Announcement of Commencement of Tender Offer for Share Certificates, Etc. of PanaHome Corporation (Stock Code: 1924) and Termination of Share Exchange Agreement between Panasonic Corporation and PanaHome Corporation

Purpose, etc. of Tender Offer

Overview of the Tender Offer

Background to, Purpose of and Decision Making Process of the Tender Offer, and Management Policy After the Tender Offer

a.

Background to, purpose of and decision making process of the Tender Offer

(i)

Background to and reasons for the Tender Offer

Since its establishment, the Tender Offeror has been developing business globally as a general electronics manufacturer under its basic management philosophy, which states that “the mission of an enterprise is to contribute to the progress and development of society and the well-being of people worldwide through its business activities.” In recent years, the Tender Offeror has been operating its businesses in the automobile (Note 2), housing and B2B (Note 3) business fields, in addition to the consumer electronics field, under its brand slogan, “A Better Life, A Better World” to expand its business fields to serve customers and society.

The Target Company was established in 1963 as National House industrial Co., Ltd. (National Juutaku Kenzai Kabushiki Kaisha) through the joint investment of Matsushita Electric Industrial Co., Ltd. (currently, the Tender Offeror), Matsushita Electric Works, Ltd. (subsequently, Panasonic Electric Works), and other parties (investment ratio of 50.00% by Matsushita Electric Industrial Co., Ltd. and 49.87% by Matsushita Electric Works, Ltd.) with founder Konosuke Matsushita’s strong sense of mission that “creating optimal houses to provide the most important foundation for human lives”. Thereafter, in October 1971, the Target Company listed its stock on the Second Section of the Tokyo Stock Exchange and the Second Section of the Osaka Securities Exchange, and in August 1972, its stock was allocated to the First Section of the Tokyo Stock Exchange and the First Section of the Osaka Securities Exchange. In addition, in August 1982, the Target Company changed its trade name to National House Industrial Co., Ltd. (National Juutaku Sangyou Kabushiki Kaisha, no change was made to the English translation of the trade name); and in October 2002, it merged with 28 major consolidated subsidiaries that handled marketing, logistics, construction and services and also changed its trade name to PanaHome Corporation, the same name as its product brand. As Panasonic Electric Works became a subsidiary of the Tender Offeror in April 2004, the Target Company became a consolidated subsidiary of the Tender Offeror. In January 2012, as a result of an absorption-type merger of Panasonic Electric Works by the Tender Offeror, the Tender Offeror succeeded to the Target Company’s Shares that had been held by Panasonic Electric Works, and the number of the Target Company’s Shares held by the Tender Offeror has been 91,036,634 shares since then.

As a core company in the Panasonic Group’s housing business, by utilizing the Tender Offeror’s know-how and technologies for home construction centered on the housing equipment business, in addition to the housing design and architecture technologies and the materials and construction quality management know-how that the Target Company has developed over many years, the Target Company has been aiming to become a company that is able to move people and generate creativity in life and constantly provide optimum comfort, health and joy based on its basic policy, “Customers First”. In recent years, the Target Company has placed four business areas, “custom-built housing,” “urban development,” “residential stock,” and “overseas businesses,” at the heart of its business operations and has promoted its growth strategy by strengthening its partnership with each company of the Panasonic Group.

In addition, recently, as one of the engagements by Tender Offeror and the Target Company covering “Remodeling Business,” “New Construction and Urban Development Business,” “Age-Free (elderly-care) Business,” “Home Energy Management Business” and “Overseas Business” as major areas in the housing business strategies of the Panasonic Group, the Tender Offeror subscribed the capital increase of PanaHome Reform Co., Ltd., which is a subsidiary of the Target Company, in December 2015 (the paid-in amount by the Tender Offeror was 19,200,000,000 yen, and, since the capital increase, the investment ratio of the Tender Offeror has been 49%, and the investment ratio of the Target Company has been 51%), and PanaHome Reform Co., Ltd. changed its name to Panasonic Home Renovation Co., Ltd. in April 2016. Accordingly, the Tender Offeror and the Target Company have integrated the brand in the remodeling business, the market of which is expected to grow going forward, into “Panasonic Reform” and strengthened the customer connection in the remodeling business within the Panasonic Group as a whole, and the Tender Offeror and the Target Company have thus engaged in further enforcing the capacity to propose designs and construction service system, etc. in aiming for providing more comfortable housing spaces. Including the foregoing measures, the Tender Offeror and the Target Company have shared their management strategies as group companies in order to expand their businesses.

On the other hand, the Tender Offeror and the Target Company realize that the business environment surrounding the Target Company has been changing at an accelerating pace. In the domestic housing market, a decrease of new housing starts is expected due to demographic movement, and therefore the transformation and diversification of their business model for the urban development business, remodeling business, overseas business, etc. is urgently needed in the increasingly competitive market.

(ii)

Background to the execution of the Share Exchange Agreement

Under the circumstances set forth above, the Tender Offeror has come to believe that, in order to cause the housing business, as a business of the Panasonic Group, to grow even faster than the average growth level of the other companies operating housing businesses in the market, it is effective to address customer needs swiftly and precisely, by sharing and utilizing management resources of both the Tender Offeror and the Target Company, thereby making it possible to further enhance the value of the Panasonic Group in the housing market. The Tender Offeror has been considering a method to make the Target Company its wholly owned subsidiary since the beginning of October 2016. As a result of the consideration, the Target Company has come to believe that it should make the Target Company its wholly owned subsidiary under a scheme where the consideration will be paid in shares, taking into consideration, among other things, that, a scheme of delivering cash to shareholders of the Target Company as consideration will not be eligible for a tax deferral upon the Target Company’s entry into the consolidated taxation structure of the Tender Offeror. Thus, the Tender Offeror proposed the Share Exchange to the Target Company in early November 2016.

Under the rapidly changing business environment as set forth above, the Target Company is facing the following major management challenges: to improve its market share in Japan; to further expand its business operations in overseas markets and to solve its shortage of human resource necessary therefor; and to further reduce its costs such as selling, general and administrative expenses. In order to resolve these challenges and enhance its competitive advantage and grow in the housing business, after having carefully considered the Tender Offeror’s proposal for the Share Exchange, the Target Company has recognized that it is essential for the Tender Offeror and the Target Company to have a stronger collaborative relationship and realize the following synergies as the Panasonic Group.

As a result of the Transaction to Make the Target Company a Wholly Owned Subsidiary, specifically, the Tender Offeror and the Target Company believe that both companies will realize the following synergies. The Tender Offeror and the Target Company believe that these synergies would be realizable only if the Target Company becomes a wholly owned subsidiary of the Tender Offeror (i) through promoting business strategies that maximize the use of the management resources of both the Tender Offeror and the Target Company by fully integrating the capital and businesses of both companies, and (ii) through flexible and prompt decision-making, and innovative management of the Target Company based on a long-term perspective that will be unaffected by its short-term operating results after the Tender Offeror becomes the only shareholder of the Target Company.

i)

ii)

iii)

It will become easy to appropriately and promptly carry out the re-distribution of management resources across the companies of the Panasonic Group, thereby making it possible to focus on investment of resources into the major businesses of the Panasonic Group.

Furthermore, the Target Company will also be able to accelerate the collaborative projects between the two companies in order to implement cost reductions in indirect business units and efficiently operate indirect business units through the integration of management resources, reinforcing the recruitment activities of the Panasonic Group companies for new graduates and the specialized human resource of the Panasonic Group, and increasing the introduction of large-scale projects utilizing the Tender Offeror’s domestic and overseas sales channels. Accordingly, the Tender Offeror and the Target Company believe that both companies can maximize the group’s synergies at an early stage.

With this understanding, from the beginning of November 2016, the Tender Offeror and the Target Company held consultations many times during which both companies shared their knowledge about the differences in the positions of the Target Company (as a housing builder) and the Tender Offeror (which also has a role as a supplier of the housing equipment such as building materials, air conditioner and lighting fixtures) in the housing business, and challenges to strengthening their competitive power in light of such differences, and repeatedly discussed the form that both companies should adopt in the future. The Target Company independently considered advantages and risks and effects on stakeholders caused by delisting. As a result, the Target Company and the Tender Offeror came to mutually agree that it would be highly beneficial for them to make the Target Company a wholly owned subsidiary of the Tender Offeror, so that the Tender Offeror would be able to strengthen its housing businesses, a key business field, thereby contributing to an increase in the corporate value not only of the Target Company but also of the entire Panasonic Group. Thus, both companies resolved at meetings of their respective boards of directors held on December 20, 2016 to conduct the Share Exchange, and executed the Share Exchange Agreement. For details of the Share Exchange, please refer to the December 20, 2016 Press Release.

(iii)

Background to the implementation of the Tender Offer by the Tender Offeror after the execution of the Share Exchange Agreement

As set forth in “(ii) Background to the execution of the Share Exchange Agreement” above, the Tender Offeror was, before having proposed the Share Exchange to the Target Company, considering a scheme, as one of the options, to deliver cash to the Target Company’s shareholders as consideration.  At that point, however, the scheme of delivering cash as consideration was not favorable to the Tender Offeror in terms of taxation, because, such scheme would not be eligible for a tax deferral (Note) upon the Target Company’s entry into the Tender Offeror’s consolidated taxation structure.

(Note)

Prior to the relevant amendment by the 2017 Tax Reform (i.e., the tax reform pursuant to the Act on Partial Revision, etc. of the Income Tax Act, etc. promulgated on March 31, 2017; hereinafter the same shall apply), when the Target Company becomes a wholly owned subsidiary of the Tender Offeror and enters into the Tender Offeror’s consolidated taxation structure through the scheme where cash is delivered to the Target Company’s shareholders as consideration, some assets (certain fixed assets, lands, securities, monetary claims and deferred assets) are required to be revalued to fair market value at the time of the Target Company’s entry into the Tender Offeror’s consolidated taxation structure.  Resultantly, taxable gain would be recognized.  In contrast, after the relevant amendment by the 2017 Tax Reform, when making the Target Company a wholly owned subsidiary of the Tender Offeror on and after October 1, 2017 through the scheme where cash is delivered to the Target Company’s shareholders as consideration, such revaluation of these assets to fair market value at the time of the Target Company’s entry into the Tender Offeror’s consolidated taxation structure will not be required, and thus, taxable gain would not be recognized at that time to the extent certain requirements are met.  The language “tax deferral” used herein describes the effect that the timing of recognition of unrealized taxable gain on the assets is to be later than the timing when the Target Company becomes a wholly owned subsidiary of the Tender Offeror, as explained above.

However, the 2017 Tax Reform, including an amendment to the Corporate Tax Act to the effect that a scheme under which a party makes another party its wholly owned subsidiary by delivering cash to such other party’s shareholders as consideration will be eligible for a tax deferral upon the other party’s entry into its consolidated taxation structure, was approved in a Cabinet meeting on December 22, 2016 after the announcement of the December 20, 2016 Press Release.  Therefore, even after the execution of the Share Exchange Agreement, the Tender Offeror continued to consider the positioning of the Share Exchange within the Panasonic Group’s capital strategies and financial strategies, while assessing the status and movements of deliberations with respect to the tax reform.  Thereafter, the certainty of the scheme delivering cash as consideration being eligible for the tax deferral was increased to a satisfactory level based on relevant circumstances including the fact that a bill for the Act on Partial Revision, etc. of the Income Tax Act was submitted to the Diet on February 3, 2017.  In consideration of the circumstances above, the Tender Offeror has come to believe that, if the scheme of delivering cash as consideration will be eligible for the tax deferral, the scheme under the Transaction will be more favorable than the scheme under the Share Exchange for the following reasons: (i) in terms of the financial strategies of the Panasonic Group, by adopting the scheme under the Transaction, the Tender Offeror will be able to receive financial benefits such as the reduction of cost of equity capital and enhancement of return on equity by maintaining the capital composition of the Tender Offeror and (ii) the scheme under the Transaction will contribute to the benefit of shareholders of the Tender Offeror by anticipating an increase of net income per share of Tender Offeror’s common shares (“Tender Offeror’s Shares”) by preventing a dilution of their shares.  In early March 2017, the Tender Offeror proposed to the Target Company a change in scheme from the Share Exchange to the Transaction.

In addition, when the Tender Offeror proposed a change in the scheme of the Transaction to Make the Target Company a Wholly Owned Subsidiary to the Target Company, it re-examined the amount of consideration it could pay in terms of the Target Company’s acceptability of the change in scheme from the Share Exchange to the Transaction, while ensuring the reasonable ground for the Tender Offeror’s business judgement taking into account the financial benefit that will be received by the Panasonic Group and the benefits of the shareholders of the Tender Offeror, in the case of delivering cash as consideration under the new scheme.  Upon such re-examination, the Tender Offeror has also taken into account the prediction that by implementing the Tender Offer with the tender offer price, on which a certain premium is added to the valuation of the Target Company’s Shares, by giving maximum consideration to the interest of shareholders of the Target Company other than the Tender Offeror, it will be able to gain the understanding and support of the Target Company’s shareholders and further ensure the completion of the Transaction to Make the Target Company a Wholly Owned Subsidiary.

After the foregoing, from the middle of March 2017 until the end of that month, the Tender Offeror conducted due diligence on the Target Company after obtaining the Target Company’s approval and, from March 27, 2017 until April 10, 2017, the Tender Offeror has continued to hold consultations and negotiations with the Target Company with respect to the terms and conditions of the Tender Offer, including the tender offer price per share of the Target Company’s Shares (the “Tender Offer Price”) in the Tender Offer.  In addition, the Tender Offeror has confirmed that, with the promulgation of the Act on Partial Revision, etc. of the Income Tax Act, etc. on March 31, 2017 in relation to the 2017 Tax Reform, the scheme of delivering cash as consideration would be eligible for the tax deferral, on the basis of consummating the Procedures for Making the Target Company a Wholly Owned Subsidiary on or after October 1, 2017.

Through the above consultations and negotiations, the Tender Offeror has agreed, with the Target Company, on the termination of the Share Exchange Agreement by mutual agreement and on the terms and conditions of the Tender Offer, including the Tender Offer Price.  As a result thereof, the Tender Offeror resolved, at the meeting of its board of directors held today, to implement the Tender Offer as a part of the Transaction, with the commencement date of the Tender Offer being April 28, 2017 subject to the Conditions of the Tender Offer being satisfied, and the Tender Offeror and the Target Company terminated the Share Exchange Agreement by mutual agreement as of today after each obtaining approval at meetings of their respective boards of directors also held today.

(iv)

Background to the decision of the Target Company to support the Tender Offer and reasons therefor

b.

Management Policy After the Tender Offer

Policy for Organizational Restructuring, etc., After the Tender Offer (Matters Relating to So-called “Two-tier Acquisitions”)

As stated in “(1) Overview of the Tender Offer” above, Tender Offeror plans to make the Target Company a wholly owned subsidiary of the Tender Offeror, and if the Tender Offeror is unable to acquire all of the Target Shares (excluding the Target Shares held by the Tender Offeror and the treasury shares held by the Target Company) upon completion of the Tender Offer, the Tender Offeror plans to request the Target Company to implement the following procedures:

Specifically, if upon completion of the Tender Offer, the Tender Offeror owns at least 90% of the voting rights of all shareholders of the Target Company and the Tender Offeror may exercise its rights as the special controlling shareholder as set forth in Article 179, Paragraph 1 of the Companies Act (Act No. 86 of 2005, as amended; hereinafter the same), the Tender Offeror plans to request all of the Target Company’s shareholders who did not tender their shares in the Tender Offer (excluding the Tender Offeror and the Target Company) (the “Shareholders Subject to the Cash-Out”) to sell all of the Target Company’s Shares they own (excluding the Target Company’s Shares held by the Tender Offeror and the treasury shares held by the Target Company) pursuant to the provisions of Part II, Chapter II, Section 4-2 of the Companies Act (the “Demand for Shares Cash-Out”), promptly after the completion of the settlement of the Tender Offer.  In the Demand for Shares Cash-Out, the Tender Offeror plans to set forth that the amount equivalent to the Tender Offer Price will be delivered to the Shareholders Subject to the Cash-Out as the price per share of the Target Company’s Shares, and that the acquisition date will be October 2, 2017 or any date thereafter.  In such case, the Tender Offeror will notify the Target Company to such effect and will require the Target Company to approve the Demand for Shares Cash-Out.  If the Target Company approves the Demand for Shares Cash-Out by a resolution of its board of directors, in accordance with the procedures set forth in the relevant laws and ordinances, without individual approval by the Shareholders Subject to the Cash-Out, the Tender Offeror will acquire, as of the acquisition date set forth in the Demand for Shares Cash-Out, all of the Target Company’s Shares owned by the Shareholders Subject to the Cash-Out (excluding the Target Company’s Shares held by the Tender Offeror and the treasury shares held by the Target Company).  The Tender Offeror plans to deliver the amount equivalent to the Tender Offer Price per share of the Target Company’s Shares to each of the Shareholders Subject to the Cash-Out as the price per share of the Target Company’s Shares owned by each of the Shareholders Subject to the Cash-Out.  In addition, according to the Target Company’s press release, if the Target Company receives a notice regarding the matters set forth in each item of Article 179-2, Paragraph 1 of the Companies Act to the effect that the Tender Offeror will conduct the Demand for Shares Cash-Out, the board of directors of the Target Company plans to approve the Demand for Shares Cash-Out by the Tender Offeror.

It is provided under the Companies Act, as a measure to secure the rights of minority shareholders in relation to the Demand for Shares Cash-Out, that Shareholders Subject to the Cash-Out may file a petition with a court to determine the sale price of such Target Company’s Shares they own, pursuant to the provisions of Article 179-8 of the Companies Act and other relevant laws or ordinances.  In addition, if the aforementioned petition is filed, the sale price will ultimately be determined by a court.

On the other hand, if, after the completion of the Tender Offer, the Tender Offeror does not own 90% or more of the Target Company’s voting rights, the Tender Offeror plans to request the Target Company to hold an extraordinary shareholders’ meeting during the period from around late August 2017 to late September 2017 (the “Extraordinary Shareholders’ Meeting”) promptly after the completion of the settlement of the Tender Offer that includes each of the following as proposals submitted for deliberation: (x) a proposal regarding consolidation of the Target Company’s Shares (the “Share Consolidation”) with an effective date being on or after October 2, 2017 and (y) subject to the Share Consolidation becoming effective, a proposal regarding partial amendment to the articles of incorporation for the purpose of abolishing the provision regarding the number of shares constituting one whole unit of stock.  Even if the voting rights of the Target Company held by the Tender Offeror after the Tender Offer are less than two-thirds (2/3) of the entire voting rights of the Target Company, the Tender Offeror does not plan to additionally acquire the Target Shares from the shareholders of the Target Company (excluding the Tender Offeror) upon implementation of the Share Consolidation, but plans to make the above request in principle, at present.  As an exception, such request may not be made if the implementation of such procedures is reasonably found to be likely to cause a breach of the fiduciary duties of the Target Company’s directors, including a case where the number of shares tendered is extremely small and the implementation of such procedures is likely to harm the interests of the minority shareholders.  In addition, the Tender Offeror plans to approve each of the above mentioned proposals at the Extraordinary Shareholders’ Meeting.  If the proposal regarding the Share Consolidation is approved at the Extraordinary Shareholders’ Meeting, the shareholders of the Target Company will own, as of the effective date of the Share Consolidation, the number of the Target Company’s Shares that accords with the percentage of the Share Consolidation approved at the Extraordinary Shareholders’ Meeting.  In the case where any fraction of one share arises as a result of the Share Consolidation, the amount of money to be obtained through the sale, etc., of the Target Company’s Shares equivalent to the total of such fraction (with respect to such total, any fraction of one share will be rounded down; hereinafter the same) to the Target Company or the Tender Offeror, will be delivered to the shareholders pursuant to Article 235 of the Companies Act and other relevant laws or ordinances.  With respect to the sales price of the Target Company’s Shares equivalent to the total number of such fraction, the Target Company plans to file a petition with a court for permission for sale by private contract after calculating so that the amount of money to be delivered to each of the Target Company’s shareholders who did not tender their shares in the Tender Offer (excluding the Tender Offeror and the Target Company) as a result of such sale will be equal to the price obtained by multiplying (a) the Tender Offer Price by (b) the number of the Target Company’s Shares held by each shareholder.  Furthermore, the percentage of the consolidation of the Target Company’s Shares is undetermined as of today; however, it will be determined in such manner that the Tender Offeror will hold all of the Target Company’s Shares (excluding the treasury shares held by the Target Company) and that the number of the Target Company’s Shares owned by the Target Company’s shareholders (excluding the Tender Offeror and the Target Company) who did not tender their shares in the Tender Offer will be a fraction of one share.

It is provided under the Companies Act, as a measure to secure the rights of minority shareholders in relation to the Share Consolidation in the case where the Share Consolidation is conducted and any fraction of one share arises, that the Target Company’s Shareholders may request the Target Company to purchase at a fair price all fractions of one share owned by them and file a petition for determination of the price for the acquisition of the Target Company’s Shares pursuant to the provisions of Articles 182-4 and 182-5 of the Companies Act and other relevant laws or ordinances.  As stated above, with respect to the Share Consolidation, since the number of the Target Company’s Shares held by the Target Company shareholders (excluding the Tender Offeror and the Target Company) who did not tender their shares in the Tender Offer will be faction of one share, the shareholders of the Target Company who oppose to the Share Consolidation will be able to file petition for price determination pursuant to the provisions of Articles 182-4 and 182-5 of the Companies Act and other relevant laws or ordinances.  If the petition above is filed, the purchase price will ultimately be determined by a court.

The timing for each of the procedures above may change, depending on the status of amendment, enforcement, the governmental authorities’ interpretation, etc., of the relevant laws and ordinances, the ownership percentage of shares of the Tender Offeror after the Tender Offer, and the ownership status of the Target Company’s Shares by the shareholders other than the Tender Offeror, or the foregoing may be changed to other methods with effects roughly equivalent thereto.  Provided, however, even in such case, with respect to each of the Target Company’s shareholders (excluding the Tender Offeror and the Target Company) who did not tender their shares in the Tender Offer, money will be ultimately delivered, and in such case, the amount of money to be delivered to each shareholder will be equal to the price obtained by multiplying (a) the Tender Offer Price by (b) the number of the Target Company’s Shares held by each shareholder.  In such case, the specific procedure and the timing of the implementation thereof, etc., will be decided upon discussion with the Target Company, and as soon as they are determined, they will be promptly announced.

The Tender Offer does not intend to solicit the endorsement of the Target Company’s shareholders at the Extraordinary Shareholders’ Meeting.  Further, shareholders may need to consult, at their own responsibility, with a tax accountant with respect to the tax treatment in case of receipt of monies pursuant to the Tender Offer or the procedure described above and in case of purchase, etc., pursuant to a share purchase demand.

Measures to Ensure the Fairness of the Tender Offer such as Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest

a.

Measures to ensure the fairness of the Tender Offer Price and other measures to ensure the fairness of the Tender Offer by the Tender Offeror;

b.

Obtaining by the Target Company of a share valuation report and a fairness opinion from independent third-party appraisers;

Obtaining the response to referral from an Independent Special Committee;

d.

Obtaining by the Target Company of opinions from an independent outside law firm;

e.

Unanimous approval of directors and no objection opinion of all company auditors (excluding Directors and Company Auditors with conflicts of interest) at the Target Company;

f.

Measures to ensure opportunities to purchase from other offerors.

Possibility of and reasons for delisting

As of today, the Target Company’s Shares are listed on the First Section of Tokyo Stock Exchange.  However, since the Tender Offeror has not set a limit on the maximum number of shares to be purchased in the Tender Offer, depending on the results of the Tender Offer, the Target Company’s Shares may be delisted pursuant to the procedures prescribed by Tokyo Stock Exchange in accordance with Tokyo Stock Exchange’s criteria for delisting shares.  In addition, even if the Target Company’s Shares do not fall under such criteria at the time of the completion of the Tender Offer, after the Tender Offer is completed, the Tender Offeror plans to implement the Procedures for Making the Target Company a Wholly Owned Subsidiary, aiming to acquire all of the Target Company’s Shares (excluding, however, the Target Company’s Shares owned by the Tender Offeror and the treasury shares owned by the Target Company), as described in “(3) Policy for Organizational Restructuring, etc. After the Tender Offer (Matters Relating to So-called ‘Two-tier Acquisitions’).  In such case, the Target Company’s Shares will be delisted pursuant to the procedures prescribed by Tokyo Stock Exchange in accordance with Tokyo Stock Exchange’s criteria for delisting shares.  The Target Company’s Shares will not be able to be sold or purchased on the First Section of Tokyo Stock Exchange after delisting.

Matters Concerning Material Agreement Related to the Tender Offer

The Tender Offeror and the Target Company have executed the MoU as of today.  In the MoU, the Tender Offeror and the Target Company agreed upon, among other things, the followings: (i) the Share Exchange Agreement shall be terminated by mutual agreement; (ii) the Tender Offeror shall implement the Tender Offer subject to the Conditions of the Tender Offer being satisfied; and (iii) until the completion of the Transaction to Make the Target Company a Wholly Owned Subsidiary, the Target Company shall operate its business, maintain and manage its property and govern itself with the care of a good manager, and if Target Company intends to take an action which has material effect on its property or rights and duties, the Target Company shall consult with and make an agreement with the Tender Offeror prior to taking such action.

Outline of the Tender Offer

Outline of the Target Company

(Note) The information contained in the above chart was current as of September 30, 2016 unless other date is specified therein.

(Note) The Tender Offeror does not plan to hold a board of directors meeting again at the time of commencement of the Tender Offer.

(ii)

Tender Offer Period as of the time of filing of the Registration Statement

From Friday, April 28, 2017 (Friday) through Tuesday, June 13, 2017 (Tuesday) (30 business days)

(iii)

Possible extension of the Tender Offer Period based on the Target Company’s request

Tender Offer Price

1,200 yen per share of common stock

Basis of Calculation, etc. of the Tender Offer Price

(i)

Basis of Calculation

(ii)

Background of Calculation

i.

Obtaining the share valuation report from a third-party appraiser

ii.

Outline of advice from Nomura Securities

iii.

Background to determination of the Tender Offer Price upon consideration of the advice

a.

Measures by the Tender Offeror to ensure the fairness of the Tender Offer Price and other measures to ensure the fairness of the Tender Offer

b.

Obtaining a share valuation report and a fairness opinion from an independent third-party appraiser by the Target Company

According to SMBC Nikko, in calculating the stock value of the Target Company, SMBC Nikko has relied upon the assumptions that all information and materials that were furnished by the Target Company and publicly available information were accurate and complete and all facts that could materially affect the calculation of the stock value were disclosed to SMBC Nikko, and SMBC Nikko has used the materials and information as it was and has not independently verified the accuracy and completeness thereof. Similarly, SMBC Nikko has not independently evaluated, appraised or assessed assets and liabilities (including contingent liabilities) of the Target Company and their respective subsidiaries and affiliates, and has not made any analysis and valuation of individual assets and liabilities. SMBC Nikko has not independently requested any third-party institution to make such valuation, appraisal or assessment. SMBC Nikko assumed that the Target Company’s financial forecasts and other materials used as base materials for preparing the value report were prepared by the management of the Target Company based on the best estimation and judgment which could be obtained at this point and in accordance with reasonable and appropriate methods. Accordingly, the result of the calculation of the Target Company’s stock value by SMBC Nikko reflects the information and economic conditions up to today. The results of the calculation of the Target Company’s stock value by SMBC Nikko are not expressions of opinion concerning the fairness of the Tender Offer Price.

According to SMBC Nikko, to establish a peer group of similar public companies in the comparable companies analysis and to appropriately evaluate the stock value, SMBC Nikko put emphasis on following factors appropriate process of selecting peers, integrity and consistency of logic, objectivity of criteria. SMBC Nikko checked (1) similarity in contents of business, (2) similarity in size of business and on top of (1) and (2), (3) non-existence of stock price anomalies and other abnormal factors, in the process of screening the comparable companies.

The Target Company has revised the financial forecasts for the period from the fiscal year ended March 2017 to the fiscal year ending March 2020 from the forecast figures used in the Press Release dated December 20, 2016. Specifically, the Target Company has revised the financial forecasts for the fiscal year ended March 2017 downward as set out in the press release “PanaHome Announces to have Revised the Financial Forecasts” disclosed today, given that (i) the orders of products such as box unit houses have been sluggish due to the persistent trend of home-buyer behavior towards the lengthening of negotiations in the expectation that mortgage rates will continue to hover near the current low level, (ii) deliveries of some multi-story residential building have been delayed into the next fiscal year due to completion dates being concentrated near the end of fiscal year and the associated workforce shortages, and (iii) the sales of condominiums have not grown at the expected pace; in light of such revision, and taking into account the effects of the Target Company’s efforts to spread out construction completion dates under concrete study and secure additional personnel, the Target Company has also revised the forecasts for the period from the fiscal year ending March 2018 to the fiscal year ending March 2020 downward. The revision also took into consideration the Target Company’s expectation that the gross margin rate will improve due to the reduction of work costs by the Target Company’s efforts to spread out construction completion dates and the effects of ensuring sales strategies that emphasize added value. SMBC Nikko and Plutus calculated the stock value by discounting the future cash flows etc. which the Target Company is expected to generate based upon the revised financial forecasts for the period from the fiscal year ended March 2018 to the fiscal year ending March 2020 to arrive at a present value in the DCF Analysis.

According to SMBC Nikko, it applied the discount rate calculated based upon the median of the beta (a measure of the relationship between the price movements of individual stocks and the fluctuations of the TOPIX) values of the four peers selected for the comparable listed company analysis, deeming it difficult to conduct an unbiased assessment if they use the beta value of the Target Company whose stock price has been running mostly parallel to that of the Tender Offeror following the Press Release dated December 20, 2016.

In preparing and submitting the fairness opinion, etc. and conducting the calculation of the Target Company’s stock value underlying the opinion, Plutus has relied upon the assumptions that all information and materials that were furnished by the Target Company and publicly available information were accurate and complete and all facts that could materially affect the calculation of the Target Company’s stock value were disclosed to Plutus, and Plutus has used the materials and information as it was and has not independently verified the accuracy and completeness thereof, and is not obliged to verify them.

According to Plutus, MISAWA HOMES CO., LTD is newly added as a comparable publicly listed company in performing the valuation this time. The reason is that, in performing the valuation for the Share Exchange, MISAWA HOMES CO., LTD was excluded because a tender offer was made to its shares on the valuation date, however on the reference date in performing the valuation this time, the ordinary market transactions were taking place after the tender offer for the MISAWA HOMES CO., LTD’s shares.

Obtaining the Response to Referral From an Independent Special Committee

According to the Target Company, on November 14, 2016, the Target Company established a special committee to avoid conflicts of interest with the Tender Offeror and prevent the Share Exchange from becoming disadvantageous to the non-controlling shareholders of the Target Company. The Special Committee consisted of Mr. Naoto Terakawa, an outside director and independent officer of the Target Company, Mr. Katsuhiko Arita, an outside company auditor and independent officer of the Target Company, and Mr. Takashi Goto (an attorney at STW & Partners) and Mr. Akira Sakata (a certified public accountant at AKIRA SAKATA Certified Public Accountant Office), both of whom are independent and outside experts having no interest in the Tender Offeror, the controlling shareholder of the Target Company, or the Target Company itself. Pursuant to the resolutions of the board of directors on March 15, 2017 and March 22, 2017, in examining the Transaction (including the Tender Offer), the Target Company referred the following matters (collectively, the “Questions”) to the Special Committee (consisting of four members; Mr. Naoto Terakawa declined to be a member of the Special Committee due to scheduling difficulties, and his position was replaced by Mr. Haruo Kawamura, Representative Director of CAS Capital, Inc., who is an independent and outside expert having no interest in the Tender Offeror, the controlling shareholder of the Target Company, or the Target Company itself) (for the independence of the members of Special Committee, please see “Note: Independence of members of Special Committee” below) and requested their opinion (I) whether the Target Company’s board of directors should vote to express an opinion in favor of the Tender Offer and to recommend that the shareholders of the Target Company accept the Tender Offer, and to implement the Transaction to Make the Target Company a Wholly Owned Subsidiary by its shareholders other than the Tender Offeror if the Tender Offer is executed, taking into account (i) whether the Transaction to Make the Target Company a Wholly Owned Subsidiary through the Tender Offer and the Procedures for Making the Target Company a Wholly Owned Subsidiary will enhance the Target Company’s corporate value, (ii) whether the determination of the Transaction to Make the Target Company a Wholly Owned Subsidiary has been conducted using fair procedures, giving due consideration so as not to undermine the interest of the minority shareholders of the Target Company, and (II) whether the board of director’s approval of implementation of the Tender Offer and the transaction for making the Target Company a wholly owned subsidiary will disadvantage minority shareholders of the Target Company.

(i)

The Target Company has made no obviously irrational judgments in determining to that effect, and therefore the Transaction to Make the Target Company a Wholly Owned Subsidiary will enhance the Target Company’s corporate value, considering that: (a) the necessity of the Transaction to Make the Target Company a Wholly Owned Subsidiary is acknowledged given that the majority of the Target Company’s profit comes from the Japanese housing business, which is projected to decline in the medium to long term, making it the Target Company’s most important challenge to maintain or increase domestic sales and profit and expand overseas business; (b) the implementation of the post- Transaction to Make the Target Company a Wholly Owned Subsidiary strategy can be viewed as contributing to the Target Company’s overcoming its business challenges; (c) the expected disadvantages can be viewed as minor; and (d) the Target Company do not find any reason to believe that maintaining current capital relationship or alliance with a third party is an effective alternative to the Transaction to Make the Target Company a Wholly Owned Subsidiary.

(ii)

All decisions with respect to the Transaction to Make the Target Company a Wholly Owned Subsidiary, including the determination of the consideration for the Transaction to Make the Target Company a Wholly Owned Subsidiary, were made using fair procedures, giving due consideration, and therefore it will not undermine the interest of the minority shareholders of the Target Company, considering that: (a) in determining the Tender Offer Price, the Tender Offer Price was agreed after the Target Company’s secretariat, consisting of persons who have no interest in the Tender Offeror, actually negotiated in good faith multiple times on the basis of non-arbitrary valuations by the independent experts and with the advice of the financial advisor and the recommendations of the Special Committee; (b) the Tender Offer Price is within the range of valuations set out in the valuation report obtained from SMBC Nikko, higher than the range of valuations set out in the valuation report obtained from Plutus, and is in line with the average premium offered in similar cases, demonstrating concern for minority shareholders’ expected acquisition price, theoretical stock price of the Target Company’s Shares in the Share Exchange and the contents of Oasis Proposal; and (c) other fair procedures have been performed giving due consideration to the interest of shareholders, including the establishment of the Special Committee.

(iii)

In light of the above, the Special Committee believes that it is reasonable for the Target Company’s board of directors to approve to express an opinion in favor of the Tender Offer and to recommend that the shareholders of the Target Company accept the Tender Offer, and to implement the procedure for squeeze-out of the Target Company’s shareholders other than the Tender Offeror if the Tender Offer is executed.

(iv)

In addition, based on the reasons (i) and (ii) above, the Special Committee believes that the approval by the Target Company’s board of directors of the implementation of the Tender Offer and the Transaction to Make the Target Company a Wholly Owned Subsidiary will not cause any disadvantages to the Target Company’s shareholders.

Note:

The Independence of Members of Special Committee

●

Mr. Katsuhiko Arita qualifies as “Outside Company Auditor” under the Companies Act, and is also independent in light of the Target Company’s “Standards for Determining the Independence of Independent Directors/Auditors (please refer to the Corporate Governance Report disclosed by the Target Company on June 24, 2016)”

●

Mr. Takashi Goto neither has nor has had a relationship with or any other interest in the Target Company or the Tender Offeror, and he is an independent outside expert. In the past, Mr. Goto worked for the independent law firm that currently advises the Target Company in relation to the Transaction (including the Tender Offer), but it had been almost eight years and 10 months since Mr. Goto left that firm and, considering the fact that the said law firm and the firm he currently works for have a competitive relationship, the Special Committee has determined that this will not affect the independence of Mr. Goto.

●

Mr. Akira Sakata neither has nor has had a relationship with or any other interest in the Target Company or the Tender Offeror, and he is an independent outside expert.

●

Mr. Haruo Kawamura neither has nor has had a relationship with or any other interest in the Target Company or the Tender Offeror, and he is an independent outside expert.

d.

Obtaining Opinions from an Independent Outside Law Firm by the Target Company

e.

Unanimous Approval of Directors and the No Objection Opinion of All Company Auditors (Excluding Directors and Company Auditors with Conflicts of Interest) at the Target Company

f.

Measures to ensure acquisition opportunities, etc. for other investors

(iii)

Relationship with the Appraiser

Number of Shares to be Purchased

Transfer of Ownership Percentage of Shares through the Tender Offer, etc.

Aggregate Tender Offer Price ¥ 92,382,129,600

Method of Settlement

(i)

Name and Address of the Head Office of the Financial Instruments Business Operator/Banks in Charge of Settlement for Purchase

(ii)

Settlement Commencement Date

(iii)

Method of Settlement

A notice of purchase by way of the Tender Offer will be mailed to the address of each tendering shareholder (or the standing proxy in the case of foreign shareholders) promptly after the end of the Tender Offer Period. If electronic delivery of documents has been approved by the tendering shareholders on Nomura Net & Call, the notice of purchase will be given to the shareholders electronically on Nomura Net & Call’s website (https://netcall.nomura.co.jp/).

(iv)

Method of Returning Share Certificates, etc.

Other Conditions and Methods of Purchase

(i)

Conditions set forth in each Item of Article 27-13, Paragraph 4 of the Act and Details thereof

(ii)

Conditions of Withdrawal, etc., of Tender Offer, Details thereof and Method of Disclosure of Withdrawal

(iii)

Conditions of Reduction of Purchase Price, Details thereof and Method of Disclosure of Reduction

(iv)

Matters Concerning Tendering Shareholders’ Right of Cancellation of Contract

A Tendering Shareholder may cancel a contract related to the Tender Offer at any time during the Tender Offer Period. In order to cancel a contract related to the Tender Offer, the tendering shareholder must deliver or mail (by post) a written request for the cancellation of the contract related to the Tender Offer (the “Cancellation Documents”) to the head office or a branch office in Japan of the tender offer agent that received the application from such tendering shareholder, by 15:30 on the last day of the Tender Offer Period. If cancellation is made by postal mail, the cancellation of the contract related to the Tender Offer will not be effective unless the Cancellation Documents are delivered at the head office or the relevant branch office of the tender offer agent by 15:30 on the last day of the Tender Offer Period. A contract applied through Nomura Net & Call can be canceled either via Nomura Net & Call’s website (https://netcall.nomura.co.jp/) or by sending the Cancellation Documents. To cancel a contract via Nomura Net & Call’s website, the tendering shareholder must complete the cancellation procedures in the manner prescribed on that website by 15:30 on the last day of the Tender Offer Period. To cancel a contract by sending the Cancellation Documents, the tendering shareholder must request the form of the Cancellation Documents in advance from Nomura Net & Call’s customer support and then send the filled out format to Nomura Net & Call. The Cancellation Documents that are sent must arrive at Nomura Net & Call by 15:30 of the last day of the Tender Offer Period.

(v)

Method of Disclosure if the Conditions or other Terms of the Tender Offer are Changed

(vi)

Method of Disclosure if Amendment to Registration Statement is Submitted

(vii)

Method of Disclosure of Results of the Tender Offer

Date of Public Notice of the Tender Offer

Tender Offer Agent

Nomura Securities Co., Ltd.   1-9-1, Nihonbashi, Chuo-ku, Tokyo

Policy, etc. after the Tender Offer and Future Outlook

Policy after the Tender Offer, etc.

Future outlook

Other Information

Agreements between the Tender Offeror and the Target Company or its Directors and Officers, and Details Thereof

(i)

Agreements between the Tender Offeror and the Target Company and details thereof

(ii)

Background to, Purpose of and Decision Making Process of the Tender Offer, and Management Policy After the Tender Offer

(iii)

Measures to Ensure the Fairness of the Tender Offer Such As Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflict of Interest

Other Information Considered to be Necessary for Investors to Determine Whether to Tender the Tender Shares in the Tender Offer

(a)

Details, etc. of Information Received on a Fact Concerning Launch of a Tender Offer

(b)

Details, etc. of Information Received on a Fact Concerning Launch of a Tender Offer

[Soliciting Regulations]

[Regulations of the United States]

[Forward-Looking Statements]

[Other Countries]

●

Economic conditions, particularly consumer spending and corporate capital expenditures in the Americas, Europe, Japan, China and other Asian countries

●

Volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets

●

The possibility that excessive currency rate fluctuations of the U.S. dollar, the euro, the Chinese yuan and other currencies against the yen may adversely affect costs and prices of the Tender Offeror’s products and services and certain other transactions that are denominated in these foreign currencies

●

The possibility of the Panasonic Group incurring additional costs of raising funds, because of changes in the fund raising environment

●

The possibility of the Panasonic Group not being able to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology

●

The possibility of not achieving expected results or incurring unexpected losses in connection with the alliances or mergers and acquisitions

●

The possibility of not being able to achieve its business objectives through joint ventures and other collaborative agreements with other companies, including due to the pressure of price reduction exceeding that which can be achieved by its effort and decrease in demand for products from business partners which Panasonic highly depends on in B2B business areas

●

The possibility of the Panasonic Group not being able to maintain competitive strength in many product and geographical areas

●

The possibility of incurring expenses resulting from any defects in products or services of the Panasonic Group

●

The possibility that the Panasonic Group may face intellectual property infringement claims by third parties;

●

Current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations

●

Fluctuations in market prices of securities and other assets in which the Panasonic Group has holdings or changes in valuation of long-lived assets, including property, plant and equipment and goodwill, deferred tax assets and uncertain tax positions; future changes or revisions to accounting policies or accounting rules

●

The possibility of incurring expenses resulting from a leakage of customers’ or confidential information from Panasonic Group systems due to unauthorized access or a detection of vulnerability of network-connected products of the Panasonic Group

●

Natural disasters including earthquakes, prevalence of infectious diseases throughout the world, disruption of supply chain and other events that may negatively impact business activities of the Panasonic Group.