“Pursuing infinite possibilities with the power of ideas”

since 1896

198

The

th Fiscal Year

Interim Business Report
April 1, 2017

September 30, 2017

IN T ERI M
BU SI N ESSREPORT
Securities code: 3202

Management’s message<Introduction>
During the first half of the fiscal year ending March 31, 2018, the Japanese
economy remained in a moderate recovery trend overall. Although thedomestic income and employment environment continued to improve as aresult of various government policies, concerns remained in issues such as
the ongoing uncertainty of overseas economies.
Under these circumstances, the Group continued to work diligently on
managerial initiatives based on the “Bridge to the Future” Mid-termManagement Plan in each of its business sections.

<Business results for the first half>
Net sales decreased to ¥2,133 million (down 7.2% year on year) due to theabsence of extraordinary income in the commercial property business seenin the same period of the previous fiscal year, as well as sluggish growthamong some OEM customers in the health-related and apparel-related
sectors. However, operating income increased to ¥227 million (up 14.9%
year on year) as a result of a reduction in general and administrative
expenses, and ordinary income increased to ¥169 million (up 81.7% year
on year) due to the absence of one-time non-operating expenses incurred in
the same period of the previous fiscal year. As a result of this, combinedwith the absence of extraordinary income and extraordinary losses recordedin the same period of the previous fiscal year and income taxes, profit
attributable to owners of parent increased around two-fold year on year to¥130 million (up 105.7% year on year).

Kazuhiro Yamauchi

President and Representative Director

Please allow me to begin by extending my heartfelt gratitude to ourshareholders for their continued patronage and support.
I would like to make a brief statement on our performance for the firsthalf of the 198th fiscal year (from April 1, 2017 to September 30, 2017).

<Business results by segment>(Commercial property business)
In the commercial property business, the volume of facility handlingremained favorable as a result of promoting a preliminary study for future
additional development of SUN TO MOON Kakitagawa, one of the leading
commercial facilities in Shizuoka Prefecture, and events held throughout theyear commemorating the facility’s 20th anniversary. However, due to theabsence of extraordinary income recorded in the same period of theConsolidated financial highlights
Net sales

Operating income¥2,113 million

First half

Full year (Millions of yen)

Down 7.2% year on year
Down 6.9% from business results forecast

1

2,270

2,113

197th fiscal
year results

198th fiscal
year forecast

198th fiscal
year results

First half

Full year (Millions of yen)

Up 14.9% year on year
Up 13.7% from business results forecast

4,701

2,278

¥227 million

197th fiscal
year results

4,800

198th fiscal
year forecast

198

200

197th fiscal
year results

198th fiscal
year forecast

417

420

197th fiscal
year results

198th fiscal
year forecast

227

198th fiscal
year resultsprevious fiscal year and the extraordinary expenditure of renovation costs
incurred for events planned for the 20th anniversary, net sales totaled¥1,172 million (down 2.5% year on year) and operating income amounted
to ¥466 million (down 9.7% year on year).
(Health care business)
In the health care business, we further reinforced our shift to the healthrelated business area, leveraging our capital and business alliance with Ito
Physiotherapy & Rehabilitation. However, as a result of the slow sales
growth among some OEM customers, the impact from declining demandduring summer, as well as persistently high raw material costs, net sales
totaled ¥349 million (down 12.4% year on year) and operating loss
amounted to ¥25 million (compared with an operating loss of ¥20 million in
the same period of the previous fiscal year).
(Textile and apparel business)
In the textile and apparel business, sales among some fabric-related OEM
business partners, where the market is weak, struggled; however, as aresult of improved profitability, net sales totaled ¥592 million (down 12.4%
year on year) and operating loss amounted to ¥2 million (compared with anoperating loss of ¥5 million in the same period of the previous fiscal year).

Business results by segment (Graphs show business results for the first half)Commercial property businessNet sales(Millions of yen)

197th fiscal year

Ordinary income

198th fiscal year

516

466

197th fiscal year

198th fiscal year

Health care businessNet sales(Millions of yen)

Operating income(Millions of yen)

399

349

(20)

<In conclusion>
In the first half of this fiscal year, we entered into a capital and businessalliance with First Brothers Co., Ltd., listed on the First Section of the Tokyo
Stock Exchange, in August 2017 for the purpose of strengthening ourbusiness base. In addition, we proactively worked on new initiatives such asenriching our shareholder benefit program in association with the reduced
unit of share trading. Going forward, we are committed to working to
improve corporate value and creating a new tomorrow based on ourmanagement philosophies of fostering a spirit of enterprise and of helping
others through self-help. We would like to ask our shareholders for theircontinued support and guidance.

Operating income(Millions of yen)

1,172

1,202

197th fiscal year

198th fiscal year

(25)

197th fiscal year

198th fiscal year

Textile and apparel businessNet sales

Operating income(Millions of yen)

(Millions of yen)

676

592

197th fiscal year

198th fiscal year

(5)

(2)

197th fiscal year

198th fiscal year

Profit attributable to owners of parent¥169 million

First half

Full year (Millions of yen)

Up 81.7% year on year
Up 25.3% from business results forecast¥130 million

First half

Full year (Millions of yen)

Up 105.7% year on year
Up 18.5% from business results forecast

267

290

240

156
130

135

110

169
63

93

197th fiscal
year results

198th fiscal
year forecast

198th fiscal
year results

197th fiscal
year results

198th fiscal
year forecast

197th fiscal
year results

198th fiscal
year forecast

198th fiscal
year results

197th fiscal 198th fiscal
year results year forecast

Notes: Forecasts shown above are based on the materials available as of the date of publication of this report, and actual business results may differ from these forecasts due to various factors.

2

S

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“Pursuing infinite possibilities

Kazuhiro Yamauchi
President and Representative Director

Kazuhiro Yamauchi
President and Representative Director

In shogi, it is often said thatwhat is important is the“power of ideas early in the game,”along with keeping the big picture inmind and having the power of ideas.
In addition, shogi players are said topursue the “infinite possibilities” hidden within the 81 squares on theboard. I feel that “pursuing infinite possibilities with the power ofideas,” which is the theme of the Daitobo Group’s logo, is also true forshogi, but what was the concept behind the logo at its inception?

The Daitobo Group is celebrating its 122nd anniversary, andthe history of the Group as a business entity is astounding.
How do you feel about the weight of this history?

The infinity symbol(“”) isincorporated in the “bo” at the end of
the daitobo logo. We imagined the “i”
as a person with the “ ”on the top
representing a head with flexible
ideas. The message symbolized in this logo is that the Group will
promote sustainable corporate value leveraging its ideas and its
people to enrich lifestyles. I think, as you said, the key concepts of“the power of ideas” and “infinite possibilities” also applies to shogi.

Incidentally, this year is the final year of the “Bridge to the
Future” Mid-term Management Plan that the Company isworking on. Please tell us about your initiatives for the next fiscal year
and beyond.

MuroyaYamauchi3This year, shogi (Japanese chess) received a great deal of attention,
whether it was on Souta Fujii, Yodan (fourth degree), a junior high school
professional shogi player who established a new record of consecutive
wins, the popular Hifumi Katoh, Kudan (ninth degree) who is known by his
nickname “Hifumin,” or Yoshiharu Habu, Ryuo, the first shogi player everMuroyaThis is a short period of time compared with the history ofshogi in Japan, which dates back around 1,000 years, but
our feelings of appreciation to our shareholders, our customers andour business partners, and the sense of pride that we have insomehow having created a history that brings us to the present day issomething that we share with every one of our employees.
Yamauchi

MuroyaWe are currently in the process of formulating the next
mid-term management plan, so it is premature to discuss
details. What I can say is, we are moving forward with a preliminary
study of additional development in the commercial property business.
In addition, in the health care business, we are strengthening
alliances with capital and business partners as well as considering
potential M&A targets with the aim of cultivating the health care
Yamauchi

i

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e

r

v

i

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with the power of ideas”

Yuki Muroya
Women’s shogi player

to win lifetime titles in all seven major titles in December 2017. This time,
we were pleased to meet Yuki Muroya, a Women’s Nidan (second degree)
player in the Japan Shogi Association. Kazuhiro Yamauchi, President andRepresentative Director, enjoyed the opportunity to exchange views on awide range of topics related to the management of the Group.
business as one of our main businesses. In our next mid-term
management plan, I would like to demonstrate the assured growth of
the Group with a view to restoring dividends.

MuroyaFinally, please tell us if there are any areas in commonshared between shogi and corporate management.

I believe that “the power of ideas,” which enables creation
Yamauchi from non-existence, and “infinite possibilities” are also true
for business itself. In addition, “the big picture,” which is anotherimportant element in shogi, is also integral in management. With theevolution of AI and the dramatic change in global mechanisms, I
would like to engage in management that views the big picture andsees the way ahead in order to further broaden the potential of
human beings. In addition, “reading three moves ahead” is a shogi
term that also appears in our internal action guidelines. Shogi terms
are actually used frequently in the business world. Going forward, as
a company, we would like to incorporate shogi as part of our internal
training so that we can apply it to training human resources.

Yuki Muroya, Women’s Nidan
Yuki Muroya is a women’s shogi player and member of the Japan Shogi Association.
She won the Kansai Amateur Women’s Competition at the age of 14. After turning
professional in 2009, Muroya won her first title at the 2016 Mynavi Women’s Open.
Born in Osaka Prefecture, she was appointed as Osaka Sayama City Tourism
Ambassador in October 2017. She frequently appears on TV and at various events,
including on NHK shogi programs.

contribute to human resource training in the Daitobo Group. I trustthat your steps towards the future “pursuing infinite possibilities withthe power of ideas” will be fruitful.
I have taken up a greater interest in shogi and am grateful tohave had the honor of this enlightening conversation withyou. I appreciate your continued support.
YamauchiThank you very much. Your resolve on the future of the
Daitobo Group impressed me with the potential it holds as acompany with great history. I would be delighted if shogi can
Muroya4

Review of Financial Results
Consolidated balance sheetDescription(Thousands of yen)

End of the first halfof this fiscal year

End of the priorfiscal year

(as of September 30, 2017)(as of March 31, 2017)(Assets)(Thousands of yen)

For the first half of
this fiscal year

For the first half ofthe prior fiscal year

(from April 1, 2017 to September 30, 2017)(from April 1, 2016 to September 30, 2016)

Net sales

2,113,985

2,278,141

Cost of sales

1,494,507

1,621,289

Gross profit

619,478

656,852

Selling, general andadministrative expenses

391,988458,840

Operating income

227,489

198,011

Description

Current assets

2,940,496

3,022,133

Non-current assets

16,013,067

16,071,652

15,566,615

15,701,243

7,632

9,417

Non-operating income

3,813

54,054

438,819

360,992

Non-operating expenses

62,089158,936

18,953,564

19,093,785

Ordinary income

169,214

93,129Extraordinary income—

109,743

Extraordinary losses—

107,257

 roperty, plant andPequipment
Intangible assets
Investments and otherassetsTotal assets(Liabilities)
Current liabilities

1,456,057

1,523,259

Profit before income taxes

169,214

95,615

Non-current liabilities

13,023,514

13,240,938

Income taxes-current

40,06830,040Total liabilities

14,479,571

14,764,197

Income taxes-deferred(1,208)2,206

Profit130,354

63,368

Profit attributable toowners of parent

130,354

63,368(Net assets)
Shareholders’ equity
Capital stock(531,610)(661,897)

1,500,000

1,500,000

Consolidated statement of cash flows(Thousands of yen)

For the first half of
this fiscal year

For the first half ofthe prior fiscal year

(from April 1, 2017 to September 30, 2017)(from April 1, 2016 to September 30, 2016)

Capital surplus

503,375

503,375

Description

Retained earnings(2,527,780)(2,658,134)

Cash flows from operating activities

177,917

58,233(7,206)(7,138)Cash flows from investing activities

9,334

359,260

Accumulated othercomprehensive income

5,003,794

4,990,863

Cash flows from financing activities(183,447)

294,034(551)(1,296)

Stock acquisition rights

1,809

622

3,252

710,232

Total net assets

4,473,992

4,329,588

1,668,446

687,297

Total liabilities and net
assets

18,953,564

19,093,785

Effect of exchange rate change
on cash and cash equivalents
Net increase (decrease) incash and cash equivalents
Cash and cash equivalents
at beginning of the period
Cash and cash equivalents
at end of the period

1,671,698

1,397,529

Treasury shares

5

Consolidated statement of incomeBusiness fields
Commercial property business
Daitobo’s commercial properties are the go-to place forpleasant lifestyles. We will offer enriched living space
based on our vision of “creating space that delights ourcustomers.”

Shopping malls

Health care businessTextile and apparel businessIn response to the aging population and rising healthconsciousness, the Company supports the healthy andcomfortable life of customers with products drawing on our
proprietary technology. Our strength lies in the hightechnological ability of the Group’s domestic production bases.

Daitobo will satisfy the diverse needs of our customers,from apparel fashion to uniforms, based on its vision of“creating products that delight our customers.”

Health-promoting textile materials-relatedHome-use medical devices
Health-promoting foodstuffs General bed and bedding

Uniforms for both official and civilian users
Production-management type OEM operations
Knitwear planningC o r p o r a t e O v e r v i e w / S t a t u s o f S h a r e s (as of September 30, 2017)
Corporate Overview

Status of Shares

EstablishedFebruary 27, 1896
Capital stock ¥1,500,000,000
Place of business
Head Office Marukashiwa Tama Building, 6-1 Nihonbashihoncho
1-chome, Chuo-ku, Tokyo, Japan+81-3-6262-6565
Meiji Sangyo Building 2, 17-9 Honmachi
NagoyaSales Office 4-chome, Ichinomiya-shi, Aichi, Japan+81-586-23-4811
Osaka Sales 3-6 Minamikyuhojimachi 2-chome, Chuo-ku, Osaka, Japan+81-6-6262-8322
OfficeGroup
Daitobo Estate Co., Ltd. (Shizuoka)
companies
Niigata Daitobo Co., Ltd. (Niigata)
DAITOBOSHOKU (SHANGHAI) CORPORATION (China)

Breakdown of Shares by Type of Shareholder (Shareholding ratio)
Financial
institutions(10.16%)

Other domestic corporations(10.31%)

Individuals and other(71.87%)

Securities Foreign shareholders (2.40%)
companies(5.26%)
National and local governments (0.00%)

Total number of shares authorized to be issued

96,000,000 shares

Total number of shares issued

30,000,000 shares

Total number of shareholders

7,775

Principal Shareholders (Top 10)
Shareholder name

Number of shares held Shareholding ratio(Thousand shares)(%)

First Brothers Co., Ltd.

682

2.27

The Master Trust Bank of Japan, Ltd. (Trust account)

574

1.91

Developer Sanshin inc.

550

1.83

Japan Trustee Services Bank, Ltd. (Trust account 5)

541

1.80

SEED INC.

501

1.67

Yoshio Koizumi

456

1.52

Japan Trustee Services Bank, Ltd. (Trust account 2)

400

1.33

SBI SECURITIES Co., Ltd.

343

1.14

JAPAN SECURITIES FINANCE CO., LTD.

330

1.10

Japan Trustee Services Bank, Ltd. (Trust account 1)

297

0.99

Note: Shareholding ratio is calculated excluding treasury stock (68,598 shares).

6

Members of the Board of Directors
President and Representative Director Kazuhiro Yamauchi
Vice President and Representative Director Toshiyasu Nomura
Director and Executive Officer

Shogo Mieda

Outside Director

Yasunobu Sawada

Director (Audit and Supervisory Committee Member) Yuji Kakuma
Outside Director (Audit and Supervisory Committee Member) Haruki Iinuma
Outside Director (Audit and Supervisory Committee Member) Takashi Kagami
Outside Director (Audit and Supervisory Committee Member) Shusaku Okumura
Notes: 1. Messrs. Yasunobu Sawada, Haruki Iinuma, Takashi Kagami andShusaku Okumura are Outside Directors (independent directors).
2. The Company has an Audit and Supervisory Committee which iscomposed of four (4) Audit and Supervisory Committee Members.

We resolved to change our shareholder benefit program
following the change to the number of shares per unit at
the Board of Directors’ meeting held on August 10, 2017.
Eligible shareholders
The program targets shareholders who own 100 shares or more of theCompany’s share for six consecutive months or longer and are registered orrecorded in the shareholders’ register as of March 31 of each year.
Detail of the plan
Number of shares held
Consecutively
held period 100 shares or more but 1,000 shares or more but less 2,000 shares or moreless than 1,000 sharesthan 2,000 shares
One benefit discountQUO card worth ¥2,000QUO card worth ¥4,000
Six months or coupon for products
One benefit discountOne benefit discountmore but less available at the
coupon for products
coupon for products
than one year Company’s internet
available at the Company’s
available at the Company’s
shopping site
internet shopping site
internet shopping site
Two benefit discountQUO card worth ¥3,000QUO card worth ¥5,000
coupons for products
Two benefit discountTwo benefit discountOne year oravailable at the
coupons for products
coupons for products
moreCompany’s internet
available at the Company’s
available at the Company’s
shopping site
internet shopping site
internet shopping site

Commencement timing and method
The program will commence for the shareholders who are registered or recorded in
the shareholders’ register as of March 31, 2018.
Benefits will be mailed after the Annual General Meeting of Shareholders.

IR information
Please visit the Company’s website with IR information such as summary of financial results andsecurities report, as well as the latest financial information and matters for timely disclosure.

http://www.daitobo.co.jp/ir/

Information for Shareholders
Fiscal year
Record dates for
dividend of surplus
Annual General Meetingof Shareholders
Administrator of shareholders’register (special accountmanagement institution)
Mailing address

Yasunobu
SawadaTakashi
KagamiToshiyasu
NomuraShogo
Mieda
Kazuhiro
YamauchiHaruki
IinumaYuji
KakumaShusaku
Okumura(For telephone inquiries)
Method of public
noticeFrom April 1 to March 31 of the following year
Year-end dividend March 31
Interim dividend September 30
June every year
4-1 Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan
Sumitomo Mitsui Trust Bank, Limited.
8-4 Izumi 2-chome, Suginami-ku, Tokyo 168-0063, Japan
Stock Transfer Agency Business Planning Dept.,
Sumitomo Mitsui Trust Bank, Limited.
0120-782-031 (toll-free in Japan)
Public notices by the Company shall be done by electronic means;however, in the event that accidents or other unavoidable reasons
prevent public notice by electronic means, the notice will be posted
in the The Nikkei.

http://www.daitobo.co.jp/
For inquiries regarding this report, please contact: Business Management Headquarters TEL: +81-3-6262-6565