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

(Summary)

Annual Securities Report
The English translation of part of the “Yukashoken-Houkokusho”
for the 54th fiscal year (from January 1, 2023 to December 31, 2023)

Funai Soken Holdings Inc.

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ContentsPage
The 54th Fiscal Year Annual Securities Report
Cover ................................................................................................................................................................................................ 1
1. Overview of Business ................................................................................................................................................... 3
2. Management Policy, Management Environment and Challenges to Address................................................................ 5
3. Approach to Sustainability and Sustainability Initiatives .............................................................................................. 7
4. Business Risks .............................................................................................................................................................11
5. Management’s Analysis of Financial Position, Operating Results and Cash Flows.................................................... 15
6. Corporate Governance ................................................................................................................................................ 21―2―

1. Overview of Business
The Group consists of Funai Soken Holdings and eight consolidated subsidiaries and a second-tier subsidiary. Our core business ismanagement consulting, and we also offer logistics and digital solutions services relating to those operations.
Funai Soken Holdings is a specified Listed Company, etc. stipulated in paragraph (2), Article 49 of the Cabinet Office Ordinance on
Restrictions on Securities Transactions, etc. This requires judgment on the criteria for regarding a material fact concerning insider dealing
regulations to be made based on consolidated data.
The positioning of each company in the Group’s business and its relationship with the segments are as follows.
(1) Consulting
The Group is fully equipped to offer a comprehensive range of consulting services, and we focus mainly on management consulting.
In addition to core management consulting solutions, we also provide industry-specific and solution-specific workshops and seminars.
Major affiliated companies: Funai Consulting Inc., Funai Consulting Shanghai Inc., Funai Soken IT Solutions Inc.,
Proseed Corporation and Seichou Senryaku Inc.
(2) Logistics
Our logistics services cover two main areas: consulting, designed to help clients improve results and reduce their logistics costs; andBPO services, in which we design, build, and operate clients’ logistics frameworks.
Major affiliated company:

Funai Soken Logistics Inc.

(3) Digital Solutions
We provide Sales Process Transformation (SPX) services such as online advertising management services, cloud solution services suchas cloud development and operation, IT consulting services to transform back-office operations through both business improvement
and the promotion of digitization, and HR solution services centered on the provision of Recruiting Cloud (AI recruiting cloud services).
Major affiliated companies: Funai Soken Digital Inc. and HR Force Inc.

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The figure below shows the Group’s operating structure.

―4―2. Management Policy, Management Environment and Challenges to Address
The forward-looking statements below are based on judgments of the Group as of the end of the consolidated fiscal year under review.
(1) Basic management policy of the Company
In 2023, a new Group Purpose was adopted. The Group defines companies that can achieve sustainable growth as those that can thriveand grow amid tumultuous change and uncertainty, and the Group Purpose reflects our determination to produce many companies likethis and to also become such a company ourselves.
(i) Group Purpose
Sustainable Growth for More Companies
We lead the way to a better future and a more productive society in which more companies can achieve growth in any conditions
and people can reach their full potential(2) Objective Indicators for Judging Status of Achievement of Management Goals
To realize the Group Purpose described above, we aim to be a group that achieves consistent growth, and under our Mid-Range
Business Plan 2023-2025, we aim to manage our business with an awareness of capital efficiency, targeting ROE (return on equity) of
25% by 2025.
(3) Business environment and the Company’s medium- to long-term management strategies
Under the new plan, our basic policy is to establish ourselves as the foremost providers of “digital and comprehensive consulting
solutions for mid-scale and SME clients,” with “aggressive investment in HR” as the driver of our growth and “ingraining the Group
Purpose” identified as priorities.
Each of the strategies below are strategies under the Mid-Range Business Plan 2023-2025.
(i) Business strategy in the consulting businessDirect contact with a large pool of proprietors gives us a unique strength: the ability to approach immediately with upstream services.
In this way, we can maintain high profitability while expanding our business so as to provide a full spectrum of solutions for SMEs
and mid-scale companies seamlessly. We will also push forward with further expansion of upstream consulting and expansion into
the mid-scale company business domain.
(ii) Business strategy in the logistics businessWe aim to build Japan’s most extensive logistics foundation around consulting, community, networks, and databases, enhancing
operations in existing domains to cement our position as a comprehensive provider of logistics solutions.
(iii) Business strategy in the digital solutions businessWe will continue investing management resources in the expansion of our digital solution services, contributing to expansion into
DX consulting and management consulting for mid-scale companies in line with our basic policy.
(iv) Human resources strategy
We will use the core values shared throughout the whole group as a solid base for an environment that allows a diverse workforce toharness its individual strengths and start a cycle of hiring, professional development, and empowerment to generate sustained growth.
(v) Basic policy for capital policy- Basic policies
The Company recognizes that developing and executing an appropriate capital policy is extremely important to enhance shareholder
value over the medium to long term. Our basic policy is to strive to improve shareholder returns in conjunction with the formationof an optimal level of shareholders’ equity, while at the same time aiming to increase profits through aggressive business investment
and improving capital efficiency.

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- Efficiency policy
By 2025, we aim to achieve a return on equity (ROE) of 25% or more.
- Shareholder returns policy
The Company aims to achieve a dividend payout ratio of at least 55% and a total return ratio of at least 60%.
(4) Priority business and financial issues to be addressed
Under the Mid-Range Business Plan 2023-2025, which began in the 54th fiscal year, the Group has set “digital and comprehensive
consulting solutions for mid-scale and SME clients” as its basic policy, and will work on the following issues to become a company
that can continue to grow sustainably.
(i) Strengthening group management and expanding business domains
The Group aims to be the “foremost provider of digital and comprehensive consulting solutions for mid-scale and SME clients.” In
addition, we have adopted “Sustainable Growth for More Companies” as a Group Purpose, and support our clients in increasing thesustainability of their operations while maintaining growth and profitability. More specifically, while expanding existing industryspecific growth support marketing consulting services and HR development support management consulting services for SMEs, weare also accelerating DX consulting in areas such as marketing automation, SFA, and AI utilization, as well as support for valueenhancement including M&A and IPO. To this end, we will further strengthen cooperation among Group companies going forward.
Through these efforts, we aim to achieve Group net sales of 33 billion yen and operating income of 8.9 billion yen in fiscal 2025.
(ii) Strengthening recruitment and training of excellent human resources and improving retention rate
We will increase the number of employees at an average annual growth rate of approximately 10%, focusing on “consultant humanresources” which are directly linked to sales. In consultant human resources, we will continue to control turnover, which has become
an issue under remote work, and expand profitability by increasing the number of consultants in the upstream process. Morespecifically, we will actively recruit career professionals in the high-growth DX and M&A domains, and aim to improve productivity
by strengthening the recruitment and training of PM human resources capable of dealing with mid-scale companies. Business humanresources, including engineers, will be actively assigned to system development, focusing on no-code and low-code, and thedevelopment and sale of DX solutions for industries to improve utilization and productivity.
(iii) Improving capital efficiency and proactively returning profits to shareholders
We aim to achieve sustainable growth by actively using the cash flow generated from operating activities to invest in growth andreturn profits to shareholders. Regarding investment for growth, looking ahead to 2030, we aim to achieve strong sustainable growththrough proactive investment on the themes “human resources,” “digital” and “office.” As for capital efficiency, we had targeted
ROE of 20% in 2025, but since we achieved this target in 2023, two years ahead of schedule, we have revised our ROE target for2025 upward to 25% or more. Our shareholder return policy is to continue to implement shareholder return measures to achieve a
dividend payout ratio of at least 55% and a total return ratio of at least 60% through continuous dividend increases and share buybacks.
(iv) Implementing sustainability management initiatives
We have defined companies that can achieve sustainable growth as those that can thrive and grow amid tumultuous change anduncertainty, and we have established “Sustainable Growth for More Companies” as our new group purpose, reflecting ourdetermination to produce many such companies and to also become such a company ourselves. In addition, for the Group’s own
sustainable growth, we have determined three high-materiality issues, namely: 1) We contribute to our communities throughconsulting services for SMEs and mid-scale businesses; 2) We offer support and solutions to help clients implement ESG
management of client companies; and 3) ESG and proactive information disclosure are at the core of our group company management.
Based on these high-materiality issues, we are working to create new business opportunities in response to climate change, accelerate
human resource development to further enhance human capital, and create a comfortable work environment. In addition, we willseek to develop an environment that enables us to respond to current trends through regular discussions at the Sustainability
Committee, which is chaired by an outside director.

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(v) Strengthening internal controls and corporate governanceWe recognize that further improvement of corporate governance is indispensable for sustainable growth and enhancement ofcorporate value over the medium to long term, and we consider robust implementation of the Corporate Governance Code and theestablishment of internal control functions to be extremely important issues. We will strengthen our business foundations by ensuring
effective corporate governance within the Group and improving the appropriateness and efficiency of management.

3. Approach to Sustainability and Sustainability Initiatives
The Group’s approach to sustainability and sustainability initiatives are as follows.
Forward-looking statements in this document are based on judgments of the Group’s management as of the end of the consolidated fiscal
year under review.
ESG and sustainability matters have always been common topics of discussion by the Board of Directors. In 2021, though, we establisheda Sustainability Committee as an advisory committee to the board to ensure sustainability becomes firmly established as a coremanagement tenet across the whole Funai Soken Consulting Group. The Sustainability Committee has four members and is chaired byan outside director. It typically meets three times a year to set sustainability targets, monitor progress, and evaluate outcomes, and prepare
reports and recommendations for the Board of Directors. In addition, a Sustainability Office has been created within the Funai Soken
Holdings organization. The office has established four groups to oversee action across the whole Funai Soken Consulting Group in four
specific areas: the environment (climate change), human capital (our people), information security, and business. The Sustainability
Office meets monthly to monitor action progress across the whole Funai Soken Consulting Group and discuss future initiatives.
In addition, the Funai Soken Consulting Group has initiatives in place to tackle issues of keen interest to stakeholders and the community
at large, and lists those it considers as being highly material on its website. These are subject to review as the landscape inside and outside
the group evolves.
(Funai Soken Consulting Group’s high-materiality sustainability issues)
https://hd.funaisoken.co.jp/sustainability/materiality/(1) Climate change(i) Governance
The Company, led by the Sustainability Office and a director in charge of sustainability affairs, also collaborates with Funai
Consulting’s Carbon Neutrality Consulting Unit to assess and manage risks and opportunities relating to climate change, to study
the group’s basic environmental policy and targets for GHG emissions, etc., and to implement measures, manage their progress andhandle information disclosure. The Sustainability Office reports those studies and progress information to the Sustainability
Committee, an advisory body to the Board of Directors, for further discussion. The outcomes of these discussions are reported to theboard as appropriate for monitoring.
(ii) Strategy
The Group’s Basic Policy on the Environment states that we will strive to make a real reduction in environmental impact, not only
within our business activities, but also by using our consulting and other services as a means for working together with clients toaddress climate change, prevent environmental pollution, and promote recycling. To that end, we endeavor to be aware of the impactof risks and opportunities pertaining to climate change, and will carry out the strategies necessary to making sustainability the norm
throughout society.

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- Risks
Category
MarketTransition
risks

RatingMain response measures

Increased awareness of
As concern about climate change becomes widespread, mid-scale companies
climate change andand SMEs are increasingly shifting toward decarbonization and environmentallydecarbonization throughout conscious management, and we seek to support them on that journey withsociety and among clients consulting services relating to decarbonization and other climate action.

Loss of business due todrop in reputation among
Reputation
stakeholders and lack of
accountability

Physical
risks

Acute

Stakeholders are increasingly demanding action on climate change, andreluctance to engage brings the risk of damage to brand and public reputation.
Also, the particular urgency of climate concern among younger demographics
may cause underperforming companies to struggle to attract workers.

Physical damage to group premises or transport networks would likely impact
Increased risk of economic
our ability to provide in-person consulting services and we must also ensure thestagnation due to more
safety of group employees. A safety confirmation system is in place to ensure
severe natural disasters andsafety. Damage to premises also brings the risk of loss of data (e.g., client datawind and flood damage
and personal information), so we are working with the Information Security
Risk of data loss, etc. due
Section and the Risk Management Committee to strengthen systems andto damage to offices
infrastructures.

- Opportunities
Category

Opportunities

Main response measures
Growing interest in sustainability among society, markets, and our clients is expected toboost demand for consulting services. We will offer more climate change conscious,
environmentally friendly options among our industry-specific consulting services.

Initiatives at each group company- Funai Consulting, Inc. provides ZEB/ZEH building business solutions in theresidential and real estate sectors, as well as TCFD compliance, CDP response, SBT
certification, decarbonization roadmap development, and carbon neutrality support
Products Offer
solutions via its Carbon Neutrality Support Group.
Opportunities
andenvironmentally- In addition, to promote carbon neutral management, Funai Consulting holds
services conscious services
members-only workshops to promote carbon neutrality in management for managers
and sustainability managers of SMEs and mid-scale businesses.
Funai Soken Logistics Inc. has developed logistics ESG consulting services and is
working to reduce the environmental impact caused by logistics activities. Funai Soken
Logistics provides a “radar chart evaluation” of a company’s level of commitment froman ESG perspective. Based on the results of the diagnosis, logistics consultants analyze
progress and issues, discuss strategies, and provide implementation support for the
introduction of ESG logistics.
These risks and opportunities are reported to the Risk Management Committee and the Sustainability Committee described below,
for consideration and implementation of appropriate countermeasures.
(iii) Risk management
The Sustainability Office is responsible for analyzing climate change risks and reporting these to the Sustainability Committee. If
the Sustainability Committee determines that an environmental risk requires action, it alerts the Risk Management Committee andreports to the Board of Directors. The board, having considered the connection with other risks, then decides on action to be taken.
(iv) Metrics and targets
The Group’s Mid-Range Business Plan 2023-2025 stipulates a sustainability goal of reducing greenhouse gas emissions by 50%
compared with 2019 levels. In June 2021, the group switched its energy supply contract, and now Tokyo Headquarters is poweredby electricity derived from renewable energy sources. By 2030, the Group aims to achieve a 100% renewable energy procurement
rate at all its Japanese sites, thereby reducing greenhouse gas emissions to virtually zero and achieving Scope 2 under the GHG
Protocol.

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Actual GHG emissions by Scope (FY2023)
Emissions (t-CO₂)
Scope 1

Reduction target
2025 target: Reduce greenhouse gas emissions by 50% compared with 2019 levels* Per scope 1 and 2

2.9

Scope 2* market standard 376.4

2030 target: Achieve a 100% renewable energy procurement rate at all its Japanesesites, thereby reducing Scope 2 greenhouse gas emissions to virtually zero

<Emission rate approach in Scope 2 calculation>
Calculation of emissions by the market-based method is based on an adjusted CO2 emission factor specific to each site’s retailelectricity supplier; however, an adjusted CO2 emission factor could not be confirmed through State Grid Shanghai Electric Power
Company and so a unified grid emission factor for China (0.5703 tCO2/MWh in 2022) was used as an alternative at sites in Shanghai.
(2) Human capital(i) Governance
Governance relating to human capital is monitored and discussed by the Sustainability Committee. The relevant in-house
departments pursue hiring, training, and retention policies in accordance with the Funai Soken Consulting Group Basic Policy on
Human Resources and the Mid-Range Business Plan 2023-2025. The progress of the various group companies’ initiatives is shared
at Group HR meetings and Executive Committee meetings, and reported to the Board of Directors as necessary.
(ii) Strategy
Strategies relating to human capital are applied in accordance with the Funai Soken Consulting Group Basic Policy on Human
Resources through implementation of initiatives set forth in the HR strategy section of the Mid-Range Business Plan 2023-2025.
- Policy 1: Funai Soken Consulting Group Basic Policy on Human Resources
In keeping with the fundamental principles set forth in the Funai Soken Consulting Group Basic Policy on Human Resources, werecognize the importance of people as the very means by which we create value as part of the global effort toward sustainability. To
that end, attracting and retaining talented people is a top priority in our quest to deliver real value to the world.
Themes Included in the Basic Policy on Human Resources
1. Diversity & Inclusion

2. Creating Opportunities for Growth

3. Better Employee Engagement

4. Healthy Management

5. Transparency Regarding Human Resource Initiatives

6. CompliancePart of our quest for workforce development is creating opportunities for growth, and we are committed to maintaining an extensive,robust training regime to arm our workforce with the skills to drive the innovation the times demand. We will expand training
programs and further invest in education, including accelerated development of young employees and the acquisition of digital skills
for better productivity.
Regarding the creation and maintenance of better working environments, we believe that diversity and inclusion—not the least ofwhich is empowering women to forge meaningful careers and providing employment opportunities for people with disabilities—isthe bedrock on which inclusivity, value creation, and improved productivity are founded. We will continue to endeavor to maintainrewarding, diverse, inclusive workplaces.
- Policy 2: Funai Soken Consulting Group Basic Policy on Human Rights
At the Funai Soken Consulting Group, respect for human rights is not just an obligation but a fundamental precept of our consulting
and other business operations. To that end, we have established the Funai Soken Consulting Group Basic Policy on Human Rights
to ensure that people’s basic rights are protected and respected in all areas of the group’s activities.
We prohibit discrimination based on race, ethnic origin, nationality, religion, place of birth, gender, marital status, age, language,
physical disability, health status, job type, form of employment, etc. and we shall not engage in harassment of any kind. We reject
and will not tolerate human trafficking and other forms of slave labor, forced labor, or child labor. Moreover, we respect basic laborrights including the right to collective bargaining. In terms of human rights, we will strive to deepen understanding by providing in-―9―house education and training opportunities.
- Human resources strategy
At the Funai Soken Consulting Group, we believe that a diverse workforce is key to sustained growth. To this end, aggressive
investment in HR and ingraining the Group Purpose have been established as priorities under our Mid-Range Business Plan 20232025, and we will endeavor to further enhance our human capital.
Key Initiatives in HR Strategy
Hiring: Ramp up hiring: 1,800 headcount by end of 2025
● Restrengthen hiring of recent graduates for consulting positions● Strengthen mid-career hiring in new and specialist fields● Hire people from more diverse backgrounds for management roles
Training & Career Development: Training & career development for consultants and business staff● Expand training programs to accelerate development of new and younger employees● Improve productivity through acquisition of digital skills by consultants● Expand investment in professional development to boost staff skills and develop the pool of management candidates
Retention: Improve employee value proposition (EVP) to boost retention of talent● Boost retention through sustained improvements in compensation● Boost communication by relocating Tokyo office and consolidating into a single floor● Increase employee engagement by sharing the Group Purpose(iii) Risk management
To ensure consideration and respect for human rights in an age when people and working styles are diversifying, we have establisheda framework of due diligence to ensure we comply with the UN’s Guiding Principles on Business and Human Rights. If an event
arises that may constitute the occurrence of a human rights risk, the Risk Management Committee is alerted, and measures are
discussed and implemented.
- Identifying and Eliminating Potential Human Rights Risks
Our employees are not just our most valuable form of capital, they are true stakeholders in the Group’s business. Due diligence
includes identifying and assessing areas with potential for adverse impact, and we conduct thorough studies to seek out potential
risks to the human rights of our stakeholders.
TargetPotential human rights risks

Impact on businessGroup employees
Physical and mental effects of overwork, discrimination, and harassment.
Infringements on freedom of association and collective bargaining rights, and privacy
Delayed response insufficient access to remedy (e.g., whistleblower system)
Decline in engagement
Higher staff turnover rate
Negative impact on recruitment

Prevention

Human capital investment
Appropriate personnel evaluation and compensation systems
Use of the whistleblowing system
Follow-ups by specialist department dedicated to eliminating such risks
Ongoing education through e-learning courses, etc.

RemedyNotify Risk Management Committee, ascertain facts of the matterOnce the facts are established, take corrective action
Raise awareness to prevent recurrence, and more

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(iv) Metrics and targets
In keeping with our belief that our people are the true drivers of our growth, our Mid-Range Business Plan 2023-2025 stipulates threetargets: a total workforce of 1,800 (including 1,150 consultants); at least 25% of management positions groupwide held by women;
and sustaining a majority of outside directors on the board. The Group has a 25% ratio of female managers and a continuing majorityof outside directors.
In 2023, women held 34.6% of management positions at Funai Soken Holdings, and 22.6% across the whole Funai Soken Consulting
Group.

4. Business Risks
Major risks that are related to what is stated primarily in the business overview and financial status chapters of the securities report,
which management thinks could significantly affect the financial position, operating results and cash flows of the consolidated companies
are as follows.
Forward-looking statements in this document are based on judgments of the Group’s management as of the end of the consolidated fiscal
year under review.
(1) Risk management system of the GroupThe Company has established a Risk Management Committee as a company-wide organization to manage crises including
management of the risk of loss. The Risk Management Committee recognizes of the importance of identifying, evaluating, andmanaging risks that have a significant impact on corporate management and business continuity, and appropriately manages the risks
surrounding the group and seeks to prevent risks from arising, for instance by identifying risks that require a priority response andimplementing specific measures to deal with them. It consists mainly of directors, executive officers and employees who manage major
departments. It collects information from both inside and outside the company, conducts risk analysis from various perspectives anddeliberates on and implements measures in response to risks.
(2) Reliance on consulting business
The consulting business is the Group’s core business and accounts for a large share of its sales and income.
The table below shows a breakdown of the Group’s (consolidated) net sales and operating income (loss) for the fiscal years ending
December 31, 2022 and December 31, 2023 respectively (amounts and component ratios).
(Jan. 1, 2022 – Dec. 31, 2022)
Net sales(Jan. 1, 2023 – Dec. 31, 2023)

Operating income (loss)

Net sales

Operating income (loss)

Amount(Millionyen)Component
ratio
(%)

Amount(Millionyen)Component
ratio
(%)

Amount(Millionyen)Component
ratio
(%)

Amount(Millionyen)Component
ratio
(%)

Consulting
Logistics
Digital Solutions
Elimination or
corporate

18,277
3,778
3,562

71.3
14.7
13.9

6,238
448
176

87.9
6.3
2.5

20,284
3,886
4,051

71.8
13.8
14.3

6,757
394
(70)

93.3
5.4
(1.0)

17

0.1

237

3.3

15

0.1

166

2.3

Total

25,635

100.0

7,100

100.0

28,238

100.0

7,247

100.0

(3) Risks associated with the Group’s core consulting business(i) Environment surrounding the management consulting industry
Within the Group, management consulting services to companies and corporations are provided mainly by Funai Consulting Inc.
The management consulting business consists of professional services such as planning, guidance and advice services that harness
all kinds of expertise, information and technology across a wide range of fields. However, unlike types of business for which
occupational licensing is required by law, for example, licensing as a lawyer, certified public accountant or tax accountant, themanagement consulting business is a type of business for which no special licensing is required to open a business.
In order to provide services that deliver high levels of client satisfaction, consulting firms in this industry accumulate know-how
gained from day-to-day operations and develop new methodologies (methods for analyzing the current state of clients and methods―11―for reforming the current state based on current state analysis). However, the industry is expected to become even more competitivein the future, and new client needs such as DX are emerging, creating a polarization between companies that can meet customer
needs and those that cannot, and further industry reorganization including M&A is likely going forward.
It has also been pointed out that the market size of the industry in Japan is relatively small compared to Europe and the United Statesin terms of economic scale. We recognize that as corporate management in Japan matures, demand for knowledge-based professional
services such as management consulting will grow. However, if understanding and awareness of such knowledge-based professional
services does not increase sufficiently, and if we move in a direction that does not meet the needs of our clients, then the expansionof our earnings may remain limited.
(ii) Business activities and client development of Funai Consulting Inc.
Funai Consulting Inc., the core operating company of the Funai Soken Group, supports the growth and development of clientcompanies by providing management consulting services in marketing, customer management, human resources, and other areas
tailored to each industry and business category to address the various management issues faced by corporate managers.
In addition to direct consulting activities for client companies, we also sponsor management seminars that address a wide range ofmanagement issues and current trends, and operate members-only management workshops consisting of a diverse group of members
for the purpose of researching management strategies and creating a network to open up business possibilities through mutual
exchange among members.
In terms of client development, Funai Consulting Inc. seeks to develop new clients through a range of channels including referrals
from existing clients, the attraction of customers through its seminars, the expansion of its workshop network, and the provision freemanagement consultation services.
Since its founding, its client base has been focused mainly on the distribution industry; however, its client base has now expanded
to include the housing and real estate industries, medical, nursing care, and welfare industries, professional services industry,
automotive industry, and human resource service industry, among others.
Funai Consulting Inc. does not have a sales department dedicated to customer development, and our policy is to continue to develop
customers through consulting activities as described above. However, in the event that the activities and methods used to develop
new clients cease to be effective, our business results may be affected.
(iii) Other consulting business
Funai Soken IT Solutions Inc. is in the IT consulting business, mainly providing IT consulting services such as support for the
introduction of core systems and IT cost reduction support. The IT-related industry is highly competitive due to the rapid pace oftechnological innovation and the presence of many new companies as well as major companies among competitors. In this industry,
it is necessary to accurately respond to the ever-changing and increasingly complex needs of clients, and if Funai Soken IT Solutions
Inc. fails to meet client needs, the Group’s business performance may be affected. Funai Soken IT Solutions Inc. is scheduled to bemerged into Funai Consulting Inc. as of April 1, 2024.
Proseed Inc. is in the contact center consulting business and provides individual training, including COPC certification, based on an
exclusive license with US-based COPC Inc. to provide CoPC-based training in Japan. Accordingly, any changes in COPC Inc.’smanagement policies, service content, or other factors may affect the Group’s business results.
(iv) Dependence on consultants
In the consulting business, there is a limit to the amount of work each consultant can complete, and it is essential to increase thenumber of excellent consultants in order to expand the business. To this end, we equip our consultants with a basic approach toconsultancy work and the knowledge they will need as consultants as part of our in-house training program, and also strive to develop
human resources through actual on-site consulting work in teams usually made up of three to five people to improve the skills levelof individual consultants and share knowledge and know-how within the company. In particular, we are actively working to improve
opportunities for women to play an active role by introducing a system to help them balance work with childcare, etc., in an attempt
to retain excellent human resources. Furthermore, as part of efforts to secure new human resources, we are actively recruiting
experienced personnel in various fields as well as new graduates, both in Japan and overseas, in a bid to acquire personnel with highpotential.

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Going forward, we will continue striving to secure excellent human resources and develop them into excellent consultants, and we
intend to continue increasing our workforce. However, if we are unable to make progress in securing and developing the humanresources that our Group requires, this will have an impact on our business operations that are reliant on consultants and on ourbusiness results.
In addition, due to the nature of this business, performance may vary depending on the awareness and abilities of individual
consultants.
In order to enhance the motivation and sense of belonging of our employees, we have reviewed our personnel evaluation system andintroduced a salary structure that better reflects individual performance. However, some extremely capable consultants may be very
independent minded, and if certain key personnel were to leave the Group, our business results may be temporarily affected.
(v) Country risk in overseas business
The Company has a subsidiary in Shanghai, China, which mainly supports Japanese companies entering the Chinese market andprovides consulting services for local sales and marketing. While demand for consulting services in the Chinese market is strong,country risk remains high. Specifically, these include the impact of anti-Japanese activities on Japanese products, the impact of
repeated changes in tax and legal systems, the impact of drastic changes in the political and economic landscape on the market, theimpact of air pollution and other environmental problems on employee health, and other country risks specific to overseas operations,such as foreign exchange risks. We believe that we will continue to see growing demand for consulting services in our business in
China. However, the country risks mentioned above may temporarily affect our Group.
(4) Risks associated with businesses other than consulting business
The logistics business consists of the provision of services in two main areas: consulting, designed to help clients improve results andreduce their logistics costs; and BPO services, in which we design, build, and operate clients’ logistics frameworks. Since these services
depend on good relationships with customers, we are always exposed to the risk of losing customers as a result of sales activities bycompeting companies. In addition, in logistics BPO services, there is potential for unexpected accidents, including accidents duringlifting operations, accidents in warehouses, and other loading and unloading accidents, vehicle accidents, and warehouse fires, whilein joint purchasing, there is a possibility of quality defects and suchlike.
Our Group’s business results may be affected depending on the measures taken in response to such incidents. We also run the risk ofneeding to promptly develop solution proposals that address the ESG concerns of clients and wider society and environmental
considerations across the entire supply chain.
In the digital solutions business, we provide services in both the marketing and back-office areas, including consulting on the use ofdigital technologies, system and product development, and online advertisement agency services. The digital industry is highly
competitive due to the rapid pace of technological innovation and the presence of many new companies as well as major companies
among competitors. In this industry, it is necessary to accurately respond to the ever-changing and increasingly complex needs ofclients, and if Funai Soken Digital Inc. fails to meet client needs, the Group’s business performance may be affected. In the HR
solutions business, we provide IT technology-based solutions to the current labor shortage issues faced by many companies, mainly
through our recruitment advertising agency services. There are many competitors in the HR industry, including major firms, and if weare unable to maintain our competitive advantage in terms of price and service, our business results may be affected.
(5) Group strategies, etc.
(i) Review of business domains
As a result of a review of business strategies under the current management, the Group has determined that expansion of its core
consulting business, which is expected to generate stable profits, is possible for the time being and has adopted a policy ofconcentrating its management resources on this business and its surrounding businesses.
In accordance with this policy, the Group will seek to advance into new business domains such as surrounding businesses that havehigh synergy with the consulting business, causing the Group to incur initial investment costs and potentially causing deviations
between the investment plan and actual performance. In this case, the Group’s business results may be temporarily affected.

―13―

(ii) Strength of the Group’s brand
The “Funai Soken” brand established by our founder, Yukio Funai, is essential to the development of our group’s business, including
our consulting business, and maintaining and developing this brand is extremely important to the expansion of our group’s businessbase. However, if a situation arises in which the quality of consultants declines or the services provided by the Group do notnecessarily meet the needs of clients, affecting the Group’s ability to gain the trust of clients, this will lead to a decline in brandstrength. In addition, legal compliance and corporate governance issues that arise at companies that bear the “Funai Consulting” or“Funai Soken” trademark may lead to brand damage and affect the business performance of the Group.
(6) Information security risks
The Group holds confidential information about clients, including personal and management information, for the purpose of conducting
its business. The Group regards information security as one of the most important ESG issues. Under the Group’s Basic Policy on
Information Security, the Group has established a group-wide system for controlling information security-related regulations and theiroperation and handling information in accordance with internal regulations, in order to strictly comply with the Act on the Protectionof Personal Information, other laws and regulations, confidentiality agreements and nondisclosure agreements when collecting, storing,processing, using, and disposing of such information. In terms of organization, our executives and employees are made thoroughly
aware of the importance of information management through education and training using the so-called Five Clauses for information
security, information security manuals, and e-learning programs, etc. In terms of systems, major group companies have been working
to develop a seamless mobile environment that can be used anywhere from 2018 and to balance cloud computing and security throughemail encryption, and measures to stop misdirected emails, and we are smoothly adapting to new workstyles in the post-COVID era.
Funai Consulting Inc. is also working to strengthen security measures and maintain confidentiality on a daily basis, including arevamping of the way in which clients entrust us with their information assets initiated in 2020.
However, in the event of unforeseen circumstances in spite of such measures that results in a leak of such information, a violation oflaws and regulations due to inadequate procedures for collecting and handling personal information, destruction or falsification ofimportant data, or a system shutdown, our Group’s business results may be affected due to a loss of trust in our company orcompensation for damages.
(7) Internal control systems
The Group considers the enhancement of corporate governance to be an important management issue for achieving sustainable growthand increasing corporate value over the medium to long term. To ensure the appropriateness of its business operations and the reliabilityof its financial reporting, the Group has established, maintains, and operates systems to ensure that internal controls over such matters
function effectively. However, failure to build adequate internal control systems in response to a rapid expansion of businesses could
make proper business operation difficult and adversely affect the Group’s business results.
(8) Risks related to assets held
The Group may recognize impairment losses on property, plant and equipment, intangible assets, securities and other assets it holds inthe event that its business results are not in line with its plans, leading to significant reduction in expected future cash flows, or in theevent of deterioration in the business results or the business failure of the issuer. In such cases, the Group’s business results may beaffected. To avoid such risks related to assets held, the Board of Directors gives due consideration to new investments and managementof progress after investment and strives to prevent and detect risks as early as possible.
(9) Risks of major disasters, pandemics, etc.
A large-scale disaster that damages social infrastructure or another coronavirus pandemic that adversely affects the global economy
could affect the Group’s business results. In preparation for such contingencies, we have established a crisis management manual toconfirm the safety of our employees and ensure their safety. Furthermore, as part of our business continuity measures, we will relocate
our Tokyo Head Office to Tokyo Midtown Yaesu in April 2024.

―14―

5. Management’s Analysis of Financial Position, Operating Results and Cash Flows(1) Overview of operating results, etc.
An overview of the financial condition, operating results and cash flows (hereinafter operating results, etc.) of the Group (the Company
and its consolidated subsidiaries) during the current fiscal year is as follows.
(i) Financial condition and operating results
The economic environment during the current consolidated fiscal year saw progression in the normalization of socioeconomic
activities, including the lifting of COVID-19 restrictions and a steady recovery in the number of foreign visitors to Japan. However,small and medium-sized enterprises continue to face a difficult situation due to rising raw material prices and severe labor shortages
due to difficulties in securing employees. In addition, increasing geopolitical risks such as the prolonged situation in Ukraine and theintensifying situation in the Middle East, soaring energy and raw material prices due to the unstable international situation, and sharp
fluctuations in exchange rates have become concerns for the economy, and the future outlook remains uncertain.
In this situation, based on our aspiration to produce many companies that can continue to grow strongly and sustainably even intimes of rapid and uncertain change, and to become such a company ourselves, we have defined the Group’s purpose as “Sustainable
Growth for More Companies” In order to realize the Group’s purpose, we will expand our business towards a structure that can
provide a full spectrum of services for corporate management issues, with the aim of achieving our Group vision of becoming “thego-to provider of digital solutions and comprehensive management consulting for medium-sized business and SMEs”. Within ouroperating activities, our consulting activities such as seminars, management workshops, and monthly support are returning to faceto-face activities. While our main focus is on comprehensive management consulting for SMEs, we are also progressing our
expansion into the areas of DX consulting and comprehensive consulting for medium-sized companies.
As a result, the Group posted 28,238 million yen in net sales (up 10.2% year on year), 7,247 million yen in operating income (up2.1% year on year), 7,343 million yen in ordinary income (up 2.0% year on year), and 5,201 million yen in net income attributableto owners of the parent (up 4.2% year on year) for FY2023.
Consolidated performance for each business segment is outlined below.
From the current consolidated fiscal year, the segments were changed to the three segments of Consulting, Logistics and Digital
Solutions. These statements are created based on categories applicable after the implementation of these changes.
- Consulting
In the consulting business, the number of orders received from seminars increased significantly due to the aggressive holding of feebased face-to-face seminars. Online orders also increased steadily. As a result, we achieved net sales and income exceeding results
for the previous fiscal year. Looking at each industry sector, the consulting divisions for the medical, aged care, and welfare industries,
and the manufacturing consulting division all greatly increased their net sales. Looking at income, we achieved increased profit eventhough there were increases in travel expenses due to an increase in face-to-face activities, venue expenses due to hosting seminars,
and online sales promotion expenses due to aggressive sales promotion activities.
Consequently, net sales increased 11.0% year on year to 20,284 million yen, and operating income rose 8.3% year on year to 6,757
million yen.
Breakdown of sales
Unit: million yen

Monthly support
14,104

Management
workshopmembership fees

Project
2,725

2,228

Others

Total
1,225

20,284(Note) Project sales include some M&A sales.
- Logistics
In the logistics business, sales of logistics consulting services decreased due to sluggish growth in consulting services for shippers,
despite an increase in management workshop memberships for logistics companies and a recovery in the hosting of seminars.
Logistics BPO services saw increased sales due to continued steady business with existing clients through our deep relationships, aswell as the development of new clients. Income decreased due to higher personnel expenses resulting from strengthened recruitment.
Consequently, net sales increased 2.8% year on year to 3,886 million yen, and operating income fell 11.9% year on year to 394―15―

million yen.
- Digital Solutions
The cloud solutions and online advertising management services in the digital solutions business also performed well, resulting in
an increase in sales. Looking at income, however, we posted an operating loss due to an increase in recruiting and personnel expenses
resulting from upfront investments to secure human resources, mainly engineers. In HR Solutions, sales increased due to an increasein new orders and higher customer budgets.
Consequently, net sales rose 13.7% year on year to 4,051 million yen and an operating loss of 70 million yen was posted, comparedwith an operating income of 176 million yen in the previous fiscal year.
The financial position at the end of the current fiscal year was as follows.
- Assets
Total assets decreased 1,379 million yen year-on-year to 31,631 million yen at the end of FY2023.
Current assets decreased by 3,625 million yen from the end of the previous fiscal year to 18,657 million yen. This was mainly due
to a decrease in cash and deposits, and increases in trade notes, accounts receivable, and contract assets.
Noncurrent assets increased 2,245 million yen from the end of the previous fiscal year to 12,973 million yen. This was mainly due
to increases in construction work in progress and goodwill, and guarantee deposits and term deposits which are included in otherinvestments and other assets.
- Liabilities
Total liabilities increased 594 million year-on-year to 5,904 million yen at the end of FY2023.
Current liabilities rose by 599 million yen from the end of the previous fiscal year to 5,666 million yen. This was mainly due to anincrease in other accounts payable, and deposits which are included in other current liabilities.
Noncurrent liabilities decreased by 4 million yen from the end of the previous fiscal year to 238 million yen. This was mainly due
to a decrease in retirement benefit liabilities.
- Net assets
Total net assets decreased 1,974 million yen year-on-year to 25,726 million yen at the end of FY2023. This was mainly due to anincrease from net income attributable to owners of the parent, a decrease in net assets due to the purchase of treasury stock, and adecrease in retained earnings due to the appropriation of retained earnings.
Consequently, the shareholders’ equity ratio decreased by 2.5 percentage points to 79.2% compared to the end of the previous fiscal
year.
(ii) Cash flows
Cash and cash equivalents decreased 4,137 million year-on-year to 12,894 million yen at the end of FY2023.
Trends in cash flow by activity are described below.
- Cash Flows from Operating Activities
Cash flows from operating activities ended on a net gain of 5,479 million yen this year compared to a net gain of 4,960 million yen
in the preceding year. This was mainly due to net income before income taxes and other adjustments of 7,272 million yen; income
taxes paid of 2,385 million yen; and income tax refunds of 602 million yen.
- Cash Flows from Investing Activities
Cash flows from investing activities ended on a net loss of 2,233 million yen this year compared to a net gain of 389 million yen in
the preceding year. This was mainly due to expenditures of 649 million yen for the purchase of property, plant and equipment andintangible assets, 617 million yen for the purchase of investments in subsidiaries resulting in change in scope of consolidation, and
759 million yen for payments for lease and guarantee deposits.

―16―

- Cash Flows from Financing Activities
Cash flows from financing activities ended on a net loss of 7,385 million yen this year compared to a net loss of 2,996 million yen
in the preceding year. This was mainly due to a net expenditure of 4,312 million yen on the sale and purchase of treasury stock, and
3,047 million yen distributed as dividends.
The following table presents the historical movements of certain cash flow indices.
FY12/19

FY12/20

FY12/21

FY12/22

FY12/23

Shareholders’ equity ratio (%)

79.4

82.4

80.7

81.7

79.2

Shareholders’ equity ratio based on market
price (%)

434.6

446.3

417.7

406.2

387.6

Interest-bearing debt to cash flow ratio (years)
Interest coverage ratio (x)

0.1

0.1

0.1

0.1

0.1

863.6

761.7

1,056.1

671.8

823.3

(Notes) 1. Indices are calculated on a consolidated basis as follows:
Shareholders’ equity ratio: Shareholders’ equity divided by total assets
Shareholders’ equity ratio based on market price: Market capitalization divided by total assets
Interest-bearing debt to cash flow ratio: Interest-bearing debt divided by operating cash flow
Interest coverage ratio: Operating cash flow divided by interest payments
2. Market capitalization: Closing stock price at FY-end multiplied by the number of outstanding shares at period-end (after
deducting treasury stock).
3. Interest-bearing debt: All interest-bearing liabilities listed under liabilities on the consolidated balance sheet(excluding
lease obligations).
4. Operating cash flow and interest payments are taken from cash flows from operating activities and interest paid,
respectively, as listed in consolidated cash flow statements.
(iii) Status of orders received and sales- Orders received
The table below shows a breakdown of orders performance in the current fiscal year by segment.
Segment

Amount of orders
received(thousand yen)Consulting

YoY change (%)

17,184,006

Logistics
Digital Solutions

Order backlog(thousand yen)

YoY change (%)

104.8

7,455,707

100.8

698,63193.8

266,66887.6

1,289,586

112.3

209,10480.9(Notes) 1. For the consulting business, only monthly support and project management consulting revenues are shown.
2. For the logistics business, only logistics consulting revenue is shown.
3. For the digital solutions business, IT consulting revenue and cloud solutions revenue are shown.
4. The amount is based on sales prices.
- Sales results
The table below shows sales performance by business segment in the current fiscal year.
Segment

Sales (thousand yen)

YoY change (%)

Consulting

20,284,921

111.0

Logistics

3,886,134

102.8

Digital Solutions

4,051,746

113.7(Notes) 1. Sales results indicate sales to external customers.
2. There are no customers that account for 10% or more of total sales.
(2) Details of analysis and examination concerning the state of operating results, etc. from the perspective of the management
The details of understanding, analysis and examination concerning the state of operating results, etc. for the Group from the perspective―17―

of the management are as follows.
Forward-looking statements in this document are based on judgments of the Company’s management as of the end of the current fiscal
year.
(i) Recognition, analysis and discussion of financial condition and results of operations(Analysis of financial position)- Assets
Total assets decreased 1,379 million yen year-on-year to 31,631 million yen at the end of FY2023.
Current assets decreased by 3,625 million yen from the end of the previous fiscal year to 18,657 million yen. This was mainly due
to a decrease in cash and deposits, and increases in trade notes, accounts receivable, and contract assets.
Noncurrent assets increased 2,245 million yen from the end of the previous fiscal year to 12,973 million yen. This was mainly due
to increases in construction work in progress and goodwill, and guarantee deposits and term deposits which are included in otherinvestments and other assets.
- Liabilities
Total liabilities increased 594 million year-on-year to 5,904 million yen at the end of FY2023.
Current liabilities rose by 599 million yen from the end of the previous fiscal year to 5,666 million yen. This was mainly due to anincrease in other accounts payable, and deposits which are included in other current liabilities.
Noncurrent liabilities decreased by 4 million yen from the end of the previous fiscal year to 238 million yen. This was mainly due
to a decrease in retirement benefit liabilities.
- Net assets
Total net assets decreased 1,974 million yen year-on-year to 25,726 million yen at the end of FY2023. This was mainly due to anincrease from net income attributable to owners of the parent, a decrease in net assets due to the purchase of treasury stock, and adecrease in retained earnings due to the appropriation of retained earnings.
Consequently, the shareholders’ equity ratio decreased by 2.5 percentage points to 79.2% compared to the end of the previous fiscal
year.
(Analysis of operating results)
Net sales increased in the monthly consulting support service and project consulting, the main businesses of the business consulting
business segment. The cloud solutions and HR solutions in the digital solutions business also performed well, resulting in an increasein sales. Consequently, net sales rose 10.2% year on year to 28,238 million yen.
Looking at operating income, cost of sales was 17,517 million yen (previous fiscal year was 15,484 million yen); travel, meetingand venue expenses significantly increased as we resumed consulting activities following the easing of COVID-19 restriction, andrecruitment and labor costs increased due to aggressive hiring of personnel. SG&A expenses were 3,473 million yen (previous fiscal
year was 3,049 million yen). Consequently, operating income rose 2.1% over the previous fiscal year to 7,247 million yen and ouroperating margin was 25.7%.
Non-operating income was 114 million yen, compared with 115 million yen in the previous fiscal year, while non-operating expenses
were 19 million yen, compared with 18 million yen in the previous fiscal year. Consequently, ordinary income rose 2.0% over theprevious fiscal year to 7,343 million yen.
With income taxes totaling 2,070 million yen for the current fiscal year, compared with 2,148 million yen in the previous fiscal year,
net income attributable to owners of the parent rose 4.2% year on year to 5,201 million yen.

―18―

Consolidated performance for each business segment is outlined below.
- Consulting
In the consulting business, the number of orders received from seminars increased significantly due to the aggressive holding of feebased face-to-face seminars. Online orders also increased steadily. As a result, we achieved net sales and income exceeding results
for the previous fiscal year. Looking at each industry sector, the consulting divisions for the medical, aged care, and welfare industries,
and the manufacturing consulting division all greatly increased their net sales. Looking at income, we achieved increased profit eventhough there were increases in travel expenses due to an increase in face-to-face activities, venue expenses due to hosting seminars,
and online sales promotion expenses due to aggressive sales promotion activities.
Consequently, net sales increased 11.0% year on year to 20,284 million yen, and operating income rose 8.3% year on year to 6,757
million yen.
- Logistics
In the logistics business, sales of logistics consulting services decreased due to sluggish growth in consulting services for shippers,
despite an increase in management workshop memberships for logistics companies and a recovery in the hosting of seminars.
Logistics BPO services saw increased sales due to continued steady business with existing clients through our deep relationships, aswell as the development of new clients. Income decreased due to higher personnel expenses resulting from strengthened recruitment.
Consequently, net sales increased 2.8% year on year to 3,886 million yen, and operating income fell 11.9% year on year to 394
million yen.
- Digital Solutions
The cloud solutions and online advertising management services in the digital solutions business also performed well, resulting in
an increase in sales. Looking at income, however, we posted an operating loss due to an increase in recruiting and personnel expenses
resulting from upfront investments to secure human resources, mainly engineers. In HR Solutions, sales increased due to an increasein new orders and higher customer budgets.
Consequently, net sales rose 13.7% year on year to 4,051 million yen and an operating loss of 70 million yen was posted, comparedwith an operating income of 176 million yen in the previous fiscal year.
(ii) Information about the analysis and discussion of the status of cash flow, capital resources and fund liquidity
Cash and cash equivalents decreased 4,137 million year-on-year to 12,894 million yen at the end of FY2023. Cash flows fromoperating activities ended on a net gain of 5,479 million yen this year compared to a net gain of 4,960 million yen in the preceding
year. This was mainly due to net income before income taxes and other adjustments of 7,272 million yen; income taxes paid of 2,385
million yen; and income tax refunds of 602 million yen. Cash flows from investing activities ended on a net loss of 2,233 million
yen this year compared to a net gain of 389 million yen in the preceding year. This was mainly due to expenditures of 649 million
yen for the purchase of property, plant and equipment and intangible assets, 617 million yen for the purchase of investments in
subsidiaries resulting in change in scope of consolidation, and 759 million yen for payments for lease and guarantee deposits. Cashflows from financing activities ended on a net loss of 7,385 million yen this year compared to a net loss of 2,996 million yen in thepreceding year. This was mainly due to a net expenditure of 4,312 million yen on the sale and purchase of treasury stock, and 3,047
million yen distributed as dividends.
The Group’s cash requirements are primarily for operating expenses such as cost of sales and selling, general and administrative
expenses.
The Group’s sources of funds are mainly cash flows from operating activities.
(iii) Significant accounting estimates and the assumptions used for them
The Group prepares its consolidated financial statements based on generally accepted accounting standards in Japan. In preparing
these consolidated financial statements, accounting estimates that affect the status of assets and liabilities or profit and loss arereasonably estimated based on historical experience and other information available at the time the consolidated financial statements
are prepared. However, actual results may differ from these estimates due to uncertainties inherent in estimates.

―19―

(iv) Management policy, management strategy, objective indicators for judging the achievement of management objectives, etc.
The Group has set out a three-year Mid-Range Business Plan (2023-2025) that begins with the fiscal year ending December 31, 2023.
Sales in the consulting and logistics segments are on track to exceed the initial targets established in the plan, buoyed by a steadyincrease in consultant numbers as part of the group’s HR strategy. Conversely, in the digital solutions business segment, performancehas diverged significantly from initial plans, and sales figures are expected to be lower than the initial targets. Income targets havebeen revised in light of the review of plans for the digital solutions business segment, as well as ongoing increases in personnel costs(esp. consultants) and recent inflation.
Meanwhile, because the group’s flexible capital policy has yielded improvements in capital efficiency, capital efficiency targets
under the Mid-Range Business Plan have also been revised. For more information, please see our press release dated February 8,
2024.
Performance targets in the Mid-Range Business Plan (2023-2025)
Fiscal period
FY12/23

Net sales(Million yen)Plan/Result

Operating income(Million yen)Plan

28,5007,900

Result28,2387,247

FY12/24

Plan

30,5007,900

FY12/25

Plan

33,0008,900(Note) The above plan shows the revised figures, as plan figures for the second and third years were revised to reflect factors in thefirst fiscal year of the plan (fiscal year ended December 31, 2023), such as revision of the plan for the digital solutions businessand lower than initially planned results under the impact of persistently rising personnel costs, mainly for consultants, andrecent inflation.
Capital efficiency under the Mid-Range Business Plan (2023-2025)
Fiscal period

Plan/Result

FY12/23

ResultROE
20.0%

FY12/25Plan

25% or more

(Note) The Group decided to revise the capital efficiency target under the Mid-Range Business Plan as shown above in response toimprovement in capital efficiency achieved through the flexible implementation of capital policies.

―20―6. Corporate Governance(1) Overview of corporate governance(i) Corporate governance policy
The company strives to strengthen its corporate governance with a focus on ensuring effective legal compliance and maximizing
shareholder returns.
We believe that a proactive approach to disclosure is an important pillar of corporate governance, and we are committed to prompt
and accurate disclosure of our current business activities and future business strategies through statutory announcements and throughinitiatives such as company briefings and individual meetings with institutional investors and analysts.
(ii) Overview of the corporate governance structure and reasons for its adoption
Following a resolution at the 46th Ordinary General Meeting of Shareholders held on March 26, 2016, the company transitioned
from a company with a board of corporate auditors to a company with an Audit and Supervisory Committee and appointed three
directors (including two outside directors) who are members of the Audit and Supervisory Committee. The company considers thatby granting voting rights to these directors on the Board of Directors its audit and supervisory functions are strengthened. In addition,
it considers that increasing the ratio of outside directors on the Board of Directors and improving the transparency and validity ofmanagement will further enhance corporate value.
In order to enhance corporate governance, a majority of the directors of the company are outside directors. The company audits thelegality and validity of the Board of Directors by means of the Audit and Supervisory Committee (comprising three members,
including two outside directors) to ensure objectivity and validity. In addition, the company has established a Corporate GovernanceCommittee, formed exclusively of outside directors, to conduct reviews of corporate governance on a regular basis as required. The
company has also established a Nominating Committee and Compensation Committee (of which more than half of the members areoutside directors) as advisory bodies to the Board of Directors to ensure transparency and objectivity with respect to the appointment
of directors and directors’ remuneration. Based on these bodies’ deliberations regarding the various reports, the president makes
submissions to the Board of Directors for decisions. To ensure procedures surrounding the selection and development of future group
CEO candidates are fair and transparent, the Successor Nominating Committee’s recommendations are discussed by the Board of
Directors to identify those candidates with “the right stuff” to lead the group to future prosperity. Moreover, an executive officer
system has been introduced to ensure a separation between the management and execution of business matters, as well as to ensure
flexibility in business execution.
- Board of Directors
The Board of Directors deliberates and makes decisions on important management matters. In addition to the regular Board of
Directors’ meeting once a month, extraordinary board meetings are held as required. The Board of Directors also conducts specialist
and diverse ranging reviews of the management of the company and reaches prompt decisions on this basis.
The term of office for directors (excluding directors who are Audit and Supervisory Committee members) is one year, and for
directors who are Audit and Supervisory Committee members it is two years in order to clarify management responsibilities for eachfiscal year.
The chairman of the board is President and CEO Takayuki Nakatani; the other board members are Tatsuro Ono, Motoki Haruta,
Nobuyuki Isagawa (outside director), Taeko Yamamoto (outside director), Tomomi Murakami (outside director), Masahiro
Hyakumura, Atsushi Nakao (outside director and member of the Audit and Supervisory Committee), and Akihiro Kobayashi (outside
director and member of the Audit and Supervisory Committee).
- Audit and Supervisory Committee
The Audit and Supervisory Committee effectively monitors and audits management decisions and execution of business activities,
and holds regular meetings every month. The full-time member of the Audit and Supervisory Committee attends important meetingsother than Board of Directors meetings, such as Executive Committee meetings, and expresses his or her opinions accordingly. Of
the outside directors who serve on the Audit and Supervisory Committee, one is a certified public accountant with specialized
knowledge of finance and accounting, while another is a lawyer with specialized knowledge pertaining to compliance.
The chairperson is Director Masahiro Hyakumura; the other committee members are Atsushi Nakao and Akihiro Kobayashi.

―21―

- Nominating Committee
The Nominating Committee deliberates the selection criteria for directors and executive officers in accordance with company
regulations. Its role is to increase the transparency and objectivity of decisions on candidates to be directors and executive officers
and to strengthen supervisory function of the Board of Directors. Three of the four committee members are outside directors, andthe chairperson is an outside director of the company.
The chairperson is Outside Director Nobuyuki Isagawa; other committee members are Akihiro Kobayashi, Tomomi Murakami, andTatsuro Ono.
- Successor Nominating Committee
The Successor Nominating Committee evaluates the current Group CEO and representative director based on business performance,
etc., and discusses the succession plan in accordance with company regulations. Its role is to increase transparency and objectivity
in the selection of Group CEO and representative director candidates. Three of the four committee members are outside directors,
and the chairperson is an outside director of the company.
The chairperson is Outside Director Nobuyuki Isagawa; other committee members are Akihiro Kobayashi, Tomomi Murakami, andTatsuro Ono.
- Compensation Committee
The Compensation Committee deliberates remuneration policy for directors and executive officers in accordance with company
regulations. Its role is to increase the transparency and objectivity of decisions on remuneration for directors and executive officers
and to strengthen supervisory function of the Board of Directors. Three of the five committee members are outside directors, and thechairperson is an outside director of the company.
The chairperson is Outside Director and member of the Audit and Supervisory Committee Atsushi Nakao; the other committee
members are Nobuyuki Isagawa, Taeko Yamamoto, Tatsuro Ono, and Motoki Haruta.
- Governance Committee
The Governance Committee reviews various issues related to the corporate governance of the group from a medium- to long-term
perspective. Its purpose is to improve management fairness and transparency and to strengthen corporate governance. All fivecommittee members are outside directors, and the chairperson is an outside director of the company.
The chairperson is Outside Director and member of the Audit and Supervisory Committee Akihiro Kobayashi; the other committee
members are Nobuyuki Isagawa, Atsushi Nakao, Taeko Yamamoto, and Tomomi Murakami.
- Sustainability Committee
The Sustainability Committee exchanges information and fosters a shared awareness regarding sustainability in business
management, and submits recommendations to the Board of Directors regarding the sustainability connotations of policies and plans,
thereby helping to deepen the board’s discussions in this area and overseeing the entrenchment of sustainability in business
management groupwide through the steady resolution of ESG issues, all with a view to promoting the mid-to-long term developmentof Funai Soken Holdings and the greater Funai Soken Consulting Group. Two of the five committee members are outside directors,
and the chairperson is an outside director of the company.
The chairperson is Outside Director Tomomi Murakami; other committee members are Nobuyuki Isagawa, Takayuki Nakatani,
Tatsuro Ono, and Motoki Haruta.
- DX Promotion Committee
The DX Promotion Committee exchanges information and fosters a shared awareness regarding digital transformation at the Funai
Soken Consulting Group, and submits recommendations to the Board of Directors regarding the group’s DX-related policies andplans, thereby helping to deepen the board’s discussions in this area and overseeing the entrenchment of DX in business management
groupwide, all with a view to promoting the mid-to-long-term development of Funai Soken Holdings and the greater Funai Soken
Consulting Group.
The chairperson is Outside Director Taeko Yamamoto; the other committee members are Takayuki Nakatani, one Funai Soken―22―

Holdings executive officer, and directors and management-level employees from the Funai Soken Consulting Group.
- Risk Management Committee
The Risk Management Committee recognizes of the importance of identifying, evaluating, and managing risks that have a significant
impact on corporate management and business continuity, and appropriately manages the risks surrounding the group and seeks toprevent risks from arising, for instance by identifying risks that require a priority response and implementing specific measures todeal with them. It consists mainly of directors, executive officers and employees who manage major departments. It collects
information from both inside and outside the company, conducts risk analysis from various perspectives and deliberates on andimplements measures in response to risks.
The chairperson is Director and Executive Vice President Tatsuro Ono; the other committee members are Masahiro Hyakumura, one
Funai Soken Holdings executive officer, and directors and management-level employees from the Funai Soken Consulting Group.
- Internal Control Committee
The Internal Control Committee functions to ensure the creation and proper operation of an internal control system overseeing Funai
Soken Holdings’ and the Funai Soken Consulting Group’s financial statements, so as to uphold the appropriateness of financial
statements stipulated in the Financial Instruments and Exchange Act and its enforcement order. The Funai Soken Consulting GroupCEO and the heads of the organizational units subject to internal oversight all serve on the committee as internal control managers,in which capacity they build and manage internal control systems within their day-to-day work.
The chairperson is President and CEO Takayuki Nakatani; the other committee members are Tatsuro Ono, Motoki Haruta, andMasahiro Hyakumura.
- Executive Committee
The company separates the functions of the Board of Directors, which makes decisions and supervises the management of thecompany, from the functions of executive officers who execute business matters. The scope of this is defined in the official
regulations of administrative authority. The Executive Committee comprises directors and executive officers and exists under the
Board of Directors to carry out swiftly the policies instituted by the board. In addition to considering and discussing important agenda
items in advance of board meetings (excluding those subject to a vote) to aid the board’s deliberations, the committee makes decisions
and shares information on those agenda items that are not tabled at board meetings.
The chairperson is President and CEO Takayuki Nakatani; other committee members are Tatsuro Ono, Motoki Haruta, Masahiro
Hyakumura, and four Funai Soken Holdings executive officers.

―23―

- Corporate governance structure(iii) Other matters related to corporate governance(1) Business Execution System
The company has introduced an executive officer system in order to distinguish decision-making and supervision of businessexecution by the Board of Directors from the business execution functions of the business divisions. In accordance with the policies
determined by the Board of Directors, the executive officers are responsible for carrying out the daily business operations of thecompany. In addition to Board of Directors’ meetings, the company holds monthly Executive Committee meetings, consisting of
the directors, executive officers, and standing members of the Audit and Supervisory Committee to review business execution andto build consensus among the officers.
(2) Development of Internal Control System
Based on our aspiration to produce many companies that can continue to grow strongly and sustainably even in times of rapid anduncertain change, and to become such a company ourselves, we have defined the Group’s purpose as “Sustainable Growth forMore Companies” To ensure that the Group’s directors and employees embody this Group purpose, the company has establishedand maintains an internal control system to build an appropriate organization, set internal rules and regulations, communicate
information and monitor business execution. The company ensures that its business is properly executed through reviews of thissystem as appropriate and through continual improvement.
(3) Status of Risk Management System
The Company has established a Risk Management Committee as a company-wide organization to manage crises including
management of the risk of losses. It consists mainly of directors, executive officers and employees who manage major departments.
It collects information from both inside and outside the company, conducts risk analysis from various perspectives and deliberates
on and implements measures in response to risks.

―24―

(4) Basic Policy for Establishment of Internal Control System(i) Summary of Resolutions for Matters such as Systems for Ensuring Appropriateness of Operations(i)-1 System to Ensure that the Execution of Duties by Directors and Employees of the Company Complies with Laws andRegulations as well as the Articles of Incorporationa) The group has established the Regulations on Group Compliance and the Group Corporate Ethics Code of Conduct which set
forth its basic stance on social responsibility. It thereby clarifies the criteria to ensure that the directors and employees act withstrong ethics and good sense in accordance with laws and ordinances and internal rules and regulations.
b) The group has established and maintains an appropriate internal control system. It has established the Internal Oversight Office
as an auditory function under the direct control of the representative director to: ensure that the business of the company and thecompanies in the group is properly conducted in accordance with laws and regulations; oversee the correct implementation of thegroup’s internal control system; propose improvements as required; and perform internal oversight of the company and group.
c) If a director or employee discovers any serious instances of violation of laws or ordinances, or any other infringement of laws
and ordinances or internal rules and regulations, this must be reported immediately and without delay to the Audit and Supervisory
Committee and to the Board of Directors.
d) In order to prevent and rectify illegal conduct, or acts that violate social norms and corporate ethics, the company has establishedthe Group Hotline Rules and strives to enhance its compliance system through initiatives such as an internal hotline for anyone
involved with the group. The company is also committed to raising the awareness of directors and employees of compliance mattersthrough training, including workshops and e-learning.
e) The group takes a strong stance on anti-social individuals and organizations that have a negative impact on social order and theintegrity of its corporate activities.
(i)-2 System to Ensure that the Execution of Duties by Directors of the Company Is Performed Efficientlya) In order to ensure that directors’ decisions and their execution of duties are implemented efficiently, the company has establishedrules concerning the operation of the Board of Directors. As a general rule, the Board of Directors meets once a month, but meetings
can also be held on an ad hoc basis as required.
b) To ensure efficient, organized business execution, the company has established the Regulations of Administrative Authority andCriteria of Administrative Authority to clarify the responsibilities and system of authority for each of the company’s organizations
and each position therein.
c) The company promotes quick decision making and efficient business execution through appointing executive officers to be incharge of business execution and through delegating the company’s operations and clarifying authority and responsibility in theexecution of the company’s business by resolution of the Board of Directors.
d) The company has established the Executive Committee as an organization to coordinate the business activities of the Group,
review the status of business execution and build consensus through discussion of important matters within the group.
e) The company sets out numerical targets for the budget period based on the business plan and clarifies the objectives andresponsibilities of each group company and department and aims to achieve its planned performance targets through analyzing
differences between the budget and actual results.
(i)-3 System Concerning the Storage and Management of Information Related to the Execution of Duties by Directors of theCompanya) The details of resolutions, approvals and reports on directors’ execution of their duties are saved and stored as appropriate basedon the Regulations of the Board of Directors, Regulations of the Executive Committee, Regulations for Document Management,
and Regulations for Confidential Document Management.
b) Regarding the protection of information, the company has established the Regulations on Information Security and strives toclarify the levels of authority required to view different information, and to promote awareness among directors and employees ofissues such as password management and leak prevention measures, falsification, and destruction of information.
(i)-4 Regulations and Other Systems Concerning Management of Risk of Losses of the Companya) The company recognizes the importance of identifying, evaluating, and managing those risks that have a significant impact on―25―

corporate management and business continuity. It strives to implement a system for appropriately managing the risks surrounding
the group and has established the Risk Management Committee to take specific measures to deal with risks that require a priority
response.
b) With respect to the management of the risk of losses, the company has established the Regulations on Group Crisis Management
to strengthen the management system to prevent losses.
(i)-5 System to Ensure the Appropriate Operation of Group Companiesa) The group shall share the basic ideas expressed in the Group Philosophy and Group Vision while respecting management
autonomy in each of its companies.
b) The company shall dispatch directors and corporate auditors to group companies as required in order to improve the soundness
and efficiency of management. It shall also hold Group Presidents’ Council meetings to exchange information and to consult with
its companies.
c) The group shall conduct internal audits to ensure the effectiveness and validity of internal controls as a system for conducting
surveys and audits of group companies, in addition to audits by members of the Audit and Supervisory Committee and accounting
auditors.
d) The group shall have a set of Regulations for Group Company Management in place to manage the business operations of its
companies.
e) The group shall establish a system of company approval for important matters concerning the business operations of groupcompanies when it is necessary to improve soundness of management at its companies and to ensure the appropriateness of its
business activities.
f) The company shall ensure the reliability of its financial reporting through appropriate and effective management and evaluation.
It shall also establish company-wide internal controls for financial reporting across the group and control systems for individual
business processes.
(i)-6 Matters Concerning Employees Who Assist in the Execution of Duties by Audit and Supervisory Committee Members at theCommittee’s Requesta) Directors shall engage employees to assist the Audit and Supervisory Committee in carrying out its duties if requested by the
Audit and Supervisory Committee.
b) Assistants to the Audit and Supervisory Committee are assigned as dedicated staff to members of Audit and Supervisory
Committee to assist them in carrying out their duties. Independence from the business executives on matters related to staff transfersand personnel evaluation is ensured by obtaining the agreement of Audit and Supervisory Committee members in advance.
(i)-7 System Concerning Directors’ and Employees’ Reports to the Audit and Supervisory Committee and Other Systems
Concerning Reports to the Audit and Supervisory Committeea) Members of the Audit and Supervisory Committee attend important meetings such as Board of Directors’ meetings andExecutive Committee meetings to monitor and audit the management of the company and the decision-making process on a regularbasis.
b) A system is in place that allows prompt and effective reporting by directors and employees to Audit and Supervisory Committee
members upon request for issues such as facts that may cause significant damage to the company or information received on thein-house hotline.
No disadvantage shall accrue to anyone making reports as outlined above.
c) The Internal Oversight Office reports on the status and results of its internal audits to members of the Audit and Supervisory
Committee. The Audit and Supervisory Committee cooperates closely with the Internal Oversight Office—e.g., the committee
requesting reviews by the Internal Oversight Office as required—and conducts efficient audits.
(i)-8 Policy Related to the Handling of Audit Expensesa) The Audit and Supervisory Committee is eligible to receive payment in advance or reimbursement from the company for
expenses arising from the execution of its duties.

―26―b) When the Audit and Supervisory Committee deems it necessary, it may use external experts for the execution of its duties.
Expenses accruing from this shall be treated as set forth in a) above.
(i)-9 Other Systems to Ensure that the Audit by Audit and Supervisory Committee Members is Conducted Effectivelya) The majority of the Audit and Supervisory Committee shall be outside directors to ensure the transparency of the audit. The
Audit and Supervisory Committee meets with the president and directors as necessary to exchange opinions on important company
issues and on audit matters and makes requests when it deems these necessary, thereby promoting mutual understanding with thepresident and the directors.
b) The Audit and Supervisory Committee meets regularly with the accounting auditors and the Internal Oversight Office to actively
exchange opinions and information.
(ii) Overview of Implementation of System to Ensure the Appropriate Operation of Group Companies
The Board of Directors meets once a month as a decision-making body on matters related to the management of the company andbusiness execution. It makes decisions on important management issues, such as items stipulated in laws and ordinances and in
the Articles of Incorporation, management policy and budget setting. It analyzes and evaluates the performance of group companies
based on monthly reports. It discusses matters from the perspective of compliance with laws and ordinances and the Articles ofIncorporation and business appropriateness. In addition, the Executive Committee, which is attended by the company’s directors,
executive officers and full-time members of the Audit and Supervisory Committee, meets once a month to deliberate on importantgroup matters(ii)-1 Internal Audits
Regarding the appropriateness of the operation of the company’s internal control system, the Internal Oversight Office has
conducted an audit of the company and the companies in the group and has reported the results of this to the company’s president
and members of the Audit and Supervisory Committee.
Two of the three members of the company’s Audit and Supervisory Committee are Outside Directors. This ensures the transparencyof audits.
(ii)-2 Compliance
In order to improve directors’ and employees’ awareness of compliance, the company arranges compliance education including
training through workshops and e-learning.
(ii)-3 Risk Management
The company has established a Risk Management Committee and undertakes risk management activities, including assessment ofpotential risks and prevention of the occurrence of risks within the company and the group. The group has also established a Group
Corporate Ethics Code of Conduct to eliminate anti-social forces. It sets out the provisions and reviews new clients when they
apply for credit, and implements this code as required.
In addition, it has established an inhouse hotline and has communicated this to the directors and employees of the company andthe group. The company has a system in place to enable it to ascertain facts that may cause significant damage to the company.
Legal counsel and the outside directors on the Audit and Supervisory Committee act as points of contact in this respect.
(5) Basic Views on Eliminating Anti-Social Forces(i) Basic Approach to the Exclusion of Antisocial Forces
The group takes its social responsibilities very seriously and has a basic principle of avoiding any sort of relationship with antisocial forces. It has established action guidelines in this respect in the Regulations on Group Compliance. In accordance with thecode of conduct in these regulations, group employees pledge to observe the conduct stipulated in the guidelines when joining thecompany.
The company has an internal process in place in accordance with its legal system to eliminate anti-social forces and has a crisis
management system for swift assessment of information. It has established a department to take responsibility in case of emergency―27―

and ensured a system enabling companywide response including the involvement of top management.
(ii) Status of Exclusion of Antisocial Forces(ii)-1 The company has put in place a risk management system and strives to obtain information promptly through the establishmentof a Risk Management Committee. There is also a system in place in which the Risk Management Department is charged withensuring prompt reporting to top management and implementation of countermeasures based on information obtained.
(ii)-2 Based on this system, the company manages information in an integrated manner based on prompt understanding of issues
internally. It strengthens its cooperation with external professional entities such as legal counsel and the police and ensures any
relationships with antisocial forces are promptly terminated.
(ii)-3 When the company undertakes work under consignment, provisions for the exclusion of antisocial forces are clearly set forthin writing in the contract at the time of the contract of assignment.
(ii)-4 The company’s credit management rules set forth provisions for the exclusion of antisocial forces. The credit management
system is operated in accordance with these rules.
(6) Outline of the Details of Liability Limitation Agreement
The Company has executed agreements with Nobuyuki Isagawa, Taeko Yamamoto, Tomomi Murakami, Atsushi Nakao, andAkihiro Kobayashi, all of whom are outside directors, on the limitation of liability for damages as provided for under the provisionsof Paragraph 1, Article 423 of the Companies Act according to the provisions of Paragraph 1, Article 427 thereof. The maximum
amount of liability for damages under these agreements is the minimum liability limit stipulated by law.
(7) Outline of Liability Insurance for Officers, etc.
The company has concluded an agreement on liability insurance for officers (D&O insurance) under the provisions of Paragraph
1, Article 430-3 of the Companies Act with an insurance company.
The scope of the insured of the insurance contract is the directors (including members of the Audit and Supervisory Committee)
and executive officers of the company, and the directors, corporate auditors and executive officers of its subsidiaries (hereafter, the“eligible officers”), and the insured does not bear the insurance premiums.
Under the insurance contract, the insurance company agrees to indemnify any damage that may arise when eligible officers, who
are the insured persons, assume liability for the execution of their duties or receive a claim related to the pursuit of such liability.
The contract is renewed each year.
The insurance contract states that insurance shall not be paid in cases where the company takes action pursuing liability forcompensation of damages against eligible officers and stipulates provisions to the effect that the scope of damages to becompensated shall be limited, for the purpose of guaranteeing the appropriateness of the eligible officers’ execution of duties.
(8) Matters to be Resolved at the Shareholders’ Meeting that May be Resolved by the Board of Directors- Purchase of treasury shares
The Articles of Incorporation of the company stipulate that the company may, by resolution of the Board of Directors, purchasetreasury shares in the market pursuant to Paragraph 2, Article 165 of the Companies Act for flexible implementation of capital
policy in response to changes in the operating environment.
- Interim dividend
To enable the flexible return of profits to shareholders, the company’s Articles of Incorporation stipulate that the company may,by a resolution of the Board of Directors, pay dividends from surplus as interim dividends to shareholders or registered sharepledgees, with a record date of June 30 of each year.
- Exemption of Directors from Liability
The Articles of Incorporation of the company stipulate that the liability for damages of directors (including former Directors) may
be exempted by a resolution of the Board of Directors to the extent permitted by laws and regulations, pursuant to Paragraph 1,
Article 426 of the Companies Act, in order to allow the Directors to fully play their expected roles.

―28―

The handling of exemption by resolution of the Board of Directors from the liability specified in Paragraph 1, Article 423 of theCompanies Act and agreements to limit liability for such damages already executed in relation to acts of Corporate Auditors(including former Corporate Auditors) prior to the conclusion of the 46th Ordinary General Meeting of Shareholders held on March
26, 2016 shall be in accordance with the provisions then in force.
(9) Number of Directors
The Articles of Incorporation of the company stipulate that the company shall have not more than ten (10) directors (excluding
Audit and Supervisory Committee Members) and that it shall have not more than five (5) directors who are Audit and Supervisory
Committee Members.
(10) Requirement for the Resolution for the Election of Directors
The Articles of Incorporation of the company stipulate that resolutions for the election of the directors shall be made by a majorityof voting rights of the shareholders in attendance who hold one-third or more of the voting rights, and not through cumulative
voting.
(11) Requirement for Special Resolutions of the General Meeting of Shareholders
The company’s Articles of Incorporation stipulate that resolutions pursuant to Article 309, Paragraph 2 of the Companies Act shallbe adopted by two thirds or more of the voting rights of shareholders present at a meeting where shareholders holding one third or
more of the voting rights of shareholders who are entitled to exercise their voting rights are present.
The purpose of this measure is to facilitate the smooth operation of the General Meeting of Shareholders by relaxing the quorum
for special resolutions at the General Meeting of Shareholders.
(iv) Status of Activities of the Board of Directors
The company held 13 meetings of the Board of Directors during the current fiscal year, and the attendance of individual directors is
as follows.
Name

Number of meetings

Attendance

Sakae Takashima

3

3

Takayuki Nakatani

13

13

Tatsuro Ono

13

13

Motoki Haruta--

Nobuyuki Isagawa

13

13

Miki Mitsunari

3

3

Taeko Yamamoto

10

10

Tomomi Murakami

10

10Masahiro Hyakumura

13

13

Atsushi Nakao

13

13

Akihiro Kobayashi

13

13(Notes) 1. The attendance of Sakae Takashima and Miki Mitsunari at the meetings of the Board of Directors held until theirretirement is shown because they both retired as director at the conclusion of the Ordinary General Meeting of
Shareholders held on March 25th, 2023.
2. Taeko Yamamoto and Tomomi Murakami were appointed as directors at the Ordinary General Meeting of Shareholders
held on March 25, 2023, and attendance at the Board of Directors meetings held after their appointment is shown.
3. Motoki Haruta was newly elected as a director at the 54th Ordinary General Meeting of Shareholders held on March 23,2024; therefore, he did not attend any meetings during the current fiscal year.
Specific matters discussed by the Board of Directors during the current fiscal year included business plans, matters related to generalmanagement policies, sustainability initiatives, and corporate governance systems.

―29―

(2) Shareholdings(i) Standards and approach to the classification of investment shares
The company classifies its investment shares into the investment stocks held for the purpose of pure investment, or solely for making
profits from changes in the value of the stocks or dividends related to the stocks, and those held for purposes other than pureinvestment.
(ii) Investment shares held for purposes other than pure investment
a. Policy for shareholding, method for examining the rationality of shareholding, and the examination of whether holding shares ofindividual stocks is appropriate or not
The company will hold shares if it is determined that the shares will contribute to the sustainable enhancement of corporate value
and the holding is deemed to be strategically significant. The Board of Directors annually examines the appropriateness of holding
these securities by scrutinizing the purpose and rationale for holding them from a medium- to long-term perspective. When reviewing
the appropriateness of stockholdings, we consider the status of collaboration with the investee company, the impact on business, andthe contribution of the transaction to our profits. As a result of this review, those stockholdings deemed to have limited strategic
significance or economic rationale are sold, while taking into account the impact of disposal on the market and other considerations.
b. Number of stocks and total amount on the balance sheet
Number ofstocks(Stock name)

Total balance sheet amount(thousand yen)

Unlisted shares

2614

Shares other than unlisted shares

3

324,055(Stocks for which the number of shares increased for the current fiscal year)
Number ofstocks(Stock name)

Total acquisition cost for increasein number of shares (thousand yen)

Reason for increase in number of shares

Unlisted shares

-

-

-

Shares other than unlisted shares

-

-

-

(Stocks for which the number of shares decreased for the current fiscal year)
Number ofstocks(Stock name)

Total sale value related todecreases in shares (thousand yen)

Unlisted shares--

Shares other than unlisted shares

-

-

―30―

c. Number and balance sheet amount of specified investment shares and deemed shareholdings for each stock held and otherinformation- Specified investment shares

Stock nameCurrent fiscal year

Previous fiscal year

Number of shares(shares)Number of shares(shares)

Carrying amount on thebalance sheet(thousand yen)

Carrying amount on thebalance sheet(thousand yen)

Chuo Warehouse
Co., Ltd.

193,300

Mitsubishi UFJ
Financial Group, Inc.

58,110Sumitomo Mitsui
Financial Group, Inc.

214,563
70,4005,682
39,092

Purpose, outline of business alliance,
Shareholding
etc., quantitative effect of shareholding
by theand reason for an increase in thecompany
number of shares

193,300 Held for the purpose of maintaining and
181,122 strengthening business relationships.

Yes

58,110 Held for the purpose of maintaining and
51,659 strengthening business relationships.

No (Note 1)

5,682 Held for the purpose of maintaining and
30,091 strengthening business relationships.

No (Note 1)(Notes) 1. The entity in which the company holds shares does not hold shares of the company; however, its subsidiary holds sharesof the company.
2. Quantitative retention effects are not stated because they are difficult to describe, but the rationale for retention is verified
by the method described in a. above.
- Deemed shareholdings
Not applicable(iii) Investment shares held for the purpose of pure investment
Not applicable(iv) Investment shares that were held for the purpose of pure investment before the fiscal year under review and that the purpose ofholding them has changed to other than pure investment
Not applicable(v) Investment shares that were held for purposes other than pure investment before the fiscal year under review and that the purposeof holding them has changed to pure investment
Not applicable―31―