Maruka : Notification Regarding Integration of Maruka Corporation and Furusato Industries Ltd. through Establishment of Joint Holding Company (Share Transfer)

The transactions pursuant to the joint share transfer described in this press release involve securities of a Japanese company. The joint share transfer is subject to disclosure requirements of Japan that are different from those of the United States. Financial information included in this document, if any, was excerpted from financial statements prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.

It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal securities laws, since the issuer is located in Japan and some or all of its officers and directors reside outside of the United States. You may not be able to sue a Japanese company or its officers or directors in a Japanese court for violations of the U.S. securities laws. It may be difficult to compel a Japanese company and its affiliates to subject themselves to a U.S. court's judgment. You should be aware that the issuer may purchase securities otherwise than under the joint share transfer, such as in the open market or through privately negotiated purchases.

This document has been translated from the Japanese-language original for reference purposes only. In the event of any conflict or discrepancy between this document and the Japanese-language original, the Japanese- language original shall prevail in all respects.

May 7, 2021

To whom it may concern:

Company Name:	Maruka Corporation
Representative:	Kunihiko Iida
	President and Representative Director
(Tokyo Stock Exchange Securities Code: 7594)
Contact:	Naoto Shimabayashi
	Executive Officer, Head of
	Administration Division
	(Tel: [phone])
Company Name:	Furusato Industries, Ltd.
Representative:	Ryohei Furusato
	President and Representative Director
(Tokyo Stock Exchange Securities Code: 8087)
Contact:	Taketsugu Fujii
	Director, General Manager of the
	Administration Headquarters
	(Tel: [phone])

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Notification Regarding Integration of Maruka Corporation and Furusato Industries,

Ltd. through Establishment of Joint Holding Company (Share Transfer)

Maruka Corporation ("Maruka") and Furusato Industries, Ltd. ("Furusato") have reached an agreement with respect to the establishment of MARUKA FURUSATO Corporation, which will be the wholly owning parent company of both companies (the "Joint Holding Company"), through a joint share transfer (the "Share Transfer") scheduled to become effective on October 1, 2021 (the "Integration"). As of May 7, 2021, pursuant to the resolution of the respective meetings of the Boards of Directors of Maruka and Furusato held on May 7, 2021, both companies have entered into an agreement on management integration concerning the Integration (the "Integration Agreement"), and have prepared a share transfer plan regarding the Share Transfer (the "Share Transfer Plan"), as described below:

The execution of the Integration and the Share Transfer is subject to the approval of the general meetings of shareholders of Maruka and Furusato, respectively, and any other permits and approvals required for the Integration.

1. Background and Purpose of the Integration

1. Background

Maruka was established in 1946 as a trading company that conducts domestic sales and the import and export of various goods, including paper, woolen textiles, bicycles, bearings and tools. Since then, Maruka has operated a wide range of businesses in Japan and abroad as a trading company specializing in industrial and construction machinery. With respect to the Industrial Machinery Division, Maruka sells machine tools, forming machinery, injection molding machinery and other machinery directly to its customers in Japan and abroad. In particular, through the global network consisting of 23 overseas bases through local subsidiaries in North America, Asia and China, Maruka engages actively in sales activities such as sales and maintenance to local companies and Japanese companies and support to Japanese companies in their overseas expansion. With respect to the Construction Machinery Division, with the aim to expand business areas and to enhance profitability, Maruka acquired Japan Rental Co., Ltd., which operated a rental business of construction machinery and undertook contracting work at height, in 2003, and sells and rents out aerial work platforms, cranes and other vehicles.

Maruka has strived to be a company that meets the expectations of society through its guiding philosophy "Sincerity is Everything in Life", its mottoes "Sincere Service" and "Unique Solutions" and its mission "Customer Satisfaction". As a trading company specializing in machinery that will continue to contribute to the manufacturing of products around the world based on this management spirit, Maruka aims to further strengthen its sales of industrial and construction machinery as well as expanding the business of peripheral categories, such as parts and consumable goods, improving its earning power by strengthening its engineering capability through the incorporation of manufacturer functions into group companies, investing more management resources in overseas markets, expanding into growing fields such as food machinery and EV through M&A, and strengthening management practices by improving profitability.

On the other hand, since its establishment in 1959, Furusato has been engaged in the manufacture, purchase and sale of steel frame building supplies. Amid an increase in market share in a relatively small market and market contraction in a period of slow growth, in 2000, Furusato acquired G-net Corporation, a machine and industrial tool wholesaler, in order to ensure its growth by expanding its business areas, and

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commenced the sales of machines and industrial tools to the domestic manufacturing industry. In 2007, it acquired Gifu Shoji, Co., Ltd. in order to further develop the machine and industrial tool business and build its own strength. Moreover, intending to develop the minor security business as a core business of the Furusato Group, it acquired Security Design, Inc. in 2016, and has been expanding the business in the crime prevention and surveillance market.

The Furusato Group has expresses its ideal through the group philosophy, OUR VISION "Hoping for a sustainable society, being responsible for the continuing growth of the group and our employees work energetically," and specifies what its employees should do in OUR MISSION "Creating value for many people with unique ideas and engaging in meaningful activities." In accordance with this group philosophy, it has set out the group's basic policy "Promoting value-based management by unique ideas." Based on the principle of business portfolio management*, the Furusato Group aims to enhance competitiveness in different businesses, secure a revenue base by pursuing customer satisfaction, create a new business through synergies between businesses, re-challenge overseas business fields, acquire volumes and functions through M&A and alliances and increase corporate value through the promotion of capital cost management.

As described above, both companies have been considering alliances, including their integration, in order to address challenges in their respective business areas, achieve expansion of operation results, enhance corporate value and accelerate further growth and development. By using the strengths of both companies under the platform strategy* for creating optimal value, the companies have come to realize that they will be able to overcome their respective challenges and create even greater synergies.

Under such circumstances, both companies have been engaged in broad discussions for the purpose of maximizing their corporate value since around September 2019. In the course of considering various solutions to its business challenges, Furusato made contact with business consultants and financial institutions, and after considering and discussing measures, including implementing alliances with companies that are in the same business environment and are likely to face similar business challenges, Furusato considered Maruka as a candidate for an alliance company that could be expected to achieve significant synergies and enhance corporate value early. Triggered by the proposal of integration by Furusato to Maruka in June 2020, both companies have commenced full-fledged discussions. On the other hand, Maruka has also been considering business challenges as mentioned above variously, and upon receiving the proposal of management integration from Furusato, Maruka proceeded to consider the resolution of business challenges and the enhancement of corporate value through the proposal. Through these discussions, the companies have confirmed that they can complement their challenges and strengths, and have reached a common understanding that establishing a presence as an engineering trading company is the best way to maximize their corporate value. As a result, Maruka and Furusato have decided to establish a joint holding company to integrate their management based on an equal footing.

• Business portfolio management: Business approach that diversifies risks and secures profitability, stability and growth potential by operating multiple businesses with different business models and economic sensitivities. The current life cycle of each business is identified and management capital is distributed to areas with higher growth potential.
  Moreover, by withdrawing the businesses that have lost a competitive advantage, a viable business portfolio is constructed.
• Platform strategy: A strategy that defines a mechanism for providing optimal value to users in each business as a platform, and continues to seek the perfect form of the required platform by complementing the lacking pieces (functions and scales) in each business area.

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1. Purpose

Through the Integration, both companies will develop their platform strategy by achieving the synergy described below and strive to enhance their corporate value as an engineering trading company that fully supports manufacturing. It is expected that approximately 2 billion yen of synergy effects will be achieved by 2025 on a consolidated operating profit basis.

1. Synergy through increased transaction volumes in machine tools

Although both companies sell a certain amount of machine tools in Japan, most of their brands do not overlap, and cross-selling will enable them to expand the lineup and satisfy the diverse needs of users. In addition, costs will be reduced due to favorable procurement conditions.

With respect to the brands for which both companies have purchasing channels, the transaction volume will be increased as a result of the Integration. Then, by establishing a close relationship with manufacturers, we can provide various benefits such as offering a wider range of products and providing services under better conditions, and we can expect more effects than we can obtain from the total transaction volume, such as strengthening the relationship with users.

Furthermore, by utilizing Maruka's domestic sales channel, both companies strive to achieve a comprehensive solution by providing a one-stop service through the cross-selling of Furusato's equipment and tools and consumable goods centered on peripheral equipment of machine tools with Maruka's machine tools.

(ii) Expansion of robot system integrator business

Both companies have been strengthening their design and engineering functions to strengthen their ability to propose and introduce robotic automation lines, the demand of which is expected to increase, in order to address the declining birthrate and aging population and to improve production efficiency. The expansion of engineering functions and the strengthening of proposal capabilities will contribute to establishing their presence as an engineering trading company, enabling both companies to improve their ability to respond to diverse user needs. With these expanded and enhanced output functions, it is possible to efficiently manufacture and deliver the number of projects expected to increase due to orders of both companies.

(iii) Collaboration in global market

By taking advantage of Maruka's global network consisting of 23 locations, mainly in North America and Asia, both companies will be able to develop high-quality and comprehensive sales operations that include industrial machinery as well as peripheral equipment and consumable goods.

By further expanding their lineup of machinery and peripheral equipment centered on private brands that are developed in Japan and expanding it overseas, both companies strive to meet the user's needs in

1. a one-stop manner.

2. Improvement of ability to generate cash flow through efficiency of management resources and strategic investments
   Both companies strive to improve their ability to generate cash flow by allocating management capital to areas with high growth potential and securing the profitability and stability of the entire group

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through the mutual utilization of domestic and overseas bases and optimization of the allocation of human resources as well as concentrating management resources in strategic areas.

2. Summary of the Share Transfer

1. Schedule of the Share Transfer

Record date for the ordinary general meeting of	March 31, 2021 (Wed)
shareholders (Furusato)
Meeting of board of directors for approval of the	May 7, 2021 (Fri) (Today)
Integration Agreement and the Share Transfer Plan
(both companies)
Conclusion of the Integration Agreement and	May 7, 2021 (Fri) (Today)
preparation of the Share Transfer Plan (both
companies)
Public notice of the record date for the extraordinary	(Scheduled on) May 18, 2021 (Tue)
general meeting of shareholders (Maruka)
Record date for the extraordinary general meeting of	(Scheduled on) June 2, 2021 (Wed)
shareholders (Maruka)
Ordinary general meeting of shareholders for	(Scheduled on) June 21, 2021 (Mon)
approval of the Share Transfer Plan (Furusato)
Extraordinary general meeting of shareholders for	(Scheduled on) July 16, 2021 (Fri)
approval of the Share Transfer Plan (Maruka)
Date of delisting of stocks (both companies)	(Scheduled on) September 29, 2021 (Wed)
Incorporation and registration of the Joint Holding	(Scheduled on) October 1, 2021 (Fri)
Company (Effective date)
Listing of shares of the Joint Holding Company	(Scheduled on) October 1, 2021 (Fri)

During the procedures, the above schedule is subject to change upon consultation between both companies if the necessity arises in the course of the proceedings for the Integration or under any other circumstances.

1. Method of the Share Transfer

The Share Transfer will consist of a joint share transfer whereby Maruka and Furusato will become the wholly owned subsidiaries and the newly established Joint Holding Company will become the wholly owning parent company.

1. Details of Allotment in the Share Transfer (Share Transfer Ratio)

	Furusato	Maruka
Share Transfer Ratio	1	1.29

(Note 1) Details of Share Allotment in the Share Transfer

One (1) share of common stock of the Joint Holding Company for One (1) share of common stock of Furusato, and 1.29 share of common stock of the Joint Holding Company for One (1) share of common stock of Maruka will be allotted. Provided, however, that the above share transfer ratio is subject to change upon consultation between both companies in the event of any material change to the conditions upon which the calculations are based.

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