Annual Report
9th Fiscal year
From : April 1, 2023
To : March 31, 2024

Chilled & Frozen Logistics Holdings Co., Ltd.

0

【INDEX】【COVER】……………………………………………………………………………………………………………………

2

Ⅰ. Overview of the Company
1. Terms used in this report
2. Company History…………………………………………………………………………………………

3…………………………………………………………………………………………………

4

3. Subsidiaries and Affiliate…………………………………………………………………………………………

5

4. Employees …………………………………………………………………………………………………………

6

Ⅱ. Status of Business
1. Management Policy, business environment, and issues to be addressed ………………………………………

8

2. Sustainability Concepts and Initiatives ……………………………………………………………………………

12

3. Business risks ………………………………………………………………………………………………………

20

4. Management Discussion and Analysis of Financial Position, Operating Results and Cash Flows …………

27

Ⅲ. Status of the Reporting Company
1. Corporate Governance……………………………………………………………………………………………

32

2. Status of stockholdings……………………………………………………………………………………………

39

1

【COVER】

Report Title

Annual Report

Update Date

July 30, 2024

Business Year

9th Fiscal year (From April 1, 2023 to March 31, 2024)

Company Name

Chilled & Frozen Logistics Holdings Co., Ltd.

Name of Representative

Hiromasa Aya

Title of Representative

President and Chief Executive Officer

Address of registered Headquarters

33-8, Wakamatsu-chou, Shinjuku-ku, TOKYO, 162-0056 JAPAN

Telephone Number+81-3-5291-8100

Place for Public Inspection

Tokyo Stock Exchange Prime Market

Securities Code

9099

URL

https://www.cflogi.co.jp/en/

NOTE: This document has been translated using a machine translation system from a part of the Japaneseoriginal for reference purposes only. In the event of any discrepancy between this translated document and
the Japanese original, the original shall prevail.

2

I. Overview of the Company
1.

Terms used in this report“The Company”

Refers toor “Submitting Company”“Chilled & Frozen Logistics Holdings Co., Ltd.”“The Group”

Refers to the Company and 15 subsidiaries

or “C&F Group”“Consolidated Companies”

Refers to the Company, 15 subsidiaries and 1 affiliate“Domestic Group”

Refers to the Group excluding 2 overseas subsidiaries

or “Domestic Companies(MEITO VIETNAM CO., LTD
and T&M Transportation Co., Ltd)Business Segment “TC”

Initial of “Transfer Center”
TC Business is handling, sorting, and transporting mainly chilled foods
consigned by mainly food manufacturers and wholesalers with its
temperature at less than 10 ℃ in cold-storage warehouses located inlogistically important areas across the nation.

Business Segment “DC”

Initial of “Distribution Center”
DC Business is storing and handling mainly frozen foods that must be kept
at －18℃ and bonded goods such as imported frozen foods in coldstorage warehouses having the function of distribution centers located inlogistically important areas across the country, and transporting freight toeach destination basically within 24 hours upon receipt of order with jointdelivery.

Business Segment(1) Transportation of cash and valuables“Other Business”(2) Hospital-related business such as transporting linen products(3) Temporary staffing business focused on logistics(4) Insurance agency, etc.

32.

Company History

April 2015

MEITO TRANSPORTATION CO., LTD. and Hutech norin Co., Ltd. approved andprepared a Share Transfer Plan at the Board of Directors meetings of both companies,
subject to approval at the Ordinary General Meeting of Shareholders held on June 26,
2015.

June 2015

At

theordinary

generalmeetings

ofshareholders

of

both

MEITO

TRANSPORTATION CO., LTD. and Hutech Norin Co., Ltd., a resolution was
passed approving the establishment of the Company through a joint share transfer
and the two companies becoming wholly owned subsidiaries of the Company.
October 2015

The Company was established by a joint share transfer between MEITO
TRANSPORTATION CO., LTD. and Hutech Norin Co., Ltd.
The Company's common stock was listed on the First Section of the Tokyo Stock
Exchange.

September 2016

T&M Transportation Co., Ltd. is established.

October 2015

The Company was established by a joint share transfer between MEITO
TRANSPORTATION CO., LTD. and Hutech Norin Co., Ltd.

October 2017

JUSTEM Co., Ltd. absorbs S-Trust Co., Ltd.

April 2018

NK Trading Co., Ltd. becomes a subsidiary through a simplified share exchange. After
that, Meisho Co., Ltd. absorbs NK Trading Co., Ltd. and changes its trade name to
C&F Support Service Co., Ltd.

April 2022

Transferred to the Tokyo Stock Exchange Prime Market following the revision of themarket segmentation of the Tokyo Stock Exchange.

4

3.

Subsidiaries and Affiliate
Address

Main Businessvoting rights
owned

MEITO TRANSPORTATION CO., LTD.

Shinjuku-ku, Tokyo

Logistics

100.0%

Hutech Norin Co., Ltd

Shinjuku-ku, Tokyo

Logistics,
Other

100.0%C&F Support Service Co., Ltd.

Shinjuku-ku, Tokyo

Other

100.0%

Trans mate Co., Ltd.

Shinjuku-ku, Tokyo

Logistics

100.0%

Isonet Line Co., Ltd

Shinjuku-ku, Tokyo

Logistics

100.0%

JAPAN FOODS LOGISTICS CO., LTD.

Shinjuku-ku, Tokyo

Logistics

100.0%

M’S LINE CO., LTD.

Shinjuku-ku, Tokyo

Other

100.0%JUSTEM Co., Ltd.

Shinjuku-ku, Tokyo

Logistics

100.0%

Yamagata-mura,
Nagano Pref.

Logistics

100.0%

Koshigaya-city, Saitama

Logistics

100.0%

Shinjuku-ku, Tokyo

Logistics

65.0%

Healty Co., LTD.

Koshigaya-city, Saitama

Logistics,
Other

65.0%

Hutech service Co., Ltd.

Iwatsuki-ward,
Saitama-city, Saitama

Real estateleasing100.0%

METO VIETNAM CO., LTD.

Binh Duong Prov.
Viet Nam

Logistics

100.0%

T&M TRANSPORTATION CO., LTD.

Binh Duong Prov.
Viet Nam

Logistics

50.0%

Shibuya-ku, Tokyo

Logistics

30.0%

Company Name

Consolidated Subsidiaries

K2 Co., Ltd.
MAKOTO TRANSPORT SERVICE., LTD
DAY LINE CO., LTD.

Equity method affiliate
Choku-han delivery Co., Ltd.

5

4.

Employees(1) Consolidated Companies
Business Segment

temporaryemployeeemployee

TC

3,822

4,381

DC

1,647

869

Other Business

283

201

Shared Services dept. (Common)

246

23

5.998

5,474

Total

(2) Submitting Company
Business Segment

temporaryemployeeemployee

Shared Services dept. (Common)

108

9

Total

108

9

Including those seconded from MEITO TRANSPORTATION and Hutech Norin.

Average age

Average years of service

average annual income

40.3 years old

5 years 9 months

5.4 million yen(3) labor Union
Union Name

Number of members

Superior Organizations

MEITO TRANSPROT Worker’s Union

2,403

―

Hutech Norin Worker’s Union

1,098

―

JJS LABOR UNION

217―

MAKOTO TRANSPORT Worker’s
Union

107

―

5

UNYU ROREN

DAY LINE Worker’s Union

3,830

Total

6

(4) Index of Diversity
Percentage of men
taking childcare
leave

Percentage ofwage gap between
men and women

2.8

0

62.4

MEITO TRANSPORTATION CO., LTD.

5.7

31

55.1

Hutech Norin Co., Ltd

2.1

40

64.2

C&F Support Service Co., Ltd.

―

－

53.8

Isonet Line Co., Ltd

0.0

0

73.6

Trans mate Co., Ltd.

0.0

0

59.6

JAPAN FOODS LOGISTICS CO., LTD.

0.0

0

57.7

JUSTEM Co., Ltd.

0.0

50

46.9

M’S LINE CO., LTD.

33.3

－

71.6

K2 Co., Ltd.

0.0

0

61.0

MAKOTO TRANSPORT SERVICE., LTD

0.0

－

71.1

DAY LINE CO., LTD.

0.0

－

70.3

Healty Co., LTD.

0.0

0

59.4

Hutech service Co., Ltd.

－

－

108.0

Company Name

Ratio of female
managers

Submitting Company
The Company

Domestic Companies

7II. Status of Business
1.

Management policy, business environment, and issues to be addressed(1) Basic management policy[The Group’s Vision]“We are an integrated logistics and information company whose core-business is the lowtemperature zone shipping and storage of food products in the globally developing market."― We are the logistics company of choice for customers who appreciate the cutting-edge capabilitiesof our temperature-management systems. ―①

Leveraging logistics quality backed by our own facilities and vehicles and the experience we haveaccumulated as a pioneer in cold chain logistics for food products, we will bolster our businessscale and expand into new business domains by creating "new" logistics systems, securing ourposition as an industry leader in the cold chain logistics for food products.

②

By realizing added value related to logistics and further strengthening logistics quality, we willkeep enhancing corporate value.

③

We will become a logistics company where employees have hope for the future and can workwith enthusiasm.

④

We will fulfill our corporate social responsibilities and become a logistics company supportedby all stakeholders.

(2) Medium-Term Management Plan
[Basic Policy]“Achieving sustainable low temperature zone logistics, meeting the needs of new cold-chains”
In an era where all local communities, companies and people face various difficulties, including the
spread of COVID-19 and rapid climate change, the company will provide “safe and secure foodlogistics” and strengthen its profit structure by developing and expanding a new cold chain thatconnects consumption needs with supply needs for low-temperature controlled products, including
food which are different from conventional channels.
By strengthening our profit structure in light of challenging new business domains and facing andsincerely working closely with all stakeholders’ issues including measures to address the naturalenvironment where changes are accelerating, C&F will build a sustainable cold chain logistics
business that fulfills our responsibilities for the future and enhance our corporate value.
[Basic Strategy (Key Measures)]①

Building a Sustainable Logistics BusinessProtect food lifelines and promote logistics operations that contribute to the creation of aprosperous society.



Build a logistics infrastructure that is friendly to the global environment toward therealization of a decarbonized society.

Emphasize diversity and create a comfortable and rewarding workplace environment for
all employees.

②

Enhancing Corporate Value through Strategic Financial Structure8Actively optimize the balance between capital and liabilities and conduct management thatmaintains and continues ROE of 8% or higher.

In order to improve capital efficiency, make appropriate capital allocation, and at the sametime, make investment with an awareness of capital cost.

Improve the value of shares by further enhancing shareholder returns and dialogue withshareholders.

③

Strengthening the Functions and Earnings Base of Existing Businesses Centered on the Joint
Delivery Business

Promote the strengthening of the profit structure of the joint delivery business byreorganizing the network and developing new functions.



Beyond the framework of conventional business models for each operating company, suchas “shippers and customers” or “temperature zones,” build a new joint delivery businessand acquire business opportunities.



Reorganize and strengthen existing business models that meet the needs of customers andmarkets.

④

Promoting Investment in Growing Fields
Promote the injection of management resources into growing markets, including
expansion into EC-related logistics.



Expand new business domains utilizing temperature control technology.



In overseas business, invest in projects that can be expected to achieve stable growth, while
increasing sensitivity to country risk.

[The revision of Medium-term Management Plan]
C&F has resolved the revision of the Medium-term Management Plan (from FY2022 to FY2024) asa 3-year plan from FY2023 to FY2025.
While the basic policy and strategy of the Medium-term Management Plan have not changed
significantly, the following items are added as important measures in light of the diversification of
distribution channels for low-temperature products and changes in the social and economic
environment.
①

Investing in the development and introduction of new technologies in order to rise up the
productivity in respect of manpower-saving and address the environmental issues assustainability initiatives.

②

Accelerating the growth speed by promoting investment in businesses such as overseas business,
e-commerce logistics and pharmaceutical logistics and by business alliance with othercompanies.

③

Enhancing profitability and expanding business volume by both organic and inorganic growth
including through the M&A that contributes to strengthening the existing business.

[Action to Implement Management that is Conscious of Cost of Capital and Stock Price]
The Company discloses its policies and targets, and specific initiatives for improvement as "Action
to Implement Management that is Conscious of Cost of Capital and Stock Price."①

To strengthen revenue base and develop sustainable growth by fostering more investmentsEnhancing “low-temperature logistics business” based on selection and concentration.

Promoting Investments for the development of new technologies and the environmental

9issues as sustainability initiatives
②

Investing human capital to materialize ‘Human Capital Management’To implement efficient management with financial approach③Enhancing corporate value by realizing the most optimal capital structure.

Strengthening shareholder return.

To encourage constructive dialogue with stakeholders by strengthening communication withthem


Offering the current initiatives and growth strategy in an easy-to-understand manner with
sufficient IR framework and enhancing initiatives for stakeholder engagement.

④

To enhance corporate governance and corporate value by activating the internal organization


Operating the cross-sectional committees to enhance corporate value.

(3) Management target
In June 2023, the Company revised its Medium-term Management Plan as follows.
FY2023

FY2024FY2025

Consolidated operating revenue

115,300 million yen

118,700 million yen

122,400 million yen

Consolidated operating profit

3,400 million yen

4,700 million yen

5,700 million yen

ROE

8.0% or higher by FY2025

Capital Adequacy Ratio

Approx. 45%

Dividend Payout Ratio

20% or more (up to 30% or more gradually)

Long-Term Targets in " Action to Implement Management that is Conscious of Cost of Capital andStock Price” (disclosed on March 15, 2024)
FY2034
Consolidated Operating
Revenue

200 billion yen(4) Issues to Be AddressedSocial activities fully resumed with revitalization in the flow of people. On the other hand, the outlook
for the Japanese economy remains uncertain due to the slowdown of consumer spending owing to highprice of raw materials and energies on the background of unstable international circumstances, theprolonged depreciation of Japanese yen, and the continuing increase in any costs, including labor cost.
Additionally, as actions for climate change are globally required, the sustainability of corporate
activities is getting more and more important. In this regard, companies listed on the Tokyo Stock
Exchange’s Prime Market are particularly urged by society and the market to grow with a sustainability
perspective.
In the cold chain logistics for food products industry, which is the Group’s principal focus, the market
environment has been rapidly changing. While food manufacturers mainly have passed an increase incosts to product prices to a certain extent, the handling volume of household chilled and frozen foods
showed slow growth as consumers have been cutting down on their spending and selecting purchases

10more rigidly. However, the handling volume of commercial products has been recovering, anddistribution channels including Ecommerce are being diversified. At the same time, a decrease inlogistics resources such as human resources, represented by the so-called “2024 issues” on logistics
industry is concerning. Thus, business continuity risk for logistics operators is higher than ever before.
Amid these changes in social and economic environments, from April in 2022, the Group began its
3rd Medium-Term Management Plan from FY2022 to FY2024. Setting as basic policy “Achieving
sustainable low temperature zone logistics, meeting the needs of new cold-chains,” the Group strives
to expand new business of growing fields such as E-commerce related logistics and Pharmaceuticallogistics, and to strengthen the existing business through some initiatives such as acquiring new
facilities.
Additionally, in light of the diversification of distribution channels for low-temperature products, theGroup revised the 3rd Mid-term Management Plan as a 3-year plan from FY2023 to FY2025, as
announced on June 16, 2023. While continuing to promote the implementation of effective measures
to sustain the food lifelines and realize the prosperous society with its function for chilled and frozen
logistics, the Group added the important measures and planned an additional investment ofapproximately 10 billion yen to achieve.
Furthermore, the Group announced in March 15, 2024, “Notice concerning action to implement
management that is conscious of cost of capital and stock price.” Following the 3rd Medium-Term
Management Plan from April 2022, based on the maximum use of its accumulated business experiencesof low-temperature logistics, the Group aims achieving ¥200 billion of operating revenue as a longterm target by expanding growth fields more actively with an unconventional idea and establishing asustainable logistical infrastructure with the expansion of the capacity of existing cold-chain businessfor foods, in which continuous demands are expected. At the same time, the Group will respond torequests from society and the market by accelerating efforts to reduce CO2 emissions and labor-saving
initiatives by automation and digital transformation (DX) to realize a corporate growth that ensuressustainability.
The forward-looking statements in this report are based on the judgment of the Group as of the filingdate of the securities report.

11

2.

Sustainability Concepts and Initiatives
The Group's concepts and initiatives for sustainability are as follows.
The forward-looking statements in this report are based on the judgment of the Group as of the filingdate of the securities report.

(1) Sustainability Concepts
The Group has a vision of “We are an integrated logistics and information company whose corebusiness is the low-temperature zone shipping and storage of food products in the globally developing
market.“ which states that “We will fulfill our corporate social responsibilities and become a logistics
company supported by all stakeholders.”
The Groupe believe that addressing sustainability will contribute to the realization of a sustainable
society and lead to fulfilling the Groupe’s social responsibilities.
Therefore, the Group has formulated the “Sustainability Policy”, identified the “materiality” (fiveimportant issues), and established a sustainable management promotion system.
[Sustainability Policy]
C&F Group declares its intention to strive to achieve the "Sustainable Development Goals (SDGs)",
agreed upon by the international community by committing to "solving social issues through business"in order to realize a sustainable logistics business, and practices "Sustainable Management" to createnext-generation logistics together with its stakeholders.
[Identified the materiality]
After confirming and organizing the social issues such as SDGs, the Group has identified five material
issues that should be addressed as priority issues in the sustainable management. These are identified
by identifying themes that have a large impact on society and the environment both from theperspective of business and stakeholders, and that have a high degree of importance in improving theGroup's corporate value and business continuity.

12Materiality

Theme

Environmental
measuresEstablishment of alogistics infrastructurethat is friendly to theglobal environment
Realization of acomfortable andrewarding workplace withawareness of humanrights Support for TCFD
 Efforts for Environmentally Friendly
Vehicles, Natural Refrigerants, andRenewable Energy Improvement of working hours and working
environment
 Ensuring occupational health and safety Dissemination of remedial measures
 Initiation of human rights due diligence

Diversity

Creation of anenvironment in which
diverse human resources
can play an active role

 Efforts to strengthen human capital Promoting the active participation of diverse
human resources, including women, foreign
nationals, and seniors

Disasterprevention
measures

Flexible response todisasters and other risksDX

Creation of nextgeneration logistics

 Response to Transport Disaster Prevention
Management
 Response to Information Security
 Response to Personal Information Protection
 Automation and Mechanization Initiatives
 Efforts to Improve Transportation Efficiency

Human rights

SDGs targets

Main Initiatives(2) Governance
The Company has established the Sustainability Committee as an advisory body to the Board of
Directors to promote sustainable management. The Sustainability Committee will identify issues
related to sustainability, including climate change, consider measures to address these issues,
understand and analyze the status of initiatives, and periodically report to the Board of Directors.
The Sustainability Committee is chaired by the President and Chief Executive Officer, and consistsof the Executive Officers and the President of the Operating Company. The Company also seeks advice
from external experts as necessary to ensure fair and appropriate consideration.
In the fiscal year under review, the Sustainability Committee met 9 times and reported to the Boardof Directors 4 times.
[Sustainability Management System]
Sustainability
Committee

ReportBoard of Directors
direction andsupervision

・Issues and Countermeasures
・Understanding and analyzing

ReportExecutive Officer’s
Meeting
direction

Understanding of issues
and current situation

ReportDepartments/
Group Companies

13

Business
Execution

[Report to the Board of Directors in FY2023]
No.

Date

Main Agenda

1April 14The Groupe’s Sustainability Status and Issues

2

May 25

Sustainability Disclosure

3

July 14

Targets and Results of GHG Emissions

4

September 29

Measures for Renewable Energy Initiatives(3) Strategy[Strategies against climate change]①

PolicyThe Group has established the "Environmental Policy" as a basic approach to climate change andmanages it in accordance with the framework of the TCFD (Task Force for Climate-related Financial
Information Disclosure).
(Environmental Policy)
As a logistics company focused on low-temperature logistics, the Chilled & Frozen (C&F) Logistics
Holdings Group is able to do business thanks to the bounties provided by Earth, and we recognizethat preserving the global environment in order to sustain our business activities is an importantmanagement issue for the Group.
②

About Scenarios Analysis

The Group has examined individual measures to address the identified risks and opportunities
related to climate change and their impact on business. Scenario analysis is conducted to assess
whether the countermeasure can respond realistically to situations that may occur in each scenario.
Scenarios to use

For the transition risks and opportunities : IEA’s “Sustainable Development Scenario(SDS)”,and “The Net Zero Emissions by 2050 Scenario (NZE)”

For the physical risks and opportunities : IPCC’s “Representative Concentration Pathway(RCP)8.5”③

Climate-related risks and opportunities, impacts and responses

Results of scenario analysis Although it is expected that carbon tax will be introduced in the 1.5℃
scenario, and it will be transferred to various costs such as fuel costs and power costs, and it isexpected that profit will be reduced, it is possible to respond by converting to renewable energy andintroducing new technologies such as next-generation low-carbon vehicles.
Risks and opportunities from each scenario are shown in the following table.

14

[Transition Risks (1.5℃ Scenarios)]

High

Large

Strategic Planning

Install solar panels.
Switch to renewable energy.
Continue energy conservation activities.
Introduce the hybrid vehicle.
Continue fuel saving activities (e.g.,switching to fuel-efficient tires).

Commoditization of renewable energy

Low

Opportunities

15

MediumRisks

Increased competitive position by
establishing a sustainable logistics networkwith low GHG emissions

MediumOpportunities

Increased investment to install new vehicles(EV/FCV) and charging facilities.
Increased fuel costs using Bio Diesel Fueland Renewable Diesel Fuel.
Increased investment in materials handlingequipment (AI, robots, etc.) through digitaltransformation.
Decreased competitive position by delay andmisjudgements in introducing nextgeneration technologies.
By accurately introducing next-generation
technologies and exerting their effects, The
Company will gain new business
opportunities as a result of strengthening its
business competitiveness.
The shift to DX of material handlingequipment and other will improve
productivity in office and warehouse
operations.
Decreased competitive position without asustainable logistics network.
Efforts to address environmental problems
are considered weak, and labor force is notgathered.

MediumRisks

Reputation

Changing
stakeholder
reputation

Introduced carbon taxes, and passed on
prices.
Increased operating costs(e.g., fuel cost,energy cost, vehicle procurement cost, andoutsourced cost)

Impacts

Opportunities

Technology

Advancement anddiffusion of nextgeneration
technology

℃

Risks

MarketChange in energy
supply anddemand

1.5

Policy and Legal

Transition Risks and Opportunities

Increased pricingof GHG emissions

Risks and Potential Financial Impacts

Probability

Scenarios

Risks and Opportunities

Enhance the ability to collect information
on next generation technologies.
Technology that will become mainstream
will be judged by test introduction andsmall start.
Collaborate with other companies andinstitutions to improve knowledge.
Make an appropriate investment.

Construction of a sustainable logistics
network with low environmental impact.
Appropriately address issues related tosustainability by setting targets,
implementing and verifying
countermeasures, and disclosing them.

[Physical Risks (4.0℃ Scenarios)]

Strategic Planning

Install solar panels
Switch to renewable energy
Continue energy conservation activities.

Global warming increases outside airtemperatures, and higher low-temperature
quality control is required throughout the
supply chain

The Company will further strengthen its
strength in low-temperature quality
control

High

Large

Low

Opportunities

Build a resilient logistics system against
natural disasters, maintain the supply chainthat serves as a social infrastructure, and earn
the trust of stakeholders.

MediumRisks

Increased operating costs for business
continuity plan

Low

Improve the working environment with
air conditioning equipment.
Small

Reduced revenue and higher costs fromnegative impacts on health of workforce.

Reduced revenue and higher costs fromnegative impacts on workforce (e.g., safety,
absenteeism)④

Medium

Large

Opportunities

Acute Risk

Increased severityof extreme weather
eventsIncreased energy costs

Impacts

℃

Risks

4.0

Chronic Risk

Physical Risks and Opportunities

Rising mean
temperatures

Risks and Potential Financial Impacts

Probability

Scenarios

Risks and Opportunities

Development of disaster management
systemEstablish a logistics system that is safeand resilient against natural disasters

Specific Initiatives in FY2023


Switching grid electricity to electricity derived from renewable energy (13 sites), installing
new solar panels at their own facilities (Hutech Norin Co., Ltd. : Carport of Tohoku Branch,
Chubu Branch warehouse rooftop, Kansai Branch Kinki Distribution Center warehouserooftop), and introducing electricity derived from solar power generation through off-site PPA(12 sites)Plans to replace all refrigerants in major refrigerators of Hutech Norin with naturalrefrigerants.

Financing through Green Loans (11 billion yen)Introduction of the Truck Reservation System to build sustainable distribution network (allmajor sites of Hutech Norin Co., Ltd.), construction plan of relay base, and implementation
experiment of pallet transportation of frozen food, etc.



Switching to Eco-type Packaging Materials to Reduce Plastics.

16

[human capital strategy]①

PolicyGroup's Vision is “We are an integrated logistics and information company whose core-business isthe low-temperature zone shipping and storage of food products in the globally developing
market.“ And we say that “be a logistics company where employees have hope for the future and canwork with enthusiasm.”
In order to achieve this, the Groupe believe that it is important for each employee to grow into aperson who can think for themselves and take on challenges, and that an internal environment where
each employee can maximize their own aptitude and abilities is important. And the Groupe haveestablished the following two policies.
(Human Resource Development Policy)
The Group understands that personal growth is the growth of a company, and each employee thinks
for himself, challenges new reforms based on environmental changes, and develops professional
personnel who can provide the best service in the field of responsibility.
(Workplace Environment Enhancement Policy)
The Group provides a workplace environment in which each employee can maximize their aptitudeand capabilities with a sense of pride and mission to "support society through logistics." In addition,
we respect the diversity of each person and create a comfortable and worthwhile workplaceenvironment for everyone.
②

Specific Initiatives in FY2023



Enhancement of training systems (increase in training programs by rank, etc.)Improvement of Work Environment (Examples: use of automatic trucks, creation ofmultilingual video manuals, etc.)

Identify and improve employee satisfaction (conduct and respond to engagement surveys, etc.)Formation of the Women's Empowerment Team and its recommendations (Examples:
Participation in women's career development training, proposals to improve women's uniforms,
promotion of awareness and utilization of systems related to women, etc.)Strengthen recruitment competitiveness (Examples: improvement of salaries and benefits,
promotion of employment of regular employees, group-wide recruitment plans, etc.)

Initiatives on Business and Human Rights (Promotion of awareness and utilization of relief
measures, initiation of human rights due diligence, etc.)(4) Risk Management①

Identifying climate-related risks and opportunities

C&F Group has identified risks and opportunities for each stakeholder (supplier, company, andcustomer) in the value chain and examined them from the following perspectives oftransition/physical risks and opportunities.
[Transition risks and opportunities]
Policy and Legal : Tightened regulations on GHG emissions
Market : Supply and demand of renewable energy and low-carbon productsTechnology : Advancement and diffusion of next-generation technology
Reputation : Changing stakeholder reputation[Physical risks and opportunities]

17

Chronic : Environmental changes due to global warming
Acute : Escalation of natural disasters②

Assessing climate-related risks and opportunities

C&F Group assesses and identifies risks and opportunities extracted from two perspectives: themagnitude of the potential impact on its businesses, and the likelihood of their manifestation.
Impacts on the organization’s businesses, strategy, and financial planning
DegreeLarge

Viewpoint Revenue Profit and Loss Business potential

Medium Business Resources(human resource, technology, facilities, etc)
 Compliance

Small Stakeholder Confidence Impact on customers, corporate brands, and markets

Probability
DegreeAssumed timeHighwithin 1-2 years

Medium

2-5 years from now

Low

more than 5 years from now(5) Metrics & Targets①

Metrics & Target of Climate Change

In order to manage the risks and opportunities associated with climate change, the Group has set
the following reduction targets for CO2 emissions and monitored the results.
a） Targets
The reduction targets are Scope1 and 2, which can be managed by us, and the year to achieve
them is set for FY2030, the same year as the national emission reduction target.
The reduction target is set based on the Near-term SBT to achieve a 4.2% reduction inemissions per year at the 1.5℃ level.
(Target Companies: Domestic Group)
Scope

Target-Year

TargetFY2023

Reduce CO2 emissions by 38% from FY 2021 levels

FY2050Carbon neutrality

Scope1 and 218b） Actual and Forecast(Target Companies: Domestic Group )(Unit: t-CO2e, %)Scope

FY2021
Actual(Base Year)FY2022

Scope187,40890,364+3.4

92,963+6.3

Scope250,53452,190+3.3

30,931△38.8

Scope1 and 2

137,942

142,554+3.3

123,894△10.2

ActualFY2023Comparedwith FY2021

Forecast

Comparedwith FY2021c） Reference(Target Companies: Domestic Group )(Unit: t-CO2e, %)Scope

FY2021
ActualScope3

FY2022
ActualYoY

214,145

190,272

FY2023
Forecast
YoY

△11.1

175,434△7.8*Scope1, 2 and 3 assessment methods are based on the " Basic Guidelines on Accordingfor Greenhouse Gas Emissions Throughout the Supply Chain (ver.2.6)" , " Report on
Emissions Unit Values (ver.3.4)" and the Company's Calculation Procedures.
* The actual emissions in FY2021 and FY2022 have been verified by the Japan
Management Association GHG Certification Center and have received the Verification
Statement.
*The forecasts for fiscal 2023 are based on the calculation method for the previous fiscal
year and are subject to verification by a third-party organization.
Any changes in the values as a result of the verification will be promptly disclosed on the
Company's website.
②

Metrics & Target of Human Capital

Indicators

TargetRecent results

Total training time
per employee, year(*1)
Ratio of womenin managerial positions(*2)

5 times by FY2030
compared to FY2021

1.11 times in FY2023
compared to FY2021

10% by FY2030

3.07% in FY2023*1 : Target Companies is : Domestic Group*2 : Target Companies is : the Group

19

3.

Business Risks
Of the matters related to the status of business and accounting stated in the Annual Securities Report,
the major business risks that the management recognizes as having the potential to have a material
impact on the financial position, operating results and cash flow status of the consolidated companies
are as follows.
The forward-looking statements in this report are based on the judgment of the Group as of the endof the consolidated fiscal year under review.
[Risk Management Policy]
The Company conducts business activities for the purpose of enhancing corporate value, preserving
assets, continuing business, and maintaining the trust of stakeholders. The Board of Directors conducts
risk management to direct and control the organization in order to reduce threats and seize
opportunities that are difficult to foresee as business risks.
[System for Risk Management]
In order to conduct effective risk management, the Company has established the Risk Management
Committee as an advisory body to the Board of Directors, and has established the Rules for the Risk
Management Committee. The Risk Management Committee identifies and evaluates potential risks
across the entire Group or across divisions, considers countermeasures, and monitors countermeasures
implemented, and periodically reports to the Board of Directors.
The Board of Directors receives reports from the Risk Management Committee, discusses and approves
risk measures, and instructs each business and division to implement them. At that time, in order toenhance the execution of risk measures, the Company appoints the person responsible for
implementing them and the division in charge, and instructs the development of control systems suchas rules and manuals as necessary.
The Audit and Supervisory Committee audits whether the Company's overall risk management
activities are functioning effectively. The Audit Office audits the execution of risk measures as part ofinternal audits of each business and division.

20

[Risk Identification]
Risks were identified by taking into account potential risks and risks that have materialized in thepast in the business areas and regions in which the Group operates and in the 5 material issues that theGroup has identified as issues to be addressed.
These were classified into 6 categories based on similarities and relationships, and 30 risks wereidentified.
Category

Category

Risks

Compliance Risk

Human Resources
Risk

Shortage of human resources
Insufficient human resource development
Labor Issues
Labor-Management Issues

Risks

Compliance with laws and regulations
Compliance with tax and accounting laws
Leakage of information
Corruption and Bribery
Litigation risk

Deterioration of service quality

Country risk

PEST Risk

Operational Risk

Supply chain disruption

Incidents, Fires, etc.

International disputes and Trade friction
Fluctuations in exchange rates and interest rates

Impact on business assets

FinancingOperational error

Market competition

Computer system failure

Soaring purchase prices

Natural disasters

Technological innovation

Climate ChangeManagement failure

Governance
Risk

Environmental
Risk

Business bias

Biodiversity
Epidemic pandemic

21

Failure of group governance
Mergers and Acquisitions

[Risk Analysis]
The Groupe conducted a questionnaire targeting senior managers of the Group in order to analyze
the specific impact and countermeasures for the identified risks and to assess their importance.
For each specific risk, the Groupe asked them to list “Probability, ” “ Impact, ” “Specific impact, ”
and“ Effective countermeasures, ” and received 582 responses.
The “Probability,” and the “Impact,” were each scored on a scale of 4. The degree of impact wasgraded.

Probability

Impact1

Occurred approximately 1 time in decade1

No business impact

2

Occurred approximately 1 time in a few years

2

Minor business impact

3

Occurred approximately 1 time each year

4

Unavoidable business impact

4

Occurred frequently

6

Serious business impact[Risk Assessment]
The Groupe calculated the average score of "Probability, " and "Impact, " for each risk listed in thequestionnaire and multiplied them to determine the significance of each risk as the primary assessment.
In the results of the primary assessment, excluding risks of minor significance, risks with overlapping
content were combined with other risks and assessed as 22 risks.

22

As a result of the risk assessment, the Groupe have identified a number of potential Significant Risks
and Moderate Risks, although the Groupe do not Serious Risks.
Specifically, the Groupe identified five Significant Risks: Shortage of human resources, Natural disasters,
Incidents and Fires, Computer system failure, and Impact on business assets. Of the Moderate Risks, the Groupe

identified four risks with a high probability of occurrence: Insufficient human resource development, Labor Issues,
Deterioration of service quality, and Corruption and Bribery. The Groupe also identified two risks with a highimpact: Country risk and Mergers and Acquisitions.

ImpactProbability

23

[Risk Impact and Countermeasures]
As a result of the risk assessment, the following table summarizes the impacts and countermeasuresfor Significant Risks and Moderate Risks with high likelihood of occurrence or impact.
Risks

Category

Content

Shortage of humanresources
human resource
development

Human Resources Risk

Labor Issues
Incidents and Fires
Computer system failure

Operational Risk

Impact Level

Impacts

Countermeasures[Risk]
 Chronic labor
shortages
 Increasing number ofretirees due to theaging Outflow of humanresources due toworking conditions

Significant Risk
 Probability 4
 Impact 4[Risk]
 Lack of manager
training Increased burden of
training new
employees

Moderate Risk
 Probability 4
 Impact 2

 Promoting to regular
employees
 Improving employee income,working hours, and benefits
 Receipt of reasonable fees Increasing human capital
investment for HR
development Diverse human resources anddiverse work styles
 Saving labor by systemizationand mechanization
 Enhancing harassment
training Increase communication with
employees[Risk]
 Long working hours
 Induction ofharassment

Moderate Risk
 Probability 4
 Impact 2[Risk]
 Serious accident Fire in warehouse or
office Accident inequipment

Significant Risk
 Probability 2
 Impact 4

 Suspension of new work or inability
to continue existing work Increase in outsourcing costs anddeterioration in asset turnover Increase in long working hours andwork on holidays to compensate forlabor shortages, and increase inemployee stress and turnover Deterioration of the humanenvironment in the workplace Loss of trust with suppliers due todeterioration in business quality
 Increase in costs for causing
accidents and fraud and responding
to quality complaints due todeterioration in management
functions Penalties for violations ofregulations on the overtime limit
for drivers and labor-managementagreements
 Human rights violations throughharassment
 Impact on human life or injury
 Damage to warehouses, offices,
equipment and vehicles, and loss ofconsigned goods
 Social responsibility and criminal oradministrative punishment
 Loss of trust among business
partners and suspension of business Liability for damages and increased
insurance costs[Risk]
 System failures
related to operations

Significant Risk
 Probability 2
 Impact 4

 Business service became impossible
and business was suspended
 Loss of trust among business
partners
 Business became complicated, long
working hours and working on
holidays increased, and employee
stress and turnover increased Increase in damages, labor costs,
and outsourcing costs

 Data backup, redundancy,
system monitoring, sufficientmaintenance services, andsecurity measures
 Utilization of cloud-based
business services and cloudservers
 Improvement of employee
information literacy
 Development of system BCP

24

 Safety-first driving
 Safety and technicaleducation and penetration ofsafety awareness System improvement of safety
and reduction of driverburden Periodic inspections andequipment maintenance Evacuation drills, patrols,monitoring, and alerting Sufficient insuranceRisksCategory

Content

Impact on business assets
Deterioration of service quality

Operational Risk

Natural disasters

Environmental Risk

Corruption and Bribery

Compliance Risk

Impact Level

Impacts

Countermeasures

Significant Risk
 Probability 3
 Impact 4

 Decreased sales or impairment
due to changes in market
conditions or preferences, crop
losses, or accidents involving
livestock and dairy products Decreased sales or income due totermination of contracts withmajor suppliers or credit
deterioration
 Strengthen business portfolio andpromote growth strategy
 (Initial investment and initial cost
are taken into consideration.) Develop investment plans thattake risks into account Head office backs up on-site
operations
 Quickly respond to deviations
from plans[Risk]
 Negligence due tooperational error(Wrong shipment,
wrong delivery,
inadequate
temperature control,
dirty damage, noise,etc.)

Moderate Risk
 Probability 4
 Impact 2

 Social Responsibility Impossibility of BusinessContinuation
 Loss on Consignment, Business
Service Failure Loss of trust among business
partners and suspension ofbusiness Liability for damages andincreased insurance costs

 Thorough employee education
 Strengthening quality control
and internal controls
 Maintaining goodcommunication with all
stakeholders
 Efficiency and standardizationof on-site education throughsystemization
 Coexistence and consideration
for neighborhoods and local
communities[Risk]
 Earthquakes,
tsunamis, typhoons,volcanic eruptions,torrential rains,
heavy snow, etc.
 Damage to roads,
large-scale power
outages,
communication
disruptions, etc.

Significant Risk
 Probability 3
 Impact 6

 Impact on the lives of employees
and their families
 Inability to come to the office orwork Damage to warehouses, offices,
facilities, vehicles, and loss ofconsigned goods
 Impossibility of business
continuity (Stagnation of
information systems, disruption ofdelivery routes, difficulty inobtaining fuel, loss of powersources, etc.)

 Development of transportdisaster prevention
management
 Preparation of evacuation drills
and hazard maps
 Installation of fuel-in-tanks andstockpiling of emergency
supplies, water and food Necessary and sufficient
insurance
 Maintenance of BCP
 Safety confirmation system for
employees
 Private power generation andstorage batteries
 Disaster prevention items or
portable toilets for drivers[Risk]
 Embezzlement,
embezzlement,
falsification, coverup, bribery, etc.

Moderate Risk
 Probability 3
 Impact 2

 Suspension of business due toadministrative action or revocationof permission
 Damage to corporate value
 Loss of trust among business
partners and suspension ofbusiness transactions
 Impact of rumors on business
transactions
 Decrease in employee engagement
and increase in turnover Compliance education
 Rewards and punishments
based on rules
 Dissemination of internalreporting and other remedies
 Strengthening internal control
functions and internal audit
systems
 Regular personnel changes[Risk]
 Changes in Items
Handled Changes in LargeScale Customers[Opportunity] Developing new
products andbusiness partners

25

RisksCategory

Country risk

PEST Risk

Mergers andAcquisitions

Governance Risk

Content

Impact Level

Impacts

Countermeasures[Risk]
 Country Risk inCountries Expanding
Operations

Moderate Risk
 Probability 1
 Impact 4

 Changes in economic growth,exchange rate fluctuations,political and economic turmoil,changes in laws and policies,
inappropriate business practices,terrorist activities, epidemics, etc.
 Impact on the lives of employees
and their families

 Timely and appropriate grasp ofinternational trends and backup
system by head office Business planning andmanagement taking account ofvariability[Risk]
 Possibility of
Acquisition

Moderate Risk
 Probability 1
 Impact 6

 Possibility of acquisition as a listedcompany Medium- to Long-Term
Enhancement of Corporate
Value Enhancement of Shareholder
Value Constructive Dialogue with
Shareholders

Apart from business activities, the risk of fluctuations in the value of assets held by the Group may
have an impact regardless of risk assessment.
Risks

Content

Impactschanges in the value ofinvestment securities[Risk]
 Future changes in the stock market
 Deterioration of financial conditions ofinvestment investee

 For assets with a fair value, impairment loss isrecorded if the fair value declines by 30% or
more For assets without a fair value, impairment loss
is recorded if the net asset value declines by
50% or more and recovery is unlikely

26

4.

Management Discussion and Analysis of Financial Position, Operating Results and Cash
Flows(1) Outline of Operating Results
A summary of the financial position, operating results and cash flows of the Group for the
consolidated fiscal year under review is as follows.
① Financial Position and Operating Results
As for the Japanese economy during the fiscal year under review, social activities fully resumed
in wake of reclassification of COVID-19 to Class 5 under the Infectious Diseases Control Law.
On the other hand, outlooks remain uncertain due to a slowdown of consumer spending alongwith high price of raw materials and energies on the background of unstable international
circumstances, a prolonged depreciation of Japanese yen, and a continuing increase in any costs,
including labor cost.
In the cold chain logistics for food products industry, which is the Group’s principal focus,
while food manufacturers mainly have passed an increase in costs to product prices to a certain
extent, the handling volume of household chilled and frozen foods showed slow growth as
consumers have been cutting down on their spending and selecting purchases more rigidly.
However, the handling volume of commercial products has been recovering by the revitalizationin the flow of people.
Amid these changes in social and economic environments, the Group began its 3rd MediumTerm Management Plan from FY2022 to FY2024. Setting as basic policy “Achieving sustainable
low temperature zone logistics, meeting the needs of new cold-chains”, the Group strives toexpand new business of growing fields such as E-commerce related logistics and Pharmaceuticallogistics, and to strengthen the existing business through some initiatives such as acquiring new
facilities.
Additionally, in light of the diversification of distribution channels for low-temperature
products, the Group revised the 3rd Mid-term Management Plan as a 3-years plan from FY2023
to FY2025, as announced on June 16, 2023. While continuing to promote the implementationof effective measures to sustain the food lifelines and realize the prosperous society with its
function for chilled and frozen logistics, the Group added the following items as importantmeasures and planed an additional investment of 10 billion yen to achieve them:

Investing in the development and introduction of new technologies in order to raise theproductivity in respect of labor-saving and address the environmental issues assustainability initiatives.



Accelerating the growth speed by promoting the investment in businesses such as
overseas business, e-commerce related logistics and pharmaceutical logistics and bybusiness alliance with other companies.

Enhancing profitability and expanding business volumes by both organic and inorganic
growth including through the M&A that contributes to strengthening the existing
business.

As a result of the above, operating revenue was ¥116,028 million (up 2.4% year-on-year),
operating profit was ¥4,777 million (up 8.5% year-on-year), and ordinary profit was ¥5,194
million (up 5.3% year-on-year). Profit attributable to owners of parent was ¥3,283 million (up277.4% year-on-year).
The following describes performance by segment.
a） TC Business (Transfer Center Business)
While the handling volume of chilled foods for convenience stores was recovered slowly, theGroup secured revenue by negotiating price revision in accordance with an increase in costs,
starting new businesses and expanding e-commerce related logistics business. As a result,operating revenue amounted ¥74,353 million (up2.7% year-on-year).
As for Segment profit, operating costs decreased mainly because replacements of operating
vehicles were delayed due to the supply system issues of vehicle manufacturers, while laborcosts increased by promoting part-time/temporary employees to full-time/permanent status
and improved treatment for securing adequate human resources, and fuel costs increased due
to high crude oil prices. In addition, promoting to expanding profitable businesses, including
new business, contributed to the increase in profits. As a result, segment profit amounted¥4,216million (up 23.3% year-on-year)b） DC Business (Distribution Center Business)
While the slow recovery in the shipping volume of household frozen foods and thereorganization of logistical networks by certain customers brought negative impact onrevenue to some extent, the handling volume those for business-use recovered. Besides, theGroup also secured revenue by negotiating price revision in accordance with an increase incosts and expanding the handling volume in new facilities which started operation in FY2022.
As a result, operating revenue amounted ¥39,699 million (up 1.3% year-on-year).
Segment profit was ¥4,670million (down 7.7% year-on-year), mainly due to the increase inlabor costs for securing adequate human resources, while power costs reduced due to a changeof electricity contracts.
c） Other
Other business segment includes the guarded transport, hospital-related distribution, temp
service, and insurance agency businesses. Its operating revenue was ¥1,975 million (up 9.5%
year-on-year) and segment profit was ¥209 million (up 24.1% year-on-year).
② Outline of Cash Flows for the Fiscal Year Under Review
The balance of cash and cash equivalents (“net cash”) at the end of the fiscal year under review
amounted to ¥12,414 million, up ¥4,246 million from the end of the previous fiscal year.
The following outlines the status and underlying factors of each classification of cash flows forthe fiscal year under review.
(Cash flows from operating activities)
Net cash provided by operating activities amounted to ¥8,123 million (compared with net cashof ¥9,051 million provided in the previous fiscal year).
This was mainly due to an increase in net cash from profit before income taxes and depreciation.
(Cash flows from investing activities)
Net cash used in investing activities amounted to ¥8,067 million (compared with net cash of¥5,832 million used in the previous fiscal year).
This was mainly due to a decrease in net cash from acquisition of property, plant andequipment.

28

(Cash flows from financing activities)
Net cash provided by financing activities amounted to ¥4,189 million (compared with net cashof ¥878 million used in the previous fiscal year).
This was mainly due to an increase in proceeds from long-term borrowings, while decrease in
net cash from purchase of treasury shares.
[Reference: Changes in cash flow indicators]
FY2020

FY2021

FY2022

FY2023equity ratio

(%)

50.0

50.7

51.3

43.5

Market value based equity ratio

(%)

53.2

33.6

34.0

62.9

Interest Bearing Debt Operating Cash Flow Ratio(year)

2.1

2.3

2.3

4.1

Interest coverage ratio(times)

39.2

37.3

37.2

27.1

③ Outline of Production, Orders Received and Salesa)

Operating revenue by segments

Operating revenue

Segment

Year-on-year

TC Business(Millions of Yen)
74,353

DC Business

39,699

101.3

Other

1,975

109.5

116,028102.4

FY2022
AmountRatio(%)

FY2023
AmountRatio(%)

Total

(%)
102.7

Operating revenue of main consignee is as follows

consignee(Millions of Yen)

Mitsubishi Shokuhin Co., Ltd.

b)

14,461(Millions of Yen)

12.8

15,13013.0

Operating revenue of outsourcing
Operatingrevenue

Ratio ofoutsourcing(%)

TC Business(Millions of Yen)
20,012

DC Business

Segment

Other
Total

Year-on-year
(%)

26.9

100.4

10,552

26.6

101.3

205

10.4

130.3

30,770

26.5

100.8

(2) Management Analysis and Consideration of Operating Results① Key Accounting Policy and Estimate
The Group's consolidated financial statements are prepared based on accounting standards
generally accepted as fair and appropriate in Japan. The Groupe use estimates and assumptions
that affect the reported value of assets, liabilities, revenues, and expenses. However, theseestimates and assumptions may differ from actual results.

29

② Recognition, Analysis and Consideration of Operating Results in this fiscal year
(Consolidated operating revenue)
During the fiscal year under review, while food manufacturers mainly have passed an increasein costs to product prices to a certain extent, the handling volume of household chilled and frozen
foods showed slow growth as consumers have been cutting down on their spending and selecting
purchases more rigidly. However, the handling volume of commercial products has been
recovering by the revitalization in the flow of people.
As a result of the above, operating revenue was ¥116,028 million (up 2.4% year-on-year). The
reportable segments accounted for 64.1% of revenue from external customers in the TC business,
34.2% in the DC business, and 1.7% in other business.
(Consolidated ordinary profit)
During the fiscal year under review, operating costs decreased mainly because replacements ofoperating vehicles were delayed due to the supply system issues of vehicle manufacturers, whilelabor costs increased for securing adequate human resources, and fuel costs increased due tohigh crude oil prices. In addition, promoting to expanding profitable businesses, including new
business, contributed to the increase in profits.
As a result, ordinary profit amounted ¥5,194million (up 5.3% year-on-year)(Assets)
Assets amounted to ¥105,506 million, increased ¥14,155 million from the end of the previous
fiscal year.
The major increases were ¥4,246 million in cash and deposit, ¥1,561 million in trade receivableaccount, ¥6,102 million in buildings and structures, net and ¥1,700 million in leased assets, net.
(Liabilities)
Liabilities amounted to ¥58,706 million, increased ¥15,002 million from the end of the previous
fiscal year.
Major increases were ¥8,989 million in long-term borrowings and ¥1,952 million in leaseliabilities.
(Net assets)
Net assets amounted to ¥46,800 million, decreased ¥846 million from the end of the previous
fiscal year.
The major increase was ¥2,520 million in retained earnings, while the major decrease was¥4,117 million in treasury shares.
(Cash flow)
Reference to 4-(1)-② Outline of Cash Flows for the Fiscal Year Under Review.
The Groupe’s capital sources and funding liquidity are as follows.
The main working capital needs are labor costs and outsourcing costs. The demand for funds
for investment purposes is mainly due to facilities.
Short-term working capital is basically short-term loans from financial institutions and treasury
funds. Capital investment is basically long-term loans from financial institutions and treasury
funds.
In principle, cash flow from business activities is used as a financial resource to meet financing

30

demand. However, when responding to massive demand for funds, the Bank will borrow funds
from financial institutions to ensure the level of liquidity necessary for smooth business activities
and to maintain financial soundness and stability. When raising funds, The Groupe conduct themost appropriate funding, taking into account factors such as the duration of the funding period
and market interest rates in Japan, as well as the impact on financial indicators such as the capital
adequacy ratio, DE ratio (debt-to-equity ratio), and ROE.

31

III. Status of the Reporting Company
1.

Corporate Governance(1) Overview of Corporate Governance① Basic Views
The Company’s basic policy on corporate governance is to work on clarifying its monitoring
system and strengthening its check-and-balance function for corporate management,
recognizing the importance of business ethics, while endeavoring to disclose corporate
information fairly, equitably, and promptly in a more transparent manner, with a view to earningand sustaining the trust of the general public and investors.
② Corporate Governance System[Overview of Corporate Governance System]
The Company has adopted a system of a company with Audit and Supervisory Committee toexhibit the effectiveness of its corporate governance system.
The Company has improved the effectiveness of auditing and supervision through auditing byDirectors who are Audit and Supervisory Committee Members with voting rights on the Boardof Directors, and increased the ratio of Outside Directors by continuously bringing in talented
human resources to further strengthen the supervisory function of the Board of Directors.
a)Board of Directors
The Company’s Board of Directors consist of 10 Directors. The Company has six Outside
Directors, out of which four are Directors who are Audit and Supervisory Committee
Members. The Board of Directors meets at least once a month, in principle, and makes
decisions, as the highest decision-making body, on matters prescribed by laws and regulations
and the Articles of Incorporation and other matters. The Board of Directors is operated bynine male Directors and one female Director.
The Company conducts self-evaluation and analysis on the effectiveness of the Board of
Directors with the aim of improving the functions of the Board of Directors and increasing
corporate value.
Regarding self-evaluation and analysis, the Company commissioned an externalorganization to conduct a questionnaire targeting all Directors who are members of the Boardof Directors. Anonymity was ensured by responding directly to the external organization.
As a result of the survey on the February 2024, the Company has been given a generally
positive evaluation and it believes that the effectiveness of the Board of Directors is ensured.
Meanwhile, regarding the monitoring functions of the Board of Directors, some opinions
were voiced on potential groupwide risks and measures to address them as well as opinions
calling for the strengthening of the risk management system. In light of these opinions, theCompany shared awareness on the issues regarding the further improvement of the functionsof the Board of Directors and the revitalization of discussions. Going forward, the Company,
keeping in mind this evaluation, will promptly address these issues upon sufficient
discussions and consideration and continue to advance initiatives to heighten the functions

32

of the Board of Directors.
b)

Executive Officers’ Meeting
The Company holds at least one Executive Officers’ meeting in which full-time Directors
and Executive Officers participate each month, in principle. At an Executive Officers’
meeting, participants deliberate on matters entrusted by the Board of Directors andimportant management matters, and work to clarify the decision-making process of proposals
submitted to the Board of Directors and ensure transparency thereof.
Specific matters include the progress of the establishment of new bases, sustainable
management, and the progress of the third medium-term management plan.

c)

Audit and Supervisory Committee
The Company’s Audit and Supervisory Committee consists of four Outside Directors who
are Audit and Supervisory Committee Members (three males and one female), and audits
and supervises overall management, leveraging the members’ experience, expertise, etc. froman independent standpoint. The Audit and Supervisory Committee has a system to fully
supervise all aspects of Directors’ execution of duties by having the full-time Audit andSupervisory Committee Member attend all meetings such as Executive Officers’ meetings at
which important matters related to management are deliberated on and determined, andinspecting requests for approval and various reports for daily work. In addition, the Company
has ensured the effectiveness of instructions of Audit and Supervisory Committee Membersby having a cooperative system in place between the Audit and Supervisory Committee Officeand each department, and conducting investigation and collecting information necessary foraudit.

d)Establishment of the Nomination Committee and the Compensation Committee
The Company has voluntarily established the Nomination Committee for the purposes ofmainly ensuring the transparency and objectivity of the appointment process of Directors
and avoiding concentration of authority over personnel issues into Representative Directors,
and the Compensation Committee for the purposes of primarily ensuring the transparency
and objectivity of the decision-making process of compensation for the Company’s officers
and ensuring decision-making and the rationality of the basic policy of officers’ compensation
system. To ensure transparency, a majority of members of both committees are outside
officers, and the chairpersons of both committees are Outside Directors.
Specific matters are discussed on the appropriateness of the remuneration of officers andappointment of officers, and reported to the Board of Directors.

e)Accounting Auditor
The Company has entered into an audit agreement with Ernst & Young ShinNihon LLC.,
which performs audits of accounting and internal control over financial reporting from an
independent and impartial standpoint.

f)Internal Audit
The Company has established the Audit Office as the internal audit department. The Audit
Office performs audits of the Company and the Group companies to ensure that business
operations are being conducted in an appropriate manner.

g)

Limited Liability Agreement
Pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, the Company

33

has entered into an agreement with Outside Directors to limit their liabilities. The limit ofliability for damage under the agreement is the minimum liability amount stipulated in Article
425, Paragraph 1 of the said Act.
Corporate Governance System[Basic Views on Internal Control System]
The Group considers that developing and operating an internal control system is an importantmanagement issue for the purpose of ensuring the appropriateness, effectiveness and efficiencyof business operations to maintain and increase corporate value and improving businessperformance by ensuring social credibility and further enhancing the function and quality oflogistics for food products. The Group will work to establish an internal control system for all
officers, employees and workers at offices of the Group based on the following basic policy.
a)Systems to ensure that Directors’ and employees’ execution of duties complies with laws
and regulations and the Articles of Incorporation
The Company shall regularly hold a meeting of the Board of Directors each month inaccordance with the Regulations for the Board of Directors to promote communication
among Directors and prevent a breach of laws and regulations and the Articles ofIncorporation by having Directors supervise execution of their duties each other.

The Company shall establish the Code of Ethical Conduct as the standards of conduct
to be complied with by all officers and employees of the Group, and work to ensure that
all officers and employees of the Group are fully aware of it.



The Company has established a whistleblowing system where a person who is aware ofan actual and threatened breach of laws and regulations and other rules by an officer,
employee or worker of the Group can report it to the Whistleblowing Committee Office.
The Company shall establish a system to promptly report the whistleblowing contents
to the Audit and Supervisory Committee.

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

The Company shall establish an internal audit system where the Audit Officeindependent of the business execution departments conducts internal audits of theGroup and checks the status of compliance with laws and regulations and internal rules.

b)

Systems for storage and management of information regarding execution of duties byDirectors
The Company shall store minutes of important meetings, including minutes of meetings of theBoard of Directors and other documents such as requests for approval pursuant to laws andregulations and internal rules.



The Company shall establish the Information Security Policy for electric records and clarify theguidelines to handle such records.



The Company shall establish a system where Directors can access the information set forth
above.

c)Regulations and other systems relating to management of the risk of loss of the Company
and its subsidiaries


The Company shall set up the Risk Management Committee chaired by the President,
and establish systems and policies regarding risk management, as well as assess risk
management systems of the Group’s departments, and improve them, if necessary.



The Company shall identify and assess risks associated with business operations ofdepartments and develop rules and regulations related to the avoidance and mitigationof those risks.



If a serious risk occurs or is threatened to occur at the Company or a subsidiary, theEmergency Headquarters with the President serving as the chief shall take action.



If a subsidiary finds any misconduct or material fact in violation of laws and regulations,
the Articles of Incorporation or internal rules or any other fact raising concerns in termsof risk management, Directors of the subsidiary shall report such fact to Directors of theCompany and the Audit and Supervisory Committee.

d)Systems to ensure the efficient execution of duties by Directors


To ensure the efficient execution of duties by Directors, the Company shall hold ameeting of the Board of Directors each month and supervise the decision-making ofimportant matters and the status of execution of duties by Directors (excluding those
who are Audit and Supervisory Committee Members), among other things.



The Company shall approve the Group companies’ important matters that requireapproval in accordance with the official authority table prescribed in the DecisionMaking Regulations. Matters other than those to be resolved by the Board of Directors
shall be resolved at an Executive Officers’ meeting.

e)

Systems to ensure the appropriateness of business operations of the Group companies


The Company shall receive reports from the Group companies on the status of their management
at a regular business results briefing session.

The Company shall give its subsidiaries directions to clarify the authority andresponsibilities of persons who execute business for their decision-making and ensurethat business is executed systematically and efficiently in accordance with their
Regulations for the Board of Directors, Regulations for Official Authority, and othervarious rules and regulations.



The Company provides the Group companies with education on compliance, transport35

safety, etc.


The Company’s Audit Office conducts a business audit of the Company’s departments
and subsidiaries and reports the status and results of the audit to the Company’s Boardof Directors and other relevant organizations according to the importance thereof.
Following the report, the Company shall instruct and support the methods of executing
business of the subsidiaries.

f)

Matters regarding employees who assist the duties of the Audit and Supervisory Committee
and ensuring their independence and the effectiveness of instructions


The Company shall establish the Audit and Supervisory Committee Office if necessary
to assist the duties of Directors who are Audit and Supervisory Committee Members.
Personnel matters regarding assistants shall be discussed by Directors (excluding those
who are Audit and Supervisory Committee Members) and Directors who are Audit andSupervisory Committee Members, as necessary.

To ensure the independence of the Audit and Supervisory Committee Office, personnel
matters such as appointment, transfer, etc. of staff of the Audit and Supervisory
Committee Office require prior consent of the Audit and Supervisory Committee.
Personnel evaluation also requires consent of the full-time Audit and Supervisory
Committee Member.

g)

Systems for reporting to the Audit and Supervisory Committee and other systems to ensure
effective performance of audits by the Audit and Supervisory Committee

If a Director or employee of the Group discovers a fact that would cause material damage
to the Company, such Director or employee shall promptly report such fact to the Audit
and Supervisory Committee. Any unfavorable treatment of the whistleblower shall be
prohibited.



Directors who are Audit and Supervisory Committee Members shall attend important
meetings such as Executive Officers’ meetings, in addition to meetings of the Board of
Directors, and express their opinions, as necessary.

Directors who are Audit and Supervisory Committee Members shall inspect various requests forapproval and other documents related to business execution and seek explanation from Directors(excluding those who are Audit and Supervisory Committee Members) and employees, asnecessary.



Any whistleblowing shall be reported to the Audit and Supervisory Committee pursuant to thewhistleblowing system.

h)Matters regarding policies on treatment of audit expenses, etc.
To ensure that audit activities are conducted from an independent standpoint, the Audit
and Supervisory Committee may retain external professionals such as lawyers, asnecessary, and charge the Company for expenses to retain such professionals.

i)

Systems to eliminate anti-social forces

The Group shall not have any relationship with anti-social forces that threats the safety
and order of civil society. If an event occurs such as receiving unreasonable demand froman anti-social force, the General Affairs Department shall be responsible to supervise
actions, centrally manage and collect information, and respond to such event in a firm
attitude in cooperation with lawyers and relevant institutions such as the competentpolice station.

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

To prevent occurrence of an event, the Company shall regularly provide training,develop response manuals, and build a close relationship with the competent police
station even in normal circumstances by exchanging information with them.

The provisions for elimination of anti-social forces must be included in the terms ofagreements and the terms and conditions of transactions executed during the course ofdaily business activities.

j)

Systems to ensure the reliability of financial reports


The Company shall develop an internal control system for submission of valid andappropriate internal control reports pursuant to the Financial Instruments and ExchangeAct, and continuously evaluate whether such system properly works and correct any
defect in such system in accordance with the Implementation Standards for Evaluationof Internal Control over Finance Reporting separately established.

③ Other matters related to Corporate Governance
The Company has entered into a directors and officers liability insurance policy pursuant to theprovisions of Article 430-3, Paragraph 1 of the Companies Act with an insurance company. The
insureds of the policy include all Directors and Executive Officers of the Company and all
Directors and Audit and Supervisory Board Members of the Company’s consolidated
subsidiaries. The policy will cover damages, litigation costs, and other expenses incurred by the
insured in cases where the insured receives a claim for damages arising from an act or anomission committed by the insured in his or her capacity as a director or officer of the company.
The full amount of the insurance premiums is borne by the Company.
If each candidate is elected and assumes the position of Directors who are Audit andSupervisory Committee Members, such Director will become an insured person under the
insurance policy. In addition, the Company plans to renew the insurance policy under the sameterms and conditions at the next renewal.
④ Activities of the Board of Directors
The Board of Directors is responsible for realizing sound and sustainable growth and mediumto long-term enhancement of corporate value of the Group. As the highest decision-making body,the Board of Directors makes decisions on important matters, including matters stipulated bylaws and regulations and the Articles of Incorporation, as well as the ideal form, management
strategy and management plan of the Group.
The main agenda of the Board of Directors for FY 2023 is as follows.

Matters to beresolved anddiscussed

 Capital investment by operating companies.
 Procurement of green loans (syndicated loans).
 Formulation of human capital targets and indicators.
 Possibility of holding cross-shareholdings.
 Measures to realize management that is aware of capital costs and stock prices.
 Formulation of the FY2024 budget.

Matters to bereported, etc.

 Monthly performance report.
 Shareholder status report.
 Safety and quality report.
 Evaluation of the effectiveness of the Board of Directors.
 FY2022 CO2 emissions report and FY2023 measures.

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⑤ Directorsa)Number of directors
The Company's Articles of Incorporation stipulate that 12 Directors (excluding Directors
who are Audit and Supervisory Committee Members) and 5 Directors of the Company who
are Audit and Supervisory Committee Members.

b)Requirements for the Election of Directors
The Company stipulates in its Articles of Incorporation that the election of Directors shallbe made by a majority of the voting rights of shareholders present who hold 1/3 or more of
the voting rights of shareholders entitled to exercise voting rights, and that cumulative voting
shall not be used.

⑥ Matters to be resolved at the Shareholders Meeting that can also be resolved by the Board of
Directorsa)Organization for Deciding Dividends of Surplus, etc.
In order to enable the Company to flexibly implement its dividend policy and capital policy,
the Company stipulates in its Articles of Incorporation that matters stipulated in each itemof Article 459, Paragraph 1 of the Companies Act, such as matters related to dividends ofsurplus and acquisition of treasury stock, shall be determined by resolution of the Board of
Directors, not by resolution of the General Meeting of Shareholders, unless otherwise
provided for by laws and regulations. In addition, regarding the record date for dividends ofsurplus, the Company stipulates in its Articles of Incorporation that the year-end dividend
may be paid on March 31 of each year, the interim dividend on September 30 of each year,
and other record dates may be specified for dividends of surplus.

b)

Exemption from Liability of Directors and Accounting Auditors
The Company stipulates in its Articles of Incorporation that, pursuant to Article 426,
Paragraph 1 of the Companies Act, the Company may, by a resolution of the Board of
Directors, exempt Directors and Accounting Auditors from liability with respect to the acts
set forth in Article 423, Paragraph 1 of the same Act within the limits of laws and regulations.
The purpose of this exemption is to create an environment in which Directors andAccounting Auditors can fully exercise their abilities and fulfill their expected roles when
performing their duties.

⑦ Requirements for extraordinary resolution of the Shareholders Meeting
The Company stipulates in its Articles of Incorporation that resolutions at the Shareholders
Meeting prescribed in Article 309, Paragraph 2 of the Companies Act shall be made by 2/3 ormore of the voting rights of shareholders present who hold 1/3 or more of the voting rights ofshareholders entitled to exercise their voting rights.
The purpose of this resolution is to ensure the smooth operation of the Shareholders Meetingby relaxing the quorum for special resolutions at the Shareholders Meeting.

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2.

Status of stockholdings(1) Standards and approach for classification of investment sharesWith regard to the classification of investment stocks held for the purpose of net investment andinvestment stocks held for purposes other than net investment, the Company considers
investment stocks held for the purpose of net investment to be investment stocks whose purpose
is to receive profits from changes in the value of shares or dividends related to shares.
The Company considers other investment stocks held for purposes other than net investment.
The Company's main business is to conduct business management of subsidiaries. All the stocks
held by the Company are stocks of affiliates, and the Company does not hold any other stocks held
for the purpose of net investment or purposes other than net investment.

(2) Shares held by subsidiaries for purposes other than net investment
The Group hold cross-shareholding shares to enhance medium- to long-term corporate value,
taking into consideration the purpose of strengthening relationships with companies in which theCompany has invested and cooperative business relationships. The Company’s basic policy is toassess the appropriateness of holding individual cross-shareholding shares at a meeting of theBoard of Directors each year, considering various matters such as the purpose of holding thereof,
the economic rationality, the effectiveness of the enhancement of corporate value, and financial
strategies.
At the meeting of the Board of Directors held in September 29, 2023, the Board of Directors
examined whether to continue cross-shareholdings after its comprehensive review of transactionrelated earnings, dividend income, and valuation difference, as well as on its examination from a
medium- to long-term viewpoint of the relationship with business developed by the Group andnew business opportunities for future business expansion. We will reduce cross-shareholdings
deemed less meaningful, with due consideration to the effect on markets. As a result, the number
of issues held by shareholders for strategic purposes as of March 31, 2024 was 23 (including 14
issues held by listed companies), unchanged from the end of the previous fiscal year.

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