May 27 2021
To Whom It May Concern
Company nameEPS Holdings Inc.

(Code No.4282 First Section of the Tokyo Stock Exchange)
Representative

Hao YanContact
Vice President and Corporate Officer
Kazuki SekitaniCall

03-5684-7873

Notice Regarding MBO and Recommendation Application
EPS Holdings Co., Ltd. (the “Company”) hereby announces that it resolved, at its Board of directors’
meeting held on May 27, 2021, that it will express an opinion in support of a tender offer for its commonshares (the “Company Shares”) to be conducted by Shinyou K.K. (the “Tender Offeror”) as part of a
“Management Buyout (MBO)” (Note) (the “Tender Offer”), and recommend that the Company’s
shareholders apply for the Tender Offer, as detailed below.
The resolution of the Board of directors was made on the assumption that the Company Shares arescheduled to be delisted as a result of the Tender Offer and a series of subsequent procedures.
Note: "Management Buyout (MBO)" generally means a transaction in which the management of theacquired company invests all or part of the acquisition funds to acquire shares of the acquired company
on the premise of continuing the business of the acquired company.
1 Outline of the Tender Offeror
(1)

Name

Shinyou K.K.

(2)

Address

1-8, Tsukudo-cho, Shinjuku-ku, Tokyo(3)

Name and title ofrepresentative(4)

Description ofbusiness

Hao Yan Representative Director
1. Acquisition, holding and sale of securities
2. Any and all businesses related or incidental to the businesses referred
to in the foregoing(5)

Capital stock

JPY100,000(6)Date ofMay 10, 2021

1

incorporation
(7)

Major
shareholders andY&G Limited

100％

shareholding ratio(8)

Relationship between the Tender Offeror and the Company
Not applicable. Mr. Yan Hao, Representative Director of the Tender
Shareholding

Offeror, owns 330,009 shares of the Company (Note 1) (ownership ratio:
0.75%), and Mr. Shuzo Orihashi, Corporate Auditor of the Tender
Offeror, owns 8,745 shares of the Company (ownership ratio: 0.02%).
Mr. Hao Yan, a representative director of the Company, concurrently

Personnel

serves as a representative director of the Tender Offeror, and Mr. Shuzo
Orihashi, a director of the Company, concurrently serves as a corporate
auditor of the Tender Offeror (Note 2).

Trading
Applicability as arelated party

Not applicable
The Tender Offeror is a related party of the Company because all of thevoting rights are owned by Y&G Limited, in which Mr. Hao Yan, therepresentative director of the Company, owns all of the shares(Note 1) The “ownership ratio” refers to the ratio to the number of shares (44,287,656 shares) obtained bysubtracting the number of treasury shares owned by the Company as of March 31, 2021 as stated in thesecond quarterly report for the 31st fiscal year submitted by the Company on May 14, 2021 (the“Company’s Second Quarterly Report”) (2,023,733 shares) from the total number of issued shares as ofMarch 31, 2021 as stated in the Company’s Second Quarterly Report (46,311,389 shares) (rounded to thenearest hundredth). The same applies hereinafter.
(Note 2) Mr. Hao Yan and Mr. Shuzo Orihashi are members of the Company's Officers' Shareholding
Association and have interests in the Company's shares held by the Shareholding Association. However,the number of Company shares held by each of them as stated in " Shareholding " above does not include
the number of the Company shares the Shareholding Association (the same shall apply hereinafter).
2 Tender Offer Price
JPY 1,800 per share of common stock
3 Details and Grounds and Reasons for, the Opinion Regarding the Tender Offer(1) Details of the Opinion
The company resolved, at its board of directors’ meeting held on May 27 2021, that it will express an
opinion in support of the Tender Offer and recommend that its shareholders apply for the Tender Offer,2

based on the ground and reasons as described in “(2) Grounds and Reasons for opinion” below.
The above resolution was passed using a method described in “(6) Measures to Ensure Fairness of theTender Offer, Such as Measures to Ensure Fairness of the Tender Offer Price as Well as Measures to Avoid
Conflicts of Interest, ⅳ. Approval of All Directors of the Company Without Conflicts of Interest and No
Objection from any Auditor; and.”(2) Grounds and Reasons for opinion
The following descriptions concerning the Tender Offeror are based on the explanations received from theTender Offeror.
(i) Overview of the Tender Offer
The Tender Offeror is a stock company (kabushiki kaisha) established on May 10, 2021. All of the Tender
Offeror’s shares are owned by Y&G Limited (“Y&G,” number of shares held: 9,744,000 shares,
ownership ratio: 22.00%),which is the largest shareholder of the Company and is a company which has
objectives of consulting and maintaining control of the Company and is wholly owned by, Mr. Hao Yan(“Mr. Yan,”), who is the representative director of the Company. The main objective of the Tender Offeror
is to, by way of acquiring and holding all of the outstanding common shares of the Company listed on theFirst Section of Tokyo Stock Exchange, Inc. (the “Tokyo Stock Exchange”), implement a series oftransactions (the “Transaction”) that assume that the Company Shares will be delisted for the purpose of
making the Company its wholly-owned subsidiary, and to control and manage the business of theCompany thereafter. Currently, the Tender Offeror does not own any of the Company Shares.
The Tender Offeror has decided to implement the Tender Offer for the purpose of acquiring all of theCompany Shares (excluding, however, Non-tendered Y&G Shares (as defined below), Officers andEmployees Non-tendered Shares (as defined below) and the Company Shares owned by EPS EKISHIN
Co., Ltd. (“EPS EKISHIN”) which is a consolidated subsidiary of the Company, that are part of theCompany Shares owned by Y&G, and the Company Shares owned by the Company; the same applies
hereinafter). The Transaction constitutes a management buy-out (MBO)), and Mr. Yan is expected tocontinue managing the Company after the Transaction. Y&G agrees in the Shareholders Agreement (asdefined below) to tender the Y&G Tendered Shares (as defined below) in order to procure funds for
repayment of its borrowings.
The Transaction consists of:i.

Tender Offer;ii.

Contribution to the Tender Offeror from SUZUKEN CO., LTD. (“Suzuken”) (note 4) and Shinyou
SS II L.P. (“MBKP Fund”) which is a fund to which services are provided by MBK Partners and3persons related thereto (collectively “MBKP”) (note 5), made subject to conclusion of the Tender
Offer, and made after the end of the Tender Offer Period of the Tender offer and prior to thecommencement date of the settlement of the Tender Offer (contribution to the Tender Offeror from
Suzuken is hereinafter referred to as “Suzuken’s Contribution,” and contribution to the Tender Offerfrom MBKP Fund is hereinafter referred to as “MBKP’s Contribution.” Suzuken’s Contribution
and MBKP’s Contribution are made by way of an allocation of new shares to a third party with thepaid-in amount per share in Suzuken’s Contribution being JPY1,000 and the paid-in amount per
share in MBKP’s Contribution being JPY1,000, and amounting to JPY8,736,300,000 in total(consisting of Suzuken’s Contribution of JPY4,736,300,000 in total and MBKP’s Contribution of
JPY4,000,000,000 in total);iii.

Share consolidation executed by the Company for the purpose of making the Tender Offeror and
Y&G the sole shareholders of the Company (“Share Consolidation”), subject to execution andcompletion of the settlement of the Tender Offer, and to execution of Suzuken’s Contribution and
MBKP’s Contribution;iv.

Contribution to the Tender Offeror from Mr. Yan, Mr. Junbo Song and Mr. Shinro Tashiro, Mr.
Tatsuma Nagaoka, Mr. Shinji Hirosaki and Mr. Huanran Yu who are officers or employees of theCompany (collectively “Contributing Officers and Employees” (note 3)) (such contribution ishereinafter referred to as “Contribution by Officers and Employees” and shall be made by way ofan allocation of new shares to a third party with the paid-in amount per share being JPY1,000,
amounting to JPY2,000,000,000 in total), subject to completion of a series of procedures to makethe Tender Offeror and Y&G the sole shareholders of the Company as stated under “(4) Post-Tender
Offer Reorganization Policy (Matters Regarding “Two-Step Acquisition Items”)” below (“SqueezeOut”);

v. Share exchange in which the Tender Offeror is a wholly owning parent and the Company is a wholly
owned subsidiary (“Share Exchange”), subject to completion of the Contribution by Officers andEmployees;vi.

Share transfer in which a newly established company is a wholly owning parent and the Tender
Offeror is a wholly owned subsidiary (“Share Transfer”), subject to the Share Exchange being
effective; andvii.

Absorption-type merger in which the Tender Offeror is a surviving company and the Company is adisappearing company (“Absorption-type Merger”), subject to the Share Transfer being effective.
(Note 1) As of the submission date hereof, Suzuken owns 1,504,000 shares of the Company Shares(ownership ratio: 3.40%) making it the fourth largest shareholders of the Company (as of March
31, 2021). As per “(i) Background of the Decision of the Tender Offeror to Implement the Tender
Offer, Purpose and Decision-Making Process” under “(2) Background of the Decision to Implement
the Tender Offer, Purpose and Decision-Making Process, and Post-Tender Offer Management

4Policy” below, it is stated that the Company and Suzuken have established a capital and businessalliance with a view to seek expansion of the business not only in Japan but also in the Asia area,
People’s Republic of China (“China”) in particular, making use of their management resources andknowhow, and contribute to medical and healthcare industries. Since it is important for theCompany from perspective of enhancement of the enterprise value, to maintain a good relationshipwith Suzuken and reinforce it beyond the Transaction, it is intended that the capital relationshipbetween the Company and Suzuken will be maintained beyond the Transaction through contribution
from Suzuken to the Tender Offeror. In Suzuken’s Contribution, the Tender Offeror intends toallocate its class A shares (“Class A Shares”) to Suzuken. Although Class A Shares have not been
issued as of the submission date hereof, the Class A Shares will not have any voting right but haveput option which enables Suzuken to request the Tender Offeror to convert Class A Shares into
common shares the Tender Offeror (“Put Option”). Y&G and Suzuken have agreed in the
Shareholders Agreement (as defined below) upon Suzuken’s exercise of the Put Options of all theClass A Shares owned by it on the effective date of the Share Exchange (“Conversion”), subject tocompletion of the Contribution by Officers and Employees and the Share Exchange being effective.
Since acquisition ratio of the Put Options is set so as to make the voting rights ratio after theConversion 20.00%, Suzuken’s voting rights ratio to the Tender Offeror after the Conversion willbe 20.00%.
(Note 2) MBKP is an independent private equity firm established in March 2005 and specializing
in private equity investment in Japan, China and South Korea. It is based in Beijing, Hong Kong,
Seoul, Shanghai and Tokyo, and has obtained support from investors, mainly institutional investors
such as global banks, insurance companies, asset management companies, public pension plans,
corporate pension plans, foundations, fund of funds and government-affiliated investment
institutions and as of the submission date hereof, holds approximately USD 23.5 billion undermanagement, and invest into from large- to medium-sized companies mainly in such areas asretail/consumables, communication/media, financial services, business services, transportation,
general manufacturing. Once investment is made, it actively provides the invested companies withmanagement assistance in order to maximize their enterprise value. It has made 51 investments inthe East Asian countries since its establishment in March 2005. Of the investments, it has made 12
investments into 9 companies in Japan, namely, Yayoi Co., Ltd., USJ LLC. (formerly known as USJ
Co., Ltd.), INVOICE INC, Komeda Co., Ltd., TASAKI & Co., Ltd. (formerly known as Tasaki
Shinju Co., Ltd.), Accordia Golf co., Ltd., KURODA ELECTRIC CO., LTD., Godiva Japan, Inc.
and TSUKUI HOLDIGNS CORPORATION. After the investment, it successfully increased their
net sales and earning power as a result of medium- to long-term approach jointly made withmanagement towards value-up themes of each of the companies. MBKP does not own the Company
Shares as of the submission date hereof. In MBKP’s Contribution, the Tender Offeror intends to5

allocate its class B preferred shares (“Class B Preferred Shares”) to MBKP. Although Class B
Shares have not been issued as of the submission date hereof, the Class B Preferred Shares will nothave any voting right but have put option which enables MBKP to request the Tender Offeror toconvert the Class B Preferred Shares into cash or Tender Offeror’s class C preferred shares whichhave voting rights (it is intended that exercise of a put option in exchange for cash is subject tosuspension of payment, commencement of bankruptcy proceedings and other events, on the part of
the Tender Offeror or the Newly Established Company (as defined below), that have a material
adverse impact on performance of obligations under an investment agreement concerning issuanceof the Class B Preferred Shares). In addition to occurrence of an event which justifies exercise of aput option in exchange for cash, it is intended to set as a condition for exercise of put options in
exchange for class C preferred shares reasonable determination that it is certain that even if a put
option in exchange for cash is exercised, all or some of the cash as the consideration for such
exercise cannot be paid due to a lack of cash available for such purpose or financial resources.
Although MBKP will own 2/3 or more of the voting rights in the Tender Offeror if such put options
in exchange for class C preferred shares are all exercised, the exercise of the put options in exchange
for class C preferred shares are, as stated above, permitted only when there is reasonable
determination that it is certain that the consideration of the exercise of the put options in exchange
for cash cannot be paid. According to MBKP, it does not intend to acquire control over the Tender
Offeror in the Tender Offer. The Tender Offeror, Y&G and MBKP Fund intend to enter into anagreement regarding investment into Class B Preferred Shares from MBKP Fund on the same dateas a loan agreement regarding the Tender Offer Settlement Funds Borrowings (as defined below)
after the end of the Tender Offer Period of the Tender offer and prior to the commencement date of
the settlement of the Tender Offer, under which agreement MBKP will participate in a Company’sboard of directors as an observer and will support the Company with advancement and expansion
to Asia markets.
(Note 3) Since the Contributing Officers and Employees intend to continue their involvement inmanagement of the Company, they will make Contribution by Officers and Employees in order toshare objectives for enhancement of the enterprise value. In Contribution by Officers andEmployees, the Tender Offeror intends to allocate its common shares to the Contributing Officers
and Employees.
In implementing the Tender Offer, the Tender Offeror entered into an agreement with Suzuken regarding
tendering in the Tender Offer (“Suzuken Tender Offer Agreement”) on May 27, 2021. In the Suzuken
Tender Offer Agreement, the parties agreed to tender 1,504,000 shares (ownership ratio: 3.40%), whichconstitute all of the Company Shares held by Suzuken (“Suzuken’s Tendered Shares”), into the Tender
Offer.

6

In implementing the Tender Offer, the Tender Offeror entered into an agreement with each of Mr. Yan,
the representative director of the Company, (number of shares held: 330,009 shares, ownership ratio:
0.75%), Mr. Junbo Song, a corporate officer of the Company, (number of shares held: 551,936 shares,
ownership ratio: 1.25%), and Mr. Shinro Tashiro, a vice chairman and corporate officer of the Company,(number of shares held: 113,367 shares, ownership ratio: 0.26%), Mr. Tatsuma Nagaoka, a president andcorporate officer of the Company, (number of shares held: 109,642 shares, ownership ratio: 0.25%, Mr.
Shinji Hirosaki, an employee of the Company, (number of shares held: 88,828 shares (note 4), ownership
ratio: 0.20%) and Mr. Huanran Yu, an employee of the Company, (number of shares held: 396,000 shares,
ownership ratio: 0.89%), and Yukihiro Sasaki who was a shareholder of EP-SOGO Co., Ltd. which is awholly-owned subsidiary of the Company, and who is the 6th largest shareholder of the Company (as ofMarch 31, 2021)(number of shares held: 1,389,328 shares, ownership ratio: 3.14%) and Mr. Haruo

Nishino who is the 7th largest shareholder of the Company (as of March 31, 2021) (number of shares held:
1,387,828 shares, ownership ratio: 3.13 %) (collectively “Tendering Officers and Employees, Etc.”) on
May 27, 2021 regarding tendering in the Tender Offer (an agreement between the Tender Offeror and eachof the Tendering Officers and Employees is hereinafter referred to as “Officers and Employees, Etc. Tender
Offer Agreement,” and together with the Suzuken Tender Offer Agreement, “Tender Offer Agreement”),
and agreed with the Tendering Officers and Employees, Etc. that 4,340,306 shares (ownership ratio:
9.80%), which constitute all of the Company Shares owned by them (“Tendering Officers and Employees’,
Etc.’s Tendered Shares”) (excluding Company Shares owned by Mr. Yan, Mr. Junbo Song, Mr. Shinro
Tashiro, Mr. Tatsuma Nagaoka and Mr. Shinji Hirosak and granted under the Company’s restricted sharecompensation plan (which refer to 26,632 shares (ownership ratio: 0.06%) consisting of 8,409 shares(ownership ratio: 0.02%) of shares owned by Mr. Yan, 3,026 shares (ownership ratio: 0.01%) of shares
owned by Mr. Junbo Song, 6,727 shares (ownership ratio: 0.02% of shares owned by Mr. Shinro Tashiro,
6,042 shares (ownership ratio: 0.01%) of shares owned by Mr. Tatsuma Nagaoka, 2,428 shares (ownership
ratio: 0.01%) of shares owned by Shinji Hirosaki, and hereinafter referred to as “Officers and Employees’
Non-tendered Shares”)), will be tendered in the Tender Offer, and that voting rights of 26,632 shares of
the Officers and Employees’ Non-tendered Shares owned by Mr. Yan, Mr. Junbo Song, Mr. Shinro Tashiro,
Mr. Tatsuma Nagaoka and Mr. Shinji Hirosaki (ownership ratio: 0.06%) will be exercised in accordancewith instructions of the Tender Offeror. For details of the Tender Agreement, see “i Tender Agreement”
under “4 Items Regarding Critical Agreements Related to the Tender Offer.”
Further, with respect to the Transaction, Y&G and Suzuken entered into a shareholders agreement(“Shareholders Agreement”) on May 27, 2021. The Shareholders Agreement provides for mattersregarding operations of the Tender Offeror and the Company, and provides that 330,000 shares (ownership
ratio: 0.75%) among the Company Shares held by Y&G (“Y&G’s Tendered Shares” and together with
Suzuken’s Tendered Shares and Tendering Officers and Employees, Etc.’s Tendered Shares, “Tendered
Shares”) will be tendered in the Tender Offer, and that 9,414,000 shares (ownership ratio: 21.26%)

7

(“Y&G’s Non-tendered Shares”) will not be tendered in the Tender Offer. Y&G intends to tender some ofits owned shares in the Tender Offer in order to procure funds to repay its borrowings and the number ofshares required to be sold through tendering for procurement of the funds for repayment is set as thenumber of the Y&G’s Tendered Shares. Suzuken has agreed in the Shareholders Agreement upon
implementation of the Suzuken’s Contribution. For details of the Shareholders Agreement, see “ii.
Shareholders Agreement” under “4 Items Regarding Critical Agreements Related to the Tender Offer.”
In the Tender Offer, the Tender Offeror has set 20,022,368 shares (ownership ratio: 45.21%) as theminimum planned purchase quantity (note 5) because it contemplates making the Company its wholly
owned subsidiary. If the aggregate number of share certificates, etc. tendered in the Tender Offer(“Tendered Share Certificates, Etc.”) is less than the minimum planned purchase quantity, the Tender
Offeror will not purchase any of the Tendered Share Certificates, Etc. Meanwhile, the Tender Offeror has
not set any cap on the planned purchase quantity because it aims to make the Company Shares private
through acquisition of all the Company Shares, and thus, the Tender Offeror will purchase all of theTendered Share Certificates, Etc. as long as the aggregate number of the Tendered Share Certificates, Etc.
is equal to, or greater than, the minimum planned purchase quantity (20,022,368 shares).
(Note 4) Although Mr. Shinji Hirosaki is a member of the employee shareholding association of theCompany and has interest in the Company Shares owned by such association, the Company Sharescorresponding to such interest (810 shares (rounded down any fractions)) are not included in the number ofshares held above.
(Note 5) The Tender Offeror intends to implement the Share Consolidation in order to make the Tender
Offer or and Y&G the sole shareholders of the Company after the conclusion of the Tender Offer inaccordance with “(4) Post-Tender Offer Reorganization Policy (Matters Regarding “Two-Step Acquisition
Items”)” below. The minimum planned purchase quantity in the Tender Offer (20,022,368 shares,
ownership ratio: 45.21%) is set pursuant to the following formula: (i) the number of treasury shares ownedby the Company as of March 31, 2021 (2,023,733 shares) and the number of shares held by EPS EKISHIN(93,090 shares, ownership ratio: 0.21%)subtracted from the total number of issued shares of the Company
as of March 31, 2021 as stated in the Company’s Second Quarterly Report (46,311,389 shares), whichamounts to 44,194,566 shares and corresponds to 441,945 voting rights; (ii) the number of voting rights is
multiplied by 2/3 (294,630 voting rights) (rounded up to the nearest whole number); (iii) the number ofvoting rights calculated in step (ii) (as rounded) is multiplied by 100 shares, which is the share unit numberof the Company (29,463,000 shares); and (iv) the number of Y&G’s Non-tendered Shares (9,414,000
shares) and Officers and Employees’ Non-tendered Shares (26,632 shares) are subtracted from the productcalculated in step (iii). Further, the minimum planned purchase quantity in the Tender Offer (20,022,368
shares, ownership ratio: 45.21%) will exceed 19,075,543 shares (ownership ratio: 43.07%) which is thesum of (i) 15,678,393 shares (ownership ratio: 35.40%) which equals to the majority of 31,356,784 shares

8(ownership ratio: 70.80%) that is the number of shares obtained by subtracting from the total number ofissued shares as of March 31, 2021 as stated in the Company’s Second Quarterly Report (46,311,389 shares),the number of treasury shares owned by the Company as of March 31, 2021 (2,023,733 shares), the numberof shares held by EPS EKISHIN (93,090 shares, ownership ratio: 0.21%), the Tendered Shares (except forthe shares held by Mr. Yukihiro Sasaki (number of shares held: 1,389,328 shares, ownership ratio: 3.14%)
and Mr. Haruo Nishino (number of shares held: 1,387,828 shares, ownership ratio: 3.13%), who will notmake Contribution by Officers and Employees; 3,397,150 shares, ownership ratio: 7.67%), Y&G Nontendered Shares (9,414,000 shares, ownership ratio: 21.26%) and Officers and Employees Non-tendered
Shares (26,632 shares, ownership ratio:0.06 %), and (ii) the number of shares held by Tendered Shares(except for the shares held by Mr. Yukihiro Sasaki (number of shares held: 1,389,328 shares, ownership
ratio: 3.14%) and Mr. Haruo Nishino (number of shares held: 1,387,828 shares, ownership ratio: 3.13%),
who will not make Contribution by Officers and Employees; this is a majority of the number of shares heldby the Company’s shareholders who have no interest in the Tender Offeror (i.e. “majority of minority”)).
Based on the above, if the Tender Offeror fails to obtain approval of the shareholders of the Company otherthan those who have interest in the Tender Offeror, it will not carry out the Transaction including the Tender
Offer, respecting the intention of the minority shareholders of the Company.
The Tender Offeror intends to cover the funds required for the settlement of the Tender Offer byborrowing from MUFG Bank, Ltd. (the “MUFG Bank”) (the “Tender Offer Settlement Funds
Borrowings”) and issuance of corporate bonds of the Company to be purchased by Suzuken (amounting
to JPY2,869,000,000 in total), and by using Suzuken’s Contribution and MBKP’s Contribution(collectively the “Contribution”), and intends to accept the Tender Offer Settlement Funds Borrowings
and the Contribution no later than the business day preceding the date of commencement of the settlementof the Tender Offer, under such conditions as contemplated in the terms of the Tender Offer.
Further, as stated in “(4) Post-Tender Offer Reorganization Policy (Matters Regarding a So-called “TwoStep Acquisition”),” if the Tender Offeror, despite the completion of the Tender Offer, fails to acquire allof the Company Shares through the Tender Offer, the Tender Offeror intends to request that the Company
implement the Share Consolidation as part of the Transaction for the purpose of making the Tender Offeror
and Y&G the sole shareholders of the Company. However, with respect to the funds required for theacquisition of the Company Shares equivalent to the total of the fractional shares resulting from the Share
Consolidation, the Tender Offeror intends to cover the same by borrowing from MUFG Bank (the“Fractional Shares Purchase Borrowings”).
While the details of the Tender Offer Settlement Funds Borrowings and Fractional Shares Purchase
Borrowings are to be set forth in the loan agreement regarding the relevant borrowing through separate
deliberations by Tender Offeror with MUFG Bank, the loan agreement regarding the relevant borrowing
is scheduled to set forth the terms and conditions for implementing the loan set out in the loan certificate

9attached to Tender Offer Explanation Statement of the Tender Offer and the contractual terms andconditions that are generally set forth in similar loan agreements, such as a certain degree of financial
covenant. All of the outstanding shares of the Tender Offeror owned by Y&G and the Company Sharesacquired by the Newly Established Company (as defined below) based on the Share Transfer are scheduled
to be provided as collateral.
The outline of the Transaction is as follows:I.

Pre-Tender Offer
As of May 27, 2021, Y&G owns 9,744,000 shares of the Company Shares (ownership ratio:

22.00%), Suzuken owns 1,504,000 shares (ownership ratio: 3.40%), the Tendering Officers andEmployees, Etc. own 4,366,938 shares (ownership ratio: 9.86%, the number of shares owned by theTendering Officers and Employees, Etc. except Mr. Yan is 4,036,929 (ownership ratio: 9.12%)) andthe minority shareholders own the remaining 28,672,718 shares (ownership ratio: 64.74%).

100.00%Company*Except Mr. Hao Yan

II.

Tender Offer (from May 28, 2021 to July 8, 2021 (scheduled))
The Tender Offeror will implement the Tender Offer with respect to all of the Company Shares (thepurchase price per Company Share (the “Tender Offer Price”) is JPY 1,800 ). Y&G will tender 330,000
shares of Y&G’s Tendered Shares (ownership ratio: 0.75%) in the Tender Offer, Suzuken will tender
1,504,000 shares of Suzuken’s Tendered Shares (ownership ratio: 3.40%) and the Tendering Officers
and Employees will tender 4,340,306 shares of the Tendering Officers and Employees, Etc.’s Tendered

10

Shares (ownership ratio: 9.80%).

Y&G

SuzukenTender Offer
Tendering
Officers andEmployees*

TenderOfferorOther
minorityshareholders

Company*Except Mr. Hao Yan

III. Post-Tender Offer(i) Contribution (around July 2021 (scheduled))
Contribution will be made to the Tender Offeror from Suzuken and MBKP from the day
immediately following the end of the Tender Period and prior to the commencement date of thesettlement of the Tender Offer. The Contribution will be made by way of an allocation of new sharesto a third party, amounting to JPY8,736,300,000 in total (consisting of Suzuken’s Contribution of
JPY4,736,300,000 in total and MBKP’s Contribution of JPY4,000,000,000 in total, and the paid-in
amount per share paid by the Tender Offeror in the Suzuken Contribution being JPY1,000 and thepaid-in amount per share paid by the Tender Offeror in the MBKP Contribution being JPY1,000).

11

Mr. Hao Yan

100.00%Suzuken

Y&G

Issue Class A

Tendering
Officers andEmployees*

TenderOfferorIssue Class B Shares

Other minority
shareholders

Company*Except Mr. Hao Yan(ii) Share Consolidation (around end of September 2021 (scheduled))
Share consolidation will be implemented by the Company for the purpose of making the Tender
Offeror and Y&G the sole shareholders of the Company, subject to execution of the Tender Offer,
execution of the Contribution and completion of its settlement.

Mr. Hao Yan

100.00%r
Y&G

SuzukenTendering
Officers andEmployees,

TenderOfferorOther minority
shareholders

Company*Except Mr. Hao Yan(iii) Contribution by Officers and Employees (around end of October 2021 (scheduled))

12

Contribution will be made to the Tender Offeror from the Contributing Officers and Employees,
subject to completion of the Squeeze-Out. The Contribution by Officers and Employees will bemade by way of an allocation of new shares to a third party with the paid-in amount per share being
JPY1,000, amounting to JPY2,000,000,000 in total. As a result of the Contribution by Officers andEmployees, voting rights ratio of Y&G to the Tender Offeror will be 0.00%, Mr. Yan’s voting rights
ratio to the Tender Offeror will be 22.50% and the voting rights ratio of the Contributing Officers
and Employees other than Mr. Yan to the Tender Offeror will be 77.50% but the foregoing voting
right ratio will be subject to change as a result of the Share Transfer and Conversion as below.

Mr. Hao Yan

100.00%r

Y&G

Suzuken

0.00%

Contributing
Officers andEmployees, Etc.*

Third-party
allocation

100.00%TenderOfferorCompany*Includging Mr. Hao(iv) Share Exchange (around the end of October 2021 (scheduled))
Share exchange will occur in which the Tender Offeror will be the wholly owning parent and theCompany will be the wholly owned subsidiary, and which will be implemented subject tocompletion of the Contribution by Officers and Employees. Although timing of execution of the
Share Exchange and details of specific terms have not yet been determined as of the submission
date hereof, the Share Exchange will be carried out for the purpose of acquisition by the Tender
Offeror of the Company Shares (excluding any fractional shares) owned by Y&G after completionof the Squeeze-Out and making the Tender Offeror the sole shareholder of the Company. As a resultof the Share Exchange, the Tender Offeror will be the sole shareholder of the Company. While theshare exchange ratio in the Share Exchange, will be determined by a separate agreement between
Y&G and Suzuken, such ratio is planned to be a ratio obtained by dividing price per Y&G Nontendered Share by price per common share of the Tender Offeror. Price per common share of the13

Tender Offeror is planned to be JPY 1,000 in consideration of administrative work related to shareson the part of the Tender Offeror and the Newly Established Company (as defined below) after theTransaction. Valuation of Y&G Non-tendered Shares which serves as a basis for determination of
consideration to be given to Y&G as a result of the Share Exchange (common shares of the Tender
Offeror; provided that if there is any fractional share less than one share in the number of shares tobe given, cash shall be paid for such fractional shares pursuant to Article 234) will be the amountobtained by multiplying JPY1,800 which is the same price as the Tender Offer Price, by the numberof Y&G Non-tendered Shares. In addition, Suzuken will acquire common shares of the Tender
Offeror as a result of the Conversion. Hence, Y&G, Suzuken, the Tendering Officers and Employees
and MBKP Fund will be the sole shareholders of the Tender Offeror as a result of the Share
Exchange and the Conversion. As a result of the Share Exchange and Conversion, voting rights
ratio of Y&G to the Tender Offeror will be 71.56%, voting rights ratio of Suzuken to the Tender
Offeror will be 20.00%, Mr. Yan’s voting rights ratio to the Tender Offeror will be 1.90% and thevoting rights ratio of the Contributing Officers and Employees other than Mr. Yan to the Tender
Offeror will be 6.55%.

Mr. Hao Yan

Y&G

Suzuken

Allocation of shares through hareexchange (*Share Exchange
involves the Tender Offeror andCompany)

Contributing
Officers andEmployees, Etc.*

TenderOfferorCompany*Includging Mr. Hao Yan(v) Share Transfer (around the end of October 2021 (scheduled))
Share transfer will occur in which a newly established company (“Newly Established Company”)
will be the wholly owning parent and the Tender Offeror will be the wholly owned subsidiary, andwhich will be implemented subject to the Share Exchange being effective. Although timing ofexecution of the Share Transfer and details of specific terms have not yet been determined as of the14

submission date hereof, the purpose of the Share Transfer is to cause the Newly EstablishedCompany to acquire all the shares in the Tender Offeror after the Absorption-type Merger and toprovide MUFG Bank with all the shares in the Tender Offeror to be owned by the Newly EstablishedCompany as collateral for the Tender Offer Settlement Funds Borrowings and the Fractional Shares
Purchase Borrowings.

Mr. Hao Yan

Y&G

SuzukenContributing
Officers andEmployees*

Newly
EstablishedCompany
Eclusive sharetansfer
TenderOfferorCompany*Includging Mr. Hao Yan(vi) Absorption-type Merger (around the end of October 2021 (scheduled))
Absorption-type merger will occur in which the Tender Offeror will be the surviving company andthe Company will be the disappearing company, and which will be implemented subject to the
Share Transfer being effective. Although timing of execution of the Absorption-type Merger anddetails of specific terms have not yet been determined as of the submission date hereof, as a resultof the Absorption-type Merger, Y&G, Suzuken, the Tendering Officers and Employees, and MBKP
Fund will substantially own shares in the Tender Offeror after the Absorption-type Merger) throughshareholding by the newly established company.

15

厳浩氏
Mr.
Hao Yan100.00%Y&G
Gull

71.55%

SuzukenSw an

20.00%

Contributing
出資
Officers and役職員※
Employees*

MBKP

8.45%
Newly

SPC 2

Established

Merger
合併

Newly
買付者
Established
SPC
Company

Target

対象者

Company※厳浩氏を含みます。
*Includging
Mr. Hao Yan

In addition, as stated in the "Notice of Agreement with Suzuken CO., LTD. Regarding Capital
Participation in the Company's Subsidiary" announced by the Company on May 27, 2021 ( the"Press Release on the Agreement with Suzuken"), Suzuken intends to invest to EP-PharmaLine Co.,
Ltd. ( "EP Pharma Line"), a consolidated subsidiary of the Company, subject to the completion of
the Tender Offer (investment ratio: 49.00%).
(ii) Background of the Decision to Implement the Tender Offer, Purpose and Decision-Making Process,and Post-Tender Offer Management Policya. Background of the Decision of the Tender Offeror to Implement the Tender Offer, Purpose andDecision-Making Process
The Company was established in May 1991 as EPS Tokyo Inc. for the purpose of developing and selling
software related to statistical analysis of clinical trial data for pharmaceuticals. The Company's tradename was changed to EPS Co., Ltd. in April 2001, and to EPS Holdings, Inc. in January 2015. The
Company was listed on the JASDAQ market (currently the JASDAQ (Standard) Market of the Tokyo
Stock Exchange) in July 2001, the Second Section of the Tokyo Stock Exchange in July 2004, and theFirst Section of the Tokyo Stock Exchange in September 2006.
Currently, the Company Group consists of the Company, 56 consolidated subsidiaries of the Company
and 5 affiliated companies (collectively, the "Company Group"), and it consists primarily of 5 businesses:
the CRO (Note 1) Business, the SMO (Note 2) Business, the CSO (Note 3) Business, the Global Research16

Business, and the EKISHIN Business.
The basic philosophy of the Company Group is: "We will contribute to the advancement of thehealthcare industry through creating valuable solutions." While each business segment is independently
focused on its own business activities and operational efficiency improvement, the Company Group isstrengthening business management capabilities of the group as “OneEPS” and focusing onstrengthening group management capabilities in both vertical and horizontal directions, so that it canachieve "Three Growths" (basic growth, quality growth, and sustainable growth).
Initiatives of each business segment (including those to be implemented in the future) are as follows:(a) CRO Business
The CRO Business is centered on the current contract business for operations related to clinical trials(Note 4), and its basic policy is to achieve solid basic growth in this business. Specifically, the main
initiatives for the CRO Business include: (1) strengthening sales capabilities, implementing thoroughcost management and improving operational efficiency, as well as maximizing profit by restructuringbusinesses with declining needs or low profitability; (2) further strengthening monitoring in clinical
trial and PMS (Note 5) operations and further utilizing high-quality services and supply capabilities indata science; (3) strengthening responses to globalization; (4) enhancing expertise in disease areas, etc.;
and (5) strengthening digitization, including virtual clinical trials. Through these initiatives, theCompany Group aims to further enhance the competitiveness of its CRO Business. In addition, theCompany Group plans to actively expand its business in promising business areas such as development
support for medical devices and development of functional foods, utilizing its achievements andknowledge obtained in pharmaceutical clinical trials.
Further, due to the expansion of clinical research, physician-led clinical trials and database research,and the increase in activity by drug discovery ventures, medical supply development needs are expected
to become more diverse in the future. In order to respond to those needs, the Company Group will
establish a system to provide a “one-stop” solution from formulation of development strategies tosupport of manufacturing and sales.
(b) SMO Business
The SMO Business aims to further expand its market share by making effective use of its resources
through the implementation of regional and facility strategies while leveraging its largest business scalein Japan, focusing on areas with high customer needs such as cancer, dermatology and central nervous
system, and responding to growing needs for clinical trial office support at large-scale medical
institutions. In addition, the Company Group utilizes resources through collaboration with the CRO
Business, for example, deployment of a CRA (Clinical Research Associate) who was educated at the
CRO medical institutions as a SDM (Site Data Manager) to be exclusively in charge of detailed

17

examination of test data and data input into the system, etc., so that CRCs (Note 6) can focus on dealing
with examinees and medical staff and case accumulation, and therefore it will be possible to further
accelerate operational efficiency. In the new approach to IT technology, the Company Group will
promote efficient clinical trial operations and aim to further improve customer satisfaction bycomputerizing the Central IRB (Note 7) and selling a clinical trial progress management system for
medical institutions, etc.
(c) CSO BusinessIn the CSO Business, the Company Group will develop new services based on an accurate
understanding of needs and changes from pharmaceutical and medical device companies. In existing
services, the Company Group will differentiate itself from competitors by combining the CSO
operations, such as conventional contract MRs (Note 8) and call centers, with the various uniqueservices of the Company Group. In the DI (Drug Information) business that manages drug information,
the Company Group will continue to improve the quality of highly specialized operators, to improve
operational efficiency by promoting digital transformation (Note 9), and to further strengthencommunication with clients. The Contract MR Division will shift from dispatch style to multi-channel
promotion through physical-digital integration, as well as improve the quality of MRs. In the newservices, the Company Group plans to expand its new business such as commercializing remote PMS
monitors in the PMS (post-marketing surveillance) Division and deploying field service engineers in
the Medical Equipment Division. In addition, the Company Group aims to expand orders by leveraging
its expertise in production of academic materials, education and training services, and field in cancer,
etc. ES-Link Co., Ltd. ("ES Link"), which was established as a joint venture with Suzuken in October
2018, is currently promoting distribution management as an initiative to respond to new needs forpromotion services, rare disease drugs and medical devices by combining Suzuken's strong networkwith pharmaceutical and medical device companies with the highly specialized virtual MR of theCompany.
(d) Global Research Business
The Global Research Business aims to become a leading CRO company in the Asia-Pacific region,
and will build a solid business foundation in Japan, Asia and China. In order to do so, the Company
Group plans to increase inbound orders from Europe, the United States and China, and outbound orders
from Japan to China and Asia by strengthening its alliances with overseas CROs, including a Chinese
CRO, Beijing Global Pharmaceutical Research Co., Ltd. (G&P), which the Company Group acquiredin June 2020, Hangzhou Tigermed Consulting Co., Ltd., and George Clinical Pty Ltd., and domestic
CROs, and flexibly and promptly reorganizing the CROs in China and Asia. In international joint
clinical trials, the Company Group aims for stable growth by providing high-quality products (services)and strengthening human resource management. In terms of profit, the Company Group will reduce
costs by reviewing expenses and selling general and administrative expenses, including those for18

domestic and overseas bases.
(e) EKISHIN BusinessAs “a healthcare-focused trading firm connecting Japan with China,” the EKISHIN Business will seek
cooperation and capital alliances with new business partners, and make a shift toward the next stage
based on its existing businesses.
While securing current business performance through the stable operation of the existing businesses
based on product-related business, international trade-related business and relevant support related
business, the EKISHIN Business will actively promote the restructuring of businesses within the group,
but also for outside companies. In the product-related business, the Company Group will improve theinterferon production process of Shanghai Huaxin High Biotechnology Inc., further cultivate and newly
develop the markets, and promote the introduction of new products and partnerships with drug
discovery ventures in China. In the international trade-related business, the Company Group will
steadily operate the existing business of selling pharmaceuticals and medical devices between Japanand China and the business of selling equipment related to preclinical tests among Japan, the UnitedStates and China, and expand products and sales channels by strengthening partnerships with outsidebusiness partners.
(Note 1) An abbreviation for the Contract Research Organization, which is an organization (or anindividual) entrusted by pharmaceutical companies, etc. with various businesses related to operations
and management of clinical trials conducted by pharmaceutical companies.
(Note 2) An abbreviation for the Site Management Organization, which is an organization (or anindividual) entrusted by medical institutions with part of businesses related to implementation ofclinical trials conducted by medical institutions.
(Note 3) An abbreviation for the Contract Sales Organization, which is an individual, organization,
or body that is entrusted with, or performs, sales and marketing operations on behalf of pharmaceuticalcompanies, and is an organization (or an individual) entrusted by medical companies, etc. with abusiness in which MRs (medical representative) not only provide medical institutions with informationon the proper use of drugs, such as information on efficacy or effects and side effects, but also collectrelevant information from those institutions.
(Note 4) This refers to checking and collecting data on efficacy and side effects associated with theuse of drugs, medical appliances or instruments and processed cells, etc. through clinical trials before
applying for approval for pharmaceuticals, medical devices and regenerative medicine products.
(Note 5) An abbreviation for the Post Marketing Surveillance, which refers to a survey conducted toconfirm efficacy and safety of newly market launched pharmaceuticals after approved by clinical trials.
(Note 6) An abbreviation for the Clinical Research Coordinator, which refers to a person who
supports the implementation of clinical trials at medical institutions. The CRC refers to the person who
is instructed and supervised by an investigator (or a dentist) and cooperates with an investigator and a19subinvestigator from a professional standpoint, and may be a nurse, pharmacist, clinical laboratory
technician, and other person with relevant medical knowledge.
(Note 7) An abbreviation for the Central Institutional Review Board, which refers to an institutional
review board within hospitals of specific medical institutions that collectively performs reviews
entrusted by multiple medical institutions.
(Note 8) An abbreviation for the Medical Representative. The main duties of MRs are to conduct
interviews with pharmaceutical industry professionals, and provide information on the quality, efficacy
and safety of drugs, and collect and communicate information on side effects, etc., mainly for the
purpose of proper use and widespread use of drugs.
(Note 9) "Digital transformation" refers to transformation of a company's products, services, andbusiness models based on needs of customers and society in response to drastic changes in the businessenvironment, as well as transformation of its operations, organization, processes and corporate culture,
thereby establishing a competitive advantage, through utilization of data and digital technologies.
The Company Group has been discussing ways to create new-added value with Suzuken, a leading
drug-distribution company which has developed the Drug Wholesaling Business as its core business aswell as other businesses including the Drug Manufacturing Business and the Health Insurance
Pharmacy Business since its establishment as a pharmaceutical wholesale company in 1932, with theaim of contributing to the medical and healthcare industries. As announced in the "Notice of Capitaland Business Partnership and Disposition of Treasury Stock through Third-Party Allocation" dated
September 27, 2016, the Company Group entered into a capital and business partnership with Suzuken
with the aim of developing their businesses not only in Japan, but also in Asia, particularly in China,
and contributing to the medical and healthcare industries, by utilizing both companies group's
management resources and expertise. Specifically, in Japan, the companies aim to create new addedvalue mainly for pharmaceutical companies and medical institutions through joint promotion of theCRO, SMO and CSO Businesses and their ancillary businesses, and joint development of new
businesses, while in China, they aim to create new-added value in the medical service business,
including the manufacturing support business and distribution business, in addition to strengthening thecapabilities of the existing businesses of both companies. Subsequently, as announced in the "Notice ofEstablishment of Joint Venture and Receipt of Contributions in Connection With Capital and Business
Partnership with Suzuken CO., LTD." dated May 9, 2018, the Company Group believes that it can
support pharmaceutical companies by utilizing the management resources and know-hows of bothgroups, and agreed to establish a joint venture and to accept capital participation from Suzuken to EP
Pharma Line. According to the Press Release Concerning Agreement with Suzuken, Suzuken will makecontribution (capital contribution ratio: 49%) to EP Pharma Line conditional upon the completion of
the Tender Offer. In addition, as announced in the "Notice of Establishment of Joint Venture with20

Suzuken CO., LTD." dated September 25, 2018, in October 2018, the two companies agreed to integrate
the functions of both companies to conduct a new promotion service business for pharmaceuticalcompanies and a BPO (Note 10) service business to support business reform carried out bypharmaceutical companies, and established ES Link as the above-mentioned joint venture on October
1, 2018. As for future development, the ES Link aims to be a company that can respond to needs frommarketing, distribution and development divisions of pharmaceutical companies and makecomprehensive proposals for improving effectiveness and efficiency by combining the MS (Marketing
Specialist) (Note 11) function and other various functions of Suzuken with the BPO function and the
medical contact center (Note 12) function in the CSO Business of the Company Group.
After of the collaboration mentioned above, the two companies have continuously discussed andconsidered the details, terms and conditions and implementation timing of the business partnership in
the agreed areas, and the possibility of business partnership and business development in other areas inorder to maximize synergy between the two groups.
(Note 10) An abbreviation for the Business Process Outsourcing, which refers to outsourcing part ofa company's business processes to an outside professional company on a continuous basis.
(Note 11) An abbreviation for the Marketing Specialist, which refers to a sales representative of the
Drug Wholesaling Business, who visits medical institutions and insurance pharmacies, etc., andintroduces medicines, conducts business negotiations, and provides and collects information.
(Note 12) The medical contact center is a 24-hour, 365-day call center owned by EP Pharma Line thatspecializes in medicine, medical care, medical devices and healthcare. EP Pharma Line 's BPO service,
which consists of pharmacists, MRs, nurses and other qualified professionals who specialize in thepharmaceutical industry, provides one-stop support for business processes from pre-approval to PMS.
However, due to the promotion of generic drugs to reduce social security costs, and the lowering ofdrug prices by revisions to drug prices, the profitability of pharmaceutical and medical device industries,
which are customers of the main businesses of the Company Group, is declining. In addition, as thefield of drug development shifts from lifestyle-related diseases to cancer, central nervous systemdiseases and rare diseases, the difficulty of clinical trials is ever increasing. Therefore, the businessenvironment is changing.
As described above, the growth of the outsourcing market for drug and medical device development
is expected to slow down, and competition is expected to further intensify in the business environment
surrounding the Company Group due to the following factors: (1) pharmaceutical companies andmedical device companies, which are customers of the Company Group, are shortening thedevelopment period and reducing development costs in order to enhance their competitiveness; (2)costs are increasing due to the downscaling of projects and the sophistication of expertise in such fields

21

as cancer, central nervous system diseases, intractable diseases and rare diseases; and (3) the domestic
clinical trial market is shrinking due to globalization.
In such a business environment, looking back on the recent performance, Mr. Yan has recognized that
the Company Group has achieved steady revenue growth by expanding the scope of business throughthe development of multiple business segments, such as the SMO, CSO, Global Research, andEKISHIN, in addition to the core CRO Business, and the use of M&A, etc., profit growth has beenstagnant due to the aforementioned slowdown in market growth and intensifying competition.
In such circumstances, Mr. Yan believes that it would be difficult to achieve sustainable growth of theCompany Group, even if the current performance can be maintained by merely continuing each existing
business as-is. He recognizes the need to flexibly and promptly implement fundamental growth
initiatives that require large up-front investments and bold transformation of the business model, suchas the creation of new businesses and responses to digital transformation, in order to becomecompetitive on the global stage.
In addition, Mr. Yan believes that it is possible to further increase the enterprise value of the Company
Group in this severe business environment surrounding the Company Group by implementing thefollowing initiatives.
(i) Restructuring the existing core businesses through bold investments and strategic changes
The CRO Business, which is the core business of the Company Group, has achieved steady sales
growth, but earnings growth has been stagnant. As for the business environment, the needs for theCompany Group are becoming more diverse and complex, including increasingly sophisticated drug
discovery processes, globalization accompanying the development of international joint clinical trials,
and responses to digitization.
Under these circumstances, Mr. Yan regards the existing CRO Business, which is mainly targeted at
pharmaceutical companies and is mainly engaged in the implementation of the late phase in clinicaldevelopment, as an old CRO. While he believes that the necessity for an old CRO will continue, herecognizes that building a new business model is essential, which he positions as a new CRO (NRO).
Needs from academia, drug discovery ventures, and overseas biotech companies, which areconsidered to be potential customers to replace existing pharmaceutical companies, are expected toincrease in the future. In order to respond to such needs, he thinks it is necessary to build an NRO as
a new business model because the significance of CRO business operators' active involvement in drug
discovery with customers from the early stage of clinical development is increasing, including the
upgrading of services such as development strategy planning, efficiency improvement through thebold use of IT technology, and the shift to a performance-based (risk-sharing type) contract structure.
Furthermore, in order to increase both inbound and outbound orders, he believes it is important to22

provide high-quality and innovative services that meet global standards, to strengthen the systems fordiversifying clinical trials, and to further strengthen cooperation and alliances, including M&As, withbusiness partners in Japan and overseas.
With respect to the SMO and CSO Businesses, as the entire market shifts to virtual due to changes
in the business environment, he believes that there is considerable room for improvement throughdigitization, and that it is necessary to flexibly and promptly execute active investment while utilizing
the cooperative relations with business partners, including Suzuken, that the Company Group has
established so far. Furthermore, as the business environment for medical institutions is expected tochange significantly due to the reform of the healthcare system, he thinks that, in the SMO Business,
the Company Group must flexibly build closer relationships with medical institutions in order todevelop services other than the clinical trial-related services.
As stated above, Mr. Yan believes that the Company Group must actively implement the businessmodel change and associated investments in various areas, as well as alliances with outside companies
both in Japan and overseas.
(ii) Creation of drug discovery and healthcare product businesses
As stated above, Mr. Yan believes that, in a situation where the growth of the outsourcing market for
drug and medical device development is expected to slow down and competition is expected tointensify, by building the NRO Business, the Company Group will be able to participate in clinical
trials, the core business of the Company Group, from the stage of development strategy formulation,
which is the upstream aspect, and develop a wider customer base, such as drug discovery ventures, byproviding comprehensive services from upstream to downstream in drug development, such as
research and development, clinical trials, manufacturing and sales, and licensing, which will enable
the Company Group to strengthen the existing core businesses.
Accordingly, he believes that it is necessary to create businesses related to products that go beyond
services, such as the drug discovery business and sales of healthcare products.
Through its CRO and SMO Businesses, the Company Group has built beneficial long-term
relationships with academia, and has already invested in more than 10 drug discovery ventures andentered into business alliances based on those relationships. In the EKISHIN Business, the Company
Group is engaged in the channel sales on behalf of Japanese pharmaceutical and medical devicecompanies, and the manufacture and sale of own-brand drugs in China. Based on these experiences,
Mr. Yan strongly feels that although Japanese drug discovery ventures, especially academia such asuniversities and research institutions, have many potential seeds, their commercialization has notprogressed due to insufficient clinical development systems and lack of funds, etc. while in China,
despite the extremely high needs for joint development of these seeds, their commercialization ismaking slow progress due to business practices and various other factors, and at the same time, there

23are advantageous business opportunities with high social significance. Based on the Company Group's
extensive experience and resources in clinical development, as well as its experience in the EKISHIN
Business that links Japan and China, the Company Group intends to firmly promote the drug discovery
business based on its unique know-how. At the same time, he plans to expand sales of healthcare
products for a wider range of customers.
However, Mr. Yan assumes that certain business risks may arise in the existing business model
because it is necessary to make a large number of up-front investments and shift to a performancebased profit model in order to realize the above business models, including the NRO Business. He
also believes that such a major change in the business model may not be sufficiently appreciated bycapital markets as an initiative of the Company Group.
(iii) Promotion of digital transformation in both business and management
As the use of IT technologies, such as remote monitoring and virtual clinical trials, accelerates,
responding to digital transformation is becoming increasingly important together with the spread of
the COVID-19 infection.
While various initiatives are being carried out, such as digitalization of clinical trial processes,
virtualization of monitoring operations, and digitalization of DI operations, Mr. Yan recognizes thatfurther digitalization in data handling and utilization is possible, and in order to stay competitive on
the global stage, it is necessary to continue aggressive and bold investments, including incorporating
the latest technologies that lead other companies, securing talent with the latest know-how, andconducting M&As of IT companies and partnerships with other companies within the CRO, SMO andCSO Businesses of the Company Group. In addition, Mr. Yan believes that in order to break awayfrom the labor-intensive industry, not only the business perspective, but also the management system,must be improved, including reform of internal infrastructure and office functions. He thinks that if
the Company Group focuses on its share price and securing short-term profits as a listed company, it
will be difficult to continue the bold and active investments, including the reform of its internalmanagement system.
(iv) Strengthening independent management in business segments and creating new venture businesses
In order to flexibly and promptly implement the initiatives described in (i) through (iii) above, Mr.
Yan believes that it is necessary to review and restructure the roles of the Company Group companies.
He believes that the Company, which plays a central role in important decision-making of theCompany Group as the parent company, should shift and concentrate on planning, coordinating andpromoting functions, while streamlining routine and administrative operations as much as possible,
while each business segment of the Company Group should strengthen its independent andautonomous management system. Mr. Yan has recognized that, in order to flexibly respond to changes

24

in the management environment surrounding the Company Group, each business segment of theCompany Group should take the initiative in implementing flexible and prompt decision-making, but
at the same time, he has also recognized a problem in the current situation that the importantmanagerial decision-making of the Company Group companies is left to the Company, because theCompany, which is the parent company of the Company Group, manages the operations of theCompany Group as a listed company, and therefore, the decision-making of the Company Group is
not led by each business segment. He believes that, by reviewing the roles of the Company Group
companies, each business segment will be able to implement fundamental initiatives, such as
restructuring the operational system of each business, forming alliances including flexible and prompt
M&As and making new business investments taking risks, which have not yet been implemented, andthe Company will be able to focus on the consideration of company-wide strategies throughstreamlined management operations, which could lead to the encouragement of a challenging spirit,
the nurturing of the next generation, and the creation of new venture businesses.
The Company Group had been discussing with Suzuken the possibility of business development fora long time, while considering initiatives to continuously improve the enterprise value of the Company
Group mentioned in (i) to (iv) above. In mid March, 2021, Mr. Yan discussed the future management
initiatives of the Company Group with Suzuken. In the course of continuing discussions between thetwo companies, they came to a common understanding that, in order to further enhance the enterprisevalue of the Company Group, further business synergies must be created by effectively utilizing themanagement resources of both the Company Group and Suzuken Group under a stronger capital
relationship, and that therefore, strengthening capital and business alliances is the most effectivemeans. In addition, Mr. Yan believed that in order to realize the initiatives mentioned above, it isnecessary to work with third parties that can support the financing regarding the Tender Offer, whilefurther strengthening management know-how, overseas network, and other functions of the Company
Group, and since mid-March 2021, he had been discussing with multiple companies including MBKP
through introduction from financial institutions. In early April 2021, while Mr. Yan was discussing
with MBKP the business prospects of the Company Group and the possibility of capital participation,
he came to a conclusion that making the most of MBKP’ s network and know-how would contributeto the increase of the Company Group's enterprise value.
Meanwhile, Mr. Yan believes that if the Company Group implements the initiatives stated in (i)through (iv) above in order to resolve the management issues mentioned above while remaining listed,
the level of profit on a consolidated basis would be expected to decrease at least in the short term andit would have an adverse effect on the share price due to the implementation of the alliance strategy
and up-front investments, and the term fluctuations in the business performance during that period
will not necessarily be appreciated enough by capital markets, and that therefore, the Company Group25

may not meet the expectations of shareholders.
Mr. Yan believes that in order to survive the ever-changing business environment and intensifying
competition, it is essential to establish a management system that enables flexible and prompt
implementation of a fundamental and flexible decision-making process in order to maximize theenterprise value of the Company Group from a medium- to long-term perspective.
In addition, the expenses necessary for the Company Group to maintain the listing of its shares(expenses required for the continuous information disclosure such as annual securities reports, andexpenses required for the operation of shareholders meetings and entrustment of business toshareholder registry administrators, etc.) have increased in recent years, and Mr. Yan believes thatthose expenses may become an additional burden on the management of the Company Group in the
future. Since its listing on the JASDAQ market (currently the JASDAQ (Standard) Market of theTokyo Stock Exchange) in 2001, the Company Group has enjoyed various benefits as a listed company,
including securing excellent human resources owing to the improvement of its name recognition andsocial credibility. However, Mr. Yan believes that it is difficult to justify maintaining the listing of theCompany shares on a continuous basis in the future, because, given the current financial condition of
the Company Group under which it is able to secure funds necessary for conducting its normal
business activities and the recent low interest rate environment for indirect financing, the need for theCompany Group to raise funds on a large scale through the use of equity financing is not high for thetime being, and the brand power and social credibility of the Company Group can be maintained andacquired more through its business activities.
In light of the circumstances described above, in early March, 2021, Mr. Yan determined that making
the Company shares private would be an effective way to flexibly and promptly implement the
management initiatives described in (i) through (iv) above while avoiding imposing any risk on theshareholders that would inevitably arise due to the implementation of the medium- to long-term
strategy of the Company Group, and it would make it possible to provide the Company Group’s
shareholders with reasonable opportunities to sell their shares at the market price with a certain
premium. In addition, Mr. Yan believes, in order to promote the initatives described above, it isnecessary to make the Company shares private while ensuring the continuity of business operationsin the past. And he determined that, in doing so, it is necessary for the growth of the Company Group
that Mr. Yan, the founder of the Company, who has long served as the representative director of theCompany and strengthened the competitiveness and profitability of the Company Group, continues tomanage the operations of the Company instead of other person and make manegirial dicision-making
frelxibly and promptly, and making the Company shares private through management buyout (MBO)
would be in the best interest of the shareholders of the Company and that would contribute to theincrease of the Company Group's enterprise value. In addition, if the Company Group makes theCompany private using a method other than management buyout (MBO), Mr. Yan may not be able to26

continue to manage the operations of the Company, and there may be differences in the management
policies of the Company between the management of the Company and shareholders of the Company,
which may make it impossible for the Company to make flexible and prompt decision-making. For
this reason, Mr. Yan considers it undesirable to make the Company private by a method other than
MBO. As the Company Group marks 30 years since its establishment in May 2021, Mr. Yan regards
the execution of the Transaction as an opportunity to make its second start, and made this decision
toward the further development of the Company Group. Given that Mr. Yan is expected to continue tomanage the operations of the Company as described above, Mr. Yan and Y&G discussed the capital
structure of the Tender Offeror after the Transaction on the premise that the capital and businessalliance with Suzuken would be strengthened after Y&G acquires the majority of the Tender Offeror’s
voting rights after the Transaction. They considered the terms and conditions of the Transaction sothat Suzuken would hold 20.00% of the voting rights of the Newly Established Company after theTransaction and the said company would become an equity method affiliate of Suzuken, taking into
account the amount of funds required for the Transaction. Based on the above discussion, Mr. Yan and
Y&G asked Suzuken to make Suzuken’s Contribution, and Suzuken agreed, and thus they decided tomake Suzuken’s Contribution. In addition, Mr. Yan and Y&G confirmed with current management
team and manager class employees, who are as large-scale shareholders and considered having
capability to make a contribution, whether they would like to make a contribution to the Tender Offeror.
The Contributing Officers and Employees expressed their will to make a contribution, so Mr. Yan and
Y&G discussed terms and conditions of the Transaction based on the amount that the Contributing
Officers and Employees were willing to contribute. Later, Mr. Yan and Y&G proposed the contribution
amount and the terms and conditions of the Transaction to the Contributing Officers and Employees.
Each Contributing Officer and Employee agreed to the same so the Contributing Officers andEmployees has been decided to be carried out.
Subsequently, in early March 2021, Y&G made an initial offer to the Company to start examinations
and discussions toward the implementation of an MBO. Then, Y&G conducted due diligence on the
Company from mid-March 2021 until late April of the same year, and on March 19, 2021, submitted
to the Company a letter of intent regarding the Transaction and commenced discussions andnegotiations with the Company regarding whether to implement the Transaction. While conducting
the due diligence on the Company, from mid-March to late April 2021, Y&G discussed the specificscheme of the Transaction taking into account the policies of Suzuken and MBKP, the intention of theContributing Officers and Employees to become more involved in the management of the Company
as shareholders and contribute to the increase of the Company's enterprise value, and the tax benefits
from the Absorption-Type Merger for the purpose of effectively utilizing the costs associated with thefinancing for the Transaction, etc., and finalized the specific method of the Transaction in late April

27

2021 and informed Company thereof. And then, after multiple discussions with the Company on themethod of the Transaction and the terms and conditions of the Transaction, Y&G conducted a further
detailed examination of the terms and conditions of the Transaction, and on April 30, 2021, made an
initial price proposal to the Company to set the Tender Offer Price at JPY1,500. On May 7, 2021, theCompany responded in writing from that it would be extremely difficult for the Company to accept
the Tender Offer at such price or recommend minority shareholders of the Company to apply for theTender Offer. Subsequently, Y&G made a reproposal in writing with the Tender Offer Price at
JPY1,600 on the 10th of the same month, and on the 12th of the same month, the Company respondedin writing to Y&G to consider settingthe Tender Offer Price at JPY2,100. Subsequently, on the 17thof the same month, Y&G made a reproposal in writing to the effect that while it considered JPY1,600
per share, which was said offer price, to be a sufficiently reasonable price comprehensively
considering the business and financial conditions, etc. of the Company, after reconsidering the content
of the Company's response seriously and considering putting a premium based on the Company's pastand latest stock prices, etc., the Tender Offer Price should be JPY1,650. The Company responded inwriting from to Y&G to reconsider the Tender Offer Price from the viewpoint of further consideration
to the interests of the minority shareholders and reconsider setting the Tender Offer Price at JPY2,050.
In response, on the 19th of the same month, Y&G made a reproposal requesting to set the Tender Offer
Price at JPY1,750. After that, on the 20th of the same month, the Company responded Y&G toconsider setting the Tender Offer Price at JPY1,850 and give a response by the 24th of the same month.
In response to the Company’s proposal, on the 21th of the same month, Y&G made a reproposal inwriting to set the Tender Offer Price at JPY1,770, and on the 24th of the same month, the Company
responded to set the Tender Offer Price at JPY1,800. After these discussions and negotiations, on May
24, 2021, Y&G and the Tender Offeror decided to set the Tender Offer Price at JPY 1,800 and on May
27, 2021, decided to commence the Tender Offer through as part of the Transaction.
b. Post-Tender Offer Management Policy
The Transaction falls under the so-called management buyout (MBO). Mr. Yan, a representative
director of the Company, will remain in charge of management of the Company after completion of theTender Offer and promote the management policy set forth above. With respect to assumption of position
as an officer after the Tender Offer is made, no special agreement has been executed among the Tender
Offeror and the Contributing Officers and Employees at this time. On the assumption that theContributing Officers and Employees will remain in charge of management of the Company as officers
and employees, it is expected that the Contributing Officers and Employees will own and manage theCompany by obtaining the status as a shareholder in the Tender Offeror and more actively endeavor to
improve enterprise value of the Company.
As described in “(ii) Shareholders Agreement” under “(4) Items Regarding Critical Agreements Related28

to the Tender Offer” below, Y&G and Suzuken agreed on the matters regarding operation of the Tender
Offeror and the Company as of May 27, 2021. For further details, please see “(ii) Shareholders
Agreement” under “(4) Items Regarding Critical Agreements Related to the Tender Offer” below.
Subject to completion of the Squeeze-Out, the Tender Offeror intends to implement the Contribution
by Officers and Employees, Etc., the Share Exchange, the Share Transfer and the Absorption-Type
Merger in the said sequential order. (However, the details such as specific timing and conditions of
implementation of the Contribution by Officers and Employees, Etc., the Share Exchange, the Share
Transfer and the Absorption-Type Merger have not yet been decided currently.)(iii) Process of and Reasons for Decision-Making by the Company
On March 19, 2021, in response to Mr. Yan's initial request to commence discussions on theimplementation of the Company’s management buyout (MBO) as described in "a. Background of theDecision of the Tender Offeror to Implement the Tender Offer, Purpose and Decision-Making Process”
under " (ii) Background of the Decision to Implement the Tender Offer, Purpose and Decision-Making
Process, and Post-Tender Offer Management Policy" in order to ensure the fairness of the Tender Offer
Price and the fairness of other matters pertaining to the Transaction, including the Tender Offer, on March
19, 2021, the Company appointed Mizuho Securities Co., Ltd. (the "Mizuho Securities") as its financial
advisor and TMI Associates as its legal advisor, each being independent from each of Mr. Yan, the Tender
Offeror, the Company, Y&G, Suzuken, MBKP and the Tendering Officers and Employees (collectively
the "Tender Offer Related Parties") as well as the Transaction itself. The remuneration to be paid toMizuho Securities in connection with the Transaction is composed of fixed remuneration only, and does
not include the success fee payable subject to the successful completion of the Tender Offer, etc.
Furthermore, prior to the Company’s deliberation and resolution on the Transaction at its Board, theCompany established a special committee (the "Special Committee") as of March 19, 2021, for the
purpose of ensuring the fairness of the decision-making process of the Company's board of directors by
carefully considering the Company's decision-making on the Transaction and eliminating arbitrarinessand the possibility of conflicts of interest in the decision-making process. For details of the compositionand specific activities of the Special Committee, please see "(iii) Establishment of Independent Special
Committee by the Company and Acquisition of Report from Said Special Committee” under “(6)Measures to Ensure Fairness of the Tender Offer, Such as Measures to Ensure Fairness of the Tender
Offer Price as Well as Measures to Avoid Conflicts of Interest”.
Under the above-mentioned system, the Company held multiple discussions and deliberations with theTender Offeror regarding the purpose of the Transaction, the manner of the Transaction, the management
policy after the Transaction, and the terms and conditions of the Transaction, including the Tender Offer
Price, based on the negotiation policy confirmed in advance by the Special Committee and the opinions,
instructions, and requests from the Special Committee at important points in the negotiations, while29

receiving advice from Mizuho Securities and TMI Associates.
With respect to the Tender Offer Price, the Company received a proposal from the Tender Offeror on
April 30, 2021, that the Tender Offer Price be set at JPY 1,500, and in response to this proposal, theCompany responded to Y&G in writing on May 7, 2021, stating that it would be extremely difficult toapprove the Tender Offer at the relevant price and to recommend that the Company's minor shareholders
tender their shares in the Tender Offer based on the content of the report on the results of the calculationof the share value of the Company's shares received from Mizuho Securities and the discussions at theSpecial Committee. Thereafter, the Company reported the status of negotiations to the Special
Committee in a timely manner, and based on the Special Committee's opinions, instructions, requests,
etc. at important points in the negotiations, the Company held discussions and negotiations with Y&G
on the Tender Offer Price several times, while receiving advice from Mizuho Securities and TMI
Associates. Specifically, the Company received a proposal from Y&G to set the Tender Offer Price at
JPY 1,600 on May 10, a proposal to set the Tender Offer Price at JPY 1,650 on May 17, a proposal to set
the Tender Offer Price at JPY 1,750 on May 19, and a proposal to set the Tender Offer Price at JPY 1,770
on Mary 21. In response to these proposals, the Company requested a further review of the Tender Offer
Price from the viewpoint of further consideration for the interests of minor shareholders. Based on theabove negotiations, the Company received a proposal from Y&G on May 24th to set the Tender Offer
Price at JPY 1,800.
In addition, the Company received legal advice as necessary from TMI Associates, its legal advisor,
regarding the method and process of decision-making by the Board of Directors of the Company,
including various procedures related to the Transaction, and other points to be noted. the Company
received final proposal from the Tender Offeror on May 24, 2021, and received the report (the “Report”)
dated May 26, 2021 (For an outline of the Report and the specific activities of the Special Committee,
please see "(iii) Establishment of Independent Special Committee by the Company and Acquisition ofReport from Said Special Committee” under “ (6) Measures to Ensure Fairness of the Tender Offer, Suchas Measures to Ensure Fairness of the Tender Offer Price as Well as Measures to Avoid Conflicts ofInterest”).
Then, at its Board of directors’ meeting held on May 27, 2021, the Company resolved, based on thelegal advice received from TMI Associates, its legal advisor, and the content of the Company Share
Valuation Report (Defined in "(3) Matters Concerning Calculation" below.) obtained from Mizuho
Securities, the third-party valuation organization, as of May 26, 2021, to consider, to the maximum extent
possible, whether the Transaction will enhance the enterprise value of the Company, and whether theterms and conditions of the Transaction, including the Tender Offer Price, are appropriate. While giving
maximum consideration to the content of the Report submitted by the Special Committee, the Company
carefully discussed and deliberated from the perspectives of whether the Transaction would enhance theenterprise value of the Company and whether the terms and conditions of the Transaction, including the30

Tender Offer Price, were appropriate.
As a result, as stated in "a. Background of the Decision of the Tender Offeror to Implement the Tender
Offer, Purpose and Decision-Making Process, (ii) Background of the Decision to Implement the Tender
Offer, Purpose and Decision-Making Process, and Post-Tender Offer Management Policy" above, theCompany Group's main customers, pharmaceutical companies and medical device companies, areshortening development periods and curbing development costs in order to strengthen theircompetitiveness. Against the backdrop of a decrease in the number of clinical trials in Japan due to anincrease in international clinical trials, the growth of the outsourcing market for pharmaceutical andmedical device development is expected to slow down, and competition is expected to intensify further
in the business environment surrounding the Group. In order to maximize the enterprise value of theCompany Group from a medium- to long-term perspective under such a business environment, theCompany has come to the conclusion that it is necessary to establish a management system that enables
drastic and flexible decision-making in a flexible and prompt manner. Specifically, as described in "a.
Background of the Decision of the Tender Offeror to Implement the Tender Offer, Purpose and DecisionMaking Process, (ii) Background of the Decision to Implement the Tender Offer, Purpose and DecisionMaking Process, and Post-Tender Offer Management Policy" above, the Company has come to theconclusion that it needs to implement (i) strategic changes and active investment to respond to thediversification and complexity of needs of the Company Group, such as the increasingly sophisticateddrug discovery process, globalization accompanying the progress of international joint clinical trials, anddigitization, (ii) the development of a drug discovery support platform by participating in thedevelopment stage of new drugs upstream in clinical trials and providing integrated services fromupstream to downstream in drug development, such as research and development, clinical trials,
manufacturing sales, and licensing, and the resulting business model change, (iii) the reorganization ofinternal infrastructure and office functions to promote the virtualization of the Company Groupbusinesses, digitization, and departure from labor-intensive industries, and (iv) the roles of each theCompany Group.
Furthermore, in the event that the Company Group implements each of the above measures while
maintaining its listing, it is expected that the profit level on a consolidated basis with the Company Groupwill decrease at least for a short-term due to the implementation of alliance strategies and up-front
investments, and during that term fluctuations in business performance will not necessarily be fairly
evaluated by the capital markets, and as a result, the Company has come to believe that the share priceof the Company Shares may possibly decline, which will have a negative impact on the Company's
shareholders.
In addition, the disadvantages of delisting are limited because: (i) the Company currently is able tosecure its funding necessary to conduct its normal business activities; (ii) the need for large-scalefinancing through the equity financing is not high in the Company Group for the time being under the31low interest rate environment in recent indirect financing market; and (iii) the brand power and social
credibility of the Company Group are increasingly maintained and acquired through the Company’sbusiness activities.
In light of the above, the Company has come to the conclusion that, in order to establish a management
system that can flexibly and swiftly implement drastic and flexible decision-making while avoiding any
adverse effects that may occur to the shareholders of the Company, and to further improve the enterprisevalue of the Company Group from a medium- to long-term perspective, it is effective to take theCompany Shares private through the Transaction. In order to efficiently implement each of the abovemeasures, the Company has determined that it would be useful from the perspective of enhancing theeffectiveness of each of the above measures if the Company were to be taken private by a tender offeror
in which Y&G, a company which has objectives of, consulting and maintaining control of the Company,in which Mr. Yan, the Company's representative director who is well versed in the Company's businessand management environment, owns all of the voting rights, limited the Company's substantial
shareholders to Mr. Yan, Suzuken, MBKP, and the Company's officers and employees who share thesame awareness of the issues with Mr. Yan (For an overview of the capital relationship of the Company
after the Transaction, please see "(i) Overview of the Tender Offer"). The Company also has determinedthat the manner of the series of the Transaction, including the Absorption-Type Merger in order toestablish a shareholding structure that will enable efficient business operations after the implementationof the Transaction, is not unreasonable.
The Board of Directors of the Company has determined that the Tender Offer Price and the other terms
and conditions of the Tender Offer are reasonable for the shareholders of the Company and that theTender Offer will provide its shareholders with a reasonable opportunity to sell their shares of theCompany for the following reasons: (a) The Tender Offer Price (JPY 1,800) exceeds the upper end of
the calculation results based on the market price method, exceeds the average (JPY1,772) of the rangeof the calculation results based on the DCF method, and also above the average (JPY1,788) of the rangeof the calculation results based on the comparable multiple valuation method in the calculation results in
the Company Share Valuation Report by Mizuho Securities as described in "(3) Matters Regarding
Calculation" below; (b) the Tender Offer Prices is equal to the amount adding a 36.47 % premium(rounding to three decimal places; the same shall apply hereinafter in the calculation of premium rates)to the closing price of the Company Shares on the First Section of the TSE on May 26, 2021(JPY 1,319),
which is the business day immediately preceding the announcement date of the Tender Offer; a 39.53%
premium to the simple average of the closing prices of the Company Shares on the First Section of the
TSE for the past one (1) month up to that day (JPY 1,290) (rounding to the nearest whole number; thesame shall apply hereinafter in the calculation of the simple average of the closing price); a 50.25 %premium to the simple average of the closing prices of the Company Shares on the First Section of the
TSE for the past three (3) month up to that day (JPY 1,198); and a 60.14 % premium to the simple

32

average of the closing prices of the Company Shares on the First Section of the TSE for the past six (6)month up to that day(JPY 1,124), and it can be said to be a reasonable price as compared to the cases ofsimilar transactions conducted as part of a "management buyout (MBO)"; (c) it is recognized thatconsideration is given to the interests of minority shareholders, such as measures taken to eliminate
conflicts of interest as described "(6) Measures to Ensure Fairness of the Tender Offer, Such as Measures
to Ensure Fairness of the Tender Offer Price as Well as Measures to Avoid Conflicts of Interest" below;(d) the Tender Offer Price was determined after measures were taken to eliminate the conflicts of interest,
and after multiple rounds of discussions and negotiations equivalent to discussions and negotiations inarm's length transactions between the Company and the Tender Offeror; (e) the Special Committee hasreceived timely reports from the Company on the background and details of the discussions andnegotiations with the Tender Offeror regarding the Transaction, and has held the Special Committee
Meetings to discuss the policy of the discussions and negotiations with the Tender Offeror, and theSpecial Committee has given the Company its opinions and instructions. The price was determined after
the Company discussed and negotiated with the Tender Offeror with the utmost respect on the opinions,
instructions and requests rendered by the Special Committee.
Based on the above, the Board of Directors of the Company at its meeting held on May 27, 2021, toexpress its opinion in favor of the Tender Offer and to recommend that the shareholders of the Company
tender their shares in the Tender Offer.
(3) Matters Regarding Calculation(i)Name of a third-party valuation organization and Relationship with the Company and the Tender
Offeror, etc.
In expressing its opinion on the Tender Offer, the Company requested Mizuho Securities to calculate thevalue of the Company Shares as a measure to ensure the fairness and objectivity of the terms andconditions of the Transaction including the Tender Offer Price. Mizuho Securities is a financial advisor
and a third-party valuation organization independent from the Tender Offer Related Parties and theTransaction itself and is not a related party of the Tender Offer Related Parties. Although Mizuho
Securities holds a position as a shareholder of the Company, its ownership ratio is only 0.78%, and Mizuho
Securities have taken appropriate measures to prevent adverse effects, such as measures to isolate
information between the department in charge of financial advisory services and the calculation of thevalue of the Company's shares and the department in charge ofstrategic-shareholdings within Mizuho
Securities. Although Mizuho Bank Co., Ltd., a group company of Mizuho Securities, ("Mizuho Bank"),
has conducted loan transactions, etc. as part of its normal banking transactions with the Company andSuzuken, Mizuho Securities does not have any material conflict of interest with respect to the Transaction.
According to Mizuho Securities, pursuant to the applicable laws and regulations, including Article 36,
Paragraph 2 of the Act and Article 70-4 of the Cabinet Office Ordinance on Financial Instruments Business,33

etc., Mizuho Securities has established and implemented an appropriate system for the management ofconflicts of interest, including measures for the separation of information between Mizuho Securities andMizuho Bank, and conducted the calculation of the share value of the Company from a standpoint
independent of the status of lender of Mizuho Bank. In addition, Mizuho Securities has established andimplemented an appropriate conflict of interest management system, such as measures to isolate
information, within Mizuho Securities as described above, and the department in charge of financial
advisory services and the calculation of the value of the Company's shares calculated the value of theCompany Shares from a standpoint independent from the department in charge of strategic-shareholdings
without any effects of the conflict of interest about the Transaction because of the system. The company
selected Mizuho Securities as a third-party valuation organization independent from the Tender Offer
Related Parties and the Transaction based on the following factors: (ⅰ) appropriate measures such asmeasures to isolate information have been taken to prevent any adverse effect between Mizuho Securities
and Mizuho Bank as well as within Mizuho Securities as described above; (ⅱ) independence of Mizuho
Securities as a third-party valuation organization has been secured because the Company and Mizuho
Securities conduct transactions on arms-length conditions; and (ⅲ) Mizuho Securities has a track record
as a third-party valuation organization in the past in similar cases.
Furthermore, the Special Committee has approved appointments of the financial advisor and the thirdparty valuation organization by the Company in the light of the fact there is no issues pertaining to theirrespective independence and expertise as described above, and the Special Committee has well noted thatit has the right to seek for their professional advice as necessary.
(ii)Outline of Calculation
After considering the calculation method to be adopted for the calculation of the Company's share value
from among several valuation methods, Mizuho Securities adopted: the market price method because theCompany Shares are listed on the First Section of the Tokyo Stock Exchange and a market share priceexists; the DCF method to reflect the future business activities of the Company in the calculation; and thecomparable multiple valuation method because there are multiple listed companies engaging in relatively
similar businesses to the Company and it is possible to analogize the share value by comparing similar
companies. The Company obtained a share valuation report (the "Company Share Valuation Report") from
Mizuho Securities as of May26 2021. The Company has not obtained a written opinion (fairness opinion)from Mizuho Securities to the effect that the Tender Offer Price is fair to the Company's minor
shareholders from a financial point of view.
The range of per-share values of the Company shares calculated based on each of the above methods is
as follows.
the market price method：JPY 1,124~JPY 1,319

34

the DCF method：JPY 1,341~JPY 2,202
the comparable multiple valuation method：JPY 1,440~JPY 2,135
Under the market price method, the range of the value of the Company Shares per share is calculated
from JPY 1,124 to JPY 1,319 based on the closing price (JPY 1,319) of the Company Shares in the First
Section of the Tokyo Stock Exchange as of May 26, 2021, the average closing price (JPY 1,290) of theCompany Shares in the last one month (from April 27, 2021 to May 26, 2021), the average closing price(JPY 1,198) in the last three months (from March 1, 2021 to May 26, 2021), and the average closing price(JPY 1,124) in the last six months (from November 27, 2020 to May 26, 2021).
Under the DCF method, the free cash flow that the Company is expected to generate from the third
quarter of the fiscal year ending September 2021 onwards is discounted to its present value at a certain
discount rate, based on various factors such as the earnings forecasts and investment plans in the businessplans for the five fiscal years from the fiscal year ending September 2021 to the fiscal year ending
September 2025 prepared by the Company and publicly available information and the value per share of
the Company Share is calculated to be between JPY 1,341 and JPY 2,202.The discount rate applied is
6.0% to 7.0%, and the calculation of the terminal value is calculated by the perpetual growth rate method
and the EXIT multiple method, and the perpetual growth rate method uses a perpetual growth rate of 0.5% to 0.5%, and the EXIT multiple method uses a multiple of EBITDA to enterprise value of 7.1 times
to 10.3 times.
The business plan (consolidated) prepared by the Company, which was used by Mizuho Securities forthe DCF analysis, does not include fiscal years in which a significant increase or decrease in profit isexpected in comparison to the previous fiscal year. In addition, the enterprise value enhancement measuresenvisioned by the Tender Offeror after the realization of the Transaction have not been taken into accountin the following financial projections, as the Company is not aware of any matters that can bequantitatively evaluated as having the potential to have a material impact on the value calculation at thistime. For the reason above, the financial projections in the said business plan are not necessarily based on
the assumption of the execution of the Tender Offer.
The financial projections based on the business plan prepared by the Company, which was used as apremise for the calculation of the DCF method by Mizuho Securities, is as follows.
(In Millions of JPY)Net Sales

Fiscal year

Fiscal year

Fiscal year

Fiscal year

Fiscal year

endingendingendingendingendingSeptember 2021

September

September

September

September(6 months)

2022

2023

2024

2025

36,61082,79585,66535

87,82990,187

Operating
ProfitEBITDA
Free

cash

flows

1,812

5,266

6,273

7,302

7,881

2,910

7,827

8,894

9,780

10,419△715△2,461

5,105

6,095

6,370

According to Mizuho Securities, under the comparable multiple valuation method, the Company selected
CMIC HOLDINGS Co., Ltd., Linical Co., Ltd., I’rom Group Co., Ltd., Shin Nippon Biomedical
Laboratories, LTD., TRANS GENIC INC., Ina Research Inc., WDB coco Co., LTD., M3, Inc.,
PhoenixBio Co., Ltd., and INTAGE HOLDINGS Inc., as listed companies engaged in a relatively similarbusiness to that of the Company, and then calculated the share value of the Company Shares using themultiple of EBITDA to enterprise value, and calculated the range of shares value per share of the Company
Shares to be between JPY 1,440 and JPY 2,135.
In calculating the share value of the Company Shares, Mizuho Securities has, in principle, used theinformation provided by the Company and publicly available information without making any changes,
and has assumed that all such materials and information are accurate and complete, and has notindependently verified their accuracy and completeness. In addition, information regarding the Company's
financial projections is assumed to have been prepared reasonably based on the best forecasts andjudgments currently available to the Company. In addition, Mizuho Securities has not conducted any
independent valuation or appraisal on the assets and liabilities (including off-balance-sheet assets andliabilities, and other contingent liabilities) of the Company and its affiliates, nor has it requested any thirdparty valuation organization to provide an appraisal or assessment. Mizuho Securities' calculations reflect
the above information up to May 26, 2021.
(4) Post-Tender Offer Reorganization Policy (Matters Regarding the So-called “Two-Step Acquisition”)
According to the Tender Offeror, as is stated in “(i) Overview of the Tender Offer, (2) Grounds andReasons for opinion” above, if the Tender Offeror fails to acquire all of the Company Shares through theTender Offer, the Company will implement the following procedures and a series of procedures to makethe Tender Offeror and Y&G the sole shareholders of the Company in the following manner after conclusionof the Tender Offer.
Specifically, the Tender Offeror will request that the Company hold a special shareholders’ meeting (the“Special Shareholders’ Meeting”) which agenda will include implementation of Share Consolidation ofCompany Shares in accordance with Article 180 of the Companies Act, and subject to the completion of
the Share Consolidation, amendments to the Company’s articles of incorporation that will eliminate
provisions on a share unit number. The Tender Offeror, Y&G, and Tendering Officers and Employees who
own Non-tendered Shares, will approve each of the proposals above at the Special Shareholders’ Meeting.

36

If proposals concerning the Share Consolidation are approved at the Special Shareholders’ Meeting, theCompany shareholders will, as of the effective date of the Share Consolidation, each retain a number of theCompany Shares corresponding to the Share Consolidation ratio approved at the Special Shareholders’Meeting. If the Share Consolidation results in fractional shares that are less than one share, in accordancewith the procedures set forth in Article 235 of the Companies Act and other relevant laws and regulations,the Company shareholders retaining the fractional shares will be provided with money to be obtained
through the sale of Company Shares equivalent to the sum of the fractional shares (if the sum of thefractional shares is less than one share, the fractional shares will be discarded) by the Company or theTender Offeror. With respect to the sale price of the Company Shares equivalent to the sum of the fractional
shares, a petition for permission for voluntary sale will be filed with a court, after ensuring that as a resultof the sale of fractional shares, the monetary amount provided to each Company shareholder who did not
apply for the Tender Offer (excluding the Tender Offeror, the Company and Y&G) will be the same as thevalue calculated when the number of the Company Shares owned by each shareholder is multiplied by theTender Offer Price. Furthermore, although the consolidation ratio of the Company Shares has not yet been
decided currently, the consolidation ratio will be determined such that as a result of the Share Consolidation,
the shareholders of the Company who did not tender their Company Shares into the Tender Offer (excluding
the Tender Offeror, the Company and Y&G) will each hold fractional shares less than one share and thatafter the settlement of the sale of the sum of the fractional shares, the Tender Offeror and Y&G will own
all of the Company Shares (excluding treasury shares held by the Company).
For the purpose of protecting the rights of minority shareholders in relation to the Share Consolidation, if
the share consolidation is implemented, and results in fractional shares that are less than one share, theCompanies Act allows Company shareholders (excluding the Tender Offeror, the Company and Y&G) to
demand that the Company purchase all fractional shares less than one share owned by them at a fair price,
as well as to petition a court for a decision regarding the sale price of their Company Shares, in accordancewith Articles 182-4 and 182-5 of the Companies Act and other relevant laws and regulations. As describedabove, in connection with the Share Consolidation, the Company Shares to be owned by Company
shareholders who did not apply for the Tender Offer (excluding the Tender Offeror, the Company and Y&G)
will be fractional shares less than one share. Therefore, the Company shareholders who oppose the Share
Consolidation will be able to petition a court for a decision regarding the above sale price of their Company
Shares. If the above petition is made, the sale price will be ultimately determined by a court.
In implementing the above procedures, implementation methods and time may change, depending on thestatus of amendments to, execution of, and interpretation by relevant authorities of, the relevant laws andregulations, the percentage of ownership of shares, etc. of the Tender Offeror and Y&G after the Tender
Offer as well as the holding status of Company Shares of Company shareholders other than the Tender
Offeror and Y&G, etc. To be specific, if a shareholder holds the same number or more of the Company
Shares as the number of Company Shares owned by Y&G (the “Major Shareholder”), or when there is a37

reasonable possibility that a Major Shareholder will appear before the effective date of the Share
Consolidation, then, after the completion of the settlement of the Tender Offer, the Tender Offeror and Y&G
will, in lieu of the procedures for the Share Consolidation, take actions that are necessary for the Share
Consolidation of the Company Shares, which are intended to consolidate the shareholders of the Company
as the sole Tender Offeror, and will implement a share consolidation and then the Tender Offeror willtransfer the Company Shares to Y&G to make the Tender Offeror and Y&G the sole shareholders of theCompany. However, even in that event, measures will be taken by which monetary consideration will beultimately provided to each Company shareholder who did not apply for the Tender Offer (excluding theTender Offeror, the Company and Y&G), and the value of that consideration will be calculated to be theprice obtained when the number of Company Shares owned by each Company shareholder is multiplied by
the Tender Offer Price.
If the Special Shareholders’ Meeting is held, it will be held in late August 2021, but the Company willpromptly announce the specific procedures therefor, and implementation timing thereof, once they are
determined after consultation between the Tender Offeror and the Company. The Tender Offer is notintended to solicit the Company shareholders to approve the relevant proposals at the Special Shareholders’Meeting. In addition, the Company shareholders are each personally responsible for consulting with experts,
such as certified public tax accountants, regarding the handling of taxes relating to applications for theTender Offer, and the procedures described above.
The Tender Offeror and the Company intends to serially implement as described in “(i) Overview of theTender Offer” the Contribution by Officers and Employees, the Share Exchange, the Share Transfer and theAbsorption-type Merger described in “(ⅰ) Overview of the Tender Offer, (2) Grounds and Reasons for
opinion” above once a series of procedures to make the Tender Offeror and Y&G the sole shareholders of
the Company described above are completed.
(5) Possibility of Delisting
Currently, the Company Shares are listed on the First Section of the Tokyo Stock Exchange, and since theTender Offeror has not set a maximum planned purchase quantity with respect to the Tender Offer,depending on the results of the Tender Offer, it is possible that the Company Shares may be delisted
following the designated procedures in accordance with the delisting standards established by the Tokyo
Stock Exchange.
Furthermore, even if the delisting standards do not apply as of completion of the Tender Offer, in
accordance with the procedures described in “(4) Post-Tender Offer Reorganization Policy (Matters
Regarding the So-called “Two-Step Acquisition”)” above, the Tender Offeror plans to make the Tender
Offeror and Y&G the sole shareholders of the Company, and make the Company private. In such a case,
the Company Shares will be delisted following the designated procedures, in accordance with the delisting
standards established by the Tokyo Stock Exchange. After being delisted, it will be impossible to trade the38Company Shares on the First Section of the Tokyo Stock Exchange.
(6) Measures to Ensure Fairness of the Tender Offer, Such as Measures to Ensure Fairness of the Tender
Offer Price as Well as Measures to Avoid Conflicts of Interest
The Tender Offeror and the Company have taken the following measures to ensure the fairness of theTransaction, including the Tender Offer, from the perspectives of ensuring the fairness of the Tender Offer
Price, eliminating arbitrariness in the decision-making process leading to the decision to implement theTender Offer, and avoiding conflicts of interest, in light of the fact that the Tender Offer is part of theTransaction, which is a so-called management buyout (MBO), and that there are structural conflicts ofinterest.
The following descriptions of the measures taken by the Tender Offeror are based on the explanation
received from the Tender Offeror.
i. Company’s Acquisition of Share Valuation Report from a Third-Party Valuation
Organization independent from the Tender Offer Related Parties and the Transaction;
In expressing its opinion on the Tender Offer, the Company requested Mizuho Securities to calculate
the value of the Company Shares as a measure to ensure the fairness and objectivity of the terms andconditions of the Transaction including the Tender Offer Price. Mizuho Securities is a financial advisor
and third-party valuation organization independent from the Tender Offer Related Parties and theTransaction itself and is not a related party of the Tender Offer Related Parties. Although Mizuho
Securities holds a position as a shareholder of the Company, its ownership ratio is only 0.78%, andMizuho Securities have taken appropriate measures to prevent adverse effects, such as measures toisolate information between the department in charge of financial advisory services and the calculationof the value of the Company's shares and the department in charge of strategic-shareholdings within
Mizuho Securities. Although Mizuho Bank has conducted financing transactions as a part of normalbanking transactions with the Company and Suzuken, Mizuho Securities does not have any material
conflict of interest with respect to the Transaction. According to Mizuho Securities, pursuant to theapplicable laws and regulations, including Article 36, Paragraph 2 of the Act and Article 70-4 of the
Cabinet Office Order on Financial Instruments Business, etc., Mizuho Securities has established andimplemented an appropriate system for the management of conflicts of interest, including measures
for the separation of information between Mizuho Securities and Mizuho Bank, and has conducted
the calculation of the share value of the Company on a standpoint independent of the position of alender of Mizuho Bank. Mizuho Securities also has established and implemented an appropriate
system for managing conflicts of interest, such as measures to isolate information within Mizuho
Securities as described above, and the department in charge of financial advisory services and thecalculation of the value of the Company's shares

39

calculated the share value of the Company on a

standpoint independent from the department in charge of strategic-shareholdings without any effectsof the conflict of interest about the Transaction because of the system. The company selected Mizuho
Securities as a third-party valuation organization independent from the Tender Offer Related Parties
and the Transaction based on the following factors: (ⅰ) appropriate measures such as measures toisolate information have been taken to prevent any adverse effect between Mizuho Securities andMizuho Bank as well as within Mizuho Securities as described above; (ⅱ) independence of Mizuho
Securities as a third-party valuation organization has been secured because the Company and Mizuho
Securities conduct transactions on the just same terms and conditions as those of general trading
partners; (ⅲ) and Mizuho Securities has a track record as a third-party valuation organization in thepast in similar cases.
Furthermore, the Special Committee has approved Mizuho Securities appointed by the Company
as a Company's financial advisor and a third-party valuation organization because there is no problem
with their independence and expertise as described above, and the Special Committee has confirmedthat the Special Committee may receive their professional advice as necessary.
For an overview of the Company Share Valuation Report, please see "(3) Matters Regarding
Calculation" above.
ii. Advice given to Company was from an Independent Law Firm;
In order to ensure the fairness and appropriateness of the decision-making of the Board of Directorsof the Company regarding the Transaction including the Tender Offer, the Company has appointed
TMI Associates as a legal advisor independent from the Tender Offer Related Parties and theTransaction, and has received legal advice as necessary from TMI Associates regarding the method
and process of the decision-making of the Board of Directors of the Company including the various
procedures regarding the Transaction and other points to be noted. TMI Associates is not relevant to
the Tender Offer Related Parties and does not have any material interest in the Transaction. In
addition, the remuneration of TMI Associates is only on an hourly basis regardless of the success or
failure of the Transaction and does not include the contingent fee conditional on the consummationof the Transaction.
The Special Committee has approved TMI Associates appointed by the Company as the Company's
legal advisor because there is no problem with their independence and expertise, and the Special
Committee has confirmed that the Special Committee may receive their professional advice asnecessary.
iii. Establishment of Independent Special Committee by the Company and Acquisition of Report from
Said Special Committee
In light of the fact that the Transaction will be conducted as part of a so-called management buyout

40

(MBO), and that a structural conflict of interest may arise in the Company's consideration of theTransaction, the Company has resolved at its board of directors’ meeting held on March 27 2021 toestablish the Special Committee, which will be composed of members independent from the Tender
Offer Related Parties, in order to ensure fairness, transparency, and objectivity in the Company's
decision-making process and to eliminate arbitrariness in the decision-making process of theCompany's Board of Directors. The following five persons were selected as members of the Special
Committee: Mr. Yoshinori Ando (Representative Director of Office Yoshinori Ando Co., Ltd.) andMr. Haruo Funabashi (Representative Director of SIRIUS INSTITUTE Co., Ltd.), who are outside
directors of the Company, and Mr. Junichiro Tsuji (President of J&T Clinical Trial School), Mr.
Toshiaki Tochigi (Attorney at law, NOZOMI Sogo Attorneys at law) and Mr. Yoshiyuki Higuchi(Certified Public Accountant, Yoshiyuki Higuchi Certified Public Accountant Office), who are
outside auditors of the Company. In addition, the Special Committee has selected Mr. Yoshinori Andoas the Chairman of the Special Committee by mutual election. The Company has selected these fivepersons as the members of the Special Committee from the beginning, and there is no fact that theCompany has changed the members of the Special Committee. In addition, upon the establishmentof the Special Committee, the Company has determined in advance to respect the opinion of theSpecial Committee to the maximum extent when making. Furthermore, the remuneration of themembers of the Special Committee is only a fixed remuneration to be paid regardless of the content
of the Report and does not include the contingent fee conditional on the consummation of theTransactions including the Tender Offer.
The Company requested the Special Committee to consider (a) matters concerning the legitimacyof the purpose of the Transaction, (b) matters concerning the fairness of the procedures in thenegotiation process for the Transaction, (c) matters concerning the appropriateness of the terms andconditions of the Transaction, including the consideration to be delivered to minor shareholders
through the Transaction, and (d) whether or not the Transaction (including the expression of opinion
on the Tender Offer) is disadvantageous to the Company's minor shareholders based on (a) through(c) and other matters above (the matters in (a) through (d) are collectively "Matters for Consultation").
In addition, the Board of Directors has decided to grant the Special Committee (i) the authority to
conduct an investigation of the Transaction, (ii) the authority to request the Company to (a)communicate to the Tender Offeror proposals and other opinions or questions of the Special
Committee, (b) set up opportunities for the Special Committee to discuss and negotiate with theTender Offeror and (iii) the authority to independently appoint attorneys, third-party valuation
organizations, certified public accountants, and other advisors on the Company's expense.
The Special Committee met a total of 12 times from March 22, 2021 to May 25, 2021 (round 15
hours), and also carefully reviewed and discussed the Advisory Matters during each meeting date,with reports, discussions and examinations being made by e-mail and other methods. Specifically,41

the Special Committee received an explanation from the Tender Offeror on the purpose andsignificance of the Transaction, assurance of fairness regarding the Transaction, and matters related
to the management policy after the execution of the Transaction and conducted a question and answer
to the Tender Offeror. In addition, the Special Committee received explanations from the Company
regarding the nature of the business of the Company Group, the external environment, current
management issues, the content of the business plan on which the calculation of the share value of
the Company Shares by Mizuho Securities was based, matters related to the content of the Tender
Offeror's proposal, etc., and verified the reasonableness of such explanations through question andanswer sessions. Furthermore, with respect to the discussions and negotiations between the Tender
Offeror and the Company regarding the Transaction, the Special Committee has received timely
reports from the Company regarding the background and details of such discussions and negotiations,etc., and the Company has discussed such matters with the Special Committee, and the Special
Committee has been involved in the process of negotiations with the Tender Offeror by, for example,
having the Company conduct negotiations in accordance with the negotiation policy approved by theSpecial Committee. In addition, the Special Committee received from Mizuho Securities an
explanation of the calculation method and results of the share value of the Company's shares, andconducted a question and answer session regarding such calculation method and results from afinancial perspective, and verified the reasonableness thereof. Furthermore, the Special Committee
received from TMI Associates an explanation of the measures taken to reduce or prevent conflicts ofinterest in the Transaction, and conducted a question and answer session regarding the sufficiency ofsuch measures, etc. Based on the above information, the Special Committee discussed and reviewed
the issues raised in this consultation.
As a result of careful discussions and deliberations, the Special Committee unanimously submitted
the Report to the Board of Directors of the Company as of May 26, 2021 as follows.
(a) Matters concerning the legitimacy of the purpose of the Transaction
The Special Committee interviewed the Company and the Tender Offeror's related parties (Y&G
and Mr. Yan) regarding the purpose of the Transaction and the specific details of the Company's
enterprise value that is expected to be enhanced by the Transaction, and received explanations of
the details as described in "(a) Background to the decision to conduct the Tender Offer, the purposeand decision-making process, and the management policy after the Tender Offer" and "(c)Decision-making process and reasons for the Company's approval of the Tender Offer" of "(2)Outline and reasons for the opinion" above. As a result, the Special Committee has determinedthat there is nothing unreasonable in any of the significance or purpose of the Transaction
including the Tender Offer, that the Transaction is recognized as

the result of reasonableconsideration, that the Transaction is being conducted for the purpose of improving the enterprise42

value of the Company Group, and that the purpose of the Transaction is legitimate.
(b) Matters concerning the fairness of the procedures in the negotiation process for the Transaction(ⅰ) Method of the Company’s review
In considering the Transaction, the Company has carefully examined and discussed theappropriateness of the purchase conditions of the Tender Offer, including the Tender Offer Price,and the fairness of the series of procedures for the Transaction from the perspective of improving
the enterprise value of the Company and the common interests of its shareholders, whileobtaining advice and opinions, etc. from Mizuho Securities, a financial advisor and third-party
valuation organization and TMI Associates, a legal advisor each independent of the Tender Offer
Related Parties and the Transaction.
(ⅱ) Consultation and negotiation by the Company
The Company has conducted substantive discussions and negotiations with the Tender Offeror
on multiple occasions to ensure the fairness of the Tender Offer Price from the perspective ofprotecting the interests of minor shareholders.
Specifically, the Company, through Mizuho Securities, conducted repeated price negotiations
several times in response to Y&G's proposal about the Tender Offer Price. In such discussions
and negotiations, the Special Committee was substantially involved in the negotiation processwith the Tender Offeror, such as by receiving timely reports from the Company on the
background and details of such discussions and negotiations, discussing policies, etc. throughthe Special Committee, and stating its opinions.
As a result of those negotiations, the Tender Offer Price of JPY 1,800 was determined, and theprice increase of JPY 300 was extracted from Y&G's initial proposal of JPY 1,500 per share of
the Company Shares.
(ⅲ) Non-involvement of special interested parties in the negotiation process of the Transaction
The directors who will represent the Company in considering and negotiating the Transaction,
do not include any person who has a special interest in the Transaction including Mr. Yan and theTendering Officers and Employees, and there are no other facts that would lead to the inference
that the Tender Offeror or any other person who has a special interest in the Transaction has had
an undue influence on the Company's side in the course of discussions, examinations andnegotiations concerning the Transaction.
(ⅳ) Respect the opinions of this Special Committee to the maximum extent possible.
The Company has determined to respect the opinions of the Special Committee to the maximum

43extent when making decisions regarding the Transaction.
(ⅴ) Summary
Based on the above points, the Special Committee carefully discussed and reviewed the matter,and came to the conclusion that the procedures of the negotiation process for the Transaction are
fair.
(c) Matters concerning the appropriateness of the terms and conditions of the Transaction,
including the consideration to be delivered to minor shareholders through the Transaction,(ⅰ) Share value calculation report by Mizuho Securities
According to the Company Share Valuation Report obtained by the Company from Mizuho
Securities, a third-party valuation organization independent of the Tender Offer Related Parties
and the Transaction, the per-share value of the Company Shares ranges from JPY 1,124 to JPY
1,319 based on the market price method, from JPY 1,341 to JPY 2,202 based on the DCF method,and from JPY 1,440 to JPY 2,135 based on the comparable multiple valuation method.
The Tender Offer Price exceeds the upper end of the calculation results based on the market
price method, exceeds the average (JPY1,772) of the range of the calculation results based on
the DCF method, and also exceeds the average (JPY1,788) of the range of the calculation results
based on the comparable multiple valuation method in the Company Share Valuation Reportobtained from Mizuho Securities.
The Special Committee received a detailed explanation from Mizuho Securities regarding the
calculation method, etc., used in the valuation of the shares, reviewed and discussed with Mizuho
Securities and the Company, and conducted a question and answer session regarding the selectionof the valuation method and the preconditions, etc., including financial projections based on the
Company's business plan, which was the basis of the calculation. As a result of the Special
Committee’s review, the Special Committee found no unreasonable points in light of generalvaluation practices.
In addition, The tender Offer Prices (JPY 1,800) is amount adding a 36.47 % premium to theclosing price of the Company Shares on the First Section of the TSE on May 26, 2021(JPY 1,319),
Which is the business day immediately preceding the announcement date of the Tender Offer, a39.53% premium to the simple average of the closing price of the Company Shares on the First
Section of the TSE for the past one (1) month up to that day(JPY 1,290), a 50.25 % premium tothe simple average of the closing price of the Company Shares on the First Section of the TSE
for the past three (3) month up to that day(JPY 1,198) and a 60.14 % premium to the simple
average of the closing price of the Company Shares on the First Section of the TSE for the pastsix (6) month up to that day(JPY 1,124), and it can be said to be a reasonable premium as

44

compared to the average premium in other similar cases of tender offers as part of a "managementbuyout (MBO)".
(ⅱ) Procedural fairness of the negotiation process
As described in (b) above, the procedures of the negotiation process for the Transaction
including the Tender Offer are considered to be fair, and the Tender Offer Price is considered tohave been determined based on the results of such negotiations.
(ⅲ) The price to be paid in the procedures after the Tender Offer
The minor shareholders who did not tender their shares in the Tender Offer will eventually
receive cash in the procedures for going private, which are scheduled to be implemented after
the Tender Offer, and the amount of money to be delivered in this procedure will be calculated
to be the same as the Tender Offer Price multiplied by the number of the Company Shares heldby the shareholders, and it will be clearly stated in the press release, etc.
(ⅳ)Summary
In light of the above, the Special Committee has determined that the consideration to bedelivered to the Company's minor shareholders through the Transaction is appropriate after
careful discussion and consideration.
(d) Whether or not the Transaction is disadvantageous to the Company's minor shareholders
After careful consideration of the impact of the Transaction on the Company's minority
shareholders, the Special Committee has come to the conclusion that the Transaction, including
the expression of the Company's opinion in favor of the Tender Offer and the recommendation to
the Company's shareholders to accept the Tender Offer, is not disadvantageous to the Company's
minor shareholders because of in (a) through (c) above and as follows: (i) the Tender Offeror andthe Company have not entered into any agreement that would restrict the Company's contact witha competing takeover bidder other than the Tender Offeror, so that the opportunity for a tender
offer by a party other than the Tender Offeror will not be unreasonably restricted, and the Company
will not hinder the opportunity for a competing takeover bid; (ii) the Tender Offeror plans torequest the Company to hold an Special Shareholders’ Meeting promptly after the completion of
the settlement of the Tender Offer, which will include the consolidation of shares and the partial
amendment of the Articles of Incorporation to abolish the provision of the number of sharesconstituting one unit of shares on the condition that the consolidation of shares takes effect. Tender
Offeror will not adopt any method that does not ensure that the shareholders of the Company havethe right to request the purchase of their shares or the right to request the determination of the45

price; (ⅲ) the Tender Offer Period is scheduled to be set at 30 business days, which is longer thanthe minimum period (20 business days) stipulated by laws and regulations, and consideration is
being given to ensuring the fairness of the Tender Offer by planning to ensure that the Company's
shareholders have an appropriate opportunity to make a decision regarding the application for theTender Offer; and (ⅳ) the Tender Offeror has set the minimum number of shares to be purchasedin the Tender Offer at a number that exceeds the majority of the Company's shares held byshareholders who do not have a material interest in the Tender Offeror, the number equivalent tocalled the "majority of minorities". In light of the above, and after carefully considering the impactof the Transaction on the Company's minor shareholders.
iv. Approval of All Directors of the Company Without Conflicts of Interest and No Objection from any
Auditor; andThe Company carefully considered the terms and conditions of the Transaction, including theTender Offer, based on the Company Share Valuation Report obtained from Mizuho Securities andthe legal advice obtained from TMI Associates, while respecting the contents of the Report to the
maximum extent possible.
As a result, the Board of Directors of the Company has determined that the Transaction willcontribute to the enhancement of the enterprise value of the Company Group and that the Tender
Offer will provide a reasonable opportunity to sell the Company's shares. At its board of directors’
meeting held on May 27 2021, all of the Company's directors who participated in the deliberation
and resolution (seven directors, Kazuki Sekitani, Toshihiro Jike, Kenichi Yamamoto, Kaori Takeda,
Haruo Funabashi, Yoshinori Ando, and Junichi Taguchi, except Mr. Yan, Mr. Tatsuma Nagaoka and
Mr. Shuzo Orihashi), unanimously resolved to express their opinion in favor of the Tender Offer andto recommend that the Company's shareholders tender their shares in the Tender Offer. All four of
the Company's Corporate Auditors also (Yasuharu Tamai, Junichiro Tsuji, Toshiaki Tochigi, andYoshiyuki Higuchi) attended the above its board of directors’ meeting, and all of them expressed
their opinions that they had no objection to the above resolution.
In the Company’s directors, Mr. Yan, who is the representative director, is scheduled to continue tooperate the Company even after the Tender Offer, and Mr. Yan, Mr. Nagaoka, and Mr. Orihashi arescheduled to invest in the Tender Offeror after the Tender Offer. Therefore, from the viewpoint of
avoiding any conflict of interest, these three directors have not participated in the deliberations andresolutions of the Board of Directors mentioned above, nor have they participated in any discussions
or negotiations with the Tender Offeror in the Company’s standpoint.
v. Setting of a minimum planned purchase quantity exceeding the number equivalent tomajority of minority

46

The Tender Offeror sets the minimum number of shares to be purchased as 20,022,368 shares(ownership ratio: 45.21%). If the total number of the Tendered Share Certificates is less than theminimum number of shares to be purchased, Tender Offeror will not purchase all of the Tendered
Share Certificates. 20,022,368 shares (ownership ratio: 45.21%),, which is the minimum number ofshares to be purchased, exceeds 19,075,543 shares (ownership ratio: 43.07%) which is the sum of (i)15,678.393 shares ( (ownership ratio: 35.40%) which equals to the majority of 31,356,784 shares(ownership ratio: 70.80%) that is the number of shares obtained by subtracting from the total number
of issued shares as of March 31, 2021 as stated in the Company’s Second Quarterly Report(46,311,389 shares), the number of treasury shares owned by the Company as of March 31, 2021
(2,023,733 shares), the number of shares held by EPS EKISHIN (93,090 shares, ownership ratio:
0.21%), the Tendered Shares (except for the shares held by Mr. Yukihiro Sasaki (number of shares
held: 1,389,328 shares, ownership ratio: 3.14%) and Mr. Haruo Nishino (number of shares held:
1,387,828 shares, ownership ratio: 3.13%), who will not make Contribution by Officers andEmployees; 3,397,150 shares, ownership ratio: 7.67%), Y&G Non-tendered Shares (9,414,000
shares, ownership ratio: 21.26%) and Officers and Employees Non-tendered Shares (26,632 shares,
ownership ratio: 0.06%), and (ii) the number of shares held by Tendered Shares (except for the shares
held by Mr. Yukihiro Sasaki (number of shares held: 1,389,328 shares, ownership ratio: 3.14%) andMr. Haruo Nishino (number of shares held: 1,387,828 shares, ownership ratio: 3.13%), who will notmake Contribution by Officers and Employees; this is a majority of the number of shares held by theCompany’s shareholders who have no of interest in the Tender Offeror(i.e. “majority of minority”)).
Based on the above, if the Tender Offeror fails to obtain approval of the shareholders of the Company
other than those who have interest in the Tender Offeror, it will not carry out the Transaction
including the Tender Offer, respecting the intention of the minority shareholders of the Company.
vi. Objective Circumstances to Ensure Fairness of Tender Offer.
The Tender Offeror has set the Tender Offer Period at 30 business days, where the minimum period
stipulated by act is 20 business days. By setting a relatively long Tender Offer Period, the Tender
Offeror intends to ensure that the Company's shareholders have an opportunity to make anappropriate decision on whether to tender their shares in the Tender Offer, and also to ensure thatparties other than the Tender Offeror (hereinafter referred to as "Opposing Takeover Bidder") havean opportunity to make a counter offer for the Company's shares.
In addition, the Tender Offeror and the Company have not entered into any agreement that would
restrict such a competing offeror from having contact with the Company, such as an agreement
containing transaction protection clauses that would prohibit the Company from having contact withthe competing offeror. Thus, together with the establishment of the above-mentioned Tender Offer
Period, consideration has been given to ensuring the fairness of the Tender Offer by ensuring the47

opportunity for a counter-offer.
4 Items Regarding Critical Agreements Related to the Tender Offer
i. Tender Offer Agreements
In implementing the Tender Offer, the Tender Offeror entered into the Suzuken Tender Offer
Agreement with Suzuken on May 27, 2021. In the Suzuken Tender Offer Agreement, they agreed totender the Suzuken Tendered Shares, which were all of the Company Shares held by Suzuken (total
number: 1,504,000 shares, ownership ratio: 3.40%), into the Tender Offer.
In implementing the Tender Offer, the Tender Offeror entered into the Officers and Employees, Etc.
Tender Offer Agreement with each of the Tendering Officers and Employees on May 27, 2021. In
the Officers and Employees, Etc. Tender Offer Agreement, they agreed to tender to the Tendering
Officers and Employees Tendered Shares (total number: 4,340,306 shares, ownership ratio: 9.80%)
and not to tender 26,632 Officers and Employees Non-tendered Shares (ownership ratio: 0.06%) into
the Tender Offer and to exercise voting rights with respect to the Officers and Employees Nontendered Shares in accordance with the instructions of the Tender Offeror. In the Contribution by
Officers and Employees, Etc., the Tender Offeror and the Contributing Officers and Employees
agreed to make the Contribution by Officers and Employees. (Note 1)(Note 1) The Tender Offeror will set the amount at the same price as the paid-in amount per shareto be used for share exchange rate of the Share Exchange because the paid-in amount per commonshare of the Tender Offeror paid by the Contributing Officers and Employees related to theContribution by Officers and Employees is determined through consultations and negotiations
among Y&G, Suzuken, MBKP and the Contributing Officers and Employees and is set to JPY 1,800
as described above for the convenience of post-Transactions office functions of the Tender Offeror
and the Newly Formed Company . As described above, since the assessment of shares in the
Company to be used for conditions precedent for determining the amount of consideration to bereceived by Y&G in relation to the Share Exchange (common shares of the Tender Offeror)(Provided, however, that fractional shares shall be distributed pursuant to Article 234 of theCompanies Act.) will be set JPY 1,000 that is the same price as the Tender Offer Price, the Tender
Offeror does not believe that the paid-in amount per common share of the Tender Offeror paid by
the Contributing Officers and Employees in relation to the Contribution by Officers and Employees
is not favorable to the Tender Offer Price. Although obligations related to the Contribution by
Officers and Employees are provided in the Tender Offer Agreement, the Tender Offeror does notbelieve that the Contribution by Officers and Employees is a violation of the rules to set the sametender offer price (Article 27-2, Paragraph 3 of the Act) because (i) the purpose of tendering sharesof the Contributing Officers and Employees into the Tender Offer, the purpose of which is toenhance the degree of probability that the Tender Offer is made and to recover the existing
investment, and the Contribution by Officers and Employees, which is implemented in an aim toenable the Contributing Officers and Employees to be more involved in the management of theCompany as shareholders and to contribute to improvement of enterprise value of the Company, isdifferent, and (ii) the Contribution by Officers and Employees, which is not implemented under the48

condition that the Contributing Officers and Employees tender their shares into the Tender Offer,and that the Contribution by Officers and Employees will be implemented even if the tendering of
the Tender Offer by Contributing Officers and Employees is not implemented, and therefore does
not have direct relation with tendering shares into the Tender Offer, is a different type of investment
from tendering shares into the Tender Offer.
ii. Shareholders Agreement
With respect to the Transaction, Y&G and Suzuken entered into the Shareholders Agreement on
May 27, 2021. The Shareholders Agreement provides the matters regarding operation of the Tender
Offeror and the Company and that 30,000 Y&G Tendered Shares among the Company Shares heldby Y&G (ownership ratio: 0.75%) will be tendered in the Tender Offer and 9,414,000 Y&G Nontendered Shares among them (ownership ratio: 21.26%) will not be tendered in the Tender Offer.
In the Shareholders Agreement, with respect to the Transaction, it has been agreed that: (a) Y&G
would cause the Tender Offeror to implement the Tender Offer; (b) Y&G and Suzuken would,
subject to the completion of the settlement of the Tender Offer, cause the Company to hold ashareholders’ meeting wherein the resolution on the Share Consolidation would be resolved; (c) after
the completion of the Squeeze-Out, Y&G and Suzuken would cause the Company to implement theContribution by the Officers and Employees, the Share Exchange, the Share Transfer and theAbsorption-Type Merger in the said sequential order.
With respect to the matters regarding operation of the Tender Offeror and the Company, theShareholders Agreement provides that (a) the Tender Offeror shall have one director and one auditor
and Y&G has the right to appoint and remove the director and the auditor, (b) the Company shallhave no more than eleven directors, ten of whom Y&G has the right to nominate and remove andone of whom Suzuken has the right to nominate and remove, (c) the Company shall have one
representative director, of whom Y&G has the right to nominate and remove, (d) the Company shallhave no more than four auditors, three of whom Y&G has the right to nominate and remove and oneof whom Suzuken has the right to nominate and remove , (e) the accounting auditor of the Company
may be nominated by Y&G through prior consultation with Suzuken and may be removed only by
Y&G and (f) in principle, material matters of the Company such as change to the articles ofincorporation, liquidation or dissolution, issuance of shares, acquisition of treasury shares, approvalof share transfer, filing a petition for bankruptcy proceedings, execution of material contracts with
Y&G Group or Suzuken Group, change to material business contents and entity conversion andsqueeze out proceedings excluding the Share Consolidation shall be subject to prior approval of theboth parties and (g) the both parties shall cause the Company and its subsidiaries to disclose
appropriate management information to each party in a timely manner and to provide accountsettlement information required by each party to the reasonable extent.
Also, in the Shareholders Agreement, Y&G and Suzuken agreed not to: (i) directly or indirectly;

49

(a) enter into any agreement related to any transaction that would formally or substantially contradict
or conflict with the Transaction or that would make implementation of the Transaction difficult or
any other act related thereto (the “Conflicting Transactions”) or accede to the Conflicting
Transactions; (b) provide information related to the Company Group or other information to any
person other than the Tender Offeror in relation to the Conflicting Transactions; nor (c) apply orsolicit for application of the Conflicting Transactions or implement any consultation or negotiation
regarding the Conflicting Transactions or other related acts with any person other than the Tender
Offeror; and not to (ii) obtain or assign the Company Shares other than through application for theTender Offer (including but not limited to applications for any tender offer other than the Tender
Offer) or enter into any related agreement thereto.
In the Shareholders Agreement, it has been agreed that the Tender Offeror is caused to implement
the Suzuken’s Contributions. (Note 2)(Note 2) The Tender Offeror will set the amount at the same price as the paid-in amount per shareto be used for share exchange rate of the Share Exchange because the paid-in amount per commonshare of the Tender Offeror paid by the Suzuken related to Suzuken’s Contribution is determinedthrough consultations and negotiations among Y&G, Suzuken, MBKP and the Contributing Officers
and Employees and is set to JPY 1,000 as described above for the convenience of post-Transactions
office functions of the Tender Offeror and the Newly Formed Company . As described above, since
the assessment of shares in the Company to be used for conditions precedent for determining theamount of consideration to be received by Y&G in relation to the Share Exchange (common sharesof the Tender Offeror) (Provided, however, that fractional shares shall be distributed pursuant to
Article 234 of the Companies Act.) will be set JPY 1,800 that is the same price as the Tender Offer
Price, the Tender Offeror does not believe that the paid-in amount per common share of the Tender
Offeror paid by the Contributing Officers and Employees in relation to the Contribution by Officers
and Employees is not favorable to the Tender Offer Price. Although obligations related to Suzuken’s
Contribution are provided in the Tender Offer Agreement, the Tender Offeror does not believe that
the Contribution by Officers and Employees is a violation of the rules to set the same tender offer
price (Article 27-2, Paragraph 3 of the Act) because (i) the purpose of tendering shares of Suzuken
into the Tender Offer, the purpose of which is to enhance the degree of probability that the Tender
Offer is made and to recover the existing investment, and the Suzuken’s Contribution, which is
implemented in an aim to maintain capital relationship between the Company and Suzuken throughcontribution by Suzuken to the Tender Offeror as it is important to maintain and enhance friendly
relationship with Suzuken after the Transaction from the perspective of improving enterprise value,
is different, and (ii) Suzuken’s Contribution, which is not implemented under the condition that theSuzuken tenders its shares into the Tender Offer and that Suzuken’s Contribution will be
implemented even if the tendering of the Tender Offer by Suzuken is not implemented, and therefore

50does not have direct relation with tendering shares into the Tender Offer, is a different type ofinvestment from tendering shares into the Tender Offer.
5 Matters Concerning Inappropriate Profits Received From the Offeror or its Specially Related Parties
Not applicable
6 Policy for Responses Regarding Basic Policies on the Control of the Company
Not applicable
7 Inquiries to the Offeror
Not applicable
8 Request for Extension of the Tender Offer Period
Not applicable
9 Future Prospects
Please see “(4)Post-Tender Offer Reorganization Policy (Matters Regarding the So-called “Two-Step
Acquisition”) “and “(5) Possibility of Delisting”, “(ii) Background of the Decision to Implement theTender Offer, Purpose and Decision-Making Process, and Post-Tender Offer Management Policy”
under,” (2) Grounds and Reasons for opinion”, “3 Details and Grounds and Reasons for, the Opinion
Regarding the Tender Offer” above.
10 Others
i. Notice Regarding “Announcements regarding revision of expected dividends for the fiscal year
ending on September 2021”
The Company’s board of directors at its meeting held on May 27, 2021 resolved that thedividends of the fiscal year ending September 2021 will not be paid subject to the completion of
the Tender Offer. For further details, please refer to “Announcements regarding revision of
expected dividends for the fiscal year ending on September 2021” released today by the Company.
ii. The financial advisor of the Tender Offeror or the Company and the tender offer agent (including
their respective affiliates) may, within the ordinary course of their business, purchase, or conduct any
act toward the purchase of, the shares of the common stock of the Company for their own account or
for their customers’ accounts outside the Tender Offer prior to the commencement of the Tender Offer,or during of the Tender Offer Period, in accordance with the requirements of Rule 14e-5(b) under therules of the U.S. Securities Exchange Act of 1934 to the extent permissible under the laws and51

regulations in Japan related to financial instrument transactions and other applicable laws andregulations in Japan. The purchase may be conducted at the market price through market transactions
or at the price negotiated outside of the market. If any information concerning the purchase is disclosed
in Japan, the disclosure of that information will also be made on the English website (or by anotherdisclosure method) of the financial advisor or the tender offer agent that conducted the purchase.
End52