Securities Report

16th Fiscal Year (FY2022)
From January 1, 2022
To December 31, 2022

Frontier Management Inc.
3-2-1 Roppongi, Minato-ku, Tokyo, Japan

Table of Contents[Cover]Section I. Corporate Information ............................................................................................................................................................... 1
I. Company Overview ............................................................................................................................................................................... 1
1. Changes in Key Management Indicators, Etc. ................................................................................................................................... 1
2. History ............................................................................................................................................................................................... 4
3. Description of Business ..................................................................................................................................................................... 6
4. Status of Subsidiaries and Affiliates .................................................................................................................................................. 9
5. Status of Employees ........................................................................................................................................................................ 10
II. Business Status ................................................................................................................................................................................... 11
1. Management Policy, Management Environment and Issues to Address .......................................................................................... 11
2. Business and Other Risks ................................................................................................................................................................ 13
3. Management’s Discussion & Analysis of Financial Condition, Operating Results and Cash Flows ............................................... 17
4. Significant Contracts, ETC. in Business .......................................................................................................................................... 22
5. Research and Development Activities ............................................................................................................................................. 22
III. Facilities ............................................................................................................................................................................................ 23
1. Outline of Capital Expenditure ........................................................................................................................................................ 23
2. Main Facilities ................................................................................................................................................................................. 23
3. Planned New Facilities and Retirement ........................................................................................................................................... 23
IV. Submitter Company ........................................................................................................................................................................... 24
1. Shares .............................................................................................................................................................................................. 24
2. Purchase of Treasury Stock ............................................................................................................................................................. 35
3. Dividend Policy ............................................................................................................................................................................... 36
4. Corporate Governance ..................................................................................................................................................................... 37
V. Accounting .......................................................................................................................................................................................... 55
1. Consolidated Financial Statements .................................................................................................................................................. 56(1) Consolidated Financial Statements ............................................................................................................................................ 56
2. Non-consolidated Financial Statements........................................................................................................................................... 90(1) Non-consolidated Financial Statements ..................................................................................................................................... 90(2) Breakdown of Main Assets and Liabilities................................................................................................................................. 99(3) Other .......................................................................................................................................................................................... 99
VI. Outline of Stock Administration by Submitter Company ................................................................................................................ 100
VII. Reference Information on Submitter Company ............................................................................................................................. 101
1. Information on Parent of Submitter Company............................................................................................................................... 101
2. Other Reference Information ......................................................................................................................................................... 101
Section II. Information on Guarantor Company for Submitter Company ............................................................................................. 102

Front cover
Submitted document

Securities Report

Legal basis

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

Submit to

Director-General of the Kanto Local Finance Bureau

Submission date

March 24, 2023

Fiscal year

16th Fiscal Year (from January 1, 2022 to December 31, 2022)

Company name

Frontier Management Inc.

Name translated in English

Frontier Management Inc.

Job title/Name of representative

Shoichiro Onishi, Representative Director, Co-President and Executive Officer

Location of head office3-2-1 Roppongi, Minato-ku, Tokyo, Japan

Telephone

03-6862-8335

Administrative contact

Hiroaki Hamada, Executive Officer and Head of Company Planning and
Administration Department

Contact location

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

Telephone

03-6862-8335

Administrative contact

Hiroaki Hamada, Executive Officer and Head of Company Planning and
Administration Department

Place available for public inspection

Tokyo Stock Exchange, Inc.
(2-1 Nihombashi Kabutocho, Chuo-ku, Tokyo)

Section I. Corporate Information
I. Company Overview
1. Changes in Key Management Indicators, Etc.
(1) Key management indicators, etc.
Fiscal year

12th fiscal year
(FY2018)

13th fiscal year
(FY2019)

14th fiscal year
(FY2020)15th fiscal year
(FY2021)16th fiscal year
(FY2022)

Fiscal year-end

Dec. 2018

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022(Thousands

Net salesof yen)Ordinary income
Net income attributable toowners of parent
Comprehensive income(Thousandsof yen)(Thousandsof yen)(Thousandsof yen)(Thousands

Net assetsof yen)(Thousands

Total assetsof yen)4,690,065

4,771,144

5,192,527

5,741,654

7,915,655

676,615

678,872

575,633

514,576

921,511472,434

429,382

420,515

338,707556,722475,292

430,556

420,304

336,103565,308

1,897,531

2,185,341

2,448,598

2,454,066

3,015,956

3,623,692

3,269,111

3,792,731

3,819,274

5,658,644

Net assets per share(Yen)

166.39191.63213.05215.40255.37

Net income per share

(Yen)

45.64

37.65

36.89

29.70

48.67

Diluted net income per share

(Yen)

45.30

36.68

36.05

29.24

47.93

Equity ratio

(%)

52.4

66.8

64.6

63.0

51.7

Return on equity (ROE)

(%)

35.8

21.0

18.1

14.0

20.9

Price-earnings ratio (PER)(Times)

16.16

19.26

64.59

25.28

25.91

Cash flows from operating(Thousands

629,176

137,641

456,102316,8131,250,257(22,045)(203,350)(59,305)(31,524)(486,911)

649,168(317,748)(230,684)(404,765)

646,534

2,116,453

1,733,235

1,899,100

1,784,218

3,199,089

165

177

227

257

335

activities

of yen)Cash flows from investing
activities(Thousandsof yen)Cash flows from financing
activities(Thousandsof yen)Cash and cash equivalents at end (Thousandsof periodof yen)Number of employees(Persons)(Notes) 1.
2.
3.

Diluted net income per share for the 12th fiscal year is calculated with the average stock price from the date of new listing
to the end of the 12th fiscal year assumed as the average stock price during the period, because the Company was listedon the Mothers Market of the Tokyo Stock Exchange on September 28, 2018.
The Company carried out a 1,000-for-1 common stock split on July 13, 2018, a 2-for-1 common stock split on October 1,
2019, and a 2-for-1 common stock split on January 1, 2021. Net assets per share, net income per share and diluted net
income per share were calculated as if these stock splits had taken place at the start of the 12th fiscal year.
The “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020, Accounting Standards
Board of Japan), etc. have been applied from the beginning of the current fiscal year, and the major management indices,
etc. related to the current fiscal year are indices after the relevant accounting standards, etc. have been applied.

1(2) Key management indicators, etc. of submitter company
Fiscal year

12th fiscal year
(FY2018)

13th fiscal year
(FY2019)

14th fiscal year
(FY2020)15th fiscal year
(FY2021)16th fiscal year
(FY2022)

Fiscal year-end

Dec. 2018

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022(Thousands

Net salesof yen)Ordinary income(Thousandsof yen)(Thousands

Net incomeof yen)Paid-in capital
Total number of shares issued(Thousandsof yen)(Shares)(Thousands

Net assetsof yen)(Thousands

Total assetsof yen)Net assets per share(Yen)

Dividend per share[Of which, interim dividend per(Yen)share]

4,690,065

4,762,968

5,188,593

5,732,196

7,546,117

665,292

660,550

556,817513,057

1,081,609

461,787

417,231

413,157

345,454754,497

158,137

158,137

163,530

178,723

210,062

2,853,000

5,706,000

5,777,900

11,418,398

11,468,478

1,883,974

2,158,459

2,414,569

2,429,387

3,136,089

3,610,673

3,243,878

3,759,798

3,800,171

5,646,614

165.20189.27210.09213.24270.56

50

23

24

10

28

[–]

[–]

[–]

[–]

[–]

Net income per share

(Yen)

44.61

36.58

36.24

30.29

65.96

Diluted net income per share

(Yen)

44.28

35.65

35.42

29.82

64.96

Equity ratio

(%)

52.2

66.5

64.2

62.7

54.9

Return on equity (ROE)

(%)

35.2

20.6

18.1

14.5

27.5

Price-earnings ratio (PER)(Times)

16.53

19.83

65.75

24.79

19.12

Dividend payout ratio

(%)

28.0

31.4

33.1

33.0

42.4

Number of employees(Persons)

164

177

226

256

304

(%)

–

99.9

326.3

106.4

179.3

(%)

[–]

[118.1][126.8][143.0][139.5]Highest stock price

(Yen)

7,990

2,635

1,570

Lowest stock price

(Yen)

2,601

681

608

Total shareholder return (TSR)[Comparative index: Dividendincluded TOPIX](Notes) 1.
2.

3.
4.

5.

1,488

2,453

[4,260][6,540]

1,151

2,283

[2,029][1,281]

Diluted net income per share for the 12th fiscal year is calculated with the average stock price from the date of new listing
to the end of the 12th fiscal year assumed as the average stock price during the period, because the Company was listedon the Mothers Market of the Tokyo Stock Exchange on September 28, 2018.
The Company carried out a 1,000-for-1 common stock split on July 13, 2018, a 2-for-1 common stock split on October 1,
2019, and a 2-for-1 common stock split on January 1, 2021. Net assets per share, net income per share and diluted net
income per share were calculated as if these stock splits had taken place at the start of the 12th fiscal year.
Dividend per share reflects the amount of actual dividend prior to the aforementioned stock splits.
Total shareholder return and comparative indicator for the 12th fiscal year are not recorded, because the Company was
listed on the Mothers Market of the Tokyo Stock Exchange on September 28, 2018.
The Company switched its listing from the Mothers Market of the Tokyo Stock Exchange to the First Section of the saidexchange effective September 7, 2020. The highest stock price and the lowest stock price refer to those on the Mothers
Market of the Tokyo Stock Exchange before September 6, 2020, on the First Section of the said exchange between
September 7, 2020 and April 3, 2022, and on the Prime Market of the said exchange from April 4, 2022 onwards. However,since the Company was listed on the Mothers Market of the Tokyo Stock Exchange effective September 28, 2018, the dataon stock prices before this date do not apply.
The Company carried out a 2-for-1 common stock split on October 1, 2019, and a 2-for-1 common stock split on January
1, 2021. The highest stock price and the lowest stock price after ex-rights of the aforesaid stock splits are recorded for the2

6.

stock prices of the 13th fiscal year and the 14th fiscal year, and the highest stock price and the lowest stock price before
the ex-rights of the aforesaid stock splits are indicated in the square brackets.
The “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020, Accounting Standards
Board of Japan), etc. have been applied from the beginning of the current fiscal year, and the major management indices,
etc. related to the current fiscal year are indices after the relevant accounting standards, etc. have been applied.

3

2. History
Many members of Frontier Management Inc. (“the Company”) at the time of its foundation, including Representative Directors
Shoichiro Onishi and Masahiro Matsuoka, were from Industrial Revitalization Corporation of Japan(Note) where they acquired agreat deal of know-how on operations for management consulting, business revitalization and M&A through handling many
projects.
To facilitate the execution of operations while solving various issues in management consulting, business revitalization and M&A
projects, it is necessary to arrive at a total optimum solution by combining complex and advanced expertise as well as know-how
in a variety of areas including business, finance, accounting and law. Generally, companies with needs for services of management
consulting, business revitalization and M&A establish a special in-house team to execute the said operations and complement
necessary expertise by individually hiring different companies and groups, such as a management consulting company, aninvestment bank, an accounting office and a law office, for each project.
However, it is not necessarily easy to facilitate the execution of operations for management consulting, business revitalization and
M&A in a unified manner, because multiple experts need to cooperate while maintaining close communication. This is because
each expert belongs to a company or group with its own organizational policy and circumstances in different locations. Mutual
understanding could also be deemed insufficient in some cases.
Therefore, a special team of companies need to perform the difficult task of arriving at a total optimum solution by communicatingwith the expert group in each area and combining individually presented and partially optimum solutions to be considered
comprehensively on their own.
In order to solve this issue, Shoichiro Onishi and Masahiro Matsuoka, the founders of the Company, came up with an idea ofcollecting experts with diverse backgrounds, such as a management consultant, an industrial analyst, business experts including
those from business corporations, an M&A specialist from an investment bank, and institutional experts, such as a lawyer, a certified
public accountant and a certified tax accountant, in a single consulting firm. They thought that if they could provide various
management support services in one stop by finding experts in each area that meet the required needs as a single team from the inhouse collection of experts, they could not only dramatically increase the convenience of customer companies, but also provide
total optimum solutions to solve complex and advanced management issues facing the customer companies.
Given these circumstances, Shoichiro Onishi and Masahiro Matsuoka established the Company in January 2007 with other initial
members who agreed with the idea for comprehensively solving management issues that are becoming increasingly complex andadvanced, making excellent use of various expert methods by accepting an investment from RISA Partners, Inc. (currently, thecapital relationship is dissolved).
(Note) Industrial Revitalization Corporation of Japan is a timed organization established in 2003 based on the Industrial
Revitalization Corporation Act. It was dissolved in March 2007, with the termination of its operations.
Month & Year

History

January 2007

Frontier Management Inc. (capital stock: ¥85,000 thousand) was established in Minato-ku, Tokyo for the purposeof comprehensively solving management issues that are becoming increasingly complex and advanced by making
excellent use of various expert methods.

November 2008 Head office was relocated to 3-2-11 Kudankita, Chiyoda-ku, Tokyo.
October 2011

Frontier Management (Shanghai) Inc. (consolidated subsidiary) was established in Shanghai, China for the purposeof providing Chinese companies and Japanese companies aiming to make inroads in China with various
management support services, including management consulting and M&A.

September 2012 Frontier Turnaround Inc. (consolidated subsidiary) was established in Chiyoda-ku, Tokyo for the purpose of
separating the Consulting Division that conducted hands-on management reform support (station-type support for
implementation of management reforms) operations and other related operations from the Company and further
strengthening these operations. (Merged through absorption into Frontier Management Inc. in April 2017)
December 2012 Singapore Branch was opened as an information base to develop the market in Asia other than China for
management consulting and cross-border M&A.
July 2014

Nagano Branch was opened in Nagano City, Nagano for the purpose of realizing community-based management
support services. (Closed in April 2022)

August 2014

Osaka Branch was opened in Kita-ku, Osaka City, Osaka for the purpose of realizing community-based
management support services.

May 2016

Frontier Business School was opened as an education and training business for officers and employees of businesscompanies and financial institutions.

June 2017

New York Branch was opened in New York, the U.S. for the purpose of strengthening the support system for theadvancement and business expansion of Japanese companies in the North American region.
4

Month & Year

History

November 2017 FCD Partners Inc. (equity-method affiliate) was established as a joint venture with Development Bank of Japan
Inc. for the purpose of providing customers with financial support services.
December 2017 The Company invested in FCD No. 1 Investment Business Limited Partnership.
September 2018 Listed on TSE Mothers.
July 2019

Nagoya Branch was opened in Nagoya City, Aichi for the purpose of realizing community-based management
support services.

July 2019

Head office was relocated to 3-2-1 Roppongi, Minato-ku, Tokyo.

September 2020 Changed stock market listing to the First Section of the Tokyo Stock Exchange.
January 2022

Acquired the stock of Celebrain Corporation (consolidated subsidiary) and converted it to a consolidated
subsidiary

April 2022

Established Frontier Capital Inc. (consolidated subsidiary) upon the commencement of the new investment
business

April 2022

Due to a review of the market categories on the Tokyo Stock Exchange, transferred from the First Section to thePrime Section of the said exchange

June 2022

Frontier Nanto Investment Godo Kaisha (equity-method affiliate) was established as a joint venture with Nanto
Capital Partners. Inc. with the purpose of supporting the management reform, growth and revitalization of thecompanies which have received investment

5

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

Corporate clients

Revitalization
Support Business

M&A Advisory
Business

Management
Consulting
Business

Other Business

Investment
Business

Other Business(Financial support)

FCD No. 1 Investment
Business Limited Partnership
Frontier Nanto Investment
Limited Partnership

Frontier Management(Shanghai) Inc.
Investmen
in capital
100%

Celebrain
Corporation
Investmen
in capital
60%

Consulting and Advisory Business segment

FCD Partners Inc.
Frontier Nanto Investment
Godo Kaisha

Frontier Capital Inc.

Investmen
in capital
50% each

Investmen
in capital
100%

Investment Business segment

Frontier Management Inc.

The Group’s businesses consist of two segments: Consulting and Advisory Business and Investment Business.
An outline of each segment is as follows.
(1) Consulting and Advisory Business segment
Net sales of the Consulting and Advisory Business segment are classified under (i) Management Consulting Business, (ii)
M&A Advisory Business, (iii) Revitalization Support Business, or (iv) Other Business.
An outline of each business is as follows.
(i) Management Consulting BusinessFor corporate clients, the roster of consulting solutions that Frontier Management offers includes proposal of management
strategies (company-wide strategies, business strategies, function-specific strategies (strategies related to marketing, operation,and other individual functions of a company)), support for medium-term management plans from drafting to execution,
permanent support for management execution through dispatch of management teams and due diligence related to M&A(research and analysis of business activities, etc.).
One of the key features of the Group’s consulting business is that we provide various solutions designed and developed by ourexperienced analysts to our corporate clients in a wide range of industries according to the characteristics of each industry,including retail and distribution, transportation, restaurants, service, information and communication, technology,
manufacturing, trading companies, and pharmaceuticals and healthcare.
In addition, opportunities to support management execution have diversified against the background of the sophistication ofmanagement and the increase in business succession, and the Group is expanding the service of providing permanent support
for management execution through the dispatch of management teams.
6

The Group has begun to address ESG, sustainability, and digital transformation (DX) on the part of client companies.
Since its foundation, the Group has steadily built a corps of industry analysts and consultants with knowledge of a wide range
of industries, as well as specialists deeply versed in their respective business fields. By sharing the knowledge and expertise of
these specialists, the Group deepens its Group-wide knowledge of the industries to which each corporate client belongs andexpands the breadth of solutions it can offer. In this way the Group constantly improves the quality of its services.
(ii) M&A Advisory BusinessFor corporate clients contemplating M&A or reorganization, the Group provides comprehensive advice and assistance. Services
in this area include formulation of M&A strategies, selection and approaching of target companies, a wide variety of due
diligence (research and analysis), calculation of corporate value, negotiation of contracts and terms and conditions, andhandling of closing procedures (settlement, etc.).
In this business, the Group has been ranked highly in total number of M&A since 2011 in the advisor ranking in Bloomberg’s
Japan M&A market review, and rivals major financial institutions in record of accomplishments.
As Japanese enterprises develop their businesses globally, client needs for cross-border M&A services are growing. To serve
this demand, the Group actively recruits professionals with a wealth of results. We are also strengthening our framework for
executing cross-border M&A projects while expanding our overseas network. For example, the Group has established asubsidiary in China, opened Singapore and New York branches, and joined CFI (Corporate Finance International) as a full
member. CFI is an M&A firm organization that operates in more than 20 countries, mainly in Europe, and Matsuoka,
Representative Director of the Company, became a Board Member of CFI in January 2021.
(iii) Revitalization Support Business
The Group is pleased to offer total support in revitalization, from drafting of a business-revitalization plan to implementation
support, reconciliation of interests with financial institutions, participation in management for the purpose of management
innovation (turnaround) and support for various processes associated with revitalization.
A key feature of the Group’s Revitalization Support Business is the hands-on management innovation support (support for
implementation of management innovation by permanently seconded staff). At the Group, “hands-on management innovation
support” means the dispatch of consultants accomplished in management innovation (turnaround) to serve as members of thecorporate client’s management team, providing direct support for the execution of revitalization plans and management
innovation. The Group commits fully and directly with the corporate client to draft the revitalization plan and implement
management innovation, seeing the project through to realization.
(iv) Other BusinessIn relation to the Revitalization Support Business and M&A Advisory Business, the Group offers research services (legal,financial and tax due diligence) conducted by lawyers, certified public accountants, tax accountants and other specialists invarious systems and provides advice related to respective systems regarding business revitalization plans, M&A andreorganization in the execution phase.
To provide education and training to the executives and employees of business companies and financial institutions, the Group
operates the Frontier Business School.
Through FCD Partners Inc. and Frontier Nanto Investment Godo Kaisha, affiliates of the Group, the Group offers financial
support (investment) via funds.
(2) Investment Business segment
For customers who require funds for growth through business model reforms and industry consolidation, we will not only
make direct investment aimed at increasing corporate value over the medium to long term but also dispatch management
personnel.
The Group has continued to be strongly conscious of enhancing the corporate value of client companies since its foundation. In
order to accommodate diverse client needs, we have continued to focus on providing a variety of solutions and securing various
experts to support those solutions.
As a result of keeping this focus, the Group has come to have the following features.
(Features of the Group)(1) Experts in a diverse range of fields
The Group’s professionals (experts providing various management support services to corporate clients) include institutional
experts, such as a lawyer, a certified public accountant, and a certified tax accountant, management consultants, industrial
analysts, business experts, including those from investment banks, business corporations and financial institutions, and otherspecialists. Since its founding, the Group has continued to consciously hire experts with diverse backgrounds to maintain awell-rounded base of expertise. Establishing such a portfolio of human resources enables the Group to provide a variety ofsolutions as follows.

7(2) A variety of solutions
The Group engages in the Management Consulting Business, the M&A Advisory Business, the Revitalization Support Business,
the Investment Business, and Other Business, providing relevant services alone or in combination to clients. Being capable ofoffering diverse solutions enables the Group to propose a total optimum solution and offer a one-stop solution for various
issues to clients.
For example, proposals to enhance the corporate value of a client provided by a company specializing in M&A advisory arebasically limited to supporting M&A while those from a company specializing in management consulting are basically limited
to supporting self-driven growth. Meanwhile, the Group can offer proposals that meet the wide-ranging needs of clients becauseof its capabilities to comprehensively provide services.
The management environment surrounding companies is drastically changing due to globalization in the capital and productmarkets, decline in the workforce, changes in legal and accounting systems, deregulation and tightening of regulations andother factors. Companies are expected to have the capability to comprehensively utilize knowledge and information acrossdifferent fields in an environment that is becoming increasingly complicated and sophisticated.
However, when solving highly complicated and sophisticated management issues across multiple areas of expertise, althoughan optimal solution for each field can be attained by consulting an expert in each field, it is not easy to derive a total optimum
solution through integrating the individual solutions obtained.
Having in-house specialists who are well versed in their respective fields, the Group assembles teams of specialists optimized
for each project. These in-house specialists closely cooperate with one another and comprehensively bring together theexpertise across multiple fields to derive a total optimum solution. It is in this way that the Group offers strong, speedy, onestop support services with high quality for solving management issues.
In addition, by being capable of adjusting interests based on abundant experience and executing hands-on support, the Groupcan offer support from drafting the necessary measures to realize the total optimum solution derived to executing such measures.
(3) Strong commitment
In carrying out projects, the Group is committed to enhancing the corporate value of clients. Ever since its founding, the Grouphas demonstrated strength in supporting business revitalization. Since an inadequate level of commitment when pursuingbusiness revitalization can cause a failure in business revitalization and possibly lead to termination of business with therespective client, the Group has continued to be keenly conscious of maintaining a strong commitment. We demonstrate ourstrong commitment not only in the rehabilitation support services but also in all services we provide.
(4) Extensive industrial knowledge
The Group’s Industry Research Department is composed of industrial specialists who have been observers of their respective
sectors for 10 to 20 years. We continue to enhance the quality of our management consulting and M&A advisory services
through fully utilizing the extensive industrial knowledge of our specialists.
(5) A nationwide network of financial institutions
The Group’s Business Development Department specializes in building and maintaining relationships with megabanks,regional banks and other financial institutions. As a result of building and deepening such relationships over many years, wehave a nationwide network of financial institutions with which we have close relationships. Consequently, we are able to accessnot only financial institutions across the country but also their business partners and clients.
(6) Neutrality as an independent firm
Frontier Management Group is an independent consulting firm that does not have a capital relationship with any specificfinancial institution, audit corporation, or other business corporation.
If a consulting firm is part of the capital of a certain business corporation, for example, it would be difficult to handle an M&A
that might bring benefit to a rival company of the business corporation, and the consulting firm would not necessarily be able
to offer the optimum proposal for its client. Meanwhile, the Group, as an independent consulting firm that does not have acapital relationship with another entity, can provide services from a neutral standpoint without conflicts of interest.

8

4. Status of Subsidiaries and Affiliates

Name

Address

Paid-in capital orinvestments(Millions of yen)

Ratio ofvoting rights
owned by theCompany(owned in the
Company)(%)

Business relationship

100.0

Concurrent post held by officer
Partial outsourcing ofcommissioned operations by theCompany
Partial outsourcing ofcommissioned operations to theCompany
Borrowings from the Company

60.4

Concurrent post held by officer
Partial outsourcing ofcommissioned operations by theCompany

Investment
Business

100.0

Concurrent post held by officer
Partial outsourcing ofcommissioned operations by theCompany
Acceptance of seconded
employees of the Company

Description of
main business(Consolidated subsidiary)

Frontier Management(Shanghai) Inc.
(Note)

People’sRepublic of
China
Shanghai

Celebrain Corporation(Note)

Minato-ku,
Tokyo

Frontier Capital Inc.
(Note)

120

Management
Consulting
Business, M&A
Advisory Business

64

Management
Consulting
Business, Other
Business

Minato-ku,
Tokyo

500

FCD Partners Inc.

Minato-ku,
Tokyo

6

Other Business(Financial support)

50.0

Concurrent post held by officer
Acceptance of seconded
employees of the Company

Frontier Nanto
Investment Godo Kaisha

Nara City, Nara
Prefecture

5

Other Business(Financial support)

50.0

Outsourcing of fundmanagement support operations
to the Company(Equity method affiliate)(Note)

It corresponds to a specified subsidiary.

95. Status of Employees(1) Status of consolidated subsidiaries
As of December 31, 2022
Segment name

Number of employees (Persons)Consulting and Advisory Business

324

Investment Business

11
Total

(Notes) 1.
2.
3.

335

Number of employees represents the number of the Group’s full-time staff members (excluding seconded persons fromthe Group to companies outside the Group).
The 67-person increase in the number of employees of the Consulting and Advisory Business from the end of the previous
fiscal year is due to aggressive recruitment and Celebrain Corporation’s becoming a consolidated subsidiary.
The Investment Business is a new reporting segment from the fiscal year under review. The 11-person increase in thenumber of employees of the Investment Business from the end of the previous fiscal year is due to the establishment ofFrontier Capital Inc.

(2) Status of submitter company
Number of employees(Persons)

Average age(Yeas old)

304

37.8

Segment name

Average years of service(Years)

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

3.0

12,575

Number of employees (Persons)Consulting and Advisory Business

304

Total
(Notes) 1.
2.

304

Number of employees represents the number of the Group’s full-time staff members (excluding seconded persons fromthe Company to companies outside the Company).
Average annual salary includes bonuses and non-standard wages.

(3) Status of labor union
No labor union has been formed, and the management-labor relationship is sound.

10II. Business Status
1. Management Policy, Management Environment and Issues to Address
Forward-looking statements in this document are based on the views of the Group as of December 31, 2022.
(1) Management environment(i) Consulting market
According to International Data Corporation Japan, the business consulting market was significantly affected by the spreadof the novel coronavirus disease (COVID-19) in the middle of 2020, causing stagnation in new projects and suspension ofexisting projects. Subsequently, however, demand rapidly recovered, and in 2021 the market was ¥572.4 billion, an 11.4%
increase compared to the previous year. Further, given the projection that the market will grow at an average rate of 8.8%
between 2021 and 2026 and reach ¥873.2 billion in 2026 and that the U.S. market will be approximately ¥10 trillion, weview that there is still adequate room for growth.
(ii) M&A market
Information released by RECOF Corporation states that M&A deals have been on the rise since 2011. In 2020, M&A
temporarily declined due to the spread of COVID-19. However, the market turned around and marked a record-high numberof M&A deals for two consecutive years in 2021 and 2022. It is expected that M&A will continue to grow going forward,
backed by an increase in business-succession-type M&A deals due to the advancement of the aging population and anincrease in business-reconstruction-type M&A deals. The M&A market is expected to continue to increase, with increases
in M&As for reorganization by domestic small and medium-sized enterprises (SMEs) due to market contraction in Japan
associated with the population decline and low birthrate, M&As for business restructuring in response to changes in businessstructures prompted by the spread of COVID-19, and increases in cross-border M&As due to the COVID-19 pandemic
reducing.
(iii) Business revitalization market
According to TEIKOKU DATABANK, LTD., 6,376 companies went bankrupt in 2022 (up 6.0% from a year earlier), which
was the first increase in three years, since 2019. The record-low level of corporate bankruptcies, which was due to the subsidy
program for sustaining businesses and other de facto capital injection measures introduced by the government, as well as theimplementation by financial institutions of no-interest, no-collateral (so-called zero-zero) loans, a moratorium for existingloans and other multilayered measures for SMEs under public-private collaboration, shifted to an upwards trend from May
2022 and this phase of gradual increasing is expected to continue in the future, leading us to perceive the need for business
revitalization expanding.
(2) Future management policy
In order to expand our existing businesses and provide client companies with optimal services for their challenges under suchmanagement environment described above, we have positioned the following measures as priority issues and are working tostrengthen and enhance the management base.
(i) Strengthening the organizational sales system
To maximize the sales of the Group, we will further enhance the organizational coverage system for companies that
constituted a growth driver for us in recent years.
In addition to expanding the Company’s Marketing Department to conduct multi-layered and multifaceted sales withmultiple departments of large client companies, we are also conducting sales training for front office staff that is provided
by people with sales experience at large financial institutions and we will continue to strengthen the Group’s organizationalsales system.
(ii) Expanding and strengthening solutions
As client companies’ needs for support efforts to address ESG, sustainability, and DX grow each year, the Group willcontinue to recruit expert professionals and widen the scope of its consulting services.
Until now we have addressed expanding our solutions in the areas of IR/SR, DX, TCFD, GRC (Governance, Risk,
Compliance) and HR consulting, and we will continue to expand and strengthen new solutions.
(iii) Rebuilding our location strategy
Currently in Japan, in addition to the Tokyo head office, Osaka Branch and Nagoya Branch, we opened a Fukuoka Branch
in January 2023. In order to expand the number of locations in the future and provide high-quality services to customers atthese locations, we will employ excellent local human resources and utilize IT to collaborate with the Tokyo head office withthe aim of expanding the scope of the Group’s business and contributing to the local community.
Outside of Japan too, we have established a subsidiary in China, opened Singapore and New York Branches, and are currently
considering establishing locations in Europe.

11

(iv) Improving profitability
We are working earnestly on improving the unit price of projects and the efficiency of operations in order to improve theGroup’s profitability.
In the fiscal year ending in December 2022, improvement in the unit price of projects in the M&A Advisory Business has
been realized by actively working on projects with a high degree of difficulty. In the future, we will aim to improve
profitability by focusing on expanding the range of solutions in the Management Consulting Business and Revitalization
Support Business too, as well as earnestly promoting operational efficiency.
(v) Initiating the Investment Business
Domestic companies are required to change their business models through working to: address sustainability; achieve
increased productivity through digitalization; vitalize regional economies beset with low birth rates and an aging population
and business succession issues; and take post-COVID-19 measures.
The consolidated subsidiary Frontier Capital Inc. will commence full-scale operations of its medium- to long-term
investment business involving the dispatch of management personnel from the fiscal 2023, with the aim of solving social
issues by resolving these important issues in client companies, and will work to improve the corporate value of the Group in
addition to contributing to growth through business model reform and industry reorganization at the companies that havebeen invested in.
(3) Issues to address
The Group is focusing on the following issues as medium- to long-term initiatives in order to develop and grow sustainably.
(i) Promoting work style reforms and DE&I (creating a comfortable work environment for employees)
Human resources are the most important management resource for the Group, and we will build an environment in which
diverse staff can thrive, and recruit such staff and enhance their retention by promoting the Company’s Basic Sustainability
Policy centered on human capital and key issues (materiality) as well as diversity, equity, and inclusion (DE&I), while
continuing to work to limit overtime work, eliminate harassment, and train management executives.
(ii) Increasing visibility and brand power
In order to increase the trust placed in us by our potential clients, it is necessary for us to enhance our visibility and brandpower.
As measures to address this, the Group’s front office staff contributes specialized and current affairs articles to the Group’s
owned media “FRONTIER EYES ONLINE,” which is aimed at the managers and management levels of potential customers,
and disseminates timely information in webinars. We are also working to increase the name recognition of the Group’s front
office staff and the Company by contributing to magazines and web media, publishing books, and appearing in various media.

122. Business and Other Risks
Matters that are likely to be risk factors in the business development of the Group are indicated below. Matters that are notnecessarily risks associated with business but are considered important for decision-making by investors are also indicated fromthe perspective of active information disclosure to investors. Forward-looking statements are included in some of these matters thatare based on the views of the Group as of December 31, 2022.
The Group recognizes the possibility that these risks could occur and works to avoid their occurrence and to respond should risks
occur.

(1) Risks arising from external environmental factors(i) External environment and market trends, etc.
The Group engages in the Management Consulting Business, the M&A Advisory Business, the Revitalization Support
Business, and Other Business primarily in Japan and Asia, including China, as well as in Europe and the U.S. If, due to theimpact of economic fluctuations on the management status of client companies, there is a change in the quality or volume
of projects entrusted with the Company, it may affect the financial position and operating results of the Group.
(ii) Intensifying competition
The Group’s business does not require approval or a license to execute operations, making barriers to entry low while
competition in the relevant fields is intensifying.
We will strive to differentiate ourselves from competitors in the business by providing various management support services
on a one-stop basis, increasing sophistication of service details provided and taking other steps. However, it is possible thatcompetition will continue to intensify, causing severer competition in prices. Such a situation may affect the financial
position and operating results of the Group.
(iii) Change in performance due to success fees for large projects
Sales of the M&A Advisory Business, which is one of the primary businesses of the Group, consist of the basic remuneration
mainly composed of a mobilization fee, pay received for hours of work performed and monthly fixed remuneration, andcontingency remuneration which can be received only when certain conditions, such as signing of the contract for a project,are satisfied. Particularly in a large project, if a contract for the project cannot be signed between a client company and theother party, the profit of the Group will decline. On the other hand, if our remuneration increases more than expected, theGroup’s profit will significantly increase.
Further, in terms of our quarterly results, performance might fluctuate considerably from a quarter in which no success fee
for a large project is recorded to a quarter where success fees of large projects are recorded.
The Group strives to stabilize profits through engaging in the Management Consulting Business, Revitalization Support
Business, and Other Business in addition to the M&A Advisory Business. At the same time, we handle a number of smaller
projects without being dependent on large projects. However, our performance may fluctuate depending on the amount of
success fees from large projects in the M&A Advisory Business.
For reference, sales along with the amount of M&A Advisory Business success fees included and the operating income/loss
by quarter for the 16th fiscal year are provided below.

Net sales[success fees from the M&A
Advisory Business]
Operating income(Thousands of yen)First quarter of Second quarter of Third quarter of Fourth quarter of
16th fiscal year
16th fiscal year 16th fiscal year 16th fiscal year 16th fiscal year
(FY2022)(FY2022)(FY2022)(FY2022)(FY2022)2,224,878
1,747,964
1,916,621
2,026,189
7,915,655[657,054][297,694][299,806][411,188][1,665,744]

408,404

135,012

135,795

228,919

908,131(iv) Legal restrictions
The Group views that there are no legal provisions that directly impose restrictions on its primary businesses. However, if
legal provisions that can directly or indirectly impose restrictions on the Group’s businesses are set in the future, or if any
changes are made to the operation of conventional legal provisions, it is possible that the Group’s business development may
be subject to restrictions, and this may affect the business strategies and operating results of the Group.
13

The Company engages in the intermediation of loan agreements as a service that complements its primary business. In regard
to this business, the Company has made the necessary registration under the Money Lending Business Act. In addition, theCompany has received authorization to engage in the worker dispatch business and the fee-based job placement business.
(v) Possibility of lawsuits
The Group works to establish an effective compliance structure. However, it is possible that in the course of carrying out its
business, a lawsuit or such action may be brought against the Group regardless of whether or not there was any legal violation
on its part.
If such lawsuit is brought against it and depending on the results thereof, this may affect the Group’s social credibility andoperating results.
(vi) Overseas business activities and fluctuations in foreign exchange rates
Business activities that the Group engages in overseas are exposed to the following risks.
a) Changes in laws and regulations that are normally unexpectedb) Presence or occurrence of economically disadvantageous factors, such as difficulty in hiring and securing humanresourcesc) Social or political confusion due to terrorism, war or other such events
If these risks become tangible, it is possible that the overseas business activities of the Group may be disrupted, affecting
the operating results of the Group.
Further, in the Group’s overseas business, items that are denominated in local currencies are influenced by the value afterconversion into yen using foreign exchange rates, and this may affect the operating results and financial position of theGroup.
(vii) Impact of COVID-19
The restrictions on physical travel to overseas caused by COVID-19 have impacted the Group’s M&A Advisory Business inthat there have been interruptions and delays in the progress of cross-border M&A deals between domestic companies andoverseas companies. If the COVID-19 pandemic carries on in the future too, such impact may affect the financial positionand operating results of the Group.
(2) Risks arising from internal environmental factors(i) Recruitment and development of personnel
The Group allocates experienced persons in each of its businesses and departments as core staff in those fields, and ourhuman capital comprises a wide variety of specialists. To expand the businesses of the Group, it is important to recruit anddevelop talented individuals. In particular, securing personnel with abundant experience and high expertise is an immense
issue in carrying out the business activities of the Group.
Therefore, if the Group is unable to adequately and in a timely way secure the necessary personnel or if there is an outflow
of individuals with high expertise who undertake key roles in the Group, such situations may affect the future businessexecution.
Furthermore, even when the Group can smoothly secure human resources, there is a likelihood of a rise in the cost for hiring
talented individuals in conjunction with the tightening demand-supply balance and of increases in fixed costs including
personnel and facility expenses. Such situation may affect the financial position and operating results of the Group.
(ii) Development of frameworks for internal control
As of December 31, 2022, the Group’s organization has become five Directors (including two part-time Outside Directors),
three Audit & Supervisory Board Members (including two part-time Outside Audit & Supervisory Board Members) and 335
employees, but our frameworks for internal control and business execution are in line with the size of our organization.
The Group will strive to develop and operate more systematic frameworks for internal control than before by continuing todevelop employees and hiring new employees from outside. If in the course of our efforts, however, a rapid businessexpansion or such like occurs, we may not be able to make an adequate human and organizational response. Such a situation
may affect the business development and expansion of the Group.

14

(iii) Information management and insider trading
The Group’s business is based on the acquisition of confidential information of client companies. Therefore, the Group has
a duty of confidentiality to client companies and to potential future client companies under a confidentiality agreement orsuch like.
The Group ensures it promotes strict information management and provides guidance and education to its employees aboutcompliance with the duty of confidentiality. However, in the event of a leakage of confidential information to unauthorizedparties for some reason, the Group’s credibility will be impaired, and this may affect the business strategies and operating
results of the Group.
Furthermore, the Group ensures proper information management and provides guidance and education on compliance withthe duty of confidentiality to its employees as described above. It also prohibits officers and employees from carrying out
stock transactions, etc. as a general rule set out under the internal rules regardless of inside or outside the country or ofwhether the transaction pertains to a client company or not, from the perspective of preventing insider trading. However, if
by any chance an officer or employee of the Group conducts insider trading based on the confidential information of a clientcompany, the Group’s credibility will be impaired, and this may affect the business strategies and operating results of theGroup.
(iv) Realizing profits in overseas businessWith the purpose of providing services to Chinese and other Asian companies and Japanese companies aiming to makeinroads in China and other countries in Asia, the Company established Frontier Management (Shanghai) Inc. as a whollyowned subsidiary in Shanghai, China in October 2011 and opened the Singapore Branch in December 2012. In addition, the
New York Branch was opened in June 2017 for the purpose of strengthening the support system for the advancement andbusiness expansion of Japanese companies in North America. However, these entities were affected by the spread of COVID19 while in the course of attaining earnings, and if the business plan cannot be realized smoothly going forward, this may
affect the financial position and operating results of the Group.
(v) Realizing profits in investment business
In April 2022 the Group established Frontier Capital Inc., which conducts investment business involving the dispatch ofmanagement personnel. It has repeatedly conducted fundraising activities to solicit funds from financial institutions thatagree with the purpose of its establishment, and at the board of directors meeting held on December 27, 2022, it resolved toraise a total of ¥2,666,400 thousand from seven financial institutions. It plans to commence full-scale investment activities
from the fiscal 2023 and onwards, but if the realization of the business plan does not proceed smoothly in the future this may
affect the operating results and financial position of the Group.
In addition, if an impairment loss occurs due to the companies in which Frontier Capital Inc. has invested suffering significant
loses in earnings due to changes in the external environment, etc., this may affect the operating results and financial positionof the Group.
(vi) Dependence on certain individuals
Representative Director Shoichiro Onishi and Representative Director Masahiro Matsuoka who are the Company’s founders
and business promoters hold vital roles in the overall business activities of the Group such as making decisions on
management policies and strategies.
At present, we do not expect Representative Directors Shoichiro Onishi and Masahiro Matsuoka to exit from the business of
the Group. However, if a situation arises where they will withdraw from the management of the Group due to resignation orother reasons, it may affect the business strategies, organizational operation, operating results and other matters of the Group.
(3) Other(i) Policy regarding shareholder return
The Group maintains a basic policy of paying stable dividends on a continual basis, while securing sufficient internal reservesto develop future business and enhance the management structure of the Group.
Recognizing that appropriate return of profits to shareholders is an important management issue, the Group intends toaggressively distribute profit in order to meet the expectations of shareholders going forward. However, with a view tomaximizing shareholder value through business expansion based on comprehensively taking into account the profit level ofeach fiscal year, forecasts for the following fiscal year and beyond, capital needs, status of internal reserves and other factors,
the Group may not distribute dividends.

15

(ii) Exercise of stock options and dilution of stock value due to issuance of shares subject to transfer restriction
The Group adopts a stock option plan as a means of offering an incentive for officers and employees. If, in addition to thestock options currently granted as of the end of the fiscal year under review, stock options to be granted in the future areexercised, it is possible that the value of shares held by existing shareholders will be diluted.
As of December 31, 2022, there are 205,720 diluted shares caused by exercise of stock options, accounting for 1.79% of thetotal number of shares issued.
The Group also adopts a restricted stock compensation plan for the Company’s Directors, excluding Outside Directors, andemployees. If shares are issued or disposed of under the plan, it is possible that the value of shares held by existing
shareholders will be diluted as in the case with the stock option plan.

16

3. Management’s Discussion & Analysis of Financial Condition, Operating Results and Cash Flows(1) Overview of results of operations
An overview of the financial condition, operating results and cash flows (hereinafter, “results of operations”) of the Group (theCompany, consolidated subsidiaries and equity method affiliates) for the fiscal year ended December 31, 2022 is as follows.
(i) Operating results
During the fiscal year (from January 1, 2022 to December 31, 2022), the Japanese economy experienced a gradual relaxation of
behavioral restrictions associated with the spread of COVID-19 and the normalization of social and economic activities, and also
saw signs of an economic recovery. Nonetheless, the economic outlook remains largely uncertain, as evidenced by the supply
shortages of natural resources due to the prolonged situation in Russia and Ukraine, soaring energy prices, and rising prices
associated with the depreciation of the yen.
In this management environment, the Group continued to focus on proposing and executing one-stop solutions to issues faced bycompanies by providing comprehensive services that leverage management consulting, M&A advisory, revitalization support,
and other functions. In January, we welcomed Celebrain Corporation, which engages in a personnel-related consulting business,to the Group, and expanded the solutions domain in management consulting. In April, we established Frontier Capital Inc., which
engages in an investment business involving the dispatch of management personnel, and made preparations for the start of thebusiness.
As a result of the above, the Group reported consolidated net sales of ¥7,915,655 thousand (up 37.9% from the previous fiscal
year), operating income of ¥908,131 thousand (up 81.2%), ordinary income of ¥921,511 thousand (up 79.1%), and net income
attributable to owners of parent of ¥556,722 thousand (up 64.4%) for the fiscal year under review.
Operating results by segment are as follows. Net sales include inter-segment sales.
The business of the Group had been a single segment, however from this fiscal year we have changed it to two segments: theConsulting and Advisory Business and the Investment Business. The details are as described in the “Notes (Segment Information)”of the Consolidated Financial Statements. As a result, year-on-year comparisons and analyses have not been performed, except
with respect to net sales and operating income in the Consulting and Advisory Business, and net sales by business.
(Consulting and Advisory Business Segment)
For the fiscal year, in the Consulting and Advisory Business segment, the Management Consulting Business and the M&A
Advisory Business performed well, with net sales of ¥7,912,655 thousand (up 37.8% from the previous year) and operating
income of ¥1,099,403 thousand (up 119.3%).
Results of operations by business are as follows.
<Management Consulting Business>
In the fiscal year ended December 31, 2022, the Management Consulting Business recorded net sales of ¥4,351,972 thousand(up 32.7% from the previous fiscal year). In the fiscal year under review, sales increased substantially compared with the previous
fiscal year. In addition to the effect of increased personnel resulting from aggressive recruitment, the expansion of the consultingrelated services, including SR/IR services, DX services, and human resources, contributed to such increase.
<M&A Advisory Business>
In the M&A Advisory Business, net sales for the fiscal year under review were ¥2,793,464 thousand (up 61.9% from the previousyear). In the fiscal year, sales increased substantially compared with the previous fiscal year as a result of the successful
completion of large- and medium-sized M&A deals.
<Revitalization Support Business>
In the fiscal year ended December 31, 2022, the Revitalization Support Business recorded net sales of ¥601,236 thousand (down
9.2% from the previous fiscal year). In the fiscal year under review, the continued support provided by financial institutions inproviding loans to companies continued to prevent the need for revitalization support from expanding, and net sales decreased
compared with the previous fiscal year.

17<Other Business>
In the fiscal year ended December 31, 2022, the Other Business recorded net sales of ¥165,981 thousand (up 124.9% from theprevious fiscal year).
(Investment Business Segment)
In the Investment Business segment, net sales and operating loss for the fiscal year ended December 31, 2022 were ¥17,603
thousand and ¥191,272 thousand, respectively, due to personnel expenses and other expenses associated with the launch of thisbusiness.
(ii) Financial condition
Total assets at the end of the fiscal year were ¥5,658,644 thousand (¥3,819,274 thousand at the end of the previous fiscal year),an increase of ¥1,839,369 thousand from the end of the previous fiscal year. Total liabilities were ¥2,642,688 thousand(¥1,365,207 thousand at the end of the previous fiscal year), up ¥1,277,480 thousand from the end of the previous fiscal year.
Net assets were ¥3,015,956 thousand (¥2,454,066 thousand at the end of the previous fiscal year), an increase of ¥561,889
thousand from the end of the previous fiscal year.
(iii) Status of cash flows
Cash and cash equivalents (hereinafter, “funds”) on December 31, 2022 increased ¥1,414,871 thousand from the end of theprevious fiscal year to ¥3,199,089 thousand.
The status of cash flows and their factors for the fiscal year ended December 31, 2022 are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities was ¥1,250,257 thousand (net cash provided of ¥316,813 thousand in the previous
fiscal year). This was mainly attributable to income before income taxes of ¥868,006 thousand, decrease in notes and accounts
receivable-trade of ¥215,932 thousand, increase in accrued bonuses of ¥211,471 thousand, charges for stock compensation of¥88,167 thousand, write-down of investment securities of ¥53,505 thousand and depreciation and amortization of ¥47,495
thousand, which were factors increasing cash, and to income taxes paid of ¥343,093 thousand, which was a factor decreasing
cash.
(Cash flows from investing activities)
Net cash used in investing activities was ¥486,911 thousand (net cash used of ¥31,524 thousand in the previous fiscal year). Thiswas mainly attributable to additional investments in newly consolidated entities of ¥238,932 thousand, proceeds from collectionof lease and guarantee deposits of ¥148,174, and purchases of tangible fixed assets of ¥87,142 thousand.
(Cash flows from financing activities)
Net cash used in financing activities was ¥646,534 thousand (net cash used of ¥404,765 thousand in the previous fiscal year).
This was mainly attributable to proceeds from long-term debt of ¥860,000 thousand, which was a factor increasing cash, anddividends paid of ¥113,750 thousand and repayments of long-term debt of ¥90,284 thousand, which were factors decreasing cash.
(iv) Results of production, orders received and salesa) Production
Not applicable.
b) Orders received
Not applicable.
c) SalesSales in the fiscal year ended December 31, 2022 were as follows.

Segment nameName of sales category

Management Consulting Business18

Current fiscal year
(January 1, 2022 to December 31, 2022)
Sales(Thousands of yen)

YoY change (%)

4,351,972

132.7

Name of sales category

Segment nameCurrent fiscal year
(January 1, 2022 to December 31, 2022)
Sales(Thousands of yen)

YoY change (%)

M&A Advisory Business

2,793,464

161.9

Revitalization Support Business

601,236

90.8

Other Business

165,981224.9

Investment Business

17,603–

Removal of transactions between segments(14,603)–

Total

7,915,655

137.9

Consulting andAdvisory Business segment
Investment Business segment(Note) Includes transactions between segments.
(2) Analysis and considerations concerning the status of results of operations from the management’s perspective
The contents of analysis and considerations concerning the status of results of operations from the management’s perspective
are as follows.
Forward-looking statements in this document are based on the views as of December 31, 2022.
(i) Significant accounting policies and estimates
The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles inJapan. In preparing the consolidated financial statements, estimations were made in part within the scope of certain accounting
standards and have been reflected in the figures for assets, liabilities, income and expenses. These estimates are evaluated on acontinual basis and are revised as needed. However, since estimates involve uncertainties, the actual results may differ from such
estimates. The details of significant accounting policies and accounting estimates are stated in (Significant Matters Forming theBasis for Preparation of Consolidated Financial Statements) in “Notes to Consolidated Financial Statements” of “1. Consolidated
Financial Statements” in “V. Accounting.” Accounting estimates and assumptions related to the impact of COVID-19 are statedin (Additional Information) in “1. Consolidated Financial Statements” in “V. Accounting.”(ii) Recognition, analysis and considerations concerning the status of results of operations for the fiscal year ended December 31,
2022(A) Analysis of results of operations
a. Net sales
In the fiscal year ended December 31, 2022, net sales were ¥7,915,655 thousand (up 37.9% from the previous fiscal year).
The breakdown by business segment is as follows: ¥7,912,655 thousand in the Consulting and Advisory Business (up 37.8%
from the previous fiscal year), and ¥17,603 thousand in the Investment Business (including ¥14,603 thousand for intersegment sales). Further, the breakdown by business segment within the Consulting and Advisory Business is as follows:¥4,351,972 thousand (up 32.7% from the previous fiscal year) in the Management Consulting Business, ¥2,793,464
thousand (up 61.9% from the previous fiscal year) in the M&A Advisory Business, ¥601,236 thousand (down 9.2% fromthe previous fiscal year) in the Revitalization Support Business, and ¥165,981 thousand (up 124.9% from the previous fiscal
year) in Other Business.
In the Consulting and Advisory Business segment, although sales declined in the Revitalization Support Business, where
the market’s needs for revitalization did not expand due to financial institutions continuing to provide funding support tocompanies, sales significantly increased in the Management Consulting Business due to the realization of the effects ofproactively increasing the number of employees and the contribution of the strengthening and expansion of consulting
services such as SR/IR-related, DX-related, and personnel-related, while sales significantly increased in the M&A Advisory
Business as a result of successfully concluding large- and medium-sized M&A projects.
b. Operating income
Operating income for the fiscal year ended December 31, 2022 came to ¥908,131 thousand (up 81.2% from the previous
fiscal year) after recording cost of sales of ¥3,230,126 thousand (up 43.7% from the previous fiscal year) and selling, generaland administrative expenses of ¥3,777,396 thousand (up 26.2% from the previous fiscal year). The main components of costof sales are personnel expenses, such as salaries and allowances of ¥1,544,440 thousand and provision for bonuses of19¥410,953 thousand, and outsourcing costs of ¥364,076 thousand, and the major factor that contributed to the rise was anincrease in salaries and allowances of ¥307,014 thousand and provision for bonuses of ¥130,430 thousand as a result ofactively hiring personnel, and an increase on outsourcing costs of ¥212,415 thousand due to the utilization of suppliers. The
main components of selling, general and administrative expenses are personnel expenses, such as salaries and allowancesof ¥1,419,541 thousand and provision for bonuses of ¥364,820 thousand, and recruiting expenses of ¥469,080 thousand,and the major factor that contributed to the rise was an increase in salaries and allowances of ¥116,797 thousand, provision
for bonuses of ¥95,778 thousand and recruiting expenses of ¥237,245 thousand as a result of actively hiring personnel.
c. Ordinary income
Ordinary income for the fiscal year ended December 31, 2022 came to ¥921,511 thousand (up 79.1% from the previous
fiscal year) after recording non-operating income of ¥21,057 thousand and non-operating expenses of ¥7,676 thousand.
Main components of non-operating income are foreign exchange gains of ¥9,158 thousand and equity in earnings of affiliatesof ¥8,059 thousand while the main component of non-operating expenses is interest expense of ¥7,429 thousand.
d. Income before income taxes
Income before income taxes for the fiscal year ended December 31, 2022 came to ¥868,006 thousand (up 68.7% from theprevious fiscal year) after recording write-down of investment securities of ¥53,505 thousand.

e. Net income attributable to owners of parent
Net income attributable to owners of parent for the fiscal year ended December 31, 2022 came to ¥556,722 thousand (up64.4% from the previous fiscal year) after recording income taxes of ¥301,670 thousand and net income attributable toowners of non-controlling interests of ¥9,614 thousand.
(B) Financial conditiona. Assets
Total assets at the end of the fiscal year were ¥5,658,644 thousand (¥3,819,274 thousand at the end of the previous fiscal
year), an increase of ¥1,839,369 thousand from the end of the previous fiscal year. Current assets were ¥4,276,116 thousand(¥2,998,206 thousand at the end of the previous fiscal year), non-current assets were ¥1,375,149 thousand (¥821,068
thousand at the end of the previous fiscal year) and deferred assets were ¥7,379 thousand (¥0 thousand at the end of theprevious fiscal year). Current assets increased ¥1,277,909 thousand, non-current assets increased ¥554,081 thousand anddeferred assets increased ¥7,379 thousand compared with the levels at the end of the previous fiscal year. The main changes
in current assets were an increase of ¥1,414,871 thousand in cash and deposits and a decrease of ¥160,549 thousand in notes,
accounts receivable and contract assets (notes and accounts receivable-trade in the previous fiscal year). The main changes
in non-current assets were increases of ¥265,130 thousand in goodwill, ¥149,347 thousand in lease deposits, ¥88,738
thousand in facilities attached to buildings, and ¥68,838 thousand in deferred tax assets, and a decrease of ¥53,209 thousandin investment securities. The change in deferred assets was an increase of ¥7,379 thousand in organization expenses.
b. Liabilities
Total liabilities at the end of the fiscal year were ¥2,642,688 thousand (¥1,365,207 thousand at the end of the previous fiscal
year), an increase of ¥1,277,480 thousand from the end of the previous fiscal year. Current liabilities were ¥1,868,624
thousand (¥1,282,944 thousand at the end of the previous fiscal year) and fixed liabilities were ¥774,063 thousand (¥82,262
thousand at the end of the previous fiscal year). Current liabilities increased ¥585,680 thousand and fixed liabilities increased¥691,800 thousand compared with the levels at the end of the previous fiscal year. The main changes in current liabilities
were increases of ¥211,471 thousand in provision for bonuses, ¥138,388 thousand in current portion of long-term debt,¥135,647 thousand in other current liabilities such as increases in accrued consumption taxes and accrued expenses, ¥34,161
thousand in accounts payable-other, ¥28,510 in income taxes payable and ¥25,606 in accounts payable. The main changes
in fixed liabilities were increases of ¥639,313 thousand in long-term debt and ¥52,487 thousand in asset retirement
obligations.
c. Net assets
Total assets at the end of the fiscal year were ¥3,015,956 thousand (¥2,454,066 thousand at the end of the previous fiscal
year), an increase of ¥561,889 thousand from the end of the previous fiscal year. This was mainly due to the recording of¥556,722 thousand in net income attributable to owners of parent.
20

(iii) Sources of capital and liquidity of capital
The status of cash flows is stated in “(iii) Status of cash flows” in “(1) Overview of results of operations” in “3. Management’s
Discussion & Analysis of Financial Condition, Operating Results and Cash Flows.” The Group adopts the basic approach ofcovering the funds for working capital and capital investments with cash on hand and pursues financing by bank borrowings ifneeded.
(iv) Factors having a significant impact on operating results
The M&A Advisory Business, which is one of the core businesses of the Group, accounted for 35.3% of net sales in the fiscal
year ended December 31, 2022. In this business, we provide customers with M&A advisory services. Due to the nature of thebusiness, the ratio of success fees tends to be high. Whether success fees can be earned in M&A advisory services is dependenton whether clients can close their M&A deals, which is beyond the control of the Group. Closing and non-closing of M&A deals
can possibly impact the operating results of the Group.
For details on the factors that have a significant impact on operating results, see “2. Business and Other Risks” in “II. Business
Status.”(v) Objective indicators for determining the status of achievement of management policies and strategies or management targets
The Group, in its medium-term management plan, has set out targets to achieve net sales of ¥8,700,000 thousand and operating
income of ¥1,740,000 thousand (operating margin of 20.0%) in fiscal 2023. For this purpose, the Group focuses on the following
indicators and determines the status of achievement.
TargetCAGR

Actual amount
18.8%

23.5%

40

78

Operating margin

20.0%

11.5%

ROE

20.0%

20.9%

Dividend payout ratio (consolidated)

30.0%

57.5%

Increase in number of employees in a year

(Note) The actual value of CAGR is calculated with FY2020 as the base fiscal year.

21

4. Significant Contracts, ETC. in BusinessNot applicable.

5. Research and Development Activities
Not applicable.

22III. Facilities
1. Outline of Capital Expenditure
Capital expenditure (tangible fixed assets and intangible fixed assets; excluding goodwill and customer-related assets) for the
fiscal year under review totaled ¥153,841 thousand, of which the major items were equipment installation, furniture and fixtures,etc. of ¥110,556 thousand (including the increase in tangible fixed assets related to retirement of assets) due to expansion of thehead office.
There was no retirement or selling of significant facilities during the fiscal year under review.

2. Main Facilities
Main facilities in the Group are as follows.
(Submitter company)
As of December 31, 2022
Book value
Business officename(Address)

Segment name

Description offacilities

Buildings(Thousands ofyen)

Tools, furnitureand fixtures(Thousands of
yen)

Total
(Thousands ofyen)

Head officeConsulting and(Minato-ku, Tokyo) Advisory Business

Office facilities

167,893

28,102

195,995(Note)In addition to the above, the following is the main rented facility.
Business office name
Segment name
Description of facilities(Address)
Head office(Minato-ku, Tokyo)

Consulting and Advisory
Business

3. Planned New Facilities and Retirement(1) Significant new facilities
Not applicable.
(2) Retirement of significant facilities
Not applicable.

23

OfficeNumber of
employees(Persons)
304

Annual rent
(Thousands of yen)
255,199

IV. Submitter Company
1. Shares(1) Total number of shares, etc.
(i) Total number of shares
Class

Total number of shares authorized to be issued (Shares)

Common stock

45,648,000
Total

45,648,000(ii) Number of shares outstandingClass

Number of shares issued asof the end of fiscal year
(Shares)(December 31, 2022)

Number of shares issued
as of the submission day(Shares)(March 24, 2023)

Name of financial
instruments exchange
listed on or registeredauthorized financial
instruments firms
association

Description

It is full voting stock

Common stock

11,468,478

11,481,998

Tokyo Stock Exchange
Prime Market

without any restriction on
its rights, and is standard
stock of the Company.
There are 100 shares per
unit.

Total

11,468,478

11,481,998––(Note) The section of “Number of shares issued as of the submission day” does not include the number of shares that have been issued
by the exercise of stock acquisition rights from March 1, 2023 to the day of submitting this securities report.

24

(2) Stock acquisition rights(i) Description of stock option
Annual general meeting of shareholders held on March 29,
2018
Board of Directors meeting held on May 15, 2018
Director: 3
Employee: 140

Date of resolution
Grantee categories and count (Persons)
Number of stock acquisition rights(Note)

15,865 [15,425]

Class, description and number of shares underlying stockacquisition rights (Shares)(Note)
Payment of money at the exercise of stock acquisition rights(Yen)(Note)

Common stock: 126,920 [123,400] (Note 1)
75 (Note 2)

Exercise period of stock acquisition rights(Note)

From May 16, 2020 to May 15, 2028

Issue price and the amount to be included in capital whenissuing shares by the exercise of stock acquisition rights(Yen)(Note)

Issue price: 75
Amount to be included in capital: 37.5 (Note 3)

Conditions for exercise of the stock acquisition rights(Note)(Note 4)

Transfer of stock acquisition rights(Note)

Approval of the Board of Directors of the Company shall be
required to obtain stock acquisition rights by transfer.

Issuance of stock acquisition rights due to the act of(Note 5)reorganization(Note)(Note) The description is as of the end of the fiscal year under review (December 31, 2022). For the items that had been changed fromthe end of the fiscal year under review to the end of the previous month (February 28, 2023), their description as of the end of
the previous month to the submission day was included in brackets, while there was no change from the description for otheritems.
(Notes) 1.

2.

When the Company splits shares (including allotment of shares without contribution; the same shall apply hereinafter) or
consolidates them, the number of shares issued shall be adjusted using the following formula. However, such adjustments
shall be made only for the number of shares to be issued upon the exercise of stock acquisition rights that have not been
exercised among stock acquisition rights.
Number of shares after adjustment = Number of shares before adjustment × Ratio of split/consolidation.
Moreover, in the case of succession of stock acquisition rights due to the absorption-type merger or consolidation-typemerger by the Company with other companies, or in the case of succession of stock acquisition rights due to share exchangeor share transfer in which the Company becomes a wholly-owned subsidiary, the Company may adjust the number ofshares deemed necessary according to the merger ratio and others.
The value of property to be contributed upon exercise of the stock acquisition rights shall be the one calculated bymultiplying the amount of contribution per share to be made upon exercise of stock acquisition rights (the “exercise price”)
by the number of shares to be issued per unit of stock acquisition rights.
However, if there is one of the following events, the amount shall be calculated by multiplying the exercise price adjusted
by each formula below by the number of shares to be issued per unit of stock acquisition rights. For the exercise priceafter adjustment, any fraction less than one yen shall be rounded up.
(1) When the Company conducts a stock split or consolidation
1
Split/consolidation
ratio(2) When the Company issues shares for subscription or disposes of treasury stock shares below the market price(including the issuance of shares by allotment of shares without contribution and delivery of treasury stock shares,
but excluding the exercise of stock acquisition rights (including corporate bonds with share options) and theconversion of securities that can be converted into common stock shares of the Company)
Number of shares newly issued × Amount of
Number of
payment per share
shares already +Exercise price
Exercise price
Stock price before issuance of shares for
issued=×after adjustment
before adjustment
subscription
Number of shares already issued + Number of shares newly issued
Exercise priceafter adjustment=

Exercise pricebeforeadjustment

×

However, the number of shares already issued in the formula shall be the total number of shares outstanding on the
day before the effective day of the issuance of the above shares less the number of treasury stock shares owned by
the Company at the time; if treasury stock shares are to be disposed of, the number of shares newly issued and thestock price before issuance of shares for subscription shall be replaced with the number of treasury stock shares tobe disposed of and the stock price before disposal of treasury stock shares, respectively. Moreover, the stock pricebefore issuance of shares for subscription in the formula shall be the exercise price before adjustment if there is no
25

3.

4.

5.

market price for the Company stock, while it shall be the last traded price in the priority exchange of the Company
immediately before issuance if there is a market price for the Company stock.
(3) The Company shall adjust the exercise price as deemed necessary when conducting an absorption-type merger inwhich the Company becomes an existing entity by absorption, when conducting an absorption-type company split
in which the Company becomes a successor entity by divestiture, when conducting a share exchange by which theCompany becomes a parent of a wholly owned subsidiary, or when needing to adjust the exercise price in othercases pursuant to these cases.
The amount to be included in capital is as follows.
(1) The amount of paid-in capital to be increased when issuing shares by exercising stock acquisition rights shall be halfof the upper limit of increases in paid-in capital, etc., calculated in accordance with Article 17, Paragraph (1) of theRegulation on Corporate Accounting, with any fraction less than one yen rounded up.
(2) The amount of capital reserve to be increased when issuing shares by exercising stock acquisition rights shall be theupper limit of increases in paid-in capital, etc. stated in (1) above less the amount of paid-in capital to be increased
stipulated in (1) above.
Conditions for exercise of the stock acquisition rights are as follows.
(1) The person who is allotted stock acquisition rights (the “holder of share options”) must be a Director, Audit &Supervisory Board Member, or employee even when exercising the rights, and shall have five years or more of total
service. However, stock acquisition rights may be exercised if employees of the Company or its subsidiaries resign
due to reaching a specified retirement age and when exercise is approved by the Board of Directors of the Company.
(2) Stock acquisition rights may not be inherited if the holder of share options has died.
(3) Holders of share options may exercise their stock acquisition rights after the start date of exercising their rights or
the listing date of the Company stock on any of the financial instruments exchanges in Japan, whichever is later.
Treatment at the time of reorganization is as follows.
If stock acquisition rights of the following stock companies are to be issued in accordance with the provisions of theagreement, plan, or the like stipulated at the time of reorganization, stock acquisition rights of the following stockcompanies shall be issued according to the ratio of such reorganization.
(1) Merger (only in the case where the Company ceases to exist)
Stock company that survives the merger or stock company incorporated as a result of the merger(2) Absorption-type company split
Stock company in which all or part of its rights and obligations related to its business are to be succeeded by a stockcompany conducting an absorption-type company split(3) Incorporation-type company split
Stock company to be established by incorporation-type company split(4) Share exchange
Stock company acquiring all the issued shares of a stock company to conduct a share exchange with.
(5) Share transfer
Stock company to be established by share transfer

Date of resolution

Board of Directors meeting held on March 25, 2021

Grantee categories and count (Persons)Executive Officer: 5
Employee: 10

Number of stock acquisition rights(Note)

57

Class, description and number of shares underlying stockacquisition rights (Shares)(Note)
Payment of money at the exercise of stock acquisition rights(Yen)(Note)

Common stock: 5,700 (Note 1)
1

Exercise period of stock acquisition rights(Note)

From March 26, 2022 to March 25, 2026

Issue price and the amount to be included in capital whenissuing shares by the exercise of stock acquisition rights(Yen)(Note)

Issue price: 1
Amount to be included in capital: 1 (Note 2)

Conditions for exercise of the stock acquisition rights(Note)(Note 3)

Transfer of stock acquisition rights(Note)

Approval of the Board of Directors of the Company shall be
required to obtain stock acquisition rights by transfer.

Issuance of stock acquisition rights due to the act of(Note 4)
reorganization(Note)(Note) The description is as of the end of the fiscal year under review (December 31, 2022). As the details that should be stated as ofthe end of the month prior to the submission day have not changed from the details as of the end of the fiscal year underreview, the description of details as of the end of the month prior to the submission day has been omitted.
26

(Notes) 1.

2.

3.

4.

When conducting a stock split, allotment of shares without contribution, or stock consolidation of common stock of theCompany, the number of shares granted shall be adjusted using the following formula, with any fraction less than one
share as a result of the adjustment rounded down.
Number of shares granted after adjustment = Number of shares granted before adjustment × Ratio of stock split, allotmentof shares without contribution, or stock consolidation.
The number of shares granted after adjustment shall be applied after the day following the record date (effective date if
the record date is not decided) for the stock split or allotment of shares without contribution in the case of a stock split orallotment of shares without contribution, while after the effective date for a stock consolidation. However, if a stock split
or allotment of shares without contribution is conducted on condition that a proposal to increase paid-in capital or reserves
by decreasing surplus is approved by the Company’s general meeting of shareholders, and the record date for the stock
split or allotment of shares without contribution is a date before the concluding date of such general meeting ofshareholders, the number of shares granted after adjustment shall be applied after the day following the concluding dateof such general meeting of shareholders.
Moreover, in the case of succession of stock acquisition rights due to an absorption-type merger or consolidation-typemerger by the Company, or in the case of succession of stock acquisition rights due to share exchange or share transfer inwhich the Company becomes a wholly-owned subsidiary, or in other cases of requiring adjustment of the number of shares
granted pursuant to these cases, the Company may adjust the number of shares granted appropriately within a reasonable
scope.
The amount to be included in capital is as follows.
(1) The amount of paid-in capital to be increased when issuing shares by exercising stock acquisition rights shall be theamount calculated by multiplying the upper limit of increases in paid-in capital, etc., by 0.5 in accordance with
Article 17, Paragraph (1) of the Regulation on Corporate Accounting, with any fraction less than one yen roundedup.
(2) The amount of capital reserve to be increased when issuing shares by exercising stock acquisition rights shall be theupper limit of increases in paid-in capital, etc. stated in (1) above less the amount of paid-in capital to be increased
stipulated in (1) above.
Conditions for exercise of the stock acquisition rights are as follows.
(1) The holder of share options must be either a Director, Audit & Supervisory Board Member, Executive Officer, or
employee of the Company or a subsidiary of the Company even when exercising the rights. However, stockacquisition rights are allowed to be exercised if the person resigns due to reaching a specified retirement age,Company reasons, or industrial illness, or if the person is transferred to a different company, or if exercise isapproved by its Board of Directors as having a legitimate reason.
(2) Stock acquisition rights may not be inherited if the holder of share options has died.
Treatment at the time of reorganization is as follows.
When the Company conducts a merger (limited to cases where the Company ceases to exist due to merger), absorptiontype company split (limited to cases where the Company becomes a divesting entity to a successor entity by divesture),
incorporation-type company split, share exchange (limited to cases where the Company becomes a wholly-owned
subsidiary), or share transfer (collectively, the “acts of reorganization”), stock acquisition rights of stock companies listed
in Article 236, Paragraph (1), Item (viii) from (a) to (e) of the Companies Act (hereinafter, “target company ofreorganization”), shall be issued to the holders of share options who hold remaining stock acquisition rights immediately
before the effective date of acts of reorganization (hereinafter, the “Remaining Stock Acquisition Rights”) (the effective
date of absorption-type merger for an absorption-type merger, that of an incorporation-type merger for an incorporationtype merger, that of an absorption-type of company split for an absorption-type company split, that of an incorporationtype of company split for an incorporation-type company split, that of a share exchange for a share exchange, and the dateof establishment of a newly established parent company of a wholly owned subsidiary by transfer of shares for a sharetransfer) in respective cases. However, it is conditional upon stipulating in the absorption-type merger agreement,
incorporation-type merger agreement, absorption-type company split agreement, incorporation-type company split plan,share exchange agreement or share transfer plan that stock acquisition rights of target companies of reorganization shallbe issued in accordance with the following conditions.
(1) Number of stock acquisition rights for target company of reorganization to be issued
The same number as that of the Remaining Stock Acquisition Rights held by the holder of share options shall be
issued, respectively.
(2) Class of stock of target company of reorganization underlying stock acquisition rights
Common stock of target company of reorganization(3) Number of shares of target company of reorganization underlying stock acquisition rights
To be decided pursuant to 1. above, taking into account conditions for the acts of reorganization, and others(4) Value of property to be contributed upon exercise of the stock acquisition rights(i)
The value of property to be contributed upon exercise of the stock acquisition rights shall be the amountobtained by multiplying the amount of payment after reorganization stipulated in (ii) below by the number ofshares of the target company of reorganization underlying stock acquisition rights to be decided in accordancewith (3) above.
(ii) The amount of payment after reorganization shall be one yen per share of the target company of reorganizationthat can be issued by exercising the stock acquisition rights granted.
(5) Period for exercise of stock acquisition rights
It shall be from the start date of the period for exercising stock acquisition rights or the effective date for the acts ofreorganization, whichever is later, to the expiration date of the period for exercising stock acquisition rights.
27

(6)

(7)
(8)

Matters regarding paid-in capital and capital reserve that increase when issuing shares by exercising stock acquisitionrightsTo be decided pursuant to 2. above.
Restriction on acquisition of stock acquisition rights by transfer
Acquisition of stock acquisition rights by transfer needs approval of the target company of reorganization.
Conditions for exercise of the stock acquisition rights
To be decided pursuant to 3. above.

28

Date of resolution

Board of Directors meeting held on February 10, 2022

Grantee categories and count (people)

Employee: 182

Number of stock acquisition rights(Note)

631

Class, description and number of shares underlying stockacquisition rights (Shares)(Note)
Payment of money at the exercise of stock acquisitionrights (Yen)(Note)

Common stock: 63,100 (Note 1)
1

Exercise period of stock acquisition rights(Note)(February 11, 2025 to February 10, 2028)

Issue price and the amount to be included in capital whenissuing shares by the exercise of stock acquisition rights(Yen)(Note)

Issue price: 1
Amount to be included in capital: 1 (Note 2)

Conditions for exercise of the stock acquisition rights(Note)(Note 3)

Transfer of stock acquisition rights(Note)

Approval of the Board of Directors of the Company shallbe required to obtain stock acquisition rights by transfer.

Issuance of stock acquisition rights due to the act of(Note 4)
reorganization(Note)(Note) The description is as of the end of the fiscal year under review (December 31, 2022). As the details that should be stated as ofthe end of the month prior to the submission day have not changed from the details as of the end of the fiscal year underreview, the description of details as of the end of the month prior to the submission day has been omitted.
(Notes) 1.

2.

3.

4.

When conducting a stock split, allotment of shares without contribution, or stock consolidation, the number of shares
granted shall be adjusted using the following formula, with any fraction less than one share as a result of the adjustment
rounded down.
Number of shares granted after adjustment = Number of shares granted before adjustment × Ratio of stock split, allotmentof shares without contribution, or stock consolidation.
The number of shares granted after adjustment shall be applied after the day following the record date (effective date if
the record date is not decided) for the stock split or allotment of shares without contribution in the case of a stock split orallotment of shares without contribution, while after the effective date for a stock consolidation. However, if a stock split
or allotment of shares without contribution is conducted on condition that a proposal to increase paid-in capital or reserves
by decreasing surplus is approved by the Company’s general meeting of shareholders, and the record date for the stock
split or allotment of shares without contribution is a date before the concluding date of such general meeting ofshareholders, the number of shares granted after adjustment shall be applied after the day following the concluding dateof such general meeting of shareholders.
Moreover, in the case of succession of stock acquisition rights due to an absorption-type merger or consolidation-typemerger by the Company, or in the case of succession of stock acquisition rights due to share exchange or share transfer inwhich the Company becomes a wholly-owned subsidiary, or in other cases of requiring adjustment of the number of shares
granted pursuant to these cases, the Company may adjust the number of shares granted appropriately within a reasonable
scope.
The amount to be included in capital is as follows.
(1) The amount of paid-in capital to be increased when issuing shares by exercising stock acquisition rights shall be theamount calculated by multiplying the upper limit of increases in paid-in capital, etc., by 0.5 in accordance with
Article 17, Paragraph (1) of the Regulation on Corporate Accounting, with any fraction less than one yen roundedup.
(2) The amount of capital reserve to be increased when issuing shares by exercising stock acquisition rights shall be theupper limit of increases in paid-in capital, etc. stated in (1) above less the amount of paid-in capital to be increased
stipulated in (1) above.
Conditions for exercise of the stock acquisition rights are as follows.
(1) The holder of share options must be either a Director, Audit & Supervisory Board Member, Executive Officer, or
employee of the Company or a subsidiary of the Company even when exercising the rights, and shall have five years
or more of total service when exercising the rights that are held. However, stock acquisition rights are allowed to be
exercised if the person resigns due to reaching a specified retirement age, Company reasons, or industrial illness, orif the person is transferred to a different company, or if exercise is approved by its Board of Directors as having a
legitimate reason.
(2) Stock acquisition rights may not be inherited if the holder of share options has died.
Treatment at the time of reorganization is as follows.
When the Company conducts a merger (limited to cases where the Company ceases to exist due to merger), absorptiontype company split (limited to cases where the Company becomes a divesting entity to a successor entity by divesture),
incorporation-type company split, share exchange (limited to cases where the Company becomes a wholly-owned
subsidiary), or share transfer (collectively, the “acts of reorganization”), stock acquisition rights of stock companies listed
in Article 236, Paragraph (1), Item (viii) from (a) to (e) of the Companies Act (hereinafter, “target company of29

reorganization”), shall be issued to the holders of share options who hold remaining stock acquisition rights immediately
before the effective date of acts of reorganization (hereinafter, the “Remaining Stock Acquisition Rights”) (the effective
date of absorption-type merger for an absorption-type merger, that of an incorporation-type merger for an incorporationtype merger, that of an absorption-type of company split for an absorption-type company split, that of an incorporationtype of company split for an incorporation-type company split, that of a share exchange for a share exchange, and the dateof establishment of a newly established parent company of a wholly owned subsidiary by transfer of shares for a sharetransfer) in respective cases. However, it is conditional upon stipulating in the absorption-type merger agreement,
incorporation-type merger agreement, absorption-type company split agreement, incorporation-type company split plan,share exchange agreement or share transfer plan that stock acquisition rights of target companies of reorganization shallbe issued in accordance with the following conditions.
(1) Number of stock acquisition rights for target company of reorganization to be issued
The same number as that of the Remaining Stock Acquisition Rights held by the holder of share options shall be
issued, respectively.
(2) Class of stock of target company of reorganization underlying stock acquisition rights
Common stock of target company of reorganization(3) Number of shares of target company of reorganization underlying stock acquisition rights
To be decided pursuant to 1. above, taking into account conditions for the acts of reorganization, and others(4) Value of property to be contributed upon exercise of the stock acquisition rights(i)
The value of property to be contributed upon exercise of the stock acquisition rights shall be the amountobtained by multiplying the amount of payment after reorganization stipulated in (ii) below by the number ofshares of the target company of reorganization underlying stock acquisition rights to be decided in accordancewith (3) above.
(ii) The amount of payment after reorganization shall be one yen per share of the target company of reorganizationthat can be issued by exercising the stock acquisition rights granted.
(5) Period for exercise of stock acquisition rights
It shall be from the start date of the period for exercising stock acquisition rights or the effective date for the acts ofreorganization, whichever is later, to the expiration date of the period for exercising stock acquisition rights.
(6) Matters regarding paid-in capital and capital reserve that increase when issuing shares by exercising stock acquisitionrightsTo be decided pursuant to 2. above.
(7) Restriction on acquisition of stock acquisition rights by transfer
Acquisition of stock acquisition rights by transfer needs approval of the target company of reorganization.
(8) Conditions for exercise of the stock acquisition rights
To be decided pursuant to 3. above.

30

Date of resolution

Board of Directors meeting held on February 10, 2022

Grantee categories and count (people)

Employee: 1

Number of stock acquisition rights(Note)

100 [–]Class, description and number of shares underlying stockacquisition rights (Shares)(Note)
Payment of money at the exercise of stock acquisitionrights (Yen)(Note)

Common stock: 10,000 [–] (Note 1)
1

Exercise period of stock acquisition rights(Note)(February 11, 2023 to February 10, 2028)

Issue price and the amount to be included in capital whenissuing shares by the exercise of stock acquisition rights(Yen)(Note)

Issue price: 1
Amount to be included in capital: 1 (Note 2)

Conditions for exercise of the stock acquisition rights(Note)(Note 3)

Transfer of stock acquisition rights(Note)

Approval of the Board of Directors of the Company shallbe required to obtain stock acquisition rights by transfer.

Issuance of stock acquisition rights due to the act of(Note 4)
reorganization(Note)(Note) The description is as of the end of the fiscal year under review (December 31, 2022). For the items that had been changed fromthe end of the fiscal year under review to the end of the previous month (February 28, 2023), their description as of the end of
the previous month to the submission day was included in brackets, while there was no change from the description for otheritems.
(Notes) 1.

2.

3.

4.

When conducting a stock split, allotment of shares without contribution, or stock consolidation, the number of shares
granted shall be adjusted using the following formula, with any fraction less than one share as a result of the adjustment
rounded down.
Number of shares granted after adjustment = Number of shares granted before adjustment × Ratio of stock split, allotmentof shares without contribution, or stock consolidation.
The number of shares granted after adjustment shall be applied after the day following the record date (effective date if
the record date is not decided) for the stock split or allotment of shares without contribution in the case of a stock split orallotment of shares without contribution, while after the effective date for a stock consolidation. However, if a stock split
or allotment of shares without contribution is conducted on condition that a proposal to increase paid-in capital or reserves
by decreasing surplus is approved by the Company’s general meeting of shareholders, and the record date for the stock
split or allotment of shares without contribution is a date before the concluding date of such general meeting ofshareholders, the number of shares granted after adjustment shall be applied after the day following the concluding dateof such general meeting of shareholders.
Moreover, in the case of succession of stock acquisition rights due to an absorption-type merger or consolidation-typemerger by the Company, or in the case of succession of stock acquisition rights due to share exchange or share transfer inwhich the Company becomes a wholly-owned subsidiary, or in other cases of requiring adjustment of the number of shares
granted pursuant to these cases, the Company may adjust the number of shares granted appropriately within a reasonable
scope.
The amount to be included in capital is as follows.
(1) The amount of paid-in capital to be increased when issuing shares by exercising stock acquisition rights shall be theamount calculated by multiplying the upper limit of increases in paid-in capital, etc., by 0.5 in accordance with
Article 17, Paragraph (1) of the Regulation on Corporate Accounting, with any fraction less than one yen roundedup.
(2) The amount of capital reserve to be increased when issuing shares by exercising stock acquisition rights shall be theupper limit of increases in paid-in capital, etc. stated in (1) above less the amount of paid-in capital to be increased
stipulated in (1) above.
Conditions for exercise of the stock acquisition rights are as follows.
(1) The holder of share options must be either a Director, Audit & Supervisory Board Member, Executive Officer, or
employee of the Company or a subsidiary of the Company even when exercising the rights. However, stockacquisition rights are allowed to be exercised if the person resigns due to reaching a specified retirement age,Company reasons, or industrial illness, or if the person is transferred to a different company, or if exercise isapproved by its Board of Directors as having a legitimate reason.
(2) Stock acquisition rights may not be inherited if the holder of share options has died.
Treatment at the time of reorganization is as follows.
When the Company conducts a merger (limited to cases where the Company ceases to exist due to merger), absorptiontype company split (limited to cases where the Company becomes a divesting entity to a successor entity by divesture),
incorporation-type company split, share exchange (limited to cases where the Company becomes a wholly-owned
subsidiary), or share transfer (collectively, the “acts of reorganization”), stock acquisition rights of stock companies listed
in Article 236, Paragraph (1), Item (viii) from (a) to (e) of the Companies Act (hereinafter, “target company of31

reorganization”), shall be issued to the holders of share options who hold remaining stock acquisition rights immediately
before the effective date of acts of reorganization (hereinafter, the “Remaining Stock Acquisition Rights”) (the effective
date of absorption-type merger for an absorption-type merger, that of an incorporation-type merger for an incorporationtype merger, that of an absorption-type of company split for an absorption-type company split, that of an incorporationtype of company split for an incorporation-type company split, that of a share exchange for a share exchange, and the dateof establishment of a newly established parent company of a wholly owned subsidiary by transfer of shares for a sharetransfer) in respective cases. However, it is conditional upon stipulating in the absorption-type merger agreement,
incorporation-type merger agreement, absorption-type company split agreement, incorporation-type company split plan,share exchange agreement or share transfer plan that stock acquisition rights of target companies of reorganization shallbe issued in accordance with the following conditions.
(1) Number of stock acquisition rights for target company of reorganization to be issued
The same number as that of the Remaining Stock Acquisition Rights held by the holder of share options shall be
issued, respectively.
(2) Class of stock of target company of reorganization underlying stock acquisition rights
Common stock of target company of reorganization(3) Number of shares of target company of reorganization underlying stock acquisition rights
To be decided pursuant to 1. above, taking into account conditions for the acts of reorganization, and others(4) Value of property to be contributed upon exercise of the stock acquisition rights(i)
The value of property to be contributed upon exercise of the stock acquisition rights shall be the amountobtained by multiplying the amount of payment after reorganization stipulated in (ii) below by the number ofshares of the target company of reorganization underlying stock acquisition rights to be decided in accordancewith (3) above.
(ii) The amount of payment after reorganization shall be one yen per share of the target company of reorganizationthat can be issued by exercising the stock acquisition rights granted.
(5) Period for exercise of stock acquisition rights
It shall be from the start date of the period for exercising stock acquisition rights or the effective date for the acts ofreorganization, whichever is later, to the expiration date of the period for exercising stock acquisition rights.
(6) Matters regarding paid-in capital and capital reserve that increase when issuing shares by exercising stock acquisitionrightsTo be decided pursuant to 2. above.
(7) Restriction on acquisition of stock acquisition rights by transfer
Acquisition of stock acquisition rights by transfer needs approval of the target company of reorganization.
(8) Conditions for exercise of the stock acquisition rights
To be decided pursuant to 3. above.
(ii) Description of the rights plan
Not applicable.
(iii) Other stock acquisition rights
Not applicable.

32

(3) Status of exercise of corporate bonds with share options with an amended exercise priceNot applicable.
(4) Changes in the total number of shares outstanding, paid-in capital and others
Changes in the
Changes in the
Changes in the total
Balance of capital
Balance of paid-in
Total number ofamount of capitalamount of paid-in
number of shares
reserve
capitalshares outstanding
reserve
capitaloutstanding(Thousands of yen)(Thousands of yen)
(Shares)(Thousands of yen)(Thousands of yen)
(Shares)

Date

July 13, 2018

2,850,147

2,853,000–

158,137–

158,137

2,853,000

5,706,000–

158,137–

158,137

71,9005,777,900

5,392

163,530

5,392

163,530

5,777,900

11,555,800–

163,530–

163,530

19,998

11,575,798–

163,530–

163,530(200,000)

11,375,798–

163,530–

163,530

42,60011,418,398

1,597

165,127

1,597

165,127–

11,418,398

13,596

178,723

13,596

178,723January 1, 2022December 31, 2022
(Note 3)50,08011,468,478

26,806

205,530

26,806

205,530

December 31, 2022
(Note 6)–

11,468,478

4,532

210,062

4,532

210,062(Note 1)
October 1, 2019
(Note 2)January 1, 2020December 31, 2020
(Note 3)January 1, 2021
(Note 2)
April 15, 2021
(Note 4)
May 31, 2021
(Note 5)January 1, 2021December 31, 2021
(Note 3)
December 31, 2021
(Note 6)(Notes) 1.
2.
3.
4.
5.
6.
7.

It is an increase due to a share split (1:1,000).
It is an increase due to a share split (1:2).
It is an increase due to the exercise of stock acquisition rights.
It is an increase due to the issuance of new shares as restricted stock awards.
Issue price: ¥1,813 per share
Persons to be allotted: Three Directors (excluding Outside Directors)
It is a decrease due to the retirement of treasury stocks.
It is an increase due to the provision of services for restricted stock awards issued without contribution as remuneration
for Directors.
During the period from January 1, 2023 to February 28, 2023, the total number of shares outstanding increased 13,520
shares, and paid-in capital and capital reserve grew by ¥137 thousand, respectively, due to the exercise of stock acquisitionrights.

(5) Status by owner
As of December 31, 2022
Status of shares (100 shares per unit)
Financial
institutions

Financial
instrumentbusiness
operators

Other
corporations

–

8

26

Number ofshares held
(Unit)–

17,615

Ratio of shares
owned (%)

–

15.37

Category

Central andlocal
governments

Number ofshareholders(Persons)

Foreign corporations, etc.

Individuals andothers

Total

Shares lessthan oneunit(Shares)

Other than
individuals

Individuals

25

52

10

3,622

3,743

–

9,166

329

3,563

38

83,903

114,614

7,078

8.00

0.29

3.11

0.03

73.20

100.00–(Notes) Among 5,821 shares of treasury stock, 58 units are included in “Individuals and others” and 21 shares in “Shares less than one
unit.”
33

(6) Major shareholders

Name

Address

As of December 31, 2022
Ratio of shares
owned to the total
Number of shares
number of shares
heldoutstanding(Shares)(excluding treasury
stock) (%)

Shoichiro Onishi

Suginami-ku, Tokyo

2,169,974

18.93

Masahiro Matsuoka

Minato-ku, Tokyo

2,169,974

18.93

875,300

7.64

805,600

7.03

The Master Trust Bank of Japan, Ltd.
2-11-3 Hamamatsu-cho, Minato-ku, Tokyo(Trust Account)
Custody Bank of Japan, Ltd. (Trust
1-8-12 Harumi, Chuo-ku, Tokyo
Account)
SBI Securities Co., Ltd.

1-6-1 Roppongi, Minato-ku, Tokyo, Japan

622,715

5.43

Masaya Yajima

Minato-ku, Tokyo

614,880

5.36

Tomohiro Murata

Ota-ku, Tokyo

266,880

2.33

Takahiro Yamaguchi

Minato-ku, Tokyo

160,000

1.40

Toshiyuki Mitsuzawa

Nakano-ku, Tokyo

146,000

1.27

Akinori Nishida

Minato-ku, Tokyo

112,200

0.98

7,943,523

69.30

Total

–

(Notes) Among the above number of shares held, the number of shares for trust business is as follows.
The Master Trust Bank of Japan, Ltd. (Trust Account):
875,300
Custody Bank of Japan, Ltd. (Trust Account):
805,60034

(7) Voting rights(i) Number of shares outstanding
As of December 31, 2022
Number of shares(Shares)Category

Number of voting rights(Units)Description

Stock with no voting rights

–

–

–

Shares with restricted voting rights (treasury
stock, etc.)

–

–

–

Shares with restricted voting rights (others)

–

–

–

5,800

–

–

Shares with full voting rights (treasury stock,etc.)

Common stock

Shares with full voting rights (others)

Common stock 11,455,600

Shares less than one unit

Common stock

Total number of shares outstanding

It is stock without any
restriction on its rights asshareholders, and is standard
stock of the Company. There
are 100 shares per unit.

114,556

7,078

–

–

11,468,478

–

–

–

Voting rights of all shareholders

114,556–(Note) In the section of “Number of shares” for “Shares less than one unit” there are 21 shares of treasury stock.
(ii) Treasury stock
As of December 31, 2022

Name of owner

Address of owner

Number of shares
owned under own
name (Shares)

Number of shares
owned underanother person’sname (Shares)

Total of shares
owned (Shares)

Ratio of shares owned
to the total number ofshares outstanding (%)

5,800

–

5,800

0.05

5,800

–

5,800

0.05

(Shares held by oneself)
3-2-1 Roppongi, MinatoFrontier Management
ku, Tokyo, Japan
Inc.
Total

–

2. Purchase of Treasury StockClass of stock, etc.

Not applicable.

(1) Purchase by resolution of the general meeting of shareholders
Not applicable.
(2) Purchase by resolution of the Board of Directors
Not applicable.
(3) Description of acquisition not by resolution of the general meeting of shareholders or the Board of Directors
Not applicable.

35

(4) Disposal and holding of the acquired treasury stock
Current fiscal year
Category

Number of shares(Shares)

Current period

Total amount of
Total amount of
Number of sharesdisposition
disposition(Shares)
(Yen)
(Yen)

Acquired treasury stock solicited for subscribers

–

–

–

–

Acquired treasury stock disposed of by cancellation

–

–

–

–

–

–

–

–

19,99820,997,900

–

–

5,821

–

5,821

–

Acquired treasury stock transferred for merger, shareexchange, share issuance and company split
Other(Disposal of treasury stock due to restricted stock
awards)Number of treasury stock held

(Notes) The number of treasury stock held during the current period does not include the number of shares for the purchase of sharesless than one unit and the gratis acquisition of shares subject to transfer restriction from March 1, 2023 to the submission dateof the securities report.

3. Dividend Policy
For the profit distribution for the fiscal year under review (FYE December 2022), the Company has decided on a year-end dividendof ¥28 per share, wishing to aggressively return profit in order to meet the expectations of shareholders, with a basic policy of
paying stable dividends on a continual basis, while securing sufficient internal reserves to develop future business and enhance themanagement structure.
Regarding the profit distribution for the next fiscal year (FYE December 2023), considering the fact we believe that to allow theloss related to the establishment of the consolidated subsidiary Frontier Capital Inc. to reduce the dividend resources to be paid to
our shareholders is inconsistent with our basic dividend policy, and considering the fact that in the future, if Frontier Capital Inc.
invests in a company which becomes a consolidated subsidiary of Frontier Capital Inc., it will temporarily increase or decrease theCompany’s consolidated net income for accounting purposes, but will not actually affect the increase or decrease in the Company’s
dividend resources, we will target 40% of consolidated net income exclusive of Frontier Capital Inc., and intend to decide upon thedividend after considering the full-year consolidated business performance, financial position, economic situation and the like of
the Group.
We would like to make effective use of internal reserves to develop businesses in Japan and abroad, and secure excellent humanresources.
For dividends of surplus, we have a basic policy of paying them as an annual year-end dividend. The general meeting of shareholders
decides dividends of surplus. Moreover, it is stipulated in the Articles of Incorporation that the Company may pay an interim
dividend by a resolution of the Board of Directors.
Dividends of surplus for the fiscal year under review are as follows.
Date of resolution

Total cash dividends paid
(Thousands of yen)

Resolution of annual general meeting ofshareholders held on March 24, 2023

320,954

36

Dividend per share
(Yen)
28

4. Corporate Governance(1) Outline of corporate governance(i) Basic policy of corporate governance
The Company recognizes that it is extremely important to promote efficient management through the facilitation of decisionmaking, and at the same time reinforce risk control in management, in order to improve enterprise value on a continual basis.
The Company has adopted the Board of Directors system and the Audit & Supervisory Board system, to monitor management
risks through the Board of Directors and the Audit & Supervisory Board Member audit, and thoroughly implement complianceand strive to strengthen its self-purification capability through audits by the Internal Audit Office.
Through these measures, we will secure the effectiveness of corporate governance to further enhance business administration
organizations in the Group.
(ii) Outline of the corporate governance system and reasons for adopting such system
The Company has adopted the Audit & Supervisory Board Member system for the Board of Directors and the Audit &Supervisory Board to make decisions on important business executions, and conduct supervision and audits. The Board of
Directors consists of six Directors (including two Outside Directors), with the authority to decide business execution of theCompany and supervise the execution of duties by Directors. The Audit & Supervisory Board consists of three Audit &Supervisory Board Members (all of them are Outside Audit & Supervisory Board Members) to monitor corporate governance andits operations, and audit daily activities, including the execution of duties by Directors.
The Board of Directors and the Audit & Supervisory Board hold regular meetings once a month in principle, and extraordinary
ones as necessary.
Moreover, the Company has established the Nomination and Compensation Advisory Committee as a voluntary advisoryorganization for the Board of Directors. The Nomination and Compensation Advisory Committee consists of two Representative
Directors and four independent officers, to deliberate matters concerning the appointment and compensation for Directors andAudit & Supervisory Board Members upon consultation by the Board of Directors, and make recommendations to the Board of
Directors. For decision-making on the appointment and compensation for Directors and Audit & Supervisory Board Members, weare striving to further enhance and strengthen the corporate governance system by securing appropriate opportunities for the
involvement and advice of independent officers to improve the fairness, objectivity and transparency of the decision-making
process at the Board of Directors.
For the business execution system, we have elected two Representative Directors, under whom an Executive Officer system has
been adopted.
While checking each other, the two Representative Directors direct Executive Officers to manage the business execution of theentire company. Moreover, Representative Director Shoichiro Onishi, having served as an attorney, possesses knowledge in thearea of law to demonstrate his expertise especially in the management of the general meeting of shareholders and the Board of
Directors meeting, etc., while Representative Director Masahiro Matsuoka utilizes his experience as an analyst at a securities
company to demonstrate his expertise in such areas as IR.
The Executive Officer system has been introduced to strengthen, streamline and expediate the business execution in management.
Moreover, we have established the Executive Committee and the Management Committee for the Board of Directors to consult
with in advance. The Executive Committee is held monthly in principle, and extraordinarily as necessary, to share information on
the execution of duties and discuss matters related to important business execution, with the attendance of Representative
Directors, full-time Directors, the President and Executive Officer, the Deputy President and Executive Officer, the Senior
Managing Executive Officer, Managing Executive Officers, full-time Audit & Supervisory Board Members, the Head of theInternal Audit Office and other Executive Officers, Heads of Department, and Deputy Heads of Department or General Managers
who are designated by the Representative Director. The Management Meeting is held monthly in principle, and when there is amatter in need of swiftness and that requires confidentiality such as important personnel affairs and business alliances with othercompanies, to have discussions, with the attendance of Representative Directors, full-time Directors, the President and Executive
Officer, the Deputy President and Executive Officer, the Senior Managing Executive Officer, Managing Executive Officers,
person(s) designated by the Chairperson and full-time Audit & Supervisory Board Members.
The members of each meeting are as follows.
(Board of Directors)
Chairperson: Shoichiro Onishi, Representative Director
Member: Masahiro Matsuoka, Representative Director; Tadaaki Komori, Director; Masao Nishihara, Director; Kazuhito Osugi,
Outside Director; Keiko Unotoro, Outside Director; Takeshi Umemoto, Outside Audit & Supervisory Board Member;37

Kazuhiko Shimokobe, Outside Audit & Supervisory Board Member; Nobumichi Hattori, Outside Audit & Supervisory
Board Member
Outside Audit & Supervisory Board Members always attend the Board of Directors meetings and state their opinions asnecessary.
(Audit & Supervisory Board)
Chairperson: Takeshi Umemoto, Outside Audit & Supervisory Board Member
Member: Kazuhiko Shimokobe, Outside Audit & Supervisory Board Member; Nobumichi Hattori, Outside Audit & Supervisory
Board Member(Nomination and Compensation Advisory Committee)
Chairperson: Kazuhito Osugi, Outside Director
Member: Shoichiro Onishi, Representative Director; Masahiro Matsuoka, Representative Director; Keiko Unotoro, Outside
Director; Kazuhiko Shimokobe, Outside Audit & Supervisory Board Member; Nobumichi Hattori, Outside Audit &Supervisory Board Member(Management Committee)
Chairperson: Shoichiro Onishi, Representative Director, Co-President and Executive Officer
Member: Masahiro Matsuoka, Representative Director, Co-President and Executive Officer; Tadaaki Komori, Director, Deputy
President and Executive Officer; Toshiyuki Mitsuzawa, Senior Managing Executive Officer; Sumio Nishizawa,
Managing Executive Officer; Akinori Nishida, Managing Executive Officer; Takeshi Umemoto, Full-time Audit &Supervisory Board Member (Observer)(Executive Committee)
Chairperson: Shoichiro Onishi, Representative Director, Co-President and Executive Officer
Member: Masahiro Matsuoka, Representative Director, Co-President and Executive Officer; Tadaaki Komori, Director, Deputy
President and Executive Officer; Toshiyuki Mitsuzawa, Senior Managing Executive Officer; Sumio Nishizawa,
Managing Executive Officer; Akinori Nishida, Managing Executive Officer; Shinji Hikoe, Executive Officer; Tomohiro
Murata, Executive Officer; Hiroaki Hamada, Executive Officer; Takeshi Umemoto, Full-time Audit & Supervisory
Board Member (Observer); Nobuhiro Yanagida, Head of Internal Audit Office (Observer)

38

<Schematic diagram of the corporate governance structure>
General Meeting of Shareholders
Appointment andDismissal

Appointment and Dismissal

Appointment andDismissal

Consultation

Audit &
Supervisory
Board

Board ofDirectors/Directors

Audit

ReportCollaboration

Direction andsupervision

Collaboration

Accounting
Auditor

Audit

Collaboration

Nomination andCompensation
Advisory Committee

Appointment, dismissal, supervision

Representative
Directors

ReportInternal Audit OfficeConsultation

Management
Committee

Consultation

Executive
Committee

ReportDirection and supervision

Various departments
and subsidiaries(iii) Development of the internal control systems
The Group has determined the basic policy for the internal control systems as follows, in order to realize the management
philosophy of “contributing to the interests of clients,” “contributing to the interests of stakeholders,” and “contributing tosociety.”
A. System to ensure that the execution of duties by Directors and employees conforms to laws and regulations and the Articles
of Incorporation(a) Recognizing that thorough compliance is indispensable for ensuring the survival and sustainable growth of anenterprise, the Company shall strive to make all Directors and all the employees aware of compliance, and provide
compliance training to them.
(b) The Audit & Supervisory Board Members shall conduct audits and the Internal Audit Office shall conduct internal
audits to confirm that the execution of duties by Directors and employees is properly performed without violating laws
and regulations, the Articles of Incorporation, and the internal rules.
(c) Establish a reporting system for violations of laws and regulations by stipulating the compliance rules and the internalreporting rules so that the Company can promptly recognize and deal with such acts.
B. System for storing and managing information related to the execution of duties by Directors(a) Documents (including electromagnetic documents) related to the execution of duties by Directors shall be stored andmanaged in accordance with laws and regulations, the Articles of Incorporation, the documentation management rules,
and other relevant rules.
(b) These documents (including electromagnetic documents) shall be available per request from Directors and Audit &Supervisory Board Members.
C. Frameworks for managing the risks of loss including the relevant internal regulations(a) The Representative Director shall be the Chief Risk Management Officer, and the Company shall establish the risk
management rules and frameworks for risk management across the organizations.
(b) Establish the crisis management rules and the reporting and command structure in an emergency so that the Company
can identify emergencies promptly and minimize losses.

39

D.System to ensure that Directors perform their duties efficiently(a) In principle, the Board of Directors holds a regular meeting once a month and an extraordinary meeting as necessary to
make decisions on important matters in accordance with the rules of the Board of Directors and supervise the executionof duties by Directors.
(b) Matters to be submitted to a Board of Directors meeting shall be subject to discussion at a voluntary meeting of theNomination and Compensation Committee and by the Management Committee or the Executive Committee.
E. System to ensure appropriateness of business operations in the corporate group comprising the Company and its subsidiaries(a) Establish subsidiary management rules to ensure the appropriateness of the business conducted by the corporate group
comprising the Company and its subsidiaries, and manage the subsidiaries in accordance with the rules.
(b) Communicate with the Directors of the subsidiaries on a daily basis to discuss management of the corporate group, andconfirm that the subsidiaries are properly operated in accordance with the Company’s management policies.
F. Matters concerning employees who assist in the duties of Audit & Supervisory Board Members when such Audit &Supervisory Board Members request to have such employees assigned
If Audit & Supervisory Board Members request the assignment of employees who are to assist in Audit & Supervisory
Board Members’ duties, Directors and Audit & Supervisory Board Members shall discuss and decide the assignment.
G.Matters related to independence of employees in F. above from Directors
If putting in place employees set forth in F. above, such employees shall not belong to the business operation and follow the
instructions of the Audit & Supervisory Board Members. The opinions of the Audit & Supervisory Board shall be respected
regarding the transfer of such employees, personnel assessments, and disciplinary actions.
H. Matters on securing the effectiveness of instruction to employees set forth in F. above for Audit & Supervisory Board
Members
If putting in place employees set forth in F. above, the Full-time Audit & Supervisory Board Member should check the statusof duty execution by such employees by having a meeting with them periodically.
I. System for reporting by Directors and employees to Audit & Supervisory Board Members and other systems involving
reporting to Audit & Supervisory Board Members(a) Directors and employees shall make a business report upon request from the Audit & Supervisory Board Members.
(b) Full-time Audit & Supervisory Board Members attend the Board of Directors meetings and other important meetings,
and receive reports on important matters from Directors and employees.
J. The system to ensure that a person who has submitted a report as described in the preceding item is not treateddisadvantageously on account of having reported it
As the internal reporting rules provide that a person who has done whistle-blowing shall not be treated disadvantageously on
account of having done so, operations will be run in conformity to the rules.
K. Matters on the policy to process expenses and liabilities that are incurred due to execution of duties by Audit & Supervisory
Board Members(a) The Audit & Supervisory Board secures a budget required for executing an audit plan it approves.
(b) If being requested by an Audit & Supervisory Board Member to pay an expense for execution of his/her duties, theCompany pays it swiftly unless deeming it evidently unnecessary for the execution.
(c) Control and payment of expenses for execution of duties by Audit & Supervisory Board Members are done by Audit &Supervisory Board Members and employees who assist in their duties.
L. Other systems for ensuring effective auditing by the Audit & Supervisory Board Members(a) The Audit & Supervisory Board shall establish the Audit & Supervisory Board rules and auditing standards forcorporate audits, prepare an audit plan, explain its contents at the Board of Directors meetings, and obtainunderstanding and cooperation regarding the implementation of audits.
(b) Audit & Supervisory Board Members shall exchange opinions with Representative Directors through regular meetings.
(c) Audit & Supervisory Board Members shall witness internal audits conducted by internal auditors, exchange opinionswith internal auditors and coordinate closely with related departments to ensure the effectiveness of audits.

40

M. System to ensure appropriateness of financial reports
Directors and employees shall ensure the appropriateness of financial reports through business execution in compliance withthe “Basic policy for the maintenance, operation and evaluation of internal controls related to financial reporting.”
N. Basic thinking on exclusion of antisocial forces and development status
The Company will confront any antisocial forces sternly and blocks any relationship with them.
In addition, in order to block relationships with antisocial forces, the Company shall establish the compliance rules and otherinternal rules.
(iv) Development of frameworks for risk management
As internal rules for risk management, the Company has established the “risk management rules” and is developing frameworks
for appropriate risk management in order to minimize losses or disadvantages arising from business activities.
Specifically, the Risk Management Committee, which consists of the “Chief Risk Management Officer,” who is decided bymutual election between the Representative Directors and serves as the Chairperson, the other Representative Director as Vice
Chairperson, and an Officer responsible for management, who is the “Risk Management Officer,” the Head of Internal Audit
Office, and other Risk Management Committee Members who are designated by the Chairperson, provide guidance andsupervision to each department of the Company to ensure appropriate risk management.
In normal times, under the guidance of the Risk Management Committee, each department identifies risks on a regular basis,
reports to the Risk Management Committee and receives guidance on measures to address risks; whether there are problems incompliance with laws, regulations and various rules as well as risk management is verified by conducting regular internal audits,and risk management is strengthened by finding fraudulent acts early and correcting them. Moreover, we have established the“crisis management rules” and developed frameworks so that even when there is an emergency that may lead to serious losses or
events causing damage to the Company physically, economically, or reputationally such as natural disasters, accidents or system
failures, the Company shall establish an emergency headquarters with the Representative Director as its head, and theheadquarters, or officers/employees instructed by the headquarters shall take the necessary measures.
(v) Summary of details of limited liability agreement
The Company has stipulated in the Articles of Incorporation that pursuant to the provisions of Article 427, Paragraph (1) of theCompanies Act, the Company may, by resolution of the Board of Directors, exempt the liability of Outside Directors and Outside
Audit & Supervisory Board Members for the acts under Article 423, Paragraph (1) of the Act to the extent permitted by law. Thisaims to establish an environment where Directors (excluding Executive Directors, etc.) and Audit & Supervisory Board Members
can fully demonstrate their abilities and fulfil their expected roles in executing their duties.
The Company has entered into limited liability agreements with Outside Directors Kazuhito Osugi and Keiko Unotoro, as well as
Outside Audit & Supervisory Board Members Takeshi Umemoto, Kazuhiko Shimokobe and Nobumichi Hattori, based on which
their liability for damages shall be the amount stipulated by law.
(vi) Outline of directors and officers liability insurance policy
The Company has entered into a directors and officers liability insurance policy as provided for in Article 430-3, Paragraph (1) of
the Companies Act with an insurance company, thereby covering losses that may arise from a Director or an Audit & Supervisory
Board Member, an insured person, assuming liability incurred in the course of the performance of duties or receiving claims
pertaining to the pursuit of such liability. Directors and Audit & Supervisory Board Members will be included as insured persons
in such policy.
(vii) Fixed number of Directors
The Company has stipulated in the Articles of Incorporation that the fixed number of Directors shall be seven or less.
(viii)
Requirements for resolution on election of Directors
The Company has stipulated in the Articles of Incorporation that a resolution on election of Directors shall be approved by amajority of the voting rights of attending shareholders, with the attendance of shareholders with no less than one-third of voting
rights of shareholders who can exercise voting rights at the general meeting of shareholders, and shall not be approved bycumulative voting.
(ix) Matters that may be resolved by the Board of Directors among those to be resolved by the general meeting of shareholders
In order to flexibly return profit to shareholders by delegating the interim dividend from the general meeting of shareholders to
the Board of Directors, the Company has stipulated in the Articles of Incorporation that by a resolution of the Board of Directors,
41the Company may give dividends of surplus stipulated by Article 454, Paragraph (5) of the Companies Act to shareholders or
registered pledgees listed in the final shareholder register of June 30 every year.
(x) Requirements for special resolution of general meeting of shareholders
In order to operate the general meeting of shareholders smoothly by relaxing the quorum for special resolution at the general
meeting of shareholders, the Company has stipulated in the Articles of Incorporation that resolutions stipulated by Article 309,
Paragraph (2) of the Companies Act shall be approved by no less than two-thirds of voting rights with the attendance ofshareholders who have no less than one-third of voting rights of shareholders who can exercise voting rights.
(xi) Purchase of treasury stock
The Company has stipulated in the Articles of Incorporation that pursuant to Article 165, Paragraph (2) of the Companies Act,
treasury stock may, by resolution of the Board of Directors, be purchased through market transactions, etc. This is to enable theexecution of flexible capital policies in response to changes in the business environment.

42

(2) Officers(i) List of officers
Male: Eight

Female: One

Position

Name(Ratio of women among officers: 11.1%)
Date of birth

Representative Director
Co-President and Executive Shoichiro Onishi September 25, 1963
Officer

Representative Director
Co-President and Executive
Officer

Masahiro
Matsuoka

September 20, 1967

Career summary
Apr. 1992

Joined Okuno & Partners Law Office(currently OKUNO & PARTNERS)

Apr. 1997

PartnerJune 2003

Joined Industrial Revitalization Corporation of
Japan

Nov. 2003

Managing Director

Jan. 2004

Outside Corporate Auditor of Mitsui Mining
Co., Ltd. (currently NIPPON COKE &ENGINEERING. CO., LTD.)

June 2004

Outside Director of Kanebo, Ltd.

Mar. 2005

Outside Director of The Daiei, Inc.

Jan. 2007

Counsel of OKUNO & PARTNERS (current
position)Jan. 2007

Founded the Company, Representative
Director (current position)

Sept. 2012

Representative Director and President ofFrontier Turnaround Inc.

July 2016

Representative Director and Chairman

Nov. 2017

Representative Director of FCD Partners Inc.
(current position)

June 2020

Outside Director of Tokyo Electric Power
Company Holdings, Incorporated (current
position)

Apr. 2022

President, CEO and COO of Frontier Capital
Inc. (current position)

Apr. 1990

Joined Nomura Research Institute, Ltd.

July 1994

Joined Barclays Securities Japan Co., Ltd.
(currently Barclays Securities Japan Limited)

Sept. 1997

Joined SBC Warburg Securities Japan(currently UBS Securities Japan Co., Ltd.)

Sept. 1999

General Manager of Equity Research
Department and Managing Director

July 2003

Joined Industrial Revitalization Corporation ofJapan

Feb. 2004

Managing Director

June 2004

Outside Director of Kanebo, Ltd.

Mar. 2005

Outside Director of The Daiei, Inc.

Jan. 2007

Founded the Company, Representative
Director (current position)

Aug. 2012

Chairman and CEO of Frontier Management(Shanghai) Inc.

Sept. 2015

Chairman (current position)

Nov. 2017

Representative Director of FCD Partners Inc.
(current position)

July 2018

Outside Director of ORENO Corporation

June 2020

Outside Director of RIZAP GROUP, Inc.
(current position)

Nov. 2020

Representative Director and Chairman of
ORENO Corporation (current position)

Jan. 2022

Director of Celebrain Corporation (current
position)

Apr. 2022

Representative Director of Frontier Capital
Inc. (current position)

43

Term ofofficeNumber ofshares held
(Shares)(Note 3)2,169,974(Note 3)2,169,974

Position

Director
Deputy President andExecutive Officer

Director

Name

Tadaaki Komori

Masao Nishihara

Date of birth

March 2, 1962

Career summary

Term ofofficeNumber ofshares held
(Shares)(Note 3)

11,122–

Apr. 1985

Joined The Sumitomo Bank, Ltd. (currently
Sumitomo Mitsui Banking Corporation)

Apr. 2006

Head of Financial Sponsor Dept., Corporate
Advisory Div.

Apr. 2013

Head of Corporate Sales Dept. at Yokohama

Apr. 2015

Vice President and Head of Corporate Sales
Dept. at Yokohama

Apr. 2016

Vice President and Deputy Head of Corporate
Advisory Div.

July 2017

Executive Officer and Head of Corporate
Business Div. of SMBC Nikko Securities Inc.
(joined the company)

Mar. 2018

Managing Executive Officer and Head ofInvestment Banking Div.

Mar. 2019

Managing Executive Officer and Head of
M&A Advisory Div.

Mar. 2020

Managing Executive Officer, Deputy Head ofWholesale Business, and Head of M&A
Advisory Div.

Apr. 2020

Managing Executive Officer and Deputy
Head of Wholesale Business of Sumitomo
Mitsui Financial Group, Inc. (concurrently
serving at SMBC Nikko Securities Inc.)

Aug. 2021

Deputy President and Executive Officer of
the Company

Jan. 2022

Deputy President and Executive Officer,
Head of Financial Advisory Department,
Head of Financial Advisory Division 1, andHead of Marketing Department

Mar. 2022

Director of the Company (current position)

May 2022

Deputy President and Executive Officer,
Head of M&A Advisory Business, and Headof Marketing Department (current position)

Apr. 1975

Joined the Ministry of FinanceJuly 2004

Director-General of the Inspection Bureau of
the Financial Services Agency

July 2007

Director-General of the Supervision Bureau

July 2008

Secretary-General of the Executive Bureau of
Securities and Exchange SurveillanceCommission(Note 4)

Aug. 2009

Senior Managing Director of Organization for
Promoting Urban Development

June 2013

Vice Chairman and Senior Managing Directorof Regional Banks Association of Japan

Aug. 2022

Advisor of the Company

Mar. 2023

Director of the Company (current position)

May 18, 1951

44

Position

Director

Director

Name

Kazuhito Osugi

Keiko Unotoro

Date of birth

July 31, 1953

October 26, 1954

Career summary
Apr. 1977

Joined Bank of Japan

Nov. 1986

Economist of Bank for International
Settlements (BIS)

June 1999

Branch Manager of Matsumoto Branch of
Bank of JapanMay 2001

Deputy Branch Manager of Osaka Branch

May 2003

RM Manager and Senior Director of Industrial
Revitalization Corporation of Japan

July 2005

Deputy Director-General of Financial System
and Bank Examination Department and Headof Center for Advanced Financial Technology
of Bank of JapanMay 2006

Internal Auditor and Director-General ofInternal Auditors’ Office

Apr. 2007

Director-General of Secretariat of the Policy
Board

Apr. 2009

Visiting Professor of Ochanomizu University

Sept. 2011

Auditor of Bank of Japan

Oct. 2015

Advisor of Security Transport Business
Division of Nippon Express Company,
LimitedApr. 2016

Part-time Advisor of the Company

June 2016

Independent Outside Director of the Board of
Nissha Printing Co., Ltd. (currently Nissha
Co., Ltd.) (current position)

Aug. 2018

Outside Director of the Company (current
position)

June 2021

Outside Director of The Gunma Bank, Ltd.
(current position)

Apr. 1977

Joined Secretariat of Japan Fair Trade
Commission

Apr. 2000

Part-time Lecturer of Graduate School of
Economics of Senshu University (current
position)

June 2004

Chief Hearing Examiner of General
Secretariat of Japan Fair Trade Commission

Jan. 2007

Director General of Trade Practices
Department

June 2008

Senior Deputy Secretary General of
Secretariat

Jan. 2011

Director General of Economic Affairs Bureau

Nov. 2012

Advisor of OH-EBASHI LPC & PARTNERS(current position)

Apr. 2013

Professor of Faculty of Business
Administration of Toyo Gakuen University

June 2013

Outside Director of Olympus Corporation

Mar. 2015

Outside Director of Bridgestone Corporation

June 2019

Outside Director of SAN-AI OIL CO., LTD.
(currently SAN-AI OBBLI CO., LTD.)(current position)

Dec. 2019

Member of Investment and Miscellaneous
Issues Working Group of Council for
Regulatory Reform

Apr. 2020

Specially Appointed Professor of Faculty ofBusiness Administration of Toyo Gakuen
University

Apr. 2020

Outside Director (Audit and Supervisory
Committee Member) of OS Co., Ltd. (current
position)Aug. 2020

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

Jan. 2021

Commissioner of Public Security
Examination Commission (current position)

Mar. 2021

Outside Director of the Company (current
position)

Sept. 2022

Auditor of Tokyo Metropolitan Public
University Corporation (current position)

45

Term ofofficeNumber ofshares held
(Shares)(Note 3)–(Note 3)–

Position

Standing Audit &Supervisory Board Member

Audit & Supervisory Board
MemberName

TakeshiUmemotoKazuhiko
Shimokobe

Date of birthJune 8, 1950

December 12, 1947

Career summary

Term ofofficeNumber ofshares held
(Shares)

40,000Mar. 1973

Joined Ito-Yokado Co., Ltd.

Nov. 1992

Securities General Manager

Jan. 1998

General Manager of Treasury and Securities
Department

Jan. 2004

General Manager of Business Development
Department of IY Bank Co., Ltd. (currently
Seven Bank, Ltd.)

July 2005

General Manager of General Affairs Division (Note 5)

May 2006

General Manager of Planning Division

Oct. 2007

General Manager of Audit & Supervisory
Board Members’ Office

June 2011

Counselor of Audit & Supervisory Board
Members’ OfficeFeb. 2012

Outside Audit & Supervisory Board Memberof the Company (current position)

Apr. 1974

Registered as an attorney

Apr. 1996

Civil Conciliation Commissioner of Tokyo
District Court

May 2000

Corporate reorganization provisional
administrator and trustee for LIFE CO., LTD.

Nov. 2001

Corporate reorganization provisional
administrator and trustee for Taisei Fire andMarine Insurance Co., Ltd. (currently Sompo
Japan Insurance Inc.)

Oct. 2002

Representative Director and President ofTaisei Reinsurance Company, Limited

Apr. 2003

Advisor of Industrial Revitalization
Corporation of Japan

Oct. 2005

Director

Oct. 2005

Industrial Revitalization Committee Member

Apr. 2007

President of Tokyo Bar Association

Apr. 2007

Vice President of Japan Federation of Bar
Associations

Oct. 2007

Outside Director (Audit Committee Member)of JAPAN POST HOLDINGS Co., Ltd.

Apr. 2011

President of Fujiwara Natural History
Foundation

May 2011

Chairman of Management and FinanceExamination Commission for Tokyo Electric
Power

June 2011

Outside Audit & Supervisory Board Memberof CHORI CO., LTD.

July 2011

Outside Audit & Supervisory Board Memberof the Company (current position)

Oct. 2011

Chairperson of Management Committee of
Nuclear Damage Compensation Facilitation
Corporation

June 2012

Director and Chairman of Tokyo ElectricPower Company, Incorporated

Dec. 2014

Outside Auditor of Industrial Growth
Platform, Inc. (current position)

June 2015

Outside Director of CHORI CO., LTD.

June 2016

Outside Director (Audit & Supervisory
Committee Member)June 2017

Outside Director of Japan Display Inc.

46

(Note 5)–

Position

Audit & Supervisory Board
MemberName

Nobumichi
Hattori

Date of birth

December 25, 1957

Career summary
Apr. 1981

Joined Nissan Motor Co., Ltd.

June 1989

Joined Goldman Sachs & Co., New York
headquarters

Nov. 1998

Managing Director
M&A advisory manager in Japan

Oct. 2003

Visiting Associate Professor of School ofInternational Corporate Strategy of
Hitotsubashi University Business School

June 2005

Outside Director of Miraca Holdings Inc.
(currently H.U. Group Holdings, Inc.)

Nov. 2005

External Director of FAST RETAILING CO.,LTD. (current position)

Oct. 2006

Visiting Professor of School of International
Corporate Strategy of Hitotsubashi University
Business School

Apr. 2009

Visiting Professor, Graduate School ofFinance, Accounting and Law of Waseda
University

Mar. 2015

Outside Audit & Supervisory Board Memberof the Company (current position)

June 2015

Outside Director of Hakuhodo DY Holdings
Inc. (current position)

July 2016

Special Visiting Professor of Graduate Schoolof Business Administration of Keio
University

Apr. 2017

Visiting Professor of Graduate School ofBusiness and Finance of Waseda University(current position)

Apr. 2017

Visiting Professor of Graduate School ofBusiness Administration of Keio University(current position)

Total(Notes)

1.
2.
3.
4.
5.
6.

Term ofofficeNumber ofshares held
(Shares)(Note 5)–

4,391,070

Directors Kazuhito Osugi and Keiko Unotoro are Outside Directors.
Audit & Supervisory Board Members Takeshi Umemoto, Kazuhiko Shimokobe, and Nobumichi Hattori are Outside
Audit & Supervisory Board Members.
From the conclusion of the annual general meeting of shareholders held on March 24, 2022 to the conclusion of theannual general meeting of shareholders for the fiscal year ending December 2023.
From the conclusion of the annual general meeting of shareholders held on March 24, 2023 to the conclusion of theannual general meeting of shareholders for the fiscal year ending December 2023.
From the conclusion of the annual general meeting of shareholders held on March 24, 2022 to the conclusion of theannual general meeting of shareholders for the fiscal year ending December 2025.
In preparation for a case where the number of statutory auditors comes to fall below that stipulated by law, the Company
has appointed one Substitute Audit & Supervisory Board Member, as prescribed in Article 329, Paragraph (3) of theCompanies Act.

47

The career summary of the Substitute Audit & Supervisory Board Member is as follows.

Name

Date of birth

Career summary

Apr. 1987

Joined Minato Audit Corporation (current KPMG AZSA LLC)

Aug. 1987

Joined Prudential Securities Incorporated, Tokyo BranchAug. 1992

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

Term

Number ofofshares held

office(Shares)(Note 1)–

CIB)
June 2000

Joined Canadian Imperial Bank of Commerce, Tokyo Branch

July 2006

Joined BUSICOM Co., Ltd.

Sept. 2007

Representative Director of Prominent Consulting Co., Ltd.

May 2010

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

HirokoNoda

July 3, 1960

Apr. 2014

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

Mar. 2019

External Director of MODEC, Inc. (current position)

Mar. 2019

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

Mar. 2021

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

June 2021

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

June 2022

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

Mar. 2023

Substitute Audit & Supervisory Board Member of the Company (current
position)(Notes) 1.
2.

7.

The term of office of the Substitute Audit & Supervisory Board Member is from the time of their appointment
until the end of the term of the Audit & Supervisory Board Member who resigned.
Substitute Audit & Supervisory Board Member Hiroko Noda meets the requirements for Outside Audit &Supervisory Board Members.

The Company has introduced the Executive Officer system to invigorate the Board of Directors meetings by separating
decision-making/supervision and execution. Executive Officers (excluding those who concurrently serve as Director) are
as follows.

Senior Managing Toshiyuki
Executive Officer Mitsuzawa
Managing
Sumio
Executive Officer Nishizawa
Managing
Akinori
Executive Officer Nishida(Responsible for promoting M&A Advisory Business projects and Head of Global
Innovation Support Section)(General Manager of Business Development Department, Branch Manager of Osaka
Branch, Branch Manager of Fukuoka Branch, and Director of Frontier Capital Inc.)(Head of Management Executive Support Department and Manager of Investment
Business Promotion Office)(Deputy Head of Management Consulting Department, General Manager of
Executive Officer Shinji Hikoe Management Innovation Support Division and General Manager of Transaction
Advisory Department)
Tomohiro
Executive Officer(General Manager of Industry Research Department)
Murata(Head of Company Planning and Administration Department and Auditor of Frontier
HiroakiExecutive Officer
Management (Shanghai) Inc., Audit & Supervisory Board Member of Celebrain
HamadaCorporation and Audit & Supervisory Board Member of Frontier Capital Inc.)48

(ii) Outside officers
The Company has elected two Outside Directors and three Outside Audit & Supervisory Board Members. The number of theCompany’s shares held by the Outside Directors and Outside Audit & Supervisory Board Members is as described in the“Number of shares held” column of “(i) List of officers.”
The Company decided that Outside Director Kazuhito Osugi would utilize his in-depth knowledge of economy, finance andbusiness rehabilitation, accumulated in serving in key positions at the Bank of Japan and Industrial Revitalization Corporationof Japan, in strengthening the supervisory function of the Company’s Board of Directors, while Keiko Unotoro would utilize
her in-depth insights into economic laws, competition policy and corporate compliance as well as abundant experience,
accumulated in serving in key positions at the Japan Fair Trade Commission, in strengthening the supervisory function of theCompany’s Board of Directors, and elected them as Outside Directors. These two persons meet the requirements forindependent officers stipulated by the Tokyo Stock Exchange, and the Company has decided that there is no conflict of interest
with general shareholders and designated them as independent officers.
The Company decided that Outside Audit & Supervisory Board Member Takeshi Umemoto would utilize his long experiencein audits in monitoring management and providing appropriate advice as an Outside Audit & Supervisory Board Member,
Kazuhiko Shimokobe would utilize his experience in handling many corporate rehabilitation cases as an attorney in monitoring
management and providing appropriate advice as an Outside Audit & Supervisory Board Member, and Nobumichi Hattori
would utilize his expertise at a U.S. major investment bank and knowledge in the management field as a university professor inmonitoring management and providing appropriate advice as an Outside Audit & Supervisory Board Member. Accordingly, theCompany elected them as Outside Audit & Supervisory Board Members. These three persons meet the requirements forindependent officers stipulated by the Tokyo Stock Exchange, and the Company has decided that there is no conflict of interest
with general shareholders and designated them as independent officers.
As the criteria and policy on independence for the election of Outside Directors, the Company has determined the compositionof the Board of Directors and the policy on the election of candidates for Directors. For the election of candidates for Outside
Directors, based on the policy, the Company nominates as candidates those who are deemed to be able to ensure sufficient
independence for executing their duties as an Outside Director in a position independent from the management of theCompany. For the election of candidates for Outside Audit & Supervisory Board Members, in consideration of their career
histories and relationships with the Company, the Company nominates as candidates those who are deemed to be able to ensuresufficient independence for executing their duties as an Outside Audit & Supervisory Board Member in a position independent
from the management of the Company, while there is no criteria or policy on independence for the election of Outside Audit &Supervisory Board Members.
(iii)Supervision or audit by Outside Directors or Outside Audit & Supervisory Board Members, mutual coordination of internal
audits, audits by Audit & Supervisory Board Members and accounting audits, and relationship with the internal control
department
Outside Directors are supervising the execution of business at the Board of Directors meetings. Outside Audit & Supervisory
Board Members are auditing the supervision of the execution of business as well as the decision-making at the Board of
Directors meetings.
For the audit system of Audit & Supervisory Board Members, the Audit & Supervisory Board of the Company consists of three
Outside Audit & Supervisory Board Members for whom independence is secured. In addition, Audit & Supervisory Board
Members are striving to share information on audit matters in cooperation with internal auditors and Accounting Auditor.
For the internal audit system, the Company has established the Internal Audit Office, with one of the internal auditors
conducting audits on the “effectiveness of internal control and the appropriateness of the management targets” across thecompany. The status of internal audits is reported by the Internal Audit Office at the Board of Directors and Audit &Supervisory Board meetings.

49

(3) Status of audits(i) Status of audits by Audit & Supervisory Board Members
With the basic policy of ensuring sound and sustainable growth of a company and contributing to the establishment of a quality
corporate governance system that can be worthy of the trust placed in the company by society, by appropriately exercising the
granted broad authority and auditing the execution of duties by Directors from an independent position, the Audit &Supervisory Board of the Company has determined the audit plan and is conducting audits primarily on the development andoperation of the internal control system, and the promotion system of compliance and risk management. Each Audit &Supervisory Board Member is conducting audits by attending the Board of Directors meetings and other important meetings,
exchanging opinions with Representative Directors, hearing about the execution of business from Directors, etc. on a regularbasis, inspecting important internal approval documents such as requests for managerial decision, and examining theoperations and assets at the Head Office, as well as for subsidiaries, communicating and exchanging information with Directors
and Audit & Supervisory Board Members of subsidiaries, and receiving reports on business from subsidiaries as necessary.
The Standing Audit & Supervisory Board Member is conducting audits, by attending important meetings including those of theBoard of Directors, the Management Committee, and the Executive Committee, hearing from each department, and inspecting
important documents, etc., while sharing information with Part-time Audit & Supervisory Board Members.
During the fiscal year under review, the Company held 14 meetings of the Audit & Supervisory Board. Attendance by
individual Audit & Supervisory Board Members is as follows.
Name

Number of meetings held

Number of times of attendance

Takeshi Umemoto

14

14

Kazuhiko Shimokobe

14

14

Nobumichi Hattori

1414(ii)Status of internal audits
It is as described in “(iii) Supervision or audit by Outside Directors or Outside Audit & Supervisory Board Members mutual
coordination of internal audits, audits by Audit & Supervisory Board Members and accounting audits, and relationship with theinternal control department” in “(2) Officers.”(iii) Status of accounting audits
A. Name of the audit firm
KPMG AZSA LLC
B. Continuous audit period
Seven years
C. Certified public accountants who executed the operation
Masaki Sugiyama, Designated Limited Liability Partner and Executive Member
Hidenori Kawamura, Designated Limited Liability Partner and Executive Member
D. Composition of assistants for audit operations
Assistants for accounting audit of the Company consist of three certified public accountants and three other people.
E. Policy and reasons for the selection of the audit firm
In the selection of the Accounting Auditor, the Company makes a comprehensive assessment by considering that the quality
management system of the audit firm is appropriate and without problems of independence, and audit plans and fees areappropriate, among others.
F. Evaluation of the audit firm by Audit & Supervisory Board Members and the Audit & Supervisory Board
Audit & Supervisory Board Members and the Audit & Supervisory Board have evaluated that there is no reason fallingunder a cause for dismissal or non-reappointment of Accounting Auditor in terms of its execution of duties, audit system
and independence among others.

50

(iv) Description of audit fees
A. Fees for auditing certified public accountants and others(Thousands of yen)Previous fiscal year
Category

Fees for audit
certification services

Fees for non-audit
services

Fees for audit
certification services

Fees for non-audit
services

20,272–28,608

–

–

–

5,000

–

20,272–33,608–

Submitter company
Consolidated
subsidiary
Total(Notes) 1.
2.

Current fiscal year

During the previous fiscal year, the Company paid additional fees of ¥770 thousand for audit in the fiscal year before theprevious one to Accounting Auditor KPMG AZSA LLC.
During the current fiscal year, the Company paid additional fees of ¥5,964 thousand for the audit in the previous fiscal
year to Accounting Auditor KPMG AZSA LLC.

B. Fees for organizations belonging to the same network of auditing certified public accountants (excluding A.)(Previous fiscal year)
Not applicable.
(Current fiscal year)
Not applicable.
C. Description of fees for other important audit certification services(Previous fiscal year)
Not applicable.
(Current fiscal year)
Not applicable.
D. Policy for the decision on audit fees
The Company decides audit fees for auditing certified public accountants and others by considering the business size andcharacteristics of operations of the Company, the audit plan, details of audits, number of staff, auditing hours, etc. for audit
certification services, and by consulting with auditing certified public accountants and others.
E. Reasons for the consent of the Audit & Supervisory Board to fees for Accounting Auditor
Based on the actual audits in the past fiscal years, the Audit & Supervisory Board confirmed and examined as to whether
the Accounting Auditor’s audit plan, audit status and the basis for calculating the estimated compensation were appropriate,
and the result of this was that it decided they were appropriate, and therefore, agreed on the amount.

51

(4) Compensation for officers(i) Matters for the policy on the decision on the amount of compensation for officers and its calculation method
The Company has set a policy to decide on the amount of compensation for officers and its calculation method, and thedescription is as follows. The Board of Directors judged the compensation for individual Directors for the fiscal year underreview to be consistent with the policy since the Board checked that: i) the determined details of the compensation and themethod for determining them were consistent with the determination policy resolved by the Board; and ii) the details were
determined by the Board of Directors within a range of the total compensation amount resolved beforehand by a general
meeting of shareholders in light of voluntary deliberations by the Nomination and Compensation Advisory Committee and its
recommendation.
A. Basic policy
To provide compensation that enables the Company to appoint as Directors the finest persons who practice the corporate
mission and contribute to the achievement of short-term performance targets, achievement of medium- to long-term
performance targets, and continuous enhancement of corporate value. At the Company, we will create a compensation
system that is highly transparent, fair, and reasonable to ensure accountability to our stakeholders.
B. Compensation composition
Compensation for Directors (excluding Outside Directors) is comprised of basic compensation, which is fixedcompensation, and single-fiscal-year performance-based compensation and medium- to long-term performance-based
compensation, which vary depending on performance, while balancing the elements listed in the above basic policy.
Compensation for Outside Directors is comprised of only basic compensation, from the perspective of their role andindependence.
The compensation structure ratio of each performance-based compensation to basic compensation for Directors (excluding
Outside Directors) will be determined in accordance with the category of the officers.
C. Basic compensation
Basic compensation, which is fixed compensation, will be paid monthly to Directors. The amount of basic compensation for
Directors (excluding Outside Directors) will be determined by taking into account the work duties they are in charge of,scope of responsibility, years of service, degree of contribution to short-term and medium- to long-term performance,
degree of contribution to enhancement of corporate value, and the like, as well as taking into consideration the level of othercompanies in the same industry. The amount of basic compensation for Outside Directors will be determined by taking into
consideration the work responsibilities and the level of other companies.
D. Single-fiscal-year performance-based compensation
Single-fiscal-year performance-based compensation (cash bonuses and stock-based compensation A) is linked toconsolidated results for a single fiscal year and the amount of compensation is determined based on the Company’s
performance results and the like for a single year, and the determined amount of compensation will be paid to Directors(excluding Outside Directors; “Eligible Directors”) in the form of cash bonuses and restricted stock (stock-based
compensation A) after the results of each fiscal year are fixed.
The maximum amount of single-fiscal-year performance-based compensation (total amount to be paid to all Eligible
Directors) is the smaller of either one-third of an amount in excess of targeted operating income, or a total amount of 18month basic compensation for the Representative Directors and nine-month basic compensation for Eligible Directors(excluding Representative Directors).
The amount of single-fiscal-year performance-based compensation to be paid to Eligible Directors is determined in light of:i) the degree of contribution to performance in relation to an amount in excess of targeted operating income; and ii) the
maximum amount of compensation for the Eligible Directors, and the like.
The structure ratio of single-fiscal-year performance-based compensation for each Eligible Director is composed of a cash
bonus, representing two-thirds of such compensation, and stock-based compensation A, representing one-third of suchcompensation.
We chose the performance indicator because operating income, representing income from principal business activities, is anevaluation metric that reflects results very directly.
This performance indicator could potentially be changed in the future by a resolution of the Board of Directors.
Shown below are the target for the indicator for single-fiscal-year performance-based compensation and the actual amountfor the fiscal year under review.
(Thousands of yen)
TargetActual amount
800,000

Consolidated operating income

908,131

E. Medium- to long-term performance-based compensation
Medium- to long-term performance-based compensation (stock-based compensation B) is linked to the degree ofachievement of the management target for the medium-term management plan, the degree of enhancement of corporate52

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

30%

20%

30%

At least 20%

30%

Items shown in the medium-term
management plan

10%

Consolidated operating margin
Consolidated ROE
ESG, SDGs

Evaluation ratio¥8,700,000 thousand

F. Compensation governanceCompensation for Directors (basic compensation, single-fiscal-year performance-based compensation and medium- tolong-term performance-based compensation) will be determined by a resolution of the Board of Directors in light ofvoluntary deliberations and reports by the Nomination and Compensation Advisory Committee.
Clawback provisions are set out to the effect that if a certain event such as material accounting fraud, a huge amount ofloss, or the like occurs, all or part of stock-based compensation A and stock-based compensation B that has already been
paid will be returned without any consideration in accordance with each officer’s liability.

The General Meeting of Shareholders held on March 24, 2022 passed a resolution for setting monetary compensation,
comprised of the basic compensation and single-fiscal-year performance-based compensation at ¥400 million or less per year(including ¥25 million or less per year for Outside Directors but excluding employee salaries for Directors concurrently
serving as employees). The number of Directors (including two Outside Directors) at the conclusion of said General Meetingof Shareholders was five.
The Annual General Meeting of Shareholders held on March 25, 2021 passed a resolution for stock-based compensation for theCompany’s Directors excluding Outside Directors, separately from the aforementioned monetary compensation: the total value
and total number of shares of the Company’s common stock to be issued or disposed of as stock-based compensation A at ¥100
million or less per year and 40,000 shares or less per year, respectively; and the total value and total number of shares of theCompany’s common stock to be issued or disposed of as stock-based compensation B at ¥50 million or less per year and20,000 shares or less per year, respectively. The number of Directors (excluding Outside Directors) at the conclusion of said
General Meeting of Shareholders was three.
The total amount of compensation for the Audit & Supervisory Board Members was decided by a resolution at theExtraordinary General Meeting of Shareholders held on August 14, 2018 to be ¥50 million or less per year. The number ofAudit & Supervisory Board Members at the conclusion of said General Meeting of Shareholders was three.

53

(ii) Total amount of compensation, etc. for each officer category, total amount of compensation, etc. by category and the numberof target officers
Officer category

Total amount ofcompensation,
etc.
(Thousands ofyen)

Total amount of compensation, etc. by category(Thousands of yen)
Performance-based of which at left,
Basic
Performance-basedstock
non-monetarycompensationcompensationcompensationcompensation

Number oftarget officers

Directors (excluding
Outside Directors)

196,312

171,500–

24,812

24,8124 personsOutside Officers

45,00045,000–––5 persons(iii) Total amount of consolidated compensation, etc. for each officer
It is not described, as there is no officer whose total amount of consolidated compensation, etc. is ¥100 million or more.
(iv) Most important employee salary for officers concurrently serving as an employee
Not applicable.
(5) Stocks held(i) Criteria and approach to category of investment stocks
Regarding the category of investment stocks which are held for the purpose of pure investment and those for purposes otherthan pure investment, the Company defines pure investment purpose as cases solely aiming to receive profit by changes in thevalue of stocks or dividends of stocks, while purposes other than that as purposes other than pure investment.
(ii) Investment stocks held for purposes other than pure investment purpose
A. Method of verifying the policy for holding and the rationality of holding, as well as the description of verification of theappropriateness of holding individual issues at the meeting of Board of Directors, etc.
Description is omitted, as the Company does not hold listed stocks.
B. Number of issues and amount recorded on non-consolidated balance sheet
Number of issues(Issues)

Total amount recorded on the nonconsolidated balance sheet(Thousands of yen)

Non-listed stocks

1

3,294

Stocks other than non-listed stocks––(Issues whose number of shares increased during the current fiscal year)
Not applicable.
(Issues whose number of shares decreased during the current fiscal year)
Not applicable.
C. Information on the number of specified investment stocks and deemed holding of stocks by issue, amount recorded on the
non-consolidated balance sheet, etc.
Not applicable.
(iii) Investment stocks held for pure investment purposes
Not applicable.

54

V. Accounting
1. Consolidated Financial Statements and Preparation Method(1) The Company’s consolidated financial statements are prepared in accordance with the Regulations on Terms, Forms, andPreparation Method for Consolidated Financial Statements (Ministry of Finance Ordinance No. 28 of 1976).
(2) The Company’s non-consolidated financial statements are prepared in accordance with the Regulations on Terms, Forms, andPreparation Method for Non-consolidated Financial Statements (Ministry of Finance Ordinance No. 59 of 1963; hereinafter
the “Financial Statement Regulations”).
Further, the Company falls under the definition of a special company submitting financial statements, and financial
statements are prepared pursuant to the provisions of Article 127 of the Financial Statement Regulations.

2. Audit Certification
KPMG AZSA LLC audited the Company’s consolidated financial statements and non-consolidated financial statements for the
fiscal year ended December 31, 2022 (from January 1, 2022 to December 31, 2022) in accordance with the provision of Article
193-2, Paragraph (1) of the Financial Instruments and Exchange Act.

3. Particular Efforts to Ensure the Appropriateness of Consolidated Financial Statements
The Company makes particular efforts to ensure the appropriateness of its consolidated financial statements Specifically, todevelop a platform allowing it to properly understand accounting principles and aptly respond to any change to them, theCompany joined the Financial Accounting Standards Foundation, obtaining various pieces of information while having its
personnel participate in training and seminars hosted by organizations having specialized information.

55

1. Consolidated Financial Statements(1) Consolidated Financial Statements(i) Consolidated Balance Sheet(Thousands of yen)Previous fiscal year
(As of December 31, 2021)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable
Notes, accounts receivable and contract assets
Operational investment securities
Other
Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings, net
Tools, furniture and fixtures, net
Total tangible fixed assets
Intangible fixed assets
Software
Goodwill
Customer-related assets
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Investments in affiliates
Investments in capital of subsidiaries andassociates
Lease deposits
Deferred tax assets
Other
Total investments and other assets
Total fixed assets
Deferred assets
Organization expenses
Total deferred assets
Total assets

56

Current fiscal year
(As of December 31, 2022)

1,784,218
1,073,376–
9,837
147,710(16,936)2,998,206

3,199,089–
Note 1) 912,827
23,833
164,580(24,214)
4,276,116

193,854
14,473Note 2) 208,328

282,593
31,122
Note 2) 313,716

11,267––102
11,36910,471
265,130
18,750102
294,454

56,80043,633

3,591
51,707–2,485

212,055
277,356
11,524
601,370821,068

361,403
346,194
1,595
766,978
1,375,149––
3,819,274

7,379
7,379
5,658,644

(Thousands of yen)Previous fiscal year
(As of December 31, 2021)
Liabilities
Current liabilities
Accounts payable
Current portion of long-term debt
Accounts payable-other
Income taxes payable
Provision for bonuses
Provision for directors’ bonuses
Provision for shareholder benefit program
Other
Total current liabilities
Fixed liabilities
Long-term debt
Asset retirement obligations
Total fixed liabilities
Total liabilities
Net assets
Shareholders’ equity
Paid-in capital
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Other accumulated comprehensive income
Foreign currency translation adjustments
Total other accumulated comprehensive income
Stock acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

57

Current fiscal year
(As of December 31, 2022)

45,424–
94,699259,633
553,014–
7,079
323,095
1,282,944

71,030138,388
128,860
288,143764,486
5,050
13,924Note 3) 458,742
1,868,624–
82,26282,262
1,365,207

639,313
134,750
774,0632,642,688

178,723558,745
1,696,822(36,575)
2,397,717

210,062
577,5032,139,619(8,246)2,918,939

9,380
9,380
46,969–2,454,066
3,819,274

8,352
8,352
34,67353,9903,015,956
5,658,644

(ii) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income(Thousands of yen)Previous fiscal year
(January 1, 2021
to December 31, 2021)
Net sales
Cost of sales
Gross income
Selling, general and administrative expenses
Salaries and allowances
Provision for bonuses
Provision for directors’ bonuses
Recruiting expenses
Retirement benefit expenses
Provision for shareholder benefit program
Provision for allowance for doubtful accounts
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Equity in earnings of affiliates
Insurance dividend income
Administrative fees received
Income from subsidies
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expense
Charges for stock compensation
Other
Total non-operating expenses
Ordinary income
Extraordinary losses
Loss on valuation of investment securities
Total extraordinary losses
Income before income taxes
Income taxes
Income taxes-deferred
Total income taxes
Net income
Net income attributable to owners of non-controllinginterests
Net income attributable to owners of parent

58

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

5,741,654
2,247,959
3,493,695

Note) 7,915,655

1,302,744
269,041–
231,835
23,1747,079
1,303
1,157,231
2,992,409
501,285

1,419,541
364,8202,025
469,080
23,2596,845
6,903
1,484,921
3,777,396
908,131

125
6,506
1,125
2,268
686
6,751
239
17,702

158
8,059
1,802
1,502
–
9,158
375
21,057

1,253
2,902
256
4,411
514,576

7,429
–
247
7,676
921,511––514,576
228,988(53,119)
175,868
338,70753,50553,505
868,006
366,689(65,019)
301,670
566,336–

9,614

338,707556,7223,230,126
4,685,528

Consolidated Statements of Comprehensive Income(Thousands of yen)Previous fiscal year
(January 1, 2021
to December 31, 2021)
Net income
Other comprehensive income
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income(Comprehensive income attributable to)Comprehensive income attributable to owners of theparentComprehensive income attributable to non-controllinginterests

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

338,70759

566,336(2,603)(1,027)Note) (2,603)

Note) (1,027)

336,103565,308

336,103555,694–9,614

(iii) Consolidated Statements of Changes in Shareholders’ Equity
Previous fiscal year (January 1, 2021 to December 31, 2021)(Thousands of yen)
Shareholders’ equity
Paid-in capital
Opening balance

Capital surplus

163,530

835,220

1,597

1,597

Retained earnings

Total shareholders’equityTreasury stock

1,496,027(58,163)2,436,614

Change during the period
Issuance of new shares (exercise ofsubscription rights to shares)

3,195

Dividends of surplus(137,912)(137,912)

Net income attributable to owners of parent

338,707

338,707

Purchase of treasury stock
Retirement of treasury stock(291,668)

Restricted stock awards(270,080)(270,080)

291,668–

13,596

13,59627,192

Total changes during the period

15,193(276,474)

200,794

21,588(38,897)

Ending balance

178,723558,745

1,696,822(36,575)

2,397,717

Stock acquisitionrightsTotal net assets

Net changes of items other thanshareholders’ equity (net)Other accumulated comprehensive income
Foreign currencytranslation
adjustments
Opening balance

Total otheraccumulatedcomprehensive
income11,984

11,984–2,448,598

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

of

3,195

Dividends of surplus(137,912)

Net income attributable to owners of parent

338,707

Purchase of treasury stock(270,080)–

Retirement of treasury stock
Restricted stock awards
Net changes of items other than shareholders’equity (net)27,192(2,603)(2,603)

46,96944,365

Total changes during the period(2,603)(2,603)

46,9695,467

Ending balance

9,380

9,380

46,9692,454,066

60

Current fiscal year (January 1, 2022 to December 31, 2022)(Thousands of yen)
Shareholders’ equity
Paid-in capital
Opening balance

Capital surplus

178,723558,745

26,80626,806

Retained earnings
1,696,822

Total shareholders’equityTreasury stock(36,575)

2,397,717

Change during the period
Issuance of new shares (exercise ofsubscription rights to shares)

53,613

Dividends of surplus(113,925)(113,925)

Net income attributable to owners of parent

556,722556,722

Restricted stock awards

4,532(8,048)

Total changes during the period

31,33818,758Ending balance

210,062

577,503

28,32924,812442,796

28,329521,222

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

Stock acquisition rightNon-controllinginterests

Total net assets

Net changes of items other thanshareholders’ equity (net)Other accumulated comprehensive income
Foreign currencytranslation
adjustments
Opening balance

Total otheraccumulatedcomprehensive
income

9,380

9,380

46,969–2,454,066

Change during the period
Issuance of new shares (exercise ofsubscription rights to shares)

53,613

Dividends of surplus(113,925)

Net income attributable to owners of parent

556,722

Restricted stock awards

24,812

Net changes of items other thanshareholders’ equity (net)(1,027)(1,027)(12,295)

53,99040,666

Total changes during the period(1,027)(1,027)(12,295)

53,990561,889

Ending balance

8,352

8,352

34,67353,9903,015,956

61

(iv) Consolidated Statements of Cash Flows(Thousands of yen)
Current fiscal year
(January 1, 2022
to December 31, 2022)

Previous fiscal year
(January 1, 2021
to December 31, 2021)
Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Amortization of deferred assets
Amortization of goodwill
Amortization of customer-related assets
Equity in losses (earnings) of investments
Charges for stock compensation
Loss (gain) on valuation of investment securities (−:profit)Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors’ bonuses
Increase (decrease) in provision for shareholder benefit
programIncrease (decrease) in allowance for doubtful accounts
Interest income
Interest expense
Decrease (increase) in notes and accounts receivabletrade
Decrease (increase) in operational investment
securities
Increase (decrease) in notes and accounts payabletrade
Increase (decrease) in accounts payable-other
Other
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Purchases of tangible fixed assets
Purchase of intangible assets
Additional investments in newly consolidated entities
Disbursement for investments in capital of subsidiaries
and associates
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee
deposits
Purchase of deferred charges
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Proceeds from long-term debt
Repayments of long-term debt
Purchase of treasury stock
Dividends paid
Dividends paid to non-controlling interests
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

62

514,576
36,478–––(6,506)102,189

868,006
47,495
1,302
29,4586,250(8,059)88,167–53,50547,277(1,000)211,471
5,050

7,079

6,845

1,303
(125)
1,253

6,952
(158)
7,429

(109,713)

215,932(8,473)(13,995)(14,741)

11,792(51,600)
4,685
522,681125(1,253)(204,740)
316,813

22,16042,0181,601,625
158(8,433)(343,093)
1,250,257(25,876)(4,800)–(87,142)(3,133)Note 2) (238,932)–(2,500)(847)(148,174)

–

1,652

–
(31,524)(8,681)(486,911)––(270,080)(137,880)–
3,195(404,765)

860,000(90,284)–(113,750)(11,100)
1,669
646,534

4,593

4,991

(114,882)
1,899,100
Note 1) 1,784,218

1,414,871
1,784,218
Note 1) 3,199,089

Notes to Consolidated Financial Statements(Significant Matters Forming the Basis for Preparation of Consolidated Financial Statements)
1. Matters regarding the scope of consolidation
All subsidiaries of the Company are consolidated.
Number of consolidated subsidiaries 3
Names of consolidated subsidiaries
Frontier Management (Shanghai) Inc.
Celebrain Corporation
Frontier Capital Inc.
Of the above, because the shares of Celebrain Corporation were acquired on January 14, 2022, and Frontier Capital Inc. wasnewly established on April 1, 2022, they are included in the scope of consolidation from the current fiscal year.
2. Matters regarding application of the equity method(1) Number of equity method affiliates 2
Names of equity method affiliates
FCD Partners Inc.
Frontier Nanto Investment Godo Kaisha
Of the above, because Frontier Nanto Investment Godo Kaisha was newly established on May 16, 2022, it is included in thescope of equity method from the current fiscal year.
(2) For an equity method affiliate whose balance sheet date differs from the consolidated balance sheet date of Company, theformer’s fiscal year balance sheets are used.
3. Matters regarding consolidated subsidiary fiscal years
Balance sheet dates of all consolidated subsidiaries of the Company are identical to its consolidated balance sheet date.
4. Matters regarding accounting policies(1) Valuation standards and valuation methods for significant assets
Securities
Available-for-sale securities (including operational investment securities)
Securities without market value, etc.
Available-for-sale securities without market value are stated at cost using the moving-average method.
(2) Depreciation and amortization methods for significant depreciable and amortizable assets
A. Tangible fixed assets
Tangible fixed assets of the Company and its domestic consolidated subsidiaries are depreciated using the declining-balancemethod and those of its overseas consolidated subsidiaries are depreciated using the straight-line method.
However, buildings (fixtures) acquired on or after April 1, 2016 are depreciated using the straight-line method.
Useful lives are mainly as follows:
Buildings (fixtures)
2 to 15 years
Tools, furniture and fixtures 2 to 20 years
B. Intangible fixed assets
Intangible fixed assets are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method in accordance with an internally usable period (5 years).
Also, customer-related assets are amortized using the straight-line method in accordance with their effective period (4 years).
(3) Treatment method for deferred assets
Organization expenses: amortized using the straight-line method over a five-year period.
(4) Standard for recording allowances or provisions of importanceA. Allowance for doubtful accounts
To prepare for a potential loss from a default on receivables, an estimated uncollectible amount is recorded for ordinary
receivables in an amount determined by our historical loss experience ratio and for specific receivables feared to be defaulted
on in an amount determined by considering the recoverability on a case-by-case basis.
B. Provision for bonuses
To prepare for paying bonuses to employees, we recorded a provision for bonuses in an amount required to be paid in thecurrent fiscal year as part of an amount likely to be paid as bonuses for them.
63

C. Provision for directors’ bonuses
To prepare for paying bonuses to directors, we recorded a provision for bonuses in an amount required to be paid in the current
fiscal year as part of an amount likely to be paid as bonuses for them.
D. Provision for shareholder benefit program
To prepare for spending of shareholder benefit points granted to shareholders under the shareholder benefit program, we at theend of the current fiscal year recorded a provision for shareholder benefit program in an amount likely to be incurredcorrespondingly in the future.
(5) Accounting treatment for retirement benefits
The Company has adopted a defined contribution pension program. Expenses related to retirement benefits under the defined
contribution pension program are recognized at the time of contribution.
(6) Standard for recording revenues and expenses of importance
Details of the main performance obligations and the usual timing of satisfying the performance obligations (ordinary timing ofrecognizing revenue) in the main businesses of the Company and its consolidated subsidiaries related to revenue from contracts
with customers are as follows.
• Recognition of revenue related to Consulting and Advisory (excluding success fees)
In the Consulting and Advisory Business, services such as management consulting, M&A advisory, and revitalization support
are provided based on outsourcing contracts concluded with customers, and these services which are agreed to with customers
are the performance obligations. Since these performance obligations are generally satisfied during the outsourcing period
stipulated in the outsourcing contract, revenue is recognized over the outsourcing period.
• Success fees
Success fees, which are generated mainly in M&A advisory services, are recognized when the conditions for accruing successfees defined in an outsourcing contract are met, such as when a contract is concluded between the client company and its
counterparty.
• Revenue recognition related to agency transactions
Regarding usage fees, etc. for services related to the talent management system provided by our consolidated subsidiary, therole of the consolidated subsidiary is determined as corresponding to that of an agent, and revenue is recognized as the net
amount after relevant costs are deducted from the total consideration received from the customer.
(7) Goodwill amortization method and amortization term for goodwill
Goodwill is amortized using the straight-line method over a ten-year period.
(8) Standard for translation of amounts of important foreign-currency-denominated assets or liabilities into Japanese yen
Amounts of foreign-currency-denominated receivables and payables are translated into Japanese yen at the spot exchange rate on
the balance sheet date and any translation difference is recorded as a profit or loss. Amounts of assets and liabilities of overseas
consolidated subsidiaries are translated into Japanese yen at the spot exchange rate on the balance sheet date. Their revenues andexpenses are translated into Japanese yen at the average foreign exchange rate during each term and any translation difference isrecorded as foreign currency translation adjustments under net assets.
(9) Scope of funds in a consolidated statement of cash flows
Funds in a consolidated statement of cash flows consist of cash on hand, deposits able to be withdrawn any time, and short-term
investments that are able to be cashed easily and are exposed to only a minuscule value fluctuation risk and mature within threemonths from the date of acquisition.

64

(Changes to Accounting Policies)(Application of accounting standard for revenue recognition, etc.)
The “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020, Accounting Standards Board ofJapan; hereinafter the “Revenue Recognition Accounting Standard”), etc. have been applied from the beginning of the current
fiscal year, and revenue is recognized at the amount expected to be received in exchange for promised goods or services whencontrol of the relevant goods or services is transferred to the customer.
The application of the Revenue Recognition Accounting Standard, etc. is in accordance with the transitional treatment prescribedin the proviso to Paragraph 84 of the Revenue Recognition Accounting Standard, and the cumulative effect of applying the new
accounting policy retroactively prior to the beginning of the current fiscal year is added to or subtracted from the retained earnings
at the beginning of the current fiscal year, and the new accounting policy is applied to the opening balance from the beginning of
the current fiscal year; however, there is no cumulative effect that requires an adjustment to retained earnings at the beginning of
the current fiscal year.
It also does not have an effect on the profit or loss of the current fiscal year.
Due to the adoption of the Revenue Recognition Accounting Standard, etc., “Notes and accounts receivable” which was presented
under “Current assets” in the consolidated balance sheet for the previous fiscal year has been changed to “Notes, accounts
receivable and contract assets” from the current fiscal year. In accordance with the transitional treatment prescribed in Paragraph89-2 of the Revenue Recognition Accounting Standard, no reclassification based on the new presentation method has been madefor the previous fiscal year.
Further, in accordance with the transitional treatment prescribed in Paragraph 89-3 of the Revenue Recognition AccountingStandard, no “Revenue recognition” notes have been presented for the previous fiscal year.
(Application of accounting standard for fair value measurement, etc.)
The “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019, Accounting Standards Board ofJapan), etc. have been applied from the beginning of the current fiscal year, and in accordance with the transitional treatment inParagraph 19 of the Accounting Standard for Fair Value Measurement and Paragraph 44-2 of the “Accounting Standard for
Financial Instruments” (ASBJ Statement No. 10, July 4, 2019, Accounting Standards Board of Japan), we have decided that the
new accounting policies prescribed in the Accounting Standard for Fair Value Measurement, etc. will be applied in the future. This
will not have an effect on the consolidated financial statements.
Further, we have decided to add notes on matters related to the breakdown of the fair value of financial products by level in thenotes for “Financial products.” However, in accordance with the transitional treatment prescribed in Paragraph 7-4 of the“Implementation Guideline for Disclosures about Fair Value of Financial Instruments” (ASBJ Application Standard No. 19, July4, 2019), matters related to the previous fiscal year are not presented in the relevant notes.
(Change in Presentation Method)(Consolidated statement of income)
Because “Recruiting expenses” that were included in “Other” under “Selling, general and administrative expenses” exceeded 10%of the total selling, general and administrative expenses in the previous fiscal year, we have decided to list it separately from thecurrent fiscal year. In order to reflect this change in presentation method, the consolidated financial statements for the previous
fiscal year have been reclassified.
As a result, the ¥1,389,067 thousand shown in “Other” under “Selling, general and administrative expenses” in the consolidated
statement of income for the previous fiscal year has been reclassified as ¥231,835 thousand in “Recruiting expenses” and¥1,157,231 thousand in “Other.”(Additional Information)(Accounting estimate of the impact of spread of COVID-19)
With respect to the status of COVID-19, we make accounting estimates such as for recoverability of deferred tax assets, based on
currently available information, assuming that current conditions will continue for at least FY2023.
As a consequence, we are not aware of any material impact on the valuation of our accounting estimates; however, due to thehighly uncertain impact of the spread of COVID-19, financial condition and results of operations of the Group may be impacted in
the future.

65

(Consolidated Balance Sheet)
Note 1) Among notes, accounts receivable and contract assets, the amount of liabilities arising from contracts with customers ispresented in “Notes (Revenue recognition) of 3. (1) Balance of contract assets and contract liabilities, etc.” of theconsolidated financial statements.
Note 2) Cumulative depreciation of tangible fixed assets(Thousands of yen)Previous fiscal year (As of December 31, 2021)

Current fiscal year (As of December 31, 2022)

99,533

134,531

Note 3) Among other current liabilities, the amount of contract liabilities is presented in “Notes (Revenue recognition) of 3. (1)Balance of contract assets and contract liabilities, etc.” of the consolidated financial statements.
(Consolidated Statement of Income)
Note)
Revenue from contracts with customers
Net sales are not presented as being categorized into revenue from contracts with customers and other revenue. The amountof revenue from contracts with customers is presented in “Notes (Revenue recognition), 1. Disaggregated information onrevenue from contracts with customers” in the consolidated financial statements.
(Consolidated Statements of Comprehensive Income)Note)
Amounts of adjustments and tax effects associated with comprehensive income(Thousands of yen)Previous fiscal year
(January 1, 2021 to December 31, 2021)

Current fiscal year
(January 1, 2022 to December 31, 2022)(2,603)(1,027)(2,603)(1,027)

Foreign currency translation adjustments:
Amounts recorded for the current fiscal
year
Total other comprehensive income

66

(Consolidated Statements of Changes in Shareholders’ Equity)
Previous fiscal year (January 1, 2021 to December 31, 2021)
1. Matters regarding the classes and total numbers of shares outstanding and treasury stock shares
Beginning Number of Increase in number of Decrease in number ofEnding Number ofshares for the current shares during the current shares during the current shares for the current
fiscal year (Shares)
fiscal year (Shares)
fiscal year (Shares)
fiscal year (Shares)
Number of shares outstanding
Common stock (Notes 1., 3.)

5,777,900

5,840,498

200,000

11,418,398

Total

5,777,900

5,840,498

200,000

11,418,398

Common stock (Notes 2., 3.)

31,540194,279

200,000

25,819Total

31,540194,279

200,000

25,819Treasury stock(Notes) 1.
2.
3.

An increase of 5,840,498 shares in the total number of common stock shares outstanding consisted of 5,777,900 sharescaused by a stock split, 19,998 shares by a new share issuance for restricted stock awards, and 42,600 shares by exercise ofstock options.
An increase of 194,279 shares in the number of treasury common stock shares was comprised of 31,540 shares caused bya stock split and 2,739 shares by gratis purchasing of restricted stock shares, and 160,000 shares by acquisition of treasury
stock shares by resolution of the Board of Directors.
A decrease of 200,000 shares in the number of common stock shares and treasury common stock shares was caused byretirement of treasury stock shares.

2. Matters regarding stock acquisition rights and new treasury stock share subscription rights
Number of shares of stock underlying stock acquisition Ending
rights (Shares)
balance forClass of stock
Breakdown of stock acquisition
the current
Increase
Decrease
Category
underlying stock Start of the
End of therightsfiscal year
during the during theacquisition rights current fiscal
current fiscal(Thousands
current fiscal current fiscal
year
year
of yen)year
year
Submittercompany
Stock acquisition right in the
–
–
–
–
–
46,969(Parent
form of a stock option
company)
Total
–
–
–
–
–
46,9693. Matters regarding dividend(1) Dividends paid
(Resolution)

Total cash
dividends paid
Class of stock(Thousands ofyen)

Sources ofdividends

Dividend pershare (Yen)Record date

Effective date

March 25, 2021
Annual general
CommonRetained
137,91224 December 31, 2020
March 26, 2021
meeting ofstock
earnings
shareholders(Note) Although we conducted a 2-for-1 common stock split on January 1, 2021 by resolution of a Board of Directors meeting held on
November 12, 2020, dividend per share shown is that prior to the stock split.
(2) Of dividends whose record dates were in the current fiscal year, dividends whose effective dates will be in the next fiscal
year
Total cash
Sources of
Dividend per
dividends paid
Record date
Effective date
(Resolution)
Class of stock
dividends
share (Yen)(Thousands ofyen)
March 24, 2022
Annual general
CommonRetained
113,925
10 December 31, 2021
March 25, 2022
meeting ofstock
earnings
shareholders

67Current fiscal year (January 1, 2022 to December 31, 2022)
1. Matters regarding the classes and total numbers of shares outstanding and treasury stock shares
Current fiscal year
Beginning number ofshares (Shares)

Current fiscal year
Increase in number ofshares (Shares)

Current fiscal year
Decrease in number ofshares (Shares)

Ending number ofshares for the current
fiscal year (Shares)

Common stock (Note 1)

11,418,398

50,080–11,468,478

Total

11,418,398

50,080–11,468,478

Common stock (Note 2)

25,819–19,998

5,821

Total

25,819–19,998

5,821

Number of shares outstanding

Treasury stock(Notes) 1.
2.

An increase of 50,080 shares in the total number of common stock shares outstanding was caused by exercise of stock
options.
A decrease of 19,998 shares in the number of treasury common stock shares was caused by disposing of treasury stock
shares for restricted stock compensation.

2. Matters regarding stock acquisition rights and new treasury stock share subscription rights
Number of shares of stock underlying stock acquisition
Ending balancerights (Shares)
Class of stock
for the current
Breakdown of stock underlying stock
Increase
Decrease
Category
fiscal year
Start of the
End of theacquisition rights
acquisition
during theduring thecurrent fiscal
current fiscal (Thousands ofrightscurrent fiscal current fiscal
yen)
year
year
year
year
Submitter
Stock acquisition
company
right in the form of
–
–
–
–
–
34,673(Parent
a stock option
company)
Total

–

–

–

–

Total cash
dividends paid
(Thousands ofyen)

Sources ofdividends

Dividend pershare (Yen)

113,925

Retainedearnings

10–

34,673

Record date

Effective date

December 31, 2021

March 25, 2022

3. Matters regarding dividend(1) Dividends paid
(Resolution)

Class of stock

March 24, 2022
Annual general
meeting ofshareholders

Commonstock(2) Of dividends whose record dates were in the current fiscal year, dividends whose effective dates will be in the next fiscal
year(Resolution)
March 24, 2023
Annual general
meeting ofshareholders

Total cash
dividends paid
Class of stock(Thousands ofyen)
Commonstock

320,954

Sources ofdividends

Dividend pershare (Yen)

Retainedearnings

28

68

Record date

Effective date

December 31, 2022

March 27, 2023

(Consolidated Statements of Cash Flows)
Note 1) Relation between cash and cash equivalents at end of period and account amounts shown in consolidated balance sheet(Thousands of yen)Previous fiscal year
(January 1, 2021 to December 31, 2021)

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

Cash and deposits

1,784,218

3,199,089

Cash and cash equivalents

1,784,218

3,199,089

Note 2) Main breakdown of assets and liabilities of the company that became a new consolidated subsidiary through the acquisitionof shares in the current fiscal year
The breakdown of assets and liabilities at the time of the consolidation of Celebrain Corporation, which was newly consolidated
through the acquisition of shares, and the relationship between the acquisition price of shares and the expenditure (net amount)for the acquisition are as follows.
(Thousands of yen)

Current assets
Fixed assets

181,469
39,843

Goodwill
Current liabilities

294,589(97,930)

Fixed liabilities
Non-controlling interests(11,434)(44,375)

Acquisition cost of stock
Cash and cash equivalents

362,161(123,229)

Subtract: Expenditure for theacquisition

238,932

3) Description of non-monetary transactions
Please see “Notes (Asset retirement obligation)” regarding the recording of significant asset retirement obligations.
(Lease transactions)(Lessee)
1. Financial lease transactions
Not applicable.
2. Operating lease transactions
Unearned lease fees for operating lease transactions that are unable to be terminated(Thousands of yen)Previous fiscal year
(As of December 31, 2021)
Within one year
In excess of one year
Total

69

Current fiscal year
(As of December 31, 2022)

224,416

385,524

273,988

238,105

498,404

623,629(Financial products)
1. Matters regarding financial products(1) Policy on handling financial products
We manage funds solely through deposits that are short in period and highly safe as we have a policy to refrain from entering
into speculative transactions. We procure funds required in light of our business plans (mainly through loans from banks).
(2) Descriptions of financial products and their risks
Notes and accounts receivable, operating receivables, are exposed to customer credit risk.
Most of accounts payable, accounts payable-other, operating payables, are due within one month.
Lease deposits, being associated mainly with the lease agreement for our head office space, are exposed to lessor credit risk.
Long-term debt is mainly used for capital payments for the establishment of subsidiaries and the procurement of funding forthe acquisition of shares of subsidiaries, and is exposed to liquidity risk and interest rate fluctuation risk.
(3) Framework for risk management for financial products(i) Management of credit risk
We curb credit risk associated with operating receivables by managing due dates and balances for individual business partners.
(ii) Market risks (management of fluctuation risk in exchange rates, interest rates, etc.)
Fluctuation risk in interest rates for long-term debt is managed by monitoring fluctuations in interest rates at all times.
(iii) Management of liquidity risk from obtaining financing
Our unit responsible manages liquidity risk by keeping liquidity on hand in consideration of cash flow control.
(4) Supplementary description of matters relating to fair value of financial products
In computing the fair value of financial products, variable factors are factored in, meaning that they could potentially vary if
different premises are used.
2. Matters regarding fair value of financial products
Shown below are amounts recorded on the consolidated balance sheet, fair value, and their differences.
Previous fiscal year (As of December 31, 2021)(Thousands of yen)Amount recorded on the
consolidated balance sheet

Fair value

Difference

Lease deposits

212,055

210,637(1,418)

Total assets

212,055

210,637(1,418)Current fiscal year (As of December 31, 2022)(Thousands of yen)Amount recorded on the
consolidated balance sheet

Fair value

Difference

Lease deposits

361,403

352,080(9,323)

Total assets

361,403

352,080(9,323)Long-term debt (Note)

777,701

777,700(0)

Total liabilities

777,701

777,700(0)(Note) The amount recorded on the consolidated balance sheet and fair value of long-term debt includes the current portion of longterm debt (amount recorded on the consolidated balance sheet: ¥138,388 thousand).

70

(Notes) 1. Cash is omitted from the notes, and regarding deposits, notes, accounts receivable and contract assets, accounts payable,accounts payable-other, and income taxes payable, the fair value should be close to the book value because they are settled
in a short period of time, and therefore their presentation is omitted.
2. Securities without market value, etc. are not included in the above table. The amount recorded on the consolidated balance
sheet for the relevant financial products are as follows.
(Thousands of yen)
Category

Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

Operational investment securities

9,837

23,833

Investment securities

56,8003,591

Investments in affiliates

43,63351,707–2,485

Investments in capital of subsidiaries andassociates
3.

Amounts of planned redemptions of receivables after balance sheet datePrevious fiscal year (As of December 31, 2021)
In excess of fiveIn excess of one year
Within one year
years and within ten In excess of ten years
and within five years(Thousands of yen)
years
(Thousands of yen)(Thousands of yen)(Thousands of yen)

Cash and deposits

1,784,218–––

Notes and accounts receivable

1,073,376

–

–

–

5,048

3,406

203,028573

2,862,642

3,406

203,028

573

Lease deposits
Total

Current fiscal year (As of December 31, 2022)
In excess of fiveIn excess of one year
Within one year
years and within ten In excess of ten years
and within five years(Thousands of yen)
years
(Thousands of yen)(Thousands of yen)(Thousands of yen)
Cash and deposits

3,199,089–––

Notes, accounts receivable and contract
assets912,827–––

Lease deposits

10,85539,991

309,984573

4,122,771

39,991

309,984

573

Total
4.

Amounts of planned repayments of interest-bearing debt after balance sheet datePrevious fiscal year (As of December 31, 2021)
Not applicable.
Current fiscal year (As of December 31, 2022)
In excess of fiveIn excess of one year
In excess of ten years
Within one year
years
and within five years(Thousands of yen)
and within ten years (Thousands of yen)(Thousands of yen)(Thousands of yen)

Long-term debt
Total

138,388495,313

144,000–

138,388495,313

144,000–

71

3. Matters related to the breakdown of the fair value of financial products
The fair value of financial products is classified into the following three levels according to the observability and significanceof the inputs used in the calculation of the fair value.
Level 1 fair value: Fair value calculated from the (unadjusted) market price in active markets for identical assets or liabilities
Level 2 fair value: Fair value calculated using directly or indirectly observable inputs other than Level 1 inputs
Level 3 fair value: Fair value calculated using significant unobservable inputs
If multiple inputs that have a significant impact on the calculation of fair value are used, it is categorized as the lowest level ofpriority in the calculation of fair value from among the levels to which each input belongs.
(1) Financial products recorded at fair value in the consolidated balance sheet
Not applicable.
(2) Financial products other than the financial products recorded at fair value in the consolidated balance sheet
Current fiscal year (As of December 31, 2022)
Fair value (Thousands of yen)
Category
Level 1
Level 2
Level 3
Lease deposits
Total assets
Long-term debt

Total

–

352,080–

352,080–

352,080–

352,080–

777,700–

777,700

Total liabilities–
777,700–
777,700(Note) Explanation of the valuation method and inputs used in the calculation of the fair value
Lease deposits
The fair value of lease deposits is calculated based on the present value which is obtained by discounting the future cash flowby an interest rate that is based on an appropriate index such as government bond yields corresponding to the remaining period,and classified as Level 2.
Long-term debt
For long-term debt with variable interest rates, because the fair value approximates the book value, since they reflect market
interest rates over the short term and the credit conditions have not changed significantly since execution, so they are listed
according to the relevant book value.
The fair value of long-term debt with fixed interest rates is calculated using the discounted present value method based on
the total amount of principal and interest and an interest rate that takes into account the remaining period of the debt andcredit risk, and is classified as Level 2 fair value.

72

(Securities)
1. Available-for-sale securities
Previous fiscal year (As of December 31, 2021)
The fair values of operational investment securities (¥9,837 thousand recorded on the consolidated balance sheet), investment
securities (¥56,800 thousand recorded likewise), and investments in affiliates (¥43,633 thousand recorded likewise) are notdisclosed as they are deemed to be highly difficult to know in the absence of market prices.
Current fiscal year (As of December 31, 2022)
The fair values of operational investment securities (¥23,833 thousand recorded on the consolidated balance sheet), investment
securities (¥3,591 thousand recorded likewise), investments in affiliates (¥51,707 thousand recorded likewise) and investments incapital of subsidiaries and associates (¥2,485 thousand recorded likewise) are not disclosed as they are securities without market
value, etc.
2. Available-for-sale securities soldNot applicable.
3. Securities subject to recording of impairment loss
In the current fiscal year, ¥53,505 thousand of investment securities (¥53,505 thousand of available-for-sale securities) wererecorded as impairment losses.
Regarding impairment losses on securities without market value, etc., if the substantial value declines by 50% or more comparedto the acquisition cost due to the deterioration of the issuing company’s financial condition, impairment losses are recorded withconsideration given to the possibility of recovery.
(Retirement benefits)
Previous fiscal year (January 1, 2021 to December 31, 2021)
1. Outline of a retirement benefit program adopted
The Company adopted a selective defined contribution pension program in order to pay retirement benefits to employees.
2.

Defined contribution pension program
The Company is required to contribute ¥42,552 thousand to its defined contribution pension program.

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

Outline of a retirement benefit program adopted
The Company adopted a selective defined contribution pension program in order to pay retirement benefits to employees.

2.

Defined contribution pension program
The Company is required to contribute ¥46,663 thousand to its defined contribution pension program.

73

(Stock option, etc.)(Stock option(s))
1. Expense amount to be recorded for stock options and the account(Thousands of yen)Previous fiscal year
(January 1, 2021 to December 31, 2021)

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

Cost of sales

26,024

22,269Selling, general and administrative expenses

20,945

17,3792. Description and number of stock options and their change(1) Description of stock option
11th Stock Acquisition
Rights12th Stock Acquisition
Rights13th Stock Acquisition
Rights14th Stock Acquisition
RightsCompany

Submitter company

Submitter company

Submitter company

Submitter company

Date of resolution

Annual general meetingof shareholders held on
Board of Directors
March 29, 2018
meeting held on March
Board of Directors
25, 2021
meeting held on May
15, 2018

Board of Directors
meeting held on
February 10, 2022

Board of Directors
meeting held on
February 10, 2022

Grantee categories andcount

Director: 3 persons
Employee: 140 persons

Executive Officer: 5
persons
Employee: 10 persons

Employee: 182 persons

Employee: 1 person

Number of stock options by Common stock
stock class (Note)
335,200

Common stock
34,900Common stock
63,100Common stock
10,000Date of granting

June 15, 2018

April 13, 2021

March 31, 2022

March 31, 2022

Requirements fordetermining rights

The requirements fordetermining rights are
as shown in “(2) Stockacquisition rights” in“1. Shares” in “IV.
Status of Submitting
Company.”

Same as on the left

Same as on the left

Same as on the left

Applicable term of service

From June 15, 2018 to
May 15, 2020

From March 15, 2021
to March 25, 2022

From February 11, 2022 From February 11, 2022
to February 10, 2025
to February 10, 2023

Period for rights exercise

From May 16, 2020 to
May 15, 2028

From March 26, 2022
to March 25, 2026

From February 11, 2025 From February 11, 2023
to February 10, 2028
to February 10, 2028

(Note) Stated by translating into the number of shares. Stated by translating into the number of shares after a stock split conducted on
July 13, 2018 (1,000-for-1 stock split), and one conducted on October 1, 2019 (2-for-1 stock split), and one conducted on
January 1, 2021 (2-for-1 stock split).
(2) Number of stock options and their changeStated by translating the number of stock options in existence for the current fiscal year into the number of shares.

74

(i) Number of stock options

Company

Date of resolution

Prior to determining rights(Shares)
End of previous fiscal
year
Granting
Lapse
Determination of rights
Balance of undeterminedrightsAfter determining rights(Shares)
End of previous fiscal
year

11th Stock Acquisition
RightsSubmitter company
Annual general meetingof shareholders held on
March 29, 2018
Board of Directors
meeting held on May
15, 2018

12th Stock Acquisition
RightsSubmitter company

13th Stock Acquisition
RightsSubmitter company

14th Stock Acquisition
RightsSubmitter company

Board of Directors
meeting held on March
25, 2021

Board of Directors
meeting held on
February 10, 2022

Board of Directors
meeting held on
February 10, 2022

57,16033,900––––36,800––33,90063,100––10,000––20,360–63,10010,00091,640–––

Determination of rights

36,80033,900––Exercise of rights
Lapse
Balance of rights not
exercised

21,880–28,200–––––106,560

5,700

–

–

(Note) Stated by translating into the number of shares after a stock split conducted on July 13, 2018 (1,000-for-1 stock split), and one
conducted on October 1, 2019 (2-for-1 stock split), and one conducted on January 1, 2021 (2-for-1 stock split).
(ii) Unit price information

Company

Date of resolution

Rights exercise price (Yen)
Average stock price at rights
exercise (Yen)Fairly valued unit price ondate of grant (Yen)

11th Stock Acquisition
RightsSubmitter company
Annual general meetingof shareholders held on
March 29, 2018
Board of Directors
meeting held on May
15, 2018
75

12th Stock Acquisition
RightsSubmitter company

13th Stock Acquisition
RightsSubmitter company

14th Stock Acquisition
RightsSubmitter company

Board of Directors
meeting held on March
25, 2021

Board of Directors
meeting held on
February 10, 2022

Board of Directors
meeting held on
February 10, 2022

1

1

1

1,116

1,041

–

–

–

1,842

1,062

1,072

(Note) Stated by translating into values after a stock split conducted on July 13, 2018 (1,000-for-1 stock split), and one conducted on
October 1, 2019 (2-for-1 stock split), and one conducted on January 1, 2021 (2-for-1 stock split).
3. Estimation method for a stock option unit price that is valued fairly
Shown below are estimation methods used for estimating a fairly valued unit price of the 13th Stock Acquisition Rights and 14th
Stock Acquisition Rights granted in the current fiscal year.
(1) Valuation method used
Black-Scholes equation75

(2) Main basic numbers and estimation methods
13th Stock Acquisition Rights

14th Stock Acquisition Rights

Stock price variability (Note 1)

54.56%

52.76%

Expected residual period (Note 2)

4.37 years

3.36 years¥10 per share¥10 per share

0.03%(0.01%)

Expected dividend (Note 3)
Risk-free interest rate (Note 4)(Notes) 1. Stock price variability was calculated in reference to stock prices from September 2018 to March 2022.
2. Since it is difficult to reasonably estimate a residual period in the absence of sufficient data accumulated, we
estimated it by presuming that the stock options would be exercised at the midpoint of the option exercise period.
3. Expected dividend was in reference to the dividend for the fiscal year ended December 31, 2021.
4. The yield on Japanese government bonds for the expected residual period was used as risk-free interest rate.
4. Estimation method for the number of stock option rights determined
Since it is essentially difficult to reasonably estimate the number of future lapses, we adopted a method by which to reflect only the
number of lapses done.
5. Total intrinsic value at the end of the current fiscal year for when computing using a stock option’s intrinsic value per unit and thetotal intrinsic value at the exercise date of stock options exercised at the end of the current fiscal year
(1) Total intrinsic value at the end of the current fiscal year
¥150,527 thousand(2) Total intrinsic value of options exercised during the current fiscal year76

¥22,889 thousand

(Restricted stock awards)
1. Description and number of advance grant-based stock options and their change, among options to be granted at no charge as
director remuneration(1) Description of advance grant-based stock options
Advance grant-based stock options for 2021

Advance grant-based stock options for 2022

Grantee categories and count(Persons)

Directors (excluding Outside Directors), 3
persons

Directors (excluding Outside Directors), 3
persons

Number of granted shares byclass of stock

Common stock, 19,998 shares

Common stock, 19,998 shares

Date of granting

April 15, 2021

April 15, 2022

Conditions for removing the
restriction

The restriction will be removed at expirationof the transfer restriction period bydetermining, by resolution of the Board of
Directors, the number of shares for which thetransfer restriction is to be removed. This will
be in consideration of deliberations by avoluntary meeting of the Compensation
Advisory Committee and its recommendationin accordance with the fact that grantees wereconsecutively in office as Directors of theCompany over the transfer restriction period
and to the achievement rate for Medium-term
Business Plan operational targets and theextent of corporate value improvement.
If, before the expiration of the Transfer
Restriction Period, an Eligible Director retires
due to expiration of the term of office, death,or other justifiable reason, (i) where such
retirement occurs during the period from thetime of granting such shares to the time prior
to determining the number of shares withrespect to which the Transfer Restriction will
be removed, the number of such shares withrespect to which the Transfer Restriction will Same as on the left
be removed and the timing of removing theTransfer Restriction will be reasonably
adjusted and determined as necessary inaccordance with the degree of achievement of
the management targets for the medium-term
management plan and the degree ofenhancement of corporate value as of thattime, and the like, and (ii) where such
retirement occurs during the period from thetime of determining the number of shareswith respect to which the Transfer Restriction
will be removed to the time of expiration of
the Transfer Restriction Period, the timing ofremoving the Transfer Restriction will bereasonably adjusted and determined asnecessary. The number of shares and thetiming of removing the Transfer Restriction incase of (i) and the timing of removing theTransfer Restriction in case of (ii) will be
determined by resolution of the Board of
Directors in consideration of deliberations by
a voluntary meeting of the Compensation
Advisory Committee and its recommendation.

Transfer Restriction Period

From April 15, 2021 to April 14, 2024

From April 15, 2022 to April 14, 2025

(2) Number of advance grant-based stock options and their changeStated by targeting advance grant-based stock options on which unremoved transfer restriction applied to a number of sharesfor the current fiscal year (the fiscal year ended December 31, 2022).
(i)Amount of expense recognized and account(Thousands of yen)

- 77 -

Previous fiscal year

Current fiscal year

(January 1, 2021 to December 31, 2021)
Selling, general and administrative expenses(January 1, 2022 to December 31, 2022)––

27,192

24,812

Cost of sales(ii) Number of shares
Advance grant-based stock options for
2021

Advance grant-based stock options for
2022

19,998–Granting (Shares)–

19,998Gratis acquisition (Shares)––

Transfer restriction removed (Shares)––

19,99819,998Advance grant-based stock options for
2021

Advance grant-based stock options for
2022

1,813

1,050

Closing balance of restricted stock
options for the previous fiscal year
(Shares)

Closing balance of restricted stock
options for the current fiscal year
(Shares)(iii) Unit price information

Fairly valued unit price on date of grant(Yen)

2. Estimation method for fairly valued unit price
The advance grant-based stock options for 2021 used the closing price of the Company’s common stock on the Tokyo Stock
Exchange on the date of granting as the fairly valued unit price.
The advance grant-based stock options for 2022 used the closing price of the Company’s common stock on the Tokyo Stock
Exchange on the business day prior to the date of resolution of Board of Directors meeting as the fairly valued unit price.
3. Estimation method for the number of shares whose transfer restriction will be removed
For advance grant-based stock options, it is essentially difficult to reasonably estimate the number of shares to be acquired at nocharge in the future, so we adopted a method by which to reflect only the number of shares acquired at no charge in the past.

- 78 -(Tax effect accounting)
1. Breakdown of deferred tax assets and deferred tax liabilities by cause(Thousands of yen)Previous fiscal year
(As of December 31, 2021)
Deferred tax assets
Income taxes payable
Provision for bonuses
Statutory welfare expenses payable

Current fiscal year
(As of December 31, 2022)

20,498169,359
18,861

25,369234,122
26,928

489
–

2,595
50,636

Allowance for doubtful accounts
Operational investment securities

4,727
16,7797,300
16,779Investment securities
Asset retirement obligations–
25,192

16,385
39,116

Restricted stock awards
Charges for stock compensation

10,99014,384

18,251
10,61815,555

14,354

Disallowance of cost of sales
Loss carried forward

Other
Deferred tax assets subtotal
Valuation reserve
Total deferred tax assets
Deferred tax liabilities
Disallowance of net sales
Asset retirement expenses
Customer-related assets
Total deferred tax liabilities
Net deferred tax assets

296,839

462,460–(75,362)

296,839

387,097(1,343)(18,139)–(19,483)
277,356(6,246)(28,915)(5,741)(40,903)
346,194

2. Breakdown of main matters that caused a significant difference to occur between the statutory effective tax rate and income tax
rate after application of tax effect accounting
Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

30.6%

30.6%

3.3

2.7

0.3
(0.4)

0.2
(0.3)

0.7
–

8.6
1.0

–

(7.8)

(0.3)

(0.3)

34.2

34.7

Statutory effective tax rate
(Adjustment)
Items not expensed without limit in time such asentertainment expenses
Per-capita inhabitant tax
Equity in losses (earnings) of investments
Change in valuation reserve
Amortization of goodwill
Tax deduction related to tax incentives for securing
human resources
Other
Income tax rate after application of tax effectaccounting- 79 -

(Business Combination, etc.)
Business Combination through Acquisition
At a meeting of the Board of Directors held on December 27, 2021, we resolved to acquire shares of Celebrain Corporation andmake it a consolidated subsidiary. On the same day, we concluded a share transfer agreement and acquired the shares on January
14, 2022.
1. Outline of Business Combination(1) Name of the company whose shares will be purchased and description of its business
Name of company whose shares will be purchased: Celebrain Corporation
Business: Human Resource Strategy Consulting, Human Resource Development and Education Training, and HR
Technology Consulting(2) Main reasons for the business combination
In HR consulting, there is growing demand from clients who face issues such as the promotion of work style reforms andretention due to a shortage of human resources. By providing HR-related consulting functions as an integrated solution for
the Group, we can enhance our functions as a comprehensive consulting firm.
In addition, HR consulting will enable us to transform our clients’ corporate culture from the perspective of people andenhance our ability to realize strategies. At the same time, by broadly exploring CXO candidates from our networks, we will
be able to provide management personnel that are suitable for our clients.
In addition, we will be able to develop the HR Tech domain, which is growing through collaboration between our Digital
Strategy Office and HR Consulting.
We believe that we can expect significant synergies between the two companies through this matter, and we will further
accelerate our growth strategy as a comprehensive consulting firm for the Group.
(3) Business Combination Date
January 14, 2022
(4) Legal form of business combination
Acquisition of shares(5) Name following business combination
Celebrain Corporation(6) Percentage of voting rights acquired60%(7) Main grounds for deciding on the company whose shares will be purchasedThis is due to our acquisition of shares in exchange for cash.
2.

Period of the results of the acquired company that is included in the consolidated financial statements
From January 1, 2022 to December 31, 2022

3.

Acquisition cost of the company whose shares will be purchased and breakdown by type of consideration
Price of acquisitionCash¥362,161 thousand
Cost of acquisition¥362,161 thousand

4.

Details and amount of major acquisition-related expenses
Advisory fees, commissions, etc.: ¥10,651 thousand

5.

Goodwill, reason for recognizing goodwill, amortization method and amortization term
(1) Value of goodwill¥294,589 thousand(2) Reason for recognition
Mainly due to the excess earning power which is expected from future business development.
(3) Amortization method and amortization term
Amortization using the straight-line method over a ten-year period- 80 -

6.

The amount of assets accepted and liabilities assumed on the date of the Business Combination, and major breakdown
thereof(Thousands of yen)

7.

Current assets
Fixed assets

181,469
39,843

Total assets

221,312Current liabilities
Fixed liabilities

97,93011,434

Total liabilities

109,364

Determination of provisional treatment related to business combination
Provisional accounting was applied to the end of the first, second and third quarters of the consolidated fiscal year because
the allocation of the cost of acquisition had not been completed, but the allocation of the cost of acquisition had been
determined at the end of the current fiscal year. With the determination of this provisional accounting treatment, thetentatively calculated amount of goodwill of ¥305,059 thousand decreased by ¥10,469 thousand to ¥294,589 thousand, andthis decrease was allocated as ¥25,000 thousand to customer-related assets, ¥7,655 thousand to deferred tax liabilities and¥6,875 thousand to non-controlling interests.
(Asset retirement obligation)
Asset retirement obligation recorded on the consolidated balance sheet
1. Outline of the asset retirement obligation
Obligation to restore our head office space to its original condition under the real estate lease agreement
2. Method for computing the asset retirement obligation
The asset retirement obligation is computed with a discount rate for a proper indicator such as the yield on Japanese
government bonds for an estimated usage period (0.000% to 0.980%) while predicting the period to be 3 to 15 years fromacquisition.
3. Change in the total asset retirement obligation(Thousands of yen)Previous fiscal year
(January 1, 2021
to December 31, 2021)

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

Opening balance
Increase in amount due to acquisition of tangible
fixed assets
Increase in amount due to changes to estimates

82,257

82,262–

52,827–2,279

Amount adjusted due to the passage of time
Reduction due to performance of asset
retirement obligations
Ending balance

4

61

–

(2,680)82,262

134,750

4. Changes to estimates of the relevant asset retirement obligation
In the current fiscal year, regarding asset retirement obligations that are recorded as a restoration obligation associated with
the Company’s real estate lease agreement, a change in the estimates of the restoration cost has been made due to theacquisition of new information, such as an estimate of the expected costs when the facility is vacated.
The increase in amount due to changes to estimates of ¥2,279 thousand has been added to the pre-change asset retirement
obligations balance.
Due to this change in estimates, operating income, ordinary income and income before income taxes for the current fiscal
year decreased by ¥2,279 thousand.

- 81 -

(Revenue recognition)
1. Disaggregated information on revenue from contracts with customers
Current fiscal year (January 1, 2022 to December 31, 2022)(Thousands of yen)
Investment
Business

Consulting and Advisory Business
Management
Consulting
Consulting and advisory
fees, etc.
(excluding success fees)

Consulting andAdvisory
Business
Total

Other

Total
Investment

1,127,720

601,236

126,547

6,207,477

3,000

6,210,477–

1,665,744–

39,433

1,705,177–

1,705,177

4,351,972

2,793,464

601,236

165,981

7,912,655

3,000

7,915,655

–

–

–

–

–

–

–

4,351,972

2,793,464

601,236

165,981

7,912,655

3,000

7,915,655

Other revenue
Sales to externalcustomers

Revitalization
Support

4,351,972

Success fees
Revenue from contracts
with customers

M&A
Advisory

2. Base information in order to understand revenue from contracts with customers
The information that forms the base for understanding revenue arising from contracts with customers is presented in the “Notes(Significant Matters Forming the Basis for Preparation of Consolidated Financial Statements), 4. Matters regarding accounting
policies, (6) Standard for recording revenues and expenses of importance.”
3.

Information related to the relationship between the satisfaction of performance obligations under contracts with customers
and cash flows arising from such contracts, and the amount and timing of revenue expected to be recognized in the next
fiscal year onward from contracts with customers existing at the end of the current fiscal year
(1) Balance of contract assets and contract liabilities, etc.
(Thousands of yen)
Current fiscal year
Opening balanceEnding balance

Liabilities from contracts with customers
Notes and accounts receivable
Contract assets

1,045,910

752,474

27,466160,352

Contract liabilities
35,713
19,868Contract assets primarily relate to the Group’s rights to unclaimed consideration for revenue from satisfying performanceobligations in the Consulting and Advisory Business. Contract assets are transferred to liabilities from contracts withcustomers when the Group’s right to the consideration becomes unconditional.
Contract liabilities are mainly advances received from customers in the Consulting and Advisory Business. Contract
liabilities are reversed upon recognition of the revenue.
Of the amount of revenue recognized during the current fiscal year, the amount included in the balance of contract liabilities
as of the beginning of the fiscal year was ¥35,713 thousand.
(2) Transaction price allocated to outstanding performance obligations
As the Group does not have any significant transactions with an initial expected contract period of more than one year, theirpresentation is omitted through the application of practical expediency. In addition, there are no significant amounts ofconsideration arising from contracts with customers that are not included in the transaction price.

- 82 -

(Segment Information)
Segment Information
1. Outline of reporting segments
The Group’s reporting segments are those units among the constituent units of the Group for which separate financial
information is available, and are subject to regular review by decision-making bodies such as the Board of Directors
in order to determine the allocation of management resources and evaluate performance.
The Group’s businesses consist of segments based on business type, and the two reporting segments are the “Consulting
and Advisory Business” and the “Investment Business.”
The “Consulting and Advisory Business” operates the Management Consulting Business, M&A Advisory Businessand Revitalization Support Business. The “Investment Business” performs investment business involving the dispatchof management personnel with the purpose of improving the long-term, sustainable corporate value of the companies
which receive investment.
2.

Matters related to changes in reporting segments
The segments of the Group had been a single segment. However, we added the Investment Business as a new reportablesegment to change it to two segments from the current fiscal year—the Consulting and Advisory Business and theInvestment Business—as we established Frontier Capital Inc. to commence an investment business involving the dispatchof management personnel.
However, the segment information for the previous fiscal year that was created using the reporting segmentclassification method for the current fiscal year is not disclosed due to the addition of the “Investment Business” fromthe current fiscal year.

3.

Calculation method for net sales, profit and loss, assets, liabilities and other items for each reporting segment
Accounting methods for reporting business segments are generally the same as presented in “Significant Matters
Forming the Basis for Preparation of Consolidated Financial Statements.”
The income of reporting segments are figures based on operating income.
Internal revenue between segments and transfer amounts are based on the prevailing market price.

4.

Information regarding net sales, profit and loss, assets, liabilities and other items for each reporting segment
Previous fiscal year (January 1, 2021 to December 31, 2021)
Presentation is omitted because the Group has only one segment.
Current fiscal year (January 1, 2022 to December 31, 2022)(Thousands ofyen)
Amount Recordedin theConsolidated
Financial
Statements

Reporting Segment
Consulting andAdvisory
Business

Investment
Business

Total

Adjustment

Net sales
Sales to external customers

7,912,655

3,000

7,915,655–

7,915,655–

14,603

14,603(14,603)–

7,912,655

17,6037,930,258(14,603)

7,915,655

1,099,403(191,272)

908,131–

908,1314,800,439

858,204

5,658,644–

5,658,644

Depreciation and amortization

47,495–47,495–47,495

Amortization of goodwill

29,458–29,458–29,458Internal net sales and transfer
amounts between segments
Total
Segment profit or loss (-:loss)
Segment assets
Other items

Amortization of customer-related
6,250
–
6,250
–
assetsInvestment in equity method
54,193–54,193–affiliates
Increase in tangible fixed assets
473,430–
473,430–and intangible fixed assets(Note) “Segment profit or loss” matches the operating income in the consolidated statement of income.

- 83 -

6,250
54,193
473,430

Related Information
Previous fiscal year (January 1, 2021 to December 31, 2021)
1. Information on individual products and services(Thousands of yen)Management consulting
service

M&A advisory service

Rehabilitation support
service

3,280,302

1,725,210

662,331

Sales to externalcustomers

2.

Other

Total

73,8105,741,654

Information on individual areas(1) Net sales
Presentation is omitted because sales to external customers in Japan exceeded 90% of net sales on the consolidated
statement of income.
(2) Tangible fixed assets
Presentation is omitted because the value of tangible fixed assets in Japan exceeded 90% of the value of tangible
fixed assets on the consolidated balance sheet.

3.

1.

Information on individual main customers
Presentation is omitted because no external customer accounted for 10% or more of net sales on the consolidated
statement of income.
Current fiscal year (January 1, 2022 to December 31, 2022)
Information on individual products and services(Thousands of yen)
Investment
Business

Consulting and Advisory Business
Management
consulting service
Sales to externalcustomers

4,351,972

M&A advisory
service

2,793,464

Rehabilitation
support service

Other

601,236

Total

Investment

165,981

30,0007,915,655(Note) From the current fiscal year, the name of the “Financial Advisory Business” has been changed to the “M&A Advisory
Business.” There is no effect due to the change of name.
2. Information on individual areas(1) Net sales
Presentation is omitted because sales to external customers in Japan exceeded 90% of net sales on the consolidated
statement of income.
(2) Tangible fixed assets
Presentation is omitted because the value of tangible fixed assets in Japan exceeded 90% of the value of tangible fixed
assets on the consolidated balance sheet.
3. Information on individual main customers
Presentation is omitted because no external customer accounted for 10% or more of net sales on the consolidated
statement of income.
Information on impairment loss on fixed assets of individual reporting segments
Not applicable.
Information on goodwill amortization and unamortized balance of individual reporting segments
Previous fiscal year (January 1, 2021 to December 31, 2021)
Not applicable.
Current fiscal year (January 1, 2022 to December 31, 2022)(Thousands of yen)Consulting and Advisory
BusinessAmount of depreciation andamortization for the current
fiscal year
Ending balance for the current
fiscal year

Investment BusinessCompany-wide / Removal

Total

29,458––29,458265,130––

265,130

Information on gain on negative goodwill in individual reporting segments
Not applicable.

- 84 -

Information on Related Parties
Information on transactions with related parties(1) Transactions between the company submitting consolidated financial statements and related parties(i) The parent of the company submitting consolidated financial statements and its major shareholders (limited to corporations)Not applicable.
(ii) Officers and major shareholders (limited to individuals) of the company submitting consolidated financial statements
Not applicable.
(2) Transactions between consolidated subsidiaries of the company submitting consolidated financial statements and relatedparties
Not applicable.
(Per Share Information)
Previous fiscal year
(January 1, 2021
to December 31, 2021)

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

Net assets per share

JPY215.40

JPY255.37

Net income per share

JPY29.70

JPY48.67

Net income per share-diluted

JPY29.24

JPY47.93(Note) Shown below is the basis for calculating net income per share and diluted net income per share:Previous fiscal year
(January 1, 2021
to December 31, 2021)

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

338,707556,722––338,707556,722

11,404,286

11,437,677––

Net income per share
Net income attributable to owners of parent(Thousands of yen)Amount not attributable to common stock(Thousands of yen)
Net income attributable to owners of parent
attributable to common stock (Thousands of yen)
Average number of shares of common stock
outstanding during the period (Shares)
Net income per share-diluted
Adjustment of net income attributable to owners ofparent (Thousands of yen)
Increase in common stock (Shares)(Of which, stock acquisition rights (Shares))
Explanation of residual stock not included in
calculation of diluted net income per share due to lackof dilutive potential

177,288(177,288)–- 85 -

176,925(176,925)–

(Significant Subsequent Events)(Capital Increase of a Subsidiary)
1. At the Board of Directors meeting held on December 27, 2022, the Company resolved that its consolidated subsidiary,
Frontier Capital Inc., would raise funds from seven financial institutions through a third-party allocation of shares, andpayment was completed on January 18, 2023.
(1) Purpose of capital increase
The funds were procured as investment funds for the investment business involving the dispatch of management personnel
conducted by Frontier Capital Inc.
The investment business of Frontier Capital Inc., makes direct investments aimed at improving the corporate value of thecompanies which receive investment over the medium to long term, which makes growth through business model reform
and industry reorganization at the companies that have been invested in possible; at the same time, we believe that
accelerating the expansion of the Group’s scale will also contribute to the enhancement of our corporate value.
In promoting the Investment Business, in addition to dispatching management personnel from Frontier Capital Inc. to thecompanies which receive investment, the Company also provides consulting services as necessary.
In addition, The Bank of Fukuoka, Ltd., JAPAN POST BANK Co., Ltd., and The Bank of Yokohama, Ltd. are positioned
as anchor investors, and because investment was also received from four other banks (Saitama Resona Bank, Limited, The
Daishi Hokuetsu Bank, Ltd., The Hokuriku Bank, Ltd., and Sumitomo Mitsui Banking Corporation), the combination andutilization of the regional relations and financial business know-how held by each bank with the consulting, M&A,
management personnel dispatch, and revitalization support know-how held by the Company and Frontier Capital Inc.
becomes possible, and the promotion of this business will be further strengthened. Through these efforts, we will increase
the corporate value of the Company and Frontier Capital Inc. by increasing the corporate value of the companies which
receive investment.
(2) Outline of consolidated subsidiary(i) Name
Frontier Capital Inc.
(ii) Address
3-2-1 Roppongi, Minato-ku, Tokyo, Japan
Shoichiro Onishi, Representative Director, President, CEO and COO(iii) Job Title/Name of Representative
Masahiro Matsuoka, Representative Director(iv) Description of business
Investment business involving the dispatch of management personnel(v) Paid-in capital prior to increase¥500 million (Capital: ¥500 million; Capital reserve: ¥500 million)(vi) Date of Incorporation
April 1, 2022(vii) Fiscal year end
December 31 of each year(viii) Shareholding ratio and voting rights ratioof the Company before the capital
Shareholding ratio: 100%; Voting rights ratio: 100%
increase86

(3) Outline of financing activities(i) Number of shares newly issued(ii) Issue price:(iii) Amount to be included in capital(iv) Payment date(v)

Allottees(vi) Paid-in capital after increase(vii) Number of shares outstanding after
increase(viii) Shareholding ratio and voting rights ratioof the Company after the capital increase(ix) Description of share classes

26,673 (26,664 Class A shares and 9 Class B shares)¥100,000 per share¥1,333 million (¥50,000 per share)
January 18, 2023
Class A shares
The Bank of Fukuoka, Ltd., JAPAN POST BANK Co., Ltd., The Bank of
Yokohama, Ltd., Saitama Resona Bank, Limited, The Daishi Hokuetsu Bank,
Ltd., The Hokuriku Bank, Ltd., Sumitomo Mitsui Banking Corporation
Class B shares
The Bank of Fukuoka, Ltd., JAPAN POST BANK Co., Ltd., The Bank of
Yokohama, Ltd.
¥1,833 million
36,673
Shareholding ratio: 27.3%; Voting rights ratio: 91.0%
Class A shares• Dividends of surplus in cash are made to Class A shareholders prior toshareholders, etc. who hold other types of shares.
• The distribution of residual assets to allottees shall be made prior toshareholders, etc. who hold other types of shares.
• The allottees cannot exercise voting rights at the general meeting ofshareholders of Frontier Capital Inc.
• The Class A shareholders may demand acquisition of all or a part of the Class A
shares against Frontier Capital Inc. in exchange for the payment of money
after 10 years has passed from the date of the first issuance of the Class A
Shares.
Class B shares• The payment of dividends of surplus will not be made to Class B shareholders.
• The distribution of residual assets to allottees shall be made to Class B
shareholders, etc. prior to Class C shareholders, etc. and commonshareholders, etc. in the case of further distribution of residual assets after
distribution of residual assets to Class A shareholders.
• The allottees hold one voting right for each Class B shares at the general
meeting of shareholders of Frontier Capital Inc.

87

2.

At the meeting of the Board of Directors held on February 10, 2023, it was resolved that the Company and its consolidated
subsidiary Frontier Capital Inc. would enter into agreements with The Joyo Bank, Ltd., Tokai Tokyo Financial Holdings,
Inc., and JAPAN POST BANK Co., Ltd. regarding a capital increase to Frontier Capital Inc. through third-party allotment;
the contracts were entered into on February 17, 2023, and payment was completed on February 28, 2023.
(1) Purpose of capital increase
An investment of a total of ¥2,667,300 thousand as investment funds for the investment business involving the dispatchof management personnel conducted by Frontier Capital Inc. was received on January 18, 2023, then additional investment
was newly obtained from The Joyo Bank, Ltd., Tokai Tokyo Financial Holdings, Inc., and JAPAN POST BANK Co., Ltd.
At the meeting of the Board of Directors held on February 10, 2023, it was resolved to enter into underwriting agreementswith The Joyo Bank, Ltd., Tokai Tokyo Financial Holdings, Inc., and JAPAN POST BANK Co., Ltd. regarding a total
capital increase of ¥1,500 million in stages and that the initial funding would be a total of ¥333,300 thousand, and said
payment was received. The conclusion of new underwriting agreements with these three companies has resulted in the aimof achieving a total of ¥15,000 million in funding, including the underwriting agreements concluded on December 28,
2022 and the additional investment of ¥500 million from the Company (cumulative investment of ¥1,500 million). The
capital increase in January and February 2023 will be total ¥3,000,600 thousand as the initial portion of the total ¥15,000
million in the staged capital increase.

(2) Outline of consolidated subsidiary(i) Name
Frontier Capital Inc.
(ii) Address
3-2-1 Roppongi, Minato-ku, Tokyo, Japan
Shoichiro Onishi, Representative Director, President, CEO and COO(iii) Job Title/Name of Representative
Masahiro Matsuoka, Representative Director(iv) Description of business
Investment business involving the dispatch of management personnel(v) Paid-in capital prior to increase¥1,833 million (Capital: ¥1,833 million; Capital reserve: ¥1,833 million)(vi) Date of Incorporation
April 1, 2022(vii) Fiscal year end
December 31 of each year(viii) Shareholding ratio and voting rights ratioof the Company before the capital
Shareholding ratio: 27.3%; Voting rights ratio: 91.0%
increase(3) Outline of financing activities(i) Number of shares newly issued(ii) Issue price(iii) Amount to be included in capital(iv) Payment date(v) Allottees(vi) Paid-in capital after increase(vii) Number of shares outstanding after
increase(viii) Shareholding ratio and voting rights ratioof the Company after the capital increase(ix) Description of class shares

3,333 Class A shares¥100,000 per share¥166 million (¥50,000 per share)
February 28, 2023
Class A shares
The Joyo Bank, Ltd., Tokai Tokyo Financial Holdings, Inc., JAPAN POSTBANK Co., Ltd.
¥2,000 million
40,006
Shareholding ratio: 25.0%; Voting rights ratio: 91.0%
Class A shares• Dividends of surplus in cash are made to Class A shareholders prior toshareholders, etc. who hold other types of shares.
• The distribution of residual assets to allottees shall be made prior toshareholders, etc. who hold other types of shares.
• The allottees cannot exercise voting rights at the general meeting ofshareholders of Frontier Capital Inc.
• The Class A shareholders may demand acquisition of all or a part of the Class A
shares against Frontier Capital Inc. in exchange for the payment of money
after 10 years has passed from the date of the first issuance of the Class A
shares.

88

(v) Consolidated Supplementary Schedule
Breakdown of corporate bonds
Not applicable.
Breakdown of borrowings
Opening balance
for the current
fiscal year
(Thousands ofyen)

Ending balance
for the current
fiscal year
(Thousands ofyen)

Average interest
rate (%)

Current portion of long-term debt–

138,388

0.85–

Long-term debt (excluding the current portion)–

639,3130.852024 to 2031–

777,701

Category

Total–

Repayment due date–

(Notes) 1. The average interest rate is the weighted average interest rate for the balance of borrowings at the end of the fiscal year.
2. Long-term debt (excluding the current portion) that are due to be repaid within five years after the consolidated balance
sheet date are as follows.
In excess of four
In excess of three
In excess of one year In excess of two years
years and within four years and within five
and within two years and within three years
years
years
(Thousands of yen) (Thousands of yen)(Thousands of yen) (Thousands of yen)
Long-term debt

137,313136,000

136,000

86,000

Schedule of asset retirement obligations
Presentation of schedule of asset retirement obligations is omitted as information required to be stated in such schedule isshown in notes as provided for in Article 15-23 of the Regulations of Consolidated Financial Statements.
(2) Other
Quarterly information for the current fiscal year
(Cumulative periods)
Net sales (Thousands of yen)
Quarterly income before income
taxes (Thousands of yen)
Quarterly net income
attributable to owners of parent(Thousands of yen)
Quarterly net income per share(Yen)(Accounting period)
Quarterly net income per share(Yen)First quarter

Second quarter

Third quarter

Current fiscal year

2,224,878

3,972,843

5,889,465

7,915,655

416,064

503,270643,156

868,006

236,713277,805351,338

556,722

20.77

24.32

30.73

48.67

First quarter

Second quarter

20.77

3.59

89

Third quarter

Fourth quarter
6.42

17.92

2. Non-consolidated Financial Statements(1) Non-consolidated Financial Statements(i) Non-consolidated Balance Sheet(Thousands of yen)Previous fiscal year
(As of December 31, 2021)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable
Notes, accounts receivable and contract assets
Operational investment securities
Prepaid expenses
Advances paid
Other
Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings, net
Tools, furniture and fixtures, net
Total tangible fixed assets
Intangible fixed assets
Software
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Investments in affiliates
Investments in capital of subsidiaries andassociates
Long-term loans receivable from subsidiaries
and associates
Long-term accounts receivable - other
Lease deposits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets

Current fiscal year
(As of December 31, 2022)

1,751,698–
9,837
115,227Note) 23,294
Note) 8,858(16,936)2,969,741

2,187,359–
Note) 857,016
23,833
120,335Note) 41,232
Note) 8,423(23,839)3,214,359

193,854
14,357208,212275,435
31,057
306,493

11,194102
11,296

10,244102
10,34656,8003,000

3,294
1,380,613

0

2,500

30,00030,000Note) 20,601

Note) 20,601

211,373
277,356
26,975(15,186)
610,920
830,4293,800,171

333,584
347,568–(2,747)
2,115,415
2,432,254
5,646,614

Note) 1,077,761

90

(Thousands of yen)Previous fiscal year
(As of December 31, 2021)
Liabilities
Current liabilities
Accounts payable
Current portion of long-term debt
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Provision for bonuses
Provision for shareholder benefit program
Other
Total current liabilities
Fixed liabilities
Long-term debt
Asset retirement obligations
Total fixed liabilities
Total liabilities
Net assets
Shareholders’ equity
Paid-in capital
Capital surplus
Capital reserve
Other capital surplus
Total capital surplus
Retained earnings
Other retained earnings
Retained earnings carried forward
Total retained earnings
Treasury stock
Total shareholders’ equity
Stock acquisition rights
Total net assets
Total liabilities and net assets

91

Current fiscal year
(As of December 31, 2022)

52,016–
93,682
119,221259,633
118,051
35,713
48,211
553,014
7,079
1,897
1,288,520

71,215136,000
115,650
139,316
274,196
174,031
14,22059,848745,174
13,924
1,934
1,745,513–
82,26282,262
1,370,783

638,000
127,010765,0102,510,524

178,723

210,062

178,723
380,022558,745

210,062
367,441
577,503

1,681,523
1,681,523(36,575)
2,382,418
46,9692,429,387
3,800,171

2,322,095
2,322,095(8,246)
3,101,416
34,673
3,136,089
5,646,614

(ii) Non-consolidated Statement of Income(Thousands of yen)Previous fiscal year
(January 1, 2021
to December 31, 2021)
Net sales
Cost of sales
Gross income
Selling, general and administrative expenses
Salaries and allowances
Provision for bonuses
Recruiting expenses
Retirement benefit expenses
Depreciation and amortization
Provision for shareholder benefit program
Provision recorded for allowance for doubtful accounts
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Insurance dividend income
Administrative fees received
Income from subsidies
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expense
Charges for stock compensation
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Reversal of allowance for doubtful accounts for
subsidiaries and associates
Total extraordinary income
Extraordinary losses
Loss on valuation of investment securities
Total extraordinary losses
Income before income taxes
Income taxes
Income taxes-deferred
Total income taxes
Net income

92

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

Note) 5,732,196

Note) 7,546,117

Note) 2,244,842

Note) 3,014,856

3,487,353

4,531,261

1,299,291
269,041
231,835
23,174
18,7687,079
1,303
1,123,951
Note) 2,974,445
512,908

1,306,198
347,589438,761
23,25922,3056,845
6,903
1,300,545
Note) 3,452,408
1,078,852

Note) 345

Note) 169

1,125
2,268
686
–
Note) 158
4,584

1,802
3,115
–
4,840
Note) 182
10,110

1,253
2,902
23
256
4,435
513,057

7,353
–
–
–
7,353
1,081,609

8,142

12,4388,142

12,438––521,200
228,866(53,119)
175,746
345,454

53,50553,505
1,040,542
356,257(70,212)
286,045754,497

(iii) Non-consolidated Statement of Shareholders’ Equity
Previous fiscal year (January 1, 2021 to December 31, 2021)
Shareholders’ equity
Capital surplus
Paid-in capital
Capital reserve
Opening balance

163,530

163,530

1,597

1,597

Retained earnings

Other capital Total capital Other retained Total retained
surplussurplusearnings
earnings
671,690

835,220

1,473,982

1,473,982

Dividends of surplus(137,912)(137,912)

Net income

345,454345,454

Change during the period
Issuance of new shares (exerciseof subscription rights to shares)

1,597

Purchase of treasury stock
Retirement of treasury stock
Restricted stock awards(291,668)(291,668)

13,596

13,596

13,596

Total changes during the period

15,193

15,193(291,668)(276,474)

207,541

207,541

Ending balance

178,723

178,723

380,022558,745

1,681,523

1,681,523

Net changes of items other thanshareholders’ equity (net)(Thousands of yen)
Shareholders’ equity
Total
Treasury stock shareholders’equityOpening balance(58,163)2,414,569

Stockacquisitionrights–Total net
assets2,414,569

Change during the period
Issuance of new shares (exerciseof subscription rights to shares)

3,195

3,195

Dividends of surplus(137,912)(137,912)

Net income

345,454345,454

Purchase of treasury stock(270,080)(270,080)(270,080)

Retirement of treasury stock

291,668––

27,192

27,192

Restricted stock awards
Net changes of items other thanshareholders’ equity (net)

46,96946,969Total changes during the period

21,588(32,151)

46,96914,818Ending balance(36,575)

2,382,418

46,9692,429,387

93

Current fiscal year (January 1, 2022 to December 31, 2022)
Shareholders’ equity
Capital surplus
Paid-in capital
Opening balance

Retained earnings

Other capital Total capital Other retained Total retained
Capital reserve
surplussurplusearnings
earnings

178,723

178,723

26,80626,806

380,022558,745

1,681,523

1,681,523

Dividends of surplus(113,925)(113,925)

Net income

754,497

754,497

Change during the period
Issuance of new shares (exerciseof subscription rights to shares)

Restricted stock awards

26,806

4,532

4,532

(12,580)(8,048)

Total changes during the period

31,33831,338(12,580)

18,758640,571

640,571

Ending balance

210,062

210,062

367,441

577,5032,322,095

2,322,095

Net changes of items other thanshareholders’ equity (net)(Thousands of yen)
Shareholders’ equity

New share
subscription
TotalrightsTreasury stock shareholders’equityOpening balance(36,575)

2,382,418

46,969Total net
assets2,429,387

Change during the period
Issuance of new shares (exerciseof subscription rights to shares)

53,61353,613

Dividends of surplus(113,925)(113,925)

Net income

754,497

754,497

24,812

24,812

Restricted stock awards

28,329Net changes of items other thanshareholders’ equity (net)(12,295)(12,295)

Total changes during the period

28,329718,997(12,295)

706,702

Ending balance(8,246)

3,101,416

34,673

3,136,089

94

Notes to Non-consolidated Financial Statements(Significant Accounting Policies)
1. Valuation standards and valuation methods for securities(1) Investments in shares and capital of subsidiaries and affiliates
Investments in shares and capital of subsidiaries and affiliates are stated at cost using the moving-average method.
(2) Available-for-sale securities (including operational investment securities)
Securities without market value, etc.
Available-for-sale securities without market value are stated at cost using the moving-average method.
2. Depreciation method for fixed assets(1) Tangible fixed assets
Tangible fixed assets are amortized using the declining–balance method.
However, buildings (fixtures) acquired on or after April 1, 2016 are depreciated using the straight–line method.
Useful lives are mainly as follows:
Buildings (fixtures)
Tools, furniture and fixtures

2 to 15 years
2 to 20 years(2) Intangible fixed assets
Intangible fixed assets are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method in accordance with an estimated internal usage period (5years).
3. Standard for translation of amounts of foreign-currency-denominated assets and liabilities into Japanese yen
Amounts of foreign-currency-denominated receivables and payables are translated into Japanese yen at the spot exchange rate on
the balance sheet date and any translation difference is recorded as profit or loss.
4. Standard for recording allowances or provisions(1) Allowance for doubtful accounts
To prepare for a potential loss from a default on receivables, an estimated uncollectible amount is recorded for ordinary
receivables in an amount determined by our historical loss experience ratio and for specific receivables feared to be defaulted onin an amount determined by considering the recoverability on a case-by-case basis.
(2) Provision for bonuses
To prepare for paying bonuses to employees, we recorded a provision for bonuses in an amount required to be paid in the current
fiscal year as part of an amount likely to be paid as bonuses for them.
(3) Provision for shareholder benefit program
To prepare for spending of shareholder benefit points granted to shareholders under the shareholder benefit program, we at theend of the current fiscal year recorded a provision for shareholder benefit program in an amount likely to be incurredcorrespondingly in the future.
5. Standard for recording revenues and expenses
Details of the main performance obligations and the usual timing of satisfying the performance obligations (ordinary timing ofrecognizing revenue) in the main businesses of the Company related to revenue from contracts with customers are as follows.
• Recognition of revenue related to the Consulting and Advisory Business (excluding success fees)
In the Consulting and Advisory Business, services such as management consulting, M&A advisory, and revitalization support areprovided based on outsourcing contracts concluded with customers, and these services which are agreed to with customers are theperformance obligations. Since these performance obligations are generally satisfied during the outsourcing period stipulated in
the outsourcing contract, revenue is recognized over the outsourcing period.
• Success fees
Success fees, which are generated mainly in M&A advisory services, are recognized when the conditions for accruing success fees
defined in an outsourcing contract are met, such as when a contract is concluded between the client company and its counterparty.

95

(Changes to accounting policies)(Application of accounting standard for revenue recognition, etc.)
The “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020, Accounting Standards Boardof Japan; hereinafter the “Revenue Recognition Accounting Standard”), etc. have been applied from the beginning of the fiscal
year under review, and revenue is recognized at the amount expected to be received in exchange for promised goods or services
when control of the relevant goods or services is transferred to the customer.
The application of the Revenue Recognition Accounting Standard, etc. is in accordance with the transitional treatmentprescribed in the proviso to Paragraph 84 of the Revenue Recognition Accounting Standard, and the cumulative effect ofapplying the new accounting policy retroactively prior to the beginning of the fiscal year under review is added to or subtracted
from the retained earnings carried forward at the beginning of the fiscal year under review, and the new accounting policy isapplied to the balance from the beginning of the fiscal year under review; however, there is no cumulative effect that requires
an adjustment to retained earnings carried forward at the beginning of the fiscal year under review.
It also does not have an effect on the profit or loss of the fiscal year under review.
Due to the adoption of the Revenue Recognition Accounting Standard, etc., “Notes and accounts receivable” which waspresented under “Current assets” in the balance sheet for the previous fiscal year has been changed to “Notes, accounts
receivable and contract assets” from the current fiscal year. In accordance with the transitional treatment prescribed in
Paragraph 89-2 of the Revenue Recognition Accounting Standard, no reclassification based on the new presentation method
has been made for the previous fiscal year.
Further, in accordance with the transitional treatment prescribed in Paragraph 89-3 of the Revenue Recognition AccountingStandard, no “Revenue recognition” notes have been presented for the previous fiscal year.
(Application of accounting standard for fair value measurement, etc.)
The “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019, Accounting Standards Boardof Japan), etc. have been applied from the beginning of the fiscal year under review, and in accordance with the transitional
treatment in Paragraph 19 of the Accounting Standard for Fair Value Measurement and Paragraph 44-2 of the “AccountingStandard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019, Accounting Standards Board of Japan), we havedecided that the new accounting policies prescribed in the Accounting Standard for Fair Value Measurement will be appliedin the future. This will not have an effect on the financial statements.
(Change in presentation method)(Standards for preparation of financial statements of a special company submitting financial statements)
As the Company is a special company submitting financial statements, from the current fiscal year, the non-consolidatedbalance sheet, non-consolidated statement of income, non-consolidated statement of shareholders’ equity, schedule of tangible
fixed assets, and schedule of allowances and provisions are prepared based on the format stipulated in Article 127, Paragraph
1 of the Financial Statement Regulations.
In addition, the notes for each item listed in Article 127, Paragraph 2 of the Financial Statement Regulations have been changed
to notes on the matters listed in the Regulations on Corporate Accounting for each item.
Non-consolidated Statement of Income
Because “Recruiting expenses” that were included in “Other” under “Selling, general and administrative expenses” exceeded
10% of the total selling, general and administrative expenses in the previous fiscal year, we have decided to list it separatelyfrom the current fiscal year. In order to reflect this change in presentation method, the consolidated financial statements forthe previous fiscal year have been reclassified.
As a result, the ¥1,355,787 thousand shown in “Other” under “Selling, general and administrative expenses” in the nonconsolidated statement of income for the previous fiscal year has been reclassified as ¥231,835 thousand in “Recruiting
expenses” and ¥1,123,951 thousand in “Other.”(Additional Information)(Accounting Estimate of the Impact of Spread of COVID-19)
With respect to the status of COVID-19, we make accounting estimates such as for recoverability of deferred tax assets, basedon currently available information, assuming that current conditions will continue for at least FY2023.
As a consequence, we are not aware of any material impact on the valuation of our accounting estimates; however, due to thehighly uncertain impact of the spread of COVID-19, our financial condition and results of operations may be impacted in the
future.

96

(Non-consolidated Balance Sheet)(Note) Monetary claims and monetary liabilities against affiliate companies (excluding those presented as categories)(Thousands of yen)Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

25,31020,601
7,251

37,06920,601
29,599

Short-term monetary claims
Long-term monetary claims
Short-term monetary liabilities(Non-consolidated Statement of Income)(Note) (Balance of transactions with affiliate companies)(Thousands of yen)Previous fiscal year
(January 1, 2021
to December 31, 2021)
Balance of transactions due to sales
transactions
Net sales
Operating expenses
Balance of transactions due to non-sales
transactions

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

22,465
11,70033,49071,268

2,597

3,265

(Securities)
Investments in shares and capital of subsidiaries and affiliates (¥1,377,613 thousand recorded as shares of subsidiaries, ¥3,000
thousand recorded as shares of affiliates, ¥0 thousand recorded as investments in the capital of subsidiaries and ¥2,500 thousand
recorded as investments in the capital of affiliates on the non-consolidated balance sheet for the current fiscal year and ¥3,000
thousand recorded as shares of affiliates and ¥0 thousand as investments in the capital of subsidiaries on the non-consolidatedbalance sheet for the previous fiscal year) are not presented as they are shares without a market value.
(Tax effect accounting)
1. Breakdown of deferred tax assets and deferred tax liabilities by cause(Thousands of yen)Previous fiscal year
(As of December 31, 2021)
Deferred tax assets
Income taxes payable

Current fiscal year
(As of December 31, 2022)

20,49824,163

Provision for bonuses
Statutory welfare expenses payable

169,359
18,861

228,20724,470

Disallowance of cost of sales
Allowance for doubtful accounts

489
9,837

2,595
8,142

Operational investment securities
Investment securities

16,779–16,77916,385

Asset retirement obligations
Restricted stock awards

25,192
10,99038,896
18,251

Charges for stock compensation
Other

14,384
15,555

10,618
11,905

Deferred tax assets subtotal

301,950

400,417

Valuation reserve
Total deferred tax assets(5,110)296,839(17,686)
382,730

Deferred tax liabilities
Disallowance of net sales(1,343)(6,246)

Asset retirement expenses
Total deferred tax liabilities
Net deferred tax assets(18,139)(19,483)
277,356(28,915)(35,161)
347,56897

2. Breakdown of main matters that caused a significant difference to occur between the statutory effective tax rate and income tax
rate after application of tax effect accounting
Previous fiscal year
(As of December 31, 2021)

Current fiscal year
(As of December 31, 2022)

30.6%

30.6%

3.3

2.1

0.3

0.1

(0.5)

1.2

–

(6.5)

0.0

0.0

33.7

27.5

Statutory effective tax rate
(Adjustment)
Items not expensed without limit in time such asentertainment expenses
Per-capita inhabitant tax
Change in valuation reserve
Tax deduction related to tax incentives for securing
human resources
Other
Income tax rate after application of tax effectaccounting(Business Combination, etc.)
Business Combination through Acquisition
Because the description is the same as that presented in “Notes (Business Combination, etc.)” of the consolidated financial
statements, the notes have been omitted.
(Revenue Recognition)
Because the base information in order to understand revenue from contracts with customers are the same as the description
presented in “Notes (Revenue Recognition)” of the consolidated financial statements, the notes have been omitted.
(Significant Subsequent Events)
Not applicable.
(iv) Supplementary Schedule
Schedule of tangible fixed assets

Category

Property,plant andequipment
Intangible
fixed assets

Openingbalance forthe current
fiscal year
(Thousandsof yen)Asset type

Depreciation
Decrease
Increasefor theduring theduring thecurrent fiscal current fiscal current fiscal
year
year
year
(Thousands(Thousands(Thousandsof yen)of yen)of yen)Closingbalance forthe current
fiscal year
(Thousandsof yen)Cumulative
depreciation
andamortization(Thousandsof yen)Buildings

193,854

116,5150

34,934275,435

94,349Tools, furniture and fixtures

14,35723,891

0

7,192

31,05737,404

Total

208,212140,4070

42,126306,493

131,754

11,194

3,494

–

4,445

10,24425,246

102

–

–

–

102

–

11,296

3,494

–

4,445

10,34625,246

Software
Other
Total

(Note) Shown below are the main amounts of increase for the current fiscal year.
Buildings

Equipment work at the head office¥55,453 thousand
Asset retirement expenses of the head office¥34,434 thousand

Asset retirement expenses of the Yodoyabashi office of the Osaka Branch ¥10,652 thousand
Tools, furniture and fixtures Furniture and fixtures at the head office¥20,668 thousand
Schedule of allowances and provisions
Account
Provision for bonuses
Allowance for doubtful
accounts

Opening balance for the Amount of increase forcurrent fiscal year
the current fiscal year
(Thousands of yen)(Thousands of yen)Amount of decrease forthe current fiscal year
(Thousands of yen)Ending balance for thecurrent fiscal year
(Thousands of yen)

553,014745,174

553,014745,174

32,123

6,903

12,43826,58798

Account
Provision forshareholder benefit

Opening balance for the Amount of increase forcurrent fiscal year
the current fiscal year
(Thousands of yen)(Thousands of yen)
7,079

Amount of decrease forthe current fiscal year
(Thousands of yen)Ending balance for thecurrent fiscal year
(Thousands of yen)

9,195

13,924

16,041

program(2) Breakdown of Main Assets and Liabilities
Presentation is omitted as consolidated financial statements were prepared.
(3) Other
Not applicable.

99VI. Outline of Stock Administration by Submitter Company
Fiscal year
Annual general meeting ofshareholders

From January 1 to December 31 of each year
Within three months from the last day of each fiscal year

Record date

December 31 of each year

Record date for dividends ofDecember 31 of each year

surplusJune 30 of each year

Number of shares per unit

100

Repurchase of shares less than
one unit
Service place

1-4-5, Marunouchi, Chiyoda-ku, Tokyo
Securities Agency Division, Mitsubishi UFJ Trust and Banking Corporation

Shareholder registermanager

1-4-5, Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation

Intermediary place
Repurchase fee

Public notification method–
An amount to be separately determined as a handling free for agency service for stock
trading
To be done electronically. However, if this is not possible for an unavoidable reason,
notification will be done by posting it in the Nikkei newspaper.
Public notification posting on: URL https://www.frontier-mgmt.com/
We grant shareholder benefit points to shareholders recorded on the shareholder registeron June 30 and December 31, each year who hold at least one unit (100 shares) of
Frontier Management Inc. shares, in accordance with the number of shares held.
Shareholders are allowed to exchange their shareholder benefit points for a benefit
product choice from among at least 2,000 items on shareholder-only website FrontierManagement Premium Benefit Club.
Number of shares held

Privileges for shareholders

June 30

December 31

100 to 199 shares

1,000 points

1,000 points

200 to 299 shares

1,500 points

1,500 points

300 to 399 shares

2,000 points

2,000 points

400 to 499 shares

2,500 points

2,500 points

500 to 599 shares

3,000 points

3,000 points

600 to 699 shares

3,500 points

3,500 points

700 to 799 shares

4,000 points

4,000 points

800 to 899 shares

4,500 points

4,500 points

900 to 999 shares

5,000 points

5,000 points

At least 1,000 shares

5,500 points

5,500 points(Note) As regards shares less than one unit that are held by shareholders of the Company, the Articles of Incorporation provide thatthey may not exercise rights other than those set forth in the items of Article 189, Paragraph (2) of the Companies Act.

100

VII. Reference Information on Submitter Company
1. Information on Parent of Submitter Company
The Company has no parent as set forth in Article 24-7, Paragraph (1) of the Financial Instruments and Exchange Act.

2. Other Reference Information
The Company has submitted the following documents during the period from the first day of the current fiscal year to the day ofsubmitting this securities report.
(1) Securities report, its attachment and a letter of confirmation
The 15th fiscal year (from January 1, 2021 to December 31, 2021). Submitted to the Director-General of the Kanto Local
Finance Bureau on March 24, 2022
(2) Internal control report
Submitted to the Director-General of the Kanto Local Finance Bureau on March 24, 2022
(3) Quarterly report and a letter of confirmation(The first quarter of the 16th fiscal year) (from January 1, 2022 to March 31, 2022). Submitted to the Director-General of the
Kanto Local Finance Bureau on May 13, 2022
(The second quarter of the 16th fiscal year) (from April 1, 2022 to June 30, 2022). Submitted to the Director-General of the
Kanto Local Finance Bureau on August 12, 2022
(The third quarter of the 16th fiscal year) (from July 1, 2022 to September 30, 2022). Submitted to the Director-General of the
Kanto Local Finance Bureau on November 11, 2022
(4) Ad hoc report
An ad hoc report based on the provisions of Article 19, Paragraph (2), Item (ix)-2 “Result of voting rights exercise at general
meeting of shareholders” of the Cabinet Office ordinance on disclosure of corporate information. Submitted to the DirectorGeneral of the Kanto Local Finance Bureau on March 25, 2022
An ad hoc report based on the provisions of Article 19, Paragraph (2), Items (iii) and (xiii)-2 “Decision about a change to a
specified subsidiary company and acquisition of a subsidiary company” of the Cabinet Office ordinance on disclosure ofcorporate information. Submitted to the Director-General of the Kanto Local Finance Bureau on May 26, 2022
An ad hoc report based on the provisions of Article 19, Paragraph (2), Item (iii) “Change to a specified subsidiary company”
of the Cabinet Office ordinance on disclosure of corporate information. Submitted to the Director-General of the Kanto
Local Finance Bureau on May 26, 2022

101

Section II. Information on Guarantor Company for Submitter Company
Not applicable.

102