February 13, 2017
To whom it may concern:
Name of company:
Name of representative:

Name of contact person:

Tel:

USEN CORPORATION
Kimimasa Tamura,President and Representative Director(Code Number: 4842, JASDAQ)
Shohei Mabuchi,
Vice President, Director, Executive Officer and Chief
Financial Officer+81-3-6823-7015

Position statement and recommendation to tender in response to the tender offer for sharecertificates of USEN Corporation by Kabushiki Kaisha U-NEXT SPC1 and announcement ofexecution of the basic agreement for consolidation with U-NEXT Co., Ltd.
USEN Corporation (hereinafter the “Company”) announced that at the meeting of the board of
directors of the Company held on February 13, 2017, the Company expressed an opinion in favor of
the tender offer for common stocks of the Company (the “Company’s Stock”) by Kabushiki Kaisha UNEXT SPC1 (the “Tender Offeror”) (the “Tender Offer”) and resolved to recommend to shareholdersof the Company to tender in response to the Tender Offer.
The Company also announced that at the meeting of the board of directors of the Company held on
February 13, 2017, the Company gave approval to execute the basic agreement with Kabushiki Kaisha
U-NEXT (“U-NEXT”) with respect to the consolidation with U-NEXT (the “Consolidation”),
including the Tender Offer. The Company and U-NEXT will execute a definitive agreement withregards to the Consolidation in approximately June 2017, and will discuss and review the details of theConsolidation and will aim to complete the Consolidation on December 1, 2017.

I.

Outline of the Tender Offer

1.
(1)
(2)
(3)

Outline of the Tender Offeror
Name of the Tender Offeror
Address of head office
Name and title of representative

(4)
(5)
(6)
(7)

Details of its businessStated capital
Date of incorporation
Major shareholders andshareholding ratio
Relationship with the Company
Capital relationship(8)

Personal relationshipTransactional relationship
Status of relationships withrelated parties

Kabushiki Kaisha U-NEXT SPC1
35-2, Jingumae 3-chome, Shibuya-ku, Tokyo
Yasuhide Uno,
Representative Director
Pure holding company
1,000,000 yen
January 13, 2017
U-NEXT: 100%

There is no capital relationship between the Tender Offeror
and the Company.
Mr. Yasuhide Uno, who is the chairman and director of theCompany, concurrently serves as the representative directorof the Tender Offeror and the president and therepresentative director of U-NEXT, which is the sole parent
company of the Tender Offeror.
There is no transactional relationship between the Tender
Offeror and the Company.
The Company is not a related party of the Tender Offeror.

-2-

2.
The Tender Offer Price
461 yen per share of common stock (the “Tender Offer Price”)
3.
Contents of, basis of, and reason for opinion related to the Tender Offer(1)
Contents of the opinion
At the meeting of the board of directors of the Company held on February 13, 2017, the Company
expressed an opinion in favor of the Tender Offer and resolved to recommend to shareholders of theCompany to tender in response to the Tender Offer based on the basis and reason stated in “(2) Basisof and reason for opinion” below.
The board of directors of the Company resolved such matters in the manner described in “(iv)Approvals from all directors without conflicts of interest and opinions from all statutory auditors thatthey have no objections” in the section titled “(7) Measures to ensure fairness of the Tender Offer
Price and to avoid conflicts of interest and other measures to ensure fairness of the Tender Offer”
below.
(2)
Basis of and reason for the opinion①
Outline of the Tender Offer
According to the Tender Offeror, the outline of the Tender Offer is as follows:
The Tender Offeror is a joint stock corporation (kabushiki kaisha) incorporated on January 13, 2017
for the purpose of acquiring and holding the common stock in the Company (the “Company’s Shares”)
through the Tender Offer among other things, and U-NEXT Co., Ltd. (“U-NEXT”) owns all of issued
shares in the Tender Offeror (1 share) as of the filing date of this Statement. Further, the Tender
Offeror owns 100 shares of Company’s Shares as of the filing date of this Statement.
The Tender Offeror and U-NEXT (the “Tender Offerors”) (i) will have the Tender Offeror acquire allof the Company’s Shares, excluding the treasury shares owned by the Company and Non-tendered
Shares (as defined below; hereinafter the same), make the Company a private company, and thereafter
consolidate the managements of U-NEXT and Company (the “Consolidation”) through a series ofreorganizations, and (ii) have decided to conduct the Tender Offer as a part of such Consolidation.
In connection with the Tender Offer, the Tender Offeror executed with Mr. Yasuhide Uno (“Mr. Uno”)(chairman and director of the Company; largest shareholder of the principal shareholder of theCompany; president and representative director of U-NEXT, which is 100% parent company of theTender Offeror; and the sole shareholder of Kabushiki Kaisha UNO-HOLDINGS (“UNOHOLDINGS”), which is the controlling shareholder of U-NEXT) a contract under which Mr. Uno
agreed not to tender any of the Company’s Shares held by Mr. Uno (63,400,402 shares (Note 1) and a
Shareholding Ratio (Note 2) of 30.77%) in response to the Tender Offer (the “Non-tender
Agreement”). The Tender Offeror also executed with HIKARI TSUSHIN, INC. (“Hikari Tsushin”)(the second largest shareholder of the Company) a contract under which Hikari Tsushin agreed totender part of the Company’s Shares held by Hikari Tsushin (28,205,437 shares and Shareholding
Ratio of 13.69% if Tender Offer Agreement 2 (as defined below) is executed and 29,380,335 shares
and a Shareholding Ratio of 14.26% if Tender Offer Agreement 2 is not executed) and all of theCompany’s Shares held by Kabushiki Kaisha Infoservice (“Infoservice”) (the fifth largest shareholderof the Company and subsidiary of Hikari Tsushin) (4,146,300 shares and a Shareholding Ratio of
2.01%) and Kabushiki Kaisha Broad Peak (“Broad Peak”) (the subsidiary of Hikari Tsushin) (224,100
shares and Shareholding Ratio of 0.11%) (32,575,837 shares and a Shareholding Ratio of 15.81% in
total for the three companies if Tender Offer Agreement 2 is executed and 33,750,735 shares and a
Shareholding Ratio of 16.38% in total for the three companies if Tender Offer Agreement 2 is not
executed) in response to the Tender Offer (the “Tender Offer Agreement 1”). The Tender Offeror has
also agreed with Hikari Tsushin under Tender Offer Agreement 1 that Hikari Tsushin would not tenderits Non-tendered Shares (9,204,023 shares and a Shareholding Ratio of 4.47% if Tender Offer
Agreement 2 is executed and 8,029,125 shares and a Shareholding Ratio of 3.90% if Tender Offer

-3Agreement 2 is not executed) in response to the Tender Offer (Company’s Shares not subject to tenderunder the Tender Offer Agreement 1 and Non-tender Agreement (Mr. Uno: 63,400,402 shares andShareholding Ratio of 30.77%; Hikari Tsushin: 9,204,023 shares and a Shareholding Ratio of 4.47% if
Tender Offer Agreement 2 is executed and 8,029,125 shares and a Shareholding Ratio of 3.90% if
Tender Offer Agreement 2 is not executed; and a total of: 72,604,425 shares and a Shareholding Ratioof 35.24% if Tender Offer Agreement 2 is executed and 71,429,527 shares and a Shareholding Ratio of
34.67% if Tender Offer Agreement 2 is not executed) shall be individually and collectively referred toas “Non-tendered Share(s)”.) (Note 3).
During the Tender Offer Period, the Tender Offeror wishes to execute with GSTK2 Holdings Godo
Kaisha (“GS”) (the third largest shareholder of the Company) a contract under which GS agrees totender part of the Company’s Shares held by GS (13,695,951 shares and Shareholding Ratio of 6.65%)
and GS agrees not to tender remaining Company Shares held by GS (10,813,859 shares andShareholding Ratio of 5.25%) (the “Expected Non-tendered Shares”) in response to the Tender Offer(the “Tender Offer Agreement 2”) (as defined below; hereinafter the same). With respect to the
execution of Tender Offer Agreement 2, the Tender Offeror is engaging in good faith discussions with
GS as of the filing date of this Statement and plans to proceed with the necessary procedures.
Mr. Uno is the chairman and director of the Company, the largest shareholder of the principal
shareholder of the Company, the president and representative director of U-NEXT which is 100%parent company of the Tender Offeror, and the sole shareholder of UNO-HOLDINGS which is thecontrolling shareholder of U-NEXT. Due to the fact that the Tender Offer will be conducted under
the leadership of Mr. Uno, the chairman and director of the Company and the largest shareholder ofthe principal shareholder of the Company, U-NEXT views the Consolidation as a transaction
equivalent to a so-called management buyout (MBO) (Note 4).
For details of the Non-tender Agreement, Tender Offer Agreement 1, and Tender Offer Agreement 2,
please see “(i) Non-tender Agreement,” “(ii) Tender Offer Agreement 1” and “(iv) Tender Offer
Agreement 2” of “(4) Matters regarding material agreement(s) related to the Tender Offer”.
(Note 1)

In addition to the Company’s Shares (63,400,402 shares) mentioned above whichfall under the Non-tender Agreement, Mr. Uno holds 99,783 shares of theCompany’s Shares as equity in the officers stock ownership plan of the Company,
which are not subject to the Non-tender Agreement.
(Note 2) “Shareholding Ratio” means the ratio (rounded to the nearest one-hundredth)between (i) the number of shares in the Company held by a shareholder of theCompany and (ii) the number of shares in the Company (206,045,787 shares) equal
to the difference between the total number of issued shares in the Company as ofNovember 30, 2016 (207,148,891 shares) as provided in the Quarterly Securities
Report for the First Quarter of the 53th Term which has been filed by the Company
on January 13, 2017 (the “Company’s Quarterly Report”) and the number oftreasury shares owned by the Company as of November 30, 2016 (1,103,104 shares)
as provided in the “First Quarter Earnings Summary (Japanese Standard)(Consolidated) of Fiscal Year Ending August 2017” (the “Company’s Earnings
Summary”) which has been announced by the Company on January 11, 2017.
(Note 3) As stated above, the number of the Non-tendered Shares of the Company’s Shares
held by Hikari Tsushin differs depending on the success or failure of Tender Offer
Agreement 2 so that the voting right ratio of U-NEXT between GS and Hikari
Tsushin will remain the same after the Consolidation in each case. If Tender Offer
Agreement 2 is executed and GS does not tender the Expected Non-tendered Sharesin response to the Tender Offer (case (a)), GS is expected to receive common stockin U-NEXT as a shareholder of the Company under the Merger ② (please see “(e)Implementation of Merger in which U-NEXT Is the Surviving Company andCompany Is the Merged Company” of “③ Structure of Consolidation” of “(i)Background, Purpose and Decision-making Process Leading up to Decision to-4Implement Tender Offer” of “(2) Background, purpose and decision-making process
leading to decision to conduct the Tender Offer and management policy for after theTender Offer” below; hereinafter the same). However, if Tender Offer Agreement 2
is not executed and GS tenders the Expected Non-tendered Shares in response to theTender Offer, GS is not expected to receive the common stock in U-NEXT under the
Merger ② (case (b)). In case (a) above, where the total number of voting rights ofall shareholders increases after GS receives the common stock in U-NEXT, whencompared with case (b), U-NEXT decides that the number of the Non-tendered
Shares of the Company’s Shares held by Hikari Tsushin should be adjusted so thatthe voting right ratio of U-NEXT between GS and Hikari Tsushin will remain thesame as case (b) after the Consolidation.
(Note 4) Management buyout (MBO) means the tender offer in which the tender offeror is adirector or officer of the target company (including a tender offer in which the tender
offeror is a person who is conducting the tender offer based on a request from a
director or officer of the target company and who has a common interest with suchdirector or officer of the target company). As there are no direct capital ties
between the Tender Offeror and Mr. Uno and Mr. Uno and the Tender Offeror did notalways maintain a common interest due to the absence of such direct capital ties, UNEXT is of the belief that the Consolidation is not a pure management buyout.
However, the Consolidation will be handled in a manner equivalent to a managementbuyout (MBO) since the possibility cannot be ruled out that there may be a conflictof interest between Mr. Uno, who is the chairman and director of the Company, andthe Company in terms of the structure of the Consolidation as in the standard
management buyout.
The Tender Offeror has set 71,465,300 shares (Shareholding Ratio of 34.68%) as the minimum
number of share certificates, etc. to be tendered under the Tender Offer. If the total number of sharecertificates, etc. tendered under the Tender Offer (the “Share Certificates of Tendered Shares”) does
not reach the minimum number of share certificates, etc. scheduled to be tendered (71,465,300 shares),the Tender Offeror will not purchase, among other things, all of the Share Certificates of Tendered
Shares. The minimum number of share certificates, etc. scheduled to be tendered (71,465,300
shares) is the number of shares in the Company equal to the difference (142,645,285 shares) between(i) the total number of issued shares in the Company as of November 30, 2016 (207,148,891 shares) as
provided in the Company’s Quarterly Report and (ii) the total amount of (a) the treasury shares ownedby the Company (1,103,104 shares) as of November 30, 2016 as provided in the Company’s Earnings
Summary, (b) the Company Shares owned by the Tender Offeror (100 shares) and (c) the Company
Shares owned by Mr. Uno (63,400,402 shares), who agreed not to tender his Company’s Shares in
response to the Tender Offer, after multiplying such difference by 50.1% and rounding it up to thenearest whole unit (100 shares). On the other hand, as the Tender Offeror’s purpose is to acquire allof Company’s Shares (excluding treasury shares owned by the Company and Non-tendered Shares andif Tender Offer Agreement 2 is executed, excluding the Expected Non-tendered Shares), a maximum
number of share certificates, etc. scheduled to be tendered has not been set in the Tender Offer, andtherefore, if the total number of Share Certificates of Tendered Shares is no less than the minimum
number of share certificates, etc. scheduled to be tendered (71,465,300 shares), the Tender Offeror willpurchase all of the Share Certificates of Tendered Shares. If the Tender Offer is implemented, theTender Offeror will acquire by itself at least 714,653 units of the voting rights in the Company(34.93% of the total number of voting rights of all shareholders) out of the total number of voting
rights of all shareholders of the Company as of August 31, 2016 (2,046,095 units of voting rights) as
provided in the Company’s Quarterly Report, and the sum of the voting rights to be acquired by theTender Offeror and the voting rights relating to the Non-tendered Shares (Mr. Uno: 63,400,402 shares
and a Shareholding Ratio of 30.77%; Hikari Tsushin: 8,029,125 shares and a Shareholding Ratio of
3.90% (in case Tender Offer Agreement 2 is not executed); and a total of 71,429,527 shares and a
Shareholding Ratio of 34.67%) will be 714,295 units of the voting rights in the Company (69.84% of
the total number of voting rights of all shareholders), which will result in the Tender Offeror, Mr. Uno

-5and Hikari Tsushin holding at least 2/3 of the total number of voting rights of all shareholders of theCompany.
If the Tender Offeror fails to acquire all of Company’s Shares (excluding treasury shares owned by theCompany and Non-tendered Shares and if Tender Offer Agreement 2 is executed, excluding the
Expected Non-tendered Shares), the Tender Offeror plans to implement a series of procedures asprovided in “(6) Policy for organizational restructuring, etc. after the Tender Offer (matters relating toso-called “Two-Step Acquisitions”)” below after the implementation of Tender Offer. After the
implementation of such procedures, the Tender Offeror also plans to implement a series ofreorganizations as a part of Consolidation. For details, please see “ (a) Structure of Consolidation” of“(i) Background, Purpose and Decision-making Process Leading up to Decision to Implement Tender
Offer” of “② Background, purpose and decision-making process leading to decision to conduct theTender Offer and management policy for after the Tender Offer” below.
According to “(iii) Funds to be borrowed on or after the date hereof” of “(2) Deposits or borrowings
allocable for funds required for tender offer” of “8. Funds Required for Tender Offer, etc.” in theTender Offer Registration Statements, the Tender Offeror plans to take out a loan from Mizuho Bank,
Ltd. (“Mizuho Bank”) up to the maximum total amount of 80,000,000,000 yen and to use such funds
for payment under the Tender Offer, payment for the Squeeze Out (as defined in “(6) Policy fororganizational restructuring, etc. after the Tender Offer (matters relating to so-called “Two-Step
Acquisitions”) below; hereinafter the same), repayment of existing loans of the Company and paymentof costs and expenses relating to the Consolidation including the Tender Offer. Subject to thecompletion of the Tender Offer, the repayment of the existing loan borrowed by the Company isscheduled to be implemented on March 31, 2017. For such loan from Mizuho Bank, the Tender
Offeror plans to offer as collateral all of issued shares of Tender Offeror and all of Company’s Shares
to be acquired by Tender Offeror through a series of procedures as provided in “(6) Policy fororganizational restructuring, etc. after the Tender Offer (matters relating to so-called “Two-Step
Acquisitions”) ” below.
②

Background, purpose and decision-making process leading to decision to conduct the Tender
Offer and management policy for after the Tender Offer(i)

Background, Purpose and Decision-making Process Leading up to Decision to
Implement Tender Offer(A) Background and Purpose Leading up to Decision to Implement the Tender Offer
U-NEXT, which owns all of issued shares of Tender Offeror as of the filing date of thisStatement, runs contents platform business whose core business is video streaming business
which mainly streams contents such as movies and television dramas (hereinafter referred as“CP Business”) and communication network business which is telecommunication business
whose core business is internet connection service via fiber optic and mobile communications(the “CN Business”). The current CP Business was originally a fee-based internet video
streaming service for individual viewers started by the Company, which was established inJune 1961 (The Company changed the form of company to joint stock corporation (kabushiki
kaisha) in September 1964.), in June 2007 as “U-NEXT business” and as a future corebusiness in the content streaming business which followed the cable broadcasting musicstreaming business, and has been promoted to increase the number of users in order to earnsteady Running Profits (Note 1) by securing long-term users since the commencement of thebusiness. However, as of December 2010 when the Restructuring (as defined below) was
implemented, the number of users to gain enough income to cover the business operation costs
could not be achieved and the costs continued to exceed the profits, even after 3 years after thecommencement of the business in June 2007. U-NEXT also was of the belief that theinvestments in renewing the terminals would become necessary in the future in order todifferentiate its service from the competitors’ services. On the other hand, the Company’s
distribution business of fiber optic internet service to individual users at that time (the “BB-6Business”), which became the basis of current CN Business, was under the business model inwhich U-NEXT received Incentives (Note 2) from fiber optic internet service provider such as
Nippon Telegraph and Telephone Corporation by mainly selling the fiber optic internet service
for individual users and U-NEXT saw it as an opportunity to acquire new users of “U-NEXT
Business” by securing the viewing environment, but U-NEXT could not earn enough profits tocover the business operation costs and was therefore required to provide certain support to thisbusiness.
As explained above, as of December 2010, the Company was not able to clearly envision the
future of both businesses which were unprofitable and was in a situation in which theCompany was required to internally discuss the continuation of the business.
At the present, the Target Company, 3 consolidated subsidiaries and 3 affiliated companies(the “Company Group") engage in the music streaming business, systems business forbusiness customers, ICT business and other businesses (such as customer attraction support
business).
In the music streaming business, the Company Group offers the service of broadcasting
contents such as music and information to stores for business customers, chain stores andindividual customers through the leased tuners via coaxial cable, telecommunications satellite
and internet exclusively used by the Company. Most of the customers are stores for businesscustomers, many of whom are in the food, retail, hair salon, healthcare or office business.
ALMEX Inc., which is consolidated subsidiary of the Company, conducts the system businessfor business customers and aims to offer hospitality to end-users by offering products andservices which use the state-of-the-art technologies. ALMEX, Inc. develops, manufactures,
sells and conducts maintenance on systems such as automatic fare adjustment machine, hotelmanagement system, reception system and guide display system for business hotels, city
hotels, leisure hotels, medical institutions such as general hospitals, and golf courses.
In the ICT business, the Company Group sells ICT products and services such as network
service (such as internet service and internet cables), cloud service and mobile service forcorporate customers under the brand name “USEN GATE 02.”
The Company Group also conducts other businesses, including customer attraction support
business, energy business, music copyright management and creation business, anddevelopment and launch of new products and services. In the customer attraction support
business, the Company Group runs “Hitosara”, which offers customer attraction support
service for restaurants.
After the Company was founded in June 1961, the Company listed on NASDAQ Japan market
of Osaka Securities Exchange, Inc. (currently, JASDAQ (standard) market (“JASDAQ”) of
Tokyo Stock Exchange, Inc. (“Tokyo Stock Exchange”)) in April 2001. The Company
Group was starting to stop the decline in its corporate performance which had been affected by
the economic stagnation continuing around two years since the consolidated fiscal year ending
August 2009, but the business environment surrounding the Company group was still harsh atthat time and its corporate performance was not making recovery yet and therefore, theCompany group needed to aim to strengthen its business structure by generating profits andcash flow by continuing to further narrow down and cultivate the existing business areas andreduce and save costs.
In the midst of such situation, the Company, upon considering any measures to be taken toreconstruct the business of the Company, came to a conclusion that the elimination of existingburden of the Company by immediately withdrawing from the “U-NEXT Business” and BB
Business and by controlling the outflow of available funds and the focus on music streaming

-7business, which was the Company group’s main business and which generated stable profits,
would contribute to the enhancement of corporate value of the Company group rather thanaiming to gain profits in the future by making additional investments in the “U-NEXT
Business” and by increasing the number of U-NEXT users while at the same time carrying therisk of decline in the profitability of the BB Business.
Thereafter, in around 2010, due to the fact that Mr. Uno, who was the chairman and director of
the Company at the time, ended up personally taking over the business departments in chargeof “U-NEXT Business” and BB Business as a result of internal discussions within the
Company and bidding by multiple companies, in December 2010, U-NEXT succeeded both
“U-NEXT Business” and BB Business by the Company’s transfer of “U-NEXT Business” andBB Business to U-NEXT, which was the wholly owned subsidiary of the Company at thetime, by demerger and by the Company’s transfer of all of U-NEXT shares to Mr. Uno, who
was the representative director and president of the Company at the time, at the same time (the“Restructuring”), and restarted as a joint stock corporation (kabushiki kaisha) which is 100%
funded by Mr. Uno. U-NEXT, which succeeded “U-NEXT Business” and BB Business, andthe Company thereby have been conducting the business until today as separate entities
without having any capital tie-up.
According to the Tender Offeror, the background and purpose leading up to the decision to
implement the Tender Offer is as follows:
After the Restructuring, U-NEXT, under Mr. Uno’s management, caused its business tosteadily grow and improved its corporate performance by expanding its customer base whichused to be mainly general individual customers, by properly managing the costs concerning
the contents such as procurement costs and sales promotion costs, and by popularization ofsmartphones/tablets. In December 2014, U-NEXT listed its stocks on the Mothers market of
the Tokyo Stock Exchange and in December 2015, its stocks were listed on the First Sectionof the Tokyo Stock Exchange. Upon U-NEXT’s listing of its stocks on the Mothers marketof Tokyo Stock Exchange, Mr. Uno and U-NEXT ended their 100% capital tie-up, but evenafter the listing, Mr. Uno continued to hold the U-NEXT shares through UNO-HOLDINGS,
which is Mr. Uno’s asset management company, and the number of such shares held as ofJune 30, 2016 is 10,530,000 shares (Shareholding Ratio compared to the total number ofissued shares: 64.11%).
On the other hand, with respect to the CN Business, the price war in the MVNO (Note 4)
market, in which U-NEXT began “U-Mobile” (Note 3) in 2013, has eased to a certain extent,
but the competition in terms of services and promotions has intensified and is in a very
competitive state due to reasons such as entry of large companies. “U-NEXT Hikari
Collaboration” (Note 5) which began in 2015 is also not growing at the pace initially expectedby U-NEXT due to the rise in market share of packaged service offered by the existing mobile
phone carriers since the time of commencement of “U-NEXT Hikari Collaboration” service.
With regard to the CP Business, the infrastructure has been developed to offer VOD Service(Note 6) due to the rise of smartphones, but the competition has intensified due to the video
streaming service offered by subsidiaries of existing domestic telecommunications carriers,
who are aiming to acquire market share in such market, and entry of foreign video streaming
service providers into the Japanese market such as “Hulu” (Its business in Japan has beentaken over by Nippon Television Network Corporation.), “Netflix” and “Amazon (Amazon
Prime).”As explained above, the environment surrounding U-NEXT is continuing to go throughsignificant changes and U-NEXT is required to solidify its business strategy in order to secure
its competitive edge at all times and to accelerate its growth. Under such circumstances, UNEXT acquired in March 2016 a portion of fixed broadband network business for apartment

-8complex, which had been operated by ARTERIA Networks Corporation. Such acquisition
was the action taken by the U-NEXT management upon understanding the current situationthat it was urgent for U-NEXT to further strengthen its competitiveness and sales capabilities
by expanding its service lineup and to enhance its corporate performance by further expanding
the customer base of CP Business and CN Business.
The Company refinanced the total amount of its syndicate loan and acquired and cancelled its
preferred stocks in March 2016 and therefore, U-NEXT envisions a strategy in which theCompany continues to clean its balance sheet and simultaneously grow as a company which
can offer various total solution services by expanding its lineup, including new services which
are based on strong platforms developed by the maintenance and expansion of its existing
business, but U-NEXT understands that the Company’s corporate performance growth
remains flat due to reasons such as restraint on active investment in order to prioritize
improvement on its financial basis and therefore, the adoption of clear growth strategy is anurgent issue for the Company’s management hereafter.
(Note 1) “Running Profit” means a certain amount of the profit constantly gained fromexisting customers.
(Note 2) “Incentive” in the above context means the commission-based profit paid by fiber
optic internet service provider such as Nippon Telegraph and Telephone Corporation
based on the number of the sales of the fiber optic internet service.
(Note 3) “U-Mobile” means one of the CN Business which sells cheap smartphones and SIM
cards.
(Note 4) “MVNO” means the business in which a company borrows from othertelecommunications business operators the wireless communication platform such as
mobile phone line and offers the wireless communication service by adding its own
service.
(Note 5) “U-NEXT Hikari Collaboration” collectively means the service pack, whose coreservice is fiber optic internet service “U-NEXT Hikari” which U-NEXT is able tooffer at low price by receiving the “FLET’S Hikari” service offered by Nippon
Telegraph and Telephone East Corporation and Nippon Telegraph and Telephone
West Corporation by wholesale.
(Note 6) “VOD Service” means the service in which viewers can watch various video contents
at any time they wish.
(B) Decision-making Process
As explained above, while U-NEXT and Company respectively have management issues
concerning the current business environment, Mr. Uno, who is president and representative
director of U-NEXT, sole shareholder of UNO-HOLDINGS which is the controllingshareholder of U-NEXT, the chairman and director of the Company and the largest
shareholder of the principal shareholder of the Company, viewed that there would be synergy
between U-NEXT and the Company from the individual customer sales network and video
and telecommunication service of U-NEXT and the corporate customer sales network
exceeding 147 offices and 618,410 shops nationwide (as of December 31, 2016) and musicstreaming service of the Company, which was not foreseeable at the time when the Company
went through the Restructuring in December 2010. Therefore, in late February 2016, Mr.
Uno requested U-NEXT consider the measures concerning the collaboration between UNEXT and Company and the synergy effect from the two companies becoming as one, and UNEXT began considering them in the middle of April 2016.

According to the Tender Offeror, the decision making process of the Tender Offer was asfollows:

-9In the course of such consideration, U-NEXT came to the conclusion that since thestabilization of management base was the issue for actively making investments in the fierce
competitive environment, the consolidation of management resources of U-NEXT and
Company by including the Company, which had stable management base, into U-NEXT groupwould contribute to the stabilization of management base and open up a possibility to come up
with aggressive measures which would not lose to competitors.
U-NEXT also came to a conclusion that even though the profitability of Company’s businessitself was high and stable, the lack of growth and sluggish rise of its stock price were issues
and therefore, there was a possibility that the Company would be evaluated as a growing
company overall if U-NEXT’s capability of generating new services including U-NEXT’stechnical aspects was put into use. Specifically, the Company views (i) that the businessbenefits can be gained such as the promotion of ICT (information and communication
technology) to commercial stores through the integration of telecommunication businessknow-hows, the expansion of sales methods by integration of know-hows and resources
relating to Telemarketing (Note 1) and the increase in the number of subscriptions to cablebroadcasting for individuals by integration of Consumer Marketing (Note 2), and (ii) that suchintegrations will significantly contribute to the enhancement of the Company’s corporate
value.
After going through the process as explained above, from late July 2016, U-NEXT began toconsider a plan of a holding company structure between U-NEXT and Company and informed
the Company that U-NEXT wished to begin the consideration and discussion on theConsolidation in the beginning of August 2016. Thereafter, both companies started to makepreliminary consideration on the Consolidation of the two companies and to respectively
conduct due diligence on each other from the middle of August 2016. U-NEXT’s due
diligence on the Company ended in early December 2016. After going through suchconsideration and due diligence, U-NEXT provided the Company with a written proposal on
the Consolidation on January 17, 2017 and continued serious considerations and discussions
with the Company upon making proposals on the objectives of the Consolidation, expectedstructure, tender offer price and shareholding ratio upon the Consolidation.
By taking into account such considerations and discussions, U-NEXT believes that thefollowing synergy effects are expected upon materializing the new holding company structure
between U-NEXT and Company:(a)

Sales Synergy
By materializing the holding company structure which consolidates U-NEXT and
Company, the music streaming business for corporate and individual customers, theCP Business for individual customers, and the CN Business for corporate andindividual customers will be conducted within the same corporate group. Each ofsuch businesses originally offered products and services to corporate customers andindividual customers which are in different markets, and the businesses succeeded by
U-NEXT by Restructuring especially were in the business environment at the time of
implementation of Consolidation in December 2010 in which such businesses were
not only incurring losses but also were not expected to have synergy effect.
However, with the popularization of smartphones thereafter, U-NEXT’s CP Businessbecame profitable due to the fact that smartphone become popularized and the video
streaming business became more well-known and the number of users significantly
increased and its CN Business is also steadily increasing both corporate and individual
users during the same period by starting its own fiber optic internet service and
MVNO (i.e., cheap smartphones and SIM).

- 10 In the midst of such change in the business environment, U-NEXT came to theconclusion that in the CP Business, it is beneficial to begin expanding the business as
the business offering the integrated entertainment service via internet which adds themusic broadcasting feature as added service value. In the CN Business, U-NEXTcame to a conclusion that more effective sales activities are possible throughexpansion of business by sharing the know-hows within the same corporate group dueto the fact that part of U-NEXT’s service is sold to the Company by wholesale and theCompany sells the fiber optic internet service to corporate customers based on such UNEXT’s service.
(b)

Cost Synergy
With the sharp sales increase especially in the CP Business and CN Business, UNEXT is in a situation in which the development of its business management structure
is not keeping up and in which the procurement of management resources, whichmainly consist of personnel and know-how, has become management issue all the time
and therefore, U-NEXT came to a conclusion that it would become possible to moresmoothly deal with the expansion of business by consolidating the U-NEXT’s featureswith the Company’s features which are same. Furthermore, with respect to thetransactions currently occurring between U-NEXT and the Company, since thetransactions are within the same corporate group, U-NEXT came to a conclusion that
more efficient business management would be possible due to the fact that thetransaction costs of both U-NEXT and the Company on the matters such as
negotiation on the transaction terms would be reduced and that U-NEXT and
Company would be able to conduct joint public relations activities and procurement
activities.

(c)Streamlining the Business Management System and Reduction of the Listing
Maintenance Cost
U-NEXT came to the conclusion that it would be possible to achieve the streamlining
including improvement of business such as sorting out overlapping businesses by
consolidating again the business management structures of the Company, whose main
customers are corporate customers, and U-NEXT, whose main customers areindividual customers, both of which used to be managed as one entity until 2010.
At the present time, both U-NEXT and the Company are respectively listed on thestock exchange and audited by accounting firm, and U-NEXT believes that byconsolidating them, the overall costs to maintain the listing will be reduced.

In addition to such synergy, U-NEXT views that by U-NEXT and the Company transitioning
to a new system which is holding company structure between them, the holding company can
integrate all companies under the group, better monitoring of growth stage of companies under
the group becomes possible and implementation of most appropriate allocation ofmanagement resources becomes possible. Furthermore, U-NEXT views that further
enhancement of corporate value of entire group is expected due to the fact that together with
the implementation of most appropriate allocation of management resources, it will become
possible for each company to enhance its corporate value by using such management
resources.
U-NEXT also came to the conclusion that in order to fully take advantage of the benefits ofsynergy effect and holding company structure as mentioned above, it is most important thatthe management who well understands the business of U-NEXT and the Company manages
the operations of U-NEXT and the Company by taking advantage of the strength andcomplementing the disadvantage. In this regard, U-NEXT thinks that the Consolidation, underwhich U-NEXT (of which Mr. Uno holds the majority of the voting rights) plays a main roleand consolidates U-NEXT and the Company into a same group again and operate both- 11 companies under new organization, is most preferable for the enhancement of the corporate
values of U-NEXT and the Company, under the strong leadership of Mr. Uno, who wellunderstands the business of U-NEXT and the Company, is the president and representative
director of U-NEXT and the chairman and director of the Company.
U-NEXT views that if the Consolidation is implemented, there is a risk of reduction in the
profit level or deterioration of cash flow due to the necessity to finance a large amount ofpurchase funds in a short term, but there is a possibility to move onto the new growth stage by
the implementation of Consolidation.
U-NEXT views that if the Consolidation is not implemented, it may become difficult tosustain growth while simultaneously securing competitive edge in the environment which
continues to make significant changes and that while it is not certain that the Consolidation
will achieve the expected results depending on the future business environment andcompetitive environment, the Consolidation is the most effective method to avoid any negative
impact which may arise against the shareholders of the Company and to swiftly andaggressively implement the fundamental and flexible management strategies from themedium- and long-term perspective.
Due to the fact that U-NEXT also viewed that Hikari Tsushin and GS are large shareholders of
the Company and that enhancement in stability of shareholder composition and businesssynergy is expected by having Hikari Tsushin, which has strong business relationships with UNEXT and the Company, cooperate with the Consolidation and become a stable shareholder of
U-NEXT which became a holding company, U-NEXT made a proposal of Consolidation toboth Hikari Tsushin and GS in the middle of January 2017. After such proposal, U-NEXT
discussed with Hikari Tsushin on the terms and conditions of Consolidation including tender
offer price and on the details of business tie-up among U-NEXT, Company and Hikari Tsushin
after the Consolidation and executed the Tender Offer Agreement 1 on the Tender Offer with
Hikari Tsushin on February 13, 2017. The Tender Offeror is also discussing with GS in goodfaith as of the filing date of this Statement and plans to proceed with the necessary procedureswith respect to the execution of Tender Offer Agreement 2.
By going through the circumstances explained above, U-NEXT established the Tender Offeror
in January 2017 in order to implement the Consolidation, and the Tender Offeror came to adecision on February 13, 2017 to conduct the Tender Offer as a part of the Consolidation.
U-NEXT has received the Company’s approval on the implementation of Consolidation
including the Tender Offer. After the implementation of Tender Offer, U-NEXT and
Company entered into the Basic Agreement on Consolidation as of February 13, 2017 (the“Basic Agreement”) because it was necessary to promptly proceed with the preparation ofConsolidation between U-NEXT and Company. For the outline of Basic Agreement, pleasesee “(iii) Basic Agreement” of “(4) Matters regarding material agreement(s) related to theTender Offer” below.
(Note 1) “Telemarketing” means the sales promotion activity through direct communication
with customers by means of telephone, etc.
(Note 2) “Consumer Marketing” means the sales promotion activities for the consumer market
formed by individuals.
(C) Structure of Consolidation
The structure of Consolidation is as provided below:(a)Implementation of Tender Offer- 12 The Tender Offeror conducts the Tender Offer for the purpose of acquiring all of Company’s
Shares (excluding the treasury shares owned by the Company and Non-tendered Shares and if
Tender Offer Agreement 2 is executed, excluding the Expected Non-tendered Shares).

- 13 -Mr. Uno100%
Other Shareholders

UNO-HOLDINGSOther Shareholders

U-NEXT

100%

Tender Offeror

Company

Tender Offer(b)
Procedures to Make the Shareholders of Company Only Tender Offeror andRemaining Shareholders (which means Mr. Uno and Hikari Tsushin and if Tender Offer
Agreement 2 is executed, Mr. Uno, Hikari Tsushin and GS; hereinafter the same)If the Tender Offer is implemented and the Tender Offeror fails to acquire all of theCompany’s Shares (excluding the treasury shares owned by the Company and Non-tendered
Shares and if Tender Offer Agreement 2 is executed, excluding the Expected Non-tendered
Shares), the Squeeze Out will be implemented. Specifically, the Tender Offeror plans torequest the Company to hold an extraordinary general shareholders’ meeting including the
proposal for Share Consolidation (as defined in “(5) Policy for organizational restructuring,etc. after the Tender Offer (matters relating to so-called “Two-Step Acquisitions”)” below;
hereinafter the same). For details, please see “(5) Policy for organizational restructuring, etc.
after the Tender Offer (matters relating to so-called “Two-Step Acquisitions”)” below.
If there is any fraction of Non-tendered Shares held by any Remaining Shareholders (theExpected Non-tendered Shares is included if Tender Offer Agreement 2 is executed) which isless than 1 share and such fraction of share is sold to the Tender Offeror during the Squeeze
Out, the Tender Offeror plans to transfer to each of such Remaining Shareholders such fractionof Company’s Share in the amount equal to the Tender Offer Price (which means the price oftender offer, etc. per share of Company’s Shares in the Tender Offer; hereinafter the same)(i.e., the price per share after the stock split which is scheduled to be implemented on the
Company’s Shares before such transfer at the ratio which is the opposite of the consolidation
ratio of Share Consolidation). The above transfer is scheduled to be implemented after theCompany’s Shares no longer are share certificates, etc. which are required to be subject totender offer pursuant to Article 27-2 of the Act, on the condition that the application tosuspend the filing of securities report of the Company has been approved by competentauthority pursuant to the proviso to Article 42, Paragraph 1 of the Act.

- 14 -The shareholder composition after the Squeeze Out and the transfer of the Company’s Sharesto each of the Remaining Shareholders as mentioned above is as follows:
Shareholder

Voting Right Ratio (ifTender Offer Agreement 2
is not executed)

Tender Offeror
Mr. UnoHikari Tsushin
GS

65.3%
30.8%
3.9%
-

Voting Right Ratio (ifTender Offer
Agreement 2 is
executed)
59.5%
30.8%
4.5%
5.2%

- 15 -U-NEXT

100%

Tender Offeror

Mr. UnoHikari Tsushin

Company(Note) If Tender Offer Agreement 2 is executed, GS is expected to remain as
shareholder of Company. Same will apply under “(c) Implementation ofDemerger by U-NEXT and Company” and “(d) Implementation of Merger inwhich U-NEXT Is Surviving Company and Tender Offeror Is Merged Company.”(c)Implementation of Demerger by U-NEXT and Company
U-NEXT will have a new entity to be established by U-NEXT (the “Newco ①”) (There is apossibility that Newco ① will become multiple entities based on discussion hereafter.)succeed all of U-NEXT’s businesses (other than the business management of subsidiaries andthe so-called back office work of subsidiaries such as human resources (HR), accounting andgeneral affairs (the “Back Office Business”)) by means of absorption-type demerger (the “UNEXT Demerger”).
The Company will also have a new entity to be established by the Company (the “Newco②”) (There is a possibility that Newco ② will become multiple entities based on discussion
hereafter.) succeed all of Company’s businesses (other than the business management ofsubsidiaries and the Back Office Business) by means of absorption-type demerger (the“Company Demerger”).
U-NEXT Demerger, Company Demerger, Merger ① (as defined under “(d) Implementationof Merger in which U-NEXT Is Surviving Company and Tender Offeror Is Merged Company”
below) and Merger ② are scheduled to become effective at the same time.

- 16 -U-NEXT
Absorption-type

100%

100%
Newco ①

Tender Offeror

Mr. UnoHikari Tsushin

Company
Absorption-type

100%
Newco ②(d)
Implementation of Merger in which U-NEXT Is Surviving Company and Tender
Offeror Is Merged Company
The merger will be implemented in which U-NEXT is the surviving company and the Tender
Offeror is the merged company (the “Merger ①”). Due to the fact that Merger ① is amerger between U-NEXT and its wholly-owned subsidiary, the Tender Offeror, the merger has
no consideration and there will be no issuance of shares, etc.

- 17 -U-NEXT
Merger100%

100%
Tender Offeror

Mr. UnoHikari Tsushin

Company
100%
Newco ①

Newco ②(e)
Implementation of Merger in which U-NEXT Is the Surviving Company andCompany Is the Merged Company
The merger will be implemented in which U-NEXT is the surviving company and theCompany is the merged company (the “Merger ②”). As provided in “(iii) Basic
Agreement” of “(4) Matters regarding material agreement(s) related to the Tender Offer”
below, U-NEXT and the Company agreed that U-NEXT will allocate 0.61 shares of common
stock of U-NEXT per 1 share of the Company’s Shares. For the basis of calculation of themerger ratio of Merger ②, please see “② Basis of and Reason for Contents of Allocation” of“(iii) Basic Agreement” of “(4) Matters regarding material agreement(s) related to the Tender
Offer” below.

- 18 -

Allocation of U-NEXT Common StockU-NEXT

Mr. UnoHikari Tsushin

MergerCompany
100%

100%
Newco ①

Newco ②

(Note) If Tender Offer Agreement 2 is executed, GS is also expected to receive thecommon stock in U-NEXT as a shareholder of the Company.
(f)After Completion of Consolidation
The businesses to be managed by U-NEXT after the implementation of Merger ① andMerger ② are planned to be the Back Office Business. U-NEXT plans to own or rent theoffices, etc. which are necessary to conduct these businesses, to employ employees, and to
manage these businesses by continuously receiving considerations from the subsidiaries.
Business management is specifically expected to be the work of supervising the managementof entire group from financial and auditing perspectives, etc. not only as the shareholder but
also as the holding company by, among others, developing business plan, providing guidanceon sales and conducting auditing work by taking into account the optimization of businesses ofsubsidiaries, etc.

- 19 -Mr. Uno100%
UNO-HOLDINGS

Hikari Tsushin

Other Shareholders

U-NEXT(Holding
Company)

100%

100%

100%

Newco ①

Newco ②

Existing Subsidiaries(Note) If Tender Offer Agreement 2 is executed, GS is also expected to become ashareholder of U-NEXT.
(ii)
Management Policy after Tender Offer
As provided in “ (c) Structure of Consolidation” of “(i) Background, Purpose and Decision-making
Process Leading up to Decision to Implement Tender Offer” above, a series of reorganizations areplanned after the implementation of Tender Offer and Squeeze Out, and U-NEXT and Company willconsider the most appropriate structure with respect to the composition of directors and officers of UNEXT, etc. and other management structures after the completion of Consolidation including suchreorganizations, in order to further enhance the corporate value of entire U-NEXT and the Company
Group in the future. After U-NEXT becomes the holding company of entire group after thecompletion of Consolidation, certain number of current directors and officers of the Company areplanned to be appointed as the director and officers of such holding company, but the specific number
is yet to be determined.
On an additional note, there is no contract or agreement on the management policy after the Tender
Offer among U-NEXT, Company and Remaining Shareholders.
③
Our decision making process
The board of directors of the Company deliberately discussed and considered the process of theConsolidation, including the Tender Offer, and the terms and conditions of the Tender Offer, taking
into account the Valuation Report (to be defined in “(3) Matters Concerning Calculation”, heareinafter
the same) of the Company and legal advice from Nishimura & Asahi and respecting the Company
Inquiry Report (to be defined in “(i) Establishment of a third-party committee by the Company” of“(7) Measures to ensure fairness of the Tender Offer Price and to avoid conflicts of interest and othermeasures to ensure fairness of the Tender Offer)”, hereinafter the same) prepared by the third party
committee to the fullest extent. As a result, the Company reached the conclusion that an

- 20 enhancement of the corporate value of the Company is expected from the Consolidation, including theTender Offer, for the following reasons:(a) The Company group (i) has engaged in the background music broadcasting business forcommercial use for 50 years since the Company was founded, (ii) conducts an internet service andsoftware provider business for small and medium-sized enterprises and (iii) engages in facility
business, including an automatic fare adjustment machine operation for use in leisure hotels, businesshotels and large-sized hospitals and ancillary services, and the total number of the Company’s clientsis around 500 thousand (as of December 31, 2016). The Company recognized that the customer
accounts of those clients (the “Customer Accounts”) are the greatest asset of the Company group andare the source of the corporate value of the Company group. The Company group gives top priority
to enhancing the corporate performance of the Company group using the Customer Accounts in orderto enhance the Company’s corporate value. Not only the development and marketing of newcommodities and services by the Company group but also the creation of new business relationships
with third party business partners and the provision of those third party business partners’ commodities
and services to the Company and the third party business partners’ clients using the Company group asa hub and through the Customer Accounts will contribute to achieving the goal.
(b) The Customer Accounts based on the background music broadcasting business, etc. that has been
conducted for more than 50 years gives the Company a major advantage; however, it is necessary tosolidify the Customer Accounts and maintain the Company’s competitive advantage. To achieve thisgoal, it is imperative to develop more value-added commodities and services in order to meet customer
needs and to improve customer satisfaction, not simply increasing the number of business partners anddiversifying the commodities provided by the Company, and the Company’s business judgment should
be based on strategic thinking.
(c) Specifically, the Company needs to have a management structure that enables (i) the making ofprior financial investments, including to secure and to grow the necessary personnel, etc., (ii) the
creation of new business relationships with third-party business partners through a broad human andcorporate network, (iii) the making of choices between each commodity and service taking into
consideration profitability, growth potential, competitive advantage and sustainability, (iv) the
proactive development of new markets and customers and (v) the maintenance of the sustainability ofexisting commodities and services, based on a deep understanding of the stakeholders of the Company
group such as shareholders of the Company and financial institutions.
(d) Furthermore, the Company group expects that all of the operations, services and facilities for all
clients of the Company group will be organically bonded through the Internet as a result of rapid
digitalization within a few years. The Company expects that the Company will maintaincompetitiveness by (i) planning clear growth strategies and (ii) enhancing the transaction value foreach customer by developing commodities and services under the growth strategy and suggesting
complete packages of commodities and services of the Company group to the clients and cross-selling.
The Company also recognized that a key point to achieve the goal is not only concrete and feasible
business strategies and commodities and services that meet the client’s needs, but by going back to theprinciples of human society whereby corporate transactions are supported by human relationships andmutual trust. Therefore, one of the largest business challenges of the Company is to enhance, secureand maintain human resources, an intangible asset of the business enterprise.
(e) On the other hand, a major part of U-NEXT’s customer base is individual customers, in contrast to
the Company group’s customer base, and U-NEXT is continuously increasing its customer base
despite being in a very competitive market due to the entry of large companies. Although U-NEXTneeds to conduct its business under very serious business circumstances in which it continuously needs
to keep its novelty, originality and lower prices in the market for individual customers, whose
priorities are diversifying, to develop and update the quality of commodities and services, and not to
be at risk of having contracts terminated, it maintains a certain level of corporate performance. This
proves that U-NEXT can continuously grasp the characteristics and changes in the markets in which it- 21 conducts business, keep a close eye on competitor trends and develop and provide commodities andservices taking into consideration its current customers’ needs and mid-and-long term vision.
(f) Therefore, the Company is confident that the benefit of the Consolidation, including the Tender
Offer, which is not a simple business alliance suggested by U-NEXT, is not only that costs will be
reduced by integrating overlapping functions and promoting efficiency, but is by obtaining new humanresources including new officers and appropriate distribution of human resources and restructuring
including supplementing and increasing personnel in each division of the whole new company groupusing compatibility in human affairs coming from the fact that the origins of the Company and UNEXT are the same.
(g) The Company expects a possibile increase in clients as a result of the Consolidation consideringthat the major customer base of the Company is corporate customers in contrast to the U-NEXT’s
customer base and it will contribute to the enhancement of corporate value of the Company.
Furthermore,
the Company may introduce new a business model for corporate and individual customers through theConsolidation because U-NEXT has the know-how to structure a new business model from its
transaction experience with the more-sensitive consumers; and the business model will contribute toachieving the goal of “developing more value-added commodities and services in order to meetcustomer needs and to improve customer satisfaction.”(h) The Company expects that the Company will overcome its weakness whereby the Company’s
growth potential is relatively low, although the Company’s main customer base is corporate customers,
and it will achieve stable business and profit from its business by the Consolidation with U-NEXT, themain customer base of which is individual customers, and the business of which is less stable due towide swings in the market price, and which has a lot of potential for growth and may result in a more
attractive portfolio for the whole company group.
(i) Furthermore, the Company believes that it is likely to be difficult to maintain its competitivenessand business growth in its ever-changing business circumstances without implementing theConsolidation. The Company also believes that the Consolidation is the best solution to avoid
disadvantages for shareholders of the Company and to implement its fundamental and proactive
business plan from the mid-and-long term even though it is not necessarily bringing about substantial
results due to future business circumstances and the competitive market.
(j) Although the Company will be delisted due to the Consolidation, the new company group which
has control of the Company will maintain its status as a listed company and investors may purchasethe shares of the holding company of the Company group, the share value of which will be increasedby the Consolidation, therefore, the Company believes that shareholders of the Company still have theopportunity to invest in the Company’s business. Additionally, since the Company may promote its
efficiency by carrying on its business as an unlisted subsidiary in the new company group underunclear market circumstances, the Company expects that the Company’s business performance will bebetter and the corporate value of the whole new group will increase as well.
Also, the Company received the proposal to set the Tender Offer Price 450 yen per share by thewritten proposal concerning the Consolidation to the Company on January 17, 2017 from U-NEXT.
Upon receipt of the proposal, the Company diligently reviewed the proposal by obtaining advice, etc.
from EY Transaction Advisory Services Co., Ltd. (“EY”) as financial advisor and Nishimura & Asahi
as legal advisor for the Company and requested U-NEXT to review the Tender Offer Price on January
25, 2017.
Thereafter, U-NEXT reviewed the Tender Offer Price and made another proposal to make the Tender
Offer Price to be 460 yen on January 31, 2017.

- 22 Upon receipt of this proposal, the Company again sought opinion from EY and Nishimura & Asahi
and carefully reviewed the issue, and based on the result of such review, determined that this proposal
is favorable for the benefit of the minority shareholders of the Company when compared with the lastproposal but the Tender Offer Price had not still sufficiently reflected the synergy of the Consolidationand may additionally provide more premium when compared with other similar cases (i.e., past tender
offer cases implemented from 2003 to 2016 which was able to calculate premium rate or discount rate,
as applicable (in total: 712 cases)). As such, on February 3, 2019, the Company requested U-NEXT
to review the Tender Offer Price.
Thereafter, U-NEXT reviewed the issue and proposed that the Tender Offer Price be 461 yen per share
on February 8, 2017. According to U-NEXT, the reason for this offer price was that (a) it was morethan the representative valuation figure (i.e., the median obtained by using permanent growth rate or
discount rate as the basis of the DCF Method (452 yen)) as made in the calculation of the valuation of
the Company’s Shares by KPMG, an independent evaluator who was retained by U-NEXT and (b)when compared with the past range of the stock price of the Company analyzed by the closing prices
and trading volumes in the previous one year, it offered ample premium to most of the minority
shareholders.
In light of the discussions and negotiations stated above, the board of directors of the Company
carefully considers that (i) the Tender Offer Price is not less than the appraised value of the Company’s
Shares under the market price method (from 309 yen to 445 yen) and under the DCF Method (from444 yen to 559 yen) calculated by EY, a third party appraiser independent from the Company, (ii) the
Tender Offer Price represents a premium of 18.8% on 388 yen, the closing price of the Company’s
Shares on JASDAQ as of February 10, 2017, which is the Business Day immediately preceding theannouncement date of the Tender Offer, a premium of 17.3% on 393 yen, the average closing price forthe one-month period prior to February 10, 2017, a premium of 22.0% on 378 yen, the average closing
price for the three-month period prior to February 10, 2017, and a premium of 32.1% on 349 yen, theaverage closing price for the six-month period prior to February 10, 2017 and the premium rate of theTender Offer Price seems to be appropriate when compared with other cases (i.e., past tender offer
cases implemented from 2003 to 2016 which were able to calculate the premium rate or discount rate,
as applicable (in total: 712 cases)), and (iii) the Tender Offer Price is determined as a result of theserious and continuous discussions and considerations between the Company and U-NEXT
substantially equivalent to the discussions and considerations in an arms-length transaction under themeasures to avoid conflicts of interest stated in this “Measures to ensure fairness of the Tender Offer
Price and to avoid conflicts of interest and other measures to ensure fairness of the Tender Offer” and(iv) the Tender Offer process does not impair the appraisal rights of shareholders of the Company
following the procedure under the Companies Act at the discretion of shareholders and presents anopportunity.
Therefore, the board of directors of the Company has determined that the Tender Offer provides
shareholders of the Company with a reasonable opportunity to sell the Company’s Shares.
At the meeting of the board of directors of the Company held on February 13, 2017, the Company
expressed an opinion in favor of the Tender Offer and resolved to recommend to shareholders of theCompany to accept the Tender Offer by the unanimous approval of all five directors, other than Mr.
Uno, the director and chairman of the Company.
Mr. Uno, the director and chairman of the Company, concurrently serves as the president andrepresentative director of U-NEXT and did not participate in any of the deliberations or resolutions of
all agendas concerning the Consolidation, including the Tender Offer, in the board of directors meetingof the Company or attend the negotiations with the Tender Offeror as a director of the Company to
avoid conflicts of interest with the Company regarding the Consolidation.

- 23 Furthermore, all three statutory auditors, including the external statutory auditor, participated in themeeting of the board of directors, and they had no objections to the resolution adopted at the meetingof the board of directors of the Company.

(3)
Matters Concerning Calculation
The Company asked EY, a third party appraiser, to conduct a valuation analysis of the share value of
the Company and merger ratio of the Merger ② in order to ensure the fairness of the decisionmaking process when evaluating the Tender Offer Price submitted by the Tender Offeror, etc. The
Company received a valuation report from EY (the “Valuation Report of the Company”) on February
10, 2017. EY does not fall under a related party of the Company or the Tender Offeror, etc., nor doesit have a material interest in the Tender Offer. The Company has not obtained an opinion concerning
the fairness of the Tender Offer Price (a fairness opinion) from EY.
EY carried out the calculation by using the market stock price method due to the fact that the common
stock of the Company is listed on a financial instruments exchange and therefore has a market stock
price and by using the DCF Method in order to incorporate into the valuation the condition of futurebusiness activities of the Company. The range of the per share value of the Company’s Sharescalculated based on such methods is as follows:
Market price method:
From 309 yen to 445 yen
DCF Method:
From 444 yen to 559 yen
Under the market price method, the per share value of the Company’s Shares was analyzed in therange of 309 yen to 445 yen based on the calculation by setting the calculation record date as February
10, 2017, and by using the minimum and maximum closing prices during the period from October 7,
2016, immediately after the public announcement of the Company’s corporate performance for the
fiscal year ending August, 2016, on JASDAQ
Under the DCF Method, the per share value of the Company’s Shares was analyzed in the range of
444 yen to 559 yen, by converting the amount of free cash flow expected to be generated by theCompany by discounting at certain discount rates, based on future earnings forecasts included in the
Company’s business plan for the period between the fiscal year ending December 2016 and the fiscal
year ending December 2020 prepared by the Company. The discount rates used are from 5.5% to6.7% except that 20% discount rate was adopted for cash flow generated by the Company’s energy
business taking into consideration the probability of achieving the business plan as a start-up business.
The perpetual growth method was used to calculate the contentious value with 1% perpetual growthrate.
The consolidated financial forecast (Japanese Standard), which is based on the business plan preparedby the Company and used the analysis by EY, is as follows. With respect to the business plan, a large
increase in profits is not expected. The Company expected a large increase in sales from the energy
business, which is a start-up business of the Company, because there is a large number of end
customers, the energy business is under the business model in which the Company expectedsustainable and continuous sales (cumulated sales) from exisiting customers, and expected existingcustomers to shift to using the service, on the other hand, the number of commercial stores andindividual clients for the music broadcasting business has been decreasing. Therefore, theCompany’s business profit is expected to be flat. However, the Company recognized that the energy
business may not contribute a large increase in total profits for the Company because the businessmodel of the energy business is the electricity wholesale trade with electric power companies and theCompany cannot expect a large increase in profits due to the high number of competitors in the market
based on common benchmark prices, even though the Company did expect a large increase in sales inthe energy business.

- 24 In regard to the synergy effect expected to materialize upon implementation of the Consolidation, it is
not incorporated into the financial forecast below due to the difficulty in making detailed estimates atthe present time.
(100 million yen)
Net
Sales
Business
ProfitEBITDA
Free
Cash
Flow
(note)

FY
2017

FY
2018

FY
2019

FY
2020

FY
2021

FY
2022

FY
2023

FY
2024

796

1,068

1,408

1,715

1,933

2,091

2,191

2,238

103

97

100

102

103

106

104

102

161
91

153
79

154
82

155
85

155
84

156
69

154
68

152
68

(note) The reason why the expected free cash flow in the period from FY 2022 to FY
2024 will be reduced is that the application of loss carried forward will befinished and the normal corporation tax rate will be applied.
(iii)
Advice from an independent law firm to the Company
According to the Company’s press release, the Company appointed Nishimura & Asahi as a legal
advisor independent from the Company and the Tender Offeror to obtain the necessary legal advice
regarding the decision-making method and process for the Consolidation, including the Tender Offer,in order to secure the transparency and reasonableness of the decision-making process, etc. concerning
the Consolidation, including the Tender Offer. Nishimura & Asahi does not fall under a related partyof the Company or the Tender Offeror, etc., nor does it have a material interest in the Tender Offer.
(4)

Matters regarding material agreement(s) related to the Tender Offer(i)
Non-tender Agreement
With respect to the Tender Offer, according to the Tender Offeror, the Tender Offeror enteredinto the Non-tender Agreement with Mr. Uno as of February 13, 2017 under which Mr. Uno
agreed not to tender all the Company’s Shares held by him (63,400,402 shares and theShareholding Ratio of 30.77%) in the Tender Offer. The Non-tender Agreement contains no
conditions precedent for non-tendering by Mr. Uno.
Further, according to the Tender Offeror, the Tender Offeror has obtained consent from Mr.
Uno under the Non-tender Agreement to the effect that, if a fractional share less than 1 shareof the Company’s Shares held by Mr. Uno arises from the Squeeze Out and such fractional
share is sold to the Tender Offeror, Mr. Uno will repurchase the share corresponding to such
fractional share from the Tender Offeror at the time separately agreed between Mr. Uno andthe Tender Offeror and the purchase price of such repurchase (i.e., the price per share after
the stock split which is scheduled to be implemented on the Company’s Shares before such
repurchase at the ratio which is the opposite of the consolidation ratio of Share
Consolidation) shall be the same price as the Tender Offer Price.
In addition, according to the Tender Offeror, the Tender Offeror obtained consent from Mr.
Uno under the Non-tender Agreement to the effect that, if the Tender Offer comes into effect,
he will agree to all the items on the agenda including the items in connection with the Share
Consolidation at the Extraordinary Shareholder’s Meeting (to be defined in (5) Policy fororganizational restructuring, etc. after the Tender Offer (matters relating to so-called “TwoStep Acquisitions”) below; the same shall apply hereinbelow).
(ii)
Tender Offer Agreement 1
According to the Tender Offeror, the Tender Offeror entered into the Tender Offer
Agreement 1 as of February 13, 2017 with Hikari Tsushin under which Hikari Tsushin willtender a part of the Company’s Shares held by it (28,205,437 shares and a Shareholding- 25 Ratio of 13.69% if Tender Offer Agreement 2 is executed and 29,380,335 shares andShareholding Ratio of 14.26% if Tender Offer Agreement 2 is not executed) as well as all the
Company’s Shares held by Infoservice, a subsidiary of Hikari Tsushin (4,146,300 shares; aShareholding Ratio of 2.01%) and all the Company’s Shares held by Broad Peak (224,100
shares; a Shareholding Ratio of 0.11%) (total of 32,575,837 shares and a Shareholding Ratioof 15.81% for the 3 companies if Tender Offer Agreement 2 is executed and 33,750,735
shares and a Shareholding Ratio of 16.38% for the 3 companies if Tender Offer Agreement 2
is not executed). The Tender Offeror has agreed with Hikari Tsushin to the effect that
Hikari Tsushin will not tender Non-tendered Shares (9,204,023 shares and Shareholding
Ratio of 4.47% if Tender Offer Agreement 2 is executed and 8,029,125 shares and a
Shareholding Ratio of 3.90% if Tender Offer Agreement 2 is not executed) under the Tender
Offer Agreement 1.
The Tender Offer Agreement 1 provides the conditions precedent for tendering by Hikari
Tsushin and its subsidiaries to the effect that ① under the applicable laws and regulations,
all the procedures necessary for the commencement of the Tender Offer have been taken, theTender Offer has been commenced pursuant to the provisions of the Tender Offer Agreement
1 and has not been withdrawn thereafter, ② there exists no material breach of theobligations under the Tender Offer Agreement 1 to be performed by the Tender Offeror by
the commencement date of the Tender Offer (Note 1) or the representations and warranties
by the Tender Offeror thereunder (Note 2), and ③ all the directors who were duly present
at the meeting of the board of directors of the Company (excluding a director who did notparticipate in the vote for the purpose of avoiding possible conflict of interests, if any)
unanimously resolved to express their opinion in agreement with the Tender Offer and such
opinion has been published and has not been withdrawn.
The Tender Offeror has obtained consent from Hikari Tsushin under the Tender Offer
Agreement 1 to the effect that, if a fractional share less than 1 share of the Company’s
Shares held by Hikari Tsushin arises from the Squeeze Out and such fractional share is soldto the Tender Offeror, Hikari Tsushin will repurchase the share corresponding to such
fractional share from the Tender Offeror at the time separately agreed between Hikari
Tsushin, and the Tender Offeror and the purchase price of such repurchase (i.e., the price pershare after the stock split which is scheduled to be implemented on the Company’s Shares
before such repurchase at the ratio which is the opposite of the consolidation ratio of Share
Consolidation) shall be the same price as the Tender Offer Price.
Furthermore, the Tender Offeror obtained consent from Hikari Tsushin under the Tender
Offer Agreement 1 to the effect that, if the Tender Offer comes into effect, Hikari Tsushin
will agree to all the items on the agenda including the items in connection with the Share
Consolidation at the Extraordinary Shareholder’s Meeting.
In addition, the Tender Offeror executed the business alliance agreement regarding
reservation system business and reservation media business concluded between the
Company, Hikari Tsushin and EPARK, Inc. which is a subsidiary of the Hikari Tsushin on
February 13, 2017 (the “Hikari Tsushin Business Alliance Agreement”) and agreed toapprove the Hikari Tsushin Business Alliance Agreement and to cause the Company to
execute and comply with the Hikari Tsushin Business Alliance Agreement after thecompletion of the Tender Offer pursuant to Tender Offer Agreement 1.
(Note 1) The Tender Offeror assumes as the obligations under the Tender Offer Agreement 1
which are required to be performed by the commencement date of Tender Offer thecompensation obligation in case of breach of any obligation, confidential
obligation, obligation to bear its own costs, etc., obligation not to assign, etc. its

- 26 contractual position, rights and obligations under the agreement, and obligation to
discuss with other party in good faith any matters not provided in the agreement.
(Note 2) The Tender Offeror represents and warrants that ① the Tender Offeror is lawfully
and validly established and existing, ② the Tender Offeror has the power andauthority and performed the procedures necessary to execute and perform theTender Offer Agreement 1, ③ the Tender Offer Agreement 1 is enforceable, ④execution and performance of Tender Offer Agreement 1 do not contravene anylaws and regulations, etc., ⑤ the Tender Offeror has obtained the approvals andauthorizations, etc. necessary to execute and perform the Tender Offer Agreement
1, and ⑥ the Tender Offeror does not fall under and is not involved with antisocial forces.
(iii) Basic Agreement① Outline of the Basic Agreement
For the Tender Offer, U-NEXT and Company executed the Basic Agreement as of February
13, 2017 under the terms as outlined below with respect to the Consolidation method andschedule and the merger ratio of Merger ②, among other things:(Consolidation Method)
U-NEXT and Company will implement the Consolidation by implementing each of thefollowing procedures:(i)
The Tender Offeror will conduct the Tender Offer and implement the Squeeze
Out on the Company’s Shares after the Tender Offer.
(ii)
Thereafter, U-NEXT will implement the U-NEXT Demerger, under which UNEXT’s business will be succeeded by Newco ①, and the Company will
implement the Company Demerger, under which Company’s business will be
succeeded by Newco ②.
(iii) Merger ① will be implemented, under which U-NEXT after the U-NEXT
Demerger will be the surviving company and the Tender Offeror will be themerged company.
(iv) Merger ② will be implemented, under which U-NEXT after the Merger ①
will be the surviving company and the Company after the Company Demerger
will be the merged company.
(v)
U-NEXT and the Company will conduct an intra-group reorganization fromthe perspective of maximizing the synergy amongst the group companies,
securing the likelihood that the leveraged buyout financing will be repaid
without any issues, construct firm group management structure such ascompliance and internal governance in order to secure repayment of loans,including (a) the transactions listed from (i) to (iii) above and (b) cause
ALMEX Inc. to become a direct subsidiary of U-NEXT after Merger ② andcause Newco ②, which has the assumed customer attraction support
business as result of the Company Demerger, to become a direct subsidiaryof N-NEXT.
(Consolidation Schedule)
The Consolidation will be implemented generally under the schedule set forth below.
However, if it becomes necessary to change such schedule, U-NEXT and Company willchange such schedule upon good faith discussion and agreement.
February 13, 2017: Execution of Basic Agreement and announcement ofConsolidation
February 14, 2017: Commencement of Tender Offer
March 28, 2017: Final day of Tender Offer- 27 April 4, 2017:
Mid-June 2017:

Commencement date of payments relating to Tender Offer
Resolutions at the board of directors meetings of U-NEXT and
Company (i.e., resolutions on Squeeze Out, U-NEXT Demerger,
Company Demerger, Merger ① and Merger ②)
Mid-July 2017:
Openings of extraordinary general shareholders’ meetings of UNEXT and Company (Note)
Mid-August 2017: Effective date of Share Consolidation
December 1, 2017: Effective date of U-NEXT Demerger, Company Demerger, Merger① and Merger ②(Note) The matters relating to U-NEXT Demerger, Merger ① and Merger ② arescheduled to be discussed in the extraordinary general shareholders’ meeting of UNEXT and the matters relating to Share Consolidation, Company Demerger andMerger ② are scheduled to be discussed in the extraordinary general shareholders’meeting of the Company, respectively.

(Tender Offer Price and Merger Ratio of Merger ②)
The Tender Offeror will implement the Tender Offer at 461 yen per share of Company’s
Shares. For the Merger ②, U-NEXT will allocate 0.61 shares of U-Next common stock
per 1 share of Company’s Shares (Note).
(Note) U-NEXT plans to use newly-issued shares of U-NEXT common stock withrespect to all shares which U-NEXT will allocate.
②
Basis of and Reason for Contents of Allocation
In order to ensure fairness and reasonableness on the determination merger ratio of Merger② (the “Merger Ratio”), U-NEXT appointed Kabushiki Kaisha KPMG FAS (“KPMG”) andthe Company appointed Ernst & Young Transaction Advisory Service Co., Ltd. (“EY”) eachas an independent third party accounting firm for the calculation of merger ratio, and UNEXT and Company respectively requested such firms to calculate the merger ratio ofcommon stock in the Merger ②. U-NEXT and Company (i) carefully reviewed the analysis
results and advices on the merger ratio of common stock received from their respective third
party accounting firms as mentioned above, (ii) valuated the Company’s Shares at the same
price as the Tender Offer Price (for the purpose of calculating the Merger Ratio) in order toequalize the financial values to be received by shareholders under the Tender Offer andMerger ②which will be implemented as a part of Consolidation, (iii) have taken into
consideration the financial conditions, corporate performance trends, stock price trends andother factors concerning both U-NEXT and Company, and (iv) negotiated and discussed ingood faith by taking into account the aforementioned matters. As a result, both U-NEXTand Company determined that the Merger Ratio was reasonable and contributed to thebenefits of respective shareholders.
By taking into account the abovementioned matters, the board of directors meetings of both
U-NEXT and Company, which were held on February 13, 2017, decided on the merger priceof Merger ② and U-NEXT and Company executed the Basic Agreement on the same date.
③ Matters Concerning Calculation
According to U-NEXT, with respect to U-NEXT, KPMG carried out the calculation by using
the average market stock price method due to the fact that the common stock of U-NEXT islisted on the financial instruments exchange and therefore has a market stock price and byusing the discounted cash flow method (the “DCF Method”) in order to incorporate into thevaluation the condition of future business activities of U-NEXT. With respect to theCompany, KPMG carried out the calculation by using the average market stock price method

- 28 due to the fact that the Company’s Shares is listed on the financial instruments exchange andtherefore has a market stock price and by using the DCF Method in order to incorporate into
the valuation the condition of future business activities of the Company.
The results of calculation of the merger ratio, under which the share value of 1 share of UNEXT common stock is set at 1, are as follows:
Method Used
Average Market Stock Price Method
DCF Method

Results of Calculation of Merger Ratio
0.47 ~ 0.64
0.42 ~ 0.83

Under the average market stock price method, KPMG has carried out the calculation by
setting the calculation record date as February 10, 2017 and by using the closing price as of
the calculation record date and the average closing prices during the immediately preceding
1-month period, 3-month period and 6-month period on the Tokyo Stock Exchange.
With respect to U-NEXT, KPMG has analyzed the corporate value and stock value of UNEXT based on the DCF Method by converting the amount of free cash flow expected to begenerated by U-NEXT on and after the fourth quarter of the fiscal year ending December
2016 to the current value by discounting at certain discount rates, by taking into account thefactors, etc. such as the profits in the business plans and investment plans prepared by UNEXT for the period between the fourth quarter of the fiscal year ending December 2016
and the fiscal year ending December 2020 and publicly-available information.
With respect to the corporate performance of U-NEXT during the business plan period of UNEXT which is used for the analysis based on the DCF Method, large increase in profits inthe amount of 2.219 billion yen from the fiscal year ending December 2016 (net profit:
minus 1.062 billion yen) to the fiscal year ending December 2020 (net profit: 1.157 billion
yen) is expected mainly due to the enlargement of markets of video streaming business and
MVNO service.
On the other hand, with respect to the Company, KPMG has analyzed the corporate value
and stock value of the Company based on the DCF Method by converting the amount of free
cash flow expected to be generated by the Company on and after the fiscal year ending
August 2017 to the current value by discounting at certain discount rates, by taking into
account the factors, etc. such as the profits in the business plans and investment plans
prepared by the Company for the period between the fiscal year ending August 2017 and thefiscal year ending August 2024 and publicly-available information. With respect to thecorporate performance of the Company during the business plan period of the Company
which is used for the analysis based on the DCF Method, a large increase in profits is notexpected because the difference is minus 116 million yen between the expected net profit of
the fiscal year ending August 2017 (5.948 billion yen) and the expected net profit of the
fiscal year ending August 2024 (5.832 billion yen).
For the calculation of merger ratio, KPMG (i) generally used the information received from
U-NEXT and the Company and publicly-available information as is, (ii) assumed, among
others, that all of such materials and documents, etc. used are true and complete and that
there are no facts not disclosed to KPMG which have the possibility of having a material
effect on the calculation of merger ratio and (iii) therefore, has not independently verified
their accuracy and completeness. KPMG has not valued, appraised or assessed on its own,
or requested any third party for appraisal or assessment of, any assets or debts (including
contingent liabilities) of U-NEXT, the Company or any of their respective subsidiaries oraffiliates. In addition, KPMG assumed that the information on the business plan of UNEXT and the Company as referred to in the calculation has been reasonably prepared by
the management of U-NEXT and the Company based on the best possible forecasts and- 29 decisions currently available. KPMG’s calculation on the merger ratio incorporates theinformation and economic condition as of February 10, 2017.
U-NEXT has not obtained from KPMG the fairness opinion on the merger ratio of common
stock.
On the other hand, EY carried out the calculation by using the market stock price method
due to the fact that the common stock of the Company and U-NEXT is listed on a financial
instruments exchange and therefore has a market stock price, and by using the DCF Method
in order to incorporate into the valuation the condition of future business activities of theCompany and U-NEXT.
The results of the merger ratio calculation, under which the share value of one share of UNEXT common stock is set at 1, obtained by EY using the abovementioned method are as
follows:
Method Used
Market Stock Price Method
DCF Method

Results of Calculation of Merger Ratio
0.402 ~ 0.862
0.507 ~ 0.959

Under the market stock price method, EY has carried out the calculation by setting the
calculation record date as February 10, 2017, and by using the closing price as of thecalculation record date and the average closing prices (i) with respect to U-NEXT, during theperiod from November 15, 2016, the following business day after announcing U-NEXT’s
Third Quarterly Report, to the calculation record date and (ii) with respect to the Company,
during the period from October 7, 2016, immediately after the public announcement of theCompany’s corporate performance for fiscal year ending August, 2016. Under the market
stock price method, the merger ratio was derived to be 0.402 to 0.862.
Under the DCF Method, with respect to U-NEXT, EY has analyzed the stock value of UNEXT by converting the amount of free cash flow expected to be generated by U-NEXT by
discounting at certain discount rates, based on future earnings forecasts of U-NEXT for theperiod between the fiscal year ending December 2016 and the fiscal year ending December
2020. The discount rates used are from 7.4% to 9.2%. The perpetual growth method wasused to calculate the contentious value with 1% perpetual growth rate.
On the other hand, with respect to the Company, EY has analyzed the stock value of theCompany by converting the amount of free cash flow expected to be generated by theCompany by discounting at certain discount rates, based on future earnings forecasts of theCompany for the period between the fiscal year ending August 2017 and the fiscal year
ending August 2021. The discount rates used are from 5.5% to 6.7%. The perpetual
growth method was used to calculate the contentious value with 1% perpetual growth rate.
Under the DCF Method, the merger ratio was derived to be 0.507 to 0.959.
For the merger ratio calculation, EY generally used the information received from U-NEXTand the Company and publicly-available information as is and assumed, among other things,
that all of such materials and documents, etc. used are true and complete and that there are nofacts not disclosed to EY that could possibly have a material effect on the calculation of themerger ratio and therefore, has not independently verified their accuracy and completeness.
EY has not valued, appraised or assessed on its own, or requested any third party to appraiseor assess, any assets or debts (including contingent liabilities) of U-NEXT and the Company
or any of their respective subsidiaries or affiliates. EY’s calculation of the merger ratio
incorporates the information and economic condition as of February 10, 2017 and EY
assumed that the information on the business plan of the Company as referred to in thecalculation has been reasonably prepared by the management of the Company based on thebest possible forecasts and decisions currently available.

- 30 The net profits in future earnings forecasts of U-NEXT which is used for the analysis basedon the DCF Method are minus 1.062 billion yen in the fiscal year ending December 2016,
233 million yen in the fiscal year ending December 2017, 630 million yen in the fiscal year
ending December 2018, 909 million yen in the fiscal year ending December 2019 and 1.157
billion yen in the fiscal year ending December 2020. Large increase in profits in theamount of 2.219 billion yen from the fiscal year ending December 2016 to the fiscal year
ending December 2020 is expected mainly due to the enlargement of markets for the video
streaming business and MVNO service. The net profits in future earnings forecasts of theCompany which is used for the analysis based on the DCF Method are 5.948 billion yen in
the fiscal year ending August 2017, 5.636 billion yen in the fiscal year ending August 2018,5.898 billion yen in the fiscal year ending August 2019, 6.197 billion yen in the fiscal year
ending August 2020, 5.929 billion yen in the fiscal year ending August 2021, 6.114 billion
yen in the fiscal year ending August 2022, 6.005 billion yen in the fiscal year ending August2023 and 5.832 billion yen in the fiscal year ending August 2024. A large increase inprofits is not expected during the period from the fiscal year ending August 2017 to August
2024.

(iv) Tender Offer Agreement 2
According to the Tender Offeror, during the Tender Offer Period, the Tender Offeror wishes
to execute with GS (which is the third largest shareholder of the Company) the Tender Offer
Agreement 2 under which GS agrees to tender part of Company’s Shares held by GS(13,695,951 shares and Shareholding Ratio of 6.65%) and GS agrees not to tenderremaining the Expected Non-tendered Shares (10,813,859 shares and Shareholding Ratio of
5.25%) in response to the Tender Offer.
The Tender Offeror also expects to obtain consent from GS under the Tender Offer
Agreement 2 to the effect that, if a fractional share less than 1 share of the Company’s Shares
held by GS arises from the Squeeze Out and such fractional share is sold to the Tender
Offeror, GS will repurchase the share corresponding to such fractional share from the Tender
Offeror at the time separately agreed between GS and the Tender Offeror and the purchaseprice of such repurchase (i.e., the price per share after the stock split which is scheduled to be
implemented on the Company’s Shares before such repurchase at the ratio which is the
opposite of the consolidation ratio of Share Consolidation) shall be the same price as theTender Offer Price.
Furthermore, the Tender Offeror expects to obtain from GS under the Tender Offer
Agreement 2 that upon successful completion of the Tender Offer, GS will vote for the
proposal on Share Consolidation, proposal on the Company Demerger and proposal on
Merger ② at the Extraordinary Shareholders’ Meeting.
(5)

Possibility of and reasons for delisting

The Company’s Shares are listed on JASDAQ as of the date hereof. However, since the Tender
Offeror has not set a maximum limit on the number of Share Certificates to be purchased in the Tender
Offer, the Company’s Shares may be delisted through prescribed procedures in accordance with thestock delisting criteria set forth by JASDAQ, depending on the results of the Tender Offer. Also,
even in the case where the shares of Common Stock of the Company do not fall under that criteria at
the time of the successful completion of the Tender Offer, if the Tender Offeror conduct the Squeeze
Out as set out in “(5) Policy for organizational restructuring, etc. after the Tender Offer (mattersrelating to so-called “Two-Step Acquisitions”)” above, Company’s Shares will be delisted through theprescribed procedures in accordance with the stock delisting criteria of JASDAQ. After delisting, theCompany’s Shares will be unable to be traded on JASDAQ.

- 31 (6)

Policy for organizational restructuring, etc. after the Tender Offer (matters relating to socalled “Two-Step Acquisitions”)

According to the Tender Offeror, the Policy for organizational restructuring, etc. after the Tender Offer(matters relating to so-called “Two-Step Acquisitions”) is as follows:
Although the Tender Offeror implements this Tender Offer in order to acquire all of the Company’s
Shares (other than treasury shares held by the Company and the Non-Tendered Shares and if Tender
Offer Agreement 2 is executed, excluding the Expected Non-tendered Shares), if the Tender Offeror
fails to acquire them all through the Tender Offer, the Tender Offeror plans to take a series ofprocedures in the following manner so that the Tender Offeror and Remaining Shareholders will holdall Company’s Shares (other than treasury shares held by the Company) (the “Squeeze Out”).
Specifically, the Tender Offeror intends to request the Company to hold an extraordinary generalshareholders’ meeting at which the following proposals will be submitted (the “Extraordinary
Shareholders’ Meeting”) promptly after the successful completion of the Tender Offer to conduct a
consolidation of the Company’s Shares (the “Share Consolidation”). The Tender Offeror andRemaining Shareholders will vote in favor of such proposal at the Extraordinary Shareholders’Meeting. If the proposal of the Share Consolidation is approved at the Extraordinary Shareholders’Meeting, the shareholders of the Company will, on the effective date of the Share Consolidation, holdthe number of Company’s Shares proportionate to the ratio of the Share Consolidation that is approvedat the Extraordinary Shareholders’ Meeting. If there is a fraction of one share of the Company’s
Shares as a result of the Share Consolidation, each shareholder will receive an amount of money
obtained by selling the Company’s Shares equivalent to the total number of such fractions (anyfraction of one share in the total will be rounded down) to the Company or the Tender Offeror orotherwise, in accordance with the procedures under Article 235 of the Companies Act (Act No. 86 of2005, as amended; hereinafter the same) and other relevant laws and regulations. The sale price ofsuch Company’s Shares equivalent to the total number of the fractions will be valued so that theamount of money to be delivered to each shareholder of the Company who did not tender its shares in
the Tender Offer (other than the Company) and any Remaining Shareholders who own a fraction of
one share of the Company’s Shares as a result of the sale will be equal to the price obtained bymultiplying the Tender Offer Price by the number of the Company’s Shares held by each suchshareholder, and then a petition for permission of voluntary sale will be filed with a court. The ratioof the Share Consolidation has not been determined as of the date hereof. However, the ratio of the
Share Consolidation will be determined so that the number of the Company’s Shares held by eachshareholder of the Company (other than the Tender Offeror and Remaining Shareholders) who did nottender its shares in the Tender Offer will be a fraction of one share in order for only the Tender Offeror
and Remaining Shareholders to hold all Company’s Shares (other than treasury shares held by theCompany). If the Extraordinary Shareholders’ Meeting is held, it will be held around July 2017 andthe specific procedures and the schedule of implementation thereof will be announced promptly by theCompany once it has decided them.
The Companies Act provides that if the Share Consolidation has been conducted and there is a fractionof one share of the Company’s Shares as a result of the Share Consolidation, each shareholder of theCompany may request the Company to purchase all of the shares held by it that are fractions of one
share at a fair price and may file a petition to a court to determine the price of the Company’s Sharesin accordance with Articles 182-4 and 182-5 of the Companies Act and other provisions of relevantlaws and regulations. In this case, the purchase price per share will ultimately be determined by acourt.
There may be a change in the method to use class shares subject to wholly call or any other method
which has almost the same effect as above, depending on the circumstances of interpretation of any
relevant law or regulation by the relevant authorities, etc., the Shareholding Ratio of Share Certificatesby the Tender Offeror and Remaining Shareholders after the Tender Offer and the ownership of Share
Certificates of the Company by the Company’s shareholders other than the Tender Offeror and- 32 Remaining Shareholders. However, even in such case, the Tender Offeror intends to adopt themethod of ultimately delivering money to the Company’s shareholders (other than the Remaining
Shareholders and the Company) who did not tender their shares in the Tender Offer. The amount ofmoney to be delivered to such shareholders in such case is expected to be valued so that it will beequal to the price obtained by multiplying the Tender Offer Price by the number of Company’s Shares
held by such shareholders.
The Tender Offer is not intended to solicit the shareholders of the Company to approve the proposals
at the Extraordinary Shareholders’ Meeting.
(7)

Measures to ensure fairness of the Tender Offer Price and to avoid conflicts of interest andother measures to ensure fairness of the Tender Offer)

Taking into consideration the fact that Mr. Uno, who is the president and the representative director of
the U-NEXT which owns 100% shares of the Tender Offeror, concurrently serves as the chairman anddirector of the Company and owns 63,400,402 shares of the Company’s Shares (the Shareholding
Ratio of which is 30.77%) and he is in the position which can be influential on the determination of
the Tender Offer Price, the problem of structural conflicts of interest with the minority shareholders of
the Company exists, the following measures have been taken to ensure the fairness of theConsolidation including the Tender Offer and to avoid conflicts of interest. Among the following
statements, those relating to the Company are stated based on the explanation and the Company’s
Press Releases.
Although the minimum number of the Share Certificates to be purchased in the Tender Offer relating
to so-called “majority of minority” is not provided under the Tender Offer, according to the Tender
Offeror, the Tender Offeror considers that the benefit of the minority shareholders of the Company issufficiently taken care by the implementation of the items from (i) to (vii) below.

(i) Establishment of a third-party committee by the Company
According to the Company’s press release, the Company established an independent third-party
committee consisting of Mr. Motohiko Aiba (attorney-at-law, Aiba Law Office), Ms. Kumiko Igushi(the external director of the Company) and Mr. Keiichi Omura (tax accountant, Heiseikaikeisha Tax
Corporation), all independent from the board of directors of the Company and the Tender Offeror, etc.,
on January 24, 2017, (and such members have not changed since establishment) for the purpose ofeliminating arbitrariness in decision making concerning the Tender Offer and securing fairness,transparency and objectivity in the decision making process by the Company, and consulted the thirdparty committee regarding (i) the rationality and reasonableness of the purpose of the Consolidation(including whether the Consolidation will contribute to the enhancement of the corporate value of theCompany), (ii) the fairness of the Tender Offer process (including measures to avoid conflicts ofinterest), (iii) the fairness and reasonableness of the terms and conditions of the Consolidation(including the Tender Offer Price), (iv) based on the foregoing (i) to (iii), an investigation into whether
the board of directors of the Company should agree to the Tender Offer and recommend toshareholders who hold the Company’s Shares to tender the Company’s Shares in response to theTender Offer and (v) based on the foregoing (i) to (iii), whether the Consolidation will not bedisadvantageous to the minority shareholders of the Company (collectively referred to as the “Subject
Matters of the Company”) and requested that the committee submit a report thereon to the board of
directors of the Company.
The third-party committee held seven meetings in total during the period from January 25, 2017, toFebruary 10, 2017, and deliberately discussed and considered the Subject Matters of the Company.
Specifically (a) the third-party committee heard a detailed outline of the Consolidation, negotiation
process with U-NEXT, the Company’s business plan and business circumstances and impact of theConsolidation on the Company’s business and other related matters from the project team of theCompany and the third-party committee and the project team held question and answer sessions.

- 33 Further, (b) the third-party committee also heard about the current picture and the businesscircumstances of U-NEXT, the purposes of the Consolidation and other background of theConsolidation, the management policy after the Consolidation, terms and conditions of theConsolidation, details about the structure of the Consolidation and other related matters from U-NEXT
and Daiwa Securities Co., Ltd., a financial adviser of U-NEXT (“Daiwa”), the third-party committee,
U-NEXT and Daiwa held question and answer sessions and the third-party committee discussed thereasons for adopting the structure of the Consolidation with U-NEXT, Daiwa and Nishimura & Asahi.
Additionally, (c) an opinion was explained to the third-party committee on the valuation analysis of
the share value of the Company, the Tender Offer Price and the Merger Ratio as a third party appraiser
by EY, a third party appraiser which was requested to calculate the share value of the Company andthe third-party committee and EY held question and answer sessions.
In light of the details of the investigation, the discussions and considerations stated above, the thirdparty committee deliberately discussed and considered the Subject Matters of the Company.
The third-party committee submitted a report (the “Company Inquiry Report”) regarding the Subject
Matters of the Company to the board of directors of the Company on February 13, 2017 saying that:(a) the purpose of the Consolidation in achieving the following synergy effects by implementing theConsolidation is fair because it takes into consideration that the synergy effects may not be achieved
only by a business alliance without the Consolidation, and is reasonable because there is no doubt
about the feasibility of the Consolidation:- Promoting the efficiency of business operations by sharing business resources of the Company, themajor customer of which is a corporate client and which has a small number of individual clients, andU-NEXT, the major customer of which is an individual client and which has a small number ofcorporate clients (for example, the Company and U-NEXT plans for the ICT business division (forcorporate customers) of the Company and the ICT business division (for individual customers) of UNEXT to be under the control of a single intermediary holding company, and expected the synergy
effects from carrying on the music broadcasting business of the Company and the video streaming
business of U-NEXT within the same corporate group);- the business benefits such as the enhancement of sales capabilities using marketing personnel andbusiness partner networks of the Company and U-NEXT (for example, the promotion of ICT tocommercial stores by integrating telecommunications business know-how, and expanding sales
methods by integrating know-how and resources relating to Telemarketing) and the increase in thenumber of subscriptions to the music broadcasting business for individuals by integrating Consumer
Marketing etc.;- Promoting the capacity to generate added-value by sharing the function to develop the commodity
and technology;- Achieving appropriate business resource distribution; and- Reducing administration costs through promoting organizational efficiency.
(b) considering that (i) the Company established a third-party committee independent from the Tender
Offeror and the Company and referred the report submitted by the third-party committee to agree with
the Tender Offer, (ii) the Company asked EY as a independent third-party appraiser and obtained thevaluation report regarding the share value of the Company and the merger ratio of the Company and
U-NEXT and considering the Consolidation based on the valuation report, (iii) the Company
appointed Nishimura & Asahi, a legal advisor independent from the Tender Offeror and the Company
and obtained necessary legal advice regarding the decision-making method and process for theConsolidation and other legal issues in the decision-making of the Tender Offer and the Merger ②,(iv) the Tender Offeror set the Tender Offer Period as 30 Business Days, longer than the minimum
period of 20 Business Days for tender offers under laws and regulations and the Company has not
executed any agreement with the Tender Offeror which includes deal protection provisions to prohibit
the Company from having contact with a counter offeror or which otherwise limits the opportunity fora counter offeror to have contact with the Company, (v) the Tender Offeror intends to implement the
Squeeze Out by means of a Share Consolidation after the completion of the Tender Offer, and theTender Offeror announced to shareholders of the Company that the shareholders may challenge the- 34 Tender Offer Price by exercising their appraisal rights when the Squeeze out is implemented andpaying adequate attention to avoiding coercive behaviour, the process of the Consolidation seems to befair.
(c) considering that the Company and U-NEXT conducted multiple consultations and discussions withregard to the Tender Offer Price and the Merger Ratio by referring the Valuation Report of theCompany (please see “(ii) Obtaining a valuation report from an independent third party appraiser by
the Company”) prepared by EY, an independent third-party appraiser, the Tender Offer Price and theMerger Ratio is within the result of EY’s valuation analysis, the premium rate of the Tender Offer
Price seems to be appropriate when compared with other cases (i.e., past tender offer cases
implemented from 2003 to 2016 which were able to calculate the premium rate or discount rate, asapplicable (in total: 712 cases)) and the Company will pay substantially the same price as the Tender
Offer Price to shareholders of the Company during the Squeeze Out process after the completion of
the Tender Offer, the terms and conditions of the Consolidation such as the Tender Offer Price and theMerger Ratio seems to be fair and appropriate.
(d) based on the foregoing (a) to (c), since the purpose of the Consolidation seems to be fair andreasonable, the process of the Consolidation seems to be fair and the terms and conditions of theConsolidation seem to be fair and reasonable, the Consolidation will not be disadvantageous to theminority shareholders of the Company and it is appropriate that the board of directors of the Company
agrees to the Tender Offer and recommends to shareholders who hold the Company’s Shares to tender
the Company’s Shares in response to the Tender Offer.
(ii) Obtaining a valuation report from an independent third party appraiser by the Company
The Company asked EY, a third party appraiser independent from the Tender Offerors, to conduct a
valuation analysis of the share value of the Company and merger ratio of the Merger ② in order toensure the fairness of the decision-making process when evaluating the Tender Offer Price submitted
by the Tender Offeror, etc. The Company received a valuation report from EY (the “Valuation
Report of the Company”) on February 10, 2017. EY is not a related party of the Company or theTender Offeror, etc., nor does it have a material interest in the Tender Offer. The Company has not
obtained an opinion concerning the fairness of the Tender Offer Price (a fairness opinion) from EY.
Please see “(3) Matters Concerning Calculation” above for a summary of the valuation report.
(iii) Advice from an independent law firm to the Company
According to the Company’s press release, the Company appointed Nishimura & Asahi as a legal
advisor independent from the Company and the Tender Offeror to obtain the necessary legal advice
regarding the decision-making method and process for the Consolidation, including the Tender Offer,in order to secure the transparency and reasonableness of the decision-making process, etc. concerning
the Consolidation, including the Tender Offer. Nishimura & Asahi does not fall under a related partyof the Company or the Tender Offeror, etc., nor does it have a material interest in the Tender Offer.
(iv) Approvals from all directors of the Company without conflicts of interest and opinions from all
statutory auditors of the Company without conflicts of interest that they have no objections
Based on the reasons set forth in “③ Our Decision Making Process” of “(2) Basis of and reason forthe opinion” above, the board of directors of the Company, excluding Mr. Uno, the director of theCompany, deliberately discussed and considered the process of the Consolidation, including theTender Offer, and the terms and conditions of the Tender Offer, taking into account the Valuation
Report of the Company and legal advice from Nishimura & Asahi and respecting the Company
Inquiry Report prepared by the third party committee to the fullest extent. As a result, the Company
reached the conclusion that an enhancement of the corporate value of the Company is expected fromthe Consolidation, including the Tender Offer.
Mr. Uno, the director of the Company, and who concurrently serves as the representative director of UNEXT, did not participate in any of the deliberations or resolutions of all agendas concerning the- 35 Consolidation, including the Tender Offer, in the board of directors meeting of the Company or attend
the negotiations with the Tender Offeror as a director of the Company to avoid conflicts of interest
with the Company regarding the Consolidation.
Furthermore, all statutory auditors, including the external statutory auditor, participated in the meetingof the board of directors, and they had no objections to the resolution adopted at the meeting of theboard of directors of the Company.
(v)

Obtaining valuation report from an independent third party appraiser by the Tender Offeror

According to the Tender Offeror, etc., in determining the Tender Offer Price, the Tender Offeror, etc.
requested KPMG, a third party appraiser independent from the Tender Offeror and the Company, tocalculate the share value of the Company and referred to the valuation report of the Company’s Sharesobtained as of February 13, 2017 (the “Valuation Report”).
According to the Tender Offeror, etc., in calculating the value of the Company’s Shares, KPMG
deemed it appropriate to value the Company’s Shares from various perspectives after examination of
the financial status of the Company as well as the trend, etc. of the market prices of the Company’s
Shares and used the methods such as the average market price method and the DCF Method to
calculate the value of the Company’s Shares. The Tender Offeror has not obtained the opinion
concerning the fairness of the Tender Offer Price (the fairness opinion) from KPMG.
According to the Valuation Report, the methods adopted and the range of the share value per share of
the Company’s Shares calculated based on such methods are as follows;
Average market price method:
DCF Method:

From 349 yen to 393 yen
From 401 yen to 520 yen

Under the average market price method, the share value per share of the Company’s Shares wasanalyzed in the range of 349 yen to 393 yen based on the closing price (388 yen) of the Company’s
Shares on JASDAQ on the Record Date (being February 10, 2017; the same applies hereinbelow) andthe average closing prices during a one-month period prior to the Record Date was 393 yen, during athree month period prior to the Record Date was 378 yen and during a six month period prior to the
Record Date was 349 yen (rounded off to the closest whole number; the same applies to thecalculation of the average closing prices).
Under the DCF Method, the share value per share of the Company’s Shares was analyzed in the rangeof 401 yen to 520 yen based on the analysis of business and share valuations of the Company bytaking into consideration of various factors, such as the profits and investment plans in the businessplans for the period from the fiscal year ending August 2017 to the fiscal year ending August 2024,
publicly available information, etc. and discounting the free cash flow expected to be generated after
the fiscal year ending August 2017 by a certain discount rate to the present value. In the periods of thebusiness plans of the Company used for analysis under the DCF Method, substantial increase in profit
is not expected in any fiscal year. The synergy effect, etc. expected to be achieved by the
implementation of the Consolidation, which is difficult to estimate specifically at this point, are notincluded in the financial forecast in the above business plan.
According to the Tender Offerors, in addition to the result of the Valuation Report obtained from
KPMG, comprehensively taking into account the due diligence on the Company conducted by UNEXT, actual cases of the premium placed on the price of share certificates, etc. in the determinationof tender offer price in the cases of tender offer for share certificates, etc. by an offeror other than an
issuing company in the past, the possibility of endorsement of the Tender Offer by the board of
directors of the Company, the trend of market values of the Company’s Shares in the past one year andthe estimated tendering under the Tender Offer, and upon discussion and negotiation with theCompany, the Tender Offeror determined the Tender Offer Price to be 461 yen per share on February
13, 2017.

- 36 -The Tender Offer Price of 461 yen per share for the Company’s Shares represents (i) a premium of
18.8% (rounded to one decimal place; the same applies to premium rates hereinafter) on 388 yen, theclosing price of the Company’s Shares on JASDAQ as of February 10, 2017 which is the Business
Day immediately preceding the announcement date of the Tender Offer, (ii) a premium of 17.3% on
393 yen, the average closing price for the one-month period prior to February 10, 2017, (iii) a
premium of 22.0% on 378 yen, the average closing price for the three-month period prior to February
10, 2017, and (iv) a premium of 32.1% on 349 yen, the average closing price for the six-month periodprior to February 10, 2017. The Tender Offer Price also represents a premium of 15.3% on 400 yen,
the closing price of the Company’s Shares on JASDAQ as of February 13, 2017, which is the Business
Day immediately preceding the filing date of this Statement.
According to the Tender Offeror, the Tender Offeror made an off-market purchase of 100 shares of theCompany’s Shares from Mr. Uno on February 1, 2017 at 379 yen per share which is the closing priceof the Company’s Shares on JASDAQ on January 31, 2017 under the share purchase agreement with
Mr. Uno on February 1, 2017. There occurred a difference of 82 yen between the Tender Offer Price(461 yen per share) and the price of such purchase (379 yen per share). This is due to the premium
added on the Tender Offer Price as stated above, in addition to the trend of the share price of theCompany’s Shares after such purchase of the shares.
(vi)
Establishment of third-party committee by the Tender Offeror
According to the Tender Offeror, in the light of the particularity of the fact that Mr. Uno is thepresident and representative director of U-NEXT, the sole shareholder of UNO-HOLDINGS which isthe controlling shareholder of U-NEXT, the chairman and director of the Company and the large
shareholder of the Company, on the determination of the Tender Offer Price, Mr. Uno has thepossibility of structural conflicts of interest with the minority shareholders of the Company and theminority shareholders of U-NEXT, U-NEXT, the wholly owning parent company of the Tender
Offeror, has established a third-party committee consisting of Mr. Omoo Yamazaki (the committee
chairman, certified public accountant and tax accountant, the representative director of Kabushiki
Kaisha GG Partners), Mr. Shintaro Suhara (the external statutory auditor of U-NEXT) and Mr. Seiji
Yamashita (attorney-at-law, Yamashita Law Office), all independent from the Company and the Tender
Offerors on January 17, 2017, (and such members have not been changed since the establishment) forthe purpose of eliminating arbitrariness in decision making concerning the Consolidation and securing
fairness, transparency and objectivity in the process of decision making by the Tender Offeror as wellas improving fairness of the procedures for the Consolidation as a whole by obtaining an opinion froman independent third party concerning the purpose, etc. of the Consolidation on the side of the Tender
Offeror, and consulted the third-party committee about the (i) rationality of the purpose of theConsolidation, (ii) reasonableness of the terms and conditions of the Consolidation (especially, themerger ratio in the case of Merger B), and (iii) based on the foregoing (i) and (ii), whether theConsolidation will contribute to the business valuation of U-NEXT and will not be disadvantageous tothe minority shareholders of U-NEXT (collectively referred to as the “Subject Matters”) and requested
the committee to submit a report thereon to the board of directors of U-NEXT. Although Mr.
Shintaro Suhara owns 500 shares of the Company’s Shares, the number of shares held by him is smalland he is in an independent position as an external statutory auditor, therefore, U-NEXT considers that
there is no problem in particular in appointing him as a member of the third-party committee.
The third-party committee held three meetings in total during the period from January 25, 2017 to
February 10, 2017 and deliberately discussed and considered the Subject Matters. Specifically, UNEXT explained to the third-party committee the details and background of the proposal of theConsolidation, the significance and purpose of the Consolidation for U-NEXT and the progress of thenegotiation with the Company, and KPMG explained to the third-party committee the calculation of
the merger ratio of the Merger ②. Based on the explanation, the third-party committee and UNEXT held a question and answer session.

- 37 In light of the details of the investigation, discussion and consideration stated above, the third-party
committee deliberately discussed and considered the Subject Matters and determined as follows:(x) The purpose of the Consolidation is reasonable because U-NEXT and the Company will establish a
new holding company structure through the implementation of the Consolidation, which is beneficial
to deal with the change of business environment after the Restructuring and maximize the synergy toconsolidate U-NEXT and the Company which was difficult to realize at the time of the Restructuring.
(y) Considering that U-NEXT discussed the terms of the Consolidation (especially, the merger rationof the Merger ②) with the Company in good faith by obtaining the advice of KPMG as third party
appraiser and the merger ratio of the Merger ② falls under the range of the merger ratio calculated by
KPMG, the terms of the Consolidation (especially, the merger ration of the Merger ②) are reasonable.
(z) In light of (x) and (y) above, the Consolidation is not detrimental to the minority shareholders of
U-NEXT.
Through the above processes, the third-party committee reported a unanimous opinion regarding (x) to(z) above and submitted the report to that effect on February 13, 2017.
(vii)
Measures to secure an opportunity for a counter offer by any other party
The Company has not executed any agreement with the Tender Offeror which includes deal protection
provisions to prohibit the Company from having contact with a counter offeror or which otherwise
limit the opportunity for a counter offeror to have contact with the Company.
In addition, according to the Tender Offeror, by setting the Tender Offer Period as 30 Business Days,
longer than the minimum period of 20 Business Days for tender offers under laws and regulations, theTender Offeror ensures an appropriate opportunity for general shareholders of the Company to make adecision whether to tender their shares in the Tender Offer and secures an opportunity for any party
other than the Tender Offeror to conduct counter offers for the Company’s Shares, as a means toensure the fairness of the Tender Offer.
4. Matters regarding the material agreement(s) related to the Tender Offer to the Tender Offeror
between the Tender Offeror, the shareholders of the Company and the director
With regards to the Non-tender Agreement entered into between the Tender Offeror and Mr. Uno, theshareholder of the Company, and the Tender Offer Agreement entered into between the Tender Offeror,
Hikari Tsushin and GS, please refer to “(i) Non-tender Agreement” and “(ii) Tender Offer Agreement
1” of “(4) Matters regarding material agreement(s) related to the Tender Offer” of “3. Contents of,basis of, and reason for opinion related to the Tender Offer” above.
5. Summary of Profit-Sharing by the Tender Offeror or its Specially Related Parties
None.
6. Counter-Policies with respect to the Basic Policies Regarding the Control of the Company
None.
7. Inquiries to the Tender Offeror
None.
8. Request for Extension of Tender Offer PeriodNone.
9. Future Prospects(1) Policies to be implemented after this Tender Offer
With respect to the policies to be implemented after this Tender Offer, please refer to “② Background,purpose and decision-making process leading to decision to conduct the Tender Offer andmanagement policy for after the Tender Offer” of “(2) Basis of and reason for the opinion” of “3.
Contents of, basis of, and reason for opinion related to the Tender Offer”, “5. Possibility of and- 38 reasons for delisting”, and “6. Policy for organizational restructuring, etc. after the Tender Offer(matters relating to so-called “Two-Step Acquisitions”)” above.
(2) Future Performance Prospects
With respect to the effects on the performance of the Company as a result of this Tender Offer, any
arising matters that should be officially disclosed will be promptly disclosed.
10. Other
It was decided at the meeting of the board of directors of the Company held on February 13, 2017 that(i) subject to the completion of the Tender Offer, the forecasted dividends for the August 2017 termthat were announced on October 12, 2016 would be revised such that dividends would not be
distributed at the end of the August 2017 term and (ii) the special shareholder benefit plan would be
abolished. For more details, please see the “Notice of Revision of the August 2017 Term Dividend
Forecast and Abolishment of the Special Shareholder Benefit Plan” dated February 13, 2017.