Note: This document has been translated from a part of the Japanese original for reference purposes only. In the event of any
discrepancy between this translated document and the Japanese original, the original shall prevail.

Securities Code: 7038
March 8, 2023
To Our Shareholders:
Shoichiro Onishi, Representative Director
Masahiro Matsuoka, Representative Director
Frontier Management Inc.
3-2-1 Roppongi, Minato-ku, Tokyo, Japan

Notice of the 16th Annual General Meeting of Shareholders
You are cordially notified that the 16th Annual General Meeting of Shareholders of Frontier Management Inc. (the“Company”) will be held as stated below.
In convening the General Meeting of Shareholders, the Company has taken measures to provide electronically the
information that is the content of the Reference Documents for the General Meeting of Shareholders, etc. (thematters to be electronically provided) and posted such information on each of the websites shown below on theInternet. You are kindly requested to access one of the following websites to review the information.
The Company’s website:
https://www.frontier-mgmt.com/ (in Japanese only)(Please access the above website to select from the menu “IR,” and then “General Meeting of Shareholders”
to review the information.)
Website on which the materials for the General Meeting of Shareholders are posted:
https://d.sokai.jp/7038/teiji/ (in Japanese only)
Tokyo Stock Exchange’s website (TSE’s Company Announcements Service for listed companies):
https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show (in Japanese only)(Please access the above website and enter “FRONTIER MANAGEMENT” in “Security Name (Company
Name)” or the Company’s securities code “7038” in “Code” to search, select “Basic information” and then“Documents for public inspection/PR information,” and see the “Convocation notices/documents forshareholder meetings” column under “Documents for public inspection.)
If you are unable to attend the meeting, you can exercise your voting rights in writing or via the Internet.
After reviewing the Reference Documents for the General Meeting of Shareholders, please exercise yourvoting rights by indicating your approval or disapproval of each of the proposals on the voting form
provided together with this notice and return the voting form, or by accessing the designated website forexercising voting rights (https://evote.tr.mufg.jp/) and entering your vote for approval or disapproval.
Either way, please exercise your voting rights by no later than 6 p.m. on Thursday, March 23, 2023 (JST).

11. Date and Time:

Friday, March 24, 2023, at 10 a.m. (JST)(The reception desk opens at 9:30 a.m.)

2. Venue:

Belle Salle Roppongi Grand Conference Center,
Sumitomo Fudosan Roppongi Grand Tower, 9th floor
3-2-1 Roppongi, Minato-ku, Tokyo, Japan

3. Purpose of the Meeting
Matters to be reported:

1. Business Report and Consolidated Financial Statements for the 16th fiscal year
(from January 1, 2022 to December 31, 2022) and audit results of Consolidated
Financial Statements by Accounting Auditor and the Audit & Supervisory
Board
2. Non-consolidated Financial Statements for the 16th fiscal year (from January
1, 2022 to December 31, 2022)

Matters to be resolved:
Proposal No. 1

Dividends of Surplus

Proposal No. 2

Election of One Director

Proposal No. 3

Election of One Substitute Audit & Supervisory Board Member

・ When attending the meeting in person, please hand in the voting form as an attendance slip at the reception
desk at the meeting venue.
・ Please also bring with you this Notice of the Annual General Meeting of Shareholders as a reference at themeeting.
・ Only shareholders can enter the venue on the day of the event. In the case of proxy attendance, the proxymust also be a shareholder. In addition to the voting form to be exercised as a proxy and a written document
certifying the authority of proxy, please submit the voting form in the name of the proxy.
・ If you wish to make a diverse exercise of your voting rights (voting for and against the same proposal),please advise us three days prior to the Annual General Meeting of Shareholders, with your reasons therefor.
・ If any changes are made to the matters to be electronically provided, such change will be announced oneach of the websites shown above on the Internet, together with information before and after the changes.
・ In accordance with the amendment to the Companies Act, shareholders shall confirm the matters subject tomeasures for electronic provision by accessing any of the websites shown above on the Internet as a general
rule. The Company shall send paper-based documents only to shareholders who have requested the deliveryof paper-based documents by the reference date, but for this General Meeting of Shareholders, the Company
shall send paper-based documents stating the matters subject to measures for electronic provision to allshareholders regardless of whether or not delivery of paper-based documents has been requested.
Among matters for which measures for providing information in electronic format are to be taken, thefollowing matters are not included in the documents to be delivered in accordance with laws and regulations
and Article 15 of the Company’s Articles of Incorporation.
(i) “Notes to the Consolidated Financial Statements” of the Consolidated Financial Statements(ii) “Notes to the Non-consolidated Financial Statements” of the Non-consolidated Financial Statements
Consolidated financial statements and non-consolidated financial statements attached to such documents arepart of the documents audited by the Accounting Auditor when preparing the accounting audit report and thesame documents audited by the Audit and Supervisory Board in preparing the audit report.
<Notice Concerning COVID-19>
Currently there is a pandemic of the novel coronavirus disease (COVID-19).
Shareholders attending the General Meeting of Shareholders in person are requested to check the status of
infection on the date of the meeting and take note of their own health condition. Please take measures to protect
yourself from infection, such as wearing a face mask, when you attend.
In addition, there may be additional measures in place at the venue to prevent the spread of infection, and yourcooperation with such measures is requested.

2

Reference Documents for the General Meeting of Shareholders
Proposal No. 1

Dividends of Surplus

The Company maintains a basic policy of paying stable dividends on a continual basis, while securing sufficientinternal reserves to develop future business and enhance the management structure of the Company group (the“Group”).
In accordance with the above basic policy, the Company proposes to pay a year-end dividend for the fiscal year as
follows:(1) Type of dividend property

To be paid in cash.

(2) Allotment of dividend property andtheir aggregate amountThe Company proposes to pay a dividend of ¥28 per common shareof the Company.
In this event, the total dividends will be ¥320,954,396.

(3) Effective date of dividends ofsurplus

March 27, 2023

3

Proposal No. 2

Election of One Director

The Company proposes the election of one Director, increasing the number of Directors by one to enhance themanagement system. In addition, as provided for in the Company’s Articles of Incorporation, the term of office ofthe newly elected Director will be until the terms of office of the other currently serving Directors expire.
The candidate for Director is as follows:
When selecting the candidate for Director, the Board of Directors decided on the candidate in consideration ofvoluntary deliberations by the Nomination and Compensation Advisory Committee.
Masao Nishihara
New election

Date of birth
May 18, 1951
Number of the Company’s
shares owned0
Number of years in office0
Attendance at Board of
Directors meetings–

Career summary and position and responsibility in the Company
Apr. 1975

Joined the Ministry of FinanceJul. 2004

Director-General of the Inspection Bureau of the Financial Services
AgencyJul. 2007

Director-General of the Supervision Bureau of the Financial Services
AgencyJul. 2008

Secretary-General of the Executive Bureau of Securities and Exchange
Surveillance Commission

Aug. 2009

Senior Managing Director of Organization for Promoting Urban
Development

Jun. 2013

Vice Chairman and Senior Managing Director of Regional Banks
Association of Japan

Aug. 2022

Advisor of the Company (current position)

Significant concurrent positions outside the Company–
Reasons for nomination as candidate for Director
The Company has nominated Mr. Nishihara as a candidate for Director as he will likely manage
the organization appropriately and contribute to increasing its corporate value, based on his
abundant experience in fiscal and monetary policies and deep insight into the regional banking
industry gained through his career in key positions at the Financial Services Agency, theOrganization for Promoting Urban Development, and the Regional Bank Association of Japan.

Notes: 1. There is no special interest between Masao Nishihara and the Company.
2. The Company has entered into a directors and officers liability insurance policy as provided for in Article 430-3,
paragraph (1) of the Companies Act with an insurance company, thereby covering losses that may arise from a
Director, an insured person, assuming liability incurred in the course of the performance of duties or receiving claims
pertaining to the pursuit of such liability. Masao Nishihara will be included as an insured person in such policy.
In addition, when the policy is renewed, the Company plans to renew the policy with the same terms.

4Proposal No. 3

Election of One Substitute Audit & Supervisory Board Member

Pursuant to the provision of Article 329, paragraph 3 of the Companies Act, the Company proposes to elect one
Substitute Outside Audit & Supervisory Board Member in advance to prepare for a case where the number ofstatutory auditors comes to fall below that stipulated by law.
The substitute Audit & Supervisory Board Member shall assume office on condition that the number of Audit &Supervisory Board Members comes to fall below the required number. The term of office of such substitute Audit& Supervisory Board Member shall be the remaining term of their predecessor. Further, this resolution will bevalid until the commencement of the next annual general meeting of shareholders.
When selecting the candidate for Substitute Audit & Supervisory Board Member, the Board of Directors decided
on the candidate in consideration of voluntary deliberations by the Nomination and Compensation Advisory
Committee.
The candidate for Audit & Supervisory Board Member is as follows:
The consent of the Audit & Supervisory Board has been obtained for this proposal.
Hiroko Noda

Career summary and position in the Company
Apr. 1987

Joined Minato Audit Corporation (current KPMG AZSA LLC)

OutsideAug. 1987

Joined Prudential Securities Incorporated, Tokyo Branch

IndependentAug. 1992

Joined Banque Indosuez S.A., Tokyo Branch (current Credit Agricole
CIB)

Jun. 2000

Joined Canadian Imperial Bank of Commerce, Tokyo BranchJul. 2006

Joined BUSICOM Co., Ltd.

Date of birth
July 3, 1960
Number of the Company’s
shares owned0
Number of years in office0
Attendance at Board of
Directors meetings–
Attendance at Audit &Supervisory Board
meetings–

Sep. 2007

Representative Director of Prominent Consulting Co., Ltd.

May 2010

Representative Director of Probity Consulting Co., Ltd. (current position)

Apr. 2014

Part-time Lecturer at Graduate School of Asian and International Business
Strategy of Asia University (current position)

Mar. 2019

External Director of MODEC, Inc. (current position)

Mar. 2019

Outside Director (Audit and Supervisory Committee Member) of Okabe
Co., Ltd. (current position)

Mar. 2021

Substitute Audit & Supervisory Board Member of Pigeon Corporation(current position)

Jun. 2021

Outside Director of S.T. CORPORATION (current position)

Jun. 2022

Outside Director of CHORI CO., LTD. (current position)

Significant concurrent positions outside the Company
Representative Director of Probity Consulting Co., Ltd.
Part-time Lecturer at Graduate School of Asian and International Business Strategy of Asia
University
External Director of MODEC, Inc.
Outside Director (Audit and Supervisory Committee Member) of Okabe Co., Ltd.
Substitute Audit & Supervisory Board Member of Pigeon Corporation
Outside Director of S.T. CORPORATION
Outside Director of CHORI CO., LTD.
Reasons for nomination as candidate for Substitute Audit & Supervisory Board Member
The Company has nominated Ms. Noda as a candidate for substitute Audit & Supervisory Board
Member as it believes she will likely monitor its management and provide it with appropriate
advice as an Outside Audit & Supervisory Board Member by using her knowledge in businessadministration gained as a corporate executive and a certified public accountant.
As she meets the requirements for independent officers stipulated by the Tokyo Stock Exchange,
the Company has decided that there will be no conflict of interest with general shareholders if she
assumes office as Audit & Supervisory Board Member and plans to designate her as anindependent officer.

5Notes: 1. There is no special interest between Hiroko Noda and the Company.
2. Hiroko Noda is a candidate for Outside Audit & Supervisory Board Member as stipulated in Article 2, paragraph (3),item (viii) of the Ordinance for Enforcement of the Companies Act.
3. When Hiroko Noda assumes office as Audit & Supervisory Board Member, the Company plans to enter into a limited
liability agreement with Hiroko Noda to limit her liability for damages under Article 423, paragraph (1) of theCompanies Act, pursuant to the provisions of Article 427, paragraph (1) of the Companies Act. Pursuant to suchagreement, the defined maximum amount of liability for damages is the minimum liability amount provided for under
Article 425, paragraph (1) of the Companies Act.
4. The Company has entered into a directors and officers liability insurance policy as provided for in Article 430-3,
paragraph (1) of the Companies Act with an insurance company, thereby covering losses that may arise from an Audit& Supervisory Board Member, an insured person, assuming liability incurred in the course of the performance of duties
or receiving claims pertaining to the pursuit of such liability. If Hiroko Noda assumes office as Audit & Supervisory
Board Member, she will be included as an insured person in such policy.
In addition, when the policy is renewed, the Company plans to renew the policy with the same terms.
5. If Hiroko Noda assumes office as Audit & Supervisory Board Member, the Company plans to submit notification to
Tokyo Stock Exchange, Inc. concerning her designation as an independent officer as provided for by the
aforementioned exchange.

6

(Reference) Skill matrix for Directors and Audit & Supervisory Board Members (including candidates for
Directors and candidates for Substitute Audit & Supervisory Board Members) of theCompany
Name(Current position)

Attributes

Shoichiro Onishi

Corporate
management

Economy●(Representative Director)

Masahiro Matsuoka

●

●
●

●

●

●

●

●

●

OutsideIndependent

●

●

●

OutsideIndependent●

OutsideIndependent●

Masao Nishihara

Takeshi Umemoto(Audit & Supervisory
Board Member)

Kazuhiko Shimokobe(Audit & Supervisory
Board Member)

Nobumichi Hattori(Audit & Supervisory
Board Member)

OutsideIndependent●

OutsideIndependent

●
●

●

●

●

●

●

●

Environmentand society●●(Candidate for Director)(Director)●●(Director)

Keiko Unotoro●

Global●Tadaaki Komori(Director)

Corporate
Management Sales andloans andof legal risks marketinginvestments●(Representative Director)

Kazuhito Osugi

Finance andaccounting

●

●

●

●

Hiroko Noda

Outside(Candidate for Substitute
Audit & Supervisory Board Independent
Member)

●

●

7

●

(Attached documents)
Business Report(From January 1, 2022 to December 31, 2022)

I

Current Situation of the Group(1) Progress and results of operations
During the fiscal year under review (January 1, 2022 to December 31, 2022), the Japanese economy
experienced a gradual relaxation of behavioral restrictions associated with the spread of the novel coronavirus(COVID-19) and the normalization of social and economic activities, and also saw signs of an economic
recovery. Nonetheless, the economic outlook remains largely uncertain, as evidenced by the supply shortagesof natural resources due to the prolonged situation in Russia and Ukraine, soaring energy prices, and rising
prices associated with the depreciation of the yen.
In this management environment, the Group continued to focus on proposing and executing one-stop solutions
to issues faced by companies by providing comprehensive services that leverage management consulting,
M&A advisory, revitalization support, and other functions. In January, we welcomed Celebrain Corporation,
which engages in a personnel-related consulting business, to the Group, and expanded the solutions domain in
management consulting. In April, we established Frontier Capital Inc., which engages in an investment
business involving the dispatch of management personnel, and made preparations for the start of the business.
As a result of the above, the Group reported consolidated net sales of ¥7,915,655 thousand (up 37.9% from theprevious fiscal year), operating income of ¥908,131 thousand (up 81.2%), ordinary income of ¥921,511
thousand (up 79.1%), and net income attributable to owners of parent of ¥556,722 thousand (up 64.4%) for the
fiscal year under review.
Operating results by segment are as follows. Net sales include inter-segment sales.
Further, the business of the Group had been a single segment. However, we added the Investment Business tochange it to two segments from this fiscal year—the Consulting and Advisory Business and the Investment
Business—as we established Frontier Capital Inc. to commence an investment business involving the dispatchof management personnel. As a result, comparisons with the previous fiscal year and analyses have not been
performed, except with respect to net sales and operating income in the Consulting and Advisory Business aswell as net sales by business.
(Consulting and Advisory Business Segment)
For the fiscal year under review, in the Consulting and Advisory Business segment, the Management
Consulting Business and the M&A Advisory Business (the Financial Advisory Business was renamed to the
M&A Advisory Business from this fiscal year) performed well, with net sales of ¥7,912,655 thousand (up37.8% from the previous year) and operating income of ¥1,099,403 thousand (up 119.3%).
Results of operations by business are as follows.
Management Consulting Business
The business results of the Management Consulting Business for the fiscal year under review were ¥4,351,972
thousand (up 32.7% from the previous year) in net sales. In the fiscal year under review, sales increased
substantially compared with the previous fiscal year. In addition to the effect of increased personnel resulting
from aggressive recruitment, the expansion of the consulting-related services, including SR/IR services, DX
services, and human resources, contributed to such increase.

8

M&A Advisory BusinessIn the M&A Advisory Business, net sales for the fiscal year under review were ¥2,793,465 thousand (up61.9% from the previous year). In the fiscal year, sales increased substantially compared with the previous
fiscal year as a result of the successful completion of large- and medium-sized M&A deals.
Revitalization Support BusinessIn the Revitalization Support Business, net sales for the fiscal year under review were ¥601,236 thousand(down 9.2% from the previous year). In the fiscal year under review, the continued support provided byfinancial institutions in providing loans to companies continued to prevent the need for revitalization support
from expanding, and net sales decreased compared with the previous fiscal year.
Other Business
The business results of Other Business for the fiscal year under review were net sales of ¥165,982 thousand(up 124.9% from the previous year).
(Investment Business Segment)
In the Investment Business segment, net sales and operating loss for the fiscal year under review were ¥17,603
thousand and ¥191,272 thousand, respectively, due to personnel expenses and other expenses associated withthe launch of this business.
(2) Capital expenditure
The Group’s capital expenditure (tangible assets and intangible assets; excluding goodwill and customerrelated assets) for the fiscal year under review totaled ¥153,841 thousand, of which major items were
equipment installation at the head office and Osaka office, as well as furniture and fixtures, among others.
There was no selling or retirement of significant facilities during the fiscal year under review.
(3) Financing activities
During the fiscal year under review, the Group financed ¥500,000 thousand in short-term borrowings and¥860,000 thousand in long-term borrowings from a financial institution for business purposes.
(4) Transfer of business, absorption-type company split, and incorporation-type company split
Not applicable(5) Acquisition of business from other company
Not applicable(6) Succession of rights and obligations related to business of other entities through absorption-type merger orabsorption-type company split
Not applicable(7) Acquisition or disposal of other company’s shares, equities, or stock acquisition rights and the like
The Company acquired the shares of Celebrain Corporation on January 14, 2022 to make it a consolidated
subsidiary.
9In addition, the Company newly established Frontier Capital Inc. on April 1, 2022 to make it a consolidated
subsidiary.
(8) Issues to address
In order to expand our existing businesses and provide customers with optimal services for their challenges,
the Group is working to enhance the following measures and solutions.
(i) Proactive recruitment and accelerated development of professionals and creation of an environment inwhich employees can work easily
Personnel are the most important management resource for the Group, and we will continue proactive
recruitment to secure professionals able to meet diversifying project demand, and will expand the scale of
the Group.
In the Management Consulting Business, in order to promote differentiation from other companies, wewill keep accelerating recruitment and development of personnel who have rich industry insights and areaccomplished in specific business fields. Moreover, to cater for a growing number of deals related tomergers and acquisitions (M&As) and global transactions, we will actively recruit and develop highly
skilled experts.
Furthermore, the Group will invite analysts from each industry field to build a support system for a wide
range of industries, aiming to expand the key industrial coverage as well as to further develop new
business areas over the medium term.
We will build an environment in which diverse staff can thrive, and recruit such staff and enhance theirretention by promoting the Company’s Basic Sustainability Policy centered on human capital and key
issues (materiality) as well as diversity, equity, and inclusion (DE&I), while working to limit overtime
work, eliminate harassment, and train management executives.
(ii) Reinforcing consulting business related to investment and investment activities for small and medium-sizedenterprises (SMEs)
For SMEs, as the market shrinks, the development of new businesses has become a major issue, and there
are increasing needs for consulting support for this purpose. At the same time, as the demand for risk
capital to develop new businesses has been increasing, the Group provides support to client companies
through funds and self-investment, dispatches management, and offers consulting services, aiming toenhance the corporate value of the investee client company to ensure the invested capital andaccompanying success fee are collected.
Furthermore, we will continue to provide consulting services that assist investment projects done byregional financial institutions.
Japanese companies are also required to change their business models through working to: i) address
sustainability; ii) achieve increased productivity through digitalization; iii) vitalize regional economies
beset with low birth rates and an aging population and business succession issues; and iv) take postCOVID-19 measures. To resolve these key corporate issues and social challenges, we have started aninvestment business that can make medium- to long-term investments and involves the dispatch ofmanagement personnel, thereby growing by reforming the business models of investee companies andreshuffling industries.
(iii) Reinforcing consulting and M&A execution support for large companies
Large corporate clients of the Group have many needs for support for transforming their businessstructure. Against such background, the Group will also focus on a support system to provide services
from consulting on business portfolio review to M&A execution to post merger integration (PMI) on a
one-stop basis since the system is expected to expand further in the future.

10

(iv) Reinforcing M&A support for SMEs
There have been a growing number of business succession issues and business succession-type M&A
deals due to the aging of top managers of SMEs in Japan. The Group will grow its business succession
services with a focus on business succession-type M&A deals brought in through a financial corporation
network unique to the Company.
(v) Reinforcing consulting business through ESG and sustainability strategies and digital transformation (DX)strategies
As client companies’ needs for support for efforts to address ESG, sustainability, and DX have been
growing rapidly, the Group will continue to recruit expert professionals and widen the scope of its
consulting services.
(vi) Increasing visibility and brand power
In order to increase the trust of the Group’s potential clients, it is necessary for us to enhance its visibility
and brand power.
For that purpose, the Group will strive to operate its owned media Frontier Eyes Online as well as
Webinars sponsored by the Company.
(vii) Developing an organizational sales system
To maximize the sales of the Group, we will further enhance an organizational coverage system forcompanies that constituted a growth driver for us in recent years.

11(9) Assets and profit and loss(i)

Changes in the Group’s assets and profit and loss
The 13th Fiscal
Year (FY2019)

The 14th Fiscal
Year (FY2020)

The 15th Fiscal
Year (FY2021)

The 16th Fiscal
Year (the fiscal
year underreview)(FY2022)(Thousands of yen)

4,771,144

5,192,527

5,741,654

7,915,655

Ordinary income(Thousands of yen)

678,872

575,633

514,576

921,511Net income attributable toowners of parent(Thousands of yen)

429,382

420,515

338,707556,722

Net income per share

(Yen)

37.65

36.89

29.70

48.67

Net assets(Thousands of yen)

2,185,341

2,448,598

2,454,066

3,015,956

Total assets(Thousands of yen)

3,269,111

3,792,731

3,819,274

5,658,644

Category

Fiscal year

Net sales(ii) Changes in the Company’s assets and profit and loss
The 13th Fiscal
Year (FY2019)

The 14th Fiscal
Year (FY2020)

The 15th Fiscal
Year (FY2021)

The 16th Fiscal
Year (the fiscal
year underreview)(FY2022)(Thousands of yen)

4,762,968

5,188,593

5,732,196

7,546,117

Ordinary income(Thousands of yen)

660,550

556,817513,057

1,081,609

Net income(Thousands of yen)

417,231

413,157

345,454754,497

Net income per share

(Yen)

36.58

36.24

30.29

65.96

Net assets(Thousands of yen)

2,158,459

2,414,569

2,429,387

3,136,089

Total assets(Thousands of yen)

3,243,878

3,759,798

3,800,171

5,646,614

Category

Fiscal year

Net sales

Note:

The Company carried out a two-for-one common stock split on October 1, 2019, and a two-for-one common stock split
on January 1, 2021. Net income per share was calculated assuming that these stock splits were effected at the beginningof the 13th Fiscal Year (FY2019).

12

(10)

Significant subsidiaries
Paid-in capital(thousands of yen)Company name

Capital contribution rate(%)

Frontier Management(Shanghai) Inc.

120,000

100.00Celebrain Corporation

64,50060.36

Frontier Capital Inc.

500,000

100.00Notes: 1.
2.

(11)

Description of business
Management Consulting Business
M&A advisory business
Management Consulting Business
Other Business
Investment business that involves thedispatch of management personnel

The Company acquired the shares of Celebrain Corporation on January 14, 2022 to make the company a consolidated
subsidiary.
The Company newly established Frontier Capital Inc. on April 1, 2022 to make the company a consolidated subsidiary.

Principal businesses (as of December 31, 2022)

The Group consists of six companies: the Company (Frontier Management Inc.), three consolidated subsidiaries(Frontier Management (Shanghai) Inc., Celebrain Corporation, and Frontier Capital Inc.), and two affiliates
accounted for by the equity method (FCD Partners Inc. and Frontier Nanto Investment Godo Kaisha).
Under the management philosophy of “contributing to the interests of clients,” “contributing to the interests ofstakeholders,” and “contributing to society,” the Group provides management-support services, principally
including management consulting, M&A advisory services and revitalization support, and a financial support
service involving the dispatch of management personnel as its core business fields.
The Group provides these services alone or in combination, depending on the needs of its client companies. In
addition, as an independent consulting firm that does not have a capital relationship with any specific financial
institution, audit corporation, or other business corporation, the Group provides services from a neutral standpoint
without conflicts of interest.

Client companies

Revitalization
Support Business

M&A Advisory
Business

Management
Consulting
Business

Other Business

Other Business(Financial support)

Investment
Business

FCD No. 1 Investment
Business Limited Partnership
Frontier Nanto Investment
Limited Partnership
Frontier Management(Shanghai) Inc.
Investment
in capital
100%

Celebrain
Corporation
Investment
in capital
60%

Consulting and Advisory Business segment
Frontier Management Inc.

13

FCD Partners Inc.
Frontier Nanto Investment
Godo Kaisha
Investment
in capital
50% each

Frontier Capital Inc.
Investment
in capital
100%

Investment Business segment

The Group’s businesses consist of two segments: Consulting and Advisory Business and Investment Business.
An outline of each segment is as follows.
(i)

Consulting and Advisory Business segment
Net sales of the Consulting and Advisory Business segment are classified under (a) Management
Consulting Business, (b) M&A Advisory Business, (c) Revitalization Support Business, or (d) Other
Business.
An outline of each business is as follows.
a) Management Consulting BusinessFor client companies, the roster of consulting solutions that Frontier Management offers includes
proposal of management strategies (company-wide strategies, business strategies, function-specificstrategies (strategies related to marketing, operation, and other individual functions of a company)),
support for medium-term management plans from drafting to execution, permanent support for
management execution through dispatch of management teams and due diligence related to M&A(research and analysis of business activities, etc.).
One of the key features of the Group’s consulting business is that we provide various solutions designed
and developed by our experienced analysts to our client companies in a wide range of industries
according to the characteristics of each industry, including retail and distribution, transportation,
restaurants, service, information and communication, technology, manufacturing, trading companies,
and pharmaceuticals and healthcare.
In addition, opportunities to support management execution have diversified against the background of
the sophistication of management and the increase in business succession, and the Group is expanding
the service of providing permanent support for management execution through the dispatch ofmanagement teams.
The Group has begun to address ESG, sustainability, and digital transformation (DX) on the part ofclient companies.
Since its foundation, the Group has steadily built a corps of industry analysts and consultants withknowledge of a wide range of industries, as well as specialists deeply versed in their respective businessfields. By sharing the knowledge and expertise of these specialists, the Group deepens its Group-wideknowledge of the industries to which each client company belongs and expands the breadth of solutions
it can offer. In this way the Group constantly improves the quality of its services.
b) M&A Advisory BusinessFor client companies contemplating M&A or reorganization, the Group provides comprehensive advice
and assistance. Services in this area include formulation of M&A strategies, selection and approachingof target companies, a wide variety of due diligence (research and analysis), calculation of corporate
value, negotiation of contracts and terms and conditions, and handling of closing procedures(settlement, etc.).
In this business, the Group has been ranked highly in total number of M&A since 2011 in the advisor
ranking in Bloomberg’s Japan M&A market review, and rivals major financial institutions in record ofaccomplishments.
As Japanese enterprises develop their businesses globally, client needs for cross-border M&A services
are growing. To serve this demand, the Group actively recruits professionals with a wealth of results.
We are also strengthening our framework for executing cross-border M&A projects while expanding ouroverseas network. For example, the Group has established a subsidiary in China, opened Singapore and
New York branches, and joined CFI (Corporate Finance International) as a full member. CFI is an M&A
firm organization that operates in more than 20 countries, mainly in Europe, and Matsuoka,
Representative Director of the Company, became a Board Member of CFI in January 2021.
14c) Revitalization Support Business
The Group is pleased to offer total support in revitalization, from drafting of a business-revitalization
plan to implementation support, reconciliation of interests with financial institutions, participation in
management for the purpose of management innovation (turnaround) and support for various processes
associated with revitalization.
A key feature of the Group’s Revitalization Support Business is the hands-on management innovation
support (support for implementation of management innovation by permanently seconded staff). At theGroup, “hands-on management innovation support” means the dispatch of consultants accomplished inmanagement innovation (turnaround) to serve as members of the client company’s management team,providing direct support for the execution of revitalization plans and management innovation. The
Group commits fully and directly with the client company to draft the revitalization plan and implement
management innovation, seeing the project through to realization.
d) Other BusinessIn relation to the Revitalization Support Business and M&A Advisory Business, the Group offers
research services (legal, financial and tax due diligence) conducted by lawyers, certified public
accountants, tax accountants and other specialists in various systems and provides advice related torespective systems regarding business revitalization plans, M&A and reorganization in the execution
phase.
To provide education and training to the executives and employees of business companies and financial
institutions, the Group operates the Frontier Business School.
Through FCD Partners Inc. and Frontier Nanto Investment Godo Kaisha, affiliates of the Group, theGroup offers financial support (investment) via funds.
(ii) Investment Business segment
For customers who require funds for growth through business model reforms and industry consolidation,
we will not only make direct investment aimed at increasing corporate value over the medium to long term
but also dispatch management personnel.
(12)Major offices (as of December 31, 2022)

・The Company
Head office3-2-1 Roppongi, Minato-ku, Tokyo, Japan

Osaka Branch

3-3-13 Imabashi, Chuo-ku, Osaka City, Osaka, Japan

Nagoya Branch

2-45-14 Meieki, Nakamura-ku, Nagoya City, Aichi, Japan

Singapore Branch

Republic of Singapore

New York Branch

United States of America

・Subsidiaries
Frontier Management (Shanghai) Inc.

People’s Republic of China

Celebrain Corporation

3-4-4 Akasaka, Minato-ku, Tokyo

Frontier Capital Inc.

3-2-1 Roppongi, Minato-ku, Tokyo

15

(13)

Employees (as of December 31, 2022)(i)

Employees of the Group
Segment name

Number of employees

Change from the end of the previous
fiscal year

Consulting and Advisory Business

324

67 (increase)

Investment Business11

11 (increase)335

78 (increase)

Total
Notes: 1.
2.
3.

The number of employees represents the number of the Group’s full-time staff members (excluding seconded persons
from the Group to companies outside the Group) and does not include the number of part-time employees, contract
employees, temporary employees, etc.
The 67-person increase in the number of employees of the Consulting and Advisory Business from the end of theprevious fiscal year is due to aggressive recruitment and Celebrain Corporation’s becoming a consolidated subsidiary.
The 11-person increase in the number of employees of the Investment Business from the previous fiscal year is due tothe establishment of Frontier Capital Inc.

(ii) Employees of the Company
Number of employees

Change from the end of theprevious fiscal year
304

Note:

(14)

Average age

48 (increase)

Average years of service

37.8 years old

The number of employees represents the number of the Company’s full-time staff members (excluding seconded persons
from the Company to other companies) and does not include the number of part-time employees, contract employees,
temporary employees, etc.

Principal lenders (as of December 31, 2022)
LenderLoan amount (millions of yen)

Sumitomo Mitsui Banking Corporation(15)

3.0 years

774

Material information related to the current situation of the corporate group other than the above

Not applicable16

II Shares of the Company (as of December 31, 2022)(1) Total number of shares issuable:

45,648,000(2) Total number of shares issued:

11,462,657 (excluding 5,821 shares of treasury stock)(3) Number of shareholders:

3,743(4) Major shareholders (top 10)
Number of shares owned(shares)Name of shareholders

Shareholding ratio (%)

Shoichiro Onishi

2,169,974

18.93

Masahiro Matsuoka

2,169,974

18.93

The Master Trust Bank of Japan, Ltd. (Trust Account)875,300

7.64

Custody Bank of Japan, Ltd. (Trust Account)

805,600

7.03

SBI SECURITIES Co., Ltd.

622,715

5.43

Masaya Yajima

614,880

5.36

Tomohiro Murata

266,880

2.33

Takahiro Yamaguchi

160,000

1.40

Toshiyuki Mitsuzawa

146,000

1.27

Akinori Nishida
112,200
Note:
Shareholding ratio is calculated excluding the number of shares of treasury stock (5,821 shares).

0.98(5) Shares delivered to officers as consideration for the execution of duties during the fiscal year under review
Number of shares (shares)
Directors (excluding Outside Directors)

Number of persons towhom shares weredelivered (persons)

19,9983(6) Other material information related to the Company shares(i) Stock option(s)The total number of shares issued increased by 50,080 due to the exercise of stock options.
(ii) Shares subject to transfer restriction
At its Board of Directors’ meeting held on March 24, 2022, the Company resolved to dispose of treasury
stock, and disposed of 19,998 shares of treasury stock on April 15, 2022 in order to grant shares subject to atransfer restriction to three Directors (excluding Outside Directors).

17

III Stock Acquisition Rights, etc. of the Company(1) Stock acquisition rights held by the officers of the Company that were delivered as consideration for the
execution of duties
14th Stock Acquisition Rights
Resolution date of issuance

February 10, 2022

Number of stock acquisition rights

100

Type and number of shares underlying the stock acquisition rights

10,000 shares of common stock (100 shares per stockacquisition right)

Payment of money for the stock acquisition rights

Payment of money is not required in exchange for stockacquisition rights

Value of property to be contributed upon exercise of the stockacquisition rights¥100 per stock acquisition right (¥1 per share)

Exercise period

From February 11, 2023 to February 10, 2028

Conditions for exercise of the stock acquisition rights(Note)

Number of stock acquisition rights: 100
Number of shares underlying the stock acquisition
Stock acquisition rights Directors
rights: 10,000
held by officers(excluding Outside Directors)
Number of persons who hold the stock acquisitionrights: 1
Notes: Conditions for exercise of the stock acquisition rights are as follows.
1. The person to whom the stock acquisition rights have been allotted must be a Director, Audit & Supervisory Board
Member, Executive Officer, or employee of the Company or a subsidiary of the Company even when exercising therights. However, stock acquisition rights are allowed to be exercised if the person resigns due to reaching a specified
retirement age, Company reasons, or industrial illness, or if the person is transferred to a different company, or if
exercise is approved by its Board of Directors as having a legitimate reason.
2. Any person who has waived stock acquisition rights is not allowed to exercise them.
3. The stock acquisition rights held by one Director are those that were granted while serving as an employee.

(2) Stock acquisition rights delivered to employees, etc. as consideration for the execution of duties during the
fiscal year under review
13th Stock Acquisition Rights

14th Stock Acquisition Rights

Issuance resolution dateFebruary 10, 2022

February 10, 2022

Number of stock acquisition rights

631

100

Type and number of shares underlying
the stock acquisition rights

63,100 shares of common stock (100shares per stock acquisition right)

10,000 shares of common stock (100shares per stock acquisition right)

Payment of money for the stockacquisition rights

Payment of money is not required in
exchange for stock acquisition rights

Payment of money is not required in
exchange for stock acquisition rights

Value of property to be contributed
upon exercise of the stock acquisitionrights¥100 per stock acquisition right (¥1 pershare)¥100 per stock acquisition right (¥1 pershare)

Exercise period

From February 11, 2025 to February 10,
2028

From February 11, 2023 to February 10,
2028

Conditions for exercise of the stockacquisition rights(Note)(Note)

Number of stock acquisition rights: 631
Number of shares underlying the stockacquisition rights: 63,100
Number of persons who hold the stockacquisition rights: 182

Number of stock acquisition rights: 100
Number of shares underlying the stockacquisition rights: 10,000
Number of persons who hold the stockacquisition rights: 1

Delivery to employees,
etc.

Notes:

Employees of
the Company

Officers andemployees of –subsidiaries
Conditions for exercise of the stock acquisition rights are as follows.
1.

–

The person to whom the stock acquisition rights have been allotted must be a Director, Audit & Supervisory Board
Member, Executive Officer, or employee of the Company or a subsidiary of the Company even when exercising therights. However, stock acquisition rights are allowed to be exercised if the person resigns due to reaching a specified

18

retirement age, Company reasons, or industrial illness, or if the person is transferred to a different company, or if
exercise is approved by its Board of Directors as having a legitimate reason.
2. Any person who has waived stock acquisition rights is not allowed to exercise them.

(3) Other material information related to stock acquisition rights
Not applicable19

IV Company Officers(1) Directors and Audit & Supervisory Board Members
Name

Position and responsibility

Significant concurrent positions outside the Company

Representative
Director

Co-President and Executive
OfficerMember of the Nomination
and Compensation Advisory
Committee
Chairperson of the Risk
Management Committee

President, CEO and COO of Frontier Capital Inc.
Representative Director of FCD Partners Inc.
Outside Director of Tokyo Electric Power Company
Holdings, Incorporated

Representative
Director

Co-President and Executive
OfficerMember of the Nomination
and Compensation Advisory
Committee
Member of the Risk
Management Committee

Representative Director of Frontier Capital Inc.
Director of Celebrain Corporation
Chairman of Frontier Management (Shanghai) Inc.
Representative Director of FCD Partners Inc.
Representative Director and Chairman of ORENO
Corporation
Outside Director of RIZAP GROUP, Inc.

Tadaaki Komori

Director

Deputy President andExecutive Officer
Head of M&A Advisory
Business
General Manager ofMarketing Department

Kazuhito Osugi

Director

Chairperson of theNomination andCompensation Advisory
Committee

Independent Outside Director of the Board of Nissha
Co., Ltd.
Outside Director of The Gunma Bank, Ltd.

Member of the Nomination
and Compensation Advisory
Committee

Outside Director of SAN-AI OBBLI CO., LTD.
Outside Director (Audit and Supervisory Committee
Member) of OS Co., Ltd.
Outside Director of OHBA CO., LTD.
Commissioner of Public Security Examination
Commission
Advisor of OH-EBASHI LPC & PARTNERS
Part-time Lecturer of Graduate School of Economics
of Senshu University
Auditor of Tokyo Metropolitan Public University
Corporation

Member of the Nomination
and Compensation Advisory
Committee

Outside Auditor of Industrial Growth Platform, Inc.

Shoichiro Onishi

Masahiro Matsuoka

Keiko Unotoro

DirectorTakeshi Umemoto

Full-time Audit& Supervisory
Board Member

Kazuhiko Shimokobe

Audit &
Supervisory
Board Member

External Director of FAST RETAILING CO., LTD.
Outside Director of Hakuhodo DY Holdings Inc.
Audit &
Member of the Nomination
Nobumichi Hattori
Supervisory
and Compensation Advisory Visiting Professor of Graduate School of Businessand Finance of Waseda University
Board Member
Committee
Visiting Professor of Graduate School of Business
Administration of Keio University
Notes: 1. Kazuhito Osugi and Keiko Unotoro are Outside Directors as stipulated in Article 2, item (xv) of the Companies Act.
2. Takeshi Umemoto, Kazuhiko Shimokobe, and Nobumichi Hattori are Outside Audit & Supervisory Board Members as
stipulated in Article 2, item (xvi) of the Companies Act.
3. The Company has designated Mr. Osugi and Ms. Unotoro, who are Directors of the Company, and Mr. Umemoto, Mr.
Shimokobe and Mr. Hattori, who are Audit & Supervisory Board Members of the Company, as independent officers
based on the provisions of the Tokyo Stock Exchange, and has submitted notification to the exchange.
4. Takeshi Umemoto, full-time Audit & Supervisory Board Member, has been in charge of audits for many years andpossesses considerable knowledge in finance and accounting.
Nobumichi Hattori, Audit & Supervisory Board Member, possesses considerable knowledge in finance and accounting,having worked at a leading U.S. investment bank.

20

(2) Amount of compensation, etc. for Directors and Audit & Supervisory Board Members(i) Total amount of compensation, etc. paid during the fiscal year under review
Total amount of compensation, etc. by category(thousands of yen)

Category

Total amountMedium- tooflong-termSingle-fiscal-year performanceNumber ofcompensation,
performancebased compensation
target officers
etc.
based
Basic
(persons)(Thousands of compensationcompensationyen)
Stock-based
Stock-based
Cash bonuses compensation compensation
A
B

Directors

211,912

187,100––

24,812

6(Of whom, outside
officers)(15,600)(15,600)

(–)

(–)

(–)

(2)

29,40029,400–––3(29,400)(29,400)

(–)

(–)

(–)

(3)

241,312

216,500––

24,812

9

Audit &
Supervisory Board
Members(Of whom, outside
officers)
Total(Of whom, outside(45,000)(45,000)
(–)
(–)
(–)
(5)
officers)
Notes: 1. The total amount of compensation for Directors does not include salary paid as an employee to Directors
concurrently serving as an employee.
2. The above includes one Director who retired upon the conclusion of the annual general meeting ofshareholders held on March 24, 2022.

(ii) Matters relating to resolution of general meeting of shareholders for compensation, etc. for Directors
and Audit & Supervisory Board Members
The Annual General Meeting of Shareholders held on March 24, 2022 passed a resolution for setting
monetary compensation for the Company’s Directors (including its Outside Directors) at ¥400 million
or less per year (including ¥25 million or less per year for Outside Directors, excluding employee
salaries for Directors concurrently serving as employees). The number of Directors (including two
Outside Directors) at the conclusion of said General Meeting of Shareholders was five.
The Annual General Meeting of Shareholders held on March 25, 2021 passed a resolution for stockbased compensation for the Company’s Directors, excluding Outside Directors, separately from theaforementioned monetary compensation: (i) the total value and total number of shares of the Company’scommon stock to be issued or disposed of as stock-based compensation A linked to single-year
consolidated business performance shall be ¥100 million or less per year and 40,000 shares or less per
year, respectively; and (ii) the total value and total number of shares of the Company’s common stock to
be issued or disposed of as stock-based compensation B linked to an achievement rate against mediumterm business plan targets and the extent of improvement of its corporate value shall be ¥50 million orless per year and 20,000 shares or less per year, respectively. The number of Directors (excluding
Outside Directors) at the conclusion of said General Meeting of Shareholders was three.
The total amount of compensation for the Audit & Supervisory Board Members was decided by aresolution at the Extraordinary General Meeting of Shareholders held on August 14, 2018 to be ¥50
million or less per year. The number of Audit & Supervisory Board Members at the conclusion of said
General Meeting of Shareholders was three.

21

(iii)

Policy for determining the details of compensation for officers

A) How to decide the policy for determining the details of compensation for individual Directors
The policy for determining the details of compensation for the Company’s individual Directors was
resolved by the Board of Directors meeting held on February 9, 2021 in light of voluntary
deliberations and reports by the Nomination and Compensation Advisory Committee.
The Board of Directors judged the compensation for individual Directors for the fiscal year underreview to be consistent with the policy since the Board checked that: i) the determined details of thecompensation and the method for determining them were consistent with the determination policy
resolved by the Board; and ii) the details were determined by the Board of Directors within a rangeof total compensation amount resolved beforehand by a general meeting of shareholders in light ofvoluntary deliberations by the Nomination and Compensation Advisory Committee and its
recommendation.
B) Description of the policy for determining the details of compensation for individual Directors
・ Basic policy
To provide compensation that enables the Company to appoint as Directors the finest persons
who practice the corporate mission and contribute to the achievement of short-term performancetargets, achievement of medium- to long-term performance targets, and continuous
enhancement of corporate value.
At the Company, we will create a compensation system that is highly transparent, fair, andreasonable to ensure accountability to our stakeholders.
・ Compensation composition
Compensation for Directors (excluding Outside Directors) is comprised of basic compensation,
which is fixed compensation, and single-fiscal-year performance-based compensation andmedium- to long-term performance-based compensation, which vary depending on
performance, while balancing the elements listed in the above basic policy.
Compensation for Outside Directors is comprised of only basic compensation, from theperspective of their role and independence.
The compensation composition ratio of each performance-based compensation to basic
compensation for Directors (excluding Outside Directors) will be determined in accordancewith the category of the officers.
・ Basic compensation
Basic compensation, which is fixed compensation, will be paid monthly to Directors.
The amount of basic compensation for Directors (excluding Outside Directors) will be
determined by taking into account the work duties they are in charge of, scope of responsibility,
years of service, degree of contribution to short-term and medium- to long-term performance,
degree of contribution to enhancement of corporate value, and the like, as well as taking into
consideration the level of other companies in the same industry. The amount of basic
compensation for Outside Directors will be determined by taking into consideration the work
responsibilities and the level of other companies.
・ Single-fiscal-year performance-based compensation
Single-fiscal-year performance-based compensation (cash bonuses and stock-based
compensation A) is linked to consolidated results for a single fiscal year and the amount ofcompensation is determined based on the Company’s performance results and the like for asingle year, and the determined amount of compensation will be paid to Directors (excluding
Outside Directors; “Eligible Directors”) in the form of cash bonuses and restricted stock (stockbased compensation A) after the results of each fiscal year are fixed.
The maximum amount of single-fiscal-year performance-based compensation (total amount tobe paid to all Eligible Directors) is the smaller of one-third of an amount in excess of targeted
operating income, or a total amount of 18-month basic compensation for the Representative
Directors and nine-month basic compensation for Eligible Directors (excluding Representative
Directors).
The amount of single-fiscal-year performance-based compensation to be paid to Eligible
Directors is determined in light of: i) the degree of contribution to performance in relation to an22amount in excess of targeted operating income; and ii) the maximum amount of compensation
for the Eligible Directors, and the like.
The composition ratio of single-fiscal-year performance-based compensation for each Eligible
Director is composed of a cash bonus, representing two-thirds of such compensation, and stockbased compensation A, representing one-third of such compensation.
We chose the performance indicator because operating income, representing income fromprincipal business activities, is an evaluation metric that reflects results very directly.
This performance indicator could potentially be changed in the future by a resolution of theBoard of Directors.
Shown below are the target for the indicator for single-fiscal-year performance-based
compensation and the actual amount for the fiscal year under review.
TargetConsolidated operating income

Actual amount¥800 million¥908 million

・ Medium- to long-term performance-based compensation
Medium- to long-term performance-based compensation (stock-based compensation B) is
linked to the degree of achievement of the management target for the medium-term
management plan, the degree of enhancement of corporate value, and the like, and restricted
stock (stock-based compensation B) will be delivered to the Eligible Directors at the beginningof each fiscal year based on the compensation base amount in accordance with their position.
In principle, after the end of the period falling under the medium-term management plan, thenumber of shares with respect to which the transfer restriction is lifted will be determined,
regarding such shares granted during such period, in accordance with the degree of achievementof the management target for the medium-term management plan, the degree of enhancement ofcorporate value, and the like.
The performance indicators for the medium-term management plan from 2021 to 2023 include
the level of achievement of consolidated net sales, consolidated operating margin, consolidated
ROE and ESG/SDGs.
We chose these performance indicators because we thought it appropriate to consider themexhaustively in order to reflect the Company’s performance in Directors’ compensation in a
multi-faceted manner while attaching importance to growth potential and profitability in light ofthe purpose of the performance-based compensation scheme, namely to further contribute toraising our corporate value in the medium to long term. This was after linking this type ofcompensation to business targets specified in the medium-term management plan as it is linked
to performance for the plan.
If a new medium-term management plan is formulated in the future, the performance indicators
serving as the basis for computing this type of compensation could potentially be changed by aresolution of the Board of Directors.
Shown below are the targets for the indicators for medium- to long-term performance-based
compensation. After the term of the medium-term management plan, we will conduct
performance evaluations.
TargetConsolidated net sales
Consolidated operating margin
Consolidated ROE
ESG/SDGs

Evaluation ratio¥8,700 million

30%

20%

30%

At least 20%

30%

Items shown in the medium-term
management plan

10%・ Compensation governanceCompensation for Directors (basic compensation, single-fiscal-year performance-based
compensation and medium- to long-term performance-based compensation) will be determined23

by a resolution of the Board of Directors in light of voluntary deliberations and reports by the
Nomination and Compensation Advisory Committee.
Clawback provisions are set out to the effect that if a certain event such as material accounting
fraud, a huge amount of loss, or the like occurs, all or part of stock-based compensation A andstock-based compensation B that has already been paid will be returned without any
consideration in accordance with each officer’s liability.
(3) Outside Directors and Outside Audit & Supervisory Board Members(i) Significant concurrent positions outside the Company as a business executor of other corporations, etc.
and relevant relationship between the Company and the other corporations, etc.
Not applicable(ii) Significant concurrent positions outside the Company as an outside officer of other corporations, etc.
and relevant relationship between the Company and the other corporations, etc.
Kazuhito Osugi, Director concurrently serves as Independent Outside Director of the Board of Nissha
Co., Ltd. and Outside Director of The Gunma Bank, Ltd., but there is no special relationship between
the Company and these companies.
Keiko Unotoro, Director concurrently serves in the following posts: Outside Director of SAN-AI
OBBLI CO., LTD., Outside Director (Audit and Supervisory Committee Member) of OS Co., Ltd.,
Outside Director of OHBA CO., LTD., Commissioner of Public Security Examination Commission,
Advisor of OH-EBASHI LPC & PARTNERS, Part-time Lecturer of Graduate School of Economics ofSenshu University, and Auditor of Tokyo Metropolitan Public University Corporation. However, there
is no special relationship between the Company and these organizations.
Kazuhiko Shimokobe, Audit & Supervisory Board Member concurrently serves as Outside Auditor ofIndustrial Growth Platform, Inc., but there is no special relationship between the Company and thecorporation.
Nobumichi Hattori, Audit & Supervisory Board Member, concurrently serves as External Director of
FAST RETAILING CO., LTD., Outside Director of Hakuhodo DY Holdings Inc., Visiting Professor of
Graduate School of Business and Finance of Waseda University, and Visiting Professor of Graduate
School of Business Administration of Keio University, but there is no special relationship between the
Company and these organizations.

24

(iii) Main activities in the fiscal year under review
Category

Director

Director

Name

Kazuhito Osugi

Keiko Unotoro

Full-time Audit
Takeshi& Supervisory
UmemotoBoard Member

Audit &
Supervisory
Board Member

Audit &
Supervisory
Board Member

Kazuhiko
Shimokobe

Nobumichi
Hattori

Attendance atBoard ofDirectors
meetings

Attendance at
Audit &
Supervisory
Board meetings

Outline of main activities and duties executed inrelation to roles expected–

Kazuhito Osugi has been continuing to give diverse
statements actively at Board of Directors meetings,
provide advice on the management of the Company
and each department, and oversee its businessexecution appropriately from an objective andspecialized perspective by tapping into the in-depth
knowledge in economy, finance, and business
revitalization that he accumulated through serving in
key posts at the Bank of Japan and Industrial
Revitalization Corporation of Japan. In his capacity
as Chairperson of the Nomination and Compensation
Advisory Committee, he led deliberations on thepolicy for election of officers and determination of
the details of Directors’ compensation.

–

Keiko Unotoro has been continuing to make diverse
statements actively at Board of Directors meetings,
provide advice on the management of the Company
and each department, and oversee its businessexecution appropriately from an objective andspecialized perspective by tapping into the in-depth
knowledge in economic laws, competition policies,and corporate compliance that she accumulated
through serving in key posts at the Fair Trade
Commission. Further, she led deliberations on thedesired direction of the Company and its Board of
Directors in risk management and sustainability.

14/14

Takeshi Umemoto has been conducting audits froman impartial and objective perspective by using his
experience in audit operations to lead the Audit &Supervisory Board and giving necessary statements
as appropriate from primarily a financial andaccounting perspective at Board of Directors
meetings and Audit & Supervisory Board meetings.
In addition, he has been providing advice andsuggestions in the deliberations to ensure thereasonableness and appropriateness of businessexecution.

14/14

Kazuhiko Shimokobe has been conducting audits
from an impartial and objective perspective by using
his experience of engaging in many corporate
revitalization projects as an attorney to makenecessary statements as appropriate at Board of
Directors meetings and Audit & Supervisory Board
meetings. In addition, he has been providing advice
and suggestions in the deliberations to ensure thereasonableness and appropriateness of businessexecution.

14/14

Nobumichi Hattori has been conducting audits froman impartial and objective perspective by using his
experience at a leading U.S. investment bank as wellas his knowledge in business administration as auniversity professor to make necessary statements asappropriate at Board of Directors meetings andAudit & Supervisory Board meetings. In addition, he
has been providing advice and suggestions in the
deliberations to ensure the reasonableness andappropriateness of business execution.

15/15

15/15

15/15

15/15

15/15

Note: Excluding the number of Board of Directors meetings for written resolution.

25

(iv) Summary of details of limited liability agreement
Pursuant to the provisions of Article 427, paragraph (1) of the Companies Act, the Company hasentered into limited liability agreements with Outside Directors and Outside Audit & Supervisory
Board Members to limit their liability for damages under Article 423, paragraph (1) of the Companies
Act.
Pursuant to such agreements, the defined maximum amount of liability for damages is the minimum
liability amount provided for under Article 425, paragraph (1) of the Companies Act with regard toboth Outside Directors and Outside Audit & Supervisory Board Members.
(v) Outline of directors and officers liability insurance policy
The Company has entered into a directors and officers liability insurance policy as provided for in
Article 430-3, paragraph (1) of the Companies Act with an insurance company, thereby covering losses
that may arise from a Director or an Audit & Supervisory Board Member, an insured person, assuming
liability incurred in the course of the performance of duties or receiving claims pertaining to the
pursuit of such liability. All of Directors and Audit & Supervisory Board Members will be included as
the insured of the said insurance policy, and the Company bears insurance premiums for all the insured
persons in full.

26

V Accounting Auditor(1) Name

KPMG AZSA LLC(2) Compensation, etc.
Amounts paid
Compensation, etc. paid to Accounting Auditor during the fiscal year under review¥28,608 thousand

Total amount of monetary and other property benefits to be paid by the Company¥33,608 thousand
and its subsidiaries to Accounting Auditor
Notes: 1. The Audit & Supervisory Board verified as to whether the Accounting Auditor’s audit plan, audit status and the basis forcalculating the estimated compensation were appropriate, and then decided to agree on the amount.
2. In addition to the above, additional compensation of ¥5,964 thousand was paid for audits of the previous fiscal year.

(3) Description of non-auditing services
Not applicable(4) Policy for decisions on dismissal and non-reappointment of Accounting Auditor
If the Audit & Supervisory Board judges it necessary, including where there is an obstacle to the executionof duties by the Accounting Auditor, the Audit & Supervisory Board will decide the content of the
proposal regarding the dismissal or non-reappointment of the Accounting Auditor to be submitted to theGeneral Meeting of Shareholders.
In addition, if the Accounting Auditor is deemed to fall under any of the items of Article 340, paragraph(1) of the Companies Act, the Audit & Supervisory Board will dismiss the Accounting Auditor based on
the unanimous consent of the Audit & Supervisory Board Members. In this case, the Audit & Supervisory
Board Member selected by the Audit & Supervisory Board will report the dismissal of the Accounting
Auditor and the reason for the dismissal at the first General Meeting of Shareholders convened after thedismissal of the Accounting Auditor.
(5) Summary of details of limited liability agreement
Not applicable27

VI Overview of the System to Ensure Appropriateness of Business Operations
An overview of the decisions made regarding the systems to ensure that Directors perform their duties incompliance with relevant laws and regulations and the Articles of Incorporation, and other systems to ensure
appropriateness of business operations of the Company is as follows.
(1) System to ensure that the execution of duties by Directors and employees conforms to laws and regulations
and the Articles of Incorporation(i)

Recognizing that thorough compliance is indispensable for ensuring the survival and sustainable growthof an enterprise, the Company shall strive to make all Directors and all the employees aware ofcompliance, and provide compliance training to them.

(ii) The Audit & Supervisory Board Members shall conduct audits and the Internal Audit Office shall conduct
internal audits to confirm that the execution of duties by Directors and employees is properly performed
without violating laws and regulations, the Articles of Incorporation, and the internal rules.
(iii) Establish a reporting system for violating laws and regulations by stipulating the compliance rules and theinternal reporting rules so that the Company can promptly recognize and deal with such acts.
(2) System for storing and managing information related to the execution of duties by Directors(i)Documents (including electromagnetic documents) related to the execution of duties by Directors shall be
stored and managed in accordance with laws and regulations, the Articles of Incorporation, thedocumentation management rules, and other relevant rules.

(ii) These documents (including electromagnetic documents) shall be available per request from Directors
and Audit & Supervisory Board Members.
(3) Frameworks for managing the risks of loss including the relevant internal regulations(i)

The Representative Director shall be the Chief Risk Management Officer, and the Company shallestablish the risk management rules and frameworks for risk management across the organizations.

(ii) Establish the crisis management rules and the reporting and command structure in an emergency so that
the Company can identify emergencies promptly and minimize losses.
(4) System to ensure that Directors perform their duties efficiently(i)

In principle, the Board of Directors holds a regular meeting once a month and an extraordinary meetingas necessary to make decisions on important matters in accordance with the rules of the Board of
Directors and supervises the execution of duties by Directors.

(ii) Matters to be submitted to a Board of Directors meeting shall be subject to discussion at a voluntary
meeting of the Nomination and Compensation Advisory Committee and by the Management Committeeor the Executive Committee.
(5) System to ensure appropriateness of business operations in the corporate group comprising the Company
and its subsidiaries(i)

Establish subsidiary management rules to ensure the appropriateness of the business conducted by the
corporate group comprising the Company and its subsidiaries, and manage the subsidiaries in accordancewith the rules.

(ii) Communicate with the Directors of the subsidiaries on a daily basis to discuss management of thecorporate group, and confirm that the subsidiaries are properly operated in accordance with theCompany’s management policies.

28

(6) Matters concerning employees who assist in the duties of Audit & Supervisory Board Members when such
Audit & Supervisory Board Members request the assignment of such employees
If Audit & Supervisory Board Members request the assignment of employees who are to assist in Audit &Supervisory Board Members’ duties, Directors and Audit & Supervisory Board Members shall discuss anddecide the assignment.
(7) Matters related to independence of employees of the preceding item from Directors
If putting in place employees set forth in the preceding item, such employees shall not belong to thebusiness operation and follow the instructions of the Audit & Supervisory Board Members. The opinions of
the Audit & Supervisory Board shall be respected regarding the transfer of such employees, personnel
assessments, and disciplinary actions.
(8) Matters on securing the effectiveness of instruction to employees set forth in item 6 for Audit &Supervisory Board Members
If putting in place employees set forth in item 6, the Full-time Audit & Supervisory Board Member should
check the status of duty execution by such employees by having a meeting with them periodically.
(9) System for reporting by Directors and employees to Audit & Supervisory Board Members and othersystems involving reporting to Audit & Supervisory Board Members(i)

Directors and employees shall make a business report upon request from the Audit & Supervisory Board
Members.

(ii) Full-time Audit & Supervisory Board Members attend the Board of Directors meetings and other important
meetings, and receive reports on important matters from Directors and employees.
(10) The system to ensure that a person who has submitted a report as described in the preceding item is nottreated disadvantageously on account of having reported it
As the internal reporting rules provide that a person who has done whistleblowing shall not be treateddisadvantageously on account of having done so, operations will be run in conformity to the rules.
(11) Matters on the policy to process expenses and liabilities that are incurred due to execution of duties by
Audit & Supervisory Board Members(i)

The Audit & Supervisory Board secures a budget required for executing an audit plan it approves.

(ii) If being requested by an Audit & Supervisory Board Member to pay an expense for execution of his/herduties, the Company pays it swiftly unless deeming it evidently unnecessary for the execution.
(iii) Control and payment of expenses for execution of duties by Audit & Supervisory Board Members are doneby Audit & Supervisory Board Members and employees who assist in their duties.
(12) Other systems for ensuring effective auditing by the Audit & Supervisory Board Members(i)

The Audit & Supervisory Board shall establish the Audit & Supervisory Board rules and auditing
standards for corporate audits, prepare an audit plan, explain its contents at the Board of Directors
meetings, and obtain understanding and cooperation regarding the implementation of audits.

(ii) Audit & Supervisory Board Members shall exchange opinions with Representative Directors throughregular meetings.

29

(iii) Audit & Supervisory Board Members shall witness internal audits conducted by internal auditors,
exchange opinions with internal auditors and coordinate closely with related departments to ensure theeffectiveness of audits.
(13) System to ensure appropriateness of financial reports
Directors and employees shall ensure the appropriateness of financial reports through business execution
in compliance with the “Basic policy for the maintenance, operation and evaluation of internal controls
related to financial reporting.”(14) Basic thinking on exclusion of antisocial forces and development status
The Company will confront any antisocial forces sternly and blocks any relationship with them. In
addition, in order to block relationships with antisocial forces, the Company shall establish the compliancerules and other internal rules.

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VII Overview of the Operational Status of the System to Ensure Appropriateness of Business
Operations

An overview of the operational status of the systems to ensure that Directors perform their duties incompliance with relevant laws and regulations and the Articles of Incorporation, and other systems to ensure
appropriateness of business operations of the Company is as follows.
(1) The operational status of the system to ensure that the execution of duties by Directors and employees
conforms to laws and regulations and the Articles of Incorporation(i) To ensure thorough compliance, compliance training was provided to the Company’s officers andemployees. The Company has also created an environment in which the officers and employees can viewthe internal rules at any time. Furthermore, when the internal rules were changed during the fiscal year
under review, the Company sent a notice to all officers and employees to inform them.
(ii) The Audit & Supervisory Board Members conducted audits and the Internal Audit Office conductedinternal audits to confirm that the execution of duties by Directors and employees is properly performed
without violating laws and regulations, the Articles of Incorporation, and the internal rules.
(iii) The Company has set up the compliance rules and operates a whistleblower contact based on the internalreporting rules.
(2) The operational status of the system for storing and managing information related to the execution of duties
by Directors
Documents (including electromagnetic documents) related to the execution of duties by Directors are stored
and managed in accordance with laws and regulations, the Articles of Incorporation, the documentation
management rules, and other relevant rules.
(3) The operational status of the frameworks for managing the risks of loss including the relevant internal
regulations
Financial risks are appropriately managed based on the risk management rules and the crisis management
rules. During the fiscal year under review, the Risk Management Committee met three times to formulate
the basic policy and an annual plan for risk management, identify risks, and implement and provide
guidance on measures and policies for risks.
(4) The operational status of the system to ensure that Directors perform their duties efficiently
During the fiscal year under review, 15 meetings of the Board of Directors were held to make decisions onimportant matters in accordance with the rules of the Board of Directors and supervise the execution ofduties by Directors.
(5) The operational status of the system to ensure appropriateness of business operations in the Group,comprising the Company and its subsidiaries(i) The subsidiaries were managed in accordance with the subsidiary management rules to ensure theappropriateness of the business conducted by the Group, comprising the Company and its subsidiaries.
Training to ensure thorough compliance was provided to the officers and employees of the subsidiaries.
(ii) The Company communicated with the Directors of the subsidiaries on a daily basis and requested
reporting as needed to discuss management of the Group, and confirmed that the subsidiaries are properly
operated in accordance with the Company’s management policies.
(6) Operation status for matters concerning employees who assist in the duties of Audit & Supervisory Board
Members when such Audit & Supervisory Board Members request the assignment of such employees
The Company does not have a full-time employee to assist in the duties of Audit & Supervisory Board
Members. However, two employees concurrently assist in the administrative work of the Audit &Supervisory Board.
31

(7) Operation status for matters related to independence of employees of the preceding item from Directors
When carrying out the administrative work of the Audit & Supervisory Board, these employees follow the
instructions and orders of the Audit & Supervisory Board Members and do not belong to the command
system for business execution.
(8) Operation status for matters on securing the effectiveness of instruction to employees set forth in item 6 for
Audit & Supervisory Board Members
Full-time Audit & Supervisory Board Members check the status of duty execution by such employees by
having a meeting with them periodically.
(9) The operational status of the system for reporting by Directors and employees to Audit & Supervisory
Board Members and other systems involving reporting to Audit & Supervisory Board Members
Full-time Audit & Supervisory Board Members attended the Board of Directors meetings and otherimportant meetings, and received reports on important matters from officers and employees.
(10) Operation status for the system to ensure that a person who has submitted a report as described in thepreceding item is not treated disadvantageously on account of having reported it
No person who has submitted a report to an Audit & Supervisory Board Member has been treateddisadvantageously.
(11) Operational status for matters relating to the policy to process expenses and liabilities that are incurred due
to execution of duties by Audit & Supervisory Board Members(i) If being requested by an Audit & Supervisory Board Member to pay an expense for execution of his/herduties, the Company pays it swiftly.
(ii) Control and payment of expenses for execution of duties by Audit & Supervisory Board Members aredone by Audit & Supervisory Board Members and employees who assist in their duties.
(12) The operational status of other systems for ensuring effective auditing by the Audit & Supervisory Board
Members(i) The Audit & Supervisory Board prepared an audit plan, and Audit & Supervisory Board Members
explained the contents at the Board of Directors meetings.
(ii) The Audit & Supervisory Board Members held two regular meetings during the year with Representative
Directors and exchanged opinions.
(iii) The Audit & Supervisory Board Members held two regular meetings during the year with Outside
Directors and exchanged opinions.
(iv) Audit & Supervisory Board Members exchanged opinions with internal auditors on a regular basis.
(13) The operational status of the system to ensure appropriateness of financial reports
Directors and employees executed business in compliance with the “Basic policy for the maintenance,
operation and evaluation of internal controls related to financial reporting.”(14) Basic thinking on exclusion of antisocial forces and operation status
In order to avoid contact with antisocial forces, antisocial force checks were carried out prior tocommencement of transactions, and in order to block relationships with antisocial forces, provisions for
exclusion of antisocial forces are included in contracts.

32

VIII Basic Policy Regarding Control of the Company
Not applicable

Note: The amounts stated in this Business Report are rounded down to the unit used for presentation.

33

Consolidated Balance Sheet(As of December 31, 2022)(Thousands of yen)
AssetsItem
Current assets
Cash and deposits
Notes and accounts receivable, and contract
assetsLiabilities
AmountItem

Amount4,276,116

Current liabilities

1,868,624

3,199,089

Accounts payable

71,030Current portion of long-term borrowings

138,388912,827

Operational investment securities

23,833

Accounts payable-other

128,860

Other

164,580

Income taxes payable

288,143

Allowance for doubtful accounts(24,214)

Provision for bonuses

764,486

Fixed assets

Provision for officers’ bonuses

1,375,149

5,050

Tangible assets

313,716

Provision for shareholder benefit program

13,924

Buildings

282,593

Other

458,742

Tools, furniture, and fixtures

31,122Long-term liabilities

774,063

Intangible assets

294,454

Long-term borrowings

Software10,471

Asset retirement obligations

Goodwill

265,130

Customer-related assets

18,750

Other

Total liabilities

639,313
134,750
2,642,688
Net assets

102

Shareholders’ equity

2,918,939

766,978

Paid-in Capital

210,062

Investment securities

3,591

Capital surplus

577,503

Stocks of subsidiaries and affiliates

51,707Retained earnings

2,139,619

Investments in capital of subsidiaries andassociates

2,485

Treasury stock

Investments and other assets

Lease deposits

361,403

Deferred tax assets

346,194

Other accumulated comprehensive income
Foreign currency translation adjustment(8,246)
8,352
8,352

Other

1,595

Stock acquisition right

34,673

Deferred assets

7,379

Non-controlling interests

53,990Organization expenses

7,379

Total assets
Note:5,658,644

Total net assets

3,015,956

Total liabilities and net assets

5,658,644

The amounts stated in the Balance Sheet are rounded down to the nearest thousand yen.

34

Consolidated Statement of Income(from January 1, 2022 to December 31, 2022)(Thousands of yen)
Item

AmountNet sales

7,915,655

Cost of sales

3,230,126

Gross profit

4,685,528

Selling, general and administrative expenses

3,777,396

Operating income

908,131

Non-operating income
Interest income

158

Equity in earnings of affiliates

8,059

Insurance dividend income

1,802Administrative fees received

1,502

Foreign exchange gains

9,158

Other

375

21,057

Non-operating expenses
Interest expense

7,429

Other

247

Ordinary income

7,676
921,511Extraordinary loss
Loss on valuation of investment securities

53,505

Income before income taxes

868,006

Income taxes

366,689

Income taxes-deferred(65,019)

Net income

301,670
566,336

Net income attributable to non-controlling interests

9,614

Net income attributable to owners of parent
Note:

53,505556,722

The amounts stated in the Statement of Income are rounded down to the nearest thousand yen.

35

Consolidated Statement of Shareholders’ Equity(from January 1, 2022 to December 31, 2022)(Thousands of yen)
Other accumulatedcomprehensive income

Shareholders’ equity

Balance as of January 1, 2022

Paid-in
CapitalCapitalsurplusRetainedearnings

178,723558,745

1,696,822

26,80626,806

Treasurystock(36,575)

ForeignTotal
currency
shareholders’translation
equityadjustment
2,397,717

9,380

Stock
NonTotal other acquisition controlling Total net
assetsaccumulated
rightinterests
comprehensive income
9,380

46,969– 2,454,066

Change during the fiscal year
under review
Issuance of new shares(exercise of subscription
rights to shares)

53,61353,613

Dividends(113,925)(113,925)(113,925)

Net income attributable toowners of parent

556,722556,722556,722

24,812

24,812

Restricted share awards

4,532(8,048)28,329Net changes of items otherthan shareholders’ equity(net)(1,027)(1,027)(12,295)

53,99040,666561,889

Total changes during the year
under review

31,33818,758442,796

28,329521,222(1,027)(1,027)(12,295)

53,990

Balance as of December 31,
2022

210,062

577,5032,139,619(8,246)2,918,939

8,352

8,352

34,67353,990 3,015,956

Note:

The amounts stated in the Statement of Shareholders’ Equity are rounded down to the nearest thousand yen.

36

Non-consolidated Balance Sheet(As of December 31, 2022)(Thousands of yen)
AssetsItem
Current assets
Cash and deposits
Notes and accounts receivable, andcontract assets

Liabilities
AmountItem

Amount3,214,359

Current liabilities

1,745,513

2,187,359

Accounts payable

71,215Current portion of long-term borrowings

136,000

857,016

Operational investment securities

23,833

Accounts payable-other

115,650

Prepaid expenses

120,335

Accrued expenses

139,316

Advances paid

41,232Contract liabilities

14,220

Other

8,423

Deposits received

59,848

Allowance for doubtful accounts
Fixed assets(23,839)2,432,254

Income taxes payable

274,196

Accrued consumption taxes

174,031

Tangible assets

306,493

Provision for bonuses

745,174

Buildings

275,435

Provision for shareholder benefit program

13,924Tools, furniture, and fixtures

31,057

Other

1,934

Intangible assets

10,346

Software

10,244

Other

102

Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates

Long-term liabilities

2,115,415

765,010Long-term borrowings

638,000

Asset retirement obligations

127,010

Total liabilities

3,294

2,510,524
Net assets

1,380,613

Shareholders’ equity

3,101,416

Investments in capital of subsidiaries andassociates

2,500

Paid-in Capital

210,062

Long-term loans receivable fromsubsidiaries and associates

30,000Capital surplus

577,503

Long-term accounts receivable - other

20,601

Capital reserve

210,062

Lease deposits

333,584

Other capital surplus

367,441

Deferred tax assets

347,568

Retained earnings

2,322,095

Allowance for doubtful accounts(2,747)

Other retained earnings

2,322,095

Retained earnings brought forward

2,322,095

Total assets
Note:5,646,614

Treasury stock(8,246)

Stock acquisition right

34,673

Total net assets

3,136,089

Total liabilities and net assets

5,646,614

The amounts stated in the Balance Sheet are rounded down to the nearest thousand yen.

37

Non-consolidated Statement of Income(from January 1, 2022 to December 31, 2022)(Thousands of yen)
Item

AmountNet sales

7,546,117

Cost of sales

3,014,856

Gross profit

4,531,261

Selling, general and administrative expenses

3,452,408

Operating income

1,078,852

Non-operating income
Interest income

169

Insurance dividend income

1,802Administrative fees received

3,115

Foreign exchange gains

4,840

Other

182

10,110

7,353

7,353

Non-operating expenses
Interest expense
Ordinary income

1,081,609

Extraordinary income
Gain on reversal of allowance for doubtful accounts for subsidiaries
and associates

12,43812,43853,50553,505Extraordinary loss
Loss on valuation of investment securities
Income before income taxes

1,040,542

Income taxes

356,257

Income taxes-deferred(70,212)Net income
Note:286,045754,497

The amounts stated in the Statement of Income are rounded down to the nearest thousand yen.

38

Non-consolidated Statement of Shareholders’ Equity(from January 1, 2022 to December 31, 2022)(Thousands of yen)
Shareholders’ equity
Capital surplus

Paid-in
CapitalBalance as of January 1, 2022

Retained earnings

Capitalreserve

Other
capitalsurplusTotal
capitalsurplus178,723

178,723

380,022558,745

26,80626,806

Otherretainedearnings
Retainedearnings
brought
forward1,681,523

Stock
Total share- acquisition
holders’
rightequityTotal
retainedearnings

Treasurystock

1,681,523(36,575) 2,382,418

46,969Total net
assets2,429,387

Change during the year
Issuance of new shares(exercise of subscription rights
to shares)

26,806

53,61353,613

Dividends(113,925)(113,925)(113,925)(113,925)

Net income

754,497

754,497

754,497

754,497

24,812

24,812

Restricted share awards

4,532

4,532

(12,580)(8,048)28,329Net changes of items other thanshareholders’ equity (net)Total changes during the year

31,33831,338(12,580)

18,758640,571

640,571

Balance as of December 31,
2022

210,062

210,062

367,441

577,5032,322,095

2,322,095

Note:(12,295)(12,295)

718,997(12,295)

706,702(8,246) 3,101,416

34,673

3,136,089

28,329The amounts stated in the Statement of Shareholders’ Equity are rounded down to the nearest thousand yen.

39

Audit & Supervisory Board’s Audit Report
Audit Report
The Audit & Supervisory Board, upon deliberation, prepared this audit report regarding the executionof duties of the Directors during the 16th Fiscal Year from January 1, 2022 to December 31, 2022,
based on the audit reports prepared by each Audit & Supervisory Board Member and hereby reports asfollows:
Auditing Method Employed by Audit & Supervisory Board Members and the Audit & Supervisory
Board and Details Thereof(1) The Audit & Supervisory Board, having established an auditing policy and audit plan including
division of duties, received from each Audit & Supervisory Board Member reports on the executionof audits and results thereof, and in addition, received from the Directors and Accounting Auditor
reports on the execution of their duties and sought explanations as necessary.
(2) In compliance with the auditing standards for corporate audits established by the Audit &Supervisory Board, and in accordance with the auditing policy and division of duties, each Audit &Supervisory Board Member has communicated with the Directors, employees of the Internal Audit
Department and other relevant personnel, collected information, improved the audit environment,
and conducted audits using the following methods, while making use of media such as the phone
and the Internet.
(i) We attended the Board of Directors meetings and other important meetings, received reports
from the Directors, employees, and other relevant personnel regarding the execution of theirduties, sought explanations as necessary, inspected important internal approval documents, andexamined the operations and assets of the Company at the Head Office. We also communicatedand exchanged information with the Directors and Audit & Supervisory Board Members of thesubsidiaries, and received business reports from the subsidiaries as necessary.
(ii) We regularly received reports from the Directors and personnel in the internal audit division andother relevant departments, sought their explanations as necessary, and expressed our opinionswith respect to the development and operation status of systems that are necessary to ensure thatthe execution of duties by the Directors stated in the Business Report complies with laws andregulations and with the Company’s Articles of Incorporation; and other systems (internal
control system), which have been developed in compliance with resolutions from the Board of
Directors prescribed by Article 100, paragraphs (1) and (3) of the Ordinance for Enforcement of
the Companies Act of Japan as systems necessary to ensure the properness of business
operations of a corporate group comprising a stock company and its subsidiaries.
(iii) We also monitored and examined whether the Accounting Auditor maintains its independence
and implement appropriate audits, received reports from the Accounting Auditor on theexecution of their duties, and sought explanations as necessary. We also received notificationfrom the Accounting Auditor that the “System for ensuring that duties are performed properly”(as enumerated in each Item of Article 131 of the Regulation on Corporate Accounting) havebeen established in accordance with the Quality Control Standards for Audits (BusinessAccounting Council, October 28, 2005) and other relevant standards and sought explanations asnecessary.
1.

Based on the foregoing method, we reviewed the Business Report for the fiscal year under review, its
supplementary data, and Non-consolidated Financial Statements (Non-consolidated Balance Sheets,
Non-consolidated Statements of Income, Non-consolidated Statements of Shareholders’ Equity, andnotes to the Non-consolidated Financial Statements), as well as its supplementary data andConsolidated Financial Statements (Consolidated Balance Sheets, Consolidated Statements of Income,Consolidated Statements of Shareholders’ Equity, and notes to the Consolidated Financial Statements).

40

2. Audit results(1) Audit results on the Business Report, etc.
(i) In our opinion, the Business Report and supplementary data fairly represent the Company’s

condition in conformity with the applicable laws and regulations as well as the Articles ofIncorporation of the Company.
(ii) We have found no evidence of misconduct or material facts in violation of the applicable laws
and regulations or the Articles of Incorporation of the Company in the course of the execution ofduties of the Directors.
(iii) In our opinion, the content of the resolutions of the Board of Directors regarding the internal
control systems is appropriate. Furthermore, we have found no matters to be pointed out inregard to the contents of the Business Report and the execution of duties by the Directors
regarding the internal control systems.
(2) Audit results of the Non-consolidated Financial Statements and Supplementary Data

In our opinion, the method and results of the audit employed and rendered by KPMG AZSA LLC,
the Accounting Auditor, are fair and reasonable.
(3) Audit results of the Consolidated Financial Statements

In our opinion, the method and results of the audit employed and rendered by KPMG AZSA LLC,
the Accounting Auditor, are fair and reasonable.
February 17, 2023
Audit & Supervisory Board
Frontier Management Inc.
Full-time Audit & Supervisory Board Member Takeshi Umemoto
Audit & Supervisory Board Member
Kazuhiko Shimokobe
Audit & Supervisory Board Member
Nobumichi Hattori
Note: Mr. Umemoto, Audit & Supervisory Board Member, Mr. Shimokobe, Audit & Supervisory
Board Member, and Mr. Hattori, Audit & Supervisory Board Member, are Outside Audit &Supervisory Board Members as stipulated in Article 2, item (xvi) and Article 335, paragraph(3) of the Companies Act.

41