September 20, 2023
Company Name: Sun Frontier Fudousan Co., Ltd.
Representative: Seiichi Saito,
President and Representative Director(Stock Code: 8934, TSE Prime Market)
Inquiries: Takeshi Hirahara,
General Manager ofCorporate Planning Department
TEL: 03-5521-1551

Notice of Offering of 1st Series Unsecured Convertible Bonds with Share Acquisition
Rights to be Issued Through Third-Party Allotment
Sun Frontier Fudousan Co., Ltd. (the “Company”) hereby announces that today its Board of Directors
resolved to conduct an offering of convertible bonds with share acquisition rights (the “Bonds with Share
Acquisition Rights,” and the bonds thereof are hereinafter referred to as the “Bonds,” and the shareacquisition rights attached thereto are hereinafter referred to as the “Share Acquisition Rights”) to be issued
through a third-party allotment. The details are described below.
Please also refer to the “Notice of Business Alliance” dated today.
1.

Overview of Offering

1st Series Unsecured Convertible Bonds with Share Acquisition Rights
(1)
(2)
(3)

Due date of payment
Total number of shareacquisition rights
Issue price of Bonds andShare Acquisition Rights(4)

Number of dilutive
shares resulting fromissuance(5)

Amount of funds to be
procured
Exercise price orconversion price
Method of offering or
allotment
Scheduled allotee
Other Matters

(6)
(7)
(8)
(9)

October 6, 2023
49 acquisition rights
The issue price of each bond is 204,488,160 yen (100.2 yen per 100 yenof the face value; the face value of each bond is 204,080,000 yen)
However, no payment in exchange for the Share Acquisition Rights isrequired.
6,434,900 shares
A conversion price adjustment will not be conducted with respect to theBonds with Share Acquisition Rights, so there is no maximum
conversion price or minimum conversion price.
10,019,919,840 yen (estimated net proceeds: 9,999,318,200 yen)
1,554 yen per share
By way of third-party allotment
AAGS S5, L.P.
The Company will agree to the following matters with respect to theconversion, exercise, and transfer of the Bonds with Share Acquisition
Rights and the Share Acquisition Rights in the subscription agreement(the “Subscription Agreement”) to be executed with AAGS S5, L.P. (the“Scheduled Allotee”) on September 20, 2023.
(i) In principle, the Scheduled Allotee may not exercise the ShareThis press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
1【to さん：フッターのディスクレーマーについても英訳をお願いいたします。】
financial conditions, foreign exchange trends, or other risk factors.

Acquisition Rights within one year from the Closing Date.
(ii) In principle, the Scheduled Allotee may make a request for the
exercise of the Share Acquisition Rights only if the closing priceof regular trading of common shares of the Company for thebusiness day immediately preceding the day on which the request
for the exercise of the Share Acquisition Rights becomes effective
is not less than the amount obtained by multiplying the conversion
price which is effective on the day on which the Scheduled Allotee
intends to make a request for the exercise of the Share Acquisition
Rights by 1.20.
(iii) The transfer of the Bonds with Share Acquisition Rights by the
Scheduled Allotee requires approval by resolution of the Board of
Directors of the Company.
(iv) If the Scheduled Allotee transfers the shares acquired through theconversion of the Bonds with Share Acquisition Rights throughoff-market trading (excluding trading in which the purchaser isunidentifiable, such as PTS trading or off-floor trading), theScheduled Allotee will not transfer such shares to certain
competitors designated by the Company or to activists without theprior written approval of the Company.
(v) In addition, the details of the following matters will be specified
in the Subscription Agreement. For further information, pleaserefer to “(5) Lockup and First Refusal Right under “6. Reason for
Selection of Scheduled Allottee, Etc.” below.
Lockup and first refusal right2.
Purpose of and Reasons for Offering
Founded in 1999, this year our corporate group is approaching its 25th anniversary. Since its founding, thecorporate group has consistently upheld “Altruism” (i.e., a mindset that places the highest priority on how
much one can contribute to people and society through one’s work throughout life, and a spirit ofconsideration for others) as our corporate moto, and the corporate group has strived to manage itself with thephilosophy of “Protect all employees, pursue the material and intellectual happiness, with the heart ofcoexistence we contribute to the prosperity of society and humankind.” In particular, the corporate groupis continuing to focus its efforts toward solving three important issues for realizing a sustainable society(materiality): “environmental protection,” “regional revitalization,” and “human resource development.”
Over the last several years, the promising and talented individuals in our corporate group have grown by
overcoming the global financial crisis and the coronavirus pandemic, and as there is approximately a year
and a half remaining in the current mid-term management plan, which will end in the fiscal year ending on
March 31, 2025, the corporate group is aware that now the time has come to accelerate our growth strategy
for the future while also drawing up our next mid-term management plan.
The business of our corporate group is comprised of the following four segments. First, we have the “RealEstate Revitalization Business” and the “Real Estate Service Business,” which aim to conduct urban
development through the revitalization and efficient use of existing real estate. Next, we have the “Hoteland Tourism Business,” which is tied to the promotion of regional development. Finally, the overseas
development and management business, construction business, and the like fall under our “Other” segment.
In the midst of these segments, while our original “Real Estate Revitalization Business” has high social
significance from both an environmental and economic perspective, the “Real Estate Service Business,”which serves as a platform, enhances our customer base, and the synergy between these two businesses will
result in the corporate group further expanding our existing businesses, which have established pioneering
positions. At the same time, the corporate group will meticulously and boldly take on challenges for new
businesses in the field. In addition, the “Hotel and Tourism Business,” which engages in our hotel
development and management businesses, is aiming to have 10,000 guest rooms in operation in the next 10
years, through the further refinement of the business hotels the corporate group established through successThis press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
2【to さん：フッターのディスクレーマーについても英訳をお願いいたします。】
financial conditions, foreign exchange trends, or other risk factors.

in its past challenges and by improving our “heartwarming and fun hotel” brand. Furthermore, we will
deepen the possibility of growth opportunities through M&A in all of our business segments. Through thesepolicies, we are endeavoring to grow the businesses of the corporate group and improve our market
competitiveness while also continuing to find solutions to the important issues mentioned above.
In order to steadily advance each of the abovementioned measures, the corporate group believes thatprocuring investment funds and M&A funds for the hotel development business and others will be necessary,and also that acquiring a high level of external professional support will be effective. Under thesecircumstances, the corporate group has received a proposal from Advantage Advisors Co., Ltd. (Address:
Toranomon Towers Office 4-1-28 Toranomon, Minato-ku, Tokyo; Representative Director: Taisuke
Sasanuma) (“Advantage Advisors”) regarding a business alliance with the corporate group in which
Advantage Advisors would provide information, introduce clients, and provide business support as well as
procure financing through third-party allotment for funds for which Advantage Advisors provides services.
After careful consideration of Advantage Advisors’ extensive track record in dealing with listed companies
and the specifics of their proposal, the corporate group has determined that the proposal from Advantage
Advisors is the most appropriate in order to improve the corporate value of the corporate group, because it
can receive from Advantage Advisors growth support consistent with the corporate group’s mission and needs
when tackling the management issues of which the corporate group is aware, and because the corporate groupconsiders the issuance of the Bonds with Share Acquisition Rights by way of third-party allotment as statedbelow in the “Reasons for selecting financing through bonds with share acquisition rights” section in “2.
Specific use of funds to be procured” under “3. Amount of funds to be procured, purpose of use, andscheduled timing of expenditure” to be the most appropriate fundraising method. Therefore, the corporategroup has resolved to conduct the financing through a third-party allotment and to execute a business allianceagreement with Advantage Advisors. The corporate group believes that, by receiving various support from
Advantage Advisors through the use of the management know-how, networks and the like held by the
Advantage Advisors group including Advantage Advisors, it will be able to steadily promote each of theabovementioned measures and also be able to realize its management philosophy and increase its corporate
value. Specifically, the corporate group expects to be able to receive growth support such as management
support in the form of searching functions and enhanced examination process of M&A candidates, supply of
personnel with a high level of expertise and experience, establishment of various measures, and execution of
those measures jointly with the corporate group.
Please also refer to the timely disclosure “Notice of Business Alliance” dated today for the details concerning
the business alliance.
3.

Amount of funds to be procured, purpose of use, and scheduled timing of expenditure(1)

Amount of funds to be procured (estimated net proceeds)
Estimated amount of issuanceTotal amount to be paid in (yen)costs (yen)10,019,919,840

Note:

1.
2.

20,601,640

Estimated net proceeds (yen)9,999,318,200

Consumption taxes and the like are not included in the estimated amount of issuance costs.
Issuance costs are mainly comprised of attorney’s fees, expenses for investigating anti-social
forces, expenses for evaluating the bonds with share acquisition rights, fiscal agent fees,
registration and license taxes, other administrative expenses (printing service expenses,
registration expenses), and the like.

(2)
Specific use of funds to be procured
In respect of the 9,999,318,200 yen of the abovementioned estimated next proceeds, the funds for (i) the
acquisition of land in conjunction with new hotel development and construction work investment and (ii)
M&A funds primarily for the hotel development business and construction business are scheduled to by
allocated by no later than March 2026; the breakdown of such funds is as follows.
Until their actual expenditure, the procured funds will be invested and retained in secure financial assets such
This press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
3【to さん：フッターのディスクレーマーについても英訳をお願いいたします。】
financial conditions, foreign exchange trends, or other risk factors.

as the bank deposits of the Company.
Specific use of funds(i) Acquisition of land in
conjunction with new hotel
development and construction
work investment(ii) M&A funds primarily for the
hotel development business andconstruction businessAmount(Millions of yen)
8,000

1,999

Scheduled timing ofexpenditure
October 2023 to March 2026

October 2023 to March 2026

Use of proceeds

As stated above in “2. Purpose of and Reasons for Offering,” the corporate group mainly performs the“Real Estate Revitalization Business” and the “Real Estate Service Business,” which aim to conduct urban
development through the revitalization and efficient use of existing real estate, as well as the “Hotel andTourism Business,” which is tied to the promotion of regional development. However, in order tosteadily advance these measures for the future while also drawing up our next mid-term management plan,
the corporate group believes that procuring investment funds and M&A funds for the hotel development
business and others will be necessary. Accordingly, the corporate group will allocate the funds procuredby the issuance of the Bonds with Share Acquisition Rights to the following uses.

(i)

Acquisition of land in conjunction with new hotel development and construction work
investment
For sustainable future growth, Sun Frontier Hotel Management Inc., a consolidated subsidiary of theCompany, develops and operates hotels throughout Japan. Its basic business model is to obtain
development profits by selling the real estate after operating the hotels for a certain period of time, andthen continue to operate those hotels by way of leaseback to obtain operational income. It is alreadyprogressing with hotel development in places like Ishikari-shi, Hokkaido, Sakata-shi, Yamagata,Fujikawaguchiko-machi, Yamanashi, Hakone-machi, Kanagawa, Atami-shi, Shizuoka, Ozu-machi,
Kumamoto, and Ishigaki-shi, Okinawa, and going forward will make progress in hotel development inother regions as well. In order to realize the foregoing projects, the Company will allocate
approximately 8,000 million yen through financing to Sun Frontier Hotel Management Inc. as a part ofthe expenses for acquiring land, construction work, and the like.
(ii)
M&A funds primarily for the hotel development business and construction business
The corporate group is always searching for business opportunities through M&A in which the operating
results of its existing hotels will be further increased through added value based on its own management
ability. It fully scrutinizes promising transactions from a risk and return perspective, and proactively
and aggressively tackles those transactions. In addition, for the Real Estate Revitalization Business
which is the corporate group’s main business and in which the corporate group acquires small andmedium-sized office buildings, raises rents and operation rates by increasing the value of those buildings,
increases earning power, and ultimately sells those buildings, the corporate group is establishing its
internal value chain within the group in relation to a series of services from the purchase of buildings to
the revitalization of, attraction of tenants for, and management after the sale of, those buildings.
Therefore, further enhancement of the value chain by the reinforcement of the construction businessthrough M&A is one of the corporate group’s vital strategies for increasing returns. As stated above, thecorporate group will allocate 1,999 million yen as investment funds to these target businesses (however
such allocation will not be limited to those two businesses) in order to continuously and flexibly examine
M&A transactions. With respect to such M&A investment funds, the corporate group will respectively
allocate M&A funds for the Hotel Development Business to Sun Frontier Hotel Management Inc. throughfinancing from the Company thereto and M&A funds for the construction business to the Company. No
specific M&A transaction is planned at this moment. If Sun Frontier Hotel Management Inc. or theCompany do not execute M&A transactions in such amount as set out above within the scheduledThis press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
4【to さん：フッターのディスクレーマーについても英訳をお願いいたします。】
financial conditions, foreign exchange trends, or other risk factors.

allocation period described above, the corporate group will allocate additional funds for the uses stated in
Item (1) above.
Reasons for selecting financing through bonds with share acquisition rights
In securing the funds necessary for further business expansion and increased earning power, the Company
examined a number of financing methods. As a result, the Company concluded that the issuance of theBonds with Share Acquisition Rights by way of third-party allotment is the most appropriate financing
method for the following reasons.
(i)
In the case of financing through issuing new shares by way of public offering or third-party
allotment, while it is possible to complete financing by issuing new shares at the same time andwithout requiring redemption, because the number of issued shares immediately increases, there
is a possibility that such method may have a significant impact on the share price. On theother hand, because financing through issuing convertible bonds with share acquisition rights
does not immediately dilute shares, it is expected that the impact on the share price will be
relatively lessened. In addition, because the total amount of 10,019,919,840 yen is to be paidon the due date of payment, the Company may procure a large sum of funds at the time of theissuance.
(ii)
In the case of financing through issuing stock acquisition rights, while it is generally possible
to avoid immediate dilution as in the case of financing through issuing convertible bonds withshare acquisition rights, it is believed that there are certain demerits in which there is apossibility that the Company would be unable to procure funds at the time or in the amount thatit initially expected.
(iii)
In the case of financing through bank loans, while it would be necessary to pay proportionate
interest and repay the principal at maturity, it is generally possible to procure a considerable
amount of funds without interest through the issuance of convertible bonds with shareacquisition rights, and if the share price rises and the conversion into shares processes in the
future, it is expected that the Company’s equity capital may be enhanced and its financial
foundation may be reinforced without the need to repay the amount equivalent to the face value
amount.
Merits and demerits of the financing scheme through issuance of the Bonds with Share Acquisition
RightsMerits(i)
By issuing the Bonds with Share Acquisition Rights, it is possible to procure certain funds at
the time of the issue of the securities.
(ii)
By issuing the Bonds with Share Acquisition Rights, it will be possible to disperse the impact
on the share price because while future expansion of the Company’s equity capital can be
expected, the conversion is expected to be executed in stages.
(iii)
The conversion price of the Share Acquisition Rights is set to be 1,554 yen, which is equal tothe closing price of the trading day immediately prior to September 20, 2023, the date ofresolution for issuance, and it will be agreed on in the Subscription Agreement that, in principle,
it will be possible to make a request for the exercise the Share Acquisition Rights only if theclosing price of regular trading of common shares of the Company for the business day
immediately preceding the day on which the request for the exercise of the Share Acquisition
Rights becomes effective is not less than the amount obtained by multiplying the conversion
price by 1.20. Therefore, exercise of the Share Acquisition Rights at a level not less than thecurrent share price level may be expected. In cases such as issuing shares with put options
where the delivery of common shares of the Company in an amount less than the market priceis stipulated or granting the share acquisition rights where the delivery of common shares of theCompany for in an amount less than the market value may be requested (including those
attached to bonds with share acquisition rights, but excluding the share acquisition rights thatare delivered to the officers or employees of the Company or the Company’s affiliates under
the stock option system), or in the case where certain events otherwise occur, there is apossibility that the conversion price of the Bonds with Share Acquisition Rights may beThis press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
5【to さん：フッターのディスクレーマーについても英訳をお願いいたします。】
financial conditions, foreign exchange trends, or other risk factors.

(iv)adjusted downward by applying the adjustment provisions attached to the Bonds wish Share
Acquisition Rights.
Because the amount procured by the Bonds with Share Acquisition Rights that is subject to theconversion constitutes equity capital, the financial soundness indicators of the Company will
increase.

Demerits(i)
A certain period of time is required for the completion of the conversion of the Bonds with
Share Acquisition Rights depending on the market environment. In addition, if the liquidityof the shares of the Company decreases, it may take some time to complete the conversion.
(ii)
The Bonds with Share Acquisition Rights are not subject to any conversion value change, theconversion price of the Bonds with Share Acquisition Rights is set to be 1,554 yen, which isequal to the closing price of the trading day immediately prior to September 20, 2023, the dateof resolution for issuance, and the Scheduled Allottee will agree in the Subscription Agreement
that, in principle, it may make a request for the exercise the Share Acquisition Rights only if
the closing price of regular trading of common shares of the Company for the business day
immediately preceding the day on which the request for the exercise of the Share Acquisition
Rights becomes effective is not less than the amount obtained by multiplying the conversion
price by 1.20. Therefore, if the share price changes to a level lower than such amount, there
is a possibility that the conversion of the Bonds with Share Acquisition Rights will not progress,
and it will be necessary to prepare funds for redemption as corporate bonds.
(iii)
The Bonds with Share Acquisition Rights at the time of their issuance are debts from an
accounting perspective and are not counted in the capital, so the debt ratio will temporarily
increase.
(iv)
Because the agreement is made only between the Company and the Scheduled Allottee, which
is known as a third-party allotment method, it will not be possible to enjoy any benefits that
could be obtained from procuring funds from an unspecified number of new investors.
In addition, as a result of the discussions with the Scheduled Allottee to delay the timing of dilution of
the share value as much as possible, it will be agreed on in the Subscription Agreement that in principle,
the Scheduled Allottee may not exercise the Share Acquisition Rights within one year from the Closing
Date as a reasonable period of time to confirm any further business expansion and increased earning
power obtained through financing by the Bonds with Share Acquisition Rights. On the other hand, as
stated below in “(3) Holding policy of the Scheduled Allottee” under “6. Reason for Selection of
Scheduled Allottee, Etc.,” because the Scheduled Allottee intends to acquire capital gains to be obtainedby aiming to increase the corporate value of the Company and maximize the share price of the Company
in the mid- to long-term (during which time the Scheduled Allottee will recover its investment funds upon
the conversion of the Bonds with Share Acquisition Rights into common shares and the sale of suchshares), the Scheduled Allotee will convert the Share Acquisition Rights into shares at the time that the
Scheduled Allottee deems appropriate taking into account the share price of common shares of theCompany and other matters during the period in which the Share Acquisition Rights are exercisable.
Based on the above, aiming to increase the corporate value of the Company and maximize the share priceof the Company in the mid- to long-term while responding to the Company’s funding needs, premised on
the fact that the Scheduled Allottee will consider the share price and existing shareholders’ benefits,
benefits the Scheduled Allottee. Therefore, the Company concluded that the most appropriate financing
method is to execute the Subscription Agreement and issue the Bonds with Share Acquisition Rights
through third-party allotment.
4.
Views concerning rationality of use of funds
The Company believes that the use of funds is reasonable from the Company’s business perspective because
the allocation of the funds procured from the issuance of the Bonds with Share Acquisition Rights for theuses stated above in “(2) Specific use of funds to be procured” under “3. Amount and Use of Funds to be
Procured, and Scheduled Timing of Expenditure” is connected with an increase in corporate value and the
maximization of shareholder benefit.
This press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
6【to さん：フッターのディスクレーマーについても英訳をお願いいたします。】
financial conditions, foreign exchange trends, or other risk factors.

5.

Rationality of Issuance Conditions, Etc.

(1)
Basis of calculation and specific details of the amount to be paid in
In order to ensure fairness in the determination of the issuance conditions of the Bonds with Share Acquisition
Rights, the Company requested Plutus Consulting Co., Ltd. (Head Office: 30th floor, Kasumigaseki Building,
3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo; Representative: Mahito Noguchi) (“Plutus”), an independent
third-party institution, to calculate the value of the Bonds with Share Acquisition Rights and received avaluation report (the “Valuation Report”) of the Bonds with Share Acquisition Rights on September 19, 2023.
After comparing the calculation results with and examining the results of a Black-Scholes model, binomial
model, and other price calculation models, Plutus utilized a Monte Carlo simulation when evaluating theBonds with Share Acquisition Rights, which as a price calculation model could reflect the various conditions
set out in the terms and conditions and the like for the Bonds with Share Acquisition Rights against thecalculation results in a relative and appropriate manner. Plutus also calculated the fair value of the Bonds
with Share Acquisition Rights by reflecting the trading volume (liquidity) on the stock market, after setting
certain conditions for the Company’s share price (1,554 yen), volatility (32.63%), dividend yield (3.09%),risk-free interest rate (0.274%), discount rate (0.93%), etc. and positing certain premises on the Scheduled
Allottee’s act of exercising its rights, taking into account the various conditions set out in the terms andconditions of the Bonds with Share Acquisition Rights (conversion price: 1,554 yen, the term until thematurity: five years, interest rate: 0%), the market environment on the valuation reference date, and otherfactors.
The Company has determined upon consultation with the Scheduled Allottee that the conversion price of theBonds with Share Acquisition Rights will be 1,554 yen in light of the Company’s financial conditions andmanagement conditions. Such conversion price represents (i) the amount equal to the closing price of thecommon shares of the Company on September 19, 2023 (which is the business day immediately preceding
the date of resolution of the Board of Directors), (ii) a premium of 5.50% on 1,473 yen of the average closing
price for the last one month, (iii) a premium of 6.58% on 1,458 yen of the average closing price for the last
three months, and (iv) a premium of 12.45% on 1,382 yen of the average closing price for the last six months.
Given the above, the Company has determined the issue price of the Bonds with Share Acquisition Rights(100.2 yen per 100 yen of each bond) to be higher than 100.2 yen per 100 yen of each bond the appraisedvalue (98.2 yen per 100 yen of each bond) evaluated by Plutus. Because the substantial consideration for
the Share Acquisition Rights is higher than the fair value of the Share Acquisition Rights after comparing the
economic interests that the Company may acquire by attaching the Share Acquisition Rights to the Bonds
with the fair value of the Share Acquisition Rights themselves based on the financial engineering, and because
no significantly unreasonable point was found in respect of the procedures for such calculation, the Company
determined that the issuance conditions for the Bonds with Share Acquisition Rights do not constitute anissuance with particularly favorable conditions (yuri hakko), and that the price is appropriate and reasonable.
The Audit & Supervisory Committee of the Company (consisting of three members, including two outside
directors) expressed an unanimous opinion of all members that, as a result of the examination based on thedetails of the issuance terms and conditions, as well as the calculation results of the Valuation Report, theissuance of the Bonds with Share Acquisition Rights does not constitute an issuance with particularly
favorable conditions (yuri hakko) to the Scheduled Allottee and that the issuance is legal on the grounds that
Plutus, a third party valuation institution independent from the Company and the Scheduled Allottee,
calculated the value of the Bonds with Share Acquisition Rights, that the calculation method of the value ofthe Bonds with Share Acquisition Rights utilized by Plutus is a generally accepted and reasonable method
pursuant to financial engineering, that the valuation is based on the main facts and premises that may havean impact on the appraised value of the Bonds with Share Acquisition Rights and no unreasonable point was
found in respect of the calculation method and process, etc., for the terms and conditions, and that thesubstantial consideration for the Share Acquisition Rights attached to the Bonds with Share Acquisition
Rights is higher than the fair value of the Share Acquisition Rights.
This press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
7【to さん：フッターのディスクレーマーについても英訳をお願いいたします。】
financial conditions, foreign exchange trends, or other risk factors.

(2)Basis of judgment that the issuance quantity and impact of dilution are reasonable
The total number of common shares of the Company to be issued upon the conversion of all of the Bonds
with Share Acquisition Rights at the conversion price of 1,554 yen is 6,434,900 shares (64,349 voting rights),
and such number represents 13.20% of 48,755,500 shares, which is the total number of issued shares of theCompany as of June 30, 2023, and 13.23% of 486,253 voting rights, which is the total number of voting
rights of the Company as of March 31, 2023, respectively.
However, the Company believes that the allocation of the funds procured from the issuance of the Bonds
with Share Acquisition Rights to the funds for acquisition of land in conjunction with new hotel development
and construction work investment and the M&A funds primarily for the hotel development business andconstruction business as stated above in “(2) Specific use of funds to be procured” of “3. Amount and Use ofFunds to be Procured, and Scheduled Timing of Expenditure” will contribute to improved corporate value
and to the maximization of share value of the Company in the mid- to long-term. The average trading
volume of shares of the Company per day for the past two years is 127,349 shares, and the average trading
volume for the last six months is 132,510 shares, meaning that the shares of the Company are liquid to acertain extent. On the other hand, if the total number of common shares of the Company (6,434,900 shares)
to be issued upon the conversion of all of the Bonds with Share Acquisition Rights at the conversion price of
1,554 yen is exercised and sold during the five-year exercise period, the number of shares traded per day will
be 5,148 shares, and such number will represent approximately 4.04% of the abovementioned trading volume
per day for the past two years and approximately 3.88% of the aforementioned trading volume for the past
six months. Therefore, the Company believes that the impact on the share price is limited and consumable.
For the avoidance of doubt, it will be agreed on in the Subscription Agreement that if the Scheduled Allottee
sells the shares of the Company acquired upon the conversion of the Bonds with Share Acquisition Rights
on the market, it will not be allowed to sell the shares of the Company that amount to 25% or more of thetotal trading volume of shares of the Company on such sale date on the Tokyo Stock Exchange.
Based on the above, the Company determined that the scale of the dilution of shares due to the issuance of
the Bonds with Share Acquisition Rights will not have an excessive impact on the market and is reasonable.

This press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
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financial conditions, foreign exchange trends, or other risk factors.

6.

Reason for Selection of Scheduled Allottee, Etc.

(1)

Overview of Scheduled Allottee

(i)

Name

(ii)

Location

(iii)
(iv)
(v)
(vi)
(vii)

Basis ofestablishment, etc.
Purpose of formation
Date of formation
investment amount
Investors, investment
ratio and overview ofinvestors(As of September 20, 2023)
AAGS S5, L.P.
Walkers Corporate Limited, 190 Elgin Avenue, George Town, Grand
Cayman KY1-9008, Cayman Islands
Exempted Limited Partnership Law of the Cayman Islands
Investment
July 4, 2023
5,690,000,000 yen
Advantage Advisors Growth Support Investment Limited Partnership
100%
Name
Location(viii)(ix)

Overview of generalpartner

Overview ofJapanese agent

Title and name ofrepresentative
DescriptionofbusinessStated capital

(x)

Note:

1.
2.

Douglas R. Stringer, Director
Management and administration of investment
partnership assets
1,000 U.S dollars (approximately 147,730 yen)

Not applicable.
Relationshipbetweenlistedcompany and fund

Relationship with theCompany and the
Scheduled Allottee

AAGS Investment, Inc.
Walkers Corporate Limited, 190 Elgin Avenue, George
Town, Grand Cayman KY1-9008, Cayman Islands

Relationshipbetweenlistedcompany
andgeneral partner

The Company, and the Company’s relevant parties
and affiliates do not directly or indirectly invest in thefund.
There is no capital, personnel, or transactional
relationship to be noted between the Company and thegeneral partner of the fund. Also, there is no capital,
personnel, or transactional relationship to be
specifically noted between the Company and theCompany’s relevant parties and affiliates, and thefund’s general partner, the fund’s investors (including
current investors), and the relevant parties and affiliatesof the fund’s general partner.
Not applicable.

Relationshipbetweenlistedcompany
andJapanese agent
Using the U.S. dollar to yen exchange rate where one dollar is converted into 147.73 yen (theexchange rate as of September 19, 2023).
The Company requested K.K. Security & Research (Address: 2-16-6, Akasaka, Minato-ku,
Tokyo; Representative: Toshitsugu Haneda), a third party research institution, to researchwhether the Scheduled Allottee, its general partner and officers, and all investors of the
Scheduled Allottee (collectively, the “Scheduled Allottee Relevant Parties”) are anti-social
forces such as organized crime groups, etc., and whether they have any relationship with antisocial forces. The Company received a report from K.K. Security & Research that it
examined, analyzed, and verified documents and materials, confirmed previous acts, attributeinformation, lawsuit records, criminal records, and other matters, made inquiries to various
related institutions, collected reputational information, and conducted on-site surveys inrelation to the Scheduled Allottee, its related corporations and other groups, and its relatedThis press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
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financial conditions, foreign exchange trends, or other risk factors.

individuals.
The Company received a written report on August 28, 2023 stating to the effect that as a resultof such research, no information was found which indicates that the persons subject to suchresearch have any relationship with anti-social forces, etc. or have committed illegal acts.
Therefore, the Company determined that the Scheduled Allottee Relevant Parties have no
relationship with anti-social forces such as organized crime groups, etc. The Company also
filed their confirmation that the Scheduled Allottee Relevant Parties have no relationship with
anti-social forces with the Tokyo Stock Exchange, Inc.
(2)
Reason for selection of scheduled allottee
The Company selected AAGS S5, L.P. as the Scheduled Allottee of the Bonds with Share Acquisition Rights
for the following reasons.
As stated above in “2. Purpose and Reasons for Offering,” when steadily promoting the measures foraccelerating our growth strategy for the future while also drawing up our next mid-term management plan,
while the Company believes that procuring investment funds and M&A funds for the hotel development
business and others will be necessary, and also that acquiring a high level of external professional support
will be effective, the Company has received a proposal from Advantage Advisors regarding a businessalliance with the corporate group in which Advantage Advisors would provide information, introduce clients,
and provide business support in around April 2023.
In addition, Advantage Advisors, which has track record in dealing with listed companies and is reliable,
introduced to the Company a fund for which Advantage Advisors provides services as the Scheduled Allottee
as a financing method that may satisfy the Company’s needs, in which the Company desires to procurenecessary funds while fully considering the share price and existing shareholders benefit. Advantage
Advisors provides management and financial advice, and provides information by using its own network, tothe listed companies in which the fund invests in order to maximize investment returns for the fund for which
Advantage Advisors provides services.
After careful consideration of Advantage Advisors’ extensive track record in dealing with listed companies
and the specifics of their proposal, the corporate group has determined that the proposal from Advantage
Advisors is the most appropriate in order to improve the corporate value of the corporate group because it
can receive from Advantage Advisors growth support consistent with the corporate group’s mission and needs
when tackling the management issues of which the corporate group is aware and because the corporate groupconsiders the issuance of the Bonds with Share Acquisition Rights by way of third-party allotment as statedabove in “Reasons for selecting financing by bonds with share acquisition rights” in “(2) Specific use offunds to be procured” under “3. Amount and Use of Funds to be Procured, and Scheduled Timing of
Expenditure” to be the most appropriate fundraising method. Therefore, the corporate group has resolved
around August 2023 to conduct the third-party allotment and selected AAGS S5, L.P., a fund for which
Advantage Advisors provides services and which as described above has a track record in dealing with listedcompanies and is reliable, as the Scheduled Allottee.
(3)
Holding policy of the Scheduled Allottee
The Company has received oral explanations from the Scheduled Allottee that the Scheduled Allottee has thepolicy in which it will not transfer of the Bonds with Share Acquisition Rights to a third party within a shortperiod of time after the allocation because the Scheduled Allottee anticipates the medium-to long-term growthof the Company and intends to acquire capital gains to be obtained by aiming to increase the corporate valueof the Company and maximize the share price of the Company in the mid- to long-term (during which time
the Scheduled Allottee will recover its investment funds upon the conversion of the Bonds with Share
Acquisition Rights into common shares and the sale of such shares). However, the Scheduled Allottee has
the policy in which it will sell the common shares of the Company to be delivered upon the exercise of theshare acquisition rights for the Bonds with Share Acquisition Rights while taking into account the operating
results of the corporate group, the status of distribution, market trends and other matters.
In addition, as stated above in “(9) Other Matters” in “1st Series Unsecured Convertible Bonds with ShareThis press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
10【to さん：フッターのディスクレーマーについても英訳をお願いいたします。
】
financial conditions, foreign exchange trends, or other risk factors.

Acquisition Rights” under “1. Overview of Offering,” the Scheduled Allottee will agree in the Subscription
Agreement that in principle, the Scheduled Allottee may not exercise the Share Acquisition Rights within
one year from the Closing Date.
With respect to the Bonds with Share Acquisition Rights, although the Scheduled Allottee will not be able totransfer either of the Share Acquisition Rights or the Bonds in accordance with the provisions of the mainclauses of Paragraphs 2 and 3 of Article 254 of the Companies Act, the Subscription Agreement executed
between the Company and the Scheduled Allottee is expected to provide for restrictions in which the transferof the Bonds with Share Acquisition Rights to a third party will require approval by resolution of the Boardof Directors of the Company. In the case of a transfer of the Bonds with Share Acquisition Rights with suchapproval by a resolution of the Board of Directors of the Company, the Company confirms that the transferee
will succeed to the rights and obligations relating to prior identity verification and anti-social forcescompliance checks, confirmation of the source of the funds for the payment upon the exercise, confirmationof the holding policy for the share acquisition rights and the shares to be acquired upon the exercise thereof,
restrictions on the exercise under the agreement to be executed between the Company and the Scheduled
Allottee, and the like, and if the transfer is approved, the Company will disclose the details of the transfer.
In addition, as stated above in “(9) Other Matters” of “1st Series Unsecured Convertible Bonds with Share
Acquisition Rights” of “1. Overview of Offering,” the Scheduled Allottee will agree in the Subscription
Agreement that if the Scheduled Allotee transfers the shares acquired through the conversion of Bonds with
Share Acquisition Rights through off-market trading (excluding trading in which the purchaser isunidentifiable, such as PTS trading or off-floor trading), the Scheduled Allotee will not transfer such sharesto certain competitors designated by the Company or to activists without the prior written approval of theCompany.
(4)
Confirmation of the existence of assets required for the Scheduled Allottee to make payment
With respect to the existence of the assets required for the Scheduled Allotee of the Bonds with Share
Acquisition Rights to pay the issue price, the Company obtained a copy of the account balance (as of
September 13, 2023) at the transaction bank of the Scheduled Allotee of the Bonds with Share Acquisition
Rights, and the loan certificates (both as of September 13, 2023) obtained by the Scheduled Allottee fromThe Bank of Yokohama, Ltd. and Chugoku Bank, Limited indicating that those banks are ready to make aloan in the maximum amount of 3.5 billion yen and 1.5 billion yen, respectively, on the specific conditions(such as interest rate, term, and repayment method) that were separately determined upon consultation. The
Company examined the loan term, loan type, repayment method, conditions for loan drawdown, and othermatters, and confirmed that the relevant loan will be executed on October 6, 2023 and that there are nomaterial conditions that would prevent the execution of such loan between the Scheduled Allottee, and The
Bank of Yokohama, Ltd. and Chugoku Bank, Limited.
Based on the results of such confirmation, the Company determined that the payment of the issue price of
the Bonds with Share Acquisition Rights is assured.
(5)
Lockup and first refusal right
The Company will agree in the Subscription Agreement that if the Company intends to decide, execute, or
agree with a third party on, the issue or disposal of shares, etc. (excluding those in conjunction with (i) theissue of the Bonds with Share Acquisition Rights, and (ii) the share remuneration based on the share
remuneration system for the officers and employees of the Company and its subsidiaries that have been
already adopted as of the execution date of the Subscription Agreement, and the exercise of share acquisitionrights for stock option purposes that have already been issued as of the execution date of the Subscription
Agreement) for the period from the Closing Date to the earlier of either (i) the expiration date of the exercise
period of the Share Acquisition Rights or (ii) the day on which the holding ratio of shares, etc. of the
Scheduled Allotee ceases to be equal to or more than 5%, the Company will notify the Scheduled Allotee ofthe details of such decision, execution, or agreement and confirm the intention of the Scheduled Allotee by
no later than 20 business days prior to the such decision, execution or agreement, whichever is earliest, andthe Company will obtain the approval in writing from the Scheduled Allotee before the earlier of suchdecision, execution or agreement. After the receipt of such notice, if the Scheduled Allotee desires the issue
This press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
11【to さん：フッターのディスクレーマーについても英訳をお願いいたします。
】
financial conditions, foreign exchange trends, or other risk factors.

or disposal of shares, etc. to the Scheduled Allotee on the same conditions on behalf of, or in addition to,such third party, the Company will issue or dispose of the shares, etc. to the Scheduled Allotee under thesame conditions.
7.

Major Shareholders and Ownership Ratio After the Offering
Before offering (As of March 31, 2023)

After offering

HOUON Co., Ltd.

36.91
%

The Master Trust Bank of Japan, Ltd.
(Accounted in trust)

8.46% AAGS S5, L.P.

Tomoaki Horiguchi

6.21%

Custody Bank of Japan, Ltd. (Accounted
in trust)

3.51% Tomoaki Horiguchi

S KAWAGOE Co., Ltd.

3.22%

THE BANK OF NEW YORK MELLON
140044(Standing proxy: Mizuho Bank, Ltd.,
Settlement & Clearing)

1.53% S KAWAGOE Co., Ltd.

Morgan Stanley MUFG Securities Co.,Ltd.
JP Morgan Securities Co., Ltd.
DFA INTL SMALL CAP VALUE
PORTFOLIO(Standing proxy: Citibank, NA Tokyo
Branch)HOUON Co., Ltd.

The Master Trust Bank of Japan, Ltd.
(Accounted in trust)

Custody Bank of Japan, Ltd.
(Accounted in trust)

THE BANK OF NEW YORKMELLON 140044
1.21%(Standing proxy: Mizuho Bank, Ltd.,
Settlement & Clearing)Morgan Stanley MUFG Securities Co.,
1.13%
Ltd.
0.87% JP Morgan Securities Co., Ltd.

32.60%
11.68%
7.47%
5.49%
3.10%
2.84%

1.35%
1.07%
1.00%

DFA INTL SMALL CAP VALUE
PORTFOLIO
Keiko Horiguchi
0.86%
0.77%
(Standing proxy: Citibank, NA Tokyo
Branch)Note: 1. The major shareholders and shareholding ratios before the offering are calculated based on
the shareholders’ register as of Mach 31, 2023.
2. The major shareholders and shareholding ratios after the offering are calculated by adding thenumber of common shares of the Company (6,434,900 shares) to be delivered upon theconversion of all of the Bonds with Share Acquisition Rights at the conversion price (1,554
yen) to the total number of issued shares (48,755,500 shares) as of March 31, 2023.
3. The shareholding ratio is rounded off to the second dismal place.
4. The shareholding ratio is calculated by deducting the number of treasury shares (108,869
shares as of March 31, 2023).
8.
Future Outlook
Although this issue of the Bonds with Share Acquisition Rights through third-party allotment is expected tohave a minimal impact on the operating results of the corporate group for the year ending March 2024, while
receiving growth support from Advantage Advisors through the business alliance, the Company believes that
it will be able to realize corporate value improvement for the corporate group and shareholder benefit
maximization through allocating the funds procured by the third-party allotment to investments in hotel
development and the like as well as funds for M&A.
9.

Matters Concerning the Procedures Required by the Corporate Code of Conduct
This press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
12【to さん：フッターのディスクレーマーについても英訳をお願いいたします。
】
financial conditions, foreign exchange trends, or other risk factors.

This issue of the Bonds with Share Acquisition Rights does not require the procurement of an opinion froman independent third party or require procedures for confirming the intent of shareholders, which are provided
for under Rule 432 of the Securities Listing Regulations of the Tokyo Stock Exchange, because (i) the dilution
ratio is less than 25% and (ii) this issue does not involve a change in controlling shareholder (no change incontrolling shareholder is expected even in the event that all of the Bonds with Share Acquisition Rights areconverted into common shares).
10.

Operating Results and Status of Equity Finance Executed for the Last Three Years(1)

Operating results for the last three years (consolidated)(Denominated in millions of yen unless otherwise noted)
FY ending MarchFY ending MarchFY ending March
2021
2022
2023
59,632
71,251
82,777
7,912
12,127
14,905
7,524
12,215
14,722

Net sales
Operating profit
Ordinary profit
Profit attributable to the owners of
4,274
7,415
11,612the parent company
Earnings per share (yen)87.77
152.26238.98Dividend per share (yen)42
44
48
Net assets per share (yen)1,368.14
1,463.74
1,663.33
Note: 1. “Accounting Standards for Revenue Recognition” (ASBJ Statement No. 29 as of March 31,2020) has been applied from the beginning of the FY ending March 2022. Major
management indicators, etc. for the FY ending March 2022 are the indicators after theapplication of the accounting standards, etc.
2. The Company has adopted the Employee Stock Ownership Plan (J-ESOP) since the 19th
fiscal year, and the Company’s shares held by the trust account of the Employee Stock
Ownership Plan are included as treasury shares in the consolidated financial statements forthe 19th fiscal year and thereafter. Therefore, when calculating consolidated earnings per
share, the weighted average number of shares for the period in common shares is calculated
including the number of the said shares in treasury shares. In calculating the amount ofconsolidated net assets per share, the said number of shares is included in the number oftreasury shares to be deducted from the total number of issued shares at the end of the period.
(2)

Current number of issued shares and dilutive shares (as of September 20, 2023)
Type

48,755,500 shares

Ratio to the number of issued
shares100.00%－－

Number of shares

Number of issued shares
Number of dilutive shares atcurrent conversion price(exercise price)
Note:

The number of dilutive shares described above is based on the stock options.

(3)

Status of recent share prices
Status for the last three years(i)

Opening priceHighest price
Lowest price
Closing price

FY ending March 2021
803 yen
1,077 yen
703 yen
967 yen

FY ending March 2022
967 yen
1,263 yen
912 yen1,050 yen

FY ending March 2023
1,058 yen
1,317 yen
1,005 yen
1,281 yenThis press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
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】
financial conditions, foreign exchange trends, or other risk factors.

(ii)Status for the last six months

Opening
price
Highestprice
Lowestprice
Closing
price
Note:
(iii)

1,428 yenAugust2023
1,508 yen

September
2023
1,444 yen

1,476 yen

1,517 yen

1,541 yen

1,559 yen

1,282 yen

1,312 yen

1,393 yen

1,382 yen

1,433yen

1,318 yen

1,427 yen

1,508 yen

1,444 yen

1,554 yen

April 2023

May 2023

June 2023

July 2023

1,295 yen

1,330 yen

1,316 yen

1,316 yen

1,381 yen

1,241 yen
1,316 yen

The share price for September 2023 is as of September 19, 2023.
Share prices on the day immediately preceding the date of resolution for issuance.
Opening priceHighest price
Lowest price
Closing priceAs of September 19, 2023
1,539 yen
1,556 yen
1,530 yen
1,554 yen

(4)
Status of equity finance executed for the last three years
Not applicable.
End

This press release has been prepared for the purpose of publicly announcing the issuance by the Company of convertible bonds with shareacquisition rights by way of third-party allotment, and not for the purpose of soliciting investment or engaging in any other similar
activities.
The forecasts, estimations, prospects and other information pertaining to future outcomes included in this press release are based on
the information available to the Company as of today and certain conditions or assumptions, and the actual operating results, etc. may
differ significantly from the information pertaining to future outcomes included in this press release due to domestic and foreign
14【to さん：フッターのディスクレーマーについても英訳をお願いいたします。
】
financial conditions, foreign exchange trends, or other risk factors.