The transactions pursuant to the share exchange described in this press release involve securities of aJapanese company. The share exchange is subject to disclosure requirements of Japan that are different
from those of the United States. Financial information included in this document, if any, was excerpted
from financial statements prepared in accordance with foreign accounting standards that may not becomparable to the financial statements of United States companies.

It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal
securities laws, since the issuer is located in Japan and some or all of its officers and directors resideoutside of the United States. You may not be able to sue a Japanese company or its officers or directors in
a Japanese court for violations of the U.S. securities laws. It may be difficult to compel a Japanesecompany and its affiliates to subject themselves to a U.S. court’s judgment. You should be aware that theissuer may purchase securities otherwise than under the share exchange, such as in the open market or
through privately negotiated purchases.

This document has been translated from the Japanese-language original for reference purposes only. In
the event of any conflict or discrepancy between this document and the Japanese-language original, theJapanese-language original shall prevail in all respects.

May 14, 2021

To Whom It May Concern,
Company Name: Taisho Pharmaceutical Holdings Co., Ltd.
Representative:

Akira Uehara, Chief Executive Officer(First Section of TSE: Code 4581)

Contact:

Shinichi Tanaka, General Manager
Corporate Communications(Tel: +81-3-3985-2020)

Company Name: Biofermin Pharmaceutical Co., Ltd.
Representative:

Toshimichi Kunori, President andRepresentative Director(First Section of TSE: Code 4517)

Contact:

Hidehiko Kitamura, Director(Tel: +81-78-332-2890)

Notice Concerning the Execution of the Share Exchange Agreement to Make
Biofermin Pharmaceutical Co., Ltd. a Wholly-owned Subsidiary of
Taisho Pharmaceutical Holdings Co., Ltd.
1

Taisho Pharmaceutical Holdings Co., Ltd. [Headquarters: Toshima-ku, Tokyo, Chief Executive Officer:
Akira Uehara] (hereinafter, “Taisho HD”) and Biofermin Pharmaceutical Co., Ltd. [Headquarters: Kobe,
Hyogo, President and Representative Director: Toshimichi Kunori] (hereinafter, “Biofermin”) hereby
announce that they resolved at their respective boards of directors meeting held today to conduct a shareexchange through which Taisho HD will become a wholly-owning parent company and Biofermin will
become a wholly-owned subsidiary (hereinafter, the “Share Exchange”), and that they have executed ashare exchange agreement (hereinafter, the “Share Exchange Agreement”) between the companies
today.
The Share Exchange is scheduled to be conducted after the Share Exchange Agreement is approvedby resolution of the annual shareholders meeting of Biofermin scheduled to be held on June 24, 2021.
However, Taisho HD plans to conduct the Share Exchange through the simplified share exchange
procedure (kani kabushiki kokan) under the provision of Article 796, Paragraph 2 of the Companies Act,
without obtaining approval for the execution of the Share Exchange Agreement by resolution of its
shareholders meeting.
Prior to the effective date of the Share Exchange (scheduled on July 30, 2021), the common stock ofBiofermin (hereinafter, the “Biofermin Shares”) is scheduled to be delisted from the First Section of Tokyo
Stock Exchange, Inc. (hereinafter, the “TSE”) as of July 28, 2021 (with a final trading date of July 27,2021).

1.

Purposes of the Share Exchange
Taisho Group’s mission is “to contribute to society by creating and offering superior pharmaceuticals

and health-related products as well as healthcare-related information and services in socially responsible
ways that enrich people's lives by improving health and beauty”. As the leading company for domestic
OTC pharmaceuticals, the main Self-Medication Operation Group (the group handling OTC
pharmaceuticals and health related products) is strengthening its brand by developing and improving
products that meet the needs of consumers. In addition, the Prescription Pharmaceutical Operation Groupis working on creating distinctive new drugs as an R&D-oriented company, by focusing on the following
key domains: “orthopedic disorders”, “metabolic diseases”, “infectious diseases,” and “CNS diseases”
where Taisho HD has advantages in sales and development.
Meanwhile, since its establishment in 1917, Biofermin has specialized in the manufacture anddistribution of lactic acid bacteria products including “Biofermin”, established the “Biofermin” brand andactively contributed to promoting the health of consumers. Its philosophy has been “to protect intestinal
environments with medicines for lactic acid bacteria and to contribute to a society where all people canlead healthy lives” since its establishment. To fulfill its mission, Biofermin aims to expand its business andachieve sustainable growth by developing new products and strengthening its brand value in order tosolve the concerns of, and respond to the needs from, consumers. Biofermin also aims to enhance its
enterprise value by strengthening its business foundation through the promotion of research anddevelopment that focuses on probiotics including lactic acid bacteria and the investment in production
facilities.

2

In 2008, Taisho Pharmaceutical Co., Ltd. [Headquarters: Toshima-ku, Tokyo, Chief Executive Officer:
Shigeru Uehara] (hereinafter, “Taisho”) acquired 56.93% of the Biofermin Shares through a tender offer(in terms of voting rights after the tender offer) and made Biofermin its consolidated subsidiary. Since thecommencement of the capital alliance in the same year, Taisho HD and its subsidiaries, Taisho andBiofermin, have established various cooperative structures, including sales, through the execution of an
exclusive distributorship agreement in 2013 and increase of shareholding ratio. In terms of Biofermin’s
transactions of OTC drugs and quasi-drugs, Taisho started selling such drugs in October 2017, andTaisho has been conducting domestic sales of all products including prescription drugs since January
2021, and thereby further strengthening the cooperative structures.
Meanwhile, the business environment surrounding both companies has been changing significantly inrecent years. In Taisho Group’s Self-Medication Operation Group, due to the impacts of the COVID-19
pandemic, the market has drastically changed due to a decline in the inbound tourism demand as well aschanges in consumer needs, living environments and purchasing behaviors. In its Prescription
Pharmaceutical Operation Group, while the difficulty in developing new drugs has increased, the businessenvironment is becoming increasingly severe, with the NHI price revision, which was previously
implemented once every two years, being implemented in the off-years as well from fiscal year ending
March 31, 2022.
Under such a business environment, Taisho HD believes that, in the mid-and-long term businessstrategies of Taisho Group’s Self-Medication Operation Group and Prescription Pharmaceutical Operation
Group, the “Biofermin” brand that Biofermin owns and the know-how cultivated through technology andexperience accumulated over 100 years are respectively important management assets of Taisho Group,
and wishes to pursue the unknown potential of lactic acid bacteria by continuing to bring together the fullstrengths of both companies in terms of sales, research and development, quality assurance, andmanufacturing. Further, as for the overseas expansion of Biofermin, Taisho HD believes that it can utilize
Taisho’s overseas sales networks, which are expanding mainly in Southeast Asia and Europe, to proceedwith the overseas expansion of Biofermin’s products more quickly. Based on the above, Taisho HD
concluded that conducting the Share Exchange is the best choice for both Taisho HD and Biofermin, andat the beginning of February 2021, Taisho HD proposed the Share Exchange to Biofermin.
On the other hand, Biofermin also believes that its business environment is becoming increasingly
severe year by year due to the increasingly competitive environment in recent years, the NHI pricerevision in connection with the medical system reform, the decrease, etc. in sales figures and prescription
volume resulting from the decrease in the number of customers at drug stores and patients at medical
facilities with the public voluntarily refraining from going outside to prevent the spread of the COVID-19
pandemic.
Under such circumstances, Biofermin has carefully considered the proposal from Taisho HD, andTaisho HD and Biofermin held discussions on several occasions. As a result, Biofermin came to theconclusion that becoming a wholly-owned subsidiary of Taisho HD and deepening the group-wide
cooperative structures based on the relationship of trust that has been cultivated since becoming a
consolidated subsidiary of Taisho, and thereby making greater use of Taisho’s solutions and marketingsystems than ever before will contribute to the enhancement of Biofermin’s enterprise value. In particular,
as described above, the business environment is becoming increasingly severe, and since it has become3necessary to further focus on product development and basic research for future growth, Biofermin
believes that, through direct communication with Taisho’s sales divisions, it will become able to sharecustomer information, and develop products and engage in promotional activities more than ever in
response to the needs of consumers. In addition, it believes that technological synergies can be expected,
such as sharing Taisho’s technology in drug developments and the like, which Biofermin has no previous
experience in. Furthermore, it believes that utilizing Taisho’s overseas sales networks and sharing
information from other countries more than ever before are advantages that Biofermin, which is seeking to
expand its business overseas to achieve sustainable expansion as the Japanese population is decreasing,can achieve.
As a result, Taisho HD and Biofermin determined that it is desirable to make Taisho HD the wholly
owning parent company of Biofermin by conducting the Share Exchange and to promote the sustainablegrowth of Biofermin through the establishment of a flexible and prompt decision making system. Therefore,both companies resolved to conduct the Share Exchange and executed the Share Exchange Agreement
today.
After conducting the Share Exchange, Taisho HD and Biofermin will further share information andhuman resources between the companies and mutually combine their management resources more thanever before. In addition, through the Share Exchange, Biofermin will be able to eliminate the need torespond to general shareholders as well as the cost of handling and maintaining the listing, dissolve
potential conflicts of interest between Taisho HD and its minority shareholders, establish an efficientmanagement system including a rapid decision making system, and concentrate management resources
on business strategies. Taisho HD believes that the Share Exchange will enable the implementation of
Biofermin’s bold and flexible business strategy and significantly contribute to the continued growth anddevelopment of Biofermin, as well as increase the corporate value of the entire group from a
mid-and-long-term perspective.

2.

Outline of the Share Exchange(1) Schedule for the Share Exchange
Record date for the shareholders meeting (Biofermin)

March 31, 2021

Date of the resolution of the board of directors for the
execution of the Share Exchange Agreement (Taisho HD

May 14, 2021

and Biofermin)
Date of execution of the Share Exchange Agreement(Taisho HD and Biofermin)
Date of the resolution of the annual shareholders meeting
to approve the Share Exchange (Biofermin)

May 14, 2021

June 24, 2021 (scheduled)

Final trading date of shares (Biofermin)

July 27, 2021 (scheduled)

Delisting date of shares (Biofermin)

July 28, 2021 (scheduled)

Scheduled date of the Share Exchange (effective date)July 30, 2021 (scheduled)(Note 1) Taisho HD plans to conduct the Share Exchange through the simplified share exchange
procedure (kani kabushiki kokan) under the provision of Article 796, Paragraph 2 of the4Companies Act, without obtaining approval for the execution of the Share Exchange
Agreement by resolution of its shareholders meeting.
(Note 2) The schedule of the Share Exchange may be subject to change upon discussion andagreement between both companies where necessary in the course of the procedures of
the Share Exchange or for other reasons.

(2) Method of the Share Exchange
Taisho HD and Biofermin will conduct the Share Exchange with Taisho HD as being thewholly-owning parent company and Biofermin as being the wholly-owned subsidiary. The Share
Exchange will be conducted after the Share Exchange Agreement is approved by resolution of theannual shareholders meeting of Biofermin to be held on June 24, 2021. Taisho HD plans to conduct the
Share Exchange through the simplified share exchange procedure (kani kabushiki kokan) under theprovision of Article 796, Paragraph 2 of the Companies Act, without obtaining approval for the executionof the Share Exchange Agreement by resolution of its shareholders meeting.

(3) Details of Allotment in the Share Exchange
Taisho HD

Biofermin(wholly-owning parent(wholly-owned subsidiarycompany resulting from theresulting from the share

share exchange)

exchange)1

0.50

Allotment ratio in the Share
Exchange
Number of shares to be delivered

Common stock of Taisho HD: 2,164,627 sharesthrough the Share Exchange(scheduled)(Note 1) Allotment ratio pertaining to the Share Exchange
For each share of the Biofermin Shares, 0.50 shares of the common stock of Taisho HD(hereinafter, the “Taisho HD Shares”) will be allotted and delivered. However, no shares willbe allotted in the Share Exchange for the Biofermin Shares held by Taisho HD (7,632,021
shares as of the date of this press release).
The abovementioned allotment ratio in the Share Exchange (hereinafter, the “Share
Exchange Ratio”) may be subject to change upon discussion and agreement between bothcompanies in the event of any material change to the grounds on which the valuation isbased.
(Note 2) Number of the Taisho HD Shares to be delivered through the Share Exchange
Upon the Share Exchange, Taisho HD will allot and deliver to shareholders of Biofermin(provided, however, that such shareholders shall exclude Taisho HD) at the time
immediately preceding the time at which Taisho HD acquires all of Biofermin’s outstanding
shares (excluding the Biofermin Shares held by Taisho HD) through the Share Exchange(hereinafter, the “Record Time”) the Taisho HD Shares equivalent to the amount obtainedby multiplying the Share Exchange Ratio by the total number of the Biofermin Shares it

5

holds. Upon such delivery, Taisho HD will allot shares from the treasury shares it holds, andwill not issue new shares upon the allotment in the Share Exchange.
By resolution of the board of directors to be held by the day immediately preceding theeffective date of the Share Exchange, Biofermin plans to cancel all of its treasury shares
held at the Record Time (including the shares acquired in response to dissenting
shareholders’ share purchase request regarding the Share Exchange under Article 785,
Paragraph 1 of the Companies Act) on or before the Record Time. The number of shares tobe delivered through the Share Exchange may be subject to change in the future upon theacquisition or cancellation of treasury shares by Biofermin or for other reasons.
(Note 3) Treatment of shares less than one unit
The shareholders of Biofermin who will hold shares that are less than one unit of the
Taisho HD Shares (less than 100 shares) in conjunction with the Share Exchange will beentitled to use the following program for the Taisho HD Shares. Shares less than one unit
are not allowed to be sold in the financial instruments exchange markets.
Purchase for shares less than one unit (sale of shares less than 100 shares)
Pursuant to the provisions of Article 192, Paragraph 1 of the Companies Act,
shareholders who hold less than one unit of the Taisho HD Shares may request that
Taisho HD purchase their shares less than one unit.
(Note 4) Treatment of fractional shares less than one share
In accordance with Article 234 of the Companies Act and other relevant laws andregulations, Taisho HD will sell the number of Taisho HD Shares equivalent to the total
number of such fractional shares (if there is any fractional share less than one share in the
total number, such fractional share shall be rounded down), and will pay in cash theproceeds of such sale in proportion to such fractional share to shareholders of Biofermin
who will receive the allotment of the Taisho HD Shares for fractions constituting less than
one share under the Share Exchange.

(4) Treatment of Stock Acquisition Rights and Bonds with Stock Acquisition Rights in Conjunction with
the Share Exchange
Biofermin will extinguish all of the stock acquisition rights issued and outstanding by Biofermin byacquiring such rights without consideration from holders of such stock acquisition rights and cancellingsuch rights by not later than the day immediately preceding the effective date.
Biofermin has not issued any bonds with stock acquisition rights.

3. Basis, etc. for Details of Allotment of Shares Pertaining to the Share Exchange(1) Basis and Reasons for Details of Allotment
In order to ensure that the Share Exchange Ratio to be used in the Share Exchange, which is statedin “(3) Details of Allotment in the Share Exchange” in “2. Outline of the Share Exchange” above, will becalculated fairly and appropriately, Taisho HD and Biofermin have decided to separately retain athird-party valuation agent that is independent of both companies to calculate the share exchange ratio.
Taisho HD appointed SMBC Nikko Securities Inc. (hereinafter, “SMBC Nikko Securities), and Biofermin
6appointed Daiwa Securities Co. Ltd. (hereinafter, “Daiwa Securities”) as their third-party valuation agent,respectively.
As described in “(4) Measures to Ensure Fairness (Including Measures to Avoid Conflict of Interests)”
below, Taisho HD has carefully discussed and examined the Share Exchange Ratio based on thevaluation report of the share exchange ratio received from SMBC Nikko Securities, which is thethird-party valuation agent of Taisho HD, advice from Anderson Mori & Tomotsune, which is its legal
advisor, results of the due diligence that Taisho HD conducted on Biofermin and the like. As a result,since Taisho HD has reached a decision that the Share Exchange Ratio is appropriate and willcontribute to the interests of its shareholders, it has determined that it is appropriate to implement the
Share Exchange with the Share Exchange Ratio.
As described in “(4) Measures to Ensure Fairness (Including Measures to Avoid Conflict of Interests)”
below, Biofermin has carefully discussed and examined the Share Exchange Ratio based on thevaluation report of the share exchange ratio received from Daiwa Securities, which is the third-party
valuation agent of Biofermin, advice from Nakamura, Tsunoda & Matsumoto, which is its legal advisor,
results of the due diligence that Biofermin conducted on Taisho HD, and instructions and advice
received from a special committee comprised only of members who are independent of, and have nointerest in, Taisho HD, which is the majority shareholder of Biofermin (hereinafter, the “Special
Committee”; for further details, see “(4) Measures to Ensure Fairness (Including Measures to Avoid
Conflict of Interests)” below) and contents of the report from the Special Committee received on May 14,
2021 (for further details, see ”(3) Outline of Opinion Obtained from a Party who has No Conflicts ofInterest in a Controlling Shareholder Stating that the Transaction, etc. would Not be Disadvantageous to
the Minority Shareholders” of “8. Matters Related to Transactions, Etc. with Controlling Shareholders”
below) and the like. As a result, since Biofermin has reached a decision that the Share Exchange Ratio
is appropriate and will contribute to the interests of its shareholders as explained in “(ii) Outline of theValuation” of “(2) Matters Concerning the Valuation” below, it has determined that it is appropriate toimplement the Share Exchange with the Share Exchange Ratio.
In this way, Taisho HD and Biofermin have carefully examined the Share Exchange by referring to theresults of the valuation of the share exchange ratio that each of them were provided by a separate
third-party valuation agent and to the results of due diligence that they conducted on each other, andhave had continuous negotiations and discussions by comprehensively considering factors including
the financial conditions, asset conditions and future outlook of both companies. As a result, Taisho HD
and Biofermin have reached a decision that the Share Exchange Ratio is appropriate and will contributeto the interests of their respective shareholders, and therefore, they have concluded that it isappropriate to implement the Share Exchange using the Share Exchange Ratio. The Share Exchange
Ratio may be amended upon discussion between the two companies in the event of any materialchange in the conditions on which the valuation is based in accordance with the Share Exchange
Agreement.

(2) Matters Concerning the Valuationi.

Names of the Valuation Agents and their Relationships with the Companies

7

Neither SMBC Nikko Securities, which is the third-party valuation agent of Taisho HD, nor Daiwa
Securities, which is the third-party valuation agent of Biofermin, are a related party of Taisho HD or
Biofermin. They are independent valuation agents and do not have any material interest that must be
stated in relation to the Share Exchange.

ii.

Outline of the Valuation
With respect to Taisho HD, SMBC Nikko Securities performed its valuation by adopting the average
market price analysis (in which, SMBC Nikko Securities set May 13, 2021 as the valuation referencedate, and conducted the analysis by using the average closing price of Taisho HD shares on the firstsection of the TSE for the last one month from April 14, 2021 to valuation reference date, for the last
three months from February 15, 2021 to the valuation reference date, and for the last six months from
November 16, 2020 to the valuation reference date) as Taisho HD is listed in a financial instruments
exchange and its market share price exists.
With respect to Biofermin, SMBC Nikko Securities performed its valuation by adopting the average
market price analysis (in which, SMBC Nikko Securities set May 13, 2021 as the valuation referencedate, and conducted the analysis by using the average closing price of Biofermin shares on the firstsection of the TSE for the last one month from April 14, 2021 to the valuation reference date, for thelast three months from February 15, 2021 to the valuation reference date, and for the last six months
from November 16, 2020 to the valuation reference date) as Biofermin is listed in a financial
instruments exchange and its market share price exists. SMBC Nikko Securities also used thediscounted cash flow method (hereinafter, the “DCF Analysis”) in valuation for Biofermin so that thevaluation will reflect the future conditions of Biofermin’s business activities. In the DCF Analysis,
Taisho HD independently reviewed the financial projections provided by Biofermin, and the shareprice is calculated by discounting the future cash flows, which are based on financial projections fromthe fiscal year ending March 2022 until the fiscal year ending March 2026, at a certain discount rate
to give their present values.
The range of the exchange ratio of Biofermin shares is as follows where the share value per shareof Taisho HD is 1.
Adopted method
Taisho HD
Average market price analysis

Calculated result of the share
Biofermin

exchange ratio

Average market price analysis

0.382～0.443

DCF Analysis

0.439～0.565

When calculating the share exchange ratios above, SMBC Nikko Securities used information
provided by Biofermin or disclosed publicly on the assumption that all of the materials and information
are accurate and complete, and therefore, SMBC Nikko Securities has not made an independent
study of the accuracy and completeness thereof. Also, SMBC Nikko Securities has not made an
independent assessment, appraisal or evaluation and has not requested an appraisal or evaluation to
any third-party agent in connection with the value of assets or liabilities (including contingent
liabilities) of Biofermin, including the analysis and assessment of their respective assets and liabilities.
The valuation of the share exchange ratio by SMBC Nikko Securities reflects information and8economic conditions up to May 13, 2021, and it is assumed that the financial projections of Bioferminwere reasonably examined or prepared by the management of both companies based on the best
projection and determination available at that time.
In the financial projections that SMBC Nikko Securities used as a basis for the valuation in the DCF
Analysis, a significant increase or decrease of the profit is expected. Specifically, as it is expectedthat its operating profit will decline significantly, with the effects of the cost for the redevelopment of afactory that Biofermin started constructing in April 2021 concentrating in the fiscal year ending March
2024, Biofermin expects a significant decrease in profit from the fiscal year ending March 2023, andexpects a significant increase in profit in the next fiscal year ending March 2025 due to the reductionof its burden. The financial projections do not reflect the implementation of the Share Exchange.
Meanwhile, with respect to Taisho HD, Daiwa Securities performed its valuation by adopting themarket price analysis as Taisho HD is listed in a financial instruments exchange and its market shareprice exists. In performing the market price analysis, Daiwa Securities set May 13, 2021 as thevaluation reference date, and used the simple average closing prices of Taisho HD shares on the firstsection of the TSE for the last one month, three months and six months before the valuationreference date.
With respect to Biofermin, Daiwa Securities performed its valuation by adopting the market priceanalysis as Biofermin is listed in a financial instruments exchange and its market share price exists.
Daiwa Securities also used the DCF Analysis in valuation for Biofermin so that the valuation willreflect the future conditions of business activities.
In performing the market price analysis, Daiwa Securities set May 13, 2021 as the valuationreference date, and used the simple average closing prices of Biofermin shares on the first section of
the TSE for the last one month, three months and six months before the valuation reference date.
In the DCF Analysis, the enterprise value is appraised by discounting the future cash flows, which
are based on financial projections from the fiscal year ending March 2022 until the fiscal year ending
March 2028 prepared by Biofermin, at a certain discount rate to give their present values. The
perpetual growth method was used to calculate the continuous value under the DCF Analysis.
Specifically, it is calculated at a discount rate of 7.1% to 8.1% and a permanent growth rate of 0.0% to
0.5%.
The range of the exchange ratio of Biofermin shares is as follows where the share value per shareof Taisho HD is 1.
Adopted method
Taisho HD
Market price analysis

Calculated result of the share
Biofermin

exchange ratio

Market price analysis

0.382～0.443

DCF Analysis

0.442～0.539

When calculating the share exchange ratio, Daiwa Securities used information provided by
Biofermin or disclosed publicly, without modifying it in principle, on the assumption that all of thematerials and information subject to the analysis and examination are accurate and complete, andthat there is no fact that may materially affect the valuation of the share exchange ratio among facts
that are not disclosed to Daiwa Securities. Therefore, Daiwa Securities has not made an independent9

study of the accuracy and completeness thereof. Also, Daiwa Securities has not made an
independent assessment, appraisal or evaluation and has not requested an appraisal or evaluation to
any third-party agent in connection with the value of assets or liabilities (including contingent
liabilities) of Biofermin, including the analysis and valuation of their respective assets and liabilities. It
is assumed that the financial projections of Biofermin that were referred to in the valuation wereprepared reasonably by the management of Biofermin based on the best projection anddetermination available at that time. The valuation reflects information and economic situation up to
May 13, 2021. Daiwa Securities does not express its opinion regarding fairness of the shareexchange ratio to be used in the Share Exchange by providing the result of the valuation of such ratio.
In the financial projections that Daiwa Securities used as a basis for application of the DCF Analysis,a significant increase or decrease of the profit is expected. Specifically, although the operating profit
decreased in the fiscal year ended March 2021 due to an increase in investments, Biofermin expects
a significant increase in its profit in the fiscal year ending March 2022 primarily due to the expected
expansion of Shin Biofermin S series with the effect of the aforementioned investments. In the fiscal
year ending March 2024, Biofermin expects a significant decrease in its profit from the fiscal year
ending March 2023 since its operating profit is expected to decline significantly due to the temporary
increase in the cost for the redevelopment of a factory that Biofermin started constructing in April
2021. However, as the cost is expected to decrease in the fiscal year ending March 2025, Biofermin
expects a significant increase in its profit in the same fiscal year. The financial projections do notreflect the implementation of the Share Exchange.

(3) Prospects of the Delisting and Reasons for the Delisting
By conducting the Share Exchange, Biofermin will become a wholly owned subsidiary of Taisho HD
on the effective date of the Share Exchange (scheduled to be July 30, 2021), and Biofermin shares will
be delisted as of July 28, 2021 (the final trading date is scheduled to be July 27, 2021) in accordancewith the TSE’s delisting criteria. If the planned effective date of the Share Exchange is changed, thedelisting date will also be changed.
Although it will no longer be possible to trade Biofermin shares on the TSE after its delisting, Taisho
HD shares, which will be allocated to the shareholders of Biofermin through the Share Exchange, willremain listed on and can be traded in the TSE even after the effective date of the Share Exchange.
Therefore, as for the shareholders of Biofermin who hold at least 200 shares of Biofermin as of theRecord Time and, through the Share Exchange, will be allotted at least 100 shares of Taisho HD, whichcollectively constitute one Taisho HD share unit, Taisho HD and Biofermin believe that they cancontinue to provide liquidity for the portion of shares constituting at least one share units although suchshareholders might also be allotted a number of shares less than one share unit in proportion to thenumber of shares they hold.
On the other hand, shareholders of Biofermin who hold less than 200 shares of Biofermin as of theRecord Time will be allotted less than 100 shares of Taisho HD, which are less than one Taisho HD
share unit. They will be granted a right to receive dividends of Taisho HD with a reference date after theeffective date of the Share Exchange according to the number of the shares less than one share unit,
but such shares cannot be sold in the financial instruments exchange market. Shareholders who hold10

shares less than one share unit may request Taisho HD to purchase the shares they hold. For details ofsuch procedures, please see “(Note 3) Treatment of shares less than one unit” in “(3) Details of
Allotment in the Share Exchange” of “2. Outline of the Share Exchange” above. For details of handlingof fractional shares less than one share in case such fractional shares remain after the Share Exchange,
please see “(Note 4) Treatment of fractional shares less than one share” in “(3) Details of Allotment in
the Share Exchange” of “2. Outline of the Share Exchange” above.
The shareholders of Biofermin may continue to trade the Biofermin shares they hold on the TSE as
before and may exercise their legal rights stipulated in the Companies Act and other relevant laws or
regulations until July 27, 2021 (scheduled), which is the final trading date of shares.

(4) Measures to Ensure Fairness (Including Measures to Avoid Conflict of Interests)
As Taisho HD already owns 7,632,021 shares of Biofermin (the ratio of voting rights to total number ofissued shares outstanding as of March 31, 2021 (12,154,000 shares) is 63.8%) and Biofermin is a
consolidated subsidiary of Taisho HD, Taisho HD and Biofermin determined that it is necessary toensure the fairness of the Share Exchange and have implemented measures to ensure the fairness asfollows.

i.

Obtaining of Valuation Reports from Independent Third-Party Valuation Agents
Taisho HD appointed SMBC Nikko Securities as its third-party valuation agent, which is
independent of both of Taisho HD and Biofermin, and obtained a valuation report for the shareexchange ratio dated May 14, 2021. For the outline of the report, please see “(2) Matters
Concerning the Valuation.”On the other hand, Biofermin appointed Daiwa Securities as its third-party valuation agent, whichis independent of both of Taisho HD and Biofermin, and obtained a valuation report for the shareexchange ratio dated May 13, 2021. The compensation for Daiwa Securities includes contingent
fees to be paid contingent upon the execution of the Share Exchange. For the outline of the report,
please see “(2) Matters Concerning the Valuation.”
Neither Taisho HD nor Biofermin has obtained a written opinion (fairness opinion) from either of
their third-party valuation agents stating that the Share Exchange Ratio is appropriate or fair from afinancial perspective.

ii.

Advice from Independent Law Firms
Taisho HD appointed Anderson, Mori & Tomotsune, and Biofermin appointed Nakamura,Tsunoda & Matsumoto as a legal advisor for the Share Exchange, and they have received advice
from each legal advisor regarding procedures of the Share Exchange and processes ofdecision-making method and processes from legal aspects. Anderson, Mori & Tomotsune andNakamura, Tsunoda & Matsumoto are independent of both of Taisho HD and Biofermin, and do
not have any material interest in them.

iii.

Obtaining of a Report from Special Committee Having No Interest in Biofermin11In order to ensure that Biofermin’s decision regarding the Share Exchange is made carefully, toeliminate the risk of arbitrariness and conflicts of interest in, and ensure fairness of, thedecision-making process by Biofermin’s board of directors, and to confirm that the board of
directors’ decision to implement the Share Exchange will not be disadvantageous to the minority
shareholders of Biofermin, Biofermin has established the Special Committee on February 17,
2021 that is comprised of the following three persons: Mr. Hitoshi Inuga (an outside director of
Biofermin (an audit and supervisory committee member)) and Mr. Toru Kawasaki (an outside
director of Biofermin (an audit and supervisory committee member)) both of whom have nointerest in Taisho HD and serve as an outside director of Biofermin and also as an independent
officer registered on the TSE, and of Mr. Takashi Goto (an attorney at SHIOMIZAKA), an external
expert who has no interest in Taisho HD and Biofermin. When examining the Share Exchange,
Biofermin has consulted with the Special Committee on the following matters (collectively, the"Matters of Inquiry"): (i) whether the purpose of the Share Exchange is reasonable (including
whether the Share Exchange will contribute to the enhancement of Biofermin’s enterprise value),(ii) whether fairness of the conditions of the Share Exchange is ensured, (iii) whether the benefit ofshareholders of Biofermin is sufficiently considered through fair procedures in the Share
Exchange, and (iv) in addition to (i) through (iii) above, whether it can be considered that the
Share Exchange will not to be disadvantageous to the minority shareholders of Biofermin.
Biofermin’s board of directors has resolved that the decision of the board regarding the Share
Exchange shall be made with utmost respect to the judgements of the Special Committee, andthat the board shall grant the Special Committee a right to entrust an advisor of the Special
Committee with examination of the Matters of Inquiry above if necessary (in such case, cost ofsuch entrustment shall be borne by Biofermin). Exercising this right, the Special Committee has
appointed Mr. Shinsuke Hasegawa (a certified accountant and tax accountant, the representativeof Hasegawa CPA office) as its financial advisor. Biofermin’s board of directors has resolved that
although negotiations related to the Share Exchange be conducted by Biofermin’s board of
directors, the board shall ensure that the Special Committee may substantially affect thenegotiation process regarding the terms and conditions of the transaction by reporting the statusof the negotiation to the Special Committee in a timely manner, hearing their opinion on important
aspects and conducting negotiations taking into consideration instructions and requests from theSpecial Committee. Also, Biofermin’s board of directors has resolved that it shall not execute theshare exchange agreement for the Share Exchange if the Special Committee determines that theshare exchange ratio or other conditions of the Share Exchange are not appropriate.
The Special Committee held 9 meetings in total, which amounted to 9 hours and 26 minutes fromFebruary 17, 2021 to May 13, 2021. Outside the meetings, the Special Committee also carefully
examined the Matters of Inquiry by expressing opinions, exchanging information and gathering
information through emails and other means, and by holding discussions when necessary. Morespecifically, at the first meeting of the Special Committee, the Special Committee approved theappointments, which were made by Biofermin, of Daiwa Securities as a financial advisor and athird-party valuation agent, and of Nakamura, Tsunoda & Matsumoto as a legal advisor after
confirming that they had no problems with their independence. Also, the Special Committee has
12approved the selection of directors at Biofermin who would be engaged in the examination,negotiations and determinations concerning the Share Exchange after confirming that they haveno problem from the perspective of interests in Taisho HD. The Special Committee received
explanation from Biofermin and had a question and answer session with Biofermin regarding the
purpose of the Share Exchange, the background and circumstances that led to the Share
Exchange, the method of preparation and contents of Biofermin’s business plan, which forms thebasis for valuation of the share exchange ratio, and the examination system and method ofdecision-making for the Share Exchange, Biofermin’s view on the proposals from Taisho HD
relating to the Share Exchange, and the impact of the Share Exchange on Biofermin’s enterprisevalue. The Special Committee has sent a questionnaire to Taisho HD regarding the purpose of the
Share Exchange and other matters, and received explanation from Taisho HD and had a question
and answer session with Taisho HD regarding the purpose of the Share Exchange, thebackground and circumstances that led to the Share Exchange, policies after the implementationof the Share Exchange and other matters. The committee also received explanation from Daiwa
Securities, which is Biofermin’s financial advisor and third-party valuation agent, and had aquestion and answer session with Daiwa Securities as to the results of the valuation of the shareexchange ratio and the scheme of the Share Exchange, and carefully examined these mattersbased on advice from Mr. Hasegawa on financial aspects. In addition, the Special Committee
received advice from Nakamura, Tsunoda & Matsumoto and had a question and answer session
with it regarding measures to ensure fairness in the procedures of the Share Exchange, method
and process of decision-making by Biofermin’s board of directors concerning the Share Exchange,and other measures to avoid conflicts of interest. The Special Committee also has collected
information on the Share Exchange from materials relevant to the Share Exchange submitted tothem, and has discussed the Matters of Inquiry based on such information through careful
discussions and examinations. Based on timely reports that the Special Committee has received
on the backgrounds and details of the discussions and negotiations between Taisho HD and
Biofermin regarding the Share Exchange, the Special Committee has been involved in theprocess of negotiations with Taisho HD until Biofermin received the final proposal on the Share
Exchange Ratio from Taisho HD by holding several discussions on the method of negotiation andother matters and by expressing its opinion to Biofermin. Through these processes, the Special
Committee has carefully discussed and considered the Matters of Inquiry based on these
explanations, valuation results and other materials it examined, and has submitted a report toBiofermin’s board of directors on May 14, 2021 stating that the Share Exchange is not found to bedisadvantageous to Biofermin’s minority shareholders. For the overview of the Special
Committee’s opinion, please see “(3) Outline of Opinion Obtained from a Party who has No
Conflicts of Interest in a Controlling Shareholder Stating that the Transaction, etc. would Not be
Disadvantageous to the Minority Shareholders” in “8. Matters Related to Transactions, Etc. with
Controlling Shareholders” below.

iv.

Approval of All Directors Excluding those Who Have an Interest in the Companies

13

Among the seven directors of Biofermin, Mr. Ken Uehara also serves as a director of Taisho HD
and as Executive Vice President of Taisho, and Mr. Yuji Koyama also serves as Corporate Officer
and Head of Production Headquarters of Taisho. Therefore, at the meeting of Biofermin’s board of
directors held today, which passed a resolution as to the Share Exchange, five directors excluding
Mr. Ken Uehara and Mr. Yuji Koyama attended the discussion and passed the resolution with theunanimous approval with a view to avoiding conflicts of interest.
With a view to avoiding the conflicts of interest, Mr. Ken Uehara and Mr. Yuji Koyama have notbeen participated in discussions and negotiations concerning the Share Exchange from thestandpoint of Biofermin.

4. Outline of the Companies that are Parties to the Share Exchange
Wholly-owning parent company

Wholly-owned subsidiary resulting

resulting from the share exchange

from the share exchange

TAISHO PHARMACEUTICAL

BIOFERMIN PHARMACEUTICALHOLDINGS CO., LTD.

CO.,LTD.

(1)

Name

(2)

Address

3-24-1, Takada, Toshima-ku, Tokyo

Title and name of

Akira Uehara, Chief Executive

representative

Officer(3)

1-1-2, Sannomiya-cho, Chuo-ku,
Kobe-shi, Hyogo
Toshimichi Kunori, President- Production, sales and purchaseof pharmaceuticals, designated(4)

Holding company which isquasi-pharmaceutical products,

responsible for the management ofveterinary medicine, agricultural

subsidiaries, etc. that produce andchemicals, other drugs, cosmetics,

Description ofsell OTC pharmaceutical products,

medical devices, foods, beverages,

businessfood and sundry goods, etc. as wellfood additives, feed and feed

as ethical pharmaceuticals, and for

additives

business incidental to or related to- Examinations including laboratory

the abovetests- Any businesses incidental to or
related to the above

30,000 million JPY

1,227 million JPY(as of March 31, 2021)(as of March 31, 2021)

Date of incorporation

October 3, 2011

February 12, 1917

Number of issued(Common stock)(Common stock)shares85,139,653 shares

12,154,000 shares

End of fiscal year

March 31

March 31

Number of(Consolidated) 9,195(Non-consolidated) 236

employees(as of March 31, 2021)(as of March 31, 2021)

Major business

Taisho Pharmaceutical Co., Ltd.

Taisho Pharmaceutical Co., Ltd.,(5)

Stated capital

(6)
(7)
(8)
(9)
(10)

14

partners

Matsutani Chemical Industry Co.,
Ltd.

(11)

Major banks

Major shareholders
and shareholding(12)

ratios(as of March 31,
2021)

Sumitomo Mitsui Banking
Corporation, MUFG Bank, Ltd.

Resona Bank, Limited., Sumitomo
Mitsui Banking Corporation, MUFG
Bank, Ltd.

The Uehara Memorial Foundation

TAISHO PHARMACEUTICAL

18.78%HOLDINGS CO., LTD.

Shoji Uehara

63.8%

9.68%

The Master Trust Bank of Japan,

Uehara Museum of Art

Ltd. (Trust account)

4.88%

1.8%

The Master Trust Bank of Japan,

STATE STREET BANK AND

Ltd. (Trust account)

TRUST CLIENT OMNIBUS

4.30%

ACCOUNT OM02 505002

Sumitomo Mitsui Banking

1.1%

Corporation

Custody Bank of Japan, Ltd.

3.76%

(Trust account)

MUFG Bank, Ltd.

1.1%

3.76%

Takahito Ohnishi

Akira Uehara

1.0%

2.68%

Kazunori Teratani

Custody Bank of Japan, Ltd.

0.8%

(Trust account)

BBH FOR FIDELITY PURITAN TR:

2.19%

FIDELITY SR INTRINSIC

KAJIMA CORPORATIONOPPORTUNITIES FUND

2.07%

0.8%

Custody Bank of Japan, Ltd.

MUFG Bank, Ltd.

(the portion re-entrusted with

0.7%

Sumitomo Mitsui Trust Bank,HISA KINZOKU KOGYO CO., LTD.

Limited for Sumitomo Chemical

0.7%

Company, Limited retirement

Akiko Kido

benefit trust account)

0.7%

1.92%
Relationship(13)

between thecompanies
Taisho HD owns 7,632,021 shares of Biofermin, of which voting rights
Capital relationshipaccount for 63.8% of all of Biofermin’s issued shares, and is the parent
company of Biofermin.

Personal relationship

One of the seven directors of Biofermin serves as a director of Taisho HD
and Executive Vice President of Taisho, and another one serves as an
15

executive officer of Taisho.
Although there is no direct relation of transaction between Taisho HD andBusiness relationship

Biofermin, as products of Biofermin are sold via Taisho, a consolidated
subsidiary of Taisho HD, trading with Taisho HD Group accounts for
entire sales of Biofermin.

(14)

Status as relatedSince Biofermin is a consolidated subsidiary of Taisho HD, each of Taisho

parties

HD and Biofermin is the related party of the other.

Business results and financial position for the last three fiscal years
Taisho HD (consolidated)

Biofermin (non-consolidated)

FY ended

FY ended

FY ended

FY ended

FY ended

FY ended

March

March

March

March

March

March

2019

2020

2021

2019

2020

2021

Net assets

724,137

739,778

758,406

28,246

29,40730,441

Total assets

821,782

864,974

876,923

31,16532,41733,384

Net asset per share (JPY)8,924.23

8,887,84

9,129.95

2,359.54

2,455.72

2,541.33

Sales

261,551

288,527

281,980

11,542

11,924

10,811

Operating profit

31,211

21,137

19,965

3,186

3,068

2,058

Ordinary profit

40,851

24,47425,946

3,273

3,139

2,120

20,172

13,316

2,305

2,240

1,548

Fiscal year

Net profit attributable toshareholders of the parent

48,593company
Net profit per share (JPY)608.80252.74166.84

192.78187.33129.45

Dividend per share (JPY)

120

110

100

60

60

60

(In millions of yen unless specifically stated)(Note) The shareholding ratios are calculated based on the total number of issued shares excluding thetreasury shares.

5. Status After the Share Exchange
Wholly-owning parent company resulting from the share exchange
(1)

Name

TAISHO PHARMACEUTICAL HOLDINGS CO., LTD.

(2)

Address

3-24-1, Takada, Toshima-ku, Tokyo(3)

Title and name ofrepresentative

Akira Uehara, Chief Executive Officer
Holding company which is responsible for the management of(4)

Description of businesssubsidiaries, etc. that produce and sell OTC pharmaceutical products,
food and sundry goods, etc. as well as ethical pharmaceuticals, and forbusiness incidental to or related to the above(5)

Stated capital

30,000 million JPY(6)

End of fiscal year

March 31

(7)

Net Assets

To be fixed
16

(8)

Total assets

To be fixed

6. Summary of Accounting
In Taisho HD’s consolidated accounts, the Share Exchange is expected to fall under the category oftransactions under common control, etc. under the Accounting Standards for Business Combinations.

7.

Future Outlook
Biofermin is already a consolidated subsidiary of Taisho HD. Therefore, the impact of the Share

Exchange on the operating results of Taisho HD and Biofermin is expected to be minor.

8.

Matters Related to Transactions, Etc. with Controlling Shareholders(1) Applicability of the Transaction, etc. with Controlling Shareholders and Status of Conformity with
Policy for Measures to Protect Minority Shareholders
Taisho HD is a controlling shareholder that already holds 7,632,021 shares of the Biofermin Shares(the ratio of voting rights to total number of issued shares outstanding as of March 31, 2021
(12,154,000 shares) is 63.8%). Therefore, the Share Exchange constitutes a transaction, etc. with acontrolling shareholder for Biofermin. As described in “Other Special Circumstances which may have
Material Impact on Corporate Governance” in Biofermin’s corporate governance report disclosed onJune 26, 2020, as its policy for the decision to execute the transaction with Taisho HD Group, uponmaking the decision regarding such transaction, Biofermin has obtained a written opinion from an
independent third party having no interest in Taisho and Taisho HD to the effect that the decision of its
board of directors to execute such transaction is not disadvantageous to the minority shareholders ofBiofermin.
In addition, in terms of the Share Exchange, as described in “(4) Measures to Ensure Fairness(Including Measures to Avoid Conflict of Interests)” under “3. Basis, etc. for Details of Allotment of
Shares Pertaining to the Share Exchange” above, Biofermin established the Special Committee andconsulted on the Matters of Inquiry. As a result, as of May 14, 2021, Biofermin received a report fromthe Special Committee to the effect that the Share Exchange is not disadvantageous to the minority
shareholders of Biofermin. Therefore, the Share Exchange conforms to Biofermin’s policy mentioned
above.

(2) Matters Regarding Measures to Ensure Fairness and Measures to Avoid Conflicts of Interest
As described in “(1) Applicability of the Transaction, etc. with Controlling Shareholders and Status ofConformity with Policy for Measures to Protect Minority Shareholders” above, the Share Exchange
constitutes a transaction, etc. with a controlling shareholder for Biofermin. Therefore, Biofermin has
determined that measures to ensure fairness and to avoid conflicts of interest are necessary. Biofermin
has carefully discussed and considered the terms and conditions of the Share Exchange at its board
meeting, and has made decisions after ensuring fairness and avoiding conflicts of interest by taking themeasures described in “(4) Measures to Ensure Fairness (Including Measures to Avoid Conflict ofInterests) under “3. Basis, etc. for Details of Allotment of Shares Pertaining to the Share Exchange”
above.
17

(3) Outline of Opinion Obtained from a Party who has No Conflicts of Interest in a Controlling
Shareholder Stating that the Transaction, etc. would Not be Disadvantageous to the Minority
Shareholders
As described in “(4) Measures to Ensure Fairness (Including Measures to Avoid Conflict ofInterests)” under “3. Basis, etc. for Details of Allotment of Shares Pertaining to the Share Exchange”
above, in order to ensure that Biofermin’s decision regarding the Share Exchange is made carefully,
to eliminate the risk of arbitrariness and conflicts of interest in, and ensure fairness of, thedecision-making process by Biofermin’s board of directors, and to confirm that the board of
directors’ decision to implement the Share Exchange will not be disadvantageous to the minority
shareholders of Biofermin, Biofermin established the Special Committee and consulted on the
Matters of Inquiry.
As a result, as of May 14, 2021, Biofermin received a report from the Special Committee as
outlined below.
Outline of the Report(i) Whether the purpose of the Share Exchange is reasonable
Biofermin is engaged in (i) OTC business (manufacture and distribution of OTC drugs andquasi-drugs that do not require prescriptions at the time of purchase), (ii) PD business(manufacture and distribution of pharmaceuticals that require prescriptions at the time ofpurchase), (iii) overseas business (distribution of lactic acid bacteria products in Southeast
Asian countries including Taiwan and Hong Kong), and (iv) food business (manufacture anddistribution of food and supplements containing lactic acid bacteria).
Biofermin has a history of more than 100 years since its founding. The name of “Biofermin”
brand is extremely well recognized among general consumers and Biofermin is highly trusted
for the products’ quality, efficacy and safety. In relation to the development of products,
Biofermin possesses lactic acid bacteria strains that have been proven to be effective and safe,
and also has a human and physical infrastructure that enables Biofermin to complete theprocesses from research and development (cultivation, etc.) to commercialization (drug productformulation and assurance of quality as pharmaceuticals) by itself. Furthermore, in the sales
activities, Biofermin sells its products via Taisho HD Group, which is the top OTC productmanufacturer, and it is significantly advantageous for Biofermin that it can utilize Taisho HD
Group’s sales functions (sales and distribution functions such as sales channels and MRs).
As to the relationship with Taisho HD Group, its parent company, since Biofermin became asubsidiary of Taisho HD Group in 2008, Biofermin has strengthened its partnership with Taisho
HD Group by utilizing Taisho HD Group’s sales and distribution functions such as sales
channels and MRs in Japan and overseas through exclusive sales of Biofermin products to
Taisho HD Group, by receiving support from Taisho HD Group for Biofermin’s manufacturing,
quality, and research and development, and by collaborating with Taisho HD Group on joint
researches and other projects between the two companies.
Regarding the recent business environment, the domestic market for OTC products(antidiarrheal drug and intestinal drug) and PD products (live bacteria products), which are the18main business fields of Biofermin, has grown steadily over the past ten years. In response to
the growth, Biofermin's sales have been growing steadily with the amount over 10 billion yen.
However, its sales have declined in the most recent period due to the impact of the COVID-19
pandemic, and the significance and duration of the impact caused by the pandemic on
Biofermin's future businesses are uncertain. In addition, Biofermin faces issues such as its
dependence on "Shin Biofermin S Fine Granules" in the OTC business, intensifying competition
with other companies in the PD business and uncertainty in its new businesses such as
overseas business and food business.
Biofermin and Taisho HD share a common understanding of these Biofermin's management
issues, and in order to overcome them, they examine specific qualitative synergy effects
obtained by implementing specific measures. Specifically, in the OTC business and the PD
business, they consider sharing and utilizing technologies and know-how in research anddevelopment, manufacture, quality control and distribution; in the overseas business, they
consider developing and selling Biofermin products for countries where Biofermin has not yet
expanded its business by referring to information on regulations, demand of consumers andother relevant matters in each country gathered by using the overseas network of Taisho HD
Group; and in the food business, they consider sharing and utilizing technologies andknow-how related to development, manufacture, marketing and distribution.
The above measures accurately grasp Biofermin’s management issues and are consistent
with Biofermin's mid-term policy. In addition, given the relationship between Biofermin andTaisho HD Group as well as Taisho HD Group’s business activities and their results, there are
no reason to deny the feasibility of the above measures.
Considering these circumstances, it is possible to deem as reasonable and to accept
Biofermin's judgment that the Share Exchange will enable Biofermin to implement its bold andflexible business strategy, will contribute significantly to Biofermin's continuous growth anddevelopment, and will contribute to the enhancement of the enterprise value of the entire groupfrom the medium-to-long term perspective.
On the other hand, possible disadvantages of the Share Exchange are also examined
specifically to a practically reasonable extent, and no particular irrationality has been found in
the examination. According to the conclusion of the examination, it cannot be acknowledged atleast, that the Share Exchange will present disadvantages that clearly exceed theaforementioned advantages. Also, there seems to be no reason to believe that there is a more
effective alternative to the Share Exchange in terms of the enhancement of Biofermin’s
enterprise value.
Accordingly, the Special Committee believes that the Share Exchange will contribute to theenhancement of Biofermin's enterprise value and that the purpose of the Share Exchange isreasonable.

(ii) Whether fairness of the conditions of the Share Exchange is ensured
By giving comprehensive consideration to the fact that (i) the implementation of measures toensure fairness, including the establishment and involvement of the Special Committee,
19

secures a situation which can be equated with that of an arm's length transaction in the process
of forming the Share Exchange Ratio, and in fact, an agreement has been reached throughsincere negotiations between the parties, (ii) the valuation report has been prepared by athird-party agent independent from Biofermin and Taisho HD, which is a major company thathas many achievements in Japan, and there are no unreasonable aspects in the financial
projection or preconditions, etc., that serve as bases of the valuation and the valuation method
and results are deemed reasonable, and the Share Exchange Ratio is at a level which exceeds
the upper limit of the range of the average market price method and exceeds the median of therange of the DCF Analysis, and (iii) it can be evaluated that this project has secured the levelsof premium that are in no way inferior relative to similar projects, it is presumed that the minority
shareholders of Biofermin will be able to achieve not only “the values that can be accomplishedwithout implementing the Share Exchange” but also “the expected effect in the increase ofenterprise value through the Share Exchange” to a considerable extent by receiving the Taisho
HD Shares based on the Share Exchange Ratio in the Share Exchange.
Further, the method of and considerations for the Share Exchange are not disadvantageous
to the minority shareholders of Biofermin, and therefore, the scheme or other conditions of thetransaction are also acceptable.
Based on the above, fairness of the conditions of the Share Exchange is ensured.

(iii) Whether the benefit of shareholders of Biofermin is sufficiently considered through fair
procedures in the Share Exchange
In the Share Exchange, various measures to ensure fairness, such as the establishment of
the Special Committee (including the implementation of practical measures to enhance theeffectiveness of the Special Committee), the early appointment of independent outside experts(financial advisors and legal advisors), and the obtainment of professional advice and valuation
reports, the exclusion of interested parties in the discussion, negotiation and resolution of the
Share Exchange, and the enhancement of transparency in procedures by fully providing
information to minority shareholders, have been implemented.
In light of the specific circumstances of the Share Exchange, from the viewpoints of both (i)securing a situation which can be equated with that of an arm's length transaction in theprocess of forming the Share Exchange Ratio and (ii) ensuring opportunities for minority
shareholders to make appropriate decisions based on sufficient information, it is consideredthat the contents of such measures to ensure fairness are necessary and sufficient with respect
to its contents and combinations, and have been actually implemented in an effective manner.
Based on the above, it is deemed that the benefit of shareholders of Biofermin is sufficiently
considered through fair procedures in the Share Exchange.

(iv) In addition to (i) through (iii) above, whether it can be considered that the Share Exchange will
not to be disadvantageous to the minority shareholders of Biofermin(i)

The Share Exchange will contribute to the enhancement of the enterprise value ofBiofermin and the purposes of the Share Exchange are reasonable20Biofermin’s sales have declined in the most recent period due to the impact of the
COVID-19 pandemic, and the significance and duration of the impact caused by the
pandemic on Biofermin's future businesses are uncertain. In addition, Biofermin faces
issues such as its dependence on “Shin Biofermin S Fine Granules” in the OTC
business, intensifying competition with other companies in the PD business anduncertainty in its new businesses such as overseas business and food business.
In order to overcome the above, Biofermin and Taisho HD are conducting thefollowing: in the OTC business and the PD business, they consider sharing andutilizing technologies and know-how in research and development, manufacture,quality control and distribution; in the overseas business, they consider developing
and selling Biofermin products for countries where Biofermin has not yet expanded its
business by referring to information on regulations, demand of consumers and otherrelevant matters in each country gathered by using the overseas network of Taisho
HD Group; and in the food business, they consider sharing and utilizing technologies
and know-how related to development, manufacture, marketing and distribution.
Moreover, the merits of the Share Exchange outweigh the possible disadvantages,
and there are no alternative means to enhance the enterprise value other than the
Share Exchange, and therefore, the purposes of the Share Exchange are reasonable.
(ii)

Fairness of the conditions of the Share Exchange is ensured
The implementation of measures to ensure fairness, including the establishment
and involvement of the Special Committee, secures a situation which can be equatedwith that of an arm's length transaction in the process of forming the Share Exchange
Ratio. In addition, the valuation report has been prepared by a third-party agent
independent from Biofermin and Taisho HD, which is a major company that has many
achievements in Japan, and the valuation method and results are reasonable, andtherefore, it can be said that fairness of the conditions of the Share Exchange isensured.

(iii)

Whether the Share Exchange was conducted through fair procedures
Measures to ensure fairness, such as the establishment of the Special Committee,
the early appointment of independent outside experts, and the obtainment ofprofessional advice and valuation reports, the exclusion of interested parties in thediscussion, negotiation and resolution of the Share Exchange, and the enhancementof transparency in procedures by fully providing information to minority shareholders,have been implemented.
From the viewpoints of both securing a situation which can be equated with that ofan arm's length transaction in the process of forming the Share Exchange Ratio andensuring opportunities for minority shareholders to make appropriate decisions basedon sufficient information, the contents of such measures to ensure fairness arenecessary and sufficient with respect to its contents and combinations, and havebeen implemented through fair procedures.

Based on the above, it is considered that the Share Exchange will not be disadvantageous to21

the minority shareholders of Biofermin.
END

22

(Reference) (Consolidated) operating results forecast for the current period, and (consolidated)
operating results for the previous period
Taisho HD(In millions of yen)
Net profit
Consolidated

Consolidated

Consolidated

sales

operating profit

ordinary profit

attributable toshareholders of
the parent
company

Results forecast forthe current period(FY ending March

269,000

14,50018,50010,500281,980

19,96525,946

13,316

2022)
Results for theprevious period (FY
ended March 2021)

Biofermin(In millions of yen)
Net profit
attributable toSales

Operating profit

Ordinary profit

shareholders of
the parent
company

Results forecast forthe current period(FY ending March

11,100

1,970

2,040

1,460

10,811

2,058

2,120

1,548

2022)
Results for theprevious period (FY
ended March 2021)

23