｜Net One Systems Co., Ltd
net one report 2022

net one report
Integrated Report

2022
JP TOWER, 2-7-2 Marunouchi, Chiyoda-ku, Tokyo 100-7024
ir@netone.co.jp
Investor Relations Office
Issued in: December 2022

Unleash the Potential of
People and Networks

Leverage
our tradition

Network technology is the source of our competitive strength, which has been
handed down from generation to generation since the time of our founding. As
the importance of digitalization to solve various social challenges is growing at
an accelerating pace, networks, which are our strengths, have become
indispensable for digitalization, and serve as a powerful engine for problem
solving.

Makeinnovations

As a leading network company, we have responded to needs for digitalization
as they have changed with the times, and contributed to the transformation of
our customers and greater society. Digitalization is now the core of business
transformation for many companies. We will become a strategic business
partner in the process of our customers’ business transformations, and work
together with them to achieve customer success and solve social challenges.

Createthe future

Our value is in connecting people with each other as well as with society, andunleashing new possibilities as “TAKUMI (“masters” or “experts” in English)”with expertise in critical assessment for ICT. We will create a prosperous future
together with our stakeholders, in order to solve social challenges and achievesustainable growth.

In order to solve social challenges and achieve continuous growth,
we reexamined our value in society,and renewed our philosophy system with our new Purpose,“Unleash the potential of people and networks, and create a prosperous future
by carrying on / inheriting tradition and making innovation happen.”
Under our new philosophy system, all employees will share our values,
and work to accelerate growth in the same direction.

Renew our philosophy system to solve social challenges through ICT utilization
In April 2022, we announced Our Declaration of the Net One Group
as our new philosophy system, which consists of our Purpose, Mission, Vision, Values,and WAY (Code of Conduct) to solve social challenges through ICT utilization.
Our Declaration of the Net One Group
Unleash the potential of people and networks, and create a prosperous future bycarrying on / inheriting tradition and making Innovation happen

MissionEach of us is a professional with outstanding expertise and high ethical standards,
and contributes to solving the problems of the society and our customers

WAY(Code of Conduct)

Vision

Act with pride as a leading network company● Create added value unique to Net One and achieve sustained growth● Continue to be an elite group of people who train their minds and skills throughcontinuous self-improvement● Maintain an appropriate profit structure to fulfill our responsibilities to a wide
range of stakeholders

ValuesPeople: I will proudly fulfill my duties honoring my loved ones
Governance: I will strive to take socially responsible behavior
Social: I will work with customers to create and promote values for society
Environment: I will work to create a better future for all●1

net one report 2022

WAY
WAY is our Code of Conduct,and is a clear statement of“the basics of how we think,decide, and act in the courseof our business.” It expresses
the actions we actually taketo realize what is important to
us by linking Purpose, which
is our will and cause, andValues, which are our values.

Be sincere
Be thoughtful

Go beyondall expectations

No WAKUWAKU
No workMoving forward
to next net one“TAKUMI”
as a neverending story

ESG

PurposeRememberthe failure ofarrogance

Healthy body,
Healthy mind

Work together
to breaknew ground
Find seeds ofgrowthin both failureand successnet one report 2022

2

Net One by the Numbers

Contents
Highlights
Net One by the Numbers
CEO Message

Net One in all these places

Chapter 1

Related page

P.25

Chapter 2: Growth Strategy

Value Creation

Value Creation Process

Service ratio

ROE

Operating margin

Customer satisfaction

Ratio of Independent
Outside Executive Directors

44.5 %

15.8 %

8.9 %

78.2 %

66.7 %

Accelerate the shift to services
and achieve customer success

Maintaining a high level ofcapital efficiency

Materiality
Value Creation through Customer SuccessBusiness Model

Value Creation

15
17
19
21
23

Major achievements in fiscal 2021

Corporate History
Review of Operations

Introduction

1
3
5
9
11
13

Capital Supporting Value Creation

Chapter 2

Growth Strategy

25 Review of the Previous Medium-TermBusiness Plan and Status of the Current
Medium-Term Business Plan

High value-added businessand improved productivity*From fiscal 2021, the survey policy has been changed withthe aim of “Clarifying the gap between the Company’s visionand customer expectations, as well the factors behind it.”27 Overview of the 2022 to 2024 Current

Medium-Term Business Plan / Explanationof the Current Medium-Term Business Planby the COO

Major materiality KPIs

31 Growth Strategy: Business Strategy /Related page

33 Growth Strategy: Service Strategy /Solving social challenges
Solution revenue

Train personnel
for the next generation

35 Growth Strategy: Financial Strategy /FY2024CISSP holders

Explanation of our Service Strategy
by the CTO

Explanation of our Financial Strategy
by the CFO

38 Reinforcement of the Business Base &P.17

Two of our Outside
Executive Directors are women
An Outside Executive Director serves as
the Chairman of the Board of Directors
Resolved to transition to a company with an Audit &Supervisory Committee in March 2022, approved at theGeneral Shareholders Meeting in June

Chapter 1: Materiality

30.0 billion yen

Social Responsibility / Explanation of
our Personnel Strategy by the CHRO

Security personnel

FY203080 persons

Registered Information
Security Specialist (RISS)FY2030100 persons

Percentage of male
employees taking childcare
leave or special leave for childbirth

Ratio of female
managers

Ratio of female
new graduate hires

FY2030

FY2030

FY203090 %15%Growth Strategy

Explanation of our Business Strategy
by the CSO

Changed the survey policy
in pursuit of higher customer satisfaction*

50%

Cloud personnel
Chapter 3

Front divisions

50 %Environment

FY2030 up

Society

DX personnel

GovernanceCorporate divisions

Discussion between the President
and Independent Outside Executive Directors

FY2030 up

50

50

ESG

41
42
43
47

ESG Initiatives to Strengthen Capital

150 persons

51 Feature Article: Corporate Culture Reform
Chapter 4

Enterprise Market
Telecom Carrier Market
Public Market
Partner Business

61 Financial Highlights /Non-financial Highlights

63 Consolidated Financial Data
65 Glossary
66 External evaluation

Editorial policy

Reference guidelines

From this fiscal year onwards, we will publish the “Annual Report” under the name of the “netone report,” with the purpose of informing all stakeholders of the Net One Group regarding our
growth strategies, value creation, and sustainability management concepts and initiatives aimed
at realizing our Purpose. In “net one report 2022,” the Officer in charge explains the strategy andoutlook of the current Medium-Term Business Plan that started in fiscal 2022, based on our
newly formulated Purpose. The report also introduces value creation through customer success,materiality identification and initiatives, and a feature article on corporate culture reforms. In
addition, the separate “Sustainability Data Book 2022” comprehensively covers non-financial
information, including ESG performance data. In this report, figures for financial results fromfiscal 2014 to fiscal 2019 have been restated to reflect the revisions that were made to pastfinancial results disclosed in December 2020.

Ministry of Economy, Trade and Industry:
Guidance for Collaborative Value Creation

Notes on included matters
The names of each company in the net one report are trademarks or registered trademarks ofeach company. “Health Management®” is a registered trademark of the Nonprofit Organization
Kenkokeiei.

3

net one report 2022

International Integrated Reporting Council (IIRC)
The International <IR> Framework

Forward-looking statements
This report contains forward-looking statements that involve
inherent risks and uncertainties and therefore may differ materiallyfrom actual results. Forward-looking statements are based on
information currently available to the Company and investors
should not place undue reliance on them. The Company
undertakes no obligation to update or revise current forecasts inthis report to reflect events, changes in the operating environment
or other unforeseen developments that may occur in the future.

Disclosure tools for financial
and non-financial information“net one report 2022”: An integrated report comprising content
focused on the importance and story lines of our value creation andsustainability.
“Sustainability Data Book 2022 (SDB)”: A data book focused on
the completeness of non-financial information such as reports on
ESG initiatives.

Financialinformation
Annual Securities
ReportFinancial Results
Financial Results
Briefing Materials
etc.

net onereport2022

Financial andnon-financial integration
Importance:
Emphasison storytelling

Review of Operations

53
55
57
59

Review of Operations

Non-financial
information
Sustainability website,
etc.

SDB 2022

Emphasis on
breadth of non-financial
information

net one report 2022

4

CEO Message

5

net one report 2022

Medium- to long-term vision

As a leading network company,
we aim to be a company that moves
society forward in a better direction.

Takafumi Takeshita
President & CEO
Net One Systems Co., Ltd.

Review of Operations

In April 2022, we announced Our Declaration of the Net One
Group as our new corporate philosophy system, which
consists of our Purpose, Mission, Vision, Values, and WAY(Code of Conduct). We have replaced our corporate
philosophy with the Purpose, which is positioned as theaspiration of the Net One Group, to serve as the basis forcontinuously confirming our stance on everything frombusiness activities and management decisions to the way inwhich each employee should conduct themselves.
In formulating our Purpose, we aimed for it to represent a
cause that our employees could relate to. We started with a
discussion of how society would be affected if the Company
ceased to exist, and then went back as far as the businessplan at the time of our establishment to deeply pursue ourstrengths and winning strategies. What was the purpose of
establishment of Net One Systems? Has the current
Company inherited the will that existed at the time of its

ESG

We will create a new Net One,with organizations and associates
who share our “Purpose.”establishment? Was the strategy and organization
appropriate at that time, in response to changes in theexternal environment? We have repeatedly discussed thetrue meaning of our existence. What we realized during
these discussions was the existence of the “network,” which
is an essential element in the use of digital technology andthe starting point of us. Our strength is our “network.” This is
how the word “network” came to be included in our
Purpose.
We considered the process of establishing the corporate
philosophy system itself through corporate culture reform,
and the management team played a central role in thedevelopment of the Purpose, Mission, and Vision, while
employee volunteers played a central role in thedevelopment of the Values and the WAY. The new
Declaration of the Net One Group is the result of reconcilingthe direction that management is aiming for with the will andvalues of the employees. In this process, I have come torealize the employees’ attachment to the Company, theirsense of unity, their understanding of what they should do,
and their high level of motivation. I am convinced that these
intangible energies are assets of us and will serve as theengine for our future growth.

Growth Strategy

Establishment of a new philosophy system

Value Creation

Last year, when I assumed the position of President & CEO,I stated that my mission was to build a framework to support
both business growth and stronger governance. To fulfill thismission, in fiscal 2021, we restructured the Net One Groupphilosophy system as the cornerstone of our corporate
culture reform, and formulated a Medium-Term Business
Plan (from fiscal 2022 to 2024; hereinafter, the “current
Medium-Term Business Plan”) to realize our philosophy.
During this three-year period, in which we will establish thefoundation for our continued growth, we will work tostrengthen our business base through “corporate culture
reform,” “thorough visualization,” and a “personnel strategy,”
while promoting each of our growth strategies as well assustainability.

Introduction

We are looking to build a corporate
image that will serve as a role model,
as the next step beyond
our corporate culture reform.

We believe that the most important aspect of our mediumto long-term vision is the establishment of a clear and firm
position as a leading network company. While most major
system integrators have manufacturers or user companies
as their parent companies, we are an independent company,
and are unbound. In other words, we can create and change
not only our business, but also our corporate culture andcorporate governance. We are not bound by fixed ideas or

net one report 2022

6

CEO Message

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net one report 2022

In addition to reforming our Board of Directors,
we will transform our executive structure.
We are continuing our efforts to strengthen governance. In
fiscal 2022, we established the Governance and Corporate
Culture Advisory Committee as an advisory body to theBoard of Directors, through the integration of the existing
Internal Control Enhancement Council and Corporate

Culture Reform Committee. In addition, the Company
transitioned to a company with an Audit & Supervisory
Committee, to enhance the independence and objectivity of
the Board of Directors, and to further strengthen the
supervision of business execution. After the transition, theBoard of Directors will include six outside executive directors
among a total of nine directors and will be chaired by anoutside executive director.
Furthermore, to strengthen governance, it is essential not
only to reform the supervisory function which is centered on
the Board of Directors, but also to strengthen the executivefunction. In order to reform our organizational structure andauthority, we have appointed a Chief x Officer (CxO) as afunctional manager in each area and positioned them as aCxO Team to execute management strategies. The CxOs
provide direction and guidance as the chief executive
officers of Net One in their respective areas of responsibility,
while the executives run the organization under theirdirection, and the Board of Directors supervises andmonitors them. Although executive officers may view the
CxOs as their superiors, it is important to recognize that
execution and supervision do not comprise a supervisionsubordinate relationship, and that the roles of the two are
different. By instilling this awareness, it will be possible forthe executive function to deal with business management
challenges that should essentially be handled by them, andfor the Board of Directors to engage in higher-level,
substantive discussions. By clarifying the authority, roles,
and responsibilities of the executive officers and higher
positions, rather than simply strengthening the formal

governance system, the perspectives of the executive
officers will be broadened, which in turn will lead to abroadening of the perspectives of general managers andbelow, leading to the improved functionality and growth ofthe organization as a whole. This is the form of corporate
governance that we are aiming for.
Although our starting point was to prevent recurrence, myvision is to promote these measures and make them truly
effective, so that we can become a role model forgovernance.
Over the past year, we have had many conversations in
the process of promoting corporate culture reform, and wehave come to believe in the direction of our business, thestrategies and tactics for achieving reform, and the vision weare aiming for. The market is continuing to grow, and wehave the foundation in place to grow as a company.
Everyone, from top management to each employee, is
now working together to transform our corporate culture.
What we are looking forward to is further business growth
and the creation of a corporate image that will serve as arole model, in all aspects. Part of the WAY drafted by our
employees states that, “Remember the failure of arrogance.”
I am confident that one day, we will be able to look back andsay that Net One was able to evolve because we overcame
the failure of arrogance and united further to work as one.
We would greatly appreciate your support as we move
forward with strong resolve.

net one report 2022

Review of Operations

Based on the Sustainability Policy formulated last year, Net
One has identified four materialities (key challenges) that wewill address: “Realization of a safe and secure advanced
information society,” “Thriving professional personnel,”“Contribution to a decarbonized society,” and “Maintaining
and enhancing a governance structure for sustainable

Strengthening governanceaccelerate business growth. ”

ESG

We will promote sustainability managementthat links contributions to social challenges
to business growth.

social challenges, while at the same time

Growth Strategy

Sustainability management“ We will leverage our strengths to solve

Value Creation

growth.” Going forward, we will position sustainability as thecornerstone of our management strategy.
As with the aforementioned “Values” and “WAY,” ourmaterialities were based on deep employee-led discussions
on the linkage between our business and social challenges.
One of the means of solving issues such as decarbonization,
declining birthrates, and an aging population is to utilize
digital technology, and networks are indispensable forachieving this aim. In other words, while our businesscreates the social infrastructure of networks, it is also
connected to social challenges and can serve as a powerfulengine for building a new social infrastructure. We believethat an essential aspect of employee engagement is thatthey themselves recognize that our business is connected tosocial challenges, and that this is directly related to “Unleash
the potential,” as stated in our Purpose.
On the other hand, if we simply make vague claims about
how we can “solve problems using the power of the
network,” our progress will slow. Accordingly, we moved
one step further, in discussing what issues exist behindphenomena such as climate change and declining birthrates.
We clarified what we could achieve with the power of
networks to realize a prosperous future and identified areas
where we could contribute. An awareness of social
challenges also enhances the connection between
employees and society. We continued to communicate toour employees the importance of exploring challenges
further, in order to gain an essential understanding of why
networks can solve social challenges. The fact that we wereable to share this awareness with our employees during themateriality identification process was a major achievement.
In the current Medium-Term Business Plan, we haveidentified “Digital government,” “Social infrastructure to
realize Society 5.0,” and “Smart manufacturing,” which
contribute to solving social challenges such as “Regional
revitalization,” “Declining birthrates and an aging population,”and “Decarbonization,” as related focus areas that areclosely related to the focus markets and focus models wehave been promoting to accelerate our business growth. To
realize a sustainable society, we will leverage our strengths inthese areas to solve social challenges, while at the sametime ensuring economic viability and business growth. Thisis our approach to sustainability.

Introduction

conventional wisdom, and we will strive to challenge all ourpossibilities, as a leading network company.
What are the strengths that enable us to take on thesechallenges? Specifically, these strengths comprise our“Expertise” and our “Customer-oriented (Customer success)perspective,” which is part of our DNA. We focus on
supporting our customers throughout their lifecycle andemphasizing the “feeling of effectiveness” that comes from
more than simply proposing and implementing solutions,while also making efforts toward constant improvement toprovide even greater value. Our source of value creation
stems from our high level of expertise to carry out thesetasks, as well as the personnel with a standpoint ofcustomer success, who always solve problems ahead oftime, thereby contributing to the business of our customers.
In addition, we are also building a development system forstandardizing and automating such fully customized cuttingedge case studies and expanding them laterally for new
proposals. We believe they will represent an even greater
strength in the future. In the current Medium-Term Business
Plan, we have positioned standardization and automation as
one of our service strategies.
We are promoting “visualization” to acquire further
strengths. This is an essential tool for quickly gaining an
understanding of matters at hand and sharing them with all
employees. Considering the problems of conventional“visualization,” which was complicated and lacked anadequate management system, we will be able to acceleratemanagement decision-making by gaining a timely
understanding of the data and facts. Timely “visualization”
will contribute greatly to voluntary actions and activities by
employees, and we believe that making such a culture thenorm will lead to stronger governance and prevent therecurrence of scandals.
In the long run, the industry will inevitably face a shortageof personnel, and one of the most important themes is how
to secure personnel. One of our goals is to be a company
that has an abundance of personnel who possesses theexpertise and will to move society forward in the right
direction, and to be a place where people can grow throughtheir involvement with the Net One Group.

8

2022-2024

Current Medium-Term Business Plan

Net One Systems was established in 1988 as a specialist network installation company, focusing initially on the
procurement and sale of routers, switches and other ICT equipment.
Since then, we have continued to grow in response to the evolution of ICT and changing customer needs, using
our advanced network technologies as a point of difference, while extending our business reach from networks
into all areas of ICT platforms, such as cloud systems, security and IoT.

Transformation
for the next era

Executing our growth strategy and strengthening
our business base,with the aim of realizing
our new philosophy system

Previous
Medium-TermBusiness Plan

2016-2018(Shift to services)

Introduction

Corporate History

2019-2021(Integrated Service Business)

Previous
Medium-TermBusiness Plan
Sustained growth(Cloud and security)

Revenue (by markets)

2022■ Enterprise■ Public

Value Creation

Promotion of sustainability
management■ Telecom carrier

2021■ Partner

Acquired “COPCⓇ,” a certification
for contact centers■ Other

2020

Established the “nBC” and “Lab asa Service” to help customers
accelerate DX

2019

Started providing the refurbishment
business and solutions for MSP

2001
Operating income amount

2007

1999

2010

1990

2010

Number of employees

601

Customer needs

Sharing information between business sites

2024

Servicesales ratio

Servicesales ratio

42.2%

55.0%
2021

Number of employees

2,023

Improvements
in ICT system efficiency

2024

Number of employees

2,703

ICT utilization becomes central to business reform

Improving communication speeds

ICT utilization

1988 ~

1992 ~

1995 ~

2008 ~

2011 ~

2016 ~

Interconnection

Network systems

Internet

Virtualization

Cloud & Security

Digitalization

Conventionally, computer networks
have been connected only according
to each manufacturer’s proprietary
specifications. With our proprietaryequipment, communication softwaredevelopment capabilities, and personnel, we have achieved interconnection
regardless of specifications and manufacturers.

Began providing sales, design, andmaintenance services for network
equipment for limited communications
within the premises, such as computerto-computer connections, mainly tomajor private sector companies, research institutes, and universities.

With the rapid spread of the Internet,
sales, design, installation, andmaintenance of network equipment
have increased. In response, theCompany has expanded its businessfields to include the network integration
business for telecom carriers andgovernment agencies, in addition to
our existing fields of major private
sector companies and universities.

The Company has focused on virtualization
as a new technology for pursuing efficiency.
By utilizing the characteristics of virtualizationt e c h n o l o g y, w h i c h p r e s e n t s v a r i o u sadvantages including the effective use of ICT
assets, flexibility in adding capacity, andpower saving, the Company strived to
expand its business to major private sector
companies, government agencies, and local
governments.

By leveraging its network know-how, theCompany has shifted to a business style thatprovides total solutions, including the installation of servers and cloud systems for clientcompanies. The Company had also begun tofocus on security, such as countermeasures
to prevent information leaks through networks.

ICT utilization has expanded rapidly, and theCompany has transformed itself to play ac e n t r a l ro l e i n b u s i n e s s re f o r m s . T h e
Company is creating new added value, in
response to the growing importance of
network technologies that safely connect all
k i n d s o f p ro d u c t s a n d s e r v i c e s a s i t sbusiness field continues to expand.

Review of Operations

Changesin business fields

Internet uptake(Target)billion yen

ESG

Wider use of information systems

85.2

2020

Established the “Security
Operations Center” (SOC)

34.3%
2000

Changes in market
conditions

2016

billion yen

Servicesales ratio

Registered as an over-the-counter
stock with the Japan Securities
Dealers Association

Founded1988

Launched a subscription service that provides the“functions” that are necessary for ICT platforms

44.9

Certified as a gold partner by Cisco Systems

1996

2017

Established the Expert Operations
Center (XOC)

Growth Strategy

Listed on the First Section of theTokyo Stock Exchange

Strategy support
Systems optimization

Changesin provided value

9

net one report 2022

Maintenance / Operations
Hardware sales

net one report 2022

10

Review of Operations

FY2021 Revenue
Enterprise market *1

21.9%

Telecom carrier market *1

25.6%

30.2%

Key markets / sectors●●

Enterprise market

Strengths and characteristics
The enterprise business has built up a high level oftrust with customers after many years of providing
high-quality network systems.
● Backed by that trust, we share with customers theGroup’s knowledge and experience of utilizing ICT.
Our approach allows customers to use cloudsystems, reinforce security and implement work
style innovation in a more flexible and practicalway.
●

Focus areas
Smart manufacturing, social infrastructure to realize Society 5.0

Telecom carriers / ISP *2●

Service platforms
Corporate business●

Extensive track record in the design and installationof large-scale networks●

Strong position in multivendor product integration
and automated system operation, backed byadvanced network design capabilities*2. ISP: Internet service providers

Telecom carrier market
Focus areas
Social infrastructure to realize Society 5.0, digital government, and smart manufacturing

Local governments / education /universities, research centers /social infrastructures / healthcare

Consulting services that help customers clearly
identify the challenges they face●

Optimization of the full ICT lifecycle, from design,
installation and maintenance to operation,
optimization and in-field improvement of ICT
platforms

Cloud systems
Security measures● Campus networks●

Telecom carriers

PublicESG●●

Customers
Enterprise

Growth Strategy●

The Group’s business is broadly divided into four segments based on the industry of the customers they serve. The
composition ratio of each segment is well-balanced, at roughly 20% to 30%.
In the enterprise, telecom carrier, and public markets, we provide customers with solutions from system proposals
to various services under a direct sales model. In the partner business, we are conducting a resale business that sells
products and services through collaboration with system integrators who undertake all-in-one information systemoutsourcing. In addition to the conventional direct sales model, we also engage in co-creation with telecom carriers
and partner companies, and provide support for corporate groups. We are working to acquire a diversified market, by
making efficient proposals to customers who are difficult for us to approach directly.

21.3%

Value Creation

Cloud systems
Security measures● Work style innovation

Expansion of our business fields centered on networks

Characteristics of our business segments

Partner business* Note that the sum of the above percentages does not add up to 100%, due to other business segments that are not included in the reportable segments (the Global business segment, etc.).
*1. From fiscal 2022, the ISP industry has been reclassified from the enterprise market to the telecom carrier market. Changes have been applied to these figures.

Manufacturing /non-manufacturing / finance

We have leveraged our strengths in networks, and expanded our business fields in line with the increase in demand for
ICT utilization.
In recent years, new roles are being sought for networks along with the rise of the cloud computing. Such roles
include the provision of required ICT resources as needed, such as CPUs, memory, disks, etc., which are built into
servers and storage. Accordingly, we provided more server/storage functions via networks, and thus expanded ourbusiness fields. As for cyber security measures, the most effective method to prevent the spread of infections andinformation leaks is to detect and contain the movements of network intruders. It is precisely due to the advanced
network technology we possess that we are able to create much differentiation and added value.
Currently, the ICT platform itself is expanding into multi-cloud systems that utilize a combination of private andpublic clouds. Networks are also essential for connecting clouds safely and functionally, and the Group’s businessfields are continuing to expand.

Public market

Introduction

The Group proposes integrated systems and measures to accelerate new ICT utilization, with a focus
on large-scale companies and government agencies that are working on business modeltransformations and work style innovation utilizing ICT, with the aim of strengthening competitiveness.
We have expanded our scope to support general ICT platforms, such as support for cloud systems
and cyber security measures. We also provide services ranging from proposing grand designs for the
installation of next-generation systems, to establishing efficient systems that optimally combine avariety of products, as well as services that support the entire lifecycle of systems.

188.5 billion yen

Public market
Focus areas
Digital government, social infrastructure to realize Society 5.0

Partner companies
Directsales

A wide range of support,
from product proposal to technical support●

Handles a wide range of products from overseas

Specializes in collaboration
with partner companies● Network● Cutting-edge ICT equipment
and related solutions●

Provides quality assurance, technology verificationand value-added services such as proposal
support and system maintenance●

Net One Partners
Net One Systems

Review of Operations

System integrators

Partner business
ICT vendors (equipment manufacturing, software development)

Focus areas
Social infrastructure to realize Society 5.0, digital government, and smart manufacturing* Revenue for external customers is used in revenue by segment presented on this page and in Chapter 4.

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12

Net One in All These Places

Zero trust security

Main contribution scenes
Remote working / Zero trust

Factories

Smart factories

Construction

Smart buildings
OfficesEnterprise market

Logistics

Main contribution scenes

Authenticate by user / group

Properly authenticate incoming
Authenticate by device / OSusers, in order to allow
Authenticate by place / time
only legitimate
Authenticate by action history
access.

Localgovernments

MobileGround security

Smart logistics

Public market

Factories

Security cloud, strengthening
the information security
Digitalization of business processes /Local government CRM

Educational
institutions

School systems / GIGA schools

Hospitals

Work style innovation, telemedicine
Hospital Wi-Fi / Security

Examples of reviewing local government
security measures
Strengthening security measures in consideration of enhancing
efficiency and convenience

Separation

Juki Net

Separation

LGWAN

The Local Government
Information
Security Cloud

LGWAN
connection
systemInternetconnection
system(Basic Resident Ledger Network)

Affairs using
the individual
number system

Value Creation

Offices

Introduction

The Group’s solutions and services are utilized in various places and situations where they supportsocial infrastructure.
We are working to achieve our materiality of “realizing a safe and secure advanced information society,”by leveraging our strengths in network technology to connect society and contribute to ICT utilization.

Homes

Educational
institutions

Offices

Hospitals
Growth Strategy

Financial
institutions

Local
governments

Railroads

Electricity

Factories
Telecommunication

Gas

Logistics
ESG

Main contribution scenes

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net one report 2022

ICT Platform Security Cloud

Corporatebusiness

Access control solutions
MEC / edge cloud

Main contribution scenes

Realizing a safe Internet connection environment
with high-performance security

Logistics

Supply chains

Manufacturing Smart factories
Personnel
services
Partner businessSupporting the installation ofcloud service infrastructure

Corporate cloud services
provided by telecom carriers

Retail

Education

GIGA schools

Review of Operations

Telecom carrier
marketService
platforms

Examples of the cloud service platformbusiness

SocialSmart cities
infrastructures

Talent management systems

Healthcare

Digital marketingEntertainment AR / VR e-sports

Wearables

Corporate
customers

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Chapter 1

Value Creation I Value Creation Process

With newly formulated Purpose: “Unleash the potential of people and networks, and create aprosperous future by carrying on / inheriting tradition and making innovation happen,” we provide
solutions and services that support customers through their entire ICT lifecycle by leveraging the
network that we have built since our founding. We will contribute to solving social challenges andcreate social and economic value through achieving customer success.

Purpose‐Mission‐Vision‐Values

Introduction

Based on our newly formulated Purpose, we will use
our network as our strength to achieve customer
success and create social and corporate value.

WAY
P.1

Social Challenges

Materiality

Financial andNon-financial Capital

P.17

P.23

Professional personnel

Declining birthrate and aging
population, regional disparities

Regional revitalization

Co-creation capabilities

The 2025 Digital Cliff

Maintaining
and enhancing
a governancestructure forsustainable growth

Financial capital
Shift tostock-type businessResponding to the declining birthrate
and aging population

Optimize

Consulting

Plan

Regional revitalization
Realizing a decarbonized society
Customer business successEnterprise market

OperatePropose

Lifecycle
services
Design /Install

MaintainOperateTelecom carrier
marketProjectmanagement

Public market

Build

Realizing a rewarding society
DX personnel training
Maximizing shareholder value

Economic Value
Current Medium-TermBusiness Plan Indicators
Partner business

Management
Strategy

Review of Operations

High capital efficiency

Large-scalecustomer base

Customer base

Corporate reform throughdigitalization
Accelerated digitalization

Network withbusiness partners

Social Value

ESG

Customers

Social capital
Contribution toa decarbonizedsociety

P.11

Technology capabilities

Shift from products to services

Innovative progress in
ICT technology

P.19

Solve social challenges

Thriving
professional
personnel

MarketMulti-vendor
supportMarketIntellectual capitalStrengths

Achieve customer success

Decarbonized society,sustainability

P.21

Growth Strategy

Society

Realization ofa safe and secureadvanced
information society

Social Value / Economic ValueBusiness Model

Network technology
capabilities

Human capital

Value Creation

Sustainability Policy

Revenue
Operating margin

Current Medium-Term Business Plan

P.25

Service ratio
ROE

Value cycle

15

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Reinvesting to strengthen capitalnet one report 2022

16

Chapter 1

Value Creation I Materiality

In order to further promote sustainability management, we identify challenges of high importance asmaterialities from the perspective of opportunities and risks for sustainable growth, then set KPIs, andmanage progress. In addition, we announced our contribution to the SDGs through our materiality initiatives
in our SDGs Declaration.
SDGs Declaration
P.7
Data Book

Materiality KPIs and Contribution to SDGs

Overview of Sustainability Management

Realization of a safe and secure advanced information society

We have identified materialities as key challenges for sustainable growth, based on our corporate philosophy system,
including our Purpose, and sustainability policy. Materialities are incorporated into specific initiatives in our current
Medium-Term Business Plan and SDGs Declaration.

Theme 1

Provide solutions
and services by challenge
and domain

WAY

Mission‐Vision‐Values

Expand and promote
the service businessContribution toa decarbonized society

SDGs Declaration

Growth strategy

Contribution through businessTrain IT personnel
for the next generation

We will also contribute to the training of future ICT
personnel by providing learning opportunities that utilize
Net One’s intellectual property, for students who willlead the next generation.

●

Promotion of diversity
and inclusion

Contribution through corporate activities

Contribution to a decarbonized society

Positioning and identifying materialities

Maintaining and enhancing
a governance structure
for sustainable growth

Initiatives Policy

Initiatives Policy

Initiatives Policy

We will contribute to realizing
a safe and secure advanced
information society throughhigh-quality services, with
our strength in network
technology as our core.

In order to achieve sustainablegrowth, we will train and secure
diverse personnel, who are thesource of our competitiveness,and build a work environment
where each employee can play
an active role.

We will address climatechange by both reducing
greenhouse gas emissions
through business, andreducing the environmental
impact of our own businessprocesses.

In order to improve corporate
value, we will strengthen
governance and work toreform our corporate culture,so as to build stronger
relationships of trust withstakeholders.

Reduce emissions in thebusiness processes of ourCompany

We will strive to reduce risks caused by climate change
by reducing emissions in our own business processes
and supply chains.

SDGs

Expansion of green solutions
Develop and expand solutions and services that
contribute to reducing greenhouse gas emissions in
our customers and society.

●Expansion of sales of low power consumption
products and services
Reduce CO2 emissions per purchase / selling price,focusing reduction efforts on the purchase and saleof products and services, which account for the
majority of CO2 emissions.

KPI

SDGs

Maintaining and enhancing a governance structure for sustainable growth
Theme 1

Foster the corporate culture
and enhance internal
controls

We will foster a corporate culture that embodies the
new Net One, as well as strengthen internal controls,
including measures to prevent the recurrence ofscandals.

KPI

Realization of Health andProductivity Management®

SDGs

Conduct an annual employee awareness survey aspart of our efforts to foster the corporate culture(Future disclosure of survey results planned)● Progress report on recurrence prevention measures
The operational status of recurrence prevention
measures is reported on our website once every six
months.
●

Theme 2
We will work on health and productivity management tomaintain the physical and mental health of ouremployees, which is essential for business growth andcontinuation.

Review of Operations

Contribution toa decarbonized society

Initiatives Policy

net one report 2022

KPI●

Theme 2

We have assigned an order of priority to opportunities and risks for our sustainable growth, based on their degree of impact
on both business growth and solving social challenges, and have identified four challenges of particularly high importance asmaterialities.

17

We will both contribute to realization of a decarbonizedsociety and achieve growth of our own company bydeveloping and providing “green solutions” that
contribute to reducing greenhouse gas emissions in
our customers and society.

ESG

Reduce greenhouse gas
emissions through business

Thriving professional
personnel

SDGs

Ratio of female managers (parentheses show thenumber of personnel as of March 2021)
Fiscal 2030 target: 15% (6.5%)● Ratio of newly hired female graduates (parentheses
show the number of personnel as of March 2021)
Fiscal 2030 target: 50% (35.5%)● Male employees taking paternity leave and special
leave for childbirthFiscal 2030 target: 90%●

Theme 1

Sustainability

Realization of a safe
and secure advanced
information society

Train ICT personnel for the next generation
Expanding next-generation IT personnel training
programs through industry-academia collaboration

KPI

We will strive to improve productivity and promotecreation of innovation by developing environments andsystems that allow diverse personnel to recognize eachother and make the most of their individual qualities.

Social responsibility

SDGs

Security personnel (parentheses show the numberof personnel as of March 2021)
CISSP certification Fiscal 2030 target: 80 (22)Security specialists Fiscal 2030 target: 100 (41)
● Cloud personnel (parentheses show the number of
personnel as of March 2021)
Front department Fiscal 2030 target: 50% increase
in cloud personnel (232)● DX personnel (data analysis qualification holders)
Corporate division Fiscal 2030 target: 150 people
increase
Business improvement proposals: 100 (cumulative
total from Fiscal 2022 to 2030)●

Theme 2

Reinforcement of the business base
Corporate culture
reforms

SDGs

KPI

In order to become more competitive in the solutions
services for business growth, we will strengthen the
training of security personnel and cloud personnel, andalso focus on the acquisition of DX skills with the aim ofstrengthening the functions of our corporate
departments.

Financialstrategy

Thoroughvisualization

Service ratio
Fiscal 2024 target: 55%

Growth Strategy

Maintaining and enhancing
a governance structure
for sustainable growth2022 - 2024 Current Medium-Term Business Plan

Personnel
strategy●

KPI

As the ICT market reaches a major turning point, we
will accelerate our shift to a business model centeredon the service business, in order to achieve sustainablegrowth over the medium to long term.

Theme 1

Materiality

Servicestrategy

Revenue of social challenge-solving solutions (threefocus areas of the current Medium-Term Business
Plan)
Fiscal 2024 target: 30.0 billion yen

Thriving professional personnel

Sustainability Policy

Businessstrategy

SDGs●

Theme 2

Unleash the potential of people and networks, and create a prosperous future
by carrying on / inheriting tradition and making innovation happen

Thriving professional
personnel

KPI

We aim to grow our business and realize a sustainable
society, by providing social challenge-solving solutions
and services, centered on the three focus areas of thecurrent Medium-Term Business Plan: Digital
government, Society 5.0, and Smart manufacturing.

Value Creation

PurposeRealization of a safe
and secure advanced
information society

Introduction

We will identify opportunities and risks forsustainable growth as materialities,
in order to promote sustainability management.

KPI
●

SDGs

Certification as an Outstanding Organization of
Health and Productivity Management
Fiscal 2024 target: Be a Certified Health andProductivity Management Organization (METI system)

net one report 2022

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Chapter 1

Value Creation I Value Creation through Customer Success

The Group provides services to customers that support them through their entire ICT lifecycle, thereby
realizing customer success. This also creates social value, such as by contributing to solving social
challenges, and creating economic value that leads to our growth.
We are working to develop services that enable advanced customer success, with the aim of being abusiness partner that supports customers in formulation of ICT platform strategies.

Achieving a higher level of customer success by developing our services

MeasureAs a strategic business partner of our customers, we will pursue further development of our services based onservice strategies and focus areas of our current Medium-Term Business Plan, in order to achieve a higher levelof customer success.

Acquire and demonstrate new strengths to further shift to services, by using our expertise in criticalassessment that we have cultivatedCustomer strategy
support services

Strengths to be utilized and acquired in the future

Networktechnology
capabilities

Ability to make proposals and respond tothe business challenges of our customers,
leading to the achievement of solutions
together● Requirement definitions with a comprehensive
view of business support that goes beyond
ICT specifications●

As a pioneer of Network Integrator inJapan, we have unparalleled technology
and knowledge in the network field● Specializing in the ICT infrastructure
required by all companies, enabling thelateral deployment of technology

DX enablement
capabilities

Offers optimal solutions for customers,
with no affiliations to a single vendor or
corporate group● Capable of providing optimized, cutting-edge
solutions due to our extensive knowledge ofthe latest network equipment from overseas

Expertise

Strong relationships with large-scalecustomers and accumulated know-how
in diverse range of industries

Standpoint ofcustomersuccess

New operations services●

System maintenance services●

Expansion of service areas

We will apply our achievements and knowledge of providing ICT platform which we have accumulated so far, in order toachieve system standardization and automation, and realize improvements in “the utilization of ICT by customers,” by linking
business strategies to cutting-edge technological knowledge.
DX strategy consulting service

Managed services

In-house cloud services

Embodiment of cutting-edge examples

Lateral expansion into existing markets
and focus areas

Deployment of packages
to diverse customers

Standardization and automation

Full customization

We will accelerate business growth in three focus areas adjacent to existing businesses, in order to contribute to solvingsocial challenges.
Social infrastructure to realize Society 5.0

Smart manufacturing

Large-scalecustomer baseMeasure2

Deepen existing core businesses and explore service businesses (Shift to services)

Create new value by shifting from existing core businesses to services
Establish function-providing services and platforms, and strengthen stock-type businesses
Deepen existing core businesses

Explore service businesses

Architectural design that applies
Net One’s tradition and innovative ability

Create recurring services unique to Net One

Promote ICT consulting

Collaboration
andinteraction

Create advanced cases through full customization
Present services as a menu based on
advanced cases and expand laterally

More advanced system operation services

Shift to complete packaging and generalization

Support function provisionand overall optimization

Establish service platforms

Review of Operations

Strengthen grand design formulation support

Evolution of customer success

Expansion of post-implementation
lifecycle services (planning, building,operation, and optimization)● Realization of customer success bylinking DX enablement capabilities,
expertise, and lifecycle services
●

●

ESG

Net One’s Focus Areas

Develop and provide the latest and bestsolutions in the networking field, inre s p o n s e t o i n c re a s i n g l y c o m p l e xtechnologies and customer needs

Growth Strategy

Multi-vendor
supportProduct maintenance services

Net One’s service strategy

Digital government

Our strength is our expertise in critical assessment●

Deepening relationships
with customers

We will expand the range of proposals,from conventional services including
design, installation, and maintenance,
to include operation and optimizationof systems overall, so that we can
support formulation of ICT platform
strategies as a strategic business
partner of our customers.

Acquire and demonstrate strengths

Value Creation

Shift to being a strategic business partner
for our customers

Net One’s ideal lifecycle services

1

Introduction

We aim to achieve a higher level of customer
success and become a strategic business partner
for our customers, by leveraging our strengths
and developing our services.

Net One’s Ideal Value Creation
Social value

19

net one report 2022

Sustainability
Contribution to social challenges

Economic value

Continuous growth of Net One

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20

Chapter 1

Value Creation I Business Model

We provide a wide range of services that support the entire
ICT lifecycle and guide our customers to optimization.

ICT platforms that run applications are important for demonstrating the performance of ICT solutions. While
many applications are industry-specific, ICT platforms have many requirements that are common to different
industries, even if their demands differ, and the integration of technologies enables lateral development of highly
functional and stable systems.
As the digitalization of society progresses at an accelerating pace, and all manner of products and people
become connected, we support safe and secure utilization of ICT based on the strengths of network technology.
We continuously deepen and develop our relationships with our customers by providing the optimal system
for them as a service, and by proposing everything from operational improvements to grand designs for the next
system.

The Group supports the entire ICT lifecycle, through a process in which we plan/propose, design/install,
operate/maintain, and optimize. We provide optimal solutions and services that leverage our strengths in combining
cutting-edge technologies, including networks. We are building deeper relationships with our customers through aprocess of proposals aimed at overall optimization, from improving operations to formulating medium- to long-term
grand designs.

Build

Operation

Optimization

Plan / Propose

Design / Install

Operate / Maintain

Optimize

Consulting
Status analysis / Plan development

Engineering
PMS / Quality control

Operate / Monitor / Maintain
Troubleshooting“Leading customers’ businesses to success”
through ICT platform operation

Promotion of effective and efficient projects
such as ICT environment assessment and plan formulation

Flexible and speedy system design,
installation, and construction

Monitoring, operation, maintenance,
and threat isolation aimed at stable system operation

Net One’s
customer success

Master of
ICT platforms overall

One of Japan’s
top verification facilities

Swift responseby taking a bird’s-eye view

Guarantee quality
with COPC certification

Strategic business

Objective view

Technological backing

Abundant experienceand achievements

Vendor relations

A professional groupwith abundant experience

Familiarity
with system installation

Operational business

Net One’s Ideal Vision

Net One’s Ideal Vision

Expand supported areas by proposing grand designs

Provide the optimal and latest solutions with broad knowledge and multi-vendor
relations, based on customer problem analysis through consulting

Acquire opportunities to participate in and support upstream
DX strategy and grand design by supporting operation
and achieving optimization proposals

Present services as a menu and create service packages

Manufacturingindustry

Switching tosmart factories

Grand design: Plan production innovation and full automation
network design policy, and make basic policies for factory
Operation: Standardize security/network rooted in our basic●

Focus on strategic business

ICT platform
operational support
Releasefrom operational business

Strategic business
Operational business

Net One’s Ideal Vision

Propose optimization to become the axis for expanding services(Improving service ratio)
Deepen relationships with customers
through optimization and grand design proposals

relationships with customers and accumulating know-how and data(smart factory) along with renovation of factories. In anticipation of many production facilities getting connected, create asecurity measures, and to operate and maintain factory networks.
policy. Install an advanced incident response system and maximize cost performance.

Grand design

Operation

Optimization

Formulating grand designs (To-Be)

Provision of operational services

Proposals for further customer successValue provided

Value provided

Value provided

Value provided

Provide optimized operational services based on
designed policy● With COPC certification, establish an advanced incident
response system with support from XOC/SOC

Customers have the leeway to focus on strategic
operations, and new needs are created, by being
optimized through a series of projects.

Using networks as our strength, we provide consulting
having assessed challenges backed by our abundance ofachievements, insight, and technology capabilities in ICT
platform domains.

By presenting a future To-Be vision, it is possible topropose future medium- to long-term optimization as a
DX strategic business partner.

Assess the current situation such as network configuration

Examination of next-generation factory infrastructureand security architecture, OT security consulting

Under the basic policy, standardize network equipment
configuration to clarify the impact when problems occur

Document research and hearings

Creation of factory network design policy

Maximize cost performanceby consolidating devices used in common

Organization of challenges

Establish basic policies for factory security measures,
as well as network operation and maintenance

Establish an incident response system●

Review of Operations

Investigation and assessment of challenges (AS-IS)

net one report 2022

ESG

ExampleIncrease productivity
Improve competitiveness● Achieve business goals●

Growth Strategy

Respond withthe latest technologies

Strengthen services and intellectual property by making deeper

21

Achieve customer success

Mastery of
the ICT utilization

Net One’s Ideal Vision

Value Creation

Plan

Create advanced cases, expand the scale of projects,
and improve profitability, by providing DX strategy consulting services

Introduction

Features of Net One’s business model

Utilize the knowledge gained through this project
and the relationships built through problem solving,in order to make proposals that leadto new solutions for customers

net one report 2022

22

Chapter 1

Value Creation I Capital Supporting Value Creation

We work to strengthen management capital that
supports value creation, in order to build a stronger
management foundation.

Co-creation capabilities

Network with business partners

Customer baseWe have accumulated experience of successes
and failures in our own business, and we use thisas know-how to provide solutions for ourcustomers. All of our employees’ knowledge andexperience enables us to create added value, so
our personnel is the source of our competitiveness.

One of our core competencies is network
technology, which we have cultivated over many
years since our founding as a company specialized
in integration of network systems. In the future, as
ICT technology develops, it will be more necessary
to take robust security measures, so it is likely that
there will be greater need for network technology.

We must be a strategic business partnerthat supports the ICT lifecycle ofcustomers, from the making ICT
investment plans to installation andoperation of systems, as seen from theperspective of total optimization. To that
end, it is essential that we develop
mechanisms for effectively applying
intellectual property, including thetechnology, know-how, and infrastructure
we have accumulated so far.

Leveraging our position as a multi-vendor
not constrained to specific manufacturers orcapital groups, and based on trusting
relationships with vendors, we devise
combinations that identify the characteristics
of products through a wide variety ofcollaborations and exchanges, so we canrealize the optimal system for our customers
from a neutral standpoint.

The top 100 companies account forslightly less than 80% of our revenue, andour client base is centered on Japan’s
leading private companies and public
institutions. In these circumstances, we arein a position where we can work withcustomers who are proactivelytransforming their businesses with ICT,and create new mechanisms that takeadvantage of our strengths.

The defining features of our company’s personnel
are their consulting capabilities that enable them tofollow projects from upstream to downstream
aimed at achieving customer success, as well as
their technology capabilities which cover a wide
range of areas, including networks, and enable
them to realize installation and operation.

●

Security personnel: CISSP certification 22
Security specialists 41●

Cloud personnel:●

Percentage of female managers: 6.5%

Sales staff: 46
Technical staff: 186

Because our company specializes not in businessapplications, but in ICT platforms which are
indispensable to all companies, we improve
efficiency by laterally deploying this technology.

In addition to providing high-quality
services and solutions, we are working to
expand our platforms for intellectual
property utilization, so as to maximize theirvalue.

Based on our record of leading the
network industry for many years, we havebuilt a wide range of collaborative
relationships, including work on productdevelopment, with top-class telecom
carriers, general electronics manufacturers,
automobile manufacturers, and integrators
both in Japan and overseas.

Growth Strategy

Specific examples
and current status of
capitalTechnology capabilities●

Technical staff: 1,500●nBC (netone Briefing Center)●Awards from business partners●

Customer satisfaction survey results●

XOC, SOC●

Incubation Lab●

Roles and functions of Net One Partners●

DX strategy consulting service●“COPC ” certification●

Gitlab●Record of collaborations with customers●

Stock-type services●

netone on netone(Reference realization cases, etc.)●●

LaaS (Lab as a Service)

Many customers who are responsible for
infrastructure and other foundations ofsociety●Business news, technical news®

Value Creation

Definition of capital

Professional personnel

Introduction

Management capitalIn our value creation process, it is essential to have management capital, such as personnel, technology,
knowledge, and relationships of trust with customers and business partners. By strengthening these formsof capital, we will further strengthen our business models and strengths, and achieve greater value creation.
We incorporate the strengthening of important capital into our management strategy as a materiality, andbuild a solid management foundation so as to further improve corporate value and achieve sustainablegrowth.

ESG

Relatedmaterialities

Train personnel for the next generation●

Promote diversity and inclusion●

Realize health and productivity management●

Training security, cloud, and DX personnel(personnel strategy)●

Providing opportunities to promote innovation
creation(R&D, innovation)●23

net one report 2022

Industry-academia collaboration●

Provide solutions and services by challenge anddomain●Provide solutions and services bychallenge and domain●

Provide solutions and services bychallenge and domain●

Provide solutions and services bychallenge and domain●

Expand and promote the service business●

Expand and promote the service
business●

Expand green solutions●

Expand and promote the service
business●

Expand green solutions●

Promotion of netone DX●

Application of GitLab (R&D, innovation)●

Partner CSR guidelines●

Customer satisfaction survey●

Development of personnel system●

Integration of engineering departments●

Compliance questionnaire●

Network Academy●

Net One Blog●

Acceleration of services●

Expansion of services and solutions

net one report 2022

Review of Operations

Initiatives
for strengthening●24

Chapter 2

Growth Strategy

2022 – 2024 Current Medium-Term Business Plan

2019–2021

2022– 2024

Sustained growth

Transformation for the next era(Cloud and security)(Integrated Service Business)

Defined all of our activities for customers as an Integrated
Service Business to create high added value, andsupported the entire life cycle for the future vision of ICT.
Expanded the scale of our projects and improved
profitability

Our cloud systems and network security service
business contributed significantly to profit growth,and drove our overall growth. We made progress inthe development of new markets, such as thetransition to smart factories in the manufacturing industry, andmanaged services for telecom carriers, etc., as well as support
for work style innovation. We also accelerated the shift toservices by providing capital services and security services.

As digitalization accelerates, demand is growing for
networking, security reinforcement, and cloudutilization. The Integrated Service Business accelerated
due to increased proposals for ICT strategy granddesign, as well as operation and optimization, and theco-creation business with customers progressed in managed
services. We also implemented enhancements to the quality andefficiency of our operations, thereby enhancing productivity.

Customers’ needs have changed from ownership
Challenges of ICT equipment to solving management issues
utilizing ICT. In order to respond to the shift fromownership to utilization, it is essential for us to shift
our business model from hardware sales to service
provision.

We strengthened our business base by preventing a
Challenges recurrence of the failure of arrogance, as well as byimplementing governance and corporate culture
reforms. In order to achieve further growth, ourchallenges are to create solutions for solving social challenges,
and to promote a stock-type business that achieves stablebusiness growth as well as visualization of data.

Results

Results and challenges

Service ratio(Revenue)
ROE

2016

2018

38.9%
2.1%

42.6
12.8

%
%

Results

Service ratio(Revenue)
ROE

2019

2021

42.8%
15.9%

44.5
15.8

For a new Medium-Term Business Plan that enables us toleverage our superior technology capabilities and uniquestrength in assessing value, based on the results and challengesof the previous Medium-Term Business Plan, amidst a market
environment where the importance of networks is growing

Based on our new redefined philosophy system, we
aim to further enhance our corporate value andachieve sustainable growth, by implementing growthstrategies and reinforcing our business base tosupport these strategies

Solving social challenges through digitalization

Evolution of technology

202,122●Operating margin (%)

174,825
153,124

186,353

153,346

8.9

8.9

Thoroughvisualization

Corporate
culture reforms

Social responsibility

Cloud, AI / IoT, robots

Sustainability

A safe and high-quality network is
the foundation for all aspects of business

2024

Service ratio
Performance (Revenue)

targets

ROE

Net One’s strengths
World-leading
networktechnology

Expertise incriticalassessment

Integration
capability

210,000

220,000

55.0
20.0

%
%

226,000

12.0
Opportunities in the previous Medium-Term Business Plan

9.7

Financialstrategy

Reinforcement of the business base
Personnel
strategy%

188,520

Servicestrategy

ESG

10.5

11.2

Expanded business ICT investments
and sustainability investments of customers
Expanding business opportunities through co-creation
Expanded customer contacts

6.8

Challenges in the previous Medium-Term Business Plan
Governance and corporate culture

3.5
5,368
2016
net one report 2022

6,925
2017

Review of Operations

Management indicators / Performance■Operating income (Million yen)

Businessstrategy(decarbonization, a declining birthrate
and an aging population, regional revitalization)

Net One’s perspective%(Shift to services)

Growth strategy

Changing demands■Revenue (Million yen)

4.5

25

Executing our growth strategy and strengthening our business base,with the aim of realizing our new philosophy system

Growth Strategy

Improved our track record with cloud and security as ourcore business. Shifted from a hardware sales-oriented
business to a business that includes highly profitable,
added value services

For the current Medium-Term Business Plan

Value Creation

Concept and strategy

2016– 2018

Introduction

We have implemented the previous Medium-Term Business Plan as a strategy for sustainable growth, in response
to customer needs and an operating environment that have changed along with the progress of digitalization.
Based on a review of the results and issues of the previous Medium-Term Business Plan, which ended in fiscal
2021, we have formulated our new Medium-Term Business Plan, with the aim of expanding areas in which we
provide value.

Review of the previous Medium-Term Business Planand status of the current Medium-Term Business Plan

11,8092018

16,49919,6732019

2020

16,7902021

Promote stock-type business

22,00024,6002022

2023

27,100

Data visualization

2024

(FY)

net one report 2022

26

Chapter 2

Growth Strategy

2022 – 2024 Current Medium-Term Business PlanAs the digitalization of society accelerates, networks and their security are growing in importance.
In light of our business environment and the challenges of our previous Medium-Term Business Plan, we
formulated our current Medium-Term Business Plan with the aim of contributing to solving social challenges
by applying world-leading network technology and achieving stable growth by accelerating the shift toservice businesses.

Our understanding of our external environment, opportunities, and challenges

Basic policy and overall picture
Basic policy
Reinforcement of
the business base●

Expand our business fields by entering those that have a large potential for solving challenges
faced by society through digitalization● Link support for DX strategy formulation with the package provision of cutting-edge examples,in order to install a highly profitable service lineup● Pursue an optimal capital structure, by balancing strategic business investment and proactive
shareholder returns

Growth strategy●

Performance targets● At the Company, we are making steady progress in capturing network-related demand. Although the shortage of semiconductors

Value Creationcore of digitalization, will become increasingly important.

Install a solid management structure based on three pillars: corporate culture reforms,
thorough visualization, and personnel strategy●

Awareness of current conditions● Digitalization is progressing in all industries at an accelerating pace. Going forward, the network field, which is positioned at the

Introduction

Overview of the 2022 to 2024 Current Medium-TermBusiness Plan

Achieve the highest scale and profitability in our history, with revenue of 226.0 billion yen andan operating margin of 12%, while aiming for high capital efficiency with an ROE of 20% or
more, by implementing our growth strategy

had a significant impact in fiscal 2021, we achieved the operating income target of the previous Medium-Term Business Plan,
based on actual performance excluding the impact of the semiconductor shortage.
● Although some challenges remain regarding our internal control, business opportunities are expanding significantly.

Changing demands● Innovative advances in ICT

declining workforce● Urgent digitalization required due to changes in theindustrial structure● Replacement of legacy systems for the 2025 Digital Cliff● Explosive increase in the use of cloud services● Improvements in the sophistication and availability of AI

and IoT technologies● Evolution of devices, robots, drones, etc.

What is required is a network systemthat provides support for all
Develop digital infrastructure
in response to the increased
digital demand

Unchanging trends● Increased communication volume● Resulting increased demand for network installation

Expand cyberspace throughutilization of technology

Expanded business ICT investments
and sustainability investments of customers

Expanded business opportunities through co-creation
We accelerated support for MSP through co-creation withservice providers and others. Further business development isin sight, through standardization and automation.

Expanded customer contacts
Achieved an organization and working styles that maximize thequality and efficiency of sales representatives and engineers,
thereby deepening and expanding our customer base27

net one report 2022

Service strategy

Financial strategy

Accelerating business growthin focus areas

Evolving the profit structure throughbusiness model reforms

Capital raising/strategic investment
Shareholder returns● Rising expectations for ICT to solve management issues● Increasing sophistication and complexity of network technology

Reinforcement of the business base
Personnel strategy

Support management through the growth and success of our diverse personnel

Thorough visualization

Visualizing data to increase the speed of transformation

Corporate culture reforms

Fundamental reform of our corporate culture and organizational culture
to prevent the recurrence of the failure of arrogance

Challenges
Governance and corporate culture

Social responsibility

Multiple failures of arrogance occurred. The challenge is not
only to prevent recurrence, but also to continuously reform thecorporate culture itself, in order to build a stronger businessbase.

Sustainability
Review of Operations

Through deep relationships with customers, we have gained
opportunities to participate in and support upstream DX
strategies and grand designs, thereby expanding areas related
to the business ICT investments and sustainability investmentsof our customers.

Business strategy

Automate using robots
and machines tosave manpower

Changes that need to be addressed

Opportunities

Growth strategy

ESG● Expansion of ICT investment

Implement growth strategies toward our new redefined philosophy system(Purpose, Mission, Vision, Values),
and reinforce our business base to support these strategies

Growth Strategy● Increased need to increase productivity due to a

Improve work efficiency
through cloud services

2022 – 2024 Current Medium-Term Business Plan

Evolution of technology

Promote stock-type business
Short-term revenue declined due to the spread of COVID-19
and delays in equipment delivery caused by the semiconductor
shortage. The challenge is to promote stock-type businesses
to enable stable management.

Data visualization
There were issues with the monitoring methods for revenue
and business risks, in terms of speed and comprehensiveness,due to the inability of the management system to keep pacewith the increasing complexity of the business structure.

Performance targets

FY2022

FY2023

FY2024

Operating margin

10.5%

11.2%

12.0%

Revenue

210 billion yen

220 billion yen

226 billion yen

Service ratio

47.6%

50.0%

55.0%

ROE

19.2%

19.5%

20.0%

net one report 2022

28

Chapter 2

Growth Strategy

Explanation of the Current Medium-Term Business Plan by the COO

Takuya Tanaka
Director,
Executive Vice President, COO

Successfully captured investment demandand improved customer relationships*MSP: Abbreviation for Managed Service Provider. A solution that supports
provider services with support from line connection to use. It is a businessmodel that enables rollout of business to SMEs efficiently.

Background of the formulation of the current
Medium-Term Business Plan

Reflecting management issues
in the previous Medium-Term Business Plan

Results of the previous Medium-term Business Plan
Revenue

Performancehighlights

ROE

16.7 billion yen

8.9 %44.5 %

15.8 %(target 21.0 billion yen)(target: 9.5%)(target: 50.0%)(target: 16.8%)

Integrated Service
Business

Target bookings:+25.0 billion yen

Actual bookings:+32.2 billion yen

Target service ratio:

50 %Actual service ratio:

44.5 %

Healthcare: Continued efforts aiming for DX, despite decreased
investments due to the COVID-19 pandemic
School systems: Progress in educational DX with the GIGA school concept
Smart factory: Acceleration of DX in manufacturing factories
MSP support: Progress in co-creation of services and support for groupcompanies
Refurbishment: Establishment of highly profitable and green businesses

New initiatives to provide operational support to grand design
proposals led to a growth in revenue in the service product group,
which contributed significantly to the improvement in gross profit
margin. On the other hand, the service ratio did not reach the target,
as the product group also saw a simultaneous growth.

Significant progress has been made in efforts toward work style innovation, in conjunction with responses to the
COVID-19 pandemic. On the other hand, DX saw a delay in progress, as priority was given to reestablishing policies
and responding to failure of arrogance.

Overall picture of the current
Medium-Term Business Plan

Review of Operations

net one report 2022

Service ratio

188.5 billion yen

Work styleinnovation 2.0/DX

29

Operating margin(target 220.0 billion yen)

Focus markets
and new models

Growth strategy

Operating income

ESG

Based on the issues that were clarified in the previous
Medium-Term Business Plan, the current Medium-Term

Growth Strategy

In the past few years, DX initiatives have become a pressing
management challenge in the markets we cover, without
exception. With the current tailwinds in the market, the needsof our customers are firmly aligned with the values of ourbusiness propositions, and the business environment isfavorable.
In this business environment, we achieved a total booking
growth of 32.2 billion yen against the target of 25.0 billion yen
in three focus markets and two new models, in our MediumTerm Business Plan ended in fiscal 2021 (hereinafter, the“previous Medium-Term Business Plan”). Support for the
MSP business* was the area with the greatest growth. Alongwith smart factories, where demand for DX in factories is
expected to increase further in the future, growth is also
expected in the new Medium-Term Business Plan whichstarted in April 2022 (hereinafter, the “current Medium-TermBusiness Plan”). In addition, the acceleration of support forcustomers’ overall ICT infrastructure in the Integrated Service
Business has led to opportunities to participate in andsupport the formulation of DX strategies and grand designs,
as a strategic partner.
Another achievement of the previous Medium-TermBusiness Plan that I would like to emphasize is the successof our work style innovation efforts, which further
strengthened our relationships with our customers. The
shortage of engineers is a major issue in the IT industry. Withlimits on manpower, we believe that it is important to
respond efficiently in order to provide valuable services to ourmany customers. By implementing work style innovations forour engineers and utilizing digital tools, we have been able torespond efficiently and quickly to customer needs, andengage in better communication with our customers.

Value Creation

Summary of the previous Medium-Term Business Plancore of all industries, we will leverage our strengths in
network technology capabilities, multi-vendor support, andexpertise in critical assessment cultivated from our largescale customer base.
As for our growth strategy, we will focus on areas where
we can leverage our strengths, and where there is a large
potential for solving challenges through digitalization, in order
to both solve social challenges and accelerate businessgrowth.
In our service strategy, we will continue to accelerate ourshift to services. We will continue to evolve our service lineup
by laterally expanding our experience in DX strategy
consulting service and other full-customization services, tomanaged services and in-house cloud services.
With regard to our financial strategy, our three pillars arestrengthening profitability, optimizing capital structure, andproactively returning profits to shareholders. We will pursue
optimal shareholder returns through stock market valuations
and dialogue with shareholders and investors.
As for measures to reinforce our business base, we haveidentified materialities and clarified the challenges that wemust prioritize. In addition to reforming our governance andcorporate culture and their thorough visualization, we will
work to develop and utilize the professional personnel who
are the source of our growth potential, and to create anenvironment in which employees who have a desire to growcan take on challenges without hesitation. To increase ourpresence in the market going forward, we intend to actively
communicate the outstanding skills and advanced
knowledge of engineers externally.
Although the market environment is favorable, future
prospects still remain uncertain. However, this period can beseen as an opportunity for us to engage in thoroughdialogue with our customers and have a series ofsubstantive discussions regarding the ideal form of network.
We believe that our next stage will reveal itself if we
steadily implement the strategies and measures set forth in
the current Medium-Term Business Plan, without becoming
complacent in the current market environment.

Introduction

We will steadily implement our growthstrategies and reinforce our business base,to solve social challenges and achievebusiness growth.

Business Plan leverages our unique characteristics and sets
forth various strategies to achieve further growth andreinforce our business base.
First is the promotion of stock-type business. Although
our core business customers have been major firms,
recently we have increased our business with SMEs, in linewith the expansion of our support for MSP business. With
the expansion of our customer base, we need a versatile
service lineup to meet diversifying needs.
The service strategy of the current Medium-TermBusiness Plan focuses on the development of services thatmeet changing needs. We will leverage our pastachievements to laterally expand cutting-edge case studies
created through full customization, and deploy them asstandardized services to a diverse range of customers. This
will, of course provide added value to our customers, and it
is also intended to expand our stock-type business andsecure stable earnings.
Next is the visualization of data. It is essential for us toregard the data we have accumulated as a management
resource for future growth, and to utilize it effectively inforecasting and analyzing business profitability and theeffects of investing management resources, and managing
the skill sets of our employees. Although we are currently inthe phase of establishing a data sharing system, we hope toquickly move forward to the phase of utilizing data for
management and business. In April 2022, we established a
new specialized department called the Corporate Data andAnalytic Office, which has begun their first measure of issue
analysis, and this initiative is attracting a great amount ofinterest from our customers. If we are able to establish
know-how in visualization, we can expect to generatebusiness in the future.
Finally, we are reforming governance and our corporate
culture. Up to now, we have positioned the strengthening ofgovernance as an important management challenge, and wehave been working to improve the effectiveness of the Boardof Directors and accelerate decision-making. We haveactively implemented reforms, including the transition to acompany with an Audit & Supervisory Committee in June
2022. Going forward, we will continue to promote theongoing reform of our corporate culture through thepenetration of our newly formulated corporate philosophy
system.

Moving forward to the next stage
by leveraging our strengths
and steadily implementing the plan
The basic policy of the current Medium-Term Business Plan
is to engage in efforts to execute our growth strategies andstrengthen the business base that supports them. In abusiness environment where digitalization is becoming thenet one report 202230

Growth Strategy

Chapter 22022 – 2024 Current Medium-Term Business Plan
Explanation of our Business Strategy by the CSO

Growth strategy policies and initiatives
Accelerating the shift to services by turning social challenges into new business opportunities

Business strategy

Service strategy

Financial strategy

Generate +30 billion yen of revenue
in our focus areas

Expand our focused services
and increase the service ratio to 55%

Formulation and execution of our financial strategies
in line with a business shift to services

Focus on areas
with a high demand for DX

Create cutting-edge examples
and enhance efficiency throughstandardization and automation

Koji Tsuji
1. Strategic investment:
30 billion yen level, to strengthen
profitability
2. Pursuit of an optimal capital structure
3. Proactive shareholder returns

Social challenges

Proposed solutions

Regional revitalization(creation of diverse societies)

Create an equitable environment where no one is left behind,by establishing a digital connection between society and residents

Declining birthrates
and an aging population(workforce improvement)

Complement the decline in the workforce due to the declining population and aging,by improving operational efficiency and productivity through DX

Green growth(realization of a decarbonized society)

Reduce CO2 emissions through thorough utilization of a cutting-edge ICT infrastructure,with the aim of achieving a decarbonized society

？

？

？

What areas in digital datautilization needs are expected
to grow over the next five years?

In the previous Medium-Term Business Plan that ended infiscal 2021, we defined the markets and customers on which
we will focus our efforts, and strengthened our relationships.
As a result, we were able to foster relationships of trust, tothe point that we were asked to play a role as a strategic
partner, such as by formulating a grand design for acomplete ICT platform and providing lifecycle support. One ofour great achievements was that we learned to have a broad
perspective, from facing social challenges and challenges at
the forefront of our industry through our customers. We also
took the opportunity to take steps toward contributing tosolving social challenges, as set forth in the current MediumTerm Business Plan that started in April 2022.
As delayed digitalization is a major challenge in Japanesesociety as a whole, we were able to reaffirm the importanceof networks, which support all aspects of digitalization.

1. Digital government

2. Social infrastructure to realize Society 5.0● Strengthening the information

security, information security cloud● Upgrading ICT infrastructure
in local communities● Solving challenges faced by local
communities and regional
revitalization through DX● Improve business value throughand railroad infrastructure● Stabilization of social infrastructure
through advanced operations● Strengthen business field security

Targets: Telecom / social infrastructure,
the private sector, healthcare

Targets: Manufacturing industry(automobiles, electronics, machinery, etc.)+10 billion yen

Revenue target+10 billion yen

data utilization● Implement visualization

for decarbonization management

Revenue target+10 billion yen

Enterprise market

Public market
Telecom carrier market, partner business

KPI: Revenue of solutions for solving social challenges in FY2024
Related page

31

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Chapter 4: Review of Operations

net one report 2022

30 billion yen

Amidst changes in society and markets, as well as various
social challenges, there has not only been an evolution oftechnology, but also a shift of needs from things to services,in other words, from integration centered on network
equipment to the provision of services. In light of this businessenvironment, identifying the optimal method of expanding ourbusiness fields and improving our services became achallenge in our previous Medium-Term Business Plan.
The business strategy in the current Medium-TermBusiness Plan focuses on three social challenges: “Regional
revitalization,” “Declining birthrates and an aging population,”and “Green growth,” which are common challenges inadjacent areas of our existing businesses. Because these arecommon challenges, we believe that we can make a highlevel of contribution with a high degree of feasibility, as we
accelerate solutions. We have organized these three social

Creating inter-organizational synergy for thesteady implementation of the current
Medium-Term Business Plan
The role of the CSO is management of the effective
implementation of business strategies, and building up thedriving force necessary to achieve goals, while promoting
the creation of synergies between organizations. Goingforward, in order to face management and social challenges
together with our customers, we will develop ourorganization and personnel to further strengthen our
relationships.
In Japanese society today, the most important key
challenge is how much we can strengthen the economy, sothat we can recover from the so-called “lost three decades”
of economic stagnation caused by the collapse of the asset
price bubble in the early 1990s. We intend to help bolster
the national strength of Japan by providing value to themarket and customers through our services, and by putting
the Japanese economy on a growth trajectory.

net one report 2022

Review of Operations

Revenue target● Upgrading telecom infrastructure● Upgrading electricity, gas,

Targets: Local governments,
local public institutions

3. Smart manufacturing

Accelerating co-creation with our customers
beyond market barriers, using our networks
as our strength

Outlook

ESG

Business strategy in the current Medium-TermBusiness Plan

challenges in order to achieve both “social value” and“economic value,” and have defined three focus areas.
The first focus area is Digital government, the area ofsociety which has the greatest room for growth in terms ofdigitalization. The second area is Social infrastructure to
realize Society 5.0, and it is necessary for us to strengthen
this area as the base for information infrastructure that
supports society as a whole. The third area is Smart
manufacturing. As digitalization progresses from the factory
to the entire supply chain, there is a growing demand for thevisualization of information, with the aim of strengthening
security and decarbonization. Each of these areas requires
both upgrading and strengthening of networks and security,
which are two absolute strengths of the Company.
These social challenges are closely interrelated andcannot be solved by a single business. We will provide a cocreation service model that brings customers together, andalso search for shortcuts to solving social challenges byengaging in deeper cooperation within the Company,
beyond the framework of the market.

Growth Strategy

Accelerate business growth in three focus areas that are adjacent to existing businesses, to contribute to solving
challenges faced by society

What areas are likely to generatemutual synergies through use of
the Company’s track record?

Summary of the business strategy in the previous
Medium-Term Business Plan

Gaining a higher perspective on social challenges
through co-creation with our customers

Business strategy

Which areas are closely correlatedwith challenges faced by society
and have a large potential for problem
solving through digitalization?

Executive Director
CSO (Chief Strategy Officer)
Value Creation

1. DX strategy consulting service:
Creating cutting-edge examples
starting with consulting
2. Managed services:
Lateral expansion of the above
cutting-edge examples
3. In-house cloud services:
Provide the full package of the above
cutting-edge examples

1. Smart manufacturing:+ 10 billion yen
2. Social infrastructure
to realize Society 5.0:
+10 billion yen
3. Digital government:+10 billion yen

We will implement effective growth strategies
under a co-creation system with our customers,in order to realize both social value andeconomic value.

Introduction

Growth Strategy

32

Growth Strategy

Chapter 2

Service strategy

Explanation of our Service Strategy by the CTO

DX strategy consulting
services

Focusedservices

Services to support the formulationof IT strategies regarding how ICT
should be utilized and how it cancontribute to business

Managed services

In-house cloud services

Total service that provides functions
and operations for the continuous
operation of customer systems

Services that allow the secure useof various ICT system functions
through the network, by means ofan environment prepared in advance

Capitalizing on network technology
to accelerate the shift to services
and achieve customer success

Introduction

Develop highly profitable services to meet changing needs; achieve system standardization and automation byleveraging past track records, and realize improvements in the utilization of ICT by customers, by linking businessstrategies to cutting-edge technological knowledge

Fumihiko Shinoura
Executive Director
CTO (Chief Technology Officer)

Lateral expansion into existing
markets and focus areas

Standardization and automation

Full customization

Business
opportunities

Standardization and automation of systems by leveraging our track record and expertise in providing
ICT infrastructure systems
Provision of prompt and stable system delivery, and improvement of customer ICT utilization

KPI: FY2024 service ratio
P.19

55%

Chapter 1: Value Creation through Customer Success

Changes in our service businessIn order to achieve stable growth and enhanced profitability,
create and expand new function-providing service businesses that are not linked to hardware
Conventional

FutureHardwareFunction-providing services

linkedIntegration of know-how on hardware,( software,
cloud, services, and utilization )Initiatives to create function-providing services
1. Creation of cutting-edge examples
Present services as a menu
(thorough standardization / automation)

DX strategy consulting service

Supporting the formulation of DX strategies for business contribution
Grand design, measurement of the ICT investment effect, streamlining of business processes(Semi-customization)

Managed services
Provide total functions and operation of
the customer’s ICT platform

2. Lateral expansion(No customization)

Function-providing services

In-house cloud services
Providing services for ICT platform functions(network / security, etc.) from our facilities

In our previous Medium-Term Business Plan, which ended infiscal 2021, we focused on the Integrated Service Business,
which supports the entire customer lifecycle from theperspective of customer success, with the aim oftransforming to a service-oriented business model. One ofour great achievements was that employees are now able toput into practice a way of thinking that is centered on theperspective of customer success, such as asking, “What are
the customer’s expectations, and how should we provide
value?” As a result of the evolution of the Company’sbusiness model to support the overall optimization of ICT
platforms based on our customers’ management strategies,
the positioning of the Company in the eyes of our customers
has changed, and we have become a strategic partner inmore projects.
In terms of initiatives for standardization and automation,
the Company has accumulated its proprietary intellectual
property, and made progress in the development of ICT
platforms for company-wide utilization. However, this is still
not sufficient. In the previous Medium-Term Business Plan,
we promoted the optimization of our business at thebusiness unit level, toward a shift to services. Our current
Medium-Term Business Plan, which started in April 2022 is
now in the phase of promoting standardization andautomation for overall optimization. We will revise ourorganization and functions, and change the way we work, inorder to allocate the resources we have created throughstandardization and automation to operations that increase
added value for our customers.

Service strategy in the current Medium-TermBusiness Plan

Starting from networks to achieve true
customer success through standardizationand visualization

Outlook

Providing an opportunity to put cutting-edgeknowledge into practice and train DX
personnel
In the future, based on visualized data, we will analyze
the contribution to business made by the ICT platform
we provide to the customer, and aim to make proposals
that lead to the reform of the core parts of theirbusiness. This will also require new methods such asprocess mining to analyze the relationships between
systems and business processes. Furthermore, it is also
necessary for us to master cutting-edge technology.
Putting technology into practice is crucial for training
engineers. In order to create new added value, we will
provide opportunities for learning and practice, andstrive to train personnel who have the ability andexpertise to realize DX, as well as the perspective ofcustomer success.

Review of Operations

2. Lateral expansion(Full customization)

Becoming a strategic partner for ourcustomers by instilling the perspective ofcustomer successa further shift to services. We will laterally expand cuttingedge case studies created by integrating seeds, needs, andoriginality at a high level, and present them as a menu ofstandardized services. This will not only enable us to provide
services that meet a wider range of customer needs, butalso help to secure stable earnings through the growth of
our stock-type business.
In addition, the “thorough visualization” set forth in thebasic policy is extremely important for achieving customer
success. For example, in terms of maintenance,“visualization” is the key to monitoring the stable operation of
the systems that are used by our customers. The true needsof our customers lie in how we can propose efficientmechanisms and operations that do not cause failures, whileconstantly analyzing system operation. We are uniquelycapable of realizing such a s e r v i c e , th a n ks to i ts
understanding of network systems. By continuing tovisualize systems and provide advanced services, newneeds will arise, leading to the further improvement of ourrelationships with customers.

ESG

Services(design, installation, maintenance, operation)

Summary of the service strategy in the previous
Medium-Term Business Plan

Growth Strategy

Related page

Deployment of packages
to diverse customers

Value Creation

Embodiment of
cutting-edge examples

Servicecomponents

The service strategy in the current Medium-Term Business
Plan is based on the promotion of stock-type business and33

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34

Growth Strategy

Chapter 2

Financial strategy

Explanation of our Financial Strategy by the CFO● Realize an acceleration of growth, and enhance profitability by proactively investing capital to

execute growth strategies

Basic policy● Fund investments through cash on hand, as well as capital procurement through borrowings● Continue to proactively pursue shareholder returns, with a target dividend payout ratio of 40%

Strategic investment

Investment for improvement

30.0 billion yen level
Compared to the previous
Medium-Term Business Plan:
1.5 times● Thorough visualization● Personnel training and acquisition● Internal DX infrastructure● Investigative research for new services● Strengthen security● Service platforms for business● M&A

Summary of the financial strategy in the previous
Medium-Term Business Plan

● Use debt financing as the basic method for new capital procurement● Determine shareholder returns based on a consolidated dividend payout ratio target of 40%, while

Shareholder returns

P.61

comprehensively taking into account factors such as business performance, financial position, andprogress in the current Medium-Term Business Plan
● Use internal reserves for investment in growth and share buybacks as part of a flexible capital policy

Financial Highlights

Strengthen systems to achieve management indicators
Achieve management indicators through a company-wide effort
with thorough visualization, KPI logic trees, and financial strategies
KPI logic tree

Financial strategy

Refining and accelerating
management judgements
Prevention of recurrence and promotion of
corporate culture reforms

Towards the same direction
company-wide with the aim ofachieving management indicators

Formulation and execution offinancial strategies
to execute growth strategies

Visualization of management(Profitability status, management of estimates and results)

Management Indicators

By market

By project

Revenue

Operating margin

Strategic investment

By device

By service

Service ratioROE

30 billion yen level in 3 years,
to strengthen profitability

compared to the previous( 1.5 times,)
Medium-Term Business PlanKPI logic tree
Sales
division

Engineering
division

Pursuit of an optimal capital structure
Corporate
division

For sustainable growth
Visualization of business processes
Visualization of organization and people

35

net one report 2022

Generate
profitand cashCreatebusinessbase

Createbusiness
structures

Proceed with examination in conjunction
with the results of thorough visualization

Proactive shareholder returns
Determined comprehensively taking into accountfactors such as financial position and progressin the current Medium-Term Business Plan,
financial position, and progressin the current Medium-Term Business Plan

Financial strategy in the current Medium-TermBusiness Plan

Planning to make new investments worth a
total of 30.0 billion yen over three years
In the current Medium-Term Business Plan from fiscal 2022
to fiscal 2024, the total amount of new investment over the
next three years is 30.0 billion yen. In the three years of theprevious Medium-Term Business Plan, we invested
approximately 20.0 billion yen. In our current plan, we havedecided to add 10.0 billion yen, in order to look ahead to the
future from the perspective of backcasting from our granddesign, which envisions the next ten years for the Group.

Strengthening profitability through strategic
investment, optimizing capital structure,
proactively returning profits to shareholders,and achieving management indicators
In our financial strategy, our policy is to aim for a further
improvement of our corporate value by “strengthening
profitability through strategic investment,” “pursuing the
optimal capital structure (finance),” and “proactively returning
profits to shareholders.”● First is “strengthening profitability through strategic
investment,” which can be broadly divided into
improvement investment and growth investment. In termsof improvement investment, we will quickly be able tounderstand and utilize data related to our management
conditions and management challenges, by investing in
the “thorough visualization” of our management
organization structure and business processes, thereby
improving performance. In terms of growth investment,
we will make investments in human capital in order toproduce a large number of personnel who will be
responsible for the technology capabilities that form thestrengths of the Group. We will also focus on recruiting
and training personnel by investing management
resources in a wide range of fields, such as revitalizing
recruitment activities and upgrading our education andtraining systems.

net one report 2022

Review of Operations

Break down and understandmanagement indicators, and make
optimal investments inmanagement resources

In the previous Medium-Term Business Plan from fiscal 2019
to fiscal 2021, the Group accelerated the Integrated Service
Business against a backdrop of needs for digitalization in allareas of society, with the theme of reforms to adapt to newera. Bookings in the final fiscal year of the plan reached arecord high of 231.8 billion yen. However, revenue was
188.5 billion yen, operating income was 16.7 billion yen,operating margin was 8.9%, and the service ratio was
44.5%, none of which reached the planned goals. This was
mainly because the delivery time for product purchases has
been extended due to global semiconductor shortages.
Meanwhile, progress has been made in the reform andestablishment of services to adapt to the new era, such as
establishing deeper relationships with our customers inassociation with the DX strategy, and expanding business
opportunities through co-creation, including support for
MSP (Managed Service Provider) business. Since suchprogress can help to shift to a financial structure that is lesssusceptible to delays in product delivery, we recognize thisas an important financial achievement.

ESG

Thorough visualization

Reform and establishment of the Company’s
services are progressing, against the
backdrop of needs for digitalization

We have formulated three growth strategies in the current
Medium-Term Business Plan. These strategies are: 1)“Business strategy” to accelerate business growth in our
focus areas, 2) “Service strategy” to develop our profit
structure through business model reforms, and 3) “Financial
strategy” that supports our business and service strategies
in terms of finances and funding. We will allocate a total of
30.0 billion yen in new investments to these growthstrategies.

Growth Strategy

Related page

Vice President
CFO (Chief Financial Officer)● Sustainability● Use cash on hand and cash generated by business

Finance policy

Kazuaki Ishibashi

Growth investment

Value Creation(FY2022 to FY2024)

Pursuing the maximization of corporate value
by building a strong financial foundation,
while enhancing the Company’s source ofprofits and competitive advantage

Introduction

Enhance our corporate value through three pillars: strengthening profitability through strategic investments, pursuit ofan optimal capital structure, and proactive shareholder returns

36Growth Strategy

Chapter 22022 – 2024 Current Medium-Term Business Plan

Policies and initiatives for strengthening our business basePromote governance and corporate culture reforms / Establish a system to accelerate the shift to services through a company-wide effort
Governance and corporate culture reforms

Toward a business base that realizes medium to long-term growth● Continuously promote recurrence prevention measures● Reform and strengthen the Board of Directors into a monitoring-type
Board● Personnel evaluation / compensation system to accelerate the shift
to services

Corporate culture reforms
In order to prevent a recurrence of the failure of arrogance, we have positioned corporate culture reforms as a key
measure. We have established a specialized organization as an advisory committee to the Board of Directors for such
reforms, in order to further promote the reform of our corporate culture, and the implementation and instilling of
measures to prevent the recurrence of such failures of arrogance.

Governance and Corporate Culture Advisory Committee

Business Strategy

Complement the decline in the workforce due to the declining population and aging,
and an aging population
by improving operational
efficiency
and productivity
through
DX on / inheriting
and createa prosperous
future bycarrying(workforce
improvement)
The ROE target for the final fiscal year of the current

？

？

？

● Stabilization of social infrastructure● Implement visualization

Targets: Local governments,
local public institutions

Targets: Telecom / social infrastructure,
the private sector, healthcare

Targets: Manufacturing industry(automobiles, electronics, machinery, etc.)

Revenue target

through advanced operations+10 billion yen

Revenue target+10 billion yen

for decarbonization management

Revenue target+10 billion yen

Enterprise market

Public market

Enhancing governance● Shift

focus from business
management to monitoring● Strengthen the management
oversight system, including
further coordination of threeway audits, etc.

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37

P.53

Enhance internal
control systems●Foster an environment in which● Continued implementation,● Strengthen the effectivenessemployees feel comfortablevoicing their opinions● Instill a new code of conduct
and values●Train and actively recruit personnel● Create a system to remember
our failure of arroganceof the three (Defense-) lines
model● Continuous, effective PDCA
implementation

Chapter 3: Feature Article: Corporate Culture Reform

Current “unsatisfactory visualization”

Thorough visualization to be realized

The management system has not been able to keep pacewith the increasing complexity of the business structure

Improve business performance through a timely understanding of
the data and facts related to business conditions and issues

Specific issues● Fact-based management judgments and faster

Delay in development of a data integration platform,
decentralized data management● Prevention of recurrence and promotion of corporate●

Internal data is scattered among different departments and individuals

Inconsistent profitability management on a project-by-project basis●●

Management still undertaken on an individual product or service basis
Cost and quality evaluation of outsourcing is also insufficient

Organization is divided on a top-to-bottom basis,and coordination is insufficient

30 billion yen

including the improvement ofrecurrence prevention measuresdeveloped under eight themes

Support a business base that is conducive to decision-making, via active communication based on informationcommon to all employees through thorough visualization.

●

Related page

Continuous implementation of
measures to prevent recurrence

Thorough visualization

Telecom carrier business, partner business

KPI: Revenue of solutions for solving social challenges in FY2024

P.51

Corporate culture reforms●

Duplications of internal projects
Internal terminology is inconsistent, and departments are not always
on the same page during discussions

decision-making

Review of Operations

in local communities● Solving issues faced by local communities
and regional revitalization through DX

Governance and corporate culture reforms

ESG

tradition
andutilization
making ofinnovation
happen.”Our financial
thorougha cutting-edge
ICT infrastructure,
ReduceCO2Inemissions
Green
growthPlan has been set
Medium-TermBusinessat 20%.
order throughwith thestrategy
aim of achieving
a decarbonizedsociety(realization of a decarbonized society)
is
also
based
on
this
concept.
We
will
implement
to set the achievement of management indicators as amanagement
strategy
andfinancialstrategythatisahead ofcompany-wide goal, we have introduced a “KPI logic tree”
Which areas are closely correlated
thetimes,
and
focus
on
the
creationofeconomicandareas are likely to generate
What areas in digital data socialthat connects“thoroughandWhat“financial
with issues
faced by visualization”
societymutual synergies throughof as the improvement
utilizationofneeds
are expectedvalue, use
as wellour corporate
value, byand havea largepotential forBy
problemstrategy”
withinthe Company.
developing mechanisms
the Company’s track record?
to grow over the next five years?
solving through digitalization?
increasing
thesourceofprofits
and
the
true
competitivethat enable individual employees to understand theadvantage of the Group, and continuing to engage inconnection between their efforts and the financial
dialogue with all stakeholders, including shareholders andstatements, I hope that they will find their work moreinvestors. This is the Group’s mission as an ICT company, torewarding, while aiming for the maximum improvement of
1. Digital government
2. Social infrastructure tocontinuously
realize Society 5.0
Smart tomanufacturingcontribute to3.society
create a prosperous
corporate value.
● Strengthening the information● Upgrading telecom infrastructure
Improveas
businessvalue throughthrough social
future, with the aim of ●growing
a company● Upgrading electricity, gas,
security, information security clouddata utilization
contributions.
● Upgrading ICT infrastructure● Strengthen business field security
and railroad infrastructure

Growth Strategy

v a l uSocial
e , c o n tchallenges
inue to pay stable dividends with amanagement
Proposedmeasuressolutionsfrom a medium- to long-term
consolidated dividend payout ratio target of 40%, andperspectiveisoneof the noGroup’sstrengths.
Create an equitable environment where
one is left
behind,Regional revitalization
maximizevalue by implementing abyflexible
establishing a digitaland residents(creation shareholder
of diverse societies)
The connection
Group hasbetween
stated society
its management
concept in ourcapital Declining
policy. birthrates
Purpose: “Unleash the potential of people and networks,

Personnel / Organization

Engage in deep dialogue with customers and provide high value-added services● Train consulting personnel and DX / CX personnel● Consolidate sales office administrative work and increase dialogue timewith customers● Consolidate our technical departments and consistently provide
high-quality services
Value Creation● Second is “pursuit of an optimal capital structure
Outlook(finance).” We consider the financial resources for
Focusing
on creation of economic value and
Growth strategy policies
and initiatives
investment to be based on cash on hand and thesocial value, and improvement of corporate
operatingbalance generated
business
Accelerating
the shiftbytoour
servicesby activities.
turning socialvalue
challenges into new business opportunities
Since our founding, we have procured ICT products fromCurrently, the trend “from Financial
ownership tostrategy
use” is accelerating
Business strategy
Service strategy
Japan and overseas, and have developed a business thatintheinstallationandstrengtheningof
ICT
In theGenerate +30 billion yen of revenue
Expand our focus services
Formulation and execution of our platforms.
financial strategies
integrates these products into optimal systems for ourin our focus areasand increase the service
ratio
to
55%
in line withPlan,a businessto services
current Medium-Term Businessourshiftfuturefocus areas
customers. This business model does not require large
areexamples“Managed services,” in which we provide a combination
Create cutting-edge
Focus on areas
upfront investments
and has a relatively low
andfinancial
enhance efficiency
through and operations that are required for ourof functions
with high a demand for DX
standardization
burden, when compared to ICT companies within-house and automation
customers’ systems, and “In-house cloud services” that
manufacturingfunctions and companies
engagedStrategic
1. DX
strategyinconsulting
service:
1. Smart manufacturing:enablethe safe and 1.
secureuse investment:of various functions of ICT
30 billion yen level, to strengthen
Creating
examples+ 10 billionapplicationyenlarge-scale
development. Currently,
wecutting-edge
areplatforms via networks. profitability
starting with consulting
2. Social platforms
to realize
Society 5.0:
applying
short-termborrowings
to working capital, in
2. is
Pursuitof an optimal
capitalstructureso it
2. Managed services:“Use” by customers“ownership”
for theCompany,+10 billion yen
order
to respondto extended delivery timesLateralfor productexpansion ofmay
the above
3. Digital
government:
3. Proactive
shareholder
become a businessthat utilizes
balancereturns
sheets. Before+10 billionIf yenpurchases.
we need to raise a large amountcutting-edgeof funds forexamples
I became the CFO, I had worked since 2017 on the launchIn-house
cloud services:
investment activities such as M&A, we 3.
may
use debtof theNet above
One “all in” Platform, a subscription-based service
Provide the full package
shown
financing as a means of raising funds. However, wethat enables customers to use the functions they need in an
believe that we will be able to maintain financial
all-in-one package. A function-providing service is a stocksoundness.
type business model designed to earn continuous profits● Third is “proactive shareholders returns.” We aim toinstead of selling out. At present, it has grown into one of the
Accelerate
growth inthreebyfocus
areasgrowththat are adjacent
to existing
to contributesolving
increase businesstotal shareholder
returnrealizing
Company’s
unique businesses,
services. I believethat thisto
corporateissuesfaced
by society
throughstrategic
investment and increasing corporate
culture, which allows us to make decisions and implement

Introduction

Reinforcement of the business base

Growth strategy

culture reforms

Visualization ofmanagement
Management of
estimates andresults based ona unified data
platform

Visualization ofbusiness
processes

Visualization oforganizationand people

Installation of a
projectmanagement
system thatrealizes overall
optimization

Development ofcomprehensive
projectmanagement
and processdevelopment

Chapter 4: Review of Operations

net one report 2022

net one report 2022

38

Chapter 2

Growth Strategy

Personnel strategy

Explanation of our Personnel Strategy by the CHRO

Professional personnel training

Providing an environment where personnel can thrive

Provide support for the development of individual expertise, so thateach individual can demonstrate critical assessment skills in their
responsible industries, technical fields, and corporate functions,and provide value with a high level of quality

Install an environment and structure that enables personnel withdifferent areas of expertise and values to respect each other andcreate value in optimal teams that are tailored to the needs ofcustomers

Train personnel with strong expertisein both corporate and business divisions

Create an environment where the entire company
engages in efforts to expand customer contact points●●●

Schemes for evaluating team activities

Providing learning through industry-academia collaboration

KPI: Train personnel in security, cloud, and DX / Receive certification as
an outstanding Organization of Health & Productivity Management
P.42

Chapter 3: Personnel Strategy

Social responsibility
Sustainability
Solving social challenges and enhancing our corporate value by promoting initiatives that are identified asmaterialities based on our Sustainability Policy

Sustainability Policy
environment” through our business will enhance
corporate value. We will hone our ICT expertise in criticalassessment and knowledge born of “superior network
technology,” “multi-vendor support,” and “co-creation
with customers” to provide services that create bothsocial and economic values, thereby contributing to asustainable society and achieving sustainable growth forour company.

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39

P.17

Chapter 1: Materiality

net one report 2022

Thriving
professional personnel

Contribution toa decarbonized society

Maintaining and enhancing
a governance structure
for sustainable growth

In our previous Medium-Term Business Plan that ended
in fiscal 2021, we aimed to shift to a service-oriented
business model for the Integrated Service Business as a
growth strategy, and worked to train the personnel thatwere necessary to realize this shift. We have bolstered
our ability to make proposals and carry out project
management for solution provision and consulting
approaches, which has helped us to acquire projects
that are involved in the formulation of our customers’ DX
strategies.
In addition, we have made great progress in work styleinnovation, and were able to establish a highly productive
work style, even online.
Meanwhile, in response to problems in our personnel
system and its operation that were pointed out by an
external investigative committee in cases of misconduct, weare holding discussions on revising the personnel system. In
order for the Company to grow soundly and continuously,
we must train personnel who have strong expertise in bothour business divisions and corporate divisions. It is alsoessential for us to train the next generation of leaders. As
one of our medium- to long-term initiatives, we intend to lay
the foundations for the three years of the current MediumTerm Business Plan.

Personnel strategy in the current Medium-TermBusiness Plan

Each individual becomes a professional toexceed customers’ expectations
In our personnel strategy, we will focus on “Professional
personnel training” and “Providing an environment where
personnel can thrive.”
In order to accelerate the shift to a service-oriented
business model, we must expand consulting personnel and
DX/CX personnel. Under the previous Medium-TermBusiness Plan, we are now able to provide optimal solutions
for our customers’ challenges. The next step is to discoverchallenges and make far-sighted proposals that “exceed

OutlookTraining next-generation leaders andcreating an environment in which diverse
personnel can demonstrate their abilities
In future personnel strategies, it will be important to train
next-generation leaders for sustainable growth and the
medium- to long-term improvement of our corporate value.
In order to close the gap between management and generalemployees, the next-generation leaders, who are mainly
middle managers, must be able to specifically explain
management’s message to members in their own words.
Moreover, it is also necessary to train members while
showing the direction of business at the forefront.
Strengthening the awareness of next-generation leadersregarding personnel training will also help in the training of
future next-generation managers. Furthermore, it is essentialthat we create an environment in which diverse personnel
can gather in the Company and demonstrate their abilities.
In particular, we will work on promoting women’s
empowerment and health management as materialities of
the Company, by setting medium- to long-term goals.
net one report 2022

Review of Operations

Four materialities (key challenges) to be addressed by the Net One Group

Progress in personnel training and work styleinnovation to accelerate our shift to services

customers’ expectations.” It is certainly true that technology
evolves rapidly, has value in and of itself, and is a source ofcompetitiveness. However, to maintain that competitiveedge, we need the strength of our personnel. Competitive
advantages that rely on specific technologies are notsustainable, and we have risks and concerns that they will
eventually become obsolete. Therefore, we have redefined
the source of our competitive advantage as our personnel,
and each of our business divisions and corporate divisions
pursues a high degree of expertise as professionals. Having
done so, we must mutually improve our ability tocommunicate and work as a team, at a high level.
The keys in our new personnel system are “Team,”“TAKUMI,” and “Fairness,” which we have stated in the
Personnel Management Policy. Our ideal is for craftsmen
with expertise in each area to mutually demonstrate theirindividual abilities, creating synergies that will lead to thecollective strength of the team. We are now examining ways
to create a system to fairly and impartially evaluate thecontributions of individual employees.

ESG

As a leading network company, we have grown by
providing high value-added services that support thetransformation of our customers and society.
Our value is “to create a prosperous future throughtradition and innovation by unlocking the potential ofpeople and networks,” and we believe that contributing to“customer success,” “employee happiness,” “building
co-creation relationships with partners,” “increasings h a re h o l d e r v a l u e , ” a n d “ p re s e r v i n g t h e n a t u r a l

Summary of the personnel strategy in the previous
Medium-Term Business Plan

Growth Strategy

2022 – 2024 Current Medium-Term Business Plan

Realization of a safe
and secure advanced
information society

Director, Senior Vice President
CHRO (Chief Human Resources Officer)

Transition to a personnel system that supports diverse growth

Expansion of DX/CX personnel for the service business

Related page

Mitsuru Kiuchi
Value Creation

Expansion of consulting personnel

Reorganization of the technical organization
Consolidation of sales administration

We will create a company where
all employees can demonstrate their abilities
as professionals, in order to exceed
customers’ expectations.

Introduction

Create an environment in which personnel who have a desire to grow can take on challenges without hesitation anddemonstrate their abilities to the fullest

40

Chapter 3

ESG Initiatives to Strengthen Capital

Environment

Contributing to a decarbonized society

Society

Personnel Strategy
Introduction

Basic approach

The Group considers environmental issues, including climate change to be important management challenges, and has set“contribution to a decarbonized society” as one of its materialities. Based on this materiality, we will work to both reducegreenhouse gas emissions through our business and reduce our environmental burden in our own business processes.

As the evolution of technology is rapid in the ICT industry, responding to evolution itself is “value,” and represents the“source” of our competitiveness. The power of personnel is the key to maintaining our competitiveness. There is a risk that
our competitive advantage may become obsolete if it is reliant on a specific technology. Therefore, we believe that the pointof human capital management is to train and produce excellent personnel who can think and act on their own, so that they
are able to create value from the essence and utilization of technology.
At the Group, we make reference cases from the practical experiences we have gained from successes and failures wehave made through our own operations, and use these reference cases in solutions for our customers. As such, theknowledge and experience of our employees help to create added value. For this reason, we believe it is critical to train
personnel who can act autonomously and create solutions, and for each and every employee to understand and adopt theCode of Conduct and compliance that form the foundation of these activities.
In addition, we are promoting diversity-and-inclusion initiatives with the aim of creating synergies and innovation throughthe integration of diversity. We aim to create work environments where each employee can actively express their thoughts
and work in good health, regardless of gender, age, nationality, disability, work experience, sense of values, or any other
differences. By doing so, we will draw forth the power of individuals, foster an open corporate culture, and achievesustainable growth by increasing productivity.

KPIs●

Expansion of green solutions●

Expanding sales of low power consumption products and services

TOPICS

Disclosures based on the TCFD
As our response to the risks and opportunities related to climate change, we are promoting information disclosures
regarding governance, strategy, risk management, and metrics and targets, in line with the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD).
Items

Response status● We have set “contribution to a decarbonized society” as one of our materialities and progress is monitored by● Consider a wide range of potential impacts of climate change over the medium to long term, and identify

particularly important risks and opportunities. Going forward, we will make trial calculations of these financial
impacts and promptly disclose countermeasures.
Representative risks and opportunities

Strategy

KPIs●

Security personnel●

Cloud personnel●

DX personnel●

Training personnel for next-generation ICT

Growth Strategy

Governancethe Sustainability Committee, which is overseen by the President & CEO and chaired by a Senior Vice
President.
● The Sustainability Committee meets once per month, and regularly reports on its activities to theManagement Committee.
● The Management Committee deliberates and decides on fundamental or important matters related tocompany management in a proper and prompt manner, while the Board of Directors focuses on overallmanagement and supervisory functions.

Value Creation

Basic approach

Promotion system for personnel training and diversity
Commitment of
the top management

Chief Human Resources
Officer (CHRO)

Personnel Department

Promotes personnel measures to execute
growth strategies and strengthen ourbusiness base, under the strong commitmentof the management team

Establishes human capital management andleads at the forefront of the management
team, to increase the value of the Group’s
personnel

Implements overall personnel management
to establish and maintain a business basethat supports the growth of the entire
Group over the medium to long term

● Risks: Carbon taxes and regulations on existing products and services, rising purchase prices due to higher

production costs at vendors, etc.

● Opportunities: We anticipate growth in new products and services, such as making more efficient use of

TOPICS

resources and an expansion of low-emission products and services, through the utilization of more efficienttransportation methods and production / distribution processes.

Riskmanagement

and appointed a Chief Risk Officer (CRO), and identify and respond to risks, evaluate the effectiveness of risk
management activities, make continuous improvements, and promote and supervise other risk management
processes across the organization. In addition, we identify, evaluate, and monitor important management
risks on an annual basis.
● We prepare a business continuity plan (BCP) in preparation for system blackouts and business shutdowns
due to disasters. In the event of a disaster, we have established a system that ensures the safety of all Group
officers and employees, and enables us to continue providing services to our customers● In fiscal 2022, we plan to conduct scenario analyses in order to identify, assess, and manage the risks thatclimate change poses to our business activities in more detail.

based on the recognition that it is important to engage in energy conservation efforts not only at theCompany, but also throughout the entire supply chain in order to reduce climate change risks.

Metrics
and targets

The Group recognizes the necessity of reforming our personnel system, based on the past corporate culture which led
to the failure of arrogance and the results of our employee awareness surveys. Accordingly, the Group is considering the
introduction of a new personnel system, in order to realize personnel strategies such as professional personnel training
and providing an environment where our personnel can thrive. In fiscal 2022, with the aim of introducing the new
personnel system in fiscal 2023, we have established the “Personnel Management Policy” as our first step, which
serves as the core concept of our system reform.
With our new personnel system, we aim to enable each staff member to have contact with customers at every stageof the value chain, and to make proposals and provide value, irrespective of employee categories such as “sales ortechnical” or “front-line or follow-up.” By introducing our new personnel system, we will resolve challenges in our current
system, reform our corporate culture, and realize our management strategies.

Review of Operations● We have expanded the scope of greenhouse gas emissions and implemented management up to Scope 3,

Establishing a Personnel Management Policy for personnel system reform

ESG● We have established the Risk Management Committee as an advisory body to the Management Committee

Fiscal 2021 Results

Personnel Management Policy

Scope 1: N/A / Scope 2: 5,356 t-CO2 / Scope 3: 569,460 t-CO2 (calculated for categories 1-7, 9, and 11-12)● Going forward, based on the results of greenhouse gas emissions calculations, we will work actively to

reduce greenhouse gas emissions through the use of renewable energy, in collaboration with our customers
and business partners.

1. Disclosure of information related to our climate change response, in line with TCFD recommendations
https://www.netone.co.jp/sustainability/esg/environment/tcfd/ (Japanese only)

Team

TAKUMI

Fairness

Encourage co-creation among
diverse members to create value as a teamSupport the enhancement of expertisein each area, so that each person cancontribute to their team as a “TAKUMI”

Reward contributions to the organization
in a fair and impartial manner

Personnel management

P.14

Data Book41

net one report 2022

net one report 2022

42

Chapter 3

ESG Initiatives to Strengthen Capital

GovernanceCorporate GovernanceCorporate governance structure

Transition to a company
with an Audit &Supervisory Committee

Strengthen thenomination andremuneration functions
Advisory Committee↓
Reorganized into theNomination Advisory
Committee and theRemuneration Advisory
Committee

Value Creation

The Company is working to establish a highly effective corporate governance structure through several measures. We
conduct supervision and audits of management and the execution of duties by the Board of Directors (the majority of whom
are independent outside executive directors) and the Audit & Supervisory Committee. We have also strengthened thebusiness management and supervisory functions of the Board of Directors by introducing a vice president system, andimproved the efficiency and speed of business execution. Furthermore, we work to ensure fairness and objectivity throughthe nomination and remuneration of directors and vice presidents by the Nomination Advisory Committee and theRemuneration Advisory Committee.

Organizational structure

Introduction

The Group will achieve continuous growth based on its corporate philosophy system. Aiming for anenhancement of our corporate value over the medium to long term, we are working continuously to improveand strengthen corporate governance to ensure transparent, fair, prompt, and decisive decision-making.

In 2019 and 2020, several cases of fraudulent acts committed byformer employees of the Company were discovered, and an
external investigative committee analyzed the causes of thesefraudulent incidents, and provided advice on measures to prevent
recurrence. Since that time, we have formulated specific measures
to prevent recurrence, and have engaged in Group-wide efforts tostrengthen internal control, and fundamentally reform our corporate
governance and corporate culture.
In order to sustainably develop these initiatives and achieve ourcurrent Medium-Term Business Plan, we determined that it isnecessary to increase the independence and objectivity of theBoard of Directors and further strengthen the supervision ofbusiness execution, and to establish a business execution systemthat is capable of responding quickly and flexibly to rapid changes
in the operating environment of our Group. Accordingly, on June22, 2022, following approval at the Annual Shareholders Meeting,
we transitioned to a company with an Audit & Supervisory
Committee.

Shareholders Meeting
Elect / dismiss
Determine cap for remuneration

Nomination Advisory Committee
AdviseRemuneration Advisory Committee

Elect / dismiss
Oversee / audit

Board of Directors

Audit & Supervisory Committee

ReportExecutive Directors

Audit & Supervisory Committee Members

Accounting Auditor(Grant Thornton Taiyo LLC)

ReportReportAppoint / oversee

Audit

InstructInternal Audit Office

Collaborate

Accounting
audit

Improving the ratio ofindependent outside
executive directors

66.7%
Ratio ofindependent
outsideexecutive
directors

Audit

Business Operation
Organizations

MonitorReportPresident & CEO
Management Committee

Compliance Committee

Risk Management Committee

Investment & Financing Committee

Sustainability Committee

Vice Presidents
Responsible departments, subsidiaries, etc.

Strengthening corporate governance: Activity highlights

Assessment ofeffectiveness of Board of
Directors

Expansion of evaluation
items

Independent outside executive director appointed as Chairperson of the Board of Directors
Message from the Chairpersonof the Board of Directors

Maya Ito
Chairperson of the Board of Directors
Independent Outside Executive Director

net one report 2022

Executive remuneration
system

Revisions including the
introduction of a
restricted stock system,
etc.

On June 22, 2022, we revised our executive remuneration systemafter approval at the Annual Shareholders Meeting. The purposeof this revision is to motivate executive directors and vicepresidents more strongly than ever to enhance our corporate
value over the medium to long term, and to promote further value
sharing between the Company’s management team andshareholders. In place of the stock option remuneration system inour conventional remuneration system, we have introduced
restricted stock, and expanded the stock-based compensation
ratio in the remuneration composition ratio.
Overall performance indicators for bonuses are the service
ratio, consolidated revenue, and consolidated operating income,which are also emphasized in the current Medium-Term Business
Plan. As for individual performance indicators, while reflecting on
fraudulent incidents, we have selected corporate culture reform,materiality KPIs, and other personal goals, in order to further
enhance our corporate value. At the same time, we have also
introduced the malus/clawback system.

Number of evaluation
items
Questionnaire with a
total of 52 items
Expanded major items
from 6 to 12

Enhancing our medium
to long term corporate
value and further value
sharing withshareholders
Expanding the stockbased compensation
ratio
Adoption of the current
Medium-Term Business
Plan indicators andnon-financial target
indicators

net one report 2022

Review of Operations

I was appointed as the Chairperson of the Board of Directors inJune 2022. As a lawyer and an external advisor, I will make useof my experience in providing objective views regarding
companies, perceive business from a perspective that isdifferent from business execution, and will do my utmost to
provide support for execution in order to conduct betterbusiness operations.
A year has passed since I was appointed as an independent
outside executive director of the Company. At the beginning of
my appointment, I spent a substantial amount of time

investigating the causes of fraudulent incidents, examining
countermeasures, and discussing measures to strengthen
governance and compliance. While facing many challenges, I
realized the collaborative power of Net One, which works oneach countermeasure as an organization that is centered on theleaders of each department. Related proposals such as thetransition to a company with an Audit & Supervisory Committee,
and the reorganization of the Advisory Committee wereapproved at the 2022 Shareholders Meeting. I believe that weare building an organization in which mutual checks andbalances are effective based on responses to incidents.
Since the beginning of this year, the Board of Directors has
gradually increased the amount of time that is spent discussing
our main business, and there are more forward-looking agenda
items, such as the current Medium-Term Business Plan. I believethat the mission of the Chairperson of the Board of Directors is
to encourage fruitful discussions among the officers during
debates of important agenda items that have been put up for
discussion. I will make every effort to prepare for fulfilling
discussions, and will endeavor to hold proceedings in a mannerthat contributes to the efficient operation of business, while
including the content of discussions with staff in the departmentson the agenda.

In the evaluation of the effectiveness of the Board of Directors forfiscal 2021, which was conducted in 2022, we introduced
evaluations based on the advice of an external organization, andexpanded the evaluation items. Due to the fraudulent transactions
made by our former employees, in the previous fiscal year’s
effectiveness evaluation, we recognized challenges such as theroles and responsibilities of inside executive directors and thestrengthening of internal controls, and we recognize that results
are being produced, as well. On the other hand, we also
recognized the need to enhance various discussions based on
our management strategies, review the agenda items of the Boardof Directors, and secure time for discussions of important agenda
items through planned agenda submissions. Accordingly, we aretaking measures such as regular reporting to the Board of
Directors regarding the status of the activities of internal meetings
and the introduction of discussion items at the Board of Directors.

ESG

I will do my utmost to enhancedeliberations at the Board of
Directors, while holding
discussions with the person in
charge of each department.

43

Following our transition to a company with an Audit &Supervisory Committee, six of nine members of the Board of
Directors are independent outside executive directors. The
ratio of independent outside executive directors, which was
42.9% as of the end of June 2021, now stands at 66.7% asof the end of June 2022, and the ratio of independent outside
executive directors well exceeds the majority.

Growth Strategy

Governanceand Corporate Culture Advisory Committee

AdviseCollaborate

Composition of the Boardof Directors

44

ESG Initiatives to Strengthen Capital

Chapter 3

Executives
Executive Directors

President & CEO

Takuya Tanaka
Executive Vice President
Chief Operating Officer (COO)

Independent Outside Executive
Director
Chairperson of the Nomination
Advisory Committee
Independent Executive Officer

Masayoshi Wada

He has served as VP of IBM Japan, Ltd., General Manager of the Corporate Planning Division of Canon Marketing
Japan Inc., Director, Senior Executive Officer, General Manager of Infrastructure Business Division of Canon IT
Solutions Inc., and Full-time Audit & Supervisory Board Member of Canon IT Solutions Inc. He serves as Director of
SOFTMAX CO., LTD. (in charge of Development Department) from 2020, and assumed his current position at theCompany from June 2022. He supervises the Company’s management, especially from the perspective ofcorporate management, technology, risk management, and other areas, based on his experience as a Director and
Audit & Supervisory Board Member at other companies and a wealth of knowledge and experience in theinformation and telecommunications business field.

Skill matrix of the Executive Directors
Corporate management
Management strategy

Technology

Human resources
Corporate culture andorganizational reform

Takafumi Takeshita

○

○

○

Takuya Tanaka

○

○

○
○

Mitsuru Kiuchi

Finance
Accounting○○

Masayoshi Wada

○

○

○

Shigeki Kusaka○

net one report 2022○○

Sachiko Iizuka○○

Kazuhiro Noguchi

○

○
○

○

Name

Board of Directors

Takafumi Takeshita○

Takuya Tanaka○

Mitsuru Kiuchi○

Audit & Supervisory
Committee○

Nomination Advisory
Committee○

Chairperson○

Hideki Suda○

Chairperson

Masayoshi Wada○

Kazuhiro Noguchi○

Chairperson

Sachiko Iizuka○○

Shigeki Kusaka○○

Maya Ito

Remuneration Advisory
Committee○

Governance andCorporate Culture
Advisory Committee

Management Committee

Chairperson

Chairperson

○

○

○

○

○
Chairperson

Vice Presidents (excluding those who are Executive Directors)
Title

Senior Vice President

Name

Chief Technology Officer (CTO)

Committees Chaired

Fumihiko Shinoura

Senior Vice President Chief Strategy Officer (CSO)
Executive Director of Net One Partners Co., Ltd.

Koji Tsuji

Chairperson of the Sustainability
Committee

Senior Vice President Chief Risk Management Officer (CRO)
Chief Compliance Officer (CCO)
President & CEO of Net One Business Operations G.K.
Executive Director of Net One Partners Co., Ltd.
Executive Director of Net One Next Co., Ltd.

Masayuki Kitajima

Chairperson of the Risk Management
Committee
Chairperson of the Compliance
Committee

Vice President Chief Financial Officer (CFO)
General Manager of Corporate Planning Division
Executive Director of Net One Partners Co., Ltd.

Kazuaki Ishibashi

Chairperson of the Investment &Financing Committee

Vice President Chief Information Officer (CIO)
Management & Administration Division○○

Hideki Suda

Sustainability○

Maya Ito

45

Governance
Law
Risk management

Composition of organizations and committees of Executive Directors

General Manager of Corporate

Review of Operations

Name

He has served as Executive Officer of Mitsubishi Corporation, Representative Director, Executive Officer, President
and COO of IT Frontier Corporation (current Tata Consultancy Services Japan, Ltd.), President and Representative
Independent Outside Executive Director of INTEC Inc., and Director of TIS Inc. At the Company, he has served as Independent Outside Executive
Director
Director since 2020, and assumed his current position in June 2022. He supervises and audits the Company’s
Audit & Supervisory Committee
management using his wealth of knowledge and experience in the information and telecommunications business
MemberIndependent Executive Director field and his experience as a Representative Director or Director at other companies.

ESG

Independent Outside Executive
Director
Chairperson of theRemuneration Advisory
Committee
Independent Executive Officer

He has served as Deputy General Manager of the Human Resources Department of Fujikura Electric Wire Corporation(current Fujikura Ltd.), Managing Director and General Manager of General Affairs Department of Fujikura Electric Wire
Corporation, President of Fujikura Development Co., Ltd., and Corporate Auditor of Fujikura Ltd. At the Company, he
has served as Outside Audit & Supervisory Board Member since 2016, and assumed his current position in June
2022. He supervises the Company’s management, especially from the perspective of corporate management, humanresources, corporate culture, and organizational reform, by drawing on his proven track record in human resourcesand organizational reform based on his experience in the human resources operations of other companies, in addition
to his extensive knowledge and experience as a President and Corporate Auditor at other companies.

Shigeki Kusaka

Growth Strategy

Hideki Suda

Registered as a Certified Public Accountant in 1998. She serves as Representative Director of LAUREACORPORATION, Auditor (Outside) of KORAKUEN HOLDINGS CORPORATION, Auditor (Outside) of BeeX Co.,
Independent Outside Executive Ltd., and Representative Partner of Cenxus Audit Corporation. At the Company, she has served as Outside Audit &Director
Supervisory Board Member since 2020, and assumed her current position in June 2022. She supervises and audits
Audit & Supervisory Committee
the Company’s management using her extensive knowledge and experience in finance and accounting
MemberIndependent Executive Director accumulated as a certified public accountant and as a Representative Director of other companies.

Value Creation

Independent Outside Executive
Director
Chairperson of the Board of
Directors
Independent Executive Officer

Registered as a lawyer in 2002. She serves as Partner at Nishimura & Asahi, Outside Executive Director (Audit &Supervisory Committee) of OPTIMUS Group Co., Ltd., and Outside Audit & Supervisory Board Member of Human
Life CORD Japan Inc. At the Company, she serves as Independent Outside Executive Director since 2021, andassumed the position of Chairperson of the Board of Directors in June 2022. She supervises the Company’s
management as a specialist in corporate governance, and law and compliance, based on her extensive knowledge
and experience as a lawyer and as an Outside Executive Director who is an Audit & Supervisory Committee
Member and Audit & Supervisory Board Member at other companies.

Registered as Certified Public Accountant in 1989. He established the Noguchi Kazuhiro Certified Public
Accountant Office and serves as Audit & Supervisory Board Member of Nichiryoku Co., Ltd. At the Company, he
has served as Full-time Outside Audit & Supervisory Board Member since 2021, and assumed his current positionin June 2022. He supervises and audits the Company’s management using his extensive knowledge andexperience in finance and accounting accumulated as a certified public accountant.

Sachiko Iizuka

Joined the Company in 2009, and assumed the position of Vice President in charge of Western Japan Sales Headquartersof Net One Partners Co., Ltd., after serving as Vice President in charge of Western Japan Sales Headquarters at Nihon
Cisco Systems K.K. (current Cisco Systems G.K.). He served as Executive Director and Vice President of Net One
Partners Co., Ltd., and since 2018, has been President & CEO of the said company. He also assumed Senior Vice
President of the Company in 2018. After serving as Executive Vice President of the Company, he assumed his current
position in April 2022. He has an extensive track record based on experience through many years of practical experiencein sales operations and experience in management of a subsidiary of the Company. Since his appointment as Executive
Director of the Company, he has been making every effort to strengthen the business base, business management
system, and sales operations as Executive Director in charge of sales divisions, etc., and is also working to establish asound governance system for the entire Group and to reform the corporate culture and organization.

He has served as Executive Officer of Tokio Marine & Nichido Fire Insurance Co., Ltd., Full-time Auditor of Health
Insurance Claims Review & Reimbursement Services in 2015, and Full-time Audit & Supervisory Board Member of Tokio
Marine & Nichido Facilities, Inc. in 2019. At the Company, he served as Adviser in 2021, then as Executive Vice
Mitsuru Kiuchi
President and Chief Human Resources Officer (CHRO) from April 2022, and assumed his current position in June. He
Executive Vice President
has an extensive track record based on his experience in the human resources and internal audit operations, as well as
Chief Human Resources Officer
in senior management positions of other companies. Since assuming office as Adviser to the Company, he has(CHRO)
supported various measures to strengthen internal audits, which are also being undertaken as part of measures toprevent recurrence. After assuming the position of Executive Vice President of the Company, he has been making every
effort to restructure the Company’s personnel system and reform the corporate culture and organization as the CHRO.

Maya Ito

Independent Outside Executive
Director
Full-time Audit & Supervisory
Committee Member
Chairperson of the Audit &Supervisory Committee
Independent Executive Director

Introduction

Takafumi Takeshita

Kazuhiro Noguchi

Joined the Company in 1989. He served as Vice President of the Technical Service Headquarters of Network
Services and Technologies Co., Ltd. (current Net One Systems Co., Ltd.) from 2006, Executive Director of the said
company, and Executive Director of the Company from 2018. He assumed the position of President & CEO in
2021, and his current position in April 2022. In addition to his wealth of experience and a proven track record intechnology through many years of practical experience in technology operations, he has made an effort tostrengthen the business management system of the entire Group as Executive Director in charge of divisions suchas the Corporate Planning & Management Division. Since assuming the position of President & CEO, he has been
making every effort to build a sound governance system for the entire Group, reform the corporate culture andorganization, and formulate a medium- to long-term growth strategy for the Group.

Tomohiro Iwamoto

Vice President

General Manager of Business Control Division

Katsuya Hayashi

Vice President

General Manager of East Japan Business Unit 1

Junji Ueno

Vice President General Manager of East Japan Business Unit 2
Executive Director of Net One Partners Co., Ltd.

Akiko Kanai

Vice President

General Manager of East Japan Business Unit 3

Yoshimitsu Narita

Vice President

General Manager of Central Japan Business Unit

Yoichi Matsumoto

Vice President

General Manager of West Japan Business Unit

Daisuke Hatakeyama

Vice President

General Manager of Sales Engineering Unit

Kenta Minagawa

net one report 2022

46

Chapter 3

ESG Initiatives to Strengthen Capital

President

Kazuhiro Noguchi

Maya Ito

Independent Outside
Executive Director

President & CEO

Independent Outside
Executive Director

Independent Outside
Executive Director

net one report 2022

Ito: I feel that members of the younger generation, inparticular, have a mindset of first grasping the outline,
and then moving on to details. For that reason, I think it
will be easy to disseminate our message by presenting a
big picture that has been conceived by the management
based on shared values, in order to create Net One
together. As I chair the Board of Directors, I hope tofulfill my role so that the Board of Directors is able todraw a big picture and engage in deeper discussions.

Ito: The rules have grown much stronger as a result ofstrengthening our internal controls and management, as
well as reforming our corporate culture. Our challenge
going forward is how to make use of this and continue to
implement it.
Kusaka: I think there is a limit to what you can accomplish
with just rules. If making double and triple rules to prevent
mistakes is our “compulsory routine,” then I think that fiscal
2022 will be the year of “free performance,” where we think
about what we should do under the rules. In order to doso, we must align our vectors; however, we are still unable
to see the goals that will serve as our centripetal force.

Review of Operations

Takafumi Takeshita

Takeshita: That’s exactly right. When formulating ourcorporate philosophy system, management considered
the Purpose, Mission, and Vision, while employees
participated in formulating Values and the WAY. Alongthe same lines of thinking, I believe that management
should take the lead in drawing a map for theCompany’s direction and goals for the next few years.

Noguchi: Looking back on fiscal 2021, I feel that theenhancement of the Internal Audit Office has produced
considerable results. In my experience, no other company
has such finely detailed documentation. In addition, I
believe that the decision to build the 1.5th line of defense
handled by the Business Control Division, in addition to
the three lines model, is also very effective in terms ofsupervising and supporting the first line of defense from a
position closer to the frontline. Meanwhile, there areconcerns that the thorough implementation of such awide range of procedures has created multiple layers. I
think it will be necessary to review and revise it again, in
the future.

ESG

Shigeki Kusaka

Kusaka: I think that the Company’s requirements havebeen stated clearly, compared to the previous
philosophy. However, I also feel that there are stillsome parts that are difficult to communicate toemployees. I think management should go one stepfurther and present specific directions, so that all
employees can unite their intentions and understandwhat they should do.

A year in which employees became
more autonomous through corporate
culture reforms

Growth Strategy

47

Independent
Outside
Executive
Directors

Based on our new corporate philosophy systemand the current Medium-Term Business Plan,
we held discussions on how we should
contribute to solving social challenges as aleading network company, and the path to
growth over the long term.

Ito: I think that “Remember the failure of arrogance,”
which is the first line stated in the WAY, is a uniqueperspective of Net One. As I chair the Board of
Directors, I am determined to keep these words in mind
when proceeding with the discussions of the board.

Value Creation

Discussion

Noguchi: The WAY is particularly well-crafted amongcorporate philosophy systems. I think that our
accumulated actions based on the WAY will help us
realize our Purpose and Mission. So, I feel that it will be
important to spend some time working to instill the WAY.

term strategies using a top-down approach. So, howshould we respond to this era of rapid change? I think ourfrontline capabilities are of the utmost importance.
Management discusses the future, while frontline teams
drive our organization. Conversely, by catching up withthe voices of frontline employees, management formulates
new strategies for the future. The current reforms of theBoard of Directors and the business execution system will
also help to create this form.

Introduction

We will hold discussions
with an eye toward the future,with the aim of being a company
that leads ICT in Japan

Aiming at growth based on our
corporate philosophy system

Takeshita: As the President, I would like to discuss the
future. However, since the future is currently difficult toenvision clearly, it is not possible to work through long-net one report 2022

48

Chapter 3

ESG Initiatives to Strengthen Capital

Kusaka: Until now, our management style was for
employees to follow orders from their superiors.
However, I think that Mr. Takeshita’s message to think
and act more freely has changed the mindset of ouremployees. It was a big step for us to move forward witha sense of urgency that we must nurture our employees
and increase our depth as an organization. I am surethat this will be the strength of Net One in the future.
From that beginning, the next generation of management
will grow.

net one report 2022

Producing new output as a leading
network company
Noguchi: Earning trust is extremely important for theCompany today. I hope that we do not forget that thestability of an organization is achieved through compliance,
and that trust that has been steadily accumulated can belost in just a single day. Also, I hope that we thoroughly
carry out our work with a focus on compliance.
Kusaka: While questioning myself about my role as anindependent outside executive director, I try to see thingsfrom a broader perspective, and believe in my own
common sense, so I always speak up when I feel thatsomething is wrong. I hope to maintain this stance andcontinue to discuss with everyone about what we should
do in order to obtain the position the Company aims toachieve. One of our goals is to be in a position where ourcustomers’ management teams can come to us directly
to discuss about their ICT, more than ever before.

Takeshita: First of all, we declare that compliance, which
is a prerequisite for all other things, will be thoroughly
enforced no matter what may happen in the future. Now,Net One is about to change. However, new input is
indispensable for output that is different from the past.
Input includes the voices of all stakeholders, such as
shareholders, investors, customers, business partners, andemployees. I would like to hear more of the opinions of the
independent outside executive directors, from theirobjective perspectives as spokespersons for stakeholders.
This fiscal year, I hope that we have more independent
outside executive directors participate in meetings withshareholders and investors than last year, and hope toreflect the opinions that have been input through their filtersin our discussions.
Finally, network is not only the starting point of us, but isin fact the starting point of my own career as a first-year
new graduate. It has now become commonplace to beconnected to the network. However, we do not consider
our current location to be “mature.” Rather, we finallyhave a “foundation” for connecting with each other. I
believe that what we connect to, and how we connect
from here, as well as what kind of change we bringabout, will be a chance to demonstrate our skills as acompany with its origins in networks.

net one report 2022

Review of Operations

49

Noguchi: Formulating a medium-term business planleads to thinking about management, so I think this wasvery good training for our employees. Another aspect I
appreciate is that we organized our thoughts onsustainability in our current Medium-Term Business Plan.
We carefully considered the point that Net One must
address challenges such as enhancing governance andcontributing to an advanced information society, andthat by doing so, the Company will carry on and fulfill its
social responsibility. I hope that we monitor the actual
progress closely, so that these do not become mereslogans.

Takeshita: It is strongly related to “No WAKUWAKU No
work” in the WAY. Assuming the basic premise of rulesthat should be followed, the Company is working onreforms to become an organization in which eachfrontline team can make decisions regarding detailed
matters. While that does carry with it responsibility, I
hope that managers will be excited about running Net
One as a company.

ESG

Ito: At in-house events, I was able to hear various
stories from employees, including what they were having
trouble with in their work and what they find rewarding
about their work. I felt that the fact that executive
directors are now able to tune in to such voices is one
result of thorough visualization. Going forward, I would
like to continue to actively create opportunities for
dialogue, in order to have more chances to listen to thevoices of our frontline employees.

Ito: In many companies, medium-term business plans
and medium- to long-term visions are only discussed by
the management team, and the content of decisions iscommunicated to employees. Nonetheless, we havebeen commended for having employees in various
positions participate in the formulation process of theCompany’s current Medium-Term Business Plan. I also
attended the discussions as an observer, and I believethat as a result of this process, the content has become
easier to instill in our employees. For example, it is very
easy to understand that by focusing on services, we will
be able to recover revenue that fell due to delays in thedelivery of products in fiscal 2021.

Ito: I sincerely hope that the Company achieves its
sustainability KPI to “Raise the ratio of female managers
to 15% by fiscal 2030.” Therefore, I think it is importantfor managers to show that they enjoy their work,
regardless of gender. Some people may hesitate withregard to management positions. Nonetheless, I thinkthat more and more people will want to aim for such
positions if they understand that managers do their workwith a sense of fulfillment, while maintaining a goodwork-life balance.

Ito: ICT is now indispensable for both individuals andcompanies. Furthermore, the Company is able to get
more involved in situations where advanced ICT isneeded, including local public institutions and publicorganizations, and major private companies. This is oneof our greatest strengths. I hope that we do not pass up
this opportunity, and that we move forward with a sharedawareness as we continue to be a leading company in
the ICT field.

Growth Strategy

Noguchi: I often had interactions with young employees
in a certain department, and as their roles became
clearer, they grew rapidly. As long as we show ouremployees the general direction and they understandtheir roles, they have the ability to adopt to their rolesand carry out detailed work by themselves.

Kusaka: There are surely many things that the Company
can contribute to Japan, which is considered to be adigitally underdeveloped country. In our current MediumTerm Business Plan, Net One is a leader in Japan’s
network, and I feel there is a strong will to continue tolead in the future. Going forward, I expect that a concrete
path will be presented regarding how we can adequately
be a leading company, without forgetting our original
intentions.

Takeshita: For both business strategy and sustainability,
in the current Medium-Term Business Plan, we formulate
a KPI logic tree for all departments, and are working to
make it more concrete. One reason for this is that I want
employees to know more about what they are working
for, and what their work contributes to. I think that paying
close attention to whether the logic tree is being
operated properly will be a theme for achieving our goals.

Value Creation

Takeshita: In fiscal 2021, we established clear rules withno room for interpretation, in order to prevent recurrence,
and we have achieved a certain degree of results.
Through this process, I feel that we have been able todiscover challenges that had not previously beenvisualized, and also that we have gained strength as anorganization that is self-cleansing. Although we must
devise further measures in order to carry out appropriate
operations, we are not at that stage yet. Protecting our
employees is the primary purpose of improving theeffectiveness of our internal control system. I believe that
fiscal 2022 will be an important year for “making rules ourstrength.”

Concrete measures and monitoring of
KPIs are essential to achieving ourcurrent Medium-Term Business Plan

Introduction

Ito: I believe it is the right time for the Board of Directors
to shift its focus to forward-looking discussions, such as
considering growth investments and new businesses,
after having fully considered the future of Net One.

50

ESG Initiatives to Strengthen Capital

Chapter 3

Corporate Culture Reform
FeatureArticleSince 2020, the Group has been working to prevent a recurrence of the failure of arrogance and to reform ourcorporate culture, by disseminating its philosophy and management vision.
We are steadily fostering our corporate culture through a variety of activities, with an emphasis on dialogue todisseminate our philosophy.
Message from the President

Young employees
made presentations
very skillfully, and thecontent had a highstandard. I thought it
was a really great
initiative.

Formulation of a new philosophy system

I was excited, as somany of us werethinking seriously
about the company.

I was surprised tolearn that various
activities I didn’tknow about werebeing conducted byeach department.

Formulated in April 2022

We have formulated a new corporate philosophy system (Purpose, Mission, Vision, Values, and WAY) in order topromote measures to prevent recurrence as planned, and establish a corporate culture that will prevent fraudulent actsfrom recurring. The discussions regarding our Purpose, Mission, and Vision, which indicate the major direction the
Company is aiming for, were centered on our management team. Employees volunteered to formulate our Values and
WAY, which represent our set of values and code of conduct.

Achievements thus far
All employees participate in RCT with Executive Directors
Participant satisfaction rate: Approximately 80%

Vision Week & Awards

Plans and events are held for the purpose of fostering a sense of unity
through understanding and dissemination of the vision and code of conduct.
Our theme for fiscal 2021 is “Considering the future of Net One”

Vision Week & Award Event
Participants: 885
Award Entries: 24 groups, 139 persons

Workshops

Providing a place for employees to see the WAY as a personal concern, speak
to each other, and come into contact with diverse opinions, with the aim ofchanging to a mindset of “creating, maintaining, and improving our own culture”

All employees participate
Held a total of 12 times, with 2,286 participants

Training Model: 1-on-1

Dissemination of the code of conduct through dialogue with superiors

Quarterly 1-on-1 review

E-learning

Questionnaire data analysis, competitions, and analysis to gain a deeper
understanding of the SDGs

All employees receive e-learning on the SDGs

・Effective use of the Vision Book and consideration of tools to help the

Utilization of the Vision philosophy and vision take root
Book and visualization ・Promotion of dissemination through visualization, so that employees
become more aware of the vision

Production and publication of the Vision Book,
virtual background images for web conferences,and videos for events

Agrees with the philosophy
and vision

Acts with an awarenessof the philosophy and vision

Discusses the philosophy and codeof conduct with those around them

74.9%

69.7%

29.3%

Key initiatives for monitoring and follow-up
Employee awareness survey

Implemented from fiscal 2019

We have conducted this survey since fiscal 2019, with the aim of collecting opinions and proposals for future initiatives,
as well as to clarify employees’ job satisfaction and awareness of the workplace environment, and identify challenges
related to work style measures based on survey results.
In fiscal 2021, the number of questions in the survey was expanded from 75 in fiscal 2020 to 97, and the effective
response rate was 94.7%, which is an improvement of 1.1 points over the previous survey.

Organizational culture survey /Corporate culture monitoring survey

Review of Operations

A place for dialogue with management using the WAY as our common
language. Fostering communication as “Net One,” which transcends divisions
by “sharing the background and intentions of our corporate philosophy”

ESG

A state in which all employees understand the corporate philosophy
and are able to embody it in their daily actions

RCT for all employees*(Internal awareness survey results)

Comments fromthe participants

Overall, I felt that
there was a positive
atmosphere, and I
was motivated toundertake challenges
myself.

Growth Strategy

our dissemination activities. It is extremely important foreach individual to share their own thoughts throughdialogue, and the repetition of this work will disseminate
our philosophy. Going forward, I would like to continue toactively create opportunities for dialogue and sharing.
We are now in the third year of our visiondissemination activities. Although the total number ofparticipants in these activities has increased, I would likefor even more employees to participate. Employees who
participate in these activities gain a deeper understandingof the Company’ s structure and philosophy, andbecome our “philosophy evangelists,” so to speak. As
their number grows, the impact on the Company should
also grow. Since we have also enhanced our measures tosome extent, I would like to improve both the quality andquantity of our activities, while conducting follow-ups sothat their impact lasts in the long term.

Main measures

Disseminationof the philosophy and vision

We carry out various projects and events during “Vision Week,” which we have established as a period
to gain a deeper understanding and disseminate our corporate philosophy, management vision, andcode of conduct, and to strengthen our sense of unity as a company.
Thus far, we have held events to resolve questions from employees regarding our corporate
philosophy, such as open round-table discussions between the President and employees, and thePresident answering questions from employees in real time.
In fiscal 2021, we set the theme of “Considering the future of Net One,” and held new projects such as
the “Vision Awards,” with a total of 885 participants.

This is a project to reward dissemination activities for the philosophy and vision, based on the concept of “Putting into
practice and reaching out,” “Having successful experiences,” and “Understanding the importance of shared values.” A
total of 139 people from 24 groups made entries and presented their daily actions and the ideas they established.

Vision dissemination initiatives and results
Medium- to long-term vision

February 2022

Vision Awards

President & CEO

Since 2020, we have been working on “corporate culture
reform” centered on the implementation of measures toprevent recurrence and activities to disseminate ourmanagement vision including our corporate philosophy, inorder to ensure that we never repeat our past failure ofarrogance, and to foster a corporate culture in which theentire Company is united toward further growth. Startingwith revising our management philosophy to our
corporate philosophy and renewing our code of conduct,
we are enacting initiatives with different approaches, andmeasuring their effectiveness through internal awarenesssurveys and other means.
We aim to achieve a state in which all employees
understand the philosophy system and are able toembody it in their daily actions. I myself have seen
employees voluntarily engaged in discussions regarding
the philosophy, and I feel that we are making progress in

Holding Vision Week

Value Creation

We will expand the range of participationin our dissemination activities, as we aim
to establish a corporate culture that can realize
our philosophy through our actions. Takafumi Takeshita

Key initiatives for dissemination of the vision

Introduction

Fostering our corporate culture
by disseminating our corporate philosophy system

Implemented from fiscal 2021

In fiscal 2021, the Group launched a new organizational culture survey as part of its activities to reform and cultivate ourorganizational culture. Based on the results of this survey, we identify challenges related to organizational culture andimplement various measures for improvement. In addition, we also conduct a “corporate culture monitoring survey”
every other month, in order to observe the results of these measures from a fixed perspective.

*RCT (Respect, Communication, Teamwork): A shared communication approach designed to create strong links between management and employees, share our corporate philosophy,
enhance workplace environments, and foster our corporate culture51

net one report 2022

net one report 2022

52

Review of Operations

Chapter 4

Enterprise Market

GrowthStrategy

Focus themes for growth● Provide issue-solving lifecycle services and● Implement work style innovation 2.0 / DX

propose grand designs for the future

Introduction

Expanding security measures, cloud systems,
and work style innovation through ICT utilization

Our Vision

Strategy● Smart manufacturing● Business expansion into business ICT areas● Solutions for MSPs

such as production technology departments● Refurbishment business● Detection of signs of cyber-attacks and system

failuresMedium- to Long-term Outlook / Growth Strategy / Current Medium-Term Business Plan
Medium-term outlook

We conduct business for major private companies in the manufacturing and non-manufacturing industries, as well as domestic
financial institutions and foreign companies. We support information utilization to enhance competitiveness, work styleinnovation, cost reductions, etc., through the utilization of ICT platforms.

Demand for telework is increasing rapidly in anticipation of
the spread and prolongation of the COVID-19 pandemic. As
such, continuous efforts are being made to improvebusiness efficiency through work style innovations andcollaboration based on the cloud and Internet. In addition,with regard to security measures, reviews of the boundary
defense model, in which communications with the outside
world are consolidated in data centers and other locations,are also being encouraged in response to the situation.
While next generation network environment (SD-WAN) is
attracting attention in anticipation of the utilization of thezero-trust model, which confirms the safety of all accessfrom inside and outside the company, we are proposing a

Operating environment

Demand for security measures, cloud systems, and work style innovation continues to remain high.

Bookings / Revenue / Order backlog (Million yen)

Operating income (Million yen) / Operating margin (%)■ Bookings■ Operating income■ Revenue● Operating margin■ Order backlog

60,23351,293 52,329

55,37657,28154,54754,00046,896

29,20826,472

21,49811.4%
9.3%

51,000

6.2%

41,2895,089

34,281

31,281

8.2%

6,294

3,800

3,263

Performance and outlook

Solutions for DX issues in the manufacturing industry

2020

2021

2022

2018

(FY)

2019

2020

2021 (FY)CAGR (3-year compound annual growth rate up to FY2021):

Revenue- 7.6 %

Operating income

5.2%

Outlook for fiscal 2022

In the manufacturing industry, bookings and revenue
decreased, as customer investments were restrained due tothe impact of semiconductor shortage on performance. In
the financial industry, the second quarter was a trough forinvestment, and we were unable to make up for the
shortcomings of this period in the full year. However, in the
fourth quarter, bookings recovered in both the
manufacturing and financial industries.
As a result, bookings were 46,896 million yen (down
18.1% year-on-year), revenue was 41,289 million yen (down
24.3% year-on-year), and the order backlog was 31,281
million yen (up 7.1% year-on-year). Operating income was
3,800 million yen (down 25.3% year-on-year) due to thedecrease in revenue, while the operating margin was 8.2%
(down 1.1 points year-on-year).

In the enterprise market, we plan to increase bookings andrevenue. In the manufacturing industry, we expect arecovery based on smart manufacturing. In the nonmanufacturing industry as well, we will focus on areas wherebusiness digitalization is expanding. The financial industry is
expected to remain flat due to both investments indigitalization and cost reductions.
We estimate bookings of 54,000 million yen (up 15.1%
year-on-year), revenue of 51,000 million yen (up 23.5% yearon-year), and an order backlog of 34,281 million yen (up9.6% year-on-year).

net one report 2022

Cloud access- ZTN / SASE -Corporate

Sales

Production

Distribution

Cloud access- Cloud hub -Business
Researchdevelopment and development

Commoncompany-wide

Third party maintenanceDX

Hybrid-oriented data
infrastructure

Research /development

Factory network optimization
Factory security

Industrial wireless

Production /distribution

Services for the manufacturing industry- Consulting, operation -Review of Operations

Fiscal 2021 results

Amidst the demand for business transformation throughdigitalization technology, we support DX promotion, security
measures, and decarbonization in the manufacturingindustry through various solutions that address ICT issues
associated with digitalization. Specifically, we propose theoverall optimization of ICT platforms at production sites,such as support for formulating a grand design, security
measures for cloud utilization and business continuity, work
style innovation, and enhancement of production efficiency.

ESG*From fiscal 2022, the ISP industry has been reclassified from the enterprise market to the telecom carrier market. Bookings, revenue, and the order backlog for fiscal 2021 are figures after
this change has been applied. Operating income and operating margin are figures before this change is applied.

2019

Outlook

53

ExampleIn the manufacturing industry, progress is being made withsmart factories, which are equipped with internal networks.
Accordingly, initiatives are being considered for smart
manufacturing, in order to continuously reform businessprocesses, and improve productivity and quality throughout
the supply chain. This system will become more complex asdigital utilization spreads throughout the supply chain, andICT platform maintenance and security measures will
become increasingly important.

2018

highly productive ICT platform that utilizes the Internet safely,
by combining our expertise in networking and security
measures. In addition, our comprehensive proposals are
gaining popularity as the importance of security measures inthe supply chain increases.
Operations that are free from external connections are
becoming increasingly limited, and it is essential to takemeasures to achieve a balance between digitalization and asafe and secure work environment. With the increasing useof multi-cloud system, we will strive to continue supporting
the entire ICT platform through drastic security measuresand network reviews.

Growth Strategy

Content of business

Value Creation

Overview of Business

Remote operational support
Video integration platform

net one report 2022

54

Review of Operations

Chapter 4

Telecom Carrier Market● Strengthen corporate business throughbusinesses that contribute to telecom carriersales, such as service platform installationand corporate business support

We conduct business for fixed and mobile telecom carriers. Working together with our customers, we establish safe and secureInternet platforms and cloud computing platforms as social infrastructure.

In the telecom carrier market, we are working with ourcustomers to achieve value co-creation through ICT
utilization, toward the realization of a safe and securesociety.
In the corporate business, where customers are focusing
their efforts, the risk of hidden cyber-attacks in the use ofcloud services via the Internet is increasing in line with theincreasing use of cloud services. In response to this risk, ourcustomers are providing advanced security services
combined with highly functional cloud-based firewalls.
In line with the launch of a new security service thatutilizes the customer’s cloud system, we have installed an
operational system for this service, and provide

Customer appetite for investment in corporate business expansion continues to be strong. Shifting
our focus area to installation of service platforms such as the cloud

Bookings / Revenue / Order backlog (Million yen)

Operating income (Million yen) / Operating margin (%)■ Bookings■ Operating income● Operating margin■ Order backlog

53,88848,20735,386 35,552

35,442 35,176

39,464

14,508

2018

2019

10.5%

10.1%

10.4%
4,480

36,489

3,454

3,708

3,688

Example17,481

2020

2021

2022

2018

(FY)

2019

2020

2021 (FY)

Outlook

CAGR (3-year compound annual growth rate up to FY2021):

Revenue

Performance and outlook
Outlook for fiscal 2022

Advance bookings continued, in anticipation of line
reinforcement in response to the increased communication
volume due to teleworking, as well as longer delivery times
for product due to the semiconductor shortage. Support for
MSP and corporate businesses continued to progresssteadily.
As a result, bookings were 53,888 million yen (up 36.5%
year-on-year), revenue was 48,207 million yen (up 32.1%
year-on-year), and the order backlog was 27,552 million yen(up 57.6% year-on-year). Operating income was 4,480
million yen (up 21.5% year-on-year) due to the increase inrevenue, while the operating margin was 10.4% (up 0.3
points year-on-year).

In the telecom carrier market, it is expected that part of theline reinforcement projects that were scheduled in advanceduring fiscal 2021 will be reduced, and bookings are
expected to decrease compared to fiscal 2021. We willcontinue to focus on supporting digitalization and security
enhancement businesses for private companies and public
institutions, through corporate business and MSP business.
We estimate bookings of 52,000 million yen (down 3.5%
year-on-year), revenue of 50,000 million yen (up 3.7% yearon-year), and an order backlog of 29,552 million yen (up7.3% year-on-year).

the definition of requirements and performance
evaluation of ICT systems that utilize this advanced
technology for telecom carriers. Specifically, we
provided our customers with an environment for testing
the MEC platform, and by working together to considerplans for next-generation service platforms, theconfigurations that we proposed were adopted as theirnext service platform.
In order to realize service platforms with higher
added value, we will lead technological innovation,build safe and secure digital platforms together withour customers, and support the digital industry throughthe co-creation of new markets.

MEC (Multiaccess Edge Computing)

Mobile network

Internet

Review of Operations

Fiscal 2021 results

The use of the cloud is spreading, and an increasing
number of services are provided via the Internet.
Furthermore, communications are increasing with the
emergence of edge computing, which utilizes DX andIoT to process large amounts of data close to theusers. Meanwhile, issues such as increased network
load, communication delays, and security measures
have arisen.
Accordingly, attention has turned to a standard
known as MEC (Multiaccess Edge Computing), which
utilizes the performance of 5G to its full extent. Byutilizing 5G and MEC to position computers closer tousers, high-speed, low-latency, and high-security
network usage is expected to be achieved. We support

ESG

10.7% Operating income 9.1%

*From fiscal 2022, the ISP industry has been reclassified from the enterprise market to the telecom carrier market. Bookings, revenue, and the order backlog for fiscal 2021 are
figures after this change has been applied. Operating income and operating margin are figures before this change is applied.

net one report 2022

comprehensive operation services. This new operation
service effectively unifies the monitoring of security operation
systems and cloud systems, thereby improving quality andreducing operational costs, in order to achieve stable system
operations and reduce the operational load for the customer.
Based on the new relationships that are being createdthrough this project, we support the early launch of newservices and a reduction of planning and development
costs. We will continue to expand our services for value cocreation, and continue to make proposals that earn ourcustomers’ continued trust.

29,552

27,552
14,241

9.7%

52,000 50,000

expansion of solutions for MSPs

Growth Strategy

Medium-term outlook■ Revenue

collaboration with telecom carriers● Collaborative business in other markets andMedium- to Long-term Outlook / Growth Strategy / Current Medium-Term Business Plan

Content of business

Operating environment

55● Proposing solutions and co-creation

Value Creation

Overview of Business

GrowthStrategy

Focus themes for growth

Introduction

Exploring new business possibilities throughcollaboration with telecom carriers

Our Vision

Strategy

Cloud

net one report 2022

56

Review of Operations

Chapter 4

Public Market

Our Vision

Focus themes for growth● Propose optimization of ICT platforms,● Shift to cloud computing for ICT platforms,

including operations, for markets where
digitalization is progressing

strengthen security● Social infrastructure to realize Society 5.0● Participate in bidding focused on value-added

proposals such as ICT utilization and provisionof functions

Medium- to Long-term Outlook / Growth Strategy / Current Medium-Term Business Plan
Medium-term outlook

We conduct business for public institutions such as central and local governments, education, civil engineering, companies thatprovide social infrastructure (power companies, railways, etc.), and healthcare (hospitals). We strengthen the security of public
information, and develop a common infrastructure for optimizing investment costs.

The Public market is the field where the most progress has
been made in the strengthening of ICT platforms, in recent
years. The needs for digitalization are continuing to become
stronger and increasingly specific, including the joint use ofcloud-based systems, comprehensive security measures,and work style innovations.
In the market of local governments, while drastic security
enhancements were made in a short period of time in 2016,
there has been an increase in requests for ICT utilization,such as cloud computing proposed by the government,
online administrative procedures, and work style innovations
centered on telework. In terms of new information security
measures, ICT platforms using the Internet are being
reviewed in order to improve administrative services andclerical efficiency. It is expected that the demand for the

Operating environment

Strong demand for security measures and cloud systems

Bookings / Revenue / Order backlog (Million yen)

Operating income (Million yen) / Operating margin (%)■ Bookings■ Operating income■ Revenue● Operating margin■ Order backlog

11.8%
80,63962,456

71,255 69,795
56,556

62,672

55,79339,7159.6%

7.8%
62,45938,25531,3778,260

63,459 63,000 64,000
56,961

6.2%
3,485

5,485
4,327

unique value that combine the most suitable products andservices, and advanced operation services will continue,
especially in key system designs, where a series of proof-ofconcept (PoC) experiments are being conducted to verify
performance and operability.
We expect local governments to accelerate ICT utilizationin resident services, such as through the digitalization ofadministrative services, in response to the shift towards
digital government. We will continue the expansion of ourbusiness fields by contributing to the realization of a digitalsociety and solving challenges in local communities. In
addition, we will further transform the Company byleveraging the knowledge and experience we have cultivatedthrough participation in projects with high social significance,such as the digitalization of education and medical care.

Growth Strategy

Content of business

Value Creation

Overview of Business

GrowthStrategy

Strategy

Introduction

Provide a safe and secure ICT platform for social
infrastructure, realize a sustainable society,and realize the growth of the Company

Example
2018

2019

2020

2021

2022

2018

(FY)

2019

2020

2021 (FY)

Outlook

CAGR (3-year compound annual growth rate up to FY2021):

Revenue

Performance and outlook
Outlook for fiscal 2022

Orders were strong for the local government information
security cloud and strengthening for information security,
which made up for the lack of orders for the GIGA school
project in fiscal 2020. In terms of revenue, the timing of sales
was delayed due to the prolonged delivery time of product.
As a result, bookings were 80,639 million yen (up 13.2%
year-on-year), revenue was 56,961 million yen (down 18.4%
year-on-year), and the order backlog was 63,459 million yen(up 59.8% year-on-year). Operating income was 5,485
million yen (down 33.6% year-on-year) due to the decrease
in revenue, while the operating margin was 9.6% (down 2.2
points year-on-year).

In the public market, we plan to increase revenue, althoughbookings are expected to decline due to the loss of largescale orders received in advance during the previous fiscal
year. We will continue to focus on acquiring projects that are
related to the local government information security cloudand strengthening for information security.
We estimate bookings of 63,000 million yen (down 21.9%
year-on-year), revenue of 64,000 million yen (up 12.4% yearon-year), and an order backlog of 62,459 million yen (down
1.6% year-on-year).

Offering function-providing services that emphasize scalability and flexibility

Kanagawa Information Security Cloud (KSC)

Organizations
using KSC

Internet space

Review of Operations

Fiscal 2021 results

standardizing information security response levels in
Kanagawa Prefecture, we are working to strengthen various
functions such as security monitoring and log analysis, byconsolidating the Internet connection ports that have been
established by prefectures and municipalities in one location
and unifying network monitoring and security measures. In
addition, this will also allow us to provide unified networkand security functions using the security cloud throughout
the prefecture, by creating a service menu that can flexibly
respond to an increased number of users, added security
functions, speeding up lines, etc., for user groups such asprefectures and municipalities.

ESG

0.2% Operating income 16.3%

Going forward, in the local government market, thestandardization of core information systems will progress for
17 major work areas, including resident records, local taxes,
and welfare, and shift to a government-led “government
cloud” that can be shared as cloud services.
In the “Kanagawa Information Security Cloud (hereinafter“KSC”),” which is jointly utilized by a total of 34
organizations including Kanagawa Prefecture and its
municipalities, we are involved in the installation andoperation of the network and the implementation of related
network security, and offer function-providing services with
an emphasis on scalability and flexibility. In addition to

Providing functions related to use of the cloud (23 types)
Prefectural
WAN
service

File exchange service

Mailbox service

Virtual desktop service

Log management
and analysis support service

Web browsing service

EDR operation service

Operation management by an SOC
Consolidate Internet connection ports in one location and standardize the level of information security

57

net one report 2022

net one report 2022

58

Review of Operations

Chapter 4Partner Business● Establish a collaborative model with partner● Expand solution businesses for partner● Provide timely proposals, assistance, and● Develop solutions for MSPs

companies

technical support, as well as strategic
products and solutions

Medium- to Long-term Outlook / Growth Strategy / Current Medium-Term Business Plan

A business that specializes in collaboration with partner companies through Net One Partners. We conduct businesses for awide range of markets, and create optimal added value for each market by integrating the Net One Group’s ICT platform
solutions with the system solutions of our partner companies.

Net One Partners aims to establish its position as anadvanced technology distributor, by leveraging its strong
and innovative business base and its expertise in criticalassessment utilizing the knowledge of the Net One Group.
We will readily provide new technologies with our technology
capabilities as TAKUMI (“masters” or “experts” in English),and contribute to business success, corporate growth, andsocial development together with our partner companies,
based on strong vendor relationships.
As partner companies are focusing more on services andsolutions, and shifting to subscription-type service
businesses, we will provide the elements and values that are

Strong business for system integrators

Bookings / Revenue / Order backlog (Million yen)

Operating income (Million yen) / Operating margin (%)■ Bookings■ Operating income● Operating margin■ Order backlog

48,65944,962
39,73038,72740,20144,000 43,000

7.1%

8.8%
3,507

9.2%
3,706

3,093

33,86531,607 30,028

8.0%

Strengths of Net One Partners

2,117
17,757

16,757

14,165
8,299

7,930

Powerful Connection to
2018

2019

2020

2021

2022

2018

(FY)

2019

2020

2021 (FY)

Outlook

CAGR (3-year compound annual growth rate up to FY2021): Revenue

Innovative

With Partners

Business Base

Design new businesswith business partners,
based on strong vendor relationships

A strong and innovative businessbase that utilizes the knowledge of
the Net One GroupThe businesses of our major business partners, which havebeen affected by COVID-19, were on a trend toward
recovery, overall. In the first quarter, we received orders for
5G projects worth approximately 3,000 million yen, and the
MSP business also saw strong performance.
As a result, bookings were 48,659 million yen (up 43.7%
year-on-year), revenue was 40,201 million yen (up 1.2%
year-on-year), and the order backlog was 16,757 million yen(up 101.9% year-on-year). Operating income was 3,706
million yen (up 5.7% year-on-year) due to the increase inrevenue, while the operating margin was 9.2% (up 0.4 points
year-on-year).

In our partner business, we plan to increase revenue despitea decrease in bookings. We will continue to strengthen
collaborative businesses with our major business partners.
On the other hand, in terms of bookings, we expect that 5G
projects and part of the MSP business that were scheduled
in advance during fiscal 2021 will decrease.
We estimate bookings of 44,000 million yen (down 9.6%
year-on-year), revenue of 43,000 million yen (up 7.0% yearon-year), and an order backlog of 17,757 million yen (up6.0% year-on-year).

Readily provide new technologies
with the technology capabilities of
TAKUMI

Review of Operations

Outlook for fiscal 2022

ESG

Fiscal 2021 results

net one report 2022

New Technology

Business
Co-Design

10.2% Operating income 20.5%

Performance and outlook

59

necessary for the realization of DX and a shift to services,and co-create new businesses with partner companies.
Specifically, we will find new products in anticipation of theshift to services, and support the transition to services by
providing the Net One Group’s know-how. We will also
provide the “DX Core,” which consists of five categories, as
the elements and values necessary for realizing DX, in orderto support the promotion of DX throughout the market.
These categories are: (1) digital workplaces, (2) mobile andwireless, (3) new-generation and next-generation networks,(4) cloud infrastructure and management, and (5) digital
security.

Growth Strategy

Medium-term outlook■ Revenue● Demonstrate group synergies with Net One

Systems

Content of business

Operating environment

companies

Value Creation

Overview of Business

GrowthStrategy

Focus themes for growth

Introduction

Readily adopt cutting-edge technology,
enabling us to respond to diverse business models

Our Vision

Strategy

net one report 2022

60

Financial Highlights / Non-financial Highlights
Financial Highlights*1 Employees (registered at Net One Systems) includes staff seconded from external partners, excludes employees
seconded to outside the Net One Group and employees on short- to long-term leave*2 Figures exclude certain overseas subsidiaries and certain domestic subsidiaries of the Net One Group

Number of employees*1 and turnover rate*1

New graduate recruits by gender*2■■ Male (persons)■■ Female (persons)● Turnover rate (%)■■ Male (persons)■■ Female (persons)● Female ratio (%)

Bookings

Revenue / Order backlog

Gross profit / Gross profit margin

CO2 emissions■■ Product (Million yen)■■ Service (Million yen)
● Service ratio (%)■■ Revenue (Million yen)■■ Order backlog (Million yen)■■ Gross profit (Million yen)
● Gross profit margin (%)■ Scope2■ Scope3

231,844
204,607 203,520

1%

44.8

202,122

163,843

153,346

79,658139,160

44.0

71,22093,51768,92043.4

43,206

5.7
2,434
2,372
2,353
412
399
403
380
1,973

1,941

Total CO2 emissions

478

35.5
107

28.6

38

95

90

34

34

2,092

2,022

1,950

37.8

35.8

69

574,816 t-CO2

24.7

94,915

2,570

2,321

FY2021

36.7

4.8

49

75,052

61

49
14

23.8

127,904

114,111

115,752

35

56

18
31

Value Creation

101,299

92,62327.5

36,515

43.9

43.5

6.2

51,786

48,953
26.3

7.3

6.9

55,913

174,825

103,940

89,40888,85527.7

188,520

186,353

180,957

5,356 t-CO2

Introduction

Non-financial Highlights

569,460 t-CO2

99%
2017

2018

2019

2020

2021 (FY)Operating income / Operating margin■■ Operating income (Million yen)
● Operating margin (%)

9.7
8.9

2017

2018

2019

2020

2018

2019

2020

Earnings per share (EPS)
Book-value per share (BPS)■■ Net income attributable to owners of the parent (Million yen)
● ROE (%)● EPS (Yen)● BPS (Yen)

17.8

8.9

11,809

8.6

6,925

2019

2020

2021 (FY)

9.24

8.72

2019

2020

2021 (FY)

2017

2018

2020

2021 (FY)

2019

2021

2022 (FY)

9.34

57.3
2,372

18.6

58.5
57.8

16.8

6.6

6.6

6.5

6.5

2017

2018

2019

2020

16.9

2,570

2,434

2,353

16.4

17.1

8.68
8.43

8.43

1,331

8.16

2018

2020

59.2

9.41

2,321
8.55

7,155

2017

9.64
9.39

4,551

2018

2019

● Female ratio (%)● Ratio of female managers (%)

58.1

134.152018■■ Total number of registered employees (persons)■■ No. of engineers (persons)● Ratio of engineers (%)

8.83

115.902021 (FY)● All employees (year)● Male (year)● Female (year)

832.48145.422020

Female ratio*1 / ratio of female managers*2

9.27

84.52

2019

Ratio of engineers of all employees*1

634.47

53.79

2017

2018

Average years worked at Net One Systems*1

9,817
4.5

2017

689.97
11,225

12.8**Scope 1: N/A

767.8915.8
12,321

16,790867.482021 (FY)

Growth Strategy

19,673
16,4992017

Net income attributable to owners of the parent
Return on Equity (ROE)

15.9
6.8

2021 (FY)

1,378

1,361

1,441

1,503

8.04

7.7

7.84

2017

2018

2019

2020

2021 (FY)

2017

2018

2019

2020

2021 (FY)2021 (FY)Dividend per share
Consolidated dividend payout ratio■■ Dividend per share (Yen)● Consolidated dividend payout ratio (%)

55.8
64.00

Total assets / Return on Assets (ROA)

Capital expenditures / Depreciation

Employees taking childcare leave*2

Composition of the Board of Directors

Customer satisfaction■■ Total assets (Million yen)
●Return on Assets (%)■■ Capital expenditures (Million yen)■■ Depreciation (Million yen)■■ No. of employees taking childcare leave (persons)■■ No. of male employees taking childcare leave (persons)● Ratio of male employees taking childcare leave (%)■■ Internal executive directors (persons)■■ Outside executive directors (persons)● Ratio of outside executive directors (%)● Ratio of female executive directors (%)● Overall satisfaction (%)● Satisfied (%)● Somewhat satisfied (%)

12.7

72.00
53.7
10.8

43.8
44.0

155,782 161,713
12.5

2,809

135,764

10.6

121,494

2,707

2,846

2,446

2,306

4

36.4

40.0

51.1
43.2
22.2

20

14.8

2018

2019

2020

2021 (FY)

2017

2018

2019

2020

2021 (FY)*ROA: Ordinary income / average total assets during theperiod × 100

net one report 2022

2017

2018

2019

2020

2021 (FY)

2017

14.3

8

9.1

4
2018

2019

2020

2021 (FY)

41.5

4

14

61

6

3

7

30.00

2017

42.9

6

6

91.2
78.2

36.4

7

23.0

9.1

89.4

4

44

12.2

88.5

4

49

6.9

37.00

84.7
31.7

54

2,618

102,502

45.00

63

61

3,020 3,066 2,962 2,979

66.7

2018

9.1

2019

47.2
42.2

46.2

Review of Operations

38.8

ESG

*ROE: Net income attributable to owners of the parent /average equity during the period × 100

45.8

45.0

37.4
32.4

3

10.0

2020

2021

2022 (FY)*Transition to a company with an Audit & Supervisory
Committee from a company with an Audit & Supervisory
Board in FY2022

2017

2018

2019

2020

2021 (FY)*Overall satisfaction: Satisfied + Somewhat satisfied*Survey methodology changed from FY2021

62

Consolidated Financial Data

Service business

FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

million yen

136,404

160,667

154,582

146,216

144,684

138,103

158,181

163,843

180,957

204,607203,520

231,844

million yen

48,32250,70653,14757,49057,93556,291

63,736

71,22079,65888,85589,408103,940

Year over year

%

9.1

4.9

4.8

8.2

0.8

(2.8)

13.2

11.7

11.8

11.5

0.6

16.3

Composition ratio

%

35.4

31.6

34.4

39.3

40.0

40.8

40.3

43.5

44.0

43.4

43.9

44.8

Order backlog

million yen

48,56951,60251,31655,10458,25956,19258,42368,92075,05293,517

94,915

139,160

Revenuemillion yen

157,633

154,869

142,427

141,529

140,170

153,124

153,346

174,825

186,353

202,122

188,520

Year over year

5.2

20.5

(1.8)

(8.0)

(0.6)

(1.0)

9.2

0.1

14.0

6.6

8.5

(6.7)

CAGR (three years)

%

5.4

6.3

7.6

2.9

(3.5)

(3.3)

2.4

2.7

7.6

6.8

9.6

2.5

30,49142,30236,266

31,69931,91629,01534,84336,515

43,206

48,95355,91351,786

23.3

26.8

23.4

22.3

22.6

20.7

22.8

23.8

24.7

26.3

27.7

27.5

24,79327,07327,81428,55628,15727,391

29,47529,59031,39732,45336,23934,995Gross profit
Gross profit margin
Selling, general and administrative expenses
SGA ratio

million yen%
million yen
%

18.9

17.2

18.0

20.0

19.9

19.5

19.2

19.3

18.0

17.4

17.9

18.6

Operating income

million yen

5,697

15,229

8,451

3,142

3,759

1,623

5,368

6,925

11,80916,49919,673

16,790Year over year

%

13.9

167.3

(44.5)(62.8)

19.6(56.8)

230.6

29.0

70.5

39.7

19.2

(14.7)CAGR (three years)

%

6.1

19.7

19.1

(18.0)(37.3)(42.3)

19.5

22.6

93.8

45.4

41.6

12.4

Operating margin

%

4.4

9.7

5.5

2.2

2.7

1.2

3.5

4.5

6.8

8.9

9.7

8.9

2,891

8,520

4,324

983

1,453

(124)

1,075

4,551

7,155

9,817

12,321

11,225

Total assets

million yen

82,627100,00292,92490,624

103,013

99,266

102,038

102,502

121,494

135,764

155,782

161,713

Cash and deposits

million yen

12,256

19,233

18,58018,184

19,374

20,66816,236

21,95323,30531,47332,42920,281

Interest bearing liabilities (mainly lease obligations)million yen

1,133

1,843

1,882

2,173

4,700

5,832

6,994

7,306

12,442

16,10921,49841,069Net assets

million yen

56,29463,50861,38757,263

56,10952,896

51,94353,84758,58465,33773,79568,547

Equitymillion yen

56,18063,36861,19057,19656,014

52,77751,81553,68658,42065,05373,51368,363Equity ratio

%

68.0

63.4

65.8

63.1

54.4

53.2

50.8

52.4

48.1

47.9

47.2

42.3

D/E ratio

times

0.02

0.03

0.03

0.04

0.08

0.11

0.13

0.14

0.21

0.25

0.29

0.60

Net D/E ratio

times(0.20)(0.27)(0.27)(0.28)(0.26)(0.28)(0.18)(0.27)(0.19)(0.24)(0.15)

0.30

Return on Equity

%

5.2

14.3

6.9

1.7

2.6

(0.2)

2.1

8.6

12.8

15.9

17.8

15.8

Return on Assets

%

7.1

16.9

9.0

3.9

3.9

1.7

5.3

6.9

10.8

12.7

12.5

10.6

Book-value per shareyen

623.47703.25699.63676.65662.62624.24612.64634.47689.97767.89867.48832.48Dividend per share

yen

2,200

6,200

34.00

34.00

30.00

30.00

30.00

30.00

37.00

45.00

64.00

72.00

Earnings per share

yen

32.20

94.56

48.89

11.40

17.20

(1.47)

12.72

53.79

84.52

115.90145.42134.15

Diluted earnings per share

yen

—

—

48.89

11.39

17.17

—

12.69

53.65

84.30

115.63145.09133.98million yen

8,129

19,313

3,932

1,016

5,291

5,877

259

11,5696,682

12,281

9,800(10,874)

Cash flows from investing activities

million yen(1,887)(1,572)(3,416)(3,823)(1,610)(2,235)(1,127)(1,264)(1,424)(1,194)(3,336)(1,515)

Cash flows from financing activities

million yen(1,407)(1,765)(7,167)(5,589)(3,490)(3,329)(3,564)(3,588)(3,905)(5,131)(5,505)233

Cash and cash equivalents at end of period

million yen

20,25636,231

29,58021,183

21,374

21,66817,23623,95325,30531,47332,42920,281

person

2,010

2,023

2,210

2,422

2,374

2,252

2,284

2,317

2,294

2,431

2,560

2,703

Total employees
Bookings per employee

million yen

68

79

70

60

61

61

69

71

79

84

80

86

Revenue per employee

million yen

65

78

70

59

60

62

67

66

76

77

79

70

Gross profit per employee

million yen

15

21

16

13

13

13

15

16

19

20

22

19

Operating income per employee

million yen

3

8

4

1

2

1

2

3

5

7

8

6

Review of Operations

Cash flows from operating activities

ESG

million yen

Growth Strategy

Net income attributable to owners of the parent

Value Creation

130,857%

Introduction

Bookings

unit

CAGR : compound annual growth rate
Equity =Total net assets - Share acquisition rights -Non-controlling interests* Diluted earnings per share for fiscal 2015 is not shown because there is a net loss per share although there are residual shares.
** Diluted earnings per share for fiscal 2011 and before is not shown because there are no residual shares.
*** Although the Company conducted a 200-for-1 stock split on April 1, 2012, book-value per share and earnings per share have been calculated on the assumption that the stock split was conducted at
the beginning of fiscal 2010.

63

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64

Glossary

A technical support process that involves working with customers to help them achieve optimum system utilization.
Through ongoing monitoring of ICT system usage post-installation, gaps in expected system performance can be
identified and rectified. Proposals can also be made to update existing systems in line with advances in technology

Capital services

A financial service that reduces initial costs and enables continuous use when introducing an ICT system.

Smart factories

Smart factories enable the creation of new added value, by acquiring and collecting data regarding all equipment,
facilities, and the work of the personnel in the factory using IoT networks, and analyzing and utilizing such data.

Smart manufacturing

Smart manufacturing aims to decarbonize and enhance manufacturing performance, by enhancing efficiency throughthe use of IoT, big data, AI, etc. This refers to the digitalization of manufacturing, which uses data to connect all
corporate activities, including not only factories, but also product design, supply chains, production, distribution, andsales.

Three lines model

A model of an organization’s risk management and control activities. Generally, the first line consists of the businessdepartment, the second line the management department, and the third line the internal audit department. In the caseof the Company, we have established our own 1.5 line to monitor the first line, in order to ensure discipline as well as
the establishment of effective business rules.

Zero trust / Zero trust network

A new security measure which replaces the conventional perimeter defense type of security that works to protect theinternal network from the outside. This is a mechanism that protects information assets and ICT assets by verifying thereliability of access through appropriate authorization, in an ICT environment where various users and devices areconnected, such as cloud use and remote work.

Digital government

A revision by national and local governments of the administrative services they provide through the utilization of digitaltechnology and data, with the aim of transforming the very nature of government itself. Digital government aims tocreate new value from the perspective of users such as citizens and companies.

Integrated Service BusinessThis is our unique business model, which builds an engagement model that maximizes value for our customers, alongwith an expansion of lifecycle services that utilize the intellectual property we have accumulated thus far. We provide
new value through co-creation with our customers and business partners by linking a variety of intellectual properties.

2025 Digital Cliff

A term coined in METI’s “DX Report” (2018), which refers to the prediction that “there is a possibility that Japan’sinternational digital competitiveness will stagnate after 2025, due to the retirement of IT system personnel who support
corporate legacy systems, and the resulting continuation of system black-boxization, as well as a lack of progress indigitalization.”Managed Service Provider (MSP)

A business provider that provides support from line connection to usage. In addition to conducting various analyses thatare necessary when introducing ICT systems / equipment, MSPs provide simple usage of equipment similar to home
appliances, at a fixed monthly fee.

Lifecycle service

Services that support the development of the ICT infrastructure strategies of customers, by expanding the scope of
proposals from traditional services such as design, installation and maintenance to operations, as well as overall system
optimization.

Recurring

A business model that generates revenue through recurring billing. At the Company, this is a system that responds tocustomer’s problem-solving needs in ICT utilization, ranging from system maintenance and operations, to the provisionof ICT platform functions, overall system optimization, and payment methods for operation and maintenance costs,
thereby continuously providing value to our customers.

Refurbishment

A business model that addresses the growing demand for equipment referred to as remanufactured products, withguaranteed functions and operations. Technological innovation by manufacturers is progressing rapidly, which makes
the continued usage of equipment difficult. Accordingly, the procurement of functions for ICT utilization has become anew customer trend, and guaranteeing functions is key.

Reference

Customers referring to examples from other companies before introducing a new system. In principle, we provide ourcustomers with examples of our internal use and application of systems, as part of our basic proposal activities at theCompany.

COPC (Customer Operations®
Performance Center) certification

An international standard established to contribute to customers, through high-quality contact center operations.
Organizations that consistently produce high-level results in terms of service speed, response quality, operational
efficiency, and customer satisfaction are certified.

DX (Digital Transformation)

The utilization of ICT technology to create new revenue models and significantly enhance operational efficiency. At theCompany, we are focused on the digitalization of business processes (netone DX) in providing lifecycle services. In
order to improve productivity, we are promoting behavioral reforms, including revisions of organizations and personnel
systems.

netone on netone

To support customers by eliminating anxiety when introducing a new system and in deploying effective ICT utilization at
an early stage, by actively disseminating our ICT utilization case studies to our customers.

OT security services

Services we provide for comprehensive support to accurately identify ICT assets, visualize vulnerabilities, reduce
potential risks, and monitor communications, in an OT (Operational Technology: technology to control and operate
production equipment and systems) environment where various devices and mechanisms that are unique tomanufacturers are used.

XOC (Expert Operation Center)

Our operation center, which supports high network availability 24 hours a day, 365 days a year. It is one of the largest
integrated operation management services in Japan.

SOC (Security Operation Center)

Our security monitoring system, which consists of our high-quality security analysis infrastructure and a team of
dedicated security analysts.

net one report 2022

FTSE Blossom Japan Sector Relative Index

MSCI Japan ESG Select Leaders Index

MSCI Japan Empowering Women Index (WIN)Work style (work-life balance, empowerment of women)
We have acquired the “Kurumin Mark” from MHLW (certified in 2013) for activities topromote work-life balance, and have also received the “Eruboshi certification (second
stage)” for our activities to promote the empowerment of women.

Partners Companies’ Awards
The Group has built strong cooperative relationships with a variety of domestic and overseas partner companies. We havereceived numerous awards in recognition of our achievements in customer success using our partner companies’ products andservices, and our contributions to the promotion of our partner companies’ businesses.
Examples of Awards from Partner Companies during Fiscal 2021 P.23
Data Book

IR Activities● Selected for the first time as a Highly Improved Integrated Report selected by GPIF’s domestic equity management
institutions● Selected as the “AAA Website” for substantial content in the Overall Ranking of the Ranking Survey of All Japanese
Listed Companies’ Website for fiscal 2021
● Selected for the “‘Most Liked!’ IR Award” at the 2021 IR Award

Website information
https://www.netone.co.jp/english/investor-relations/IR

We also post IR news as well as IR materials such as financial results
briefing materials and Annual Securities Reports.

https://www.netone.co.jp/sustainability/ (Japanese only)

Sustainability

Corporate
governance

We provide an overview of our basic approach and initiatives regarding
aspects of society and the environment.

https://www.netone.co.jp/sustainability/esg/governance/corporate/(Japanese only)
In addition to our Corporate Governance Report, we also publish our
Corporate Governance Guidelines.

Review of Operations

Customer success

JPX-Nikkei Index 400

ESG

Edge cloud

Adoption in ESG indices

Growth Strategy

Meanings
The edge cloud provides the convenience and connectivity of the cloud to the locations where data is created andimplemented. Specifically, in IoT networks at production sites such as factories, the edge cloud enables the utilization ofdata as information that is necessary for decision-making in management and at production sites, by collecting, storing,and processing data in a public cloud within the production site, rather than in of the broader public cloud. This
technology realizes digital transformation to connect production sites and management.

Value Creation

Terminology

Introduction

65

External evaluation

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66