Sun Frontier Fudousan : Annual Report | Shareholder Newsletter 2022

Sun Frontier Fudousan Co., Ltd. Business Report

S h a r e h o l d e r N e w s l e t t e r 2 0 2 2

Fiscal Year Ended March 31, 2022

Stock Code: 8934

opportunities for medium- to long-termreturn of profit to shareholders. Furthermore, we increased the term-enddividend by 2 yen from the initial forecast of 21 yen to 23 yen, and the annual dividend, including the interim dividend, was 44 yen. We will continue to strive for a long-termand stable return of profits and to increase the entire group's corporate value to meet our shareholders' expectations and be worthy of their support.

Aspiring to achieve sustainable growth based on the Medium-termManagement Plan

Our group is currently implementing a medium-termmanagement plan with the term ending March 2025 as its final year. With "provide the world with a place where people can gather, communicate with each other, and create social development and people's happiness" as our basic policy, we are working to resolve social issues through our business, and we have set quantitative targets of net sales of 100 billion yen, an ordinary income of 20 billion yen, and a net income of 14 billion yen.

Moreover, we have set the ESG perspective as one of our priori- ties. Taking the opportunity of our transition to the TSE Prime Market in April this year, we have formulated a Sustainability Vision as a guideline for contributing to the realization of a sustainable society and improving corporate value over the medium to long term. The key issues of the Sustainability Vision are environmental protection, regional revitalization, and human resource development. Since its founding, the group's corporate philosophy has been to "minimize the waste of non-reproducibleresources and contribute to the lasting prosperity of humankind, animals, and plants on the Earth." Thus, we have been developing business activities that contribute to the sustainability of society, and we will further promote specific initiatives in line with our Vision and key issues in the future. Further- more, in June of this year, we transitioned into a company with an audit and supervisory committee to further strengthen governance and enhance management flexibility. Through these measures, our group will achieve sustainable growth.

(See P.3-6for details.)

Sticking to our main policies under any circumstances

We aim to be the world's most loved and selected real estate com- pany in any environment based on our main policy, "we seek trust, not profit, and we keep on changing. We resolve problems from the customer's perspective to meet their expectations and more!"

We would like to ask our shareholders for their continued support

and encouragement.June, 2022 Sun Frontier Fudousan Co., Ltd.

President Seiichi Saito

To our Shareholders

Summary of The 23rd Business Year

The Real Estate Revitalization Business Led the Significant Recovery in Earnings, and Our Company is on a Growth Track Again.

We hope that things are going well with all of our shareholders, and would like to express our sincere gratitude for your continued patronage. In addition, we would like to express our heartfelt condolences to those who have been affected by the infection with COVID-19 and to those who have been affected by the spread of COVID-19, and we would like to express our sincere appreciation to all medical professionals.

In the business environment surrounding our group in the 23rd term, the omicron variant spread worldwide from the beginning of 2022, and the situation was unpredictable. In addition, the rise in raw material prices due to the Russian invasion of Ukraine has spurred an increase in prices, and monetary easing measures have been downsizing and monetary tightening has been adopted worldwide. While paying close attention to such market trends, our group has taken thorough measures to prevent the spread of the novel coronavirus, and all employees have worked together to resolve customer problems. In particular, in the office business division, we promoted the sales of renovated properties that were turned into high-performance and high-value-added buildings in collaboration with all divisions. As a result, it significantly drove the group's earnings. Thus, both net sales and ordinary income recovered significantly, 19.5% and 62.3%, respectively, and we were able to return to a growth track.

Increasing term-end dividends

In December of last year, we paid an interim dividend to enhance

Front row, from left: Seiichi Saito, President and Tomoaki Horiguchi, Chairman

Back row, from left: Mitsuhiro Ninomiya, Director; Yasushi Yamada,

Managing Director; Izumi Nakamura, Executive Vice President; and Kenji Honda, Director

01 Sun Frontier Fudousan Co., Ltd. Business Report

Consolidated Performance Highlights

(Fiscal Year Ended March 31, 2022)

Net Sales

71.2billion yen

up 19.5 % year over year

Operating Income

12.1billion yen

up 53.3 % year over year

Ordinary Income

12.2billion yen

up 62.3 % year over year

Income Attributable to Owners of Parent Company

7.4billion yen

up 73.5 % year over year

Key Performance Indicators

Ordinary Income Margin		Equity Ratio		ROE
17.1%		52.2%		10.8%

< C o n t e n t s >

To Our Shareholders	01
Medium-term	03
Management Plan
Transition to a Company with
an Audit and Supervisory	0４
Committee
Sustainability Policy	0５
Sustainability Activities	0６
Business Topics
Office Building Business	07
Change, Endeavor, and	１０
Creation in Each Business
Shareholder Special Benefit	11
Results Information
Financial Highlights by Segment	13
Financial Highlights	14

Corporate Information Back Cover

Sun Frontier Fudousan Co., Ltd. Business Report 02

Medium-term Management Plan

Contributing to the Resolution of Social Issues Through the Achievement of the Medium-Term Management Plan

Our group has been working on a medium-term management plan with its final year set as the term ending March 2025. Amid changes in the business environment due to the spread of the novel coronavirus and the transition to the "new normal," we were able to flexibly change ourselves and return to a growth track. As per our basic policy, we will upgrade all businesses according to our priorities and work to solve social issues by achieving our goals.

■ Basic policy

Provide a place where people can gather, communicate with each other, and create social development and people's happiness.

Office Business	・"Revitalization" contributes to carbon neutrality by reducing the waste of non-reproducible resources.
	・Focusing on "urban centers," "small and medium-sized buildings," and "office buildings," we will capture the
	diversifying needs of our customers from a consistent on-site perspective.
	・Contributing to the development of cities that will continue to prosper into the future by utilizing digital
	technology and other new technologies.
Hotel Business	・To provide security, healing time and space, to bring out the best smiles, and to restore and enrich people's minds.
Overseas Business	・To make Asian people happy, together with fellow Asian people.
	・Specializing in the development, sale, management, and brokerage of residential properties (condominiums),
	we contribute to the development of the city by improving the quality of housing for local residents.

■ Points to focus on

Points to focus on to upgrade the business and management to catch up with the changing times

(1)ＥＳＧ	(2)Digital	(3)Cash flow	(4)Marketing	NEW
Quantitative targets	(billion yen)
120	■ Net Sales ■ Ordinary Income ■ Net Income*
Term ended March 2025		100
Net Sales		100 billion yen	100
									84
Ordinary Income	20 billion yen	80				73.2
					71.2
Net Income*	14 billion yen
60	53.3				59.6
Ordinary Income Margin 20% or more
Equity Ratio	50% level	40											20
ROE		10% more	20		12.8		16.110.7		12.2		12.8		14
		8.8	7.5 4.4	7.4	8.3
*Income Attributable to Owners of Parent Company
0
					2019.3	2020.3		2021.3	2022.3	2023.3 (target) …	2025.3 (target)

03 Sun Frontier Fudousan Co., Ltd. Business Report

Transition to a Company with an Audit and Supervisory Committee

Enhance Management Supervision Functions and Strengthen Corporate Governance

With the approval of the 23rd Ordinary General Meeting of Shareholders held on June 21, 2022, our group has transitioned from a company with a board of auditors to a company with an audit and supervisory committee.

A company with an audit and supervisory committee is a stock company's institutional design made possible by the amendments to the Companies Act in June 2014. Instead of having a board of auditors, the company sets up an audit and supervisory committee dominated by outside directors to strengthen the auditing and supervision function of the board of directors.

Unlike conventional corporate auditors, directors who are members of the audit and supervisory committee are directors with voting rights at the board of directors. In a company with an audit and supervisory committee, the person in charge of auditing has more substantial authority than in a company with a board of auditors, which enables the company to enhance its auditing and supervisory function and to strengthen its corporate governance.

Before June 21, 2022	On and after June 21, 2022
Company with a board of auditors	Company with an audit and supervisory committee

General meeting of shareholders	General meeting of shareholders
Appointment/	Appointment/	Appointment/	Appointment/
dismissal	dismissal	dismissal	dismissal
Board of directors	Board of auditors		Board of directors
Directors	Full-time auditor	Directors		Audit and supervisory committee
				Directors
Have voting rights	No voting rights	Have voting rights		Have voting
	rights
Audit	Outside audit and	Outside directors	Audit and
Outside directors	supervisory board members	Outside
			supervision	directors
				Have voting
				rights
Have voting rights	No voting rights	Have voting rights

By changing this corporate structure, our group aims to further improve management transparency and fairness, enable swift management decisions by delegating important business execution decisions, and maximize sustainable corporate value.

Sun Frontier Fudousan Co., Ltd. Business Report 04