Notice Regarding the Offering of the 1st Series Stock Options and the 1st Series Unsecured Convertible Bond with Stock Acquisition Rights Issued by Third-Party Allotment

Overview of the Offering

At the board meeting held on April 30, 2026, Mitsubishi Pencil Co., Ltd. resolved to allocate 8,169 units of 1st Series Stock Options and unsecured convertible bonds with stock acquisition rights totaling approximately 10 billion yen to AP PS IV S2, L.P. via third-party allotment. The payment date is scheduled for May 19, 2026. The exercise price is set at 2,448 yen per share (premium 0.45%), subject to downward adjustment depending on stock price revisions on reset dates. The number of potential shares is approximately 4.9 million (at initial exercise price), which corresponds to about 8.16% of the outstanding shares.

Use and Purpose of the Raised Funds

The approximately 12 billion yen raised will be allocated to: (1) repayment of loans related to share buyback by May 2026 (about 10 billion yen), (2) additional investment for growth in the overseas writing instruments business from May 2026 to May 2031 (about 1.5 billion yen), and (3) additional investment to optimize the global supply chain during the same period (about 0.5 billion yen). These actions aim to enhance corporate value and achieve sustainable growth. Additionally, a business alliance with Advantage Partners will be advanced simultaneously to receive management support.

Impact on Shareholders and Dilution Measures

The number of potential shares represents approximately 8.16% of the outstanding shares (at the initial exercise price) and could reach up to approximately 10.08% (at the lower limit exercise price). To mitigate share dilution, the company plans to conduct a share buyback of up to 4.2 million shares on May 1, 2026. The allottee has agreed to gradually exercise rights after May 19, 2027, to suppress short-term impacts on the stock market.

Rationality of Issuance Terms and Third-Party Evaluation

Issuance terms were determined based on evaluations conducted by independent third-party institution Plutus Consulting using Monte Carlo simulations. The exercise and conversion prices are linked to market prices and are judged not to be excessively low. The Audit & Supervisory Board also confirmed the rationality of the terms, certifying they are not particularly favorable to the allottee.

Overview and Selection Rationale of the Allottee

The allottee is AP PS IV S2, L.P., an investment fund established in the Cayman Islands, with services provided by Advantage Partners. The purpose includes not only financing but also management support and utilization of networks, aiming for the company’s medium- to long-term growth and corporate value enhancement. Investigations have denied any connections with antisocial forces.

Future Prospects

This third-party allotment fundraising is expected to have a minimal impact on current term results while strengthening equity capital and the financial base. The company plans to leverage management, financial, sales, and recruitment advice from Advantage Partners to drive management reforms amid a challenging economic environment.