(Translated from the original Japanese)

Company Name: Aderans Co., Ltd.

Representative: Nobuo Nemoto, Representative Director,

Chairman and President

Stock Listing: First Section of the Tokyo Stock Exchange

Stock Code: 8170

Contact: Masaaki Izumoto, General Manager,

Global IR Department

Phone: +81-3-5366-6591

Notice regarding share consolidation, abolishment of share unit number provision, and

partial amendment to Articles of Incorporation

December 9, 2016, Tokyo—Aderans Co., Ltd. (hereafter, “Aderans” and “Company”) announces that its

Board of Directors resolved at a meeting held today to convene an extraordinary general shareholders’

meeting (hereafter, “Extraordinary General Shareholders’ Meeting”) to be held on January 21, 2019, and to

submit agenda items—Proposal 1: Consolidation of shares (hereafter, “Share Consolidation”) and Proposal 2:

Partial Amendment to Articles of Incorporation—as described below.

Note that through the above process, common shares of the Company (hereafter, “Shares”) will be subject

to delisting from the First Section of the Tokyo Stock Exchange, under the rules of Tokyo Stock Exchange,

Inc. (hereafter, “Tokyo Stock Exchange”) for listing marketable securities. Consequently, the Shares are set to

be delisted on February 10, 2017, after a period from January 21, 2017, through February 9, 2017, during

which the Shares will be designated issues in process, that is, for delisting, by the Tokyo Stock Exchange.

After delisting, it will not be possible to trade the Shares on the First Section of the Tokyo Stock Exchange.

Please be aware of this situation.

Details

I. Share Consolidation

1. Purpose and Reason for Share Consolidation

As already disclosed in the press release “Notice of Results of Tender Offer for Share Certificates, etc. of

Aderans Company by Adherence Corporation,” issued November 30, 2016 (hereafter, “the Press Release

about Results of Tender Offer”), Adherence Corporation (hereafter, “Adherence”) conducted the tender

offer (hereafter, “the Tender Offer”) for Shares, Stock Acquisition Rights (Note 1) and Convertible Bonds

(Note 2) (hereafter, collectively referred to as “Share Certificates”) during the 30 business days from

October 17, 2016, to November 29, 2016, as the tender offer period for the Tender Offer (hereafter, “the

Tender Offer Period”). As a result of the Tender Offer, Adherence holds 26,038,397 Shares (ownership

ratio (Note 3): 74.80%) as of December 6, 2016 (commencement date of settlement for the Tender Offer).

Note 1: “Stock Acquisition Rights” covers the following:

(i) Stock acquisition rights issued pursuant to a resolution at the Company’s Board of Directors’

meeting held on June 21, 2012 (the “Fourth Series Stock Acquisition Rights”)

(ii) Stock acquisition rights issued pursuant to a resolution at the Company’s Board of Directors’

meeting held on May 23, 2013 (the “Fifth Series Stock Acquisition Rights”)

(iii) Stock acquisition rights issued pursuant to a resolution at the Company’s Board of Directors’

2

meeting held on May 22, 2014 (the “Sixth Series Stock Acquisition Rights”)

(iv) Stock acquisition rights issued pursuant to a resolution at the Company’s Board of Directors’

meeting held on May 28, 2015 (the “Seventh Series Stock Acquisition Rights”)

(v) Stock acquisition rights issued pursuant to a resolution at the Company’s Board of Directors’

meeting held on May 26, 2016 (the “Eighth Series Stock Acquisition Rights”)

Note 2: “Convertible Bonds” covers Yen-Denominated Convertible Bonds with Stock Acquisition

Rights Due 2019, issued pursuant to a resolution at the Company’s Board of Directors’

meeting held on September 17, 2014.

Note 3: Ownership ratio (rounded to two decimal places; the same applies for ownership ratios hereafter) is

based on a denominator using the number of voting rights, 348,114 units, as of August 31, 2016,

stated in the quarterly report for the second quarter of the 48th term filed by the Company on

October 14, 2016.

Adherence is a joint stock corporation (kabushiki kaisha) incorporated on September 26, 2016, for the

main purpose of acquiring and holding Share Certificates of the Company, and all of its issued shares are

owned by Integral Corporation (hereafter, “Integral”) as of the date hereof.

As already disclosed in the press release “Notice of Implementation of MBO and Recommendation of

Tender Acceptance.” issued October 14, 2016 (hereafter, “the Press Release of Expression of Opinion”), in

the domestic men’s market, which has matured to an almost flat level of growth, the wig business is

experiencing intensified competition from contiguous markets such as drugs for AGA (Androgenetic

Alopecia) treatment and hair growth stimulants. While there has also been a revitalization of the domestic

women’s market due to the increase in the major target population of women in their 50s through 70s and an

increase in the number of active seniors, leading to an outlook of market growth, new customer acquisition

has been slow for the Company due to competitors and the impact of non-industry players entering the

market for low-priced wigs. In the overseas businesses, also, factors such as the gradual progress of a shift

towards Follicular Unit Extraction (FUE) and a heightened demand for women’s wigs have generated a need

for new products that meet the needs of new customers and for securing human resources. Against this

operating backdrop, in its consolidated business results for the fiscal year ended February 29, 2016, the

Company posted consolidated net sales of 79,153 million yen (up 3.2% from the preceding fiscal year) but

also recorded adverse results such as an operating loss of 125 million yen (whereas it posted 2,880 million

yen in operating income in the preceding fiscal year), an ordinary loss of 548 million yen (whereas it posted

5,997 million yen in ordinary profit in the preceding fiscal year), and a net loss of 1,860 million yen (whereas

it posted net income of 5,075 million yen in the preceding fiscal year). Furthermore, the corporate strength of

the Company is currently weakening as a result of decisions made from 2009 under the direction of

management members invited from outside the Company, namely a loss of talent to competitors due to the

introduction of a voluntary retirement scheme and closing of the research and development facility (in Tainai,

Niigata Prefecture), confusion and a loss of customers due to a change in the name of the Company, and

confusion due to management policies such as the short-term pursuit of revenues and profits despite the

decrease in the number of customers.

With this awareness of its environment, the Company set a management vision of “realizing the ‘good

company’ standard” and adopted a basic policy of sanpo yoshi (three-way benefit) management comprising

“customer satisfaction,” “employee satisfaction,” and “corporate responsibility and trust earned from

society,” based on which it is endeavoring to enhance corporate value and aiming to expand global market

share and secure stable profits. In Japan, the Company is aiming to enhance loyalty from wig users through

after-sales services and expand its business domains, and in order to achieve these aims it is expanding its

business mainly into hair solutions (see Note 4), along with total beauty (see Note 5) and organic care (see

Note 6), as well as into the medical market domain for hair implants and drug treatments for AGA. In the

3

United States, the Company is aiming for Hair Club to open more locations and reinforce its presence in the

market for women, and for Bosley to pursue globalization and expand its medical business, while Aderans

Hair Goods (AHG, the Company’s distributor in the United States) is to widen sales channels, and in order to

achieve these aims, the Company, in addition to developing new services using the strength of physician-

facilitated medical businesses and expanding into other countries and enhancing its position in hair growth

services, is working at responding to diversified demand in the wig and hair volumizing market and at

enhancing its after-sales services. In Europe, the Company is aiming to enter regions where a presence has

not yet been established, boost repeat sales for order-made products and strengthen after-sales services, and in

order to achieve these aims it is seeking to attain a number one share in each market by enhancing and firmly

establishing ordering salons, accelerating expansion into unpenetrated countries, and establishing a position

of overwhelming advantage. In Asia, the Company is aiming to firm its foothold in the hair solutions

business, and in order to achieve this aim it is endeavoring to firmly establish its hair solutions business,

accelerate the speed of business growth in China, and set up bases in the ASEAN region.

Note 4: “Hair solutions” means providing services such as scalp care, hair growth and hair volumizing,

in response each customer’s different hair-related concerns and needs.

Note 5: “Total beauty” means an anti-aging regime centered on promoting healthy hair and scalp.

Note 6: “Organic care” means hair care products such as shampoos that are made using organic raw

materials.

It is the belief of Nobuo Nemoto, Representative Director, Chairman and President of the Company

(hereafter, “Mr. Nemoto”) and Yoshihiro Tsumura, Representative Director and Executive Vice-President of

the Company (hereafter, “Mr. Tsumura”) that, although the above measures being adopted by the Company

can be expected to offer sizeable growth and stabilized profits if viewed from a medium-term perspective, the

measures will not be able to immediately contribute to the interests of the Company, and will require a

considerable amount of time and acquisition of talent, as well as various prior investments including the

opening of new locations. In particular, it is the view of Mr. Nemoto and Mr. Tsumura that various risks exist

that could adversely affect aspects of the Company, such as its profit level and cash flow in the short term,

and that these risks mean that the business of the Company will continue to be in a position in which its

future is uncertain and is unable to be viewed optimistically. With a competitive environment that is

undergoing changes in market dynamics such as the new entry of non-industry players and the appearance of

low-priced wigs, the risks for the domestic business include a decrease in profitability in the immediate future

due to new expansion of after-sales service locations in order to achieve differentiation, as well as

cannibalization (see Note 7) due to the sale of low-priced wigs, along with the need for investment in order to

enter new business domains, such as the medical market for hair transplants or AGA treatment drugs, while

the risks for the overseas business include a need for investment in order to accelerate expansion into

countries in which there is not yet a presence. In light of their view as to the foregoing risks, Mr. Nemoto and

Mr. Tsumura, by early August 2016, came to believe that if the Company were to attempt to implement these

measures while remaining listed, it would not be able to receive sufficient support from the capital markets,

and that doing so would thus possibly be disadvantageous to the interests of the shareholders of the Company

such as by adversely affecting the share price.

Note 7: “Cannibalization” means that the sale of low-priced wigs by the Company would adversely

affect the sale of the existing wigs of the Company.

Further, Mr. Nemoto and Mr. Tsumura believed that, in order to speedily carry out the various

abovementioned measures, it would be necessary to have networks, credit strength, management know-how,

and fund-raising capabilities of a level beyond that of the Company at present, and that it would thus also be

necessary to work together with a third party who would be able to enhance these aspects of the Company.

4

Under those circumstances, Integral, which had already been making investigations and studies into potential

investment targets within Japan, gained an opportunity to have discussions with Mr. Nemoto and Mr.

Tsumura regarding the future of the business of the Company, and from that point forward the three parties

engaged in discussions and examinations regarding matters such as the business strategy of the Company and

its capital policy, from the perspective of seeking to grow the Company in the medium to long term.

Integral possesses an abundant network of talent such as in management, financial strategy, marketing,

overseas expansion operations, and international operational alliances, and by utilizing such network of talent

it would be possible for Integral to supply the Company, through the Offeror, with the talent necessary to

pursue business reforms. Further, Mr. Nemoto and Mr. Tsumura believe that, by introducing into the

Company, through the Offeror, the various types of knowhow possessed by Integral such as that pertaining to

management, governance and compliance, making reliable headway with the business reforms of the

Company will also become possible. With the view that maximally utilizing the networks, knowhow and

other attributes possessed by Integral would in this way lead to improvement in the corporate value of the

Company, Mr. Nemoto and Mr. Tsumura came to believe that Integral would be suitable as a partner who is

able to supplement the Company with the functions it requires.

With a view that in order for the Company to aim for future growth it is important that a management

structure be developed that enables agile and flexible decision-making from a medium- to long-term

perspective without being overly swayed by factors such as short-term fluctuations in business results and

that the management team and employees of the Company work as one, with the cooperation of Integral, to

pursue business expansion and a strengthened management foundation, Mr. Nemoto and Mr. Tsumura, in

mid-August 2016, began examining making the Company a private company by way of a management

buyout (MBO) jointly conducted with Integral.

Mr. Nemoto and Mr. Tsumura believe that simply continuing to manage the Company as it is without

taking radical measures may result in the Company being unable to realize its abovementioned corporate

philosophy of protecting customers, protecting employees, and fulfilling its responsibilities to society. Mr.

Nemoto and Mr. Tsumura also believe that maintaining the listing of the Company in its current state may

lead to extensive losses for ordinary shareholders. For these reasons, Mr. Nemoto and Mr. Tsumura came to

believe that it is essential to take the Company private and pursue reforms of its business structure and

measures to strengthen its management foundation from a medium- to long-term viewpoint.

As a result of the above considerations, Mr. Nemoto and Mr. Tsumura came to the conclusion that a

series of transactions (hereafter, “the Transaction”) to acquire all Company Shares (excluding treasury shares

held by the Company as well as non-tendered shares (which are all Company Shares except Share

Certificates, etc. held indirectly by Mr. Nemoto through the management stock ownership plan (number of

shares held: 4,944,658; ownership ratio: 14.20%; hereafter, “Non-Tendered Shares”))), Stock Acquisition

Rights and Convertible Bonds and take the Company private would contribute to improved corporate value

of the Company and would also be the best approach not only for general shareholders of the Company but

also for various stakeholders.

As disclosed in the Press Release on Expression of Opinion, the Company received a proposal in late-August

2016 from Mr. Nemoto and Mr. Tsumura, who had discussions with Integral, and based on such proposal, set

up a structure to review such proposal concerning the Transaction by appointing Plutus Consulting Co., Ltd.

(“Plutus Consulting”) as financial advisor and third-party valuation institution and Nomura & Partners as

legal advisor and by establishing an independent committee (For member composition and other matters

concerning the independent committee, please see “(iv) Establishment of Independent Committee of

Company” of “(3) Measures to Ensure Fairness of Tender Offer such as Measures to Ensure Fairness of

Tender Offer Price and to Avoid Conflict of Interest” provided below) to review such proposal concerning the

Transaction, in order to ensure the fairness of Tender Offer Price and to ensure the fairness of other matters

5

on the Transaction including Tender Offer. Thereafter, the Company had good faith negotiations with Mr.

Nemoto and Mr. Tsumura and with Integral and ended up receiving a final proposal to have the Tender Offer

Price at 620 yen on October 11, 2016, by receiving advices from Plutus Consulting and Nomura & Partners

and by further taking into account the opinion of independent committee.

The Company’s Board of Directors carefully discussed and reviewed the terms of the Transaction by

taking into account the share valuation report on Shares received from Plutus Consulting on October 13,

2016, legal advice received from Nomura & Partners, the response letter provided by the independent

committee on October 13, 2016, and other relevant materials, etc.

Thereupon, the Company came to a conclusion that although it is necessary to make flexible and

adjustable decisions based on a medium- and long-term perspective in order for the Company to promptly

and appropriately respond to the changes in business environment surrounding the Company and risks

accompanying such changes and for its business to continue to grow in Japan and overseas, the

implementation of measures based on such decisions will require costs for advance investment in a short term

and will require a reasonable period of time until such measures actually contribute to the Company’s

earnings. Furthermore, due to the fact that taking measures based on a long-term perspective, which are

accompanied by the said risks, has the risk of causing decrease in Company’s profit level and deterioration in

its cash flow, the Company may not be able to receive sufficient valuation from the capital market in a short

term and the shareholders of Company may suffer a loss due to reason such as adverse effect on the price of

Shares if these measures are implemented while the Company continues to be a listed company. Therefore,

the Company came to a conclusion that the delisting of Shares through an MBO would be the best measure

to take not only for general shareholders of the Company, but also for various stakeholders due to the fact that

(i) it is absolutely necessary for the Company to promote the restructuring of its business structure in a way

which corresponds to the future changes and strengthening of the management base by management and

employees of the Company working as one after building a management system which enables flexible and

adjustable decision-making from a medium- and long-term perspective without being swayed by short-term

change in its business performance, etc., in order to maintain and enhance the corporate value of the

Company and (ii) it is also necessary to avoid the risk of shareholders of the Company incurring any financial

loss arising from any short-term decrease in the Company’s profit level and deterioration in its cash flow.

The Company also concluded that Integral is a valuable business partner in terms of maintaining and

enhancing the corporate value of the Company when promoting the restructuring of medium- and long-term

business structure of the Company and strengthening of the management base due to the fact that by the

participation of Integral in addition to Mr. Nemoto and Mr. Tsumura, who are current members of

management of the Company, the Company will likely be able to receive from Integral valuable support for,

among others, improvement on existing business operations, active and planned undertaking of new

businesses, precise assessment of risk and management processes and speedy decision-making and to have

access to Integral’s human resource network in terms of management, financial strategy, marketing, overseas

expansion work and international business tie-ups, among other things.

Moreover, the Company’s Board of Directors concluded that the Tender Offer Price and other terms of

the Tender Offer are reasonable to the shareholders of the Company and that the Tender Offer will provide

shareholders of the Company with an opportunity to sell Shares at a reasonable price, by taking into account

such facts as (a) the Tender Offer Price exceeds the price range (455 yen to 495 yen) determined by the

market value method as provided in the share valuation report, which the Company received from Plutus

Consulting on October 13, 2016, and the Tender Offer Price is within the price range (536 yen to 685 yen)

determined by the discounted cash flow method (“DCF Method”) and (b) the Tender Offer Price represents a

premium (rounded to second decimal place; the same applies to premium calculations hereafter) of,

respectively, an amount equal to 28.36% on closing price of the 483 yen for Shares quoted on the First

Section of the Tokyo Stock Exchange, on October 13, 2016, the business day immediately preceding public

6

announcement of the Tender Offer; 34.49% on the average closing price of 461 yen for Shares over a one-

month period ended October 13, 2016 (rounded to the nearest whole yen; the same calculation applies to

simple average closing prices hereafter); 36.26% of the average closing price of 455 yen for Shares over a

three-month period ended October 13, 2016, and an amount equal to 25.25% of the average closing price of

495 yen for Shares over a six-month period ended October 13, 2016.

The price book-value ratio (PBR) of the Company, based on the book value of net assets of the

Company as of February 29, 2016, is less than one, but considering such facts as considerable additional

costs arising from liquidation of the Company, book value of net assets of the Company will not necessarily

be converted into cash “as is” and the resulting amount based on the DCF method, which assumes the

continuation of the Company’s business, indicates no undervaluation. Therefore, the Company placed the

greatest weight on the result based on the DCF method for calculating the value of Shares by taking into

consideration such factors as the fact that the result of the DCF method reflects the future earning capacity

and growth of the Company.

Based on the foregoing, the Company resolved at its board of directors meeting held on October 14,

2016, to express an opinion in support of the Tender Offer and to recommend to the Company’s shareholders

to tender their shares in response to the Tender Offer, by a unanimous vote of all directors (i.e., five directors

excluding Mr. Nemoto, who is Representative Director, Chairman and President of the Company, and Mr.

Tsumura, who is Representative Director and Vice President of the Company) who participated in the

deliberation and resolution. By a unanimous vote of all directors (i.e., five directors excluding Mr. Nemoto,

who is Representative Director, Chairman and President of the Company, and Mr. Tsumura, who is

Representative Director and Vice President of the Company), who participated in the deliberation and

resolution, such board of directors’ meeting also resolved to leave the decision to the holders of Stock

Acquisition Rights and Convertible Bonds as to whether or not to tender their Stock Acquisition Rights and

Convertible Bonds in response to the Tender Offer due to the fact that (a) the decision has been made that the

price to purchase, etc. per stock acquisition right of Fourth Series Stock Acquisition Rights, Fifth Series Stock

Acquisition Rights, Sixth Series Stock Acquisition Rights and Seventh Series Stock Acquisition Rights is one

yen because the exercise price per share with respect to such Stock Acquisition Rights (Fourth Series Stock

Acquisition Rights: 972 yen, Fifth Series Stock Acquisition Rights: 1,381 yen, Sixth Series Stock Acquisition

Rights: 1,571 yen and Seventh Series Stock Acquisition Rights: 1,088 yen) exceeded the Tender Offer Price

(620 yen) as of the public announcement date of the Tender Offer (October 14, 2016), (b) the decision has

been made that the price to purchase, etc. per stock acquisition right of Eighth Series Stock Acquisition

Rights is 10,100 yen which is the difference (101 yen) between the Tender Offer Price (620 yen) and the

exercise price per Share with respect to the Eighth Series Stock Acquisition Rights (519 yen) after

multiplying by 100 which is the number of Shares subject to one stock acquisition right of Eighth Series

Stock Acquisition Rights because the exercise price per Share with respect to the Eighth Stock Acquisition

Rights (519 yen) was lower than the Tender Offer Price (620 yen) as of the public announcement date of

Tender Offer, but the exercise period begins approximately one year and eight months after the final day of

Tender Offer Period (November 29, 2016) and (c) the price to purchase, etc. per bond with stock acquisition

right is 1,453,280 yen which is the face value of Convertible Bonds in the amount of 5,000,000 yen after

dividing by the conversion price valid as of the public announcement date of the Tender Offer in the amount

of 2,133 yen (2,344 shares) (rounding off anything less than one share) and multiplying by the Tender Offer

Price in the amount of 620 yen.

The Transaction has moved forward against this backdrop, but even with the Tender Offer, Adherence

was not been able to acquire all Shares (except treasury shares held by the Company and Non-Tendered

Shares) and made a request of the Company to hold the Extraordinary General Shareholders’ Meeting where

proposals would be put before shareholders to approve steps to consolidate Shares and to partially amend the

Articles of Incorporation such that the provision on share unit number would be abolished, conditioned upon

7

successful consolidation of Shares. Acknowledging this request, the Company decided, given that the Tender

Offer was undertaken as part of the Transaction through the aforementioned processes, on a one- for-

4 ,944,658 consolidation of Shares (hereafter, “Share Consolidation) that would make Adherence and Mr.

Nemoto the Company’s only shareholders, conditioned upon approval by shareholders at the Extraordinary

General Shareholders’ Meeting.

Note that a request to abandon Stock Acquisition Rights ended today, and all such rights have been

extinguished. Also, Convertible Bonds will be redeemed on February 2, 2017, in accordance with an early

redemption clause, and all will be extinguished.

Through the Share Consolidation, the number of shares held by shareholders other than Adherence and Mr.

Nemoto is likely to be a fractional number less than one share.

For details on the Transaction, please refer to the Press Release on Expression of Opinion and the Press

Release about Results of Tender Offer.

2. Overview of Share Consolidation

(1) Share Consolidation schedule

(i) Public notice of date for Extraordinary

General Shareholders’ Meeting

Wednesday, November 23, 2016

(ii) Record date for Extraordinary General

Shareholders’ Meeting

Wednesday, December 7, 2016

(iii) Date of Board of Directors’ resolution Friday, December 9, 2016

(iv) Date of Extraordinary General Shareholders’

Meeting

Saturday, January 21, 2017 (planned)

(v) Date stock is assigned to delisting category Saturday, January 21, 2017 (planned)

(vi) Last day of trading Thursday, February 9, 2017 (planned)

(vii) Date of delisting Friday, February 10, 2017 (planned)

(viii) Effective date of Share Consolidation Wednesday, February 15, 2017 (planned)

(2) Details regarding Share Consolidation

(i) Type of shares to be consolidated Common shares (ii) Consolidation ratio For shares of the Company, the consolidation will be one share for 4,944,658 shares. (iii) Total number of issued shares reduced through consolidation 37,246,381 shares (iv) Total number of issued shares before consolidation 37,246,388 shares (v) Total number of issued shares after consolidation Seven shares (vi) Total number of authorized shares as of the effective date of consolidation 28 shares (vii) Treatment of fractional shares of less than one share and amount of possible distribution to

shareholders through such treatment

As described in the above “Purpose and Reason for Share Consolidation,” the number of shares

8

held by all shareholders other than Adherence and Mr. Nemoto will, through the Share Consolidation,

likely become fractional shares of less than one share.

To address fractional shares of less than one share caused by consolidation of shares, the

Company will sell shares the number of which is equivalent to the sum of all fractional shares (if there

is a fractional number of shares constituting less than one share in such aggregate number, such

fractional shares will be truncated), pursuant to the provisions of Article 235 Paragraph 1 of the

Companies Act (Act No. 86 of 2005; including later revisions; the same hereafter), such fractional

shares will be rounded down to the nearest whole number) in accordance with the provisions of Article

235 of the Companies Act and other related laws and regulations and will distribute the proceeds thus

obtained to all shareholders having fractional shares in proportion to their respective fractions. As for

the procedures of such sale, the Company plans to sell Shares equivalent to the total amount of such

fractional shares to Adherence with the court’s approval in accordance with Article 234 Paragraph 2 of

the Companies Act pursuant to Article 235 Paragraph 2 of the Companies Act, or else buy them back

with the court’s approval in accordance with Article 234 Paragraph 2 and Paragraph 4 of the

Companies Act pursuant to Article 235 Paragraph 2 of the Companies Act.

The sale price in this case, if the required permission from the court is received as expected, will

be set at a level so that the amount of money for distribution to shareholders of fractional shares is

equivalent to an amount obtained by multiplying the number of Shares held by shareholders in the

Company’s last shareholder registry (hereafter, “Minimum Number of Shares”), as of February 14,

2017, which is the day before the effective date of the Share Consolidation, by the Tender Offer Price

of 620 yen. However, the amount actually distributed may be different from the above-mentioned

amount if the court’s approval is not given as anticipated or if fractions based on calculations require

adjustment.

3. Basis for Amount of Possible Distribution to Shareholders Through Fractional Treatment

Associated with Share Consolidation

(1) Basis and reasons for amount of possible distribution to shareholders through fractional treatment

(i) Matters requiring due care so as not to damage interests of shareholders of the Company other

than the parent company in the event a parent exists

The Tender Offer and the Transaction, which includes the Share Consolidation, are components of the

MBO. Since the Tender Offer is likely to place Adherence under the heading of the Company’s parent

company and issues, such as structural conflict of interest, may arise, Adherence and the Company

drafted the measures described below in “(3) Measures to ensure fairness of the Transaction and

measures to avoid conflict of interest” to ensure the fairness of the Transaction, including the Tender

Offer, and prevent damage to the interests of shareholders other than Adherence, parent of the

Company, and Mr. Nemoto, from the perspective of ensuring the fairness of prices, such as Tender

Offer Price and purchase price for Stock Acquisition Rights and Convertible Bonds, eliminating

arbitrariness in decision-making processes leading to implementation of the Tender Offer, and

avoiding any conflicts of interest.

(ii) Matters related to method of treatment if fractional shares of less than one share arise and

amount of amount of possible distribution to shareholders through such treatment as well as

appropriateness of such amount

As described above in “2. Overview of Share Consolidation (2) Details regarding Share Consolidation

(vii) Treatment of fractional shares of less than one share and amount of possible distribution to

9

shareholders through such treatment,” the amount of money that might be needed to pay shareholders

through treatment of fractional shares will be based on the Tender Offer Price, with the amount

determined by multiplying the Tender Offer Price of 620 yen by the Minimum Number of Shares held

by all shareholders.

With respect to the Tender Offer Price, given that (a) the Tender Offer Price exceeds the range

(455 yen to 495 yen) determined by the market value method used in the share valuation report that

the Company received from Plutus Consulting on October 13, 2016, and it also falls within the range

(536 yen to 685 yen) determined by the DCF method; and that (b) the Tender Offer Price represents a

premium (rounded off to second decimal place; the same applies to premium calculations hereafter)

of, respectively, an amount equal to 28.36% on the closing price of 483 yen for Shares quoted on the

First Section of the Tokyo Stock Exchange on October 13, 2016, the business day preceding public

announcement of the Tender Offer; 34.49% on the simple average closing price of 461 yen (rounded

to the nearest whole yen; the same calculation applies to simple average closing prices hereafter) over

the one-month period ended on the same date; 36.26% on the simple average closing price of 455 yen

over the three-month period ended on the same date; and 25.25% on the simple average closing price

of 495 yen over the six-month period ended on the same date, the Company’s Board of Directors

concluded that the Tender Offer Price and other terms of the Tender Offer are appropriate from the

perspective of shareholders of the Company and that the Tender Offer will provide an opportunity for

shareholders of the Company to sell Shares at a reasonable price. Note that the price book-value ratio

(PBR), based on the book value of net assets of the Company as of February 29, 2016, is less than

one, but when taking into account substantial additional costs arising from liquidation, book value of

net assets will not necessarily be converted into cash “as is,” and analysis by the DCF method,

conditioned upon continuation of business, indicates no undervaluation. Therefore, in estimating the

Company’s stock value, management took into account results of evaluation using the DCF method,

which reflect the Company’s future profitability and growth potential, and placed the greatest weight

on analysis using the DCF method.

In addition, the Company confirmed that no major changes in the terms forming the basis of the

Company’s decision on Tender Offer Price would occur after the Company expressed an opinion to

support the Tender Offer and to recommend to shareholders that they tender their shares in response to

the Tender Offer right up until the Company’s Board of Directors’ meeting on December 9, 2016,

where a resolution was passed to convene the Extraordinary General Shareholders’ Meeting.

Given the above, the Company feels the that the amount of possible distribution to shareholders

through treatment of fractional shares of less than one share is appropriate.

(iii) Events having significant impact on disposal of important assets, burden of considerable

debts and status of other corporate assets on the last day of the last business year of the

Company

a. Tender Offer

As described in “1. Purpose and Reason for Share Consolidation” above, Adherence implemented the

Tender Offer with a tender offer period of 30 business days, from October 17, 2016 to November 29,

2016. The result of the Tender Offer gives Adherence a shareholding of 26,038,397 shares (ownership

ratio: 74.80%) as of December 6, 2016 (the start date for settlement of the Tender Offer).

b. Issuance of stock options (Aderans Co.. Ltd. Eighth Series Stock Acquisition Rights)

The Company’s Board of Directors resolved at a meeting on May 26, 2014, to issue subscription rights

as stock options as follows to Company directors (including employees with director responsibilities

10

and outside directors; the same shall apply hereafter) and employees, pursuant to articles 236, 238 and

240 of the Companies Act.

(a) Purpose

Primarily to boost morale and motivate directors and employees to maintain their commitment

and enthusiasm to raise corporate value of the

(b) Outline of issue

(i) Classification and number of people granted subscription rights and number of subscription

rights allotted

Directors of the Company: 7 people, 2500 subscription rights

Employees of the Company: 78 people, 3,540 subscription rights

(ii) Total number of subscription rights

6,040 units

(iii) Type and number of shares to be issued upon exercise of subscription rights

Common stock: 604,000 shares

The number of shares granted per unit shall be 100.

(iv) Amount of money paid in exchange for subscription rights

No payment of money shall be required in exchange for subscription rights. Note that

subscription rights shall be granted as consideration for the execution of duties.

(v) Value of assets invested upon exercise of subscription (exercise price)

51,900 yen per unit (519 yen per share)

(vi) Allotment date

July 26, 2016

(vii) Exercise period

From July 26, 2018 to May 26, 2026

(viii) Restriction on acquisition of subscription rights by transfer

Acquisition of subscription rights by transfer shall be subject to approval by the Company’s

Board of Directors.

c. Acquisition of all shares in Hi-Net Co., Ltd.

By resolution of the Board of Directors at its meeting on August 20, 2016, the Company

concluded a share transfer agreement on September 30, 2016, with the shareholder of Hi-Net

Co., Ltd., for the purchase of 100,000 shares of common stock from the shareholder of that

company, effective on the same date (Aderans’ shareholding after transfer: 100%), and then

turned the company into a subsidiary of the Company on the same date.

d. Early redemption of Convertible Bonds

In accordance with the content of Terms of the Notes 4.2 (c), the Company decided to pursue early

redemption of Convertible Bonds issued October 7, 2014, due to the delisting of shares, and plans to

notify holders of Convertible Bonds on December 19, 2016. The anticipated date for early redemption

is February 2, 2017.

(a) Outline of convertible bonds to be redeemed

i. Issue date: October 7, 2014

ii. Total amount issued: ¥10 billion

iii. Unredeemed balance: ¥10 billion (as of December 8, 2016)

iv. Redemption date at time of issue: October 7, 2019

11

v. Interest rate: The Convertible Bonds do not bear any interest.

vi. Conversion price: ¥2,133

(b) Summary of early redemption target

Reason for early

redemption

Early redemption due to delisting, described in Terms

of the Notes 4.2(c) for the Convertible Bonds

Method of early

redemption Through early redemption of entire amount

Name of issue to be

redeemed early

Aderans Co., Ltd. Yen-Denominated Convertible Bonds

with Stock Acquisition Rights Due 2019

Anticipated date of

early redemption February 2, 2017

Target of early

redemption Entire balance of Convertible Bonds

Amount of early

redemption 100% of face value of Convertible Bonds

(c) Method to procure funds for redemption

Loan from Adherence

(2) Intent to delist

(i) Delisting

As described above in “1. Purpose and Reason for Share Consolidation,” the Company seeks to have

only Adherence and Mr. Nemoto as shareholders, conditioned upon approval of shareholders at the

Extraordinary General Shareholders’ Meeting. As a result, the Company expects Shares to be delisted

through prescribed procedures in line with the delisting rules of the Tokyo Stock Exchange.

In regard to schedule, Shares are expected be delisted on February 10, 2017, after a period from

January 21, 2017 through February 9, 2017, during which Shares will be posted for delisting by the

Tokyo Stock Exchange. After delisting, Shares will be untradeable on the First Section of the Tokyo

Stock Exchange.

(ii) Reason to seek delisting

As described above in 1. Purpose and Reason for Share Consolidation, in mid-August 2016, Mr.

Nemoto and Mr. Tsumura began examining the potential of taking the Company private by way of an

MBO jointly conducted with Integral, with a view that for the Company to aim for future growth, it

would be important to develop a management structure facilitating agile and flexible decision-making

from a medium- to long-term perspective without being overly swayed by factors such as short-term

fluctuations in business results and that the management team and employees of the Company work as

one, with the cooperation of Integral, to pursue business expansion and a strengthened management

foundation.

Mr. Nemoto and Mr. Tsumura believe that simply continuing to manage the Company as it is

without taking radical measures may result in the Company being unable to realize its

abovementioned corporate philosophy of protecting customers, protecting employees, and fulfilling its

responsibilities to society. Mr. Nemoto and Mr. Tsumura also believe that maintaining the listing of

the Company in its current state may lead to extensive losses for ordinary shareholders. For these

reasons, Mr. Nemoto and Mr. Tsumura came to believe that it is essential to make the Company a

private company and pursue reforms of its business structure and measures to strengthen its

management foundation from a medium- to long-term viewpoint.

As a result of the foregoing considerations, Mr. Nemoto and Mr. Tsumura concluded that the

12

Transaction will contribute to improved corporate value of the Company and is the optimal policy for

its general shareholders as well as its various other stakeholders.

Also, the Company itself, as described above in 1. Purpose and Reason for Share Consolidation,

came to the conclusion that although it is necessary to make flexible and adjustable decisions based on

a medium- and long-term perspective in order for the Company to promptly and appropriately respond

to the changes in business environment surrounding the Company and risks accompanying such

changes and for its business to continue to grow in Japan and overseas, the implementation of

measures based on such decisions will require costs for advance investment in a short term and will

require a reasonable period of time until such measures actually contribute to the Company’s earnings.

Furthermore, due to the fact that taking measures based on a long-term perspective, which are

accompanied by said risks, has the risk of causing a decrease in the Company’s profit level and

deterioration in its cash flow, the Company may not be able to receive sufficient valuation from the

capital market in a short term and the shareholders of Company may suffer a loss due to such reasons

as an adverse effect on the price of shares if these measures are implemented while the Company

continues to be a listed company. Therefore, the Company came to the conclusion that the delisting of

shares through an MBO would be the best measure to take not only for general shareholders of

Company but also for various stakeholders due to the fact that (i) it is absolutely necessary for the

Company to promote the restructuring of its business structure in a way which corresponds to the

future changes and strengthening of the management base by management and employees of the

Company working as one after building a management system which enables flexible and adjustable

decision-making from a medium- and long-term perspective without being swayed by short-term

changes in its business performance, etc., in order to maintain and enhance the corporate value of the

Company and (ii) it is also necessary to avoid the risk of shareholders of the Company incurring any

financial loss arising from any short-term decrease in the Company’s profit level and deterioration in

its cash flow.

(iii) Impact on minority shareholders and attitude toward this

As described below in “(3) Measures to Ensure Fairness of Tender Offer such as Measures to Ensure

Fairness of Tender Offer Price and to Avoid Conflict of Interest” “(iv) Establishment of Independent

Committee of Company,” the Company asked the independent committee on August 20, 2016, if the

Transaction might harm the interests minority shareholders, and on October 13, 2016, the committee

responded with a letter confirming that the Transaction would not harm the interests of minority

shareholders.

(3) Measures to ensure fairness of the Transaction and measures to avoid conflict of interest

So as to avoid suspicion of conflict of interest, given that the Share Consolidation is part of an MBO and

concerns exist, such as structural conflict of interest, Mr. Nemoto, who is Representative Director,

Chairman and President of the Company, and Mr. Tsumura, who is Representative Director and Vice-

President of the Company, have not been involved in any deliberations or resolutions undertaken by the

Company’s Board of Directors regarding decision-making processes related to the Share Consolidation

nor have they participated in any discussions or negotiations with Integral or Adherence on behalf of the

Company. Note that all directors of said Board of Directors who participated in deliberations and

resolutions (five directors excluding Mr. Nemoto, and Mr. Tsumura) resolved to put the issue of Share

Consolidation before shareholders at the Extraordinary General Shareholders’ Meeting for approval. All

corporate auditors, including two outside corporate auditors of the Company, participated in deliberations

of said Board of Directors, and all these corporate auditors expressed the opinion that that they have no

13

objection to putting the issue of Share Consolidation before shareholders at the Extraordinary General

Shareholders’ Meeting for approval.

In addition, given that the Share Consolidation is part of an MBO and concerns exist, such as

structural conflict of interest, Adherence and the Company drafted the following measures specifically to

ensure the fairness of the Transaction, including the Tender Offer, from the perspective of ensuring the

fairness of prices, such as Tender Offer Price and purchase price for Stock Acquisition Rights and

Convertible Bonds, eliminating arbitrariness in decision-making processes leading to implementation of

the Tender Offer, and avoiding any conflicts of interest. Note that any mention of Adherence within the

measures outlined below is based on information received from Adherence.

(i) Review, discussion, negotiation, etc. by Project Team of Company

Upon receiving the proposal for the Transaction from Mr. Nemoto and Mr. Tsumura in late-August 2016

following their discussion with Integral, the Company established the Company Project Team, which

comprises Masayoshi Sato, a director of the Company, and Masaaki Izumoto, an executive officer of the

Company, both of whom have no special interest in the Transaction, reviewed and discussed through the

Company Project Team matters such as the pros and cons of the Transaction, including the Tender Offer

from the perspective mentioned above, and had discussions and negotiations with Mr. Nemoto, Mr.

Tsumura and Integral multiple times, in order to be careful in the decision-making on the Transaction,

including the Tender Offer, to exclude any risk of arbitrariness and conflict of interest in the decision-

making process by the Company’s Board of Directors and to ensure fairness in such a decision-making

process, by taking into account the fact that the Transaction falls under a so-called MBO and the possible

existence of structural conflict of interest.

Specifically, the Project Team (a) conducted reviews and discussions on the Transaction from late-

August 2016, (b) carefully reviewed and discussed the reasonableness of terms of purchase under the

Tender Offer, such as Tender Offer Price and the fairness of series of procedures of Transaction from the

perspective of enhanced corporate value of the Company and common interests of shareholders of the

Company by receiving advice, opinions and other assistance from a financial advisor and a legal advisor

who are independent from the Offeror and Integral, as provided in “(ii) Procurement of Share Valuation

Report from Independent Third Party Valuation Institution Retained by Company” and “(iii) Advice from

Independent Law Firm Retained by Company”, and (c) had discussions and negotiations with Mr.

Nemoto, Mr. Tsumura and Integral multiple times (for details about the process of negotiations, please

refer to the Press Release on Expression of Opinion “(ii) Background, Purpose and Decision-making

Process Leading to Implementation of Tender Offer and Management Policy after Tender Offer” of “(2)

Grounds and Reasons for Opinion on Tender Offer” above).

Mr. Nemoto, who is Representative Director, Chairman and President of the Company, and Mr.

Tsumura, who is Representative Director and Vice-President of the Company have not been appointed as

members of the Company Project Team and have not been involved in any reviews or discussions of the

Company Project Team mentioned above, in order to avoid any conflict of interest based on the fact that

(i) they plan to enter into a management agreement with Integral 2 Limited Partnership (hereafter,

“Integral 2 LP”) (Note 1), and Integral Fund II (A) L.P. (Note 2) (hereafter, collectively referred to as “the

Integral Group) concerning the continuing management of the Company by Mr. Nemoto and Mr.

Tsumura as the Representative Directors of the Company after the end of Tender Offer, (ii) Mr. Nemoto

plans to make a contribution to the Offeror no later than two business days prior to the commencement of

payment of the Tender Offer, (iii) the total contribution ratio of Mr. Nemoto and Mr. Tsumura in the

Company after the Merger under the Transaction is planned to be approximately 50.1%, and (iv) in terms

of management structure of the Company after the Merger, Mr. Nemoto, Mr. Tsumura and the Integral

Group have agreed that they will be able to nominate the directors of the Company in proportion to their

respective voting right percentages in the Company.

14

(Note 1) Integral 2 LP is an investment limited partnership established under the Act on Investment

Limited Partnership Agreements (Act No. 90 of 1998, as amended; hereinafter the same) and

which is operated and managed by two general partners—Integral Partners Corporation, a

subsidiary of Integral, and Integral II GP Investment Limited Partnership, which is operated

and managed by Integral Partners Corporation as general partner.

(Note 2) Integral Fund II (A) L.P. is an exempted limited partnership established under the laws of the

Cayman Islands and operated and managed by Integral Partners (Cayman) II (A) Limited as

general partner.

(ii) Procurement of share valuation report from independent third-party valuation institution

retained by the Company

To express an opinion on the Tender Offer Price, the Company requested Plutus Consulting, which is

financial advisor and third-party valuation institution independent from the Offeror and Integral, to

calculate the value of shares and received a share valuation report from Plutus Consulting on October 13,

2016. Plutus Consulting, is not a party related to the Offeror and Integral and does not have any notable

material interest in the Tender Offer. Also, the Company has not received a fairness opinion on Tender

Offer Price from Plutus Consulting.

Upon considering the calculation methods to be used for the Tender Offer, Plutus Consulting

conducted the calculation by using the market share price method due to the fact that the Shares are listed

on the First Section of the Tokyo Stock Exchange and by using the DCF method to reflect the future

business activities of Company in the calculation. The value ranges per Share as calculated by Plutus

Consulting by using the methods mentioned above are as provided below.

Market Share Price Method: 455 yen to 495 yen

DCF Method: 536 yen to 685 yen

Under the market share price method, with October 13, 2016, as the reference date, the calculation

resulted in a range of 455 yen to 495 yen in value per share, based on the 483 yen closing price of shares

of on the First Section of the Tokyo Stock Exchange as of the reference date, the 461 yen average closing

price of shares over the past one-month period, the 455 yen average closing price of shares over the past

three-month period and the of 495 yen average closing price of shares of over the past six-month period.

Under the DCF method, the corporate value of the Company was evaluated by discounting the current

value by a certain discount rate corresponding to the business risk based on free cash flow which will be

created on and after the third quarter of fiscal year ending February 28, 2017, based on the future earnings

forecast of the Company by considering the factors such as the business plan prepared by the Company

for the period from the fiscal year ending February 28, 2017and the fiscal year ending February 28, 2021,

interviews with the Company and information publicly available. The discount rate (shareholders’

equity cost) used was 5.404% to 6.240% and the continuous value was calculated by using the perpetuity

growth method with the perpetuity growth rate at 0%.

The financial forecasts based on the business plan of the Company, which were used as the basis of

calculation using the DCF method, are as provided below. Such plan incorporates the impact of

downward adjustment of the earnings forecast disclosed by the Company in the “Notice on Difference

between Consolidated Earnings Forecast and Actual Earnings Figures for Second Quarter of Fiscal Year

Ending February 2017 and Revision on Consolidated Earnings Forecast for Fiscal Year Ending February

2017” dated October 14, 2017. The financial forecasts provided below also include the business years in

which significant increase or decrease in earnings is expected. Specifically, in the fiscal year ending

February 28, 2017 and the fiscal year ending February 28, 2018, a significant decrease in earnings is

expected compared with the fiscal year immediately preceding each of such fiscal years mainly due to

reasons such as slowdown in acquiring new customers in the Fontaine business (ready-made) due to the

15

entry of competitors and companies in different business into the low-end wig market and an increase in

shop-related costs and labor costs relating to the opening of new shops. Between the fiscal year ending

February 28, 2019 and the fiscal year ending February 28, 2021, a significant increase in earnings

compared with the fiscal year immediately preceding each of such fiscal years is expected by taking

measures such as attraction and retention of wig users through after-services and expansion of business

areas in Japan, opening of new Hair Club locations and strengthening of business towards female

customers in the United States, global expansion of Bosley, expansion of the healthcare business and

strengthening hair restoration business, and meeting the diversified demands and strengthening of after-

services in the wig and hair-growth markets. The synergy effects expected to occur upon implementation

of the Transaction are not added to the said financial forecasts because it was difficult to establish a

precise estimate at the present time.

(Millions of yen)

2nd half of

fiscal year

ending

February 28,

2017

（six months）

Fiscal year

ending

February 28,

2018

Fiscal year

ending February

28, 2019

Fiscal year

ending

February 29,

2020

Fiscal year

ending

February 28,

2021

Net sales 39,602 79,156 82,331 85,965 89,880

Operating

income (loss)

(539) (527) (104) 744 1,999

EBITDA 1,720 3,961 4,230 5,008 6,308

Free cash

flow

(1,523) (526) 465 958 2,018

(Note) For the calculation of share value, Plutus Consulting generally used the information provided

by the Company and publicly available information, etc. “as is” based on the assumption that all of

such materials and information, etc. are accurate and complete and has not verified on its own as to

their accuracy and completeness. In addition, it is assumed that the information on financial forecast

as provided by the Company is reasonably prepared by the management of the Company based on

the best forecasts and decisions possible at the present time.

The financial forecasts as provided above differ from the figures provided in the consolidated sales,

consolidated operating income and consolidated EBITDA provided in the “Aderans Group New

Medium-term Business Plan ESCR 2016”, which was published by the Company on April 14, 2016, for

the reasons provided below.

Acquisition of new customers is slowing down due heightened competition in the wig business with

the adjacent markets such as the markets for AGA (androgenetic alopecia) treatment products, hair

restoration products and hair growth products with respect to the men’s market in Japan and the entry of

competitors and companies in different business sectors into the low-end wig market with respect to the

women’s market in Japan. As for the overseas business, the shift to a new hair transplant method (FUE) is

slower than expected and the development and advertising costs for new products and shop-related costs

and labor costs relating to the active opening of new shops are increasing in order for the Company to

meet the new customers’ needs based on the increase in demands for women’s wigs. For this reason, the

Company concluded that instead of using the figures provided in the “Aderans Group New Medium-term

Business Plan ESCR 2016”, which were the target figures of Company, it was more appropriate to

consider the reasonableness of Tender Offer Price by making objective and reasonable calculation of

corporate value of Company based on the forecasts which are more in line with current conditions by

taking into account, among others, the up-to-date business environment and business performance of the

Company.

16

The Company has not obtained any valuation report or fairness opinion from any third-party valuation

institution with respect to the price to purchase, etc. per stock acquisition right of Stock Acquisition Rights

and price to purchase, etc. per face value of 5,000,000 yen of Convertible Bonds.

(iii) Advice from independent law firm retained by the Company

In order to ensure the transparency and reasonableness of the decision-making process of the Company’s

Board of Directors with respect to the Transaction, including the Tender Offer, the Company appointed

Nomura & Partners as a legal advisor who is independent from the Offeror and Integral, and has been

receiving necessary legal advice from such law firm concerning the method and process of decision-

making by the Company’s Board of Directors and other matters to keep in mind in relation to the

Transaction, including the Tender Offer. Also, Nomura & Partners is not a party related to the Offeror or

Integral and does not have any notable material interest in the Tender Offer.

(iv) Establishment of independent committee of the Company

On August 20, 2016, the Company resolved to establish an independent committee, which comprises of

members including outside experts who are highly independent from the Offeror and Integral (As

members of independent committee, Seiji Yamashita (attorney at Yamashita Sogo Law Offices) and

Masaaki Suda (Certified Public Accountant at Suda Certified Public Accountant Office, both of whom are

outside experts who are highly independent from the Offeror and Integral, and Kazuhiro Miyakawa

(Certified Public Accountant and Certified Public Tax Accountant) who is an outside statutory auditor of

the Company and independent executive as prescribed in Article 436-2 of Securities Listing Regulations

of the Tokyo Stock Exchange), to have such independent committee (i) review and express an opinion to

the Company’s Board of Directors, among others, (1) whether or not the purpose of the Tender Offer

(including any procedures relating to the delisting of the Company) would be deemed reasonable

(including the issue of whether or not the Tender Offer (including any procedures relating to the delisting

of the Company) would contribute to enhanced corporate value of the Company), (2) whether or not the

fairness of the tender offer price of the Tender Offer has been ensured, and (3) whether or not the interests

of shareholders of the Company have been taken into consideration through fair procedures, in connection

with the policy on expression of opinion to be made by the Company’s Board of Directors in relation to

the Tender Offer (“Response Policy”), and issue a notice on the contents of the Response Policy and (ii)

review whether or not the decision of the Company’s Board of Directors on the Response Policy

(including the decision on any procedures relating to the delisting of the Company) based on (i) above

would go against the interests of minority shareholders of the Company (collectively, “Matters of

Inquiry”), in order to be careful in the decision-making on the Transaction. including the Tender Offer, to

exclude any risk of arbitrariness and conflict of interest in the decision-making process of the Company’s

Board of Directors and to ensure fairness in such decision-making process, by taking into account the fact

that the Transaction falls under a so-called MBO and the possibility of existence of structural conflict of

interest. The independent committee met seven times in total from September 8, 2016 to October 13,

2016 and carefully reviewed and discussed the Matters of Inquiry. Specifically, the independent

committee (a) received explanation from the Company Project Team on such topics as the current status

of the Company, significance of the Transaction, enhancement of corporate value, business plan, contents

of proposals made by Integral, Mr. Nemoto and Mr. Tsumura, and progress on negotiations, (b) was

informed by Integral and Mr. Tsumura through hearing details on, among others, purpose and significance

of the Transaction, management policy after implementation of the Transaction, and handling of

employees, and conducted Q&As relating to these matters, and (c) further received explanation from

Plutus Consulting on the calculation of value of shares and conducted Q&As.

Upon carefully reviewing and discussing the Matters of Inquiry under the circumstances mentioned

above, the independent committee, by unanimous vote of members, provided the Company’s Board of

17

Directors with a response letter on October 13, 2016, of which a summary is provided below.

(i) The Transaction will achieve the further strengthening of earnings base and enhancement of

corporate value of the Company and its purpose is reasonable due to the fact that by the delisting of

the Company through the Transaction, (a) the management system, under which flexible and

adjustable decision-making will be made from a medium- and long-term perspective without being

swayed by short-term changes such as changes in business performance and share price, will be

developed, (b) the reorganization of its business structure and the strengthening of management base

will be facilitated, (c) prompt and appropriate response to the changes in business environment

surrounding the Company and risks accompanying such changes will become possible, and (d)

receipt from Integral a valuable support on, among others, improvement on existing business

operations, active and planned undertaking of new businesses, precise assessment of risk and

management process and speedy decision-making and access to Integral’s human resource network

in terms of, among others, management, financial strategy, marketing, overseas expansion work and

international business tie-up will likely become possible due to participation by Integral, (2) the

terms of the Transaction are reasonable due to reasons such as the fact that (a) it is planned that the

amount of payment to be made during the two-step buyout will be calculated in a way so that such

amount will become identical to the price equal to the Tender Offer Price multiplied by the number

of common shares of the Company owned by the common shareholders of the Company, (b) the

period of tender offer under the terms of the Tender Offer is set for relatively long time, (c) the

Tender Offer Price can be considered as a price with a considerable amount of premium added

because it is a price to which a premium is added in the amount equal to 28.36% of closing price of

Shares of 483 yen (rounded to the nearest hundredth; hereafter, the same for the purpose of

calculation of premium) on the First Section of the Tokyo Stock Exchange as of October 13, 2016, in

the amount equal to 34.49% of arithmetic average closing price of Shares over the past one-month

period of 461 yen until October 13, 2016 (rounded to the nearest whole; hereafter. the same for the

purpose of calculation of arithmetic average closing price), in the amount equal to 36.26% of

arithmetic average closing price of Shares over the past the-month period of 455yen until October

13, 2016, and in the amount equal to 25.25% of arithmetic average closing price of Shares over the

past six-month period of 495 yen until October 13, 2016, and (d) the price has been decided after

taking appropriate measures to resolve any conflict of interest, and (3) by taking into account the

facts such as the fact that no directors, who have any conflict of interest with the Company,

participated in the decision-making process concerning the Transaction, independent financial

advisor and legal advisor have been appointed, and share valuation report has been procured from

independent third party valuation institution, it would be considered as reasonable for the board of

directors of the Company to express an opinion in support of the Tender Offer and to recommend to

shareholders of the Company to tender their Shares in response to the Tender Offer due to the fact

that the procedures of the Transaction are transparent and fair and the interests of minority

shareholders of the Company have been taken into consideration. On the other hand, it would be

considered reasonable to leave the decision to the holders of Stock Acquisition Rights and

Convertible Bonds with respect to the issue of whether or not such holders should tender their Stock

Acquisition Rights and Bonds with Stock Acquisition Rights in response to the Tender Offer due the

fact that (a) the decision has been made that the price to purchase, etc. per stock acquisition right of

Fourth Series Stock Acquisition Rights, Fifth Series Stock Acquisition Rights, Sixth Series Stock

Acquisition Rights and Seventh Series Stock Acquisition Rights is one yen because the exercise

price per share with respect to such Stock Acquisition Rights exceeded the Tender Offer Price, (b)

the decision has been made that the price to purchase, etc. per stock acquisition right of Eighth Series

Stock Acquisition Rights is 10,100 yen which is the difference (101 yen) between the Tender Offer

18

Price and the exercise price per Share with respect to the Eighth Series Stock Acquisition Rights

after multiplying by 100 which is the number of Shares subject to one stock acquisition right of

Eighth Series Stock Acquisition Rights because the exercise price per share with respect to the

Eighth Stock Acquisition Rights (519 yen) was lower than the Tender Offer Price, but the exercise

period begins approximately one year and eight months after the final day of the Tender Offer Period

and (c) the price to purchase, etc. per bond with stock acquisition right is 1,453,280 yen which is the

face value of Convertible Bonds in the amount of 5,000,000 yen after dividing by the valid

conversion price in the amount of 2,133 yen (2,344 shares) (rounding off anything less than one

share) and multiplying by the Tender Offer Price.

(ii) Accordingly, the Transaction would be deemed as not going against the interests of minority

shareholders of the Company.

(v) Approval from all directors of the Company without conflict of interest and opinions of no

objection from all statutory auditors without conflict of interest Based on the reasons described in 1. Purpose and Reason for Share Consolidation above, the Company

resolved at a Board of Directors’ meeting held on October 14, 2016, to express an opinion in support of

the Tender Offer and to recommend to the Company’s shareholders to tender their shares in response to

the Tender Offer by a unanimous vote of all directors (i.e., five directors excluding Mr. Nemoto, who is

Representative Director, Chairman and President of the Company, and Mr. Tsumura, who is

Representative Director and Vice President of the Company) who participated in the deliberation and

resolution. On the other hand, the Board of Directors also resolved to leave the decision to the holders of

Stock Acquisition Rights and Convertible Bonds as to whether or not to tender their Stock Acquisition

Rights and Convertible Bonds in response to the Tender Offer.

All statutory auditors of the Company, including two outside statutory auditors, participated in this

Board of Directors’ meeting and expressed an opinion that they have no objection to the resolutions

mentioned above.

Mr. Nemoto, who is Representative Director, Chairman and President of the Company, and Mr.

Tsumura, who is Representative Director and Vice President of the Company have not participated in any

deliberations and resolutions by the Board of Directors or in any discussions and negotiations with

Integral and the Offeror on behalf of the Company in order to avoid any conflict of interest based on the

fact that (i) they plan to enter into a management agreement with the Integral Group concerning

continuing management of the Company by Mr. Nemoto and Mr. Tsumura as the Representative

Directors of the Company after the end of the Tender Offer, (ii) Mr. Nemoto plans to make a contribution

to the Offeror no later than two business days prior to the commencement of payment of the Tender Offer,

(iii) the total contribution ratio of Mr. Nemoto and Mr. Tsumura in the Company after the Merger under

the Transaction is planned to be approximately 50.1%, and (iv) in terms of management structure of the

Company after the Merger, Mr. Nemoto, Mr. Tsumura and the Integral Group have agreed that they will

be able to nominate directors of the Company in proportion to their respective voting right percentages in

the Company.

(vi) Securing objective circumstances that ensure fairness of the Tender Offer

While the minimum period for tender offers under laws and regulations is 20 business days, Adherence

has set the Tender Offer Period for the Tender Offer as 30 business days. Setting a relatively long Tender

Offer Period ensures an appropriate opportunity for the shareholders of the Company, the holders of the

Stock Acquisition Rights and the holders of the Convertible Bonds to make a decision whether to tender

their shares in the Tender Offer as well as ensures an opportunity for any party other than the Offeror to

conduct counter offers for Shares, Stock Acquisition Rights and Convertible Bonds, as a means to ensure

19

the appropriateness of the Tender Offer Price.

No agreement has been executed between Adherence and the Company that would include deal

protection provisions to prohibit the Company from having contact with a counter offeror or which

otherwise limit the opportunity for a counter offeror to have contact with the Company. The Offeror and

its affiliates give consideration to ensure fairness of the Tender Offer by not only setting the Tender Offer

Period as above but also ensuring the opportunity for a counter offer.

In addition to the above, while Franklin Templeton Institutional LLC (hereafter ,“FT”) does not intend

to make a contribution to the Offeror or the Company after the Tender Offer, and FT is a major

shareholder who has no special interest in the Tender Offer or the Transaction different from minority

shareholders, the Tender Offer Price has been approved by FT. Such confirmation of intention of a major

shareholder who has no special interest indicates sufficient consideration to the interests of minority

shareholders.

4. Outlook

The Company expects Shares to be delisted, as described in “3. Basis for Amount of Possible Distribution to

Shareholders Through Fractional Treatment Associated with Share Consolidation, following implementation

of Share Consolidation (2) Intent to delist (i) Delisting. “

The Transaction constitutes a so-called MBO, and Mr. Nemoto and Mr. Tsumura agreed in the MBO

Memorandum, which was concluded on October 14, 2016, with the Integral Group, to continue to manage

the Company as representative directors of the Company after the completion of the Tender Offer. Also, in

the shareholders agreement entered into by the Integral Group, Mr. Nemoto and Mr. Tsumura on October 14,

2016, addressing such issues as the composition of the Company’s Board of Directors after the Transaction,

matters that require prior approvals related to the operation of the Company and restrictions on the transfer of

the Company’s shares, Mr. Nemoto, Mr. Tsumura and the Integral Group have agreed that each may, in

proportion to respective voting rights, name Company directors to establish the Company’s management

structure after the Transaction. The Company plans to put before shareholders at the Extraordinary General

Meeting of Shareholders as a company recommendation a proposal to elect Reijiro Yamamoto and Tsuyoshi

Yamazaki, who have been nominated by Integral. Note that Adherence plans to firm up the details of

management structure, including composition of the Company’s Board of Directors after the Transaction,

through discussions with the Company. It is also planned that the employees of the Company will, in

principle, continue to enjoy their current level of employment conditions following successful completion of

the Tender Offer.

5. Matters Related to Transactions with Controlling Shareholder

As of today, because Adherence falls under the heading of the Company’s parent company, transactions

related to the Share Consolidation shall be deemed transactions with a controlling shareholder.

(1) Consistency with policy related to protection of minority shareholders in executing transactions

with controlling shareholder

The Company does not provide any policy related to protection of minority shareholders in executing

transactions with a controlling shareholder in its corporate governance report. However, it is policy that

when executing transactions with a controlling shareholder, the Company will consider measures, such as

obtaining advice from lawyers or third-party organizations, as necessary, to ensure fairness in the content

and associated terms of such transactions, and will also make decisions based on careful screening by the

Board of Directors and implement suitable responses so as not to impair the interests of minority

20

shareholders.

Also in executing the Share Consolidation, as described in “3. Basis for Amount of Possible

Distribution to Shareholders Through Fractional Treatment Associated with Share Consolidation (3)

Measures to ensure fairness of the Transaction and measures to avoid conflict of interest,” the Company’s

Board of Directors considers measures consistent with the aforementioned policy.

(2) Matters related to measures to ensure fairness of the Transaction and measures to avoid conflict of

interest

Please refer to “3. Basis for Amount of Possible Distribution to Shareholders Through Fractional

Treatment Associated with Share Consolidation” “(3) Measures to ensure fairness of the Transaction and

measures to avoid conflict of interest.”

(3) Summary of opinion received from party having no conflict of interest with controlling shareholder

stating no disadvantage to minority shareholders

The Company received from the independent committee On October 13, 2016, the committee responded

with a letter confirming that the Transaction would not harm the interests of minority shareholders. For

details, please refer to “3. Basis for Amount of Possible Distribution to Shareholders Through Fractional

Treatment Associated with Share Consolidation” “(3) Measures to ensure fairness of the Transaction and

measures to avoid conflict of interest” “(iv) Establishment of Independent Committee of Company.”

II. Abolishment of Share Unit Number Provision

1. Reason for Abolishment

If the Share Consolidation comes to pass, the total number of shares outstanding will be seven shares, and

there will be no need to maintain a share unit number.

2. Planned Date of Abolishment

February 15, 2017

3. Condition for Abolishment

Abolishment of the provision is conditioned upon approval of a proposal for Share Consolidation and a

proposal to partially amend the Articles of Incorporation as related to the provision on share unit number

(refer to III. Partial Amendment to Articles of Incorporation below), which will be put forward at the

Extraordinary General Shareholders’ Meeting, and the Share Consolidation being implement.

III. Partial Amendment to Articles of Incorporation

1. Purpose of Amendments to Articles of Incorporation

If the Share Consolidation comes to pass, the total number of shares outstanding will be seven shares, and

there will be no need to maintain a share unit number. Because the provision on share unit number for the

Company’s common stock, currently set at 100 shares per unit, will be abolished, conditioned upon the

Share Consolidation coming to pass, Article 8 (Share-trading unit) through Article 10 (Adding to holdings

21

of shares less than one unit) will be deleted from the Articles of Incorporation and article numbers will be

renumbered, paralleling the associated changes.

In addition, with the total number of authorized shares of the Company at 28 shares due to the Share

Consolidation, Article 6 (Total number of authorized shares) will be amended to clarify associated points.

2. Content of Amendments to Articles of Incorporation

The content of amendments to the Articles of Incorporation is presented below. These amendments will

go into effect on February 15, 2017, the effective date of the Share Consolidation, conditioned upon

approval of the agenda item on Share Consolidation as proposed to shareholders at the Extraordinary

General Meeting of Shareholders and upon the Share Consolidation being implemented.

(Changes are underlined.)

Current After Amendment

(Total number of authorized shares)

Article 6 The total number of authorized shares

for the Company is 138,000,000.

(Total number of authorized shares)

Article 6 The total number of authorized shares

for the Company is 28 shares.

(Share-trading unit)

Article 8 The number of shares in one trading unit

shall be 100.

(Deleted)

(Rights regarding shares less than one unit)

Article 9 Shareholders of the Company may not

exercise rights other than the rights listed below

with regard to holdings of shares less than one

unit.

(1) Rights described in each item of Article

189, Paragraph 2 of the Companies Act

(2) Rights to make claims based on the

provisions of Article 166, Paragraph 1

of the Companies Act

(3) Rights to receive the allotment of shares

for subscription and the allotment of

share options for subscription

corresponding to the number of shares

held by shareholders

(4) Rights to make claims described in the

next article

(Deleted)

(Adding to holdings of shares less than one unit)

Article 10 As described in share handling

regulations, any shareholder of the Company may

ask that the Company sell them the exact number

of shares that would, with shares of less than one

unit owned by the shareholder, constitute one unit

of shares.

(Deleted)

Article 11 to Article 40 (Text omitted) Article 8 to Article 37 (No change)

3. Date of Amendments

22

February 15, 2017 (planned)

END