197thTheFiscal Year

Interim Business Report
April 1, 2016

September 30, 2016

Securities code: 3202

I N T E R I M
BU S I NE SS
R E PO RT“Pursuing infinite possibilities with the power of ideas”

since 1896

Management’s message
Please allow me to begin by extending my heartfelt gratitude toour shareholders for their continued patronage and support.
I would like to make a brief statement on our performance forthe first half of the 197th fiscal year (from April 1, 2016 toSeptember 30, 2016).

Progress on the Mid-term Management Plan
The Company Group (or the “Group”) has launched the “Bridgeto the Future” Mid-term Management Plan this fiscal year, andis implementing the six key strategies as shown below.
 Commercial property business: Maintaining a position tooutperform rivals and strengthening our competitive
advantage Health care business: Promoting business cooperation,with contribution to a society with long healthy lifespans Textile and apparel business: Reconstructing the businessafter the structural reorganization
 Financial strategy: Procurement of stable, long-term
funding, and achievement of a range of financial targets Corporate governance: Promoting management in line withthe corporate governance code Personnel strategy: Fostering personnel that can contributeto society
By promoting these strategies, we are committed to“strengthening our financial position,” “establishing a robust
Kazuhiro Yamauchi, President and Representative Director
platform for our core businesses” and “ensuring a higher levelof earnings.”
Firstly, with regard to “strengthening our financial position,”
we secured stable and long-term funding through refinancing
the entire amount of the existing borrowings with a long-term syndicated loan during the first quarter of fiscal 2016, thus steadily
achieving the target financial indicators under the Mid-Term Management Plan.
Secondly, in respect of “establishing a robust platform for our core businesses,” in the commercial property business, we worked tofurther appeal to customers, by taking measures to enhance events for children and invite more attractive tenants at SUN TO MOON
Kakitagawa, one of the leading commercial facilities in Shizuoka Prefecture. In the health care business, considering extreme summer
heat as a business opportunity, we strove to expand sales of health-promoting bio-linen material for summer and other products
drawing on the Company’s proprietary technology. In the textile and apparel business, we endeavored to further boost revenue of thebusiness, which had improved profitability upon streamlining through structural reorganization.
Lastly, regarding “ensuring a higher level of earnings,” although net sales decreased year on year due to the structural reorganizationin the textile and apparel business implemented in the prior fiscal year, in terms of earnings, there were positive effects in improvedprofitability and cost reduction.
Owing to the effects of these measures, we announced the upward revisions in the consolidated business results including anincrease in operating income by 50% in the “Revisions in the First Half and Full-year Consolidated Business Results Forecast for theFiscal Year Ending March 31, 2017” on August 10, 2016.

1

Business results for the first half
Net sales for the first half of this fiscal year totaled ¥2,278 million (down 18.9% year on year). Despite favorable performance in thecommercial property business, the structural reorganization in the textile and apparel business implemented in the prior fiscal year
affected revenues. In terms of earnings, despite the effect of improved gross profit margin associated with the structural reorganizationand the effects of a reduction in selling, general and administrative expenses, operating income came to ¥198 million (down 5.2%year on year) due to declined gross profit resulting from a decrease in net sales. Ordinary income was ¥93 million (down 26.2% yearon year) due mainly to the initial expenses incurred in the execution of syndicated loan. Furthermore, with a profit attributable toowners of parent at a total of ¥63 million (down 63.3% year on year), both sales and income declined although maintaining
profitability. This was caused by the posting of extraordinary losses such as premature cancellation loss on the execution of thesyndicated loan and payment of income taxes, in spite of extraordinary income following the sale of our equity interest in theinvestment in the Chinese business.
For the operating results by reportable segments, please refer to “Overview of business results by segment” described hereafter.

Full-year business results forecast
Consolidated business results for the first half of this fiscal year showed increases in both sales and income and outperformed thebusiness results forecast in every level of income, as evidenced by operating income that exceeded forecast by 32%. Accordingly, weannounced “Notice of Difference Between Business Results
Forecast and Actual Results for the First Half of the Fiscal YearEnding March 31, 2017” on November 9, 2016. However, as
the outlook of the market environment in the second half of theyear is uncertain, the full-year business results forecastannounced on August 10, 2016 is left unchanged.

In conclusion
In the second quarter of this fiscal year, the Company wasreleased from the obligation of stating significant events
regarding going concern assumption, and the grace period
related to market capitalization was lifted. We would like to takethis opportunity to thank all of our shareholders who have madeit possible with their understanding and support over the years.
Additionally, we are actively promoting new approaches such asentering into e-commerce business and introducing ashareholder benefit program. Moreover, as already announced,
on the occasion of the 120th anniversary of the Company’s
founding, we changed our trade name to “Daitobo Co., Ltd.” andestablished a new company logo on September 1, 2016. Goingforward, we are committed to working to improve corporate
value with increased speed and creating a new tomorrow basedon our management philosophies of fostering a spirit ofenterprise and of helping others through self-help.
We would like to ask our shareholders for their continued
support and guidance.

2Overview of business results for the first half
Consolidated financial highlights
Net sales

Operating income¥2,278 million

First half
Initial forecast

Full year   (Millions of yen)
Revised forecast for the first half Revised forecast for the full year

Down 18.9% year on year
Up 1.7% from business results forecast(Initial forecast)(Revised forecast)
5,000
4,700

197th fiscal year
(first half)

197th fiscal year
(full year)

196th fiscal year

198

197th fiscal year
(first half)

197th fiscal year
(full year)

Profit attributable to owners of parent
First half
Initial forecast

Full year    
Revised forecast for the first half

(Millions of yen)
Revised forecast for the full year

Down 26.2% year on year
Up 132.8% from business results forecast¥63 million

First half
Initial forecast

Full year    
Revised forecast for the first half

(Revised forecast)
180
126

172

(Revised forecast)
140

124

(Initial forecast)
90

93

74

(Millions of yen)
Revised forecast for the full year

Down 63.3% year on year
Up 216.8% from business results forecast(Initial forecast)
140

63
40

196th fiscal year

(Millions of yen)
Revised forecast for the full year

(Initial forecast) (Revised forecast)
350
350

150

Ordinary income¥93 million

Full year    
Revised forecast for the first half

378

208

2,240 2,278

196th fiscal year

First half
Initial forecast

Down 5.2% year on year
Up 32.0% from business results forecast

5,407

2,809

¥198 million

197th fiscal year
(first half)

20
197th fiscal year
(full year)

196th fiscal year

197th fiscal year
(first half)

197th fiscal year
(full year)

Notes: 1. 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. Figures in the revised forecast are those announced in the “Revisions in the First Half and Full-year Consolidated Business Results Forecast for the Fiscal Year Ending March 31, 2017” on August 10,
2016.

Overview
Business results were robust for SUN TO MOON Kakitagawa, one of
the leading commercial facilities in Shizuoka Prefecture, but due toreduced revenues resulting from the structural reorganization in thetextile and apparel business implemented in the prior fiscal year, theGroup recorded net sales of ¥2,278 million (down 18.9% year onyear), operating income of ¥198 million (down 5.2% year on year), andordinary income of ¥93 million (down 26.2% year on year). Profit
attributable to owners of parent reflecting the payment of income taxes
amounted to ¥63 million (down 63.3% year on year).
Compared to the plan, as one-time expenses associated with thesyndicated loan have been incorporated from the planning stage, net
sales exceeded the plan by 1.7% due mainly to the favorable

3performance in the commercial property business. With regard toearnings, reduction of selling, general and administrative expenses
such as head office transfer cost surpassed plans. As a result,operating income, ordinary income and profit attributable to owners ofparent outperformed the plan by 32.0%, 132.8% and 216.8%,respectively.
Outlook for the full-year
Since the actual results outpaced the business results forecast for the
first half of this fiscal year, the Group made an announcement on thedifference between business results forecast and actual results. In thesecond half of this fiscal year, however, as the market outlook is
uncertain including possibilities of weakening in consumer sentiment,
the full-year business results forecast is left unchanged.

Overview of business results by segment
Commercial property businessNet sales

Operating income(Millions of yen)

(Millions of yen)

Daitobo’s commercial properties are the go-to
place for pleasant lifestyles. We will offer enrichedliving space based on our vision of “creatingspace that delights our customers.”

1,191

1,202516

Performance for the first halfShopping malls

At the commercial property SUN TO MOON
Kakitagawa, we ran blockbuster films,
enriched events and took other measures touphold customer footfall levels. As a result,the segment recorded increased sales andincome year on year.

Health care business

461

First half of
196th fiscal
yearFirst half of
197th fiscal
yearFirst half of
196th fiscal
yearFirst half of
197th fiscal
year

Net sales

Operating income(Millions of yen)

(Millions of yen)In response to the aging population and rising
health consciousness, the Company supports thehealthy and comfortable life of customers withproducts drawing on our proprietary technology.
Our strength lies in the high technological abilityof the Group’s domestic production bases.

388

399

Performance for the first halfHealth-promoting textile
materials-relatedHome-use medical devices
Health-promoting foodstuffs
General bed and bedding

Although sales of home-use thermal andelectric potential therapy devices, etc. werestrong, due to increased material costs andselling, general and administrative expenses,
the segment recorded increased sales anddecreased income year on year.

Textile and apparel business
Daitobo will satisfy the diverse needs of ourcustomers, from apparel fashion to uniforms,
based on its vision of “creating products thatdelight our customers.”(11)(20)First half of
196th fiscalyear
Uniforms for both official andcivilian users
Production-managementtype OEM operations
Knitwear planningFirst half of
196th fiscal
yearFirst half of
197th fiscal
year

Net sales

Operating income(Millions of yen)

(Millions of yen)

1,229

Performance for the first half
Although net sales declined year on year due
to the withdrawals from certain businesses
following the structural reorganization in thetextile and apparel business, operating loss
improved thanks to the effects of a reduction
in selling, general and administrative
expenses.

First half of
197th fiscalyear

676
(5)
(15)
First half of
196th fiscal
yearFirst half of
197th fiscal
yearFirst half of
196th fiscalyear

First half of
197th fiscal
year

4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, 2016)(as of March 31, 2016)(Assets)(Thousands of yen)

For the first half of
this fiscal year

For the first half ofthe prior fiscal year

(from April 1, 2016 to September 30, 2016)(from April 1, 2015 to September 30, 2015)

Net sales

2,278,141

2,809,659

Cost of sales

1,621,289

2,114,240

Description

Current assets

2,461,288

1,856,216

Gross profit

656,852

695,419

Non-current assets

16,722,366

17,140,028

Selling, general andadministrative expenses

458,840

486,537

15,886,260

16,060,922

Operating income

198,011

208,881

Intangible assets

11,30012,995Non-operating income

54,05463,524Investments and otherassets

Non-operating expenses

158,936

146,265824,805

1,066,110

Ordinary income

93,129126,140

19,183,655

18,996,244

Extraordinary income

109,743

64,814Extraordinary losses

107,257

Profit before income taxes

95,615

190,954

Income taxes-current

30,04018,481

Income taxes-deferred

2,206(216)Profit63,368

172,689

Profit attributable toowners of parent

63,368

172,689

 roperty, plant andP
equipment

Total assets(Liabilities)
Current liabilities

1,462,049

4,561,660

Non-current liabilities

13,454,185

10,134,269

Total liabilities

14,916,234

14,695,929(Net assets)
Shareholders’ equity(752,548)(815,826)

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, 2016 to September 30, 2016)(from April 1, 2015 to September 30, 2015)

Cash flows from operating activities

58,233(462,301)

Cash flows from investing activities

359,260

109,218

Cash flows from financing activities

294,034

240,780

Effect of exchange rate change
on cash and cash equivalents

Capital stock

1,500,000

1,500,000

Capital surplus

503,375

503,375

Retained earnings(2,748,799)(2,812,168)(7,124)(7,033)

Accumulated othercomprehensive income(1,296)(132)

5,019,969

5,116,141

Net increase (decrease) incash and cash equivalents

710,232(112,435)

Total net assets

4,267,420

4,300,315

Cash and cash equivalents
at beginning of the period

687,297

919,966

18,996,244

Cash and cash equivalents
at end of the period

1,397,529

807,531

Treasury shares

Total liabilities and netassets

5Consolidated statement of income19,183,655

Description

Editor’s note

Introduction of a new company name and Grouplogo, and relocation of the head office
On the occasion of the 120th anniversary of the Company’s founding, we established a new company
name and Group logo, and relocated the head office on September 1, 2016.

New company name:
Establishment of a new Group logo
Theme of the new Group logo

“Pursuing infinite possibilities with the power of ideas”
The last syllable “bo” took the infinity symbol “∞” as a motif.
It represents our creed as a corporation that contributes to the wellbeing of people through sustainable
development. Also, the letter “i” symbolizes a person, the dot on the top “ ” representing the head, the sourceof flexible ideas. The image is infused with our belief that the collective energy of talents creates the future of theGroup. Leveraging the Company’s unique “ideas and human resources,” it will work to improve corporate value.

New head office location
7th floor, Marukashiwa Tama Building, 6-1 Nihonbashihoncho 1-chome, Chuo-ku, Tokyo, 103-0023 Japan+81-3-6262-6565

Kazuhiro Yamauchi,

President and Representative Director

We resolved to introduce a shareholder benefit program at the Board of Directors’ meeting held on August 24, 2016.
Eligible shareholders
The program targets the shareholders who own one unit of the Company’sshares (1,000 shares) or more for six consecutive months or longer andare registered or recorded in the shareholders’ register as of March 31 ofeach year.

Commencementtiming and method

Detail of the plan
Number of shares held (held for six consecutive months or longer)

Detail of benefit

1,000 shares or more but less than 2,000 shares
2,000 shares or more

Products worth ¥2,000
Products worth ¥4,000

The program will commence for the shareholders who own one unit of the Company’s shares (1,000 shares) or more
for six consecutive months or longer and are registered or recorded in the shareholders’ register as of March 31, 2017.
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/

6

C 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 (a s of S e pte mb e r 3 0, 2 016)
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
NagoyaMeiji Sangyo Building 2, 17-9 Honmachi 4-chome,
Sales Office Ichinomiya-shi, Aichi, Japan+81-586-23-4811
Osaka
3-6 Minamikyuhojimachi 2-chome, Chuo-ku, Osaka, Japan
Sales Office +81-6-6262-8322
Group
Daitobo Estate Co., Ltd
companies
Niigata Daitobo Co., Ltd.
DAITOBOSHOKU (SHANGHAI) CORPORATIONNINGBO SHANJING APPAREL CO. LTD. (entity
accounted for using equity method)

Total number of shares authorized to be issued
Total number of shares issued
Total number of shareholders

Members of the Board of Directors
President and Representative Director

Kazuhiro Yamauchi

Vice President and Representative Director Toshiyasu Nomura

96,000,000 shares
30,000,000 shares
6,085

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

Shareholder name

Sumitomo Mitsui Trust Bank, Limited

1,478

Shareholdingratio (%)

4.93

SBI SECURITIES Co., Ltd.

716

2.39

Mitsui Sumitomo Insurance Company, Limited

610

2.03

Developer Sanshin inc.

550

1.83

Atsushi Hida

516

1.72

Rakuten Securities, Inc.

514

1.71

Yoshio Koizumi

499

1.66

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

352

1.17

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

339

1.13

Japan Trustee Services Bank, Ltd. (Trust account 6)

325

1.08

Director and Executive Officer

Shogo Mieda

Note: Shareholding ratio is calculated excluding treasury stock (67,498 shares).

Outside Director

Yasunobu Sawada

Breakdown of Shares by Type of Shareholder (Shareholding ratio)

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■ Securities
companies ■ Foreign shareholders(5.80%)(2.18%)■ National and local governments(0.00%)

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

■ Financialinstitutions(15.47%)■ Other domestic corporations(5.57%)■ Individuals and other(70.98%)

Total number of shareholders: 6,085

Information for Shareholders
Fiscal year

From April 1 to March 31 of the following year

Record dates for
dividend of surplus

Year-end dividend March 31
Interim dividend
September 30

Annual General Meeting June every yearof Shareholders
Administrator of
4-1 Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan
shareholders’ register
Sumitomo Mitsui Trust Bank, Limited.
(special accountmanagement institution)

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)

Mailing address

Method of publicnotice

Public notices by the Company shall be doneby electronic means;however, in the event that accidents or other unavoidable
reasons prevent public notice by electronic means, thenotice 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