Integrated Report 2024 Released

POLA ORBIS HOLDINGS

Integrated Report 2024

POLA ORBIS Group direction

To maximize the unique character of each brand, and

become a global corporate group that enriches the lives of people around the world.

Editorial Policy This report, incorporating non-financial information such as management's policies, strategies and the underlying basis for these decisions in addition to financial information, is intended to give stakeholders greater insight into our activities. In addition, it has been compiled with reference to the International Integrated Reporting Framework, issued by the International Integrated Reporting Council (IIRC), as well as Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation, prepared by Japan's Ministry of Economy, Trade and Industry. Our sustainability report and a database related to ESG are available for viewing on our website.

https://www.po-holdings.co.jp/en/csr/index.html

Time Frame This report focuses on activities and results achieved in fiscal 2024-the 12 months from January 1, 2024 to December 31, 2024-but some fiscal 2025 content is also included.

Scope POLA ORBIS HOLDINGS INC. and consolidated subsidiaries

Disclaimer Forecasts and other forward-looking statements in this report are predictions related to future results or events, except where the information is historical fact, and are based on assumptions made by the Company using information available at the time. The risks and uncertainties inherent in such assumptions may cause actual results to differ from stated expectations. Information related to the financial results for fiscal 2024 has been prepared on the basis of data available as of February 14, 2025.

Editorial Structure The Corporate Division functions as the production office and coordinates with corporate planning departments, finance departments, human resources departments and Group companies to compile this report. The director in charge of IR carries responsibility for production of this report.

Our perception of value/what we hold dear

02 To Our Stakeholders

04 A Message from the President

Value creation story

10 Strengths of the POLA ORBIS Group

12 POLA ORBIS Group History

14 Value Creation Process of the POLA ORBIS Group

16 Recognizing and Responding to Opportunities and Risks

Activities that underpin value creation

28 Initiatives on Sustainability

Five non-financial materiality categories

30 1. Quality of Life Improvement through Innovative Technology Services

32 2. Regional Revitalization

34 3. Culture, the Arts, Design

36 4. All-Inclusive Human Resources

43 5. Environment

Financial data

64 Financial and Non-Financial Highlights

66 Ten-Year Summary of Selected Financial Data

68 Management's Discussion and Analysis

73 Corporate Information

Strategy

18 Financial Strategies

20 Business Structure

22 Growth Strategies by Brand

22 POLA

24 ORBIS

1. Overseas Brand

2. Brands under Development

50 Human Rights

52 Stakeholder Engagement

54 Basic Stance on Corporate Governance

56 Matters Related to the Board of Directors

58 Management Structure

63 Fundamental Activities That Fulfill Our Corporate Responsibilities

POLA ORBIS HOLDINGS INTEGRATED REPORT 2024 01

To Our Stakeholders

The POLA ORBIS Group formulated the long-term management plan VISION 2029 to guide the Group toward 2029-the year marking its 100th anniversary. We seek to be a collection of unique businesses that respond to diversifying values of "beauty." To achieve this goal, in addition to our existing value provision centered on cosmetics, we are expanding our business portfolio beyond well-being and individuals into the social domain, aiming for sustainable business growth in Japan and overseas.

Fiscal 2024 was the first year of the medium-term management plan (2024-2026), which is the second stage toward achieving VISION 2029. In line with this plan, we focused efforts on priority strategies to 1) strengthen the customer base in the domestic business to achieve sustainable growth and improve profitability; 2) further grow the overseas business and establish business bases in new markets; 3) achieve profitability through growth in brands under development, contributing to sustainable earnings; 4) enhance the brand portfolio and expand business domains; 5) strengthen R&D capabilities for new value creation; and 6) strengthen sustainability combining the resolution of social issues with uniqueness. ORBIS marked favorable progress, maintaining double-digit increases in sales and income, but POLA struggled, ultimately impacting consolidated results, which fell short of targets.

We see fiscal 2025 as the year to build on the steady growth and enhanced profitability of ORBIS and to focus efforts on revitalizing POLA's domestic operations, which hinge on the consignment sales channel. We recognize that this is the year to focus on the structural reform of our overseas business, especially in mainland China, where the external environment is severe. In January 2025, the POLA ORBIS Group revamped the management structure of Group operating companies. Under this new structure, we will work as a cohesive corporate body toward achieving VISION 2029, expediting a recovery in business results and further refining the unique qualities of portfolio brands.

We ask for the continued support of stakeholders as we travel new roads together.

Satoshi Suzuki

Representative Director and Chairman

Yoshikazu Yokote

Representative Director and President

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A Message from the President

Under a new Group management structure,

we will maximize the individuality and sensitivity of every employee to create new value.

Representative Director and President

Looking back on fiscal 2024 results

Against a backdrop of a gradual recovery in the domestic economy, demand in the cosmetics market shifted favorably, substantiated by growth in the low single digits. But overseas, especially in mainland China, sluggish economic conditions persisted, and spending on cosmetics mirrored the economic situation. Under this business environment, ORBIS posted double-digit increases in sales and income in fiscal 2024, but POLA struggled domestically and overseas, experiencing eroded consolidated sales and income that left significant room for improvement. We know that falling short of targets despite revising our consolidated performance forecast downward, at the announcement of second-quarter financial results, requires serious reflection. The reasons for the results are very clear: the recovery of POLA's domestic consignment sales channel*1is taking longer than expected and measures to address challenges in the economic environment, particularly in mainland China, have been inadequate.

In the wake of the COVID-19 pandemic, POLA found that

relationships with existing customers, especially those who had been loyal to the brand for ages, had weakened. Thus, the most

customer base. Meanwhile, ORBIS has successfully won the loyalty of a wide range of customers by offering high-quality products at affordable prices, steadily expanding its base of loyal customers.

*1 Consignment-style salon business run by Beauty Directors

Aim of new Group management

structure through replacement of

operating company presidents

In 2022, POLA ORBIS HOLDINGS announced a long-term management plan for the Group-VISION 2029-with end year 2029 coinciding with the Group's 100th anniversary. The year 2025 marks the halfway point to our 2029 finish line, but progress toward goals has been derailed in both the domestic and overseas businesses. To resolve issues specific to each brand and bridge the current gap between anticipated results and actual results through the second half of VISION 2029, we implemented a new management structure in January 2025 by appointing new presidents and a different lineup of officers at Group operating companies.

take a medium- to long-term perspective in defining strategies that will deliver the desired results. POLA urgently needs to rebuild close relationships with its domestic customers. Takuma Kobayashi, who executed highly precise customer-oriented marketing methods and enhanced customer-company communication at DECENCIA and ORBIS, is the new president of POLA. We expect him to take the initiative on swiftly implementing insightful strategies.

Meanwhile, Hiroe Yamaguchi has assumed the role of president at ORBIS, where she will certainly draw on a proven track record of creating high-value-added series at POLA and building a stable customer base at DECENCIA. We expect her to lead to an enhanced connection between customers and brand and improve lifetime value for customers while reinforcing branding-an area of her expertise-to make ORBIS even more appealing. Taking the

New Management Structure (as of January 1, 2025)

corporate reins at DECENCIA is Emi Nishino, who served as a director at ORBIS. We expect her to promote stronger messaging to better engage the steadily increasing number of repeat customers while implementing growth strategies such as launching highly functional products to attract new customers and raise brand presence.

The true value of the new management structure lies in its potential to boost brand power and solidify customer composition more quickly than before, driven by the unique perspective that each new president brings in recognizing brand-specific issues and hypothesis-testing fine-tuned to that brand. This structure will facilitate evolution of the Group's business portfolio combining 1) different value perceptions and experiences gained in directing the strategic trajectory of brands and 2) other brands distinguished by unique characteristics.

important issue for POLA has been to strengthen the connection between brand and customers and rebuild the

Our biggest challenge is to strengthen brand power so that we can reach VISION 2029 targets. Toward that end, we have to

Representative Director and President

POLA INC.

Representative Director and President

ORBIS Inc.

Representative Director and President DECENCIA INC.

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Initiatives under 2024-2026

medium-term management plan

The 2024-2026 medium-term management plan that currently guides Group activities is the second stage of VISION 2029. Let me provide a progress report on the first year of the second stage and describe initiatives going forward under each of the stated strategies.

On the products front, POLA plans to launch a new aesthetic service in August 2025, followed by its new and improved high-prestige series, B.A, in September. The company will leverage strengths by building good customer relationships through aesthetic services and improved

POLA reshaped its strategy to adapt to the changing conditions, shuttered unprofitable stores and embarked on community-store development as a new approach to improving customer contact. Targeting affluent customers, POLA will open stores in areas near districts where the wealthy reside and then unveil experience-based initiatives, such as community-building events, beauty services and workshops, to deepen relationships with existing customers and create new touch points to connect

extraction method. We aim to strengthen THREE's customer base, a priority issue, by enhancing the appeal of products and developing experience-oriented customer touch points dedicated to the

THREE HIBIYA, where customers can enjoy the scents of plant-derived essential oils

lifetime value with high-

performance skincare products.

POLA's new and improved high-prestige series, B.A

with new customers. In the ASEAN region, demand for cosmetics

is expected to increase, supported by higher disposable incomes

scents of essential oils. The facility in the city of Karatsu, Saga

Prefecture, where THREE's essential oils are refined, grows

Strategy 1

POLA has been struggling since the COVID-19 pandemic, largely due to a decrease in customers over its consignment sales channel. However, stores on a growth track have bucked the trend because the operators flexibly adapted to changes in the market environment and, on their own initiative, utilized social media, etc., to attract customers and deepen communication with their customer base overall. Stores on a growth track make up a solid 20% of POLA's salon network, and the company introduced a new salon strategy to capitalize

Concerted efforts will be directed toward reversing the current trend of declining revenue and returning POLA's domestic business overall to its original state, where the number of loyal customers steadily increased.

ORBIS is successfully attracting customers to its skincare, especially the ORBIS U series, and steadily improving lifetime value by cross-selling to existing customers its high-performance products such as skincare that targets skin-brightening, dark spots and wrinkles. In addition, the company is making favorable progress in expanding customer touch points through external channels, highlighted by the launch of

ORBIS SHOT PLUS exclusively for external channels, which will

against a backdrop of continued economic growth. The positive atmosphere has benefited POLA as well, with business results improving in this market over the last few years and investment accelerated to quickly expand customer touch points and, by extension, the POLA ORBIS Group. The goal of these initiatives is to position the ASEAN region

as a key market of overseas strategy. As of 2024 year-end, POLA was operating 23 stores in the ASEAN region. With a commitment to open

new stores, the local network

the herbs and other source plants from which raw materials for cosmetics are produced. This location serves as a combined laboratory and experience space, playing a role in communicating the brand value to customers and focusing on developing domestic high-quality herbal ingredients.

DECENCIA is a line of anti-aging care and skin-brightening products that can be used with peace of mind by people with sensitive skin. This is the message that the company wants customers to understand as its brand value. The brand is steadily attracting new customers, prompting efforts to build a more stable customer structure through sophisticated,

data-utilizing customer relationship management (CRM).

on the momentum generated by profitable salons and

serve as a gateway for wider access to the brand. In May 2025,

could even double by 2027.

Community store in mainland China

FUJIMI turned a profit in fiscal 2024. tricot initially launched

accelerate development of a store-on-a-growth-track network. Under this strategy, newly established salons will offer higher-end services in a more upmarket space, enticingly adapted to location, concept and current trends. Salons will be opened primarily in Japan's three major metropolitan areas, core cities and large commercial districts. Existing salons will be relocated and renovated, with the aim of opening a total of 180 new-style salons by 2027.

ORBIS debuted a cleansing oil as a strategic product designed to attract not only existing customers but also new customers. With the widespread availability of makeup products that claim to be long-lasting, customers can be extremely critical in their reviews about how well a cleanser works and how it leaves their skin after use. With this in mind, ORBIS knew the market needed a cleanser that would surpass the usual standards in removing makeup and pore-clogging

impurities, and embarked on developing its first cleansing oil. Capitalizing on the R&D capabilities that the Group has cultivated over the years and its abundant track record in product development, we will earn even greater customer trust

Jurlique had been moving toward reduced losses from the success of face oil and other skincare products, but a sudden deterioration in business conditions, especially in mainland China, caused losses to expand beyond management's estimate. In certain markets, namely, mainland China and Hong Kong, the company is pursuing structural reforms more thoroughly than before, assuming that a recovery in those markets is not likely anytime soon. Jurlique is, of course, closing unprofitable stores, but rather than continuing along the same strategic path, management will make critical

changes to the very structure and functions of the organization, implementing measures to simplify operations and drastically boost efficiency, while establishing a

FUJIMI as a personalized supplement brand, and personalized protein has been well received by many customers as it fits the lifestyle and values of FUJIMI's target wellness-conscious customer segment. tricot aims to achieve further growth by reinforcing the FUJIMI lineup with seasonal cross-selling centered on protein products.

Strategy 4

POLA ORBIS HOLDINGS is keen to utilize accumulated knowledge cultivated through skin research to extend the Group's reach into uncharted domains. In 2024, the Company started the aesthetic medicine business, which draws on the Group's proprietary dermatology research results. Entry into

Increasing brand value of POLA salons

To date, POLA has accumulated a vast amount of customer data through direct selling, including notes about customer thought processes or interests gleaned from conversations

and loyalty.

ORBIS THE CLEANSING OIL

Strategy 2

framework that will ensure profit even if sales do not grow significantly. The goal is to turn a profit by 2026.

Rare Rose Face Oil

this new beauty domain was guided by the thinking that, ideally,

aesthetics and medicine should not be segmented and that people are free to choose a beauty method matched to personal preference. Meanwhile, the Kaokara business, which uses an AI camera for heat countermeasures, is steadily

during customer contact. I believe that POLA possesses a unique underlying strength because the individuals who interact with customers are sensitive to their needs and use in-person contact opportunities to build stronger relationships based on knowledge that goes beyond simple purchasing history to deep insight into what customers are truly looking for. POLA will maximize this underlying strength and, under the new management structure,

strive to achieve a quick recovery in business results.

Many issues remain to be addressed in our overseas operations. In POLA's mainland China operations, the number of store openings was on the rise and the business achieved profitability. But from the second half of 2023, the economic environment changed dramatically, and the number of potential shoppers at malls and department stores plummeted, as if the previously substantial middle class had simply vanished. Such factors

make a market recovery in the near future unlikely. In response,

Strategy 3

We are working to rebuild THREE's brand value with an emphasis on essential oils. As a holistic care brand, THREE presents an approach built around essential oils extracted from domestic sources with careful attention paid to harvest time and

attracting more clients. Kaokara was developed from results gathered by POLA

CHEMICAL INDUSTRIES

over many years in the field of facial analysis technology. Heat countermeasures are urgently needed not only at construction sites and

Dive®medical cosmetics series offered

exclusively to clinics

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