The198th Fiscal YearBusiness ReportA p r i l 1 , 2017

M a r ch 31, 2 018

BUS INESSREPO RT

since 1896

Daitobo Co., Ltd.
Securities code: 3202

Dear Shareholders

Kazuhiro Yamauchi
President and Representative Director

Please allow me to begin by extending my heartfelt gratitude to our shareholders for their continued patronage and support.
I would like to make a brief statement on ourperformance for the 198th fiscal year (from April
1, 2017 to March 31, 2018).
Introduction
In the fiscal year under review, the Japanese
economy continued to expand moderately as theemployment and income environment improved,backed by ongoing accommodative monetary policy and the effects of various government policies.
In this environment, the Company Group continued implementing the management strategy inaccordance with our mid-term management plan,“Bridge to the Future.”
Performance in the fiscal year under review
was generally favorable, with profits trending inline with the mid-term management plan, as profitability improved in the health business department of the health care business and the textile
and apparel business department. However, some
one-time expenses occurred as a result of the decision made on March 28, 2018 to engage in construction (Stage 4 Development) to expand andrenew the “SUN TO MOON Kakitagawa” commercial facility (in Shizuoka Prefecture), including
an increase in depreciation due to the dismantlingof certain facilities and the payment of fees toraise development funds through a syndicatedloan.
As a result, although profit before income taxes increased year-on-year, one-time expenses significantly affected results, and operating income,ordinary income, and profit attributable to ownersof parent after income taxes each declined year-

Consolidated financial highlights
Net sales

(Millions of yen)

Operating income(Millions of yen)

Ordinary income (Millions of yen)
267

4,701

197th
fiscal year

4,427

198th
fiscal year

(forecast)
4,750

199th
fiscal year

417
325

197th
fiscal year

198th
fiscal year

(forecast)
180(forecast)
340

199th
fiscal yearP rofit attributable to (Millions of yen)owners of parent

153

197th
fiscal year

198th
fiscal year

(forecast)
170

156
103

199th
fiscal year

197th
fiscal year

198th
fiscal year

199th
fiscal year

* 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.

1on-year and fell below targets.
During the fiscal year under review, the Company was also able to make progress with initiatives aimed at new possibilities, including achieving of a capital and business alliance with First
Brothers Co., Ltd., a decision for Stage 4 Development at the “SUN TO MOON Kakitagawa” commercial facility, and conclusion of a basic agreement related to the acquisition of cert ain
businesses in the health care business. We deeply appreciate our shareholders once again sincethese results are entirely due to your understanding and support.
Moving forward, all officers and employees
will make efforts as one to undertake the “Get
Ahead of the Future mid-term management policy” launched in the new fiscal year, and continue
striving to improve our corporate value over themedium-to long-term.
We appreciate our shareholders’ continuedencouragement and support.
June 2018

Achievement status for financial targets of mid-term management plan
Ordinary income ratio
5.0%

Composition ratioof net sales

Net sales

Operating income(Millions of yen)

(Millions of yen)

2.9%
2.4%
1.4%

Results

Target196th fiscal year
Before commencing
mid-termmanagement plan

2,336

2,315

948

817

TargetResults

198th fiscal year
Final year of
mid-termmanagement plan

Equity ratio
182.9%

25.0%

23.5%

22.6%
120.0%

40.7%

Results

TargetResults

Target196th fiscal year
Before commencing
mid-termmanagement plan

Results

198th fiscal year
Final year of
mid-termmanagement plan

Textile and apparel business

Operating income(Millions of yen)

(Millions of yen)

828

Results

198th fiscal year
Final year ofmid-term
management plan

Net sales

Composition ratioof net sales

750

30.7%
37

197th 198th 197th 198th
fiscal fiscal fiscal fiscal
year year year year

Results

196th fiscal year
Before commencing
mid-termmanagement plan

Current ratio

17.0%

52.3%

Results

198th fiscal year
Final year of
mid-termmanagement plan

Health care business
Composition ratioof net sales

5.0%

3.5%

196th fiscal year
Before commencing
mid-termmanagement plan

Commercial facility business

ROE

51

197th 198th 197th 198th
fiscal fiscal fiscal fiscal
year year year year

Net sales

Operating income(Millions of yen)

(Millions of yen)

1,537

1,361
112

197th 198th 197th 198th
fiscal fiscal fiscal fiscal
year year year year2Mid-term Management Policy

Tell us about the basic concept of the new mid-term
management policy.
Under the assumption that the Japanese economy will continue to grow moderately, on the other hand, we consider that we are entering in times of unprecedented
great uncertainty over the medium-to long-term in the future, including drastic market change with the 4th industrial revolution, serious labor shortage and uncertain
trends in global politics and economics.
Therefore, we established five years as a mid-term for our management plan,
based on the idea of promptly corresponding to the times of unprecedented uncertainty that is anticipated in the future. In addition, as for allocation of management
resources, we will place priority on growth investment on the condition of financial
soundness and securing human resources. Furthermore, we will establish our policy to conduct appropriate return of profits to shareholders and aim for resumptionof dividend payment during the period of this mid-term management policy.

Major profit and loss targets / financial targets
Net sales

Operating income(Millions of yen)

5,500

5,300

5,400

5,500

500

4,500

450

4,000

400

3,500

350

3,000300

2018

2019

2020

2021

2022
(Fiscal year)(Millions of yen)

550

5,000 4,750

0

3

5,100

Profit attributable to owners of parent(Millions of yen)

0

450

470

480

500

300
250
200

340

2018

280
250
200

220

170

150

2019

2020

2021

2022
(Fiscal year)

0

2018

2019

2020

2021

2022
(Fiscal year)

Image of the Pillar Strategy

Priority initiatives
aimed at investmentfor growth, andmaintenance andrenewal investment

Expansion ofbusiness scale andenhancementof profitability

13

We established five pillar strategies as follows(please refer to the left figure).
Priority initiatives aimed at investment for growth,and maintenance and renewal investment
Expansion of business scale and enhancement ofprofitability
Strengthening financial management and resuming a dividend
Securing and developing human resources
Thorough implementation of management consistent with Japan’s Corporate Governance CodeProfit and loss targets / financial targets based onthese strategies are presented in the tables below.

2Pillar Strategy

Strengthening
financialmanagement
and resuming
a dividend

What are the key strategies within themid-term management policy?

45

Securing anddeveloping humanresources

Thoroughimplementationof management
consistent with Japan’s
Corporate
Governance CodeTell us about “priority initiatives aimed at investment for growth, and maintenanceand renewal investment.”
The Company will continue to prioritize investment in the commercial facility business, its pillar of earnings. Especially, the Company will begin construction (Stage 4 Development) to expand and renew “SUN TO MOON Kakitagawa,” one of the leading shopping
centers in Shizuoka Prefecture, during 2018 which is a milestone year of 100th anniversary for establishment of our Group’s Mishima Plant in Shizuoka Prefecture. Aiming to complete in the summer of 2019, after opening in a full-scale, we expect that the annual
number of purchasing customers will increase nearly to 10 million (please refer to page 7 for the Stage 4 Development).
In addition, we will perform maintenance and renewal investment in domestic plants of health care business that are locatedin Niigata Prefecture.
Profit and loss targets(Millions of yen)

Fiscal year

2018

2019

2020

2021

2022

Net sales

4,750

5,100

5,300

5,400

5,500

Operating income

340

450

470

480500

Profit attributable to owners of parent

170200

220

250

280

2018

2019

2020

2021

2022

Financial targets
Fiscal year
Operating margin

7%

9%

9%

9%

9%

ROE *1

4%

4%

5%

5%

5%

215%

225%

200%

175%

155%

NetDER *2*1 ROE: Return on equity = profit per share / equity per share*2 NetDER: Net debt-to-equity ratio = (interest-bearing debt - cash and cash equivalents) / equity

4Tell us about “expansion of business scale andenhancement of profitability.”
Although our profitability has increased from the management reform todate, we still have challenges for expansion of business scale due to difficulties overcoming shrinking trends from restructuring in textile and apparel business and riding a tailwind of sleep-related health boom in healthcare business. Therefore, the Group will take the plunge to focus management resources on the commercial facility business, thereby making theexpansion of business scale and enhancement of profitability certain.
In addition, as it focuses on expanding business scale, the Companywill maintain an awareness of concepts such as ESG (Environmental, Social, and Governance) and CSV (Creating Shared Value), and strengthen
collaborative initiatives with business alliance partners.
By taking initiatives maintaining awareness of synergies within theGroup’s businesses, we will engage on creating new businesses in the future and set sights on business acquisitions in health care business thatthe market is expected to expand, thereby leading to the acceleration of
the growth speed.
Profit and loss targets by business segment are presented in the tables below.

Tell us your strategic themes for each business segment.
Strategic themes for pillar of each segment are as follows.
Commercial facility business: Ensuring competitive advantage as number one store in the region
Health care business: Focusing on sleep-related business through offering of high quality sleep
Textile and apparel business: Strengthening of knitwear / uniform businesses that utilize wool which is ourfounding businessProfit and loss targets by business segment

Commercial facility businessNet sales

Operating income(Millions of yen)

2,600

Health care business

2,610

2,610

2,610

2,480

(Millions of yen)

1,1001,200

1,000

2,400 2,330

Net sales(Millions of yen)

900
2,200

940

980

980

1,160

1,010

1,020

1,000

1,210

1,080

850

840

800

800
2,000
0

5600

700

2018

2019

2020

2021

2022
(Fiscal year)

0

2018

2019

2020

2021

2022
(Fiscal year)

0

2018

2019

2020

2021

2022
(Fiscal year)

of IT human resources. In addition, as for national initiatives toward utilization of women
workforce, we will recognize again that ourbusiness fields are originally suited for women, and engage in hiring women workforce actively.

Tell us about “strengthening financial
management and resuming a dividend.”
We consider securing free cash flow and reducing interest-bearing debt balance such as
syndicate loan which we financed in connection with Stage 4 Development of “SUN TO
MOON Kakitagawa” are the most important
themes in securing a sound financial position.
We will strengthen financial management inorder to reduce capital cost.
As for dividends, I would like to take thisopportunity to again sincerely apologize for not
being able to pay dividend due to the uncertain elimination of the retained deficit brought
forward for a long time. Through the steady
implementation of various management measures being held in this mid-term management
policy, including the effect of capital reduction,
the Company aims to resume dividend payments during the period covered by this midterm management policy.

Tell us about “thorough implementation of management
consistent with Japan’s Corporate Governance Code.”
By placing importance on interests of stakeholders including our shareholders, as well as
promoting responses to social issues throughthe business activities, we will make efforts tocreate positive values in both economic andsocial values, and ensure sustainable growthand enhancement of corporate value over themid- to long-term.
Backed by our management philosophy“enterprising spirit” and “mindset of benefitting ourselves and others,” all the employees
in the Company will work together to accomplish various measures in this mid-term management policy. We would like to ask ourshareholders for their continued support andguidance.

Tell us about “securing anddeveloping human resources.”
In the time of labor shortage, for a company tomaintain sustainable growth, it is indispensable to secure human resources and improve
productivity per person. We will raise recruiting competitiveness and strengthen cultivation

For details of the mid-term management
policy, please refer to our website.

Textile and apparel business
Operating income

Net sales(Millions of yen)

Operating income(Millions of yen)

40

(Millions of yen)

1,680

1,700

30
20

1520

25

30
1,600

1,600

1,610

1,630

70
60

1,570

1050

060

60

2020

2021

60

55
50

1,500
40

-10-20-10
2018

2019

2020

2021

2022
(Fiscal year)

02018

2019

2020

2021

2022
(Fiscal year)

02018

2019

2022
(Fiscal year)

6Construction (Stage 4 Development) to expand and renew SUN TO MOON Kakitagawa
Development concept“Birth of Happy New Junction”
Leaping forward to the next step after the 20th anniversary of its opening.
Theme for Stage 4 Development

Happy New Junction(Mt. Fuji)“New junction,” where fun crosses
Connecting
passageway(to Annex wing)

Location

Newwing

Connecting
passageway

Scheduled to open
in summer 2019

Mainwing

Shimizu-cho, Sunto-gun, Shizuoka Prefecture* Located along National Route 1, 2 km south of Shinkansen Mishima station.
Next to Kakitagawa Park, a place selected as one of the 100 best waters in Japan

7Site area

Approximately 108,000 m2

Schedule

April 2018: Commencement of expansion and renewal construction
Summer 2019: Scheduled to complete expansion and renewal construction

Floor space

Approximately 119,000 m2

Parking lot

Approximately spaces for 3,270 cars available

Leasable area

Approximately 66,000 m2

New SWEN &Casa Annex(North parking)Scheduled to open
in autumn 2018

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

End of thisfiscal year

End of the priorfiscal year

(as of March 31, 2018)(as of March 31, 2017)(Assets)Current assets

3,011,089

3,022,133

Consolidated statement of incomeDescription(Thousands of yen)

For this fiscal year For the prior fiscal year
(from April 1, 2017 toMarch 31, 2018)(from April 1, 2016 to
March 31, 2017)

Net sales

4,427,778

4,701,997

Cost of sales

3,267,704

3,432,247

Gross profit

1,160,074

1,269,750

834,424852,681

Non-current assets

15,877,766

16,071,652

Selling, general andadministrative expenses

Property, plantand equipment

15,497,544

15,701,243

Operating income

325,650

417,068

Intangible assets

8,1819,417

Non-operating income

35,68373,470Investments andother assets

Non-operating expenses

207,387

222,937

372,040

360,992

Ordinary income

153,946

267,602

18,888,855

19,093,785

Extraordinary income—

109,743

Extraordinary losses—

229,234

Profit before income taxes

153,946

148,111

Income taxes-current

57,03557,143

Total assets(Liabilities)
Current liabilities

1,646,688

1,523,259

Non-current liabilities

12,791,231

13,240,938

Total liabilities

14,437,919

14,764,197(558,177)(661,897)

Capital stock

1,500,000

1,500,000

Capital surplus

503,375

503,375(2,554,346)(2,658,134)(7,206)(7,138)

Accumulated othercomprehensive income

5,004,849

4,990,863

Stock acquisition rights

4,264

622

Total net assets

4,450,935

4,329,588

Total liabilities and net assets

18,888,855

19,093,785

Income taxes-deferred(6,876)(65,112)

Profit103,788

156,079

Profit attributable toowners of parent

103,788

156,079(Net assets)
Shareholders’ equity

Retained earnings
Treasury shares

Consolidated statement of cash flows
Description

Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
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(Thousands of yen)

For this fiscal year For the prior fiscal year
(from April 1, 2017 toMarch 31, 2018)(from April 1, 2016 to
March 31, 2017)559,135

528,592(86,777)

343,770(363,993)

109,641

509

(855)

108,873

981,148

1,668,446

687,297

1,777,319

1,668,4468

Business fieldsCommercial facility business
Daitobo’s commercial properties are the go-toplace for pleasant lifestyles. We will offer enriched living space based on our vision of“creating space that delights our customers.”

Shopping malls

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

Daitobo will satisfy the diverse needs of ourcustomers, from apparel fashion to uniforms,
based on its vision of “creating products thatdelight 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 planningGroup companies
1 Daitobo Estate Co., Ltd. (management and operation of shopping centers)
61-2, Tamagawa, Shimizu-cho, Sunto-gun, Shizuoka 411-0902, Japan
TEL: +81-55-981-8800
URL: http://www.suntomoon.co.jp/
2 Niigata Daitobo Co., Ltd. (manufacturing of bed and bedding)133-1 Shitadairashinden, Tokamachi, Niigata 948-0123, Japan
TEL: +81-25-768-2996
URL: http://www.niigata-daitobo.com/
3 DAITOBOSHOKU (SHANGHAI) CORPORATION (trading)Rm. 8 0 2, Zhaocheng Tower, No. 1 2 0, Tianshan West Road., Changning,Shanghai, People’s Republic of China
TEL: +86-21-62757733

9213

Corporate Overview (as of June 30, 2018)
Established
Capital stock
Place of business
Head Office
Nagoya Sales
Department
Osaka Sales
Department
AuditorFebruary 27, 1896
¥1,500,000,000

IR information

6-1 Nihonbashihoncho 1-chome, Chuo-ku, Tokyo, Japan+81-3-6262-6565
17-9 Honmachi 4-chome, Ichinomiya-shi, Aichi, Japan+81-586-23-4811
3-6 Minamikyuhojimachi 2-chome, Chuo-ku, Osaka, Japan+81-6-6262-8322
BDO Toyo & Co.

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/

Members of the Board of Directors (as of June 30, 2018)
Directors (excluding Directors serving as Audit and Supervisory Committee Members)

Directors serving as Audit and Supervisory Committee Members

President andRepresentative
Director
Director andExecutive OfficerDirector(Audit and Supervisory Yuji Kakuma
Committee Member)
Outside Director(Audit and Supervisory Takashi Kagami
Committee Member)

Kazuhiro Yamauchi

Vice President andRepresentative
Director

Shogo Mieda

Outside Director

Mieda
Yamauchi
SawadaNomuraToshiyasu Nomura

Yasunobu Sawada
Executive Officers

General Manager, Textile andHiroshige Aoki
Apparel Business Headquarters
General Manager, Commercial Facility
Business Headquarters, President of Wataru Iida
Daitobo Estate Co., Ltd.

IidaAoki

Outside Director(Audit and Supervisory Haruki Iinuma
Committee Member)
Outside Director(Audit and Supervisory Shusaku Okumura
Committee Member)

KagamiKakuma
IinumaOkumura(Note 1) Messrs. Yasunobu Sawada, Haruki Iinuma, Takashi Kagami and Shusaku Okumura are Outside Directors (independent directors).
(Note 2) The Company has an Audit and Supervisory Committee which is composed of four (4) Audit and Supervisory Committee Members.

10Status of Shares
Status of Shares (as of March 31, 2018)
Total number of shares authorized to be issued

96,000,000 sharesTotal number of shares issued

30,000,000 shares

Total number of shareholders

9,158

Principal Shareholders (Top 10)
Number of shares held(Thousand shares)

Shareholder nameShareholdingratio (%)

SBI SECURITIES Co., Ltd.

1,069

3.57

JAPAN SECURITIES FINANCE CO., LTD.

1,048

3.50

First Brothers Co., Ltd.

682

2.27

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

599

2.00

SEED INC.

501

1.67

Developer Sanshin inc.

500

1.67

SMBC Nikko Securities Inc.

434

1.45

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

403

1.34

JPMorgan Securities Japan Co., Ltd.

3831.28

Matsui Securities Co., Ltd.

307

1.02

Note: Shareholding ratio is calculated excluding treasury stock (68,599 shares).

Breakdown of Shares by Type of Shareholder(Shareholding ratio)

Total number ofshareholders

9,158

We resolved to change our shareholder benefit
program following the change to the number ofshares per unit at the Board of Directors’ meeting
held on August 10, 2017.
Eligible shareholders
The program targets shareholders who own 100 shares ormore of the Company’s share for six consecutive months or
longer and are registered or recorded in the shareholders’ register as of March 31 of each year.
Detail of the plan
Consecutively
100 shares orheld period more but less than
1,000 shares
One benefit
Six months
discount coupon
or morefor products
but lessavailable at thethan one
Company’s internet
year
shopping site
Two benefit
discount coupons
One year for products
or more available at theCompany’s internet
shopping site

Number of shares held
1,000 shares or more
2,000 shares or
but less than 2,000
moreshares
QUO card worth ¥2,000QUO card worth ¥4,000
One benefit discountOne benefit discountcoupon for products
coupon for products
available at theavailable at theCompany’s internet
Company’s internet
shopping site
shopping site
QUO card worth ¥3,000
QUO card worth ¥5,000
Two benefit discountTwo benefit discountcoupons for products
coupons for products
available at theavailable at theCompany’s internet
Company’s internet
shopping site
shopping site

National and local governments

0.00%

Commencement timing and method

Financial institutions11.36%

Securities companies

9.84%

The program will commence for the shareholders who are registeredor recorded in the shareholders’ register as of March 31, 2018.
Benefits will be mailed after the Annual General Meeting ofShareholders.

Other domestic corporations9.21%
Foreign shareholders

3.14%

Individuals and other

66.45%

Information for Shareholders
Fiscal year
From April 1 to March 31 of the following year
Year-end dividend March 31
Record dates forInterim dividend September 30
dividend of surplus
Annual General Meeting June every yearof Shareholders
Administrator of shareholders’ 4-1 Marunouchi 1-chome, Chiyoda-ku,
register (special accountTokyo, Japan
management institution)
Sumitomo Mitsui Trust Bank, Limited.

Daitobo Co., Ltd.
http://www.daitobo.co.jp/

For inquiries regarding this report, please contact:
Business Management Headquarters TEL: +81-3-6262-6565

8-4 Izumi 2-chome, Suginami-ku, Tokyo 168-0063, Japan
Stock Transfer Agency Business Planning Dept.,
Sumitomo Mitsui Trust Bank, Limited.
(For telephone inquiries) 0120-782-031 (toll-free in Japan)
Method of public
Public notices by the Company shall benoticedone by electronic means;

Mailing address

however, in the event that accidents or otherunavoidable reasons prevent public notice by electronicmeans, the notice will be posted in the The Nikkei.