FREUND CORPORATIONFREUND Report 2021
Fiscal Year Ended February 28 2021
(From March 1, 2020 to February 28, 2021)

Contents

ProfileProfile1

Milestones of FREUND Group

2

Manufacturing Process for Pharmaceutical
Products and FREUND Group's Business
Scope
3
Overview of Business Segments andRelationship with Society4

Message from the President and CEO

5

Close-Up
Global Development of
FREUND Group

10

10-Year Financial Data of
FREUND Group

15

Analysis of Business Results

16

Corporate Governance

17

Company and Stock Information

22

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 5 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 segment activities
aimed at contributing to better medical care and health for people worldwide in management vision.

Corporate
Philosophy

Develop the Future throughCreativity®

Management
VisionContributing to better medical care and health for people worldwide, and creating
and fostering technologies for fulfilling lives and food safety.

Values which the FREUND Group holds precious

Disclaimer

Forward looking
statementThis Report contains forward looking plans, estimates,
strategies, financial results and other statements.
Such information is based on the most accurate
information available at the time of production of thisReport. Therefore, the Company's actual financial
results may diverge largely from statements
represented in this Report due to the influence ofvarious risks and uncertainties. Influencing factors
include the economic environment, competitive
pressures, related regulations and laws, changes in
product development conditions and fluctuations inforeign exchange 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, 2021 (from March 1, 2020 to February
28, 2021). However, new information available after March 2021
has also been included in this Report.

Creating
special value
Aiming to be No.1
in each businesssegment

NumberONE

FREUND

ONE
Only

ONE

Be

ONE

Putting clients' views 1st

Networking

Aiming to be the Only ONE
for customers and society

Unite to a
"Be One" group1

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

1964-1969

Founded amidst high economic growth period

Chiyoda-ku, Tokyo

1969

Developed and launched testing machine"FM-2 model" and manufacturing machine"FM-5 model" for automatedfilm coating machine

Chemicals

Developed and launched film coating liquidfor pharmaceuticals “FC-101” and “EC-101”

Machinery

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

1971

Machinery

1978

Chemicals

Developed and launched automatedsugar and film coating machine"HICOATER"

1992 Management Established the “Hamamatsu facility /Developed and launched foodpreservatives "Antimold-102"

1996 Management Registered shares on the Over-The-Counter(¥ million)

2014

Technology Development Research Center”
in Hamamatsu City, Shizuoka PrefectureMarket with the Japan Securities Dealers
Association (later JASDAQ)

Urawa City, Saitama Prefecture(currently Saitama City)(merged in March 2014)

Chemicals

2020-

Expanded target markets to the world through globalization

1980 Management Established Freund Kasei Corporation in1987

To the future

1990-2019

Grew dramatically in line with economic growth of Japan

1964 Management Established in Kanda Tsukasamachi,
Machinery

Growth period

1970-1989

Developed and launched multiple function
type food preservatives "Negamold"

20,0001997

Management

Acquired VECTOR CORPORATION (U.S.)(currently FREUND-VECTOR CORPORATION)

2008

Machinery

Developed and launched new tablet
coating machine "HICOATER FZ"

2010

Management

Acquired Turbo Corporation(currently FREUND-TURBO CORPORATION)Management

Established FREUND PHARMATEC LTD.
in Ireland (transferred business to Sigmoid
Pharma Ltd. (Ireland) in February 2016)

Machinery

Launched tablet printing machine "TABREX"

2013

Fly to the future with creativity

2020 Management Acquired Cos.Mec S.r.l. (Italy)

Management

Celebrated the 50th anniversary since
FREUND’s founding

Machinery

Developed continuous granulation anddrying system "Granuformer concept model"

2015

Chemicals

Launched pharmaceutical excipients fororally disintegrating tablets“NONPAREIL-105 (150)”

2016

Machinery

Developed and launched tablet
imprinting machine "TABREX Rev."2018

Machinery

Developed and launched continuous
granulation and drying system "Granuformer"

2019

Management

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

2021 Management Establishes joint venturecompany Freund-Chineway
Pharmaceutical Technology
Center Co., Ltd.
(China) (planned)(¥ million)

2,400

15,0001,800

Net sales and operating profit trends
Net sales (LHS)

Consolidated financial results

Operating profit (RHS)

Non-consolidated financial results* Fiscal year ended at the end of February each year

21

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 2021

2

Our main products are machinery equipment and chemicals 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 and chemicals businesses inpharmaceutical related business. Furthermore, in November 2020, the Group's product lineup expanded
significantly with Italy's Cos.Mec joining the Group, which material handling equipment that is used in the
ancillary processes for pharmaceutical products.

Manufacturing Process for
Pharmaceutical Products
and FREUND Group's
Business ScopeContinuous production

Manufacturing processes inwhich machinery equipment of
FREUND Group is used

Granulating/Coating
GRANUMEIST

Granuformer

FLOW COATER

Granurex

SPIR-A-FLOW

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

FREUNDCORPORATIONFREUNDVECTOR

Please see here for
product details.

Turbo Mill

Weighing

Bag discharge
stationTurbo Screener

Pulverizing

Palletized bin
mixer

ROLLER COMPACTORClassifying

Mixing/Kneading

FLOW DRYER

Granulating

Millmeist

Drying/
Grading

Lifter for
granulating

HSM

Pneumatictransport system

Lifter for drums

FBD

Reversing machine

AQUA COATER

Tableting

HICOATER FZ

Inspection/
Printing

Coating

Lifter for tableting

Lifter for coating

TABREX Rev.

Packaging

Lifter for tablets

Cos.Mec
Vibration siever
Bag lifter

For powder and granules

For tablets

BINs (containers)

3

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

MachineryBusiness
Segment

Chemicals
Business
Segment

Manufacture and sales of
granulating and coating
equipment forpharmaceutical, food,cosmetic and other products

Manufacture and sales ofpharmaceutical excipients,
food preservatives and healthfoods

Characteristics

Characteristics• ‌Granulating/coating equipment
boasting the top share of the world
market as well as the Japanesemarket• ‌Accelerating deployment ofbusinesses 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 ofequipment for other industrial
business fields by integrating
granulating/coating andpulverizing/classifying
technologies• ‌Pharmaceutical excipients
manufactured at GMP* certified
facilities• ‌Food preservatives used topreserve 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

Provision of Values to Society

Improving the quality of medicalcare by increasing the value additionof pharmaceutical products

Better taste and health; supporting
enriched lives of people

Improving drug efficacy
through granulating andcoating 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 the value of pharmaceutical products.
At the same time, FREUND has conductedmanufacturing that enables more people toaccess high value-added pharmaceuticalproducts, and the Group strives to improve thequality of medical care worldwide.

Pursuing fresh taste, safety andsecurity

Continuous Granulation and Drying
System"Granuformer"

Along with the increased concern for health, demand forsupplements and health foods is on the rise. FREUND iscontributing to healthy lives together with health support
manufacturers by using advanced drug formulation
technologies to promote the function of effective foodingredients and enable easier ingestion.

Food Coating Agent"Chitocoat"

Pharmaceutical Excipients"Granutol F (Fine) "Provision of Values to Society

Taking on challenges in newtechnological fields to support enrichedand convenient lives

Preventing medical mistakes
caused by dispensing errors
In the dispensing field, there are incidents ofmedical mistakes due to patients taking thewrong drugs because they are similar inappearance and name. FREUND prints on drugs
to allow for easy identification and contributes toprevention of medical mistakes worldwide. To doso, FREUND developed the industry’s first safe
drug ingestion concept that involves a newgeneration tablet imprinting/inspection machineand specialized inks.

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, withthe remaining portion being excipients that areused to make drugs into sizes that are easy to
swallow and for coating of the surface to mask
the bitter taste. FREUND is strengthening thedevelopment of orally disintegrating tablet (ODT)
related products which use a unique drug
formulation technology and allows for easieringestion of drugs by assisting the swallowing
process.

Food preservatives are small pouches placed inside ofpackaging to protect the flavor and ensure the safety
and security of freshly cooked pastries and breads,
Japanese confectionaries and other products. FREUND
develops food quality prolonging agents based on its“ethanol evaporation” technology which preservesbacteriostatic effects in order to deliver fresh, tasty
products as well as safety and security.

Creating new markets for the next
generation using FREUND's uniquepulverizing technologies
Tablet Imprinting Machine"TABREX Rev."The FREUND Group’s powder pulverization technology
is used to create products in the cosmetic, food andother industries that support peoples’ daily lives. For
example, this technology is used in make up foundations
which many women wear daily. The fine powders
manufactured by the Group’s equipment help to produce“healthy looking and clean skin.”High Viscosity Wet Grinding Mill andSeparator"AQUA TURBO TZ"

FREUND REPORT 2021

4

Message from the President and CEO“Develop the Future through Creativity ®”The FREUND Group is pursuing the goal of“contributing to better medical care and healthfor people worldwide” based on its corporate
value of “ONE FREUND.”
In the fiscal year ended February 28, 2021 (hereinafter “FY02/21”,) the first fiscal year of the 8th
Medium-Term Management Plan, which aims to build a new business foundation for sustainablegrowth by “putting clients’ views 1st,” economic activities were greatly affected by the spread of the
COVID-19 infection on a global scale. Under the environment, we asked Iwao Fusejima, President
and CEO, who says “I was reminded of the fact that the FREUND Group's businesses are deeply
involved in medical care and health of people,” on the outline of the Group’s business activities andfuture initiatives.

ONE FREUND
Iwao Fusejima
President and CEO

5

FY02/21:
Overview of Business Activities
Japan's macro economy suffered an unprecedented
slump from the spring of 2020 due to the COVID-19
pandemic. Economic activities resumed after the fulltermination of the declaration of a state of emergency inMay, and the economy showed a gradual recovery
trend. However, the third wave arrived from autumn
onward, slowing the pace of economic recovery, andthe outlook became uncertain.
The Japanese pharmaceutical industry is underpressure to respond to various issues, including
strengthening of medical cost control measures such as
drug price revisions and promotion of generic drug use,rising R&D expenses, and increasing development
risks. Growth in generic drugs market is expected toslow down as the government-implemented measures
to promote dissemination have run their course.
The global economy was heading toward recovery,
albeit moderately, as countries sought to maintaineconomic activities and curb the spread of infections
after the COVID-19 pandemic significantly curtailed theireconomic activities. However, the economic recovery is
becoming increasingly uncertain due to the resurgenceof infections caused by the outbreak of variant viruses
and other factors.

Business Activities in Pharmaceutical
Product Field
Overview of Machinery BusinessIn addition to the COVID-19 pandemic, the Japanesemarket was in a challenging environment of the
reduction in drug prices, but we succeeded instrengthening sales activities from the clients’viewpoints, enabling us to capture pharmaceuticalcompanies’ capital investment demand and receive
orders. Furthermore, the Customer Division, which was

Operating Performances by Business Segment
Machinery Business

Chemicals Business

Net Sales by Group Company

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

14.5%

FREUND
FREUND-TURBO

FREUND-VECTOR
Cos.Mec

1,866

Sales
Breakdown

4,132

7,075

85.5%
Net Sales by Product Field andSegment Profit Margin

FY02/19

1,522

1,422

3,994

3,580

6,254

6,838

FY02/20

Orders Received

Industrial Product Field

Order Backlog

16.8%

33.8%
Net Sales by Product Field andSegment Profit Margin
Pharmaceutical Excipients
Food Preservatives(¥ million)

1,760

10,160

9,357

6.0%

2.8%

FY02/19

1,623(¥ million)

FY02/20

12,386

11,83910,2279.7%
9,547

FY02/21

Health Foods

693
2,151

6,615
5,428

FY02/19

49.4%

Sales
Breakdown

17.0%
2,207

Food Preservatives

Health Foods

FY02/21

Orders Received and Order Backlog

Pharmaceutical Product Field
Segment Profit Margin(¥ million)

Pharmaceutical Excipients

4,695

FY02/20

newly established in September 2019, worked closelywith the sales/marketing department and the service
technology department to achieve delivery on time evenin the COVID-19 pandemic, achieving in financial resultsin line with the forecasts.
In the overseas markets, sales activities weresignificantly affected by the COVID-19 pandemic in
India, Europe and the U.S., but operating profit
increased due to the U.S. FREUND-VECTOR receiving
subsidies from the U.S. government as a

3,195
FY02/21

FY02/19

Segment Profit Margin(¥ million)

13.8%
704

938

2,079

9.8%
1,889

2,869

2,765

FY02/20

FY02/21countermeasure against COVID-19 and group-wide
efforts to reduce expenses. In China, where economic
activities resumed at the early stage, and the sales
efforts by FREUND and 2 local sales agents led to thelargest ever net sales.

Overview of Chemicals Business

In Japan, some products were affected by the client
manufacturers’ production adjustments and shifts in

FREUND REPORT 2021

6

delivery timing to the fiscal year ending February 2022
(hereinafter "FY02/22"). However, in the overseas
market, exports increased in response to the expansionof demand in China and the transfer of production to
overseas plants by domestic pharmaceuticalcompanies, resulting in a higher-than-expected figures.
In addition, new orders have been piling up in theJapanese market, and we are steadily strengthening oursales base from FY02/22 onward.

Business Activities in NonPharmaceutical Product Field
In the Machinery Business Segment, the chemicalindustry and battery industry, which are our major client
markets, were affected by the COVID-19 pandemic.
However, orders from these industries have begun topick up in anticipation of the end of the COVID-19
pandemic, and earnings are expected to recover from
FY02/22 onward.
In the Chemicals Business Segment, sales related toinbound demand, and for department stores and themeparks, etc. declined, and the food preservatives
business was significantly affected by the COVID-19
pandemic.

The 8th Medium-Term Management Plan (FY02/21-FY02/23)

Basic Strategy

Seven Management Goals

Respond to clients' needs withtechnological expertise andcreate a management structure to
realize sustained growth in profits

Net sales

FY02/23

Numerical
Targets¥

Operatingprofit20.1 ¥1.4
billionbillion1

Group collaboration

5

Execution of growth strategy

2

Putting clients' views 1st

6

Promotion of business process
reengineering andwork style reforms

3

Emphasis on innovation

7

Emphasis on compliance andcorporate governance4

Global management

Review of the First Year of the 8th
Medium-Term Management Planclients’ needs on site captured by the sales department,
are gradually being strengthened.
Especially in Japan, where productive working
population is declining, demand for automation andlabor saving is increasing. Cost reduction for ongoing
reduction in drug prices is also critical. In response tothese potential clients’ needs, we have begun to work
toward stable operations for stable supply ofpharmaceutical products by making full use ofcontinuous production technologies and building asensor based production control system.

Business Foundation Reform by
Putting Clients’ Views 1st

Initiatives to Promote Global
Deployment

With the launch of the Customer Division and theintegration of technology, machinery sales, excipientsales and overseas sales departments from “puttingclients' views 1st,” the awareness of “everyone is asalesperson” has increased. Efforts, such as that thetechnology department immediately responding to

In November 2020, we made Cos.Mec S.r.l. (Head
Office: Milan, Italy, hereafter "Cos.Mec"), an Italianmanufacturer of manufacturing machinery equipment
for pharmaceutical products, etc., a wholly owned
subsidiary. In December 2020, we entered into a joint
venture with a local sales agent in China to establish atechnology development research center called FreundChineway Pharmaceutical Technology Center Co., Ltd.
(Head Office: Shanghai, China, hereinafter the"Shanghai FC Center"). The Shanghai FC Center isscheduled to be established in FY02/22, which will
create a five-pillar-structure that includes Japan(FREUND), the U.S. (FREUND-VECTOR), Europe (Cos.
Mec), India (Parle Freund) and China (the Shanghai FC
Center), and will enhance the coverage of the entire
world including emerging countries.
Please refer to page 10 for the Group's global development map,and pages 10-14 for the overview of global development.

I believe that the 3 key points of overseas businesses
are as follows. First to "have good products that meetthe demand of each region, then localize services to thegreatest extent possible, including maintenance, andfinally have strong local sales agents in each country."
From these perspectives, we intend to accelerate theoptimization of the Group’s business foundation.

7

product-based divisional structure to the function-based
divisional structure, which handles both machinery andchemicals products by function, the integration of theMachinery Business Segment and the Chemicals
Business Segment has begun to progress.
Under the executive officer system, in addition toappointing general managers as executive officers, thepresidents of major subsidiaries were appointed as
executive officers of FREUND to strengthen its
consolidated management.
In terms of administration, we have been working on
workstyle reforms, including remote works, while
launching a project related to business process
innovation (BPI) and the restructuring of our humanresources system. In FY02/22, the completion of the BPI
project and the introduction of a new ERP system andthe human resources system will be critical.
Furthermore, we renewed our management structure

We have established a global five-pillar-structure, andI believe that we have laid the groundwork for achieving
our management vision. Going forward, we will enter aphase that embodies our global management.
Regardless of pharmaceutical product ornonpharmaceutical product fields, our Group will
provide products that contribute to better medical care,health, fulfilling lives and food safety for people
worldwide, ensure that we are promoting businesses
that can contribute to the global society, and further
strengthen the development of global human resources.

Progress of Measures to Strengthen
Management Foundation
In September 2019, we introduced a new corporate
structure and an executive officer system, marking one
and half years since then. With the change from theat the start of FY02/22. First, we invited a person withmanagement experiences as an outside director. In
addition, we appointed an internal director, who joined
FREUND as a new graduate and has worked with us
since then, to help younger employees imagine their
future career paths. We have also invited a lawyer who
is a legal expert as an external audit & supervisoryboard member.
As stated in our management vision, our mission is to"contribute to better medical care and health for people
worldwide" through businesses. To fulfill the
responsibility, we will continue to strengthen our various
management foundations, disseminate our corporate
value of "ONE FREUND" globally, and work to create agroup in which employees around the world with diverse
knowledge and experience can thrive on all frontlines.

FY02/22: Overview of Consolidated Financial Forecasts/Forecasts by Business Segment
Consolidated Financial
Forecasts

FY02/21(Actual)

FY02/22(Forecasts)(¥ million)

Net sales

Financial Forecasts by
Business Segment

YoY Changes

FY02/21(Actual)%

FY02/22(Forecasts)

YoY Changes(¥ million)%

16,76518,500+1,735+10.3

Consolidated net sales

16,76518,500+1,735+10.3

Operating profit

1,147

1,100

(47)

(4.2)

Machinery Business

11,171

13,100+1,929+17.3

Ordinary profit

1,344

1,130

(214)

(16.0)

Chemicals Business

5,593

5,400

(193)

(3.5)

995

790

(205)

(20.7)

1,147

1,100

(47)

(4.2)

59.47

47.18

(12.29)(20.7)

Machinery Business

1,084

—

—

—

Capital investment

637

—

—

—

Chemicals Business

546

—

—

—

Depreciation

414

—

—

—

Adjustments

(482)

—

—

—

R&D expenses

526

—

—

—

105.98105.00——

Profit attributable to owners of parent
EPS (¥)

Segment profit

Exchange rate (¥/US$)FREUND REPORT 2021

8

To Our Stakeholders
With an eye on the future, we recognize that what should beprotected as the core are the technologies and businesses in thepharmaceutical product field that are essential to the society, andthat pharmaceutical companies which are responsible for thetechnologies and businesses are needed by the entire world. In
FY02/21, in addition to the major pharmaceutical markets in
Europe, the U. S., and India, we secured a network and productgroups accessible to the pharmaceutical emerging regions such as
China, Southeast Asia, and Africa.
Now that we have secured the business foundation for a wider
range of global development, we believe that the key is to“contribute to better medical care and health for people worldwide
and creating and fostering technologies for fulfilling lives and foodsafety,” as in our management vision. The entire Group will work
together to promote the realization of these values, which are now
important under the COVID-19 pandemic environment, and aim fora true global management.
We will continue our endeavors in establishing a foundation torealize the next generation of growth by fostering the value of“ONE FREUND,” and ask for the continued support of all our
stakeholders.

9Close-Up Global Development of FREUND GroupRegarding
Our Global
Five-PillarStructure

According to IQVIA Institute for Human Data Science Forecasts (May 2021), a major global provider in medical information services, the world pharmaceuticalmarket is expected to exceed $1.6 trillion by 2025, and CAGR (5-year) is expected to be 3 to 6%. The growth during this period is expected to be driven by the
U.S., and pharmaceutical emerging markets centered on China.
The U.S., the 5 European countries (Germany, France, Italy, the U.K., and Spain), which are pharmaceutical developed countries, and Japan have been the top
3 players in pharmaceutical spending. In the 5 European countries, Germany, the U.K., and Italy are expected to maintain growth rates on a par with those of
the global market toward 2025.
In the pharmaceutical emerging markets, the Chinese market has grown to dominate. It has already surpassed Japan and is next to the 5 European
countries. In terms of the growth rate through 2025, a significant growth is expected in Brazil, India, Turkey, and other countries.
As of May 2021, the FREUND Group has established business facilities in Japan, the U.S., India, and Italy. This will add China within this fiscal year, bringing
the total to five-pillar-structure. We believe that the establishment of a structure that allows us to access the pharmaceutical developed markets, which areimportant in terms of market size, and the pharmaceutical emerging markets, which are expected to grow significantly in the future, has laid the foundation for
full-scale global development.

FREUND Group's
Global Five-Pillar-Structure

FREUND CORPORATION

Cos.Mec S.r.l.
Joined the Group in 2020

FREUND-VECTORCORPORATION
Parle Freund Machinery
Private Limited

Joined the Group in 1997

Established joint venture company in 2019

Evolving Regions
FREUND
Cos.Mec

FREUND-VECTOR

Freund-Chineway
Pharmaceutical
Technology Center Co., Ltd.
Plans to open Shanghai FC Center during FY02/22

FREUND REPORT 2021

10

Close-Up Global Development of FREUND GroupIn addition to Japan, the U.S. and India, we introduce Cos.Mec, our fourth pillar, and the Shanghai FC
Center, our fifth pillar, which will form our global five-pillar-structure.

Global Fourth Pillar: Cos.Mec in Italy
Cos.Mec, which joined the Group in November 2020, is a medium-sized pharmaceuticalmachinery manufacturer established in 1991, and is headquartered in the suburbs ofMilan, where many machinery manufacturers are located. Cos.Mec has grown into a
specialized manufacturer of transfer and process equipment that handles the incidental
processes of drug formulations, such as transferring raw materials and intermediatematerials, mixing, and storing granules, which are final products. About a decade ago,
Cos.Mec has also entered machinery equipment for granulating and drying, in which
we are involved.
In Europe, there are major global drug formulation machinery manufacturers such as
Glatt and GEA. However, Cos.Mec has pioneered its own market with a strategy ofputting Italian design on products for ancillary processes that connect core processes
and selling them outside Italy and outside Europe.
In FY12/20, the net sales ratio outside Europe was 61%, of which Latin America was
35% (Mexico, Colombia, etc.), Asia was 13% (Bangladesh, etc.), the Middle East was
6% (Saudi Arabia, UAE, etc.), Africa was 7 % (Egypt, etc.), and the businessdevelopment in emerging pharmaceutical regions is Cos.Mec’s mainstay. Its clients arealso second largest manufacturers after major global pharmaceutical companies.
In the developing regions, where populations are expanding, we believe that apotential market related to lifestyle-related diseases is extremely large. As these regions
eventually age, the demand for oral solid dosages is expected to increase in response tovarious diseases caused by the westernization of eating habits. Amidst this trend, Cos.
Mec, which understands the entire drug formulation process and can handle inexpensive
manufacturing, can be said to have a great significance in joining the Group.
With Cos.Mec joining the Group, our Group's evolving regions and products have
expanded largely. Going forward, we will optimize the Group's business foundation fromthe perspectives of providing better products that are suitable for each market,
responding to regional needs for services including maintenance, and cultivating highquality local agents.

Overview of Cos.Mec
Company Name

Cos.Mec S.r.l.

Head Office

Via Aldo Moro, 17/19, 20037, Paderno Dugnano, Milan,
Italy

Representative

Angelo LamannaBusiness
Summary

Manufacturing and sales of manufacturing machinery
equipment for pharmaceutical and other products
Transfer and process equipment

Major
Pharmaceutical
Manufacturing
Machinery
Equipment

Material handling system
Mainly containers, vibrating sieves, air transfer equipment,
cone mill pulverizers, container/drum blenders, lifters,
washing equipment, etc.

Granulating machinery equipment

Granulation system
Fluid bed granulating and drying equipment, stirring andgranulating equipment

Major
Pharmaceutical
Client Markets

Italy, Spain, Russia, Mexico, Colombia, Bangladesh,
Saudi Arabia, UAE, Egypt, etc.

Capital Stock

EUR80,000 (¥9.7 million)

Established

1991

11

External view of Cos.Mec's head office and manufacturing plant

Cos.Mec's Business Performance and Financial Position
Unit: EUR1,000 (¥ million)
for the Past 3 Years 
FY12/17

FY12/18

FY12/19

Net assets

1,128
(138)

1,664
(203)

1,927
(236)

Total assets

7,894
(966)

9,499
(1,163)

11,031(1,350)Net sales

10,080(1,234)9,130(1,118)10,016(1,226)

Operatingprofit

541
(66)

641
(78)

634
(77)

Ordinary profit

526
(64)

933
(114)

689
(84)

Profit for the
year

349
(42)

736
(90)

492
(60)

(NOTE) Converted at EUR1=JPY122.45 (as of November 4, 2020)

Pharmaceutical manufacturing process covered by Cos.Mec

Weighing

Lifter for
granulating

Pulverizing

Classifying

Lifter for
drums

Mixing/Kneading

Granulating

Pneumatictransport system

Processes covered by products of FREUND, FREUND-VECTOR, and FREUND-TURBO

ReversingmachineDrying/
Grading

Tableting

Lifter fortabletingCoating

Lifter forcoating

Inspection/
Printing

Packaging

Lifter fortablets

Cos.Mec's products

FREUND REPORT 2021

12

Close-Up Global Development of FREUND Group
Message from Cos.Mec Management

As a “global partner in solid dosages,” we have been providing machinery and plant designing solutions topharmaceutical, chemical and food manufacturers inside and outside Italy for 30 years in compliance with pharmaceuticalmanufacturing guidelines of each country. We work closely with our clients to provide not only comprehensive but also
customized solutions for transferring and processing processes of powders and granules to meet their various
manufacturing needs.
Our missions are as follows:

Angelo Lamanna

1

Design and engineering in Italy (Made in Italy)

5

Efficient pre-and post-sales and local support in themain world markets

2Compliance with international regulations andprocedures

6

Quality materials

3

Quality, effectiveness, and safety

7High level of process automation

4

Excellent value for money

8

Simple use

Founder, Managing Director

On November 5, 2020, Cos.Mec transferred its entire stake to FREUND CORPORATION. As a member of the FREUND
Group, Cos.Mec has become a part of a multinational company with operations in Japan, the U.S., Italy and India.
Currently, we have begun activities to improve our corporate values in line with the integrated strategies of the FREUND
Group in terms of both technologies and sales.
Please visit our head office and plant in the suburbs of Milan, Italy. We will be waiting for you.

13

Global Fifth Pillar: Shanghai FC Center
Although major global drug formulation machinery manufacturers are entering the
Chinese market, which is a huge emerging market for pharmaceutical products, we
see this as a market in which we can demonstrate the Group's advantage, since
China has a high confidence in Japanese quality. In order to strengthen our productdevelopment support of Chinese pharmaceutical companies and translate ouradvantages into business opportunities, we plan to open the Shanghai FC Center,our technology development research center, during FY02/22.
Under the pharmaceutical regulatory reform by the Chinese government thatbegan in 2015, manufacturing processes based on GMP (Good Manufacturing
Practice) and highly functional additives have become essential elements. In thistrend, the center will raise awareness of our products by collectively testing ourmachinery and excipient products as a research facility that handles both ourmachinery and pharmaceutical excipients in China.

Overview of Shanghai FC Center
Company Name

Freund-Chineway Pharmaceutical Technology Center Co., Ltd(Chinese name: 富仁德昌 制 技 （上海）有限公司)

Head Office

Shanghai, People's Republic of China

Investment Ratio

Chineway 51%, FREUND 49%

Capital Stock

RMB50 million

Business Summary

Drug formulation technology services for Chinese
pharmaceutical manufacturers

Scheduled Date toOpen the ResearchCenterDuring FY02/22

Message from Shanghai FC Center Management

Sherry Fang
Managing Director of Shanghai FC Center,
Chairman of Shanghai Chineway
Pharmaceutical Technology Co, Ltd.

I am delighted to have signed the Joint Venture Agreement for the Shanghai FC Center. Shanghai Chineway
Pharmaceutical Technology Co, Ltd. (hereinafter "Chineway ") is one of the leading distributors of pharmaceutical
excipients in China, formed in 2000. With more than 20 years of experience in developing pharmaceutical businesses in
China and customer base of more than one thousand customers, Chineway is expanding its business in pharmaceuticalequipment, API and technology transfer, especially in solid dosages. With the vision to be a “Total Solution Provider” to the
China pharmaceutical industry, Chineway has been seeking for long-term partners globally to develop businesses in
China.
FREUND has a business model that integrates "Pen and Ink" and "Hardware and Software” to provide services combining
machinery, excipients, as well as drug formulation technologies, which is a perfect match with Chineway’s vision ofproviding total solutions with pharmaceutical industry in China.
Therefore, after having served as a distributor for FREUND excipients for a few years, Chineway embarked a new journey
to form the JV with FREUND, and to further develop and expand the business scope to pharmaceutical equipment andtechnology transfer for the pharmaceutical customers in China.
China is the second largest pharmaceutical market in the world. Although the market is large and growing, competitions
are very intensive. The Shanghai FC Center will strive for winning in the Chinese market with emphasis on advanced
technologies, premium qualities, and the putting clients’ view first principle.

FREUND REPORT 2021

14

10-Year Financial Data of FREUND Group

FREUND CORPORATION and Consolidated Subsidiaries
Ended February 2012 to February 2021(¥ million)

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

Net sales

15,236

16,396

17,616

17,42419,027

21,164

Cost of sales

10,624

11,313

12,377

11,97812,921

14,343

Selling, general and administrative expenses

3,546

3,612

3,952

4,295

4,759

4,779

Operating profit

1,065

1,470

1,286

1,150

1,346

2,041

FY02/19

FY02/20

FY02/21

19,801

18,408

16,772

16,765

12,985

12,22011,344

11,126

4,845

4,964

4,870

4,491

1,971

1,223

558

1,147

FY02/18

For the year

608

765

787

695

961

1,064

1,477

843

381

995

EBITDA1

1,351

1,717

1,610

1,478

1,687

2,396

2,329

1,575

951

1,574

Orders received

12,20012,117

12,804

14,34015,10918,286

12,12912,574

11,006

12,386

Order backlog at end of period

6,148

5,809

5,551

6,780

7,328

8,790

5,906

5,555

4,897

6,615

Profit attributable to owners of parent

Capital investment

218

222

477

545

266

564

524

627

951

637

Depreciation

264

232

303

308

321

338

344

344

386

414

R&D expenses

390

435

464

592

687

640

862

832

725

526

Cash flows from operating activities

1,219

740

1,227

822

290

3,605

594

435

(27)

2,280

Cash flows from investing activities

(154)

(332)

(423)

(240)

(432)

(351)

(493)

(566)

(852)

(1,726)

Cash flows from financing activities

(134)

(164)

(226)

(284)

(331)

(277)

(499)

(921)

(325)

(371)

Total assets

14,342

14,971

15,55017,277

17,206

19,101

19,125

17,46518,505

20,499Net assets

8,489

9,315

10,392

11,18011,52912,185

13,242

13,25013,243

13,884(Equity)

8,356

9,197

10,23910,987

11,52912,185

13,242

13,25013,243

13,884

Earnings per share (EPS, ¥)

35.30

44.38

45.69

40.36

55.74

61.72

85.69

50.15

22.79

59.47

Book value per share (BPS, ¥)484.56533.37593.76637.19668.57706.62767.91

791.34790.94829.21Dividend3 per share (DPS, ¥)

7.50

10.00

12.50

15.00

25.00

20.00

20.00

20.00

20.00

20.00

7.0

9.0

7.3

6.6

7.1

9.6

10.0

6.6

3.3

6.8

At end of period

Per share data 2

Major indicators
Operating margin (%)
Return on assets (ROA, %)

4.2

5.1

5.1

4.0

5.6

5.6

7.7

4.8

2.1

4.9

Return on equity (ROE, %)

7.5

8.7

8.1

6.6

8.5

9.0

11.6

6.4

2.9

7.3

Dividend payout ratio (%)

21.2

22.5

27.4

37.2

22.4

32.4

23.3

39.9

87.8

33.6

Equity ratio (%)

58.3

61.4

65.8

63.6

67.0

63.8

69.2

75.9

71.6

67.7

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).

15

Analysis of Business Results
Through the risk-diversification management, the FREUND Group has built a stable earnings structure that is not susceptible to market fluctuations, focusing
on the financial strategies to build a business portfolio that enables a sustainable growth. In the fiscal year ended February 2021 (hereinafter “FY 02/21”), themacro-economy was severely affected by the COVID-19 pandemic. However, in the first fiscal year of the 8th Medium-Term Management Plan (hereinafter “thePlan”), we evaluate that we almost achieved financial results that we had anticipated. With the pharmaceutical industry as our main clients, the financial results
were supported by the client base and brand value that has been built over many years, particularly in Japan.

Overview of Results of Operations
by Group Company
FREUND

Japan

Pharmaceutical and nonpharmaceutical product fields

The Machinery Business Segment strengthened theappeal of products and services based on“puttingclients’ views 1st,” one of the management goals of thePlan, and the businesses in Japan contributed
significantly to both net sales and profits. In addition, 2
local sales agent companies contributed to net sales
growth in the Chinese market.
In the Chemicals Business Segment, net sales andprofits declined due to the impact of production
adjustments by some pharmaceutical companies in thepharmaceutical excipient business, despite an increasein exports to China and Europe following the production
shift to overseas by the Japanese pharmaceuticalcompanies.
FREUND-TURBO

Japan

Non-pharmaceuticalproduct field

Net sales and profits declined mainly due to the impactof a decline in demand from chemical and industrial
equipment manufacturers in the 1H FY02/21. However,
FREUND-TURBO ‘s product lineup has been enhanced
as the brand recognition of strategic product of highspeed mixing/granulating machine "BALANCE GRAN"
has progressed. In FY02/22, FREUND-TURBO isworking to expand sales of these strengths.

FREUND-VECTORThe U.S.

Pharmaceuticalproduct field

Net sales decreased due to the significant impact of the
COVID-19 pandemic. Affected by the stronger dollar,
FREUND-VECTOR’s competitiveness declined on adollar basis and demand declined significantly in Brazil
and Latin America, which had been active for the past
several years. Profits rose due to cost reductions and acoronavirus countermeasure subsidy from the U.S.
government.
Cos.Mec

Italy

Pharmaceuticalproduct field

Cos.Mec joined the Group in November 2020. In
FY02/21, it showed a strong performance, although thecontribution was limited to the Q4.

Key Performance Indicators to Be
Emphasized in the Future
We believe that the key performance indicators to beemphasized in the future are net sales, operating profit,and order backlog at beginning of period of each groupcompany. For FREUND on a non-consolidated basiswith multiple business segments, net sales and grossprofit of the Machinery Business Segment and theChemicals Business Segment (pharmaceutical
excipients and food preservatives) are key indicators.
In addition, order backlog at beginning of period andthe order-taking activities in the 1H will be the key

foundation for the full-year results, we would like to aim
for leveling the results that tend to be biased in the 2H
to make them more stable.
Furthermore, based on our belief that developments
are the base of our net sales, we will focus on the new
product ratio within 3 years after launch. To this end, weare strengthening stage-management of new productdevelopments in every business segment.

Order Backlog at Beginning of Period ofGroup Companies(¥ million)

10,000

8,000

6,000

4,000

2,000

0
Beginningof
FY02/16

FREUND

Beginningof
FY02/17

Beginningof
FY02/18

FREUND-VECTOR

Beginningof
FY02/19

Beginningof
FY02/20

FREUND-TURBO

Beginningof
FY02/21Beginningof
FY02/22

Cos.Mec

FREUND REPORT 2021

16

CORPORATE GOVERNANCE

As of May 31, 2021

Honorary Chairman, Directors and Audit & Supervisory
Board Members
Honorary Chairman and Directors

Corporate Governance toSupport Sustained GrowthStarting from FY02/21, the FREUND Group has implemented its 8th
Medium-Term Management Plan based on its corporate philosophy of“Develop the Future through Creativity®.” Along with the implementation,
the Group fulfills its economic responsibility to secure an appropriate levelof profits through the provision of optimal products to client users throughfair and appropriate competitions. In addition, it fulfills its obligation to thesociety to act as a responsible group of companies.

Corporate Governance Structure (As of May 31, 2021)
General Shareholders' Meeting
Ryuji Nakatake

Masao Wakai

External Director

Managing Director

Yasutoyo Fusejima Iwao Fusejima
Honorary Chairman

President and CEO

Toshiaki Honda

Hisashi Tanaka

Director

External Director

Appointment/
Dismissal

Appointment/
Dismissal

Appointment/
Dismissal

Audit & Supervisory Board Members
Board ofDirectors’ Meeting
Internal Directors: 3

External Directors: 2

Audit/
Reporting

Audit andSupervisory
Board Members &the Board

ReportingExternal Audit & Supervisory
Board Members: 3(Full-time: 1)

Accounting
AuditorSupervision
Executive
Officers
Appointment/
Dismissal

Sayoko Izumoto

Sakae Hirano

Kazunari Hamada

External Audit &Supervisory Board
MemberFull-time Audit &Supervisory Board
MemberExternal Audit &Supervisory Board
MemberReportingAccounting
Audit

Important Management Matters to be Discussed
Operational Execution Reporting

Operational Execution Structure

17Reasons for Appointment of External Director andExternal Audit & Supervisory Board Member and Major
Activities in FY02/21
Ryuji Nakatake

Reappointed

Sakae Hirano

Current position

External Director

Full-time Audit & Supervisory Board Member

Ryuji Nakatake was appointed as external
director as he was deemed to have more thanadequate ability to oversee the management
based on his superior insight regarding
management in general.

Sakae Hirano was appointed as full-time audit &supervisory board member he was deemed tohave more than adequate ability to oversee themanagement based on his knowledge of financeand accounting as well as superior insight
regarding management in general.

He attended 11 out of 11 board of
directors’ meetings held in FY02/21

Hisashi Tanaka

He attended 11 out of 11 board of
directors’ meetings and 12 out of 12 audit &supervisory board members’ meetings
held in FY02/21.

Newly appointed

External Director
Takashi Tanaka was appointed as external
director as he was deemed to be able tocontribute to strengthening management
oversight and corporate governance by having
abundant experience and wide-ranging insight asa manager.

Sayoko Izumoto

Reappointed

External Audit & Supervisory Board Member
Sayoko Izumoto was appointed as external audit& supervisory board member as she was deemedto satisfy this role by leveraging on her longexperience as a certified public accountant andon her vast insight regarding finance andaccounting.
She attended 11 out of 11 board of
directors’ meetings and 12 out of 12 audit &supervisory board members’ meetings
held in FY02/21.

Kazunari Hamada

Message from Full-Time Audit & Supervisory Board Member

Newly appointed

External Audit & Supervisory Board Member
Kazunari Hamada was appointed as an external
audit & supervisory board member as he wasdeemed to satisfy this role having specialized
knowledge and experiences as an attorney froman objective standpoint as a legal expert.

Sakae Hirano
Full-Time Audit & Supervisory Board Member

Review of FY02/21
In FY02/21, we began enhancing the overseas business, promoting business process
innovation (BPI), and fundamentally revising our human resources system. And we took
the first step in line with the 8th Medium-Term Management Plan's management goals.
On the other hand, it was a year to prevent COVID-19 infection. Remote-work was
introduced in full-scale, and web conferencing has become commonplace both insideand outside the company. As an audit & supervisory board member, I have reaffirmed
the importance of auditing activities utilizing electronic information and remotecommunications, while placing importance on face-to-face relationships.

Future Outlook for FREUND GroupAs well as business, auditing activities need to be firmly adapted to globalization. The
audit & supervisory board is now composed of 3 instead of 4 members. All members,
including a full-time one, are external independent members, which is a highly
independent auditing system. In addition, the newly appointed audit & supervisory board
member, Mr. Hamada, is a legal expert who has been absent so far, and is particularlyfamiliar with the overseas activities of Japanese companies, and is the best humanresource for us to promote global expansion. As an accountant, Ms. Izumoto, who wasreappointed, is fully demonstrating her knowledge on international accounting and herabundant experiences as an external officer. As a full-time audit & supervisory board
member, I will make full use of my experiences in finance and overseas businessactivities.
In order to globalize, it is also necessary to deepen the coordination of 3-way auditing
with our Internal Audit Office and the auditing firm including its global network. We arecommitted to contributing to the sound development of our business activities globally,
while making the most of expertise in the 3-way auditing process.

FREUND REPORT 2021

18

CORPORATE GOVERNANCE
Message from
Newly Appointed Directors
and Audit & Supervisory
Board Member

As of May 31, 2021

On May 28, 2021, we renewed our directors and audit & supervisory board members structure. Under the new structure, we will strengthen governance, develop
human resources for leaders, and strengthen global business foundation. This section introduces Mr. Masao Wakai, who has been in charge of corporate planning as
an internal director and promoted to managing director, Mr. Toshiaki Honda, a newly appointed internal director, who is in charge of promoting businesses from user’spoint-of-view, and Mr. Hisashi Tanaka, a newly appointed external director, who has been in the pharmaceutical industry for many years and is also familiar with global
management, and Mr. Kazunari Hamada, a newly appointed external audit & supervisory board member, who is an attorney with global legal experiences.

Internal Directors

Masao Wakai

Toshiaki Honda

Managing Director

Director

For our Group, FY02/21 was the new start year in many ways, First, as the first year of the 8th
Medium-Term Management Plan, we newly set seven management goals for the next 3
years. Secondly, the new corporate structure with 7 divisions was established, and the headsof the divisions were appointed as executive officers. We organized a new management
meeting with 11 members, including 8 executive officers, President Fushijima, and 2
presidents of subsidiaries, to address issues and share information throughout the Group.
The financial results for FY02/21 were partially affected by the COVID-19 pandemic andnet sales were slightly below the plan. However, thanks to constant efforts by various
divisions and affiliates, operating profit and other profit items were able to exceed the plansignificantly.
In FY02/22, we will continue to work on seven management goals of the 8th MediumTerm Management Plan. Aiming for financial forecasts of consolidated net sales of ¥18.5
billion and operating profit of ¥1.1 billion, we will further accelerate our growing strategies.
Particularly in Japan, we will focus on supporting pharmaceutical companies in improving
and upgrading their production processes. Overseas, we will pursue synergies with theacquired Cos.Mec in Italy and utilize the Shanghai FC Center, a technology development
research center, to be established within this fiscal year. In addition, we will strengthen our
production system of chemical products and upgrade our computer system.
We appreciate the continued support of our stakeholders.

Since joining FREUND as a new graduate, I have been in charge of sales activities.
Currently, I lead the Customer Business Division, which integrates technical, machinery
business sales, excipients sales, and overseas sales departments. What I pursue at thefront lines of businesses is how to create values for customers of our clients, that is, forsociety-oriented markets based on our corporate philosophy of "Developing the Futurewith Creativity®."
In addition, I would like to work together with each and every employee to raiseawareness at business sites and foster businesses that can contribute to society in linewith our management vision. I will contribute to raising this awareness as a company.
I was newly appointed as an internal director, and am only a director who has worked
at FREUND since having joined as a new graduate. My strength is that I understand ourclients and business front lines. I may have a strong short-term perspective now.
However, as a director, I would like to take on the challenge of expanding our businesssegment domains, while balancing short-term perspectives with medium-to long-term
perspectives of 10 or 20 years from now.
Leveraging my strengths as an employee who has worked at FREUND for many
years, I will work together with business sites to realize sustainable and stable businessgrowth.

19External Directors

External Audit & Supervisory Board Member

Hisashi Tanaka

Kazunari Hamada

External Director (Independent)

External Audit & Supervisory Board Member (Independent)

For many years, I have overseen pharmaceutical research, stationed in the U.S., andclinical research at the laboratory of a major domestic pharmaceutical manufacturer. In my
current position, I launched the Chinese business also. The Chinese pharmaceuticalproducts industry has been dominated by traditional Chinese herbal medicines, and there
is no original new drug. It is still at the stage of imitating pharmaceutical products indeveloped nations. The spread of generic products is about to begin. On the other hand,
we must consider China catching up in a short period of time. FREUND will make afull-scale entry into China in the future, and I would like to proceed with discussions onsuch assumptions.
The FREUND Group has specifically defined the three axes of "Number ONE," "Only
ONE" and "Be ONE" based on the Group Values "ONE FREUND," and I think this is
excellent. In order to translate these into businesses in a concrete manner, we need todevelop a diverse range of human resources globally.
When I was at a pharmaceutical manufacturer, I had the experience of learning how towork globally under the guidance of a boss from a foreign-affiliated company, such ascommunicating with overseas authorities for drug approval applications in Europe and the
U.S. In addition, at the research laboratory, I was given personnel rights and focused on
developing human resources. I would like to contribute to the construction of the nextgeneration growth foundation by utilizing my experience in promoting such global
businesses and developing human resources.
Currently, the implementation of the 8th Medium-Term Management Plan is our highest
priority. However, I would like to provide the advice we need to make in order to become a
100-year company that lies ahead of us. I would like to fulfill my responsibilities as anexternal director by making solid comments from an external perspective.

As an attorney, I have provided various advices on domestic and overseas matters, andthere was an opportunity to be seconded to Japan Airlines (JAL) at the time of the merger
between JAL and Japan Air System (JAS). It was very valuable that I was able toexperience the frontline of management decisions from the perspective of a legal expert
from within the company.
Since FREUND is a company with an Audit & Supervisory Board, audit & supervisoryboard members do not have any involvement in management, however, they have a role
to work together with directors who are responsible for management while maintaining
tense relationship, and make the company desirable. From an attorney's perspective, I
would like to actively speak out about what I think and what I find questionable, making
use of my experiences and knowledge that I have cultivated by seeing other companies.
The number of companies transitioning to the Audit & Supervisory Committee system
has increased, but it cannot be said that governance will be effective only through themechanism. I think it is important to balance and harmonize the relationships between
directors and audit & supervisory board members. From corporate governance's
perspective, I would like to increase the effectiveness of the 3-way auditing process
through repeated discussions at the Audit & Supervisory Board and collaboration with theaccounting auditor and the Internal Audit Office.
This is the first time that I participate in an operating company as an external audit &supervisory board member, so I will do my best and keep that in mind. The FREUND Groupsupports markets such as pharmaceutical products and foods, which are essential to people
in the world. I feel that the role that can be played globally will expand further in the future.
To realize this, I will strive to meet the expectations of our stakeholders by making theworkplace and company more comfortable for our employees to work and byconsequently increasing our corporate values.

FREUND REPORT 2021

20

CORPORATE GOVERNANCE

As of May 31, 2021

About Risk Management
Business and Other Risks

Risks to Be Watched Closely in the Future

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 these risks occur. The Group maintains a
policy to acknowledge the possibility of such occurrences, and prevent the occurrence of
these risks to the best of its ability, while also responding quickly and adequately in the casethat 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 FY02/21.

In terms of business operations, the risk of the worldwide spread of COVID-19
infection became apparent in FY02/21. In addition, we are aware of the following
risks that should be watched closely in the future.

For details of each risk item, please refer to our website below.

https://www.freund.co.jp/ir/policy/risk.html (Japanese only)

1 Industry Trend Risk

9 Human Resources Risk

2 Pricing Competition Risk

10 Foreign Exchange Fluctuation 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

8 Public Regulations-Related Risk

Industry Trend Risk
In Japan, the reduction in drug price is expected to continue, and there is apossibility of a reorganization of the pharmaceutical industry. As stated in the
M&A of Cos.Mec in Italy in November 2020 and the opening of the Shanghai FC
Center in FY02/21, the Group is working to increase its presence in overseas
markets and accelerate the global expansion of pharmaceutical product field,
while promoting Machinery Business and Chemicals Business related to thenon-pharmaceutical fields of food, batteries, and chemicals, as well as
expanding its geographical and business areas.

Overseas Business Operational Risk
Trends in financials and healthcare policies around the world affect the
management of pharmaceutical companies. Pharmaceutical companies in the
U.S. and other developed countries are taking cost-cutting measures, such astransferring manufacturing to lower-cost emerging countries. Our Group's priority
countries and regions for business expansion include India, China, andSoutheast Asia, where populations and incomes are expected to grow, and weare required to manage risks related to business expansion in these countries
and regions. To this end, we are strengthening our understanding of conditions
by country/region, drafting strategies, and monitoring individual transactions.

21

Company and Stock Information

Company Name:FREUND CORPORATION

Established:

April 22, 1964

Capital Stock:¥1,035,600,000

Employees:

484 (Consolidated)

Head Office
Location:

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

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

Stock Listing:

TSE JASDAQ Standard(securities code 6312)

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 andBanking Corporation

Total Number of Shares
Issued:18,400,000 shares

Total Number of
Shareholders:

15,713(As of February 28, 2021)

Shares owned
Ownership ratio
Major Shareholders (Top Ten) (thousand
shares)(%)

K. K. Fusejima Yokosha

1,648

9.84

Yasutoyo Fusejima

1,256

7.50

MUFG Bank , Ltd.

836

4.99

Sumitomo Mitsui Banking Corporation

744

4.44

Okawara Mfg. Co., Ltd.

673

4.02

PERSHING-DIV. OF DLJ SECS. CORP.

503

3.00

Freund Employee Shareholding Circle

401

2.39

The Shizuoka Bank, Ltd.

368

2.19

Meiji Yasuda Life Insurance Company

360

2.14

QUINTET PRIVATE BANK (EUROPE)S.A. 107704

321

1.92

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

Shareholder Distribution byType of Shareholders

Total shares issued:

18,400(thousand shares)

Financial Institutions
Financial Instruments Firms
Other Corporations
Foreign Corporations
Individuals, Others
Government and Local Public Bodies

No. of shares held
(thousand shares)

Percentage
(％)

2,716
304
3,063
1,145
11,160
12

14.76
1.65
16.65
6.22
60.65
0.07

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 CORPORATION (Trade Volume)

FREUND CORPORATION (Share Price)

TOPIX

600,000

150

400,000

100

200,000

50

March 1,
2018

March 1,
2019

NOTE: ‌Share prices and trading volumes
prior to the stock split shown in thechart have been adjusted to reflect
the stock split. FREUNDCORPORATION and TOPIX prices
have been adjusted to show relative
valuations on March 1, 2018 as 100.

March 2,
2020

FREUND REPORT 2021

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.

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/