BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/

BESTERRA CO., LTD (1433)

President Akitatsu YoshinoCompany Information
MarketIndustry
President
HQ Address
Year-end
Homepage

TSE 1st Section (Newly established: Prime Market)
Construction business
Akitatsu Yoshino
Kiba Park Bldg, 3-2-6 Hirano, Koto-ku, Tokyo, JapanEnd of January
https://www.besterra.co.jp/

Stock Information
Share Price
Share Outstanding (End of the term)¥1,1908,750,400 shares
DPS (Est.)
Dividend Yield (Est.)
EPS (Est.)¥20.001.7%¥54.40Market Cap.
¥10,412 million
PER (Est.)
21.9 xROE (Act.)
42.4%
BPS (Act.)¥502.81

Trading Unit
100 shares
PBR (Act.)
2.4 x*The share price is the closing price on March 28. Each number is from the financial results for the FY22/1.

Consolidated Earnings
Fiscal Year
Jan. 2019 (Actual)Jan. 2020 (Actual)Jan. 2021 (Actual)Jan. 2022 (Actual)Jan. 2023 (Forecast)

Net Sales
Operating Income Ordinary Income
4,927
497
495
3,436
93
97
3,682
124
212
5,966
607
840
6,700
620
666

Net Income
621
59
142
1,467
469

EPS
75.25
7.29
17.33
174.54
54.40

DPS
15.00
16.00
16.00
16.00
20.00

* The forecasted values were provided by the company. Unit: million yen, yen.

This Bridge Report reviews on the outlook of BESTERRA CO., LTD’s earnings results for the fiscal year ended January 2022, its
forecast of the fiscal year ending January 2023 and medium-term management plan.

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BRIDGE REPORT (1433) March 28, 2022

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Table of Contents
Key Points
1. Company Overview
2. Fiscal Year Ended January 2022 Earnings Results
3. Fiscal Year Ending January 2023 Earnings Forecasts
4. Progress of Medium-term Management Plan 2025
5. Conclusions<Reference1: Medium-term Management Plan 2025><Reference2: Regarding Corporate Governance>

Key Points⚫

In the term ended January 2022, sales increased 62.0% year on year to 5,966 million yen. Large-scale percentage-ofcompletion projects progressed smoothly, and business synergies with Yazawa Corporation, a new company of thecorporate group, also contributed. Operating income increased 388.3% year on year to 607 million yen. The increase insales, the contribution of high-margin construction works, and the boost of profit due to soaring scrap market prices
offset the increase in SG&A expenses, including human resource investment and new windmill demolition method
development costs in accordance with the medium-term management plan, resulting in a significant increase in profit.
The company posted 201 million yen as equity in earnings of affiliated companies as a result of the conversion of Rever
Holdings into an equity-method affiliate, and 1,275 million yen as gain on exchange of shares through the businesscombination of Rever Holdings as Rever Holdings and TAKEEI CORPORATION jointly transferred their shares andbecame subsidiaries of the newly established TRE Holdings. As a result, ordinary income increased 294.9% year on year
to 840 million yen, and net income grew 929.7% year on year to 1,467 million yen. Both sales and profit exceeded thesecond revised forecast. Even on a quarterly basis, the fourth quarter (November-January) saw record sales and profit.

⚫

For the term ending January 2023, the company forecasts a 12.3% year on year increase in sales to 6.7 billion yen and a
2.0% year on year increase in operating income to 620 million yen. The company expects the number of orders to remainfirm. Due to the absence of equity in earnings of affiliates and exchange gains from business combination recorded in theprevious fiscal year, ordinary income and net income are expected to decrease. The company plans to pay an interim
dividend of 10 yen/share, up 4 yen/share, and a term-end dividend of 10 yen/share, unchanged from the previous year,
for a total of 20 yen/share. The payout ratio is expected to be 36.8%.

⚫

In the term ended January 2022, the first year of the "Mid-Term Management Plan 2025," the company steadily
promoted the goals set forth in the Mid-Term Management Plan and exceeded the second upwardly revised figures. The
company aims to continue steady progress in the second year and beyond.

⚫

Originally, the company had planned a V-shaped recovery in the term ended January 2021, following significant declines
in sales and profit in the term ended January 2020 due to delays in project orders and higher labor costs, but the
COVID-19 pandemic delayed the recovery for a full fiscal year. However, we can highly evaluate the fact that thecompany's progress in expanding its human capital by hiring more demolition supervisors, which is necessary not only
for the recovery but also for future growth, was in line with plans. Yazawa Corporation, which has become a subsidiary,is expected to contribute only to a certain extent to sales and profit, with expected sales of 700 million yen in 2023, but it is
an important step forward in terms of expected synergies, such as the incorporation of key technologies and the use ofcustomer bases.

⚫

We expect the company to achieve a V-shape recovery and steadily expand its top line from this fiscal year onward. In
addition, we will also pay close attention to the company's efforts and progress to further improve profitability while
making aggressive investments.

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1. Company Overview
As a specialist in plant dismantlement, BESTERRA manages the dismantlement of plants (metal structures) for iron-making, power
generation, gas, petroleum, etc. Its core competence is “the method and technology for dismantling plants,” and it has many patented
methods including international patents. The company concentrates its managerial resources on engineering (proposal, design, andwork planning) and management (supervision and work management), and outsources actual dismantlement work to its affiliates, andso it does not own heavy machinery or construction teams (the risk of owning assets can be avoided), and it is unnecessary to procurematerials, etc. and make transactions for material production (the inventory risk can be avoided).
The Group also has two consolidated subsidiaries, Hiro Engineering, which provides human resource services for design work, etc.
and 3D Visual KK, which handles 3D scan modeling and design work.
The corporate name “BESTERRA” was coined by combining the English word “Best (the superlative of ‘good’)” and the Latin word
“Terra (the earth),” and、infused with the ambition to “create the best earth.” By developing an integrated system for dismantling andrecycling, the company aims to actualize an advanced recycling society and contribute to the earth environment.
Corporate ethos and the code of conduct
Under the corporate ethos “We will contribute to the earth environment with our flexible way of thinking, creativity, and technologies
using these concepts,” the company enacted the following code of conduct.
The company has also established a "Basic Sustainability Policy" to contribute to the realization of a sustainable society.
◎ Basic Sustainability Policy
We, Besterra, are committed to both "realization of an advanced recycling-oriented society" and "sustainable corporate growth" basedon our corporate philosophy of "We will contribute to the earth environment with our flexible way of thinking, creativity, andtechnologies using these concepts."
Long-term vision (Ideal state of the company)
・ Plant Demolition Leader in Japan・ Proposing Plant Disassembly Technologies to the World
1-1 Characteristics of the business
The company has a single segment consisting of the plant demolition business. For others, it engages in the human resource service
business and the 3D scan, modeling, and design business. In the term ended January 2021, the plant dismantling business accounted
for 92.7% of total sales.
Plant dismantlement businessIn the plant dismantlement business, the company works on all types of plants in the fields of ironmaking, electric power, gas,petroleum, and petrochemicals, etc. The company offers services on overall engineering processes including proposals, designing,
work planning, outsourcing/arrangement of equipment and materials, supervision, safety management, cost management, financial
management, and handling of governmental procedures. It focuses on designing its unique demolition technologies and supervisingdemolition works based on demolition plans and uses specialized subcontractors for demolition works.
The clients for plant dismantlement are leading companies that own plants for ironmaking, electric power, gas, petroleum, etc. In mostcases, the equipment installation companies of the corporate groups of clients or leading general contractors are entrusted withdismantlement, and then BESTERRA serves as the primary or second-tier subcontractor.
Also, in the plant dismantlement business, BESTERRA receives valuable materials generated through dismantlement, such as scrap,
and sells them to scrap handlers. Accordingly, the company estimates the value of valuable materials while comprehensively
considering material, quantity, price (market price of each material, such as iron, stainless steel, and copper), etc. and negotiates withclients about the fee for dismantlement work. In accounting, the gain from sale of valuable materials is included in revenue fromdismantlement work and posted as part of sales from completed dismantlement work. In some cases, contractors (clients) dispose of(sell) scrap, etc. by themselves.

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https://www.bridge-salon.jp/*Two standards for posting revenue and seasonality of revenue posting of the company
The standards for posting revenue from contracts can be classified into the completed contract method, in which revenue is posted
when works are completed, and the percentage-of-completion method, in which revenue is posted according to the progress of works.
In the case of plant dismantlement, where valuables, such as scrap, are collected, revenue cannot be confirmed until the sale of scrap.
Therefore, the company basically applies the percentage-of-completion method to large-scale projects whose contract amount exceeds
50 million yen and whose period exceeds 3 months, from the term ended January 2018 (the completed contract method is applied tothe projects that are not applicable to the above criteria). The timing of posting revenue (the completion of demolition work) fromworks for which the completed contract method is used is often affected by the capital investment plans of clients. In the case of
BESTERRA, revenue tends to be posted in the first quarter (February to April) and the fourth quarter (November to January) (theseasonality of revenue posting). However, the variation in quarterly performance may mislead investors, so the company is expanding
the scope of application of the percentage-of-completion method step by step, to equalize the timings of revenue posting.
OthersIn response to the chronic shortage of skilled construction workers, the company began providing human resource services in January
2013, and in March 2018, it made Hiro Engineering, which handles human resource services such as design work, a subsidiary. In
January 2015, the company began offering a 3D measurement service as well. It established 3D Visual KK in December 2019, and 3D
scan modeling and design business was transferred from INTER ACTION Corporation (securities code: 7725) in February 2020.
1-2 Strengths: an excellent client base, efficient dismantlement management based on plenty of experience, and intellectual
property, such as patented methods
The strengths of the company are excellent client assets, efficient dismantlement management based on plenty of experience, andintellectual property, such as patented methods. Because the clients are basically engineering subsidiary companies of leading
companies in ironmaking, electric, gas, coal oil fields, and major general contractors, which are easily trustable excellent clients, and it
is predicted that they will receive orders continuously. The clients of the leading companies highly evaluate its company’s total
management (low cost and high efficiency) of plant dismantlement that it cultivated experiences for over 40 years, and it elect a barrier
to entry.
Furthermore, a variety of technologies and know-how the company possesses, which have been accumulated through environmental
work, etc. is also the strength of the company, including the recycling of waste materials which is a manifest and potential intellectual
property.
Patented methods, etc.
“Apple peeling demolition method” and fusing robot “Ringo☆Star”
The “apple peeling demolition method” is a method of dismantling a large spherical tank, such as gas holders and oil tanks, by cutting
it in spirals from the center of the ceiling of the enclosure part. The cut part spirals down to the ground gradually under the force of theearth’s gravity (natural energy). The method enjoys superiority in a work period, cost, and safety, and has considerable competitive
advantages, realizing “greater promptness, higher cost efficiency, and added safety.” Furthermore, the company offers a robot for thefusing process, “Ringo☆Star,” which automates the “apple peeling demolition method.” (The company is also working to expand therange of applications for “Ringo☆Star” by developing a new attachment).
Environment-related methods
The company has cultivated experiences and business results of a multitude of environment-related demolition works, using the“fireless methods” which do not require the use of fire. For example, although polychlorinated biphenyls (PCBs) are considered as a
toxic substance and therefore totally abolished today, it had been used for many years in transformers and condensers because of its
excellent thermal stability and chemical stability (electric insulation characteristics). In many cases, transformers and condensers aredisposed of in conjunction with plant demolition works; however, because PCBs gasify when they are treated at the high temperature,posing a risk of inhaling the gas so generated, any firearms (such as gas cutting machines) cannot be used in demolition andwithdrawal involving PCBs. The company is skillful at fireless and quasi-fireless methods using saber saws (which cut off objects with
their saw blades moving in a reciprocating manner) that can cut off objects thicker than the thickness, which, in the industry, had been
considered impossible to cut, through numerous devices, including measures against seizure of motors and recycling of blades.

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BESTERRA has applied for joint patents with Hitachi Plant Construction, Ltd. for a transformer dismantling method, a transformer
dismantling jig, and a cutting device for dismantling a transformer.
Windmill demolition works
The number of power-generating wind turbines continues to increase by about 20% annually worldwide, but the demand fordismantling is expected to increase in the future due to wear and tear and economic obsolescence. According to the material presented
by the company, the wind power generation volume worldwide is 486,790 MW (by about 340,000 onshore power generation plants
and about 4,000 offshore ones) with an annual growth rate of about 20%. In Japan, the number of wind power generation plants stood
at 2,225 as of the end of 2017, expanding by about 90 every year. Meanwhile, as the useful life is approximately 15 to 20 years, andthe windmills for power generation established in the early stage are reaching the application limit. Moreover, not a few plants need tobe dismantled due to damage or fatal failure caused by thunderbolts or typhoons.
How to knock down a power-generating wind turbine (international patent application)
As some windmills have been built in mountain districts and on the sea, demolition of them is highly difficult. The company has
devised a method for dismantling wind turbines that does not require scaffolds and has already acquired a domestic patent for “Methodof knocking down a power-generating wind turbine.” International patents are pending for “Method of knocking down towering
structures using their bases” and “Method for dismantling tower-shaped equipment for wind power generation.” Safety of workers canbe improved dramatically, and the work period can be shortened by using these patent-based methods.
Pursuit of the value of the 3D business
Using services such as layout simulation, strain/bending/torsion measurement, comparison of structures before and after improvement,
and video walkthroughs, the company converts physical data taken when plants were established (more than 30 years ago) into thelatest 3D data and uses that to provide detailed information about the dismantling process. They also provide unique 3D measurement
services for dismantling work using the latest measuring technology and simulation systems that are capable of drawing data as 2D
diagrams, handling BIM/CIM modeling, Perfect 3D, and 3D printing, etc.
“Visualize” the dismantling process
Layout simulation
The equipment models produced with 3D CAD are placed in 3D data, and the replacement ofequipment can be simulated. By moving the equipment models, it is possible to check how theyinterfere and collide with one another.
Strain, bending, and torsion It is possible to measure changes in shapes. This is useful for diagnosing frameworks tentatively, tomeasurements
check whether a building got distorted due to an earthquake, deterioration, etc.
Comparison of structures
The shapes of equipment that changes due to heat and vibration, such as pipes, conveyors, andbefore and after installation furnaces, at the time of installation and after operation are compared. With 3D data, it is possible tograsp overall changes intuitively.
Video walkthroughs
Walk-through videos are produced by using synthesized point cloud data. These videos can beutilized for presentations and publicity videos regarding dismantlement plans and real estate
information.
Unique 3D measurement service
Draws a two-dimensional
The 3D CAD models based on point cloud data are converted into drawings. It is also possible todiagramproduce drawings directly from point cloud data in a simple manner.
Handles BIM/CIM
Modeling is conducted with 3D CAD based on point cloud data. It is possible to produce models ofmodeling
the parts that require construction or renovation as BIM (building information modeling) data.
Perfect 3D
This is a large-scale 3D data measurement service combining automobile-based MMS (mobile
mapping system), airborne laser measurement, water area measurement, etc.
3D printing
After modeling with point cloud data, data are processed and deformed so that they can be shapedwith a 3D printer. It can produce fine structures with a lamination pitch of 15 μm.

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1-3 ROE analysis
FY 1/18
ROE (%)Net Income to Sales Ratio(%)
Asset Turnover
Ratio(Times）
Leverage（Times）

FY 1/19

FY 1/20

FY 1/21FY 1/22

11.7
5.87

23.8
12.62

2.3
1.75

5.6
3.87

42.4
24.60

1.11

1.08

0.72

0.67

0.79

1.80

1.75

1.85

2.14

2.17

The 42.4% in FY 1/22 was due to the recording of a 1.2 billion yen gain on exchange in the business combination. The company aims
to achieve “an ROE of 13% in the term ending January 2026” in its “mid-term management plan 2025” (which will be describedlater).

2. Fiscal Year Ended January 2022 Earnings Results
2-1 Consolidated results
FY 1/21
Sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income

3,682
732
608
124
212
142

Ratio to sales

FY 1/22100.0%
19.9%
16.5%
3.4%
5.8%
3.9%

5,966
1,357
749
607
840
1,467

Ratio to sales
100.0%
22.7%
12.6%
10.2%
14.1%
24.6%

YoY
+62.0%+85.2%+23.2%+388.3%+294.9%+929.7%

Forecast
ratio
+1.1%
+3.0%
+1.3%
+0.7%

*Unit: million yen. Net income is net income attributable to owners of the parent company. Forecast ratios are ratios to the forecasts announced in February2022.

Significant increase Record sales and profits were recorded. Forecasts also exceeded.
Sales increased 62.0% year on year to 5,966 million yen. Large-scale construction projects under the percentage-of-completion
method progressed smoothly, and business synergies with Yazawa Corporation, a new addition to the group, also contributed to sales.
Operating income rose 388.3% year on year to 607 million yen. The increase in sales, contribution from high-margin construction
projects, and soaring scrap prices boosted profits, which offset higher SG&A expenses, including human resource investment based on
the medium-term management plan and development costs for new windmill demolition projects, resulting in a significant increase inprofits.
In addition to posting equity in earnings of 201 million yen from the conversion of River Holdings Corporation into an equity-method
affiliate, River Holdings Corporation conducted a joint share transfer with Takeei Co. Ltd. became a subsidiary of TRE Holdings, Inc.,
the Company recorded an exchange gain of 1,275 million yen on the business combination of River Holdings, Inc. Net income
increased 929.7% year on year to 1,467 million yen.
Both sales and profits exceeded the second revised forecast.
On a quarterly basis, Q4 (Nov.-Jan.) sales and profits reached record high.

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The number of completed works (rough estimates)
FY 1/21
Electric power
Steelmaking
Petroleum/petrochemical
Gas
3D
Environment
Others
Total

615
1,263
1,161
68
102
205
3,414

Ratio to sales
18%
37%
34%
2%
3%
6%
100%

FY 1/22
1,205
975
2,008
57
115
1,205
172
5,736

Ratio to sales
21%
17%
35%
1%
2%
21%
3%
100%

YoY
+96%
-23%
+73%
-16%
+12%
-16%
+68%

*Unit: million yen"Environment-friendly work (dioxin, asbestos, soil contamination, etc.)," which was previously included in the "other" category, is
now shown as a new category. The ratio of environment-related improvement works increased with the reorganization of Yazawa
Corporation, which possesses advanced asbestos removal technology, into a subsidiary.

Both full-year and fourth-quarter sales reached record highs. Due to the seasonality of customers' (clients') capital investment plans. In
past years, the company tends to be anticipating an increase in the amount of completed works in the second half.

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Breakdown of SG&A

333

Ratio to
sales
9.0%

9

FY 1/21FY 1/22

Ratio to sales
434

7.3%

0.2%

13

0.2%

64

1.7%

69

1.2%

13
4
183
608

0.4%
0.1%
5.0%
16.5%

24
8
198
749

0.4%
0.1%
3.3%
12.6%

Personnel cost

R&D cost
Commissions andremunerations
paid
Recruitment cost
Advertisement
OthersTotal SG&A
expenses

YoY

Major change factors+30.3% Increase in headcount of
main employee andbonuses+51.4% The development of
dismantling methods forwind power generation
facilities+8.3%+80.1% Personnel increase+85.8% Branding+8.2% +23.2%-*Unit: million yen
The company aggressively made investments for growth, including human resource investments based on its medium-term
management plan, development costs for new windmill demolition work methods, and corporate brand development costs to receive
orders as prime contractors.

As a result of aggressive hiring activities based on the personnel strategy in the mid-term management plan, the number of demolition
supervisors exceeded the 43 set in the initial plan, and reached 44, up 5 from the beginning of the term.
2-2 Orders received and the backlog of orders
The backlog of orders at the beginning of the term
The amount of works received
The amount of completed works
The backlog of orders at the end of the term

FY 1/21
1,046
4,912
3,414
2,545

FY 1/22
2,545
4,785
5,736
1,594

YoY
+143.1%-2.6%+68.0%-37.4%*Unit: million yen

Orders received remained steady. The number of promising projects for which orders are expected to be received is increasing as aresult of aggressive approaches to prime contractors. The number of inquiries from all industries is healthy.

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Orders received by sector (Amounts are approximate.)
FY 1/21
Ratio
Electric power
814
32%
Steelmaking
382
15%
Petroleum/petrochemical
1,145
45%
Gas
76
3%
Environment
Other
127
5%
Total order received
2,545
100%

FY 1/22

Ratio
271
383
622
255
64
1,594

YoY

17%
24%
39%
16%
4%
100%

-67%
+0%
-46%
-50%
-37%

*Unit: million yen
The ratio of environment-related improvement works has increased thanks to the acquisition of Yazawa Corporation as a subsidiary.
The composition of the company is well-balanced across all industries.
2-3 Financial condition and cash flow（CF）
Financial condition

Cash
Notes receivable, accounts receivable
fromcompleted construction contracts andother
Current Assets
Investments, Others
Noncurrent Assets

January
2021
1,367
1,392

2,948
2,765
3,082

January2022
2,122 Payables
2,212 Borrowings and Bonds

4,561 Liabilities
3,905 Net Assets
4,458 Total Liabilities, Net
AssetsJanuary
2021
558
2,519

January
2022
1,199
2,389

3,435
2,595
6,030

4,665
4,354
9,020

*Unit: million yen
Total assets increased 2,989 million yen from the end of the previous term to 9,020 million yen, mainly due to an increase in cash.
Total liabilities increased 1,230 million yen from the end of the previous term to 4,665 million yen, mainly due to an increase in payables.
Net assets increased 1,759 million yen from the end of the previous term to 4,354 million yen due to an increase in retained earnings.
Capital-to-asset ratio increased 5.1 points from the end of the previous term to 48.1%.
Cash Flow（CF）
FY 1/21
Operating Cash Flow(A)Investing Cash Flow(B)Free Cash Flows (A + B)
Financing Cash Flow
Cash and Equivalents at Term End

FY 1/22
-108
-101
-209
638
1,367

YoY
537
-32
505
250
2,122

+646
+68
+714
-388
+755

*Unit: million yen
Operating CF and free CF turned positive, mainly due to an increase in quarterly income before taxes and other adjustments.
The cash position improved.

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2-4 Topics(1) Prepared a plan to comply with the criteria for remaining listed in the new market segment.
In November 2021, the company resolved to select the prime market as the new market classification of the Tokyo Stock Exchange,
Inc. will become effective in April 2022, and submitted an application for market selection on the same day. However, as of thetransition reference date (June 30, 2021), the market capitalization of tradable shares was 7.55 billion yen, which did not meet the 10
billion yen listing maintenance standard for this market, so the company prepared a plan to comply with the listing maintenancestandard for the new market segment.
By the term ending January 2026, the company aims to meet the criteria for maintaining its listing on the prime market by
implementing various measures to fulfill the criteria for maintaining listing based on the Mid-term Management Plan 2025.
For details, please refer to the company's website.
https://ssl4.eir-parts.net/doc/1433/tdnet/2050149/00.pdf(2) Nomination and Compensation Committee established
In December 2021, the Nomination and Compensation Committee was established.
By establishing this committee, which is an advisory body to the Board of Directors, the company aims to ensure the fairness,transparency, and objectivity of the decision-making process regarding the nomination and compensation of directors, etc., and tofurther enhance and strengthen its corporate governance system.
The Committee shall consist of three or more directors selected through the resolution of the Board of Directors, a majority of whomshall be independent outside directors. In addition, a chairman shall be selected from the members of the independent outside directors
appointed as committee members by a resolution of said committee.
(3) Set the "Basic Sustainability Policy" and established the "Sustainability Committee"
In December 2021, the company set the "Basic Sustainability Policy" to contribute to the realization of a sustainable society andestablished the "Sustainability Committee" to oversee and manage this policy.
【Basic Sustainability Policy】
We, Besterra, are committed to both "realization of an advanced recycling-oriented society" and "sustainable corporate growth" basedon our corporate philosophy of "We will contribute to the earth environment with our flexible way of thinking, creativity, andtechnologies using these concepts."
The Sustainability Committee shall be chaired by the Chairman of the Board and its members shall consist of full-time directors.

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3. Fiscal Year Ending January 2023 Earnings Forecasts
3-1 Full-year consolidated earnings forecast
FY 1/22 Act.
Sales
5,966
Operating income
607
Ordinary income
840
Net income
1,467

Ratio to sales
100.0%
10.2%
14.1%
24.6%

FY 1/23 Est.
6,700
620
666
469

Ratio to sales
100.0%
9.3%
9.9%
7.0%

YoY
+12.3%+2.0%-20.8%-68.1%*Unit: million yen

Sales and operating income are predicted to increase
Sales are expected to increase 12.3% year on year to 6.7 billion yen, and operating income is projected to rise 2.0% year on year to 620
million yen. The company expects orders to be firm. Ordinary income and net income are expected to decrease due to the absence ofequity in earnings of affiliates and exchange gains from business combinations, which were recorded in the previous fiscal year. The
company plans to pay an interim dividend of 10 yen per share, up 4 yen per share, unchanged from the previous year, for a total of 20
yen per share. The expected payout ratio is 36.8%.

4. Progress of Medium-term Management Plan 2025
The company is executing the 5-year “mid-term management plan 2025 (FY 1/22 to FY 1/26),” which starts January 2022.
(1) Review of the first fiscal year
(1) Quantitative Plan
The company made two upward revisions, but the results exceeded them.

Sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Quarterly net income

FY 1/21 initial plan

FY 1/22 Act.

Rate of achievement

5,600
1,200
750
450
518
360

5,966
1,357
749
607
840
1,467

+6.6%
+13.1%-0.1%+35.1%+62.2%+307.8%Change from
Revised Forecast
+1.1%
+3.0%
+1.3%
+0.7%

*Unit: million yen. Net income is net income attributable to owners of the parent company. Forecast ratios are ratios to the forecasts announced in February2022.

(2) SG&A expenses
As mentioned above, the company aggressively made investments for growth, including human resource investments based on its
medium-term management plan, development costs for new windmill demolition works, and corporate brand development costs toreceive orders as a prime contractor. The advertising expenses were 50% of the estimate because the exhibition could not be held
because of the pandemic.

11

BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/

Breakdown of SG&A expenses

Personnel expenses
Research anddevelopment expenses
Commissions and fees
paid
Recruitment expenses
Advertising expenses
Other
Total SG&A expenses

FY 1/21 Plan

FY 1/22 Act.

407
14

434
13

Rate ofachievement
+6.5%
-0.6%

70

69

-0.8%

19
16
222
750

24
8
198
749

+25.1%-49.6%-10.6%-0.1%*Unit: million yen(3) Qualitative Plan
The following measures were actively promoted.
Technology Patent Strategy

Sales Strategy

Strengthening of the WorkManagement System
Management Strategy

Details of implementation
・Decarbonized demolition initiatives
・Development of wind power generation equipment
dismantling methods
・Expansion of orders as a prime contractor
・Strengthening of corporate brand development
・Enhancement of bases
・To complete the personnel plan
・Environmental management initiatives
・To strengthen the corporate governance structure
・M&A investment using procured funds (Phase 1: Yazawa
Corporation)◎Decarbonized Dismantlement Initiatives
The company is developing demolition methods that take into account environmental aspects in order to achieve a sustainable society(SDGs). All of the following methods do not use large heavy machinery, do not use fuel, and use natural energy (gravity). They ensure
a high level of safety, reduce costs due to shorter project periods, and significantly reduce greenhouse gas emissions.
MethodApple Peeling
MethodTipping overmethodOutlinePeriodIn dismantling spherical storage tanks such as gas holders
and oil tanks, this method involves cutting from the centerof the outer ceiling in a spiral shape, just like peeling anapple.
In wind power generation facilities, the tower foundation(concrete portion) is cut and turned over. The axis oftipping over is clear, allowing precise control of thetipping-over direction.

Approx.
65%
shortening

CO2
Cost
emissions
Approx. 50% Approx.
reduction
65%
reduction

Approx.
10%
shortening

Approx. 40% Approx.
reduction
45%
reduction

12

BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/◎Development of a method for dismantling wind power generation facilities
Wind power generation output in the world is about 490,000 MW per year and growing by about 20% annually. In Japan, 2,225 wind
power generation facilities had been installed by the end of 2017, with an annual increase of about 90 units.
On the other hand, the service life is about 15 to 20 years, and the windmills installed in the early years for power generation arereaching the end of their useful life. In addition, it is assumed that a significant number of units need to be dismantled due to damage orcatastrophic failures caused by lightning strikes, typhoons, and other factors.
Against the backdrop of this increased demand for dismantling wind power generation equipment and the expansion of theenvironmentally friendly natural energy business, they have developed a dismantling method ahead of their competitors as a patented
method. Demonstration tests of the tipping method were conducted in Akita Prefecture and the Goto Islands in Nagasaki Prefecture.
◎Expansion of orders as a prime contractor
The percentage of orders for prime contracting work from client manufacturers is increasing due to the improvement of reliability andtechnical capabilities. The increase in the ratio of prime contracting projects is a sign of a stronger customer base and is linked tohigher profit margins.
◎To strengthen corporate brand development
To enhance corporate value (brand power), the company is enhancing its advertising tools and promoting effective corporate branddevelopment through various media.
Specifically, the company is sending a unified message to all stakeholders through the appointment of the Judo master Kosei Inoue as
an ambassador, an appearance on NHK's TV program "Kaitai Kingdom," and the release of a video of dismantling method.
◎Enhancement of bases
In order to increase orders for recurring-revenue projects (projects with continuous orders from customers and stationed work within
the same premises), an office was newly established in Kitakyushu City, Fukuoka Prefecture, near the Kitakyushu factory area. In
addition, the West Japan Office (Fukuyama) was relocated (expanded).
Preparations are underway to open offices in Kashima and Kurashiki, and the company is considering opening another in Sendai.
◎Completion of the staffing plan
In order to reap the benefits of market growth, it is essential to expand the hiring of demolition supervisors.
As a result of company-wide recruiting efforts, the company hired 5 supervisors in the term ended January 2022, achieving the target
number of supervisors (43). For the term ending January 2023, the company plans to hire at least 6 more supervisors, aiming toachieve the term ending January 2024 target of 56, ahead of schedule.

◎Environmental Management Initiatives
The company recognizes that mitigating climate change and contributing to the transition to a decarbonized society and its realization
is a corporate responsibility and an important management issue. Through activities to reduce energy consumption, the company will
reduce greenhouse gas emissions and contribute to the mitigation of climate change.
Specific actions are as follows.

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BRIDGE REPORT (1433) March 28, 2022

ActionCompany
VehiclesLighting

In-house system
PCs and OA
equipment
Air conditioning

https://www.bridge-salon.jp/

Overview
14 HV-spec vehicles were introduced. Compared to gasoline-powered vehicles, each HV vehicle reduces
CO2 emissions by approximately 43% per month, which is equivalent to reducing the amount of CO2
absorbed by approximately 1,200 cedar trees per year.
All the main lighting was replaced with LEDs. The CO2 reduction rate is approximately 60% per year, whichis equivalent to the reduction of CO2 absorbed by approximately 700 cedar trees per year.
In addition to frequently turning off lights in unused meeting rooms, etc., the company also makes sure that alllights are turned off when leaving the office.
The company is promoting a paperless office environment and telework, including the adoption of
a cloud billing service.
All PCs and OA equipment are turned off when leaving the office. The company promotes setting PCs to theenergy-saving mode.
In addition to frequently turning off the air conditioning when not in use, the use of after-hours air
conditioning is being reduced and circulators are being used to improve cooling efficiency.

◎Strengthening of the corporate governance system
The company responded to the revised governance code and established the Sustainability Committee and the Nomination andCompensation Committee to further strengthen its corporate governance structure.
It aims to further enhance its corporate value toward the realization of a sustainable society.
◎M&A investment using procured funds
With the funds raised through the exercise of the 9th series of stock acquisition rights, the company succeeded in reorganizing Yazawa
Corporation into a subsidiary of the Company.
Yazawa Corporation provides Japan's top-class special technologies for asbestos and dioxin countermeasures, as represented by the"Yazawa Asbestos Removal Method," and has received many orders for urban redevelopment projects, with major general contractors
as its main customers.
The company's goals in acquiring this company are: to capture Yazawa's strong order backlog (several projects in central Tokyo);occupy the asbestos removal market and increase unit prices by offering package solutions; and to expand contacts with prime
contractors.
As in the case of Yazawa, the company aims to increase its corporate value by pursuing M&A to bring key technologies in-house in
the following four areas, which have high synergy effects with plant dismantling technologies.
The amount of investment is up to 2.5 billion yen over four years.
Areas related to decommissioning of facilities for
decarbonization
Areas related to the dismantling of wind power facilities
Digital-related fields for pursuing 3D business value
Specialized fields aimed at upgrading demolition
techniques(2) Five-year quantitative plan
In the first fiscal year, the term ended January 2022, the company achieved results that far exceeded the planned figures. The company
will continue to steadily achieve its goals in the second year and beyond.
In the long term, the company aims to achieve sales of 100 billion yen and an operating income of 10 billion yen, and a 10% share of
the plant dismantling market.

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BRIDGE REPORT (1433) March 28, 2022

3,682
124
212
142
3.4%

1st year
FY 1/22（Goal）
5,600
450
518
360
7.9%

1st year
FY 1/22
（Act）
5,966
607
840
1,467
10.2%

5.6%
17

12.3%
43

42.4%
174

FY1/21
Sales
Operating income
Ordinary income
Net income
Operating income
marginROE
EPS

https://www.bridge-salon.jp/

2nd year
FY 1/23

3rd year
FY 1/24

5th year
FY 1/26

CAGR

6,700
620
666
469
9.3%

7,800
720
794
552
9.2%

10,000
1,000
1,072
752
10.0%

+22.1%+51.8%+38.3%+39.6%
-

10.1%
54

12.5%
67

13.0%
91

+39.9%*Unit: million yen, yen.
*CAGR (1) is the average annual growth rate from FY 1/21 to FY 1/26, and CAGR (2) is the average annual growth rate from FY 1/22 to FY 1/26, calculated
by Investment Bridge Co., Ltd.

5. Conclusions
Originally, the company had planned a V-shaped recovery in the term ended January 2021, following significant declines in sales andprofit in the term ended January 2020 due to delays in project orders and higher labor costs, but the COVID-19 pandemic delayed therecovery for a full fiscal year. However, we can highly evaluate the fact that that the company's progress in expanding its humancapital by hiring more demolition supervisors, which is necessary not only for the recovery but also for future growth, was in line withplans. Yazawa Corporation, which has become a subsidiary, is expected to contribute only to a certain extent to sales and profit, withexpected sales of 700 million yen in 2023, but it is an important step forward in terms of expected synergies, such as the incorporationof key technologies and the use of customer bases. We expect the company to achieve a V-shaped recovery and steadily expand its top
line from this fiscal year onward. In addition, we will also pay close attention to the efforts and progress made to further improve
profitability while making aggressive investments.

15

BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/<Reference1: Medium-term Management Plan 2025>① Ideal state and long-term vision
Besterra aims to flourish in the global market as the “plant demolition leader in Japan” and the “enterprise that proposes the plantdismantling technology to the world” based on its technologies and know-how.
To attain this goal, the company pursues “Besterra ESG management.” In detail, it will implement the five strategies: the “technologicalpatent strategy,” “sales strategy,” “strengthening of the dismantlement management system,” “digital transformation (DX),” and“management strategy.”② Besterra ESG management and SDGs
◎ Besterra ESG management
Under the corporate ethos: “to contribute to the earth environment with flexible thinking and creativity and technological capacity basedon them,” the company aims to contribute to social sustainability and achieve beneficial growth. This is “Besterra ESG management,”
and its unique business model for gaining competitive advantages.
The company will concentrate on the following five items, with the measures or policies of “SDGs of Besterra,” “enhancement of nonfinancial strategies and initiatives,” and “establishment of a growth model from the long-term viewpoint.”

Personnel
SafetyR&D
Recycling
GovernancePursuit of worthwhile jobs and individual growth
Creation of a safety culture with its unique technologies
Development of innovative demolition methods friendly tothe earth
Realization of advanced environmental cycling through thestrengthening of the venous industry
Thorough transparency and risk control◎ SDGs of Besterra
For contributing to the earth environment, the company set a total of 17 goals related to SDGs and aims to attain them.
1

To contribute to the earth
environment by offering
innovative dismantlingtechnologies

2

To develop a working
environment in which
employees can feel that theirjobs are worthwhile① To offer innovative dismantlingtechnologies for deteriorated
infrastructure② To offer reliable, safe dismantlingtechnologies for a low-carbon society
and contribute to the earth environment③ To offer advanced dismantlingtechnologies as a professional indismantlement by utilizing 3Dtechnologies① To become a company in which
every employee can feel that their job
is worthwhile and be proud of the
future② To respect diversity and enrich thefair environment③ To develop a fair educational
environment where it is possible toexert abilities to the maximum

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BRIDGE REPORT (1433) March 28, 2022

3-1

To realize an advanced
recycling-oriented society andcontribute to the establishmentof a sustainable society

3-2

To foster partnership forestablishing a sustainable(advanced recycling) society

https://www.bridge-salon.jp/① To dispose harmful materials andpollutants appropriately and offer
technologies for making them harmless② To develop a recycling businesswith high added value and improve
productivity③ To coexist with local communities
and contribute to the improvement oflocal environments① To foster future-oriented
partnership with lofty goals beyond all
kinds of boundaries② To promote fair and equitablepartnership between enterprises③To offer new technologies,
knowledge, and findings to theadvanced recycling society, to attaingoals③ Strategies
The outline of the five strategies: “technological patent strategy,” “sales strategy,” “strengthening of the dismantlement management
system,” “digital transformation (DX),” and “management strategy” is as follows.
③ Strategies
The outline of the five strategies: “technological patent strategy,” “sales strategy,” “strengthening of the dismantlement management
system,” “digital transformation (DX),” and “management strategy” is as follows.
③-1 Technological patent strategy
The company has obtained a lot of patents regarding tanks, boilers, chimneys, etc., and will keep acquiring competitive patents for
dismantlement methods in the fields of windmills, wind power generation, etc., where demand is expected to grow, and propose original
demolition methods and put them into practice.
While the global demand for windmills for power generation is growing at an annual growth rate of about 20%, the demand fordismantlement is projected to rise, due to the expiration for use and economic obsolescence.
In order to meet the growing demand for dismantlement of wind power generation equipment, the company has applied for a patent forthe dismantlement method “Matryoshka Method” and "Tower crane method" and "tipping method" ahead of competitors.
The technological development division is in charge of development of dismantlement methods for obtaining patents and has a systemfor developing methods based on ideas collected from on-site staff. Demonstration tests of the tipping method were conducted in Akita
Prefecture and the Goto Islands in Nagasaki Prefecture.

Reference: Patent construction method video
https://www.besterra.co.jp/technology/movie.html

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BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/(Source: The company)

Since harmful substances are used at each plant equipment, soil pollution is an issue. Through the amendment into the Soil
Contamination Countermeasures Act, it became necessary to conduct a soil survey when developing land with an area of 900 m2 orlarger (before the amendment: 3,000 m2 or larger) in April 2019.
They will respond to the growth of such needs.
③-2 Sales strategy
In detail, the company will work on the “increase of orders received as a main contractor,” “enhancement of corporate branddevelopment,” “cementing of cooperation,” and “upgrade of business bases.”◎ Increase of orders received as a main contractor
The company aims to boost earnings ratio by increasing direct orders and the ratio of directly commissioned works and public works.
Since Besterra proposes plans based on each client’s plan, it possesses the knowledge of how directly commissioned works are carriedout, but in order to fortify the system, it will adopt the system for obtaining qualifications, including those for supervising engineers,
increase marketing support staff, and reform the personnel system.
◎ Enhancement of corporate brand development
In order to effectively enhance its brand power, the company will enrich advertising tools and distribute unified messages to stakeholders
via the media, etc.
◎ Cementing of cooperation
The company will cement corporation in various ways.
* Cementing of cooperation with group companies
The company offers human resources services and 3D measurement services via subsidiaries. It will pursue business synergy bycementing cooperation among group companies and offering services through group marketing.
* Cementing of cooperation with alliance partners
The company will cement cooperation for decommissioning nuclear power plants.
Besterra will serve as a platform, and alliance partners, such as Hitachi Plant Construction, Ltd. (business alliance formed in July 2018),
Daiichi Cutter Kogyo K.K. (business alliance formed in September 2018), and Rever Holdings Corporation (business alliance formed
in September 2019), will conduct cooperative activities while utilizing each other’s strengths, to establish a system for decommissioning
business.
In Japan, there are 60 nuclear reactors at 19 locations, but 24 reactors out of them are to be decommissioned. The examination on thecompliance with the new standards will progress, and the decommissioning business is expected to grow. Actually, business inquiries
are reportedly increasing.

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BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/* Cementing of cooperation with Rever HD
The company will cement the cooperation with Rever Holdings Corporation, which is an equity-method affiliate.
While the core business of Besterra is the dismantlement of plants, which is positioned between the arterial industries including “electric
power, iron-making, and petroleum/petrochemical ones” and the venous industries including “scraps and industrial waste,” the corebusiness of the Rever Holdings Group is the intermediate processing in the venous industries including “scraps and industrial waste.”
While responding to the deterioration of infrastructure, whose market is expected to grow, the two companies will fulfill the role oflinking the arterial and venous industries and establish an indispensable position in the advanced recycling society.
*Rever Holdings Corporation integrated with TAKEEI CORPORARION to establish a joint holding company, TRE Holdings, on October 1, 2021.

◎ Upgrade of business bases
In order to increase orders for recurring-revenue projects (such as continuous orders from clients, works that require supervisors always
staying, the apple peeling dismantlement method, and PCB treatment works), the company will consider the establishment of new
business bases in Kurashiki, where the amount of dismantlement projects is large, industrial complexes in Kashima, etc., Sendai, etc.
③-3 Strengthening of the dismantlement management system* Improvement of the procurement system
The company used to outsource works at each site for swift management, but seeing the expansion of the corporate scale, the newly
established procurement division of the headquarters has adopted a cost control system. It aims to optimize procurement costs byoutsourcing works all at once.
* Staffing plans
As the company specializes in dismantlement management, it needs to deploy a supervisor for all works. For sustainable growth, it isindispensable to increase dismantlement supervisors, so it will engage in company-wide recruitment activities.
* Development of a personnel training system
In order to cope with the chronic shortage of manpower, the company will develop “a program for producing advanced dismantlement
engineers” to increase the number of employees who will drive business growth and make them useful early.
“Program for producing advanced dismantlement engineers”
The company will implement the “training program” for realizing the transfer of techniques from experienced engineers to inexperienced
ones.
In addition, it will “introduce a course for specialists in dismantlement and a course for managers” and “enrich the system for promoting
the acquisition of qualifications” for producing dismantlement supervisors, and formulate and operate a personnel system, which is
focused on the workstyles of individuals.
* Cementing of cooperation with subcontractors
Actual dismantlement works are conducted by subcontractors, and Besterra supervises and manages on-site work. Subcontractors aregroups of engineers who take central roles in dismantlement works. Accordingly, Besterra aims to improve the quality of works bycementing the cooperation with them.
Besterra makes transactions with a hundred and several tens of subcontractors per year. They are composed of a broad range ofcompanies, including dismantling firms, companies that lease or rent heavy machinery, equipment, etc., and companies that process
scraps and industrial waste. Among subcontractors around Japan, only about 30 companies possess the technology required forBesterra’s works, so Besterra entrust them even if the site is distant.
With the dismantlement plan designed by Besterra, the dismantlement process is optimized, and a high profit margin is actualized.
Besterra pays to subcontractors within about 35 days after the closing date of a transaction, while clients pay within about 105 days after
the closing date of a transaction. This is a merit in cash management for subcontractors undertaking the works of Besterra.

19

BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/* Acquisition of essential technologies through M&A, etc.
The company will encourage enterprises that possess essential technologies for the processes such as preliminary surveys, planning,dismantlement, disposal of waste, and ground leveling to join the Besterra Group through M&A or the like and acquire advanced
technologies.
③-4 Promotion of DX
By utilizing data and digital technologies, the company will upgrade products, services, and business models, and reform its business
operations, organizations, processes, corporate culture, and climate, to establish a competitive advantage.
* Crane rail inspection robots and revision to inspection methods
In order to efficiently conduct regular inspection of overhead cranes, which are installed at plants and factories to convey heavy objects
and parts, the company has developed a self-propelled inspection robot that runs on a crane rail in cooperation with iXs Co., Ltd.
A distortion of an overhead crane caused by deterioration due to aging would lead to a serious accident if it were not dealt with, so theregulations on safety of cranes, etc. in the Industrial Safety and Health Act stipulates that an enterprise that has installed a crane shallinspect it voluntarily once a month and once a year.
In the conventional manual inspection, workers had to go to the ceiling. Accordingly, there was a risk of an accident, visual inspection
led to inconsistency, and the loss of opportunities occurred due to the suspension of factory operation.
Meanwhile, inspection robots can reduce the risk of accidents among workers, always obtain accurate, meticulous data, and complete
inspection in a short period of time or in a spare time.
Besterra estimates that the market scale is about 30 billion yen.
* Reform of design and dismantlement processes
By converting paper data at the time of construction (over 30 years ago) into cutting-edge 3D data, the company will conductdismantlement whose processes are “visualized.”* Streamlining of on-site work based on the collaboration between people and robots
The company will use people and robots together at dismantlement sites while combining technologies for 3D measurement,
dismantlement, and robot control.
③-5 Management strategy*Environment
The company will contribute to the environment-oriented business administration of each client, by actualizing environment-oriented
business administration itself and providing dismantlement technologies for revamping plant equipment that would produce highenvironmental burdens.
* Reform of workstyles and development of a system for working without worry
The company has adopted various systems so that employees can work with peace in mind for a long period of time. It will make efforts
to increase the retention rate of employees and utilize the systems for recruitment.
(Concrete examples)
・Income insurance: The company will fully bear the insurance premiums. 50% of monthly pay will be covered until the age of retirement(60 years old). It is one of the best income insurances in Japan.
・ Retirement benefit system
・ Employee shareholding association: The company bears 15% of the reserve for members.
・ Retainable annual paid holidays: Paid holidays can be generally retained for 40 days as set forth in the Labor Standards Act, but in thecompany, it can be retained for up to 80 days in case an employee’s needs to recover from an injury or a disease.

20

BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/*GovernanceIn order to actualize a system for achieving profitable growth and a sustainable society, the company will tighten its corporate
governance.
④ Fundraising
As mentioned above, the company has procured funds by issuing share acquisition rights for the purposes of securing funds for growthand fortifying its financial foundation for completing the Mid-term Management Plan.
⑤Distribution of profits and return to shareholders
With regard to the distribution of net income, the company set the policies: (1) “investment for future growth,” (2) “internal reserve forstrengthening the business base,” and (3) “return of profit to shareholders targeting a payout ratio of 40%.”
For growth, the company allocates funds rationally according to situations to the investment in human resources (recruitment andeducation), the investment in technological development (dismantlement methods and robots), the investment in systems (3D systems,
BIM and CIM), and the investment in strategic business (M&A).

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BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/<Reference2: Regarding Corporate Governance>◎ Organization type and the composition of directors and auditors

Organization type
Directors
AuditorsCompany with a board of company auditors
8 directors, including 2 outside ones
3 auditors, including 3 outside ones

◎ Corporate Governance Report Update date: April 23, 2021
Basic policy
In order to promote sound business administration and win social trust sufficiently, our company recognizes corporate governance as
the most important issue, puts importance on the improvement of the soundness, transparency, and fairness of business administration,and complies with laws and regulations thoroughly, and all executives operate business while keeping in mind that “the violation of laws
or regulations would lead to management responsibility.” In detail, our company disseminates and executes business pursuant to laws,
regulations, and in-company rules thoroughly, by developing appropriate systems for making decisions about business administration,
fulfilling duties, supervising work, conducting internal control, etc.
It is also important to reform management systems for “achieving appropriate share price” and “increasing share price sustainably” toemphasize shareholders and strengthen the function to check business administration, to establish global-level corporate governance.
The results of such efforts would win the trust of society, increase corporate value, and satisfy shareholders.
<Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)>【Supplementary principle 4-3-3】
Our company has not established a clear procedure ensuring objectivity, timeliness, and transparency for dismissal of the president orCEO, but we strive to realize a mutual assessment by involving outside directors in the process of evaluation of nomination andremuneration of the Board of Directors, in order to carry out the assessment of effectiveness of the Board of Directors appropriately.
【Principle 4-11】
The Board of Directors consists of directors and others with thorough knowledge of each of our business lines, and outside directors
who are company managers. While we consider the size of the board appropriate, we cannot say the same with regard to gender andethnic diversity. As such, we will strive to place importance on diversity when appointing directors going forward. In addition, the Boardof Directors, joined by outside directors, shall periodically meet to discuss the structure and management of the board in order to improveits capabilities and effectiveness. Our Board of Auditors comprises three independent auditors, including tax accounts and persons withexperience in corporate management, with expert knowledge and experience in management, finance, accounting, sales, auditing, etc.
<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>【Principle 1-4 Strategically held shares】
From the viewpoint of business expansion based on maintaining and strengthening long-term, stable partnerships with business partners,
etc., we will acquire and hold the shares of business partners, etc., if we judge that this will contribute to the improvement of our mid/longterm corporate value. For equity investments premised on forming business alliances, the management meets with and receives
explanations of the operating environment, business strategy, and purposes of the capital alliance from representatives of the other party.
Based on this, the Board of Directors comprehensively evaluates the appropriateness of the stock valuation report and judges whether
the deal should take place. For strategically held shares, the Board of Directors constantly checks whether the holding of such shares willcontribute to the improvement of our corporate value and confirms the purpose and rationality of said holding based on that check. Our
company will appropriately buy/sell shares and exercise voting rights in accordance with relevant regulations, based on a comprehensive
evaluation from the viewpoint of improving our corporate value.

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BRIDGE REPORT (1433) March 28, 2022

https://www.bridge-salon.jp/【Principle 5-1 Policy on constructive dialogue with shareholders】
Regarding requests from shareholders for dialogue (interviews), our company believes that we should express a positive attitude withina reasonable scope in order to contribute to sustainable growth and medium- and long-term improvement of the corporate value of ourcompany. Aiming to promote constructive dialogue with shareholders, with the planning department designated as a department incharge of IR activities, our company holds financial results briefings targeted at financial institutions and investors semiannually anddiscloses corporate information as needed on our website and through the system of optional disclosure offered by Tokyo Stock
Exchange.

This report is not intended for soliciting or promoting investment activities or offering any advice on investment or the like, but forproviding information only. The information included in this report was taken from sources considered reliable by our company. Our
company will not guarantee the accuracy, integrity, or appropriateness of information or opinions in this report. Our company will notassume any responsibility for expenses, damages or the like arising out of the use of this report or information obtained from this report.
All kinds of rights related to this report belong to Investment Bridge Co., Ltd. The contents, etc. of this report may be revised without
notice. Please make an investment decision on your own judgment.
Copyright(C) Investment Bridge Co., Ltd. All Rights Reserved.

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