Avant : Creative Dialog with Investors

Creative Dialog with Investors

Growth Strategy

Business StrategyESGData Section

Purpose of the Dialog

As we have no debt, our cost of capital is effectively equal to our cost of equity, which we calculate using the CAPM and recognize as 6.6% to 7.9%. Although we maintain a sufficient equity spread with an ROE around the 20% level, we are actively engaging in dialog with investors to find ways to lower the cost of capital and further increase corporate value.

We also gain insights from investors' questions and sugges-tions and apply them to our strategy considerations, linking the dialog to increasing corporate value by increasing free cash flow.

Dialog Content and Response

Institutional investor comments

Investors appear to view the key market in the medium-term management plan as the market for the business management solutions business. Investors are keen to understand more about how Avant Group's products work, their strengths and weak- nesses, and the specific benefits for customers. These explanations help better convey the growth story of the Avant Group.

Our response

We once again have been reminded that we are unable to provide solutions that offer greater clarity, but are working on improving our how we can respond.

We will disclose information as and when specifics become available. At the Q2 FY6/2024 financial results meeting, we will walk through a demonstration of the TRINITY BOARD and an explanation of the AVANT Cruise product will be provided.

Risk-free rate

0.6-0.7%

Set based on 10-year JGB yield

β

1.0-1.2%

Set from 2-5 years x daily, weekly, monthly

Risk premium

6%

Set from historical stock market returns

Cost of equity

6.6-7.9% range

Number and Frequency of Investor Interactions (Fiscal year ended June 2023 and first half of fiscal year ending June 2024)

With the intention of creative dialog, IR activities are targeted with institutional investors. Specifically, our main target is over-seas growth-style investors, but we also engage in dialog with GARP (Growth At Reasonable Price) style and hedge funds, con-sidering the diversity of investment perspectives.

We also combine online interviews as appropriate with onsite interviews, taking into account the influence of each investor in the U.S., Europe, and Hong Kong/Singapore.

Main IR ActivitiesInvestor Interactions

Others

We feel it is important to have a more focused dialog with investors about the drivers of Avant Group's growth rather than projections of future performance.

We want to better understand what leading indicators can offer pointers to the progress of growth.

Our response

C-level management are discussing and refining the drivers of sales growth and margin improvement, and critical success factors (CSFs) that are highly important for the achievement of the medium-term management plan, at Group manage-ment meetings.

We are bolstering our management of quantitative data to enable ongoing disclosure.

We believe that share buybacks can send a message that the stock price is undervalued. I think the value of such transac-tions will increase as more of the company's own shares are repurchased. If we are able to show more clearly how cash is being used, I think the market may change its perception and understand how management resources are being directed toward growth.

Our response

Capital allocation is clearly stated, and the scale of shareholder return through investment in growth and dividends is avail-able to investors. The company will then consider acquiring shares from the market as appropriate, taking into account the merits of how these shares can be best used, both as additional returns to shareholders, as well as incentive compensation for employees or a supplementary means of payment in M&A transactions.

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AVANT GROUPINTEGRATED REPORT 2023

SHINGO MOROI

Our focus is on international institutional investors, especially growth and GARP style investors. While we aim to have them become our shareholders and hold our shares for the long term, we also place importance on having these investors eval-uate our strategy from a long-termperspective. We aim to improve our strat-egy based on the suggestions we get from these types of dialog. It is also our inten-tion that dialog does not end at that point in time, but will continue during the imple-mentation phase to help drive success of the strategy.

Group CSO, Executive Officer Director, Avant Corporation

AVANT GROUPINTEGRATED REPORT 2023

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GROUP CSO MESSAGE