Information Meeting: Summary of Q&A Session（PDF：21KB）

Information Meeting for Financial Results for the Six Months Ended Sept. 30, 2017 Summary of Q&A Session

Date: Monday, October 23, 2017 Presenter: Shinichi Fuki, CEO

Q1. JAFCO dissolved its capital ties with the Nomura Group. Will this have any effect on JAFCO's direction?

A1. As we have been operating independently of the Nomura Group, there will be no changes in our daily activities and no negative impact following the dissolution. For an investment management business, independence in management and decision making, as well as sustainability, is very important. This dissolution ensures that we will continue to follow this path into the future. After we dissolved the capital ties, the shareholding ratio of domestic and overseas institutional investors has risen above 80%. We believe that maintaining high fund performance will directly lead to high shareholder returns.

Q2. With large SV3 Fund entering the extension period, AUM (or total commitments) will trend downward. As the total commitments are the source of fund management fees, could you explain JAFCO's view as a fund manager? Also, what are the planned uses of surplus funds, for example, in investment, etc.?

A2. We always bear in mind to increase AUM. We have spent several years reshuffling our portfolio to enhance quality and improve fund performance. During the process, we intentionally reduced fund size and AUM. Now, with the process having run its course, we plan to gradually increase AUM and fund size while maintaining a good balance between the growth of the VC market and an increase in our investment capacity.

As our VC investments are gaining momentum at a faster rate than expected, we may use surplus funds to make parallel investments with other funds that would lead to higher fund performance, while carefully considering conflict of interest. For this reason, we plan to set aside certain surplus funds. Other uses may include investment in large PE buyout deals.

Q3. It seems that investment activity in Japan has been increasingly getting overheated. With low interest rates and a buoyant IPO market, what do you think of the current level of valuations at the time of investment?

A3. There is no denying that valuations of VC and buyout investments, IPOs, and in particular, technology companies are rising due to excessive capital flows. Valuations in Fintech and other high-profile sectors are surging. Startups' fundraising rounds and VC fund size are increasing in scale worldwide, and although excess overheating may lead to a major adjustment phase, both fundraising and fund sizes will never fall to previous levels. Domestic VC investment valuations have risen two- to

three-folds since bottoming out, but they are still relatively low compared to valuations in the US and China. We have been making aggressive commitments to high-potential startups, from which high valuations of several tens of billions of yen at IPO and other exits can be expected, through bold, sizable investments. We can also expect high returns as the time needed for business launch has been reduced dramatically in line with a sweeping trend in digitization and plummeting startup costs. We aim to maintain high performance of high-risk, high-return investments by making aggressive commitments to carefully selected investments.