Universe

OTANI

BELJOISIto Chain

FUKUHARA

Douhoku Arcs

Doutou Arcs

Dounan Ralse

TOKOU STORE

Lifeline for each community

RALSE

ELDy

ARCS COMPANY, LIMITED
11-2-32, Minami 13-jo Nishi, Chuo-ku, Sapporo, Hokkaido 064-8610, JAPAN
Tel.011-530-1000（main）

Fax.011-530-1010

www.arcs-g.co.jp

Integrated Report 2 0 2 3

Company name and symbol
C ON T E N T S
Company name and symbol
The ARCS Group in Figures
What is the ARCS Group
ARCS Group Philosophy

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President's Message
Interview with Vice President

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Sustainability
Sustainability Policy and Structure
Materiality
 Coexistence with local communities
Consideration for Environment
Contributing to affluent lifestyles of customers
Promoting Diversity and Inclusion

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Key Strategies
Logistics Strategy
Merchandising Strategy
DX Strategy
Human Capital Strategy

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Group synergies
Market share
Group Companies
 RALSE
Universe
BELJOISFUKUHARA
Douhoku Arcs
TOKOU STORE
Dounan Ralse
Doutou Arcs
Ito Chain
OTANI
ELDy

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Key Indicators
Financial and Non-Financial Highlights
Corporate and Stock Information

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01

47
49
51
53
55
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61

It means "contributing to the local community".
ARCS also consists the initials of Always, Rising, Community, and Service,
Each letter has following meanings.

AlwaysWe always have what you need at your fingertips.
The ARCS Group always wishes to be close partners to our customers.

RisingWe are working on various innovations to contribute to our customers'
more affluent lifestyles. Your smiles feel us joy of work.

Community
Always we are committed to providing safe and secure merchandiseand services for the local community.

Service
We strive to make decisions based on good matters rather than profit
from the customer's point of view. Our employees continue to provide
customer service training.

Abstract image of the sun andshining stars. The group symbol

Symbolof the ARCS is, Expresses theconnection between the Groupand our customers, Symbolizes
our challenge toward the future.
Symbol colors are,● RED＝Sun＝Life● YELLOW＝Star＝HappinessGovernanceCorporate Governance
Messages from Outside Director
Directors and Officers
Skill Matrix
Compliance and Risk Management

Each company draws a strong arc and creates a large circle (ARCS).

A
R
C
S

Value Creation
Value Creation Story
Value Creation Process of the ARCS GROUP
Stakeholder Communication
Business Model"ARCS" comes from "arc".

Editorial Policy
This report is intended to provide all current and future stakeholders with an understanding of the ARCS Group's approach tosustainable growth and its efforts to create medium and long term economic and social value, as well as a comprehensive descriptionof our values and strengths, strategies and plans for sustainable growth, including medium and long term management policies, financial
and non-financial information. In particular, we focused on consistency with the management philosophy and connection with the value
creation story, and tried to make the simple and easy to understand description, including the business overview. For this report, wehave referred to the "Guidance on Integrated Disclosure and Dialogue for Value Creation" issued by the Ministry of Economy, Trade andIndustry (METI) and the "International Integrated Reporting Framework" issued by the International Integrated Reporting Council (IIRC).

ARCS INTEGRATED REPORT 2023

02

The ARCS Group in Figures (FY 2023)
To be a lifeline for the community continuously, Yatsugatake Mountains Range Management that combines
economies of scale with close ties to each community management and continuous expansion.

566.2

220

Consolidated Net sales

Visiting number of customers per year

billion yen

million

ARCS has the fourth largest sales among listed food supermarkets

ARCS Group's food supermarkets are visited by a total of 220 million

in Japan.

16.4

Ordinary income

billion yen

customers annually, more than 600,000 customers per day.

2.9

Ordinary Income Ratio

％

84.8

Food Segment Ratio％

Among listed food supermarkets in Japan, ARCS ranks fifth

Our ordinary income Ratio has been stable around 3%.

6.3

Number of stores

373

Number of cardholders

storesmillionin Hokkaido, Tohoku, and northern Kanto.

group increased by 80,000 in FY 2022, exceeding 3.21 million.

in terms of ordinary income.

ROA％

ROA has continuously remained above 6%.

ARCS Group operates 373 stores, mainly food supermarkets,

274,000

Number of merchandise handled

items

Food products account for more than 80% of sales.

All of merchandise items are controlled by the group's

3.21

Percentage of cardholder sales

The number of active members of "ARCS RARA card" of ourIntegrated system platform.

73.8

％

Over 70% of customers who visit our stores present their
ARCS RARA card.

*Sales by cardholders as a percentage of total sales

30,000

Number of Employees

Approximately 30,000 employees support the local lifelines.

65

Number of municipalities with disaster prevention agreements

time building a local operating base and trusting relationships.

agreements for disasters with local governments.

Average years of establishment of supermarket companies

years

The ten food supermarkets in our group have spent a long39

municipalities

All of our operating companies have concluded cooperation*Calculated based on food supermarket companies.

03

ARCS INTEGRATED REPORT 2023

04

What is the ARCS Group
Group Operation by Yatsugatake Mountain Range Management
Under a holding company, a group of mountains of similar height, like theYatsugatake mountain range, is working side by side to govern themselves on an

ARCS Groupequal footing, keeping the distance between the company and their customers

The ARCS Group is a food distribution group with 10

short, while enlarging the management resources of the entire group and expanding

food supermarkets and one other operating company

the group's infrastructure. We advocate Yatsugatake Mountain Range Management.

with locations in Hokkaido, Tohoku, and northern
Kanto. ARCS COMPANY,LIMITED

is a pure holding■ Formulate strategies and guidelines for theGroup as a whole

company that owns shares of the operating companies■ Capital control as a pure holding company ofand, as a parent company, supervise the entire group

operating companies

and formulates strategies.

■ Investigate further Yatsugatake Mountain

Range Management

The operating companies are engaged in communitybased food supermarket and related businesses
following the strategy of ARCS.

Corporate Statement
Our corporate statement, "Bridge on the Rich Land
for Your Life," expresses our fundamental conceptof what we are. This is based on our thought to build

ELDy

RALSE

Food
Supermarket

Universe

BELJOISFUKUHARA

Douhoku Arcs

TOKOU STORE

Dounan Ralse

Food
Supermarket

Food
Supermarket

Food
Supermarket

Food
Supermarket

Food
Supermarket

Food
Supermarket

Doutou Arcs
Food
Supermarket

Ito Chain

Food
Supermarket

OTANI

Food
Supermarket

Home improvement,
building maintenance,
insurance, resources
environment, travel

dominant areas in each region and provide fresh, safe,
and secure food products to customers, and serve asa bridge between production areas and customers,
as well as a bridge between local companies with thesame aspirations as us as such, it will be a receptacle
to compete with major retail companies.

Yatsugatake mountain range

Bridge on the Rich Land for Your Life

What is "Yatsugatake Mountain Range Management"?
In an editorial titled "Urgent Establishment of New Japanese-style Management" by the late Kotaro
Higuchi, former honorary chairman of Asahi Breweries, Ltd. in the May 11, 2000 Nihon Keizai
Shimbun, he wrote: "...A company like Mt. Fuji may look good, but it is inevitably distant from its
customers and cannot respond to their needs carefully. From now on, group management in which
companies of roughly the same size are lined up, like the Yatsugatake mountain range, is required".
"Instead of corporate integration that aims for a tall and large corporate entity like Mt. Fuji, corporate
integration under a holding company, with mountains of similar height lined up side by side likethe Yatsugatake mountain range, on an equal footing, will allow the company to keep the distance
between it and its customers short, while at the same time allowing the entire group's management
resources to be enlanged and the group's foundation to be built upon. This is the basic conceptthat underlies the management of the ARCS Group. We received permission to use the phrase"Yatsugatake Mountain Range Management" from the late former Honorary Chairman Higuchi by apiece of autograph paper.

05

ARCS INTEGRATED REPORT 2023

06

ARCS Group Philosophy
The philosophy system of the ARCS Group is based on the Group Philosophy, which is thebasic approach for the Group. It comprised of "Group Management Policy" and "Group Codeof Conduct".

ARCS Group becomes a lifeline for each community.

Group

Philosophy

We contribute to affluent lifestyles by providing valuable merchandiseand services at low prices.
As a basic approach to clarify in what areas we should fulfill our social mission, theARCS Group philosophy, which is shared by all group companies, is to "contributeto affluent lifestyles by providing valuable merchandise and services at low
prices as a lifeline for each community". The term "lifeline" usually refers to thesocial network systems (electricity, gas, water, etc.) for the basis of life, the food
distribution is also an important social infrastructure for sustaining life.

Group

Philosophy

Group

Management
Policy1.Customer-first policy
2.Yatsugatake Mountain Range Management
3.Sound management and steady growth
4.Pursuit of low price and low cost
5.Disclosure and compliance
Our group is an aggregation of various companies. We share the same fundamental

Group

Management
Policyphilosophy, and each group company also has its own culture. Therefore , itGroup

Code of
Conduct(Arcs Way)is essential to have a basic philosophy in order to conduct unified actions andactivities as a group, and we have established the above management policy.

Group

Code of
Conduct(Arcs Way)We are,1.Think and act for our customers.
We always think of our customers and act to their satisfaction.

2.Based on right rather than profit
We will always comply with laws, regulations, and social norms, and conduct with thehighest ethical standards.

3.Contribute to safe, secure, and comfortable living
We will always contribute to the community by providing safe and secure goods andservices.

4.Respect and deal with each other with integrity.
We will always treat our shareholders, suppliers, employees and families with respect andintegrity.

5.Think independently and challenge ourselves to realize our dreams
We will always strive to realize our dreams while thinking and acting for ourselves andfeeling the joy of working.

In order to embody the Group Philosophy and the Group Management Policy, we
have established the Arcs Way, a set of action guidelines. We believe that thegroup philosophy can be put into practice by each employee acting on the premiseof the code of conduct.

07

ARCS INTEGRATED REPORT 2023

08

President’s Message

An era of Value Transformation. Leveraging"Yatsugatake Mountain Range Management"that responds quickly to any changes, we will be
expanding the regional lifeline function and will
deepen stakeholder communication.

20 years of building the foundation as regional lifelines
The ARCS Group has been established in November 2002 with the merger of RALSE(Sapporo City) and FUKUHARA (Obihiro City) in Hokkaido, resulting in a pure holding
company ARCS and two operating subsidiaries. Subsequently, some of leading regional
food supermarkets joined the group, and in April 2021, OTANI (Utsunomiya City, Tochigi
Prefecture) joined as a recent, ARCS Group could celebrate its 20th anniversary.
In order for a supermarket to be viable and continue to operate as a business, it isessential to be prepared to hedge risks while keeping an eye on trends in foreign exchange
rates and prices. It is not enough to have a large scale of business but is also necessary tohave a sound financial position through the Everyday Low Cost (EDLC).
Some of the operating companies had partial problems such as business succession
and cash flow and so on, but I believe that we have come to this day as a result of ourcommon understanding of the business environment and our efforts over the years with thecompanies in the retail industry.
The companies had a history of more than 50 years before joining the ARCS Group, andthrough M&A (Mind & Agreement: agreement of minds and opinions), we were able to form a
corporate group as one of the industry's leading players.
Over the past 20 years, the ARCS Group has been building the foundation to achieve its
mission statement, "The ARCS Group, as a regional lifeline, contributes to affluent lifestyles
of customers by providing valuable merchandise and services at low prices”.

Representative Director and President

In detail, we have been promoting a generational shift in management and remodeling/reconstruction of stores.
To continue to provide customers with valuable merchandise at low prices, we refrainfrom excessive investment and always keep in mind cost-effectiveness in our management.

Kiyoshi Yokoyama

We intend to take future measures based on the low-cost structure we have built over theyears.
*In general, M&A means "Merger and Acquisition", but ARCS M&A means "Mind and Agreement".

09

ARCS INTEGRATED REPORT 2023

10

President’s Message

New Year's Messages with my thoughts - What is Value
Transformation from Behavior Change?
For the ARCS Group to create value, it is necessary to open stores everyday as places
for co-creating value with stakeholders and for employees to continue their daily work.
However, as Market environment continues to change, it is difficult for employees tothink about how customers spent its daily life, and because the ARCS Group philosophy isuniversal, it tends to be weakly connected to daily work.
Therefore, at the beginning of each year, I write a New Year's message in my handwriting
with a brush so that all Group companies can share the same awareness of our philosophy,
and so that it becomes an easy-to-understand watchword.
As the number of ARCS Group companies and associates continue to grow, I feel that
my New Year's Messages help to create each company's short-, medium-, and long-termbusiness plans. As a communication tool for the Group's 30,000 employees, I try to choose
words and sentence that is easy to understand.
At the beginning of my New Year's message for 2023, there are "This is a time of valuetransformation”. As our customers' values are changing and their lifestyles do not returnto the past, we must continue to respond to their changing needs. We have been fighting
against price hikes in the past, but we recognize that we have entered a different era. We
cannot accept price hikes that we do not agree with, but we must keep an eye on prices
while at the same time ensuring that we provide our customers with food products for their
daily tables. The "transition to the new pricing system" means that even during price hike,we must provide value and prices that satisfy our customers' needs, which is our mission asa supermarket operator.
A "happy life" is basically something that can only be achieved when one has an affluent
mind.

Be closer and more useful to our customers
Improving Corporate Governance through Yatsugatake Mountain
Range Management
Yatsugatake Mountain Range Management is our management style.
A pure holding company and operating subsidiaries similar like mountains standing side byside of the Yatsugatake mountain range govern keeping each company and its customers
close together.
The advantage of Yatsugatake Mountain Range Management is that it allows each operatingcompany to be unique and maintain the same perspective as the local customers. Conversely,
if there is a disadvantage, it is the possibility of heading in the direction of disunity. The
corporate governance of the ARCS Group is based on "Mind & Agreement," which meansgroup companies mutual respect for each individuality while at the same time overcoming
differences of opinion, finding points of agreement, and doing our utmost to achieve what has
been decided.
Our corporate culture has been cultivated in the honest implementation of management
resources toward the determined goals.
ARCS Group's fiscal year begins with the breakdown of the New Year's Message intobusiness plans for each operating company, which are then implemented, verified, andcountermeasures repeated on a monthly, weekly, and daily cycle at the department anddivision level. There is no end to corporate governance, and as continuity is a matter ofcourse, we are determined to improve the level of our corporate governance with daily basis.

ARCS Group will be a closer to stakeholders through SHINKUI(action, statement, and awareness)

If our customers only consider to saving their times of shopping, they may be able tochoose eating out or using online shopping.

The ARCS Group must continue to fulfill its role as a listed company as well as a lifeline
for the community. Our major business is operating supermarkets, so we can create value
by providing usefulness to customers and by bringing them happiness. We are investing toenhance our function as a regional lifeline, and we will also create environmental and social
value while continuing to reduce costs and improve productivity in accordance with theconcept of ESG investment.
The word "SANMITSU" is often heard under Covid-19 pandemic, whereas in esoteric
Buddhism, "SANMITSU" means to align action, behavior, and consciousness (SHINKUI) andto activate communication. We must become closer to our customers and more useful tothem, at the same time, disclosure of ourcorporate activities must be recognized asa significant action to all of stakeholders.
The ARCS Group will continue to make thenecessary investments to create value on
the foundation that has been cultivatedduring these 20 years.
We have produced this integrated report
to disclose and explain the culmination of ourefforts to date and our future policies. We hopethat all our stakeholders will look forward to
the further growth of the ARCS Group, and we
thank you for your continuous support.

In fact, the "ARCS Online Shop*" has come inhandy during times when it is difficult to go out,
such as when there is a heavy snowfall.
On the other hand, we are committed tocreate a happy life for our customers that
includes the pleasure and happiness of eatingwith family members while selecting foodstuffs
at ARCS Group stores and cooking them athome.
For a long time, we have specialized insupermarket business as a food retailers, but
now drugstores and some other categories
of retailers also handle food products. Now
that food prices are in an upward phase alongwith rising prices, our skills as "food and fresh
produce specialists" of many years will be morevaluable to the customers. We will demonstrate
our experience and know-how as an "essential
worker" who opens a store every day.
*ARCS Online Shop・・・Online supermarket, as of the end of February 2023,
it has been introduced at RALSE11

New Year's Message for 2023

P62

Description of「SHINKUI」and calligraphy by Yokoyama

ARCS INTEGRATED REPORT 2023

12

Interview with Vice President

governance in effect. Every decision is thoroughly discussed, and the criterion for judgment
is whether it is in line with the ARCS Group's philosophy.
As each group company operates food supermarket business, we place the highest
priority on our customers among our stakeholders. On the other hand, from the perspectiveof corporate governance for the entire group, we will continue to operate the group in
the future with both the establishment of a business model and corporate governanceby disclosing information to all stakeholders in a timely and appropriate manner for thesustainable growth of our business.

Director and Executive
Vice President

Koichi
Furukawa
Looking Back on 20 Years of ARCS's Establishment～Aiming to the financial strength and sound management~

In 2022, the year that marks the 20th anniversary of the establishment of the ARCS
Group, we see the year as marking a major milestone in the framework of the world
economy, broadly speaking, the shift from a global economy to a block economy,
which naturally affects the Japanese economy and society as well. In this context,
the ARCS Group has been striving to strengthen its corporate financial position
and achieve sound management, although it can be said that we are halfway there.
As a coalition of food supermarkets representing each region, we have adopted
a structure in which operating companies are linked under the umbrella of a pureholding company, and we recognize that the management of this structure is maturing.
The role of the pure holding company ARCS is to provide a management base that takes
advantage of the economies of scale of the entire group and to strengthen the financialbase so that the operating companies can run stores that face customers in the same way
and can continuously and stably conduct everything from product procurement to sales.
On the other hand, the role of stores operated by operating companies is to continue to beclose to customers in the community, but to do so, it is necessary to notice and sense thechanges in customers' values and accompanying changes in behavior. Customers' lifestyles
change day by day, as do their eating habits, so all we should do is to continue to provide
merchandise that meet their needs in our stores on a day-to-day basis through steady efforts.
The ARCS Group is a group of fellow who have come together under the M&A (Mind & Agreement:
agreement of minds and opinions) concept, therefore we share a common understanding with each
operating company to co-create value together, and we are proud to be a group that can do so.

Governance Structure～Group Governance and Business Model are two wheels~
The corporate governance of the ARCS Group may not appear outwardly different
from that of other companies, but we are proud to say that we have a substantial level of

13

The Yatsugatake Mountain Range Management also needs to develop a next-generation
system. We must continue to train and produce practitioners and evangelists of the ARCS Groupphilosophy and remain close to our customers. We will evolve our management system with themind of a small- to medium-sized company, without becoming big company disease.

Sustainability Activities~ Proactively express and disclose initiatives~
In fiscal year 2022, the Sustainability Promotion Office was established at ARCS COMPANY
LIMITED as a dedicated department. Under the Group's common sustainability promotion
policy, it has worked to visualize and standardize the efforts of each company. In fiscal year
2023, we will set quantitative goals for the Group's common initiatives and further enhance thepromotion of activities by implementing the PDCA cycle. The Board of Directors has reaffirmedthat our mission as a TSE Prime listed company is not only to create economic value, but also
to create social and environmental value at the same time, and that we will express this in ourvalue creation process. We will incorporate the concept of sustainability into our corporate
governance as an explicit goal, and we will actively engage in information disclosure.

Medium- and Long-term Issues for the ARCS Group~Promoting the achievement of financial and non-financial KPIs and human resource development~
Among its key management indicators, the ARCS Group places importance on return on
assets (ROA) and asset turnover and sets medium- and long-term targets of ROA of 10% ormore and asset turnover of 3 or more. These are indicators for healthy growth of the foodsupermarket business.
We will also work to further improve return on equity (ROE) through continuous profit growthand efficient management of capital in each fiscal year.
In addition to financial KPIs, we will incorporate KPIs in the promotion of sustainability into
our management targets, and promote medium- to long-term initiatives aimed at integrated
management that creates synergy between financial and non-financial targets.
In order to put the ARCS Group Philosophy into practice, we must continue to identify
what makes our customers' lives affluent and what makes our merchandise and services
valuable, and put them into practice in our stores on a daily basis. In this sense, we consider"Human Capital" to be the most important management resource. Sustainable growth of
a company is possible only when it has employees who can think and act on their own
in matters other than manuals. To repeat daily business and daily work and to become alifeline for the community, we cannot remain the same as before, so must repeatedly change
and take on new challenges. Our customers are each one of them is different, so we mustchange as well. This kind of DNA is in place from the management down to all employees.
Now it is up to us to pass it on to the next generation.
Based on what the ARCS group has achieved and nurtured over the past 20 years, I
would like to create a workplace where all employees of the Group can feel a sense of
purpose and joy in working at ARCS, and I believe that give back to all of our stakeholders.

ARCS INTEGRATED REPORT 2023

14

Value Creation

Sustainability

Key strategies

Group synergies

GovernanceValue Creation Story"We have been striving as a local food supermarket that
inherits the universal value of contribute to affluent lifestyles
as a lifeline for the community and we have continuously
undertaken challenges in accordance with the times."
We are developing our business with the thought to build a dominant area in each region and provide fresh, safe foodproducts to our customers, thereby becoming a bridge between the production area and the customers, and also to
become a bridge between local companies with the same aspiration as us to compete with major distribution companies.

Historyof M&AStore opening of Daimaru Super

1995

Company name changed to RALSE.

2000

Merged with Marutomo Sangyo,
operator of "Kinichikan" clothingmass merchandiser. Company namechanged to RALSE (now ARCS).
Capital participation in Iwai to makeits liquor sales business a subsidiary.

Universe and Shinohara Shoten joined
The company changes its name from RALSE
to ARCS and transitions to a pure holding
company. At the same time, FUKUHARA (45stores at the time) in Obihiro City, and the
newly established RALSE (48 stores at thetime) become subsidiaries.

Expansion to Southern Hokkaido

Hokkaido Ryutsu Kikaku (19 stores at thetime) in Hakodate City, becomes a subsidiaryand changes its name to Dounan Ralse.

Belle Plus joined

Belle Plus (now BELJOIS, 29 storesat the time) in Morioka City, Iwate
Prefecture, becomes a subsidiary.

Shinohara Shoten (now Doutou Arcs,
3 stores at the time) in Abashiri City,
Hokkaido, becomes a subsidiary.

Doutou Ralse and Shinohara
Shoten merge and change tradename to Doutou Arcs.

Listed on the First Section of
the Tokyo Stock Exchange

Listed on the Second Section of
the Tokyo Stock Exchange

Listed on the
Sapporo Stock Exchange

Sales exceeded

500

billion yen

Sales exceeded

400

billion yen

Sales exceeded

300

Ordinary income margin ofbillion yen

Sales exceeded

200

3.2％

(post-establishment average)

Ordinary Income(Unit: billion yen)billion yen

15
10
5

1945 1961 1973

End ofwar

2014

JOIS and Belle Plus merge
and change corporate name to
BELJOIS.

Fuji (now Douhoku Arcs, 22
stores at the time) in Asahikawa
City, becomes a subsidiary.

300

OTANI joined

2016

Fuji joined

500

200

Universe (47 stores at the time) in
Hachinohe City, Aomori Prefecture,
becomes a subsidiary.

Capital participation in HomeStoreto make it a subsidiary

Net sales(Unit: billion yen)

2021

OTANI (31 stores) in Utsunomiya
City, Tochigi Prefecture, becomesa subsidiary.

Expansion to Muroranarea (Hokkaido)

400

Fuji and Douhoku Ralse merge andchange name to Douhoku Arcs

Ito Chain (9 stores at that time) in
Shibata-gun, Miyagi Prefecture,
becomes a subsidiary.

Transition to TSE
Prime Market

Eight stores are transferredfrom Mishima in Shibetsu City,
Hokkaido to Douhoku Ralse(now Douhoku Arcs)

1989

2011

JOIS (now BELJOIS, 35 stores at
the time) in Morioka City, Iwate
Prefecture, becomes a subsidiary.

2004

Daimaru Kenso (now ELDy)
becomes a subsidiary.

ARCS is established.

15

Acquired Lifeport pharmaceuticalsales business as a subsidiary(now ELDy)

Expansion to Northern
Hokkaido

1987

100

Trendsof the
times

1996

1997

Company name changed to
Daimaru Super Co.

Sapporo Tokyu Store joined

Sapporo Tokyu Store (now TOKOUSTORE, 28 stores at the time) in
Sapporo City, becomes a subsidiary.

Expansion to Eastern
Hokkaido

Daimaru Super established.

The ARCS Group continues to grow sustainably in the spirit of M&A(Mind & Agreement: agreement of minds and opinions), in which

like-minded companies work together to achieve their goals.

1969

JOIS joined

2009

ARCS is established (FUKUHARA joins)

Capital participation in Ichiwa in
Kitami City, Hokkaido, making it
a subsidiary (now Doutou Arcs)

Daimaru Super (now ARCS)
established in Sapporo City, Hokkaido

Ito Chain joined

2012

2002

Predecessor company of ARCS

1961

2019

Oil crisis

1991

Bubble economy
collapses

Predecessor of ARCS

2002

2004

2005

2008

The collapse of Lehman Brothers

Rallying within Hokkaido from the begining of ARCS

2010

2011

2012

Great East Japan
Earthquake

2014

2015

consumption
tax increase to 8%

Expansion to Tohoku

2019

2020

consumption tax increase to 10%(excluding food)2022
Spread of
COVID-19 infection

Expansion to Northern Kanto*The "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and others are applied from the fiscal year 2022, and the sales
figures for fiscal year 2022 are after the application of the said accounting standard and others.

ARCS INTEGRATED REPORT 2023

16

Value Creation

Sustainability

Key strategies

Group synergies

GovernanceValue Creation Process of the ARCS GroupThe ARCS Group believes that our greatest capital accumulation is the relationship of trust it has built with its stakeholders over many years ofoperating a food supermarket business in the region. Based on this relationship of trust, we view the most important business process as continuing
to live up to the trust of our customers by accurately grasping the external environment and continuing our daily PDCA cycle based on the Group's

Sustainability Promotion

philosophy and New Year's Messages. As a result, we believe that the source of our sustainable growth is the "value co-creation cycle," in whichP21

we not only expand our own operations, but also create social and environmental value and develop the sustainability of the community.

Coexistencewith local
communities

External environment

inputInternational trend

Domestic economy, consumption and industry

2023-2030 Trends▪Climate Change and Environmental Issues▪Declining population, declining birthrate and aging population▪Coexistence of real and digital▪Shift to ESG Management▪Diversification of values and lifestyles▪Labor Shortage▪Growing awareness of sustainable growth

The ARCS Group's Strengths(Management Resources)▪Impact of Overseas Economic and Price Trends▪Efficiency through DX▪Continued restructuring of retail industry▪Transformation to a decarbonized society

Value and Outcomes
Created by the ARCS Group

Social and relational capital▪Regional coverage(Hokkaido, Tohoku, Northern Kanto)

ARCS Group Philosophy▪Customer base (3.21
million RARA cardholders)▪220 million store visits per year

Annually fitting by
New Year's Messages Continues

ConsiderationforEnvironment

business
model

Manufacturing and sales capital

Practice through▪19 process centers

Monthly, weekly, and daily measures

Store Operations▪13 distribution
centers

Quarterly and semi-annual plan
revisions▪Ordinary income▪ROA▪Cash Flow

Merchandise Policy and Planning

Sales plan

Plan

Check

▪Know-how on procurementof commodities

S

Social value▪Lifeline for the community▪Local production for local consumption

Pricing

Intragroup Comparison▪Contribute to a decarbonized,
circular economy
P25▪Contributing to affluent lifestyle

Procurement

Confirmation of sales trends and productivity▪Group Integration (Information) Infrastructure

Contributing
to affluent
lifestyles ofcustomers

Do

Monthly, weekly, daily, and hourly▪Food supermarket management know-how▪Environmental Impact
Reduction

Investment plan

ActionIntellectual capital▪Social Contribution Activities(Fund, Scholarship)

Store operations

P23

Douhoku Arcs

P27

Doutou Arcs

Human capital▪Employees' experience,skills, and qualifications

PromotingDiversity andInclusion

Dounan Ralse

Key Strategies
Pursuit of low-price, low-cost operations

Financial capitalthat support efficient management▪Short-term financial strength (cash and cash equivalents)

P29▪Investment Capacity: Shareholders' Equity

G

M＆A（Mind ＆Agreement：
agreement of minds
and opinions）

Corporate Governance

Logistics
Strategy

P47

ARCS sublimates the insights gained from communication
with stakeholders into management resources,

Value Co-Creation
17

Economic value

E Environmental value

PDCA Cycle▪373 stores

OutcomeMerchandising
StrategyDX
Strategy

Human
CapitalStrategy

Increase in the value of management resources▪Human Capital Accumulation▪Intellectual capital accumulation▪Manufacturing and sales
capital Accumulation

Under the Yatsugatake Mountain Range Management, balance between decisionmaking based on the Group's philosophy and the autonomy of operating companies

and applies human capital, goods, money, information, and thoughts(philosophy) to daily store operations to achieve sustainable growth.

Cycle
ARCS INTEGRATED REPORT 2023

18

Value Creation

Sustainability

Key strategies

Group synergies

GovernancePursuit of creating ideal stores based on stakeholder communication
We believe that maintaining a relationshipwith our stakeholders and reflecting their

We provide safe andis important for the promotion ofsustainable business activities.
We will proactively establish various
communication channels to deepen
mutual understanding and reflect
stakeholders' perspectives in our store

Creating a system to "contribute to affluent lifestyles by providing valuable
merchandise and services at low prices as a lifeline for the community"

Our Customers

views in our day-to-day store operations

reliable merchandiseand services inShareholders and investors

response to various

We will enhance our efforts

customers’ requests.

to sustainably increase

and accountability.

w

a y t o c r e at e

A RC

networks for future generations.

self-realization and work withpeace of mind.

capabilities, developing a delivery network with efficient logistics, effectively utilizing the Group's integrated information
infrastructure, and realizing an efficient ordering and receiving system, thereby creating an environment in which employees instores in various regions can work customers with a smile. In addition to this, another strength of low-cost operations is the ability
to pursue investment efficiency without provoking overstores through M&A (Mind & Agreement: agreement of minds and opinions).

lu ecollaboration with a variety ofat low prices. Low-cost operations are a prerequisite for achieving low prices. To achieve this, we are refining our merchandisingvaS

operations.

problems through dialogue andWe aim to create a workplacerealize their own growth andmanagement transparency

We are working to solve environmental

The ARCS Group has maintained its thought to be a lifeline for the community since its establishment by offering merchandise

where every employee cancorporate value while fulfilling

Global Environment & Future Generations

Employees

A place (store) wherestakeholders' aspirations
and the Group's
philosophy resonate

ARCS Group's food supermarket business model

Local Communities
We build relationships of trust withmerchandise Movement
information flow

local communities through theprovision of lifeline functions andcommunity contribution activities.
buyer

Place of origin
Business Partners

We build good relationships not

We conduct fair and proper

only through compliance with laws

transactions and deliver ourand regulations, but also throughcooperation with government policies.

Industry and Economic Organizations
We work to solve social issues

products responsibly together
with our business partners.

through exchanging opinions andcollaborating with various industry
and economic organizations.

Business Partners

Customers(individual and corporate)

Stores(producer)

Efficient Logistics

National and local governments

cookingadvisor(373 locations)Centers(32 locations)

online store

Ordering Information
POS (sales)
RARA card

Relationships with stakeholders and various communication channels
stakeholders

communication channels

Our Customers

Business activities focused on
improving customer satisfaction▪Store manager's direct mail (in-store survey)▪Customer Service

Employees

Increase the value of each individual's
human resources▪Various training and on-the-job training▪Internal reporting system

Local communities

Building trust and contributing toaffluent lifestyle▪Store and various delivery services▪Various community-based social contribution activities

Fair and equitable trade andcollaboration▪Opinion exchange meetings with major business partners▪Collaboration in disaster relief activities

Industry and Economic
Organizations

Collaboration to solve social issues▪Participation in the organization's activities, seminars,
workshops, etc.

National and local
governments

Building good and healthy
relationships and cooperation on
policies▪Participation in various policy councils▪Participation in local projects▪Participation in environmental and food policy by local governments

Global Environment &Future Generations

Broader Dialogue on Environmental
Preservation▪Information disclosure and dialogue on environmental conservation activities▪Collaborative efforts regarding the SDGs

Shareholders a n dInvestors

Timely and appropriate information
disclosure and dialogue over management▪General meetings of shareholders, various briefings, various publications▪Exchange of opinions and questionnaires with outside directors, etc.

Business Partners

19

Relationships

Integrated system platform ofgroup-wide usage

Customer Information

ARCS app

Reasons for our valuable merchandise lineup

Reasons for Low Cost

Reasons for Low Cost

Contributing to affluent lifestyleprocurement ability

Thoroughly pursue profitabilityof investment in store openings

Utilization of Group Integration Infrastructure
and Pursuit of Business Efficiency

contact with customers▪E n s u r e i n v e s t m e n t
profitability through astore opening strategy
that takes into accountthe real estate market
and regional information▪Effective use of automatedordering (to improve
efficiency of purchasing
operations)▪L o c a l i z e d p r o c u r e m e n t o fcommercial materials by buyers(direct transactions, relationshipsof trust built over many years)▪Co-creation of plans through cross-groupmerchandise procurement projects▪P roduct development andquality assurance in close
collaboration with CGC Japan▪K now-how sharing
across the group▪H igh-speed processing ofvast amounts of merchandise
information▪373 stores spread from Hokkaido to northern Kanto▪Online store and other home delivery functions▪Smartphone app Utilization
Reasons why valuable merchandise sellability to sell out▪Accurate assortment, sales promotion, and promotion
based on RARA card customer information▪Sales planning in collaboration with suppliers

ARCS INTEGRATED REPORT 2023

20

Value Creation

Sustainability

Key strategies

Group synergies

Governance

Sustainability Policy and Structure
ARCS’s Sustainability Initiatives
In April 2022, we formulated our "Sustainability Promotion Policy" and "Materiality on Sustainability".We
established Sustainability Promotion Committees at each Group company. In line with the materiality, we sortout group-wide measures and Group company’s individual measures and incorporate them into action plans toenhance the effectiveness of our initiatives. We will contribute to the sustainable society through our businessactivities by leveraging the strengths of the Yatsugatake Mountain Range Management.
Our
Approach to
Sustainability

Sustainability Promotion Policy
The following policies have been established toGroup
Philosophy

Materiality Formulation Process and Mapping
STEP ①

STEP ②

STEP ③

STEP ④

Conduct interviews
with each stakeholder(customers, employees,
suppliers, and investors)
and select issues based on
the results of the interviews

Map the issues identified in
STEP 1) according to theirimportance to the businessand society as shownin the table below, andidentify high-priority issues

Classify the issues
identified in STEP 2) basedon the opinions of outside
directors and outside
auditors, and determine themateriality of the Group

Formulate a sustainability
promotion policy thatwill serve as a high-levelguideline based on themateriality determined in
STEP 3).

deepen our activities to realize sustainable society.

P7

Sustainability
Promotion Policy

Materiality on
Sustainability

Materiality❶ Coexistence with local●
communities
P23❷ Consideration for●Environment
P25❸ Contributing to affluent●
lifestyles of customers
P27❹ Promoting Diversity and●Inclusion
P28

Achievements of Major Initiatives

Future Goals Open a store in small municipality⃝ 
Cooperate and support community events⃝ 
Donate proceeds from plastic bags⃝ 
Sign a partnership agreement with the local
government/organization⃝ 
Establish BCP plan for disaster⃝ 
Respond to COVID-19▶ 
D evelop

Reduce food waste
Reduce plastic packaging⃝ Energy and CO₂ measures⃝ Respond to TCFD recommendations▶ Set⃝⃝ ⃝ model stores in small commercial area
profitability▶ 
E xpand collaboration with food bank/children's
cafeteria▶ 
Strengthen collaboration with suppliers in the areaof sustainability

targets for food loss and plastic reduction ateach Group company▶ R educe CO₂ emissions Scope 1 and 2 by 50%
compared to FY2013▶ Calculate Scope 3 CO₂ emissions

Propose community-based food
Improve the hygiene management system(equipment/education)⃝ Online store initiatives⃝ E nhance ARCS RARA card function andpromote cashless transactions▶ Strengthen proposals for local products and health/Diversity Promotion Project
Reform systems and raise awareness⃝ Proactive Initiatives at Group Companies▶ All Group companies have received at least 2-stars

⃝ 

⃝ 

⃝ 
⃝ 

▶ Paperless application for ARCS RARA cardin the "Eruboshi" rating system▶ All Group companies have achieved a 10% ratio ofmanagerial position for female▶ Enhancement of on-the-job training at Group companies

21

・Plastic reduction ❷・M aintenance the function of food・Enhancement of employee education ❹●・Strengthen external collaboration with・Strengthen proposals for health andenvironment ●❸suppliers, etc. ●❶・C o m m u n i t y c o n t r i b u t i o n / w e l f a r e
activities ●❶・Measures for shopping refugees ❶●・Expansion of local production for local

・Pursuit of job satisfaction and diversity ❹●❶consumption ●・Stable merchandise procurement system ●❸・Deterrence of Harassment ●❹・Food safety management ❸●・Establishing fair trading system ●❶・Promoting of DX ●❸・Reduction of using papers ●❷・Establishment of disaster response/・S trengthen the use of Integrated system platform ●❸・Expanding marketing functions ●❸BCP system ●❶・Appropriate governance system ❺●・Enhanced information security ●
❺

large

extremely large

Importance to the businessCorrespondence with Materiality❶ Coexistence with local communities

ARCS’s Board of Directors

ARCS’s Sustainability Promotion Oﬃce
(newly established on June 1, 2022)

reportPlanning, operation andmanagement

ARCS’s Sustainability
Promotion Committee
cooperation

ARCS Group’s operating companies
Sustainability Promotion Committee, etc.

cooperation

reportARCS’s Compliance andRisk Management
Committee❷ Consideration for Environment❸ Contributing to affluent lifestyles of customers❹ Promoting Diversity and Inclusion▶ Implementation of employee engagement surveys

The Sustainability Promotion Committee
is chaired by Director and Executive
Vice President and convenes members
from each Group company, meeting
approximately once a quarter. Progressof activities and decisions are shared with
the Compliance and Risk Management
Committee and reported to the Board of
Directors as appropriate.

・Food loss reduction ❷●environmentally friendly products▶ Expand delivery service’s areas▶ Expansion of flexible operation of working hours

Sustainability
Promotion
System・Energy and CO₂ measures ●❷lifeline ❷Importance to society

Materiality on Sustainability

extremely large

Based on the ARCS Group philosophyof "contributing to affluent lifestyles by
providing valuable merchandise andservices at low prices as a lifeline foreach community," we aim for a sustainable
society and grow as a group with our
stakeholders through our businessactivities, and play a social role as a linking
bridge to the future for the community.

❺ Governance

Develop a Sustainability Action Plan
In order to promote sustainability activities thatleverage the strengths of the Yatsugatake Mountain
Range Management, the ARCS Group has compiled
a list of 85 items, categorizing them into activities
that each Group company undertakes in a unified
manner (Group-wide initiatives) and activities thateach Group company undertakes on its own. Basedon the list, each Group company formulates a"Sustainability Action Plan" for a single fiscal year,
and checks the progress of the plan once every halfyear. This process helps to share examples among
Group companies and strengthen the degree of
implementation.
*Care-Fitter・・・employee helping with shopping

Group-wide Initiatives
number of
initiatives

Classification of Initiatives
Initiatives that ARCS (parent company) takes and uses
common methods

Examples: Achievement of 10% ratio of managerial position for female, etc.

Initiatives that each group company must take25

7

Examples: Promoting recycling of food trays, etc.

Initiatives that each group company should undertake on its own

Examples: Signing a disaster relief agreement with a local community, etc.

Initiatives voluntarily by group companies

Examples: Food bank activities, Establishment of Care-Fitter*, etc.

Total

9
44
85

ARCS INTEGRATED REPORT 2023

22

Value Creation

Sustainability

Key strategies

Group synergies

GovernanceMateriality①

Coexistence with local communities
As a lifeline company for local communities
As a community-based food supermarket, our group contributes to local communities through our business activities.
Through the new stores in depopulated and aging communities, improving store management systems after various
disasters and Covid-19, and the partnerships and cooperative systems through agreements with local governments. weare fulfilling our function as a lifeline for community.

Community contributions and welfare activities for customers

Activities to maintain local lifelines with local governments
Signing of cooperation agreements with local municipalities/organizations
ARCS Group has concluded cooperation agreements with53 organizations, including 39 local governments, 7 privatecompanies, and 7 firefighting and medical institutions. For
examples, RALSE has concluded "Disaster Supply Agreements"

Openings in small municipalities
Since 2015, Douhoku Arcs has opened a series of"Da*Marche" stores as a model for small commercial
areas, and currently operates seven stores. The storesare located in cities and towns with a population of 3,000
to 4,000 around Asahikawa City, and play a role as foodinfrastructures where many customers have difficulty
shopping. The Da*Marche Utashinai store (Utashinai City,
Hokkaido) opened in April 2023, will be the first newsupermarket in the city in 14
years. In cooperation with local
government, an experiment

Pippu Aibetsu
NumataTown Takasu Town Town
Town
Kamikawa
Town

of a pick-up service is being
conducted. It is expected to bea model case study for futurecommunity development.

Utashinai
City

Universe and Kitakami City, Iwate Prefecture Signing Ceremony for
Collaboration Agreement

Da*Marche Utashinai Store (Douhoku Arcs)

Asahikawa City
Nakafurano
Town

Delivery from the integrated
distribution center "DaMC" to"Da*Marche"

Cooperation and support for community events

Donation of plastic bag proceeds

In order to create local communities and help our customers

ARCS group uses the proceeds from plastic shopping

healthy life, our group companies cooperate and support

bags for environmental conservation and social

sports competitions and other events., BELJOIS has held thewelfare activities. Hokkaido CGC member companies"Chibikko Kenko Marathon" (Children's Health Marathon) sinceof our group donate all

1986. We donate 1,000 yen for each finisher to a fund forproceeds from the salechildren affected by the Great East Japan Earthquake. Sinceof plastic shopping bags

2011, its total amount raised has exceeded 30 million yen.

to the Hokkaido CGC

Building BCP for Disasters
ARCS Group is continually reviewing its BusinessContinuity Plan (BCP). Triggered by the 2018 Hokkaido
Eastern Iburi Earthquake, we develop a manual for
power outages, and together with the organization ofpriority operations, recovery procedures, and personnel
assignments. we are building a response system forlarge disasters and emergency.
In addition, some Group companies have emergency
stockpiles of drinking water, powdered milk, food,batteries, etc., which are replaced according to their
expiration dates on a rolling stock basis.

with the cities of Sapporo, Chitose, and Ishikari. Universe
established a "Disaster Stockpile Warehouse" in 2007 for foodand daily necessities which will be supplied to victims in disaster.
In addition, Dounan Ralse has
concluded a "Comprehensive
Collaboration Agreement"with Hakodate City, and has
installed a Hakodate Citysupplied disaster supply
warehouse at its Super ARCS
Chiyogadai Store, which
opened in September 2022.
what's more, FUKUHARA has
also concluded a "Food Drive
agreement" with the Tokachi
Regional Promotion Bureau
and provides food to local
welfare organizations throughFood Drive Poster (FUKUHARA)
the bureau.

Response to the Covid-19
Amidst the unprecedented Covid-19 pandemic, as
lifelines for the community, we have continued tooperate with the cooperation of customers to preventthe spread of infection. we put the safety and securityof customers and employees as the top priority.
Employees of food supermarkets are "essential
workers" who are indispensable for life, and although
they were exposed to infection risk and mental stresseveryday, the headquarters and the frontline worked
together to keep the stores open as a "Life Defense
Force" that supplies "food = life itself".

Green and Heart Fund.
In fiscal year 2022,

Acrylic panels at the cash
register

69.34 million yen had
be donated to the fund.

New Year's Message for 2021,"Life Defense Force" in the wakeof the Covid-19.

Since 2008, the total
amount donated to thefund was 798.07 million yen. Tree-planting activities at CGC's Usakumai Forest
Green and Heart Fund
ARCS Group Cumulative Donations

The 37th BELJOIS Cup and S&B Cup Chibikko kenko Marathon(September 2022)

23

798.07 million yen(2008-2022)

Emergency Disaster Transport Vehicle (Universe)

NEXT ACTION▶ Development of profitable model stores with small commercial area

▶ Expand dominations in Tohoku/Northern Kanto area

▶ Expand collaboration with Food Drive/children's cafeterias▶ Strengthen collaboration with suppliers in the area of sustainability

ARCS INTEGRATED REPORT 2023

24

Value Creation

Sustainability

Key strategies

Group synergies

GovernanceMateriality②

Consideration for Environment
Promotion of sustainable business operations
To reduce food loss problems in supermarket, our group is implementing measures such as raising awarenessof "Temae-dori" (Take from front). In response to climate change, we are also promoting the reduction ofenvironmental burdens, such as the use of plastics and CO₂ emissions, in order to achieve sustainable business.

Initiatives to reduce food loss emissions and conserve resources and energy
Reduction of food loss emissions
In order to reduce food waste caused by expired
food, group companies are implementing initiatives suchas "Temae-dori (Take from front)" to raise awareness atstores.
In addition, since 2003, RALSE has been outsourcing
its food residues to the Bankei Recycle Center forcomposting. Approximately 10,000 tons are processedannually, and the compost is provided to the center's
contracted farmers and to elementary and junior highschools in Sapporo City for their educational material

gardens.
Since 2008, Universe has been working on arecycling-oriented vegetable sales program in whichfood residues are composted and provided to ourpartner agricultural producers, who then sell the
produce at Universe stores.

Response to TCFD Recommendations
ARCS group consider the issue of climate change to be an important issue that should be addressed acrossthe group and recognize that the risks and opportunities associated with climate change have a significant
impact on their business strategies. We agree with the recommendations of the Task Force on ClimateRelated Financial Disclosures (TCFD).

*For more information on the content, please see the "Notice of Disclosure Based on TCFD Recommendations" dated April 3, 2023, available at https://www.arcs-g.co.jp/
common/datadir/info_dat_20230403153440.pdf.

Governance and Risk Management

Strategy (scenario analysis - identification of risks and opportunities)

The Sustainability Promotion Committee is chairedby the Director and Executive Vice President andExecutive Officer and its Secretary General is theGeneral Manager of the Sustainability Promotion
Office. The Sustainability Promotion Committee andthe Compliance and Risk Management Committee
work closely together to assess risks and discusscountermeasures, and report to the Board of
Directors as necessary.

We have assumed a society in 2050 under two
scenarios: "1.5°C" and "4°C" for the global averagetemperature increase compared to pre-industrial
times by the end of this century. We also analyzed
the opportunities and risks for our company in 2030
as far as the impact on our business can be foreseen.
We have established specific initiatives to address
the most important opportunities and risks, and are
actively promoting them across the Group.

Highly Significant Risk/Opportunity Items

Initiatives

Carbon tax burden incurred Install/update energy-efficient air conditioning, refrigeration,and freezing equipment, etc.
⃝ 
Improve the efficiency of logistics operations throughconsolidation of distribution centers or modal shift.

Increase in renewable energy investment costs⃝ Expand the installation of photovoltaic power generation equipment.

⃝ Improve the accuracy of merchandise purchase orders,⃝ Recycle food residues.

⃝

Risk

Opportunity

processing and manufacturing plans, inventory control, etc.

Reduction of food disposal costs

Indicators and Targets
Bankei Recycle Center

Eco-Vegetable Producers (Universe)

Reduction of plastic containers and packaging

Energy conservation and reduction of CO₂ emissions

As the trend toward eliminating plastic is growing,
our group is working to reduce the use of plastic
shopping bags. In fiscal year 2021, the group's
rejection rate for plastic shopping bags was 85.3%,
compared with the average rejection rate of 77.1% *at food supermarket. Regarding cutlery distributed atstores, we are working to reduce the amount of plastic
used by switching to paper and wooden materials andreducing the size of the cutlery, and by charging for
products.

In order to realize a decarbonized society, our Groupis working to reduce CO₂ emissions by introducing
energy-saving equipment such as demand* monitoring
and control devices, solar power generation systems,
LED store lighting, reach-in cases, and switching tohigh-efficiency air conditioning systems.

ARCS Group Plastic
bag declination rate

Source: HP of National Supermarket Association of Japan①Calculation of Scope 1 and Scope 2.
CO₂ emissions Total
FY2013
Actual (t-CO₂e) (*)*D emand: The maximum amount of electricity demanded on a monthly basis.
Monitoring and control is necessary because unit price changes when the contracted
amount with the power company is exceeded.

Scope 1 and Scope 2

85.3%(Food supermarket industry average 77.1%*)

In order to achieve "the realization of a sustainable society and the growth of the Group" as stated in our
Sustainability Promotion Policy, and to achieve sustainable value enhancement in terms of both "social andenvironmental value" and "economic value," we have established and are monitoring KPIs related to climatechange that are closely related to the business activities of the food supermarket. The actual emissions and longterm targets for fiscal year 2021 are as follows.

343,917

FY2021
Actual (t-CO₂e)337,317

CO₂ emissions per unit

Solar panels installed
at Big House Shishiori
store (BELJOIS) in
December 2021.

unit class

FY2013
Actual (t-CO₂e) (*)

FY2021
Actual (t-CO₂e)

FY2013vs.

Per net sales (100million yen)79

59

▲25.3％*FY2013 results include some estimates.

②Reduction target

NEXT ACTION▶ Set targets for food loss and plastic waste reduction at each Group company▶ Calculation of CO₂ Scope 3 emissions

25

L o n g -te rm g o a l In FY 2030, we will reduce our Scope 1 and 2 CO2 emissions per 100 million yen of sales by 50%
compared to our base year (FY 2013).
⃝ 
Achieve carbon neutrality by FY 2050.
⃝

ARCS INTEGRATED REPORT 2023

26

Value Creation

Materiality③

Key strategies

Group synergies

GovernanceMateriality④

Contributing to affluent lifestyles of customers

Promoting Diversity and Inclusion

Food proposals and services that accompany customers in their daily lives

Aiming to be a company where all people can play an active roleand pick up the food at home. And we are also enhancing the ARCS app, and diversifying payment methods.

In 2019, the ARCS Group launched the Diversity Promotion Project, which aims to create a workplace where
diverse human capital can work lively and in their own way by reforming work systems and conducting various
awareness-raising activities, as well as by sharing good practices among Group companies for horizontal
deployment across the Group.

Responding to various customer needs

Promote diversity throughout the Group

Community-based food proposals

Activities by the Diversity Promotion Project

The ARCS Group is committed to enriching the lives of its customers through community-based food proposals
and services. In recent years, we have been expanding our online store, which allows customers to order online

In 2020, Ito Chain opened Foods Garden Yuriage
Shokusaikan in Natori City, Miyagi Prefecture which
located in the area of “the Great East Japan Earthquake

Foods Garden Yuriage Shokusaikan (Ito Chain) Fresh Fish Corner "Suisan
Taikoku"

Reconstruction Plan”. It has a farmer's market with local
agricultural products and a live fish tank where locallycaught seafood is displayed and sold, contributing to newcommunity development as a place that offers a communitybased food experience.
The ARCS Group also
supports its customers'
affluent lifestyles
through proposals for
local production for local
consumption, seasonal
ingredients, and healthconscious dining. RALSE
has cooking information
at the storefront, andprofessional staff
proposes menus using
seasonal ingredients andSuper ARCS Yamahana Store (RALSE)
recommended products.
Cooking Information

Improving customer convenience
Online Shop Initiatives
RALSE opened the ARCS Online Shop in 2021. The store
offers ordering services for merchandise not available instores, as well as delivery to home, and also pick up at thestore. This Service are available approximately 1.29 million
households in Sapporo City and its suburbs, the shop isused by individual
customers as well as
corporate customers
such as nurseryschools and welfare
facilities. Demandis particularly highduring the wintermonths, and theservice serves as alifeline.
Winter Delivery Scene nhance RARA card functions andEpromote cashless transactions
The ARCS RARA card has
3.21 million members. The card
can be used to earn points forvarious payments such as cashonly cards, in-house prepaid
cards and credit-cards. From
2021, points will be awarded
and prepaid payments will bemade with the "ARCS app". In
response to payment, from2022, credit payment can also
be completed on the app. It
also support payment by othercompanies' credit cards andvarious barcodes as a cashlessservice.

Project Activity Slogan

Creating attractive workplaces
where all people can work lively
and in their own way
In 2019, the Diversity Promotion Project was
launched with diverse members from each groupcompany. Aiming to create a workplace where
employees with diverse attributes and backgrounds,
including gender, age, nationality, and race, canwork lively in their own way, the project is working
from the bottom up to formulate action plans foreach group company and conduct educational andawareness activities across the group, while receiving
commitment from top management.

Proactive efforts at each group company

The Diversity Promotion Project and the human resources
departments of each group company have collaborated to implement
various activities, including system reforms such as the company-wide
introduction of a half-day paid leave system, reforms in work styles
through the promotion of "Eruboshi" (described later) acquisition,
as well as seminars including management and the publication ofDiversity News. In November 2022, ARCS was awarded the 3-stars"Eruboshi" certification mark, which recognizes companies that havemade significant contributions to the advancement of women, by the
Ministry of Health, Labour and Welfare.

Each Group company has formulated "Diversity
Action Plan" and is proactively promoting initiatives.
For example, Doutou Arcs produces educational
posters and videos on maternity and childcare leave.
OTANI received an award for its advanced efforts in
employing people with disabilities.

Received the President's Commendationfrom Japan Organization for Employmentof the Elderly, people with Disabilities and
Job Seekers (OTANI)Diversity News "rashiku”

Received 3-stars "Eruboshi" rating(ARCS)

Maternity Leave Awareness
Poster (Doutou Arcs)

NEXT ACTION▶ Strengthen proposals for local products and health/environment friendly products▶ All Group companies acquire at least 2-stars of Eruboshi.

▶ Expansion of online store area coverradge▶ Enhance on-the-job training at each company▶ Paperless application for ARCS RARA card

Discussion on Diversity Promotion Project

Institutional reform and awareness-raising activities

ARCS appNEXT ACTION

27

Sustainability▶ Create a system for flexible working hours▶ 10% of managerial positon for female▶ Conduct employee engagement surveys

ARCS INTEGRATED REPORT 2023

28

Value Creation

Key Strategies

Sustainability

Key strategies

Group synergies

Governance

Key Strategies

Logistics

Merchandising

Reducing environmental impact through logistics

Procurement utilizing Yatsugatake Mountain Range Management

We established the Logistics Group in 2013 and have initiated logistics reforms. We have been promoting
reforms and system since the Group's Integrated system platform began operating in 2019. We are working to
reduce environmental impact and solve local issues through logistics, such as centralization of deliveries andutilization of centers.

In order to realize the Group's philosophy of "providing valuable merchandise and services at low prices asa lifeline for the community," we are strengthening our procurement base through local procurement and joint
procurement. We are also actively engaged in product development through collaboration with CGC Japan and
the New Japan Supermarket Alliance.

Logistics Efficiency

Local procurement base through the Yatsugatake Mountain Range Management

Improving logistics efficiency andreducing environmental impact

Establishment of local procurement base by group companies

Expanding Joint Procurement and Considerations of Sustainability

As a community-based company, each group company has
built longstanding relationships with local markets and business
partners. In addition to fresh food, we are also building a productprocurement platform that makes use of local characteristics,
such as developing products with local manufacturers
and developing boxed lunches and side dishes using local
ingredients in collaboration with local schools for general food.

The "ARCS Procurement Project," in which procurement
managers from Group companies, is working to reduce
procurement costs by increasing the scale of joint
procurement of national brand (NB) products each year.
The project has also formulated an environmentally friendly
and health-conscious "Procurement Action Plan" to support
the introduction of soybean meat, low-sugar and low-sodium
products at Group
companies and tofoster awarenessof sustainability
by sharing knowhow on how to
reduce food loss.

We support the government’s movement "White
Logistics", we have declared our voluntary actions
to improve delivery efficiency, reduce environmental
impact, improve the labor environment, and cut costs.
To solve the "2024 problem" of driver shortages inlogistics, we are promoting a modal shift and using rail
freight for pick up(fruits and vegetables).
In cooperation with a Hokkaido-based transportationcompany, we have established an efficient logistics
system in which cargo is unloaded in the Kanto areaand shared by trucks on the return trip, travelingnorthward to pick up cargo from various locations
and deliver it to our companies. In addition, weare reducing the environmental impact and humanburden in supply chain. For example, we are using
regular shipping services for imports from overseas

Soybean Meat Products Sales Floor(TOKOU STORE)

Development of original products to strengthen local
production for local consumption (FUKUHARA)

and unloading at the nearest port of the operatingcompany.

Product development and sales promotion in collaboration with partner companies
 rovide leadership in thePdevelopment of CGC productsGroup companies
carpool return trucks

Modal Shift by
Freight Trains

Reduction achieved by unifying center delivery at RALSE and TOKOU STORE
Mileage
Fuel
CO₂

Center utilization

302,12075,719549

km Reductionℓ Reductiont Reduction*Compared to FY2021 and the previous year

As the core of the CGC Group (largest cooperative chain in
Japan), we regard CGC products as our own private brand anddispatch person to CGC Japan to lead product development
and planning. The company's product development policy
is based on consideration for the environment, safety, andsecurity, and ARCS practices measures such as reducing
packaging containers, FSC certification, and extending of the
expiration date. Our contract manufacturers have obtained
third-party certification (ISO9001, HACCP*).
HACCP: Hazard
Analysis and CriticalControl PointRALSE and TOKOU STORE began joint distribution in 2018, and reduce 549 tons CO₂ emissions in FY2021. In
addition, We began the integration and expansion of distribution centers, introduced advanced equipment. Our
hygiene management has been thoroughly implemented and strengthened, resulting in improved temperature andhumidity control, refrigeration, freezing, and thawing functions, etc. at each facility.

P roduct development by "the New
Japan Supermarket Alliance""The New Japan Supermarket Alliance", consisting of
ARCS, Valor Holdings, and Retail Partners, has been engaged
in joint product development and sales promotionthat
take advantage of
economies of scale
since its formation in2018.
So far, "Antioxidantfree wine" with
Sapporo Breweries
and "Gotochi no Aji
Fuwatto" with Iwatsuka
Seika, featuring local
ingredients of the threecompanies' locations,have become hit
Our jointly developed product, Bisque-style
products.

1,900 CGC productsNEXT ACTION

29

NEXT ACTION▶ Shared use of distribution centers among group companies and unification of handling categories▶ Expansion of the ratio of joint procurement by the Group▶ Addressing the 2024 problem (driver shortage) in logistics▶ Expand collaboration with partners to develop valuable products▶ Increased energy efficiency of fresh food centers

mellow crab cream croquettes, wins the top
prize in the prepared dish category of the
Bento and Prepared Meal Awards 2022.

▶ Shift to a new pricing system during a period of rising prices

ARCS INTEGRATED REPORT 2023

30

Value Creation

Key Strategies

Sustainability

Key strategies

Group synergies

Governance

Key Strategies

DX Strategy

Human Capital

Accelerate Digital Transformation by integrating real and digital

Creating workplace where can be opportunities for growth and be rewarding

Our group have implemented group-wide core system as “Integrated system platform of group-wide usage” since 2019.
With this system, we have achieved the unification of 10 food supermarket companies in our group and are promoting
operational efficiency and standardization to cope with the intensifying competitive environment. In addition, we will
respond to the changing needs of our customers through new marketing that integrates real and digital operations.

wide training system. In 2019, we introduced the unified personnel system and the education system across theUtilization of the Integrated system platform of group-wide usage

Concept of Group Human Resource Education

Creation of group synergies basedon the Integrated system platform

Unified Personnel System and Human Resources Training

Image of synergy creation in terms of sales and marketing

ARCS Group has integrated merchandise masters, categories,
accounts, and forms into the Integrated system platform with theaim of "unifying the standard of things" for the 10 food supermarket
companies in our Group.
Our group sells 2.8 billion units of merchandise and customers
visiting our stores 220 million times each year. Integrated system
platform has enabled the centralization of price fluctuations andvarious sales promotion methods for each group company in terms ofmerchandising. In terms of store operations, the system has made it
possible to manage a vast amount of data, including sales, inventory,
and employee’s working hours management for each store anddepartment. By comparing and analyzing these sales data acrossthe group on the same basis and reflecting them in purchasing andmerchandise assortment, we aim to improve sales methods and profit
margins.
On the administrative side, the unification of accounting systems has
led to the standardization of operations in both financial and managerial
accounting. This has also led to the consolidation of accounting andhuman resource-related operations of group companies into ourcentralized administrative center, thereby improving the operational
efficiency of the group.
In addition, the DX Committee which all group companies participate,is not only for promoting the use of the Integrated system platform,
but also promoting overall DX initiatives such as the introduction of
RPA (software-assisted automation of PC work), paperless operation
by digitizing pay slips, and experiments with electronic shelf tags.
We are creating group synergies in cost reduction and productivity
improvement.

Food supermarket
stores 373

Annual sales
2.8 billion units

220 million customers
visiting per year

Uniﬁcation of standards(uniﬁcation of systems, merchandise masters, and forms)

Integrated system platform of group wide usage
Data extraction

Cost reduction throughvisualization of datafrom each company

Improved productivity andeﬃciency throughstandardization of operations

Improvement of productpolicy through comparison ofsimilar conditions

Since 2013, ARCS Group has established a human resource development philosophy and formulated a groupGroup. In addition to company-wide training, each Group company hold training programs and develop careers.

In 2019, our group launched a unified personnel systemthat unifies the positions and grades of all group companies.
While taking advantage of the regional characteristics andunique human resource development processes of eachGroup company, the evaluation system and basic education
are common to all Group companies, enabling visualizationof human resources and flexible personnel assignments.
In accordance with our Group's human resources
education philosophy, we conduct group-wide educationand training programs by position and qualification as
basic education. In addition to online training by external
instructors, our instructors conduct hygiene management
education, compliance training, diversity training, andother training programs. In addition, each Group company
ARCS Group's Education System and Career
Development Structure● Joint training for new employees● Training for beginner-level● Training for departments● Department training

supervisors (C1)

● Training for mid-term hires

Improvementof gross proﬁt

Low-cost
operation(intermediate level)(basic, beginner level), etc.

implements human resource development programs basedon its own needs, such as department-specific training, video
manuals, and on-site training (on-the-job training).

ARCS Group
Human Resource
Education
Philosophy

1．Human power improvement
２．Improve common sense
３．Improving basic skills
４．Improving responsiveness to change
５．Improving autonomy● Senior leadership (C3) training● Domestic and international distribution study tours● Intermediate leadership (C2) training● Top management training● Management (M) training● Department training (advanced)● Training for store managers and other position-speciﬁc training● Executive management training, etc.

Sales expansion
General Positions

S2

Creation of group synergies

2-4 years（Person in charge）

Leadership position

C1

2-4 years(Chief 1)

C2

2-4 years(Chief 2)

Necessary 1. Supermarket Proﬁciency Test Manager Level 3
Qualiﬁcations 2. Checker Proﬁciency Test Level 2

C3

Managerial position

M

Assignment(Chief 3)

Executive management Position

Appointment(Store Manager,
Buyer, Manager)

GM(GeneralManager)

Necessary 1. Class 2 Hygiene Supervisor
Qualiﬁcations 2. Supermarket Certiﬁcation Test Manager Level 2, etc

Support for self-development through qualiﬁcation acquisition, correspondence education, outside seminars, store surveys, product knowledge exploration, etc.

Promotion of digital marketing

Human Capital Data

Individual Marketing
ARCS Group promotes a hybrid marketing approach that combines traditional
marketing through flyers, POPs, etc. with digital marketing.
In addition to appealing to customers through the ARCS app and digital
signage, we will analyze and understand the purchasing behavior of eachindividual ARCS RARA card member, in order to increase the number of fans of
ARCS Group and achieve medium- to long-term sales growth.

Total numberof employees

5,787

29,887

Number of new
graduates hired

Number of employees
hired during the term

Average monthly
overtime hours

Ratio of paid
Ratio of managerial employment rate of thevacation usage position for female physically challenged

Full-time employees

Full-time employees

Full-time employees

Full-time employees(FY2022)(FY2022)(FY2022)(FY2022)146

135

19.8 hours(End of FY2022)(End of FY2022)

Number of employees
participating in training

Total traininghours

Training hours
per person

Certified Food Safety
and Hygiene Manager

Certified Food
Labeling Manager

Full-time employees

Full-time employees(FY2022)(FY2022)

Cumulative
total: 139

Cumulative
total: 1,150

Full-time employees
Super ARCS Chiyogadai Store (Dounan
Ralse) Digital Signage

NEXT ACTION

31

Number of fulltime employees

4,208(FY2022)

100,209 hours

17.3 hours(by FY2022)

52.0%

6.5%

(FY2022)

2.9%(FY2022)(by FY2022)

NEXT ACTION▶ Sharing of know-how on system utilization among group companies ▶ Synergistic effects of business standardization and system utilization▶ Further enhancement of on-the-job training▶ Expand personnel to promote digital marketing		

▶ Create flexibility in hiring and working styles and foster a climate conducive to ideas ▶ Develop a strategy for human capital investment▶ Utilization of ID-POS data

▶ Formalization of skills possessed by veterans and transfer of authority

ARCS INTEGRATED REPORT 2023

32

Value Creation

Sustainability

Key strategies

Group synergies

GovernanceGroup Market Share
Northern Hokkaido area

43

Eastern Hokkaido area

14

storesstoresThe ARCS Group has the number one market share in Hokkaido, Aomori Prefecture, and Iwate Prefecture.
The Group's food supermarkets are taking advantage of their economies of scale to build area dominance in various regions,
we deliver merchandise and services that are closely related to daily life to the community.
In the future, we aim to further expand our business, and as a standard-bearer in protecting the lifelines of the community, we
will refine our regional number one store management.

Central Hokkaido area102

market sharestores18

stores42

Othercompanies
22.1%

Other
companies
22.4%

Hokkaido

25.7%

Other
companies
11.0%

Market size: 1,135.1 billion yen

storesIwate Prefecture

67

Akita Prefecture

1storesstoresRALSEFUKUHARA

store

ARCS
Group
28.6%

Other
SM/GMS
34.5%

Tokachi, Kushiro, Nemuro area

Aomori Prefecture

38

ARCS
Group
25.7%

Other
SM/GMS
29.8%

Southern Hokkaido area

Other
companies
14.2%

Other
companies
11.7%

28.6%
Universe

28.2%

BELJOIS

25.2%

3.5%

BELJOIS

0.4%

Universe

14.2%*Share of food product sales. Our estimate based on the Food Supermarket Yearbook 2022.

1.7%

Miyagi Prefecture

Number of retail stores(as of the end of February 2023)

Hokkaido 219 stores
Tochigi Prefecture

30

storesCentral Hokkaido area
RALSE

1

store

373

storesTohoku area 123 stores

Eastern Hokkaido area

Aomori Prefecture

Doutou Arcs 14 stores

Universe

37 stores

BELJOIS48 stores

TOKOU STORE 27 stores

Tokachi, Kushiro, Nemuro area

BELJOIS

1 storeUniverse

19 stores

3 stores

Northern Hokkaido area
Douhoku Arcs 41 stores
RALSE

2 stores

FUKUHARA

42 stores

Southern Hokkaido area

Akita Prefecture
Universe

Miyagi Prefecture
1 storeDounan Ralse 18 stores

Ito Chain

10 stores

BELJOIS

7 stores

Northern Kanto area 31 stores
Tochigi Prefecture
OTANI

33

Iwate Prefecture

72 stores

ELDy

Saitama Prefecture

39.4%

Market size: 261.9 billion yen

11.6%

Dounan Ralse 2.1%

storesIwate PrefectureMarket size: 291.6 billion yen

TOKOU STORE3.2%

17

ARCS
Group
39.4%

Other
Other
companies
companies
12.2%
14.7%

Aomori Prefecture

Douhoku Arcs 3.6%

Doutou Arcs

Other
SM/GMS
33.7%

30 stores

Saitama Prefecture
OTANI

1 storeARCS INTEGRATED REPORT 2023

34

Value Creation

Sustainability

Key strategies

Group synergies

Governance

RALSE COMPANY,LIMITED

2-32, Minami-13-jo Nishi 11-chome, Chuo-ku, Sapporo, Hokkaido 064-8621
Tel. 011-530-6000 Fax. 011-530-6010

Company Overview

CentralHokkaido area
72 stores

Representative Director and President / Kazuhisa Nekomiya

Number of employees/7,808

Date of Establishment / November 1, 2002

Number of stores/74

Capital / 4.2 billion yen

Net sales / 140,820 million yen

Northern
Hokkaido area
2 storesNature of Business/ General retail store chain

Group
Companies

Each company in our group is rooted in thelocal community as a Lifeline Company while
contributing to affluent lifestyles of customers,
expansion of area dominance in each region，
aim to create further group synergies.

RALSE is the core company of the ARCS Group, which has begun business for
63 years, counting from Daimaru Super, the predecessor of ARCS. We are taking
advantage of the strength of store development according to regional characteristics
and individual store management. We use Participatory Management and think "taste","freshness", "price" priority in product and merchandise development. Through low-cost
management, we are developing leaders who think and act on their own initiative.

RALSE’s Strengths❶ Pursuit of "customer satisfaction" and "employee satisfaction" andPDCA management❷ Developing leaders with passion and enthusiasm to think and act
dependently and on-the-job training❸ Pursuit of greeting, cleanliness, a sales floor without missing items
and realization of low prices based on low-cost management

Kazuhisa Nekomiya,
Representative Director
and President

Sustainability Initiatives
We are committed to environmental
friendliness by utilizing railtransportation.

Modal shift, green

Expand direct businesslogistics

with local producers

In cooperation with production
areas and logistics providers, wehave been working to improvelogistics efficiency and reduce CO2
emissions through a modal shift
from trucks to environmentallyfriendly railroads for the purchaseof vegetables. In 2017, ourcompany received the "Green
Logistics Excellent Business Award"
from the Ministry of Economy,
Trade and Industry for our efforts tobuild a sustainable logistics system.

35

We have direct contracts with
agricultural producers and fisherycooperatives throughout Hokkaido
to deliver a wide variety of local
products with freshness. One suchinitiative is our "direct delivery
from the production area". Freshvegetables and fish picked in
the morning are placed on store
shelves on the same day. We
also make effort to introduce theproduction area and the producer.

Environmental initiatives
In order to recycle valuable
resources instead of discarding
them, we collect milk cartons, foodtrays, PET bottles, aluminum cans,
cardboard boxes, etc. with thecooperation of our customers. We
are also promoting the formationof a recycling-oriented society bycomposting vegetable scraps, fish
guts, unsold products, and otherfood residues generated in ourstores.

ARCS INTEGRATED REPORT 2023

36

Value Creation

Universe Co.,Ltd.
Company Overview

Tel. 019-623-6100 (main)

Aomori Prefecture
37 stores
Iwate Prefecture
19 stores

Representative Director and President / Takehiko Miura

Number of employees/5,370

Date of establishment / October 20, 1967

Number of stores/57

Capital / 1,522 million yen

Net sales / 130,971 million yen

Akita Prefecture
1 storeCompany Overview

Fax. 019-622-0474

Representative Director and President / Tsukasa Sawada

Number of employees/4,533

Date of establishment / January 17, 1951

Number of stores/56

Capital / 1,052 million yen

Net sales / 80,024 million yen

Aomori Prefecture
1 storeIwate Prefecture
48 stores
Miyagi Prefecture
7 stores

BELJOIS operates mainly in Iwate Prefecture, but also in Aomori Prefecture and Miyagi Prefecture.
In the 95 years since its establishment, BELJOIS has gained the largest market share in Iwate
Prefecture, and has developed a diverse range of stores, from large discount stores to small to
medium-sized stores, in accordance with the characteristics of the region. The integration processof the former Belle Plus and the former JOIS has been completed. In recent years, the company has
been actively promoting the conversion from the "Big House" format to the "Super ARCS" format.

Strengths of Universe

Strengths of BELJOIS❶ No. 1 market share in Aomori Prefecture through coexistence withthe local community and the strict adherence to "Customers, ourPriority. We put customers first anytime, anywhere.”❷ Creating a sales floor that pursues freshness and assortment❸ High productivity through precise operations❶ 95 years in business and No.1 regional market share in Iwate
Prefecture❷ Operational capabilities of various business categories according toregional characteristics❸ Creation of integration effect of former Belle Plus and former JOIS

Takehiko Miura,
Representative Director
and President

Sustainability Initiatives

As a company that provides a "foodlifeline," we are promoting efforts toconclude disaster relief agreementswith local governments and otherentities in the areas where we open
stores.
In the event of a disaster, Universe
can support the affected area by
quickly supplying necessary goods
from nearby Universe stores anddisaster stockpile warehouses, etc.,
in response to requests from local
governments and other organizations.

Governance

Nature of Business/ Food supermarket

Universe operates mainly in Aomori Prefecture, Iwate Prefecture and Akita
Prefecture. With the philosophy of "Customers, our Priority. We put customers
first anytime, anywhere." our strength lies in developing human resources and anorganization capable of thoroughly considering what we can do for our customers andperforming PDCA. We also focus on cooperation with local governments to realize more
affluent lifestyles for our customers in the region.

Disaster Relief Activities

Group synergies

2-1-30 Higashianiwa, Morioka City, Iwate 020-0824

Fax. 0178-21-1811

Nature of Business/ Food supermarket

37

Key strategies

BELJOIS Co.,Ltd.

83-1 Maeda, Naganawashiro, Hachinohe City, Aomori 039-1185
Tel. 0178-21-1888(main)

Sustainability

Tsukasa Sawada,
Representative Director
and President

Sustainability Initiatives

ISO 14001 certification

Health promotion

Disaster Cooperation Agreements

acquired

activities through foodwith Local Governments

In October 2001, we obtainedinternational standard ISO 14001
certification.
By including an outside perspective,
we make it known throughout thecompany that addressing environmental
issues is an "important requirement forthe survival of the company," clarify
issues toward harmonizing businessactivities with the natural environment,
and actively foster awareness of theneed to address these issues.

In cooperation with local governments inthe areas where our stores are located, we
conduct campaigns and other activities that
promote health and wellness.
At stores in Aomori Prefecture, theprefectural government, led by the Governorof Aomori Prefecture, holds PR events for"DASHIKATSU + DASUKATSU※" recommended
by the prefecture, and implements initiatives
to achieve good taste and health throughthe consumption of "DASHIKATSU AOMORI
products" and vegetables made fromprefectural ingredients.
※Campaign to reduce salt intake by using “DASHI”

We have concluded disastercooperation agreements with four local
governments and one fire union to
give priority to the provision of water,
food, and other supplies necessary for
responding to disasters and for livingin evacuation centers upon requestfrom local governments. In the Great
East Japan Earthquake in 2011, at therequest of Iwate Prefecture, we gavepriority to providing relief supplies toevacuation centers in coastal areas
affected by the tsunami.

Food Drive
We conduct Food Drive activities
by collecting food items that are
lying around at home and placing
them in our collection boxes. We
are working with NPO to change"wasteful" into "thank you". We
have set up collection boxes atstores in Iwate Prefecture andMiyagi Prefecture in order tosolve poverty and reduce foodloss.

Endorsement of the Pink
Ribbon Movement
In support of the educational
activities of the "Iwate Pink
Ribbon Association," which calls
for the early detection of breast
cancer. We set pink ribbon
trees in our stores every year
in October, which is Pink Ribbon
Month. In addition, in cooperation
with MICHINOKU COCA-COLA
BOTTLING CO., LTD., we also
make a donation to the associationin proportion to the number ofbottles sold.

ARCS INTEGRATED REPORT 2023

38

Value Creation

FUKUHARA CO.,LTD.
Company Overview

Number of employees/1,937

Date of establishment / May 23, 1958

Number of stores/42

Capital / 2,481 million yen

Net sales/42,088 million yen

Tokachi,
Kushiro，
Nemuro area
42 stores

Nature of Business / Food supermarket

Tel. 0166-47-2818 (main)

Company Overview

Fax. 0166-48-8987

Representative Director and President / Akira Muguruma

Number of employees / 2,797

Date of establishment / May 22, 1965

Number of stores/41

Capital/781 million yen

Net sales / 43,568 million yen

Northern
Hokkaidoarea
41 stores

Douhoku Arcs operates stores in the northern part of Hokkaido, centering on Asahikawa City. By taking
advantage of Asahikawa's geographical location in the center of Hokkaido and strategically utilizing thecenter's functions, we are able to develop a wide range of store formats, from over 3000㎡stores that
attract customers from a wide area and offer a rich merchandise lineup to ultra-small stores with floor spaceof around 250㎡, over a broad area. This contributes to the sustainable development of local communities.

FUKUHARA’s Strengths

Strengths of Douhoku Arcs

❶ Name recognition and trust in the local community as a communitybased company❷ Store operation know-how and profitability model, including in towns
and villages with small populations❸ Active promotion of social activities such as children’s cafeterias andFood Drive❶ Establish a wide-area logistics system utilizing geographicaladvantages and a highly functional center.
❷ Know-how in the operation of shopping areas including own large
stores that attract customers from a wide area
❸ Expertise in operating ultra-small stores in towns and villages withsmall populations

Ikuharu Fukuhara,
Representative Director
and President

Sustainability Initiatives

39

Governance

Nature of Business / Food supermarket

FUKUHARA is a community-based company that has been in business for 65 years,
with stores based in the Tokachi, Kushiro, and Nemuro areas. Our corporate message“We deliver happiness to all. ～Make Happiness!～” expresses our thoughts anddetermination to deliver happiness to all of our customers, producers, suppliers, andemployees through our business.

Akira Muguruma,
Representative Director
and President

Sustainability Initiatives

Promotion of recycling

Support activities for

activities

children’s cafeterias

To promote a decarbonized
and recycling-oriented society,
we are collecting plastic bottles,
caps, food trays, used clothing,used paper, etc. at our stores.
In addition, we are promoting
the recycling of waste oil andStyrofoam from our stores, aswell as water and electricity
conservation projects at all stores
to reduce energy consumption.

Group synergies

1-33-1, Ryutsu Danchi 1-jo, Asahikawa City, Hokkaido 079-8585

Fax. 0155-37-5752

Representative Director and President / Ikuharu Fukuhara

Key strategies

Douhoku Arcs Co.,Ltd.

Nishi 22-jo Kita 1-chome 13, Obihiro City, Hokkaido 080-2498
Tel. 0155-37-3983 (main)

Sustainability

To contribute to the local
community and reduce foodloss, we conduct Food Drive
activities at all stores. Foodcollected at stores is donated to
local children’s cafeterias, etc.
More than 120 times children’s
cafeterias are held each year.
Currently, food is donated to a
total of 10 facilities in the Tokachi
and Kushiro areas, and we willcontinue to provide support in the
future.

Sports promotion
Taking advantage of the vastland of Tokachi, we host the“FUKUHARA Cup” youth soccer
tournament at a venue with all
natural grass. This year marks the27th FUKUHARA Cup, making it oneof the largest soccer tournaments in
Hokkaido, and has even produced a
J-League soccer player. In addition,
we also hold community-based
tournaments such as mini-volleyballand badminton, contributing to thedevelopment of the local community.

"Da*Marche" small store
As a lifeline for the local
community, we have beendeveloping the "Da*Marche" ultracompact store format since 2015.
By supplying all fresh produce
from the Fresh Food Center and
Delicatessen Center, we are able
to operate stores with fewer staff
in small populations areas, andcontribute to the community.

AEDs installed in all

Promotion of managerial

storesposition for female

As part of our efforts to createa safe and secure shopping
environment for our customers,
we have installed AEDs at all of
stores and centers.
It is not only for our customers
and employees, but also serveas an AED installation site inneighborhood.

We have been promoting
employees to managerial positions,mainly in the administrative
division, based on abilities but
not gender. Our percentage ofmanagerial position for female ishigh in ARCS Group, and many
women are active in the company.
We will continue to promote theactive participation of women in
the future.

ARCS INTEGRATED REPORT 2023

40

Value Creation

TOKOU STORE COMPANY,LIMITED
Number of employees / 2,182

Date of establishment / July 15, 1972

Number of stores / 27

Capital / 1,377 million yen

Net sales/39,380 million yen

Tel. 0138-48-2220 (main) Fax. 0138-48-2226

CentralHokkaidoarea
27 stores

Governance

Company Overview

Representative Director and President / Shin Konno

Number of employees/1,561

Date of Establishment / September 30, 1998

Number of stores / 18

Capital/480 million yen

Net sales / 25,939 million yen

Southern
Hokkaidoarea
18 stores

Nature of Business / Food supermarket

Nature of Business / Food supermarket

TOKOU STORE operates in Sapporo City and the neighboring city of Kitahiroshima. Our stores are characterized by themaking of stores which meet the needs of people living within walking distance, such as stores along the subway line and24-hour stores. The company's strengths also lie in quality and customer service, such as enhanced freshness of fresh
food and the deployment of Care-Fitter in all stores. We have established a good cooperative relationship with RALSE,
with whom we have overlapping trade areas, through close information exchange and common distribution centers.

Dounan Ralse operates stores in Hakodate city and other areas in southern
Hokkaido. Under the motto of "community-based and customer-first," we offer
freshness, a full lineup of merchandise, and friendly service. Headquartered in
Hokuto City, the company's strength is its ability to quickly and flexibly manage
its stores to meet local needs.

Strengths of TOKOU STORE

Strengths of Dounan Ralse❶ Store development and merchandise composition close to consumers
in urban areas❷ Quality enhancement of fresh food and friendly customer service forseniors and people with disabilities❸ Active exchanges with local residents as local shops❶ Merchandise development and store development that responds
immediately to local food culture and customs❷ Store openings in 2 cities and 7 towns covering the entire southern
Hokkaido❸ Abundant product lineup in the fresh food department through the useof process centers

Shuichi Kusumi,
Representative Director
and President

Sustainability Initiatives

Shin Konno,
Representative Director
and President

Sustainability Initiatives

Aiming to be a lifeline for

Care-Fitter are assigned

Various in-store

Close collaboration with Hakodate City throughElderly customer-friendly

Initiatives to Preserve

local residents

to all stores.

seminarsa comprehensive cooperation agreement

telephone and fax home delivery

Local History

In 2011, a comprehensive
partnership agreement was signed with
Hakodate city, Hokkaido. "Hakodate
city bulletin board" has been set up
in eight stores in the city, in order toprovide local information and municipal
information to our customers. In
addition, Dounan Ralse and Hakodate
city have jointly implemented various
initiatives such as the "Temae-dori(Take from front)" and participation asadvisors in mock business meetings torevitalize local businesses.

We deliver our products
throughout the Hakodate areafrom our base at Super ARCS
Minatomachi Store in Hakodate
City. We receive orders via theInternet as well as traditional
telephone and fax orders. This
service is popular with elderly
customers who do not haveInternet.

Through 24-hour operations at
our stores in central Sapporo andalong the subway lines, we areable to provide fresh foods anddaily necessities at any time. Asa lifeline for the community, we
will continue to contribute to theconvenience of our customers.

41

Group synergies

3-4-11, Oiwake, Hokuto City, Hokkaido 049-0101

Tel. 011-842-3246 (main) Fax. 011-842-3240

Representative Director and President / Shuichi Kusumi

Key strategies

Dounan Ralse Co.,Ltd.

1-9-6, Hiragishi 1-jo, Toyohira-ku, Sapporo, Hokkaido 062-0931

Company Overview

Sustainability

All of our stores are staffed with
Care-Fitter. We are committed
to creating a safe and enjoyable
shopping environment forcustomers in wheelchairs, thevisually impaired, and others whoneed assistance, and to improving
our customer service.

In cooperation with the cities of
Sapporo and Kitahiroshima, wehold health seminars using ourstorefront space. Local residents
enjoy interacting with eachother through physical exercises
such as rhythm exercises, brain
training, and mini lectures on
health.

In September 2022, Super ARCS
Chiyogadai Store opened on thesite of the former Chiyogadai
Elementary School in Hakodate
city. The cherry tree in theschoolyard was retained, andchairs and tables remade fromjumping boxes were used in theeat-in corner. The second-floor
wall is inscribed with the school
song of Chiyogadai Elementary
School, giving the store a sense of
the school's 101-year history.

ARCS INTEGRATED REPORT 2023

42

Value Creation

Doutou Arcs Co.,Ltd.
Company Overview

Fax. 0157-36-5125

Representative Director and President / Tatsushi Kitano

Number of employees/1,076

Date of Establishment / December 25, 1959

Number of stores / 14

Capital/450 million yen

Net sales/19,885 million yen

Group synergies

Governance

2-1, Yakedan, Tsukinoki, Shibatamachi, Shibata-gun, Miyagi, 989-1756
Eastern
Hokkaidoarea
14 stores

Nature of Business / Food supermarket

TEL.0224-58-7171 FAX.0224-58-7173

Company Overview

Representative Director and President / Yoshikazu Ito

Number of employees/778

Date of Establishment / April 9, 1974

Number of stores / 10

Capital/50 million yen

Net sales/13,605 million yen

MiyagiPrefecture
10 stores

Nature of Business / Food supermarket

Doutou Arcs operates 14 stores mainly in Kitami and Abashiri cities. Doutou Arcs
has formed a dominant position in the local trade area with small and large stores,
and is developing community-based merchandise and stores, such as sell preparedfoods with taste of home cooking.

Ito Chain is a food supermarket that operates 10 stores in the area from Sendai
City, Miyagi Prefecture to the southern part of the prefecture, and joined the ARCS
Group in 2019. The company's corporate motto is "Continue to do business every
day to please our customers". Ito Chain is actively opening stores in areas affectedby the Great East Japan Earthquake.

Strengths of Doutou Arcs

Strengths of the Ito Chain❶ Name recognition and credibility through local community functions❷ Support local companies handling locally produced and locallyconsumed products❸ High man-hour productivity with multitasking❶ Dominant expansion in southern area of Miyagi Prefecture andcreation of stores with close ties to the community❷ Strengthening ties with producers through the region's largest direct sales outlet❸ Creating a fun store like a farmer’s market

Tatsushi Kitano,
Representative Director
and President

Sustainability Initiatives

43

Key strategies

Ito Chain Co.,Ltd.

3-3-3 Oroshimachi, Kitami City, Hokkaido 090-0056
Tel. 0157-36-5121 (main)

Sustainability

Yoshikazu Ito,
Representative Director
and President

Sustainability Initiatives

Working with local schools

Product development focusing on health

Human resource development through our own

Received “Hometown

Promoting local production for local consumption

to provide a venue for sales

and local production for local consumption

curriculum that does not rely on external lecturer

Company of the Year Award”

by setting up a direct-to-consumer corner

As a community-based
company, we contribute to the
local community by holding an
open sale of agricultural products
produced by a local agricultural
high school, Hokkaido Bihoro
High School. This event is greatly
appreciated not only by thestudents, but also by their families
and local residents.

Using local products handled
by the fruits and vegetables
department, we developed andsold "Kamu Kamu lunchboxes"
jointly designed with the Kitami
Dental Association and otherorganizations with an awarenessof chewing power and nutrition,and retort curry from the popular
restaurant “Curry Chikara”
originating from the Kitami city.

Since 2021, we have revised
the content of our training for new
employees, and by having themexperience all departments atregular intervals, we are striving todevelop human resources capableof multi-tasking. In addition, at thetraining for employees in their third
to fifth years and the training forchiefs, both present each other's
work content, which leads to growthand provides a valuable opportunity
for exchange of opinions.

In October 2022, the Foundation
for Regional Development (Furusato
Foundation) awarded us the “Hometown Company of the YearAward (Minister of Internal Affairs
and Communications Award)” for ourcontribution to the local economy
and employment through Foods
Garden Tamaura Shokusaikan
store, which opened in the Tamaura
district of Iwanuma City, Miyagi
Prefecture, an area affected by theGreat East Japan Earthquake.

As a community-based store,each store has a direct sales
section that sells products directlyfrom producers. In addition to thestandard vegetables and fruits,
the stores sell a wide variety
of products, including marine
products, desserts, specialties,
and sundries, and also play a rolein the local production and local
consumption of Miyagi Prefecture
products.

Shopping bus
We provide free "shoppingbuses" at several of our stores
to connect stores in areas where
shopping has become difficult
due to the withdrawal of foodsupermarkets and other reasons.
It is popular among elderly
people who have few means oftransportation for shopping.

ARCS INTEGRATED REPORT 2023

44

Value Creation

OTANI CO.,LTD.

ELDy Co.,Ltd.

Tel. 028-661-4011 (main) Fax. 028-660-2222

Tel. 011-812-8088 (main) Fax. 011-812-8885

37-3 Hiraide Kogyo Danchi, Utsunomiya City, Tochigi 321-0905

Company Overview

Representative Director and President/ Izumi Kawano

Number of employees/1,397

Date of Establishment / September 1, 1982

Number of stores/31

Capital/98 million yen

Net sales / 25,139 million yen

Key strategies

Tochigi
Prefecture
30 stores

Company Overview

SaitamaPrefecture
1 storeOTANI is a food supermarket headquartered in Utsunomiya City, Tochigi Prefecture, with
31 stores in Tochigi Prefecture and Saitama Prefecture. Joined the ARCS Group in 2021. its
establishment in 1946, OTANI has been providing a wide range of merchandise and services
to all customers under the corporate philosophy that "Stores are for customers ~With aconsiderate and honest heart~”. We provide safe, secure, healthy, and delicious food.

Group synergies

Governance

Sapporomain officeCainz's 3 stores
Sapporo 1 store
Ishikari 1 store
Kitahiroshima 1 store

1-9-6, Hiragishi 1-jo, Toyohira-ku, Sapporo, Hokkaido 062-0931

Nature of Business:/Food supermarket

Representative Director and President / Kiyoshi Yokoyama

Nature of Business / building

Number of employees/278

Representative Director and Senior Managing Director/Kozo Dotemaintenance, insurance,

Number of stores / 3

Date of establishment / May 17, 1966

resource and environment, home

Net sales / 7,971 million yen

Capital/480 million yen

improvement, and travel agency

Hachinohe
officeMorioka
officeTochigi
officeELDy is a company that supports not only general customers but also ARCS Group
companies through a wide range of business operations, including building maintenance,industrial waste collection and transportation, insurance and travel agency business, andoperation of home improvement center business. We contribute to local communities by
providing daily support so that group companies can function as lifelines for the community.

OTANI's Strengths

ELDy's Strengths❶ Trusted relationship with local customers and business partners
cultivated 76 years since the company was established.
❷ Differentiate from competitors by developing two business categories: "Food Market OTANI," which
offers both low prices and high quality, and "Food Oasis OTANI," which is oriented toward authenticity.
❸ Creation of stores that meet regional characteristics and merchandise
lineups that incorporate local customer needs❶ W e can undertake peripheral operations essential to foodsupermarkets within the group.
❷ A ccumulation of know-how in handling products related to "allaspects of life" other than foodIzumi Kawano,
Representative Director
and President

Sustainability Initiatives

Kozo Dote,
Representative Director
and Senior Managing
Director

Sustainability Initiatives

Received the Governor's Commendation and the Employment Support

Collection of used paperFree donation of vegetable

Waste Management andUnified receivership insurance for all

Disaster Response in the

Organization Commendation for its efforts to employ people with disabilities.

packs

scraps to Utsunomiya Zoo

Reusegroup companies to visualize risk

Home Improvement Business

After identifying risks in the retailbusiness without omission, we
propose risk management in line withthe management policies of eachgroup company.
In addition, by predicting damage
in the event of a large-scale disasterand covering it as insurance, we
can quickly coordinate with disasterrecovery companies in the event ofan emergency, thereby contributing to
the early restoration of stores, which
are a lifeline for the community.

We operate three franchised
home improvement stores (Cainz's)
and signed an agreement with
Kitahiroshima City in 2017 andIshikari City in 2020 regarding
the supply of daily commodities
and other supplies in times ofdisaster. Additionally, in response
to a request from the Ministry of
Economy, Trade and Industry, we
provided supplies to evacuation
centers in the aftermath of the 2018
Hokkaido Eastern Iburi Earthquake.

We have 29 employees with disabilities
working in the Fruits and Vegetables
Department, Grocery Department, Seafood
Department, Delicatessen Department, etc.,
according to their aptitudes and objective.
The employment rate of persons withdisabilities reached 3.68% as of the endof February 2023. In 2018, the company
received the Tochigi Prefecture Governor's
Commendation for Excellent Employment of
Persons with Disabilities, and in 2022, thePresident's Award from the Employment
Support Organization Commendation.

45

Sustainability

In October 2022, used paper
packs collection boxes were
installed in all stores, and by theend of February 2023, 1,500 kg of
paper cartons had been collected.
Since then, they have beentransformed into approximately
8,000 pieces of toilet paper,
contributing to a reduction of
1,170 kg of CO₂ emissions.

Vegetable scraps generated
from store merchandising areprovided free of charge to the
Utsunomiya Zoo. The vegetablescraps are collected directly fromthe stores twice a week, leading
to a reduction in vegetable waste
disposal costs and contributing toabout 30% reduction in feed costs
for the zoo.

In the resource and environment
business, we collect corrugatedcardboard and used paper
for reuse as raw materials forrecycled corrugated cardboard,paper tubes, and cattle bedding
straw, among others. In addition,
we have begun studying thepossibility of refining biodiesel fuelfrom waste cooking oil to reduce
CO₂ emissions.

ARCS INTEGRATED REPORT 2023

46

Value Creation

Sustainability

Key strategies

Group synergies

GovernanceCorporate Governance
Basic Stance on Corporate GovernanceDirectors' remuneration

The ARCS Group is comprised of a pure holding company (ARCS) and its affiliated operating companies. The mostimportant management issues are the implementation of the Group's philosophy, the strengthening of corporate
governance throughout the Group, and the enhancement of the Group's enterprise value. In order to strengthen
corporate governance, we will build an organizational structure that can respond quickly to changes in the businessenvironment, maintain a fair and transparent management stance as a publicly listed company, disclose information
to all stakeholders in a timely and appropriate manner, and develop internal systems to establish corporate social
responsibility and corporate ethics. At the same time, we have established an internal system for the establishmentof corporate social responsibility and corporate ethics, thereby ensuring thorough compliance management.

The remuneration of the ARCS Company's directors currently consists of fixed remuneration, performancelinked remuneration (bonus) and retirement benefits. ARCS places the highest priority on respecting the positionof each stakeholder and continuously growing and expanding its business as a going concern. At present, wehave not adopted a stock compensation plan for directors. However in May 2022, we established the Nomination
and Compensation Committee, a voluntary advisory body, and this committee has been studying the ideal form ofstock compensation and retirement benefits.

Main items for discussion at Board of Directors meetings

Corporate Governance Structure
Our corporate governance system is shown in the diagram below. The Board of Directors meets monthly to makefinal management decisions. The executive officer system has been introduced to clarify executive responsibility
related to the authority to use management resources. In addition, Group Management Committee, consisting of theCompany's directors, corporate auditors, executive officers, and presidents of business subsidiaries, holds meeting
monthly to deepen discussions on important matters to unify and ensure communication among the group companies.
Our management supervisory function is secured through the attendance of outside director at important meetings
such as Board of Directors meetings and management meetings, as well as audits conducted by corporate auditors.
Corporate Governance Structure

The main deliberations of the Board of Directors are listed in the table below. Final management decisions are
made at monthly meetings of the Board of Directors, which meet more than 60 times a year to pass resolutions
on management strategy, investment, and governance.
Amidst the remarkable changes in the business environment, PDCA-type management, in which management
decision-making and execution are repeated in a short cycle, is being established.
Board of Directors' Meetings Items to be Discussed and Number of Meetings

Appointment
and dismissal

Appointment
and dismissal

Appointment
and dismissal

Board of Corporate Auditors
Internal Auditor

Director

Outside Auditor

Nominating andCompensation Committee

Appointment
and Supervision

ReportExecutive Oﬃcer

Financialaudit

adviceManagement Meetings
Instruction(under direct control

Auditof the President)

20

37

DX etc.

81422Investment

25

10

35

Governance

13

5

18

Sustainability

2

4

6

Compliance and Risk Management

4

13

17

Personnel matters

9

5

14

Company-wide Comittee

0

15

15

Others

1

6

7

Total

79

92

171

Assessment of Board Effectivenessthe board of directors shall summarize and analyze the results, and measures are being taken to address theissues identified as a result.

ARCS

Aﬃliated
company

Total amount

17

ARCS will evaluate and analyze the effectiveness of the board of directors every year. Self-evaluation

advice

Audit

ReportBusiness Strategy

questionnaires will be conducted for directors and audit & supervisory board members. Based on the responses,

Business operation

Management Audit Group
Audit

Reportlegal advisor

Accounting auditor (auditing ﬁrm)

Audit

adviceOutside Director

Inquiry

Resolution

Management
strategy

Recommendations
and Reports

Board of directors
Audit

Number of deliberations

Item

General Meeting of Shareholders

In fiscal year 2022, the Board of Directors discussed the results of the questionnaire based on its tabulation,and found that the board of directors was generally rated as functioning effectively in all items of thequestionnaire. There is no significant findings regarding its effectiveness. While discussions at the board of
directors meetings have been further energized by the active comments of each director, there were also
clarified issues that require further consideration, such as the need more diversity initiatives (increasing the

Cooperation

Sustainability Promotion Committee

number of outside and female directors), deeper discussion and understanding of the SDGs and DX initiatives.
In response to these issues, we have increased the number of female outside directors with management
experience at other companies. We have achieved success through discussions on SDGs and DX initiatives atSurveillance

Cooperation

board of directors meetings, as well as at a training camp attended by all directors and auditors, and executive
officers and presidents of operating companies.

Compliance and Risk Management Committee
Legal & Compliance Group (under direct control of the President)

47

In the evaluation of effectiveness in fiscal year 2023, we confirmed the need for further efforts to ensuresufficient deliberation time as the number of agenda items to be submitted and deliberated by the board of
directors is increasing, such as expansion of operating companies, expansion of new businesses, responses tothe demands of the times.

ARCS INTEGRATED REPORT 2023

48

Value Creation

Sustainability

Key strategies

Group synergies

Governance

Messages from Outside Director
Strengthen the governance of the holding company

Outside Director

Hiroshi Saeki

He has extensive insight as an educator andresearcher, as well as extensive organizational
management experience as Vice President
and President of Hokkaido University. He wasappointed to our Board of Directors in 2014.
Member of the Nominating and Compensation
Committee since 2022.

Maintaining a Corporate Structure Resistant to Environmental Changes

During the fiscal year 2022, many people were
infected the COVID-19 pandemic in the areas
where the store operates, but thanks to the efforts
of all employees, the Group has fully fulfilled its
primary role as a supermarket: to provide people
with daily commodities. In addition, the Company's
focus on employee education regarding the SDGs,
which is a necessary and useful work for humanity.
On the other hand, there are large gaps inperformance among group companies. Before thegap between companies becomes too large, thesupport from holding company ARCS is necessary.
The uniqueness of each company is important, but
the balanced development of the group is more
important. Training of young employees at othercompanies is also necessary.
In addition, in the operation and decision-making
process of the board of directors, it is necessary toreach a conclusion within a limited amount of timeand number of times. By presenting the main points
of discussion and multiple options for them, more
focused discussion and convincing consensus
building can be achieved.

As the Representative Director and Chairmanof Hokkaido Human Resources Bank Co.,
Ltd. She has extensive experience andachievements in finding human resources,and has experience and knowledge from awide range of activities. In 2022, she wasappointed as a director of the Company.

Outside Director

Toyoko Togashi

Repeating Management Decisions for Further Advancement
In fiscal year 2022, investment projects such as
business expansion at group companies, real estatepurchases and sales, store remodeling and scrap & builds
were on the agenda at every meeting of our Board of
Directors. There were many management decisions thatwill lead to the harvest in several years.
In addition to the above, we tackled a dizzying arrayof new issues, including the integrated system platform,
logistics reform, acquisition of the "Eruboshi" certification
as an excellent company for promoting women's activities,
enhancement of the childcare leave system, reform of the
ARCS RARA card, renewal of our website, and compliancewith the Corporate Governance Code. I believe that weare on track to meet all of the remaining challenges tocomply with the Corporate Governance Code as of fiscal
year 2022. Once we have completed the tasks at hand,
we should return to the Group's overall growth strategy.
As areas for improvement in future governance anddecision-making processes, it is necessary to selectboard meeting proposals, save labor by explaining them inadvance, and further strengthen information collaboration
regarding human capital and compliance risk areas thathave been of growing interest in recent years.

49

In fiscal year 2022, the problem about the
integrated system platform upgrading was solved.
So in order to make the store more convenient forcustomers to use, It was a year in which we laid thegroundwork to shift resources from the information
systems division to DX in the sales division.
In fiscal year 2023, we believe that "lifestyleprotection" should be our top priority. This includes
not only price action but also business continuity
planning (BCP) to prepare for earthquakes andweather disasters. By continuing our business in theevent of an emergency, we will be able to protect
the lives of our customers in the community. In
this sense, I hope that everyone of our employees
will aware that our group is not merely a business
entity, but also a “lifeline for the community”.
Although the environment surrounding ourcompany is becoming increasingly severe due touncertainties in the domestic and international
outlook and heightened risk of natural disasters.
It is one of the ways to be prepared is to maintaina certain amount of internal reserve in order tomaintain a corporate structure that is sufficiently
strong to withstand any serious situation that may
come our way.

Composition of the Board of Directors （as of May 23, 2023）
Ratio of Outside Directors

Ratio of female directors

Two female
directors

Three outside
directors

3 persons/
9 persons

2 persons/
9 persons

5 persons/
13 persons

％

％

％

33.3

Six internal
directors

Outside director

Ryoko sasaki

In addition to managing the R's Seminar
Corporation, she also has experience inadministrative work as the vice governorof Hokkaido. She became a director of thecompany in 2015.
Member of the nomination and compensationcommittee in 2022.

Ratio of Outside Directors andOutside Corporate Auditors

22.2

7 maledirectors

38.5

5 Outside
Directors
andOutsideCorporate
Auditors

8 internal
directors

The company's board of directors currently consists of nine directors, who are
well-versed in business management, have knowledge, experience, and abilities. In
order to ensure diversity, three outside directors are invited from outside the retailindustry, and two of them are female directors with management experience at othercompanies.

ARCS INTEGRATED REPORT 2023

50

Value Creation

Sustainability

Key strategies

Group synergies

Governance

Board of Directors (May 23, 2023)

Representative Director and President

Kiyoshi Yokoyama

Director and Executive Vice President

Koichi Furukawa(May 15, 1935)

Dec. 1961 Joined the Company
Dec. 1964 Appointed Managing Director of the Company
Apr. 1970 Appointed Representative Director andSenior Managing officer of the Company
Apr. 1985 Appointed Representative Director andPresident of the Company (current position)
Nov. 2002 Appointed Representative Director andPresident of RALSE COMPANY,LIMITED
May. 2007 Appointed Representative Director,
Chairperson and CEO of RALSECOMPANY,LIMITED (current position)

Director and Executive Officer

Kazuhisa Nekomiya(May 7, 1956)

Apr. 1980
Oct. 1998
Nov. 2002
May. 2006

Joined the Hokkaido Bank, Ltd.
Joined the Company
Appointed Executive Officer of the Company
Appointed Director of RALSECOMPANY,LIMITED (current position)
May. 2013 Appointed Director and Managing
Executive Officer of the Company
May. 2019 Appointed Director and Senior Managing
Executive Officer of the Company
May. 2021 A
 ppointed Director and Executive Vice
President of the Company (current position)(August 11, 1960)

Mar. 1983
May. 2005
May. 2006
May. 2010
May. 2016

Joined the Company
Appointed Executive Officer of RALSECOMPANY, LIMITED
Appointed Director of RALSE COMPANY, LIMITEDAppointed Managing Director of RALSECOMPANY, LIMITEDAppointed Representative Director,
President and COO of RALSECOMPANY, LIMITED (current position)
Appointed Director and Executive
Officer of the Company (current position)

Full-time Corporate Auditor

May. 1989
Jun. 1997
Jun. 2002

May. 2014

Director and Executive Officer

Director and Executive Officer(August 28, 1971)(September 30, 1967)(October 16, 1953)

Takehiko Miura

Jun. 2005 Joined Universe Co., Ltd.
Jul. 2011 Appointed Director of Universe Co., Ltd.
May. 2020 Appointed Representative Director and
COO of Universe Co., Ltd.
Appointed Director and Executive Officerof the Company (current position)
May. 2021 Appointed Representative Director andPresident of Universe Co., Ltd. (current
position)

Ikuharu Fukuhara

Sep. 1995 Joined FUKUHARA CO.,LTD
May. 2006 Appointed Director of FUKUHARA CO.,LTD.
May. 2009 Appointed Managing Director of
FUKUHARA CO., LTD.
May. 2013 Appointed Representative Director andPresident of FUKUHARA CO., LTD.
(current position)
 ppointed Director and Executive Officer ofA
the Company (current position)

Director

Director

Hiroshi Saeki

Ryoko Sasaki(July 1, 1941)

Appointed Professor of School ofEngineering of Hokkaido University
Appointed Dean of Graduate Schoolof Engineering and Dean of School ofEngineering of Hokkaido University
May. 2003 Appointed Vice President of Hokkaido
University
May. 2007 Appointed President of Hokkaido
University
Apr. 2013 Appointed Professor Emeritus of
Hokkaido University (current position)
May. 2014 Appointed Outside Director of theCompany (current position)

51(July 6, 1946)

Apr. 1984

Jun. 1992

Apr. 2001

Jul. 1995
Jul. 2002
Jul. 2007
Jun. 2013
May. 2015
Apr. 2018

 ppointed Managing Director of Survey
Aand Development Center Co., Ltd.
Appointed Representative Director of R's
Seminar Corporation
Appointed Deputy Governor of Hokkaido Government
Appointed Chairperson of Hokkaido
prefectural Public Safety Commission
Appointed Outside Director of Hokkaido
Electric Power Co., Inc.
Appointed Outside Director of theCompany(current position)
Appointed Hokkaido University Nitobe
College Fellow (current position)

Takayuki Tamori(May 31, 1949)

Apr. 1974

May. 2008

Director and Executive Officer

Auditor

Hiroyuki Sagawa

Joined Jotetsu Shoji Co.,
Ltd. (currently TOKOUSTORE COMPANY, LIMITED)
Appointed Directorof TOKOU STORECOMPANY, LIMITED
Appointed Managing
Director of TOKOU STORECOMPANY, LIMITED
Appointed Senior
Managing Directorof TOKOU STORECOMPANY, LIMITED
Appointed Audit&Supervisory Board
Member of TOKOUSTORE COMPANY,
LIMITED (current position)
Appointed Full-time Audit&Supervisory Board
Member of the Company(current position)(November 2, 1952)

Apr. 1976
Jun. 1995
May. 2010
May. 2014

May. 2019

Joined Jotetsu Shoji Co., Ltd.
(currently TOKOU STORECOMPANY, LIMITED)A ppointed Directorof TOKOU STORECOMPANY, LIMITEDAppointed Managing
Director of TOKOU STORECOMPANY, LIMITEDAppointed Full-time
Corporate Audit &Supervisory Board
Member of TOKOU STORECOMPANY, LIMITED(current position)
Appointed Audit&Supervisory Board
Member of the Company(current position)

Auditor

Auditor

Satoru Takashima

Kazunori Ito(October 21, 1951)

Apr. 1985

Established Satoru
Takashima Law Office
May. 1993 Appointed Audit&Supervisory Board
Member of the Company(current position)
Jan. 1996 Established Sapporo Chuo
Law Office
Aug. 2006 Appointed Head of the
Takashima Law Office(current position)(May 16, 1949)

Apr.1968

Joined SAPPORO Regional
Taxation Bureau
Jul. 2008 Appointed District Directorof Sapporo Naka Tax
OfficeAug. 2009 Appointed Head of the
Kazunori Ito Certified
Public Tax Accountant
Office (current position)
May. 2013 Appointed Audit&Supervisory Board
Member of the Company(current position)

Akira Muguruma

Feb. 1981 Joined Fuji Co., Ltd (currently Douhoku Arcs Co., Ltd.)
Dec. 1987 Appointed Director of Fuji Co., Ltd
Jul. 1991 Appointed Managing Director of Fuji Co., Ltd
Jul. 1992 Appointed Senior Managing Director of Fuji Co., Ltd
Jul. 1998 Appointed Representative Director andPresident of Fuji Co., Ltd (current position)
Oct. 2004 Appointed Director and Executive
Officer of the Company
Jun. 2022 Appointed Executive Officer of the Company
May. 2023 A ppointed Director and Executive Officer of
the Company (current position)

Executive Officer

Executive Officer

Hideki Kogarimai

Tsukasa Sawada(December 26, 1962)

Mar. 1988
Jun. 2004
Jan. 2007
Jan. 2009(January 31, 1959)J oined the JOIS Co., Ltd. (currently BELJOIS Co., Ltd.)A ppointed Director of JOIS Co., Ltd.
A ppointed Managing Director of JOIS Co., Ltd.
A ppointed Representative Director, President and Chief
Executive Officer of JOIS Co., Ltd.
Sep. 2012 A ppointed Director and Executive Officer of the company
Mar. 2016 A
 ppointed Representative Director and Chairperson of
BELJOIS Co., Ltd.
May. 2022 A
 ppointed Executive Officer of the Company(current position)

Oct. 1990 Joined the Belle Development Co., Ltd.
May. 1992 Appointed Director of Belle Development Co., Ltd.
May. 2004 Appointed Representative Director and President of Belle
Development Co., Ltd.
May. 2010 Appointed Representative Director and President of Belle Plus
Co., Ltd. (currently BELJOIS)
Mar. 2016 A
 ppointed Representative Director and President of BELJOIS Co., Ltd.
May. 2016 A
 ppointed Director and Executive Officer of the Company
May. 2022 A
 ppointed Executive Officer of the Company (current position)

Executive Officer

Executive Officer(August 11, 1956)(January 6, 1963)

Director

Toyoko Togashi(June 11, 1955)

Apr. 1985 Appointed Director of B4 corporation
Aug. 1996 Appointed President of Hokkaido Human
Resources Bank, Limited
Aug. 2012 Appointed Representative Director
and Chairperson of Hokkaido Human
Resources Bank, Co., Ltd. (current
position)May. 2022 Appointed Outside Director of theCompany (current position)

Koichi Inoue

May. 1989
Sep. 2005
Jul. 2010
May. 2014
Apr. 2020
May. 2022

Joined the Sony Corporation (currently Sony Group)
Joined Universe Co., Ltd.
Appointed Director of Universe Co., Ltd.
A ppointed Director and Executive Officer of the Company
Appointed Director in charge of the Company of Universe Co., Ltd.
Appointed Executive Officer of the Company (current position)

Naoto Matsuo

Sep. 1990
May. 2012
May. 2014
May. 2016
May. 2020

Joined the Company
Appointed Executive Officer of RALSE COMPANY, LIMITED
Appointed Director of RALSE COMPANY, LIMITEDAppointed Managing Director of RALSE COMPANY, LIMITEDA ppointed Senior Managing Director of RALSE COMPANY,
LIMITED (current position)
Appointed Executive Officer of the Company (current position)

ARCS INTEGRATED REPORT 2023

52

Value Creation

Sustainability

Key strategies

Group synergies

GovernanceDirector/Executive officer skill matrix
The key expertise and experience of each director and executive officer is illustrated in the skill matrix.
In addition, regarding the Company's management strategy and priority issues related to sustainability, whatperspectives are the directors and exective officers contributing and providing knowledgebased on their respective
experiences, skills, and knowledge shown in the skill matrix listed in the table on page 54.

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Perspective from a position
overseeing the management of our
group

○

○

○

Perspective based on
the performance andbusiness condition of
the entire group

Perspectives
on Company
Management(Company-wide)

Perspectives
from experiencein handling many
M&A transactions

Perspectives
based onknowledge ofenergyPerspectives
on Company
Management(Company-wide)

P25

P27

Perspective fromthe Position of Vice
President in Chargeof Administration

P28

P47

Perspectives
on Company
Management
Perspective from the Position of Vice
President in Charge of Administration○

Perspectives
Perspectives from a Position Leadingon Company
the Management of Operating
Management
Companies(Central Hokkaido)

Perspectives
on Company
Management(Central Hokkaido)

Perspectives on
Employee Educationand Human Resource
Management○

Perspectives
Perspectives from a Position Leadingon Company
the Management of Operating
Management
Companies(Tohoku)

Perspectives
on Company
Management(Tohoku)

Perspectives on
Employee Educationand Human Resource
Management

Perspectives
Perspectives from a Position Leadingon Company
the Management of Operating
Management
Companies(Eastern Hokkaido)

Perspectives
on Company
Management(Eastern Hokkaido)

Perspectives on
Employee Educationand Human Resource
Management

Perspectives
Perspectives from a Position Leadingon Company
the Management of an Operating
Management
Company(Northern Hokkaido)

Perspectives
on Company
Management(Northern Hokkaido)

Perspectives on
Perspectives
Employee Education
on Company
and Human Resource
Management
Management

Directors andExecutive Officer

Ikuharu Fukuhara

○

○

○

○

Directors andExecutive Officer

Akira Muguruma

○

○

○

○

Director (outside
and independent
directors)

Hiroshi Saeki

Director (outside
and independent
directors)

Ryoko Sasaki

○

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53

Takehiko Miura

○

○

○

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Directors andExecutive Officer

Kazuhisa Nekomiya

○

○

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Directors andExecutive officer

○

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Director and Exective
Koichi Furukawa
vice President

○

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Kiyoshi Yokoyama

P29-32

Materiality on Sustainability (Key Issues)
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Representative
Director andPresident

NameManagement Strategies

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business experience

Job title

Perspectives on the contributions and offerings of directors and executive officers on key themes

Management skills and knowledge

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ne
ev
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SG

Management and

○

○

○

○

○

○

○

Engineering
Perspective on
the Environment
Perspectives fromDifferent Industry
Management Experienceand Knowledge

Consumer
Perspectives on
Local Economies

Perspectives on
Electricity Supply
and Demand for
Local Economies

Perspectives fromDifferent Industry
Management Experienceand Knowledge

Objective
perspective as an
academic expert
Perspectives on
Diverse Human
Resources andWork Styles

Perspectives fromdifferent industry
management experienceand knowledge

Consumer
Perspectives
on the Local
EconomyPerspectives on
Diverse Human
Resources andWork Styles

Perspectives fromdifferent industry
management experienceand knowledge

Director (outside
and independent
directors)

Toyoko Togashi○

Executive officer

Hideki Kogarimai

○

○

○

○

Perspectives from a position leading
the management of operatingcompany

Perspectives
on Company
Management(Tohoku)

Perspectives
on Company
Management(Tohoku)

Perspectives on
Employee Educationand Human Resource
Management

Executive officer

Tsukasa Sawada

○

○

○

○

Perspectives from a position leading
the management of operatingcompany

Perspectives
on Company
Management(Tohoku)

Perspectives
on Company
Management(Tohoku)

Perspectives on
Employee Educationand Human Resource
Management

Executive officer

Koichi Inoue

Executive officer

Naoto Matsuo

○

○

○

○

○

Perspectives from a
position promoting
DX throughout the
group

○

○

Perspectives on
Perspectives from
economies of scale
an online store
in Merchandising,promoterlogistics, etc.

Perspectives
on Security
Enhancement
Perspectives fromthe standpoint ofenergy conservation
and BCP promotion

ARCS INTEGRATED REPORT 2023

54

Value Creation

Sustainability

Key strategies

Group synergies

GovernanceCompliance and Risk Management
Basic Approach to Compliance and Risk Management

Compliance Education

In 2008, ARCS established the Compliance and Risk Management Committee, which is chaired by the
President and includes outside lawyers, to oversee compliance and risk management of the group. It isregularly reported to the board of directors.

The Compliance and Risk Management
Committee distributes the booklet “ARCSGroup Philosophy”, which describes
the corporate philosophy and code of
conduct, to all officers and employees ofgroup, and educates them on relevantlaws, regulations, the group's philosophy,
code of conduct, in order to ensurethat they are familiar with basic mattersconcerning corporate governance andcompliance. We also conduct periodic
compliance training sessions. In addition,
we periodically publishes ComplianceNews to strengthen compliance and instill
corporate ethics.

Ensure compliance

Risk management

The "Compliance Regulations" stipulate mattersnecessary for the handling of compliance of our group,
and we are committed to thorough compliance and fairand honest management.

In accordance with the "Risk Management
Regulations" we have established basic policies
and systems for risk management. We have put inplace the risk management system and methods, inorder to manage the risks of our group companies
comprehensively and individually.

Major Risks and Countermeasures
Major Risks
Naturaldisasters,
accidents andincidents
Infectious andcontagious
diseases

Securing
human
resources

Specific Risks

Geopolitics

Product andfood safety■ Fires, accidents and incidents inside and outside stores■E stablishment of emergency contact system and information

rains, floods, and other major disasters■D isruption of store operations, merchandiseprocurement, and other business activities by
disasters

Changes in
the Business
Environment
Compliance &Misconduct

prevention manual

sharing system with group companies■S torage of emergency supplies and disaster equipment■E vacuation drills and crime prevention measures at group companies■C ustomer and employee health risks■E stablishment of response rules in accordance with official■R isks related to merchandise procurement■ Establishment of personnel support systems at headquarters■R isks related to personnel shortages■R isks related to intensified price competition

guidelines and thorough measures against infectious diseases
and among divisions and stores■S ecuring of unique merchandise procurement quotas at each Group company■ Expansion of joint Group procurement, utilization of CGC and■D ifficulty in securing and training excellent

the New Supermarket Alliance of Japan■ Establishment and thorough implementation of internal
environmental improvement policy■ Promotion of diversity and inclusion■ Diversification of recruitment methods■ Enhancement of education and training systems■ Health and safety issues in the workplace■ Establishment and thorough implementation of internal■D eclining workforce due to aging society withfewer children■ Intensifying competition for human resourcesamong companies(overwork, harassment, etc.)

environmental improvement policies■ Periodic checks for overwork and harassment and sharing offor all levels■ Establishment of harassment guidelines■ Close cooperation with industrial physicians and sharing of

information to Group companies as needed■G lobal economic recession due to political■ Secure unique commodity procurement quotas for each■E rrors in food labeling and promotional advertising■G uidance based on HACCP standards and thorough hygiene

instability such as terrorism, wars and conflicts■S oaring energy prices, supply chain disruptions, etc.
■R
 ising costs and cooling consumer confidence
due to the above■F ood poisoning and other product problems

Group company■P romote introduction of energy-saving equipment andconsider diversification of energy procurement■S hare information among Group companies and takeadvantage of economies of scale
management at each group company■R eputational damage■P eriodic checks of labeling rules and operational status■D efects in software and equipment due to■P reventive maintenance management of hardware

disasters, power outages, etc.
■C omputer virus infection or unauthorizedaccess from within■S uspension or temporary disruption of information
systems, leakage or falsification of internal information
including personal information due to the above■ Increased competition in the retail industry■C hanging customer consumption trends■H arassment, social media risk■S erious misconduct, compliance issues■N etwork redundancy/communication monitoring■S oftware operation status monitoring■E stablishment of various rules and guidelines for personal

information protection and implementation of employee
training■S ecure regional market share through area dominancestrategy■P romote marketing using customer information■E ducate

employees using the booklet “ARCS Group
Philosophy” and Compliance News■S
 hare risk cases through the Compliance Risk Management

Committee■C ollaborate with external experts such as legal advisors■C ontinue to educate and enlighten employees onimportance of compliance with laws and regulations

55

Internal Reporting System and Helpline for suppliers of the ARCS GroupThe ARCS Group has established an "Internal Reporting Desk" for employees of group companies and a "HelpLine for Suppliers of the ARCS Group" for suppliers to prevent violations of laws and regulations, misconduct,harassment, etc., and to ensure early detection, early correction and prevention of recurrence of such violations.

Internal Reporting System
As an internal reporting system for the purpose ofearly detection and correction of violations of laws
and regulations, internal rules, and social norms, wehave established an internal reporting system withinternal staff and outside attorneys as direct contact
points.

Exclusive Helpline for suppliers
We have established a dedicated contact point for
suppliers to contact us if the employee of a Group
company has committed (or is seen committing) an act
that violates laws and regulations, the ARCS Groupaction guideline, contracts with suppliers, or otherethical standards required by society.

information among Group companies■ Implementation of harassment training and awareness-raising■C ompensation for damages

Information
Security andInformation
Management

Compliance News■E
 stablishment of business continuity plan (BCP) and disasterhuman resources due to job turnoverLabor
management,
workplacehealth andsafetyCountermeasure■E arthquakes, tsunamis, typhoons, torrential

theQuality Assurance Promotion
In 2018, we established
the Quality Assurance
Promotion Office, andestablished a "Quality Policy"and "Quality Assurance
Regulations" for in-houseproducts. The Quality
Assurance Promotion
Committee, attended bypersonnel from each Group
company, meets regularly
to inform employees ofthe discussions and linkthem to ongoing activities.
In addition, QAP (Quality
Assurance Promotion) news
is published regularly, andstudy sessions are held toactively promote awarenessof hygiene management.

Each store holds a study session on hygiene management.

QAP (Quality Assurance Promotion) News

ARCS INTEGRATED REPORT 2023

56

Key Indicators
10-Year Summary (Consolidated)
Item

unit

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Net Sales

Million yen

454,391

470,310

501,905

512,645

513,955

512,246

519,218

556,946

577,568

566,209

Operating Income

Million yen

13,435

12,712

14,42914,854

14,44014,821

12,11917,74815,562

14,835

Ordinary Income

Million yen

14,68814,29015,894

16,471

16,366

16,405

13,746

19,503

17,306

16,444

%

3.2%

3.0%

3.2%

3.2%

3.2%

3.2%

2.6%

3.5%

3.0%

2.9%

Net income

Million yen

6,375

9,475

6,547

10,493

10,255

10,1686,870

12,967

10,304

9,947

Total Assets

Million yen

177,564

201,356

200,954

205,313211,157

226,846

232,332

251,032

258,025

266,155

Net Assets

Million yen

110,019

119,417

118,368

126,859

133,442

147,529

144,580

157,504

163,995

171,686

Ordinary Income Ratio

ROA (Return on Assets)

%

8.3%

7.5%

7.9%

8.1%

7.9%

7.5%

6.0%

8.1%

6.8%

6.3%

ROE (Return on Equity)

%

5.9%

8.3%

5.6%

8.6%

7.9%

7.2%

4.7%

8.6%

6.4%

5.9%

Total Assets Turnover

Number of times

2.6

2.3

2.5

2.5

2.4

2.3

2.2

2.2

2.2

2.1

%

62.0%

58.7%

58.9%

61.8%

63.2%

65.0%

62.2%

62.7%

63.5%

64.5%

Cash flows from operating activities

Million yen

12,057

17,764

12,757

16,25718,087

16,186

16,58429,047

14,247

16,989Cash flows from investing activities

Million yen△ 3,262△ 3,467△ 5,571△ 7,560△ 10,276△ 18,033△ 10,775△ 5,627△ 4,417△ 7,768

Cash flows from financing activities

Million yen△ 4,496△ 4,344△ 8,176△ 4,509△ 4,936

5,796△ 5,159△ 3,887△ 7,422△ 2,801

Cash and cash equivalents at end of period

Million yen

23,28833,24032,02336,20939,08443,03344,212

63,767

66,17572,594Equity ratio

Net income per share (EPS)

yen

115

171

117

188

185

183

121

229

182

177

Net assets per share

yen

1,999

2,128

2,128

2,281

2,425

2,557

2,558

2,787

2,910

3,066

Dividends per share

yen

40

42

42

46

48

50

50

55

57

58

24,196

26,401

26,923

26,64826,78826,81327,891

28,85530,13529,887

290

319

339

338

336

334

345

344

375

373

Total number of employees
Number of stores at end of period*The Christian year represents the fiscal year.

*The "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and others are applied from the fiscal year 2022, and the sales figures for fiscal
year 2022 are after the application of the said accounting standard and others.

57

ARCS INTEGRATED REPORT 2023

58

Financial Highlights

Non-Financial Highlights■ Net Sales(million yen)
600,000

500,000

FY2021■ Operating income

556,946
512,246

577,568

566,209

Total CO₂ emissions(million yen)
20,00017,748519,218
15,00015,562

14,821400,000

14,835

10,000200,000
5,000
100,000

2018

2019

2020

2021

0

2022

■ Ordinary Income and Ordinary Income Ratio
Ordinary income(million yen)
20,000Ordinary Income Ratio (%) (%)
19,503
5
17,306

16,40515,00016,44410,000

3.0

2.9

2020

2020

2021

2021

12,967
4

55,179t-CO₂e

Scope2

243,541t-CO₂e

10,304

3

9,000

2

6,000

1

3,000

2022

0

0

2018

2019

2020

2021

(%)

(million yen)

ROA (Return on Assets)

ROE (Return on Equity)2022

29,04730,00025,000

7.2

8.1
6.0

6.8
6.4

6

6.3

CO₂ emissions per 100 million yen in sales

59t-CO₂eAmount of plastic containers and packaging used

5,369t

Plastic Shopping Bag Refuse Rate

85.3%

Amount of food waste generated

16,112t

Amount of food recycled

9,951tFood recycling rate

61.8%

5.9

FY2021

FY2022

Number of employees (total)

30,13529,887

Number of employees (8hour equivalent)

21,193

20,985

Number of new graduates hired

176

146

Ratio of managerial position of female

6.3%

6.5%

Number of managerial position of female

51

53

Percentage of employees with disabilities

2.7%

2.9%

5

21

Percentage of paid leave taken (regular employees only)

45.5%

52.0%

Training hours per employee (regular employees only)-

Number of male employees taking maternity leave

20,00016,186

16,98916,584
14,247

15,0004.7

4906t-CO₂e

9,947

8.6
7.5

CO₂ emissions per store

12,000■ Cash flows from operating activities

8(emissions due to leakage of CFCs)

2022(million yen)
15,000■ ROA (Return on Assets)/ROE (Return on Equity)10

93,776t-CO₂e

6,870

5,000

2019

2019

10,168
3.5

2.6

2018

2018

■ Net income

13,746
3.2

0

Scope1

12,119300,000

0337,317t-CO₂e17.3 hours

10,000
2

0

5,000

2018

2019

2020

2021

2022

0

2018

2019

2020

2021

2022

*Financial figures for fiscal year 2022 are after applying the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020), etc.

59

ARCS INTEGRATED REPORT 2023

60

Company Profile As of February 28, 2023
Company Name
Address
Representative
Established

ARCS COMPANY,LIMITED

Capital21,205 million yen

2-32, Minami 13-jo Nishi 11-chome,
Chuo-ku, Sapporo, 064-8610, Japan

Number of employees

162

Kiyoshi Yokoyama, Representative
Director and President

Accounting Auditor

Ernst & Young ShinNihon LLC.

October 28, 1961

Listed exchanges

Tokyo Stock Exchange Prime Market /Sapporo Securities Exchange*part-time employee are 8-hour equivalents.

Shares As of February 28, 2023
■ Total number of authorized shares■ Total number of shares issued

and outstanding■ Number of shareholders

200,000,000 shares
57,649,868 shares
47,323*5,862 more than in the previous period

Major Shareholders (Top 10)
Shareholder Name

Number ofshares held
(shares)

Shareholding
ratio (%)

Number ofshares held
(shares)

Shareholding
ratio (%)

The Master Trust Bank of Japan, Ltd.

3,808,600

6.80

Valor Holdings Co., Ltd.

1,335,000

2.38

Kiyoshi Yokoyama

3,040,554

5.43

RETAIL PARTNERS CO., LTD.

1,335,000

2.38

The Hokkaido Bank, Ltd.

2,533,972

4.52

ARCS Group Employee shareholding
Association

1,065,598

1.90

Maruji Ltd.

1,437,131

2.56

ARCS Group Business Partners
Shareholding Association

1,033,902

1.84

North Pacific Bank, Ltd.

1,415,844

2.52

The Hokuriku Bank, Ltd.

977,208

1.74

Shareholder Name*The Company holds 1,666,818 shares of treasury stock, which are excluded from theabove list of major shareholders.
*Shareholding ratio is calculated excluding treasury stock (1,666,818 shares).

Distribution by Shareholder (Number of Shares)

Distribution by Region(Number of Shareholders)Life and non-life insurance
1,429 thousand shares
2.48%
Foreign corporations
and individuals
7,288 thousand shares
12.64%

Hokkaido
5,206 persons
11.00%

In esoteric Buddhism, the three elements of action (body), behavior (mouth),and consciousness (will) are called the "Sanmitsu”.

Individuals and Others
24,222 thousand shares
42.02%

Other corporations
14,518 thousand shares
25.18%

It is said that human conduct consists of this body, mouth, and will.
Chubu region
6,981 persons
14.75%

Financial institutions
10,190 thousand shares
17.68%

By aligning these three elements, we aim to build a relationship of trust
Tohoku region
3,369 persons
7.12%

with its stakeholders and further deepen our communication.
(Written by Kiyoshi Yokoyama, Representative Director and President)

Chugoku region
1,934 persons
4.09%
Kyushu/Okinawa region
2,138 persons
4.52%

Shikoku region
916 persons Kinki region
9,295 persons
1.94%
19.64%

61

Kantou region
17,281 persons
36.52%
Foreign countries, etc.
203 persons
0.42%

ARCS INTEGRATED REPORT 2023

62