Shiseido : Notice of Company Split and Other Changes Accompanying the Transfer of the Manufacturing Business of Personal Care Products

(Translation)

	August 1, 2022
Name of Company:	Shiseido Company, Limited
Name of Representative:	Masahiko Uotani
	President and CEO
	(Representative Director)
(Code No. 4911; The Prime Market of the Tokyo Stock Exchange)
Contact:	Ayako Hirofuji
	Vice President
	Investor Relations Department
	(Tel: [phone])

Notice of Company Split (Simple Absorption-type Split) and Other Changes

Accompanying the Transfer of the Manufacturing Business

of Personal Care Products

Shiseido Company, Limited (the "Company") hereby announces that it has determined to transfer its manufacturing business of personal care products conducted at Shiseido Kuki Factory (Saitama Prefecture, the "Kuki Factory") and Shiseido Vietnam Factory (Bien Hoa City, Dong Nai Province, Vietnam; the "Vietnam Factory").

The business conducted by the Company at the Kuki Factory (the "Business") will be transferred from the Company through a company split (simple absorption-type split) to be succeeded by a newly established company (the "New Company"), whose shares will be then transferred to K.K. Asian Personal Care Holding ("APCH"), a subsidiary of Oriental Beauty Holding (HK) Limited ("OBH"), directly or indirectly financed by funds advised by CVC Capital Partners ("CVC") (the "New Company Share Transfer"). Subsequently, all of the equity interest of the Company in its wholly owned subsidiary Shiseido Vietnam Inc. ("SVI"), which operates the Vietnam Factory, will be transferred to APCH (the "SVI Equity Interest Transfer"). It is hereby notified that today, the Company has executed a legally binding agreement (the "Agreement") pertaining to the New Company Share Transfer and the SVI Equity Interest Transfer (collectively, the "Transaction") and other related matters.

1. Background and Objectives of the Transaction

The Kuki Factory began operations in 1983 as a mass-production facility different from a typical cosmetics

factory. It is positioned as a mainstay factory for personal care products and has contributed to the Company's operations through manufacturing and supplying high quality products. The Vietnam Factory began operations in 2009 as a production base for the Japanese and Asian markets, mainly manufacturing personal care products such as the uno brand.

On the other hand, the Company has been undergoing portfolio reorganization as part of its fundamental business transformation, positioning skin beauty as the core business. In July 2021, the Company transferred its personal care business to Fine Today Shiseido Co., Ltd. ("FTS," Minato-ku, Tokyo), a company indirectly financed by CVC, and other companies, aiming for further growth and development of the business. Following the transfer, the Company has been cooperating with CVC in the operation of the business by producing and supplying personal care products from both Kuki and Vietnam factories pursuant to a contract manufacturing agreement ("CMA") with FTS as a shareholder with a 35% stake in APCH, the wholly-owning

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parent company of FTS.

FTS has made a good start since the transfer, achieving stable business operations, and the Company has continuously discussed with CVC strategic actions required to ensure its sustainable growth. As a result, the Company concluded that equipping FTS with its own production infrastructure and integrating production and sales would be the best option and decided to transfer the Business and SVI to APCH. After the transfer, FTS, by further promoting a structure where R&D, production, marketing, sales and other functions are integrated, will be able to create new value-added products, implement production technologies, develop professionals and generate synergy through interactions of people, in a prompt manner. The employees of the Business and SVI will basically become employees of the New Company and SVI, which will newly become a subsidiary of APCH after the Share Transfer, and will engage in production.

In addition, the Company currently owns 35% of APCH to support the independence of the personal care business for further growth but considering successful autonomous business operations under the new structure, the Company will transfer a portion of its shares to OBH and reduce its shareholding ratio to 20.7% on the same date as the New Company Share Transfer (the "APCH Share Transfer"). The Company's shareholding ratio after the capital increase of OBH, which is scheduled to take place on the same date as the APCH Share Transfer, will be 20.1%

The Company has determined, given the terms of the CMA with FTS and the Company's inability to adequately invest in the Business and SVI under its current strategy, a prompt transfer of the Business and SVI to APCH will be in the best financial interest of the Company. The Transaction will also allow the Company to focus on production technologies specific to prestige and premium cosmetics, ultimately decreasing our cost of sales ratio. Under its medium-to-long-term strategy "WIN 2023 and Beyond", the Company has now established a domestic production base that handles the prestige and premium cosmetics business in the skin beauty category, by commencing operations at the Nasu Factory in 2019, the Osaka Ibaraki Factory in 2020, and the Fukuoka Kurume Factory in May 2022, in addition to the existing Kakegawa Factory and Osaka Factory. Shiseido strives to become a true "Global Winner with Our Heritage", through stably supplying Shiseido's unique "made by Japan" products.

2. Details of the Transaction Procedures

The Business will be transferred from the Company to the New Company in the first quarter of 2023

(planned) through an absorption-type split (the "Company Split"), followed by a transfer of all New Company shares to APCH. The Company also plans to transfer all of its equity interest in SVI to APCH in the second half of 2023 (planned).

The New Company Share Transfer is subject to obtaining clearance from relevant authorities based on the Antimonopoly Act, while the SVI Equity Interest Transfer is subject to obtaining the necessary permits and approvals in Vietnam. Since the Company Split is a simple absorption-type split carried out between the Company and its wholly owned subsidiary, some of the disclosure items and details have been omitted.

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Reference: Overview of the Transaction Scheme

3. Schedule of the Transaction, etc.

Conclusion of the Agreement	August 1, 2022
Establishment of the New Company	Second half of 2022 (planned)
Approval of the Company Split agreement	First quarter of 2023 (planned)
by the Board of Directors
Conclusion of the Company Split	First quarter of 2023 (planned)
agreement
Approval of the Company Split agreement	First quarter of 2023 (planned)
by a general meeting of shareholders (the
New Company)
Effective date of the Company Split	First quarter of 2023 (planned)
Date of the New Company Share Transfer	First quarter of 2023 (planned)
Date of APCH Share Transfer	First quarter of 2023 (planned)
Date of the SVI Equity Interest Transfer	Second half of 2023 (planned)

(Notes)

Since the Company Split is a simple absorption-type corporate split as stipulated in Article 784 Paragraph 2 of the Companies Act, the Company will not convene a general meeting of shareholders to seek approval of the Company Split agreement.

4. Overview of the Company Split

1. Schedule

Please refer to "3. Schedule of the Transaction, etc." above.

(2) Method

This is an absorption-type corporate split in which the Company is the splitting company, and the New Company is the succeeding company. The Company will split off the part of its business associated with the Business.

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(3) Allotment of shares

In the Company Split, the New Company will issue common shares (the number of shares to be issued has not been determined), and all shares will be allotted to the Company.

1. Handling of stock acquisition rights and bonds with stock acquisition rights Not applicable.
2. Capital increase or decrease

There will be no capital increase or decrease.

(6) Rights and obligations taken over by the succeeding company

The New Company will take over all assets, liabilities, and contractual relationships associated with the Business as stipulated in the absorption-type split agreement pertaining to the Company Split, as well as all rights and obligations that accompany such.

(7) Prospect of obligation performance

The Company believes that there is no concern as to whether the New Company will be capable of performing its obligations after the Company Split.

1. Overview of the companies involved in the Company Split a. Splitting company

Trade name	Shiseido Company, Limited
Location	5-5, Ginza 7-chome,Chuo-ku, Tokyo
Representative's	Masahiko Uotani, Representative Director, President and CEO
name and position
Main business	Research, development, production, and distribution of cosmetics and other
activities	products
Capital	64,506 million yen (as of December 31, 2021)
Date of	June 24, 1927
establishment
Number of shares	400,000,000
issued
Settlement term	December 31
Major shareholders	The Master Trust Bank of Japan, Ltd. (Trust Account)	19.41%
and their	Custody Bank of Japan, Ltd. (Trust Account)	5.88%
shareholding	THE BANK OF NEW YORK 134104	1.97%
ratios (As of	Mizuho Trust & Banking Co., Ltd., Employees Pension Trust for	1.75%
December 31, 2021)	Mizuho Bank re-trusted to Custody Bank of Japan, Ltd.
	JP MORGAN CHASE BANK 385632	1.73%
	BNYM TREATY DTT 15	1.69%
	SSBTC CLIENT OMNIBUS ACCOUNT	1.67%
	STATE STREET BANK WEST CLIENT - TREATY 505234	1.64%
	Nippon Life Insurance Company	1.40%
	JP MORGAN CHASE BANK 385781	1.28%

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Operating results and financial position of the splitting company (consolidated)

(Millions of yen unless otherwise stated)

	Period			Fiscal year ended			Fiscal year ended			Fiscal year ended
			December 31, 2019			December 31, 2020			December 31, 2021
Net Assets	517,857		506,593	567,433
Total Assets	1,218,795		1,204,229	1,179,360
Net Assets per Share (Yen)	1,242.85		1,212.34	1,364.28
Net Sales	1,131,547		920,888	1,035,165
Operating Profit	113,831		14,963	41,586
Ordinary Profit	108,739		9,638	44,835
Net Profit (Loss) Attributable to	73,562		(11,660)	42,439
Owners of Parent
Net Profit (Loss) per Share (Yen)	184.18		(29.19)	106.24

(Notes)

The Company has disclosed that it will voluntarily adopt International Financial Reporting Standards (IFRS) from the fiscal year ending December 31, 2022, in place of the conventional Japanese GAAP. The above operating results and financial position of the splitting company, however, are calculated under the Japanese GAAP.

b. Succeeding company

Trade name	Undecided
Location	Undecided
Representative's	Undecided
name and position
Main business activities	Production of personal care products
Capital	Undecided
Date of establishment	Second half of 2022 (planned)
Number of shares issued	Undecided
Settlement term	December 31
Major shareholders and their	Shiseido Company, Limited: 100%
shareholding ratios

(Notes)

As the New Company is scheduled to be established in the second half of 2022, there is no fixed most current fiscal year.

1. Overview of the business to be split a. Details of the business
   Production of personal care products b. Operating results
   Since this is a production division, there are no operating results such as sales to be disclosed. c. Assets and liabilities of the business to be split, and their values (as of December 31, 2021)

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