[Translation]

Tender Offer Explanatory Statement

August 2022
SK Life Support Co., Ltd.
(Target Company: Shinoken Group Co., Ltd.)

1

Tender Offer Explanatory Statement
The tender offer to be conducted in accordance with this Explanatory Statement is subject toSection 1, Chapter 2-2 of the Financial Instruments and Exchange Act (Act No. 25 of 1948, as
amended) and this Explanatory Statement has been prepared in accordance with Article 27-9 of
the Financial Instruments and Exchange Act.
Name of filing party (Tender
Offeror)
Address of filing party (Tender
Offeror)Place to contact
Telephone number
Name of contact person

SK Life Support Co., Ltd.
1-9-2, Marunouchi, Chiyoda-ku, Tokyo

1-9-2, Marunouchi, Chiyoda-ku, Tokyo(+81) 3-6212-6097
Integral Corporation
Yasuaki Sumikawa, CFO & Controller
Name of attorney-in-fact
N/A
Address of attorney-in-fact
N/A
Place to contact
N/A
Telephone number
N/A
Name of contact person
N/A
Place where a copy of the tender SK Life Support Co., Ltd.
offer registration statement is (1-9-2, Marunouchi, Chiyoda-ku, Tokyo)
available for public inspection
Tokyo Stock Exchange, Inc.
(2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo)
Note 1: The term “Tender Offeror” means SK Life Support Co., Ltd.
Note 2: The term “Target Company” means Shinoken Group Co., Ltd.
Note 3: Where the figures have been rounded or truncated, the amount indicated as the total
may not always be equal to the sum of the relevant figures.
Note 4: The term “Act” means the Financial Instruments and Exchange Act (Act No. 25 of1948, as amended).
Note 5: The term “Enforcement Order” means the Financial Instruments and Exchange Act
Enforcement Order (Cabinet Order No. 321 of 1965, as amended).
Note 6: The term “Cabinet Ordinance” means the Cabinet Ordinance with respect toDisclosure of a Tender Offer for Share Certificates, Etc. by an Offeror other than the
Issuing Company (Ministry of Finance Ordinance No. 38 of 1990, as amended).
Note 7: The term “Share Certificates, Etc.” means a right or interest in a share or stockacquisition right.
Note 8: The term “Business Day(s)” means any day(s) other than those set forth in Article 1,
Paragraph 1 of the Act on Holidays of Administrative Organs (Act No. 91 of 1988, as
amended).
Note 9: Unless otherwise specified, any reference to the number of days or the date and timemeans the number of days or the date and time in Japan.
Note 10: While the tender offer that is the subject of this Statement (the “Tender Offer”) will
be conducted in accordance with the procedures and information disclosure standards2prescribed in the Act, these procedures and information disclosure standards may differ
from the procedures and information disclosure standards in the United States. In
particular, Sections 13 (e) or 14 (d) of the U.S. Securities Exchange Act of 1934 (asamended; the “U.S. Securities Exchange Act of 1934”), and the rules prescribed
thereunder, do not apply to the Tender Offer, and the Tender Offer does not conformto those procedures and standards. The financial information contained in thisStatement and reference documents for this Statement may not be equivalent to thefinancial information of U.S. companies. It may be difficult to enforce any right or
claim arising under U.S. federal securities laws because the Tender Offeror and theTarget Company are incorporated outside the United States and some or all of their
executives are non-U.S. residents. It may not be possible to commence legal
proceedings against a non-U.S. company or individual in a non-U.S. court forviolations of U.S. securities laws. In addition, it may not be possible to compel a
non-U.S. company or individual, or a subsidiary or affiliate (an “Affiliate”) of the nonU.S. company to subject themselves to a U.S. court’s jurisdiction.
Note 11: Unless otherwise described in this Statement, all procedures relating to the Tender
Offer will be conducted entirely in Japanese. While some or all of the documentation
relating to the Tender Offer will be prepared in English, if there is any inconsistency
between the English documentation and the Japanese documentation, the Japanese
documentation will prevail.
Note 12: This Statement and the reference documents for this Statement include “forwardlooking statements” as defined in Section 27A of the U.S. Securities Act of 1933 (asamended) and Section 21E of the U.S. Securities Exchange Act of 1934. Actual
results might be substantially different from the express or implied predictions set forth
herein as “forward-looking statements” due to known or unknown risks, uncertainties
or any other factors. The Tender Offeror, the Target Company, or its Affiliates do notassure that such express or implied predictions, etc. included as “forward-looking
statements” will be achieved. The “forward-looking statements” contained in thisStatement or the reference documents for this Statement have been prepared based on
the information held by the Tender Offeror and the Target Company as of the date ofthis Statement, and, unless otherwise required under applicable laws and regulations,
neither the Tender Offeror, the Target Company nor their Affiliates assume any
obligation to update or revise those documents to reflect any future events orcircumstances.
Note 13: Before the commencement of the Tender Offer or during the tender offer period of theTender Offer (the “Tender Offer Period”), the Tender Offeror and its Affiliates, and
the Affiliates of the financial advisor of each of the Tender Offeror and the Target
Company might purchase by means other than the Tender Offer or conduct an act
aimed at such a purchase of the Target Company Shares on their own account or theaccount of their client to the extent permitted by Japanese laws and regulations related
to financial instruments transactions and other applicable laws and regulations in thescope of their ordinary business and in accordance with the requirements of Rule 14e5(b) of the U.S. Securities Exchange Act of 1934. If information regarding such apurchase is disclosed in Japan, that information will also be disclosed in the English
language on an English website of the person that conducted such purchase or its
Affiliate.
Note 14: If a right to demand purchase of shares less than one unit is exercised by a shareholder
in accordance with the Companies Act (Law No. 86 of 2005, as amended; the3

“Companies Act”), the Target Company may purchase its own shares during theTender Offer Period in accordance with procedures under laws and regulations.

4

Table of Contents
Page
I.

Summary of the Tender Offer ......................................................................................................... 7
1.

Name of the Target Company ...................................................................................................... 72.

Type of Share Certificates, Etc. Subject to Tender Offer ............................................................ 7

3.

Purpose of the Tender Offer ........................................................................................................ 74.

Period and Price of the Tender Offer and Number of Share Certificates, Etc. to be Purchased 38

5.

Ownership Ratio of Share Certificates, Etc. after Tender Offer ................................................ 67

6.

Licenses, etc. concerning Acquisition of Share Certificates, Etc. ............................................. 69

7.

Method of Tendering Shares in Response to the Tender Offer and Cancellation Thereof ........ 70

8.

Funds Required for Tender Offer............................................................................................... 79

9.

Status of the Issuer of Securities to be Used as Consideration for the Tender Offer ................. 86

10.

Method of Settlement ............................................................................................................. 86

11.

Other Conditions and Methods of Purchase........................................................................... 88

II.

Status of the Tender Offeror .......................................................................................................... 91
1.

In the case of a Corporation ....................................................................................................... 91

2.

In the case of an Entity other than a Corporation ...................................................................... 94

3.

In the case of an Individual ........................................................................................................ 94

III.
Breakdown of Share Certificates, Etc. Held and/or Traded by the Tender Offeror and Specially
Related Parties ....................................................................................................................................... 95
1.

Breakdown of Ownership of Share Certificates, Etc. ................................................................ 95

2.

Trading of Share Certificates, Etc. ............................................................................................. 98

3.

Material Agreements regarding the Share Certificates, Etc. ...................................................... 98

4.

Agreements of Purchase, etc. of Share Certificates, Etc. on and after the Date Hereof ............ 98

IV.

Transactions etc. between the Tender Offeror and the Target Company .................................. 99

1. Transactions between the Tender Offeror and the Target Company or its Directors or Officers,
and the Contents Thereof .................................................................................................................. 99
2. Agreements between the Tender Offeror and the Target Company or its Directors or Officers,
and the Contents Thereof .................................................................................................................. 99
V.

Status of the Target Company ..................................................................................................... 101
1.

Profit and Losses, etc. for the Past Three Years ...................................................................... 101

2.

Share Price Information ........................................................................................................... 102

3.

Shareholder Information .......................................................................................................... 103

54. Matters concerning the Target Company which is a Company Subject to the Continuous
Disclosure Obligation ...................................................................................................................... 105
5.

Details, etc. of Facts regarding Implementation of Tender Offer that have been Notified ...... 106

6.

Other Matters ........................................................................................................................... 106

Changes in Major Business Indices, Etc. of the Target Company ...................................................... 109

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I.

Summary of the Tender Offer

1.

Name of the Target Company
Shinoken Group Co., Ltd.

2.

Type of Share Certificates, Etc. Subject to Tender Offer(1) Common stock(2) The 7th stock acquisition rights issued pursuant to the resolution at the Target
Company’s board of directors meeting held on March 1, 2016 (the “Stock
Acquisition Rights”) (the exercise period for the Stock Acquisition Rights is from
April 1, 2019 to March 15, 2023)

3.

Purpose of the Tender Offer(1)

Outline of the Tender Offer
The Tender Offeror is a stock company (kabushiki kaisha) established on July 7, 2022
mainly for the purpose of acquiring and holding the Share Certificates, Etc. of the Target
Company, and as of the date hereof, all of the issued shares of the Tender Offeror are
held by Integral Corporation (“Integral”; Integral and the Tender Offeror arecollectively referred to as the “Tender Offerors”). As of the date hereof, Integral andits subsidiaries and affiliates, including the Tender Offeror, do not hold any commonshares of the Target Company (the “Target Company Shares”) or any of the Stock
Acquisition Rights.
Integral is an equity investment company that invests in listed companies, privatecompanies, and the like in Japan. The company’s name, Integral, refers to integration
and accumulation, and Integral’s mission is to engage in equity investments from a longterm perspective that involves building relationships of trust with portfolio companies
and steadily implementing measures one on top of another that contribute to sustainably
enhancing corporate value. Integral’s policy is to walk together with portfolio
companies based on the same perspectives and timescales as their management and toprovide optimal management support in terms of both management and finances inorder to maximize corporate value while respecting the business policies of the portfolio
companies.
Since its founding in September 2007, Integral has invested in a total of 27 companies
including QB Net Holdings Co., Ltd., Skymark Airlines Inc., Toyo Engineering
Corporation, and Oliver Corporation and has provided support thereto in terms of bothmanagement and finances in order to enhance corporate value. Integral does not
pursue short-term profits only through reducing costs and improving the efficiency ofoperations but instead aims to achieve lasting business growth and development throughinvestment and resource allocation based on a long-term perspective.
As an
independent domestic investment company that has gathered people who are engaged
in M&A operations and corporate management and who have a high level of expert
knowledge in regard thereto, Integral gives its utmost to support the promotion of
growth strategies that prioritize enhancing the corporate value of portfolio companies
7while fully understanding and respecting the characteristics of management-level
personnel at Japanese companies.
The Tender Offeror decided on August 10, 2022 to conduct the Tender Offer as part of
the transactions for the purpose of acquiring all of the Target Company Shares listed on
the Standard Market of the Tokyo Stock Exchange, Inc. (the “TSE”) (including theTarget Company Shares issued due to the exercise of the Stock Acquisition Rights, andexcluding the treasury shares held by the Target Company (excluding Target Company
Shares held by the trust account of the Target Company’s employee stock ownershipplan (J-ESOP); the same applies below) and the Shares Agreed to Not Be Tendered (asdefined below)) and the Stock Acquisition Rights and taking the Target Company Shares
private (the “Transactions”).
The Tender Offer will be conducted as part of a management buyout (MBO) (Note 1)with the support of the Target Company’s board of directors for the purpose of amicably
acquiring all of the Target Company Shares (including the Target Company Shares to beissued due to the exercise of the Stock Acquisition Rights, and excluding the treasury
shares held by the Target Company and the Shares Agreed to Not Be Tendered) and theStock Acquisition Rights. Hideaki Shinohara (“Mr. Shinohara”), who is therepresentative director and president of the Target Company as well as its top
shareholder and major shareholder (shares held: 7,633,957 shares (Note 2) (including
the 600,000 Target Company Shares to be issued upon the exercise of the 3,000 Stock
Acquisition Rights held by Mr. Shinohara, the “Shares Held by Mr. Shinohara”);
ownership ratio (Note 3): 22.31%), intends to continue engaging in the management of
the Target Company after the Transactions, and in order to share common goals for theenhancement of corporate value, the Tender Offerors executed a basic agreement with
Mr. Shinohara on August 10, 2022 (the “Basic Agreement”) so that the contribution
ratio of Mr. Shinohara to the Tender Offeror, which will be the surviving company in
the Merger (as defined below), will be about 8%. In the Basic Agreement, it is agreed
that Mr. Shinohara will tender 6,148,647 Shares Held by Mr. Shinohara (ownership
ratio: 17.97%; the “Shares Agreed to Be Tendered”) and 3,000 Stock Acquisition
Rights held by Mr. Shinohara (the “Stock Acquisition Rights Agreed to Be
Tendered”; number of shares to be acquired upon the exercise of the Stock Acquisition
Rights: 600,000 shares; ownership ratio: 1.75%) in the Tender Offer but will not tender885,310 Shares Held by Mr. Shinohara (ownership ratio: 2.59%; the “Shares Agreed to
Not Be Tendered”, shares pertaining to restricted stock compensation held by Mr.
Shinohara are include in the Shares Agreed to Not Be Tendered as they are subject totransfer restrictions and therefore cannot be tendered in the Tender Offer) in the Tender
Offer (however, the Basic Agreement stipulates that Mr. Shinohara may exercise theStock Acquisition Right Agreed to Be Tendered and tender the Target Company Sharesissued due to the exercise thereof in the Tender Offer, and in that case, the number of
the Shares Agree to Be Tendered will be increased by the number of Target Company
Shares issued due to the exercise of the Stock Acquisition Rights to Be Tendered, andMr. Shinohara will no longer be obligated to tender the Stock Acquisition Right Agreed
to Be Tender in the Tender Offer). For details of the Basic Agreement, please refer to“(6) Material Agreements regarding the Tender Offer” below.
Note 1:“Management buyout (MBO)” generally refers to a transaction in which the
management of the company being acquired contributes all or part of the8acquisition funds and acquires the shares of the company on the assumptionof continuing its business.
Note 2:The number of shares held by Mr. Shinohara stated above (7,633,957 shares)
includes 300,800 Target Company Shares indirectly held as equity throughthe officer shareholding association of the Target Company (the number ofshares held as equity is rounded down to the nearest whole number) and 1,657
Target Company Shares granted as restricted stock compensation. The same
applies below in regard to the calculation of the number of shares held by Mr.
Shinohara.

Note 3:“Ownership ratio” means the ratio to the number of shares (34,210,366
shares; the “Total Number of Shares after Accounting for Potential
Shares”) calculated by adding the number of Target Company Shares(616,800 shares) to be issued upon the exercise of the Stock Acquisition
Rights (3,090 units) reported by the Target Company to still exist as of June30, 2022 to the number of shares (33,592,366 shares) calculated by deducting
the number of treasury shares (2,788,034 shares; the number of treasury
shares does not include the Target Company Shares (162,400 shares) held by
the trust account of the Target Company’s employee stock ownership plan (JESOP) as of June 30, 2022; the same applies below) held by the Target
Company as of June 30, 2022 from the total number of issued shares(36,380,400 shares) of the Target Company as of June 30, 2022 as stated in
the “Consolidated Financial Results Release for the Second Quarter of the
Fiscal Year Ending December 2022 (Japanese GAAP)” (the “Target
Company’s Second Quarter Financial Results Release”) released by theTarget Company on August 10, 2022. When calculating ownership ratios,
numbers are rounded to two decimal places. The same applies below inregard to the calculation of ownership ratios.

The Tender Offeror has set the minimum number of shares to be purchased in the Tender
Offer to 21,509,600 shares (ownership ratio: 62.87%), and if the total number of Share
Certificates, Etc. tendered in the Tender Offer (the “Tendered Share Certificates,
Etc.”) is less than the minimum number of shares to be purchased (21,509,600 shares),the Tender Offeror will not purchase any of the Tendered Share Certificates, Etc.
However, as the Tender Offeror intends to take the Target Company Shares private byacquiring all of the Target Company Shares (including the Target Company Shares to beissued due to the exercise of the Stock Acquisition Rights, and excluding the treasury
shares held by the Target Company and the Shares Agreed to Not Be Tendered) and theStock Acquisition Rights, the Tender Offeror has not set a maximum number of shares
to be purchased in the Tender Offer, and if the total number of the Tendered Share
Certificates, Etc. is equal to or greater than the minimum number of shares to bepurchased (21,509,600 shares), the Tender Offeror will purchase all of the Tendered
Share Certificates, Etc.
That minimum number of shares to be purchased (21,509,600 shares) has been set
because as the purpose of the Tender Offer is to take the Target Company Shares private,a special resolution of a shareholders’ meeting provided for in Article 309, Paragraph 2of the Companies Act is required at the Extraordinary Shareholders’ Meeting (as definedin “(4) Policy for Organizational Restructuring, Etc. after the Tender Offer (Mattersrelating to the “Two-Step Acquisition”)” below) when conducting the Share9Consolidation (as defined in “(4) Policy for Organizational Restructuring, Etc. after theTender Offer (Matters relating to the “Two-Step Acquisition”)” below). Specifically,
the minimum number of shares to be purchased has been set to the number calculatedby (a) deducting the number of treasury shares held by the Target Company as of June30, 2022 (2,788,034 shares) from the total number of issued shares of the Target
Company as of June 30, 2022 (36,380,400 shares) stated in the Target Company’s
Second Quarter Financial Results Release (resulting in 33,592,366 shares), (b)multiplying the number of voting rights represented by those shares (335,923 voting
rights) by two thirds, which is the voting right ratio necessary for a special resolution of
the shareholders’ meeting to approve the Share Consolidation (resulting in 223,949
voting rights, rounded up to the nearest whole number), (c) deducting the number ofvoting rights (8,853) represented by the Shares Agreed to Not Be Tendered (885,310
shares) (resulting in 215,096 voting rights), and (d) multiplying that amount by 100
shares, which is the number of shares in a share unit of the Target Company. This
exceeds the number of voting rights equivalent to the so-called “majority of minority,”
or a majority of the voting rights represented by the number of Target Company Shares
held by shareholders of the Target Company who do not have any interests in the Tender
Offeror (the number of shares (26,576,409 shares) calculated by deducting the Shares
Held by Mr. Shinohara (7,633,957 shares) from the Total Number of Shares after
Accounting for Potential Shares (34,210,366 shares).
If the Tender Offeror is unable to acquire all of the Target Company Shares (including
the Target Company Shares to be issued due to the exercise of the Stock Acquisition
Rights, and excluding the treasury shares held by the Target Company and the Shares
Agreed to Not Be Tendered) and the Stock Acquisition Rights through the Tender Offer,then as stated in “(4) Policy for Organizational Restructuring, Etc. after the Tender Offer(Matters relating to the “Two-Step Acquisition”)” below, after the successful completionof the Tender Offer, the Tender Offeror intends to conduct a series of procedures in orderto make the Tender Offeror and Mr. Shinohara the only shareholders of the Target
Company, or to make the Tender Offeror the only shareholder of the Target Company,
and take the Target Company Shares private (the “Squeeze-Out Procedures”), and after
the Squeeze-Out Procedures, the Tender Offeror intends to conduct a merger in which
the Tender Offeror is the surviving company and the Target Company is the disappearing
company (the “Merger”); however, the details such as the specific schedule of the
Merger are undetermined as of the date hereof. If Mr. Shinohara no longer holds any
shares of the Target Company as a result of the Squeeze-Out Procedures, he intends torecontribute part of the money received through the Transactions to the Tender Offeror
so that his contribution ratio in the Tender Offeror, which will be the surviving company
in the Merger is about 8%, as stated in “(C) Management Policy After the Tender Offer”
under “(2) Background, Purpose, and Decision-Making Process with respect to
Conducting the Tender Offer, and Management Policy After the Tender Offer”” below.
So as to not conflict with the intent of the provisions that tender offer prices must be
based on a single set of conditions (Article 27-2, Paragraph 3 of the Act) upon thatrecontribution, the amount calculated by multiplying the number of the Shares Agreed
to Not Be Tendered by the purchase price per Target Company Share in the Tender Offer(the “Tender Offer Price”) will be deemed to be the contribution amount of Mr.
Shinohara, and the contribution ratio of Mr. Shinohara to the Tender Offeror, which willbe the surviving company in the Merger, is planned to be determined upon calculation
based on that contribution amount and the contribution amount of Integral and funds
10that Integral or its affiliates manage or operate, or in which they are otherwise involved.
Additionally, the reason for Mr. Shinohara to hold shares in the Tender Offeror is to give
Mr. Shinohara, who is planned to continue being engaged in the management of theTarget Company after the Transactions, a common incentive for enhancing the corporate
value of the Tender Offeror after the Merger, and not to provide consideration for
tendering his shares in the Tender Offeror. Therefore the Tender Offeror considers thisto not be contrary to the intent of the provisions that tender offer prices must be basedon a single set of conditions (Article 27-2, Paragraph 3 of the Act).
As stated in “(C) Funds to be borrowed on or after the date hereof” and “(D) Other
methods of financing” in “(2) Deposits or borrowings allocable for funds required fortender offer” under “8. Funds Required for Tender Offer” below, the Tender Offeror
intends to cover the funds required for the Transactions, including the Tender Offer, byborrowings from Shinsei Bank, Limited and contributions from Integral, Integral 4
Limited Partnership, Innovation Alpha IV L.P., and Initiative Delta IV L.P., and theTender Offeror intends to apply the same to the funds required for the Tender Offer.
According to the “Announcement of Implementation of MBO and Recommendation for
Tender Offer” released by the Target Company on August 10, 2022 (the “Target
Company’s Press Release”), the Target Company resolved at its board of directors
meeting held on August 10, 2022 to express an opinion in support of the Tender Offer
and to recommend that its shareholders and owners of the Stock Acquisition Rights (the“Stock Acquisition Right Holders”) tender their shares certificates, etc. in the Tender
Offer.
For details of the above decision-making process of the Target Company’s board of
directors, please refer to the Target Company’s Press Release and to “(D) Approval of
All Disinterested Directors (including Audit Committee Director) of the Target
Company” in “(Measures to Ensure Fairness of the Tender Offer, Including Measures to
Ensure Fairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest)”
under “Background of Valuation” in “(2) Price of Tender Offer” under “4. Period andPrice of the Tender Offer and Number of Share Certificates, Etc. to be Purchased” below.
(2)

Background, Purpose, and Decision-Making Process with respect to Conducting theTender Offer, and Management Policy After the Tender Offer(A)

Background, Purpose, and Decision-Making Process with respect to the Tender
Offeror Deciding to Conduct the Tender Offer

The background, purpose, and decision-making process with respect to the Tender
Offeror deciding to conduct the Tender Offer are as follows. Statements below
regarding the Target Company are based on explanations received from the Target
Company and information publicly announced thereby.
Since its founding, the Target Company Group (collectively meaning the Target
Company and its 30 consolidated subsidiaries and one equity-method affiliate as of thedate hereof; the same applies below) has developed its business centered aroundproviding “life support systems,” meaning asset development, through apartment
management under its corporate philosophy of “‘All for customers success,” “Neverforget Gratitude,” and “Challenge Spirit,” and the Target Company Group engages in its
11

business as a “Life Support Company” that stands by its customers throughout theirlives.
The Target Company was founded as Shinohara Kensetsu Systems Co., Ltd. in Fukuokashi in June 1990, and under the leadership of its founder, Mr. Shinohara, who is also its
representative director and president as of the date hereof, it began the apartment sales
business and real estate leasing and management business. In December 2002, its
shares were registered for over-the-counter trading with the Japan Securities Dealers
Association and then listed on the JASDAQ Securities Exchange, Inc. (the “JASDAQ
Securities Exchange”) in December 2004. Additionally, the Target Company
implemented a holding company structure in October 2007 and changed its trade nameto Shinoken Group Co., Ltd. Subsequently, following the merger of the JASDAQ
Securities Exchange and the Osaka Securities Exchange Co., Ltd. (the “OSE”) in April
2010 and the merger of the TSE and the OSE in July 2013, the Target Company moved
to the TSE Standard Market following the review of the market divisions of the TSE in
April 2022.
Since its founding, the Target Company Group has consistently advocated “apartment
management that can be done by office workers through their perspective,” and as asupporter of the lives of its customers (who are also owners) even after completing sales,
the Target Company Group has built life support systems to aid customers throughout
their lives by providing support for apartment management using the collective strengthof the Group and covering the elderly care domain that is essential in Japan’s aging
society, and it is engaged in the following businesses.
(i)Real estate sales businessIn the real estate sales business, which is the Target Company Group’s main business,
the Target Company Group is engaged in the development, construction, and sale ofnewly-built wooden apartments and RC (reinforced concrete; the same applies below)
condominiums for investment purposes. In particular, in regard to newly-built wooden
apartments for investment, main customers (for B2C) are office workers, civil servants,
and the like, and by carefully selecting and procuring land within 10 minutes on footfrom the nearest station, building designers apartments and condominiums that are both
highly functional and well-designed, and appropriately setting rents, the Target
Company Group provides stable assets (land and buildings) with reduced risk of
vacancy while also making use of loans from affiliated financial institutions provided toits customers. In recent years, the Target Company Group has also engaged in sales
for REITs for B2B, and these sales for REITs are intended as an exit strategy that leads
to creating further room for developing and selling properties.
(ii)

Real estate service businessIn the real estate service business, the Target Company Group provides rental
management services towards owners of the properties such as tenant recruiting, rent
collection, and maintenance, leasing and sales brokerage, and condominium
management as well as the selection of assets to be included in real estate funds and
REITs, asset management, and the like. This means that revenue is generated basedon the stock of properties created through the real estate sales business.
(iii)

General contractor business12Through its consolidated subsidiary, Ogawa Construction Co., Ltd., the Target Company
Group develops its general contractor business, which mainly undertakes constructionof RC-structured condominiums mainly in the 23 special wards of Tokyo. Ogawa
Construction Co., Ltd., which joined the Target Company Group through M&A in
February 2014 is highly regarded for its model where experienced technicians / formersite managers serves as sales managers.
(iv)

Energy business

Through its group company, SK Energy Co., Ltd., and the subsidiaries thereof, theTarget Company Group engages in the business of supplying electricity and gas tomainly residents of the properties sold and managed by the Target Company Group.
As with the real estate service business, this is a “stock business” in which revenue
increases as the number of the stock of managed properties obtained through the realestate sales business increases.
(v)

Life care businessIn order to achieve the Target Company Group’s vision of becoming “A Life Support
Company for every generation across the world,” the Target Company Group owns andoperates housing for the elderly with home-care services, elderly day care services,group homes and also provides home-visit care, support for people with disabilities, andother such services. The Target Company Group provides housing (leased housingwith elderly support) to suite the life stage of residents of properties sold through thereal estate sales business who find it difficult to live in ordinary properties as they age,
thereby providing support to customers throughout their lives.
(vi)

Other businesses

Regarding overseas businesses, the Target Company Group is engaged in the real estateleasing and sales brokerage business in Shanghai and Singapore, and in Indonesia, it isengaged in the development and operation of serviced apartments for Japanese expats.
Additionally, Shinoken Asset Management Co., Ltd. (Director General of Kanto Local
Finance Bureau (Financial Instruments) No. 3167) (“Shinoken Asset Management”),
a consolidated subsidiary of the Target Company, is engaged by Shinoken REIT
Investment Corporation (Director General of Kanto Local Finance Bureau No. 150)(“Shinoken REIT”), a private REIT, to provide asset management services.
According to the press release titled “Regarding Efforts to List the Investment Units of
Shinoken REIT Investment Corporation on the Tokyo Stock Exchange” released by theTarget Company on August 10, 2022 (the “Target Company’s Press Release
Regarding the Shinoken REIT Listing”), as stated in the “Notice of Approval of
Listing of “Shinoken REIT Investment Corporation” on the Tokyo Stock Exchange”
released by the Target Company on February 2, 2022, Shinoken REIT received approval
from the TSE for the listing of its investment units on the TSE Real Estate Investment
Trust Securities Market, but as stated in the “Notice Regarding the Postponement of
Listing of “Shinoken REIT Investment Corporation” on the Tokyo Stock Exchange”
released by the Target Company on February 17, 2022, the board of directors of
Shinoken REIT resolved at its meeting held on February 17, 2022 to suspend theissuance of new investment units and the secondary offering of investment units and topostpone its listing on the TSE Real Estate Investment Trust Securities Market, due towhich the approval for the listing of Shinoken REIT’s investment units on the TSE Real13

Estate Investment Trust Securities Market was revoked (this postponement is hereinafterreferred to as the “Shinoken REIT Listing Postponement”). Additionally, on
February 17, 2022, the securities registration statement that it submitted to the DirectorGeneral of the Kanto Local Finance Bureau on February 2, 2022 in regard to theissuance of new investment units (units to be issued: 123,476; total issue value:
12,347,600,000 yen; issue price undetermined) and secondary offering by overallotment(units subject to secondary offering: 6,174; total secondary offering value: 617,400,000
yen; secondary offering price undetermined) to be conducted upon the listing of its
investment units was withdrawn.
According to the Target Company’s Press Release Regarding the Shinoken REIT Listing,this is because Shinoken REIT determined that as of February 17, 2022, when the
Shinoken REIT Listing Postponement was announced, there is growing caution
regarding early monetary tightening in response to increased long-term interest rates in
the United States as well as rapidly increasing uncertainty caused by factors such as
geopolitical risks due to increased tensions in Ukraine, and in consideration of there
being concerns that amid this state of emergency in the market environment, it may not
be possible to achieve a satisfactory level of financing through the issuance of new
investment units in conjunction with the listing of Shinoken REIT’s investment units,
and therefore carefully monitoring market trends and aiming to list its investment units
at an appropriate time would contribute more to the investment value of Shinoken REIT
and, by extension, the interests of its investors.
Following that, Shinoken REIT has continued preparations for listing, such as byconfirming investor demand trends through securities companies and reconsidering theequity story to apply for listing, but uncertainty in the economic environment only
continues to increase due to factors such as another increase in COVID-19 infections,the prolonged Russian invasion of Ukraine, increased long-term interest rates in the
United States, and the rapid weakening of the yen, and although approximately six
months have passed since the announcement of the Shinoken REIT Listing
Postponement, it is difficult to say that the environment has improved, and the Target
Company has confirmed that Shinoken REIT has reached the decision that at present, it
is not appropriate to aim for listing during 2022.
However, the Target Company and Shinoken REIT have not changed their policy ofcontinuing to aim to list Shinoken REIT at an appropriate time, and they intend tomonitor the market environment from 2023 and list Shinoken REIT’s investment units
on the TSE Real Estate Investment Trust Securities Market at an appropriate time (thelisting of those investment units is hereinafter referred to as the “Shinoken REIT
Listing”) (Note 1).
Note 1:

As of the date hereof, nothing has been decided in regard to the Shinoken
REIT Listing, including the timing thereof, and it is possible that the Shinoken
REIT Listing will not be conducted in the future. Additionally, if it isconducted, it is possible that the Shinoken REIT Listing and transactions
conducted in connection thereto (including Shinoken REIT acquiring realestate from the Target Company Group) will be conducted under terms andconditions greatly different from those anticipated before the Shinoken REIT
Listing Postponement. This Tender Offer Registration Statement is notintended to solicit requests for the acquisition of Shinoken REIT’s investment
units or to solicit requests for the sale or purchase thereof.
14

In addition, the Target Company Group has set its mission to resolve issues people andsociety face through REaaS (Note 2), and by combining business model innovations
with technology to promote REaaS that makes it easier for a greater number of people
to easily and safely engage in real estate transactions starting from small amounts ofmoney, the Target Company Group aims to resolve not only future economic
uncertainties, but also various social issues, such as elderly care problems and worker
shortages. On November 20, 2020, the Target Company Group announced its “Midlong-term Vision 2020” and set out initiatives explained in (I) to (III) below.
(I) Expansion of overseas businesses
By taking the real estate sales business ((i) above) and real estate service business ((ii)
above) established in Japan, meaning the model that handles the entire process of landacquisition, construction, tenant management, operational management, and exit
strategies within the group, and expanding it overseas, the Target Company Group will
aim to further expand its overseas businesses.
(II) Development of REaaS
In order to achieve REaaS, the Target Company Group will establish a globally leadingedge platform using real estate trust DX (Note 3) in the area of trust services, which will
become more active in Japan in the future.
(III) Strategic M&A development
As The Target Company Group has done in the past, it will continue to actively pursue
M&A opportunities under a basic policy of creating group synergies in the life caredomain, where social needs are increasing, in the DX domain, and in regard to overseas
M&A.
Note 2:“REaaS” means “real estate as a service” and refers to the concept of a new
type of real estate distribution that ties together real estate technology andbusiness.

Note 3:“DX” means “digital transformation” and refers to establishing competitive
advantages by making innovations in regard to anything such as products,
services, and business models by combining data and digital technologies.

However, the Target Company recognizes that since its announcement of its “Mid-longterm Vision 2020,” the business environment surrounding the Target Company Grouphas become more severe, and as sustainable growth into the future cannot be expected
if business is operated in the same way as at present, the Target Company considers thatin order to achieve further enhancement to its corporate value, it is necessary for the
management and employees of the Target Company Group to unite and promote atransformation of its business structure.
We are seeing unprecedented changes in international conditions, such as the spread of
COVID-19 from 2020 and the continuing social unease regarding infection,
procurement risks due to rising wood prices and supply shortages referred to as the“wood shock” that began in the spring of 2021, and recently, the Russian invasion of
Ukraine, and construction material prices are rising due to a complex set of factors.
These conditions are impacting the business of developing, constructing, and selling
newly-built wooden apartments, which is the main business of the Target Company
15

Group, in the form of a reduced number of optimal yield properties that make it possible
to ensure profitability.
Additionally, regarding land procurement, which is crucial to the Target Company
Group’s business model (i.e. purchasing land and constructing apartments) , there is agovernmental policy support for single-family home construction businesses, andcompetition to obtain land is becoming more intense, leading to further increases incosts, thereby making it more difficult to obtain optimal yield properties.
Since passing the increased costs of land to the property sale prices is undesirable fromthe perspective of owners as this prevents owners from enjoying optimal yield properties.
while maintaining appropriate level of property rents. In order to secure current profit
levels under adverse conditions in terms of finding optimal yield properties, increasing
the volume of properties sold is necessary and to do this, building an active sales
structure is essential. However, strongly pursuing sales proceeds and quantity ofproperties sold leads to unrealistic sales plans and targets that are difficult to achieve,
and to achieve those plans and targets, sales staff may be pressured to conduct sales
activities through inappropriate methods, ultimately increasing compliance risks inways such as leading to problems with customers. Therefore the Target Company
considers it difficult to adopt such measure as it could have a negative impact on its
competitiveness over the medium to long term. In this way, the Target Company
recognizes that the business environment of the real estate sales business may become
increasingly opaque going forward, which may lead to a drop in sales and profit levels,a resultant impact on share prices, and by extension, detriment to the interests of generalshareholders.
Under the business model of the Target Company Group, in addition to flow revenue(Note 4) being generated through the development and sale of properties (in the realestate sales business), stock revenue (Note 4) is also generated through the management
services and other such services provided to owners of properties developed and soldby the Target Company Group (in the real estate service business and other businesses).
Currently, the real estate sales business is the leading driver of the Target Company
Group’s performance, accounting for 53% of sales and 48% of operating profit.
However, as there are concerns regarding a slowdown in the growth of the real estate
sales business due to the severe business environment described above, while
maintaining development and sales, the Target Company Group plans to implement
measures to evolve and diversify its business into a more sustainable business model
centered around real estate service businesses. Measures include increase in therelative importance of “stock revenue”, increase in the diversity of sales channels fordeveloped real estate through expanding existing REITs and establishing new REITs in
Japan and overseas in the future to stabilize revenue, and creating new services such as
developing and providing real estate technology. Additionally, the Target Company
Group feels that despite their efforts to ethical and integral business management,
negative impression on the industry as a whole caused by misconduct of othercompanies in the past is having a certain level of impact on the business of the Target
Company Group. Therefore, the Target Company Group considers that evolving anddiversifying its business will contribute to enhancing its corporate value over the
medium to long term also through a change in its image.

16

Note 4:

“Flow revenue” is one-time revenue generated whenever a product or service
is sold, while “stock revenue” is revenue continually generated from acts suchas providing services.

Specifically, instead of pursuing short-term growth through strengthening real estate
sales business, the Target Company Group intends to promote DX through means suchas utilizing IoT, to secure opportunities for stock revenue from sale properties, and to
expand its overseas businesses to achieve innovations aimed at sustainable growth overthe medium to long term. In terms of forward looking measures, to strengthen existing
businesses, (i) in the real estate sales business, based on the established business model,
the Target Company Group will pursue a greater degree of discernment to find optimal
yield properties, which are limited under the severe market environment, develop
broader customer segments, and increase transactions with existing customers.
Additionally, (ii) in relation to the real estate service business, the Target Company
Group will increase property value by pursuing further added value (e.g. by introducing
IoT such as facial recognition and smart locks (Note 5) in their properties), thereby
appealing to new potential tenant segments. Further, the Target Company Group willseek ways to develop existing services originally developed by the Target Company (e.g.
insurance for owners against an unattended death, which was developed in collaboration
with insurance companies), and to develop the economic sphere surrounding owners,
tenants, and the Target Company Group by introducing Shinoken Coin (Note 6).
Furthermore, (iii) in the life care business, under its vision, “life support company forevery generation across the world,” Target Company Group will endeavor to expand theservices it already provides and intends to achieve growth through M&A to expand andprovide services that aid customers and tenants throughout their lives. Additionally,(iv) regarding overseas business, in which the Target Company Group is currently
applying efforts, it will endeavor to strengthen and expand their business in existing
foreign locations and intends to apply its REIT business model overseas as well.
Note 5:“Smart locks” collectively means existing locks made capable oftelecommunication through certain methods that are able to be opened, closed,
and managed using devices such as smartphones, as well as the systems
relating thereto.

Note 6:“Shinoken Coin” collectively means a point system to be introduced by theTarget Company, in which the Target Company expects to grant, mainly tothe owners and tenants of the properties managed by the Target Company,
points that may be used for payment of various services provided by theTarget Company Group.

However, in order to swiftly implement the above measures, not only active capital
investment in systems and the like is necessary, but also securing management resources,
i.e. utilizing and acquiring outside human resources, is becoming more an urgent issue
than ever. In order to increase added value in the real estate service business, R&D
investment for developing technology suited to the properties provided by the Target
Company Group, as well as investment in development costs and human resources for
introducing Shinoken Coin and developing platforms is necessary. Additionally, infields where group synergies can be created, such as the life care business, DX areas,
and overseas businesses, the Target Company Group actively promotes growth throughM&A. In addition to securing funds for that purpose, it is important to secure humanresources to promote PMI (post-merger integration) (Note 7). Furthermore, it is17necessary to implement measures from a long-term perspective while investing indevelopment funds and human resources when expanding overseas businesses and the
REIT business.
Note 7:“PMI (post-merger integration)” generally means the process of integration
after M&A.

Based on the above awareness, amid the expected continuation of the severe businessenvironment and substantial increases in expenses, Mr. Shinohara and the Target
Company considered measures to achieve long-term growth.
In the process of that consideration, based on the awareness of the problems involving
the above management issues, Mr. Shinohara considered that in addition to the
management efforts of the Target Company Group itself, it would be beneficial to utilize
outside management resources in order to achieve the further growth and enhanced
corporate value of the Target Company Group, and in mid-April 2021, he obtainedreferrals to several companies, including Integral, from Credit Suisse Securities (Japan)
Limited (“Credit Suisse Securities”), which had been providing proposals andinformation to the Target Company in regard to its capital policies and the enhancementof its corporate value over the medium to long term, for the purpose of consulting inregard to the management measures and optimal capital structure of the Target Company
Group, including what methods would be available for utilizing outside management
resources, and he received and exchanged opinions with those companies in turn.
Integral came to consider that in order to achieve the future growth of the Target
Company Group, it would be effective to take the Target Company Shares private andto further evolve and diversify business, and in late June 2021, Integral introduced to
Mr. Shinohara the option of a management buyout (MBO) as part of general portfolio
company sourcing activities, proposed a direction for business portfolio restructuring,and expressed its initial intention that in the future, it would be able to support theconsideration, and execution of a management buyout (MBO).
Following that, from July 2021, Mr. Shinohara exchanged opinions and engaged ininitial consideration of the possibility of potential capital transactions, including thepossibility of a management buyout (MBO), with several companies referred by Credit
Suisse Securities, including Integral. However, time passed with no progress being
made in specific considerations due to numerous unpredictable and unusual changes in
the management environment surrounding the real estate industry, such as the dizzying
pace of changes in international conditions, including the spread of COVID-19 and thecontinuing social unease regarding infection, the wood shock, and the Russian invasionof Ukraine. In 2022 as well, Mr. Shinohara continued considering potential capitaltransactions, including options other than a management buyout (MBO) such as a capitaland business alliance with a third party, from the perspective of what would be theoptimal measures for the Target Company Group.
Meanwhile, from July 2021, Integral deepened its understanding of the real estateindustry and the Target Company Group through having meals and holding meetings,
etc. with Mr. Shinohara, and once Mr. Shinohara had deeply considered the possibilityof the Target Company Group conducting capital transactions, including a managementbuyout (MBO), on May 10 2022, Integral proposed to Mr. Shinohara the level of theplanned purchase price anticipated at that time, based on examples of managementbuyouts (MBOs) by other companies, and the recontribution by Mr. Shinohara on the18

assumption of a management buyout (MBO), expressed its intention regarding theTender Offer, including a summary of the management support anticipated by Integral,and explained the details thereof to Mr. Shinohara. At that time, Integral approved of
Mr. Shinohara’s founding spirit and expressed its strong desire that he continue tocontribute his guidance and advice in regard to management, at least as an executive
officer of the management committee of the Target Company, which is an important
decision-making body composed of directors, executive officers, and the like.
Specifically, Integral recognizes that the Target Company Group is dependent uponaccumulated layers of the trust, knowledge, and labor of its employees, management,
customers, financial institutions, cooperating companies, and local communities, andIntegral expressed that desire having determined that it is extremely important for Mr.
Shinohara, the founder of the Target Company Group, to continue to captivate the many
people gathered together in the Target Company Group as the symbol thereof.
Taking into consideration the above intention expressed by Integral, as well as thecontent of discussions with Integral since April 2021, in mid May 2022, Mr. Shinoharacame to consider that in order to grow the Target Company Group into an even more
appealing corporation and achieve the enhancement of its corporate value over the
medium to long term, it is essential to conduct active investments based on swift
business judgments and medium- to long-term management strategies without being
excessively focused on short-term performance changes and the like and to restructure
existing businesses to further develop them.
According to the “Notice Regarding Progress Status of Acquisition of Own Shares(Acquisition of Own Shares in Accordance with Articles of Incorporation Pursuant to
Article 165, Paragraph 2 of the Companies Act)” released by the Target Company on
March 28, 2022 and the “Notice Regarding Status and Completion of Acquisition of
Own Shares (Acquisition of Own Shares in Accordance with Articles of Incorporation
Pursuant to Article 165, Paragraph 2 of the Companies Act)” released by the Target
Company on April 12, 2022, the Target Company acquired 344,400 shares of its own
shares at 349,949,100 yen during the period from March 9, 2022 to April 11, 2022 by
way of on-market purchase on the TSE in accordance with the resolution at the Target
Company’s board of directors meeting held on March 8, 2022. However, because
Integral has not reached a decision to conduct the Tender Offer as of the time of theTarget Company’s decision to acquire its own shares, the Target Company considers thatno “fact that a tender offer, etc. will be conducted” under Article 167, Paragraph 1 of the
Act has occurred and also the Target Company was not aware of any “fact that a tender
offer, etc. will be conducted” under Article 167, Paragraph 1 of the Act at that time.
Specifically, up to the present, the Target Company Group has provided real estateservices and other peripheral services centered around the development and sale ofproperties, but the real estate sales business faces a severe business environment,
including concerns of a decrease in sales and profit levels due to a decrease in optimal
yield properties and a reduction in the number of units sold caused by factors such as
high material prices and increased competition from single-family home businesses, andMr. Shinohara considered that it is necessary moving forward to aim to achieve growthcentered around the real estate service business, which creates stable stock revenue.
However, in the real estate service business, due to the characteristics of stock revenue
businesses, while revenue is stable, sustainable growth is difficult unless the number ofsales expands rapidly. In order to increase the number of managed properties that serve19

as a base for stock revenue under the environment of severe market competition, in
addition to the current direct response sales method, which encourages prospective
customers to purchase the Target Company’s properties through marketing activities
such as TV commercials, newspaper advertisements and web advertisements, it isnecessary to create a new, active sales team structure, but the Target Company
considered it difficult to adopt that type of measure as it may lead to increased
compliance risks that could have a negative impact on competitiveness over the medium
to long term. Therefore, Mr. Shinohara considered that it is necessary to swiftly
proceed with business expansion through other measures in order to transition to a
structure centered around the real estate service business without rapidly expanding thenumber of sales.
In order to achieve that goal, Mr. Shinohara considered that in addition to increasing thenumber of properties managed, the promotion of measures such as increasing the added
value of buildings themselves, utilizing IoT to improve the lifestyle experiences ofowners (who are customers) and property tenants, and achieving digital transformationin real estate management and the creation of a business model that does not rely solely
on development and sales for growth are urgent issues. Specifically, Mr. Shinohara
considered that it is necessary to consider measures such as platform development andservice line expansion for owners and tenants, the expansion of the real estate REIT
business to broaden small-sum investment and diversify sales channels for existingowners and new investor segments, and the development of real estate STOs (security
token offerings) (Note 8, Note 9) through the introduction of Shinoken Coin and further
business expansion. Furthermore, he considered that it is necessary to expand overseas
the real estate service business model that has grown based on the domestic real estate
sales business and to search for and diversify revenue opportunities in growing markets.
However, Mr. Shinohara considered that when developing that type of platform or STOs,
in addition to the development costs, it would also be necessary to expand the humanresources that would handle the platform and STOs. In addition, he considered that
capital investment is necessary in order to promote the implementation of IoT inbuildings as part of the real estate service business. Furthermore, although growththrough M&A is intended for the life care business, digital transformation areas, andoverseas businesses, Mr. Shinohara considered that funds are also necessary for M&A
and that it will also become more important to be able to conduct agile decision-making.
However, Integral and Mr. Shinohara came to consider that there are significant
concerns in regard to the fact that although the enhancement of the corporate value of
the Target Company Group over the medium to long term can be expected, the abovemeasures for evolving and diversifying business into a sustainable business modelcannot be expected to quickly contribute to profits as a certain amount of time is required
for the effects of each measure to manifest, and instead, even if the large sums ofnecessary investments are made for M&A, expansion into new business areas, IT
investment, and the like, there is a significant risk of business not expanding as planned,
and there is a possibility of the financial condition or revenue of the Target Company
Group worsening over the short term. Therefore, Integral and Mr. Shinohara
considered that if these measures are implemented while the Target Company remains
listed, there is a concern that in the short term, share value would be negatively impacted
due to not being sufficiently evaluated by the market, which may be detrimental to theinterests of existing shareholders. Therefore, taking into consideration Integral’s
above expression of its initial intention in late June 2021 and subsequent discussions as20

well as the expression of intent received on May 10 2022, in mid-May 2022, Mr.
Shinohara came to consider that it is important to avoid exposing the Target Company’s
shareholders to the risks inherently involved in the above measures by temporarily
taking the Target Company Shares private, to limit the shareholders of the Target
Company to Integral and Mr. Shinohara, who can accept those risks, and establish a
structure that can swiftly respond to rapid changes in the environment surrounding thereal estate business, and for Integral, Mr. Shinohara, and the management andemployees of the Target Company to unite in promoting the expansion of business andthe strengthening of management foundations.
Integral and Mr. Shinohara have confirmed that as a future option, although they intend
in principle to aim to relist the Target Company (i.e., the Tender Offeror after the
Merger), the specific policies regarding conducting the relisting and the timing of therelisting if it is conducted are not decided at present.
Additionally, Mr. Shinohara considered that, compared to the multiple companies withwhich he held discussions, Integral is more capable of contributing to enhance thecorporate value the corporate value of the Target Company Group, considering factors
such as depth of understanding of the real estate industry, attitude of valuing dialogue
with Mr. Shinohara, and level of desire to support the realization of Mr. Shinohara’s
ideas. Moreover, Mr. Shinohara received explanations from Integral to the effect that
if Integral were to engage in capital participation in the Target Company, it would bepossible for the Target Company to receive through Integral the necessary humanresources for promoting the business transformation using Integral’s rich humanresources network in areas such as management, financial strategy, and marketing, andby receiving support as required by the Target Company from “i-Engine,” Integral’s
corporate value enhancement support team, it would be possible to steadily promote thebusiness reforms of the Target Company through Integral providing consulting to theTarget Company for the purpose of enhancing business administration in regard tomatters such as management, governance, and compliance. Based on the results ofthese discussions, in mid-May 2022, Mr. Shinohara considered that utilizing Integral’s
networks, know-how, and the like to the maximum extent would lead to enhancing thecorporate value of the Target Company and therefore began considering theTransactions with Integral as the optimal partner.
Note 8:“STO (security token offering)” means a method of procuring funds throughsecurity tokens, which are digitized securities.

Note 9:“Real estate STO” means procuring funds for real estate investment from thepublic through an STO (security token offering). At present, the Target
Company Group sells apartments by the building and condominiums by theunit, but for individual investors, investing in a building or unit requires asignificant investment amount. By introducing real estate STOs, it will bepossible to invest with smaller amounts by securitizing and improving theliquidity of property assets, and the Target Company Group considers that thiswill make it possible to appeal to existing investors who find it difficult tomake additional investments even if they want to due to having loans, and topotential customer segments who consider the hurdles to investing in a single
building or unit to be too high, thereby enabling the Target Company Groupto increase the number of its customers.
21

Based on the above considerations, Integral and Mr. Shinohara reached the decision that
the Transactions will contribute to enhancing the Target Company’s corporate value
over the medium to long term to be achieved by implementing the above measures
without being deterred by performance changes in the short-term, and that theTransactions are the best measure not only for the general shareholders but also for thevarious stakeholders of the Target Company. Therefore, on May 17, 2022, Integral and
Mr. Shinohara made a request to the Target Company to discuss and consider the
implementation of the Transactions. In late April 2022, Integral appointed Mori
Hamada & Matsumoto as its legal advisor , but it has not appointed any financial advisor.
Thereafter, taking into consideration matters such as the progress of the due diligenceon the Target Company Group conducted by Integral from early June to early July 2022,
Mr. Shinohara and the Tender Offerors made an official proposal to the Target Company
regarding the Transactions on June 21, 2022, which included the purchase price per
Target Company Share in the Tender Offer (the “Tender Offer Price”) being
approximately 1,300 yen (a premium of 34.30% (rounded to two decimal places; thesame applies below in regard to the calculation of premium ratios unless otherwise
specified) on the closing price of the Target Company Shares (968 yen) on June 20,
2022, the Business Day before the submission of the relevant letter of intent).
Subsequently, as stated in “(B) Decision-Making Process and Reasons Behind the Target
Company’s Opinion Supporting Tender Offer” below, on July 6, 2022, the Tender
Offerors received a request from the Target Company to reconsider the Tender Offer
Price, and to make a proposal regarding the handling of the Stock Acquisition Rights,
for the reasons that taking into consideration the opinion of the Special Committee (asdefined in “(B) Decision-Making Process and Reasons Behind the Target Company’s
Opinion Supporting Tender Offer” below; the same applies below) and discussions with
Credit Suisse Securities, the price cannot be said to be at a level that appropriatelyreflects the intrinsic value that the Target Company may achieve and that in light oftrends in recent similar transactions as well, the price does not include an appropriate
level of premiums from the perspective of protecting the interests of minority
shareholders. Therefore, the Tender Offerors reconsidered the Tender Offer Price andmade a new proposal on July 11, 2022 for the Tender Offer Price to be 1,425 yen (apremium of 45.41% on the closing price of the Target Company Shares (980 yen) on
July 8, 2022, the Business Day before the submission of the relevant letter of intent) andto purchase the Stock Acquisition Rights at the price calculated by multiplying thenumber of shares to be acquired per Stock Acquisition Right by the difference between
the Tender Offer Price and the exercise price. In response, as the Tender Offerors
received a request from the Target Company on July 15, 2022 to reconsider the Tender
Offer Price for the reasons that the price is not at a level that appropriately reflects theintrinsic value that the Target Company may achieve, that the proposal cannot be said
to include an appropriate price and conditions that ensure the benefits to be enjoyed bygeneral shareholders of the Target Company, and that the price does not provide thegeneral shareholders of the Target Company with a reasonable opportunity to sell theirshares, the Tender Offerors reconsidered the Tender Offer Price and made a newproposal to the Target Company on July 21, 2022 for the Tender Offer Price to be 1,520
yen. In response, the Tender Offerors received a request from the Target Company on
July 26, 2022 to reconsider the Tender Offer Price for the reasons that the price is still
not at a level that appropriately reflects the intrinsic value that the Target Company may
achieve and that in consideration of factors such as that the price cannot be said to22

include sufficient premiums from the perspective of protecting the interests of minority
shareholders taking into account the fact that the share price of the Target Company has
been increasing recently as well as in light of trends in similar recent transactions, theproposed conditions cannot be said to ensure the benefits to be enjoyed by the generalshareholders of the Target Company, and the price does not provide the generalshareholders of the Target Company with a reasonable opportunity to sell their shares.
Thereafter, the Tender Offerors engaged in further discussions and negotiations with theTarget Company regarding the various terms of the Transactions and made a final
proposal on August 3, 2022 for the Tender Offer Price to be 1,600 yen. In regard to
the final proposal, after confirming and discussing the details of the proposal on August
5, 2022 with the Tender Offerors, and confirming the reasonableness of the proposal
with the Special Committee and asking for an opinion, etc. from Credit Suisse Securities,
on August 10, 2022, the Target Company’s board of directors determined that the Tender
Offer Price was appropriate for the Target Company’s shareholders and provided areasonable opportunity to sell their shares taking into consideration the facts that (i) of
the valuation results of the share value of the Target Company Shares performed by
Credit Suisse Securities stated in “(A) The Target Company’s Acquisition of a Share
Valuation Report from an Independent Third-Party Appraiser” in “(Measures to Ensure
Fairness of the Tender Offer, Including Measures to Ensure Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest)” under “Background of Valuation”
in “(2) Price of Tender Offer” under “4. Period and Price of the Tender Offer andNumber of Share Certificates, Etc. to be Purchased” below, the proposed price exceeds
the upper limit of the range of valuation results under the market price method and iswithin the ranges of valuation results under the comparable company analysis and thediscounted cash flow analysis (“DCF Analysis”) and exceeds the medians of those
ranges; (ii) the proposed price represents a premium of 45.59% on the closing price(1,099 yen) of the Target Company Shares quoted on the TSE Standard Market on
August 9, 2022, the Business Day preceding the announcement date of theimplementation of the Tender Offer, and a premium of 49.39% on the simple averageclosing price (1,071 yen) (rounded to the nearest yen; the same applies below in regard
to the calculation of simple average closing prices) over the one-month period endingon that date, a premium of 57.33% on the simple average closing price (1,017 yen) over
the three-month period ending on that date, and a premium of 57.33% on the simple
average closing price (1,017 yen) over the six-month period ending on that date, eachas quoted on that market (or the TSE JASDAQ Market on and before April 3, 2022),
and the proposed price can be assessed as including a suitable premium in comparison
to the levels of premiums added when determining purchase prices in past examples of
MBOs for the purpose of taking a company private announced from June 28, 2019 toAugust 9, 2022 (14 examples; however, limited to transactions in which the purchaseprice was 10 billion yen or more and that were successfully completed) (the average of
those premiums is 46.0% for the Business Day preceding the announcement date, 44.8%
for the most recent one month, 49.7% for the most recent three months, and 52.2% for
the most recent six months, and the median of those premiums is 40.8% for the BusinessDay preceding the announcement date, 38.0% for the most recent one month, 45.7% for
the most recent three months, and 52.7% for the most recent six months; rounded to one
decimal place), and (iii) it is recognized that the interests of general shareholders aretaken into consideration, such as measures to avoid conflicts of interest as stated in “(6)Measures to Ensure the Fairness of the Tender Offer, Including Measures to Ensure the23

Fairness of the Tender Offer Price and to Avoid Conflicts of Interest” under “3. Contents,
Basis of and Reasons for Opinion on Tender Offer”. Following that, on August 10,
2022, the Tender Offerors reached an agreement with the Target Company for the Tender
Offer Price to be 1,600 yen. The Tender Offerors has not made any agreement with
Mr. Shinohara for tendering shares in the Tender Offer on the condition of recontribution
by Mr. Shinohara.
After repeatedly engaging in these discussions and negotiations, on August 10, 2022,
the Tender Offeror decided to conduct the Tender Offer with a Tender Offer Price of
1,600 yen as part of the Transactions. For details of the Tender Offer Price, please refer
to “Basis of Valuation” and “Background to Valuation” in “(2) Price of Tender Offer”
under “4. Period and Price of the Tender Offer and Number of Share Certificates, Etc.
to be Purchased” below.
(B)

Decision-Making Process and Reasons Behind the Target Company’s Opinion
Supporting Tender Offer

According to the Target Company’s Press Release, in response to a proposal for
discussion and consideration towards pursuing the Transactions from Integral and Mr.
Shinohara on May 17, 2022, the Target Company commenced to consider theTransactions in detail.
As stated in “(3) Measures to Ensure Fairness of the Tender Offer, Including Measures
to Ensure Fairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest”
below, the Target Company appointed as its legal adviser Anderson Mori & Tomotsune
which has given the Target Company advice on other matters in the past, and alsoestablished a special committee for consideration of the offer for the Transactions (the“Special Committee”, and for its members and other specific consultation matters, see“(C) Establishment by the Target Company of an Independent Special Committee andProcurement of the Opinion (Special Committee Report)” in “Measures to Ensure
Fairness of the Tender Offer, Including Measures to Ensure Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest” under “Background of Valuation” in“(2) Price of Tender Offer” under “4. Period and Price of the Tender Offer and Numberof Share Certificates, Etc. to be Purchased” below) on May 24, 2022 in order toeliminate arbitrariness in decision-making by the Target Company and its board of
directors in the Transactions, and to ensure fairness, transparency and objectivity in its
decision-making process. The Target Company also appointed as its financial adviser
and third-party appraiser Credit Suisse Securities which has given various advice
including the trends in stock markets and IR activities from the perspective of capital
markets, and organized a structure to examine the offer from the Tender Offeror andbegan considerations. For the avoidance of doubt, as stated in “(A) Background,Purpose, and Decision-Making Process with respect to the Tender Offeror Deciding to
Conduct the Tender Offer” in “(2) Background, Purpose, and Decision-Making Processwith respect to Conducting the Tender Offer, and Management Policy After the Tender
Offer” above, Credit Suisse Securities referred Mr. Shinohara to several companies
including Integral however (i) Mr. Shinohara had not yet decided on the implementationof the MBO as of the mid April when such referral was made, and in fact, referral was
made to Mr. Shinohara in the context of and as a part of consultation by him as therepresentative director and chief executive officer of the Target Company on strategic
measures to further grow of the Target Company, (ii) Credit Suisse Securities referred
Mr. Shinohara to not only one specific party but to several parties including Integral,24

and (iii) Credit Suisse Securities was not involved in the decision-making by Mr.
Shinohara that Integral would be the optimal partner to realize the growth strategy of
the Target Company. As such, the Target Company has determined that Credit Suisse
Securities does not have any material interest in the Transactions including the Tender
Offer and there are no doubts with respect to its independence. In addition, The Target
Company and the Special Committee have verified through an external and objective
observation that Credit Suisse Securities has consistently given objective advice as afinancial adviser based on its extensive knowledge and experience and there has been
no incentive for Credit Suisse Securities to close the transaction in the process of the
discussions and negotiations with the Tender Offerors on the Tender Offer, for example,
even after the discussion with the Tender Offerors commenced on the transaction to takethe Target Company Shares private by a means of MBO, Credit Suisse Securities
continued to give the advice to compare and examine competing offers, if made, fromthe qualitative and economic perspective to avoid opportunity losses of minority
shareholders of the Target Company, and the advice to comprehensively consider theoffers including suspension and extension depending on terms and conditions of suchcompeting offers. Thus, taking into account the background of referral of Integral to
Mr. Shinohara and the fee structure that includes an success based fee, it is reasonable
for the Target Company to determine that Credit Suisse Securities has given the Target
Company and the Special Committee advice on the appropriateness of the Transaction
from an objective and independent standpoint, and as such the Target Company does
not have any doubt on such determination on independence based on the determinationby the Special Committee that there are no doubts with respect to Credit Suisse
Securities’ independence.
Thereafter, taking such examination into account, the Target Company held discussions
and negotiations with the Tender Offeror several times on the appropriateness of theTransactions based on negotiation policies confirmed by the Special Committee inadvance, and opinions, instructions and requests at important junctures of thenegotiation, and with advice from Credit Suisse Securities and Anderson Mori &Tomotsune.
Furthermore, after the Target Company received an offer from the Tender Offeror onJune 21, 2022 with the Tender Offer Price being around 1,300 yen, the Target Company
requested to reconsider the Tender Offer Price on July 6, 2022, taking into accountopinions from the Special Committee and discussions with Credit Suisse Securities, forthe reasons that the Tender Offer Price did not properly reflect the intrinsic value that
the Target Company could achieve and that the Tender Offer Price was not offered withthe reasonable level of premium in light of the recent trends in transactions of the similar
kind to protect the interest of minor shareholders. Thereafter, the Target Company
continued to report the progress of the negotiation to the Special Committee in a timely
manner and to hold discussions and negotiations with the Tender Offeror several times
on the Tender Offer Price based on opinions, instructions, and requests at importantjunctures of the negotiation and with advice from Credit Suisse Securities. Specifically,
the Target Company received an offer from the Tender Offeror with the Tender Offer
Price being 1,425 yen on July 11, 2022 and an offer with the Tender Offer Price being
1,520 yen on July 21, 2022. In response to the offers, the Target Company requested
further reconsideration of the Tender Offer Price from the perspective of the further
protection of the interest of minor shareholders. Based on the negotiations above, the25Target Company received a final offer from the Tender Offeror with the Tender Offer
Price being 1,600 yen on August 3, 2022.
The Target Company confirmed and discussed the detail of the offer with the Tender
Offerors on August 5, 2022, consulted the Special Committee on the reasonableness ofthe offer, requested Credit Suisse Securities for its additional views on the offer, andcarefully examined the offer taking into account a share valuation report obtained from
Credit Suisse Securities on August 9, 2022 (“Share Valuation Report”). As a result,the Target Company determined that (i) the price was appropriate since it could be
regarded as carrying a reasonable premium in light of the market price and was
reasonable as it exceeded the upper limit of the range calculated by the market priceanalysis, and was in and above the median of the range calculated by the comparable
companies analysis and DCF Analysis) conducted by Credit Suisse Securities describedin “(A) The Target Company’s Acquisition of a Share Valuation Report from an
Independent Third-Party Appraiser “Measures to Ensure Fairness of the Tender Offer,
Including Measures to Ensure Fairness of the Tender Offer Price and Measures to Avoid
Conflicts of Interest” under “Background of Valuation” in “(2) Price of Tender Offer”
under “4. Period and Price of the Tender Offer and Number of Share Certificates, Etc.
to be Purchased” below, (ii) the proposed price represents a premium of 45.59% on theclosing price (1,099 yen) of the Company Shares quoted on the TSE Standard Market
on August 9, 2022, the Business Day preceding the announcement date of theimplementation of the Tender Offer, and a premium of 49.39% on the simple averageclosing price (1,071 yen) over the one-month period ending on that date, a premium of
57.33% on the simple average closing price (1,017 yen) over the three-month period
ending on that date, and a premium of 57.33% on the simple average closing price (1,017
yen) over the six-month period ending on that date, each as quoted on that market (orthe TSE JASDAQ Market on and before April 3, 2022), and the proposed price can beassessed as including a suitable premium in comparison to the levels of premiums added
when determining purchase prices in past examples of MBOs for the purpose of taking
a company private announced from June 28, 2019 to August 9, 2022 (14 examples;
however, limited to transactions in which the purchase price was 10 billion yen or more
and that were successfully completed) (the average of those premiums is 46.0% for theBusiness Day preceding the announcement date, 44.8% for the most recent one month,
49.7% for the most recent three months, and 52.2% for the most recent six months, andthe median of those premiums is 40.8% for the Business Day preceding theannouncement date, 38.0% for the most recent one month, 45.7% for the most recent
three months, and 52.7% for the most recent six months; rounded to one decimal place),and (iii) it is recognized that the interests of general shareholders are taken into
consideration, such as measures to avoid conflicts of interest as stated in “(6) Measures
to Ensure the Fairness of the Tender Offer, Including Measures to Ensure the Fairnessof the Tender Offer Price and to Avoid Conflicts of Interest” under “3. Contents, Basisof and Reasons for Opinion on Tender Offer”. As stated above, the Target Company
continuously negotiated with the Tender Offeror on the Tender Offer Price.
The Target Company received necessary legal advice from Anderson Mori & Tomotsune,
its legal adviser, on the method and process of decision-making by the board of directorsof the Target Company including various procedures relating to the Transactions as wellas other points of attention, and received a findings report from the Special Committee
on August 9, 2022 (“Special Committee Report” and for the overview of the Special
Committee Report and specific activities of the Special Committee, see “(C)26

Establishment by the Target Company of an Independent Special Committee andProcurement of the Opinion (Special Committee Report)” in “Measures to Ensure
Fairness of the Tender Offer, Including Measures to Ensure Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest” under “Background of Valuation” in“(2) Price of Tender Offer” under “4. Period and Price of the Tender Offer and Numberof Share Certificates, Etc. to be Purchased” below). Given the foregoing, the Target
Company has carefully discussed and examined whether the Transactions would
contribute to improvement of the corporate value of the Target Company and whether
the terms and conditions of the Transactions including the Tender Offer Price areappropriate while fully respecting the Special Committee Report submitted from theSpecial Committee and taking into account legal advice given by Anderson Mori &Tomotsune as its legal adviser, and the Share Valuation Report from Credit Suisse
Securities as its third-party appraiser.
As stated in “(A) Background, Purpose, and Decision-Making Process with respect to
the Tender Offeror Deciding to Conduct the Tender Offer” above, the Target Company
recognizes that the environment surrounding the Target Company Group has become
more and more difficult, with soaring prices of construction materials due to various
factors and increasing competition for lands acquisitions making it more difficult tosecure properties with optimal yields. The Target Company has come to believe that
it would be difficult to maintain the same growth potential and competitive advantages
under the previous business model that relied on the real estate sales business to drive
the performance of the Target Company Group, and that if it does not make a more
fundamental shift to a business model centered on the service business, its earnings may
decline and result in damage to the Target Company’s corporate value in the medium tolong term. Specifically, the Target Company concluded that it is necessary to (i) withrespect to the real estate sales business, seek to further pursue the ability to findproperties with optimal yields that are limited in a severe market environment, todevelop a more diversified customer base, and to further cultivate existing customers
based on the already established business model, and (ii) with respect to the real estateservice business, seek to enhance property value by providing additional value (such as
introducing IoT to properties such as facial recognition and smart lock) to appeal to new
potential customers, strengthen the existing high value-added services that the Target
Company has uniquely developed (such as an unattended death insurance developed incooperation with an insurance company) and develop a circle of economy involving
owners, tenants and the Target Company Group through introduction of Shinoken Coin,etc., (iii) with respect to the life care business, seek to expand the existing services andpursue growth through M&A in order to expand and provide services that closely
support customers and tenants throughout their lives as a “life support company for all
generations around the world” which is the Target Company Group’s vision, and (iv)seek to strengthen and expand operations not only in the domestic business but also theinternational business that the Target Company is currently working on, and to expand
the REIT business model internationally and the Target Company believes that theforegoing restructurings will ensure its competitiveness and enhance its corporate value
over the medium to long term. However, while it is expected that initiatives for theabove restructurings towards the shift to a sustainable business model anddiversification will enhance its corporate value in the medium to long term, not all ofsuch initiatives will be successful in the short term, and it will take time to realize theeffects of the business restructurings and to make profits from new businesses. Rather,27

even if essential large investments are made in the establishment of a platform, IT
investment, entry into new business domains, M&A, and acceleration of international
expansion, etc., there is a business risk that the business will not be developed as planned,
and the Target Company Group’s financial condition and earnings may deteriorate in
the short term. There is a concern that if these initiatives are implemented while theTarget Company remains listed, the Target Company may not be fully evaluated by themarket in the short term and that may adversely affect the stock price causing
disadvantages to existing shareholders.
Under these circumstances, in order to avoid the above adverse effects that may occur
to the shareholders and to enhance its corporate value in a medium to long-term
perspective, the Target Company has concluded that it is important to privatize theTarget Company Shares by a means of management buyout (MBO) and to establish amanagement system that enables the Tender Offeror, directors, and employees together
to promptly and boldly address each initiative with the cooperation of Integral without
being constrained from the shorter-term evaluation from the stock market.
In the case that the Target Company goes private, it will not be able to raise funds
through equity finance from capital markets, and that it is possible to affect theacquisition of talented human resources and the expansion of its clients which aresupported by high social credibility and name recognition which the Target Company
has enjoyed as a listed company. However, the Target Company is not likely to havea need for large-scale financing through equity finance in the next several years provided
that of the Target Company’s current financial conditions and other factors. In addition
to the foregoing, it is unlikely that privatization will have a significant impact on theacquisition of human resources given the brand, name recognition, and accumulated
achievements that it has established, and the expansion of clients can be partiallyachieved through improvement of name recognition and social credibility throughbusiness activities, the Target Company believes that the demerits of the privatizationof the Target Company Shares will be limited. Hence, the board of directors of theTarget Company determined that the merits of the privatization of the Target Company
Shares exceeds the demerits.
Based on the above, the board of directors of the Target Company determined thatprivatization of the Target Company Shares through the Transactions including theTender Offer, will contribute to the enhancement of the corporate value of the Target
Company.
Also, the board of directors of the Target Company determined that the Tender Offer
Price and other terms and conditions of the Tender Offer are reasonable for shareholdersof the Target Company and that the Tender Offer provides shareholders of the Target
Company with a reasonable opportunity to sell their shares, based on the facts that (i)the Tender Offer Price (1,600 yen) exceeds the upper limit of the range calculated by
the market price analysis, is within the range calculated by the comparable companies
analysis and the DCF Analysis, and is above the median of the range of the valuation of
the Target Company Shares by Credit Suisse Securities as described in “Measures to
Ensure Fairness of the Tender Offer, Including Measures to Ensure Fairness of theTender Offer Price and Measures to Avoid Conflicts of Interest” under “Background of
Valuation” in “(2) Price of Tender Offer” under “4. Period and Price of the Tender Offer
and Number of Share Certificates, Etc. to be Purchased” below; (ii) the Tender Offer
Price (1,600 yen) is the price of 1,099 yen, the closing price of Target Company Shares28

on the Standard Market of the TSE on August 9, 2022 which is the business day
immediately preceding the announcement date of the implementation of the Tender
Offer, plus a 45.59% premium; 1,071 yen, the simple average of closing prices during
the past one (1) month period up to the same date, plus a 49.39% premium; 1,017 yen,
the simple average of closing prices during the past three (3) month period up to thesame date, plus a 57.33% premium; 1,017 yen, the simple average of closing prices
during the past six (6) month period up to the same date, plus a 57.33% premium, andcompared with the premium levels (the average of those premiums is 46.0% for theBusiness Day preceding the announcement date, 44.8% for the most recent one month,
49.7% for the most recent three months, and 52.2% for the most recent six months, andthe median of those premiums is 40.8% for the Business Day preceding theannouncement date, 38.0% for the most recent one month, 45.7% for the most recent
three months, and 52.7% for the most recent six months; rounded to one decimal place)
granted when determining the purchase price in the past MBO cases (14 cases, andlimited to the successfully completed case of which the purchase value is 10 billion yen
or more) publicly announced from June 28, 2019 to August 9, 2022 for the purpose ofprivatization, the price can be evaluated as a price with an appropriate premium added
thereto; (iii) it is found that due consideration is given to interests of generalshareholders such as measures, etc. to avoid conflict of interest described in “Measures
to Ensure the Fairness of the Tender Offer, Including Measures to Ensure the Fairnessof the Tender Offer Price and to Avoid Conflicts of Interest under “Background of
Valuation” in “(2) Price of Tender Offer” under “4. Period and Price of the Tender Offer
and Number of Share Certificates, Etc. to be Purchased” below; and (iv) the Tender
Offer Price was determined through several discussions and negotiations between theTarget Company and the Tender Offeror after the above measures were taken toeliminate the conflicts of interest, more specifically, determined through good faith andcontinued discussions and negotiations taking into account the valuation of the Target
Company Shares by Credit Suisse Securities, discussions with the Special Committee,
and legal advice from Anderson Mori & Tomotsune.
Since the Stock Acquisition Rights Tender Offer Price was calculated based on theamount obtained by multiplying the difference between the Tender Offer Price and theexercise price of the Stock Acquisition Rights per Target Company Share by 200 shares
which are the number of the Target Company Shares to be issued upon exercise of one(1) Stock Acquisition Right, the Target Company determined that the Stock Acquisition
Rights Tender Offer Price would generate economic benefits equivalent to those of theTarget Company Shares and provides the Stock Acquisition Right Holders with anopportunity to sell their Stock Acquisition Rights at a price with a reasonable premium
added thereto and on reasonable terms and conditions.
Based on the above, the Target Company adopted a resolution at the board of directors’
meeting held on August 10, 2022 by unanimous consent of the directors of the Target
Company who participated in the deliberation and voting (Junichi Tsurukawa, Yoshiaki
Miura, Takashi Tamaki, Minoru Sakata, Katsuji Inoue, Yuichiro Yasuda, and Yasuko
Maekawa, all the members of the board of directors except for Mr. Shinohara and
Hiroyuki Irie) to express the opinion supporting the Tender Offer and recommend that
the Target Company’s shareholders and Stock Acquisition Right Holders tender theirshares in the Tender Offer.

29

The resolution of the board of directors was made on the assumption that the Target
Company Shares would be delisted as a result of the implementation of the Tender Offer
and a series of procedures thereafter by the Tender Offer.
Since Mr. Shinohara, who is the Representative Director and Chief Executive Officer of
the Target Company, intends to invest in the Tender Offeror if the Tender Offer is closed
and continue to manage the Target Company after the Transactions, and thus has astructural conflict of interest with the Target Company with regard to the Transactions,
he did not participate in any deliberation and voting at the aforementioned board of
directors’ meeting as a director with special interest and did not participate in any
discussions and negotiations with the Tender Offeror on behalf of the Target Company.
In addition to Mr. Shinohara, since Mr. Hiroyuki Irie concurrently serves as a Deputy
President of The Nishi-Nippon City Bank, Ltd. and the Tender Offeror communicatedon August 4, 2022 its decision to borrow funds from Shinsei Bank, Limited as
fundraising for the Transactions, resulting in reconsideration of the transactions between
the current financial institutions, he did not participate in any deliberation and voting at
the aforementioned board of directors’ meeting in order to avoid a conflict of interest
with the Company with regard to the Transactions.
(C)

Management Policy After the Tender Offer

The Transactions constitute a management buyout (MBO), and Mr. Shinohara has
agreed with the Tender Offerors in the Basic Agreement to hold approximately8% of theshares of the Tender Offeror after the Merger by continuing to hold the Shares Agreed
to Not Be Tendered without tendering them in the Tender Offer (however, as stated in“(4) Policy for Organizational Restructuring, Etc. after the Tender Offer (Mattersrelating to the “Two-Step Acquisition”)” below, before the Share Consolidation takes
effect, if there is any shareholder of the Target Company other than the Tender Offeror
or Mr. Shinohara who holds Target Company Shares in a number greater than that of the
Shares Agreed to Not Be Tendered, or if it is determined that there may come to be sucha shareholder, the Tender Offeror intends to conduct the Squeeze-Out Procedures tomake the Tender Offeror the only shareholder of the Target Company, in which case Mr.
Shinohara will be unable to continue holding the Target Company Shares and will
therefore hold the shares of the Tender Offeror after the Merger by contributing to theTender Offeror after the Transactions are conducted (the specific amount, contribution
ratio, and timing of that contribution are undetermined at present, but the Tender Offeror
intends to hold discussions with Mr. Shinohara in the future)). Additionally, Mr.
Shinohara intends to continue promoting the management of the Target Company asstated in “(A) Background, Purpose, and Decision-Making Process with respect to theTender Offeror Deciding to Conduct the Tender Offer” under “(2) Background, Purpose,and Decision-Making Process with respect to Conducting the Tender Offer, andManagement Policy After the Tender Offer” above as the representative director of theTarget Company after the Tender Offer is completed. The Tender Offeror isconsidering appointing people nominated by Integral as directors of the Target Company,
but the specific number of people, timing, candidates, and the like are undetermined atpresent, and there is no agreement between the Tender Offeror and the directors of theTarget Company other than Mr. Shinohara regarding the appointment of officers after
the Tender Offer. In the Basic Agreement, the Tender Offeror has agreed with Mr.
30

Shinohara to execute, after the completion of the Transactions, an executive service
agreement with Mr. Shinohara that contains terms regarding the performance andcontinuance of the duties of Mr. Shinohara as the representative director of the Target
Company, but at present, no matters have been specifically agreed to.
The Tender Offeror intends to determine the details of the management structure,including the officer composition, of the Target Company after the Tender Offer while
holding amicable discussions with the Target Company after the successful completionof the Tender Offer. Additionally, the Tender Offeror intends in principle to maintainthe current treatment of employees of the Target Company Group after the successful
completion of the Tender Offer. Moreover, the Tender Offeror and the Target
Company intend to conduct the Merger after the completion of the Squeeze-Out
Procedures, but the details such as the specific schedule of the Merger are undetermined
as of the date hereof.
The Tender Offeror intends to introduce incentive plans such as stock options for the
management and employees of the Target Company after the Transactions, but the
specific details thereof are undetermined at present.
(3)

Measures to Ensure Fairness of the Tender Offer, Including Measures to Ensure Fairnessof the Tender Offer Price and Measures to Avoid Conflicts of Interest
In light of the fact that, among others, the Tender Offer will be conducted as part of aso-called management buyout (MBO) and therefore there is a structural conflict ofinterest, the Tender Offeror and the Target Company have taken the following measures
to ensure the fairness of the Transactions, including the Tender Offer, from theperspective of ensuring the fairness of the Tender Offer Price and the Stock Acquisition
Rights Tender Offer Price, eliminating arbitrariness in the decision-making process
leading to the decision to conduct the Tender Offer, and avoiding conflicts of interest.
The following statements on measures that have been taken by the Target Company arebased on the explanations from the Target Company.
(A)

The Target Company’s acquisition of a share valuation report from an
independent third-party appraiser.

(B)

Advice from an independent law firm at the Target Company.

(C)

Establishment by the Target Company of an independent special committee
and procurement of the opinion (special committee report).

(D)

Approval of all disinterested directors (including Audit Committee Director)of the Target Company.

(E)

Setting the minimum number of Share Certificates, Etc. to be purchased at anumber exceeding the majority of minority.

(F)

Securing objective circumstances that ensure the appropriateness of theTender Offer Price and the Stock Acquisition Rights Tender Offer Price andthe fairness of the Tender Offer.

31

For the details of the matters described above, please refer to “(Measures to Ensure
Fairness of the Tender Offer, Including Measures to Ensure Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest)” under “Background of Valuation”
in “(2) Price of Tender Offer” under “4. Period and Price of the Tender Offer andNumber of Share Certificates, Etc. to be Purchased” below.
(4)

Policy for Organizational Restructuring, Etc. after the Tender Offer (Matters relating to
the “Two-Step Acquisition”)
As set out in “(1) Outline of the Tender Offer” above, if the Tender Offer is successfullycompleted but the Tender Offeror is not able to acquire all of the Target Company Shares(excluding the treasury shares held by the Target Company and the Shares Agreed to
Not Be Tendered), the Tender Offeror intends to carry out the Squeeze-Out Proceduresin the following manner after the successful completion of the Tender Offer in order tomake the Tender Offeror and Mr. Shinohara or the Tender Offeror the only
shareholder(s) of the Target Company and take the Target Company Shares private.
(A)

Share Consolidation

Promptly after the completion of the settlement of the Tender Offer, the Tender Offeror
will, in accordance with Article 180 of the Companies Act, request the Target Company
to hold an extraordinary shareholders’ meeting (the “Extraordinary Shareholders’Meeting”) in late November 2022 at which the consolidation of the Target Company
Shares (the “Share Consolidation”) and a partial amendment to the Target Company’s
Articles of Incorporation that would abolish the share unit number provisions on thecondition that the Share Consolidation becomes effective will be proposed. According
to the Target Company’s Press Release, the Target Company intends to accept the Tender
Offeror’s request if so requested by the Tender Offeror. The Tender Offeror and Mr.
Shinohara intend to approve each of the above proposals at the Extraordinary
Shareholders’ Meeting.
If the proposal for the Share Consolidation is approved at the Extraordinary
Shareholders’ Meeting, the shareholders of the Target Company will, on the effective
date of the Share Consolidation, hold the number of Target Company Sharesproportionate to the ratio of the Share Consolidation that is approved at theExtraordinary Shareholders’ Meeting. If a fraction less than one share arises due to the
Share Consolidation, any shareholder of the Target Company who holds such fractional
shares will receive an amount of cash obtained by selling the Target Company Sharesequivalent to the total sum of the fractional shares (with such aggregate sum rounded
down to the nearest whole number) to the Target Company or the Tender Offeror as per
the procedures specified in Article 235 of the Companies Act and other applicable laws
and regulations. The purchase price for the number of shares equivalent to the totalsum of the fractional shares in the Target Company Shares will be calculated so that theamount of cash received by each shareholder who did not tender its shares in the Tender
Offer (excluding the Target Company and Mr. Shinohara) as a result of the sale will beequal to the price obtained by multiplying the Tender Offer Price by the number ofTarget Company Shares held by the shareholder of the Target Company, and then apetition will be filed to the court for permission to sell such Target Company Shares on32this basis. Although the ratio of the Share Consolidation of the Target Company Shares
has not been determined as of the date hereof, it is intended that shareholders (excluding
the Target Company and Mr. Shinohara) who hold shares in the Target Company and do
not tender in the Tender Offer will have a fraction of less than one share in order for theTender Offeror and Mr. Shinohara to become the only owners of all of the Target
Company Shares (excluding treasury shares held by the Target Company).
However, if, before the Share Consolidation becomes effective, there are certain
shareholders of the Target Company (other than the Tender Offeror and Mr. Shinohara)
who hold the number of Target Company Shares that is equal to or greater than thenumber of the Shares Agreed to Not Be Tendered (885,310 shares) or it is determinedthat there is a possibility that such shareholders would exist, and as a result of thesuccessful completion of the Tender Offer, the total number of voting rights in the Target
Company held by the Tender Offeror is less than 90% of the number of voting rights ofall shareholders of the Target Company, the ratio of the Share Consolidation will be set
in a manner that, as a result of the Share Consolidation, the Tender Offeror will become
the only owner of all of the Target Company Shares (excluding treasury shares held by
the Target Company). In this case, Mr. Shinohara will not remain to be a shareholderof the Target Company and will receive money as consideration for fractional shares heholds, but a portion of the money received as a result of the Transactions is scheduled
to be recontributed to the Tender Offeror. The Target Company intends to disclose
specific procedures for the Share Consolidation as soon as the details are determined
upon discussion between the Tender Offeror and the Target Company.
For the purpose of protecting the rights of general shareholders in relation to the Share
Consolidation, the Companies Act provides that if the Share Consolidation occurs andthere is a fraction less than one share as a result thereof, each shareholder may requestthat the Target Company purchase all such shares that will be a fraction less than one
share at a fair price, and such shareholders may file a petition to the court to determine
the price of the Target Company Shares in accordance with Articles 182-4 and 182-5 of
the Companies Act and other applicable laws and regulations. As stated above,
because the number of the Target Company Shares held by the shareholders who do nottender their shares in the Tender Offer (excluding the Target Company and Mr.
Shinohara) will be less than one, the shareholders of the Target Company objecting to
the Share Consolidation will be able to file a petition to determine the price. It is notedthat the court will ultimately make a decision on the purchase price of the Target
Company Shares if the above petition is filed.
(B)

Demand for Cash-Out of Shares, Etc.

In addition, if, before the Share Consolidation becomes effective, there are certain
shareholders of the Target Company (other than the Tender Offeror and Mr. Shinohara)
who hold the number of Target Company Shares that is equal to or greater than thenumber of the Shares Agreed to Not Be Tendered (885,310 shares) or it is determinedthat there is a possibility that such shareholders would exist, and as a result of thesuccessful completion of the Tender Offer, the total number of voting rights in the Target
Company held by the Tender Offeror becomes 90% or more of the number of the voting
rights of all shareholders of the Target Company, and the Tender Offeror becomes a
special controlling shareholder as provided for in Article 179, paragraph (1) of the33Companies Act, the Tender Offeror intends to, promptly after the completion of thesettlement of the Tender Offer, make a demand to all of the shareholders of the Target
Company (excluding the Tender Offeror and the Target Company; the “Selling
Shareholders”) to sell all of the Target Company Shares they hold (the “Demand for
Shares Cash-Out”) and to all of the Stock Acquisition Right Holders pertaining to the
Stock Acquisition Rights (excluding the Tender Offeror; the “Selling Stock Acquisition
Right Holders”) to sell all of the Stock Acquisition Rights they hold (“Demand for
Cash-Out of Stock Acquisition Rights”; together with the Demand for Shares CashOut, “Demand for Cash-Out of Shares, Etc.”) under the provisions of Part II, Chapter
II, Section 4-2 of the Companies Act.
Money equal to the amount of the Tender Offer Price is to be delivered to theshareholders of the Target Company in the Demand for Shares Cash-Out asconsideration for each share of the Target Company Shares, and money equal to theamount of the Stock Acquisition Rights Tender Offer Price is to be delivered to the
Selling Stock Acquisition Right Holders in the Demand for Cash-Out of Stock
Acquisition Rights as consideration for each Stock Acquisition Right. In that case, theTender Offeror will notify the Target Company to that effect and request approval fromthe Target Company for the Demand for Cash-Out Shares, Etc. If the Target Company
approves the Demand for Cash-Out of Shares, Etc. by a resolution of its board of
directors meeting, the Tender Offeror will acquire all of the Target Company Shares heldby the Selling Shareholders and all of the Stock Acquisition Rights held by the Selling
Stock Acquisition Right Holders as of the acquisition date stated in the Demand for
Cash-Out of Shares, Etc. without requiring any individual approval of the Selling
Shareholders or the Selling Stock Acquisition Right Holders in accordance withprocedures prescribed in applicable laws and regulations. As consideration for theTarget Company Shares held by the Selling Shareholders and the Stock Acquisition
Rights held by the Selling Stock Acquisition Right Holders, the Tender Offeror will
deliver an amount of cash equal to the Tender Offer Price to each of the Selling
Shareholders in exchange for one share of the Target Company Shares and an amountof cash equal to the Stock Acquisition Rights Tender Offer Price to each of the Selling
Stock Acquisition Right Holders in exchange for one Stock Acquisition Right.
According to the Target Company’s Press Release, if the Target Company is notified by
the Tender Offeror to the effect that it intends to make the Demand for Cash-Out of
Shares, Etc. and of the matters set out in the items of Article 179-2(1) of the Companies
Act, the Target Company’s board of directors will approve the Demand for Cash-Out of
Shares, Etc.
If the Demand for Cash-Out of Shares, Etc. is made, Mr. Shinohara will not remain to
be a shareholder of the Target Company and will receive money as consideration for theshares of the Target Company he holds, but a portion of money received as a result of
the Transactions is scheduled to be recontributed to the Tender Offeror.
For the purpose of protecting the rights of minority shareholders in relation to the
Demand for Cash-Out of Shares, Etc., the Companies Act provides that any of theshareholders of the Target Company may file a petition with a court for determinationof the purchase price of its Target Company Shares in accordance with the provisions ofArticle 179-8 of the Companies Act and other applicable laws and regulations. It isnoted that the court will ultimately make a decision on the purchase price of the Target
Company Shares if the above petition is filed.
34With regard to the above procedures, it is possible that, depending on amendments to or
the implementation or interpretation of the relevant laws and regulations by authorities
and in the case where there are certain shareholders of the Target Company (other than
the Tender Offeror and Mr. Shinohara) who hold the number of Target Company Sharesthat is equal to or greater than the number of the Shares Agreed to Not Be Tendered or
it is determined that there is a possibility that such shareholders would exist as of thetime when the Share Consolidation becomes effective, it will require time to implement
the procedure or the methods of implementation may be altered. However, even insuch a case, it is intended that a method will be used whereby the shareholders of theTarget Company who do not tender their shares in the Tender Offer (excluding the Target
Company and Mr. Shinohara) will ultimately receive cash consideration equal to thenumber of Target Company Shares held by such shareholder multiplied by the Tender
Offer Price in exchange for their shares. The specific details and expected timing forthe procedures described above will be determined through consultation between theTender Offeror and the Target Company and then promptly announced by the Target
Company.
In addition, if the Tender Offer is successfully completed but the Tender Offeror is notable to acquire all of the Stock Acquisition Rights in the Tender Offer and there areremaining Stock Acquisition Rights due to not being exercised, the Tender Offeror will
request the Target Company to carry out procedures that are reasonably necessary toeffect the Transactions, such as recommending the Stock Acquisition Right Holders towaive the Stock Acquisition Rights.
The Tender Offer is in no way intended to solicit the consent of the Target Company’s
shareholders at the Extraordinary Shareholders’ Meeting. Also, all shareholders andStock Acquisition Right Holders are solely responsible for seeking advice from certified
public tax accountants or other experts with regard to the tax consequences of tenderingin the Tender Offer or the procedures outlined above.
Furthermore, although the Tender Offeror intends to conduct the Merger after thecompletion of the Squeeze-Out Procedures, the specific method, date, or other detailsof the Merger have not been determined as of present.
(5)

Prospects and Reasons for Delisting
The Target Company Shares are currently listed on the Standard Market of the TSE asof the date hereof. However, since the Tender Offeror has not set a maximum number
to be purchased in the Tender Offer, the Target Company Shares may be delisted throughprescribed procedures in accordance with the delisting criteria set out by the TSE,
depending on the results of the Tender Offer.
Also, if the Tender Offer is successfully completed, even in the case that the delisting
criteria are not met upon completion of the Tender Offer, the Tender Offeror plans tocarry out the Squeeze-Out Procedures stated in “(4) Policy for Organizational
Restructuring, Etc. after the Tender Offer (Matters relating to the “Two-Step
Acquisition”)” above after the successful completion of the Tender Offer, in which case
the Target Company Shares will be delisted through the prescribed procedures in35

accordance with the delisting criteria of the TSE. After delisting, the Target Company
Shares will be unable to be traded on the Standard Market of the TSE.
(6)

Material Agreements regarding the Tender Offer
The Tender Offeror executed the Basic Agreement dated August 10, 2022 with Mr.
Hideaki Shinohara, the Representative Director and President of the Target Company(number of shares held: 7,633,957 shares; ownership ratio: 22.31%), that contains thefollowing terms and conditions.
(i)Mr. Shinohara shall tender the Shares Agreed to Be Tendered (number of shares
held: 6,148,647 shares; ownership ratio: 17.97%) among the shares held by Mr.
Shinohara (number of shares held: 7,633,957 shares; ownership ratio: 22.31%)
and Stock Acquisition Rights Agreed to Be Tendered (number of Target
Company Shares to be acquired: 600,000 shares; ownership ratio: 1.75%; the“Stock Acquisition Rights Agreed to Be Tendered”) and shall not tender the
Shares Agreed to Not Be Tendered (885,310 shares; ownership ratio: 2.59%) in
the Tender Offer. However, Mr. Shinohara may exercise the Stock Acquisition
Rights Agreed to Be Tendered and then tender the Target Company Shares issued
upon the exercise thereof in the Tender Offer, in which case the Shares Agreed
to Be Tendered will be the number of Target Company Shares to which the Target
Company Shares issued upon the exercise of the Stock Acquisition Rights
Agreed to Be Tendered. No conditions precedent have been established withregard to the tendering or non-tendering.

(ii)

Mr. Shinohara shall cooperate with the procedures that will be necessary to
conduct the Share Consolidation (including voting in favor of the relevant
proposal at a general meeting of shareholders of the Target Company) if, withrespect to the Shares Agreed to Not Be Tendered (885,310 shares; ownership
ratio: 2.59%), (a) the Tender Offer is successfully completed but the Tender
Offeror is not able to acquire all of the Target Company Shares (including theTarget Company Shares to be issued upon the exercise of the Stock Acquisition
Rights but excluding the treasury shares held by the Target Company and theShares Agreed to Not Be Tendered) in the Tender Offer, and (b) regardless of (a),if, after the settlement of the Tender Offer, there are certain shareholders of theTarget Company (other than the Tender Offeror and Mr. Shinohara) who holdthe number of Target Company Shares that is equal to or greater than the numberof the Shares Agreed to Not Be Tendered or the Tender Offeror reasonably
determines that there is a possibility that such shareholders would exist, theTender Offeror will be able to conduct the Share Consolidation at the ratio ofconsolidation that will enable the Tender Offeror to achieve the purpose of
making the Tender Offeror the only shareholder of the Target Company or makea Demand for Cash-Out of Shares, Etc. for that purpose, and Mr. Shinohara shallcooperate with the procedures necessary therefor.

(iii)

After the completion of the Squeeze-Out Procedures, Mr. Shinohara shallprovide necessary cooperation (including voting in favor of the relevant proposal
at a general meeting of shareholders of the Target Company) so that the Merger
is conducted in the timeline and manner and based on the terms and conditions
that the Tender Offeror reasonably requests.
36

(iv)

If the Squeeze-Out Procedures are conducted in accordance with (b) of (ii) above,
Mr. Shinohara shall, promptly after the completion of the Squeeze-Out
Procedures and before the Merger, subscribe for the number of shares forsubscription to be issued by the Tender Offeror whose value is equivalent to thenumber of the Shares Agreed to Not Be Tendered multiplied by the Tender Offer
Price and the Tender Offeror and Mr. Shinohara shall carry out procedures
necessary therefor.

(v)

After the Merger becomes effective, the Merger and recontribution set out in (iv)above are to be conducted so that the percentage of the number of shares in theTender Offeror held by Mr. Shinohara will be approximately 8% of the total
number of issued shares of the Tender Offeror.

(vi)

Mr. Shinohara and the Tender Offeror confirm as of the execution date of the
Basic Agreement that, after the Transactions are completed, the Target Company
Group will implement measures for evolving and diversifying its business toform a sustainable business model and enhance its corporate value with theintention of, as a general rule, aiming at relisting shares of the Tender Offeror
after the Merger on a financial instruments exchange, and Mr. Shinohara and theTender Offeror shall consult in good faith to achieve that purpose.

(vii)

Promptly after the completion of the Transactions, Mr. Shinohara shall executean executive service agreement with Integral or a fund that Integral or its affiliate
manages or operates or in which they are otherwise involved, that contains terms
regarding the performance and continuance of the duties of Mr. Shinohara as therepresentative director of the Target Company.

(viii) After the completion of the Tender Offer, if (i) Mr. Shinohara holds Target
Company Shares and the Tender Offeror wishes to transfer (including any
transfer resulting from the execution of security interests created on the Shares
to be Transferred; the same applies below (including any execution understatutory proceedings and execution resulting from voluntary sale and substituteperformance outside statutory proceedings; the same applies below)) all or partof the Target Company Shares held by it to a third party or (ii) Mr. Shinohara
holds shares in the Tender Offeror and Integral wishes to transfer all or part ofthe shares in the Tender Offeror held by it (together with the shares to betransferred in the case of (i) above, “Shares to Be Transferred”) to a third party,
the Tender Offeror or Integral (as the case may be) who wishes to effect thetransfer (the “Shareholder Wishing to Transfer Shares”) shall give a written
notice of request for sale of shares to Mr. Shinohara that states the principal terms
regarding the transfer, and may, by giving a written notice that states the numberof the Target Company Shares or the shares in the Tender Offeror held by Mr.
Shinohara that the Shareholder Wishing to Transfer Shares requests Mr.
Shinohara to sell together with the Shares to Be Transferred, request Mr.
Shinohara to transfer the Target Company Shares or the shares in the Tender
Offeror held by Mr. Shinohara to the third party as the transferee on the terms
stated in the notice. However, the number of shares subject to such request forsale must be the number set out in (a) or (b) below (any fraction less than one
share will be rounded down to the nearest whole number; the “Number of
Shares Available for Sale by Mr. Shinohara”).
37

(ix)

(a)

In the case of (i) above, the portion of the Target Company Shares held by
Mr. Shinohara that corresponds to the percentage of (x) the number of the
Shares to be Transferred in (y) the number of the Target Company Shares
held by the Tender Offeror.

(b)

In the case of (ii) above, the portion of the Target Company Shares held by
Mr. Shinohara that corresponds to the percentage of (x) the shares to betransferred concurrently with the transfer by the Shareholder Wishing toTransfer Shares in (y) the shares held by the shareholders of the Tender
Offeror after the Merger (excluding Mr. Shinohara).

In the case of (i) and (ii) of item (viii) above, if the Shareholder Wishing toTransfer Shares wishes to transfer the Shares to Be Transferred (excluding any
transfer as a result of the execution of security interests created on the Shares to
Be Transferred), Mr. Shinohara may, at the time of the transfer, request that allof the portion of the Target Company Shares or the common stock of the Tender
Offeror held by Mr. Shinohara at that time that is equivalent to the Number of
Shares Available for Sale by Mr. Shinohara be transferred at the same terms andconditions as those of the transfer of the Shares to Be Transferred unless any
Shareholder Wishing to Transfer Shares exercises the right to request the sale ofshares in accordance with item (viii) above.

4.

Period and Price of the Tender Offer and Number of Share Certificates, Etc. to be
Purchased(1)

Period of the Tender Offer(A) Initial period as of registration
August 12, 2022 (Friday) to September
26, 2022 (Monday (30 Business Days))
Date of public notice
August 12, 2022 (Friday)
An electronic public notice will be
conducted, and a notice to that effect will
Name of newspaper in which public
be published in the Nikkei.
notice is to appear(URL of the electronic public notice:
http://disclosure.edinet-fsa.go.jp/)
Tender offer period(B) Possibility of extension by request of the Target Company
N/A(C) Person to contact for information about extension of Tender Offer Period
N/A(2)

Price of Tender Offer

38

SharecertificatesCalloptions
Bonds withcall options
Trust
beneficiary
certificatesfor Share
Certificates, Etc.
()
Depositreceipts for
Share
Certificates, Etc.
()
Basis of
Valuation

1,600 yen per common stock
142,600 yen per Stock Acquisition Right‒‒‒(1) Common stock
In determining the Tender Offer Price, the Tender Offeror analyzed thebusiness and financial conditions of the Target Company in a
multifaceted and comprehensive manner based on the financial
information and other materials disclosed by the Target Company, theresults of the due diligence of the Target Company conducted byIntegral from early June to early July 2022, and other factors. In
addition, given that the Target Company Shares are traded through afinancial instruments exchange, the Tender Offeror referred to theclosing price (1,099 yen) of the Target Company Shares on August 9,2022, which is a Business Day preceding the date of the announcementof the implementation of the Tender Offer (August 10, 2022), andchanges in the simple average closing prices over the preceding onemonth, three-month, and six-month periods (1,071yen, 1,017 yen, and
1,017 yen, respectively), each as quoted on the Standard Market of theTSE (or the TSE JASDAQ Market on and before April 3, 2022).
Furthermore, on August 10, 2022, the Tender Offeror decided on theTender Offer Price of 1,600 yen, comprehensively taking into account
whether or not the Target Company supports the Tender Offer and theprospect of the successful completion of the Tender Offer, and basedon the discussions and negotiations with the Target Company. The
Tender Offeror did not obtain any valuation report or opinion (fairness
opinion) from any third party appraiser because the Tender Offeror
decided on the Tender Offer Price by comprehensively taking into
account the above factors and through holding discussions andnegotiations with the Target Company.
The Tender Offer Price of 1,600 yen is a price that represents apremium of 45.59% on the closing price (1,099 yen) of the Target
39

Company Shares quoted on the TSE Standard Market on August 92022, the Business Day preceding the announcement date of theimplementation of the Tender Offer, and a premium of 49.39% on thesimple average closing price (1,071 yen) over the one-month period
ending on that date, a premium of 57.33% on the simple averageclosing price (1,017 yen) over the three-month period ending on thatdate, and a premium of 57.33% on the simple average closing price(1,017 yen) over the six-month period ending on that date, each as
quoted on that market (or the TSE JASDAQ Market on and before
April 3, 2022). In addition, the Tender Offer Price of 1,600 yen is a
price that represents a premium of 45.45 % on the closing price (1,100yen) of the Target Company Shares on the Standard Market of the TSE
on August 10 2022, which is the Business Day preceding the datehereof.
(2) Stock Acquisition Rights
Because the exercise price (887 yen) per Stock Acquisition Right islower than the Tender Offer Price (1,600 yen) as of the date hereof andthe exercise period has commenced and the terms and conditions forexercising the Stock Acquisition Rights have been satisfied, on August
10, 2022, the Tender Offeror decided to set the Stock Acquisition
Rights Tender Offer Price at 887 yen, which is the difference between
the Tender Offer Price (1,600 yen) and the exercise price per Stock
Acquisition Right (142,600 yen) multiplied by the number of Target
Company Shares to be acquired upon the exercise of the Stock
Acquisition Rights (200 shares).
Although the terms of issuance of the Stock Acquisition Rights
stipulate that any acquisition of the Stock Acquisition Rights by way oftransfer requires the approval of the board of directors of the Target
Company, the Target Company resolved at its board of directors
meeting held on August 10, 2022 to comprehensively approve theTender Offeror’s acquisition of Target Company Shares in relation to
the purchase of shares tendered in the Tender Offer on the condition
that the Tender Offer is successfully completed.
The Tender Offeror did not obtain any valuation report or opinion(fairness opinion) from any third party appraiser because the Tender
Offeror decided on the Stock Acquisition Rights Tender Offer Pricebased on the Tender Offer Price as described above.
Backgroun
d ofValuation(Background of the Decisions on the Tender Offer Price and the Stock
Acquisition Rights Tender Offer Price)
As stated in “(A) Background, Purpose, and Decision-Making Processwith respect to the Tender Offeror Deciding to Conduct the Tender
Offer” in “(2) Background, Purpose, and Decision-Making Processwith respect to Conducting the Tender Offer, and Management Policy
After the Tender Offer” under “3. Purpose of the Tender Offer” above,
Integral and Mr. Shinohara reached the determination that the40

Transactions will contribute to the enhancement of the Target
Company’s corporate value over the medium to long term to beachieved by the Target Company implementing the above measures
without being deterred by short-term performance changes and that theTransactions are therefore the best measure for both the generalshareholders of the Target Company as well as its various stakeholders.
Therefore, on May 17, 2022, Integral and Mr. Shinohara made a request
to the Target Company to discuss and consider the implementation of
the Transactions.
Thereafter, taking into consideration matters such as the progress of thedue diligence on the Target Company Group conducted by Integral
from early June to early July 2022, Mr. Shinohara and the Tender
Offerors made an official proposal to the Target Company regarding
the Transactions on June 21, 2022, which included the purchase price
per Target Company Share in the Tender Offer (the “Tender Offer
Price”) being approximately 1,300 yen (a premium of 34.30%
onthe closing price of the Target Company Shares (968 yen) on June 20,
2022, the Business Day before the submission of the relevant letter ofintent). Subsequently, as stated in “(B) Decision-Making Process andReasons Behind the Target Company’s Opinion Supporting Tender
Offer” in “(2) Background, Purpose, and Decision-Making Processwith respect to Conducting the Tender Offer, and Management Policy
After the Tender Offer” under “3. Purpose of the Tender Offer” above,on July 6, 2022, the Tender Offerors received a request from the Target
Company to reconsider the Tender Offer Price, and to make a proposal
regarding the handling of the Stock Acquisition Rights, for the reasonsthat taking into consideration the opinion of the Special Committee anddiscussions with Credit Suisse Securities, the price cannot be said to be
at a level that appropriately reflects the intrinsic value that the Target
Company may achieve and that in light of trends in recent similartransactions as well, the price does not include an appropriate level ofpremiums from the perspective of protecting the interests of minority
shareholders. Therefore, the Tender Offerors reconsidered the Tender
Offer Price and made a new proposal on July 11, 2022 for the Tender
Offer Price to be 1,425 yen (a premium of 45.41% on the closing priceof the Target Company Shares (980 yen) on July 8, 2022, the BusinessDay before the submission of the relevant letter of intent) and topurchase the Stock Acquisition Rights at the price calculated bymultiplying the number of shares to be acquired per Stock Acquisition
Right by the difference between the Tender Offer Price and the exercise
price. In response, as the Tender Offerors received a request from theTarget Company on July 15, 2022 to reconsider the Tender Offer Pricefor the reasons that the price is not at a level that appropriately reflects
the intrinsic value that the Target Company may achieve, that the
proposal cannot be said to include an appropriate price and conditions
that ensure the benefits to be enjoyed by general shareholders of theTarget Company, and that the price does not provide the generalshareholders of the Target Company with a reasonable opportunity to41

sell their shares, the Tender Offerors reconsidered the Tender Offer
Price and made a new proposal to the Target Company on July 21, 2022
for the Tender Offer Price to be 1,520 yen. In response, the Tender
Offerors received a request from the Target Company on July 26, 2022
to reconsider the Tender Offer Price for the reasons that the price is still
not at a level that appropriately reflects the intrinsic value that theTarget Company may achieve and that in consideration of factors suchas that the price cannot be said to include sufficient premiums from theperspective of protecting the interests of minority shareholders taking
into account the fact that the share price of the Target Company has
been increasing recently as well as in light of trends in similar recent
transactions, the proposed conditions cannot be said to ensure thebenefits to be enjoyed by the general shareholders of the Target
Company, and the price does not provide the general shareholders of
the Target Company with a reasonable opportunity to sell their shares.
Thereafter, the Tender Offerors engaged in further discussions andnegotiations with the Target Company regarding the various terms of
the Transactions and made a final proposal on August 3, 2022 for theTender Offer Price to be 1,600 yen. In regard to the final proposal,
after confirming and discussing the details of the proposal on August
5, 2022 with the Tender Offerors, and confirming the reasonablenessof the proposal with the Special Committee and asking for an opinion,
etc. from Credit Suisse Securities, on August 10, 2022, the Target
Company’s board of directors determined that the Tender Offer Price
was appropriate for the Target Company’s shareholders and provided areasonable opportunity to sell their shares taking into consideration thefacts that (i) of the valuation results of the share value of the Target
Company Shares performed by Credit Suisse Securities stated in “(A)The Target Company’s Acquisition of a Share Valuation Report froman Independent Third-Party Appraiser” in “(Measures to Ensure
Fairness of the Tender Offer, Including Measures to Ensure Fairness of
the Tender Offer Price and Measures to Avoid Conflicts of Interest)”
below, the proposed price exceeds the upper limit of the range ofvaluation results under the market price method and is within theranges of valuation results under the comparable company analysis andthe DCF Analysis and exceeds the medians of those ranges; (ii) the
proposed price represents a premium of 45.59% on the closing price(1,099 yen) of the Target Company Shares quoted on the TSE Standard
Market on August 9, 2022, the Business Day preceding theannouncement date of the implementation of the Tender Offer, and a
premium of 49.39% on the simple average closing price (1,071 yen)over the one-month period ending on that date, a premium of 57.33%
on the simple average closing price (1,017 yen) over the three-month
period ending on that date, and a premium of 57.33% on the simple
average closing price (1,017 yen) over the six-month period ending onthat date, each as quoted on that market (or the TSE JASDAQ Market
on and before April 3, 2022), and the proposed price can be assessed asincluding a suitable premium in comparison to the levels of premiums
42

added when determining purchase prices in past examples of MBOs
for the purpose of taking a company private announced from June 28,
2019 to August 9, 2022 (14 examples; however, limited to transactions
in which the purchase price was 10 billion yen or more and that weresuccessfully completed) (the average of those premiums is 46.0% for
the Business Day preceding the announcement date, 44.8% for the mostrecent one month, 49.7% for the most recent three months, and 52.2%
for the most recent six months, and the median of those premiums is
40.8% for the Business Day preceding the announcement date, 38.0%
for the most recent one month, 45.7% for the most recent three months,
and 52.7% for the most recent six months; rounded to one decimal
place), and (iii) it is recognized that the interests of generalshareholders are taken into consideration, such as measures to avoid
conflicts of interest as stated in “(6) Measures to Ensure the Fairnessof the Tender Offer, Including Measures to Ensure the Fairness of theTender Offer Price and to Avoid Conflicts of Interest” under “3.
Contents, Basis of and Reasons for Opinion on Tender Offer”.
Following that, on August 10, 2022, the Tender Offerors reached anagreement with the Target Company for the Tender Offer Price to be
1,600 yen. The Tender Offerors has not made any agreement with Mr.
Shinohara for tendering shares in the Tender Offer on the condition ofrecontribution by Mr. Shinohara.
After repeatedly engaging in these discussions and negotiations, on
August 10, 2022, the Tender Offeror decided to conduct the Tender
Offer with a Tender Offer Price of 1,600 yen as part of the Transactions.
(Measures to Ensure Fairness of the Tender Offer, Including Measures
to Ensure Fairness of the Tender Offer Price and Measures to Avoid
Conflicts of Interest)
In light of the fact that, among others, the Tender Offer will be
conducted as part of a so-called management buyout (MBO) andtherefore there is a structural conflict of interest, the Tender Offeror andthe Target Company have taken the following measures to ensure thefairness of the Transactions, including the Tender Offer, from theperspective of ensuring the fairness of the Tender Offer Price and theStock Acquisition Rights Tender Offer Price, eliminating arbitrarinessin the decision-making process leading to the decision to conduct theTender Offer, and avoiding conflicts of interest.
The following statements on measures that have been taken by theTarget Company are based on the explanations from the Target
Company.
(A) The Target Company’s Acquisition of a Share Valuation Reportfrom an Independent Third-Party Appraiser
According to the Target Company’s Press Release, in expressing theTarget Company’s opinion on the Tender Offer, the Target Company
requested Credit Suisse Securities, the financial adviser and third-party
appraiser independent from the Target Company, the Tender Offeror,
43and Mr. Shinohara, to conduct a valuation of the Target Company
Shares in order to ensure the fairness in the process of decision making
on the Tender Offer Price offered by the Tender Offeror, and acquired
the Share Valuation Report dated August 9, 2022. The Target
Company has not acquired an opinion on the fairness of the Tender
Offer Price (fairness opinion) from Credit Suisse Securities.
Credit Suisse Securities, the financial adviser and third-party appraiserof the Target Company, does not fall under the related party of theTarget Company, the Tender Offeror, and Mr. Shinohara, and has nomaterial interest in relation to the Transactions. In addition, fees
payable to Credit Suisse Securities in connection with the Transactions
include a success based fee payable on the condition of the closing of
the Transactions. The Target Company appointed Credit Suisse
Securities as its financial adviser and third-party appraiser under the fee
structure described above based on its determination that the inclusionof the success based fee payable on the condition of the consummationof the Transactions will not deny independence, given the generalbusiness practice in transactions of the same kind and the fee structurethat requires the Target Company to bear certain financial burdens incase of failure of the Transactions.
Credit Suisse Securities considered the valuation method to be adopted
for the valuation of the Target Company Shares among a number ofvaluation methods, and based on the idea that it would be appropriate
to evaluate the Target Company Shares from various perspectives on
the assumption that the Target Company is a going concern, Credit
Suisse Securities conducted analyses of the per-share value of theTarget Company Shares using the following valuation methods: (a) themarket price analysis given the Target Company Shares are listed on
the Standard Market of the TSE and have a market price; (b) thecomparable companies analysis given there are multiple listedcompanies comparable to the Target Company and analytical inferenceof the share value of the Target Company based on comparable
companies is possible; and (c) the DCF Analysis in order to reflect theearnings results and projections of the Target Company in the valuation.
The Target Company acquired the Share Valuation Report dated August
9, 2022 from Credit Suisse Securities.
According to Credit Suisse Securities, the methods adopted forvaluation of the Target Company shares and the range of per-sharevalue of the Target Company shares estimated under each of suchmethods are as follows:
Market price analysis

from 1,017 yen to 1,099 yen

Comparable companies
analysisfrom 879 yen to 1,881 yen

DCF Analysis

from 1,285 yen to 1,748 yen
44Under the market price analysis, the valuation reference date is August
9, 2022, and based on 1,099 yen, the closing price of the Target
Company Shares on the reference date on the Standard Market of theTSE (or the TSE JASDEQ Market on and before April 3, 2022); 1,071
yen, the simple average of the closing prices for the last one (1) month;
1,017 yen, the simple average of the closing prices for the last three (3)months; and 1,071 yen, the simple average of the closing prices for thelast six (6) months, the range of per-share value of the Target Company
Shares is estimated as 1,017 yen to 1,099 yen.
Under the comparable companies analysis, PRESSANCECORPORATION, KI-STAR REAL ESTATE CO.,LTD, SANEIARCHITECTURE PLANNING CO.,LTD., and ESLEADCORPORATION were selected as similar listed companies determined
to have similarity to the Target Company, per-share value of the Target
Company Shares is estimated using the ratio of its operating profit
before amortization (“EBITDA”) to its corporate value (the ratio ishereinafter referred to as “EBITDA Multiple”) and the ratio of its net
earnings to its market value.
Under the DCF Analysis, the corporate value and share value of theTarget Company were estimated by discounting free cash flows
expected to be generated by the Target Company in and after the third
quarter of the fiscal year ending December 2022 to their present values
at certain discount rate, based on the business plan developed by theTarget Company and on the assumption of various factors such as
earnings estimates, investment plans in the business plan for the 3 fiscal
years from the fiscal year ending December 2022 to the fiscal year
ending December 2024, and publicly available information, then therange of per-share value of the Target Company Shares is estimated as
1,285 yen to 1,748 yen. The Target Company adopts the discount rateof 6.1% to 7.1%, a multiple model for the valuation of the terminal
value, and an EBITDA Multiple of 3.5 to 5.0.
Specific figures of the financial forecast that Credit Suisse Securities
used in the DCF Analysis are as follows. In the financial forecasts,
there is no fiscal year in which a significant change in profits is
expected. For the avoidance of doubt, the financial forecasts include
fiscal years in which a significant change in free cash flow is expected.
Specifically, free cash flow is expected to decrease significantly in thefiscal year ending December 2022 and fiscal year ending December
2024. This is because the estimated change in the working capital forthe fiscal year ending December 2022 (6 months) was calculated bycomparing the balances at the end of different months, specificallycomparing the actual amount of the working capital at the end of June
2022 and the projected amount of the working capital at the end of
December 2022, which will result in a significant increase in theworking capital and a decrease in free cash flow. For the fiscal year
ending December 2024, although the comparison was made using thefigures of the working capital at the end of December, a significant
growth in the net sales is expected in the fiscal year and this is expected45

to significantly increase the working capital and significantly decrease
free cash flow. In addition, the synergies expected to be realized by the
execution of the Transactions are not taken into account in thefollowing financial forecasts because it is difficult to make a specificestimate at this point.
(unit: million yen)
Item
Fiscal year
Fiscal year
Fiscal year
endingendingendingDecember
December
December
2022
2023
2024
(6 months)(Note)Net sales
56,906
112,563
126,324
Operating
4,473
9,737
10,425profitEBITDA
4,900
10,642
11,379
Free cash flow
607
4,613
1,283
(Note)A period from July 1, 2022 to December 31, 2022, whichis the third and subsequent quarterly accounting periods ofthe fiscal year. The financial forecast above takes into
account the consolidated earnings forecast for the full
fiscal year ending December 2022 stated in “Notice on
Revision of Consolidated Earnings Forecast for the Full
Fiscal Year Ending December 2022” released by the Target
Company on August 10, 2022.

(B) Advice from an Independent Law Firm at the Target Company
According to the Target Company’s Press Release, in order to ensure
the fairness and appropriateness of decision-making at the Target
Company’s board of directors’ meeting regarding the Transactions
including the Tender Offer, the Target Company appointed Anderson
Mori & Tomotsune as its legal adviser independent of the Target
Company, the Tender Offeror and Mr. Shinohara, from which theTarget Company received necessary legal advice on the method andprocess of decision-making at the Target Company’s board of directors’
meeting including procedures regarding the Transactions including theTender Offer and other points to note. Anderson Mori & Tomotsune
is not a party affiliated with the Target Company, the Tender Offeror
and Mr. Shinohara, and does not have any material interest in theTransactions including the Tender Offer.
The fees payable toAnderson Mori & Tomotsune do not include success based fees to be
paid subject to the completion of the Transactions.
(C) Establishment by the Target Company of an Independent Special
Committee and Procurement of the Opinion (Special Committee
Report)46

According to the Target Company’s Press Release, in light of factors
such that the Tender Offer is carried out as part of management buyout(MBO) and there may be an inherent conflicts of interest in considering
the Transactions at the Target Company, for the purposes of being
careful about the Target Company’s decision-making regarding theTransactions, eliminating the arbitrariness of decision-making andconflicts of interest at the Target Company’s board of directors’
meeting, ensuring the fairness thereof and procuring opinions onwhether or not the decision at the Target Company’s board of directors’
meeting to carry out the Transactions would be disadvantageous to theTarget Company’s minority shareholders, the Target Company resolved
at the board of directors’ meeting held on May 24, 2022 to establish theSpecial Committee consisting of three members whom are considered
to be independent of the Target Company, the Tender Offeror and Mr.
Shinohara and have advanced insight, namely Mr. Minoru Sakata(external director of the Target Company), Mr. Yuichiro Yasuda(external director of the Target Company, certified public accountant
and certified tax accountant) and Mr. Hidetaka Nishina who hasabundant experience in similar transactions to the Transactions (lawyerof Nakamura, Tsunoda & Matsumoto) (the membership of the Special
Committee has not changed since its establishment, and Mr. Yuichiro
Yasuda was appointed a chairperson of the Special Committee by themembers’ mutual vote.).
Pursuant to the resolution of the board of directors’ meeting, the Target
Company consulted with the Special Committee on (a) whether or not
the objectives of the Transactions are reasonable (including whether or
not the Transaction contribute to enhance the Target Company’s
corporate value), (b) whether or not the fairness and appropriateness ofthe conditions of the Transactions (including the Tender Offer Price) is
ensured, (c) whether or not the fairness of procedures such as
negotiation process behind the Transactions is ensured, (d) based on
the above, whether or not the Transactions are not disadvantageous to
the Target Company’s minority shareholders, and (e) details of
opinions to be stated by the Target Company’s board of directors for
the Tender Offer (including whether or not to approve the Tender Offer
and whether or not to recommend shareholders and share acquisitionright holders to participate in the Tender Offer) (collectively, the“Consulted-on Matters”.) and requested it to submit the Special
Committee Report on the Consulted-on Matters to the Target Company.
Also, the Target Company’s board of directors resolved that thedecision-making at the Target Company’s board of directors’ meeting
regarding the Transactions will fully respect the content of the Special
Committee’s judgment, and that in particular, if the Special Committee
judges the conditions of the Transactions to be inappropriate, the Target
Company’s board of directors will not approve the Transactions underthose conditions (including opinion not in support of the Tender Offer).
Moreover, the Target Company’s board of directors resolved to grant
the Special Committee the authority to request any of the Target
47

Company’s officers and employees, financial advisers and legal
advisers to collect any information required to submit a report, and be
substantially involved in the negotiation process regarding theconditions of the Transactions between the Target Company and theTender Offeror by confirming a policy beforehand, receiving timely
report, stating opinions as necessary or making a request in thenegotiation of the conditions of the Transactions.
Each member of the Special Committee will be paid remuneration in atime charge or fixed amount as consideration for their duties regardlessof the matters reported by them.
The Special Committee held 10 meetings in total during the period
from May 30, 2022 to August 9, 2022 and carefully examined anddiscussed the Consulted-on Matters. Specifically, the Special
Committee received an explanation form the Target Company on theprocess of accepting the proposal of the Transactions, objectives of theTransactions, business environment, business plan and businesschallenges and had a question and answer session, and received an
explanation form the Tender Offeror on the process and reasons for the
proposal of the Transactions, objectives of the Transactions andconditions of the Transactions and had a question and answer session.
In addition, as a policy to involve in the negotiation process with theTender Offeror, the Special Committee confirmed that, while Credit
Suisse Securities, the financial adviser of the Target Company will act
as a contact of the Target Company to directly negotiate, the Special
Committee is entitled to be substantially involved in the negotiation
process regarding the conditions of the Transactions by receiving atimely report on the situation from a person in charge of negotiation,
stating an opinion in a material phase and making an instruction orrequest. Moreover, the Special Committee received an explanationfrom Credit Suisse Securities on the valuation methods of the value of
the Target Company Shares and the results thereof (with regard to theTarget Company’s business plan which is the basis of the valuation ofshare value, the Special Committee confirmed the reasonability of theTarget Company’s business plan by grasping the preparation process ofthe business plan and current situation of the Target Company throughmultiple questions and answer sessions with the Target Company fromthe perspective that whether there were any unreasonable points
therein.).
Then, after the Special Committee received a timely report from theTarget Company on the process and details of the consultation andnegotiation regarding the Transactions between the Tender Offeror andthe Target Company, the Special Committee had a discussion andcarried out a negotiation with regard to the Tender Offer Price and theShare Acquisition Right Purchase Price as described in “(B) DecisionMaking Process and Reasons Behind the Target Company’s Opinion
Supporting Tender Offer” of “(2) Background, Purpose, and DecisionMaking Process with respect to Conducting the Tender Offer, andManagement Policy After the Tender Offer” under “3. Purpose of the48

Tender Offer” above. Until the Special Committee received anultimate proposal from the Tender Offeror for the Tender Offer Price of
1,600 yen and for the Share Acquisition Right Purchase Price of
142,600 yen which is the amount calculated by multiplying thedifference between the Tender Offer Price and the exercise price per
Share which is subject to each Share Acquisition Right (713 yen) and200 shares which is the number of Target Company Shares which is
subject to each Share Acquisition Right, the Special Committee wasinvolved in the negotiation process with the Tender Offeror by stating
an opinion to the Target Company to the effect that the Target Company
should request the Tender Offeror to raise the Tender Offer Price.
Moreover, the Special Committee received an explanation from
Anderson Mori & Tomotsune on the measures to mitigate or avoid
conflicts of interest in the Transactions and the Transactions and had aquestion and answer session, and also received an explanation from theTarget Company on the negotiation and determination process of theconditions of the Transactions and had a question and answer session.
As the Special Committee confirmed that there are no doubts withrespect to the independence and expertise of both Credit Suisse
Securities as the financial adviser and third-party appraiser andAnderson Mori & Tomotsune as the legal adviser appointed by theTarget Company, the Special Committee approved for their
appointment as the Target Company’s financial adviser and third-party
appraiser and the legal adviser respectively.
Based on the above, the Special Committee had many discussions with
Credit Suisse Securities and Anderson Mori & Tomotsune and engaged
in consultation and deliberation on the Consulted-on Matters. As aresult of such careful consultation and deliberation on the Consultedon Matters, the Special Committee submitted to the Target Company’sboard of directors’ meeting the Special Committee Report substantiallyin the manner set out below based on the unanimous opinion of thecommittee member on August 9, 2022.
(a) Matters reported
1. The Transactions are considered to contribute to the enhancementof the Target Company’s corporate value and the objectives of theTransactions are recognized as reasonable.
2. Fairness and appropriateness of the conditions of the Transactions(including the Tender Offer Price) are considered to be ensured.
3. Fairness of the procedures such as negotiation process behind theTransactions are considered to be ensured.
4. Based on the above, the Transactions are considered not to bedisadvantageous to the Target Company’s minority shareholders.
5. It is reasonable that the Target Company’s board of directors
expressed its opinion supporting the Tender Offer and resolved torecommend the Target Company’s shareholders and shareacquisition right holders to participate in the Tender Offer.

49

(b) Reasons for Giving the Above Opinions in the Report
1. Enhancement of the Target Company’s corporate value (related toConsulted-on Matters (a))
From the following reasons, the Transactions are considered tocontribute to the enhancement of the Target Company’s corporate value
and the objectives of the Transactions are recognized as reasonable.
(1) Recognition of Current Situation by the Target Company­ For the prospective business development of the Target
Company Group, the following matters are pointed out.
(i) For the real estate sales business, challenges are to pursue
further ability to judge the quality of properties to bepurchased which enables to discover a limited property with
optimal return of interest in a difficult market environment,
to find wider customer bases and to deeply appeal toexisting customers.
(ii) For the real estate services business, challenges are to
improve the property value by providing much additional
value (such as properties combined with IoT throughintroduction of face authentication and smart locking) andto appeal to new potential resident bases.
(iii) In order to improve the additional value of the real estateservices business as described in (ii) above, investment indevelopment cost and human resources in the field of DX(Digital Transformation) for the introduction of the
Shinoken Coin and development of a platform as well as
investment in a technology development adaptable toproperties provided by the Target Company Group arenecessary.
(iv) For the overall business portfolio, a challenge is to develop
to a business model centering the real estate services
business by increasing the ratio of stock income.
(v) Also for the overall business portfolio, it is also a challenge
to diversify the businesses. This includes an expansion ofoverseas business and development of a REIT businessmodel to overseas, for which the Target Company needs towork on with a long-term perspective while investing indevelopment funds and human resources.
(vi) Each business has common challenges that proactive
equipment investment for systems is required and thatprocurement of management resources such as effective useof external human resources or acquiring of humanresources is required.
(vii) In addition to the above, in the life care business, the DX
field and overseas where the group synergies are created,
growth through M&A is actively promoted, and therefore
procurement of funds therefor and human resources to50

promote PMI (integration process after M&A) is also achallenge.
­ As a strategy for mid- to long-term, the Target Company
published “Mid- to Long-term Vision 2020” on November 20,
2020 and announced the measures described in (I) to (III)below.
(I) Expansion of the overseas business: the Target Company
aims to further expand the overseas business by delivering
the consistent and coherent model within the Groupestablished in Japan in real estate sales business and realestate service business which contains from site acquisition,
construction, move-in management, operation management
and to exit strategy overseas.
(II) Development of REaaS: the Target Company establishes theworld’s most advanced platform in the trust DX of real
properties in the field of trust services to be fully in progressin Japan hereafter for the purpose of achieving REaaS (Real
Estate as a Service)(III) Strategic development of M&A: the Target Company
remains to proactively work on M&A in the fields such as
life care and DX where societal needs are growing andoverseas setting a creation of the group synergies as a basic
policy.
­ Each measure announced in the Mid- to Long-term Vision2020 by the Target Company has the same centerpiece as (i) to(vii) above.
­ For Recognition of the current situation of the Target Company
Group and the Target Company’s material challenges identified
by the Special Committee, there is no contradiction orcontrariety between the Target Company’s previous
disclosures or objective facts, and the same is also consistent
with information regarding the Target Company’s businessrecognized by members of the Special Committee who
concurrently serves as an external director of the Target
Company, therefore it can be considered to be reasonable basedon objective grounds.
­ Although taking measures contributing to (i) to (vii) above(including, but not limited to M&A) requires to take individual
risks for the measures and demerits in association with themeasures into consideration, in general terms, it is believed thatthese measures contribute to enhance the Target Company’s
corporate value.
(2)

Corporate Value-enhancing Effect of the Transactions­ In the hearing of explanations from relevant parties conductedby the Special Committee (the “Hearing”), the Tender Offeror
made an explanation on the Target Company’s policy to51enhance the Target Company’s corporate value to be carriedout after the Transactions as follows:
A. Transformation of a business model: In the current difficult
environment surrounding the real estate market and theTarget Company, it is difficult to expand sales anddevelopments of new properties and the situation will not be
solved in a short-term considering the current market
environment, therefore a transformation from a businessmodel centering the sales of real property is necessary
toward the development and growth of the business in a
mid- to long-term.
B. Intensification of sales opportunities in the real estate sales
business: The Target Company reaches new customer bases
by offering wider opportunity of a small investment for
acquisition of existing owners and new investor bases, byexpanding real property REIT business contemplating thediversification of sales channel and by developing the real
property STO (a fund procurement method through security
token of digitalized securities), and aims for the growth inincome by increasing sales opportunity.
C. Improvement of additional values in the real estate services
business: The Target Company reaches wider customer
bases and resident bases in addition to the existing customer
base by an active introduction of new technology and IoT
products to apartments and mansions, and aims for thegrowth in income by creating an option to lift property priceor house rent.
D. Making real estate services business a platform: Throughdeepening the existing services with high additional values
independently developed by the Target Company (such as
an insurance for an unattended death developed by acollaboration with an insurance company) and developmentof an economic circle involving owners, residents and theTarget Company Group through introduction of Shinoken
Coin, the Target Company aims for the expectation of future
growth.
E. Promotion of M&A: In the life care business, in order toexpand and provide lifetime services for clients andresidents, the Target Company aims for the growth by
M&A.
F.
Promotion of DX: For the transformation contemplating thesustainable growth in a mid- to long-term, the Target
Company plans to promote DX through using IoT in thebusinesses, ensure an opportunity of stock income fromsales properties and acquire overseas growth market.
G. Proactive overseas expansion: As well as the domestic
business, the Target Company tries to strengthen the current
overseas business and expand the location of business, and52

export and develop the REIT model implemented in Japanoverseas.
H. Recruitment of external human resources: Through utilizing
the professional human resources network of the Tender
Offeror, the Target Company strengthen recruitment andtraining of human resources in relation to new businesses.
­ The Target Company acknowledges that the explanations fromthe Tender Offeror above are realizable and effective policy toenhance the Target Company’s corporate value based on thecurrent challenges.
­ From the points above, the policy to enhance the Target
Company’s corporate value planned by the Tender Offeror to
be implemented after the Transactions is found to contribute toeach of the points of importance for future enhancement of theTarget Company’s corporate value as described in (1) above,
as follows:- Merits of the Transactions Points where contribution can be
found
A. Transformation of the business model(iv)(v) of (1)above
B. Intensification of sales opportunities in the real estateservices business(i) of (1) above
C. Improvement of additional values in the real estate services
business(ii)(iii) of (1) above
D. Making real estate services business a platform(iii)(iv)of (1) above
E. Promotion of M&A(vii) of (1) aboveF.
Promotion of DX(iii)(vi) of (1) above
G. Proactive overseas expansion(v) of (1) above
H. Recruitment of external human resources (vi)(vii) of (1)above­ As above, the policy to enhance the Target Company’s
corporate value planned by the Tender Offeror is recognized tohandle each of material challenges for the Target Company’s
future business development.
­ The Transactions have a superiority towards other possiblemeans from the perspective of the enhancement of thecorporate value.
­ The Special Committee received an explanation of demerits for
the Target Company and the Tender Offeror in connection with
the Transactions in the Hearing and confirmed that no material
demerits existed.
(3)

Indispensability of delisting­ From the facts that the policy to enhance the Target Company’s
corporate value planned by the Tender Offeror may have anegative impact on its short-term income and a possibility of
failure, it is believed that delisting because of the Transaction53

is indispensable as a premise of working on such policy toenhance the Target Company’s corporate value.
­ Taking it from another perspective, it can be said that delisting
after granting of appropriate consideration for the minority
shareholders can release the minority shareholders of suchrisks and also give the minority shareholders a part of futureenhanced corporate value.
­ From the points above, on the premise that appropriateness ofprice and other requests are appropriately satisfied, theTransactions necessitating delisting can be considered to havea certain reasonability.
2. Ensuring the interests of minority shareholders through fairness
procedures (related to Consulted-on Matters (c))
From the following reasons, the interests of the Target Company’s
minority shareholders are considered to have been adequately taken
into account through fair procedures in the Transactions.
(1)

Establishment of the Special Committee­ The Special Committee consists of three members of two
external directors of the Target Company and one independent
professional.
­ In the Special Committee, attention is paid as follows:
A. The Special Committee was established before adetermination of the conditions of the Transactions by theTender Offeror and the Target Company.
B. The Special Committee was ensured its independence of all
members from the Tender Offeror and from the success or
failure of the Transactions, and constituted with external
directors who are most eligible to a member of a special
committee in the M&A guideline forming a majority.
C. In consultation of the Tender Offer Price by the Target
Company with the Tender Offeror, confirmation by theSpecial Committee is requested before or promptly after the
consultation, whereby the Special Committee was ensured
a situation to substantially have an influence on thenegotiation process of the conditions of the Transactions byreceiving a timely report on the negotiation status, stating
an opinion in a material phase and making an instruction orrequest. In addition, it is decided that, if the Target
Company’s board of directors resolved to ask the Special
Committee and when the Special Committee judges theconditions of the Transactions to be inappropriate, theTarget Company’s board of directors will not approve theTransactions.
D. Although an adviser of a special committee is not appointed,
each member has advanced insight on the characteristics of
the Target Company’s business (two of the members of the54

Special Committee are the directors of the Target
Company), on the evaluation of corporate value (one of themembers of the Special Committee is a certified public
accountant), and on laws (one of the members of the Special
Committee is a lawyer), and in view of the professional andindependence of an adviser of the Target Company, theSpecial Committee determined that appointment of anadviser as the Special Committee is unnecessary.
E. Agreements to be planned or synergies to be expected
regarding the Transactions vary and such whole details
cannot be made public. Therefore, on behalf of theminority shareholders, the Special Committee obtainedmaterial information including drafts of agreements to be
executed by the Target Company in connection with theTransactions and reviewed and made a determination based
thereon.
­ Moreover, the Target Company’s board of directors determined
that, at the time of resolution to ask the Special Committee, theboard of directors fully respect opinions of the Special
Committee and make a resolution regarding the Transaction.
­ From the establishment of the Special Committee and status ofoperation as above, the Special Committee can be recognizedto effectively work as a measure to ensure fairness.
(2)

Decision-making process at the Target Company­ Since, the Target Company’s directors (i), Mr. Shinohara, thepresident, is a person who carries out the Transactions as theTender Offeror, and (ii) Mr. Mr. Hiroyuki Irie, who
concurrently serves as a Deputy President of The Nishi-Nippon
City Bank, Ltd., was informed from the Tender Offeror on
August 4, 2022 of the decision to borrow funds from Shinsei
Bank, Limited as fundraising for the Transactions resulting inreconsideration of the transactions between the current
financial institutions, they will not attend the board of
directors’ meeting to determine the Transactions and did notparticipate in consultation and negotiation with the Tender
Offeror from the perspective of avoiding conflicts of interest
and ensuring the fairness of the Transactions. No unfair
points can be found in such arrangement of conflicts ofinterests in the Target Company’s board of directors’ meeting.
­ According to the Target Company’s Press Release, a resolution
will be made by unanimous consent of all of seven directors of
the Target Company in the Target Company’s board of
directors’ meeting. If approval of all directors other thanthose who have material interest in the M&A is made in the
resolution of board of directors to determine whether toapprove M&A, such approval is regarded as one of the fact55

indicating that the measures to ensure fairness effectively
worked in the M&A.
­ From the above, no suspicion on the fairness regarding thedecision-making process at the Target Company cannot befound.
(3)

Procurement of professional advice from external
professionals­ The Target Company’s board of directors received an advice
on decision-making from lawyers of Anderson Mori &Tomotsune of a legal adviser, and were recognized to haveprocured independent professional advice from lawyers. The
independence of the legal adviser was recognized as theSpecial Committee did not find any matters, including the fee
structure, that raise questions about independence of the legal
advisor.
­ The Target Company’s board of directors procured the Share
Valuation Report as a document on the value of the Target
Company Shares from Credit Suisse Securities of an
independent third-party appraiser and a financial adviser of theTarget Company in order to ensure the fairness of the Tender
Offer Price.
­ In the Share Valuation Report, multiple valuation methods areused and attention was paid not to make an arbitrary valuationof a price. In addition, in preparing the Target Company’sbusiness plan which is the basis of the valuation, no facts ofarbitrary actions by directors or officers of the Tender Offeror
nor circumstances throwing suspicion on fairness in thevaluation are found.
­ Regarding the independence of Credit Suisse Securities,
although Credit Suisse Securities introduced Integral to Mr.
Shinohara, the Special Committee directly confirmed throughexternal and objective observations that Credit Suisse
Securities is conducting business while maintaining thefairness of the Transaction through objective and accurate
advice such as how the Target Company should respond in theevent of a competing offer against the Tender Offer and advice
on negotiations in relation to this Transaction Thus, taking
into account the background of referral of Integral to Mr.
Shinohara and the fee structure that includes an success basedfee, it is reasonable for the Target Company to determine that
Credit Suisse Securities has given the Target Company and theSpecial Committee advice from an objective and independent
standpoint. The Target Company’s Press Release also states,
along with detailed reasons, that Credit Suisse Securities is
independent from the Target Company.

56

­ From the above, the Share Valuation Report can be recognized
as a share valuation report by independent third-party
appraiser.
(4)Market check­ The tender offer period for the Transactions are set 30 Business
Days.
This comparatively long tender offer period is
considered to ensure an appropriate opportunity to make adecision about participation in the Tender Offer while ensuring
an opportunity for offers for the Target Company Shares byparties other than the Tender Offeror.
­ The Target Company and the Tender Offeror have not agreed
to prohibit contacting competing acquisition offerors includingtransaction protection clause.
- As such, in the Transactions, a so-called indirect market check
was carried out by conducting M&A after establishing anenvironment enabling other potential offeror to offer acompetitive suggestion after the announcement.
­ The Special Committee determined that the possibility ofreceiving actual competitive offers is small even if theTransactions take bidding procedures as Mr. Shinohara, a
representative of the Target Company Group carries out theTransactions as the Tender Offeror and it is not expected thathe accept other offers. Therefore, in the Transactions, it isconsidered that the indirect market check also strengthens theTarget Company’s negotiation ability in the process of forming
the conditions of the Transactions and contributes to carry out
M&A in as advantageous conditions to the minority
shareholders as possible while enhancing the corporate value.

(5)

Majority of minority­ The minimum number of shares to be purchased in the Tender
Offer is set as a majority of voting rights pertaining to thenumber of the Shares held by the Target Company’s
shareholders who do not have conflicts of interest with theTender Offeror (the number of shares by deducting the shares
held by Mr. Shinohara from the total number of shares after
taking into account the potential shares including the numberof shares subject to the Share Acquisition Rights, which isequivalent to so-called “majority of minority”).
­ In a M&A guideline, it is also evaluated that majority ofminority places an much emphasis on ensuring an opportunity
to make a decision by the minority shareholders andcontributes to carry out M&A in as advantageous conditions to
the minority shareholders as possible, thus it has highefficiency as part of measures to ensure the fairness.

57

­ From this fact, in the Transactions as well, the minimum
number set in the Tender Offer above is considered to further
ensure the fairness of the Transactions.
(6)

Sufficient information provision to minority shareholders andimprovement of transparency in the process­ As for the Special Committee, it is advisable under the M&A
policy to disclose, (a) information on the independence andqualification of its members, (b) information on the details of
authorizations granted to the Special Committee, (c)information on deliberation by the Special Committee and its
involvement in the negotiation process, (d) grounds andreasons for determinations of the Special Committee anddetails of the Special Committee Report, and (e) the fee
structure of the members. For the Transactions, the Target
Company’s Press Release states all of the factors from (a) to(e).
­ As for the Share Valuation Report, with respect to DCF
Analysis in particular, the M&A policy exemplifies disclosureof (a) the Target Company’s free cash flow forecast which
served as a basis of the calculation and whether such forecast
assumes implementation of the M&A, (b) the process of
preparation of the financial forecast which served as a basis of
the calculation, (c) type and calculation base of the discountrate, and (d) policies for the period of free cash flow forecast
and policies for terminal value such as growth rate assumed
beyond the forecast period.
­ For the Transactions, the Target Company’s Press Releasestates (a) and (b) (the fact that the Special Committee hasverified the appropriateness, and whether the business planassumes a fiscal year in which a significant fluctuation in
profits in comparison to the previous year), the discount rate as(c), and the calculation method of the terminal value as (d).
­ As for other information, it is found that the Target Company’s
Press Release provides sufficient statements on the process andnegotiations leading up to the implementation of the M&A.

(7)

Elimination of coercive pressure­ The Squeeze-Out Procedures contemplated as a part of theTransaction after the closing of the Tender Offer will be
executed by a scheme using the share consolidation method or
the demand for cash-out of Shares, Etc.. Whichever scheme ischosen, shareholders are entitled to demand pricedetermination, and this is expressly disclosed in the Target
Company’s Press Release.
­ Furthermore, the Target Company’s Press Release discloses
facts that the Squeeze-Out Procedures are executed promptly
after the consummation of the Tender Offer and that the amount58

paid to the minority shareholders upon the Squeeze-Out
Procedures is planned to be the same amount as the Tender
Offer Price.
­ Based on the above, it is found that measures to eliminate
coercive pressure have been taken.
3. Reasonableness of terms and conditions (related to Consulted-on
Matters (b))(1)
Ensuring negotiations equivalent to negotiations between
independent parties­ The Tender Offer Price was fairly and conclusively determinedby the Target Company with advice from Credit Suisse
Securities as well as opinions and instructions from the Special
Committee.
­ Looking back to a series of negotiations on the Tender Offer
Price, Credit Suisse Securities and the Target Company
provided the Special Committee with the detailed explanations
at the 4th and subsequent meetings and by e-mail from time totime between meetings.
­ At each of such explanations, the Special Committee stated its
opinion on whether to accept or refuse an offer for the Tender
Offer Price from the Tender Offeror. At the same time, whenrefusing the proposal from the Tender Offeror and giving acounteroffer on the price from the Target Company, it also
stated its opinion on how much the price should be and thegrounds for it.
­ For example, when the Target Company and Credit Suisse
Securities intended to give the Tender Offeror written
communication on the Tender Offer Price, the Special
Committee viewed its content in advance and checked whether
it accurately reflected the direction of discussions at the Special
Committee. Thus, the Special Committee’s opinions in thenegotiation process were not that it only stated a desirable
Tender Offer Price and left all the other things to the Target
Company but that it stated opinions and requests on specificmatters including negotiation policies and responses to theTender Offeror.
­ The Tender Offer Price was negotiated through the process that
the Special Committee stated its opinions on whether to accept
or refuse an offer for the Tender Offer Price from the Tender
Offeror and on counteroffers as above, and the Target
Company and Credit Suisse Securities responded to the Tender
Offeror taking into account the opinions.
­ Through such process, the Special Committee refused
proposals on the Tender Offer Price from the Tender Offeror
several times, and as a result of an upward revision of theTender Offer Price three times, the Special Committee finallyaccepted the Tender Offer Price of 1,600 yen to determine the59Tender Offer Price. As a result of the negotiation, the Tender
Offer Price became the price which is 300 yen higher than theinitial offer from the Tender Offeror.
­ As stated above, the Special Committee actively involved itself
in the negotiations on the Tender Offer Price taking into
account its authorities. It is found that the negotiations were
proceeded with an aim to execute the M&A on the terms andconditions as favorable to the minority shareholders as
possible.
­ Based on the above, it was ensured that reasonable efforts
would be made in the process to discuss and negotiate on theterms and conditions of the Transactions with the Tender
Offeror with an aim to enhance the corporate value of theTarget Company and execute the M&A on the terms andconditions as favorable to the minority shareholders as
possible.
(2)

Relation between share valuation and Tender Offer Price­ The Transactions are not a type of a transaction in which bothparties conduct due diligence on the other party as in a merger,
and whereas the Tender Offeror conducted a due diligence on
the Target Company, the Target Company has not conducted adue diligence on the Tender Offeror. Thus, it is difficult for
the Target Company to quantitatively estimate the effect of theTransactions on the enhancement of its corporate value at thispoint. For instance, the Target Company cannot analyze asynergy to reduce costs in back-office departments with acertain level of accuracy because the Target Company has notconducted a due diligence on the Tender Offeror.
­ As a result, the Target Company’s business plan which serves
as a basis of the share valuation is on a stand-alone basis, which
is not unreasonable.
­ The Special Committee conducted a detailed hearing on thedevelopment process of the business plan at the 2nd meetingand confirmed that Mr. Shinohara was not involved in thedevelopment process of the business plan and no arbitrariness
was found in the development. Also, no unreasonable point
was found in the business plan.
­ Based on the above, it is recognized that no arbitrary pressure
from the Tender Offeror was placed with respect to the businessplan from the perspective of both its development process anddevelopment method, and its content is found to be reasonable.
­ The Special Committee conducted several hearings with Credit
Suisse Securities to obtain detailed explanations on thecalculation method of the share value and the valuation processof the Target Company Shares, and the examination processconcerning the share value calculation.
The Special
Committee confirmed that there was no unreasonable point in60

any of the foregoing and the Share Valuation Report preparedby Credit Suisse Securities is reliable.
­ Per share value of 1,600 yen which is the Tender Offer Price (i)exceeds the upper limit of the range calculated by the market
price analysis, (ii) was in and above the median of the range
calculated by the comparable companies analysis and by the
DCF Analysis.
­ Meanwhile, the M&A policy points out that it is fair that (a) all
shareholders including minority shareholders should receive
the “value achievable without M&A” in proportion to thenumber of shares held while (b) minority shareholders also
receive a proper portion of the “value that cannot be achieved
without M&A” though the minority shareholders will besqueezed out as a result of the M&A.
­ Even with such point taken into account, the Tender Offer Priceis deemed as a price with a proper addition in comparison to
the value of the Target Company Share calculated by Credit
Suisse Securities (which is (a) above since it is the share value
on a stand-alone basis); hence, the price is at a level that theproper portion mentioned in (b) above is given to the minority
shareholders.
­ Based on the above, the Special Committee also understands
that the Tender Offer Price is at a level not unfavorable to theminority shareholders in comparison to the value of the Target
Company Shares calculated by Credit Suisse Securities .
(3) Premium Review­ According to the Share Valuation Report prepared by Credit
Suisse Securities , the Tender Offer Price is calculated byadding the relevant premium shown in the table below to theclosing price of the Target Company Shares on the TSE on andbefore August 9, 2022 (the “Immediately Preceding Date”).
Reference Value Share Price
Premium
Closing Price on the Immediately Preceding Date
1,099
yen
45.59%
Average Closing Price for the Past One Month from the
Immediately Preceding Date
1,071 yen
49.39%
Average Closing Price for the Past Three Months from the
Immediately Preceding Date
1,017 yen
57.33%
Average Closing Price for the Past Six Months from the
Immediately Preceding Date
1,017 yen
57.33%­ Among the tender offers implemented after the M&A
guidelines are issued, the median of the level of premium of
the same MBO case as the Tender Offer (14 cases, and limited
to the successfully completed case of which the purchase value
is 10 billion yen or more) is as shown in the table below.
Reference Value Median
Closing Price on Immediately Preceding Date
40.8%
61

Average Closing Price for the Past One Month from
Immediately Preceding Date
38.0%
Average Closing Price for the Past Three Months from the
Immediately Preceding Date
45.7%
Average Closing Price for the Past Six Months from the
Immediately Preceding Date
52.7%
­ As shown above, since the Tender Offer Price is above themedian of the range in relation to the reference value based on
all of the closing price on the Immediately Preceding Date aswell as on the average closing price for the past one, three andsix months from the Immediately Preceding Date, it isgenerally deemed that the Tender Offer has the level ofpremium equivalent to other similar cases.
­ Further, it can be pointed out that the Tender Offer Price is thehighest price since 2019, in relation to the past trend of theTarget Company’s share prices.
(4) Appropriateness of Purchase Price of Share Acquisition Rights­ The purchase price of the Share Acquisition Rights wascalculated based on the difference between the Tender Offer
Price and the exercise price per share of the Company Sharesfor the Share Acquisition Rights multiplied by 200 shares, thenumber of the Company Shares to be issued for each SAR.
­ Therefore, if the Tender Offer Price is found to be appropriate,
the purchase price of the Stock Acquisition Rights is also
considered to be appropriate as a price that will bring economic
benefits to the holders of the Stock Acquisition Rights
equivalent to those of the Company Shares.
(5)

Appropriateness of Schemes­ In the first place, due to the MBO nature of the Transactions, it
is not assumed that the Target Company’s minority
shareholders acquire the Tender Offeror’s shares instead of theshares in the Target Company. Also, there is no advantage for
the Target Company’s minority shareholders in acquiring theTender Offeror’s shares because the Tender Offeror is a nonlisted company and the methods for recovering investments are
significantly limited.
­ With respect to the presence or absence and the details ofalternative transactions, the schemes of the Transactions are
not deemed to be inferior to those of the others.
­ From these points, the schemes of the Transactions underwhich the minority shareholders of the Target Company are
granted opportunities to recover investments through theTender Offer and the Squeeze-Out Procedures are appropriate
among various measures to realize the policy to improve
corporate value contemplated by the Tender Offeror.
62

4. The Special Committee considers that the matters requested to be
discussed in the Consulted-on Matters (a) through (c) are theelements to discuss the Consulted-on Matters (d). As detailed in
the Special Committee Report, no problems were found in theConsulted-on Matters (a) through (c) as a result of the deliberations
at the Special Committee. Therefore, the Special Committee
reports the opinion regarding the Consulted-on Matters (d) that theTarget Company’s decision-making on the Transactions is notdeemed to be disadvantageous to the Target Company’s minority
shareholders.
5. With respect to the Consulted-on Matter (e), the Special Committee
considers that the confirmation of the Consulted-on Matters (a)through (d) constitutes the reason for approving the Consulted-on
Matters (e). As detailed in the Special Committee Report, no
problems were found in the Consulted-on Matters (a) through (d)as a result of the deliberations at the Special Committee.
Therefore, with respect to the Consulted-on Matters (e), the Special
Committee reports that the Target Company’s board of director’s
meeting expresses its support at the time of announcement of theTender Offer and that it is reasonable to make a resolution torecommend that the shareholders of the Target Company tender in
the Tender Offer.
(D) Approval of All Disinterested Directors (including Audit
Committee Director) of the Target Company
According to the Target Company’s Press Release, the Target Company
carefully deliberated the conditions of the Transactions including theTender Offer by fully respecting the contents of the Special Committee
Report based on the Share Valuation Report procured from Credit
Suisse Securities and legal advice obtained from Anderson Mori &Tomotsune. As a result, as described in “(B) Decision-Making
Process and Reasons Behind the Target Company’s Opinion
Supporting Tender Offer” of “(2) Background, Purpose, and DecisionMaking Process with respect to Conducting the Tender Offer, andManagement Policy After the Tender Offer” under “3. Purpose of theTender Offer” above, with respect to the Tender Offer, the Target
Company’s board of directors determined that (i) the Target Company’s
corporate value is expected to be enhanced by the Tender Offer and (ii)the Tender Offer Price and the Share Acquisition Right Purchase Priceas well as the conditions on the Tender Offer is appropriate for theTarget Company’s shareholders and share acquisition right holders, andthe Tender Offer is to provide a reasonable opportunity for the Target
Company’s shareholders and share acquisition right holders to sell theirshares and share acquisition rights. Accordingly, the board of
directors’ meeting held on August 10, 2022 resolved, by unanimous
vote of seven directors, namely, Mr. Junichi Tsurukawa, Mr. Yoshiaki
Miura, Mr. Takashi Tamaki, Mr. Minoru Sakata, Mr. Katsuji Inoue, Mr.
63

Yuichiro Yasuda and Ms. Yasuko Maekawa who participated in the
deliberation and resolution, of the nine (9) directors of the Target
Company’s board of directors excluding Mr. Shinohara and Mr.
Hiroyuki Irie, to express its opinion supporting the Tender Offer andrecommend the Target Company’s shareholders and share acquisitionright holders to participate in the Tender Offer. An acquisition of the
Share Acquisition Rights through transfer requires an approval of theCompany’s board of directors' meeting. At the Company's board of
directors’ meeting held on August 10, 2022, the Company resolved tocomprehensively approve the transfer of the Share Acquisition Rights
owned by the Share Acquisition Right Holders from such Share
Acquisition Right Holders to the Tender Offeror by tendering in theTender Offer subject to the completion of the Tender Offer.
Such resolution at the Target Company’s board of directors’ meeting
was resolved on the assumption that the Target Company Shares areplanned to be delisted through the Tender Offer and a set of procedures
thereafter by the Tender Offeror.
Since, if the Tender Offer is completed, Mr. Shinohara will take a stakefor the Tender Offeror and expected to remain engaged in the
management of the Target Company after the Transactions andtherefore has inherent conflicts of interest with the Target Company
regarding the Transactions, he did not in any way participate in the
deliberations and resolutions at the board of directors’ meeting above
as a special interested director, nor did he participate in the
consultations and negotiations with the Tender Offeror on behalf of theTarget Company.
In addition to Mr. Shinohara, since Mr. Hiroyuki Irie concurrently
serves as a Deputy President of The Nishi-Nippon City Bank, Ltd. andthe Tender Offeror communicated on August 4, 2022 its decision toborrow funds from Shinsei Bank, Limited as fundraising for theTransactions, resulting in reconsideration of the transactions between
the current financial institutions, he did not participate in any
deliberation and voting at the aforementioned board of directors'
meeting in order to avoid a conflict of interest with the Company withregard to the Transactions.
(E) Setting Minimum Number of Share Certificates, Etc. to be
Purchased at a Number Exceeding Majority of Minority
The Tender Offeror has set the minimum number of Share Certificates,
Etc. to be purchased in the Tender Offer at 21,509,600 shares(ownership ratio: 62.87%) because the Tender Offeror conducts theTender Offer with the aim of taking the Target Company private, and if
the total number of Tendered Share Certificates, Etc. is less than theminimum number of Share Certificates, Etc. to be purchased(21,509,600 shares), the Tender Offeror will not purchase or otherwise
acquire all of the Tendered Share Certificates, Etc. The minimum
number of Share Certificates, Etc. to be purchased (21,509,600 shares)is the number calculated by (a) deducting the number of treasury shares64

held by the Target Company as of June 30, 2022 (2,788,034 shares)
from the total number of issued shares of the Target Company as ofJune 30, 2022 (36,380,400 shares) stated in the Target Company’s
Second Quarter Financial Results Release (resulting in 33,592,366
shares), (b) multiplying the number of voting rights represented bythose shares (335,923 voting rights) by two thirds, which is the voting
right ratio necessary for a special resolution of the shareholders’meeting to approve the Share Consolidation (resulting in 223,949
voting rights, rounded up to the nearest whole number), (c) deducting
the number of voting rights (8,853) represented by the Shares Agreed
to Not Be Tendered (885,310 shares) (resulting in 215,096 voting
rights), and (d) multiplying that amount by 100 shares, which is thenumber of shares in a share unit of the Target Company. This exceeds
the number of voting rights equivalent to the so-called “majority ofminority,” or a majority of the voting rights represented by the numberof Target Company Shares held by shareholders of the Target Company
who do not have any interest in the Tender Offeror (i.e, the Total
Number of Shares after Accounting for Potential Shares (34,210,366
shares) less the Shares Held by Mr. Shinohara (7,633,957 shares)(26,576,409 shares)). By making this arrangement, if the Tender
Offeror is not able to obtain the consent of the majority of theshareholders of the Target Company who do not have any interest in
the Tender Offeror, the Tender Offeror will not conduct theTransactions, including the Tender Offer, placing importance on theintent of the minority shareholders of the Target Company.
(F) Securing
Objective
Circumstances
that
EnsuretheAppropriateness of the Tender Offer Price and the Stock
Acquisition Rights Tender Offer Price and the Fairness of theTender Offer
Although the shortest tender offer period under laws and ordinances is
20 Business Days, the Tender Offeror has set the Tender Offer Period
to be 30 Business Days.
The Tender Offeror has set a comparatively long tender offer period as
describe above to ensure an appropriate opportunity for theshareholders of the Target Company to make a decision about thetendering in response to the Tender Offer while ensuring an opportunity
for competing offers regarding Target Company Shares by parties otherthan the Tender Offeror (“Competing Offerors”) as a means to ensure
the fairness of the Tender Offer.
In addition, the Tender Offeror and the Target Company has not enteredinto any agreement that would restrict an opportunity for Competing
Offerors to contact or otherwise negotiate with the Target Company,
such as an agreement that contains a transaction protection clause thatprohibits the Target Company from having contact with Competing
Offerors. This, together with setting a comparatively long tender
offer period described above, will ensure an opportunity for competing65

offers, thereby giving consideration to ensuring the fairness of theTender Offer.
Note:

(3)

In calculating the share value, as a general rule, Credit Suisse Securities used
information provided by the Target Company and publicly-available
information, etc. on an as-is basis and assumed that all of the materials andpublicly-available information, etc. it used were accurate and complete, anddid not independently verify the accuracy, reliability, or completeness of suchinformation, etc. In addition, Credit Suisse Securities did not conduct an
independent assessment, valuation, or appraisal of any assets or liabilities(including off-balance sheet assets and liabilities and other contingent
liabilities) of the Target Company, nor did it make any request to a third-party
agency for any such assessment, valuation, or appraisal. Further, Credit
Suisse Securities assumed that the financial forecasts (including profit plansand other information) submitted by the Target Company were reasonably
prepared based on the best projections and judgement that were available tothe management of the Target Company at the time of the provision of therelevant information, and it did not independently verify the accuracy of suchinformation. The calculation by Credit Suisse Securities reflects the above
information as of August 9, 2022.

Number of Share Certificates, Etc. to be Purchased

Number of ShareClass of Share
Certificates, Etc. to be
Certificates, Etc.
purchased

Minimum number of
Share Certificates, Etc. tobe purchased

Maximum number of
Share Certificates, Etc. tobe purchased

Common stock

33,325,056 shares

21,509,600 shares– sharesTotal

33,325,056 shares

21,509,600 shares– shares(Note 1): The Tender Offeror will not purchase all of the Tendered Share Certificates,
Etc. if the total number of the Tendered Share Certificates, Etc. is less thanthe minimum number of Share Certificates, Etc. to be purchased (21,509,600
shares). The Tender Offeror will purchase all of the Tendered Share
Certificates, Etc. if the total number of the Tendered Share Certificates, Etc.
is equal to or greater than the minimum number of Share Certificates, Etc. tobe purchased (21,509,600 shares).
(Note 2): Shares less than one unit are also subject to the Tender Offer. If a right todemand purchase of shares less than one unit is exercised by a shareholder inaccordance with the Companies Act, the Target Company may purchase its
own treasury shares during the Tender Offer Period in accordance withprocedures under laws and regulations.
(Note 3): The Tender Offeror does not intend to acquire the treasury shares held by theTarget Company through the Tender Offer.
66

(Note 4): Target Company Shares that will be issued or transferred as a result of theexercise of the Stock Acquisition Rights by the last day of the Tender Offer
Period will be subject to the Tender Offer.
(Note 5): The number of Share Certificates, Etc. to be purchased is stated as the
maximum number of Share Certificates, Etc. of the Target Company to beacquired by the Tender Offeror through the Tender Offer (33,325,056 shares)
because the maximum number of Share Certificates, Etc. to be purchased has
not been set in the Tender Offer. The maximum number corresponds to the
Total Number of Shares after Accounting for Potential Shares (34,210,366
shares) less the Shares Agreed to Not Be Tendered (885,310 shares)(33,325,056 shares).

5.

Ownership Ratio of Share Certificates, Etc. after Tender Offer

Number of
voting rights

Details
Number of voting rights represented by the Share Certificates, Etc. to bepurchased: (a)333,250

Number of voting rights represented by the potential Share Certificates, Etc.
included in (a): (b)6,1646,180

Number of voting rights represented by trust beneficiary certificates anddepositary receipts for Share Certificates, Etc. included in (b): (c)-Number of voting rights represented by the Share Certificates, Etc. held by
the Tender Offeror (as of August 12, 2022): (d)-Number of voting rights represented by the potential Share Certificates, Etc.
included in (d): (e)-Number of voting rights represented by trust beneficiary certificates anddepositary receipts for Share Certificates, Etc. included in (e): (f)-Number of voting rights represented by the Share Certificates, Etc. held byspecially related parties (as of August 12, 2022): (g)76,339Number of voting rights represented by the potential Share Certificates, Etc.
included in (g): (h)6,000

Number of voting rights represented by trust beneficiary certificates anddepositary receipts for Share Certificates, Etc. included in (h): (i)-Total number of voting rights of all shareholders, etc. of the Target Company(as of December 31, 2021): (j)340,089

67

Ratio of the number of voting rights represented by the Share Certificates, Etc.
to be purchased in the total number of voting rights of all shareholders, etc. of
the Target Company (a/j) (%)
Ownership ratio of Share Certificates, Etc. after the Tender Offer((a+d+g)/(j+(b-c)+(e-f)+(h-i))×100) (%)

97.41

100.00Note 1: “Number of voting rights represented by the Share Certificates, Etc. to bepurchased: (a)” is the number of voting rights represented by the number of
Share Certificates, Etc. to be purchased (33,325,056 shares) in the Tender
Offer.
Note 2: “Number of voting rights represented by the Share Certificates, Etc. held byspecially related parties (as of August 12, 2022): (g)” and “Number of voting
rights represented by the potential Share Certificates, Etc. included in (g): (h)”state(s) the total number of voting rights represented by Share Certificates,
Etc. held by each specially related party (except for persons excluded from
specially related parties under Article 3(2)(i) of the Cabinet Ordinance for the
purpose of calculating the ownership ratio of Share Certificates, Etc. undereach item of Article 27-2(1)). However, since the Share Certificates, Etc.
held by specially related parties (excluding the Shares Agreed to Not Be
Tendered (885,310 shares) are subject to purchase in the Tender Offer, only
the number of voting rights (8,853) represented by the Shares Agreed to Not
Be Tendered (885,310 shares) among the “Number of voting rights
represented by the Share Certificates, Etc. held by specially related parties (asof August 12, 2022): (g)” is included in the numerator when calculating the“Ownership ratio of Share Certificates, Etc. after the Tender Offer.”
Note 3: “Total number of voting rights of all shareholders, etc. of the Target Company(as of December 31, 2021): (j)” is the number of voting rights of allshareholders, etc. based on the preceding record date (December 31, 2021)
stated in the quarterly report for the first quarter of the 33rd fiscal year
submitted by the Target Company on May 12, 2022. However, since theshares less than one unit and Target Company Shares that will be issued ortransferred as a result of the exercise of the Stock Acquisition Rights are
subject to purchase in the Tender Offer, when calculating “Ratio of thenumber of voting rights represented by the Share Certificates, Etc. to bepurchased in the total number of voting rights of all shareholders, etc. of theTarget Company” and “Ownership ratio of Share Certificates, Etc. after theTender Offer,” the number of voting rights (342,103) represented by the Total
Number of Shares after Accounting for Potential Shares (34,210,366 shares)
is used as the denominator.
Note 4: “Ratio of the number of voting rights represented by the Share Certificates,
Etc. to be purchased in the total number of voting rights of all shareholders,etc. of the Target Company” and “Ownership ratio of Share Certificates, Etc.
after the Tender Offer” have been rounded to two decimal places.

68

6.

Licenses, etc. concerning Acquisition of Share Certificates, Etc.
(1) Type of Share Certificates, Etc.
Common stock(2) Relevant laws and regulations
The Tender Offeror shall, in accordance with Article 10, Paragraph 2 of the Act
on Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No.
54 of 1947, as amended; the “Antimonopoly Act”), give prior notification (the“Prior Notification”) to the Japan Fair Trade Commission regarding the plan for
acquisition of shares of the Target Company through the Tender Offer (the “Share
Acquisition”) and under Article 10, Paragraph 8 of the Antimonopoly Act, inprinciple, the Tender Offeror may not conduct the Share Acquisition until 30 days
have passed from the date on which the Prior Notification was accepted (theperiod might be shortened; the period during which the Share Acquisition isprohibited is referred to as the “Acquisition Prohibition Period”).
In addition, Article 10, Paragraph 1 of the Antimonopoly Act prohibits any act ofacquiring shares of other companies that will cause a substantial restraint ofcompetition in a particular field of trade and the Japan Fair Trade Commission
may order measures necessary to eliminate any acts that breach that provision(Article 17-2, Paragraph 1 of the Antimonopoly Act; hereinafter referred to as a
“Cease and Desist Order”). If the Prior Notification set out above has been
made and the Japan Fair Trade Commission intends to issue a Cease and Desist
Order, it shall conduct a hearing of opinions with the would-be addressee of that
Cease and Desist Order (Article 49 of the Antimonopoly Act), and in such ahearing, it shall notify the addressee of the details and the like of the planned Cease
and Desist Order (Article 50, Paragraph 1 of the Antimonopoly Act; hereinafterreferred to as “Prior Notice of Cease and Desist Order”), and Prior Notice of
the Cease and Desist Order regarding share acquisition is to be made within acertain period of time (in principle, 30 days from the date on which the Prior
Notification above was accepted; however, the period might be extended or
shortened; hereinafter referred to as the “Cease and Desist Period”) (Article 10,
Paragraph 9 of the Antimonopoly Act). If the Japan Fair Trade Commission has
decided not to give Prior Notice of Cease and Desist Order, it will give notice tothat effect (“Notice to the Effect that Cease and Desist Order will not be
Issued”) (Article 9 of the Rules on Applications for Approval, Reporting,
Notification, etc. Pursuant to the Provisions of Articles 9 to 16 of the Act on
Prohibition of Private Monopolization and Maintenance of Fair Trade (Japan Fair
Trade Commission Rule No. 1 of 1953)).
The Tender Offeror has made Prior Notification to the Japan Fair Trade
Commission regarding the Share Acquisition as of July 21, 2022, and it has been
accepted as of that date. Subsequently, with respect to the Share Acquisition, on
August 9, 2022, the Tender Offeror received from the Japan Fair Trade
Commission a “notice of shortening of the Acquisition Prohibition Period” as ofAugust 8, 2022, to the effect that the Acquisition Prohibition Period of 30 days
would be shortened to 18 days, and therefore the Acquisition Prohibition Period
ended upon the passing of August 8, 2022. In addition, on August 9, 2022, the69

Tender Offeror received from the Japan Fair Trade Commission a “Notice to the
Effect that Cease and Desist Order will not be Issued” as of August 8, 2022, andtherefore the Cease and Desist Period ended on August 8, 2022.
(3)

Date and Number of Licenses, Etc.
Date of Licenses, etc.:

August 8, 2022 (upon receipt of a Notice to the Effect that
Cease and Desist Order will not be Issued)

Number of Licenses, etc.: Ko/Kei/Ki No. 602 (the number of the Notice to the Effectthat Cease and Desist Order will not be Issued)
Date of Licenses, etc.:

August 8, 2022 (upon receipt of a notice of shortening ofProhibition Period)

Number of Licenses, etc.: Ko/Kei/Ki No. 603 (the number of the notice of shorteningof Prohibition Period)
7.

Method of Tendering Shares in Response to the Tender Offer and Cancellation
Thereof(1)

Method of tendering shares in response to the tender offer(A)

Tender offer agent

SMBC Nikko Securities Inc.

3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo

SBI SECURITIES Co., Ltd.

1-6-1 Roppongi, Minato-ku, Tokyo(In case of tendering shares through SMBC Nikko Securities Inc.)(B)

Any person who accepts the offer for the purchase of Share Certificates, Etc.
in the Tender Offer or offers the sale of Share Certificates, Etc. in the Tender
Offer (meaning shareholders and the Stock Acquisition Right Holders,“Tendering Shareholders, Etc.”) is requested to fill out the prescribed“Tender Offer Subscription Form” and submits it to the head office or any
domestic sales office of SMBC Nikko Securities Inc. by 3:30 p.m. on the last
day of the Tender Offer Period (subject to the business hours of the sales
office and hours for operation and management of securities; Tendering
Shareholders, Etc. should contact their sales office in advance to confirm).
Tendering
Shareholders,Etc.
may
tenderonline(https://trade.smbcnikko.co.jp/) (“Nikko Easy Trade”) by logging into
Nikko Easy Trade, accepting the Nikko Easy Trade Tender Transaction Rules,
and providing the required information by 3:30 p.m. on the last day of theTender Offer Period. Tendering Shareholders, Etc. must sign up for Nikko
Easy Trade on the Tendering Shareholder, Etc.’s account with SMBC Nikko
Securities Inc. (in “In case of tendering shares through SMBC Nikko
Securities Inc.”, a “Tendering Shareholder Account”) to tender via Nikko
Easy Trade.

70

(C)

The Tendered Share Certificates, Etc. must be registered in the Tendering
Shareholder Account when tendering shares.

(D)

When tendering stock acquisition rights, since there are restrictions ontransfer of Stock Acquisition Rights, it is required that “a notice of transfer
approval for stock acquisition rights,” which is issued by the Target Company
upon request from the Stock Acquisition Right Holders, and “a request forregistration of transfer in the registry,” which is necessary to request thechange of the holders’ name of the stock acquisition right in the registrysubject to the completion of the Tender Offer, and “a document certifying theitems described in the stock acquisition right registry” as certification of theposition of holders of stock acquisition rights, which is issued by the Target
Company upon their request, be submitted. For specific procedures for
issuing “a notice of transfer approval for stock acquisition rights” and otherdocuments, please contact the Target Company. Stock acquisition rights tobe tendered in the Tender Offer will not be accepted at Nikko Easy Trade.

(E)

In the Tender Offer, Share Certificates, Etc. tendered through any financial
instruments firm and the like other than the tender offer agents will not be
accepted.

(F)

If a Tendering Shareholder, Etc. does not hold an account with SMBC Nikko
Securities Inc., that Tendering Shareholder, Etc. must open a new account(see Note 1). Identification documents and the Tendering Shareholder,
Etc.’s individual number (My Number) or corporate number (see Note 2)
must be provided when opening a new account.

(G)

Shareholders, etc. residing outside Japan (including corporate shareholders,etc., “Non-Resident Shareholders, Etc.”) must tender Share Certificates,
Etc. through their respective standing proxies in Japan (“Standing Proxies”).
Submission of identification documents will be required (see Note 2). NonResident Shareholders, Etc. may not tender using Nikko Easy Trade.

(H)

Individual shareholders residing in Japan will generally be subject to separate
self-assessment taxation concerning capital gains from transfer of shares, etc.
(see Note 3) with respect to capital gains on the difference between the saleprice and the acquisition cost or other price of Share Certificates, Etc. to bepurchased.

(I)

Share Certificates, Etc. registered in an account with a financial instruments
firm, etc. other than SMBC Nikko Securities Inc. (including Share
Certificates, Etc. registered in a special account with Tokyo Securities
Transfer Agent Co., Ltd., the special account manager of the Target
71

Company) must be transferred to the Tendering Shareholder Account withSMBC Nikko Securities Inc. SMBC Nikko Securities Inc. will accept
Tendered Share Certificates, Etc. only after it has confirmed that transfer of
those Tendered Share Certificates, Etc. to the Tendering Shareholder Accountwith SMBC Nikko Securities Inc. has been completed, and the Tendered
Share Certificates, Etc. are registered to that account. Please note that thetransfer process may take several days, and that Tendered Share Certificates,
Etc. cannot be returned to a special account once they have been transferredfrom the special account.
(J)

The Target Company Shares issued or transferred by the exercise of the Share
Acquisition Rights by the last day of the Tender Offer Period are also subject
to the Tender Offer.

(Note 1):

When opening an account, an individual shareholder will generally not be required
to submit his/her seal. If a minor, an individual shareholder using the adultguardianship system, or a corporate shareholder, etc. opens an account, he/she will
be required to submit his/her seal. In addition, if a shareholder changes theregistered details of a Tendering Shareholder Account that has been already opened,
he/she may be required to submit his/her seal.

(Note 2):

Providing identification documents and individual number (My Number) or
corporate number:
Tendering Shareholders, Etc. who tender by opening a new account with SMBC
Nikko Securities Inc. and a Non-Resident Shareholder, Etc. who tenders through aStanding Proxy by opening a new account must provide the following identification
documents and proof of individual or corporate number. Documents must be
unexpired, or from within the last six months for documents without an expiry date(excluding a Notification Card). Please contact SMBC Nikko Securities Inc. forfurther details about identification documents and proof of individual or corporate
number.

-Individuals:

A. Proof of My Number or
corporate number (any one
item)

B. Identification documents(any one item of photo ID
or any two items of nonphoto ID)

My Number card (both sides) (*1)
Notification card
Copy of a residence certificate (with individual number)(*2)
Driver’s license (certificate of driving
history) (*3)
Residence card
Photo ID
Special permanent resident certificate
Passport (*4)
Welfare benefit certificate
Health insurance card (*3)
Public service pension fund membership
Non-photocard (*3)
ID
Pension handbook
Seal registration certificate

72

Copy of a residence certificate (*2)-

Corporations:Certificate of all recorded matters
Certificate of all presently recorded matters
B. Proof of individual or corporate number Notification of corporate number(any one item)
Corporate number information (*5)
Driver’s license (*3)
My Number card (the front side)
C. Identification documents of the individual
Health insurance card (*3)
opening the account on behalf of the
Public service pension fund membershipcorporation (any one item)
card (*3)
Passport (*6)
A. Identification documents (any one item)(*1) If an My Number card is used as proof of My Number, separate identification documents
are not required.
(*2) Copies of a residence certificate must include the page with the issuer’s seal and date ofissue.
(*3) If the holder’s address is stated on the reverse side, the reverse side will be required inaddition to the front side.
(*4) Each of the pages on which the holder’s address, name, and date of birth can be confirmed
is required. A passport issued on or after February 4, 2020 cannot be used because there
is no space to state the holder’s address.
(*5) Corporate number information can be obtained by printing the page that displays thecorporate number on the “Corporate Number Publication Site” of the National Tax
Agency.
(*6) Since a passport issued on or after February 4, 2020 has no space to state the holder’saddress, a copy of “any one of the identification documents” or “any one of the
supplementary documents of the certificate of tax payment or the like” stating the holder’scurrent address is required to be submitted separately.
-

Non-Resident Shareholders, Etc.:
In addition to the above documents for the Standing Proxy, either a copy of thepower of attorney or standing proxy agreement (the above documents shall include
the Non-Resident Shareholder, Etc.’s name, name of corporate representative, andaddress outside Japan) must be submitted; if the Standing Proxy is not a financial
institution, documents issued by a foreign government or a competent internationalorganization approved by the Japanese government, or other similar documents
equivalent to the identification documents required for Japanese residents mustalso be submitted.

(Note 3):

Separate self-assessment taxation concerning capital gains from transfer of shares,
etc. (for individual shareholders residing in Japan):
For individual shareholders, capital gains from transfer of shares, etc. will in
principle be subject to separate self-assessment taxation. Please individually73

consult with a certified tax accountant or other expert for any specific inquiries about
taxation and make your own decision.

(In case of tendering shares through SBI SECURITIES Co., Ltd.)(B)

Shareholders who tender in the Tender Offer or the Stock Acquisition Right
Holders who tender in the Tender Offer (“Tendering Shareholders, Etc.”)
may tender by tendering online by providing the required information on thewebsite of SBI SECURITIES Co., Ltd. (https://www.sbisec.co.jp) by 9:00
a.m. on the last day of the Tender Offer Period, by requesting a “Tender Offer
Subscription Form” from the website of SBI SECURITIES Co., Ltd.
(https://www.sbisec.co.jp) and providing the required information on the“Tender Offer Subscription Form” dispatched by SBI SECURITIES Co., Ltd.
and returning it to SBI SECURITIES Co., Ltd., or by providing the required
information on the prescribed “Tender Offer Subscription Form” by 9:00 a.m.
on the last day of the Tender Offer Period at the head office or any sales officeof SBI SECURITIES Co., Ltd. or any branch office (Note 1) of SBI MONEYPLAZA Co., Ltd. at which a person in charge of SBI SECURITIES Co., Ltd.
is stationed (in “In case of tendering shares through SBI SECURITIES Co.,
Ltd.”, “OTC Counter”; please see the website of SBI SECURITIES Co., Ltd.
(https://www.sbisec.co.jp) or contact SBI SECURITIES Co., Ltd. for thelocation and other details; the same applies hereinafter.). The Stock
Acquisition Right Holders may tender by contacting the customer service
center of SBI SECURITIES Co., Ltd. (fixed telephone: 0120-104-214 (tollfree), mobile phone: 0570-550-104 (Navi Dial) and request a “Tender Offer
Subscription Form” and providing the required information on the prescribed“Tender Offer Subscription Form” and submitting it by 9:00 a.m. on the last
day of the Tender Offer Period). Identification documents may be required
for tendering (Note 2) (Tendering Shareholders, Etc. who tender at an OTCCounter are requested to bring his/her seal. as well as “Tender Offer
Subscription Form” when tendering). If the “Tender Offer Subscription
Form,” is sent by mail, it must arrive at the OTC Counter by 9:00 a.m. on thelast day of the Tender Offer Period after completing the transfer process for
Tendered Share Certificates, Etc. to the Tendering Shareholders, Etc. Account(as defined in (c) below) opened with SBI SECURITIES Co., Ltd. set out
below.

(C)

For tendering the Target Company Shares, the shares to be tendered must be
stated or registered in the securities transaction account that any Tendering
Shareholders, Etc. has opened with SBI SECURITIES Co., Ltd. in the nameof the Tendering Shareholders, Etc. (in “In case of tendering shares through
SBI SECURITIES Co., Ltd.”, “Tendering Shareholders, Etc. Account”).
Accordingly, if the Target Company Shares to be tendered are stated orregistered in the account opened with any financial instruments firm otherthan SBI SECURITIES Co., Ltd. (including in the case where the Target
Company Shares are stated or registered in a special account with Tokyo
Securities Transfer Agent Co., Ltd., the special account manager of the Target
74

Company), the transfer process of Tendered Share Certificates, Etc. to theTendering Shareholders, Etc. Account opened with SBI SECURITIES Co.,
Ltd. must be completed prior to tendering. Please contact the accountmanagement institution of the special account stated above for the details of
the process for transfer of records of shares and the like to the Tendering
Shareholders, Etc. Account with SBI SECURITIES Co., Ltd. from a special
account.
(D)

When tendering stock acquisition rights, since there are restrictions ontransfer of Stock Acquisition Rights, it is required that the “Tender Offer
Subscription Form (for stock acquisition rights)” and “a notice of transfer
approval for stock acquisition rights” is submitted. It is also required that“a document certifying the items described in the stock acquisition rightregistry” as certification of the position of holders of stock acquisition rights,
which is issued by the Target Company upon their request and “a request forregistration of transfer in the registry,” which is necessary to request thechange of the holders’ name of the stock acquisition right in the registrysubject to the completion of the Tender Offer be submitted.

(E)

In the Tender Offer, Share Certificates, Etc. tendered through any financial
instruments firm other than the tender offer agents will not be accepted.

(F)

If a Tendering Shareholder, Etc. does not hold a securities transaction accountwith SBI SECURITIES Co., Ltd., that Tendering Shareholder, Etc. must open
a new securities transaction account. Identification documents (see Note 2)
must be provided when opening a new securities transaction account.

(G)

Shareholders residing outside Japan (including corporate shareholders, etc.,“Non-Resident Shareholders, Etc.”) must tender Share Certificates, Etc.
through their respective standing proxies in Japan (a certified copy of thepower of attorney of or the agreement with Non-Resident Shareholders, Etc.
must be provided through Standing Proxies). Submission of identification
documents will be required (see Note 2).

(H)

Individual shareholders residing in Japan will generally be subject to separate
self-assessment taxation concerning capital gains from transfer of shares, etc.
with respect to capital gains on the difference between the sale price and theacquisition cost or other price of Share Certificates, Etc. to be purchased (seeNote 3).

(I)

Upon acceptance of any tendered Target Company Shares, SBI SECURITIESCo., Ltd. will deliver a tender receipt by mail to the Tendering Shareholders,
Etc.
75

(J)

If all of the Tendered Share Certificates, Etc. are ultimately not purchased,
the Share Certificates, Etc. that are not purchased will be returned to theTendering Shareholders, Etc.

(Note 1):OTC Counters are located as follows:
The head office of SBI SECURITIES Co., Ltd.
Sales office of SBI SECURITIES Co., Ltd.
Osaka Sales Office, Nagoya Sales Office, Fukuoka Sales Office
Each sales office of SBI SECURITIES Co., Ltd. is attached to a branch office of SBI
MONEY PLAZA Co., Ltd. (Osaka Branch, Nagoya Branch, Fukuoka-Chuo Branch).
Each branch office of SBI MONEY PLAZA Co., Ltd. at which a person in chargeof SBI SECURITIES Co., Ltd. is stationed
Aizu Branch, Kumagaya-Chuo Branch, Shinjuku-Chuo Branch, Matsumoto Branch,
Ina Branch, Nagoya Branch, Osaka Branch, Fukuoka-Chuo Branch, KagoshimaChuo Branch(Note 2):

Seal, My Number (individual number) or corporate number, identification
documents, and the like
Tendering Shareholders, Etc. who tender by opening a new account with SBI
SECURITIES Co., Ltd. and a Non-Resident Shareholder, Etc. who tenders througha Standing Proxy by opening a new securities trading account must provide thefollowing proof of My Number (individual number) or corporate number andidentification documents in addition to their seal. Even if Tendering Shareholders,Etc. already have an account, proof of their My Number (individual number) or
corporate number, identification documents, and the like may be required each timethey change their address or trading office or perform tax procedures.
Identification documents required may vary depending on the document submitted
for the confirmation of My Number (individual number). For more information,please visit the website of SBI SECURITIES Co., Ltd. (https://www.sbisec.co.jp) oran OTC Counter.

-

For individuals:
Documents for the confirmation of My Number (individual number) and identification
documents (Documents must state all of the name, address, date of birth and be fromwithin six months or unexpired) will be required.

Proof of individual number(copy)

Identification documents (copy)76

My Number card (both sides)

N/A

Photo
(any
item)

ID
one

Driver’s license, basic resident registration
card (with photo), residence card, special
permanent resident certificate, etc.

Notification card

Non-photo
ID (any one
item)

Copy of a residence certificate
with individual number
Certificate of items stated inresident register withindividual number-

Health insurance card, pension handbook,seal registration certificate, abstract offamily register, copy of a residence
certificate, etc.

Any one of the items below other than “copy of a residence
certificate” or “certificate of items stated in resident
register”:
driver’s license, basic resident registration card (withphoto), residence card, special permanent resident
certificate, health insurance card, pension handbook, seal
registration certificate, abstract of family register, etc.

For corporations:(A) Certificate of registered matters and seal registration certificate (certificate must
be original and from within six months from issuance date and on which the nameand the location of the head office or principal office and business activities canbe confirmed)(B) Individual identity confirmation of the representative and agent/person in chargeof the transaction (a person responsible for the execution of agreement) will be
required, in addition to identity confirmation of the corporation itself.
(C) Copy of “Notification of Corporate Number” or a printout of the webpage
obtained as a result of searching for the corporate number on the Corporate
Number Publication Site of the National Tax Agency will be required as
certification of corporate number.

-

For Non-Resident Shareholders, Etc.
For Non-Resident Shareholders, Etc. (excluding Japanese residents) and a corporation
having its head office or principal office outside Japan, a copy of documents for
identity confirmation such as documents issued by a foreign government or acompetent international organization approved by the Japanese government, or othersimilar documents equivalent to the documents for identity confirmation required forJapanese residents and a written agreement regarding proxy agreement with theStanding Proxy, power of attorney, or the like (limited to those stating the name, the77name of the representative, and the location outside Japan of the Non-Resident
Shareholders, Etc.) will be required.
Tendering Shareholders, Etc. who wish to open a transaction account during theTender Offer Period are requested to promptly consult SBI SECURITIES Co., Ltd.
(Note 3):

Separate self-assessment taxation concerning capital gains from transfer of shares,
etc. (for individual shareholders residing in Japan):
For individual shareholders who reside in Japan, capital gains from transfer of shares,
etc. will be generally applicable to separate self-assessment taxation. Pleaseindividually consult with a certified tax accountant or other expert for any specificinquiries about taxation and make your own decision.

(2)

Method of cancellation of agreement(In case of tendering shares through SMBC Nikko Securities Inc.)
Tendering Shareholders, Etc. may, at any time during the Tender Offer Period, cancel
their agreement for the Tender Offer.
A Tendering Shareholder, Etc. who wishes to cancel an agreement must deliver or senda notice stating the intention to cancel the agreement for the Tender Offer (a“Cancellation Document”) to the person designated below by 3:30 p.m. on the last
day of the Tender Offer Period (subject to the business hours of the sales office andhours for operation and management of securities; Tendering Shareholders, Etc. should
contact their sales office in advance to confirm). However, if a Cancellation
Document is sent by mail, the cancellation is conditional on the Cancellation Document
reaching the designated recipient below by no later than 3:30 p.m. on the last day of
the Tender Offer Period (subject to the business hours of the sales office and hours for
operation and management of securities; Tendering Shareholders, Etc. should contact
their sales office in advance to confirm).
Tenders and agreements made through Nikko Easy Trade may be cancelled by logging
into Nikko Easy Trade and following the onscreen instructions by 3:30 p.m. on the last
day of the Tender Offer Period.
Party authorized to receive the Cancellation Document:
SMBC Nikko Securities Inc.

3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo(or any other domestic sales office of SMBC Nikko Securities Inc.)(In case of tendering shares through SBI SECURITIES Co., Ltd.)
Tendering Shareholders, Etc. who tender in the Tender Offer may, at any time during
the Tender Offer Period, cancel their agreement for the Tender Offer. Tendering
Shareholders, Etc. may take cancellation procedures by providing the required
information on the website of SBI SECURITIES Co., Ltd. (https://www.sbisec.co.jp)
78

or by contacting the customer service center of SBI SECURITIES Co., Ltd. (fixed
telephone: 0120-104-214 (toll-free), mobile phone: 0570-550-104 (Navi Dial) by 9:00
a.m. on the last day of the Tender Offer Period. Stock Acquisition Right Holders may,at any time during the Tender Offer Period, cancel their agreement for the Tender Offer.
Stock Acquisition Right Holders may take cancellation procedures by contacting thecustomer service center of SBI SECURITIES Co., Ltd. (fixed telephone: 0120-104214 (toll-free), mobile phone: 0570-550-104 (Navi Dial) by 9:00 a.m. on the last dayof the Tender Offer Period.
A Tendering Shareholder, Etc. who wishes to cancel an agreement for tendering madevia an OTC Counter (face-to-face transaction account) must deliver or send a noticestating the intention to cancel the agreement for the Tender Offer (a “Cancellation
Document”) with a tender receipt (if delivered) attached to it to the head office or any
sales office of the person designated below or any branch of SBI MONEY PLAZA Co.,
Ltd. at which a person designated below is stationed by 9:00 a.m. on the last day of theTender Offer Period. However, if a Cancellation Document is sent by mail, it must
arrive at the OTC Counter by 9:00 a.m. on the last day of the Tender Offer Period.
Party authorized to receive the Cancellation Document:
SBI SECURITIES Co., Ltd.

1-6-1 Roppongi, Minato-ku, Tokyo(or any other domestic sales office of SBI SECURITIES Co., Ltd. or any other branchof SBI MONEY PLAZA Co., Ltd. at which a person in charge of SBI SECURITIESCo., Ltd. is stationed)(3)

Method of returning of Share Certificates, Etc.
If a Tendering Shareholder, Etc. cancels their agreement under the Tender Offer in themanner described in “(2) Method of cancellation of agreement” above, the Tendered
Share Certificates, Etc. will be returned promptly after the completion of thecancellation procedures in accordance with the method indicated in “(4) Method of
return of Share Certificates, Etc.” of “10. Method of Settlement” below.

(4)

Name and address of the head office of financial instruments firm/bank, etc. holding intrust and returning Share Certificates, Etc.
SMBC Nikko Securities Inc.

3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo

SBI SECURITIES Co., Ltd.

1-6-1 Roppongi, Minato-ku, Tokyo

8.

Funds Required for Tender Offer(1)

Funds, etc. required for tender offer

Purchase price (yen): (a)53,320,089,600
79Type of consideration other than cash:-

Total amount of consideration other than cash:-

Purchase commission (yen): (b)210,000,000

Others (yen): (c)12,000,000

Total (yen) (a)+(b)+(c):53,542,089,600

Note 1: “Purchase price (yen): (a)” shows the amount obtained by multiplying thenumber of shares to be purchased in the Tender Offer (33,325,056 shares) by
the Tender Offer Price per share (1,600 yen).
Note 2: “Purchase commission (yen): (b)” consists of estimated commissions to be
paid to the tender offer agent.
Note 3: “Others (yen): (c)” consists of the estimated amount of fees and expenses
including fees for issuing a public notice concerning the commencement of
the Tender Offer and printing fees for the Tender Offer explanatory statement
and other necessary documents.
Note 4: The above amounts are exclusive of consumption tax, etc.
Note 5: There are other expenses to be paid to the tender offer agent and attorney’s
fees, etc., but the amounts of those expenses and fees will not be determineduntil after the completion of the Tender Offer.
(2)

Deposits or borrowings allocable for funds required for tender offer(A) Deposits as of one day or two days preceding the date hereofType of deposit

Amount (thousand yen)--

Total (a)-(B) Borrowings before the date hereof(a) Financial institutions

80

Category ofbusiness ofName ofTerms oflendercontract

Amount(thousand yen)lender
1

-

-

-

-

2

-

-

-

-

Total

-

(b) Others
Category ofName ofTerms oflendercontract

Amount(thousand
yen)

-

-

-

-

-

-

-

-

business oflenderTotal-(C) Funds to be borrowed on or after the date hereof(a) Financial institutions
Categ
ory ofbusiness ofName ofTerms oflendercontract

Amount(thousand yen)

-

-

-

lender1-

81

Borrowing to be allocated tofunds required for tender offer(Note):(1) Term loan A
Borrowing period:
seven years (installment
payment)
Interest:
variable interest rate based on
JBA Japanese yen TIBOR
Collaterals:
Target Company Shares, etc.

2

Bank

(2) Term loan B
Shinsei Bank,
Borrowing period:
Limitedseven years (bullet payment)(2-4-3,
Nihonbashimuromachi
Chuo-ku,
Tokyo)

Interest:
variable interest rate based on
JBA Japanese yen TIBOR
Collaterals:
Target Company Shares, etc.

(1) Term LoanA
7,110,000(2) Term Loan
B
16,590,000(3) Bridge Loan
25,700,000(3) Bridge loan
Repayment due date:Same date as the deadline forcompletion of the Squeeze-Out
ProceduresInterest:
short-term prime lending rate
published by Shinsei Bank,
LimitedCollaterals:
Target Company Shares, etc.
Total (b)49,400,000(Note): On August 10, 2022, the Tender Offeror obtained a loan certificate as
evidence of the above borrowing from Shinsei Bank, Limited stating that82

it is ready to make a loan up to 49,400,000 thousand yen. The terms andconditions set out in the loan certificate attached hereto are planned to be
set as the conditions precedent for implementing the loan. The above
amount includes the funds necessary to implement the Transactions, funds
for the repayment of outstanding debts, and funds to cover incidental costs
and expenses with respect thereto.
(b) Others
Category ofName ofTerms oflendercontract

Amount(thousand
yen)

-

-

-

-

-

-

-

-

business oflenderTotal (c)-(D) Other methods of financing
Contents

Amount (thousand yen)Contribution by Integral Corporation(Note 1)420,000

Contribution by Integral 4 Limited
Partnership (Note 2)

7,470,000

Contribution by Innovation Alpha IV
L.P. (Note 3)

2,852,000

Contribution by Initiative Delta IV
L.P. (Note 4)

3,258,000

Total (d)14,000,000(Note 1): As evidence of the above contribution, on August 9, 2022, the Tender
Offeror obtained a certificate of financing from Integral stating that it isready to make a contribution up to 420,000 thousand yen. There areno conditions precedent for the contribution. The Tender Offeror
obtained a copy of Integral’s bank book and confirmed that Integral has
cash deposits of more than the amount set out in the certificate offinancing.
(Note 2): As evidence of the above contribution, on August 9, 2022, the Tender
Offeror obtained a certificate of financing from Integral 4 Limited
83

Partnership stating that it is ready to make a contribution up to
7,470,000 thousand yen. There are no conditions precedent for thecontribution. Integral 4 Limited Partnership is an investment limited
partnership established under the Limited Partnership Act for
Investment (Act No. 90 of 1998, as amended). Integral 4 Limited
Partnership consists of Integral 4 GP Limited Partnership as a generalpartner and institutional investors such as banks, securities companies,
credit associations, life insurance companies, pension funds, and fundof funds and business companies in Japan as limited partners. Eachlimited partner of Integral 4 Limited Partnership has agreed to make aspecified capital contribution by cash to Integral 4 Limited Partnership,
up to a certain cap amount (“Commitment Amount”). Once a capitalcall has been received from the general partner of Integral 4 Limited
Partnership, at least seven business days prior to the date designated by
the general partner, each of the limited partners is obligated tocontribute the necessary amount of cash in proportion to its relative
Commitment Amount, by no later than the date designated by thegeneral partner, up to the Commitment Amount remaining after
deduction of the amount which such limited partner has alreadycontributed to Integral 4 Limited Partnership. In addition, the failureof a limited partner of Integral 4 Limited Partnership to fulfill its
funding obligations does not excuse any other limited partner ofIntegral 4 Limited Partnership from funding its obligation, and thegeneral partner of Integral 4 Limited Partnership may satisfy any
shortfall due to such a failure by obligating remaining limited partners
to make additional cash contributions proportionate to their respective
Commitment Amount to Integral 4 Limited Partnership up to a certain
extent, so that Integral 4 Limited Partnership will have the ability tofund this capital contribution.
(Note 3): As evidence of the above contribution, on August 9, 2022, the Tender
Offeror obtained a certificate of financing from Innovation Alpha IV
L.P. stating that it is ready to make a contribution up to 2,852,000
thousand yen. There are no conditions precedent for the contribution.
Innovation Alpha Ⅳ L.P. is an exempted limited partnership establishedunder the laws of the Cayman Islands and is operated and managed by
Innovation Partners Alpha Ⅳ Ltd. as a general partner, which Integral
provides investment advice to. Innovation Alpha Ⅳ L.P. consists of,Innovation Partners Alpha Ⅳ Ltd. as a general partner and foreign
insurance companies, university endowment, sovereign wealth fund,
fund of funds, and asset management companies, as limited partners.
Each limited partner of Innovation Alpha Ⅳ L.P. has agreed to make aspecified capital contribution by cash to Innovation Alpha Ⅳ L.P., up
to a certain cap amount. Once a capital call notice has been received
from the general partner of Innovation Alpha Ⅳ L.P., each of the limited
partners is obligated to contribute the necessary amount of cash inproportion to its relative cap amount, by no later than the datedesignated by the general partner, up to the cap amount remaining after
deduction of the amount which such limited partner has already84contributed to Innovation Alpha Ⅳ L.P. In addition, Innovation Alpha
Ⅳ L.P. confirmed the general partner and limited partners of Innovation
Alpha Ⅳ L.P.’s funding ability through financial investigation or the
like, and as a result thereof, Innovation Alpha Ⅳ L.P. believes that it iscertain that Innovation Alpha Ⅳ L.P. can get funding from the generalpartner and limited partners. In addition, the failure of a limited
partner of Innovation Alpha Ⅳ L.P. to fulfill its funding obligations
does not excuse any other limited partner of Innovation Alpha Ⅳ L.P.
from funding its obligation, and the general partner of Innovation Alpha
Ⅳ L.P. may satisfy any shortfall due to such a failure by obligating
remaining limited partners to make additional cash contributions
proportionate to their respective cap amounts to Innovation Alpha Ⅳ
L.P. up to the cap amount remaining after deduction of the amountwhich such limited partner has already contributed, so that Innovation
Alpha Ⅳ L.P. will have the ability to fund capital to provide to theTender Offerors.
(Note 4): As evidence of the above contribution, on August 9, 2022, the Tender
Offeror obtained a certificate of financing from Initiative Delta IV L.P.
stating that it is ready to make a contribution up to 3,258,000 thousandyen.
There are no conditions precedent for the contribution.
Initiative Delta Ⅳ L.P. is an exempted limited partnership establishedunder the laws of the Cayman Islands and is operated and managed by
Initiative Partners Delta Ⅳ Ltd. as a general partner, which Integral
provides investment advice to. Initiative Delta Ⅳ L.P. consists of,
Initiative Partners Delta Ⅳ Ltd. as a general partner and foreign pension
funds, foundations, insurance companies, university endowment, andasset management companies, as limited partners. Each limited
partner of Initiative Delta Ⅳ L.P. has agreed to make a specified capital
contribution by cash to Initiative Delta Ⅳ L.P., up to a certain cap
amount. Once a capital call notice has been received from the generalpartner of Initiative Delta Ⅳ L.P., each of the limited partners is
obligated to contribute the necessary amount of cash in proportion to its
relative cap amount, by no later than the date designated by the generalpartner, up to the cap amount remaining after deduction of the amountwhich such limited partner has already contributed to Initiative Delta
Ⅳ L.P. In addition, Initiative Delta Ⅳ L.P. confirmed the generalpartner and limited partners of Initiative Delta Ⅳ L.P.’s funding ability
through financial investigation or the like, and as a result thereof,
Initiative Delta Ⅳ L.P. believes that it is certain that Initiative Delta Ⅳ
L.P. can get funding from the general partner and limited partners. In
addition, the failure of a limited partner of Initiative Delta Ⅳ L.P. tofulfill its funding obligations does not excuse any other limited partnerof Initiative Delta Ⅳ L.P. from funding its obligation, and the generalpartner of Initiative Delta Ⅳ L.P. may satisfy any shortfall due to sucha failure by obligating remaining limited partners to make additional
cash contributions proportionate to their respective cap amounts toInitiative Delta Ⅳ L.P. up to the cap amount remaining after deductionof the amount which such limited partner has already contributed, so85

that Initiative Delta Ⅳ L.P. will have the ability to fund capital toprovide to the Tender Offerors.
(E) Total amount of deposits or borrowings allocable for funds required for purchase
63,400,000 thousand yen ((a)+(b)+(c)+(d))(3)

Relationship between the Tender Offeror and the issuer of securities to be used asconsideration for tender offer
N/A

9.

Status of the Issuer of Securities to be Used as Consideration for the Tender Offer
N/A

10.

Method of Settlement(1)

Name and address of head office of financial instruments business operator, bank, etc.
in charge of settlement of tender offer(2)

SMBC Nikko Securities Inc.

3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo

SBI SECURITIES Co., Ltd.

1-6-1 Roppongi, Minato-ku, Tokyo

Commencement date of settlement
October 3, 2022 (Monday)(3)

Method of settlement(In case of tendering shares through SMBC Nikko Securities Inc.)
A notice regarding the purchase under the Tender Offer will be mailed to the address or
location of the Tendering Shareholders, Etc. (or the Standing Proxy in the case of NonResident Shareholders, Etc.) without delay after the expiration of the Tender Offer
Period. If Tendering Shareholders, Etc. tendered their Share Certificates, Etc. through
Nikko Easy Trade, the notice will be delivered by electromagnetic means.
The purchase will be settled in cash. SMBC Nikko Securities Inc. will remit the sales
proceeds of the Share Certificates, Etc. purchased to the address designated by theTendering Shareholders, Etc. (or the Standing Proxy in the case of Non-Resident
Shareholders, Etc.) in accordance with the instructions given by the Tendering

86Shareholders, Etc. (or the Standing Proxy in the case of Non-Resident Shareholders,Etc.) and without delay after the commencement date of the settlement.
(In case of tendering shares through SBI SECURITIES Co., Ltd.)A notice regarding the purchase under the Tender Offer will be mailed to the address or
location of the Tendering Shareholders, Etc. (or the Standing Proxy in the case of NonResident Shareholders, Etc.) without delay after the expiration of the Tender Offer
Period.
The purchase will be settled in cash. SBI SECURITIES Co., Ltd. will remit the sales
proceeds of the Share Certificates, Etc. purchased to the address designated by theTendering Shareholders, Etc. (or the Standing Proxy in the case of Non-Resident
Shareholders, Etc.) in accordance with the instructions given by the Tendering
Shareholders, Etc. (or the Standing Proxy in the case of Non-Resident Shareholders,Etc.) and without delay after the commencement date of the settlement.
(4)

Method of return of Share Certificates, Etc.
(In case of tendering shares through SMBC Nikko Securities Inc.)
In the event that all of the Tendered Share Certificates, Etc. will not be purchased under
the terms set forth in “(1) Conditions set forth in each item of Article 27-13, Paragraph
4 of the Act and the details thereof” or “(2) Conditions of withdrawal, etc. of the tender
offer, details thereof and method of disclosure of withdrawal, etc.” in “11. Other
Conditions and Methods of Purchase” below, SMBC Nikko Securities Inc. will revert
the Share Certificates, Etc. that are required to be returned to their original condition at
the time of the tender (“the original condition at the time of the tender” means thecondition where the execution of the order to tender in the Tender Offer has beencancelled) on the Tendering Shareholder Accounts with SMBC Nikko Securities Inc. on
the date two business days after the last day of the Tender Offer Period (or the day of
withdrawal, etc. if the Tender Offeror withdraws the Tender Offer).
With respect to Stock Acquisition Rights, the submitted documents for the Tender Offer
set forth in (iv) in “(1) Method of tendering shares in response to the tender offer” in “7.
Method of Tendering Shares in Response to the Tender Offer and Cancellation Thereof”
above will be mailed or delivered to the Tendering Shareholders, Etc. (or the Standing
Proxy in the case of Non-Resident Shareholders, Etc.)(In case of tendering shares through SBI SECURITIES Co., Ltd.)In the event that all of the Tendered Share Certificates, Etc. will not be purchased under
the terms set forth in “(1) Conditions set forth in each item of Article 27-13, Paragraph
4 of the Act and the details thereof” or “(2) Conditions of withdrawal, etc. of the tender
offer, details thereof and method of disclosure of withdrawal, etc.” in “11. Other
Conditions and Methods of Purchase” below, SBI SECURITIES Co., Ltd. will return
the Share Certificates, Etc. that are required to be returned promptly after the date twobusiness days after the last day of the Tender Offer Period (or the day of withdrawal, etc.
if the Tender Offeror withdraws the Tender Offer). SBI SECURITIES Co., Ltd. will87

return shares on the Tendering Shareholder Accounts with SBI SECURITIES Co., Ltd.
by restoring the record to the status immediately preceding the tendering of those shares
to be returned. (If the Tendering Shareholders, Etc. wish their shares to be transferredto their account opened with other financial instruments firms, please instruct SBI
SECURITIES Co., Ltd. accordingly.)

11.

Other Conditions and Methods of Purchase(1)

Conditions set forth in each item of Article 27-13, Paragraph 4 of the Act and the details
thereofIf the total number of Tendered Share Certificates, Etc. is less than the minimum numberof the Share Certificates, Etc. to be purchased (21,509,600 shares), the Tender Offeror
will not purchase any of the Tendered Share Certificates, Etc. If the total number of
the Tendered Share Certificates, Etc. is equal to or greater than the minimum number of
Share Certificates, Etc. to be purchased (21,509,600 shares), the Tender Offeror willpurchase all of the Tendered Share Certificates, Etc.

(2)

Conditions of withdrawal, etc. of the tender offer, details thereof and method of
disclosure of withdrawal, etc.
If any event listed in Article 14, Paragraph 1, Items (1)1 through (1)10 and Items (1)13
through (1)19, and Items (3)1 through (3)8 and (3)10, as well as Article 14, Paragraph2, Items (3) through (6) of the Enforcement Order occurs, the Tender Offeror may
withdraw the Tender Offer. The “events which are equivalent to those listed in Items(3)1 through (3)9” set out in Article 14, Paragraph 1, Item (3)10 of the Enforcement
Order refers to (i) the case where any of the statutory disclosure documents submitted
by the Target Company in the past is found to contain a false statement on a material
fact, or omit a statement on a material fact that should have been stated but the Tender
Offeror was not aware of the existence of such false statement, etc. nor could the Tender
Offeror have been aware of such false statement, etc. even with reasonable care and(ii)the case where any of the events listed in Article 14, Paragraph 1, Items (3)1 through(3)7 occurs to a principal subsidiary of the Target Company.
If the Tender Offeror intends to withdraw the Tender Offer, the Tender Offeror will givean electronic public notice and publish a notice to that effect in the Nikkei. However,
if it is deemed difficult to give the public notice by the last day of the Tender Offer
Period, the Tender Offeror will make a public announcement by the method set out in
Article 20 of the Cabinet Ordinance and give a public notice immediately after theannouncement.

(3)

Conditions to reduce purchase price, details thereof and method of disclosure of
reduction
Under Article 27-6, Paragraph 1, Item (1) of the Act, if the Target Company conducts
any act set out in Article 13, Paragraph 1 of the Enforcement Order during the Tender88Offer Period, the Tender Offeror may reduce the purchase price in accordance with thestandards set out in the provision of Article 19, Paragraph 1 of the Cabinet Ordinance.
If the Tender Offeror intends to reduce the purchase price, the Tender Offeror will givean electronic public notice and publish a notice to that effect in the Nikkei. However,
if it is deemed difficult to give the public notice by the last day of the Tender Offer
Period, the Tender Offeror will make a public announcement by the method set out in
Article 20 of the Cabinet Ordinance and give public notice immediately after theannouncement.
If the purchase price is reduced, the Tender Offeror will also purchase the Share
Certificates, Etc. tendered on or before the date of the public notice at the reduced
purchase price.
(4)

Matters concerning right of Tendering Shareholders, Etc. to cancel the agreement
The Tendering Shareholders, Etc. may, at any time during the Tender Offer Period,
cancel their agreements for the Tender Offer in accordance with the method set out in“(2) Method of cancellation of the agreement” of “7. Method of Tendering Shares in
Response to the Tender Offer and Cancellation Thereof” above.
The Tender Offeror will not make any claim for damages or a penalty payment due tothe Tendering Shareholders, Etc.’s cancellation of their agreements. Further, the costof returning Tendered Share Certificates, Etc. to the Tendering Shareholders, Etc. will
be borne by the Tender Offeror. If cancellation is proposed, the Tendered Share
Certificates, Etc. will be returned promptly after the procedures for that cancellation
proposal are consummated in the manner set out in “(4) Method of return of Share
Certificates, Etc.” in “10. Method of Settlement” above.

(5)

Method of disclosure if the conditions of the Tender Offer are changed
The Tender Offeror may change the conditions, etc. of the Tender Offer during theTender Offer Period unless such change is prohibited under Article 27-6, Paragraph 1 of
the Act or Article 13 of the Enforcement Order.
If the Tender Offeror intends to change any conditions, etc. of the Tender Offer, theTender Offeror will give an electronic public notice and publish a notice to that effect in
the Nikkei. However, if it is deemed difficult to give the notice by the last day of theTender Offer Period, the Tender Offeror will make a public announcement in the manner
set out in Article 20 of the Cabinet Ordinance and give a public notice immediately after
the announcement.
If the conditions, etc. of the Tender Offer are changed, the Tender Offeror will alsopurchase the Share Certificates, Etc. tendered on or before the date of the public noticein accordance with the changed conditions, etc. of the Tender Offer.

(6)

Method of disclosure if amendment statement is filed
If an amendment statement is submitted to the Director-General of the Kanto Local
Finance Bureau (unless otherwise provided for in the proviso in Article 27-8, Paragraph89

11 of the Act), the Tender Offeror will immediately make a public announcement of thecontent of that amendment statement that is relevant to the content of the public noticeof the commencement of the Tender Offer in the manner set out in Article 20 of the
Cabinet Ordinance. The Tender Offeror will also immediately amend the explanatory
statement of the Tender Offer and deliver the amended explanatory statement to theTendering Shareholders, Etc. who have already received the previous explanatory
statement. However, if the amendments are limited in scope, the Tender Offeror may
instead prepare and deliver to Tendering Shareholders, Etc. a document stating thereason for the amendments, the matters amended, and the details thereof.
(7)

Method of disclosure of results of the Tender Offer
Tender Offer will be made public on the day following the last day of the Tender Offer
Period in the manner set out in Article 9-4 of the Enforcement Order and Article 30-2 of
the Cabinet Ordinance.

90

II.

Status of the Tender Offeror

1.

In the case of a Corporation(1)

Outline of the Tender Offeror(A) History of the Tender Offeror
Month, Year
July 2022

OutlineIncorporated as a joint stock corporation (kabushiki kaisha)
whose trade name is SK Life Support Co., Ltd., whose head
office is at 1-9-2, Marunouchi, Chiyoda-ku, Tokyo, and whosestated capital is 500,000 yen.

(B) Business purpose of the Tender Offeror and the details of its business(Business purpose of the Tender Offeror)
The purpose of the Tender Offeror is to engage in the following businesses:(1)

sale and purchase, brokerage, consulting, and appraisal of real estate;(2)

possession, leasing, and management of real estate;(3)

contracting, design, and supervision of construction works, civil works,
landscaping and gardening, and interior finish works;(4)

investment advisory business and businesses of discretionary investment
agreements relating to real estate, etc.;(5)

investment corporation asset management business and business ofinvestment trust management under the Act on Investment Trusts andInvestment Corporations;(6)management and operation business related to apartment housing andbuildings, etc., including cleaning, maintenance, and security;(7)

non-life insurance agency business and services regarding solicitation of life
insurance;(8) ownership, leasing, and operation of retail facilities such as hotels, restaurants,
and sport facilities;(9)

financial services such as lending of money, guaranteeing of debts, and saleand purchase of all types of receivables;(10) possession, sale and purchase, brokerage, and management of securities, etc.;(11) business related to sale and supply of gas, manufacturing and sale ofequipment related thereto, and supply of water;(12) power generation business and electric services;91

(13) business related to ownership, leasing, and operation of facilities for theelderly and nursing care;(14) data processing and data provision services;(15) planning, development, construction, sale, operation, and maintenance andmanagement of apps for smart devices and proptech, which is formed by
combining property and technology;(16) corporate planning, general affairs, human resources, and financial services
and other services deemed necessary for the Group companies or affiliates;(17) management, guidance, assistance, and control of business activities ofcompanies (including foreign companies) and partnerships (including foreign
entities equivalent to partnerships) that are engaged in the businesses in theitems above and other business entities equivalent thereto through the holdingof shares or equity of such companies, partnerships, and entities; and(18) any and all services incidental or related to the items above.
(Details of its business)
The details of business of the Tender Offeror are acquisition and possession of Share
Certificates, Etc. of the Target Company.
(C) Amount of capital and total number of issued shares of the Tender Offeror(as of August 12, 2022)
Amount of capital (yen)Total number of issued shares (shares)

500,000

10,000(Note): As stated in “(D) Other methods of financing” in “(2) Deposits or borrowings
allocable for funds required for tender offer” in “8. Funds Required for Tender
Offer” in “I. Summary of the Tender Offer,” the Tender Offeror will receive acontribution up to 14,000,000 thousand yen in total, and the Tender Offeror’s
stated capital and the total number of issued shares will be increased.
(D) Major shareholders(as of August 12, 2022)

Name

Number of shares
held

Address(shares)92

Ratio to the total
number of issued
shares (excluding
treasury shares) (%)

Integral
Corporation

1-9-2,
Marunouchi,
Chiyoda-ku,
Tokyo

10,000100.00Total--

10,000100.00(E) Employment histories of and number of shares held by officers(as of August 12, 2022)

Title held Position

Name

NumberofDate ofbirth

Employment history

sharesheld(shares)

Represent
ative
Director-

Yoshihiro
Hemmi

October
7, 1957

April
1980

Entered MITSUI &CO., LTD.

May
1998

Partner of Boston
Consulting Group

January
2001

Vice President of adidas
Japan K.K.

June
2004

Representative Director
and President of Tohato,
Inc.

September
2007

Director & Partner ofIntegral Corporation(present)

July
2022

Representative Directorof the Tender Offeror(present)

Total

(2)

-

-

Financial condition

93

The Tender Offeror is a company incorporated on July 7, 2022 and its initial fiscal year
has not ended yet after the incorporation. Therefore, no financial statements of theTender Offeror have been prepared so far.
(3)

Matters concerning the Tender Offeror which is a company subject to the continuous
disclosure obligation(A) Documents filed by the Tender Offeror(a) Annual Securities Report and documents attached thereto(b) Quarterly Securities Report or Semiannual Securities Report(c) Amendment Report(B) Place of public inspection of documents mentioned above2.

In the case of an Entity other than a Corporation
N/A

3.

In the case of an Individual
N/A

94

III.

Breakdown of Share Certificates, Etc. Held and/or Traded by the Tender Offeror
and Specially Related Parties

1.

Breakdown of Ownership of Share Certificates, Etc.

(1)

Total number of Share Certificates, Etc. held by the Tender Offeror and the speciallyrelated parties

Share certificates
Certificates of stock acquisitionrightsCertificates of corporate bonds
with stock acquisition rights
Beneficiary certificates of trustof Share Certificates, Etc. ()
Deposit receipts for Share
Certificates, Etc. ()
Total
Total number of Share
Certificates, Etc. held
(Total number of potential Share
Certificates, Etc. held)(2)(as of August 12, 2022)
Number of
Number of
Share
Share
Certificates, Etc. Certificates, Etc.
Number ofprovided inprovided in
Share
Article 7,
Article 7,
Certificates, Etc.
Paragraph 1,
Paragraph 1,
held
Item (2) of
Item (3) of
Enforcement
Enforcement
Order
Order
70,339––(shares)(shares)(shares)
6,000

–

–

–

–

–

–

–

–

–

–

–

76,339––76,339––(6,000)––Share Certificates, Etc. held by the Tender Offeror
N/A

(3)

Share Certificates, Etc. held by the specially related parties (total shares held byspecially related parties)(as of August 12, 2022)
Number of
Number of
Number of
Share
Share
Share
Certificates, Etc. Certificates, Etc. Certificates, Etc.
95

held

Share certificates

70,339(shares)

provided in
Article 7,
Paragraph 1,
Item (2) of
Enforcement
Order–(shares)

provided in
Article 7,
Paragraph 1,
Item (3) of
Enforcement
Order–(shares)Certificates of stock acquisition
6,000
–
–
rightsCertificates of corporate bonds–––
with stock acquisition rights
Beneficiary certificates of trust–––of Share Certificates, Etc. ()
Deposit receipts for Share–––
Certificates, Etc. ()
Total
76,339––Total number of Share
76,339––Certificates, Etc. held
(Total number of potential Share(6,000)––
Certificates, Etc. held)(Note 1): “Number of Share Certificates, Etc. held” above includes 16 voting rights
pertaining to 1,657 shares of the Target Company indirectly held as equity
through the management stock ownership plan of the Target Company (anyfractions resulting from calculation of the number of shares as equity are rounded
down to the nearest whole number).
(Note 2):

(4)

“Number of Share Certificates, Etc. held” above includes 3,008 voting rights
pertaining to 300,800 shares of the Target Company granted as restricted stockcompensation. The restrictions have been imposed on the transfer of 111,000
shares of the Target Company Shares until May 22, 2023, 115,800 shares of theTarget Company Shares until April 26, 2024, and 74,000 shares of the Target
Company Shares until April 28, 2025.

Share Certificates, Etc. held by each specially related party (breakdown by eachspecially related party)(A) Specially related parties

Name or corporate name
Address or location(as of August 12, 2022)
Hideaki Shinohara
1-1-1 Tenjin, Chuo-ku, Fukuoka-shi (location of theTarget Company)

96

Occupation orcontents of businessContact information

Relationship with Tender
Offeror(B)

Representative Director and President of the Target
Company
Director and Chairman of Shinoken Produce Co., Ltd.
Director and Chairman of Shinoken Harmony Co.,Ltd.
Director and Chairman of SK Energy Co., Ltd.
Contact liaison: Shinoken Group Co., Ltd.
Takashi Tamaki Senior Vice President and Managing
Executive Officer
Address: 1-1-1 Tenjin, Chuo-ku, Fukuoka-shi
Tel: 092-714-0040 (main number)
A person who agreed to exercise the voting rights andother rights as a shareholder of the Target Company
jointly with the Tender Offeror after the completion of
the Tender Offer.

Number of Share Certificates, Etc. held

Share certificates(as of August 12, 2022)
Number of
Number of
Share
Share
Certificates, Etc. Certificates, Etc.
Number ofprovided inprovided in
Share
Article 7,
Article 7,
Certificates, Etc.
Paragraph 1,
Paragraph 1,
held
Item (2) of
Item (3) of
Enforcement
Enforcement
Order
Order
70,339––(shares)(shares)(shares)Certificates of stock acquisition
6,000
–
–
rightsCertificates of corporate bonds–––
with stock acquisition rights
Beneficiary certificates of trust–––of Share Certificates, Etc. ()
Deposit receipts for Share–––
Certificates, Etc. ()
Total
76,339–Total number of Share
76,339––Certificates, Etc. held
(Total number of potential Share(6,000)––
Certificates, Etc. held)(Note 1): “Number of Share Certificates, Etc. held” above includes 16 voting rights
pertaining to 1,657 shares of the Target Company indirectly held as equity throughthe management stock ownership plan of the Target Company (any fractions
resulting from calculation of the number of shares as equity are rounded down to97the nearest whole number).
(Note 2):

“Number of Share Certificates, Etc. held” above includes 3,008 voting rights
pertaining to 300,800 shares of the Target Company granted as restricted stockcompensation. The restrictions have been imposed on the transfer of 111,000
shares of the Target Company Shares until May 22, 2023, 115,800 shares of theTarget Company Shares until April 26, 2024, and 74,000 shares of the Target
Company Shares until April 28, 2025.

2.

Trading of Share Certificates, Etc.

(1)

Trading during the 60-day period prior to the date hereof
N/A

3.

Material Agreements regarding the Share Certificates, Etc.
The Tender Offeror and Mr. Shinohara executed the Basic Agreement as of August 10,
2022, under which the Tender Offeror and Mr. Shinohara agreed to tender the Shares
Agreed to Be Tendered (the number of shares held: 6,148,647 shares; and ownership
ratio: 17.97%) and 3,000 rights of the Stock Acquisition Rights Agreed to Be Tendered(the number of the Target Company Shares underlying the Stock Acquisition Rights:
600,000 shares; and ownership ratio: 1.75%) out of the Shares Held by Mr. Shinohara(the number of shares held: 7,633,957 shares; and ownership ratio: 22.31%) in theTender Offer and not to tender the Shares Agreed Not to Be Tendered (885,310 shares;
and ownership ratio: 2.59%; shares relating to restricted stock compensation held by Mr.
Shinohara are included in the Shares Agreed Not to Be Tendered because such shares
are subject to transfer restrictions and may not to be tendered in the Tender Offer) in theTender Offer (however, Mr. Shinohara may tender the Target Company Shares issued
by exercising the Stock Acquisition Rights Agreed to Be Tendered in the Tender Offer
after such exercise, in which case such Target Company Shares issued by exercising the
Stock Acquisition Rights Agreed to Be Tendered will be added to he “Shares Agreed to
Be Tendered” above, and Mr. Shinohara will no longer have an obligation to tender such
Stock Acquisition Rights Agreed to Be Tendered in the Tender Offer.).
For the details of the Basic Agreement, please refer to “(6) Matters relating to Material
Agreements regarding the Tender Offer” in “3. Purpose of the Tender Offer” in “I.
Summary of the Tender Offer.”

4.

Agreements of Purchase, etc. of Share Certificates, Etc. on and after the Date
Hereof
N/A
98

IV.

Transactions etc. between the Tender Offeror and the Target Company

1.

Transactions between the Tender Offeror and the Target Company or its Directors
or Officers, and the Contents Thereof
N/A

2.

Agreements between the Tender Offeror and the Target Company or its Directors
or Officers, and the Contents Thereof(1)

Agreements between the Tender Offeror and the Target Company and the contents
thereof
According to the Target Company’s Press Release, the Target Company resolved at its
board of directors meeting held on August 10, 2022 to express its opinion in support of
the Tender Offer and to recommend to the shareholders and Stock Acquisition Right
Holders of the Target Company to tender shares in the Tender Offer by unanimous
agreement of the directors of the Target Company who participated in the deliberation
and resolution at the meeting (Mr. Junichi Tsurukawa, Mr. Yoshiaki Miura, Mr. Takashi
Tamaki, Mr. Minoru Sakata, Mr. Katsuji Inoue, Mr. Yuichiro Yasuda, and Ms. Yasuko
Maekawa, seven of nine persons who constitute the Board of Directors of the Target
Company, excluding Mr. Shinohara and Mr. Hiroyuki Irie).
For the details of the decision-making process of the Board of Directors of the Target
Company, please refer to the Target Company’s Press Release and “(Measures to Ensure
Fairness of the Tender Offer, Including Measures to Ensure Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest)” in “Background of Valuation” in“(2) Price of Tender Offer” in “4. Period and Price of the Tender Offer and Number of
Share Certificates, Etc. to be Purchased” under “I. Summary of the Tender Offer” above.

(2)

Agreements between the Tender Offeror and directors or officers of the Target Company
and the contents thereof
The Tender Offeror and Mr. Shinohara executed the Basic Agreement as of August 10,
2022, under which the Tender Offeror and Mr. Shinohara agreed to tender the Shares
Agreed to Be Tendered (the number of shares held: 6,148,647 shares; and ownership
ratio: 17.97%) and 3,000 rights of the Stock Acquisition Rights Agreed to Be Tendered(the number of the Target Company Shares underlying the Stock Acquisition Rights:
600,000 shares; and ownership ratio: 1.75%) out of the Shares Held by Mr. Shinohara(the number of shares held: 7,633,957 shares; and ownership ratio: 22.31%) in theTender Offer and not to tender the Shares Agreed Not to Be Tendered (885,310 shares;
and ownership ratio: 2.59%; shares relating to restricted stock compensation held by Mr.
Shinohara are included in the Shares Agreed Not to Be Tendered because such shares
are subject to transfer restrictions and may not to be tendered in the Tender Offer) in theTender Offer (however, Mr. Shinohara may tender the Target Company Shares issued
by exercising the Stock Acquisition Rights Agreed to Be Tendered in the Tender Offer
after such exercise, in which case such Target Company Shares issued by exercising the
Stock Acquisition Rights Agreed to Be Tendered will be added to the “Shares Agreed to
Be Tendered” above, and Mr. Shinohara will no longer have an obligation to tender such
99

Stock Acquisition Rights Agreed to Be Tendered in the Tender Offer.).
For the details of the Basic Agreement, please refer to “(6) Matters relating to Material
Agreements regarding the Tender Offer” in “3. Purpose of the Tender Offer” in “I.
Summary of the Tender Offer.”(3)

Background, purpose, and decision-making process with respect to conducting theTender Offer, and management policy after the Tender Offer
Please refer to “(2) Background, Purpose, and Decision-Making Process with respect to
Conducting the Tender Offer, and Management Policy After the Tender Offer” in “3.
Purpose of the Tender Offer” under “I. Summary of the Tender Offer” above.

(4)

Measures to ensure fairness of the Tender Offer, including measures to ensure fairnessof the Tender Offer Price and measures to avoid conflicts of interest
Please refer to “(Measures to Ensure Fairness of the Tender Offer, Including Measures
to Ensure Fairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest)”
in “Background of Valuation” in “(2) Price of Tender Offer” in “4. Period and Price of
the Tender Offer and Number of Share Certificates, Etc. to be Purchased” under “I.
Summary of the Tender Offer” above.

100

V.

Status of the Target Company

1.

Profit and Losses, etc. for the Past Three Years(1)

Profits and losses
Fiscal year

-

-

-

Net sales---

Cost of Sales

-

-

-

Selling, general andadministrative expenses

-

-

-

Non-operating income

-

-

-

Non-operating expenses

-

-

-

Net income (loss)

-

-

-

-

-

-

Net income or loss per share

-

-

-

Dividend per share

-

-

-

Net assets per share

-

-

-

(2)

Profit and loss per share
Fiscal year

101

2.

Share Price Information

Names offinancial
instruments
exchange orapprovedfinancial
instruments
dealers
association
Month
Highestshare priceStandard Market of the TSE

February

March

April

May

June

July

August

2022

2022

2022

2022

2022

2022

2022

1,041

1,049

1,072

1,024

1,039

1,104

1,103

968

924

981

968

966

962

1,088

(yen)
Lowestshare price(yen)(Note1): The share price before April 1, 2022 shows the share price in the JASDAQ marketof the TSE.
(Note 2): The share price in August 2022 shows the share price before August 10, 2022.

102

(2)

Number of shares held by major shareholders, directors and officers(A) Major shareholders
as ofRatio of the number ofshares held to the total
number of issued shares(excluding treasury shares)(%)

Name or
corporate
nameAddress or location

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Total

-

-

-

Number ofshares held104

(B) Directors and officers
as of

Name

Title

Job title

Number ofshares held

Ratio of thenumber of shares
held to the total
number of issued
shares(excluding
treasury shares)
(%)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Total

-

-

-

-

4.

Matters concerning the Target Company which is a Company Subject to theContinuous Disclosure Obligation(1)

Documents filed by the Target Company(A) Annual Securities Report and documents attached thereto
The Annual Securities Report and documents attached thereto for the 31st fiscal term(from January 1, 2020 to December 31, 2020) were filed with the Director-General of
the Fukuoka Local Finance Branch Bureau on March 26, 2021.
The Annual Securities Report and documents attached thereto for the 32nd fiscal term(from January 1, 2021 to December 31, 2021) were filed with the Director-General of
the Fukuoka Local Finance Branch Bureau on March 30, 2022.
(B) Quarterly Securities Report or Semiannual Securities Report
The Quarterly Securities Report for the first quarter of the 33rd fiscal term (from January
1, 2022 to March 31, 2022) was filed with the Director-General of Fukuoka Local
Finance Branch Bureau on May 12, 2022.
The Quarterly Securities Report for the second quarter of the 33rd fiscal term (from
April 1, 2022 to June 30, 2022) will be filed with the Director-General of Fukuoka Local
Finance Branch Bureau on August 12, 2022.

105

(C) Extraordinary report
N/A(D) Amendment report
N/A(2)

Place of public inspection of documents mentioned above
Shinoken Group Co., Ltd.
(1-1-1 Tenjin, Chuo-ku, Fukuoka-shi)
Tokyo Stock Exchange, Inc.
(2-1 Nihombashi Kabutocho, Chuo-ku Tokyo)

5.

Details, etc. of Facts regarding Implementation of Tender Offer that have been
Notified
N/A

6.

Other Matters(1)

Release of “Consolidated Financial Results Release for the Second Quarter of the Fiscal
Year Ending December 2022 (Japanese GAAP)”The Target Company released the Target Company’s Second Quarter Financial Results
Release on August 10, 2022. The outline thereof based on such release is as follows.
According to the Target Company, the Release has not been audited by an audit firm fora quarterly review as provided for in Article 193, Paragraph 2, Item (1) of the Act. The
outline below is an excerpt of the information disclosed by the Target Company. For
details, please refer to the release concerned.
(A) Profit and loss (consolidated)
Fiscal period
Net sales
Cost of sales
Selling, general and administrative
expensesNon-operating income
Non-operating expenses
Net income attributable to owners of
the parent
106

Cumulative second quarter of the Y.E.
December 2022
50,810 million yen
41,007 million yen
5,231 million yen
645 million yen
376 million yen
3,464 million yen

Changes in Major Business Indices, Etc. of the Target Company
Changes in Major Business Indices, Etc.
(1)

Consolidated Business Indices, Etc.
Fiscal year

28th

29th

30th

31st

32nd

Last month of the accounting
periodDecember
2017

December
2018

December
2019

December
2020

December
2021

Net sales(thousand
105,936,134 111,390,361 95,786,915 95,213,851 96,394,450
yen)Ordinary income(thousandyen)

12,201,122 10,699,005

9,018,592

8,490,133

8,931,059

Net profit attributable(thousandto owners of theyen)parent8,489,802

7,415,644

5,875,046

5,952,344

6,011,299

Comprehensive
income(thousandyen)

8,523,399

7,145,174

5,902,813

5,895,076

6,029,631

Net assets(thousandyen)

26,390,044 32,582,629 37,411,469 41,566,461 45,320,087

Total assets(thousandyen)

90,972,062 101,130,935 85,957,650 88,159,820 99,010,087

Net assets per share(yen)

788.60960.281,090.86

1,205.11

1,331.58

Net profit per share(yen)

254.92220.08172.68175.29174.37

Net profit per shareafter adjusting forpotential shares(yen)

242.10210.90167.81

171.19173.04Equity ratio

(%)

29.0

32.1

43.4

47.0

45.7

Return on equity

(%)

37.8

25.2

16.8

15.1

13.9

Price earnings ratio(multiples)

4.9

3.1

7.5

6.3

5.3

Cash flow fromoperating activities(thousandyen)

2,407,405(819,274) 28,136,591 12,106,212

6,308,604

Cash flow from(thousand(1,496,605)
investment activities
yen)
109

(725,762) (1,132,495) (2,666,644) (1,546,079)

Cash flow fromfinancial activities(thousandyen)

9,004,305

Year-end balance of
cash and cash
equivalents(thousandyen)

23,035,265 22,372,573 28,653,452 34,931,387 40,269,655

Number of
employees[Temporary
employees other than
the above]

854,090 (20,727,466) (3,130,367)

576,918

664

748

831

810

855

[202]

[202]

[207]

[224]

[233]

(persons)

Note 1: Net sales does not include consumption tax, etc.
Note 2: The number of temporary employees indicates the average number during therelevant period.
Note 3: The “number of common stock at the end of the fiscal year used for
calculation of net assets per share” and the “average number of shares ofcommon stock during the fiscal period used as the basis for calculation of net
profit per share,” which are used as the basis for calculation of the per-share
information, excludes the number of Target Company Shares held by therelevant trust as the trust assets for the board benefit trust (BBT) and theemployee stock ownership plan (J-ESOP).
Note 4: Effective as of July 1, 2018, the Target Company conducted a share split at
the ratio of two shares per share. “Net assets per share,” “net profit per
share,” and “profit per share after adjusting for potential shares” were
calculated based on the assumption that the share split was conducted at the
beginning of the 28th fiscal year.
Note 5: The Target Company is subject to the Partial Amendment to the “AccountingStandards for Tax Effect Accounting” (ASBJ Statement No. 28; February 16,2018), etc. from the beginning of the 30th fiscal year, and therefore its major
business indices, etc. for the 29th fiscal year are stated in figures after
retrospectively applying those accounting standards, etc.
Note 6: Figures in parentheses indicate negative figures.

110

(2)

Business Indices, Etc. of the Target Company
Fiscal year

28th

29th

30th

31st

32nd

Last month of the accounting
periodDecember
2017

December
2018

December
2019

December
2020

December
2021

Net sales(thousandyen)

2,759,405

4,846,063

4,469,057

4,445,902

4,432,794

Ordinary income(thousandyen)

1,974,661

4,066,161

3,667,335

3,692,571

3,676,530

Net profit(thousandyen)

1,981,345

4,109,083

3,605,792

3,678,003

3,672,073

Stated capital(thousandyen)

1,055,625

1,094,830

1,094,830

1,094,830

1,094,830

Total number of issued(shares)shares18,030,600 36,380,400 36,380,400 36,380,400 36,380,400

Net assets(thousandyen)

6,123,322

Total assets(thousandyen)

11,746,367 13,169,448 13,009,035 15,808,067 17,096,150

Net assets per share(yen)

Dividends per share(yen)

Of the above, interim
dividends per share

9,061,734 11,571,139 13,523,388 14,942,149

182.86266.36337.03391.65439.42

55.00

45.00

38.00

41.00

41.00

22.50

30.00

15.00

22.50

20.50

Net profit per share

(yen)

59.49

121.95105.98108.31106.52

Net profit per shareafter adjusting forpotential shares

(yen)

56.50

116.86102.99105.78105.71Equity ratio

(%)

52.0

68.4

88.6

85.3

87.4

Return on equity

(%)

36.5

54.4

35.1

29.4

25.8

Price Earnings ratio(multiples)

20.9

5.6

12.2

10.3

8.7

Dividend payout ratio

(%)

46.2

24.6

35.9

37.9

38.5

111

Number of employees[Temporary employees
other than the above]

10

11

11

14

[-]

[-]

[-]

[-]

[-]

122.2

71.3

133.4

120.4

106.5

122.2

102.7

121.3

130.3

146.9

2,780

3,830

1,372

1,327

1,360

631

656

920

(persons)

Total shareholder return(%)

Comparative
benchmark: TOPIX(dividends included)(%)

Highest share price

7

(yen)

* 1,997
1,872
Lowest share price

(yen)

2,371
* 630

Note 1: Net sales does not include consumption tax, etc.
Note 2: The number of temporary employees indicates the average number during therelevant period.
Note 3: The “number of common stock at the end of the fiscal year used for
calculation of net assets per share” and the “average number of shares ofcommon stock during the fiscal period used as the basis for calculation of net
profit per share,” which are used as the basis for calculation of the per-share
information, excludes the number of Target Company Shares held by therelevant trust as the trust assets for the board benefit trust (BBT) and theemployee stock ownership plan (J-ESOP).
Note 4: Effective as of July 1, 2018, the Target Company conducted a share split at
the ratio of two shares per share. “Net assets per share,” “net profit per
share,” and “profit per share after adjusting for potential shares” were
calculated based on the assumption that the share split was conducted at the
beginning of the 28th fiscal year. In addition, a dividend of 45 yen per sharein the 29th fiscal year is the sum of (i) an interim dividend of 30 yen per share
before the share split and (ii) a year-end dividend of 15 yen per share after theshare split. If these amounts of dividends are converted into the relevant
amounts before the share split, the amount of the year-end dividend is 30 yen
and the amount of the annual dividend is 60 yen.
Note 5: The Target Company is subject to the Partial Amendment to the “AccountingStandards for Tax Effect Accounting” (ASBJ Statement No. 28; February 16,2018), etc. from the beginning of the 30th fiscal year, and therefore its major
business indices, etc. for the 29th fiscal year are stated in figures after
retrospectively applying those accounting standards, etc.
Note 6: The highest and lowest share prices are those quoted on the TSE JASDAQ(Standard) Market.
112

In addition, figures stated with an * mark indicate the highest and lowest shareprices after ex-rights due to the share split (making one share to two shares)on July 1, 2018.

113