Funai Soken Incorporated : Summary of Financial Results for the 2nd Quarter of the Fiscal Year Ending December 2020

2nd Quarter of Fiscal Year Ending December 2020

Summary of Financial Results

Funai Soken Holdings Incorporated

(TSE 1st section: stock code 9757)

August 20, 2020

Contents

1. FY2020 2nd Quarter Financial Results

1. Consolidated Income
2. Comparison with Revised Earnings Forecast of May 20, 2020
3. Results of Operations by Segment
4. Results of Operations by Segment: Consulting
5. Results of Operations by Segment: Logistics
6. Results of Operations by Segment: Direct recruiting
7. Consolidated Financial Position

1. Full-yearOutlook & Impact of Covid-19

1. Revision of Financial Result Forecast
2. Outlook & Impact of Covid-19 by Segment
3. New Services Adopted to Current Conditions with Covid-19

3 Shareholder Returns and Outlook

Statement Regarding Use of These Materials

1

FY2020

2nd Quarter Financial Results

1. FY2020 2nd Quarter Financial Results

(1) Consolidated Income

• Despite the restrictions on our ability to operate in full due to Covid-19, net sales increased 1.2% over the same period in the preceding year, buoyed by strong sales of online advertisement agency services and direct recruiting.
• Operating income was down 10.1% from the same period in the preceding year, ordinary income 9.4%, and net income 9.0%.

	June 2019	June 2020				Comparison with financial
				result forecast
								(Issued May 20, 2020)
	Amount	% of total	Amount	% of total	Change	Amount	Difference
	(million yen)	(million yen)	(%)	(million yen)	(%)
Net sales	12,087	100.0	12,234	100.0	+1.2	12,000 - 12,400	+2.0% -
-1.3%
Operating	2,874	23.8	2,584	21.1	-	10.1	2,100 - 2,300	+23.1% -
income	+12.4%
Ordinary income	2,914	24.1	2,640	21.6		-	9.4	2,100 - 2,300	+25.7% -
	+14.8%
Net income	1,918	15.9	1,745	14.3		-9.0	1,350 - 1,450	+29.3% -
attributable to owners		+20.4%
of the parent

3

1. FY2020 2nd Quarter Financial Results

(2) Comparison with Revised Financial Result Forecast of May 20, 2020

• Operating income far exceeded initial forecasts, +12.4% - +23.1% above the financial result forecast.
• Major factors are shown below.

2020 2Q

operating income

(Million yen)

2,600

2,500

2,400

May 20 operating income forecast

1. Shift to remote working yields greater cost reductions than expected

+117mil. yen

2. Profits boosted by better- than-expected recovery

of high-profit services	+65 mil. yen
+102 mil. yen	3. Other SG&A expenses
(e.g., advertising and
	repairs) curbed

2,584 mil. yen

2,300

2,300

mil. yen

2,200to

2,100

2,100

mil. yen

2,000

1,900

4

1. FY2020 2nd Quarter Financial Results

(3) Results of Operations by Segment

• New orders stagnated in our core consulting segment due to our refraining from in-person seminars and workshops. However, business has recovered at Funai Consulting Shanghai since April with the subsiding of Covid-19 in China.
• Sales increased in the logistics segment through spot orders and deep mining of existing clients.
• Cancelled seminars and a decrease in ad placements had an impact on the direct recruiting segment, but operating losses have decreased.

Net sales	June 2019	June 2020
Amount	Amount	Change
	(million yen)	(million yen)	(%)
Consulting	9,267	9,071	-2.1
Logistics	1,169	1,279	+9.4
Direct recruiting	1,091	1,358	+24.4
Other businesses	547	513	-6.3
(Intra-group & whole-group	11	11	-
transactions)
Total	12,087	12,234	+1.2
	Consulting
	74.2% of total
Net	Logistics
10.5% of total
sales	Direct recruiting
	11.1% of total

Other businesses

4.2% of total

Operating income	June 2019		June 2020
Amount		Amount		Change
	(million yen)		(million yen)	(%)
Consulting	2,859		2,513	-12.1
Logistics	166		165	-0.5
Direct recruiting	-153		-66	-
Other businesses	6		-51	-
(Intra-group & whole-group	-4		23	-
transactions)
Total	2,874		2,584		-10.1
	Consulting
	98.1% of total
Operating	Logistics
6.5% of total
income	Direct recruiting
	-2.6% of total

Other businesses

-2.0% of total

*Percentages exclude intra-group & whole-group transactions.

5

1. FY2020 2nd Quarter Financial Results

1. Results of Operations by Segment: Consulting Sales by Service Category

• The portion of total consulting sales occupied by monthly support decreased 5.0% from the same period in the preceding year, and project-based consulting decreased 35.2%.
• Management workshop subscription income decreased 4.6% as new memberships stagnated due to Covid-19.
• Seminar income decreased 59.8% due to the suspension of in-person seminars (and switch to web-based seminars).
• Web ad listing income increased 32.6% on the back of a solid rise in accounts from FY2019.

(Million yen)
7,000
6,000	6,057	5,753

Monthly support	=	Consulting services provided through regular visits
Projects	=	Regular reports, issued over a specific period, regarding investigations,
		diagnoses, and proposals based on the results of these activities

5,000

Management workshop

=

Fees received for industry-specific management workshops and other

subscriptions

membership activities

4,000

Open seminars

=

Seminars for proprietors focusing on different business models

Listings

=

Online ad agency services

3,000

Jan. - Jun. 2019

Jan. - Jun. 2020

2,000

1,074

1,025

1,121 1,486

1,000

579

375

315

126

112

168

0

Mo hly support

Projects

Management workshop

Open seminars

Listings

Others

Monthly support

Projects

Management

workshop

Open seminars

Listings

Others

subscriptions

subscriptions

Consulting

＋49.6％

-5.0％

-35.2％

-4.6%

-59.8％

+32.6％

6

Support for improved corporate value, etc.: Helping clients achieve balance sheet improvements through assistance with business ownership succession, M&As, and financial matters.

1. FY2020 2nd Quarter Financial Results

(4) Results of Operations by Segment: Consulting Sales by Sector

• The core housing & real estate sector continues to grow despite the adverse conditions.
• Swift delivery of solutions amid restrictive conditions brought about by Covid-19 saw the education, childcare, and schools sector and the production goods and mercantile trade sector continue to perform well.
• Temporary business closures in the dining sector and other areas saw sales decline compared with the same period in the preceding year.

Upper bar: Jan. - Jun. 2020

Lower bar: Jan. - Jun. 2019

Housing and real estate

+3.0%

Healthcare, nursing care, welfare

-5.0%

Certified professional services

-7.6%

Mobility

-11.5%

Environment, energy

-8.1%

Education, childcare, schools

+25.6%

2,074

2,013

1,276

1,343

756

819

449 Growth support: Raising business performance to achieve profit-and-loss statement improvements

508

Talent development support: HRD consulting services to help clients recruit, train, and assess

338 workers, and invigorate their organizations

368

337

268

0

1,000

2,000 (Million yen)

HR business			336
-20.9%				425
Specialist services			345
-21.7%			440
Dining			265
-38.5%			431
Amusement			260
-18.8%			320
Food			218
-18.3%			267
Production goods,			192
mercantile trade			181
+5.6%	0		500 (Million yen)

NB: Figures show sales of consulting contracts, management workshop subscriptions, and open seminar revenues, grouped in accordance with the company's industry classifications, for the January-to-June period of 2019 and 2020.

7

1. FY2020 2nd Quarter Financial Results

(5) Results of Operations by Segment: Logistics Sales by Service Category (by quarter)

Logistics Consulting		Logistics Operations		Logistics Trading
		Reducing purchasing costs
Helping clients reduce logistics costs		Logistics on behalf of clients
		through joint buying

Some projects ordered last year were delayed, but 2Q sales are generally in line with 2019.

Deep-mining of existing clients and ongoing business with 2019's new clients saw sales rise steadily.

New clients were acquired but falling unit prices in the fuel business and temporary business suspensions due to Covid-19 saw sales decline.

(Million yen)						(Million yen)					(Million yen)
400						400		385			400
	2018				341	339	351
		2019						330
300		2020				300		325	321	336	300
					318
	210				212		321
200		139	159	200				200	116
157		208
137								126	134
												113	116
				146
100	133	133		100					100			108	118	123
							111
0	1Q	2Q	3Q	4Q	0					0			91
1Q	2Q	3Q	4Q	1Q	2Q	3Q	4Q

8

1. FY2020 2nd Quarter Financial Results

(6) Results of Operations by Segment: Direct Recruiting

• Although, due to Covid-19, seminar cancellations have seen new customer acquisitions decrease and fewer ad placements have resulted in a large drop in sales, the existing client renewal rate remains strong at more than 90 percent.

Net sales (million yen)

Renewal rate

92.3%

814 800

658

583558

508

414

356

291

236

1Q	2Q	3Q	4Q	1Q	2Q	3Q	4Q		1Q	2Q
		2018					2019		2020

Point of difference with competitors

Cloud-based AI recruiting service

• Big data analysis of job-search keywords enables AI-informedwriting of effective job ad copy
• Automated listing in optimal, cost-effective media reduces cost per response
• AI allows for 24-hour365-day operation and integrated administration of respondents, streamlining hiring work

9

1. FY2020 2nd Quarter Financial Results

(7) Consolidated Financial Position-Balance Sheet

(Million yen)

	As of	As of	Change	Major factors behind changes
	Dec. 31, 2019	Jun. 30, 2020
Current assets	16,694	15,798	-89	Decrease in current assets: Mainly increases in cash and
deposits; decreases in trade notes and accounts receivable
Property, plant,	6,109	6,051	-5	and short-term investment securities.
Decrease in property, plant and equipment: Mainly
and equipment
assetsNoncurrent Investments and				decreases in buildings and structures.
Intangible assets	773	743	-30
other assets	4,840	4,872	+32
Total assets	28,419	27,466	-953
Current liabilities	4,931	3,410	-1,52	Decrease in current liabilities: Mainly decreases in current
portion of bonds, other accounts payable (listed under
	322	290	-3	"other current liabilities"), and deposits received.
Noncurrent liabilities	Decrease in noncurrent liabilities: Mainly decrease in
				deferred tax liabilities.
Total liabilities	5,254	3,700	-1,553
Total net assets	23,165	23,765	+60	Financial position remains sound with a high equity ratio of
84.1%.
Total liabilities	28,419	27,466	-953
and net assets

10

1. FY2020 2nd Quarter Financial Results

(7) Consolidated Financial Position-Cash Flow Statement

• Cash earned from operations was 1,562 million yen, down 606 million yen from the same period in the preceding year.
• Cash earned from investments was driven mainly by investment of surplus funds.
• The net use of cash in financing was mainly due to the distribution of dividends.

					(Million yen)
			June 2019	June 2020		Change
Net cash provided by (used in) operations
		Net income before income taxes and other adjustments	2,908	2,635		(272)
		Depreciation	132	142		9
		Decrease (increase) in trade notes and accounts receivable	(31)	603		634
		Decrease (increase) in other assets	(453)	(265)		188
		Increase (decrease) in other liabilities	(13)	(1,129)		(1,115)
		Other	238	211		(26)
		Subtotal	2,780	2,198		(582)
		Interest and dividends received	20	20		0
		Income taxes paid	(972)	(1,108)		(136)
		Income tax refunds	343	454		111
		Other	(2)	(1)		0
	Net cash provided by (used in) operations	2,168	1,562		(606)
Net cash provided by (used in) investments
		Income from time deposits	－	－		－
		Purchase of short-term and long term investment securities	(263)	(205)		57
		Proceeds from sales and redemption of short-term and long term investment securities	114	600		486
		Purchase of property, plant and equipment and intangible assets	(295)	(123)		171
		Purchase of investments in subsidiaries resulting in change in scope of consolidation	－	－		－
		Other	8	－		(8)
	Net cash provided by (used in) investments	(435)	271		706
Net cash provided by (used in) financing
		Purchase of treasury stock	(7)	(5)		1
		Dividends paid	(1,005)	(1,142)		(137)
		Other	(7)	(305)		(297)
	Net cash provided by (used in) financing	(1,019)	(1,453)		(433)
Change in cash and cash equivalents	711	379		(332)
Cash and cash equivalents at start of fiscal year	11,022	11,630		607
Cash and cash equivalents at end of quarter	11,734	12,009		275

						(Million yen)
		Net cash provided by operations
		June 2019					2,168
		June 2020				1,562
		Net cash provided by investments
			-435
					271
		Net cash provided by financing
			-1,019
	-1,453
-3,000	-2,000	-1,000	0	1,000	2,000	3,000

11

Full-year Outlook & Impact of Covid-19

2. Full-year Outlook & Impact of Covid-19

(1) Revision of Financial Result Forecast

• The financial result forecast for FY2020, previously stated as "undetermined" because of Covid-19, was revised on August 20, 2020.

FY2020 full-year	(FYI) FY2019 actual	Previous forecast	Revised forecast (August 20)
(May 20)
forecast
Amount	Amount	Amount		Change
	(million yen)	(million yen)	(million yen)
Net sales	25,752		24,000 - 25,760		-
Operating income	5,705	Undetermined	4,300 - 5,150		-
Ordinary income	5,755	4,350 - 5,200		-
Current net income	3,868		2,900 - 3,500		-
attributable to owners of
the parent

13

2. Full-year Outlook & Impact of Covid-19

(2) Outlook & Impact of Covid-19 by Segment

• The decline in orders through the second quarter due to operational limitations caused by Covid-19 will inevitably have an impact on full-year performance.
• Consulting activity in China is returning to pre-Covid levels.

Impact on FY2020 1H (Jan. - Jun.)

In Japan, our ability to seek new orders severely hampered as we have refrained from in-person seminars

Consulting and consultant visits since March.

Sales declined sharply in China as consulting activity was impossible in Feb. and Mar., but have gradually recovered between Apr. and Jun. as operations resumed.

Outlook

As Covid-19 spreads, we will offer industry-specific solutions for adapting to the Covid situation, remote support, online seminars, and management workshops via web conferencing. Impact likely on full-year performance in the Japanese consulting segment.

China-based consulting business is predicted to return to pre- Covid levels starting in 3Q.

Logistics

Direct recruiting

Other businesses

Ongoing projects from last year ensured that performance was not as badly impacted as other segments amid limited ability to seek new orders: up 9.4% over the same period in FY2019.

Drop in client acquisitions due to suspension of seminars and fewer ad placements caused sales to drop sharply through 2Q, but cost reductions meant operating losses decreased.

Operational restrictions and delays have had an impact in the IT and call center consulting sectors.

No major effects on the systems development sector.

Restrictions through 2Q have delayed new client acquisitions, so the full-year forecast is for sales at a similar level to, and operating income down from, FY2019.

New customer acquisition is a challenge at this time, but we predict an increase in revenues this year due to work with accounts added last year.

Revenue structure will improve as a result of keeping a lid on promotion costs.

Returning to normal performance in the IT and call center consulting sectors will likely take time.

14

2. Full-year Outlook & Impact of Covid-19

(3) New Services Adopted to Current Conditions with Covid-19

• We have begun offering web-based seminars and solutions to help clients deal with Covid-19, each tailored to specific industries and solution categories.

"Exit Strategy Report" offers Covid-19 strategies

We are developing and delivering industry-specific and solution-category-specific ideas for dealing with

Covid-19.

(Partial list)

covering 41 industries and solution categories.

Online seminars tailored for optimal effectiveness in these Covid-affected times.

Education &

childcare

Certified

professional

services

HR business

Manufacturing

Dining & food

Digital innovation

Finance

• Online lesson delivery and online student recruiting for tutoring and vocational schools.
• Helping to counter Covid-19 difficulties through firm-wide digitalization, e.g., building remote legal advice framework, streamlining case processing.
• Helping clients set up outplacement (i.e., support for transitioning to new employment) operations as the outplacement market grows due to increased lay-offs.
• Marketing automation and remote sales meeting solutions that work in a drastically changed sales and marketing landscape under Covid-19.
• Helping restore sales in a Covid-affected landscape with solutions

such as developing new business categories and forging takeout and delivery channels.

・"DX Journey Mapping Consulting" to help clients plot their digital transformation.

• Facilitating stronger monitoring of funding and finances, and execution of astute financial strategies via remote support.

15

Shareholder Returns and Future Initiatives

3. Shareholder Returns and Future Initiatives

(1) Dividends

In 2020, we plan to distribute an interim dividend of 20 yen and a year-end dividend of 25 yen, thus totaling 45 yen for the year. *Revisions to financial result forecasts for the current period were announced on August 20, 2020 but there will be no change to dividend forecasts at this time.

Initial forecast

Actual dividend

(Yen)

Planned dividend for the year: 45 yen

Record date	Dividend	Details	Dividend	Details
(per share)	(per share)

45.0

Annual Dividend per Share

FY2015	34.0	2Q-end15.0	36.0	2Q-end15.0
Year end 19.0	Year end 21.0
FY2016	36.0	2Q-end15.0	36.0	2Q-end15.0
1.2-for-1 share split	Year end 21.0	Year end 21.0
FY2017	39.0	2Q-end15.0	45.0	2Q-end15.0
Year end 24.0	Year end 30.0
		2Q-end15.0		2Q-end15.0
FY2018	33.0	35.0	Year end 20.0
1.5-for-1 share split	Year end 18.0	*including special
				dividend of 2.0
				2Q-end17.0
FY2019	40.0	2Q-end17.0	40.0	Year end 23.0
*Including a
Year end 23.0
				commemorative
				dividend of 3.0
FY2020	45.0	Year end 25.0		2Q-end20.0
(Forecast)

40.0	NB: Shares in the company were split 1.5-for-1 in January
2018 and 1.2-for-1 in January 2016. For ease of
	comparison, figures for 2015 through 2017 have been	Annual
	adjusted by the same ratio; figures in parentheses are
35.0	the actual figures for those years.		Annual
			35.0	4	0	Year end
30.0				40.0	25.0
		30.0
25.0			(45)
		24.0
20.0
20.0	(36)
15.0	(36)
10.0					2Q-end	2Q-end
					17.0	20.0
5.0
0.0	2015	2016	2017	2018	2019	2020
							(Forecast)	17

3. Shareholder Returns and Future Initiatives

(2) Business Strategy

We are sequentially expanding the range of solution categories in which we offer support as part of our quest to be a comprehensive provider of management consulting solutions.

18

3. Shareholder Returns and Future Initiatives

(2) Business Strategy

Our Group will accelerate DX consulting services for SMEs and we will take on challenges towards providing comprehensive management consulting solutions to mid-scale companies.

Consulting needs and positioning

Implementation support

DX support

Strategic

Major corporations

(By sector/subjects)

proposals

Global consulting

IT consulting companies

companies

scale-Mid companies

solutions for mid

-scale companies

Strategy

consulting

companies

& Think tanks

３

Comprehensive management consulting

Select and concentrate on blue oceans

１

２

Comprehensive

DX consulting

SMEs

management consulting

solutions for SMEs

solutions for SMEs

*Consulting: Funai Consulting Inc., Funai Consulting Shanghai Inc., Funai Soken Corporate Relations Inc.

*Logistics: Funai Soken Logistics Inc. *Direct Recruiting: HR Force Inc.

*Others: Funai Soken IT Solutions Inc., Proseed Corporation, Shinwa Computer Service Co., Ltd.

Policy for 2020-2022

1	Comprehensive management consulting solutions for SMEs
	（SMEs x implementation support)
						Support for improved
		Growth support	Talent development
				support		corporate value

• Deepen our existing businesses (No. 1 market shares in housing and real estate, healthcare and nursing care, and certified professional service industries)
• Expand new main divisions and new themes (construction, HR services, energy, manufacturing, in-bound business, tourism etc.)
• Strengthen M&A and business succession consulting

2	DX consulting solutions for SMEs
	(SMEs x DX support)

Digitalization support

• Support SME's improved productivity from the perspective of a digital shift
• Propose and support implementation of industry-specific digital solutions that produce results
• Set up Digital Innovation Lab to promote DX consulting

3	Comprehensive management consulting solutions for mid-scale
	companies

(Mid-scale companies x implementation support & DX support)

• Help deepen their existing businesses and support development of new businesses that will become their second pillar (incl: support for IPO, rebranding and transformation to holding company systems)
• Enhance solution-specific workshops that meet the needs of mid-scale companies
• Set up Account Partner Office to establish a team-based consulting system for

mid-scale companies

19

3. Shareholder Returns and Future Initiatives

(3) Human Resources Strategy

Design an environment that helps diverse individuals fully unleash their strengths to support the Group's sustained growth.

Proactive

hiring

Early

development

Unleash

talents

The Group's employee number to reach 1,600 by 2022 (adding approx. 400)

1. Continue proactively hiring consultants (hiring 200-250 per year);
2. Expand new hires for DX functions;
3. Accelerate the hiring of non-Japanese (especially in Shanghai, China); and
4. Strengthen the hiring of licensed professionals (to support governance and improved productivity in back-offices)

Re-develop an "Early Development Program" suitable for increased personnel

1. Set up Talent Development Center (TDC) seeking to foster early development of individuals for DX functions and maximizing consultants' employee lifetime values (ELTV); and
2. Continue fostering early development of team leaders (with the target to make them team leaders within five years)

Result in 2019: 3 years and 8 months

Establish an environment where diverse individuals can unleash their talents

1. Introduce and establish a new personnel assessment system based on four career courses:
2. 1. Consulting Development Course, (ii) Business Development Course,

1. 1. Corporate Professional Course and (iv) Management Course
2. Increase the flexibility of work hours and places towards realizing a working environment with improved efficiency Expand and strengthen Remote Support that makes it possible to conduct consulting from anywhere

• Involve all employees of the Group in the celebration of the company's 50th anniversary
  to create new core values for the future.

*Our company celebrated its 50th anniversary on March 6, 2020.

20

3. Shareholder Returns and Future Initiatives

(4) Financial Strategy

• Investment for growth: Allocation of cash flow from operating activities in coming three years

Allocate cash at hand and cash flow from operating activities for investment in the next growth period and for appropriate shareholder returns to increase shareholder value

Operating

cash flow in 3

yearsInvestment for growth

15 billion yen

		Shareholder
Cash at hand		returns
0.5 billion yen

Priority initiatives
		・Digitalization
・Business strategy
・M&A	・HR
・Overseas expansion	・Offices

etc., proactive investment for further growth

Continue to promote shareholder returns with the return-to-shareholdersratio target of 60+%

*excluding working capital of 7 billion yen

21

3. Shareholder Returns and Future Initiatives

1. Financial Strategy
   • Capital policy

Maintain 15％ or higher consolidated ROE, pursuing "our Group's sustained growth and increased medium to long-term shareholder value," "appropriate level of shareholders' equity," "appropriate shareholder return," and "proactive business investment with necessary risk-taking"

Consolidated ROE and capital cost

20.0%	ROEROE				17.4	Target
資本コスト
	Capital cost			16.4	15+%	Priority initiatives
			15.9
					(i) Promote new investments, taking
15.0%	14.0	13.8	Exceeded the target of10%
		shareholder return into account
10.0%				7.7			(ii) Business investments with
			5.5	6.8		awareness on capital efficiency
	4.3	4.4				-	Capital cost
5.0%
						- Net present value (NPV)
0.0%	2015年	2016年	2017年	2018年	2019年	2020 - 2022
	2015	2016	2017	2018	2019
			Previous mid-range business plan	New mid-range business plan

22

3. Shareholder Returns and Future Initiatives

1. Financial Strategy
2. • Shareholder return policy
   • 1. Distribution of profits taking performance into account
     2. Flexible share buyback taking into consideration market environment, capital efficiency etc.
     3. 60％ or higher return-to-shareholder ratio

Total dividends and return-to-shareholders ratio

(million yen)								Target
4,000				Purchase of treasury shares (million yen)		100%
				配Total当総額dividends（百万円）(million yen)			90.6%	60+%
				自己株式取得（百万円）
				Return-to-shareholders ratio (%)					90%
3,500				総還元性向（%）	78.1%
							80%
3,000							1,500			70%
2,500
								60%
47.3%	999
2,000					50%
1,500										40%
1,000							2,003			30%
1,520	1,771				20%
500
									10%
0										0%
2017	2018		2019	2020 - 2022
				Previous mid-range business plan		New mid-range business plan

Target of previous

mid-range business plan

23

3. Shareholder Returns and Future Initiatives

(5) ESG Initiatives

We will further strengthen our initiatives for ESG, recognizing its importance, under the Group philosophy: "We help to build a better future for people, business, and the society."

Our Group's ESG vision

Strengthen ESG initiatives through management consulting and other

business activities

CSR activities

Great Company Awards

• Contribute to economic growth through consulting on implementation support for SMEs and mid-scale companies

• Profitability
• Growth
• Uniqueness

●Provide diverse personnel with opportunities to unleash their capabilities (emphasizing diversity and inclusion)

Awarded 64 companies over ten years

(every year since 2010)

● Contribute to the environment through consulting relating to energy savings and renewable energy-related areas

Environmental- friendliness

Environment

• Industry-specificconsulting making environmentally-conscious proposals, advice and support (for housing, automotive, food and other industries)

Social and educational significance

Social

●Contribute to development of local

societies through consulting for regional revitalization (revitalization of local community, local production local consumption, response measures for declining birthrate)

●Industry-specific consulting providing proposals, advice and support taking social significance into account (for healthcare, certified professional services, preschool and education, and other industries)

• We support the Great Company Award program run by Funai Foundation helping to find and promote "great companies" that serve as role models for many companies.

*We define "great companies" as "companies with sustained growth that demonstrate their unique merits along with social and educational significance, profitability, growth and

Governance

• Strengthen corporate governance (for details see next slide)

environmental-friendliness."

24

3. Shareholder Returns and Future Initiatives

(6) Corporate Governance Framework

Implement and strengthen our Group's corporate governance based on the below framework

*at the end of March 2020

Nominating Committee:

Ensures objectivity and adequacy of the director candidate selection process

General Meeting of Shareholders

1 internal member;

2 external members

Successor Nominating Committee:

Ensures fairness and high transparency of procedure for selecting and fostering candidates for next Group CEO

1 internal member;

3 external members

Compensation Committee:

Ensures objectivity of decisions on, and the adequacy of, directors' compensation through consideration of a pay package that contributes to improved medium to long-term performance

2 internal members;

2 external members

Governance Committee:

Seeks to strengthen governance by discussing overall governance from medium to long-term perspectives

4 external members

Appointment / dismissal

Board of Directors

Nominating Committee

Successor Nominating

Committee

Compensation

Committee

Governance Committee

Risk Management

Committee

Internal Control

Committee

Executive Committee

Auditing

Internal

audits

Accounting

audits

Appointment / dismissal

Appointment / dismissal

Audit and Supervisory

Committee

Internal Oversight

Office

Accounting Auditors

[Examples of past initiatives for strengthening governance]

2017: Held explanatory meetings for shareholders (May and June) and new business meetings

2018: Reduced cross-shareholdings

2019: Set up Successor Nominating Committee; appointed external directors for core Group companies; and hired in-house lawyers

[Considerations for future initiatives]

• Appointment of women directors *Appointed 1 woman director in March 2020
• Establishment of a Group compliance department focusing on Group companies
• External disclosure of the Group's code of ethics and conduct

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Our Mission

We help to build a better future for people, businesses, and society

We at the Funai Consulting Group will offer solutions for a better future to all the people and businesses we are involved with - and to society as a whole - and will do our best to turn those ideas into reality.

Our Vision for the Future

Trusted and respected by society for bringing joy to people and businesses through our work

We are determined to work together as a corporate group to bring joy to the people and businesses we are involved with. By earning the trust and respect of the people and businesses we seek to please, we can also earn the trust and respect of society as a whole.

Statement Regarding Use of These Materials

Plans, outlooks, strategies and other information contained herein are based on reasonable judgments made in accordance with information currently available.

Actual results may differ greatly from these forecasts for a number of factors.

All possible care has been exercised in preparing these materials, but the Funai Consulting Group assumes no responsibility for losses or other damages resulting from errors concerning any information.

These materials are not intended to encourage any kind of investment. Investment decisions are the sole responsibility of the individual investor.

Please direct enquiries regarding IR to:

Funai Soken Holdings, Inc. IR & PR Office

TEL: [phone]

Mail: [e-mail] URL: https://hd.funaisoken.co.jp