[Translation]
February 12, 2020
To whom it may concern:
Company name
Representative

Toshiba Machine Co., Ltd.
Takahiro Mikami
President and Chief Operating Officer(Code: 6104, First Section of the Tokyo Stock Exchange)
Contact person
Yoshiaki Kai
Corporate Strategy Department Senior Manager(TEL: +81-55-926-5072)

Notice of Expression of Opinion (Opposition) Regarding
the Tender Offer for the Company Shares by City Index Eleventh Co., Ltd. andHolding of Shareholders’ Will Confirmation Meeting
With the “Notice of (Withholding of) Expression of Opinion Regarding the Tender Offer for theCompany Shares by City Index Eleventh Co., Ltd.” dated January 28, 2020, regarding the tender offer
for the Company Shares (the “Tender Offer”) commenced on January 21, 2020 by City Index EleventhCo., Ltd. (the “Tender Offeror”), a subsidiary of Office Support K.K. (“Office Support”), the Company
announced that it would withhold expressing its opinion at the time. The Company announces that
the Company’s board of directors, at its meeting held today (February 12, 2020), resolved to express
its opinion opposing the Tender Offer.
Shareholders are requested not to tender in the Tender Offer, and those shareholders who have alreadytendered in the Tender Offer are requested to promptly cancel the agreements related thereto.
The Tender Offer was commenced without complying with the Response Policies introduced by theCompany as of January 17, 2020 (as defined in “(1) Introduction of the Response Policies andbackground and reason that led to the decision to hold the Shareholders’ Will Confirmation Meeting”
of “6. Response policies pertaining to basic policies regarding control of the Company” below;
hereinafter the same). In line with the purpose of the Response Policies to let the shareholders
determine whether to accept the large-scale purchase actions for the Company’s shares, theCompany’s board of directors determined to hold an extraordinary shareholders meeting to confirm
the shareholders’ will (the “Shareholders’ Will Confirmation Meeting”) regarding the Response
Policies and the implementation of the countermeasures (allotment of share options without
contribution subject to discriminatory exercise conditions and acquisition clause) thereon on March
27, 2020. Details of the Shareholders’ Will Confirmation Meeting will be announced promptly after
a formal convocation decision is reached.
In the letter dated January 24, 2020, the Company already requested that the Tender Offeror extend thetender offer period to sixty business days (make April 16, 2020, the date of the end of the tender offer
period). However, the tender offer period has not yet been extended as of today. Therefore, as
announced in the “Notice Concerning Request for Extension of the Tender Offer Period” dated today,
the Company requested again to Office Support in the letter dated today to extend the tender offer
period to sixty business days, with a deadline of noon of February 19, 2020, which is five businessdays from today. If the Tender Offeror extends the tender offer period in response to such request,
the Shareholders’ Will Confirmation Meeting will be held during the tender offer period.

1.

Outlines of the Tender Offeror(1) Name
City Index Eleventh Co., Ltd.
(2) Location
22-14, Higashi 3-chome, Shibuya-ku, Tokyo(3) Title and Name of
Hironao Fukushima, Representative Director
Representative(4) Type of Business
Investment business and other businesses(5) Stated Capital
One million yen(6) Date of Incorporation
May 20, 2009(7) Major Shareholders and1. Office Support K.K.
66.50%
Shareholding Ratio (as2. Kabushiki Kaisha Minami-Aoyama Fudosan
33.50%of January 21, 2020)(8) Relationship between the Company and the Tender Offeror
Capital Relationship
The Tender Offeror does not own the shares of the Company;
however, Office Support K.K. and S-Grant. Co., Ltd., being
specially related parties of the Tender Offeror, own 1,576,200
shares (ownership ratio (Note 2): 6.53%) and 1,500,000 shares(ownership ratio: 6.21%), respectively, of the Company.
Personnel Relationship Not applicable.
Business Relationship
Not applicable.
Status of Applicability
Not applicable.
to the Related Parties(Note 1)

The above information is based on information contained in the tender offer statementthat was submitted by the Tender Offeror regarding the Tender Offer on January 21,
2020 (the “Tender Offer Statement”), or documents attached thereto, except for
information contained in “Personnel Relationship,” “Business Relationship,” and“Capital Relationship” of “(8) Relationship between Listed Company and the Tender
Offeror.”(Note 2)

According to the Tender Offer Statement, the term “ownership ratio” refers to the ratioof shares owned by each shareholder against 24,135,231 shares, which is (a) the total
number of issued shares (29,977,106 shares) as of September 30, 2019, as set forth in
the 97th Term - Second Quarter Report filed by the Company on November 8, 2019,
after deducting (b) treasury shares (5,841,875 shares) owned by the Company as of
September 30, 2019, as set forth in the “Summary of Consolidated Financial Results
for the Six Months Ended September 30, 2019 (Based on Japanese GAAP)” publishedby the Company on November 8, 2019. In calculating such number, fractions arerounded to the second decimal place.

2.

Tender offer price
3,456 yen per common share

3.

Opinion regarding the Tender Offer, and basis and reasons thereof(1)

Opinion regarding the Tender Offer
The Company’s board of director resolved to oppose the Tender Offer at its meeting held
today. Therefore, shareholders are requested not to tender in the Tender Offer, and thoseshareholders who have already tendered in the Tender Offer, are requested to promptly cancel
the agreements regarding the Tender Offer.

-2-

In the letter dated January 24, 2020, the Company already requested that the Tender Offeror
extend the tender offer period to sixty business days (make April 16, 2020, the date of the endof the tender offer period). However, the tender offer period has not yet been extended as oftoday. Therefore, as announced in the “Notice Concerning Request for Extension of theTender Offer Period” dated today, the Company requested again to Office Support in the letter
dated today to extend the tender offer period to sixty business days, with a deadline of noon of
February 19, 2020, which is five business days from today.
If the Tender Offeror extends the tender offer period to sixty business days (at least 47
business days or longer) in response to such request, the Company will consult theshareholders at the Shareholders’ Will Confirmation Meeting regarding the Response Policies
and propriety of the countermeasures based on the Response Policies. If the shareholders
approve the Response Policies and the implementation of the countermeasures, the Company’sboard of directors shall trigger the countermeasures while fully respecting the opinions of the
Independent Committee, pursuant to the shareholders’ will. If any of the proposals above is
not approved, the Company’s board of directors will not trigger the countermeasures pursuant
to the shareholders’ will.
On the other hand, if the Tender Offeror fails to extend the tender offer period for the Tender
Offer up to and including the above deadline of noon of February 19, 2020, or if the extended
tender offer period is 46 business days or shorter (date of the end of the tender offer period is
March 27, 2020 or earlier), the time necessary for the shareholders to contemplate whether toaccept implementation of the Large-scale Purchase Actions, etc., based on information
disclosed by the Large-scale Purchaser, cannot be secured. In addition, the opportunity toconfirm the shareholders’ will in advance may not be secured. Therefore, in such cases, theCompany’s board of directors will trigger the countermeasures unless there are special
reasons, without holding the Shareholders’ Will Confirmation Meeting, while fully respecting
the opinions of the Independent Committee. However, in such cases, the Company will holdthe Shareholders’ Will Confirmation Meeting on March 27, 2020 to subsequently confirm theshareholders’ will, even after triggering the countermeasures.
For details of the Shareholders’ Will Confirmation Meeting, please see “6. Response policies
pertaining to basic policies regarding control of the Company” below.
(2)

Basis and reasons for opinion regarding the Tender Offer(i)

Basis for opinion regarding the Tender Offer

The Tender Offeror announced to commence the Tender Offer as of January 21, 2020. The
Tender Offer was commenced without any notice to or contact with the Company regarding
the purpose of the Tender Offer and the specific management policies intended after theTender Offer, although Office Support, a parent company of the Tender Offeror, sent to theCompany a letter dated January 10, 2020, and e-mails dated January 12 and 16, 2020, each ofwhich referred to the fact that it was considering conducting the Tender Offer.
Based solely on information that the Company has gathered until January 28, 2020, including
the content described in the Tender Offer Statement, no substantial explanation was made, andthe details were unclear for many matters that are deemed important when evaluating andconsidering the propriety of the Tender Offer and its conditions, such as: the purpose of theTender Offer; details of the specific management policies of the Company contemplated by theTender Offeror to be pursued after the Tender Offer; details of maximization of the Company’s
corporate value and the shareholders’ common interests; and details of improvement of thecorporate governance; and the basis for the tender offer price in the Tender Offer (the “Tender
Offer Price”).

-3-Accordingly, regarding matters such as the propriety of the Tender Offer and its conditions, theCompany’s board of directors believed that it should continue making efforts to gather
information on the Tender Offer and the Tender Offeror in order for the Company to form an
opinion regarding the Tender Offer after carefully evaluating and considering it from theperspective of maximization of the Company’s corporate value and the shareholders’ common
interests.
Therefore, the Company has decided that it should timely gather accurate information
regarding the Tender Offer and the Tender Offeror by means of posing questions to the Tender
Offeror in a target company’s position statement based on a system set forth in the Financial
Instruments and Exchange Act (Law No. 25 of 1948; as amended; the “Act”). Accordingly,
at its board of directors meeting held on January 28, 2020, the Company resolved to submit atarget company’s position statement containing questions directed at the Tender Offeror.
Meanwhile, the Company resolved that it would withhold expressing its opinion regardingwhether to accept the Tender Offer presently. One reasons for this is that it will be necessary
to continue carefully evaluating and considering the propriety of the Tender Offer. And
another reason is that even though, as stated in the “Notice Concerning Establishment of
Independent Committee and Appointment of Independent Committee Members” dated
January 17, 2020, the Company established, when introducing the Response Policies, anIndependent Committee comprising entirely of outside directors independent from theCompany and the Tender Offeror to prevent arbitrary decision-making by the Company’sboard of directors and ensure fairness and transparency of the Response Policies, andconsulted the Consulted Matters (as defined in “(ii) Establishment and recommendations of
the Independent Committee” of “(5) Measures to ensure fairness and measures to avoid
conflicts of interest” below; hereinafter the same). As of January 28, 2020, the Independent
Committee has not indicated a final decision regarding the Tender Offer.
Thereafter, in response to the Company’s questions above, the Tender Offeror submitted thetender offeror’s answer (the “Tender Offeror’s Answer”) to the Director-General of Kanto
Local Finance Bureau on February 4, 2020. The Company evaluated and considered theTender Offeror’s proposals in detail based on the Tender Offeror’s Answer, and information on
the Tender Offer and the Tender Offeror collected by the Company.
The Company appointed several external experts (IR Japan, Inc., PwC Advisory LLC, andNishimura & Asahi) as external advisors and receives their advice, etc. in expressing theCompany’s opinions regarding the Tender Offer.
The Independent Committee has independently appointed external experts (GCA Corporation
and TMI Associates) as external advisors separately from the Company’s respective external
advisors. The Independent Committee was held on January 24, 2020, January 27, 2020,
February 6, 2020, February 11, 2020, and today (February 12, 2020). The Independent
Committee (i) commenced deliberation on the Consulted Matters and appointed the external
experts above as external advisors on January 24, 2020, (ii) deliberated on and recommended
that the Company withhold expressing its opinion on the Tender Offer, and submit questions to
the Tender Offeror, on January 27, 2020, and (iii) deliberated on the Consulted Matters after
consideration of the Tender Offeror’s Answer submitted by the Tender Offeror, on February 6,2020 and February 11, 2020.
Then, today, the Independent Committee unanimously recommended to the Company’s boardof directors that it is appropriate for the Company to express its opinion opposing the Tender
Offer. In response to this recommendation, at the Company’s board of directors meeting held
today, it was unanimously resolved by attending directors to express its opinion opposing theTender Offer.

-4-

(ii)

Reasons for opinion regarding the Tender Offer

The Company opposes the Tender Offer for the following reasons. First, implementation of
the substance of the new mid-term management plan (between FY2019 and FY2023)
proposed by the Company to the shareholders enhances the Company’s corporate value andshareholders’ common interests. Second, the Tender Offeror group has not shared any
management policies for the Company for after the Tender Offer, and instead, it is likely that
the Company’s corporate value and shareholders’ common interests will be impaired by theTender Offer and the shareholder value enhancement plan proposed by the Tender Offerorgroup. Third, the Tender Offer neglects to follow any of the procedures stipulated in the
Response Policies, and will be implemented using coercive methods, and slights theshareholders’ will. Specific details of the decision are as follows:(i)

Execution of new mid-term management plan (between FY2019 and FY2023)
formulated by the Company contributes to the Company’s medium to long-term
corporate value and the shareholders’ common interests
The Company formulated a three-year mid-term management plan, the “Revolution E10 Plan” (“RE-10”), for the period between FY2019 and FY2021, which wasannounced on May 15, 2019, and implemented it with the basic policy of enhancing
corporate value through enhanced profitability, strengthened product appeal, andgrowth investments.
However, due to intensified US-China trade friction, the entire machine industry is
faced with a fall in receiving orders since the Lehman Shock, and there is an
unprecedented decrease in orders received by the Company, and enhancement of
profitability is a pressing need, and a rebirth from low profit structure to a profitablecompany became necessary. The Company determined that while enhancement of
profitability of the core business became a pressing need, one-step further structuralreform and securing of the revenue source was necessary, and sold all shares of
NuFlare Technology Inc. (“NFT”), the Company’s affiliate, on January 16, 2020.
However, due to the sale of the NFT shares, because equity interests were lost andprofitability declined further, in addition to the structural reform, rebirth as a profitablecompany through drastic revision of investment strategies and financial strategies wasconsidered essential.
Under such circumstances, the Company’s board of directors proceeded withdiscussion of significant revisions to “RE-10,” with core members being independent
outside directors who occupy six out of eleven seats of the board of directors, and inorder to proceed further toward the next era, and to be reborn as a new company, theCompany’s board of directors formulated and announced a new mid-term
management plan (between FY2019 and FY2023) (the “Management Reform Plan”)
on February 4, 2020.
The Company set, as a quantitative target, the realization of sales of 135 billion yen,an operating profit ratio of 8.0%, a payout ratio prospect of 40% (during the period of
the Management Reform Plan), and ROE of 8.5% in fiscal year 2023 as new“Shibaura Machine” based on the Management Reform Plan.
In addition, to realize the quantitative target, the Company will enhance profitability
and capital efficiency through the specific measures (a) through (d) and the investment
plan/financial strategy in (e) below.

<Management reform centered on reorganization>

-5-

(a)
(b)
(c)

Abolishment of the “division system” which produced specific optimization issues,
and adoption of a “company system”
Establishment of an “R&D Center” and a “Production Division” which bearenhancement of production efficiency and QCD (Quality, Cost, Delivery) as common
functions.
Implementation of personnel relocation and voluntary retirement toward optimal
resource allocation and reduction of fixed costs.

<Promotion of investments in response to areas of growth>(d)Promotion of growth investments aimed for expansion of purposes to fields expected
to grow in the future(Specifically, constructing a business portfolio with energy fields and productivity
enhancement fields as an axis of growth, and promoting growth investments intechnology fields such as “environmental SDGs,” “CASE,” “automation/laborsaving,” and “IoT/AI.” New business opportunities will be pursued in fields such as(a) development of new materials for renewable energy and large thin parts, in
response to making automobiles into EVs at the Molding Machine Company, (b)responses to mold demands in connection with the update of electronic devices
responding to 5G at the Machine Tools Company, and (c) development of verticalmulti-articulated robots and human-collaborative robots for the purpose of
productivity enhancement and solving personnel shortage at the Control MachineCompany.)<Implementation of financial strategies aimed for enhancement of return on equity (ROE)>(e)

Enhancement of profitability and capital efficiency after allocation of cash-on-hand toinvestments towards change into a profitable company
To achieve sales of 135 billion yen, and ROE of 8.5%, as uses of cash flow between
FY2019 and FY2023, with operating cash flow, proceeds from sale of NFT shares,
and cash-on-hand being the resources, the Company has a policy to spend 3 billion
yen on structural reform expenses, 25 billion yen on capital investment, 2 billion yen
on R&D/personnel investment, and 15 billion yen on shareholder returns throughdividends (including special dividends) (In the next year, the Company plans to pay 3
billion yen of special dividends during the period up to the payment of interim
dividends which eliminate the impact on the TOB, in addition to regular dividends atthe same level as this fiscal year), and to use the remaining cash flow to appropriate
M&A (including borrowing according to the scale of projects). Regarding M&As
and external alliances, a “M&A Promotion Division” will be newly established, andthe Company will promote investments after ascertaining themes to enhance thebusiness value of each company, such as expansion of sales channels, technology
support, and creation of new businesses.
Through implementation of the specific measures stated above based on theManagement Reform Plan, the Company intends to make full efforts to realize sales of
135 billion yen, operating profit ratio of 8.0%, payout ratio prospect of 40%, and ROEof 8.5% in fiscal year 2023, and to enhance the Company’s corporate value andshareholders’ common interests.
As stated in the Response Policies, the Company’s corporate governance system wasshifted to a corporate governance system based on the so-called monitoring model by
a company with an audit and supervisory committee, as of June 21, 2019. Currently,-6-the Company’s board of directors comprises eight directors (including four outside
directors and excluding directors who are audit and supervisory committee members)
and three directors (including two outside directors) who are audit and supervisorycommittee members. Six directors, which is a majority of the total of eleven board
members, are independent outside directors. By shifting to a company with an audit
and supervisory committee, and the structuring of a corporate governance system withthe majority of the board of directors comprised of independent outside directors,
decision-making for business execution was further accelerated, and the audit andsupervisory functions of the board of directors were further strengthened. The
Company shall securely realize the Management Reform Plan, which is a promise to
the shareholders, with prompt decision-making and appropriate audit and supervisionof the Company’s board of directors, under the corporate governance system describedabove, which was newly constructed in June 2019.
For details of the Management Reform Plan, please see “Notice Concerning Reviewof the Mid-Term Management Plan and Establishment of a Management Reform Plan”
announced by the Company on February 4, 2020.
(ii)

The Tender Offeror group fails to provide the Company’s management policies to be
pursued after the Tender Offer, and the Tender Offer and the shareholder valueenhancement plan proposed by the Tender Offeror group will likely prejudice theCompany’s corporate value and the shareholders’ common interests(a)

The Tender Offeror group fails to provide the Company’s management policies to be
pursued after the Tender Offer, and the manner of the Tender Offeror group’s
involvement in the Company’s business management is entirely unclear
According to the Tender Offer Statement, as of the filing date of the Tender Offer
Statement, although the Tender Offeror does not own any Company shares, Office
Support and S-Grant Co., Ltd. (“S-Grant”) (which are specially related parties of theTender Offeror) (the Tender Offeror, Office Support, and S-Grant are collectively
referred to as the “Tender Offeror Group”) own 1,576,200 Company shares(ownership ratio: 6.53%) and 1,500,000 Company shares (ownership ratio: 6.21%)
respectively, which means that the Tender Offeror Group owns 3,076,200 Company
shares (ownership ratio: 12.75%) in total. According to the Tender Offer Statement,
the Tender Offeror reached an oral agreement with Office Support and S-Grant(collectively, the “Non-tendering Shareholders”) that the Company shares owned by
the Non-tendering Shareholders (3,076,200 shares, ownership ratio: 12.75%) would
not be tendered in the Tender Offer, and the total number of Company shares to beowned by the Tender Offeror Group through the Tender Offer will be
10,576,200 shares (ownership ratio: 43.82%) at the maximum.
If the Tender Offeror Group becomes the owner of 10,576,200 Company shares(ownership ratio: 43.82%) through the Tender Offer, its voting right exercise ratio at
the Company’s shareholders meetings will obviously entitle the Tender Offeror Groupto determine the ordinary resolutions at the Company’s shareholders meetings andgrant it substantial control over the Company. Therefore, the Company believes that
the Company’s management policies envisaged by the Tender Offeror must bepresented in the Tender Offer. In this respect, the Tender Offeror commented in its
response to Question 5, Part 2 of the Tender Offeror’s Answer (page 24) that “wewould like the management of the Target [quoter’s note: the Company] to think ofraising the voting right exercise ratio with due consideration for its shareholders.”
However, if the Company may increase its voting right exercise ratio to the maximum
extent, the shareholder group owning 43.82% of voting rights will still have the rightto easily determine the ordinary resolutions at shareholders meetings, whether alone or-7-through coordination with other minority shareholders. As a note, the “Practical
Guidelines for Group Governance System” formulated on June 28, 2019 by the
Ministry of Economy, Trade and Industry states on page 117 that a party owning lessthan 40% of voting rights may be considered to substantially control the relevant
company if the actual voting right exercise ratio and all other factors are taken into
account.
Nevertheless, the Tender Offeror maintains insistence on shareholder returns, such as
by stating in the Tender Offer Statement, “shareholder value of the Target [quoter’s
note: the Company] will be increased through releasing its internal reserve that is
considered unnecessary by such means as acquiring own shares.” The Tender
Offeror admits that it has no specific management policies for the Company to be
pursued after the Tender Offer by stating that it “does not intend to be involved in thebusiness management of the Target [quoter’s note: the Company] and would like thecurrent management of the Target [quoter’s note: the Company] to continue to assume
the business management.” Office Support stated in its January 27, 2020, e-mail that“the purpose of our tender offer targeting Toshiba Machine is not in acquiring its
management right, as we have set our prospective ownership ratio to 43.83% at the
maximum.” In “Our Shareholder Value Enhancement Plan for Toshiba Machine Co.,
Ltd.” sent by Office Support to the Company on the same date (the “Tender Offeror
Group’s Shareholder Value Enhancement Plan”) as well, Office Support asserts only
shareholder returns and does not present any management policies for the Company.
To begin with, the Tender Offer is being conducted in an unnatural manner where theTender Offeror is a subsidiary of Office Support instead of Office Support and S-Grant
that are currently shareholders of the Company (according to the Tender Offer
Statement, the capital relationship among Mr. Yoshiaki Murakami (“Mr. Murakami”),
Ms. Aya Nomura (Mr. Murakami’s eldest daughter and a shareholder of the Company
until January 14, 2020), and the Tender Offeror group is as provided in the Exhibit 1
hereto). The prospective corporation or individual who will be involved in the
Company’s business management, and the manner of involvement, are entirely
unclear; and the party responsible for such corporation or individual’s comments is
ambiguous. The Tender Offeror’s response to Question 8, Part 1 of the Tender
Offeror’s Answer (page 16) also shows that the Tender Offeror Group obviously
avoids disclosing its purpose to intentionally have the Company shares divided among
three companies.
Considering, among other factors, that Ms. Aya Nomura transferred all Company
shares to S-Grant immediately before the Tender Offer, Company shares may likely betransferred between corporations over which Mr. Murakami exercises influence.
There is an undeniable possibility that such act may: cast uncertain influence over theCompany’s corporate value; increase non-transparency in the prospective corporation
or individual who will be involved in the Company’s business management, and themanner of involvement; and prevent the maximization of the Company’s medium- tolong-term corporate value and the shareholders’ common interests.
The Tender Offeror Group further fails to provide any management policies in theTender Offeror’s responses to Question 21, Part 2 of the Tender Offeror’s Answer(page 33), and to Questions 1 and 4, Part 6 of the Tender Offeror’s Answer (pages 36
and 37). In response to the Company’s question regarding management policies, theTender Offeror only maintained that “it does not intend to acquire the management
right,” and “the business management must be executed in the interest of enhancing
the shareholder value for all shareholders of the Target [quoter’s note: the Company].”
The Tender Offeror Group also does not refer to the Company business from a
professional point of view in its letters or other communications to the Company.

-8-

According to the response to Question 13, Part 1 of the Tender Offeror’s Answer(page 17), the Tender Offeror Group has not been involved in any business, or
corporate management, related to the Company business. As the Tender Offeror
Group admits that “we have been making investments with the basic policy of
entrusting, as a general rule, the business operations of our investment targets to their
management” in its response to Question 14, Part 1 of the Tender Offeror’s Answer(page 18), the Tender Offeror Group obviously does not understand the substance of
the Company business or the industrial machinery industry to which the Company
belongs.
As discussed above, the Tender Offeror Group attempts to acquire substantial control
over the Company after the Tender Offer; but it has not presented the Company’s
management policies to pursue after the Tender Offer, the manner of the Tender
Offeror Group intending to be involved in the Company’s business management
remains entirely unclear, and the Tender Offeror Group does not even slightly
understand the substance of the Company business or the industrial machineryindustry. Therefore, if the Tender Offeror Group ever acquires control over theCompany, it is easily envisaged that the Company’s daily business operations to date
will be materially prejudiced; and this will damage its business partners, customers,
and employees. It is also easy to anticipate that this will materially adversely affectthe amicable relationship that the Company has developed with its business partners,
customers, and employees and damage the Company’s corporate value and theshareholders’ common interests.
(b)

The background to the Tender Offer also suggests that the Tender Offeror does notintend to pursue enhancing the Company’s corporate value but its interest lies solelyin acquiring cash for personal gain
The Tender Offeror explains in the Tender Offer Statement that the purpose of theTender Offer is in “achieving enhancement of the Company’s corporate value andROE.” However, the Tender Offeror Group states, in relation to the Company’s
management system after the Tender Offer, that “as long as the management of theTarget [quoter’s note: the Company] pursues business management contemplating the
maximization of its shareholder value, we do not intend to be involved in the business
management of the Target [quoter’s note: the Company] and would like the current
management of the Target [quoter’s note: the Company] to continue to assume thebusiness management,” and it fails to explain how it intends to use the control over theCompany to be substantially acquired through the Tender Offer for “achieving
enhancement of the Company’s corporate value and ROE.” Accordingly, not only is
the purpose of the Tender Offer extremely unclear, but it is also even doubtful that theTender Offeror intends to pursue the enhancement of the Company’s corporate value.
The Company has had dialogues with the Tender Offeror Group until a subsidiary ofToshiba Corporation (“Toshiba”), Toshiba Electronic Devices & Storage Corporation(together with Toshiba, “Toshiba et al.”) announced a tender offer on November 13,
2019 for shares in the Company’s affiliate, NFT (the “Tender Offer for NFT”). This
included the Tender Offeror Group sending a total of five letters to the Company, andfour meetings in total being held between the Company and the Tender Offeror Group.
During those dialogues, the Tender Offeror Group requested that the Company:(i) clearly explain to its shareholders the level of funds that it needs to retain as areserve among its internal reserve (cash and deposits: 25.5 billion yen, strategicallyheld shares: 6.7 billion yen, and NFT shares: 12.2 billion yen, respectively, as of theend of the fiscal year ended March 2019); and then (ii) return to its shareholders theremainder thereof after deducting the required portion, or specifically, enhance its
shareholder value and ROE by acquiring its own shares or making distributions worth-9-approximately 30 billion yen (the Tender Offeror Group had requested shareholder
returns of approximately 40 to 50 billion yen until May 2019).
For example, the Tender Offeror Group wrote in its April 18, 2019 letter that “there
are unlikely to be investment targets in realistic terms that are less expensive and more
attractive for the management members of your company [quoter’s note: theCompany] than the Company’s own shares.” It particularly emphasized that theCompany shares were traded at a PBR of 0.6 to 0.7 times, and stated that theCompany had no measures (such as capital investments and M&As) available to itother than acquiring its own shares or making distributions. The Tender Offeror
Group also questioned in its May 20, 2019 letter whether the investments referred toin the Company’s medium-term management plan would “better contribute toenhancing the corporate value of your company [quoter’s note: the Company] rather
than acquiring its own shares.” It then stated that “our company and other numerous
institutional investors will object to the director election proposal at the shareholders
meeting of your company [quoter’s note: the Company] unless it generates profits
satisfying the criterion of an 8% IRR” and implicitly requested that the Company
acquire its own shares by suggesting exercising voting rights.
In this way, the Tender Offeror Group requested that the Company enhance its
shareholder value and ROE during its dialogues with the Company to date, while only
claiming that the Company acquire its own shares or make distributions, as the
specific method therefor. This inevitably suggests that the Tender Offeror Group isadhered to gaining cash through shareholder returns by the Company.
After the Tender Offer for NFT by Toshiba et al. was released on November 13, 2019
and the Tender Offeror Group learned that the Company was discussing selling NFT
shares with Toshiba et al. who were joint holders of NFT shares, the Tender Offeror
Group requested on November 15, 2019, through Mr. Murakami who had substantial
control over the Tender Offeror Group, that the Company hold discussions with
Toshiba et al. so that the Company would not tender shares in the Tender Offer for
NFT by Toshiba et al. but would instead implement a scheme that involved NFT
making a tender offer for its own shares or a special dividend payout (the “Tender
Offeror Group-Proposed Scheme”). Mr. Murakami also personally informed NFT
and Toshiba et al. of a proposal over the phone that they change their scheme to theTender Offeror Group-Proposed Scheme. According to the Tender Offeror, theadvantage of the Tender Offeror Group-Proposed Scheme was that the Company
would benefit from tax advantages of approximately 3.2 billion yen as opposed totendering in the Tender Offer for NFT if it changed its plan to, and tendered in, theTender Offeror Group-Proposed Scheme through discussions with Toshiba et al. and
NFT, while the Company would be subject to capital gains taxes of approximately
6.3 billion yen if it tendered in the Tender Offer for NFT. Then, the Tender Offeror
Group demanded that the Company discuss with Toshiba et al. to change its plan to
the Tender Offeror Group-Proposed Scheme for the benefit of such tax advantages,
persistently until it sent its letter on January 10, 2020. That said, it would not beappropriate at least for the Company to proactively request that Toshiba et al. or NFT
change their plans to the Tender Offeror Group-Proposed Scheme, in light of legal
compliance or the Company reputation, due to the following reasons: (i) the Tender
Offeror Group-Proposed Scheme may be legally questionable in light of theuniformity of tender offer prices required by the restrictions on tender offer, in that theCompany will benefit from greater favorable treatment on an after-tax proceeds basis
compared to other general NFT shareholders; and (ii) in cases where some of the
major shareholders benefit from tax advantages by adopting a share buyback or othersimilar scheme, a method will be normally selected to return those advantages equally
to other general shareholders. Notwithstanding such issues, the Tender Offeror- 10 -

Group has been persistently requesting a change to the Tender Offeror GroupProposed Scheme. This and the Tender Offeror Group’s adherence to acquiring cash
through the Company’s shareholder returns as stated above suggest that the Tender
Offeror Group has been keenly interested in the Company’s shareholder returns
anticipated after the Tender Offer for NFT, and in acquiring cash for personal gain as aresult thereof.
The Tender Offeror Group also requested after HOYA Corporation (“HOYA”) released
an advance notice of tender offer for NFT shares on December 13, 2019 (the “HOYA
Tender Offer”), that the Company request that HOYA adopt the Tender Offeror GroupProposed Scheme. It also repeated its request that the Company discuss with Toshiba
et al. conducting a tender offer by the Tender Offeror Group-Proposed Scheme.
Although the Tender Offeror Group had been consistently requesting the enhancementof shareholder returns and ROE as stated above since November 22, 2018 when it had
its first meeting with the Company, it was extremely rare that methods other than the
Company acquiring its own shares or making distributions were discussed;
accordingly, specific measures to enhance corporate value commensurate with thesubstance of the Company’s business or its management plans were hardly everdiscussed. Given such background, the Tender Offeror Group apparently does not
aim to enhance the Company’s shareholder value through managing the Company
together with its management. Moreover, the Tender Offeror Group admits that it
will not be involved in the Company’s business management, as explained in “(a) The
Tender Offeror Group fails to provide the Company’s management policies to be
pursued after the Tender Offer, and the manner of the Tender Offeror Group’s
involvement in the Company’s business management is entirely unclear” above. The
Tender Offeror Group’s attempt to acquire substantial control through the Tender
Offer also inevitably suggests that it aims to seek to acquire cash and profit for
personal gain by having the Company acquire its own shares or make distributions,
under the pretext of shareholder return or ROE enhancement.
Although the Tender Offeror Group claims to have continued dialogues with theCompany for approximately one and a half years, it does not sufficiently understandthe substance of the Company business, nor has it offered any response regarding
specific measures to enhance shareholder value or ROE other than by having theCompany increase dividends or acquire its own shares, as shown in the response to
Question 4, Part 2 of the Tender Offeror’s Answer (page 23). This proves that theTender Offeror Group’s interest does not extend to matters other than the Company
acquiring its own shares or making distributions.
Given the foregoing and the points discussed in “(a) The Tender Offeror Group fails toprovide the Company’s management policies to be pursued after the Tender Offer, andthe manner of the Tender Offeror Group’s involvement in the Company’s business
management is entirely unclear” above, the Company has concluded that the purposeof the Tender Offer lies in achieving objectives such as changing the Company’s
management policies as it desires (including implementing extremely short-term andradical means of shareholder returns) through acquiring substantial control over theCompany with minimum funds by coercive tender offering limiting the number ofshares to be purchased (please see “(b) The Tender Offer is of a coercive nature” in“(iii) The Tender Offer neglects the shareholders’ will” below). The Company isconcerned that this will likely impede the implementation of growth investments.
Accordingly, the Company considers that its shareholders will be (i) given an
opportunity to sell a limited number of Company shares while continuing to hold theremainder of the Company shares; and (ii) exposed to the risk of the Company’s
corporate value and the shareholders’ common interests being prejudiced by- 11 -

involvement in the Company’s business management by the Tender Offeror Groupafter acquiring substantial control over the Company.
(c)

The Tender Offer for the Company and the Tender Offeror Group’s Shareholder Value
Enhancement Plan will likely prejudice the Company’s corporate value in light ofprevious investment cases of corporations over which Mr. Murakami exercises
influence
In addition to the above, the Tender Offeror Group and the corporations over which
Mr. Murakami exercises influence previously made the investments listed in Exhibit 1
to the “Notice Concerning the Company’s Response Policies for the Advance Noticeof the Tender Offer of the Shares of the Company from Office Support K.K.” dated
January 17, 2020 (the “Response Policies Press Release”).
Specifically, thecorporations over which Mr. Murakami exercises influence earned a massive amountof profit by: (i) purchasing a large number of shares in Accordia Golf Co., Ltd.
(“Accordia”) in a short period and (ii) during the period of about one year and ten
months since the commencement of the acquisition of Accordia shares, applying
pressure on Accordia in various ways including the demand for convocation of an
extraordinary shareholders meeting, and successfully causing Accordia to purchase its
own shares at a high price through a TOB, and also to agree to distribute large
shareholder returns. The corporations over which Mr. Murakami exercises influencealso purchased a large number of shares in Kuroda Electric Co., Ltd. (“Kuroda
Electric”) in the market and applied pressure including by submitting a shareholder’s
proposal to Kuroda Electric “... in a manner to intimidate the management memberspresent” and “overbearing behavior that was beyond the level of normal dialogue”(see the press release titled “Sequence of Events Leading to the Opinion of the Boardof Directors of the Company on the Shareholder Proposal” dated June 7, 2017, by
Kuroda Electric). As a result, they successfully dispatched one outside director to
Kuroda Electric. Although they thereafter purchased additional Kuroda Electricshares, they reached an agreement to sell all shares in Kuroda Electric that they had,
only four months after they dispatched the outside director to Kuroda Electric, andactually sold all these shares only four months after that. As a result, they made asignificant amount of profit from these transactions.
Further, the Court found that the corporations over which Mr. Murakami exercised
influence had purchased a large number of shares in Yorozu Corporation (“Yorozu”),
with intentions to benefit from a significant amount of profit by placing Yorozu’s
management under pressure, and earning a resale gain by causing Yorozu or its relatedcompanies to purchase at high prices the large number of shares purchased in a shortperiod, similar to what Reno, Inc. (“Reno”) (or any other corporate entity under the
powerful influence of Mr. Murakami) had done in the past to corporations it invested
in, as stated in Exhibit 1 to the Response Policies Press Release. The Court found thelikelihood of attempts to abolish the takeover defense measure that stood in the way(the Yokohama District Court decision on May 20, 2019 (page 118 of the Siryoban
Shojihomu No. 424); the “Yokohama District Court Decision on Yorozu”).
The previous investment cases of corporations over which Mr. Murakami exercises
influence listed in Exhibit 1 to the Response Policies Press Release, and the facts
found in the Yokohama District Court Decision on Yorozu obviously demonstrate thatthose corporations are skilled in earning a significant amount of profit by purchasing alarge number of shares, placing the relevant companies’ management under pressure
in various ways, and earning a resale gain by causing those companies or their relatedcompanies to purchase at high prices the large number of shares purchased in a shortperiod.

- 12 -

In the case of the Tender Offer as well, it is highly likely that, as with the Yorozu caseand other examples, the true intention of the Tender Offer for the Company and theshareholder returns proposed by the Tender Offeror Group is to benefit from a large
amount of profit by applying pressure on the Company management in various ways,
and to earn a resale gain by causing the Company or its related companies to purchaseat high prices the large number of shares purchased in a short period or to receive alarge amount of dividends, given factors including the following: (i) the background to
the dialogues in which the Tender Offeror Group persistently demanded shareholder
returns from the Company; and (ii) the Tender Offer was unilaterally commenced
without the Tender Offeror Group notifying or informing the Company managementin advance of the purpose of the Tender Offer or the specific management policies tobe pursued after the Tender Offer, or without observing the Response Policies thatprescribed the procedures to confirm the Company shareholders’ will at shareholders
meetings.
As discussed above, the previous investment cases of corporations over which
Mr. Murakami exercises influence suggest the undeniable possibility that the Tender
Offer for the Company and the Tender Offeror Group’s Shareholder Value
Enhancement Plan may prejudice the Company’s corporate value.
(d)

The Tender Offeror Group continually disregarded the Company’s request during the
dialogue process and when commencing the Tender Offer
The Company has had repeated positive dialogues with the Tender Offeror Group or
Mr. Murakami et al. to a reasonable extent in the interest of enhancing its medium- tolong-term corporate value in accordance with Principle 5-1 of the Corporate
Governance Code (Policy for Constructive Dialogue with Shareholders).
Specifically, the Company has had dialogues on eight occasions either in meetings orby teleconference since April 2018, including a meeting personally attended by
Mr. Murakami. Those occasions include five meetings attended by Takahiro
Mikami, President and Chief Operating Officer, and other directors or executive
officers of the Company. In addition to meetings and teleconferences, there wereconstant dialogues by e-mail exchange or telephone.
When the Tender Offeror Group requested that the Company discuss with Toshiba tochange its plan to the Tender Offeror Group-Proposed Scheme in connection with theTender Offer for NFT, the Company sincerely examined the Tender Offeror GroupProposed Scheme, including by obtaining advice and cooperation from external
advisors, although the Company eventually decided not to accept the Tender Offeror
Group’s request by considering that it would not be appropriate, at least for theCompany to proactively request that Toshiba et al. or NFT change their plans to theTender Offeror Group-Proposed Scheme, in light of legal compliance or theCompany’s reputation, due to the following reasons: (a) whether to change a plan to
the Tender Offeror Group-Proposed Scheme should be basically negotiated with
Toshiba et al. by NFT or its special committee on behalf of NFT’s generalshareholders, and the Company, being simply one of the NFT shareholders, should not
make any decision therefor proactively; (b) the Tender Offeror Group-Proposed
Scheme could be legally questionable in light of the uniformity of tender offer prices
required by the restrictions on tender offer, in that the Company will benefit fromgreater favorable treatment on an after-tax proceeds basis compared to other general
NFT shareholders; and (c) in other companies’ cases where some of the major
shareholders benefit from tax advantages by adopting a share buyback or other similar
scheme, a method will normally be selected to return those advantages equally to othergeneral shareholders.

- 13 -

However, the Tender Offeror Group commenced consideration of the Tender Offer for
the Company simultaneously with the Tender Offer for NFT being announced. After
Toshiba et al. declared its policy not to agree to increasing the tender offer price in theTender Offer for NFT or not to respond to the tender offer for NFT shares by HOYA,
the Tender Offeror Group unilaterally notified the Company abruptly on January 10,2020 of prospective implementation of a tender offer for the Company shares, together
with informing the Company that it should tender in the Tender Offer for NFT if theCompany would not change its plan to the Tender Offeror Group-Proposed Scheme.
Then, the Tender Offeror Group persistently requested that the Company discuss
therewith the shareholder value enhancement in a manner involving disclosure of
insider information subject to executing a confidentiality agreement.
The Company responded that it was unable to accept the request, explaining that:(i) allowing the Tender Offeror Group’s involvement in revising the Company’s
medium- to long-term management plan by disclosing confidential information thereto
under a confidentiality agreement would contravene the purpose of the fair disclosurerules by listed companies introduced upon the amendment of the Financial
Instruments and Exchange Act in 2017; and (ii) it might contravene the principle ofequal treatment of shareholders to disclose only to the Tender Offeror Group,
confidential information not disclosed to other institutional investors or shareholders.
The Company added that it was prepared to sincerely receive the Tender Offeror
Group’s opinions if they were made for constructive purposes to enhance theCompany’s medium- to long-term corporate value, similar to dialogues with otherinstitutional investors or shareholders. As for the Company’s medium-term
management plan, the Company informed the Tender Offeror Group that it would liketo hold discussions, as necessary, based on the details of revision after the Company’s
announcement thereof scheduled in February 2020.
However, the Tender Offeror Group refused the Company’s request without providing
due reasons and commenced the Tender Offer on January 21, 2020, without notifying
or informing the Company in advance of the purpose of the Tender Offer or the
specific management policies to be pursued after the Tender Offer and by disregarding
all procedures under the Response Policies that prescribed the procedures to confirm
the shareholders’ will at shareholders meetings, as set forth in “(a) The Tender Offer
was commenced disregarding the Response Policies” in “(iii)The Tender Offer
neglects the shareholders’ will” below.
Although the Tender Offeror Group criticizes the Company’s stance on the alleged
grounds of shareholder dialogue in the Tender Offer Statement and its response to
Question 16, Part 2 of the Tender Offeror’s Answer (page 30), the Company has held
sufficient dialogues to date with the Tender Offeror Group and Mr. Murakami et al. inaccordance with Principle 5-1 of the Corporate Governance Code (Policy for
Constructive Dialogue with Shareholders). It is the Tender Offeror Group that
refused the Company’s request without providing due reasons and forced the Tender
Offer to go ahead by disregarding the Response Policies aimed at the shareholders
making appropriate decisions according to their will. While the Tender Offerorstated that it “does not intend to be involved in the business management of the Target[quoter’s note: the Company] and would like the current management of the Target[quoter’s note: the Company] to continue to assume the business management” inconnection with the specific management policies to be pursued after the Tender Offer,as quoted in “The Tender Offeror Group fails to provide the Company’s management
policies to be pursued after the Tender Offer, and the manner of the Tender Offeror
Group’s involvement in the Company’s business management is entirely unclear”
above, the Company believes that there is no trust relationship with the Tender Offeror
Group that forced the Tender Offer to go ahead by refusing the Company’s request- 14 -

without due reasons. If the Tender Offeror Group in such a manner acquires
substantial control over the Company, its corporate value and the shareholders’common interests will inevitably be prejudiced.
(e)

The Tender Offeror Group may be in violation of the Foreign Exchange and Foreign
Trade Act and may not qualify as a major shareholder of the Company
The Company manufactures and sells regulated goods and technologies that require
advance notifications regarding inward direct investments under the Foreign Exchange
and Foreign Trade Act (the “FEFTA”)
In this regard, Mr. Murakami, a foreign investor (Article 26, paragraph 1 of the
FEFTA; hereinafter the same) residing in Singapore (the Tender Offeror admits that
Mr. Murakami is a foreign investor in its response to Question 2(8), Part 1 of theTender Offeror’s Answer (page 12)), attended meetings between the Company and
Office Support on two occasions. Mr. Murakami also personally commented asfollows openly in his interview article “Exclusive: Yoshiaki Murakami Discloses His
Aim for Hostile TOB Against Toshiba Machine” published in the Nikkei BusinessElectronic Version dated January 21, 2020: (i) “I have held Toshiba Machine sharesfor a long time. I have been requesting dialogues with the Company, but it has notagreed to do so. When I made an appointment for the first time, it was cancelled at
the last minute a few hours beforehand. I was able to meet the president only once,but thereafter he would not agree to a meeting. So far, I have had a chance to have
five meetings with the Company in total, and have sent letters to its board of directors
13 times”; (ii) (when asked whether he would seek an injunction if a takeover defense
measure was triggered) “Of course, I will. Corporate governance has been mylifework. I have devoted my life to it. Therefore, I will exhaustively think how toprevent a takeover defense measure to be triggered this time. As someone who hascommitted his life to corporate governance, I will use all means available and do mybest to ensure that such bad practice will not be repeated.”; and (iii) “If there arequestions for me, the Company can ask those questions during the TOB period under
the Financial Instruments and Exchange Act. If necessary, I am ready to have an
open discussion with the Toshiba Machine president on the Nikkei Business. I willanswer questions that he may have. I, too, have numerous questions that I would liketo ask. I will return to Japan from Singapore, if required for that purpose.”
Mr. Murakami also personally openly stated in his interview article “Hostile TOB
Against Toshiba Machine: Murakami’s New Proposal” published in the Nikkei
Business Electronic Version dated January 22, 2020: (iv) “There is no problem with
me if Toshiba Machine holds an extraordinary shareholders meeting to ask whether its
shareholders approve or disapprove the introduction of a takeover defense measure.
It should decide whether it is right or wrong at the meeting fair and square.”; and(v) “I do not mind extending the TOB period so the Company can hold a shareholders
meeting before the TOB ends.” This shows that Mr. Murakami himself issubstantively acting as a Company shareholder and tender offeror and is the principal
making investments in the Company and conducting the Tender Offer by using Office
Support, S-Grant and the Tender Offeror as his hands and feet. Office Support, SGrant and the Tender Offeror are each likely deemed a foreign investor (Article 27,
paragraph 13 of the FEFTA), no advance notification under the FEFTA has been, or
will likely be, filed for the acquisition and holding of at least 10% of the Company
shares by Office Support and S-Grant, nor for the Tender Offer by the Tender Offeror,on the grounds that the Tender Offeror Group does not fall under a foreign investor(see the response to Question 3, Part 1 of the Tender Offeror’s Answer (page 13)).
This strongly suggests that the Tender Offeror Group is in violation of the FEFTA.

- 15 -

The very fact that the Tender Offeror Group’s legal compliance awareness isquestionable casts doubt on its qualification to substantially control the Company,
being a listed company having numerous stakeholders and corporate social
responsibility for legal compliance. Further, the Company is concerned that its
corporate value and the shareholders’ common interests may be prejudiced by theCompany being forced to take action regarding the Tender Offeror Group’s violationof the FEFTA due to the Tender Offer.
(iii)

The Tender Offer neglects the shareholders’ will(a)

The Tender Offer was commenced disregarding the Response Policies
As stated in “(1) Background and reasons leading to the decision to introduce the
Response Policies and to hold the Shareholders’ Will Confirmation Meeting” in“6. Response policies pertaining to basic policies regarding control of the Company”
below, the Company’s board of directors resolved to introduce the Response Policies
at its January 17, 2020 meeting, as efforts to prevent the determination of theCompany’s financial and business policies from being controlled by an inappropriate
person in light of the Company’s basic policies (Article 118, item (iii), (b).2 of theRegulation for Enforcement of the Companies Act (Ordinance of the Ministry ofJustice No. 12 of 2006, as amended)). In introducing the Response Policies, theboard of directors also established an Independent Committee comprising three of theCompany’s independent outside directors in order to prevent the board of directors’
arbitrary decisions and to further enhance the fairness and objectivity of the operationof the Response Policies, as stated in “(ii) Establishment and recommendations of the
Independent Committee” below.
On the other hand, the Tender Offeror Group commenced the Tender Offer on
January 21, 2020, by only stating that it is considering conducting the Tender Offeragainst the Company in its communications such as its January 10, 2020 letter, and email on January 12 and 16, 2020. In doing so, the Tender Offeror Group did not
notify or inform the Company in advance of the purpose of the Tender Offer or the
specific management policies to be pursued after the Tender Offer, and disregarded allprocedures under the Response Policies that prescribed the procedures to confirm theshareholders’ will at shareholders meetings.
The Company considers that the Tender Offer having been commenced on January 21,
2020, disregarding all procedures under the Response Policies is clear proof of theTender Offeror Group neglecting the Company shareholders’ will, as the purpose of
the Response Policies is to secure sufficient information and time for the shareholders
to deliberate and make appropriate decisions and for the Company to ultimately
procure the opportunity to confirm the shareholders’ will overall at a shareholders
meeting, as stated in “(1) Background and reasons leading to the decision to introduce
the Response Policies and to hold the Shareholders’ Will Confirmation Meeting” in“6. Response policies pertaining to basic policies regarding control of the Company”
below.

(b)

The Tender Offer is of a coercive nature
The Tender Offer Statement shows that the Tender Offer has a limit on the number ofshares to be purchased, restricting the maximum number of shares to be purchased to7,500,000 shares (ownership ratio: 31.07%). Any number of shares exceeding thelimit will not be subject to the purchase and will be settled on a pro-rata basis.
Therefore, the Tender Offer does not warrant an opportunity for shareholders to sell at
the Tender Offer Price all the shares that they tender, and a certain number of the- 16 -

Company shareholders will inevitably remain its shareholders after the Tender Offer.
According to the Tender Offer Statement, as of the filing date of the Tender Offer
Statement, although the Tender Offeror does not own any Company shares, Office
Support and S-Grant (which are specially related parties of the Tender Offeror) own
1,576,200 Company shares (ownership ratio: 6.53%) and 1,500,000 Company shares(ownership ratio: 6.21%) respectively, which means that the Tender Offeror Groupowns 3,076,200 Company shares (ownership ratio: 12.75%) in total. According to
the Tender Offer Statement, the Tender Offeror reached an oral agreement with the
Non-tendering Shareholders that the Company shares owned by the Non-tendering
Shareholders (3,076,200 shares, ownership ratio: 12.75%) would not be tendered in
the Tender Offer; and the total number of Company shares to be owned by the Tender
Offeror Group through the Tender Offer will be 10,576,200 shares (ownership ratio:
43.82%) at the maximum.
In this connection, the Tender Offeror Group stated in its January 27, 2020, e-mail that“the purpose of our tender offer targeting Toshiba Machine is not in acquiring its
management right, as we have set our prospective ownership ratio to 43.83% at the
maximum.” It also repeated that it did not contemplate acquiring the Company’s
management right by the Tender Offer in its responses to Question 21, Part 2 of theTender Offeror’s Answer (page 33), and to Questions 1 and 4, Part 6 of the Tender
Offeror’s Answer (pages 36 and 37). However, if the Tender Offeror Group becomes
the owner of 10,576,200 Company shares (ownership ratio: 43.82%) through theTender Offer, its voting right exercise ratio at the Company’s shareholders meetings
will obviously entitle the Tender Offeror Group to determine the ordinary resolutions
at the Company’s shareholders meetings and grant it substantial control over theCompany, as stated in “The Tender Offeror group fails to provide the Company’s
management policies to be pursued after the Tender Offer, and the manner of theTender Offeror group’s involvement in the Company’s business management isentirely unclear” above.
If the Company shareholders believe that the Company’s corporate value will be
prejudiced under the control of the Tender Offeror Group, the aforementioned Tender
Offer conditions will incentivize those shareholders to elect to tender in the Tender
Offer despite unsatisfactory tender offer conditions, rather than remain minor
shareholders of the Company. This means that the Tender Offer will incentivize theshareholders objecting to a transfer of control to nonetheless tender in the tender offer;accordingly, it may be considered to be a typical coercive method. As stated in “The
Tender Offeror group fails to provide the Company’s management policies to be
pursued after the Tender Offer, and the manner of the Tender Offeror group’s
involvement in the Company’s business management is entirely unclear” above, theTender Offeror Group fails to provide any specific management policies to be pursued
after the Tender Offer, and the Company views that the Tender Offer and the Tender
Offeror Group’s shareholder value enhancement plan will likely prejudice theCompany’s corporate value and the shareholders’ common interests. The Tender
Offer will force those shareholders who agree to the Company’s view above to tenderin the Tender Offer.
The Tender Offeror Group refutes the coercive nature of the Tender Offer in theTender Offeror’s responses to Question 6, Part 2 of the Tender Offeror’s Answer(page 24), solely on the grounds that “the purpose is not in acquiring a majority ofvoting rights in the Target [quoter’s note: the Company].” However, conducting theTender Offer by relying on such formality logic and without envisaging any
management policies is the very cause of increasing concerns for coerciveness.

- 17 -

As discussed above, the Tender Offer largely involves concerns for coerciveness.
Even if there are shareholders who tender therein, it does not necessarily mean thatshareholders agree to the Tender Offer conditions or the transfer of control to theTender Offeror Group through the Tender Offer. The Company sees the need to set
an opportunity, apart from the Tender Offer, to confirm its shareholders’ will in a noncoercive environment and finds it appropriate to hold a Shareholders’ Will
Confirmation Meeting from that point of view.
(iv)

Conclusion
As discussed in the foregoing, the Company opposes the Tender Offer on the grounds
that (i) the Tender Offeror Group fails to provide any management policies to be
pursued after the Tender Offer, and the Tender Offer and the shareholder valueenhancement plan proposed by the Tender Offeror Group will likely prejudice theCompany’s corporate value and the shareholders’ common interests; and (ii) the
Tender Offer neglects the shareholders’ will as it disregards all procedures under the
Response Policies and will be implemented using coercive methods.

(3)

Prospects of the Company being delisted and reasons thereof
As of today, the Company’s shares are listed on the First Section of Tokyo Stock Exchange,
Inc. (the “TSE”).
According to the Tender Offer Statement, the Tender Offeror does not intend to cause theCompany’s shares to be delisted, and it is expected that the Company’s shares will remain
listed on the TSE First Section, considering the following: the Tender Offeror has set the
maximum number of shares to be purchased at 7,500,000 shares (ownership ratio: 31.07%) in
conducting the Tender Offer; and the total number of the Company’s shares owned by theTender Offeror Group after the Tender Offer is supposed to remain 10,576,200 shares(ownership ratio: 43.82%) at most.

(4)

Policies regarding reorganization, among others, after the Tender Offer (matters regarding theso-called two-step acquisition)
According to the Tender Offer Statement and its response to Question 11, Part 2 of the Tender
Offeror’s Answer (page 27), if the total number of the Company’s shares to be owned by theTender Offeror group through the Tender Offer is less than 10,576,200 shares (ownership
ratio: 43.82%), the Tender Offeror Group intends to additionally acquire, after the terminationof the tender offer period of the Tender Offer, shares of the Company within the scope ofdifference between 10,576,200 shares and the number of the Company’s shares purchased
through the Tender Offer, but presently, no specific timing or method has been determined.

(5)

Measures to ensure fairness and measures to avoid conflicts of interest(i)Introduction of the Response Policies, etc.

As stated in “(1) Background and reasons leading to the decision to introduce the Response
Policies and to hold the Shareholders’ Will Confirmation Meeting” of “6. Response policies
pertaining to basic policies regarding control of the Company” below, the Company’s board of
directors resolved, at its meeting held on January 17, 2020, to introduce the Response Policies
to prevent the determination of financial and business policies of the Company from being
controlled by an inappropriate person in light of the Company’s basic policies (Article 118,
item (iii), (b).2 of the Regulation for Enforcement of the Companies Act). Further, as statedin “(ii) Establishment and recommendations of the Independent Committee” below, in
adopting the Response Policies, the Company’s board of directors established the Independent- 18 -

Committee consisting of three independent outside directors of the Company, in order toprevent arbitrary decision-making by the Company’s board of directors and to further enhance
the fairness and objectiveness of the operation of the Response Policies.
For the background that the Company has decided to hold the Shareholders’ Will
Confirmation Meeting on March 27, 2020, as a result of continuously seeking appropriate
responses, based on the purposes of the Response Policies, from the viewpoint of maximizing
the Company’s corporate value and the shareholders’ common interests, under thecircumstances where the Tender Offer group has actually commenced the Tender Offer,neglecting all the procedures provided in the Response Policies, please see “(1) Backgroundand reasons leading to the decision to introduce the Response Policies and to hold theShareholders’ Will Confirmation Meeting” of “6. Response policies pertaining to basic
policies regarding control of the Company” below.
(ii)

Establishment and recommendations of the Independent Committee

As stated in the “Notice Concerning Establishment of an Independent Committee andAppointment of Independent Committee Members” dated January 17, 2020, in adopting the
Response Policies, the Company’s board of directors established the Independent Committee
consisting of three independent outside directors of the Company (Mr. Seigo Iwasaki, thechair; Mr. Kiyoshi Sato, a committee member; Mr. Kazumine Terawaki, a committee
member), in order to prevent arbitrary decision-making by the Company’s board of directors
and to further enhance the fairness and objectiveness of the operation of the Response
Policies. In addition, as announced in “Consultation with the Company’s Independent
Committee based on the ‘Company’s Response Policies for the Advance Notice of the Tender
Offer for Shares of the Company from Office Support K.K.’” dated January 21, 2020, theCompany’s board of directors consulted on the matters below (the “Consulted Matters”) with
the Independent Committee, on January 22, 2020, immediately after the establishment of the
Independent Committee:(a)Examination and evaluation of the sufficiency and properness, etc. of the information
requested to be provided from the Tender Offeror to the Company;(b)
Investigation, examination, and evaluation of the sufficiency, etc. of the information
provided by the Tender Offeror.;(c)
In addition to investigation, examination, and evaluation of the Tender Offeror’scompliance or non-compliance with the procedures provided in the Response Policies,
and the status thereof, examination and evaluation of the propriety of the request to theTender Offeror for extension of the tender offer period (including the properness of theperiod of examination of the request for extension by the Company’s board of
directors, if such a request should be made);(d)Investigation, examination and evaluation of whether the Tender Offer prevents
maximization of the Company’s corporate value and the shareholders’ common
interests;(e)
In consideration of the investigations, examinations, and evaluations above, issuanceof recommendations or opinions on the propriety of holding a Shareholders’ Will
Confirmation Meeting, the propriety of triggering countermeasures based on the
Response Policies without holding a Shareholders’ Will Confirmation Meeting if theTender Offeror is evaluated as being noncompliant with the procedures provided in the
Response Policies; or on the terms and conditions or procedures, etc., which will bepreconditions for such a holding or triggering; and(f)
In addition to the above, among the matters to be determined by the Company’s boardof directors, investigation, examination and evaluation, or issuance ofrecommendations or opinions on, the matters regarding which the Company’s board of
directors will consult with the Independent Committee from time to time, and thematters for which the Independent Committee considers that its recommendations or
opinions to the Company’s board of directors are required.

- 19 -

The Independent Committee held meetings on January 24, 2020, January 27, 2020,
February 6, 2020, February 11, 2020, and today; (i) on January 24, it started deliberating over
the Consulted Matters; (ii) on January 27, separately from each outside advisor of theCompany, it independently appointed outside experts (GCA Corporation and TMI Associates)
as outside advisors, and conducted deliberations and issued recommendations regarding theCompany’s withholding expressing its opinion on the Tender Offer and submitting questions
to the Tender Offeror; and (iii) on February 6 and 11, it conducted deliberations over theConsulted Matters, based on the Tender Offeror’s Answer submitted by the Tender Offeror.
Then, today, the Independent Committee unanimously recommended to the Company’s boardof directors that it is appropriate for the Company to express its opinion opposing the Tender
Offer.
The outline of the recommendations is as below.
(i)

The Management Reform Plan promotes structural reforms and growth investments,
etc. to achieve regeneration, from an unprofitable company into a profitable company,in light of recent changes in the business environment, as well as maintains andensures the necessary financial soundness while intending maximum shareholder
returns, in connection with the capital policy. Therefore, it is considered that theManagement Reform Plan contributes to the enhancement of the Company’s corporate
value and the shareholders’ common interests. In addition, the Management Reform
Plan specifies that the resources from the Company’s operating cash flow, cash-in
from sale of NFT shares, and cash-on-hand will be allocated for the growthinvestments, etc. and shareholder returns.
Furthermore, the Management Reform Plan presents the sincere intention and strong
sense of responsibility of the Company’s management to realize the Management
Reform Plan, based fully on the reflection that the target value in the previous Midterm Management Plan could not be achieved. Additionally, the Management
Reform Plan is clearly distinctive from the previous Mid-term Management Plan, in
terms of the contents thereof, because, among other reasons, it aims at radical
management reforms, based on observations that are highly specialized and in-depth
in the Company’s business, as well as clearly stating the purpose of use of the funds
that were previously retained.

(ii)

Meanwhile, the Tender Offeror Group explains that the purpose of the Tender Offer is
to “achieve an increase in shareholder value, and improvement of ROE.” However,even though the Tender Offeror Group will thereby have significant authority andpower of influence over the Company, the Tender Offeror Group has not reasonably
explained how it will use such authority for the above purpose.
In addition, the Tender Offeror Group still claims the necessity of the Tender Offer
even after considering the Management Reform Plan, by answering the questions fromthe Independent Committee that: (a) the Management Reform Plan lacks reliability
concerning the feasibility thereof, because the Company has never achieved the Midterm Management Plans; and (b) the Tender Offeror Group requests “a clear
explanation to the shareholders regarding the level of funds that are necessary to beretained […] out of the retained earnings that are held by the Target and deemed
unnecessary to be retained, and an improvement of ROE and increase in shareholder
value through returning the remaining portions to the shareholders.”
With respect to (a), it is definitely true that the Company has not achieved the target
values in the Mid-term Management Plans that the Company has ever announced, and- 20 -

it is undeniable that the Company must be asked by the shareholders to reflect thereon.
However, the Tender Offeror Group may not immediately claim the necessity toacquire the above authority.
Even if the intention of (a) is interpreted to mean that the Tender Offeror Group as amajor shareholder will supervise the process of realizing the Management Reform
Plan on the premise of the promotion of the Management Reform Plan, it would be
difficult to say that the supervision by the Tender Offeror Group contributes to theCompany’s corporate value and the shareholders’ common interests. This is because:
the Tender Offeror Group has no experience in engaging in businesses related to theCompany’s business and the management of a company; the Tender Offeror Group is
not recognized as having sophisticated expertise, which is the base of the Management
Reform Plan; and the Company’s internal information and other important information
may not be transmitted exclusively to the Tender Offeror Group in terms of the equal
treatment of the shareholders; and no in-depth observation is expected to be conductedby the Tender Offeror Group. Instead, it must be said that such supervision by aspecific shareholder with substantial control will create the risk of conflicts of interest
with the other general shareholders. Based on the above reasons and a majority ofthe board members of the Company being independent outside directors, it isappropriate to leave the supervision to realize the Management Reform Plan to the
independent outside directors of the Company, but inappropriate to leave it to theTender Offeror Group.
To begin with, if the Tender Offeror Group does not rely on the Company’s
management as stated in (a), it must be concluded that the Tender Offeror Groupinitially plans to be involved in the management of the Company after all, despite theexplanation of the Tender Offeror Group that “it will not involve itself in the
management of the Target and would like the Target’s management to continuously becommitted to the management of the Target as long as the management of the Target
conducts the management with an intention to maximize the shareholder value.”
Meanwhile, with respect to (b), the Management Reform Plan specifies an allocationof 30 billion yen for growth investments, etc. and 15 billion yen for shareholder
returns, using the resources comprised of the Company’s operating cash flow, cash-in
from sale of NFT shares, and cash-on-hand, whereby it aims to improve ROE andshareholder value. The Tender Offeror Group nevertheless has an attitude ofmaintaining the claims as above, which must lead to the conclusion that the Tender
Offeror Group eventually disagrees with the growth investments, etc., and requests
unbalanced shareholder returns.
In addition to the above, taking comprehensively into account: that the Tender Offeror
Group is considered to have implicitly taken advantage of its voting rights andrequested that the Company purchase its own shares, during the process until theTender Offer commences; that in the materials disclosed by the Tender Offeror, theTender Offeror Group did not eventually deny selling the shares that it owns to theCompany, at least by making a proposal of measures to improve shareholder value;and further, given the past investment cases made by the Tender Offeror Group andcompanies that are considered to have a special relationship with the Tender Offergroup, it is strongly suspected that the true purpose of the Tender Offer is for theTender Offeror Group to earn profits by, among other things, selling the shares that it
owns to the Company and related parties thereof at a high price.
(iii)

As stated in (i) above, the Management Reform Plan is recognized as contributing toenhancement of the Company’s corporate value and the shareholders common
interests. However, if the true purpose of the Tender Offer is as stated in (ii) above, it- 21 -

must be concluded that the Tender Offer will cause an outflow of funds necessary to
execute the Management Reform Plan and prevent achievement of the Management
Reform Plan.
Moreover, even if the true purpose of the Tender Offer differs from the above, theTender Offeror Group has no experience in engaging in businesses related to theCompany’s business or management of a company; from the fact stated in (ii) above,it is easily assumed that the Tender Offeror Group will disapprove the Company’s
making growth investments, etc. and also request that the Company implement
excessive shareholder returns, etc., by taking advantage of its voting rights; andalthough the implementation of excessive shareholder returns, etc. may benefit theshareholders at the time of the implementation from a short-term perspective, it will
make it difficult for the Company to make the medium- to long-term growthinvestments, etc. intended in the Management Reform Plan. Therefore, from themedium- to long-term perspective, it must be said that the Tender Offer is contrary to
the Company’s corporate value and the shareholders’ common interests.
Based on the above, because the Tender Offer is deemed to prevent maximization of
the Company’s corporate value and the shareholders’ common interests, it isconsidered to be appropriate for the Company’s board of directors to express its
opinion opposing the Tender Offer.
(iv)

As stated in (iii) above, because the Tender Offer is deemed to prevent maximizationof the Company’s corporate value and the shareholders’ common interests, it isappropriate for the Company to trigger the countermeasures based on the Response
Policies, from the viewpoint of protecting the Company’s corporate value and theshareholders’ common interests, and as a procedure therefor, to hold the Shareholders’Will Confirmation Meeting, from the viewpoint of leaving the decision on whether toaccept the Tender Offer to the discretion of the shareholders.
The period required for holding the Shareholders’ Will Confirmation Meeting must be
decided, taking into account the statutory period and practical preparatory period, as
well as the shareholders’ deliberation period, etc. from the viewpoint of requesting thatthe shareholders carefully make decisions. The Independent Committee received the
explanation by the Company that the Shareholders’ Will Confirmation Meeting will beheld on March 27, 2020 at the earliest, which has no unreasonable points, as a result ofconsideration from the above viewpoint.
Therefore, it is considered to be appropriate for the Company to hold theShareholders’ Will Confirmation Meeting on March 27, 2020.
In addition, from the viewpoint of the Tender Offeror’s interests, in order to provide
the Tender Offeror with an opportunity to decide on whether to withdraw the Tender
Offer based on the outcome of the Shareholders’ Will Confirmation Meeting andsubsequent judicial decisions, it is desirable that the Tender Offer period be extended,taking into account the Shareholders’ Will Confirmation Meeting and the proceeding
period for the subsequent judicial decisions. However, it is appropriate that the
Shareholders’ Will Confirmation Meeting be held after the Tender Offer period ends,
if the Tender Offeror waives the above interests and does not extend the Tender Offer
period to the date of the Shareholders’ Will Confirmation Meeting.
With regard to the above, the Tender Offeror Group claims the unreasonableness of
the Response Policies on the grounds mainly that: (a) the Company resolved at its
board of directors meeting held on May 16, 2019 to discontinue and abolish “theresponse policies (takeover defense measures) for large-scale purchase actions for the- 22 -

Company’s shares”; (b) the Company did not confirm the shareholders’ will regarding
introduction of the Response Policies; and (c) as the Company shareholders will nottender their shares in the Tender Offer if they rely on the Company’s management, theTender Offer will not be consummated, and therefore the Response Policies no longer
need to be maintained.
However, with respect to (a), the board of directors merely resolved to abolish the socalled takeover defense measures that are introduced at normal times. Accordingly,
it is impossible to consider that the Company waived all the countermeasures to be
implemented when such large-scale purchase actions as prevent maximization of theCompany’s corporate value and the shareholders’ common interests commence, andfurther, that the Company’s shareholders wanted such waiver.
Meanwhile, with respect to (b), it is impossible to consider that the Response Policies
are unreasonable and neglect the shareholders’ will, taking into consideration that noopportunity to confirm the shareholders’ will was provided, and the Response Policies
are triggered only if the Shareholders’ Will Confirmation Meeting approves to do so,in principle, in connection with the Tender Offer.
Finally, with respect to (c), in consideration of the coercion of the Tender Offer(meaning that if the Company shareholders rely on the opinion of the Company’sboard of directors that the Tender Offer will prevent maximization of the Company’s
corporate value and the shareholders’ common interests, together with noforeseeability of acts by the other shareholders, the Company’s shareholders will be
motivated to tender their shares in the Tender Offer in order to avoid the Tender Offer
succeeding without them tendering their shares in the Tender Offer, and suffering
losses arising from the damage to the corporate value and the shareholders’ common
interests caused by the Tender Offer), it is impossible to say that the Response Policies
do not need to be maintained, taking into account that: it is inappropriate to determine
whether the Tender Offer contributes to the enhancement of the Company’s corporate
value and the shareholders’ common interests based on the success or failure of theTender Offer and the number of shares tendered in the Tender Offer; and that theTender Offeror will additionally acquire the Company shares for the difference if theTender Offeror Group’s ownership ratio is less than 43.82% as a result of the Tender
Offer.
(v)

In light of the above, because the Tender Offer prevents maximization of theCompany’s corporate value and the shareholders’ common interests, it is deemed to beappropriate for the Company’s board of directors to expresses its opinion opposing theTender Offer and to hold the Shareholders’ Will Confirmation Meeting to confirm theshareholder’s will regarding whether to implement the countermeasures based on the
Response Policies.

(iii)

Appointment of external advisors

As stated in “(i) Basis for opinion regarding the Tender Offer” of “(2) Basis and reasons for
opinion regarding the Tender Offer” above, with the aim of ensuring the fairness andappropriateness of a decision-making process in evaluating and considering the Tender Offer,
the Company appointed several external experts independent from the Company and theTender Offeror (IR Japan, Inc., PwC Advisory LLC, and Nishimura & Asahi) as external
advisors. The Company has proceeded to carefully evaluate and consider the Tender Offer inlight of advice from these external advisors. None of the external advisors is a related partyof the Tender Offeror or the Company, nor do they have any material interests in the Tender
Offer that need to be noted.

- 23 -

(iv)Extension of the tender offer period

As stated in the “Notice Concerning the Company’s Response for the Shareholders’ Will
Confirmation Meeting” dated January 24, 2020, and the “Notice Concerning the Company’s
Response for the Shareholders’ Will Confirmation Meeting (Follow-up)” dated January 28,
2020, it has been decided that the Company’s board of directors will hold a Shareholders’ Will
Confirmation Meeting in late March or early April to confirm the shareholders’ will regarding(a) and (b) below if the Company’s board of directors, as a result of its future evaluation andconsideration of the Tender Offer, takes an opposing position against the Tender Offer anddeems it necessary to trigger countermeasures against the Tender Offer: (a) whether theshareholders agree to introduce the Response Policies; and (b) whether the shareholders agree
to a proposal concerning triggering countermeasures based on the Response Policies. In
connection with the Shareholders’ Will Confirmation Meeting, the Company needs time toevaluate and consider the Tender Offer to consider whether to trigger the countermeasures, andtime to prepare and take procedures for the Shareholders’ Will Confirmation Meeting. In
addition, the Company thinks that it is necessary to secure adequate information and adeliberation period so that the shareholders can make appropriate decisions about (a) and (b)above. Accordingly, in a letter dated January 24, 2020, the Company requested that theTender Offeror extend the tender offer period to sixty business days. However, the tender
offer period has not been extended yet as of today. Therefore, as announced in the “NoticeConcerning Request for Extension of the Tender Offer Period” dated today, the Company
requested again, in a letter dated today, that Office Support extend the tender offer period tosixty business days, setting the deadline for noon of February 19, 2020, which is five businessdays from today. If the tender offer period becomes sixty business days, the tender offer
period of the Tender Offer will end on Thursday, April 16, 2020 (sixty business days).
4.

Matters regarding important agreements between the Tender Offeror and the Company’s
shareholders, directors, etc. concerning tendering shares in the Tender Offer
According to the Tender Offer Statement, Office Support and S-Grant (which are speciallyrelated parties of the Tender Offeror) own 1,576,200 Company shares (ownership ratio:
6.53%) and 1,500,000 Company shares (ownership ratio: 6.21%), respectively, but an oral
agreement was reached between the Tender Offeror and the Non-tendering Shareholders that
the Company shares owned by the Non-tendering Shareholders (3,076,200 shares, ownership
ratio: 12.75%) would not be tendered in the Tender Offer.

5.

Provision of benefits by the Tender Offeror or its specially related parties
Not applicable.

6.

Response policies pertaining to basic policies regarding control of the Company(1)

Background and reasons leading to the decision to introduce the Response Policies and to holdthe Shareholders’ Will Confirmation Meeting
As stated in the Response Polices Press Release, the Company’s board of directors resolved, at
its meeting held on January 17, 2020, to introduce response policies for the tender offer for theCompany’s shares by Office Support and/or its subsidiaries about which the Company hasreceived advance notice, and other large-scale purchase actions, etc. that may be intended
under the circumstances where the tender offer is announced in advance (the “Response
Policies”). This is an effort to prevent the determination of financial and business policies of
the Company from being controlled by an inappropriate person in light of the Company’s
basic policies (Article 118, item (iii), (b).2 of the Regulation for Enforcement of theCompanies Act).

- 24 -

Company believes that the decision on whether to accept the conduct of large-scale purchaseactions for the shares of the Company must ultimately be made by the shareholders, from theviewpoint of maximizing the Company’s corporate value and the shareholders’ common
interests. The Response Policies aim to secure sufficient information and a deliberation
period for the shareholders to make proper decisions on the potential impact of the tender offer
for the Company’s shares by Office Support and/or its subsidiaries and other large-scalepurchase actions, etc. that may be intended under the circumstances where the tender offer isannounced in advance on the Company’s corporate value or the sources thereof, andultimately, to secure an opportunity to confirm the shareholders’ collective will at ashareholders meeting. As stated in “(ii) Establishment and recommendations of the
Independent Committee” of “(5) Measures to ensure fairness and measures to avoid conflictsof interest” of “3. Opinion regarding the Tender Offer, and basis and reasons thereof” above,in adopting the Response Policies, the Company’s board of directors established theIndependent Committee consisting of three independent outside directors of the Company, inorder to prevent arbitrary decision-making by the Company’s board of directors and to further
enhance the fairness and objectiveness of the operation of the Response Policies.
Meanwhile, the Tender Offeror Group only mentioned that it was considering conducting theTender Offer against the Company in a letter dated January 10, 2020, and e-mails dated
January 12 and 16, etc., and commenced the Tender Offer on January 21, 2020 without any
notice to or contact with the Company regarding the purpose of the Tender Offer and thespecific management policies intended after the Tender Offer, neglecting all the procedures
provided in the Response Policies that set forth the procedures to confirm the shareholders’will at a shareholders meeting.
The Company believes that essentially, the Tender Offer must have been conducted after
completing the procedures provided in the Response Policies, from the viewpoint of
maximizing the Company’s corporate value and the shareholders’ common interests, in order
to secure sufficient information and a deliberation period for the shareholders to make proper
decisions. Thus, the Company extremely regrets that the Tender Offeror Group commenced
the Tender Offer by neglecting all the procedures provided in the Response Policies. As
such, under the situation where the Tender Offer has actually commenced, the Company has
continued seeking appropriate responses, from the viewpoint of maximizing the Company’s
corporate value and the shareholders’ common interests, based on the purposes of the
Response Policies.
Consequently, as stated in the “Notice Concerning the Company’s Response for the
Shareholders’ Will Confirmation Meeting” dated January 24, 2020 and “Notice Concerning
the Company’s Response for the Shareholders’ Will Confirmation Meeting (Follow-up)”
dated January 28, 2020, as a result of the future evaluation and consideration by theCompany’s board of directors regarding the Tender Offer, if the Company’s board of directors
takes an opposing position against the Tender Offer and deems it necessary to trigger
countermeasures against the Tender Offer, the Company concluded that holding theShareholders’ Will Confirmation Meeting to confirm the shareholders’ will regarding (a)whether the shareholders agree to introduce the Response Policies, and (b) whether theshareholders agree to a proposal concerning triggering countermeasures based on the
Response Policies, conforms to the purposes of the Response Policies. Thus, the Company
decided that it would hold the Shareholders’ Will Confirmation Meeting to confirm theshareholders’ will regarding (a) and (b) above, depending on the results of the futureevaluation and consideration regarding the Tender Offer.
Therefore, in order to prepare to hold the Shareholders’ Will Confirmation Meeting and to
determine the shareholders who are entitled to exercise their voting rights at the Shareholders’Will Confirmation Meeting, the Company decided to conduct procedures to set the record dateas promptly as possible, in practice. As announced in the “Notice of Setting the Record Date

- 25 -

for Convening the Extraordinary Shareholders Meeting” dated January 28, 2020, the Company
resolved, at its board of directors meeting on the same day, to set Saturday, February 15, 2020,as the record date and to regard the shareholders entered or recorded in the latest shareholder
registry as of the record date as those shareholders entitled to exercise their voting rights at the
Shareholders’ Will Confirmation Meeting.
Before convocation of the Shareholders’ Will Confirmation Meeting, on and after January 21,
2020 when the Tender Offer was announced, in order to express its opinion regarding theTender Offer, the Company’s board of directors immediately received advice and cooperationfrom the external advisors, etc. while striving to collect information regarding the Tender
Offer and the Tender Offeror, and proceeded with evaluations and consideration regarding theTender Offer, in consideration of information, including information that is not stated in theTender Offer Statement. As such, the Company’s board of directors decided to take an
opposing position against the Tender Offer, and to hold the Shareholders’ Will Confirmation
Meeting to confirm the shareholders’ will regarding the Response Policies and theimplementation of the countermeasures based on them on March 27, 2020. The details of the
Shareholders’ Will Confirmation Meeting will be promptly announced after the convocation
thereof is officially decided.
In addition, the scheduled date of the Shareholders’ Will Confirmation Meeting wasdetermined for March 27, 2020, taking into account that: the Company needs time to evaluate
and consider the Tender Offer to consider the propriety of triggering the countermeasures, andtime to prepare and take procedures for the Shareholders’ Will Confirmation Meeting; and it isnecessary to secure adequate information and a deliberation period so that the shareholders
can make appropriate decisions about (a) whether the shareholders agree to introduce the
Response Policies, and (b) whether the shareholders agree to a proposal concerning triggeringcountermeasures based on the Response Policies. Also, the scheduled date was determined
as a result of the adjustment of the schedule, to ensure three weeks from dispatch of the
convocation notice up to the Shareholders’ Will Confirmation Meeting, considering theCompany’s attitude toward the guidelines for its institutional shareholders’ exercise of voting
rights with respect to a proposal on takeover defense measures (the period for examination by
the board of directors and the period secured until a shareholders meeting after sending a
convocation notice). As stated above, while the Company introduced the Response Policies
on January 17, 2020, the Tender Offer was announced on January 21, 2020. Therefore,
March 27, 2020, which is the scheduled date of the Shareholders’ Will Confirmation Meeting,is the 46th business day calculated from the commencement date of the Tender Offer. In
many cases of common prior warning-type takeover defense measures in which the
Independent Committee and the board of directors decided whether to trigger thecountermeasures, 150 or more days in total were secured, i.e., sixty days as a period to collectinformation necessary to decide whether to trigger the countermeasures and 90 days
(excluding cases of 100% acquisition by cash consideration) as a period to consider whether totrigger the countermeasures. Thus, holding the Shareholders’ Will Confirmation Meeting
concerning the Tender Offer on March 27, 2020, which is the 46th business day calculated
from the commencement date of the Tender Offer, does not unreasonably secure a long period.
Moreover, the 46 business days includes the period required to ask the Tender Offeror
questions and to have them answered. Taking into account that the Company’s board of
directors will express its opinion by evaluating and considering the purchase action inconsideration of the answers after receiving the answers from the Tender Offeror, theCompany believes that this is the minimum period required for a shareholders deliberation
period.
Furthermore, while planning to hold the Shareholders’ Will Confirmation Meeting on March
27, 2020, the Company considers it appropriate that the tender offer period be extended to
sixty business days (until April 16, 2020). This is because the Company was notified by theTender Offeror Group in its e-mail dated January 25, 2020, that regarding the proposal on- 26 -

triggering the countermeasures based on the Response Policies, “the Tender Offeror Groupwill seek the decision of a court […] if the proposal meets the ordinary resolution
requirements but does not meet the special resolution requirements.” Thus, if the Tender
Offeror Group seeks a court’s decision based on the outcome of the Shareholders’ Will
Confirmation Meeting, it is considered to be desirable that the period for proceedings at a
court be secured by the end of the Tender Offer. As such, the Company believes that it isreasonable to extend the tender offer period to sixty business days, which is the maximum
tender offer period permitted by law.
Against the Company’s request to extend the tender offer period to sixty business days, which
will allow the Shareholders’ Will Confirmation Meeting to be held, the Tender Offeror Group
claims in its e-mail dated January 29, 2020 that “damage” will arise due to the decrease in the
year-end dividends that it will receive, compared to the case where the payment of the Tender
Offer will be completed within the current fiscal year. However, it was the Tender Offeror
Group who put itself in the above situation by neglecting the procedures provided in the
Response Policies, and forcing the Tender Offer to commence. Therefore, it must be said
that it is putting the cart before the horse to deprive the shareholders of a deliberation period
by holding a rushed shareholders meeting due to the actions of the Tender Offeror Group. In
addition, the Company understands that the “damage” claimed by the Tender Offeror Group is
the amount equivalent to the year-end dividends pertaining to the shares where the Tender
Offeror Group additionally acquires the Company’s shares through the Tender Offer.
However, this is merely a loss of profit when assuming that the Tender Offer will be
consummated, and cannot be deemed to be specific damage.
For the avoidance of doubt, please be assured that the shareholders other than the Tender
Offeror Group will not suffer any disadvantages due to the payment of the Tender Offer being
completed after the end of the fiscal year.
In this respect, the Company obtained opinions from various company law scholars, to theeffect that there are no legal issues in conducting the settlement of the Tender Offer after theend of the current fiscal year.
As stated in “(ii) Establishment and recommendations of the Independent Committee” of “(5)Measures to ensure fairness and measures to avoid conflicts of interest” of “3. Opinion
regarding the Tender Offer, and basis and reasons thereof” above, the Company’s board of
directors has received recommendations from the Independent Committee today, as aunanimous opinion of the Independent Committee, to the effect that it is appropriate for theCompany’s board of directors to express its opinion opposing the Tender Offer, because theTender Offer prevents the maximization of the Company’s corporate value and theshareholders’ common interests, and also to hold the Shareholders’ Will Confirmation Meeting
to confirm the shareholders’ will regarding the Response Policies and the implementation of
the countermeasures based on them.
(2)

Matters for resolution and the resolution requirements therefor, etc. of the Shareholders’ Will
Confirmation Meeting
The following states, among other things, the matters for resolution and the resolution
requirements therefor of the Shareholders’ Will Confirmation Meeting, based on theassumption as of today, the details of which will be announced when the convocation thereof
is officially decided.
(i)

Matters for resolution of the Shareholders’ Will Confirmation Meeting

The details of the Shareholders’ Will Confirmation Meeting will be announced promptly after
the convocation thereof is officially decided. The matters to be resolved at the Shareholders’- 27 -

Will Confirmation Meeting will be: (a) a proposal to approve the introduction of the Response
Policies; and (b) a proposal to approve the implementation of the countermeasures based on
the Response Policies.
(i)

Approval of the introduction of the Response Policies
As announced in the Response Policies Press Release, in response to the advancenotice of a tender offer for the Company’s shares by Office Support and/or its
subsidiaries, the Company introduced the Response Policies for the tender offer andother large-scale purchase actions, etc. that may be intended under the circumstanceswhere the tender offer is announced in advance, on January 17, 2020.
At the Shareholders’ Will Confirmation Meeting, the Company’s board of directors
will consult with the shareholders on whether to approve the introduction of the
Response Policies. For the details of the Response Policies, please see the Response
Policies Press Releases.

(ii)

Approval of the implementation of the countermeasures based on the Response
Policies
As stated in “(1) Background and reasons leading to the decision to introduce the
Response Policies and to hold the Shareholders’ Will Confirmation Meeting” above,
the Company’s board of directors opposes the Tender Offer, and concluded that it isappropriate to trigger the countermeasures based on the Response Policies against theTender Offer. Thus, the Company’s board of directors will consult with theshareholders on whether to approve the implementation of the countermeasures. The
details of the countermeasures, which will be determined when deciding theconvocation of the Shareholders’ Will Confirmation Meeting, will be announced to theshareholders later. Meanwhile, for an outline of the countermeasures, please see the
Exhibit attached to the Response Policies Press Release.

(ii)

Resolution requirements for matters to be resolved at the Shareholders’ Will
Confirmation Meeting

The details of the Shareholders’ Will Confirmation Meeting will be announced promptly after
the convocation thereof is officially decided. The resolution requirements for both mattersfor resolution, i.e., (a) a proposal to approve the introduction of the Response Policies; and(b) a proposal to approve the implementation of the countermeasures based on the Response
Policies, will be those for ordinary resolutions. As announced in “Notice Concerning theCompany’s Response for the Shareholders’ Will Confirmation Meeting” dated January 24,
2020, the reason for the resolution requirements being those for ordinary resolutions is as
below.
(i)

(ii)
(iii)

in cases such as the issuance of shares for subscription causing changes in thecontrolling shareholders that will require a resolution at a shareholders meeting, theresolution to be required pursuant to the prescribed resolution requirements is an
ordinary resolution (Article 206-2, paragraph (5) of the Companies Act); therefore, aswith the above case, it is reasonable to ask, by an ordinary resolution at a shareholders
meeting, the shareholder’s will regarding the proposed acquisition of the controllingright by collecting shares;in the case where a proposal is approved by a majority vote at a shareholders meeting,there are no substantial grounds for not considering the majority’s will; andthe Supreme Court Decision in the Bulldog Sauce Case (Supreme Court Decision,
August 7, 2007, Minshu [Supreme Court Report in Civil Cases], vol. 61, No. 5, p.
2215), cited by Office Support, also holds as follows: “Shareholders’ own decisions at- 28 -

a shareholders meeting should be respected regarding whether the acquisition of the
management controlling right by a specific shareholder will result in damaging thestock company’s corporate value and harming the shareholders’ common interests,
unless material defects exist in the decisions that would cause loss of its validity”;
furthermore, the Supreme Court Decision does not particularly refer to the resolution
requirements for “the shareholders’ own decisions at a shareholders meeting” (such asnecessity of a special resolution). Therefore, it is reasonable to understand that theSupreme Court Decision in the Bulldog Sauce Case is based on the premise of an
ordinary resolution at a shareholders meeting being the resolution requirement.
Additionally, the Company’s board of directors obtained opinions from various company law
scholars to the effect that there are no legal issues in applying, as resolution requirements, anordinary resolution for the proposals regarding (a) and (b) above.
(iii)

Future procedures, etc.

Although the Company has already requested, in a letter dated January 24, 2020, that theTender Offeror extend the tender offer period to sixty business days, the tender offer period
has not been extended yet as of today. Therefore, as announced in “Notice Concerning
Request for Extension of the Tender Offer Period” dated today, the Company requested again,
in a letter dated today, that Office Support extend the tender offer period to sixty business days
(until April 16, 2020), setting the deadline for noon of February 19, 2020, which is fivebusiness days from today. As the Company’s future responses, there are three main scenarios
below, depending on how the Tender Offeror Group responds to the Company’s request. In
addition, the deadline is required to be set for the Company to perform various procedures,
including convocation procedures of the Shareholders’ Will Confirmation Meeting. Thus,
the Company will proceed with the measures according to the situation and content of the
responses by the Tender Offeror Group, at the time of the deadline.
(i)

If the Tender Offeror Group extends the tender offer period to sixty business days bynoon of February 19, 2020 which is five business days from today
If the shareholders approve and adopt both (a) a proposal to approve the introductionof the Response Policies, and (b) a proposal to approve the implementation of thecountermeasures based on the Response Policies, at the Shareholders’ Will
Confirmation Meeting, the Company’s board of directors will trigger thecountermeasures by fully respecting the opinions of the Independent Committee, in
accordance with the shareholders’ will. On the other hand, if either of the proposals
is not approved, the Company’s board of directors will not trigger thecountermeasures, in accordance with the shareholders’ will.
After triggering the countermeasures, if the Tender Offer is withdrawn by the Tender
Offeror Group, or if the Tender Offer is not consummated because the total number of
the Company’s shares offered for a sale, etc. in response to the Tender Offer is lessthan the lower limit of the number of shares to be purchased (3,500,000 shares;
ownership ratio: 14.50%), when the Company‘s board of directors determines that it is
no longer necessary to trigger the countermeasures, then the Company’s board of
directors will suspend the allotment of share options without contribution subject todiscriminatory exercise conditions and acquisition clauses to be conducted as acountermeasure, by fully respecting the Independent Committee’s opinions.

- 29 -

(ii)

If the Tender Offeror Group extends the tender offer period to 47 or more businessdays by noon of February 19, 2020 which is five business days from today
If the Tender Offeror Group extends the tender offer period to 47 or more businessdays, the tender offer period will end on March 30, 2020. Accordingly, if the Tender
Offeror Group extends the tender offer period to 47 or more business days, theCompany will basically treat this in the same manner as the case “(i) If the Tender
Offeror Group extends the tender offer period to sixty business days by noon of
February 19, 2020 which is five business days from today” above, because theextended period allows the Company to secure the process of triggering thecountermeasures after confirming the shareholders’ will at the Shareholders’ Will
Confirmation Meeting.
The Company plans to hold the Shareholders’ Will Confirmation Meeting on
March 27, 2020, while also requesting again that the Tender Offeror extend the tender
offer period to sixty business days. This is because, as stated in “(1) Background andreasons leading to the decision to introduce the Response Policies and to hold theShareholders’ Will Confirmation Meeting” above, the Company was notified by theTender Offeror Group in its e-mail dated January 25, 2020, that in connection with theproposal on the implementation of the countermeasures based on the Response
Policies, “the Tender Offeror Group will seek the decision of a court […] if the
proposal meets the ordinary resolution requirements but does not meet the special
resolution requirements.” Therefore, if the Tender Offeror Group seeks a court’s
decision based on the outcome of the Shareholders’ Will Confirmation Meeting, it isconsidered to be desirable that a period for proceedings at a court be secured by theend of the Tender Offer. Accordingly, the Company believes that it is reasonable toextend the tender offer period to sixty business days, which is the maximum tender
offer period permitted by law.

(iii)

If the Tender Offeror does not extend the tender offer period at all, or extends it but theextended tender offer period is 46 or less business days (the tender offer period ends
on or before March 27, 2020), by noon of February 19, 2020 which is five businessdays from today
If the Tender Offeror Group does not extend the tender offer period at all, or extends it
but the extended tender offer period is 46 or less business days, the Tender Offer willend on or before March 27, 2020, the date on which the Shareholders’ Will
Confirmation Meeting is held. This will preclude ensuring the time necessary for theshareholders to deliberate based on the information to be disclosed by the Large-scale
Purchaser, or the opportunity for the Company to confirm their will, regardingwhether to accept the Large-scale Purchase Action, etc. being conducted. Therefore,
in this case, unless exceptions apply, the Company’s board of directors will trigger thecountermeasures by fully respecting the Independent Committee’s opinions, without
holding the Shareholders’ Will Confirmation Meeting.
However, even in such a case, the Company, although after triggering thecountermeasures, will hold the Shareholders’ Will Confirmation Meeting on
March 27, 2020. In this case, the Company’s board of directors will consult with theshareholders ex-post facto on its decisions regarding not only (a) a proposal toapprove the introduction of the Response Policies, but also (b) a proposal to approve
the implementation of the countermeasures based on the Response Policies. If both(a) a proposal to approve the introduction of the Response Policies, and (b) a proposal
to approve the implementation of the countermeasures based on the Response Policies,
are approved and adopted at the Shareholders’ Will Confirmation Meeting, theCompany’s board of directors will keep the countermeasures triggered, in accordance- 30 -

with the shareholders’ will. On the other hand, if either of the proposals is not
approved and adopted, the Company will take necessary and reasonable measures inorder to prevent economic losses to be incurred by the Tender Offeror Group, within
the extent permitted by laws and regulations, by fully respecting the shareholders’will. The details of the measures will be announced upon decision.
In addition, after triggering the countermeasures, if the Tender Offer is withdrawn by
the Tender Offeror Group, or if the Tender Offer is not consummated because the total
number of the Company’s shares offered for a sale, etc. in response to the Tender
Offer is less than the lower limit of the number of shares to be purchased(3,500,000 shares; ownership ratio: 14.50%), when the Company’s board of directors
determines that it is no longer necessary to trigger the countermeasures, then the
Company’s board of directors will suspend the allotment of share options subject todiscriminatory exercise conditions and acquisition clauses without contribution to be
conducted as a countermeasure, as with the case in “(i) If the Tender Offeror Groupextends the tender offer period to sixty business days by noon of February 19, 2020
which is five business days from today” above.
7.

Questions to the Tender Offeror
Not applicable.

8.

Request for extension of the tender offer period
Not applicable.
However, as stated in “(iv) Extension of the tender offer period” of “(5) Measures to ensure
fairness and measures to avoid conflicts of interest” of “3. Opinion regarding the Tender Offer,and basis and reasons thereof” above, the Company requested that the Tender Offeror extend
the tender offer period to sixty business days. However, the tender offer period is not yet
extended as of today. Therefore, as announced in the “Notice Concerning Request for
Extension of the Tender Offer Period” dated today, the Company requested again to Office
Support in the letter dated today to extend the tender offer period to sixty business days, withthe deadline of noon of February 19, 2020, which is five business days from today. If thetender offer period becomes sixty business days, the tender offer period of the Tender Offer
will end on April 16, 2020 (Thursday) (sixty business days).
End- 31 -

Exhibit 1

Parent-childrelationship

Mr. Yoshiaki Murakami

Ms. Aya Nomura (owned theCompany’s shared until
January 14, 2020)

Major shareholder (ratio of voting rights is unknown)

ATRA Co., Ltd.
Parent-subsidiary relationship

Office Support K.K.
(owns the Company’s shares equivalent to 6.53% ratio of voting rights)
100％

100％

Kabushiki Kaisha MinamiAoyama Fudosan

66.50%

33.50%

City Index Eleventh Co., Ltd. (Tender Offeror)- 32 -

S-Grant. Co., Ltd.
(owns the Company’s sharesequivalent to 6.21% ratio of voting
rights)