FREUND CORPORATIONFREUND Report 2022
Fiscal Year Ended February 28 2022
(From March 1, 2021 to February 28, 2022)

Profile

Contents
Profile1

Milestones of FREUND Group2

Global Network of FREUND Group3

Value Creation Cycle of FREUND
Group

4

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
8

Top Message

We have grown on the basis of our "Hardware (pharmaceutical product manufacturing equipment, pharmaceutical excipients and otherproducts)" and "Software (drug formulation technologies)" business models. Currently, we have 6 Group companies in Asia, the U.S. andEurope, 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 medicalcare and health for people worldwide” in management vision.

Corporate Philosophy

Management Vision

Develop the Future
through Creativity®

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

Close-Up
Pharmaceutical Product Field

13

Non-Pharmaceutical
Product Field

15

Sustainable Management
Foundation

17

Company and Stock Information

22

Disclaimer

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's
businesses. Furthermore, the factors influencing theCompany's estimates and other statements are notlimited to the above.

Creating
special value
Aiming to be No. 1 ineach business segment

NumberValues which
the FREUND
Group holds
preciousONE
FREUND

ONE
Only

ONE

Be

ONE

Putting clients' views 1st

Networking

Aiming to be the Only ONE for clientsand society

Unite to a "Be One" group

Note: T he details of this Report are based on the results of the fiscal
year ended February 28, 2022(from March 1, 2021 to February
28, 2022). (However, new information available after March2022 has also been included in this Report.)

1

HISTORYof FREUND

Focusing on ﬁlm coating technologies for tablets, we were the ﬁrst in the world to succeed in developing"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

Innovation period Growth period

1964-19691970-1989

To the future2020-

1990-2019

Founded amidst high economic growth period

Grew dramatically in line with economic growth of Japan

Expanded target markets to the world through globalization

1964

1971

1992

Management

Machinery

Chemicals

1969

Machinery

Established in Kanda
Tsukasamachi, Chiyoda-ku, Tokyo
Developed and launched testingmachine "FM-2 model" andmanufacturing machine"FM-5 model" for automated film
coating machine machine
Developed and launched f
ilm coating liquid forpharmaceuticals "FC-101" and"EC-101"1978

Chemicals

1980Management

1987

Developed and launched fluid bed
granulation, coating and drying
machine "FLOW COATER”

Machinery

Chemicals

Developed and launchedautomated sugar and film coatingmachine "HICOATER"
Developed and launchedfood preservatives "Antimold-102”

1996

Established Freund Kasei
Corporation in Urawa City,
Saitama Prefecture(currently Saitama City)(merged in March 2014)
Developed and launchedmultiple function type foodpreservatives "Negamold"Management

Management

Established the "Hamamatsu facility /Technology Development ResearchCenter" in Hamamatsu City,
Shizuoka Prefecture
Registered shares on
the Over-The-Counter Market with
the Japan Securities Dealers
Association (later JASDAQ)

2014

Fly to the future with creativity

2020

Celebrated the 50th anniversary
since FREUND’s founding

Management

Developed continuous granulationand drying system "Granuformer
concept model"

Machinery2015

Chemicals

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

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

Machinery

Developed and launched tablet
imprinting machine "TABREX Rev."

1997

Management

2008

Machinery

Developed and launched
new tablet coating machine"HICOATER FZ"

2018

Machinery

2010

Management

Acquired Turbo Corporation(currently Freund-Turbo Corporation)

Developed and launched
continuous granulation anddrying system "Granuformer"

2019

Management

Established joint venture company
Parle Freund Machinery Private
Limited (India)

2013

Management

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

Machinery

Launched tablet imprinting
machine "TABREX"(¥million)

2021

2022

Management

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

Machinery

Developed and launcheddata integrity system "Smart DI"

Management

Established joint venturecompany 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 launchedtablet coater "HICOATER HV"

Machinery

Developed and launchednear infrared technology"Smart MOIS"Management

Moved to the Tokyo Stock
Exchange standard market(¥million)

20,0002,400

Net sales and operating profit trends
Net sales (LHS)

Operating profit (RHS)*Fiscal year ended at the end of February each year

Consolidated financial results

15,0001,800

Non-consolidated financial results

22

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 2022

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 operations during FY02/23. As a result, our Group’s global networkin 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 inJapan 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 andchemical 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 amonggroup companies.
The business domains developed at each site and the functions of each site are as follows.

Evolving Regions

Freund-Vector
European Laboratories Machinery
Sales

Laboratory

Cos.Mec S.r.l. Machinery
Development

Manufacturing

FREUND CORPORATION Machinery Chemicals

Sales

Development

Joined the Group in 2020

Manufacturing

Sales

Laboratory

Freund-Turbo Corporation
Development

Parle Freund Machinery
Private Limited Machinery
Manufacturing

Manufacturing

Sales

Machinery(Non-Pharmaceutical Products)

Laboratory

Laboratory

Established joint venture company in 2019

Freund-Vector
Corporation Machinery
Development

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

Manufacturing

Sales

Laboratory

Joined the Group in 1997

Laboratory

Shanghai FC Center will start operations during FY02/23

3

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 material 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

Collaboration

Hard
ware
(products)

Manufacturing

2 Capital

Intellectual
3 Capital

Sales

OutcomeDevelopment/Production Partner/
Academia
Procurement

Collaboration

Pen

Ink

machinery( equipment)( chemical
product )OutputPharmaceutical productmanufacturing equipment
Powder machinery equipmentfor non-pharmaceutical use

Medical excipients

Product development/
manufacture/sales

Printing ink

Material handling equipment
for manufacturing

Contract processing

Tablet imprinting machineTechnical services

Measuring equipment

Engineering services

Functional food materials

Food preservatives

Providing value tostakeholders

Financial

1 Capital

Sales increase, cash flow
generation, ROE & EPS
improvement

Manufacturing

2 Capital

Provision of competitive
products, top-level productivity

Intellectual
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

Human
4 Capital

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

5 Capital

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).

Soft
ware

Mechatronics technologies DDS technologies
Intellectual property
Japanese technologies

formulation(drugtechnologies)

Overseas technologies

Collaboration
FREUND CORPORATION
Freund-Turbo Corporation

Freund-Vector Corporation
Cos.Mec S.r.l.
Parle Freund Machinery Private Limited
Freund-Chineway Pharmaceutical
Technology Center Co., Ltd.

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
the machinery business“Pen” and chemical
product business “Ink”
Since our inception, we havedifferentiated ourselves from ourcompetitors in the pharmaceuticalfield through developing thebusiness model of “Pen” machineryand “Ink” chemical products.
Today, we have establishedourselves as a leading company inthe pharmaceutical 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 andchemicals, 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 2022

4

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, whichmaterial handling equipment that is used in the ancillary processes for pharmaceutical products.

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

Continuous production

Granulating/Coating
GRANUMEIST

Granuformer

FLOW COATER

Granurex

Manufacturing processes
in which machinery
equipment of FREUND
Group is used

HICOATER HVSPIR-A-FLOW

Please see here for
product details.

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

Pulverizing

Palletizedbin mixer

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

Packaging

Lifter for tablets

Cos.Mec S.r.l.
Vibration siever
Bag lifter

For powder and granules

For tablets

BINs (containers)

5

Provision of Value to Society

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 other products
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 andNorth 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 businessfields by integrating granulating/coating and pulverizing/classifying
technologies

Chemicals
Business
Segment

Manufacture and sales ofpharmaceutical excipients,
food preservatives 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 Practice

Provision of Values to Society

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.

Pursuing fresh taste, safety andsecurity

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"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 account for only
several percent of total volume of drugs, with theremaining portion being excipients that are used tomake drugs into sizes that are easy to swallow andfor coating 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.

Better taste and health;supporting enriched lives of people

Along 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”

Provision of Values to Society
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
imprinting/inspection machine and specialized inks.

Creating new markets for the
next generation using FREUND's
unique pulverizing technologies
Tablet Imprinting 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 2022

6

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

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22Net sales

16,396

17,616

17,42419,027

21,16419,801

18,408

16,772

16,765

17,632

Cost of sales

11,313

12,377

11,97812,921

14,343

12,985

12,22011,344

11,126

11,620

Selling, general and administrative expenses

3,612

3,952

4,295

4,759

4,779

4,845

4,964

4,870

4,528

5,030

Operating profit

1,470

1,286

1,150

1,346

2,041

1,971

1,223

558

1,111

981

For the year

765

787

695

961

1,064

1,477

843

381

970

543

EBITDA*1

1,717

1,610

1,478

1,687

2,396

2,329

1,575

951

1,584

1,575

Orders received (Machinery)

9,272

10,067

12,407

13,112

16,358

11,513

11,83910,227

12,386

15,621

Order backlog at end of period (Machinery)

5,263

4,991

6,682

7,086

8,561

5,822

5,428

4,695

6,615

10,574

Capital investment

222

477

545

266

564

524

627

951

637

571

Depreciation

232

303

308

321

338

344

344

386

461

570

R&D expenses

435

464

592

687

640

862

832

725

526

580

Cash flows from operating activities

740

1,227

822

290

3,605

594

435

(27)

2,280

701

Cash flows from investing activities

(332)

(423)

(240)

(432)

(351)

(493)

(566)

(852)

(1,726)(680)

Cash flows from financing activities

(164)

(226)

(284)

(331)

(277)

(499)

(921)

(325)

(371)

(427)

Total assets

14,971

15,55017,277

17,206

19,101

19,125

17,46518,505

20,57522,273

Net assets

9,315

10,392

11,18011,52912,185

13,242

13,25013,243

13,85814,354(Equity)

9,197

10,23910,987

11,52912,185

13,242

13,25013,243

13,85814,354

Profit attributable to owners of parent

At end of period

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

44.38

45.69

40.36

55.74

61.72

85.69

50.15

22.79

57.96

32.46

Book value per share (BPS, ¥)533.37593.76637.19668.57706.62767.91

791.34790.94827.67857.28Dividend*3 per share (DPS, ¥)

10.00

12.50

15.00

25.00

20.00

20.00

20.00

20.00

20.00

20.00

Operating profit margin (%)

9.0

7.3

6.6

7.1

9.6

10.0

6.6

3.3

6.6

5.6

Return on assets (ROA, %)

5.1

5.1

4.0

5.6

5.6

7.7

4.8

2.1

4.7

2.4

Major indicators

Return on equity (ROE, %)

8.7

8.1

6.6

8.5

9.0

11.6

6.4

2.9

7.2

3.9

Dividend payout ratio (%)

22.5

27.4

37.2

22.4

32.4

23.3

39.9

87.8

34.5

61.6

Equity ratio (%)

61.4

65.8

63.6

67.0

63.8

69.2

75.9

71.6

67.4

64.4

*1. EBITDA = Operating profit + Technical support fee + Interest expenses + Depreciation*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 FY02/12.
*3. Dividend per share includes commemorative dividends of ¥2.50 (for FY02/15) and ¥5.00 (for FY02/17).

7

Top Message

Develop the Future through Creativity®

Under our corporate values “ONE FREUND,”
we will realize new creations
that are unique to our Group.
In the fiscal year ended February 28, 2022 (hereinafter “FY02/22”), the turnaround year for the 8th MediumTerm Management Plan (hereinafter the “Plan”), uncertainty in the global market increased further, becauseof the geographical risks being increasingly complex in addition to the COVID-19 pandemic. Meanwhile, at
the FREUND Group, new creations are germinating in various business fields, which will help us realize ourmanagement vision of “contributing to the future of medicine and good health of people around the world.”
We interviewed Iwao Fusejima, President and CEO about the overview of the Group's business activities andfuture initiatives.

Iwao Fusejima
President and CEO

O

N

E

F

R

E

U

N

D
FREUND REPORT 2022

8

FY02/22: Overview ofBusiness Activities
Japanese economy continued to face strong downward
pressure, particularly on personal consumption, due tothe intermittent declaration of a state of emergency andpriority measures to prevent the spread of thecoronavirus. Although various restrictive measures wereeased in stages, with the increased people being
vaccinated and “living with Coronavirus (COVID-19)”
countermeasures being increasingly accepted, theeconomic recovery was prolonged due to the spread of
new mutant strains of the virus as well as the worsenedbalance of supply and demand for semiconductors andvarious materials and components.
In the pharmaceutical industry, which is the main userof the Group, the Japanese market is under pressure to
respond to the strengthening of measures to control
medical cost, such as the implementation of the drug
price revision every year, which used to be once every
two years, in addition to the increase in R&D expenses.
The government has been promoting measures toencourage the generic drug (GE) industry to raise thediffusion of their drugs, but the effects of thesemeasures have run their course and growth is predicted
to slow down. In addition, deficiencies in the
manufacturing systems of some manufacturers have led
to industry-wide demands for the development ofsystems to assure quality and a stable supply.
In the global economy, behavioral restrictions haveeased, especially in developed countries, with theincreased number of people being vaccinated. As aresult, economic recovery has progressed, but there aresigns of re-expansion of the infections in some areas
and disruptions in logistics and supply chains are
becoming apparent. In addition, the military invasion of

Ukraine by Russia since February 2022 and economic
sanctions against Russia by various countries haveraised concerns about the impact on the global
economy. Thus, the future outlook remains uncertain.
Although our orders received were favorable as anentire Group, prolonging lead times became apparent,
particularly in the U.S., due to labor shortages andsupply chain disruptions.
In addition, FREUND posted extraordinary losses ofapprox. ¥210 million on a parent basis due to an
impairment loss on equipment that is no longer
expected to be used and expenses related to asettlement of a copyright infringement case. We deeply
apologize to our stakeholders that we fell short of ourannual financial forecasts due to these one-off special
factors, in addition to changes in the global businessenvironment.

Business Activities inPharmaceutical Product Field

period reached a record high.
In FY02/21, Freund-Vector received approx. ¥200
million subsidies from the U.S. Government as
COVID-19 countermeasures, which led to an increase inoperating profit and other profits below it. In addition,
there were special factors such as insurance income of
approx. ¥100 million, but excluding these factors, thecompany's operating profit and ordinary profit were
essentially the same level as the FY02/21.
Overview of Chemicals BusinessIn the Japanese market, the pharmaceutical excipientbusiness performed well and achieved record sales,
despite the disruption caused by the inadequate
manufacturing system in the GE industry. In overseas
markets, we have promoted sales activities in India andorders are beginning to recover. In addition, changes in
product mix and progress in cost reductions led toconsolidated year-on-year increases in both sales andprofits.

Overview of Machinery BusinessIn the Japanese market, we built up orders toward theend of FY02/22 by capturing extraordinary demand forsystem development by the GE industry. Orders
received also piled up in overseas markets, but thenegative impact of COVID-19 pandemic became
apparent due to significant delays in shipments.
By region, orders received by Freund-Vector in the
U.S. and Brazil were strong, resulting in a record-highorder backlog at end of period. Cos.Mec of Italy, whose
main markets are emerging countries, not only sufferedfrom the negative impact of the Covid-19 pandemic, butalso particularly struggled to absorb fixed costs as it
possessed its own manufacturing infrastructure. Despite
these difficulties, the order backlog at the end of theBusiness Activities in
Non-Pharmaceutical Product Field
Overview of Machinery Business
Freund-Turbo, which is responsible for the industrial
machinery business, made a progress in expanding its
product lineup (please refer to “Close-Up” on page 15
for the company's new product development trends). In
addition to the conventional chemical and foodindustries, the company's efforts to meet nextgeneration needs in the battery and electronic
component industries turned out to be successful, andthe company enjoyed the record-high order backlogs at
the end of the period.

9Overview of Chemicals BusinessIn the food preservatives business, while the souvenir
market, one of the major markets for the business,
continued to be affected by the COVID-19 pandemic,
demand for confectionary products remained brisk at
supermarkets and convenience stores. As a result, net
sales reached a record high. In addition, cost control
was successful and profitability improved (new products
were launched in the food preservatives business. For
details, please refer to “Close-Up” on page 16).
In the health food business, net sales declined
significantly as expected due to the termination of acontract from a large user, but operating profit declined
only slightly thanks to a decrease in low margin
projects.

Operating Performances by Business Segment
Machinery Business
Net Sales by Group Company

Pharmaceutical Product Field
Industrial Product Field*Before elimination of intra group transactions

15.2%

Sales
Breakdown

FREUND

Freund-Vector

Freund-Turbo

Cos.Mec

1,522

382
1,422

937
1,529

3,994

3,591

3,135

6,254

6,838

6,865

(¥million)

84.8%

Progress andOutlook of the Plan
The effects of the global supply chain disruptions andtight supply-demand balance for semiconductors andvarious materials in FY02/22 are predicted to continue in
FY02/23. In addition, heightened geopolitical risks havefurther increased the uncertainty of the businessenvironment.
On the other hand, looking at the global trends of thepharmaceutical industry, a series of capital investment
for plant expansion is planned in the domestic market
over the next several years, mainly by major GE
manufacturers. In the global market, the pharmaceuticalmarket is forecast to grow in the future against the
backdrop of an aging population in developed countries
and population growth and rising medical standards inemerging countries.

Chemicals Business

5.9%

56.1%

Sales
Breakdown

FY02/21

FY02/22

Orders Received andOrder Backlog

Net Sales by Product Field andSegment Profit Margin

Pharmaceutical Product Field

Orders Received

Pharmaceutical ExcipientsIndustrial Product Field

Order Backlog

Food Preservatives

Segment Profit Margin

Health Foods(¥million)

1,760

1,623

(¥million)

15,621

1,795

704
13.8%
2,079

9.4%
10,041
5.3%

340
938
15.3%

10,574

10,227

9,547

Segment Profit Margin(¥million)

12,386

9,357

Food Preservatives

Health Foods

38.0%
FY02/20

Net Sales by Product Field andSegment Profit Margin

Pharmaceutical Excipients

1,889

2,204

9.8%

6,615
4,695

2,869

2,765

3,251

2.8%
FY02/20

FY02/21

FY02/22

FY02/20

FY02/21

FY02/22

FY02/20

FY02/21

FY02/22

FREUND REPORT 2022

10

Review of the Second Fiscal Yearand Revision of the Plan for the
Final Fiscal Year

resulting in ¥17.63 billion for net sales and ¥0.98 billion
for operating profit.
In line with its growth strategy of promoting
globalization, the Group has expanded into India in
2019 and Italy in 2020, in addition to Japan and the U.S.
In 2022, we plan to start base activities in China, andare building a global five-pillar-structure. We would liketo make steady progress in building a global
management foundation in the current environment
where our business environment is favorable thanks to
the higher-level of capital investments by GE
manufacturers.

In the Plan, the Group had projected consolidated net
sales of ¥19 billion and operating profit of ¥1.2 billion for
FY02/22. Considering the impact of the COVID-19
pandemic, however, the Group revised its forecasts
downward to ¥18.5 billion and ¥1.1 billion, respectively,
as of April 13, 2021. In addition, the delays of delivery,
especially in the U.S. caused a further decline in sales,

Although we have not changed our medium-to-longterm growth scenario and our outlook for the businessenvironment, we were forced to revise our consolidated
financial forecasts for FY02/23, the final year of the Plan,taking into account that the longer lead-time and risinglabor costs which became apparent in the U.S. are also
likely to be witnessed in other regions of the world. We,
thus, lowered our FY02/23 net sales and operating profit
forecasts from ¥20.14 billion and ¥1.46 billion to ¥18.5
billion and ¥0.7 billion, respectively.

FY02/23: Overview of Consolidated Financial Forecasts/Forecasts by Business Segment
Consolidated Financial
Forecasts

FY02/22(Actual)

FY02/23(Forecasts)

YoY Changes(¥million)

Financial Forecasts by
Business Segment%

FY02/22(Actual)

FY02/23(Forecasts)

YoY Changes(¥million)%

17,632

18,500+867+4.9

Consolidated net sales

17,632

18,500+867+4.9Operating profit

981

700

-281

-28.7

Machinery Business

11,836

12,700+863+7.3

Ordinary profit

1,032

720

-312

-30.3

Chemicals Business

5,795

5,800

+4

+0.1

543

450

-93

-17.2

981

700

-281

-28.7

32.46

26.87

-5.59

-17.2

Machinery Business

623

—

—

—

Capital investment

571

—

—

—

Chemicals Business

884

—

—

—

Depreciation

570

—

—

—

Adjustments

(526)

—

—

—

R&D expenses

580

—

—

—

111.49120.00——Net sales

Profit attributable to owners ofparentEPS (¥)

Segment profit

Exchange rate (¥/US$)11

Initiatives by Group Companies for New Creation
In September 2021, we launched the “HICOATER HV,”a new automated tablet coater. For the development
team, it is almost as important to them as their own
children. As a development-oriented manufacturer, we
will continue to give birth to new creations like this.
FY02/22 saw a variety of new creations. In theJapanese pharmaceutical product market, we haveintroduced new value-added services to our machinery
equipment operating in the existing market (For details,
please refer to “Close-Up” on pages 13-14).
To realize our management vision of “contributing to
the future of medical care and health of people
throughout the world” we want to operate our businessby pursuing product to meet social requirements, andhave begun developing products that are friendly to theenvironment.

In terms of building management foundation, theautonomous activities of our employees are taking
shape. As a part of these efforts, we have been taking
initiatives e.g., by inviting outside management
professionals to participate in the activities cultivatingnext-generation management-level human resources
and D&I (Diversity & Inclusion) activities (for details,
please refer to “Sustainable Management Foundation”
on pages 20-21).
Although we are facing an uncertain businessenvironment which we have never foreseen before, theGroup is taking a major step forward in preparation for
the next 100 years. We would like to ask all of our
stakeholders for their continuous support to our Group.

FREUND REPORT 2022

12

Close-Up

Pharmaceutical Product Field

Innovation in Existing Machinery Equipment—Toward further labor saving and “visualization”—
In 1964, we were the first in the world to develop and launch an automated film coating machine for pharmaceuticalproducts. Since then, we have consistently provided solutions to achieve labor savings and have become a leading
manufacturer of formulation machines. Here, we introduce the features of the two solutions that aim to create newvalue: the tablet coating PAT*1 system “TACT (Tablet Automatic Coating Tool)” for tablets during coating and the data
integrity system “Smart DI”. The background to the development of these two solutions will also be introduced.
HICOATER ®HVBackground of the Development of “TACT”

Advantages of “TACT” and Future Development

In 2019, we were in the process of formulating our “8th Medium-Term Management
Plan” which started in FY02/21, when the achievement of the "80% Generic Drug (GE)Volume Share Target" due in September 2020 based on a Cabinet decision in 2017 wasimminent. Based on the assumption that capital investment by pharmaceuticalcompanies would slow down after the GE80% special demand, the Equipment
Development Section was also considering development themes other thandevelopment of new products.
In considering new themes, we set our sights on clients who already use ourmachinery equipment, and focused on developing solutions to solve their problems byimproving and upgrading their equipment, with an eye toward innovation in the existing
equipment market, and development of a PAT system with automated tablet sampling
was initiated.
Conventional automated sampling systems only automate the ejection of a small
amount of tablets from the coating machine, but in addition to the automated tablet
sampling mechanism, we aimed to complete a fully automated tablet sampling systemthat would lead to improved quality stability, work efficiency, productivity, and preventionof human error by automating tablet weight measurement and manufacturing end point
prediction.

Initially, with the “HICOATER FZ,” the previous model of the new “HICOATER HV*2”
released in 2021, in mind, the development members exchanged various ideas, repeateddesign studies, and conducted a trial production so that a mechanism to collect a part ofthe coated tablets being manufactured from the machine could be retrofitted.
This was the industry's first challenge, as there was no other equipment that can be
retrofitted, and no other equipment that can measure the number and weight ofautomatically collected tablets, predict the end-point of production, and automaticallyterminate the process. In addition to being able to design machines as hardware,
software development based on a thorough understanding of the manufacturing flow oftablet coating was necessary, and this was a new challenge for us as well. In particular,
the end-point prediction is a control that we were able to achieve only because we arein contact with many of our clients.
We focused on products that would make an impact on first-time clients, and at thesame time, could be easily installed on existing equipment at a reasonable price.
“TACT” is used in the “HICOATER FZ” as well as the “HICOATER HV”.
The response from clients has been positive, as we have been able to provide newvalue, and we plan to brush it up further in the future. In the future, we would like to add
control functions based on AI-based operation prediction to further stabilize production
and improve quality.

*1 PAT (Process Analytical Technology): A system that continuously inspects and monitors the entire process to ensure high quality through real-time monitoring of the quality of intermediate products in the product.

*2 Renamed on December 1, 2021.

13

Advantages of “Smart DI”

Overview of the “TACT” System Configuration

Control

Controlpanel

Automatedsampling and end-point
management
systemAutomatedtablet weightmeasuringmachine
WT-1

HICOATER®HV

Tablets are automatically sampled fromthe conical backside of pan and transported
by conveyor belt to the automated tablet
weight measuring machine.

Background of the Development of “Smart DI”
Traditionally, in the field of pharmaceutical manufacturing and quality control,
handwritten records have been used because it is believed that electronic records do
not keep a history of record revisions and changes. On the other hand, in recent years,
based on the “Guidance on Data Integrity” issued by the United States Food and Drug
Administration (FDA), there has been an increasing demand for systems that achieve
record integrity through electronic records.
The Japanese pharmaceutical industry faces the challenge of complying with GMP*3
revisions which places a heavy burden on the site of quality control and pre-shipment
inspections. In order to solve such client issues, we established a new Control Sectionin our Technology Development Research Center in 2019 to develop a data integrity
system, the “Smart DI,” that complies with data integrity guidance and GMP and keeps
clear record/data of manufacturing process.

Our equipment is operated using a control panel. This system keeps a log of all datachanges and deletions as well as logs of the workers. This makes it possible to prevent
fraud on the site and reduce the workload of manufacturing and quality managers. With
regard to data integrity, test equipment manufacturers were among the first to takeaction in the field of quality control, and authorities have since strengthened their audits
in this area, with many companies introducing LIMS*4 and other systems.
In order to make it easy to introduce our “Smart DI” into production facilities, thesystem lineup was constructed in three stages, (1) acquisition of operating data andmanagement of data in the control panel, (2) centralized management of data in
multiple devices, and (3) creation of a database that enables data retrieval andextraction. Since the required functions can be selectively implemented, we canpropose and implement the appropriate version to meet the needs of our clients, fromthe small start needs of those who want to start by acquiring digital data logs. “SmartDI” is also highly reliable and durable in commercial manufacturing, so it can beequipped in the control systems of existing facilities that combine PLCs*5 and touch
panels, which are mainly used in Japan.
In the future, in addition to brushing up functions such as “a confirmation screen when
outputting acquired data to USB memory” and “outputting data in a form that is easy forclients to review and cannot be tampered with.” We will promote various standardization
to ensure high quality and propose “visualization” of manufacturing processes with DX
and AI in mind.
*4 LIMS (Laboratory Information Management System): A system for managing integrated laboratory information*5 PLC (Programmable Logic Controller): Controller used for equipment control

System Lineup of “Smart DI”
Effective use ofcontrol panel
equipment
1

Data acquisition

Audit trail
Process data
Security settings

Use of external
storage systems
2

Data protection andviewing

Data access control
Data contents organization
Batch viewing of multiple
device data

Databasecompilation
3

Data search

Database
Item search within data
Data extraction*3 GMP (Good Manufacturing Practice): Standards for manufacturing control and quality control of pharmaceuticals products

FREUND REPORT 2022

14

Close-Up

Non-Pharmaceutical Product Field

Challenge to Meet New Market Needs with New Technologies—Staying one step ahead of the market to solve our clients’ problems—
The Group's non-pharmaceutical product field includes the industrial machinery business operated by Freund-Turbo, a group company, and the food preservatives andhealth food businesses operated by the Company. In all of our business segments, we are experiencing various changes in the needs of society and client markets. Here,
we introduce the current status of new technology and product development in the business segment areas of machinery equipment and food preservatives as a challenge
to meet new market needs.

New Products Development Status of Freund-Turbo
In 2018, Freund-Turbo added the “BALANCE GRAN” high-speed mixing/granulating machine for lithium-ion battery ("LiB") applications and the “FE COATER” coating machine to its productlineup through M&A and business collaboration. Since then, it has been developing new products with an eye not only on LiB but also on markets and applications where demand is
expected to grow over the medium- to long-term while distancing itself from the LiB market in China, where it has fallen into price competition.
Until now, we have been focusing on expanding our product lineup to include general chemical and food applications, and will continue to take on the challenge of upgrading thefunctionality of existing equipment and developing new technologies to explore next-generation applications.

Response to the Evolution of the Lithium Ion Battery Market
External appearance of the “TURBO SCREENER P Series”
In 2021, we developed the “P Series,” in which the body of fine powder classifier “TURBO SCREENER”
was improved from stainless steel to all resin for powder contact part, with an eye on LiB raw material
applications, where metals can easily cause ignition. The “P Series,” the industry's first all-resin classifier,is extremely light and easy to handle, and we hope to expand our sales channels not only to LiB but also
to the market for raw materials with “zero” contamination, where metal is not preferred.
From 2021 onward, sales of the small-scale “BALANCE GRAN” machine became active in Japan andEurope, and demand for a large-scale machine is expected to expand toward full-scale mass productionin the future. Currently, to meet future needs, we are developing a testing machine for a large-scalemachine for mass production of the “BALANCE GRAN” with the aim of launching it in the autumn of 2022.
LiB raw materials vary from manufacturer to manufacturer, and in many cases, accumulated datacannot be used. We are accelerating the development of equipment that can respond to a wide variety ofrequests, as we need to conduct evaluation tests and scale-up to meet the requirements of each client.

All resin typefor powder
contact part

Conventional(stainless steel)
type

15

Response to the Next-generation Markets such as Multilayer Ceramic Capacitors and Films
In 2021, we developed a model for increased processing
volume of the wet grinding mill “AQUA TURBO” for raw material
applications such as LiB and multilayer ceramic capacitors(hereinafter “MLCC”). While other companies have increased
the diameter of the pulverizing rotor (solid of revolution) in order
to increase processing volume, Freund-Turbo has extended thewidth (length) of the rotor without changing its diameter.
This equipment is expected to be used not only for LiB and
MLCC, but also for next generation battery applications usinghydrogen storage alloys, etc., according to evaluation test
results.
The “FE COATER” series of coating machines, mainly
medium- and small-sized machines, has also seen an increasein deliveries for LiB, MLCC, and high-performance films, and is
expected to expand into the growing SDGs-related market.

New product and model development handled by Freund-Turbo
The “AQUA
TURBO” model
for increased
processing
volumeExternal
appearance of the“FE COATER,” amedium-sizedcoaterNew Initiatives in the Food
Preservatives Business
Food can be altered by temperature, humidity, light, andmicroorganisms. Food preservatives (hereinafter“Preservatives”) prevent such alterations. We are developing
our business segment with a lineup of ethanol evaporation foodpreservatives which preserves moistness and bacteriostatic
effect (“Antimold” series) at the core, ethanol evaporation foodpreservatives + oxygen absorb type food preservatives with thestrongest bacteriostatic effects (“Negamold” series), andoxygen absorb type food preservatives that prevent
deterioration due to oxidation and bacteriostatic effects(“Negamold Z” series).
In the future, we will promote the development of newenvironment friendly products and manufacturing systems, andaim to expand the range of applications to which our technology
can be applied, in addition to the currently mainstream
confectionery products. In addition, we will strengthen ourbusiness segment structure with a view to solving our clients’issues, and build and strengthen relationships of trust as apartner that supports our clients’ businesses.

Product name

Model name

Development contents

Main applications

LaunchTargetmarkets

Wet grinding mill

AQUA TURBO

L/D (length-to-diameter ratio) of the pulverizing
section has been reviewed and changed(model for increased processing volume)

LiB raw material applications, next generation
battery applications, MLCC raw material
applications, electronic material applications

Summer 2022

Japan/
Europe andthe U.S.

Wet disperser

Wet Medialess
Dispers Mill

Equipment, dispersants, applications(challenges for new technology without beads)

LiB raw material applications, next generation
battery applications, MLCC raw material
applications, electronic material applications

Under
development

Japan/
Europe andthe U.S.

Frozen Pulverization
SystemICROS MillFreezing and pulverizing system using liquid
nitrogenFood applications, recycling of resins, tires,rubber, etc.

Summer 2022

Japan/Asia

Fine Powder
Classifier

TURBO
SCREENER
P Series

All resinous model for powder contact parts (for“zero” metal contamination)

Raw material applications where metals are
not preferred, such as LiB raw materials

Autumn 2021

Japan/
Europe andthe U.S.

High-speed mixing/
granulating machine

BALANCE GRAN

Large testing machine 100-150L (for scale-up
to large manufacturing machines)

LiB raw material applications

Autumn 2022

Japan/
Europe andthe U.S.

High-speed mixing& crushing machine

CIRCLE MIXER

Liquid mixer added to product lineup

General chemical, food and pharmaceuticalproducts applications

Autumn 2021

Japan/Asia

New Product “Antimold Mild FDS” Launched
Amid growing public
Image of inspection flow “Antimold Mild FDS”
concern for food
Metal Detection
Antimold Mild FDS
safety and security,
SystemInspection System
Magnet(Magnetizer)
sanitation
Metal Detector
FDS
Foreign
Inspector
management inmetal object
accordance with
Metal Contaminants
FDS Attached
HACCP* wasinstitutionalized in“Antimold Mild FDS”
inspection machine
June 2021. Even
FDS Not Attached
Manufactured bybefore thisAntimold Mild FDS
Anritsu Corporation
Magnetic
ContaminatedMetal Detector M Series
Sensorinstitutionalization, we
began developing a
new product that can inspect for the presence of preservatives in theintensive and inspection errors have become a problem. The
final inspection process of food manufacturing, regardless of the
combination technology of preservatives and detectors reduces thepacking material or position of the seal, leading to the launch ofrisk of defective shipments and resulting recalls for clients involved in“Antimold Mild FDS” in October 2021.
food production, while at the same time saving the need for human
To prevent 100% leakage of preservatives, the content of theoperation at the factories, so we have received feedback from clientsmagnetic material (iron oxide) in the mixture is an important factor.
who have introduced the system that it has led to improvements in
We attempted to develop new technologies, such as the combination
their manufacturing sites.
of “Antimold Mild FDS” and metal detector M Series (manufactured
by Anritsu Corporation) to derive content uniformity that leads to100% detection.
*HACCP (Hazard Analysis and Critical Control Point): A method of sanitation management inwhich food business segment operators themselves identify hazardous factors (hazards) such as
At food manufacturing sites, the presence or absence offood poisoning contamination and foreign material contamination, and then control particularlypreservatives is checked prior to product shipment by visual or image
important processes to eliminate or reduce these hazardous factors in the entire process from
inspection, or by conventional metal detectors, but this is laborreceiving raw materials to shipping products.

()

FREUND REPORT 2022

16

Sustainable Management Foundation

Corporate GovernanceCorporate Governance Structure (As of May 31, 2022)
General Shareholders' Meeting

Overview of the Corporate Governance Structure
The Company has a Board of Directors, Audit & Supervisory Board, and accounting
auditors. The Executive Officers execute business operations, while the Board of Directors
sets management policies and targets for the entire Group and supervises the
management and business operations of each group company. The Board of Directors
consists of five members (two of whom are External Directors) with diverse experience,
knowledge and expertise, and in principle meets once a month. Three external auditors(one of whom is a full-time auditor) also participate in the Board of Directors meetings toensure appropriate and prompt decision-making and to further strengthen the supervisory
function. Auditors work closely with the Internal Audit Office, which reports directly to the
President and CEO, and the accounting auditors to enhance the effectiveness of audits.

Submit/ReportReportNomination
andCompensation
Committee

Appointment/
Dismissal

Auditing

President and CEO

Collaboration

Internal
Audit Office

Audit & Supervisory Board Members’ Meeting

Based on the corporate philosophy of “Develop the Future through Creativity®,” theCompany is engaged in business activities to realize its management vision of “contributing
to the future of medical care and health of people throughout the world, and creating andfostering technologies for fulfilling lives and food safety.” Through fair and appropriatecompetition, we aim to provide products and services that are useful to our clients andincrease our corporate value through the process of pursuing reasonable profits.

(Directors/External Directors)(Decision-making/Supervision)

Auditing

Auditing

Management Meeting(Executive Officers)

Operational Execution Divisions
and Subsidiaries

Corporate Lawyer, etc.

Basic Policy(Audit & Supervisory Board Members & External Audit & Supervisory Board Members)

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

Inquiry

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 tocontinuously 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

Basic Approach to Internal Control andOutline of the Structure
The Company identifies the internal control function as “a framework for management tocontrol operational execution divisions.” The Board of Directors assumes responsibility
in designing basic scheme of internal controls for the group companies, and insupervising maintenance, operation and assessment of internal controls based on the
Companies Act and other relevant laws as well as the Company’s articles ofincorporation and other internal rules.
To fulfill its corporate social responsibility, which is the basis of our corporate
philosophy of “Develop the Future through Creativity®,” we are working to instill
compliance and establish a risk management system, and have established theCompliance and Risk Management Committee and the Internal Control Committee,
which comprehensively manages internal controls.
17Introduction of Board Members
Honorary Chairman and Directors

Audit & Supervisory Board Members
Reason for
Appointment

Yasutoyo Fusejima

Iwao Fusejima

Ryuji Nakatake

Honorary Chairman

President and CEO

External Director

Reason for
Appointment

Ryuji Nakatake wasappointed as external
director as he wasdeemed to have morethan adequate ability
to oversee themanagement basedon his superior insight
regardingmanagement ingeneral.

Sakae Hirano
Full-time Audit &Supervisory Board Member

Reason for
Appointment

Masao Wakai

Toshiaki Honda

Hisashi Tanaka

Managing Director

Director

External Director

Reason for
Appointment

Sakae Hirano was
appointed as full-time
audit & supervisoryboard member as hewas deemed to havemore than adequate
ability to oversee themanagement based on
his knowledge offinance and accounting
as well as superior
insight regarding
management in general.

Sayoko Izumoto was
appointed as external
audit & supervisoryboard member as she
was deemed to satisfy
this role by leveraging
on her long experience
as a certified public
accountant and on her
vast insight regarding
finance andaccounting.

Sayoko Izumoto
External Audit &Supervisory Board Member

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.

Kazunari Hamada was
appointed as external
audit & supervisoryboard member as hewas deemed to satisfy
this role having
specialized knowledge
and experiences as an
attorney from an
objective standpoint
as a legal expert.

Kazunari Hamada
External Audit &Supervisory Board Member

Skill Matrix
Advisory Committee

Audit & Supervisory
Board Members

Directors

Current Position/
Reappointment

Name

TenureAttendance at Board of Directors andAudit & Supervisory Board

Fields expected to coverNominating andRemuneration Committee

Corporate
Management/
Top Management
Experience

Marketing/Sales

Members of the Nominating andRemuneration Committee●●

Reappointed

Iwao Fusejima

14 years

13 times/13 times

Reappointed

Masao Wakai

2 years

13 times/13 times

Reappointed

Toshiaki Honda

1 year10 times/10 times

Reappointed

Ryuji Nakatake

7 years

13 times/13 times

Members of the Nominating andRemuneration Committee●

Reappointed

Hisashi Tanaka

1 year10 times/10 times

Chairman of the Nominating andRemuneration Committee●

Current position

Sakae Hirano

3 years

Board of Directors: 13 times/13 times
Audit & Supervisory Board: 14 times/14 times

Current position

Sayoko Izumoto

5 years

Board of Directors: 13 times/13 times
Audit & Supervisory Board: 14 times/14 times

Current position

Kazunari Hamada

1 yearBoard of Directors: 10 times/10 times
Audit & Supervisory Board: 11 times/11 times●

Finance/
Accounting

IT/
Security

Human Resources/
Labor/
Legal/
Global Experience
Human Resources Risk Management
RelationsObserver of the Nomination andRemuneration Committee

ESG/
Sustainability

●
●

●

●

●

●

Manufacturing/
Development/
Research andDevelopment

●

●

●

●

●

●

●

●

●

●

●
●
●
●

●

●

●

●
●

●

FREUND REPORT 2022

18

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 FY02/22.

Risks to Be Watched Closely in the Future
In FY02/22, various risks emerged, including the risk of prolonged global spread of
COVID-19 and supply chain disruptions due to the pandemic and other disasters.
Furthermore, geopolitical risks are increasing, such as trade frictions between the U.S.
and China and Russia's military invasion of Ukraine. The Group is aware of the following
risks that should be watched closely in the future.

Industry Trend Risk

1 Industry Trend Risk

9 Human Resources 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.

2 Pricing Competition Risk

10 Foreign Exchange Fluctuation Risk

Overseas Business Operational Risk

3 Client Company Credibility Risk

11 Natural Disaster Risk

4 Business Partner Relationship Risk

12 Impairment Risk for Non-Current Assets

5 Collaborative Alliances with Strategic Partnership Risk

13 Overseas Business Operational Risk

6 Intellectual Property Risk

14 Information Leakage Risk

7 Product Liability Risk

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 business expansion
are emerging countries such as India, China, and Southeast Asia, where populations andincomes are expected to grow, and we are required to manage risks related to businessexpansion in these countries and regions. To this end, the Group is strengthening its
understanding of conditions by country/region, drafting strategies, and monitoring
individual transactions.

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

8 Public Regulations-Related Risk

19

Initiatives for Human Resource Development
through Revitalization of Corporate Culture
Let’s Take on Innovation

After serving as General Manager of theLife Science Research Laboratory at
Asahi Chemical Industry Co., Ltd. (nowAsahi Kasei Corp.), President and CEO
of Asahi Kasei Pharma Corporation andPresident and CEO of Asahi Kasei
Corp., he was appointed as Chairman of
the Japanese Foundation for Cancer
Research in June 2021. Since 2020, he
has served as an advisor to theCompany, supporting the development“Companies reach a turning point every 30 to 50 years. In order for a company to overcome a period ofchange, everyone must act with the awareness that they are responsible for innovation,” says Mr. Toshio
Asano, an advisor to the Company. What Mr. Asano reconfirmed in training scene for our employees wasthat each of the training participants recognized the need to revitalize the corporate culture. We spoke withhim about the training outline and his expectations for the future of our company.

Relationship with FREUND CORPORATION
During my time at Asahi Kasei Pharma Corporation, I had business contacts with
FREUND CORPORATION (hereinafter “the Company”,) which I thought was a very goodcompany with a high market share in a niche industry and a solid work ethic.
Several years ago, I had the opportunity to meet President Iwao Fusejima. I wasresonated with his word saying “We have been in business for 50 years and are now ata turning point. We want to change our corporate culture for the better so that both thecompany and our employees can continue to grow.”
Technology is an important business foundation for the Company as a manufacturer,
and the foundation is carried out by “people.” I accepted the position of advisor
because I found it rewarding to help revitalize a corporate culture based on “people” ata time of change in the Company.

Awareness of Challenges and Innovation
My training session which started with Executive Officers, is now expanding the target
to heads of each department. The Company’s corporate philosophy is “Develop the
Future through Creativity®.” This philosophy advocates the need for innovation. We havebeen constantly innovating and growing until now, but if we do not continue to do so,
we will never be able to pave the way for the future. In our training, we strongly ask thisquestion first.
In order to pave the way for the future... What I keep saying in my training is, “We caninnovate. However, in order to do so, each of you must be responsible for innovation.”
Innovation is to spread quality products and services far and wide. To achieve this, alldivisions, including Research and Development, Manufacturing, Sales, andof human resource through employee
training and other programs.

Mr. Toshio Asano
Advisor to
FREUND CORPORATION

Administrative Division, must act in unison. That is why I use the term, “taking on
innovation.” I believe that the accumulation of innovation by each individual creates
innovation in the company, which in turn leads to the company’s growth.
During the training, all participants are asked to submit a paper on the theme, “thecompany’s issues and my future.” Then, after one year, we follow up on it. Rather thanending with a single training session, we incorporate a process for participants to checkfor themselves how they have solved the issues they have identified and whether they
have become a kind of person who can solve them.

A “Little Courage” and a “Benevolent Spirit”
The first step in taking on innovation at your respective positions and implementing it is
to “have a little courage” to voice your opinions to your subordinates, colleagues andbosses. I believe that is the type of personnel that the Company is looking for.
My motto is “benevolence.” In Japanese, the character for “benevolence” is written as“two people.” Human cannot do anything alone. At the same time, you are not alone
when you are really in trouble. There will be someone to help you. Innovation requires
cooperation with colleagues with a “benevolent spirit.”
We are a company with tremendous potential. Through the training, we found that wehave strengths as a solution-oriented company with a strong client focus. And all
employees, including the President, share a common awareness of the issues. I am
confident that we will continue to grow sustainably as a company that “Develops the
Future through Creativity®” by each of us acting on our own innovations and“contributing to the future of medicine and good health of people around the world,” asstated in our management vision.

FREUND REPORT 2022

20

Sustainable Management Foundation

Diversity Initiatives
Toward “ONE FREUND” —Current Status of D&I Activities—
Diversity in our D&I (Diversity & Inclusion) activities includes not only superficial attributes such as age, gender, race, religion, and taste and preferences, but also deeper
attributes such as individuality, talent, way of thinking and values. Furthermore, we aim to enhance our corporate value by growing and revitalizing our employees andorganization through “inclusion,” in which we tolerate and accept the inner diversity that is difficult to see on the surface, relate to each other as equals, recognize each
person's differences and make full use of 100% of each person's abilities. Here we will introduce the current status of our D&I activities.

Start of D&I Activities
Initially, we intended to reform the way women work, but an External Audit & Supervisory
Board Member suggested that we should consider our activities from a broader
perspective, and in March 2020, D&I activities were launched with a focus on companywide work style reforms and educational activities to promote individual awareness andbehavioral change.
The start of the D&I activities was not smooth, as the purpose and policy of “why D&I
activities are necessary in our company” were not well recognized or understood. In
addition, during the COVID-19 pandemic, the inability of promotion members from
Tokyo, Osaka and Hamamatsu to get together for face-to-face discussions caused alack of impetus and other major obstacles to the activities.

Changes in D&I Activities and Future Initiatives
At the end of 2021, the promotion members finally got together and held a workshop to
fully discuss and understand the current status and issues of the entire organization,and to formulate a vision and medium- to long-term goals.
A consensus was reached after reporting to management that D&I activities will bepromoted in phases from 2022 onward.
In the first phase, we will work to create the foundation for diversity with the vision ofan “organization that can speak up and think.” In this way, we aim to create a seamlessorganization in which each individual can proactively voice his or her opinion andunderstand and respect each other.
Although our D&I activities have just begun, we will continue to promote awareness

D&I VISION (1 Phase)stMedium- to long-term goals01

We will create an organization with a sense of unity thattranscends the boundaries of the mind and departments

Organization that canspeak up and think02

We will create a culture that fosters a spirit ofchallenge and embraces motivation

We aim to create a seamless organization
where each individual has
an opinion and can understand andrespect each other.

03

We will create a friendly environment full ofenergy and careand culture reforms in phases to allow diversity to flourish. In this way, we aim to realize
a true “ONE FREUND” and create new corporate value through the sustained growth of
our Group.

D&I promotion members

Tokyo Head OfficeOsaka OfficeHamamatsu Plant/Hamamatsu Technology
Development Research Center

21Company and Stock Information

Company NameFREUND CORPORATION

Established

April 22, 1964

Capital Stock¥1,035,600,000

Employees(As of February 28, 2022)

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

1,230

7.35

Head Office Location

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

MUFG Bank, Ltd.

836

4.99

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

Sumitomo Mitsui Banking Corporation

744

4.44

18,400Stock Listing

TSE Standard (securities code 6312)

PERSHING-DIV. OF DLJ SECS.CORP.

715

4.27

(thousand shares)

Fiscal Year

From March 1 to the last day of
February next year

Okawara Mfg. Co., Ltd.

673

4.02

Held in May of every year

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

620

3.71

Freund Employee Shareholding Circle

411

2.46

The Shizuoka Bank, Ltd.

368

2.20

360

2.15

Annual General
Shareholders’ Meeting
Shareholder Registry
Administrator

Mitsubishi UFJ Trust and Banking Corporation

Total Number of
Shares Issued:

18,400,000 shares

Meiji Yasuda Life Insurance Company

Total Number of
Shareholders

15,586The Company has 1,655,000 shares (9.00%) of treasury shares.
Shareholding percentage stakes are calculated after excluding 1,655,000 shares oftreasury shares.

Total sharesissued:No. of shares held
(thousand shares)

Percentage
(%)

3,304

17.95

299

1.63

3,063

16.65

Financial Institutions
Financial Instruments Firms
Other Corporations
Foreign Corporations

1,351

7.34

Individuals, Others

10,383

56.43

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
NOTE:

200,000

50

March 1,
2019

March 2,2020

Share prices and trading volumes prior to
the stock split shown in the chart havebeen adjusted to reflect the stock split.
FREUND CORPORATION and TOPIX
prices have been adjusted to show relative
valuations on March 1, 2019 as 100.

March 1,
2021

FREUND REPORT 2022

22

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

Corporate Planning Department, Corporate Planning Division
Phone: +81-3-6890-0767

E-mail: ir@freund.co.jp

Fax: +81-3-6890-0870

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