ジャフコ　グループ（8595） – Notice of Convocation of the 50th Annual General Meeting of Shareholders

(Securities Code: 8595) NOTICE OF CONVOCATION OF THE 50TH ANNUAL GENERAL MEETING OF SHAREHOLDERS ■ Our Mission / Identity – Mission – “Commit to new business creation and jointly shape the future” Since establishment, JAFCO Group has created various innovative products and services jointly with entrepreneurs. Our mission is to open up new frontiers with our stakeholders by committing to creating new businesses that are in demand. – Identity – Co-Founder At the startup stage, JAFCO Group is expected to play the same role as “Co-Founder.” We will pass on and develop JAFCO spirit, expertise and experiences built up since inception to allow each member to be a resourceful “Co-Founder.” 1 ■ To our shareholders: Capture changes and continue to take on the challenge with entrepreneurs for the realization of sustainable future. Keisuke Miyoshi President & CEO JAFCO Group Co., Ltd. The stock market has been sluggish due to a significant market correction, mainly for U.S. high-tech stocks, since the end of last year. A further rise in crude oil prices due to the crisis in Ukraine and the rapid inflation have added uncertainty about the future. In Japan there has been a series of postponements of large IPOs and reductions in the scale of IPOs. issues continues On the other hand, a new lifestyle “with CORONA” is further accelerating digitalization. The number of “outstanding entrepreneurs” who are committed to creating new solutions to social to rise. The expansion of investment funds in private equity led by surplus funds resulting from monetary easing is not likely to change the direction toward “industrial restructuring” significantly. This is because of the direction is attributable to the pressing issues facing the world and the changing values of people. Our venture and buyout investments are long-term joint businesses in which we work together with our stakeholders to create a future that lies beyond businesses. JAFCO Group practices the essence of ESG investment by responding to entrepreneurs with sincerity and diligence, investing in companies capable of addressing social issues, and committing to their growth. In the current fiscal year, we realized an epoch-making large-scale IPO from our domestic portfolio. The SV6 series, our flagship domestic fund established under the partnership model, has made solid investment progress. In Asia, we established the JAS-8 fund and are accelerating investment activities. With the aim of returning such results to our shareholders, we completed a total of \35 billion in share buybacks by June 2021 in accordance with the policy announced in the previous fiscal year, and has bought back a further \15 billion in treasury shares since October 2021. In addition, we conducted a stock split from a capital policy perspective. We boldly take risks and invest in what is truly valuable. We are involved in the management of each of our portfolio companies and work with entrepreneurs to create new businesses. In a difficult environment, we prevent the corporate value of portfolio companies from dropping, while aiming for future growth at the same time. This investment policy remains unchanged. I am convinced that this is the basis for creating a significant social impact and high returns in an uncertain world. 2 This is an excerpt translation of the Japanese original for convenience only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. To Shareholders: (Securities Code: 8595) May 25, 2022 Keisuke Miyoshi President & CEO JAFCO Group Co., Ltd. 1-23-1 Toranomon, Minato-ku, Tokyo NOTICE OF CONVOCATION OF THE 50TH ANNUAL GENERAL MEETING OF SHAREHOLDERS You are hereby informed that the 50th Annual General Meeting of Shareholders (the “Meeting”) of JAFCO Group Co., Ltd. (the “Company”) will be held as described below. For the perspective of preventing the spread of the new coronavirus at this General Meeting of Shareholders, we recommend that shareholders exercise their voting rights either by postal mail or electronic means in advance. Please see page 5 for the request for shareholders and infection prevention measures at the Meeting. Please examine the attached Reference Documents for the General Meeting of Shareholders and vote by either of the following methods by 5:00 p.m. on Monday, June 20, 2022 (Japan Time). [Voting by postal mail] Please indicate on the enclosed voting form whether you are for or against each proposal and return it by postal mail to us by the voting deadline indicated above. [Voting by electronic means (via Internet, etc.)] Please review “How to exercise your voting rights via Internet, etc.” on page 67, and access the website for voting designated by the Company (https://evote.tr.mufg.jp/). Follow the instructions on the screen and enter for or against each proposal by the voting deadline indicated above. 1. Date and Time Tuesday, June 21, 2022, at 10:00 a.m. (Japan Time) 2. Place Grand Hall on the 5th floor, Nomura Conference Plaza Nihonbashi Nihonbashi Muromachi Nomura Bldg. (YUITO) 2-4-3 Nihonbashi-Muromachi, Chuo-ku, Tokyo 3 3. Purpose of the Meeting Matters to be reported: Matters to be resolved: Proposal 1: Proposal 2: Proposal 3: Business Report, Consolidated Financial Statements, Non-Consolidated Financial Statements, and Results of Audit by the Financial Auditor and the Board-Audit Committee of the Consolidated Financial Statements, for the 50th Fiscal Year (from April 1, 2021 to March 31, 2022) Partial Amendments to the Articles of Incorporation Election of Two (2) Directors (Excluding Directors Serving as Board-Audit Committee Members) Determination of Remuneration for Granting Transfer-Restricted Shares to Directors (Excluding Directors Serving as Board-Audit Committee Members and Independent Directors) 4. Notice Regarding Exercise of Voting Rights If you vote twice by postal mail and via Internet, the vote via Internet shall be deemed valid. If you vote via Internet more than once, only the last vote shall be deemed valid. For those attending the Meeting, please present the enclosed voting form at the reception desk on arrival at the meeting. Pursuant to the provisions of applicable laws and regulations and Article 15 of the Articles of Incorporation of the Company, the following materials are not provided in this document, but they have been posted on the Company’s website. Systems for ensuring appropriate operations Overview of the operation status of the systems for ensuring appropriate operations Notes to Consolidated Financial Statements Notes to Non-Consolidated Financial Statements The materials above are part of the documents audited by the Board-Audit Committee and the financial auditor in the course preparing their respective audit reports. Please be advised that in the event of any revisions to the Reference Documents for the General Meeting of Shareholders, Business Report, Consolidated Financial Statements or Non-Consolidated Financial Statements, the Company will post the contents of modification on its website below. The Company will inform you of the results of resolutions of the Meeting by posting the matter on its website below. JAFCO website: https://www.jafco.co.jp/english/ir/shareholder/meeting/ 4 In light of the spread of the new coronavirus, we would like to inform the guidelines for attending the Meeting. We would kindly ask shareholders planning to attend the Meeting in person for their understanding and cooperation. Request for shareholders For the perspective of preventing the spread of the new coronavirus, we recommend that shareholders exercise their voting rights either by postal mail or electronic means in advance. Shareholders attending the Meeting are requested to wear face masks. All attendees will have their temperature taken at the entrance of the meeting room. Those who have fever or are not feeling well may be asked to refrain from entering the meeting room and leave the venue. Fewer seats will be available at this year’s Meeting to ensure sufficient spacing between attendees with the aim of preventing the spread of the coronavirus. Therefore, we may restrict admission to the Meeting. Depending on the situation of the coronavirus infection, the venue and the time of the Meeting are subject to change. Major changes in the operation of the Meeting due to future situation will be informed on the JAFCO website. Please check the website in advance if you plan to attend the Meeting in person. JAFCO website : https://www.jafco.co.jp/english/ir/shareholder/meeting/ Infection prevention measures at the Meeting Directors and operation staff will check their temperature and health status before the Meeting and wear face masks during the Meeting. From the perspective of reducing the risk of spreading the infection, it is possible that some directors will not attend the Meeting or will attend remotely (online), regardless of their health status on the day of the Meeting. The time required for holding the Meeting will be shortened. Detailed explanations of matters to be reported at the Meeting (including Audit Report) and the proposals will be omitted. No drink will be served at the Meeting. 5 Reference Documents for the General Meeting of Shareholders Partial Amendments to the Articles of Incorporation Proposal 1: The Company proposes to amend the Articles of Incorporation of the Company as follows: 1. Reason for the amendments (1) In accordance with the amended provisions stipulated in the proviso of Article 1 of the Supplementary Provisions of the “Act for Partial Amendment of the Companies Act” (Act No. 70 of 2019), which will come into effect on September 1, 2022, the Company will make the following amendments to its Articles of Incorporation in preparation for the introduction of an electronic provision system for materials for general meetings of shareholders: (i) Article 15, Paragraph 1 of the proposed amendment is to stipulate that the Company shall take measures for the electronic provision of the information contained in the reference documents for general meetings of shareholders, etc. (ii) Article 15, Paragraph 2 of the proposed amendment is to establish provisions to limit the scope of matters to be included in the paper documents to be delivered to shareholders who have made a request for delivery of documents. (iii) The provisions regarding internet disclosure and deemed provision of reference documents for general meeting of shareholders, etc. (Article 15 of the current Articles of Incorporation) will no longer be necessary and will therefore be deleted. (iv) In line with the above establishment and deletion, supplementary provisions related to the effective date, etc. shall be established. (2) Article 18, Paragraph 2 of the proposed amendment is to allow advance notification through electromagnetic means, in addition to paper forms, regarding the diverse exercise of voting rights at the General Meeting of Shareholders. 2. Details of Amendments The details of the amendments are shown below. Current Articles of Incorporation Proposed Amendments CHAPTER III CHAPTER III GENERAL MEETING OF SHAREHOLDERS (Deleted) GENERAL MEETING OF SHAREHOLDERS Article 15. (Disclosure of Reference Materials for General Meeting of Shareholders, etc. via the Internet) When convening a general meeting of shareholders, the Company may deem that it has provided shareholders with information which should be stated or indicated in reference materials for the general meeting of shareholders, business reports, financial statements and consolidated financial statements (including results of audit by the board-audit committee and the accounting auditor on the consolidated financial statements) when it has disclosed such information via the Internet in accordance with laws and regulations. 6 Current Articles of Incorporation （Newly established） Proposed Amendments Article 15. (Measures for Electronic Provision, etc.) 1. When convening a general meeting of shareholders, the Company shall take measures for the electronic provision of information contained in the reference documents for general meeting of shareholders, etc. 2. Among the matters to be provided electronically, the Company may choose to omit all or part of the matters stipulated in the Ordinance of the Ministry of Justice in the paper document to be sent to shareholders who have made a request for the document delivery by the record date of voting rights. Article 18. (Diverse Exercise of Voting Rights) Article 18. (Diverse Exercise of Voting Rights) 1. Any shareholder who holds shares on behalf of others may make a diverse exercise of voting rights. 2. In the event of the preceding paragraph, such shareholder is required to submit a written notice of the diverse exercise of voting rights and reasons thereof no later than three days prior to the general meeting of shareholders. (Unchanged) 1. 2. In the event of the preceding paragraph, such shareholder is required to submit a notice of the diverse exercise of voting rights and reasons thereof by writing or electromagnetic means no later than three days prior to the general meeting of shareholders. (Newly established） (Supplementary provisions) 1. The deletion of Article 15 (Disclosure of Reference Materials for General Meeting of Shareholders, etc. via the Internet) and the new establishment of Article 15 (Measures for Electronic Provision, etc.) of the Articles of Incorporation shall come into effect on September 1, 2022 (hereinafter referred to as the “Effective Date”), which is the effective date of the amending provisions stipulated in the proviso of Article 1 of the Supplementary Provisions of the Act for Partial Amendment of the Companies Act (Act No. 70 of 2019). 2. Notwithstanding the provisions of the preceding paragraph, Article 15 (Disclosure of Reference Materials for General Meeting of Shareholders, etc. via the Internet) of the Articles of Incorporation shall remain in effect for a general meeting of shareholders held on a date within six months of the Effective Date. 3. These supplementary provisions shall be deleted after six months have elapsed from the Effective date or three months have elapsed from the date of the general meeting of shareholders as specified in the preceding paragraph, whichever is later. 7 Election of Two (2) Directors (Excluding Directors Serving as Board-Audit Proposal 2: Committee Members) The terms of office of all two (2) directors (excluding directors serving as Board-Audit Committee members; the same applies hereafter in this Proposal 2) will expire at the conclusion of the Meeting. Accordingly, the Company proposes to elect two (2) directors. This Proposal has been deliberated by the Nomination and Remuneration Committee. With regard to the election of directors, the summary of opinions of the Board-Audit Committee is as follows. The Board-Audit Committee discussed the election of directors based on the deliberations by the Nomination and Remuneration Committee composed of all four (4) independent directors and the President. As a result, the Committee reached a conclusion that it has no objection to the nomination of director candidates in this Proposal with regard to oversight, execution and future focus of the Board of Directors (or “BOD”), the composition of the Board of Directors, the business execution structure, and expertise, experience and track record of each candidate. The candidates for director are as follows. No. Name Attribute Current position and responsibilities at the Company, and significant concurrent positions outside the Company 1 Shinichi Fuki Chairman Re-election 2 Keisuke Miyoshi Re-election President & CEO [Representative Director] In charge of Investment, Partner Number of attendances at the BOD meetings 13 out of 13 (100%) 13 out of 13 (100%) 8 No. Name (Date of birth) Career summary, position and responsibilities at the Company, and significant concurrent positions outside the Company Shinichi Fuki (November 1, 1961) April 1985 June 2003 Joined JAFCO Director in charge of Investment Group II, Kansai Branch and Planning & Administration, JAFCO February 2005 Managing Director in charge of Finance, Investment Group II, Kansai Branch and VA Department III, JAFCO Executive Managing Director in charge of Finance, Structured Investment, Kansai Branch and VA Department III, JAFCO President & CEO (Representative Director) March 2007 January 2010 1 April 2022 Chairman, JAFCO (Present) Number of the Company’s shares owned 49,774 shares Number of attendances at the Board of Directors meetings: 13 out of 13 meetings (100%) Reason for nomination as candidate for director Since joining JAFCO, Shinichi Fuki has constantly been involved in private equity investment, and has taken charge of the Company’s overall operations, including investment and fund management. As President (CEO) between January 2010 and March 2022 and as Chairman since April 2022, he has enhanced the Board of Directors’ effective decision-making and supervisory function by capitalizing on his extensive experience and deep insight. Based on his track record, the Board of Directors deemed it appropriate that he continues to execute and supervise business activities as a director of the Company. 9 No. Name (Date of birth) Career summary, position and responsibilities at the Company, and significant concurrent positions outside the Company Keisuke Miyoshi (September 18, 1969) April 1993 August 2011 April 2013 June 2015 March 2018 April 2022 Joined JAFCO Group Officer of Investment Group II, JAFCO Corporate Officer in charge of Investment, JAFCO Director in charge of Investment, JAFCO Director in charge of Investment, Partner, JAFCO President & CEO, in charge of Investment, Partner, JAFCO (Present) 2 Number of the Company’s shares owned 18,307 shares Number of attendances at the Board of Directors meetings: 13 out of 13 meetings (100%) Reason for nomination as candidate for director Since joining JAFCO, Keisuke Miyoshi has been involved in private equity investment operations and served as an executive in charge of the domestic venture investment division. He is also one of the Partners who make important investment decisions. Since assuming President (CEO) in April 2022, he has taken charge of the Company’s overall operations. Based on his broad experience, expertise and track record of domestic investment, the Board of Directors deemed it appropriate that he continues to execute and supervise business activities as a director of the Company. Notes: 1. Candidate for director Keisuke Miyoshi participates in SV6 Partners Limited Liability Partnership (“Partners LLP”), which is the joint general partner of JAFCO SV6 Fund Series (“SV6”), with other Partners and the Company, and has made partner commitment in SV6 through Partners LLP. The Company has provided a loan for Mr. Miyoshi for his partner commitment. The financing details are as shown in “9. Notes to related party transactions” in the “Notes to Non-Consolidated Financial Statements” of the Matters available on the website in relation to the Notice of Convocation of the 50th Annual General Meeting of Shareholders. In addition, in case of the establishment of a new flagship fund in the fiscal year ending March 31, 2023, which is currently being planned by the Company, Keisuke Miyoshi will make partner commitment in the fund as in the case of SV6, and the Company plans to provide a loan for Mr. Miyoshi for his partner commitment. There are no special interests between the Company and other director candidates. 2. The Company has entered into an indemnification agreement with each candidate as stipulated in Article 430-2, Paragraph 1 of the Companies Act, under which the Company shall indemnify them for the expenses provided for in item (i) and the loss provided for in item (ii) of said paragraph to the extent provided for in laws and regulations. In order to ensure that the appropriateness of the execution of duties by the Company’s directors is not impaired by said indemnification agreement, the BOD resolution approving the execution of an indemnification agreement shall be subject to the approval of all the independent directors (excluding the director to be covered by the 10 said agreement). If each candidate is reelected, the Company plans to continue such indemnification agreements with each candidate. 3. The Company has concluded a Directors and Officers liability insurance contract, which covers all directors, with an insurance company as prescribed in Article 430-3, Paragraph 1 of the Companies Act, and if candidates are reelected, they will remain covered by the said contract. The contract covers the liability of the insured for compensation for damages, legal dispute fees, etc. arising from claims for damages from third-parties, shareholders, etc. However, there are certain exemptions such as in cases where violation of laws and regulations were knowingly committed. The premium, including the portion for riders, will be borne by the Company and its subsidiaries and there are no premiums to be borne by the insured individuals. The Company plans to renew the said contract during their term in office under the similar contents as the current contract. 11 [Reference] Experience and specialty of the Company’s directors The policy and procedure for selection of director candidates are stipulated in the Corporate Governance Policy of the Company as shown below. Directors, including CEO, and corporate officers are appointed by the Board of Directors based on deliberations by the Nomination and Remuneration Committee. All directors (excluding directors serving as Board-Audit Committee members) are subject to election/re-election every year at the General Meeting of Shareholders. The Board-Audit Committee expresses its opinion on directors’ election/ dismissal at the General Meeting of Shareholders when it deems it necessary. The Company shall select director candidates who have business skills, insight, experience, and expertise to serve as a director to allow the Board of Directors to fully exercise its operational and supervisory functions. The Company proactively selects suitable candidates from diverse background regardless of gender and nationality. The Company shall select independent director candidates who have abundant experience and deep insight into corporate management or specialist fields and can be expected to fulfill the roles and responsibilities of an independent director. The selection is in accordance with the Company’s “Standards for Independence of Independent Directors.” Experience and expertise required for directors serving the Company’s Board of Directors and after the election at the Annual General Meeting of Shareholder are as shown below. Experience: 1. Corporate management 2. Investment 3. Fundraising/ fund operation 4. Overseas operation (b) Treasury accounting (c) Legal affairs/ compliance (d) Finance (e) Academic research/ education Expertise*: (a) Personnel/ labor affairs Experience/expertise 1 2 3 4 (a) (b) (c) (d) (e) Expertise * Directors Shinichi Fuki Keisuke Miyoshi Shigeru Tamura (Independent Director) Koji Tanami (Independent Director) ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Kenichi Akiba (Independent Director) ● ● ● Yoshie Kajihara (Independent Director) ● ● ● * Note: Expertise Directors Shinichi Fuki and Keisuke Miyoshi have experienced management team member recruitment, management figure analysis, investment legal affairs, fundraising arrangement, etc. at unlisted companies through their venture investment operations. Therefore, even if they have not worked in the relevant divisions, they are judged to have expertise in personnel/ labor affairs, treasury/ accounting, and legal affairs. 12 Determination of Remuneration for Granting Transfer-Restricted Shares to Proposal 3: Directors (Excluding Directors Serving as Board-Audit Committee Members and Independent Directors) At the 43rd Annual General Meeting of Shareholders held on June 16, 2015, the amount of remuneration, etc. for the Directors (excluding Directors Serving as Board-Audit Committee Members) was approved to be no more than \600 million per year. As part of our efforts to review the remuneration system for Directors, we would like to request approval to introduce a stock remuneration plan to pay a new remuneration for granting transfer-restricted shares to the Directors excluding Directors Serving as Board-Audit Committee Members and independent directors (the “Eligible Director(s)”) separately from the aforementioned remuneration amount, in order to provide incentives to continuously improve the corporate value of the Company and to further share the value with shareholders. Based on this proposal, the remuneration for granting transfer-restricted shares to the eligible Directors will be monetary claims, the amount of which shall be no more than \300 million per year. Currently, the Company has two (2) Directors (excluding Directors Serving as Board-Audit Committee Members), neither of them is Independent Directors. Even if Proposal 2 “Election of Two (2) Directors (Excluding Directors Serving as Board-Audit Committee Members)” is approved as proposed, the number of Directors (excluding Directors Serving as Board-Audit Committee Members) remains unchanged. In accordance with the resolution of the Board of Directors, the Eligible Directors shall deliver all the monetary remuneration claims paid based on this proposal as assets contributed in kind and shall receive the issuance or disposition of the Company’s common shares. The total number of common shares to be issued or disposed of as a result shall be within 300,000 shares per year. However, if a stock split (including gratis allotment of the Company’s common shares) or a reverse stock split of the common shares of the Company is carried out after the date of resolution of this proposal and, as a result, the total number of the Company’s common shares to be issued or disposed of as transfer-restricted shares needs to be adjusted, such number shall be adjusted to a reasonable extent. The amount to be paid per share shall be determined by the Board of Directors within the scope that does not fall under particularly favorable terms for the Eligible Directors, and the basis of such amount shall be the closing price of the Company’s common shares on the Tokyo Stock Exchange on the business day immediately preceding the date of each resolution of the Board of Directors (if there is no transaction on that day, the closing price on the most recent trading day prior to such date). For the issuance or disposition of shares of the Company’s common stock pursuant to this, the Company and the Eligible Directors shall enter into an agreement on allotment of transfer-restricted shares (hereinafter referred to as the “Allotment Agreement”) which shall contain the details shown below. The Company believes that the maximum amount of remuneration under this proposal, the total number of the Company’s common shares to be issued or disposed of and other conditions for granting transfer-restricted shares to the Eligible Directors based on this proposal are appropriate as they are determined by taking into account the aforementioned purpose, the Company’s business status, the Company’s “Policy for Determination of Remuneration of Directors, etc.” (a summary of the contents of this policy is shown on page 42 of the Company’s Business Report for the 50th fiscal year. If this proposal is approved, the Company plans to change this policy to the contents described in the [Reference] column below to be consistent with the contents approved by the Board of Directors) and various other circumstances. 13 The Board-Audit Committee has also expressed an opinion regarding the remuneration of directors as follows. The Board-Audit Committee discussed the remuneration of directors, etc., including granting of transfer-restricted shares proposed in this proposal (hereinafter referred to as the “Remuneration of Directors” in this opinion), at the Board-Audit Committee based on the “Policy for Determination of Remuneration of Directors, etc.” and the deliberation by the Nomination and Remuneration Committee composed of four independent directors and the President. As a result, the Board-Audit Committee has judged the Remuneration of Directors is appropriate after taking into account fairness in remuneration calculation, balance between remuneration levels and duties/ responsibilities of directors, its links to the Company’s business performance, the details and conditions of the system, etc. If this proposal is approved as proposed, transfer-restricted shares equivalent to those under this system, are planned to be granted to the Company’s corporate officers and the CEO of JAFCO Investment (Asia Pacific) Ltd, the Company’s core subsidiary. [Outline of the Allotment Agreement] (1) Transfer Restriction Period The Eligible Directors shall not transfer, create security interests on, or otherwise dispose of (hereinafter referred to as the “Transfer Restriction”) the common shares of the Company allotted under the Allotment Agreement (hereinafter referred to as the “Allotted Shares”) during the period from the day when they received the allotment under the Allotment Agreement until the time immediately after the retirement or resignation of Eligible Directors from their position as director or other position of the Company or its subsidiaries, as determined in advance by the Company’s Board of Directors (hereinafter the “Transfer Restriction Period”). Provided, however, if the time immediately after such retirement or resignation is prior to the date after a lapse of three (3) months since the end of the fiscal year within which the date of the allotment of the Allotted Shares falls, the end of the Transfer Restriction Period may be adjusted to a reasonable extent. (2) Removal of Transfer Restriction On the condition that the Eligible Directors continue to hold their position as director or other position of the Company or its subsidiary, as determined in advance by Company’s Board of Directors, during a period of time determined in advance by Company’s Board of Directors (the “Service Period”), the Company shall remove the Transfer Restriction as of the end of the Transfer Restriction Period. Provided, however, that: (a) if an Eligible Director retires or resigns from his or her position as director or other position of the Company or its subsidiary, as determined in advance by Company’s Board of Directors, before the expiration of the Service Period for justifiable reasons; or (b) if an Eligible Director resigns or retires from his or her position as director or other position of the Company or its subsidiary, as determined in advance by Company’s Board of Directors for any reason other than justifiable reasons even after the expiration of the Service Period, the number of the Allotted Shares to be removed from Transfer Restriction and the timing of the removal of Transfer Restriction shall be reasonably adjusted as necessary. (3) Acquisition of the Allotted Shares without Consideration The Company shall acquire, without consideration, the Allotted Shares for which Transfer Restriction has not been removed at the time immediately after the removal of Transfer Restriction pursuant to the provisions of (2) above as a matter of course. If an Eligible Director resigns or retires from his or her position as director or other position of the Company or its subsidiary, as determined in advance by Company’s Board of Directors, before the expiration of the Service Period, the Company shall acquire the Allotted Shares without consideration as 14 a matter of course, unless there are reasonable grounds for the retirement or resignation such as the expiration of the term of office or the death of the Eligible Director. In addition, if the Board of Directors of the Company recognizes that an Eligible Director has violated laws, regulations, internal rules or the Allotment Agreement in any material respect during the Transfer Restriction Period, or in the case of certain grounds set forth in the Allotment Agreement, the Company shall acquire, without consideration, all of the Allotted Shares held by the Eligible Director at the relevant time as a matter of course. (4) Treatment in Reorganization, Etc. Notwithstanding the provisions of (1) above, if any matter relating to a merger agreement under which the Company becomes the disappearing company, contract of share exchange, share transfer plan, or any other reorganization in which the Company becomes a wholly-owned subsidiary is approved at a General Meeting of Shareholders of the Company (provided, however, that if the approval of such reorganization is not required by the General Meeting of Shareholders of the Company, the Board of Directors of the Company) during the Transfer Restriction Period, the Company shall, by resolution of the Board of Directors of the Company, remove the Transfer Restriction with respect to the number of Allotted Shares reasonably determined based on the period from the commencement date of the Transfer Restriction Period until the effective date of such reorganization, etc., prior to the effective date of such reorganization, etc. In this case, moreover, the Company shall acquire, as a matter of course, the Allotted Shares, for which the Transfer Restriction has not been removed immediately after the removal of the Transfer Restriction, without consideration. (5) Other Matters Any other matters related to the Allotment Agreement shall be determined by the Company’s Board of Directors. 15 [Reference] If Proposal 3 is approved as proposed, the “Policy for Determination of Remuneration of Directors, etc.” will be amended as follows. Outline of Policy for Determination of Remuneration of Directors, etc. (after amendment) The Company has established the Nomination and Remuneration Committee composed of independent directors and the president to strengthen corporate governance and enhance fairness, transparency and objectivity in procedures related to nomination and remuneration of directors, corporate officers and partners (hereinafter “Directors”). Based on the results of deliberations by the Committee, the Company determines the “Policy for Determination of Remuneration of Directors, etc.” at the Board of Directors meeting. (Basic policy) The levels and structure of remuneration shall be sufficient to attract, retain, and motivate competent personnel for the realization of the Company’s mission of “Commit to new business creation and jointly shape the future.” Remuneration shall motivate our directors, etc. to commit to an increase in corporate value and the improvement of not only short-term financial results, but also medium-to long-term results. Given the Company’s business nature of being an investment company managing funds investing in unlisted companies, the remuneration of Directors, etc. executing company business shall reflect fund management performance. With the aim of gaining stakeholders’ trust, the remuneration plan shall be transparent, fair, and rationalized, determined through an appropriate and transparent process. The plan shall also be designed to prevent fraud and over-emphasis on short-term performance. (Remuneration of directors (excluding Board-Audit Committee members)) The remuneration of directors (excluding Board-Audit Committee members) is determined by the Board of Directors based on deliberations by the Nomination and Remuneration Committee. The monetary compensation of directors (excluding Board-Audit Committee members) shall consist of basic compensation and extraordinary compensation. Part of basic compensation is linked to the Company’s ordinary income and other business performance, and extraordinary compensation additionally takes into account fund performance. In addition, from the perspective of improving the Company’s corporate value in the medium to long term, stock-based remuneration shall be paid to directors (excluding Board-Audit Committee members). As an investment company managing highly volatile venture and buyout investment funds, the level of compensation shall reflect the amount of assets under management, the Company’s business performance as a result of asset management, and shareholder value and be appropriate for securing highly capable human resources. The maximum total amount of monetary compensation of directors (excluding Board-Audit Committee members) shall be within \600 million per annum (based on a resolution of the 43rd Annual General Meeting of Shareholders held on June 16, 2015; the number of directors (excluding Board-Audit Committee members) as of the end of this Annual General Meeting of Shareholders mentioned above was six). As stock-based remuneration to be paid to directors (excluding Board-Audit Committee members and independent directors), the total amount of monetary claims for granting transfer-restricted shares (hereinafter referred to as “Restricted Stocks”) shall be no more than 16 \300 million, and the total number of the Company’s common shares to be issued or disposed of as transfer-restricted shares shall be within 300,000 shares per year (based on a resolution of the 50th Annual General Meeting of Shareholders held on June 21, 2022; the number of directors (excluding Board-Audit Committee members and independent directors) as of the end of this Annual General Meeting of Shareholders mentioned above is two). (Outline of directors’ monetary compensation) Basic compensation (fixed) Basic compensation (performance-linked) Fixed monetary remuneration paid monthly, determined by importance of roles and responsible areas of each job position, years in service, etc. Monetary remuneration paid monthly, determined once a year, in principle, by the Board of Directors on a scale of 1 to 5 by reflecting short-term results based on the comparison of the Company’s profit levels (capital gains, net additions to investment loss reserves, ordinary income, etc.) and its details for the preceding fiscal year with the past results. A standard percentage of performance-linked basic compensation in total basic compensation is about 20%, and the relevant portion increases/ decreases within a range of 30% based on the above 5-point scale. The year-on-year increase/ decrease in percentage terms of extraordinary compensation level for each position is determined by the Board of Directors based on the year-on-year comparison of ordinary income, core income (amount of management fees subtracted by SG&A expenses), unrealized gains, fund performance, which is a major management index over the medium- to long-term, and total fund commitments. The amount is then determined by the Board of Directors by taking into account their job responsibilities and the degree of contribution, and paid to each director once a year. Extraordinary compensation may not be paid when the Company’ performance deteriorates sharply. Extraordinary compensation (performance-linked) (Outline of stock-based remuneration) In order to provide incentives to continuously improve the corporate value of the Company and to further share the value with shareholders, the Company shall pay a remuneration for granting transfer-restricted shares to directors (excluding Board-Audit Committee members and independent directors; hereinafter referred to as the “Eligible Directors”). The outline of the restricted-stock remuneration plan is as shown below. Granting of transfer-restricted shares The Company shall grant transfer-restricted shares (hereinafter the “Allotted Shares”) in an amount determined by the Board of Directors of the Company based on a base amount corresponding to the positions of the Eligible Directors and a comparison of the Company’s stock price growth rate and the TOPIX (Tokyo Stock Price Index) growth rate for a certain period of time prior to the grant. 17 Transfer restriction period Removal of transfer restriction The number of the Allotted Shares granted to the Eligible Directors shall be no more than the maximum of 300,000 shares per year as approved at the Annual General Meeting of Shareholders held on June 21, 2022. From the allotment date to the time of retirement or resignation from director or other position of the Company or its subsidiaries as determined in advance by the Company’s board of Directors. Provided, however, if the time immediately after such retirement or resignation is prior to the date after a lapse of three months since the end of the fiscal year within which the date of the allotment of the Allotted Shares falls, the end of the Transfer Restriction Period may be adjusted to a reasonable extent. (1) On the condition that the Eligible Directors continue to hold their position as director or other position of the Company or its subsidiary, as determined in advance by Company’s Board of Directors, during a period of time determined in advance by Company’s Board of Directors (the “Service Period”), the Company shall remove the Transfer Restriction as of the expiration of the Transfer Restriction Period. Provided, however, that: (a) if an Eligible Director retires or resigns from his or her position as director or other position of the Company or its subsidiary, as determined in advance by Company’s Board of Directors, before the expiration of the Service Period for justifiable reasons; or (b) if an Eligible Director resigns or retires from his or her position as director or other position of the Company or its subsidiary, as determined in advance by Company’s Board of Directors for any reason other than justifiable reasons even after the expiration of the Service Period, the number of the Allotted Shares to be removed from Transfer Restriction and the timing of the removal of Transfer Restriction shall be reasonably adjusted as necessary. (2) If any matter relating to a merger agreement under which the Company becomes the disappearing company, contract of share exchange, share transfer plan, or any other reorganization in which the Company becomes a wholly-owned subsidiary is approved at a General Meeting of Shareholders of the Company (provided, however, that if the approval of such reorganization is not required by the General Meeting of Shareholders of the Company, the Board of Directors of the Company) during the Transfer Restriction Period, the Company shall, by resolution of the Board of Directors of the Company, remove the Transfer Restriction with respect to the number of Allotted Shares reasonably determined based on the period from the commencement date of the Transfer Restriction Period until the effective date of such reorganization, etc., prior to the effective date of such reorganization, etc. 18 Acquisition of the Allotted Shares without consideration (1) The Company shall acquire, without consideration, the Allotted Shares, for which the Transfer Restriction has not been removed immediately after the removal of the Transfer Restriction pursuant to the “Removal of transfer restriction” above, as a matter of course. (2) If an Eligible Director resigns or retires from his or her position as director or other position of the Company or its subsidiary, as determined in advance by Company’s Board of Directors, before the expiration of the Service Period, the Company shall acquire the Allotted Shares without consideration as a matter of course, unless there are reasonable grounds for the retirement or resignation such as the expiration of the term of office or the death of the Eligible Director. (3) If the Board of Directors of the Company recognizes that an Eligible Director has violated laws, regulations, internal rules or the Allotment Agreement in any material respect during the Transfer Restriction Period, or in the case of certain grounds set forth in the Allotment Agreement, the Company shall acquire, without consideration, all of the Allotted Shares held by the Eligible Director at the relevant time as a matter of course. The standard ratio of the performance-linked portion of monetary compensation (the sum of the performance-linked basic compensation and extraordinary compensation) and stock-based remuneration to total compensation for directors is approximately one-third, respectively. In introducing stock-related remuneration, the Company will partially reduce monetary compensation paid prior to the introduction based on a review of its level, and then pay the restricted-stock remuneration in the ratio shown above as a guideline. As a result, the ratio of fixed compensation to performance-linked compensation (performance-linked monetary compensation and stock-based remuneration) in total compensation for directors is approximately 1:2. (Remuneration of directors serving as Board-Audit Committee members) The remuneration of directors serving as Board-Audit Committee members shall be within \300 million per annum (based on a resolution of the 43rd Annual General Meeting of Shareholders held on June 16, 2015). Note: The number of directors serving as Board-Audit Committee members as of the end of this Annual General Meeting of Shareholders mentioned above was four. 19 The remuneration of directors serving as Board-Audit Committee members is determined through discussions between the Board-Audit Committee members. The remuneration of directors serving as Board-Audit Committee members consists only of basic compensation excluding performance-linked portion, and there is no extraordinary compensation nor stock-based remuneration. The remuneration system, which is not easily affected by the Company’s performance, ensures their independence to the Company’s management. The Articles of Incorporation of the Company do not stipulate that decisions on the execution of important business can be delegated to directors. Such decisions are made based on thorough discussions by the Board of Directors, including independent directors serving as Board-Audit Committee members. The level of remuneration for directors serving as Board-Audit Committee members is set by taking into account their involvement in important management decision-making and their duties of supervising business execution. (Remuneration of corporate officers and partners) Remuneration of corporate officers and partners is determined by the Board of Directors based on deliberations by the Nomination and Remuneration Committee, as in the case of directors (excluding directors serving as Board-Audit Committee members). Monetary remuneration of corporate officers and partners consists of basic compensation and extraordinary compensation. The amount of extraordinary compensation is determined by taking into account the Company’s business results and fund performance and reflecting their respective degree of contributions, etc. The Company also provides restricted-stock remuneration with the similar details as those for directors (excluding Board-Audit Committee members and independent directors) as stock-based remuneration. 20 (Document to be provided) Business Report (From April 1, 2021 to March 31, 2022) I Current Status of JAFCO Group Co., Ltd. (hereinafter the “Company”) and its Subsidiaries (collectively hereinafter the “Company Group”) 1. About the Company Group 1) Business Environment The world continued to be impacted by the COVID-19 pandemic in the fiscal year under review with the spread of a new COVID-19 variant. Additionally, since the end of 2021, the emergence of geopolitical risks, a further rise in crude oil prices, and a change in the U.S monetary policy added uncertainty to the business environment surrounding the Company. Meanwhile, such environment has provided a strong tail wind to our portfolio companies in the businesses such as those with an eye on “living with the COVID-19” and “post-Covid-19,” those that involve keywords―non-face-to-face, non-contact, and remote−and those promoting DX-based efficiency. The “Digital Revolution,” which causes a major shift in the global industrial structure, has fundamentally changed the structure of existing industries and creating new industries. High potential startups are also emerging in numbers in Japan and young entrepreneurs who lead the next generation are increasing rapidly. In terms of venture capital investment stage, seed and early stages have increased to account for a large percentage of investments. 2) JAFCO’s business line and business model Since establishment, the Company has moved forward with cutting-edge entrepreneurs. In addition to a number of venture capitalists with broad experience, we have accumulated abundant resources and built extensive networks to foster growth of portfolio companies. Not only as an investor but also as “Co-Founder,” we commit to expanding business and adding corporate value with entrepreneurs through management involvement from the business conception stage. Since adopting the partnership model in 2018, we have been focusing on building a flat organization centered around Partners, who are responsible for fund management as top capitalists. Partners and employees have invested alongside JAFCO in the latest SV6 Fund Series (“SV6”), bearing the risk of fund performance while receiving carried interest based on fund performance and degree of individual contribution. We are also enhancing long-accumulated organizational strength to further improve fund performance through deep involvement in the management of portfolio companies. JAFCO’s business is venture and buyout investment through fund management. Our main income sources are fund management fees and success fees that we receive from fund operations, and capital gains from direct investment in funds. The fund term is 10 years with a possible extension of two years in general. A portfolio of a newly established fund is built over a period of about three years since the start of fund operation. We believe that stable performance can be achieved by continually identifying and investing in high-potential companies regardless of the timing of establishment and business sentiment. After investment, we deepen management involvement to raise corporate value with entrepreneurs and lead their exits (sales) through IPO, M&A, etc. 21 3) Investment Activity in Terms of Sustainability and ESG The essence of our investment activity matches strongly with the concept of ESG investment. At the initial stage of investment activity, which involves identifying high-potential companies, we evaluate business potential by incorporating risks and social needs from E (=environmental), S (=social), and SDGs aspects. Based on such evaluation, we make investment decisions after having discussions with the management team of investment candidates on issues towards achieving sustainable growth. In the year under review, in the E (=environmental) aspect, we invested in a company conducting R&D of cutting-edge technology leading to the practical use of fusion energy with the aim of realizing a carbon-neutral society. In the S (=social) aspect, we invested in a company providing a hand-made meal delivery service for double-income households. This company’s aim is to realize services that reduce the burden of women’s household chores and encourage their social advancement, enriching their lifestyle. The following stage of investment activity involves supporting growth by resolving issues through dialogue and providing management involvement. We regularly check the fund management and legal compliance status of our portfolio companies in addition to tracking their business status. While placing top priority on their business launch, we also place importance on building the administrative structure in parallel. Through dialogue with management teams, we share and resolve issues. We support the establishment of sales, development and administrative structures, including human resource recruitment, according to growth stages. We also provide hands-on support for management teams to build a G (=governance) structure. Through the above initiatives, we contribute to the realization of sustainability by producing companies that will generate large social impacts in the future. [Reference] 22 JAFCO and SDGs We have invested in over 4,000 unlisted companies, provided IPO support to over 1,000 companies, and produced many companies representing Japan and various overseas countries. Among these include many companies whose business activities align with SDGs, or which have become big companies in Japan following an IPO and are proactively addressing SDGs to fulfill their social responsibilities. We will continue with our contribution to the achievement of SDGs through our investment activities. Unlisted domestic portfolio companies related to each SDG (example) 4) Funds under management Total commitments of funds under management stand at \332.3 billion. We decide fund size based on our assumption of investment amount per company and the number of investments, and also taking into account the trends in investment target markets and our investment capacity. To allow an increase in the future fund size and ensure continuous commitments, we are promoting an increase in the average commitment amount, mainly from institutional investors. In the case of SV6 established in June 2019, we increased the amount of funds raised from external investors while reducing the number of investors by about half compared to our previous funds. In line with the introduction of the partnership model, we changed investment targets and the fund operation structure. In the case of SV6, commitments are used entirely for venture and buyout investments by domestic teams, whereas for SV5, about 30-40% of total commitments are used for capital commitments to our Asian and US funds. Individual partners also commit to fund operations and are jointly liable with the Company. Establishment of a new flagship fund in Japan is planned in the fiscal year ending March 2023. While continuing to invest our own capital in the US and Asian funds, we are making efforts to expand the size of overseas funds through fundraising from external investors based on the funds’ solid performance. As Japan’s pioneer in venture capital fund management, we will preserve discipline and transparency under the following three management policies. We believe that genuine pursuit of portfolio companies’ growth and fund performance is in the best interest of fund investors and the Company. We will not establish industry-specific funds. We will not establish investor-specific funds. We will not engage in any business other than PE investment and fund management. 23 Flagship funds under management 5) Investment structure and strategy At JAFCO, investment teams in Japan, Asia and the US operate their own funds based on their respective investment strategies. Investment teams deeply rooted in local communities carry out everything from identifying investment candidates, deciding on and executing investments, to post-investment support. This tri-polar investment activity allows us to diversify regional risk. In Japan, we specialize in startup investment and buyout investment involving business succession, spin-outs, etc. Overseas, our investment targets are high-potential startup companies mainly in China and other high-potential regions in Asia, and Silicon Valley in the US. For our domestic venture investment, we rigorously select promising companies to boost investment amount and stake in each company, thereby increasing management involvement in portfolio companies. Not only as an investor, but also with a spirit of “Co-Founder,” we will offer deep management involvement from the business conception stage. We will commit to expanding business and raising corporate value with entrepreneurs. We invest in around 25 new companies annually, and the average shareholding at initial investment and the average amount invested per company are around 15% and about \400 million respectively. With regard to promising start-ups, so-called mega ventures and game changers, we have seen cases where several billions of yen are raised in a single financing round. For buyout investment, we target small to midsize deals (with an equity value of around \1-5 billion). Our strengths in buyout investment are business re-engineering and growth support using cutting-edge technologies, leveraging our expertise accumulated through venture investment. In September 2021, the Chubu, Kansai and Kyushu branches were integrated as the West Japan Branch. The new branch will continue to invest in high-potential start-up companies in Chubu, Kansai and Kyushu regions. In the US, we have built good relationships with top-tier VC firms and invested in high-potential startups mainly in Silicon Valley under the name of Icon Ventures. In Asia, we make investments in China, Taiwan, India, and growth regions in Southeast Asia by capitalizing on over 30 years of experience as a Japanese VC pioneer expanding into Asia. 24 Global Investment Structure Notes: 1. Balance of unlisted securities (acquisition basis): as of March 31, 2022 2. Exchange rate: 1US$=\122.39 as of March 31, 2022 3. Number of members: as of April 1, 2022 4. BD stands for business development. 5. Overseas investments carried out by the venture investment division in Japan are included in Japan. Initial investment amount and stake at investment (as of March 31, 2022) Stake at investment 17.0% 17.3% 13.7% Note: Domestic venture investment only 6) Business support and governance establishment for portfolio companies The most important aspect of investment in startup companies is the speed with which to launch business. Investment staff attend important meetings at portfolio companies and contact with the management team on a daily basis to address management issues. At the Business Development division, professional members with strengths in recruitment, marketing/ sales, back-office construction support, and other fields form teams with venture capitalists to raise corporate value of portfolio companies. We provide free services that support efficient business launch with a minimum burden on startups which only have limited resources. We have extensive resources and networks accumulated over the years. In recent years, we have been rapidly expanding networks with large companies promoting new business 25 development. Strengthening the collaboration between large companies and portfolio companies and leveraging the knowledge of large companies allow us to expand operations of portfolio companies. For portfolio companies to achieve sustainable business growth and be recognized as a listed company, construction of an internal control structure is also an important issue. As it is not unusual for a startup company with a couple of members to raise several hundreds of millions of yen, we provide cash management support and staff recruitment in line with its growth stage. For IPO preparations, we support the selection of corporate auditor, securities agency, and lead managing securities company, the establishment of internal rules, and preparation of IPO applications. Portfolio company support structure 7) Change of Directors and Executive Officers The appointment of new president (CEO) took place effective April 1, 2022. Under the new management of President and CEO Miyoshi, we will exert our best efforts to move our business forward. Director Shibusawa resigned from the Company’s Board of Directors as of the end of March 2022, and will concentrate on investment activity in the Asian region as President & CEO of JAFCO Investment (Asia Pacific) Ltd. to strengthen the investment structure of the Company Group. 26 2. Business Summary and Results 1) Changes in the Business Environment and Impact on Portfolio Companies Against the backdrop of a changes in the U.S. monetary policy, geopolitical risks and a further rise in crude oil prices, the stock market has entered a major correction phase with increasing uncertainty. In the domestic IPO market, there has been a series of IPO postponements and downsizing, and the impact on the unlisted stock market also needs to be closely monitored. Under these circumstances, we acknowledge that the impact on the performance and fundraising of our portfolio companies is unpredictable. 2) Financial highlights and capital gains (Billions of yen) Net sales Ordinary income Net income FY21.3 FY22.3 Change 21.5 11.7 38.5 27.7 18.4 15.1 28.7％ 56.8％ (60.8％) During the current fiscal year, both net sales and ordinary income increased from the previous year, while net income fell as a result of a decrease in gains on the sale of investment securities recorded in the previous year. Capital gains totaled \12.6 billion on both listed and unlisted shares (\11.3 billion in the previous year), exceeding the level of the previous year due mainly to the IPO by Visional, Inc. in April 2021. Our biggest management focus is to maintain high fund performance over the long term. We will continue to pursue IPO, M&A and other exits from which large capital gains can be expected, regardless of the number of IPOs achieved each year. Although business results fluctuate significantly from year to year depending on the number of large exits, continuous improvement in performance of each operating fund allows us to maintain strong business results over the long term. Capital gains (JAFCO’s interests) (\ Billion)Gains, net (Unlisted)Gains, net (Listed)2.3 11.3 18.03 9.9 8.8 12.7 5.3 19.03 6.4 2.6 20.03 7.1 0.0 12.6 3.7 7.6 21.03 14.9 22.03 12.5 Unrealized gains (Billions of yen) Note: Gains/losses include other portfolio-related revenues and impairment losses. 3) Investment loss reserves The balance of investment loss reserves and reserve ratio have been falling as we reshuffled our portfolio through highly selective, intensive investment and deepened management involvement. In the current fiscal year, additions to investment loss reserves, which had been increasing until the previous year due to such factors as the COVID-19 pandemic, fell sharply to \1.1 billion (previous year \