforts, we will cultivate strong talent and establish a robust organizational foundation to
improve fund performance and enhance corporate value.


Our unique approach todeveloping investment
professionals
Recruitment of diverse­investment professionals aswell as new graduates

Recruitment anddevelopment of professionals
in each domain

See page 38 for details on each division’s role, etc.

Development of systems and schemes that support performance improvement

34Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Human Resource Strategy

Recruiting Diverse
Investment
Professionals

The Investment Division continues to recruit new graduates with the objectiveof securing high-potential personnel. When hiring new employees, we focus on
not only their understanding of our business but also their level of commitment
and how strongly they relate to our Purpose and identity. For this reason, we
employ a multilayered hiring process that involves orientation and internships

JAFCO Group’s
Unique Approach to
Developing
Investment
Professionals

Through years of consistently hiring new graduates, we have accumulated awealth of experience, which is the basis of our model for training junior employees. In this model, each junior employee in the Investment Division is placed
under an instructor who supports and guides them until they become independent. For approximately one month after joining the Company, new graduateswith carefully designed programs as well as screening by the Partners

receive basic training combined with practical programs. Thereafter, new hires

themselves.

mainly undergo on-the-job training, but we also provide occasional off-the-job

At the same time, we are emphasizing the mid-career recruitment of invest-

training to facilitate their early growth. In addition, experienced investment pro-ment professionals. As the needs of society become increasingly diverse, having

fessionals provide mentoring support to mid-level employees to develop stronger

human resources with distinct backgrounds that can utilize their experience andtalent and improve their performance. Moreover, beyond providing individual

skills to demonstrate their strong talent will enable our entire organization to

support in the form of instructors and mentors, we hold a quarterly meeting tomore effectively respond to changes in the business environment and values,

discuss the development of investment professionals throughout the organization.

thereby leading to improved performance.

While building on the experience and expertise gained through implementing our

The Structured Investment Division, which has hitherto focused on hiring

instructor-based program, we have made it a priority to evolve our investment

professional talent that can make an immediate contribution to the Company,

professional training system by implementing new measures in response to issues

will set forth a policy of hiring and training young talent. In such efforts, we willthat arise.

also capitalize on our strengths and experience as a venture capital firm with aunique track record of hiring new graduates.

We actively recruit and develop professional human resources, regardless
Recruiting andof gender, age, or nationality, for the Business Development Division, Fund
Developing
Professional Human Management Division, and Administration Division. When providing support to ourportfolio companies, the type of support required differs depending on the growth
Resources in Eachstage of the company in question. Furthermore, we possess specialists in various
Area of Operation

Mid-career hires among our investment professionals(venture and buyout investments)
(%)

41.3

38.8

33.3
25.5

areas, such as customer acquisition, recruitment, and development of back-office
functions, and have established a system to provide support tailored to each portfolio company.

27.9

The Fund Management Division is responsible for securing funds for our businessactivity by raising and managing risk capital on an ongoing basis while responding
to changes in the business environment. The division recruits and trains professional personnel who inherit and develop wide-ranging know-how, including maintaining relationships with existing investors. The Administration Division also hires

2019.32020.32021.32022.32023.3professionals with a wealth of knowledge and experience to ensure continued highperformance while responding to changes in social needs.

35Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Human Resource Strategy

MESSAGEWe are engaged in ongoing efforts to enable diverse human resources to work
Establishingwith vitality and enthusiasm, including a flextime system, a shared-desk system,
Systems andSchemes to Support the promotion of remote working, and encouragement of side jobs. Since prior to
the COVID-19 pandemic, the Company has worked to develop and improve its IT
Performance

Promoting Diversity to Build
a Stronger Workforce and Organization

infrastructure and go paperless. The system combining flextime and remote work
allows us to maintain business continuity and support performance at all times.
Viewing good physical and mental health as essential for each employee to

Yuichiro Araki

fulfill their potential, we are implementing various health-related measures. In

Group Leader, HR Planning Group

cooperation with industrial physicians and public health nurses, we conduct

Administration Divisionindividual interviews, share health-related information, and aim to maintain a
100% health checkup rate by proactively encouraging employees to undergo
health checkups without delay as well as providing them with follow-up support. As of April 2023, the Company has received Silver certification from theIt goes without saying that people are a key manage-

the situation at hand, thereby strengthening the organi-ment resource in our business, and we thus recognize

zation as well as the individual.

that the HR Planning Group has an extremely important

Against this backdrop, the HR Planning Group is

responsibility to implement an effective human resource

required to design and elaborately implement an

strategy. Under the mission of developing the workforce

approach to hiring highly talented personnel and aand organization necessary to realize the Company’s

screening process for ensuring quality selection, andIn terms of personnel systems, we have established childcare and nursing

management and business strategies (mainly invest-

to inspire suitable candidates to join the Company.

care leave systems, and we encourage male employees to take childcare leavement strategies), the HR Planning Group is charged with

However, the investment environment is constantly

and paternity leave, which is a prominent issue in Japan. We are building a trackoverseeing recruitment, onboarding, growth support,changing, and entrepreneurs are becoming increasingly

record of employees taking long-term childcare leave.

organizational development, and all other aspects ofdiverse in nature. So, even if we implement a model forthis process.

recruiting high performers, it is not always possible to

National Federation of Health Insurance Societies in recognition of its excellent
health promotion efforts and it is continuing to promote various health management initiatives.

Specifically, we devote much effort to recruiting
human resources, as this is the starting point for build-

Fostering andInstilling a Culture
That Preserves
Our Strengths

reproduce the uniform levels of talent, which increases
the difficulty of developing a hiring strategy.

ing an organization. However, hiring investment profes-

In this message, I have touched on some of thesionals is exceptionally difficult. There are numerous

difficulties we face in carrying out our human resource

indispensable skills and abilities required to become amission. It is self-evident that the task of developing

venture capitalist. Intellectual capacity alone encom-

our workforce and organization, which are the sources

passes a wide range of skills, such as the ability to digof our competitiveness, is not easy precisely because it

deeper into issues to gain insight, perceive matters

is so important. We will continue to approach our mis-in recent years have brought together employees with diverse backgrounds whofrom various perspectives, interpret data, and expand

sion with a broad perspective and strong will, andhave demonstrated their individual abilities, the reaffirmation and sharing of our

one’s imagination.

demonstrate our commitment to recruiting diverse

Since its founding in 1973, JAFCO Group has operated with the mindset of anindustry leader. Since the formulation of our Purpose of “Fueling perpetual growth;
investing in bold visions” in February 2023, we have engaged in ongoing efforts tofoster a culture that instills the Company’s enduring strengths among employees.
While the hiring of new graduates and the active recruitment of mid-career hires

strengths and culture will give rise to even greater synergistic benefits. ThroughKnown by some as the “mixed martial artists of thevarious workshops and activities with alumni, we are driving forward numerous

business world,” venture capitalists are required notwhich is key not only to adjusting to the investment

initiatives to help all employees perform at a high level by exposing them to andonly to have intellectual and other fundamental skills

environment but also to staying ahead of the times.

reaffirming the values and strengths that we have cultivated over the past 50 years.

but also to be able to exercise leadership according tohuman resources to promote organizational diversity,

36Section- 01   Section- 02   SectionSection- 03
03   Section- 04   Section- 05  INTEGRATED REPORT 2023

38 Business Process
39 Venture Investment
41 Buyout Investment
43 Business Development
45 Fund Management
47 Overseas Strategy

Section- 03

Business Strategies

37Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Main Activity

Business Process

Features of JAFCO's Business Structure
The Fund Management Division plays the central role in fundraising for domestic flagship funds in collaboration with the Investment Division, the Structured Investment Division, and the Business
Development Division.
We form the optimal team for each investment and provide comprehensive growth support from the deal-sourcing stage to exit.
For enhancing the corporate value of portfolio companies, a specialist team is formed for each company to provide systematic support according to the growth stage, ranging from recruitment andsales and marketing support to IPO preparation.

Fund Establishment

Deal Sourcing

Investment

Value Adding

Exit

In order to secure stable investment funds on acontinuous basis, it is essential not only to retain
investments from existing investors, who areprimarily financial institutions and business
firms, but also to attract new investors. Private
equity investment takes around five to 10 years
to realize returns. Because of this, we believe
that, in addition to prioritizing fund performance,
it is important to build trust with fund investors
through highly transparent fund management,
information provision that caters to the needs ofindividual investors, and detailed communication
regarding the social significance of private
equity investment.

With private equity investments, high-quality
deal sourcing creates reproducible success. The
wellspring of our deal-sourcing capabilities isthe experience of our investment professionals,
who have cultivated the ability to ascertain
future business potential through their interactions with numerous entrepreneurs. At JAFCO,
every individual from Partners to new graduate
hires meets with a broad range of candidate
portfolio companies, gaining valuable experienceand insight through the roughly 3,000 deals wesource on an annual basis. Through these efforts
by our employees, we have built up a proprietarydatabase and network of entrepreneurs. We
achieve repeated success by fully leveraging
these strengths to carefully select companies
to invest in.

Because many of the unlisted companies in which
we invest do not have the necessary businessfoundations in place, the main focus of our corporate value assessments is on identifying businesspotential and measuring management quality. To
determine business feasibility, we verify key factors
such as market growth potential, competitivenessand uniqueness of products and services, and theinnovativeness of technology. In recent years, wehave also been conducting screening on growthpotential and risks from an ESG standpoint. Afterour investment professionals have held repeated­dialogue with the management of a candidate
company, our team of specialists dedicated toinvestment evaluation conducts an assessment of
the company’s business potential and management
quality. When this process is complete, we decide
whether or not to invest based on approval at
Investment Committee meeting.

In venture investments, our investment professionals who are in charge of portfolio companies
pursue various initiatives with a sense of ownership, envisioning growth scenarios together withentrepreneurs. Furthermore, our team of business development specialists work together toprovide support essential for the growth of
portfolio companies, namely in the areas ofrecruitment, sales and marketing, back-officedevelopment, and IPO preparation. In buyout
investment, we seek to accelerate businessgrowth by promoting post-merger integration(PMI) from the standpoint of substantive management. Our network of fund investors, portfolio companies, and business firms helps
underpin the corporate value enhancement of
portfolio companies, and we work to strengthen
this network on an ongoing basis.

At the exit stage, we examine approaches thatrealize both portfolio company growth and highreturns for fund investors. In the case of venture
investment, the majority of portfolio companies
aim for an IPO. To that end, our team of specialists who provide support for IPO preparation
assist portfolio companies while ascertaining
various changes in the market environment.
When selecting an exit strategy other than an
IPO, because we hold a fairly large stake under
our policy of highly selective, intensive investment, we are able to design an optimal exit,
including an M&A, for a portfolio company,
based on agreement with its management team.

 utstanding volume of interaction withO
entrepreneurs and companiesJ udgment and insight from Partners andexperienced investment professionals

 ormulation of exit strategies that fullyFleverage potential of portfolio companies

Information on investment candidates
accumulated through past deal-sourcing
activities

Investment decisions based on the­con­sensus of all Partners

 onsistent management involvement, fromC
investment and value adding to exit, byforming the optimal team for each deal

JAFCO Strengths

Attractiveness of funds as financial
instruments that ensure high performancein tandem with the growth of portfolio
companies
Discipline and transparency of management

Relevant
Divisions
Information
provision and communication
tailored to the individual needs of investors(FY March 2023)

Quantitative
Information38

 upport by experts specializing in humanS
resources, back-office functions, marketing,and more according to the growth stage of
portfolio companies

IPO preparation support leveraging experience from more than 1,000 IPOs

Investment Division (Venture Investment)

P39–40

Structured Investment Division (Buyout Investment)

P41–42Business Development Division

P43–44

Fund Management Division

P45–46

Capital commitments to domestic funds¥289.4 billion

3,005

Number of investors

269

Number of first contacts with domestic
companies

Note: Total of SV4 to SV7(As of March 31, 2023)

Amount/number of new investments

Number of referrals to customers

Venture investment ¥9.1 billion / 22 companies

5,119

Buyout investment ¥12.4 billion / 3 companies

Balance of domestic unlisted securities¥129.9 billion / 167 companies

Number of business meetings conducted

Capital gains on and IPOs by domestic portfolio
companies
Capital gains: ¥7.5 billion / IPOs: 4 companies

825
Involvement as the main division

Partial involvement

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

VENTUREINVESTMENT
1

Mission and Social Role of the Investment Division
2

3

4

5

6

Yutaro Saka

1 	Partner2	Mizuki Takahara

	General Manager of theWest Japan Branch, Partner3

	Keisuke Miyoshi
President & CEO, Partner

Keisuke Miyoshi

4PartnerPresident & CEO
Partner	Atsushi Fujii

5	Tomotake Kitazawa

Venture investment has been the Company’s core business since its establishment, and we have continued topursue the creation of new industries in partnership with entrepreneurs. To date, JAFCO has invested in 4,142
companies on a companywide basis and has helped 1,024 companies to go public.
As we execute venture investment, we place the most value on continuing to invest at all times and ensuring the
expansion of the private equity market. The continuation and expansion of venture investments lead to an increasein the number of entrepreneurs who take on the challenge of responding to social changes, thereby creating anddeveloping industries that will forge a more prosperous society. We believe that consistent investment, under bothfavorable and challenging market conditions, will help bring about social changes and fuel perpetual growth thatinspires bold visions.
Guided by our Mission to commit to new business creation and jointly shape the future, we will continue topursue new challenges together with entrepreneurs as we strive to contribute to social progress.

Partner6

	Shozo Isaka
PartnerMarket Environment» Increase in and diversification of entrepreneurs and fund providers in the Japanese startup ecosystem» Short-term contraction and fluctuation in the domestic IPO market» Enhancement of “people, money, and things” pertaining to startups
Medium- to Long-Term Targets and KPIs
» Average ROI of 2.5x or more
Medium- to Long-Term Strategies and Direction of Initiatives» Identify potential seed investments involving entrepreneurs at the pre- and post-launch stages» Prepare an exit approach not limited to conventional IPOs
» Promote human resource training directed toward the ongoing development of top investment
professionals

Awareness of the Market Environment Over the Medium to Long Term
Over the past ten years, the operating environment for startups has become more fertile, exemplified in particularby the growth and diversification of the startup community in Japan. A rising number of serial entrepreneurs andhigh-level professionals are launching their own companies, and it is no longer unusual for employees of large
companies to switch over and join startups.
Fund providers who support entrepreneurs and startup companies are also increasing in number and becoming
more diverse. It is therefore important that we promote the business creation and growth of our portfolio companies in collaboration with other fund providers. Another recent change in the operating environment has been thedevelopment of wider infrastructure for external support, including collaboration in business launches via investment by business firms as well as the expansion of government-backed support systems and budgets for startups.
This kind of infrastructure is expected to continue to grow.
Various other changes have been taking place in recent times, such as the rise of geopolitical risks and rapidly
progressing climate change and digitalization. These changes, however, present promising business opportunities
for startups. While closely observing the current contraction in the IPO market, we will be even more selective inour screening process amid the ongoing increase in investment opportunities over the long term. At the same time,
we will collaborate with each of our stakeholders in an effort to create new industries and expand existing ones.

Internal Resources and Strengths» Know-how for ascertaining market and business potential backed by 50 years of investment experience» External network and human resources in the startup market» Unique investment professional development model cultivated through the ongoing recruitment of new
graduates

Strategies for Achieving Targets and Direction of Initiatives
In terms of our investment performance, we are working daily to achieve our target of an average ROI of 2.5x or more.
Our investment performance is the result of the growth of our portfolio companies. It is also an important performanceindicator for investors, as we strive to provide a strong fund performance and increase the supply of risk capital. To

39

INTEGRATED REPORT 2023

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

VENTURE INVESTMENT
enhance our investment performance, we will further evolve our investment policy of “highly selective, intensive
investment” and promote a wider exit approach that incorporates not only conventional IPOs but also trade sales.
“Highly selective, intensive investment” is the core policy for our investment activities, allowing us to continue
to invest in and create new businesses even under poor market conditions. This policy emphasizes being highly
selective, meaning that we thoroughly assess the numerous corporations we come in contact with through our
extensive deal-sourcing activities. The policy also values intensiveness, meaning that we concentrate as many
management resources as needed after acquiring an influential stake in a corporation.
Our highly selective investment focuses on ascertaining domains with a potential of drastic change from among
the diverse business opportunities being created by social change. We have recently expanded our deal-sourcing
targets to include not only companies and entrepreneurs in the seed and early stages but also those in the startup
preparation phase. This allows us to become involved in companies with higher growth potential as the lead investor at an early stage.
With our intensive investment, we will continue to provide our carefully selected portfolio companies with all
the resources they need to ensure the growth of their businesses. We work with the Business Development
Division to provide the functions essential to all portfolio companies, including support for business development, customer acquisition, recruitment, and back-office structuring. We also make additional investments on an
ongoing basis to accelerate business growth and reduce downside risks when necessary, thereby committing tothorough and deep involvement in our portfolio companies.
To respond flexibly to market fluctuations and other changes and to ensure a high investment performance, weare promoting exit approaches that are not limited to IPOs. Generally, when we aim for an IPO it tends to take agreat deal of time before reaching an exit. While maintaining our respect for the ambitions of entrepreneurs andthe growth potential of their businesses, we believe that examining M&As and capital alliances aimed at enhancing social impact will lead to a higher ROI. Accordingly, we are working with other divisions to set up schemes fora more diverse exit approach.
We must strengthen our personnel and organization, as they represent the foundation of our investment­activities. Recently, in addition to Partners, we have established the new position of Chief Capitalist, thereby
putting in place a structure for nurturing investment professionals who can lead investment projects on an ongoing basis. While also continuing to pursue new graduate hires, on whom we have focused our human resources
development, we will increase the number of work-ready investment professionals with expertise through midcareer hires. Furthermore, we aim to swiftly develop investment professionals that can play an active role froman early stage by standardizing our human resource development models aimed at accelerating the growth of ourdiverse personnel and bolstering our organizational capabilities.
We have committed ourselves to identifying new business opportunities and becoming involved in the management of our portfolio companies up through exit by sharing an entrepreneurial perspective and vision. Maintaining
our approach as a Co-Founder, we will seek to establish contacts with startups from an even earlier stage andfirmly commit to achieving growth through deep management involvement after investment. While we move forward with efforts to enhance our investment performance, such as those mentioned above, the Investment
Division will systematically expand the fund size and strengthen its external fundraising capabilities.

Internal Resources and Strengths Supporting Our Strategies
We have cultivated vast insight into ascertaining market and business growth potential, cultivated over our
50 years of investment experience, and this insight serves as the lynchpin for enhancing our investment performance. Starting in the era when venture capital companies did not exist in Japan, we have been building an
investment model that caters to the needs of each generation. Throughout this process, we have cultivated ourcurrent “highly selective, intensive investment” policy, which focuses on being the lead investor and proactively
responding to market ups and downs. This policy is the wellspring of our value, helping us refine the assessment
capabilities of our investment professionals through direct involvement in numerous business opportunities aswell as cultivate crucial insight through active involvement in the business growth of our portfolio companies.
Another major strength of the Company is its vast network and human resources built up over many yearsof activity in the startup market. In addition to expanding contacts with investment candidates from an earlystage, we contribute to the resolution of post-investment business issues, including personnel recruitment
and customer acquisition.
In addition, our investment professional development model based on many years of experience in hiring new
graduates is the source of our strength. An environment in which talent with the necessary mindset and potential skills can achieve investment success by accumulating experience while gaining internal insights serves as
the core that enables us to continue to perform at a high level.
Deal Sourcing for Achieving Highly Selective, Intensive Investment
Our more than 40 investment professionals aim to realize repeat successes
through a process of identifying investment candidates by conducting quality
deal sourcing and thinking through future business potential.
Number offirst contacts

3,005 companies
Referrals from management,
conference and paper research,overseas case studies, media,
angel investors and VC firms, andthe startup community
Investment professionals

41

Partner involvement /due diligence216 companies

Carefulselection

Thorough due diligence
Formation of teams for each deal

New investments
Carefulselection

22 companies

Partners

6
Continuous contact with several hundred startups
Organizational efforts to avoid overlooking promising startups
from the seed stage

Notes 1. Numbers of companies indicate the total number for the fiscal year ended March 31, 2023. Numbers of persons are as of April 1, 2023.
2. The number of companies and the number of investment professionals are for venture investment only.

40Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

BUYOUTINVESTMENT

Mission and Social Role of the Structured Investment Division
1

2

3

4

Keisuke Aoyama

1 	Managing Director
2	Ko Minamikurosawa

	General Manager ofStructured Investment
DivisionManaging Director
Partner

Ko Minamikurosawa

3

Managing Director

General Manager ofStructured Investment Division	Hirogi Nakayama

4	Masataka Kobayashi

Managing Director

Managing Director

Buyout investment refers to a type of investment in which we take control of management of a portfolio company
by acquiring more than 50% of equity shares and seek to increase corporate value by reviewing management
strategies and implementing various operational improvements.
Backed by its 50 years of experience and track record as a venture capital company, JAFCO’s mission is to“commit to new business creation and jointly shape the future.” Our Structured Investment Division, which wasestablished in 1998 to conduct buyout investments, has been addressing business succession-related issues headon. Our theme is a commitment to the regrowth of companies through second starts to jointly shape the future. Asof the fiscal year ended March 31, 2023, we have invested in a total of 55 companies, of which 39 have made exits.
Our division seeks to create new growth for maturing companies beyond the corporate lifecycle of establishment, growth, maturation, and decline. We also help transform industrial structures by promoting corporate rejuvenation. By promoting these initiatives through our private equity investment function of channeling risk capital,
we hope to help Japan break free from its economic stagnation that has persisted for nearly 30 years.

Partner

Awareness of the Market Environment Over the Medium to Long Term
Market Environment» Expansion in M&A market due to aging of business owners and business succession difficulties at smalland medium-sized enterprises (SMEs)» Increase in number of investment companies and private equity funds involved in business successionrelated M&As
Medium- to Long-Term Targets and KPIs
» IRR of 20% or more
» Average ROI of 2.5x or more
Medium- to Long-Term Strategies and Direction of Initiatives» Invest in deals involving the succession of small- and medium-sized growth businesses and medium-sizedcompanies generating sustainable cash flows» Invest in startups with positive cash flows (venture buyouts)» Enhance corporate value through post-merger integration (PMI) that leverages our venture capital insightand networks
Internal Resources and Strengths» Personnel with diverse expertise and insight who can maximize the corporate value of portfolio companies» Optimized team structure that provides comprehensive support from deal-sourcing to exit
» Personnel development cycle that generates a growth curve in line with PMI and exits of portfolio companies

M&As have also continued on an upward trend. In addition to a steady flow of business succession deals against
a backdrop of aging of upper management and business succession issues at SMEs, we have also seen steadycarve-out deals involving large corporations in line with their digital transformation and management reform
efforts. Although the number of M&As was adversely impacted by the COVID-19 pandemic in 2020, the numberof domestic M&As continued to grow, leading to a recovery in the number of overall M&As in 2021 and a steadyincrease from then on. As the impacts of demographic change are likely to increase going forward, we believethat there will be an even greater need for business succession-related M&As. Accordingly, in 2023 we expectthat the market for business succession-related M&As will continue to remain strong.
While the main buyers in M&As have conventionally been business firms, in recent years a growing number ofinvestment companies and private equity funds that support SMEs through business succession-related M&As
have been established. Over the 25 years since the beginning of the private equity market in Japan, the understanding and reception of private equity funds by business managers have increased greatly. As a result, the private
equity market has remained on a long-term growth trend, alongside the steady expansion of the M&A market.
Meanwhile, if we look at the size of the private equity market as a percentage of GDP, Japan’s private equity
market is still relatively small compared with those of other advanced economies, and roughly only a quarter thesize of the market in the United States. This is primarily because private equity funds only account for a small
percentage of M&A investors in Japan and the overall number of M&As is lower than in many other countries.
However, this also means that the private equity market has the potential for significant growth.
Based on these forecasts of the market environment, our division will continue to allocate management
resources to further expanding buyout investment focused on corporate growth.

41Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

BUYOUT INVESTMENT
Strategies for Achieving Targets and Direction of Initiatives
Our division strives to enhance the corporate value of portfolio companies to achieve IRR of 20% or more
and an average ROI of 2.5x or more. Our most important task, in common with the Investment Division, is tomaximize investment performance by rigorously screening candidates with significant growth potential andimplementing a broad range of measures after investment. While steadily securing and examining roughly
200 potential deals each year, we aim to invest in three or four deals per year.
To enhance investment performance, we place importance on our ability to identify portfolio companies
with high growth potential as well as our PMI initiatives that fully leverage solutions unique to a venture capitalcompany. The primary targets of our investments are small- and medium-sized business succession deals
with growth potential and an enterprise value ranging from several billion yen to 20 billion yen, and unlisted
medium-sized companies where a certain level of sustainable cash flows can be expected. JAFCO is uniquein that we also are involved in venture buyouts. By acquiring startup and early-stage companies with positive
cash flows and promoting value-adding initiatives that we have cultivated through venture investment, weseek to enhance their corporate value. We sometimes use leverage through acquisition loans or make fullequity investments without using acquisition loans.
Although we have not defined specific industries as the targets of our investments, we aim to invest incompanies with the following features:  1. Companies that possess competitive brands, intellectual property, networks, and operational know-how  2. Companies that are starting to build a sizable position in growing markets

track record in the Investment Division. While other private equity funds operate on an individual task basis,
we form a team of three or four people per investment, which carries out everything from sourcing, investment
scheme planning, and negotiations with sellers to investment execution, value adding, and exit.
Additionally, our division members are stationed part-time at the offices of our portfolio companies for atleast six months to two years after investment to maximize corporate value. As there is a major need for close
communication with the management and employees of portfolio companies to make firm commitments toachieving business growth, we emphasize a comprehensive support style where members are stationed at
portfolio companies part-time, rather than providing support on a specific work basis.
This comprehensive support style provides many benefits. For example, it fosters aspiration and a strong
commitment to supporting the portfolio companies that stationed members have identified. It also allows themembers to gain a deep understanding of the business and technology of the portfolio companies based on
the “Three Realities Principle,”* and it helps us provide portfolio companies with new perspectives and ideas
consistently. We work alongside the management and employees of portfolio companies up to exit via an IPO
or M&A based on deep trust-based relationships that are built by overcoming hardships and achieving thebusiness plans formulated at the time of investment.
Through a series of close collaborations, we promote our members’ accelerating growth, while at the sametime leveraging the experience they gain through PMI and exit to improve the quality of their deal-sourcing andinvestment capabilities. We believe that replicating this cycle of growth for our members is the source of ourvalue that leads to higher fund performance.
* The Three Realities Principle refers to an approach to resolving issues by focusing on three realities: the actual place, the actual product, and theactual situation.

  3. Companies that have already established a strong position in a niche market  4. Companies with the potential for dynamic growth through the promotion of digital transformation  5. Companies that can roll out products and services across the globe  6. Companies that have the potential to grow by leveraging JAFCO’s resources

After investment, we promote corporate growth through initiatives that draw on our unique strengths as aventure capital company. These initiatives include expanding sales channels and boosting sales through theuse of our networks, as well as utilizing the IT technologies and solutions of our Investment Division’s portfolio
companies in PMI. In addition to improving the profitability of portfolio companies by making full use of cuttingedge solutions for enhancing the efficiency of advertising, marketing, and operating activities, we also work toincrease the business scale of certain portfolio companies through the acquisition of similar companies.

Internal Resources and Strengths Supporting Our Strategies
The Structured Investment Division is comprised of members who have gained experience at financial institutions, private equity funds, and consulting firms, among others, in addition to those who have built a proven

Promoting PMI for a Second Start by Leveraging JAFCO’s Strengths
Sourcing

Execution

PMI

Exit

JAFCO’s approach to PMI after buyout investment

PMI Style embers are stationedM
part-time at portfolio companies for about six months
to two years after investmentM embers continually provide
new perspectives and ideas
based on a deeper understanding of the portfolio
company’s business andtechnology, with high aspiration and strong commitment

Management
strategyMarketing

Finance

Operations

Administration

Branding

Active use of technology / Digital transformation solutions
JAFCO Business Development Division

JAFCO’s Network usiness development teams established in
B
Japan, North America, and Asia, dedicated tovalue-adding activities
Provision of expertise for enhancing management as well as support for cultivation of sales
channels, joint development of IoT businesses,
M&As and business alliances, and global
expansion

 xtensive network of portfolio companies, fundE
investors, and others formed through businessactivities spanning roughly half a century
Support for enhancing customer referrals,
business operations, and service value by
leveraging our diverse networks that range fromcutting-edge startups to large corporations anduniversities

42Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

BUSINESSDEVELOPMENT

Naoki Sato
Corporate Officer
In charge of Business Development
Partner (SV6)

Mission and Social Role of the Business Development Division
The Business Development Division provides portfolio companies with the support they need to enhance theircorporate value, in accordance with their growth stage. We assist startups whose businesses are at the conceptual stage with recruiting human resources to accompany management, developing products and services,increasing their brand recognition, and expanding their sales channels, thereby helping them accelerate thelaunch of actual businesses. After these companies have reached the commercialization stage, we help them
identify business partners, establish administrative structures, and prepare for listing.
Customer acquisition (sales and marketing), human resources (recruitment, professional training, and organizational development), and back-office operations (administrative operations/systemization and IPO support)
are all necessary for any portfolio company, no matter what growth stage they are at. To this end, the Business
Development Division comprises a team of specialists in each area (a total of 14 as of April 1, 2023) who workside by side with portfolio companies to help them secure these resources.
We believe that our mission includes building ecosystems around startup companies and expanding thestartup market. Guided by this mission, we promote collaboration with large corporations to create new businesses and communicate the appeal of investment in startups. We also work proactively to expand the overall
startup community and draw management resources of “people, money, and things” into the startup market. We
undertake such endeavors daily, with the firm belief that these resources will help facilitate the overall growthof startup companies, including those in our portfolio.

Market Environment» Intensifying competitive environment in line with the expansion of the domestic startup market» Growing need for increasing “people, money, and things” involved in startups and for sustainability
Medium- to Long-Term Targets and KPIs
» Average ROI of 2.5x or more
Medium- to Long-Term Strategies and Direction of Initiatives» Enhance corporate value of portfolio companies by offering customer acquisition, human resource, andback-office support» Increase business success rate through support for strengthening governance and risk assessment» Promote conferences and community operations aimed at enhancing the ecosystems around portfolio
companies» Strengthen our capabilities for responding to the needs for creating innovation at large companies and theentrepreneurial needs of individuals
Internal Resources and Strengths» Understanding of the key ingredients for startup success, focusing on a highly reproducible roadmap­tailor-made with the entrepreneur in mind, and focused on boosting corporate value with extensive
IPO experience and know-how to portfolio companies for boosting corporate value and achieving IPOs
» Robust network of startup companies and large corporations built up through many years of investment
experience

Awareness of the Market Environment Over the Medium to Long Term
The venture investment market in Japan is on an upward trend, and with this market expansion has come anincrease in competitors, including government-backed venture capital firms (VCs) and VCs affiliated with financial institutions and universities, in addition to independent VCs similar to the Company Group. There are alsosituations where major companies, primarily, form corporate venture capital (CVC) funds, leveraging their capital
to invest in and support startup companies.
In such a market environment, our unique efforts to provide portfolio companies with support catered to their
growth stage are vital to differentiating the Company Group from other players in the market. Furthermore, withthe rise in awareness of sustainability in recent years, the number of startup companies seeking to resolve
social issues has increased. Given the context, we have been evaluating business potential based on risks
and social needs from the perspective of ESG and the SDGs in our efforts to identify promising candidates
for investment.
We believe that focusing on both bolstering governance within our investment activities and working toenhance the sustainability of our portfolio companies enables us to maximize the corporate value of our­portfolio companies and outdo other companies in fund performance.

43Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

BUSINESS DEVELOPMENT
Strategies for Achieving Targets and Direction of Initiatives

Internal Resources and Strengths Supporting Our Strategies

To realize the Company Group’s investment performance target of an ROI of 2.5x or more, our division will pursue
initiatives that contribute directly to the enhancement of our portfolio companies’ corporate value. We will also
work to expand the ecosystems that underpin the growth of the startup market.
With regard to enhancing the corporate value of our portfolio companies, we will step up efforts to support
them with customer acquisition (sales and marketing), human resources (recruitment, professional training, andorganizational development), and back-office operations (administrative operations/systemization and support
for listing), which are all necessary for any portfolio company.
For customer acquisition, we facilitate business matching between portfolio companies and primarily large
corporations to increase the success rates of business negotiations and closings. Concerning human resources,
we offer support focused on the recruitment of essential but hard-to-fill personnel for startup companies, suchas C-level executives and engineers. At the same time, we work to resolve common organizational issues thatarise in the course of implementing new initiatives, including organizational development and upper management
coaching, by providing case studies and other support for business growth. In the establishment of back-office
operations and IPO support, our staff of certified public accountants and tax accountants assist in setting up
systems and various other operations.
We believe that strengthening the governance of portfolio companies in a way that relates directly to maximizing
the corporate value and assessing the risks of investment candidates are just as important as expanding theirbusinesses. To that end, we are striving to enhance the accuracy of our evaluation in collaboration with theInvestment Division.
Additionally, we are reinforcing our network of large corporations, primarily business firms that could potentially become our fund investors as well as customers, business alliance partners, and exit routes (buyers) of ourportfolio companies, as we work to build a mechanism that continuously enhances the corporate value of portfolio companies. In addition to conferences and community operations aimed at building ecosystems to resolve
issues across the market, we are turning our attention toward innovation issues at large companies to contributeto the development of startups and the creation of new businesses in Japan. We will also expand the operationof our Career Academy, which targets individuals who are interested in startups, as part of our efforts to lay thefoundation for increasing public awareness of startups.
The specialists that comprise our division and their high level of expertise are what underpin these kinds ofinitiatives. Consisting of members involved in the Company’s investment activities since being hired as new graduates as well as expert mid-career hires, our specialist staff aim to maximize the value of our portfolio companies, with a focus on sales and marketing, human resources, and back-office functions. Guided by this aim, these
specialists work together to build a structure for accelerating portfolio company support with the help of externalorganizations as needed.
In our efforts to enhance the corporate value of our portfolio companies, we do not solely rely on the Company
Group’s resources. While making concerted efforts to increase the probability of success for our portfolio companies, we will proactively expand the ecosystems around them by actively pursuing collaborations with external
specialists in areas where we cannot fully capitalize on our strengths.

The foundation for enhancing our investment performance is our know-how in guiding startups to success.
This know-how has been cultivated through our involvement with 4,142 portfolio companies and IPO support
for 1,024 companies. We have developed various case studies and insights that can be utilized to ensure thesuccess of startups, including conditions for hiring C-level executives, organization-building based on businesslines and growth stages, and collaboration with business firms geared toward sales channel expansion and­business growth.
The explicit and tacit knowledge built up through our over 20-year track record of providing support hasenabled us to cultivate a highly effective frontline presence that many entrepreneurs can relate to, as well as theability to reproduce success that provides hints to boost the probability of success for portfolio companies andinvestors, who are constantly exposed to the risk of failure. When working closely with portfolio companies, theCompany’s investment professionals and the members of our division place greatest emphasis on this frontline
presence and replicability.
Another important source of our value is our network of startup companies, including former portfolio companies, and large corporations. In addition to the Company’s ongoing solo involvement in the management of portfolio
companies and other startups, we will continue to strengthen collaboration with the broad range of stakeholders
involved in startups, as we believe that it is important to foster the overall growth of the startup market.
Track Record in Portfolio Company Support That Underpins the Enhancement of Corporate Value
We make a firm commitment to addressing the major issues of unlisted companies. We have been strengthening ourrecruitment, customer acquisition, and back-office support structure year after year to contribute to the accelerated
growth of their businesses.
Most important issues for
portfolio companies

Recruitment

Customer acquisition(sales and marketing)

Back-officedevelopment

Details of support

Results for FY March 2023

C-level and other executive referrals
Organizational development consulting

Recruited

Support for lead generation
Tie-up arrangements
Proof of concept (PoC) deal referrals

Business matching

IPO consulting
Support for establishing administrative divisions
Support for tool selection

IPO consulting

37 people
825 cases

32 companies

44Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

FUND
MANAGEMENT

Sueko Matsumoto
Corporate Officer
In charge of Fund Management and Administration

Market Environment» Decline in growth investments by overseas investors due to tightening monetary policies, leading to thedownsizing of IPOs in Japan

Mission and Social Role of the Fund Management Division
The Fund Management Division raises capital for investment and provides investor support, covering everythingfrom the formation of and fundraising for JAFCO-managed partnerships (funds) to fund management and reporting. While there are currently a large number of private equity investment funds in Japan, the origin of such funds
in Japan dates back to 1982, when the Company established the first venture capital fund under Japanese law.
Since then, there have been many changes in the investment environment and relevant laws and regulations.
Amid these changes, we have sought to create a vision for the ideal form of private equity investment funds
and have established a management structure in coordination with relevant ministries and agencies.
The performance of private equity investment funds hinges greatly on the management capabilities of fundmanagers. Furthermore, it takes several years before investment results can be confirmed. To secure stable
fundraising, it is extremely important that investors have a thorough understanding of the nature and significanceof investments in advance. For that reason, after a fund launch, we provide information regularly about suchmatters as overall fund performance and the status of portfolio companies. By consistently engaging in these
activities both when funds are performing well and when they are not, we have helped to provide risk capital tostartups and unlisted companies.
The social role of private equity investment funds is to raise risk capital extensively from investors in Japanand overseas, allocating this money to companies that require growth capital and becoming the driving force
for delivering new businesses and value to society through management involvement, thereby helping to revi­talize the economy and society as a whole. Increasing the amount of risk capital is essential for regrowing theJapanese economy and realizing a sustainable society, and we see it as our critical responsibility as a company
that has been leading private equity investment in Japan.

» Advancement in collaboration between large corporations; expansion of government policies centered on theStartup Development Five-Year Plan
Medium- to Long-Term Targets and KPIs

Awareness of the Market Environment Over the Medium to Long Term

» Expand the size of newly established funds to around ¥250 billion on a global basis

We conduct fundraising about once every three years, and whether or not we reach our fundraising target
depends significantly on the stock market and economic environment at the time. Tightening of monetary policy
since around the end of 2021 has largely put the brakes on heated startup investment in the United States, andthis has had a negative impact on growth investment in Japan by overseas institutional investors. As a result, thenumber of domestic IPOs decreased throughout 2022, and the average market capitalization at IPO also declined.
Meanwhile, the Startup Development Five-Year Plan was announced in November 2022, and a series of­measures of unprecedented scale to develop startups are now being launched by the Japanese government.
As startups are expected to play an important role in revitalizing the Japanese economy, developing humanresources for startups, providing risk capital, and building startup ecosystems are at the core of such measures.
In addition, there are growing expectations for venture capital companies, and we believe this will have a positive
impact on our operating environment over the medium to long term.

» Increase the ratio of external capital contribution to 80%
Medium- to Long-Term Strategies and Direction of Initiatives» Gain repeat investments from existing investors by generating their expected returns and strengthening
relationships» Acquire new investment groups and enhance fund management structure with a view to increasing external capital contribution
Internal Resources and Strengths» Investor network cultivated through our more than 40-year track record in fund management» Fund management know-how acquired and refined through our experience as a pioneer venture capitalcompany in Japan» Well-established, trust-based relationships with fund investors that put our fiduciary responsibility firstthrough such means as ensuring transparent management

45Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

46

FUND MANAGEMENT
Strategies for Achieving Targets and Direction of Initiatives
In November 2022, we announced the Basic Policy for Enhancing Corporate Value. Under this policy, the Company
is working to increase external fundraising and capital commitments gradually while continuing to provide fundinvestors with their expected returns, which will, in turn, lead to a stable increase in our profits. The FundManagement Division plays a crucial role in the realization of this policy. Over the medium to long term, we will
work to increase the size of new funds from the current ¥150 billion to ¥250 billion (total for Japan, Asia, and theUnited States) in ten years’ time and raise the ratio of external capital contribution from the present 60% to 80%
by the same time.
Fundraising activities for the new JAFCO SV7 Fund Series were delayed by roughly six months due to the impactof a shareholder-related issue that took place in August 2022, causing investors who wanted to monitor developments to postpone their decisions to invest. After we resolved this shareholder-related issue, the impact of thebankruptcy of Silicon Valley Bank in March 2023 was a cause for concern. However, as there remained a highlevel of interest in startups and private equity investment in Japan, we were able to continue steady fundraising
activities, with the fund making its final closing at ¥97.8 billion on September 30, 2023.
Under an economic environment with an uncertain outlook, including the possibility of financial crises, investors
tend to forgo investment in long-term investment products with low liquidity, such as private equity funds. In sucha context, our division proactively provides support for collaboration between investors and portfolio companies tostrengthen the relationship between them so that we can continue to steadily raise funds from external investors.
Business firms in particular are very interested in new business development. We provide them with advice forsuccessfully collaborating with startups, which have corporate cultures that differ from those of large corporations,as well as what to look for in investment targets and important points in making investment decisions. Working as
an intermediary and solid advisor, our division seeks to resolve the issues facing investors while at the same time
supporting the growth of portfolio companies. Such activities are predicated on the assumption that they bring
benefits to both parties and contribute to the improvement of fund performance.
While our primary investors are currently domestic financial institutions and business firms, there is a risk that
economic conditions and business regulations could significantly hamper our ability to raise funds from certain
investor groups. For that reason, developing and diversifying our investor groups is a pressing issue. We are working with external institutions to examine ways to obtain contributions from institutional investors, including overseas investors and pension funds, as well as individual investors, among other groups. Although there are various
hurdles, such as determining fair value and securing liquidity, by succeeding in our efforts to develop and diversify
investor groups, we believe we can significantly expand sources for channeling risk capital in Japan.

Internal Resources and Strengths Supporting Our Strategies
The value of our division lies in our fund management experience, which we have cultivated by overcoming major
fluctuations in the economic environment time and time again, and our ability to customize our approach to meetthe specific circumstances and needs of fund investors. While overcoming numerous hardships, such as thebursting of the dot-com bubble and the global financial crisis, we have pursued efforts to control downside
risks and enhance our ability to reproduce success. We have also continued to openly and honestly commu­
nicate our situation and initiatives to investors, even in difficult circumstances. It is our firm belief that theexperience we have gained through these endeavors has provided us with strengths unrivaled by other­venture capital companies.
Another strength of the Company Group is our fund management structure that makes use of the wealth ofknow-how we have accumulated as a venture capital pioneer in Japan. While securing to the greatest extent
possible the level of operational freedom needed to maximize fund performance, we leverage our knowledge
base from previous experiences in private equity fund operations including fund structures that align withinvestors’ needs, valuation methods for unlisted securities, and strategies for liquidating funds at maturity.
Our division places the utmost importance on engaging in organic communication with financial institutions,business firms, and other investors, to maintain and build on our connections with them. From our division, we
designate a contact member for each fund investor. This member provides regular reports on fund operations
and engages with investors in various settings to deepen their understanding of our investment activities andfund management. These routine activities build and strengthen robust trust-based relationships with investors, which in turn lead to their continued investments.

Breakdown of Fund Investors
Financial
institutions

18%

Financial
institutions

Other

3%

32%

Financial
institutions

Other

2%

45%

Financial
institutions

Other

2%

42%

SV4

SV5

SV6

SV7*

Establishedin 2013

Establishedin 2016

Establishedin 2019

Establishedin 2022

Business firms

JAFCO

32%

50%

Business firms

JAFCO

22%

43%

Business firms

JAFCO

16%

37%

Business firms

JAFCO

29%

27%

Fund size ¥60.0 billion

Fund size ¥75.0 billion

Fund size ¥80.0 billion

Fund size ¥97.8 billion

Period of operation

Period of operation

Period of operation

Period of operation

June 2019–December 2029
(under management)

June 2022–December 2032
(under management)* As of September 30, 2023
March 2013–December 2024
(under management)
Breakdown of investors
Financial institutions 
Business firms 
JAFCO ¥10.8 billion¥19.5 billion¥29.7 billion

August 2016–December 2026
(under management)
Breakdown of investors
Financial institutions 
Business firms 
JAFCO Other ¥24.3 billion¥16.5 billion¥32.4 billion¥1.8 billion

Breakdown of investors
Financial institutions 
Business firms 
JAFCO Other ¥36.2 billion¥12.9 billion¥29.1 billion¥1.8 billion

Breakdown of investors
Financial institutions 
Business firms 
JAFCO Other ¥41.0 billion¥28.0 billion¥26.5 billion¥2.3 billion

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INTEGRATED REPORT 2023

47

Overseas Strategy

Tri-polar Structure of the Company Group and Future Overseas Strategy
Results for FY March 2023
At the Company Group, investment teams in Japan,

In Asia, our history of full-scale investment started

Asia, and the United States operate their own funds

back in the early 1990s. After the 1997 Asian financial

based on their respective investment strategies.

crisis, we revamped our operating structure in the

We diversify regional risks by pursuing investment

region in 2000, and in 2012, there was a change ofopportunities in three regions: Japan, our home base

CEO at JAFCO Investment (Asia Pacific) Ltd. (“JAFCO

of operations; fast-growing Asia; and the United

Asia”) in Singapore. In addition to promoting theStates, a leader in cutting-edge technologies.

further localization of operations, the new CEO also

The beginning of our overseas investment can be

strived to share the JAFCO Group’s investment philos­

Global balance of unlisted securities¥217.7 billion / 261 companies

Japan

Asia

United States

Balance of unlisted securities

Balance of unlisted securities

Balance of unlisted securities

traced back to 1984, when we established a local

ophy and its standards for investment quality acrosssubsidiary in the United States for fundraising. We

the organization. Currently, JAFCO Asia’s investment¥129.9 billion /¥26.1 billion /¥61.7 billion /activities focus primarily on China, Taiwan, India,

167 companies

60 companies

34 companies

Indonesia, Vietnam, and Singapore.

Venture investment
151 companies

started by co-investing with local funds through overseas investors, and in 1986 we established a Japanbased unit specializing in overseas investments.

After 2000, we established dedicated teams within

Initially, the U.S. subsidiary worked together with

the Business Development Division in Japan that

the Overseas Investment Division in Japan to makeprovide support to portfolio companies in Asia andU.S. investments. After the historic success of our IT

the U.S. primarily for establishing Japanese subsid-

fund in the United States around 2000, we switchediaries, cultivating sales channels, and forming capitalto managing funds in the same style as U.S. ventureand business alliances. Our strength in supporting

capital firms, with locally hired teams making invest-

these portfolio companies for entering the Japanesement decisions. This policy of entrusting fund man-market has led to the acquisition of promising

agement to local teams to make full use of the theirinvestment opportunities in Asia and the U.S.

capabilities in venture investments, which are highly
local in nature, has been passed on to today’s Silicon
Valley-based Icon Ventures.

Buyout investment

16 companies

Venture investment
team members

41

Investment
team members

Buyout investment
team members 

15Business development
team members

Business development
team members 

14

15
2

Investment
team members

7

Operatingpartners

2

Business development
team members 

2Business development teams collaborate with local investment teams to provide valueadding support and achieve portfolio exits.
• Balance of unlisted securities as of March 31, 2023 (acquisition cost basis)• Exchange rate: US$1 = ¥133.53 (as of March 31, 2023)• Number of personnel is as of April 1, 2023
• Overseas investments made by the Venture Investment Division in Japan are included in the category of Japan.

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Overseas Strategy  | Asia

JAFCO Asia

Accelerating investment in cutting-edge domains in emerging markets where rapid expansion is expected in the medium to long term

Advancing in Asia, Which Accounts for 40% of the Global PE Market Share
The Asian private equity market, which includes China, a country that we must naturally
focus on in our operations in Asia, as well as Greater China including Taiwan, and India,
which is showing promising signs of growth, has expanded in recent years to accountfor the majority of the global market. With this expansion, ASEAN countries, in particularIndonesia and Vietnam, have been growing as emerging markets. With an awareness thatJapan is part of Asia and that Asia is a lifeline for Japan, JAFCO Asia has remained committed to the Asian market for over 30 years. As a local Asian venture capital firm withstrong ties to Japan, JAFCO Asia has been operating with the following uniquecharacteristics.
Investment strategies and investment decision-making adapted to the local context
Disciplined investment team comprising investment professionals of diverse nationalities
Business development team (located in Tokyo) specializing in the Asian region
Market Environment
In China, where the market is expected to reach maturity, there has been a rapid industry
shift involving the expansion of domestic-driven demand and the local production ofvarious products and services. In Taiwan, the semiconductor, EV, and security software
industries, among others, are becoming hot sectors. In India and Southeast Asia, countless startups are being established against a backdrop of a high percentage of young
people, large absolute demand from middle-class consumers, and rapidly developing
social infrastructure. Meanwhile, there are many factors in the Asian region to which
JAFCO Asia needs to pay close attention, such as political frictions between the U.S. andChina leading to possible difficulties for Chinese companies in achieving exits via listingon the U.S. stock market, intensifying market competition in India, and the importance of
local context in making investment decisions in Southeast Asia, which comprises numerous countries.

Major portfolio companies (including EXITed)

JAFCO Asia’s Strengths and Challenges
Stability as a venture capital fund: In Asia, where venture capital companies themselves are undergoing significant rejuvenation, promising startups tend to seek stability
from their investors. Under these circumstances, JAFCO Asia has established a total ofnine funds on an ongoing basis since 2000.
High problem-solving capabilities as a venture capital firm: Venture capital ecosystems
in emerging countries are still relatively new, and there is only a small number of investment professionals who have experience in dealing with changes in the operating environment. JAFCO Asia draws on the wisdom and experience it has gained through its
operational history to identify the best possible solutions for the business issues facing
its portfolio companies.
Corporate value enhancement of portfolio companies leveraging operations spanningall of Asia: JAFCO Asia helps its portfolio companies adopt the highly competitive technologies of Japanese companies and also make an entrance into the Japanese market,
thereby enhancing their performance and creating a diverse array of exit scenarios.
Expansion of fund size and level of recognition: In Asia, where the prospect of market
growth is promising, there is a need to enhance the level of recognition of funds anddouble or triple their size. To that end, JAFCO Asia needs to assemble first-rate, stable
investment teams, build an attractive portfolio, and demonstrate its ability to reproduce
success through the numerical performance of its funds.

JAFCO Asia Management Structure

Yoshiyuki Shibusawa
President & CEO

Swee Ting Pan
Managing Director,
Head of China (Shanghai, China)

John Lin
Managing Director,
Head of Taiwan

Supriya Singh
Director,

Policies Moving Forward
To establish our operations in Asia as a major pillar of the JAFCO Group, JAFCO Asia must
expand its fund size based on solid results. The success that the company achieved with
its leading home-run deal of SHEIN (China) (ROI of 56.5x) has bolstered its resolve topursue the next game-changing opportunity. Additionally, in the recent cases of Appier(Taiwan) and AnyMind Group (Singapore), JAFCO Asia managed an exit approach involving
the listing of these Asian companies on the Tokyo Stock Exchange. Through such successstories, the company hopes to deepen the understanding of its business activities amongpromising entrepreneurs, fund investors, and other business partners.

Head of South Asia Investments

Melvin Teo
CFO

48

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INTEGRATED REPORT 2023

Overseas Strategy  |United States

Icon Ventures

Executing investments in the world’s largest and most advanced startup market and enhancing support for business development in Asia

Recognizing our growth potential in the United States—the largest private equity market in
the world—at an early stage, the Company established JAFCO America Ventures Inc. in 1984.
Joe Horowitz and other members joined JAFCO America Ventures in 2003, and since 2015, theU.S. subsidiary has operated under the name Icon Ventures. Currently, Icon Ventures is known
as a local venture capital firm with strengths in Series B and C funding rounds based on its
network of top-tier venture capital firms in the United States. Joe Horowitz and his team at
Icon Ventures manage a cumulative total of US$1.4 billion in funds, and have successfullycompleted 34 exits, including eight IPOs, for a total exit value of more than US$93 billion. In
addition to its support for the expansion of portfolio companies into Japan and Asia, Icon
Ventures also assists with the recruitment of engineers in Canada. These efforts set Icon
Ventures apart from its competitors and have helped it acquire promising portfolio companies.
Market Environment
Since 2022, there has been a challenging environment for startup fundraising in the
United States. due to tightening of monetary policies. This environment is expected tocause difficulties for inexperienced venture capital companies and portfolio companies.
Meanwhile, Icon Ventures has experienced the cycle of economic change time after time,
and the current investment environment is thought to present an excellent opportunity
to invest in companies at an adequate value. Furthermore, many attractive investment
opportunities are emerging, centered on the domain of AI. Icon Ventures will leverage its
many years of investment experience in the data and AI domain to capitalize on theseopportunities going forward.

Icon Ventures’ Strengths and Challenges
The experience that Icon Ventures has gained navigating through various market environments
over the past 20 years represents its greatest strength. This has enabled the company to consistently generate stable returns under both favorable and unfavorable market conditions. We
believe that the strong personal connections and network the company has built up within thestartup ecosystem in Silicon Valley will allow it to provide even greater value moving forward.
Responding to the changes in the environment around venture capital companies is
an important issue for Icon Ventures as well. The investment landscape is undergoingsignificant change as the era of abundant funding in the startup community is coming
to an end, and the company must therefore respond to these changes accordingly.

Icon Ventures Management Structure

Joe Horowitz
Managing General Partner

Tom Mawhinney
General Partner

Policies Moving Forward
Icon Ventures remains committed to the direction in which it has been heading to date,
and will continue to invest with perseverance and earnestness in sectors where it candraw on its strengths. Meanwhile, the AI domain is expected to drive market growth in the
future, and the company will enhance its expertise and coverage in this domain byincreasing its resources. Furthermore, the company will strengthen recruitment activities
at portfolio companies to ensure they can secure personnel that will help them pursue
engineering, market launches, and business expansion. Amid the dramatic changes in themarket environment, entrepreneurs require not only funding from venture capital companies but also support for achieving corporate growth. In this environment, Icon Venture’s
business model is becoming even more essential, and the company will therefore continue to push forward with its initiatives to date.

Jeb Miller
General Partner

Preeti Rathi
General Partner

Major portfolio companies
Security

Exits

Unicorns

Up & Comers

Consumer / SaaS

Data and AI

Digital Health49Section- 01   Section- 02   Section- 03   SectionSection- 04
04   Section- 05  INTEGRATED REPORT 2023

51 I nterview with
the Independent Directors
54 Board of Directors
56 Corporate Governance
61 Compliance
62 Risk Management

Section- 04

Business Foundation for Sustainable Growth50Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

51

Interview with the Independent Directors

Independent director serving as a
Independent director serving as a

Independent director serving as a

Independent director serving as afull-time Board-Audit

Board-Audit Committee member

Board-Audit Committee member

Board-Audit Committee member

Committee member

Koji Tanami

Yoshie Kajihara

Kenichi Akiba

Shigeru Tamura

Views on the Ideal Formof JAFCO’s Management
and Governancefor Realizing Medium- to Long-Term GrowthQ.

	What are your impressions of the Company
and its Board of Directors?

flat and open, and many of the Company’s employees andKoji Tanami: JAFCO Group is a small organization of highly

managers are very outgoing but also humble.

Yoshie Kajihara: JAFCO Group has a corporate culture that isqualified individuals, and accordingly, the Board of Directors is

When I was appointed as independent director, I was sur-also small, so I think it operates in an extremely efficient way.

prised that the majority of those on the executive side were

The pre-briefing sessions for the Board of Directors, which

men who had built their entire careers as investment profes-

include thorough explanations of the agenda and data, havesionals at the Company. The situation remains largely the same

contributed to highly engaging discussions between indepen-

today, and I therefore believe that an important role I play as andent directors and the executive side.

independent director is in providing a woman’s perspective

After many years working in administrative organizations andgovernment-affiliated financial institutions, I became an attor-

informed by my personal experience of working at numerous
startup companies.

ney-at-law and now also serve as an independent director of

the Company. Throughout my career, my ambitions have been

Kenichi Akiba: When I was appointed as independent director

to contribute to Japan, as well as to the world and the people

eight years ago, the Company was focusing on how to leverageliving in it. JAFCO Group is an investment company, so its oper-

the capabilities of its investment professionals. I therefore got

ations are completely different from the kind of work I havethe impression that the Company placed more emphasis on thepreviously been involved in. However, I strongly believe that theindividual rather than the organization itself. While the capabili-

Company is an organization that truly encapsulates the visions

ties of individual employees are obviously still important, thethat I have been pursuing throughout my career.

Company has been steadily enhancing its organizational

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INTEGRATED REPORT 2023

Interview with the Independent Directors

capabilities in recent years, including by expanding thein-house meetings regularly. In these ways, the Company utilizesBusiness Development Division.

each independent director’s unique expertise and role at the

Akiba: We are working continuously to strengthen monitoring

The Company’s business activities entail close involvement

meetings of the Board of Directors and the Nomination andfunctions, including verifying management initiatives and per-with portfolio companies and fund investors, so I make concerted

Remuneration Committee, as well as in its management.

formance, primarily through meetings of the Board of Directors

efforts to speak at the Board of Directors’ meetings from theIt has been over a year since Keisuke Miyoshi was appointed

and the Board-Audit Committee, which are held every month.

standpoint of capital markets and the shareholders. Over the pastas President & CEO. While I commend the Company for its

several years, the Company has been strengthening management

current executive structure, I believe that the Nomination andintroduced the stock compensation plan in 2022 to establish ageared toward capital markets, by clarifying its shareholder

Remuneration Committee needs to talk more about succession

compensation system for management members that better

return policy and the amount of funds necessary for investment

plans, including the cultivation of candidates to oversee thereflects the trends in capital markets. In terms of nomination,

activities to enhance capital efficiency. I view this progress asnext generation of JAFCO’s management.

while President Miyoshi was just appointed in 2022, we are

one of my accomplishments as an independent director.

working to enhance communication through interviews andKajihara: Recently, I feel there has been a much greater

discussions with corporate officers and Partners. Meanwhile,

Shigeru Tamura: The Company is fully committed to fueling­awareness of the perspective of shareholders at the Board

there remain issues related to the effectiveness of nomination

the perpetual growth of corporations and society at large byof Directors’ meetings. At the same time, all of the Company’sfunctions, not only for JAFCO Group but also for Japaneseworking side-by-side with entrepreneurs and supporting its

stakeholders, including fund investors, portfolio companies,

companies in general. We therefore need to hold ongoing

portfolio companies. With that said, the Company has always

and employees, remain equally important. Therefore, I pay­discussions about establishing more substantive nomination

regarded itself as a behind-the-scenes supporter of portfolio

particular attention to maintaining a balance to ensure thatmethods and schemes.

companies or, as a consequence, has been somewhat indiffer-no conflicts of interest arise.
One issue that the Company needs to address going forward is

ent or unskilled in terms of communicating the appeal of its
initiatives and the value it creates for its portfolio companies. In

the strengthening of the Board of Directors’ evaluation processthat sense, I believe the Company still needs to improve its

for the executive side. Evaluating the management team is anexternal communication.

important role of the Nomination and Remuneration Committee,

Regarding the Nomination and Remuneration Committee, weQ.

	Please tell us about your evaluation of
the Company’s medium- to long-term targets
and your awareness of issues going forward.

but there is still room to improve evaluation methods anddirectors have a strong commitment to understanding manage-

schemes, including the evaluation of matters not reflected in

Kajihara: The Board of Directors’ discussions on capital effi-

ment issues in detail and are given preliminary explanations

business results and numerical figures. Accordingly, I believe

ciency are now far more lively. Following discussions with aof important issues through monthly pre-briefing sessions.

that the Company needs to hold more relevant discussions tolarge number of shareholders, the Board decided to sell its

Because they take the time to explain mainly technical issues

strengthen the evaluation process.

shares in Nomura Research Institute, Ltd., which accounted for

to us, we can focus on discussing strategically important mat-

a large percentage of the Company’s assets, and implement

ters and other significant issues at actual Board of Directors’

Tamura: Starting in the fiscal year ended March 31, 2023, I havelarge-scale shareholder returns after the sale. The Company

meetings, in which the executive side also participates.

been actively attending individual meetings with ­shareholders

used the Board’s decision as an opportunity to formulate theand institutional investors as an independent director. What I

Basic Policy for Enhancing Corporate Value and relevantQ.

have noticed is that, while the Nomination and Remuneration

medium- to long-term targets, and to announce its manage-

	How do you evaluate the effectivenessof the Company’s governance?

Committee is a voluntary body, shareholder expectations andment direction and qualitative and quantitative goals. I com-demands for this committee are extremely high. These meetings

mend the Company in this regard.



were held a total of three times during the fiscal year ended

On the other hand, I believe that the Company needs toTanami: As a certified public accountant, Mr. Akiba excels in the

March 31, 2023, and I hope that we c
­ ontinue to meet share-

better clarify its plans for the future, including its efforts toanalysis of detailed numerical figures and data. Ms. Kajihara has

holder expectations by increasing the frequency of theseincrease the size of funds and enhance investment perfor-

a wealth of work experience at startup companies and, as a­meetings going forward, so that we can engage in further dis-mance, and communicate these plans to its stakeholders.

woman, a perspective that differs from that of the other directors.

cussion, particularly on the evaluation of the CEO’s performance

Mr. Tamura is a full-time independent director and is included inand the succession plans, among others important matters.

In terms of the Board of Directors’ meetings, all independent

52

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INTEGRATED REPORT 2023

Interview with the Independent Directors

In the past, most employees were men who built their entire

continue to grow over the past 50 years, and as such the most

Akiba: When surplus funds are abundant, the general practicecareers at JAFCO, creating a very homogenous atmosphere

important task for JAFCO is to continue to recruit and develop

is to allocate those funds to investments in new businesses

within the Company. Recently, however, a number of mid-career

outstanding talent so that they can play an active role. Also,

and other areas. However, JAFCO needs to be mindful of such

employees from different industries and professions have

while the Company’s venture investment and buyout invest-

matters as preventing conflicts of interest, and as an indepen-

joined the Company, thanks to the promotion of mid-career

ment activities are currently very local, many of JAFCO’s portfo-

dent director, I have recommended that the Company allocate

hiring, and these employees have brought with them cultures

lio companies have strong global ambitions. In addition, theany surpluses to shareholder returns, so long as it does not

and ways of thinking different from anything JAFCO has seen

percentage of JAFCO shareholders and fund investors frombranch out into domains outside the fund business. When the

before. I hope that these mid-career hires can draw on JAFCO’s

overseas is likely to increase in the future. I would therefore like

Company reduced the amount of capital it requires for invest-

organizational capabilities to actively pursue new challenges.

to see the Company’s employees broaden their global perspec-

ment activities to ¥120.0 billion and carried out share buybacks

tives. In general. I think that the younger employees alreadyin 2021, I continued to discuss this matter at Board of Directors’

Tamura: The Company urgently needs to enhance the value of

have such a perspective, so I would like to see managers step

meetings. I believe this was an extremely significant decision

its human capital. Diversity is obviously an important aspect ofup their efforts in this regard.

for the Company to make, given its difficult experiences of

securing outstanding personnel. In the past, instilling JAFCO’sfundraising during past financial crises.

organizational culture in its employees has allowed it to grow

Kajihara: JAFCO’s investment activities are directly linked toAdditionally, in November 2022 the Company formulated thethrough a sense of unity and cohesiveness. Now, however,sustainability. In addition, the Company advocates for the

medium- to long-term target of achieving ROE within the range

JAFCO must respond to dramatic changes in the operating

establishment of startup ecosystems. I feel that this stanceof 15% to 20% as part of the Basic Policy for Enhancing

environment and therefore needs to generate new ideas andis the reason for JAFCO’s existence and the essence of the

Corporate Value. This target reflects the possibility that the

take on new challenges by interacting with personnel from

Company’s approach to sustainability.

Company's cost of shareholders' equity is considered higher

different backgrounds. Additionally, I think it is even morethan the overall market average, and our efforts to further

important to widen its recruitment base as much as possible, tosignificance of its sustainability initiatives and communicate

enhance corporate value. It is essential to expand the amount

keep hiring highly capable personnel. The Company must avoid

them to its stakeholders to improve corporate value movingof external capital contributions to reach this target, so themaking its hiring practices unnecessarily restrictive, including

forward. In addition, the Company’s P/B ratio remains below 1x.

Company needs to further enhance its fundraising capabilities

in terms of gender, career stage, age, and nationality.

From the perspective of addressing this major issue, as well as

moving forward.

Outstanding and diverse personnel will be more eager to joinfrom a sustainability perspective, the Company should prioritize

the Company if it communicates the appeal of this kind of open

efforts to consistently generate stable profit from its invest-

hiring policy. I see it as my responsibility to constantly demandment activities.

that the executive side secure a working environment where

people can make the most of their talents.

Tanami: The Company’s investment activities themselves consti-

Q.

	It is imperative that the Company recruit andcultivate outstanding personnel and strengthen
its organizational capabilities to reach its
medium- to long-term targets. How do you view
the Company’s approach to human resources?

I think that the Company needs to organize the details andtute a contribution to sustainability. As a Co-Founder with capitalQ.

and talent, the Company supports the creation of innovativethat all JAFCO Group employees, from management to the frontchanging enormously since I became an independent director

Tamura: All of the companies in JAFCO’s portfolio strive tolines, share a strong awareness of contributing to sustainability.

four years ago. The average age of in-house personnel is grad-create new value that contributes to sustainability and the

I hope that the Company will persist in its commitment not only

ually increasing, so the Company has prioritized the recruitment

resolution of social issues. So, in that somewhat narrow sense,

to making investments but also to taking a leadership role andand development of personnel for the next generation and has

I believe that the Company is contributing sufficiently to sus-working closely with portfolio companies to resolve social issues

actively pursued mid-career hires. As a result, the Company hastainability. On the other hand, passing on talent and skills to theand realize a sustainable society.

built up a diverse pool of personnel with a wealth ofnext generation is essential for the sustainable development ofexperience.

the Company. Doing so is what has enabled the Company toKajihara: The composition of JAFCO’s employees has been	How do you evaluate the Company’s efforts andcontributions toward sustainability?

technologies as well as products and services that help resolve
social issues. This is an extremely meaningful activity. I believe

53Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Board of Directors
Directors

Independent Directors

ChairmanShinichi Fuki

Apr. 1985

Joined JAFCO

Director

Director(Board-Audit Committee member, full-time)(Board-Audit Committee member)

Shigeru Tamura

Kenichi Akiba

Apr. 1985

Joined The Bank of Yokohama, Ltd.

Sep. 1986

Joined Eiwa Audit Corporation (currently KPMG AZSA LLC)

Jun. 2003 	Director in charge of Investment Group II, Kansai Branch and Planning &Administration, JAFCO

Jun. 2000

General Manager of Business Administration and Head of Office of IPO, Members Co., Ltd.

Jul. 1989

Registered as a certified public accountant

Aug. 2000

Director & CFO, Members Co., Ltd.

Sep. 2001

Accounting Standards Board of Japan, seconded as Technical Manager

Feb. 2005	Managing Director in charge of Finance, Investment Group II,
Kansai Branch and VA Department III, JAFCO

Sep. 2002

General Manager of the Business Management Headquarters (CFO), Aplix Corporation

Apr. 2007 	Accounting Standards Board of Japan, seconded as Technical Director(until Aug. 2009)

Mar. 2007	Executive Managing Director in charge of Finance, Structured Investment,
Kansai Branch and VA Department III, JAFCO
Jan. 2010

President & CEO (Representative Director)

Apr. 2022

Chairman, JAFCO (present)

Jun. 2003 	Vice President of Principal Investments, Investment Banking Headquarters,
ORIX Corporation

Jul. 2007	Partner, KPMG AZSA Corporation (currently KPMG AZSA LLC)

Aug. 2005

Senior Corporate Officer, Medical Industries Corp. (currently MEDISCIENCE PLANNING INC.)

Sep. 2009	Professor, Waseda University Graduate School of Accountancy (present)

Aug. 2006

Executive Vice President, MIC Medical Corporation (currently MEDISCIENCE PLANNING INC.)

Jun. 2015

Director (Board-Audit Committee member), JAFCO (present)

Jun. 2010

President & CEO, MIC Medical Corporation

Jun. 2018

Auditor of the Board (outside), Mitsui Sumitomo Insurance Co., Ltd. (present)

Oct. 2014

Chairman, MIC Medical Corporation (until May 2015)

Jun. 2017

Director (Board-Audit Committee member), JAFCO

Jun. 2019

Director (Board-Audit Committee member, full-time), JAFCO (present)

President & CEO

Director

Director(Representative Director)(Board-Audit Committee member)(Board-Audit Committee member)

Keisuke Miyoshi

Koji Tanami

Yoshie Kajihara

Apr. 1993

Joined JAFCO

Apr. 1964

Joined the Ministry of FinanceOct. 2001

General Manager of Accounting, Aplix Corporation

Aug. 2011

Group Officer of Investment Group II, JAFCO

Jul. 1994

Director-General of the Financial Bureau, Ministry of FinanceMar. 2005

Corporate Officer and Head of Corporate Planning Office, Aplix Corporation (until Mar. 2007)

Apr. 2013

Corporate Officer in charge of Investment, JAFCO

Jul. 1996

Chief Cabinet Councilor for Internal Affairs, Cabinet Secretariat

May 2007

Corporate Auditor (full-time), MIC Medical Corporation (currently MEDISCIENCE PLANNING INC.)

Jun. 2015

Director in charge of Investment, JAFCO

Jan. 1998

Administrative Vice Minister, Ministry of FinanceFeb. 2008 	Resigned from the position of Corporate Auditor (full-time) of MIC Medical Corporation

Mar. 2018

Director in charge of Investment, Partner, JAFCO

Sep. 1999

Special Advisor to the Minister of FinanceOct. 2009

Joined CCS Inc.

Apr. 2022

President & CEO, in charge of Investment, Partner, JAFCO (present)

Jun. 2001

Deputy Governor and Managing Director, Japan Bank for International Cooperation

Nov. 2013

Executive Officer in charge of Corporate Planning, CCS Inc.

Oct. 2007

Governor, Japan Bank for International Cooperation

Oct. 2016

Resigned from the position of Executive Officer of CCS Inc.

Jan. 2017

Joined Interactive Solutions Corporation

Sep. 2008	Resigned from the position of Governor of Japan Bank forInternational Cooperation
Dec. 2010	Registered as Attorney-at-Law (Dai-ichi Tokyo Bar Association) Attorney-at-Law,
Hashidate Law Office (present)
Jun. 2015

Director (Board-Audit Committee member), JAFCO (present)

Aug. 2017	Director and General Manager of Human Resources & Administration, Interactive
Solutions Corporation
Jul. 2018

Resigned from the position of Director of Interactive Solutions Corporation

Jun. 2019

Director (Board-Audit Committee member), JAFCO (present)

54Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

55

Board of Directors

Experience and Expertise of Directors
The policy and procedure for selection of director candidates are stipulated in the Corporate Governance Policy of the Company as shown below.
• Directors and corporate officers are appointed by the Boardof Directors based on deliberations by the Nomination andRemuneration Committee.
• All directors (excluding directors serving as Board-Audit Committee
members) are subject to election/reelection every year at theGeneral Meeting of Shareholders. The Board-Audit Committee
expresses its opinion on directors’ appointment/dismissal at theGeneral Meeting of Shareholders when it deems it necessary.
• The Company shall select director candidates who have the businessskills, insight, experience, and expertise to serve as directors toallow the Board of Directors to fully exercise its operational andsupervisory functions. The Company proactively selects suitable
candidates from diverse backgrounds regardless of gender andnationality.
• The Company shall select independent director candidates who haveabundant experience and deep insight into corporate management
or specialist fields, and who can be expected to fulfill the roles andresponsibilities of an independent director. The selection is inaccordance with the Company’s Standards for Independence ofIndependent Directors.

Corporate Officers

The experience and expertise required of directors comprising the Company’s Board of Directors, and the experience and expertiseof the directors appointed at the Annual General Meeting of Shareholders held on June 21, 2022, are outlined below.
Experience/
Expertise

Expertise*
Investment

Fundraising/Fund
operation

Overseas
operation

●

●

●

●

Keisuke Miyoshi

●

●

●

Shigeru Tamura●●

Corporate
management

Shinichi Fuki

Director

Independent Director

Koji Tanami
Independent Director●

Personnel/
Labor affairs

Treasury/
Accounting

Legal affairs/
Compliance

Finance

●

●

●

●

●

●

●

●

●

●

●
●

●

Independent Director

Yoshie Kajihara
Independent Director●●

Kenichi Akiba●●

Academic
research/
Education

●
●

●

●

Notes: 1. Directors Shinichi Fuki and Keisuke Miyoshi have experience in management team member recruitment, management figure analysis, investment legal affairs, fundraisingarrangement, etc. at unlisted companies through their venture investment operations. Therefore, even if they have not worked in the relevant divisions, they are deemed to haveexpertise in personnel/labor affairs, treasury/accounting, and legal affairs.
2. The table above does not represent all the knowledge or experience of the directors.

Partners

Hiroaki Matsuda

Sueko Matsumoto

Naoki Sato

Atsushi Fujii

Shozo Isaka

Tomotake Kitazawa

Mizuki Takahara

Yutaro Saka

In charge of Administration

In charge ofFund Management and Administration

In charge ofBusiness Development

In charge ofVenture Investment

In charge ofVenture Investment

In charge ofVenture Investment

General Manager ofthe West Japan Branch

In charge ofVenture Investment

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Corporate Governance
Basic Views on Corporate GovernanceCorporate Governance Structure

The Company’s basic views on corporate governance are as outlined below. With an eye to increasing corporate

JAFCO Group is a company with a board-audit committee, whereby the Board of Directors and the Board-Audit

value over the medium to long term, the Company makes continuous efforts to enhance corporate governance.

Committee make important management decisions and audit and supervise business execution by directors.

• Establish an appropriate supervising structure• Maintain transparency and fairness in decision
making• Establish a corporate structure that ensures effective andswift business execution

General Meeting of Shareholders
Business Execution

Appointment,
dismissal

Appointment, dismissal

Appointment,
dismissal

Board of Directors
Directors (excluding directors serving as Board-Audit Committee members)

Corporate Governance Policy

Supervision

Based on the above basic views, the Company has established the Corporate Governance Policy, which
outlines its concrete corporate governance measures.

Corporate Governance Report and Corporate Governance Policy

More information

Governance Initiatives

pendence, sharing value with shareholders, improving capital efficiency, and promoting growth strategy,
among other things. Going forward, we will continue such efforts to improve governance.

Independent director
Female director

Policies and strategies

FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023

Transitioned to Company with a Board-Audit Committee
One third or more

* Nomura Research Institute, Ltd.

Cooperation

Investment Committee

Divisions,subsidiaries

Internal
auditing

Internal Audit
Division

Directors

Reporting

Auditing ofaccounts

Accounting Auditor

Company with a board-audit committee
Number of directors [of which, Board-Audit Committee members]

6 [4]Ratio of female directors

16.7%

Ratio of independent directors

66.7%

Term

1 year*Accounting auditor

Ernst & Young ShinNihon LLC* Excludes directors serving as Board-Audit Committee members

Reasons for Adoption of Corporate Governance System

Established Nomination and Remuneration Committee

The Company focuses on private equity investment, a highly specialized business aimed at providing risk

Majority

capital. In light of the nature and scale of the Company’s business and number of employees, the Board of
Directors, whose members are few in number, endeavors to ensure swift and appropriate decision-making.

One person appointed
Announced Basic Policy on Dividends
Introduced partnership model

Announced Basic Policy for
Enhancing Corporate Value

Eliminated cross-shareholdings with Nomura Group and bought back all shares held by Nomura GroupManagement­independence and­shareholder returns

Auditing

Partners

have made incremental improvements to governance each year in terms of increasing management inde-

Supervisionandexecution

Reporting

Organization

important to enhance management governance and carry out fair and prompt decision-making. To date, we

Committee

Board-Audit Committee

Supervision

Representative Director

For the Company, which operates a high-risk business of venture and buyout investments, it is extremely

FY2016

Supervision

Nomination andRemuneration Committee• Build respectful relationships with stakeholders

Sold a portionof NRI* shares andused the proceeds
for share buybacks

Sold all NRI* shares andused the proceeds forshare buybacks

In consideration of the above, the Company has adopted its current framework as it believes that themost effective governance structure is one that leverages the advantages of independent directors and a
Board-Audit Committee (a majority of whom are independent directors) to further strengthen business­execution auditing and supervisory functions as well as the corporate governance system, with the aim ofenhancing corporate value to an even greater degree.
In principle, the Board of Directors shall comprise a majority of independent directors to increase theeffectiveness of corporate governance.

56Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Corporate GovernanceInside director

Status of Committee Activities
Board of Directors
Chairperson

The Board of Directors consists of a total ofsix directors, including two inside directors
and four independent directors. Independent
Chairman President
directors constitute a majority of the Board.
& CEO
The Board of Directors, which is chaired by
the President & CEO, is responsible for making
important management decisions and supervising directors’ execution of duties. Independent directors supervise
management from an objective and neutral standpoint.

Board-Audit Committee
Chairperson

The Board-Audit Committee is composed offour independent directors and is currently
chaired by the full-time Board-Audit
Committee member. The Board-Audit
Committee audits execution of duties bydirectors and prepares an audit report. To
ensure the independence of independent
directors, the Company has established its own Standards for
Independence of Independent Directors, and appoints independent
directors based on the Standards.

Activities in FY March 2023

Activities in FY March 2023

Meetings held: 17 / Participation: 100%

Meetings held: 14 / Participation: 100%

Main resolutions

Main resolutions and reports

 ormulation of our Purpose andFmaterial issues
Establishment of Basic Policy for
Enhancing Corporate ValueResponse policies to large-scalepurchases actions, etc. of theCompany shares
Appointment of directors, corporate officers, and partners
Remuneration for directors,
corporate officers, and partners(basic, extraordinary, and stockrelated compensation)
Directors and officers liability
insurance
Approval of potential conflict-ofinterest transactions by directors
Acquisition and cancellation oftreasury shares
Surplus dividends
Convening of the General
Meeting of Shareholders

 rganizational reformOImportant personnel changes,
bonusesEstablishment, revision, andabolition of regulations
Approval of financial statements
Annual securities reportExpense budget, financial plan
Fund strategy
Portfolio status reportApproval of JAFCO Group’s
investment in venture investment deals (from the perspectiveof prevention of conflicts ofinterest)
Matters related to corporate
governanceVerification ofcross-shareholdings
Risk management

Resolutions
Board-Audit Committee audit
plans and division of duties
Accounting auditor appointment
and consent to remuneration
Audit reports
Approval of potential conflictof-interest transactions
Formation of opinions on theappointment and remunerationof directors (excluding BoardAudit Committee members)

Reports
Monthly audit reports(Administration Division andInternal Audit Division hearings,
etc.)Exchange of opinions withthe officer in charge ofadministration
Reports on audit results related
to the execution of duties bydirectors, etc.
Reports related to the General
Meeting of Shareholders, etc.

Independent director

Nomination and Remuneration Committee
Chairperson

The Nomination and Remuneration Committee
is composed of four independent directors andthe President & CEO. The chair is elected fromPresident
independent directors. To ensure the transpar& CEO
ency and objectivity of nominations and remuneration, important decisions regarding thenomination and remuneration of directors,
corporate officers, partners, and representatives of major subsidiaries
are deliberated by the committee in advance. The Board of Directors
discusses and makes decisions on nominations and remuneration
based on deliberation by the committee. Investment decisions are madeby the Investment Committee, comprising the President & CEO, partners, and other personnel, in order to expedite the decision-making
process. Directors who are members of the Board-Audit Committee
also participate in Investment Committee meetings as needed.
Activities in FY March 2023
Meetings held: 3 / Participation: 100%

Main resolutions
 omination of directors, corpoN
rate officers, partners, andrepresentatives of major subsidiaries (basic, extraordinary andstock-related compensation)

 evision of the policy for deterR
mination of remuneration of
directors, etc., and granting ofstock remuneration according to
the introduction of a stock remuneration plan

Investment Committee
Investment decisions are made by the Investment Committee comprising the President & CEO, Partners, and others to allow quick decisionmaking. Directors who are Board-Audit Committee members also
participate in the committee on an as-needed basis.

57

INTEGRATED REPORT 2023

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

Corporate GovernanceReasons for Appointment of Independent Directors
Attendance in FY March 2023
Name

Reasons for Appointment

Shigeru Tamura

Mr. Tamura has been involved in the management of listed and unlisted companies in positions including CEO and CFO, and has abundant experienceand deep insight. He also has experience in financial and investment businesses as well as international operations. He has leveraged his achievements,
insight, and knowledge to contribute to the Company’s important management decision-making while supervising the execution of its operations froman independent standpoint as the full-time Board-Audit Committee member. He also chairs the Nomination and Remuneration Committee and actively
contributes opinions at the committee meetings. Based on the above, the Company believes that he is capable of appropriately performing his duties as
an independent director ­serving as a Board-Audit Committee member.

Koji Tanami

Mr. Tanami has held various important positions at government agencies and international organizations, and has extensive experience and insight inmonetary, financial, tax, and international matters, as well as expertise in legal affairs as an attorney-at-law. He has leveraged the above experience andinsight to contribute to the Company’s important management decision-making while supervising the execution of its operations from an independent
standpoint. He also serves as a member of the Nomination and Remuneration Committee and actively contributes opinions at the committee meetings.
Based on the above, the Company believes that he is capable of appropriately performing his duties as an independent director serving as a Board-Audit
Committee member.

Kenichi Akiba

Mr. Akiba is a certified public accountant with extensive knowledge of international accounting systems and has contributed to the development ofaccounting standards in Japan. He is also committed to research activities and human resources development as a graduate school professor. He hasleveraged his high level of expertise in financial accounting and other fields to contribute to the Company’s important management decision-making while
supervising the execution of its operations from an independent standpoint. He also serves as a member of the Nomination and Remuneration Committee
and actively contributes opinions at the committee meetings. Based on the above, the Company believes that he is capable of appropriately performing his
duties as an independent director serving as a Board-Audit Committee member.

Yoshie Kajihara

Ms. Kajihara has served as an executive, mainly in charge of accounting and management planning, at listed and unlisted companies and has abundant
experience and deep insight in these fields. She has leveraged her achievements, insight, and knowledge to contribute to the Company’s important­management decision-making while supervising the execution of its operations from an independent standpoint. She also serves as a member of theNomination and Remuneration Committee and actively contributes opinions at the committee meetings. Based on the above, the Company believes that
she is capable of appropriately performing her duties as an independent director serving as a Board-Audit Committee member.

Board ofDirectors
meetings

Board-Audit
Committee
meetings

17 out of 17

14 out of 14(100%)(100%)

17 out of 17

14 out of 14(100%)(100%)

17 out of 17

14 out of 14(100%)(100%)

17 out of 17

14 out of 14(100%)(100%)

58

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Corporate GovernanceEvaluation of the Effectiveness of the Board of Directors
The Board of Directors evaluates its effectiveness every year. In the fiscal year ended March 31, 2023, surveys
and interviews were conducted with all directors regarding the Board of Directors’ composition, operation,
roles, and responsibilities, which formed the basis for discussion by the Board of Directors.
The Company’s Board of Directors comprises a majority of
independent directors, who are deemed to possess the levelof experience and expertise necessary for enhancing ongoing
discussions.
In the fiscal year ended March 31, 2023, under President &CEO Keisuke Miyoshi’s new administration, we furtheredmedium- to long-term discussions on the enhancement ofcorporate value. In addition to matters for which discussions
had been ongoing since the previous fiscal year, the Board of
Directors vigorously exchanged opinions and deliberated its
response to the large-scale purchase of the Company sharesfrom August 2022 onward, in particular, with appropriate
timing and frequency at Board meetings.
Based on these discussions and dialogue with shareholders, investors, and other stakeholders, we formulated a new
Basic Policy for Enhancing Corporate Value in the fiscal year
ended March 31, 2023, which specifies our strategies for
growth and capital efficiency improvements. Beyond setting

medium- to long-term targets for ROE and the total shareholder return ratio, as a short-term measure, we sold allshares held in Nomura Research Institute, Ltd., bought backand canceled our own shares, and revised our dividend policy.
Accordingly, the Board of Directors judges itself to befunctioning effectively, having set a major course for discussions that have been ongoing since the fiscal year ended
March 31, 2022, while approving several important resolutions and launching various measures.
In terms of actions going forward, the Board of Directors
will confirm the progress of medium- to long-term targets
and measures under the Basic Policy for Enhancing Corporate
Value and conduct necessary discussions as appropriate.
Based on these discussions, it was affirmed that the Board of
Directors will continue to engage in the requisite deliberationof various matters from a medium- to long-term perspective.
We will continue to conduct periodic evaluations with the aimof further improving the effectiveness of the Board of Directors.

The monetary compensation of directors (excluding Board-Audit Committee members) shall consist of basic
compensation and extraordinary compensation. Part of basic compensation is linked to the Company’s ordinary
income and other performance indicators, and extraordinary compensation additionally takes into account fundperformance. In addition, from the perspective of improving the Company’s corporate value in the medium to longterm, stock-based remuneration shall be paid to directors (excluding directors serving as Board-Audit Committee
members and independent directors).
As an investment company managing highly volatile venture and buyout investment funds, the level of compensation shall reflect the amount of assets under management, the Company’s business performance as a result ofasset management, and shareholder value, and be appropriate for securing highly capable human resources.
The maximum total amount of monetary compensation of directors (excluding directors serving as Board-Audit
Committee members) shall be within ¥600 million per annum.*1
As stock-based remuneration to be paid to directors (excluding Board-Audit Committee members and independent directors), the total amount of monetary claims for granting transfer-restricted shares shall be no more than¥300 million per annum, and the total number of the Company’s common shares to be issued or disposed of astransfer-restricted shares shall be within 300,000 shares per year.*2*1 Based on a resolution of the 43rd Annual General Meeting of Shareholders held on June 16, 2015. The number of directors (excluding directors
serving as Board-Audit Committee members) as of the end of the 43rd Annual General Meeting of Shareholders was six.
*2 B ased on a resolution of the 50th Annual General Meeting of Shareholders held on June 21, 2022. The number of directors (excluding directors
serving as Board-Audit Committee members and independent directors) as of the end of the 50th Annual General Meeting of Shareholders was two.

Outline of Directors’ Monetary Compensation
Basic compensation (fixed)

Fixed monetary remuneration paid monthly, determined by importance of roles and responsible areas ofeach job position, years of service, etc.

Basiccompensation(performancelinked)

Monetary remuneration paid monthly, determined once a year, in principle, by the Board of Directors on ascale of one to five by reflecting short-term results based on the comparison of the Company’s profit levels(capital gains, net additions to investment loss reserves, ordinary income, etc.) and its details for the preceding fiscal year with the past results. A standard percentage of performance-linked basic compensation
to total basic compensation is about 20%, and the relevant portion increases/decreases within a range of
30% based on the above five-point scale.

Extraordinarycompensation(performancelinked)

The Board of Directors determines the year-on-year percentage change in the level of remuneration for eachposition based on the year-on-year comparison of ordinary income, core income (amount of management fees
after subtracting SG&A expenses), unrealized gains, fund performance, which is a major management index overthe medium to long term, and total funds under management. The amount is then determined by the Board of
Directors by taking into account respective job responsibilities and the degree of contribution, and paid to eachdirector once a year. Extraordinary compensation may not be paid when the Company’s performance deteriorates sharply.

Remuneration of Directors and Officers
Basic Approach to the Remuneration of Directors

 he levels and structure of remuneration shall be sufficient to attract, retain, and motivate competent personnel forT
the realization of the Company’s Purpose of “Fueling perpetual growth; investing in bold visions” and its Mission to“Commit to new business creation and jointly shape the future.” emuneration shall motivate our directors, etc., to commit to increasing corporate value and improving not only shortR
term financial results but also medium- to long-term results.
 iven the Company’s business as an investment company managing private equity investment funds, the remunerationGof directors, etc., executing Company business shall reflect fund management performance.
 ith the aim of gaining stakeholders’ trust, the remuneration plan shall be transparent, fair, and rationalized, deterW
mined through an appropriate and transparent process.
There shall be a mechanism to prevent fraud and over-emphasis on short-term performance.

Remuneration of Directors (Excluding Board-Audit Committee Members)
The remuneration of directors (excluding Board-Audit Committee members) is determined by the Board of
Directors based on deliberations by the Nomination and Remuneration Committee.

Stock-Based Compensation
In order to provide incentives to continuously improve the corporate value of the Company and to further promotevalue sharing with shareholders, the Company shall pay remuneration in the form of transfer-restricted sharesto directors excluding those directors serving as Board-Audit Committee members and independent directors(the “Eligible Directors”). The outline of the transfer-restricted share remuneration plan is as shown on page 60.

59Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

60

Corporate Governance
Stock-Based Compensation (continued)
Granting of­transfer-restricted
sharesThe Company shall grant transfer-restricted shares (the “Allotted Shares”) in an amount determined by the
Board of Directors of the Company based on a base amount corresponding to the positions of the Eligible
Directors and a comparison between the Company’s stock price growth rate and the Tokyo Stock Price Index(TOPIX) growth rate for a certain period of time prior to the grant.

Acquisition of the
Allotted Shares
without
consideration

1. The Company shall acquire, without consideration, any Allotted Shares, for which the Transfer Restriction
has not been removed as of the time immediately after the removal of the Transfer Restriction pursuant to
the “Removal of transfer restriction” on the left as a matter of course.
2. If an Eligible Director resigns or retires from his or her position as director or other position of theCompany or its subsidiary, as determined in advance by the Company’s Board of Directors, before theexpiration of the Service Period, the Company shall acquire the Allotted Shares without consideration as amatter of course, unless there are reasonable grounds for the retirement or resignation such as the
expiration of the term of office or the death of the Eligible Director.

Payment ratio against base amountPayment ratio

Amount of stock-based remuneration = Base amount × Payment ratio= Base amount × Against TOPIX growth rate
125%

Against TOPIX growth rate =
75%

75%

125%

Against TOPIX growth rate

A Average closing price of the Company’s common shares for the three months
immediately preceding the month within which the allotment resolution date falls
B Dividend per share for the previous fiscal year
C Average closing price of the Company’s common shares for the three months
immediately preceding the month within which the date one year prior to theallotment resolution date falls
D Average closing price of TOPIX for the three months immediately preceding themonth within which the allotment resolution date falls
E Average closing price of TOPIX for the three months immediately preceding themonth within which the date one year prior to the allotment resolution date falls

The number of the Allotted Shares granted to the Eligible Directors shall be no more than the maximum of
300,000 shares per year as approved at the 50th Annual General Meeting of Shareholders held on June 21, 2022.

Transfer restriction
periodRemoval of transfer
restriction

3. If the Board of Directors of the Company recognizes that an Eligible Director has violated laws, regulations,internal rules, or the Allotment Agreement in any material respect during the Transfer Restriction Period, or in
the case of certain grounds set forth in the Allotment Agreement, the Company shall acquire, without consideration, all of the Allotted Shares held by the Eligible Director at the relevant time as a matter of course.

(A + B) ÷ CD÷EFrom the allotment date to the time of retirement or resignation from director or other position of theCompany or its subsidiary, as determined in advance by the Company’s Board of Directors. Provided, however, if the time immediately after such retirement or resignation is prior to the date after a lapse of threemonths from the end of the fiscal year within which the date of the allotment of the Allotted Shares falls,
the end of the Transfer Restriction Period may be adjusted to a reasonable extent.
1. On the condition that the Eligible Directors continue to hold their position as director or other position of theCompany or its subsidiary, as determined in advance by the Company’s Board of Directors, during a period oftime determined in advance by the Company’s Board of Directors (the “Service Period”), the Company shallremove the Transfer Restriction as of the expiration of the Transfer Restriction Period. Provided, however, that: (a)if an Eligible Director retires or resigns from his or her position as director or other position of the Company or its
subsidiary, as determined in advance by the Company’s Board of Directors, before the expiration of the Service
Period for justifiable reasons; or (b) if an Eligible Director resigns or retires from his or her position as director orother position of the Company or its subsidiary, as determined in advance by the Company’s Board of Directors,
for any reason other than justifiable reasons before the expiration of the Transfer Restriction Period, the numberof the Allotted Shares to be removed from Transfer Restriction and the timing of the removal of Transfer
Restriction shall be reasonably adjusted as necessary even after the expiration of the Service Period.
2. If any matter relating to a merger agreement under which the Company becomes the disappearing company, or acontract of share exchange, a share transfer plan, or any other reorganization in which the Company becomes awholly-owned subsidiary, is approved at a General Meeting of Shareholders of the Company (or by the Board of
Directors of the Company if such approval is not required by the General Meeting of Shareholders of the Company)
during the Transfer Restriction Period, the Company shall, by resolution of the Board of Directors of the Company,
remove the Transfer Restriction with respect to the number of Allotted Shares reasonably determined based on
the period between the commencement date of the Transfer Restriction Period and the approval date of suchreorganization, etc., prior to the effective date of such reorganization, etc.

Monetary compensation
Basic compensation

Extraordinarycompensation(Performancelinked)(Fixed)(1/3)

Stock-based
remuneration(1/3)

Fixed compensation(1/3)
Performance-linked compensation

Note: Fractions in parentheses are approximate.

Director and Independent Director Remuneration in the Fiscal Year Ended March 31, 2023
Total remuneration by category (millions of yen)

Number ofapplicableofficers(persons)

Total­remuneration(millions of
yen)

Basic
compensation(fixed)Basiccompensation(performancelinked)

Extraordinarycompensation

Transferrestricted
share
remuneration

Directors (excluding Board-Audit Committee
members and independent directors)

193

74

20

46

52

2

Directors (Board-Audit Committee members)(of whom, independent directors)

76 (76)76 (76)

–

–

–

4 (4)

Total (of whom, independent directors)

269 (76)

151 (76)

20 (–)

46 (–)

52 (–)

6 (4)Director classification

Total Remuneration for Individuals with Remuneration Amounting to ¥100 million or More in the Fiscal Year
Ended March 31, 2023

Name

Keisuke Miyoshi

Total remuneration by category (millions of yen)Total
­remuneration(millions ofyen)

Directorclassification

Companyclassification

101

Director

Submitting
company

Basiccompensation(fixed)Basiccompensation(performancelinked)

Extraordinarycompensation

Transferrestricted
share
remuneration

37

10

25

26

Note: Non-monetary remuneration to Keisuke Miyoshi (President & CEO) amounted to ¥26.0 million in transfer-restricted shares.

Other

2

INTEGRATED REPORT 2023

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

Compliance
Compliance Promotion System

Initiatives to Prevent Bribery

Information related to JAFCO Group’s compliance is reported to the compliance officer, who supervises

In response to global trends in establishing and strengthening bribery prevention systems, we haveoverall compliance initiatives. The heads of each division are responsible for compliance in their respective­established the Basic Policy on Bribery Prevention to prevent improper transactions.

divisions and promote daily compliance, the Administration Division supports and manages compliancerelated initiatives as the supervising division, and the Internal Audit Division audits these activities. In addition, the Administration Division disseminates information concerning the enactment, revision, and abolitionof laws and regulations to directors, officers, and employees and holds compliance training and seminars. In
case of violation of laws, regulations, internal rules, etc., or administrative incidents, information is reported
to the compliance officer and the supervising division, and immediate remedial measures are then examined
and implemented to take steps to thoroughly prevent recurrence. Furthermore, we have establishedthe JAFCO Hotline as a whistleblowing system for reporting compliance-related matters. The hotline is­connected to the compliance officer, the Administration Division, and an independent director.
For details regarding the compliance management structure, please see page 62.

Initiatives to Prevent Improper Use of Public Funds
Clarification of the Responsibility System
We have established the necessary systems for the handling of public research funds, etc., in accordancewith the Guidelines for Supervision and Auditing of Public Research Funds at Research Institutions (implementation standards) to ensure their proper management and promote appropriate and smooth operation.
Under the President & CEO as the chief administrative officer, the director in charge has been appointed as
the supervising officer and the manager of the department handling competitive funds, etc., as the officer
responsible for compliance promotion.
Consultation and Contact Desks
We have established the following consultation and contact desks for appropriate use of public researchfunds, etc.
C onsultation desk regarding appropriate use and administrative processing of public research funds, etc.
Contact desk for reporting improper use, etc.

Basic Policy on Bribery Prevention
1. Prohibition of bribery
The directors, officers, and employees of
JAFCO Group Co., Ltd. and its group companies(hereinafter “the Company Group”) shall not
engage in any act of offering or accepting
bribes prohibited by the laws and regulationsof each country, either directly or indirectly,with public officials, their equivalents andpersons of interest (hereinafter “public officials, etc.”) to acquire illicit gains in businessor offer benefits to third parties.
2.	Establishment and operation of a bribery
prevention framework
The Company Group shall establish internal
rules related to bribery prevention in lightof the laws and regulations of each country,
while building a framework to prevent bribery
through the establishment of a continuous
monitoring system and an internal whistleblowing system.

3. Education and training
The Company Group shall provide periodic
training to prevent its directors, officers andemployees from offering or accepting bribesand ensure the effectiveness of the bribery
prevention system.
4. Retention of payment records
The Company Group shall accurately record
payments made to public officials, etc., andretain the records properly under the appropriate internal control systems.
5. Internal audit
The Company Group shall conduct periodic
internal audits on the operational status of
the bribery prevention framework.
6. Disciplinary action
The Company Group shall take strict disciplinary
actions based on the Rules of Employment in
the event that a director, officer, or employee
violates this policy or internal rules related tobribery prevention.

61

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Risk Management
Risk Management System

Operations risks

JAFCO Group considers risk management to be an important management issue and has established a system to ensure that operations are
conducted appropriately.
Our risk management rules define the management system in accordance with the characteristics and importance of each risk. The risks
that we manage are classified into categories including investment man-Investment
management
risks

Market risks

Liquidity risks

Private equity
investment

Fall in stock
pricesFundraising /fund operation

Economicsituation

Exchange rate
fluctuation

Sale of unlisted
securities

Specializedbusiness

Economicsituation

Human resource
risks

Compliancerisks

Securing, training, and retaining talented
human
resources

Violations of laws
and regulations
and the Articles
of Incorporation
Business regulations, litigation

ance risks, information management risks, systems risks, back-officerisks, and new risks. After deciding the degree of impact of risk material-

Systems risks

Leakage of business partners’
important information and personal
information

System outages,
malfunctions,virus/malware
infection, orun­authorizedaccess, etc.

Dispatch of upper
management toportfolio companies (compensation for damages,
employer liability)

Competition /loss of­investment
opportunities

agement risks, market risks, liquidity risks, human resource risks, compli-

Information
management
risks

Back-officerisks

New risksDisclosure andnotification of
documents

Infectious­diseases

Settling
accounts

Natural disasters

Back-office work
related to portfolio companies andinvestors, etc.

Pandemics
Reputation, etc.

ization, each risk is assigned to departments in charge and managed.
The risk management system adopts the Three Lines of Defense

First line: Departments in charge

model: risk management by each department in charge (first line), moniline), and monitoring by the Internal Audit Division (third line).
As a preventive measure, the Board of Directors and the Board-Audit
Committee evaluate the effectiveness of risk management based on
management status reports. Investment Committee meetings and port­
folio meetings are also held regularly to appropriately manage investment
management risks, market risks, liquidity risks, and human resource risks,
ensuring the enhancement of the risk management system.

Investment / Structured Investment

Checking and monitoring

toring by the compliance officer and Administration Division (second

HR Planning /HR Operations

Fund Management Division

Administration

Administration

Administration(system)

Asia

Second line: Administration Division

Monitoring

Compliance Officer (Officer in charge of administration)
Administration Division

Monitoring

Committee, whose members include the President & CEO and Partners.

Internal Audit Division

When making decisions, the opinions of staff in charge of investment
evaluation are sought separately from those of Investment Division. The

Meetings/Committees, etc.

Investment Committee meetings, portfolio meetings, and fund valuation
meetings, for reflection in the valuation of portfolio companies and discussion of appropriate ways to address issues.
To create a culture that ensures proper recognition and management ofrisks as an organization, we have put in place a system for prompt reportingand consultation by the relevant divisions in case risk management concerns or issues arise. In addition, we have established the JAFCO Hotline toenable directors, officers, and employees to directly report information on
actions that violate or may violate laws and regulations.

Preventive measures

status of unlisted portfolio companies is reported on a regular basis at

Investment Committee
Portfolio meetings / Fund valuation meetings
Board-Audit Committee
Board of Directors
JAFCO Hotline

Fund
Administration/
management
Asia

Overseas subsidiaries (Asia and United States)

Third line: Internal Audit Division

Investment decisions are made after deliberation by the Investment

J-SOX

J-SOX

Employees
Compliance Officer / Administration Division / Independent Director

Relevant
departments

62

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Risk Management

Responses to Business and Other Risks

Economic
conditions
Investment
management risk

Investments inunlisted securities
Investment
management risk

Specializedbusiness
Investment
management risk

Competition
Investment
management risk

Fall in stock prices
Market risk

Exchange rate
fluctuations
Market risk

Fundraising
Liquidity risk

Business Characteristics and Risks

Countermeasures

Fund performance is affected by political, economic, and social conditions as well as stock market trends in Japan,
Asia, and the United States. In the event of an economic recession, portfolio company performance may decline, and adeterioration in the entrepreneurial environment may lead to a decrease in the number of startups that may be eligible
for investment. If stock or IPO markets suffer a downturn, opportunities to liquidate fund holdings may be limited, withthe potential for significant fluctuations in capital gains and success fees earned from funds.

JAFCO Group diversifies regional risks by making investments in Japan, Asia, and the United States. In addition, the private equity investment funds managed by JAFCO typically make new investments over a period ofaround three years to diversify risks over a certain period of time. We also constantly pursue exit opportunities
not only through IPOs but also through M&As and other means to reduce the impact of stock and IPO market
fluctuations on our earnings base.

A growing percentage of our investments involve startups in the seed and early stages. As companies at thesestages pose high risks stemming from business uncertainty and weak management and/or administrative systems,
we may miss investment opportunities as well as opportunities to generate significant returns on investments. If a
portfolio company’s business does not progress as initially planned and its financial situation deteriorates, there isa risk that all invested capital will be lost. Further, there is no guarantee of exiting through an IPO or M&A, and it is
not certain that a portfolio company can be sold for an amount greater than the investment cost.

Investment decisions are reached through multifaceted discussions held by the respective investment committees at our bases in Japan, Asia, and the United States. In addition, we strengthen management involvement in portfolio companies through highly selective, intensive investment. After investment, we utilize ourabundant resources and accumulated network to provide support for recruiting human resources, acquiring
customers, and creating back-office functions according to the specific needs of portfolio companies. In thisway, we strive to grow the businesses of portfolio companies and enhance their corporate value, thereby
increasing capital gains and investment multiples.

JAFCO Group conducts business activities by concentrating management resources on the management and operation of funds and investments in unlisted securities across Japan, Asia, and the United States. As our business isstrongly affected by changes in global political, economic, and social conditions, as well as by stock and IPO markets
in countries around the world, such changes may negatively impact the Company Group’s performance and financial
position.

While advancing the partnership model introduced in March 2018 and fostering collaboration within the organizational infrastructure we have accumulated, we strive to enhance our investment management capabilities
to improve fund performance and strengthen our fundraising efforts.

Regarding private equity investments, competition for investment deals in promising unlisted companies is­intensifying among competing companies, including specialist venture capital firms and corporate venture capital
programs of business companies. For this reason, we may miss opportunities to invest in promising unlisted companies or fail to generate sufficient capital gains depending on the terms of the investment, which may have anegative impact on fund performance.

We will advance our partnership model and leverage our organizational infrastructure and network to support
portfolio company growth with the aim of differentiating ourselves from competitors and improving fundperformance.

The decline in the prices of our listed shareholdings may negatively impact fund performance as well as the business performance and financial situation of the Company Group. In particular, the negative impact from a fall instock prices may increase substantially if the shareholding ratios at IPO of the Company Group and its funds arecomparatively high as a result of highly selective, intensive investment.

Following the IPO of a portfolio company, we sell our shareholdings after considering factors such as trends inthe stock market, acquisition cost, shareholding balance, stock price, trading volume, the portfolio company’sbusiness conditions, and the agreement period of the fund holding the shares. Additionally, a certain numberof shares may be sold in bulk to an institutional investor through bilateral trading, etc., in the event that various terms and conditions are agreed upon through a securities firm acting as a broker.

Beyond just investing in Japan, the Company Group diversifies its geographic coverage overseas, primarily in Asiaand the United States. Since assets held through overseas investments are denominated in foreign currency (primarily U.S. dollars) exchange rate fluctuations affect fund performance. However, as it requires several years for aninvestment in an unlisted company to achieve an exit, it is difficult to completely eliminate the effects of exchange
rate fluctuations.

Private equity investment funds managed by the Company Group usually require a period of around three years
to incorporate new companies into the portfolio, including overseas investments. The sale of shares in overseas
portfolio companies and the distribution of the proceeds of such sales are paid over the period up to the expiration of the fund term (usually 10 years). As a result, exchange rate risks as of the acquisition and liquidation offoreign currency-denominated assets acquired through overseas investments are diversified over a given period.

The Company Group makes investments by primarily using capital from funds. The fund investors are mainly institutional investors, such as financial institutions, as well as business companies. In the event that we are unable toraise sufficient funds from investors due to deteriorating economic conditions, sluggish business performance, orother factors, our investment activities may be interrupted and our fund management fees may decrease. While we
aim to steadily increase the size of new funds in line with their target markets, we also aim to gradually reduce our
stake in such funds and improve capital efficiency, but failure in doing so may negatively affect the Company
Group’s business performance and financial situation.

We endeavor to build trust with our fund investors and ensure transparency in our fund management by
issuing regular fund management reports, arranging meetings, and engaging in other types of communication
as needed. Additionally, to cultivate a potential investor base, we are working to improve our fundraisingcapabilities by providing opportunities to deepen understanding of the social significance of funds, our investment activities, and fund management through various events and a variety of other contact points.

63

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Risk Management

Responses to Business and Other Risks
Business Characteristics and Risks

Management of
information
Information
management risk

Legal regulations
Compliance risk

Legal violations
Compliance risk

Dispatching ofexecutives
Compliance risk

Securing andtraining of talented
human resources
Compliance risk

In the event that important customer information or personal information held by the Company Group is leaked
through unauthorized external access stemming from an increase in global cyberattacks, or through malicious
intent or negligence on the part of executives, employees, or other related parties, there are risks of claims fordamages, loss of social credibility, etc.

In terms of information management, we have established various in-house rules and regulations that are
thoroughly disseminated to executives and employees through training, etc., and we have strengthened the
security of information systems. Further, we are working to reduce the risk of important documents being
taken outside the Company or lost by implementing and reinforcing cybersecurity measures and promoting
paperless operations.

The Company Group operates and manages funds and invests in unlisted stocks predominantly in Japan, Asia, andthe United States. These activities are subject to the legal regulations of the respective countries where they takeplace, which may limit the Company Group’s activities or increase costs in relation to these regulations.

At the Company Group, the relevant divisions, mainly the Administration Division, gather information andrespond to the introduction, revision, and abolition of legal regulations related to our business.

In the event of violations of relevant laws and regulations or various contracts related to investment activities,
breaches of duty of diligence as general partner of funds, or operational errors, misconduct, or other incidents
which result in damage to portfolio companies, fund investors, or third parties, the Company Group may be held
liable for compensating said damage. Further, there is a possibility that the Company may suffer a loss of social
credibility and/or be subject to administrative sanctions by the supervising authorities in response to said legal
or other violations.

The heads of each division serve as persons responsible for promoting daily compliance in their respective
divisions. The Administration Division supports and manages compliance-related initiatives, and the Internal
Audit Division audits these activities. In the event of non-compliance with laws, regulations, and internal rules,
or if a clerical error has been made, information is collected and reported to the compliance officer and theAdministration Division. Remedial measures are then examined and implemented, and steps to prevent recurrence are reinforced.

The Company Group may dispatch its directors, officers, or employees to serve as executives at portfolio companies to improve the value of said companies. However, in the event that a claim for damages is filed against the
dispatched individual, there is a risk of total or partial economic loss incurred by said individual, as well as the riskof the Company Group’s employer’s liability and loss of social credibility.

To the extent possible, the Company Group takes out directors’ and officers’ liability insurance (D&O insurance)and enters into liability limitation agreements with portfolio companies. The D&O insurance we purchaseincludes coverage for directors, officers and employees dispatched as executives.

Due to the nature of our business, our future growth and success are heavily dependent on talented investment
professionals and other human resources. If we are unable to secure human resources with high potential, theCompany Group’s future growth, performance, and financial position could be adversely affected. In addition, inorder to recruit, train, and retain talented personnel, personnel costs may increase, which may adversely affect
the Company Group’s performance and financial position.

We recruit new graduates on an ongoing basis and actively hire mid-career professionals while working todevelop young personnel, mainly through on-the-job training. We have also introduced a partnership modelin which individuals (Partners) with proven track records make key investment management decisions andcommit to fund performance, enabling them to benefit from investment results. At the same time, we haveestablished a system enabling employees to receive a share of investment results based on their direct andindirect contributions to said results in an effort to retain and develop a diverse and talented workforce.

In the event of an increase in the number of portfolio companies affected by flagging sales or fundraising difficulties due to an epidemic or prolonged outbreak of infectious disease, there is a risk that the Company Group's­provision for investment loss reserves will increase, or that portfolio company exits will slow down. Additionally,
events such as natural disasters or terrorist activities may cause personal and property damage or system failures,­potentially restricting the business activities of the Company, its portfolio companies, and others.

In response to the COVID-19 pandemic, the Company Group has endeavored to prevent its spread by prioritizing the health and safety of its employees and customers. At the same time, it has worked with portfolio
company management teams to raise funds for their businesses, reduce costs, and overhaul their profit plans.
We are also migrating information systems to the cloud and taking other measures to reduce the risk of­personal/property damage and system failures.

In the event that the Company’s sustainability efforts are not fully effective and its ESG investments, efforts toachieve sustainability, and response to ESG-related risks are considered insufficient, we may lose the supportof our stakeholders, which could have a negative impact on our fundraising and investment activities as well as
on our ability to secure talented human resources. As a result, the Company Group’s performance and financial
position may be adversely affected.

The Company’s approach to sustainability can be divided into two types: the enhancement of ESG initiatives
as a corporate entity and contributions to sustainability through business. The efforts we engage in are
described in the described in JAFCO Group’s Value Creation: Sustainability on pages 18–20.

P.26, 34

Infectious diseases
and natural
disasters
New riskESG
New risk

P.18

Countermeasures64Section- 01   Section- 02   Section- 03   Section- 04   Section   Section- 05  INTEGRATED REPORT 2023

66	
Review and Analysis of the Fiscal Year
Ended March 31, 2023
70 Financial Highlights
71 Non-Financial Highlights
72 11-Year Summary
73 Changes in Fund Performance
74 ESG Data
75 Company Information
76 Shareholder/Investor Information

Section- 05

Corporate Data

65

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Review and Analysis of the Fiscal Year Ended March 31, 2023
Business Progress and Results
Changes in the Business Environment and Impact on Portfolio

We recorded significant investment loss reserves in the fourthCompanies during the Fiscal Year Ended March 31, 2023

quarter, anticipating a worsening financial situation and a slumping

In the fiscal year ended March 31, 2023, the stock market continued onexit market.

its correction phase, ongoing since the fall of 2021, with a sense ofGraph 1: T rend in Net Sales, Ordinary Income (loss), and Profit

Attributable to JAFCO Group Co., Ltd. Stockholders(Billions of yen)apprehension, against a backdrop of tightening monetary policy and an

depending on the number of large exits, the continuous improvement

inflationary trend in the United States as well as a sense of cautionin performance of each fund under management will lead to strong

about adjustments to the monetary policy in Japan. Furthermore, politi-

performance over the long term. We will continue to pursue IPOs,

cal, economic, and social conditions are increasingly uncertain with

M&As, and other exits that would generate large capital gains.

40.6

38.5

Although our performance changes significantly each fiscal year

29.9

25.9
13.4
10.2

27.7
21.5

17.0
11.8

18.4
15.1

11.7

14.1

growing credit concerns of financial institutions in addition to surfacing
geopolitical risks. Also, in the domestic IPO market, the number of new–3.0

Profits and Selling, General and Administrative (SG&A) Expenses

listings and the volume of fundraising have decreased, creating difficult

Please refer to graphs 2, 3 and 4.

conditions for large-scale IPOs, with some companies having resched-In the fiscal year under review, capital gains plunged to ¥3.7 billion

uled their listings. Under these circumstances, the impact on the perfor-(total for listed and unlisted companies; ¥12.6 billion in the previous

mance and fundraising of our portfolio companies continued to befiscal year) and success fees also decreased to ¥1.0 billion yen

unpredictable.

2019.32020.32021.3(¥4.5 billion in the previous fiscal year). On the other hand, fund man-Graph 2: P rofits and SG&A Expenses

agement fees increased to ¥3.4 billion (¥2.9 billion in the p­ revious(Billions of yen)

November 2022, under which a series of government support programs

fiscal year) along with the launch of new funds, including the SV7

for startups are being formulated at a larger scale than ever before.

Fund Series (“SV7”). As for SG&A expenses, business taxes increased

In this environment, new technologies such as next-generation AI are

due to the sale of the shares of Nomura Research Institute, Ltd.

garnering significant attention, boosting expectations of the contribu-

Despite being a fund management company, we remain unable to21.6

target markets, while being firmly committed to highly selective,
intensive investment. Accordingly, we will promote the strengthening

ous fiscal year as a result of a decrease in capital gains due to theof our investment management and fundraising capabilities as ourlack of large IPOs from our portfolio companies, partly affected by thegrowth strategy to boost success fees and fund management fees.

severe market environment. Net sales were ¥14.1 billion (down 49.2%

During the fiscal year under review, we had five IPOs in Japan.

from ¥27.7 billion in the previous fiscal year) with an ordinary loss ofCapital gains were ¥3.7 billion and ROI (investment multiple) was held

¥3.0 billion (ordinary income of ¥18.4 billion in the previous fiscal year).

down at 1.6x affected by difficult market conditions.

Meanwhile, due to the sale of our holdings in Nomura Research Institute,

Capital commitments to funds were ¥419.2 billion due to a launchLtd. and a subsequent share buyback, profit rose from the previous fiscalof SV7 and the Taiwan II Fund and the amount subject to manage-

year, with profit attributable to JAFCO Group Co., Ltd. stockholders of ¥40.6

ment fees increased to ¥157.6 billion (¥138.9 billion in the previous

billion (up 169.0% from ¥15.1 billion in the previous fiscal year) and returnfiscal year). Fund management fees were ¥3.4 billion in the fiscal year

on equity (ROE) of 24.7% (7.3% in the previous fiscal year).

under review.

16.6
12.6
15.4

11.3

14.0

4.1

3.9

will expand the size of our future funds in line with the expansion ofDuring the fiscal year under review, revenues declined from the previ-

20.0

16.6

cover SG&A expenses with our core income of management fees. We

Financial Highlights Please refer to Graph 1.

2023.3

Net sales
Ordinary income (loss)
Profit attributable to JAFCO Group Co., Ltd. stockholders

Meanwhile, the Startup Development Five-Year Plan was announced intions of startups to new industry creation.

2022.3

0.5
0.8

1.8

3.4

2019.3

3.6
2.6

3.6

2020.3

8.1
4.3

0.5

1.1

2.5

4.5

4.0
0.5

5.5
1.2

3.7
1.0
4.3

2.9 3.2

2.9 3.5

3.4

2021.32022.32023.3135147

No. of employees

134

131

Income sources
Fund management fees
Success fees
Capital gains

132

Expenses
SG&A expenses (excl. business tax)
Business tax

Notes: 1. Success fees and fund management fees are based on total capital commitments
excluding JAFCO’s interests.
2. These figures do not include those for the U.S. subsidiary (JAV) due to the change inthe scope of consolidation.

66

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Review and Analysis of the Fiscal Year Ended March 31, 2023

Balance of Unlisted Operational Investment Securities andGraph 3: Capital Gains and ROI (investment multiple)

Investment Loss Reserves Please refer to Graph 5.

(Multiple)

Additions to Investment Loss Reserves

In the fiscal year ended March 31, 2023, the balance of unlisted opera-

14.0

tional investment securities increased ¥11.4 billion (from ¥73.9 billion

5.3

15.4

85.3

2.7

7.9

73.9
63.1

2019.32020.3

2

4

7.6

12.6

1.6
3.7

3.1

3.5

8.7

8.2

10.9

9.0

5

2019.32020.32021.32022.32023.3

110

17.4

14.9

12.1

17.0

3.0

2021.32022.3

55.1

49.8

0.7

1.1

1.6

2023.3

14.5

Number of IPOs (companies)

provided favorable circumstances for post-investment fundraising.
However, in the fiscal year under review, we recorded significant invest-

6

6

Unrealized gains (billions of yen)ment loss reserves in the fourth quarter in anticipation of a worsening

balance of investment loss reserves was ¥14.5 billion (¥9.0 billion in the

11.3

3.7

selective, intensive investment, and continuing tailwinds for startups

significantly to ¥7.9 billion (¥1.1 billion in the previous fiscal year). The(Billions of yen)

8.8

reserve additions had thus far remained at relatively low levels as webusiness environment. Additions to investment loss reserves increased

2.8

12.7

ment. The balance of investment loss reserves, the reserve ratio, andfinancial situation and a slumping exit market based on changes in the

3.3

2.6

2.5

in the previous fiscal year) to ¥85.3 billion, due to progress of invest-

increased our involvement in management under our policy of highly

Graph 5: B alance of Unlisted Operational Investment Securities and64

71

Gain (loss) on sale, net (unlisted)

149

125

Reserve ratio (%)

Gain (loss) on sale, net (listed)

Gross ROI

Notes: 1. “ Gain (loss) on sale, net (unlisted)” include other portfolio-related revenues andimpairment losses.
2. Unrealized gains are valuation gains on listed operational investment securities.

17.3

Balance of unlisted operational investment securities
Balance of investment loss reserves
Additions to investment loss reserves
Note: Excluding investment in other funds

previous fiscal year) and the reserve ratio was 17.0% (12.1% in the­previous fiscal year).
The situation remains unpredictable and we continue to monitor
the impact of the changes in the business environment on the private

Graph 4: Capital Commitments to Funds and Fund Management Fees

Graph 6: Total Assets and Net Assets(Billions of yen)(Billions of yen)

performance and fundraising of our portfolio companies are affected.

451.5

433.9

equity market. The reserves may increase even further when the future

222.1
2.6

Assets Please refer to Graph 6.

2.9

332.3

3.4

2.9

184.2
163.2

215.2

188.4

233.0
197.4
159.8
130.7

1.8

A majority of our portfolio consists of unlisted companies, and theirshares are highly illiquid. For this reason, we need to maintain a solid

262.4

419.2

359.1

129.0

132.0

138.9

157.6

7.55

financial base to allow us to continue investing, regardless of thecircumstances.
Net assets at the end of the fiscal year ended March 31, 2023 were¥130.7 billion, a decrease of ¥66.6 billion from the end of the previous
year, primarily due to a buyback and subsequent cancellation of treasury shares. The equity ratio came to 81.8%. Cash and deposit as of theend of the fiscal year under review stood at ¥69.5 billion, including
uncalled commitments to funds, which will be used to invest in ourfunds over the next three years or so.

2019.32020.3

Breakdown of capital commitments
Extended
Newly raised
Under management

2021.32022.32023.32019.32020.3

88.6

84.8

Amount subject to management fees
Fund management fees

Notes: 1. The amount subject to management fees does not include JAFCO’s interests in funds,
funds under extension, and U.S. funds excluded from the scope of consolidation.
2. Translated using the exchange rate as of each fiscal year end, which was ¥133.53 to
the U.S. dollar as of the end of March 2023.

2021.32022.32023.384.7

81.8

Equity ratio (%)

Total assets

Net assets

82.0

67

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Review and Analysis of the Fiscal Year Ended March 31, 2023

Fund Management: Balance of Unlisted Securities
Please refer to Graph 7.

Graph 7: Balance of Unlisted Securities

Graph 9: Portfolio by Region(Billions of yen)In the fiscal year ended March 31, 2023, the balance of unlisted
217.7

securities for all funds was ¥217.7 billion. The balance of unlisted
191.9

securities under management has been increasing as investment
progresses.
Fund Management: Investment Amount

Asia

36.3

174.0

12%

154.4

142.2

74.2

United States

Please refer to Graph 8.

The amounts of investment in each region vary from one fiscal year215

to another. In the fiscal year ended March 31, 2023, investments

236

220

206

261

global basis amounted to ¥41.8 billion.
Fund Management: Breakdown of Portfolio
Please refer to Graph 9 and 10.

We invest in three regions, namely Japan, Asia, and the United States,
to disperse geographical risks.
Broken down by region, Japan accounted for 60%, the U.S. 28%
and Asia 12% of the balance of unlisted securities of ¥217.7 billion.

2019.32020.32021.3Markdowns
Overseas (after markdown)
Domestic/Overseas: Number of companies

2022.32023.3

Domestic (after markdown)

Graph 8: Investment AmountGraph 10: Portfolio by Sector(Billions of yen)

41.8
37.1
34.8

include many startups which utilize cutting-edge technologies tochange business models in existing industries. With the concepts of

8.4

25.1

32.8

5.7

8.6

7.8
5.3

7.6

E
 lectronics

Services, etc.

4%

14%

6.1

1.5

ing, including those that aim to solve social issues amid technological advances or provide new services catering to changing lifestyles.

Japan60%

Notes: 1. An exchange rate of ¥133.53 to the U.S. dollar has been used for all periods.
2. Overseas investments made by the Investment Division in Japan are included
in “Domestic.”

In terms of sector, IT services accounted for 65%. IT services

ESG and the SDGs rapidly gaining traction, many startups are emerg-

217.7 billion

¥

107.2

focused on domestic buyout deals against a backdrop of growing
needs for business succession. The amount of investment on a

28%

3.7
3.9

12.4

10.8

Manufacturing

7%

9.0

217.7 billion¥S oftware

5%

3.0
2.3

19.2

9.0

2019.3
United States

19.3
12.5

2020.3
Asia

2021.3

Japan: Buyout

2022.315.5

2023.3

Japan: Venture

Note: Overseas investments made by the Investment Division in Japan are included in “Japan.”M edical/Biotech

5%

IT services

65%

68

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Review and Analysis of the Fiscal Year Ended March 31, 2023

(Reference) JAFCO-backed IPOs and other exits during the fiscal year ended March 31, 2023
JAFCO backed five IPOs and an M&A exit during the fiscal year under review

JAFCO-Backed IPOs

Microwave Chemical Co., Ltd.
Manufacturing, sales, and licensing based on microwave processing technologies

IPO Date:
IPO Market:
Head Office:June 24, 2022
GrowthOsaka

airCloset, Inc.
Operation of airCloset, an online fashion styling and rental platform

IPO Date:
IPO Market:
Head Office:

July 29, 2022
GrowthTokyo

Linkers Corporation
Operation of Linkers, a matchmaking service for business partners and suppliers

IPO Date:
IPO Market:
Head Office:October 26, 2022
GrowthTokyo

note inc.
Operation of a media platform to distribute works by individual and corporate creators

IPO Date:
IPO Market:
Head Office:December 21, 2022
GrowthTokyo

AnyMind Group Inc.
Development and operation of a next-generation, end-to-end commerce enablement platform

IPO Date:
IPO Market:
Head Office:March 29, 2023
GrowthTokyo

Medical Support Co., Ltd.
Consulting for dental clinics related to management, opening, and operation

Head Office:Tokyo

M&A Exits

69

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

70

Financial Highlights

Net sales / Gross profit margin(Billions of yen)

Ordinary income (loss) / Ordinary income ratio
(%)

29.9

(Billions of yen)

(%)

21.5
68.4

451.5

12.6

419.2

359.1

11.3

332.3

14.1
57.1

66.3

42.3

(3.0)
(21.7)

2020.32021.32022.32023.3Gross profit margin

2019.32020.3

Ordinary income (loss)

2021.32022.32023.31.8
0.8

2019.3
Capital gains

Ordinary income ratio

ROE

Profit attributable to JAFCO Group Co., Ltd.
stockholders / Earnings per share

(%)
(%)

(Billions of yen)

(Yen)

4.5

3.6
2.6

2.5 2.9

2.9

2020.32021.3

Success fees

2022.32023.3Fund management fees

2019.32020.32021.311.8

10.2

2022.315.1

2021.32022.32023.3(Yen)(%)(Yen)(%)
150.0
285.7

2,438.7

2,404.1

2,030.0

84.8

82.0

84.7
81.8

192.5

37.3

124.6

51.0

46.0

39.3

127.6

2019.32020.3

30.8

34.1

109.5

2023.32020.3

Dividend per share /Consolidated total return ratio

88.6

24.7

2019.3

Total funds under management
JAFCO Group’s investment ratio

1,758.9

416.5

7.3

40.1

Book value per share / Equity ratio

40.6

38.5

6.7

40.9

1.0

586.9

6.3

40.4

3.7 3.4

2,769.2

19.1

40.8

54.4

51.8

ROE

(%)

433.9

14.0

11.7

47.8

2019.3(Billions of yen)

15.4

13.4

59.6

Net sales(Billions of yen)

17.0

25.9

61.8

Total funds under management /JAFCO Group’s investment ratio

18.4

27.7

73.5

Capital gains / Success fees /Fund management fees

2021.32022.32023.3

Profit attributable to JAFCO Group Co., Ltd. stockholders
Earnings per share2019.32020.3

Book value per share2021.3Equity ratio

2022.32023.32019.32020.3

Dividend per share

36.9

2021.32022.32023.3

Consolidated total return ratio

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

71

Non-Financial Highlights

Capital gain from overall funds by region

Domestic IPOs

新規上場社数(Including fund investors’ interests)

29.6(Billions of yen)

(Billions of yen)

(Number of companies)

Fund size / Amount of external capital­commitments (per funds)

Deal sourcing and investment execution(Billions of yen)

(Number of companies)

38.4

22.5
19.5

80.0

32.8
5

50.4

2

4.4
2.1

1.8

0.2
(0.7) (0.7)(3.0)

2019.3
Japan

3

7.5

2020.32021.3

United States

Asia

2022.3

22

2,587

50.4

19

42.8

4

11.1
7.9

3,005

60.0
5

8.6

78.3

75.0

2,182

30.0

29

12.1
7.1

6.2

(1.9)

2023.32019.32020.32021.32022.32023.3First price-based capital gains
Number of IPOs (companies)

SV4

SV5

SV6

SV7

2021.3Fund Size
Amount of external capital commitments (per fund)2022.3New contacts  

2023.3

Of which, investment executed

Note: Regional classification is based on the location of the fund thatinvested in the portfolio company making exit.

Notes: 1. One of the IPOs in the fiscal year ended March 31, 2021 was bya Taiwan-based portfolio company on the TSE Mothers Market.
2. Market value at IPO is calculated by multiplying the first pricewith the number of shares held by JAFCO prior to the IPO.
3. The number of newly listed companies includes the TSE
listings of investees in JAFCO Asia.

Note: Fundraising amounts for SV7 (fundraising ongoing) are as ofApril 2023.

Note: Number of new contacts includes both venture and buyout
investments

Greenhouse gas emissions* (Scope 1 and 2)

Number of employees by gender / Ratio of
female employees (non-consolidated basis)

Ratio of female managers (non-consolidated basis)

Ratio of independent directors(Persons)(%)(Persons)(%)(Persons)(%)(t-CO2)

78.4
72.3

71.5
62.7

77

74

56.9

82

76

74

11

12

11

10

10

3
69.1

60.3

66.2

26.7

27.5

29.6

28.2

58.5

28

54.0

28

32

29

16.2

15.6

15.4

4

4

4

66.7

16.9

16.2

57.1

29.9

57.1

57.1

4

42.9

35
57

54

55

57

59
4

3

3

3
2

9.3

2019.3
Scope 1

6.1

3.0

4.2

2020.32021.32022.311.2

2023.3

Scope 2* Figures are for the Tokyo Head Office and the West Japan Branch(formerly Kansai Branch until August 2021) only. The former Chubu
and Kyushu branches are not included.

2019.32020.32021.32022.3

Male employees
Female employees
Ratio of female employees

2023.32019.32020.3

Number of male managers
Ratio of female managers

2021.32022.32023.3

Number of female managers

2019.32020.32021.3

Number of inside directors
Number of independent directors
Ratio of independent directors

2022.32023.3

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

72

11-Year Summary(Millions of yen)
2013.32014.32015.32016.32017.32018.32019.32020.32021.32023.32022.3Operating results
Net sales

22,07244,89061,945

41,15527,85729,47025,87829,85521,512

27,677

14,073 Revenue from operational investment securities

17,74438,49856,471

32,376

20,774

23,47023,291

23,697

16,164

20,257

9,665

4,225

6,279

5,218

8,688

7,062

5,987

2,586

6,155

5,340

7,410

4,402

102

112

256

90

20

12

0

1

6

9

4

8,007

27,302

38,41919,226

12,324

14,252

12,23914,9708,964

16,876(4,414)

Income from fund management
Other
Operating income
Operating margin (%)

36.3

60.8

62.0

46.7

44.2

48.4

47.3

50.1

41.7

61.0

(31.4)

Profit attributable to JAFCO Group Co., Ltd. stockholders

6,583

17,292

27,707

17,018

11,07324,235

10,162

11,83938,50415,08040,571

Net profit margin (%)

29.8

38.5

44.7

41.4

39.8

82.2

39.3

39.7

179.0

54.5

288.3

Cash flows from operating activities

8,476

30,153

28,822

12,788

15,117

7,425(1,350)12,177

8(12,958)(7,245)

Cash flows from investing activities(4,623)2,550(5,744)

11,768(1,580)24,732213(277)

49,154748

69,640Cash flows from financing activities

6,816(18,442)(3,970)(14,092)(5,817)(69,046)(3,923)(3,581)(13,944)(43,474)(46,225)

Cash and cash equivalents at end of period

53,063

68,29089,89599,302

107,179

70,08663,87872,040107,51752,603

69,481
159,847

Cash flows

Financial position
Total assets

164,122

220,167

239,035

214,245

237,902

191,550

184,213

222,059

262,383

233,024

Net assets

112,535

159,347

188,125

189,501

207,855

160,299

163,215

188,366

215,237

197,390

130,745

Total capital commitments

463,864

494,899

420,641

432,912434,772

348,506

359,103433,939

451,475

332,251

419,237

Balance of investment loss reserves*¹

18,843

18,78815,757

15,176

12,332

10,351

9,501

8,229

10,917

8,969

14,490Return on equity (ROE) (%)

6.2

12.7

15.9

9.0

5.6

13.2

6.3

6.7

19.1

7.3

24.7

Return on assets (ROA) (%)

4.0

7.9

11.6

7.9

4.7

12.7

5.5

5.3

14.7

6.5

25.4

Major indicators

Equity ratio (%)

68.6

72.4

78.7

88.5

87.4

83.7

88.6

84.8

82.0

84.7

81.8

Dividend payout ratio (%)

16.8

6.4

16.0

26.1

40.1

15.6

34.1

30.8

11.0

26.5

25.6

Total investment balance

178,721

175,167

155,176

128,839

119,596

120,879

133,424

144,227

164,146

190,046

225,029

695

580

483

378

327

279

266

235

251

269

294

Number of existing portfolio companies
Per share information
Earnings per share (EPS) (¥)

49.5

129.9

208.2

127.9

83.2

229.0

109.5

127.6

416.5

192.5

586.9

Book value per share (BPS) (¥)

845.4

1,197.2

1,413.4

1,423.7

1,561.6

1,727.5

1,758.9

2,030.0

2,438.7

2,769.2

2,404.1

Annual dividend per share (¥)

8.3

8.3

33.3

33.3

33.3

35.7

37.3

39.3

46.0

51.0

150.0

Stock price indices1,090.0

1,543.3

1,490.0

1,153.3

1,246.7

1,680.0

1,321.7938.7

2,193.3

1,875.0

1,893.0

Market capitalization*² (¥ billion)

1,451

2,054

1,983

1,535

1,659

1,559

1,226

871

1,936

1,337

1,029

Price earnings ratio (PER)

22.0

11.9

7.2

9.0

15.0

7.3

12.1

7.4

5.3

9.7

3.2

Price-to-book ratio (P/B ratio)

1.3

1.3

1.1

0.8

0.8

1.0

0.8

0.5

0.9

0.7

0.8

Closing stock price at fiscal year-end (¥)

Investment amounts / Number of companies by regionJapan

11,280/24

10,806/30

7,691/31

12,195/36

15,180/33

18,057/37

11,379/26

24,883/35

21,491/35

23,216/56

27,873/47

United States

6,636/17

5,400/19

10,005/21

5,008/10

3,938/12

7,101/19

10,753/19

8,425/24

7,637/18

Asia

2,588/18

4,667/19

3,947/19

4,236/16

1,786/10

5,063/11

3,014/11

1,459/12

3,684/13

7,775/16
6,060/21

8,630/16
5,286/22*1. Balance of investment loss reserves: Other funds are excluded from the fiscal year ended March 31, 2020.
*2. Market capitalization excludes treasury shares.
Notes: 1. The Company conducted a 3-for-1 stock split of common shares as of February 1, 2022. For the purposes of comparison, figures prior to the fiscal year ended March 31, 2022 have been retroactively adjusted.
		
2. The U.S. subsidiary is excluded from the scope of consolidation from the fiscal year ended March 31, 2019.

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

73

Changes in Fund Performance
Performance of Main Funds in Operation

Funds

Japan
JAFCO SV4
JAFCO SV5
JAFCO SV6
Asia
JATF VI
JATF VII
JAFCO
Taiwan I
JAS-8
United States
Icon II
Icon IV
Icon V
Icon VI

As of March 31, 2023 (Preliminary basis)(Billions of yen [Japan], Millions of U.S. dollars [United States / Asia])

Fair value valuation (Japan: Reference value)
Capitalcommitments
Total
Previous
Paid-in
Remaining
Establishment (total funds
distribution
Net IRR
Multipleyear
capital (PI)valuation
under
(D)
(%)
(D + R)/PI
multiple(R)management)(2022/3)

Mar. 2013
Aug. 2016
June 2019

60.0
75.0
80.0

1.00
0.95
0.93

1.61
0.12
0.00

0.66
1.01
1.03

16.2
3.6
4.9

2.27
1.18
1.11

2.36
1.21
1.01

Mar. 2013
Apr. 2017

150
140

1.00
0.98

2.31
0.00

0.27
0.86

21.8
—

2.57
0.88

2.92
0.96

Sep. 2019

67

0.95

0.00

1.17

12.9

1.24

—

Apr. 2021

130

0.45

0.00

0.40

—

0.90

—

Apr. 2006
Feb. 2010
May 2012
Dec. 2015

108
150
260
375

0.96
1.00
0.99
0.90

1.37
2.45
0.53
0.07

0.01
0.49
0.80
1.46

6.4
11.7
4.6
12.4

1.34
2.55
1.28
1.56

1.34
2.58
1.34
1.54

Fund Performance of Fully Liquidated Funds(Billions of yen)

Marked-down valuation
Remaining
Multiplevaluation Net IRR (%)(D + R)/PI
(R)

0.22
0.69
0.80

13.1
—
—

1.84
0.85
0.86

Previousyear
multiple(2022/3)

1.79
0.92
0.91

Notes: 1. Figures for U.S. and Asian funds are after annual audit based on GAAP (U.S.) and International Accounting Standards, respectively.
2. Marked-down valuation: Only markdowns are recorded, in principle. Markups are not recorded until the shares are sold or listed.
3. Net IRR of domestic funds are those of capital call funds of each domestic fund series.
4. Net IRR and multiples are calculated from the investors’ point of view based on actual date and amount of distribution, and residual net assets
as of the date of calculation.
5. Total distribution of U.S. funds includes success fee equivalents, which are excluded when calculating net IRR and multiples.
6. Figures for paid-in capital, total distribution and remaining valuation are the ratio to capital commitments.
7. Figures are rounded to the nearest unit.

Fair Value Valuation
Fair value valuation is required under international standards such as IFRS and GAAP (U.S.) for investment securities held byventure capital and other investment firms, and the International Private Equity and Venture Capital Valuation (IPEV) Guidelines
have been used as the basis for the fair value valuation of unlisted securities. For some time now, we have performed fair value
valuation for our U.S. and Asian funds based on these standards.
For our domestic funds, in response to investors’ requests, we also conduct a fair value valuation of unlisted securities basedon the IPEV Guidelines. These figures are provided for reference purposes and are unaudited. This valuation differs significantly
from the limited partnership accounting standards adopted by our funds as markups are also recorded for unlisted securities
whose market valuation exceeds acquisition costs.
Valuations are conducted using key indicators—the terms of the latest round of financing, portfolio company performance,
and the valuation multiple of similar listed companies (multiple method). Certain conditions are also applied in accordance withthe situation of portfolio companies. Although valuations are calculated using a specialized platform (Qval*) after a careful
examination of the available information, either the most recent or as of the reference date, we cannot guarantee complete
accuracy. While we emphasize consistency in the conditions applied, differences may arise due to changes in the situation of
portfolio companies. This can have a substantial impact on the valuation of unlisted securities as a whole.
* Qval is a fair value valuation system for unlisted securities provided by S&P Global Market Intelligence. It is used by many venture capital andprivate equity funds, mainly in the United States.

Domestic funds

JAFCO No.1
JAFCO No.2
JAFCO No.3
JAFCO No.4
JAVP
JAFCO No.5
JAFCO No.6
JAFCO G-3
JAFCO G-4
JAFCO R1
JAVP2
JAFCO G-5
JAFCO R2
JAFCO R3
JAFCO G6
JAFCO G7
JAFCO MBO1
JAFCO G8
JAFCO G-9
JAFCO MBO2
JAFCO V1
JAFCO V2
JAFCO SV3

Establishment

Apr. 1982
July 1982
Mar. 1983
June 1984
Aug. 1985
Dec. 1985
Feb. 1989
Jan. 1990
Feb. 1990
Apr. 1991
Mar. 1992
Jan. 1991
Apr 1992
Apr. 1995
Apr. 1995
Jan. 1997
Nov. 1999
Mar. 2000
Sept. 2002
Feb. 2004
Mar. 2004
Sept. 2005
July 2007

End of term

Capitalcommitments(total funds
undermanagement)

Dec. 1993
July 1994
Mar. 1995
Dec. 1996
Sept. 1998
Sept. 1998
Feb. 2001
Jan. 2002
Feb. 2002
Nov. 2003
Dec. 2003
Mar. 2004
June 2004
June 2007
June 2007
Dec. 2008
Dec. 2009
Dec. 2011
Dec. 2014
Dec. 2014
Dec. 2017
Dec. 2016
Dec. 2021

1.6
2.8
7.0
8.0
U.S.$37M
5.3
5.5
14.0
10.5
11.4
U.S.$68M
12.2
5.2
5.0
9.0
12.2
28.0
34.4
23.0
50.0
53.7
94.0
146.5

Establishment

End of term

Capitalcommitments(total funds
undermanagement)

Nov. 1994
June 1997
July 2003
Aug. 2007
Nov. 2000
Feb. 2004
Dec. 2005
Aug. 2007
Jan. 2010

Dec. 2006
Dec. 2006
Aug. 2020
Dec. 2018
Mar. 2012
Dec. 2014
Dec. 2017
Sept. 2019
Dec. 2021

—
—
113
150
178
100
168
200
130

Against 1.0 in capitalcommitments
Paid-in capital
(PI)

1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
0.92
1.00
1.00
1.00

Total
distribution (D)

3.26
3.07
3.53
2.91
4.08
2.23
1.00
0.97
0.98
1.10
1.17
1.39
1.46
2.38
2.13
1.55
1.17
0.92
1.06
1.09
0.89
0.85
1.70

Multiple

Net IRR

D/PI

(%)

3.26
3.07
3.53
2.91
4.08
2.23
1.00
0.97
0.98
1.10
1.17
1.39
1.46
2.38
2.13
1.55
1.17
0.92
1.06
1.18
0.89
0.85
1.70

16.7
14.9
17.2
15.3
24.7
10.1
—
—
—
1.2
3.2
4.2
4.4
12.9
10.9
6.2
4.0
—
0.9
5.0
—
—
10.3

(Millions of U.S. dollars)

Overseas funds

USIT (US)USIT (US)Icon (US)Icon III (US)JATF I (Asia)
JATF II (Asia)
JATF III (Asia)
JATF IV (Asia)
JATF V (Asia)

Against 1.0 in capitalcommitments
Paid-in capital
(PI)

1.00
0.97
0.95
1.00
1.00
1.00
0.95

Total
distribution (D)

2.67
1.58
0.94
1.33
1.16
1.10
0.70

Multiple

Net IRR

D/PI

(%)

7.06
5.37
2.67
1.65
0.99
1.33
1.16
1.10
0.74

Notes: 1. Net IRR is calculated after subtracting management fees and success fees.
2. Figures are rounded to the nearest unit.
3. Total distribution of U.S. funds includes success fee equivalents, which are excluded when calculating net IRR and multiples.

63.8
63.7
12.7
13.6
—
6.7
4.1
1.8
—

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

74

ESG Data
Environmental

Governance
Unit

Greenhouse gas emissions(Scope 1 and Scope 2)
Energy consumption

Electricity
consumption

2019.32020.32021.32022.32023.3

t-CO2

78.4

72.3

56.9

62.7

71.5

Thousand kWh

91.4

88.2

64.7

77.5

82.1

SocialEmployees
Number of employees(non-consolidated)
Number of employees(consolidated)*1

Unit2019.32020.32021.32022.32023.3Headcount

105
77
28
134
86
48
17 y, 2 m
15 y, 11 m
20 y, 9 m
43 y, 10 m
42 y, 8 m
47 y, 3 m
3.8
2,126
40.0

102
74
28
131
83
48
17 y, 4 m
16 y, 1 m
20 y, 9 m
44 y, 3 m
43 y, 1 m
47 y, 7 m
9.4
2,060
43.6

103
74
29
132
84
48
17 y, 1 m
15 y, 11 m
20 y, 3 m
44 y, 3 m
43 y, 4 m
46 y, 6 m
13.3
2,109
35.1

108
76
32
135
83
52
16 y, 3 m
15 y, 6 m
18 y, 1 m
44 y, 0m
43 y, 5 m
45 y, 5 m
6.7
2,144
40.9

117
82
35
147
93
54
14 y, 11 m
13 y, 11 m
17 y, 4 m
42 y, 11 m
42 y, 2 m
44 y, 9 m
8.9
2,128
47.3

%

—

—

99.4

98.2

96.3

Headcount

%
%

0
0
0
6
4
2
0.0
26.7

2
2
0
2
1
1
0.0
27.5

4
2
2
13
11
2
50.0
28.2

1
1
0
11
6
5
0.0
29.6

4
3
1
16
12
4
25.0
29.9

6.4

9.3

11.9

10.9

10.2

%

43.1
16.2

40.7
15.6

39.3
15.4

43.5
16.2

44.1
16.9

10.0

10.3

10.3

9.4

6.1

21.1
0.0
—

20.0
0.0
—

19.4
0.0
—

22.2
25.0
—

26.3
25.0
100.0

Male
FemaleHeadcount
Male
FemaleAverage years of service

Years, months
Male
FemaleAverage age

Age
Male
FemaleTurnover rate*2
Average annual working hours
Annual paid leave utilization rate
Remote workingi­ mplementation rate*3
Recruitment / Diversity
Number of new hires(new graduates)
Number of new hires(mid-career)

%
Hours
%

Male
FemaleHeadcount
Male
FemaleRatio of female employees among new hires
Ratio of female employees
Front office (investment, branches, structured
investment)
Middle/back office (other than the above)

Ratio of female managers
Front office (investment, branches, structured
investment)
Middle/back office (other than the above)
Men
Childcare leave utilization rate*4
Women

Human resources development
Average hours for training
and human resources
development

%

Unit

Corporate governance
Number of directors

InsideMale
FemaleIndependent
Male
Female

5.1

10.1

10.1

13.8

17.6

Persons

Average term of office forYear
directors
Number of Board ofTimes
Directors meetings held
Average attendance rate%for Board of Directors
meetings
Ratio of independent%
directors%
Ratio of female directors
InsidePersons
Number of Board-Audit
Committee members
Independent
Number of Board-Audit
Times
Committee meetings held
Average attendance rate%for Board-Audit Committee
meetings
Persons
Number of Nomination andRemuneration Committee
Insidemembers
Independent
Number of Nomination andTimes
Remuneration Committee meetings
held
Attendance rate for
Nomination and%Remuneration Committee
meetings
Director remuneration (excludes direc- Millions of yen
tors serving as Board-Audit Committee
members)
Basic compensation
Extraordinary compensation
Transfer-restricted share remuneration
Total

Remuneration of directors serving as
Board-Audit Committee members

Basic compensation

2020.32021.32023.32022.3

4
4
0
3
3
0

3
3
0
4
3
1

3
3
0
4
3
1

3
3
0
4
3
1

2
2
0
4
3
1

6 y, 4 m

6 y, 9 m

7 y, 9 m

8 y, 9 m

8 y, 9 m

13

13

14

13

17

100

100

100

100

100

42.9

57.1

57.1

57.1

66.7

0.0
1
3

14.3
0
4

14.3
0
4

14.3
0
4

16.7

13

14

14

14

14

100

100

100

100

100

5
2
3

5
1
4

5
1
4

5
1
4

5
1
4

1

3

3

5

3

100

100

100

100

100

90
89
—
179

91
89
—
180

90
84
—
175

90
92
—
183

94
46
52
193

80

75

73

75

76

51

68

73

75

76

0
4

Millions of yen

Basic compensation

Remuneration of independent directors*5
Hours peremployee

Persons2019.3

Millions of yen

Note: Figures are calculated on a non-consolidated basis unless marked with an asterisk.
*1 Figures exclude the U.S. subsidiary.
*2 Figures include employees who retired at mandatory retirement age.
*3 The percentage of employees who work from home at least once per month. Data collection began in October 2020. Prior data is not available.
*4 Instances where there are no eligible employees for childcare leave are indicated with “—”. Instances where there are eligible employees but nonethat have made use of childcare leave are indicated with “0.0”.
*5 The remuneration of independent directors is included in the remuneration of directors who are Board-Audit Committee members.

Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

Company Information (As of March 31, 2023)
Information Disclosure System

Company Profile
Trade name

JAFCO Group Co., Ltd. (JAFCO)

President & CEO

Keisuke Miyoshi (from April 2022)

The Company publishes this Integrated Report to communicate its value creation story using financial and non-financial information.
To promote communication with our stakeholders, we not only share information through this report but also in a range of other ways.
Type of information

Address of head office T oranomon Hills Mori Tower 24F,
1-23-1 Toranomon, Minato-ku, Tokyo
105-6324, Japan
Established

Information disclosure media

April 5, 1973

Capital¥33,251 million

Number of employees

147 (consolidated),
117 (non-consolidated)

Financial instruments
business operator

 irector-General of Kanto Local
D
Finance Bureau (Kinsho) No. 1693

Industry organization
membershipJapan Investment Advisers
Association
Type II Financial Instruments Firms
Association

Integrated Report

Discloses the overall picture of the Company’s value creation for sustainable growth in an integrated manner, providing a systematic explanation of our strategies and measures from bothfinancial and non-financial standpoints

Securities Report(in Japanese only)

Provides an overview of the Company, the status of its business, financial information such as
financial statements, and non-financial information such as the corporate governance structure,
based on the Financial Instruments and Exchange Act

Financial summaries andbriefing materials

Provide quarterly financial information

Fact Book

Published once a year separately from the Integrated Report, providing a summary of theCompany’s disclosure data, including the results of previous fiscal years and management
indicators

Corporate Governance
ReportProvides information on the Company’s corporate governance based on stock exchange listing
rules

JAFCO Group website

Provides more detailed information and data that are not included in the above media

Financialinformation

Nonfinancial
information

75Section- 01   Section- 02   Section- 03   Section- 04   Section- 05

INTEGRATED REPORT 2023

76

Shareholder/Investor Information (As of March 31, 2023)
Stock Information

Shareholder Composition

Authorized number of shares

240,000,000

Number of shares issued

56,060,000

Number of shareholders

12,385

Listed market

TSE Prime Market

Securities code

8595

Administrator of shareholders’ registerand banking corporation

Mitsubishi UFJ Trust

Fiscal year

Breakdown by Shareholder Category

Total Shareholder Return

Treasury shares

March
2020

March
2021

March
2022

March
2023

3.0%

JAFCO Group

80.9%

60.4%

137.9%

121.9%

131.9%

Individuals, etc.

Reference:
TOPIX Net Total Return

95.0%

85.9%

122.1%

124.6%

131.8%

Foreign
institutional
investors

19.8%

 pril 1 to March 31Aof ­the following year

March
2019

Major Shareholders

41.7%

Domestic
institutional
investors, etc.

Name

35.5%

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

Share Price and Trading Volume(Yen)

(Thousand shares)

3,000
2,750
2,500

Number ofshares held(Thousandshares)Shareholding
ratio
(%)

9,375

17.2

Custody Bank of Japan, Ltd. (Trust Account)

3,474

6.4

Nippon Life Insurance Company

1,158

2.1

STATE STREET BANKAND TRUST COMPANY 505103

1,083

2.0

STATE STREET BANKWEST CLIENT - TREATY 505234

894

1.6

GOVERNMENT OF NORWAY

818

1.5

2,000

STATE STREET BANKAND TRUST COMPANY 505019

808

1.5

1,750

JPMorgan Securities Japan Co., Ltd.

795

1.5

STATE STREET BANKAND TRUST COMPANY 505001

760

1.4

DFA INTL SMALL CAP VALUE PORTFOLIO

753

1.4

2,250

1,500
1,250

50,0001,000

40,000750

30,000500

20,000250

10,0000

April 2014
Share price (left)April 2015

April 2016

Trading volume (right)

April 2017

April 2018

April 2019

April 2020

April 2021

April 2022

April 2023

0

Notes: 1. The Company holds 1,675 thousand treasury shares, which are excluded from theabove list of major shareholders.
2. The shareholding ratio is calculated after deducting the number of treasury shares.