FREUND CORPORATIONFREUND Report 2023
Fiscal Year Ended February 28 2023
(From March 1, 2022 to February 28, 2023)

Profile

Contents
Profile1
Milestones of FREUND Group2

Global Network of FREUND Group3

Value Creation Cycle of
FREUND Group4

We have grown on the basis of our “Hardware (pharmaceutical product manufacturing equipment,
pharmaceutical excipients and other products)” and “Software (drug formulation technologies)” businessmodels. Currently, we have 6 Group companies in Asia, the U.S. and Europe, including Japan. We are
expanding our business segment not only to pharmaceutical product field but also to non-pharmaceuticalproduct field. Based on the Group’s value of “ONE FREUND,” we are promoting business activities aimed at“contributing to better medical care and health for people worldwide” in management vision.

Manufacturing Process for
Pharmaceutical Products and FREUND
Group’s Business Scope
5
Overview of Business Segments andRelationship with Society

6

10-Year Consolidated Financial Data of
FREUND Group
7
Top Message

8

Corporate Philosophy“Develop the Future through Creativity®”

From Business Site

New Management Structure of Group
Company13
Our Global Five-Pillar Structure

14

Non-pharmaceutical Product Field:
Machinery15
Non-pharmaceutical Product Field:
Food Preservatives

Disclaimer

Contributing to better medical care and health for people worldwide, and creating andfostering technologies for fulfilling lives and food safety.

16

Sustainable Management Foundation17
Company and Stock Information

Management Vision

22

Forward looking
statementThis Report contains forward looking plans,estimates, strategies, financial results and otherstatements. Such information is based on the mostaccurate information available at the time of
production of this Report. Therefore, the Company’s
actual financial results may diverge largely fromstatements represented in this Report due to the
influence of various risks and uncertainties.
Influencing factors include the economic
environment, competitive pressures, related
regulations and laws, changes in productdevelopment conditions and fluctuations in foreignexchange rates relating to the Company’sbusinesses. Furthermore, the factors influencing theCompany’s estimates and other statements are notlimited to the above.
Note: T he details of this Report are based on the results of the fiscal
year ended February 28, 2023 (from March 1, 2022 to February
28, 2023). (However, new information available after March2023 has also been included in this Report).

Values which the FREUND Groupholds precious

Creating
special value
Aiming to be No.1 ineach businesssegment

NumberONE
FREUND

ONE
Only

ONE

Be

ONE

Putting clients’ views 1st

Networking

Aiming to be the Only ONE for
clients and society

Unite to a “Be One” group

1

HISTORYof FREUND

Focusing on film coating technologies for tablets, we were the first in the world to succeed indeveloping “automated film coating machine” and “film coating liquid.” Since our foundation in 1964,
FREUND CORPORATION has been on a path as a research and development type company based on granulation/
coating technologies under corporate philosophy of “Develop the Future through Creativity®.”

Milestones of FREUND Group

Founding period 19641969

Innovation period 19701989

Growth period 1990-2019

To the future 2020-

Founded amidst high economic growth period

Grew dramatically in line with economic growth of Japan

Expanded target markets to the world through globalization

Fly to the future with creativity

1964 Management

Established in Kanda
Tsukasamachi, Chiyoda-ku, Tokyo

1971 Machinery

Machinery

Developed and launched testingmachine for automated film
coating machine “FM-2 model”
and manufacturing machine“FM-5 model”

Developed and launchedautomated sugar and film
coating machine “HICOATER”

1978 Chemicals

Developed and launched foodpreservatives “Antimold-102”

Chemicals

1969 Machinery

1980

Developed and launched film
coating liquid for pharmaceuticals“FC-101” and “EC-101”
Developed and launched fluid
bed granulation, coating anddrying machine “FLOW COATER”

Developed and launchedmultiple function type foodpreservatives “Negamold”

Machinery

Celebrated the 50th anniversary
since FREUND’s founding
Developed continuous
granulation and drying system“Granuformer concept model”

2015 Chemicals

Launched pharmaceutical
excipients for orally disintegratingtablets “NONPAREIL-105 (150)”

1997 Management

Acquired Vector Corporation (U.S.)(currently Freund-Vector Corporation)2016 Machinery

Developed and launched tablet
printing machine “TABREX Rev.”

2008 Machinery

Developed and launched new tablet
coating machine “HICOATER FZ”

2018 Machinery2010 Management

Acquired Turbo Corporation(currently Freund-Turbo Corporation)

Developed and launched
continuous granulation anddrying system “Granuformer”

2019 Management

Established joint venturecompany Parle Freund Machinery
Private Limited (India)

Net sales andoperating profit trends

Established Freund Pharmatec Ltd.
in Ireland (transferred business to
Sigmoid Pharma Ltd. (Ireland) in
February 2016)

Management

Net sales (LHS)2020 Management

Acquired Cos.Mec S.r.l. (Italy)

Machinery

Developed and launched data
integrity system “Smart DI”

2021 Management

Established joint venture company
Freund-Chineway Pharmaceutical
Technology Center Co., Ltd. (China)

Chemicals

Developed and launched foodpreservative for fine detection
solution “Antimold Mild FDS”

Machinery

Developed and launched tablet
automatic coating tool “TACT”

Machinery

Developed and launched tablet
coater “HICOATER HV”

2022 Machinery
Management

Launched tablet printing
machine “TABREX”

2013 MachineryOperating profit (RHS)

2014 Management

Registered shares on theOver-The-Counter Market with
the Japan Securities Dealers
Association (later JASDAQ)

1996 Management

Management Established Freund Kasei
Corporation in Urawa City,
Saitama Prefecture(currently Saitama City)(merged in March 2014)1987 Chemicals

Established the “Hamamatsu Plant/
Hamamatsu Technology
Development Research Center” inHamamatsu City, Shizuoka Prefecture

1992 Management

Developed and launched nearinfrared technology “Smart MOIS”
Moved to the Tokyo Stock Exchange
standard market*Fiscal year ended at the end of
February each year(¥ million)(¥ million)

20,0002,400

Consolidated financial results

15,0001,800

Non-consolidated financial results

23

22

20

21

20

20

20

19

20

18

20

17

20

16

20

15

20

14

20

13

20

12

20

11

20

10

20

09

20

08

20

07

20

06

20

05

20

04

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

93

19

92

19

91

19

90

19

89

19

88

19

87

19

86

19

85

19

84

19

83

19

82

19

81

19

80

19

79

19

78

19

77

19

76

19

75

19

74

19

73

19

72

19

71

19

19

19

19

19

19

19

19

70

0

69

0

68

600

67

5,000

66

1,200

65

10,000

FREUND REPORT 2023

2

GLOBAL NETWORK
Global Network of FREUND GroupIn July 2021, we established the Shanghai FC Center, a technology development research center in China, and are preparing to start its operations during the second quarter of FY02/24. As aresult, our Group’s global network in the pharmaceutical product field now consists of a five-pillar-structure including Japan, the U.S., India, Italy and China. The addition of manufacturing sites
in India and Italy to the existing sites in Japan and the U.S. has strengthened the business development in the pharmaceutical emerging regions. For China, a huge pharmaceutical emerging
market, we will handle both machinery and chemical products at the Shanghai FC Center to increase awareness of our products. Through these efforts, we will provide better products suited
to the market, respond to regional needs for services including maintenance and cultivate high-quality local agents. With the establishment of a five-pillar-structure as a cornerstone, we aim to
expand our global market share by pursuing synergies among group companies. The business domains developed at each site and the functions of each site are as follows.

Evolving regions

Cos.Mec S.r.l. Machinery
Development Manufacturing

Sales

FREUNDCORPORATION Machinery Chemicals

Joined the Group in 2020

Development Manufacturing

Freund-Vector
EuropeanLaboratories Machinery
Sales

Development Manufacturing

Established joint venture company in 2019

Sales

(Non-Pharmaceutical Products)

Laboratory

Joined the Group in 2010

Established in 2014

Manufacturing Laboratory

Laboratory

Freund-Turbo
Corporation Machinery

Laboratory

Parle Freund Machinery
Private Limited Machinery

Sales

Freund-Chineway
Pharmaceutical
Technology Center
Co., Ltd. Machinery Chemicals
Sales

Laboratory

Shanghai FC Center opens in 2023 (planned)

Freund-Vector
Corporation Machinery
Development Manufacturing

Sales

Laboratory

Joined the Group in 19973

Value Creation Cycle of FREUND GroupWe have grown our solid dosage manufacturing equipment business, such as tablets and granules, and pharmaceutical
excipient business since founding. We are a unique research and development-oriented group of companies that are
involved in both formulation of machines and excipients in the pharmaceutical field, and are the only one of its kind in theworld. In recent years, while expanding our fundamental particle processing technologies into non-pharmaceutical productfields such as food and industrial applications, we have added powder handling equipment that is used in the ancillary
processes for pharmaceutical products to our business domain and are promoting global business activities. Furthermore,
we are taking on the challenge of realizing sustained growth based on our management vision by launching our own
engineering services with a view to solving problems with existing equipment operating at our clients’ manufacturing sites.

Pharmaceutical/Food/
Ingredient Manufacturers

Input
Financial
1 Capital
Manufacturing

Collaboration

Sales(products)

Procurement

2 Capital

Intellectual
3 Capital

Collaboration

Inkmachinery( equipment)( chemical
product )Pharmaceutical productmanufacturing equipment

Pharmaceutical excipient

Powder machinery equipmentfor non-pharmaceutical use

Product development/
manufacture/sales

Powder handling equipment
for manufacturing

Contract processing

Tablet printing machineTechnical services

Measuring equipment

Engineering services

OutputSales increase, cash flow
generation, ROE & EPS
improvement

Manufacturing
2 Capital

Functional food materials

Provision of competitive
products, top-level products

Food preservatives

Providing value tostakeholders

Financial

1 Capital

Tablet printing inkIntellectual

3 Capital

Shareholders/
Investors
Contributing to asset formation,
increased visibility incapital markets

Clients
Further cooperation asa good partner and stablesupply of reliable products

Brand strength enhancement

Human

4 Capital
Social
5 Capital

OutcomeDevelopment/Production Partner/
Academia

Pen

Hard
ware

Sustainability
policyFor FREUND Group, sustainability means aiming for sustained growthof stakeholders, the Group and society, based on our corporate
philosophy of “Develop the Future through Creativity®”. We willcontribute through the value we provide to our clients in our corporate
activities, while taking into consideration issues such as abnormal
weather, resource depletion, deforestation, and human rights. We will
also strive to contribute to the realization of a long-term sustainable
society from an ESG (Environment, Social and Governance)
perspective, taking into consideration D&I (Diversity & Inclusion).

Human

4 Capital

Particle processing technologies(pharmaceutical products/food/chemical applications)

Soft
ware

formulation(drugtechnologies)

Mechatronics technologies DDS technologies
Intellectual property
FREUND Group’s basic technologies
FREUND CORPORATION
Freund-Turbo Corporation

Freund-Vector Corporation
Cos.Mec S.r.l.

Revenue/Investments

Fostering excellent
researchers and attracting
global human resources

Social
5 Capital
Strengthening of inter-group
coordination, expansion of
global networks andexpansion of collaboration
with regions and clients

Employees
Respect for human rights,
promoting individual growthand providing a comfortable
and safe work environment

End Users
Enjoyment of good medicine
and realization of good healthand a prosperous life

Society
Contributing to civil society
and international society

Pen

+

Ink

Business modeling of themachinery business“Pen” and chemical
product business “Ink”
Since our inception, we havedifferentiated ourselves from ourcompetitors in the pharmaceuticalproduct field through likening its
business model to “Pen” machineryand “Ink” chemical products.
Today, we have established ourselves
as a leading company in thepharmaceutical manufacturing
equipment industry.

Hard
Soft
ware + ware
Unique value-added
creation through thefusion of “Hardware” and“Software”
In addition to the research anddevelopment of “Hardware” such asmachinery equipment and chemicals,
our Group possesses the “Software”
for particle processing technologies
that fusing their superior performance.
By integrating “Hardware” and“Software”, we promote uniquevalue-added creation to produce
original in-house products, contract
processing and technical services.

FREUND REPORT 2023

4

Manufacturing Process for
Pharmaceutical Products
and FREUND Group’s
Business Scope

Our main products are machinery equipment and chemical products such as excipients, which areused in the process of manufacturing pharmaceutical products (tablets and granules, etc.).
FREUND is the only enterprise in the world that conducts both the machinery equipment andchemicals businesses in pharmaceutical related business. Furthermore, in November 2020, theGroup’s product lineup expanded significantly with Italy’s Cos.Mec joining the Group, which powder
handling equipment that is used in the ancillary processes for pharmaceutical products.

Continuous production

Please see here for
product details.

Granulating/Coating
GRANUMEIST

Granuformer

FLOW COATER

Granurex

HICOATER HVSPIR-A-FLOW

Manufacturing processes
in which machinery
equipment of FREUND
Group is used

FREUNDCORPORATION

Manufacturing processes
in which chemicals products,
such as excipients, of
FREUND are used

Freund- Vector
Corporation
Turbo Mill

Turbo Screener

ROLLER COMPACTORFLOW DRYER

Millmeist

AQUA COATERHICOATER FZTABREX Rev.

Freund-Turbo
Corporation

Weighing

Bag discharge
station

Cos.MecS.r.l.

Pulverizing

Palletizedbin mixer

Vibration siever
Bag lifter

Classifying

Mixing/Kneading

Granulating

Drying/
Grading

Lifter for
granulating

HSM

Pneumatictransport system

Lifter for drums

FBD

Reversing machine

Tableting

Inspection/
Printing

Coating

Lifter for tableting

Lifter for coating

For powder and granules

Packing

Lifter for tablets

For tablets

BINs (containers)

5Overview of Business
Segments and Relationshipwith Society
Based on technologies such as granulating, coating,pulverizing, classifying, the FREUND Group is
expanding its businesses into the non-pharmaceuticalproduct field including food and other industrial
applications in addition to the pharmaceutical productfield. The Group is thereby taking on new challenges
that can contribute to improving the quality of healthand life of people.

MachineryBusiness
Segment

Manufacture and sales of
granulating and coating
equipment forpharmaceutical, food,cosmetic and otherproducts

Characteristics
Granulating/coating equipment boasting the top share of the world
market as well as the Japanese market
Accelerating deployment of businesses in Asia, as well as Europe
and North America via subsidiaries in the U.S. and Italy
Developing equipment based on drug formulation technologies
Focusing on sales expansion of equipment for other industrial
business fields by integrating granulating/coating and pulverizing/classifying technologies

Chemicals
Business
Segment

Manufacture and sales ofpharmaceutical
excipients, foodpreservatives and healthfoods

Characteristics
Pharmaceutical excipients manufactured at GMP* certified facilities
Food preservatives used to preserve the quality of various foods
contributing to food safety
Commercialization of health foods and seamless mini-capsules jointly
developed with client companies using granulating and coating
technologies*GMP:Good Manufacturing PracticeSocial value to be provided to the medical site

Improving the quality of medical care byincreasing the value addition ofpharmaceutical products
Improving drug efficacy throughgranulating and coating
technologies
For over half a century, FREUND CORPORATION
has leveraged its core competencies of granulating
and coating technologies, along with its products
and drug formulation technologies, to increase thevalue of pharmaceutical products. At the same time,
FREUND has conducted manufacturing that enables
more people to access high value-added
pharmaceutical products, and the Group strives toimprove the quality of medical care worldwide.

Better taste and health;supporting enriched lives of people
Pursuing fresh taste,safety and security

Continuous granulation anddrying system“Granuformer”

Food preservatives are small pouches placed insideof packaging to protect the flavor and ensure thesafety and security of freshly cooked pastries andbreads, Japanese confectionaries and otherproducts. FREUND develops food quality prolonging
agents based on its “ethanol evaporation”
technology which preserves bacteriostatic effects inorder to deliver fresh, tasty products as well as
safety and security.

Food preservatives“Antimold-Mild”

Maximizing the effect of effective
food ingredients with advanced
drug formulation technologies

Contributing to aging society by
pursuing “easy to ingest” drugs
Active pharmaceutical ingredients of medicine
accounts for a small percent of the total. The
remaining portion is excipients that are used to makedrugs into sizes that are easy to swallow and forcoating of the surface to mask the bitter taste.
FREUND is strengthening the development of orally
disintegrating tablet (ODT) related products which
use a unique drug formulation technology and allows
for easier ingestion of drugs by assisting theswallowing process.

Social value to be provided to the food and healthAlong with the increased concern for health,demand for supplements and health foods is on therise. FREUND is contributing to healthy lives together
with health support manufacturers by using
advanced drug formulation technologies to promote
the function of effective food ingredients and enableeasier ingestion.
Pharmaceutical excipients“Granutol F (Fine)”

Food coating agent“Chitocoat”

Social value to be provided to the leading-edge industry

Preventing medical mistakes
caused by dispensing errors

Taking on challenges in
new technological fields tosupport enriched and convenient lives

In the dispensing field, there are incidents ofmedical mistakes due to patients taking the wrong
drugs because they are similar in appearance andname. FREUND prints on drugs to allow for easy
identification and contributes to prevention of
medical mistakes worldwide. To do so, FREUND
developed the industry’s first safe drug ingestion
concept that involves a new generation tablet
printing/inspection machine and specialized inks.

Creating new markets for the
next generation using FREUND’s
unique pulverizing technologies
Tablet printing machine“TABREX Rev.”The FREUND Group’s powder pulverization
technology is used to create products in thecosmetic, food and other industries that support
peoples’ daily lives. For example, this technology isused in make up foundations which many women
wear daily. The fine powders manufactured by theGroup’s equipment help to produce “healthy looking
and clean skin.”High viscosity wet grinding mill andseparator“AQUA TURBO TZ”

FREUND REPORT 2023

6

10-Year Consolidated Financial Data of FREUND Group(¥ million)

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

Net sales

17,616

17,42419,027

21,16419,801

18,408

16,772

16,765

17,632

19,658

Cost of sales

12,377

11,97812,921

14,343

12,985

12,22011,344

11,126

11,62013,665

Selling, general and administrative expenses

3,952

4,295

4,759

4,779

4,845

4,964

4,870

4,528

5,030

5,541

Operating profit

1,286

1,150

1,346

2,041

1,971

1,223

558

1,111

981

451

787

695

961

1,064

1,477

843

381

970

543

(538)

For the year

Profit (loss) attributable to owners of parent
EBITDA*1

1,605

1,473

1,692

2,393

2,332

1,598

950

1,599

1,639

1,113

Orders received (Machinery)

10,067

12,407

13,112

16,358

11,513

11,83910,227

12,386

15,621

14,630Order backlog at end of period (Machinery)

4,991

6,682

7,086

8,561

5,822

5,428

4,695

6,615

10,574

12,826

303

308

321

338

344

344

386

461

570

565

Depreciation

464

592

687

640

862

832

725

526

580

622

Cash flows from operating activities

1,227

822

290

3,605

594

435

(27)

2,280

701

(196)

Cash flows from investing activities

(423)

(240)

(432)

(351)

(493)

(566)

(852)

(1,726)

(680)

(666)

Cash flows from financing activities

(226)

(284)

(331)

(277)

(499)

(921)

(325)

(371)

(427)

451

Total assets

15,55017,277

17,206

19,101

19,125

17,46518,505

20,57522,27322,758

Net assets

10,392

11,18011,52912,185

13,242

13,25013,243

13,85814,354

14,117(Equity)

10,23910,987

11,52912,185

13,242

13,25013,243

13,85814,354

14,117

R&D expenses

At end of period

Per share data*2
Earnings per share (EPS, ¥)

45.69

40.36

55.74

61.72

85.69

50.15

22.79

57.96

32.46

(32.15)

Book value per share (BPS, ¥)593.76637.19668.57706.62767.91

791.34790.94827.67857.28843.09Dividend*3 per share (DPS, ¥)

12.50

15.00

25.00

20.00

20.00

20.00

20.00

20.00

20.00

20.00

Operating profit margin (%)

7.3

6.6

7.1

9.6

10.0

6.6

3.3

6.6

5.6

2.3

Return on assets (ROA, %)

5.1

4.0

5.6

5.6

7.7

4.8

2.1

4.7

2.5

(2.4)

Return on equity (ROE, %)

8.1

6.6

8.5

9.0

11.6

6.4

2.9

7.2

3.9

(3.8)

Dividend payout ratio* (%)

27.4

37.2

22.4

32.4

23.3

39.9

87.8

34.5

61.6

—

Equity ratio (%)

65.8

63.6

67.0

63.8

69.2

75.9

71.6

67.4

64.4

62.0

Major indicators

4*1. EBITDA = Operating profit + Technical support fee income + Depreciation + Amortization of goodwill*2. The Company carried out a 2-for-1 split of common shares on March 1, 2016. The “per share” calculations are based on the assumption that the stock splits were conducted at the beginning of FY02/14.
*3. Dividend per share includes commemorative dividends of ¥2.50 (for FY02/15) and ¥5.00 (for FY02/17).
*4. Consolidated dividend payout ratio for FY02/23 is not available due to loss attributable to owners of parent.

7Top Message

Develop the Future through Creativity ®

Under a sense of value “ONE FREUND,”
we will challenge the next stage,for operation of global five-pillar-structure
in full scale.
In FY02/23, the last fiscal year of the 8th Medium-Term Management Plan that sets the basic strategy of“Respond to clients’ needs with technological expertise and create a management structure to realize
sustained growth in profits,” critical condition continued due to various issues associated with prolonged
Ukraine crisis, accelerated depreciation of the yen, etc. while there was a sign of recovery from COVID-19
pandemic. Against the backdrop of difficult situations, FREUND Group has steadily improved the global
structure to realize the management vision of “contributing to better medical care and health for people
worldwide.” We interviewed Iwao Fusejima, President and CEO on the overview of the Group’s businessactivities and future initiatives.

Iwao Fusejima
President and CEO

O N E

F R E U N DFREUND REPORT 2023

8

FY02/23: Overview ofBusiness Activities
Regarding Japan’s economy, there was a move toward
recovery realized by balancing the measures against
COVID-19 and social/economic activities. However, situationis still uncertain, because of, for example, price increasecaused by escalating price of raw materials and energy
associated with prolonged Ukraine crisis and acceleration ofdepreciation of the yen.
The pharmaceutical industry, which is the main user of theGroup in the Japanese market, is under pressure to respondto the strengthening of measures to control medical cost, suchas the implementation of the drug price revision every year,
which used to be once every two years, in addition to theincrease in R&D expenses. For the generic drugs (GE)industry, the government has promoted the measures topopularize and promote GE. The effect has taken a round,and therefore, the growth is expected to slow down. In themeantime, improvements to the structure for quality assurance
and stable supply are required for the entire industry, due toflaws in some manufacturers’ manufacturing system. In
response to such issues, large-scale GE manufacturers andother manufacturers plan to increase and enhance thefacilities, such as increasing and the number of plants.
Although the world economy shows a sign of recovery, it isin the critical conditions, because of continuous monetary
tightening in Europe and the U.S. after acceleration of
inflation caused by price increase of resources, energy, andfood associated with prolonged Ukraine crisis.
In FY02/23, Chemicals Business Segment achieved
better results than planned. Regarding the Machinery
Business Segment, there was an effect of increase in net
sales of overseas subsidiaries. However, labor shortage
and disruption of supply chain continued in the Machinery
Business Segment especially in the U.S., resulting in the
prolonged lead time. And, we revised the annual financial
forecasts twice, as of January 12, 2023 and May 2, 2023,
because the margin of Japanese market and othermarkets decreased, associated with price increase of raw
materials caused by rapid inflation, and recognition of
impairment loss related to Cos.Mec. Although net sales
exceeded the forecast announced in the beginning of theperiod, operating profit and other profits fell short of theforecast. In addition, impairment loss caused the first net
loss since the establishment. We deeply apologize to
stakeholders for the results.
Machinery Business Segment and Chemicals Business
Segment will continue to make efforts to further strengthen
the sales capabilities, and improve the structure that
responds to the true needs of clients with their technologicalcapabilities to proactively promote development,
manufacturing, and sales activities across the globe.

result, it achieved the record-high net sales, and succeededin turning profitable.

Overview of Chemicals BusinessPharmaceutical excipient business showed a steady growthboth for Japanese and overseas markets, exceeding
FY02/22 that hit a record high. The result was increased
year-on-year in both net sales and profits.

Business Activities in
Non-Pharmaceutical Product Field
Overview of Machinery BusinessBusiness Activities inPharmaceutical Product Field
Overview of Machinery BusinessIn the Japanese market, we received order steadily becauseof the GE industry’s plan to increase and enhance theproduction facilities. As a result, order backlog hit the record
high, and we could keep the high level until the end of
FY02/23.
In the overseas market, there were significant delays inshipments due to ongoing challenges in parts procurement
caused by the tight labor market in the U.S. and disruptionsin the supply chain. Furthermore, profit margins decreased
as a result of rising raw material prices driven by rapid
inflation.
By region, profitability of businesses in the U.S. and Brazil,
for which FREUND-VECTOR is responsible for, deteriorated
because prolonged lead time and raw material priceincrease made a negative impact. So, those regions
struggled in terms of financial results. Cos.Mec, with its mainmarkets in emerging countries, passed the escalating priceof raw materials on to its selling prices in an appropriatemanner, and steadily converted the orders to sales. As a

FREUND-TURBO, which is involved in industrial machinery
business, showed a steady growth in orders received andorder backlog mainly for chemical industry, resulting inincreased net sales year-on-year. On the other hand, net
sales of high-margin products were stagnant. As a result,operating profit margin decreased year-on-year.

Overview of Chemicals Business
Regarding food preservatives business, demand forconfectionary products recovered and demand for breadsold online increased, exceeding the previous year’s recordhigh net sales, similar to the pharmaceutical excipientbusiness (For the initiatives of bread industry, please refer to“From Business Site: Non-pharmaceutical product field foodpreservatives” on page 16.). Despite the rising raw material
prices, increase in operating rate helped improvement in
profit margin, resulting in an increase both in net sales andprofits.
Net sales of health food decreased as was forecasted in
the beginning of the period, due to the termination of acontract from a large user.

9

Review of the 8th MediumTerm Management Plan

Operating Performances by Business Segment
Machinery Business
Japan

43.5%

Net Sales/Segment Profit/
Segment Profit Margin (¥ million)
Net sales

Segment profit

Segment profit margin

Orders Received/
Order Backlog (¥ million)
Orders received

9.4%

Order backlog

15,621

14,630

5.3%

Sales
Breakdown

0.4%
13,44812,386

12,826
10,574

11,836

11,171
1,047

6,615
623

59

Overseas

56.5%

FY02/21

FY02/23

FY02/22

FY02/21

FY02/22

FY02/23

Chemicals Business
Overseas

5.5%

Pharmaceutical
Excipients

Health Food

3.2%

54.8%

Net Sales/Segment Profit/
Segment Profit Margin (¥ million)
Net sales

9.8%

Sales
Breakdown

Sales
Breakdown

5,593

Segment profit

15.3%

5,795
884

Segment profit margin

15.7%
6,209
976

546

Japan

94.5%

In the 8th Medium-Term Management Plan, the Grouporiginally planned consolidated net sales of FY02/23 to be¥20.1 billion, and operating profit of the same period to be¥1.4 billion. However, due to continued uncertain businessenvironment, such as disruption of supply chain and tightsemiconductor and parts markets caused by heightened
geopolitical risks, we revised down the forecasts of theconsolidated net sales to ¥18.5 billion and consolidated
operating profit to ¥700 million as of April 13, 2022. The
actual financial results were ¥19.6 billion in net sales and¥450 million in operating profit. However, net loss wasrecorded due to the impairment loss.

Food Preservatives

42.0%

FY02/21

FY02/22

FY02/23

Toward Global Five-Pillar-Structure
Looking at the global trends of the pharmaceutical industry,a series of capital investment for plant expansion is plannedin the domestic market over the next several years, mainly bymajor GE manufacturers. In the global market, thepharmaceutical product market is projected to grow in the
future against the backdrop of an aging population indeveloped countries and population growth and rising
medical standards in emerging countries. In addition, someJapanese pharmaceutical companies start to transfer theirplants overseas.
In light of this situation, based on its growth strategies ofpromoting globalization, the Group has expanded into India
and Italy, in addition to Japan and the U.S. And, we establisheda joint venture company (Freund-Chineway Pharmaceutical
Technology Center Co., Ltd: Shanghai FC Center) in China thatis at a standstill due to lockdown associated with Zero-COVID
policy, and plan to start the operation during the second
quarter of FY02/24. Needs of Chinese pharmaceuticalcompanies for introduction of new machinery have alreadyincreased. Excipients industry shows the similar move.
FREUND REPORT 2023

10

Shanghai FC Center is a research center that handles bothmachinery equipment and excipients. The Center develops theformulation design and aims for providing Chinese
pharmaceutical companies with the developed know-how. Thisis the Group’s fourth research base, following Hamamatsu inJapan, Iowa in the U.S., and Milan in Italy.
Considering growth of the next generation, we steadily
proceed with establishment of the global managementfoundation, respond to the local needs flexibly with global
five-pillar-structure focusing on Japan, the U.S., Europe(Italy,) India, and China, and try to expand the businessglobally under a sense of value “ONE FREUND.”

Machinery Division

Newly
establishedHamamatsu
Technical Center

We transferred Corporate Planning Department to be directlysupervised by the President, so that the Department can be
responsible for formulating the Group management
strategies, and developing and executing the 9th MediumTerm Management Plan of the entire Group.
For realizing our vision and promoting the global five-pillarstructure in a strong manner, we newly established theOverseas Management Division and placed it directly under

President and CEO

Chemical Divisionand newly established Overseas Management
Division into the organization directlysupervised by the President

Board of Directors’ Meeting

Quality Assurance
Division

3 Transferring Corporate Planning Department

General Shareholders’ Meeting
Audit & Supervisory Board
Members’ Meeting

Corporate Administration
Division

Considering the recent quality issues in the pharmaceuticalindustry, we try to strengthen the functions throughuniforming the quality assurance functions, which had been
independent for each business segment, and quality
management functions of functional excipients and foodpreservatives, and through promoting those functions to thedivision.

(Structure of the new organization on and after March 1, 2023)

Internal Audit
Office2 Establishment of Quality Assurance Division

Outline of Organization Restructuring

Corporate Planning
Department

We restructured the organization into Machinery Division andChemical Division to immediately make decisions on theissues to be responded as a business segment, such as
responding to diversified customer needs and creating
value, adopting to changes in external environment andsocial issues, and contributing to a sustainable society; andto realize the continuous growth and stability of eachbusiness segment.
Furthermore, with the aim of developing human resourcesfrom the perspective of the entire business, we will
strengthen the development of human resources withbusiness acumen and an entrepreneurial mindset.

Overseas Management
Division

We originally had planned to develop and announce the new
Medium-Term Management Plan (the 9th Medium-Term
Management Plan) with FY02/24 as the initial year. However,the business environment of the Group is still in the unclear
conditions, because there are many uncertain elements,
such as prolonged Ukraine situation, escalating price of raw
materials and energy caused by them, and restrictions interms of supply. Considering the situations, we regard the
FY02/24 to be the year of the single-year managing plan,
and are to develop the 9th Medium-Term Management Plan
that sets the FY02/25 as the first year.
So, we implemented organizational restructuring as ofMarch 1, 2023, prior to formulating the 9th Medium-Term
Management Plan. The restructuring was done to establish a
new function-oriented organization with the purpose ofstrengthening the synergy of Machinery Business andChemicals Business, strengthening supply chain of chemical
products, and responding to globalization. Followings are
the three key points that were revised.

organization focusing on functions to that
focusing on business segments

the President. We will also aim to enhance the management
capabilities of our overseas subsidiaries while fostering
global talent and developing managerial personnel of theoverseas subsidiaries.

China Business
Development Division

Initiatives for Reorganization for
the 9th Medium-Term
Management Plan

1 Reorganization of the Company from an

Newly established andpromoted to the division

Transferred to the organization
directly supervised by the President

Restructured to the organization
focusing on business segments

Following the restructuring, position and responsibilities of
the two Directors were changed, Toshifumi Moriguchi waspromoted to Director, and Ryuichi Kume assumed the officeof External Director (For details, please refer to “Introductionof New Directors” on page 19.).
In addition, Greg Smith assumed the office of President of
Freund-Vector as of February 1, 2023, and as of March 1,
2023, Ken Shinogi assumed the office of President and CEO
of Freund-Turbo (For details, please refer to “From BusinessSite: New Management Structure of the Group Companies”
on page 13.). With the new management structure, we will
strive to formulate and execute the 9th Medium-Term
Management Plan through strengthening collaboration
among the Group companies.

11

Initiatives of Human Resources
System Reform for the Next Stageof Growth and Change
In 2024, the Company commemorates the 60th
anniversary since its founding. Business environment
surrounding the Company has changed as times change.
We revised the human resources system, because, as astarting point for transformation from the stable-growthstage to the next stage of growth and change, we
recognized the need for both the growth of our businessmodel and reform of human resources management tosupport the change (For details, please refer to“Promotion of Sustainable Management: Human
Resources System Realizing Corporate Philosophy andSustainability” on page 21). Human resources system has
been reviewed under the concept of clarifying theCompany’s core competencies as well as corporate culture
and human resources policies necessary to leverage thecore competencies, and the concept that growth of eachone of the employees leads to the development of theCompany. In addition, we promote Diversity and Inclusion(D&I) activities and activities to cultivate human resources
for the next generation management by inviting externalmanagement professionals. We aim to enhance employee
engagement and grow together with our employees, uniting
as one company towards the realization of our management
vision “contributing to better medical care and health forpeople worldwide.”

purpose of providing the medium- to long-term incentives forcontinuous improvement of our Corporate value, and sharing
more values with shareholders.
Aforementioned stock-based rewards account for 10% of
the annual reward of the Executive Directors. In addition,celebrating the 60th year in business, the Company grants
the stocks to the Company’s executive officers and all
employees to motivate employees, have them become awareof participating in the management, and enhancing theirawareness of improving the Company’s financial results andstock price. By doing so, we will enhance the medium- andlong-term corporate value.

To Our Stakeholders
The Company is still in the unclear conditions, because
COVID-19 pandemic, Russian invasion in Ukraine, andvarious issues associated with them have a negative impact
on our business activities. Indeed, those issues haveinterfered with execution of the 8th Medium-Term
Management Plan. However, at the same time, just before
marking the 60th anniversary, we made the shift to the neworganization and management structure. Under the new

FY02/24: Overview of Consolidated Financial Forecasts
FY02/23 (Actual)

The Company has decided to introduce the Restricted Stock
Unit Plan for Executive Directors of the Company, utilizing
the treasury shares within the existing limit of thecompensation for Directors, ¥300 million or below, with the

FY02/24 (Forecasts)

YoY Changes(¥ million)%

19,65820,000+342+1.7Operating profit

451

700

+249

+55.0

Ordinary profit

559

650

+91

+16.3

Net sales

Introduction of Restricted Stock
Unit Plan

management structure, we would like to promote thedevelopment of the 9th Medium-Term Management Plan
after thorough discussion on the next initiatives for the 70th
anniversary after 10 years. And, we steadily take strategic
measures the Group needs, including improvement of the
global five-pillar-structure.
As the starting point for the next stage, we will continue topursue further growth with a sense of value “ONE FREUND.”
We appreciate the continued support of you, all our
stakeholders, for the Group.

(538)

450

+988

—

(32.15)26.87+59.02—

Capital investment

646

—

—

—

Depreciation

565

—

—

—

R&D expenses

622

—

—

—

Profit attributable to owners of parent
EPS (¥)

FREUND REPORT 2023

12

From Business Site

New Management Structure of Group Company

New Presidents ofFreund-Vector (the U.S.) and Freund-Turbo (Japan)
Greg Smith

President
Freund-Vector Corporation

ProfileJoined the Company in 1992 as control engineer. Engaged in developing the Company’s
first PC-based management system. Since 2004, promoted re-examination of product lineup
as Vice President in charge of sales and engineering. From 2013, became in charge of sales
and business development fields and introduced the new spray drying machine product line.
Concurrently served as manager of laboratories and assumed the office of President as ofFebruary 1, 2023.

Ken Shinogi

President
Freund-Turbo Corporation

ProfileJoined Mitsubishi Precision Co., Ltd. in 1991 and engaged in developing traffic-control
parking lot system. Joined Turbo Corporation (currently Freund-Turbo Corporation) in 1999.
Engaged in improvement and development as a person responsible for designing pulverizers.
Assumed the office of Manager of Design Section, General Manager of Engineering
Department, Plant Manager and in 2018 Director and Plant Manager. Then Managing Director
and Plant Manager in 2022, before assuming the office of President as of March 1, 2023.

I Will Push Forward with Development of FreundVector with Unmatched Passion.

Under a Sense of Value “ONE FREUND,”
We Aim for the High Quality Manufacturing.

Freund-Vector, which manufactures and sells process equipment, is characterized by flexible
customization tailored to clients’ needs and careful support. As a vendor that fits in with thefacilities of clients and their manufacturing philosophies and meets their original validation
requirements in various situations such as expansion of facilities, new product research, andlaunching of new drugs, we confront the issues of clients seriously and resolve them, which will
satisfy the clients. Superior service and support that are developed during such processes willcontribute to the competitiveness in the end.
Our clients do business globally. It is crucial to provide them with the services and support
that suit their business activities. With our original full FAT*, we can install and validate theprocess equipment much faster than other companies. And, in addition to provision of extra
parts, we deal with repair of aged machines. We also hold personal seminars, online seminars,
and other various forms of training programs to clients.
I am sure of our advantage in manufacturing equipment and confident that we can provide
the valuable solution to the issues of clients. I think my goal and mission are to be the person
who plays an important role in contributing to the business performance of the Freund Groupthrough, with our excellent service, establishing the long-term win-win relationship with clients.
We will tackle the mission with unmatched passion.
*FAT: Factory Acceptance Test

Freund-Turbo is a manufacturing company that has provided powder processing technology
equipment and contract processing service since its establishment in 1967. In particular, in thefield of “pulverizing,” “classifying,” and “granulating,” we have been well received and trusted
as an industry-leading company by various clients in the industrial field. After joining the
FREUND Group in 2010, “mixing” was added to our technologies, which encouraged us totake a step in the new stage and led to our current business activities.
The industries and fields we focus on span a wide range of areas. In addition topharmaceutical solid formulation, we provide technologies of pulverization, granulating, andenhancing functions of various raw materials, which are indispensable in reuse of resources
such as toners for realizing zero emissions (zero CO2) and recycling of resins, environmental
fields including soil improvement, forage, and fertilizer, and processes for manufacturing
semiconductor-related items, new fuels, biodegradable resins, advanced functional materials,
high-functionality films, and secondary batteries.
In particular, our equipment contributes to enhancing the functions of raw materials forbatteries of electric vehicles, whose global market keeps expanding for realization of carbon
neutral. We will promote high-quality product development with an eye on expansion of ourbusiness that includes materials for silicon wafer and semiconductor sealing going forward.
Through integrating the technological capabilities we have been cultivating with new
inspiration to continue innovation, we provide new solutions to ever-evolving raw materials and,
under a sense of value “ONE FREUND” and with our unique technologies, aim to become acompany that is needed by people around the world.

13

From Business Site

Our Global Five-Pillar Structure

In the pharmaceutical product field, the five-pillar-structure focusing on Japan, the U.S.,
India, Italy, and China, is starting to take shape. Shanghai FC Center in China, whose
opening was delayed due to the impact of COVID-19 pandemic, is planned to start
operations by the end of the second quarter of FY02/24. Global-scale major exhibitions had
not been held in person for a while due to COVID-19 pandemic. However, in FY02/23,
physical exhibitions started to be held little by little. The Group’s companies participated in
the exhibitions below and conducted marketing activities in a proactive manner.

Key Marketing Activities
in Pharmaceutical
Product Field
Key Marketing Activities in FY02/23
August 22-26, 2022

“ACHEMA 2022”

Germany

Messe Frankfurt, GermanyJapan

The overseas Group companies Freund-Vector in the U.S. and Cos.Mec in Italy
participated in “ACHEMA,” the world-largest exhibition featuring chemicalindustry technologies.

Algeria

All management
teams of theoverseas Group
companies gatheredat the exhibition.

July 13-15, 2022
February 7-9, 2023

“INTERPHEX JAPAN 2022”“MAGHREB PHARMA Expo 2023”

Tokyo Big Sight, Japan

Algiers, Algeria
Cos.Mec participated in “MAGHREB PHARMA Expo 2023,” the pharmaceuticalexhibition held in Algiers, the capital and the largest city of Algeria in North Africa.
Algeria is expected to increase its investment in pharmaceutical product field as an
emerging country in the pharmaceutical product markets.

FREUND participated in “INTERHEX JAPAN,” one of the largest exhibitions inJapan, which features products, technologies, and service related to research
and manufacturing of pharmaceutical products and cosmetics.

Cos.Mec boothFor details, please refer to “Business Topics: Machinery Business Segment” in the FY02/23 Interim
Shareholders’ Newsletter (Japanese only) .

FREUND REPORT 2023

14

From Business Site

Non-pharmaceutical Product Field: Machinery

Freund-Turbo: New Order-Receiving
Strategies in Cooperation Among
Business Segments

Under the concept of “Act‘20’24,” Freund-Turbo Corporation launched the new orderreceiving strategies from March 2022. In the strategies, 11 segment teams, including
key machinery and services, develop their original strategies for achieving therespective target order volume, crossing the boundaries of business sections, suchas sales, technologies, and inspection, and conduct sales activities. The purpose of
the strategies is to achieve the order volume of ¥2 billion as the entire company. We
interviewed the two Team Leaders about the current status of the strategies.

Yasutetsu AndoToshiya Komagata

Team Leader“Act‘20’24” Pulverizing-Segment
GL, Assistant Manager, Testing Section, Development Division

Team Leader“Act‘20’24” Classifying-Segment
Testing Section, Development Division

From left,

Sales: Tomoyuki Maruyama
Testing: Yasuteru Ando (Team Leader)
Design: Masahito Abe

From left,

Sales: Toyohiko Hagiwara
Inspection: Toshiya Komagata (Team Leader)
Design: Kosuke Ando

Realizing a Manufacturing Site Where Everyone Thinks
Before Taking Action Through Becoming Aware of theThings That Had Not Been Aware Of

Leading New Experience to the Proposal for
Improvement, and Making Use of It for Vibrant Working
Environment

I joined the Company in 2011 and was assigned to Testing Section, where I have been working eversince. For the first four years, I was responsible for testing of “TURBO SCREENER,” Fine Powder
Classifier. And then, my responsibilities shifted to include “TURBO MILL” and other pulverizers.
Freund-Turbo has expanded the product lineup since I joined the company. For example, in
2018, the Company absorbed Akira Kiko Co., Ltd., a company that specialized in high stirring
granulation machine, specifically “BALANCE GRAN,” High Share Mixer / Coater. It added thelineup of “mixing” to the powder use, and enabled us to flexibly respond to the requests ofclients. Responding to the needs of the industry, we have been making efforts to increase thesales through improvement of technological capabilities.
I regard the purpose of “Act‘20’24” as the raising awareness within the company.
Establishing an organization where employees on site proactively think and take action insteadof waiting for instructions from superiors. To put it in practice in a more dynamic manner, threebusiness sections cooperate each other in a cross-sectional manner.
Conventionally, Sales Division was responsible for orders received, while Technology andTesting Division oversaw the post-order procedures. Due to implementation of “Act‘20’24” andincreasing cross-sectional awareness of the procedures, cooperation among businesssections became smoother, which leads to enhancement in productivity.
Achievement degree of each team regarding “Act‘20’24” is evaluated on a quarterly basis
and revision to the strategies is made as needed. We will take the initiative in achieving thegoals through further deepening the cooperation among the business sections.

I joined the Company in 2005 and engaged in operations of commissioned pulverizing at the
Pulverizing Section. Then I was transferred to Testing Section in 2014. After being involved in
actual operations, I have supervised testing since 2019.
Back then, Freund-Turbo had corporate culture of pursuing for manufacturing as a
specialist. However, under the direction of the former President, it made a shift, increasing the
product lineup in response to the market needs and aiming for increasing the revenue withhigh-quality products.
In “Act‘20’24,” members of different business sections work together for the common goals
as a team. It is an unconventional challenge for us. About a year has passed since we started“Act‘20’24.” Since the initiative started, each section became more open, facilitating
communications. I think they are significant achievements.
We, the Classifying-Segment Team is in charge of the strategies of “TURBO SCREENER.” It
is a high-performance product with high repeating rate. However, its stagnant sales were
problematic. The team discussed the potential causes of the problem and agreed that a lack ofrecognition was one of the causes. Consequently, we actively worked on developing PR
strategies to address this issue. It was a task that we were unfamiliar with. However, welearned a lot from the experience.
We would like to use such experience and knowledge to improve proposals for otherdepartments, too, and create the animated working environment.

15

From Business Site

Non-pharmaceutical Product Field: Food Preservatives

Aiming for Improving Productivity andFood Loss Reduction by Extending
Best-Before Period of Bread

Conventionally, food preservatives were used for food with long
best-before period. The Company aims for “improvement of
productivity” and “food loss reduction by extending the best-before
period” of the bread industry through applying them to bread with shortbest-before period. Yona, Manager of Planning & Promotion Office,
Food Preservatives Division, explains the new initiatives.

Start of Collaboration with Japan Institute of Baking

Hideki YonaManager of Planning &Promotion Office, Food
Preservatives Division

Food preservatives used for bread
From left, Antimold-Mild, Negamold (moisturedependent type)

Reasons for Launching the Initiative of “Extending BestBefore Period of Bread”
Food preservatives such as ethanol evaporative food preservatives and oxygen scavenger type
food preservatives began to be widely adopted more than 40 years ago. They have been used
for souvenir snacks, distributed snacks and other food with long best-before period. In themeantime, we have received inquiries regarding extension of best-before period for shelf-stablebread. Additionally, in the spring of 2022, Japan Institute of Baking made a similar inquiry, which
made us recognize that reduction of food loss by extending the best-before period for bread is
becoming an industry-wide concern.
In general, use-by period of bread products ranges from three to five days. Therefore, datemanagement similar to that of fresh food is essential. In addition, due to a wide variety of products
and frequent changes in the production line among different manufacturers, the productivity ofbread manufacturing is not high, compared with manufacturing of the souvenir snacks anddistributed snacks that have longer use-by period thanks to enclosed food preservatives.
This is why we thought we could contribute to improving the production efficiency of the breadindustry and reducing food loss in a relatively simple manner by extending the best-before periodof bread using the food preservatives for bread products.
To extend the best-before and use-by periods, it is essential to preserve the flavor and texture
while effectively controlling the growth of microorganisms including mold. The same principle
applies to bread. Ethanol-evaporative type food preservatives generate ethanol gas in the foodpackaging, which is then absorbed by bread. That controls the growth of microorganisms,
thereby preserving softness and moisture of the bread.

The Company conducted a basic test on the effects of food preservatives on bread preservationand summarized the technological findings regarding the application method and effects. As partof the collaboration with Japan Institute of Baking, in September 2022, we held the study session
to present the findings concerning the food preservatives to member bread manufacturers. And,in January 2023, the Institute edited and published the technological materials on foodpreservatives written by our engineers. They distributed 800 copies of these materials tofactories, R&D centers, procurement departments, and other bases of bread manufactures inJapan.
From 2023, the Institute launched acurriculum on the quality preservation as a partof “Breadmaking Technology Education Course”
offered by the Institute. The course aims toprovide bakers with occupational education andtraining. The Company contributes to the course
by providing three lecturers per year. We will
present the advantages of adopting our producttechnologies in an easy-to-understand mannerand make the lectures interesting so as tospread our expertise to the bread
Study session
manufacturers.

Strengthening the Food Preservatives Business Paying
Attention to Environment
Working with Japan Institute of Baking, we have realized the new collaboration with an externalorganization. And the collaboration is about to bear fruit. With an eye on those initiatives, we willcontinue to promote application of food preservatives to food products other than confectionery.
Currently, the Company is already engaged in environmentally conscious product design bothin product development and improvement of existing products. In the future, we aim to contributeto promotion of SDGs beyond food loss reduction by developing eco-conscious foodpreservatives.
FREUND REPORT 2023

16

SUSTAINABILITY

Sustainable Management Foundation

Introduction of Board Members
Honorary Chairman and Directors

Audit & Supervisory Board Members
Reason for
Appointment

Yasutoyo Fusejima

Iwao Fusejima

Masao Wakai

Hisashi Tanaka

Honorary Chairman

President and CEO

Director

External Director

Reason for
Appointment

Hisashi Tanaka was
appointed as External
Director as he wasdeemed to be able tocontribute tostrengthening
management oversightand corporate
governance by having
abundant experienceand wide-ranging insight
as a manager.

Sakae Hirano
Full-time Audit &Supervisory Board Member

Sakae Hirano was
appointed as Full-time
Audit & Supervisory
Board Member as hewas deemed to havemore than adequate
ability to oversee themanagement based on
his knowledge of financeand accounting as wellas superior insight
regarding managementin general.

Reason for
Appointment

Toshiaki Honda

Toshifumi Moriguchi

Ryuichi Kume

Director

Director

External Director

Reason for
Appointment

Sayoko Izumoto was
appointed as External
Audit & Supervisory
Board Member as she
was deemed to satisfy
this role by leveraging on
her long experience as acertified public
accountant and on her
vast insight regarding
finance and accounting.

Sayoko Izumoto
External Audit &Supervisory Board Member

Reason for
Appointment

Ryuichi Kume wasappointed as External
Director as he wasdeemed to be a manager
with abundant
experience andwide-ranging insight in
the pharmaceuticalindustry, and able tocontribute tostrengthening ofmanagement oversightand corporate
governance.

Kazunari Hamada

Kazunari Hamada was
appointed as External
Audit & Supervisory
Board Member as hewas deemed to satisfy
this role having
specialized knowledge
and experiences as an
attorney from an
objective standpoint as alegal expert.

External Audit &Supervisory Board Member

Skill Matrix
Advisory Committee

Audit & Supervisory
Board Members

Directors

Name

TenureAttendance at Board of Directors andAudit & Supervisory Board

Fields expected to coverNominating andRemuneration Committee

Corporate Management/
Top Management
Experience

Marketing/Sales

Member of the Nominating andRemuneration Committee●●

Re-appointed

Iwao Fusejima

15 years

11 times/11 times

Re-appointed

Masao Wakai

3 years

11 times/11 times

Re-appointed

Toshiaki Honda

2 years

11 times/11 times

Newly appointed

Toshifumi Moriguchi——

Re-appointed

Hisashi Tanaka

2 years

10 times/11 times

Chairman of the Nominating andRemuneration Committee●

Newly appointed

Ryuichi Kume——

Member of the Nominating andRemuneration Committee●

Re-appointed

Sakae Hirano

4 years

Board of Directors: 11 times/11 times
Audit & Supervisory Board: 13 times/13 times

Current position

Sayoko Izumoto

6 years

Board of Directors: 11 times/11 times
Audit & Supervisory Board: 13 times/13 times

Current position

Kazunari Hamada

2 years

Board of Directors: 11 times/11 times
Audit & Supervisory Board: 13 times/13 times●

Finance/Accounting

IT/Security

Human Resources/
Labor/Human
Resources Relations

Manufacturing/
Development/Researchand Development

ESG/Sustainability

●

●

●

●

●

●

●

●

●

●

Legal/Risk
Management

●
●

●

●

●
●

●
Observer of the Nomination andRemuneration Committee

Global Experience

●

●
●

●

●

●

●
●
●

●

●

●
●

●

17

SUSTAINABILITY

Sustainable Management Foundation

Corporate GovernanceCorporate Governance Structure (As of the end of May 2023)
General Shareholders’ Meetingis engaged in business activities to realize its management vision of “contributing to the

Submit/ReportReportNominating
andRemuneration
Committee

Auditing

Appointment/
Dismissal

President and CEO

Collaboration

Internal
Audit Office

Audit & Supervisory Board Members’ Meeting

Based on the corporate philosophy of “Develop the Future through Creativity®,” the Company(Audit & Supervisory Board Members & External Audit & Supervisory Board Members)

Basic Policy(Directors/External Directors)(Decision-making/Supervision)Inquiry

Auditing

Management Meeting

Auditing

Operational Execution Divisions
and Subsidiaries

Corporate Lawyer, etc.

https://www.freund.co.jp/english/company/governance.html

Board of Directors’ Meeting(Auditing Firm)

For more detailed information, please refer to the “Corporate Governance” section of our website.

Auditing

Appointment/
Dismissal

Appointment/
Dismissal

Accounting Auditor

The Group’s basic policy and objective of corporate governance is to continuously
enhance corporate value by increasing corporate transparency, ensuring legal
compliance, fairness, and independence from the perspective of all stakeholders,
including shareholders, investors, and users.

Appointment/
Dismissal

future of medical care and health of people throughout the world, and creating and fostering
technologies for fulfilling lives and food safety.” Through fair and appropriate competition, we
aim to provide products and services that are useful to our clients and increase our corporate
value through the process of pursuing reasonable profits.

Overview of the Corporate Governance Structure

Basic Approach to Internal Control andOutline of the Structure
The Company identifies the internal control function as “a framework for management to

The Company has a Board of Directors, Audit & Supervisory Board, and accounting auditors.

control operational execution divisions.” The Board of Directors assumes responsibility in

The Executive Officers execute business operations, while the Board of Directors sets

designing basic scheme of internal controls for the group companies, and in supervising

management policies and targets for the entire Group and supervises the management andmaintenance, operation and assessment of internal controls based on the Companies Act

business operations of each group company. The Board of Directors consists of six members

and other relevant laws as well as the Company’s articles of incorporation and other(two of whom are External Directors) with diverse experience, knowledge and expertise, andinternal rules.

in principle meets once a month. Three external auditors (one of whom is a full-time auditor)

To fulfill its corporate social responsibility, which is the basis of our corporate philosophy ofalso participate in the Board of Directors meetings to ensure appropriate and prompt“Develop the Future through Creativity®,” we are working to instill compliance and establish adecision-making and to further strengthen the supervisory function. Auditors work closely

risk management system, and have established the Compliance and Risk Managementwith the Internal Audit Office, which reports directly to the President and CEO, and theCommittee and the Internal Control Committee, which comprehensively manages internal

accounting auditors to enhance the effectiveness of audits.

controls.
FREUND REPORT 2023

18

SUSTAINABILITY

Sustainable Management Foundation

Introduction of New Directors
Toshifumi Moriguchi

Ryuichi Kume

Internal Director

External Director

Joined YOSHITOMI PHARMACEUTICAL INDUSTRIES, LTD. in
1985. After merger, served as General Manager of Facility
Engineering Department, Pharmaceutical Division, Mitsubishi Tanabe
Pharma Corporation; Director and Manager of Yoshitomi Plant,
Mitsubishi Tanabe Pharma Factory Ltd.; before being appointed to
Director and Vice President of the same company. Joined BIKEN Co.,
Ltd. as Director and General Manager of Business Management
Department in 2017. Joined FREUND in 2019 and appointed as
Executive Officer and Division Director of Production Division. Since
March 2023, served as Executive Officer and Division Director ofChemical Division up until now.

When I joined YOSHITOMI PHARMACEUTICAL INDUSTRIES, LTD. (Current Mitsubishi Tanabe
Pharma Corporation,) the company started to introduce Factory Automation (FA), which involved
the automation of factory by computer-control technologies. Although I was specialized inmachinery, I was assigned to an engineering work department, and experienced electricalinstrumentation, process design, and machinery equipment, and other general processes.
Then, I was involved in many capital investments in the course of merger, restructuring, andcompany split-up by function of YOSHITOMI PHARMACEUTICAL INDUSTRIES, LTD., and, as
factory manager, engaged in pharmaceutical manufacturing and quality control, and worked toensure a stable supply of products.
I joined the Company with the purpose of taking charge of overall process of building the newchemical product factory from planning to the construction management, which was underway inHamamatsu plant. However, the investment was cancelled due to concerns about profitability.
Therefore, I have supervised the Production Business Division since September 2019 and worked
on development of production infrastructure focusing on safety, quality, and response to laws.
In the future, I would like to accelerate the response through responding to the environmental
change in an immediate and flexible manner and quickly rotating the cycle of the value chain tostrengthen the capability to propose solutions to customers and enhance our competitiveness.
And, taking advantage of the experience in production business, I will make efforts to coordinate
the functions of sales, development, and supply chain so as to realize the stable and sustainablegrowth of the business. We appreciate the continued support of our stakeholders.

Joined Shionogi & Co., Ltd. in 1981. In the 2000s, assumed the officeof Managing Executive Officer and Division Director of Manufacturing
Division, Senior Executive Officer and Division Director of
Pharmaceutical Business Division, Senior Executive Officer andDivision Director of CMC Research Division, etc., before being
appointed as President and CEO, Shionogi Pharma Co., Ltd. in 2019.
Since 2022, served as Chairman and Director of the same company
and continue to hold the position up until now.

After joining Shionogi & Co., Ltd., I engaged in development of fungicides at Chemical Division. At
The Dow Chemical Company, the licensee, I served as leader of the formulation team in a global
project. This experience provided me with a broader perspective, considering both global andbusiness aspects of the work.
After getting back to the pharmaceutical business, I experienced the entire value chain fromresearch to sales as manager. In particular, in the CMC (chemical/manufacturing/qualitymanagement information of active pharmaceutical ingredients [APIs] and formulation in theapplication documents) research, I made a significant improvement to the development methodwith the purpose of shortening the time of initial period of development and reducing the amount of
API use. Those opportunities to interact with a wide variety of professionals in the industry became
my foundation for aspiration and implementation of many alliances.
FREUND is a balanced company in terms of basic technologies, because it understands the actof “manufacturing” both on the software and hardware sides, and practice pharmaceutical
excipients and pharmaceutical products manufacturing while handling machinery. I believe
integration of machinery and prescription technologies will be needed even more in manufacturingof pharmaceutical products, formulation in particular, across the globe. The Company can lead theworld as a company with the will and technologies that meet those needs.
I feel responsibility and tension to be appointed as External Director of this historic company. To
develop the Company, I will utilize my experience and knowledge for management. I will focus on
improvement of transparency and soundness of the management through providing the objective
opinions.
19

SUSTAINABILITY

Sustainable Management Foundation

Risk Management
The Group perceives risks as latent factors in its corporate business activities that
could lead to deterioration in its social credibility or to damages in its corporate
value. The Group is exposed to various potential risks as listed below, and its
financial results may unexpectedly be influenced in the event that any of theserisks occur. The Group maintains a policy to acknowledge the possibility of suchoccurrences, and prevent the occurrence of these risks to the best of its ability,
while also responding quickly and adequately in the case that they do occur. It
should be noted that not all risks are cited here. Furthermore, factors related to
the future mentioned here represent those recognized as of the end of FY02/23.

For details of each risk item, please refer to the “Corporate Governance/Risk Management” section of our website.

https://www.freund.co.jp/english/company/governance.html
Business Risks

Risks to Be Watched Closely in the Future
In FY02/23, with the idea of “with COVID-19,” movement for normalizing the economic
activities has become prominent. However, many risks such as acceleration of inflationand disruption of supply chain in the world caused by Russian invasion in Ukraine havebecome visible. The Group is aware of the following risks that should be watchedclosely in the future.

Industry Trend Risk
In Japan, in addition to the ongoing reduction in drug prices, quality and stable supply
issues that have arisen in the generic drug industry have triggered a movement toreorganize the pharmaceutical industry. In the midst of these developments, the Group isincreasing its presence in overseas markets and accelerating global expansion in thepharmaceutical product field through such measures as the M&A of Cos.Mec in Italy in
November 2020 and the establishment of the Shanghai FC Center in July 2021, while
promoting machinery and chemical businesses related to non-pharmaceutical productfields, such as the chemical, food, and battery industries, and expanding its geographicaland business areas.

1 Pricing Competition Risk

9 Intellectual Property Risk

2 Raw Materials Procurement Risk

10 Product Liability Risk

Overseas Business Operational Risk

3 Industry Trend Risk

11 Public Regulations-Related Risk

4 Foreign Exchange Fluctuation Risk

12 Information Leakage Risk

5 Human Resources Risk

13 Natural Disaster risk

6 Business Partner Relationship Risk

14 Overseas Business Operational Risk

7 Impairment Risk for Non-Current Assets

15 COVID-19 Related Risk

Trends in financials and healthcare policies around the world affect the management ofpharmaceutical companies. Pharmaceutical companies in the U.S. and other developed
countries are taking cost-cutting measures, such as transferring manufacturing to lowercost emerging countries. The Group’s priority countries and regions for businessexpansion are emerging countries such as India, China, and Southeast Asia, where
populations and incomes are expected to grow, and we are required to manage risks
related to business expansion in these countries and regions. To this end, the Group isstrengthening its understanding of conditions by country/region, drafting strategies, andmonitoring individual transactions.

8 Client Company Credibility Risk

FREUND REPORT 2023

20

SUSTAINABILITY

Sustainable Management Foundation

Promotion of Sustainable Management

Human Resources System Realizing
Corporate Philosophy and Sustainability
With the 60th anniversary within a year, we are tackling human resourcesmanagement reform as the starting point for entering the stage of change, whichhelps us leave the stable growth period for the next growth. As part of theinitiatives, Omori, Manager of Human Resources Section of the Corporate
Administration Division explains the aim of human resources system reform thatwas implemented for the first time in about eight years.

Chiaki Omori
Manager of Human Resources Section,
Corporate Administration Division
Chiaki Omori (right)*Person on the left is Sahona Kikuchi, a project member.

grasp the current issues through carrying out the survey for all the employees and interviewing
some of them in advance.
In addition, we asked the opinions of the management level. This is how we reflect the broader
concepts such as “what are core competencies of the Company?” “what kind of organizational
culture is needed to take advantage of the core competencies?” and “what kind of humanresources we needed to realize such an organizational culture?” to clarify the human resources
policies we pursue.

Concept and Key Point of
New Human Resources System
Although it was difficult to design the human resources system suitable for the Company under theconcept that growth of each one of the employees leads to development of the company andthrough integrating the necessary elements, in the end, we could get the concept of the newhuman resources system into shape as follows.
PurposeCreate the environment where employees work voluntarily and with a sense of satisfaction

Theme

Dialogue: Company and employees; superiors and subordinates

Basic policy

ONE FREUND: Growth of individuals leads to development of the company

And, the concept leads to the key points below.
Enhance the team power for realization of business strategies

Issues of Existing Human Resources System andReasons for ReformIn the previous revision of human resources system, which was conducted in 2014, humanresources strategies were not developed based on the business strategies. And, there have been
issues on institutional fatigue. For example, a job-rank system, evaluation system and its processes
have lost substance.
As times change, both external and internal environment has changed. The Company, which will
mark its 60th year soon, has come to the point of leaving the stage of stable growth for that ofchange, aiming for further growth. Under the recognition that we need human resources management
reform now for the next growth, we have decided to revise the human resources system.

Clarification of Human Resources Policy
In a way, operation of human resources system is equivalent to utilization for growth (development).
Considering the fact that employees are the ones who put the system into practice, we tried toPromote voluntary action
Reward employees that contributed to the organization and made achievement

Take Key Measures of
Human Resources System Reform
First, we reviewed the definition of the rank, and clarified the roles we expect for each rank, job
type, and position. Based on those ideas, we restructured the evaluation and reward systems.
Although the evaluation standards are “achievement” and “action required for the desired
figure,” we place importance on the dialogue between evaluators and those who are evaluated to
set the goals and perform evaluation. We aim for understanding the direction and level of capability
development that each one of the employees needs, and promoting the growth.
Basic policy of the new human resources system states “growth of individuals leads todevelopment of the company.” We would like to adopt the career development plan (CDP)
proactively and proceed with the human resources management reform.

21

CORPORATE DATA / STOCK INFORMATION

Company NameFREUND CORPORATION

Established

April 22, 1964

Capital Stock¥1,035,600,000

Employees

Company and Stock Information (As of February 28, 2023)

Major Shareholders (Top Ten)

Shares owned
Ownership ratio(thousand shares)(%)

Shareholder Distribution by Type of
Shareholders

K. K. Fusejima Yokosha

1,648

9.84

476 (Consolidated)

Yasutoyo Fusejima

1,217

7.27

Head Office Location

FREUND Bldg. 6-25-13 Nishishinjuku,
Shinjuku-ku, Tokyo, 160-0023

MUFG Bank, Ltd.

836

4.99

Websitehttps://www.freund.co.jp/english/

The Master Trust Bank of Japan, Ltd.
(Trust Account)

756

4.52

18,400Stock Listing

TSE Standard (securities code 6312)(thousand shares)

Fiscal Year

From March 1 to the last day of
February next year

Annual General
Shareholders’ Meeting

Held in May of every year

Shareholder Registry
Administrator

Mitsubishi UFJ Trust and Banking
Corporation

Total Number of
Shares Issued
Total Number of
Shareholders

Sumitomo Mitsui Banking Corporation

744

4.44

PERSHING-DIV. OF DLJ SECS. CORP.

706

4.22

Okawara Mfg. Co., Ltd.

673

4.02

Freund Employee Shareholding Circle

423

2.53

The Shizuoka Bank, Ltd.

368

2.20

18,400,000 shares

Meiji Yasuda Life Insurance Company

360

2.15

16,760

The Company has 1,655,000 shares of treasury shares.
Shareholding percentage stakes are calculated after excluding 1,655,000 shares oftreasury shares.

Total sharesissued:Financial Institutions

No. of shares held
(thousand shares)

Percentage
(%)

3,443

18.71

242

1.31

3,084

16.76

Financial Instruments Firms
Other Corporations
Foreign Corporations

1,220

6.63

Individuals, Others

10,411

56.59

NOTE: Treasury shares are included in the category of “Individuals, Others”

Trends of Share Price, Trading Volume and TOPIX(Shares)(Index)800,000

200
FREUND CORPORATIONFREUND CORPORATION(trade volume)(share price)

TOPIX

600,000

150

400,000

100

200,000

50

March 2,2020

March 1,
2021

NOTE:
Share prices and trading volumes prior
to the stock split shown in the chart
have been adjusted to reflect the stock
split. FREUND CORPORATION and
TOPIX prices have been adjusted toshow relative valuations on March 2,2020 as 100.

March 1,
2022

FREUND REPORT 2023

22

FREUND CORPORATIONFREUND Bldg. 6-25-13 Nishishinjuku, Shinjuku-ku, Tokyo, 160-0023
Please contact with us for any inquiry at the E-mail address on the right.

Finance & Accounting Department,
Corporate Administration Division
Phone: +81-3-6890-0747

E-mail: ir@freund.co.jp

Fax: +81-3-6890-0870

URL: https://www.freund.co.jp