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

Annual Securities Report

Milbon Co., Ltd.
E01039

The 63rd Fiscal Year (from January 1, 2022 to December 31, 2022)

Annual Securities Report(“Yukashoken Hokokusho”)
1. This document is an electronic report of the Annual Securities Report based on
Article 24, Paragraph 1 of the Financial Instruments and Exchange Act, which
was submitted using the Electronic Disclosure for Investors’ NETwork(EDINET) provided for in Article 27, Paragraph 30-2 of the same Act, and wasprinted with an added table of contents and page numbers.
2. This document includes, at the end, the audit report attached to the Annual
Securities Report submitted in the manner described above and the internal
control report (in Japanese only) and confirmation document (in Japanese only)
submitted in conjunction with the Annual Securities Report described above.

Milbon Co., Ltd.

Table of Contents

Page
Annual Securities Report (“Yukashoken Hokokusho”) for the 63rd Fiscal Year
CoverPart 1 Company Information
I. Overview of Company
1. Key Financial Data
2. History
3. Business Description
4. Subsidiaries and Other Affiliated Entities
5. Employees
II. Overview of Business
1. Management Policy, Business Environment, Issues to Address
2. Business Risks
3. Management Analysis of Financial Position, Operating Results and Cash Flows
4. Material Contracts, etc.
5. Research and Development Activities
III. Information about Facilities
1. Overview of Capital Expenditures
2. Major Facilities
3. Planned Addition, Retirement, and Other Changes of Facilities
IV. Information about Reporting Company
1. Company’s Shares, etc.
2. Acquisition and Disposal of Treasury Shares
3. Dividend Policy
4. Corporate Governance
V. Financial Information
1. Consolidated Financial Statements, etc.
2. Financial Statements, etc.
VI. Outline of Share-Related Administration of Reporting Company
VII. Reference Information of Reporting Company
1. Information about Parent of Reporting Company
2. Other Reference Information
Part 2 Information about Reporting Company’s Guarantor, etc.
Independent Auditor’s Report
Internal Control Report (in Japanese only)
Confirmation Letter (in Japanese only)

1
2
2
2
4
6
7
8
9
9
12
15
20
21
22
22
22
23
24
24
29
30
31
50
51
86
100
101
101
101
102

Cover[Document Submitted]

Annual Securities Report (“Yukashoken Hokokusho”)[Article of the Applicable Law Requiring

Article 24, Paragraph 1 of the Financial Instruments and Exchange Act

Submission of This Document][Submitted to]

Director-General, Kinki Local Finance Bureau[Date of Submission]

March 29, 2023

[Accounting Period]

The 63rd Fiscal Year (from January 1, 2022 to December 31, 2022)[Company Name]

Kabushiki Gaisha Milbon[Company Name in English]

Milbon Co., Ltd.

[Position and Name of Representative]

Ryuji Sato, Representative Director, President & CEO[Location of Head Office]2-3-35, Zengenji-cho, Miyakojima-ku, Osaka City, Osaka[Phone No.]

06-6928-2331 (main)[Contact for Communications]

Masahiro Murai, Managing Executive Director, and in charge of Corporate
Administration, Internal Audit, Finance, and Sustainability Promotion[Nearest Contact]

Kyobashi Edogrand, 2-2-1 Kyobashi, Chuo-ku, Tokyo[Phone No.]

03-3517-3915 (main)[Contact for Communications]

Masahiro Murai, Managing Executive Director, and in charge of Corporate
Administration, Internal Audit, Finance, and Sustainability Promotion[Place Where Available for Public
Inspection]

Head Office, Milbon Co., Ltd.
(Kyobashi Edogrand, 2-2-1 Kyobashi, Chuo-ku, Tokyo)
Nagoya Branch, Milbon Co., Ltd.
(3-19-8 Sakae, Naka-ku, Nagoya City, Aichi)
Tokyo Stock Exchange, Inc.
(2-1 Nihombashi Kabutocho, Chuo-ku, Tokyo)-1-

Part 1 Company Information
I. Overview of Company
1. Key Financial Data
(1) Consolidated Financial Data, etc.
Fiscal Year

59th

60th

61st

62nd

63rd

Year End

Dec. 2018

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Net sales(thousand yen)

33,882,496

36,266,444

35,725,069

41,582,267

45,238,377

Ordinary income(thousand yen)

5,811,372

6,231,538

5,791,315

7,158,440

7,829,279(thousand yen)

4,495,417

4,517,615

4,204,139

5,109,288

5,577,274

Comprehensive income(thousand yen)

3,689,484

4,601,226

3,776,739

5,754,382

6,253,306

Net assets(thousand yen)

33,151,797

35,882,612

36,308,349

40,197,181

43,991,750

Total assets(thousand yen)

39,634,942

41,912,194

43,075,520

48,238,490

52,760,387

Net assets per share(Yen)

1,012.58

1,096.02

1,117.10

1,236.41

1,352.52

Basic earnings per share(Yen)

137.31137.99129.24157.17171.49Diluted earnings per share

(Yen)

-

-

-

-

-

Equity ratio

(%)

83.6

85.6

84.3

83.3

83.4

Return on equity

(%)

14.0

13.1

11.6

13.4

13.2

Price earnings ratio(Times)

32.6

44.9

50.8

36.3

33.4

(thousand yen)

6,487,332

4,486,862

6,548,116

6,636,823

5,008,008(thousand yen)

(1,202,149)(2,777,709)(161,779)(3,995,279)(3,865,221)(thousand yen)

(1,639,203)(1,869,274)(3,416,124)(1,919,749)(2,578,462)(thousand yen)

9,541,483

9,376,300

12,307,591

13,312,634

12,258,237

856

910

975

1,038

1,097

Profit attributable toowners of parent

Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents
at end of period
Number of employees(Persons)(Notes) 1. Diluted earnings per share is not shown since there are no dilutive shares.
2. The “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29,
March 31, 2020), etc., are applied from the beginning of the current fiscal year. The “Accounting Standard for Revenue
Recognition,” etc., issued on March 30, 2018 are applied from the beginning of the 60th fiscal year.
3. The “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16,2018), etc., are applied from the beginning of the 60th fiscal year, and the key management indicators for the 59th fiscal
year are those after retroactive application of the said accounting standard, etc.

-2-(2) Financial Data, etc., of Reporting Company
Fiscal Year

59th

60th

61st

62nd

63rd

Year End

Dec. 2018

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Net sales(thousand yen)

31,717,731

34,085,114

33,651,807

39,237,623

41,780,945

Ordinary income(thousand yen)

5,203,303

5,825,268

5,584,059

6,928,387

7,959,986

Profit(thousand yen)

4,037,824

4,236,159

3,842,075

4,986,323

5,533,885

Capital stock(thousand yen)

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000(Shares)

33,117,234

33,117,234

33,117,234

33,117,234

33,117,234

Net assets(thousand yen)

32,841,818

35,120,946

35,243,127

38,128,794

41,249,787

Total assets(thousand yen)

39,135,985

40,962,412

41,650,835

45,721,261

49,508,428(Yen)

1,003.12

1,072.76

1,084.32

1,172.79

1,268.22

54.00

56.00

56.00

68.00

86.00

(24.00)(27.00)(27.00)(30.00)(40.00)Total number of issued
sharesNet assets per share
Dividend per share(Interim dividend per share)(Yen)

Basic earnings per share(Yen)

123.33129.39118.11

153.38170.16

Diluted earnings per share

(Yen)

-

-

-

-

-

Equity ratio

(%)

83.9

85.7

84.6

83.4

83.3

Return on equity

(%)

12.7

12.5

10.9

13.6

13.9

Price earnings ratio(Times)

36.2

47.9

55.6

37.2

33.6

Dividend payout ratio

(%)

43.8

43.3

47.4

44.3

50.5

Number of employees(Persons)

674

723

765

810

842

Total shareholder return

(%)

119.4

166.5

177.7

156.6

159.4

(%)

(84.0)(99.2)(106.6)(120.2)(117.2)Highest share price

(Yen)

5,880

6,500

6,690

7,270

6,480

Lowest share price

(Yen)

3,340

4,245

4,280

5,510

4,220

(Comparison indicators:
Dividend Included TOPIX)(Notes) 1. Diluted earnings per share is not shown since there are no dilutive shares.
2. The “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020), etc., are applied fromthe beginning of the current fiscal year. The “Accounting Standard for Revenue Recognition,” etc., issued on March 30,
2018 are applied from the beginning of the 60th fiscal year.
3. The “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16,2018), etc., are applied from the beginning of the 60th fiscal year, and the key management indicators for the 59th fiscal
year are those after retroactive application of the said accounting standard, etc.
4. Highest and lowest share prices are those recorded on the Prime Market of the Tokyo Stock Exchange from April 4, 2022,
while those recorded on the First Section of the Tokyo Stock Exchange before that date.

-3-

2. History
Month / Year
July 1960

Overview
Established Yutaka Beauty Chemicals Co., Ltd. in Higashi-yodogawa-ku, Osaka City, for the purpose of
manufacturing and selling (cold wave perm solutions, shampoos, etc.). A factory was also built at the same
location.

September 1963

Transferred the head office in Higashi-yodogawa-ku, Osaka City to Higashi-sumiyoshi-ku, Osaka City andshutdown the factory. Established Kire Factory in Higashi-sumiyoshi-ku, Osaka City.

January 1965
February 1969

Changed trade name to Milbon Co., Ltd. Transferred the head office to Asahi-ku, Osaka City in the next month.
Established Ueno Dai-Ichi Factory in Ueno City, Mie (currently Iga City, Mie), and shutdown Kire Factory.

May 1970
October 1975

Opened Tokyo Branch in Minato-ku, Tokyo.
Established Ueno Dai-Ni Factory in Ueno City, Mie (currently Iga City, Mie).

June 1979
July 1980

Opened Osaka Branch in Miyakojima-ku, Osaka City, and established Osaka Studio in the same location.
Transferred Tokyo Branch to Shinjuku-ku, Tokyo, and established Tokyo Studio in the same location.

July 1982
March 1984

Opened Nagoya Branch in Naka-ku, Nagoya City, and established Nagoya Studio in the same location.
Established Training Center in Miyakojima-ku, Osaka City.

April 1984
March 1987

Started Field Person Strategy (first term employees were hired).
Started Milbon’s proprietary TAC Product Development System.

March 1991
October 1992

Transferred Training Center to Joto-ku, Osaka City.
Established Aoyama Factory in Aoyama-cho, Naga-gun, Mie (currently Iga City, Mie).

April 1993
June 1996

Launched NIGELLE to create natural design.
Registered shares as over-the-counter securities at Japan Securities Dealers Association.

April 1997

Transferred head office to Miyakojima-ku, Osaka City. Renovated the former head office and established Central
Research Institute.

April 1998
October 1998

Transferred Tokyo Branch from Shibuya-ku, Tokyo to Shinjuku-ku, Tokyo
Launched LISCIO, a hair straightening system using iron technology.

June 1999
May 2000

Launched DEESSE’S, hair care series that supports colored hair.
Established additional factory adjacent to Aoyama Factory in Aoyama-cho, Naga-gun, Mie (currently Iga City,

July 2000

Mie).
Listed shares on the Second Section of the Tokyo Stock Exchange.

November 2000
June 2001

Newly built the Training Center and company dormitory at Joto-ku, Osaka City.
Assigned to the First Section of the Tokyo Stock Exchange.

September 2002

Newly built the head office and Central Research Institute buildings and transferred from Asahi-ku, Osaka City to
Miyakojima-ku, Osaka City.

March 2004
December 2004

Established MILBON USA, INC. in New York.
Opened MILBON USA, INC. Studio in New York.

July 2005
December 2006

Established Yumegaoka Factory in Iga City, Mie.
Transferred Osaka Branch from Miyakojima-ku, Osaka City to Nishi-ku, Osaka City.

December 2006
April 2007

Raised the status of Fukuoka Sales Office to Fukuoka Branch.
Launched a hair color product “ORDEVE” that supports foil placement techniques.

November 2007
December 2008

Established Milbon Trading (Shanghai) Co., Ltd. in China.
Opened Milbon Trading (Shanghai) Co., Ltd. Studio in China.

June 2009
July 2009

Shutdown Ueno Dai-Ichi Factory in Iga City, Mie.
Established Production Technology Development Center in Yumegaoka Factory in Iga City, Mie.

July 2009
April 2010

Established Milbon Korea Co., Ltd. in South Korea and opened a Studio.
Launched a premium brand “Aujua,” born from Japanese climate, culture, and hair characteristics.

May 2012
December 2013

Established MILBON (THAILAND) CO., LTD. in Thailand.
Established MILBON (THAILAND) CO., LTD. production factory in Thailand.

March 2015
June 2016

Opened Tokyo Ginza Branch in Chuo-ku, Tokyo and opened a Studio.
Launched “Global Milbon,” a premium brand of 360 Degree Beautiful Hair.

September 2016
November 2016

Shutdown Aoyama Factory in Iga City, Mie.
Established additional factory adjacent to Yumegaoka Factory in Iga City, Mie.

-4-Month / Year

Overview

July 2017

Established KOSÉ Milbon Cosmetics Co., Ltd. (currently affiliate accounted for by the equity method) jointly

November 2017with KOSÉ Corporation.
Upgraded the premium brand “Aujua.”November 2017
December 2017

Transferred head office from Miyakojima-ku, Osaka City to Chuo-ku, Tokyo.
Changed settlement day from December 20 to December 31.

January 2018
September 2018

Raised the status of Saitama Sales Office to Saitama Branch.
Established MILBON MALAYSIA SDN. BHD. in Malaysia.

October 2018
January 2019

Established MILBON VIETNAM CO., LTD. in Vietnam.
Raised the status of Hiroshima Sales Office to Hiroshima Branch.

April 2019
October 2019

Launched “iMPREA,” a premium cosmetics brand exclusive to hair salons
Established MILBON SINGAPORE PTE. LTD. in Singapore.

February 2020
July 2021

Established Milbon (Zhejiang) Cosmetics Co., Ltd. in China.
Transferred Tokyo Aoyama Branch from Shibuya-ku, Tokyo to Minato-ku, Tokyo

April 2022

Established Milbon Europe GmbH in Germany.

(Note) Studios are training venue for stylists.

-5-

3. Business Description
The Group consists of the Company, nine subsidiaries, and one affiliate, and is mainly engaged in the manufacture and sale ofcosmetic products, as well as related services.
The Group’s business is not described in terms of segments, as it consists of the above-mentioned single segment.
The Group classifies the products it manufactures or handles into the following five categories.
Category
Hair care products

Major items
Shampoo, conditioner, hair treatment, hair tonic, hair cream, liquid and foam hairdressing
product, set lotion, hair spray

Hair coloring products

Oxidative hair dye, acid hair dye, hair dye, hair bleach

Permanent wave products

Thioglycolic acid-based permanent wave product
Cysteine-based permanent wave product, hair straightening productCosmetic products

Skincare, make-up cosmetics

Other

Beauty equipment, etc.
The following diagram shows the positioning of the Milbon Group companies and the Group’s businesses.

(Diagram of business activities)(Note)

Overseas transactions differ in sales channels depending on the country.

-6-

4. Subsidiaries and Other Affiliated Entities
Company nameLocation

Capital stock or capital
contribution

United States
New York

USD 2 million

Main business

Share of voting
rightspercentage

Relationship with the Company

100.0

Sells the Company’s hair productsin the U.S.

100.0

Sells the Company’s hair products
in China.
Two executives hold concurrent
posts at the Company.

(Consolidated subsidiary)
MILBON USA, INC.
(Note 1)

Sale of hair products(Consolidated subsidiary)
Milbon Trading (Shanghai) Co.,
Ltd.
(Note 1)

China
Shanghai CityJPY 430 million

Sale of hair products(Consolidated subsidiary)
Milbon Korea Co., Ltd.
(Note 1)

South Korea
Seoul City

KRW 3,000 million

Sale of hair products

100.0

Sells the Company’s hair products
in South Korea.
Two executives hold concurrent
posts at the Company

Kingdom ofThailandRayong Pref.

THB 450 million

Manufacture and saleof hair products

100.0

Manufactures and sells theCompany’s hair products in
Thailand.

Malaysia
Kuala Lumpur

MYR 1.5 million

Sale of hair products

100.0

Sells the Company’s hair products
in Malaysia.

VND 46,380 million

Sale of hair products

100.0

Sells the Company’s hair products
in Vietnam.

SGD 250,000

Sale of hair products

100.0

Sells the Company’s hair productsin Singapore.

China
Zhejiang

CNY 240 million

Manufacture and saleof hair products

100.0

Manufactures and sells theCompany’s hair products in China.
Two executives hold concurrent
posts at the Company.

Germany
Dusseldorf

EUR 2 million

Sale of hair products

100.0

Sells the Company’s hair productsin Germany.

(Consolidated subsidiary)
MILBON (THAILAND) CO.,LTD.
(Note 1)
(Consolidated subsidiary)
MILBON MALAYSIA SDN.
BHD.
(Consolidated subsidiary)
MILBON VIETNAM CO.,LTD.
(Note 1)

VietnamHo Chi Minh City

(Consolidated subsidiary)
MILBON SINGAPORE PTE.
LTD.

Singapore(Consolidated subsidiary)
Milbon (Zhejiang) Cosmetics
Co., Ltd.
(Note 1)
(Consolidated subsidiary)
Milbon Europe GmbH
(Note 1)

(Notes) 1. The company falls under the category of “specified subsidiary.”
2. In addition to the companies noted above, the Group has one equity-method affiliate.

-7-5. Employees(1) Consolidated Companies
As of December 31, 2022
Number of employees
1,097(Notes) 1. The number of employees refers to full-time employees and does not include 53 part-time employees, 25 associate
employees.
2. The Group is composed of a single segment, the manufacture and sale of cosmetics, and therefore, no segment-related
information is presented.
(2) The Company
Number of employees
842

Average age(years old)

Average length of service(years)35.5

As of December 31, 2022
Average annual salary(thousand yen)

10.8

7,190

(Notes) 1. The number of employees refers to full-time employees and does not include 53 part-time employees, 25 associate
employees, and 24 employees seconded from the Company to subsidiaries and affiliates.
2. The average annual salary includes bonuses and extra wages.
(3) Status of Labor Union
Although no labor union has been formed, the relationship between labor and management is amicable.

-8-II. Overview of Business
1. Management Policy, Business Environment, Issues to Address
Matters related to future developments that are mentioned in this section are judgments of the Group that were made as of theend of the fiscal year under review.
(1) Management policy
The Group is in the business of supporting beautiful lifestyles through hairstylists.
In order to establish long-term relationships of trust with its customers, the Group expresses its promise to them in its
corporate statement and the slogan has been established as a symbol of this.
Corporate Statement
To live beautifully.
It’s how we approach the world. It’s the one, single idea that drives us.
Our hair frames our personal beauty how it’s styled, how it feels, how it flows.
It sets the stage for the inner self we radiate. Everyone’s hair is unique, and everyone’s beauty is, too. Our purpose
is to help people find, embrace, and express their individuality to head out into each day confidently and gracefully,
and to live vibrantly.
For more than 50 years, professional stylists have been Milbon’s partners: we learn from and inspire each other.
What unites us is our passion for transforming everything we touch into something beautiful. Together, weconstantly push the boundaries of the global hair care industry.
Together, we help give people the confidence, sophistication, and grace with which they inspire the world.
Corporate Slogan
Find Your Beauty
We believe that the sources of corporate value for the Group are (i) to (iii) below.
(i) Sales capability = Field Person System
The Group has established a unique sales structure to support beauty salons and hairstylists. Rather than simply selling
products, we listen sincerely to the voices of beauty salons and end users, identify issues, and propose solutions. With
educational activities for beauty salons at the core, we contribute to the increase in sales and profits of beauty salons. We
call the sales department members who conduct such activities “Field Persons.”
In order to develop Field Persons, the Group conducts in-house training programs that last for nine months. In addition tobasic beauty techniques such as hair care, coloring, and perms, Field Persons develop various skills such as acquiring a broad
knowledge of the beauty industry, business analysis, and planning. This is the Group’s unique business model thatcompetitors cannot imitate.
(ii) Product development capability = TAC Product Development System
The Group’s unique “TAC (Target Authority Customer) Product Development System” develops beauty software andproducts while learning from successful hairstylists at beauty salons and end users.
Beauty salons and hairstylists that are by far the most popular with their customers by theme, such as salons with morehair color customers than other salons, salons with more hair care customers than other salons have successful techniques(philosophy, way of thinking, hair design, and beauty techniques). We standardize these successful techniques so that they
can be used in general beauty salons, and create products to support them.
(iii) Market strategy = Field Activity System
Growing beauty salons exist in any market environment. By concentrating the activities of Field Persons in beauty salonsthat are growing or have great potential for growth, we are developing marketing that allows the Group to grow with themeven when market conditions deteriorate.

-9-(2) Medium-Term Management Plan (2022-2026)
Starting from Fiscal Year 2022 (63rd fiscal year), the Group has formulated a Medium-Term Management Plan (2022-2026),“Stage for the Future,” looking ahead to the next future, and announced it on February 10, 2022.
The Group’s mid-term goal is to “become the leading manufacturer in Asia and top 5 in the world by elevating the value ofindustry professionals in the eyes of consumers and society at large.”
To realize our mid-term goal, in our global strategy, we view the global market as seven regions (Japan, Korea, Chinese
cultural sphere, ASEAN, North America, EU, and the Middle East), and as a long-term global strategy, we will work toestablish a development and production system for each region, responding to differences in hair quality, culture, and values,and contributing to the development of the local beauty industry.
On the other hand, in the Japanese market, in order to strengthen our business foundation, we will implement “Salon-based
Social Innovation,” a reform of the way beauty salons should be in response to the times, and will implement the “Beauty
Platform Plan,” a new form of beauty salon, and the “Sustainability Commitment: Five Key Challenges,” centered on therealization of spiritual enrichment through beauty.
The “Beauty Platform Plan” will be achieved through the promotion of the “Smart Salon Strategy,” which creates a place
for customer experience that integrates digital and real life, and the “Lifetime Beauty Care Strategy,” which is composed ofthree care concepts: hair care, skin care, and beauty health care.
We have set the following challenges as “Sustainability Commitment: Five Key Challenges” and are working on them: I.
Realize spiritual richness through beauty, II. Promote regenerative and recycling-oriented production and consumption
activities, III. Practice people-friendly procurement activities, IV. Establish a fair and flexible management structure, and V.
Realize work environments with enhanced job satisfaction.
Beyond the achievement of these goals, Milbon strives to achieve a sustainable community and society for people to live
beautifully, through collaboration with salons.
<Mid-term goal>
Aim to become the leading manufacturer in Asia and top 5 in the world by elevating the valueof industry professionals in the eyes of consumers and society at large.
<Mid-term policy>
Stage for the Future“Salon-based Social Innovation” × “Sustainability Commitment”
Milbon strives to achieve a sustainable community and society for people to live beautifully,
through collaboration with salons.

I. Realize spiritual richness through beauty
II. Promote regenerative and recycling-oriented production and consumption activities
III. Practice people-friendly procurement activities
IV. Establish a fair and flexible management structure
V. Realize work environments with enhanced job satisfaction- 10 -

(3) Issues to be addressed
The outlook for the economic environment is uncertain due to the prolonged situation in Ukraine and the impact of risingenergy costs and high prices, although a pick-up is expected, mainly in consumption activities, due to developments in socialand economic activities and the effects of various policies.
Under these circumstances, we are proceeding with the Medium-Term Management Plan (2022-2026).
In the global market, we view the global market as seven regions (Japan, Korea, the Chinese cultural sphere, ASEAN, North
America, EU, and the Middle East), and by advancing our system of local production and local consumption, we aim tominimize geopolitical and other risks and to provide products matched to the values and hair qualities of each region.
In the domestic market, we recognize the ongoing shrinking of the population, the acceleration of the digitalization of thesocial environment, and the changes in consumer mentalities resulting from the COVID-19 pandemic as issues which areimportant to address. The core of our domestic strategy is our “Beauty Platform Plan,” a new model for beauty salons. To
achieve this strategy, we are promoting specific measures under our two major strategies, the “Smart Salon Strategy” and“Lifetime Beauty Care Strategy.”
Under our “Smart Salon Strategy,” in January 2023 we will launch “Smart Salons,” a salon format that provides a new
product buying experience through diverse content that integrate digital technology and the real world. We plan to roll out amulti-stage Smart Salon project nationwide in collaboration with beauty salons with which Milbon’s new salon approach has
resonated.
Under our “Lifetime Beauty Care Strategy,” we are going beyond hair care alone, entering the skin care field in 2019 andprogressing into the beauty health care field. In this field, we plan to use our framework for collaborating with other companies
which possess unique skills and knowledge to create new beauty salon products and services.
At the same time, we will continue to promote initiatives aimed at realizing our “Sustainability Commitment: Five Key
Challenges” and work to resolve social issues.
Our results for the fiscal year under review and our targets for the final year of the Medium-Term Management Plan
(FY2026) are as shown below.
(Million yen)
Mid-Term End

FY2022
Results

FY2026% total sales

Target% total sales

Net sales

45,238100.0

58,000100.0

Domestic

35,33478.1

43,70075.3

Overseas

9,904

21.9

14,30024.7

Gross profit

29,50965.2

38,16065.8

21,95748.5

27,36047.2

Operating income

7,551

16.7

10,80018.6

Ordinary income

7,829

17.3

10,810

18.6

5,577

12.3

7,670

13.2

Selling, general andadministrative expenses

Profit attributable to owners ofparent- 11 -

2. Business Risks
Among the matters related to the business and financial status described in this document, the following are the main risks that the
management recognizes as having the potential to exert a significant impact on the financial position, operating results, and cash
flows of the Group.
The forward-looking statements in the text are based on judgments made by the Group as of the end of the fiscal year underreview, but are not limited to the items listed herein.
The Group defines matters with the potential to have a significant negative impact on the realization of our management
philosophy or our business continuity as “risks,” and has established a basic risk management policy to reduce the likelihood ofthese risks manifesting themselves and to prevent the expansion of damage in the event that a risk materializes and a crisis occurs.
The Group is working to develop and improve its risk management promotion system and framework.
Based on this policy, each business division and subsidiary reviews the “List of Risk Matters,” which summarizes the risks that
may arise in the Group. In addition, the Group identifies and responds to incidents arising from the conduct of business and reports
them on a quarterly basis to the Management Meeting, which is composed of the Internal Board Directors, the Standing Audit &Supervisory Board Member and the Executive Officers. During the fiscal year under review, the Corporate Administration
Department and business divisions worked together to address risks related to the global COVID-19 pandemic, protecting personal
information, ensuring product quality, sharing information appropriately with customers, difficulties with the procuring of raw
materials, rising costs, and the like. They prepared a system for reducing risk and they conducted activities such as clarifying andrevising rules and providing training to employees.
In addition, the Group has established the Risk Management Committee, which is chaired by the Representative Director,
President & CEO and composed of the Internal Board Directors, the Standing Audit & Supervisory Board Member and Executive
Officers. As a general rule, this committee meets three times per year. This committee identifies “company-wide risks,” i.e., risks
that should be addressed on a company-wide basis, taking into account the significance and priority of the risks surrounding theGroup, the likelihood and timing of the materialization of risks, the likelihood and impact of impeding the achievement of theMedium-Term Management Plan, etc., and appoints a person in charge of each company-wide risk from among the members of
the Risk Management Committee to implement countermeasures on a company-wide basis. The Risk Management Committee
reports to the Board of Directors semiannually on the progress made in responding to company-wide risks, and the Committee issubject to the supervision and monitoring of the Board of Directors.

- 12 -

The table below shows the company-wide risks which may affect the Group’s operating results, share price, financial position,etc., and the Risk Management Committee has selected as risks requiring company-wide deliberation and for which the committee
has considered countermeasures during the fiscal year under review.
Risk

Details of Risks
The Group possesses important

Risks Related to Confidential
Information Management

Main Initiatives
The Group strives to maintain credibility

information, such as business-relatedby, for example, responding quickly to thetransaction information and confidential

occurrence of information leaks and otherinformation, through its business activities.

risks and making public announcements

Unauthorized use of such information by

when necessary.

third parties due to theft or loss, violations

In the current fiscal year, we haveof laws and regulations, and otherreviewed and developed internal

unforeseen circumstances could result in

regulations and clarified internal rules on

incidents such as the disposal or corruption

the handling of confidential information.

of important data, information leakage, orsystem failure, which could have a material
impact on the Group’s operating results
and other matters.

Risks Related to the Governanceof Overseas Subsidiaries

The Group’s inadequate development of

The Group collects information on the

the Group and governance system, such as

laws and regulations of each country in

the formulation of Group strategies and thewhich our overseas subsidiaries aremonitoring and supervision of Group

expanding, identifies issues that need to becompanies, and the failure to fully

addressed in order to advance our business,demonstrate the effects of the management

and cooperates and shares this informationof Group companies, could have a material

with our subsidiaries as necessary.

impact on the Group’s operating results
and other factors.

In the current fiscal year, we haveestablished a system in which the parent
company regularly identifies issues
specific to each subsidiary to ensuresmooth information exchange between theparent company and its subsidiaries.

Risks Related to Appropriate
Information Dissemination to
Consumers

The Group strives to earn the trust of

The Group strives to maintain the trust

customers and consumers by complyingof the public by responding promptly towith various laws and regulations,the occurrence of inappropriate

developing and providing safe and high-information dissemination and other risks,quality products and services that meet theand making public announcements whenneeds of customers and consumers, andnecessary.

providing accurate information thatIn the current fiscal year, the Company

customers can use safely and withhas strengthened internal training andconfidence. However, if inappropriate

revised its system of prior review as an

expressions or inaccurate information are

initiative to prevent inappropriate

disseminated in the Group’s

expressions in the use of advertising andadvertisements, etc., it may damage thesocial networking sites.

Group’s reputation and materially affect
the Group’s operating results, etc.

- 13 -

Risk

Details of Risks
If a natural disaster such as a major

Risks Related to Large-Scale
Earthquakes and BusinessContinuity

Main Initiatives
We have formulated a Businessearthquake were to occur, or if unforeseen

Continuity Plan (BCP) aimed at quickly

circumstances were to cause a business

restoring production and logistics

continuity crisis, the Group’s operating

operations in the event of a natural disaster

results could be materially affected by such

such as a major earthquake or a businessfactors as the shutdown of the Group’s

continuity crisis due to unforeseen

factory, research institutes or offices, thecircumstances, and we regularly review theloss of the Group’s human resources,

plan.

delays in the production and shipment ofIn the current fiscal year, the Production

our products, delays in the development of

Headquarters reviewed the BCP for

new products, and a decline in productproduction and logistics and improved thesales due to our inability to provide ourcontent to be effective in the event of an

products to salons.

emergency.

- 14 -

3. Management Analysis of Financial Position, Operating Results and Cash FlowsThe summary of the financial position, operating results, and cash flows (below, “operating results, etc.”) of the Group (theCompany, its consolidated subsidiaries, and its equity-method affiliates) for the current fiscal year and analysis and discussion of
the Group’s operating results, etc., from the perspective of management are as follows.
Matters related to future developments that are mentioned in this section are judgments that were made as of the end of the
fiscal year under review.
(1) Analysis of operating results(i) Net sales and gross profit
Net sales for the current fiscal year were 45,238 million yen (up 8.8% year on year). This was primarily due to the growing
popularity in the domestic market of bleach-on-color and other double-process coloring, among people of a wide range ofages, and the growth of hair care needs resulting from this trend. In the hair care products category, sales of the premium
brand Aujua and of Global Milbon continued to be steady. In the hair coloring products category, sales rose significantly,
driven by Ordeve Addicthy and by the new ENOG brand, which was launched in June and which has succeeded in reachinga new demographic of users highly focused on design. In overseas markets, although sales in China were sluggish due tolockdowns, our market activities such as going onsite together with distributors and accompanied salon visits were wellreceived, and sales in the U.S. and Korea grew significantly.
Gross profit rose to 29,509 million yen (up 7.3% year on year). The ratio of gross profit to net sales was 65.2% (down
0.9% year on year) due to improvements in the productivity of domestic plants and the depreciation of the yen, despite theimpact of soaring raw material prices.
(ii) Selling, general and administrative expenses, and operating income
Selling, general and administrative expenses for the current fiscal year were 21,957 million yen (up 11.6% year on year).
This was mainly due to higher personnel costs resulting from an increase in headcount and salary raises, together withincreases in research and development expenses with the launch of R&D centers in China and Thailand. As a result, operating
income was 7,551 million yen (down 3.4% year on year).
(iii) Non-operating income/expenses, ordinary income
Non-operating income for the current fiscal year was 399 million yen and non-operating expenses were 121 million yen. As
a result, ordinary income was 7,829 million yen (up 9.4% year on year).
(iv) Extraordinary income/loss, profit attributable to owners of parent
Extraordinary income for the current fiscal year amounted to 1 million yen and extraordinary losses amounted to 7 million
yen. As a result, profit attributable to owners of parent was 5,577 million yen (up 9.2% year on year), and net income pershare was 171.49 yen.
A breakdown of net sales by product category, a breakdown of net sales into domestic and overseas sales, and production,orders, and sales results are shown below.
(Net sales by product category)(Million yen)Previous fiscal year

Current fiscal year

Category
AmountRatio (%)

AmountRatio (%)

Increase(decrease)amountYear-on-yearchange (%)

Hair care products

24,46658.8

26,312

58.2

1,846

7.5

Hair coloring products

14,813

35.6

16,631

36.7

1,817

12.3

Permanent wave products

1,449

3.5

1,450

3.2

0

0.0

Cosmetic products

579

1.4

572

1.3

(7)

(1.3)

Other

273

0.7

272

0.6

(1)

(0.5)

41,582100.0

45,238

100.0

3,656

8.8

Total

- 15 -

(Breakdown of net sales into domestic and overseas sales)(Million yen)Previous fiscal year
AmountCurrent fiscal year

Ratio (%)

AmountRatio (%)

Increase(decrease)amountYear-on-yearchange (%)

Domestic sales

33,64380.9

35,334

78.1

1,690

5.0

Overseas sales

7,938

19.1

9,904

21.9

1,965

24.8

Total

41,582100.0

45,238

100.0

3,656

8.8

(Production, orders, and sales results)(i) Production results
The following is a breakdown by product category for the current fiscal year.
(Thousand yen)
Product category

Current fiscal year
(From January 1, 2022
to December 31, 2022)

Change (%)

Hair care products

31,732,862

8.6

Hair coloring products

17,591,814

19.7

Permanent wave products

1,679,159

8.3

254,724(7.1)

51,258,561

12.1

Other
Total
(Note) Amounts are based on selling prices.

(ii) Order results
There are no applicable items because the Group conducts production on a prospective basis.

- 16 -

3) Sales results
The following is a breakdown by product category for the current fiscal year.
(Thousand yen)
Current fiscal year
(From January 1, 2022
to December 31, 2022)

Product category

Change (%)

Hair care products

26,312,862

7.5

Hair coloring products

16,631,187

12.3

Permanent wave products

1,450,096

0.0

Cosmetic products

572,085

(1.3)

Other

272,146(0.5)

45,238,377

8.8

Total
(Note)

Sales results by the major counterparty and the ratio of such sales results to total sales results for the two most recent fiscal
years are as follows.

Counterparty

Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Amount(million yen)

Current fiscal year
(From January 1, 2022
to December 31, 2022)
AmountRatio (%)

(million yen)

Ratio (%)

Topy Co., Ltd.

4,532

10.9

4,804

10.6

GAMO Co., Ltd.

3,628

8.7

3,810

8.4

BIC HOLDINGS Inc.

3,194

7.7

3,396

7.5

(2) Explanation of Financial Position
Total assets at the end of the fiscal year increased by 4,521 million yen from the end of the previous fiscal year to 52,760
million yen.
Current assets increased by 1,797 million yen from the end of the previous fiscal year to 26,698 million yen. The main
factors for the change were increases of 582 million yen in notes and accounts receivable - trade, 1,781 million yen inmerchandise and finished goods, and 638 million yen in raw materials and supplies, despite decreases of 1,050 million yen in
cash and deposits.
Non-current assets increased by 2,724 million yen from the end of the previous fiscal year to 26,061 million yen. This was
mainly due to an increase in land of 1,457 million yen associated with the purchase of land for the Human Resources
Development Center.
Current liabilities increased by 685 million yen from the end of the previous fiscal year to 7,996 million yen. The main
factor for the change was an increase of 526 million yen in accounts payable - other.
Non-current liabilities increased by 41 million yen from the end of the previous fiscal year to 772 million yen.
Net assets increased by 3,794 million yen from the end of the previous fiscal year to 43,991 million yen. The main factors
for the change were increases of 3,040 million yen in retained earnings and 915 million yen in foreign currency translation
adjustment due to the depreciation of the yen.
As a result, the equity ratio changed from 83.3% at the end of the previous fiscal year to 83.4%. Net assets per share basedon the total number of shares outstanding at the end of the period were 1,352.52 yen, compared with 1,236.41 yen at the endof the previous fiscal year.

- 17 -

(3) Cash Flows
Cash and cash equivalents (hereinafter, “funds”) at the end of the current fiscal year decreased by 1,054 million yen from theend of the previous fiscal year to 12,258 million yen.
The status of cash flows during the current fiscal year and the factors responsible are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities was 5,008 million yen. This was mainly due to profit before income taxes of 7,823
million yen, depreciation of 2,080 million yen, share of loss of entities accounted for using equity method of 112 million yen,
an increase in notes and accounts receivable-trade of 546 million yen, an increase in inventories of 2,148 million yen, andincome taxes paid of 2,456 million yen.
(Cash flows from investing activities)
Net cash used in investing activities was 3,865 million yen. This was mainly due to purchase of property, plant andequipment of 3,061 million yen and purchase of intangible assets of 761 million yen, which were proceeds from redemptionof investment securities of 200 million yen and payments for guarantee deposits of 285 million yen.
(Cash flows from financing activities)
Net cash used in financing activities was 2,578 million yen. This was mainly due to cash dividends paid of 2,534 million
yen.
(4) Significant accounting policies and estimates
The Group’s consolidated financial statements have been prepared based on accounting principles generally accepted in Japan.
In preparing the consolidated financial statements, the Group continually evaluates the estimates and judgments that affectthe reported items of assets and liabilities and the disclosure of contingent liabilities as of the balance sheet date, as well as thereported figures of revenues and expenses during the consolidated accounting period. However, actual results may differ fromcurrent estimates due to the occurrence of unforeseeable events and other factors.
Significant accounting policies adopted in the Group’s consolidated financial statements are described in Notes to theConsolidated Financial Statements (Significant matters that serve as the basis for preparation of consolidated financial
statements) of “V. Financial Information, 1. Consolidated Financial Statements, etc., (1) Consolidated Financial Statements.”(5) Recognition, analysis and discussion of the status of operating results
Factors affecting the Group’s management are described in “II. Overview of Business, 2. Business Risks.”(6) Sources of capital and liquidity of funds
The Group’s capital needs are primarily working capital needs and capital expenditure needs.
The working capital needs are mainly due to the Group’s production costs, such as the purchase of raw materials, andoperating expenses, such as selling, general and administrative expenses. Capital expenditure needs are mainly for the purchaseof fixed assets for the establishment of new bases, relocation and expansion of existing bases, and acquisition of production
facilities. For general investment of surplus funds, the Company selects investment instruments with safety as the primaryconsideration.
(7) Objective indicators for judging the achievement of management policy, management strategy, or management objectives
The Group’s management policy is described in “II. Overview of Business, 1. Management Policy, Business Environment,
Issues to Address, (1) Management policy.”
The results for Fiscal Year 2022 are net sales of 45,238 million yen (3.0% up from the target), operating income of 7,551
million yen (0.0% up from the target), ordinary income of 7,829 million yen (5.7% up from the target), and profit attributableto owners of parent of 5,577 million yen (6.6% up from the target).

- 18 -

The plan for Fiscal Year 2023 is net sales of 49,200 million yen (up 8.8% year on year), operating income of 8,300 million
yen (up 9.9% year on year), ordinary income of 8,250 million yen (up 5.4% year on year), and profit attributable to owners ofparent of 5,800 million yen (up 4.0% year on year).
The plan and results for Fiscal Year 2022 and the plan for Fiscal Year 2023 are as follows.
(Million yen)
FY2022Composition

FY2022Composition

Plan

(%)

Results(%)

Increase

Year-on-(decrease)year

amountchange (%)

FY2023Composition

Plan

(%)

Net sales

43,900100.045,238

100.0

1,338

3.0

49,200100.0

Domestic

35,15080.1

35,334

78.1

184

0.5

38,021

77.3

Overseas

8,750

19.9

9,904

21.9

1,154

13.2

11,17922.7

Gross profit

29,14066.4

29,509

65.2

369

1.3

32,16065.4

Selling,

21,59049.2

21,957

48.5

367

1.7

23,860

48.5

7,550

17.2

7,551

16.7

1

0.0

8,300

16.9

7,410

16.9

7,829

17.3

419

5.7

8,250

16.8

5,230

11.9

5,577

12.3

347

6.6

5,800

11.8

general andadministrative
expenses
OperatingincomeOrdinary
incomeProfitattributable toowners ofparentInformation regarding the Medium-Term Management Plan is indicated in “II. Overview of Business, 1. Management
Policy, Business Environment, Issues to Address, (2) Medium-Term Management Plan (2022-2026).”- 19 -

4. Material Contracts, etc.
There were no significant decisions or agreements on material contracts, etc., during the current fiscal year.

- 20 -

5. Research and Development Activities
The Group conducts product development under the “TAC Product Development System,” a structure in which persons with ahigh level of beauty expertise, such as hairstylists who are supported by customers, are invited to participate as representatives of
their customers. The Group uses scientific methods to elucidate the sensible beauty know-how of hairstylists, such as design
creation, and create products that reflect this know-how using formulation technology.
In the current fiscal year, we strengthened business in the hair care field by focusing on basic and fundamental research, and we
also engaged in research and development activities with an emphasis on environmental friendliness from the perspective of thesustainability. In addition, we opened two more R&D centers, in China and Thailand. These join our Central Research Institute inJapan and the U.S. R&D center, which was established Fiscal Year 2021, bringing our total number of global R&D centers to four.
Going forward, we intend to respond to the changes in the world accelerated by the spread of COVID-19 and to develop local
products for overseas markets that match the characteristics of each region, in addition to our existing global products from Japan,
in order to create products that will please stylists and their customers around the world.
Total research and development expenses for the current fiscal year amounted to 2,074 million yen (4.6% of net sales), and themain research and development activities and achievements are as follows.
(1) Hair care field
By combining the latest hair research results with innovative formulation development technologies, we are developing saloncare products that achieve salon quality and essentially solve problems through stylists’ treatments, as well as home careproducts that propose the realization of beautiful hair in accordance with customers’ values and lifestyles.
Recently, we have been developing products that focus on hair damage caused by bleaching in line with the trend toward
high-brightness hair color designs. We have launched Mizulisse, a liquid treatment that instantly untangles bleached hair, andCOLOR GADGET Color Shampoo, which easily and beautifully dyes bleached hair. For wavy hair, we have launched
MYFORCE heat memory care, a treatment product that helps create manageable hair through day-to-day hair iron use. Fromthe premium brand Aujua, we launched Aujua EXSHIELD, which protects hair from the damage caused by everyday
particulate fouling, helps repair cuticle, and leads to glossy, supple hair. From Global Milbon, we have launched ENHANCING
VIVACITY, which addresses five different factors that cause hair loss.
(2) Hair color field
We are developing additional items that provide customers with new hair color designs and developing high-value-added
formulations based on the latest hair research results.
In the Ordeve hair color brand, we launched Glow line, which helps users shine while staying true to themselves throughthe line’s translucent yet deep colors. From Villa Lodola COLOR, we have released PALETTE series, which can be used toachieve translucent, vivid colors with less of a brown tone. For stylists who want to create their own unique hair color designs,
we have launched the new ENOG hair color brand, which enables stylists to control colors as they wish, just like mixing paint.
(3) Basic research field
In order to apply cutting-edge research to the development of products, we are actively promoting the use of SPring-8, a large
synchrotron radiation experimental facility that enables observation of hair and cells at the nano-level, as well as joint researchwith universities. The results are utilized in the development of new hair care brand products, such as Aujua and Global Milbon
products. As part of our Lifetime Beauty Care Strategy, we are also conducting research in the area of beauty health care, oneof our core fields.

- 21 -

III. Information about Facilities
1. Overview of Capital Expenditures
Capital expenditures (property, plant and equipment, and intangible assets) in the current fiscal year totaled 4,097 million yen. The
major components of the capital expenditures were the cost of acquiring land for the construction of the new Human Resources
Development Center, and the introduction of production facilities at Yumegaoka Factory.

2. Major Facilities(1) The Company
Major facilities are as follows.
As of December 31, 2022
Book value (thousand yen)
Office name
(Location)

Description offacilities

Head Office

Companywide(Chuo-ku, Tokyo)

administration

Jingumae Sales Office(Shibuya-ku, Tokyo)
Training Center /Dormitory(Joto-ku, Osaka City)

Sales and services
New hire training
and dormitory

Machinery,
Buildings andequipment andstructures
vehicles

Land
Area
(m2)

Other

Total

Numberofemployees

Amount180,378---496,964

677,34257

536,1700981

1,258,529

280,923

2,075,623

41

76,4420422

39,602

1,533

117,57710

880,507

11,3084,100

1,602,859

443,246

2,937,921

183

2,524,490

1,927,584

58,345

1,555,093

801,6216,808,789

162

379,582-542

423,8098,460

811,852

61

Central ResearchInstitute(Miyakojima-ku,

Research

Osaka City)
Yumegaoka Factory

Manufacture of(Iga City, Mie)hair products

Osaka Branch(Nishi-ku, Osaka City)

Sales and services(Notes) 1. “Other” under book value includes tool, furniture and fixtures, construction in progress, software and software in
progress.
2. The number of employees refers to full-time employees and does not include employees concurrently serving as officers,
part-time employees, associate employees, and employees seconded from the Company to subsidiaries and affiliates.
3. There are no major leased facilities under lease contracts.

- 22 -

(2) Overseas subsidiaries
As of December 31, 2022
Book value (thousand yen)Company Name

MILBON USA,
INC.

Office name
(Location)

Description offacilities

Head office

Head office(Shanghai) Co.,

(Shanghai City,

Ltd.

China)

Milbon Korea
Co., Ltd.

118,787

532

-

5,720

-

22,281

Total-

74,936

194,256

19--

19,18024,900

45

493

-

-

27,10149,87650

986,645

34,31324,000128,135

162,463

1,311,557

91

1,815,463

926,885--

391,062

3,133,411

23

Sales andservices

Head office(Seoul City, South
Korea)

Number of
employees

Other

services

United States)

Milbon Trading

Machinery,equipment
and vehicles

Sales and(New York, theLand

Buildings
andstructures

Sales andservices

Area
(m2)

AmountHead office

MILBON(THAILAND)
CO., LTD.

(Rayong Pref.,Manufacture

Kingdom ofand sales

Thailand)

Milbon(Zhejiang)

Head office

Manufacture

Cosmetics Co.,

(Zhejiang, China)

and sales

Ltd.

(Notes) 1. “Other” under book value includes tool, furniture and fixtures, construction in progress, leasehold interests in land andsoftware in progress.
2. The number of employees does not include the number of associate employees and part-time staff.
3. There are no major leased facilities under lease contracts.

3. Planned Addition, Retirement, and Other Changes of Facilities
The Group’s capital expenditures are planned by each group company based on future demand forecasts and new product plans.
Facility plans are formulated by consolidated companies in principle, while the overall plan is coordinated by the reporting
company.
Significant plans for the addition, refurbishment and retirement of facilities as of the end of the current fiscal year are as follows.
(1) Significant addition of facilities
Planned capital expenditures
Company name
Office name

Description of

Location

Milbon Co.,

Miyakojima-ku,

Ltd.

Osaka City

facilities(million yen)

Total

Amountamountalready paid

TBD

1,444

Method offund
procurement

Plannedstart date

Plannedend date

TBD

TBD

Land and building for
Human Resources
Development Center(2) Significant refurbishment
Not applicable.
(3) Significant retirement of facilities
Not applicable.

- 23 -

Own funds

IV. Information about Reporting Company
1. Company’s Shares, etc.
(1) Total number of shares, etc.
1) Total number of shares
Class

Total number of shares authorized to be issued (shares)

Common stock

120,408,000

Total

120,408,0002) Issued shares

Class

Name of financial
instruments exchange
Number of issued shareson which securities are
Number of issued shares
as of the end of thelisted or authorized
as of the submission date
Description
current fiscal year
financial instruments(March 29, 2023)(December 31, 2022)
business association towhich securities areregistered
Tokyo StockStandard shares with no restrictions

Common stock

33,117,234

33,117,234

Total

33,117,234

33,117,234(2) Share Acquisition Rights
1) Stock options
Not applicable.
2) Rights plans
Not applicable.
3) Other share acquisition rights
Not applicable.

- 24 -

Exchange(Prime Market)-

on shareholder’s rights
Number of shares per unit: 100 shares-(3) Exercises of bonds with share acquisition rights containing a clause for exercise price amendment
Not applicable.
(4) Changes in total number of issued shares, share capital and others
Changes in Balance of total
Changes in
Balance of
Changes in
Balance of
total number of number of
legal
legal capitalDateshare capital share capitalissued shares issued shares
capital surplus
surplus(thousand yen) (thousand yen)(shares)(shares)(thousand yen) (thousand yen)
January 1, 2018

(Note)

16,558,617

33,117,234-

2,000,000-

199,120(Note) The increase was due to the 2-for-1 stock split.
(5) Shareholding by shareholder category
As of December 31, 2022
Status of shares (Number of shares constituting one unit: 100 shares)
Category

Foreign corporations
Government
Financial
Financial
Other
Individuals
and local
serviceinstitutions
corporations Other thanand others
municipalities
providers
Individuals
individuals

Number ofshareholders
Number ofshares held

Total

Status ofshares lessthan oneunit(shares)

-

26

18

146

183

22

12,74013,135--

106,575

2,792

41,22588,882

63

89,763329,300

187,234

-

32.36

0.85

12.52

26.99

0.02

27.26

100

-

(Unit)
Percentage ofshareholdings(%)(Notes) 1. There are 591,511 treasury shares, of which 5,915 units are included in “individuals and others” and 11 shares are in“status of shares less than one unit.” The number of treasury shares of 591,511 is the actual number of shares substantiallyheld as of December 31, 2022.
2. The figures in “other corporations” and “status of shares less than one unit” above include 20 units and 68 shares,
respectively, held under the name of Japan Securities Depository Center, Inc.

- 25 -

(6) Major shareholders

Name/company name

The Master Trust Bank of Japan,
Ltd. (Trust account)

As of December 31, 2022
Percentage of shares
Number of shares
held to the total
heldnumber of issued(thousand shares)
shares (excluding
treasury shares) (%)

Address

2-11-3, Hamamatsucho, Minato-ku, Tokyo

5,783

17.78

2,571

7.91

2-1-1, Edobori, Nishi-ku, Osaka City, Osaka

1,920

5.90

1-8-12, Harumi, Chuo-ku, Tokyo

1,683

5.17

1-3-2, Marunouchi, Chiyoda-ku, Tokyo

1,328

4.08

2-3-35, Zengenji-cho, Miyakojima-ku, Osaka
City, Osaka

1,004

3.09

Suita City, Osaka

865

2.66

2-2-1, Kyobashi, Chuo-ku, Tokyo

605

1.86

Keiko Murai

Miyakojima-ku, Osaka City, Osaka

483

1.49

Maiko Kitajima

Toyonaka City, Osaka

482

1.48

16,72751.42

SSBTC CLIENT OMNIBUS
ACCOUNT(Standing proxy: Custody
Services Department, Tokyo
Branch, The Hongkong and

One Lincoln Street, Boston, MA U.S.A. 02111(3-11-1, Nihombashi, Chuo-ku, Tokyo)

Shanghai. Banking Corporation
Limited)Konoike Asset Management
Company
Custody Bank of Japan, Ltd.
(Trust account)
SMBC Trust Bank Ltd.
Designated Securities Trust
MILBON Cooperating
Companies Shareholding
Association
Kazunobu Konoike
MILBON Employee Stock
Ownership Association

Total

-

(Notes) 1. The above numbers of shares held by banks include the following shares held in connection with their trust business.
The Master Trust Bank of Japan, Ltd.
Custody Bank of Japan, Ltd.

5,783 thousand shares
1,683 thousand shares

SMBC Trust Bank Ltd.

1,328 thousand shares- 26 -

2. Although the report of large volume holding (change report) made available for public inspection on April 6, 2022
states that Sumitomo Mitsui Trust Bank, Limited held the following shares as of March 31, 2022, since the Company
is not able to confirm the actual number of shares held as of the end of the current fiscal year, these shares are notincluded in the status of major shareholders above.
The details of the report of large volume holding (change report) are as follows:

Name/company name

Address

Number of sharecertificates, etc. held
(thousand shares)

Percentage ofshares held(%)

Sumitomo Mitsui Trust AssetManagement Co., Ltd.

1-1-1, Shibakoen, Minato-ku, Tokyo

959

2.90

Nikko Asset Management Co., Ltd.

9-7-1, Akasaka, Minato-ku, Tokyo

399

1.21

1,358

4.10

Total

-

3. Although the report of large volume holding (change report) made available for public inspection on April 22, 2022
states that NIPPON LIFE INSURANCE COMPANY held the following shares as of April 15, 2022, since the Company
is not able to confirm the actual number of shares held as of the end of the current fiscal year, these shares are notincluded in the status of major shareholders above.
The details of the report of large volume holding (change report) are as follows:

Name/company name

Address

Number of sharecertificates, etc. held
(thousand shares)

Percentage ofshares held(%)

NIPPON LIFE INSURANCECOMPANY

3-5-12, Imabashi, Chuo-ku, Osaka City,
Osaka

371

1.12

Nissay Asset Management
Corporation

1-6-6, Marunouchi, Chiyoda-ku, Tokyo

1,399

4.23

1,770

5.35

Total

-

- 27 -

(7) Voting rights
1) Issued shares
As of December 31, 2022
Category

Number of shares (shares) Number of voting rights

Description

-

-

-

-

-

-

-

-

-

Shares with no voting rights
Shares with restricted voting rights(Treasury shares, etc.)
Shares with restricted voting rights(Other)(Treasury shares)

Shares with full voting rights(Treasury shares, etc.)

Commonstock

591,500

Shares with full voting rights (Other)

Commonstock

32,338,500

CommonShares less than one unit

stock

Total number of issued sharesStandard shares with no restrictions-

on shareholder’s rights
323,385

Same as the above

187,234--

33,117,234--

Number of voting rights held by all-

shareholders

323,385-(Notes) 1. The figures in “shares with full voting rights (other)” and “shares less than one unit” include 2,000 shares (20 voting
rights) and 68 shares, respectively, held under the name of Japan Securities Depository Center, Inc.
2. The number of shares in “shares less than one unit” includes 11 treasury shares held by the Company.
2) Treasury shares, etc.

Name/company name ofshareholder(Treasury shares)
Milbon Co., Ltd.
Total

Address of shareholder

As of December 31, 2022
Number of
Number of
Ratio of number ofshares held
Total number
shares held undershares held to total
under the names of shares held
own name
number of issuedof others(shares)(shares)shares (%)(shares)

2-3-35, Zengenji-cho,Miyakojima-ku, Osaka City

591,500-

591,500

1.79-

591,500-

591,500

1.79- 28 -

2. Acquisition and Disposal of Treasury SharesClass of Shares, etc.: Redemption of common stock in accordance with Article 155, Item 7 of the Companies Act(1) Acquisition by resolution of General Meeting of Shareholders
Not applicable.
(2) Acquisition by resolution of Board of Directors’ Meeting
Not applicable.
(3) Acquisition not based on resolution of General Meeting of Shareholders or Board of Directors’ Meeting
Redemption in accordance with Article 155, Item 7 of the Companies Act
Category

Number of shares (shares)

Total amount (thousand yen)

Treasury shares acquired during the current fiscal year

238

1,350

Treasury shares acquired during the current term

82

466

(Note) The number of treasury shares acquired during the current term does not include the number of shares acquired as a result of
the purchase of shares less than one unit during the period from March 1, 2023 to the date of filing of this annual securities
report.
(4) Disposal of acquired treasury shares and number of treasury shares held
Current fiscal year
Category

Acquired treasury shares for which

Current term

Total amount ofdisposition(thousand yen)

Number of shares(shares)

Total amount ofdisposition(thousand yen)

Number of shares(shares)

-

-

-

-

-

-

-

-

-

-

-

-

Other

14,80750,832--

Number of treasury shares held

591,511-591,593-subscribers were solicited
Acquired treasury shares that werecanceled
Acquired treasury shares that weretransferred due to merger, share exchange,
share issuance, or company split(Notes) 1. The decrease in “other” for the current fiscal year is due to the disposal of treasury shares (number of shares: 14,787
shares, total amount of disposition: 50,763 thousand yen) pursuant to the resolution of the Board of Directors meeting
held on April 15, 2022, accompanying the introduction of the restricted share-based compensation plan, and due to thesale of shares less than one unit (number of shares: 20 shares, total amount of disposition: 68 thousand yen).
2. The status of disposal during the current term does not include the sale of shares less than one unit during the period fromMarch 1, 2023 to the date of filing of this annual securities report.
3. The number of treasury shares held during the current term does not include the purchase or sale of shares less than one
unit during the period from March 1, 2023 to the date of filing of this annual securities report.

- 29 -

3. Dividend Policy
The Company considers the return of profits to its shareholders as one of the management priorities, and upholds the basic policyof carrying out the performance-based distribution while working to reinforce its corporate structure by maintaining internal
reserves for achieving higher profitability in the future.
The decision-making body is the Board of Directors for the interim dividend and the General Meeting of Shareholders for the
year-end dividend, and the Company conducts two dividend payments per fiscal year.
With respect to the dividends for the current fiscal year, the Company decided to pay an annual dividend of 86 yen per shareafter comprehensively considering its financial position and profit level, among others. As a result, the payout ratio on aconsolidated basis for the current fiscal year was 50.2%.
The internal reserve will be used for enhancing the production capability and establishing and reinforcing new sales offices inorder to further strengthen the corporate structure.
The Company stipulates in its Articles of Incorporation that it is able to pay an interim dividend pursuant to the provisions in
Article 454, Paragraph 5 of the Companies Act.
(Note) Dividend of surplus distributed in the current fiscal year pursuant to Article 453 of the Companies Act
Interim dividend
Resolution by the Board of Directors: August 10, 2022
40 yen per share, totaling 1,301,032 thousand yen
Year-end dividend
Resolution at the General Meeting of Shareholders: March 29, 2023
46 yen per share, totaling 1,496,183 thousand yen- 30 -

4. Corporate Governance(1) Overview of corporate governance(i)
Basic views on corporate governancea. Basic approach to corporate governance
Maintaining a sound corporate governance framework and making improvements is one of the highest priorities of Milbon.
We have a strong commitment to upgrading the transparency, fairness and efficiency of management in order to achieve
steady growth in corporate value.
b. Fundamental policy
1) Shareholder rights and equality
We will disclose in a timely and accurate manner the information required for shareholders to exercise their rights. We
will also maintain a proper environment for shareholders to submit votes on resolutions and protect the rights andequality of foreign shareholders (including beneficial shareholders), minority shareholders, and all other shareholders.
2) Proper relationships with stakeholders other than shareholders
We will maintain proper relationships with customers, suppliers, employees, creditors, communities, the beauty salon
industry and all other stakeholders. We will also show respect for the rights, perspectives and ethical business operationsof stakeholders.
3) Suitable information disclosure and transparency
We will supply information about our financial condition, results of operations and other aspects of business operations
on a quarterly basis as prescribed in laws and regulations. We will also disclose all pertinent information about our
strategies, medium-term vision and other non-financial subjects. We will do everything possible to ensure that all of thisinformation is accurate and easy to understand for the purpose of facilitating a constructive dialogue with shareholders.
4) Responsibilities of the Board of Directors
The Board of Directors has an obligation to operate in the best interests of shareholders and to provide explanations fortheir actions. Consequently, the Board Directors are responsible for the following roles and duties, as well as other items,
for the purpose of achieving sustained growth, a consistent increase in corporate value, and improvements in earnings
and the return on capital.
• The Board Directors establish a corporate philosophy and medium-term vision, clearly define strategic goals andsupervise the necessary actions.
• The Board Directors establish frameworks for internal controls and risk management and provide support for
appropriate risk exposure decisions by senior executives.
• Milbon has an Audit & Supervisory Board. Audits are performed by the members of this Board, where the majorityof the members are from outside the Milbon Group. There is also a Nominations Committee and Compensation
Committee, each with a majority of Independent Outside Board Directors. The use of Independent Outside Audit &Supervisory Board Members and Independent Outside Board Directors makes it possible to perform highly effective
audits of the Board Directors from an objective standpoint.
5) Dialogues with shareholders
To contribute to the consistent growth of the Milbon Group and its corporate value, the Representative Director and theBoard Director in charge of Finance conduct a variety of investor relations activities. The objective is constructive
dialogues with shareholders and other stakeholders.
(ii)

Overview of corporate governance system and reasons for adopting the system
We have adopted the company with an Audit & Supervisory Board as our corporate governance structure. The basis of thestructure lies in the supervision and audits of the status of business execution of the Board of Directors by five Outside
Board Directors and Audit & Supervisory Board Members including two Outside Audit & Supervisory Board Members
who attend important meetings such as the Board of Directors meetings. During the 63rd term, 13 Board of Directors
meetings were held.
Finely detailed control activities are made possible through the coordination of the Internal Audit Department and the
Corporate Administration Department to promote companywide risk management activities and engage in activities todevelop and evaluate internal controls over financial reporting, thereby responding to the risks of each business division
while auditing and evaluating the status of business execution and making reports to the President and CEO.
We have also concluded advisory and other agreements with outside experts in each field and have been making efforts
to promote corporate governance and gather the information and know-how necessary to bolster its framework.
Furthermore, the Audit & Supervisory Board Members, the Internal Audit Department, the Corporate Administration- 31 -

Department, and the Accounting Auditor have strengthened their cooperation by engaging in exchanges of information,
when necessary, and voicing their views from their unique standpoints, and engaged in the establishment and reinforcementof an effective and efficient corporate governance structure.
We have established the Nominations and Compensation Committees as voluntary committees, the majority of themembers of which comprise Independent Outside Board Directors. The Nominations and Compensation Committeesdeliberate executive appointments and executive compensation, and make recommendations to the Board of Directors,
after which the Board of Directors deliberates and determines the nomination and compensation proposals based on such
recommendations.
The members of the Nominations and Compensation Committees are as follows:
Chairman: Shoichiro Takahata, Board Director
Members: Masahiro Murai, Managing Executive Director; Taizo Hamaguchi, Board Director; Tsuneko Murata,
Board Director; Etsuhiro Takato, Board Director; and Chisa Hayakawa, Board Director
Furthermore, in Fiscal Year 2022, we established the Governance Committee as a new voluntary committee, in addition
to the above Nominations and Compensation Committees. The Governance Committee conducts deliberations regarding
medium- and long-term themes in order to contribute to the improvement of our corporate governance, reports its progress,
and submits matters to be discussed as necessary, to the Board of Directors.
The members of the Governance Committee are as follows:
Chairman: Ryuji Sato, President & CEO
Members: Masahiro Murai, Managing Executive Director; Hidenori Sakashita, Board Director; and Etsuhiro
Takato, Board Director
We have elected five Outside Board Directors and two Outside Audit & Supervisory Board Members in order tostrengthen the function of oversight of the Board of Directors, which has been entrusted with the function of management
decision-making. In terms of corporate governance, we recognize that the function of objective and neutral monitoringfrom the outside is essential and has thus maintained the current structure in the belief that the function of monitoring fromthe outside has become fully functional as a result of the oversight and auditing by the five Outside Board Directors andthe two Outside Audit & Supervisory Board Members.
[Corporate Governance System]- 32 -

(iii) Other matters regarding corporate governancea. Development status of the internal control system and the risk management framework
Based on the Basic Policy for the Establishment of the Internal Control System, we manage various risks that impact theefficiency and the effectiveness of management, while ensuring the reliability of financial reporting and making efforts topromote compliance.
1) Risk management
Based on the Basic Rules of Risk Management, we have designated the Corporate Administration Department as thesecretariat to promote activities to monitor, evaluate, and respond to risks that impact the efficiency and effectivenessof management, risks that inhibit the reliability and appropriateness of financial reporting, and compliance-related risks.
In Fiscal Year 2022, we established the Risk Management Committee, which is chaired by the President and CEO,and composed of the Internal Board Directors, the Standing Audit & Supervisory Board Member, and Executive
Officers. Based on the Risk Management Basic Policy defined in the Basic Rules of Risk Management, the Risk
Management Committee identifies company-wide risks, i.e., risks that should be addressed on a company-wide basis,
and appoints a person in charge of each company-wide risk from among the members of the Risk Management
Committee to implement countermeasures on a company-wide basis.
2) Ensuring the reliability of financial reporting
We are engaged in the development of internal controls over financial reporting by designating the Internal Audit
Department as the secretariat. In addition, by utilizing the information acquired through such activities, we are proposing
and promoting improvements to the operational and information systems, in an effort to further enhance reliability.
3) Promotion of complianceIn addition to the audit conducted by the Audit & Supervisory Board Members on the legal compliance of the Board of
Directors, the Internal Audit Department and the Corporate Administration Department are promoting activities to grasp
the status of compliance in the business execution of each business division. Furthermore, the points for improvementthat have come to light are reported to the Board of Directors as necessary, and incorporated into the aforementioned
risk management activities, in an effort to further strengthen compliance.
b. System for ensuring the adequacy of Group operations, including the Company, its parent, and its subsidiaries
1) System for reporting to Milbon on matters related to the execution of duties by the Board Directors, etc., of thesubsidiaries
A system for reporting matters related to the execution of duties by the subsidiaries to Milbon has been establishedthrough the periodic submission of financial reports and activity reports to the Board of Directors of Milbon from eachsubsidiary.
2) Regulations and other systems concerning the management of the risk of loss of subsidiaries
The Corporate Administration Department serves as the division in charge, pursuant to the Basic Rules of Risk
Management and the Rules on the Management of Subsidiaries, to gather information and analyze the risks of eachsubsidiary and report to the Board of Directors. The Corporate Administration Department develops rules, conducts
training, and prepares and distributes manuals, as necessary. Each subsidiary also updates the risk management tableeach year and formulates policies to mitigate risk. In the event that a material risk emerges, each subsidiary immediately
notifies the Corporate Administration Department, which will implement responses including the establishment of atask force, as necessary.
3) System for ensuring the efficient execution of duties by the Board Directors, etc., of subsidiaries
By implementing the Rules on the Division of Duties, a system is established to enable the appropriate and efficient
execution of duties by the Board Directors, etc., of the subsidiaries. Furthermore, pursuant to the Rules on theManagement of Subsidiaries, subsidiaries are required to obtain the approval of their business plans from Milbon’sBoard of Directors each year and periodically submit financial reports and activity reports to Milbon’s Board of
Directors. Milbon provides various support to the subsidiaries as necessary, and ensures the efficiency of the duties of
the Board Directors, etc., of the subsidiaries.
4) System for ensuring that the execution of duties by the Board Directors, etc., and the employees of the subsidiaries
comply with laws, regulations, and the Articles of Incorporation
Pursuant to the Rules on the Management of Subsidiaries and the employment regulations of each subsidiary, the rules
concerning compliance serve as the code of conduct in taking actions in compliance with laws, regulations, the Articles
of Incorporation and social norms by the executives and employees, and are thoroughly communicated to all executives
and employees, while training is conducted as necessary, to ensure compliance. The Corporate Administration Divisionmonitors the compliance-related problems and issues of each subsidiary and provides support as necessary. In addition,- 33 -

the Audit & Supervisory Board Members and the Internal Audit Department conduct auditing activities on thesubsidiaries and make efforts for the early detection of compliance-related problems.
c. Overview of the liability limitation agreement
In accordance with the provisions of Article 427, paragraph 1 of the Companies Act and Article 34 paragraph 2 of the
Articles of Incorporation, we have entered into an agreement with all Outside Board Directors and all Audit & Supervisory
Board Members to limit their liability provided for in Article 423, paragraph 1 of the Companies Act. The maximum
amount of liability for damages under this agreement is the minimum liability amount set forth in Article 425, paragraph
1 of the Companies Act.
d. Overview of the indemnification agreement
We have entered into an indemnification agreement with all Board Directors and all Audit & Supervisory Board Membersin accordance with the provisions of Article 430-2, paragraph 1 of the Companies Act. The agreement indemnifies themagainst the expenses indicated in Item 1 and the losses indicated in Item 2 of Article 430-2, paragraph 1 of the Companies
Act. However, to ensure that the Board Directors and Audit & Supervisory Board Members execute their duties in an
appropriate manner, the agreement does not provide coverage in the case of malice or gross negligence during the executionof their duties.
e. Overview of the Board Directors and officers liability insurance contract
We have entered into a Directors and Officers liability insurance with an insurance company in accordance with theprovisions of Article 430-3, paragraph 1 of the Companies Act, in which insurance shall cover damages and costs of dispute
resolutions that the Board Directors and Audit & Supervisory Board Members, who are the insured party, are otherwise tobear under law. All insurance premiums are paid by the company and will be renewed with the same coverage at the next
renewal.

- 34 -

(iv) Matters to be resolved by the General Meeting of Shareholders that may be resolved by the Board of Directors
a. Acquisition of treasury shares
The Company’s Articles of Incorporation provide that the Company may redeem its treasury shares by resolution of theBoard of Directors through market transactions or other means pursuant to Article 165, Paragraph 2 of the Companies Act,in order to flexibly carry out its management policies including capital policy in response to changes in the businessenvironment.
b. Exemption of liability of Board Directors and Audit & Supervisory Board Members
Pursuant to the provisions of Article 426, paragraph 1 of the Companies Act, to ensure that Board Directors and Audit &Supervisory Board Members fully perform their expected roles, the Company’s Articles of Incorporation stipulate that
Board Directors (including former Board Directors) and Audit & Supervisory Board Members (including former Audit &Supervisory Board Members) may be exempted from liability for damages referred to in Article 423, paragraph 1 of thesame Act, to the extent provided by laws and regulations by resolution of the Board of Directors.
c. Decision-making body for interim dividends
To flexibly distribute earnings to shareholders, the Company’s Articles of Incorporation stipulate that interim dividends
may be paid by resolution of the Board of Directors.
(v)

(vi)

Maximum number of Board Directors
The Company’s Articles of Incorporation stipulate that the number of Board Directors shall be no more than 15.
Requirements for resolution regarding election of Board Directors
The Company’s Articles of Incorporation provide that resolution for the election of Board Directors requires attendanceby shareholders with more than one-third of the voting rights of shareholders entitled to exercise voting rights, and isadopted by a majority of the votes of the shareholders present, and that the election of Board Directors shall not be
conducted by cumulative voting.

(vii) Requirements for special resolution at the General Meetings of Shareholders
The Company’s Articles of Incorporation provide that the special resolution at a General Meeting of Shareholders pursuant
to Article 309, Paragraph 2 of the Companies Act requires attendance by shareholders with more than one-third of thevoting rights of shareholders entitled to exercise voting rights, and is adopted by a majority, representing two-thirds ormore of the votes of the shareholders present. This arrangement aims to smoothly operate General Meetings ofShareholders by relaxing the quorum for special resolution at general meetings of shareholders.

- 35 -

(2) Board Directors(i)List of Board Directors
12 male Board Directors and two female Board Directors (Ratio of female Board Directors: 14.3%)
Title and position

Name

Date of birth

Ryuji Sato

October 18, 1959

December 2000
March 2002
December 2003
March 2008
March 1992
December 2001
March 2007
December 2009
December 2014

Managing Executive Director,
and in charge of Corporate
Administration, Internal
Audit, Finance, Corporate
Masahiro Murai
Communication, Quality
Assurance, and Sustainability
Promotion

January 2018

April 28, 1959

January 2020

January 2022

January 2023

April 1981
December 2006
March 2012
Board Director
Director of Development
Headquarters, and in chargeof Organic Business

December 2014
Yasufumi Takeda

January 19, 1959

Number ofshares held
(thousandshares)Joined the Company
General Manager of Products Produce
Dept.
General Manager of Marketing Dept.
Board Director and General Manager ofMarketing Dept.
Managing Executive Director
Representative Director, President &CEO (current position)(Note) 1

26

Joined the Company
General Manager of Corporate
Administration Dept.
Board Director and General Manager ofCorporate Administration Dept.
Managing Executive Director, and in
charge of Corporate Administration
Managing Executive Director, and in
charge of Corporate Administration,
Corporate Strategy Development, andCS Promotion
Managing Executive Director, and in
charge of Corporate Administration,
Corporate Strategy Development, andInternal Audit
Managing Executive Director, and in
charge of Corporate Administration,
Corporate Strategy Development,Internal Audit, Finance, and Cosmetics
Business PlanningManaging Executive Director, and in
charge of Corporate Administration,
Internal Audit, Finance, andSustainability Promotion
Managing Executive Director, and in
charge of Corporate Administration,
Internal Audit, Finance, Corporate
Communication, Quality Assurance,
and Sustainability Promotion (current
position)(Note) 1

55

Joined the Company
General Manager of Central ResearchInstitute
Board Director and General Manager ofCentral Research Institute
Board Director and General Manager ofDevelopment Headquarters
Board Director and General Manager ofDevelopment Headquarters, and in
charge of Business Development
Board Director and General Manager ofDevelopment Headquarters, and in
charge of Organic Business (current
position)(Note) 1

41

Career summary
April 1981
December 1999

Representative Director,
President & CEO

Term ofofficeJanuary 2021

January 2022

- 36 -

Title and position

Name

Date of birth
April 1992
March 2004
October 2010
December 2011
March 2012

Board Director
Director of Production
Headquarters

Kazunobu
Konoike

December 2013
November 8, 1969
January 2018

January 2022

January 2023

Board Director
Director of FP Headquarters,
and in charge of FP Global
Sales and Marketing,
Education Planning

April 1992
December 2005
December 2007
December 2009
January 2019
Junji Morimoto

July 17, 1967
January 2021
March 2022

April 2001
October 2010
January 2018
Board Director,
and in charge of Corporate
Strategy Development, ICTStrategies, KOSÉ Milbon
Cosmetics

March 2022
Hidenori
Sakashita

Term ofofficeNumber ofshares held
(thousandshares)Joined the Company
President of MILBON USA,INC.
General Manager of Corporate Planning
Dept.
General Manager of Corporate Strategy
Development Dept.
Board Director and General Manager ofCorporate Strategy Development Dept.
Board Director and General Manager ofInternational Sales Dept. II
Board Director and General Manager ofInformation System Dept. and in chargeof CS Promotion
Board Director and Director of
Production Headquarters, and in chargeof CS Promotion
Board Director and Director of
Production Headquarters (current
position)(Note) 1

865

Joined the Company
General Manager of Tokyo Branch
General Manager of Osaka Branch
General Manager of Tokyo Branch
Executive Officer, General Manager ofTokyo Aoyama Branch, FP
Headquarters
Executive Officer, Director of FP
Headquarters
Board Director and Director of FP
Headquarters, and in charge of FP
Global Sales and Marketing, Education
Planning (current position)(Note) 1

6

Joined the Company
President of MILBON USA, INC.
General Manager of Corporate Strategy
Development Dept.
Board Director and General Manager ofCorporate Strategy Development Dept.,
and in charge of Cosmetics Business
Planning, ICT Strategies
Board Director, and in charge ofCorporate Strategy Development, ICTStrategies, KOSÉ Milbon Cosmetics(current position)(Note) 1

1

Career summary

February 3, 1976
January 2023

- 37 -

Title and position

Name

Date of birth
April 1975
October 1986

Board Director

Shoichiro
Takahata

January 4, 1953

April 1993
March 2005
March 2016
April 1973
October 1977
June 2004
December 2004
June 2014

June 2015
Board Director

Term ofofficeNumber ofshares held
(thousandshares)Joined Japan Finance Corporation for
Small and Medium Enterprise
Registered as certified public
accountant
General Manager of Corporate Strategy
Research Institute (current position)
Audit & Supervisory Board Member of
the Company
Outside Board Director of the Company(current position)(Note) 1

2

Joined Ataka & Co., Ltd.
Joined ITOCHU Corporation
Executive Officer of ITOCHU
Corporation
President and CEO of ITOCHUSHOKUHIN Co., Ltd.
Chairman, Director and Executive
Officer of ITOCHU-SHOKUHIN Co.,
Ltd.
Chairman of ITOCHU-SHOKUHIN
Co., Ltd.
Outside Board Director of the Company(current position)
Representative Director, President andExecutive Officer of ITOCHUSHOKUHIN Co., Ltd.
Director and Adovisor of ITOCHUSHOKUHIN Co., Ltd.
Executive Director of ITOCHUSHOKUHIN Co., Ltd.
Outside Director of EPARK, Inc.

(Note) 1

2

Career summary

Taizo Hamaguchi October 29, 1950
March 2016
June 2016

June 2017
June 2019- 38 -

Title and position

Name

Date of birth

Career summary
April 1982

May 2003

April 2007

June 2008

February 2010

July 2013

Board Director

Tsuneko Murata September 27, 1958 January 2014
January 2016
June 2018

June 2019

March 2021

Joined Matsushita Electric IndustrialCo., Ltd. (currently Panasonic
Corporation)
General Manager, Legal Affairs
Department, Panasonic System
Solutions of Matsushita ElectricIndustrial Co., Ltd.
Senior Councilor & General Manager,
Legal Affairs & CSR Department ofHome Appliances Company ofMatsushita Electric Industrial Co., Ltd.
Member of Board of Directors of
Matsushita Facilities Net Services Co.,
Ltd. (currently Panasonic Appliances
Safety Service Co., Ltd.)
Director for Lifelong Learning Policy,
Ministry of Education, Culture, Sports,
Science & Technology Japan
Senior Councilor of Corporate Legal
Affairs Division of Panasonic
Corporation
Executive Director of Japan Pension
Service
Auditor of Japan Pension Service
Member of the Audit and Supervisory
Board of Japan Finance Corporation
Outside Director and Audit andSupervisory Committee member of
ADVANTEST CORPORATION
Director (Outside director), Audit &Supervisory Committee Member of
Fujikura Ltd.
Outside Board Director of the Company(current position)

June 2021

Outside Director of Kakuyasu Group
Co., Ltd. (current position)

June 2022

External Director serving as Audit andSupervisory Committee Member ofTOKYO SEIMITSU CO., LTD.
(current position)
Outside Director, Audit & Supervisory
Committee Member of Sun Frontier
Fudousan Co., Ltd. (current position)- 39 -

Term ofofficeNumber ofshares held
(thousandshares)(Note) 10

Title and position

Name

Date of birth

Career summary
April 1979
August 2002
July 2007

June 2009

June 2013

January 2015
Board Director

Etsuhiro Takato

February 6, 1957
June 2015
June 2016
September 2016
June 2017
June 2019
June 2021
March 2022
April 2022
June 2022- 40 -

Joined Ajinomoto Co., Inc.
President of PT AJINOMOTOINDONESIA
General Manager of Umami Seasoning
for Processing at Amino Acid Company
Division of Ajinomoto Co., Inc.
Executive Officer of Ajinomoto Co.,Inc.
President of AJINOMOTO DO
BRASIL INDÚSTRIA E COMÉRCIODE ALIMENTOS LTDA.
Director and Managing Executive
Officer of Ajinomoto Co., Inc.
President of AJINOMOTO CO.
(THAILAND) LTD.
President of ASEAN Region
Management Company of AjinomotoCo., Inc.
Executive Officer & Senior Vice
President of Ajinomoto Co., Inc.
General Manager, Food Products
Division of Ajinomoto Co., Inc.
Outside Director of TOKAI DENPUN
CO., LTD.
Representative Director of AjinomotoCo., Inc.
Director of Ajinomoto Co., Inc.
Advisor of Ajinomoto Co., Inc. (current
position)
Outside Board Director of the Company(current position)
Outside Director of TOKYO VERDY,
Inc. (current position)
Outside Director of Seven Bank, Ltd.
(current position)

Term ofoffice(Note) 1

Number ofshares held
(thousandshares)-Title and position

Name

Date of birth
April 1991
March 1998
November 2002
July 2009
April 2011
April 2013

April 2014

April 2016
Board Director

Chisa Hayakawa

June 27, 1968

April 2017
April 2019
June 2020

April 2021

March 2022
April 2022

April 1988
December 2006
December 2007
December 2009
December 2011
March 2012
Standing Audit & Supervisory
Mitsuru Oshio
Board Member

December 16, 1965

Term ofofficeNumber ofshares held
(thousandshares)Joined Sanyo Securities Company
LimitedJoined FANCL CORPORATION
Registered as tax accountant
Joined Calbee, Inc.
Manager of Investor Relations Group ofCalbee, Inc.
Executive Officer and General Manager
of Investor Relations Department ofCalbee, Inc.
General Manager of Corporate Planning
Department and Investor Relations
Department of Calbee, Inc.
Deputy General Manager of East Japan
Sales Department of Calbee, Inc.
General Manager of East Japan Sales
Department of Calbee, Inc.
General Manager of Financial &Accounting Department of Calbee, Inc.
Outside Director of SHIBAURA
MACHINE CO., LTD. (current
position)
Executive Officer and General
Manager, Investor Relations, Financeand Accounting Division of Calbee, Inc.
Outside Board Director of the Company(current position)
Managing Executive Officer & CFO,
General Manager, Investor Relations,
Finance and Accounting Division ofCalbee, Inc. (current position)(Note) 10

Joined the Company
General Manager of Osaka Branch
General Manager of Fukuoka Branch
General Manager of Nagoya Branch
General Manager of Nagoya Branch
and Business Development Dept.
Board Director and General Manager ofNagoya Branch and Business
Development Dept.
Board Director and General Manager ofCorporate Strategy Development Dept.
and Business Development Dept.
Board Director and General Manager ofBusiness Development Dept.
Board Director and in charge ofBusiness Development
Standing Audit & Supervisory Board
Member (current position)(Note) 2

26

Career summary

December 2013

December 2014
January 2018
March 2021

- 41 -

Title and position

Name

Date of birth
March 1998

April 1998
March 2001
Audit & Supervisory Board
MemberKeisuke Endo

November 27, 1951

April 2008
April 2011
July 2018
March 2019

March 1976
July 2004
July 2006
July 2009
Audit & Supervisory Board
MemberYoshihiko Okuda

August 20, 1957

Term ofofficeNumber ofshares held
(thousandshares)Completed legal training at the Legal
Training and Research Institute of theSupreme Court
Registered as attorney-at-law
Outside Audit & Supervisory Board
Member of the Company (current position)
FY2008 Vice Chairman of Wakayama Bar
Association
FY2011 Vice Chairman of Wakayama Bar
Association
Human Rights Volunteers (The Ministry ofJustice)
Chairman of Wakayama Public Works Bid
Surveillance Committee(Note 3)66

Joined Fukuoka Regional Taxation Bureau
Associate Appeals Judge, Fukuoka Regional
Tax Tribunal
Deputy District Director, Kokura Tax Office
Professor, Technical Education Department,
National Tax College
District Director, Kanoya Tax OfficeDirector (Appeals Judge), Yokohama
Branch, Tokyo Regional Tax Tribunal
Director, Takamatsu Regional Tax Tribunal
Attached to the Commissioner’s Secretariat,
National Tax Agency
Registered as tax accountant
Outside Audit & Supervisory Board
Member of the Company (current position)(Note 3)-Career summary

July 2013
April 2015
April 2017
March 2018
June 2018
March 2020
Total

1,093

(Notes) 1. As of the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within two
years after March 29, 2022.
2. As of the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within four
years after March 30, 2021.
3. As of the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within four
years after March 26, 2020.
4. Board Directors Shoichiro Takahata, Taizo Hamaguchi, Tsuneko Murata, Etsuhiro Takato and Chisa Hayakawa are
Outside Board Directors.
5. Audit & Supervisory Board Members Keisuke Endo and Yoshihiko Okuda are Outside Audit & Supervisory Board
Members.
6. Board Director Kazunobu Konoike is the younger brother of the spouse of Managing Executive Director Masahiro Murai.

- 42 -

(ii)Outside officers
The Company has five Outside Board Directors and two Outside Audit & Supervisory Board Members. There is no special
interest between any of these outside officers and the Company except for having an ownership of the Company’s shares
described in (i) Board Directors and Officers.
Outside Board Director Shoichiro Takahata is a certified public accountant and he concurrently serves as the Presidentof the Corporate Strategy Research Institute. There is no capital relationship, important business relationship or any otherspecial interest between the research institute and the Company.
Outside Board Director Tsuneko Murata concurrently serves as an Outside Board Director of Kakuyasu Group Co., Ltd.,an External Director serving as an Audit and Supervisory Committee Member of TOKYO SEIMITSU CO., LTD., and an
Outside Director, Audit & Supervisory Committee Member of Sun Frontier Fudousan Co., Ltd. There is no capital
relationship, important business relationship or any other special interest between these companies and the Company.
Outside Board Director Etsuhiro Takato concurrently serves as an Advisor of Ajinomoto Co., Inc., an Outside Directorof TOKYO VERDY, Inc., and an Outside Director of Seven Bank, Ltd. There is no capital relationship, important business
relationship or any other special interest between these companies and the Company.
Outside Board Director Chisa Hayakawa concurrently serves as an Outside Director of SHIBAURA MACHINE CO.,LTD. and the Managing Executive Officer & CFO, General Manager, Investor Relations, Finance and Accounting Divisionof Calbee, Inc. There is no capital relationship, important business relationship or any other special interest between thesecompanies and the Company.
Outside Audit & Supervisory Board Member Keisuke Endo is an attorney-at-law. There is no capital relationship,
important business relationship or any other special interest between him and the Company.
Outside Audit & Supervisory Board Member Yoshihiko Okuda is a certified public accountant and he concurrently
serves as the representative of Yoshihiko Okuda Tax Accountant Office. There is no capital relationship, important business
relationship or any other special interest between the tax accountant office and the Company.
The Company’s independence criteria for appointing Outside Board Directors and Outside Audit & Supervisory Board
Members are as follows: they must not have any special interest in other Directors, Audit & Supervisory Board Members,
or the Company; they must be independent; there must be no possibility of a conflict of interest with general shareholders;
and they must meet the independence criteria stipulated by the Companies Act and the Tokyo Stock Exchange. There isno special interest between the five Outside Board Directors and two Outside Audit & Supervisory Board Members andthe Company.
The five Outside Board Directors and two Outside Audit & Supervisory Board Members have been determined to haveno potential conflicts of interest with general shareholders and have been registered with the Tokyo Stock Exchange, Inc.
as independent officers as stipulated by the exchange.

(iii) Relationship between supervision or auditing by Outside Board Directors or Outside Audit & Supervisory Board Members
and mutual coordination with internal audits, audits by Audit & Supervisory Board Members, and accounting audits, aswell as the relationship with the internal control division
At Board of Directors meetings and other important meetings attended by Outside Board Directors and Outside Audit &Supervisory Board Members, important matters concerning the status of business execution by Board Directors, includinginternal audits, accounting audits, results of internal control development and evaluation, and the status of risk management
and compliance, are proposed and reported. As necessary, the Board Director in charge of Corporate Administration and
the Standing Audit & Supervisory Board Member provide information to Outside Board Directors and Outside Audit &Supervisory Board Members in the form of materials for the Board of Directors meetings.

- 43 -

(3) Audits(i)Status of audits by Audit & Supervisory Board Members
As of the date of submission of the Annual Securities Report, the Audit & Supervisory Board of the Company consists of
one Standing Audit & Supervisory Board Member and two Outside Audit & Supervisory Board Members who have no
special interest in the Company.
The Audit & Supervisory Board met eight times during the 63rd fiscal year, and both Standing and Outside Audit &Supervisory Board Members attended all of the meetings.
Outside Audit & Supervisory Board Member Keisuke Endo is an attorney-at-law and has a significant level of legal
knowledge. Outside Audit & Supervisory Board Member Yoshihiko Okuda is a certified public accountant and has asignificant level of knowledge of finance and accounting.
(ii)

Status of internal audits
The Company has set up the Internal Audit Department and its three staff members conduct audits of organizational
systems and business operations, as well as audits with a special mission directed by the President based on an annualinternal audit plan, and report to the President.
The Internal Audit Department and the Administration Department work together to formulate policies and specificmeasures for the development and operation of internal controls, conduct evaluation activities, support necessary
improvement activities in each department, and report their status to the Audit & Supervisory Board Members. In addition,
the Company confirms the adequacy of the maintenance and operation of internal controls through internal control audits.
Furthermore, the Company is working to strengthen the management oversight function and ensure objectivity andneutrality by regularly holding joint meetings of the Audit & Supervisory Board Members, Accounting Auditors, andInternal Audit Department to enhance the three-party audit.

(iii)

Accounting auditsa. Name of audit firm
GYOSEI & CO.
b. Continuous audit period: 31 years
c. Engagement certified public accountants
Engagement partner Takayuki Nakagawa
Engagement partner Toshiya Shinshimad. Other personnel engaged in assisting the accounting audit
Eleven certified public accountants and seven personnel who have passed the certified public accountant exam engage inassisting the accounting audit of the Company.
e. Policy and reasons for selecting audit firm
The Audit & Supervisory Board of the Company comprehensively evaluates and makes a decision on the selection of theaccounting auditor based on the “Practical Guidelines for Audit & Supervisory Board Members on the Evaluation of
Accounting Auditors and the Establishment of Selection Standards” published by the Japan Audit & Supervisory Board
Members Association, confirming the status of quality control, independence and expertise of the accounting auditor, theestablishment of an audit system, the specific audit plan and whether audit fees are reasonable and appropriate, as well as
audit results.
GYOSEI & CO. ensures the adequacy of the audit plan, audit method and audit implementation system, as well assmooth communication with the Company’s management (Board Directors, etc.), Audit & Supervisory Board and Internal
Audit Department.
The Audit & Supervisory Board will dismiss the Accounting Auditor with the unanimous consent of the Audit &Supervisory Board Member if the Accounting Auditor is deemed to fall under any of the items of Article 340, Paragraph
1 of the Companies Act. In this case, the Audit & Supervisory Board Member selected by the Audit & Supervisory Board
will report the dismissal of the accounting auditor and the reasons for the dismissal at the first General Meeting of
Shareholders convened after the dismissal.
f.

Evaluation of the audit firm by Audit & Supervisory Board Members and the Audit & Supervisory Board
The Audit & Supervisory Board of the Company has established standards for the evaluation and appointment ofaccounting auditors, and evaluates the work of the accounting auditor in each fiscal year in accordance with the standards.
The criteria set by the Company were met in the results of the evaluation.

- 44 -

(iv) Audit fees, etc.
a. Fees paid to the certified public accountants, etc.
Previous fiscal year
Category

Current fiscal year

Fees for audit services
Fees for non-audit
Fees for audit services
Fees for non-audit(thousand yen)services (thousand yen)(thousand yen)services (thousand yen)

Reporting company
Consolidated subsidiaries
Total

25,200-26,000

-

-

-

-

-

25,200-26,000-b. Fees for member firms of certified public accountants, etc. (excluding a.)
Not applicable.
c. Other important details of fees for audit service(Previous fiscal year)
Not applicable.
(Current fiscal year)
Not applicable.
d. Policy for determining audit fees
The Company’s audit fees to certified public accountants is determined by taking into consideration the reasonable numberof audit days, etc., based on the scale of the Company’s business.
e. Reasons the Audit & Supervisory Board’s consent to the fees, etc., of the accounting auditor
Based on the “Practical Guidelines for Cooperation with Accounting Auditors” of the Japan Audit & Supervisory Board
Members Association, the Audit & Supervisory Board has analyzed and evaluated the audit results for the previous fiscal
year and reviewed the audit fees and audit plan for the current fiscal year presented by the accounting auditor, and as aresult, has determined that the said fees, etc., are appropriate and gave consent to the terms of Article 399, Paragraph 1 of
the Companies Act.
(4) Compensation for Board Directors(i)Policy for determining amount or calculation method of compensation for Board Directors
a. Policy for determining amount of compensation for Board Directors
At its meeting held on March 11, 2022, the Company’s Board of Directors approved a policy for determining the details
of individual Board Director compensation. The Board of Directors consults the Nominations and Compensation
Committees on the details of the resolution to be adopted in advance and received a report from the Nominations andCompensation Committees. In addition, the Board of Directors has confirmed that the method of determining the detailsof compensation, etc., and the details of compensation, etc., determined for each individual Board Director for the relevant
fiscal year are consistent with such determination policy and that the report from the Nominations and Compensation
Committees is respected, and the Board of Directors has determined that such determination policy is in line with suchpolicy.
The details of the Company’s policy for determining the details of compensation, etc., for each individual Board
Director are as follows.
1) Basic policy for Board Director compensation
Compensation for Board Directors (excluding Outside Board Directors) shall consist of base compensation, performancelinked compensation, and stock-based compensation as an incentive to continuously increase corporate value, in order toencourage each Board Director to perform his/her duties with an awareness of business performance and sustainableimprovement of corporate value. The Board of Directors also consults the Nominations and Compensation Committees,
which are comprised mainly of Outside Board Directors, on proposed compensation amounts, and determines individualcompensation amounts after obtaining advice as necessary. Outside Board Directors and Audit & Supervisory Board
Members shall receive only base compensation, as they are independent from the execution of business operations, andcompensation linked to performance is not appropriate for them.
b. Method of calculating compensation for Board Directors (excluding Outside Board Directors)- 45 -

1) Basic compensation
The amount of basic compensation is determined in accordance with the Board Director’s position and paid in cash.
2) Performance-linked compensation
In order to raise awareness of the need to improve the Company’s performance in each fiscal year, performance-linked
compensation is calculated by adding up the percentage of achievement of each performance indicator target multipliedby the weighting ratio, and then multiplying the performance-linked coefficient corresponding to the percentage ofachievement of the target by the performance-linked standard amount corresponding to the position, and is paid in cash.
The performance indicators, performance-linked coefficients and actual performance-linked compensation are as follows.
<Performance indicator>
Consolidated net sales: Weight 60% / Consolidated operating profit: 30% / Consolidated profit: Weight 10%<Performance-linked coefficient>
Target achievement

Performance-linked coefficientOver 120%

200%

Over 115%, less than 120%

175%

Over 110%, less than 115%

150%

Over 105%, less than 110%125%Over 100%, less than 105%

100%

Over 95%, less than 100%

80%

Over 90%, less than 95%

50%

Less than 90%

0%

Fiscal year ended December 31, 2022
Performance indicator

Weight (%)
Target (Million yen)

Result (Million yen)

Achievement rate (%)

Consolidated net sales

43,90045,238

103.0

60.0

Consolidated operating
income

7,550

7,551

100.0

30.0

Consolidated profit

5,230

5,577

106.6

10.0

(Note) Target achievement rate for the fiscal year ended December 31, 2022: 103.0%x60%+100.0%x30%+106.6%x10%=102.5%
3) Stock-based compensation
Stock-based compensation is granted once a year (around May) with a restriction on transfer until retirement of theCompany’s shares equivalent to the amount obtained by multiplying the base compensation plus the performance-linked
compensation by 20%.
4) Ratio of compensation, etc., by typeThe ratio of each type of compensation for Board Directors (excluding Outside Board Directors) is as follows:
Basic compensation : Performance-linked compensation = 70% : 30%
Stock-based compensation = (Basic compensation + Performance-linked compensation)x20%- 46 -

(ii)Total amount of compensation, etc., by category of Board Director, total amount of compensation, etc., by type ofcompensation, and number of recipients of reporting company

Officer category

Board Director(excluding Outside Board

Total amount ofcompensation(thousand yen)

Total amount of compensation, etc., by type ofcompensation (thousand yen)

Number ofrecipients(persons)

Basic
compensation

Performancelinked
compensation

Stock-based
compensation

359,971

227,579

78,60053,7928

32,00432,004--

1

61,04461,044--

7

Director)
Audit & Supervisory Board
Member(excluding Audit &Supervisory Board Member)
Outside Officer(Note) At the 62nd Ordinary General Meeting of Shareholders held on March 29, 2022, it was resolved that the amount of cash
compensation for Board Directors shall be “no more than 500 million yen per year (including 70 million yen for Outside Board
Directors)” (not including employee salaries paid to Board Directors who concurrently serve as employees). The number ofBoard Directors as of the conclusion of said Ordinary General Meeting of Shareholders was 11 (including five Outside Board
Directors).
(iii)

Total amount of consolidated compensation, etc., by Board Director of the reporting company
Total amount of compensation, etc., by type of
Total amount ofcompensation (thousand yen)
OfficerCompany
compensation
Name
PerformanceBasic
Stock-based
category
category(thousand yen)
linkedcompensationcompensationcompensation
ReportingRyuji Sato
Board Director
66,951
24,00017,221
108,172
Company(Note) The above information only states those whose total amount of compensation, etc., is 100 million yen or more.

- 47 -

(5) Shareholdings(i)
Criteria for and approach to investment shares
The Company classifies shares as investment shares held for pure investment if they are held for the purpose of making
profit from changes in the value of shares or dividends on shares, and other shares as investment shares held for purposes(ii)

other than pure investment.
Investment shares held for purposes other than pure investment

a. Policy of shareholding, method for verifying the rationality of shareholding, and details of verification of the suitability ofholding individual shares by the Board of Directors, etc.
The Company’s policy is to hold only shares of business partners for which there is a rational reason, such as strengthening
ties in anticipation of business expansion. For rationality of holdings these shares, the Board of Directors makes acomprehensive judgment, and if the Board of Directors determines that there is no rationality in holding these shares, itwill consider such measures as reducing the number of shares held.
b. Number of individual shares and carrying amount
Number ofindividual shares

Carrying amount(thousand yen)

Unlisted shares--

Shares other than the above

1

1,730,400(Stocks whose number of shares increased in the current fiscal year)
Total acquisition cost
Number of
related to increase inindividual shares
number of shares(thousand yen)

Reasons for an increase in number of shares

Unlisted shares

-

-

-

Shares other than the above

-

-

-

(Stocks whose number of shares decreased in the current fiscal year)
Total sale price related to
Number of
decrease in number ofindividual sharesshares (thousand yen)
Unlisted shares--

Shares other than the above--- 48 -

c. Information on number of shares, amounts in the balance sheet, etc., of specified investment shares and deemed investment
shares by individual shares
Specified investment shares
Current fiscal year
Issuing company

Previous fiscal year

Number of shares
Number of shares(shares)(shares)
Purpose of holding, quantitative effect ofShareholding inholding, and reasons for increase in number ofAmounts in theAmounts in the
the Company
sharesconsolidated balance consolidated balance
sheetssheets(thousand yen)(thousand yen)
120,000

120,000

1,730,400

1,566,000

KOSÉ Corporation

Strengthening

collaborationforfuturebusiness expansion

Yes(Note) Although it is difficult to describe the quantitative holding effect, a comprehensive study of the holding effect was conducted,
taking into account a review of the cost of capital.
(iii)

Investment shares held for pure investment
Current fiscal year

Category

Number of individual
shares(Individual shares)

Previous fiscal year
Number of individual
shares(Individual shares)

Carrying amount(thousand yen)

Carrying amount(thousand yen)

Unlisted shares

528,4005

28,400Shares other than the above

5

16,934

6

16,207

Current fiscal year
Category

Total dividend income(thousand yen)

Total income (loss) fromsales (thousand yen)

Total unrealized gains(loss) (thousand yen)

Unlisted shares

192

-

-

Shares other than the above

188

448

14,276- 49 -

V. Financial Information
1. Method of Preparing Consolidated Financial Statements and Financial Statements(1) The Company prepares its consolidated financial statements in accordance with the “Regulation on Terminology, Forms, andPreparation Methods of Consolidated Financial Statements” (Ministry of Finance Order No. 28 of 1976).
(2) The Company prepares its financial statements in accordance with the “Regulation on Terminology, Forms, and Preparation
Methods of Financial Statements” (Ministry of Finance Order No. 59 of 1963; hereinafter referred to as the “Regulation on
Financial Statements”).
In addition, the Company falls under a special company submitting financial statements, and prepares its financial statements
pursuant to the provisions of Article 127 of the Regulation on Financial Statements.

2. Audit Certification
The Company’s consolidated financial statements for the fiscal year from January 1, 2022 to December 31, 2022 and the financial
statements for the fiscal year from January 1, 2022 to December 31, 2022 have been audited by GYOSEI & CO. in accordancewith the provisions of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act.

3. Special Efforts to Ensure the Appropriateness of Consolidated Financial Statements, etc.
The Company has undertaken special efforts to ensure the appropriateness of its consolidated financial statements, etc. Specifically,in order to develop a system for gaining proper understanding of the details of accounting standards, etc., or appropriately
responding to changes in such standards, the Company has joined the Financial Accounting Standards Foundation and regularlycollects information.

- 50 -

1. Consolidated Financial Statements, etc.
(1) Consolidated Financial Statements
1) Consolidated Balance Sheets(Thousand yen)Previous fiscal year
(As of December 31, 2021)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
LandConstruction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Net defined benefit asset
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets- 51 -

Current fiscal year
(As of December 31, 2022)

13,350,147

12,300,053*1, *2 4,673,258*1, *2 5,255,686

200,000
4,537,613
41,842
1,360,902
740,268(3,271)
24,900,761

6,319,121
39,927
1,999,103
784,924(185)
26,698,631

14,865,989(5,908,390)
8,957,598
8,336,484(5,495,871)
2,840,613
4,995,014
269,654
3,101,336(2,347,955)
753,381
17,816,262
1,516,714

15,437,304(6,423,189)
9,014,115
9,088,926(6,006,867)
3,082,059
6,452,228
453,7543,331,141(2,513,398)
817,742
19,819,899
1,902,217

1,610,607
32,527438,540
577,944
1,393,519(48,387)
4,004,752
23,337,729
48,238,490

1,775,734
7,425
56,180826,583
1,719,802(46,087)
4,339,639
26,061,755
52,760,387

(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - other
Income taxes payable
Provision for bonuses
Other
Total current liabilities
Non-current liabilities
Net defined benefit liability
Deferred tax liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets- 52 -

Current fiscal year
(As of December 31, 2022)

936,108
3,495,694
1,401,441
511,612*3 965,353
7,310,210

1,133,259
4,022,247
1,334,496
591,582*3 914,619
7,996,205

7,753
595
608,139
114,611731,099
8,041,309

10,628610
643,317
117,875
772,4318,768,636

2,000,000
246,299
38,834,669(2,080,393)
39,000,575

2,000,000
274,537
41,875,487(2,030,911)
42,119,113

100,262
68,821
850,537
176,984
1,196,605
40,197,181
48,238,490

214,928
1,766,040(108,331)
1,872,637
43,991,750
52,760,387

2) Consolidated Statements of Earnings and Consolidated Statements of Comprehensive Income
Consolidated Statements of Earnings(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Company house defrayment income
Subsidy income
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Sales discounts
Share of loss of entities accounted for using equity
methodOther
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Loss on sales of investment securities
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to owners of parent- 53 -

Current fiscal year
(From January 1, 2022
to December 31, 2022)*1 41,582,267*1 45,238,377

14,083,338
27,498,928*2, *3 19,681,230
7,817,698

15,729,160
29,509,216*2, *3 21,957,505
7,551,711

25,87832,4093,761
53,071
54,621
59,254228,997

21,212
15,9803,890
101,506
152,574
104,327
399,491

733,118-

151,399

112,392

3,736
888,255
7,158,440

9,530
121,922
7,829,279*4 351
19,087
19,438*4 949*5 517*5 7,060

43,95944,477
7,133,401
2,183,317(159,204)
2,024,112
5,109,288
5,109,288

7,060
7,823,617
2,387,643(141,300)
2,246,342
5,577,274
5,577,274

448
1,397

Consolidated Statements of Comprehensive Income(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to non-controllinginterests- 54 -

Current fiscal year
(From January 1, 2022
to December 31, 2022)

5,109,288

5,577,274(305,133)
70,027
702,761
177,438* 645,093
5,754,382

114,665(68,821)915,502(285,315)* 676,032
6,253,306

5,754,382

6,253,306--

3) Consolidated Statements of Changes in Shareholders’ Equity
Previous fiscal year (from January 1, 2021 to December 31, 2021)(Thousand yen)
Shareholders’ equity
Capital stock
Balance at beginning of period

Capital surplus

2,000,000

Retained earnings

222,490

Treasury shares

35,643,295

Total shareholders’equity(2,108,947)

35,756,838

Changes of items during period
Dividends of surplus(1,917,914)(1,917,914)

Profit attributable to ownersof parent

5,109,288

5,109,288

Purchase of treasury shares
Disposal of treasury shares

23,809(3,244)(3,244)

31,79855,608Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of period-

23,8093,191,374

28,5533,243,737

2,000,000

246,299

38,834,669(2,080,393)

39,000,575

Accumulated other comprehensive income
Valuation difference
Deferred gains or
on available-for-salelosses on hedges
securities
Balance at beginning of period

405,396

Foreign currencytranslation
adjustment(1,206)

147,775

Remeasurements of Total accumulated
defined benefit other comprehensive
plansincome(454)

551,511

Total net assets

36,308,349

Changes of items during period
Dividends of surplus(1,917,914)

Profit attributable to ownersof parent

5,109,288

Purchase of treasury shares(3,244)

Disposal of treasury shares

55,608Net changes of items otherthan shareholders’ equity(305,133)

70,027

702,761

177,438

645,093645,093

Total changes of items during
period(305,133)

70,027

702,761

177,438

645,0933,888,831

Balance at end of period

100,262

68,821

850,537

176,984

1,196,605

40,197,181- 55 -

Current fiscal year (from January 1, 2022 to December 31, 2022)(Thousand yen)
Shareholders’ equity
Capital stock
Balance at beginning of period

Capital surplus

2,000,000

Retained earnings

246,299

Treasury shares

Total shareholders’equity(2,080,393)

38,834,669

39,000,575

Changes of items during period
Dividends of surplus(2,536,456)(2,536,456)

Profit attributable to ownersof parent

5,577,274

5,577,274

Purchase of treasury shares
Disposal of treasury shares

28,237(1,350)(1,350)50,832

79,069Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of period-

28,2373,040,818

49,482

3,118,537

2,000,000

274,537

41,875,487(2,030,911)

42,119,113

Accumulated other comprehensive income
Valuation difference
Deferred gains or
on available-for-salelosses on hedges
securities
Balance at beginning of period

100,262

Foreign currencytranslation
adjustment

68,821

850,537

Remeasurements of Total accumulate
defined benefit other comprehensive
plansincome176,984

1,196,605

Total net assets

40,197,181

Changes of items during period
Dividends of surplus(2,536,456)

Profit attributable to ownersof parent

5,577,274

Purchase of treasury shares(1,350)

Disposal of treasury shares

79,069Net changes of items otherthan shareholders’ equity

114,665(68,821)915,502(285,315)

676,032

676,032

Total changes of items during
period114,665(68,821)915,502(285,315)

676,032

3,794,569

Balance at end of period

214,928-

1,766,040(108,331)

1,872,637

43,991,750- 56 -

4) Consolidated Statements of Cash Flows(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Decrease (increase) in net defined benefit asset
Increase (decrease) in net defined benefit liability
Interest and dividend income
Share of loss (profit) of entities accounted for using
equity method
Foreign exchange losses (gains)
Loss (gain) on sales of investment securities
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Other
SubtotalInterest and dividend income received
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments of loans receivableCollection of loans receivable
Purchase of investment securities
Proceeds from redemption of investment securities
Proceeds from sales of investment securities
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase (decrease) in notes and short-term borrowings- tradeNet decrease (increase) in treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities- 57 -

Current fiscal year
(From January 1, 2022
to December 31, 2022)

7,133,401
1,777,323(10,741)
71,94324,6092,529(58,287)

7,823,617
2,080,891(5,856)
77,241(28,757)
1,951(37,193)

151,399

112,392

55,54024,872(351)
517(467,843)(612,402)
122,057
268,5888,483,156
58,805(1,905,137)
6,636,823(30,521)
(448)
(949)
7,060
(546,020)(2,148,445)
108,264
16,726
7,429,954
34,812(2,456,758)
5,008,008(3,827,976)
351(659,900)(148,000)
2,024(12,150)
200,000
472,646(58,435)
28,285
7,875(3,995,279)(3,061,820)
1,003(761,154)(73,500)
3,454
200,000
546(285,452)
115,978(4,277)(3,865,221)-(42,631)(3,244)(1,916,504)(1,919,749)(1,243)(2,534,587)(2,578,462)

(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period- 58 -

Current fiscal year
(From January 1, 2022
to December 31, 2022)

283,248

381,279

1,005,043
12,307,591* 13,312,634(1,054,396)
13,312,634* 12,258,237

Notes to the Consolidated Financial Statements(Significant matters that serve as the basis for preparation of consolidated financial statements)
1. Matters regarding the scope of consolidation
Number of consolidated subsidiaries: 9
Names of consolidated subsidiaries
MILBON USA, INC.
Milbon Trading (Shanghai) Co., Ltd.
Milbon Korea Co., Ltd.
MILBON (THAILAND) CO., LTD.
MILBON MALAYSIA SDN. BHD.
MILBON VIETNAM CO., LTD.
MILBON SINGAPORE PTE. LTD.
Milbon (Zhejiang) Cosmetics Co., Ltd.
Milbon Europe GmbH
Changes in the scope of consolidation
Milbon Europe GmbH was newly established and included in the scope of consolidation for the current fiscal year.
2. Matters regarding the application of equity method
Number of associates accounted for by the equity method: 1
Names of companies, etc.
KOSÉ Milbon Cosmetics Co., Ltd.
3. Matters regarding fiscal years, etc., of consolidated subsidiaries
The account closing dates of consolidated subsidiaries are the same as the consolidated account closing date.
4. Matters regarding accounting policies(1) Valuation standards and methods for significant assets(i) Securities
1) Held-to-maturity bonds
Stated using the amortized cost method
2) Available-for-sale securities
Other than shares, etc., without market priceStated at market value (unrealized gains and losses are reported as a separate component of net assets, and cost of
sales is calculated by the moving-average method)
Shares, etc., without market priceStated at cost using the moving-average method(ii) Inventories
MerchandiseStated primarily at cost using the weighted average method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)
Finished goods and work in process
Stated primarily at cost using the weighted average method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)
Raw materials
Stated primarily at cost using the weighted average method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)
Supplies
Stated at cost using the last-purchase-price method (the balance sheet value is calculated using the inventory writedown method based on decreased profitability)- 59 -

(2) Depreciation and amortization methods for significant depreciable assets(i) Property, plant and equipment
They are depreciated using the straight-line method.
Useful lives of principal assets are as follows:
Buildings and structures:
Machinery, equipment and vehicles:

31 to 50 years
6 to 8 years(ii) Intangible assets
They are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated period of internal use (3 to 5
years).
(3) Accounting standards for significant allowances(i) Allowance for doubtful accounts
To prepare for losses arising from uncollectible receivables, the Company and its overseas consolidated subsidiaries record
an allowance for doubtful accounts at an estimated uncollectible amount based on the historical rate of credit losses withrespect to general receivables, and in consideration of individual collectability with respect to doubtful accounts and otherspecific receivables.
(ii) Provision for bonuses
To provide for payment of bonuses to employees (including those for employees also serving as officers), the Company
and its overseas consolidated subsidiaries record a provision for bonuses based on the estimated payment amount.
(4) Accounting methods for retirement benefits(i) Method of attributing expected retirement benefits to periods
In calculating retirement benefit obligations, expected retirement benefits are attributed to the period up to the end of thecurrent fiscal year based on the benefit formula basis.
(ii) Method of amortizing actuarial differences and past service costs
Actuarial gains and losses are amortized using the straight-line method over a certain number of years (5 years) within the
average remaining years of service of the eligible employees at the time of occurrence, starting from the fiscal year
following the occurrence.
Prior service cost is amortized using the straight-line method over a certain number of years (5 years) within the averageremaining years of service of the eligible employees at the time of occurrence.
(iii) Adoption of a simplified method in small companies, etc.
Certain overseas consolidated subsidiaries apply a simplified method to calculate net defined benefit liability andretirement benefit expenses based on the method where the amount of retirement benefits to be paid for voluntary
retirement at the end of the fiscal year represents the amount of retirement benefit obligations.
(5) Accounting standards for significant revenue and expenses
The principal performance obligations relating to revenue from contracts with customers of the Group, as well as the standard
point at which such obligations are satisfied (i.e., the point at which revenue is recognized) are explained as follows.
The Group is engaged in the manufacturing and sale of cosmetic products. In terms of the sale of such goods or products,
revenue is recognized upon delivery of the goods or products to customers. However, revenue is recognized at the time of
shipment if the period from the time of shipment to the point at which control of the goods or products is transferred to thecustomer is the standard period.
Revenue is measured by the amount of consideration promised in the contract with the customer, less any applicable rebates
and returns.
The transaction consideration is typically received within one month of the fulfillment of the performance obligation anddoes not contain any significant financial elements.

- 60 -

(6) Translation standards of significant assets and liabilities denominated in foreign currencies into Japanese yen
Foreign currency denominated monetary receivables and payables are translated into Japanese yen at the spot exchange rateon the consolidated closing date, and foreign exchange gains and losses from translation are recognized as profit or loss. The
assets and liabilities of overseas consolidated subsidiaries are translated into Japanese yen at the spot exchange rate on thelocal account closing dates of overseas consolidated subsidiaries, while revenue and expenses are translated into Japanese yenat the average exchange rate for the period, and foreign exchange gains and losses from translation are recorded in foreign
currency translation adjustment under net assets.
(7) Scope of funds in the consolidated statements of cash flows
Funds (cash and cash equivalents) in the consolidated statements of cash flows comprise cash on hand, deposits available forwithdrawal as needed, and short-term investments due for redemption within three months from the date of acquisition, which
are easily cashable and are subject to minimal risk of fluctuations in value.

- 61 -

(Significant accounting estimates)
Valuation of merchandise and finished goods(1) Amount recorded in consolidated financial statements for the current fiscal year
(Thousand yen)Previous fiscal year

Current fiscal year

Merchandise and finished goods

4,537,613

6,319,121

Loss on valuation of inventories

78,046

254,786(Note) The amount of loss on valuation of inventories represents the amount of write-down due to decreased profitability.
(2) Information to aid in understanding the details of accounting estimates
In the calculation using the method of write-down based on decreased profitability, regarding merchandise and finished goods,
a method, in which the planned annual shipment volume and the inventory volume at the end of the fiscal year are comparedfor each merchandise and finished good, and the amount of slow-moving inventories exceeding the planned shipment volume
for a certain period is written down, and other methods are adopted.
These accounting estimates may differ from the actual profitability if assumed circumstances change as they can be affectedby changes in the future uncertain market environment and other factors.
(Changes in accounting policies)(Change in valuation method for inventories)
The Company used the first-in first-out method for the valuation of merchandise; however, from the current fiscal year, we havechanged to the cost method based on the weighted average method. This change in the valuation method is aimed at realizing amore appropriate calculation of periodic profit and loss by smoothing out the impact of fluctuations in purchase prices, triggeredby an increase in overseas product purchases, etc.
As the impact of this change is immaterial, it has not been applied retrospectively.
(Application of accounting standard for fair value measurement, etc.)
The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019;
hereinafter referred to as the “Fair Value Measurement Standard”), etc., from the beginning of the current fiscal year, and under
the transitional treatment stipulated in paragraph 19 of the Fair Value Measurement Standard and paragraph 44-2 of the“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019), the new accounting policies stipulatedby the Fair Value Measurement Standard, etc., will be applied in the future.
In addition, the Company will include the notes to matters regarding the breakdown of the market value of financial instruments
by appropriate level, etc., in “Notes to the Consolidated Financial Statements (Financial instruments).” However, in accordancewith the transitional treatment provided in Paragraph 7-4 of the “Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No. 19, July 4, 2019), notes pertaining to the previous fiscal year are not presented.
There is no impact on the consolidated financial statements.
(Changes in presentation methods)(Application of accounting standard for revenue recognition, etc.)
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020;
hereinafter referred to as the “Revenue Recognition Standard”), etc., from the beginning of the current fiscal year. With regard to
the Revenue Recognition Standard, etc., issued on March 30, 2018, the Company applied them from the beginning of the fiscal
year ended December 31, 2019.
In line with this, the Company has provided useful information in understanding revenue from contracts with customers in“Notes to the Consolidated Financial Statements (Revenue recognition).”- 62 -

(Consolidated balance sheets)*1 Treatment of notes due at the fiscal year-end
Notes due at the end of the fiscal year are treated as settled on the due date.
As the fiscal year-end fell on a holiday for financial institutions, the following notes due at the fiscal year-end are treated as settled
on the due date.
(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Notes receivable - trade

Current fiscal year
(As of December 31, 2022)

88,45080,781*2 Receivables from contracts with customers in notes and accounts receivable - trade are as follows:(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Notes receivable - trade
Accounts receivable - trade

Current fiscal year
(As of December 31, 2022)

180,771

170,637

4,492,486

5,085,049*3 “Contract liabilities” are included in “other” under “current liabilities.” The amount of the “contract liabilities” is as described in“Notes to the Consolidated Financial Statements (Revenue recognition), 3. Information on the reconciliation of satisfaction of
performance obligations within contracts with customers and cash flows arising from such contracts, and information on the amountand timing of revenue that is expected to be recognized after the following fiscal year arising from contracts with customers thatexist at the end of the current fiscal year, (1) Balance of contract liabilities, etc.”- 63 -

(Consolidated statements of earnings)*1 Revenue from contracts with customers
The Company does not disaggregate revenues from contracts with customers and other sources of revenue. The amount of revenue
from contracts with customers is presented in “Notes to the Consolidated Financial Statements (Revenue recognition), 1.
Disaggregation of revenue from contracts with customers” in the consolidated financial statements.
*2 Major expenses included in selling, general and administrative expenses and their amounts(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)

Current fiscal year
(From January 1, 2022
to December 31, 2022)

Remuneration, salaries and allowances
Logistics expenses

5,447,521
3,413,309

5,858,488
3,543,161

Promotion expenses
Provision for bonuses

1,105,993
377,488

1,177,111
422,032

309,787(633)

307,677(3,566)Retirement benefit expenses
Provision of allowance for doubtful accounts*3 The total amount of research and development expenses included in general and administrative expenses(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Research and development expenses

Current fiscal year
(From January 1, 2022
to December 31, 2022)

1,741,738

2,074,942*4 Breakdown of gain on sales of non-current assets(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Machinery, equipment and vehicles

Current fiscal year
(From January 1, 2022
to December 31, 2022)
351

949

*5 Breakdown of loss on retirement of non-current assets(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)

Current fiscal year
(From January 1, 2022
to December 31, 2022)

Buildings and structures

117

5,230

Machinery, equipment and vehicles
Other

400
0

872
186

-

771

517

7,060

Intangible assets
Total- 64 -

(Consolidated statements of comprehensive income)* Reclassification adjustments and tax effects relating to other comprehensive income(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)

Current fiscal year
(From January 1, 2022
to December 31, 2022)

Valuation difference on available-for-sale securities
Amount arising during the fiscal year
Reclassification adjustments(464,545)
24,872

165,672(448)

Before tax effect adjustments
Tax effects(439,673)
134,540

165,224(50,558)

Valuation difference on available-for-sale securities(305,133)

114,665

100,903(99,165)

Deferred gains or losses on hedges
Amount arising during the fiscal year
Reclassification adjustments--

Before tax effect adjustments
Tax effects

100,903(30,876)(99,165)
30,344

Deferred gains or losses on hedges

70,027(68,821)

Foreign currency translation adjustment
Amount arising during the fiscal year

702,761

915,502

Remeasurements of defined benefit plans, net of tax
Amount arising during the fiscal year

232,098(383,108)

Reclassification adjustments

23,575(28,008)

Before tax effect adjustments
Tax effects

255,674(78,236)(411,117)
125,801

Remeasurements of defined benefit plans, net of tax

177,438(285,315)

645,093

676,032

Total other comprehensive income- 65 -

(Consolidated statements of changes in shareholders’ equity)
Previous fiscal year (from January 1, 2021 to December 31, 2021)
1. Matters regarding issued shares
Beginning of the
fiscal year

Class of shares
Common stock (shares)

Increase

33,117,234

End of the fiscal
year

Decrease--

33,117,234

2. Matters regarding treasury sharesClass of shares
Common stock (shares)

Beginning of the
fiscal year

Increase

614,837

End of the fiscal
year

Decrease
511

9,268

606,080(Outline of reasons for changes)
1. The increase is due to the purchase of shares less than one unit.
2. The decrease is due to the disposal of treasury shares pursuant to the resolution of the Board of Directors meeting held on April 9,
2021, accompanying the introduction of the restricted share-based compensation plan.
3. Matters regarding dividends(1) Amount of dividends paid
Resolution

Class of shares

Total amount of Dividend per
dividends
share(Thousand yen)
(Yen)

Record date

Effective dateOrdinary General Meetingof Shareholders held on
March 30, 2021
Board of Directors meeting
held on August 6, 2021

Common stock

942,569

29

December 31, 2020

March 31, 2021

Common stock

975,34430

June 30, 2021

August 16, 2021

(2) Dividend for which the record date falls in the fiscal year under review but the effective date falls in the following fiscal year
Total amount of Dividend per
Source of
Resolution
Class of shares
dividends
share
Record date
Effective datedividends(Thousand yen)
(Yen)
Ordinary General Meeting
Retainedof Shareholders held on
Common stock
1,235,423
38 December 31, 2021
March 30, 2022
earnings
March 29, 2022

- 66 -

Current fiscal year (from January 1, 2022 to December 31, 2022)
1. Matters regarding issued shares
Beginning of theClass of sharesfiscal year
Common stock (shares)

Increase

33,117,234

End of the fiscal
year

Decrease--

33,117,234

2. Matters regarding treasury sharesClass of shares

Beginning of the
fiscal year

Common stock (shares)

Increase

606,080

End of the fiscal
year

Decrease
238

14,807

591,511(Outline of reasons for changes)
1. The increase is due to the purchase of shares less than one unit.
2. The decrease was due to a decrease of 20 shares from the sale of shares less than one unit, and a decrease of 14,787 shares fromthe disposal of treasury shares pursuant to the resolution of the Board of Directors meeting held on April 15, 2022, accompanying
the introduction of the restricted share-based compensation plan.
3. Matters regarding dividends(1) Amount of dividends paid
Resolution

Class of shares

Total amount of Dividend per
dividends
share(Thousand yen)
(Yen)

Record date

Effective dateOrdinary General Meetingof Shareholders held on
March 29, 2022
Board of Directors meeting
held on August 10, 2022

Common stock

1,235,423

38

December 31, 2021

March 30, 2022

Common stock

1,301,032

40

June 30, 2022

August 16, 2022

(2) Dividend for which the record date falls in the fiscal year under review but the effective date falls in the following fiscal year
Total amount of Dividend per
Source of
Resolution
Class of shares
dividends
share
Record date
Effective datedividends(Thousand yen)
(Yen)
Ordinary General Meeting
Retainedof Shareholders held on
Common stock
1,496,183
46 December 31, 2022
March 30, 2023
earnings
March 29, 2023
(Consolidated statements of cash flows)*

Reconciliation between the balance of cash and cash equivalents at the end of the fiscal year and the amount of accounts presented
in the consolidated balance sheets(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Cash and deposits
Time deposits with deposit terms over threemonthsCash and cash equivalents- 67 -

Current fiscal year
(From January 1, 2022
to December 31, 2022)

13,350,147

12,300,053(37,512)(41,815)

13,312,634

12,258,237

(Lease transactions)
1. Operating lease transactions(Lessor)
Remaining lease payments for non-cancelable operating lease transactions(Thousand yen)Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

Within one year

326,159366,385

Over one year

926,536

942,027

1,252,695

1,308,413

Total(Financial instruments)
1. Matters regarding financial instruments(1) Policy for financial instruments

The Group manages its funds in principle for the purpose of maintaining its assets, and only manages highly secured funds.
The Group also has a policy of not engaging in derivative transactions for speculative purposes.
(2) Content of financial instruments and risks thereof, and risk management systems
Notes and accounts receivable - trade, which are trade receivables, are exposed to customer credit risks. For such risks, the Group
controls the due dates and balances by business partner.
Securities and investment securities are primarily shares of companies with which the Group has business relationships and heldto-maturity bonds, and are exposed to market price fluctuation risks. For such risks, the Group regularly understands and manages
their market value and issuers’ financial conditions, etc., and regularly reports the identified market value to the Board of Directors.
Accounts payable - trade, which are trade payables, are mostly due within one month.
(3) Supplementary explanation on market value, etc., of financial instruments
The market value of financial instruments is calculated based on their market prices. If a market price is not available, the value iscalculated in a reasonable manner. As the market value calculation incorporates fluctuating factors, the value may differ if different
assumptions are used in calculation.

- 68 -

2. Matters regarding market value, etc., of financial instruments
The amounts in the consolidated balance sheets, market value of financial instruments, and their differences are shown below.
Previous fiscal year (as of December 31, 2021)(Thousand yen)Amounts in the consolidatedbalance sheets
Investment securities
Securities
Available-for-sale securities
Total assets

Market value

200,000

197,806

1,582,207

1,582,207

1,782,207

1,780,013

Differences(2,194)(2,194)Current fiscal year (as of December 31, 2022)(Thousand yen)Amounts in the consolidatedbalance sheets
Investment securities
Available-for-sale securities
Total assets(Note 1)Market value

Differences

1,747,334

1,747,334-

1,747,334

1,747,334-“Cash and deposits,” “notes and accounts receivable - trade,” “accounts payable - trade,” “accounts payable - other,”and “income taxes payable” are omitted, because they comprise cash and short-term instruments whose carrying
amount approximates their market value.

(Note 2)

Shares, etc., without market price are not included in “investment securities.” The amount of the financial instrumentin the consolidated balance sheets is as follows:(Thousand yen)
Category

Previous fiscal year

Unlisted shares

Current fiscal year
28,400- 69 -

28,400(Note 3)

Scheduled redemption amounts of monetary claims after the consolidated closing datePrevious fiscal year (as of December 31, 2021)(Thousand yen)

Within one year

Over one year
within five years

Cash and deposits

13,350,147

-

-

-

Notes and accounts receivable trade

4,673,258

-

-

-

-

-

-

200,000---

18,223,405

-

-

-

Securities and investment securities

Over five years
within ten years

Over ten years

Held-to-maturity bonds
Other
Total

Current fiscal year (as of December 31, 2022)(Thousand yen)

Within one year

Over one year
within five years

12,300,053

-

-

-

5,255,686---

17,555,740

-

-

-

Cash and deposits
Notes and accounts receivable trade
Total

Over five years
within ten years

Over ten years

3. Matters regarding the breakdown of the market value of financial instruments by level
The market value of financial instruments is classified into the following three levels according to the observability andmateriality of the inputs used to measure market value.
Level 1 market value: Market value measured using observable inputs, i.e., quoted prices in active markets for assets or
liabilities that are the subject of the measurement.
Level 2 market value: Market value measured using observable inputs other than Level 1 inputs.
Level 3 market value: Market value measured using unobservable inputs.
If multiple inputs are used that are significant to the market value measurement, the market value measurement iscategorized in its entirety in the level of the lowest level input that is significant to the entire measurement.
(1) Financial instruments measured at market value in the consolidated financial statements
Current fiscal year (as of December 31, 2022)(Thousand yen)
Market value

Category
Level 1

Level 2

Level 3

Total

Investment securities
Available-for-sale securities
SharesTotal assets

1,747,334--

1,747,334

1,747,334--

1,747,334(Note) A description of the valuation techniques and inputs used in the market value measurements
Investment securities
Listed shares are valued using quoted prices. As listed shares are traded in active markets, their market value isclassified as Level 1.

- 70 -

(Securities)
1. Held-to-maturity bonds
Previous fiscal year (as of December 31, 2021)(Thousand yen)Type

Amounts in the
consolidated balance
sheetsMarket value

Differences(1) Government andlocal government
bonds, etc.

Bonds with the market value
exceeding the amount in the
consolidated balance sheets

-

-

-

(2) Bonds payable

-

-

-

(3) Other

-

-

-

-

-

-

-

-

-

-

-

-

200,000

197,806(2,194)200,000

197,806(2,194)200,000

197,806(2,194)

Subtotal(1) Government andBonds with the market value not

local government
bonds, etc.
(2) Bonds payable

exceeding the amount in the
consolidated balance sheets(3) Other
Subtotal
Total

Current fiscal year (as of December 31, 2022)(Thousand yen)Type

Amounts in the
consolidated balance
sheetsMarket value

Differences(1) Government andlocal government
bonds, etc.

Bonds with the market value
exceeding the amount in the
consolidated balance sheets

-

-

-

(2) Bonds payable

-

-

-

(3) Other

-

-

-

-

-

-

-

-

-

(2) Bonds payable

-

-

-

(3) Other

-

-

-

-

-

-

-

-

-

Subtotal(1) Government andBonds with the market value notexceeding the amount in the
consolidated balance sheets

local government
bonds, etc.

Subtotal
Total- 71 -

2. Available-for-sale securities
Previous fiscal year (as of December 31, 2021)(Thousand yen)Amounts in the
consolidated balance
sheetsAcquisition cost(1) Shares

1,581,665

1,437,118

144,546(2) Bonds---(3) Other---

1,581,665

1,437,118

144,546(1) Shares

542

618

(76)

(2) Bonds---(3) Other

-

-

-

542

618

(76)

1,582,207

1,437,736

144,470

Type

Available-for-sale securities with theamount in the consolidated balance
sheets exceeding the acquisition cost

Subtotal
Available-for-sale securities with theamount in the consolidated balance
sheets not exceeding the acquisition

Differences

cost
Subtotal
Total(Note) Unlisted shares (the amount in the consolidated balance sheets: 28,400 thousand yen) are not included in the available-for-salesecurities in the table above, since they have no market price and their market values are deemed extremely difficult todetermine.
Current fiscal year (as of December 31, 2022)(Thousand yen)Amounts in the
consolidated balance
sheetsAcquisition cost(1) Shares

1,746,801

1,437,020

309,780

Available-for-sale securities with the(2) Bonds---

amount in the consolidated balance
sheets exceeding the acquisition cost(3) Other---

1,746,801

1,437,020

309,780(1) Shares

533

618

(85)

(2) Bonds---(3) Other

-

-

-

533

618

(85)

1,747,334

1,437,638

309,695

Type

Subtotal

Differences

Available-for-sale securities with theamount in the consolidated balance
sheets not exceeding the acquisition
cost
Subtotal
Total(Note) Unlisted shares (the amount in the consolidated balance sheets: 28,400 thousand yen) are not included in the available-for-salesecurities in the table above, since they have no market price and their market values are deemed extremely difficult todetermine.

- 72 -

3. Available-for-sale securities sold during the fiscal year
Previous fiscal year (from January 1, 2021 to December 31, 2021)(Thousand yen)Type

Sales amount

Total gain on sales

Total loss on sales(1) Shares

472,646

19,087

43,959(2) Bonds

200,000--(3) Other---672,646

19,087

43,959Total

Current fiscal year (from January 1, 2022 to December 31, 2022)(Thousand yen)Type

Sales amount

Total gain on sales

Total loss on sales(1) Shares

538

448

-

(2) Bonds---(3) Other

-

-

-

538

448

-

Total
4. Impairment losses on securities
Not applicable.

Impairment losses are fully recognized for securities whose market value declined 50% or more compared to the acquisition cost.
For securities whose market value declined 30% or more but less than 50%, impairment losses are determined by judging theindividual recoverability.

- 73 -

(Derivative transactions)
1. Derivative transactions for which hedge accounting is applied
Currency-related transactions
Previous fiscal year (as of December 31, 2021)
The Company engages in forward exchange contracts for currency-related transactions. However, this information is omitted due
to lack of materiality.
Current fiscal year (as of December 31, 2022)
Not applicable.
(Retirement benefits)
1. Outline of retirement benefit plans adopted
The Company has both a defined benefit corporate pension plan as the defined benefit plan and a defined contribution pension plan.
Some of the consolidated subsidiaries have adopted a lump-sum retirement payment plan as the defined benefit plan and a defined
contribution plan.
For the lump-sum retirement payment plan adopted by some of the consolidated subsidiaries, net defined benefit liability andretirement benefit expenses are calculated using a simplified method.
The Company participates in the employees’ pension fund plan, which is a multi-employer plan. The same accounting as for thedefined contribution plan is adopted for the plans for which the amount of plan assets corresponding to the Company’s contribution
cannot be reasonably calculated.
2. Defined benefit plan (excluding plans that adopt the simplified method)(1) Reconciliation of retirement benefit obligations at the beginning and end of the fiscal year
(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Balance of retirement benefit obligations at the
beginning of the fiscal year

Current fiscal year
(From January 1, 2022
to December 31, 2022)

2,634,269

2,771,124Service cost

202,157

214,520

Interest cost

13,171

14,066

Actuarial gains and losses generated

12,347

12,798-111,974(90,821)(135,047)

2,771,124

2,989,436

Past service costs generated
Retirement benefits paid
Balance of retirement benefit obligations at the end of
the fiscal year
(2) Reconciliation of plan assets at the beginning and end of the fiscal year

(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Balance of plan assets at the beginning of the fiscal

2,841,744

year

Current fiscal year
(From January 1, 2022
to December 31, 2022)
3,209,664

Expected return on plan assets

71,04380,241

Actuarial gains and losses generated

244,445(258,335)

Contribution from the employer

143,251

149,095

Retirement benefits paid

(90,821)(135,047)

3,209,664

3,045,617

Balance of plan assets at the end of the fiscal year

- 74 -

(3) Reconciliation of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability andnet defined benefit asset recorded in the consolidated balance sheets(Thousand yen)Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

Retirement benefit obligations of funded plans

2,771,124

2,989,436

Plan assets(3,209,664)(3,045,617)

Net liabilities and assets recorded in the consolidatedbalance sheets(438,540)(56,180)

Net defined benefit asset(438,540)(56,180)(438,540)(56,180)

Net liabilities and assets recorded in the consolidatedbalance sheets(4) Retirement benefit expenses and breakdown thereof(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)

Current fiscal year
(From January 1, 2022
to December 31, 2022)

Service cost

202,157

214,520

Interest cost

13,171

14,066

Expected return on plan assets(71,043)(80,241)

Amortization of actuarial gains and losses

23,575(33,607)-

5,598

167,860

120,337

Amortization of past service costs
Retirement benefit expenses for defined benefit plans(5) Remeasurements of defined benefit plans, net of tax

Components of remeasurements of defined benefit plans, net of tax (before tax effects) are as follows:(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Actuarial gains and losses(255,674)

304,741-

106,375(255,674)

411,117

Past service costs
Total

Current fiscal year
(From January 1, 2022
to December 31, 2022)(6) Remeasurements of defined benefit plans
Components of remeasurements of defined benefit plans (before tax effects) are as follows:(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Unrecognized actuarial gains and losses
Unrecognized past service costs
Total- 75 -

Current fiscal year
(As of December 31, 2022)

255,020(49,721)-(106,375)

255,020(156,096)

(7) Matters regarding plan assets(i) Major components of plan assets
Ratios by major category of the total plan assets are as follows:
Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

Japanese bonds

20%

23%

Japanese shares

25%

24%

Foreign bonds

12%

10%

Foreign shares

25%

23%

Other

18%

20%

Total

100%

100%

(ii) Method of determining expected long-term rate of return on plan assets
The current and expected allocation of plan assets, and the current and expected future long-term rate of return on diverse assets
comprising plan assets are taken into account in determining expected long-term rate of return on plan assets.
(8) Matters regarding basis for actuarial assumptions
Major actuarial assumptions (in weighted average)
Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

Discount rate

0.5%

0.5%

Expected long-term rate of return on plan assets

2.5%

2.5%

Expected rate of increase in salary

4.7%

5.9%

3. Defined benefit plans that apply the simplified method(1) Reconciliation of net defined benefit liability at the beginning and end of the fiscal year under the plans that apply the simplified
method(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Balance of net defined benefit liability at the
beginning of the fiscal year
Retirement benefit expenses

5,216

7,753

2,529

1,951

7

923

7,753

10,628Translation gains or losses
Balance of net defined benefit liability at the end of
the fiscal year

Current fiscal year
(From January 1, 2022
to December 31, 2022)(2) Reconciliation of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability andnet defined benefit asset recorded in the consolidated balance sheets(Thousand yen)Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

Retirement benefit obligations of unfunded plans

7,753

10,628Net liabilities and assets recorded in the consolidatedbalance sheets

7,753

10,628Net defined benefit liability

7,753

10,628

7,753

10,628Net liabilities and assets recorded in the consolidatedbalance sheets- 76 -

(3) Retirement benefit expenses
Retirement benefit expenses calculated using the simplified method: Previous fiscal year: 2,529 thousand yen
Current fiscal year: 1,951 thousand yen
4. Defined contribution plans
The required amount of contributions to defined contribution plans of the Company and its consolidated subsidiaries are 89,532
thousand yen for the previous fiscal year and 110,148 thousand yen for the current fiscal year.
5. Multi-employer plans
The required amount of contributions to the employees’ pension fund plan and corporate pension fund plan, which are multiemployer plans and adopt the same accounting method as that for defined contribution plans, are 176,159 thousand yen for theprevious fiscal year and 185,256 thousand yen for the current fiscal year.
(1) The latest status of funding of multi-employer plans(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Amount of plan assets
Aggregate actuarial obligation under pension financecalculation and minimum reserve
Difference

Current fiscal year
(As of December 31, 2022)

15,897,847

16,951,908

19,938,577

19,873,038(4,040,730)(2,921,130)(2) Ratio of contributions by the Company in multi-employer plans
Previous fiscal year: 10.9% (as of December 31, 2021)
Current fiscal year: 11.6% (as of December 31, 2022)(3) Supplementary explanation
Major factors for the difference in (1) above are the balance of past service liabilities under pension finance calculation (7,918,856
thousand yen for the previous fiscal year, 6,938,156 thousand yen for the current fiscal year) and the general reserve (3,878,126
thousand yen for the previous fiscal year, 4,017,026 thousand yen for the current fiscal year). Past service liabilities under the plan
are amortized using the straight-line method over a period of 8 years. The Company has amortized special contribution in the
consolidated financial statements (119,873 thousand yen in the previous fiscal year, 126,896 thousand yen in the current fiscal
year).
The ratios in (2) above do not correspond to the actual ratios of the contribution by the Company.

- 77 -

(Stock options, etc.)
Not applicable.
(Tax effect accounting)
1. Breakdown of major causes for deferred tax assets and deferred tax liabilities(Thousand yen)Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

Deferred tax assets
Tax loss carryforward (Note)
Provision for bonuses

160,145
154,722

342,943
174,159

Loss on valuation of inventories
Accrued enterprise tax and business office tax

27,05684,44989,98686,245

Accrued social insurance premiums
Unrealized income on inventories

23,192
270,895

26,071
435,069

Depreciation
Asset retirement obligations

231,677
175,025

227,383
184,536

Allowance for doubtful accounts
Net defined benefit liability

15,7261,550

14,102
2,125

Loss on valuation of investment securities
Retirement benefits for directors (and other officers)

43
3,905

3,709

155,629

108,938

1,304,019

1,695,270(160,145)(342,943)(28,545)(24,295)

Subtotal valuation allowance(188,691)(367,238)

Total deferred tax assets
Deferred tax liabilities

1,115,329

1,328,032

Net defined benefit asset
Retirement cost for asset retirement obligations(134,193)(118,568)(17,191)(113,579)

Valuation difference on available-for-sale securities
Retained earnings of overseas subsidiaries(44,208)(208,844)(94,766)(275,911)

Other(32,164)(610)

Total deferred tax liabilities(537,979)(502,057)

Net deferred tax assets (liabilities)

577,349

825,975

Other
Subtotal deferred tax assets
Valuation allowance for tax loss carryforward (Note)
Valuation allowance for aggregate deductible
temporary differences(Note) Tax loss carryforward and corresponding deferred tax assets by carryforward period
Previous fiscal year (as of December 31, 2021)(Thousand yen)
Within one
year

Over oneyear within

Over twoyears within

Over three
years within

Over four
years within

two years

three years

four years

five years

Over five
years

Total

Tax loss carryforward

-

-

-

8,733

7,164

144,248

160,145

Valuation allowance

-

-

-

(8,733)(7,164)(144,248)(160,145)

Deferred tax assets

-

-

-

-

-

-

-

(Note) Tax loss carryforward is the amount obtained by multiplying it with the effective statutory tax rate.

- 78 -

Current fiscal year (as of December 31, 2022)(Thousand yen)
Within one
year

Over one

Over twoOver three

Over four

year within
two years

years within
three years

years withinfour years

years within
five years

Over five

Total

years

Tax loss carryforward

-

-

9,698

7,955

7,549

317,739

342,943

Valuation allowance--(9,698)(7,955)(7,549)(317,739)(342,943)

Deferred tax assets

-

-

-

-

-

-

-

(Note) Tax loss carryforward is the amount obtained by multiplying them with the effective statutory tax rate.
2. Breakdown by item of major causes of significant difference between the effective statutory tax rate and the income tax rate after
applying tax effect accounting
Previous fiscal year
(As of December 31, 2021)
Effective statutory tax rate
(Adjustments)

Current fiscal year
(As of December 31, 2022)

30.6%

30.6%

Items permanently excluded from deductible expenses
such as entertainment expenses

0.8%

1.0%

Exclusion of dividend income from taxable income
Inhabitant tax on per capita basis

0.0%
0.4%

(0.8)%
0.3%

Experimentation and research expenses tax credit
Salary increase tax credits(3.2)%(0.6)%(4.1)%(0.6)%

Allowance
Other

0.1%
0.3%

2.3%
(0.0)%

Income tax rate after applying tax effect accounting

28.4%

28.7%

(Business combinations, etc.)
Not applicable.

- 79 -

(Asset retirement obligations)
Asset retirement obligations recorded in the consolidated balance sheets(1) Outline of the asset retirement obligations
These are the restoration obligation under real estate lease contracts of branch offices and sales offices.
(2) Calculation method of the amount of the asset retirement obligations
The amount of asset retirement obligations is calculated by using the government bond yield as the discount rate based on theestimated period of use of 10 to 15 years from the acquisition.
(3) Changes in the total amount of the asset retirement obligations(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)

Current fiscal year
(From January 1, 2022
to December 31, 2022)

Balance at the beginning of the fiscal year

546,954

608,139

Increase due to the acquisition of property,
plant and equipment

61,18458,05500-(22,877)

608,139643,317

Adjustments due to passage of time
Decrease due to the performance of asset
retirement obligations
Balance at the end of the fiscal year
(Real estate for lease, etc.)
Not applicable.

- 80 -

(Revenue recognition)
1. Disaggregation of revenue from contracts with customers(Thousand yen)

Category

Previous fiscal year
(From January 1, 2021
to December 31, 2021)

Current fiscal year
(From January 1, 2022
to December 31, 2022)

AmountAmountRatio (%)

Ratio (%)

Hair care products

24,466,607

58.8

26,312,862

58.2

Hair coloring products

14,813,209

35.6

16,631,187

36.7

Permanent wave products

1,449,411

3.5

1,450,096

3.2

Cosmetic products

579,594

1.4

572,085

1.3

Other

273,4440.7

272,146

0.6

41,582,267

100.0

45,238,377

100.0

-

-

-

-

41,582,267

100.0

45,238,377

100.0

Revenue from contracts with customers
Revenue from other sources
Net sales to external customers

2. Useful information in understanding revenue from contracts with customers
The description of useful information in understanding revenue from contracts with customers is omitted as it is provided in “Notes
to the Consolidated Financial Statements (Significant matters that serve as the basis for preparation of consolidated financial
statements), 4. Matters regarding accounting policies, (5) Accounting standards for significant revenue and expenses.”
3. Information on the reconciliation of satisfaction of performance obligations within contracts with customers and cash flows arisingfrom such contracts, and information on the amount and timing of revenue that is expected to be recognized after the following fiscal
year arising from contracts with customers that exist at the end of the current fiscal year
(1) Balance of contract liabilities, etc.
Previous fiscal year (from January 1, 2021 to December 31, 2021)(Thousand yen)
Beginning of the fiscal year

End of the fiscal year

(As of January 1, 2021)(As of December 31, 2021)

Receivables from contracts with customers

4,199,283

4,673,258

27,59821,901

Contract liabilities(Note) Contract liabilities are advances received from customers and are reversed upon recognition of revenue.
Current fiscal year (from January 1, 2022 to December 31, 2022)(Thousand yen)
Beginning of the fiscal year

End of the fiscal year

(As of January 1, 2022)(As of December 31, 2022)

Receivables from contracts with customers
Contract liabilities

4,673,258

5,255,686

21,901

4,612(Note) Contract liabilities are advances received from customers and are reversed upon recognition of revenue.
(2) Transaction price allocated to the remaining performance obligations
The description of information on the remaining performance obligations is omitted since there are no significant contracts
with an original expected duration of more than one year and the Company has applied the practical expedient to the notes ontransaction prices allocated to the remaining performance obligations.

- 81 -

(Segment information, etc.)
Segment information
This information is omitted since the Group has a single segment of manufacture and sales of cosmetic products.
Related information
Previous fiscal year (from January 1, 2021 to December 31, 2021)
1. Information by product and service(Thousand yen)

Net sales to external customers

Hair careproducts

Hair coloringproducts

Permanent
wave products

24,466,607

14,813,209

1,449,411

Cosmetic
products
579,594

Other

Total

273,444

41,582,267

2. Information by geographical area
(1) Net sales(Thousand yen)Japan
33,643,710

Other

Total

7,938,557

41,582,267(Note) Net sales are based on locations of customers and classified by country or region.

(2) Property, plant and equipment
This information is omitted since the amount of property, plant and equipment located in Japan accounts for more than 90% of theamount of property, plant and equipment in the consolidated balance sheets.
3. Information by major customer(Thousand yen)
Name of customer

Net sales

Topy Co., Ltd.

4,532,368

GAMO Co., Ltd.

3,628,949

BIC HOLDINGS Inc.

3,194,447(Note) The description of related segments is omitted since the Group has a single segment of manufacture and sales of cosmetic
products.

- 82 -

Current fiscal year (from January 1, 2022 to December 31, 2022)
1. Information by product and service(Thousand yen)

Net sales to external customers

Hair careproducts

Hair coloringproducts

Permanent
wave products

26,312,862

16,631,187

1,450,096

Cosmetic
products
572,085

Other

Total

272,146

45,238,377

2. Information by geographical area
(1) Net sales(Thousand yen)Japan35,334,124

Other

Total

9,904,253

45,238,377(Note) Net sales are based on locations of customers and classified by country or region.

(2) Property, plant and equipment(Thousand yen)Japan
15,422,742

China

Other

2,886,791

Total

1,510,364

19,819,899

3. Information by major customer(Thousand yen)
Name of customer

Net sales

Topy Co., Ltd.

4,804,640

GAMO Co., Ltd.

3,810,883

BIC HOLDINGS Inc.

3,396,274(Note) The description of related segments is omitted since the Group has a single segment of manufacture and sales of cosmetic
products.
Information regarding impairment losses on non-current assets by reportable segment
Not applicable.
Information regarding amortization and unamortized balance of goodwill by reportable segment
Not applicable.
Information regarding gain on bargain purchase by reportable segment
Not applicable.
Related party information
Previous fiscal year (from January 1, 2021 to December 31, 2021)
Not applicable.
Current fiscal year (from January 1, 2022 to December 31, 2022)
Not applicable.

- 83 -

(Per share information)
Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Net assets per share (yen)Basic earnings per share (yen)Current fiscal year
(From January 1, 2022
to December 31, 2022)

1,236.41

1,352.52

157.17171.49(Notes) 1. Diluted earnings per share are not presented because there are no dilutive shares.
2. The basis for calculating basic earnings per share is as follows:
Previous fiscal year
(from January 1, 2021
to December 31, 2021)
Profit attributable to owners of parent (thousand yen)Amount not attributable to common shareholders(thousand yen)
Profit attributable to owners of parent related to common
stock (thousand yen)
Average number of shares of common stock during theperiod (shares)(Significant subsequent events)
Not applicable.

- 84 -

Current fiscal year
(from January 1, 2022
to December 31, 2022)

5,109,288

5,577,274--

5,109,288

5,577,274

32,508,933

32,521,551

5) Consolidated supplementary schedules
Schedule of corporate bonds
Not applicable.
Schedule of borrowings, etc.
Category

Balance at beginningof period(Thousand yen)

Short-term borrowings

-

-

-

-

Current portion of long-termborrowings

-

-

-

-

Current portion of lease obligations

-

-

-

-

Long-term borrowings (except for thecurrent portion)

-

-

-

-

-

-

-

-

75,44874,0320.002-

75,44874,032--

Lease obligations (except for thecurrent portion)
Other interest-bearing liabilities
Total

Balance at end of
period(Thousand yen)

Average interest rate(%)

Repayment due date

(Notes) 1. The average interest rate shows the weighted average interest rate applicable to the balance at end of period.
2. Other interest-bearing liabilities are guarantee deposits received from customers with no prescribed repayment due date.
Schedule of asset retirement obligations
The description of matters to be reported in the schedule of asset retirement obligations is omitted, because relevant
information is provided as notes pursuant to Article 15-23 of the Regulation on Consolidated Financial Statements.
(2) Other
Quarterly information, etc., for the current fiscal year
(Cumulative accounting period)

1st quarter2nd quarter3rd quarter

Current fiscal year

Net sales(Thousand yen)

9,635,091

21,467,252

32,407,657

45,238,377

Profit before income
taxes(Thousand yen)

1,633,692

4,138,326

6,043,023

7,823,617(Thousand yen)

1,166,773

2,875,154

4,310,982

5,577,274

35.89

88.42

132.56

171.49Profit attributable toowners of parent
Basic earnings per share(Yen)(Accounting period)
Basic earnings per share

1st quarter(Yen)

2nd quarter

35.89- 85 -

52.53

3rd quarter
44.14

4th quarter
38.93

2. Financial Statements, etc.
(1) Financial Statements
1) Balance Sheets(Thousand yen)Previous fiscal year
(As of December 31, 2021)
AssetsCurrent assets
Cash and deposits
Notes receivable - trade
Accounts receivable - trade
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Prepaid expenses
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Other
Total intangible assets

10,505,512*2 180,771*1 5,211,564
200,000
3,031,256
41,084
1,136,801
144,426*1 192,779
20,644,197- 86 -

Current fiscal year
(As of December 31, 2022)

9,399,665*2 170,637*1 5,654,505

4,034,129
39,422
1,645,261
182,762*1 223,645
21,350,030

6,085,512
103,558
1,836,420
14,174
628,7884,879,893
153,740
13,702,088

5,958,847
89,7732,106,899
10,288642,177
6,324,093
277,940
15,410,019

1,151,587
134,030
1,285,618

1,194,130
315,446
1,509,577

(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Investments and other assets
Investment securities
Shares of subsidiaries and associates
Investments in capital of subsidiaries andassociates
Long-term loans receivable from employees
Long-term loans receivable from subsidiaries
and associates
Prepaid pension costs
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - otherAccrued expenses
Income taxes payable
Advances received
Deposits received
Provision for bonuses
Other
Total current liabilities
Non-current liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities- 87 -

Current fiscal year
(As of December 31, 2022)

1,610,607
1,995,246

1,775,734
2,213,793

3,838,000

4,457,200

750-

740,030

828,000

183,519
728,547
1,041,044(48,387)
10,089,358
25,077,064
45,721,261

212,277
911,607
1,248,689(408,501)
11,238,801
28,158,398
49,508,428*1 989,613*1 1,159,984*1 3,273,075*1 3,797,900

431,993
1,332,777
5,125
268,641
480,844
162,971
6,945,041

454,798
1,263,767
4,357
329,607549,238
22,327
7,581,981

571,978
75,448647,426
7,592,467

602,626
74,032
676,659
8,258,641

(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
General reserve
Retained earnings brought forward
Total retained earnings
Treasury shares
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets- 88 -

Current fiscal year
(As of December 31, 2022)

2,000,000

2,000,000

199,120
47,179246,299

199,120
75,417274,537

300,880

300,880

3,500,000
33,992,924
37,793,804(2,080,393)
37,959,710

3,500,000
36,990,353
40,791,233(2,030,911)
41,034,858

100,262
68,821
169,083
38,128,794
45,721,261

214,928
214,928
41,249,787
49,508,428

2) Statements of Earnings(Thousand yen)Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividend income
Foreign exchange gains
Miscellaneous income
Total non-operating income
Non-operating expenses
Sales discounts
Miscellaneous losses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Loss on valuation of shares of subsidiaries andassociates
Provision of allowance for doubtful accounts of loans
receivable from subsidiaries and associates
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Profit- 89 -

Current fiscal year
(From January 1, 2022
to December 31, 2022)*1 39,237,623*1 41,780,945*1 14,828,677*1 16,215,637

24,408,945*1, *2 16,950,535
7,458,410*1, *2 18,157,310*1 43,230*1 226,638*1 133,867
177,098*1 168,387

704,7152,404
707,120
6,928,387

472
472
7,959,986

56
19,087
19,143

684
448
1,132

517

6,262

43,95949,000-362,41444,477
6,903,054
2,043,942(127,211)
1,916,730
4,986,323

417,676
7,543,443
2,212,832(203,274)
2,009,557
5,533,885

25,565,308
7,407,997

157,434
552,460

Schedule of manufacturing costs
Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Category

Amount(Thousand yen)

Note

Current fiscal year
(From January 1, 2022
to December 31, 2022)

Ratio
(%)

Amount(Thousand yen)

Ratio
(%)

I.

Cost of raw materials

8,211,825

68.7

9,740,305

69.5

II.

Cost of outsourced processing

1,390,343

11.6

1,659,198

11.8

975,6098.2

1,035,166

7.4

III. Labor cost

(65,006)(Provision for bonuses)
IV. Expenses

1,367,462(75,208)
11.5

1,572,281(Depreciation)(729,431)(760,879)(Repair expenses)(111,417)(98,181)(Utility expenses)(89,284)(130,522)(Supplies expenses)(95,680)(98,494)

Gross manufacturing cost for the
fiscal year

11,945,240

Beginning of work in process
Total
Transfer to other account

14,006,951

45,99041,084

11,991,230

14,048,035

63,183102,924

41,08439,422

11,886,963

13,905,688*1

Ending of work in process
Cost of products manufactured

100.0

11.2

100.0

(Footnote)
Previous fiscal year
(From January 1, 2021
to December 31, 2021)

Current fiscal year
(From January 1, 2022
to December 31, 2022)*1 Breakdown of the transfer to other account is as follows:*1 Breakdown of the transfer to other account is as follows:

Promotion expenses
56,604 thousand yen
Research and development expenses 6,174 thousand yen

Promotion expenses
92,920 thousand yen
Research and development expenses 8,333 thousand yen

Other

404 thousand yen

Other1,669 thousand yen

Total

63,183 thousand yen

Total

102,924 thousand yen

2. Method of calculation of costs

2. Method of calculation of costs

The continuous process cost system is adopted.

Same as the previous fiscal year

- 90 -

3) Statements of Changes in Shareholders’ Equity
Previous fiscal year (from January 1, 2021 to December 31, 2021)(Thousand yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capital stock

Retainedearnings
brought
forward

Total retained
earnings

30,924,514

34,725,394

Dividends of surplus(1,917,914)(1,917,914)

Profit4,986,323

4,986,323

Balance at beginning of
periodChanges of items during
periodPurchase of treasury
shares
Disposal of treasury
sharesNet changes of items
other than shareholders’equityTotal changes of items
during period
Balance at end of period

Legal capitalsurplus

Other capitalsurplus

Total capitalsurplus

Legal retained
earnings

199,120

23,370222,490

300,880

2,000,000

23,80923,8093,500,000--

23,80923,809--3,068,409

3,068,409

2,000,000

199,120

47,179246,299

300,880

3,500,000

33,992,924

37,793,804

Shareholders’ equity
Treasury shares
Balance at beginning of
periodChanges of items during
periodGeneral reserve(2,108,947)

Valuation and translation adjustments

Total shareholders’equityValuationdifference on
available-for-salesecurities

Deferred gains orlosses on hedges

Total valuation andtranslation
adjustments

34,838,937

405,396(1,206)404,189

Total net assets

35,243,127

Dividends of surplus(1,917,914)(1,917,914)

Profit4,986,323

4,986,323(3,244)(3,244)(3,244)

31,79855,60855,608Purchase of treasury
shares
Disposal of treasury
sharesNet changes of items
other than shareholders’equityTotal changes of items
during period
Balance at end of period(305,133)

70,027(235,105)(235,105)

28,553

3,120,772(305,133)

70,027(235,105)

2,885,666(2,080,393)

37,959,710

100,262

68,821

169,083

38,128,794- 91 -

Current fiscal year (from January 1, 2022 to December 31, 2022)(Thousand yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capital stock

Retainedearnings
brought
forward

Total retained
earnings

33,992,924

37,793,804

Dividends of surplus(2,536,456)(2,536,456)

Profit

5,533,885

5,533,885

Balance at beginning of
periodChanges of items during
periodPurchase of treasury
shares
Disposal of treasury
sharesNet changes of items
other than shareholders’equityTotal changes of items
during period
Balance at end of period

Legal capitalsurplus

Other capitalsurplus

Total capitalsurplus

Legal retained
earnings

199,120

47,179246,299

300,880

2,000,000

28,23728,2373,500,000--

28,23728,237--2,997,429

2,997,429

2,000,000

199,120

75,417274,537

300,880

3,500,000

36,990,353

40,791,233

Shareholders’ equity
Treasury shares
Balance at beginning of
periodChanges of items during
periodGeneral reserve(2,080,393)

Valuation and translation adjustments

Total shareholders’equityValuationdifference on
available-for-salesecurities

Deferred gains orlosses on hedges

Total valuation andtranslation
adjustments

37,959,710

100,262

68,821

169,083

Total net assets

38,128,794

Dividends of surplus(2,536,456)(2,536,456)

Profit

5,533,885

5,533,885(1,350)(1,350)(1,350)50,832

79,06979,069Purchase of treasury
shares
Disposal of treasury
sharesNet changes of items
other than shareholders’equityTotal changes of items
during period
Balance at end of period

114,665(68,821)45,84445,84449,482

3,075,148

114,665(68,821)45,844

3,120,993(2,030,911)

41,034,858

214,928-

214,928

41,249,787- 92 -

Notes to the Financial Statements(Significant accounting policies)
1. Valuation standards and methods for assets(1) Valuation standard and method for securities(i)

Held-to-maturity bonds
Stated using the amortized cost method(ii) Shares of subsidiaries and shares of associates
Stated at cost using the moving-average method(iii) Available-for-sale securities
Other than shares, etc., without market priceStated at market value based on the market price, etc., at the fiscal year-end (unrealized gains and losses are reported asa separate component of net assets, and cost of sales is calculated by the moving-average method)
Shares, etc., without market priceStated at cost using the moving-average method(2) Valuation standards and methods for inventories(i) MerchandiseStated at cost using the weighted average method (the balance sheet value is calculated using the inventory write-down
method based on decreased profitability)(ii) Finished goods and work in process
Stated at cost using the weighted average method (the balance sheet value is calculated using the inventory write-down
method based on decreased profitability)(iii) Raw materials
Stated at cost using the weighted average method (the balance sheet value is calculated using the inventory write-down
method based on decreased profitability)(iv) Supplies
Stated at cost using the last-purchase-price method (the balance sheet value is calculated using the inventory write-down
method based on decreased profitability)
2. Depreciation and amortization methods for non-current assets(1) Property, plant and equipment
They are depreciated using the straight-line method.
Useful lives of principal assets are as follows:
Buildings:
31 to 50 years
Machinery and equipment:
8 years(2) Intangible assets
They are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated period of internal use (5 years).
3. Translation standards of assets and liabilities denominated in foreign currencies into Japanese yen
Foreign currency denominated monetary receivables and payables are translated into Japanese yen at the spot exchange rate at
the fiscal year-end, and foreign exchange gains and losses from translation are recognized as profit or loss.

- 93 -

4. Accounting standards for allowances(1) Allowance for doubtful accounts
To prepare for losses arising from uncollectible receivables, an allowance for doubtful accounts is recorded at an estimateduncollectible amount based on the historical rate of credit losses with respect to general receivables, and in consideration ofindividual collectability with respect to doubtful accounts and other specific receivables.
(2) Provision for bonuses
To provide for payment of bonuses to employees (including those for employees also serving as officers), a provision forbonuses is recorded based on the estimated payment amount.
(3) Provision for retirement benefits
To prepare for the payment of retirement benefits to employees, a provision for retirement benefits is recorded based on theestimated amount of retirement benefit obligations and plan assets at the end of the current fiscal year.
(i) Method of attributing expected retirement benefits to periods
In calculating retirement benefit obligations, expected retirement benefits are attributed to the period up to the end of thecurrent fiscal year based on the benefit formula basis.
(ii) Method of amortizing actuarial differences and past service costs
Actuarial gains and losses are amortized using the straight-line method over a certain number of years (5 years) within the
average remaining years of service of the eligible employees at the time of occurrence, starting from the fiscal year
following the occurrence.
Prior service cost is amortized using the straight-line method over a certain number of years (5 years) within the averageremaining years of service of the eligible employees at the time of occurrence.
5. Accounting standards for significant revenue and expenses
The principal performance obligations relating to revenue from contracts with customers of the Company, as well as the standard
point at which such obligations are satisfied (i.e., the point at which revenue is recognized) are explained as follows.
The Company is engaged in the manufacturing and sale of cosmetic products. In terms of the sale of such goods or products,
for domestic sales, revenue is recognized upon delivery of the goods or products to customers. For export sales, it is consideredthat the customer has acquired control over the products and goods when the risk burden is transferred to the customer based on
the terms of trade stipulated by Incoterms, etc., and that the performance obligation has been satisfied; accordingly, revenue isrecognized upon such transfer of the risk burden. However, for domestic sales, revenue is recognized at the time of shipment if
the period from the time of shipment to the point at which control of the goods or products is transferred to the customer is thestandard period.
Revenue is measured by the amount of consideration promised in the contract with the customer, less any applicable rebates
and returns.
The transaction consideration is typically received within one month of the fulfillment of the performance obligation and does
not contain any significant financial elements.
6. Other significant matters that serve as the basis for preparation of financial statements
Accounting methods for retirement benefits
The accounting methods for unrecognized actuarial gains and losses and unrecognized past service cost used for retirement
benefits are different from those used in the consolidated financial statements.

- 94 -

(Significant accounting estimates)
Valuation of merchandise and finished goods(1) Amount recorded in consolidated financial statements for the current fiscal year
(Thousand yen)Previous fiscal year

Current fiscal year

Merchandise and finished goods

3,031,256

4,034,129

Loss on valuation of inventories

78,046

254,786(Note) The amount of loss on valuation of inventories represents the amount of write-down due to decreased profitability.
(2) Information to aid in understanding the details of accounting estimates
In the calculation using the method of write-down based on decreased profitability, regarding merchandise and finished goods,
the planned annual shipment volume and the inventory volume at the end of the fiscal year are compared for each merchandiseand finished good, and the amount of slow-moving inventories exceeding the planned shipment volume for a certain period is
written down.
These accounting estimates may differ from the actual profitability if assumed circumstances change as they can be affectedby changes in the future uncertain market environment and other factors.
(Changes in accounting policies)(Change in valuation method for inventories)
The Company used the first-in first-out method for the valuation of merchandise; however, from the current fiscal year, we havechanged to the cost method based on the weighted average method. This change in the valuation method is aimed at realizing amore appropriate calculation of periodic profit and loss by smoothing out the impact of fluctuations in purchase prices, triggeredby an increase in overseas product purchases, etc.
As the impact of this change is immaterial, it has not been applied retrospectively.
(Application of accounting standard for fair value measurement, etc.)
The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019;
hereinafter referred to as the “Fair Value Measurement Standard”), etc., from the beginning of the current fiscal year, and under
the transitional treatment stipulated in paragraph 19 of the Fair Value Measurement Standard and paragraph 44-2 of the“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019), the new accounting policies stipulatedby the Fair Value Measurement Standard, etc., will be applied in the future.
There is no impact on the financial statements.
(Changes in presentation methods)(Application of accounting standard for revenue recognition, etc.)
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020;
hereinafter referred to as the “Revenue Recognition Standard”), etc., from the beginning of the current fiscal year. With regard to
the Revenue Recognition Standard, etc., issued on March 30, 2018, the Company applied them from the beginning of the fiscal
year ended December 31, 2019.
In line with this, the Company has provided useful information in understanding revenue from contracts with customers in“Notes to the Consolidated Financial Statements (Revenue recognition).”- 95 -

(Balance sheets)*1 Monetary receivables and monetary payables related to subsidiaries and associates
Monetary receivables and monetary payables included in each account other than those presented separately are as follows:(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Shot-term monetary receivables
Shot-term monetary payables

Current fiscal year
(As of December 31, 2022)

643,962
217,957

911,799
218,889*2 Treatment of notes due at the fiscal year-end
Notes due at the end of the fiscal year are treated as settled on the due date.
As the fiscal year-end fell on a holiday for financial institutions, the following notes due at the fiscal year-end are treated as settled
on the due date.
(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Notes receivable - trade

Current fiscal year
(As of December 31, 2022)

88,45080,781(Statements of earnings)*1 Transactions with subsidiaries and associates(Thousand yen)
Current fiscal year
(From January 1, 2022
to December 31, 2022)

Previous fiscal year
(From January 1, 2021
to December 31, 2021)
Amount of operating transactions
Net sales
Purchase amount
Other
Amount of non-operating transactions

4,691,979
2,300,470

5,333,992
2,542,278

15,32449,291

311,952
275,531*2 Approximate ratios of expenses included in selling expenses are 9.7% for the previous fiscal year and 9.8% for the current fiscal
year, and those included in general and administrative expenses are 90.3% for the previous fiscal year and 90.2% for the current
fiscal year.
Major expenses included in selling, general and administrative expenses and their amounts are as follows:(Thousand yen)Previous fiscal year
Current fiscal year
(From January 1, 2021
(From January 1, 2022
to December 31, 2021)
to December 31, 2022)
Remuneration, salaries and allowances
4,598,139
4,798,376
Logistics expenses
Research and development expenses

2,858,206
1,744,223

2,743,662
2,108,860

Promotion expenses
Depreciation

829,828
778,770932,097823,036

Provision for bonuses
Retirement benefit expenses

346,719
293,508

390,067
273,695

115-

Provision of allowance for doubtful accounts(Securities)
Previous fiscal year (as of December 31, 2021)
The description of the market values of shares of subsidiaries and associates (amounts in the balance sheets: 1,946,246 thousand yenof shares of subsidiaries, 3,838,000 thousand yen of investments in capital of subsidiaries and associates, and 49,000 thousand yen of
shares of associates) is omitted since they are shares, etc., without market price.
Current fiscal year (as of December 31, 2022)
The description of the market values of shares of subsidiaries and associates (amounts in the balance sheets: 2,213,793 thousand yenof shares of subsidiaries and 4,457,200 thousand yen of investments in capital of subsidiaries and associates) is omitted since they areshares, etc., without market price.

- 96 -(Tax effect accounting)
1. Breakdown of major causes for deferred tax assets and deferred tax liabilities(Thousand yen)Previous fiscal year
(As of December 31, 2021)
Deferred tax assets
Provision for bonuses

Current fiscal year
(As of December 31, 2022)

147,138

168,066

Loss on valuation of inventories
Accrued enterprise tax and business office tax

23,88284,44977,96486,245

Accrued social insurance premiums
Depreciation

23,192
231,209

26,071
227,369

Allowance for doubtful accounts
Loss on valuation of investment securities

14,80643

125,001-

Loss on valuation of shares of subsidiaries andassociates

179,738

194,732

Retirement benefits for directors (and other officers)
Asset retirement obligations

3,905
175,025

3,709
184,403

Restricted share-based compensation
Performance-linked compensation

33,16730,42040,422
24,05130,846

26,872

Total deferred tax assets

Other

977,825

1,184,911

Deferred tax liabilities
Valuation difference on available-for-sale securities(44,208)(94,766)

Deferred gains or losses on hedges
Retirement cost for asset retirement obligations(30,344)(118,568)(113,579)

Prepaid pension costs(56,157)(64,956)(249,278)
728,547(273,303)
911,607

Total deferred tax liabilities
Net deferred tax assets (liabilities)

2. Breakdown by item of major causes of significant difference between the effective statutory tax rate and the income tax rate after
applying tax effect accounting
Previous fiscal year
(As of December 31, 2021)
Effective statutory tax rate
(Adjustments)
Items permanently excluded from deductible expenses
such as entertainment expenses
Dividend income excluded from gross revenue

Current fiscal year
(As of December 31, 2022)

30.6%

30.6%

0.9%

1.1%

0.0%

(0.8)%

Inhabitant tax on per capita basis
Experimentation and research expenses tax credit

0.4%(3.3)%

0.3%(4.2)%

Salary increase tax credits(0.6)%(0.6)%

Other(0.2)%

0.2%

Income tax rate after applying tax effect accounting

27.8%

26.6%

(Revenue recognition)
The description of useful information in understanding revenue from contracts with customers is omitted as it is provided in “Notes
to the Financial Statements (Significant accounting policies), 5. Accounting standards for significant revenue and expenses.”(Significant subsequent events)
Not applicable.

- 97 -

4) Supplementary schedules
Schedule of property, plant and equipment, etc.
(Thousand yen)
Category

Balance at
Depreciation
Accumulated
Increase
Decrease
Balance at end
beginning of(amortization)
depreciation
during period during periodof period
periodduring period(amortization)

Type of assets
Buildings

6,085,512

296,307

83,090407,087

5,958,847

5,645,984

Structures

103,558

2,270-

16,054

89,773

272,524

1,836,420

798,398

173,033

527,047

2,106,899

5,539,152

Vehicles14,174

4,234

3,662

5,485

10,28838,549Tools, furniture andfixtures628,788

325,922

207,154

312,373

642,177

2,344,086

4,879,893

1,444,199--

6,324,093-

153,740

2,281,371

2,157,170-

277,940-

13,702,088

5,152,703

2,624,111

1,268,049

15,410,019

13,840,297

Software1,151,587

503,101

2,452

460,558

1,194,130

2,973,803

Other

134,030

518,101

336,441245

315,446

9,172

1,285,618

1,021,203

338,894

460,8031,509,577

2,982,976

Machinery andequipment
Property,plant andequipment

Land
Construction inprogress
Total

Intangible
assets

Total(Note) Significant changes in non-current assets are as follows:
1. Major components of an increase in buildings of 296,307 thousand yen are 144,991 thousand yen of construction work forrelocation of the Kobe Sales Office, 39,000 thousand yen of construction work for repair of unimplemented rooms on thefirst floor of the North Wing of the Yumegaoka Factory, and 32,324 thousand yen of construction work for renovation of the
Saitama Sales Office.
2. A major component of an increase in machinery and equipment of 798,398 thousand yen is 369,273 thousand yen of
wrapping and filling facilities at the Yumegaoka Factory.
3. A major component of an increase in tools, furniture and fixtures of 325,922 thousand yen is 22,145 thousand yen of fixturesassociated with the relocation of the Kobe Sales Office.
4. An increase in land of 1,444,199 thousand yen is 1,444,199 thousand yen of expenses associated with the purchase of theland for the Human Resources Development Center.
5. A major component of an increase in construction in progress of 2,281,371 thousand yen is 1,453,696 thousand yen of
expenses associated with the purchase of the land for the Human Resources Development Center.
6. A major component of a decrease in construction in progress of 2,157,170 thousand yen is 1,453,696 thousand yen of transfer
associated with the purchase of the land for the Human Resources Development Center.
7. Major components of an increase in software of 503,101 thousand yen are 122,625 thousand yen for upgrading the sales
management system, 102,225 thousand yen for the production instruction system, and 20,700 thousand yen for replacing theaccounting system.
Schedule of provisions(Thousand yen)Account

Balance at beginning of
Increase during period Decrease during period Balance at end of period
periodAllowance for doubtful
accounts

48,387362,4142,300

408,501

Provision for bonuses

480,844549,238

480,844549,238- 98 -

(2) Components of major assets and liabilities
This information is omitted since the Company prepares the consolidated financial statements.
(3) Others
Not applicable.

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VI. Outline of Share-Related Administration of Reporting Company
Fiscal year

From January 1 to December 31

Ordinary General Meeting of
Shareholders

During March

Record date

December 31

Record date for distribution of
surplusNumber of shares constituting one
unit

June 30 and December 31
100 shares

Purchase and sale of shares less than
one unit
Handling office

Administrator of shareholder(Special account)
1-4-1 Marunouchi, Chiyoda-ku, Tokyo
Sumitomo Mitsui Trust Bank, Limited(Special account)registry

1-4-1 Marunouchi, Chiyoda-ku, Tokyo
Sumitomo Mitsui Trust Bank, Limited

Transfer office-

Purchase / sale fee

An amount set separately equivalent to the amount of brokerage commission
The method of public notice of the Company shall be by electronic public notice. However,

Method of public noticein the event that electronic public notice becomes impossible due to unavoidable
circumstances, announcements will be published in the Nikkei. Electronic public notices areposted on the Company’s website, which may be accessed with the following URL.
https://www.milbon.com/en/

Shareholder benefits(Note)We have a shareholder benefit program where bonus points are awarded based on the numberof shares held and the holding period of the shares.

We have stipulated in our Articles of Incorporation that shareholders of shares constituting less than one unit may not
exercise some or all rights, other than the following rights.
(1) The rights which cannot be restricted by the Articles of Incorporation in accordance with relevant laws and ordinances.
(2) The right to receive an allotment of shares or share purchase options in proportion to the number of shares owned byshareholders.
(3) The right to request the purchase of shares constituting less than one unit.

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VII. Reference Information of Reporting Company
1. Information about Parent of Reporting Company
Not applicable.

2. Other Reference Information
The Company submitted the following documents during the period from the beginning of the current fiscal year to the date ofsubmission of the annual securities report.
(1) Annual securities report and attached documents, and confirmation document
Fiscal year (62nd Term)(From January 1, 2021 to December 31, 2021)

Submitted to the Director-General of
the Kinki Local Finance Bureau on
March 29, 2022

(2) Internal control report and attached documents
Submitted to the Director-General of the Kinki Local Finance Bureau on March 29, 2022
(3) Quarterly securities reports and confirmation documents(The 1st Quarter of 63rd Term)(From January 1, 2022 to March 31, 2022)

Submitted to the Director-General of
the Kinki Local Finance Bureau on
May 13, 2022

(The 2nd Quarter of 63rd Term)(From April 1, 2022 to June 30, 2022)

Submitted to the Director-General of
the Kinki Local Finance Bureau on
August 10, 2022

(The 3rd Quarter of 63rd Term)(From July 1, 2022 to September 30, 2022)

Submitted to the Director-General of
the Kinki Local Finance Bureau on
November 11, 2022

(4) Extraordinary report(i) Submitted to the Director-General of the Kinki Local Finance Bureau on March 30, 2022.
The extraordinary report was submitted based on the provisions of Article 19, Paragraph 2, Item 9-2 (Results of exercise
of voting rights at a general meeting of shareholders) of the Cabinet Office Order on Disclosure of Corporate Affairs.
(ii) Submitted to the Director-General of the Kinki Local Finance Bureau on June 2, 2022.
The extraordinary report was submitted based on the provisions of Article 19, Paragraph 2, Item 3 (Change to a specified
subsidiary company) of the Cabinet Office Order on Disclosure of Corporate Affairs.

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Part 2 Information about Reporting Company’s Guarantor, etc.
Not applicable.

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Independent Auditor’s Report on the Financial Statements
and Internal Control Over Financial Reporting
March 29, 2023

To the Board of Directors of Milbon Co., Ltd.

GYOSEI & CO.
Tokyo Office

Designated partner
Engagement partner

Certified public accountant

Takayuki Nakagawa

Designated partner
Engagement partner

Certified public accountant

Toshiya Shinshima<Audit of Financial Statements>
OpinionWe have audited Milbon Co., Ltd.’s consolidated financial statements referred to in the Financial Information section of this annual
securities report for the consolidated fiscal year from January 1, 2022 to December 31, 2022, which comprise the consolidated balance
sheets, consolidated statement of income, consolidated statement of comprehensive income, consolidated statements of changes in net
assets, consolidated statements of cash flows, material matters that serve as the basis for preparation of consolidated financial statements,
other notes, and annexed consolidated detailed schedules, in order to certify the audit pursuant to Article 193-2, Paragraph 1 of the
Financial Instruments and Exchange Act.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Milbon Co., Ltd. and its consolidated subsidiaries as of December 31, 2022, and the results of its operations and cash flows for the
consolidated fiscal year then ended, in accordance with accounting principles generally accepted in Japan.
Basis for the Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibility under the auditing
standards is stated in Auditor’s Responsibility for the Audit of the Consolidated Financial Statements. We are independent of theCompany and its consolidated subsidiaries in accordance with the provisions related to professional ethics in Japan, and are fulfillingother ethical responsibilities as an auditor. We believe that we have obtained sufficient and appropriate audit evidence to provide a basis
for our audit opinion.
Key Audit Matter
A key audit matter is a matter, in our professional judgments, which is of most significance in our audit of the consolidated financial
statements for the current consolidated fiscal year. The key audit matter is addressed in the context of our audit of the consolidated
financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on this matter.

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Valuation of the merchandise and finished goods of Milbon Co., Ltd.
Description of the key audit matter
How the key audit matter was addressed in the audit
and reason for determination as key audit matterIn the consolidated balance sheets for the current fiscal year, To verify the validity of the valuation of the merchandise and6,319,121 thousand yen has been reported under merchandise and finished goods, we primarily implemented the following audit
finished goods, of which the merchandise and finished goods of procedures.
Milbon Co., Ltd. account for 4,034,129 thousand yen.
(1) Assessment of internal controls
The balance sheet value of merchandise and finished goods was• We assessed the status of design and operation of internal
calculated using the inventory write-down method based on
decreased profitability, as stated in 4 (1) Valuation standards andcontrols related to the valuation of slow-moving inventory.

methods for significant assets under Significant matters that serve (2) Examination of the validity of the valuation of slow-moving
as the basis for preparation of consolidated financial statements.
inventory
The Company manufactures and sells hair care products, haircoloring products, permanent wave products, etc., and holds• We assessed the accuracy of management’s estimates bycomparing the shipping plans of prior years with the actual

various types of merchandise and finished goods. In certain cases,
merchandise and finished goods fail to sell as planned and remain

shipment volume for the current year and examined thereasons for their difference.

due to market demand, competition from peers and other factors.
The Company, as stated in its (Significant accounting• We obtained the shipping plan for each merchandise andfinished goods for the following year, questioned

estimates), has primarily been reducing the carrying amounts ofslow-moving inventory that exceeds the planned shipment

management on the risk factors which could impact theachievability of this shipping plan. We also carried out a trend

volume for a certain period, and this shipping plan carries a highlevel of uncertainty, thus requiring the subjective judgment ofanalysis based on past results as well as a comparative study
with available outside data.

management.
We, therefore, determined that the valuation of the merchandise• We verified that the shipping plan for each merchandise andfinished goods was consistent with next year’s budget

and finished goods of Milbon Co., Ltd. was a particularly
important element in the audit of the consolidated financial

approved by the Board of Directors and the Medium-Term
Management Plan.

statements for the current fiscal year and hence a key audit matter.

• By carrying out a recalculation based on the valuation method
used by the Company, we verified the validity of the amountreported as a valuation loss.

Other Information
The other information comprises the information included in the annual securities report other than the consolidated financial statements,
the financial statements, and our auditor’s reports thereon. Management is responsible for the preparation and disclosure of the otherinformation. The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for overseeing the Board
Directors’ performance of their duties with regard to the design and operation of the reporting process of the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
Our responsibility in our audit of the consolidated financial statements is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in thecourse of the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Responsibilities of Management, the Audit & Supervisory Board Members and the Audit & Supervisory Board for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for designing and operating such internal control as management determines isnecessary to enable the presentation and fair presentation of the consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing whether it is appropriate to prepare theconsolidated financial statements in accordance with the premise of a going concern, and for disclosing matters relating to going concern
when it is required to do so in accordance with accounting principles generally accepted in Japan.
The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for monitoring the execution of the- 104 -

duties of Executive Officers and Board Directors related to designing and operating the financial reporting process.
Auditor’s Responsibility for the Audit of the Consolidated Financial Statements
Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to express an opinion on the consolidated financial statements from an independent
standpoint in an audit report, based on our audit. Misstatements can occur as a result of fraud or error, and are deemed material if they
can be reasonably expected to, either individually or collectively, influence the decisions of users taken on the basis of the consolidated
financial statements.
We make professional judgments in the audit process in accordance with auditing standards generally accepted in Japan, and performthe following while maintaining professional skepticism.
• Identify and assess the risks of material misstatement, whether due to fraud or error. Design and implement audit procedures toaddress the risks of material misstatement. The audit procedures shall be selected and applied as determined by the auditor. In
addition, sufficient and appropriate audit evidence shall be obtained to provide a basis for the audit opinion.
• In making those risk assessments, the auditor considers internal control relevant to the entity’s audit in order to design audit
procedures that are appropriate in the circumstances, although the purpose of the audit of the consolidated financial statements is
not to express an opinion on the effectiveness of the entity’s internal control.
• Assess the appropriateness of accounting policies adopted by management and the method of their application, as well as thereasonableness of accounting estimates made by management and the adequacy of related notes.
• Determine whether it is appropriate for management to prepare the consolidated financial statements on the premise of a going
concern and, based on the audit evidence obtained, determine whether there is a significant uncertainty in regard to events orconditions that may cast significant doubt on the entity’s ability to continue as a going concern. If there is a significant uncertainty
concerning the premise of a going concern, the auditor is required to call attention to the notes to the consolidated financial
statements in the audit report, or if the notes to the consolidated financial statements pertaining to the significant uncertainty areinappropriate, issue a modified opinion on the consolidated financial statements. While the conclusions of the auditor are basedon the audit evidence obtained up to the date of the audit report, depending on future events or conditions, an entity may be unable
to continue as a going concern.
• Besides assessing whether the presentation of and notes to the consolidated financial statements are in accordance with accounting
principles generally accepted in Japan, assess the presentation, structure, and content of the consolidated financial statements
including related notes, and whether the consolidated financial statements fairly present the transactions and accounting events on
which they are based.
• Obtain sufficient and appropriate audit evidence regarding the financial information of the Company and its consolidated
subsidiaries in order to express an opinion on the consolidated financial statements. The auditor is responsible for instructing,supervising, and implementing the audit of the consolidated financial statements, and is solely responsible for the audit opinion.
The auditor reports to the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding the scope and timingof implementation of the planned audit, material audit findings including material weaknesses in internal control identified in the courseof the audit, and other matters required under the auditing standards.
The auditor reports to the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding the observance ofprovisions related to professional ethics in Japan as well as matters that are reasonably considered to have an impact on the auditor’s
independence and any safeguards that are in place to reduce or eliminate obstacles.
From the matters discussed with the Audit & Supervisory Board Members and the Audit & Supervisory Board, the auditor judges thematter that is of most significance in the audit of the consolidated financial statements of the current consolidated fiscal year anddetermines it as the key audit matter, and describes the matter in the auditor’s report. However, in the event that laws and regulations
preclude public disclosure about the matter or when, in extremely rare circumstances, the auditor determined that a matter should not bereported in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such report, such matter shall not be described in the report.
<Audit of Internal Control>
OpinionWe have audited the internal control report over financial reporting of Milbon Co., Ltd. as of December 31, 2022 in order to certify theaudit pursuant to Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act.
In our opinion, the report on internal control over financial reporting referred to above, which shows that the internal control overfinancial reporting of Milbon Co., Ltd. as of December 31, 2022 is effectively maintained, presents fairly, in all material respects, theresults of the assessment of internal control over financial reporting in accordance with assessment standards for internal control overfinancial reporting generally accepted in Japan.

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Basis for the Opinion
We conducted our internal control audit in accordance with auditing standards for internal control over financial reporting generally
accepted in Japan. Our responsibility under the auditing standards for internal control over financial reporting is stated in Auditors’
Responsibilities for the Internal Audit. We are independent of the Company and its consolidated subsidiaries in accordance with theprovisions related to professional ethics in Japan, and are fulfilling other ethical responsibilities as an auditor. We believe that we haveobtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.
Responsibilities of Management, Audit & Supervisory Board Member and the Audit & Supervisory Board for Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the preparation andfair representation of the internal control report in accordance with assessment standards for internal control over financial reporting
generally accepted in Japan.
The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for monitoring and verifying the designand operating status of internal control over financial reporting.
There is a possibility that misstatements may not be completely prevented or detected by internal control over financial reporting.
Auditor’s Responsibility for the Audit of the Internal Control
Our responsibility is to obtain reasonable assurance about whether the internal control report is free from material misstatement, and to
express an opinion on the internal control report from an independent standpoint in an audit report on the internal control over financial
reporting, based on our audit.
We make professional judgments in the audit process in accordance with auditing standards for internal control over financial reporting
generally accepted in Japan, and perform the following while maintaining professional skepticism.
• Perform audit procedures to obtain audit evidence regarding the results of the assessment of internal control over financial reportingin the internal control report. Audit procedures for internal control audits are selected and applied at the auditor's discretion, basedon the materiality of the effect on the reliability of financial reporting.
• Examine representations on the scope, procedures, and results of the assessment of internal control over financial reporting madeby management, as well as consider the overall presentation of the internal control report.
• Obtain sufficient and appropriate audit evidence regarding the results of the assessment of internal control over financial reportingin the internal control report. The auditor is responsible for instructing, supervising, and implementing the audit of the internal
control report, and is solely responsible for the audit opinion.
The auditor reports to the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding the scope and timingof implementation of the planned internal control audit, the results of internal control audit, material weaknesses identified which should
be disclosed, the results of their remediation, and other matters required under the internal control auditing standards.
The auditor reports to the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding the observance ofprovisions related to professional ethics in Japan as well as matters that are reasonably considered to have an impact on the auditor’s
independence and any safeguards that are in place to reduce or eliminate obstacles.
Interest
Our firm and engagement partners have no interests in the Company or its consolidated subsidiaries requiring disclosure under theprovisions of the Certified Public Accountants Act of Japan.

(Notes)1. The above is the digitized form of the matters described in the original audit report, and the original copy is in thecustody of the Company (the company submitting the annual securities report).
2. XBRL data are not in the audit scope of the Independent Auditor.

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Independent Auditor’s Report
March 29, 2023

To the Board of Directors of Milbon Co., Ltd.

GYOSEI & CO.
Tokyo Office

Designated partner
Engagement partner

Certified public accountant

Takayuki Nakagawa

Designated partner
Engagement partner

Certified public accountant

Toshiya Shinshima

OpinionWe have audited Milbon Co., Ltd.’s financial statements referred to in the Financial Information section of this annual securities reportfor the fiscal year from January 1, 2022 to December 31, 2022, which comprise the balance sheets, statement of income, statements ofchanges in net assets, significant accounting policies, other notes, and annexed detailed schedules, in order to certify the audit pursuant
to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Milbon Co.,
Ltd. as of December 31, 2022, and the results of its operations for the fiscal year then ended, in accordance with accounting principles
generally accepted in Japan.
Basis for the Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibility under the auditing
standards is stated in Auditor’s Responsibility for the Audit of the Financial Statements. We are independent of the Company inaccordance with the provisions related to professional ethics in Japan, and are fulfilling other ethical responsibilities as an auditor. We
believe that we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.
Key Audit Matter
A key audit matter is a matter, in our professional judgments, which is of most significance in our audit of the financial statements forthe current fiscal year. The key audit matter is addressed in the context of our audit of the financial statements as a whole, and informing
our opinion thereon, and we do not provide a separate opinion on the matter.

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Valuation of the merchandise and finished goods of Milbon Co., Ltd.
The description is omitted since it is the same as the description of the key audit matter (Valuation of the merchandise and finishedgoods of Milbon Co., Ltd.) in the Independent Auditor’s Report on the consolidated financial statements.
Other Information
The other information comprises the information included in the annual securities report other than the consolidated financial statements,
the financial statements, and our auditor’s reports thereon. Management is responsible for the preparation and disclosure of the otherinformation. The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for overseeing the Board
Directors’ performance of their duties with regard to the design and operation of the reporting process of the other information.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
Our responsibility in our audit of the financial statements is to read the other information and, in doing so, consider whether the otherinformation is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Responsibilities of Management, Audit & Supervisory Board Members and the Audit & Supervisory Board for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles
generally accepted in Japan, and for designing and operating such internal control as management determines is necessary to enable thepreparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing whether it is appropriate to prepare the financial
statement in accordance with the premise of a going concern, and for disclosing matters relating to going concern when it is required to
do so in accordance with accounting principles generally accepted in Japan.
The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for monitoring the execution of theduties of Executive Officers and Board Directors related to designing and operating the financial reporting process.
Auditor’s Responsibility for the Audit of the Financial Statements
Our responsibility is to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to express an opinion on the financial statements from an independent standpoint in anaudit report, based on our audit. Misstatements can occur as a result of fraud or error, and are deemed material if they can be reasonably
expected to, either individually or collectively, influence the decisions of users taken on the basis of the consolidated financial statements.
We make professional judgments in the audit process in accordance with auditing standards generally accepted in Japan, and performthe following while maintaining professional skepticism.
• Identify and assess the risks of material misstatement, whether due to fraud or error. Design and implement audit procedures toaddress the risks of material misstatement. The audit procedures shall be selected and applied as determined by the auditor. In
addition, sufficient and appropriate audit evidence shall be obtained to provide a basis for the audit opinion.
• In making those risk assessments, the auditor considers internal control relevant to the entity’s audit in order to design audit
procedures that are appropriate in the circumstances, although the purpose of the audit of the financial statements is not to express
an opinion on the effectiveness of the entity’s internal control.
• Assess the appropriateness of accounting policies adopted by management and the method of their application, as well as thereasonableness of accounting estimates made by management and the adequacy of related notes.
• Determine whether it is appropriate for management to prepare the financial statements on the premise of a going concern and,based on the audit evidence obtained, determine whether there is a significant uncertainty in regard to events or conditions that
may cast significant doubt on the entity’s ability to continue as a going concern. If there is a significant uncertainty concerning thepremise of a going concern, the auditor is required to call attention to the notes to the financial statements in the audit report, or if
the notes to the financial statements pertaining to the significant uncertainty are inappropriate, issue a modified opinion on thefinancial statements. While the conclusions of the auditor are based on the audit evidence obtained up to the date of the audit
report, depending on future events or conditions, an entity may be unable to continue as a going concern.
• Besides assessing whether the presentation of and notes to the financial statements are in accordance with accounting principles
generally accepted in Japan, assess the presentation, structure, and content of the financial statements including related notes, andwhether the financial statements fairly present the transactions and accounting events on which they are based.

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The auditor reports to the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding the scope and timingof implementation of the planned audit, material audit findings including material weaknesses in internal control identified in the courseof the audit, and other matters required under the auditing standards.
The auditor reports to the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding the observance ofprovisions related to professional ethics in Japan as well as matters that are reasonably considered to have an impact on the auditor’s
independence and any safeguards that are in place to reduce or eliminate obstacles.
From the matters discussed with the Audit & Supervisory Board Members and the Audit & Supervisory Board, the auditor judges thematter that is of most significance in the audit of the financial statements of the current fiscal year and determines it as the key audit
matter, and describes the matter in the auditor’s report. However, in the event that laws and regulations preclude public disclosure about
the matter or when, in extremely rare circumstances, the auditor determined that a matter should not be reported in the auditor’s reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such report, suchmatter shall not be described in the report.
Interest
Our firm and engagement partners have no interests in the Company requiring disclosure under the provisions of the Certified Public
Accountants Act of Japan.

(Notes) 1. The above is the digitized form of the matters described in the original audit report, and the original copy is in the custodyof the Company (the company submitting the annual securities report).
2. XBRL data are not in the audit scope of the Independent Auditor.

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