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

Annual Securities Report

Milbon Co., Ltd.
E01039

The 64th Fiscal Year (from January 1, 2023 to December 31, 2023)

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

Milbon Co., Ltd.

Table of Contents

Page
Annual Securities Report (“Yukashoken Hokokusho”) for the 64th Fiscal Year
CoverPart 1 Company Information
I. Overview of Company
1. Key Financial Data
2. History
3. Business Description
4. Subsidiaries and Other Affiliated Entities
5. Employees
II. Overview of Business
1. Management Policy, Business Environment, Issues to Address
2. Sustainability Approach and Initiatives
3. Business Risks
4. Management Analysis of Financial Position, Operating Results and Cash Flows
5. Material Contracts, etc.
6. Research and Development Activities
III. Information about Facilities
1. Overview of Capital Expenditures
2. Major Facilities
3. Planned Addition, Retirement, and Other Changes of Facilities
IV. Information about Reporting Company
1. Company’s Shares, etc.
2. Acquisition and Disposal of Treasury Shares
3. Dividend Policy
4. Corporate Governance
V. Financial Information
1. Consolidated Financial Statements, etc.
2. Financial Statements, etc.
VI. Outline of Share-Related Administration of Reporting Company
VII. Reference Information of Reporting Company
1. Information about Parent of Reporting Company
2. Other Reference Information
Part 2 Information about Reporting Company’s Guarantor, etc.
Independent Auditor’s Report
Internal Control Report (in Japanese only)
Confirmation Letter (in Japanese only)

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2
2
2
4
6
7
8
9
9
12
22
26
31
32
34
34
34
35
36
36
42
43
44
68
69
103
117
118
118
118
119

Cover[Document Submitted]

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

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

Submission of This Document][Submitted to]

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

March 28, 2024

[Accounting Period]

The 64th Fiscal Year (from January 1, 2023 to December 31, 2023)[Company Name]

Kabushiki Gaisha Milbon[Company Name in English]

Milbon Co., Ltd.

[Position and Name of Representative]

Hidenori Sakashita, President & CEO[Location of Head Office]2-3-35, Zengenji-cho, Miyakojima-ku, Osaka City, Osaka[Phone No.]

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

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

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

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

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

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

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

60th

61st

62nd

63rd

64th

Year End

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

Net sales(thousand yen)

36,266,444

35,725,069

41,582,267

45,238,377

47,762,432

Ordinary income(thousand yen)

6,231,538

5,791,315

7,158,440

7,829,279

5,586,650(thousand yen)

4,517,615

4,204,139

5,109,288

5,577,274

4,001,627

Comprehensive income(thousand yen)

4,601,226

3,776,739

5,754,382

6,253,306

4,657,169

Net assets(thousand yen)

35,882,612

36,308,349

40,197,181

43,991,750

45,932,297

Total assets(thousand yen)

41,912,194

43,075,520

48,238,490

52,760,387

53,391,872

Net assets per share(yen)

1,096.02

1,117.10

1,236.41

1,352.52

1,411.56

Basic earnings per share(yen)

137.99129.24157.17171.49122.99Diluted earnings per share

(yen)

-

-

-

-

-

Equity ratio

(%)

85.6

84.3

83.3

83.4

86.0

Return on equity

(%)

13.1

11.6

13.4

13.2

8.9

Price earnings ratio(times)

44.9

50.8

36.3

33.4

30.0

(thousand yen)

4,486,862

6,548,116

6,636,823

5,008,008

4,765,687(thousand yen)

(2,777,709)(161,779)(3,995,279)(3,865,221)(3,109,692)(thousand yen)

(1,869,274)(3,416,124)(1,919,749)(2,578,462)(2,797,765)(thousand yen)

9,376,300

12,307,591

13,312,634

12,258,237

11,292,078

910

975

1,038

1,097

1,140

Profit attributable toowners of parent

Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents
at end of period
Number of employees(Note)(persons)

Diluted earnings per share is not shown since there are no dilutive shares.

-2-

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

60th

61st

62nd

63rd

64th

Year End

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

Net sales(thousand yen)

34,085,114

33,651,807

39,237,623

41,780,945

42,520,224

Ordinary income(thousand yen)

5,825,268

5,584,059

6,928,387

7,959,986

4,906,452

Profit(thousand yen)

4,236,159

3,842,075

4,986,323

5,533,885

3,233,267

Capital stock(thousand yen)

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000(shares)

33,117,234

33,117,234

33,117,234

33,117,234

33,117,234

Net assets(thousand yen)

35,120,946

35,243,127

38,128,794

41,249,787

41,444,776

Total assets(thousand yen)

40,962,412

41,650,835

45,721,261

49,508,428

48,400,863(yen)

1,072.76

1,084.32

1,172.79

1,268.22

1,273.65

56.00

56.00

68.00

86.00

88.00

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

Basic earnings per share(yen)

129.39118.11

153.38170.16

99.37

Diluted earnings per share

(yen)

-

-

-

-

-

Equity ratio

(%)

85.7

84.6

83.4

83.3

85.6

Return on equity

(%)

12.5

10.9

13.6

13.9

7.8

Price earnings ratio(times)

47.9

55.6

37.2

33.6

37.2

Dividend payout ratio

(%)

43.3

47.4

44.3

50.5

88.6

Number of employees(persons)

723

765

810

842

870

Total shareholder return

(%)

140.0

149.5

131.5

133.9

90.6

(%)

(118.1)(126.8)(143.0)(139.5)(178.9)Highest share price

(yen)

6,500

6,690

7,270

6,480

5,870

Lowest share price

(yen)

4,245

4,280

5,510

4,220

3,247

(Comparison indicators:
Dividend Included TOPIX)(Notes) 1. Diluted earnings per share is not shown since there are no dilutive shares.
2. Highest and lowest share prices are those recorded on the Prime Market of the Tokyo Stock Exchange from April 4, 2022,
while those recorded on the First Section of the Tokyo Stock Exchange before that date.

-3-

2. History
Month / Year
July 1960

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

September 1963

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

January 1965
February 1969

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

May 1970
October 1975

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

June 1979
July 1980

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

July 1982
March 1984

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

April 1984
March 1987

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

March 1991
October 1992

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

April 1993
June 1996

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

April 1997

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

April 1998
October 1998

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

June 1999
May 2000

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

July 2000

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

November 2000
June 2001

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

September 2002

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

March 2004
December 2004

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

July 2005
December 2006

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

April 2007
November 2007

Launched a hair color product “ORDEVE” that supports foil placement techniques.
Established Milbon Trading (Shanghai) Co., Ltd. in China.

December 2008
June 2009

Opened Milbon Trading (Shanghai) Co., Ltd. Studio in China.
Shutdown Ueno Dai-Ichi Factory in Iga City, Mie.

July 2009
July 2009

Established Production Technology Development Center in Yumegaoka Factory in Iga City, Mie.
Established Milbon Korea Co., Ltd. in South Korea and opened a Studio.

April 2010
May 2012

Launched a premium brand “Aujua,” born from Japanese climate, culture, and hair characteristics.
Established MILBON (THAILAND) CO., LTD. in Thailand.

December 2013
March 2015

Established MILBON (THAILAND) CO., LTD. production factory in Thailand.
Opened Tokyo Ginza Branch in Chuo-ku, Tokyo and opened a Studio.

June 2016
September 2016

Launched “milbon,” a premium brand of 360 Degree Beautiful Hair.
Shutdown Aoyama Factory in Iga City, Mie.

November 2016

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

-4-Month / Year

Overview

July 2017

Established KOSÉ MILBON COSMETICS CO., LTD. (currently affiliate accounted for by the equity method)

November 2017

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

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

September 2018
October 2018

Established MILBON MALAYSIA SDN. BHD. in Malaysia.
Established MILBON VIETNAM CO., LTD. in Vietnam.

April 2019
October 2019

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

January 2020
July 2021

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

April 2022

Established Milbon Europe GmbH in Germany.

(Note) Studios are training venue for stylists.

-5-

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

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

Hair coloring products

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

Permanent wave products

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

Skincare, make-up cosmetics

Other

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

(Diagram of business activities)(Note)

Overseas transactions differ in sales channels depending on the country.

-6-

4. Subsidiaries and Other Affiliated Entities
Company nameLocation

Capital stock or capital
contribution

United States
New York

USD 2 million

Main business

Share of voting
rightspercentage

Relationship with the Company

100.0

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

100.0

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

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

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

China
Shanghai CityJPY 430 million

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

South Korea
Seoul City

KRW 3,000 million

Sale of hair products

100.0

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

Kingdom ofThailandRayong Pref.

THB 450 million

Manufacture and saleof hair products

100.0

Manufactures and sells theCompany’s hair products in
Thailand.

Malaysia
Kuala Lumpur

MYR 1.5 million

Sale of hair products

100.0

Sells the Company’s hair products
in Malaysia.

VND 46,380 million

Sale of hair products

100.0

Sells the Company’s hair products
in Vietnam.

SGD 250,000

Sale of hair products

100.0

Sells the Company’s hair productsin Singapore.

China
Zhejiang

CNY 240 million

Manufacture and saleof hair products

100.0

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

Germany
Dusseldorf

EUR 2 million

Sale of hair products

100.0

Sells the Company’s hair productsin Germany.

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

VietnamHo Chi Minh City

(Consolidated subsidiary)
MILBON SINGAPORE PTE.
LTD.

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

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

-7-5. Employees(1) Consolidated Companies
As of December 31, 2023
Number of employees
1,140(Notes) 1. The number of employees refers to full-time employees and does not include 53 part-time employees, 35 associate
employees.
2. The Group is composed of a single segment, the manufacture and sale of cosmetics, and therefore, no segment-related
information is presented.
(2) The Company
Average age(years old)

Number of employees
870

As of December 31, 2023
Average annual salary(thousand yen)

Average length of service(years)

35.4

10.8

7,440

(Notes) 1. The number of employees refers to full-time employees and does not include 53 part-time employees, 35 associate
employees, and 29 employees seconded from the Company to subsidiaries and affiliates.
2. The average annual salary includes bonuses and extra wages.
(3) Status of Labor Union
Although no labor union has been formed, the relationship between labor and management is amicable.
(4) Percentage of female employees in management positions, rate of childcare leave usage by male employees, and gender pay
gap among employees
The Company
Current fiscal year
Percentage of female
employees inmanagement position(%)(Note 1)
10.9

Gender pay gap among employees (%)(Notes 1, 3, 4)Rate of childcare leave
usage by male
employees (%)

All employees(Note 2)25.0

Regular employees
70.9

74.3

Irregular employees
50.6(Notes) 1. Calculated in accordance with the stipulations of the Act on Promotion of Women’s Active Engagement in ProfessionalLife (Act No. 64 of 2015).
2. Childcare leave usage rates as described in Article 71-4, Item 1 of the Ordinance for Enforcement of the Act on Childcare
Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members(Ordinance of the Ministry of Labor No. 25 of 1991) were calculated in accordance with the stipulations of the Act onChildcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family
Members (Act No. 76 of 1991).
3. “Regular employees” refers to Executive Officers (other than Board Directors) and permanent employees. “Irregular
employees” refers to associate employees (employees rehired after reaching retirement age), part-time employees, andfixed-term contract employees.
4. The gender pay gap among employees is primarily due to the fact that a large number of female employees have shortlengths of service due to hiring conditions in recent years, the percentage of people in managerial positions that are
women is low, women account for a relatively high percentage of employees with reduced working hours, and otherfactors. Wage structures and systems are uniformly defined, irrespective of gender or age.

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

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

I. Enrich the spirit through beauty
II. Promote recycling in manufacturing and consumption activities
III. Practice people-friendly procurement
IV. Construct a fair and flexible management structure
V. Realize work environments with enhanced job satisfaction- 10 -

(3) Issues to be addressed
The outlook for the economic environment is expected to remain uncertain due to global inflationary pressure, which remains
high although the rate of inflationary growth has settled, geopolitical risks such as the prolonged situation in Ukraine and thesituation in the Middle East, and the risk of economic declines overseas.
Under these circumstances, we are beginning the third year of the Medium-Term Management Plan (2022-2026). In the
global market, we view the global market as seven regions (Japan, Korea, the Chinese cultural sphere, ASEAN, North America,
EU, and the Middle East), and by advancing our system of local production and local consumption, we aim to minimize
geopolitical and other risks and to provide products matched to the values and hair qualities of each region.
In the domestic market, we are accelerating the “Smart Salon Strategy” to achieve the “Beauty Platform Plan,” a new modelfor hair salons. We are wholeheartedly promoting proposals for our Smart Salons, which we expanded to 23 salons in 2023,
and aim to reach 100 Smart Salons by the end of Fiscal Year 2024. Furthermore, in the domestic hair coloring products market,
which remains strong, we are promoting total coloring proposals for both hair and eyebrow coloring, as only hair salons can,along with our high value coloring options for adults through the organic brand Villa Lodola. Through these efforts, we will
put our domestic hair coloring product sales on a new growth trajectory.
At the same time, we will continue to promote initiatives aimed at realizing our Sustainability Commitment Five Key
Challenges and work to resolve social issues.
In the following fiscal year, we expect to record net sales of 50,620 million yen (up 6.0% year on year), operating incomeof 6,600 million yen (up 19.5% year on year), ordinary income of 6,560 million yen (up 17.4% year on year), and profit
attributable to owners of parent of 4,650 million yen (up 16.2% year on year).
* With respect to progress on the Medium-Term Management Plan (2022-2026), net sales are proceeding according to plan,but operating income continues to fall below target levels due to soaring raw material costs, increased labor costs due to wage
increases, and increases in unforeseen expenses, such as Expo sponsorship payments.
We are therefore reviewing and revising the target figures in the Medium-Term Management Plan (2022-2026) weannounced on February 10, 2022, and we have not included a table that was normally reported comparing the actual results
for the current fiscal year and the target figures for the final year (FY2026) of the Medium-Term Management Plan.
Once the review and revision process is completed, plan values will be announced after careful review.

- 11 -

2. Sustainability Approach and Initiatives
Our approach to sustainability and our sustainability initiatives are as indicated below.
Matters related to future developments that are mentioned in this section are judgments that were made as of the end of thecurrent fiscal year.
(1)

Sustainability approach and basic guideline
The Company focuses its business activities on the beauty market, founded in its management philosophy that has been
handed down since its founding. We believe that the creation of a sustainable beauty industry will eventually lead to therealization of a sustainable society. Each and every one of us, including executive management, is working toward this goalby thinking and acting toward this realization.
Basic Guideline for Sustainability
We strive to achieve a sustainable society through our collaboration with haircare professionals.

(2) Matters applying to all aspects of sustainability(i) Governance and risk management
The Company views sustainability-related issues as significant business challenge and has put in place a promotion
framework for resolving those issues. Specifically, the Sustainability Committee, chaired by the Managing Executive
Director, meets once a month. The Sustainability Committee identifies sustainability-related risks and opportunities andevaluates their impact on the company. Based on this evaluation, it examines and discusses sustainability policies and issues
around implementation of related measures with details reported, or submitted for discussion, to the Management Meetingand the Board of Directors as required. The Board of Directors regularly supervises this process, instructing courses of action
and adjusting strategy accordingly.
(Sustainability-related governance structure)- 12 -

(ii) Strategy
1) Defining the “Five Key Challenges (Materiality)”In the Medium-Term Management Plan (2022-2026) announced on February 10, 2022, we have identified the following“Sustainability Commitment Five Key Challenges,” and we are actively prioritizing those areas with the aim of realizing
a sustainable society.
I.
II.

Enrich the spirit through beauty
Promote recycling in manufacturing and consumption activities

III. Practice people-friendly procurement
IV. Construct a fair and flexible management structureV.

Realize work environments with enhanced job satisfaction

2) Process for determining the Five Key Challenges
To determine the Five Key Challenges, we debated the issues that we should promote from three separate perspectives—
ISO 26000, the 17 Sustainable Development Goals (SDGs), and environmental, social, and governance (ESG)
perspectives—and arranged them within an SDGs/ESG matrix (https://www.milbon.com/ja/uploads/docs/esgsdgsmatrix.pdf) (in Japanese only). The Sustainability Committee played a central role in this process, gathering input
from various business divisions, outside experts, and senior management. Subsequently, we reassessed those themes
within the matrix to identify those with high relevance to our business activities and those for which stakeholders havehigh expectations. The Five Key Challenges were then selected based on three areas: solving societal issues, achieving
sustainable business growth, and establishing internal foundations. In addition, we have designated “Enrich the spirit
through beauty,”—one of the Five Key Challenges—as our core issue, labelled Key Challenge I. Providing beauty is not
only integral to our business activities, but it also contributes to emotional well-being. We believe that a spirituallyenriched society will engender a sustainable society. If Key Challenges IV and V ensure that we can continue to besustainable, Key Challenges II and III will ensure that the entire supply chain encompassed by our business activity cancontinue to be sustainable.
(iii) Metrics (KPI) and targets for each of the Five Key Challenges
We have defined priority themes for each of the Five Key Challenges and we have set KPIs and concrete numerical targets
for each theme. These KPIs are periodically monitored by the Sustainability Committee to confirm progress toward them.
When necessary, the Sustainability Committee also deliberates regarding additions or revisions of KPIs.

- 13 -

FY2023
Results

2026
Target2030
TargetNumber of registered milbon:iD members

670,000

1 million-

Number of cities in Japan where Milbon deploys
knowledge-based product sales (Smart Salon)

19 cities
23 salons

100 cities
in Japan-

Total number of annual users of our studios, events, andeducational videos

271,000

335,000-

Number of registered education:iD members

40,000100,000-

81%
reduction

75%
reduction

Priority themes

KPI [Medium- to long-term theme]

I. Enrich the spirit through beauty
Establishment ofknowledge-based
product sales business
utilizing both thephysical and digital
realmsFostering lifetime
beauty partners

II. Promote recycling in manufacturing and consumption activities
Establishment of acarbon-neutral
production system

Reduction rate of CO2 emissions at Yumegaoka Factory(compared to 2019 levels)

Sustainable container

Reduction rate of petroleum-derived virgin plastic use

and packaging design(compared to 2020 levels, per unit sales)

Achievecarbonneutrality

9.6%

15%

30%

reduction

reduction

reduction

RSPO certified palm oil adoption rate (MB+B&C)

9.5%

50%

100%

Number of cases of human rights violations identified

0

0

0

III. Practice people-friendly procurement
Sustainableprocurement of palmoil
Respect for humanrights in the supply
chain
IV. Construct a fair and flexible management structureContinuously
appoint overAppointment of outside board directors

5 (5 out of 11)-

directors

Promoting diversity
among the Board of
Directors

1/3 outsideboard
Continuously

Active appointment of female board members

2 (2 out of 14)

appoint female
board

-

members
Securing diverse skills, including internationality

Improving theeffectiveness of theBoard of Directors

Progress in selecting and improving key challenges
though third-party evaluations

0 (0 out of 14)

Ensure diverse
skills-Continuous
improvement
Continuing

activities forsetting annual-

challenges
V. Realize work environments with enhanced job satisfaction
Turnover rate of junior employees (new graduates to 3rd
year)

10.8%

9%

6%

and framework thatencourage employees

Paid leave utilization rate

67.8%

70%

80%

to continue working

Progress of engagement survey

Conducted
survey and set--

Achieving systems

targets, etc.

- 14 -

(3) Response to climate change(i) Governance and risk management
We see climate change as a real risk that will affect our business strategies and financial plans over the medium to long term.
We have therefore positioned it as one of the Key Challenges of our Sustainability Commitment.
Within our sustainability-related activities, we have created a TCFD Working Group under our Sustainability Committee
to deal with climate change-related risks and opportunities. The TCFD Working Group identifies risks, etc. related to climatechange. The Sustainability Committee reports the activities of the TCFD Working Group to the Management Meeting and
the Board of Directors semiannually, and the TCFD Working Group is supervised by the Board of Directors.
(ii) Strategy
Fiscal Year 2023 was the first fiscal year in which we implemented climate change measures, so we performed a scenario
analysis for Milbon Co., Ltd., the standalone core of the Milbon Group, envisioning scenarios in which average temperaturesrose by 1.5°C and 4°C. For the scenario analysis, we envisaged temperature rises of 1.5°C and 4°C and examined the risks
and opportunities presented by climate change at three points in time—the years 2025 (short-term), 2030 (medium-term),and 2050 (long-term). Scenarios provided by the IPCC and the International Energy Agency (IEA) were used for the analysis.
For the 1.5°C temperature rise scenario, we analyzed the impact of changes in policy, regulations, technology, markets, andconsumer perceptions associated with a transition to a decarbonized society. For the 4°C temperature rise scenario, we
analyzed physical impacts resulting from both acute change (e.g. heavy rainfall, floods) and chronic change (e.g. increases
in average temperature, changes in annual rainfall).
Scenario analysis revealed around 40 risks and opportunities for the Company. The impacts of these risks and opportunities
for us were evaluated, and responses were determined. Results of scenario analysis showed that we would potentially besignificantly impacted by increases in raw material procurement costs under both 1.5°C and 4°C scenarios and would
potentially be significantly impacted by an increase in the costs of the company’s own operations under the 1.5°C scenario.
The results also showed that progress on promoting recycling in manufacturing and consumption activities and practicing
people-friendly procurement, as prescribed in the Five Key Challenges, would help minimize identified risks and capture
identified opportunities. In the future, we will regularly monitor actual conditions and strive to reduce risk by developing
additional response measures as necessary.

- 15 -

(Results of scenario analysis)
Description of opportunity-risk

Classification

Time
frame

Impact1.5°C temperature rise scenario
Increase in procurement costs due to the introduction or

Risk

2030

Large

Increase in procurement costs resulting from land use
constraints due to laws and regulations for protecting forests

Risk

2025

MediumIncrease in procurement costs due to strengthening of laws andregulations relating to raw material traceability

Risk

2030

Medium

Risk

2030

Small

Risk

2030

MediumRisk

2030

MediumRisk

2030

MediumOpportunity

2030

MediumOpportunity

2030

MediumOpportunity

2030

Medium

Risk

2050

Large

Opportunity

2030

Medium

Risk

2050

Small

Risk

2050

Small

expansion of carbon pricing applicable to suppliers
Raw material
procurement

Increase in operating costs due to the introduction or expansionof carbon pricing applicable to Milbon
Increase in energy costs due to rising retail electricity prices
Increase in compliance costs due to more stringent laws andMilbon’s operations

regulations at various worldwide locations
Increase in costs for adapting to a circular economy
Increase in sales due to a rise in competitiveness as a result of
the impact of carbon pricing on competitors
Decrease in emissions and energy costs due to the introductionof in-house power generation

Demand for products

Increase in sales of environmentally friendly product

4°C temperature rise scenario
Increase in the cost of procuring palm oil and other plantRaw material
procurement

derived raw materials due to climate change
Decrease in procurement costs due to initiatives for ensuring
stable procurement of raw materials
Increase in costs for repairing damaged manufacturing facilities

Milbon’s operations

Decrease in sales due to impacts on deliveries and increase incosts due to damaged inventories as a result of flooding andtyphoon damage- 16 -

(Envisaged responses)
1.5°C temperature rise scenario• Survey procurement channels and traceability in the context of risk related
to climate change and the international situation• Investigate efficient procurement and purchasing methods for securing raw
Plant-derived
raw materials

materials• Estimate the increase in costs to suppliers due to carbon pricing, investigate
passing on costs to product prices, and investigate alternative raw materials• Actively use RSPO certified palm oil. Target 100% use of Mass Balance

Raw material
procurement

certified palm oil by 2030
• Actively use plant-derived plastic and resin-reducing molding methods for
packaging of new products with the aim of reducing petroleum-derived
Containers and packaging
materials

virgin plastic use by 30% by 2030
• Research plastic container recycling methods• Estimate the increase in costs of containers and packaging materials due tocarbon pricing, investigate passing on costs to product prices, andinvestigate alternative raw materials• Estimate the cost of carbon pricing for Scope 1 and 2 emissions using carbon

Use of our own energy

prices under the NZE scenario in WEO 2021, 2022
• Increase the percentage of electricity generated in-house based on
projections of rising electricity costs

Milbon’s operations
Response to laws andregulations• Identify the various regulations and envisage switching to other raw
materials or passing on costs to products depending on the impact of rising
costs• Secure costs and establish internal systems for adapting to laws andregulations, particularly in the EU

Demand for products

Product development• Develop products that respond to the needs of consumers’ daily lives,enhance functionality, and reduce environmental impact

4°C temperature rise scenario• Research palm oil alternatives and investigate adapting by altering theexisting formula• Estimate fluctuations in the price of procuring palm oil due to climate
Raw material
procurement

Procurementchange• Research raw materials and securing of procurement channels• Ascertain the impact of climate change on each raw material• Survey climate change in countries where principal natural raw materials
originate and undertake activities to protect those materials

Milbon’s operations

Disaster response• Confirm that insurance will cover repairs to manufacturing facilities
damaged in a disaster• Prepare alternative transportation arrangements in readiness for disaster due
to concerns about the impact on some logistics warehouses- 17 -

(iii) Metrics (KPI) and targets for climate change-related initiatives
With regard to the KPI for climate change-related initiatives, activities to minimize the risk of increases in raw material
procurement costs, which scenario analysis results indicate would have the largest impact on our business, will continue
through efforts to achieve the KPI, which are set out in the Five Key Challenges, of reduction rate of petroleum-derived
virgin plastic use and RSPO certified palm oil adoption rate.
To address the risk of increased operating costs due to the introduction of carbon pricing and escalating electricity prices,in addition to our CO2 emission reduction targets for the Yumegaoka Factory in 2026 and 2030, we have set a new goal for
the Milbon Group to achieve carbon neutrality by 2050. With regard to the Milbon Group’s Scope 1 and 2 emissions, firstwe will aim to achieve carbon neutrality at Yumegaoka Factory, our manufacturing base and the Japanese business location
with the highest CO2 emissions, by 2030. We will then aim to achieve carbon neutrality across the Milbon Group by 2050.
We will continue our efforts to minimize risk by regularly monitoring the status of initiatives for achieving carbon
neutrality and developing measures to address risks.
(CO2 emissions results and target) (t-CO2)
FY2019(reference year)
results
Milbon Co., Ltd.
(non-consolidated)

FY2022

FY2023

2026

2030

2050

results

results

targettargettarget

1,248

1,357

1,419

Scope 1--

Scope 2
(market reference)

3,151

1,531

971

Yumegaoka Factory
Scope 1

502

530

461

75% reduction(compared to2019 levels)

Scope 2
(market reference)
Milbon Group
Scope 1 and 2

1,931

450

0

-

-

-

Carbonneutrality--

Carbonneutrality(4) Human capital and diversity initiatives(i) Basic views on human capital
We consider human capital to be the most important type of capital, absolutely vital to company management and sustained
corporate growth. We believe that human resources create the added value that is the source of our continued corporate
growth and a foundation of greater sales and profits for hair salons. Since our company was founded, we have positioned
human resource hiring and growth as critical management issues, and we have continued to devote our attention to people
as we do business.
(ii) Human capital strategies, metrics (KPI), and targets of the Medium-Term Management Plan (2022-2026)
To achieve our Medium-Term Management Plan (2022-2026), we have set out a “Basic Policy on Human Resources
Strategy: Each employee becomes a driving force of Milbon; As part of Milbon’s sustainable growth, we will foster a
corporate culture that enables every employee to continue to work with a spirit of independence and a feeling of satisfaction.”
We have defined “five key human resources strategy themes” and we strive to motivate employees and create environmentsthat encourage employees to continue working. These “five key human resources strategy themes” are closely linked to our
Medium-Term Management Plan (2022-2026) to create new added value that will be the source of our sustained growth andto contribute to greater hair salon sales and profits.

- 18 -

The contents of specific initiatives, metrics (KPI), and targets for these five key human resources strategy themes are as
indicated below.
1) Next-generation leadership development
In 2014, we envisioned our system of succession for the decade to follow, and over a four-year period beginning in 2015
we conducted a Next Management Leadership Development Program for 42 participants. This led to the appointment of
three Board Directors and eight Executive Officers. The qualitative targets we are working toward for the current fiscal
year are to rebuild succession plans for 10 and 20 years into the future and to launch a new Next Management Leadership
Development Program beginning in 2025.
In parallel with this, in 2024, we will establish a Human Resources Development Committee and we will continue
to aim to create an organizational structure that steadily produces new leaders through leadership development from acompany-wide perspective and by implementing and monitoring training and personnel placement that contributes tothe motivation of each and every member of our Group.
(Metrics (KPI) and targets for next-generation leadership development)
Metrics (KPI)

2024
target2025
targetNext-generation leadershipdevelopment

Establish Next Management
Leadership Development Program

Implement Next Management
Leadership Development Program

2) Fostering greater motivation
In 2022, we introduced an engagement survey and prepared an environment for reporting to management, reporting toand engaging in dialogue with individual business divisions, and creating and implementing action plans, including
conducting compliance awareness surveys.
To promote a greater diversity of working styles, we created a system for appointing experts in individual divisions
and job categories, we appointed experts under this system, we raised the mandatory retirement age to 65, we
introduced a super flextime system, we added productivity-related items to the scope of our evaluation system, and weengaged in various other efforts to foster greater motivation and create environments that encourage employees tocontinue working.

- 19 -

(Metrics (KPI) and targets for fostering greater motivation)
FY2022
results

Metrics (KPI)

FY2023
results2026
targetTurnover rate of junior employees (newgraduates to 3rd year)

10.0

10.8%

9%

Paid leave utilization rate

64.0

67.8%

70%

Conducted survey
and set targets, etc.

-

Progress of engagement survey

Conducted survey3) Reinforcement of people and organizations that create greater value proposition
Based on our nine month long new employee training (Milbon Person/Field Person training and division-specifictraining), which we have been conducting for 40 years, we are continuing to dedicate ourselves to developing humanresources that provide value. In 2025, we will open our Odawara Human Resources Development Center and invest
even more in our human resources development.
Furthermore, we will rebuild our sales structure to create a chain reaction of moving experiences driven by haircoloring (strong value proposition), we will build and maintain customer experience value, we will launch projects
that contribute to global employee training and development, and we will take on the challenges of becoming thecompany that enjoys the greatest level of support from hairstylists.
4) Promoting omnidirectional dialogue
Over the past ten years, the numbers of employees on both a consolidated and non-consolidated basis have risen from
649 and 539 to 1,140 and 870, respectively, a roughly 1.7-fold increase. As divisions and organizational levels havegrown and the number of diverse employees has risen, we have seen the risk of weakening relationships beginning toturn into a reality. This is why we regularly conduct meetings throughout the Company, and in every organization, in
which we share The Milbon Way, our set of action guidelines.
Furthermore, our qualitative goal for Fiscal Year 2024 is to deepen mutual understanding by creating new internal
communication content that helps alleviate gaps in understanding and perception between employees and senior
management, and by creating opportunities for the new President & CEO, Hidenori Sakashita, to engage in dialogues
with all business divisions (through Field Person/Milbon Person discussions).
(Metrics (KPI) and targets for promoting omnidirectional dialogue)
Metrics (KPI)

2024

2025

targettargetCreate new internal
communication content andSmooth internal communication

conduct Field Person discussions

Conduct Milbon Person
discussions5) DE&I promotion
In 2023, we launched our new company-wide “DE&I Promotion Project.” Led by the belief that supporting our female
employees living beautifully is a way to embody our management philosophy, corporate statement, and slogan, we havefocused on the success and ongoing careers of our many female Field Persons, who account for a large percentage of
our workforce, setting this as our highest priority theme. In December 2023, we conducted a workshop on this topic formembers of management. In 2024, we will explore new approaches and deliberate regarding specific measures. Throughthese efforts, we aim to increase the ratio of female in management positions to 20% by 2030.
(Metrics (KPI) and targets for DE&I promotion)
Metrics (KPI)

FY2022

FY20232030

results

results

targetPercentage of female employees in

10.3%

management position- 20 -

10.9%

20.0%

(5) Initiatives related to water resources(i) Basic approach to water resources
We understand that water plays an integral role in all aspects of our business—from serving as an ingredient in many of our
products, including our mainstay haircare products, to being necessary for the rinsing process after customers use our
products. Recognizing the importance of water resource conservation, we are committed to gaining a thorough understandingof water stress in each of our business regions. Additionally, we are dedicated to effective water-saving practices,
encouraging the reuse of water, and actively advancing water conservation initiatives.
As of 2023, at the Yumegaoka Factory, which is the core production base of the Milbon Group where water resources aremost used, we are monitoring water intake and discharge amounts, investigating water stress in the local area, and promoting
conservation activities. Moving forward, we will strive to monitor the intake and discharge amounts of water across theentire group, including production bases of our consolidated subsidiaries and business bases both in Japan and abroad. We
will also make efforts to research and consider countermeasures for water stress specific to each location.
(ii) Specific initiatives related to water resources• Water stress survey at the Yumegaoka Factory
As a result of the water stress survey conducted at the Yumegaoka factory in 2023, the stress level has been determined tobe “Low*.” (Evaluation was performed using the Baseline Water Stress from the Aqueduct Country Ranking.)
Going forward, we plan to conduct water stress surveys not only within Japan but also in our overseas factories, such as
those in Thailand and China.
• Efforts to reduce water consumption
At the Yumegaoka Factory, we installed new pure water devices in 2021 to reduce the factory's environmental impact. The
new devices improved pure water reclamation rates by 20%, cutting the amount of pure water used for manufacturing in
2022 by approximately 2,000 m3 compared to the preceding year.
• Consideration for wastewater
The Yumegaoka Factory concluded an environmental conservation agreement with Iga City to prevent pollution and toprotect the health and living environments of the local community. A third party organization has been commissioned toanalyze monthly water discharge levels and check that they were below defined thresholds. We perform our own daily
inspections to check that levels are being kept below the restriction levels. Through these measures, we are ensuring thatthe water that is discharged into the sewer system meets processing standards equivalent to those required for discharging
water into rivers.
• Water quality survey of drainage routes
In Iga City, Mie Prefecture, where the Yumegaoka Factory is located, we are conducting water quality surveys of the
Kume River and the Kizu River, which are the direct discharge routes for the water used at the factory to reach the ocean,
together with the citizens’ group, the Network of Fish and Children. Results from the PACKTEST survey conducted in
May 2023 confirmed that the water quality of the Kume River and the Kizu River showed no abnormality in the chemical
oxygen demand (an index to measure pollution caused by organic compounds present in water) measurement. Based on
the environmental preservation agreement, we will continue to work together with the local community on activities toreduce environmental impact, including this survey.
(iii) Metrics (KPI) and targets for water resource-related initiatives
As of the date of submission of the securities report, we have not defined metrics or targets related to natural capital andbiodiversity, which includes water resources. However, we are performing analysis using the LEAP approach published in
the TNFD recommendations. We plan to announce the results of our analysis and detailed targets as soon as they are finalized.

- 21 -

3. Business Risks
Among the matters related to the business and financial status described in this document, the following are the main risks that the
management recognizes as having the potential to exert a significant impact on the financial position, operating results, and cash
flows of the Group.
The forward-looking statements in the text are based on judgments made by the Group as of the end of the current fiscal year,
but are not limited to the items listed herein.
The Group defines matters with the potential to have a significant negative impact on the realization of our management
philosophy or our business continuity as “risks,” and has established a basic risk management policy to reduce the likelihood ofthese risks manifesting themselves and to prevent the expansion of damage in the event that a risk materializes and a crisis occurs.
The Group is working to develop and improve its risk management promotion system and framework.
Based on this policy, each business division and subsidiary reviews the “List of Risk Matters,” which summarizes the risks that
may arise in the Group. In addition, the Group identifies and responds to incidents arising from the conduct of business and reports
them on a quarterly basis to the Management Meeting, which is composed of the Internal Board Directors, the Standing Audit &Supervisory Board Member and the Executive Officers. During the current fiscal year, the Corporate Administration Department
and business divisions worked together to establish systems for reducing risks related mainly to the protection of personal
information and confidential information, appropriate dissemination of information to consumers via social networking sites andadvertisements, and compliance with laws, regulations, and internal rules by clarifying and improving rules, conducting
compliance training for employees (confidential information management and information security, legal compliance when thedissemination of information, mental health and harassment, compliance with various laws and regulations) and engaging in otheractivities.
In addition, the Group has established the Risk Management Committee, which is chaired by the Representative Director,
President & CEO and composed of the Internal Board Directors, the Standing Audit & Supervisory Board Member and Executive
Officers. As a general rule, this committee meets three times per year. This committee identifies “company-wide risks,” i.e., risks
that should be addressed on a company-wide basis, taking into account the significance and priority of the risks surrounding theGroup, the likelihood and timing of the materialization of risks, the likelihood and impact of impeding the achievement of theMedium-Term Management Plan, etc., and appoints a person in charge of each company-wide risk from among the members of
the Risk Management Committee to implement countermeasures on a company-wide basis. The Risk Management Committee
reports to the Board of Directors semiannually on the progress made in responding to company-wide risks, and the Committee issubject to the supervision and monitoring of the Board of Directors.

In the current fiscal year, Internal Board Directors, the Standing Audit & Supervisory Board Member, and Executive Officers
discussed and revised the risk map that mapped company-wide risks by importance and priority when the Risk Management
Committee was established in 2022. A list and assessment of company-wide risks as of December 2023 are shown below. Notethat the risk assessment is not based on general indicators but risks are uniquely assessed based on the situation within the Group.

- 22 -

(List of company-wide risks)
Likelihood ofCompany-wide risksmaterialization
Information security andconfidential information
Highmanagement
System management for
Mediumhairstylists
Raw materials, supplies,Highand logistics costs
Regulatory andenvironmental complianceHighfor raw materials
Insufficient response to
Low
SDGs

ImpactCompany-wide risks

Likelihood ofmaterialization

ImpactLarge

Labor management

Low

Small

Large

Brand protectionHigh

MediumIncomplete sales strategy

Low

Large

MediumBusiness Continuity Plan
(BCP)

Low

Large

MediumCosmetics businessMediumSmall

MediumMediumDelay in response todigital technologies

MediumMediumMediumSmall

Climate change

Low

MediumLow

Small

Quality and safetyassurance

Low

MediumMediumSmall

Geopolitics

Low

Medium

High

Large

MediumMediumLow

Large

MediumMedium

High

Small

Low

Small

Group governanceMediumLarge

Low

MediumOverseas tax compliance

Low

Medium

High

Large

MediumLarge

Global logistics network
Deficiencies in tradeoperations
Inadequate management of
hazardous materials
Product quality assurance
overseas
Dissemination of
information to consumers
Inadequate production andadvertising materials
Traffic accidents andviolations with company
vehicles*Medium*Failure of overseas
business
Uncertainty of business
investments
Exchange and interest
rates

*

Human resources
MediumMediumdevelopment
Compliance
Low
Medium*Company-wide risks for FY2023 (64th fiscal year)

Delays in research anddevelopment
Changes in the market
environment
Failure of internal control(Approximate likelihood of the materialization of risks)
LevelTime of materializationHigh

Likelihood of materialization within a year

MediumLikelihood of materialization within three years

Low

Likelihood of materialization within five years(Approximate level of impact)
Level

Meaning of level

Large
MediumSmall

Significant impact
Moderate impact
Minor impact(Quantitative)
Impact on sales
Impact of 1% or more
Impact of less than 1%
Little or no impact(Qualitative)
Scope of impact
Society as a whole
Industry and stakeholders
Internal only

Based on the revised risk map and the risk questionnaire conducted with business division heads, the company-wide risks for
FY 2024 (65th fiscal year) were determined at the end of the current fiscal year, and we will continue to implement risk reduction
activities company-wide.

- 23 -*

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

New

Ongoing

Risks related to raw
materials, supplies, andlogistics costs

Risks related toappropriate information
dissemination to
consumers

Details of risks

Main initiatives

The Group aims to continue to provide a

Through coordination among related

stable supply of products to customers bydivisions, the Group measures the costs

ensuring steady procurement of raw

primarily of raw materials, supplies, andmaterials and supplies for manufacturing

logistics and discusses responses based on

and shipping products. However, thefuture projections, as well as prepares for

impact of geopolitical risks, changes in the

shortages of raw materials and supplies tobalance of supply and demand, fluctuations

advance measures for the stable supply ofin exchange rates, and rising labor costs

products.

related to logistics may result in increased

In the current fiscal year, we conducted acosts for raw materials, supplies, andcost analysis of raw materials and supplies,

logistics, as well as longer lead times,

shipment analysis for logistics, andwhich could result in an inability to stably

activities aimed at achieving procurement

supply products to the market andand distribution at appropriate costs

potentially lead to a deterioration in thethrough coordination among related

credibility of the Group.

divisions.

The Group strives to earn the trust of

The Group strives to maintain the trust

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

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

providing accurate information thatIn the current fiscal year, we havecustomers can use safely and withstrengthened internal training (conducting

confidence. However, if inappropriate

study sessions and video training), revised

expressions or inaccurate information are

our system of prior review, and considereddisseminated in the Group’s

the introduction and test operation ofadvertisements, etc., it may damage theautomatic check tools as an initiative toGroup’s reputation and materially affectprevent inappropriate expressions in the

the Group’s operating results, etc.

use of advertising and social networking
sites.

Ongoing

Risks related to thegovernance of overseas
subsidiaries

The Group’s inadequate development of

The Group collects information on the

the Group and governance system, such as

laws and regulations of each country in

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

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

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

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

with our subsidiaries as necessary.

impact on the Group’s operating results

In the current fiscal year, we held regularand other factors.

meetings between the parent company andeach subsidiary and clarified issues that theGroup should address based on theanalysis of risk reports from subsidiaries.

- 24 -

Risks

Details of risks
If a natural disaster such as a major

Ongoing

Risks related to largescale earthquakes andBusiness Continuity
Plan (BCP)

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

Continuity Plan (BCP) aimed at quickly

circumstances were to cause a business

restoring production and logistics

continuity crisis, the Group’s operating

operations in the event of a natural disaster

results could be materially affected by such

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

continuity crisis due to unforeseen

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

plan.

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

our products, delays in the development of

Headquarters reviewed and conducted

new products, and a decline in producttraining for the BCP for production andsales due to our inability to provide ourlogistics, verified the inventory and supply

products to salons.

status assuming the shutdown of the
Yumegaoka Factory, confirmed the statusof the communication network in the eventof a disaster affecting the logistics
network, checked the BCP response of
subcontractors, and confirmed risks atoverseas production sites.

- 25 -

4. Management Analysis of Financial Position, Operating Results and Cash FlowsThe summary of the financial position, operating results, and cash flows (below, “operating results, etc.”) of the Group (theCompany, its consolidated subsidiaries, and its equity-method affiliates) for the current fiscal year and analysis and discussion of
the Group’s operating results, etc., from the perspective of management are as follows.
Matters related to future developments that are mentioned in this section are judgments that were made as of the end of thecurrent fiscal year.
(1) Analysis of operating results(i) Net sales and gross profit
Net sales for the current fiscal year were 47,762 million yen (up 5.6% year on year). This was primarily due to the fact thatsales of haircare products were strong both in Japan and overseas, led by premium brands Aujua and Milbon, although salesof hair coloring products in Japan decreased due to a rebound from the high demand during the COVID-19 crisis.
Gross profit rose to 29,525 million yen (up 0.1% year on year). The inventory write-downs of hairdryers introduced inJapan and the impact of persistently high raw material prices resulted in a gross profit margin of 61.8% (down 3.4 points
year on year).
(ii) Selling, general and administrative expenses, and operating income
Selling, general and administrative expenses for the current fiscal year were 24,000 million yen (up 9.3% year on year). Thiswas primarily due to the fact that expenses increased mainly due to the resumption of activities, including increased
promotion expenses and market development expenses resulting from active holding of large-scale events and seminars bothin Japan and overseas. Travel expenses increased due to an increase in domestic and overseas business trips. As a result,operating income was 5,525 million yen (down 26.8% year on year).
(iii) Non-operating income/expenses, ordinary income
Non-operating income for the current fiscal year was 186 million yen and non-operating expenses were 125 million yen. As
a result, ordinary income was 5,586 million yen (down 28.6% year on year).
(iv) Extraordinary income/loss, profit attributable to owners of parent
Extraordinary income for the current fiscal year amounted to 0 million yen and extraordinary losses amounted to 154 million
yen. As a result, profit attributable to owners of parent was 4,001 million yen (down 28.3% year on year), and net income
per share was 122.99 yen.
A breakdown of consolidated net sales by product category, a breakdown of net sales into domestic and overseas sales,and production, orders, and sales results are shown below.
(Consolidated net sales by product category)(Million yen)Previous fiscal year

Current fiscal year

Category
AmountRatio (%)

AmountRatio (%)

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

Haircare products

26,31258.2

28,355

59.4

2,042

7.8

Hair coloring products

16,631

36.7

16,953

35.5

322

1.9

Permanent wave products

1,450

3.2

1,463

3.0

13

1.0

Cosmetic products

572

1.3

571

1.2

(0)

(0.1)

Other

272

0.6

418

0.9

145

53.6

45,238100.0

47,762

100.0

2,524

5.6

Total

- 26 -

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

Ratio (%)

AmountRatio (%)

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

Domestic sales

35,33478.1

36,502

76.4

1,168

3.3

Overseas sales

9,904

21.9

11,260

23.6

1,355

13.7

Total

45,238100.0

47,762

100.0

2,524

5.6

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

Current fiscal year
(From January 1, 2023
to December 31, 2023)

Change (%)

Haircare products

31,519,770(0.7)

Hair coloring products

15,969,133(9.2)

Permanent wave products

1,582,013(5.8)

459,141

80.3

49,530,059

(3.4)

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

There are no applicable items because the Group conducts production on a prospective basis.

- 27 -

(iii) Sales results
The following is a breakdown by product category for the current fiscal year.
(Thousand yen)
Current fiscal year
(From January 1, 2023
to December 31, 2023)

Product category

Change (%)

Haircare products

28,355,020

7.8Hair coloring products

16,953,723

1.9

Permanent wave products

1,463,884

1.0

Cosmetic products

571,762

(0.1)

Other

418,040

53.6

47,762,432

5.6

Total
(Note)

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

Counterparty

Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Amount(million yen)

Current fiscal year
(From January 1, 2023
to December 31, 2023)
AmountRatio (%)

(million yen)

Ratio (%)

Topy Co., Ltd.

4,804

10.6

5,199

10.9

GAMO Co., Ltd.

3,810

8.4

3,947

8.3

BIC HOLDINGS Inc.

3,396

7.5

3,493

7.3

(2) Explanation of Financial Position
Total assets at the end of the current fiscal year increased by 631 million yen from the end of the previous fiscal year to 53,391
million yen.
Current assets decreased by 520 million yen from the end of the previous fiscal year to 26,178 million yen. The main factors
for the change were a decrease of 962 million yen in cash and deposits and an increase of 620 million yen in merchandise andfinished goods.
Non-current assets increased by 1,151 million yen from the end of the previous fiscal year to 27,213 million yen. This was
mainly due to an increase in construction in progress of 541 million yen associated with construction costs for the Human
Resources Development Center.
Current liabilities decreased by 1,428 million yen from the end of the previous fiscal year to 6,567 million yen. The main
factor for the change was a decrease of 923 million yen in income taxes payable.
Non-current liabilities increased by 119 million yen from the end of the previous fiscal year to 891 million yen.
Net assets increased by 1,940 million yen from the end of the previous fiscal year to 45,932 million yen. The main factors
for the change were increases of 1,203 million yen in retained earnings and 607 million yen in foreign currency translation
adjustment due to the depreciation of the yen.
As a result, the equity ratio changed from 83.4% at the end of the previous fiscal year to 86.0%. Net assets per share basedon the total number of shares outstanding at the end of the period were 1,411.56 yen, compared with 1,352.52 yen at the endof the previous fiscal year.

- 28 -

(3) Cash Flows
Cash and cash equivalents (hereinafter, “funds”) at the end of the current fiscal year decreased by 966 million yen from theend of the previous fiscal year to 11,292 million yen.
The status of cash flows during the current fiscal year and the factors responsible are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities was 4,765 million yen. This was mainly due to profit before income taxes of 5,432
million yen, depreciation of 2,275 million yen, share of loss of entities accounted for using equity method of 110 million yen,
an increase in inventories of 469 million yen, and income taxes paid of 2,428 million yen.
(Cash flows from investing activities)
Net cash used in investing activities was 3,109 million yen. This was mainly due to purchase of property, plant andequipment of 2,598 million yen, purchase of intangible assets of 612 million yen, payments for guarantee deposits of 179
million yen, and proceeds from cancellation of insurance funds of 286 million yen.
(Cash flows from financing activities)
Net cash used in financing activities was 2,797 million yen. This was mainly due to cash dividends paid of 2,796 million
yen.
(4) Significant accounting policies and estimates
The Group’s consolidated financial statements have been prepared based on accounting principles generally accepted in Japan.
In preparing the consolidated financial statements, the Group continually evaluates the estimates and judgments that affectthe reported items of assets and liabilities and the disclosure of contingent liabilities as of the balance sheet date, as well as thereported figures of revenues and expenses during the consolidated accounting period. However, actual results may differ fromcurrent estimates due to the occurrence of unforeseeable events and other factors.
Significant accounting policies adopted in the Group’s consolidated financial statements are described in Notes to theConsolidated Financial Statements (Significant matters that serve as the basis for preparation of consolidated financial
statements) of “V. Financial Information, 1. Consolidated Financial Statements, etc., (1) Consolidated Financial Statements.”(5) Recognition, analysis and discussion of the status of operating results
Factors affecting the Group’s management are described in “II. Overview of Business, 3. Business Risks.”(6) Sources of capital and liquidity of funds
The Group’s capital needs are primarily working capital needs and capital expenditure needs.
The working capital needs are mainly due to the Group’s production costs, such as the purchase of raw materials, andoperating expenses, such as selling, general and administrative expenses. Capital expenditure needs are mainly for the purchaseof fixed assets for the establishment of new bases, relocation and expansion of existing bases, and acquisition of production
facilities. For general investment of surplus funds, the Company selects investment instruments with safety as the primaryconsideration.
(7) Objective indicators for judging the achievement of management policy, management strategy, or management objectives
The Group’s management policy is described in “II. Overview of Business, 1. Management Policy, Business Environment,
Issues to Address, (1) Management policy.”
The target ratios in the text and the figures in the revised plan for Fiscal Year 2023 are calculated based on the figuresannounced in the “Notice of Revision to Consolidated Operating Results Forecast” released on November 10, 2023.
The results for Fiscal Year 2023 are net sales of 47,762 million yen (0.1% down from the target), operating income of 5,525
million yen (7.9% down from the target), ordinary income of 5,586 million yen (9.3% down from the target), and profit
attributable to owners of parent of 4,001 million yen (6.1% down from the target).

- 29 -

The plan for Fiscal Year 2024 is net sales of 50,620 million yen (up 6.0% year on year), operating income of 6,600 million
yen (up 19.5% year on year), ordinary income of 6,560 million yen (up 17.4% year on year), and profit attributable to ownersof parent of 4,650 million yen (up 16.2% year on year).
The revised plan and results for Fiscal Year 2023 and the plan for Fiscal Year 2024 are as follows.
(Million yen)

Net sales

FY2023Composition

FY2023

Revised plan(%)

Results

Increase
Composition (%)(decrease)amountYear-on-year

FY2024change (%)

Plan

Composition (%)

47,820100.047,762

100.0

(57)

(0.1)

50,620100.0

Domestic

36,47076.3

36,502

76.4

32

0.1

38,62076.3

Overseas

11,35023.7

11,260

23.6

(90)

(0.8)

12,00023.7

Gross profit

29,90062.5

29,525

61.8

(374)

(1.3)

32,40064.0

Selling,

23,90050.0

24,000

50.2

100

0.4

25,800

51.0

6,000

12.5

5,525

11.6

(474)

(7.9)

6,600

13.0

6,160

12.9

5,586

11.7

(573)

(9.3)

6,560

13.0

4,260

8.9

4,001

8.4

(258)

(6.1)

4,650

9.2

general andadministrative
expenses
OperatingincomeOrdinary
incomeProfitattributable toowners ofparent- 30 -

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

- 31 -

6. Research and Development Activities
The Group conducts product development under the “TAC Product Development System,” a structure in which persons with ahigh level of beauty expertise, such as hairstylists who are supported by customers, are invited to participate as representatives of
their customers. The Group uses scientific methods to elucidate the sensible beauty know-how of hairstylists, such as design
creation, and create products that reflect this know-how using formulation technology.
In the current fiscal year, we strengthened business in the hair care field by focusing on basic and fundamental research, and we
also engaged in research and development activities with an emphasis on environmental friendliness from the perspective of thesustainability. We are also engaged in global research and development by strengthening the collaboration system at four locationsin Japan, the U.S., China, and Thailand. In addition, in December 2023, we opened the Innovation Center in Haneda, Tokyo as a
new research base for product and service development from a longer-term perspective. We will utilize the Center as a place topromote collaboration with other companies and academia-government-industry collaboration and conduct research using cuttingedge research technologies, and promote highly confidential research that will become the seeds of future business.
Going forward, we intend to quickly respond to rapidly changing market needs, and to develop local products for overseas
markets that match the characteristics of each region, in addition to our existing global products from Japan, in order to create
products that will please stylists and their customers around the world.
Total research and development expenses for the current fiscal year amounted to 2,334 million yen (4.9% of net sales), and themain research and development activities and achievements are as follows.
(1) Hair care field
By combining the latest hair research results with innovative formulation development technologies, we are developing saloncare products that achieve salon quality and essentially solve problems through stylists’ treatments, as well as home careproducts that propose the realization of beautiful hair in accordance with customers’ values and lifestyles.
From the premium brand Aujua, we have launched Aujua Inmmetry Line, which corrects the distortion of hair caused bydaily damage accumulation and leads to manageable, shiny hair. From “milbon,” we have launched Blondeplus Series andCreative Style Series Shimmer aimed at high-tone customers, considering the expansion of bleach designs. From the newly
created sub-brand Milbon &, we have launched Aromatic Series, which makes it possible to choose scents while enjoying awide range of hair sensation effects.
From the technical brand, we launched Myforce Controller to suppress hair breakage caused by repeated bleaching.
From the professional brand, we launched Elujuda Sun Protect, which makes it possible to choose the preferred agent typefor each usage scenario and protects hair moisture from sunlight, and Miincurl, which is used before using a hair iron tomaintain large curls without splitting.
From Villa Lodola, we launched Villa Lodola Renovo Tempus & Fulgens, which achieves beautiful color gloss and shine
to customers with aging or color damage through the repairing effects of nature’s blessings.
As a new initiative to promote our Lifetime Beauty Care Strategy, we jointly developed beauty equipment and launched
Elmista, a hair dryer with a beauty serum spraying function.
(2) Hair color field
We are developing additional items that provide customers with new hair color designs and developing high-value-added
formulations based on the latest hair research results.
In the ORDEVE hair color brand, we launched Relaxy Line, which gives an elegant and effortless chic look, down to eventhe highlight design. From ORDEVE Addicthy, we added three hues that cancel out orange undertones and express atranslucent grayish tone as a new standard line.
From ORDEVE Crystal, we launched Highbright, which gives saturated radiance to adult hair and allows for free and brightcolor expression, and added Off Black to the ENOG brand, as a dyeable black that enhances the design with a feeling oftightness and even allows for color changes beyond that.
(3) Beauty health care field
From the current fiscal year, as one of our focus areas in the Lifetime Beauty Care Strategy, we are launching products toachieve total beauty that supports the healthy and beautiful lives of customers.
Based on 20 years of applied research on 5-ALA, referred to as the source material of life energy, we launched Alanous, abeauty supplement that supports a moist and fresh daily life.
(4) Basic research field
In order to apply cutting-edge research to the development of products, we are actively promoting the use of SPring-8, a large- 32 -

synchrotron radiation experimental facility that enables observation of hair and cells at the nano-level, as well as joint researchwith universities. The results are utilized in the development of new products, such as Aujua and “milbon” products.
In a joint research division with the Osaka Metropolitan University Graduate School of Medicine, we conducted new hair
growth research using human iPS cells and discovered a component that promotes hair lengthening in human hair follicle
tissue. This research was presented at the 33rd International Federation of Societies of Cosmetic Chemists (IFSCC) Congressin Barcelona 2023, and was selected in the top ten in the applied research oral presentation category. This component is planned
to be gradually applied starting from new products to be launched in Fiscal Year 2024.
(5) Other R&D
As part of our research and development activities with an emphasis on environmental friendliness, we are implementing 4R(reduce, replace, reuse, and recycle) initiatives towards our 2030 target of reducing the use of petroleum-derived virgin plastic
by 30%.
In new products, we are promoting the continuous use of bottles by adopting bottles with a pump and refill pouch
specifications.
Furthermore, we have worked on reducing the amount of plastic use while maintaining quality through measures such as
downsizing the caps on refill pouches, switching to capless pouches, and changing the bottle molding method. These initiatives
are being gradually rolled out to new and existing products in Fiscal Year 2023.

- 33 -

III. Information about Facilities
1. Overview of Capital Expenditures
Capital expenditures (property, plant and equipment, and intangible assets) in the current fiscal year totaled 3,151 million yen. The
major components of the capital expenditures were the construction costs of the new Human Resources Development Center, andthe introduction of production facilities at Yumegaoka Factory.

2. Major Facilities(1) The Company
Major facilities are as follows.
As of December 31, 2023
Book value (thousand yen)
Office name
(Location)

Description offacilities

Head Office

Companywide(Chuo-ku, Tokyo)

administration

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

Sales and services
New hire training
and dormitory

Machinery,
Buildings andequipment andstructures
vehicles

Land
Area
(m2)

Other

Total

Numberofemployees

Amount173,359---

547,703

721,06362

506,0440981

1,258,529

273,871

2,038,446

4573,1790422

39,602

1,067

113,8499845,745

6,952

4,100

1,602,859

432,326

2,887,883

190

2,385,449

1,900,285

58,345

1,555,093

800,440

6,641,267

164

358,157-542

423,809

6,403

788,369

61

Central ResearchInstitute(Miyakojima-ku,

Research

Osaka City)
Yumegaoka Factory

Manufacture of(Iga City, Mie)hair products

Osaka Branch(Nishi-ku, Osaka City)

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

- 34 -

(2) Overseas subsidiaries
As of December 31, 2023
Book value (thousand yen)Company Name

MILBON USA,
INC.

Office name
(Location)

Description offacilities

Head office

Head office(Shanghai) Co.,

(Shanghai City,

Ltd.

China)

Milbon Korea
Co., Ltd.

117,176

-

-

6,818

-

14,309Total-

49,509166,686

21--

14,894

21,712

49

-

-

-

21,91736,226

46

991,828

262,747

24,000137,811242,795

1,635,183

90

1,854,318

987,280--

318,056

3,159,655

29

Sales andservices

Head office(Seoul City, South
Korea)

Number of
employees

Other

services

United States)

Milbon Trading

Machinery,equipment
and vehicles

Sales and(New York, theLand

Buildings
andstructures

Sales andservices

Area
(m2)

AmountHead office

MILBON(THAILAND)
CO., LTD.

(Rayong Pref.,Manufacture

Kingdom ofand sales

Thailand)

Milbon(Zhejiang)

Head office

Manufacture

Cosmetics Co.,

(Zhejiang, China)

and sales

Ltd.

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

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

Description of facilities(million yen)

Total amountAmountalready paid

Method offund

Start date

Plannedend date

September 2023

March 2026

procurement

Milbon Co.,
Ltd.
Human

Odawara City

Resources

Kanagawa

Development

Land and building for
Human Resources

4,400

Development Center

Center(2) Significant refurbishment
Not applicable.
(3) Significant retirement of facilities
Not applicable.

- 35 -

1,935

Own funds

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

Total number of shares authorized to be issued (shares)

Common stock

120,408,000

Total

120,408,000(ii) Issued shares

Class

Name of financial
instruments exchange
Number of issued shareson which securities are
Number of issued shares
as of the end of thelisted or authorized
as of the submission date
Description
current fiscal year
financial instruments(March 28, 2024)(December 31, 2023)
business association towhich securities areregistered
Tokyo StockStandard shares with no restrictions

Common stock

33,117,234

33,117,234

Total

33,117,234

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

- 36 -

Exchange(Prime Market)-

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

(Note)

16,558,617

33,117,234-

2,000,000-

199,120(Note) The increase was due to the 2-for-1 stock split.
(5) Shareholding by shareholder category
As of December 31, 2023
Status of shares (Number of shares constituting one unit: 100 shares)
Category

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

Number ofshareholders
Number ofshares held

Total

Status ofshares lessthan oneunit(shares)

-

24

20

190

183

55

19,976

20,448--83,227

7,135

52,67086,539112

99,544329,227

194,534

-

25.28

2.17

16.00

26.29

0.03

30.23

100

-

(Unit)
Percentage ofshareholdings(%)(Notes) 1. There are 577,107 treasury shares, of which 5,771 units are included in “individuals and others” and seven shares are in“status of shares less than one unit.” The number of treasury shares of 577,107 is the actual number of shares substantiallyheld as of December 31, 2023.
2. The figures in “other corporations” and “status of shares less than one unit” above include 20 units and 68 shares,
respectively, held under the name of Japan Securities Depository Center, Inc.

- 37 -

(6) Major shareholders

Name/company name

The Master Trust Bank of Japan,
Ltd. (Trust account)
Konoike Asset Management
Company

As of December 31, 2023
Percentage of shares
Number of shares
held to the total
heldnumber of issued(thousand shares)
shares (excluding
treasury shares) (%)

Address

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

4,269

13.12

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

1,920

5.90

SSBTC CLIENT OMNIBUS
ACCOUNT(Standing proxy: Custody

One Congress Street, Suite 1, Boston,Services Department, Tokyo
Branch, The Hongkong and

Massachusetts(3-11-1, Nihombashi, Chuo-ku, Tokyo)

1,469

4.52

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

1,328

4.08

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

1,029

3.16

(Standing proxy: Custody
Services Department, Tokyo

190 Elgin Avenue, George Town, Grand Cayman,
KY 1-9005, Cayman Islands

1,017

3.13

Branch, The Hongkong andShanghai. Banking Corporation(3-11-1, Nihombashi, Chuo-ku, Tokyo)

Suita City, Osaka

867

2.66

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

640

1.97

487

1.50

483

1.49

13,512

41.53

Shanghai. Banking Corporation
Limited)SMBC Trust Bank Ltd.
Designated Securities Trust
Custody Bank of Japan, Ltd.
(Trust account)
MISAKI ENGAGEMENTMASTER FUND

Limited)Kazunobu Konoike
MILBON Employee Stock
Ownership Association
THE BANK OF NEW YORKMELLON 140042

240 Greenwich Street, New York, NY 10286,
U.S.A.

(Settlement & Clearing Services
Department, Mizuho Bank, Ltd.)(Building A, Shinagawa Intercity, 2-15-1, Konan,
Minato-ku, Tokyo)

Keiko Murai

Miyakojima-ku, Osaka City, Osaka
Total

-

(Notes) 1. The above numbers of shares held by banks include the following shares held in connection with their trust business.
The Master Trust Bank of Japan, Ltd.
4,269 thousand shares
SMBC Trust Bank Ltd.
Custody Bank of Japan, Ltd.

1,328 thousand shares
1,029 thousand shares- 38 -

2. Although the report of large volume holding (change report) made available for public inspection on July 19, 2023
states that JPMorgan Asset Management (Japan) Limited held the following shares as of July 14, 2023, since theCompany is not able to confirm the actual number of shares held as of the end of the current fiscal year, these sharesare not included in the status of major shareholders above.
The details of the report of large volume holding (change report) are as follows:

Name/company name

JPMorgan Asset Management (Japan)
Limited.

J.P. Morgan Securities plc

Address

Number of sharecertificates, etc. held
(thousand shares)

Percentage ofshares held
(%)

1,464

4.42

140

0.42

1,604

4.84

Tokyo Building, 2-7-3, Marunouchi,
Chiyoda-ku, Tokyo
25 Bank Street, Canary Wharf, London
E14 5JP, U.K.

Total

-

3. Although the report of large volume holding (change report) made available for public inspection on September 7,2023 states that Capital Research and Management Company held the following shares as of August 31, 2023, since
the Company is not able to confirm the actual number of shares held as of the end of the current fiscal year, theseshares are not included in the status of major shareholders above.
The details of the report of large volume holding (change report) are as follows:
Number of sharecertificates, etc. held
(thousand shares)

Percentage ofshares held(%)

Name/company name

Address

Capital Research and Management
Company

333 South Hope Street, Los Angeles, CA
90071, U.S.A.

1,237

3.74

Capital International KK

Marunouchi Nijubashi Building, 3-2-3,
Marunouchi, Chiyoda-ku, Tokyo

857

2.59

138

0.42

125

0.38

58

0.18

2,417

7.30

Capital International Inc.
Capital International Sarl.
Capital Group Investment
Management Pte. Ltd.
Total

11100 Santa Monica Boulevard, 15th Fl.,Los Angeles, CA 90025, U.S.A
3 Place des Bergues, 1201 Geneva,
Switzerland
1 Raffles Quay, #43-00, Singapore(048583)-- 39 -

4. Although the report of large volume holding (change report) made available for public inspection on October 6, 2023
states that NIPPON LIFE INSURANCE COMPANY held the following shares as of September 29, 2023, since theCompany is not able to confirm the actual number of shares held as of the end of the current fiscal year, these sharesare not included in the status of major shareholders above.
The details of the report of large volume holding (change report) are as follows:

Name/company name

AddressNIPPON LIFE INSURANCE

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

COMPANY

Osaka

Nissay Asset Management
Corporation

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

Total

Number of sharecertificates, etc. held
(thousand shares)-

Percentage ofshares held
(%)

371

1.12

647

1.96

1,019

3.08

5. Although the report of large volume holding (change report) made available for public inspection on December 20,
2023 states that Nomura Securities Co., Ltd. held the following shares as of December 15, 2023, since the Company
is not able to confirm the actual number of shares held as of the end of the current fiscal year, these shares are notincluded in the status of major shareholders above.
The details of the report of large volume holding (change report) are as follows:

Name/company name

Address

Number of sharecertificates, etc. held
(thousand shares)

Percentage ofshares held(%)

Nomura Securities Co., Ltd.

1-13-1, Nihonbashi, Chuo-ku, Tokyo

3

0.01

Nomura International plc

1 Angel Lane, London EC4R 3AB, U.K.

64

0.19

Nomura Asset Management Co., Ltd.

2-2-1, Toyosu, Koto-ku, Tokyo

2,243

6.78

2,311

6.98

Total

-

- 40 -

(7) Voting rights(i) Issued shares
As of December 31, 2023
Category

Number of shares (shares) Number of voting rights

Description

-

-

-

-

-

-

-

-

-

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

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

Commonstock

577,100

Shares with full voting rights (Other)

Commonstock

32,345,600

CommonShares less than one unit

stock

Total number of issued sharesStandard shares with no restrictions-

on shareholder’s rights
323,456

Same as the above

194,534--

33,117,234--

Number of voting rights held by all-

shareholders

323,456-(Notes) 1. The figures in “shares with full voting rights (other)” and “shares less than one unit” include 2,000 shares (20 voting
rights) and 68 shares, respectively, held under the name of Japan Securities Depository Center, Inc.
2. The number of shares in “shares less than one unit” includes seven treasury shares held by the Company.
(ii) Treasury shares, etc.

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

Address of shareholder

As of December 31, 2023
Number of
Number of
Ratio of number ofshares held
Total number
shares held undershares held to total
under the names of shares held
own name
number of issuedof others(shares)(shares)shares (%)(shares)

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

577,100-

577,100

1.74-

577,100-

577,100

1.74- 41 -

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

Number of shares (shares)

Treasury shares acquired during the current fiscal year
Treasury shares acquired during the current term

Total amount (thousand yen)
418

2,148

-

-

(Note) The number of treasury shares acquired during the current term does not include the number of shares acquired as a result of
the purchase of shares less than one unit during the period from March 1, 2024 to the date of filing of this annual securities
report.
(4) Disposal of acquired treasury shares and number of treasury shares held
Current fiscal year
Category

Current term

Total amount ofdisposition(thousand yen)

Number of shares(shares)

Total amount ofdisposition(thousand yen)

Number of shares(shares)Acquired treasury shares for which
subscribers were solicited

-

-

-

-

Acquired treasury shares that werecanceled

-

-

-

-

-

-

-

-

Other

14,82250,898--

Number of treasury shares held

577,107-577,107-

Acquired treasury shares that weretransferred due to merger, share exchange,
share issuance, or company split(Notes) 1. The decrease in “other” for the current fiscal year is due to the disposal of treasury shares (number of shares: 14,714
shares, total amount of disposition: 50,527 thousand yen) pursuant to the resolution of the Board of Directors meeting
held on April 14, 2023, accompanying the introduction of the restricted share-based compensation plan, and due to thesale of shares less than one unit (number of shares: 108 shares, total amount of disposition: 370 thousand yen).
2. The status of disposal during the current term does not include the sale of shares less than one unit during the period fromMarch 1, 2024 to the date of filing of this annual securities report.
3. The number of treasury shares held during the current term does not include the purchase or sale of shares less than one
unit during the period from March 1, 2024 to the date of filing of this annual securities report.

- 42 -

3. Dividend Policy
The Company considers the return of profits to its shareholders as one of the management priorities, and upholds the basic policyof carrying out the performance-based distribution while working to reinforce its corporate structure by maintaining internal
reserves for achieving higher profitability in the future.
The decision-making body is the Board of Directors for the interim dividend and the General Meeting of Shareholders for the
year-end dividend, and the Company conducts two dividend payments per fiscal year.
With respect to the dividends for the current fiscal year, the Company decided to pay an annual dividend of 88 yen per shareafter comprehensively considering its financial position and profit level, among others. As a result, the payout ratio on aconsolidated basis for the current fiscal year was 71.6%.
The internal reserve will be used for enhancing the production capability and establishing and reinforcing new sales offices inorder to further strengthen the corporate structure.
The Company stipulates in its Articles of Incorporation that it is able to pay an interim dividend pursuant to the provisions in
Article 454, Paragraph 5 of the Companies Act.
(Note) Dividend of surplus distributed in the current fiscal year pursuant to Article 453 of the Companies Act
Interim dividend
Resolution by the Board of Directors: August 10, 2023
40 yen per share, totaling 1,301,609 thousand yen
Year-end dividend
Resolution at the General Meeting of Shareholders: March 28, 2024
48 yen per share, totaling 1,561,926 thousand yen- 43 -

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

Overview of corporate governance system and reasons for adopting the system
We have adopted the company with an Audit & Supervisory Board as our corporate governance structure. The basis of thestructure lies in the supervision and audits of the status of business execution of the Board of Directors by five Outside
Board Directors and Audit & Supervisory Board Members including two Outside Audit & Supervisory Board Members
who attend important meetings such as the Board of Directors meetings.
Finely detailed control activities are made possible through the coordination of the Internal Audit Department and the
Corporate Administration Department to promote companywide risk management activities and engage in activities todevelop and evaluate internal controls over financial reporting, thereby responding to the risks of each business division
while auditing and evaluating the status of business execution and making reports to the President and CEO.
We have also concluded advisory and other agreements with outside experts in each field and have been making efforts
to promote corporate governance and gather the information and know-how necessary to bolster its framework.
Furthermore, the Audit & Supervisory Board Members, the Internal Audit Department, the Corporate Administration
Department, and the Accounting Auditor have strengthened their cooperation by engaging in exchanges of information,- 44 -

when necessary, and voicing their views from their unique standpoints, and engaged in the establishment and reinforcementof an effective and efficient corporate governance structure.
We have established the Nominations Committee and Compensation Committee as voluntary committees, the majorityof the members of which comprise Independent Outside Board Directors. The Nominations Committee and Compensation
Committee deliberate executive appointments and executive compensation, and make recommendations to the Board of
Directors, after which the Board of Directors deliberates and determines the nomination and compensation proposals basedon such recommendations.
The members of the Nominations Committee and Compensation Committee are as follows:(Nominations Committee)
Chairman: Taizo Hamaguchi, Board Director
Members: Ryuji Sato, Chairperson; Masahiro Murai, Managing Executive Director; Tsuneko Murata, Board
Director; and Etsuhiro Takato, Board Director(Compensation Committee)
Chairman: Taizo Hamaguchi, Board Director
Members: Hidenori Sakashita, President & CEO; Masahiro Murai, Managing Executive Director; Etsuhiro
Takato, Board Director; and Chisa Hayakawa, Board Director- 45 -

Furthermore, in Fiscal Year 2022, we established the Governance Committee as a new voluntary committee, in addition
to the above Nominations and Compensation Committees. The Governance Committee conducts deliberations regarding
medium- and long-term themes in order to contribute to the improvement of our corporate governance, reports its progress,
and submits matters to be discussed as necessary, to the Board of Directors.
The members of the Governance Committee are as follows:
Chairman: Hidenori Sakashita, President & CEO
Members: Ryuji Sato, Chairperson; Masahiro Murai, Managing Executive Director; Etsuhiro Takato, Board
Director; and Chisa Hayakawa, Board Director
We have elected five Outside Board Directors and two Outside Audit & Supervisory Board Members in order tostrengthen the function of oversight of the Board of Directors, which has been entrusted with the function of management
decision-making. In terms of corporate governance, we recognize that the function of objective and neutral monitoringfrom the outside is essential and has thus maintained the current structure in the belief that the function of monitoring fromthe outside has become fully functional as a result of the oversight and auditing by the five Outside Board Directors andthe two Outside Audit & Supervisory Board Members.

- 46 -

(iii) Activities of the Board of Directors, Audit & Supervisory Board, Nominations Committee, and Compensation Committee
during the current fiscal year
a. Activities of the Board of Directors
During the current fiscal year, 13 Board of Directors meetings were held, and the attendance of individual Directors was
as follows:
Title and position

Name

Attendance

Ryuji Sato

100% (13/13)

Masahiro Murai

100% (13/13)

Board Director

Yasufumi Takeda

100% (13/13)

Board Director

Kazunobu Konoike

100% (13/13)

Board Director

Junji Morimoto

100% (13/13)

Representative Director,
President & CEO
Managing Executive Director

Board Director

Hidenori Sakashita

100% (13/13)

Outside Board Director

Shoichiro Takahata

100% (13/13)

Outside Board Director

Taizo Hamaguchi

100% (13/13)

Outside Board Director

Tsuneko Murata

100% (13/13)

Outside Board Director

Etsuhiro Takato

100% (13/13)

Outside Board Director

Chisa Hayakawa

100% (13/13)(Notes) 1. Title and position are those as of December 31, 2023.
2. Board Directors Harumichi Okazaki and Hiroyuki Ogata and Outside Board Director Tomomi Fukumotowere elected at the Ordinary General Meeting of Shareholders held on March 28, 2024, and accordingly
their attendance at the Board of Directors meetings held during the current fiscal year is not shown.
The specific discussions by the Board of Directors are as follows:
Theme

Contents of discussions
Confirmation of progress of Medium-Term Management Plan, DX investment,

Management and business strategy cosmetics business-related issues, issues at overseas subsidiaries, utilization of
intellectual property, etc.
Sustainability
Corporate governance

TCFD-related, ESG assessment, etc.
Ordinary General Meeting of Shareholders, basic policy and basic plan forinternal control system, corporate governance report, evaluation of theeffectiveness of the Board of Directors, etc.

Accounts and financeNominations and compensation

Human resources strategy
OthersFinancial results, annual budget, medium-term financial strategy, dividend andshareholder return policy, etc.
Selection of Representative Directors, selection of chairmen and members of theNominations and Compensation Committees, selection of Executive Officers,
compensation for Board Directors and Audit & Supervisory Board Members,
restricted share-based compensation, etc.
Wage and salary structure, organizational structure, personnel evaluation system,
engagement survey, executive appointments for overseas subsidiaries, etc.
Amendment or abolition of important regulations, matters related to donations
and contributions, etc.

b. Activities of the Audit & Supervisory Board
The activities of the Audit & Supervisory Board are described in “(3) Audits, (i) Status of audits by Audit & Supervisory
Board Members, b. Activities of the Audit & Supervisory Board.”- 47 -

c. Activities of the Nominations and Compensation Committees
1) Nominations Committee
During the current fiscal year, two Nominations Committee meetings were held, and the attendance of individual
members was as follows:
Title and position

Name

Attendance

Chairman: Outside Board Director

Taizo Hamaguchi

100% (2/2)

Ryuji Sato

100% (2/2)

Member: Managing Executive Director

Masahiro Murai

100% (2/2)

Member: Outside Board Director

Tsuneko Murata

100% (2/2)

Member: Outside Board Director

Etsuhiro Takato

100% (2/2)

Member: Representative Director,
President & CEO(Note)

Title and position are those as of December 31, 2023.

The specific discussions by the Nominations Committee are as follows:• Human resource requirements for management executives• Election of Directors, Audit & Supervisory Board Members, and Executive Officers for Fiscal Year 2024
• Members of the Nominations Committee for Fiscal Year 2024, etc.
2) Compensation Committee
During the current fiscal year, two Compensation Committee meetings were held, and the attendance of individual
members was as follows:
Title and position

Name

Attendance

Chairman: Outside Board Director

Taizo Hamaguchi

100% (2/2)

Ryuji Sato

100% (2/2)

Member: Managing Executive Director

Masahiro Murai

100% (2/2)

Member: Outside Board Director

Etsuhiro Takato

100% (2/2)

Member: Outside Board Director

Chisa Hayakawa

100% (2/2)

Member: Representative Director,
President & CEO(Note)

Title and position are those as of December 31, 2023.

The specific discussions by the Compensation Committee are as follows:• Policy for determining amount of compensation for Board Directors• Level of Board Director compensation for Fiscal Year 2024
• Performance-linked compensation for Fiscal Year 2024, etc.

- 48 -

(iv) Other matters regarding corporate governancea. Development status of the internal control system and the risk management framework
Based on the Companies Act and the Regulations for Enforcement of the Companies Act, the Company and its subsidiaries(below, the “Group”) have established the Basic Policy for the Internal Control System to manage various risks that impact
the efficiency and the effectiveness of management, while ensuring the reliability of financial reporting and making efforts
to promote compliance.
1) System for ensuring that the execution of duties by the Board Directors and employees of the Group complies with laws,
regulations and the Articles of Incorporation, and system for ensuring the adequacy of operations
A.

We have adopted the company with an Audit & Supervisory Board structure, where Audit & Supervisory Board
Members ensure the legality of the execution of business by Board Directors through their audit function. The
Board of Directors meets every month in principle and as needed to mutually supervise the execution of duties by
Board Directors.

B.

The Governance Committee has been established to continuously improve corporate governance and strengthen
the transparency and objectivity of decision making by management. In addition, the Nominations Committee andthe Compensation Committee have been established to strengthen the independence, objectivity, and accountabilityof the function of the Board of Directors related to the nomination and compensation of Board Directors. The
Governance Committee, the Nominations Committee and the Compensation Committee consist of Board Directors,
including Outside Board Directors.

C.

Based on the Milbon Ethics and Code of Conduct to practice The Milbon Way, the Board Directors and employeesof the Group act, throughout the value chain, in compliance with laws and regulations of all countries and regions
based on high ethical standards that conform with social ethics, and practice the following: “provision of safe andsuperior products and services and gaining of customer trust,” “contribution to and coexistence with local
communities,” “responsibility to the environment,” “respect for human rights,” “fair transactions and mutual
development with business partners,” “maintenance of workplace environment for employees,” “understanding
and support of shareholders and investors,” “sound relationships with government and administration,” and“dealing with antisocial forces.” The Board Directors of the Group lead by example in complying with laws andregulations and the Milbon Ethics and Code of Conduct, actively work to maintain and enhance compliancemanagement, and aim to raise compliance awareness and spread the Milbon Ethics and Code of Conduct throughD.

the continuous implementation of awareness and education activities on compliance.
We ensure that the Group’s management plans are thoroughly communicated to employees at management plan
presentation meetings and manage them by regularly reporting the status of execution at Board of Directors
meetings through financial reports and activity reports. In addition, we hold regular meetings among the Board
Directors of the Company and its subsidiaries and provide various forms of support to subsidiaries as necessary toensure the adequacy of the operations of subsidiaries.

E.

F.

We have established internal and external whistle-blowing contact points, promote the use of them by the Board
Directors and employees of the Company, and strive for the early detection of matters that may violate or risk
violating laws, regulations, or internal regulations.
The Internal Audit Department conducts business audits on the Company and its subsidiaries, reports the results to
the President & CEO, the Board of Directors, and the Audit & Supervisory Board, requests the auditedorganizations to correct issues pointed out, and inspects the status of implementation.

2) System for the storage and management of information related to the execution of duties by Board Directors
Board of Directors meeting minutes, Management Meeting minutes, and other important documents related to decisionmaking in business execution are stored and managed in accordance with laws, regulations, and internal regulations.
3) Regulations and other systems concerning the management of the risk of loss of the GroupA.

We define matters with the potential to have a significant negative impact on the realization of our management
philosophy or our business continuity as “risks,” and has established a basic risk management policy to reduce thelikelihood of these risks manifesting themselves and to prevent the expansion of damage in the event that a riskmaterializes and a crisis occurs. We develop and improve a risk management promotion system and framework.

B.

We have established the Risk Management Committee, which is chaired by the President & CEO, to identify“company-wide risks,” i.e., risks that should be addressed on a company-wide basis, taking into account thesignificance and priority of the risks surrounding the Group, the likelihood and timing of the materialization ofrisks, the likelihood and impact of impeding the achievement of the Medium-Term Management Plan, etc. The
Risk Management Committee regularly reports to the Board of Directors on the progress made in response tocompany-wide risks, and is subject to the supervision and monitoring of the Board of Directors.

- 49 -

C.

In accordance with the Basic Rules of Risk Management and the Rules on the Management of Subsidiaries, wegather information on risks that have occurred within the Group, report to Board Directors as necessary, and provide

appropriate support to each division and subsidiary.
4) System for ensuring the efficient execution of duties by Board Directors
Through the introduction of the Executive Officer system, we separate the business execution function from thesupervisory function, clarify management responsibility, and aim for quicker decision-making and business execution.
The primary roles of the Board of Directors are defined as deciding on management strategies and policies andmonitoring their execution, and we aim to enhance the advisory function, strengthen the supervisory function, andincrease effectiveness by appointing Independent Outside Board Directors that account for at least one-third of the Board
Directors. By implementing the Rules on the Board of Directors, the Rules on the Division of Duties, the Rules on Job
Authority, and the Rules on the Management of Subsidiaries, we ensure the appropriate delegation of authority and asystem for enabling the appropriate and efficient execution of duties.
5) System for ensuring the accuracy of reporting and information regarding financial calculations
Based on the Financial Instruments and Exchange Act and other related laws and regulations, etc., we have establisheda policy for internal control over financial reporting in the Basic Rules of Internal Control, maintain and operate internal
control over financial reporting, continuously evaluate its effectiveness, and make necessary corrections andimprovements to ensure the reliability of financial reporting.
b. Overview of the liability limitation agreement
In accordance with the provisions of Article 427, Paragraph 1 of the Companies Act and Article 34 Paragraph 2 of the
Articles of Incorporation, we have entered into an agreement with all Outside Board Directors and all Audit & Supervisory
Board Members to limit their liability provided for in Article 423, Paragraph 1 of the Companies Act. The maximum
amount of liability for damages under this agreement is the minimum liability amount set forth in Article 425, Paragraph
1 of the Companies Act.
c. Overview of the indemnification agreement
We have entered into an indemnification agreement with all Board Directors and all Audit & Supervisory Board Membersin accordance with the provisions of Article 430-2, Paragraph 1 of the Companies Act. The agreement indemnifies themagainst the expenses indicated in Item 1 and the losses indicated in Item 2 of Article 430-2, Paragraph 1 of the Companies
Act. However, to ensure that the Board Directors and Audit & Supervisory Board Members execute their duties in an
appropriate manner, the agreement does not provide coverage in the case of malice or gross negligence during the executionof their duties.
d. Overview of the Board Directors and officers liability insurance contract, etc.
We have entered into a Directors and Officers liability insurance with an insurance company in accordance with theprovisions of Article 430-3, Paragraph 1 of the Companies Act, in which insurance shall cover damages and costs of dispute
resolutions that the Board Directors and Audit & Supervisory Board Members, who are the insured party, are otherwise tobear under law. All insurance premiums are paid by the company and will be renewed with the same coverage at the next
renewal.

- 50 -

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

Maximum number of Board Directors
The Company’s Articles of Incorporation stipulate that the number of Board Directors shall be no more than 15.

(vii) Requirements for resolution regarding election of Board Directors
The Company’s Articles of Incorporation provide that resolution for the election of Board Directors requires attendanceby shareholders with more than one-third of the voting rights of shareholders entitled to exercise voting rights, and isadopted by a majority of the votes of the shareholders present, and that the election of Board Directors shall not be
conducted by cumulative voting.
(viii) Requirements for special resolution at the General Meetings of Shareholders
The Company’s Articles of Incorporation provide that the special resolution at a General Meeting of Shareholders pursuant
to Article 309, Paragraph 2 of the Companies Act requires attendance by shareholders with more than one-third of thevoting rights of shareholders entitled to exercise voting rights, and is adopted by a majority, representing two-thirds ormore of the votes of the shareholders present. This arrangement aims to smoothly operate General Meetings ofShareholders by relaxing the quorum for special resolution at general meetings of shareholders.

- 51 -

(2) Board Directors(i)List of Board Directors
12 male Board Directors and three female Board Directors (Ratio of female Board Directors: 20.0%)
Title and position

Name

Date of birth

Ryuji Sato

October 18, 1959

December 2000
March 2002
December 2003
March 2008
January 2024
April 2001
October 2010
January 2018

Representative Director,
President & CEO

Hidenori
Sakashita

March 2022
February 3, 1976

January 2024
March 1992
December 2001
March 2007
December 2009
December 2014

January 2018
Managing Executive Director,
and in charge of Finance,
Masahiro Murai
Corporate Communication,and Sustainability Promotion

Number ofshares held
(thousandshares)Joined the Company
General Manager of Products Produce
Dept.
General Manager of Marketing Dept.
Board Director and General Manager ofMarketing Dept.
Managing Executive Director
Representative Director, President &CEO
Chairperson (current position)(Note) 130

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

2

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

58

Career summary
April 1981
December 1999

Chairperson

Term ofofficeApril 28, 1959
January 2020

January 2022

January 2024

- 52 -

Title and position

Name

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

Board Director,
Director of Production
Headquarters, and in chargeof Development and Organic
Business

December 2013
Kazunobu
KonoikeNovember 8, 1969

January 2018

January 2022

January 2024

April 1992
December 2005
December 2007
December 2009
January 2019
Board Director,
and in charge of Corporate
Administration, Internal
Audit, and Quality Assurance

January 2021
Junji Morimoto

July 17, 1967
March 2022

January 2024

April 1996
January 2016
January 2018
January 2020

Board Director,
Director of International FP
Sales and Marketing and FP
Headquarters, and in chargeof Education Planning

January 2022
Harumichi
OkazakiTerm ofofficeNumber ofshares held
(thousandshares)Joined the Company
President of MILBON USA, INC.
General Manager of Corporate Planning
Dept.
General Manager of Corporate Strategy
Development Dept.
Board Director and General Manager ofCorporate Strategy Development Dept.
Board Director and General Manager ofInternational Sales Dept. II
Board Director and General Manager ofInformation System Dept. and in chargeof CS Promotion
Board Director and Director of
Production Headquarters, and in chargeof CS Promotion
Board Director and Director of
Production Headquarters, and in chargeof Development Headquarters andOrganic Business (current position)(Note) 1

867

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

7

Joined the Company
President of MILBON (THAILAND)
CO., LTD.
President of MILBON USA, INC.
President of MILBON USA, INC. andGeneral Manager of North America
RegionExecutive Officer, Director ofInternational FP Sales and Marketing,and General Manager of North America
Region and Europe Region
Executive Officer, Director ofInternational FP Sales and Marketingand FP Headquarters, and in charge of
Education Planning
Board Director, Director ofInternational FP Sales and Marketingand FP Headquarters, and in charge of
Education Planning (current position)(Note) 1

1

Career summary

March 9, 1974
January 2024

March 2024

- 53 -

Title and position

Name

Date of birth
April 1999
January 2020

January 2022
Board Director,
Director of Corporate
Strategy Headquarters, andHiroyuki Ogata
Deputy President of KOSÉMILBON COSMETICS CO.,LTD.

January 2023
July 13, 1975

January 2024

March 2024

April 1973
October 1977
June 2004
October 2004
December 2004
June 2014

Board Director

Taizo Hamaguchi October 29, 1950

Term ofofficeNumber ofshares held
(thousandshares)Joined the Company
General Manager of Cosmetics
Business Planning Dept. and Finance
Dept.
Executive Officer and General Manager
of Cosmetics Business Planning Dept.
and Finance Dept.
Executive Officer and General Manager
of Corporate Strategy Dept.
Executive Officer, Director of
Corporate Strategy Headquarters, and
Deputy President of KOSÉ MILBONCOSMETICS CO., LTD.
Board Director, Director of Corporate
Strategy Headquarters, and Deputy
President of KOSÉ MILBONCOSMETICS CO., LTD. (current
position)(Note) 1

1

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

(Note) 1

2

Career summary

June 2015
March 2016
June 2016

June 2017
June 2019- 54 -

Title and position

Name

Date of birth

Career summary
April 1982

May 2003

April 2007

June 2008

February 2010

July 2013

Board Director

Tsuneko Murata September 27, 1958

January 2014
January 2016
June 2018

June 2019

March 2021

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

June 2021

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

June 2022

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

September 2023

- 55 -

Term ofofficeNumber ofshares held
(thousandshares)(Note) 10

Title and position

Name

Date of birth

Career summary
April 1979
August 2002
July 2007

June 2009

June 2013

January 2015
Board Director

Etsuhiro Takato

February 6, 1957
June 2015
June 2016
September 2016
June 2017
June 2019
June 2021
March 2022
April 2022
June 2022- 56 -

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

Term ofofficeNumber ofshares held
(thousandshares)(Note) 1-

Title and position

Name

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

April 2014

April 2017

Board Director

Chisa Hayakawa

June 27, 1968

April 2019

June 2020

April 2021

March 2022
April 2022
April 2023

April 1981
April 2008
January 2012
April 2015

April 2017
April 2018

Board Director

Tomomi
Fukumoto

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

Joined Suntory Spirits Ltd.
Deputy Executive Director of Suntory
Hall
Executive Director of Suntory Hall
Executive Officer and Deputy Division
COO of Corporate Communication
Division of Suntory Holdings Limited
Managing Director and Division COO
of Customer Relations Division ofSuntory Business Expert Ltd.
Board Member of Save the Children
Japan (current position)
Executive Officer and Division COO of
Corporate Sustainability Division ofSuntory Holdings Limited
Director of Japan Philharmonic
Orchestra (current position)
Executive Board Member of Japan
Association for the 2025 World
Exposition (current position)
Advisor of Suntory Holdings Limited(current position)
Managing Director of Suntory
Foundation for the Arts (current
position)
Outside Director of Tokyo Kaikan Co.,
Ltd. (current position)
Trustee of The Resona Foundation for
Asia and Oceania (current position)
Outside Board Director of the Company(current position)(Note) 1-

Career summary

February 18, 1959 June 2019
September 2021

January 2022
April 2022

June 2022

March 2024

- 57 -

Title and position

Name

Date of birth

Career summary
April 1988
December 2006
December 2007
December 2009
December 2011
March 2012

Standing Audit & Supervisory
Mitsuru Oshio
Board Member

December 16, 1965

December 2013

December 2014
January 2018
March 2021
April 1976
July 2004
July 2006
July 2009

Audit & Supervisory Board
MemberJuly 2013
April 2015
Yoshihiko Okuda

August 20, 1957
April 2017
March 2018
June 2018
March 2020

December 2021
April 1985

August 1988
August 1990
January 1991
January 2000
Audit & Supervisory Board
MemberFebruary 2006
Takashi Hirano

February 6, 1957
January 2008
June 2019

March 2024

Total

Joined the Company
General Manager of Osaka Branch
General Manager of Fukuoka Branch
General Manager of Nagoya Branch
General Manager of Nagoya Branch
and Business Development Dept.
Board Director and General Manager ofNagoya Branch and Business
Development Dept.
Board Director and General Manager ofCorporate Strategy Development Dept.
and Business Development Dept.
Board Director and General Manager ofBusiness Development Dept.
Board Director and in charge ofBusiness Development
Standing Audit & Supervisory Board
Member (current position)
Joined Fukuoka Regional Taxation
BureauAssociate Appeals Judge, Fukuoka
Regional Tax Tribunal
Deputy District Director, Kokura Tax
OfficeProfessor, Technical Education
Department, National Tax College
District Director, Kanoya Tax OfficeDirector (Appeals Judge), Yokohama
Branch, Tokyo Regional Tax Tribunal
Director, Takamatsu Regional Tax
Tribunal
Attached to the Commissioner’s
Secretariat, National Tax Agency
Registered as tax accountant
Outside Audit & Supervisory Board
Member of the Company (current
position)
Director of SKM Business Co., Ltd.
(current position)
Registered as attorney-at-law and joined
Yagi & Ushijima (currently Ushijima &Partners, Attorneys-at-Law)
Joined Masuda, Funai, Eifert &Mitchell in Chicago, U.S.A.
Joined Blakemore & Mitsuki
Partner of Blakemore & Mitsuki
Executive Officer in charge of Law andCorporate Affairs of Microsoft Japan
Partner of Blakemore & Mitsuki(current position)
Outside Audit & Supervisory Board
Member of Morpho, Inc.
Outside Audit & Supervisory Board
Member of FALTEC Co., Ltd. (current
position)
Outside Corporate Auditor of RYOBI
LIMITED (current position)
Outside Audit & Supervisory Board
Member of the Company (current
position)

Term ofofficeNumber ofshares held
(thousandshares)(Note) 2

26(Note) 3-(Note) 3-

998- 58 -

(Notes) 1. As of the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within two
years after March 28, 2024.
2. As of the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within four
years after March 30, 2021.
3. As of the conclusion of the Ordinary General Meeting of Shareholders relating to the last fiscal year ending within four
years after March 28, 2024.
4. Board Directors Taizo Hamaguchi, Tsuneko Murata, Etsuhiro Takato, Chisa Hayakawa and Tomomi Fukumoto are
Outside Board Directors.
5. Audit & Supervisory Board Members Yoshihiko Okuda and Takashi Hirano are Outside Audit & Supervisory Board
Members.
6. Board Director Kazunobu Konoike is the younger brother of the spouse of Managing Executive Director Masahiro Murai.

- 59 -

(ii)Outside officers
The Company has five Outside Board Directors and two Outside Audit & Supervisory Board Members. There is no special
interest between any of these outside officers and the Company except for having an ownership of the Company’s shares
described in (i) Board Directors and Officers.
Outside Board Director Tsuneko Murata concurrently serves as an Outside Board Director of Kakuyasu Group Co., Ltd.,an External Director serving as an Audit and Supervisory Committee Member of TOKYO SEIMITSU CO., LTD., and an
Outside Director, Audit & Supervisory Committee Member of Sun Frontier Fudousan Co., Ltd. There is no capital
relationship, important business relationship or any other special interest between these companies and the Company.
Outside Board Director Etsuhiro Takato concurrently serves as an Outside Director of TOKYO VERDY, Inc. and an
Outside Director of Seven Bank, Ltd. There is no capital relationship, important business relationship or any other special
interest between these companies and the Company.
Outside Board Director Chisa Hayakawa concurrently serves as an Executive Officer and Asia-Oceania Regional CFO
of Calbee, Inc. and an Outside Director of SHIBAURA MACHINE CO., LTD. There is no capital relationship, importantbusiness relationship or any other special interest between these companies and the Company.
Outside Board Director Tomomi Fukumoto concurrently serves as a Board Member of Save the Children Japan, aDirector of Japan Philharmonic Orchestra, an Executive Board Member of the Japan Association for the 2025 World
Exposition, an Advisor of Suntory Holdings Limited, a Managing Director of Suntory Foundation for the Arts, an Outside
Director of Tokyo Kaikan Co., Ltd., and a Trustee of The Resona Foundation for Asia and Oceania. There is no capital
relationship, important business relationship or any other special interest between these companies and the Company.
Outside Audit & Supervisory Board Member Yoshihiko Okuda is a tax accountant and he concurrently serves as therepresentative of Yoshihiko Okuda Tax Accountant Office and a Director of SKM Business Co., Ltd. There is no capital
relationship, important business relationship or any other special interest between these companies and the Company.
Outside Audit & Supervisory Board Member Takashi Hirano is an attorney-at-law and he concurrently serves as apartner of Blakemore & Mitsuki, an Outside Audit & Supervisory Board Member of FALTEC Co., Ltd., and an Outside
Corporate Auditor of RYOBI LIMITED. There is no capital relationship, important business relationship or any otherspecial interest between these companies and the Company.
The Company’s independence criteria for appointing Outside Board Directors and Outside Audit & Supervisory Board
Members are as follows: they must not have any special interest in other Directors, Audit & Supervisory Board Members,
or the Company; they must be independent; there must be no possibility of a conflict of interest with general shareholders;
and they must meet the independence criteria stipulated by the Companies Act and the Tokyo Stock Exchange. There isno special interest between the five Outside Board Directors and two Outside Audit & Supervisory Board Members andthe Company.
The five Outside Board Directors and two Outside Audit & Supervisory Board Members have been determined to haveno potential conflicts of interest with general shareholders and have been registered with the Tokyo Stock Exchange, Inc.
as independent officers as stipulated by the exchange.

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

- 60 -

(3) Audits(i)Status of audits by Audit & Supervisory Board Members
a. Organization and personnel of the Audit & Supervisory Board
The Audit & Supervisory Board of the Company consists of a total of three members: one Standing Audit & Supervisory
Board Member and two highly independent Outside Audit & Supervisory Board Members.
Standing Audit & Supervisory Board Member Mitsuru Oshio joined the Company in 1988, and after serving as General
Manager of branches at our domestic sales locations, was in charge of the Corporate Strategy Development Department
and the Business Development Department as a Board Director from 2012. He has been a Standing Audit & Supervisory
Board Member since 2021. Outside Audit & Supervisory Board Member Yoshihiko Okuda is a tax accountant and has asignificant level of knowledge of finance and accounting. Outside Audit & Supervisory Board Member Takashi Hirano is
an attorney-at-law and has a significant level of legal knowledge.
b. Activities of the Audit & Supervisory Board
During the current fiscal year, eight Audit & Supervisory Board meetings were held, and the attendance of individual
members was as follows:
Title and position

Name

AttendanceStanding Audit & Supervisory Board Member

Mitsuru Oshio

100% (8/8)

Outside Audit & Supervisory Board Member

Yoshihiko Okuda

100% (8/8)

Outside Audit & Supervisory Board Member

Keisuke Endo

100% (8/8)(Note) Outside Audit & Supervisory Board Member Takashi Hirano was appointed at the Ordinary General Meeting of
Shareholders held on March 28, 2024, and accordingly his attendance at the Audit & Supervisory Board meetings
held during the current fiscal year is not shown.
The specific discussions by the Audit & Supervisory Board during the current fiscal year are as follows:• Basic policy for audits by Audit & Supervisory Board Members, annual audit plan, and allocation of tasks• Selection of Chairperson of the Audit & Supervisory Board, Standing Audit & Supervisory Board Member andspecified Audit & Supervisory Board Member, and compensation for Audit & Supervisory Board Members• Report on the annual audit plan of the Internal Audit Department• Evaluation and reappointment of Accounting Auditors, and audit fees
• Establishment and implementation status of the internal control system• Results of on-site audits at domestic locations and overseas subsidiaries, etc.
c. Activities of Audit & Supervisory Board Members
Audit & Supervisory Board Members conduct audit activities according to the basic policy for audits by Audit &Supervisory Board Members, the annual audit plan, and allocation of tasks determined by the Audit & Supervisory Board,and share information among Audit & Supervisory Board Members on a monthly basis on the tasks individually conducted.
The main activities conducted during the current fiscal year are as follows:• Attendance at the Board of Directors meetings and other important meetings
In addition to the Audit & Supervisory Board meetings, Audit & Supervisory Board Members attended the Board of
Directors meetings, and the Standing Audit & Supervisory Board Member also attended the Management Meeting
and regular meetings of overseas subsidiaries, etc. Audit & Supervisory Board Members expressed opinions as
appropriate, and Outside Audit & Supervisory Board Members expressed opinions from their professional perspective
as an attorney-at-law or a tax accountant.
• Interviews with Board Directors and Executive Officers
Interviews were conducted with internal and external Board Directors and Executive Officers to check the status ofexecution of their duties and express opinions from the perspective of Audit & Supervisory Board Members. In theinterview with the President & CEO, discussions were held mainly on the global expansion of the Medium-Term
Management Plan (2022-2026) and the “Beauty Platform Plan” as a major initiative in Japan, as well as the outlook
for major overseas subsidiaries and the human resources strategy.

- 61 -

• On-site audits at domestic locations and overseas subsidiaries
On-site audits are actively conducted at domestic locations and overseas subsidiaries to examine the status ofoperations and assets. In the current fiscal year, the Standing Audit & Supervisory Board Member held interviews on
overall operations and risks with the division heads of all domestic locations, five overseas subsidiaries (MILBON
USA, MILBON (THAILAND), MILBON VIETNAM, MILBON MALAYSIA, MILBON SINGAPORE), andresearch divisions, etc., among domestic indirect divisions. He, together with the Outside Audit & Supervisory Board
Members, conducted on-site audits at three domestic locations (Osaka Sales Office, Tokyo Aoyama Sales Office,Yumegaoka Factory), including interviews with the general managers and physical inspections of fixed assets andinventory.
• Cooperation with Internal Audit Department and Accounting Auditor
Audit & Supervisory Board Members work to enhance coordination with the Internal Audit Department andAccounting Auditor to improve the viability of the internal control system. They receive reports on the status of an
accounting audit on a quarterly basis and regularly receive reports on internal control from the Accounting Auditor.
Furthermore, three-party audit joint meetings with the addition of the Internal Audit Department are held three times
a year to share and exchange opinions on the status of each audit.
(ii)

Status of internal audits
The Internal Audit Department (consisting of three staff members), which is independent from other business divisions,conduct internal audits at the Company based on the Rules on Internal Audits and an annual internal audit plan approvedby the President & CEO, covering divisions and Group companies in Japan, and also evaluates internal controls related tofinancial reporting pursuant to the Financial Instruments and Exchange Act.
The audit results are regularly reported to the President & CEO, the Audit & Supervisory Board, and the Board of
Directors. Responses are requested from the audited divisions regarding the matters pointed out, and the status of
subsequent corrective actions is confirmed.
In addition, to ensure the viability and efficiency of audits, the Internal Audit Department holds three-party audit joint
meetings with the Audit & Supervisory Board and the Accounting Auditor three times a year, and holds informationexchange meetings as needed to strengthen cooperation among the three parties. Audit issues seen from the perspective ofeach party are shared and solutions are discussed at the three-party audit joint meetings.

(iii)

Accounting auditsa. Name of audit firm
GYOSEI & CO.
b. Continuous audit period: 32 years
c. Engagement certified public accountants
Engagement partner Takayuki Nakagawa
Engagement partner Toshiya Shinshimad. Other personnel engaged in assisting the accounting audit
Twelve certified public accountants and 11 personnel who have passed the certified public accountant exam engage inassisting the accounting audit of the Company.
e. Policy and reasons for selecting audit firm
The Audit & Supervisory Board of the Company comprehensively evaluates and makes a decision on the selection of theaccounting auditor based on the “Practical Guidelines for Audit & Supervisory Board Members on the Evaluation of
Accounting Auditors and the Establishment of Selection Standards” published by the Japan Audit & Supervisory Board
Members Association, confirming the status of quality control, independence and expertise of the accounting auditor, theestablishment of an audit system, the specific audit plan and whether audit fees are reasonable and appropriate, as well as
audit results.
GYOSEI & CO. ensures the adequacy of the audit plan, audit method and audit implementation system, as well assmooth communication with the Company’s management (Board Directors, etc.), Audit & Supervisory Board and Internal
Audit Department.
The Audit & Supervisory Board will dismiss the Accounting Auditor with the unanimous consent of the Audit &Supervisory Board Member if the Accounting Auditor is deemed to fall under any of the items of Article 340, Paragraph
1 of the Companies Act. In this case, the Audit & Supervisory Board Member selected by the Audit & Supervisory Board
will report the dismissal of the accounting auditor and the reasons for the dismissal at the first General Meeting of
Shareholders convened after the dismissal.

- 62 -

- 63 -

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

Audit fees, etc.

a. Fees paid to the certified public accountants, etc.
Previous fiscal year
Category

Current fiscal year

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

Reporting company
Consolidated subsidiaries
Total

26,000-30,000

-

-

-

-

-

26,000-30,000-b. Fees for member firms of certified public accountants, etc. (excluding a.)
Not applicable.
c. Other important details of fees for audit service(Previous fiscal year)
Not applicable.
(Current fiscal year)
Not applicable.
d. Policy for determining audit fees
The Company’s audit fees to certified public accountants is determined by taking into consideration the reasonable numberof audit days, etc., based on the scale of the Company’s business.
e. Reasons the Audit & Supervisory Board’s consent to the fees, etc., of the accounting auditor
Based on the “Practical Guidelines for Cooperation with Accounting Auditors” of the Japan Audit & Supervisory Board
Members Association, the Audit & Supervisory Board has analyzed and evaluated the audit results for the previous fiscal
year and reviewed the audit fees and audit plan for the current fiscal year presented by the accounting auditor, and as aresult, has determined that the said fees, etc., are appropriate and gave consent to the terms of Article 399, Paragraph 1 of
the Companies Act.

- 64 -

(4) Compensation for Board Directors(i)Policy for determining amount or calculation method of compensation for Board Directors
a. Policy for determining amount of compensation for Board Directors
At its meeting held on March 11, 2022, the Company’s Board of Directors approved a policy for determining the details
of individual Board Director compensation. The Board of Directors consults the Nominations and Compensation
Committees on the details of the resolution to be adopted in advance and received a report from the Nominations andCompensation Committees. In addition, the Board of Directors has confirmed that the method of determining the detailsof compensation, etc., and the details of compensation, etc., determined for each individual Board Director for the relevant
fiscal year are consistent with such determination policy and that the report from the Nominations and Compensation
Committees is respected, and the Board of Directors has determined that such determination policy is in line with suchpolicy.
The details of the Company’s policy for determining the details of compensation, etc., for each individual Board
Director are as follows.
1) Basic policy for Board Director compensation
Compensation for Board Directors (excluding Outside Board Directors) shall consist of base compensation,
performance-linked compensation, and stock-based compensation as an incentive to continuously increase corporate
value, in order to encourage each Board Director to perform his/her duties with an awareness of business performanceand sustainable improvement of corporate value. The Board of Directors also consults the Nominations andCompensation Committees, which are comprised mainly of Outside Board Directors, on proposed compensation
amounts, and determines individual compensation amounts after obtaining advice as necessary. Outside Board Directors
and Audit & Supervisory Board Members shall receive only base compensation, as they are independent from theexecution of business operations, and compensation linked to performance is not appropriate for them.
2) Method of calculating compensation for Board Directors (excluding Outside Board Directors)
A. Basic compensation
The amount of basic compensation is determined in accordance with the Board Director’s position and paid in cash
monthly.
B.

Performance-linked compensation
In order to raise awareness of the need to improve the Company’s performance in each fiscal year, performancelinked compensation is calculated by adding up the percentage of achievement of each performance indicator target
multiplied by the weighting ratio, and then multiplying the performance-linked coefficient corresponding to thepercentage of achievement of the target by the performance-linked standard amount corresponding to the position,and is paid in cash once a year (in April). The performance indicators, performance-linked coefficients and actual
performance-linked compensation are as follows.

(Performance indicator)
Consolidated net sales: Weight 60% / Consolidated operating profit: Weight 30% / Consolidated profit: Weight 10%(Performance-linked coefficient)
Target achievement

Performance-linked coefficientOver 120%

200%

Over 115%, less than 120%

175%

Over 110%, less than 115%

150%

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

100%

Over 95%, less than 100%

80%

Over 90%, less than 95%

50%

Less than 90%

0%- 65 -

3) Stock-based compensation
Stock-based compensation is granted once a year (around May) with a restriction on transfer until retirement of theCompany’s shares equivalent to the amount obtained by multiplying the base compensation plus the performance-linked
compensation by 20%.
4) Ratio of compensation, etc., by typeThe ratio of each type of compensation for Board Directors (excluding Outside Board Directors) is as follows:
Basic compensation : Performance-linked compensation = 70% : 30%
Stock-based compensation = (Basic compensation + Performance-linked compensation)x20%(ii)

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

Officer category

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

Total amount ofcompensation(thousand yen)

Number ofrecipients(persons)

Basic
compensation

Performancelinked
compensation

Stock-based
compensation

248,367

192,114-56,253

6

32,00432,004--

1

66,04866,048--

7

Board Director(excluding Outside Board
Director)
Audit & Supervisory Board
Member(excluding Audit &Supervisory Board Member)
Outside Officer(Note) At the 62nd Ordinary General Meeting of Shareholders held on March 29, 2022, it was resolved that the amount of cash
compensation for Board Directors shall be “no more than 500 million yen per year (including 70 million yen for Outside
Board Directors)” (not including employee salaries paid to Board Directors who concurrently serve as employees). The
number of Board Directors as of the conclusion of said Ordinary General Meeting of Shareholders was 11 (including fiveOutside Board Directors).
(iii) Results for performance-linked compensation in the current fiscal year
Fiscal year ended December 31, 2023
Performance indicator

Weight (%)
Target (Million yen)

Consolidated net sales
Consolidated operating
incomeConsolidated profit

Result (Million yen)

Achievement rate (%)

49,20047,762

97.1

60.0

8,300

5,525

66.6

30.0

5,800

4,001

69.0

10.0

(Note) Target achievement rate for the fiscal year ended December 31, 2023: 97.1%x60%+66.6%x30%+69.0%x10%=85.1%(iv)

Total amount of consolidated compensation, etc., by Board Director of the reporting company
Not stated because there are no persons whose total amount of consolidated compensation, etc., is 100 million yen or more.

- 66 -

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

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

Carrying amount(thousand yen)

Unlisted shares--

Shares other than the above

1

1,269,000(Stocks whose number of shares increased in the current fiscal year)
Total acquisition cost
Number of
related to increase inindividual shares
number of shares(thousand yen)

Reasons for an increase in number of shares

Unlisted shares

-

-

-

Shares other than the above

-

-

-

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

Shares other than the above--- 67 -

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

Previous fiscal year

Number of shares
Number of shares(shares)(shares)
Purpose of holding, outline of business
Issuing company
Shareholding inalliances, etc., quantitative effect of holding,Amounts in theAmounts in the
the Company
consolidated balance consolidated balance and reasons for increase in number of shares
sheetssheets(thousand yen)(thousand yen)
(Purpose of holding)
120,000
120,000
Strengthening collaboration for futurebusiness expansion(Outline of business alliances, etc.)
KOSÉ Corporation
Yes
Joint development of skincare and make-up
1,269,000
1,730,400
products for hair salons and implementationof sales in Japan(Quantitative effect of holding) (Note)(Note) Although it is difficult to describe the quantitative effect of holding, a comprehensive study of the holding effect is conducted,
taking into account a review of the cost of capital.
(iii)

Investment shares held for pure investment
Current fiscal year

Category

Number of individual
shares(Individual shares)

Previous fiscal year
Number of individual
shares(Individual shares)

Carrying amount(thousand yen)

Carrying amount(thousand yen)

Unlisted shares

528,4005

28,400Shares other than the above

5

14,851

5

16,934Current fiscal year
Category

Total dividend income(thousand yen)

Total income (loss) fromsales (thousand yen)

Total unrealized gains(loss) (thousand yen)

Unlisted shares

192

-

-

Shares other than the above

255-

12,194- 68 -

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

2. Audit Certification
The Company’s consolidated financial statements for the fiscal year from January 1, 2023 to December 31, 2023 and the financial
statements for the fiscal year from January 1, 2023 to December 31, 2023 have been audited by GYOSEI & CO. in accordancewith the provisions of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act.

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

- 69 -

1. Consolidated Financial Statements, etc.
(1) Consolidated Financial Statements
1) Consolidated Balance Sheets(Thousand yen)Previous fiscal year
(As of December 31, 2022)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
LandConstruction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Net defined benefit asset
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets- 70 -

Current fiscal year
(As of December 31, 2023)

12,300,053

11,337,201*1, *2 5,255,686*1, *2 5,345,669

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

6,939,156
36,8382,072,829
446,775
26,178,470

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

16,206,867(6,946,103)
9,260,764
9,889,933(6,575,887)
3,314,046
6,461,904
995,352
3,850,747(2,883,355)
967,392
20,999,461
1,930,204

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

1,312,251
1,120
511,056
909,850
1,595,544(46,087)
4,283,736
27,213,401
53,391,872

(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - other
Income taxes payable
Provision for bonuses
Other
Total current liabilities
Non-current liabilities
Net defined benefit liability
Deferred tax liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets- 71 -

Current fiscal year
(As of December 31, 2023)

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

931,247
3,665,522
410,988581,530*3 978,650
6,567,940

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

14,620277
734,815
141,919
891,633
7,459,574

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

2,000,000
306,957
43,079,323(1,982,161)
43,404,119

214,928
1,766,040(108,331)
1,872,637
43,991,750
52,760,387(106,728)
2,373,812
261,0942,528,178
45,932,297
53,391,872

2) Consolidated Statements of Earnings and Consolidated Statements of Comprehensive Income
Consolidated Statements of Earnings(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Company house defrayment income
Subsidy income
Surrender value of insurance
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Share of loss of entities accounted for using equity
methodForeign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Compensation for damages
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to owners of parent- 72 -

Current fiscal year
(From January 1, 2023
to December 31, 2023)*1 45,238,377*1 47,762,432

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

18,237,124
29,525,308*2, *3 24,000,097
5,525,210

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

20,044
17,247
3,604
20,94986,35938,247
186,454

112,392

110,704

9,530
121,922
7,829,279

6,375
7,934
125,014
5,586,650*4 949

*4 1

448
1,397

1

*5 7,060*5 39,568

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

115,000
154,568
5,432,083
1,533,874(103,419)
1,430,455
4,001,627
4,001,627

Consolidated Statements of Comprehensive Income(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to non-controllinginterests- 73 -

Current fiscal year
(From January 1, 2023
to December 31, 2023)

5,577,274

4,001,627

114,665(68,821)915,502(285,315)* 676,032
6,253,306(321,656)
607,772
369,425* 655,541
4,657,169

6,253,306

4,657,169--

3) Consolidated Statements of Changes in Shareholders’ Equity
Previous fiscal year (from January 1, 2022 to December 31, 2022)(Thousand yen)
Shareholders’ equity
Capital stock
Balance at beginning of period

Capital surplus

2,000,000

Retained earnings

246,299

Treasury shares

38,834,669

Total shareholders’equity(2,080,393)

39,000,575

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

Profit attributable to ownersof parent

5,577,274

5,577,274

Purchase of treasury shares
Disposal of treasury shares

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

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

28,2373,040,818

49,482

3,118,537

2,000,000

274,537

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

42,119,113

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

100,262

Foreign currencytranslation
adjustment

68,821

850,537

Remeasurements of Total accumulate
defined benefit other comprehensive
plansincome176,984

1,196,605

Total net assets

40,197,181

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

Profit attributable to ownersof parent

5,577,274

Purchase of treasury shares(1,350)

Disposal of treasury shares

79,069Net changes of items otherthan shareholders’ equity

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

676,032

676,032

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

676,032

3,794,569

Balance at end of period

214,928-

1,766,040(108,331)

1,872,637

43,991,750- 74 -

Current fiscal year (from January 1, 2023 to December 31, 2023)(Thousand yen)
Shareholders’ equity
Capital stock
Balance at beginning of period

Capital surplus

2,000,000

Retained earnings

274,537

Total shareholders’equityTreasury shares(2,030,911)

41,875,487

42,119,113

Changes of items during period
Dividends of surplus(2,797,792)(2,797,792)

Profit attributable to ownersof parent

4,001,627

4,001,627

Purchase of treasury shares
Disposal of treasury shares

32,420(2,148)(2,148)50,89883,319Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of period-

32,4201,203,835

48,7491,285,005

2,000,000

306,957

43,079,323(1,982,161)

43,404,119

Accumulated other comprehensive income
Valuation difference Foreign currency
on available-for-saletranslation
securities
adjustment
Balance at beginning of period

214,928

Remeasurements of Total accumulate
defined benefit other comprehensive
plansincome1,766,040(108,331)

1,872,637

Total net assets

43,991,750

Changes of items during period
Dividends of surplus(2,797,792)

Profit attributable to ownersof parent

4,001,627

Purchase of treasury shares(2,148)

Disposal of treasury shares

83,319Net changes of items otherthan shareholders’ equity(321,656)

607,772

369,425

655,541655,541

Total changes of items during
period(321,656)

607,772

369,425

655,541

1,940,547

Balance at end of period(106,728)

2,373,812

261,0942,528,178

45,932,297- 75 -

4) Consolidated Statements of Cash Flows(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Decrease (increase) in net defined benefit asset
Increase (decrease) in net defined benefit liability
Interest and dividend income
Share of loss (profit) of entities accounted for using
equity method
Foreign exchange losses (gains)
Loss (gain) on sales of investment securities
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Loss on compensation for damages
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Surrender value of insurance
Other
SubtotalInterest and dividend income received
Cash compensation for damage paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments of loans receivableCollection of loans receivable
Proceeds from redemption of investment securities
Proceeds from sales of investment securities
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Proceeds from cancellation of insurance funds
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase (decrease) in notes and short-term borrowings- tradeNet decrease (increase) in treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities- 76 -

Current fiscal year
(From January 1, 2023
to December 31, 2023)

7,823,617
2,080,891(5,856)
77,241(28,757)
1,951(37,193)5,432,083
2,275,209(197)(12,545)
77,4373,135(37,292)

112,392

110,704(30,521)
(448)
(949)
7,060
(546,020)(2,148,445)
108,264
16,726
7,429,954
34,812(2,456,758)
5,008,008(48,215)(1)
39,568115,000(63,545)(469,541)(251,803)(86,359)
188,547
7,272,184
36,613(115,000)(2,428,110)
4,765,687(3,061,820)
1,003(761,154)(73,500)
3,454
200,000
546(285,452)
115,978(4,277)(3,865,221)(2,598,241)
1(612,051)(75,200)
5,661(179,032)
101,153
286,368(38,350)(3,109,692)(42,631)-(1,243)(2,534,587)(2,578,462)(1,669)(2,796,096)(2,797,765)

(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period- 77 -

Current fiscal year
(From January 1, 2023
to December 31, 2023)

381,279

175,610(1,054,396)
13,312,634* 12,258,237(966,159)
12,258,237* 11,292,078

Notes to the Consolidated Financial Statements(Significant matters that serve as the basis for preparation of consolidated financial statements)
1. Matters regarding the scope of consolidation
Number of consolidated subsidiaries: 9
Names of consolidated subsidiaries
MILBON USA, INC.
Milbon Trading (Shanghai) Co., Ltd.
Milbon Korea Co., Ltd.
MILBON (THAILAND) CO., LTD.
MILBON MALAYSIA SDN. BHD.
MILBON VIETNAM CO., LTD.
MILBON SINGAPORE PTE. LTD.
Milbon (Zhejiang) Cosmetics Co., Ltd.
Milbon Europe GmbH2. Matters regarding the application of equity method
Number of associates accounted for by the equity method: 1
Names of companies, etc.
KOSÉ Milbon Cosmetics Co., Ltd.
3. Matters regarding fiscal years, etc., of consolidated subsidiaries
The account closing dates of consolidated subsidiaries are the same as the consolidated account closing date.
4. Matters regarding accounting policies(1) Valuation standards and methods for significant assets(i) Securities
Available-for-sale securities
Other than shares, etc., without market priceStated at market value (unrealized gains and losses are reported as a separate component of net assets, and cost of
sales is calculated by the moving-average method)
Shares, etc., without market priceStated at cost using the moving-average method(ii) Inventories
MerchandiseStated primarily at cost using the weighted average method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)
Finished goods and work in process
Stated primarily at cost using the weighted average method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)
Raw materials
Stated primarily at cost using the weighted average method (the balance sheet value is calculated using the inventory
write-down method based on decreased profitability)
Supplies
Stated at cost using the last-purchase-price method (the balance sheet value is calculated using the inventory writedown method based on decreased profitability)- 78 -

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

2 to 50 years
2 to 17 years(ii) Intangible assets
They are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated period of internal use (2 to 5
years).
(3) Accounting standards for significant allowances(i) Allowance for doubtful accounts
To prepare for losses arising from uncollectible receivables, the Company and its overseas consolidated subsidiaries record
an allowance for doubtful accounts at an estimated uncollectible amount based on the historical rate of credit losses withrespect to general receivables, and in consideration of individual collectability with respect to doubtful accounts and otherspecific receivables.
(ii) Provision for bonuses
To provide for payment of bonuses to employees (including those for employees also serving as officers), the Company
and its overseas consolidated subsidiaries record a provision for bonuses based on the estimated payment amount.
(4) Accounting methods for retirement benefits(i) Method of attributing expected retirement benefits to periods
In calculating retirement benefit obligations, expected retirement benefits are attributed to the period up to the end of thecurrent fiscal year based on the benefit formula basis.
(ii) Method of amortizing actuarial differences and past service costs
Actuarial gains and losses are amortized using the straight-line method over a certain number of years (5 years) within the
average remaining years of service of the eligible employees at the time of occurrence, starting from the fiscal year
following the occurrence.
Prior service cost is amortized using the straight-line method over a certain number of years (5 years) within the averageremaining years of service of the eligible employees at the time of occurrence.
(iii) Adoption of a simplified method in small companies, etc.
Certain overseas consolidated subsidiaries apply a simplified method to calculate net defined benefit liability andretirement benefit expenses based on the method where the amount of retirement benefits to be paid for voluntary
retirement at the end of the fiscal year represents the amount of retirement benefit obligations.
(5) Accounting standards for significant revenue and expenses
The principal performance obligations relating to revenue from contracts with customers of the Group, as well as the standard
point at which such obligations are satisfied (i.e., the point at which revenue is recognized) are explained as follows.
The Group is engaged in the manufacturing and sale of cosmetic products. In terms of the sale of such goods or products,
revenue is recognized upon delivery of the goods or products to customers. However, revenue is recognized at the time of
shipment if the period from the time of shipment to the point at which control of the goods or products is transferred to thecustomer is the standard period.
Revenue is measured by the amount of consideration promised in the contract with the customer, less any applicable rebates
and returns.
The transaction consideration is typically received within one month of the fulfillment of the performance obligation anddoes not contain any significant financial elements.

- 79 -

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

- 80 -

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

Current fiscal year

Merchandise and finished goods

6,319,121

6,939,156

Loss on valuation of inventories

254,786

1,109,533(Note) The amount of loss on valuation of inventories represents the amount of write-down due to decreased profitability.
(2) Information to aid in understanding the details of accounting estimates
In the calculation using the method of write-down based on decreased profitability, regarding merchandise and finished goods,
a method, in which the planned shipment volume and the inventory volume at the end of the fiscal year are compared for eachmerchandise and finished good, and the amount of slow-moving inventories exceeding the planned shipment volume for acertain period is written down, and other methods are adopted.
These accounting estimates may differ from the actual profitability if assumed circumstances change as they can be affectedby changes in the future uncertain market environment and other factors.
(New accounting standards not yet applied)• Accounting Standard for Current Income Taxes (ASBJ Statement No. 27, October 28, 2022)• Accounting Standard for Presentation of Comprehensive Income (ASBJ Statement No. 25, October 28, 2022)• Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28, October 28, 2022)(1) Summary
These accounting standards, etc., specify the classification of income taxes, etc., when other comprehensive income is taxed
as well as the treatment of tax effects on sales of shares of subsidiaries and other securities when the group corporate tax
system is applied.
(2) Scheduled date of application
Scheduled to apply from the beginning of the fiscal year ending December 31, 2025.
(3) Impact of applying these accounting standards, etc.
The impact on the consolidated financial statements due to the application of the “Accounting Standard for Current Income
Taxes,” etc., is currently being evaluated.

- 81 -

(Consolidated balance sheets)*1 Treatment of notes due at the fiscal year-end
Notes due at the end of the fiscal year are treated as settled on the due date.
As the fiscal year-end fell on a holiday for financial institutions, the following notes due at the fiscal year-end are treated as settled
on the due date.
(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Notes receivable - trade

Current fiscal year
(As of December 31, 2023)

80,781

68,336*2 Receivables from contracts with customers in notes and accounts receivable - trade are as follows:(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Notes receivable - trade
Accounts receivable - trade

Current fiscal year
(As of December 31, 2023)

170,637

188,316

5,085,049

5,157,353*3 “Contract liabilities” are included in “other” under “current liabilities.” The amount of the “contract liabilities” is as described in“Notes to the Consolidated Financial Statements (Revenue recognition), 3. Information on the reconciliation of satisfaction of
performance obligations within contracts with customers and cash flows arising from such contracts, and information on the amountand timing of revenue that is expected to be recognized after the following fiscal year arising from contracts with customers thatexist at the end of the current fiscal year, (1) Balance of contract liabilities, etc.”- 82 -

(Consolidated statements of earnings)*1 Revenue from contracts with customers
The Company does not disaggregate revenues from contracts with customers and other sources of revenue. The amount of revenue
from contracts with customers is presented in “Notes to the Consolidated Financial Statements (Revenue recognition), 1.
Disaggregation of revenue from contracts with customers” in the consolidated financial statements.
*2 Major expenses included in selling, general and administrative expenses and their amounts(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)

Current fiscal year
(From January 1, 2023
to December 31, 2023)

Remuneration, salaries and allowances
Logistics expenses

5,858,488
3,543,161

6,066,242
3,675,086

Promotion expenses
Provision for bonuses

1,177,111
422,032

1,516,851
366,644

Retirement benefit expenses
Provision of allowance for doubtful accounts

307,677(3,566)

422,581(197)*3 The total amount of research and development expenses included in general and administrative expenses(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Research and development expenses

Current fiscal year
(From January 1, 2023
to December 31, 2023)

2,074,942

2,334,179*4 Breakdown of gain on sales of non-current assets(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Machinery, equipment and vehicles

Current fiscal year
(From January 1, 2023
to December 31, 2023)
949

1*5 Breakdown of loss on retirement of non-current assets(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Buildings and structures

Current fiscal year
(From January 1, 2023
to December 31, 2023)
5,230

26,019Machinery, equipment and vehicles
Other

872
186

11,2762,272

Intangible assets

771

-

7,060

39,568Total- 83 -

(Consolidated statements of comprehensive income)* Reclassification adjustments and tax effects relating to other comprehensive income(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)

Current fiscal year
(From January 1, 2023
to December 31, 2023)

Valuation difference on available-for-sale securities
Amount arising during the fiscal year
Reclassification adjustments

165,672(448)(463,482)-

Before tax effect adjustments
Tax effects

165,224(50,558)(463,482)
141,825

Valuation difference on available-for-sale securities

114,665(321,656)(99,165)-

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

Before tax effect adjustments
Tax effects(99,165)
30,344-

Deferred gains or losses on hedges(68,821)-

Foreign currency translation adjustment
Amount arising during the fiscal year

915,502607,772

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

(383,108)

463,125

Reclassification adjustments(28,008)

69,188Before tax effect adjustments
Tax effects(411,117)
125,801

532,313(162,888)

Remeasurements of defined benefit plans, net of tax(285,315)

369,425

676,032

655,541

Total other comprehensive income- 84 -

(Consolidated statements of changes in shareholders’ equity)
Previous fiscal year (from January 1, 2022 to December 31, 2022)
1. Matters regarding issued shares
Beginning of the
fiscal year

Class of shares
Common stock (shares)

Increase

33,117,234

End of the fiscal
year

Decrease--

33,117,234

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

Beginning of the
fiscal year

Increase

606,080

Decrease
238

14,807

End of the fiscal
year
591,511(Outline of reasons for changes)
1. The increase is due to the purchase of shares less than one unit.
2. The decrease is due to a decrease of 20 shares from the sale of shares less than one unit, and a decrease of 14,787 shares from thedisposal of treasury shares pursuant to the resolution of the Board of Directors meeting held on April 15, 2022, accompanying the
introduction of the restricted share-based compensation plan.
3. Matters regarding dividends(1) Amount of dividends paid
Total amount of Dividend per
dividends
share(Thousand yen)
(Yen)

Resolution

Class of shares

Ordinary General Meetingof Shareholders held on

Common stock

1,235,423

Common stock

1,301,032

Record date

Effective date38

December 31, 2021

March 30, 2022

40

June 30, 2022

August 16, 2022

March 29, 2022
Board of Directors meeting
held on August 10, 2022

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

- 85 -

Current fiscal year (from January 1, 2023 to December 31, 2023)
1. Matters regarding issued shares
Beginning of theClass of sharesfiscal year
Common stock (shares)

Increase

33,117,234

End of the fiscal
year

Decrease--

33,117,234

2. Matters regarding treasury sharesClass of shares

Beginning of the
fiscal year

Common stock (shares)

Increase

591,511End of the fiscal
year

Decrease
418

14,822

577,107(Outline of reasons for changes)
1. The increase is due to the purchase of shares less than one unit.
2. The decrease is due to a decrease of 108 shares from the sale of shares less than one unit, and a decrease of 14,714 shares from thedisposal of treasury shares pursuant to the resolution of the Board of Directors meeting held on April 14, 2023, accompanying the
introduction of the restricted share-based compensation plan.
3. Matters regarding dividends(1) Amount of dividends paid
Resolution

Class of shares

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

Record date

Effective dateOrdinary General Meetingof Shareholders held on
March 29, 2023
Board of Directors meeting
held on August 10, 2023

Common stock

1,496,183

46

December 31, 2022

March 30, 2023

Common stock

1,301,609

40

June 30, 2023

August 24, 2023

(2) Dividend for which the record date falls in the current fiscal year but the effective date falls in the following fiscal year
Total amount of Dividend per
Source of
Resolution
Class of shares
dividends
share
Record date
Effective datedividends(Thousand yen)
(Yen)
Ordinary General Meeting
Retainedof Shareholders held on
Common stock
1,561,926
48 December 31, 2023
March 29, 2024
earnings
March 28, 2024
(Consolidated statements of cash flows)*

Reconciliation between the balance of cash and cash equivalents at the end of the fiscal year and the amount of accounts presented
in the consolidated balance sheets(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Cash and deposits
Time deposits with deposit terms over threemonthsCash and cash equivalents- 86 -

Current fiscal year
(From January 1, 2023
to December 31, 2023)

12,300,053

11,337,201(41,815)(45,123)

12,258,237

11,292,078

(Lease transactions)
1. Operating lease transactions(Lessor)
Remaining lease payments for non-cancelable operating lease transactions(Thousand yen)Previous fiscal year
(As of December 31, 2022)

Current fiscal year
(As of December 31, 2023)

Within one year

366,385456,098

Over one year

942,027

1,132,717

1,308,413

1,588,816

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

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

- 87 -

2. Matters regarding market value, etc., of financial instruments
The amounts in the consolidated balance sheets, market value of financial instruments, and their differences are shown below.
Previous fiscal year (as of December 31, 2022)(Thousand yen)Amounts in the consolidatedbalance sheets
Investment securities
Available-for-sale securities
Total assets

Market value

Differences

1,747,334

1,747,334-

1,747,334

1,747,334-

Current fiscal year (as of December 31, 2023)(Thousand yen)Amounts in the consolidatedbalance sheets

Market value

Differences

Investment securities
Available-for-sale securities
Total assets(Note 1)

1,283,851

1,283,851-

1,283,851

1,283,851-“Cash and deposits,” “notes and accounts receivable - trade,” “accounts payable - trade,” “accounts payable - other,”and “income taxes payable” are omitted, because they comprise cash and short-term instruments whose carrying
amount approximates their market value.

(Note 2)

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

Previous fiscal year

Unlisted shares(Note 3)Current fiscal year
28,40028,400

Scheduled redemption amounts of monetary claims after the consolidated closing datePrevious fiscal year (as of December 31, 2022)

Cash and deposits
Notes and accounts receivable trade
Total(Thousand yen)

Within one year

Over one year
within five years

Over five years
within ten years

12,300,053

-

-

-

5,255,686---

17,555,740

-

-

-

Over ten years

Current fiscal year (as of December 31, 2023)(Thousand yen)

Within one year

Over one year
within five years

Cash and deposits

11,337,201

-

-

-

Notes and accounts receivable trade

5,345,669---

16,682,870

-

-

-

Total

- 88 -

Over five years
within ten years

Over ten years

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

Category
Level 1

Level 2

Level 3

Total

Investment securities
Available-for-sale securities
SharesTotal assets

1,747,334--

1,747,334

1,747,334--

1,747,334

Current fiscal year (as of December 31, 2023)(Thousand yen)
Market value

Category
Level 1

Level 2

Level 3

Total

Investment securities
Available-for-sale securities
SharesTotal assets

1,283,851--

1,283,851

1,283,851--

1,283,851(Note) A description of the valuation techniques and inputs used in the market value measurements
Investment securities
Listed shares are valued using quoted prices. As listed shares are traded in active markets, their market value isclassified as Level 1.

- 89 -

(Securities)
1. Held-to-maturity bonds
Previous fiscal year (as of December 31, 2022)
Not applicable.
Current fiscal year (as of December 31, 2023)
Not applicable.
2. Available-for-sale securities
Previous fiscal year (as of December 31, 2022)(Thousand yen)Amounts in the
consolidated balance
sheetsAcquisition cost(1) Shares

1,746,801

1,437,020

309,780(2) Bonds---(3) Other---

1,746,801

1,437,020

309,780(1) Shares

533

618

(85)

(2) Bonds---(3) Other

-

-

-

533

618

(85)

1,747,334

1,437,638

309,695

Type

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

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

Differences

cost
Subtotal
Total(Note) Unlisted shares (the amount in the consolidated balance sheets: 28,400 thousand yen) are not included in the available-for-salesecurities in the table above, since they are shares, etc., without market price.
Current fiscal year (as of December 31, 2023)(Thousand yen)Amounts in the
consolidated balance
sheetsAcquisition cost(1) Shares

14,4502,039

12,411(2) Bonds---(3) Other---

14,4502,039

12,411Type

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

Subtotal

Differences(1) Shares

1,269,401

1,435,598(166,197)

Available-for-sale securities with theamount in the consolidated balance(2) Bonds---

sheets not exceeding the acquisition
cost(3) Other---

1,269,401

1,435,598(166,197)

1,283,851

1,437,638(153,786)

Subtotal
Total(Note) Unlisted shares (the amount in the consolidated balance sheets: 28,400 thousand yen) are not included in the available-for-salesecurities in the table above, since they are shares, etc., without market price.

- 90 -

3. Available-for-sale securities sold during the fiscal year
Previous fiscal year (from January 1, 2022 to December 31, 2022)(Thousand yen)Type

Sales amount

Total gain on sales

Total loss on sales(1) Shares

538

448

-

(2) Bonds---(3) Other

-

-

-

538

448

-

Total

Current fiscal year (from January 1, 2023 to December 31, 2023)(Thousand yen)Type

Sales amount

Total gain on sales

Total loss on sales(1) Shares

-

-

-

(2) Bonds---(3) Other

-

-

-

-

-

-

Total
4. Impairment losses on securities
Not applicable.

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

- 91 -

(Derivative transactions)
1. Derivative transactions for which hedge accounting is applied
Currency-related transactions
Previous fiscal year (as of December 31, 2022)
Not applicable.
Current fiscal year (as of December 31, 2023)
Not applicable.
(Retirement benefits)
1. Outline of retirement benefit plans adopted
The Company has both a defined benefit corporate pension plan as the defined benefit plan and a defined contribution pension plan.
Some of the consolidated subsidiaries have adopted a lump-sum retirement payment plan as the defined benefit plan and a defined
contribution plan.
For the lump-sum retirement payment plan adopted by some of the consolidated subsidiaries, net defined benefit liability andretirement benefit expenses are calculated using a simplified method.
The Company participates in the employees’ pension fund plan, which is a multi-employer plan. The same accounting as for thedefined contribution plan is adopted for the plans for which the amount of plan assets corresponding to the Company’s contribution
cannot be reasonably calculated.
2. Defined benefit plan (excluding plans that adopt the simplified method)(1) Reconciliation of retirement benefit obligations at the beginning and end of the fiscal year
(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Balance of retirement benefit obligations at theCurrent fiscal year
(From January 1, 2023
to December 31, 2023)

2,771,124

2,989,436

Service cost

214,520

223,250

Interest cost

14,06624,356

Actuarial gains and losses generated

12,798(474,972)

Past service costs generated

111,974

349,624

Retirement benefits paid

(135,047)(151,150)

2,989,436

2,960,545

beginning of the fiscal year

Balance of retirement benefit obligations at the end of
the fiscal year
(2) Reconciliation of plan assets at the beginning and end of the fiscal year

(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Balance of plan assets at the beginning of the fiscal
year
Expected return on plan assets
Actuarial gains and losses generated

Current fiscal year
(From January 1, 2023
to December 31, 2023)

3,209,664

3,045,617

80,241

76,140(258,335)

337,777

Contribution from the employer

149,095

163,216

Retirement benefits paid

(135,047)(151,150)

3,045,617

3,471,601

Balance of plan assets at the end of the fiscal year

- 92 -

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

Current fiscal year
(As of December 31, 2023)

Retirement benefit obligations of funded plans

2,989,436

2,960,545

Plan assets(3,045,617)(3,471,601)

Net liabilities and assets recorded in the consolidatedbalance sheets(56,180)(511,056)

Net defined benefit asset(56,180)(511,056)(56,180)(511,056)

Net liabilities and assets recorded in the consolidatedbalance sheets(4) Retirement benefit expenses and breakdown thereof(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)

Current fiscal year
(From January 1, 2023
to December 31, 2023)

Service cost

214,520

223,250

Interest cost

14,06624,356

Expected return on plan assets(80,241)(76,140)

Amortization of actuarial gains and losses(33,607)23,485

5,598

45,703

120,337

240,654

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

Components of remeasurements of defined benefit plans, net of tax (before tax effects) are as follows:(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)

Current fiscal year
(From January 1, 2023
to December 31, 2023)

Actuarial gains and losses

304,741(836,234)

Past service costs

106,375

303,921

Total

411,117(532,313)(6) Remeasurements of defined benefit plans
Components of remeasurements of defined benefit plans (before tax effects) are as follows:(Thousand yen)Previous fiscal year
(As of December 31, 2022)

Current fiscal year
(As of December 31, 2023)

Unrecognized actuarial gains and losses(49,721)786,513

Unrecognized past service costs(106,375)(410,296)

Total(156,096)

376,216- 93 -

(7) Matters regarding plan assets(i) Major components of plan assets
Ratios by major category of the total plan assets are as follows:
Previous fiscal year
(As of December 31, 2022)

Current fiscal year
(As of December 31, 2023)

Japanese bonds

23%

21%

Japanese shares

24%

25%

Foreign bonds

10%

13%

Foreign shares

23%

23%

Other

20%

18%

Total

100%

100%

(ii) Method of determining expected long-term rate of return on plan assets
The current and expected allocation of plan assets, and the current and expected future long-term rate of return on diverse assets
comprising plan assets are taken into account in determining expected long-term rate of return on plan assets.
(8) Matters regarding basis for actuarial assumptions
Major actuarial assumptions (in weighted average)
Previous fiscal year
(As of December 31, 2022)

Current fiscal year
(As of December 31, 2023)

Discount rate

0.5%

1.5%

Expected long-term rate of return on plan assets

2.5%

2.5%

Expected rate of increase in salary

5.9%

5.9%

3. Defined benefit plans that apply the simplified method(1) Reconciliation of net defined benefit liability at the beginning and end of the fiscal year under the plans that apply the simplified
method(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Balance of net defined benefit liability at the
beginning of the fiscal year

Current fiscal year
(From January 1, 2023
to December 31, 2023)

7,753

10,628Retirement benefit expenses

1,951

3,135

Translation gains or losses

923

856

10,628

14,620

Balance of net defined benefit liability at the end of
the fiscal year

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

Current fiscal year
(As of December 31, 2023)

Retirement benefit obligations of unfunded plans

10,628

14,620Net liabilities and assets recorded in the consolidatedbalance sheets

10,628

14,620Net defined benefit liability

10,628

14,62010,628

14,620Net liabilities and assets recorded in the consolidatedbalance sheets- 94 -

(3) Retirement benefit expenses
Retirement benefit expenses calculated using the simplified method:

Previous fiscal year: 1,951 thousand yen
Current fiscal year: 3,135 thousand yen

4. Defined contribution plans
The required amount of contributions to defined contribution plans of the Company and its consolidated subsidiaries are 110,148
thousand yen for the previous fiscal year and 109,419 thousand yen for the current fiscal year.
5. Multi-employer plans
The required amount of contributions to the employees’ pension fund plan and corporate pension fund plan, which are multiemployer plans and adopt the same accounting method as that for defined contribution plans, are 185,256 thousand yen for theprevious fiscal year and 197,109 thousand yen for the current fiscal year.
(1) The latest status of funding of multi-employer plans(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Amount of plan assets
Aggregate actuarial obligation under pension financecalculation and minimum reserve
Difference

Current fiscal year
(As of December 31, 2023)

16,951,908

17,329,484

19,873,038

19,781,141(2,921,130)(2,451,657)(2) Ratio of contributions by the Company in multi-employer plans
Previous fiscal year: 11.6% (as of December 31, 2022)
Current fiscal year: 12.2% (as of December 31, 2023)(3) Supplementary explanation
Major factors for the difference in (1) above are the balance of past service liabilities under pension finance calculation (6,938,156
thousand yen for the previous fiscal year, 6,019,889 thousand yen for the current fiscal year) and the general reserve (4,017,026
thousand yen for the previous fiscal year, 3,568,232 thousand yen for the current fiscal year). Past service liabilities under the plan
are amortized using the straight-line method over a period of 6 years. The Company has amortized special contribution in the
consolidated financial statements (126,896 thousand yen in the previous fiscal year, 134,720 thousand yen in the current fiscal
year).
The ratios in (2) above do not correspond to the actual ratios of the contribution by the Company.

- 95 -

(Stock options, etc.)
Not applicable.
(Tax effect accounting)
1. Breakdown of major causes for deferred tax assets and deferred tax liabilities(Thousand yen)Previous fiscal year
(As of December 31, 2022)

Current fiscal year
(As of December 31, 2023)

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

342,943
174,159

386,271
169,251

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

89,98686,245355,246
45,781

Accrued social insurance premiums
Unrealized income on inventories

26,071
435,069

26,033381,134

Depreciation
Asset retirement obligations

227,383
184,536

224,876
211,817

Allowance for doubtful accounts
Net defined benefit liability

14,102
2,125

14,102
2,924

Retirement benefits for directors (and other officers)
Valuation difference on available-for-sale securities

3,709
-

3,709
47,058108,938

91,4001,695,270

1,959,607(342,943)(386,271)(24,295)(44,706)

Subtotal valuation allowance(367,238)(430,977)

Total deferred tax assets
Deferred tax liabilities

1,328,032

1,528,629

Net defined benefit asset
Retirement cost for asset retirement obligations(17,191)(113,579)(156,383)(124,342)

Valuation difference on available-for-sale securities
Retained earnings of overseas subsidiaries(94,766)(275,911)(338,053)

(610)

(277)

Total deferred tax liabilities(502,057)(619,056)

Net deferred tax assets (liabilities)

825,975

909,573

Other
Subtotal deferred tax assets
Valuation allowance for tax loss carryforward (Note)
Valuation allowance for aggregate deductible
temporary differences

Other(Note) Tax loss carryforward and corresponding deferred tax assets by carryforward period
Previous fiscal year (as of December 31, 2022)(Thousand yen)
Within one
year

Over oneyear within

Over twoyears within

Over three
years within

Over four
years within

two years

three years

four years

five years

Over five
years

Total

Tax loss carryforward

-

-

9,698

7,955

7,549

317,739

342,943

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

Deferred tax assets

-

-

-

-

-

-

-

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

- 96 -

Current fiscal year (as of December 31, 2023)(Thousand yen)
Within one
year

Over one

Over twoOver three

Over four

year within
two years

years within
three years

years withinfour years

years within
five years

Over five

Total

years

Tax loss carryforward-

10,095

8,281

7,859

110,758

249,277

386,271

Valuation allowance-(10,095)(8,281)(7,859)(110,758)(249,277)(386,271)

Deferred tax assets

-

-

-

-

-

-

-

(Note) Tax loss carryforward is the amount obtained by multiplying them with the effective statutory tax rate.
2. Breakdown by item of major causes of significant difference between the effective statutory tax rate and the income tax rate after
applying tax effect accounting
Previous fiscal year
(As of December 31, 2022)
Effective statutory tax rate
(Adjustments)

Current fiscal year
(As of December 31, 2023)

30.6%

30.6%

Items permanently excluded from deductible expenses
such as entertainment expenses

1.0%

2.3%

Exclusion of dividend income from taxable income
Inhabitant tax on per capita basis(0.8)%
0.3%

0.0%
0.5%

Experimentation and research expenses tax credit
Salary increase tax credits(4.1)%(0.6)%(6.6)%(2.2)%

Increase (decrease) in valuation allowance
Other

2.3%
(0.0)%

1.2%
0.5%

Income tax rate after applying tax effect accounting

28.7%

26.3%

(Business combinations, etc.)
Not applicable.

- 97 -

(Asset retirement obligations)
Asset retirement obligations recorded in the consolidated balance sheets(1) Outline of the asset retirement obligations
These are the restoration obligation under real estate lease contracts of branch offices and sales offices.
(2) Calculation method of the amount of the asset retirement obligations
The amount of asset retirement obligations is calculated by using the government bond yield as the discount rate based on theestimated period of use of 10 to 15 years from the acquisition.
(3) Changes in the total amount of the asset retirement obligations(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)

Current fiscal year
(From January 1, 2023
to December 31, 2023)

Balance at the beginning of the fiscal year

608,139643,317

Increase due to the acquisition of property,
plant and equipment

58,055

118,734

02,375(22,877)(29,611)643,317734,815

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

- 98 -

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

Category

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

Current fiscal year
(From January 1, 2023
to December 31, 2023)

AmountAmountRatio (%)

Ratio (%)

Haircare products

26,312,862

58.2

28,355,020

59.4

Hair coloring products

16,631,187

36.7

16,953,723

35.5

Permanent wave products

1,450,096

3.2

1,463,884

3.0

Cosmetic products

572,085

1.3

571,762

1.2

Other

272,1460.6

418,040

0.9

45,238,377

100.0

47,762,432

100.0

-

-

-

-

45,238,377

100.0

47,762,432

100.0

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

2. Useful information in understanding revenue from contracts with customers
The description of useful information in understanding revenue from contracts with customers is omitted as it is provided in “Notes
to the Consolidated Financial Statements (Significant matters that serve as the basis for preparation of consolidated financial
statements), 4. Matters regarding accounting policies, (5) Accounting standards for significant revenue and expenses.”
3. Information on the reconciliation of satisfaction of performance obligations within contracts with customers and cash flows arisingfrom such contracts, and information on the amount and timing of revenue that is expected to be recognized after the following fiscal
year arising from contracts with customers that exist at the end of the current fiscal year
(1) Balance of contract liabilities, etc.
Previous fiscal year (from January 1, 2022 to December 31, 2022)(Thousand yen)
Beginning of the fiscal year

End of the fiscal year

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

Receivables from contracts with customers

4,673,258

5,255,686

21,901

4,612

Contract liabilities(Note) Contract liabilities are advances received from customers and are reversed upon recognition of revenue.
Current fiscal year (from January 1, 2023 to December 31, 2023)(Thousand yen)
Beginning of the fiscal year

End of the fiscal year

(As of January 1, 2023)(As of December 31, 2023)

Receivables from contracts with customers
Contract liabilities

5,255,686

5,345,669

4,612

8,545

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

- 99 -

(Segment information, etc.)
Segment information
This information is omitted since the Group has a single segment of manufacture and sales of cosmetic products.
Related information
Previous fiscal year (from January 1, 2022 to December 31, 2022)
1. Information by product and service(Thousand yen)

Net sales to external customers

Haircareproducts

Hair coloringproducts

Permanent
wave products

26,312,862

16,631,187

1,450,096

Cosmetic
products
572,085

Other

Total

272,146

45,238,377

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

Other
9,904,253

Total
45,238,377(Note) Net sales are based on locations of customers and classified by country or region.
(2) Property, plant and equipment(Thousand yen)Japan
15,422,742

China

Other

2,886,791

Total

1,510,364

19,819,899

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

Net sales

Topy Co., Ltd.

4,804,640

GAMO Co., Ltd.

3,810,883

BIC HOLDINGS Inc.

3,396,274(Note) The description of related segments is omitted since the Group has a single segment of manufacture and sales of cosmetic
products.

- 100 -

Current fiscal year (from January 1, 2023 to December 31, 2023)
1. Information by product and service(Thousand yen)

Net sales to external customers

Haircareproducts

Hair coloringproducts

Permanent
wave products

28,355,020

16,953,723

1,463,884

Cosmetic
products
571,762

Other

Total

418,040

47,762,432

2. Information by geographical area
(1) Net sales(Thousand yen)Japan
36,502,248

Other

Total

11,260,183

47,762,432(Note) Net sales are based on locations of customers and classified by country or region.
(2) Property, plant and equipment(Thousand yen)Japan
16,275,719

China

Other

Total

1,811,687

2,912,054

20,999,461

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

Net sales

Topy Co., Ltd.

5,199,462

GAMO Co., Ltd.

3,947,360

BIC HOLDINGS Inc.

3,493,093(Note) The description of related segments is omitted since the Group has a single segment of manufacture and sales of cosmetic
products.
Information regarding impairment losses on non-current assets by reportable segment
Not applicable.
Information regarding amortization and unamortized balance of goodwill by reportable segment
Not applicable.
Information regarding gain on bargain purchase by reportable segment
Not applicable.
Related party information
Previous fiscal year (from January 1, 2022 to December 31, 2022)
Not applicable.
Current fiscal year (from January 1, 2023 to December 31, 2023)
Not applicable.

- 101 -

(Per share information)
Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Net assets per share (yen)Basic earnings per share (yen)Current fiscal year
(From January 1, 2023
to December 31, 2023)

1,352.52

1,411.56

171.49122.99(Notes) 1. Diluted earnings per share are not presented because there are no dilutive shares.
2. The basis for calculating basic earnings per share is as follows:
Previous fiscal year
(from January 1, 2022
to December 31, 2022)
Profit attributable to owners of parent (thousand yen)Amount not attributable to common shareholders(thousand yen)
Profit attributable to owners of parent related to common
stock (thousand yen)
Average number of shares of common stock during theperiod (shares)(Significant subsequent events)
Not applicable.

- 102 -

Current fiscal year
(from January 1, 2023
to December 31, 2023)

5,577,274

4,001,627--

5,577,274

4,001,627

32,521,551

32,536,033

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

Balance at beginningof period(Thousand yen)

Short-term borrowings

-

-

-

-

Current portion of long-termborrowings

-

-

-

-

Current portion of lease obligations

-

-

-

-

Long-term borrowings (except for thecurrent portion)

-

-

-

-

-

-

-

-

74,03275,032

0.002-

74,03275,032--

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

Balance at end of
period(Thousand yen)

Average interest rate(%)

Repayment due date

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

1st quarter2nd quarter3rd quarter

Current fiscal year

Net sales(Thousand yen)

10,340,911

22,703,504

34,150,359

47,762,432

Profit before income
taxes(Thousand yen)

1,165,683

3,100,045

3,473,759

5,432,083(Thousand yen)882,314

2,195,360

2,489,397

4,001,627

(Yen)

27.13

67.48

76.52

122.99Profit attributable toowners of parent
Basic earnings per share(Accounting period)
Basic earnings per share

1st quarter(Yen)

2nd quarter

27.13- 103 -

40.35

3rd quarter
9.04

4th quarter
46.47

2. Financial Statements, etc.
(1) Financial Statements
1) Balance Sheets(Thousand yen)Previous fiscal year
(As of December 31, 2022)
AssetsCurrent assets
Cash and deposits
Notes receivable - trade
Accounts receivable - trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Short-term loans receivable from subsidiaries andassociates
Prepaid expenses
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Other
Total intangible assets- 104 -

Current fiscal year
(As of December 31, 2023)

9,399,665

7,108,249*2 170,637*2 188,316*1 5,654,505*1 5,368,165

4,034,129
39,422
1,645,261

4,679,315
35,531
1,763,522-

206,500

182,762

178,912*1 223,645*1 242,460

21,350,030

19,770,973

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

6,183,252
81,8172,049,772
12,126
809,774
6,324,093
807,292
16,268,129

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

1,440,820
116,750
1,557,571

(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Investments and other assets
Investment securities
Shares of subsidiaries and associates
Investments in capital of subsidiaries andassociates
Long-term loans receivable from subsidiaries
and associates
Prepaid pension costs
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - otherAccrued expenses
Income taxes payable
Advances received
Deposits received
Provision for bonuses
Other
Total current liabilities
Non-current liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities- 105 -

Current fiscal year
(As of December 31, 2023)

1,775,734
2,213,793

1,312,251
2,213,793

4,457,200

4,457,200

828,000

1,124,000

212,277
911,607
1,248,689(408,501)
11,238,801
28,158,398
49,508,428

134,839
958,161
1,091,029(487,087)
10,804,188
28,629,889
48,400,863*1 1,159,984*1 1,022,967*1 3,797,900*1 3,468,944

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

482,833
319,897
6,579
332,961
535,907
19,211
6,189,303

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

691,749
75,032766,782
6,956,086

(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
General reserve
Retained earnings brought forward
Total retained earnings
Treasury shares
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets- 106 -

Current fiscal year
(As of December 31, 2023)

2,000,000

2,000,000

199,120
75,417274,537

199,120
107,837
306,957

300,880

300,880

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

3,500,000
37,425,828
41,226,708(1,982,161)
41,551,504

214,928
214,928
41,249,787
49,508,428(106,728)(106,728)
41,444,776
48,400,863

2) Statements of Earnings(Thousand yen)Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividend income
Surrender value of insurance
Foreign exchange gains
Miscellaneous income
Total non-operating income
Non-operating expenses
Foreign exchange losses
Miscellaneous losses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Loss on valuation of shares of subsidiaries andassociates
Provision of allowance for doubtful accounts of loans
receivable from subsidiaries and associates
Compensation for damages
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Profit- 107 -

Current fiscal year
(From January 1, 2023
to December 31, 2023)*1 41,780,945*1 42,520,224*1 16,215,637*1 17,973,474

25,565,308*1, *2 18,157,310
7,407,997*1, *2 19,845,110*1 226,638*1 37,621

157,434*1 168,387
552,460

86,359*1 98,175
222,156472
472
7,959,986

15,2012,140
17,342
4,906,452*1 684

448
1,132

1
1

6,262

39,49349,000-362,41478,585

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

115,000
233,079
4,673,373
1,344,834
95,271
1,440,105
3,233,267

24,546,749
4,701,639

Schedule of manufacturing costs
Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Category

Note

Amount(Thousand yen)

Current fiscal year
(From January 1, 2023
to December 31, 2023)

Ratio
(%)

Amount(Thousand yen)

Ratio
(%)

I.

Cost of raw materials

9,740,305

69.5

9,919,284

68.8

II.

Cost of outsourced processing

1,659,198

11.8

1,596,669

11.1

1,035,166

7.4

1,105,952

7.7

III. Labor cost

(75,208)(Provision for bonuses)
IV. Expenses

1,572,281(78,661)
11.2

1,793,953(Depreciation)(760,879)(849,768)(Repair expenses)(98,181)(94,493)(Utility expenses)(130,522)(131,995)(Supplies expenses)(98,494)(107,344)

Gross manufacturing cost for the
fiscal year

14,006,951

Beginning of work in process
Total
Transfer to other account14,415,860

41,08439,422

14,048,035

14,455,283

102,924

105,144

39,42235,531

13,905,688

14,314,607*1

Ending of work in process
Cost of products manufactured

100.0

12.4

100.0

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

Current fiscal year
(From January 1, 2023
to December 31, 2023)*1 Breakdown of the transfer to other account is as follows:2*1 Breakdown of the transfer to other account is as follows:

Promotion expenses
Research and development expenses

92,920 thousand yen
8,333 thousand yen

Promotion expenses
Research and development expenses

89,004 thousand yen
12,474 thousand yen

Other1,669 thousand yen

Other3,665 thousand yen

Total

102,924 thousand yen

Total

105,144 thousand yen

Method of calculation of costs

2

The continuous process cost system is adopted.

Method of calculation of costs
Same as the previous fiscal year

- 108 -

3) Statements of Changes in Shareholders’ Equity
Previous fiscal year (from January 1, 2022 to December 31, 2022)(Thousand yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capital stock

Retainedearnings
brought
forward

Total retained
earnings

33,992,924

37,793,804

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

Profit

5,533,885

5,533,885

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

Legal capitalsurplus

Other capitalsurplus

Total capitalsurplus

Legal retained
earnings

199,120

47,179246,299

300,880

2,000,000

28,23728,2373,500,000--

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

2,997,429

2,000,000

199,120

75,417274,537

300,880

3,500,000

36,990,353

40,791,233

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

Valuation and translation adjustments

Total shareholders’equityValuationdifference on
available-for-salesecurities

Deferred gains orlosses on hedges

Total valuation andtranslation
adjustments

37,959,710

100,262

68,821

169,083

Total net assets

38,128,794

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

Profit

5,533,885

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

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

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

3,075,148

114,665(68,821)45,844

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

41,034,858

214,928-

214,928

41,249,787- 109 -

Current fiscal year (from January 1, 2023 to December 31, 2023)(Thousand yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capital stock

Retainedearnings
brought
forward

Total retained
earnings

36,990,353

40,791,233

Dividends of surplus(2,797,792)(2,797,792)

Profit3,233,267

3,233,267

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

Legal capitalsurplus

Other capitalsurplus

Total capitalsurplus

Legal retained
earnings

199,120

75,417274,537

300,880

2,000,000

32,42032,4203,500,000--

32,42032,420--435,475

435,475

2,000,000

199,120

107,837

306,957

300,880

3,500,000

37,425,828

41,226,708

Shareholders’ equity
Treasury shares
Balance at beginning of
periodChanges of items during
periodGeneral reserve(2,030,911)

Valuation and translation adjustments

Total shareholders’equityValuationdifference on
available-for-salesecurities

Total valuation andtranslation
adjustments

41,034,858

214,928

214,928

Total net assets

41,249,787

Dividends of surplus(2,797,792)(2,797,792)

Profit3,233,267

3,233,267(2,148)(2,148)(2,148)50,89883,31983,319Purchase of treasury
shares
Disposal of treasury
sharesNet changes of items
other than shareholders’equityTotal changes of items
during period
Balance at end of period(321,656)(321,656)(321,656)

48,749516,645(321,656)(321,656)

194,989(1,982,161)

41,551,504(106,728)(106,728)

41,444,776- 110 -

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

Shares of subsidiaries and shares of associates
Stated at cost using the moving-average method(ii) Available-for-sale securities
Other than shares, etc., without market priceStated at market value based on the market price, etc., at the fiscal year-end (unrealized gains and losses are reported asa separate component of net assets, and cost of sales is calculated by the moving-average method)
Shares, etc., without market priceStated at cost using the moving-average method(2) Valuation standards and methods for inventories(i) MerchandiseStated at cost using the weighted average method (the balance sheet value is calculated using the inventory write-down
method based on decreased profitability)(ii) Finished goods and work in process
Stated at cost using the weighted average method (the balance sheet value is calculated using the inventory write-down
method based on decreased profitability)(iii) Raw materials
Stated at cost using the weighted average method (the balance sheet value is calculated using the inventory write-down
method based on decreased profitability)(iv) Supplies
Stated at cost using the last-purchase-price method (the balance sheet value is calculated using the inventory write-down
method based on decreased profitability)
2. Depreciation and amortization methods for non-current assets(1) Property, plant and equipment
They are depreciated using the straight-line method.
Useful lives of principal assets are as follows:
Buildings:
2 to 50 years
Machinery and equipment:
2 to 17 years(2) Intangible assets
They are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated period of internal use (2 to 5 years).
3. Translation standards of assets and liabilities denominated in foreign currencies into Japanese yen
Foreign currency denominated monetary receivables and payables are translated into Japanese yen at the spot exchange rate at
the fiscal year-end, and foreign exchange gains and losses from translation are recognized as profit or loss.

- 111 -

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

- 112 -

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

Current fiscal year

Merchandise and finished goods

4,034,129

4,679,315

Loss on valuation of inventories

254,786

1,094,327(Note) The amount of loss on valuation of inventories represents the amount of write-down due to decreased profitability.
(2) Information to aid in understanding the details of accounting estimates
In the calculation using the method of write-down based on decreased profitability, regarding merchandise and finished goods,
the planned shipment volume and the inventory volume at the end of the fiscal year are compared for each merchandise andfinished good, and the amount of slow-moving inventories exceeding the planned shipment volume for a certain period is
written down.
These accounting estimates may differ from the actual profitability if assumed circumstances change as they can be affectedby changes in the future uncertain market environment and other factors.

- 113 -

(Balance sheets)*1 Monetary receivables and monetary payables related to subsidiaries and associates
Monetary receivables and monetary payables included in each account other than those presented separately are as follows:(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Shot-term monetary receivables
Shot-term monetary payables

911,799
218,889

Current fiscal year
(As of December 31, 2023)
600,900
283,699*2 Treatment of notes due at the fiscal year-end
Notes due at the end of the fiscal year are treated as settled on the due date.
As the fiscal year-end fell on a holiday for financial institutions, the following notes due at the fiscal year-end are treated as settled
on the due date.
(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Notes receivable - trade

80,781

Current fiscal year
(As of December 31, 2023)
68,336(Statements of earnings)*1 Transactions with subsidiaries and associates(Thousand yen)
Current fiscal year
(From January 1, 2023
to December 31, 2023)

Previous fiscal year
(From January 1, 2022
to December 31, 2022)
Amount of operating transactions
Net sales
Purchase amount
Other
Amount of non-operating transactions

5,333,992
2,542,278

4,797,828
2,530,614

311,952
275,531402,325
78,586*2 Approximate ratios of expenses included in selling expenses are 9.8% for the previous fiscal year and 11.9% for the current fiscal
year, and those included in general and administrative expenses are 90.2% for the previous fiscal year and 88.1% for the current
fiscal year.
Major expenses included in selling, general and administrative expenses and their amounts are as follows:(Thousand yen)Previous fiscal year
Current fiscal year
(From January 1, 2022
(From January 1, 2023
to December 31, 2022)
to December 31, 2023)
Remuneration, salaries and allowances
4,798,376
4,915,783
Logistics expenses
Research and development expenses

2,743,662
2,108,860

2,851,725
2,361,191

Promotion expenses
Depreciation

932,097823,036

1,203,818
857,928

Provision for bonuses
Retirement benefit expenses

390,067
273,695

375,976
370,433(Securities)
Previous fiscal year (as of December 31, 2022)
The description of the market values of shares of subsidiaries and associates (amounts in the balance sheets: 2,213,793 thousand yenof shares of subsidiaries and 4,457,200 thousand yen of investments in capital of subsidiaries and associates) is omitted since they areshares, etc., without market price.
Current fiscal year (as of December 31, 2023)
The description of the market values of shares of subsidiaries and associates (amounts in the balance sheets: 2,213,793 thousand yenof shares of subsidiaries and 4,457,200 thousand yen of investments in capital of subsidiaries and associates) is omitted since they areshares, etc., without market price.

- 114 -(Tax effect accounting)
1. Breakdown of major causes for deferred tax assets and deferred tax liabilities(Thousand yen)Previous fiscal year
(As of December 31, 2022)
Deferred tax assets
Provision for bonuses

Current fiscal year
(As of December 31, 2023)

168,066

163,987

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

77,96486,245334,864
45,781

Accrued social insurance premiums
Depreciation

26,071
227,369

26,033
224,396

Allowance for doubtful accounts
Loss on valuation of shares of subsidiaries and associates

125,001
194,732

149,048
194,732

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

3,709
184,403

3,709
211,675

Restricted share-based compensation
Performance-linked compensation

40,422
24,05165,474-

Valuation difference on available-for-sale securities
Other

26,872

47,058783

Subtotal deferred tax assets
Valuation allowance (Note)

1,184,911-

1,467,545(343,780)

Total deferred tax assets

1,184,911

1,123,765

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

Retirement cost for asset retirement obligations
Prepaid pension costs(113,579)(64,956)(124,342)(41,260)(273,303)(165,603)

Total deferred tax liabilities

Net deferred tax assets (liabilities)
911,607958,161(Note) Valuation allowance is recorded as a result of assessing the recoverability of deferred tax assets related to loss on valuation ofshares of subsidiaries and associates and allowance for doubtful accounts.
2. Breakdown by item of major causes of significant difference between the effective statutory tax rate and the income tax rate after
applying tax effect accounting
Previous fiscal year
(As of December 31, 2022)
Effective statutory tax rate
(Adjustments)

Current fiscal year
(As of December 31, 2023)

30.6%

30.6%

Items permanently excluded from deductible expenses suchas entertainment expenses

1.1%

2.7%

Dividend income excluded from gross revenue
Inhabitant tax on per capita basis(0.8)%
0.3%

0.0%
0.6%

Experimentation and research expenses tax credit(4.2)%(7.7)%

Salary increase tax credits(0.6)%(2.6)%

-

7.4%

Other

0.2%

(0.2)%

Income tax rate after applying tax effect accounting

26.6%

30.8%

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

- 115 -

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

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

Type of assets
Buildings

5,958,847

681,619

113,559

431,286

6,183,252

5,989,640

Structures

89,773

7,200

2,511

15,064

81,817285,169

2,106,899

525,189

192,966

571,0392,049,772

5,928,501

Vehicles

10,288

7,097

2,280

5,259

12,126

41,528Tools, furniture andfixtures642,177

542,340

66,803

372,573

809,774

2,652,026

6,324,093---

6,324,093-

277,940

1,468,416

939,064-

807,292-

15,410,019

3,231,863

1,317,185

1,395,223

16,268,129

14,896,866

Software

1,194,130

713,931-467,241

1,440,820

3,441,045

Other

315,446

324,891

523,342245

116,750

9,417

1,509,577

1,038,822

523,342

467,486

1,557,571

3,450,462

Machinery andequipment
Property,plant andequipment

Land
Construction inprogress
Total

Intangible
assets

Total(Note) Significant changes in non-current assets are as follows:
1. Major components of an increase in buildings of 681,619 thousand yen are 165,153 thousand yen of construction work for
the Haneda Innovation Center, 146,922 thousand yen of construction work for relocation of the Fukuoka Sales Office, and31,845 thousand yen of construction work for implementation and expansion of the filling and wrapping area at the
Yumegaoka Factory.
2. A major component of an increase in machinery and equipment of 525,189 thousand yen is 272,841 thousand yen of
wrapping and filling facilities at the Yumegaoka Factory.
3. Major components of an increase in tools, furniture and fixtures of 542,340 thousand yen are 81,936 thousand yen of fixturesassociated with the construction work for the Haneda Innovation Center and 44,862 thousand yen of fixtures associated withthe relocation of the Fukuoka Sales Office.
4. A major component of an increase in construction in progress of 1,468,416 thousand yen is 490,092 thousand yen of expenses
associated with the construction work for the Odawara Training Center.
5. A major component of a decrease in construction in progress of 939,064 thousand yen is 242,013 thousand yen of transfer
associated with the construction work for the Haneda Innovation Center.
6. Major components of an increase in software of 713,931 thousand yen are 169,585 thousand yen for renovating the sales
management system and 104,175 thousand yen for adding the milbon:iD STYLESTOCK function.
Schedule of provisions(Thousand yen)Account

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

408,501

78,585-

487,087

Provision for bonuses

549,238

535,907549,238

535,907- 116 -

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

- 117 -

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

From January 1 to December 31

Ordinary General Meeting of
Shareholders

During March

Record date

December 31

Record date for distribution of
surplusNumber of shares constituting one
unit

June 30 and December 31
100 shares

Purchase and sale of shares less than
one unit
Handling office

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

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

Transfer office-

Purchase / sale fee

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

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

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

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

- 118 -

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

2. Other Reference Information
The Company submitted the following documents during the period from the beginning of the current fiscal year to the date ofsubmission of the annual securities report.
(1) Annual securities report and attached documents, and confirmation document
Fiscal year (63rd Term)(From January 1, 2022 to December 31, 2022)

Submitted to the Director-General of
the Kinki Local Finance Bureau on
March 29, 2023

(2) Internal control report and attached documents
Submitted to the Director-General of the Kinki Local Finance Bureau on March 29, 2023
(3) Quarterly securities reports and confirmation documents(The 1st Quarter of 64th Term)(From January 1, 2023 to March 31, 2023)

Submitted to the Director-General of
the Kinki Local Finance Bureau on
May 15, 2023

(The 2nd Quarter of 64th Term)(From April 1, 2023 to June 30, 2023)

Submitted to the Director-General of
the Kinki Local Finance Bureau on
August 10, 2023

(The 3rd Quarter of 64th Term)(From July 1, 2023 to September 30, 2023)

Submitted to the Director-General of
the Kinki Local Finance Bureau on
November 10, 2023

(4) Extraordinary report(i) Submitted to the Director-General of the Kinki Local Finance Bureau on March 30, 2023.
The extraordinary report was submitted based on the provisions of Article 19, Paragraph 2, Item 9-2 (Results of exercise
of voting rights at a general meeting of shareholders) of the Cabinet Office Order on Disclosure of Corporate Affairs.
(ii) Submitted to the Director-General of the Kinki Local Finance Bureau on October 25, 2023.
The extraordinary report was submitted based on the provisions of Article 19, Paragraph 2, Item 9 (Change in the
representative director) of the Cabinet Office Order on Disclosure of Corporate Affairs.
(5) Securities registration statement (disposal of treasury shares as restricted share-based compensation) and attached documents
Submitted to the Director-General of the Kinki Local Finance Bureau on April 14, 2023.

- 119 -

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

- 120 -

Independent Auditor’s Report on the Financial Statements
and Internal Control Over Financial Reporting
March 28, 2024

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

GYOSEI & CO.
Tokyo Office

Designated partner
Engagement partner

Certified public accountant

Takayuki Nakagawa

Designated partner
Engagement partner

Certified public accountant

Toshiya Shinshima<Audit of Financial Statements>
OpinionWe have audited Milbon Co., Ltd.’s consolidated financial statements referred to in the Financial Information section of this annual
securities report for the consolidated fiscal year from January 1, 2023 to December 31, 2023, which comprise the consolidated balance
sheets, consolidated statement of income, consolidated statement of comprehensive income, consolidated statements of changes in net
assets, consolidated statements of cash flows, material matters that serve as the basis for preparation of consolidated financial statements,
other notes, and annexed consolidated detailed schedules, in order to certify the audit pursuant to Article 193-2, Paragraph 1 of the
Financial Instruments and Exchange Act.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Milbon Co., Ltd. and its consolidated subsidiaries as of December 31, 2023, and the results of its operations and cash flows for the
consolidated fiscal year then ended, in accordance with accounting principles generally accepted in Japan.
Basis for the Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibility under the auditing
standards is stated in Auditor’s Responsibility for the Audit of the Consolidated Financial Statements. We are independent of theCompany and its consolidated subsidiaries in accordance with the provisions related to professional ethics in Japan, and are fulfillingother ethical responsibilities as an auditor. We believe that we have obtained sufficient and appropriate audit evidence to provide a basis
for our audit opinion.
Key Audit Matter
A key audit matter is a matter, in our professional judgments, which is of most significance in our audit of the consolidated financial
statements for the current consolidated fiscal year. The key audit matter is addressed in the context of our audit of the consolidated
financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on this matter.

- 121 -

Valuation of the merchandise and finished goods of Milbon Co., Ltd.
Description of the key audit matter
How the key audit matter was addressed in the audit
and reason for determination as key audit matterIn the consolidated balance sheets for the current fiscal year, To verify the validity of the valuation of the merchandise and6,939,156 thousand yen has been reported under merchandise and finished goods, we primarily implemented the following audit
finished goods, of which the merchandise and finished goods of procedures.
Milbon Co., Ltd. account for 4,679,315 thousand yen.
(1) Assessment of internal controls
The balance sheet value of merchandise and finished goods was• We assessed the status of design and operation of internal
calculated using the inventory write-down method based on
decreased profitability, as stated in 4 (1) Valuation standards andcontrols related to the valuation of slow-moving inventory.

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

various types of merchandise and finished goods. In certain cases,
merchandise and finished goods fail to sell as planned and remainfiscal year and examining the reasons for their differences.
• We obtained the shipping plan for each merchandise anddue to market demand, competition from peers and other factors.
The Company, as stated in its (Significant accounting

finished goods for the following year, questioned
management on the risk factors which could impact theestimates), has primarily been reducing the carrying amounts ofslow-moving inventory that exceeds the planned shipment

achievability of this shipping plan, gained an understandingof the recent actual shipment volume and sales targets, andvolume for a certain period, and this shipping plan carries a highlevel of uncertainty, thus requiring the subjective judgment ofassessed the rationality of the shipping plan.
• Regarding net sales and growth rates, etc., we carried out amanagement.
We, therefore, determined that the valuation of the merchandise

trend analysis based on past results as well as a comparative
study with available outside data.

and finished goods of Milbon Co., Ltd. was a particularly
important element in the audit of the consolidated financial• We verified that the shipping plan for each merchandise andfinished goods was consistent with next year’s budget

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

approved by the Board of Directors and the Medium-Term
Management Plan.
• By carrying out a recalculation based on the valuation method
used by the Company, we verified the validity of the amountreported as a valuation loss.

Other Information
The other information comprises the information included in the annual securities report other than the consolidated financial statements,
the financial statements, and our auditor’s reports thereon. Management is responsible for the preparation and disclosure of the otherinformation. The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for overseeing the Board
Directors’ performance of their duties with regard to the design and operation of the reporting process of the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
Our responsibility in our audit of the consolidated financial statements is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in thecourse of the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Responsibilities of Management, the Audit & Supervisory Board Members and the Audit & Supervisory Board for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for designing and operating such internal control as management determines isnecessary to enable the presentation and fair presentation of the consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing whether it is appropriate to prepare theconsolidated financial statements in accordance with the premise of a going concern, and for disclosing matters relating to going concern- 122 -

when it is required to do so in accordance with accounting principles generally accepted in Japan.
The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for monitoring the execution of theduties of Executive Officers and Board Directors related to designing and operating the financial reporting process.
Auditor’s Responsibility for the Audit of the Consolidated Financial Statements
Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to express an opinion on the consolidated financial statements from an independent
standpoint in an audit report, based on our audit. Misstatements can occur as a result of fraud or error, and are deemed material if they
can be reasonably expected to, either individually or collectively, influence the decisions of users taken on the basis of the consolidated
financial statements.
We make professional judgments in the audit process in accordance with auditing standards generally accepted in Japan, and performthe following while maintaining professional skepticism.
• Identify and assess the risks of material misstatement, whether due to fraud or error. Design and implement audit procedures toaddress the risks of material misstatement. The audit procedures shall be selected and applied as determined by the auditor. In
addition, sufficient and appropriate audit evidence shall be obtained to provide a basis for the audit opinion.
• In making those risk assessments, the auditor considers internal control relevant to the entity’s audit in order to design audit
procedures that are appropriate in the circumstances, although the purpose of the audit of the consolidated financial statements is
not to express an opinion on the effectiveness of the entity’s internal control.
• Assess the appropriateness of accounting policies adopted by management and the method of their application, as well as thereasonableness of accounting estimates made by management and the adequacy of related notes.
• Determine whether it is appropriate for management to prepare the consolidated financial statements on the premise of a going
concern and, based on the audit evidence obtained, determine whether there is a significant uncertainty in regard to events orconditions that may cast significant doubt on the entity’s ability to continue as a going concern. If there is a significant uncertainty
concerning the premise of a going concern, the auditor is required to call attention to the notes to the consolidated financial
statements in the audit report, or if the notes to the consolidated financial statements pertaining to the significant uncertainty areinappropriate, issue a modified opinion on the consolidated financial statements. While the conclusions of the auditor are basedon the audit evidence obtained up to the date of the audit report, depending on future events or conditions, an entity may be unable
to continue as a going concern.
• Besides assessing whether the presentation of and notes to the consolidated financial statements are in accordance with accounting
principles generally accepted in Japan, assess the presentation, structure, and content of the consolidated financial statements
including related notes, and whether the consolidated financial statements fairly present the transactions and accounting events on
which they are based.
• Obtain sufficient and appropriate audit evidence regarding the financial information of the Company and its consolidated
subsidiaries in order to express an opinion on the consolidated financial statements. The auditor is responsible for instructing,supervising, and implementing the audit of the consolidated financial statements, and is solely responsible for the audit opinion.
The auditor reports to the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding the scope and timingof implementation of the planned audit, material audit findings including material weaknesses in internal control identified in the courseof the audit, and other matters required under the auditing standards.
The auditor reports to the Audit & Supervisory Board Members and the Audit & Supervisory Board regarding the observance ofprovisions related to professional ethics in Japan as well as matters that are reasonably considered to have an impact on the auditor’s
independence and any safeguards that are in place to reduce or eliminate obstacles.
From the matters discussed with the Audit & Supervisory Board Members and the Audit & Supervisory Board, the auditor judges thematter that is of most significance in the audit of the consolidated financial statements of the current consolidated fiscal year anddetermines it as the key audit matter, and describes the matter in the auditor’s report. However, in the event that laws and regulations
preclude public disclosure about the matter or when, in extremely rare circumstances, the auditor determined that a matter should not bereported in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such report, such matter shall not be described in the report.
<Audit of Internal Control>
OpinionWe have audited the internal control report over financial reporting of Milbon Co., Ltd. as of December 31, 2023 in order to certify theaudit pursuant to Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act.
In our opinion, the report on internal control over financial reporting referred to above, which shows that the internal control overfinancial reporting of Milbon Co., Ltd. as of December 31, 2023 is effectively maintained, presents fairly, in all material respects, the- 123 -

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

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

- 124 -

Independent Auditor’s Report
March 28, 2024

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

GYOSEI & CO.
Tokyo Office

Designated partner
Engagement partner

Certified public accountant

Takayuki Nakagawa

Designated partner
Engagement partner

Certified public accountant

Toshiya Shinshima

OpinionWe have audited Milbon Co., Ltd.’s financial statements referred to in the Financial Information section of this annual securities reportfor the fiscal year from January 1, 2023 to December 31, 2023, which comprise the balance sheets, statement of income, statements ofchanges in net assets, significant accounting policies, other notes, and annexed detailed schedules, in order to certify the audit pursuant
to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Milbon Co.,
Ltd. as of December 31, 2023, and the results of its operations for the fiscal year then ended, in accordance with accounting principles
generally accepted in Japan.
Basis for the Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibility under the auditing
standards is stated in Auditor’s Responsibility for the Audit of the Financial Statements. We are independent of the Company inaccordance with the provisions related to professional ethics in Japan, and are fulfilling other ethical responsibilities as an auditor. We
believe that we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.
Key Audit Matter
A key audit matter is a matter, in our professional judgments, which is of most significance in our audit of the financial statements forthe current fiscal year. The key audit matter is addressed in the context of our audit of the financial statements as a whole, and informing
our opinion thereon, and we do not provide a separate opinion on the matter.

- 125 -

Valuation of the merchandise and finished goods of Milbon Co., Ltd.
The description is omitted since it is the same as the description of the key audit matter (Valuation of the merchandise and finishedgoods of Milbon Co., Ltd.) in the Independent Auditor’s Report on the consolidated financial statements.
Other Information
The other information comprises the information included in the annual securities report other than the consolidated financial statements,
the financial statements, and our auditor’s reports thereon. Management is responsible for the preparation and disclosure of the otherinformation. The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for overseeing the Board
Directors’ performance of their duties with regard to the design and operation of the reporting process of the other information.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
Our responsibility in our audit of the financial statements is to read the other information and, in doing so, consider whether the otherinformation is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Responsibilities of Management, Audit & Supervisory Board Members and the Audit & Supervisory Board for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles
generally accepted in Japan, and for designing and operating such internal control as management determines is necessary to enable thepreparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing whether it is appropriate to prepare the financial
statement in accordance with the premise of a going concern, and for disclosing matters relating to going concern when it is required to
do so in accordance with accounting principles generally accepted in Japan.
The Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for monitoring the execution of theduties of Executive Officers and Board Directors related to designing and operating the financial reporting process.
Auditor’s Responsibility for the Audit of the Financial Statements
Our responsibility is to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to express an opinion on the financial statements from an independent standpoint in anaudit report, based on our audit. Misstatements can occur as a result of fraud or error, and are deemed material if they can be reasonably
expected to, either individually or collectively, influence the decisions of users taken on the basis of the consolidated financial statements.
We make professional judgments in the audit process in accordance with auditing standards generally accepted in Japan, and performthe following while maintaining professional skepticism.
• Identify and assess the risks of material misstatement, whether due to fraud or error. Design and implement audit procedures toaddress the risks of material misstatement. The audit procedures shall be selected and applied as determined by the auditor. In
addition, sufficient and appropriate audit evidence shall be obtained to provide a basis for the audit opinion.
• In making those risk assessments, the auditor considers internal control relevant to the entity’s audit in order to design audit
procedures that are appropriate in the circumstances, although the purpose of the audit of the financial statements is not to express
an opinion on the effectiveness of the entity’s internal control.
• Assess the appropriateness of accounting policies adopted by management and the method of their application, as well as thereasonableness of accounting estimates made by management and the adequacy of related notes.
• Determine whether it is appropriate for management to prepare the financial statements on the premise of a going concern and,based on the audit evidence obtained, determine whether there is a significant uncertainty in regard to events or conditions that
may cast significant doubt on the entity’s ability to continue as a going concern. If there is a significant uncertainty concerning thepremise of a going concern, the auditor is required to call attention to the notes to the financial statements in the audit report, or if
the notes to the financial statements pertaining to the significant uncertainty are inappropriate, issue a modified opinion on thefinancial statements. While the conclusions of the auditor are based on the audit evidence obtained up to the date of the audit
report, depending on future events or conditions, an entity may be unable to continue as a going concern.
• Besides assessing whether the presentation of and notes to the financial statements are in accordance with accounting principles
generally accepted in Japan, assess the presentation, structure, and content of the financial statements including related notes, and- 126 -

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

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

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