Update on Progress 2168 JT Equity: Pasona Group Inc. October 15, 2018 - Squarespace

 
Update on Progress 2168 JT Equity: Pasona Group Inc. October 15, 2018 - Squarespace
Update on Progress
2168 JT Equity: Pasona Group Inc.
October 15, 2018

                                    1
Update on Progress 2168 JT Equity: Pasona Group Inc. October 15, 2018 - Squarespace
Nambu-san Stated to Focus on Profit at the AGM

                        Oasis’s statements at the August 17, 2018 AGM

  “A sustainable company would make profits. A sustainable company recognizes when there are
    wastes of corporate resources that can be better used for new business ventures and growth.
 Profits would help secure the company for the future for everyone…We believe this is only a matter
 of choice for Pasona to make more profits. Cutting the wasteful expense is easy. We ask you, as a
      matter or your responsibly to your employees and all stakeholders to make that decision.”

                     Nambu-san’s statements at the August 17, 2018 AGM

 “In response to all the shareholder questions, the CEO has now made a public commitment that he
             will focus on profit for next year and it will be a big focus of his personally.”

                                                                                                      2
Update on Progress 2168 JT Equity: Pasona Group Inc. October 15, 2018 - Squarespace
Our Message to the Board and Management
• Our Investment Theses for Pasona Group Inc. (“Pasona”) remain
  unchanged from what we have presented on November 9, 2017 in
  “A Better Pasona”
• Nambu-San has pledged this year to focus on profits. We applaud
  that, yet progress to date has been slow. We are releasing our
  updated presentation as a reminder to Nambu-san and the board
  what can and should be done
• Progress to date is not sufficient
• Over the past year, Pasona has gotten cheaper for shareholders.
  Benefit One, its listed subsidiary, has outperformed Pasona by
  63%
• Today Pasona trades at a 149% discount to its holdings in Benefit
  One. The market applies a NEGATIVE Value to Pasona’s business.
• We strongly request that the board and management of Pasona
  execute on what we have proposed and demonstrate progress to
  the market, in order to unlock the value of Pasona
                                                                  3
Update on Progress 2168 JT Equity: Pasona Group Inc. October 15, 2018 - Squarespace
Table of Contents
• Executive Summary
• Stock Price Movement of Pasona

• Pasona’s Problem Continues
• Updates on Oasis Suggestions
  – Oasis Suggestion 1: Efficient Capital Allocation
  – Oasis Suggestion 2: Improved Cost Management
  – Oasis Suggestion 3: Rebuilt Governance Structure
• Upside to Pasona Share Price
• (Ref.) Japanese Staffing Industry Overview

                                                       4
Update on Progress 2168 JT Equity: Pasona Group Inc. October 15, 2018 - Squarespace
Executive Summary

                    5
Executive Summary
• Pasona has not shown meaningful progress on our
  proposals, which led to a plunge in the stock price
• Pasona’s value discount from the value of the Benefit One
  stake which Pasona owns is even more severe
 (62% (November 7, 2017)⇒ 149% (October 12,2018))
  – This shows that the equity market does not appreciate the
    movement of Pasona to date
• Pasona’s margin level is still very low compared to its peers
  – Pasona has not yet announced any cost management plan
  – We are waiting
• We have yet to see signs of Corporate Governance
  improvement at Pasona

                                                                  6
Our Suggestions and Progress to Date
•   Please refer to “A Better Pasona” Presentation dated November 9, 2017 for the further details of our proposal
                                                                                                                      Meaningful
            Our Suggestion                                                    Detail                                   Progress
1 Efficient       A Increase                • Organic and inorganic investment into profitable business models
                                            a
  Capital           Investment                (recruitment agency online platform and specialist staffing business)      ✗
  Allocation                                • Organic and inorganic investment into online platform for general
                                            b
                                              staffing (=Expert Service, Insourcing etc. segment)                        ✗
                     B Reduce               • Stop or reduce acquisitions of staffing subsidiaries from large
                                            a
                       Investment             Japanese companies                                                         ✗
                                            • Stop investment into outplacement businesses immediately and
                                            b
                                              shut them down                                                             ✗
                                            • Stop investment into Public Solution segments immediately and
                                            c
                                              shut them down                                                             ✗
                     C Other                • Crystalize and disclose investment KPI
                                            a                                                                            ✗
2 Improved
  Cost
                     A Cost
                       Restructuring
                                            • Review the cost structure
                                            a                                                                            ✗
                                            • Implement an aggressive cost management plan targeting 5%
  Management                                b
                                              operating margin at minimum                                                ✗
                     B Improve
                       Disclosure and
                                            • Disclose a detailed cost management plan
                                            a                                                                            ✗
                       Transparency         • Disclose breakdown of corporate overhead costs
                                            b                                                                            ✗
3 Rebuilt
  Governance
                     A Rebuild
                       Corporate
                                            • Review board structure
                                            a                                                                            ✗
  Structure            Governance           • Form a nomination committee and remuneration committee
                                            b                                                                            ✗
                       Structure            • Employ cumulative voting system (Ruiseki Tohyo Seido)
                                            c                                                                            ✗
                                            • Disclose detailed information about Komon and Sodan-yaku
                                            d                                                                            ✗
                     B Modern
                       Compensation
                                            • Employ stock based compensation more broadly
                                            a                                                                            ✗
                       Structure            • Give substance to stock based compensation
                                            b                                                                            ▲
                                            • Redesign performance measurement metrics
                                            c                                                                            ▲
                                                                                                                                   7
Stock Price Movement of Pasona Since Campaign
Launch
•                       Pasona’s stock rallied after our campaign launch. In January, Pasona’s stock price was up +57% compared to the stock price before
                        our campaign launch
•                       This indicates that the equity market appreciates our proposal to the board / management of Pasona
•                       Recently, the stock price plunged as Pasona showed no progress on our proposal. It is critical for the board / management of
                        Pasona to execute our Value-Enhancement Plan in order to maximize the value of the company
                                                                                                                                            2,000,000
                                                 2017/11/9                              2018/1/15
                                          Oasis Campaign Launch          Highest price since launch of campaign                             1,800,000
                        2,800                                           (+57% from stock price as of 2017/11/8)
                                                                                                                                            1,600,000

                                                                                                                                            1,400,000
(Closing Price (JPY))

                                                                                                                                            1,200,000

                                                                                                                                                        (Volume)
                                                                                                                                            1,000,000
                        2,100
                                                                                                                                            800,000

                                                                                                                                            600,000

                                                                                                                                            400,000

                                                                                                                                            200,000

                        1,400                                                                                                               0
                                11/16/2017
                                11/24/2017

                                12/15/2017
                                12/22/2017
                                12/29/2017
                                 11/9/2017

                                 12/1/2017
                                 12/8/2017

                                 1/11/2018
                                 1/18/2018
                                 1/25/2018

                                 2/16/2018
                                 2/23/2018

                                 3/16/2018
                                 3/26/2018

                                 4/16/2018
                                 4/23/2018

                                 5/10/2018
                                 5/17/2018
                                 5/24/2018
                                 5/31/2018

                                 6/14/2018
                                 6/21/2018
                                 6/28/2018

                                 7/12/2018
                                 7/20/2018
                                 7/27/2018

                                 8/10/2018
                                 8/17/2018
                                 8/24/2018
                                 8/31/2018

                                 9/14/2018
                                 9/25/2018
                                 10/2/2018
                                  2/1/2018
                                  2/8/2018

                                  3/2/2018
                                  3/9/2018

                                  4/2/2018
                                  4/9/2018

                                  5/1/2018

                                  6/7/2018

                                  7/5/2018

                                  8/3/2018

                                  9/7/2018
                                                                            Volume       Closing Price

                                                                                                                                                             8
Pasona is Deeply Undervalued from the
Value of the Benefit One Stake Pasona Owns
Source: Bloomberg and company disclosures
Note: Excludes treasury stock from calculations of market capitalization and Pasona’s ownership stake. Market data as of October 12, 2018.

•          Pasona owns 53.15% of Benefit One valued at JPY148bn, which exceeds the market capitalization of Pasona by 149%
•          Current valuation of Pasona excluding Benefit One implies substantial negative value of its business

                                                                                                                                             277,920

                                                                                                                                                              Stake owned by
                                                                                                                                                                  minority
                                                                                                                                             130,198           Shareholders
                                                                                                                                                               of Benefit One
    (JPY in millions)

                                                 +149%
                                                                                                                                                              Stake owned by
                                                                                                                                             147,723           Pasona Group
                                                                                                                                                                 (53.15%)

                                                  59,325

                                             Pasona                                                                                       Benefit One
                                       Market Capitalization                                                                          Market Capitalization
                                                                                                                                                                        9
Pasona’s Operating Margin Only Improved by 0.5% in the
last Fiscal Year and 0.3% in the last Quarter…
                                     Net Sales                       Operating Income (loss)                Operating Income Margin
                       FY17/5     FY18/5 FY18/5Q1FY19/5Q1 FY17/5           FY18/5 FY18/5Q1FY19/5Q1 FY17/5         FY18/5 FY18/5Q1FY19/5Q1
           Expert
           Service     142,662 159,851       37,172    43,626          -          -         -         -       -         -       -            -

  Expert Insourcing
                        77,100     84,429    19,449    22,094          -          -         -         -       -         -       -            -
 Service,
Insourcin
             HR
  g etc.
          Consulting     6,133      7,283     1,580     1,857          -          -         -         -       -         -       -            -

           Global
          Sourcing       6,388      7,216     1,724     1,961          -          -         -         -       -         -       -            -

     Sub Total         232,285 258,781       59,926    69,540     2,297      5,075       851     1,162     1.0%     2.0%    1.4%      1.7%

      Career
                        15,008     16,638     4,004     4,568     1,992      3,020       670       863    13.3%    18.2%    16.7%     18.9%
     Solutions

    Outsourcing         29,893     32,656     7,775     7,933     5,782      6,211     1,184     1,684    19.3%    19.0%    15.2%     21.2%

   Life Solution         4,657      5,129     1,250     1,355       237        268        49        18     5.1%     5.2%    3.9%      1.4%

  Public Solutions       1,670      2,277        462      756     (450)     (1,536)    (124)     (389)        -         -       -            -

  Eliminations and      (3,119)    (4,071)    (961)    (1,157)   (5,370)    (6,500)   (1,597)   (1,887)       -         -       -            -
     Corporate

       Total           280,395    311,410    72,458    82,997     4,488      6,539     1,033     1,451    1.6% 2.1% 1.4% 1.7%

                                                                                                                                        10
                                                                                                            +0.5%             +0.3%
…Pasona Forecasts 2.4% Margin in FY19/5 which is
Only 0.3% Increase from FY18/5
                                 Net Sales             Operating Income (loss)         Operating Income Margin
                        FY18/5          FY19/5 CoE     FY18/5        FY19/5 CoE        FY18/5        FY19/5 CoE
            Expert
            Service      159,851             172,800            -                  -            -                 -

   Expert  Insourcing
  Service,                84,429              91,800            -                  -            -                 -
Insourcing     HR
    etc.   Consulting      7,283               8,900            -                  -            -                 -

             Global
            Sourcing       7,216               8,100            -                  -            -                 -

      Sub Total          258,781             281,600      5,075             5,900          2.0%             2.1%

       Career
                          16,638              18,800      3,020             2,880         18.2%            15.3%
      Solutions

    Outsourcing           32,656              37,600       6,211            7,540         19.0%            20.1%

    Life Solution          5,129               5,900        268                  170       5.2%             2.9%

   Public Solutions        2,277               3,200     (1,536)          (1,300)               -                 -

  Eliminations and        (4,071)            (4,100)     (6,500)          (6,890)               -                 -
     Corporate

        Total            311,410             343,000      6,539             8,300      2.1%             2.4%
                                                                                                                  11
Recent Presentation by Pasona: Enhance business
efficiency and strengthen earning capacity
Source: Company disclosures

                              • Pasona presented “Enhance
                                business efficiency and
                                strengthen earning capacity”
                                which shows no financial
                                commitment
                              • Pasona should commit the
                                medium term margin target
                                along with a concrete cost
                                management plan to
                                shareholders
                              • Oasis is in continuous dialogue
                                with management in order to
                                enhance the margin

                                                              12
Nambu-san Stated a Focus on Profit at the AGM

                        Oasis’s statements at the August 17, 2018 AGM

  “A sustainable company would make profits. A sustainable company recognizes when there are
    wastes of corporate resources that can be better used for new business ventures and growth.
 Profits would help secure the company for the future for everyone…We believe this is only a matter
 of choice for Pasona to make more profits. Cutting the wasteful expense is easy. We ask you, as a
      matter or your responsibly to your employees and all stakeholders to make that decision.”

                     Nambu-san’s statements at the August 17, 2018 AGM

 “In response to all the shareholder questions, the CEO has now made a public commitment that he
             will focus on profit for next year and it will be a big focus of his personally.”

                                                                                                      13
Indicated operating margin of Pasona as a whole
from sum-of-the-parts analysis is 6.3%
Source: Company disclosures
Note: Analysis based on the company’s guidance FY2019/5 segment revenues and corporate overhead costs.

•                       We believe that Pasona’s profitability will improve significantly by carrying out our suggested implementations

                                                                    7,540                307             0          (4,000)
                        25,000

                                                                                                                                 21,671

                        20,000
                                                    3,760
    (JPY in millions)

                        15,000       14,064

                        10,000
                                                                                                                                           8,300

                         5,000

                            0
                                 Expert Service,    Career      Outsourcing        Life Solution Public Solution   Corporate      Total   Company
                                 Insourcing etc.   Solution      Segment             Segment       Segment         Overhead               Guidance
                                    Segment        Segment
Indicative
Operating                             5.0%          20.0%          20.1%                 5.2%            0.0%                      6.3%     2.4%
Margin %

                                                                                                                                                     14
Change in Corporate Governance since the
Campaign Launch
Source: Company disclosures

•    Since our campaign launch, the title of the board members changed, but without any material change
•    We still think the current governance structure is weak and lacks effective control over the CEO's management decisions
•    The company’s continuous decision to invest in the loss-making business, Public Solution segment, is indicative of such weak
     governance structure and lack of control
                                                                                                                 Board Member Since

Yasuyuki Nambu                                   Yasuyuki Nambu                                                         1976
Chief Executive Officer                          Chief Executive Officer

Heizo Takenaka                                   Heizo Takenaka                                                         2009
Chief Encourage Officer                          Chairman & Director

                                                 Junko Fukazawa
Junko Fukazawa                                   Executive Officer & Vice President, General Manager of
Chief Philosophy Officer                         the Human Resources & Planning Headquarters,
                                                                                                                        1990
                                                 responsible for the Social Contribution Department

                                                 Kinuko Yamamoto
                                                 Executive Officer & Vice President, General Manager of
Kinuko Yamamoto
Chief Innovation Officer
                                                 the New Business Development Headquarters,                             1990
                                                 General Manager of the Smart Life Initiative
                                                 Headquarters

                                                 Hirotaka Wakamoto
Hirotaka Wakamoto                                Executive Officer & Vice President, General Manager
Chief Strategy Officer                           of the Corporate Planning & Administration                             2006
                                                 Headquarters

                                                                                                                                    15
Execution of Our Proposals Will Create Significant
Increases in the Value of the Company
Source: Bloomberg, street estimates and company disclosures
Note: Market data as of October 12, 2018. Comparable companies includes Recruit Holdings, Persol Holdings, DIP, En-Japan, Quick, JAC Recruitment, Meitec, TechnoPro, WDB Holdings, Altech,
Outsourcing, World Holdings, UT Group, Trust Tech, Like, Hito Communication and Fullcast. Assumes 4.4% operating profit margin for Oasis Conservative Case, by using 3.0% operating profit margin for
Expert Services, Insourcing etc. segment, 17.5% operating profit margin for Career Solution segment and JPY4,500 million of corporate overhead cost. Assumes 6.3% operating profit margin for Oasis Base
Case which is calculated on P. 51. Assumes 30.86% corporate tax rate.

•     Pasona is currently trading substantially below its holding value in Benefit One stake
•     We see at least +174% upside to the current stock price by carrying out our value-enhancement plan

                      Oasis Conservative Case                                                                                       Oasis Base Case
                        Implied Stock Price                                                                                        Implied Stock Price

                                                                                                                                                                                           +419%
                                                                                                                                                            +379%          +381%

                                                                                                                                            +330%                                           7,871
                                                                                                                                                             7,266          7,302
                                                                                  +230%
                                                                                                                                             6,517
                                                    +205%          +207%

                                    +174%
                                                                                   5,013
                                                    4,628           4,651
                                    4,151
                     3,777                                                                                                    3,777

      1,517                                                                                                   1,517

      Current Benefit One 1st Quartile             Median         Average      3rd Quartile                  Current Benefit One 1st Quartile               Median         Average      3rd Quartile
    Stock Price   Value                                                                                    Stock Price   Value
                per Share                                                                                              per Share
                                       Comparable Companies FY1 P/E Multiple                                                                   Comparable Companies FY1 P/E Multiple

                                                                                                                                                                                                      16
Stock Price Movement of Pasona

                                 17
Stock Price Movement of Pasona Since Campaign
Launch
•                       Pasona’s stock rallied after our campaign launch. In January, Pasona’s stock price was up +57% compared to the stock price before
                        our campaign launch
•                       This indicates that the equity market appreciates our proposal to the board / management of Pasona
•                       Recently, the stock price plunged as Pasona showed no progress on our proposals. It is critical for the board / management of
                        Pasona to execute our Value-Enhancement Plan in order to maximize the value of the company
                                                                                                                                            2,000,000
                                                 2017/11/9                              2018/1/15
                                          Oasis Campaign Launch          Highest price since launch of campaign                             1,800,000
                        2,800                                           (+57% from stock price as of 2017/11/8)
                                                                                                                                            1,600,000

                                                                                                                                            1,400,000
(Closing Price (JPY))

                                                                                                                                            1,200,000

                                                                                                                                                        (Volume)
                                                                                                                                            1,000,000
                        2,100
                                                                                                                                            800,000

                                                                                                                                            600,000

                                                                                                                                            400,000

                                                                                                                                            200,000

                        1,400                                                                                                               0
                                11/16/2017
                                11/24/2017

                                12/15/2017
                                12/22/2017
                                12/29/2017
                                 11/9/2017

                                 12/1/2017
                                 12/8/2017

                                 1/11/2018
                                 1/18/2018
                                 1/25/2018

                                 2/16/2018
                                 2/23/2018

                                 3/16/2018
                                 3/26/2018

                                 4/16/2018
                                 4/23/2018

                                 5/10/2018
                                 5/17/2018
                                 5/24/2018
                                 5/31/2018

                                 6/14/2018
                                 6/21/2018
                                 6/28/2018

                                 7/12/2018
                                 7/20/2018
                                 7/27/2018

                                 8/10/2018
                                 8/17/2018
                                 8/24/2018
                                 8/31/2018

                                 9/14/2018
                                 9/25/2018
                                 10/2/2018
                                  2/1/2018
                                  2/8/2018

                                  3/2/2018
                                  3/9/2018

                                  4/2/2018
                                  4/9/2018

                                  5/1/2018

                                  6/7/2018

                                  7/5/2018

                                  8/3/2018

                                  9/7/2018
                                                                            Volume       Closing Price

                                                                                                                                                         18
As of November
Pasona Stock Underperformed the Sector                                                                                                                                       7, 2017
Source: Bloomberg
Note: Market data as of November 7, 2017. Excludes Recruit Holdings and TechnoPro Holdings as these companies went public during the time used in the stock price chart. Excludes DIP Corporation as
the company’s stock price gained close to 2,000% during this period.

                        Indexed Stock Price Performance of Pasona vs. Comparable Companies
12.00

10.00

 8.00

 6.00

 4.00

 2.00

 0.00
    Nov-13              May-14                     Nov-14                 May-15                Nov-15                   May-16          Nov-16                        May-17
                  Pasona                             Persol                                Meitec                           WDB Holdings                           Altech
                  Outsourcing                         World Holdings                       UT Group                            Trust Tech                          En-Japan
                  Quick                               JAC Recruitment                      Like                                Hito Comm.                          Fullcast

                                                                                                                                                                                                   19
Pasona Stock Underperformed the Sector                                                                                                                                         Updated
Source: Bloomberg
Note: Market data as of October 12, 2018. Excludes Recruit Holdings and TechnoPro Holdings as these companies went public during the time used in the stock price chart. Excludes DIP Corporation as
the company’s stock price gained close to 2,000% during this period.

                        Indexed Stock Price Performance of Pasona vs. Comparable Companies
16.00

14.00

12.00

10.00

 8.00

 6.00

 4.00

 2.00

 0.00
    Nov-13           May-14               Nov-14           May-15                Nov-15             May-16             Nov-16      May-17                     Nov-17             May-18
                  Pasona                               Persol                              Meitec                            WDB Holdings                         Altech
                  Outsourcing                          World Holdings                      UT Group                             Trust Tech                          En-Japan
                  Quick                                JAC Recruitment                     Like                                 Hito Comm.                          Fullcast

                                                                                                                                                                                                       20
As of November
Pasona is Deeply Undervalued from the                                                                                                                              7, 2017

Value of the Benefit One Stake Pasona Owns
Source: Bloomberg and company disclosures
Note: Excludes treasury stock from calculations of market capitalization and Pasona’s ownership stake. Market data as of November 7, 2017.

•                       Pasona owns 55.13% of Benefit One valued at JPY93bn, which exceeds market capitalization of Pasona by 62%
•                       Current valuation of Pasona excluding Benefit One implies substantial negative value of its business

                                                                                                                                             169,504

                                                                                                                                                                   Stake owned by
                                                                                                                                                                       minority
                                                                                                                                              76,056
                                                                                                                                                                    Shareholders
    (JPY in millions)

                                                                                                                                                                    of Benefit One

                                                    +62%

                                                                                                                                                                   Stake owned by
                                                                                                                                              93,448                Pasona Group
                                                                                                                                                                      (55.13%)
                                                   57,802

                                                  Pasona                                                                                   Benefit One
                                            Market Capitalization                                                                      Market Capitalization

                                                                                                                                                                            21
Pasona is Deeply Undervalued from the                                                                                                                         Updated

Value of the Benefit One Stake Pasona Owns
Source: Bloomberg and company disclosures
Note: Excludes treasury stock from calculations of market capitalization and Pasona’s ownership stake. Market data as of October 12, 2018.

•          Pasona owns 53.15% of Benefit One valued at JPY148bn, which exceeds market capitalization of Pasona by 149%
•          Current valuation of Pasona excluding Benefit One implies substantial negative value of its business

                                                                                                                                             277,920

                                                                                                                                                               Stake owned by
                                                                                                                                                                   minority
                                                                                                                                             130,198            Shareholders
                                                                                                                                                                of Benefit One
    (JPY in millions)

                                                 +149%
                                                                                                                                                               Stake owned by
                                                                                                                                             147,723            Pasona Group
                                                                                                                                                                  (53.15%)

                                                  59,325

                                             Pasona                                                                                       Benefit One
                                       Market Capitalization                                                                          Market Capitalization
                                                                                                                                                                        22
Pasona’s Problem Continues

                             23
Pasona’s Market Capitalization is Extremely Small
Despite the Size of Their Sales…
                                             As of November
                                                 7, 2017
Source: Bloomberg, street estimates and company disclosures
Note: Market data as of November 7, 2017.

•                        Despite the fact that Pasona’s sales volume in the Japanese staffing market is #3 after Recruit Holdings and Persol Holdings, by
                         market capitalization, it is categorized as a small-cap company, which is evidence that the market is not giving credit to their
                         operations

                                                                                                                                         FY1 Sales Volume Benchmark Analysis
                                  2,163
                                                 670
    (JPY in billions)

                                                             317
                                                                                                220
                                                                                                                            127           111                             93             80                     63                 51                   47                 40                     39                     38                                32         29       16             16
                                                 Persol

                                                                                                                                                                          Meitec

                                                                                                                                                                                                                                                                                                                                                                      Altech
                                                                                                 Outsourcing

                                                                                                                                                                                                                                                                                                                                                                               Quick
                                   Recruit

                                                             Pasona

                                                                                                                                                                                                                                                        Like

                                                                                                                                                                                                                                                                                                  DIP
                                                                                                                            Holdings

                                                                                                                                                                                                                                    Trust Tech

                                                                                                                                                                                                                                                                            En-Japan

                                                                                                                                                                                                                                                                                                                                                           Fullcast
                                                                                                                                                                                                                Hito Comm.

                                                                                                                                                                                                                                                                                                                                                                                            Recruitment
                                                                                                                                                                                          UT Group

                                                                                                                                                                                                                                                                                                                          WDB Holdings
                                                                                                                                           TechnoPro
                                                                                                                             World

                                                                                                                                                                                                                                                                                                                                                                                               JAC
                                                                                                                                   Market Capitalization Benchmark Analysis
                                  4,582
                                                 662                                           800.0
                                                                                               700.0
                                                                           (JPY in billions)
              (JPY in billions)

                                                                                               600.0
                                                                                               500.0
                                                                                               400.0
                                                                                               300.0
                                                             202                                 183
                                                                                               200.0                          158          152                            147
                                                                                               100.0                                                                                       83                    81                  80                  68                 58                    54                      51                               40         38       35             32
                                                                                                 0.0
                                                                                                                                                                                                                    Trust Tech
                                                                                                                   Persol

                                                                                                                                                                                                                                                                                                          Comm.

                                                                                                                                                                                                                                                                                                                            Altech
                                                                                                                                                                                           Meitec

                                                                                                                                                                                                                                                 DIP

                                                                                                                                                                                                                                                                                                                                                              Quick
                                                                                                                                Pasona

                                                                                                                                           Outsourcing

                                                                                                                                                                                                                                    JAC Like

                                                                                                                                                                                                                                                            En-Japan

                                                                                                                                                                                                                                                                                       Fullcast
                                                                                                                                                                                                     UT Group

                                                                                                                                                                                                                                                                       WDB Holdings

                                                                                                                                                                                                                                                                                                                                         JAC Recruitment
                                                                                                                                                                            TechnoPro
                                                                                                                                                         World Holdings
                                                    Persol

                                                                                                                                                                                                                                                                                                                                                           Altech
                                                                                                                               Meitec

                                                                                                                                          Outsourcing

                                                                                                                                                                                DIP
                                       Recruit

                                                                En-Japan

                                                                                                                                                                                                                                                                                                                                                                      Like

                                                                                                                                                                                                                                                                                                                                                                                               Quick
                                                                                                                                                                                                                                                                          Pasona
                                                                                                                                                                                        Fullcast

                                                                                                                                                                                                                                                               Tech
                                                                                                                                                                                                                   UT Group

                                                                                                                                                                                                                                                                                                      Holdings
                                                                                                      TechnoPro

                                                                                                                                                                                                                                 Recruitment

                                                                                                                                                                                                                                                                                                                                                                               Hito Comm.
                                                                                                                                                                                                                                                                                                                  World Holdings
                                                                                                                                                                                                                                                         Trust

                                                                                                                                                                                                                                                                                                  WDBHito

                                                                                                                  General Staffing                          Recruitment Agency Online Platform                                                         Specialist Staffing                                Other Staffing
                                                                                                                                                                                                                                                                                                                                                                                                          24
Pasona’s Market Capitalization is Extremely Small
Despite the Size of Their Sales…              Updated
Source: Bloomberg, street estimates and company disclosures
Note: Market data as of October 12, 2018.

•                        Despite the fact that Pasona’s sales volume in the Japanese staffing market is #3 after Recruit Holdings and Persol Holdings, by
                         market capitalization it is categorized as a small-cap company, which is evidence that the market is not giving credit to their
                         operations

                                                                                                                                     FY1 Sales Volume Benchmark Analysis
                                2,352
                                              935
    (JPY in billions)

                                                         341                              301
                                                                                                                   145                 138                             105           98                      82                65                     50                  49                   43                    43                                   38             33              23           19
                                              Persol

                                                                                                                                                                                      Meitec

                                                                                                                                                                                                                                                                                                                                                                          Altech
                                                                                           Outsourcing

                                                                                                                                                                                                                                                                                                                                                                                                      Quick
                                                                                                                                                                                                                                                                           Like

                                                                                                                                                                                                                                                                                                 DIP
                                 Recruit

                                                         Pasona

                                                                                                                                                                                                                                                       En-Japan

                                                                                                                                                                                                                                                                                                                                                           Fullcast
                                                                                                                                                                                                              Trust Tech
                                                                                                                                                                       UT Group

                                                                                                                                                                                                                                                                                                                      WDB Holdings

                                                                                                                                                                                                                                                                                                                                                                                     Recruitment
                                                                                                                                                                                                                                Hito Comm.
                                                                                                                   World Holdings

                                                                                                                                          TechnoPro

                                                                                                                                                                                                                                                                                                                                                                                        JAC
                                                                                                                                    Market Capitalization Benchmark Analysis
                                5,795
                                                                                         800.0
                                                                                         700.0
            (JPY in billions)

                                              556
                                                                     (JPY in billions)

                                                                                         600.0
                                                                                         500.0
                                                                                         400.0
                                                         245                               237
                                                                                         300.0
                                                                                         200.0                     161                 157                             148         141
                                                                                         100.0                                                                                                              95                89                    81                 70                    59                  52                                    50             36           32              31
                                                                                           0.0
                                                                                                                                                                                                            Trust Tech
                                                                                                          Persol

                                                                                                                                                                                                                                                                                                  Comm.

                                                                                                                                                                                                                                                                                                                   Altech
                                                                                                                                                                                    Meitec

                                                                                                                                                                                                                                             DIP

                                                                                                                                                                                                                                                                                                                                                         Quick
                                                                                                                         Pasona

                                                                                                                                       Outsourcing

                                                                                                                                                                                                                                Like

                                                                                                                                                                                                                                                       En-Japan

                                                                                                                                                                                                                                                                                  Fullcast
                                                                                                                                                                                               UT Group

                                                                                                                                                                                                                                                                   WDB Holdings

                                                                                                                                                                                                                                                                                                                                     JAC Recruitment
                                                                                                                                                                       TechnoPro
                                                                                                                                                      World Holdings
                                                Persol

                                                                                                                                                                                   Meitec

                                                                                                                                                                                                                                                                                                                                                       Altech
                                                                                                                    Outsourcing

                                                                                                                                                                                                                                                                                                                                                                      Quick

                                                                                                                                                                                                                                                                                                                                                                                                   Like
                                    Recruit

                                                                                                                                                                            DIP
                                                          En-Japan

                                                                                                                                                                                                                           Fullcast

                                                                                                                                                                                                                                                                                                Pasona
                                                                                                                                                                                                                                                     Trust Tech
                                                                                                                                        UT Group

                                                                                                                                                                                                                                                                  WDB Holdings
                                                                                             TechnoPro

                                                                                                                                                                                                          Recruitment

                                                                                                                                                                                                                                                                                                                                                                                   Hito Comm.
                                                                                                                                                                                                                                                                                                          World Holdings
                                                                                                                                                                                                             JAC

                                                                                                                                                                                                                                                                                             Hito

                                                                                                         General Staffing                                Recruitment Agency Online Platform                                                        Specialist Staffing                             Other Staffing
                                                                                                                                                                                                                                                                                                                                                                                                              25
…Primary Reason Behind the Low Valuation is Their
                                          As of November
Weak Profitability                            7, 2017
Source: Bloomberg, street estimates and company disclosures
Note: Market data as of November 7, 2017.

•       Pasona’s profitability is the weakest among its peers and this is the primary reason for the company’s stock price underperforming
        against its peers
•       Major companies operating general staffing businesses produce more than 5% operating profit margin at least, and this figure is
        even higher for companies dedicated to more profitable business models

                                                                           Latest FY Operating Margin Benchmark Analysis
    34.1%
                       27.5%
                               21.6%

                                           13.7%                          12.4%               11.4%          10.7%                        10.4%             9.6%                          7.9%                    7.5%          7.5%                         6.9%             5.9%                             5.6%      4.2%           3.8%
                                                                                                                                                                                                                                                                                                                                                1.6%

                                                                                                                                                                                                                                                                                                                Persol
                                                                            Meitec

                                                                                                                   Altech
                                                               Quick

                                                                                                                                                                                                                                                                                                                          Outsourcing

                                                                                                                                                                                                                                                                                                                                         Like
                        DIP

                                                                                                                                                                                                                                                              Recruit
                                En-Japan

                                                                                               Fullcast

                                                                                                                                                                                                                                                                                                                                                 Pasona
                                                                                                                                                                                                                   Trust Tech
     JAC Recruitment

                                                                                                                                           WDB Holdings

                                                                                                                                                                                                                                                                                  UT Group
                                                                                                                                                                 TechnoPro

                                                                                                                                                                                                                                     Hito Comm.
                                                                                                                                                                                           World Holdings
                                                                          Latest FY Net Income Margin Benchmark Analysis
    23.6%
                                              800.0
                       18.6%                  700.0
                                           (JPY in billions)

                               12.6%          600.0
                                              500.0
                                           10.0%                          9.5%                8.8%
                                              400.0                                                          7.7%                         7.4%              6.3%
                                                                                                                                                                                          4.6%                    4.5%          4.4%                         4.2%             3.5%
                                              300.0                                                                                                                                                                                                                                                            3.0%      2.3%           2.0%
                                              200.0
                                              100.0
                                                                                                                                                                                                                                                                                                                                                0.0%
                                                0.0
                                                                                                                                                                             Trust Tech
                                                                           Persol

                                                                                                                                                                                                                                                              Hito Comm.

                                                                                                                                                                                                                                                                                Altech
                                                                                                                                           Meitec
                                                                                     Pasona

                                                                                               Outsourcing

                                                                                                                                                                                                            DIP

                                                                                                                                                                                                                                                                                                                 Quick
                                                                                                                                                                                             Like

                                                                                                                                                                                                                    En-Japan

                                                                                                                                                                                                                                                  Fullcast
                                                                                                                                                             UT Group

                                                                                                                                                                                                                                 WDB Holdings

                                                                                                                                                                                                                                                                                             JAC Recruitment
                                                                                                                              TechnoPro
                                                                                                             World Holdings

                                                                                                                                                                                                                                                                                                                Persol
                                                                                                    Meitec

                                                                                                                                           Altech
                                                                           Quick

                                                                                                                                                                                                                                                                                                                          Outsourcing
                        DIP

                                                                                                                                                                                                                                                                                                                                         Like
                                                                                                                                                                                           Recruit
                                En-Japan

                                                               Fullcast

                                                                                                                                                                                                                   Trust Tech

                                                                                                                                                                                                                                                              Hito Comm.

                                                                                                                                                                                                                                                                                                                                                 Pasona
     JAC Recruitment

                                                                                                                                                          WDB Holdings

                                                                                                                                                                                                                                                                             UT Group
                                                                                                                 TechnoPro

                                                                                                                                                                                                                                World Holdings

                                                                          General Staffing                    Recruitment Agency Online Platform                                                                  Specialist Staffing                                   Other Staffing
                                                                                                                                                                                                                                                                                                                                                          26
…Primary Reason Behind the Low Valuation is Their
Weak Profitability                         Updated
Source: Bloomberg, street estimates and company disclosures
Note: Market data as of October 12, 2018.

•          Pasona’s profitability is the weakest among its peers and this is the primary reason for the company’s stock price underperforming
           against its peers
•          Major companies operating general staffing businesses produce more than 5% operating profit margin at least, and this figure is
           even higher for companies dedicated to more profitable business models

                                                                            Latest FY Operating Margin Benchmark Analysis
    33.1%
                          28.4%
                                  23.7%

                                               13.8%                       13.1%            12.2%               11.0%                           10.7%       9.6%                        8.8%
                                                                                                                                                                                                         6.6%          6.4%                       5.6%                    5.0%                         4.9%            4.3%           4.2%
                                                                                                                                                                                                                                                                                                                                                2.1%

                                                                                                                                                                                                                                                                            Persol
                                                                                                                                                 Altech
                                                                                                 Meitec
                           DIP

                                                                                                                                                                                                                                                                                                         Outsourcing
                                                                            Quick

                                                                                                                                                                                         Recruit

                                                                                                                                                                                                                                                                                                                                        Like
                                   En-Japan

                                                                                                                                                                                                                                                                                                                                                  Pasona
                                                              Fullcast

                                                                                                                                                                                                          Trust Tech
     JAC Recruitment

                                                                                                                     WDB Holdings

                                                                                                                                                                                                                            UT Group
                                                                                                                                                               TechnoPro

                                                                                                                                                                                                                                                                                                                         Hito Comm.
                                                                                                                                                                                                                                                   World Holdings
                                                                           Latest FY Net Income Margin Benchmark Analysis
    23.0%
                          19.8%                     800.0
                                  15.6%             700.0
                                               (JPY in billions)

                                                    600.0
                                                    500.0
                                                  9.7%                     9.3%                 8.9%            8.7%
                                                    400.0                                                                                       7.8%        7.3%                        7.0%
                                                    300.0
                                                                                                                                                                                                         4.3%          3.9%                       3.6%                    3.4%
                                                    200.0                                                                                                                                                                                                                                              2.7%            2.4%
                                                    100.0                                                                                                                                                                                                                                                                             1.1%      0.4%
                                                      0.0
                                                                                                                                                                           Trust Tech
                                                                             Persol

                                                                                                                                                                                                                                                      Hito Comm.

                                                                                                                                                                                                                                                                         Altech
                                                                                                                                                 Meitec

                                                                                                                                                                                                                                                                                                                                       Persol
                                                                                       Pasona

                                                                                                  Outsourcing

                                                                                                                                                                                                   DIP

                                                                                                                                                                                                                                                                                                             Quick
                                                                                                                                                                                           Like
                                                                                                                        Meitec

                                                                                                                                                 Altech

                                                                                                                                                                                                          En-Japan

                                                                                                                                                                                                                                       Fullcast
                                                                                                                                                           UT Group

                                                                                                                                                                                                                       WDB Holdings

                                                                                                                                                                                                                                                                           Like
                                                                                                                                                                                                                                                                                     JAC Recruitment

                                                                                                                                                                                                                                                                                                        Outsourcing
                            DIP

                                                                   Quick

                                                                                                                                    TechnoPro

                                                                                                                                                                                         Recruit
                                    En-Japan

                                                                            Fullcast

                                                                                                                                                                                                                                                                                                                                                 Pasona
                                                                                                                World Holdings

                                                                                                                                                                                                                         Trust Tech
        JAC Recruitment

                                                                                                 WDB Holdings

                                                                                                                                                                                                          UT Group
                                                                                                                                                          TechnoPro

                                                                                                                                                                                                                                                                                                                        Hito Comm.
                                                                                                                                                                                                                                                   World Holdings

                                                                           General Staffing                      Recruitment Agency Online Platform                                                      Specialist Staffing                                        Other Staffing                                                                         27
Core Businesses Excl. Benefit One Barely Producing
Profit while Non-Core Business Incurring Losses
Source: Company disclosures
Note: Financials of the latest fiscal year ending May-2017.                                                                                                                               As of November 7, 2017
•     Pasona’s current profit is largely sourced from the Outsourcing segment operated by Benefit One
•     Expert Service, Insourcing and Career Solution are other segments contributing to profits; however, profits produced by these
      segments are smaller than internal adjustments (=corporate overhead cost)
•     The Public Solution segment, where the company has recently been making its largest investments across all segments, is barely
      making revenue, and even worse, they are incurring losses
                                                                                                                                             29,893                4,660       1,667             (3,116)        280,395
                          (JPY in millions)

                                                                                                                           15,008
                                                                    77,100                  6,133              6,388

                                                   142,662

       Sales
    Breakdown

                                                                                                                           Solution

                                                                                                                                                                   Solution

                                                                                                                                                                               Solution

                                                                                                                                                                                                 Adjustment
                                                                                                Consulting

                                                                                                                                                                                                                  Total
                                                                      Insourcing

                                                                                                                                               Outsourcing
                                                     Service

                                                                                                               Sourcing
                                                     Expert

                                                                                                                            Career

                                                                                                                                                                                Public
                                                                                                                Global

                                                                                                                                                                                                  Internal
                                                                                                                                                                     Life
                                                                                                   HR

                                                               Expert Service, Insourcing etc.

                                                                                                                 5,782                237                         (450)
                                                                                                                                                                                       (5,370)
                               (JPY in millions)

Operating Profit                                                                        1,992                                                                                                                 4,488
  Breakdown
                                                          2,297

                                                   Expert Service,                 Career Solution           Outsourcing       Life Solution                 Public Solution      Internal                    Total
                                                   Insourcing etc.                                                                                                               Adjustment
Operating
Margin %                                               1.0%                           13.3%                    19.3%                  5.1%                                                                    1.6%
                                                                                                                                                                                                                          28
Core Businesses Excl. Benefit One Barely Producing
Profit while Non-Core Business Incurring Losses
Source: Company disclosures
Note: Financials of the latest fiscal year ending May-2018.                                                                                                                                     Updated
•     Pasona’s current profit is largely sourced from the Outsourcing segment operated by Benefit One
•     Expert Service, Insourcing and Career Solution are other segments contributing to profits
•     The Public Solution segment, where the company has recently been making its largest investments across all segments, is barely
      making revenue, and even worse, they are incurring losses
                                                                                                                                            32,656               5,129        2,277             (4,071)        311,410
                                                                                                                           16,638
                          (JPY in millions)

                                                                        84,429                  7,283          7,216

                                                        159,851

       Sales
    Breakdown

                                                                                                                           Solution

                                                                                                                                                                  Solution

                                                                                                                                                                              Solution
                                                                                                Consulting

                                                                                                                                                                                                Adjustment
                                                                          Insourcing

                                                                                                                                                                                                                 Total
                                                         Service

                                                                                                               Sourcing

                                                                                                                                              Outsourcing
                                                         Expert

                                                                                                                            Career

                                                                                                                                                                               Public
                                                                                                                Global

                                                                                                                                                                                                 Internal
                                                                                                                                                                    Life
                                                                                                   HR

                                                                   Expert Service, Insourcing etc.

                                                                                                                 6,211                268                       (1,536)
                                                                                                                                                                                      (6,500)
                                    (JPY in millions)

                                                                                            3,020
Operating Profit                                                                                                                                                                                             6,539
  Breakdown                                                    5,075

                                                        Expert Service,                Career Solution       Outsourcing        Life Solution               Public Solution      Internal                    Total
                                                        Insourcing etc.                                                                                                         Adjustment
Operating
Margin %                                                    2.0%                          18.2%                 19.0%                 5.2%                                                                   2.1%

                                                                                                                                                                                                                         29
Poor Operations is the Main Reason Behind the
                                           As of November
Weak Margin Profile                            7, 2017
Source: Bloomberg, street estimates and company disclosures
Note: JAC Recruitment includes corporate overhead cost since the company does not disclose segment profit.

•    Profitability of Pasona’s core segments (Expert Service, Insourcing and Career Solution) is exceptionally weaker than that of peers
     despite the fact that the there is no substantial difference in the products that Pasona is offering versus its competitors
•    We strongly believe the reason behind the weak margin profile for the respective segments are as follows:
      – Expert Service, Insourcing etc. Segment: Lack of decent cost management and engaging in low profit transactions (i.e. staffing
          business provided by a Pasona-acquired company that used to be an exclusive staffing service provider and a subsidiary of
          Japanese large company) and weak online platform implementation
      – Career Solution Segment: Weak online platform implementation and outplacement businesses that provide career agency
          services for non-performing employees of Japanese major companies are not profitable

      Expert Service, Insourcing etc. Segment                                                                                                      Career Solution Segment
       Operating Margin Benchmark Analysis                                                                                                   Operating Margin Benchmark Analysis

                                                                                                                                                                           39.5%
                                                            5.9%                                                                                                      37.0%
                                            5.6%                                                                                                                                                                                                                      34.1%
                                                                                                                                                                                                                                                                 31.4%
                                                                                                           4.7%
                                                                                      4.3%                                                                                                            23.0%
                                                                                                                                                                                                 20.7%                                           20.4%
                                                                                                                                                                                                                              20.3%
                                                                                                                                           17.9%
                                                                                                                                                     13.3%

                                     7.0%
                                     6.0%
         0.9%               1.0%

                                                                                                                                                                         (Media Seg.)

                                                                                                                                                                                                          (Recruiting Seg.)

                                                                                                                                                                                                                                                                     JAC Recruitment
                                                                                                                                                                                                                                (HR Service + Recruiting Seg.)
                                                                                                                                             (Career Solution Seg.)
                                     5.0%
                                     4.0%

                                                                                                                                                                                                             En-Japan
                                                                                                                                                                             DIP
                                     3.0%
                                                                                                                                                    Pasona

                                     2.0%
             Insourcing etc. Seg.)

                                               (Staffing Seg.)

                                                                                         (Staffing / BPO Seg.)

                                     1.0%
               (Expert Service,

                                                                                                                                                                                                                                            Quick
                                                   Recruit

                                     0.0%
                                                                   (Expert Service,

                                                                                                                         (Staffing Seg.)

                                                                                                                                                                                        (Staffing / BPO
                   Pasona

                                                                    Insourcing etc.

                                                                                                 Persol

                                                                                                                             Recruit
                                                                        Pasona

                                                                                                                                                                                            Persol

                                                                                                                                                                                             Seg.)
                                                                         Seg.)

                                                                                                                  FY-1   Latest FY
                                                                                                                                                                                                                                                                                       30
Poor Operations the Main Reason Behind the Weak
Margin Profile                             Updated
Source: Bloomberg, street estimates and company disclosures
Note: JAC Recruitment includes corporate overhead cost since the company does not disclose segment profit. Recruit had a business segment change in the latest FY.

•    Profitability of Pasona’s core segments (Expert Service, Insourcing etc. and Career Solution) is exceptionally weaker than that of
     peers despite the fact that the there is no substantial difference in the products that Pasona is offering versus its competitors
•    We strongly believe the reason behind the weak margin profile for the respective segments are as follows:
      – Expert Service, Insourcing etc. Segment: Lack of decent cost management and engaging in low profit transactions (i.e. staffing
          business provided by a Pasona-acquired company that used to be an exclusive staffing service provider and a subsidiary of
          Japanese large company) and weak online platform implementation
      – Career Solution Segment: Weak online platform implementation and outplacement businesses that provide career agency
          services for non-performing employees of Japanese major companies are not profitable

      Expert Service, Insourcing etc. Segment                                                                                                       Career Solution Segment
       Operating Margin Benchmark Analysis                                                                                                    Operating Margin Benchmark Analysis

                                            5.6%            5.6%                                                                                                       39.5%
                                                                                                                                                                            38.3%                                                                                  34.1%
                                                                                      4.7%                                                                                                                                                                              33.1%
                                                                                                            4.6%

                                                                                                                                                                                                  23.0%24.4%
                                                                                                                                                                                                                               20.4% 19.2%
                                                                                                                                                      18.2%
                                                                                                                                            13.3%

                            2.0%
                                     7.0%
         1.0%                        6.0%

                                                                                                                                                                          (Media Seg.)

                                                                                                                                                                                                           (Recruiting Seg.)

                                                                                                                                                                                                                                                                       JAC Recruitment
                                                                                                                                                                                                                                  (HR Service + Recruiting Seg.)
                                                                                                                                              (Career Solution Seg.)
                                     5.0%
                                     4.0%

                                                                                                                                                                                                              En-Japan
                                                                                                                                                                              DIP
                                     3.0%
                                                                                                                                                     Pasona

                                     2.0%
             Insourcing etc. Seg.)

                                               (Staffing Seg.)

                                                                                         (Staffing / BPO Seg.)

                                     1.0%
               (Expert Service,

                                                                                                                                                                                                                                              Quick
                                                   Recruit

                                     0.0%
                                                                   (Expert Service,

                                                                                                                          (Staffing Seg.)

                                                                                                                                                                                         (Staffing / BPO
                   Pasona

                                                                    Insourcing etc.

                                                                                                 Persol

                                                                                                                              Recruit
                                                                        Pasona

                                                                                                                                                                                             Persol

                                                                                                                                                                                              Seg.)
                                                                         Seg.)

                                                                                                                   FY-1   Latest FY
                                                                                                                                                                                                                                                                                         31
As of November
Excessive Corporate Overhead Costs                                                                                                                                                                                                                                                                                         7, 2017
Source: Bloomberg, street estimates and company disclosures
Note: All corporate overhead cost excludes depreciation, amortization and other immaterial items. Pasona corporate overhead cost includes incubation expenses used for new business. Excludes En-Japan,
JAC Recruitment, Meitec, TechnoPro. Altech, Outsourcing and Trust Tech as these companies allocate overhead costs to each segments. In addition, UT Group and Hito Communication are excluded since
the numbers disclosed don’t seem relevant.

•    Pasona’s corporate overhead costs are exceptionally higher than that of peers
•    Combination of low segment profits and robust corporate overhead costs result in the company’s weak margin profile

                                                             Latest FY Corporate Overhead Costs as a percentage of
                                                                    Pre-Internal Adjustment Operating Profits
        48%

                              31%
                                                                             28%

                                                                                                                         23%

                                                                                                                                                         16%
                                                                                                                                                                                         14%                                                         13%
                                                                                                                                                                                                                                                                                                        11%
                                                           800.0
                                                           700.0
                                                                                                                                                                                                                                                                                                                              7%
                                       (JPY in billions)

                                                           600.0
                                                           500.0
                                                           400.0
                                                           300.0
                                                           200.0
                                Like

                                                                                                                         DIP

                                                                                                                                                                                                                                                          Fullcast
          Pasona

                                                                                  Quick

                                                                                                                                                                                                                                                                                                                              Recruit
                                                                                                                                                              Persol

                                                                                                                                                                                                  World Holdings

                                                                                                                                                                                                                                                                                                        WDB Holdings
                                                           100.0
                                                             0.0
                                                                                                                                                         Trust Tech
                                                                    Persol

                                                                                                                                                                                                                                             Hito Comm.

                                                                                                                                                                                                                                                                     Altech
                                                                                                                                     Meitec

                                                                                                                                                                              DIP

                                                                                                                                                                                                                                                                                                Quick
                                                                             Pasona

                                                                                          Outsourcing

                                                                                                                                                                       Like

                                                                                                                                                                                       En-Japan

                                                                                                                                                                                                                                  Fullcast
                                                                                                                                              UT Group

                                                                                                                                                                                                                   WDB Holdings

                                                                                                                                                                                                                                                                              JAC Recruitment
                                                                                                                         TechnoPro
                                                                                                        World Holdings

                                                                   General Staffing                        Recruitment Agency Online Platform                                       Specialist Staffing                                           Other Staffing

                                                                                                                                                                                                                                                                                                                                        32
Excessive Corporate Overhead Costs                                                                                                                                                                                                                                                                   Updated
Source: Bloomberg, street estimates and company disclosures
Note: All corporate overhead cost excludes depreciation, amortization and other immaterial items. Pasona corporate overhead cost includes incubation expenses used for new business. Excludes En-Japan,
JAC Recruitment, Meitec, TechnoPro. Altech, Outsourcing, Recruit and Trust Tech as these companies allocate overhead costs to each segments. In addition, UT Group and Hito Communication are
excluded since the numbers disclosed don’t seem relevant.

•    Pasona’s corporate overhead costs are exceptionally higher than that of peers
•    Combination of low segment profits and robust corporate overhead costs result in the company’s weak margin profile

                                                          Latest FY Corporate Overhead Costs as a percentage of
                                                                 Pre-Internal Adjustment Operating Profits

         45%

                                  28%
                                                                                26%
                                                                                                                                22%                                          22%
                                                                                                                                                                                                                           21%

                                                                                                                                                                                                                                                                                        15%

                                                     800.0
                                                     700.0                                                                                                                                                                                                                                              8%
                                      (JPY in billions)

                                                     600.0
                                                     500.0
                                                     400.0
                                                     300.0
                                                     200.0
                                    Like

                                                                                                                                        DIP

                                                                                                                                                                                                                                                                                          Fullcast
           Pasona

                                                                                          Quick

                                                                                                                                                                              Persol

                                                                                                                                                                                                                               World Holdings

                                                                                                                                                                                                                                                                                                        WDB Holdings
                                                     100.0
                                                       0.0
                                                                                                                                                         Trust Tech
                                                              Persol

                                                                                                                                                                                                                                                Hito Comm.

                                                                                                                                                                                                                                                             Altech
                                                                                                                               Meitec

                                                                                                                                                                             DIP

                                                                                                                                                                                                                                                                                        Quick
                                                                       Pasona

                                                                                Outsourcing

                                                                                                                                                                      Like

                                                                                                                                                                                          En-Japan

                                                                                                                                                                                                                    Fullcast
                                                                                                                                              UT Group

                                                                                                                                                                                                     WDB Holdings

                                                                                                                                                                                                                                                                      JAC Recruitment
                                                                                                                   TechnoPro
                                                                                                  World Holdings

                                                             General Staffing                        Recruitment Agency Online Platform                                                Specialist Staffing                                           Other Staffing

                                                                                                                                                                                                                                                                                                                       33
Updates on Oasis Suggestions

                               34
Oasis Suggestion 1:
Efficient Capital Allocation

                               35
Our Suggestions and Progress to Date
                                                                                                                  Meaningful
          Our Suggestion                       Detail                                Comment                       Progress
1 Efficient      A Increase      •a Organic and inorganic      • No meaningful move on enhancing
  Capital           Investment      investment into              recruitment agency online platform and
  Allocation                        profitable business          specialist staffing business
                                    models (recruitment        • Continue the low margin “Strategic M&A              ✗
                                    agency online platform       including in-house firms of major corporations
                                    and specialist staffing      and shared companies” strategy
                                    business)
                                 • Organic and inorganic
                                 b                             • No meaningful organic and inorganic
                                    investment into online       investment into online platform for general
                                    platform for general         staffing
                                    staffing (=Expert          • Continue the low margin “Strategic M&A              ✗
                                    Service, Insourcing etc.     including in-house firms of major corporations
                                    segment)                     and shared companies” strategy
                 B Reduce        •a Stop or reduce             • As mentioned in the recent presentation,
                   Investment       acquisitions of staffing     Pasona will continue the low margin
                                    subsidiaries from large      “Strategic M&A including in-house firms of          ✗
                                    Japanese companies           major corporations and shared companies”
                                                                 strategy
                                 • Stop investment into
                                 b                             • Will not shut down outplacement business
                                    outplacement                 but rather integrate it with Placement /
                                    businesses immediately       Recruiting business                                 ✗
                                    and shut them down
                                 •c Stop investment into       • Annual report as of May 2018 shows
                                    Public Solution              JPY340bn investment plan in the Public
                                    segments immediately         Solution segments                                   ✗
                                    and shut them down
                 C Other         •a Crystalize and disclose    • Pasona’s ROIC is the lowest among the
                                    investment KPI               peers while no KPI related to Pasona’s              ✗
                                                                 investment is disclosed
                                                                                                                          36
,1 A b , 1 B a
 1 A a

Recent Pasona Presentation:M&A
Source: Company disclosures

                              • Pasona is still focused on
                                “Strategic M&A including in-
                                house firms of major
                                corporations and shared
                                companies” which will
                                pressure its margin
                              • Pasona should stop
                                considering M&A in the low
                                margin Expert Service,
                                Insourcing etc. Seg. and
                                should consider investment in
                                a recruitment agency online
                                platform and specialist staffing
                                business or online platform for
                                general staffing

                                                               37
1 B b

Recent Pasona Presentation:Outplacement
Source: Company disclosures

                              • Pasona will not shut down the
                                Outplacement business, but
                                rather, integrate it with
                                Placement / Recruiting
                                business

                              • We request that the company
                                shut down the high fixed cost
                                business, and reallocate
                                these business resources to
                                other businesses where the
                                company can produce profits

                                                                38
Loss-Making Investment Hidden Behind the
                    1 B c
                                               As of November
      Sublime Principles                           7, 2017
      Source: Company disclosures

      •               We respect Pasona’s board and management’s sublime principles of challenging social issues; however, Pasona’s recent brown-
                      field investment into theme parks in rural Japan was excessive
      •               In its latest annual report, Pasona disclosed that the company is planning to invest more than JPY 3,549 million into the Public
                      Solution segment, which is the largest across all business segments
                        – Pasona estimates operating losses of JPY 1.1 billion from Public Solutions segment for FY2018/5
      •               We request that Pasona stop this investment immediately, and moreover, consider 1.) selling the business and facilities or 2.) at a
                      minimum, entering into a partnership with the theme park operator to manage the business instead of Pasona solely managing and
                      allocating its resources to this business

                                                                                                        Public Solution Segment
                           Pasona’s Capex Plan for FY2018/5                                             Recent Major Investments

                                      Capex planned for
                                    Public Solution Segment
                                                                        990

                                                      2,200
(JPY in millions)

                                                                                                  Tango-Oukoku
                                                                                            Food theme-park located at
                                                                                    6,475    northern Kyoto prefecture

                                      1,400

                       1,885

                                                                                                                                       Nijigen-no-Mori
                                                                                                                                 Cool Japan x Nature x Tech
                    Pasona Group   Pasona Group   Nijigen-no-Mori    Benefit One    Total
                     (Corporate       (Public          (Public      (Outsourcing)                                                   theme park located
                      Function)      Solution         Solution                                                                         at Awaji-island
                                     Segment)        Segment)

                                                                                                                                                          39
Loss-Making Investment Hidden Behind the
                    1 B c

      Sublime Principles                         Updated
      Source: Company disclosures

      •               We respect Pasona’s board and management’s sublime principles of challenging social issues; however, Pasona’s recent brown-
                      field investment into theme parks in rural Japan was excessive
      •               In its latest annual report, Pasona disclosed that the company is planning to invested JPY 3,400 million into the Public Solution
                      segment, which is the largest across all business segments
                        – Pasona estimates operating losses of JPY 1.3 billion from Public Solutions segment for FY2019/5
      •               We request that Pasona stop this investment immediately, and moreover, consider 1.) selling the business and facilities or 2.) at a
                      minimum, entering into a partnership with the theme park operator to manage the business instead of Pasona solely managing and
                      allocating its resources to this business

                                                                                                      Public Solution Segment
                           Pasona’s Capex Plan for FY2019/5                                           Recent Major Investments

                                       Capex planned for
                                     Public Solution Segment
                                                                            1,124
(JPY in millions)

                                                          3,400

                                                                                        7,334

                                         500

                       2,310

                                                                                                                                       Nijigen-no-Mori
                                                                                                                                 Cool Japan x Nature x Tech
                    Pasona Group       Job-Hub        Nijigen-no-Mori    Benefit One    Total
                     (Corporate    (Expert Service,        (Public      (Outsourcing)                                               theme park located
                      Function)     Insourcing etc.       Solution                                                                     at Awaji-island
                                       Segment)          Segment)

                                                                                                                                                          40
1 C a
                                                                                                                                                                                            As of November
Crystalize and Disclose Investment KPI                                                                                                                                                          7, 2017
Source: Bloomberg, company disclosures and Ito Review of Competitiveness and Incentives for Sustainable Growth – Building Favourable Relationships between Companies and Investors-
Note: ROIC = (LTM Operating Profit * (1 – 30.86%)) / (Latest Net Assets + Latest Total Debt)

•        Pasona’s track record of investments is far from effective and its ROIC is one of the lowest among its peers
•        We request that the company crystalize key performance indicators (“KPI”) when making investments and publicly disclose KPI as a
         commitment by the management
•        We believe an ROIC target of 8% is the lowest bar for the company by referencing the Ito Report published in August 2014, and
         Pasona should aim to increase to the industry median level

                                                                                       ROIC Benchmark Analysis
40%

35%

30%

25%
                                                                                                                                                                                        Industry ROIC Median :
20%                                                                                                                                                                                     18.3%

15%
                                                                                                                                                                                        ROE Target of 8%
10%                                                                                                                                                                                     Mentioned in Ito Report

    5%

    0%
                                                                                                                           Altech

                                                                                                                                                                                 Like
                                       Fullcast

                                                                                        Meitec

                                                                                                 WDB Holdings
            DIP

                                                                                                                UT Group

                                                                                                                                                             Persol

                                                                                                                                                                                                          Pasona
                     JAC Recruitment

                                                       En-Japan

                                                                  Quick

                                                                          Trust Tech

                                                                                                                                                                       Recruit

                                                                                                                                                                                            Outsourcing
                                                                                                                                    TechnoPro

                                                                                                                                                Hito Comm.

                                                                                                                                                                                                                   World Holdings
                                                  General Staffing        Recruitment Agency Online Platform                        Specialist Staffing               Other Staffing

                                                                                                                                                                                                                                    41
1 C a

Crystalize and Disclose Investment KPI                                                                                                                                                                      Updated
Source: Bloomberg, company disclosures and Ito Review of Competitiveness and Incentives for Sustainable Growth – Building Favourable Relationships between Companies and Investors-
Note: ROIC = (LTM Operating Profit * (1 – 30.86%)) / (Latest Net Assets + Latest Total Debt)

•        Pasona’s track record of investments is far from effective and its ROIC is one of the lowest among its peers
•        We request that the company crystalize key performance indicators (“KPI”) when making investments and publicly disclose KPI as a
         commitment by the management
•        We believe an ROIC target of 8% is the lowest bar for the company by referencing the Ito Report published in August 2014, and
         Pasona should aim to increase to the industry median level

                                                                                       ROIC Benchmark Analysis
40%

35%

30%

25%
                                                                                                                                                                                                Industry ROIC Median :
                                                                                                                                                                                                18.5%
20%

15%
                                                                                                                                                                                                ROE Target of 8%
                                                                                                                                                                                                Mentioned in Ito Report
10%

    5%

    0%
                                                                              Altech

                                                                                                                                                                                                              Like
                                        Fullcast

                                                        UT Group

                                                                                                               Meitec
                                                                                                WDB Holdings
             DIP

                                                                                                                                                                         Persol
                      JAC Recruitment

                                                                                                                        Trust Tech

                                                                                                                                                                                                   Pasona
                                                                   En-Japan

                                                                                        Quick

                                                                                                                                                                                                                     World Holdings
                                                                                                                                                 Hito Comm.

                                                                                                                                                              Recruit

                                                                                                                                                                                  Outsourcing
                                                                                                                                     TechnoPro

                                                   General Staffing           Recruitment Agency Online Platform                     Specialist Staffing                Other Staffing
                                                                                                                                                                                                                                      42
Oasis Suggestion 2:
Improved Cost Management

                           43
Our Suggestions and Progress to Date
                                                                                                      Meaningful
         Our Suggestion                        Detail                            Comment               Progress
2 Improved      A Cost          a• Review the cost structure        • Pasona announced “Enhance
  Cost            Restructuring                                       business efficiency and
  Management                                                          strengthen earning capacity”
                                                                      which shows no commitment to       ✗
                                                                      financials
                                                                    • No cost management plan
                                                                      announced to date
                                b• Implement an aggressive cost     • Same as above
                                   management plan targeting 5%                                          ✗
                                   operating margin at minimum
                 B Improve      a• Disclose a detailed cost        • Same as above
                   Disclosure      management plan                                                       ✗
                   and          b• Disclose breakdown of corporate • No disclosure regarding
                   Transparency    overhead costs                    Overhead Costs which is 45% of
                                                                     Pre-Internal Adjustment
                                                                     Operating Profits                   ✗
                                                                   • The “Incubation Cost” is
                                                                     estimated to increase

                                                                                                               44
2 A a                 2 A b       2 B a
                      ,        ,           Recent Pasona Presentation:
Enhance business efficiency and strengthen earning capacity
Source: Company disclosures

                                                • Pasona presented “Enhance
                                                  business efficiency and
                                                  strengthen earning capacity”
                                                  which shows no financial
                                                  commitment
                                                • Pasona should commit the
                                                  medium term margin target
                                                  along with a concrete cost
                                                  management plan to
                                                  shareholders
                                                • Oasis is in continuous dialogue
                                                  with management in order to
                                                  enhance the margin

                                                                                45
2 B b

Recent Pasona Presentation: Overhead Cost
Source: Company disclosures

                              • Pasona expects an increase in
                                overhead cost in FY19/5
                              • Incubation costs and Group
                                costs have been continuously
                                increasing since FY14/5
                              • Pasona should disclose in
                                detail what they are spending
                                on the overhead cost accounts
                                for 45% of Pre-Internal
                                Adjustment Operating Profits

                                                            46
The Operating Margin of Pasona Only Improved by 0.5% in
the last Fiscal Year and 0.3% in the last Quarter…
                                     Net Sales                       Operating Income (loss)                Operating Income Margin
                       FY17/5     FY18/5 FY18/5Q1FY19/5Q1 FY17/5           FY18/5 FY18/5Q1FY19/5Q1 FY17/5         FY18/5 FY18/5Q1FY19/5Q1
           Expert
           Service     142,662 159,851       37,172    43,626          -          -         -         -       -         -       -            -

  Expert Insourcing
                        77,100     84,429    19,449    22,094          -          -         -         -       -         -       -            -
 Service,
Insourcin
             HR
  g etc.
          Consulting     6,133      7,283     1,580     1,857          -          -         -         -       -         -       -            -

           Global
          Sourcing       6,388      7,216     1,724     1,961          -          -         -         -       -         -       -            -

     Sub Total         232,285 258,781       59,926    69,540     2,297      5,075       851     1,162     1.0%     2.0%    1.4%      1.7%

      Career
                        15,008     16,638     4,004     4,568     1,992      3,020       670       863    13.3%    18.2%    16.7%     18.9%
     Solutions

    Outsourcing         29,893     32,656     7,775     7,933     5,782      6,211     1,184     1,684    19.3%    19.0%    15.2%     21.2%

   Life Solution         4,657      5,129     1,250     1,355       237        268        49        18     5.1%     5.2%    3.9%      1.4%

  Public Solutions       1,670      2,277        462      756     (450)     (1,536)    (124)     (389)        -         -       -            -

  Eliminations and      (3,119)    (4,071)    (961)    (1,157)   (5,370)    (6,500)   (1,597)   (1,887)       -         -       -            -
     Corporate

       Total           280,395    311,410    72,458    82,997     4,488      6,539     1,033     1,451    1.6% 2.1% 1.4% 1.7%

                                                                                                                                        47
                                                                                                            +0.5%             +0.3%
…Pasona Forecasts 2.4% Margin in FY19/5 which is
Only 0.3% Increase from FY18/5
                                 Net Sales             Operating Income (loss)         Operating Income Margin
                        FY18/5          FY19/5 CoE     FY18/5        FY19/5 CoE        FY18/5        FY19/5 CoE
            Expert
            Service      159,851             172,800            -                  -            -                 -

   Expert  Insourcing
  Service,                84,429              91,800            -                  -            -                 -
Insourcing     HR
    etc.   Consulting      7,283               8,900            -                  -            -                 -

             Global
            Sourcing       7,216               8,100            -                  -            -                 -

      Sub Total          258,781             281,600      5,075             5,900          2.0%             2.1%

       Career
                          16,638              18,800      3,020             2,880         18.2%            15.3%
      Solutions

    Outsourcing           32,656              37,600       6,211            7,540         19.0%            20.1%

    Life Solution          5,129               5,900        268                  170       5.2%             2.9%

   Public Solutions        2,277               3,200     (1,536)          (1,300)               -                 -

  Eliminations and        (4,071)            (4,100)     (6,500)          (6,890)               -                 -
     Corporate

        Total            311,410             343,000      6,539             8,300      2.1%             2.4%
                                                                                                                  48
As of November
Target Operating Margin by Segments                                                                                            7, 2017
Source: Company disclosures

                                       •   Given that marginal profit as a percentage of sales in this business is very low, we believe that
                     Expert Service,       the company can get close to operating at a level of profitability comparable to Persol Holding’s
                     Insourcing etc.       Staffing / BPO segment, which was 4.7% in the latest FY
                        Segment        •   Persol Holding is allocating its corporate overhead costs to each segment, which is not the case
                                           for Pasona; thus, we expect Pasona to reach the higher segment operating margin level

                                       •   Given that marginal profit as a percentage of sales in this business is very high, we believe the
                                           company can improve its segment operating margin by up to 20%, which is slightly north of the
                                           segment operating margin of FY2016/5, by allocating its business resources and capital from the
                    Career Solution        outplacement business to the recruitment agency online platforms
                       Segment
Segment                                •   We acknowledge that the company may be forced to spend advertisement and marketing costs
Operating                                  to enhance its online platform, but even after taking this into consideration, we believe this is an
 Margin                                    achievable target

                       Outsourcing     •   Benefit One is producing stable and strong profits and we want the company to continue its
                        Segment            efforts to further develop its business

                                       •   We request that the company put forth its efforts to maintain its profitability from FY2017/5 as a
                      Life Solution        bottom line commitment
                        Segment
                                            – Company estimates that operating profit margin will decrease by 2.2% in FY2018/5 to 2.9%
                                       •   The Pasona board and management should bring this business to the breakeven point at a
                     Public Solution
                                           minimum in the short term by reducing investment and costs, and ultimately shutting down this
                       Segment
                                           business

                                       •   We believe that the company can reduce corporate overhead costs down to JPY4.0bn, which is a
                                           decrease of JPY1.6bn compared to the company’s plan for FY2018/5
                                            – Overhead costs have increased by JPY0.6bn despite the fact that the number of employees
              Corporate                        between FY2016/5 and FY2017/5 has not changed significantly (only 20 people increased in
              Overhead                         corporate headquarters)
               Costs                        – We acknowledge that part of this is because the company has expended incubation
                                               expenses for new businesses and that these expenses were excessive
                                            – We are confident that the management will find areas of cost reduction and reduce
                                               overhead costs to a lower level than FY2016/5

                                                                                                                                             49
As of November
                                                                                                                                              7, 2017

Sum-of-the-Parts Target Operating Profit Analysis
Source: Company disclosures
Note: Analysis based on the company’s guidance FY2018/5 segment revenues and corporate overhead costs.

•                       We believe that Pasona’s profitability will improve significantly by carrying out our suggested implementations
•                       Indicated operating margin of Pasona as a whole from sum-of-the-parts analysis is 5.9%

                        25,000
                                                                    6,970                268             0          (4,000)

                        20,000                                                                                                   18,989

                                                    3,300
    (JPY in millions)

                        15,000
                                     12,450

                        10,000

                                                                                                                                                5,650
                         5,000

                            0
                                 Expert Service,    Career      Outsourcing        Life Solution Public Solution   Corporate      Total       Company
                                 Insourcing etc.   Solution      Segment             Segment       Segment         Overhead                   Guidance
                                    Segment        Segment

Indicative
Operating                             4.7%          20.0%          19.6%                 5.1%            0.0%                      5.9%         1.7%
Margin %

                                                                                                                                                         50
Target Operating Margin by Segments                                                                                           Updated
Source: Company disclosures

                                       •   Given that marginal profit as a percentage of sales in this business is very low, we believe that
                     Expert Service,       the company can get close to operating at a level of profitability comparable to Persol Holding’s
                     Insourcing etc.       Staffing / BPO segment, which was 5.0% in the latest FY
                        Segment        •   Persol Holding is allocating its corporate overhead costs to each segment, which is not the case
                                           for Pasona; thus, we expect Pasona to reach the higher segment operating margin level

                                       •   Given that marginal profit as a percentage of sales in this business is very high, we believe the
                                           company can improve its segment operating margin by up to 20%, which is slightly north of the
                                           segment operating margin of FY2016/5, by allocating its business resources and capital from the
                    Career Solution        outplacement business to the recruitment agency online platforms
                       Segment
Segment                                •   We acknowledge that the company may be forced to spend advertisement and marketing costs
Operating                                  to enhance its online platform, but even after taking this into consideration, we believe this is an
 Margin                                    achievable target

                       Outsourcing     •   Benefit One is producing stable and strong profits and we want the company to continue its
                        Segment            efforts to further develop its business

                                       •   We request that the company put forth its efforts to maintain its profitability from FY2018/5 as a
                      Life Solution        bottom line commitment
                        Segment
                                            – Company estimates that operating profit margin will decrease by 2.3% in FY2019/5 to 2.9%
                                       •   The Pasona board and management should bring this business to the breakeven point at a
                     Public Solution
                                           minimum in the short term by reducing investment and costs, and ultimately shutting down this
                       Segment
                                           business

                                       •   We believe that the company can reduce corporate overhead costs down to JPY4.0bn which is a
                                           decrease of JPY2.9bn compared to the company’s plan for FY2019/5
                                            – Overhead costs have increased by JPY1.1bn despite the fact that the number of employees
              Corporate                        between FY2017/5 and FY2018/5 has not changed significantly (only 30 people increased in
              Overhead                         corporate headquarter)
               Costs                        – We acknowledge that part of this is because the company has expended incubation
                                               expenses for new businesses and that these expenses were excessive
                                            – We are confident that the management will find areas of cost reduction and reduce
                                               overhead costs to a lower level than FY2016/5

                                                                                                                                             51
Updated

Sum-of-the-Parts Target Operating Profit Analysis
Source: Company disclosures
Note: Analysis based on the company’s guidance FY2019/5 segment revenues and corporate overhead costs.

•                       We believe that Pasona’s profitability will improve significantly by carrying out our suggested implementations
•                       Indicated operating margin of Pasona as a whole from sum-of-the-parts analysis is 6.3%

                                                                    7,540                301             0          (4,000)
                        25,000

                                                                                                                                  21,665

                        20,000
                                                    3,760
    (JPY in millions)

                        15,000       14,064

                        10,000
                                                                                                                                              8,300

                         5,000

                            0
                                 Expert Service,    Career      Outsourcing        Life Solution Public Solution   Corporate      Total     Company
                                 Insourcing etc.   Solution      Segment             Segment       Segment         Overhead                 Guidance
                                    Segment        Segment
Indicative
Operating                             5.0%          20.0%          20.1%                 5.2%            0.0%                      6.3%       2.4%
Margin %

                                                                                                                                                       52
Oasis Suggestion 3:
Rebuilt Governance Structure

                               53
Our Suggestions and Progress to Date

                                                                                                      Meaningful
          Our Suggestion                      Detail                           Comment                 Progress
3 Rebuilt       A Rebuild        • Review board structure
                                 a                               • The title name of the board
  Governance       Corporate                                       member changed but no                 ✗
  Structure        Governance                                      substantial structure review
                   Structure   • Form a nomination committee
                               b                                 • Not formed
                                 and remuneration committee                                              ✗
                               • Employ cumulative voting
                               c                                 • Not employed
                                 system (Ruiseki Tohyo Seido)                                            ✗
                               • Disclose detailed information
                               d                                 • No detail disclosed
                                 about Komon and Sodan-yaku                                              ✗
                B Modern       • Employ stock based
                               a                                 • Did not introduce stock based
                  Compensation   compensation more broadly         compensation other than for the       ✗
                  Structure                                        board member
                               • Give substance to stock based
                               b                                 • Increased stock based
                                 compensation                      compensation to certain extent        ▲
                               • Redesign performance
                               c                                 • Disclosed performance linked
                                 measurement metrics               stock compensation in the latest      ▲
                                                                   securities report

                                                                                                               54
Change in Corporate Governance since the
    3 A a

Campaign Launch
Source: Company disclosures

•    Since our campaign launch, the title of the board members changed, but no material changes
•    We still think the current governance structure is weak and lacks effective control over the CEO's management decisions
•    The company’s continuous decision to invest in the loss-making business, Public Solution segment, is indicative of such weak
     governance structure and lack of control
                                                                                                                 Board Member Since

Yasuyuki Nambu                                   Yasuyuki Nambu                                                         1976
Chief Executive Officer                          Chief Executive Officer

Heizo Takenaka                                   Heizo Takenaka                                                         2009
Chief Encourage Officer                          Chairman & Director

                                                 Junko Fukazawa
Junko Fukazawa                                   Executive Officer & Vice President, General Manager of
Chief Philosophy Officer                         the Human Resources & Planning Headquarters,
                                                                                                                        1990
                                                 responsible for the Social Contribution Department

                                                 Kinuko Yamamoto
                                                 Executive Officer & Vice President, General Manager of
Kinuko Yamamoto
Chief Innovation Officer
                                                 the New Business Development Headquarters,                             1990
                                                 General Manager of the Smart Life Initiative
                                                 Headquarters

                                                 Hirotaka Wakamoto
Hirotaka Wakamoto                                Executive Officer & Vice President, General Manager
Chief Strategy Officer                           of the Corporate Planning & Administration                             2006
                                                 Headquarters

                                                                                                                                    55
Upside to Pasona Share Price

                               56
Execution of Our Proposal Will Create Significant
Increases in the Value of the Company
Source: Bloomberg, street estimates and company disclosures
Note: Market data as of October 12, 2018. Comparable companies includes Recruit Holdings, Persol Holdings, DIP, En-Japan, Quick, JAC Recruitment, Meitec, TechnoPro, WDB Holdings, Altech,
Outsourcing, World Holdings, UT Group, Trust Tech, Like, Hito Communication and Fullcast. Assumes 4.4% operating profit margin for Oasis Conservative Case, by using 3.0% operating profit margin for
Expert Services, Insourcing etc. segment, 17.5% operating profit margin for Career Solution segment and JPY4,500 million of corporate overhead cost. Assumes 6.3% operating profit margin for Oasis Base
Case which is calculated on P. 51. Assumes 30.86% corporate tax rate.

•     Again, Pasona is currently trading below its holding value in its Benefit One stake
•     We see at least +174% upside to the current stock price by carrying out our value-enhancement plan

                      Oasis Conservative Case                                                                                       Oasis Base Case
                        Implied Stock Price                                                                                        Implied Stock Price

                                                                                                                                                                                           +419%
                                                                                                                                                            +379%          +381%

                                                                                                                                            +330%                                           7,871
                                                                                                                                                             7,266          7,302
                                                                                  +230%
                                                                                                                                             6,517
                                                    +205%          +207%

                                    +174%
                                                                                   5,013
                                                    4,628           4,651
                                     4,151
                     3,777                                                                                                    3,777

      1,517                                                                                                   1,517

      Current Benefit One 1st Quartile             Median         Average      3rd Quartile                  Current Benefit One 1st Quartile               Median         Average      3rd Quartile
    Stock Price   Value                                                                                    Stock Price   Value
                per Share                                                                                              per Share
                                       Comparable Companies FY1 P/E Multiple                                                                   Comparable Companies FY1 P/E Multiple

                                                                                                                                                                                                      57
(Ref.) Japanese Staffing Industry
Overview

                                    58
Labor Force Needs in Japan are Real
Source: Bank of Japan and Ministry of Internal Affairs and Communications
Note: Market data as of October 12, 2018.

•       Labor force imbalance in Japan is getting more serious according to the employment diffusion index (“DI”) published by Bank of
        Japan in its statistical survey in Japan (“Tankan”).
•       Even worse, the Japanese labor force is generally trending downwards because of the decreasing working age population

        Bank of Japan Tankan – Employment DI                                                                                  Japanese Population Trend
    0                                                                                                               140,000                                             75%

 -5
                                                                                                                    120,000
                                                                                                                                                                        70%
-10

                                                                                                                    100,000
-15
                                                                                                                                                                        65%

-20                                                                                                                  80,000

                                                                                                           (‘000)
                                                                                                                                                                        60%
-25
                                                                                                                     60,000
-30
                                                                                                                                                                        55%
                                                                                                                     40,000
-35

-40                                                                                                                                                                     50%
                                                                                                                     20,000

-45
                 Jun-16

                                                     Jun-17

                                                                                         Jun-18
        Mar-16

                                            Mar-17

                                                                                Mar-18
                          Sep-16

                                                              Sep-17

                                                                                                  Sep-18
                                   Dec-16

                                                                       Dec-17

                                                                                                                         0                                              45%

                                                                                                                              1990

                                                                                                                              2045
                                                                                                                              1970
                                                                                                                              1975
                                                                                                                              1980
                                                                                                                              1985

                                                                                                                              1995
                                                                                                                              2000
                                                                                                                              2005
                                                                                                                              2010
                                                                                                                              2015
                                                                                                                              2020
                                                                                                                              2025
                                                                                                                              2030
                                                                                                                              2035

                                                                                                                              2055
                                                                                                                              2065
        All Corporations                                      Large Size Corporations
                                                                                                                       Age: 0~14   Age: 15~64   Age: 65+   15~64 % of Total
        Medium Size Corporations                              Small Size Corporations

                                                                                                                                                                          59
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