JAFCO : Notice Concerning the Introduction of the Basic Policies for the Control of the Company and Response Policies to Large-scale Purchase Actions, etc.

Translation of the Japanese press release

JAFCO Group Co., Ltd. (Ticker: 8595)	Contact: Investor Relations
1-23-1 Toranomon, Minato-ku,	Tel: [phone]
Tokyo 105-6324 Japan	[e-mail]
https://www. jafco.co.jp/english/
	August 15, 2022

Notice Concerning the Introduction of the Company's Basic Policies for the Control of the

Company Based on Specific Concerns that City Index Eleventh Co., Ltd. and Other Parties will Carry Out Large-scale Purchase Actions, etc. of the Company Shares and Response Policies to Large-scale Purchase Actions, etc. of the Company Shares

JAFCO Group Co., Ltd. (the "Company" or "JAFCO") has learned that Ms. Aya Nomura (Mr. Yoshiaki Murakami's biological child), Kabushiki Kaisha Minami-Aoyama Fudosan and City Index Eleventh Co., Ltd. ("City Index Eleventh"; and collectively with Ms. Aya Nomura and Kabushiki Kaisha Minami-Aoyama Fudosan, "City and Other Parties"), which are under the influence of Mr. Yoshiaki Murakami ("Mr. Murakami"), have been rapidly and in large quantities buying up the Company's common shares (the "Company Shares") in the stock market (the "Share Buying-up") since May 2022. According to the Large Shareholding Report pertaining to the Company Shares submitted by City Index Eleventh on August 9, 2022, City and Other Parties held 4,793,600 shares, which is 6.54% of the shareholding ratio (meaning the shareholding ratio stipulated in Article 27-23, Paragraph 4 of the Financial Instruments and Exchange Act. The same applies hereinafter.) of the Company Shares as of August 2, 2022. As described below, according to Mr. Murakami and others, City and Other Parties held nearly 15% of the Company Shares as of August 5, 2022.

The Company met with Ms. Aya Nomura and Mr. Hironao Fukushima ("Mr. Fukushima"), Representative Director of City Index Eleventh, on August 4, 2022, and with Mr. Murakami, Ms. Aya Nomura and Mr. Fukushima on August 5, 2022. At the meeting on August 5, Mr. Murakami and others informed us that City and Other Parties had acquired around nearly 15% of the Company Shares and that they indicated the possibility to continue to purchase more Company Shares (the "Additional Share Purchases") and acquire 51% of the Company Shares. In addition, they requested us to conduct a large scale share buyback that amounts to approximately 50 billion yen, which is the equivalent to approximately one-third of the Company's market capitalization and 40% of consolidated shareholders' equity, by procuring funds through such as liquidating the shares of Nomura Research Institute, Ltd. held by the Company. However, City and Other Parties commenced the Share Buying- up very recently since May 2022, and we did not learn of the Share Buying-up until August 5, 2022, and City and Other Parties have never held substantive discussions with the Company regarding the

Share Buying-up and the Additional Share Purchases, and almost no information has been shared with the Company regarding the terms and conditions of the Share Buying-up and the Additional Share Purchases. We have not received any substantive explanation of the terms and conditions of the Share Buying-up and the Additional Share Purchases, or of the management policy of the Company after the Additional Share Purchases.

As stated above, being provided only insufficient information regarding the purposes and conditions of the Share Buying-up that is currently conducted by City and Other Parties, the Company believes that it is undeniable that the purpose or results of the Share Buying-up could prevent maximization of the Company's corporate value and the shareholders' common interests, given factors including the court's finding of the previous investment activities of investors, including Mr. Murakami who has powerful influence on City and Other Parties, and the funds over which he exercises influence ("Murakami Funds") as stated in Exhibit 1(for example, in the Yokohama District Court decision rendered on May 20, 2019, the Court found that Mr. Murakami and Murakami Funds purchased a large number of shares in multiple listed companies from 2012 to 2019, placed their management under pressure, and earned resale gains by causing those listed companies or their affiliated companies to purchase at high prices all or a substantial part of the shares purchased (page 126 of the Siryoban Shojihomu No. 424)).

In light of the above, the Company's Board of Directors reasonably determined that there is a specific concern that actions to purchase the Company Shares for the purpose of increasing the holding ratio of voting rights of City and Other Parties to 20% or more (Large-scale Purchase Actions, etc. (as defined in III2(2) below; the same applies hereinafter)) would be conducted through the Additional Share Purchases and assumed that other parties might contemplate Large-scale Purchase Actions, etc. under the circumstances for which there was a specific concern that City and Other Parties would conduct Large-scale Purchase Actions, etc. of the Company Shares. Therefore, the Company's Board of Directors has concluded that the Large-scalePurchase Actions, etc. must be conducted in accordance with certain procedures that it establishes, which will contribute to maximizing the Company's corporate value or the shareholders' common interests, in order (i) to secure the information and time required for the Company shareholders to make appropriate decisions on the potential impact of any such Large-scalePurchase Actions, etc. on the Company's corporate value or the sources thereof and (ii) to enable the Company's Board of Directors to negotiate or discuss with the Large-scalePurchaser(as defined in III2(2) below; the same applies hereinafter) regarding the Large-scalePurchase Actions, etc. or the Company's management policy.

As a result, the Company hereby announces that the Company's Board of Directors decided basic policies regarding how a person is to control the decisions of the Company's financial and business policies (Article 118, item (iii) of the Regulations for Enforcement of the Companies Act) in order to

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secure and improve our corporate value and our shareholders' common interests , and has resolved to introduce response policies for (i) the Large-scale Purchase Actions, etc. by City and Other Parties for the Company Shares for which there is a specific concern and (ii) other Large-scale Purchase Actions, etc. that may be intended under the circumstances for which there is a specific concern that City and Other Parties will conduct the Large-scale Purchase Actions, etc. for the Company Shares (the "Response Policies") at the meeting of the Board of Directors held today. This is an effort to prevent the determination of financial and business policies of the Company from being controlled by an inappropriate person in light of the basic policies (Article 118, item (iii), (b).2 of the Regulation for Enforcement of the Companies Act). The Response Policies will be introduced primarily to respond to a specific concern about Large-scalePurchase Actions, etc., including theShare Buying-up that have already emerged, and differ from the proactive takeover defense measures that are introduced at normal times.

In addition to passing the resolution above, the Company's Board of Directors has established an Independent Committee and appointed four independent outside directors as the committee members in order to prevent its arbitrary decisions by the Board of Directors and to further enhance the fairness and objectiveness of the operation of the Response Policies. For the establishment of the Independent Committee and the appointment of the Independent Committee members, please see "Notice Concerning Establishment of Independent Committee and Appointment of Independent Committee Members" dated today.

Given that the introduction per se of the Response Policies is not based on shareholders' express decision such as a resolution of a shareholders meeting, countermeasures under the Response Policies (specifically, allotment of share options without contribution) will be triggered by fully respecting the Independent Committee's recommendations and onlywhen (a) approved by a shareholders meeting ("Shareholders' Will Confirmation Meeting"), and the relevant Large-scale Purchaser does not withdraw its Large-scale Purchase Actions, etc. or (b) the Large-scale Purchaser does not observe the procedures set forth in III 2(3) below and attempts to conduct its Large-scale Purchase Actions, etc. before the Shareholders' Will Confirmation Meeting set forth in III 2(3) (iv) below is held.

The introduction of the Response Policies has been unanimously approved by all directors, including the Company's four independent outside directors who are also Board-Audit Committee members.

If there is any amendment to the Companies Act, the Financial Instruments and Exchange Act or other laws, any rule, cabinet order, cabinet office order or ministerial order, or any rule of the financial instruments exchange on which the Company Shares are listed (collectively, "Laws") (including a name change of any Law, and the enactment of any new Law to replace a former Law; hereinafter the

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same), and any such amendment is enforced, the provisions of the Laws quoted in the Response Policies will be respectively replaced by the relevant provisions of the amended Laws that substantively replace those former Laws, unless separately determined by the Company's Board of Directors.

1. Basic policies regarding how a person is to control the decisions of the Company's financial and business policies
   As a listed company, the Company recognizes that if a share purchase proposal is made by specific persons that materially impact the Company's basic management policies, whether to accept it should ultimately be left to its shareholders' decision. Therefore, as stipulated in the Corporate Governance Policy of the Company, the Company does not introduce proactive anti- takeover measures that are introduced at normal times.
   However, where a Large-scale Purchase Actions, etc. is conducted, it is difficult for the Company shareholders to appropriately assess the impact of the Large-scale Purchase Actions, etc. on the Company's corporate value and the shareholders' common interests, without the necessary and sufficient information being provided by the Large-scale Purchaser. Further, it is undeniable that some Large-scale Purchase Actions, etc., would damage the Company's medium- to long-term corporate value and the shareholders' common interests that the Company has maintained and enhanced, such as those that: (i) attempt to temporarily control the management and transfer the Company's tangible/intangible important management assets to the Large-scale Purchaser or its group companies; (ii) attempt to appropriate the Company's assets for repayment of the Large- scale Purchaser's debts; (iii) attempt to have the Company and/or its related parties acquire the Company Shares merely at a high price without intending to actually participate in the management (so-called greenmailer); (iv) attempt to obtain temporary high dividends by having the Company sell and dispose of its expensive assets; (v) may damage our good relationships with our stakeholders and damage the Company's medium- to long-term corporate value; (vi) do not provide time or information reasonably necessary for the Company's shareholders and Board of Directors to consider the content of purchases and acquisition proposals and for the Board of Directors to offer alternative proposals; and (vi) do not fully reflect our corporate value.
   In light of the above, the Company believes that the Company's Board of Directors has a duty:
   (i) to have the Large-scale Purchaser provide the necessary and sufficient information for the Company shareholders to make decisions; (ii) to provide the results of evaluation and consideration by the Company's Board of Directors regarding the impact of the proposal by the Large-scale Purchaser on the Company's medium- to long-term corporate value and the shareholders' common interests, as a reference for the Company shareholders to consider the proposal; and (iii) (as the case may be) to negotiate or discuss the Large-scale Purchase Actions,

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etc. or the Company's management policies with the Large-scale Purchaser, or to present the Board of Directors' alternative proposals for the management policies to the Company shareholders.

In terms of the basic policies above, the Company stipulates in the Corporate Governance Policy of the Company that, in the case of Large-scale Purchase Actions, etc. made to the Company, the Board of Directors will proposes appropriate countermeasures when it is deemed necessary to maintain and boost the Company's corporate value and the shareholders' common interests. In line with this policy, the Company's Board of Directors will require that the Large-scale Purchaser provide the necessary and sufficient information for the Company shareholders to appropriately determine whether to accept the Large-scale Purchase Actions, etc. in order to ensure maximization of the Company's medium- to long-term corporate value and the shareholders' common interests. The Board of Directors will also timely and properly disclose such information as provided to the Company or otherwise take measures to be deemed appropriate within the extent permissible under the Financial Instruments and Exchange Act, the Companies Act, and other laws and regulations, as well as the Articles of Incorporation of the Company.

While the Company's basic policies regarding how a person is to control the decisions of the Company's financial and business policies are as stated above, the Company's Board of Directors believes that any Large-scale Purchase Actions, etc. by a Large-scale Purchaser ultimately requires the Company shareholders agreeing to the Large-scale Purchase Actions, etc. by considering details of the purposes and conditions thereof and being provided in advance with sufficient time and information necessary to determine whether it is acceptable. As such, as long as the Large-scale Purchaser complies with the procedures established in the Response Policies, before triggering the countermeasures based on the Response Policies by the Board of Directors, the Company will hold a Shareholders' Will Confirmation Meeting as a venue for such consideration and determination by the Company's shareholders. Further, if the Company's shareholders express their will to support the Large-scale Purchase Actions, etc. at the Shareholders' Will Confirmation Meeting (such will is to be expressed through whether a proposal requesting approval for the Company taking the prescribed countermeasures against a Large-scale Purchase Actions, etc. is passed by the consent of a majority of the voting rights of the shareholders present at the Shareholders' Will Confirmation Meeting who are entitled to exercise voting rights), the Company's Board of Directors will not take any action to substantially prevent the Large-scale Purchase Actions, etc., as long as it is implemented pursuant to the terms and conditions disclosed at the Shareholders' Will Confirmation Meeting.

Therefore, the countermeasures based on the Response Policies (specifically, allotment of share options without contribution) will be triggered by fully respecting the Independent Committee's

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