Report on the Progress of the Key Considerations for
the Formulation of the Next Medium-Term Management
Plan and the Independence of the Fiber Business
November 22, 2023

(Securities Code: 3107)

Key Considerations in the Next Medium-Term Management Plan
We decided to transfer the shares of Daiwabo Co., Ltd. in order to make the fiber businessindependent as a result of our consideration of “establishing an optimal business portfolio”
Considerations
Establishment ofgroup-wide purposeand development ofgrowth strategy

Establishment of an
optimal businessportfolio to maximize
value for our entireGroup■ Identifying our Group’s identity and establishing a purpose
based on social trends and corporate DNA■ Formulating a growth strategy from the perspective of what isthe core of our Company and how to maximize profitability
and realize our social significance from that starting point

Current status■ We established a new purpose for our Group and willcommunicate it together with the value creation process in theintegrated report to be issued in November 2023
■ We are examining growth strategies based on the establishedpurpose, while examining growth areas and the value-added we canprovide■ Examining the best owner principles, business environment
assessment, and return on capital for existing businesses
with reference to the Practical Guidelines for BusinessRestructuring formulated by the Ministry of Economy, Tradeand Industry; implementing strategic options at theappropriate time to maximize corporate value; andestablishing an optimal business portfolio■ From the viewpoint of maximizing the corporate value of ourCompany and Daiwabo Co., Ltd., we decided to transfer theshares of Daiwabo Co., Ltd. in order to make the fiber businessindependent■ We are continuing our deliberations to establish an optimal businessportfolio in terms of value offered by our Group, growth potential, andsustainability■ Establishing a capital allocation policy for higher corporate
value by achieving optimal growth investment andshareholder returns based on the cost of capital■ We are considering a capital allocation policy to maximize theprofitability of our Group as a whole, rather than only prioritizing
growth investments to enhance the performance of each of theoperating companies■ Optimizing the allocation of human, material, and financial
resources and establishing a capital policy that maximizes
returns to shareholders©2023 Daiwabo Holdings Co., Ltd.

Ongoing

Optimization of
investment for
growth andshareholder returns

Summary1

Summary of Independence of Fiber Business
On November 22, 2023, our Company resolved to transfer 85% of its shares in Daiwabo Co., Ltd. to an SPC
owned by a fund affiliated with Aspirant Group Inc.
Summary of transfer of shares in Daiwabo Co., Ltd.
Outline of
Daiwabo’s Business■ Manufacture, processing and sales of fiber products■ Controlling business activities by holding shares inoperating companies

Consolidated
financial summary*■Net sales: ¥62.7 billion■Operating profit: ¥1.3 billion■Assets: ¥63.1 billion■Net assets: ¥32.5 billion(Mar. 2023)

Capital structure after the transfer
Current
Daiwabo HD■ Aspirant Group SPC No.11Transferee(SPC wholly owned by Aspirant Group Inc. with all of its
outstanding shares. At the time of the transfer, 100% of theshares will be owned by a fund affiliated with Aspirant Group)

Transfer price■ ¥9.54 billion (equivalent to 85% of the stock value of ¥11.22billion)■ The transfer price is based on the corporate value of ¥24.8
billion and takes into account working capital, interestbearing liabilities, and other assets and liabilities, as well as
the amount of capital investment that Aspirant Group plans tocontribute to achieve sustainable growth for Daiwabo Co.,
Ltd.

Completion oftransfer■ January 18, 2024 (planned)* Financial figures on a consolidated basis managed by Daiwabo Co., Ltd. are provided for reference only,
as the consolidated financial statements have not been prepared through an external accounting audit©2023 Daiwabo Holdings Co., Ltd.

Voting rights
100%

Daiwabo Co., Ltd.

After the transfer
Daiwabo HD
Votingrights
15%

SPC owned by a fundaffiliated with Aspirant
Group Inc.
Votingrights
85%

Daiwabo Co., Ltd.

We plan to continue to hold 15% of the voting rights for
Daiwabo Co., Ltd. for the time being as a period ofcooperation with the aim of having a smooth transition, while
maintaining certain relationships with its existing business
partners, employees, and other stakeholders

2Process for Independence of Fiber Business
We implemented a fair bidding process with a review system in place to determine the transferee for the fiber business tobecome independent
As a result of comprehensive consideration from the perspectives we consider important, we evaluated the Aspirant Group’s
proposal as being the most competitive

Summary of the independence process
Establishment of areview system■ To ensure a fair process progression, we appointed
Houlihan Lokey as financial advisor and put areview system in place

Selection ofcandidate fortransfer■ We invited a wide range of domestic and foreign
operating companies, investment funds, and othercandidates to participate in the process

Review process for
proposals■ Based on reports and advice from working groups
and external advisors, we determined the transferee
and terms and conditions of the transfer after
thorough discussions by the Board of Directors, themajority of whom are outside directors

Securing thenegotiation period■ We secured a negotiation period of over two months
to negotiate the terms and conditions of the transfer
in order to obtain the most favorable terms andconditions for our Group©2023 Daiwabo Holdings Co., Ltd.

Our decision through the independence process
Reviewed multiple proposals received fromprocess participantsComprehensive consideration of the following main aspects■

Valuation of corporate value of Daiwabo Co., Ltd.

■

Post-transfer management structure■

Certainty of the transfer■

Post-investment strategy for Daiwabo Co., Ltd.

■

Rapidity of transition to the new structure

Aspirant Group’s proposal rated as mostcompetitive3

Impact of the Transfer on Financial Results and Our Approach toShareholder Returns in the Current Fiscal Year
We plan to record an extraordinary loss from the transfer of Daiwabo shares, and the impact on net sales and operating profit isunder scrutiny
We will continue our existing approach to shareholder returns in the current fiscal year, and will also continue to pay interimand year-end dividends

Revision ofearnings
forecast■ We expect to incur an extraordinary loss of approximately ¥17.0 billion in connection with the transfer of
Daiwabo’s shares, and have factored in the impact of the loss in the revised earnings forecast disclosed
today■ We are currently examining the impact of this business portfolio reorganization on net sales and operating
profit, including recent performance trends■ If it becomes necessary to revise the earnings forecast announced today, we will announce it promptly

Our approachto shareholder
returns in thecurrent fiscalyear■No change in the annual dividend amount from the following level disclosed in the “Notice of Dividends of Surplus(Interim Dividends)” on November 9, 2023, despite the extraordinary loss incurred due to the transfer of Daiwabo’s
sharesInterim dividend: ¥32 per share
Year-end dividend: ¥32 per share (planned)■We will maintain the shareholder return policy of the current Medium-Term Management Plan with respect tothe acquisition of treasury shares that we are considering for this fiscal year, and plan to implement it flexibly inlight of our Group’s normal earnings capacity without taking into account the extraordinary loss from thetransfer of Daiwabo’s shares©2023 Daiwabo Holdings Co., Ltd.

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Optimization of investment for growth and shareholder returns
We aim to increase corporate value by optimizing growth investment and shareholder returns through the formulation and implementation of appropriate
investment evaluation criteria
We plan to allocate the cash from the transfer of Daiwabo’s shares appropriately in the next Medium-Term Management Plan, based on the following
approachBusiness expansion
Improvement in profit
marginOperatingcash flow

Working capital
optimization

Liquidity athandPursuit of asset
turnoverDispositionof assets

Optimal capital
structure throughborrowing

Financing©2023 Daiwabo Holdings Co., Ltd.

Business
investment
Exploring
investment
opportunities

Appropriate
risk-taking

Capital efficiency
improvement
Stable returns policy
Scrutiny of required
funds based on
business risk

Growthinvestment

Pursuit of returns inexcess of cost of capital■ Capital investment■ Human capital investment■ Research and■ Marketingdevelopment expenses

Strategic M&A

Disciplined investment
decisions■ Areas that complement our existing businesses■ DX-related areas where market expansion isexpected

Shareholder
returns

Dividend
Sharebuyback

To be stably implemented
based on business growth
To be flexibly implemented in
response to funding needs
and the business environment

Liquidity at
hand5

Formulation of our Purpose
purposeConnecting people and society
to the future with our value chain

We believe that the purpose of the group’s existence is to connect and link people in business, companies, and local communities in the value
chain that consists of various social activities. We will demonstrate our collective strength by focusing on partnership, branding the entire value
chain, and organically collaborating and cooperating with others to address social issues that would be difficult to solve by our group alone.
Also, “Connection to the future” expresses our determination to realize a future with comfort, safety and security, and happiness for people andsociety. We are aiming to achieve this by constantly exploring and experiencing new technologies through the promotion of diverse advanced
IT products and services and through the quest of research and development that can contribute to daily life and many industries, and byfeeding back those technologies to our value chain. We will not only support the infrastructure of modern society but also make a wide rangeof contributions to creating a more comfortable future society by catching changes in the business environment and values.

©2023 Daiwabo Holdings Co., Ltd.

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Formulation of an Ideal Growth Strategy
Based on the newly established purpose, we aim to manage our Group in a way that both solves social issues
and increases our corporate value in a sustainable manner
INPUT

OUTPUT / OUTCOME

Business model■ Financial capital
Stable cash flow to expand business scaleand strengthen financial base

Value provided by ourGroup■ Intellectual and manufacturing capital
Well-developed distribution, production
infrastructure, and unique technicalcapabilities and knowledge

Growth potential■ Human capital
Building a human resource portfolio basedon human resource development for eachbusiness■ Social capital
Strong partnerships with industry andcustomers■ Natural capitalUse of energy and natural materials©2023 Daiwabo Holdings Co., Ltd.

Sustainability■ Creation of social value➤ Advanced digital society• Introduction of advanced technologies fromaround the world• Education without regional disparities throughICT➤ Development of social infrastructure• Circular economy through widespread
subscription• Contribution to industries that support society➤ Contribution to the environment• Sales of environmentally conscious products• Contribution to the renewable energy industry

Building the ideal growthstrategy from these perspectives

Pursuit of optimal businessportfolio to maximize corporatevalue■ Creation of economic value➤ Sustainable enhancement of corporate value• Achievement of Medium-Term ManagementPlan• Improved capital efficiency (ROE and ROIC)• Enhanced shareholder returns* For details, see the Integrated Report issued on November 1, 2023

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https://www.daiwabo-holdings.com/[Disclaimer]
The statements contained in this document regarding the future, such as business performance forecasts,
have been prepared based on certain assumptions that the Company has judged to be reasonable at thepresent time using the information currently available, and the Company does not guarantee their accuracy.
Please understand in advance that actual results may differ from the details of this document due to various
factors from now on. Regardless of the reason, the Company shall bear no responsibility whatsoever withregard to any damage that occurs as a result of using this document.
* The names of companies and products stated in this document are the registered trademarks or trademarks of the respective companies.
©2023 Daiwabo Holdings Co., Ltd.

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