November 18, 2019

Name of company:
Representative:

Contact:

Mitsubishi Tanabe Pharma Corporation
Masayuki Mitsuka
President & Representative Director(Code No.: 4508, TSE 1st Sec.)
Yoshiaki Takai, Head of Corporate
Communications Department(Tel: 06-6205-5211)

Announcement of Mitsubishi Tanabe Pharma Corporation’s Opinion Regarding
Tender Offer for Shares in Mitsubishi Tanabe Pharma Corporation by
the Controlling Shareholder Mitsubishi Chemical Holdings Corporation, andRecommendation to Tender Shares
Mitsubishi Tanabe Pharma Corporation (“MTPC”) hereby announces that it has resolved asstated below at its board of directors meeting held today to express its opinion in support of
the tender offer for MTPC’s common shares (“MTPC Common Shares”) to be conducted by
Mitsubishi Chemical Holdings Corporation (the “Tender Offeror”), the controllingshareholder (parent company) of MTPC (the “Tender Offer”), and to recommend that theshareholders of MTPC tender MTPC Common Shares in the Tender Offer.
The resolution of the board of directors stated above was made on the assumption that theTender Offeror intends to make MTPC its wholly-owned subsidiary by way of the Tender
Offer and through a series of subsequent procedures and that MTPC Common Shares will bedelisted.
1.

Outline of Tender Offeror

(1)
(2)
(3)

Name
Location
Name and title ofrepresentative
Description of business

(4)

(5)
(6)
(7)

CapitalDate of incorporation
Major shareholders andshareholding ratios (as ofMarch 31, 2019)

Mitsubishi Chemical Holdings Corporation
1-1 Marunouchi 1-chome, Chiyoda-ku, Tokyo
Hitoshi Ochi, Representative Corporate Executive
Officer, President & Chief Executive Officer
Management of group companies (Development of
the group strategies and allocation of financial
resource)
50,000 million yen (as of June 25, 2019)
October 3, 2005
The Master Trust Bank of Japan, Ltd.
7.27%
(Trust Account)
Japan Trustee Services Bank, Ltd.
5.78%
(Trust Account)
Meiji Yasuda Life Insurance Company
4.52%(Standing proxy: Trust & Custody
Services Bank, Ltd.)

Nippon Life Insurance Company
2.99%(Standing proxy: The Master Trust Bankof Japan, Ltd.)
Japan Trustee Services Bank, Ltd.
1.99%
(Trust Account 4)
Japan Trustee Services Bank, Ltd.
1.81%
(Trust Account 5)
Japan Trustee Services Bank, Ltd.
1.80%
(Trust Account 7)
SSBTC Client Omnibus Account
1.51%(Standing proxy: The Hongkong andShanghai Banking Corporation Limited,Tokyo Branch, Custody Department)
MUFG Bank, Ltd.
1.44%
State Street Bank West Client – Treaty
1.44%505234 (Standing proxy: Mizuho Bank,
Ltd., Settlement & Clearing Services
Department)(8)
Relationship between MTPC and the Tender Offeror
Capital relationship
The Tender Offeror holds 316,320,069 MTPC
Common Shares (Share Holding Ratio (Note 1):56.39%).
Personnel relationshipThree of MTPC’s eight directors have worked at the
Other Tender Offeror Group Companies (Note 2); oneof those three directors currently holds a position as
director at a wholly-owned subsidiary of the Tender
Offeror, and one of the other five directors holds
positions as executive officer at the Tender Offeror
and director at a wholly-owned subsidiary of theTender Offeror. Also, one statutory auditor of MTPC
has worked at the Other Tender Offeror Group
Companies. In addition to the above, 57 employeesof the MTPC Group are seconded to the Other Tender
Offeror Group Companies, and seven employees of
the Other Tender Offeror Group Companies areseconded to the MTPC Group.
Business relationship
MTPC deposits funds with the Tender Offeror andreceives interest on those funds.
Status as related party
The Tender Offeror is MTPC’s parent company, andtherefore, a related party of MTPC.
(Note 1) “Share Holding Ratio” means any shareholding ratio relative to the total number
of issued shares of MTPC as of September 30, 2019 (i.e., 561,417,916 shares), as
set forth in the Second Quarterly Earnings Release for FY 2019 (IFRS)(Consolidated) disclosed by MTPC on October 30, 2019 (referred to as “MTPC’s
FY 2019 Second Quarterly Earnings Release”), less the number of treasury
shares (excluding the 200,279 shares that are held by the Officer Remuneration
BIP (Board Inventive Plan) Trust (the “BIP Trust”) as of September 30, 2019)held by MTPC as set forth in MTPC’s FY 2019 Second Quarterly Earnings
Release (i.e., 431,636 shares) (equating to 560,986,280 shares) (shareholding
ratios are rounded up or down to three decimal places), and hereinafter the same

- 2 -(Note 2)

2.

shall apply.
“Other Tender Offeror Group Companies” means companies which constitutethe Tender Offeror Group excluding the companies which constitute the MTPCGroup. “Tender Offeror Group” means the Tender Offeror, its 552 subsidiaries,
and its 169 affiliated companies (as of the date of September 30, 2019);
hereinafter the same) in which the Tender Offeror serves as its holding company,
and the “MTPC Group” means MTPC and its 34 subsidiaries and its twoequity-method affiliates (as of the date of September 30; hereinafter the same).

Price for Purchase, Etc.
2,010 yen per share of common share3.

Details of and Grounds and Reasons for the Opinion on the Tender Offer(1)

Details of the Opinion on the Tender Offer

MTPC has resolved at its board of directors meeting held on November 18, 2019 toexpress its opinion in support of the Tender Offer and to recommend that the shareholders of
MTPC tender MTPC Common Shares in the Tender Offer, based on the grounds and reasonsstated in “(2) Grounds and Reasons for the Opinion on the Tender Offer” below.
The resolution of the board of directors stated above was made in the manner set out in“G. Unanimous Approval of All Non-interested Directors and the No Dissenting Opinion of
All Non-interested Statutory Auditors at MTPC” in “(6) Measures to Ensure the Fairness of
the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price andMeasures to Avoid Conflicts of Interest” below.
(2)

Grounds and Reasons for the Opinion on the Tender Offer

The descriptions of the grounds and reasons for the opinion on the Tender Offer that
relate to the Tender Offeror are based on explanations given by the Tender Offeror.
A.

Outline of the Tender Offer

As of the date hereof, the Tender Offeror holds 316,320,069 shares (Share Holding
Ratio: 56.39%) of MTPC Common Shares that are listed on the First Section of the Tokyo
Stock Exchange Inc. (the “TSE”), and MTPC is a consolidated subsidiary of the Tender
Offeror.
According to the Tender Offeror, the Tender Offeror determined, by way of written
resolution in lieu of a board of directors meeting pursuant to Article 370 of the Companies Act(Act No. 86 of 2005, as amended; hereinafter the same) and Article 27 of the Articles ofIncorporation of the Tender Offeror, to conduct the Tender Offer on November 18, 2019 aspart of the series of transactions for the purpose of acquiring all of the shares of MTPC
(excluding MTPC Common Shares held by the Tender Offeror and the treasury stock held by
MTPC) and making MTPC its wholly-owned subsidiary (the “Transactions”).
According to the Tender Offeror, in the Tender Offer, the Tender Offeror has set
57,670,731 shares (Note) as the minimum number of the shares to be purchased, and, thus, if
the total number of the share, etc., tendered in the Tender Offer (“Tendered Share, Etc.”) is- 3 -less than such minimum number, the Tender Offeror will not purchase any of Tendered Share,
Etc. However, the Tender Offeror plans to obtain all of the MTPC Common Shares throughthe Tender Offer as stated above, and therefore, has not set the maximum number of theshares to be purchased. Thus, if the total number of Tendered Share, Etc., is equal to or
more than such minimum number, the Tender Offeror will purchase all of Tendered Share,
Etc., and, accordingly, depending on the results of the Tender Offer, the MTPC Common
Shares may be delisted after taking prescribed procedures in accordance with the TSE listing
rules. Additionally, even in the event that the delisting criteria are not met upon completionof the Tender Offer, because the Tender Offeror plans to execute a series of procedures inorder to acquire all MTPC Common Shares as stated in “(5) Policy for Organizational
Restructuring, Etc. After the Tender Offer (Matters Relating to So-called “Two-step
Acquisition”)” below after completion of the Tender Offer, the MTPC Common Share may bedelisted after taking prescribed procedures in accordance with the TSE listing rules.
(Note)

According to the Tender Offeror, the minimum number of the shares to bepurchased (57,670,731 shares) is calculated as follows: (i) deduct (a) the numberof treasury shares (excluding the MTPC Common Share possessed by BIP Trust
as of September 30, 2019 (200,279 shares)) (431,636 shares) held by MTPC as of
September 30, 2019, as set forth in MTPC’s FY 2019 Second Quarterly Earnings
Release from (b) the total number of issued shares of MTPC as of September 30,
2019, as set forth in MTPC’s FY 2019 Second Quarterly Earnings Release(561,417,916 shares), which becomes 560,986,280 shares; (ii) calculate thenumber of voting rights of 560,986,280 shares, which becomes 5,609,862 voting
rights; (iii) calculate the minimum figure which is two-thirds or more of 5,609,862
voting rights, which is 3,739,908 voting rights; (iv) multiply 3,739,908 by the
number of shares which constitutes 1 unit (100 shares), which becomes
373,990,800 shares; and (v) deduct the number of shares (316,320,069 shares)
held by the Tender Offeror from 373,990,800 shares, which becomes 57,670,731
shares.

B.

Background and Purpose of and Decision-Making Process for the Tender
Offeror Leading to the Decision to Conduct the Tender Offer

The Tender Offeror was established in October 2005 by means of a stock-for-stock
exchange jointly conducted by the former Mitsubishi Chemical Corporation (“Former
Mitsubishi Chemical”) and Mitsubishi Pharma Corporation (“Mitsubishi Pharma”), then asubsidiary of Former Mitsubishi Chemical, whereby the Tender Offeror became their parent
company. According to the Tender Offeror, as of the date hereof, the Tender Offeror Groupin which the Tender Offeror serves as its holding company, is conducting business activities inthe three domains which are performance products, industrial materials and health care (these
domains are further separated into four segments of performance products segments
belonging to performance products, each of segments of chemicals and industrial gases
belonging to industrial materials and health care segments belonging to health care, and otherdepartments) with Mitsubishi Chemical Corporation; MTPC; Life Science Institute, Inc. andTaiyo Nippon Sanso Corporation serving as its four operating companies.
Additionally, according to the Tender Offeror, with “KAITEKI Value for Tomorrow” asits corporate slogan, the Tender Offeror Group pursues “KAITEKI Management” to enhance
its corporate value, which is considered to be the sum of three values―improved capitalefficiency; enhancement of innovative capacity in respect of creation of innovative products- 4 -and services; and provision of solutions which contribute to the enhanced sustainability ofpeople, society and the Earth―in an effort to achieve the “sustainable well-being of people,
society and our planet Earth,” in other words, KAITEKI, and formulated the Medium-Term
Management Plan “APTSIS 20,” (Note 1) to be in effect for the five-year period from FY
2016 to FY 2020. Under the Medium-Term Management Plan, the Tender Offeror has
engaged in various portfolio reforms with the basic policy of “aiming to remain a highgrowth/high profit-model company group through businesses in the areas of performance
products, industrial materials and health care”, and has continued to work on strengthening its
business base.
(Note 1)For details of the Medium-Term Management Plan “APTSIS 20,” please refer tothe explanatory material named “Formulation of APTSIS 20 New Medium-Term
Management Plan,” disclosed by the Tender Offeror on December 9, 2015, andthe explanatory material named “Revision of Targets under Medium-Term
Management Plan APTSIS 20,” disclosed on December 4, 2018. These
explanatory materials are available on the Tender Offeror’s website.
http://www.mitsubishichem-hd.co.jp/ir/library/analysts_meeting.html

On the other hand, MTPC was established through a merger of Tanabe Seiyaku Co., Ltd.
(“Tanabe Seiyaku”) and Mitsubishi Pharma in October 2007. Through the merger of
Tanabe Seiyaku and Mitsubishi Pharma, the Tender Offeror, which was the parent company of
Mitsubishi Pharma, became the parent company that owns majority of the total number ofissued shares of MTPC, and MTPC became a consolidated subsidiary while maintaining its
listing. As of the date hereof, the MTPC Group mainly engages in the pharmaceuticalbusiness. The Tender Offeror has been owning 316,320,069 shares of MTPC Common
Shares (Share Holding Ratio: 56.39%) which the Tender Offeror acquired as a result of theOctober 2007 merger without any increase or decrease.
Since October 2007, MTPC, as the core company of the Tender Offeror Group’s
pharmaceutical business, has operated its business aiming to become a global research-driven
pharmaceutical company. Under the “Medium-Term Management Plan 16-20: Open Up the
Future,” since the FY 2016, the MTPC Group has worked on four challenges to open up thefuture medical treatment—“Maximizing Pipeline (Note 2) Value,” “Strengthening IKUYAKU(Drug Fostering and Evolution) and Marketing,” “Accelerating U.S. Business Development,”
and “Reforming Operational Productivity.” Specifically, the MTPC Group intends toaccelerate drug discovery innovation by enhancing drug discovery capabilities in biologics(bio medicine) centered in therapeutic antibodies and nucleic acid drugs (Note 3) while
affiliating with venture entities which engage in R&D of a plant-based VLP (Virus-Like
Particle) vaccine and which have revolutionary development concept and technology
combining existing medicines and medical devices. Furthermore, MTPC carries out its
business following a policy to appropriately determine actions in response to diversificationof drug discovery modalities (Note 4) (e.g. digital-health area centered in diabetes and kidneydiseases, and regenerative medicine by use of genetic therapy) depending on the areas oftreatments.
(Note 2)
(Note 3)(Note 4)

Pipeline means compounds which are ethical drug candidates and product groups
thereof subject to clinical tests; hereinafter the same.
Nucleic acid drugs means drugs using nucleotide, which is constituents ofdeoxyribonucleic acid (DNA) or ribonucleic acid (RNA), etc. controlling mattersconcerning genetic information, and its derivative; hereinafter the same.
Drug discovery modalities means treatment methods, such as small molecule- 5 -compounds; peptide drugs; protein drugs including therapeutic antibodies; genetic
therapy; nuclear acid drugs; cell therapy drugs; and regenerative medicine;hereinafter the same.
However, the pharmaceutical business environment surrounding MTPC is assumed toremain challenging due to the downward pressure on drug prices from the viewpoint of
restraining the increase of social security costs domestically and internationally, whereas
R&D expenses are escalating. Furthermore, under the situation that social security costs are
required to be reduced as a social problem, the scope of the Tender Offeror’s business needs
to be expanded so as to satisfy the social needs, from the conventional “diagnosis andtreatment” to health management reinforcement, the disease progression prevention, andregeneration and function recovery. In addition, the core operating profit (Note 5) of the
MTPC Group has recently decreased due to the increase in its R&D expenses, and the ratio of
R&D expenses to its core operating profit, which was around 1 to 1.6 in the fiscal year ended
March 2016, decreased to around 1 to 0.6 in the fiscal year ended March 2019, resulting in asignificant unbalance between its R&D expenses and core operating profit. In the fiscal year
ended March 2020, in addition to the impact of the drug prices revision, MTPC estimated thatits sales and profits will decrease due to the continuous impact related to the request for thearbitration by the Novartis Pharma AG in February 2019 on the issue as to whether or not
MTPC is entitled to certain royalties for “Gilenya,” the treatment for multiple sclerosis, andthus R&D expenses will likely to continue to exceed MTPC's core operating profit.
(Note5)

With adoption of the International Financial Reporting Standard (IFRS), MTPC
has introduced “core operating profit” as a major profit index to demonstrate its
recurring profitability and positioned it as an important indicator of business
management, etc. “Core operating profit” of MTPC is the profit excluding theincome and loss recorded by non-recurring items specified by the MTPC Group(the “non-recurring items”) from operating profit. As non-recurring items, gainor loss associated with a business transfer, restructuring loss, and impairment
losses on intangible assets associated with products are assumed.

According to the Tender Offeror, after making MTPC a consolidated subsidiary of theTender Offeror in October, 2007, the Tender Offeror enabled MTPC to obtain the merits as alisted company, such as enhancing degree of recognition and securing good human resources,
by maintaining the listing of MTPC Common Shares and supported MTPC in further
strengthening its capabilities of creating pharmaceuticals and accelerating overseas businessgrowth. The Tender Offeror has continued engaging in realizing business synergies between
Other Tender Offeror Group Companies and the MTPC Group, with an aim of achieving thegoal set at the time of the merger which was to pursue business opportunities by positively
responding to changes in the medical environment in the future.
However, according to the Tender Offeror, since the MTPC Group initially set its main
theme as becoming a global research-driven pharmaceutical company upon its establishment
in 2007 and the Other Tender Offeror Group Companies were focusing on restructuring thepetrochemical business, the Other Tender Offeror Group Companies and the MTPC Group
could not necessarily secure sufficient management resources for jointly pursuing synergies.
Despite such situation, the MTPC Group and the Other Tender Offeror Group Companies
have endeavored to create business synergies through mutual exchange of technology andhuman resources. Specifically, the MTPC Group and the Other Tender Offeror Group
Companies took on a challenge of developing the field of pharmaceutical medicine combining- 6 -medicine and chemicals (industrial materials) and a challenge of creating drugs utilizing gases,
and supported commercialization in the regenerative medicine field utilizing Muse cells (Note6). However, while the Tender Offeror and MTPC have had their own independence aslisted companies and avoided the risk of a conflict of interest as much as possible and eachhas conducted its business in compliance with its contractual obligations owed to third parties,
cooperation on utilization of each other’s intellectual property and human resources andinvestment in management resources between the Other Tender Offeror Group Companies
and the MTPC Group have not been cultivated sufficiently and the realization of synergy has
yet to be achieved.
(Note 6)

Muse cells mean the non-neoplastic mesenchymal pluripotent cells in humanbodies, which can be differentiated into various cells or tissues; hereinafter thesame.

In addition, according to the Tender Offeror, in the Tender Offeror Group, theestablishment of Mitsubishi Chemical Corporation as a result of the merger of Former
Mitsubishi Chemical, Mitsubishi Plastics, Inc. and Mitsubishi Rayon Co., Ltd. which took
place in April 2017, enhanced the science foundation and reinforced the technology platforms
as well as streamlining and reinforcing the sales organization from a customer perspective in
the area of chemical business including petrochemical business, and, thus, they now havesome good prospect on the petrochemical business restructuring which they have been
worked on. Therefore, the MTPC Group and the Other Tender Offeror Group Companies
are now in a position to be able to secure management resources for synergy pursuit.
In such current situation, the health care technology area in which the MTPC Group has
strength such as (i) collection, analysis and application of data related to health care, (ii)digitalization of prophylaxis and treatment, etc., utilizing IT techniques and (iii)biotechnologies, is expected to greatly overlap with the chemical technology area in which the
Other Tender Offer Group Companies have strength. Such overlap is expected to createsynergy between the MTPC Group and the Other Tender Offeror Group Companies and suchsynergy is expected to expand more than ever.
The Tender Offeror believes that, if the Tender Offeror Group, including the MTPCGroup, can exchange, combine and utilize the intellectual property, know-how, technology,
networks and human resources actively and flexibly in the four fields (i.e., pharmaceuticals,
biotechnology, chemistry and digital) possessed by each company, the Tender Offeror Groupcan create new products and innovations requested by society in the future.
As a specific example of the aforementioned fields in the Tender Offeror’s and MTPC’s
assumption, the field of regenerative medicine, which is a target of strong social expectations,can be listed first. The Tender Offeror and MTPC have made remarkable advances in thefields of cell medicine, genetic therapy, nuclear acid medicine and functionally alternative
medical devices as the technologies that will meet social needs, such as a complete recovery
from illness and recovery of organs and bodily functions, which cannot be achieved withtraditional medicines. According to the Tender Offeror, the Tender Offeror Group is
conducting clinical trials of regenerative medicine utilizing Muse cells, and a closer
cooperation between the Other Tender Offeror Group Companies and the MTPC Group will
be increasingly needed in clinical development. Research and development of genetic
therapy and nuclear acid medicine have also been advanced in the MTPC Group, and it will
be significantly meaningful for the future growth of the Tender Offeror Group if the Tender
Offeror Group, including the MTPC Group, works together on the field of regenerative
medicine.
Furthermore, the field of prevention (including prevention of progression) can be listed- 7 -as one of the specific fields. In terms of preventing the illness or loss of quality of life andeconomic value from becoming ill, the development of vaccines to prevent not only infectious
diseases but also illness, the development of the management technologies of information on
the individuals’ health that will lead to the early detection of disease signs, and theadvancement of sensing (Note 7) and diagnosis technologies are all important issues that theTender Offeror believes.
Furthermore, it is expected that further refinement and individualization of health care
will increasingly generate economic benefits in the field of medicine in the management of
illness that will help the recovery of illness and prevent the progression of illness. In orderto respond to these social issues, the Tender Offeror believes that the Tender Offeror Group,
including the MTPC Group, will be able to integrate internal and external knowledge andtechnology and create, at a fast pace, new solutions, such as wearable devices, healthcare data
platforms, and pharmaceuticals that are combined with IoT (Note 8), digital technology andmedical devices.
(Note 7)(Note 8)Sensing means measurement and quantification of information concerning
physiological change occurring inside and outside human body, health andexercise condition by using the sensor, etc.
IoT means the technology that enables materials derived from goods such asmachines that were previously not connected to internet to be gathered throughthe network and analyzed comprehensively through the network.

According to the Tender Offeror, the development of materials used in functionallyalternative medical devices is one of the strong fields of the Other Tender Offeror Group
Companies. By utilizing the technologies and knowhow held by the MTPC Group in thisfield, revitalization of innovation in this field can be achieved within the Tender Offeror
Group, including the MTPC Group. By utilizing MTPC’s bio-technologies, humanresources and know-hows, the Tender Offeror will be able to work on the construction of new
solution business in medical-food-bio business (i.e. performance product business related tohealth, medicine, food and agriculture) of the Tender Offeror Group.
In the pharmaceutical business operated by the MTPC Group, the MTPC Group mainly
made strategic investments and R&D investments centered on conventional type medicine
development while attempting to expand drug discovery modality. However, by integrating
the MTPC Group and the Other Tender Offeror Group Companies, they will be able todescribe a portfolio that extends to all technological areas that contribute to the healthcare
business development from conventional type medicine to digital medicine (Note 9),biotechnology and microbiomes (Note 10) and that may enable them to globally expand abusiness model that meets the needs of society and contributes to the healthcare under
KAITEKI management, i.e., disease treatment, pre-symptomatic disease care, healthmaintenance and healthy activities.
Moreover, in addition to product development and innovation, the MTPC Group and the
Other Tender Offeror Group Companies will be able to further streamline management
processes by structuring wide collaborative organizations among all the business areas by (a)mutually taking advantage of the global human network and logistics network owned by the
Other Tender Offeror Group Companies and MTPC Group, (b) making strategic and efficientinvestments jointly with investing companies (i.e., Diamond Edge Ventures/California, U.S.
(which is owned by the Tender Offeror) and MP Healthcare VentureManagement/Massachusetts, U.S. (which is owned by MTPC)) and (c) utilizing the Other
Tender Offeror Group Companies’ foreign operations of financial, general affair and human- 8 -resource function by the MTPC Group.
(Note 9)

Digital medicine means tools to support lifestyle modifications, to treat diseases
or to support treatments utilizing smartphone applications, etc. (e.g., applications
to quit smoking) or tools that combine medical devices such as sensors andmedicines (e.g., pills with integrated chips to improve drug adherence rates), etc.
(Note 10) Microbiomes are microorganism communities. Microorganism communities
exist inside and outside the human body; for example, the microbiomes existinginside bowels and cuticles of human bodies are referred to as human microbiomes,
which are subject to research in terms of possible effects on various diseases, etc.

According to the Tender Offeror, given such situation, considering that the volume ofthe synergies between the MTPC Group and the Other Tender Offeror Group Companies thatare expected to be created through making MTPC a wholly-owned subsidiary of the Tender
Offeror is remarkably large, even taking into account that MTPC will lose its merits that canbe obtained as long as MTPC remains a listed company after the Transactions, now is theappropriate timing to invest the management resources in synergy creation, and that swiftly
taking various actions and measures for synergy creation is the optimal choice to improve themedium-term and long-term corporate value development of the entire Tender Offeror Group.
The actions and measures include (i) maintenance or expansion of R&D expenses targeted atdevelopment of pipelines, which are MTPC Group’s future growth driver, (ii) making priorinvestments for synergy creation, (iii) promoting unrestricted technological exchange at aworking level within the Tender Offeror Group, and (iv) establishing supporting
communication foundations, by coordinating within the Tender Offeror Group, including theTender Offeror and MTPC. Meanwhile, the Tender Offeror is of the view that, even though
maintenance and expansion of R&D expenses targeted at pipeline development and priorinvestments for synergy creation will contribute to the corporate value improvement of theentire Tender Offeror Group, including the MTPC Group, in terms of medium-term andlong-term growth, it might be difficult to obtain the general shareholders’ understanding tothese drastic actions while MTPC Common Shares continue to be listed, because doing so
may cause an increase in MTPC’s R&D expenses in proportion to core operating income inshort-term, and be in conflict with the interests of MTPC’s general shareholders.
Therefore, according to the Tender Offeror, the Tender Offeror has concluded that, for
the improvement of the corporate value of the entire Tender Offeror Group, including the
MTPC Group, it is necessary to create an environment amenable to drastic actions whichmight not directly contribute to the MTPC Group’s short-term benefits but will contribute to
the medium-term and long-term growth of the entire Tender Offeror Group, including the
MTPC Group, and to establish a deeper alliance with the MTPC Group than ever (e.g., theOther Tender Offeror Group Companies prompting cross-sectional and active technology
exchange and R&D together with the MTPC Group) by making MTPC a wholly-owned
subsidiary of the Tender Offeror, while securing the interests of MTPC’s general shareholders
during drastic actions by providing MTPC’s general shareholders with an appropriate andreasonable opportunity to sell their MTPC Common Shares.
According to the Tender Offeror, based on the understanding above, in late July 2019,
the Tender Offeror decided that it is desirable to make MTPC a wholly-owned subsidiary andstarted considering the Transactions, and retained JPMorgan Securities Japan Co., Ltd. (“J.P.
Morgan”) as its financial adviser, as a third-party valuation institution independent from theTender Offeror and MTPC and Nagashima Ohno and Tsunematsu as a legal advisor- 9 -independent from the Tender Offeror and MTPC. On July 30, 2019, the Tender Offeror
made to MTPC an initial inquiry about commencing discussions to consider making MTPC awholly-owned subsidiary of the Tender Offeror. Consequently, since early August 2019, theTender Offeror examined the expected synergies and MTPC’s future management
organization, and on August 27, 2019, the Tender Offeror submitted to MTPC an initial
proposal of the Transactions which describes matters including background of the Tender
Offeror’s proposal for the Transactions and the management policy after the Tender Offer (the“Initial Written Proposal”) and commenced discussions with MTPC to consider a future
management policy in respect of the Tender Offeror Group’s health care business, including
the MTPC Group. The Tender Offeror and MTPC discussed the future management plan todevelop the health care business of the Tender Offeror Group, including MTPC Group, untillate September 2019, and concluded that making MTPC a wholly-owned subsidiary of theTender Offeror is indispensable to accelerate the growth of the health care business of theTender Offeror Group centered on the MTPC Group.
According to the Tender Offeror, as a result of such discussions, the Tender Offeror
further examined the terms and conditions of the Transactions in more details. On October 9,
2019, the Tender Offeror submitted to MTPC an official proposal including a tender offer
price per MTPC Common Shares to be proposed in the Tender Offer (the “Tender Offer
Price”) of 1,800 yen. The Tender Offer Price included in the above proposal made by theTender Offeror is what the Tender Offeror decided after comprehensively taking various
factors into consideration, including the followings: (a) the possibility of approval at a boardof directors’ meeting of MTPC, (b) examples of premiums added in the past cases similar to
the Tender Offer, in which a tender offer to shares, etc., was made by a person other than theissuer (i.e., tender offers made for the purpose of making a listed subsidiary a wholly-owned
subsidiary by its parent company), (c) the market trend regarding the price performance of
MTPC Common Shares, (d) the future outlook for the domestic and foreign business of
MTPC, including the forecast of business results, and (e) the outlook for the tender to bemade in the Tender Offer. Subsequently, the Tender Offeror continued the discussions andnegotiations with MTPC regarding the terms and conditions of the Transactions, including theTender Offer Price. Considering MTPC’s request for re-examination of the proposed terms
made during such discussions and negotiations by insisting that the Tender Offer Price
proposed in the abovementioned proposal (1,800 yen) did not reach a reasonable price, theTender Offeror proposed the Tender Offer Price of 1,850 yen on October 18, 2019 and theTender Offer Price of 1,940 yen on October 29, 2019, but MTPC requested the Tender Offeror
to re-examine both the proposed terms on the grounds that the proposed Tender Offer Prices
were not considered to be reasonable. Given the above, the Tender Offeror submitted arevised proposal regarding the Transactions on October 31, 2019 (which included the Tender
Offer Price of 2,010 yen; the “Revised Proposal”). Furthermore, on November 18, 2019,
the Tender Offeror determined that the terms of the Revised Proposal do not need to bechanged based on the results of the due diligence conducted on MTPC and a share valuation
report regarding the stock value of MTPC Common Shares provided by J.P. Morgan on
November 18, 2019 (the “Share Valuation Report (JPM)”). Consequently, the Tender
Offeror maintained the terms and conditions of the Revised Proposal and decided that theTender Offer Price per share would be 2,010 yen and decided to proceed with the Tender
Offer.
C.

Management Policy After the Tender Offer

According to the Tender Offeror, the Tender Offeror Group is working on providing the- 10 -

most appropriate solutions to social issues by globally concentrating innovative forces, andmaking an effort to achieve the “sustainable well-being of people, society and our planet
Earth” or “KAITEKI.” The Tender Offeror Group has been emphasizing the three values(i.e., Sustainability, Health and Comfort) and has been concentrating its management
resources on the creation of solutions by which these values can be accomplished since 2007.
According to the Tender Offeror, the Tender Offeror will continue to position the
MTPC’s pharmaceutical business at the core of its healthcare business and basically intends torespect the current MTPC’s management system even after completion of the Transactions.
Further, in accordance with the Tender Offeror’s group management rules, the Tender Offeror
Group intends to support MTPC in implementing its Medium-Term Management Plan while
respecting the independence of MTPC’s management.
Although detailed methods are still under consideration, after the Transactions, theTender Offeror and MTPC intend to expand their business to preventive care and healthcare
areas in addition to the pharmaceutical business that MTPC has been engaging in bycoordinating within the Tender Offeror Group. Moreover, they will aim for the mid-to
long-term growth of the Tender Offeror Group’s healthcare business by jointly utilizing
chemistry, biotechnology and digital technology to establish a unique healthcare platform.
For such purpose, MTPC and the Tender Offeror plan to: (a) establish the “Synergy
Creation Committee” (tentative name), which will involve both the Other Tender Offeror
Group Companies and the MTPC Group and strive for the early creation of synergies and (b)accelerate the expansion of the healthcare business of the Tender Offeror Group, including the
MTPC Group, by utilizing the Other Tender Offeror Group Companies’ management
resources to develop the MTPC Group’s foreign operations.
Assuming that no event will occur which would cause MTPC and the Tender Offeror
drastically change their business strategy due to a change in the business environment thatthey do not anticipate as of the date hereof (e.g., business integration with a major
pharmaceutical company and drastic restructuring of pharmaceutical industries), MTPC andthe Tender Offeror have confirmed that the MTPC Group’s management will be conducted asfollows in the ten year period following the Transactions:(i)Management Policy of the MTPC Group

Even after the Transactions, the Tender Offeror plans to (a) accept and support theimplementation of the MTPC’s existing business plan and supplemental management actions,(b) respect the independence of the MTPC’s management and allow the MTPC Group to
formulate its own management strategy while balancing it with the Medium-Term
Management Plan of the Tender Offeror Group, including the MTPC Group, and (c) allow the
MTPC Group to exercise its discretion in utilizing its management resources (e.g., funds forinvestment and personnel planning) when carrying out its management. In addition, theTender Offeror, in accordance with the circumstances, will consider the possibility of M&A
and business integration between the MTPC Group and third parties as one of the strategies tofurther expand the healthcare business of the Tender Offeror Group.
(ii)

The MTPC Group’s Management Resources

After the completion of the Transactions, the Tender Offeror plans to maintain the
MTPC’s strategic investment limits (300,000,000,000 yen in total until FY 2023) and research- 11 -

and development investment level (80,000,000,000 yen per fiscal year until FY 2023), and if
necessary to increase R&D expenses, the Tender Offeror intends to flexibly consult with
MTPC in this connection. Furthermore, after the completion of the Transactions, the Tender
Offeror will cause the MTPC Group to contribute their funds in hand with the exception of
the funds required for the MTPC Group’s business, to the cash management systemadministrated by the Tender Offeror Group and plans to utilize the funds efficiently anddecrease financial costs as the Tender Offeror Group in its entirety, while the Tender Offeror
will provide the MTPC Group with the funds satisfying capital needs in order to prevent any
hindrance to the MTPC Group’s business execution and financially support as necessary inthe case that additional funds are needed in addition to its surplus funds.
In addition, the Tender Offeror ensures fair treatment between its subsidiaries, such as
by not requesting only MTPC, among the Tender Offeror’s subsidiaries, to pay a special
dividend.
Furthermore, after the completion of the Transactions, the Other Tender Offeror Group
Companies and the MTPC Group plan to mutually cooperate for securing human resources
for marketing, research, development and digital technology in healthcare areas. The MTPCGroup also plans to more effectively utilize the foreign human resources and the infrastructureof organization management of the Other Tender Offeror Group Companies.
(iii) Others
The Tender Offeror plans to maintain the current employment conditions of the MTPCGroup for the time being.
The Tender Offeror believes that the MTPC Group’s pharmaceutical business iscentered on the Health (which responds to the person’s medical needs and contributes todisease treatment of disease, non-disease care, health maintenance and healthy life) among thethree values above and after completion of the Transactions, the Tender Offeror Group in
unison plans to vigorously promote development and expansion of the MTPC Group’s
pharmaceutical business.
Incidentally, as of the filing date of this Statement, of the eight directors and the fiveauditors of MTPC, one director concurrently serves as a director of The KAITEKI Institute,Inc., a wholly-owned subsidiary of the Tender Offeror, and another director concurrently
serves as a managing executive officer of the Tender Offeror and a director of Life Science
Institute, Inc., however, at this stage, the Tender Offeror does not specifically plan to execute
any changes for the management structure of MTPC after the Tender Offeror.
D.

Background of and Reasons for Decision-Making for Supporting the Tender
Offer by MTPC

Under the circumstances stated in “B. Background and Purpose of andDecision-Making Process for the Tender Offeror Leading to the Decision to Conduct theTender Offer” above, MTPC received an initial inquiry about commencing discussions to
consider making MTPC a wholly-owned subsidiary of the Tender Offeror on July 30, 2019.
Accordingly, given that MTPC is a consolidated subsidiary of the Tender Offeror and theTransactions constitute transactions that typically involve structural conflict of interest issues
and information asymmetry issues, in order to address those issues and to ensure the fairness- 12 -

of the Transactions, MTPC immediately started establishing a framework for evaluating andnegotiating the Transactions in terms of increasing its corporate value and securing theinterests of general shareholders of MTPC from a standpoint independent of the Tender
Offeror, based on the advice of Mori Hamada & Matsumoto, which is a legal adviser of
MTPC.
Specifically, after preparation towards the establishment of a special committee as statedin “A. Establishing an Independent Special Committee” in “(6) Measures to Ensure theFairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest”, by a resolution at an extraordinary
meeting of the board of directors held on August 29, 2019, soon after the receipt of the Initial
Written Proposal from the Tender Offeror on August 27, 2019, MTPC (i) established a special
committee, which consisted of four members (three members after the resignation of Mr.
Shigeki Iwane), namely Mr. Shigeki Iwane (MTPC’s former outside director (resigned on
October 7, 2019); President and Director of The Kansai Electric Power Co., Inc.; Mr. Shigeki
Iwane resigned as a member of the special committee due to personal reasons on September
30, 2019), Mr. Tsutomu Kamijo (outside director of MTPC and Chairman and Director of
Sapporo Holdings Limited), Mr. Kazutoshi Murao (outside director of MTPC and Counselor
to the president of NIPPON TELEGRAPH AND TELEPHONE WEST CORPORATION),
and Mr. Hiroshi Enoki (outside statutory auditor of MTPC and a representative of Hiroshi
Enoki Certified Public Accountant Office) (for the process of establishment of that special
committee, process of the review, and details of determinations made, please refer to “A.
Establishing an Independent Special Committee” in “(6) Measures to Ensure the Fairness of
the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price andMeasures to Avoid Conflicts of Interest” below.) (ii) referred the following (the “Consulted
Matters”) to the special committee and requested the special committee to submit its
opinions on those matters to MTPC: (i) evaluate whether the board of directors of MTPC
should express an opinion in support of the Tender Offer and whether it should recommendthat the shareholders of MTPC tender MTPC Common Shares in the Tender Offer, after (a)evaluating and determining whether the Transactions should be implemented from theperspective of increasing the corporate value of MTPC and (b) evaluating and determining thereasonableness of the transaction terms and conditions and the fairness of the procedures fromthe view of securing the interests of the general shareholders of MTPC, and provide its
recommendation to the board of directors of MTPC; and (ii) evaluate whether the decision on
the Tender Offer by the board of directors of MTPC will be disadvantageous to the minority
shareholders of MTPC, and provide its opinion to the board of directors of MTPC. The
board of directors of MTPC also resolved that the contents of determinations by the special
committee should be respected to the highest degree in relation to decision-making by theboard of directors of MTPC for the Tender Offer (including the decision whether to support
the Tender Offer) and that the board of directors of MTPC will not support the Tender Offer if
the special committee determines that the terms and conditions of the transactions are notreasonable. The board of directors of MTPC further resolved to grant the special committee
the authority (a) to negotiate the terms and conditions of the transactions with the Tender
Offeror, (b) to appoint its own financial, legal or other advisors as necessary (fees are to beborne by MTPC) to prepare responses to the Consulted Matters, or to name or approve
MTPC’s financial, legal or other advisors (including retrospective approval), and (c) toreceive from the officers and employees of MTPC the information necessary to evaluate andmake determinations regarding the Tender Offer. As stated in “A. Establishing an
Independent Special Committee” in “(6) Measures to Ensure the Fairness of the Tender Offer,such as Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid- 13 -

Conflicts of Interest” below, the special committee appointed Nakamura, Tsunoda &Matsumoto as its own legal advisor and appointed KPMG FAS Co., Ltd. (“KPMG”) as its
own financial advisor and third-party valuation institution based on the authorization
described above.
In addition, as stated in “A. Establishing an Independent Special Committee” in “(6)Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairnessof the Tender Offer Price and Measures to Avoid Conflicts of Interest” below, the special
committee confirmed that there is no concern with respect to the independence and expertiseof MTPC’s legal adviser Mori Hamada & Matsumoto and approved the appointment of Mori
Hamada & Matsumoto. Also, MTPC followed the nomination made by the special
committee after examining the independence, expertise, accomplishments, and other mattersof multiple candidates for financial advisor, and appointed Merrill Lynch Japan Securities Co.,
Ltd. (“Merrill Lynch Japan Securities”) as a financial advisor of MTPC on September 3,
2019.
Further, as stated in “F. Building of an Independent Evaluation Framework” in “(6)Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairnessof the Tender Offer Price and Measures to Avoid Conflicts of Interest” below, MTPC
established an internal framework for evaluating and negotiating and making determinations
regarding the Transactions (including the scope of the officers and employees of MTPC
involved in evaluating and negotiating and making determinations regarding the Transactions,and their duties) from a standpoint independent of the Tender Offeror, and obtained approval
from the special committee that there is no concern with respect to that evaluation frameworkfrom the standpoint of independence.
Subsequently, MTPC received guidance and other legal advice, including on measures
to secure the fairness of the procedures for the Transactions, from Mori Hamada &Matsumoto and advice from a financial point of view, including submission of the sharevaluation report on the result of calculation of the value of MTPC Common Shares, from
Merrill Lynch Japan Securities and has carefully discussed and evaluated whether toimplement the Transactions and the reasonableness of the transaction terms and conditions.
Also, MTPC received from the Tender Offeror an initial proposal including 1,800 yen
for the Tender Offer Price on October 9, 2019, and subsequently continued to discuss andnegotiate with the Tender Offeror the terms and conditions of the Transactions, including theTender Offer Price. Specifically, MTPC received from the Tender Offeror a proposal that theTender Offer Price should be 1,850 yen on October 18, 2019, and a proposal that the Tender
Offer Price should be 1,940 yen on October 29, 2019. In response to each of these proposals,
MTPC requested the Tender Offeror to reconsider its proposal because neither of the proposed
prices were reasonable enough. After that negotiation, MTPC received from the Tender
Offeror on October 31, 2019 the Revised Proposal including 2,010 yen for the Tender Offer
Price.
In the process of the evaluation and negotiation stated above, MTPC made reports to thespecial committee from time to time regarding material aspects and obtained approval fromthe special committee when necessary. Specifically, MTPC provided to the special
committee an explanation regarding the policy for negotiation of the Transactions in advance,and obtained approval from the special committee. Upon the preparation of the businessplan to be presented to the Tender Offeror and the Consolidated Financial Forecast (defined in- 14 -

“A. Procurement by MTPC of the Share Valuation Report from an Independent Third-Party
Valuation Institution” in “(3) Matters Related to Valuation”; hereinafter the same) that
constitutes the basis for the calculation of the value of MTPC Common Shares by Merrill
Lynch Japan Securities and KPMG, MTPC explained to the special committee the preparation
policy in advance, and in the process of that preparation, MTPC provided to the special
committee several explanations regarding the details of the drafts of the business plan and theConsolidated Financial Forecast under preparation (including changes to be made from therevised medium-term management plan regarding “Notice Regarding Revision ofMedium-Term Management Plan 16-20: Open Up the Future” that MTPC announced on
November 19, 2018), material assumptions, and the progress of preparation, and obtained
approval from the special committee after the special committee confirmed the rationality ofthe details, material assumptions, and the preparation process of the final business plan and
the Consolidated Financial Forecast. In addition, upon the receipt of the proposed Tender
Offer Price from the Tender Offeror, MTPC made reports to the special committee each time,and received from the special committee instructions and requests for the policy on how toreact to the proposal and the strategy for negotiation with the Tender Offeror and took
measures in accordance with those instructions and requests.
Following this, MTPC received a written report (the “Report”) from the special
committee on November 18, 2019 stating that the special committee believes that (i) theboard of directors of MTPC should resolve to express an opinion in support of the Tender
Offer and to recommend that the shareholders of MTPC tender MTPC Common Shares in theTender Offer and (ii) (a) resolving to express an opinion in support of the Tender Offer and torecommend that the shareholders of MTPC tender MTPC Common Shares in the Tender
Offer at the board of directors of MTPC would not be disadvantageous to the minority
shareholders of MTPC and (b) making MTPC a wholly-owned subsidiary of the Tender
Offeror after the completion of the Tender Offer would not be disadvantageous to the minority
shareholders of MTPC (for details of the Report, please refer to the section titled “A.
Establishing an Independent Special Committee” in “(6) Measures to Ensure the Fairness of
the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price andMeasures to Avoid Conflicts of Interest.”). In addition to the Report, MTPC received fromthe special committee a share valuation report on the result of calculation of the value of
MTPC Common Shares (the “Share Valuation Report (KPMG)”) and an opinion (a fairness
opinion) dated November 18, 2019 to the effect that 2,010 yen per share as the Tender Offer
Price is fair to the general shareholders of MTPC from a financial point of view (the“Fairness Opinion (KPMG)”) received by the special committee from KPMG on November
18, 2019 (for details of the Share Valuation Report (KPMG) and the Fairness Opinion(KPMG), please refer to the section titled “B. Procurement by the Special Committee of the
Share Valuation Report and the Fairness Opinion from an Independent Third-Party Valuation
Institution” in “(3) Matters Related to Valuation”).
In light of this background, MTPC carefully discussed and evaluated at its board of
directors meeting held on November 18, 2019 whether the Transactions, including the Tender
Offer, would contribute to increasing the corporate value of MTPC and whether thetransaction terms and conditions of the Transactions, including the Tender Offer Price, arereasonable, based on legal advice from Mori Hamada & Matsumoto, advice from a financial
point of view from Merrill Lynch Japan Securities, and a share valuation report on the resultof the valuation of the value of MTPC Common Shares received from Merrill Lynch Japan
Securities on November 18, 2019 (the “Share Valuation Report (Merrill Lynch Japan
Securities)”), as well as the Share Valuation Report (KPMG) and the Fairness Opinion- 15 -

(KPMG) received through the special committee, giving the highest degree of respect to thecontents of determinations by the special committee presented in the Report.
As a result, as stated in “B. Background and Purpose of and Decision-Making Process
for the Tender Offeror Leading to the Decision to Conduct the Tender Offer” above, MTPC
concluded that as a result of becoming a wholly owned subsidiary of the Tender Offeror, it
becomes possible for MTPC Group to closely cooperate or collaborate with the Other Tender
Offeror Group Companies and mutually utilize external networks in a smooth and efficientmanner and to seek to accelerate and enhance the creation of innovation more than ever in ahealthcare sector where business opportunities have significantly expanded, enabling both the
MTPC Group and the entire Tender Offeror Group including the MTPC Group to further
increase their corporate value.

MTPC also determined that 2,010 yen per share as Tender Offer Price is a reasonable
price that secures interests that should be enjoyed by MTPC’s general shareholders, and that
the Tender Offer would provide MTPC’s general shareholders with a reasonable opportunity
to sell their MTPC Common Shares at a price inclusive of an appropriate premium, based on
the following:(i)the fact that the price is a price agreed to with the Tender Offeror based on
sufficient negotiations conducted on multiple occasions with the Tender Offeror,
in which the special committee was substantially involved, and after taking
sufficient measures to ensure the fairness of the terms and conditions of theTransactions, including the Tender Offer Price stated in “(6) Measures to Ensure
the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of theTender Offer Price and Measures to Avoid Conflicts of Interest” below;(ii) the fact that the price exceeds the upper bound of each of the valuation ranges
evaluated using the market price analysis and the trading comparables analysis,
and it is within the valuation range evaluated using DCF Analysis (defined in “A.
Procurement by MTPC of the Share Valuation Report from an Independent
Third-Party Valuation Institution” in (3) Matters Related to Valuation” below)
according to the share valuation report of the evaluation of the value of MTPC
Common Shares by Merrill Lynch Japan Securities based on the Share Valuation
Report (Merrill Lynch Japan Securities) stated in “A. Procurement by MTPC of
the Share Valuation Report from an Independent Third-Party Valuation
Institution” in (3) Matters Related to Valuation” below;(iii) the fact that the price exceeds the upper bound of the valuation range evaluatedusing the market price method, and it also exceeds the median of each of thevaluation ranges evaluated using the share price multiple method and DCF
Method (defined in “B. Procurement by the Special Committee of the Share
Valuation Report and the Fairness Opinion from an Independent Third-Party
Valuation Institution” in (3) Matters Related to Valuation” below) according to theshare valuation report of evaluation of the value of MTPC Common Shares by
KPMG based on the Share Valuation Report (KPMG) stated in “B. Procurementby the Special Committee of the Share Valuation Report and the Fairness Opinion
from an Independent Third-Party Valuation Institution” in (3) Matters Related to
Valuation” below, and as stated in “B. Procurement by the Special Committee of
the Share Valuation Report and the Fairness Opinion from an Independent
Third-Party Valuation Institution” in (3) Matters Related to Valuation” below that- 16 -

KPMG issued the Fairness Opinion (KPMG) stating to the effect that 2,010 yen
per share as Tender Offer Price is fair to the general shareholders of MTPC;(iv) the fact that the price is a price inclusive of a premium of (a) 53.08% (to berounded to the second decimal place; the same applies to each percentage of apremium on a share price below) on 1,313 yen, the closing price on November 15,
2019, which is the business day immediately preceding the announcement date of
the implementation of the Tender Offer, (b) 54.85% on 1,298 yen, the simple
average closing price (to be rounded to the nearest one (1) yen; the same applies
to each simple average closing price below) for the one-month period ending on
November 15, 2019, (c) 62.88% on 1,234 yen, the simple average closing pricefor the three-month period ending on November 15, 2019, and (d) 63.02% on
1,233 yen, the simple average closing price for the six-month period ending on
November 15, 2019 of MTPC Common Shares on the First Section of the TSE,
and that MTPC considers the premium included in the price to be substantial
when compared to the levels of premiums offered in other cases where a tender
offer is conducted by a parent company aiming to convert its listed subsidiary into
its wholly owned subsidiary; and(v) the fact that, as stated in “A. Establishing an Independent Special Committee” in(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to
Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflicts ofInterest, the price is considered to be reasonable in the Report obtained from thespecial committee.
Based on the facts above, MTPC decided that the Transactions would contribute toincreasing the corporate value of MTPC and that the transaction terms and conditions of theTransactions, including the Tender Offer Price, are reasonable. Therefore, the board of
directors of MTPC resolved at its meeting held on November 18, 2019 to express its opinion
in support of the Tender Offer and recommend that the shareholders of MTPC tender MTPC
Common Shares in t the Tender Offer.
For details of the decision-making process at the meeting of MTPC’s board of directors
described above, please refer to “G. Unanimous Approval of All Non-interested Directors andthe No Dissenting Opinion of All Non-interested Statutory Auditors at MTPC” in “(6)Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairnessof the Tender Offer Price and Measures to Avoid Conflicts of Interest.”(3)

Matters Related to Valuation
A.

Procurement by MTPC of the Share Valuation Report from an Independent
Third-Party Valuation Institution(i)Name of Valuation Institution and its Relationship with MTPC and the Tender
OfferorIn arriving at our opinion regarding the Tender Offer, in order to ensure the fairness ofthe decision-making process concerning the Tender Offer Price presented by the Tender
Offeror, MTPC requested Merrill Lynch Japan Securities, a financial advisor and third-party
valuation institution independent from the Tender Offeror and MTPC, to evaluate the value of
MTPC Common Shares and conduct financial analysis incidental thereto. MTPC obtained
the Share Valuation Report (Merrill Lynch Japan Securities) dated November 18, 2019,- 17 -

subject to the assumptions set forth below (Note 1) and certain other conditions. Merrill
Lynch Japan Securities is not a related party of the Tender Offeror or MTPC, and does nothave any material interest in the Transactions, including Tender Offer, needing to be disclosed.
Further, MTPC has not obtained from Merrill Lynch Japan Securities any opinion concerning
the fairness of the Tender Offer Price (a fairness opinion).
Also, compensation payable to Merrill Lynch Japan Securities in connection with theTransactions is contingency compensation that is payable subject to completion of the Tender
Offer. MTPC has appointed Merrill Lynch Japan Securities as its financial advisor andthird-party valuation institution based on the compensation system above after taking into
consideration practices generally used in similar transactions, the propriety of a compensation
system in which MTPC will bear a certain level of financial burden if the Transactions are notcompleted, and other factors.
(ii)

Outline of Valuation

After considering the various valuation methods of the equity value of MTPC Common
Shares, Merrill Lynch Japan Securities analyzed the equity value of MTPC Common Sharesusing (i) the market price analysis because MTPC Common Shares are listed on the First
Section of the TSE, (ii) the trading comparables analysis because there are numerous listedcompanies that are considered to be relatively similar to MTPC and analogical inference ofthe share value of MTPC Common Shares is viable, and (iii) the discounted cash flow
analysis (the “DCF Analysis”) so as to reflect in the evaluation the status of future businessactivities, subject to the condition precedent set forth below (Note 1) and other certain
conditions, based on the premise that MTPC is a going concern and from the perspective that
it would be appropriate to evaluate the share value of MTPC Common Shares in multiple
ways.
According to Merrill Lynch Japan Securities, the methods used, and the corresponding
ranges of per-share price of MTPC Common Shares evaluated by such methods, are as
follows. For assumptions, points of attention, etc. in the preparation of the Share Valuation
Report (Merrill Lynch Japan Securities) by Merrill Lynch Japan Securities and the underlying
valuation analysis therefor, please refer to Note 1.
Market Price Analysis:
Trading Comparables Analysis:
DCF Analysis:

1,233 yen – 1,313 yen
1,386 yen – 1,750 yen
1,861 yen – 2,209 yen

Under the market price analysis, using November 15, 2019 as the valuation referencedate, the per-value of MTPC Common Shares was evaluated to range from 1,233 yen to 1,313
yen, based on the closing price of the reference date (1,313 yen), the simple average closing
price for the most recent one month (1,298 yen), the simple average closing price for the mostrecent three months (1,234 yen) and the simple average closing price for the most recent six
months (1,233 yen) of MTPC Common Shares on the First Section of the TSE.
Under the trading comparables analysis, the share value of MTPC shares was analyzed
via comparison with market share prices and financial indices indicating profitability, etc. ofvarious listed companies engaged in relatively similar, albeit not completely identical,
businesses to those of MTPC, picked out for the purpose of analysis. The per-value of
MTPC Common Shares was evaluated to range from 1,386 yen to 1,750 yen, based on theratio of EBITDA to the business value compared to Astellas Pharma Inc., Otsuka Holdings
Co., Ltd., Eisai Co., Ltd., Shionogi & Co., Ltd., Kyowa Kirin Co., Ltd., Ono PharmaceuticalCo., Ltd., Santen Pharmaceutical Co., Ltd., Sumitomo Dainippon Pharma Co., Ltd., Nippon- 18 -

Shinyaku Co., Ltd., Hisamitsu Pharmaceutical Co., Inc., Kaken Pharmaceutical Co., Ltd.,
Mochida Pharmaceutical Co., Ltd., Kissei Pharmaceutical Co., Ltd. and KYORIN Holdings,
Inc., each of which is deemed to be a listed company having similarities to MTPC, and taking
into consideration the market capitalization and the scale of corporate value, the current
business scale and the status of business deployment within/outside Japan, the future
domestic/international business deployment strategy, and the policy and status of the researchand development activities toward the creation of new medicine (including the products
developed by itself, and the activities for adoption or derivation) and other factors.
Under the DCF Analysis, the per-value of MTPC Common Shares has been evaluated torange from 1,861 yen to 2,209 yen, after analyzing the enterprise value and the equity valueof MTPC based on the financial forecast for the 12 fiscal years from the fiscal year ending
March 2020 to the fiscal year ending March 2031 (including the free cash flow) prepared by
MTPC by discounting such free cash flow to the present value at a certain discount rate. The
discount rate (weighted average cost of capital) adopted is 4.75% to 6.75% as to the domestic
operation and 8.0% to 10.0% as to the overseas operation, which are analyzed based on the
CAPM (capital asset pricing model) theory that is generally used in practice for share value
evaluation. The exit multiple method and the perpetual growth rate method are adopted forthe valuation of the going concern value, and 8.0 to 10.0 times and 8.0 to 10.0 times are
adopted as the EBITDA multiple for the domestic business and the international business,
respectively, under the exit multiple method, and the ratio of minus 2.0% to minus 1.0% and1.0% to 2.0% are adopted as the perpetual growth rate as to the domestic business and theinternational business, respectively, under the perpetual growth rate method based on theguidance given by MTPC.
The consolidated financial forecast prepared based on the business plan provided by
MTPC (the “Consolidated Financial Forecast”), used by Merrill Lynch Japan Securities as
the basis of the DCF Analysis, is as follows. Details of the Consolidated Financial Forecast
have been examined by Merrill Lynch Japan Securities, which has not independently assessed
the accuracy or completeness of the Consolidated Financial Forecast and is not obligated to
do so (please refer to (Note 1) below for assumptions, disclaimers, etc. based on which
Merrill Lynch Japan Securities examined the Consolidated Financial Forecast). Details of
the Consolidated Financial Forecast have also been confirmed by the special committee interms of the reasonableness of their details, material assumptions, and the preparation process,as stated in “A. Establishing an Independent Special Committee” in “(6) Measures to Ensure
the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest.” The forecast also covers the fiscal years
in which a substantial increase/decrease in profits is expected. Specifically, the expectationthat the full-year operating income for the fiscal year ending March 2024 will be increased to61.6 billion yen, which is 64% up from the previous year, and that the Adjusted EBITDA(Note 2) will be increased to 96.2 billion yen, which is 86% up from the previous year, ismade mainly because the investment in research and development for existing late-stage
products of MTPC will be completed and existing late-stage products of MTPC, such as
ND0612 (Levodopa/Carbidopa, Continuous SC pump (Parkinson’s disease)) and MT-1186(Edaravone, Free radical scavenger (Amyotrophic lateral sclerosis: ALS/Oral suspension)),are expected to fully contribute to MTPC’s profits. For the fiscal year ending March 2025, it
is expected that the existing late-stage products of MTPC will continuously contribute to the
profits, similar to the previous fiscal year, and the full-year operating income will be increased
to 93.0 billion yen, which is 51% up from the previous year. In contrast, the expectation for
the fiscal year ending March 2031 that the full-year operating income will be decreased to90.5 billion yen, which is 31% down from the previous year, is made mainly because the sales
amount and the items of other income will be decreased due to the completion of the existing- 19 -

late-stage products of MTPC. However, the synergistic effect expected to be achieved by
the execution of the Transactions is not reflected in the Consolidated Financial Forecast, as it
is difficult to estimate any effect at this point. Please note that an arbitration procedure wascommenced with Novartis Pharma AG in February 2019, and a part of the royalty for Gilenya
payable by Novartis Pharma AG has not been recognized as sales revenue in accordance with
IFRS. Although this accounting treatment is expected to be made going forward, so thatsuch a recognition will not be made during the process of the arbitration procedure, theConsolidated Financial Forecast was prepared under the assumption that the application for
the arbitration had not been made. Therefore, the Consolidated Financial Forecast isdifferent from the financial forecast announced by MTPC in MTPC’s FY 2019 Second
Quarterly Earnings Release:

Sales
Operating Income
Adjusted EBITDA(Note 2)
Free Cash Flow

(In 100 million Yen)FY
FY
endingending
March
March
2024
2025
4,776
5,114
616
930
962
1,201

FY
ending
March
2020
4,188
502
626

FY
ending
March
2021
4,117
440
485

FY
ending
March
2022
4,188
459
610

FY
ending
March
2023
4,158
375
517

265

166

328

296

603

933

FY
ending
March
2026
5,227
1,081

FY
ending
March
2027
5,390
1,170

FY
ending
March
2028
5,733
1,463

FY
ending
March
2029
5,756
1,498

FY
ending
March
2030
5,555
1,318

FY
ending
March
2031
4,956
905

Sales
Operating Income
Adjusted EBITDA
1,349
1,433
1,728
1,763
1,572
1,133
(Note 2)
Free Cash Flow
1,007
1,068
1,281
1,366
1,210
968
(Note 1) The above-mentioned Share Valuation Report (Merrill Lynch Japan Securities)
has been delivered solely for the use and benefit of the board of directors of
MTPC in its capacity as such in connection with and for purposes of its evaluationof the Tender Offer Price from a financial point of view. The Share Valuation
Report (Merrill Lynch Japan Securities) does not express any opinion or view
with respect to any consideration received in connection with the Transactions by
the holders of any class of securities, creditors or other constituencies of any party.
The Share Valuation Report (Merrill Lynch Japan Securities) expresses no view or
opinion as to any terms or other aspects of the Transactions, including, without
limitation, the form or structure of the Transactions. Furthermore, the Share
Valuation Report (Merrill Lynch Japan Securities) does not express any opinion orview as to the relative merits of the Transactions in comparison to other strategies
or transactions that might be available to MTPC or in which MTPC might engage
or as to the underlying business decision of MTPC to proceed with or effect theTransactions. In addition, the Share Valuation Report (Merrill Lynch Japan
Securities) does not express any opinion or recommendation to any shareholder of
MTPC as to whether to tender their MTPC shares in the Tender Offer or how tovote or act in connection with the Transactions or any related matter. Moreover,- 20 -

the Share Valuation Report (Merrill Lynch Japan Securities) does not express any
opinion or view with respect to the fairness (financial or otherwise) of the amount,nature or any other aspect of any compensation to any of the officers, directors or
employees of any party to the Transactions, or class of such persons, relative to
the Tender Offer Price. The Share Valuation Report (Merrill Lynch Japan
Securities) does not express any opinion as to the prices at which MTPC Common
Shares will be traded at any time, including following the announcement or
consummation of the Transactions.
In preparing the Share Valuation Report (Merrill Lynch Japan Securities) andconducting its underlying valuation analysis, Merrill Lynch Japan Securities
reviewed certain publicly available information concerning the business andfinancial matters of MTPC, as well as the business and financial information
inside MTPC (including the Consolidated Financial Forecast) which was either
provided by the management of MTPC to Merrill Lynch Japan Securities or withwhich Merrill Lynch Japan Securities discussed with the management of MTPC.
Merrill Lynch Japan Securities has assumed and relied upon, without independent
verification, the accuracy and completeness of the financial and other informationand data publicly available or provided to or otherwise reviewed by or discussedwith Merrill Lynch Japan Securities and has relied upon the assurances of the
management of MTPC that they are not aware of any facts or circumstances thatwould make such information or data inaccurate or misleading in any material
respect. Further, with respect to the Consolidated Financial Forecast, Merrill
Lynch Japan Securities has been advised by MTPC, and has assumed, with theconsent of MTPC, that it has been reasonably prepared on bases reflecting the best
currently available estimates and good faith judgments of the management of
MTPC as to the future financial performance of MTPC. The Share Valuation
Report (Merrill Lynch Japan Securities) is necessarily based on financial,economic, monetary, market and other conditions and circumstances as in effecton, and the information made available to Merrill Lynch Japan Securities as of,the date of the report (except as otherwise stated in the analysis). It should beunderstood that subsequent developments may affect the Share Valuation Report(Merrill Lynch Japan Securities), and Merrill Lynch Japan Securities does nothave any obligation to update, revise, or reaffirm such report.
As noted above, the descriptions of the analyses conducted by Merrill Lynch
Japan Securities set forth above are summaries of the material financial analyses
presented by Merrill Lynch Japan Securities to the board of directors of MTPC inconnection with the Share Valuation Report (Merrill Lynch Japan Securities) andare not comprehensive descriptions of all analyses undertaken by Merrill Lynch
Japan Securities in connection with such report. The preparation of the Share
Valuation Report (Merrill Lynch Japan Securities) and its underlying analysis is acomplex analytical process involving various judgments about the mostappropriate and relevant methods of financial analysis and the application of thosemethods to the particular circumstances; therefore, it is not necessarily advisable
to describe only a part of the results or summary of the analysis. Merrill Lynch
Japan Securities believes that its analyses must be considered holistically.
Merrill Lynch Japan Securities further believes that selecting portions of its
analyses and the factors considered or focusing on any information presented intabular format, without considering all analyses and factors or the narrativedescription of the analyses, could create a misleading or incomplete view of theprocesses underlying Merrill Lynch Japan Securities’ analysis and the opinion.

- 21 -

The fact that any specific analysis has been referred to in the summary set out
above is not meant to indicate that such analysis was given greater weight thanany other analysis referred to in such summary.
In performing its analyses, Merrill Lynch Japan Securities considered industry
performance, general business and economic conditions, and other matters, manyof which are beyond the control of the Tender Offeror and MTPC. The estimatesof the future performance of MTPC based on which Merrill Lynch Japan
Securities’ analyses were made are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than such
estimates. Merrill Lynch Japan Securities’ analyses were performed solely as
part of its analysis contained in the Share Valuation Report (Merrill Lynch Japan
Securities) and were provided to the board of directors of MTPC in connection
with the delivery of such report. Merrill Lynch Japan Securities’ analyses do not
purport to be appraisals or to reflect the prices at which a company might actually
be sold or the prices at which any securities have been traded or may be traded at
any time in the future. Accordingly, the estimates used in, and the ranges ofvaluations resulting from, any particular analysis described above are inherently
subject to substantial uncertainty and should not be taken to be Merrill Lynch
Japan Securities’ view of the actual values of MTPC.
The Tender Offer Price was determined through negotiations between the Tender
Offeror and MTPC (or the special committee), rather than by any financial advisor,
and was approved by the board of directors of MTPC. The determination toexpress its opinion to support the Tender Offer was made solely by the board of
directors of MTPC. As described above, the Share Valuation Report (Merrill
Lynch Japan Securities) was only one of many factors considered by the board of
directors of MTPC in its evaluation of the Transactions and should not be viewed
as determinative of the views of the board of directors or the management of
MTPC with respect to the Transactions or the Tender Offer Price.
Merrill Lynch Japan Securities has not made or been provided with any
independent evaluation or appraisal of the assets or liabilities (contingent orotherwise) of MTPC, nor has it made any physical inspection of the properties orassets of MTPC. Merrill Lynch Japan Securities has not evaluated the solvency
or fair value of MTPC under any applicable laws or regulations relating tobankruptcy, insolvency or similar matters. Merrill Lynch Japan Securities has
assumed, at the direction of MTPC, that the Tender Offer will be consummated inaccordance with its terms currently contemplated, without waiver, modification oramendment of any material term, condition or agreement and that, in the course ofobtaining the necessary governmental, regulatory and other approvals, consents,
releases and waivers for the Transactions, no delay, limitation, restriction orcondition, including any divestiture requirements or amendments thereto, will be
imposed that would have an adverse effect on the Tender Offeror or MTPC or thecontemplated benefits of the Transactions.
Merrill Lynch Japan Securities has acted as financial advisor to MTPC inconnection with the Transactions and will receive a fee for its services, all ofwhich is contingent upon completion of the Tender Offer. In addition, MTPC
has agreed to reimburse expenses incurred in connection with, and indemnify
Merrill Lynch Japan Securities against certain liabilities arising out of theengagement.
Merrill Lynch Japan Securities and its affiliates comprise a full service securities
firm and commercial bank engaged in securities, commodities and derivatives- 22 -

(Note 2)

trading, foreign exchange and other brokerage activities, and principal investing
as well as providing investment, corporate and private banking, asset andinvestment management, financing and financial advisory services and othercommercial services and products to a wide range of companies, governments andindividuals. In the ordinary course of its businesses, Merrill Lynch Japan
Securities and its affiliates may invest on a principal basis or on behalf ofcustomers or manage funds that invest, make or hold long or short positions,finance positions or trade or otherwise effect transactions in equity, debt or othersecurities or financial instruments (including derivatives, bank loans or otherobligations) of the Tender Offeror, MTPC and certain of their respective affiliates.
Merrill Lynch Japan Securities and its affiliates in the past have provided and may
be currently providing or may provide in the future, investment banking,commercial banking and other financial services to MTPC and its affiliates andhave received or in the future may receive compensation for the rendering of suchservices. In addition, Merrill Lynch Japan Securities and its affiliates in the past
have provided and may be currently providing or may provide in the future,investment banking, commercial banking and other financial services to theTender Offeror and its affiliates and have received or in the future may receive
compensation for the rendering of these services.
Merrill Lynch Japan Securities does not provide any legal, accounting or
tax-related advice.
This refers to EBITDA after the adjustments of revenue or expenses temporarily
generated.

B.

Procurement by the Special Committee of the Share Valuation Report andthe Fairness Opinion from an Independent Third-Party Valuation Institution(i)Name of Valuation Institution and its Relationship with MTPC and the Tender
OfferorIn considering the Consulted Matters, in order to ensure the reasonableness oftransaction terms and conditions of the Transactions, including the Tender Offer Price, thespecial committee requested KPMG, its own financial advisor and third-party valuation
institution independent from the Tender Offeror and MTPC, to calculate the value of MTPC
Common Shares and conduct financial analysis incidental thereto and also to express an
opinion concerning the fairness of the Tender Offer Price (a fairness opinion). MTPC
obtained the Share Valuation Report (KPMG) and the Fairness Opinion (KPMG) on
November 18, 2019.
As stated in “D. Background of and Reasons for Decision-Making for Supporting theTender Offer by MTPC” in “(2) Grounds and Reasons for the Opinion on the Tender Offer”
above, the board of directors of MTPC received the Share Valuation Report (KPMG) and the
Fairness Opinion (KPMG) together with the Report that was submitted to it by the special
committee on November 18, 2019, and, in light of the contents of the Share Valuation Report(KPMG) and the Fairness Opinion (KPMG), the board of directors of MTPC passed theresolution stated in “G. Unanimous Approval of All Non-interested Directors and the No
Dissenting Opinion of All Non-interested Statutory Auditors at MTPC” in “(6) Measures to
Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of theTender Offer Price and Measures to Avoid Conflicts of Interest” below.

- 23 -

KPMG is not a related party of the Tender Offeror or MTPC, and does not have any
material interest in connection with the Transactions, including the Tender Offer, needing to
be disclosed. As stated in “A. Establishing an Independent Special Committee” in “(6)Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairnessof the Tender Offer Price and Measures to Avoid Conflicts of Interest” below, the special
committee appointed KPMG as its own financial advisor and third-party valuation institution
after considering several candidate financial advisors and third-party valuation institutions interms of their independence, expertise, accomplishments, and other matters. Also, only afixed-amount of compensation, which is payable regardless of whether the Transactions
succeed, will be paid to KPMG in connection with the Transactions, and no contingency
compensation, which is payable subject to completion of the Transactions, including theTender Offer, and other conditions, will be paid.
(ii)

Outline of Valuation

In order to collect and examine information required for calculating the value of MTPC
Common Shares, KPMG obtained information on MTPC’s current business status andforecasted business outlook and received explanations about these matters from MTPC’s
management, and calculated the value of MTPC Common Shares based on that information.
After considering which methods should be applied to calculate the value of MTPC Common
Shares among the various share value calculation methods available, KPMG calculated thevalue of MTPC shares using: (a) the market price method because MTPC Common Shares arelisted on the First Section of the TSE and market prices exist; (b) the share price multiple
method because there are multiple listed companies engaged in businesses similar to that of
MTPC and analogical inference of the share value is viable; and (c) the discounted cash flow
method (the “DCF Method”) so as to reflect in the evaluation the status of future businessactivities, based on the premise that MTPC is a going concern and from the perspective that it
would be appropriate to assess the share value of MTPC Common Shares in multiple ways.
The following are the ranges of values per MTPC Common Share that were calculated by
KPMG based on each calculation method set out above.
Market Price Method:
Share Price Multiple Method:
DCF Method:

1,233 yen – 1,313 yen
1,735 yen – 2,050 yen
1,841 yen – 2,096 yen

Under the market price method, using November 15, 2019 as the valuation referencedate, the per-value of MTPC Common Shares was evaluated to range from 1,233 yen to 1,313
yen, based on the closing price of the reference date (1,313 yen), the simple average closing
price for the most recent one month (1,298 yen), the simple average closing price for the mostrecent three months (1,234 yen) and the simple average closing price for the most recent six
months (1,233 yen) of MTPC Common Shares on the First Section of the TSE.
Under the share price multiple method, the per-value of MTPC shares was evaluated torange from 1,735 yen to 2,050 yen based on the ratio of EBITDA to the enterprise value
compared to Astellas Pharma Inc., Daiichi Sankyo Company Limited, Eisai Co., Ltd., Chugai
Pharmaceutical Co., Ltd., Sumitomo Dainippon Pharma Co., Ltd., Shionogi & Co., Ltd., andKyowa Kirin Co., Ltd. as comparable listed companies, each of which is selected by KPMG,
among listed companies in Japan that engage mainly in development, manufacture, and saleof ethical drugs as MTPC does, comprehensively taking into account their similarities to
MTPC in terms of operating results, financial status, status of cash flow, scale of business, andother factors.

- 24 -

Under the DCF Method, the range of the per-value of MTPC Common Share isevaluated from 1,841 yen to 2,096 yen, which results from analyzing MTPC’s corporate value
and share value by discounting to the present value at a certain discount rate the free cash
flow that MTPC is expected to generate in the second quarter of 2020 and onward based on
MTPC’s business plans for the period from the fiscal year ending March 2020 to the fiscal
year ending March 2031 and trends in MTPC’s operating results to date, after holding
question-and-answer sessions with MTPC in order to confirm the reasonableness of thosebusiness plans. A sum-of-the-parts approach was used for the DCF Method, whereby
corporate value and share value are calculated by aggregating values of each businesssegment or geographic segment analyzed separately. The discount rate (weighted-average
cost of capital) adopted is 6.05% to 6.55% as to domestic operation and 9.55% to 11.45% foroverseas operation, which are calculated based on the CAPM (capital asset pricing model)
theory that is generally used in practice for share value evaluation. The perpetualassumption method was used in valuation of the going-concern value of the businesssegments and geographic segments that KPMG considers that evaluation as the going-concern
are appropriate based on sustainable cash flows, and the perpetual growth rate was 0.0% to2.35%, which was determined based on analysis conducted separately for businesses in Japanand overseas.
The Consolidated Financial Forecast used by KPMG as the basis of the DCF Method
have been reviewed by KPMG after holding several question-and-answer sessions with
MTPC and also confirmed by the special committee in terms of the reasonableness of theirdetails, material assumptions, and the preparation process, as stated in “A. Establishing an
Independent Special Committee” in “(6) Measures to Ensure the Fairness of the Tender Offer,such as Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid
Conflicts of Interest” below. Specific figures in the Consolidated Financial Forecast used as
the basis for calculation by the DCF Method by KPMG is as stated in “(ii) Outline of
Valuation” in “A. Procurement by MTPC of the Share Valuation Report from an Independent
Third-Party Valuation Institution” above.
In principle, when calculating the value of MTPC shares, KPMG has used, as-is,
information provided to it by MTPC, information obtained through interviews, publicly
available information, and other information based on the assumption that these materials andinformation are entirely accurate and complete and that there exist no circumstances that havenot been disclosed to KPMG that would have a material impact upon the calculations of thevalue of MTPC shares. KPMG has not made an independent study of the accuracy orcompleteness of those materials and information. KPMG has not independently valuated orappraised the assets or liabilities (including derivative transactions, off-balance-sheet assets or
liabilities, and other contingent liabilities) of MTPC or any of its subsidiaries or affiliates andhas not conducted any analysis or valuation of individual assets or liabilities. Also, KPMG
has not requested any third-party institution to perform any such valuation, appraisal, or
assessment. Moreover, KPMG assumed that MTPC’s financial forecast, referenced in therelevant calculations, was reasonably prepared and produced pursuant to the best forecasts
and judgments that could be obtained from MTPC this time, and that relevant calculations
reflected the information and economic situation as of November 18, 2019.
(iii) Outline of the Fairness Opinion (KPMG)
The special committee also obtained the Fairness Opinion (KPMG) from KPMG, whichstates to the effect that 2,010 yen per share as the Tender Offer Price is fair to the general- 25 -

shareholders of MTPC from a financial point of view. The Fairness Opinion (KPMG)
expresses an opinion to the effect that, assuming the scheme of the Transactions is
implemented, 2,010 yen per share as the Tender Offer Price will be a fair value to the generalshareholders of MTPC (the “Expression of Opinion”) in light of the result of the sharevaluation conducted based on the Consolidated Financial Forecast that was prepared by
MTPC as stand-alone basis and the result of analysis of premiums added in past tender offer
cases that are similar to the Tender Offer. The Fairness Opinion (KPMG) was issued after
several question-and-answer sessions were held with MTPC regarding the background andprocess that led to the conclusion to support the Tender Offer and review procedures
conducted by the review committee of KPMG independently from the KPMG team engaging
in the preparation of the Fairness Opinion, in addition to examination of the result of the
MTPC share valuation conducted by KPMG through analysis and examination of financial
information, including the Consolidated Financial Forecast, provided by MTPC and theholding of question-and-answer sessions with MTPC.
The Expression of Opinion is based on the assumption that the information provided by
MTPC and publicly available information are entirely accurate and complete, and KPMG has
not independently assessed their accuracy or completeness. KPMG has not independently
valuated, appraised, or assessed the individual assets or liabilities (including contingent
liabilities) of MTPC or any of its subsidiaries and has not received any valuation report orappraisal report on those matters. KPMG has not conducted any audit or assessment
procedures with respect to MTPC’s financial statements, including audit procedures inaccordance with generally accepted auditing standards, and is not in a position to express anaudit opinion on MTPC’s financial information. If there is a material error in theinformation disclosed to KPMG by MTPC, or if there is a fact undisclosed to KPMG as of thedate of the Expression of Opinion that could materially affect the analysis of the value of
MTPC Common Shares, then the result of analysis, which is the basis of KPMG’s opinion,
might be materially different. Since the contents of the Expression of Opinion are based on
economic conditions, the regulatory environment, the market environment, and otherconditions as of the date of the Expression of Opinion, any subsequent change in thoseconditions or environment might cause a material impact on the analysis of MTPC Common
Share value; however, KPMG is not obligated to update, amend, or reaffirm the contents ofthe Expression of Opinion.
The Expression of Opinion is made on the assumption that the estimated financial
forecast provided by MTPC is the most reasonable and accountable financial forecast
reasonably prepared by MTPC based on the best forecasts and judgments made by MTPC’s
management as of the date of the Expression of Opinion. KPMG does not express any
opinion regarding the assumptions underlying that financial forecast or its feasibility.
Matters and the environment assumed in a financial forecast not materializing as expected is acommon occurrence, and differences between the forecast and actual performance that would
potentially arise in such a case might have a material impact on the value of the MTPC
shares; however, the analysis by KPMG was not conducted for the purpose of examining thefeasibility of the financial forecast. KPMG is not in a position to express an opinion on theappropriateness of the assumptions used in the financial forecast.
The Expression of Opinion is made for the sole purpose of providing a portion of theinformation that should be considered by the special committee when considering andsubmitting its opinion on the Consulted Matters and not for any other purpose. Also, theExpression of Opinion does not express KPMG’s opinion on decision-making by the special- 26 -

committee or express any recommendation as to whether MTPC’s general shareholders
should tender their shares. In addition, KPMG has not been requested to calculate or
forecast the purchase price of the MTPC shares in transactions other than the Tender Offer
and is not in a position to express an opinion on those matters.
C.

Procurement by the Tender Offeror of the Share Valuation Report From an
Independent Third-Party Valuation Institution(i)Name of Valuation Institution and its Relationship with MTPC and the Tender
OfferorAccording to the Tender Offeror, in connection with the determination of the Tender
Offer Price, the Tender Offeror requested J.P. Morgan to provide the valuation of the shareprice of MTPC Common Shares. J.P. Morgan is not a related party to either the Tender
Offeror or MTPC, nor does it have any material conflict of interest in this Tender Offer.
(ii)Outline of Valuation

According to the Tender Offeror, having considered a number of methods for thevaluation of the share price of MTPC Common Shares, J.P. Morgan performed such valuation
using an average share price analysis, a comparable company analysis and the DCF Analysis,
and provided the Tender Offeror with the Share Valuation Report (JPM). The Share
Valuation Report (JPM) was prepared solely for the purpose of providing information to assist
the Tender Offeror’s board of directors in its evaluation of the Tender Offer. According to
the Share Valuation Report (JPM), the methods used in such valuation and the range of value
per share of MTPC Common Shares calculated based thereon are as follows:a)Average share price analysis: 1,233 yen～1,313 yen
In performing the average share price analysis based on publicly available information, J.P.
Morgan used November 15, 2019 as the base date, and reviewed a closing price per share of
MTPC Common Shares on such date (1,313 yen) and average daily closing share price of
MTPC Common Shares on the TSE for each one month (1,298 yen), three month (1,234 yen)and six month (1,233 yen) period through such date (rounded to the nearest yen, and the same
shall apply to any calculation of an average daily closing share price in this section)..
b)Comparable company analysis: 1,338 yen～1,659 yen
In performing the comparable company analysis, J.P. Morgan used November 15, 2019 as thebase date, selected listed companies, Takeda Pharmaceutical Company Limited, Chugai
Pharmaceutical Co., Ltd., Daiichi Sankyo Co., Ltd., Astellas Pharma Inc., Otsuka Holdings
Co., Ltd., Eisai Co., Ltd., Shionogi & Co., Ltd., Kyowa Kirin Co., Ltd., ONO
PHARMACEUTICAL CO., LTD., Santen Pharmaceutical Co., Ltd., and Sumitomo
Dainippon Pharma Co., Ltd., that are comparable (but may not be identical) in the businesses
they engage in to the business of MTPC for the purpose of analysis, and calculated the valueof MTPC Common Shares in comparison with the items contained in the financial statementsof such peer companies that are indicative of their market value, growth potential andprofitability, among other things.
c)
DCF Analysis:
1,799 yen～2,289 yen
In performing the DCF Analysis, J.P. Morgan used business plans, financial forecasts,
projected earnings and investment plans of MTPC, interviews with the managements of the- 27 -

Tender Offeror and MTPC, results of due diligence, and other publicly available informationand various other factors, all of which have been approved by the Tender Offeror to be used
by J.P. Morgan for the purpose of this analysis. J.P. Morgan calculated MTPC Common
Share’s value by discounting the free cash flows which MTPC is expected to generate in thefiscal period ending March 2020 and thereafter to the present value at a certain range of
discount rates. It is to be noted that no significant changes to profit or loss are expected in
the business plans and the financial forecasts of MTPC, which J.P. Morgan used as the basisof the DCF Analysis. The business plans and the financial forecasts of MTPC provided by
the Tender Offeror to J.P. Morgan, which J.P. Morgan used as the basis of the DCF Analysis,
have taken into account the impact of various measures to be implemented following theTender Offer, assuming the Tender Offer is consummated.
(iii) Outline of Fairness Opinion (JPM)
According to the Tender Offeror, the Tender Offeror determined the Tender Offer Price
as 2,010 yen, based on the analysis and results contained in the Share Valuation Report (JPM),
and by considering the results of due diligence conducted with respect to MTPC, whether theboard of directors of MTPC supports the Tender Offer, the trend of the market value of MTPC
Common Shares, and the expected number of subscribers in the Tender Offer, among otherfactors, in a comprehensive manner, as well as in light of the discussions and negotiations
with MTPC. Following the receipt of the fairness opinion from J.P. Morgan on November
18, 2019 to the effect that the Tender Offer Price of 2,010 yen thus determined was fair from afinancial point of view to the Tender Offeror under certain conditions (the “Fairness Opinion(JPM)”), the Tender Offeror determined the Tender Offer Price to be 2,010 yen by the
resolution of the board of directors on November 18, 2019..
(Note)

According to the Tender Offeror, the following is a supplementary explanation of
the Fairness Opinion (JPM) and the conditions for the valuation of share price of
MTPC Common Shares as the basis therefor, as well as the matters considered
therein and the limitations on the analyses.
In giving the Fairness Opinion (JPM) and conducting the valuation of share priceof MTPC Common Shares which was the basis for such opinion (including theShare Valuation Report (JPM), and hereinafter the same shall apply), J.P. Morgan
has relied upon and assumed the accuracy and completeness of all informationthat was publicly available or was furnished to or discussed with J.P. Morgan by
the Tender Offeror or MTPC or otherwise reviewed by or for J.P. Morgan, and J.P.
Morgan has not independently verified (nor has it assumed responsibility or
liability for independently verifying) any such information or its accuracy orcompleteness. J.P. Morgan has not conducted or been provided with any
valuation or appraisal of any assets or liabilities, nor has it evaluated the solvencyof the Tender Offeror or MTPC under any applicable laws relating to bankruptcy,
insolvency or similar matters. In relying on financial analyses and forecasts
provided to J.P. Morgan by, or derived from, the Tender Offeror or MTPC, J.P.
Morgan has assumed that they have been reasonably prepared based onassumptions reflecting the best currently available estimates and judgments bymanagement of the Tender Offeror and MTPC as of the date of the Fairness
Opinion (JPM) as to the expected future results of operations and financial
condition of the Tender Offeror and MTPC to which such analyses or forecasts
relate. J.P. Morgan expresses no view as to such analyses or forecasts or theassumptions on which they were based. J.P. Morgan has also assumed that the- 28 -

other transactions contemplated by the Tender Offer will have all theconsequences described in discussions with, and materials furnished to J.P.
Morgan by, the representatives of the Tender Offeror. J.P. Morgan is not a legal,
regulatory, tax or accounting expert and has relied on the assessments made byadvisors to the Tender Offeror with respect to such issues. J.P. Morgan further
assumes that all material governmental, regulatory or other consents andapprovals necessary for the consummation of the Tender Offer would be obtained
without any adverse effect on the Tender Offeror or MTPC or on the contemplated
benefits of the Tender Offer.
The Fairness Opinion (JPM) and the result of the valuation of share price of
MTPC Common Shares, which was the basis for such opinion, were necessarily
based on economic, market and other conditions as in effect on, and theinformation made available to J.P. Morgan, as of the date of such opinion. Itshould be understood that subsequent developments may affect the Fairness
Opinion (JPM) and that J.P. Morgan does not have any obligation to update, revise,or reaffirm its analyses and opinion therein. The Fairness Opinion (JPM) is
limited to the opinion about the fairness, from a financial point of view, to theTender Offeror of the Tender Offer Price to be paid by the Tender Offeror in theTender Offer, and J.P. Morgan expresses no opinion as to the judgment made by
the Tender Offeror to launch the Tender Offer. Furthermore, the Fairness
Opinion (JPM) and the result of the valuation of share price of MTPC Common
Shares, which was the basis for such opinion, are not intended to recommend a
specific acquisition price to the Tender Offeror or its board of directors, nor are
they intended to recommend a certain acquisition price as the only appropriate
one.
J.P. Morgan has acted as the financial advisor to the Tender Offeror with respect to
the Tender Offer and will receive a fee from the Tender Offeror for its services, asubstantial portion of which will become payable only if the Tender Offer isconsummated. In addition, the Tender Offeror has agreed to indemnify J.P.
Morgan for certain liabilities arising out of such engagement. During the twoyears preceding the date of the Fairness Opinion (JPM), neither J.P. Morgan nor
its affiliates has provided any other material financial advisory services,
commercial banking services or investment banking services to the Tender Offeror
or MTPC, except as set forth in this paragraph. In addition, J.P. Morgan and its
affiliates hold, on a proprietary basis, less than 1% of the outstanding common
stock of each of the Tender Offeror and MTPC. In the ordinary course ofbusiness, J.P. Morgan and its affiliates may actively trade the debt and equity
securities of the Tender Offeror or MTPC for its own account or for the accountsof customers and, accordingly, J.P. Morgan and its affiliates may at any time holdlong or short positions in such securities.
The financial forecasts of MTPC provided by the Tender Offeror to J.P. Morgan inconnection with the valuation of share price of MTPC Common Shares and the
Fairness Opinion (JPM) (the “Financial Forecasts”) were prepared by MTPC's
management and adjusted by the Tender Offeror. The Tender Offeror does not
publicly disclose the Financial Forecasts, which were not prepared with the view
to be publicly disclosed. The Financial Forecasts are inherently uncertain, andare dependent on a number of variables and conditions (including, without- 29 -

limitation, factors related to the general economy, competitive conditions andprevailing interest rates) that may be beyond the control of the Tender Offeror’s or
MTPC’s management. Therefore, the actual performance may largely differ
from those set forth in the Financial Forecasts.
The foregoing summary of the opinions as set forth in the Fairness Opinion (JPM),
and the result of the valuation of share price of MTPC Common Shares, which
was the basis for such Opinion, and the valuation method thereof do not purport tobe a complete description of the analyses conducted by or data referred to by J.P.
Morgan. The preparation of the Fairness Opinion (JPM) and the Share Valuation
Report (JPM) is a complex process and, therefore, a partial description or asummary of the analyses does not reflect a complete and accurate representation
thereof. J.P. Morgan believes that the results of its analyses must be considered
as a whole and that reviewing only summaries or portions of such analyses,
without considering all of such analyses as a whole, could lead to an incomplete
view of the processes underlying the analyses and its opinion. In providing its
opinion, J.P. Morgan did not attribute any particular weight to any analyses orfactors considered by it and did not form a view as to whether or how any
individual analysis or factor, considered in isolation, supported or failed to support
its opinion, or to what extent. Rather, J.P. Morgan considered the totality of thefactors and analyses performed in providing its opinion. None of the selectedcompanies reviewed as described in the above analysis as a comparable company
is identical to MTPC's operating units or subsidiaries. However, the companies
selected were chosen because they are listed companies with businesses that, forpurposes of J.P. Morgan’s analysis, may be considered similar to those of MTPC.
The analyses by J.P. Morgan necessarily involve complex considerations andjudgments concerning differences in financial and business characteristics of thecompanies involved and other factors that could affect the companies compared to
MTPC.
(4)

Possibility of Delisting and Reasons Therefor

The MTPC Common Shares are presently listed on the First Section of the TSE, but theTender Offeror has not set the maximum number of shares to be purchased through Tender
Offer. Accordingly, depending on the results of the Tender Offer, the MTPC Common
Shares may be delisted after the prescribed procedures are completed, in accordance with the
TSE listing rules. According to the Tender Offeror, even if the requirements of the delisting
rules are not met by the completion of the Tender Offer, the Tender Offeror plans to proceed
to acquire all of the MTPC Common Shares (excluding the shares owned by the Tender
Offeror and the treasury shares owned by MTPC) in the manner outlined in “(5) Policy for
Organizational Restructuring, Etc. After the Tender Offer (Matters Relating to So-called“Two-step Acquisition”” below. In such case, the MTPC Common Shares will be delisted inaccordance with the TSE listing rules. The MTPC Common Shares cannot be traded at theFirst Section of the TSE if they are delisted.
(5)

Policy for Organizational Restructuring, Etc. After the Tender Offer (Matters
Relating to So-called “Two-step Acquisition”)

According to the Tender Offeror, as stated in “A. Outline of the Tender Offer” in “(2)Grounds and Reasons for the Opinion on the Tender Offer” above, since the Tender Offeror- 30 -

plans to make MTPC a wholly-owned subsidiary of the Tender Offeror, if the Tender Offeror
cannot acquire all of the MTPC Common Shares (excluding the MTPC Common Shares heldby the Tender Offeror and the treasury shares held by MTPC) in the Tender Offer, a series offollowing proceedings is planned to be taken after the completion of the Tender Offer so that
the Tender Offeror will acquire all the MTPC Common Shares (excluding the MTPC
Common Shares held by the Tender Offeror and the treasury shares held by MTPC).
a.

Demand for Sale of Shares

According to the Tender Offeror, provided that upon completion of the Tender Offer the
total number of voting rights of MTPC owned by the Tender Offeror amounts to 90% or moreof the voting rights of all shareholders of MTPC, and the Tender Offeror becomes a special
controlling shareholder as set forth in Article 179, Paragraph 1 of the Companies Act, theTender Offeror plans to demand that all shareholders of MTPC (excluding MTPC and theTender Offeror; hereinafter the same.) sell all of their MTPC Common Shares in accordancewith the provisions of Part II, Chapter II, Section 4-2 of the Companies Act promptly after thecompletion of the settlement of the Tender Offer (the “Demand for Sale of Shares”).
According to the Tender Offeror, when exercising the Demand for Sale of Shares, theTender Offeror will set a cash amount equal to the Tender Offer Price to be paid to theshareholders of MTPC as per-share consideration for the MTPC Common Shares. At thesame time, the Tender Offeror will notify MTPC of such intention and ask MTPC to approve
the Demand for Sale of Shares. Provided MTPC approves the Demand for Sale of Sharesthrough a board of directors’ resolution, the Tender Offeror will purchase all of the MTPC
Common Shares owned by all the shareholders of MTPC by following procedures set forth in
the relevant laws and regulations, without obtaining the consent of individual shareholders ofMTPC, as of the date specified in the Demand for Sale of Shares. The Tender Offeror thenwill pay cash to the shareholders in an amount equal to the Tender Offer Price as per-shareconsideration for the number of MTPC Common Shares they own. In the event that MTPC
receives notification from the Tender Offeror concerning the matters prescribed in each Itemof Paragraph 1 of Article 179-2 of the Companies Act, with the intention to the Demand forSale of Shares, the board of directors of MTPC plans to approve such Demand for Sale ofShares.
The Companies Act has a provision which intends to protect the rights of minority
shareholders relating to the Demand for Sale of Shares and Article 179-8 of the Companies
Act and other relevant laws and regulations provide that the shareholders of MTPC who do
not tender their shares in the Tender Offer may file a motion with the court to determine thesale/purchase price of MTPC Common Shares they own. In case this motion is filed, thesale/purchase price will be ultimately ruled by the court.
b.

Share Consolidation

On the other hand, according to the Tender Offeror, if the total number of voting rights
of MTPC owned by the Tender Offeror is less than 90% of the voting rights of allshareholders of MTPC after the Tender Offer is completed, the Tender Offeror intends torequest that MTPC hold an extraordinary meeting of shareholders (the “Extraordinary
Shareholders’ Meeting”) at which MTPC will present proposals to approve the consolidationof the MTPC Common Shares (the “Share Consolidation”) in accordance with Article 180 of
the Companies Act and, subject to the Share Consolidation becoming effective, abolish the- 31 -

article in the Articles of Incorporation concerning the number of shares per share unit, and theTender Offeror will vote in favor of these proposals above at the Extraordinary Shareholders’Meeting. The Tender Offeror believes that, in order to enhance the corporate value of theTender Offeror Group including the MTPC Group, it would be desirable to hold theExtraordinary Shareholders’ Meeting as early as possible. Thus, the Tender Offeror plans tomake a request that MTPC make a public notice of a base date for the Extraordinary
Shareholders’ Meeting to set the base date on a date after but close to the settlement
commencement date of the Tender Offer (as of the date hereof, such public notice date is
expected to be sometime mid-January 2020). As of the date hereof, the base date for the
Extraordinary Shareholders’ Meeting is expected to be set sometime in late January 2020 or
early February 2020 and the Extraordinary Shareholders’ Meeting is expected to be held
sometime in mid-March 2020.
In the event that the proposed Share Consolidation is approved at the Extraordinary
Shareholders’ Meeting, as of the effective date of the Share Consolidation, the shareholders of
MTPC will own a proportionate number of the MTPC Common Shares in accordance with
the Share Consolidation ratio approved by the Extraordinary Shareholders’ Meeting. The
shareholders of MTPC will be paid for the fractional shares that they will be allocated as aresult of the Share Consolidation, if any, with the cash to be paid for the sale of the MTPC
Common Shares in a number equivalent to the total number of such fractional shares (anyfractions of the total number will be rounded down; hereinafter the same.) to MTPC or theTender Offeror, in accordance with the procedure prescribed in Article 235 of the Companies
Act and other relevant laws and regulations. According to the Tender Offeror, with regard to
the sale price of the MTPC Common Shares for a number equivalent to the total number ofsuch fractional shares, the Tender Offeror plans to request that MTPC file a motion with thecourt to permit a voluntary sale, after calculating the amount to be paid to the shareholders of
MTPC who do not tender their shares in the Tender Offer by multiplying the Tender Offer
Price by the number of the MTPC Common Shares they own respectively. While theconsolidation ratio of the Share Consolidation has not yet been determined as of the datehereof, the Tender Offeror will determine the number of the MTPC Common Shares to beowned by the shareholders who do not tender their shares in Tender Offer to be less than one
share so that only the Tender Offeror will own the MTPC Common Shares (excluding thetreasury shares owned by MTPC) after the Share Consolidation.
The Companies Act has a provision to protect the rights of minority shareholders
relating to the Share Consolidation. In the event of the Share Consolidation, if there are any
fractional shares resulting from the Share Consolidation, in accordance with Articles 182-4
and 182-5 of the Companies Act and other relevant laws and regulations, when the conditionsprescribed therein are satisfied, the shareholders of MTPC (excluding the Tender Offeror and
MTPC) may demand that MTPC purchase all of their fractional shares at fair prices and may
file a motion with the court to determine the fair price of the MTPC Common Shares.
According to the Tender Offeror, as stated above, the number of the MTPC Common Shares
to be allocated to the shareholders of MTPC who do not tender their shares in the Tender
Offer are intended to become fractions as a result of the Share Consolidation, and thus, theshareholders of MTPC who oppose to the Share Consolidation are expected to be able to filethe motion above. If this motion is filed, the purchase price will be ultimately ruled by the
court.
According to the Tender Offeror, the Tender Offer is not intended to persuade theshareholders of MTPC to agree to the proposal in the Extraordinary Shareholders’ Meeting.

- 32 -

According to the Tender Offeror, the procedures stated in “a.” and “b.” above may takea longer time or may be changed depending upon the amendment or enforcement of therelevant laws, regulations or the interpretation by the authorities on the relevant laws andregulations. However, even in such cases, if the Tender Offer is completed, the Tender
Offeror intends to take a measure to eventually pay cash to shareholders of MTPC who do nottender their shares in the Tender Offer. According to the Tender Offeror, the amount of cash
to be paid to the respective shareholders in that event is planned to be equal to an amountcalculated by multiplying the Tender Offer Price by the number of the MTPC Common
Shares that each shareholder owns. Specific procedures and the schedule thereof in suchcases will be announced by MTPC as soon as they have been determined through mutual
discussions between the Tender Offeror and MTPC.
In addition, regarding the treatment of the Tender Offer or any of the above procedures
under tax rules, please consult with your experts including tax accountants if as necessary.
(6)

Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure
the Fairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest

Considering that MTPC is a consolidated subsidiary of the Tender Offeror and that theTransactions (including the Tender Offer) constitute transactions that typically involve
structural conflict of interest issues and information asymmetry issues, MTPC implemented
the following measures to address these issues and to ensure the fairness of the terms andconditions of the Transactions (including the Tender Offer).
In addition, according to the Tender Offeror, since the Tender Offeror, as stated in “A.
Outline of the Tender Offer” in “(2) Grounds and Reasons for the Opinion on the Tender
Offer” above, holds 316,320,069 shares (Share Holding Ratio: 56.39%) of the MTPC
Common Shares as of the date hereof, and if the Tender Offeror sets the minimum number ofshares to be purchased with a lower limit of so-called “Majority of Minority” in the Tender
Offer, it makes the completion of the Tender Offer more incertitude and may not contribute to
the interest of all of the general shareholders who desire to tender their shares through theTender Offer, the Tender Offeror does not set the minimum number of shares to be purchasedwith a lower limit of so-called “Majority of Minority” in the Tender Offer. However, giventhat the Tender Offeror and MTPC have implemented the following measures, the Tender
Offeror believes that the interests of all of the general shareholders of MTPC have been given
ample consideration.
The measures implemented by the Tender Offeror described below are based on
explanations given by the Tender Offeror.
A.

Establishing an Independent Special Committee(i)

Process of the Establishment of an Independent Special Committee

As described in “D. Background of and Reasons for Decision-Making for Supporting
the Tender Offer by MTPC” in “(2) Grounds and Reasons for the Opinion on the Tender
Offer” above, MTPC established a special committee by a resolution at an extraordinary
meeting of the board of directors held on August 29, 2019. Prior to the establishment of thespecial committee, MTPC received an initial inquiry about commencing discussions to- 33 -

consider making MTPC a wholly-owned subsidiary of the Tender Offeror from the Tender
Offeror on July 30, 2019; immediately after receiving that inquiry, for the purpose of
establishing a framework for evaluating and negotiating the Transactions in terms ofincreasing the corporate value of MTPC and securing the interests of general shareholders of
MTPC from a standpoint independent of the Tender Offeror, MTPC, while receiving advice
from Mori Hamada & Matsumoto, individually explained to all of MTPC’s independent
outside directors at that time, as well as Mr. Hiroshi Enoki, a certified public accountant, and
Mr. Tadashi Fukuda, an attorney-at-law, who are independent outside statutory auditors of
MTPC with extensive experience and expertise, that (i) MTPC received the inquiry from theTender Offeror, and (ii) since the Transactions constitute transactions that typically involve
structural conflict of interest issues and information asymmetry issues, MTPC needs to takesufficient measures to ensure the fairness of the terms and conditions of the Transactions(including the Tender Offer Price), such as the establishment of a special committee, whenevaluating and negotiating the Transactions. MTPC held a meeting with all of MTPC’s
independent outside directors at that time and independent outside statutory auditors Mr.
Hiroshi Enoki and Mr. Tadashi Fukuda on August 19. At the meeting, MTPC once again
explained to the effect that the inquiry had been received from the Tender Offeror, and Mori
Hamada & Matsumoto explained (a) to the effect that MTPC needs to sufficiently ensure thefairness of procedures to address the structural conflict of interest issues and information
asymmetry issues in the Transactions and (b) the roles of the special committee, followed by aquestion-and-answer session. At the same time, MTPC confirmed the independence andcompetence of MTPC’s independent outside directors and independent outside statutory
auditors who will be candidates for the members of the special committee, while receiving
advice from Mori Hamada & Matsumoto. Subsequently, after confirming (i) independence
from the Tender Offeror (despite there being certain business relationships between eachmember’s company (including Mr. Hiroshi Enoki’s company, Deloitte Touche TohmatsuLLC) and the Tender Offeror or MTPC, the volume of those transactions accounts for lessthan 1% of consolidated profit in each case, and it has also been confirmed that there are noother material interests) and (ii) absence of material interest in the results of theTransactions that differs from that of the general shareholders, MTPC held discussions with
MTPC’s independent outside directors at that time and independent outside statutory auditorspresent at the meeting and appointed four members, namely Mr. Shigeki Iwane (MTPC’s
former outside director (resigned on October 7, 2019); President and Director of The Kansai
Electric Power Co., Inc.; Mr. Shigeki Iwane resigned as a member of the special committee
due to personal reasons on September 30, 2019), Mr. Tsutomu Kamijo (outside director of
MTPC and Chairman and Director of Sapporo Holdings Limited), Mr. Kazutoshi Murao(outside director of MTPC and Counselor to the president of NIPPON TELEGRAPH AND
TELEPHONE WEST CORPORATION), and Mr. Hiroshi Enoki (outside statutory auditor of
MTPC and a representative accountant of Hiroshi Enoki Certified Public Accountant Office)as candidates for members of the special committee, while receiving advice from Mori
Hamada & Matsumoto (there has been no change in the members of the special committee
apart from the resignation of Mr. Shigeki Iwane).
Subsequently, as stated in “D. Background of and Reasons for Decision-Making for
Supporting the Tender Offer by MTPC” in “(2) Grounds and Reasons for the Opinion on theTender Offer” above, by a resolution at an extraordinary meeting of the board of directors
held on August 29, 2019, soon after the receipt of the Initial Written Proposal from the Tender
Offeror on August 27, 2019, MTPC established the special committee, referred the Consulted
Matters to the special committee, and requested the special committee to submit its opinion
on the Consulted Matters to MTPC. The board of directors of MTPC also resolved that the- 34 -

contents of determinations by the special committee should be respected to the highest degree
in relation to decision-making by the board of directors of MTPC for the Tender Offer(including the decision whether to support the Tender Offer) and that the board of directors of
MTPC will not support the Tender Offer if the special committee determines that the terms
and conditions of the transactions are not reasonable. The board of directors of MTPC
further resolved to grant the special committee the authority (a) to negotiate the terms andconditions of the transactions with the Tender Offeror, (b) to appoint its own financial, legal
or other advisors as necessary (fees are to be borne by MTPC) to prepare responses to theConsulted Matters, or to name or approve MTPC’s financial, legal or other advisors(including retrospective approval), and (c) to receive from the officers and employees of
MTPC the information necessary to evaluate and make determinations regarding the Tender
Offer.
Each member of the special committee will be paid a fixed amount of remuneration
irrespective of the contents of responses as remuneration for his duties.
(ii)

Process of Review

From August 29, 2019 to November 18, 2019, the special committee carefully discussed
and evaluated the Consulted Matters by holding 16 meetings in total for around 26 hours intotal and frequently exchanged emails between meetings to report or share information, toconduct deliberations, and to make decisions.
Specifically, upon firstly examining the independence, expertise, and accomplishments,and other matters of multiple candidates for legal advisor and financial advisor and third-party
valuation institution, the special committee appointed Nakamura, Tsunoda & Matsumoto as
its own legal advisor independent from the Tender Offeror and MTPC and KPMG as its own
financial advisor and third-party valuation institution independent from the Tender Offeror
and MTPC. The special committee confirmed that there has been no business relationshipbetween Nakamura, Tsunoda & Matsumoto and the Tender Offeror or MTPC for the past
three years. Although one of the employees of KPMG has been seconded to the Tender
Offeror and KPMG receives a certain amount of consideration related to such secondment,
the special committee determined that, taking into account the size of KPMG’s business, theexistence of that relationship does not affect the independence of KPMG from the Tender
Offeror in the Transactions. The special committee also confirmed that there have been noother business relationships between KPMG and the Tender Offeror or MTPC for the past
three years.
In addition, the special committee approved the appointment of Mori Hamada &Matsumoto, MTPC’s legal advisor, after confirming that there is no concern with respect to its
independence and expertise.
After considering the independence, expertise, andachievements, and other matters of multiple candidates for financial advisor, the special
committee nominated Merrill Lynch Japan Securities as MTPC’s financial advisor, and,following the nomination, MTPC appointed Merrill Lynch Japan Securities as MTPC’s
financial advisor. Furthermore, the special committee approved the internal framework forevaluating the Transactions (including the scope of officers and employees of MTPC involvedin the evaluation, negotiation and decision the Transactions, and their duties) established by
MTPC after confirming that there is no concern with respect to that evaluation frameworkfrom the standpoint of independence.

- 35 -

Subsequently, the special committee has discussed and evaluated measures to be taken
to ensure the fairness of the procedures in the Transactions, taking into account legal advice
received from Nakamura, Tsunoda & Matsumoto and the opinions of Mori Hamada &Matsumoto.
The special committee submitted written questions to the Tender Offeror regarding (a)the Tender Offeror’s positioning of the health care business and its future vision, (b) the roleof MTPC in the future vision, (c) the synergies anticipated as a result of the Transactions andthe reason why making a wholly-owned subsidiary is necessary rather than retaining thecurrent capital structure, (d) the Tender Offeror’s thoughts on MTPC’s management policy
and the mid-term management plan after the Transactions, (e) the reason why the Tender
Offeror chose to conduct the Tender Offer at this timing and the Tender Offeror’s thoughts on
the Tender Offer Price, (f) the Tender Offeror’s thoughts on personnel policy and corporate
governance after the Transactions, (g) the Tender Offeror’s thoughts on the disadvantages ofdelisting and (h) procedures, terms and conditions of the Transactions. The Tender Offeror
responded to the special committee, and Hitoshi Ochi, Director and Representative Corporate
Executive Officer, President & CEO of the Tender Offeror, provided the special committee inperson with an explanation regarding these matters and held a question-and-answer session.
The special committee requested MTPC President & Representative Director Masayuki
Mitsuka, MTPC Representative Director Takashi Kobayashi, MTPC Director Eizo Tabaru,
MTPC Director Hiroaki Ueno, and MTPC Director Yoshihiro Kobayashi to attend meetingsof the special committee and asked their opinions as the management of MTPC and forrelevant information regarding (a) the relationship between the future vision for the healthcare
business in the MTPC Group and the Transactions, (b) the reason why making awholly-owned subsidiary is necessary rather than retaining the current capital structure andthe synergies anticipated as a result of the Transactions, (c) their thoughts on the timing of theTransactions, (d) disadvantages of delisting, and (e) availability of other options other than theTransactions, and then held a question-and-answer session, deliberation, and discussions onthese matters.
The special committee received, in advance, an explanation from MTPC regarding thepolicy for preparing the business plan upon the preparation of the business plan (including theConsolidated Financial Forecast) for the Transactions by MTPC, received explanations during
the preparation process regarding the details, material assumptions, and the preparation
progress of the draft of the business plan at several occasions, and approved the details,
material assumptions, and the preparation process of the final business plan after confirming
the rationality of those elements, taking into account the advice from a financial point of viewreceived from KPMG. As stated in “A. Procurement by MTPC of the Share Valuation
Report from an Independent Third-Party Valuation Institution” and “B. Procurement by theSpecial Committee of the Share Valuation Report and the Fairness Opinion from an
Independent Third-Party Valuation Institution” in “(3) Matters Related to Valuation” above,
KPMG and Merrill Lynch Japan Securities conducted the valuation of MTPC Common
Shares based on the Consolidated Financial Forecast, and the special committee (a) received
explanations from KPMG regarding the valuation method for MTPC Common Shares used by
KPMG, the reason why KPMG used the valuation method, the details of valuation by using
each method and material assumptions for the valuation of MTPC Common Shares (including
the basis for calculating the discount rate under the DCF Analysis and DCF Method and thereason for selecting comparable companies under trading comparables analysis and shareprice multiple method) (collectively, the “Evaluation Methods”) implemented by KPMG, (b)- 36 -

considered the explanations from Merrill Lynch Japan Securities regarding the Evaluation
Methods implemented by Merrill Lynch Japan Securities for the valuation of MTPC Common
Shares in accordance with instructions from MTPC which had received a request from thespecial committee to provide those instructions, and (c) confirmed the rationality of thesematters after question-and-answer sessions, deliberation, and discussions. As stated in “B.
Procurement by the Special Committee of the Share Valuation Report and the Fairness
Opinion from an Independent Third-Party Valuation Institution” in “(3) Matters Related to
Valuation” above, the special committee received the Fairness Opinion (KPMG) on
November 18, 2019, together with the explanation from KPMG regarding the details andmaterial assumptions for the Fairness Opinion (KPMG), and the special committee confirmed
such details and material assumptions.
The special committee received, in advance, an explanation from MTPC regarding thenegotiation policy for the Transactions that MTPC had decided on after taking into accountthe advice from a financial point of view received from Merrill Lynch Japan Securities,
including the implementation of adequate negotiation in accordance with general negotiation
processes for M&A conducted between independent parties to obtain more favorable terms
and conditions of the transactions to the extent possible from the Tender Offeror, andapproved the negotiation policy after deliberation and discussion based on the advice from afinancial point of view received from KPMG. Since receiving on October 9, 2019, the initial
proposal from the Tender Offeror that the Tender Offer Price should be 1,800 yen per share,each time MTPC has received from the Tender Offeror a price proposal, MTPC has made areport to the special committee in a timely manner. The special committee evaluated anddiscussed the contents of the proposal based on the advice from a financial point of viewreceived from KPMG, as well as MTPC’s view based on the advice from a financial point ofview received from Merrill Lynch Japan Securities by MTPC, and was actively involved in
the discussion and negotiation process regarding the Tender Offer Price between MTPC andthe Tender Offeror, including giving instructions and making requests to MTPC (a) to request
the Tender Offeror to increase the Tender Offer Price and (b) to suggest a price thatsufficiently reflects the synergies anticipated from the Transactions. As a result, MTPC
received the Revised Proposal on October 31, 2019 from the Tender Offeror stating 2,010 yen
per share as the Tender Offer Price.
The special committee received explanations regarding details on the following from
Mori Hamada & Matsumoto on several occasions and, while receiving advice from Nakamura,Tsunoda & Matsumoto, confirmed that sufficient information disclosure would be provided:(a) drafts of this press release and an opinion statement for the Tender Offer to be disclosed or
filed by MTPC and (b) drafts of the press release tender offer registration statement for theTender Offer to be disclosed or filed by the Tender Offeror.
(iii) Determinations
Based on the background provided above and in light of the legal advice fromNakamura, Tsunoda & Matsumoto and advice from a financial point of view from KPMG, andthe Share Valuation Report (KPMG) and the Fairness Opinion (KPMG) submitted as ofNovember 18, 2019 from KPMG,, the special committee carefully discussed and evaluated theConsulted Matters and, as of November 18, 2019, submitted to the board of directors of
MTPC the Report with the unanimous approval of the members. An outline of the Report isas follows.

- 37 -

(a)Opinioni

The special committee believes that the board of directors of MTPC should
resolve to express an opinion in support of the Tender Offer and to recommendthat the shareholders of MTPC tender MTPC Common Shares in the Tender Offer.

ii

The special committee believes that resolving to express an opinion in support of
the Tender Offer and to recommend that the shareholders of MTPC tender MTPC
Common Shares in the Tender Offer would not be disadvantageous to the minority
shareholders of MTPC. The special committee also believes that making MTPC
a wholly-owned subsidiary of the Tender Offeror after the completion of theTender Offer would not be disadvantageous to the minority shareholders of
MTPC.

(b)

EvaluationiBased on the following aspects, the special committee has determined that theTransactions and subsequent actions will contribute to increasing the corporate
value of MTPC.

●

The special committee agrees with the current understanding of MTPC and theTender Offeror regarding the business environment surrounding MTPC and
MTPC’s business issues as stated in “B. Background and Purpose of andDecision-Making Process for the Tender Offeror Leading to the Decision to
Conduct the Tender Offer” in “(2) Grounds and Reasons for the Opinion on theTender Offer” above, and considers it necessary and reasonable to conduct theTransactions between MTPC and the Tender Offeror at this time to promote thecreation and realization of further synergies.

●

Based on the business environment and business issues stated above, according to
the management of MTPC, it is important to maintain the sustainability ofpharmaceuticals in the context of a declining birthrate and aging society and rapid
technological evolution in the healthcare field in order to maintain and increase
MTPC’s corporate value in the medium to long term, and continuous investment
in technology and access to growing technological domains are essential businessstrategies, and the special committee believes that the Transactions are aneffective choice to pursue such business strategies. Under the current capital
structure in which both parent and subsidiary companies are listed, synergy effects
have not been fully realized because there are certain restrictions due to necessityof establishing a firewall between MTPC and the Tender Offeror and protecting
the interests of the general shareholders of both parties; however, making MTPC awholly-owned subsidiary of the Tender Offeror through the Transactions willremove these restrictions, and thus satisfy the conditions to realize the synergy
effects stated in “B. Background and Purpose of and Decision-Making Process for
the Tender Offeror Leading to the Decision to Conduct the Tender Offer” in “(2)Grounds and Reasons for the Opinion on the Tender Offer” above.

●

The synergy effects stated above will not be achieved solely by making MTPC awholly-owned subsidiary of the Tender Offeror; continuous investments for the
purpose of maintaining the speed of the R&D pipelines and access to new- 38 -

technology in the regenerative medicine and digital areas are also considerednecessary. In order to realize the synergy effects stated above to the fullest
extent through such continuous investment, it is considered necessary for MTPC
to remain in a core position in the healthcare business in the Tender Offeror Groupand to ensure a structure in which MTPC and the Tender Offeror may actively be
involved in realizing such synergy effects. As stated in “C. Management Policy
After the Tender Offer” in “(2) Grounds and Reasons for the Opinion on theTender Offer” above, MTPC and the Tender Offeror plan to continue to position
MTPC’s pharmaceutical business at the core of the healthcare business in theTender Offeror Group and to disclose, after mutual confirmation, the details of
business strategies and policies regarding management resources in order for
MTPC and the Tender Offeror to actively promote synergy effects; therefore, it isreasonably expected that the structure to realize synergy effects by theTransactions will be ensured.
●

Some disadvantages are also expected from MTPC’s delisting, however, it isconsidered possible to mitigate these disadvantages sufficiently, and the special
committee has determined that the advantages of strengthening the attractive
features of MTPC’s products and its pipelines through the Transactions will begreater than the disadvantages.

●

The special committee believes that none of the possible transactions other than
the Transactions would be more effective than the Transactions in increasing
MTPC’s corporate value due to the following reasons: the fact that the Tender
Offeror has no apparent intention of selling the MTPC Common Shares held by
the Tender Offeror to other third parties; the fact that a merger with a major
overseas pharmaceutical company would be unlikely to utilize the strengths of
MTPC; and the fact that significant restructuring would be required if MTPC wereto merge with a major overseas pharmaceutical company or a medium-sized
pharmaceutical company in Japan.

ii

From the perspective of (a) ensuring a situation substantially equivalent to anarm’s length transaction in the process of formulating the transaction terms and(b) ensuring that general shareholders have an opportunity to make an appropriate
decision based on sufficient information, it is confirmed that fair procedures toprotect the interests of general shareholders have been taken in the Transactions
based on following points.

●

It is confirmed that the independent special committee established by MTPC
worked effectively in the Tender Offer.

●

It is confirmed that the special committee obtained independent professional
advice from Nakamura, Tsunoda & Matsumoto and KPMG, its external experts,
and that MTPC obtained independent professional advice from Mori Hamada &Matsumoto and Merrill Lynch Japan Securities, its external experts.

●

It is confirmed that the special committee obtained a share valuation report from
KPMG, an expert independent third-party valuation institution as a basis for its
decision, and MTPC obtained a share valuation report from Merrill Lynch Japan
Securities, an expert independent third-party valuation institution as a basis for its- 39 -

decision.
●

The special committee obtained the Fairness Opinion (KPMG) from KPMG, andKPMG stated in its opinion that 2,010 yen per share as the Tender Offer Price isfair to the general shareholders of MTPC from a financial point of view.

●

MTPC made a report to the special committee to the effect that MTPC has built aninternal framework under which MTPC’s officers and employees involved in theevaluation, negotiation, and decision-making regarding the Transactions are able
to perform their duties from a position independent from the Tender Offeror, andthe special committee has confirmed and approved that there is no concern withrespect to that framework from the standpoint of independence.

●

All directors and statutory auditors who have conflict of interest are excluded
from the deliberation or resolution of the board of directors meeting andevaluation and negotiation regarding the Transactions.

●

It is confirmed that MTPC conducted so-called “indirect market checks” where an
M&A transaction is executed in a manner that allows other prospective acquiring
parties to make competing proposals after the proposed M&A transaction isannounced. Although MTPC did not conduct so-called “active market checks”
to investigate and evaluate prospective acquiring parties in the market,
considering the fact that (a) the purchaser is the controlling shareholder in theTransactions and (b) the Tender Offeror is unlikely to sell the MTPC Common
Shares held by the Tender Offeror to any third party, it would be pointless to
conduct the active market check and the fact that MTPC did not conduct so-called“active market checks” would be unlikely to reduce the fairness of procedures in
the Transactions.

●

According to the Tender Offeror, the Tender Offeror has not included a “Majorityof Minority” condition because the inclusion of a “Majority of Minority”
condition in the Tender Offer may make the completion of the Tender Offer moreincertitude and may not contribute to the interest of all of the general shareholders
who desire to tender their shares through the Tender Offer. The special
committee believes that the Tender Offer’s decision is not unreasonable.
Furthermore, the special committee believes that the fact that the Tender Offeror
did not include a “Majority of Minority” condition does not reduce the fairness ofprocedures in the Transactions because (a) the Transactions would contribute toincreasing the corporate value of MTPC and the transaction terms and conditions
for the Transactions are appropriate and (b) MTPC has taken sufficient measures
to ensure the fairness of the Transactions.

●

It is confirmed that the Tender Offer intends to ensure that general shareholders
have an opportunity to make an appropriate decision based on sufficient
information.

●

It is confirmed that coerciveness is eliminated in the Transactions.

iii

It is confirmed that transaction terms and conditions for the Transactions arereasonable based on following reasons.

- 40 -

●The acquisition method used in the Transactions is believed to be reasonablebecause the method by which an offeror conducts a tender offer as a first step, andthen conducts a demand for sale of shares or a share consolidation as a second
step is generally used in transactions conducted in order to make a company awholly-owned subsidiary like the Transactions. Also, the type of consideration
for the acquisition is believed to be reasonable because (i) a tender offer in which
consideration is paid in cash is believed to be more reasonable to MTPC’s generalshareholders than a one-step acquisition in which shares of the offeror are
delivered as consideration, since the business of the Tender Offeror is different
from that of MTPC, and (ii) the type of consideration for acquisition in the second
step transaction is deemed reasonable because MTPC’s general shareholders who
do not tender their shares will be able to avoid the risk of a decrease in the price of
the Tender Offeror’s shares which they would have borne if the Tender Offeror’sshares were to be delivered as consideration in exchange for MTPC’s shares, andwill be able to receive an amount of cash determined based on the same price as
the Tender Offer Price.

●

2,010 yen per share as the Tender Offer Price is confirmed to be reasonablebecause (a) no particular unreasonable points have been found with respect to the
purpose, preparation, or content of the Consolidated Financial Forecast that is thebasis of the share valuation by the DCF Method and DCF Analysis in the Share
Valuation Report (KPMG) and the Share Valuation Report (Merrill Lynch Japan
Securities), (b) the Share Valuation Report (KPMG) is determined to be credible
since no particular unreasonable points have been found with respect to themethod and details of valuation stated therein, and 2,010 yen per share as theTender Offer Price exceeds the upper bound of the valuation range evaluatedusing the market price method, and it also exceeds the median of each of thevaluation ranges evaluated using share price multiple method and DCF Method, in
the Share Valuation Report (KPMG) (c) the Share Valuation Report (Merrill
Lynch Japan Securities) is determined to be credible since no particular
unreasonable points have been found with respect to the method and details ofvaluation stated therein, and 2,010 yen per share as the Tender Offer Price exceeds
the upper bound of each of the valuation ranges evaluated using the market priceanalysis and the trading comparables analysis, and it is within the valuation range
evaluated using DCF Analysis, in the Share Valuation Report (Merrill Lynch
Japan Securities), (d) the premium included in 2,010 yen per share as the Tender
Offer Price exceeds the average and median of premiums added in similartransactions, therefore it is confirmed that a substantial premium is added, (e) the
Tender Offer Price is the price agreed to after sincere negotiations, in which thespecial committee was substantially involved and played a central role, between
MTPC and the Tender Offeror, and (f) the Tender Offer Price is judged to be fairto the general shareholders of MTPC from a financial point of view in the
Fairness Opinion (KPMG) obtained from KPMG.

iv

Based on above, the board of directors of MTPC believes that it should resolve toexpress its opinion in support of the Tender Offer and recommend that theshareholders of MTPC accept the Tender Offer.

v

Furthermore, the board of directors of MTPC believes that resolving to express an- 41 -

opinion in support of the Tender Offer and to recommend that the shareholders of
MTPC accept the Tender Offer would not be disadvantageous to the minority
shareholders of MTPC. The board of directors of MTPC also believes thatmaking MTPC a wholly-owned subsidiary of the Tender Offeror after thecompletion of the Tender Offer would not be disadvantageous to the minority
shareholders of MTPC.
B.

Procurement by the Special Committee of Advice from an Independent Legal
Advisor

As stated in “A. Establishing an Independent Special Committee” above, for the
purpose of obtaining expert advice regarding the fairness of procedures, the special committee
appointed Nakamura, Tsunoda & Matsumoto as its own legal advisor independent from theTender Offeror and MTPC and received legal advice, including advice regarding measures tobe taken to ensure the fairness of the procedures of the Transactions, various procedures for
the Transactions, and the method and process of deliberation of the special committee for theTransactions.
Nakamura, Tsunoda & Matsumoto is not a related party of the Tender Offeror or MTPC
and does not have any material interest in the Transactions (including the Tender Offer). For
other information regarding the independence of Nakamura, Tsunoda & Matsumoto, pleasesee “A. Establishing an Independent Special Committee” above.
C.

Procurement by the Special Committee of the Share Valuation Report andthe Fairness Opinion from Independent Financial Advisor and Third-Party
Valuation Institution

As stated in “A. Establishing an Independent Special Committee” above, for the
purpose of obtaining expert advice and assistance regarding measuring the value ofcompanies and price negotiations, etc., the special committee appointed KPMG as its own
financial advisor and a third-party valuation institution independent from the Tender Offeror
and MTPC and obtained the Share Valuation Report (KPMG) dated November 18, 2019 while
receiving advice from a financial point of view, including negotiation policy with the Tender
Offeror. The special committee also received from KPMG the Fairness Opinion (KPMG)
stating to the effect that 2,010 yen per share as the Tender Offer Price is fair to the generalshareholders of MTPC from a financial point of view. For an outline of the Share Valuation
Report (KPMG) and the Fairness Opinion (KPMG), please see “(3) Matters Related to
Valuation” above.
KPMG is not a related party of the Tender Offeror or MTPC and does not have any
material interest in the Transactions (including the Tender Offer). For other information
regarding the independence of KPMG, please see “A. Establishing an Independent Special
Committee” above.
D.

Procurement by MTPC of Advice from an Independent Legal Advisor

As stated in “A. Establishing an Independent Special Committee” above, for the
purpose of obtaining expert advice on the fairness of procedures, MTPC appointed Mori
Hamada & Matsumoto as a legal advisor independent from the Tender Offeror and MTPC andreceived legal advice, including advice regarding measures to be taken to ensure the fairness- 42 -

of the procedures of the Transactions, various procedures for the Transactions, and the method
and process of decision-making by MTPC for the Transactions.
Mori Hamada & Matsumoto is not a related party of the Tender Offeror or MTPC anddoes not have any material interest in the Transactions (including the Tender Offer).
E.

Procurement by MTPC of the Share Valuation Report from Independent
Financial Advisor and Third-Party Valuation Institution

As stated in “A. Establishing an Independent Special Committee” above, for the
purpose of obtaining expert advice and assistance regarding measuring the value ofcompanies and price negotiations, etc., MTPC appointed Merrill Lynch Japan Securities as afinancial advisor and a third-party valuation institution independent from the Tender Offeror
and MTPC and obtained the Share Valuation Report (Merrill Lynch Japan) dated November
18, 2019 while receiving advice from a financial point of view. For an outline of the Share
Valuation Report (Merrill Lynch Japan), please see “(3) Matters Related to Valuation” above.
Merrill Lynch Japan Securities is not a related party of the Tender Offeror or MTPC anddoes not have any material interest in the Transactions (including the Tender Offer).
F.

Building of an Independent Evaluation Framework

As stated in “D. Background of and Reasons for Decision-Making for Supporting theTender Offer by MTPC” in “(2) Grounds and Reasons for the Opinion on the Tender Offer”
above, MTPC has built an internal framework for evaluating and negotiating and making
determinations regarding the Transactions from a standpoint independent of the Tender
Offeror.
Specifically, immediately after MTPC received an initial inquiry aboutcommencing discussions to consider making MTPC a wholly-owned subsidiary of the Tender
Offeror from the Tender Offeror on July 30, 2019, in light of avoiding any possible impact ofstructural conflict of interest issues, MTPC has refrained, and continues to refrain, frominvolving not only MTPC’s officers and employees who concurrently serve as officers or
employees of the Other Tender Offeror Group Companies, but also each of MTPC’s officers
and employees who were officers or employees of the Other Tender Offeror Companies in thepast, in the negotiation process regarding the terms and conditions of the Transactions,
including the Tender Offer Price, between MTPC and the Tender Offeror or in the preparation
process for the Consolidated Financial Forecast on which the valuation of MTPC Common
Shares have been based. The special committee has approved that there is no concern fromthe standpoint of independence with respect to the internal framework for evaluating theTransactions built within MTPC (including the scope of MTPC’s officers and employees
involved in the evaluation negotiation, and decision of the Transactions, and their duties),
including the exclusion of MTPC’s officers and employees as stated above.
Mr. Hiroaki Ueno, one of MTPC’s directors, belonged to Mitsubishi Pharma until
MTPC was established by a merger between Tanabe Pharma and Mitsubishi Pharma in 2007.
Mr. Hiroaki Ueno joined MTPC as a result of the establishment of MTPC by the merger, and
MTPC determined that Mr. Ueno has little conflict of interest in relation to the Tender Offeror
because a significant time has passed since Mr. Ueno joined MTPC. In addition, considering
the fact that Mr. Hiroaki Ueno has comprehensive knowledge of technical aspects related topharmaceuticals, biotechnology and chemistry and his knowledge and expertise are required
for the deliberation of the Transactions, Mr. Hiroaki Ueno participated in the deliberation of- 43 -

the Transactions only with respect to the matters of which structural conflict of interest issues
would not likely affect the interests of general shareholders, such as participation in
evaluation of the expected synergies to be realized through the Transactions.
G.

Unanimous Approval of All Non-interested Directors and the No Dissenting
Opinion of All Non-interested Statutory Auditors at MTPCAs stated in “D. Background of and Reasons for Decision-Making for Supporting theTender Offer by MTPC” in “(2) Grounds and Reasons for the Opinion on the Tender Offer”
above, the board of directors of MTPC carefully discussed and evaluated whether theTransactions (including the Tender Offer) would contribute to increasing the corporate valueof MTPC and whether the transaction terms and conditions of the Transactions (including theTender Offer Price) are reasonable, based on the legal advice received from Mori Hamada &Matsumoto, advice from a financial point of view and the Share Valuation Report (Merrill
Lynch Japan Securities) received from Merrill Lynch Japan Securities, as well as the Share
Valuation Report (KPMG) and the Fairness Opinion (KPMG) received through the special
committee, giving the highest degree of respect to the contents of determinations by the
special committee presented in the Report.
As a result, as stated in “D. Background of and Reasons for Decision-Making for
Supporting the Tender Offer by MTPC” in “(2) Grounds and Reasons for the Opinion on theTender Offer” above, MTPC determined that (i) the Transactions (including the Tender Offer)would contribute to increasing the corporate value of MTPC and (ii) the transaction terms andconditions of the Transactions (including the Tender Offer Price) is reasonable, securing
interests that should be enjoyed by MTPC’s general shareholders, and the Tender Offer would
provide MTPC’s general shareholders with a reasonable opportunity to sell their MTPC
Common Shares at a price inclusive of an appropriate premium. Therefore, MTPC resolved
at its board of directors meeting held today by unanimous approval of the directors who
participated in the deliberation and resolution to express an opinion in support of the Tender
Offer and to recommend that the shareholders of MTPC tender MTPC Common Shares in theTender Offer.
Of the eight directors of MTPC, Mr. Masayuki Mitsuka concurrently serves as a directorof The KAITEKI Institute, Inc., a wholly-owned subsidiary of the Tender Offeror; Mr.
Takeshi Matsumoto concurrently serves as a managing executive officer of the Tender Offeror
and a director of Life Science Institute, Inc.; Mr. Eizo Tabaru has served as an executive
officer at major business entities within the Tender Offeror Group in the past; and Mr. Hiroaki
Ueno was once an employee at major business entities within the Tender Offeror Group.
Thus, from the standpoint of avoiding to the extent possible any possible impact of structural
conflict of interest issues in the Transactions, the board of directors meeting held today was
two-tiered: first, (i) the four directors other than Mr. Masayuki Mitsuka, Mr. Eizo Tabaru, Mr.
Takeshi Matsumoto, and Mr. Hiroaki Ueno participated in deliberation and passed a
resolution as stated above by unanimous approval ; and further, in light of ensuring thequorum for the board of directors meeting of MTPC was met, (ii) five directors (those four
directors participating in (i) above and Mr. Hiroaki Ueno) participated in the deliberation andonce again passed a resolution as stated above by unanimous approval.
All of the statutory auditors present at the board of directors (four statutory auditors (ofwhom three are outside statutory auditors) out of five statutory auditors) expressed theopinion that they had no objections with respect to the resolution.

- 44 -

Of the directors of MTPC, three directors (Mr. Masayuki Mitsuka, Mr. Eizo Tabaru, and
Mr. Takeshi Matsumoto) did not participate in the deliberation or resolution of the board of
directors meeting of MTPC for the Transactions, including the aforementioned board of
directors meeting held today, in light of avoiding any possible impact of structural conflict ofinterest issues in the Transactions, and they did not participate in the deliberation of theTransactions or the discussion or negotiation of the Transactions with the Tender Offeror on
behalf of MTPC.
On the other hand, as stated in “F. Building of an Independent Evaluation Framework”
above, Mr. Hiroaki Ueno belonged to Mitsubishi Pharma until 2007 and joined MTPC in thesame year. Given that a significant time has passed since Mr. Hiroaki Ueno joined MTPC,MTPC determined that this causes little conflict of interest in relation to the Tender Offeror.
In addition, considering the fact that Mr. Hiroaki Ueno has comprehensive knowledge oftechnical aspects related to pharmaceuticals, biotechnology, and chemistry and his knowledge
and expertise are required for the deliberation of the Transactions, Mr. Hiroaki Ueno
participated in the deliberation and resolution in the second stage of the board of directors
meeting of MTPC held today in light of ensuring the quorum for the board of directors
meeting was met, and participated in the deliberation of the Transactions only with respect tothe matters of which structural conflict of interest issues would not likely affect the interestsof general shareholders, such as participation in evaluation of the expected synergies to berealized through the Transactions.
Mr. Koji Kudo, a statutory auditor of MTPC who is originally from major business
entities within the Tender Offeror Group, did not participate in any of the deliberations at theboard of directors meeting and refrained from expressing his opinion regarding the resolutionof the board of directors.
H.

No Transaction Protection Clause

In order to secure an opportunity for persons other than the Tender Offeror to makecompeting offers, etc., and thereby contribute to ensuring the fairness of the Tender Offer
Price, the Tender Offeror and MTPC have not entered into any agreement that restricts MTPC
from contacting persons making competing offers, including any agreement providing atransaction protection clause that may forbid MTPC from contacting persons making
competing offers.
I.

Measures to Ensure Opportunities for MTPC’s Shareholders to Decide
Whether to Tender Their Shares in the Tender Offer

According to the Tender Offeror, as mentioned in “(5) Policy for Organizational
Restructuring, Etc. After the Tender Offer (Matters Relating to So-called “Two-step
Acquisition”) above, the Tender Offeror secures an opportunity for the shareholders of MTPC
to appropriately decide whether to tender their shares in the Tender Offer and thereby care toensure that the Tender Offer is not coercive, because (a) the Tender Offeror takes an approachto ensure an opportunity for all shareholders of MTPC to exercise the right under theCompanies Act to require MTPC to purchase shares constituting less than a whole unit or theright to file a motion with the court to determine the fair price of MTPC Common Shares, i.e.,
promptly after the completion of the settlement of the Tender Offer and depending on theamount of the MTPC Common Shares acquired by the Tender Offeror at completion of the- 45 -

Tender Offer, the Tender Offeror plans to exercise the Demand for Sale of Shares with respect
to all of the MTPC Common Shares (excluding the MTPC Common Shares owned by theTender Offeror and the treasury shares owned by MTPC), or alternatively, the Tender Offeror
intends to request that the MTPC hold an extraordinary meeting of shareholders at which
MTPC will present proposals to approve the Share Consolidation and, subject to the Share
Consolidation becoming effective, to abolish the article in the Articles of Incorporation
concerning the number of shares per share unit; and (b) the Tender Offeror has indicated that,in the event of exercising the Demand for Sale of Shares or conducting the Share
Consolidation, the amount of cash to be paid to the respective shareholders is planned to beequal to an amount calculated by multiplying the Tender Offer Price by the number of the
MTPC Common Shares each shareholder owns.
In addition, according to the Tender Offeror, the Tender Offeror has set the tender offer
period of the Tender Offer as 31 business days, while the statutory minimum period stipulated
in the Act is 20 business days. The Tender Offeror has set a relatively long tender offer
period and secured an appropriate opportunity for the shareholders of MTPC to decide
whether to tender their shares in the Tender Offer.
4.

Details of Material Agreements Between the Tender Offeror and the Shareholders
of MTPC Concerning Tendering Shares
None.

5.

Details of Benefits Received from the Tender Offeror or any of its Specially
Related Parties
None.

6.

Response Policy with Respect to Basic Policies Relating to the Control of MTPC
None.

7.

Questions to the Tender Offeror
None.

8.

Requests for Extension of the Tender Offer Period
None.

9.

Future Prospects

Please refer to the sections titled “B. Background and Purpose of and Decision-Making
Process for the Tender Offeror Leading to the Decision to Conduct the Tender Offer”, “C.
Management Policy After the Tender Offer”, and “D. Background of and Reasons for
Decision-Making for Supporting the Tender Offer by MTPC” in “(2) Grounds and Reasonsfor the Opinion on the Tender Offer” in “3. Details of and Grounds and Reasons for theOpinion on the Tender Offer” and “(4) Possibility of Delisting and Reasons Therefor” and“(5) Policy for Organizational Restructuring, Etc. After the Tender Offer (Matters Relating to
So-called “Two-step Acquisition”)” above.

- 46 -

10.

Details of Transactions, Etc. with Controlling Shareholder(1)

Transactions, Etc. with Controlling Shareholder and Status of Conformity with
Policy on Measures to Protect Minority Shareholders

Since the Tender Offeror is the controlling shareholder (the parent company) of MTPC,
expressing an opinion regarding the Tender Offer constitutes a transaction, etc. with acontrolling shareholder. As a “Policy on Measures to Protect Minority Shareholders in
Conducting Transactions with Controlling Shareholder” in the Corporate Governance Reportdisclosed on October 11, 2019, MTPC stated that in regard to transactions between MTPC
and the controlling shareholder, the highest priority is given in the decision-making toincrease the enterprise value of the MTPC Group in order to maximize the benefits to all of
MTPC’s shareholders, and MTPC verifies the adequacy and economic rationality such aswhether the terms and conditions are equivalent to those of general transactions; significant
transactions are subject to sufficient deliberations and approval by the board of directors,
which includes two or more independent outside board directors, from the perspective ofensuring the interests of the MTPC Group and/or MTPC’s shareholders.
With respect to the Transactions, including the Tender Offer, MTPC has implemented
measures to address structural conflict of interest issues and information asymmetry issues
and to ensure the fairness of the terms and conditions of the Transactions, including theTender Offer Price, as stated in “(6) Measures to Ensure the Fairness of the Tender Offer, suchas Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflictsof Interest” in “3. Details of and Grounds and Reasons for the Opinion on the Tender Offer”
above. MTPC believes these measures are consistent with the policy stated above.
(2)

Details of Measures to Ensure Fairness and Measures to Avoid Conflicts ofInterest

Please refer to “(6) Measures to Ensure the Fairness of the Tender Offer, such as
Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflicts ofInterest” in “3. Details of and Grounds and Reasons for the Opinion on the Tender Offer”
above.
(3)

Outline of Opinion Stating that the Transactions Would Not be Disadvantageous
to the Minority Shareholders, Obtained from a Party who has No Interest in theControlling Shareholder

MTPC received the Report from the special committee on November 18, 2019, which
includes contents to the effect that the special committee believes that resolving to express an
opinion in support of the Tender Offer and to recommend that the shareholders of MTPC
tender MTPC Common Shares in the Tender Offer at the board of directors meeting of MTPC
would not be disadvantageous to the minority shareholders of MTPC. For details, pleaserefer to “A. Establishing an Independent Special Committee” in “(6) Measures to Ensure theFairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest” in “3. Details of and Grounds and Reasonsfor the Opinion on the Tender Offer” above. The Report also includes the opinion thatmaking MTPC a wholly-owned subsidiary of the Tender Offeror as stated in “(5) Policy for
Organizational Restructuring, Etc. After the Tender Offer (Matters Relating to So-called- 47 -

“Two-step Acquisition”)” in “3. Details of and Grounds and Reasons for the Opinion on theTender Offer” above after the completion of the Tender Offer would not be disadvantageous
to the minority shareholders of MTPC.
11.

Other Matters

MTPC decided at its board of directors meeting held today to revise its dividend
forecast for FY 2019 announced on October 30, 2019 and not to declare a year-end dividendfor FY 2019, on the condition that the Tender Offer is completed. For details, please refer to“Notice of Revision of Dividend Forecast (No Declaration) For FY 2019” announced today.
End.
Reference: Tender Offeror’s announcement titled “Announcement of Commencement of
Tender Offer for Shares of Mitsubishi Tanabe Pharma Corporation (Securities Code: 4508)”
dated as of November 18, 2019 (as attached).

- 48 -

November 18, 2019
Company name:
Representative:

Contact:

Tel:

Mitsubishi Chemical Holdings
Corporation
Hitoshi Ochi
Representative Corporate Executive
Officer, President & Chief Executive
Officer
TSE code no.:4188, 1st section
Habuka Shigeki
Corporate Executive Officer, General
Manager, Public Relations and Investor
Relations Office+81 (0)3-6748-7120

Announcement of Commencement of Tender Offer for Sharesof Mitsubishi Tanabe Pharma Corporation (Securities Code: 4508)
Mitsubishi Chemical Holdings Corporation (the “Company” or the “Tender Offeror”) announces thatit has decided to acquire common stock (the “Target Company Common Stock”) of Mitsubishi Tanabe
Pharma Corporation (Tokyo Stock Exchange, Inc. (“TSE”) code no.: 4508; the “Target Company”)
through a tender offer (the “Tender Offer”) pursuant to the Financial Instruments and Exchange Act(Act No. 25 of 1948, as amended; “Act”).
1. Purpose of Tender Offer(1)

Overview of the Tender Offer
As of today, the Tender Offeror holds 316,320,069 shares (Share Holding Ratio (Note 1):56.39%) of the Target Company common stock that are listed on the First Section of the TSE,
and the Target Company is a consolidated subsidiary of the Tender Offeror.
(Note 1)

“Share Holding Ratio” means any shareholding ratio relative to the total number
of issued shares of the Target Company as of September 30, 2019 (i.e.,
561,417,916 shares), as set forth in the Second Quarterly Earnings Release for FY
2019 (IFRS) (Consolidated) disclosed by the Target Company on October 30,
2019 (referred to as the “Target Company’s FY 2019 Second Quarterly Earnings
Release”), less the number of treasury shares (excluding the 200,279 shares thatare held by the Officer Remuneration BIP (Board Inventive Plan) Trust (the “BIP
Trust”) as of September 30, 2019) held by the Target Company as set forth in theTarget Company’s FY 2019 Second Quarterly Earnings Release (i.e., 431,636

1shares) (equating to 560,986,280 shares) (shareholding ratios are rounded up or
down to three decimal places), and hereinafter the same shall apply.
The Tender Offeror determined, by way of written resolution in lieu of a board of directors
meeting pursuant to Article 370 of the Companies Act (Act No. 86 of 2005, as amended,hereinafter the same) and Article 27 of the Articles of Incorporation of the Tender Offeror, toconduct the Tender Offer today as part of the series of transactions for the purpose of acquiring
all of the shares of the Target Company (excluding the Target Company Common Stock heldby the Tender Offeror and the treasury stock held by the Target Company) and making theTarget Company its wholly-owned subsidiary (the “Transactions”).
In the Tender Offer, the Tender Offeror has set 57,670,731 shares (Note 2) as the minimum
number of the shares to be purchased, and, thus, if the total number of the share, etc., tenderedin the Tender Offer (“Tendered Share, Etc.”) is less than such minimum number, the Tender
Offeror will not purchase any of Tendered Share, Etc. However, the Tender Offeror plans to
obtain all of the Target Company Common Stock through the Tender Offer as stated above, and,
therefore, has not set the maximum number of the shares to be purchased.

Thus, if the total

number of Tendered Share, Etc., is equal to or more than such minimum number, the Tender
Offeror will purchase all of Tendered Share, Etc., and, accordingly, depending on the results of
the Tender Offer, the Target Company Common Stock may be delisted after taking prescribed
procedures in accordancewith the TSE listing rules. Additionally, even in the event that the delisting
criteria are not met upon completion of the Tender Offer, because the Tender Offeror plans to executea series of procedures in order to acquire all the Target Company Common Stock as stated in “(4) Policy
on Reorganization etc. after the Tender Offer (Matters Relating to the So-Called Two-Stage Takeover)”below after completion of the Tender Offer, the Target Company Common Stock may be delisted
after taking prescribed procedures in accordance with the TSE listing rules.
(Note 2)The minimum number of the shares to be purchased (57,670,731 shares) is
calculated as follows: (i) deduct (a) the number of treasury shares (excluding theTarget Company Common Stock possessed by BIP Trust as of September 30, 2019(200,279 shares)) (431,636 shares) held by the Target Company as of September
30, 2019, as set forth in the Target Company’s FY 2019 Second Quarterly
Earnings Release from (b) the total number of issued shares of the Target
Company as of September 30, 2019, as set forth in the Target Company’s FY 2019
Second Quarterly Earnings Release (561,417,916 shares), which becomes
560,986,280 shares; (ii) calculate the number of voting rights of 560,986,280
shares, which becomes 5,609,862 voting rights; (iii) calculate the minimum figure
which is two third or more of 5,609,862 voting rights, which is 3,739,908 voting2

rights; (iv) multiply 3,739,908 by the number of shares which constitutes 1 unit
(100 shares), which becomes 373,990,800 shares; and (v) deduct the number ofshares (316,320,069 shares) held by the Tender Offeror from 373,990,800 shares,
which becomes 57,670,731 shares.
According to the Target Company’s press release, “Announcement of Mitsubishi Tanabe
Pharma Corporation’s Opinion Regarding Tender Offer for Shares in Mitsubishi Tanabe
Pharma Corporation by the Controlling Shareholder Mitsubishi Chemical Holdings Corporation,
and Recommendation to Tender Shares” dated November 18, 2019 (the “Target Company’s
Press Release”), the Target Company resolved at its board of directors’ meeting today that theTarget Company would issue an opinion in support of the Tender Offer and recommend thatthe shareholders of the Target Company accept the Tender Offer. For details of the Target
Company’s decision making process, please refer to “2. Description of the Tender Offer,” “(4)Basis of Calculation of Tender Offer Price,” “(B) Background of Calculation,” “Measures to
Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender
Offer Price and Measures to Avoid Conflicts of Interest,” “h. Unanimous Approval of All Noninterested Directors and the No Dissenting Opinion of All Non-interested Statutory Auditors at
the Target Company” below.

(2) Background, Purpose and Determination Process for the Tender Offer, andManagement Policy after the Tender Offera. Background and Purpose of the Tender Offer
The Tender Offeror was established in October 2005 by means of a stock-for-stock exchange
jointly conducted by the former Mitsubishi Chemical Corporation (“Former Mitsubishi
Chemical”) and Mitsubishi Pharma Corporation (“Mitsubishi Pharma”), then a subsidiaryof Former Mitsubishi Chemical, whereby the Tender Offeror became their parent company.
As of today, the Tender Offeror Group (the Tender Offeror, its 552 subsidiaries, and its 169
affiliated companies (as of the date of September 30, 2019), hereinafter the same.) in which
the Tender Offeror serves as its holding company, is conducting business activities in thethree domains which are performance products, industrial materials and health care (these
domains are further separated into four segments of performance products segments
belonging to performance products, each of segments of chemicals and industrial gases
belonging to industrial materials and health care segments belonging to health care, andother departments) with Mitsubishi Chemical Corporation; the Target Company; Life
Science Institute, Inc. and Taiyo Nippon Sanso Corporation serving as its four operating
3

companies.
Additionally, with “KAITEKI Value for Tomorrow” as its corporate slogan, the Tender
Offeror Group pursues “KAITEKI Management” to enhance its corporate value, which isconsidered to be the sum of three values―improved capital efficiency; enhancement ofinnovative capacity in respect of creation of innovative products and services; and provisionof solutions which contribute to the enhanced sustainability of people, society and theEarth―in an effort to achieve the “sustainable well-being of people, society and our planet
Earth,” in other words, KAITEKI, and formulated the Medium-Term Management Plan
“APTSIS 20,” (Note 3) to be in effect for the five-year period from FY 2016 to FY 2020.
Under the Medium-Term Management Plan, the Tender Offeror has engaged in various
portfolio reforms with the basic policy of “aiming to remain a high growth/high profit-modelcompany group through businesses in the areas of performance products, industrial materials
and health care”, and has continued to work on strengthening its business base.
(Note 3) For details of the Medium-Term Management Plan “APTSIS 20,” please refer tothe explanatory material named “Formulation of APTSIS 20 New Medium-Term
Management Plan,” disclosed by the Tender Offeror on December 9, 2015, andthe explanatory material named “Revision of Targets under Medium-Term
Management Plan APTSIS 20,” disclosed on December 4, 2018. You may review
these explanatory materials on the Tender Offeror’s website.
Website: http://www.mitsubishichem-hd.co.jp/ir/library/analysts_meeting.html
On the other hand, the Target Company was established in October 2007 through a mergerof Tanabe Seiyaku Co., Ltd (“Tanabe Seiyaku”) and Mitsubishi Pharma.

Through themerger of Tanabe Seiyaku and Mitsubishi Pharma, the Tender Offeror, which was the parent
company of Mitsubishi Pharma, became the parent company that owns majority of the total
number of issued shares of the Target Company, and the Target Company became aconsolidated subsidiary while maintaining its listing. As of today, the Target Company
Group (the Target Company, its 34 subsidiaries and its 2 affiliated companies (as of the dateof September 30, 2019), hereinafter the same.) mainly engages in the pharmaceuticalbusiness. The Tender Offeror has been owning 316,320,069 shares of the Target Company
Common Stock (Share Holding Ratio: 56.39%) which the Tender Offeror acquired as aresult of the October 2007 merger without any increase or decrease.
Since October, 2007, the Target Company, as the core company of the Tender Offeror
Group’s pharmaceutical business, has operated its business aiming to become a global
research-driven pharmaceutical company.

Under the “the Medium-Term Management

Plan 16-20: Open Up the Future” since the FY 2016, the Target Company Group has worked
on four challenges to open up the future medical treatment—”Maximizing Pipeline (Note 4)4

Value”, “Strengthening IKUYAKU (Drug Fostering and Evolution) and Marketing”,“Accelerating U.S. Business Development”, and “Reforming Operational Productivity”.
Specifically, the Target Company Group intends to accelerate drug discovery innovation byenhancing drug discovery capabilities in biologics (bio medicine) centered in therapeutic
antibodies and nucleic acid drugs (Note 5) while affiliating with venture entities which
engage in R&D of a plant-based VLP (Virus-Like Particle) vaccine and which have
revolutionary development concept and technology combining existing medicines andmedical devices.

Furthermore, the Target Company carries out its business following a

policy to appropriately determine actions in response to diversification of drug discovery
modalities (Note 6) (e.g. digital-health area centered in diabetes and kidney diseases, andregenerative medicine by use of genetic therapy) depending on the areas of treatments.
(Note 4) Pipeline means compounds which are ethical drug candidates and product groups
thereof subject to clinical tests.

Hereinafter the same.

(Note 5) Nucleic acid drugs means drugs using nucleotide, which is constituents ofdeoxyribonucleic acid (DNA) or ribonucleic acid (RNA), etc. controling mattersconcerning genetic information, and its derivative.

Hereinafter the same.

(Note 6) Drug discovery modalities means treatment methods, such as small moleculecompounds; peptide drugs; protein drugs including therapeutic antibodies; genetic
therapy; nuclear acid drugs; cell therapy drugs; and regenerative medicine.
Hereinafter the same.
However, the pharmaceutical business environment surrounding the Target Company isassumed to remain challenging due to the downward pressure on drug prices from theviewpoint of restraining the increase of social security costs domestically and internationally,
whereas R&D expenses are escalating.

Furthermore, under the situation that social

security costs are required to be reduced as a social problem, the scope of the Tender
Offeror’s business needs to be expanded so as to satisfy the social needs, from theconventional “diagnosis and treatment” to health management reinforcement, the diseaseprogression prevention, and regeneration and function recovery.

In addition, the core

operating profit (Note 7) of the Target Company Group has recently decreased due to theincrease in its R&D expenses, and the ratio of R&D expenses to its core operating profit,
which was around 1 to 1.6 in the fiscal year ended March 2016, decreased to around 1 to 0.6
in the fiscal year ended March 2019, resulting in a significant unbalance between its R&D
expenses and core operating profit.

In the fiscal year ended March 2020, in addition to theimpact of the drug prices revision, the Target Company estimated that its sales and profits
will decrease due to the continuous impact related to the request for the arbitration by theNovartis Pharma AG in February 2019 on the issue as to whether or not the Target Company
5

is entitled to certain royalties for “Gilenya,” the treatment for multiple sclerosis, and thus
R&D expenses will likely to continue to exceed the Target Company's core operating profit.
(Note7) According to the Target Company, with adoption of the International Financial
Reporting Standard (IFRS), the Target Company has introduced “core operating
profit” as a major profit index to demonstrate its recurring profitability andpositioned it as an important indicator of business management, etc.

“Core

operating profit” of the Target Company is the profit excluding the income andloss recorded by non-recurring items specified by the Target Company Group (the“non-recurring items”) from operating profit.

As non-recurring items, gain orloss associated with a business transfer, restructuring loss, and impairment losses
on intangible assets associated with products are assumed.
After making the Target Company a consolidated subsidiary of the Tender Offeror in
October, 2007, the Tender Offeror enabled the Target Company to obtain the merits as alisted company, such as enhancing degree of recognition and securing good human resources,
by maintaining the listing of the Target Company Common Stock and supported the Target
Company in further strengthening its capabilities of creating pharmaceuticals andaccelerating overseas business growth. The Tender Offeror has continued engaging inrealizing business synergies between companies which constitute the Tender Offeror Groupexcluding the companies which constitute the Target Company Group (collectively the“Other Tender Offeror Group Companies”) and the Target Company Group, with an aim ofachieving the goal set at the time of the merger which was to pursue business opportunities
by positively responding to changes in the medical environment in the future.
However, since the Target Company Group initially set its main theme as becoming a global
research-driven pharmaceutical company upon its establishment in 2007 and the Other
Tender Offeror Group Companies were focusing on restructuring the petrochemical business,
the Other Tender Offeror Group Companies and the Target Company Group could notnecessarily secure sufficient management resources for jointly pursuing synergies. Despite
such situation, the Other Tender Offeror Group Companies and the Target Company Group
have endeavored to create business synergies through mutual exchange of technology andhuman resources. Specifically, the Target Company Group and the Other Tender Offeror
Group Companies took on a challenge of developing the field of pharmaceutical medicine
combining medicine and chemicals (industrial materials) and a challenge of creating drugs
utilizing gases, and supported commercialization in the regenerative medicine field utilizingMuse cells (Note 8). However, while the Tender Offeror and the Target Company have had
their own independence as listed companies and avoided the risk of a conflict of interest as
much as possible and each has conducted its business in compliance with its contractual
6

obligations owed to third parties, cooperation on utilization of each other’s intellectual
property and human resources and investment in management resources between the Other
Tender Offeror Group Companies and the Target Company Group have not been cultivatedsufficiently and the realization of synergy has yet to be achieved.
(Note 8) Muse cells mean the non-neoplastic mesenchymal pluripotent cells in humanbodies, which can be differentiated into various cells or tissues.

Hereinafter thesame.
In addition, in the Tender Offeror Group, the establishment of Mitsubishi Chemical
Corporation as a result of the merger of Former Mitsubishi Chemical, Mitsubishi Plastics,
Inc. and Mitsubishi Rayon Co., Ltd. which took place in April, 2017, enhanced the science
foundation and reinforced the technology platforms as well as streamlining and reinforcing
the sales organization from a customer perspective in the area of chemical business including
petrochemical business, and, thus, they now have some good prospect on the petrochemicalbusiness restructuring which they have been worked on.

Therefore, the Target Company

Group and the Other Tender Offeror Group Companies are now in a position to be able tosecure management resources for synergy pursuit.
In such current situation, the health care technology area in which the Target Company
Group has strength such as (i) collection, analysis and application of data related to healthcare, (ii) digitalization of prophylaxis and treatment, etc., utilizing IT techniques and (iii)biotechnologies, is expected to greatly overlap with the chemical technology area in which
the Other Tender Offer Group Companies have strength.

Such overlap is expected to createsynergy between the Target Company Group and the Other Tender Offeror Group
Companies and such synergy is expected to expand more than ever.
The Tender Offeror believes that, if the Tender Offeror Group, including the Target
Company Group, can exchange, combine and utilize the intellectual property, know-how,
technology, networks and human resources actively and flexibly in the four fields (i.e.,
pharmaceuticals, biotechnology, chemistry and digital) possessed by each company, theTender Offeror Group can create new products and innovations requested by society in the
future.
As a specific example of the aforementioned fields in the Tender Offeror’s and the Target
Company’s assumption, the field of regenerative medicine, which is a target of strong social
expectations, can be listed first.

The Tender Offeror and the Target Company have maderemarkable advances in the fields of cell medicine, genetic therapy, nuclear acid medicine
and functionally alternative medical devices as the technologies that will meet social needs,
such as a complete recovery from illness and recovery of organs and bodily functions, whichcannot be achieved with traditional medicines. The Tender Offeror Group is conducting
7

clinical trials of regenerative medicine utilizing Muse cells, and a closer cooperation
between the Other Tender Offeror Group Companies and the Target Company Group will
be increasingly needed in clinical development.

Research and development of genetic

therapy and nuclear acid medicine have also been advanced in the Target Company Group,
and it will be significantly meaningful for the future growth of the Tender Offeror Group if
the Tender Offeror Group, including the Target Company Group, works together on the fieldof regenerative medicine. Furthermore, the field of prevention (including prevention ofprogression) can be listed as one of the specific fields. In terms of preventing the illness
or loss of quality of life and economic value from becoming ill, the development of vaccines
to prevent not only infectious diseases but also illness, the development of the management
technologies of information on the individuals’ health that will lead to the early detection of
disease signs, and the advancement of sensing (Note 9) and diagnosis technologies are allimportant issues that the Tender Offeror believes.
Furthermore, it is expected that further refinement and individualization of health care will
increasingly generate economic benefits in the field of medicine in the management of
illness that will help the recovery of illness and prevent the progression of illness.

In orderto respond to these social issues, the Tender Offeror believes that the Tender Offeror Group,
including the Target Company Group, will be able to integrate internal and external
knowledge and technology and create, at a fast pace, new solutions, such as wearable devices,
healthcare data platforms, and pharmaceuticals that are combined with IoT (Note 10), digitaltechnology and medical devices.
(Note 9) Sensing means measurement and quantification of information concerning
physiological change occurring inside and outside human body, health andexercise condition by using the sensor, etc.
(Note 10) IoT means the technology that enables materials derived from goods such asmachines that were previously not connected to internet to be gathered throughthe network and analyzed comprehensively through the network.
The development of materials used in functionally alternative medical devices is one of thestrong fields of the Other Tender Offeror Group Companies. By utilizing the technologies
and knowhow held by the Target Company Group in this field, revitalization of innovationin this field can be achieved within the Tender Offeror Group, including the Target Company
Group.

By utilizing the Target Company’s bio-technologies, human resources and know-

hows, the Tender Offeror will be able to work on the construction of new solution businessin medical-food-bio business (i.e. performance product business related to health, medicine,
food and agriculture) of the Tender Offeror Group.
8In the pharmaceutical business operated by the Target Company Group, the Target Company
Group mainly made strategic investments and R&D investments centered on conventional
type medicine development while attempting to expand drug discovery modality.

However,by integrating the Target Company Group and the Other Tender Offeror Group Companies,
they will be able to describe a portfolio that extends to all technological areas that contributeto the healthcare business development from conventional type medicine to digital medicine(Note 11), biotechnology and microbiomes (Note 12) and that may enable them to globally
expand a business model that meets the needs of society and contributes to the healthcare
under KAITEKI management, i.e., disease treatment, pre-symptomatic disease care, healthmaintenance and healthy activities.
Moreover, in addition to product development and innovation, the Other Tender Offeror
Group Companies and the Target Company Group will be able to further streamline
management processes by structuring wide collaborative organizations among all thebusiness areas by (a) mutually taking advantage of the global human network and logistics
network owned by the Other Tender Offeror Group Companies and the Target Company
Group, (b) making strategic and efficient investments jointly with investing companies (i.e.,
Diamond Edge Ventures/California, U.S. (which is owned by the Tender Offeror) and M P
Healthcare Venture Management/Massachusetts, U.S. (which is owned by the Target
Company)) and (c) utilizing the Other Tender Offeror Group Companies’ foreign operationsof financial, general affair and human resource function by the Target Company Group.
(Note 11) Digital medicine means tools to support lifestyle modifications, to treat diseases
or to support treatments utilizing smartphone applications, etc. (e.g., applications
to quit smoking) or tools that combine medical devices such as sensors andmedicines (e.g., pills with integrated chips to improve drug adherence rates), etc.
(Note 12) Microbiomes are microorganism communities.

Microorganism communities

exist inside and outside the human body; for example, the microbiomes existinginside bowels and cuticles of human bodies are referred to as human microbiomes,
which are subject to research in terms of possible effects on various diseases, etc.
Given such situation, the Tender Offeror believes that, considering that the volume of thesynergies between the Target Company Group and the Other Tender Offeror Group
Companies that are expected to be created through making the Target Company a whollyowned subsidiary of the Tender Offeror is remarkably large, even taking into account that
the Target Company will lose its aforementioned merits that can be obtained as long as theTarget Company remains a listed company after the Transactions, now is the appropriate
timing to invest the management resources in synergy creation, and that swiftly taking
9various actions and measures for synergy creation is the optimal choice to improve themedium-term and long-term corporate value development of the entire Tender Offeror
Group.

The actions and measures include (i) maintenance or expansion of R&D expenses

targeted at development of pipelines, which are Target Company Group’s future growth
driver, (ii) making prior investments for synergy creation, (iii) promoting unrestricted
technological exchange at a working level within the Tender Offeror Group and (iv)establishing supporting communication foundations, by coordinating within the Tender
Offeror Group, including the Tender Offeror and the Target Company.

Meanwhile, theTender Offeror is of the view that, even though maintenance and expansion of R&D
expenses targeted at pipeline development and prior investments for synergy creation willcontribute to the corporate value improvement of the entire Tender Offeror Group, including
the Target Company Group, in terms of medium-term and long-term growth, it might bedifficult to obtain the general shareholders’ understanding to these drastic actions while theTarget Company Common Stock continue to be listed, because doing so may cause anincrease in the Target Company’s R&D expenses in proportion to core operating income inshort-term, and be in conflict with the interests of the Target Company’s generalshareholders.
Therefore, the Tender Offeror has concluded that, for the improvement of the corporate valueof the entire Tender Offeror Group, including the Target Company Group, it is necessary tocreate an environment amenable to drastic actions which might not directly contribute to theTarget Company Group’s short-term benefits but will contribute to the medium-term andlong-term growth of the entire Tender Offeror Group, including the Target Company Group,and to establish a deeper alliance with the Target Company Group than ever (e.g., the Other
Tender Offeror Group Companies prompting cross-sectional and active technology
exchange and R&D together with the Target Company Group) by making the Target
Company a wholly-owned subsidiary of the Tender Offeror, while securing the interests of
the Target Company’s general shareholders during drastic actions by providing the Target
Company’s general shareholders with an appropriate and reasonable opportunity to sell theirTarget Company Common Stock.
In late July 2019, the Tender Offeror decided that it is desirable to make the Target Company
a wholly-owned subsidiary and started considering the Transactions, and retained JPMorgan
Securities Japan Co., Ltd. (hereinafter, “J.P. Morgan”) as its financial advisor, as a thirdparty valuation institution independent from the Tender Offeror and the Target Company
and Nagashima Ohno and Tsunematsu as a legal advisor independent from the Tender
Offeror and the Target Company.

On July 30, 2019, the Tender Offeror made a preliminary

approach to the Target Company requesting for a start of a discussion on a transaction
10contemplating to make the Target Company a wholly-owned company of the Tender Offeror.
Consequently, since early August 2019, the Tender Offeror examined the expected synergies
and the Target Company’s future management organization and, on August 27, 2019, theTender Offeror submitted to the Target Company an initial proposal of the Transactions
which describes matters including background of the Tender Offeror’s proposal for theTransactions and the management policy after the Tender Offer (hereinafter, the “Initial
Written Proposal”) and commenced discussions with the Target Company to consider afuture management policy in respect of the Tender Offeror Group’s health care business,
including the Target Company Group. The Tender Offeror and the Target Company
discussed the future management plan to develop the health care business of the Tender
Offeror Group, including the Target Company Group, until late September, 2019, andconcluded that making the Target Company a wholly-owned subsidiary of the Tender
Offeror is indispensable to accelerate the growth of the health care business of the Tender
Offeror Group centered on the Target Company Group.
As a result of such discussions, the Tender Offeror further examined the terms and conditionsof the Transactions in more details.

On October 9, 2019, the Tender Offeror submitted to

the Target Company an official proposal including a tender offer price per the Target
Company Common Stock to be proposed in the Tender Offer (the “Tender Offer Price”) of
1,800 yen. The Tender Offer Price included in the above proposal made by the Tender
Offeror is what the Tender Offeror decided after comprehensively taking various factors into
consideration, including the followings: (a) the possibility of approval at a board of directors’
meeting of the Target Company, (b) examples of premiums added in the past cases similar
to the Tender Offer, in which a tender offer to shares, etc., was made by a person other than
the issuer (i.e., tender offers made for the purpose of making a listed subsidiary a whollyowned subsidiary by its parent company), (c) the market trend regarding the priceperformance of the Target Company Common Stock, (d) the future outlook for the domestic
and foreign business of the Target Company, including the forecast of business results and(e) the outlook for the tender to be made in the Tender Offer.

Subsequently, the Tender

Offeror continued the discussions and negotiations with the Target Company regarding theterms and conditions of the Transactions, including the Tender Offer Price.

Considering

the Target Company’s request for re-examination of the proposed terms made during suchdiscussions and negotiations by insisting that the Tender Offer Price proposed in theabovementioned proposal (1,800 yen) did not reach a reasonable price, the Tender Offeror
proposed the Tender Offer Price of 1,850 yen on October 18, 2019 and the Tender Offer
Price of 1,940 yen on October 29, 2019 but the Target Company requested the Tender
Offeror to re-examine both the proposed terms on the grounds that the proposed Tender11Offer Prices were not considered to be reasonable. Given the above, the Tender Offeror
submitted a revised proposal regarding the Transactions on October 31, 2019 (which
included the Tender Offer Price of 2,010 yen; hereinafter, the “Revised Proposal”).
Furthermore, today, the Tender Offeror determined that the terms of the Revised Proposal
does not need to be changed based on the results of the due diligence conducted on the Target
Company and a share valuation report regarding the stock value of the Target Company
Common Stock provided by J.P. Morgan today (hereinafter, the “Share Valuation Report(JPM)”).

Consequently, the Tender Offeror maintained the terms and conditions of the

Revised Proposal and decided that the Tender Offer Price per share would be 2,010 yen anddecided to proceed with the Tender Offer.

b.

Process and Reason of the Target Company’s Determination
According to the Target Company’s Press Release, the Target Company received an initialinquiry from the Tender Offeror on July 30, 2019, about commencing discussions to consider
making the Target Company a wholly-owned subsidiary of the Tender Offeror.
Accordingly, given that Target Company is a consolidated subsidiary of the Tender Offeror
and the Transactions constitute transactions that typically involve structural conflict ofinterest issues and information asymmetry issues, in order to address those issues and toensure the fairness of the Transactions, the Target Company immediately started establishinga framework for evaluating and negotiating the Transactions in terms of increasing its
corporate value and securing the interests of general shareholders of the Target Company
from a standpoint independent of the Tender Offeror, based on the advice of Mori Hamada& Matsumoto, which is a legal advisor of the Target Company.
Specifically, after preparation towards the establishment of a special committee as stated in“2. Description of the Tender Offer,” “(4) Basis of Calculation of Tender Offer Price,” “(B)Background of Calculation,” “Measures to Ensure the Fairness of the Tender Offer, such as
Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflictsof Interest,” “b. Establishment of an Independent Special Committee by the Target Company”
below, by a resolution at an extraordinary meeting of the board of directors held on August29, 2019, soon after the receipt of the Initial Written Proposal from the Tender Offeror on
August 27, 2019, the Target Company (i) established a special committee, which consistedof four members (three members after the resignation of Mr. Shigeki Iwane), namely Mr.
Shigeki Iwane (the Target Company’s former outside director (resigned on October 7, 2019);
President and Director of The Kansai Electric Power Co., Inc.; Mr. Shigeki Iwane resigned
as a member of the special committee due to personal reasons on September 30, 2019), Mr.
Tsutomu Kamijo (outside director of the Target Company and Chairman and Director of
12Sapporo Holdings Limited), Mr. Kazutoshi Murao (outside director of the Target Company
and Counselor to the president of NIPPON TELEGRAPH AND TELEPHONE WEST
CORPORATION), and Mr. Hiroshi Enoki (outside statutory auditor of the Target Company
and a representative of Hiroshi Enoki Certified Public Accountant Office) (for the processof establishment of that special committee, process of the review, and details of
determinations made, please refer to “2. Description of the Tender Offer,” “(4) Basis ofCalculation of Tender Offer Price,” “(B) Background of Calculation,” “Measures to Ensure
the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest,” “b. Establishment of an Independent
Special Committee by the Target Company” below.) (ii) referred the following (the“Consulted Matters”) to the special committee and requested the special committee tosubmit its opinions on those matters to the Target Company: (i) evaluate whether the boardof directors of the Target Company should express an opinion in support of the Tender Offer
and whether it should recommend that the shareholders of the Target Company tender theTarget Company Common Stock in the Tender Offer, after (a) evaluating and determining
whether the Transactions should be implemented from the perspective of increasing thecorporate value of the Target Company and (b) evaluating and determining thereasonableness of the transaction terms and conditions and the fairness of the proceduresfrom the view of securing the interests of the general shareholders of the Target Company,
and provide its recommendation to the board of directors of the Target Company; and (ii)evaluate whether the decision on the Tender Offer by the board of directors of the Target
Company will be disadvantageous to the minority shareholders of the Target Company, andprovide its opinion to the board of directors of the Target Company.

The board of directorsof the Target Company also resolved that the contents of determinations by the special
committee should be respected to the highest degree in relation to decision-making by theboard of directors of the Target Company for the Tender Offer (including the decision
whether to support the Tender Offer) and that the board of directors of the Target Company
will not support the Tender Offer if the special committee determines that the terms andconditions of the transactions are not reasonable.

The board of directors of the Target

Company further resolved to grant the special committee the authority (a) to negotiate theterms and conditions of the transactions with the Tender Offeror, (b) to appoint its own
financial, legal or other advisors as necessary (fees are to be borne by the Target Company)
to prepare responses to the Consulted Matters, or to name or approve the Target Company’s
financial, legal or other advisors (including retrospective approval), and (c) to receive fromthe officers and employees of the Target Company the information necessary to evaluate andmake determinations regarding the Tender Offer. As stated in “2. Description of the Tender13Offer,” “(4) Basis of Calculation of Tender Offer Price,” “(B) Background of Calculation,”“Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure theFairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest,” “b.
Establishment of an Independent Special Committee by the Target Company” below, thespecial committee appointed Nakamura, Tsunoda & Matsumoto as its own legal advisor andappointed KPMG FAS Co., Ltd. (“KPMG”) as its own financial advisor and third-party
valuation institution based on the authorization described above.
In addition, as stated in “2. Description of the Tender Offer,” “(4) Basis of Calculation of
Tender Offer Price,” “(B) Background of Calculation,” “Measures to Ensure the Fairness of
the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price andMeasures to Avoid Conflicts of Interest,” “b. Establishment of an Independent Special
Committee by the Target Company” below, the special committee confirmed that there is noconcern with respect to the independence and expertise of the Target Company’s legal
advisor Mori Hamada & Matsumoto and approved the appointment of Mori Hamada &Matsumoto.

Also, the Target Company followed the nomination made by the special

committee after examining the independence, expertise, accomplishments, and other mattersof multiple candidates for financial advisor, and appointed Merrill Lynch Japan Securities
Co., Ltd. (“Merrill Lynch Japan Securities”) as a financial advisor of the Target Company
on September 3, 2019.
Further, as stated in “2. Description of the Tender Offer,” “(4) Basis of Calculation of Tender
Offer Price,” “(B) Background of Calculation,” “Measures to Ensure the Fairness of theTender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price andMeasures to Avoid Conflicts of Interest,” “g. Building of an Independent Evaluation
Framework” below, the Target Company established an internal framework for evaluating
and negotiating and making determinations regarding the Transactions (including the scopeof the officers and employees of the Target Company involved in evaluating and negotiating
and making determinations regarding the Transactions, and their duties) from a standpoint
independent of the Tender Offeror, and obtained approval from the special committee that
there is no concern with respect to that evaluation framework from the standpoint of
independence.
Subsequently, the Target Company received guidance and other legal advice, including on
measures to secure the fairness of the procedures for the Transactions, from Mori Hamada& Matsumoto and advice from a financial point of view, including submission of the sharevaluation report on the result of calculation of the value of the Target Company Common
Stock, from Merrill Lynch Japan Securities and has carefully discussed and evaluatedwhether to implement the Transactions and the reasonableness of the transaction terms and14

conditions.
Also, the Target Company received from the Tender Offeror an initial proposal including
1,800 yen for the Tender Offer Price on October 9, 2019, and subsequently continued to
discuss and negotiate with the Tender Offeror the terms and conditions of the Transactions,
including the Tender Offer Price.

Specifically, the Target Company received from theTender Offeror a proposal that the Tender Offer Price should be 1,850 yen on October 18,
2019, and a proposal that the Tender Offer Price should be 1,940 yen on October 29, 2019.
In response to each of these proposals, the Target Company requested the Tender Offeror toreconsider its proposal because neither of the proposed prices were reasonable enough..
After that negotiation, the Target Company received from the Tender Offeror on October 31,
2019 the Revised Proposal including 2,010 yen for the Tender Offer Price.
In the process of the evaluation and negotiation stated above, the Target Company madereports to the special committee from time to time regarding material aspects and obtained
approval from the special committee when necessary. Specifically, the Target Company
provided to the special committee an explanation regarding the policy for negotiation of theTransactions in advance, and obtained approval from the special committee.

Upon thepreparation of the business plan to be presented to the Tender Offeror and the Consolidated
Financial Forecast (defined in “2. Description of the Tender Offeror,” “(4) Basis ofCalculation of Tender Offer Price,” “(B) Background of Calculation,” “Measures to Ensure
the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer
Price and Measures to Avoid Conflicts of Interest,” “f. Procurement by the Target Companyof the Share Valuation Report from an Independent Financial Advisor and Third-Party
Valuation Institution” below; hereinafter the same) that constitutes the basis for the
calculation of the value of the Target Company Common Stock by Merrill Lynch Japan
Securities and KPMG, the Target Company explained to the special committee thepreparation policy in advance, and in the process of that preparation, the Target Company
provided to the special committee several explanations regarding the details of the drafts ofthe business plan and the Consolidated Financial Forecast under preparation (includingchanges to be made from the revised medium-term management plan regarding “NoticeRegarding Revision of Medium-Term Management Plan 16-20: Open Up the Future” that
the Target Company announced on November 19, 2018), material assumptions, and theprogress of preparation, and obtained approval from the special committee after the special
committee confirmed the rationality of the details, material assumptions, and the preparation
process of the final business plan and the Consolidated Financial Forecast. In addition,
upon the receipt of the proposed Tender Offer Price from the Tender Offeror, the Target
Company made reports to the special committee each time, and received from the special
15

committee instructions and requests for the policy on how to react to the proposal and thestrategy for negotiation with the Tender Offeror and took measures in accordance with those
instructions and requests.
Following this, the Target Company received a written report (the “Report”) from the special
committee on November 18, 2019 stating that the special committee believes that (i) theboard of directors of the Target Company should resolve to express an opinion in support of
the Tender Offer and to recommend that the shareholders of the Target Company tender theTarget Company Common Stock in the Tender Offer and (ii) (a) resolving to express an
opinion in support of the Tender Offer and to recommend that the shareholders of the Target
Company tender the Target Company Common Stock in the Tender Offer at the board of
directors of the Target Company would not be disadvantageous to the minority shareholdersof the Target Company and (b) making the Target Company a wholly-owned subsidiary of
the Tender Offeror after the completion of the Tender Offer would not be disadvantageous
to the minority shareholders of the Target Company (for details of the Report, please referto the section titled “2. Description of the Tender Offer,” “(4) Basis of Calculation of Tender
Offer Price,” “(B) Background of Calculation,” “Measures to Ensure the Fairness of theTender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price andMeasures to Avoid Conflicts of Interest,” “b. Establishment of an Independent Special
Committee by the Target Company” below).

In addition to the Report, the Target Company

received from the special committee a share valuation report on the result of calculation of
the value of the Target Company Common Stock (the “Share Valuation Report (KPMG)”)and an opinion (a fairness opinion) dated November 18, 2019 to the effect that 2,010 yen
per share as the Tender Offer Price is fair to the general shareholders of the Target Company
from a financial point of view (the “Fairness Opinion (KPMG)”) received by the special
committee from KPMG on November 18, 2019 (for details of the Share Valuation Report(KPMG) and the Fairness Opinion (KPMG), please refer to the section titled “2. Descriptionof the Tender Offer,” “(4) Basis of Calculation of Tender Offer Price,” “(B) Background of
Calculation,” “Measures to Ensure the Fairness of the Tender Offer, such as Measures to
Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest,”“d. Procurement by the Special Committee of the Share Valuation Report and the Fairness
Opinion from an Independent Financial Advisor and Third-Party Valuation Institution”
below).
In light of this background, the Target Company carefully discussed and evaluated at its
board of directors meeting held on today whether the Transactions, including the Tender
Offer, would contribute to increasing the corporate value of the Target Company andwhether the transaction terms and conditions of the Transactions, including the Tender Offer
16

Price, are reasonable, based on legal advice from Mori Hamada & Matsumoto, advice froma financial point of view from Merrill Lynch Japan Securities, and a share valuation reporton the result of the valuation of the value of the Target Company Common Stock received
from Merrill Lynch Japan Securities on November 18, 2019 (the “Share Valuation Report(Merrill Lynch Japan Securities)”), as well as the Share Valuation Report (KPMG) and the
Fairness Opinion (KPMG) received through the special committee, giving the highest
degree of respect to the contents of determinations by the special committee presented in theReport.
The Target Company concluded that as a result of becoming a wholly owned subsidiary of
the Tender Offeror, it becomes possible for the Target Company Group to closely cooperateor collaborate with the Other Tender Offeror Group Companies and mutually utilize external
networks in a smooth and efficient manner and to seek to accelerate and enhance the creationof innovation more than ever in a healthcare sector where business opportunities havesignificantly expanded, enabling both the Target Company Group and the entire Tender
Offeror Group including the Target Company Group to further increase their corporate value.
The Target Company also determined that the Tender Offer Price of 2,010 yen per share isa reasonable price that secures interests that should be enjoyed by the Target Company’s
general shareholders, and that the Tender Offer would provide the Target Company’s generalshareholders with a reasonable opportunity to sell the Target Company Common Stock at a
price inclusive of an appropriate premium, based on the following(i)the fact that the price is a price agreed to with the Tender Offeror based on sufficientnegotiations conducted on multiple occasions with the Tender Offeror, in which thespecial committee was substantially involved, and after taking sufficient measures toensure the fairness of the terms and conditions of the Transactions, including the Tender
Offer Price stated in “2. Description of the Tender Offeror,” “(4) Basis of Calculationof Tender Offer Price,” “(B) Background of Calculation,” “Measures to Ensure theFairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender
Offer Price and Measures to Avoid Conflicts of Interest,” below;(ii) the fact that the price exceeds the upper bound of each of the valuation ranges evaluatedusing the market price analysis and the comparable company analysis, and it is within
the valuation range evaluated using the DCF Analysis (defined in “2. Description of
the Tender Offer,” “(4) Basis of Calculation of Tender Offer Price,” “(B) Backgroundof Calculation,” “Measures to Ensure the Fairness of the Tender Offer, such as
Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid
Conflicts of Interest,” “f. Procurement by the Target Company of the Share Valuation
Report from an Independent Third-Party Valuation Institution” below) according to the17share valuation report of the evaluation of the value of the Target Company Common
Stock by Merrill Lynch Japan Securities based on the Share Valuation Report (Merrill
Lynch Japan Securities) stated in “2. Description of the Tender Offer,” “(4) Basis ofCalculation of Tender Offer Price,” “(B) Background of Calculation,” “Measures to
Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of theTender Offer Price and Measures to Avoid Conflicts of Interest,” “f. Procurement by
the Target Company of the Share Valuation Report from an Independent Third-Party
Valuation Institution” below;(iii) the fact that the price exceeds the upper bound of the valuation range evaluated using
the market price method, and it also exceeds the median of each of the valuation ranges
evaluated using the share price multiple method and DCF Method (defined in “2.
Description of the Tender Offer,” “(4) Basis of Calculation of Tender Offer Price,” “(B)Background of Calculation,” “Measures to Ensure the Fairness of the Tender Offer,such as Measures to Ensure the Fairness of the Tender Offer Price and Measures to
Avoid Conflicts of Interest,” “d. Procurement by the Special Committee of the Share
Valuation Report and the Fairness Opinion from an Independent Third-Party Valuation
Institution” below) according to the share valuation report of evaluation of the value of
the Target Company Common Stock by KPMG based on the Share Valuation Report(KPMG) stated in “2. Description of the Tender Offer,” “(4) Basis of Calculation of
Tender Offer Price,” “(B) Background of Calculation,” “Measures to Ensure theFairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender
Offer Price and Measures to Avoid Conflicts of Interest,” “d. Procurement by theSpecial Committee of the Share Valuation Report and the Fairness Opinion from an
Independent Third-Party Valuation Institution” below, that KPMG issued the Fairness
Opinion (KPMG) stating to the effect that the 2,010 yen per share as Tender Offer Priceis fair to the general shareholders of the Target Company;(iv) the fact that the price is a price inclusive of a premium of (a) 53.08 % (to be rounded
to the second decimal place; the same applies to each percentage of a premium on ashare price below) on 1,313 yen, the closing price on November 15, 2019, which is thebusiness day immediately preceding the announcement date of the implementation of
the Tender Offer, (b) 54.85% on 1,298 yen, the simple average closing price (to berounded to the nearest one (1) yen; the same applies to each simple average closing
price below) for the one-month period ending on November 15, 2019, (c) 62.88% on
1,234 yen, the simple average closing price for the three-month period ending on
November 15, 2019, and (d) 63.02 % on 1,233 yen, the simple average closing pricefor the six-month period ending on November 15, 2019 of the Target Company
18Common Stock on the First Section of the TSE, and that the Target Company considers
the premium included in the price to be substantial when compared to the levels ofpremiums offered in other cases where a tender offer is conducted by a parent company
aiming to convert its listed subsidiary into its wholly owned subsidiary; and(v) the fact, as stated in “2. Description of the Tender Offer,” “(4) Basis of Calculation of
Tender Offer Price,” “(B) Background of Calculation,” “Measures to Ensure the Fairnessof the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Priceand Measures to Avoid Conflicts of Interest,” “b. Establishment of an Independent
Special Committee by the Target Company”, that the price is considered to be reasonable
in the Report obtained from the special committee.
Based on the facts above, the Target Company decided that the Transactions would
contribute to increasing the corporate value of the Target Company and that the transaction
terms and conditions of the Transactions, including the Tender Offer Price, are reasonable.
Therefore, the board of directors of the Target Company resolved at its meeting held today
to express its opinion in support of the Tender Offer and recommend that the shareholdersof the Target Company tender the Target Company Common Stock in the Tender Offer.
For details of the decision-making process at the meeting of the Target Company’s board of
directors described above, please refer to “2. Description of the Tender Offeror,” “(4) Basisof Calculation of Tender Offer Price,” “(B) Background of Calculation,” “Measures to
Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of theTender Offer Price and Measures to Avoid Conflicts of Interest,” “h. Unanimous Approvalof All Non-interested Directors and the No Dissenting Opinion of All Non-interested
Statutory Auditors at the Target Company” below.
b. Management Policy after the Tender Offer
The Tender Offeror Group is working on providing the most appropriate solutions to social
issues by globally concentrating innovative forces, and making an effort to achieve the“sustainable well-being of people, society and our planet Earth” or “KAITEKI”. The Tender
Offeror Group has been emphasizing the three values (i.e., Sustainability, Health andComfort) and has been concentrating its management resources on the creation of solutions
by which these values can be accomplished since 2007.
The Tender Offeror will continue to position the Target Company’s pharmaceutical businessat the core of its healthcare business and basically intends to respect the current Target
Company’s management system even after completion of the Transactions.

Further, in

accordance with the Tender Offeror’s group management rules, the Tender Offeror Groupintends to support the Target Company in implementing its Medium-Term Management Plan
19

while respecting the independence of the Target Company’s management.
Although detailed methods are still under consideration, after the Transactions, the Tender
Offeror and the Target Company intend to expand their business to preventive care andhealthcare areas in addition to the pharmaceutical business that the Target Company has
been engaging in by coordinating within the Tender Offeror Group. Moreover, they will
aim for the mid-to long-term growth of the Tender Offeror Group’s healthcare business by
jointly utilizing chemistry, biotechnology and digital technology to establish a uniquehealthcare platform.
For such purpose, the Tender Offeror and the Target Company plan to: (a) establish the“Synergy Creation Committee” (tentative name), which will involve both the Other Tender
Offeror Group Companies and the Target Company Group and strive for the early creationof synergies and (b) accelerate the expansion of the healthcare business of the Tender Offeror
Group, including the Target Company Group, by utilizing the Other Tender Offeror Group
Companies’ management resources to develop the Target Company Group’s foreign
operations.
Assuming that no event will occur which would cause the Tender Offeror and the Target
Company drastically change their business strategy due to a change in the businessenvironment that they do not anticipate as of today (e.g., business integration with a major
pharmaceutical company and drastic restructuring of pharmaceutical industries), the Tender
Offeror and the Target Company have confirmed that the Target Company Group’s
management will be conducted as follows in the ten year period following the Transactions:(i) Management Policy of the Target Company Group
Even after the Transactions, the Tender Offeror plans to (a) accept and support theimplementation of the Target Company’s existing business plan and supplemental
management actions, (b) respect the independence of the Target Company’s management
and allow the Target Company to formulate its own management strategy while balancing
it with the Medium-Term Management Plan of the Tender Offeror Group, including theTarget Company Group, and (c) allow the Target Company Group to exercise its discretionin utilizing its management resources (e.g., funds for investment and personnel planning)when carrying out its management.

In addition, the Tender Offeror, in accordance with thecircumstances, will consider the possibility of M&A and business integration between theTarget Company Group and third parties as one of the strategies to further expand thehealthcare business of the Tender Offeror Group.
(ii) The Target Company Group’s Management Resources20

After the completion of the Transactions, the Tender Offeror plans to maintain the Target
Company’s strategic investment limits (300,000,000,000 yen in total until FY 2023) andresearch and development investment level (80,000,000,000 yen per fiscal year until FY2023), and if necessary to increase R&D expenses, the Tender Offeror intends to flexibly
consult with the Target Company in this connection. Furthermore, after the completion of
the Transactions, the Tender Offeror will cause the Target Company Group to contribute
their funds in hand with the exception of the funds required for the Target Company Group’sbusiness, to the cash management system administrated by the Tender Offeror Group andplans to utilize the funds efficiently and decrease financial costs as the Tender Offeror Groupin its entirety, while the Tender Offeror will provide the Target Group Company Group withthe funds satisfying capital needs in order to prevent any hindrance to the Target Company
Group’s business execution and financially support as necessary in the case that additional
funds are needed in addition to its surplus funds.
In addition, the Tender Offeror ensures fair treatment between its subsidiaries, such as by
not requesting only the Target Company, among the Tender Offeror’s subsidiaries, to pay a
special dividend.
Furthermore, after the completion of the Transactions, the Other Tender Offeror Group
Companies and the Target Company Group plan to mutually cooperate for securing humanresources for marketing, research, development and digital technology in healthcare areas.
The Target Company Group also plans to more effectively utilize the foreign humanresources and the infrastructure of organization management of the Other Tender Offeror
Group Companies.
(iii) Others
The Tender Offeror plans to maintain the current employment conditions of the Target
Company Group for the time being.
The Tender Offeror believes that the Target Company Group’s pharmaceutical business iscentered on the Health (which responds to the person’s medical needs and contributes todisease treatment of disease, non-disease care, health maintenance and healthy life) among
the three values above and after completion of the Transactions, the Tender Offeror Groupin unison plans to vigorously promote development and expansion of the Target Company
Group’s pharmaceutical business.
Incidentally, as of today, of the eight directors and the five auditors of the Target Company,
one director concurrently serves as a director of The KAITEKI Institute, Inc., a whollyowned subsidiary of the Tender Offeror, and another director concurrently serves as a21managing executive officer of the Tender Offeror and a director of Life Science Institute,Inc., however, at this stage, the Tender Offeror does not specifically plan to execute anychanges for the management structure of the Target Company after the Tender Offeror.

(3) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure theFairness of the Tender Offer Price and Measures to Avoid a Conflict of Interest
Considering that the Tender Offeror holds 316,320,069 shares of Target Company Common
Stock (Share Holding Ratio: 56.39%), making the Target Company a consolidated subsidiaryof the Tender Offeror, and is a controlling shareholder of the Target Company, and that Mr.
Masayuki Mitsuka, one of eight directors of the Target Company, is concurrently taking theoffice of a director of the KAITEKI Institute, Inc., which is a wholly-owned subsidiary of theTender Offeror, Mr. Takeshi Matsumoto, one of eight directors of the Target Company, isconcurrently taking the office of a Managing Executive Officer of the Tender Offeror and a
director of Life Science Institute, Inc., which is a wholly-owned subsidiary of the Tender
Offeror, Mr. Eizo Tabaru, one of eight directors of the Target Company, held the position of an
Executive Officer of one of the main operating companies in the Tender Offeror Group in thepast, and Mr. Hiroaki Ueno, one of eight directors of the Target Company, held the position ofan employee of one of the main operating companies in the Tender Offeror Group in the past,
the Tender Offeror and the Target Company have implemented the following measuresrespectively in order to ensure the fairness of the Tender Offer and avoid the conflicts ofinterests from the perspective of avoiding the risk that the Tender Offer is affected by structural
conflicts of interests as far as they can.
In addition, since the Tender Offeror, as stated in “(1) Overview of the Tender Offer” above, asof today, holds 316,320,069 shares (Share Holding Ratio: 56.39%) of the Target Company
Common Stock, and if the Tender Offeror sets the minimum number of shares to be purchasedwith a lower limit of so-called “Majority of Minority” in the Tender Offer, it makes thecompletion of the Tender Offer more incertitude and may not contribute to the interest of all of
the general shareholders who desire to tender their shares through the Tender Offer, the Tender
Offeror does not set the minimum number of shares to be purchased with a lower limit of socalled “Majority of Minority” in the Tender Offer. However, given that the Tender Offeror andthe Target Company have implemented the following measures, the Tender Offeror believes
that the interests of all of the general shareholders of the Target Company have been given
ample consideration.
Of the matters listed below, the measures implemented by the Target Company are described
below based on explanations received from the Target Company.
22

a.

Procurement by the Tender Offeror of the Share Valuation Report and a Fairness Opinion
from an Independent Third-Party Valuation Institutionb.

Establishment of an Independent Special Committee by the Target Companyc.

Procurement by the Special Committee of Advice from an Independent Legal Advisord.

Procurement by the Special Committee of the Share Valuation Report and the Fairness
Opinion from an Independent Financial Advisor and Third-Party Valuation Institutione.

Procurement by the Target Company of Advice from an Independent Legal Advisorf.

Procurement by the Target Company of the Share Valuation Report from an Independent
Financial Advisor and Third-Party Valuation Institutiong.

Building of an Independent Evaluation Frameworkh.

Unanimous Approval of All Non-interested Directors and the No Dissenting Opinion of All
Non-interested Statutory Auditors at the Target Companyi.

Nonexistence of Transaction Protection Clausej.

Measures to Secure an Appropriate Opportunity for all Shareholder of the Target Company
to decide whether to tender their shares in the Tender Offer
For details of the items above, please refer to “2. Description of the Tender Offeror,” “(4) Basisof Calculation of Tender Offer Price,” “(B) Background of Calculation”, and “Measures to
Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender
Offer Price and Measures to Avoid a Conflict of Interest” below.

(4) Policy on Reorganization etc. after the Tender Offer (Matters Relating to the So-Called
Two-Stage Takeover)As stated in “(1) Overview of the Tender Offer” above, since the Tender Offeror plans to makethe Target Company a wholly-owned subsidiary of the Tender Offeror, if the Tender Offeror
cannot acquire all of the Target Company Common Stock (excluding the Target Company
Common Stock held by the Tender Offeror and the treasury shares held by the Target Company)in the Tender Offer, a series of following proceedings is planned to be taken after the completionof the Tender Offer so that the Tender Offeror will acquire all the Target Company Common
Stock (excluding the Target Company Common Stock held by the Tender Offeror and thetreasury shares held by the Target Company).

23

a.

Demand for Sale of Shares
Provided that upon completion of the Tender Offer the total number of voting rights of theTarget Company owned by the Tender Offeror amounts to 90% or more of the voting rights
of all shareholders of the Target Company, and the Tender Offeror becomes a special
controlling shareholder as set forth in Article 179, Paragraph 1 of the Companies Act, theTender Offeror plans to demand that all shareholders of the Target Company (excluding theTarget Company and the Tender Offeror; hereinafter the same.) sell all of their Target
Company Common Stock in accordance with the provisions of Part II, Chapter II, Section
4-2 of the Companies Act promptly after the completion of the settlement of the Tender
Offer (the “Demand for Sale of Shares”).
When exercising the Demand for Sale of Shares, the Tender Offeror will set a cash amountequal to the Tender Offer Price to be paid to the shareholders of the Target Company as pershare consideration for the Target Company Shares.

At the same time, the Tender Offeror

will notify the Target Company of such intention and ask the Target Company to approve
the Demand for Sale of Shares.

Provided the Target Company approves the Demand forSale of Shares through a board of directors’ resolution, the Tender Offeror will purchase allof the Target Company Common Stock owned by all the shareholders of the Target
Company by following procedures set forth in the relevant laws and regulations, withoutobtaining the consent of individual shareholders of the Target Company, as of the datespecified in the Demand for Sale of Shares. The Tender Offeror then will pay cash to theshareholders in an amount equal to the Tender Offer Price as per-share consideration for thenumber of Target Company Common Stock they own.

According to the Target

Company’s Press Release, in the event that it receives notification from the Tender Offeror
concerning the matters prescribed in each Item of Paragraph 1 of Article 179-2 of theCompanies Act, with the intention to the Demand for Sale of Shares, the board of directorsof the Target Company plans to approve such Demand for Sale of Shares.
The Companies Act has a provision which intends to protect the rights of minority
shareholders relating to the Demand for Sale of Shares and Article 179-8 of the Companies
Act and other relevant laws and regulations provide that the shareholders of the Target
Company who do not tender their shares in the Tender Offer may file a motion with thecourt to determine the sale/purchase price of the Target Company Common Stock they own.
In case this motion is filed, the sale/purchase price will be ultimately ruled by the court.

b.

Share Consolidation
On the other hand, if the total number of voting rights of the Target Company owned by theTender Offeror is less than 90% of the voting rights of all shareholders of the Target
24

Company after the Tender Offer is completed, the Tender Offeror intends to request that theTarget Company hold an extraordinary meeting of shareholders (the “Extraordinary
Shareholders’ Meeting”) at which the Target Company will present proposals to approve theconsolidation of the Target Company Shares (the “Share Consolidation”) in accordance with
Article 180 of the Companies Act and, subject to the Share Consolidation becoming
effective, abolish the article in the Articles of Incorporation concerning the number of shares
per share unit, and the Tender Offeror will vote in favor of these proposals above at theExtraordinary Shareholders’ Meeting.

The Tender Offeror believes that, in order toenhance the corporate value of the Tender Offeror Group including the Target Company
Group, it would be desirable to hold the Extraordinary Shareholders’ Meeting early. Thus,
the Tender Offeror plans to make a request that the Target Company make a public notice ofa base date for the Extraordinary Shareholders’ Meeting to set the base date on a date after
but close to the settlement commencement date of the Tender Offer (as of today, such public
notice date is expected to be sometime mid-January 2020).

As of today, the base date for

the Extraordinary Shareholders’ Meeting is expected to be set sometime in late January 2020
or early February 2020 and the Extraordinary Shareholders’ Meeting is expected to be held
sometime in mid-March 2020.
In the event that the proposed Share Consolidation is approved at the Extraordinary
Shareholders’ Meeting, as of the effective date of the Share Consolidation, the shareholdersof the Target Company will own a proportionate number of the Target Company Common
Stock in accordance with the Share Consolidation ratio approved by the Extraordinary
Shareholders’ Meeting. The shareholders of the Target Company will be paid for thefractional shares that they will be allocated as a result of the Share Consolidation, if any,
with the cash to be paid for the sale of the Target Company Common Stock in a number
equivalent to the total number of such fractional shares (any fractions of the total number
will be rounded down; hereinafter the same.) to the Target Company or the Tender Offeror,in accordance with the procedure prescribed in Article 235 of the Companies Act and otherrelevant laws and regulations.

With regard to the sale price of the Target Company

Common Stock for a number equivalent to the total number of such fractional shares, theTender Offeror plans to request that the Target Company file a motion with the court topermit a voluntary sale, after calculating the amount to be paid to the shareholders of theTarget Company who do not tender their shares in the Tender Offer by multiplying theTender Offer Price by the number of the Target Company Common Stock they own
respectively. While the consolidation ratio of the Share Consolidation has not yet been
determined as of today, the Tender Offeror will determine the number of the Target Company
Common Stock to be owned by the shareholders who do not tender their shares in Tender25

Offer (excluding the Target Company and the Tender Offeror) to be less than one share sothat only the Tender Offeror will own the Target Company Common Stock (excluding thetreasury shares owned by the Target Company) after the Share Consolidation.

The Companies Act has a provision to protect the rights of minority shareholders relating to
the Share Consolidation.

In the event of the Share Consolidation, if there are any fractional

shares resulting from the Share Consolidation, in accordance with Articles 182-4 and 182-5of the Companies Act and other relevant laws and regulations, when the conditionsprescribed therein are satisfied, the shareholders of the Target Company (excluding theTender Offeror and the Target Company) may demand that the Target Company purchaseall of their fractional shares at fair prices and may file a motion with the court to determine
the fair price of the Target Company Common Stock. As stated above, the number of theTarget Company Common Stock to be allocated to the shareholders of the Target Company
who do not tender their shares in the Tender Offer are intended to become fractions as aresult of the Share Consolidation, and thus, the shareholders of the Target Company who
oppose to the Share Consolidation are expected to be able to file the motion above. If thismotion is filed, the purchase price will be ultimately ruled by the court.
Please note that the Tender Offer is not intended to persuade the shareholders of the Target
Company to agree to the proposal in the Extraordinary Shareholders’ Meeting.
The procedures stated in “a.” and “b.” above may take a longer time or may be changed
depending upon the amendment or enforcement of the relevant laws, regulations or theinterpretation by the authorities on the relevant laws and regulations.

However, even in suchcases, if the Tender Offer is completed, the Tender Offeror intends to take a measure toeventually pay cash to shareholders of the Target Company who do not tender their shares in
the Tender Offer.

The amount of cash to be paid to the respective shareholders in that event isplanned to be equal to an amount calculated by multiplying the Tender Offer Price by the
number of the Target Company Common Stock that each shareholder owns.

Specific

procedures and the schedule thereof in such cases will be announced by the Target Company assoon as they have been determined through mutual discussions between the Tender Offeror andthe Target Company.
In addition, regarding the treatment of the Tender Offer or any of the above procedures undertax rules, please consult with your experts including tax accountants if as necessary.

(5) Possibility of and Reasons for Delisting26

The Target Company Common Stock are presently listed on the First Section of the TSE, but
the Tender Offeror has not set the maximum number of shares to be purchased through Tender
Offer.

Accordingly, depending on the results of the Tender Offer, the Target Company

Common Stock may be delisted after the prescribed procedures are completed, in accordance with
the TSE listing rules. Even if the requirements of the delisting rules are not met by the completionof the Tender Offer, the Tender Offeror plans to proceed to acquire all of the Target Company Common
Stock (excluding the shares owned by the Tender Offeror and the treasury shares owned by theTarget Company) in the manner outlined in “(4) Policy on Reorganization etc. after the Tender Offer(Matters Relating to the So-Called Two-Stage Takeover)” above. In such case, the Target Company
Common Stock will be delisted in accordance with the TSE listing rules. The Target Company
Common Stock cannot be traded at the First Section of the TSE if they are delisted.
(6) Matters relating to Important Agreements between Tender Offferor and theshareholders of the Target Company with respect to the Tender Offer
N/A

2. Description of the Tender Offer(1) Description of the Target Company
(1)

Name

Mitsubishi Tanabe Pharma Corporation(2)

Location

2-10, Doshomachi 3-chome, Chuo-ku, Osaka City, Osaka(3)

Name and title ofrepresentative(4)

Masayuki Mitsuka, President and Representative Director

Description of

Manufacturing and sale of pharmaceuticals with a focus on ethicalbusiness

pharmaceuticals(5)

Capital50,000 million yen(6)Date of
Incorporation

December 15, 193327

Mitsubishi Chemical Holdings Corporation

56.39%The Master Trust Bank of Japan, Ltd. (trust account)

4.67%

Japan Trustee Services Bank, Ltd. (trust account)

2.36%

Nippon Life Insurance Company (standing proxy: The Master Trust
Major Shareholders
and shareholding(7)

ratios(as of September
30, 2019)

Bank of Japan, Ltd.)

2.15%

STATE STREET BANK WEST CLIENT -TREATY 505234(standing proxy: Mizuho Bank, Ltd.)

1.18%

JPMorgan Securities Japan Co., Ltd.

1.05%

Japan Trustee Services Bank, Ltd. (trust account 9)

1.01%

STATE STREET BANK AND TRUST COMPANY 505103(standing proxy: Mizuho Bank, Ltd.)

0.84%

Japan Trustee Services Bank, Ltd. (trust account 5)

0.83%

STREET BANK AND TRUST COMPANY 505225 (standing proxy:
Mizuho Bank, Ltd.)
(8)

0.71%

Relationship between the Tender Offeror and the Target Company
The Tender Offeror holds 316,320,069 shares of the Target Company
Capital relationshipCommon Stock (shareholding ratio: 56.39 %) as of today (the total
number of issued shares of the Target Company: 561,417,916).

Personnel
relationship(Note)

As of today, the Target Company has eight directors. Three of themwere transferred from the Tender Offeror and one of them currently
holds a position as an executive officer of the Tender Offeror.

Transactional

The Target Company deposits its funds with the Tender Offeror as a

Businesspart of the Tender Offeror’s group finance and receives interests withrelationshiprespect to such deposited funds.

Status as related

The Target Company is a consolidated subsidiary of the Tender

party

Offeror and, therefore, is a related party of the Tender Offeror.

The description of shareholding ratios in “Major Shareholders and Shareholding Ratios (asof September 30, 2019)” is prepared based on the figures included in “Status of Major
Shareholders” in FY2019 Second Quarterly Report submitted by the Target Company on
November 6, 2019.

(2) Schedule, Etc.
a. Schedule28

Date of Board ofNovember 18, 2019 (Monday)

Directors’ Resolution

November 19, 2019 (Tuesday)
Scheduled Date of Public

Public disclosure will be made electronically, and a notice of such disclosure

Notice of Commencement

will be published in the Nihon Keizai Shimbun.

of the Tender Offer

EDINET (electronic disclosure for investors’ network):(http://disclosure.edinet-fsa.go.jp/)

Scheduled Date ofSubmission of the Tender
Offer Registration

November 19, 2019 (Tuesday)Statementb. Tender Offer Period as of the time of filing of the Tender Offer Registration Statement
From November 19, 2019 (Tuesday) to January 7, 2020 (Tuesday) (31 business days)c. Possible extension of the Tender Offer Period based on the Target Company’s request
N/A(3) Tender Offer Price
2,010 yen per share of common stock(4) Basis of Calculation of Tender Offer Price(A) Basis of Calculation

In connection with the determination of the Tender Offer Price, the Tender Offeror
requested J.P. Morgan to provide the valuation of share price of the Target Company
Common Stock.

J.P. Morgan is not a related party to either the Tender Offeror or theTarget Company, nor does it have any material conflict of interest in this Tender Offer.
Having considered a number of methods for the valuation of share price of the Target
Company Common Stock, J.P. Morgan performed such valuation using an average shareprice analysis, a comparable company analysis and a discounted cash flow analysis (the“DCF Method”), and provided the Tender Offeror with the Share Valuation Report (JPM).
The Share Valuation Report (JPM) was prepared solely for the purpose of providing
information to assist the Tender Offeror's board of directors in its evaluation of the Tender
Offer.

According to the Share Valuation Report (JPM), the methods used in suchvaluation and the range of value per share of the Target Company Common Stockcalculated based thereon are as follows:
29a) Average share price analysis:

1,233 yen～1,313 yen

In performing the average share price analysis based on publicly available information,
J.P. Morgan used November 15, 2019 as the base date, and reviewed a closing price pershare of the Target Company Common Stock on such date (1,313 yen) andaveragedaily closing share price of the Target Company Common Stock on the TSE for each
one month (1,298 yen), three month (1,234 yen) and six month (1,233 yen) period
through such date (rounded to the nearest yen, and the same shall apply to any
calculation of an average daily closing share price hereinafter in this section).
b) Comparable company analysis:

1,338 yen～1,659 yen

In performing the comparable company analysis, J.P. Morgan used November 15, 2019as the base date, selected listed companies, Takeda Pharmaceutical Company Limited,
Chugai Pharmaceutical Co., Ltd., Daiichi Sankyo Co., Ltd., Astellas Pharma Inc.,
Otsuka Holdings Co., Ltd., Eisai Co., Ltd., Shionogi & Co., Ltd., Kyowa Kirin Co., Ltd.,ONO PHARMACEUTICAL CO., LTD., Santen Pharmaceutical Co., Ltd., andSumitomo Dainippon Pharma Co., Ltd.,

that are comparable (but may not be identical)

in the businesses they engage in to the business of the Target Company for the purposeof analysis, and calculated the value of the Target Company Common Stock incomparison with the items contained in the financial statements of such peer companies
that are indicative of their market value, growth potential and profitability, among otherthings.
c) DCF Method:

1,799 yen～2,289 yen

In performing the DCF Method, J.P. Morgan used business plans, financial forecasts,
projected earnings and investment plans of the Target Company, interviews with the
managements of the Tender Offeror and the Target Company, results of due diligence,and other publicly available information and various other factors, all of which havebeen approved by the Tender Offeror to be used by J.P. Morgan for the purpose of thisanalysis.

J.P. Morgan calculated the Target Company Common Stock’s value by

discounting the free cash flows which the Target Company is expected to generate in
the fiscal period ending March 2020 and thereafter to the present value at a certain rangeof discount rates.

It is to be noted that no significant changes to profit or loss are

expected in the business plans and the financial forecasts of the Target Company, which
J.P. Morgan used as the basis of the DCF Method.

The business plans and the financial

forecasts of the Target Company provided by the Tender Offeror to J.P. Morgan, which
J.P. Morgan used as the basis of the DCF Method, have taken into account the impact
of various measures to be implemented following the Tender Offer, assuming the Tender
Offer is consummated.
30

The Tender Offeror determined the Tender Offer Price as 2,010 yen, based on the analysis
and results contained in the Share Valuation Report (JPM), and by considering the resultsof due diligence conducted with respect to the Target Company, whether the board of
directors of the Target Company supports the Tender Offer, the trend of the market valueof the Target Company Common Stock, and the expected number of subscribers in theTender Offer, among other factors, in a comprehensive manner, as well as in light of the
discussions and negotiations with the Target Company.

Following the receipt of thefairness opinion from J.P. Morgan today to the effect that the Tender Offer Price of 2,010
yen thus determined was fair from a financial point of view to the Tender Offeror undercertain conditions (the “Fairness Opinion (JPM)”), the Tender Offeror determined theTender Offer Price to be 2,010 yen by the resolution of the board of directors today.
The Tender Offer Price per share of 2,010 yen represents the amount adding a premium of
53.08% on the closing price of the Target Company Common Stock on the TSE as ofNovember 15, 2019, which is the business day immediately preceding the date of the publicannouncement of the Tender Offer (1,313 yen), 54.85% on the average daily closing shareprice of the Target Company on the TSE for the one month period up to such date (1,298yen), 62.88% on the average daily closing share price of the Target Company on the TSE
for the three month period up to such date (1,234 yen), and 63.02% on the average daily
closing share price of the Target Company on the TSE for the six month period up to suchdate (1,233 yen).
(Note) The following is a supplementary explanation of the Fairness Opinion (JPM) andthe conditions for the valuation of share price of the Target Company Common
Stock as the basis therefor, as well as the matters considered therein and thelimitations on the analyses.
In giving the Fairness Opinion (JPM) and conducting the valuation of share priceof the Target Company Common Stock which was the basis for such opinion(including the Share Valuation Report (JPM), and hereinafter the same shall apply),
J.P. Morgan has relied upon and assumed the accuracy and completeness of all
information that was publicly available or was furnished to or discussed with J.P.
Morgan by the Tender Offeror or the Target Company or otherwise reviewed by orfor J.P. Morgan, and J.P. Morgan has not independently verified (nor has it assumed
responsibility or liability for independently verifying) any such information or its
accuracy or completeness.

J.P. Morgan has not conducted or been provided withany valuation or appraisal of any assets or liabilities, nor has it evaluated thesolvency of the Tender Offeror or the Target Company under any applicable laws
relating to bankruptcy, insolvency or similar matters.
31

In relying on financial

analyses and forecasts provided to J.P. Morgan by, or derived from, the Tender
Offeror or the Target Company, J.P. Morgan has assumed that they have beenreasonably prepared based on assumptions reflecting the best currently available
estimates and judgments by management of the Tender Offeror and the Target
Company as of the date of the Fairness Opinion (JPM) as to the expected future
results of operations and financial condition of the Tender Offeror and Target
Company to which such analyses or forecasts relate.

J.P. Morgan expresses noview as to such analyses or forecasts or the assumptions on which they were based.
J.P. Morgan has also assumed that the other transactions contemplated by theTender Offer will have all the consequences described in discussions with, andmaterials furnished to J.P. Morgan by, the representatives of the Tender Offeror.
J.P. Morgan is not a legal, regulatory, tax or accounting expert and has relied on theassessments made by advisors to the Tender Offeror with respect to such issues.
J.P. Morgan further assumes that all material governmental, regulatory or otherconsents and approvals necessary for the consummation of the Tender Offer would
be obtained without any adverse effect on the Tender Offeror or the Target
Company or on the contemplated benefits of the Tender Offer.
The Fairness Opinion (JPM) and the result of the valuation of share price of theTarget Company Common Stock, which was the basis for such opinion, werenecessarily based on economic, market and other conditions as in effect on, and theinformation made available to J.P. Morgan, as of the date of such opinion.

Itshould be understood that subsequent developments may affect the Fairness
Opinion (JPM) and that J.P. Morgan does not have any obligation to update, revise,or reaffirm its analyses and opinion therein.

The Fairness Opinion (JPM) is

limited to the opinion about the fairness, from a financial point of view, to theTender Offeror of the Tender Offer Price to be paid by the Tender Offeror in theTender Offer, and J.P. Morgan expresses no opinion as to the judgment made by
the Tender Offeror to launch the Tender Offer.

Furthermore, the Fairness Opinion(JPM) and the result of the valuation of share price of the Target Company
Common Stock, which was the basis for such opinion, are not intended torecommend a specific acquisition price to the Tender Offeror or its board of
directors, nor are they intended to recommend a certain acquisition price as the
only appropriate one.
J.P. Morgan has acted as the financial advisor to the Tender Offeror with respect to
the Tender Offer and will receive a fee from the Tender Offeror for its services, asubstantial portion of which will become payable only if the Tender Offer is32

consummated.

In addition, the Tender Offeror has agreed to indemnify J.P.

Morgan for certain liabilities arising out of such engagement.

During the twoyears preceding the date of the Fairness Opinion (JPM), neither J.P. Morgan nor its
affiliates has provided any other material financial advisory services, commercial
banking services or investment banking services to the Tender Offeror or the Target
Company, except as set forth in this paragraph.

In addition, J.P. Morgan and its

affiliates hold, on a proprietary basis, less than 1% of the outstanding common
stock of each of the Tender Offeror and the Target Company.

In the ordinary

course of business, J.P. Morgan and its affiliates may actively trade the debt andequity securities of the Tender Offeror or the Target Company for its own accountor for the accounts of customers and, accordingly, J.P. Morgan and its affiliates may
at any time hold long or short positions in such securities.
The financial forecasts of the Target Company provided by the Tender Offeror to
J.P. Morgan in connection with the valuation of share price of the Target Company
Common Stock and the Fairness Opinion (JPM) (the “Financial Forecasts”) wereprepared by the Target Company's management and adjusted by the Tender Offeror.
The Tender Offeror does not publicly disclose the Financial Forecasts, which were
not prepared with the view to be publicly disclosed.

The Financial Forecasts are

inherently uncertain, and are dependent on a number of variables and conditions(including, without limitation, factors related to the general economy, competitive
conditions and prevailing interest rates) that may be beyond the control of theTender Offeror’s or the Target Company’s management.

Therefore, the actual

performance may largely differ from those set forth in the Financial Forecasts.
The foregoing summary of the opinions as set forth in the Fairness Opinion (JPM),
and the result of the valuation of share price of the Target Company Common Stock,which was the basis for such Opinion, and the valuation method thereof do not
purport to be a complete description of the analyses conducted by or data referred
to by J.P. Morgan.

The preparation of the Fairness Opinion (JPM) and the Share

Valuation Report (JPM) is a complex process and, therefore, a partial description
or a summary of the analyses does not reflect a complete and accurate
representation thereof.

J.P. Morgan believes that the results of its analyses must

be considered as a whole and that reviewing only summaries or portions of suchanalyses, without considering all of such analyses as a whole, could lead to an
incomplete view of the processes underlying the analyses and its opinion.

In

providing its opinion, J.P. Morgan did not attribute any particular weight to any
analyses or factors considered by it and did not form a view as to whether or how
33any individual analysis or factor, considered in isolation, supported or failed tosupport its opinion, or to what extent.

Rather, J.P. Morgan considered the totalityof the factors and analyses performed in providing its opinion.

None of theselected companies reviewed as described in the above analysis as a comparable
company is identical to the Target Company's operating units or subsidiaries.
However, the companies selected were chosen because they are listed companies
with businesses that, for purposes of J.P. Morgan’s analysis, may be consideredsimilar to those of the Target Company.

The analyses by J.P. Morgan necessarily

involve complex considerations and judgments concerning differences in financial
and business characteristics of the companies involved and other factors that could
affect the companies compared to the Target Company.
(B) Background of Calculation(Background of the determination of the Tender Offer Price)
In late July 2019, the Tender Offeror decided that it is desirable to make the Target Company awholly-owned subsidiary and started considering the Transactions. Also, the Tender Offeror
created an environment amenable to discussions and negotiations with respect to theTransactions by retaining J.P.Morgan, a financial advisor, as a third-party organization
independent from the Tender Offeror and the Target Company, and Nagashima Ohno andTsunematsu as a legal advisor independent from the Tender Offeror and the Target Company,
and on July 30, 2019, the Tender Offeror primarily approached to the Target Company regarding
the Transactions.

Consequently, since early August, 2019, the Tender Offeror and the Target

Company started specific discussion and examination regarding the terms and conditions of theTransactions including whether and how the Transactions should be executed and the Tender
Offer Price. The Tender Offeror examined the expected synergies and the Target Company’s
management organization after the Transactions and submitted the Initial Written Proposal on
August 27, 2019.

Furthermore, the Tender Offeror submitted the Revised Proposal (which

includes the Tender Offer Price of 2,010 yen) to the Target Company.

In addition, the Tender

Offeror obtained the Target Company’s consent and conducted due diligence on the Target
Company from late September to mid-November 2019.
On the other hand, after the Target Company received an initial inquiry about commencing
discussions to consider making the Target Company a wholly-owned subsidiary of the Tender
Offeror from the Tender Offeror on July 30, 2019, considering that that the Target Company isa consolidated subsidiary of the Tender Offeror and that the Transactions (including the Tender
Offer) constitute transactions that typically involve structural conflict of interest issues andinformation asymmetry issues, the Tender Offeror established a framework for evaluating and34

negotiating the Transactions in terms of increasing the corporate value of the Target Company
and securing the interests of general shareholders of the Target Company from a standpoint
independent of the Tender Offer, the Target Company by various measures such as establishinga special committee by a resolution at an extraordinary meeting of the board of directors heldon August 29, 2019, while receiving advice from Mori Hamada & Matsumoto, a legal advisorof the Target Company.
Consequently, since early August 2019, the Tender Offeror and the Target Company started
specific discussion and examination regarding the terms and conditions of the Transactions
including whether and how the Transactions should be executed and the Tender Offer Price,and thereafter continuously discussed and negotiated.
As a result, today, the Tender Offeror, based on the results of the due diligence conducted on
the Target Company and the Share Valuation Report (JPM), has concluded that, for the
improvement of the corporate value of the entire Tender Offeror Group, including the Target
Company Group, it is necessary to create an environment amenable to drastic actions directed
at not the Target Company Group’s short-term benefits but targeted at the medium-term andlong-term growth of the entire Tender Offeror Group, including the Target Company Group by
making the Target Company a wholly-owned subsidiary of the Tender Offeror through theTransactions, while providing the Target Company’s general shareholders with an appropriate
and reasonable opportunity to sell their Target Company Common Stock, and the Tender
Offeror decided to conduct the Transactions including the Tender Offer and determined theTender Offer Price through following process.

For details of the Tender Offeror’s decision

making process for the Tender Offer, please refer to “1. Purpose of Tender Offer”, “(2)Background, Purpose and Determination Process for the Tender Offer, and Management Policy
after the Tender Offer” above.
a. Name of third-party that provided an opinion regarding the calculation
To ensure the fairness of the Tender Offer Price, the Tender Offeror consulted thecalculation result in the Share Valuation Report (JPM) provided by J.P. Morgan, a thirdparty valuation institution independent from the Tender Offeror.

J.P.Morgan, the financial

advisor of the Tender Offeror, is not an affiliated party of the Tender Offeror or the Target
Company, and does not have a material interest in respect of the Tender Offer.
b. Summary of the opinion
According to the Share Valuation Report (JPM), the methods used for calculation and theper share value ranges of the Target Company Common Stock calculated under each of themethods are as follows:
Average share price analysis: 1,233 yen – 1,313 yen

35

Comparable company analysis: 1,338 yen – 1,659 yen
DCF Analysis:

1,799 yen – 2,289 yenc. Background of the determination of the Tender Offer Price based on the opinion
The Tender Offeror submitted the Revised Proposal that includes a proposed Tender Offer
Price of 2,010 yen taking into consideration (a) the Share Valuation Report (JPM), (b) the
possibility of approval at a board of directors’ meeting of the Target Company, (c) actual
examples of premiums decided in past cases similar to the Tender Offer, in which the tender
offer to shares, etc., was made by a person other than the issuer (i.e., tender offers made forthe purpose of making a subsidiary being listed a wholly-owned subsidiary by its parent
company), (d) the market trend regarding the price performance of the Target Company
Common Stock, (e) the future outlook for the domestic and foreign business of the Target
Company, including the financial forecasts, (f) the outlook for the tender in the Tender Offerand (g) the result of discussions and negotiations with the Target Company, etc. Furthermore,
the Tender Offeror determined that the Revised Proposal does not need to be further revised
in light of the results of the due diligence conducted on the Target Company by the Tender
Offeror from late September to mid-November 2019 and the Share Valuation Report (JPM).
Consequently, the Tender Offeror maintained the Revised Proposal and decided that theTender Offer Price per share would be 2,010 yen today.

(Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of
the Tender Offer Price and Measures to Avoid Conflicts of Interest)
a. Procurement by the Tender Offeror of a Share Valuation Report and a Fairness Opinion froman Independent Third-Party Valuation Institution
The Tender Offeror obtained the Share Valuation Report (JPM) and the Fairness Opinion (JPM)
by J.P. Morgan as of Today. For details of the Share Valuation Report (JPM) and the Fairness
Opinion, please refer to “(B) Background of Calculation” above.
b. Establishment of an Independent Special Committee by the Target Company(i) Process of the Establishment of an Independent Special Committee
As stated in “1. Purpose of Tender Offer,” “(2) Background, Purpose and Determination
Process for the Tender Offer, and Management Policy after the Tender Offer,” “b. Process
and Reason of the Target Company’s Determination,” the Target Company established a
special committee by a resolution at an extraordinary meeting of the board of directors heldon August 29, 2019.

Prior to the establishment of the special committee, the Target

Company received an initial inquiry from the Tender Offeror on July 30, 2019, about36

commencing discussions to consider making the Target Company a wholly-owned
subsidiary of the Tender Offeror; immediately after receiving that inquiry, for the purposeof establishing a framework for evaluating and negotiating the Transactions in terms ofincreasing the corporate value of the Target Company and securing the interests of generalshareholders of the Target Company from a standpoint independent of the Tender Offer, theTarget Company, while receiving advice from Mori Hamada & Matsumoto, individually
explained to all of the Target Company’s independent outside directors at that time, as well
as Mr. Hiroshi Enoki, a certified public accountant, and Mr. Tadashi Fukuda, an attorney-atlaw, who are independent outside statutory auditors of the Target Company with extensive
experience and expertise, that (i) the Target Company received the inquiry from the Tender
Offeror, and (ii) since the Transactions constitute transactions that typically involve
structural conflict of interest issues and information asymmetry issues, the Target Company
needs to take sufficient measures to ensure the fairness of the terms and conditions of theTransactions (including the Tender Offer Price), such as the establishment of a special
committee, when evaluating and negotiating the Transactions. The Target Company helda meeting with all of the Target Company’s independent outside directors at that time andindependent outside statutory auditors Mr. Hiroshi Enoki and Mr. Tadashi Fukuda on August
19. At the meeting, the Target Company once again explained to the effect that the inquiry
had been received from the Tender Offeror, and Mori Hamada & Matsumoto explained (a)to the effect that the Target Company needs to sufficiently ensure the fairness of procedures
to address the structural conflict of interest issues and information asymmetry issues in theTransactions and (b) the roles of the special committee, followed by a question-and-answer
session.

At the same time, the Target Company confirmed the independence andcompetence of the Target Company’s independent outside directors and independent outside
statutory auditors who will be candidates for the members of the special committee, while
receiving advice from Mori Hamada & Matsumoto.

Subsequently, after confirming (i)independence from the Tender Offeror (despite there being certain business relationships
between each member’s company (including Mr. Hiroshi Enoki’s company, Deloitte Touche
Tohmatsu LLC) and the Tender Offeror or the Target Company, the volume of thosetransactions accounts for less than 1% of consolidated profit in each case, and it has also
been confirmed that there are no other material interests) and(ii) absence of materialinterest in the results of the Transactions that differs from that of the general shareholders,the Target Company held discussions with the Target Company’s independent outside
directors at that time and independent outside statutory auditors present at the meeting andappointed four members, namely Mr. Shigeki Iwane (the Target Company’s former outside
director (resigned on October 7, 2019); President and Director of The Kansai Electric Power37

Co., Inc.; Mr. Shigeki Iwane resigned as a member of the special committee due to personalreasons on September 30, 2019), Mr. Tsutomu Kamijo (outside director of the Target
Company and Chairman and Director of Sapporo Holdings Limited), Mr. Kazutoshi Murao(outside director of the Target Company and Counselor to the president of NIPPONTELEGRAPH AND TELEPHONE WEST CORPORATION), and Mr. Hiroshi Enoki(outside statutory auditor of the Target Company and a representative accountant of Hiroshi
Enoki Certified Public Accountant Office) as candidates for members of the special
committee, while receiving advice from Mori Hamada & Matsumoto (there has been nochange in the members of the special committee apart from the resignation of Mr. Shigeki
Iwane).
Subsequently, as stated in “1. Purpose of Tender Offer,” “(2) Background, Purpose andDetermination Process for the Tender Offer, and Management Policy after the Tender Offer,”“b. Process and Reason of the Target Company’s Determination,” above, by a resolution at
an extraordinary meeting of the board of directors held on August 29, 2019, soon after thereceipt of the Initial Written Proposal from the Tender Offeror on August 27, 2019, the Target
Company established the special committee, referred the Consulted Matters to the special
committee, and requested the special committee to submit its opinion on the Consulted
Matters to the Target Company.

The board of directors of the Target Company also

resolved that the contents of determinations by the special committee should be respectedto the highest degree in relation to decision-making by the board of directors of the Target
Company for the Tender Offer (including the decision whether to support the Tender Offer)and that the board of directors of the Target Company will not support the Tender Offer if
the special committee determines that the terms and conditions of the transactions are notreasonable. The board of directors of the Target Company further resolved to grant the
special committee the authority (a) to negotiate the terms and conditions of the transactions
with the Tender Offeror, (b) to appoint its own financial, legal or other advisors as necessary(fees are to be borne by the Target Company) to prepare responses to the Consulted Matters,
or to name or approve the Target Company’s financial, legal or other advisors (including
retrospective approval), and (c) to receive from the officers and employees of the Target
Company the information necessary to evaluate and make determinations regarding theTender Offer.
Each member of the special committee will be paid a fixed amount of remuneration
irrespective of the contents of responses as remuneration for his duties.
(ii) Process of Review
From August 29, 2019 to November 18, 2019, the special committee carefully discussed
and evaluated the Consulted Matters by holding 16 meetings in total for around 26 hours in38

total and frequently exchanged emails between meetings to report or share information, toconduct deliberations, and to make decisions.
Specifically, upon firstly examining the independence, expertise, and accomplishments, andother matters of multiple candidates for legal advisor and financial advisor and third-party
valuation institution, the special committee appointed Nakamura, Tsunoda & Matsumoto as
its own legal advisor independent from the Tender Offeror and the Target Company and
KPMG as its own financial advisor and third-party valuation institution independent fromthe Tender Offeror and the Target Company.

The special committee confirmed that there

has been no business relationship between Nakamura, Tsunoda & Matsumoto and the Tender
Offeror or the Target Company for the past three years. Although one of the employees of
KPMG has been seconded to the Tender Offeror and KPMG receives a certain amount ofconsideration related to such secondment, the special committee determined that, taking into
account the size of KPMG’s business, the existence of that relationship does not affect theindependence of KPMG from the Tender Offeror in the Transactions.

The special

committee also confirmed that there has been no other business relationships between
KPMG and the Tender Offeror or the Target Company for the past three years.
In addition, the special committee approved the appointment of Mori Hamada & Matsumoto,
the Target Company’s legal advisor, after confirming that there is no concern with respect
to its independence and expertise.

After considering the independence, expertise, andachievements, and other matters of multiple candidates for financial advisor, the special
committee nominated Merrill Lynch Japan Securities as the Target Company’s financial
advisor, and, following the nomination, the Target Company appointed Merrill Lynch Japan
Securities as the Target Company’s financial advisor. Furthermore, the special committee
approved the internal framework for evaluating the Transactions (including the scope of
officers and employees of the Target Company involved in the evaluation, negotiation anddecision the Transactions, and their duties) established by the Target Company after
confirming that there is no concern with respect to that evaluation framework from thestandpoint of independence.
Subsequently, the special committee has discussed and evaluated measures to be taken to
ensure the fairness of the procedures in the Transactions, taking into account legal advice
received from Nakamura, Tsunoda & Matsumoto and the opinions of Mori Hamada &Matsumoto.
The special committee submitted written questions to the Tender Offeror regarding (a) the
Tender Offeror’s positioning of the health care business and its future vision, (b) the role of
the Target Company in the future vision, (c) the synergies anticipated as a result of theTransactions and the reason why making a wholly-owned subsidiary is necessary rather than39

retaining the current capital structure, (d) the Tender Offeror’s thoughts on the Target
Company’s management policy and the mid-term management plan after the Transactions,(e) the reason why the Tender Offeror chose to conduct the Tender Offer at this timing and
the Tender Offeror’s thoughts on the Tender Offer Price, (f) the Tender Offeror’s thoughts
on personnel policy and corporate governance after the Transactions, (g) the Tender
Offeror’s thoughts on the disadvantages of delisting and (h) procedures, terms andconditions of the Transactions. The Tender Offeror responded to the special committee,and Hitoshi Ochi, Director and Representative Corporate Executive Officer, President &CEO of the Tender Offeror, provided the special committee in person with an explanation
regarding these matters and held a question-and-answer session.
The special committee requested the Target Company’s President & Representative Director
Masayuki Mitsuka, the Target Company’s Representative Director Takashi Kobayashi, theTarget Company’s Director Eizo Tabaru, the Target Company’s Director Hiroaki Ueno, andthe Target Company’s Director Yoshihiro Kobayashi to attend a meeting of the special
committee and asked their opinions as the management of the Target Company and forrelevant information regarding (a) the relationship between the future vision for thehealthcare business in the Target Company Group and the Transactions, (b) the reason why
making a wholly-owned subsidiary is necessary rather than retaining the current capital
structure and the synergies anticipated as a result of the Transactions, (c) their thoughts on
the timing of the Transactions, (d) disadvantages of delisting, and (e) availability of otheroptions other than the Transactions, and then held a question-and-answer session,deliberation, and discussions on these matters.
The special committee received, in advance, an explanation from the Target Company
regarding the policy for preparing the business plan upon the preparation of the businessplan (including the Consolidated Financial Forecast) for the Transactions by the Target
Company, received explanations during the preparation process regarding the details,
material assumptions, and the preparation progress of the draft of the business plan at several
occasions, and approved the details, material assumptions, and the preparation process ofthe final business plan after confirming the rationality of those elements, taking into accountthe advice from a financial point of view received from KPMG.

As stated in “d.

Procurement by the Special Committee of the Share Valuation Report and the Fairness
Opinion from an Independent Financial Advisor and Third-Party Valuation Institution” and“f. Procurement by the Target Company of the Share Valuation Report from an Independent
Financial Advisor and Third-Party Valuation Institution” below, KPMG and Merrill Lynch
Japan Securities conducted the valuation of the Target Company Common Stock based on
the Consolidated Financial Forecast, and the special committee (a) received explanations
40

from KPMG regarding the valuation method for the Target Company Common Stock used
by KPMG, the reason why KPMG used the valuation method, the details of valuation byusing each method and material assumptions for the valuation of the Target Company
Common Stock (including the basis for calculating the discount rate under the DCF Analysis
or DCF Method and the reason for selecting comparable companies under comparable
company method and share price multiple method) (collectively, the “Evaluation
Methods”)) implemented by KPMG, (b) considered the explanations and from Merrill
Lynch Japan Securities regarding the Evaluation Methods implemented by Merrill Lynch
Japan Securities for the valuation of the Target Company Common Stock in accordance with
instructions from the Target Company which had received a request from the special
committee to provide those instructions and (b) confirmed the rationality of these mattersafter question-and-answer sessions, deliberation, and discussions.

As stated in “d.

Procurement by the Special Committee of the Share Valuation Report and the Fairness
Opinion from an Independent Third-Party Valuation Institution” below, the special
committee received the Fairness Opinion (KPMG) on November 18, 2019, together withthe explanation from KPMG regarding the details and material assumptions for the Fairness
Opinion (KPMG), and the special committee confirmed such details and material
assumptions.
The special committee received, in advance, an explanation from the Target Company
regarding the negotiation policy for the Transactions that the Target Company had decided
on after taking into account the advice from a financial point of view received from Merrill
Lynch Japan Securities, including the implementation of adequate negotiation in accordancewith general negotiation processes for M&A conducted between independent parties toobtain more favorable terms and conditions of the transactions to the extent possible fromthe Tender Offeror, and approved the negotiation policy after deliberation and discussion
based on the advice from a financial point of view received from KPMG.

Since receiving

on October 9, 2019 the initial proposal from the Tender Offeror that the Tender Offer Priceshould be 1,800 yen per share, each time the Target Company has received from the Tender
Offeror a price proposal, the Target Company has made a report to the special committee ina timely manner.

The special committee evaluated and discussed the contents of the

proposal based on the advice from a financial point of view received from KPMG, as wellas the Target Company’s view based on the advice from a financial point of view received
from Merrill Lynch Japan Securities by the Target Company, and was actively involved in
the discussion and negotiation process regarding the Tender Offer Price between the Target
Company and the Tender Offeror, including giving instructions and making requests to theTarget Company (a) to request the Tender Offeror to increase the Tender Offer Price and (b)41to suggest a price that sufficiently reflects the synergies anticipated from the Transactions.
As a result, the Target Company received the Revised Proposal on October 31, 2019 fromthe Tender Offeror stating 2,010 yen per share as the Tender Offer Price.
The special committee received explanations regarding details on the following from Mori
Hamada & Matsumoto on several occasions and, while receiving advice from Nakamura,Tsunoda & Matsumoto, confirmed that sufficient information disclosure would be provided(a) drafts of this press release and an opinion statement for the Tender Offer to be disclosed
or filed by the Target Company and (b) drafts of the press release and tender offer
registration statement for the Tender Offer to be disclosed or filed by the Tender Offeror.
(iii) Determinations
Based on the background provided above and in light of the legal advice from Nakamura,Tsunoda & Matsumoto and advice from a financial point of view from KPMG, and the Share
Valuation Report (KPMG) and the Fairness Opinion (KPMG) submitted as of November 18,
2019 from KPMG,, the special committee carefully discussed and evaluated the Consulted
Matters and, as of November 18, 2019, submitted to the board of directors of the Target
Company the Report with the unanimous approval of the members.

An outline of theReport is as follows.
(a)

Opiniona-i The special committee believes that the board of directors of the Target Company
should resolve to express an opinion in support of the Tender Offer and torecommend that the shareholders of the Target Company tender the Target
Company Common Stock in the Tender Offer.
a-ii The special committee believes that resolving to express an opinion in support of
the Tender Offer and to recommend that the shareholders of the Target Company
tender the Target Company Common Stock in the Tender Offer would not bedisadvantageous to the minority shareholders of the Target Company.

The special

committee also believes that making the Target Company a wholly-owned
subsidiary of the Tender Offeror after the completion of the Tender Offer would not
be disadvantageous to the minority shareholders of the Target Company.
(b)

Evaluationb-i Based on the following aspects, the special committee has determined that theTransactions and subsequent actions will contribute to increasing the corporate
value of the Target Company.


The special committee agrees with the current understanding of the Target
Company and the Tender Offeror regarding the business environment surrounding
the Target Company and the Target Company’s business issues as stated in “3.
42Details of and Grounds and Reasons for the Opinion on the Tender Offer,” “(2)Grounds and Reasons for the Opinion on the Tender Offer,” “B. Background andPurpose of and Decision-Making Process for the Tender Offeror Leading to theDecision to Conduct the Tender Offer” in the Target Company’s Press Release, andconsiders it necessary and reasonable to conduct the Transactions between theTarget Company and the Tender Offeror at this time to promote the creation andrealization of further synergies.


Based on the business environment and business issues stated above, according to
the management of the Target Company, it is important to maintain thesustainability of pharmaceuticals in the context of a declining birthrate and aging
society and rapid technological evolution in the healthcare field in order to maintainand increase the Target Company’s corporate value in the medium to long term, andcontinuous investment in technology and access to growing technological domains
are essential business strategies, and the special committee believes that theTransactions are an effective choice to pursue such business strategies.

Under thecurrent capital structure in which both parent and subsidiary companies are listed,synergy effects have not been fully realized because there are certain restrictions
due to necessity of establishing a firewall between the Target Company and theTender Offeror and protecting the interests of the general shareholders of bothparties; however, making the Target Company a wholly-owned subsidiary of theTender Offeror through the Transactions will remove these restrictions, and thus
satisfy the conditions to realize the synergy effects stated in “3. Details of andGrounds and Reasons for the Opinion on the Tender Offer,” “(2) Grounds andReasons for the Opinion on the Tender Offer,” “B. Background and Purpose of andDecision-Making Process for the Tender Offeror Leading to the Decision to
Conduct the Tender Offer” in the Target Company’s Press Release.
The synergy effects stated above will not be achieved solely by making the Target
Company a wholly-owned subsidiary of the Tender Offeror; continuous
investments for the purpose of maintaining the speed of the R&D pipelines andaccess to new technology in the regenerative medicine and digital areas are also
considered necessary.

In order to realize the synergy effects stated above to thefullest extent through such continuous investment, it is considered necessary for theTarget Company to remain in a core position in the healthcare business in the Tender
Offeror Group and to ensure a structure in which the Target Company and theTender Offeror may actively be involved in realizing such synergy effects. As
stated in “3. Details of and Grounds and Reasons for the Opinion on the Tender43

Offer,” “(2) Grounds and Reasons for the Opinion on the Tender Offer,” “C.
Management Policy After the Tender Offer” in the Target Company’s Press Release,
the Target Company and the Tender Offeror plan to continue to position the Target
Company’s pharmaceutical business at the core of the healthcare business in theTender Offeror Group and to disclose, after mutual confirmation, the details of
business strategies and policies regarding management resources in order for theTarget Company and the Tender Offeror to actively promote synergy effects;
therefore, it is reasonably expected that the structure to realize synergy effects by
the Transactions will be ensured.
Some disadvantages are also expected from the Target Company’s delisting,however, it is considered possible to mitigate these disadvantages sufficiently, andthe special committee has determined that the advantages of strengthening theattractive features of the Target Company’s products and its pipelines through theTransactions will be greater than the disadvantages.

The special committee believes that none of the possible transactions other than theTransactions would be more effective than the Transactions in increasing the Target
Company’s corporate value due to the following reasons: the fact that the Tender
Offeror has no apparent intention of selling the Target Company Common Stockheld by the Tender Offeror to other third parties; the fact that a merger with a major
overseas pharmaceutical company would be unlikely to utilize the strengths of theTarget Company; and the fact that significant restructuring would be required if theTarget Company were to merge with a major overseas pharmaceutical company ora medium-sized pharmaceutical company in Japan.

b-ii From the perspective of (a) ensuring a situation substantially equivalent to an arm’s
length transaction in the process of formulating the transaction terms and (b)ensuring that general shareholders have an opportunity to make an appropriate
decision based on sufficient information, it is confirmed that fair procedures toprotect the interests of general shareholders have been taken in the Transactions
based on following points.


It is confirmed that the independent special committee established by the Target
Company worked effectively in the Tender Offer.



It is confirmed that the special committee obtained independent professional advice
from Nakamura, Tsunoda & Matsumoto and KPMG, its external experts, and that
the Target Company obtained independent professional advice from Mori Hamada& Matsumoto and Merrill Lynch Japan Securities, its external experts.



It is confirmed that the special committee obtained a share valuation report from44

KPMG, expert independent third-party valuation institution as a basis for its
decision, and the Target Company obtained a share valuation report from Merrill
Lynch Japan Securities, expert independent third-party valuation institution as abasis for its decision.
The special committee obtained the Fairness Opinion (KPMG) from KPMG, andKPMG stated in its opinion that 2,010 yen per share as the Tender Offer Price is fairto the general shareholders of the Target Company from a financial point of view.



the Target Company made a report to the special committee to the effect that theTarget Company has built an internal framework under which the Target Company’s
officers and employees involved in the evaluation, negotiation, and decisionmaking regarding the Transactions are able to perform their duties from a position
independent from the Tender Offeror, and the special committee has confirmed andapproved that there is not concern with respect to that framework from thestandpoint of independence.



All directors and statutory auditors who have conflict of interest are excluded fromthe deliberation or resolution of the board of directors meeting and evaluation andnegotiation regarding the Transactions.



It is confirmed that the Target Company conducted so-called “indirect market
checks” where an M&A transaction is executed in a manner that allows otherprospective acquiring parties to make competing proposals after the proposed M&Atransaction is announced. Although the Target Company did not conduct so-called“active market checks” to investigate and evaluate prospective acquiring parties in
the market, considering the fact that (a) the purchaser is the controlling shareholder
in the Transactions and (b) the Tender Offeror is unlikely to sell the Target Company
Common Stock held by the Tender Offeror to any third party, it would be pointless
to conduct the active market check and the fact that the Target Company did notconduct so-called “active market checks” would be unlikely to reduce the fairnessof procedures in the Transactions.



According to the Tender Offeror, the Tender Offeror has not included a “Majorityof the Minority” condition because the inclusion of a “Majority of the Minority”
condition in the Tender Offer may make the completion of the Tender Offer moreincertitude and may not contribute to the interest of all of the general shareholders
who desire to tender their shares through the Tender Offer.

The special committee

believes that the Tender Offer’s decision is not unreasonable.

Furthermore, thespecial committee believes that the fact that the Tender Offeror did not include a“Majority of the Minority” condition does not reduce the fairness of procedures in45

the Transactions because (a) the Transactions would contribute to increasing thecorporate value of the Target Company and the transaction terms and conditions for
the Transactions are appropriate and (b) the Target Company has taken sufficientmeasures to ensure the fairness of the Transactions.


It is confirmed that the Tender Offer intends to ensure that general shareholders
have an opportunity to make an appropriate decision based on sufficient information.



It is confirmed that coerciveness is eliminated in the Transactions.

b-iii It is confirmed that transaction terms and conditions for the Transactions arereasonable based on following reasons.


The acquisition method used in the Transactions is believed to be reasonablebecause the method by which an offeror conducts a tender offer as a first step, andthen conducts a demand for sale of shares or a share consolidation as a second stepis generally used in transactions conducted in order to make a company a whollyowned subsidiary like the Transactions. Also, the type of consideration for theacquisition is believed to be reasonable because (i) a tender offer in which
consideration is paid in cash is believed to be more reasonable to the Target
Company’s general shareholders than a one-step acquisition in which shares of theofferor are delivered as consideration, since the business of the Tender Offeror isdifferent from that of the Target Company, and (ii) the type of consideration for
acquisition in the second step transaction is deemed reasonable because the Target
Company’s general shareholders who do not tender their shares will be able to avoid
the risk of a decrease in the price of the Tender Offeror’s shares which they would
have borne if the Tender Offeror’s shares were to be delivered as consideration in
exchange for the Target Company’s shares, and will be able to receive an amountof cash determined based on the same price as the Tender Offer Price.



2,010 yen per share as the Tender Offer Price is confirmed to be reasonable because(a) no particular unreasonable points have been found with respect to the purpose,
preparation, or content of the Consolidated Financial Forecast that is the basis of
the share valuation by the DCF Method and the DCF Analysis in the Share
Valuation Report (KPMG) and the Share Valuation Report (Merrill Lynch Japan
Securities), (b) the Share Valuation Report (KPMG) is determined to be credible
since no particular unreasonable points have been found with respect to the methodand details of valuation stated therein, and 2,010 yen per share as the Tender Offer
Price exceeds the upper bound of the valuation range evaluated using the market
price method, and it also exceeds the median of each of the valuation ranges
evaluated using share price multiple method and the DCF Method, in the Share46

Valuation Report (KPMG) (c) the Share Valuation Report (Merrill Lynch Japan
Securities) is determined to be credible since no particular unreasonable points havebeen found with respect to the method and details of valuation stated therein, and
2,010 yen per share as the Tender Offer Price exceeds the upper bound of each of
the valuation ranges evaluated using the market price method and the comparable
company method, and it is within the valuation range evaluated using DCF Analysis,in the Share Valuation Report (Merrill Lynch Japan Securities), (d) the premiumincluded in 2,010 yen per share as the Tender Offer Price exceeds the average andmedian of premiums added in similar transactions, therefore it is confirmed that asubstantial premium is added, (e) the Tender Offer Price is the price agreed to after
sincere negotiations, in which the special committee was substantially involved andplayed a central role, between the Target Company and the Tender Offeror, and (f)the Tender Offer Price is judged to be fair to the general shareholders of the Target
Company from a financial point of view in the Fairness Opinion (KPMG) obtained
from KPMG.
b-iv Based on above, the board of directors of the Target Company believes that it should
resolve to express its opinion in support of the Tender Offer and recommend thatthe shareholders of the Target Company accept the Tender Offer.
b-v Furthermore, the board of directors of the Target Company believes that resolving
to express an opinion in support of the Tender Offer and to recommend that theshareholders of the Target Company accept the Tender Offer would not bedisadvantageous to the minority shareholders of the Target Company.

The boardof directors of the Target Company also believe that making the Target Company awholly-owned subsidiary of the Tender Offeror after the completion of the Tender
Offer would not be disadvantageous to the minority shareholders of the Target
Company.
c. Procurement by the Special Committee of Advice from an Independent Legal Advisor
As stated in “b. Establishment of an Independent Special Committee by the Target Company”
above, for the purpose of obtaining expert advice regarding the fairness of procedures, thespecial committee appointed Nakamura, Tsunoda & Matsumoto as its own legal advisor
independent from the Tender Offeror and the Target Company and received legal advice,including advice regarding measures to be taken to ensure the fairness of the procedures of theTransactions, various procedures for the Transactions, and the method and process ofdeliberation of the special committee for the Transactions.
Nakamura, Tsunoda & Matsumoto is not a related party of the Tender Offeror or the Target
47

Company and does not have any material interest in the Transactions (including the Tender
Offer).

For other information regarding the independence of Nakamura, Tsunoda &Matsumoto, please see “b. Establishment of an Independent Special Committee by the Target
Company” above.
d. Procurement by the Special Committee of the Share Valuation Report and the Fairness
Opinion from an Independent Financial Advisor and Third-Party Valuation Institution(i) Name of Valuation Institution and its Relationship with the Target Company and theTender Offeror
In considering the Consulted Matters, in order to ensure the reasonableness of transaction
terms and conditions of the Transactions, including the Tender Offer Price, the special
committee requested KPMG, its own financial advisor and third-party valuation
institution independent from the Tender Offeror and the Target Company, to calculate
the value of the Target Company Common Stock and conduct financial analysis
incidental thereto and also to express an opinion concerning the fairness of the Tender
Offer Price (a fairness opinion). The Target Company obtained the Share Valuation
Report (KPMG) and the Fairness Opinion (KPMG) on November 18, 2019.
As stated in “1. Purpose of Tender Offer,” “(2) Background, Purpose and Determination
Process for the Tender Offer, and Management Policy after the Tender Offer,” “b. Process
and Reason of the Target Company’s Determination,” above, the board of directors of
the Target Company received the Share Valuation Report (KPMG) and the Fairness
Opinion (KPMG) together with the Report that was submitted to it by the special
committee on November 18, 2019, and, in light of the contents of the Share Valuation
Report (KPMG) and the Fairness Opinion (KPMG), the board of directors of the Target
Company passed the resolution stated in “h. Unanimous Approval of All Non-interested
Directors and the No Dissenting Opinion of All Non-interested Statutory Auditors at theTarget Company” below.
KPMG is not a related party of the Tender Offeror or the Target Company, and does nothave any material interest in connection with the Transactions, including the Tender
Offer, needing to be disclosed.

As stated in “b. Establishment of an Independent

Special Committee by the Target Company” above, the special committee appointed
KPMG as its own financial advisor and third-party valuation institution after considering
several candidate financial advisors and third-party valuation institutions in terms of
their independence, expertise, accomplishments, and other matters. Also, only a fixedamount of compensation, which is payable regardless of whether the Transactions
succeed, will be paid to KPMG in connection with the Transactions, and no contingency
48

compensation, which is payable subject to completion of the Transactions, including theTender Offer, and other conditions, will be paid.
(ii) Outline of Valuation
In order to collect and examine information required for calculating the value of theTarget Company Common Stock, KPMG obtained information on the Target Company’s
current business status and forecasted business outlook and received explanations about
these matters from the Target Company’s management, and calculated the value of theTarget Company Common Stock based on that information. After considering which
methods should be applied to calculate the value of the Target Company Common Stockamong the various share value calculation methods available KPMG calculated the valueof the Target Company shares using: (a) the market price method because the Target
Company Common Stock are listed on the First Section of the TSE and market prices
exist; (b) the share price multiple method because there are multiple listed companies
engaged in businesses similar to that of the Target Company and analogical inference ofthe share value is viable; and (c) the discounted cash flow method (the “DCF Method”)
so as to reflect in the evaluation the status of future business activities, based on thepremise that the Target Company is a going concern and from the perspective that it
would be appropriate to assess the share value of the Target Company Common Stock in
multiple ways.

The following are the ranges of values per the Target Company

Common Stock that were calculated by KPMG based on each calculation method set out
above.
Market Price Method:

1,233 yen – 1,313 yen

Share Price Multiple Method:

1,735 yen – 2,050 yen

DCF Method:

1,841 yen – 2,096 yen

Under the market price method, using November 15, 2019 as the evaluation referencedate, the per-value of the Target Company Common Stock was evaluated to range from
1,233 yen to 1,313 yen, based on the closing price of the reference date (1,313 yen), thesimple average closing price for the most recent one month (1,298 yen), the simple
average closing price for the most recent three months (1,234 yen) and the simple
average closing price for the most recent six months (1,233 yen) of the Target Company
Common Stock on the First Section of the TSE.

Under the share price multiple method,

the per-value of the Target Company shares was assessed to range from 1,735 yen to
2,050 yen based on the ratio of EBITDA to the enterprise value compared to Astellas
Pharma Inc., Daiichi Sankyo Company Limited, Eisai Co., Ltd., Chugai PharmaceuticalCo., Ltd., Sumitomo Dainippon Pharma Co., Ltd., Shionogi & Co., Ltd., and Kyowa
Kirin Co., Ltd. as comparable listed companies, each of which is selected by KPMG,
49

among listed companies in Japan that engage mainly in development, manufacture, andsale of ethical drugs as the Target Company does, comprehensively taking into accounttheir similarities to the Target Company in terms of operating results, financial status,
status of cash flow, scale of business, and other factors.
Under the DCF Method, the range of the per-value of the Target Company Common
Stock is evaluated from 1,841 yen to 2,096 yen, which results from analyzing the Target
Company’s corporate value and share value by discounting to the present value at a
certain discount rate the free cash flow that the Target Company is expected to generate
in the second quarter of 2020 and onward based on the Target Company’s business plans
for the period from the fiscal year ending March 2020 to the fiscal year ending March
2031 and trends in the Target Company’s operating results to date, after holding
question-and-answer sessions with the Target Company in order to confirm thereasonableness of those business plans. A sum-of-the-parts approach was used for the
DCF Method, whereby corporate value and share value are calculated by aggregating
values of each business segment or geographic segment analyzed separately.

The

discount rate (weighted-average cost of capital) adopted is 6.05% to 6.55% as todomestic operation and 9.55% to 11.45% for overseas operation, which are calculated
based on the CAPM (capital asset pricing model) theory that is generally used in practicefor share value evaluation.

The perpetual assumption method was used in evaluating

the going-concern value of the business segments and geographic segments that KPMG
considers that evaluation as the going-concern are appropriate based on sustainable cash
flows, and the perpetual growth rate was 0.0% to 2.35%, which was determined basedon analysis conducted separately for businesses in Japan and overseas.
The Consolidated Financial Forecast used by KPMG as the basis of the DCF Method
have been reviewed by KPMG after holding several question-and-answer sessions with
the Target Company and also confirmed by the special committee in terms of thereasonableness of their details, material assumptions, and the preparation process, as
stated in “b. Establishment of an Independent Special Committee by the Target Company”
above.

Specific figures in the Consolidated Financial Forecast used as the basis forcalculation by the DCF Method by KPMG is as stated in “f. Procurement by the Target
Company of the Share Valuation Report from an Independent Financial Advisor andThird-Party Valuation Institution,” “(ii) Outline of Valuation” below.
In principle, when calculating the value of the Target Company shares, KPMG has used,as-is, information provided to it by the Target Company, information obtained throughinterviews, publicly available information, and other information based on theassumption that these materials and information are entirely accurate and complete and50

that there exist no circumstances that have not been disclosed to KPMG that would havea material impact upon the calculations of the value of the Target Company shares.
KPMG has not made an independent study of the accuracy or completeness of thosematerials and information.

KPMG has not independently valuated or appraised theassets or liabilities (including derivative transactions, off-balance-sheet assets or
liabilities, and other contingent liabilities) of the Target Company or any of its
subsidiaries or affiliates and has not conducted any analysis or valuation of individual
assets or liabilities.

Also, KPMG has not requested any third-party institution to

perform any such valuation, appraisal, or assessment. Moreover, KPMG assumed that
the Target Company’s financial forecast, referenced in the relevant calculations, wasreasonably prepared and produced pursuant to the best forecasts and judgments that
could be obtained from the Target Company this time, and that relevant calculations
reflected the information and economic situation as of November 18, 2019.
(iii)

Outline of the Fairness Opinion (KPMG)

The special committee also obtained the Fairness Opinion (KPMG) from KPMG, whichstates to the effect that 2,010 yen per share as the Tender Offer Price is fair to the generalshareholders of the Target Company from a financial point of view.

The Fairness

Opinion (KPMG) expresses an opinion to the effect that, assuming the scheme of theTransactions is implemented, 2,010 yen per share as the Tender Offer Price will be a fairvalue to the general shareholders of the Target Company (the “Expression of Opinion”)
in light of the result of the share valuation conducted based on the Consolidated Financial
Forecast that was prepared by the Target Company as stand-alone basis and the result ofanalysis of premiums added in past tender offer cases that are similar to the Tender Offer.
The Fairness Opinion (KPMG) was issued after several question-and-answer sessions
were held with the Target Company regarding the background and process that led to theconclusion to support the Tender Offer and review procedures conducted by the review
committee of KPMG independently from the KPMG team engaging in the preparationof the Fairness Opinion, in addition to examination of the result of the Target Company
share valuation conducted by KPMG through analysis and examination of financial
information, including the Consolidated Financial Forecast, provided by the Target
Company and the holding of question-and-answer sessions with the Target Company.
The Expression of Opinion is based on the assumption that the information provided by
the Target Company and publicly available information are entirely accurate andcomplete, and KPMG has not independently assessed their accuracy or completeness.
KPMG has not independently valuated, appraised, or assessed the individual assets or
liabilities (including contingent liabilities) of the Target Company or any of its
51subsidiaries and has not received any valuation report or appraisal report on those matters.
KPMG has not conducted any audit or assessment procedures with respect to the Target
Company’s financial statements, including audit procedures in accordance withgenerally accepted auditing standards, and is not in a position to express an audit opinion
on the Target Company’s financial information.

If there is a material error in theinformation disclosed to KPMG by the Target Company, or if there is a fact undisclosed
to KPMG as of the date of the Expression of Opinion that could materially affect theanalysis of the value of the Target Company Common Stock, then the result of analysis,
which is the basis of KPMG’s opinion, might be materially different.

Since thecontents of the Expression of Opinion are based on economic conditions, the regulatoryenvironment, the market environment, and other conditions as of the date of theExpression of Opinion, any subsequent change in those conditions or environment mightcause a material impact on the analysis of the Target Company Common Stock value;
however, KPMG is not obligated to update, amend, or reaffirm the contents of theExpression of Opinion.
The Expression of Opinion is made on the assumption that the estimated financial
forecast provided by the Target Company is the most reasonable and accountablefinancial forecast reasonably prepared by the Target Company based on the best forecasts
and judgments made by the Target Company’s management as of the date of theExpression of Opinion.

KPMG does not express any opinion regarding theassumptions underlying that financial forecast or its feasibility.

Matters and theenvironment assumed in a financial forecast not materializing as expected is a common
occurrence, and differences between the forecast and actual performance that would
potentially arise in such a case might have a material impact on the value of the Target
Company shares; however, the analysis by KPMG was not conducted for the purpose of
examining the feasibility of the financial forecast.

KPMG is not in a position to express

an opinion on the appropriateness of the assumptions used in the financial forecast.
The Expression of Opinion is made for the sole purpose of providing a portion of theinformation that should be considered by the special committee when considering andsubmitting its opinion on the Consulted Matters and not for any other purpose. Also,
the Expression of Opinion does not express KPMG’s opinion on decision-making by the
special committee or express any recommendation as to whether the Target Company’s
general shareholders should tender their shares.

In addition, KPMG has not beenrequested to calculate or forecast the purchase price of the Target Company shares intransactions other than the Tender Offer and is not in a position to express an opinion on
those matters.
52

e. Procurement by the Target Company of Advice from an Independent Legal Advisor
As stated in “b. Establishment of an Independent Special Committee by the Target Company”
above, for the purpose of obtaining expert advice on the fairness of procedures, the Target
Company appointed Mori Hamada & Matsumoto as a legal advisor independent from theTender Offeror and the Target Company and received legal advice, including advice regarding
measures to be taken to ensure the fairness of the procedures of the Transactions, various
procedures for the Transactions, and the method and process of decision-making by the Target
Company for the Transactions.
Mori Hamada & Matsumoto is not a related party of the Tender Offeror or the Target Company
and does not have any material interest in the Transactions (including the Tender Offer).
f. Procurement by the Target Company of the Share Valuation Report from an Independent
Financial Advisor and Third-Party Valuation Institution
As stated in “b. Establishment of an Independent Special Committee by the Target Company”
below, for the purpose of obtaining expert advice and assistance regarding measuring the valueof companies and price negotiations, etc., the Target Company appointed Merrill Lynch Japan
Securities as a financial advisor and a third-party valuation institution independent from theTender Offeror and the Target Company and obtained the Share Valuation Report (Merrill
Lynch Japan) dated November 18, 2019 while receiving advice from a financial point of view.
For an outline of the Share Valuation Report (Merrill Lynch Japan), please see “1. Purpose of
Tender Offer,” “(2) Background, Purpose and Determination Process for the Tender Offer, andManagement Policy after the Tender Offer,” “b. Process and Reason of the Target Company’s
Determination,” above.
Merrill Lynch Japan Securities is not a related party of the Tender Offeror or the Target
Company and does not have any material interest in the Transactions (including the Tender
Offer).
(i) Name of Valuation Institution and its Relationship with the Target Company and theTender Offeror
In arriving at our opinion regarding the Tender Offer, in order to ensure the fairness ofthe decision-making process concerning the Tender Offer Price presented by the Tender
Offeror, the Target Company requested Merrill Lynch Japan Securities, a financial
advisor and third-party valuation institution independent from the Tender Offeror andthe Target Company, to evaluate the value of the Target Company Common Stock andconduct financial analysis incidental thereto. The Target Company obtained the Share
Valuation Report (Merrill Lynch Japan Securities) dated November 18, 2019, subject to53

the assumptions set forth below (Note 1) and certain other conditions. Merrill Lynch
Japan Securities is not a related party of the Tender Offeror or the Target Company, anddoes not have any material interest in the Transactions, including Tender Offer, needing
to be disclosed.

Further, the Target Company has not obtained from Merrill Lynch

Japan Securities any opinion concerning the fairness of the Tender Offer Price (a fairness
opinion).
Also, compensation payable to Merrill Lynch Japan Securities in connection with theTransactions is contingency compensation that is payable subject to completion of theTender Offer.

The Target Company has appointed Merrill Lynch Japan Securities as its

financial advisor and third-party valuation institution based on the compensation system
above after taking into consideration practices generally used in similar transactions, thepropriety of a compensation system in which the Target Company will bear a certain
level of financial burden if the Transactions are not completed, and other factors.
(ii)

Outline of Valuation

After considering the various valuation methods of the equity value of the Target
Company Common Stock, Merrill Lynch Japan Securities analyzed the equity value of
the Target Company Common Stock using (i) market price method because the Target
Company Common Stock are listed on the First Section of the TSE, (ii) comparable
company method because there are numerous listed companies that are considered to berelatively similar to the Target Company and analogical inference of the share value of
the Target Company Common Stock is viable, and (iii) the DCF Analysis so as to reflectin the evaluation the status of future business activities, subject to the condition precedent
set forth below (Note 1) and other certain conditions, based on the premise that the Target
Company is a going concern and from the perspective that it would be appropriate toevaluate the share value of the Target Company Common Stock in multiple ways.
According to Merrill Lynch Japan Securities, the methods used, and the corresponding
ranges of per-share price of the Target Company Common Stock evaluated by suchmethods, are as follows. For assumptions, points of attention, etc. in the preparation of
the Share Valuation Report (Merrill Lynch Japan Securities) by Merrill Lynch Japan
Securities and the underlying valuation analysis therefor, please refer to Note 1.
Market price method:

1,233 yen – 1,313 yen

Comparable company method:

1,386 yen – 1,750 yen

DCF Analysis:

1,861 yen – 2,209 yen

Under market price method, using November 15, 2019 as the evaluation reference date,
the per-value of the Target Company Common Stock was evaluated to range from 1,233
yen to 1,313 yen, based on the closing price of the reference date (1,313 yen), the simple
54

average closing price for the most recent one month (1,298 yen), the simple averageclosing price for the most recent three months (1,234 yen) and the simple average closing
price for the most recent six months (1,233 yen) of the Target Company Common Stockon the First Section of the TSE.
Under comparable company method, the share value of the Target Company shares wasanalyzed via comparison with market share prices and financial indices indicating
profitability, etc. of various listed companies engaged in relatively similar, albeit notcompletely identical, businesses to those of the Target Company, picked out for the
purpose of analysis.

The per-value of the Target Company Common Stock wasevaluated to range from 1,386 yen to 1,750 yen, based on the ratio of EBITDA to thebusiness value compared to Astellas Pharma Inc., Otsuka Holdings Co., Ltd., Eisai Co.,
Ltd., Shionogi & Co., Ltd., Kyowa Kirin Co., Ltd., Ono Pharmaceutical Co., Ltd., Santen
Pharmaceutical Co., Ltd., Sumitomo Dainippon Pharma Co., Ltd., Nippon Shinyaku Co.,
Hisamitsu Pharmaceutical Co., Inc., Kaken Pharmaceutical Co., Ltd., MochidaPharmaceutical Co., Ltd., Kissei Pharmaceutical Co., Ltd. and KYORIN Holdings, Inc.,
each of which is deemed to be a listed company having similarities to the Target
Company, and taking into consideration the market capitalization and the scale ofcorporate value, the current business scale and the status of business deployment
within/outside Japan, the future domestic/international business deployment strategy,
and the policy and status of the research and development activities toward the creationof new medicine (including the products developed by itself, and the activities for
adoption or derivation) and other factors.
Under the DCF Analysis, the per-value of the Target Company Common Stock has been
evaluated to range from 1,861 yen to 2,209 yen, after analyzing the enterprise value andthe equity value of the Target Company based on the financial forecast for the 12 fiscal
years from the fiscal year ending March 2020 to the fiscal year ending March 2031
(including the free cash flow) prepared by the Target Company by discounting such free
cash flow to the present value at a certain discount rate.

The discount rate (weighted

average cost of capital) adopted is 4.75% to 6.75% as to the domestic operation and 8.0%
to 10.0% as to the overseas operation, which are analyzed based on the CAPM (capital
asset pricing model) theory that is generally used in practice for share value evaluation.
The exit multiple method and the perpetual growth rate method are adopted for thevaluation of the going concern value, and 8.0 to 10.0 times and 8.0 to 10.0 times are
adopted as the EBITDA multiple for the domestic business and the international business,
respectively, under the exit multiple method, and the ratio of minus 2.0% to minus 1.0%
and 1.0% to 2.0% are adopted as the perpetual growth rate as to the domestic business55

and the international business, respectively, under the perpetual growth rate method
based on the guidance given by the Target Company.
The consolidated financial forecast prepared based on the business plan provided by theTarget Company (the “Consolidated Financial Forecast”), used by Merrill Lynch Japan
Securities as the basis of the DCF Method, is as follows.

Details of the Consolidated

Financial Forecast have been examined by Merrill Lynch Japan Securities, which has notindependently assessed the accuracy or completeness of the Consolidated Financial
Forecast and is not obligated to do so (please refer to (Note 1) below for assumptions,disclaimers, etc. based on which Merrill Lynch Japan Securities examined theConsolidated Financial Forecast).

Details of the Consolidated Financial Forecast havealso been confirmed by the special committee in terms of the reasonableness of theirdetails, material assumptions, and the preparation process, as stated in “b. Establishmentof an Independent Special Committee by the Target Company” above.

The forecast

also covers the fiscal years in which a substantial increase/decrease in profits is expected.
Specifically, the expectation that the full-year operating income for the fiscal year ending
March 2024 will be increased to 61.6 billion yen, which is 64% up from the previous
year, and that the Adjusted EBITDA (Note 2) will be increased to 96.2 billion yen, whichis 86% up from the previous year, is made mainly because the investment in researchand development for existing late-stage products of the Target Company will becompleted and existing late-stage products of the Target Company, such as ND0612(Levodopa/Carbidopa, Continuous SC pump (Parkinson’s disease)) and MT-1186(Edaravone, Free radical scavenger (Amyotrophic lateral sclerosis: ALS/Oralsuspension)), are expected to fully contribute to the Target Company’s profits.

For thefiscal year ending March 2025, it is expected that the existing late-stage products of theTarget Company will continuously contribute to the profits, similar to the previous fiscal
year, and the full-year operating income will be increased to 93.0 billion yen, which is
51% up from the previous year.

In contrast, the expectation for the fiscal year ending

March 2031 that the full-year operating income will be decreased to 90.5 billion yen,which is 31% down from the previous year, is made mainly because the sales amountand the items of other income will be decreased due to the completion of the existinglate-stage products of the Target Company.

However, the synergistic effect expected tobe achieved by the execution of the Transactions is not reflected in the Consolidated
Financial Forecast, as it is difficult to estimate any effect at this point.

Please note thatan arbitration procedure was commenced with Novartis Pharma AG in February 2019,
and a part of the royalty for Gilenya payable by Novartis Pharma AG has not beenrecognized as sales revenue in accordance with IFRS.
56

Although this accounting

treatment is expected to be made going forward, so that such a recognition will not bemade during the process of the arbitration procedure, the Consolidated Financial
Forecast was prepared under the assumption that the application for the arbitration had
not been made. Therefore, the Consolidated Financial Forecast is different from thefinancial forecast announced by the Target Company in the Second Quarterly Earnings
Release for FY 2019 (IFRS) (Consolidated) disclosed by the Target Company on October30, 2019:(In 100 million Yen)

FY

FY

FY

FY

FY

FY

endingendingendingendingendingending

March

March

March

March

March

March

2020

2021

2022

2023

2024

2025

Sales

4,188

4,117

4,188

4,158

4,776

5,114

Operating Income

502

440

459

375

616

930

Adjusted EBITDA 626

485

610

517

962

1,201

265

166

328

296

603

933

FY

FY

FY

FY

FY

FY

endingendingendingendingendingending

March

March

March

March

March

March

2026

2027

2028

2029

2030

2031

Sales

5,227

5,390

5,733

5,756

5,555

4,956

Operating Income

1,081

1,170

1,463

1,498

1,318

905

1,349

1,433

1,728

1,763

1,572

1,133

1,007

1,068

1,281

1,366

1,210

968

(Note 2)
Free Cash Flow

Adjusted
EBITDA (Note 2)
Free Cash Flow

(Note 1) The above-mentioned Share Valuation Report (Merrill Lynch Japan
Securities) has been delivered solely for the use and benefit of the board of
directors of the Target Company in its capacity as such in connection withand for purposes of its evaluation of the Tender Offer Price from a financial
point of view.

The Share Valuation Report (Merrill Lynch Japan

Securities) does not express any opinion or view with respect to any
consideration received in connection with the Transactions by the holders of
any class of securities, creditors or other constituencies of any party.
57

The

Share Valuation Report (Merrill Lynch Japan Securities) expresses no viewor opinion as to any terms or other aspects of the Transactions, including,
without limitation, the form or structure of the Transactions.

Furthermore,

the Share Valuation Report (Merrill Lynch Japan Securities) does not express
any opinion or view as to the relative merits of the Transactions incomparison to other strategies or transactions that might be available to theTarget Company or in which the Target Company might engage or as to theunderlying business decision of the Target Company to proceed with oreffect the Transactions.

In addition, the Share Valuation Report (Merrill

Lynch Japan Securities) does not express any opinion or recommendation to
any shareholder of the Target Company as to whether to tender their theTarget Company shares in the Tender Offer or how to vote or act inconnection with the Transactions or any related matter.

Moreover, theShare Valuation Report (Merrill Lynch Japan Securities) does not express
any opinion or view with respect to the fairness (financial or otherwise) of
the amount, nature or any other aspect of any compensation to any of theofficers, directors or employees of any party to the Transactions, or class ofsuch persons, relative to the Tender Offer Price.

The Share Valuation

Report (Merrill Lynch Japan Securities) does not express any opinion as tothe prices at which the Target Company Common Stock will be traded at any
time, including following the announcement or consummation of theTransactions.
In preparing the Share Valuation Report (Merrill Lynch Japan Securities) andconducting its underlying valuation analysis, Merrill Lynch Japan Securities
reviewed certain publicly available information concerning the business andfinancial matters of the Target Company, as well as the business and financial
information inside the Target Company (including the Consolidated
Financial Forecast) which was either provided by the management of theTarget Company to Merrill Lynch Japan Securities or with which Merrill
Lynch Japan Securities discussed with the management of the Target
Company. Merrill Lynch Japan Securities has assumed and relied upon,
without independent verification, the accuracy and completeness of thefinancial and other information and data publicly available or provided to orotherwise reviewed by or discussed with Merrill Lynch Japan Securities andhas relied upon the assurances of the management of the Target Company
that they are not aware of any facts or circumstances that would make such58

information or data inaccurate or misleading in any material respect.
Further, with respect to the Consolidated Financial Forecast, Merrill Lynch
Japan Securities has been advised by the Target Company, and has assumed,with the consent of the Target Company, that it has been reasonably preparedon bases reflecting the best currently available estimates and good faithjudgments of the management of the Target Company as to the futurefinancial performance of the Target Company.

The Share Valuation Report(Merrill Lynch Japan Securities) is necessarily based on financial, economic,
monetary, market and other conditions and circumstances as in effect on, andthe information made available to Merrill Lynch Japan Securities as of, thedate of the report (except as otherwise stated in the analysis).

It should beunderstood that subsequent developments may affect the Share Valuation
Report (Merrill Lynch Japan Securities), and Merrill Lynch Japan Securities
does not have any obligation to update, revise, or reaffirm such report.
As noted above, the descriptions of the analyses conducted by Merrill Lynch
Japan Securities set forth above are summaries of the material financial
analyses presented by Merrill Lynch Japan Securities to the board of directorsof the Target Company in connection with the Share Valuation Report (Merrill
Lynch Japan Securities) and are not comprehensive descriptions of all analyses
undertaken by Merrill Lynch Japan Securities in connection with such report.
The preparation of the Share Valuation Report (Merrill Lynch Japan Securities)
and its underlying analysis is a complex analytical process involving various
judgments about the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances;
therefore, it is not necessarily advisable to describe only a part of the results orsummary of the analysis.

Merrill Lynch Japan Securities believes that its

analyses must be considered holistically.

Merrill Lynch Japan Securities

further believes that selecting portions of its analyses and the factors consideredor focusing on any information presented in tabular format, without considering
all analyses and factors or the narrative description of the analyses, could createa misleading or incomplete view of the processes underlying Merrill Lynch
Japan Securities’ analysis and the opinion.

The fact that any specific analysis

has been referred to in the summary set out above is not meant to indicate thatsuch analysis was given greater weight than any other analysis referred to insuch summary.
In performing its analyses, Merrill Lynch Japan Securities considered industry
59performance, general business and economic conditions, and other matters,
many of which are beyond the control of the Tender Offeror and the Target
Company.

The estimates of the future performance of the Target Company

based on which Merrill Lynch Japan Securities’ analyses were made are notnecessarily indicative of actual values or actual future results, which may besignificantly more or less favorable than such estimates.

Merrill Lynch Japan

Securities’ analyses were performed solely as part of its analysis contained in
the Share Valuation Report (Merrill Lynch Japan Securities) and were provided
to the board of directors of the Target Company in connection with the deliveryof such report. Merrill Lynch Japan Securities’ analyses do not purport to beappraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities have been traded or may be traded at any timein the future. Accordingly, the estimates used in, and the ranges of valuations
resulting from, any particular analysis described above are inherently subject tosubstantial uncertainty and should not be taken to be Merrill Lynch Japan
Securities’ view of the actual values of the Target Company.
The Tender Offer Price was determined through negotiations between theTender Offeror and the Target Company (or the special committee), rather thanby any financial advisor, and was approved by the board of directors of theTarget Company.

The determination to express its opinion to support theTender Offer was made solely by the board of directors of the Target Company.
As described above, the Share Valuation Report (Merrill Lynch Japan
Securities) was only one of many factors considered by the board of directorsof the Target Company in its evaluation of the Transactions and should not beviewed as determinative of the views of the board of directors or the
management of the Target Company with respect to the Transactions or theTender Offer Price.
Merrill Lynch Japan Securities has not made or been provided with any
independent evaluation or appraisal of the assets or liabilities (contingent orotherwise) of the Target Company, nor has it made any physical inspection of
the properties or assets of the Target Company.

Merrill Lynch Japan Securities

has not evaluated the solvency or fair value of the Target Company under any
applicable laws or regulations relating to bankruptcy, insolvency or similar
matters.

Merrill Lynch Japan Securities has assumed, at the direction of theTarget Company, that the Tender Offer will be consummated in accordance with
its terms currently contemplated, without waiver, modification or amendment
60

of any material term, condition or agreement and that, in the course of obtaining
the necessary governmental, regulatory and other approvals, consents, releases
and waivers for the Transactions, no delay, limitation, restriction or condition,
including any divestiture requirements or amendments thereto, will be imposedthat would have an adverse effect on the Tender Offeror or the Target Company
or the contemplated benefits of the Transactions.
Merrill Lynch Japan Securities has acted as financial advisor to the Target
Company in connection with the Transactions and will receive a fee for its
services, all of which is contingent upon completion of the Tender Offer.

Inaddition, the Target Company has agreed to reimburse expenses incurred inconnection with, and indemnify Merrill Lynch Japan Securities against certain
liabilities arising out of the engagement.
Merrill Lynch Japan Securities and its affiliates comprise a full service
securities firm and commercial bank engaged in securities, commodities andderivatives trading, foreign exchange and other brokerage activities, andprincipal investing as well as providing investment, corporate and privatebanking, asset and investment management, financing and financial advisory
services and other commercial services and products to a wide range ofcompanies, governments and individuals.

In the ordinary course of its

businesses, Merrill Lynch Japan Securities and its affiliates may invest on aprincipal basis or on behalf of customers or manage funds that invest, make orhold long or short positions, finance positions or trade or otherwise effecttransactions in equity, debt or other securities or financial instruments(including derivatives, bank loans or other obligations) of the Tender Offeror,
the Target Company and certain of their respective affiliates.
Merrill Lynch Japan Securities and its affiliates in the past have provided andmay be currently providing or may provide in the future, investment banking,commercial banking and other financial services to the Target Company and its
affiliates and have received or in the future may receive compensation for therendering of such services.

In addition, Merrill Lynch Japan Securities and its

affiliates in the past have provided and may be currently providing or may
provide in the future, investment banking, commercial banking and otherfinancial services to the Tender Offeror and its affiliates and have received orin the future may receive compensation for the rendering of these services.
Merrill Lynch Japan Securities does not provide any legal, accounting or taxrelated advice.
61

(Note 2)

This refers to EBITDA after the adjustments of revenue or expenses
temporarily generated.

g. Building of an Independent Evaluation Framework
As stated in “1. Purpose of Tender Offer,” “(2) Background, Purpose and Determination Process
for the Tender Offer, and Management Policy after the Tender Offer,” “b. Process and Reasonof the Target Company’s Determination,” above, the Target Company has built an internalframework for evaluating and negotiating and making determinations regarding theTransactions from a standpoint independent of the Tender Offeror.

Specifically, immediately

after the Target Company received an initial inquiry from the Tender Offeror on July 30, 2019,about commencing discussions to consider making the Target Company a wholly-owned
subsidiary of the Tender Offeror in light of avoiding any possible impact of structural conflictof interest issues, the Target Company has refrained, and continues to refrain, from involving
not only the Target Company’s officers and employees who concurrently serve as officers or
employees of the Other Tender Offeror Group Companies, but also each of the Target
Company’s officers and employees who were officers or employees of the Other Tender Offeror
Companies in the past, in the negotiation process regarding the terms and conditions of theTransactions, including the Tender Offer Price, between the Target Company and the Tender
Offeror or in the preparation process for the Consolidated Financial Forecast on which thevaluation of the Target Company Common Stock have been based.

The special committee has

approved that there is no concern from the standpoint of independence with respect to theinternal framework for evaluating the Transactions built within the Target Company (including
the scope of the Target Company’s officers and employees involved in the evaluation
negotiation, and decision of the Transactions, and their duties), including the exclusion of theTarget Company’s officers and employees as stated above.
Mr. Hiroaki Ueno, one of the Target Company’s directors, belonged to Mitsubishi Pharma until
the Target Company was established by a merger between Tanabe Pharma and Mitsubishi
Pharma in 2007.

Mr. Hiroaki Ueno joined the Target Company as a result of the establishmentof the Target Company by the merger, and the Target Company determined that Mr. Ueno has
little conflict of interest in relation to the Tender Offeror because a significant time has passed
since Mr. Hiroaki Ueno joined the Target Company.

In addition, considering the fact that Mr.

Hiroaki Ueno has comprehensive knowledge of technical aspects related to pharmaceuticals,
biotechnology and chemistry and his knowledge and expertise are required for the deliberationof the Transactions, Mr. Hiroaki Ueno participated in the deliberation of the Transactions onlywith respect to the matters of which structural conflict of interest issues would not likely affectthe interests of general shareholders, such as participation in evaluation of the expected
62synergies to be realized through the Transactions.
h. Unanimous Approval of All Non-interested Directors and the No Dissenting Opinion of All
Non-interested Statutory Auditors at the Target Company
As stated in “1. Purpose of Tender Offer,” “(2) Background, Purpose and Determination Process
for the Tender Offer, and Management Policy after the Tender Offer,” “b. Process and Reasonof the Target Company’s Determination,” above, the board of directors of the Target Company
carefully discussed and evaluated whether the Transactions (including the Tender Offer) would
contribute to increasing the corporate value of the Target Company and whether the transaction
terms and conditions of the Transactions (including the Tender Offer Price) are reasonable,
based on the legal advice received from Mori Hamada & Matsumoto, advice from a financial
point of view and the Share Valuation Report (Merrill Lynch Japan Securities) received from
Merrill Lynch Japan Securities, as well as the Share Valuation Report (KPMG) and the Fairness
Opinion (KPMG) received through the special committee, giving the highest degree of respect
to the contents of determinations by the special committee presented in the Report.
As a result, as stated in “1. Purpose of Tender Offer,” “(2) Background, Purpose andDetermination Process for the Tender Offer, and Management Policy after the Tender Offer,”“b. Process and Reason of the Target Company’s Determination,” above, the Target Company
determined that (i) the Transactions (including the Tender Offer) would contribute to increasing
the corporate value of the Target Company and (ii) the transaction terms and conditions of theTransactions (including the Tender Offer Price) is reasonable, securing interests that should beenjoyed by the Target Company’s general shareholders, and the Tender Offer would provide
the Target Company’s general shareholders with a reasonable opportunity to sell their the Target
Company Common Stock at a price inclusive of an appropriate premium.

Therefore, theTarget Company resolved at its board of directors meeting held today, by unanimous approvalof the directors who participated in the deliberation and resolution to express an opinion in
support of the Tender Offer and to recommend that the shareholders of the Target Company
tender the Target Company Common Stock in the Tender Offer.
Of the eight directors of the Target Company, Mr. Masayuki Mitsuka concurrently serves as adirector of The KAITEKI Institute, Inc., a wholly-owned subsidiary of the Tender Offeror; Mr.
Takeshi Matsumoto concurrently serves as a managing executive officer of the Tender Offeror
and a director of Life Science Institute, Inc.; Mr. Eizo Tabaru has served as an executive officer
at major business entities within the Tender Offeror Group in the past; and Mr. Hiroaki Ueno
was once an employee at major business entities within the Tender Offeror Group. Thus, fromthe standpoint of avoiding to the extent possible any possible impact of structural conflict ofinterest issues in the Transactions, the board of directors meeting held today, was two-tiered:63

first, (i) the four directors other than Mr. Masayuki Mitsuka, Mr. Eizo Tabaru, Mr. Takeshi
Matsumoto, and Mr. Hiroaki Ueno participated in deliberation and passed a resolution as statedabove by unanimous approval ; and further, in light of ensuring the quorum for the board of
directors meeting of the Target Company was met, (ii) five directors (those four directors
participating in (i) above and Mr. Hiroaki Ueno) participated in the deliberation and once again
passed a resolution as stated above by unanimous approval.
All of the statutory auditors present at the board of directors (four statutory auditors (of whomthree are outside statutory auditors) out of five statutory auditors) expressed the opinion thatthey had no objections with respect to the resolution.
Of the directors of the Target Company, three directors (Mr. Masayuki Mitsuka, Mr. Eizo Tabaru,
and Mr. Takeshi Matsumoto) did not participate in the deliberation or resolution of the board of
directors meeting of the Target Company for the Transactions, including the aforementioned
board of directors meeting held today,, in light of avoiding any possible impact of structural
conflict of interest issues in the Transactions, and they did not participate in the deliberation of
the Transactions or the discussion or negotiation of the Transactions with the Tender Offeror on
behalf of the Target Company.
On the other hand, as stated in “g. Building of an Independent Evaluation Framework” above,
Mr. Hiroaki Ueno belonged to Mitsubishi Pharma until 2007 and joined the Target Company inthe same year.

Given that a significant time has passed since Mr. Hiroaki Ueno joined theTarget Company, the Target Company determined that this causes little conflict of interest in
relation to the Tender Offeror.

In addition, considering the fact that Mr. Hiroaki Ueno has

comprehensive knowledge of technical aspects related to pharmaceuticals, biotechnology, andchemistry and his knowledge and expertise are required for the deliberation of the Transactions,
Mr. Hiroaki Ueno participated in the deliberation and resolution in the second stage of the boardof directors meeting held today, in light of ensuring the quorum for the board of directors
meeting of the Target Company was met, and participated in the deliberation of the Transactions
only with respect to the matters of which structural conflict of interest issues would not likely
affect the interests of general shareholders, such as participation in evaluation of the expectedsynergies to be realized through the Transactions.
Mr. Koji Kudo, a statutory auditor of the Target Company who is originally from major business
entities within the Tender Offeror Group, did not participate in any of the deliberations at theboard of directors meeting and refrained from expressing his opinion regarding the resolutionof the board of directors.
i. Nonexistence of a Transaction Protection Clause
In order to secure an opportunity for persons other than the Tender Offeror to make competing64

offers, etc., and thereby contribute to ensuring the fairness of the Tender Offer Price, the Tender
Offeror and the Target Company have not entered into any agreement that restricts the Target
Company from contacting persons making competing offers, including any agreement
providing a transaction protection clause that may forbid the Target Company from contacting
persons making competing offers.
j. Measures to Secure an Appropriate Opportunity for all Shareholders of the Target Company
to decide whether to tender their shares in the Tender Offer
As mentioned in “1. Purpose of Tender Offer,” “(4) Policy on Reorganization etc. after theTender Offer (Matters Relating to the So-Called Two-Stage Takeover”

above, the Tender

Offeror secures an opportunity for the shareholders of the Target Company to appropriately
decide whether to tender their shares in the Tender Offer and thereby care to ensure that theTender Offer is not coercive, because (a) the Tender Offeror takes an approach to ensure an
opportunity for all shareholders of the Target Company to exercise the right under theCompanies Act to require the Target Company to purchase shares constituting less than a wholeunit or the right to file a motion with the court to determine the fair price of the Target Company
Shares, i.e., promptly after the completion of the settlement of the Tender Offer and dependingon the amount of the Target Company Common Stock acquired by the Tender Offeror atcompletion of the Tender Offer, the Tender Offeror plans to exercise the Demand for Sale for
Shares with respect to all of the Target Company Common Stock (excluding the Target
Company Common Stock owned by the Tender Offeror and the treasury shares owned by theTarget Company), or alternatively, the Tender Offeror intends to request that the Target
Company hold an extraordinary meeting of shareholders at which the Target Company will
present proposals to approve the Share Consolidation and, subject to the Share Consolidation
becoming effective, to abolish the article in the Articles of Incorporation concerning the numberof shares per share unit; and (b) the Tender offeror has indicated that, in the event of exercising
the Demand for Sale of Shares or conducting the Share Consolidation, the amount of cash to be
paid to the respective shareholders is planned to be equal to an amount calculated bymultiplying the Tender Offer Price by the number of the Target Company Common Stock eachshareholder owns.
In addition, the Tender Offeror has set the tender offer period of the Tender Offer as 31 businessdays, while the statutory minimum period stipulated in the Act is 20 business days.

The

Tender Offeror has set a relatively long tender offer period and secured an appropriate
opportunity for the shareholders of the Target Company to decide whether to tender their sharesin the Tender Offer.

65

(5) Number of Shares, Etc., to be Purchased in the Tender Offer
Number of sharesintended to bepurchased
244,666,211 (shares)(Note 1)Minimum number of shares

Maximum number of shares intended

intended to be purchased

to be purchased

57,670,731 (shares)– (shares)

If the total number of the Tendered Shares, Etc., is less than the minimum numberof the shares to be purchased (57,670,731 shares), the Tender Offeror will notpurchase any of Tendered Shares, Etc.

If the total number of Tendered Share,

Etc., is equal to or more than such minimum number (57,670,731 shares), theTender Offeror will purchase all of the Tendered Shares, Etc.
(Note 2)Since the maximum number of shares to be purchased through the Tender Offer
is not established, the number of shares intended to be purchased that is stated in
the relevant column is the maximum number of the Target Company Shares to beacquired by the Tender Offeror through the Tender Offer (244,666,211 shares).
Such maximum number of shares is obtained by (a) deducting (i) the number of
the treasury shares (excluding the 200,279 shares that are held by the BIP Trust as
of September 30, 2019) held by the Target Company as of September 30, 2019
(431,636 shares), as set forth in the Target Company’ s FY 2019 Second Quarterly
Earnings Release and (ii) the number of shares held by The Tender Offeror(316,320,069 shares) from (b) the total number of issued shares of the Target
Company as of September 30, 2019 (561,417,916 shares), as set forth in the Target
Company’s FY 2019 Second Quarterly Earnings Release.

(Note 3)

Shares constituting less than a whole unit will also be subject to purchase throughthe Tender Offer. The Target Company may purchase its own shares in accordancewith legal procedures during the Tender Offer Period from any shareholder who
exercises the right under the Companies Act to require the Target Company topurchase shares constituting less than a whole unit.

(Note 4)

There is no plan to purchase the treasury shares held by the Target Company
through the Tender Offer.

(6) Change in Ownership Percentage of Shares , Etc. after the Tender Offer
Number of Voting Rights
Represented by Shares, Etc.

3,163,200 units

Owned by Tender Offeror prior to
66(Ownership Percentage of Shares, Etc. prior to theTender Offer: 56.39%)

the Tender Offer
Number of Voting Rights
Represented by Shares, Etc.
Owned by Specially Related

0 unit(Ownership Percentage of Shares, Etc. prior to theTender Offer: 0%)

Parties prior to the Tender Offer
Number of Voting Rights
Represented by Shares, Etc.
Owned by Tender Offeror after

5,609,862 units(Ownership Percentage of Shares, Etc. after theTender Offer: 100 %)the Tender Offer
Number of Voting Rights
Represented by Shares, Etc.
Owned by Specially Related

0 unit(Ownership Percentage of Shares, Etc. after theTender Offer: 0 %)Parties after the Tender Offer
Total Number of Voting Rights of
All Shareholders of the Target

5,608,720 units

Company(Note 1)The “Number of Voting Rights Represented by Shares, Etc. Owned by Specially
Related Parties prior to the Tender Offer” is the total number of voting rights
represented by shares, etc. held by Specially Related Parties (excluding those whowill be excluded from the Specially Related Parties in calculating the shareholding
ratio prescribed in each Item of Article 27-2, Paragraph 1 of the Act pursuant to
Article 3, Paragraph 2, Item 1 of the Cabinet Ordinance Concerning the Disclosureof Tender Offers for Shares, Etc., by Persons Other Than Issuers (Ministry of
Finance Ordinance No. 38 of 1990, as amended; the “TOB Order”)).

(Note 2)The “Total Number of Voting Rights of All Shareholders of the Target Company”
represents the total number of voting rights of all shareholders of the Target
Company as of September 30, 2019, as stated in the Target Company’s FY2019
Second Quarterly Report submitted by the Target Company on November 6, 2019
(described on the assumption that 1 unit is 100 shares).

However, since theshares constituting less than a whole unit shall also be subject to the purchasethrough the Tender Offer, in the calculation of the “Ownership Percentage ofShares, Etc. prior to the Tender Offer” and “Ownership Percentage of Shares, Etc.
after the Tender Offer”, the number of the voting rights (5,609,862 voting rights)
represented by the number of shares (560,986,280 shares) that is obtained by67

deducting (a) the number of treasury shares (excluding the Target Company
Common Stock possessed by BIP Trust as of September 30, 2019 (200,279
shares)) (431,636 shares) held by the Target Company as of September 30, 2019,as set forth in the Target Company’s FY 2019 Second Quarterly Earnings Release,from (b) the total number of issued shares of the Target Company as of September
30, 2019, as set forth in the Target Company’s FY 2019 Second Quarterly
Earnings Release (561,417,916 shares), is used as the denominator.

(Note 3)The “Ownership Percentage of Shares, Etc. prior to the Tender Offer” and the“Ownership Percentage of Shares, Etc. after the Tender Offer” are rounded to thesecond decimal places.

(7) Aggregate Tender Offer Price
491,779,084,110 yen(Note 1)The “Aggregate Tender Offer Price” above is calculated by multiplying thenumber of shares intended to be purchased (244,666,211 shares) by the Tender
Offer Price per share (2,010 yen).

(Note 2)the Tender Offeror plans to procure funds for all the aggregate tender offer priceby borrowing from MUFG Bank Ltd.

(8) Method of Settlementa.

Name and Address of the Head Office of the Financial Instrument Firm in Charge of
Settlement
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
5-2, Marunouchi 2-chome, Chiyoda-ku, Tokyokabu.com Securities Co., Ltd. (the Sub-Agent) (Note)
3-2, Otemachi 1-chome, Chiyoda-ku, Tokyo(Note) The Sub-Agent plans to change its trade name to “au Kabucom Securities Co.,
Ltd.” and such change may be implemented during the Tender Offer Period.

b.

Settlement Commencement Date
January 15, 2020 (Wednesday)c.

Method of Settlement68

A notice of purchase will be mailed to the address of each Tendering Shareholder (or the
standing proxy in the case of Foreign Shareholders) promptly after the end of the Tender Offer
Period.
Payment of the purchase, etc., price will be made in cash.

The Tender Offer Agent will, in

accordance with the instructions of the Tendering Shareholders (or the standing proxy in thecase of Foreign Shareholders), remit the purchase price promptly after the commencement dateof settlement to the account designated by the Tendering Shareholder (or the standing proxy inthe case of Foreign Shareholders).
d.

Method of Returning Shares
If all of the Tendered Shares, Etc. are not purchased in accordance with the terms described in“a. Conditions set forth in each Item of Article 27-13, Paragraph 4 of the Act” or “b. Conditionsof Withdrawal, etc. of Tender Offer, Details thereof and Method of Disclosure of Withdrawal,
etc.” in “(9) Other Conditions and Methods of Purchase, Etc.,” below, the shares which have tobe returned will be returned to the Tendering Shareholders by restoring the record of such sharesto the original record as of immediately before the application promptly in two business days
after the last day of the Tender Offer Period (in the case of withdrawal of the Tender Offer, thedate that the Tender Offer was withdrawn.).

(9) Other Conditions and Methods of Purchase, Etc.
a.

Conditions set forth in each Item of Article 27-13, Paragraph 4 of the Act
If the total number of the Tendered Shares, Etc., is less than the minimum number of the shares
to be purchased (57,670,731 shares), the Tender Offeror will not purchase any of Tendered
Shares, Etc.

If the total number of Tendered Share, Etc., is equal to or more than suchminimum number (57,670,731 shares), the Tender Offeror will purchase all of the Tendered
Shares, Etc.
b.

Conditions of Withdrawal, etc. of Tender Offer, Details thereof and Method ofDisclosure of Withdrawal, etc.
Upon the occurrence of any event listed in Article 14, Paragraph 1, Items 1.1 through 1.9 andItems 1.12 through 1.18, Items 3.1 through 3.8 and 3.10, as well as Article 14, Paragraph 2,
Items 3 through 6 of the Enforcement Order, the Tender Offer may be withdrawn.
“Matters equivalent to the matters listed in Items 3.1 through 3.9” in Article 14, Paragraph 1,
Item 3.10 of the Enforcement Order in the Tender Offer means (i) the case where it is foundthat there is a false statement regarding, or an omission of, a material matter to be stated, in the69

statutory disclosure documents which the Target Company submitted in the past, and where theTender Offeror was not aware of the false statement or the omission and, despite using due care,
the Tender Offeror was unable to be aware of the false statement or the omission and (ii) thecase where the matters listed in Items 3.1 through 3.7 occur to the important subsidiaries of theTarget Company.
Should the Tender Offeror intend to withdraw the Tender Offer, they will give notice throughelectronic disclosure and give notice of such disclosure in the Nihon Keizai Shimbun; provided,
however, that if it is deemed difficult to give the notice within the Tender Offer Period, theTender Offeror will make an official announcement pursuant to Article 20 of the TOB Orderand forthwith give public notice.
c.

Conditions of Reduction of Purchase Price, Details thereof and Method of Disclosure of
Reduction
Pursuant to Article 27-6, Paragraph 1, Item 1 of the Act, if the Target Company takes any action
enumerated in Article 13, Paragraph 1 of the Enforcement Order during the Tender Offer Period,
the Tender Offeror may reduce the Tender Offer Price pursuant to standards set forth in Article
19, Paragraph 1 of the TOB Order. Should the Tender Offeror intend to reduce the Tender
Offer Price, they will give notice through electronic disclosure and give notice of suchdisclosure in the Nihon Keizai Shimbun; provided, however, that if it is deemed difficult to givethe notice within the Tender Offer Period, the Tender Offeror will make an official
announcement pursuant to Article 20 of the TOB Order and forthwith give public notice.

If

the Tender Offer Price is reduced, the Tender Offeror will purchase any Tendered Shares, Etc.
tendered prior to the announcement of such reduction at the amended Tender Offer Price.
d.

Matters Concerning Tendering Shareholders’ Right of Cancellation of Application
Tendering Shareholders may, at any time during the Tender Offer Period, cancel an application
for the Tender Offer.

In the event of such cancellation, the Tendering Shareholders mustdeliver or mail a written request to cancel the application for the Tender Offer (the “Written
Request for Cancellation”), with the Receipt of Application for the Tender Offer enclosed, tothe head office or any branch offices in Japan of the Tender Offer Agent who has accepted theapplication by 4:00 p.m. on the last day of the Tender Offer Period.

Cancellation of application

shall become effective when the Written Request for Cancellation is delivered to or received by
the Tender Offer Agent defined below.

If by mail, the cancellation of the acceptance of theTender Offer will not be effective unless the Written Request for Cancellation is received by
the Tender Offer Agent by 4:00 p.m. on the last day of the Tender Offer Period. In the eventof the cancellation of application tendered through kabu.com Securities Co., Ltd., as the SubAgent, Tendering Shareholders must follow the procedures for the cancellation of application70

by 4:00 p.m. on the last day of the Tender Offer Period through the website after logging in in
the way described in “Share Tender Offer (TOB)” (http://kabu.com/item/tob/) at its website(http://kabu.com/).
Entities authorized to receive the Written Request for Cancellation:
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
5-2, Marunouchi 2-chome, Chiyoda-ku, Tokyo(and other branch offices of Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. in Japan)
No compensation for damages or penalty will be demanded of any Tendering Shareholder by
the Tender Offeror associated with the cancellation of the application by the Tendering
Shareholder. The cost of returning the Tendered Shares, Etc. will be borne by the Tender
Offeror.

If the Tendering Shareholders give notice of the cancellation, the Tendered Shares,

Etc. will be returned immediately following the completion of the cancellation procedures by
the method indicated in “(8) Method of Settlement”, “d. Method of Returning Shares” above.
e.

Method of Disclosure if the Terms and Conditions of Tender Offer are Changed
Except where such change is prohibited pursuant to Paragraph 1 of Article 27-6 of the Act andParagraph 2 of Article 13 of the Enforcement Order, the Tender Offeror may change the terms
and conditions of the Tender Offer during the Tender Offer Period.
Should any terms and conditions of the Tender Offer be changed, the Tender Offeror will give
public notice thereof through electronic disclosure and give notice of such disclosure in the
Nihon Keizai Shimbun; provided, however, that if it is deemed difficult to make the notice within
the Tender Offer Period, the Tender Offeror will make an official announcement in accordancewith Article 20 of the TOB Order, and forthwith give public notice.

If the terms of the Tender

Offer are changed, the purchase of the Tendered Shares, Etc. tendered prior to such public notice
will also be made in accordance with the terms and conditions as changed.
f.

Method of Disclosure if Amendment to Registration Statement is Submitted
If the Tender Offeror submits an amendment to the Tender Offer Registration Statement to the
Director-General of the Kanto Local Finance Bureau (except in circumstances provided forunder the proviso in Article 27-8, Paragraph 11 of the Act), the Tender Offeror will promptly
make an official announcement of the contents of such amended statement to the extent relevantto the contents of the public notice of the Tender Offer, pursuant to Article 20 of the TOB Order.
The Tender Offeror will also promptly amend the tender offer explanatory statement andprovide an amended tender offer explanatory statement to the Tendering Shareholders who havereceived the original tender offer explanatory statement.
71

If the amendments are limited tosome extent, however, the Tender Offeror will amend the tender offer explanatory statement by
preparing and delivering a document stating the reason for the amendments, the mattersamended and the details thereof to the Tendering Shareholders.
g.

Method of Disclosure of Results of Tender Offer
The Tender Offeror will announce the results of the Tender Offer in accordance with methods
stipulated in Article 9-4 of the Enforcement Order and Article 30-2 of the TOB Order on the
day following the last day of the Tender Offer Period.

(10) Date of Public Notice of Commencement of the Tender Offer
November 19, 2019 (Tuesday)(11) Tender Offer Agent
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
5-2, Marunouchi 2-chome, Chiyoda-ku, Tokyokabu.com Securities Co., Ltd. (the Sub-Agent)
3-2, Otemachi 1-chome, Chiyoda-ku, Tokyo

3. Policy, Etc. after the Tender Offer and Future Outlook(1) Policy, Etc. after the Tender Offer
As to the policy, etc. after the Tender Offer, please refer to “(2) Background, Purpose andDetermination Process for the Tender Offer, and Management Policy after the Tender Offer,” “(4)Policy on Reorganization etc. after the Tender Offer (Matters Relating to the So-Called Two-Stage
Takeover)” and “(5) Possibility of and Reasons for Delisting” of “1. Purpose of Tender Offer” above.
(2) Outlook
As to the the effect of the Tender Offer to the Tender Offeror, the Tender Offeror will make anannouncement if any event which needs to be announced occurs in the future.

4. Others(1) Agreements between Tender Offeror and Target Company or its Directors and Officers,
and Details Thereofa.

Agreements between Tender Offeror and Target Company and Details Thereof
According to the Target Company’s Press Release, at a board of directors’ meeting of the Target
Company held today, it has been resolved that the Target Company expresses its opinion in
support of the Tender Offer and recommend that the shareholders of the Target Company tender72

their shares in the Tender Offer.

For details of the Target Company’s decision making process,please refer to the Target Company’s Press Release and “2. Description of the Tender Offer,”“ (4) Basis of Calculation of Tender Offer Price,” “ b. Background of Calculation,” “Measures
to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of theTender Offer Price and Measures to Avoid Conflicts of Interest,” “h. Unanimous Approval by
all of the Non-Interested Directors and No Dissenting Opinion by all of the Non-Interested
Statutory Auditors at the Target Company” above.

b.

Background, Purpose and Determination Process for the Tender Offer, andManagement Policy after the Tender Offer
Please refer to “1. Purpose of Tender Offer,” “(2) Background, Purpose and Determination
Process for the Tender Offer, and Management Policy after the Tender Offer” above.

c.

Measures to Ensure the Fairness of the Tender Offer such as Measures to Ensure theFairness of the Tender Offer Price and to Avoid a Conflict of Interest
Please refer to “2. Description of the Tender Offer,” “(4) Basis of Calculation of Tender Offer
Price,” “(B) Background of Calculation,” “Measures to Ensure the Fairness of the Tender Offer,such as Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid a
Conflict of Interest,” above.

(2) Other Relevant Information Investors May Need in Evaluating the Tender Offera.

Revision to the Dividend Forecast for the FY Ending in March 2020
According to the Target Company, the Target Company decided at its board of directors meeting
held today to revise its dividend forecast for FY 2019 announced on October 30, 2019 and not
to declare a year-end dividend for FY 2019, on the condition that the Tender Offer is completed.
For details thereof, please refer to “Notice of Revision of Dividend Forecast (No Declaration)
For FY 2019” announced by the Target Company as of today.
(End of the document)73