JAFCO : Information Meeting for Financial Results for the Year Ended March 31, 2024

Information Meeting for Financial Results for the Year Ended March 31, 2024

Date: April 24, 2024

Location: Station Conference TOKYO (Real time streaming on Zoom Webinar)

Matsuda: We will now begin the Information Meeting for the financial results for the fiscal year ended March 2024 of JAFCO Group Co., Ltd. Today's speaker is Mr. Miyoshi, President & CEO. Matsuda will be the facilitator.

In the next 30 minutes or so, President Miyoshi will give an overview of our financial results and business activities, and then we would like to take your questions. The material used for the explanation is the earnings presentation for the fiscal year ended March 2024. We have distributed copies of the material to all those in attendance, but we will also be projecting the material on a screen in the front of the hall as we explain them to you.

We would also like to ask all online participants to view the material shared on the screen. If anyone in the audience does not have the material at hand, please raise your hand to let us know. Is everyone okay? Please note that the audio for all online participants will be muted during the presentation. Mr. Miyoshi will now begin his explanation.

Miyoshi: I will now provide an explanation based on the earnings presentation material disclosed today. On the second page is the table of contents.

It is divided into four parts. First, a report on the financial figures. The following is a summary of our current situation and our future actions.

Section 3 is the overall fund status. In Section 4, we describe the response to Section 2, detailing our efforts during the current fiscal year. We will proceed in order.

1

Page three. This is the overall picture that I will explain today in the earnings presentation. As for the financial results, sales for the fiscal year ended March 2024 were JPY24.4 billion. Ordinary income was JPY8.8 billion. Net income was JPY7.5 billion.

Next, I would like to report on shareholder returns. The amount corresponding to 50% of net income or the so‐called dividend payout ratio of 50%, was JPY69. The dividend amount, which corresponds to 3% of the average for the beginning and end of the period of shareholders' equity, or the so‐called DOE of 3%, was JPY64.

Since the dividend corresponding to 50% of net income is greater, we plan to pay a dividend of JPY69 per share in accordance with the dividend policy to be applied from the current fiscal year.

ROE for the current fiscal year was 5.6%. In accordance with the basic policy for enhancing corporate value announced in December 2022, we aim to achieve a medium‐ to long‐term target of 15% to 20% ROE, which exceeds the cost of shareholders' equity.

One of these efforts, the offering of a domestic core fund, exceeded our initial plan in terms of both the total capital commitment and our investment ratio.

Page five. Summary of financial results. We will discuss changes in the business environment and their impact on our portfolio companies.

The number of IPOs this fiscal year was 99, which is a higher level than last year. While some IPOs have attracted funds, the growth market has yet to see a full‐scale capital inflow.

We recognize that we still need to make decisions while keeping a close eye on domestic and international financial policies and domestic startup‐related policies. Please refer to page 43 to page 48 of the Appendix for information on the market environment for venture investment and buyout investment in Japan.

Although the business environment is as described above, I think you can see that both of these markets have potential for growth in the future.

2

Next, with respect to business performance, the total capital gains from listed and unlisted shares was JPY7.9 billion. As for domestic IPOs, including the two IPOs of buyout investees this fiscal year, the total number of IPOs is six. The number of overseas IPOs is one.

We recorded JPY2.8 billion of investment loss reserves for the full year.

The amount of executed investments is JPY30.7 billion on a global basis. It decreased significantly from the previous year. However, we believe that this is due to the timing of the investment and the fact that the previous year saw a significant increase in investment.

For the SV7 series, the core fund in Japan, the Company's equity interest in the fund was transferred after the total amount of JPY97.8 billion was determined, and the external capital commitments amounted to JPY75.8 billion. Our own capital commitment amounted to JPY22 billion. The Company's share of the total fund amount is 22%.

As attached in detail on page 51 of the Appendix, we raised funds by issuing JPY15 billion in euro to yen denominated CBs with a five‐year maturity in September 2023.

We will proceed to the next page. From here, we will report the financial figures. We report our financial results to page 18. First, let's look at our performance. Again, capital gains totaled JPY7.9 billion. The success fees were only JPY0.6 billion. Management fees increased to JPY4.8 billion due to an increase in the amount of external investment commitment in connection with the new fundraising.

SG&A expenses were JPY4.8 billion. Operating income was JPY8.2 billion. Ordinary income was JPY8.8 billion. Net income was JPY7.5 billion.

3

Next, page seven. Net sales and SG&A expenses. For each year, the bar graph on the left side shows income sources. The bar graph on the right is for SG&A expenses. The upper orange in the bar graph on the left is capital gains. The green in the middle row is the success fees. The lower blue area is the management fees.

Because of the large fluctuation in business tax due to gains on sales of shareholdings, SG&A expenses are shown separately. The green in the upper bar graph is the business tax. The gray area below is the SG&A portion excluding business tax.

The number of employees at the end of the fiscal year is added at the bottom of this table. In the last section, we show a calculation in the form of administration expense coverage, which indicates how much of the SG&A expenses excluding business tax are covered by the management fees.

As indicated in a small note in the upper right corner, JPY0.4 billion of the JPY4.8 billion in management fees for the current fiscal year includes retroactive amounts for the previous fiscal year. However, overall management fees have increased to a level that generally covers SG&A expenses, excluding business tax.

4

We will proceed to the next page. This slide shows the structure of our sales. Our net sales consist of three main items as described here. As shown in the figure on the right, based on the total capital commitments to funds, the first sales are, first, fund management fees and, second, success fees that accrue to the external investor's interests.

In addition, the gain on the sale of our equity interests will be added to our sales as capital gains on our interests. Our business model is to have both.

5

We will proceed to the next page. The breakdown is itemized in order. First, fund management fees. While keeping pace with market growth, we will expand the fund size, including increasing the amount of external investment. With the fundraising for new funds, fund management fees will stack up as the amount of external investment in the fund under management grows. The bar graph shows the amount of fund management fees.

The gray bar graph on the left side of this chart shows actual results. The dotted bar graph on the right side of the chart shows the amount of management fees that would stack up in line with the overall target figures shown later in the corporate value enhancement measures section.

6

Next page. Success fees. Success fees in this fiscal year amounted to JPY0.6 billion. Success fees will be accrued on subsequent sales from funds under operation whose distributions have exceeded capital commitments. Although the amount of fluctuation depending on the market environment, we have been able to record recurring fees on an ongoing basis.

The figure on the right, which may be a little difficult to see, is a simulation of success fees using an investment multiple of 2.5 times, based on the current balance of unlisted holdings. The amount is represented by this orange bar graph.

As noted in the notes, the calculation excludes success fees arising from the balance of unlisted securities in the US and other fees.

7

We will proceed to the next page. This third sales item is capital gains. The bars represent the amount of capital gains. The upper green is the gain or loss on sale of the listed shares. The lower blue is the gain or loss on sale of the unlisted shares. The orange line graph shows the ROI, and our target is an average of 2.5 times. The capital gains for this fiscal year amounted to JPY7.9 billion with the investment multiple of 1.7 times.

The pie chart on the right shows the breakdown of capital gains, which is derived from venture investments or buyout investments.

On page 49 in the Appendix, you will find the ROI trends since 2008.

8

We will proceed to the next page. This slide shows the balance of unlisted operational investment securities. As for the color coding of the bar graph, the bottom gray is the marked‐down valuation. The amount that includes the blue portion above it is the acquisition cost.

The amount of the fair value valuation is the amount that includes the green bar graph above. The balance of unlisted operating investment securities for the fiscal year ended March 2024 was JPY85.7 billion, with a fair value valuation of JPY120.8 billion.

The left arrow of bar graph on the right indicates the amount of the capital gain generated here. The right side is the portion of the earnings in the income statement. This difference is the portion arising from the markdown.

Assuming that the current balance of unlisted operational investment securities is sold at an investment multiple of 2.5 times, the cumulative sales amount would be approximately JPY214 billion. Cumulative capital gains would be JPY128 billion. The cumulative earnings in the income statement would be JPY140 billion.

As shown in the lower right‐hand corner, the average investment multiple result is 2.3 times on an acquisition cost basis, and 3.5 times on a marked‐down valuation basis.

9