Net One Systems Co., Ltd.
net one report 2023

net one report

2023

Integrated Report

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

Issued in: November 2023

Contents
Net One by the Numbers

11
13
15
17

Corporate History

Net One’s Visions for Itself and Society
Message from the CEO
Message from the Chairperson of
the Board of Directors

Related page

P.29

Chapter 2: Growth Strategy

Service ratio

ROE

Operating margin

Customer satisfaction

Ratio of Independent
Outside Executive Directors

45.2 %

20.1 %

9.8 %

78.3 %

66.7 %

Accelerate the shift to services
and achieve customer success

Maintaining a high level ofcapital efficiency

Review of Operations
The Societal Prevalence of Net One
Establishment of netone valley

Value Creation

Value Creation Process
Materiality
Acceleration of Our Shift toward Services
Achieving Customer Success
Capital Supporting Value Creation

31
33
34
35
37

Message from the COO
Message from the CSDO
Message from the CTO

Progress toward the fulfillment of key materiality-related KPIs
Related page

P.21

Chapter 1: Materiality

Solving social challenges
Solution revenue

Message from the CFO
Message from the CHRO, CRO, and CCO

Management Capital

Professional Personnel
Design Capabilities

Train personnel
for the next generation
Security personnel
CISSP holder

FY2022

FY2024¥7.2¥30.0
billionbillionFY202223

FY203080

Registered Information
Security Specialist

FY2022

FY2030

Green ICT

51

Co-creation Capabilities

Cloud personnel
Front divisions

FY2022

FY2030

Up

Up

93%

GovernanceCorporate divisions

49

Executives

Enterprise Market

59
61
63
64

Financial and Non-financial Highlights

Telecom Carrier Market
Public Market
Partner Business

FY2022

FY2030Up

Up

April 2023

FY20307.8% 15% 28.6% 50%
50

Editorial policy

Reference guidelines

The net one report is published to inform all stakeholders of the Net One Group regarding our
growth strategy, value creation efforts, and the sustainability management concepts andinitiatives we have adopted as we aim to realize our Purpose. Our net one report for fiscal 2023
introduces the value creation measures we are implementing as we aim to attain our Vision for2030 in accordance with the central idea of shifting toward services and ensuring sustainability
management. In addition, the separate “Sustainability Data Book 2023” covers the Net One
Group’s progress in implementing materiality-related initiatives, including ESG performance data.
In this report, figures for financial results from fiscal 2014 to fiscal 2019 have been restated toreflect the revisions that were made to past financial results disclosed in December 2020.

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

Notes on included matters

Glossary

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.

net one report 2023

FY203050150Consolidated Financial Data
External Evaluation

68.0% 90%

April 2023

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

Financialinformation
Annual Securities
ReportFinancial Results
Financial Results
Briefing Materials
etc.

net onereportFinancial andnon-financial integration
Importance:
Emphasison storytelling

Business Segments

51
53
55
57

FY2030

Ratio of female
new graduate hires

GovernanceDX personnel

Message from the Chairperson of
the Audit and Supervisory Committee

Business Segments

FY2022

Ratio of female
managers

50 %Corporate Governance

23

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

100

45
48

Chapter 5

Two of our Outside
Executive Directors are women
An Outside Executive Director serves as
the Chairman of the Board of Directors

Management Capital

Status of Medium-Term Business Plan and
Progress toward Associated Targets

Chapter 4

Overall satisfaction improved
0.1 points year on year

Growth Strategy

29

Chapter 3

High value-added businessand improved productivity

Growth Strategy

Chapter 2

39
41
42
43

Major achievements in fiscal 2022

Value Creation

19
21
23
25
27

Introduction

1
3
5
9

Chapter 1

1

Net One by the Numbers

Non-financial
information
Sustainability website,
etc.

SDB

Emphasis on
breadth of non-financial
information

net one report 2023

2

As the pace of digitalization picks up in virtually every industry, we will proactively facilitate proper
adaptation by designing connections that link people and networks. Moving forward, we will leverage theunique critical assessment capabilities we have developed through our effective utilization of ICT as we
consistently innovate solutions for social challenges and provide society with value underpinned by ourproven technological capabilities.

Resolution of

PMVV-W

Decliningbirthrate
and aging
population

PurposeGreen growth

VisionVisionWAY(Code of Conduct)

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

Smart manufacturing

Unleash thepotential of people and networks, and create a prosperous future

by carrying

on / inheriting tradition and making innovation happen

Growthstrategy

Acceleration of shift toward
services, acquisition anddemonstration of strengths

Realizing
our Purpose

Facilitating more robust
customer success

Reinforcement ofour business base

Corporate culture reform / thorough visualization /personnel strategy

Socialresponsibility

Promoting materiality-related initiatives
in accordance with our Sustainability Policy

Key strategies

Prosperous future

Unleashing the potential ofpeople and networksof our Medium-Term Business Plan

Sustainable growth

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

Business Segments

net one report 2023

Social infrastructure to realize Society 5.0

Governance

Adapting to change
while targetingsustainable growth

Digital government

Management Capital

Values3

Regional
revitalization

areas of our Medium-Term Business Plan

Growth Strategy

MissionMissionMissionVisionThree focus

social challenges

Value Creation

Technological advancements
Stakeholder support

Introduction

Net One’s Visions for Itself and Society

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 through continuous self-improvement● Maintain an appropriate profit structure to fulfill our responsibilities toa wide range of stakeholders●●

net one report 2023

4

Message from the CEO

Now is the time to restructure the relationships
between people and digital technology anddemonstrate the true value that the Net One
Group provides in pursuit of a better society.

Value Creation

In accordance with its Purpose, the Net One Group aims to“unleash the potential of people and networks, and create aprosperous future by carrying on / inheriting tradition andmaking innovation happen.” To understand what is meant by“prosperous future,” we must first unravel the relationships
between people and digital technology. The evolution of
networks has eliminated borders that previously
compartmentalized different elements of information
distribution, while ICT has become increasingly convenient in awide range of contexts. However, at present, I personally feelthat we still have a long way to go before we can confidently

say that people are truly using ICT effectively. True, generativeAI, for example, can do in a matter of minutes what used torequire one person an hour to accomplish. At first glance, thismay seem like an improvement in productivity, but I believethat true improvement in productivity is not measured by thelength of time spent on a job, but rather by how much of thesurplus output created through the use of AI can be allocatedto tasks which only humans can perform. This belief is what
we have in mind when we talk about “unleashing the potentialof people;” in the context of human activity, ICT should beviewed as a supplemental tool to be used by all people,
regardless of race, gender, nationality, or physical ability, inorder to maximize their own abilities. If utilized in this way, ICT
will enable all people to influence each other, address
emergent issues, and facilitate the creation of a better society.
This scenario constitutes the Net One Group’s vision of a“prosperous future.”

Introduction

As a leading network company,
we will create a prosperous future
by maximizing human abilities throughoptimal ICT application.

Realizing our Purpose

Growth Strategy

The trend toward digitalization is accelerating amidchanges in our external environment, including the
emergence of geopolitical risks and a declining
population in Japan. Under these circumstances,
networks, which serve as the foundation for
digitalization, are indispensable. Accordingly, the Net

Management Capital

One Group remains keenly aware that expectations
are high. Many are waiting to see what kind of value
the Net One Group will deliver to society when thetime for digitalization is now or never. Please allow me
the opportunity to explain our vision for the future.

GovernanceBusiness Segments

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

Photo: netone valley’s VALLEY*1 space*1. This is the central gathering place of the “netone valley” innovation center. The VALLEY area connects people, technology, and information to accelerate collaboration and synergy.

5net one report 2023

net one report 2023

6

Message from the CEO

Overall, we are confident that we generated favorable progress
during fiscal 2022. We are continuously establishing andimproving the foundations for our service strategy, which is a
key focus of the growth strategy outlined within our MediumTerm Business Plan. Additionally, we firmly believe that fiscal
2023, the second year of our Medium-Term Business Plan, will
be a turning point on the road to our next major leap forward.
When listening to casual conversations among our employees,
I now commonly hear them talking about services rather thanreferencing product sales models focused on network
equipment.

Our second founding

Pursuing true innovation through theelimination of boundaries and developing
the Net One Group into an organization thatgenerates extraordinary breakthroughs

Business Segments

net one report 2023

We spent the year laying the foundationfor our next major leap forward,
while systematically promoting personnel
strategies and reinforcing our businessfoundations.

Governance

7

Progress achieved during the first year of
our Medium-Term Business Plan

Management Capital

Following discussions regarding its medium- to long-term
vision, the Net One Group’s Board of Directors established a“Vision for 2030” that is based on the four themes set forth inits overall Vision. Underlying the Vision for 2030 in its entirety is
the concept of continuity; the Company is charged with boththe mission and responsibility of surviving and continuing toprovide value as a public institution that exists for the benefit ofsociety. In accordance with this fundamental idea, please allow
me to convey the intentions and purposes behind each of thethemes underlying Vision for 2030.
First, the Net One Group aims to become a “leading
company” that is recognized and respected by domestic
companies in all industries. While we are proud of our status
as a leading network company, we also aspire to be a leading
company in other fields, including sustainability management
focused on non-financial capital. I believe that the power todecide if we are a leading company lies in the hands of others.
Undergoing objective evaluations from all possible
perspectives, including market and sustainability-related
performance metrics, we will fulfill our responsibilities and earn
recognition as an exemplary company. Through these efforts,
we will establish a reputation as a role model corporation in
Japan. I firmly believe this is the pathway forward for the Net
One Group.
Second, we aim to create value that facilitates objective
evaluation, while continuing to boost added value. This theme
incorporates the idea that the very existence of the Net One
Group, as well as its capacities for critical assessment andachievement, constitutes added value. Through sustainability

operating up until the present thanks to the support ofcustomers, partners, shareholders, our employees and theirfamilies, our local communities, and many others.
As we reflect on our history and progress to date, we are
now undergoing a second founding, creating a new Net One
Group that will facilitate the achievement of further growth
moving forward. In May 2023, we launched the “netone valley”
innovation center as a new business base and a strategic
location through which employees can take on the challengeof creating new value and charting pathways toward aprosperous future. Utilizing netone valley as a starting point,
we will embark upon our journey toward the creation of a new
future for the Net One Group. The key concept behind these
efforts will be the elimination of boundaries. Boundaries canimpact both how employees work and the relationships
between employees and our stakeholders. We encourage our
employees to f reely take adv a n ta ge of a l l a v a i l a bl e
opportunities to build a new future through their work styles
and daily lives. At the same time, we call upon our
stakeholders to share ideas that will facilitate our transition
toward this future. In this sense, netone valley could be viewed
as a giant front porch; just as back in the “good old days,”when people gathered on the front porch, a space neither
inside nor outside the home, to talk about all sorts of topics,
we will aim to explore a wide range of possibilities together
within a relaxed environment that is not constrained by normal
business conventions. I firmly believe that true innovation iscreated at times, and in places, such as these.
The development of netone valley remains incomplete. We
plan to continue updating the facility’s equipment andsoftware. Furthermore, we will simultaneously continue to“update” ourselves, refining our capabilities without amoment’s pause. By creating innovation that is nourished bytradition, we will unleash the potential of both people andnetworks. Furthermore, we will generate further traditions
through the innovation thereby achieved. We hope that you are
excited about both the innovation we will create moving
forward and the prosperous future we aim to achieve, and we
humbly request your ongoing support as we pursue theseobjectives.

Growth Strategy

We have established a “Vision for 2030”
that consists of four themes and is centrally
focused on the concept of continuity.

Our shift toward services is strategically critical to thecontinuity of our Group. By establishing a business model
grounded in recurring revenue, we will ensure our ability togenerate stable earnings throughout the year, while conducting
personnel planning and development. We also believe in theimportance of building ongoing relationships with ourcustomers through services. With this goal in mind, we
recognize the critical strategic significance of creating a service
lineup that is “standardized to the point at which it can be fully
customized,” thereby enabling us to respond to a diverse
range of customer needs.
With regard to our personnel strategy, we plan to begin
defining the necessary capabilities and drafting staffing plans
for the realization of our Vision for 2030, which describes the
future position in which we want to be. Afterward, we will
identify discrepancies between our current circumstances andour desired future through backcasting and adopt appropriate
measures for addressing these discrepancies. Furthermore, by
sharing the details of these processes with employees, we will
aim to establish a system through which employees cancompare the Company’s assessments of their aptitudes andtalents with their own ideal visions for themselves and makeadjustments accordingly, thereby enhancing employee
engagement. As a starting point, we established a new
personnel system in fiscal 2022. Employees are the wellspringfrom which the Net One Group creates value. Therefore, eachand every employee is encouraged to chart his or her own
career path, hone his or her abilities, and further improve
performance through appropriate self-evaluation. Throughthese efforts, the Net One Group will continue to achieve
growth. To facilitate the achievement of this advantageous andself-perpetuating cycle, we will implement comprehensive
strategies that cover a wide range of business elements,
including compensation, training, and recruitment.
Meanwhile, we are making steady progress toward thereinforcement of our business base. As part of our corporate
culture reform efforts, we have been concentrating on activities
aimed at driving home our corporate philosophy system infiscal 2022, and our employees have demonstrated a strong
appreciation for this system. In fiscal 2024, the final year of our
Medium-Term Business Plan, we aim to develop thisappreciation into resonance, thereby leading the Group into aphase within which its employees can take decisive andindependent action. In the more distant future, we would liketo elevate this resonance to the level of harmonization, thus
entering a stage during which employees can effectively
influence and motivate those around them.

Value Creation

Medium- to long-term vision

management, we will ensure that all of our employees are able
to perform their professional duties with vitality andenthusiasm, while also guaranteeing that our impact on ourcustomers and society at large will be evermore positive.
Third, to facilitate our evolution toward the company I havedescribed, we will establish an “elite group” of professionals.
The Net One Group firmly believes that a professional isdistinct from an expert; an expert is someone who, due tosurrounding circumstances, is the only individual who iscapable of performing a task, while a true professional issomeone who is able to systematize and pass on intellectual
capital, thereby enhancing the overall strength of anorganization. Moving forward, the Net One Group will continue
to transform itself into a leading company while maintaining
teamwork as its cornerstone.
Finally, with regard to the fourth and final theme, which
concerns profit structure, we are targeting ongoing growth for
the Net One Group. As time progresses, we will establish an
appropriate profit structure and build a foundation that will
enable us to steadily and independently take all necessary
steps forward, thereby transitioning into a new phase of value
creation.
By the end of our current Medium-Term Business Plan, we
aim to establish five cultural practices that will serve as
benchmarks for measuring progress toward achieving our
medium- to long-term vision: creating value as a team,relishing challenges, maintaining purpose-driven attitudes,
showing mutual support, and confronting risks. These cultural
practices are not independent of each other, but are instead
inextricably linked. Rather than avoiding risk, we will motivate
ourselves to consider how we can minimize risk to support theachievement of our objectives and how we can support eachother as members of the same team to facilitate this process.
Through these efforts, we will collectively generate new value.
Establishing these new cultural practices will be part of ourcorporate culture reform efforts, and will serve as the first step
toward strengthening our governance. I recognize that thefulfillment of our Vision for 2030 is a critical milestone toward
the attainment of our Mission, which I shared when I assumed
my position as president of the Company.

Introduction

We firmly believe that the driving force behind our efforts tofacilitate a “prosperous future” is our capacity for “criticalassessment,” a capability that the Net One Group has
consistently maintained and refined throughout its existence.
From the time of our founding, when computer networks were
not commonplace, we recognized that the evolution of
networks would revolutionize our perceptions of physicaldistance and human connections, while also impacting our
personal values and culture. We accordingly improved ourtechnologies in accordance with a core objective ofincorporating network application to ensure that thesechanges would enrich human lives. Along the way, we
experienced both successes and failures and developed
realistic frames of reference through which we could evaluate
our progress. Consequently, we were able to improve ourcritical assessment capabilities, which enabled us to identify
the true issues our clients were facing and the goals they wereaiming to achieve, while also enhancing our ability to facilitate
the achievement of these goals. Moving forward, we must
explore different ways to stay abreast of rapidly emerging
technologies, ensure their safety, and provide advice regarding
their optimal utilization, thereby allowing their users to masterthem without the need for compromising adaptations. I am
confident that now is the time for the Net One Group to
demonstrate its true strength.

Net One Systems, which started with just ¥200 million incapital and only ten employees, celebrated the 35th
anniversary of its founding this year. Currently, we have ¥12.2
billion in capital, more than 2,500 employees, and revenue
equivalent to more than six times the amount we reported for
2000, the year we went public. We have been able to continue

net one report 2023

8

Enhancement of nomination and remuneration systems

Independent Outside Executive Director
Chairperson of the Board of Directors
Attorney at law
Photo: netone valley’s INFORMATION HUB*1 space*1. Located within the “netone valley” innovation center, this is a space for gathering information. Its design facilitates chance encounters and encourages personal exploration.

We will facilitate a shift toward proactive management
while enhancing both internal and external communication.
Governance reform

Challenges and response measures associated with assessments of effectivenessStatus of response in fiscal 2022

Enhancement of wide-ranging
discussions based on
management strategies

We established “visualization” as a priority theme for deliberation and held objective data-based discussions regarding thestatus of the Group and other issues once every three months.
During monthly meetings of the Board of Directors, the Governance and Corporate Culture Advisory Committee reported on
the progress of corporate culture reforms and recurrence prevention measures, thereby enhancing subsequent discussions.

Review of agenda items for the
Board of Directors meetings

We used our transition into a company with an audit and supervisory committee as an opportunity to delegate approximately
70% of decision-making authority formerly held by the Board of Directors to the Management Committee and other bodies.

Acquisition of time for discussion
on important issues throughsystematic planning of agenda
items

We successfully established year-long systematic administration through the formulation of annual agendas at the beginningof the fiscal year.
Compared to the previous year (July through March), we lowered the number of agenda items for meetings of the Board of
Directors from 165 to 102 (a year-on-year decrease of 38%) and increased the average time spent discussing each agenda
item from 13 minutes to 21 minutes.

net one report 2023

Support risk management to accelerate
our shift toward services
Independent outside executive directors are responsible forbalancing, and preventing abuse of, managerial authority.
However, we also recognize the important role that outside
perspectives fulfill with regard to supporting proactive
management. Proactive approaches are always accompanied
by risks, some of which are unprecedented. Nevertheless,these risks are an unavoidable reality when it comes toachieving growth.
To facilitate business execution, independent outside
executive directors like myself should support uninhibited andenthusiastic idea sharing and challenge acceptance byproactively identifying possible risks and proposing solutions
for addressing them. The Company’s independent outside

net one report 2023

Business Segments

9

Fiscal 2021 challenges

Proactive management

GovernanceIn fiscal 2022, the governance structure of Net One Systems
underwent major changes, as we transitioned into a company
with an audit and supervisory committee and began requiringthat six of the nine members of our Board of Directors be
independent outside executive directors. We feel that we wereable to implement drastic reforms in such a short period oftime in part because all members of our management shared astrong sense of urgency regarding the need to implement
reforms aimed at preventing recurrence of fraudulent acts andin part because management held a series of dialogues with
employees concerning the Company’s direction moving
forward, which raised awareness regarding the significance ofgovernance reform activities throughout the Company.
The Company has revamped systems and processes
associated with its Board of Directors to ensure that the board

In accordance with its recently established Vision for 2030, the
Net One Group aims to be recognized throughout society as aleader in terms of all corporate activities, including, but notlimited to, those in the network field. One of the key issues wemust face as we aim to achieve this goal is the promotion ofdiversity and inclusion. To raise our ratio of female employees,
which is one of our materiality-related KPIs, we need toconstruct an organizational foundation that will allow us todevelop a fresh crop of female executive directors. We believethat having women in positions carrying ultimate decisionmaking responsibility will provide emotional support to our
female employees, while also raising their awarenesses of theroles they fulfill with the Company. Furthermore, in a rapidlychanging industry where new forces are constantly emerging
both in Japan and abroad, we must also appoint foreign
nationals in accordance with a global perspective and promotemembers of the younger generation to positions through which
they can lead the ICT industry.
To achieve these objectives, I have personally created
opportunities for interaction with employees while
simultaneously promoting open dialogue. I sincerely hope that
this dialogue will encourage each employee to think about hisor her own career and potential and communicate his or her
own thoughts and ideas more proactively. Meanwhile, I believethat as we develop more employees with this mindset, we willobserve growth in the number of leaders who proactively drive
the Net One Group forward, thereby generating new growth
for the Company as a whole.
Having expressed steadfast support for our Vision for 2030,
all members of our current Board of Directors are in agreement
regarding the future direction of the Net One Group and firmly
believe in the soundness of the Net One Group’s governancestructure. However, we cannot convey the importance ofgovernance through routine disclosures of information alone
and must ensure that our shareholders and investors
understand that our reforms represent much more than mere
formality. To convince them of the significance of our reforms,
we must continue to communicate as concretely as possible
the activities and discussions undertaken by our Board of
Directors and all committees. As chairperson of the Board of
Directors, I am responsible for proactively ensuring that the Net
One Group is recognized as a company that is achieving
business development through strong governance.

Management CapitalManagement’s strong resolve toimplement sweeping reforms

is more focused on discussing important issues. We
accomplished this feat by delegating authority to theManagement Committee and other decision-making bodies to
cut down the volume of proposals submitted to the Board of
Directors and by beginning to identify discussion items related
to important management issues, which complement
resolutions and reports reviewed by the board. Furthermore,
we shifted the focus of the board’s discussions from thepromotion of recurrence prevention measures to the future
prospects and growth potential of the Net One Group. Whilemaintaining a sound governance framework, we are diligently
discussing the adoption of a proactive system of corporate
management that will lead us into our next stage of growth. To
spur on these discussions, we will ensure proper
administration and leadership that will allow each executive
director to demonstrate his or her individual expertise during
meetings of the Board of Directors and facilitate the exchange
of a diverse range of opinions.

The Net One Group’s commitment toensuring appropriate evaluations througheffective communication

Growth Strategy

Message from the Chairperson of the Board of Directors

Looking ahead to 2030
Value Creation

Maya Ito

Another governance reform we have implemented is thereorganization of the Advisory Committee into the Nomination
Advisory Committee and the Remuneration Advisory
Committee. As a member of both committees, I am
responsible for ensuring that the results of discussions held
during meetings of the Board of Directors are reflected throughcorresponding policies and systems.
With regard to nominations, we have developed asuccession plan that prioritizes adherence to the foundationsof our compliance and governance systems and formulated tofacilitate our transition toward a proactive system ofmanagement. Independent outside executive directors are
responsible for verifying and evaluating the suitability ofcandidates for positions in our next generation ofmanagement. To ensure the selection of appropriate
candidates, we will ensure that we thoroughly understand theskills and characters of each candidate while also providing
ample opportunity for independent outside executive directors
and candidates to exchange views and opinions.
In terms of compensation, we have introduced a restricted
stock compensation system for chief executives with the aimof ensuring that they execute their duties while sharing thesame perspectives regarding value that are held by ourinvestors. Furthermore, we are currently establishing a system
under which compensation for chief executives will reflect
performance indicators unrelated to earnings, such as thedegree to which we have raised the share of revenue
generated through services and the results of employee
awareness surveys.
Japanese society at large is currently facing a scarcity ofhuman resources. Under these circumstances, we mustensure that we maintain a relatively compelling remuneration
system if we aim to shift toward proactive system ofmanagement. We updated our remuneration system in July
2023, and as time progresses, we intend to continue adjusting
this system in an effort to guarantee growth in its appeal
moving forward.

Introduction

Focus on identifying next-generation
management talent and revising
remuneration policies

executive directors have a diverse range of expertise and haveaccumulated extensive experience in the field of crisis
response. Furthermore, we have a system in place that allows
these executive directors to apply their abundant knowledge
and expertise to risk management. As we aim to earn the full
trust of our customers through the proactive delivery ofservices, we will provide the advice necessary to ensure that allneeds are addressed and further enhance cooperation withpersonnel responsible for business execution.

10

2022-2024

Current Medium-Term Business Plan

Corporate History

2019-2021

Established the Expert
Operations Center (XOC)

2016-2018

Previous
Medium-TermBusiness Plan

(Shift to services)

Introduction

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 fromnetworks into all areas of ICT platforms, such as cloud systems, security and IoT.
2007

Previous
Medium-TermBusiness Plan

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

Transformation
for the next era(Integrated Service Business)

Sustained growth(Cloud and security)

2009

2023
Established the “netone
valley” innovation center

Relocated and expanded
the Technical Center

Value Creation

Revenue (by markets)■ Enterprise■ Telecom carrier

2021■ Public

Acquired “COPCⓇ,” acertification for contact centers■ Partner■ Other

2020
Established the “nBC” and “Lab as aService” to help customers accelerate DX

Growth Strategy

2019Started providing the refurbishment
business and solutions for MSP

2001

2017

Listed on the First Section of theTokyo Stock Exchange

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

1999
Operating income amount

Certified as a gold partner
by Cisco Systems

2013

1996

1990

2000

601
Changes in market
conditions

Wider use of information systems

34.3%

42.2%

2024

Servicesales ratio

55.0%
2022

Number of employees

2,023
Improvements
in ICT system efficiency

2024

Number of employees

2,548
ICT utilization becomes central to business reform

Improving communication speeds

ICT utilization

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 countermeasurest o p re v e n t i n f o r m a t i o n l e a k s t h ro u g h
networks.

ICT utilization has expanded rapidly, and theCompany has transformed itself to play acentral role in business reforms. The Company
is creating new added value, in response to thegrowing importance of network technologies
that safely connect all kinds of products andservices as its business field continues toexpand.

Business Segments

1988 ~

Governance

Sharing information between business sites

Customer needs

Changesin business fields

Internet uptake

Servicesales ratio

2010

Number of employees(Target)2020

Servicesales ratio

Management Capital

2010

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

Founded1988

品質管理センター
移転・統合

2016
Established the “Security
Operations Center”(SOC)

Strategy support
Systems optimization

Changesin provided value

11

net one report 2023

Maintenance / Operations
Hardware sales

net one report 2023

12

Review of Operations

Expansion of our business fields centered on networks

FY2022 Revenue
Enterprise market

23.6%

Security
Multi-cloudsystems

Internet

Factories Data centers

22.1%

Cloud systems
Security measures● Work style innovation●●

ICT strategy support

Systems optimization
System installation, maintenance, and operation

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 *1●●

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*1. ISP: Internet service providers

Telecom carrier market

Hardware sales and maintenance

Strengths and characteristics

Management CapitalServices

Remote working

29.4%

Growth Strategy

DX consulting, managed services
Delivery of ICT functionality

Internal
networks

Partner business

Value Creation

Multi-cloud systems, Cloud HUB services, integrated services

Cloud
HUB

Manufacturing /non-manufacturing / financeEnterprise market

Virtualization, cloud technology, security, remote working

Security

23.4%

Public market

Key markets / sectors

Shift toward a service-based
business modelBusiness expansion andtechnological development

LAN/WAN network integration

Public cloud systems

Telecom carrier market* 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.).

The Net One Group has leveraged its strengths in networks and expanded its business fields in line with the increase indemand for ICT utilization.
Amid the recent and ongoing shift to multi-cloud systems, networks that securely and effectively link cloud systems
have become indispensable. Consequently, the Group has taken on a broader range of responsibilities, including
support for cloud systems, cybersecurity initiatives, and general support for ICT platforms utilized in pursuit of digitaltransformation. We are gradually transitioning toward a business model focused on providing services ranging fromproposing grand designs for the installation of next-generation systems to establishing efficient systems that optimallycombine a variety of products, as well as services that support the entire lifecycles of systems. Accordingly, the scopeof our business continues to expand.

Private cloud systems

209.6 billion yen

Introduction

Concentrating primarily on large-scale companies and government agencies, the Net One Groupsupports the introduction and ongoing optimization of comprehensive frameworks and systems thatenable the transformation of business models and work styles through the use of ICT.

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

Characteristics of our business segments
Local governments / education /universities, research centers /social infrastructures / healthcare

Telecom carriers●

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

Public market

Focus areas
Digital government, social infrastructure to realize Society 5.0

PublicSystem integrators

Partner companies

Directsales

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

Customers
Enterprise●

Governance

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.

A wide range of support,
from product proposal to technical support
Net One Partners

Handles a wide range of products from overseas●

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

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

Net One Systems

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 5.

13

net one report 2023

net one report 2023

14

The Societal Prevalence of Net One

Main contribution scenes

Introduction

The Group’s solutions and services are utilized in various places and situations where they support social
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.
Main contribution scenes

Integration of group ICT platforms

Remote working / Zero trust

Factories

Smart factories

Local
governments

Integrated
operation
services
Private cloud systems

Enterprise market
Logistics

SASE / Zero trust

Smart buildings

Maintenance

Educational
institutions

Authenticationand coordination

Offices

Factories

Cloud systems LGWAN

Security cloud systems

School systems / GIGA schools

SOC

Data centers
Monitoring

Public market
Group
companies

We will conduct upgrades leading to expandable, high-quality network
systems that will facilitate the creation of an advanced digital society.

Internet

Hospitals

Operation

Smart logistics

ICT platform renewal conductedin anticipation of the digital transformation era

Public cloud systems

Security

Construction

Security cloud, strengthening of
information security, digitalizationof business processes /local government CRM

Value Creation

Offices

We will enhance ICT utilization and governance in accordancewith our unified security policy.

Remote working
Homes

Work style innovation,
telemedicine,
hospital Wi-Fi / security

Monitoring

Government
office buildings

Local government
office buildings

Business
locationsPublic healthcenters, etc.

Lifecycle support from our customer success teamGrowth Strategy

Educational
institutions

Offices

Hospitals
Financial
institutions

Local
governments

Electricity

Management Capital

Railroads

Factories
Telecommunication

Gas

Logistics

Governance

Main contribution scenes

Telecom carrier
marketCorporatebusiness

ICT platforms
Security cloud systems

ICT platform
integration support

We will spearhead pioneering technological innovation targetingnext-generation service platforms while collaborating with customers
to co-create new markets.

net one report 2023

Product selection,
sales support, technical support

FunctiondeliveryComprehensive support for
procurement, quality control,and distribution

MSP
support

Proposals and supply management
for products designed to support
specific operations

We will develop a resale business through which we collaborate
with system integrators to sell products and services.

5G

Service planningsupportUtilization of
next-generation platforms*1. Multi-access edge computing (MEC)

15

Product
proposals

Operations associated with the partner businessBusiness Segments

Service
platforms

Main collaboration scenes

Example: Installation of MEC*1 platforms using 5G

Solving ofsocial challenges

Partner businessResale business operated throughcollaboration with system integrators, co-creation
involving telecom carriers and partner companies,
and support for corporate groups

Corporate
customers

net one report 2023

16

netone valley

Introduction

Establishment of,a place for taking on the challenge of creating new value
and paving the way toward a prosperous future

Solution
Value Creation

Proposing optimal solutions tocustomers using ICT platforms
refined utilizing the reference
models generated through ourown digital transformation efforts
We adopt and evaluate technologies at netone valley before
proposing their use to our clients, thereby accumulating

Growth Strategy

essential expertise. Offering sophisticated security that allows
for freedom, convenience, and safety, netone valley alsoenables us to jointly conduct proof-of-concept experiments
along with our partners and clients.

Management CapitalGiven the recent major changes in environments surrounding society, including the emergence ofgenerative AI and operational automation, the importance of value-creating human resources capableof generating innovation has been rising. To continue delivering value to a changing society, the Net
One Group must also shift toward a service-based business model and transform work styles byadopting value-creating approaches. Moving forward, we will create a prosperous future throughinnovation generated via various forms of interpersonal networking, including new professional

PROJECT ROOM

encounters and diverse collaborative efforts. The “netone valley” innovation center serves as a venue

A venue for creating new business and services alongwith our partners and customers

Communication & Collaboration

Innovation

Encouraging communicationand collaboration while fostering
an open corporate culture

Working together to develop
scenarios intended to facilitate
the resolution of social challenges
while accelerating innovation

corporate culture, and ensure widespread understanding andThrough netone valley, visitors can experience a wide variety ofacceptance of our philosophies, we must create environments in

cutting-edge technologies and new services. Using thiswhich employees can communicate closely with one another.

innovation center, we will engage in co-creation along with ourThrough our establishment of netone valley, we have provided acustomers and partners, creating new value and generating

venue that encourages a wide range of employee activities, thereby
revitalizing communication and fostering a sense of mutual
understanding and organizational unity among our employees.

17

net one report 2023

Business Segments

To facilitate the creation of ideas and innovation, foster a strong

Governancethrough which these objectives can be accomplished using practical measures.

solutions for social challenges using digital technology.

PARK

INNOVATION SHOW CASE

An office space that encourages casual communication

A place where visitors can experience what the Net One brand has
to offer through exposure to new services and the latest technological combinations

net one report 2023

18

Chapter 1

Value Creation | Value Creation Process

The Net One Group establishes optimal systems from an objective and neutral standpoint byleveraging its network technology capabilities, its multi-vendor support, and the critical assessment
skills developed through its large client base. Additionally, by making full use of the practical usage
expertise we have accumulated by applying technologies internally before introducing them at client
facilities, we are able to resolve social challenges through the facilitation of customer success.

Purpose‐Mission‐Vision‐Values

Introduction

As we strive to realize our Purpose, we will leverage
our network-related strengths to achieve customer
success while creating both social and corporate value.

WAY
Value Creation

P.3

Sustainability Policy
Materiality
Realization of a safe and secure advanced
information society

Financialand non-financial capital
P.39

Contribution toa decarbonized society

Thriving professional personnel

Maintaining and enhancing
a governance structure for sustainable growthSocial value / economic value

Business model
P.23

Strengths

Establishing ICT systems that support both business
Providing services that facilitate ICT utilizationand society

MarketSocial value

P.13

Professional personnel

Declining birthrate and aging population,
regional disparities

Regional revitalization

Optimize

Consulting

Customer business success

Plan

Realizing a rewarding society

Maximizing shareholder value

The 2025 Digital Cliff

Customers

Social capital

Telecom carrier
marketDesign /install

MaintainCo-creation capabilities

Public market

Financial capital
Shift to recurring-revenue
businesses

Large-scalecustomer base

Corporate transformation
through digitalization
Accelerated digitalization

Lifecycle
services

OperateProjectmanagement

Realization of
our Purpose
Economic value
Medium-Term Business Plan
indicators

Build

RevenueHigh capital efficiency

Operating margin
Service ratio

P.29

ROE

Medium-Term Business Plan

Value cycle

19

net one report 2023

Unleashing the potential ofpeople and networks

Business Segments

Partner business

Management
strategy

Governance

Innovative progress in ICT

ProposeResolution of social challenges

Shift from goods to experience

OperateMulti-vendor support

Design capabilities

MarketDX personnel training

Enterprise market

Achievement of customer successIntellectual capital

Prosperous future

Realizing a decarbonized society

Decarbonized society, sustainability
Regional revitalization

Responding to the declining
birthrate and aging population

Management CapitalSociety

Network technology
capabilities

Human capital

Growth Strategy

Social challenges

P.21

Reinvesting tostrengthen capitalnet one report 2023

20

Chapter 1

Value Creation | 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.

Materiality KPIs and contribution to SDGs
Realization of a safe and secure advanced information society

Overview of sustainability management

Theme 1

Provide solutions andservices by challenge anddomainWAY

Mission‐Vision‐Values

Expand and promote
the service business

Maintaining and enhancing
a governance structure
for sustainable growth

Growth strategy

Contribution through businessIn order to become more competitive in thesolutions services for business growth, we will
strengthen the training of security personnel
and cloud personnel, and also focus on theacquisition of DX skills with the aim ofstrengthening the functions of our corporate
departments.
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 will lead the next
generation.

Train IT personnel
for the next generation

45.2%

KPI

Fiscal 2022 results
23 / 24 (fiscal 2022 target)
51 / 46 (fiscal 2022 target)

Cloud personnel (parentheses show the number of
personnel as of March 2021)
Front department Fiscal 2030 target: 50% increase incloud personnel (232)448 / 239 (fiscal 2022 target)

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)

23 / 25 (fiscal 2022 target)
7 proposals●

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

Underway●

Ratio of female managers (parentheses show thenumber of personnel as of March 2021)
Fiscal 2030 target: 15% (6.5%)

7.8%

●

Ratio of newly hired female graduates (parentheses
show the number of personnel as of March 2021)
Fiscal 2030 target: 50% (35.5%)

28.6% / 35.5%(fiscal 2022 target)●

Male employees taking paternity leave and special
leave for childbirthFiscal 2030 target: 90%

68.0%

●

●

KPI

We will strive to improve productivity andpromote creation of innovation by developing
environments and systems that allow diverse
personnel to recognize each other and makethe most of their individual qualities.

Promotion of diversity
and inclusion

Contribution through corporate activities

Social responsibility
Sustainability

Fiscal 2022 results

Contribution to a decarbonized society
Theme 1

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.
Thriving professional
personnel

Contribution toa decarbonized society

Maintaining and enhancing
a governance structure
for sustainable growth

Initiatives Policy

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.

KPI

Fiscal 2022 results●

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

Three solutions created:
1. Remote support
2. Data erasure certification
services
3. Visualization of data centerelectricity usage

KPI

Fiscal 2022 results●

Expansion of sales of low power consumption
products and services
Reduce CO 2 emissions per purchase / selling price,focusing reduction efforts on the purchase and sale ofproducts and services, which account for the majority of
CO2 emissions.

Scope 2 and 3
25.6% reduction of carbon
intensity per unit of revenue /3.5% reduction* (fiscal 2022
target)

Theme 2

Reduce emissions in thebusiness processes of ourCompany

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

*Preliminary value before confirmationof some emissions data

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

Fiscal 2022 results●

Conduct an annual employee awareness survey aspart of our efforts to foster the corporate culture(Future disclosure of survey results planned)

Survey distributed to all
employees at end-September●

Progress report on recurrence prevention measures
The operational status of recurrence prevention
measures is reported on our website once every six
months.

Operational status details for2H FY2022 disclosed throughthe Company’s website

KPI

Fiscal 2022 results●

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

Theme 2

Realization of Healthand Productivity
Management®

We will work on health and productivity
management to maintain the physical andmental health of our employees, which isessential for business growth and continuation.

Business Segments

Realization of a safe
and secure advanced
information society

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

Governance

Reduce greenhouse gas
emissions through business

Positioning and identifying materialities

net one report 2023

Fiscal 2022 results

Security personnel (parentheses show the number of
personnel as of March 2021)
CISSP holders Fiscal 2030 target: 80 (22)
Registered information security specialists (RISSs)
Fiscal 2030 target: 100 (41)●Theme 2

Reinforcement of the business base21

Service ratio
Fiscal 2024 target: 55%

Management Capital

Financialstrategy

Corporate culture
reforms¥7.2 billion

Growth Strategy

Contribution toa decarbonized society

SDGs Declaration

Thoroughvisualization

Fiscal 2022 results

Thriving professional personnel

2022 - 2024 Current Medium-Term Business Plan

Personnel
strategy●

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

KPI

As the ICT market reaches a major turning
point, we will accelerate our shift to a businessmodel centered on the service business, inorder to achieve sustainable growth over the
medium to long term.

Sustainability Policy

Businessstrategy●

Theme 2

PurposeThriving professional
personnel

KPI

We aim to grow our business and realize asustainable 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

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.

Realization 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.

Underway

net one report 2023

22

Value Creation | Acceleration of Our Shift toward Services

Chapter 1

ExampleWe support the formulation of highly achievable designs and plans by applying the expertise we have generated through our delivery of services covering
a comprehensive range of procedures extending from strategy development to operation and improvement. Accordingly, we will establish a cohesive
vision (To-Be), provide support facilitating the achievement of this vision (guidance), and collaborate with our clients as they aim to achieve their objectives.
Grand design concept development

Full details of our business model (P-B-O-O)

OperateBuild
OperateLifecycle
services

Optimize

Administrators with operational experience participate inprojects and propose solutions that ensure achievability.

Discrepancies

Customer challenges●●

Operate, monitor, maintain, troubleshootStandardization ofoperational processes

The stable execution ofservices has become essential
due to the growing importanceof ICT amid ongoingdigitalization.

Reduction of
fault recovery time
Limiting labor required toperform operational procedures

To facilitate digitaltransformation, we aim to
redirect our employees to corebusiness activities.

Positive effects
and benefits

●
●

Build

Strengthen intellectual property by establishing deeper
relationships with customers and accumulating data

Creation of new value through our shift toward services
By exploring service business opportunities made possible through efforts aimed at strengthening our core businesses, wewill establish three new value-creating services. At the same time, we will establish function-providing services and platforms
and strengthen our recurring-revenue businesses.

Providing unique services that combine Net One’s strengths with digital technologies

ExampleStandardization
and automation

Lifecycle

Planning
and review phase

Challenge identificationand discrepancy analysis

Managed services

Demonstrationand confirmation phase
Trials (proof of concept)

Exploring service businesses
Provide service platforms●

Support for operational and maintenance procedures related specificallyto cloud computing is currently challenging.

●

23

Expand functionality and establish methods
Accelerate delivery of value-adding proposals

net one report 2023●●

Digitalization of operational processes
Improve the efficiency of systems formaintenance and operation

Key enhancement targets●●

Establishment of systems for service creation
Differentiation through platform creation

Operational designand service rollout

Positive effects
and benefits●●

Providing industry-leading security features through cloud technology●

Integration performed by experienced and qualified engineers●

Advanced security operations and lifecycle-spanning operational
supportSecurity cloud services

Optimal integration

Advanced security
and operational support

Enabling secure operations fromall locations under a unified
security policy by routing allcommunications through a SASE
network

Advanced integration of networkand security that enables diverse
work styles and migration support
that reduces burdens generated
at the time of implementation byminimizing impact on existing
environments

Real-time monitoring and analysis
performed to detect and block
unauthorized communications,
response to changes in conditionsof usage, and flexible informationdelivery for optimizing andupgrading system environments

Business Segments

In-house cloud services

Key enhancement targets

Integration of systems into
existing environments

Operation andimprovement phase

GovernanceCollaboration
andinteraction

Installation andimplementation phase

Solutions

A shortage of security engineers has complicated procedures associatedwith ensuring stable operations and responding to increasingly
sophisticated and complex threats.

Supporting the formulation of ICT strategies that Providing comprehensive functions and operations Providing unique services through a service
facilitate ideal ICT application and contribute to for the continuous operation of customer systems
creation model that leverages our strengths
business●

Operational
improvement mechanisms

Model case: netone Managed SASE●

Managed services

Key enhancement targets

Operation

ICT platform configuration
predicated upon automation

Providing comprehensive services for next-generation network systems utilizing the SASE*1 cloud architecture modelStandardization and automation

DX strategy consulting services

ICT
platforms

As various cloud technologies emerge and associated systems become more complex, we will provide a comprehensive range of functions andservices spanning from system implementation and operation to security measures, thereby enabling our customers to maintain stable system
operations.

Creation of three new value-creating service models
Full customization(New data-driven operation)● Reassignment of employees to core operations
Realization of stable service execution
Rapid operational improvement achieved through effective data utilization

Customer challenges

Support function provisionand overall optimization

Vision (To-Be) formulation

Formulation of ideal visions informedby operational considerations

Recommendations for customer success“Leading customers’ businesses to success” through ICT platform operation

Enhancing existing core businesses

Extensive consulting experience
We have accumulated a wealth of experience in a wide
range of industries providing solutions and support for theachievement of medium- to long-term visions (To-Be).

Management Capital

Projectmanagement

OperateCreate measures and roadmaps
to respond to challenges

Monitoring, operation, maintenance, and threat isolation aimed at stable system operation
Design /install

Maintain

3

Assistance provided by experienced ICT operational support staff

Model case: next-generation ICT operation

Engineering / PMS and quality control

Flexible and speedy system design, integration, and installation

ProposeIdentify challenges based on
discrepancies between current
and ideal circumstances

Businesstransformationachievedthrough ICT

Growth Strategy

Plan

Consulting

Promotion of practical projects such as ICT environment assessment and plan formulation2

We provide reference sources by sharing our knowledge
regarding ICT utilization and the improvement ofoperational procedures, both forms of expertise that wehave practically leveraged as a service provider.

Solutions

Optimize

Consulting / status analysis and plan development

Formulate an ideal vision (To-Be)
for ICT platforms

Customer challenges

Plan

Current
circumstances

1

Providing references as a service provider

Customers

Value Creation

In accordance with its Medium-Term Business Plan, the Net One Group is committed to a shift toward
services. Accordingly, we are creating services that provide new value to our customers by widely sharing
innovative examples of full customization while standardizing and automating associated processes.
The Net One Group supports its clients throughout their ICT lifecycles, providing optimal solutions and services by leveraging
its strong ability to combine cutting-edge technologies related to networks and other essential elements of modern
business. At the same time, we establish increasingly extensive relationships with our customers through a wide range of
proposals aimed at optimizing a broad spectrum of processes spanning from operational improvements to the formulation of
medium- to long-term grand designs.

ICT management transformation support services

Full customization

Introduction

We will accelerate our shift toward services as
we aim to resolve social challenges and improve
profitability by facilitating customer success.

Provides low latency, scalability, consistency, and operational load reduction by creating an environment where the same policies
can be applied to all environments, regardless of whether they are on-premises or located externally (i.e., in the cloud)*1 Secure access service edge (SASE): a mechanism that delivers a combination of network and network security functions through the cloud

net one report 2023

24

Chapter 1

Value Creation | Achieving Customer Success

We are transforming our service model, shifting toward a more service-oriented approach as we aim toenhance customer success. By expanding our service platform and redesigning our service portfolio, wewill be able to provide more comprehensive support and ensure optimal delivery of services to ourcustomers.

Our Group defines facilitating customer success as “providing value in excess of expectations and enabling the success ofclient business operations through ICT platform operation.” By providing lifecycle-spanning support, we free our clients fromcumbersome operational procedures and enable them to invest in more high-priority strategic activities.

Up until the present, the Net One Group’s model for operational support has focused on deploying personnel to operate ICT
platforms on behalf of clients, thereby freeing up time for these clients to concentrate on core business activities. However,the nature of system operations continues to change dramatically as technology becomes increasingly sophisticated.
Accordingly, the Net One Group believes that clients require both visions of ideal operation and services that leverage
cutting-edge technologies. Commensurate with this viewpoint, we have revamped our portfolio of operational services andassigned it the title of “Managed ONE.”Through Managed ONE, we aim to improve the speed and quality of services rendered to customers, as well as raise thelevels of satisfaction thereby generated, by focusing intensively on providing standardized services. Additionally, throughlinkage with our service models and the development of a digital platform that can be shared among the Net One Group, itscustomers, its partners, and its vendors, we will provide optimal services tailored to the needs of our clients.

Managed ONE service portfolio

Product
maintenanceOperational burdens have not abateddespite system integration and a shift
toward cloud-based systems.

Effective resource utilization and positive
business impact achieved through moreadvanced operations have become necessary.
Positive impact onclient businesses
Automation

Application
procedures

Configuration
modification

Cloud technology enhancements
Generating mutual growthalong with customers
Cloud technology
enhancement

Security
supportStandardization

Shift toremote working

Enhancing capabilities andcompetencies to sharpen
global competitiveness

Focus on strategic operations
Productivity enhancement
Strategic
operations
Operational
procedures

Effective use of personnel

Achievement ofbusiness goals

ICT platform
operation
supportStrategic
operations
Operational
procedures

Visualization

Generating synergy between engineering divisions through common KPIs and KGIs
To achieve customer success, we have established common KPIs and KGIs among our three engineering divisions and areensuring cooperation among these divisions as we aim to achieve these indicators. To enhance engagement, we have included
customer-facing metrics among our KGIs. Through the application of these standards, we are generating synergy between ourengineering divisions, thereby fostering the delivery and expansion of services that address the challenges of our customers.

Key contribution targets

Expansion ofrecurring-revenue services

Contributing to the achievement of
our operating margin target for fiscal 2024

Contributing to the achievement of
our service revenue target for fiscal 2024

Enhancing current profitability levels by
improving engineer productivity in terms
of proposal, design, integration,
operation, and maintenance

Expanding recurring-revenue services toenhance relationships with long-term
customers and improve business stability

Security

Hardwaremaintenance

Security
monitoring
Inquiry

SoftwaremaintenanceVendorservices

Application
Systemmonitoring

Receptiondesk

ICT
platforms

Bug andvulnerability
information
Inquiry
response
Configuration
modification
Troubleshooting

Digitalplatforms

cUstnetServicedeliverysystemSharedOperational
designIncident
management

Definition ofoperational
requirements

Problemmanagement

Upgradeassistance

Changemanagement

Project
supportConfiguration
management

Facilitation of
ICT use andapplication

Operational
performance
reporting

Creation ofoperationalflows

Financial KPI

Financial KPI

Financial KPI

Financial KPI

Non-financial KPI

Lifecycle service
enhancement

Delivery ofshared services

Financial KPI

Financial KPI

Medium-term value driver

Customer IT
business /To-Be model
development

To-Be model
development

Action plandevelopment

Action plandevelopment

IT services
operational
supportGrowcx

Named

System infrastructure
LANInternet GW

On-premises virtualization
infrastructure

ACL modification request

Password reset

Security platforms

Public cloud systems

Devices

Applications and requests

Various manuals
Operational design
specifications● Configuration diagrams

Configuration information, monitoring alerts, and log data

Operation
management

Customer success portal

CX Lv. 0

Customer workflow

CX Lv.1

IT workflow

Operational Customer
Success Team

Configuration management database

Vulnerability information

XOC Shared
Services TeamIT management●

Long-term value driver

ROI
assessment

Creation ofledgers

Infrastructure for the upgrading of operations services

Short-term value driver

Business
assessment

URL filter setting request●

Sustainable
society

Operational
assessment

IT businessadministration
supportVPN connection request

Knowledge

Service
expansion

Security
assessment

Security
assessment
and analysis

IT strategy
formulation
supportWe provide various services through our Growcx service platform to facilitate more advanced operation. Growcx is a systemdesigned to resolve security and cost-related challenges and help eliminate burdensome procedures. It accomplishes theseobjectives by appropriately storing collected information in a configuration management database, which is then provided tosupport efficient service management and steady operations, regardless of the vendor who installed the existing systems. By
centrally managing a range of operational information spanning from contract data to usage status-related details, Growcx isable to analyze current conditions and propose improvements, thereby assisting customers as they formulate future plans.

Targeting sustainable growth and social
contribution through company-wide
efforts undertaken in accordance withlong-term perspectives

Standardized
systems

Security
strategydevelopment
supportOperational
designCustomers

Enhancement ofcustomer-facing
activities

Assessment

Enhancement of operations services: expansion of service model platform (Growcx)

Sustainable growth and social contribution

Portfolio
adjustment

net one report 2023

Lifecycle
supportBusiness Segments

KGIs

25

Improvement in the profitability ofexisting businesses

Operational
management

GovernanceCommon KPIs and KGIs for engineering divisions

Operations
services

Business
apps

Cloud
technology

Achievement ofcustomer success

Servicedesk

CX Lv.3
Co-creation strategy support services

Management Capital

Troubleshooting

AI and ML

As businesses strive to achieve success,expectations for strategic operations in the ICT
sector have risen higher than ever before.

Monitoring

CX Lv.2
Professional operations services

Growth Strategy

Relief from cumbersome
operational procedures

Positive business impact generated
through advanced operations

CX Lv.1
System maintenance and management services

CX Lv.0

Business transformation achieved through ICT

Customer challenge phase

Value Creation

Customer success facilitated by the Net One Group

Service model transformation: redesigning our service portfolio (Managed ONE)Introduction

We are transforming our service model to facilitate
enhanced customer success.

Sales cessation information

Failure information

Technologicaloperation

CX Lv.2

CX Lv.3

Maintenance contract information

net one report 2023

26

Chapter 1

Value Creation | Capital Supporting Value Creation

We will strengthen our management capitalto support value creation as we strive to build
a more robust business base.

Green ICT

Co-creation capabilities

The Net One Group has accumulated experiencethrough its own business successes and failures
while leveraging this expertise to provide value toits customers and grow its operations. All of ouremployees’ knowledge and experience enable us
to create added value, so our personnel are thesource of our competitiveness. To advance ourshift toward a service-based business model,
each of our personnel will help provide value tosociety by pursuing high levels of expertise,enhancing each other’s communication skills, andfully demonstrating their individual abilities to carryout flawless operations as members of a larger
team.

To ensure we retain our status as a strategic partnerthat provides support throughout entire ICT
lifecycles, covering all aspects from grand design
planning for ICT strategies to system integration andoperation with a holistic perspective of optimization,
we must accomplish the critical objective of
establishing systems through which we caneffectively utilize the experience, expertise, andintellectual property accumulated by the Net One
Group throughout its existence. Utilizing an approach
focused on taking on and resolving challenges, wewill design ICT platforms indispensable for theapplication of digital technologies; unleash their fullpotential; adjust technologies, thereby allowing them
to be utilized as standardized services; and efficientlyroll out these services on a wide scale.

The network technology that we have developed over the years
since our founding as a company specializing in the integrationof network systems constitutes the core competence of the Net
One Group. Among other abilities, this technology enables us
to utilize data in support of business operations throughnetwork connectivity, integrate ICT platforms allowing for dataapplication that is secure and in keeping with proper
governance, and leverage advanced technologies to facilitate
effective data usage. Unleashing the full potential of thesetechnologies, we will create innovation and form partnerships
as we aim to create new solutions.

Adopting the approach of a multi-vendor group independent
from the influence of manufacturers and capital affiliations, the
Net One Group is able to maintain a neutral standpoint andutilize its extensive range of collaborative relationships and idea
exchange channels to identify ideal ICT product combinations
that fully leverage the characteristics of these products while
establishing optimal systems for its clients. Aiming to become
an effective advisor for the digital age, we have createdecosystems and co-creation-based relationships through which
we can accelerate ICT implementation along with clients andvendors. Moving forward, we will encourage engagement thatfacilitates digital transformation across society while ensuringthat this transformation incorporates advanced technologies
and reflects the overall concept of digital transformation.

Specific examples,and current status,of capital: 448 front division staff
members●

Ratio of female managers: 7.8%●

Train IT personnel for the next generation●

Promotion of diversity and inclusion●

Expansion of green solutions●®

XOC (COPC certification), SOC●

Remote support●

Service portfolio revamp●

Data erasure certification services●●

About 1,500 technical staff members

Sales and technical news●

Provide solutions and services by challenge anddomain●Expand and promote the service business

Expand and ensure wider implementation ofpriority services and standardized systems●

Realization of Health and Productivity
Management®

●

Reform our personnel system to facilitateachievement of our management strategy●●

Training of security, cloud, and DX personnel●●

Industry–academia collaboration●

Re-create technological infrastructure to create
new value
Achieve synergy through consolidation ofengineering divisions

Using our innovation center to “create innovation that27

net one report 2023●

Visualization of data center electricity usage●

INNOVATION SHOWCASE(advanced technology demonstration)●

Lab as a Service (LaaS)●Net One Blog●

Customer satisfaction improvement activities●

Provide solutions and services by challenge and domain●

Provide solutions and services by challenge and domain●

Reduce greenhouse gas emissions through business●

Expand and promote the service business●

Develop green solutions●●

Decarbonization market research and GX personnel
development

Proof of concept and joint verification carried out along withcustomers and vendors●

Enhancement of customer-facing activities

Identification of co-creation partners●

Ecosystem building●

Business Segments

Initiatives targeting
greater strength

Cloud personnel: 23 CISSP holders
51 registered information
security specialists (RISSs)

GovernanceRelevant materiality●

Security personnel

Management Capital●

Growth Strategy

Design capabilities

Value Creation

Definition of capital

Professional personnel

Introduction

Management capitalManagement capital, including personnel, technology and expertise, and trust-based relationships
maintained with customers and partners, is essential to the value creation efforts of the Net One
Group. By strengthening this capital, we will further enhance our business model and competitive
advantages, thereby generating expansion in the value we create. Moving forward, we will incorporate
efforts to strengthen critical capital into our management strategy as a materiality-related endeavor
while building a solid business base to drive further gains in corporate value and sustainable growth.

resolves social challenges within a free, collaborative space”

net one report 2023

28

Chapter 2

Growth Strategy

2022–2024 Medium-Term Business Plan

Status of Medium-Term Business Plan and Progress
toward Associated Targets

Fiscal 2022 progress summaries
for each strategy

Fiscal 2022–2024
Executing our growth strategy and strengthening our businessbase with the aim of realizing our new philosophy system

Introduction

In 2022, the Net One Group launched a Medium-Term Business Plan that focuses on fully implementing its
corporate philosophy system and its shift toward services. As we carry out this plan, we will reinforce ourbusiness base to facilitate the transition into our next phase of growth while steadily undertaking measuresin association with all plan strategies and tracking progress using management indicators and KPIs.

Achieved steady growth in all three of the focus areas we establishedwith the objective of solving social challenges(shift toward services)

Business strategy¥30.0 billion

Fiscal 2022 result:¥7.2 billion

Smart manufacturing

Digitalization of social infrastructure to realize Society 5.0

Digital government

Fiscal 2022

Fiscal 2022

Fiscal 2022

P.33

Growth strategy
Business strategy

Service strategy

Financial strategy

Reinforcement of the business baseThoroughvisualization

Personnel strategy

Corporate
culture reforms

Bookings¥4.3

Growthstrategy

billionRevenue¥2.0

billionBookings¥3.5

billionRevenue¥1.7

billionBookings¥10.5

Revenuebillion¥3.5

billionGrowth Strategy

Concept and strategy

Fiscal 2024 target:

Value Creation

Revenue from social issue-solving solutions

In accordance with our redefined corporate philosophy
system, we aim to further enhance our corporate value andachieve sustainable growth by implementing growth strategies
and reinforcing our business base to support these strategies

Expanded business scope by providing new value and standardization

Social responsibility

Service strategy

Sustainability

P.34

Facilitated our shift toward services in accordance with a network-based approach(share of revenue generated through services: 44.5% in fiscal 2021 → 45.2% in fiscal 2022)●●

Established systems to support the comprehensive delivery of services
Promoted standardization to clear a path for the generation of new value(figures in parentheses indicate fiscal 2024 targets)

Financial strategy
ROE

Service ratio%+0.7 points YoY+4.3 points YoY■ Revenue (million yen)
■ Operating income (million yen)
● Operating margin (%)

209,680

Personnel strategy
P.37

220,000

226,000

12.0

Reinforcement of
the business baseThoroughvisualization
P.33

Revamped our personnel system to facilitate the implementation of management
strategies and corporate value growth●

Promoted the development of professional personnel

Conducted visualization-related initiatives in pursuit of business base reinforcement
while implementing a company-wide strategy of digital reforms to enable prompt
and appropriate decision-making●●

Established data infrastructure consistent with our KPI logic tree to achieve our ROE target
Continued focusing on reforms targeting improvements in data resolution and literacy

11.2
Corporate
culture reforms

9.8

2022
net one report 2023

24,60027,1002023

2024(Targets)(Targets)

Socialresponsibility

Sustainability
P.37

Fostered our corporate culture by disseminating our corporate philosophy system●●

Transitioned into the “appreciation” phase by ensuring understanding and widespread acceptanceRaised awareness regarding compliance and observed more active use of our whistleblower system

Business Segments

P.38

20,63529

20.1 （20.0%)%

Formulated a capital allocation policy to expedite the achievement of an ongoing cycle of corporate value growth
Conducted share buybacks as we aimed to raise both corporate value and shareholder returns

GovernanceManagement indicators and performance

45.2 （55.0%)

P.35

Management Capital

Fiscal 2022 performance on management indicators

Undertook initiatives targeting the achievement of materiality-related KPIs●●

Promoted empowerment of women and work style diversification while expanding both diversity and inclusion
Developed and secured personnel with multifaceted perspectives

net one report 2023

30

Chapter 2

Growth Strategy

Message from the COO

Medium- to long-term issues

We will create new businessmodels and evolve into
an unrivaled industry leader

In fiscal 2023, the second year of our Medium-Term Business
Plan, we will examine the strategies we currently have in place,
prepare for changes in the needs of the market, and step up
our response to issues we expect to face as we aim to achieve
our Vision for 2030.

Takuya Tanaka

Overview of the first year of
our Medium-Term Business Plan

Last year, the Net One Group launched a three-year MediumTerm Business Plan that serves as the first step of theCompany’s grand design for the nine-year period leading up toand ending with 2030. The plan started off with a good firstyear during which we were able to determine courses of action
for further development.

net one report 2023

Business Segments

net one report 2023

Governance31

Implementation of our management policies
Moving forward, we strive to execute our growth strategy andstrengthen our business base through clearer identification of
pertinent issues. With regard to financial performance, we willcontinue undertaking efforts aimed at improving our cash
conversion cycle and maintaining our ROE. In terms of
personnel, we recognize the need to take especially targeted
and immediate steps toward upgrading and optimizing ourworkforce. By promoting organic reallocation and reskilling
among our personnel in accordance with our objectives, wewill transition toward a highly profitable organizational structure.
In terms of corporate culture reform, during the previous fiscal
year, we achieved significant progress through efforts
undertaken to inculcate our philosophy and raise employee
awareness thereof. We are not content with this achievement
alone and will continue to closely monitor the progress of ourreforms to ensure that they maintain their current momentum
while keeping up with our efforts to engage in dialogue with
our employees.

Enhancing consulting-related proposals
and improving service literacy
As professionals providing solutions related to cloudtechnology and other building blocks associated with ICT
platforms, we will strengthen our consulting capabilities toensure comprehensive optimization of a wide range of
operations spanning from system implementation to utilization.
At the same time, we will develop personnel capable ofidentifying the lifecycles of ICT systems and delivering optimal
proposals, while also formulating proposals that support thedigital transformation strategies of our clients. System
operation plays an important role in the ICT field, and dataobtained through the performance of system operation cancontribute greatly to the promotion of digital transformation.
We are confident that we will be able to further accelerate ourshift toward services by establishing a proposal methodologythat allows us to render services for an all-encompassing
scope of processes ranging from digital transformation
strategy formulation to system operation.
We will also work to improve the expertise we bring to thetable when providing consulting-related proposals. As we shift
toward services, we must ensure “service literacy,” whichrefers to our ability to identify both what our contributions to aclient’s operations will be and how the Net One Group’s
interests will be served through these contributions. Our clients
will inevitably need to conduct a variety of ICT investments, butmany of these clients encounter difficulties when attempting to

Rapid advances are being made in the ICT industry, and thepace of change within the industry is accelerating as emerging
forces revolutionize conventional commercial flows and businesspractices. The Net One Group concentrates primarily on ICT
platforms, but we will not remain satisfied with our current
business scale moving forward. Partnerships with industry peers
specializing in unique fields of expertise constitute one avenue
through which we could expand our business scale. At thesame time, we could secure the additional personnel thisexpansion would necessitate through M&A involving companies
employing the engineers we would require. By collaborating withemerging forces providing services that raise questions
regarding the future significance or relevance of integration, weare confident that we can achieve mutually beneficial progress
as we head into the future. Net One Systems is blessed with alarge staff of talented engineers. We also have a range ofunmatched strengths including our ability to effectively apply thecore network systems-related technologies we have developed
throughout our existence while adapting them to new andadvanced technologies. Thanks to these advantages, we areable to collaborate with a wide range of vendors and partners,
including emerging forces with the potential for substantial
market impact. Aside from these attributes, we also possess theflexibility that comes with being an independent company,
allowing us to make our own decisions and generate favorable
strategic changes. Our ideal approach is to proactively generatechange rather than react once it occurs.
As society undergoes rapid changes due to digitalization andthe exchange of massive and wide-ranging volumes of
information continues unabated, our clients will expect us toprovide proposals formulated based on a true understanding of
their needs. Customers themselves may not be aware of issues
with their current services and accordingly may not recognize
problems associated with obsolescence, blackboxing, or the
emergence of new risks. Net One Systems recognizes the criticalimportance of generating a greater number of opportunities tomeet directly with customers and hold discussions with them,
thereby improving our understanding of their ideas and priorities.
Accordingly, we will accelerate our development of personnel
capable of mapping out master plans of ICT systems together
with our clients while also adjusting the services we provide
according to external environmental changes.
Applying its unique strengths, the Net One Group will
maintain a mutually beneficial coexistence with emerging forces
while exploring the potential advantages of M&A and allianceswith partners equipped with new technologies. At the sametime, we will steadily perform conventional integration throughcollaboration with existing vendors. Through this two-sided
approach, we will continue to secure our unique identity andsuperior position in the market.

Management CapitalBusiness progress
We have accurately identified the customer and market needs
associated with each of the three focus areas in our MediumTerm Business Plan and have thereby achieved steadyprogress within all of these areas. In terms of digital
government, we plan to accelerate the digital transformation ofmunicipal operations through the application of cloudtechnologies and security measures while also speeding up
our delivery of proposals for the future expansion of cloudconnectivity among government systems. With regard to social
infrastructure to realize Society 5.0, we have begun to
generate true progress through our efforts to facilitate digitaltransformation on a society-wide scale via ICT application. On
the subject of smart manufacturing, we are observing growthin demand for network and data infrastructure capable ofproducing visible and understandable measurements of power
consumption in factories. Given this favorable businessenvironment, we believe in the importance of focusing on thequality of the outcomes we generate through each project
while also establishing a launchpad for the operations we willconduct over the next three years. We should only regard an
objective as accomplished when we have generated
contributions that have an impact on society as a whole; forexample, when end-users not counted among the customers
served by the Net One Group enjoy improvements inconvenience resulting from digital transformation. Regarding
our current Medium-Term Business Plan as a period during
which we can boldly continue to take on new challenges, wewill aim to create exceptional and unprecedented new
solutions and transform these solutions into services that will
evolve the Net One Group’s business model.

Securing market dominanceby continually generating change

Growth Strategy

Generating further development througha focus on both the quality of use cases
and the creation of unique added value

Progress on our shift toward services
Due in large part to our proactive ICT investment, we feel wehave generated substantial progress through efforts aimed at
facilitating our shift toward services. Recently, our clients haveexhibited strong demand for spontaneous and unconstrained
proposals from the Net One Group. We view this trend as anindication of the increasing difficulty our customers encounter
when attempting to identify issues impacting their own digitaltransformation initiatives. Since issues differ from customer tocustomer and change over time, we cannot appropriately keep
up with these developments unless we remain in close contact
with our customers and confront these issues on a consistentbasis. COVID-19 forced us to conduct operations remotely,
but now that the pandemic has subsided, we are taking a
fresh look at how we interact with our customers. One major
objective of Net One Systems is the enhancement of its
customer-facing activities, which require the sales andengineering divisions to cooperate side by side while
establishing optimal systems and frameworks for each phaseof the problem-solving process. While addressing thisobjective, we will also strive to improve the accuracy andvisibility of the metrics we utilize to ensure timely and precise
verification of operating income as we aim to raise our service
ratio and improve profitability.

Collaboration and critical assessment ofmarket conditions
Both the ICT industry and vendor services are transforming on adaily basis. Moving forward, we expect to encounter services
that will enable easy integration of ICT platforms without theneed for integration. Accordingly, our success will be largely
dependent upon the extent to which we can collaborate withvendors and incorporate these services into our own solutions.
We are confident that we will be able to provide clients withforward-looking proposals if we remain sensitive to changes
occurring throughout the world. However, we also recognize theneed to pursue efficiency from a broader perspective, and weplan to undertake this pursuit using a variety of methods, suchas leveraging tools provided by vendors and partners when
launching new services. At the same time, we must maintainintense scrutiny to ensure appropriate pricing and sustain andimprove our profits. Furthermore, circumstances require us toassess our competitiveness from the standpoint of profitability todetermine whether the services we offer are appropriate for themarket. Accordingly, we will further accelerate our shift toward
services by dividing the market into specific areas of focus andenhancing our critical assessment of market conditions.

Future outlook

Value Creation

Executive Director, Executive Vice President
Chief Operating Officer (COO)

accurately assess the cost of these investments. We believethat our role and responsibilities require us to maintain service
literacy while providing solutions that only we are capable ofdeveloping and delivering truly necessary services to ourcustomers at fair prices.

Introduction

Pursuing the interests of both customers
and the Net One Group while identifying
changes in the needs of the market

32

Chapter 2

Growth Strategy

Message from the CSDO

Koji Tsuji

Fumihiko Shinoura

Senior Vice President
Chief Strategy & Digital Officer (CSDO)

Senior Vice President
Chief Technology Officer (CTO)

Improve the speed and efficiency of management
strategies through the promotion of digital tactics

Defining data-related parameters that will
form the basis for managerial decision-making

Targeting improvements in system stability
and facilitating the success soughtby customers through new collaborative
relationships involving our customers,
Net One and vendors
With the accelerated adoption of multi-cloud systems,
networks are becoming more sophisticated, giving rise to
demand for both the system integration we have performed todate and solutions that improve system stability and contributeto our clients’ business through the ongoing delivery of added
value. Moving forward, we plan to concentrate on developing
more advanced networks, ensuring security, adopting datavisualization that will facilitate data usage within businessdivisions, and managing data. Networks are ideal formonitoring the flow of data and extracting necessary data
points. At the Net One Group, we believe that extracted data
can be processed flexibly through the cloud by using
advanced technologies such as AI and data lakehouses (datamanagement and processing platforms). Furthermore, we
recognize that the integration of data lakehouses and networks
will enable independent extraction, processing, and linkage ofdata, thereby allowing for data management that does not
require the use of applications. In the future, we will generateadvanced cases that support the creation of new architecturesthat eliminate the need for updates to mission-critical systems.
As we pursue these objectives, we must recognize thecritical importance of establishing more points of customer
contact throughout various phases of client ICT lifecycles anddeveloping deeper relationships with these clients (improving
customer intimacy). Accordingly, the Net One Group is
examining wide-ranging plans that extend to system linkage.
Connecting with customers and vendors through securesystem linkage will speed up support while enabling the virtual
coordination of a comprehensive range of operations, including
AI-based failure prevention, version upgrades, and security
updates. To date, we have taken on challenges associatedwith next-generation networks and optimized ICT platforms.
However, the possibilities surrounding networks remain
unlimited. Accordingly, we will continue to pursue customer
success by collaborating with our clients to develop ICT
platforms that support their business activities and by serving
as a strategic partner indispensable from the standpoint ofbusiness growth.

net one report 2023

Business Segments

net one report 2023

In fiscal 2022, both revenue and bookings were commensuratewith our projections, confirming that our strategy of focusing onsocial challenges was appropriate. Within our three focus areas,
we are ensuring that we accurately perceive changes incustomer needs that arise from the development of ICT. In
terms of digital government, performance was primarily driven
by projects related to security reinforcement, the promotion ofdigital transformation, and work style innovation. As an
additional business opportunity, we are exploring possibilities
associated with the redesign of network systems compatible
with the government cloud environment. With regard to smart
manufacturing, we are observing demand for security
reinforcement amid the establishment of networks linking factory
production lines. We are confident that this demand will persist
moving forward due to increasingly intense efforts aimed at
relocating production bases to Japan. In the case of social
infrastructure to realize Society 5.0, we are witnessing a trend
toward activities targeting enhanced group security governanceamong companies responsible for social infrastructure. We plan
to leverage the expertise we have accumulated through ourestablishment of security cloud and service platforms totransform these business opportunities into new projects.
In the future, emerging demand will require more rapid
problem solving and changes in certain elements of technology.
Net One Systems will continue to provide consistent value, but
this value will take the form of services that customers can utilize
toward favorable ends. We are currently striving to standardize
our service development models and are confident that these
efforts will accelerate our business by heightening thesophistication of our services and raising the value we deliver
while simultaneously improving our profitability.
Personnel capable of generating new ideas are indispensable
for both the transformation of business models and workflows
using digital technology and the cohesive enhancement ofvisualization. As essential technologies and mechanisms
change, we are viewing efforts targeting the resolution of social
challenges as an avenue through which personnel can honetheir abilities and broaden their perspectives. Accordingly, we
will share our own efforts and activities associated with thesechallenges to serve as a reference for both our customers andindustry peers who face similar issues, thereby helping toaddress the challenges confronting society at large.

During the first year of our Medium-Term Business Plan, we
successfully established a three-year service strategy execution
system while expanding our service portfolio. As a steppingstone toward achieving our long-term strategy, we have set
common goals for our three engineering divisions (Sales
Engineering Unit, Customer Service Division, and Business
Development Division) and established KPIs and KGIs forachieving these goals.
With the full-scale arrival of the cloud computing era, we are
beginning to witness changes in the systems utilized by
vendors and transitions in the way ICT assets are being held
due to the shift toward multi-cloud systems. Previously, support
from vendors consisted primarily of faulty equipment
replacement and software updates. However, moving forward,
vendors will attempt to transition toward programs predicatedupon stable operation (e.g., monitoring of operational statuses
and version upgrades that do not interrupt system
performance). Net One Systems has long established thesystem environments required by its customers using various
combinations of products from vendors while delivering
services that maximize product performance. As multi-cloudenvironments become increasingly complex in the coming
years, we believe the key to growth rests upon the extent towhich we can raise the value of our comprehensive services
while demonstrating the unique strengths of the Net One Groupand assisting customers as they aim to ensure stable operating
conditions and establish the system environments that fulfill
their needs.
When making system-related proposals moving forward, we
will not fully standardize these proposals, which requires toomuch time, nor will we fully customize them, which causes
difficulties associated with operation. When dealing withparticularly challenging systems, we will work toward
standardization by organizing necessary elements into systemcomponents. We will work to increase system integration
speed, which is a high priority for our clients, and at the sametime fundamentally revise our proposal methods while
concentrating on preventing system failures through operational
automation. Additionally, we will aim to radically improve
productivity by optimizing and increasing the visibility ofworkflows through process mining while effectively applying
generative AI, which will be a crucial element of innovation
moving forward. By undertaking these new initiatives, we will

Service strategy outlook

Governance

As we aim to maximize our corporate value, we recognize thecritical importance of both establishing organic links between
our sales, engineering, and corporate divisions through digitaltechnologies and uniting the Net One Group into a single
integrated team. “Visualization” is one of the strategies we are
employing to strengthen our business base as we pursue
these objectives; this term refers to the real-time sharing ofdata on which all employees rely to make prompt andappropriate decisions. Furthermore, fostering a culture underwhich decisions and actions are based on data can also
contribute to corporate culture reform. Currently, we are in theprocess of verifying what data to share and how it can best be
dispensed in support of our decision-making. Our Corporate
Data and Analytic Office is fulfilling a central role as we carryout these processes.
During fiscal 2022, in accordance with the KPI logic tree wehave adopted in pursuit of ROE achievement, we preparednecessary data for all divisions and established environmentsthat allow this data to be viewed by all division heads. As asubsequent step, we are ensuring consistency between ourdata and our KPI logic tree, which breaks down the missionsof individual divisions while illustrating the paramountimportance of ROE, which is set at the top of the tree, as amanagement indicator. Through these efforts, we will ensurethat our business operations remain effective and cohesive

Increasing the versatility and productivity ofmanagement and operations to respondpromptly to changing customer needs

Revising our service delivery systemand providing comprehensive and highly
competitive services

accelerate the Net One Group’s forward-leaning service
strategy.

Management Capital

Promoting “visualization”

Business strategy

Overview of the first year of
our Medium-Term Business Plan

Growth Strategy

I assumed the office of chief strategy and digital officer (CSDO)
effective from the beginning of fiscal 2023. As CSDO, I will be
expected to devise digital plans aimed at further accelerating
our strategies while also fulfilling the conventional role of chief
strategy officer (CSO) by ensuring the implementation ofbusiness strategies driven by synergy generation performed onan organization-wide scale. As the Net One Group pursues
further development moving forward, I will help ensure that we
prioritize initiatives aimed at raising the sophistication ofvisualization technologies while facilitating business reforms
and internal control enhancements through both improvements
in data resolution and the development of data literacy.
Furthermore, to improve the value provided by our humancapital, we will strive to effectively utilize personnel data while
cooperating closely with chief executives to successfully
implement a data-based management cycle.

while striving to advance digital transformation as a companywide strategy.

Value Creation

Support the acceleration of client operations
by generating always-optimal ICT platforms
and new ways to apply data, leveraging our
expertise as network professionals

Introduction

Accomplishment of growthstrategies and implementation ofcompany-wide business reforms
using digital technology

Role of the CSDO

33

Message from the CTO

34

Chapter 2

Growth Strategy

Message from the CFO

Masayuki Kitajima

My appointment as CFO

Applying prior experience while focusing
on strengthening Net One’s organizational
infrastructure and fulfilling my role as CFO

Fund allocation in support of growth strategies

Effectively allocating funds in accordancewith our capital allocation policy

With the formation of our capital allocation policy, we will establish a cycle of sustainable corporate value enhancement
Cash position
Fiscal 2022–2024

Capital allocation
Achievement of an optimal capital structure

Approximately¥70 billion

35 %Shareholder
returns

35 %Further enhancement of equity capital
Preparations for the flexible delivery of shareholder returns
Preparations for increasing working capital● Debt repayment●●●

Ensuring stable and flexible delivery of dividends while targeting a payout
ratio of about 40%●

Profit distribution that appropriately reflects earnings performance

Strategic investment and investment in business platforms

Investment

30 %Investment in business platforms: business platform maintenance
Investment targeting improvement: thorough visualization, internal digitaltransformation infrastructure, and enhanced security● Growth investment: personnel training and acquisition, R&D targeting new services,sustainability initiatives, and M&A●●

Notes: R&D expenses have been deducted from cash provided by operating activities.
Allocation percentages indicate shares of total capital allocation projected throughout the three-year duration of our Medium-Term Business Plan.

35

net one report 2023

We will accelerate
growth andstrengthen ourearning
capabilities withthe goal ofgenerating
sustained growthin corporate value.

My mission as CFO is to steadily achieve our ROE target of
20% throughout the duration of our Medium-Term Business
Plan. Accordingly, I am ensuring that we adopt initiatives inaccordance with the three perspectives: profitability, asset
efficiency, and financial leverage.
With regard to profitability, we will strategically invest in
growth, infrastructure, and overall improvement. We also
regard visualization as critical toward improving profitability. As
we aim to fine-tune our cost management, our three chief
executives (the CFO, CTO, and CSDO) are working together
from a top-down point of view. Furthermore, we will also target
growth in profitability by adopting measures aiming to eliminate
personnel shortages and improve operational efficiency
through the use of generative AI.
In terms of asset efficiency, we are prioritizing our cash
conversion cycle (CCC). As a consequence of longer productprocurement times stemming from semiconductor shortages,

For CFOs, commitment to achieving financial and numericaltargets is critical. To foster this commitment, we distributevideo messages internally while providing employees with
opportunities to engage in direct discussions regarding bothfinancial strategies and aspects of our KPI logic tree inaccordance with our RCT doctrine*1. Having received
questions directly from employees, we are beginning to sensehigh levels of interest within the Company while witnessing
positive effects from the growing awareness of our KPI logic
tree. Net One Systems conducts a wide range of IR activities,
including conferences with investors both in Japan andoverseas, smaller investor meetings, and IR operations carriedout abroad. Our entire chief executive team, including both the
CEO and CFO, commonly take part in these activities.
Furthermore, the chairperson of our Board of Directors and ouroutside executive directors actively maintain dialogue with ourshareholders, and we have received high praise for thisapproach. While further expanding its two-way communication
efforts, Net One Systems is focusing on activities aimed atensuring that feedback received is reported to the Board of
Directors for immediate action targeting swift improvement.
We will continue to proactively create opportunities for
dialogue regarding both cost of capital and ROE.
Moving forward, we will continue to ensure theimplementation of our financial strategies while further
improving our dialogue with shareholders and investors todrive sustained growth in our corporate value.

Business Segments

Cash provided
by operating
activities

Financial baseenhancement

Adopting a multifaceted approach targeting
steady achievement of 20% ROE

Focusing on enhancing dialogue as CFO
and a member of the chief executive teamGovernanceCapital allocation policy

Achieving an ROE target

Maintaining dialogue with shareholders and investors

Management Capital

The Net One Group’s financial strategy aims to enhance
corporate value through three pillars: the strengthening of
profitability through strategic investment, the pursuit of an
optimal capital structure, and the proactive delivery ofshareholder returns.
In May 2023, the Net One Group moved to facilitate its
implementation of management with an emphasis on capitalefficiency by announcing its capital allocation policy. Under thispolicy, the Group will primarily draw funds from cash generated
through operating activities in accordance with growthstrategies included within its Medium-Term Business Plan.
Furthermore, we will target further improvement in corporate
value by allocating funds to three objectives: strategic
investments, financial base enhancement conducted in pursuitof an optimal capital structure, and steady and flexible deliveryof shareholder returns.
First, with regard to strategic investments, we havelaunched an Innovation Center and aim to facilitate visualizationand establish digital transformation infrastructure while

Growth Strategy

For many years, I previously held finance and accounting
positions at a major general trading company, where I also
served as CFO of the business group for which I was
responsible. While fulfilling my duties, I gained a wide range ofexperience in areas including financial settlement, investment
project review, and tax affairs. I also contributed to the successof business integration projects involving affiliated companies
and the management of overseas subsidiaries while gaining
on-site experience with investee companies.
Net One initially struck me as a highly profitable company
backed by high-level expertise and technological capabilities.
However, I also experienced the Company’s implementation ofrecurrence prevention measures it announced in 2021 and theefforts it undertook to strengthen its governance structure andinternal controls. As a result of this experience, I realized that I
wanted to contribute to the enhancement of Net One’sorganizational infrastructure. Accordingly, I joined Net One’s
management team with the objective of focusing on protective
initiatives grounded in my own professional experience. After
having served as chief risk management officer (CRO) andchief compliance officer (CCO) in fiscal 2022, I began
performing duties as CFO in April 2023. The entire Net One

team is working diligently to strengthen governance andinternal controls, and I am confident that we are generating
steady progress through these efforts.

Value Creation

Senior Vice President
Chief Financial Officer (CFO)

inventories have grown and projects have become increasingly
prolonged, temporarily raising the number of days in our CCC.
However, we are committed to improving this situation and areaiming to eventually return our CCC to lengths reported before
product delivery times began to lengthen.
Concerning financial leverage, we are chiefly focusing on
the need to further strengthen our equity capital. Companies in
the network integration industry, a category that includes Net
One Systems, do not require large amounts of capital
investment and tend to have high equity ratios. Whileremaining aware of the equity ratio of industry peers, we mustalso adopt a leverage-based perspective as we explore
effective uses of debt financing for business expansion andavenues through which we can diversify our debt financing
methods. Our interest-bearing liabilities are partly characterized
by growth in lease obligations, which is largely the result of
expansion in recurring-revenue businesses that we achieved inaccordance with our growth strategy. Through theestablishment of strategic procedures and mechanisms, we
successfully provide services without having to retain assets.
However, depending on future cash positions and profitability,
we also view the retention of assets as an additional option.

Introduction

We will commit to achieving
the goals of our Medium-TermBusiness Plan and ensure
effective fund allocation

improving our service platforms for business and investing inhuman capital. As we aim to facilitate visualization, we willconcentrate on increasing the precision of our costmanagement and utilizing information gained throughvisualization to arrive at more sound business decisions. In
terms of service development, we are witnessing a trend
among vendors to shift toward subscription-based models
predicated upon assumptions of ongoing usage. Under thesecircumstances, we are confident that we can improve
profitability by pushing forward with our shift toward services
and enhancing our efficiency. We are also prioritizing
investment in personnel. The Net One Group’s technologicaland critical assessment capabilities are the driving forces
behind its business activities and are major sources of its
overall strength. As we invest in the personnel who provide
these capabilities, we will proactively target recruitment, thedevelopment of employees able to facilitate digitaltransformation and deliver high added value, and employee
reskilling efforts. In addition, we will enthusiastically undertake
measures aimed at nurturing new opportunities for inorganic
growth, including strategic investments, business investments,and M&A. Next, with respect to financial base enhancement,
we will steadily strengthen our equity capital and repay
borrowings while ensuring that we maintain working capitaland the capacity to provide shareholder returns. Our target
dividend payout ratio is 40%, and we achieved a consolidated
dividend payout ratio of 42.1% in fiscal 2022. In May 2023, weannounced a resolution authorizing the acquisition of up to¥7.5 billion in treasury shares by the end of December 2023. If
our cash position is more favorable than anticipated, we willconsider delivering additional returns in accordance with ourcapital allocation policy. At the same time, we will aim toachieve targets in our Medium-Term Business Plan whileremaining mindful of external environmental risks, such as
supply chain disruptions caused by geopolitical risks andsoaring costs.

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

net one report 2023

36

Chapter 2

Growth Strategy

Message from the CHRO, CRO, and CCO

Mitsuru Kiuchi

Overview of the first year of
our Medium-Term Business Plan

Encourage co-creation among diverse members tocreate value as a team
TAKUMI

Support the enhancement of expertise in each area,
so that each person can contribute to their team as a TAKUMI
Fairness

Reward contributions to the organization
in a fair and impartial manner

Medium- to long-term strategy

Adopting holistic perspectives as we develop
personnel strategies to drive further growth
for the Net One Group
Bringing our management strategy and personnel
strategy into alignment
Moving forward, we will adopt even broader perspectives as
we develop personnel strategies designed to facilitate theachievement of our management strategies. By looking
forward to 2030 and establishing an ideal vision for the state of
the Net One Group at that time, we will ensure our ability tovisualize discrepancies between our present state and thisvision by determining the types and quantity of personnel
necessary for its achievement. Identifying the expertise,qualities, and manpower we need will benefit our training
strategies while supporting optimal personnel allocation. With
these ideas in mind, during fiscal 2023, we will establish apersonnel strategy framework that reflects our approaches torecruitment, placement, training, evaluation, and benefit
systems, thereby enabling us to respond flexibly to possible
medium- to long-term changes in our business environment.

Facilitating more diverse knowledge and experience
The Net One Group recognizes the essential importance ofrecruiting diverse personnel with knowledge of various
industries and enhancing its overall strength as it aims to
conduct business based on a deeper understanding of client
operations. Our materiality-related KPIs include our ratio of
female managers. However, we believe that we need to digeven deeper than empowerment of women and work style
diversification as we target further diversity and inclusion andmore through knowledge and experience. With this idea inmind, we will maintain a multi-dimensional approach as we
intensify our efforts to develop personnel with unprecedented
experience and expertise, while also concentrating on securing
new personnel.

Business Segments

net one report 2023

Team

Risk management and complianceWith regard to risk management, in fiscal 2021, we defined
various types of risk, including extreme risk, critical risk, andgeneral risk, and as of April 2023, we had identified 101 specificrisks. Currently, we are striving to improve the precision of our
response to existing risks while reexamining the prevalence ofrisks associated with our Group as a whole. Additionally, wemust verify ex post facto the frequency at which we
encountered incidences of these risks and determine whether
losses incurred were within our expectations. On the topic ofrisk awareness, we believe that we must also share andcompare data with external stakeholders as supply chain risks
become increasingly significant. Furthermore, when
encountering unanticipated risks, we believe in the importanceof sharing information with partners regarding our initial crisis
management response measures and our general approach torisk management.
Compliance awareness is also on the rise, and increasingly
active utilization of our whistleblower system is a sign of thistrend. However, in some cases, reports have been filed for issues
that could also be resolved through workplace-level discussions.
These cases are an indication of the growing awarenessregarding internal reporting, and we believe that the sharing ofeven seemingly minor concerns is a positive outcome. We areconfident that employee feedback of this type will lead to
productive proposals for the Net One Group moving forward.
The Net One Group is enhancing its internal control, and I
personally feel that the Group is becoming more thorough withthe response efforts it conducts in accordance with clearly
defined rules and regulations. At the same time, we are still facing
challenges in areas for which rules have not yet been established.
We will intensify efforts aimed at encouraging employees to share
information promptly and maintain a heightened awareness of ourprinciples and Code of Conduct while using these guidelines as abasis for decision-making. Under our next Medium-TermBusiness Plan, we are also considering the possibility of exploring
integrated risk management, which involves quantifying risks andassessing them based on both the resulting statistics and theirfinancial impact.
net one report 2023

Governance37

Personnel Management Policy

Management Capital

Since the launch of our Medium-Term Business Plan, we havebeen revamping our personnel system to ensure effective
adherence to the key themes of our personnel strategy:
professional personnel training and providing an environment
where personnel can thrive. Over the past year, we have held
discussions targeting the creation of a new personnel systemthat brings our management and personnel strategies intoalignment, and in April 2023, we overhauled our evaluation
system before updating our grading and compensation
systems in July. Moving forward, we will concentrate on
administering this system in the most effective manner possible
while pursuing further reforms.
At the core of our personnel system reform efforts is our
Personnel Management Policy, which is based on theprinciples of “Team,” “TAKUMI (experts),” and “Fairness.”
To date, the Net One Group has achieved businessexpansion primarily through individual strengths. However, if
we aim to broaden the scale of our operations, increase our
profits, and achieve further growth moving forward, we believethat we must establish organizational management thatleverages these individual strengths to the fullest extent
possible. Many of our clients are now demanding digitaltransformation that supports the resolution of fundamental
business issues while contributing to business growth. To fulfill
these needs, the Net One Group must also change. In addition
to fully understanding the value chains of our clients in their
entirety, we must be able to determine the objectives we needto achieve in order to facilitate client success. As we aim toachieve these capabilities, we must bring together individuals
with different specialties, thereby establishing a highly
knowledgeable team capable of addressing the issues
confronting our clients.
Through its Personnel Management Policy, the Net One
Group aims to achieve growth by molding itself into a large
and cohesive team that maximizes individual strengths andskills of TAKUMI and fosters a culture that encourages
individual members to contribute to the overall success of theteam. We believe that these objectives reflect our policy’s
principles of “Team” and “TAKUMI.” With regard to “Fairness,”

Creating a foundation for the support of employee growth
Currently, we are tackling the challenge of developing personnel
capable of managing organizations and building teams. Whenaiming to raise their management skills, personnel need togradually increase the sizes of the organizations for which they
are responsible. Accordingly, we will establish environmentsthat enable our personnel to take on the challenge of managing
large organizations. In fiscal 2023, we will continue to holddiscussions aimed at developing an ideal vision for ourorganization that can be applied to our next Medium-TermBusiness Plan. At the same time, while ensuring that middlelevel managers remain accountable to their team members, wewill build a personnel framework that avoids multi-levelstructures, thereby enabling management to speedily apply
feedback from employees.
When conducting personnel evaluations, we will emphasizeteam building and assess both behavior and performance.
Instead of handling tasks and generating results alone, we willencourage employees to delegate work to younger employees
while providing support, thereby providing them with
opportunities to develop and grow. Additionally, we will evaluate
more than just the results of our work; we will also examine andassess the processes that generate these results and theindividuals who develop and support our personnel.
Furthermore, we will strive to achieve impressive results byensuring that the job skills and expertise that were formerly held
only by individuals are shared with all team members. Throughthese efforts, we will generate ongoing growth for the Net One
Group.

We are confident that the increasingly widespread awarenessof our newly formulated corporate philosophy system isgenerating positive effects. Furthermore, we believe that ourperiodic engagement surveys are also helping to foster
employee awareness.
There is no final goal line when it comes to corporate
culture reforms. Through growth in understanding andawareness, the development of our corporate philosophy has
at last entered the “appreciation” phase. Next comes the“harmonization/resonance” phase. Moving forward, we willtake concrete steps to resolve the issues we identified throughour organizational culture surveys. At the same time, we willencourage our employees to remain aware of, and act inaccordance with, our corporate philosophy, which forms thebasis of all our business activities, as well as our daily
operations, personnel systems, and organizational structures.

Growth Strategy

New personnel system emphasizing
team-based operations that maximize
individual strengths

we will ensure impartial and unbiased assessments ofperformance. Our new personnel system allows employees tobe confident that their individual achievements, as well as
those of the team and the Company, are all integral parts of a
unified whole.

Reforms are progressing steadily
and are now moving into the “harmonization/
resonance” phase

Value Creation

Executive Director, Executive Vice President
Chief Human Resources Officer (CHRO)
Chief Risk Management Officer (CRO)
Chief Compliance Officer (CCO)

Corporate culture reforms
Introduction

Aiming to be a company that functions
as a cohesive team, delivering value
through its personnel strategy

Through our KPIs, we will also track the extent to which
personnel measures are contributing to the improvement of ourcorporate value. Despite difficulties stemming from a complex
web of intertwining factors, we intend to explore KPIs on thebasis of quality, quantity, and productivity while determining
through visualization which personnel-related figures are linked
to business growth. Based on the results of these efforts, wewill logically identify the best ways to conduct personnel
investment in accordance with our capital allocation policy.
Meanwhile, to enhance employee engagement, we prioritize
the continuous administration of engagement surveys. In
addition to providing insight into the effectiveness of various
measures through fixed-point measurement, we are confident
that these surveys facilitate understanding of the trajectory the
Net One Group aims to follow going forward by providing
employees with an annual opportunity to view survey items.

38

Chapter 3

Management Capital

Overview of personnel system reforms

Promoting the development and active participation of personnel

Net One Systems revised its evaluation system in April 2023 before adjusting its grading and compensation system in July of
the same year.
Moving forward, we will ensure that each and every employee performs at a high level and helps deliver value to society
by creating more comfortable work environments through a strategy combining our new personnel system with a wide
variety of existing internal systems that facilitate flexible work styles.

Goals and key points behind our personnel system reforms
Realization ofmanagement
strategies

Human capital management overview and personnel system reforms

PMVV

Unleashing the potential of people and networks
Solving the problems of society
and our customers

Creating a prosperous future

Personnel Management Policy
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 fairand impartial manner

Personnel requirements profile

Personnel must have a wealth of knowledge regarding cutting-edge technologies and a spirit which enables them to boldly
take on unprecedented challenges and fulfill customer needs.

2

Personnel are required to be capable of leading innovative efforts by leveraging their communication skills and building
collaborative relationships with all project partners.

3

Personnel must be capable of mapping out multiple self-designed career paths and acting independently in pursuit ofobjectives.

Support management through the growth and success of our diverse personnel
Providing an environment where personnel can thrive

Personnel system reforms

net one report 2023

Corporate culture reforms

Resolving current systematic issues

4

Implement corporate culture reforms ensuring that each and every employee exhibits behavior
that reflects well on the Company while also generating results

5

Ensure that personal and corporate growth motivate employee performance

6

Identify appropriate personnel through the application of diverse perspectives and fair processes

Evaluation system that contributes to long-term growth and human resource development

We have adjusted our approach to evaluations, introducing an evaluation system based on two axes: achievements andactions. With this change, we aim to ensure that our evaluations place greater emphasis on the behaviors leading up toactions and achievements and the activities in which personnel will need to engage when attempting to assume higher
positions within the Company. Additionally, we extended evaluation cycles from their previous length of six months to one
year, bringing them in line with our business cycles. From a long-term perspective, we are confident that this change will
facilitate growth for both the Net One Group and its employees. Furthermore, to reinforce systems that support employee
growth throughout our organization, we will convert our existing semi-annual personnel development meetings into
forums for discussion focusing on the specific growth issues and future development paths of our individual employees.

Grading system suited to changes in business and work styles

We have adjusted our classification of professional positions to facilitate personnel management in response tochanging nature of our business operations and work styles. To complement our previously existing sales and engineer
positions, we have created two new classifications: for ICT business staff, who are equipped with technological,
market-related, and industrial expertise and provide solutions for issues facing both customers and society at large,
and for corporate staff, who are endowed with corporate knowledge and support the Company’s operations while
ensuring strategically sound and stable administration. By enhancing the expertise of employees in all of thesecategories, we aim to provide added value to our customers and establish a steady business base.
We characterize management and specialist billets as positions required on an organizational level and do not view
them in terms of individual abilities. In accordance with this approach, we only appoint to these roles individuals
equipped with the necessary skills and abilities. By adopting these strategies, we aim to develop personnel that will
strengthen the Company’s competitiveness while both retaining and acquiring superior human resources.

3

Compensation system that ensures market competitivenessWe will realize competitive compensation levels commensurate with market benchmarks to ensure that benefits andremuneration are appropriate to grading levels and the scales of the roles we have defined through our position
classification schemes while strengthening our ability to compete for the acquisition of personnel within target markets.
Effective from July 2023, we raised monthly salaries by an average of 8% across the Company while also eliminating
our system of gradually reducing base salaries for employees over a certain age, which was previously implemented,
to ensure that priority was given to each employee’s individual abilities.
In addition, we will establish our own internal certification system, which will enable us to recognize personnel who
have acquired or generated the knowledge, experience, and results necessary to achieve our management strategies
while empowering us to motivate these personnel in their pursuit of further skill development. We plan to launch thisinternal certification system beginning with technical certifications commencing in 2H FY2023.
Furthermore, we are prepared to raise starting salaries beginning with new employees who join the Company inApril 2024. To achieve a fair balance between existing base salaries and those of these freshly recruited new
graduates, we will also raise the base salaries of previously recruited young employees effective from the same month.

net one report 2023

Business Segments

Professional personnel training

Establish corporate functions that can support and check frontline operations while building
healthy inter-organizational relationships

Governance1

2002-2004 medium-term business plan: personnel strategy

39

1

2

Team

Realization of management strategies

Resolving current
systematic issues

3Management Capital

Outstanding expertiseand high ethical standards

Corporate
culture reforms

2

Form a group of personnel equipped with highly specialized skills consistent with the courseof our operations
Provide high added value to customers through team collaboration

Growth Strategy

Personnel are the source of the Net One Group’s competitiveness, and the Group views the development of personnel capableof acting independently and creating solutions as essential to its achievement of sustainable growth. During 2022, weestablished our Personnel Management Policy and a personnel requirements profile to serve as supportive pillars for our humancapital management strategy. At the same time, we formulated a personnel strategy focused on “professional personnel training”
and “providing an environment where personnel can thrive” under our Medium-Term Business Plan.
The first measure on which we embarked as we implemented our personnel strategy was to reform our personnel system. As
the Net One Group began undergoing changes to facilitate its transition into a new phase of growth, including a shift toward
services and corporate culture reforms, it encountered the need to adapt its personnel system to accommodate these changes.
In accordance with our Purpose and our Personnel Management Policy, we adjusted our personnel system with the primaryaims of “realizing management strategies,” “achieving corporate culture reforms,” and “resolving current systematic issues.”

1

Value Creation

The Net One Group defines human capital management as developing and deploying outstanding personnel
capable of thinking and acting independently with the aim of generating value through the application of essential
technologies. In accordance with the personnel strategy formulated pursuant to our Medium-Term Business Plan,
we will ensure effective human capital management by providing the Group’s personnel with opportunities for
growth and environments that encourage their active participation.

Introduction

Professional personnel

40

Management Capital

Chapter 3

Green ICTA service model that epitomizes competitive advantage

Development and expansion of green solutions

As ICT systems become increasingly large and complex, we are often finding that regular delivery of fully
customized solutions is not always in the best interests of our customers. Accordingly, we are committed tostandardizing our service model to ensure that we can provide high value-added solutions designed with emphasison the issues and requirements of our customers. Through this standardization process, we will efficiently render
solutions that leverage our knowledge and experience while building co-creation relationships through theestablishment of recurring-revenue business, thereby ensuring ongoing growth in our competitive advantage.

The Net One Group views facilitating the realization of a decarbonized society by developing and providing
solutions that help reduce the greenhouse gases emitted by both our customers and society at large as amateriality-related objective. Adopting a decarbonization-based perspective, we have reconceived solutions
heretofore rendered as “green solutions” and are addressing social challenges by making both ICT systems andtheir usage more environmentally friendly.

Green solutions portfolio

Social value (ripple effect)1fChargeValue creation

Linking of devices

3

n of Iin g

Integrated managementn

3.Burden reduction
realized throughoperational
standardization

41

net one report 2023

Virtual desktops

Market-specific2.Growth in delivery
speed

SASE / Zero trust

Managedservices

In-house
cloud services

ICT / OT security
Healthcare and work styleinnovation
Digital transformationin broadcasting

Operation

Security

XaaS

p ro c es se s i n v a ri o u s fi e l dReducing the movementof people and goods

Waste reduction

Reducing the power
consumption, and raising theefficiency, of ICT systems
Low-power devices,
centralized management,
cloud migration support

ITS

BEMS

HEMS

Environmental measurement
and forecastinga ti o
o

ou
s thr

6

Realization of a digital society
Online shopping
Electronic payment and application

netone Lab as a Service

ICT circular economy

Progress on the creation of green solutions
Development and delivery of solutions in fiscal 2022
Reducing electricity consumption

Cutting down on the movement ofpeople and goods

Eliminating waste

Visualization of data center electricity usage

Digital remote support

Proof of data deletion

Specialized data center infrastructure
management (DCIM) power monitoring
services that enable multifaceted
analyses of power consumption

Remote support solutions that merge
onsite and virtual environments using
Smart Glasses

Third-party (ADEC) certification verifyingthat data on storage disks has beenerased, thereby enabling secondary disk
usage

Development complete with several PoC phases currently underway

Business Segments

1.Higher quality
achieved throughstandardization

SharedThree benefits

DX strategy
consulting
services

Restructure operations
under a service-oriented
model that creates highadded value in anticipationof the shift toward
service-based models
among vendorsn dly

een by4

Improving energy
use efficiency

GovernanceOn-premises networks

delivery by incorporating
priority services, which
include XaaS (cloudservices) combined withmanaged services, aswell as market-specificpackages, into
standardized systems

Services expected to
grow as the shift toward
digital transformationand the use of cloudtechnology progresses

fr i eth
I C T gh theWork style innovation

Remote support solutions,video recording management
services

Data erasure certification
services, extended
maintenance, sales ofremanufactured products

rou

iro

Tested systems for which
design patterns extending
from integration to
Synergy
operation have been
establishedAccelerate service

Targets

Gr

gh

nv

Test combinations of products
and technologies, improve thelevel of efficiency at which
man-hours are spent onplanning, and promptly deliver
systems of high quality

Three priority services

ll ySupply chain management

Power/energy visualization
dashboard

5

ap

re e

Standardized systems

nta

Reduction of electricity
consumption

Data application

Data management
consulting, PoC support fordata analysis

2

Sensing networks

p li cmo

Channelme

Targets

DX strategy consulting,
advice concerning CO2
emissions reduction (planned)

CT

ChangeImproving operational
efficiency

Management Capital

Ma
kin

g

me
nta
lly

Streamlining the production
and consumption of goods

Value delivered through our operations

en of I T
Gres more envirC
on

em
yst
Ts
IC

Growth Strategy

Adopting an approach based on circular economy models and efforts aimed at making both ICT systems and their application moreenvironmentally friendly (referred to as “Green of ICT” and “Green by ICT,” respectively), the Net One Group is formulating a portfolioof green solutions covering six areas defined according to the type of value provided. During fiscal 2022, we achieved progressprimarily in the areas of “reducing electricity consumption,” “cutting down on the movement of people and goods,” and “eliminating
waste,” conducting development and booking orders in association with three projects in total. When implementing green solutions,
we must first understand what should and can be done with ICT to achieve decarbonization. Accordingly, while providing thesesolutions, we are also developing internal education programs to foster understanding and spread awareness. Moving forward, weplan to expand these programs outside the Company as well.

A c hie v

Strategic connections and targets associated with our standardized systems and our three priority services

Overview of green solutions and associated initiatives

ly
nd
rie

In accordance with the service strategy of our Medium-Term Business Plan, we aim to widely leverage precedent-setting applicationsof our fully customized “priority services” while establishing recurring-revenue businesses (managed services, in-house cloudservices, etc.) through which we can build ongoing relationships with our customers.
Harnessing these precedent-setting examples, we will build standardized systems with well-established design patterns covering
all stages from integration to operation, thereby ensuring efficient usage of man-hours and uniform quality assurance for new
projects with similar issues and requirements. As a result of these efforts, we will be able to provide added value to our customers byincreasing delivery speed and reducing operational burdens.
In the past, our application of knowledge and experience had been somewhat limited to specific projects and divisions, but theconsolidation of our engineering divisions into a single Sales Engineering Unit in 2022 has enabled us to achieve company-widestandardization. As a strategy to be employed throughout the Net One Group, we are standardizing common operational procedures
and elements, including patterns for proposed scenarios, comparisons of our products with those of competitors, the testing ofdifferent combinations of solutions, basic design, and partner selection, while ensuring that this standardization is maintained whenhandling projects. By sharing the results generated through these efforts, we promote a continuous cycle of improvement.
Moving forward, we will demonstrate the optimal applications of ICT for the business environments of our customers whileproviding services that leverage the technology and experience we have cultivated throughout our existence. Using the knowledge
gained through the administration of these services, we will strengthen our proposal models and systems to ensure ICT utilizationthat fulfills the needs of our customers.

Value Creation

Business model transformation achieved through our focus on priority services and standardization

Introduction

Design capabilities

Orders booked in association
with actual projects

net one report 2023

42

Chapter 3

Management Capital

Introduction

Co-creation capabilities

Co-creation with stakeholders

To further improve customer success, we are enhancing our customer-facing activities, which enable us to adopt a
more in-depth approach to addressing customer issues. Moving forward, we will establish support systems for allprocedural phases extending from planning to operation while firmly establishing our position as a strategic partner
through supportive frameworks, solutions, and services that help our customers successfully implement their strategies.

The strength of the Net One Group lies in its ability to establish optimal systems for customers while leveraging its
multi-vendor status, which frees it from undue influence from specific manufacturers or corporate groups; discovering
new products; and ensuring effective functional integration. In recent years, changes in customer needs have forced boththe Net One Group and its vendors to undergo changes. Given these circumstances, moving forward, we will leverage
mutual strengths to enhance our co-creation relationships and provide new value while optimizing our product portfolio.

Policies and initiatives associated with customer-facing activity enhancement

Creating new value through enhancement of co-creation relationships
Vendors are also being forced to shift toward subscription-based business models that provide functionality rather than products.
While some vendors are now approaching customers directly, the Net One Group has the advantage of being able to design andoperate ICT platforms that track data movement throughout entire systems in accordance with a network-based approach.
Furthermore, with regard to Japan, where utilization of hybrid cloud structures combining internal ICT systems and cloud computing
is standard, we are confident that the opportunity to collaborate with the Net One Group, which is well-versed in the application of
products and services and fully capable of adapting this application to meet the unique needs of Japanese companies, represents asignificant advantage.
Given these circumstances, the Net One Group will pursue new business models while strengthening relationships with vendors
and customers to accelerate its shift toward services. By enhancing these relationships and establishing ecosystems for thedevelopment of managed services and other optimal solutions, we can ensure our ability to efficiently provide impeccable systems
with higher uptime rates.
Moving forward, the Net One Group will combine the best of its technologies to create system architecture (overall pictures) andcreate new value together with its customers and vendors, thereby further strengthening these relationships.

Forming teams to enhance customer-facing activities

Examples of ecosystem construction targeting new value co-creation●

Ensure overlap between the scopes of response for all divisions to eliminate interphase inconsistencies and maintainseamless support

Sharing of productdevelopment technology roadmaps

Vendors Providing feedback regarding

Proposals formulated in accordance with customer
issues and market trends / PoC and PoV

Service Incubation
Department

Engineering Department

Operations Technology
Department

Feedback on performance of
products usedmarket needs to vendors

Standardization andproject follow-up

Collaboration targetingthe enhancement ofmanaged services

Service Development
Management Department

Customers

Managed services
for hybrid cloud systems

Governance

Customer management

Market Strategy Department

Proposals regarding, and application of, optimal solutionsand services;
introduction of state-of-the-art products from overseas

Current
circumstances

Customers
Validation of measuresthat address customer issues

Management Capital

Clarify the divisions chiefly responsible for communicating with customers in accordance with applicable phases, roles,
skills, and responsibilities, thereby expediting response

Growth Strategy

The Net One Group is continuously adjusting the approaches through which it interacts with its customers, and these customers
have begun to demand solutions attuned to their business strategies and current industry trends. Societal needs surrounding digitaltransformation have grown and customer issues have become more complicated, so we can no longer fulfill client demands throughthe simple proposal of services. Rather than waiting for customers to define their requirements, our engineers, who routinely handle
cutting-edge technologies, must remain on center stage, acquiring intimate understandings of the concerns and quandaries facing
our customers. Furthermore, to ensure the fulfillment of client requirements, we must propose effective product combinations while
exploring opportunities to integrate services and providing wide-ranging support that includes operational assistance.
In 2022, we consolidated our engineering divisions into a single Sales Engineering Unit in an effort to facilitate more intensive
collaboration. Abandoning our earlier system, under which front departments were exclusively responsible for serving as customer
contact points for all procedural phases, we have shifted toward a system that enables speedy, smooth, and sustainable co-creationof value by assigning core phase responsibility to divisions equipped with suitably specialized expertise. By honing our expertisethrough specialization in a range of specific functions spanning from planning to operation and establishing systems facilitating
collaboration with front department engineering staff, we will strive to ensure that customers select the Net One Group as theirpartner of choice for issue resolution.

●

Value Creation

Enhancement of customer-facing activities

Ecosystem construction
Strategy Consulting
Department

Engineering
Department

Service Incubation
Department

Project Management
Department

IT Outsourcing
Department

Service Development
Management Department

System integration
operations

Planning

Proposal

IT Outsourcing
Department

Service Incubation
Department

Service operations

System integration Service operations
operations

Integration and implementation

Operation

Linking the systems of three parties(vendors, Net One, and customers)
and sharing/upgrading data
concerning ICT asset conditions,
vulnerabilities, cloud functionality, andother essential elements in real time

Relationshipenhancement
Linkage of various data
and furnishing of partner programs

Linking data concerning operations
and operational status

Provide new value through ecosystem construction

Scope of support

Service Incubation Department
Service Development Management Department43

net one report 2023

Key points associated with relationship enhancement efforts

Project Management Department and Engineering Department
IT Outsourcing Department

Business Segments

Market Strategy Department
and Strategy Consulting Department

Improvement of ICT platform operation
Monitoring, observability
Automation and assurance● Vulnerability management,
policy control

Knowledge enhancement
Sharing the expertise of TAKUMI
Application of generative AI● Standardization of proposedsystems

Fine-tuning of services
Product portfolio optimization
Standardization of lineups● Portal-based delivery● Utilization of digital marketing

●

●

●

●

●

●

net one report 2023

44

Chapter 4

GovernanceCorporate governance

Activity highlights observed since fiscal 2022

Corporate governance structure

Shareholders Meeting
Selection/
dismissal

Selection/dismissal
Determination of remuneration caps

Nomination Advisory Committee
AdviceRemuneration Advisory Committee

Oversight/auditing

Board of Directors

Audit & Supervisory Committee
Collaboration

Audit & Supervisory Committee members

Accounting auditor(Grant Thornton Taiyo LLC)

Reporting
Reporting
Auditing

Appointment/oversight

Instruction

Internal Audit Office

Collaboration

Accounting
auditsAuditing
Reporting

Organizations responsible
for business execution
Monitoring

President & CEO
Management Committee

Compliance Committee

Risk Management Committee

Investment & Financing Committee

Sustainability Committee

Vice presidents
Responsible divisions, subsidiaries, etc.

Key governance characteristics
Risk management and internal control

Corporate culture reforms

Pursuit of monitoringboard-based governance

Net One’s uniquethree lines model

Fostering a corporate culture
rooted in our Purpose

Major examples

Major examples

Major examples

Transformation into a company with
an audit and supervisory committee

Risk management process oversightfrom the CRO and the Risk
Management Committee

Corporate culture monitoring surveys

Establishment of a Governanceand Corporate Culture Advisory Committee

Dialogue held between
management and employees (RCT)Six out of nine executive directors are
independent outside executive directors

Execution functions enhanced throughour chief executive system

Establishment of a unique 1.5th line
between the firstand second internal
control lines of defense

Corporate philosophy
dissemination activities

Continuous implementation of measures to prevent recurrence of fraudulent acts45

net one report 2023

Separating oversightand executive functions
and clarifying
the responsibilities of both

Generating synergy between businessdivisions, optimizing resource allocation,and streamlining the implementation ofpolicies and initiatives

Improving our ability togather information
egarding key issues

Appropriatedelegation of authority

Responsibilities of chief executives
Assist the CEO and participate in decision-making processes associated with business challenges and company-wide
strategies● Provide direction, orders, guidance, advice, and support to divisions throughout the Company regarding matters relevant todesignated areas of responsibility● Support operational execution performed by vice presidents responsible for functional and business strategies● Develop personnel capable of implementing company-wide strategies to ensure healthy and perpetual growth for the Net One
Group moving forward●

Chief
executive officer(CEO)

1. Facilitate the realization of the Group’s Purpose by developing short-, medium-, and long-term visions and formulating management policies andstrategies
2. Lead the formulation of management strategy action plans and oversee execution of the Group’s business operations
3. Share the Group’s future vision with all its stakeholders and strengthen relationships with these stakeholders through appropriate and proactive
information disclosure
4. Promote sustainable growth by leading the development of future managerial personnel

Chief
operating officer(COO)

1. Support the achievement of business goals by overseeing operational execution within the Group’s areas of business and optimizing management
resource allocation
2. Cooperate with the CEO while coordinating with, and providing support to, all chief executives
3. Provide all stakeholders with explanations regarding the Group’s operations
4. Maintain organizational control and lead business continuity efforts during both normal and emergency situations

Chief
financial officer(CFO)

1. Formulate financial strategies (targeting optimal financing and capital allocation) and policies to facilitate the realization of management strategies
2. Conduct appropriate financial reporting in accordance with laws and regulations and spearhead appropriate responses to audit results; in addition,
promote the establishment of management and tax accounting practices that contribute to corporate value enhancement
3. Oversee risk management (assessments, evaluations of effectiveness, and decisions regarding the need for impairment accounting) related toinvestments
4. Lead timely and appropriate disclosure of financial information, take heed of feedback provided by shareholders and investors, and formulate disclosure
measures that enhance corporate value

Chiefhuman resources
officer(CHRO)

1. Conduct flexible and swift decision-making to facilitate the execution of management strategies while investigating organizational structures andformulating policies to ensure efficient operations; in addition, develop policies and measures to help organizations function reliably in pursuit of theirobjectives
2. Secure personnel capable of facilitating the achievement of management objectives, identify the expertise required for the Group to ensure theirsuccess, and formulate basic policies for recruitment, training, evaluation, and compensation
3. Assist the CEO while promoting the development and advancement of future managerial personnel
4. Establish basic policies to ensure that both our Purpose and the rest of our corporate philosophy system receive acceptance throughout the Groupand establish a better corporate climate and culture

Chief strategy
and digital officer(CSDO)

1. Formulate strategies to facilitate growth, promote flexible and expeditious decision-making within the Group, generate synergy between organizations,and strengthen the momentum behind efforts targeting strategy achievement
2. Formulate company-wide operational reforms and information strategies to strengthen the Group’s business base and increase both productivity andmanagerial adaptability through the application of digital technologies

Chief
technology officer(CTO)

1. Stay abreast of technological trends and environmental changes and spearhead efforts targeting competitive advantage while monitoring the executionof growth strategies from a diverse range of perspectives
2. Maintain a strong awareness of our Purpose and Mission and ensure widespread acceptance of our corporate philosophy system while formulating
technology and service strategies aimed at resolving challenges through the application of more advanced technologies
3. Facilitate the attainment of our growth strategy by formulating company-wide policies for the development of personnel with expertise in technology
and service-related fields, thereby supporting the development of professional personnel

Chiefrisk management
officer(CRO)

1. Analyze and assess company-wide risks, formulate basic policies to ensure appropriate mitigation, and direct the implementation of these policies
2. Establish systems for addressing major disasters and other contingencies and provide leadership for the entire Company while assisting the CEO
during emergency situations
3. Formulate policies related to the establishment of internal control systems, monitor the regulation of these systems, and ensure efficient improvement
cyclesChief complianceofficer(CCO)

1. Establish a basic policy for compliance with laws and regulations and promote investigations into measures targeting its enduring acceptance andimplementation
2. Establish a culture of respect for human rights within the Company and spearhead business operations rooted in mutual respect between employees
3. Formulate policies targeting broad contributions to society, including regional development and the resolution of various social challenges

net one report 2023

Business Segments

Chairperson of the Board of Directors is
an independent outside executive director

Primary objectives behind efforts targeting the development and enhancement of our chief executive system

GovernanceOversight and execution

We have introduced chief executive positions into various sectors with the aim of building a highly effective corporate
governance structure. By clarifying the roles and domains associated with these positions, we are strengthening theirpractical functionality. In addition, we have created profiles for a total of 19 positions, including both CEO and vice president,
to facilitate a sustainable system of succession.
Chief executives formulate and implement company-wide strategies pertaining to their areas of responsibility to facilitate
the achievement of targets associated with our Purpose and the rest of our corporate philosophy system. In addition, they
carry out their own professional responsibilities while providing direction to others in positions of authority.

Management Capital

Governance and Corporate Culture Advisory Committee

Executive directors

AdviceDevelopment and enhancement of our chief executive system

Growth Strategy

ReportingReinforcement of executive functions

Value Creation

Net One Systems 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 performed by the Board of Directors (themajority of whom are independent outside executive directors) and the Audit and Supervisory Committee. We have also
strengthened the business management and supervisory functions of the Board of Directors by introducing a vice president
system while improving the efficiency and speed of business execution. Furthermore, we work to ensure fairness andobjectivity through the nomination and remuneration of executive directors and vice presidents conducted by the Nomination
Advisory Committee and the Remuneration Advisory Committee.

Introduction

In accordance with its corporate philosophy system, the Net One Group is continuously striving to enhanceand strengthen its corporate governance to ensure transparent, impartial, and swift decision-making while
generating sustainable growth and raising its corporate value over the medium to long term.

46

Governance

Chapter 4

Message from the Chairperson of the Audit and Supervisory Committee

Nomination Advisory Committee

During fiscal 2022, the first year following the inauguration of our Nomination Advisory Committee, the committee primarily
reviewed succession plans applicable under our current structure. Having obtained approval from our Board of Directors, thecommittee is proceeding with the formulation and implementation of a final succession plan. The committee is also in the
P.49
process of clearly defining requirements for inclusion in our skill matrix.

Review procedures for the formulation and implementation of a CEO succession plan
3. Conducting
assessments

Kazuhiro Noguchi

and execution of placement
4. Reviewand training policies

Personnel requirements

Selection methods

Assessment examples

Long-term implementation of personal
development measures in accordancewith assessment resultsCompetency

Recommendations
from executive directors
and/or vice presidents

Expert-led interviews
exploring candidate
activity and behavior

Experience authorization, etc.

Experience

Selection of qualified
personnel using multiple
sources of HR data

Personality

Transfer, assignment,

Exposure

Active participation in discussions andinterviews with executive, supervisory,and independent external parties

Education

Acquisition of managerial perspectives,
formulation of personnel/organizational
strategies, etc.

360-degree evaluations
Psychological assessments

Remuneration Advisory Committee

Fine-tuning our remuneration system while strengthening our chief executive system

Major discussion
details

Benefits and other forms ofcompensation associated withour complete transition toward
a delegated vice president structure

Reviewing ourcompensation
breakdown

Breakdown of executive remuneration*1
Annual base salary (ABS)

Short-term incentives (STIs)
BonusesLong-term incentives (LTIs)
Restricted stock compensation

22%

33%

44%

CEO

20%

55%

Vice presidents

30%
25%

Point of change

20%

Expansion of compensation share consisting of incentives

10%

Service ratio

Three priority services

ROE

Corporate
culture reforms

Materiality

Other personal
objectives

20%

20%

10%

15%

10%

5%

10%

Financial: 70%
Point of change

Compared to a service ratio weighting of 50%
in fiscal 2022
Pursue further value sharing with shareholders
through the adoption of ROE metrics*1 Figures have been rounded to the nearest percentage point and therefore may not add up to 100%.

47

net one report 2023

Non-financial: 30%
Point of change

Compared to respective weightings of 10%
and 15% for corporate culture reforms andmateriality in fiscal 2022
Greater emphasis on corporate culture reforms

Enhancing our audit system to facilitatea more thorough exploration of the true natureof challenges confronting the Group
During fiscal 2022, instead of simply identifying incidents, we
focused on conducting more thorough explorations of thereasons behind them. During screening panels held through theInternal Audit Office (meetings conducted for the purpose of
discussing and evaluating the content of reviews conducted inaccordance with internal audits), we begin this exploration
process by establishing an understanding of the specificcircumstances behind each detected incident. Throughmultifaceted discussions, we produce internal audit results thatlead to the discovery of the root causes or issues behind theseincidents. We then report these discoveries to the divisions that

Pursuing future development

Focusing on the construction of systems
designed to anticipate change while carefully
monitoring the implementation of recurrence
prevention measures
As environments within our industry undergo rapid change, wemust proactively adjust our regulations and controls to keep pacewith fluctuations in the nature of business dealings. I expect that
future discussions conducted within our corporate division will
have a positive impact on our internal control system’s capacity
for identifying and responding to change. As time progresses, wewill also encounter a greater need for operational risk analyses
based on the status of our budgetary plans. Accordingly, we
focus intently on monitoring the speed at which efforts aimed at
improving our corporate division, which checks and supports oursales division, are being undertaken.
We have implemented a variety of recurrence prevention
measures, and while our understanding of associatedmechanisms has progressed quickly, we are also facing
workload-related issues and have begun planning adjustments forthese measures. Maintaining a cohesive vision for ideal futurecontrols, we will continue to monitor corresponding plans toensure that all essential measures are appropriately maintained.
The success of the Net One Group’s future development
hinges upon the extent to which it can effectively shift toward a
service-based business model. Essential to this shift are efforts
associated with visualization, which are currently underway acrossthe entire Company. If we more accurately determine the earning
power of our services and further improve our governance andrisk management, we will be able to hedge against risks andreach investment decisions that will facilitate the transition toward
our next phase of growth. Moving forward, through soundauditing and purposeful proposals, we will push forward withefforts targeting the prosperous future envisioned by the Net One
Group.

net one report 2023

Business Segments

Bonuses (STIs)

Operating margin or
operating income

The Net One Group’s governance reforms have reached new
milestones since Net One Systems transitioned into a company
with an audit and supervisory committee in fiscal 2022. We havechanged the composition of our Board of Directors and shifted toa system under which the board will place more focus on its
supervisory role (a monitoring board system). Thanks to thesemodifications, the atmosphere of board meetings has changed,with the exchange of ideas and opinions becoming more
dynamic. Through two-way consultations involving our Board of
Directors, our Audit and Supervisory Committee makes decisions
regarding the details and specifics of proposals and basic policies
and plans related to internal audits. Additionally, as a full-time
Audit and Supervisory Committee member, I consistently attend
important internal conferences and committee meetings whileworking to enhance the committee’s collaborative relationshipwith the Internal Audit Office. Through these efforts, I gain a better
understanding of the Company’s internal circumstances andformulate my recommendations to the Board of Directors and the
Audit and Supervisory Committee in accordance with thisunderstanding.
Our Audit and Supervisory Committee has three members.
Like myself, Outside Executive Director Iizuka is a certified public
accountant, but she is also a business manager and has
accumulated a wealth of knowledge and experience concerning
accounting systems while working as a consultant. Outside
Executive Director Kusaka has previously held positions with large
companies and due to his managerial experience, is uniquelyequipped with highly sound and principled perspectives. We areconfident that the current composition of the Audit andSupervisory Committee allows us to effectively combine ourexpertise and supplement each other’s capabilities as we fulfill thecommittee’s responsibilities.

Priority measures for fiscal 2022

Description of short-term incentives and key points for review heading into fiscal 2023
Revenue

Focusing on improving the capabilities of
the Audit and Supervisory Committee undera three-member structure

were subject to internal auditing and additionally share them withall other relevant divisions and departments, thereby facilitating
improvements that help prevent recurrence.
Meanwhile, we have endeavored to conduct theme-specificinternal audits regarding risks affecting the entire Company, andthese efforts have led to meaningful suggestions andrecommendations. Additionally, thanks to improvement in thequality of information supplied by the Internal Audit Office, ourAudit and Supervisory Committee has been able to recognize
issues facing the Company more precisely and conduct morethorough and in-depth audits.
With regard to personnel development, during fiscal 2022, we
held study sessions for staff attached to the Audit andSupervisory Committee. Career paths associated with the Internal
Audit Office are progressively taking shape, and we are confident
that expansion in opportunities for personnel equipped withperspectives related to auditing will help strengthen foundations
supporting the Net One Group.

Governance

50%

Chief executives

Transition into a company with an audit
and supervisory committee

Management Capital

During the first year following the inauguration of our Remuneration Advisory Committee, the committee reviewed possible
remuneration systems for the subsequent fiscal year based on our current executive remuneration system, which wassignificantly revised during fiscal 2022 (introduction of a restricted stock compensation plan, adoption of non-financial targets
and indicators, etc.), and our Board of Directors has approved and adopted the committee’s proposed system.

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

Growth Strategy

Repeat processes in subsequent years and achieve talent pool expansion

Setting compensation levels
based on the expectations,rather than the duties,
associated with each position

Our Board of Directors is improving
its effectiveness while our Audit andSupervisory Committee strengthens
its auditing capabilities

Value Creation

an ideal
1. Establishing
CEO archetypeof
2. Selection
candidates

Introduction

Formulation and administration of succession plans48

Chapter 4

Governance

Executives

Name and position

Introduction

Executive directors◎Chairperson ●Member

President & CEO

Takuya Tanaka

Executive director
Executive vice president
Chief operating officer (COO)

Mitsuru Kiuchi

Maya Ito

Masayoshi Wada

Shinobu Umino
Newly appointed

Kazuhiro Noguchi

Sachiko Iizuka

Shigeki Kusaka

Independent executive director

Independent executive director

Independent executive director

Independent executive director

Independent executive director

Executive director
Executive vice president
Chief human resources officer (CHRO)
Chief risk management officer (CRO)
Chief compliance officer (CCO)

Independent outside executive
director
Chairperson of the Board of
Directors

Independent outside executive
director
Chairperson of the Remuneration
Advisory Committee

Independent outside executive
director
Chairperson of the Nomination
Advisory Committee

Independent outside executive
director
Full-time Audit & Supervisory
Committee member
Chairperson of the Audit &Supervisory Committee

Independent outside executive
director
Audit & Supervisory Committee
memberIndependent outside executive
director
Audit & Supervisory Committee
memberIndependent executive director

66,604

14,726

11,121

413

441

194

248

692

2,309

Attendance at meetings ofthe Board of Directors

15/15(100%)

15/15(100%)

13/13(100%)

15/15(100%)

13/13(100%)

ー

15/15(100%)

15/15(100%)

15/15(100%)

Nomination Advisory
Committee

10/10(100%)●

Committee●

Remuneration Advisory
Committee

10/10(100%)

10/10●(100%)●(100%)

10/10

◎

ー

10/10

◎

(100%)

Audit & Supervisory
Committee

●

●

●

●

Technology

●

●

●

●

Human resources / corporate
culture and organizational reform

●

●

●

●

●

Governance / law / risk
management●

Sustainability

◎

3/3*1
(100%)●

3/3*1(100%)● （100%)◎10/10(100%)●

10/10(100%)

10/10● （100%)●

3/3*1Management Capital

Skill matrix

Corporate management /management strategy

Finance / accounting

Growth Strategy

Shares held

Value Creation

Takafumi Takeshita

●
●

●
●

●

●

●

●

●

●

Vice presidents●●* The skill matrix above identifies the primary specialties and experience of each executive director and does not reflect the full ranges of their expertise.

Governance*1 Refers to attendance at meetings of the Audit & Supervisory Board (prior to Net One Systems’ transition into a company with an audit and supervisory committee)●●

Skill descriptions and significanceFumihiko Shinoura

Senior vice president, chief strategy &digital officer (CSDO)

Koji Tsuji

Senior vice president,
chief financial officer (CFO),
executive director of Net One Partners Co., Ltd.

Masayuki Kitajima

Senior vice president, general manager of Corporate Planning Division,
general manager of Corporate Management & Administration Division,
general manager of Business Control Division

Kazuaki Ishibashi

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 Next Co., Ltd.

Akiko Kanai(Shares held: 8,584)(Shares held: 8,365)(Shares held: 6,783)(Shares held: 3,600)(Shares held: 3,400)(Shares held: 4,113)

Vice president, general manager of
East Japan Business Unit 3

Yoshimitsu Narita

Vice president, general manager ofCentral Japan Business Unit

Yoichi Matsumoto

Vice president, general manager ofWest Japan Business Unit

Daisuke Hatakeyama

Vice president, general manager ofSales Engineering Unit

Kenta Minagawa

Vice president, general manager ofCustomer Service Division

Takatoshi Tsuchiya

Vice president, general manager ofBusiness Development Division,
executive director of Net One Next Co., Ltd.

Yusuke Fujita(Shares held: 4,910)(Shares held: 9,900)(Shares held: 3,540)(Shares held: 2,800)(Shares held: 2,100)(Shares held: 1,900)

Corporate management /management strategy

As we aim to fulfill our Purpose and all other elements of the Declaration of the Net One Group while simultaneously enhancing ourcorporate value, we must ensure appropriate oversight and support for the decision-making processes of our executive
management team by securing experience in the fields of corporate management or managerial oversight.

Technology

To establish a solid position as a leading network company, we must demonstrate thorough understanding and experience intechnological areas (e.g., knowledge of networks and ICT, insight into market environments, and perception of future trends).

Human resources /corporate culture and organizational reform

To maximize the activity of our personnel, who represent the source of our competitive strength, and improve employee engagement while
promoting corporate culture reforms using our restructured corporate philosophy system as a driving force, we must exhibit knowledge
and experience concerning basic HR principles, human capital management methods, and corporate culture and organizational reforms.

Finance / accounting

As we aim to increase our medium- to long-term corporate value, we must demonstrate knowledge and experience in finance,accounting, and shareholder relations, thereby ensuring a proper balance between strategic business investment and the proactive
delivery of shareholder returns while facilitating our pursuit of an optimal capital structure and our establishment of a stable business base.

Governance / law /risk management

To develop strong trust-based relationships with stakeholders, further strengthen our business base, and become a shining
example of effective corporate governance, we must exhibit comprehensive knowledge and experience concerning governance,
law, and risk management.

Sustainability

To cement sustainability as the foundation of our management and accelerate efforts addressing our four key materiality-related
issues, we must demonstrate knowledge and experience related to the co-creation of social and economic value (e.g.,understanding of social challenges and their incorporation into management strategies).

Business Segments

Senior vice president,
chief technology officer (CTO)* Shareholdings indicated above reflect the number of shares held by each individual according to the Company’s shareholder register as of March 31, 2023 plus restricted stock compensation grantedby resolution of the Company’s Board of Directors on June 23, 2023 and the number of shares held by each individual through the Company’s employee shareholding association as of August 31, 2023.

49

net one report 2023

net one report 2023

50

Business Segments

Chapter 5Enterprise Market

VisionGrowthstrategy

Focus themes for growth● Deliver issue-solving lifecycle services and● Implementation of digital and green transformation

propose grand designs for the future● Expand operations into business ICT areas(production technology sectors, etc.)

Introduction

Contribute to the resolution of social challenges
by sharing visions for the future of ICT utilization

Strategy● Smart manufacturing● Enhancement of security and ICT governance● Predictive detection of cyber-attacks and system

failuresMedium- to long-term outlook and strategy

Business details

Future prospects

We conduct business for major private companies in the manufacturing and non-manufacturing industries, as well as fordomestic financial institutions and foreign companies. Additionally, we support information utilization to enhancecompetitiveness, work style innovation, and cost reductions through the application of ICT platforms.
Operating environment

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

55,376

11.4%

57,281

55,17254,547
46,896
29,20849,45741,28954,00039,99636,996

31,281

9.3%

8.4%

6,294
5,089

9.3%

Business opportunities

Conventionally, investment in offices and data centers has
been driven primarily by renewal-related demand. However,with the growing application of ICT outside of corporate
environments (for work style innovation, cloud computing,etc.), we expect to observe a growing need for accessmanagement and integration related to decentralized datathat was formerly collectively managed within closed
corporate networks. Moving forward, we will continue to
conduct network design predicated upon the combined useof internal ICT platforms and cloud technologies whilestrengthening zero trust-focused security measures applied
to ensure safe access to information assets.

In terms of new business domains, we plan to facilitate
preventative maintenance, traceability, and decarbonizationsupporting electricity usage visualization by continuing toapply wireless networks and data generated throughproduction lines and manufacturing equipment, thereby
encouraging large-scale networking within factories. At thesame time, we aim to push forward with our implementationof cyber security measures. As time progresses, we expect
to observe improvements in efficiency and productivity
achieved through data sharing conducted throughout and in
between supply chains. This sharing will apply to data usage
within and between factories, as well as data applied among
companies belonging to both the same and different
corporate groups.

4,611
3,484

Management Capital

26,47257,000Operating environment

Growth Strategy

Demand for security enhancement, cloud systems, and work style innovation remains high.

Bookings / revenue / order backlog (million yen)

60,233

Value Creation

Business overview

Focus areas
2019

2020

2021

2022

2023

2019

(FY)

2020

2022 (FY)

Smart manufacturing

Social infrastructure to realize Society 5.0

CAGR(for the three-year period ending with fiscal 2022)

Bookings-2.9%

Revenue-3.7%

Operatingincome-9.9%

We are observing growth in PoC activities associatedprimarily with the on-site application of data and digital twin
technologies within manufacturing sectors, as well as
decarbonization achieved through the visualization of power
consumption. Beginning with the formulation of granddesigns aimed at generating new projects, we areundertaking proposal activities associated with a variety ofobjectives including the implementation of industrial wirelesstechnology and the enhancement of security at businesssites.

We are undertaking efforts facilitating PoC testing
associated with smart buildings. This testing focuses on a
range of elements, including the integration of networks
supporting the numerous sensors and devices installed
within office buildings, the efficiency of data application andadministration achieved through the integration of ICT
platforms, and the creation of new value accomplished via
system linkage utilizing indoor sensors.

* Effective from fiscal 2022, we have reclassified the internet service provider (ISP) industry (formerly included under the enterprise market) under the telecom carrier market. Also effective fromfiscal 2022, we adjusted our accounting policies and began recording a portion of the labor costs and other expenses incurred through our engineering division as costs of revenue. Thesechanges have been reflected through bookings, revenue, and the order backlog for fiscal 2021 and all subsequent accounting periods, as well as through operating income for fiscal 2022.

Distinguishing features of the businessProfitability

As digital technology rapidly evolves, we are observing an
ongoing need for the application and stable operation of
integrated ICT platforms that facilitate the use of advanced
digital technologies. At the same time, we are encountering
growth in demand for security enhancement supporting thesafe application of data dispersed throughout cloud andremote working systems and the well-balanced handling ofboth data utilization and ICT governance within corporategroups and new sectors (factories, manufacturing sites,etc.). With regard to the financial industry, we haveobserved relatively constant progress in terms of bothtechnological improvements and infrastructure renewal. In
the context of manufacturing and non-manufacturingindustries, which are associated with a diverse range ofdigitalization-related needs, we anticipate ongoing demand
for the operational application of ICT.

With the largest service ratio among the four markets defined by
the Net One Group, the enterprise market is highly profitable,accounting for approximately 60% of total revenue. While
providing conventional system maintenance, we have continued
to generate high amounts of revenue through service-based
operations, including those aimed at generating solutions
adopting ICT lifecycle-oriented perspectives. In contrast, theenterprise market’s operating margin declined in fiscal 2020
due to COVID-19-related impact before falling again in fiscal
2021 as investment within the manufacturing industry wascurtailed in response to semiconductor shortages. Later, in
fiscal 2022, both revenue and the operating margin generated
through the enterprise market improved thanks to our
successful capture of expanding demand in the manufacturing
and non-manufacturing industries. Moving forward, we will pushforward with efforts aimed at standardizing and automating ouroperations, target the expansion of remote operations, andendeavor to maintain ongoing profitability.

net one report 2023

Performance and outlook
Fiscal 2022 results

Fiscal 2023 outlook

With regard to the manufacturing industry, investment fromautomakers was robust, particularly in expenditures related
to EVs. Meanwhile, in terms of non-manufacturingindustries, we observed growth in bookings associated with
next-generation ICT platforms and security enhancementbusiness operations (zero trust and secure access serviceedge [SASE]). As for the financial industry, integration of
next-generation infrastructure continued unabated. Revenue
increased year on year, driven by sales targeting
automakers, among whom investment has been resurgent.

We project growth in both bookings and revenue. In termsof bookings, we expect expansion in the category of smart
manufacturing within the manufacturing industry, particularly
among automakers. Meanwhile, within non-manufacturingindustries, we anticipate growth in association with security
enhancement businesses and service platforms as
operational digitalization progresses. We expect bookings
generated through the financial industry to remain level year
on year, consisting primarily of bookings connected toongoing projects. Meanwhile, we plan to convert our
substantial order backlog into revenue and accordingly
project growth in overall enterprise market revenue.
net one report 2023

Business Segments

51

Growth potential

Governance2021(outlook)52

Business Segments

Chapter 5

Telecom Carrier Market

VisionGrowthstrategy

Focus themes for growth● Propose co-creation businesses, including● Strengthen corporate business throughservice platform installation and corporate
business support, to telecom carriers

Medium- to long-term outlook and strategy

Business details

Future prospects

We develop businesses for telecom carriers. Collaborating with clients, we also establish safe and secure ICT platforms thatfunction as social infrastructure.

Bookings / revenue / order backlog (million yen)

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

10.5%

53,88848,20735,442 35,176

51,51910.1%

49,005 49,000 48,000

36,48931,04430,04427,530

3,708

10.0%

10.1%

4,797

4,958

3,688

Business opportunities

We will continue to make decisions regarding our delivery oflarge hardware for network facilities based on acomprehensive range of factors, including profitability. Moving
forward, our priority operations will focus on areas unrelated totelecommunications, which have become a central target for
telecom carriers. Under these circumstances, we aim todevelop services that facilitate digital transformation forcorporate customers (application of data centers, furnishing ofcloud services, etc.) and expand our digitalization-supporting
co-creation business. Moving forward, we will contribute to
the development of society by expanding our delivery ofadded value and utilizing growth in client businesses as aconduit for generating transformation in industrial structures.

In addition to developing security services that support
external access to office networks (through remote working,etc.) and the use of multiple cloud systems, we will
spearhead technological innovation targeting the realizationof Society 5.0, a visionary concept that centrally involves
surmounting social challenges through new value createdby IoT-based connections between people and things.
Moving forward, we will combine the network-related
expertise we have cultivated over our many years ofexistence with 5G and digital technologies to add newvalue, thereby facilitating co-creation business operations
that support expansion in client businesses and creating
business within heretofore unexplored domains.

Management Capital

17,481

14,508Operating environment

Growth Strategy

Enthusiasm for investment targeting business expansion among corporate entities is strong. We arefocusing on building service platforms associated with cloud computing and other technologies while
also concentrating on providing corporate clients with technological support.

Operating environment

39,464

collaboration with telecom carriers● Collaborative business in other markets andexpansion of solutions for MSPs

Value Creation

Business overview

Introduction

Expand new business prospects through co-creation
involving telecom carriers

Strategy

Focus areas
2019

2020

2021

2022

2023

2019

(FY)

2020

2021

2022 (FY)Operatingincome10.2%

Social infrastructure to realize Society 5.0(outlook)

CAGR(for the three-year period ending with fiscal 2022)

Bookings

13.3%

Revenue

11.7%* Effective from fiscal 2022, we have reclassified the ISP industry (formerly included under the enterprise market) under the telecom carrier market. Also effective from fiscal 2022, we
adjusted our accounting policies and began recording a portion of the labor costs and other expenses incurred through our engineering division as costs of revenue. These changes havebeen reflected through bookings, revenue, and the order backlog for fiscal 2021 and all subsequent accounting periods, as well as through operating income for fiscal 2022.

Profitability

Until the early 2010s, growth was primarily driven by the delivery oflarge hardware for network facilities, but new hardware installations
have since subsided, and we have also observed a trend ofcommoditization with regard to hardware. In response, we havebeen shifting the focus of our operations toward operational
support and the integration of service delivery platforms. Recently,
amid this shift, revenue has been growing due to investment
conducted in pursuit of line reinforcement in response to expansion
in remote working and video communication volume. At the sametime, operations targeting network facilities focus mainly on productdelivery, so the Net One Group is shifting toward domains throughwhich it can provide services on an ongoing basis. We aim tocreate high added value by supporting the development of services
that telecom carriers can provide and through our co-creation
business, which focuses on developing businesses for corporateclients in partnership with telecom carriers.

Services (delivery of large hardware to telecom carriers, etc.)
generate about 40% of revenue achieved through thetelecom carrier market, a service ratio that is somewhat
lower than those observed within the enterprise and publicmarkets. However, due to a limited client count, we are able
to minimize SG&A expenses incurred through this market,
which successfully generates operating margins on par withthose reported through the other markets. By targeting ashift away from business structures focused on productsales and engaging in platform integration beginning with
PoC activities conducted during the service planning stage,
we are able to provide advanced operation services in
addition to platform maintenance. Currently, we are striving
to improve profitability by proposing high-value-added
systems capable of contributing to growth in clientbusinesses and providing services that reduce operationalburdens following service launches.

net one report 2023

Performance and outlook
Fiscal 2022 results

Fiscal 2023 outlook

Although investment targeting line reinforcement inresponse to growth in telecommunications traffic stemmingfrom remote working and other factors has subsided, we
also observed strong bookings in connection with cocreation business operations leveraging our expertise
concerning large-scale projects and digitalization support.
Revenue rose year on year as we recognized proceeds
generated through line reinforcement investment conductedsince fiscal 2021.

We project slight decreases in both bookings and revenue.
Line reinforcement investment conducted in response to
growth in remote working demand had previously boosted
bookings generated through the telecom carrier market, but
we expect this positive impact will dissipate in fiscal 2023.
Regardless, we will continue to focus on supporting theactivities of client companies and facilitating digitalization andsecurity enhancement through our co-creation business.
Although we expect to book revenue generated throughinvestment targeting line reinforcement, we anticipate a slightdecrease in overall telecom carrier market revenue.

net one report 2023

Business Segments

53

Growth potential

increasingly drawing attention from telecom carriers as a way
to achieve carbon neutrality. While expanding circular
economy-conscious measures formulated to extend hardware
life, we will also support the businesses of corporate clients byproviding both expertise facilitating transitions toward smart
factory facilities and joint verification environments, thereby
supporting the resolution of technological issues.

GovernanceDistinguishing features of the businessWe are participating in PoC activities aimed at establishing
5G-based multi-access edge computing (MEC) services,which, through IT service environments located in close
proximity to the user, enable the processing of large amountsof data generated by terminals and devices. We are confident
that this state-of-the-art solution will achieve low-latency andhigh-security network usage without the need for Internet
connectivity. At the same time, green transformation (GX) is

54

Business Segments

Chapter 5

Public Market

VisionGrowthstrategy

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

including operations, for markets where
digitalization is progressing

Introduction

Provide a safe and secure ICT platform for social
infrastructure and realize a sustainable society

Strategy

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 and strategy

Business details

Future prospects

We conduct business for public institutions such as central and local governments, education (universities and research
institutes), companies that provide social infrastructure (power companies, railways, etc.), and healthcare (hospitals). We alsoestablish ICT platforms and enhance security to support the application of public information and other data.
We are observing robust demand surrounding security measures supporting data utilization, cloudsystems, and work style innovation.

Bookings / revenue / order backlog (million yen)

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

80,63962,672

71,255 69,795
55,79371,00061,68470,00056,96164,20063,459 61,425 63,200

9.6%

8,260

8.9%

7.8%
5,485

39,715

5,492

4,327

Business opportunities

We have hitherto facilitated digitalization by migrating
systems originally integrated separately according to theirrespective applications to a common platform, thereby
improving efficiency and reducing operating costs. As time
progresses, we will continue to focus on sectors in which
ICT application is anticipated, including those associatedwith municipal governments, school systems, and social
infrastructure. Meanwhile, in accordance with a fundamental
rationale focused on security enhancement as a systemcore, we will promote data governance-based security
measures while capturing demand surrounding thereorganization of corporate group activities and thefortification of foundational corporate group structures.

In due course, we plan to improve the convenience of ourservices using platforms we have developed to date, enhancequality of life in general, and provide support facilitating
effective system operation and the delivery of functionality thatpaves the way for operational streamlining. Moving forward,
we must implement security measures and update our
network design to accommodate connections with external
environments, including those associated with remote working
systems and cloud computing setups administered bygovernment agencies. Meanwhile, we project that the use ofdata will continue to drive business efficiency and revitalizationin fields supporting the achievement of a sustainable society,including electric power, gas, rail transport, and medical care.

Management Capital

38,255

11.8%

Operating environment

Growth Strategy

Operating environment

Value Creation

Business overview

Focus areas
2019

2020

2021

2022

2023

2019

(FY)

2020

2021

2022 (FY)(outlook)

CAGR(for the three-year period ending with fiscal 2022)

Bookings-0.7%

Revenue

3.4%

Operatingincome8.3%* Effective from fiscal 2022, we adjusted our accounting policies and began recording a portion of the labor costs and other expenses incurred through our engineering division as costs ofrevenue.

Profitability

Capitalizing on drastic municipal security measure overhauls
implemented in response to unauthorized access incidents that
occurred in 2016, we have steadily captured renewal demandassociated with Japan’s GIGA school concept initiative and efforts
targeting strengthened security cloud systems and enhanced
information security. Meanwhile, we continue to observe demand for
digital technology application approaches conceived to addresschanging social conditions and resolve social challenges. With regard tobusinesses supporting non-municipal daily life infrastructure (associatedwith electric power, gas, railroads, medical care, etc.), we havewitnessed a trend toward revamping information platforms to facilitate
structural changes in business operations as a response to liberalizationand population decline. As time progresses, we will expand our deliveryof comprehensive support services, which cover a wide scope
extending from the renewal of ICT platforms enabling digitalization and
ICT utilization to the administration of these same platforms.

In recent years, we have generated improvements in profitability
primarily by conducting a greater volume of direct business
transactions, thereby expanding our delivery of maintenance andoperations services. By refining our proposal and technologicalcapabilities, we have become able to integrate and maintain entire
ICT platforms, which are becoming increasingly sophisticated as aresult of security enhancement and applications related to sharedinfrastructure. Furthermore, with regard to public bidding
decisions made based on comprehensive assessments, we areendeavoring to distinguish ourselves through function-oriented
proposals that combine designs aimed at fully leveraging ourtechnological capabilities with original financial services. Services
generate about 50% of our public market revenue; this service
ratio is second only to the service ratio achieved through ourenterprise marketing activities, and as a result, the public market
is a key profit driver for the Net One Group as a whole. By
expanding operational and managed services, we will aim toestablish a stable and expanded earnings base moving forward.

net one report 2023

We will expand our business while maintaining a particularfocus on sound cloud computing and information security
enhancement for municipal government agencies. Additionally,by establishing, and improving the convenience of, platforms
that enable the safe and secure use of connections linked toexternal systems associated primarily with remote working andcloud services, we will facilitate upgrades for regional ICT
platforms, the resolution of local challenges through resident
service digitalization, and regional revitalization achieved
through the digitalization of educational systems.

Moving forward, we will support electric power, gas, andrailroad infrastructure upgrades that utilize digital technology
to ensure efficient facility maintenance and management. At
the same time, we will propose platform integration that
contributes to the stabilization of social infrastructure byfacilitating effective implementation of cyber security
measures, stable operation of increasingly complex
systems, and operational upgrades enabling the applicationof data and digital technologies within medical contexts(medical digital transformation).

Performance and outlook
Fiscal 2022 results

Fiscal 2023 outlook

With regard to bookings, performance previously observedin association with large social infrastructure projects
dissipated, and bookings recorded in connection withinformation security cloud and security enhancement
projects for municipal government agencies comparedunfavorably with the relatively high results reported in fiscal
2021. Regardless, we experienced growth in demandsurrounding network system renewal projects for research
institutes and universities. Revenue rose year on year as webooked proceeds generated primarily through information
security cloud and security enhancement projects formunicipal governments.

We project increases in both bookings and revenue. With
regard to the former, we anticipate that bookings
associated with information security cloud and security
enhancement projects for municipal governments will
dissipate, but we also expect expansion in bookings
recorded in connection with Society 5.0-related digitalizationof social infrastructure (electric power, rail transport, etc.). In
terms of the latter, we expect revenue to grow as weconvert our abundant order backlog, which consists
primarily of outstanding orders related to information
security cloud and security enhancement projects formunicipal governments.
net one report 2023

Business Segments

55

Growth potential

Social infrastructure to realize Society 5.0

GovernanceDistinguishing features of the business

Digital government

56

Business Segments

Chapter 5Partner Business

VisionGrowthstrategy

Focus themes for growth● Establish a collaborative model with partner● Expand solution businesses for partnercompanies● Provide timely proposals, assistance,
and technical support, as well as strategic
products and solutions

Medium- to long-term outlook and strategy

Business details

Future prospects

Our partner business focuses on collaboration with partner companies through consolidated subsidiary Net One Partners. Bymeans of this business, we leverage the business foundation of the Net One Group to provide comprehensive support systems
that enable our partner companies to concentrate on system integration.
Operating environment

Operating income (million yen) / Operating margin (%)■ Bookings■ Operating income■ Revenue

13.4%● Operating margin■ Order backlog

48,65944,962
39,73048,400 46,357

48,000 48,000

40,201

8.0%

33,865

6,225

Business opportunities

As digital transformation demand increases, we aim toestablish a strong domestic presence by leveraging our
product selection capabilities, technical support, andlogistics functions to support system integrators. In
addition to providing ICT platform products associatedwith networks and security, we will facilitate thedevelopment of partner businesses by providing highvalue-added solutions (information indicating futurechanges in trends, technical proposal support, etc.) thatleverage our strong relationships with vendors.

In addition to our mainstay network equipment, we will
expand our delivery of security products and cloud-based
solutions, thereby joining our partners in pursuit ofstructural societal transformation addressing everchanging ICT market and business environments and theeventual realization of a prosperous future. With regard to
new products, we will support market-wide digitaltransformation by quickly providing solutions that facilitate
ICT application, including both general and PoC testing forequipment targeting local 5G systems, network
visualization, and software utilization.

3,706

3,507

Management Capital

18,80018,80016,757

14,165

3,093

9.2%

8.8%

Operating environment

Growth Strategy

Performance from business operations targeting system integrators and MSPs has been strong.

Bookings / revenue / order backlog (million yen)

38,727companies● Develop solutions for MSPs

Value Creation

Business overview

Introduction

Readily adopt cutting-edge technology,
enabling accommodation of diverse business models

Strategy

Delivering new value

8,299

2019

2020

2021

2022

2023

(FY)

2019

2020

2021

2022 (FY)Operatingincome26.3%(outlook)

CAGR(for the three-year period ending with fiscal 2022)

Bookings

2.5%

Revenue

6.2%

Distinguishing features of the businessWe are observing steady expansion in sales of ICT platformproducts, with particular growth in performance comingfrom network equipment provided by Cisco Systems, whichtargets system integrators responsible for developing
information systems. Growth has been largely driven bysales of products specifically designed for Wi-Fi services
provided by partner companies acting as managed service
providers (MSPs). Also responsible for growth is relationshipenhancement achieved by leveraging the overseas productprocurement capabilities and quality control processes that
the Net One Group has developed over the years since its
founding. Furthermore, growth has been additionally
boosted by demand stemming from digital transformation
progress and expansion in business opportunities achieved
through product resale and our delivery of technical support
and products with high added value.

The profit structure of the partner business differs
significantly from those associated with our other threemarkets, which concentrate on direct transactions withcustomers. Indirect wholesale transactions involving
products and equipment form the central core of ourpartner business, so this business generates a lower shareof its revenue through services (about 20%) than our otherthree markets. The activities of this business include
evaluation and procurement of proposed equipment andvalue-added services such as quality assurance, technology
verification, and proposal support. Accordingly, the grossprofit margin generated through this business approximates
our company-wide gross profit margin on products. In
contrast, the operating margin of the partner business issimilar to those of our other markets because this business
operates using a small staff, keeping its SG&A expenses
low primarily by entrusting a portion of its processes to Net
One Systems.

net one report 2023

For the first time in Japan, we are providing programs thatenable the smooth sale of subscription-based products
from Cisco Systems to our partner companies. With
initiatives such as these, comprehensive software contract
management adapted to accommodate technology use in
the digital transformation era, and support covering
existing-agreement-related operations ranging fromsystem installation to utilization and usage expansion, weare assisting our partner companies as they aim to
maximize their earnings.

We have supported, and continue to support, the timely
launch of ICT products through initiatives such as ourestablishment of solution verification labs that test andverify properties including radio wave characteristics,
performance, and connectivity for partner companies
exploring opportunities for providing local 5G products.
Additionally, we provide this same support by furnishing
the kitting environments, workforces, and logistic functions
necessary for the sale of ICT equipment.

Performance and outlook
Fiscal 2022 results

Fiscal 2023 outlook

Despite ongoing strong performance from network
enhancement and security reinforcement business
operations targeting major partners, bookings fell slightly
year on year primarily because bookings associated with
Wi-Fi service business operations aimed at MSPs
compared unfavorably with those reported for fiscal 2021.
Revenue increased year on year, driven by strong
proceeds from business operations targeting major
partners.

We project a decline in bookings and growth in revenue.
With regard to bookings, we will continue to strengthen
our collaborative business activities with major partners,
but we do not anticipate any significant year-on-yearchange in performance from Wi-Fi service business
operations targeting MSPs. Regardless, we forecast
growth in revenue stemming from our efforts targetingstronger collaborative business activities involving ourmajor partners.

net one report 2023

Business Segments

Profitability

Providing business platforms

Governance

57

Growth potential

Customer success58

Financial and Non-financial Highlights* Effective from fiscal 2022, we have begun recording a portion of labor costs and other expenses incurred through ourengineering division (responsible for the rendering of services) as costs of revenue. These same labor costs and otherexpenses were previously booked as SG&A expenses.

Non-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

Bookings

Revenue / Order backlog

Gross profit / Gross profit margin

Number of employees*1 and turnover rate*1

Ratio of engineers of all employees*1

New graduate recruits by gender*2■■ Product (Million yen)■■ Service (Million yen)
● Service ratio (%)■■ Revenue (Million yen)■■ Order backlog (Million yen)
● Share of revenue generated through services (%)■■ Gross profit (Million yen)
● Gross profit margin (%)■■ Male (persons)■■ Female (persons)● Turnover rate (%)■■ Total number of registered employees (persons)■■ No. of engineers (persons)● Ratio of engineers (%)■■ Male (persons)■■ Female (persons)● Female ratio (%)

231,844219,807

204,607 203,520
103,940

180,957

46.0

89,40888,855

209,680

202,122
188,520

186,353

44.5

44.8

44.0

26.3

174,825

101,220

79,65827.7

139,160

24.7

6.9

51,786

48,95350,36724.0

43,206

43.4

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

2,570

58.1
500
2,372

58.5

36.7

2,434

2,353

34

2019

2020

2022 (FY)

2021

22
1,378

1,361

1,441

1,503

69

1,504

61

49

56

18

8.9

2018

2019

2020

2022 (FY)

2021

2018

2019

2020

2021

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

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

20.1

8.9
17.8

20,635

19,673867.4815.8

15.9

16,4992022 (FY)

2018

2019

2020

2018

2019

2020

2021

2022 (FY)

2019

2020

2021

2023 (FY)2022

Female employee ratio*1 / ratio of female managers*2

Employees taking childcare leave*2● Female employee ratio (%)● Ratio of female managers (%)■■ No. of employees taking childcare leave (persons)■■ No. of male employees taking childcare leave (persons)

9.91

19.2

18.6

920.089.64

832.489.39

11,2252022 (FY)● All employees (year)● Male (year)● Female (year)

9.41

689.97

12,321

2021

Average years worked at Net One Systems*1

767.8914,458

16,790
12.8

8.83

9.24

9.27

16.8

17.1

63

61

16.9

55

54

9.58
9.34

44

8.72

7,155

8.68

115.90

84.52

2019

2020

2021

2022 (FY)

2018

2019

2020

2022 (FY)2021

145.42134.15

8.16

8.04

8.16

64.00
43.8

72.00
53.7

44.0

38.8

20

6.5
14

2018

2019

2020

2021

2022 (FY)

2018

2019

2020

2021

2022 (FY)

2018

2019

2020

2021

2022 (FY)

2018

2019

Capital expenditures / Depreciation

Customer satisfaction

Composition of the Board of Directors

CO2 emissions■■ Total assets (Million yen)
●Return on Assets (%)■■ Capital expenditures (Million yen)■■ Depreciation (Million yen)

● Overall satisfaction (%)● Satisfied (%)● Somewhat satisfied (%)■■ Internal executive directors (persons)■■ Outside executive directors (persons) 66.7
● Ratio of outside executive directors (%)● Ratio of female executive directors (%)■■ Scope2（t-CO 2）■■ Scope3（t-CO 2）

12.7
10.8

155,782 161,713
12.5

135,764

12.1
2,707

10.6

121,494

2020

7,716

2,846

88.5

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

2,618

2,446

89.4

91.2
78.2

66.7

4

78.3

4

2,291

47.2

37.4

42.2

46.2

45.8

3

7

47.7

569,460

6
4
30.6

14.3
9.1

458,356

460,41745.0
32.4

463,659

6

22.2
3

22.2
3

10.0

2022 (FY)

2018

2019

2020

2021

2022 (FY)*ROA: Ordinary income / average total assets during theperiod × 100

net one report 2023

2018

2019

2020

2021

2022 (FY)

2018

2019

2020

2021

2022 (FY)*Overall satisfaction: Satisfied + Somewhat satisfied*Survey methodology changed from FY2021

2019

2020

2021

2022

2023 (FY)*Transition to a company with an Audit & Supervisory
Committee from a company with an Audit & Supervisory
Board in FY2022

2020

5,303

5,356

5,293
2021

Business Segments

37.00

465,7096

40.0 42.9

36.4
51.1

2020

2022 (FY)574,816

45.00

2019

2021

* Female employee ratio current as of March 31 of each year
* Ratio of female managers current as of April 1 of each year

Total assets / Return on Assets (ROA)

74.00

13

4

178,651

42.1

6.5

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

6.6

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

Dividend per share
Consolidated dividend payout ratio

8.2

7.7

8.43
175.95

Management Capital

9,817

11,80959

55

Growth Strategy

9.8

9.7

2018

77

31

■■ Operating income (Million yen)
● Operating margin (%)

2018

90

34

118,586

Operating income / Operating margin

6.8

28.6

38

95

Value Creation

2018

127,904

114,111

115,752

35.5
107

2,597

2,570

75,052
101,299

37.8

35.8

57.9

2,097

2,092

42.2
94,91593,517

57.8

2,597

478

2,022

1,950

59.2

6.0

4.8

55,913

42.8

42.6

43.9

45.2
149,066

27.5

6.2

7.3

Introduction

Financial Highlights

2021

2022

(FY)

*Scope 1: N/A

net one report 2023

60

Consolidated Financial Data

Service business

FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

million yen

160,667

154,582

146,216

144,684

138,103

158,181

163,843

180,957

204,607203,520

231,844219,807

million yen

50,70653,14757,49057,93556,291

63,736

71,22079,65888,85589,408103,940

101,220

Year over year

%

4.9

4.8

8.2

0.8

(2.8)

13.2

11.7

11.8

11.5

0.6

16.3

(2.6)

Composition ratio

%

31.6

34.4

39.3

40.0

40.8

40.3

43.5

44.0

43.4

43.9

44.8

46.0

Order backlog

million yen

51,60251,31655,10458,25956,19258,42368,92075,05293,517

94,915

139,160

149,066

Revenuemillion yen

154,869

142,427

141,529

140,170

153,124

153,346

174,825

186,353

202,122

188,520

209,680

%

20.5

(1.8)

(8.0)

(0.6)

(1.0)

9.2

0.1

14.0

6.6

8.5

(6.7)

11.2

CAGR (three years)

%

6.3

7.6

2.9

(3.5)

(3.3)

2.4

2.7

7.6

6.8

9.6

2.5

4.0

48,61650,35053,76354,54556,13959,611

63,23774,416

79,76885,293

83,908

94,776

Service businessmillion yen

Year-on-year change

%

8.2

3.6

6.8

1.5

2.9

6.2

6.1

17.7

7.2

6.9

(1.6)

13.0

Share of total

%

30.8

32.5

37.7

38.5

40.1

38.9

41.2

42.6

42.8

42.2

44.5

45.2

42,30236,266

31,69931,91629,01534,84336,515

43,206

48,95355,91351,78650,367

26.8

23.4

22.3

22.6

20.7

22.8

23.8

24.7

26.3

27.7

27.5

24.0

27,07327,81428,55628,15727,391

29,47529,59031,39732,45336,23934,99529,731

17.2

18.0

20.0

19.9

19.5

19.2

19.3

18.0

17.4

17.9

18.6

14.2

Gross profit
Gross profit margin
Selling, general and administrative expenses

million yen%
million yen%

Operating income

million yen

15,229

8,451

3,142

3,759

1,623

5,368

6,925

11,80916,49919,673

16,79020,635

Year over year

%

167.3

(44.5)(62.8)

19.6(56.8)

230.6

29.0

70.5

39.7

19.2

(14.7)

22.9

CAGR (three years)

%

19.7

19.1

(18.0)(37.3)(42.3)

19.5

22.6

93.8

45.4

41.6

12.4

7.7

Operating margin

%

9.7

5.5

2.2

2.7

1.2

3.5

4.5

6.8

8.9

9.7

8.9

9.8

8,520

4,324

983

1,453

(124)

1,075

4,551

7,155

9,817

12,321

11,225

14,458

Total assets

million yen

100,00292,92490,624

103,013

99,266

102,038

102,502

121,494

135,764

155,782

161,713

178,651

Cash and deposits

million yen

19,233

18,58018,184

19,374

20,66816,236

21,95323,30531,47332,42920,28135,509Interest bearing liabilities (mainly lease obligations)million yen

1,843

1,882

2,173

4,700

5,832

6,994

7,306

12,442

16,10921,49841,06936,552

Net assets

million yen

63,50861,38757,263

56,10952,896

51,94353,84758,58465,33773,79568,54775,764Equitymillion yen

63,36861,19057,19656,014

52,77751,81553,68658,42065,05373,51368,36375,620Equity ratio

%

63.4

65.8

63.1

54.4

53.2

50.8

52.4

48.1

47.9

47.2

42.3

42.3

D/E ratio

times

0.03

0.03

0.04

0.08

0.11

0.13

0.14

0.21

0.25

0.29

0.60

0.48

Net D/E ratio

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

0.30

0.01

Return on Equity

%

14.3

6.9

1.7

2.6

(0.2)

2.1

8.6

12.8

15.9

17.8

15.8

20.1

Return on Assets

%

16.9

9.0

3.9

3.9

1.7

5.3

6.9

10.8

12.7

12.5

10.6

12.1

Book-value per shareyen

703.25699.63676.65662.62624.24612.64634.47689.97767.89867.48832.48920.08Dividend per share

yen

6,200

34.00

34.00

30.00

30.00

30.00

30.00

37.00

45.00

64.00

72.00

74.00

Earnings per share

yen

94.56

48.89

11.40

17.20

(1.47)

12.72

53.79

84.52

115.90145.42134.15175.95

Diluted earnings per share

yen

—

48.89

11.39

17.17

—

12.69

53.65

84.30

115.63145.09133.98175.76

Cash flows from operating activities

million yen

19,313

3,932

1,016

5,291

5,877

259

11,5696,682

12,281

9,800(10,874)

34,183

Cash flows from investing activities

million yen(1,572)(3,416)(3,823)(1,610)(2,235)(1,127)(1,264)(1,424)(1,194)(3,336)(1,515)(1,654)

Cash flows from financing activities

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

233(17,332)

Cash and cash equivalents at end of period

million yen

36,231

29,58021,183

21,374

21,66817,23623,95325,30531,47332,42920,28135,509personTotal employees

2,210

2,422

2,374

2,252

2,284

2,317

2,294

2,431

2,560

2,703

2,548

million yen

79

70

60

61

61

69

71

79

84

80

86

86

Revenue per employee

million yen

78

70

59

60

62

67

66

76

77

79

70

82

Gross profit per employee

million yen

21

16

13

13

13

15

16

19

20

22

19

20

Operating income per employee

million yen

8

4

1

2

1

2

3

5

7

8

6

8

Business Segments

2,023

Bookings per employee

Governancemillion yen

Management Capital

Net income attributable to owners of the parent

Growth Strategy

SGA ratio

Value Creation

157,633

Year over year

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 conductedat the beginning of fiscal 2010.
* Effective from fiscal 2022, we have begun recording a portion of labor costs and other expenses incurred through our engineering division (responsible for the rendering of services) as costs ofrevenue. These same labor costs and other expenses were previously booked as SG&A expenses.

61

net one report 2023

net one report 2023

62

Glossary

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
through the use of IoT, big data, AI, etc. This refers to the digitalization of manufacturing, which uses data toconnect all corporate activities, including not only factories, but also product design, supply chains, production,
distribution, and sales.

Three lines model

A model of an organization’s risk management and control activities. Generally, the first line consists of thebusiness department, the second line the management department, and the third line the internal audit
department. In the case of the Company, we have established our own 1.5 line to monitor the first line, in order toensure 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
the internal network from the outside. This is a mechanism that protects information assets and ICT assets byverifying the reliability of access through appropriate authorization, in an ICT environment where various users anddevices are connected, 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 ofdigital technology and data, with the aim of transforming the very nature of government itself. Digital government
aims to create 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,
along with 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 ofintellectual 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 ofprogress in digitalization.”Managed Service Provider (MSP)

A business provider that provides support from line connection to usage. In addition to conducting various
analyses that are necessary when introducing ICT systems / equipment, MSPs provide simple usage ofequipment 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 scopeof proposals from traditional services such as design, installation and maintenance to operations, as well as
overall system optimization.

Reference

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

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
the Company, 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 oforganizations and personnel systems.

Green transformation (GX)

This term refers to viewing efforts to achieve a decarbonized society as opportunities for economic growth andsocial change. The Net One Group aims to simultaneously contribute to the achievement of a sustainable society
and facilitate sustainable growth through cutting-edge ICT.

Multi-access edge computing (MEC)

This network architecture concept shortens communication delays and reduces network load by placing servers
in decentralized locations near IoT devices and mobile devices, thereby achieving high-speed processing.

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 andoperate production equipment and systems) environment where various devices and mechanisms that are uniqueto manufacturers are used.

Secure access service edge (SASE)

SASE is a technological concept according to which security and networking functions are integrated andmanaged using cloud-based technology. SASE technology allows security to be maintained even when accessing
cloud-based networks externally.

SOC (Security Operation Center)

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

XOC (Expert Operation Center)

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

net one report 2023

FTSE Blossom Japan Sector Relative Index

New

iSTOXX MUTB Japan
Platinum Career 150 IndexNew

JPX Prime 150 Index

MSCI Japan Empowering Women Index (WIN)New

Morningstar Japan ex-REIT Gender
Diversity Tilt Index (GenDi J)

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
and services, and our contributions to the promotion of our partner companies’ businesses.

IR Activities● Selected as a “AAA website” for listing under the All Markets Ranking of Nikko Investor Relations’ All Japanese Listed
Companies’ Website Ranking for fiscal 2022

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)

Business Segments

This term describes roles or duties that involve direct interaction with customers. To enrich our relationships withclients and expand our customer base, we must ensure organizational circumstances and work styles thatmaximize the skills and efficiency of sales and engineering staff.

JPX-Nikkei Index 400

Governance

Customer facing

Adoption in ESG indicesManagement Capital

Customer successA technical support process that involves working with customers to help them achieve optimum systemutilization. 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 withadvances in technology

Growth Strategy

Meanings

Value Creation

Terminology

Introduction

63

External Evaluation

In addition to our Corporate Governance Report, we also publish our
Corporate Governance Guidelines.

net one report 2023

64