The Origins of Value Creation

The Kanematsu Group’s Origins
Corporate Principle“Let us sow and nurture the seeds of global
prosperity”

The aspiration of founder Fusajiro Kanematsu lives on today as
the core heritage of Kanematsu.

“Sow a seed now,” and take action to benefit people
around the globe, bade our founder, Fusajiro Kanematsu,
setting a standard of public duty that we at Kanematsu
continue to uphold through a commitment to ethicalbusiness principles and corporate responsibility.
The beliefs and philosophies that inspired Fusajiro
Kanematsu in the late nineteenth century Meiji period, atime when Japan was striving to build a national economy,
were encapsulated in the document Our Beliefs:
Kanematsu’s Guiding Principles in 1967, on the occasion of
our merger with The Gosho Company.

In 1889, Fusajiro Kanematsu founded Kanematsu. Over the 134 years since its
beginnings as an importer of wool from Australia, the Company has
expanded into diverse fields spanning fibers to steel, machinery, food, energy,
and electronics, growing into a general trading company. Kanematsu has
flexibly adapted to changes in international society and the economic
environment over the decades, overcoming numerous obstacles andtransforming itself. While the Group continues to change and evolve, theentrepreneurial spirit valued by our founder and his aspiration to contributeto international society live on in the Kanematsu Group today.

https://www.kanematsu.co.jp/en/company/history/roots.html

Fusajiro Kanematsu
1845–1913“CREATING SHARED VALUE”
Who We Are

1.	Reflecting the pioneering spirit of our predecessors, we believe thatfairness and justice should guide our business dealings and the wiseuse of creative imagination and ingenuity will bring prosperity.
2.	Our purpose as a Company is not only to build a sound andflourishing business, but to fulfill our responsibilities as a corporate
citizen, contributing to society and the security and well-being of all.
3. 	As members of a corporation, we act not as individuals but asrepresentatives of that organization and as such we are bound byCompany rules and attendant loyalties and must work together witha spirit of cooperation while cultivating mutual understanding andrespect for fellow members.

The Origins of Value Creation

The Sayings ofFusajiro Kanematsu

Our Beliefs: Kanematsu’s Guiding Principles

Working toward ourlong-term vision

CSV-oriented management*

Human capital managementDX

GX

The Kanematsu Group’s Value Creation

Reinforcing Groupwide Management
Innovation*CSV: Creating shared value

Main Business Opportunities

Main Business Risks

Longstanding networks with customers, suppliers, and business partners
Insight and business opportunities provided by the robust customer baseStable financial base: Low net D/E ratio
Stable earnings structure: Earnings base and business portfolio that are resistant to changes in commodities andfinancial markets
Core heritage of Kanematsu passed down from our founder: Acting based on the founder’s aspirations and guidance
against thinking that any kind of business practice is acceptable as long as it is profitable
Risk management and investment management expertise supporting solid and stable business

Expanding opportunities for business investment
and M&A due to market structure changes

Slowing growth in trade businesses due to peaking
of domestic markets

The Strengths We Have Built
Strength 1

Strength 2Strength 3

Strength 4

Robust customer baseand know-how
cultivated throughbusiness

Stable financialbase and revenue
structure

Management
prioritizing capitalefficiency

Human capital andinvestment system toadvance businesscreation

Priority Initiatives

8

KANEMATSU Integrated Report 2023

Sustainable growth in fundamental businesses and expansion of the revenue
base through business investment

future 135

Electronics &DevicesMarket expansion due to 5G

Foods, Meat
& Grain

Asian market expansion, consumer taste
diversification

Electronics& Devices

Shortage of digital talent

Foods, Meat
& GrainGrowing risks to stable procurement, growing
demand for human rights protection in the
supply chain

Steel, Materials &Plant

Changes in energy markets

Steel, Materials &Plant

Tightening regulations due to decarbonization

Motor Vehicles &Aerospace

Next-generation mobility market expansion

Motor Vehicles &Aerospace

Rapid industrial structure changes, logistics
disruption

Kanematsu’s Foundations

Sources of Strength

External Environment
Economic growthin emerging
economies

Paris Agreement
SDGs

GX

Response to technical innovation

DX

Globalpopulationboom

Low birth rate
and graying inJapan

Pandemic

Establishment of management infrastructure forachieving sustainable growth
KANEMATSU Integrated Report 2023

9

The Origins of Value Creation

The Kanematsu Group’s History

In the 2000s, we focused on shrinking interest-bearing debt and improving our financial position to achieve stability. Having done so, under the future 135 medium-term vision established 2018, we have aimed at becoming a unique trading company, pushing toward
new heights.

1889 –1950s

1960s –1980s

1990s–2000s

2013–

Founding

Development into a general trading company

Restructuring

Aggressive management

Guided by Kanematsu’s founder,a pioneer in trade between Japanand Australia, Kanematsu weathered financial panics and built
a solid foundation. Eventually,
the Company expanded to theUnited States and other countries.

Kanematsu grows larger, diversifying functions as a trading company
and expanding geographically.

Following the expansion and collapse ofJapan’s economic bubble and the Asian
Financial Crisis, Kanematsu carried out
decisive business selection and concentration aimed at reinforcing its management
framework. The Company also worked to
improve and strengthen its financial base.

In step with Japan’s rapid economic growth, Kanematsu proactively
developed third-county trading as well as importing and exporting
between companies in Japan and overseas. At the same time, theGroup promoted infrastructure development in developing countries.

Responding to the rapid uptake of IT
throughout society, Kanematsu advanced
business development in line with theneeds of the digital age, entering themobile business and reinforcing information and communication technology (ICT)functions.

Shift toward aggressive management through M&A in highly specialized fields and business expansion

Solving Social Problems

1889

Fusajiro Kanematsu Shotenof Australian Trading
founded by Fusajiro
Kanematsu in Kobe

1890

1918

Company name changed toKanematsu Shoten Company

1935

Kanematsu Wool ResearchInstitute established (now
KANEYO Co., Ltd.)1936

Branches opened in New Yorkand Seattle

1943
1951

Overseas affiliate establishedin New York, the first overseas office established by aJapanese trading company
after World War II

1973

1989

100th anniversary of the Company’s
founding

1990

Listed on the first section of theTokyo Stock Exchange

Company name changed toKanematsu Corporation

Electronics & Devices

1968

Kanematsu Denshi Service Ltd. established(now Kanematsu Electronics Ltd.)

1972

1978

Kanematsu Kinzoku Hanbai Co., Ltd.
established (now Kanematsu Advanced
Materials Corp.)

Kanematsu Semiconductor Corporation estab- 1982
lished (now Kanematsu Futuretech Solutions
Nippon Office Systems Ltd. established
Corporation)
Pacific Western Systems Japan estab1974
lished (now Kanematsu PWS Ltd.)
Kanematsu Computer Systems Ltd. established (now Kanematsu Communications Ltd.)

Kanematsu Hiryo Co., Ltd established (nowKanematsu Agritec Co., Ltd.)

Kanematsu Yuso Co., Ltd. established1977

Kaneshoku Corporation established(now Kanematsu Foods Corp.)

1960
1967

Kanematsu Kaseihin Co., Ltd established(now Kanematsu Chemicals Corp.)

Acquired a controlling interest in Fine Kuroda
Services Corp., renaming it Kanematsu Gosho
Machine Tool Sales Corp. (now Kanematsu
KGK Corp.)

Kanematsu Computer Systems Ltd.
began mobile phone sales(now Kanematsu Communications
Ltd.)

1995

Kanematsu Sekiyu Hanbai Corp.
established (now Kanematsu
Petroleum Corp.)

1999

Carried out large-scale businessselection and concentration

Acquired a majority stake in
Shintoa Corp.
(100% stake acquired in 2010)

2012

1970

Kanematsu Kenzai Corporation established (now Kanematsu Trading Corp.)

Kanematsu Sekiyu Gasu Corp. established (nowKanematsu Petroleum Corp.)

1993

Kanematsu Electronics Ltd. becamea subsidiary

Steel, Materials & Plant

1959

Kanematsu Electronics Ltd. listedon the first section of the Tokyo
Stock Exchange

1974

Acquired North American steel tubing company Benoit Machine LLC(now Benoit Premium Threading,
LLC)

Donation and endowment
to what has grown into the
Kobe University ResearchInstitute for Economics andBusiness Administration(Kanematsu Memorial Hall)

2014•Expanded the executive officer system•Established business investment standards•Acquired a majority stake in Kanematsu-NNK Corp.
(now Kanematsu Sustech Corporation)

2015

Completed disposal of commercial real estate holdings

2016•Carried out an absorption-type merger with
Diamondtelecom, Inc. aimed at expanding the mobile
business•Issued first series of straight corporate bonds (return tothe straight bond market)

April 2013–March 2016

KANEMATSU Integrated Report 2023

2018

•Formed the Technologies and Business
Collaboration Team to advance innovation
investment•Established Kanematsu Ventures Inc.

2019

2021

•Revised and determined five issues of high materiality•Took over Seiko Epson Corporation’s IC test handler
business (now NS Technologies Inc.)

2022

Received A- rating from Japan Credit Rating Agency,
Ltd. (JCR)•130th anniversary of the Company’s founding•Formed strategic partnership with France-based
Dawex Systems, entering the data business

2023

Made tender offers for Kanematsu Electronics Ltd.
and Kanematsu Sustech Corporation, turning theminto wholly owned subsidiaries

April 2014 – March 2019

April 2018–March 2024

“VISION-130”– future 135 –• Approaching the 130th anniversary of the founding of
Kanematsu, we returned to our beginnings as a trading
company and to our Corporate Principle. Our management
objective was to “expand the earnings base” through coexistence and mutual development with our business partners based on the long history of our trading business.
• We aimed to increase our enterprise value by furthering ourbusiness in areas of expertise and investing in new challenges to create new businesses.
• We achieved the goals of the five-year plan in four years
and moved on to future 135.

Expansion of Scale
Acquisition of Added Value
Quality Improvement—Jump to next stage leading to
the future—• Took a positive stance to enable rapid
progress and to establish a solid growth
track in preparation for the 125th
anniversary.
• Development of VISION-130 coinciding
with the resumption of dividends

Net Interest-Bearing Debt Reduction

Total Market Valuation(Billions of yen)(Billions of yen)

543.8

1927

Construction andendowment of
the Hitotsubashi
University
Kanematsu
Auditorium• Sustainable growth in fundamental businesses andexpansion of the revenue base through business
investment• Response to technical innovation• Establishment of management infrastructure for achieving
sustainable growth

Positive Effects of Restructuring

1929

Endowment of construction funds for the
Sydney Hospital
Kanematsu Memorial
Institute of Pathology

Greatly
improved andstrengthened thefinancial base

150
100
50

86.4
2000
(Years ended March 31)

10•Took over JVCKENWOOD Corporation’s cartridge
printer business (now G-Printec, Inc.)

Began trading with Steel Service
Oilfield Tubular, Inc.

1985 Kanematsu Aerospace Corp. established
1919

2017

Resumed dividend payments

1985

Motor Vehicles & Aerospace

Major examples of social
contribution and management oriented aroundcreating shared value

2013

2005

Foods, Meat & Grain

1954

1991

Kanematsu’s Foundations

Company name changed toKanematsu Corporation

Merged with the Gosho Company to form
Kanematsu-Gosho, Ltd.

Kanematsu focused on developing products and services that take into account sustainability in such areas as food resources and the environment.
The Group worked to create new, high-value-added business models, with an eye to responding to such technological innovation as AI and IoT.

The Kanematsu Group’s Value Creation

Branch opened in Sydney
Direct importing of Australianwool began

1967

The Origins of Value Creation

Kanematsu expanded its international trading beyond
Australia, opening overseas
branches and building a foundation for the development oftrade with Japan.

2013

0

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

(Years ended March 31)

KANEMATSU Integrated Report 2023

11

The Origins of Value Creation

Value Creation Process
CapitalHuman
CapitalDeep and broad product andindustry expertise
New business creation know-how
Risk management

Invested capital and growthinvestment

Evolving traditional
businesses

Foods, Meat & Grain
Steel, Materials & Plant

Relationships with diverse
stakeholders

Stable earnings
base

Strength

Robust customer
base and know-how
cultivated throughbusiness

Business
investment

Virtuous
cycle

Digitaltransformation(DX)

Monitoring/managementGreentransformation(GX)

Human capitaland investment
system to advancebusiness creation

Employees

Employee-friendly corporate culture

Local communities and governments

Financial

Non-financial

Free cash flow

Management by Objectives (MBO)

ROIC

Employee satisfaction surveys

D/E ratio

GHG emissions

Regional revitalization

Environment

Strength

Stable financialbase and revenue
structure

Corporate Principle

Human Resource Development

Kanematsu’s Foundations

Contribution to a carbon-neutral
society
Strength

Management BaseManagement
prioritizing capitalefficiency

Governance, risk management,compliance

KANEMATSU Integrated Report 2023

Shareholders and investors

StrengthGroupwide Management

12

Expansion ofscale

Maximizing shareholder value

Trade

Contribution to the environment
and environmental development
in all communities involved in ourbusinesses
Contribution to a low-carbon
society

1. Average hours of training for Kanematsu University participants
2. Average over the five years since the launch of future 135
3. Figure for fiscal 2022
4. Cumulative new investment in the first five years of future 135

Products and services useful tosociety
Stable, ongoing procurement

Customers • Markets • Share

Domestic: 5; Overseas: 35
Group companies: 134

p78

Added
value

Motor Vehicles &Aerospace

Offices

Business Segments

Investment ininnovation (seeds)

Creating new businesses

Shareholders’ equity: ¥107.1 billion
Interest-bearing debt: ¥147.9 billion
Growth investment: Approx. ¥129.2
billion4

Business partners: Over 20,000
companies

Customers and suppliers

Creating a Future-Oriented Portfolio

Electronics & Devices

Social and Partnerships
Relationship Robust customer base (business
Capitalpartners of several decades, etc.)

NaturalCapitalFour Segments with Unique Strengths

The Kanematsu Group’s Value Creation

Manufactured
Capital

Basic Policy

Society

The Kanematsu Group will help realize sustainable global economic growth and solve social issues through the pursuit of expansion of scale, acquisition ofadded value, and quality improvement and through the evolution of its traditional businesses and the creation of new businesses, aiming to advance into thenext stage of growth.

The Origins of Value Creation

Financial
Capitalfuture 135 Medium-Term Vision

People who take on businesscreation
Consolidated employees: 7,866
Annual average training: Approx. 47hours/person1
Total annual training: Approx.
20,403 hours
Diverse human resource hiring rate(women and non-Japanesenationals): 27.1%2
Engagement score: 61%3

Value Produced

FunctionsIntellectual
CapitalBusiness Model

Kanematsu Group
Profit for the year attributable toowners of the Parent
ROE
Total return ratio

Heritage handed down since our founding

p50

KANEMATSU Integrated Report 2023

13

The Origins of Value Creation

Business Model and Business Development

Building on the trading businesses it has nurtured over the decades, the Kanematsu Group is advancing business investment aimed at generating added value and scale expansion. At the same time, we are pursuing innovation investment
aimed at establishing a future business portfolio. Through these efforts, we are working to increase enterprise value.

Trading: Stable Revenue Base Backed by Longstanding Networks and Know-How
These are core businesses developed by leveraging our robust customer base and know-how cultivated in traditional agency and trading businesses
since our founding while managing businesses directly and indirectly in line with the changing times.

Business Model and Vision for the Future

Procurement

Logistics

Sourcing

Securing new functions and roles

Storage
Quality control

Sale
Marketing and financeBusiness Investment to Secure Added Value: Performing Roles Beyond Traditional Trading Company Functions
We will secure new functions and roles in our fields of strength. Going beyond traditional trading company functions, we will expand into upstream
areas of the value chain, such as planning, development, manufacturing, and processing, as well as downstream areas, such as maintenance andrecycling. By doing so, we will provide added value unique to the Kanematsu Group.

Creating a new portfolio

Development

Added value

Downstream

Manufacturing

Processing

Procurement

Logistics

Expanding Upstream and Downstream from Trading to Add Value

Trading•Business sourcing and production•Providing logistics, financing,marketing, and trading company
functions•Diverse and stable procurement
sources, robust customer baseWe will leverage our accumulated insight and know-how to expand our business scale and trading area. We will apply business models in which we
excel to different products, customers, and markets, adjusting our approach to expand our market share.
Upstream

Planning

Development

Downstream

Manufacturing

Processing

Procurement

Logistics

Market, product, andcustomer expansion

Expansionof scaleMultifaceted development of business models in which we excel by changing our approach, including products, customers, and markets

We will create next-generation core businesses through investment in business models and startups with long-term growth potential centered on
advanced technologies in which the Kanematsu Group has strength.
Special Feature: Innovation Investment

Customers • Markets • ShareBusiness Investment Process

The Kanematsu Group’s businesses are mainly in the Group’s areas of strength, where it possesses insight and knowhow. We do not invest in businesses that are easily swayed by commodity or financial markets, such as fossil fuels, realestate, or financial businesses, and our stable revenue structure sets us apart from other general trading companies.
Kanematsu’s Revenue Structure
Non-resource: 100%
Other
Other 1.5%%
Electronics
Electronics && Devices
Devices

31.0%%

FY2023
FY2023
Foods, Meat
Meat && Grain
Grain
Foods,

37.4%%

Other Trading Companies’ Revenue Structures
Company
CompanyAA

Company
CompanyBB

Resource: 27%%

Resource: 38%%

p32

Kanematsu’s Foundations

Business Composition (Compared with Other Trading Companies)

21.2%
%

Maintenance

Sale

Innovation Investment: Creating Next-Generation Businesses Centered on Advanced Technologies

Stable earnings base

Steel,
Steel, Materials
Materials &&
Plant
Plant

Storage

Recycling

Business investment•Investment and financing•Providing people, networks,
and know-how•Taking business risks

Scale Expansion Business Investment: Investing Resources in Areas of Insight and Strength

The Kanematsu Group’s Value Creation•Insights into market needs andsocial issues•Create business opportunities
using advanced and digitaltechnologies•Utilize accumulated management
know-how

ジ
メー
年イ
30
20

0
203
for
ion
Vis

Innovation investment

ets
targ
24
20

Functions

Business investment•Investment and financing•Providing people, networks, andknow-how•Taking business risks

8.9%%

MaintenanceSale

Recycling

Seeds

Motor
Motor Vehicles
Vehicles &&Aerospace
Aerospace

Storage

The Origins of Value Creation

Upstream

Planning

Non-resource: 73%%

Non-resource: 62%%

Decision-making process
Application

Support divisions

Project Deliberation Committee

Decision

Considerations
Definition of investment
purpose and growthstrategy
Consider alignment with
future 135 (including
sustainability)

Examination of thebusiness plan
Thoroughly examine thesoundness of the businessplan (including
responsiveness)

Alignment withinvestment criteria
Examine investment
efficiency based on IRR andrecovery period using theinvestee’s free cash flow

Risk analysis

Examination of internal
controls

Establishing exit criteria

Examine the internal
controls of investees

Establish practicable exit
criteria upon investment•R isk analysis leveraging

the expertise of support
divisions• E SG risk assessment

Investment
Company
CompanyCC
Company
CompanyDD

Resource: 36%%

Resource: 52%%

Non-resource: 64%%

Non-resource: 48%%

Monitoring and Asset Replacement
Review investees at support division monthly information sharing meetings
Annually evaluate investments both qualitatively (the objective of holding each
investment) and quantitatively (related revenue, dividends received, otherreturns, etc.) to determine if they are worth the cost of capital to Kanematsu

The support divisions provide sophisticated expertise during PMI afterinvestment, supporting management divisions
Replace low-efficiency assets and businesses when they meet exit criteria or
their strategic purpose in the portfolio has diminished

Note:
Note:Data
Dataaccording
accordingto
toKanematsu’sKanematsu’sresearchresearch

14

KANEMATSU Integrated Report 2023

KANEMATSU Integrated Report 2023

15