2023
TS TECH
Integrated ReportExternal Recognition and Selection as a Constituent in Indices As of March 31, 2023

The automobile industry is in the midst of a major transformation.
The conventional concept of an automobile
as a means of transport is changing,

CDP Climate Change Report 2022, Japan edition
Selected as a company with a “Managementlevel” score of B

CSR Companies
Rankingby Toyo Keizai Inc.

233

1,702 ﬁrms

ESG Companies
Ranking by
Toyo Keizai Inc.

170

1,702 ﬁrms

requiring new value for the time spent in the cabin space of vehicles.
What can TS TECH do at such a time?

The value of our existence lies in the TS TECH Philosophy,
which doesn’t change over time.
As “A company dedicated to realizing people’s potential,
a company sincerely appreciated by all,”

Selected as a constituent stock for an index in whichweighting is determined by evaluating the levels ofenvironmental information disclosure and carbon
eﬃciency (carbon emissions per unit of sales)

Selected as a constituent of the Index, which
was designed to measure the performanceof Japanese companies with high ESG scores

Selected as a constituent stock for the MSCIJapan Empowering Women (WIN)* Select Index
which selects Japanese companies withoutstanding gender diversity from each industry

Note: The inclusion of TS TECH Co., Ltd. in any MSCI index, and the use of MSCI logos, trademarks, service marks, or index names herein do not constitute a sponsorship,endorsement, or promotion of TS TECH Co., Ltd. by MSCI or any of its aﬃliates. The MSCI indices are the exclusive property of MSCI. MSCI and the MSCI index names andlogos are trademarks or service marks of MSCI or its aﬃliates.

we have always pursued products thatbring a smile to customers’ faces by making
the most of the abilities of each and every employee.

The value we create will always keep changing
as we continue to deliver excitement like never before to the world,
but the essence of who we are will never change.
We will continue meeting the challenge of endless possibilities
to make the mobility of the future freer and more enjoyable.

Bringing joy tosociety through thepower of people

On the Publication of TS TECH Integrated Report 2023
We have been publishing an integrated report since ﬁscal 2012 to allow shareholders, investors, and other stakeholders to gain a deeper understanding of how the TS TECH Group creates value over the medium to long term.
In this integrated report, our twelfth, we have provided an introduction to our value creation process forachieving sustainable growth together with society based on our corporate philosophy, “A company dedicated torealizing people’s potential, a company sincerely appreciated by all,” which we have consistently communicatedthroughout each of our previous reports. We have also introduced our initiatives aimed at achieving the 15th
Medium-Term Management Plan, which started in April 2023, and our 2030 Vision.
To continue creating new value and achieve further corporate growth in the automobile industry, which is experiencing a major transformation, we must not only pursue the technologies we have cultivated over the years inareas such as safety, comfort, and attractiveness. Also essential are the power of our people to advance thesetechnologies and deliver them to society, business operations conducted in harmony with the environment andsociety, and a solid corporate foundation with thorough governance. To realize ESG management, the TS TECH
Group is moving forward with various measures while incorporating the opinions of stakeholders, including shareholders, customers, outside directors, employees, and others.
As the Executive General Manager of the Corporate Administration Division with overall responsibility for the
production of the integrated report, I hereby state that the process used to prepare the report is reasonable andthat the information it contains is accurate. We hope that in addition to dialogue with stakeholders in the course of
our business activities, the report will help you to better understand the TS TECH Group. Going forward, we willcontinue to value dialogue with stakeholders. We are committed to enhancing the disclosure of information interms of both quantity and quality, so please feel free to give us your candid opinions.

Shigenobu Ono

Operating Oﬃcer
Corporate Administration Division Executive General Manager,
Oﬃcer in Charge of Public Relations

TS Integrated
TECH Integrated
TS TECH
ReportReport
2023 2023 1

129

TS TECH Philosophy

Vision Statement

INDEX

A company dedicated to realizing
people’s potential
A company sincerely appreciated by all

Mission Statement

2

TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

November 2023
Printed in JapanTS TECH
Integrated Report

04 About TS TECH

39	Information Disclosure Based on TCFD
Recommendations

Our Group’s Envisioned Future

42 Environmental Initiatives

14	Review of the 14th Medium-Term
Management Plan

About the Report’s Formats

2023

38	Working to Build a Sustainable World

12 Identified Material Issues and 2030 Targets• ‌We should make our workplace a vibrant one, valuing
consensus and communication.
• ‌Work should be done in accordance with the circumstances,with importance placed on time and priorities.
• ‌We must always challenge ourselves to create new value by
leveraging our passion and know-how.
• ‌Each of us should always persevere to make our individual
vision a reality.

Integrated Report

03 Index

10 2030 Vision

Operational Directives

The TS TECH Group has been issuing the “TS TECH Report,” an integrated report that
includes both financial and non-financial information, since 2012, and changed its
name to the “TS TECH Integrated Report” in fiscal 2021. In this report, we will continue to introduce the Group’s stance as an enterprise and the efforts it is making tocontribute to sustainability in the course of its business in order to be a company
sincerely appreciated by all and whose presence is valued by all of its stakeholders.

ESG Management

06 Message from the President

We shall provide comfortable,
high-quality products at competitive prices
to our customers worldwide,
always pursuing the infinite
possibilities in manufacturing.

Editorial Policy

02 TS TECH Philosophy

TS TECH Website
Non-Financial Information
CSR Activities
Provides qualitative and quantitative information related
to environmental, social, and governance (ESG) factors.
https://www.tstech.co.jp/english/csr/
Financial Information
IR Information
Provides consolidated financial summaries, results
announcements, etc.
https://www.tstech.co.jp/english/ir/

46	Initiatives for Respecting Human Rights
47 Supply Chain Initiatives
50 Human Resources Strategy
52 Corporate Governance
60	Messages from Outside Directors

16	Outline of the 15th Medium-Term
Management Plan

Fact Book

18 Financial Strategies

64 Index

Value Creation Story

65 Financial Reporting122	Financial/Non-Financial Information

22 Value Creation Process
24	Corporate Development and Engineering
Officer Interview
28 TS TECH’s Value Chain

128 Corporate Data
129	On the Publication of TS TECH Integrated
Report 2023

36 Stakeholder Engagement

Scope of the Report
While the report is based on the consolidated group (TS TECH Co., Ltd. and its domestic and overseas subsidiaries and affiliates), some data regarding environmental
and social initiatives, etc., may pertain to aggregate results for the non-consolidated
company in Japan. Cases in which the scope of aggregation differs will be specified
in the text.

Reference Guidelines• ISO 26000:2010 standard, International Organization for Standardization (ISO)• International Integrated Reporting Framework, IFRS Foundation• Guidance for Collaborative Value Creation 2.0, Ministry of Economy, Trade andIndustry (METI) of Japan• Global Reporting Initiative (GRI) Sustainability Reporting Standards, etc.

About the Report’s Designations“TS TECH Group” (the Group) signifies the consolidated group, while “TS TECH” (thecompany) signifies the non-consolidated company in Japan.

Disclaimer
This report contains forward-looking statements from TS TECH Co., Ltd. pertaining toplans, forecasts, strategies, and results. These forward-looking statements are basedon currently available information.

Term Covered
Fiscal 2023 (April 1, 2022–March 31, 2023)
Note: Select activities from before or after this term may be included.

TS TECH Integrated Report 2023

3

About TS TECHTS TECH has been developing and producing automotive interior components for over 60 years since thecompany was established in 1960.
We have continued to grow by leveraging the strength of our technologies and know-how cultivated overmany years and our global network spanning 13 countries, supplying a variety of products, mainly automobile
seats and door trims.

409.2 billion yen

Revenue(Consolidated)(Fiscal 2023)

1.9%
Other businesses 4.6%
Motorcycles

Major
product
lines

Asia andEuropeInterior
components

9.2%

9.2%
Automobile seats

27.0% By segment

84.3%

The Americas

Automobiles

44.4 %

93.5%

Number of
Employees

Chairs for medical use(Consolidated)

15,172Motorcycle seats

19.4 %China

By business

Seats

Japan

Number of
Sites

Door trims

74 sites operated by
45 companies in 13 countries

1996

Expanded operations to South America

1997

1960

Established Tokyo Seat Co., Ltd.
1963
Took over the motorcycle seat
Began producing
business from predecessor
Teito Fuhaku Kogyo Corporation automobile seats

1960

4

1994

1977

1970

Expanded operations
to North America

1980

Assuring Quality

Pursuing Comfort

The seats for the original Honda Civic could
be considered the starting point for TS TECH’s
manufacture of automobile seats. There were
frequent issues such as tearing of seams in
the outer upholstery and deformation of seatframes when sat on by people with very large
physiques, as they were designed withJapanese people only in mind at the time. The
system we established at that time to facilitate
the immediate sharing of quality issues
among departments and quick improvements
is still in place today. We have turned thisrough start into a legacy of a strong
commitment to the perfection of quality.

TS TECH continues to pursue comfortableseats that prevent fatigue by translating
subjective judgments of comfort and fatigue,
which vary by person, into quantifiable figuresand conducting repeated research based on
ergonomics. This approach is reflected in our
unique theory of a comfortable posture.

TS TECH Integrated Report 2023

Seat for the original
Honda Civic
Launched 1972

Honda Odyssey Seat
Launched 2013
The seat bottom tilts upward as the
backrest is lowered to close in on theperfect posture for maximum comfort.

1990
Honda Civic Seat
Launched 1995
The first use of amechanism seat made it
possible for smaller drivers
to adjust to a more
comfortable driving
position.

Changed company name to TS TECH Co., Ltd.

Expanded
operations
to Asia

1999

Expanded
operations to Europe

2001

Expanded operations
to China

2000

2007

Stock listed on theFirst Section* of theTokyo Stock Exchange

Establishing a Strong
Profit Structure

2010

2010

TS TECH’s 50th anniversary

2020* Shifted to the Prime Market in April 2022

Creating New ValueAs the automotive industry enters a periodof major transformation, the functions andvalue demanded of automobiles are also
undergoing great change. Against thisbackdrop, TS TECH will not simply focus
on developing seats and doors as single
components but also aim to become aninterior system supplier that can coordinate
an entire automobile cabin space. We will
work to create new value by leveraging
corporate partnerships and joint
development projects.

As business has expanded, we have been
severely impacted by changes in the external
environment, including a global financial crisisand natural disasters in different countries.
TS TECH has streamlined development
and manufacturing through production line
automation and other technologies. This has
enabled our company to withstand externalchanges, laying the foundation for the current
highly profitable structure of the TS TECH Group.
Automated welding equipment

Health Care Seat
The seat senses the posture of
the occupant and detects the
optimal position for eachindividual.
The built-in air device relaxes
the muscles and provides
postural support from the pelvis.

TS TECH Integrated Report 2023

5

Message from the President
Review of the 14th Medium-Term
Management Plan

Realizing ESG management
by providing new value thatdelivers excitement to all
stakeholders worldwide

Masanari Yasuda

President and Representative Director

During the three years of our 14th Medium-Term Management
Plan1 (fiscal 2021–2023), we worked on various measures todrive further business growth and build a strong corporate
foundation. We focused on two approaches: “evolution for business growth” from a proactive perspective, and “stronger business operations structure to support evolution” from a protective
perspective. The 14th Medium-Term Management Plan played
an important role as the first medium-term plan on the road toachieving our 2030 Vision.
We found ourselves in an extremely challenging businessenvironment due to the COVID-19 pandemic, which broke out
just before we launched the plan. The resulting parts shortages,
along with soaring energy and resource prices, created major
profitability issues for us. However, rather than being defeated,
we maximized the investment of management resources in areas
essential for growth and prepared for further growth. To acquire
new customers and new commercial rights, we took various initiatives. These included the establishment of a new car seat production subsidiary in Poland as a key site for expanding sales toEuropean automakers, and the establishment of a new division to
oversee all processes from sales to production. These efforts are
now leading to steady expansion of commercial rights.
In the next-generation technology field, which will becomea future source of earnings for us, we announced “XR Cabin,”which will transform vehicle interiors. What has been mainly aspace for sitting during transport is being transformed into anext-generation interior space that can generate excitement. XR
Cabin is showing more concretely the value that the TS TECH
Group is ready to provide for the future of mobility.
At the same time, we have worked to strengthen our business foundation for sustainable growth. This includes governance reforms2 such as transitioning to “a company with an
Audit and Supervisory Committee” structure, and improving thediversity of our Board of Directors. It also includes efforts to
identify the Group’s material issues,3 challenges we will give priority attention.

Looking toward 2030 with the 15th MediumTerm Management Plan

Under the 15th Medium-Term Management Plan4 (fiscal 2024–2026), we seek to turn our preparations into results, and to further address issues of profitability and achieve a rapid recovery.
During the process of drafting this medium-term plan, we
started by clarifying the 2030 Vision, which is one of our objectives. We have had many discussions about what needs to beaccomplished in three years’ time in order to achieve this vision,and how we can quickly rebuild profitability, which is the main
challenge. As important issues for profitability improvement,
we have identified ways to increase not only profits but also capital efficiency.
2030 Vision Statement

Innovative quality company—Continued creation of new value—
Performance targets for fiscal 2030
OperatingincomeRevenue

700 billion yen

68 billion yen

Operatingmargin

9.7%

ROE

10.0%

In order to resolve these issues and solidify the foundation
for achieving our growth objectives by 2030, we have established nine priority strategies in the categories of growth, regional, and functional under the 15th Medium-Term Management
Plan, which is based on the management policy of realizing ESG
management. In order to fully implement all of these priority
strategies, we have created the Business Strategy Committee.
Comprised of all the company’s directors, including outside
directors, it will manage and oversee implementation progress
for the nine priority strategies. Leveraging thorough discussion
and timely decision-making, we will steadily promote various
measures despite an increasingly uncertain business environment, striving to deliver greater business growth and improved
capital efficiency.

Priority Strategies under the 15th Medium-Term Management Plan
Realizing ESG management

Management policy
Growthstrategies
Regional
strategies
Functional
strategies

Priority strategy (1)Securing cabincoordination capacity
Priority strategy (4)V-shaped recovery in North America
Priority strategy (7)Supply chain restructuring

Priority strategy (2)Priority strategy (3)Further growth innew businesses

A higher share of major
customers’ products

Priority strategy (5)Priority strategy (6)Restructuring the China
business strategy

Strategic growth innew businesses in Europe

Priority strategy (8)Priority strategy (9)Enhancing efforts to develop
environmental technologies

Building high efficiency
production structures

1 14th Medium-Term Management Plan
2 Governance reforms
3	
Material issues

pp. 52–59

pp. 12–13

4	
15th Medium-Term Management Plan

6

TS TECH Integrated Report 2023

pp. 14–15

pp. 16–17

TS TECH Integrated Report 2023

7

Message from the President

Promoting further business growth andhigher corporate value

Among the priority strategies of the 15th Medium-Term Management Plan, our three growth strategies are particularly important. These are “securing cabin coordination capacity,” “further
growth in new businesses,” and “a higher share of major customers’ products.”
For the first growth strategy, “securing cabin coordination
capacity,” we are working on the creation of new technologies5
by accelerating research into how people will spend their time innext-generation vehicles, a joint development with other industries and start-up companies, and the training of personnel with
software expertise who can prepare complex proposals for vehicle interiors. In order to bring our developed technologies tomarket as quickly as possible, we will work with our customers in
the advanced development procedures, so that our technologies can be adopted for new mass-produced vehicles. At thesame time, by working on the development of highly efficientmass production technology6 adapted to new construction andmaterials, we will build a manufacturing system that can provide
our new product technologies at competitive prices.
For the second growth strategy, “further growth in new
businesses,”7 we are working on sales activities with the goal of
ensuring new business sales account for 30% of consolidated
revenue by 2030. During the 14th Medium-Term Management
Plan period, our seats were adopted in August 2022 for the Spacia Base model released by Suzuki Motor Corporation, and wewere also able to steadily increase sales to automobile and motorcycle manufacturers in Europe and the United States. In order to increase this momentum under the 15th Medium-Term
Management Plan, we will make the most of technologies thathave been well received by customers, and aim to acquire commercial rights for variant models of these products. We will also
develop strategic sales activities by strengthening cooperation
between each segment and functional division, in an effort led
by the New Business Management Division.

customers’ products,”8 with a focus on the Honda Group. Currently, our products are used for approximately 60% of the seatsin vehicles sold by Honda, and our goal is to increase this shareto over 70% by 2030. To achieve this, we must secure orders forexisting commercial rights and expand sales through new commercial rights. We will work to improve customer satisfaction bycreating attractive products, create products jointly with customers from the early development stage, and conduct orderdevelopment activities by ensuring collaboration across oursegments and functional divisions and taking advantage of regional characteristics. We will also work to further increase ourshare of sales by winning more orders for seat components.
This will be done by enhancing development of next-generation
standard seat frames and other components, and then striving
to acquire commercial rights for the seats themselves.
Regional and functional strategies make up the remaining
priority strategies. In terms of regional strategies, we will work
to improve profitability in North America, China, and Europe tostrengthen our corporate competitiveness. With our functional
strategies, we will pursue further business growth by working tostrengthen the foundations that support our higher-level strategies. These include “supply chain restructuring,” “enhancing
efforts to develop environmental technologies,” and “building
high efficiency production structures.”Through proactive growth-related investments based onthese priority strategies, we will also address the challenge ofimproving capital efficiency. In addition to increasing profitability, we will optimize our capital structure through not only
growth-related investments but also proactive shareholder returns in order to move to a cash level that is appropriate for ourbusiness scale. During the 15th Medium-Term Management Plan
period, the shareholder return policy calls for steady distribution of returns regardless of business performance. We plan toreturn approximately 50 billion yen to shareholders over three
years through regular dividend increases and flexible acquisition of treasury stock. The aim is to achieve a dividend on equity
ratio (DOE)* of 3.5% or more by the end of the 15th Medium-Term
Management Plan period. We aim to enhance corporate value
by driving sustainable business growth with growth-related investments, and by optimizing our capital structure9 based onenhanced shareholder returns, in order to reach a price-to-bookratio (PBR) above 1, as soon as possible.
* Dividend on equity ratio (DOE) = Total dividends / Shareholders’ equity (Equity
attributable to owners of parent)

Remaining “A company sincerely
appreciated by all”
Seat production plant in Poland for European automakers

Along with these sales expansion measures, we will also
pursue the third growth strategy, “a higher share of major

In recent years, it has become increasingly important for companies to address social issues in order to help build a sustainable world. Under the TS TECH Philosophy, which requires us tobe a company dedicated to realizing people’s potential and onethat is sincerely appreciated by all, we have been working to

5 Creation of new technologies

6 Development of highly efficient mass production technology

9	
Optimizing capital structure

pp. 18–21

In closing

Given the increasingly uncertain business environment, continuing to operate our business just as we have in the past would
mean losing the ability not only to maintain the status quo but
also to create new value, even if we still maintained a solid management foundation. Therefore, it is essential to invest the necessary management resources based on timely decision-making,in order to blaze new trails to future business growth. This means
departing from established practices and sometimes moving
away from the past. During the period of the 15th Medium-Term
Management Plan, we will not relax our reform efforts, but instead strive to become a company sincerely appreciated by all
our stakeholders. I hope you are looking forward to this bold future, and I appreciate your continued support.

p. 33

p. 30

TS TECH Integrated Report 2023

pp. 47–49

p. 2

13	
Human rights are respected

p. 46

14	
Every employee can demonstrate their individual personality and play anactive role8

pp. 39–45

11 Initiatives across the entire supply chain
12	
TS TECH Philosophy

p. 31

8	
A higher share of major customers’ products

In fiscal 2022, we launched an employee engagement survey to serve as an indicator of progress in the effort to further
develop individual employee strengths and to encouragechallenge-taking. We have set this indicator as a material issue
KPI and are working on various measures with the aim of achieving the highest rating of AAA by 2030. I believe that building a
relationship of trust between the company and its employees
and ensuring that everyone works with a sense of purpose will
increase the productivity of the TS TECH Group and become adriving force for creating new value. To achieve this goal, we will
create human resource development programs along with thenecessary workplace environments. This means striving to create workplaces where the human rights of each individual arerespected,13 and every employee can demonstrate their individual personality and play an active role.14 This will extend tovarious areas including personnel evaluation and compensation, employee welfare benefits, training, and workplace environments.
We will remain “A company sincerely appreciated by all,”which includes not only employees but also all other stakeholders. In addition to achieving the targets of the 15th Medium-Term
Management Plan and the 2030 Vision, the Group will also strive
to achieve sustainable growth together with society in the years
that follow.

10 Achieve carbon neutrality

pp. 24–27

7	
Further growth in new businesses

promote growth for both our company and the broader society.
Our mission is to engage in corporate activities that also help
resolve social issues. Each of the material issues we are addressing is linked to the UN Sustainable Development Goals, and weare accelerating our efforts to help achieve these SDGs.
In particular, as a company that provides components forvehicles that emit CO₂, we see the response to climate change
as one of our most important management issues. In order tohelp achieve carbon neutrality,10 we are working on a variety ofmeasures in each operational area, including production andproduct development, with the goal of reducing the Group’s CO₂
emissions from business activities to net zero by 2050. Furthermore, in order to further reduce CO₂ emissions going forward,
we need to take initiatives not only internally but across theentire supply chain,11 which means the cooperation of our business partners is essential. While it would be easy to just issue
CO₂ emissions reduction requests to suppliers, we believe that
this alone would not lead to significant reductions. Instead, it isimportant for the Group to demonstrate leadership, and to work
together with business partners on efforts such as sharing
methods for calculating CO₂ emissions along with specific methods for emissions reduction. Accordingly, we will carry out relevant activities that are both effective and appropriate to the sizeand capabilities of our individual business partners.
To avoid a situation where initiatives to address these social
issues become merely token efforts, we understand that employees and executives must fully understand the importance of
these initiatives and be able to implement them independently.
We believe that the TS TECH Philosophy12 will be the key todeepening this understanding, as it communicates the fundamental reasons why the Group exists, and its value to society.
One of the principles set out in the TS TECH Philosophy is
being “A company dedicated to realizing people’s potential.” Thismeans we must nurture and value employees, who work hard
every day for their own sake and for the sake of the company.
They are treated not just as human resources, but as valued human beings. Another principle in our philosophy is being “Acompany sincerely appreciated by all.” This means we must
share positive outcomes with employees and all other stakeholders affected by the Group's corporate activities and build
relationships of trust with them.
Accordingly, we must ensure that we remain a company
that is valued and appreciated by everyone. With more than
15,000 employees worldwide, the TS TECH Group understands
that it can only become stronger if every person fully understands this corporate philosophy and puts it into practice, without exception. We ask every employee to carefully consider andunderstand the TS TECH Philosophy, and then put it into practice, so the Group can grow as a result. To make this a reality, I
will share my thoughts and promote a corporate culture thatencourages challenge-taking.

pp. 50–51
TS TECH Integrated Report 2023

9

2030 Vision

2030 Vision
Innovative quality company

Business growth

The TS TECH Group’s Vision Statement—“A company dedicated to realizing people’s potential, a company sincerely
appreciated by all”—underpins all of its business operations. By providing the world with attractive products evenin the evolving mobility society, we will not only achieve our 2030 Vision but also help to build a more sustainable
world. In doing so, we will continue to serve as a reassuring presence for all our stakeholders and be a company
sincerely appreciated by all.

—Continued creation of new value—
Providing innovative, attractive products
in pursuit of safe,
comfortable vehicle interiors
in the evolving mobility society

Vision Statement

A company dedicated to realizing
people’s potential
A company sincerely appreciated by all

Fiscal 2030 targets

700 billion yen
Operating income: 68 billion yen
9.7%
Operating margin:
10.0%
ROE:
Revenue:

Mission Statement
We shall provide comfortable,

16th Medium-Term
Management Plan

high-quality products at competitive prices
to our customers worldwide,
always pursuing the infinite

15th Medium-Term
Management Plan

possibilities in manufacturing.

Realizing ESG management
14 Medium-Term
Management Plan

13th Medium-Term
Management Plan

Building a foundation
for ESG management
Fiscal 2020 results

Revenue: 359.6 billion yen

Operating income:Operating margin:
ROE:
DOE*:

Fiscal 2023 results

480 billion yen
44 billion yen
9.2%
8.5%
3.5%

Revenue: 409.2 billion yen

Operating margin:
ROE:

ESG management

Identifying material issues
Setting KPIs and targets for 2030

Priority strategy (1)Growthstrategies
Regional
strategies
Functional
strategies

15.2 billion yen
3.7%
1.8%

26.3 billion yen
7.3%
Operating margin:
5.9%
ROE:

Operating income:Revenue:

Corporate evolution throughESG management

Operating income:15th Medium-Term Management Plan Fiscal 2024–2026

Fiscal 2026 targetsthPriority strategy (2)Securing cabincoordination capacity

Further growth innew businesses

Priority strategy (4)Priority strategy (5)V-shaped recovery in North America
Priority strategy (7)Supply chain restructuring

Restructuring the China
business strategy
Priority strategy (8)Enhancing efforts to develop
environmental technologies▶ pp. 16–17

Priority strategy (3)A higher share of major
customers’ products
Priority strategy (6)Strategic growth innew businesses in Europe
Priority strategy (9)Building high efficiency
production structures

Human resources and financial strategies/Earning a reputation as a quality leader/
Promoting and firmly establishing sustainability

Achieving KPIs and targets for 2030

▶ pp. 12–13

2023

2026

2029

2030

* Dividend on equity ratio (DOE) = Total dividends / Shareholders’ equity (Equity attributable to owners of parent)

10

TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

11

Identified Material Issues and 2030 Targets

The TS TECH Group has established sustainability targets for 2030 with indices indicating the vision the Groupaims to achieve for itself by that year. We will address key material issues (materiality) in a priority manner to help
build a sustainable world. Under our 15th Medium-Term Management Plan (fiscal 2024–2026), we will execute ourmanagement policy of “realizing ESG management,” moving forward boldly to achieve our targets.

TS TECH Materiality Identification Policy• Issues that are material to the vision statement under the TS TECH Philosophy: “A company dedicated to realizing people’s
potential” and “A company sincerely appreciated by all”
• Issues that are highly material to the United Nations Sustainable Development Goals (SDGs)• Issues that are material to contribute to a sustainable world

Category

Society

Environment

RelatedSDGs

Material issues

Providing attractive,
innovative new products
and technologies thatexceed society’s
expectations

Reducing impact
by practicing
environmentally friendly
manufacturing to build
a sustainable world

VisionMateriality

Developing attractive,• We will create new value that exceeds
innovative technologies
the expectations of customers and help
to build safe, secure, and prosperous
societies by providing attractive,
Improving producthigh-quality automobile interiors.
quality• Aiming for a decarbonized society, we
will work to contribute to reducing ourenvironmental impact by pursuingenergy savings and effective use ofresources, starting with product designand continuing throughout every stageof the product life cycle.
• We will strive to ensure that all of
our employees have a high level ofenvironmental awareness, whileworking to protect the environmentand conserve ecosystems based on theconcept of “giving greenery back to
the earth.”

Responding toclimate change

Recycling and effectively
using resources

Harmoniously
co-existingwith nature

Materiality KPIs
Innovative technology development
expenses as a percentage of R&D
expenses

Seat supplier IQS rating*1

Corporate
foundation

Respecting diversityand developing
structures to maximize
individual abilities• We will engage in diversity-positive,
Reforming work styles
highly transparent management toto make the most of
fulfill our corporate social responsibility
diversity(CSR), achieve sustainable businessgrowth, and enhance corporate value.
Strengthening
governance

TS TECH Integrated Report 2023

Based on international standards and guidelines such as the GRI Standards and the core subjects of
ISO 26000, we studied identification methods.

Identification and organization of issues

We identified the risks and opportunities based on the Group’s business environment and ultimately
identified and organized the relevant issues.

Prioritizing of issues

Issues were evaluated and prioritized in terms of their importance to stakeholders and their importance to the TS TECH Group.

Consultations with outside experts

We exchanged opinions with outside experts on the issues identified to verify their scope and validity.

Selection of materiality

Out of 24 items, eight material issues were selected to be addressed by the TS TECH Group.

Approval by management

Following approval by the Executive Committee, the eight material issues were submitted to the Boardof Directors for discussion and approved.

14th Medium-Term
Management Plan results

vs. FY2021 +2.6%

15th Medium-Term
Management Plan targets

vs. FY2021 +3%2030 targets

Main measures

vs. FY2021 +10%

• Proactively investing in original technologies, including
biosensing and environmental technologies• Enhancing product quality with higher-precisionverification tools• Constructing a framework enabling ongoing cultivationof quality human resources worldwide

7.0P

2.0P (stable high levels)

CO₂ emissions reduction rate*2

vs. FY2020 -16%

vs. FY2020 -25%

vs. FY2020 -50%

Waste reduction rate*3

vs. FY2020 -16%
(Total)vs. FY2020 -25%

vs. FY2020 -50%

• Improving development and manufacturing efficiency• Developing and promoting products that use plant-based
raw materials, etc.
pp. 24–27• Analyzing and responding to risks and opportunities
based on the recommendations of the TCFD
pp. 39–41• Conducting energy management based on ISO 14001/
ISO 50001• Installing energy-saving and renewable-energy
equipment
pp. 42–43

Water intake reduction rate andenvironmental impact fromwastewater*4

vs. FY2020 -13%
(Total)vs. FY2020 -15%

vs. FY2020 -50%“0” environmental impact

Establishment of the TS TECH Fund(matching gift program)

Program survey
Study of plans

Establishing a TS TECH Group
donation program

Establishing a TS TECH Group
donation program• Researching and establishing a matching gift program

C

BB

AAA

• A nalyzing survey findings individually by department andidentifying priority issues• E nhancing the evaluation system and communication
opportunities
p. 51

97%
(Subject: 126 domestic
suppliers)

100%(Subject: Domestic andinternational suppliers)

100%(Subject: Domestic andinternational suppliers)• P reparing to expand surveys to verify circumstances ofcompliance to locations outside Japan
pp. 47–49

Percentage of management positions
held by diverse human resources*7

32.5%

33.3%

35%

• S upporting career development with rank-specific training•H elping personnel balance their work and personal lives(childbirth, childcare, nursing care)p. 50

Corporate Governance Codecompliance rate

100%

100%

100%

• Pursuing ongoing efforts to prevent corruption

Supplier Sustainability Guidelines
compliance rate*6*1 Rating awarded in the Initial Quality Study (IQS) conducted by J.D. Power Japan, Inc. The study looks at new car buyers and their experiences with any problems and calculates the number ofproblems indicated per 100 vehicles. The lower the number, the higher the quality.
*2 CO₂ emissions reduction rate (Scope 1 and 2) resulting from the Group’s business activities*3 Rate of reduction of waste (excluding residue, sludge, etc.) resulting from the Group’s manufacturing activities

12

Surveys

8.8P

Engagement rating*5• We will respect the human rights of
Respecting humanall stakeholders and offer rewarding
rightsworking environments in which each andevery employee makes the most of theirdiverse talents.

Procedure for Identifying Material Issues*4 Reduction rate in water intake (amount used) at the Group’s production facilities and environmental impact of wastewater resulting from manufacturing activities*5 The engagement targets look at the company’s employees using Link and Motivation Inc.’s Motivation Cloud. The target “AAA” rating is the highest of the 11 ratings.
*6 Rate of compliance with the Supplier Sustainability Guidelines among the Group’s suppliers (including overseas suppliers)*7 Percentage of women, mid-career hires, non-Japanese citizens, older employees, and persons with disabilities in management positions

TS TECH Integrated Report 2023

13

Review of the 14th Medium-Term Management Plan Fiscal 2021–2023

The 14th Medium-Term Management Plan set out a management policy of “Corporate evolution through ESG
management,” and during those years we moved forward with efforts to strengthen our corporate structure invarious ESG-related areas that support business growth. We made progress on priority measures, but theextremely challenging business environment caused by the pandemic and material supply shortages left
outstanding issues in terms of profitability. We will implement the 15th Medium-Term Management Plan to ensurethat all remaining challenges are addressed, such as achieving as yet unattained commercial rights targets in new
business areas and remedying the downturn in capital efficiency.

● Operating margin (%)

Evaluation◎•	Active incorporation of joint development and other types of open innovation
Capital and business partnership with Imasen Electric Industrial Co., Ltd.
Business partnership with ALPS ALPINE CO., LTD.
Investment in teTra aviation corp.

Newly established mold manufacturing and technology development bases△

Evolution forbusiness growth•	Steady receipt of orders from major customers for target commercial rights
through spec proposals that leverage our strengths and enhanced
development collaboration•	Precise selection of target and strategic order development to acquire newcustomers and new commercial rights
	Although the number of new orders increased, the target for final orders received was
not achievedContribution to a sustainable society○◎• Streamlining and increased efficiency through allocation reviews andrestructuring of business operations both in Japan and overseas based onreorganization of production
UK and Hungary: Reorganization of production hubs
India: Reorganization of automobile and motorcycle businesses
Mexico: Establishment of trim cover production company
Poland: Establishment of seat production company•	Establishment of the Sustainability Committee•	Identifying material issues and setting KPIs and targets for 2030
• Stronger global CO₂ emissions reduction activities and related
management to help achieve a low-carbon society
Endorsement of TCFD recommendations and disclosure response•	Enhancing resource management to achieve a circular society

Recognition for top quality△• Enhanced know-how and support from the first production base during
global rollout of new models• Prevention of defects by strengthening verification in the beginning stagesof development•	Stronger quality control systems at Group and business partner locations
Impact on income due to quality-related response costs

Stronger business
operations
structure to
support evolution

Strengthening of continuous
earnings structure◎•	Establishment of a lowest-cost procurement structure by enhancing ourglobal procurement system• More efficient administrative and indirect operations through active useof IT• Studying and formulating financial strategies aimed at medium- tolong-term growth•	Establishment of a system to promote advancement of diverse
human resources
Introduction of referral and return of former employees recruitment

Maximization of employee andstructural efficiency◎

TS TECH Integrated Report 2023

4.9

3.7

Rating: C
Aiming to achieve highest rating of AAA

Fiscal 2020 results

Fiscal 2021 results

Fiscal 2022 results

Fiscal 2023 results

359.6

346.1

349.9

409.2

Revenue (Billion yen)

Fiscal 2024 plan
410

Operating income (Billion yen)

26.3

26.7

22.9

15.2

20

Operating margin

7.3%

7.7%

6.6%

3.7%

4.9%

ROE

5.9%

7.8%

4.3%

1.8%

3.4%

[USD]

108.7

106.1

112.4

135.5

130.0

[CNY]

15.6

15.7

17.5

19.8

19.0

Averageexchangerate

Non-Financial Trend

The TS TECH Group measures its ESG quality
using an evaluation method based on the Dow
Jones Sustainability Indices (DJSI).1
In the 14th Medium-Term Management Plan,
our governance reforms, including becoming“a company with an Audit and Supervisory
Committee” structure and enhanced disclosure of non-financial items, were all well received. This meant that we significantly
improved our scores in the domains of corporate governance and social reporting. We willcontinue to move forward with advanced ESG
management, which we highlighted as a challenge in the 13th Medium-Term Management
Plan (fiscal 2018–2020), as we strive to build anindustry-leading corporate structure and deliver sustainable corporate growth.
1 A sustainability-related index that evaluates companies’
sustainability from ESG and economic perspectives, publishedannually by S&P Dow Jones Indices LLC of the United States
2 Indicates the company’s position in the industry, with thehighest score being 100
3 New item from fiscal 2021, so no score recorded for the 13th
Medium-Term Management Plan

DJSI Evaluation (Indicated as a percentile ranking within the auto parts industry*2)

Occupational health & safety (OHS)
Corporate citizenship & philanthropy
Talent attraction & retention

Corporate
governanceMateriality
Risk & crisis management

14th Medium-Term
Management Plan

Codes of business conduct/
compliance/anti-corruption
and bribery

Human capitaldevelopment

Policy influence

Human rights

Supply chain
management

13th Medium-Term
Management Plan

Labor practiceindicators

Tax strategy

Social reporting

Cybersecurity*3

Innovation management

Climate strategy

Product quality & recall management

Product stewardship
Operational eco-efficiency

Environmental policy& management systems

Environmental reporting

Major Initiatives

E• E ndorsement of TCFD recommendations and disclosure response• E nhancing environmental management and CDP initiatives

S• I mplementation of employee engagement survey• E xpanded the deployment of Supplier Sustainability Guidelines
and the scope of surveys about the guidelines• Implementation and utilization of employee engagement survey•	Evolution of our evaluation system to accommodate various work styles•	Review of our training system for next-generation humanresource development

14

6.6

Notable initiatives• Application of advanced processing technology in mass production

Optimization of business
operations structure

7.7◎: Very good ○: Good △: Average

Announcement of next-generation vehicle interior XR Cabin

Expansion of strategiccommercial rights(Fiscal 2021–2023)■ Operating income (Billion yen)•	Acceleration of development of sensing and other technologies that lead toattractive products
Commercialization oforiginal technologies

14th Medium-Term Management Plan

■ Revenue (Billion yen)

7.3

Progress on Priority Measures
MeasureFinancial Trend

G• T ransition to “a company with an Audit and Supervisory
Committee” structure• E stablishment of the Nomination and Compensation Committee•D iversification of the Board of Directors (appointment of female
directors, etc.)• E stablishment of the Sustainability Committee• F ormulation of material issues and setting of 2030 targets

TS TECH Integrated Report 2023

15

Outline of the 15th Medium-Term Management Plan Fiscal 2024–2026

Priority strategies

Notable initiatives•	Creating attractive cabin products and technologies

Securing cabin coordination capacity

Active co-creation activities with companies in other industries
Research on how people spend time inside a vehicle, focusing on next-generation vehicles•	Enhancing systems and software development capabilities

Development of electronic control device components such as seat-integrated ECUs
Training of advanced engineers•	Strategic acceptance of orders for target commercial rights

Growth strategies

Further growth in new businesses	Securing commercial rights for derivative models that incorporate technologies from existingordered models
	Securing orders for advanced development on future models by proposing next-generation
technologies in advance•	New customer development

	Enhancing joint efforts between individual regions and the head office, centered on the New
Business Management Division

14th Medium-Term
Management Plan results

Revenue (Billion yen)

409.2

480

700

Operating income (Billion yen)

15.2

44

68

Operating margin

3.7%

9.2%

9.7%

ROE

1.8%

8.5%

10.0%

Implementing sustained, stable returns unaffected by business results

Dividends

Stable increase in dividend payments, targeting DOE of 3.5% or more by the end of the 15th Medium-Term Management Plan

Acquisition of treasury stock

Flexible share buyback during the term of the 15th Medium-Term Management Plan amounting to cumulative total of
20 billion yen and appropriate retirement of treasury stock

Materiality KPIs

•	Growing orders received for parts commercial rights

	Steadily receiving orders for next-generation shared frames	Enhancing development to receive orders for light-vehicle frames	Growing orders received through enhancing our competitive strengths in parts•	Achieving a reformed corporate structure capable of adapting to
production fluctuations
V-shaped recovery in North America

Regional
strategies

Restructuring the China business strategy

	Thorough automation of production line to keep up with irregular production and cost
increase pressures	Strengthening cost competitiveness through optimization of specifications, materials,
and processes•	New initiatives not bound by existing businesses	Building new partnerships aiming to secure new customers
	Expanding use of local manufacturers to lower costs and reduce procurement risks•	Further business expansion with European automakers
Strategic growth in new businesses in Europe

	Sales development with Poland as a key station	New establishment of a trim cover production company with a view to expanding adoptionof components

pp. 12–13

14th Medium-Term
Management Plan results

Innovative technology development expenses
as a percentage of R&D expenses

15th Medium-Term
Management Plan targets

vs. FY2021 +2.6%2030 targets

vs. FY2021 +3%

vs. FY2021 +10%

8.8P

7.0P

2.0P (stable high levels)

CO₂ emissions reduction rate

vs. FY2020 -16%

vs. FY2020 -25%

vs. FY2020 -50%

Waste reduction rate

vs. FY2020 -16%
(Total)vs. FY2020 -25%

vs. FY2020 -50%

Water intake reduction rate and environmental
impact from wastewatervs. FY2020 -13%
(Total)vs. FY2020 -15%

vs. FY2020 -50%“0” environmental impact

Establishment of the TS TECH Fund(matching gift program)

Program survey
Study of plans

Establishing a TS TECH
Group donation program

Establishing a TS TECH
Group donation program

Seat supplier IQS rating

C

BB

AAA

Supplier Sustainability Guidelines compliance
rate

97%
(Subject: 126 domestic
suppliers)

100%(Subject: Domestic andinternational suppliers)

100%(Subject: Domestic andinternational suppliers)

Percentage of management positions held bydiverse human resources

32.5%

33.3%

35%

Corporate Governance Code compliance rate

100%

100%

100%

Engagement rating
Corporate
foundation

A higher share of major customers’ products

2030 targets

Basic policy•	Receiving orders for seat trading rights through regional coordination
	Securing commercial rights in regions where no seat orders have yet been received	Building new partnerships and deploying sales activities leveraging them

15th Medium-Term
Management Plan targets

Shareholder returns

Society

Management policy Realizing ESG management

Financial targets

Environment

Under the 15th Medium-Term Management Plan, we are first of all focusing on the challenge of recoveringprofitability as soon as possible, to achieve further growth and deliver on our 2030 Vision. To do this, the plansets out nine key strategies, comprising growth, regional and functional strategies. We also aim to help to build asustainable world, as the ESG management initiatives we have been implementing since the 13th Medium-Term
Management Plan culminate, and always seek to be a reassuring presence for our stakeholders and “A company
sincerely appreciated by all.”Securing cabin coordination capacity
Changes in automobiles brought about through technological innovation will transform the value required of vehicle interiors. In order
to seize this business opportunity and translate it into further business growth, it is imperative to be able to coordinate not only seats
but the entire cabin, proposing new value to customers and users.
We will work to create products and technologies that, put together,can deliver attractive cabins, utilizing both our accumulated proprietary technologies and collaboration with companies in other fields.

Snapshot of products for next-generation vehicles[Vehicle interior products][Energy-saving products for EVs]
• Sound and vibration HMI seat
• Heated seat with rapid
warm-up blower• Door HMI stealth switch• Affordable air conditioning seat
• Long slide rail
• Thin rotating mechanism
components[Environmentally responsible
products] • Health Care Seat
• Sustainable seat, etc.
• Biosensing
Proprietary technologies × Active co-creation with companies in other industries

Creation of attractive cabin products and technologies•	Toward a sustainable supply chain	Balancing stability and profitability through risk visualization and efforts to promotelocal procurement
	Working with business partners to reduce supply chain CO₂ emissions volume (Scope 3)•	Evolution of environmental technologies for early commercial use
Functional
strategies

Enhancing efforts to develop
environmental technologies

	Establishment of technologies for product applications for biomass materials and eco-friendly
steel materials
	Resource recycling accomplished by selecting materials and designing structures with recycling
in mind•	Building a production structure capable of outperforming competitors
Building high efficiency production structures

Foundation

16

Human resources strategies/Financial strategies
establishing sustainability

TS TECH Integrated Report 2023

	Continuous evolution of production lines through introduction of digital transformation and AI,
and automation
	Improvement of production management efficiency through system reviews, etc.
pp. 18–21/Earning a reputation as a quality leader/Promoting and firmly

Targeting further business growth
The TS TECH Group has to date achieved steady business growth,

Revenue (Billion yen)
■ Sales to Honda Group■ Sales of new businesses

serving as a global partner to Honda Motor Co., Ltd. and its affiliates
in the Honda Group. In order to achieve further growth, we aim toachieve our 2030 Vision not by securing a higher share of major

409.2

Percentage
of sales
10% ofrevenue

480

customers’ (Honda Group) business but also by ensuring further
growth in new businesses, for instance by acquiring new customers
and commercial rights outside the Honda Group.

377.2

90% ofrevenue

2030 targets• Automobile seat share for the Honda Group above 70%• New business sales accounting for more than 30% ofconsolidated revenue

700

Percentage
of salesGrowing new
business sales

210

30% ofrevenue

Expanding sales
by improving share

Supply chain restructuring

490

70% ofrevenue

FY2023

FY2026

FY2030End of 14 th
Medium-Term
Management Plan

End of 15 th
Medium-Term
Management Plan

VisionTS TECH Integrated Report 2023

17

Financial Strategies
Capital structure looking to 2030

We will deliver
sustainable growthin corporate value
by improving
capital efficiency.
Atsushi Igaki

Director, Senior Managing Officer
Corporate Business Administration Division
Executive General Manager

Remaining issues and the 15th Medium-Term
Management Plan

The automobile industry is currently experiencing a once-ina-century period of major transformation, and the competitive environment that surrounds the TS TECH Group has
become even more challenging. In these circumstances, under the 14th Medium-Term Management Plan (fiscal 2021–2023), we steadily promote action for “evolution for businessgrowth,” which we set out as a priority measure, based on
the management policy of “corporate evolution through ESG
management.” Measures included: developing our production system and reviewing our organizational structure to
win new customers and new commercial rights in a way designed for “expansion of strategic commercial rights”; andrestructuring from various perspectives including production, development, and logistics designed for “optimizationof business operations structure.” However, the challenging
business environment has persisted with the impact of
COVID-19 and supply chain disruptions. As a result, the issues of profitability and capital efficiency have remained,
and ROE is currently at a low level. We recognize that, for theGroup to maintain sustainable growth, we must use capitaland assets more efficiently than ever before, based on thesolid financial foundation we have built so far, and then translate this into business growth and improved profitability.

18

TS TECH Integrated Report 2023

During the 15th Medium-Term Management Plan (fiscal
2024–2026), we will pursue the sustainable growth of corporate value by carrying out our management policy of “realizing ESG management,” seeking to reach the culmination of
our efforts to raise ESG performance, which we have been
pursuing since the 13th Medium-Term Management Plan. To
achieve this, it is essential to improve capital efficiency, which
has been an issue. In addition to the KPIs we used previously such as revenue and profit, we have set ROE as one of themost important indicators. We will allocate cash to assets
with high profitability by practicing proactive growth investment based on nine priority strategies, consisting of growthstrategies, regional strategies, and functional strategies. In
addition, we aim to achieve ROE of 8.5% or more, which is
the target for the end of the 15th Medium-Term Management Plan period (end of fiscal 2026) by providing and maintaining shareholder returns, based on sustained, stabledividends unaffected by business results, and flexible acquisition of treasury stock.

Performance targets forthe 15th Medium-Term Management Plan period
Revenue

480 billion yen

Operatingincome44 billion yen

Operatingmargin

9.2%

ROE

8.5%

The TS TECH Group has built a profit structure that cansteadily generate cash even under challenging business environments such as the global financial crisis, the Great East
Japan Earthquake, and the recent COVID-19 pandemic. As aresult, as of March 31, 2023, the Group as a whole held
132.9 billion yen in cash with a consolidated equity ratio of
78%, securing a very high level of financial security. However,in order to achieve the 2030 Vision and ensure we remain acompany sincerely appreciated by all, we must utilize capital
more efficiently than ever before and accelerate the speedof growth.
To improve capital efficiency, we will consider cash flowfrom the perspective of various risks and opportunities. While
ensuring the necessary safe funds for business operations,
we will allocate cash in excess of this to investment in growthand shareholder returns, thereby balancing improved capitalefficiency with financial security. During the 15th Medium-Term
Management Plan period, we will invest funds in the 80–100
billion yen range based on nine priority strategies in order toallocate this excess cash to assets with higher profitability.
We aim to achieve a positive cycle of sustainable growth andincreased returns by making these proactive investments toachieve further business growth and improved profitability.
This includes M&As done with a view to expanding sales innew businesses and strengthening cabin coordination capacity, capital investment and technological development related
to automation of production, and renewal of development
and production sites, with the transfer of cash generated tosubsequent investments and returns.
In addition to boosting profits through investment, we
will further reduce shareholders’ equity and improve capitalefficiency by increasing shareholder returns. The TS TECH
Group has always regarded shareholder returns as a key
management issue. During the 14th Medium-Term Management Plan period, we provided stable dividends in responseto the ongoing support of our shareholders, under the basic
policy of maintaining stable dividend payments based on acomprehensive consideration of consolidated business results, payout ratios, and other relevant factors. We also
worked to enhance shareholder returns even in the challenging business environment, implementing the first acquisition of treasury stock and other measures.

Present (As of March 31, 2023)

Target capital structure in 2030

Although our ability to generate cash is strong,issues in capital efficiency remain.

Improving the capital structure while maintaining risk assurance
Allocating cash to more profitable assets
Revenue: 700 billion yen

Liabilities
Approx. 200 billion yen

Revenue: 409.2 billion yen
Total assets

416.2 billion yen
Cash (included above)
132.9 billion yen[Initiatives to realize this vision]• Proactive growth investments
based on priority strategies
CapitalApprox. 400 billion yen • Upgrading policies on
Equity ratio
shareholder returns
70% or less• More dynamically acquiring andCash (included above)
Approx. 120 billion yen
retiring treasury stock

Total assets
Approx. 600 billion yen

Liabilities
92.7 billion yen
Capital323.4 billion yen
Equity ratio
78%

2030

15th Medium-Term Management Plan (Fiscal 2024–2026)

Cash anddeposits
132.9 billion yen

Cash flows
fromoperatingactivities
80–100billion yen

62.9 billion yen

Ordinary
investment• M&A activities targeting sales growth and enhancing cabinet coordination capacity• Capital investments and technology developments involving production automation• Upgrading development and production facilities, etc.

Investment ingrowth based onpriority strategies
80–100 billion yen

Approx.
50 billion

Surplus
70 billion yen

Ideal stable
funds level
FY2023end

Returns toshareholders

Cash inCash out

Approx.
100 billion yen

Toward an appropriate cash levelfor business growth
Approx. 120 billion yen

Approx.
20 billion yen
Approx.
80 billion yen

Ideal stable
funds level

Ideal stable
funds level

FY2026end

FY2030end

TS TECH Integrated Report 2023

19

Financial Strategies

On commencing the 15th Medium-Term Management
Plan period, we revised our policy on shareholder returns to
set out a basic policy of “implementing sustained, stable returns unaffected by business results.” We also formulated
concrete quantitative targets based on consideration of capital structure and cash flows over the medium to long term.
In terms of dividends, we plan stable growth in dividends
targeting a DOE* of 3.5% or more for the end of the 15th
Medium-Term Management Plan period (end of fiscal 2026)
by raising the dividend increase rate to a level higher than
before. In terms of the acquisition of treasury stock, we plan
flexible acquisition of a cumulative total of approximately 20
billion yen in treasury stock during the 15th Medium-Term
Management Plan period based on comprehensive consideration of growth investment, the level of dividends, cash on
hand, the level of the company’s share price, and other relevant factors. During the 15th Medium-Term Management
Plan period, we plan to support total shareholder returns ofapproximately 50 billion yen.
At present, the TS TECH Group’s consolidated revenue isaround 400 billion yen, but we are aiming to achieve consolidated revenue of 700 billion yen in fiscal 2030. When considerBasic policy for shareholder returns

Implementing sustained, stable returns unaffected by business results

Dividends

Treasury stock

End of 15th Medium-Term Management Plan: Stable increase% or morein dividend payments toward a DOE of

3.5

15th Medium-Term Management Plan—Cumulative: Flexible acquisition andbillion yen
appropriate retirement of cumulative total of approx.
in treasury stock20

ing the optimal capital structure, we will not take a short-term
perspective looking at the current scale of the company. Under the financial strategy formulated by envisioning the desired capital structure in 2030, we will strive to continuously
increase corporate value by achieving further business growththrough proactive investment, shifting toward an appropriate
cash level in line with such business growth, and streamlining
shareholders’ equity to improve capital efficiency.

The TS TECH Group’s P/B ratio remained at 0.72 (share price
1,679 yen) as of March 31, 2023, and we recognize that weare not adequately meeting expectations at present. We
think this is due to the fact that we have not been able torecover to our pre-pandemic high profitability, as well as adecline in capital efficiency.
To address this, we will work to solve the issue by creating a positive circle of “growth” and “returns” by investing in
growth based on priority strategies and enhancing shareholder returns utilizing the cash generated. At the sametime, we will strive for sustainable growth in corporate value
by realizing ESG management through training human resources to support priority strategies as well as strengthening the corporate foundation.
Through these efforts, we will not only aim to achieve a
P/B ratio of 1 or more as soon as possible, but will also keep
striving to be a company that is relied upon and sincerely
appreciated by all stakeholders, not just the capital markets.

152.4

Dividend trend
90.7

Dividends per share (Yen)DOE (%)

2.4

30

15/3

19.1

2.3

33

16/3

2.3

35

18.1

2.4

40

22.2

2.3

42

2.3

43

DOE 3.5%(Target consolidated payout ratio: 40%)

29.4

2.3
45

2.5
54

2.8
63

3.1

Continually increasing dividends tomove closer to the target

73+ Flexibly acquiringand retiring treasury stock
17/3

12th Medium-Term Management Plan

18/3

19/3

20/3

13th Medium-Term Management Plan

21/3

84.3%

Asia and Europe

9.2%

22/3

23/3

14th Medium-Term Management Plan

24/3

25/3

26/3

15th Medium-Term Management Plan

Japan

19.4 %The Americas

44.4 %

1.9%

Automobiles (other)
Automobiles (doors)

9.2%
Revenueby businessChina

27.0 %

Revenueby segment

Results by segment for fiscal 2023

Japan

This fiscal year, we commenced production of seats for
Honda’s new model Civic Type R and new model STEP WGN.
In the Hamamatsu area, a new plant began operations
to increase sales. We also worked to expand business andstrengthen the competitiveness of components, including
our decision to establish a new facility for the manufacture
and technical development of molds.

Honda Civic
Type R seat

Revenue (Million yen)
82,698 84,943

FY2022

FY2023Operating Income(Million yen)

6,261

FY20225,151

FY2023The Americas

This fiscal year, we commenced production of seats for
Honda’s new model Accord and new model CR-V among others.
We have been working on structural reform to ensureprofitability even in a challenging business environment, including the introduction of automated equipment for moreadvanced and highly efficient production in conjunction withthe launch of new models.

Honda Accord
seat

Revenue (Million yen)
144,527

FY2022

194,015

FY2023Operating Income(Million yen)(252)

(3,199)FY2022

FY2023China

FY2026 end

58.3

Targeting business growth and increased
capital efficiency to increase dividends further

18.1

24.3

Automobiles (seats)

Aiming for sustainable growth in corporate value

approx. 50 billion yen

38.8

Motorcycles

4.6%* Dividend on equity ratio (DOE) = Total dividends / Shareholders’ equity (Equity
attributable to owners of parent)

15th Medium-Term Management Plan—Cumulative: Implementing returns to shareholders ofConsolidated payout ratio (%)

Other businesses

This fiscal year, we commenced production of seats for
Honda’s new model CR-V and the new model BREEZE.
In the increasingly competitive Chinese market, we havebeen working to improve profitability by strengthening sales
activities to acquire new customers and expanding procurement of components that help to lower costs.

Honda CR-V seat

Revenue (Million yen)

Operating Income

115,236 117,800

20,000 18,227

FY2022

FY2023(Million yen)

FY2022

FY2023

Asia and Europe

This fiscal year, we commenced production of seats for
Honda’s new model WR-V and new model CR-V in Asia.
We worked to build a cost competitive product supply
structure through measures such as restructuring the motorcycle seat business in India and reorganizing production
sites in the European region.

Honda WR-V seat

Revenue (Million yen)
34,202

FY202240,164FY2023Operating Income(Million yen)

1,957

FY20222,175

FY2023TS TECH implemented a two-for-one stock split of its common shares, effective April 1, 2021.
Cash dividends were calculated on the assumption that the relevant stock split had been implemented at the beginning of fiscal 2015.

20

TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

21

Value Creation Process2030 Vision

In order to be a reassuring presence and a company sincerely appreciated by all, the TS TECH Group is working tocreate new value using a value creation process that makes the most of its diverse management resources. By
ensuring this process evolves in response to changing societal needs, we will work to achieve sustainable growthhand in hand with the broader society in the years leading up to 2030 and beyond.

BUSINESS

Figures are all for fiscal 2023

—Continued creation of new value—
MODEL

INPUT

BUSINESS ACTIVITIESOUTPUTIntellectual capital

Value chain

Products forautomobiles

Delivering reliable safety to protect lives

Providing more comfortable automobile interiors

Door trims

We were the first in Japan to introduce a dynamic sled testing

We are working hard to bring even more comfortable seats

facility, which faithfully recreates the impact of a collision. We

to market by conducting ongoing ergonomic research andcarry out tests anticipating all possible scenarios, and vehicle

working to design seats that feel comfortable the instant thesafety assessment organizations in various countries confirm

person sits down while also preventing fatigue when drivingthat the completed seats meet the highest level of safety.

for a long time.

• Research anddevelopment expenses: 14.3 billion yen• Number of patents held in Japan: 1,565• Number of patents held outside Japan: 864

Research anddevelopment

Seats

Resin-based products

Sales• Production sites: Operationsin 12 countries, 48 sites

Purchasing

Manufacturing

Human capital• Number of employees (Consolidated):

15,172• Training expenditures per employee
20,060 yen(Non-consolidated):

Financial capital• Consolidated total assets:

416.2 billion yen• Cash flows fromoperating activities:

30.4 billion yen

Natural capital• Energy input:

1,514 TJ

• Material input(Non-consolidated):

17,616 t

Social and relationship capital• Stakeholder engagement▶ pp. 36–37

TS TECH Integrated Report 2023

Value created through manufacturing

Low pressure

14.6 billion yen• Capital expenditures:

OUTCOMEHigh pressure

Manufactured capital

22

Innovative quality company

QualityPursuing structures that protect the human body

Products formotorcycles
Seats

Analysis of pressure distribution

Products that reduce environmental impact

Improving convenience with a variety of functions

We are helping to reduce environmental impact by supporting

A diverse range of seat arrangements to match different

improving fuel efficiency and power consumption, exhaustively

applications is essential in maximizing the use of the limited

examining materials and processing technologies from thespace in vehicles. We sensitively identify the needs of users,

design stage, and pursuing improvements so that we can keep

which can change every day, and deliver on our unique ideas

reducing weight and energy consumption of our products.

with advanced technical skills.

Resin-based products

Materiality
Society
Providing attractive, innovative
new products and technologies
that exceed society’s expectations
Environment
Reducing impact by practicing
environmentally friendly
manufacturing to build asustainable world
Corporate foundation
Respecting diversity anddeveloping structures tomaximize individual abilities

Other products

2010

model

2016

model

Latestmodel

Seats for multipurpose
off-road vehicles
Seats forpersonal watercraft

About 35% lighter in 10 years

Chairs for medical use

Seats that can be stored with a pull of a cord

Value created by business activities

8.1• Total dividend payout:
billion yen • Number of social contribution activities conducted:(Eligible shareholders: 18,376)• Social contribution activity
expenditures (Non-consolidated):

213

43.44 million yen• CO₂ emissions*1:• Waste output:

-16%
-16%

*2

*2

*1 Scope 1+2 emissions volume *2 Both are in comparison with fiscal 2020

TS TECH Integrated Report 2023

23

Corporate Development and Engineering Officer Interview

We are providing
new value to theautomobile industry
by leveraging thecapabilities of “people”
behind technologies.
Eiji Toba

Director, Managing Officer
Corporate Development and Engineering Division
Executive General Manager

What technologies are sources ofcompetitiveness for the TS TECH Group?

At the TS TECH Group, we aim to develop world-leading, advanced technologies with a focus on safety, the environment, and the creation of attractive products. Regarding
safety-related technology, we are working with vehicle manufacturers to develop products that will meet the anticipatedsafety standards several years from now. To do this, we obtain information from relevant organizations in various
countries, such as NHTSA1 and IIHS2 in North America, andthe Ministry of Land, Infrastructure, Transport and Tourism
in Japan. When it comes to safety, we have been an industry
pioneer. We were the first in Japan to utilize a dynamic sled
testing facility that faithfully reproduces the impact of a vehicle collision. By conducting tests that simulate a range ofconditions, we have continued to pursue technology that
protects the safety of passengers. Looking back at the history of our products and safety, there have been major advancements since the early 2000s. In 2005, we provided an
Active Headrest3 to Honda Motor Co., Ltd., our main customer, to reduce the impact to the neck for vehicle occupants inthe event of a collision, thereby improving safety. As a resultof accelerating R&D concerning seat frame construction to24

TS TECH Integrated Report 2023

improve safety performance, our products boast world’s
top-class safety performance. Currently, all of the vehicle
models equipped with our products have received the highest ratings for seat-related safety performance in vehicle
assessment worldwide.
As a supplier to the automobile industry, we are required to develop technologies that help protect the environment. Our aim is to promote recycling-oriented
manufacturing and help improve vehicle fuel efficiency, as
part of efforts to help build a sustainable world. The Grouphas been investigating the use of sustainable plant-basedmaterials that contain no fossil fuels to make seats. However, the use of such materials can pose challenges such as
higher costs and a decrease in seat comfort. Therefore, wehave been pursuing further R&D to see if we can solve thedrawbacks of such materials by modifying the seat construction, which would allow us to adopt the new materials forpractical use. Currently, automakers are also engaged in fullscale efforts to adopt sustainable materials. Therefore, by
establishing technologies that can be applied to products
before bringing them to market as quickly as possible, wewant to help build a sustainable world while enhancing ourtechnological competitiveness.

In the area of new technology for the creation of appealing products, the Group has continued to pursue “comfort” since its founding. Judgments about comfort andresistance to fatigue differ depending on the person. Therefore, we have accumulated unique expertise and technologies that allow us to quantify and evaluate occupant comfort
judgments in order to support our manufacturing process.
To create seats that properly support the human body withsuperior comfort, we have been conducting ergonomicsbased research using quantitative evaluation. With uniquetheoretical frameworks established based on this, we areworking to bring even more comfortable seats to the market. Moreover, the pursuit of comfort in particular is multifaceted and deep, and over the course of time, this pursuit
is subject to an infinite process of evolution. We believe thatproviding comfort also means making more effective use of
the limited space inside the vehicle, increasing convenience,and making time spent in the vehicle more enjoyable. We
have worked to improve comfort by creating our Functional
Seat that enables a variety of interior arrangements. The
third-row seats can be folded flat into the floor with a minimum number of operations, while the second-row seats
have a mechanism that allows them to slide forward or backward as well as left or right with the operation of a single
lever. This allows the vehicle users to enjoy a variety of seating arrangements. The various seat arrangement technologies that we have devised so far, including those that allow
seats to be rotated, moved, and stowed as necessary, haveoften surprised and delighted our automaker clients. The
foundation of the TS TECH Group’s competitiveness rests on
the core technologies we have developed over the years to
support safety, the environment, and the creation of appealing products.

Plant-based
faux leather

Support mat that enhances
sitting comfort

Can you tell us about the results of the
14th Medium-Term Management Plan?

Among the seven priority measures indicated in the 14th
Medium-Term Management Plan (fiscal 2021–2023), the one
directly linked to the technology field is the “commercialization of original technologies.” Over the years, we have created original products such as Aisareru Seat4 and INNOVAGE.5
By further accelerating these efforts, we aimed to develop
appealing products to meet latent customer needs and secure future revenue streams.
With industry trends such as Connected, Autonomous,
Shared, and Electric (CASE) vehicles, as well as Mobility as aService (MaaS), the technology required to develop products
is becoming more complex and sophisticated than ever before. Accordingly, we need to develop partnerships with othercompanies and industries. As one such initiative, we signed apartnership agreement with ALPS ALPINE CO., LTD., in January 2022. By merging our expertise with that of ALPS ALPINE,
we were able to create XR Cabin, which brings virtual reality(VR) technology to car seat technology. By considering various situations and ways in which users might want to spend
time in vehicles, we have embodied the new value required
for each scene as a cabin that allows users to experience thefuture of vehicle interior space and our future technologies
by using seats and VR images linked to them. Moreover,through joint research with other industries and start-up
companies, as well as industry–academia collaboration,
we are developing technologies and products that go
beyond the conventional vehicle seat concepts. By doing
this, we hope to expand our commercial rights in the area ofnext-generation vehicles.
As for the nearer future, we have been conducting R&D
seeking to improve the product value of seat frames, ourmain vehicle seat component. Our next-generation seatframe represents a further advancement of the current
mainstay model. The new product is one of the world's lightest and has the scalability to meet the needs of an even wider range of vehicle models. On the production side, theGroup has adopted a design approach based on automation using robotics. We are confident we can maintain ourcompetitive advantage over the long term by significantly
improving production efficiency.

Plant-based
cushion pad

Sustainable seat using plant-based raw materials

1 National Highway Traffic Safety Administration (NHTSA): An agency in the U.S.
Department of Transportation that ensures safety for vehicles and drivers
2 Insurance Institute for Highway Safety (IIHS): A u.s.-based non-profit organization
established by automobile insurance companies to evaluate automobile safety
3 Active Headrest: In the event of a rear-end collision, the headrest automaticallymoves forward to greatly minimize neck injuries. It is activated by the force applied
to the seat by the occupant’s body being pushed backward.

4 A seat system that combines automotive seat technology and IoT capabilities tosense occupant movements and turn the seat into a system controller
5 A next-generation vehicle interior space exhibited at Tokyo Motor Show 2019that showcases the Group’s technologies for the future. These include sensing
technologies to monitor occupant breathing, heart rate, and driving posture, as
well as seat arrangement technology suitable for fully autonomous vehicles.

TS TECH Integrated Report 2023

25

Corporate Development and Engineering Officer Interview

What kind of technological developments are
you working on for the automobile industry,
which is undergoing major changes?

Under our current 15th Medium-Term Management Plan (fiscal 2024–2026), one of the priority strategies is “securingcabin coordination capacity.” We are further accelerating
R&D to realize future interior spaces like the one demonstrated with XR Cabin. In an era where vehicles are no longer
just a means of transportation, and where travel time has
become a valuable resource, we aim to become a company
that can offer not only car seats but entire vehicle interiors
that allow occupants to pass the time with even greater
comfort. This does not mean that we are seeking to expand
our business into all kinds of vehicle interior components.
Instead, we are collaborating with companies in other industries and combining our strengths with theirs to create appealing cabins based on advanced seats.
Automakers and other companies are currently exploring how needs can be met in terms of ways to spend travel
time, when next-generation vehicles such as fully autonomous cars become mainstream. Through these cabins, weare proposing new ways for vehicle occupants to spend theirtravel time. By making automakers and end users think, “Oh,this is a new kind of experience,” we hope to uncover theirlatent needs. Additionally, the numerous advanced technologies installed in the cabin can also be delivered as independent systems. By allowing each technology to be adopted
for mass-produced vehicles as needed, we are also aiming
for steady business growth at the moment while focusing on
the future.
When looking ahead to next-generation automobiles,
equipping EVs is also becoming an important R&D focus.
While EVs will still need seats, their form and function willneed to change from those used in combustion engine vehicles. One necessary change will be to make the seat profile
thinner. In EVs, the battery is installed under the vehicle
floor, which increases the floor height. Additionally, theheight of the roof will need to be lowered in order to reduce
air resistance and improve the cruising range. Therefore,
EVs’ interior height (distance from the floor to the ceiling) will
be lower than in conventional vehicles. In order to maintainas much space as possible inside the vehicle, the seats will
have to have a thinner profile than before. We are promoting R&D to better meet these needs while maintaining safety and comfort. This is being done from various perspectives,
such as changing the seat frame construction, the shape ofthe cushioning material, and each material itself. Moreover,
we are working on developing technologies and productsthat will help extend the range of EVs. While using the weight
reduction technologies that we have developed over theyears, we are also devising energy-saving heating technology that balances comfort with lower power consumption.
This is done by concentrating heating on the neck and thighs
where people can feel warmth most easily.

26

TS TECH Integrated Report 2023

The Group is also accelerating the development of biosensing seat technology that could become another productstrength in the future. Our Health Care Seat, currently underdevelopment, automatically detects the posture of the occupant when they sit down, and it massages their muscles accordingly, thereby encouraging ideal posture. The seat canalso measure vital signs such as the occupant’s pulse andheart rate, from which changes in the physical condition canbe predicted. Therefore, it is equipped with functions to support human safety and health just by sitting on it. Someday
soon, we hope to bring the Health Care Seat to the market.

Products in Development❶ PTC heater (heat source)❷ Blower❸ Duct
❶
Front

❸

❷

Heated seat with rapid warm-up blower that can reduce
power consumption of the vehicle by more than 10%
by eﬃciently warming the body
Seat equipped with many
internal air devices

Health Care Seat that encourages ideal posture

As technological innovation advances at ever increasing
rates, the need for interior space will continue to change
dramatically. In any case, we believe that the human comfort
that TS TECH has always worked to deliver will remain in demand. By further refining the core technologies we have developed over the years and by combining them withexpertise from other fields, we will carry out R&D with theaim of further improving comfort while also meeting anticipated future needs.

What challenges does the Group face forachieving further business growth?

Currently, we are using XR Cabin to present our nextgeneration technology concepts to many vehicle manufacturers. While we often get positive feedback such as, “We willdefinitely consider your products,” there are also quite a few
comments that indicate a desire for more surprises. We
have been told that many proposals from emerging suppliers are much bolder than ours, and that our concepts lackexcitement in comparison. I sincerely believe that our ideas
have been limited by too many practical considerations,such as ease of mass production, and have remained within
the realm of conventional thinking. We need to change ourapproach in order to revitalize our ideas and create proposals that are not bound by preexisting assumptions of what avehicle could be.
As part of our efforts to achieve this goal, we have established a development project team made up entirely ofyounger employees. Normally, the Group develops new
products under Large Project Leaders (LPLs), who are very
experienced managers. They perform comprehensive project management from planning to mass production. While
our LPL system is great for promoting efficient product development, it leaves little room for the innovative ideas ofyounger employees. In contrast, the new project team's activities are focused on incorporating various forms of external expertise, and creating product proposals that break our
existing molds. I am very much looking forward to the proposals they will come up with. Moreover, our various collaborative activities for the purpose of “securing cabincoordination capacity” are another way of bringing in external knowledge. In addition to co-creation related to carseats, we are accelerating open innovation and joint development with various cutting-edge companies, such as teTraaviation corp., which is developing eVTOLs. This should leadto the creation of vehicle interior spaces that go beyond thestandard approach of the automobile industry.

The recent rise of Chinese automakers has been remarkable, and these companies have established unprecedented product development speeds. By working aroundthe clock, they are able to develop in six months a productthat would usually take several years. This poses a challenge
for us, and we expect the speed of development to accelerate across the auto industry going forward, in order to keep
up with Chinese automakers. Even under such circumstances, we have to catch up to them and surpass their development speed in order to achieve sustainable business growth
by further increasing our competitiveness and licensing newcommercial rights not only to existing clients but also to
emerging automakers in China and elsewhere. The TS TECH
Group has established development sites in each global region and has built a development system that can respondquickly and dynamically to regional needs. However, ourcore technology development is mostly conducted in Japan.
In order to further speed up development operations, it isessential that we train engineers and strengthen development capabilities outside Japan, as well.
To do this, we will accelerate investment in our “people,”
including the training of engineers, not to mention our efforts to enhance development capabilities in each country,
including aggressive investment in automation and efficiency improvement systems utilizing AI and IoT, exchange oftechnical support between Japan and overseas development
sites, and expanding the size of each development site. I believe that a company’s competitiveness originates with its
people, and that the key to our future business growth lies inpracticing TS TECH’s corporate philosophy of striving to be “A
company dedicated to realizing people's potential” and thatis “A company sincerely appreciated by all.” As developmentcompetition intensifies, the pressure on engineers will inevitably grow. Furthermore, as soon as the development of one
model is completed, our engineers must immediately begin
work on the next model, as they strive to fulfill their missionof relentlessly achieving ever higher performance. In addition to initiatives that are directly linked to model development, such as developing and securing highly specialized
human resources, including expanding specialized training
in areas such as digital transformation and actively recruiting mid-career personnel, we will continue to invest generously in “people.” This means fostering workplaceenvironments where each individual can feel motivated, andwork with enthusiasm, such as creating a system to properly
evaluate and compensate engineers.
For suppliers like us, technological strength forms thebasis of sustainable business growth and rising corporate
value. By nurturing the human resources that support our
technological capabilities, and by fully utilizing the seat manufacturing expertise and passion for product creation thatTS TECH has developed since its founding, we can achieveeven greater business growth. We have the ability to provide
even more new value to the automobile industry, which is
now undergoing a once-in-a-century transformation.

TS TECH Integrated Report 2023

27

TS TECH’s Value Chain

The TS TECH Group achieves value creation through manufacturing that yields high-quality products and services.
We aim to maximize corporate value by leveraging mutual cooperation and synergies among the functions ofeach value chain. In this effort, we make optimum use of all the management resources we have developed overour 60 years in business with the support of our stakeholders.

Value chain

Research and Development
The transformation of mobility brought about by recent technological innovations iscompletely changing the value that has been demanded of automotive interior products in the past. We are leveraging this change as an opportunity to drive our Group’s
further business growth. We are focusing on creating new value not only in the seats
but also throughout the entire vehicle interior space. In order to achieve sustainablegrowth together with society, we will conduct research and development from various
perspectives, including technological evolution from both the development and manufacturing axes, with the aim of quickly commercializing environmental technologies
that are ahead of other companies.
Companies cannot create value simply by accumulating conventional technologies. Based on our corporate philosophy of being “A company dedicated to realizing
people's potential,” we strive to foster product developers, innovate with the diverse
ideas they generate, and create unique technologies that have never existed before.

Basic Policies on Value Creation

Research anddevelopment• Creating and delivering appealing products and technologies• Enhancing our system and software development capabilities
beyond the framework normally required for a parts manufacturer• Developing environmentally friendly products and manufacturing
technologies that help build a sustainable world• Ensure reliable quality assurance from the outset of development

Creating innovative,
attractive products and technologies

Basic Policies on Value Creation• Offer appealing products that exceed customer expectations atcompetitive prices• Proposing new vehicle interior value to customers using internal
collaboration including regional and functional corporate divisions• Proposing products based on existing commercial rights(expanding adoption to derivative models)• Pursuing strategic sales development focusing on target
commercial rights to increase the likelihood of securing orders

Sales
Proposing competitive products
to satisfy customers’ demands

Eiji Toba

Director, Managing Officer
Corporate Development and Engineering Division
Executive General Manager

Offering stable provision ofcomponents by maintaining
a strong supply chain

Manufacturing
Operating highly efficient mass
production systems in 13 countries

Quality
Using a quality control system
to ensure stable supply of safe
and secure products

Feedback

S

Purchasing• Building a supply chain that outperforms those of other companies• Building a supply chain that supports new business expansion• Streamlining and rationalizing procurement routes• Improving QCD capabilities by enhancing supply chain management• Improving our manufacturing for higher efficiency andsustainability• Providing innovative production technology to Group companies
and strengthening control functions• Building highly efficient production lines using automation andmore advanced equipment and molds• Provision of safety and security to customers• Stable provision of products with the same high level ofquality worldwide• Earn top quality rating from customers all around the world andestablish TS-Quality brand•C reating and delivering appealing products and technologies•E nhancing our system and software development capabilities beyond theframework normally required for a parts manufacturer•D eveloping environmentally friendly products and manufacturing
technologies that help build a sustainable world•E nsure reliable quality assurance from the outset of development

trengths•W ide range of development andtechnological capabilities forphases from product planning
through development andperformance evaluation•G roup-wide development system
based on projects managed byLarge Project Leaders (LPLs)*1• C reating new value through active
collaboration with other industries

W eaknesses

O pportunities

T• S peed of global development
aimed at sales expansion• S peed of mass production
realization of innovativetechnologies• E xpansion of the EV market where
advanced technology is being
actively adopted• P roviding the new value required
for next-generation vehicle
interiors•G rowing need for environmentallyfriendly products• Intensifying competition intechnological development andchanges in product development
styles driven by the entry of companies from other industries into
the automotive industry• Tighter regulations in various areas to promote carbon neutrality

hreatsSecuring cabin coordination capacity

Ongoing pursuit of environmentally friendly technologies

The Group is working to secure cabin coordination capacity tocreate the new functions and technologies that will be requiredin the next-generation vehicle market, characterized by advanced autonomous driving technology and widespread transition to EVs. This will enable us to propose products for the entire
vehicle cabin, and go beyond our conventional business areas ofseats and doors. We aspire to propose the entire vehicle interior
space as an appealing product. Toward this end, we are accelerating basic research related to the needs of people as the ridersof next-generation vehicles. We are also promoting R&D aimed
at establishing completely new functions and technologies created through collaboration with other industries. Moreover, byworking on the development of highly efficient mass production
technology that can easily be adapted to new construction andmaterials, we are building a production system that will allow us
to deliver the technologies we develop as competitively priced
products.

In order to help reduce the environmental impact of automobiles and help build a more sustainable world, we are working tobuild EV-compatible technologies that help reduce the weight ofvehicles, as well as those that allow non-sustainable materials tobe replaced by sustainable ones,*2 such as recycled and biomass
materials. To address issues such as a decline in seat cushioning
performance caused by sustainable material adoption, we arereexamining vehicle seat construction based on the unique expertise that the Group has accumulated over the years. This approach will enable us to deliver both environmental performanceand comfort. The Group is also proposing seats constructedwith a low hip point, which helps in the creation of streamlined
designs for EVs with lower air resistance and improved powerusage efficiency. Our aim is to keep growing along with society
by creating new environmental technologies that automakers
cannot achieve on their own.

*1 A development system that assigns LPLs to coordinate all departments, including overseas bases, and provides total management from planning tomass production*2 Raw materials that are derived from continuously available resources and have a low environmental impact throughout their life cycle

28

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29

TS TECH’s Value Chain

Sales (Honda Group)

Sales (New Businesses)
Approximately 90% of the TS TECH Group’s consolidated revenue comes fromsales to the Honda Group, consisting of Honda Motor Co., Ltd. and its affiliates.
While acquiring new customers remains an important part of our plans forfurther business growth, the business relationship with Honda will continue tobe an important foundation of TS TECH’s operations, forming the backbone of
the Group.
Currently, our products account for approximately 60% of the seats installedin vehicles sold by Honda. Our goal is to increase this share to 70% by 2030. We
aim to further increase our market share with Honda not only by developing
products that meet the needs of end users but also by providing a variety of
proposals that meet the specific needs of Honda.

Takahiro Kobori
Director, Managing Officer
Corporate Sales and Purchasing Division
Executive General Manager

S

trengths• Sales proposal capabilities basedon close cooperation between
global information-gatheringsystems and QCDDM*• Total coordination capacity forvehicle interiors

Basic Policies on Value Creation

Basic Policies on Value Creation•O ffer appealing products that exceed customer expectations at competitive
prices•P ermanently secure customers’ unwavering trust•P roposing new vehicle interior value to customers using internal
collaboration including regional and functional corporate divisions•O btaining commercial rights orders with high added value using planning proposals that
anticipate customer needs• P roposing products based on existing commercial rights (expanding adoption to derivativemodels)• P ursuing strategic sales development focusing on target commercial rights to increase thelikelihood of securing orders• S trengthening the competitiveness of our European sites to promote commercial rights expansion

W eaknesses

O pportunities

T• Overemphasis on earnings fromthe seat business and slow growthof other revenue sources• Proposing new product value
needed for next-generation
vehicle interiors• Proposing new products andtechnologies created throughcross-industry collaboration• Profit structure transformation
due to soaring energy costs• Intensifying competition fororders due to the rise of emerging
local suppliers

Business development that leverages our strengths
In order to further increase our market share in Honda, in addition to acquiring new commercial rights, we need to ensure that
we continue to receive orders for commercial rights for models
for which we have already received orders, even after modelchanges. We will achieve this by creating value that is unique to
TS TECH. We do this by further enhancing customer satisfaction
through the creation of products that exceed expectations andby co-creating products with the Honda Group from the earlystages of development to propose seat products that combinefunctionality and design in line with customer needs in an unprecedented way.
Moreover, through close cooperation between relevant internal divisions under our Corporate Sales and Purchasing Division, which oversees the Honda-related business, the Group isable to offer high-quality, competitive products in any global region. We aim to acquire further commercial rights by taking fulladvantage of the geographical advantages provided by ouroverseas sites, which span 13 countries worldwide.
* QCDDM: Quality, Cost, Delivery, Development, and Management30

TS TECH Integrated Report 2023

In order for the TS TECH Group to achieve further business growth, we will expand sales not only to the Honda Group but also in new business areas beyond
that customer, by acquiring new clients and expanding commercial rights. We
have long regarded this as an important issue and have undertaken a variety of
relevant initiatives, which are steadily delivering results. We are seeing clear
signs of future sales expansion, including more commercial rights with Suzuki
Motor Corporation and Volkswagen AG, as well as orders from multiple new customers.
The Group’s target for 2030 is that 30% of revenue would come from new
businesses. This figure is 7.8% as of March 2023. To achieve the goal, we willleverage the leadership of the New Business Management Division to carry out
strategic sales activities that reach customers worldwide.

hreatsExpansion of parts orders, leading to vehicle
seat commercial rights
A vehicle seat is made up of various parts, such as the seatframe and trim cover. The Group has acquired commercial
rights not only for the seat itself but also for these parts, andis developing products tailored to each vehicle model.
Among the seat components, the frame is closely related tothe seat itself, and is an important factor in obtaining orders
for a particular seat to be developed later. By quickly andaccurately identifying customer needs, and by promotinginternal collaboration including the Corporate Development
and Engineering Division, the Group is working to create astandard seat frame that can be installed in a wide range ofvehicle models. By proposing a competitive standard seatframe, we will expand seat frame orders, leading to futureorders related to seat commercial rights.

Isao Kawashima

Managing Officer
New Business Management Division
Executive General Manager

S

trengths• S ales activities in cooperation withbusiness partners•M aking product proposals before
model development, andpromoting collaboration activities
with customers•G lobal supply capabilities basedon sites in 13 countries worldwide

W eaknesses

O pportunities

T• K eeping pace with the global
acceleration of shorter
development cycles• I ndependence of overseas bases• I nformation gathering network on
needs of new customers• E xpanding opportunities topropose new vehicle interiors
toward next-generation mobility•D eveloping new, appealing
products in collaboration withbusiness partners• Rapidly changing customer needs• Decline in profitability due tostiffer competition and entry ofcompetitors from other industries

Ongoing new business expansion
We will gain the trust of customers worldwide and acquire
new commercial rights by carrying out highly strategic sales
activities that make the most of the Group’s resources. We
will quickly expand orders by implementing optimal sales
approaches utilizing our Group’s geographically advantageous bases according to the customer’s location, and by
making technical proposals for specific target vehicle models,
including horizontal deployment to derivative models of technologies that have been highly rated under existing commercial rights. In addition, through collaboration between the
Corporate Sales Division and the Corporate Development andEngineering Division, we will identify latent customer needs,
regularly hold presentations on the functions and technologies required of next-generation vehicle interiors, and participate in customers’ advanced development that will set thedirection for future mass-produced models, thereby ensuring
the acquisition of commercial rights.

hreatsStrengthening the competitiveness of theGroup’s new European operations
With sites in Germany and Poland, the TS TECH Group is focusing on further expanding its transactions with European
automakers, such as the Volkswagen Group. Thanks to its
location, our new vehicle seat production company in
Poland, which will begin full-scale operations in fiscal 2024,
will be able to supply products at competitive prices to European automakers located in Germany, the Czech Republic,
Slovakia, and other countries. Using this as a key site to actively implement sales development in Europe, we will not
only expand commercial rights with existing customers but
also build relationships with new ones. Not only expanding
production capacity, we will also optimize our production
system, including the supply chain, to further grow our business and improve profitability.

TS TECH Integrated Report 2023

31

TS TECH’s Value Chain

Purchasing

Manufacturing
The TS TECH Group works hard to ensure that its business activities help to address social issues, fulfilling its policy of realizing ESG management. We are helping to build a sustainable world by promoting sustainability initiatives not onlyinternally but across our entire supply chain.
The Group is striving to advance its core procurement functions by practicing supply chain management to enhance price competitiveness and improving
its business continuity capabilities to ensure stable product supply even during
emergencies. In addition to this, we are further strengthening our sustainability
initiatives by addressing issues such as climate change and human rights. We
are working to share our objectives not only with our business partners in Japan,
but with all partners worldwide, in order to forge a strong, sustainable global
supply chain.

Manufacturing is the core activity of the TS TECH Group, so one key to achieving further
growth will be to improve our manufacturing capabilities. We must do this in a way that willallow us to effectively respond to an increasingly uncertain business environment, alongwith changes in raw material and product construction requirements resulting from industry trends such as CASE and MaaS. By building a highly efficient manufacturing systemthat outperforms those of other companies, for instance by adopting more automationand digital technology, we aim to forge a corporate structure that can respond to any
sudden changes that can affect production, such as semiconductor supply shortages.
Meanwhile, we are working to establish new technologies that will undergird the creation and mass production of unprecedented products. To do this, we will develop environmental technologies that prevent or reduce environmental impact, as well as
next-generation technologies suitable for EVs and autonomous vehicles. The Group’s development and manufacturing areas will work together to create these technologies,
thereby promoting further business growth and helping to build a sustainable world.

Basic Policies on Value Creation

Takahiro Kobori
Director, Managing Officer
Corporate Sales and Purchasing Division
Executive General Manager

S

trengths• Development of activities tostrengthen structures together
with business partners• Ability to gather and analyze
information to maximize
purchasing resources acrossthe Group•B uilding a supply chain that outperforms those of other companies•B uilding a supply chain that supports new business expansion•S treamlining and rationalizing procurement routes• I mproving QCD* capabilities by enhancing supply chain management

W eaknesses

O pportunitiesT• Supply chain restricted bytraditional frameworks• Supply chain specialized for
Honda’s needs• Developing new procurement
routes with cross-industry
collaboration• Expanding business withemerging local suppliers• Supply risks for components andraw materials due to climatechange, infectious diseases,
conflicts, etc.
• Impact of procurement costs due
to rising costs for energy andlabor, etc.

hreatsBasic Policies on Value Creation

Yasushi Suzaki
Director, Managing Officer
Corporate Manufacturing Division
Executive General Manager

S

trengths• Advanced technology development
and mass production verification
capabilities through in-houseproduction of molds and equipment• Achieving high standardization ofeach QCD capability within theGroup• Employing a flexible production
system that supports multi-productproduction• Improving our manufacturing for higher efficiency and sustainability• Providing innovative production technology to Group companies andstrengthening control functions• Building highly efficient production lines using automation and moreadvanced equipment and molds

W eaknesses

O pportunities

T• Still in the process of reducing
environmental impact fromproduction and adopting a resilient
manufacturing framework*• Possibilities for reducing humanintervention in quality control
processes• Collaboration effectivenessbetween sites in different countries•G reater need for new production
technology to make products with
reduced environmental impact• I ncreased demand for high-valueadded products suitable for CASE
and next-generation vehicles• Rise of emerging local suppliers• Greater cost-based competition• Rising costs for labor and raw
materials

hreatsEnsuring the supply chain boosts competitiveness

Building a sustainable supply chain

Ongoing advancement of TS TECH manufacturing

Sustainable production system

The technological transformation of mobility is expected tolead to intensified competition among suppliers, including
new entrants from other industries. To survive in this environment, the TS TECH Group is working on various measures to increase its competitiveness in the area ofpurchasing as well. In addition to further enhancing collaboration with business partners, we are completely updating
the supply chain we have built over the years. Our aim is toboost competitiveness by increasing the Group's profitability
based on a thorough streamlining of procurement routes
and an expansion of procurement of parts at sites outside
Japan. Moreover, we will establish procurement routes to accommodate the expansion of sales to non-Honda customers and to ensure a stable supply of increasingly diverse andmultifunctional products. In this way, we will strive to optimize the supply chain from various perspectives and seek tomaximize added value across the Group.

The TS TECH Group works together with business partners
to mitigate various risks and build a sustainable supply chainthat complies with relevant laws and social norms. Using the
TS TECH Supplier Sustainability Guidelines, we ask our business partners worldwide to understand and adopt sustainable practices. In the environmental field, our aim is toachieve carbon neutrality across the supply chain. We areworking to improve calculation accuracy for Scope 3 emissions and encourage business partners to further reduce
their CO₂ emissions by improving communication with them.
The Group updates its supplier guidelines as necessary,
while striving to remain a company sincerely appreciated by
all across its supply chain.

The TS TECH Group is optimizing its manufacturing system tobetter respond to the diversifying needs of customers, while delivering a stable supply of high-quality competitively priced
products to the world. In addition to thorough efficiency improvements using digital transformation, IoT, and other advanced technologies, we are also promoting further quality
improvements, such as strengthening assurance of defect-freeprocesses using a quality determination system based on AI
analysis. Due to the nature of vehicle seats, which are made up
of numerous components with different properties, many processes still need to be completed by hand. It is therefore important not only to adopt more automation but also to provide agood working environment for every employee involved in manufacturing. Accordingly, we will strive to promote employee
diversity on production lines. This includes strengthening ourability to develop in-house equipment to reduce workloads, aneffort that will be driven by employees with a deep understanding of the front lines.

The Group’s long-term environmental goal is to achieve carbon neutrality in its business activities, and it is working to
reduce its environmental impact by taking measures suchas conserving energy. While advancing technologies to increase production efficiency, we are planning to further
improve the efficiency of our production equipment by,for example replacing outdated equipment and installinginverters. Additionally, we intend to reduce CO₂ emissions
and energy costs from various angles. This includes horizontal deployment of energy conservation diagnoses by facility
experts from Japan to other sites around the world. We will
also build a production system that is sustainable from a variety of perspectives by, for instance, developing equipmentthat uses regenerative energy and devising karakuri mechanical ways to automate work without using electricity.

* Framework to create a financial structure that generates a certain amount of profit even when earnings drop

* Quality, Cost, and Delivery

32

TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

33

TS TECH’s Value Chain

Quality

Important Departments That Support the Group’s Value Chain
The TS TECH Group’s products are essential vehicle components that help protect
human life. This is why we believe that quality is the most important reason that automakers choose TS TECH. It forms the basis of their trust in us as a manufacturer. The
mission of the Corporate Quality Assurance Division is to consider all the measuresthat need to be taken to ensure that the Group never produces or ships defective
products. Its mission also includes overseeing the implementation of quality assurance measures, and ensuring that everyone in the Group fully understands the importance of quality. We work not only within the Group but also in cooperation withbusiness partners who supply our parts and raw materials.
By promoting the universal awareness that every individual is responsible for
quality, and linking this mindset to quality improvements, we are building a quality
control and assurance system that will ensure TS TECH continues to be the choice ofcustomers—an objective the Group cannot achieve without partner cooperation.

Basic Policies on Value Creation

Yoshiaki Kida

Operating Officer
Corporate Quality Assurance Division
Executive General Manager

S

trengths• Quality control and assurance
system based on international
standards• Initiative for evaluating productappearance quality using AI
image diagnosis•P rovision of safety and security to customers•S table provision of products with the same high level of quality worldwide•E arn top quality rating from customers all around the world and establish
TS-Quality brandW eaknesses

O pportunities

T• Delay in establishing fully
automatic assembly technology toeliminate human error• Now in the process of developing
expert human resources for
quality assurance• Improving quality assurance
accuracy by automating productionlines and utilizing digital technology• Increasingly sophisticateddemands for quality assurance
accompanying a trend toward
multifunctionality in products• Diversification of customer quality
requirements as a result of new
business expansion• Greater scope of impact when
quality defects occur as a result ofpart standardization• Advanced software quality
verification capabilities areneeded to make high-value-added
products to be installed in
next-generation vehicles

Developing intellectual property strategies using bothproactive and protective approaches
One of the important ways for the Group to maintain its long-term competitive advantage is to protect and utilize the results of its R&D operations, which become intellectual property (IP). When it comes to its proprietary technologies that can help build asustainable world and innovative technologies, the Group works to maximize the valueof this intellectual property by implementing a variety of proactive initiatives to build astrong patent network. We also implement protective measures to develop products
while minimizing the risk of IP disputes by strategically utilizing patent searches andrespecting the intellectual property rights of others, for instance. Our performance onthese initiatives has also been recognized by external stakeholders. The Group has
been ranked first among all similar suppliers in both Japan and the United States in athird-party survey of the comprehensive patent strength for an entire vehicle seat lineup.* We will continue to support the Group’s manufacturing with these proactive andprotective intellectual property initiatives, while ensuring that we leverage R&D outcomes to improve corporate value.

Fully utilizing IT to maximize the Group’s performance

hreatsThe Group implements defect prevention in all processes of
its value chain, from product planning, design, development,
and manufacturing, to procurement, equipment maintenance, and maintenance of quality control systems. By implementing upstream management that requires investigationof issue root causes and then conducting a series of fundamental process improvements, we have built a reliable quality
assurance and management system. This system has led tothe creation of product specifications that prevent defects
and the automation of production and inspection processes
that make quality assurance more effective. We also conduct
Group-wide continuous quality assurance training and TC Circle activities (improvement activities undertaken by small
groups) in order to keep increasing each employee’s knowledge and awareness of quality control and business improvement, and strive to improve product quality in each process.

34

TS TECH Integrated Report 2023

Enhancing quality management
In April 2023, the Group established a new quality control department with the aim of enhancing quality management. This
department will take the lead in improving the Group’s quality
auditing function by conducting physical inspections at eachsite, and by thoroughly monitoring and managing operations toensure that quality assurance is being carried out using theproper processes. The department will also prepare importantmanagement points for quality assurance and communicate
them throughout the Group. By carrying out quality control inline with these key points at all sites, we will build a system that
ensures early resolution of quality issues and keeps the productsupply system healthy. By building a quality assurance and management system that enhances corporate value, leveraging
close cooperation between the Corporate Quality Assurance Division and Group sites worldwide, TS TECH will continue to be “A
company sincerely appreciated by all” for delivering safe andreliable products.

Corporate Development and Engineering Division
Intellectual Property Department General Manager* Patent Result Co., Ltd. objectively surveys the levels of stakeholder interest in the patents of different companies based on statistics relating to the use of
expedited examination processes for individual patents, the number of times rejection reasons are cited, and existence of any objections or appeals.

Yoshihisa Masubuchi
Corporate Administration Division
IT Department General Manager

Ensuring quality assurance through defectsource management

Akira Miyoshi

The IT Department collaborates with Group sites and departments worldwide to investigate optimal system specifications. We are working on updating old systems that hinder digital transformation efforts, automating operations, and digitizing businessprocesses including performing electronic approvals. Additionally, as part of work-stylereform, we are building a remote work environment, while maximizing the performance of the entire Group in terms of both online applications and infrastructure.
In recent years, information leaks and suspension of business operations due tocyberattacks and system failures have become significant risks for companies. Addressing this, we are providing IT security training for employees using email, eliminating
vulnerabilities in internal systems, and conducting external monitoring to detect unauthorized system access and suspicious online behavior. By working to strengthen information security Group-wide through activities such as these, we are protecting ourintellectual capital and building a solid business foundation that can maintain the trustof our stakeholders.

Trade management to promote a competitive supply system
We promote the local procurement of parts and materials at sites outside Japan as apriority strategy of the 15th Medium-Term Management Plan. At the same time, we also
work to stabilize and improve the efficiency of supply and procurement activities thatinvolve international trade.
In order to facilitate trade procedures and provide the flexibility to respond tochanges in the international situation, we have established a system for handling customs procedures internally. By meeting the trade security standards set by the Japanese government, we have obtained Authorized Economic Operator status for customs
procedures in Japan. This allows for more efficient customs clearance, including theomission of cargo inspections. In the event of any maritime transport delays, we canquickly obtain export permits for alternative shipping options. These capabilities give
the Group’s worldwide production network superior reliability and flexibility.
Moreover, when utilizing the Group’s trade network, we take into account the complex economic partnership agreements that exist between countries. By making fulluse of this knowledge, we are reducing customs costs and helping supply Group products at competitive prices.

Ryuto Kusumoto

Corporate Manufacturing Division
Manufacturing Planning Department
Foreign Trade Management Section Manager

TS TECH Integrated Report 2023

35

Stakeholder Engagement

The TS TECH Philosophy calls for the Group to be a company sincerely appreciated by all of its stakeholders—from
customers and employees to shareholders and investors, business partners, and local communities. To achieve
this goal, we proactively carry out ongoing dialogue with stakeholders and incorporate the opinions and requests
we receive into our management.

Customers (automanufacturers,
end users)

Employees

Shareholders andinvestors

Business partners

Local communities

36

Relationship with stakeholders

Dialogue method

Based on daily dialogue, we build long-term
trusting relationships by identifying customer
needs from the very first stage of productdevelopment and proposing and creatingproducts that exceed expectations. We also
actively seek feedback from end users so that
we can develop even better products.

• Daily sales activities• Collect opinions from end users through thesubsidiary company that sells automobiles• Development and engineering roundtable meetings• Roundtable meetings with business partners
hosted by customers• Exhibitions including next-generation vehicle
interior presentations

The Group aims to be a company where all
employees are motivated and can achieve growth,in line with its twin visions of being “A company
dedicated to realizing people’s potential” and “A
company sincerely appreciated by all.” To achievethis, we are developing our work environment
to create comfortable workplaces and are also
accelerating initiatives designed to improve
employee engagement.
pp. 50–51• Distribution of video of President’s Message(worldwide)• Engagement survey• Various education and training sessions• Internal portal site, in-house newsletter• Whistleblower hotline system, consultation service• Consultation with the labor union

The Group strives to rapidly, accurately, andequitably disclose information, based on its
disclosure policies. In addition, we proactively
engage in dialogue with shareholders andinvestors to improve our medium- andlong-term corporate value.

• General Meeting of Shareholders• Financial results briefings (interim, full year)• Dialogue between senior management and theGroup’s shareholders and investors• Investor relations (IR) meetings every quarter• Websites (IR information for investors)• Briefings for individual investors

Strong partnerships with business partners are
essential for the Group to consistently supply
high-quality products. We treat all business
partners fairly and equitably and hold dialogues
in line with the Supplier Sustainability Guidelines
in order to build trusting relationships on a
global basis.
pp. 47–49• Daily purchasing activities• Annual conference with major business partners• Supplier awards• Carbon Neutrality Seminars• Deployment of Supplier Sustainability Guidelines• Supply chain surveys

Our determination to be a company with deeproots in local communities has inspired us to get
involved in various philanthropic programs, suchas support for childrearing and environmental
conservation (213 programs around the world in
fiscal 2023). We will continue to carry out initiatives tailored to the needs of each community, sothat we can achieve sustainable growth together
with the communities where we do business.

TS TECH Integrated Report 2023

• Participation in and cosponsorship of local events• Offering classes at local schools, donationof goods• Environmental conservation activities such as tree
planting and local cleanups• Donation of goods to public facilities• Holding baseball training sessions for kids

<Specific Examples>
Involvement withcustomers

Proposing new interiors for next-generation vehicles

There have been dramatic changes surrounding the auto industry in recent years. In
order to respond to these changes, accurately identify customer needs, and provide
products that exceed expectations, it is important for the TS TECH Group to promotedialogue with customers, including on product and technical proposals.
As part of this effort, in November 2022 we held a presentation event to showcase the Group’s next-generation vehicle interiors, where we made product proposals to Japanese and other automakers. It provided an opportunity to unveil our new
XR Cabin, which uses virtual reality technology and enables customers to experience
TS TECH driving support features and high-efficiency seat climate control. The event
also showcased a number of our other cutting-edge technologies, and customers
provided a range of comments and opinions.
Based on this feedback, we are working to develop products that better meetcustomer needs, while also further refining our proprietary technologies to offer
products that are even more appealing to our customers.

Relationships withshareholders and investors

Opinions received through proactive dialogue are reflected
in management

We proactively carry out IR activities to ensure that all shareholders
and investors understand the TS TECH Group’s financial results andmanagement approach. We post financial results and timely disclosure information promptly on our website, hold financial results
briefings every six months, and disclose these materials on our
website. We also provide opportunities for securities analysts andinstitutional investors to meet with us every fiscal quarter, and holdover 250 dialogues each year. The valuable opinions we obtain inthese dialogues are reported to the Board of Directors and othermeetings and reflected in management. We believe this will raise
corporate value in a sustainable way.

Relationship withthe local community

Proposing next-generation technology with XR Cabin

Financial results briefing

Social contribution activities rooted in local communities

A major goal in our corporate philosophy is to become “A company sincerely appreciated by all.” Under this vision, the TS TECH Group engages in social contribution
activities around the globe that are tailored to the situations and needs of each
community. In July 2022, Indian subsidiary TS TECH SUN RAJASTHAN PRIVATELIMITED donated desks and chairs to a local elementary school and renovated theschool’s restrooms to help improve the learning environment for the students.
In Japan, TS LOGISTICS CO., LTD. recovers recyclable waste from its business sites
as valuable resources, and donates the proceeds to a children’s foster care facility.
In this way, the Group has been engaged in activities to support the healthy development of children around the world. The Group also carries out a variety of otheractivities rooted in local communities. These include the preservation of ecosystems through tree planting activities, and the operation of an in-house cafe to help
provide employment for people with disabilities.

Learning environment improvement at an elementary
school in India

TS TECH Integrated Report 2023

37

Working to Build a Sustainable World

The needs of the business environment and society are changing with the emergence of various social issues andenvironmental problems in recent years.
The TS TECH Group will continue to create new value while helping to build a sustainable world, always
striving to remain a company that meets expectations and is sincerely appreciated by all.

As a company involved with the manufacture of automobiles that directly emit
CO₂, we recognize our response to climate change as a serious management issue. Accordingly, in August 2021 the Group endorsed the recommendations of
the TCFD. We will analyze the risks and opportunities climate change presents to
the Group’s operations, reflect these in our management strategy and risk management, and appropriately disclose progress in order to contribute to a decarbonized society and aim for further growth.

Basic Policy on Sustainability

The TS TECH Group has consistently worked to raise corporate value sustainably and foster a corporate culture
based on the two elements of our vision statement—being “A company dedicated to realizing people’s potential,”
which expresses our belief that people are the decisive factor in a company, and being “A company sincerely appreciated by all” stakeholders and society.
•W e will help to resolve social issues by implementing our vision statement, with its twin aims of being “A company dedicated to realizing people’s potential” and being “A company sincerely appreciated by all.”•W e will improve the overall corporate value of the Group.
•W e will hold responsible dialogues with all stakeholders and build trusting relationships.

Governance

We have established the Sustainability Committee, which deliberates on issues related to all domains of sustainability, including
our response to climate change, and manages sustainability for the Group as a whole.
p. 38

November 2021 Board Resolution

Risk Management

Promotion Framework

TS TECH established the Sustainability Committee as an advisory body to the Executive Committee, which is responsible foroverseeing business operations. The Sustainability Committee discusses issues related to overall sustainability for the Group,
including climate change measures, and manages these efforts group-wide.
During the course of its deliberations, important risks are identified and then managed in collaboration with the Global
Risk Management Committee, depending on the nature of the risks concerned. Matters deliberated by these two committees
are shared with the Executive Committee, which then makes a formal decision on which matters are to be submitted to theBoard of Directors for discussion. We strive to achieve sustainable growth for the Group and solve social issues by making
decisions on sustainability initiatives at the management level.

Sustainability Committee

Composition of the committee
This committee is chaired by the head of the Corporate Administration Division and made up of the heads of each functional and regional division.
The Corporate Communication Department serves as the secretariat.
Activity plans
The Committee meets three times a year, in principle, and holds ad hoc
meetings also when necessary.

38

Board of Directors
Response and reports
Executive Committee
Reports

Information
gathering▶

Identification of major risks
and opportunities
Evaluation and analysis based ongathered information, such as thedegree of impact on operations
and the possibility of occurrence,
to identify the Group’s major risks
and opportunities related toclimate change

Direction

Sustainability Committee
Chairperson: Corporate Administration Division
Executive General Manager
Members: Representatives from each functional
division*1
Representatives from each regional division*2
Secretariat: Corporate Communication Department

1st Meeting: May 27, 2022

• Deliberated qualitative assessment of climate-related risks and opportunities for the Group, as well as information disclosure

2nd Meeting: October 26, 2022

• Discussed the creation of a human rights policy and the establishment of a system for recognizing the sustainability-related
efforts of employees

3rd Meeting: March 17, 2023

• Deliberated quantitative assessment of climate-related risks and opportunities for the Group, as well as information disclosure• Discussed renewable energy and energy conservation measures• Evaluated progress made on achieving 2030 targets relating to the Group’s material issues, and reviewed the
medium-term targets

Selection of policies
and measures
Creation of policies andmeasures for risks andopportunities that aredeliberated upon by the
Sustainability Committee
and presented at a Board of
Directors’ meetings as necessary
once measures are passed atmeetings of the Executive
Committee▶

Incorporation into strategies and implementation
Identified major risks and opportunities will be handled as follows:• Each functional division and region will promote measures to address natural
disaster risks via the Global Risk Management Committee• Business-related matters will be addressed through incorporation into
medium-term management plans and business strategies• Each functional division and region will promote measures to address
sustainability via the Sustainability Committee

In March 2021, the Group identified the eight material issues (materiality) it will prioritize to help contribute to the creation ofa sustainable world, and it set KPIs and targets for 2030 for each material issue. The Group set long-term environmental targets that include a reduction in CO₂ emissions compared to fiscal 2020 by 50% in 2030 and 100% in 2050, and it is working toachieve them through means such as installing energy-conserving equipment and utilizing renewable energy at each location.
p. 45

15th Medium-Term Management Plan

Medium-term planLong-term plan

Reduction of 25%compared to FY2020

Reduction of 50%
compared to FY2020

Achieving carbon neutrality(FY2024–2026)

Global Risk Management Committee*1 Corporate Sales and Purchasing Division, New Business
Management Division, Corporate Development and Engineering
Division, Corporate Manufacturing Division, Corporate Quality
Assurance Division, Corporate Administration Division, Corporate
Business Administration Division, Corporate Managerial Planning
Department*2 The Americas Segment, China Segment, Asia Segment▶

Metrics and Targets

Collaboration

Main agenda items

TS TECH Integrated Report 2023

Risks and opportunities related to climate change and other sustainability issues are reviewed annually and deliberated uponby the Sustainability Committee. Major risks and opportunities are identified by classifying risks and opportunities arising fromclimate change as “transition risks” or “physical risks” and qualitatively assessing their fiscal impacts.
Identified major risks and opportunities that are physical risks (response to natural disasters) are addressed using targetedmeasures promoted by each functional division and region via the Global Risk Management Committee. Transition risk-related
matters directly linked to business activity will be incorporated into medium-term business plans and business strategies andpromoted in accordance with enacted policies. Items related to sustainability (long-term environmental targets, materiality
KPIs, etc.) will be promoted by each functional division and region via the Sustainability Committee.

Information
gathering regarding
risks andopportunities related
to climate change led
by each functional
division and region

Response and reports

Role
As the advisory body to the Executive Committee, the Sustainability Committee decides on sustainability policies and manages the progress madein achieving related goals and discusses important measures.
– Confirmation of progress made toward achieving materiality KPIs
(more than once a year)– Discussion of initiatives to achieve carbon neutrality in 2050
– Identification of risks and opportunities related to sustainability andrelated scenario analysis (TCFD requirement)– Sharing of social trends and issues related to sustainability– Establishment and operation of system aiming to foster awareness ofsustainability within the company

Committee activities
during fiscal 2023

Information Disclosure Based on TCFD Recommendations

CO₂ emissions reduction target(Scopes 1&2)

Main
initiatives(2030)(2050)

Energy conservation
activities

Improving production and business processes, optimizing air conditioning and lighting, upgrading tohigh-efficiency equipment, and enhancing environmental management, etc.

Adoption ofrenewable energy

Installing solar power systems, purchasing renewable electricity, utilizing green electricity certificates, andutilizing power storage batteries, etc.

Raising the electrification
rate

Replacing equipment powered by gas or heavy fueloil, and replacing conventional vehicles with EVs, etc.

TS TECH Integrated Report 2023

39

Information Disclosure Based on TCFD Recommendations

Strategy

Measures to achieve carbon neutrality are essential to the realization of a sustainable society. It is expected that governments
worldwide will implement energy regulations to reduce CO₂ emissions and stronger laws, and it is also anticipated that various
regulations related to automobiles will be strengthened. While tighter regulations could be a risk to the Group, addressing
them by focusing our efforts on products and services with outstanding environmental performance, one of the Group’s
strengths, could be an opportunity to expand business operations.
We believe that moving forward, promotion of Group products and services that comply with changing regulations andlaws is not only an effective measure to help control global greenhouse emissions such as CO₂ but also an opportunity forbusiness growth, and we have incorporated this belief into our business strategies.

Analysis of risks and opportunities based on climate change scenarios

A scenario analysis was conducted using the Group’s core automobile business (seats, interior components), and business risks
and opportunities were identified. Matters arising from a transition to a decarbonized society, such as tighter regulations andtechnological developments or market changes, and matters arising from the physical impact of climate change, such as acute
extreme weather and chronic temperature rises, are examples of risks and opportunities related to climate change.
The Group classified the causes for various changes in the external environment arising from climate change as “physicalrisks” or “transition risks” and qualitatively assessed the fiscal impacts using the three levels of large, medium, and small toidentify major risks and opportunities. It also assessed the potential impacts of important risks and opportunities, and performed quantitative evaluations based on the assumed financial impact amount. The analysis examined the period up to 2050,
and, in line with the Group’s long-term environmental targets, set 2030 as the medium term and 2050 as the long term.

Scenario analysis

An analysis was conducted using a “4°C scenario” where the physical impact of intensifying extreme weather caused by climatechange is apparent and a “1.5°C scenario” where the effects of a transition to carbon neutrality are evident.
Assumed scenario

Reference scenarios

Assumed state of society

4°C scenario• IEA STEPS (Stated Policies Scenario)• IPCC RCP8.5• I ncreased risk of flooding due to rising sea levels
caused by rising temperatures, stronger hurricanes
and typhoons, frequent torrential rains• I ncreased risk of water shortages due to droughts andthe spread of arid regions and desertification• Harsher work environments due to rising temperatures

1.5°C scenario• IEA NZE(Net Zero Emissions by 2050 Scenario)• IEA SDS(Sustainable Development Scenario)• IPCC RCP2.6•S tronger measures and regulations aimed at
decarbonization (implementation of a carbon tax,
energy conservation/saving measures, ZEV
regulations, policies to promote EVs, etc.)•D evelopment of decarbonization technologies and agreater range of environmentally friendly products

Risks and opportunities related to climate change and related responses

The risks and opportunities judged as having a large or medium fiscal impact on the Group’s operations using a scenario analysis are as follows.
Risk classification
Physical Risks(4°C warming
scenario)

AcuteGovernment
policies
Laws andregulations

Transition risks(1.5°C warming
scenario)

Technology

MarketIdentified risks

Opportunities(1.5°C warming
scenario)
Products andservices

40

Potential financial impact

Mitigation

Relevant initiatives and indicators

Long[Impact: Large]
The potential decrease in revenue due to a shutdown caused by flooding isestimated to be up to 5 billion yen per affected site.

• E nhancing BCP measures• T aking disaster preparedness measures for production
maintenance, including replacement parts production, andcoordinating within the Group to enable quick resumptionof operations

Need to adopt renewable energy and increase capital
investment due to stricter regulations

Medium

[Impact: Large]
An estimated investment of around 7 billion yen will likely be required by 2030 for
the transition to renewable energy, including the adoption of solar power
technology.

• More efficient energy use• Investing in efficient equipment to optimize cost-effectiveness

Higher operating costs due to widespread adoption ofcarbon taxes

Medium

[Impact: Moderate]
By 2030, the Group could be paying around 700 million yen in carbon taxes for its
emissions.

• Promoting CO₂ reduction measures (energy conservation, adoption of renewable energy, etc.)• Improving logistics efficiency

Higher R&D costs and greater capital investment to create
low-carbon and electrified products

Medium

[Impact: Large]
Higher R&D expenses are anticipated to make products with low environmental
impact, to improve manufacturing technology, and to develop products for EVs,
along with a corresponding increase in capital investment.

• Expanding sales by enhancing sales activities• Improving product development through co-creation with customers• Enhancing efforts to develop environmental technologies

Higher raw material procurement costs due to carbon taxes
and the need to adopt more eco-friendly materials

Medium

[Impact: Large]
By 2030, the Group could be paying carbon taxes of 40 billion yen on transactions
with suppliers.

• Enhancing supply chain management• Promoting measures to reduce Scope 3 emissions• Improving logistics efficiency• Supply chain restructuring

Medium

[Impact: Large]
The market is expected to shift to electric vehicles and the need to reduce theproduct environmental impact will increase. If the Group is unable to provide
products that meet customer needs, it could see a decline in sales of around 150
billion yen by 2030.

• Accelerating development of products for electric vehicles• Developing processing technology for eco-friendly materials• Building high-efficiency production lines compatible with new materials and technologies• A higher share of major customers’ products• Enhancing efforts to develop environmental technologies

Potential decrease in sales due to suspension of operations at
Group sites caused by extreme weather events such as
typhoons, torrential rains, and hurricanes

Potential drop in sales due to a lack of low-carbon and
EV products• S ite development with disaster risk management in mind•D
 isaster risk management across the supply chain• Risk management by the Global Risk Management
Committee• Building high efficiency production structures• Long-term environmental goals

Identified opportunities

Medium-or
long-term

Decrease in operating costs due to more efficient production
processes

Medium

[Impact: Moderate]
By 2030, energy conservation measures could yield a cost reduction effect ofapproximately 500 million yen.

• Continual promotion of energy-saving measures focused on production equipment• Automation of production processes and development of compatible product specifications• Improvement of production processes by utilizing regenerative energy and self-weight• Building high efficiency production structures• Material issues• Long-term environmental goals

Medium

[Impact: Large]
Enhancing product lines compatible for EVs will likely lead to the acquisition of new
customers and the expansion of commercial rights. By 2030, the resulting increasein annual sales could reach 70 billion yen.

• P roduct development that helps reduce electricity costs•D eveloping products made using plant-derived raw materials• A dopting recycled materials and designs that make products
easy to dismantle for recycling• Securing cabin coordination capacity• Further growth in new businesses• Enhancing efforts to develop environmental technologies

Medium

[Impact: Large]
By enabling product coordination with the entire vehicle interior, and by
developing products that meet new requirements for next-generation vehicles, wewill likely acquire new customers and expand our commercial rights. By 2030, this
could result in an increase in annual sales of about 35 billion yen.

• C o-creation of technologies and products with companies in other industries for cabin interior coordination• E nhancing system software development

Risk classification
Resource
usage efficiency

Medium-or
long-term

Due to increased demand for low-carbon products, the Groupwill likely sell more seats for EVs and interior components madefrom eco-friendly materials

Increased revenues due to sales of new products compatible
with next-generation vehicles

TS TECH Integrated Report 2023

Potential financial impact

Mitigation

Relevant initiatives and indicators•D eveloping processing technology for eco-friendly materials•B uilding high-efficiency production lines compatible with newmaterials and technologies• Securing cabin coordination capacity

TS TECH Integrated Report 2023

41

Environmental Initiatives
Efforts to Reduce Our Environmental Footprint

PolicyIn the interest of protecting the global environment, the TS TECH Group will work to reduce the environmental impact of all aspectsof its corporate activities, especially the production of interior components for automobiles, and help create a sustainable society,aiming to be “A company sincerely appreciated by all,” which is one of the beliefs enshrined in the Group’s philosophy.

Environmental Action Plan

DomainEnvironmental Impact
Global warming

Reduce global environmental impact
associated with business operations

Basic Environmental Policy

Resource depletion
Ozone depletion
Air pollution(1) Compliance with Legal and Other Requirements	Strive to prevent environmental pollution and protect biodiversity and ecosystems primarily through compliance with requirements, such as environmental laws and regulations and environmental standards, and proper chemical management.

(2) Reduction of Environmental Impact

	Aim to mitigate the impacts of climate change and realize a sustainable recycling-based society by striving to save energy andresources through collaboration across the supply chain, based on life cycle assessments that cover all stages in the productlife cycle, from development through sourcing, production, logistics, marketing, disposal, and reuse.

Water pollution
Soil pollution
Waste materials

Environmental protection efforts

Product
development
technology• Design products with a lighter weight and improved recyclability• Develop technology for replacing materials with sustainable
alternatives• Do not use materials containing regulated chemicals• Employ energy- and resource-saving equipment and process design

Manufacturing
management• Employ energy- and resource-saving manufacturing• Control and reduce the amount of volatile organic compound(VOC) emissions into the atmosphere• Promote proper disposal and recycling of industrial waste• Improve distribution efficiency• Promote CO₂ emissions reduction in collaboration with business partners• Establish a sustainable supply chain

Purchasing
distribution(3) Continuous Improvement of Environmental Management

	Endeavor to continuously improve environmental and energy performance by setting environmental targets based on environmental and energy management systems, and regularly reviewing them. Provide the information and management resources
needed for such improvement and also work toward the utilization of products and equipment that will improve energy efficiency.

October 2018, Resolution of the Board of Directors (Revised)

Initiatives to Strengthen Environmental
Management

The Group is promoting environmental management system ISO 14001 certification at all of its facilities around theworld. We are united in our efforts to continuously reducethe burden on the environment. Seeking additional measures to efficiently reduce CO₂ emissions, TS TECH adopted
the ISO 50001 energy management system at all of its sites
in Japan in fiscal 2019 and obtained certification. Going forward, we will continue with efforts to bolster our environmental and energy management not only to reduce theburden on the environment but also to decrease costs byusing resources more efficiently.

Internal Environmental Audits

TS TECH has established an environmental and energy audit
program that consists of annual audits of each site. The audits take into account the environmental and energy impactof the sites and the results of past audits. These internal audits examine measures to reduce environmental impact andenergy consumption, the effect of these measures, compliance with related laws and regulations, and the status of theadministration of ISO international standards, among otheritems. We promote swift, proper correction of deficiencies
and non-compliance items detected in audits, aiming to improve our environmental management.

Compliance with Environment-Related Laws
and Regulations

Under our environmental and energy management systems, TS TECH has prepared a list of legal and other requirements at each site and reviews the laws and requirementsthat we must comply with at the beginning of each fiscal
year. We also evaluate the status of compliance every six
months. Over the period from fiscal 2020 to fiscal 2023,

42

TS TECH Integrated Report 2023

there were no violations of environmental laws and regulations.

Environmental and Energy Management
Education

TS TECH provides employees with various educational programs related to environmental and energy management
under its ISO management system. Under the ISO 14001
standard, we conduct environmental education with the objectives of reducing environmental impact and preventing
pollution. Under ISO 50001, in addition to offering energy
conservation training tailored to each production facility
provided by the Energy Conservation Center, Japan, we havealso introduced our own energy-saving diagnostics focusedon improving equipment operation.
Since 2022, we have been acquiring knowledge on effective energy-saving techniques with the benefit of expert insight and input. We have focused on energy conservation
using inverters for motors and equipment, seeking tostrengthen the development of human resources specialized
in this area. We have been rolling this knowledge out horizontally across the entire Group, including sites outside Japan.
To catalyze even more effective measures, these specialists not only learn the basics of energy management but alsodelve deeply into specific management methods for particularfacilities. Going forward, we will continue to develop humanresources who can takethe lead in promoting
energy conservation ateach of our sites, Meanwhile, we will keep providing general education,
as well, seeking to improve employees’ environmental awarenessand skills.
Environmental education for facility management

Development-focused measures
We understand that reducing the weight of our products is one of the mosteffective ways in which we can reduce our impact on the environment. For
example, our seat frames account for a large portion of the weight of our
products, so we strive to apply a variety of weight-reducing technologies
wherever possible, while further improving safety and comfort in line withevolving needs. The seat frame installed in the 2020 Honda Fit is about 28%
lighter than our previous core frame. We accomplished this by using more
ultra-high tensile strength steel and thin-plate welding technology. It is
now being used in many automobile models worldwide.
In addition to weight-reducing technologies, we are focusing on re-

Evolution of parts using ultra-high tensile strength steel (shown in blue)

ducing CO₂ contained in our products through technologies utilizing cellulose nanofiber (CNF) and other plant-derived biomass materials. Compared to conventional door trims made from petroleum-derived materials, we have succeeded in reducing the amount of
CO₂ contained in these products by 60% by using plant-derived biomass materials (for resin/synthetic leather coverings), and we arecontinuing our research with the goal of applying this technology to mass-produced products.
Looking ahead to the future shift to EVs, we are also pursuing technology development that contributes to carbon neutrality fromvarious perspectives, including developing seat heaters that efficiently heat at low power to help increase electric mileage (cruising
range) and climate-control seats that help reduce electricity consumption.
Production-focused measures

Installing environmentally friendly equipment

Under the policy of “Evolving toward sustainable manufacturing

Initiatives to reduce CO₂ emissions include installing environ-and building a globally efficient production system,” our Manu-

mentally friendly equipment such as solar power generation

facturing Division works hard to ensure our manufacturing issystems and rainwater reuse systems when replacing buildings

both competitive and environmentally friendly. The main initia-

at each site, which helps to reduce CO₂ emissions and ground-

tives include accelerating automation of production lines andwater usage. We are also actively working to reduce logistics

reducing

energy-losses by taking steps such as realigning production with con-saving technologies, introducing next-generation energy-saving

solidated external warehouse functions. In fiscal 2023, we newly

technologies, and utilizing regenerative energy*1.

installed solar power systems at the Hamamatsu Plant andelectricity

usage

by

standardizing

An example of electricity reduction utilizes karakuri *2 means

Suzuka Plant, and expanded the system at the Saitama Plant.

to achieve work automation without consuming energy. In No-

At the expanded facilities of TS TECH INDIANA, LLC, we in-vember 2022, we exhibited a karakuri mechanism that uses

stalled a solar power system with storage capabilities in June

equipment exhaust air, at the Karakuri Kaizen Exhibition hosted

2022. By combining this solar power generation with green pow-

by the Japan Institute of Plant Maintenance, winning the silver

er certificates, we haveaward in the parts feeder contest category. We are currently

reduced CO₂ emissions

working to further reduce environmental impact by developingfrom electricity to zero. In

equipment that utilizes regenerative energy, such as a method ofthese ways, we are accel-

generating electricity from a karakuri mechanism.

erating efforts around the*1 Converting surplus energy generated from equipment into electricity for reuse*2 Karakuri refers to equipment or mechanisms that improve processes withminimal energy or cost through the use of gravity, gears, the principle ofleverage, etc.

world to reduce our environmental impact.

TS TECH INDIANA, LLC

TS TECH Integrated Report 2023

43

Environmental Initiatives

Environmental Targets and Results
Main environmental targets and results in fiscal 2023*1
Item

Targets

Measures

CO₂ emissions reduction
2,805 t-CO₂ lower than FY2020

FY2020 performance:
8.3 t-CO₂/thousand vehicles
Waste

Water

Recycling rate
4.1% lower than FY2020

Maintain water intake level comparedto FY2020• Conserve water at all worksites• Inspect water supply equipment
for leakage

Water intake
12% lower than FY2020

Japan

The Americas

8,382

65,1997,930

13,46077,208Asia and Europe

FY20208,103

58,875

6,324

FY2021

13,373
FY2022(t)
20,000(m3)

18,423

10,00015,120

1,388
1,257

12,835

15,25916,203

1,028
1,435

1,668
1,569

10,031

10,3879,262

FY2020

FY2021

2. Capital goods

32,466

1.3%

3. Fuel- and energy-related activities not included in Scope 1 or Scope 2

11,8640.5%

4. Transportation and distribution (upstream)

87,021

3.4%

5. Waste generated in operations

3,562

0.1%

6. Business travel

3,145

0.1%

7. Employee commuting

5,494

0.2%

10. Processing of sold products

75,1172.9%

12. End-of-life treatment of sold products

34,2601.3%

2,583,409

100%

Total

3,354

2,760
FY2022

FY2023

0

105,278
139,330
FY2020418,421

Scope 1 and 2 (CO₂ emissions from energy use)and energy consumption

6 sites of the Organization, 5 domestic
companies, 27 overseas companies

Scope 3, Category 1(CO₂ emissions from purchased goods andservices)

Products and services extracted from TS
production control system

Water intake

FY2021

422,134

80,406

79,773

126,175

141,325

138,168

85,49682,16584,214

101,954

114,526

119,979

88,810119,747

200,000

Verification range

Results

Scope 1:Scope 2:7,083 t-CO₂
49,937 t-CO₂

2,330,480 t-CO₂
16,203 t

6 sites of the Organization, 5 domestic
companies, 26 overseas companies

422,134 m³

Long-term environmental targets

FY2022* Scope of data: Consolidated sites excluding certain subsidiaries(Fiscal 2023)
		 • CO₂ emissions: 33 out of 38 consolidated subsidiaries are included in the data scope (5 companies are excluded)		 • Waste generated and water intake: 32 out of 38 consolidated subsidiaries are included in the data scope (6 companies are excluded)
The revenue of the companies within the data scope accounts for 95% or more of the Group’s consolidated revenue for each period concerned.

TS TECH Integrated Report 2023

90.2%

Waste generated (including valuable waste)

7,083
FY2023

116,461 402,436

400,000

100,000

2,445

9,877

500,000 480,815

300,000

5,000

2,399

Ratio (%)

2,330,480

Verification target

57,02049,937

6,267

Water intake

1,841
1,348

Emissions (t-CO₂)

Scope 2

24,693

Waste generated

15,00044

Scope 1

13,34755,93526,993

13,8197,089

62,202

13,90629,537
18,7382,583,409

In order to ensure the reliability environmental data disclosure, the Group has obtained third-party verification from SGS Japan
Inc. Verification results for fiscal 2023 are as follows.

14,6020

2,658,732

Implementing third-party verification

12,5990

China

84,29738,3582,381,086

Category

Trends in environmental results

30,0002,749,174

Scope 3 emissions by category breakdown for fiscal 2023

*1 Consolidated subsidiaries are included in the scope of aggregation, but some subsidiaries are excluded on the same standard as “Trends in environmental results.”*2 “Per unit” figures are calculations performed according to TS TECH’s standards and indicate CO₂ emissions relative to production volume during business activities*3 Emission coefficients for the base year are used to maintain consistency in target management. The difference in CO₂ emissions using the coefficients for FY2023 is -27,277 t-CO₂.

60,000

FY2023

1. Purchased goods and services• Promote recycling• Reduce product defect rate
• Reduce packaging materials(t-CO₂)90,000

FY2022

FY2023 performance:
8.4 t-CO₂/thousand vehicles

Recycling rate
1.5% higher than FY2020

CO₂ emissions

FY2021CO₂ emissions reduction
14,844 t-CO₂ lower than FY2020*3
Basic unit per vehicle
1% higher than FY2020(Unit: t-CO₂)

FY2020Results• Shift to energy-saving production
equipment• Switch to LEDs
• Shift to energy-saving air conditioning• Introduction of renewable energy

Basic unit per vehicle*2
3% lower than FY2020

CO₂

Scope 3 emissions (Consolidated)

FY2023In the interest of protecting the global environment, the Group will work to reduce the environmental impact of all aspects of
its corporate activities. Our efforts to build a sustainable world are guided by our vision statement of being “A company dedicated to realizing people’s potential” and “A company sincerely appreciated by all.” We aim to strike a balance between achieving
further business growth and contributing to the resolution of social issues, including the creation of a recycling-oriented society and conservation of water resources, in addition to responding to climate change, which is becoming more serious by the
year. Accordingly, we have set long-term targets for such environmental issues. The whole Group will work to achieve thesegoals by promoting environmental conservation activities.
Item

KPI

Term for comparison

CO₂

CO₂ emissions reduction rate*1

Comparison with FY2020

-50%

-100%

Waste

Waste reduction rate*2

Comparison with FY2020

-50%

-100%

Water intake and wastewater
reduction rates*3

Comparison with FY2020

Water intake reduction rate
-50%

Wastewater reduction rate
-100%

―

Zero

Zero

Water

Environmental impact fromwastewater*42030 target

2050 target*1 CO₂ emissions reduction rate (Scope 1 and 2) resulting from the Group’s business activities*2 Reduction rate for waste resulting from the Group’s manufacturing activities (excluding residue, sludge, etc.)*3 Reduction rate of water intake (amount used) at the Group’s production facilities and reduction of wastewater resulting from manufacturing activities*4 Environmental impact of wastewater resulting from the Group’s manufacturing activities

TS TECH Integrated Report 2023

45

Initiatives for Respecting Human Rights

The TS TECH Group recognizes that all of its business activities are premised on respect for human rights. We
promote initiatives to respect the human rights of all people involved in our business, guided by the TS TECH
Human Rights Policy. By working together with our stakeholders to put this policy into practice, we strive toremain a company that meets expectations and is sincerely appreciated by all.

Supply Chain Initiatives
TS TECH Philosophy
Vision Statement
Mission Statement
Operational Directives

Supply Chain Management Policy

TS TECH Human Rights Policy(Excerpts from the main text only)

Our Commitment to Respecting Human Rights

TS TECH Group understands that all business activities, ranging from product development, procurement,
manufacturing, logistics and sales, have a potential to affect human rights. We recognize the importance of humanrights from the perspectives of those who may be impacted by these activities.
We value and respect human rights as expressed in the International Bill of Human Rights which includes The
Universal Declaration of Human Rights and the core labor standards from ILO (International Labor Organization)
Declaration on Fundamental Principles and Rights at Work. In addition, with our aim to help contribute to an all-inclusive
society where no one is left behind, we strive to adopt these practices in our business activities by endorsing the United
Nations Guiding Principles on Business and Human Rights.
Furthermore, we comply with the laws and regulations of respective countries and regions where we conduct ourbusiness. If the local laws and regulations have conflicts with the internationally recognized human rights, we will pursue
ways to respect the internationally recognized human rights to the greatest extent possible.

Scope of Application

TS TECH Group will enforce the Policy to be applied to all executives and associates (including part-time associates,
contractors, temporaries, and such). We also hope and expect that all our business partners will understand the Policy
and provide endorsement.

Governance

TS TECH Group positions respect for human rights as one of our key management issues, and we will clearly specify the
director responsible for the development and implementation of the Policy, while maintaining an appropriate internal
structure. The Policy will be reflected in the necessary business policies and procedures.

Implementation of Human Rights Due Diligence

TS TECH Group evaluates the impact of our business activities on human rights and identifies any adverse impact onhuman rights. In addition, we establish and continuously implement a system for human rights due diligence to preventor mitigate such impact.

In order to coexist harmoniously with society and be a company sincerely appreciated by all and whose presence is valued by all of its stakeholders, management focused on
ESG-related issues, not just the pursuit of profit, is necessary.
Based on the TS TECH Philosophy, the Group aims torealize a sustainable society by promoting initiatives thatconsider the environment, safety, human rights, compliance,and social responsibility not only independently but throughout its supply chain.

Application of TS TECH Supplier
Sustainability Guidelines

We established the TS TECH Supplier Sustainability Guidelines to share and promote our views on sustainability withour business partners. We ask all business partners to comply with these guidelines in the following six categories: (1)Safety and Quality, (2) Human Rights and Labor, (3) The Environment, (4) Responsible Mineral Sourcing, (5) Compliance,and (6) Information Disclosure. In August 2023, we revised
the guidelines, mainly enhancing the two areas of “Human
Rights and Labor” and “The Environment” in response to social changes.

TS Standards for Conduct—TS TECH’s
norms and ideals
TS Guidelines for Conduct—Expectations forday-to-day conduct

TS TECH
Supplier Sustainability Guidelines

Category

Content

1. S afety andQuality• Provide products and services that meet consumer
and customer needs• Provide appropriate information about products
and services• Enforce governance over safety and quality of
products and services• Guarantee safety and quality of products
and services

2. Human
Rightsand Labor• No discrimination and respect and acceptancetoward diversity• Respect of human rights and no harassment• No child labor• No forced labor• Compliance with laws and regulations regarding wages• Compliance with laws and regulations regarding
working hours• Respect to freedom of association and collective
bargaining rights• Adherence to occupational health and safety• Respect to the rights of local residents andindigenous people

3. TheEnvironment• Environmental management• Reduce greenhouse gas emissions• Environmental preservation of air, water, soil, etc.
• Efficient use of resources• Chemical substance management• Conservation of biodiversity

4. Responsible
Mineral
Sourcing• Conflict minerals

5. Compliance• Compliance with laws and regulations• Compliance with competition laws
• Prevention of corruption• Prohibition of conflicts of interest• Confidential information controls and safeguards• Whistleblower protection• Export trade• Intellectual property protection• Exclusion of antisocial forces

5. Information
Disclosure• Disclosure of information to stakeholders

Remedy and Correction

TS TECH Group commits to take appropriate measures to correct or remedy, if it becomes clear that business activities
have caused or contributed to adverse impact on human rights. In addition, we will establish a grievance process thatcan be used by related parties who may be adversely affected.

Dialogue and Consultation with Stakeholders

TS TECH Group will utilize its internal and external expertise on human rights and engage in dialogue and consultation
with concerned stakeholders to improve the quality of human rights initiatives and for the continuous improvement.

Education

TS TECH Group undertakes appropriate education and awareness-raising activities to facilitate an understanding of the
Policy and putting it into practice.

Information Disclosure

TS TECH Group discloses information on our efforts to respect human rights through our corporate website and othermeans appropriately.


Human Rights Due Diligence

We have established systems to prevent or mitigate adverse
human rights impacts on society, such as making requests
to business partners and conducting risk assessments, inaccordance with the TS TECH Human Rights Policy. All groupcompanies participate in the compliance and risk assessments (TSCG self-verification system) conducted periodicallyby TS TECH, and we are working together as a group to reduce human rights infringement risks.

46

TS TECH Integrated Report 2023

The Policy was approved by Board of Directors in June 2023.

Fostering a Greater Awareness of
Human Rights

In addition to promoting awareness of the TS TECH Human
Rights Policy internally, we distribute the Corporate Principles Manual containing TS TECH’s Code of Conduct, which
includes content on respecting human rights and improving
work environments, and we provide awareness-raising education to employees. Our Group companies in and outside
Japan base their own manuals on our Corporate Principles
Manual, tailoring them to reflect local culture, customs, andlaws in each region. All Group employees also receive training to foster a deeper understanding of human rights.

The guidelines are posted on the company’s website
and shared with all suppliers in and outside Japan. We also
use a survey to verify compliance with these guidelines by
our business partners in Japan. We surveyed a total of 121
partners in fiscal 2023. As a result, we were able to confirm
that all partner companies maintain the same understanding of these guidelines as the TS TECH Group. The Group
recognizes these initiatives as part of its materiality (key material issues), continues them annually, and since fiscal 2024
will work to roll them out to suppliers outside Japan as partof efforts to build a sustainable supply chain.

TS TECH Integrated Report 2023

47

Supply Chain Initiatives

Basic Policy on Procurement

The TS TECH Group’s products are made from a wide variety
of materials and components provided by its suppliers.
In order to reliably offer quality products at competitive
prices to our customers, solid partnerships with our suppliers are indispensable.
The Group has established the Four Principles of TS Procurement, explained below, to ensure fair, just transactions
as well as to construct and maintain win–win relationships
with suppliers globally. By following these principles,
we strive to build a supply chain that can be relied upon by
all stakeholders.

Other Major Initiatives for Supply
Chain Management

Annual conference with major business partners
The TS TECH Group facilitates communication with business
partners by providing opportunities to share information
regarding purchasing strategies and policies. We hold anannual conference with major suppliers to explain our mediumterm management plan and operating policies and to exchange information. After switching to video distribution
due to the COVID-19 pandemic, in April 2023 we held anin-person meeting for the first time in four years, strengthening unity with each company to promote our 15th MediumTerm Management Plan by working together as one.

Four Principles of TS Procurement(1) Fair Trade	When selecting a supplier, we offer our business toseveral candidates irrespective of their nationality,
size, or past transactions and finalize our choice in afair manner by comprehensively evaluating theirability to offer superior quality, expertise, price, delivery, and other elements, as well as competitiveness,rationality, efforts for business security and otherrelevant matters.
(2) Mutually Beneficial Transactions	We share with our trade partners business challenges
such as development and competitive pricing, setgoals from a common perspective, and conduct joint
efforts to achieve targets. We afford the highest priority to mutually beneficial transactions in terms of results
thus obtained and make continuous efforts tostrengthen trust as the basis of mutually beneficial
relationships.
(3) Environmental Responsibility	In our corporate activities, we attach the greatest importance to global environmental preservation under
all circumstances. Accordingly, we practice “green
purchasing,” granting preference to environmentally
responsible products, services, companies, etc.
(4) Legal Compliance and Confidentiality
	We respect the principle of legal compliance and thoroughly observe relevant laws and regulations and generally accepted norms. We handle with the greatest
care all kinds of information obtained from our customers and trade partners and make the utmost effort
to prevent the loss or misuse of such information.

48

TS TECH Integrated Report 2023

Promoting environmental activities
CO₂ emissions from Category 1 “Purchased goods and services” in Scope 3 account for 88.3%* of the CO₂ emissions
from the TS TECH Group’s business activities including the
supply chain. We therefore recognize the importance of reducing emissions at our suppliers. Starting in April 2023, wehave presented CO₂ emissions reduction targets not only tosuppliers in Japan but also to suppliers worldwide, promoting
reduced emissions across our entire supply chain. To incorporate more specialized knowledge and increase effectiveness,
we held an online Carbon Neutrality Seminar with an external
lecturer and rolled out an effective emissions reduction process to our suppliers. In this manner, rather than unilaterally
demanding reductions, we work together with suppliers to
reduce CO₂ emissions across the entire supply chain.

Survey on conflict minerals
The TS TECH Group’s procurement activities are founded ona basic policy of not using conflict minerals* in order to prevent the flow of funds to armed forces and situations that violate human rights. As part of this process, the Group checks
whether conflict minerals originating in or near the Democratic Republic of the Congo, as designated by the Dodd–
Frank Wall Street Reform and Consumer Protection Act of theUnited States, are used in our products. In light of the recent
increasing risk of social human rights infringement, we havealso expanded our examination to include cobalt.
In this examination, we probe the origin of minerals,
and if we identify a mineral of concern, we take appropriate
measures in cooperation with the supplier.
* Refers to the four minerals: tin, tantalum, tungsten, and gold.

* Percentage of total Group CO₂ emissions in fiscal 2023

Annual conference with major business partners

Supply chain risk management
To address procurement risks, the TS TECH Group works toprevent all “events that impact production,” including natural
disasters, fires, and financial challenges affecting its business partners. After visualizing information from upstream
to downstream in the supply chain, we identify procured
parts concentrated on a single supplier as “high-risk parts.”
We implement initiatives in cooperation with suppliers to
prepare for contingencies like natural disasters and secure
alternative procurement sources. As an initiative to minimize
risk, we are also working to consolidate and streamline supply chains that have become complex in terms of distribution channels and hierarchy.
For business partners who are especially important tous from a production reliability standpoint, we confirm information on risk countermeasures both in writing and throughinterviews, and we work with partners who are experiencing
challenges to implement improvement activities. These
steps are effective in strengthening our risk management
structure and enhancing business continuity.
Business partner assessments
In order to continuously supply high-quality products to ourcustomers, we evaluate business partners once a year. We
assess each business partner in terms of Quality, Cost, Delivery, Development, and Management (QCDDM) and ESG toevaluate overall capabilities. For business partners that need
improvement, we work to improve their overall capabilities
with the cooperation of each department.

Carbon Neutrality Seminar

We also examine components to ensure they do notcontain chemicals prohibited by laws and regulations ineach country and region. We do not permit the use ofchemicals prohibited by laws and regulations, even in
manufacturing processes within supplier companies.
Additionally, we have established rules to monitor theemissions of specified chemical substances designatedby laws and regulations, and to report any issues that
may arise to the relevant government.

Comment

Compliance with the Antimonopoly Act and prohibitionof corruption
TS TECH has prepared and put into use its own Antimonopoly Act and Subcontract Act Compliance Manual, which sets
forth the approach and considerations related to Japan’s Act
on Prohibition of Private Monopolization and Maintenanceof Fair Trade (“Antimonopoly Act”) and the Act against Delayin Payment of Subcontract Proceeds, etc., to Subcontractors(“Subcontract Act”). The relevant departments utilize themanual in day-to-day operations in conjunction with an accurate understanding of the two laws and a thorough, close
examination into the legality of individual events.
TS TECH has created mechanisms that allow relevant
departments to liaise with the department responsible forlegal affairs and consult as needed with attorneys on events
that cannot be definitively decided based solely on the manual. Moreover, TS TECH provides training on the Antimonopoly Act and the Subcontract Act in accordance with its
rank-specific training programs to foster awareness of compliance among employees.
In March 2016, the Group issued new anti-corruption
guidelines and anti-cartel guidelines as part of its continuing
effort to build a solid framework for ensuring fair, honest
business operations across all Group operations.

Building Robust Partnerships to Improve Corporate Value Together
As a global supplier to TS TECH, we have supplied products such as the high-precision fastening parts that are used in automobile seat frames for over 30 years.
In recent years, based on the TS TECH Supplier Sustainability Guidelines, we haveworked together to improve overall QCDDM and ESG performance. We believe these activities have shifted our partnership toward even more robust cooperation, enabling us toachieve competitive pricing and quality while ensuring stable product supply even in uncertain conditions. We also believe being selected for the Supplier Award four years in a row
testifies that these activities have been effective.
Moving forward, we will use our own technology and expertise to create new value, as
we strive to balance the pursuit of economic value and the creation of social value via soundbusiness activities emphasizing ESG performance. We will pursue sustainable growth while
practicing TS TECH’s vision statement of “A company dedicated to realizing people’s potential” and “A company sincerely appreciated by all.”Mamoru Shibasaki
President and CEO
Ohashi Technica, Inc.

TS TECH Integrated Report 2023

49

Human Resources Strategy

Eruboshi Certification (October 2016)

Certified as a company with the highest ratingof 3 stars for outstanding measures to promoteparticipation by women in the workplace

Transferring skills of veteran employees
We have extended the retirement age to 65 and enabled each employee to choose their own retirementtiming after turning 60. By developing an environment where veteran employees can continue working, we have increased options for individual life plans
while securing a period for them to pass on their specialized skills and knowledge, thereby enhancing business continuity.
Employment of people with disabilities
We undertake various initiatives to hire and retain
people with disabilities. For job seekers, we provide
work experience opportunities to deepen understanding of job content so they can join the company
with peace of mind. We regularly communicate with
Hello Work public employment security offices andvocational support centers to improve workplaces tosuit the needs of those with disabilities. Additionally,
we conduct employee questionnaires and interviews
to identify and improve challenges faced by employees with disabilities

Outcome50

TS TECH Integrated Report 2023

Promoting Occupational Safety and
Health Management

Our Basic Policy on Occupational Safety and Healthstates, “Based on our philosophy of ‘A company dedicated to realizing people’s potential,’ we position safety andhealth as fundamental to business activities and aim tocontinuously improve the workplace environment.” Starting in 2023, we have been deploying occupational safety
and health management system activities based on ISO
45001. We aim to create safe and healthy workplaces byimplementing systematic measures to prevent occupational accidents while also pursuing human resource development, such as improving employees’ risk reduction
capabilities with training and conducting risk assessments at each site.
In terms of health management, we make various
efforts to improve employee health. In addition to implementing stress checks, we have systems in place to allow
employees who feel mental or physical distress to receive specialized care early on, using partnerships withvarious medical specialists. We also regularly hold inhouse training to promote proper understanding of
mental health.

• Active participation of diverse human resources in a workplace environment where everyone can work withpeace of mind
pp. 125–126• Improved operational efficiency and fewer long working hours through diverse work styles

TS Executive Business
Management School—BasicManagement Preparation Training
Mid-Level Training (Sixth Year)
Third-Year Training for New Employees
New Employee Training

OutcomeTS Camp

Management
Assessment Training

Self-Development

Correspondence Courses

TS Executive Business
Management School—Advanced
New Manager Training

By AgeDispatch

Selective

Top Management
Training

Rank-Speciﬁc

Life Plan Seminars

Certified as a company that supports childcare
based on the Act on Advancement of Measures
to Support Raising Next-Generation Children

Education and training programs

Career Design Training

Kurumin Certification (May 2015)

We have established various systems to help employees
balance work and home life and allow them to selectfrom diverse work styles the one that suits their current
life stage.
In terms of paid leave, we are working to put inplace a system offering greater convenience for employees, including allowing paid vacations to be taken in halfday increments. As a result of this and other efforts, TS
TECH has maintained a high rate of paid leave use
among employees, as exemplified by our placing seventh (with a 98.5% 3-year average usage rate) among the
1,702 companies surveyed by Toyo Keizai Inc. in its 2023
ranking of the 200 companies in Japan with the highest
rate of paid leave use.
In addition, we are also promoting work-style diversification by enhancing each system, such as by introducing flexible working hours without core time and atelecommuting system to improve labor productivity
through efficient time allocation, and by extending theavailability of part-time work until a child completes elementary school.
By enabling flexible work styles with these initiatives,
we are supporting a balance between work and parenting/family caregiving commitments and enhancing
work–life balance.

We continuously conduct TS TECH Philosophy Education so that each and every employee understands
the concept that “the existential value of TS TECH can
only be found by embodying the ‘TS TECH Philosophy’” as a shared value and puts this into practice.
We are also working to expand efforts to share success stories involving employees who put the TS
TECH Philosophy into practice.

Training Prior to Overseas Postings

Promoting women’s participation
After gathering input widely from employees, we haveundertaken initiatives including introducing maternity
uniforms, publishing childcare support guidebooks,
and establishing in-house nurseries, thereby earning
various government certifications.

Enhancing Work–Life Balance

TS Trainee Program

We recognize the importance of diversity and promotevarious initiatives so that diverse human resources canleverage their individual abilities to excel.

Educating Employees about the TS TECH
Philosophy and Putting It into Practice

We have incorporated management-related content
such as finance, accounting, and marketing into thecurricula of each rank-specific training program. Our
aim in this is to further enhance the motivation andcapabilities of all employees while also fostering
managerial talent. We are also working to increase
training efficiency, including by offering trainings online, and to expand educational opportunities for
employees to proactively build their desire to learn.

Career Development Training

Efforts to Help Our Diverse Workforce Thrive

Human Resource Development
through Diverse Training Systems

Managerial

Creating employee-friendly workplaces

Strengthening human resources

Non-Managerial

The TS TECH Group upholds “A company dedicated to realizing people’s potential” as one of its corporate
philosophies, believing that “people are the decisive factor in a company.”
With this thinking as the foundation of our human resources strategy, we strive to maximize the value
creation capabilities of every employee by providing a comfortable working environment, strengthening humanresources, and fostering the desire to grow and contribute. This, in turn, helps to increase our corporate value.

• Fostering the next generation responsible for sustaining the TS TECH Group’s growth• Maximizing corporate value by ensuring each employee practices the TS Philosophy

Fostering motivation to grow and contribute
Improving Motivation with Fair Evaluations

We enhance employees’ willingness to take on challenges and make contributions by properly evaluating actions and results commensurate with each
employee’s role and rewarding them accordinglywith compensation, rank, commendations, etc.
In addition, employees receive feedback fromsuperiors at least twice a year regarding work performance and the acquisition and demonstration ofskills in order to make them aware of their performance and encourage growth.

Fostering a Management Participation Mindset

We have introduced an incentive system using an
employee stock ownership plan to foster a mindset
among employees of participating in managementfrom the same perspective as shareholders.
• Employee stock ownership plan participation rate: 85.0% [Fiscal 2023
(non-consolidated)]

Outcome

Initiatives to Deepen Mutual
Understanding Among Employees

We conduct an annual engagement survey with theaim of building a workplace environment where all ofour diverse employees can find meaning in their work.
In this survey, we define engagement as “mutual understanding between the company and employees,”and measure satisfaction with and expectations ofvarious factors such as job content, organizational culture, systems and benefits, in order to grasp the current situation and identify issues.
Our 2030 target is to achieve the top Engagement
Rating among the 11 levels, which is AAA. Efforts tomake improvements tailored to each workplace, suchas further enhancing the evaluation system and encouraging communication among employees, translate
to enhancing employee motivation and strengtheningorganizational capabilities and labor productivity.
• Engagement rating: C [Fiscal 2023 (non-consolidated)]• Deepening trust with employees with proper evaluation and dialogue• Fostering a sense of unity to improve performance based on a management participation mindset

TS TECH Integrated Report 2023

51

Corporate Governance
Governance System Diagram
General Meeting of Shareholders

Basic Policy on Corporate Governance

The TS TECH Philosophy calls for us to be a company sincerely appreciated by all of our stakeholders—from shareholders and investors to customers, business partners,
employees, and local communities. We are working hard toenhance corporate governance as an important step toward
fulfilling our social responsibility and achieving sustainablebusiness growth and increasing corporate value over the
medium to long term.
TS TECH endorses the Tokyo Stock Exchange’s Corporate Governance Code and has set the above basic policies
accordingly. We will continue to work to strengthen our governance system in line with the intent and spirit of the Code.

●Fiscal 2022●

Fiscal 2023

52●

TS TECH Integrated Report 2023

The Board of Directors passed a resolution on the basic policies of TS TECH’s internal control system to meet therequirement to formulate regulations on internal controls
stipulated in the amendment to Japan’s Companies Act in2006. Since then, the Board of Directors has reviewed theimplementation of this system each fiscal year and passed
resolutions on changes to these policies as necessary at
Board of Directors’ meetings. Additionally, in accordancewith Japan’s Financial Instruments and Exchange Act, the TS
TECH Group has established an internal control system toensure the reliability of its financial reporting. The effectiveness of this system is maintained and internal control is enhanced through regular evaluations of improvements andoperations and corrective actions as needed.

• Moved to Prime Market of the Tokyo Stock Exchange• Appointed second woman to the Board of Directors

Board of Directors

Reports

Coordination
Ethics and Compliance
Committee

ComplianceOﬃcer
Responses and reports

Segment Management Committees

Segment Executive General Managers, etc.
(Americas/China/Asia)
Reports

14th Medium-Term
Management Plan

Directors

1

Executive Committee
4

Responses and reports

Executive General Managers Committee
Executive General Managers, etc.

Audit and Supervisory Committee 2

Audit and Supervisory Committee Members

Responses and reports

Representative Directors

Appointment

5

Audit report

Coordination

Accounting Auditor
Direction

Reports

Risk Management
Oﬃcer

Corporate Business
Audit Department

Reports
Responses and reports

TS Corporate Ethics Compliance
Consultation OfficeConsultations

Corporate ethics hotlines
set up by each company

Consultations

Divisions anddepartments in Japan
Domestic aﬃliates

Business audits

Overseas affiliates
and divisions

1

Board of Directors

T he Board of Directors is composed of 10 directors (excluding directors who are Audit and Supervisory Committee members) and four directors who are Audit and Supervisory Committee members. The Board of Directors makes decisions regarding management policies, importantmanagement issues, and matters mandated by laws and regulations. It also supervises the execution of business operations.

2

 udit and SupervisoryA
CommitteeT he Audit and Supervisory Committee is composed of four Audit and Supervisory Committee members (three of whom are outside directors).
Based on the audit policy established by the Audit and Supervisory Committee, it audits the execution of duties by the directors.

3 omination andN
Compensation
Committee

The Nomination and Compensation Committee is composed of two internal directors (excluding directors who are Audit and Supervisory
Committee members) and three outside directors. It deliberates on matters related to the appointment and dismissal of directors and executive officers and their compensation.

4

Executive CommitteeT he Executive Committee comprises the company’s three representative directors. It conducts preliminary deliberations on such matters as
resolutions to be put to the Board of Directors, and, within the scope of the authority assigned to it by the Board of Directors, discusses important matters relating to the execution of the duties of the directors.

5 xecutive General
E
Managers Committee

The Executive General Managers Committee is made up of 11 executive general managers and regional general managers. This committee
discusses policies, plans, and governance related to operations in each division to maintain efficient operations.

Group Governance Structure• Appointed an outside director as chairperson of
the Board of Directors• Transitioned from “a company with a Board of Auditors” to“a company with an Audit and Supervisory Committee” structure• Established the Nomination and Compensation Committee• Introduced restricted stock compensation scheme for directors• Appointed first woman to the Board of Directors

Responses

Monitoring

Global Risk Management
Committee

The Operation of an Internal Control System

Recent governance reforms
Fiscal 2021

Nomination and 3
Compensation Committee

Audit andsupervision

Appointment(1) Securing the Rights and Equal Treatment of Shareholders	
We respect the rights of all stockholders, who are important stakeholders, and shall maintain an environment that ensuresthat all shareholders, including non-controlling interests, are treated equally and can fully exercise their rights.
(2) Appropriate Cooperation with Stakeholders	
We shall cooperate appropriately with all stakeholders while working to achieve sustainable growth and an increase in
mid- to long-term corporate value.
(3)	Ensuring Appropriate Information Disclosure and Transparency	
We shall actively disclose information in order to be a company sincerely welcomed by all of our stakeholders, and we shallmanage our business with transparency and good faith.
(4)	Responsibilities of the Board	
The Board shall take appropriate responsibility for the establishment of mid- to long-term management policies andoversight of directors, and it shall work to build systems to enable transparent, fair, and resolute decision-making.
(5)	Dialogue with Shareholders	
The company shall engage in constructive dialogue with shareholders and investors through the annual General Meetingof Shareholders and other avenues with respect to management principles and other issues as it works to achievesustainable growth and an increase in mid- to long-term corporate value.
November 2015, Resolution of the Board of Directors

Accounting audit
Internal control audit

Basic Policies

The TS TECH Group has established a sound corporate governance system. It includes a Group-wide commitment tothe vision statement and mission statement that comprise
the TS TECH Philosophy, a basic policy on corporate governance, and a three-year medium-term management plan.
Affiliated companies also have their own effective, efficient
corporate governance systems that are based on the laws of
their respective countries and their respective businesses.
Important management issues at affiliated companies
must be reported to and approved by TS TECH in advancebased on the standards stipulated by TS TECH. Affiliatedcompanies must also regularly report business plans, sales
results, and financial status.
Furthermore, affiliated companies participate in routine
compliance and risk verification measures known as the TS
TECH Corporate Governance (TSCG) self-verification system.
This ensures that the entire TS TECH Group acts as one inpromoting compliance and reducing risk.
TS TECH’s internal audit department conducts audits ofaffiliated companies and works with internal audit departments set up at the head offices in each region to enhance
the internal audit structure of the entire TS TECH Group.

TS TECH Integrated Report 2023

53

Corporate GovernanceCompliance Framework

Based on the TS TECH Philosophy, the Group establishedthe TS Standards for Conduct (TS TECH’s norms and ideals
as an organization) and TS Guidelines for Conduct (expectations for day-to-day conduct for individual executives, officers, and employees). Regular education is provided toensure the entire Group is familiar with these concepts.
A director is appointed as a Compliance Officer in orderto promote compliance initiatives, and steps are continuallytaken to prevent legal violations before they occur throughregular TSCG self-verifications and deliberations of important ethics and compliance issues by the Ethics and Compliance Committee.
We have established a whistleblower hotline called the
TS Corporate Ethics Compliance Consultation Office, whichenables employees to bring issues before compliance officers, who respond with rapid, effective investigations andcorrective guidance in the event of a problem. Including affiliates in and outside Japan, the Group receives around 100
ethics and compliance inquiries a year, which includes consultations and other cases handled by the TS Corporate Ethics Compliance Consultation Office. In fiscal 2023, the Group
had a total of 94 cases. Continuous operation of this framework promotes internal self-improvement.

Ethics and compliance issues
Number of issues recorded (consolidated)

4 cases

8 cases

TS TECH Co., Ltd.

82 cases

Domestic subsidiaries
and affiliates

Total: 94 cases
FY2023

Overseas subsidiaries
and affiliates* Investigations into each case found no violations of laws or regulations that would have a significant
impact on our business activities.

Risk Management Framework

Important management issues are carefully deliberated
upon by TS TECH’s Executive Committee as well as various
advisory committees. Through these discussions, TS TECH
makes every effort to avoid and mitigate business risks.
In addition, a Risk Management Officer is appointed fromamong the representative directors and placed in charge ofrisk management. The Global Risk Management Committee,
comprising directors and other officers, has been establishedto deliberate regularly on the results of TSCG self-verifications
and discuss responses to serious risks affecting managementthat have been identified, ensuring that efforts are continually
made to mitigate potential risks.
Findings obtained through TSCG self-verifications areshared with internal audit departments so that they can beapplied in risk approach auditing.

Global Risk Management Committee

The Global Risk Management Committee was established as
an advisory committee to the Executive Committee to help ensure appropriate identification and control of the various risks
affecting global business activities in the 13 countries aroundthe world where TS TECH does business, and to solidify thesustainability and stability of the business.
In addition, by forming regional risk management committees in each region, risks specific to those geographic segments are identified and risk mitigation measures are promptly
advanced. TS TECH has also worked to conduct emergency
response training that anticipates a range of risks, such as themost frequently occurring natural disasters in each geographic
region, or the outbreak of an infectious disease.
In fiscal 2023, TS TECH identified four major risks and pursued the appropriate corresponding risk mitigation measures.

Four Major Risks
1. Crisis Management in Emergencies[Target]Communicable & infectious diseases/virus/wind or flood damage/earthquake/conflict/riots or terrorism[Main measures]• Preparation and enhancement of initial response task list at place
where event occurred• Continuous implementation of natural disaster response training
2. IT Security[Target]
Leakage or loss of information and cyberterrorism[Main measures]• Review of all companies’ critical systems backup methods• Survey status of compliance with IT policy and guidelines• Cybersecurity countermeasures(Enhanced monitoring systems, education about dealing withsuspicious emails, etc.)
3. Stoppage of Parts Supply[Target]Raw material supply shortages/supplier bankruptcy/trade-related,
import-export issues[Main measures]• Understand and manage the status of the supply chain for stableprocurement of components• Enhance monitoring of supplier-side financial risks
4. Fires[Target]Fire sources:
Welding/electric leakage or current surge/hazardous materials[Main measures]• Inspection based on Group-wide integrated items and crosscutting management by the department responsible• Formulation of management standards based on past incidents
and implementation of on-site education

Tax Policy

The TS TECH Group follows the TS TECH Group Tax Policy
based on the TS TECH Philosophy, seeking to minimize tax
risks while maintaining transparency and to fulfill appropriate tax obligations and social responsibilities, and in so doing, to contribute to the development of the communities inwhich the Group operates.

TS TECH Group Tax Policy
1. Tax Governance
The Group values strengthening tax governance andviews it as one of the most important management issues. The Policy was approved by TS TECH’s Board of Directors, who are ultimately responsible for tax governance.
2. Compliance
By committing to instill and establish awareness of compliance amongst its employees, the Group complies withand strives to always form the correct understanding on
both spirit and the letter of tax laws and regulations ineach country and region in which it operates to appropriately address its tax declaration and tax obligations.
3. Tax Planning and Tax Havens
The Group will determine investment and business activities according to its business objectives and economic rationality. The Group does not use business entities without
commercial substance and tax havens to engage in tax
avoidance or carry out activities such as profit shifting to
low-tax countries for the sole purpose of avoiding tax.
4. Transfer Pricing
The Group abides by international tax frameworks suchas the OECD Transfer Pricing Guidelines and the Base
Erosion and Profit Shifting (BEPS) Action Plan, and strives
to ensure tax transparency. Intragroup internationaltransactions will comply with the OECD Transfer Pricing
Guidelines, and transaction prices will be determinedbased on the arm’s length principle.
5. Minimal Tax Risk
The Group conducts appropriate accounting and tax
measures in accordance with the respective tax systems
and tax administrations of each country and region inwhich it operates. When complex, unclear tax mattersarise, the Group minimizes tax risks by consulting withexternal experts and tax authorities in advance.
6. Relationship with Tax Authorities
The Group sincerely responds to provide timely and accurate information to tax authorities of each country andregion in which it operates to mitigate tax risks and tomaintain sound relationships built on trust and cooperation.
August 2023, Resolution of the Board of Directors (Revised)

54

TS TECH Integrated Report 2023

Intellectual Property Management

The TS TECH Group respects intellectual property rights. In
developing products and technologies, we take the utmost
care to ensure that the Group does not infringe on the intellectual property rights of others. At the same time, theGroup asks others to respect its intellectual property rights.
In cases where an infringement is identified, the Grouptakes all necessary measures, including demanding that infringing parties immediately discontinue any offending activities and offering such parties an opportunity to negotiate
in the signing of license agreements. Through actions suchas these, the Group works to maximize intellectual property
value and minimize loss.

Policy and Action against Antisocial Forces

The TS TECH Group’s basic policy for internal control requires individual officers and employees to diligently avoid
any type of relationship with antisocial groups that canthreaten a safe, orderly, and civil society, and to work together as an entire group to demonstrate uncompromising attitudes against such forces. Specific measures include making
assessments in advance of the start of new transactions andincorporating provisions for excluding the influence of antisocial forces in preparing agreements.

Disclosure Policy

The TS TECH Group promptly and fairly discloses accurate corporate information to its stakeholders, such as individual investors including shareholders, institutional investors, andanalysts. In addition to disclosing information in accordancewith the Financial Instruments and Exchange Act and the Timely Disclosure Rules, even when these provisions do not apply,
we adopt a proactive approach to the disclosure of information
deemed useful and appropriate to our stakeholders.
Our primary means of disclosing information include
press releases and the Timely Disclosure Network (TDnet)
provided by the Tokyo Stock Exchange. This information is
also posted on TS TECH’s website.
Information disclosed at meetings with our investors
shall be limited to information that has already been disclosed in earnings announcements and other public statements, as well as facts that are already in the public domain,and no undisclosed important facts shall be mentioned inmeetings. Furthermore, in order to prevent the leakage offinancial information, we shall designate the period from theend of each fiscal period up to announcement of financial
results as the “IR restraint period,” during which no comments shall be made or questions responded to about thefinancial information in question.
To protect the company and its employees from legal
liability under the Financial Instruments and Exchange Act
and other legislation, the Corporate Communication Department responds to all inquiries from stakeholders. In addition, this Disclosure Policy is shared and fully enforced
throughout the TS TECH Group.

TS TECH Integrated Report 2023

55

Corporate Governance

Board of Directors

REPRESENTATIVE DIRECTOR, PRESIDENTREPRESENTATIVE DIRECTOR, VICE PRESIDENT

Director in Charge of Quality Assurance, andDevelopment
Number of shares of the company held:
75,488 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Director in Charge of Administration, Business
Administration, and Corporate Managerial
Planning, Compliance Officer
Number of shares of the company held:
35,037 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Masanari Yasuda

Yoshitaka Nakajima

REPRESENTATIVE DIRECTOR,SENIOR MANAGING DIRECTOR

DIRECTOR, AUDIT AND SUPERVISORYCOMMITTEE MEMBERDIRECTOR, AUDIT AND SUPERVISORYCOMMITTEE MEMBER (Outside Director)

DIRECTOR, AUDIT AND SUPERVISORYCOMMITTEE MEMBER (Outside Director)

DIRECTOR, AUDIT AND SUPERVISORYCOMMITTEE MEMBER (Outside Director)

Director in Charge of New Business, Sales,
Purchasing, and Manufacturing,
Risk Management Officer
Number of shares of the company held:
26,615 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Number of shares of the company held:
13,254 shares
Meetings of the Board of Directors attended:
100% (14/14 times)
Meetings of the Audit and Supervisory
Committee attended: 100% (15/15 times)

Chairperson of the Nomination andCompensation Committee, TS TECH
Representative, Sazanka Law Office
Number of shares of the company held:
693 shares
Meetings of the Board of Directors attended:
100% (14/14 times)
Meetings of the Audit and Supervisory
Committee attended: 100% (15/15 times)

Representative, Tokyo Heritage Law Firm
Number of shares of the company held:
1,119 shares
Meetings of the Board of Directors attended:
100% (14/14 times)
Meetings of the Audit and Supervisory
Committee attended: 100% (15/15 times)

Number of shares of the company held:
0 shares
Meetings of the Board of Directors attended:―%
Meetings of the Audit and Supervisory
Committee attended: ―%Kenichi Hasegawa

Tatsuo Sekine

Hajime Hayashi

Tomoko Nakada

Kenichi Naito

Selection of Directors

DIRECTOR, SENIOR MANAGING OFFICERDIRECTOR, SENIOR MANAGING OFFICERDIRECTOR, MANAGING OFFICERDIRECTOR, MANAGING OFFICER

Americas Segment Executive General
Manager, President, TS TECH AMERICAS, INC.
Number of shares of the company held:
15,368 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Corporate Business Administration Division
Executive General Manager, Representative
Director, Honda Cars SAITAMAKITA
Number of shares of the company held:
13,129 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Corporate Development and Engineering
Division Executive General Manager
Number of shares of the company held:
11,448 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Corporate Sales and Purchasing Division
Executive General Manager
Number of shares of the company held:
12,153 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

Akihiko Hayashi

Atsushi Igaki

Eiji Toba

Takahiro Kobori

The regulations for candidates for director positions stipulate that candidates should have impressive leadership abilities, decision-making skills,
vision and planning abilities, and should also have the personal qualities and insight fitting a director, among other qualities. Additionally, current directors who are up for reelection cannot have an attendance rate at Board of Directors’ meetings below 85% without a legitimate reason.
In addition, when selected as a candidate, a specific skill matrix should be considered for those skills that directors should have, in light of theGroup’s management strategies and business characteristics. The Board of Directors also strives for a balanced structure that reflects gender,
global, cultural, and other types of diversity in order to facilitate appropriate, swift decision-making and promote supervisory functions.
Individuals meeting the requirements who have the skills and who qualify as candidates for director are proposed as official candidates tothe Board of Directors after their eligibility and the overall balance of the Board of Directors, among other factors, have been discussed by the
Nomination and Compensation Committee. The Board of Directors holds discussions on the candidates for director in light of these reports andthe views of the Audit and Supervisory Committee and presents the candidate proposals at the General Meeting of Shareholders.
Experience and expertise
Name

Position and responsibilities

Representative Director,
President●●●

Representative Director,

●

●

●

Kenichi Hasegawa

Representative Director,
Senior Managing Director

●

●

●

Akihiko Hayashi

Director, Senior Managing Officer●●

Atsushi Igaki

Director, Senior Managing Officer●●

Eiji Toba

Director, Managing Officer

●

●

●

Takahiro Kobori

Director, Managing Officer

●

●

●

Yasushi Suzaki

Director, Managing Officer●●

Takeshi Ogita

Director●

Kaori Matsushita

Director●

Tatsuo Sekine

Director, Audit And Supervisory
Committee Member

Hajime Hayashi

Director, Audit And Supervisory
Committee Member

Tomoko Nakada

Director, Audit And Supervisory
Committee Member

Kenichi Naito

Director, Audit And Supervisory
Committee Member

Masanari Yasuda

Yoshitaka Nakajima Vice President

DIRECTOR, MANAGING OFFICERDIRECTOR (Outside Director)

DIRECTOR (Outside Director)

Corporate Manufacturing Division Executive
General Manager
Number of shares of the company held:
9,947 shares
Meetings of the Board of Directors attended:
100% (13/13 times)

Chairperson of the Board of Directors, TS TECH
Outside Director, Japan Hades Co., Ltd.
Number of shares of the company held:
1,574 shares
Meetings of the Board of Directors attended:
100% (14/14 times)

CEO, K&L Consulting LLC, Outside Director and
Audit & Supervisory Committee Member, Taisei
Oncho Co., Ltd., Outside Director, Belc CO., LTD.
Number of shares of the company held:
483 shares
Meetings of the Board of Directors attended:
100% (11/11 times)

Yasushi Suzaki

Takeshi Ogita

Kaori Matsushita

Note: C areer and positions and number of shares of the company held: As of June 23, 2023
(As of the date of submission of the Annual Securities Report)
Attendance of each meeting: April 1, 2022–March 31, 2023

56

TS TECH Integrated Report 2023

Knowledge about
international
HR
Legal issues
Corporate
Financial
Technology Manufacturing
Sales andEnvironment
development
and riskManagement management business andaccounting development and quality
procurement
overseasand diversity management
strategy
conditions

Nomination and Compensation Committee

●

●

●

●
●

●

●

●

●

●

●

●

●
●

●

●

●
●

●

●

●

●
●
●

●
●

●
●

●
●
Outside directors

●

●
●

●
●

Independent directors

TS TECH Integrated Report 2023

57

Corporate GovernanceAppointments of Outside Directors

The company selects persons with extensive experience in corporate management or expertise in various fields as outside
directors in order to provide advice and supervision on management from an independent standpoint, taking into account thecharacteristics of the company’s business.
When selecting outside directors, in addition to satisfying the criteria for independence set forth in the Companies Act, theOrdinance for Enforcement of the Companies Act, and by Tokyo Stock Exchange, Inc., the company makes its decisions inaccordance with its regulations for candidates for directors and Independence Standards for Outside Directors it has set forth.
The regulations stipulate that directors may concurrently serve as officers for up to three listed companies including TS TECH.

Analysis and Evaluation of the Board of Directors’ EffectivenessIn an effort to maintain and improve the Board of Directors’ functions, we evaluate its overall effectiveness yearly. These evaluations of effectiveness have been conducted continuously since fiscal 2019. This is the fifth of these evaluations.

Fiscal 2023 evaluation process
Details

1. Each director conducts
a questionnaire-based
self-evaluation(February–March 2023)

Subjects: All directors
Aggregation method: Anonymous questionnaire responses. External organization commissioned to performaggregation.
Evaluation items: (Board of Directors’ composition)
Board of Directors’ composition, level of diversity, number of independent directors, etc.
(Deliberations and resolutions)
Strategy monitoring, business portfolio optimization, appropriate allocation of management
resources, etc.
(Operation of the Board of Directors)
Number of items for deliberation, frequency of meetings, amount of time spent deliberating andtime distribution, the system for providing information necessary for deliberations, etc.
(Individual framework evaluations)Executive compensation scheme, management appointment and dismissal process, structuralprocess construction for the risk assessment system, etc.

2. Board of Directors conducts
discussions and summarization(May 2023)

The overall effectiveness of the Board of Directors is analyzed and evaluated on the basis of the questionnaire
results, as well as comparisons with the previous fiscal year’s evaluation results, and trends seen in responses toeach of the questions. Deliberations are held on policies to be taken to further increase effectiveness.

Reasons for appointments of outside directors
Name

Reasons for appointment

Takeshi Ogita

Mr. Ogita was engaged in the management of a pharmaceuticals company for many years. Based on his extensive experienceand broad insight as a corporate manager, he provides beneficial opinions and suggestions on the management of theCompany as an Outside Director. We selected him as Outside Director, in the expectation that he can continue to contribute toensuring the soundness of management, by reflecting his extensive experience and insight in the management of theCompany. He serves as Chairman of the Board of Directors from June 2022.

Kaori Matsushita

Ms. Matsushita has extensive experience and insight gained through the planning and promotion of new business andcorporate alliance strategy at a comprehensive IT vendor, and diversity management support at a consulting company. We
selected her as Outside Director, in the expectation that she will continue to contribute to enhancing diversity and ensuring thesoundness of management of the Company.

Hajime Hayashi

Mr. Hayashi has broad insight and extensive experience as an attorney. Since his appointment as Outside Director of theCompany, he has appropriately performed audits, such as by giving advice on the management of the Company as necessary.
We selected him as Outside Director who is an Audit & Supervisory Committee Member, in the expectation that he can continue
to contribute to ensuring the soundness of management, and the audit and supervision of the Company’s management.

Tomoko Nakada

Ms. Nakada has extensive overseas experience and broad insight as an attorney. Since her appointment as Outside Director of
the Company, she has appropriately performed audits, such as by giving advice on the management of the Company asnecessary. We selected her as Outside Director who is an Audit & Supervisory Committee Member, in the expectation that she
can continue to contribute to ensuring the soundness of management, and the audit and supervision of the Company’s
management.

Kenichi Naito

Mr. Naito has extensive experience and insight through financial accounting, domestic and international sales, supervising salesof group companies, corporate management at a major general chemicals manufacturer as well as auditing duties as anauditor. We selected him as Outside Director who is an Audit & Supervisory Committee Member, in the expectation that he cancontribute to ensuring the soundness of management, and the audit and supervision of the Company’s management.

Remuneration Policy

TS TECH’s basic policy on executive compensation is to ensure that it is transparent and reasonable, with the potential
to further motivate sustained business growth.
We established the Nomination and Compensation
Committee, chaired by an outside director and composedof three outside directors and two internal directors, as anadvisory body to the Board of Directors. When reviewing thelevel and calculation method of compensation in consideration of the basic policy and social conditions, revising thecompensation structure, or determining the individual compensation for directors for each fiscal year, the Board of
Directors makes resolutions based on consultations with theNomination and Compensation Committee and the deliberations of the Audit and Supervisory Committee.

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TS TECH Integrated Report 2023

Officer compensation consists of basic fixed compensation, performance-linked remuneration as a short-term
incentive, and non-monetary stock-based compensation asa medium- to long-term incentive to enhance the Group’s
corporate value over the medium to long term and further
share value with shareholders. The composition of annualcompensation is approximately 60% base compensation,
25% performance-linked compensation, and 15% stockbased compensation.
Outside directors and directors who are Audit and Supervisory Committee members are paid basic compensation
only given that their role is to audit and supervise management from an independent perspective.

Evaluation results and future initiatives
Overall evaluation results•O ur Board of Directors was evaluated as making progress in ensuring diversity in its composition, as holding active discussions inwhich each director makes use of their respective expertise and experience, and as maintaining its effectiveness.
•O utside directors are provided with advance explanations and information on Board meeting proposals. However, there can still be
understanding and perception gaps between outside and internal directors pertaining to such matters as industry and competitor
trends. The provision of supplementary information is therefore required.
Future initiatives•O ngoing consideration of steps to take to address anticipated issues regarding the number of directors and ensuring theBoard’s diversity•P rovide opportunities for free-flow, unrestrained discussion at Board of Directors’ meetings in order to tap the expertise and gain
the broad perspectives and opinions of each outside director on themes such as growth and human resources strategies, andmanage operations efficiently to ensure sufficient time for such discussions

Development and Selection of Successors

The TS TECH Group has set out the qualities, skills, and experience we seek in the people who will take on responsibility
for management as directors and executive officers. We
offer selective training and other programs to develop the
successors who will drive the company’s future success.
In our step-by-step selective training programs for
managers and general managers, we aim to nurture humanresources with advanced interpersonal skills, dignity, andmanagement capabilities. We do this by enhancing theskills and knowledge required of managers, such as skills

in management strategy and financial accounting, as well as
broadening perspectives, using various curricula.
At the stage where we select our successors, the Nomination and Compensation Committee, chaired by an outside
director, determines director and executive officer candidates’ suitability as next-generation management personnel, including their career background, areas of expertiseand personability. After a process of careful deliberation the
final decision is made by the Board of Directors.

TS TECH Integrated Report 2023

59

Messages from Outside Directors
Diverse human resources as the dynamo for innovation

Takeshi Ogita

Independent Outside Director(Chairperson of the Board of Directors)
Apr. 1980 Joined Sankyo Co., Ltd.
July 2004 Corporate Officer, Head of New Drug Development Division, Sankyo Co., Ltd.
Apr. 2007 	Executive Officer, Head of Pharmaceutical Technology Division, Daiichi Sankyo Co., Ltd.
June 2009 Member of the Board, Senior Executive Officer, Daiichi Sankyo Co., Ltd.
Apr. 2014	Member of the Board, Senior Executive Officer, Head of Vaccine Business Intelligence
Division, Daiichi Sankyo Co., Ltd.
		
Representative Director and President, Kitasato Daiichi Sankyo Vaccine Co., Ltd.
Apr. 2017	Guest Professor, Graduate School of Creative Science and Engineering, Waseda University
June 2018 Outside Director, Japan Hades Co., Ltd. (current)
June 2020 Director, TS TECH (current)
June 2022 Chairperson of the Board of Directors, TS TECH (current)

Increasing the effectiveness of the Board of Directors to achieve
our 2030 Vision
Since being appointed as chairperson of the Board of Directors
in June 2022, I have been fortunate to benefit from the diverse
range of experience and knowledge possessed by my fellow
Board members. Our active discussions have enabled decisionmaking that contributes to the enhancement of corporate value.
The move to appoint an outside director as chairperson of theBoard of Directors took place in 2020. The following year, wetransitioned to “a company with an Audit and Supervisory Committee” structure and established the Nomination and Compensation Committee as a voluntary advisory body to the Board of
Directors. By taking steps like these, we have continued to movetoward our aim: constructing a highly objective and transparent
corporate governance system. At the same time, appropriate
authority is delegated to executive officers, making for a systemthat enables prompt decision-making by the Board of Directors
and serves to deepen discussions on agenda items.
For example, the Board receives monthly reports on consolidated results and business segments. However, these meetings are not just a reporting exercise; they also involve
discussions on issues related to deviations from formulatedplans and how to respond to those issues. Board decisions on
how various matters should be handled are then conveyed tothe executive team. Similarly, the Board also receives a monthly
report on product quality, with information on the status of delivery defects at each business site shared with directors. Continuously providing high-quality products is one of our strengths,
and indeed, the lifeline on which our business depends. Although the work of quality control is not something that may be
immediately apparent, for a manufacturer like us, it is a criticalcornerstone for protecting our business. It is therefore of theutmost importance to make it clear to people at all worksitesthat the Board of Directors is constantly appraised of the situation in a regular reporting process. To those who may think thisapproach is micro-management, I would suggest that “God is in

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TS TECH Integrated Report 2023

the details.” I very much appreciate the Board’s commitment togetting involved in the minutiae of business operations.
The 14th Medium-Term Management Plan concluded at theend of March 2023. During the past three years, the Group’s
operations have been severely impacted by unprecedentedchanges in the external environment, including the COVID-19
pandemic and global semiconductor supply shortages. In theface of such circumstances, I believe that the company deserves
praise for being able to secure a certain level of revenue andprofit. This is truly thanks to the efforts of all employees, whohelped us deliver stable product supply through strengthened
cooperation both inside and outside the Group, implement newwork styles, and make thorough cost reductions. In addition, we
have made progress on various measures preparing for futurebusiness growth, including growing sales in new business areas
and announcing our next-generation automotive cabin, “XR
Cabin.” In the area of ESG performance, we made significant
progress by identifying material issues and setting out mediumto long-term targets for these. The 15th Medium-Term Management Plan is formulated with a view to driving even further
progress, and it reflects management’s determination to achieve
our 2030 Vision. A plan is only meaningful, however, if it is duly
implemented. The Board of Directors will carefully monitor
progress on the achievement of the medium- to long-term targets and provide guidance as necessary.
Three years have passed since I was appointed an outside
director, and my abiding sense is that TS TECH is a “diligent company grounded in technology.” Looking ahead, it is likely that thepace of change will continue to quicken. I hope that everyone in
the company, from young employees to management, will continue to work together to face all challenges, so that we can deliver our advanced technologies to the world, while firmly
maintaining the technologies and culture we have built so far.

The year 2022 will be remembered as a time of struggle thatwas fraught with unforeseen social situations and great challenges, ranging from delayed market recovery following the
COVID-19 pandemic to semiconductor supply shortages, andthe impact of the conflict in Ukraine. Under these circumstances, the TS TECH Group pressed forward with various initiatives,seeking not only to survive but to achieve further growth, basedon our vision statement of being “A company dedicated to realizing people’s potential” and “A company sincerely appreciatedby all.”First, with regard to “A company dedicated to realizing people’s potential,” in Japan, where companies are facing labor
shortages due to an aging society and falling birthrate, it is people who are the most important management asset for a company’s efforts to remain sustainable. Sustainability isunderpinned by diversity and inclusion (D&I), and the strengthof management commitment is the decisive factor in this area.
The TS TECH Group positions fostering D&I as an importantmanagement challenge. We aim to build a corporate culturethat is accepting of the individual characteristics and background of every employee, including gender, age, nationality,
religion, culture, and background, and empowers each individual to make the most of his or her abilities. To achieve this aim, weare following a dual approach of reforming awareness across allorganizations and implementing specific measures to respondto challenges that minorities face. Although it will take time forthese initiatives to bear tangible results, we have made a solid
start in fostering the kind of corporate culture we aspire to.
One of the immediate challenges we face is women’s
under-representation in management and executive positions.
The low proportion of women in the automotive industry’s workforce has been a perennial challenge. TS TECH is in a position
similar to the rest of the industry, in that there are fewer womenthan men who have built a career track record. That situation

notwithstanding, seeing how women working on our front lines
truly shine in their jobs, I believe that in the not-so-distant future
the many measures we are implementing now will bear fruit andwe will see female executives who were employees.
Next, with regard to being “A company sincerely appreciated by all,” in a period of dizzying change for the automotive industry, if we are to continue to provide value that pleases our
stakeholders, we must continue to create innovation. The TS
TECH Group is actively engaged in various initiatives to boost
competitiveness, including focused efforts on digital transformation, such as automation of production processes and
AI-enabled data analysis. What is more, in the period of the 15th
Medium-Term Management Plan, with an eye on the next generation of vehicles, we are stepping up our efforts to develop newtechnologies in line with our growth strategy of “securing cabincoordination capacity.“ In order to continue to provide new value
in the future as technological innovation accelerates, it is vitally
important that we build strategic alliances with companies thatpossess technologies that can be applied anywhere in the world,at home or overseas. The key will be whether we can conclude
future-oriented technological alliances. In addition, our corporate
culture, which values both the diverse ideas that young talentbrings in and vigorous discussion, is a true asset for the company.
Providing mutual reinforcement by engaging in exchanges withother companies via technological partnerships, coupled with thedevelopment of the younger people in our workforce, should ultimately help to further accelerate innovation.
While the period of transformation the automotive industry
is currently facing brings with it the risk of major market shifts, it
could also provide our company with significant opportunities.
As an outside director, I will continue to take part in management discussions with an objective perspective and contributeto promotion of the 15th Medium-Term Management Plan.

Kaori Matsushita
Independent Outside Director

Apr. 1982 Joined FUJITSU LIMITED
Apr. 2007	General Manager of Project Management Department, Alliance Management Division,
Global Strategy Headquarters of FUJITSU LIMITED
Sep. 2013 Diversity Mentor of FUJITSU LIMITED
Apr. 2016 Senior Director, Global Marketing Headquarters of FUJITSU LIMITEDMay 2019 CEO of K&L Consulting LLC (current)
June 2020	Outside Director and Audit & Supervisory Committee Member of Taisei Oncho Co., Ltd. (current)
May 2022 Outside Director of Belc CO., LTD. (current)
June 2022 Director, TS TECH (current)

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61

Messages from Outside Directors

Hajime Hayashi

Independent Outside Director, Audit and Supervisory Committee Member(Chairperson of the Nomination and Compensation Committee)
Apr. 1983 Joined Mie Labor Management Center
Apr. 1986 Registered as an attorney		
Joined Owaki & Sumi Law Office
Apr. 1989 Joined Meiwa Law Office
May 1996 Representative, Sazanka Law Office (current)
June 2020 Auditor, TS TECH
June 2021 Director, TS TECH (Audit and Supervisory Committee Member) (current)
June 2023 Chairperson of the Nomination and Compensation Committee (current)

Independent Outside Director, Audit and Supervisory Committee Member
Apr. 1997 Appointed as an Assistant Judge (Tokyo District Court)
June 2000 Registered as an attorney (affiliated with Dai-ni Tokyo Bar Association)
Aug. 2002 Admitted to the New York State Bar Association
Mar. 2015	Elected as an International Fellow of the American College of Trust and Estate Counsel (current)
Apr. 2017	Elected as an Academician of the International Academy of Estate and Trust Law (current)
Dec. 2020 Representative, Tokyo Heritage Law Firm (current)
June 2021 Director, TS TECH (Audit and Supervisory Committee Member) (current)Management-led efforts to reform awareness will lead toenhanced corporate value

Solid governance and being a great place to work are our strengths

In June 2021, the company established the Nomination andCompensation Committee as a voluntary advisory body to theBoard of Directors. I have been a member of the committee
since its inception. In June 2023, I was appointed chairperson,
and in that role I am working to ensure that the committee’s
activities serve to enhance corporate value by strengthening
governance of the nomination and compensation processes.
The primary role of the Nomination and Compensation
Committee is to report to the Board of Directors on matters relating to the selection, dismissal, and compensation of directors
and executive officers. In order to ensure objective and transparent decision-making, of the five members of the committee,
three are outside directors, to ensure that deliberations benefit
from external perspectives.
The criteria for the selection of candidates are stipulated in
the regulations of the Board of Directors, and the selection of
persons is made in accordance with these criteria. For executive
officers, it is necessary to select people who possess the foresight and decision-making abilities necessary to lead an organization, who are bright and open-minded and capable ofembodying the Group’s vision statement of being “A company
dedicated to realizing people’s potential” and “A company sincerely appreciated by all.” As an outside director, I engage in impartial deliberations to determine whether the identified
candidates are suitably qualified for the position. As for internal
candidates, it is important to take steps such as spending more

In recent years, TS TECH has strengthened its corporate governance framework, including transitioning to “a company with an
Audit and Supervisory Committee” structure, as well as increasing the number of outside directors. The Board of Directors ischaired by Takeshi Ogita, an outside director, who ensures thatproceedings are conducted appropriately from an objective andindependent standpoint. The other outside directors are Kaori
Matsushita, a woman who brings her experience and expertisein D&I and computer systems to the Board, and Hajime Hayashi
and myself, who bring legal-related knowledge as attorneys. All
outside directors engage actively in making recommendations.
When I previously raised legal-related questions in response toa report about the initiation of business transaction with a newcustomer, TS TECH staff responded by engaging in negotiations
with the customer and later reported to the Board of Directors
that, “We were able to reduce future risks by taking actions
in line with your observations.” This is just one small example toillustrate how the views of outside directors are thoroughlyreflected in management and business execution, and how thevarious experience and knowledge that outside directors possess is helping to strengthen the effectiveness of the Boardof Directors.

time with them in order to discern their qualities and personalities in greater depth, not relying only on the written informationthat is submitted.
With an eye on the next generation, another important
agenda item for deliberation is succession planning. While executive officers are required to have general management skills, inorder to win in a fast-changing automotive industry, the TS TECH
Group needs talent capable of spearheading change and reform. Working together with other committee members and thepersonnel division, I will focus on leveraging our collective
knowledge and taking an out-of-the-box perspective in selecting and developing successors.
Current officer compensation* is comprised of base compensation (60%), performance-linked compensation (25%), andstock-based compensation (15%), although there is room to debate whether this weighting is ideal for further enhancing management awareness. Also, regarding performance-linked
compensation, it is necessary to consider indicators linked tothe materiality KPIs as part of management’s responsibility toensure sustainability. Without being bound by convention andwith the aim of taking the next step forward, I aim to contributeto further enhancement of corporate value by engaging in active discussions in the Nomination and Compensation Committee and other bodies.
* Compensation for Directors and Operating Officers, excluding Outside Directors
and Directors who are members of the Audit and Supervisory Committee.

Overview of the compensation system

The company determines the amount of each form of compensation according to a compensation table, in accordance with rank, individual performance, and other factors.
For performance-linked compensation, from the perspective of value sharing with shareholders and employees, average percentages for the past three years forconsolidated revenue and consolidated operating income, together with the rate of change over the previous fiscal year in dividend amount and the number of months of
employee bonuses have been selected as performance indicators for the index.
Specifically, the company calculates the compensation amounts by multiplying a performance-linked compensation index coefficient calculated using the formula below by
the amounts for each rank in the compensation table.
Performance-linked
percentage for the past three
Average percentage for the past threeof change inRate of change in number of＝（ Average＋ terms＋ Rate＋ months）÷ 4compensation coefficientterms for consolidated revenue
for consolidated operating income
dividend amountof employee bonuses* Each performance indicator is equally weighted. The performance-linked compensation index coefficient is limited to a maximum of 150%, and there is no minimum.

Reference: The performance-linked compensation index coefficient as determined for fiscal 2023 is detailed below.
• Average percentage for the past three terms for consolidated revenue: 132.5%• Average percentage for the past three terms for consolidated operating income: 20.3%• Rate of change in dividend amount: 133.3%• Rate of change in number of months of employee bonuses: 100.0%

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Tomoko Nakada

TS TECH Integrated Report 2023

One outstanding governance-related challenge is the aspiration to appoint a non-Japanese director. There are many issues that need to be considered for such an appointment, andit may take some time for this to occur. However, in order toensure that the Group can make further progress as a global
company, the appointment of a non-Japanese director who understands and can put the TS TECH Philosophy into practicewould be a significant decision.
One of the material issues identified by the company is to“offer rewarding working environments in which each and every
employee makes the most of their diverse talents,” and this will
be key to enhancing corporate value, going forward. One youngman, who has been able to fully utilize flextime work with nocore hours, coupled with paid leave, to balance work andchild-rearing, said with a smile, “No other company is so easy towork for.” Looking across the company it is evident that the
number of women in management positions is being steadily
addressed. Through efforts to date, I feel that we have all become more accepting of each other’s diversity, and that a foundation has been laid that will empower us all to work withenthusiasm. I look forward to seeing efforts continue to enablea diverse group of talented people to give their best in management positions and eventually as executive officers.

Greeting from new outside director

I have built my career to date at the UBE Group, a chemical and machinery
manufacturer. With a uniquely manufacturing-oriented mindset that shares
similarities with that at TS TECH, yet equipped with insights from a different
industry, I believe that it is my responsibility to engage in discussions that contribute to the enhancement of corporate value. In addition, based on my financial and legal knowledge and the knowledge I acquired as a corporate auditor
in a previous position, I will work actively to make proposals as a member ofthe Audit and Supervisory Committee, in order to uphold the soundness andappropriateness of corporate management.
Improving corporate governance is synonymous with making appropriate use of all management resources and increasing corporate value, and it
will help the company to embody its vision statement of being “A company
dedicated to realizing people’s potential” and “A company sincerely appreciated by all.” I am committed to do my part in implementing richly diverse andtransparent management, and building a solid corporate foundation.

Kenichi Naito

Independent Outside Director, Audit and Supervisory
Committee Member
Apr. 1982 Joined Ube Industries, Ltd. (currently UBE Corporation)
May 2002	General Manager of Administration Dept.,
Ube Techno Eng Co., Ltd. (currently UBE
MACHINERY CORPORATION, Ltd.)
June 2008	Director, General Manager of Administration
Center, Ube Techno Eng Co., Ltd.
June 2014	Managing Director, Executive General
Manager of Administration Dept.,
T&U ELECTRONICS CO., LTD.
June 2017 Auditor, UBE EXSYMO CO., LTD.
June 2023	Director, TS TECH (Audit and Supervisory
Committee Member) (current)

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63

Financial Reporting

Management’s Discussion and Analysis

Fact Book
Financial Reporting
65

Management’s Discussion and Analysis

66	Consolidated Statement of Financial Position
68Consolidated Statements of Profit or Loss andComprehensive Income70	Consolidated Statement of Changes in Equity
71

Consolidated Statement of Cash Flows73	Notes to Consolidated Financial Statements
118	Independent Auditor’s Report

Financial/Non-Financial
Information
122 Financial Highlights

124 Non-Financial Highlights

1. Analysis of Financial Condition
Assets, liabilities, and equity

AssetsTotal assets at the end of fiscal 2023 stood at 416,226
million yen, up 241 million yen from the end of fiscal 2022.
This change resulted primarily from an overall increase in
assets due to the impact of foreign currency translations
and other factors, as well as an increase in trade andother receivables due to increased orders from major
customers. Cash and cash equivalents declined due topayments of dividends and other factors.
Liabilities
Total liabilities at the end of fiscal 2023 amounted to 92,767
million yen, up 2,365 million yen from the end of fiscal
2022. This change resulted primarily from an overall
increase in liabilities attributable to the impact of foreign
currency translations and other factors, as well as anincrease in trade and other payables attributable to various
factors, including increased orders from major customers.
EquityTotal equity at the end of fiscal 2023 totaled 323,458
million yen, down 2,124 million yen from the end of fiscal
2022. This change resulted primarily from reductions inretained earnings and non-controlling interests mainly
due to dividend payments despite increases in othercomponents of equity due to increased differences ontranslation from foreign operations and other factors.

2. Analysis of Cash Flows

Cash and cash equivalents (hereinafter “cash”) at the endof fiscal 2023 amounted to 132,914 million yen, down
6,671 million yen from the end of the previous fiscal year.
Cash flows from operating activities
Net cash provided by operating activities amounted to30,445 million yen, up 10,427 million yen year on year.
Contributing factors included differences in inventory
trends (from an increase of 6,339 million yen in theprevious fiscal year to a decrease of 14,118 million yen in
fiscal 2023) and differences in the performance of tradeand other receivables (from a decrease of 4,301 million
yen in the previous fiscal year to an increase of 6,223
million yen in fiscal 2023).
Cash flows from investing activities
Net cash used in investing activities stood at 20,970
million yen, up 3,773 million yen year on year. This reflects
various factors, including an increase in total change inpayments into and proceeds from withdrawal of time
deposits from payments of 3,053 million yen to paymentsof 5,746 million yen.
Cash flows from financing activities
Net cash used in financing activities totaled 18,860 million
yen, down 4,777 million yen from the previous fiscal year.
This was due to factors including differences in deposits
for purchase of treasury stock from an increase of 7,870

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TS TECH Integrated Report 2023

million yen in the previous fiscal year to a decrease of
7,870 million yen in fiscal 2023, despite increases of 5,694
million yen in expenditures for purchase of treasury stockand 4,959 million yen in cash dividends paid (including to
non-controlling interests).

3. Overview of Financial Results

The TS TECH Group faced challenging business conditions
in fiscal 2023, including reduced production byautomakers due to COVID-19 lockdowns in China andsemiconductor shortages. Manufacturing costs continued
to increase due to the rising cost of labor, energy, andraw materials.
Within this operating climate, we made steady progresson various measures aimed at future growth, including
measures to secure new customers and expand
commercial rights, proactive sales efforts to increase
market share among major customers, efforts to develop
next-generation technologies, looking to the future, andefforts to develop production structures to provide evengreater quality and efficiency. We are also accelerating ourefforts to transform ourselves into a company that cancoordinate the entire cabin and propose new value to ourcustomers and users.
Revenue for the consolidated fiscal year under review
was up 59,241 million yen (16.9%) from the previous
consolidated fiscal year, to 409,200 million yen, thanks
to factors including foreign exchange effects andimprovements across the model range, despite theeffects of decreased production attributable to COVID-19
lockdowns in China. Regarding income, despite efforts tolower costs through thorough streamlining and otheractivities, operating income fell 7,741 million yen (33.7%)
from the previous fiscal year, to 15,257 million yen, due
to factors including lower production, higher expenses,
and temporary costs associated with the liquidation of aconsolidated subsidiary in the United Kingdom. Income
attributable to owners of parent was down 7,073 million yen(57.0%) from the previous fiscal year, to 5,343 million yen.

The Group’s consolidated forecasts for fiscal 2024 are
as follows:
Revenue
410 billion yen(Up 0.2% year on year)
Operating income
20 billion yen(Up 31.1% year on year)
Income before income tax 20.9 billion yen(Up 11.8% year on year)
Net income
13 billion yen(Up 20.0% year on year)
Income attributable to
10 billion yen
owners of parent(Up 87.2% year on year)

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65

Consolidated Statement of Financial Position(Unit: Million yen)Note

FY2022(As of March 31, 2022)(Unit: Million yen)

FY2023(As of March 31, 2023)

ASSETSLIABILITIES AND EQUITYCURRENT ASSETSCURRENT LIABILITIESFY2022

FY2023Note(As of March 31, 2022)(As of March 31, 2023)

Cash and cash equivalents

6¥139,585¥132,914

Trade and other payables

12¥ 67,024¥ 69,710

Trade and other receivables

7

65,43074,812Other financial liabilities

13

1,718

1,166

Other financial assets

8

9,700

17,757

Inventories

9

Income taxes payable

1,776

2,318

217

639

Other current liabilities

6,830

6,828

Total current liabilities

77,56780,66343,532

31,939

Income taxes receivable

2,340

2,432

Other current assets

16,448

5,813

Total current assets

277,037

265,670

Provisions

15

NON-CURRENT LIABILITIESOther financial liabilities

13

4,420

3,662

Net defined benefit liability

16

1,466

1,917

Provisions

15

157

150

Deferred tax liabilities

14

5,470

5,081

Other non-current liabilities

1,319

1,292

Total non-current liabilities

12,834

12,104

Total liabilities

90,401

92,767

EQUITYNON-CURRENT ASSETS

Common stock

17

4,700

4,700

Capital surplus

17

5,150

5,392

17,935

Treasury stock

17(4,737)(12,508)

27,097

29,244Retained earnings

17

270,031

268,172

16

4,311

4,941

Other components of equity

17

21,71033,035

14

2,454

3,550

Total equity attributable to owners of parent

296,855

298,791

Other non-current assets

386

321

28,727

24,666

Total non-current assets

138,947

150,556

325,583

323,458¥415,985¥416,226¥415,985¥416,226

Property, plant and equipment

10

76,86083,874

Intangible assets

11

10,58010,688Investments accounted for using the equity method

28

17,257

Other financial assets

8

Net defined benefit asset
Deferred tax assets

TOTAL ASSETS

Non-controlling interests
Total equity
TOTAL LIABILITIES AND EQUITY28

See notes to consolidated financial statements.

66

TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

67

Consolidated Statements of Profit or Loss and Comprehensive Income

Consolidated Statements of Profit or Loss and Comprehensive Income(Unit: Million yen)

(Unit: Million yen)

Consolidated statement of profit or loss

Revenue
Cost of sales

FY2022

FY2023

Note(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

5, 18¥ 349,958¥ 409,200

Net income

19(295,716)(355,790)

Other comprehensive income

54,24253,410Gross profit
Selling, general and administrative expenses

19(33,896)(38,471)

Other income

20

3,240

2,212

Other expenses

20

(587)

(1,893)Operating income

522,99815,257

Finance income

22

2,367

3,080

Finance costs

22

(117)

(131)

Share of profit of investments accounted forusing the equity method

28

590

487

25,83918,692(7,035)(7,856)18,803

10,835

Income before income tax
Income tax expense

14

Net income

Note

Owners of parent
28

Net income

12,416

5,343

6,386

5,492

¥ 18,803¥ 10,835

Basic earnings per share (Yen)23¥   92.56¥   41.35

Diluted earnings per share (Yen)

23

—

—

FY2023(April 1, 2022–March 31, 2023)¥18,803¥10,835

Remeasurements of net defined benefit plans

24

864

10

Equity financial assets measured at fair value throughother comprehensive income

24

564

542

Share of other comprehensive income of affiliates
accounted for using the equity method

24

73

37

1,501

590

Total components that will not be reclassified
subsequently to net profit or loss
Components that may be reclassified subsequently
to net profit or loss:
Differences on translation from foreign operations

24

16,463

10,494

Share of other comprehensive income of affiliates
accounted for using the equity method

24

895

655

Total components that may be reclassified
subsequently to net profit or loss

17,359

11,149Total other comprehensive income, net of tax

18,86011,74037,664

22,576

Owners of parent

28,388

16,668Non-controlling interests

9,275

5,907

¥37,664¥22,576

Comprehensive income for the period attributable to:Total comprehensive income for the period

Earnings per share:

FY2022(April 1, 2021–March 31, 2022)

Components that will not be reclassified subsequently
to net profit or loss:

Comprehensive income for the period

Income attributable to:Non-controlling interests

Consolidated statement of comprehensive income

See notes to consolidated financial statements.

See notes to consolidated financial statements.

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Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows(Unit: Million yen)

For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)

Equity attributable to owners of parent
Note

BALANCE AT THE END OF
THE PREVIOUS FISCAL YEAR
Comprehensive income:Net income
Other comprehensive income
Total comprehensive income
Transactions with owners, etc.:
Dividends
Acquisition of treasury stock
Disposal of treasury stock
Share-based remunerationtransactions
Changes in ownership interestsin subsidiaries
Establishment of subsidiaries
with non-controlling interests
Other
Total transactions withowners, etc.
BALANCE AT THE END OF
THE FISCAL YEAR

Commonstock

CapitalsurplusTreasurystock

Retainedearnings

Other
componentsof equity

Total equity
attributableto ownersof parent¥4,700¥4,975¥(2,657) ¥264,261¥ 5,738¥277,017¥24,433¥301,450

15,971
15,971

12,416
15,971
28,388

6,386
2,888
9,275

18,803
18,86037,664

12,416
17
—

—

25
17
17

—

12,416(6,646)(6,646)(2,152)73(2,152)
73

29

175

—

175

¥4,700¥5,150Noncontrollinginterests

Total
equity(6,028)(12,675)(2,152)
73

23

Loss (gain) on disposal of non-current assets(1,393)(1,315)

Finance costs (income)(1,398)(2,381)

Share of loss (profit) of investments accounted for using
the equity method

(590)

(487)

Decrease (increase) in trade and other receivables

4,301(6,223)712(1,492)

Decrease (increase) in lease receivables
Decrease (increase) in inventories(6,339)14,118

Increase (decrease) in trade and other payables(3,422)

(704)

—

—

Increase (decrease) in provisions(2,566)

409

—
—

1,047

1,047
—

Other

988

3,390

Subtotal

26,27235,670Interest income received

1,011

1,796

—

(8,550)(4,981)(13,531)

Dividend income received

1,531

1,200

¥(4,737) ¥270,031¥21,710¥296,855¥28,727¥325,583

Interest expenses paid

(117)

(131)

Income taxes paid

(8,681)(8,090)Net cash provided by operating activities

20,01830,445¥(10,026)¥(17,410)

Proceeds from withdrawal of time deposits

6,972

11,663Purchase of property, plant and equipment(Unit: Million yen)

Retainedearnings

Other
componentsof equity¥4,700¥5,150 ¥ (4,737) ¥270,031¥21,710¥296,855

Treasury
stock

5,343
17
—

5,343

11,325
11,325(7,588)

Noncontrollinginterests

Total
equity¥ 28,727¥325,583

5,343
11,325
16,668

5,492
415
5,907

10,835
11,74022,576(7,588)(7,847)—(10,156)(17,745)(7,847)
—

25
17
17

(7,847)
(83)
83

29

142

142

183

183

¥4,70011,879143(238)

Capitalsurplus

CASH FLOWS FROM INVESTING ACTIVITIESPayments into time deposits(13,777)(13,434)

Proceeds from sales of property, plant and equipment

2,736

639

Purchase of intangible assets(1,858)(2,366)

Purchase of equity instruments(1,196)

(87)

0

9

Proceeds from sales of equity instruments
Payments of loans receivable

(747)

(98)

Collection of loans receivable

710

131

(9)

(17)

(17,196)(20,970)

Other
Net cash used in investing activities

142
187

371

(7)

386

(0)

—
377

(7,771)(7,202)(0)(14,732)(9,968)(24,701)¥5,392 ¥(12,508) ¥268,172¥33,035¥298,791¥ 24,666¥323,458

242

11,033

Depreciation and amortization
Impairment losses(1,036)

Commonstock—¥ 18,692

Income before income tax

Increase (decrease) in net defined benefit asset andnet defined benefit liability

Total equity
attributableto ownersof parent—¥ 25,839

CASH FLOWS FROM OPERATING ACTIVITIES(6,646)(2,079)Equity attributable to owners of parent—

FY2023(April 1, 2022–March 31, 2023)

175

For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)

BALANCE AT THE END OF
THE PREVIOUS FISCAL YEAR
Comprehensive income:Net income
Other comprehensive income
Total comprehensive income
Transactions with owners, etc.:
Dividends
Acquisition of treasury stock
Disposal of treasury stock
Share-based remunerationtransactions
Changes in ownership interestsin subsidiaries
Establishment of subsidiaries
with non-controlling interests
Other
Total transactions withowners, etc.
BALANCE AT THE END OF
THE FISCAL YEAR

FY2022(April 1, 2021–March 31, 2022)

175

See notes to consolidated financial statements.

Note

Note

—
377

See notes to consolidated financial statements.

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Consolidated Statement of Cash Flows (Continued)

Notes to Consolidated Financial Statements(Unit: Million yen)
FY2022

FY2023

Note(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

26¥ (1,435)¥ (1,571)

623

—

—

450

Purchase of treasury stock(2,152)(7,847)

Decrease (increase) in deposits for purchase oftreasury stock(7,870)7,870

CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of lease liabilities
Capital contribution from non-controlling interests
Proceeds from sale of interest in subsidiaries
to non-controlling interests

Cash dividends paid

25

(6,657)(7,600)Cash dividends paid to non-controlling interests

28(6,145)(10,161)(23,638)(18,860)

7,367

2,492

(13,449)(6,892)

153,034

139,585—220¥139,585¥132,914

Net cash used in financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD6NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS RESULTING FROM NEW CONSOLIDATIONCASH AND CASH EQUIVALENTS AT END OF PERIOD
See notes to consolidated financial statements.

6

1. REPORTING ENTITYTS TECH Co., Ltd. (hereinafter “the Company”) is a company domiciled in Japan.
The consolidated financial statements of the Company as of and for the year ended March 31, 2023 comprise theCompany, its subsidiaries (hereinafter “the Group”), and the Group’s interests in its affiliates.

2. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS(1) Compliance with International Financial Reporting Standards (IFRS)The Company meets the criteria of a “specified company” defined under Article 1-2 of the “Ordinance on Terminology,
Forms and Preparation Methods of Consolidated Financial Statements.” Accordingly, the consolidated financial
statements are prepared according to IFRS pursuant to the provisions of Article 93 of said Ordinance.
The consolidated financial statements were approved by the Board of Directors on June 23, 2023.
(2) Basis for measurement
The consolidated financial statements, with the exception of the financial instruments, etc., measured at fair value
stated in Note 3 “Important Accounting Policies,” have been prepared on a historical cost basis.
(3) Functional currency and presentation currency
The presentation currency used in the consolidated financial statements is Japanese yen, which is the Company’sfunctional currency. Any fractions below one (1) million yen are omitted.
(4) Important accounting judgments, estimates, and assumptions
In the preparation of the consolidated financial statements, management exercised certain judgments, estimates, andassumptions in the process of applying the accounting policies and in determining the reported amounts of assets,
liabilities, income, and expenses. As such, actual results may differ from these estimates.
The estimates and the underlying assumptions are reviewed on an ongoing basis, and the impact of the review isrecognized in the period in which the review was conducted and in future periods.
Among the items which were subject to estimates and judgments, the following are considered to have significant
impact on the amounts of the consolidated financial statements for the current fiscal year and the following
fiscal years.
• Scope of consolidation:
Note 3 “Important Accounting Policies (1) Basis of consolidation”• Estimated useful lives of intangible assets:
Note 3 “Important Accounting Policies (8) Intangible assets”• Scope of contracts including leases:
Note 3 “Important Accounting Policies (9) Leases”• Impairment of non-financial assets:
Note 3 “Important Accounting Policies (10) Impairment of nonfinancial assets”• Measurement of defined benefit obligations: Note 3 “Important Accounting Policies (12) Employee benefits”• Recognition and measurement of provisions: Note 3 “Important Accounting Policies (13) Provisions”• Revenue recognition:
Note 3 “Important Accounting Policies (16) Revenues”• Recoverability of deferred tax assets:
Note 3 “Important Accounting Policies (19) Income taxes”
Estimates and assumptions that may have a material impact on the Company’s consolidated financial statements
for the following fiscal years primarily include:(i) Impairment of non-financial assets (Property, plant and equipment, and Intangible assets)
The Group estimates the recoverable amount if non-financial assets show indicators of impairment. The recoverable
amount is calculated as the higher of fair value less costs of disposal and value in use. In the event the estimatedrecoverable amount falls below the carrying amount, a difference between the carrying amount and the recoverable
amount is recognized in net profit or loss as an impairment loss.
Information regarding the material impact of impairment of non-financial assets on the following fiscal year is as follows.

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(a) Amount recognized in the consolidated financial statements(Unit: Million yen)
FY2023(As of March 31, 2023)

Property, plant and equipment¥83,874

Intangible assets

10,688

Total¥94,562

In principle, the Group considers a company or plant to be the cash-generating unit for its business assets. At theCompany’s Hamamatsu Plant, operating income declined due to the production status of customers, the mix of car
models sold, and other factors, resulting in two consecutive periods of operating loss after allocating of headquarters
expenses, etc., and because an indicator of impairment was recognized, a determination was made as to whether an
impairment loss should be recognized or not. Consequently, it was determined that, because the recoverable amountof the Hamamatsu Plant exceeded the carrying amount of property, plant and equipment (¥3,770 million), no
impairment loss was required to be recognized.
(b) Major assumptions used for the estimate
Estimates of future cash flows in the current fiscal year are expected to recover gradually, although the future outlook
remains unpredictable because of reduced production by automakers due to a shortage of semiconductors or
increasing manufacturing costs caused by further increases in personnel, material, and energy costs.
With respect to the Hamamatsu Plant, the recoverable amount used to determine whether an impairment loss
should be recognized is measured at its value in use. Value in use is calculated by discounting future cash flows
calculated on the basis of the Medium-Term Management Plan using a discount rate based on the weighted-average
cost of capital. Estimates of future cash flows incorporate assumptions such as customer order forecasts.
In addition, the fair value of land at the end of the useful life of machinery and equipment, which constitute major
assets, is based on valuations and the like obtained from outside experts.
(c) Material impact on the following fiscal year
During the current fiscal year, the Company did not recognize material impairment losses. However, should thedecline in production by automakers and increase in manufacturing costs be worse than expected, and should
the recoverable amount decline as a result, a material impairment loss may arise in the following fiscal year.
(ii) Recoverability of deferred tax assets
Deferred tax assets are recognized for items that may be deducted from future taxable income, such as deductible
temporary difference and unused tax losses, to the extent that it is probable that taxable income will be available
against which these items can be utilized (hereinafter “recoverability”).
Recoverability will be reviewed each fiscal year. In the event recoverability declines, the amount of deferred tax
assets will be reduced and the reduced amount will be recognized as net profit or loss.
Information regarding the material impact of the recoverability of deferred tax assets on the following fiscal year is
as shown below.
(a) Amount recognized in the consolidated financial statements(Unit: Million yen)
FY2023(As of March 31, 2023)

Deferred tax assets¥3,550Note: The amount of the deferred tax assets recognized in the consolidated statement of financial position as listed above is offset by
the amount of deferred tax liabilities. The amount before offsetting is described in Note 14 “Income Taxes.”(b) Major assumptions used for the estimate
Future taxable income that constitutes the basis for recoverability could vary significantly depending on trends in theautomobile market and changes in customers’ production plans.
Estimates of future taxable income in the current fiscal year are expected to recover gradually, although the future
outlook remains unpredictable because of reduced production by automakers due to a shortage of semiconductors
or increasing manufacturing costs caused by further increases in personnel, material, and energy costs.

74

TS TECH Integrated Report 2023(c) Material impact on the following fiscal year
During the current fiscal year, the Company did not recognize a material reduction in deferred tax assets.
However, should the decline in production by automakers and increase in manufacturing costs be worse than expected,
and should recoverability decline as a result, a material reduction in deferred tax assets may occur in the following
fiscal year.
(iii) Post-employment benefits
To prepare for the payment of retirement benefits to its employees, the Company and certain consolidated subsidiaries
have adopted funded and unfunded defined benefit plans. Defined benefit plan obligations for defined benefit plans
are calculated using the projected unit credit method based on actuarial assumptions such as discount rate.
Information concerning the significant effects on the calculation of defined benefit plan obligations in the following
fiscal year is as follows.
(a) Amount recognized in the consolidated financial statements(Unit: Million yen)
FY2023(As of March 31, 2023)

Net defined benefit asset¥4,941

Net defined benefit liability

1,917(b) Major assumptions used for the estimate
The discount rate, which is the primary actuarial assumption, is calculated using the yield of high-quality corporate
bonds with approximately the same maturity date as the defined benefit obligations.
(c) Material impact on the following fiscal year
Changes in the discount rate and other factors used to calculate the defined benefit obligations may have a significant
impact on the net defined benefit assets, liabilities, and retirement benefit expenses in the consolidated financial
statements for the following fiscal year.

3. IMPORTANT ACCOUNTING POLICIES(1) Basis of consolidation(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that the Group gains control to the date that the Group loses control.
When the accounting policies applied by a subsidiary are different from those applied by the Group, the financial
statements of said subsidiary are revised as necessary.
The balance of accounts receivable and payable and transactions within the Group and the unrealized gain and loss
on transactions within the Group are deducted under the consolidated financial statements.
Any change in the Company’s interest in subsidiaries not involving the loss of control is processed as a capital transaction.
The carrying amounts of the Group’s ownership interest and non-controlling interests are adjusted according to thechanges in the ownership interest, and any difference between the adjustment to the non-controlling interests andthe fair value of the consideration transferred or received is recognized directly in equity and allocated to owners of
the parent.
(ii) Affiliates
Affiliates are entities over which the Group has significant influence but does not have control over the financial andoperating policies of such entities, and they are accounted for using the equity method from the date that significant
influence commences until the date the significant influence ceases.
Under the equity method, investments in affiliates are initially recorded at cost and subsequently increased (ordecreased) to reflect the Group’s post-acquisition changes in ownership interest in the affiliate’s equity. In such cases,
the amount of net profit or loss of the affiliate corresponding to the ownership interest of the Group is recognized in
net profit or loss, while the amount of other comprehensive income of the affiliate corresponding to the ownershipinterest of the Group is recognized in other comprehensive income.
Profits from important internal transactions are eliminated proportionately to the ownership share in the affiliate.

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75

(2) Business combinations
Business combinations are accounted for using the acquisition method.
Consideration for the acquisition is measured as the total fair value of the assets transferred, liabilities assumed,
and equity instruments issued by the Group.
Costs related to the acquisition are recognized in net profit or loss when incurred.
The identifiable assets and liabilities acquired from the merged company are measured at fair values unlessstipulated otherwise by the IFRS.
Goodwill is recognized if the consideration for the acquisition exceeds the fair values of the identifiable assets
and liabilities acquired from the merged company; it is recognized in net profit or loss if the consideration for theacquisition is less.
Goodwill is not amortized but is instead tested for impairment and carried at cost less accumulated impairment losses.
(3) Foreign currency translations
The financial statements of each Group company are prepared in the currency of the primary economic environment
in which each Group company conducts business (hereinafter “functional currency”).
Additionally, the financial statements of foreign operations are translated into Japanese yen, the functional currencyof the Company, when preparing the consolidated financial statements.
(i) Foreign currency transactions
Transactions in currencies other than the functional currency are translated into the functional currency using the
spot exchange rate at the date of the transaction or an exchange rate that approximates the spot exchange rate at
the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the end of the fiscal year are translated using
the spot exchange rate at the end of the fiscal year. Exchange differences arising from translation or settlement offoreign currency-denominated monetary assets and liabilities are recognized in net profit or loss.
(ii) Foreign operations
Assets and liabilities of foreign operations are translated into Japanese yen using the spot exchange rate at the endof the fiscal year, while income and expenses are translated into Japanese yen at the average exchange rates for theperiod, provided, however, that there have been no significant fluctuations in the exchange rates.
Exchange differences arising from translation of financial statements of foreign operations are recognized in othercomprehensive income, and cumulative exchange differences are presented in other components of equity.
When a foreign operation is disposed of and control or significant influence is lost, the cumulative exchange
differences related to the foreign operation are reclassified to net income or loss.
(4) Financial instruments(i) Financial assets(a) Initial recognition and measurement
The Group recognizes trade and other receivables when they occur, and other financial assets on the transaction dateon which the Group becomes a contractual party of the financial asset.
The Group, at initial recognition, measures all financial assets (excluding trade receivables that do not containsignificant financial components) at fair value. However, if an asset is not classified as a financial asset measured at fairvalue through net profit or loss, it is measured at fair value to which the transaction costs directly attributable to theacquisition of the financial asset are added. Trade receivables that do not contain significant financial components aremeasured at the transaction price at initial recognition. Note that transaction costs of financial assets measured at fairvalue through net profit or loss are recognized in net profit or loss.
(b) Classification and subsequent measurement
The Group classifies the financial assets that it holds as (a) financial assets measured at amortized cost, (b) equity
financial assets measured at fair value through other comprehensive income, or (c) financial assets measured at fairvalue through net profit or loss. These classifications are determined at the time of initial recognition, and the financial
assets after initial recognition are measured in the following manner according to each classification.
(A) Financial assets measured at amortized cost
The Group classifies the financial assets that it holds as those measured at amortized cost if it meets both of thefollowing conditions:76

TS TECH Integrated Report 2023

•T
 he financial asset is held within a business model whose objective is to hold financial assets in order to collectcontractual cash flows.
•T he contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments ofprincipal and interest on the principal amount outstanding.
After initial recognition, financial assets measured at amortized cost are measured using the effective interest
method less any impairment loss, as necessary. Amortization using the effective interest method and any gains orlosses due to derecognition are recognized in net profit or loss for the period.
(B) Equity financial assets measured at fair value through other comprehensive income
For certain equity financial assets, the Group has made the irrevocable election to measure fair value changes after
initial recognition in other comprehensive income and classifies such financial assets as equity financial assets
measured at fair value through other comprehensive income.
After initial recognition, such financial assets are measured at fair value, and fair value changes are recognizedin other comprehensive income. In the event that the investment is disposed, or if the fair value has declined
significantly, the cumulative gains or losses recognized through other comprehensive income are reclassified fromother components of equity to retained earnings.
Dividends from equity financial assets measured at fair value through other comprehensive income are recognized
as financial income in net profit or loss.
(C) Financial assets measured at fair value through net profit or loss
The Group classifies financial assets other than those measured at amortized cost and financial assets other thanequity financial assets measured at fair value through other comprehensive income, described above, as financial
assets measured at fair value through net profit or loss. Derivative assets fall under the Group’s financial assets
measured at fair value through net profit or loss.
After initial recognition, such financial assets are measured at fair value, and fair value changes are recognized in
net profit or loss. Any gains or losses relating to the financial asset measured at fair value through net profit or loss
are recognized in net profit or loss.
(c) Impairment of financial assets
With regard to impairment loss on financial assets, including financial assets measured at amortized cost, the Group
recognizes an allowance for doubtful accounts for the expected credit loss associated with the financial asset.
On each reporting date, the Group assesses whether the credit risk associated with the financial asset has increased
significantly since initial recognition.
If the credit risk associated with a financial asset has not increased significantly since initial recognition, the Group
recognizes an amount equivalent to a 12-month expected credit loss as allowance on the financial asset. If the credit
risk associated with a financial asset has increased significantly since the initial recognition, the Group recognizes anamount equal to the lifetime expected credit loss as allowance on the financial asset.
However, for trade receivables, the Group always recognizes an amount equal to the lifetime expected credit loss
as allowance for doubtful accounts.
The expected credit loss of financial assets is estimated using a method that reflects the following factors:• An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;• The time value of money; and•R easonable and supportable information about past events, current conditions, and forecasts of future economic
conditions that is available without undue cost or effort at the reporting date.
The amounts associated with such measurements are recognized in net profit or loss.
If, after the recognition of an impairment loss, an event occurs which could reduce the amount of the impairment
loss, the decrease in impairment loss is reversed and recognized in net profit or loss.
(d) Derecognition of financial assets
The Group derecognizes financial assets when the contractual rights to cash flows from the financial asset expire,or when the Group transfers the financial asset, or when substantially all the risks and rewards of ownership of thefinancial asset have been transferred in a transaction.

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77

(ii) Financial liabilities(a) Initial recognition and measurement
The Group initially recognizes financial liabilities on the transaction date.
The Group, at initial recognition, measures all financial assets at fair value. However, financial liabilities measured
at amortized cost are measured at fair value less the transaction costs directly attributable to the financial liability.
Transaction costs of financial liabilities measured at fair value through net profit or loss are recognized in net profit
or loss.
(b) Classification and subsequent measurement
The Group classifies financial liabilities as either financial liabilities measured at fair value through net profit or loss or
financial liabilities measured at amortized cost. These classifications are determined at the time of initial recognition.
Financial liabilities after initial recognition are measured in the following manner according to each classification.
Derivative liabilities fall under the Group’s financial liabilities measured at fair value through net profit or loss. The
Group has not made any irrevocable elections to measure financial liabilities as financial liabilities measured at fairvalue through net profit or loss, at initial recognition. After initial recognition, financial liabilities measured at fair value
through net profit or loss are measured at fair value, and fair value changes are recognized in net profit or loss forthe period.
After initial recognition, financial liabilities measured at amortized cost are measured using the effective interest
method. Amortization using the effective interest method and any gains or losses due to derecognition arerecognized in net profit or loss for the period.
(c) Derecognition of financial liabilities
The Group derecognizes financial liabilities when they are extinguished (i.e., when the contractual obligation is
fulfilled), or when a specific contractual obligation is discharged, canceled, or expires.
(iii) Offsetting a financial asset and a financial liability
Financial assets and financial liabilities are offset and presented in the consolidated statement of financial position as
a net amount, if and only if the Group has a legal right to offset financial assets with financial liabilities and the Groupintends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
(5) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits withdrawable as necessary, and short-term investments which
are easily converted into cash, with original maturities of three months or less and minimal risk of changes in value.
(6) Inventories
Inventories are measured at the lower of cost and net realizable value.
Cost of inventories includes purchase costs, processing costs, and all other costs incurred in bringing inventory to its
existing location and condition.
Cost of inventories is calculated primarily using the first-in, first-out method.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs ofcompletion and selling expenses.
(7) Property, plant and equipment
The cost model has been applied, and all property, plant and equipment are measured at cost less any accumulated
depreciation and accumulated impairment losses.
Cost includes costs directly attributable to the acquisition of the assets, the cost of restoring the site, and other costs.
Depreciation of assets other than land and construction in progress is calculated using the straight-line method
based on the estimated useful life of each asset. The estimated useful lives of major assets are as follows:• Buildings and structures:
2 to 50 years• Machinery, equipment and vehicles: 2 to 20 years• Tools, furniture and fixtures:
2 to 20 years
The estimated useful lives, residual values, and depreciation methods are reviewed each year and revised as necessary.

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(8) Intangible assets
The cost model has been applied, and all intangible assets are measured at cost less any accumulated amortization
and accumulated impairment losses.
Intangible assets comprise mainly development expenses, and expenses incurred in development activities arecapitalized if and only if they meet all of the requirements listed below:• I t is technically feasible to complete their developments to use or sell them;•T he Group has the intent to complete their developments and to use or sell them;•T he Group is capable of using or selling them;• I t is highly probable that they will generate future economic benefits;•T he Group has the adequate technical, financial, and other resources to complete their developments and to use
or sell them; and•T he Group is capable of reliably measuring the expenditures associated with the intangible assets during thedevelopment process.
Capitalized development expenses are amortized using the straight-line method over the estimated useful life
(mainly five years) commencing from the time the product subject to development commences mass production.
The estimated useful lives and amortization methods are reviewed each year and revised as necessary.
(9) Leases
The Group determines whether a contract is or contains a lease at the commencement of the contract. If the right tocontrol the use of an asset for a specified period of time is transferred in exchange for consideration, the contract isdeemed to be or contain a lease.
(i) Lease as lessee
At the commencement date, a lessee shall recognize a right-of-use asset and a lease liability. At the commencement
date, the right-of-use asset is recognized at cost. After the commencement date, the right-of-use asset will bemeasured at cost less accumulated depreciation and accumulated impairment losses by applying the cost model.
Right-of-use assets will be depreciated using the straight-line method over either the estimated useful life of anasset or its lease term, whichever is shorter.
At the commencement date, a lessee shall measure the lease liability at the present value of the lease paymentsthat are not paid at that time. After the commencement date, the carrying amount of a lease liability is increased or
decreased in a manner to reflect the interest rate on the lease liability and the lease payments already paid. If a leaseliability is reassessed or the terms and conditions of a lease contract are modified, the lessee shall remeasure thelease liability and recognize the amount of the remeasurement of the lease liability as an adjustment to the right-ofuse asset.
For leases that expire within 12 months or of which underlying assets are of low value, lease payments arerecognized as net profit or loss primarily on a straight-line basis over the period of the lease.
(ii) Leases as lessor
Each lease is classified as either an operating lease or a finance lease. A lease is classified as a finance lease if ittransfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified
as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of anunderlying asset. Whether a lease is a finance lease or an operating lease depends on the substance of thetransaction rather than the form of the contract.
(a) Finance lease
At the commencement date of a lease, assets held under a finance lease are presented as a receivable at an amountequal to the net investment in the lease.
(b) Operating lease
Lease payments from operating leases are recognized as net profit or loss primarily on a straight-line basis.
(c) Sublease
In classifying a sublease, an intermediate lessor shall classify the sublease as an operating lease if the head lease is a
short-term lease; otherwise, the intermediate lessor shall classify the sublease by reference to the right-of-use asset
arising from the head lease.

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(10) Impairment of non-financial assets
During each reporting period, the Group assesses each asset or cash-generating unit for any indications of
impairment, and if any such indication exists, the Group estimates the recoverable amount of the asset or cashgenerating unit.
The recoverable amount is calculated at the higher of the fair value of the asset or cash-generating unit less costs
to sell and the value in use.
Value in use is calculated by discounting the estimated future cash flows to the present value using the pre-tax
discount rate that reflects the current market assessments of the time value of money.
If the recoverable amount is less than the carrying amount of the asset or cash-generating unit, the difference
between the carrying amount and the recoverable amount is recognized as an impairment loss in net profit or loss.
In terms of impairment losses recognized in the past, assessment is conducted for any indications of the possibilityof decrease in impairment, including cases in which the assumptions used to determine the recoverable amount havechanged. If any such indication exists, the recoverable amount of the asset or cash-generating unit is estimated, andif the recoverable amount exceeds the carrying amount of the asset or cash-generating unit, impairment loss isreversed up to the lower of the recoverable amount determined and the carrying amount net of depreciation thatwould have been determined if no impairment loss had been recognized in prior years.
(11) Non-current assets held for saleAmong assets or asset groups whose carrying amounts are expected to be recovered through a sale transaction
rather than continuing use, assets for which sale within one year is highly probable, assets which are available for
immediate sale in their present condition, and assets for which the Group’s management is committed to a plan tosell, the assets are classified as non-current assets held for sale.
Non-current assets held for sale are not depreciated or amortized and are measured at the lower of the carrying
amount and fair value less costs to sell.
(12) Employee benefits(i) Post-employment benefits
The Group has adopted defined benefit plans and defined contribution plans.
Defined benefit plans are recognized in the consolidated statement of financial position in the amount of defined
benefit plan obligations, which has been calculated at the discounted present value of the amount of estimated future
benefits earned by the employee as consideration for services rendered in the past and in the current period undereach plan, less the fair value of the plan assets.
The present value of defined benefit plan obligations and related service costs is calculated using the projected unit
credit method. The discount rate is determined by reference to market yields on high-quality corporate bonds withsimilar maturities to the obligations under the plans.
Increases/decreases through remeasurements of defined benefit plan obligations and plan assets are recognized inother comprehensive income.
Prior service costs resulting from plan amendments or curtailment are recognized in net profit or loss at the earlierof the time of amendment or the time at which the related restructuring costs or severance benefits are recognized.
The obligation to make contributions under the defined contribution plans is recognized in net profit or loss in the
period in which the employee renders the related service.
(ii) Short-term employee benefits
Short-term employee benefits including wages are recognized in net profit or loss in the period in which the employee
renders the related service.
Bonus payments are recognized as liabilities if the Group has a legal or constructive obligation to pay and theobligation can be estimated reliably.
The cost of paid leave is recognized as a liability in the period in which the employee renders the service which will
increase the employee’s entitlement to future paid leave.
(iii) Other long-term employee benefits
Other long-term employee benefits, including a long-service award system, are recognized as liabilities by estimating
the amount of future benefit that employees have earned in consideration for services rendered in the current andprior periods and discounting that amount to the present value.

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(13) Provisions
Provisions are recognized if a present legal or constructive obligation exists as a result of a past event that can be
estimated reliably and if it is probable that an outflow of economic resources will be required to settle the obligation.
When the time value of money is material, a provision is measured at the present value to which estimated cash
flows are discounted using a pre-tax discount rate that reflects the risks specific to the obligation. Increases in theamount of provisions associated with the passage of time are recognized in net profit or loss.
(14) Government-imposed levies
Government-imposed levies are recognized as a liability in the estimated amount to be paid when an event obligating
payment to the government has occurred.
(15) Equity(i) Common shares
The amount of equity instruments issued by the Company is recognized in common stock and capital surplus, anddirect issue costs (after consideration of tax effects) are deducted from capital surplus.
(ii) Treasury stock
When the Company acquires treasury stock, the consideration paid, including direct transaction costs (after
consideration of tax effects), is recognized as a deduction from equity. When the Company disposes of treasury stock,gains or losses on sales of treasury stock are recognized in capital surplus.
(16) Revenues(i) Revenue from contracts with customers
The Group recognizes revenue based on the following five-step approach.
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract(s).
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract(s).
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Group’s primary line of business involves the manufacture and sale of seats for automobiles. Revenue
pertaining to the sale of these products will be recognized when a product and control of said product are transferredto the customer and the performance obligation is deemed satisfied according to the contract with the customer.
Revenue will be measured as amounts net of discounts and other deductions from compensation agreed upon in
the contract with the customer.
(ii) Interest income
Interest income is recognized based on the effective interest method.
(iii) Dividend income
Dividend income is recognized when the right to receive payment of the dividend is established.
(17) Government grants
Government grants are recognized at fair value when and only when there is reasonable assurance that the Group willcomply with the conditions attached to the grant and that the grant will be received.
Government grants relating to revenues are recognized in net profit or loss over the period in which the expenses
are compensated by the grants.
Government grants relating to assets are recognized as deferred revenue and reclassified to net profit or loss on asystematic basis over the useful life of the asset.
(18) Share-based remuneration
The Company has adopted a restricted stock compensation scheme, which is accounted for as an equity-settled share-based
remuneration plan. As to the restricted stock compensation, the restricted shares as of the allotment date are measured atfair value and recognized as an expense, along with a corresponding increase in equity, over the vesting period.

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(19) Income taxes
Income taxes comprise current taxes and deferred taxes, and they are recognized in net profit or loss, excluding
items related to business combinations, items that are directly recognized in equity, and items recognized in othercomprehensive income.
Current taxes are calculated based on the estimated payment to or refunds from the tax authorities. Current tax
liabilities are calculated based on tax rates and tax laws that have been enacted or substantively enacted by the end of
the fiscal year.
Deferred taxes are recognized for temporary differences between the carrying amounts of assets and liabilities foraccounting purposes and their tax bases at the end of the fiscal year, unused tax losses, and unused tax credits(hereinafter “temporary differences”).
Deferred tax liabilities are generally recognized for all taxable temporary differences, while deferred tax assets arerecognized for deductible temporary differences, unused tax losses, and unused tax credits only to the extent that itis probable that there will be taxable profits against which the temporary differences may be utilized.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when thetemporary difference is reversed based on the tax rates and tax laws that have been enacted or substantively enacted
by the end of the fiscal year.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same tax authority.
The Group has adopted the amendments to IAS 12 Income Taxes issued by the International Accounting Standards
Board (IASB) in May 2023. Also, the Group has adopted a temporary exception exempting from recognition anddisclosure of deferred tax assets and deferred tax liabilities related to corporate taxes under the Pillar Two
Model Rules.
(20) Basic earnings per share
Basic earnings per share is calculated by dividing profit or loss for the year attributable to ordinary shareholders of theparent by the weighted-average number of ordinary shares outstanding during the year adjusted for the weightedaverage number of treasury shares purchased in the year.

4. NEW STANDARDS NOT YET ADOPTED BY THE GROUP
None of the new or revised standards and interpretations that were issued by the date of approval of the consolidated
financial statements have a material impact on the Group.

(2) A ccounting method for revenue, profits or losses, assets, liabilities, and other items according to reportable segment
Accounting methods for reportable business segments are the same as those presented in Note 3 “ImportantAccounting Policies.”
The Company decides the price of transactions carried out among segments by considering market prices andgross costs, and through price negotiations.
(3) Information on revenue, profits or losses, and other items according to reportable segment
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)
Reportable segments
Japan

The Americas

China

Asia
and Europe

Total

Adjustments

Consolidated

External revenue¥61,515¥144,192¥111,177¥33,074¥349,958¥      —

¥349,958

Inter-segment revenue

21,183

335

4,059

1,128

26,707(26,707)—

Revenue:

Total¥82,698¥144,527¥115,236¥34,202¥376,666¥(26,707)¥349,958¥ 6,261¥   (252)¥ 20,000¥ 1,957¥ 27,966¥ (4,967)¥ 22,998

Finance income andfinance costs

—

—

—

—

—

—

2,249

Share of profit of investments
accounted for using theequity method

—

—

—

—

—

—

590

Income before income tax

—

—

—

—

—

—

25,839Segment profits (losses)

Notes: 1. Adjustments of –¥4,967 million for segment profits included an inter-segment elimination of ¥191 million and operating
expenses of –¥5,159 million associated with the administration division of the headquarters of the parent, which could not
be allocated.
2. Profits (losses) of reportable segments are figures based on operating income as reported in the consolidated statement of
profit and loss .

Other important items(Unit: Million yen)
Reportable segments

5. SEGMENT INFORMATION(1) Overview of reportable segments
The reportable segments are components of the Company for which separate financial information is available. Thesesegments file monthly reports which the Board of Directors uses for deciding the allocation of management recourses
and evaluating results.
The Company establishes subsidiaries in Japan and other countries for the execution of its business activities. In thecourse of its business management, the Company categorizes its subsidiaries into reporting segments based on theirlocation and evaluates their business results by each segment.
The categories of reportable segments are as follows.
Reportable segment

Japan

Depreciation and amortization

The Americas

Asia
and Europe

China

Total

Adjustments

Consolidated¥3,268¥4,252¥2,085¥1,440¥11,046¥(12)¥11,033

Impairment losses

137

—

6

—

143

—

143

Capital expenditures

4,528

6,213

1,392

2,332

14,466—

14,466

Note: The adjustment for depreciation and amortization is an inter-segment elimination.

Country or region

Japan

Japan

The Americas

United States, Canada, Mexico, Brazil

China

China and Hong Kong

Asia and Europe

Thailand, Philippines, India, Indonesia, United Kingdom*, Hungary, Poland* With the dissolution of TS TECH UK LTD, a consolidated subsidiary based in the United Kingdom, this company is removed from thescope of consolidation as of the end of the current fiscal year.
In the reportable segments of Japan, The Americas, and Asia and Europe, the Company manufactures and sells products that mainly
consist of automobile seats, automobile interiors, motorcycle seats, and resin-based products for motorcycles. In the reportablesegment of China, the Company engages primarily in the manufacture and sale of automobile seats and automobile interiors.

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For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)(5) Information according to region(i) Revenue(Unit: Million yen)

Reportable segments
Japan

The Americas

Asia
and Europe

China

Total

Adjustments

Revenue:
External revenue¥61,266¥193,333¥115,985¥38,616¥409,200

Inter-segment revenue

23,677

681

1,814

1,547

27,721¥   —¥409,200(27,721)—

FY2023(April 1, 2022–March 31, 2023)

Japan¥ 60,298¥ 60,346

The United States

103,735

138,645

Canada34,23344,079111,600

116,429¥84,943¥194,015¥117,800¥40,164¥436,922¥(27,721)¥409,200

China¥ 5,151¥ (3,199)¥ 18,227¥ 2,175¥ 22,355¥ (7,098)¥ 15,257

Other

40,09149,700Finance income andfinance costs

—

—

—

—

—

—

2,948

Total

¥349,958¥409,200

Share of profit of investments
accounted for using theequity method

—

—

—

—

—

—

487

Income before income tax

—

—

—

—

—

—

18,692

Total
Segment profits (losses)

Notes: 1. Adjustments of –¥7,098 million for segment profits included an inter-segment elimination of ¥278 million; operating
expenses of –¥6,102 million associated with the administration division of the headquarters of the parent, which could not
be allocated; and loss of –¥1,274 million on reversal of foreign currency translation adjustments arising from the dissolutionof TS TECH UK LTD, a consolidated subsidiary based in the United Kingdom.
2. Profits (losses) of reportable segments are figures based on operating income as reported in the consolidated statement of
profit and loss.

Other important items(Unit: Million yen)
Reportable segments
Japan

Depreciation and amortization
Impairment losses
Capital expenditures

The Americas

Asia
and Europe

China

Adjustments

Consolidated¥3,613¥4,457¥2,296¥1,527¥11,895

Total

¥(16)

¥11,879

—

—

23

—

23

—

23

7,093

3,509

1,125

2,877

14,606—

14,606(4) Information related to products and services
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)
Segment information according to products and services is omitted as revenue from external customers in a single
product/service category accounts for the majority of revenue in the consolidated statement of profit or loss.
For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)
Segment information according to products and services is omitted as revenue from external customers in a single
product/service category accounts for the majority of revenue in the consolidated statement of profit or loss.

TS TECH Integrated Report 2023

Note: Revenue is based on customers’ locations and is categorized into countries and regions.

(ii) Non-current assets (excluding financial instruments, deferred tax assets, net defined benefit asset, andrights arising from insurance contracts)(Unit: Million yen)
FY2022

FY2023(As of March 31, 2022)(As of March 31, 2023)

Japan¥37,614¥41,034

The United States

18,854

18,169China

11,19010,465

Other

19,781

24,893

Total¥87,440¥94,562

FY2022

FY2023(6) Information according to major customers

Note: The adjustment for depreciation and amortization is an inter-segment elimination.

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FY2022(April 1, 2021–March 31, 2022)

Consolidated(Unit: Million yen)

Honda Motor Co., Ltd. Group(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)¥313,659¥364,274

Note: Revenue is recorded for the Japan, The Americas, China, and Asia and Europe segments.

6. CASH AND CASH EQUIVALENTS
The breakdown of cash and cash equivalents is as follows.
(Unit: Million yen)
FY2022

Cash and cash equivalents

FY2023(As of March 31, 2022)(As of March 31, 2023)¥139,585¥132,914

Note: T he balance of “Cash and cash equivalents” in the consolidated statement of financial position and the balance of “Cash andcash equivalents at end of period” in the consolidated statement of cash flows coincide.

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85

7. TRADE AND OTHER RECEIVABLES
The breakdown of trade and other receivables is as follows.

Amounts recognized as dividends received from equity instruments measured at fair value through othercomprehensive income are as follows.
(Unit: Million yen)
FY2022

Trade receivables
OthersAllowance for doubtful accounts
Total

FY2023(As of March 31, 2022)(As of March 31, 2023)¥60,222¥69,501

5,208

5,312

(1)

(1)

¥65,430¥74,812

Note: Financial assets among “Trade and other receivables” are classified as financial assets measured at amortized cost.

FY2022

FY2023(As of March 31, 2022)(As of March 31, 2023)¥ 8,600¥15,392

Short-term loans receivable22Long-term loans receivable

549

529

Lease receivables

4,403

8,599

Equity instruments

18,411

19,224

0

27

4,846

3,239

(17)

(14)

¥36,797¥47,002

OthersAllowance for doubtful accounts
Total

FY2023(April 1, 2022–March 31, 2023)

¥532

¥656

FY2022

FY2023

Dividends received on investments held at the end of the period

9. INVENTORIESThe breakdown of inventories is as follows.

(As of March 31, 2022)(As of March 31, 2023)¥ 4,576¥ 3,557

Work in progress

3,273

2,287

Raw materials and supplies

35,681

26,094

Total¥43,532¥31,939

Merchandise and finished goods(Unit: Million yen)

Derivative financial assets

FY2022(April 1, 2021–March 31, 2022)(Unit: Million yen)

8. OTHER FINANCIAL ASSETS
The breakdown of other financial assets is as follows.

Deposits with maturities of three months or more

(Unit: Million yen)

Note: I nventories recognized as expenses during the previous fiscal year and the current fiscal year amount to ¥71 million and¥1,108 million respectively.

10. PROPERTY, PLANT AND EQUIPMENT
The following are the changes in the cost, accumulated depreciation and impairment loss, and carrying amounts ofproperty, plant and equipment.
Cost(Unit: Million yen)
Buildings
and structures

Machinery,equipment
and vehicles

Tools,
furnitureand fixtures

Land¥67,516¥72,809¥34,167¥13,889¥ 2,498¥190,881

8,865

14,238Constructionin progress

Current assets¥ 9,700¥17,757

Non-current assets

27,097

29,244

Balance as of April 1, 2021

Total

¥36,797¥47,002

Acquisition cost

2,724

1,752

382

513

Sales or disposal(2,409)(4,553)(2,146)

(862)

(33)

(10,005)

147

2,822

1,288

12

(5,108)

(837)

4,182

5,746

2,377

535

374

13,216

Notes: 1. Deposits with maturities of three months or more, short-term loans receivable, and long-term loans receivable are classified
as financial assets measured at amortized cost.
2. Equity instruments are classified as financial assets measured at fair value through other comprehensive income.
3. Derivative financial assets are classified as financial assets measured at fair value through net profit or loss.

Balance as of March 31, 2022

(Unit: Million yen)
FY2023(As of March 31, 2022)(As of March 31, 2023)¥13,496¥13,653PIOLAX, Inc.

480

596

Isuzu Motors Ltd.

482

501

OILES CORPORATION

444

493

Kurabo Industries Ltd.

305

437

Honda Motor Co., Ltd.

Effects of foreign currency translation
Other

Major securities and fair values designated as equity instruments measured at fair value through othercomprehensive income are as follows.
FY2022

Reclassification to other account

Other

3,204

3,544

Total

¥18,411¥19,224

Total

(565)

(50)

(114)

(16)

14

(731)

¥71,595¥78,528¥35,954¥14,072¥ 6,611¥206,762

Acquisition cost

1,520

1,926

1,379

767

8,557

14,149

Sales or disposal(677)(2,283)(2,896)

(297)

(8)

(6,162)

Reclassification to other account

4,015

5,956

750

9

(11,507)(776)

Effects of foreign currency translation

2,869

3,832

1,431

318

510

8,962

400

265

106

64

92

929

¥79,724¥88,225¥36,725¥14,934¥ 4,255¥223,866

Other
Balance as of March 31, 2023

The Group has elected to present subsequent changes in the fair value of the equity instruments held by the Group
in other comprehensive income, since those equity instruments are held to maintain or strengthen the business
relationship with business partners.

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87

Accumulated depreciation and impairment loss
(Unit: Million yen)
Buildings
and structures

Machinery,equipment
and vehicles

Tools,
furnitureand fixtures

Land

Constructionin progress

Total¥33,714¥57,112¥30,556¥444¥—¥121,827

2,759

4,202

1,715

74

—

8,751

Impairment loss

—

5

1

137

—

143

Sales or disposal(2,339)(4,261)(2,049)(13)—(8,663)

(53)

(96)

(51)

(5)

—

(207)

1,813

4,440

2,154

45

—

8,455

(35)

(4)

(271)

(93)

—

(405)

¥35,858¥61,397¥32,056¥590¥—¥129,902

3,151

4,466

1,851

86

—

9,555

Impairment loss

—

22

0

—

—

23

Sales or disposal(636)(2,152)(2,878)(86)—(5,753)

—

—

—

—

—

—

1,364

3,126

1,313

9

—

5,814

239

101

71

37

—

450

¥39,977¥66,961¥32,416¥636¥—¥139,992

Balance as of April 1, 2021
Depreciation

Reclassification to other accountEffects of foreign currency translation
Other
Balance as of March 31, 2022
Depreciation

Reclassification to other accountEffects of foreign currency translation
Other
Balance as of March 31, 2023

Notes: 1. Depreciation of property, plant and equipment is included in “Cost of sales” and “Selling, general and administrative
expenses” in the consolidated statement of profit or loss.
2. Depreciation of right-of-use assets included in property, plant and equipment are outlined in Note 31 “Leases.”

11. INTANGIBLE ASSETS(1) Schedule of intangible assets
The following are changes in the cost, accumulated amortization and impairment loss, and carrying amounts ofintangible assets.
Cost(Unit: Million yen)

Balance as of April 1, 2021
Acquisition cost

SoftwareDevelopment
expenses

Goodwill¥5,943¥18,518

Other

Total

¥463

¥1,228¥26,154

111

—

—

116

228

—

1,632

—

—

1,632

(175)

(3,787)——(3,962)

Effects of foreign currency translation

117

156

—

9

283

Other

129

—

—

(145)

(16)

¥6,125¥16,520¥463¥1,209¥24,319

318

—

—

137

456

—

1,910

—

—

1,910

Increase due to internal development
Disposal

Balance as of March 31, 2022
Acquisition cost
Increase due to internal development(143)(2,817)—(0)(2,960)Effects of foreign currency translation

32

157

—

7

197

Other

57

—

—

(39)

18

¥6,392¥15,770¥463¥1,314¥23,941

SoftwareDevelopment
expenses

Goodwill¥5,361¥  9,743¥—¥136

Disposal

Balance as of March 31, 2023
Accumulated amortization and impairment loss

Carrying amounts(Unit: Million yen)

(Unit: Million yen)
Buildings
and structures

Machinery,equipment
and vehicles

Tools,
furnitureand fixtures

Land

Constructionin progress

Total

Balance as of April 1, 2021

Other

Total

¥15,242

Balance as of April 1, 2021

¥33,802¥15,697¥3,610¥13,445¥2,498¥69,053

Amortization

307

1,837

—

136

2,281

Balance as of March 31, 2022

35,737

17,1303,898

13,482

6,611

76,860

Disposal(173)(3,787)——(3,960)

Balance as of March 31, 2023

39,746

21,263

4,309

14,2984,255

83,874

Effects of foreign currency translation

104

148

—

8

261

Note: The carrying amounts of right-of-use assets included in property, plant and equipment are outlined in Note 31 “Leases.”

Other
Balance as of March 31, 2022

(10)

—

—

(76)

(86)

¥5,589¥  7,942¥—¥206¥13,738

Amortization

271

1,956

—

95

2,323

Disposal(142)(2,816)—(0)(2,959)

28

149

—

4

182

Effects of foreign currency translation
Other
Balance as of March 31, 2023

1

(0)

—

(32)

(31)

¥5,748¥ 7,232¥—¥272¥13,252

Note: A mortization of intangible assets is included in “Cost of sales” and “Selling, general and administrative expenses” in the
consolidated statement of profit or loss.

Carrying amounts(Unit: Million yen)

Balance as of April 1, 2021

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SoftwareDevelopment
expenses

Goodwill¥581¥8,774

¥463

Other

Total

¥1,092¥10,911

Balance as of March 31, 2022

536

8,577

463

1,003

10,580

Balance as of March 31, 2023

644

8,538

463

1,042

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89

(2) Development expenses
The breakdown of development expenses is as follows.
(Unit: Million yen)
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)¥11,930¥14,344

Reclassification to capitalized development expenses(1,632)(1,910)

Amortization of capitalized development expenses

1,837

1,956

¥12,136¥14,390

R&D expenditures incurred during the period

Total

14. INCOME TAXES(1) Deferred tax assets and deferred tax liabilities
The breakdown of deferred tax assets and deferred tax liabilities is as follows.
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)

Property, plant and equipment
Intangible assets(Unit: Million yen)
FY2022

FY2023(As of March 31, 2022)(As of March 31, 2023)

Notes and accounts payable – trade¥47,588¥50,300

Other

19,436

19,409Total¥67,024¥69,710

Note: Financial liabilities related to “Trade and other payables” are classified as financial liabilities measured at amortized cost.

Accrued expenses and provisions

Lease obligations¥   —¥ 2,232

1,021

106

—

1,128

117

(19)

—

98

1,568

68

—

1,636

301

(14)

(19)

266

23

972

—

995

Other
Total deferred tax assets

1,185

1,096

110

2,392

¥ 6,701¥1,958¥  90¥ 8,750¥ 1,003¥  631¥   —¥ 1,635

2,455

(226)

—

2,229

Deferred tax liabilities:

Investments in equity instruments

3,740

—

207

3,947

(Unit: Million yen)

Net defined benefit asset

1,067

(75)

294

1,285

FY2023

Undistributed earnings of foreign subsidiaries

1,720

(521)

—

1,198

(As of March 31, 2022)(As of March 31, 2023)¥6,030¥4,822

108

7

Total

¥6,138¥4,829Current liabilities¥1,718¥1,166

Non-current liabilities

4,420

3,662

Total

¥6,138¥4,829Derivative financial liabilities¥ (250)Net defined benefit liability

Intangible assets

FY2022¥ 2,483

Balance atthe end of
the fiscal year

Unused tax losses

Property, plant and equipment
13. OTHER FINANCIAL LIABILITIESThe breakdown of other financial liabilities is as follows.

Recognizedthrough net
profit or loss

Deferred tax assets:
Inventories

12. TRADE AND OTHER PAYABLES
The breakdown of trade and other payables is as follows.

Balance atthe beginning of
the fiscal year

Recognizedthrough othercomprehensive
income

774

695

—

1,470

Total deferred tax liabilities

Other¥10,762¥  503¥ 501¥11,766

Net deferred tax liabilities¥ (4,060)¥1,455¥(410)¥ (3,016)

Note: T he difference between the total amount recognized through net profit or loss and total deferred tax expenses is due tofluctuations in foreign exchange rates.

Note: Derivative financial liabilities are classified as financial liabilities measured at a fair value through net profit or loss.

90

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91For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)
Balance atthe beginning of
the fiscal year

Recognizedthrough net
profit or loss

Recognizedthrough othercomprehensive
incomeBalance atthe end of
the fiscal year

Deferred tax assets:
Inventories
Property, plant and equipment
Intangible assets
Accrued expenses and provisions
Net defined benefit liability
Unused tax losses
Other
Total deferred tax assets¥ 2,232

¥

(28)

¥

—

¥ 2,203

1,128

161

—

1,289

98

848

—

947

1,636

122

—

1,759

266

(68)

209

407

995

(82)

—

913

2,392

828

(110)

3,110

¥ 8,750¥1,781¥ 98¥10,630¥ 1,635¥ 583¥¥ 2,219

Deferred tax liabilities:
Property, plant and equipment—

Intangible assets

2,229

115

—

2,344

Investments in equity instruments

3,947

—

190

4,138

Net defined benefit asset

1,285

(72)

232

1,445

Undistributed earnings of foreign subsidiaries

1,198

(55)

—

1,142

Other

1,470

(599)

—

870

Total deferred tax liabilities¥11,766

¥

(27)

¥ 423

¥12,162

Net deferred tax liabilities¥ (3,016)¥1,809¥(324)¥ (1,531)

The breakdown by expiration date of unused tax losses and tax credits for which deferred tax assets have not beenrecognized is as follows. Amounts are presented on a taxable amount basis.
(Unit: Million yen)
FY2022(Unit: Million yen)
FY2022

Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities

FY2023(As of March 31, 2022)(As of March 31, 2023)¥ 2,454¥ 3,550

5,470

5,081

¥(3,016)¥(1,531)¥  224¥  569569

702

Between 2 and 3 years

664

1,527

Between 3 and 4 years

7

22

Between 4 and 5 years—

175

Within 1 year

More than 5 years
Total(Unit: Million yen)
FY2022

Deductible temporary differences

92

TS TECH Integrated Report 2023

57

89

¥1,524¥3,087

Taxable temporary differences relating to investments in subsidiaries for which deferred tax liabilities have not beenrecognized are as follows.
Deferred tax liabilities were not recognized as the timing of the reversal of the temporary differences could becontrolled by the Group and it was probable that the temporary differences would not reverse in the foreseeable future.
Amounts are presented on an income basis.
(Unit: Million yen)
FY2022

Taxable temporary differences

FY2023(As of March 31, 2022)(As of March 31, 2023)¥139,312¥139,930(2) Income tax expenses
The breakdown of income tax expenses is as follows.
(Unit: Million yen)
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)¥ 8,146¥  9,604

Current tax expense:
Taxable amount for the fiscal year
Adjustment for prior years
Total current tax expense6042¥ 8,207¥  9,647¥(1,525)¥(3,009)—

15

Deferred tax expense:
Accrual and reversal of temporary differences
Changes in tax rates

Deductible temporary differences for which deferred tax assets have not been recognized are as follows. Amounts
are presented on a taxable amount basis.

(As of March 31, 2023)

Between 1 and 2 years

Note: The difference between the total amount recognized through net profit or loss and total deferred tax expenses is due tofluctuations in foreign exchange rates.

Deferred tax assets and deferred tax liabilities in the consolidated statement of financial position are as follows.

FY2023(As of March 31, 2022)

354

1,203

Total deferred tax expense¥(1,171)¥(1,790)

Total income tax expense¥ 7,035¥  7,856

Changes in unrecognized temporary differences, etc.

FY2023(As of March 31, 2022)(As of March 31, 2023)

¥851

¥498

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93

Reconciliation of the effective statutory tax rates with the average actual tax rates in the consolidated statement of
profit or loss is as follows.

For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)

(Unit: %)FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

29.9%

29.9%

Differences with tax rates applied to foreign subsidiaries

(6.1)

(1.2)

Undistributed earnings of foreign subsidiaries

(1.9)

0.3

Permanent differences including dividend income(19.1)(19.1)

Differences due to factors including elimination of intra-grouptransactions

24.2

28.5

Share of loss (profit) of entities accounted for using the equity
method

(0.7)

(0.8)

Tax credits

(2.1)

(4.2)

Changes in unrecognized deferred taxes

1.4

6.4

Effective statutory tax rate

Other
Average actual tax rate

1.6

2.2

27.2%

42.0%

(Unit: Million yen)
Provision for
product
warranties

Provision forseverance
charges

Asset retirement
obligations

Other

Total

¥    76¥  2,343¥  97¥  419¥ 2,936

Increase during the period

163

—

—

80

243

Decrease during the period (provision used)(205)(2,188)

(12)

(195)

(2,602)

Decrease during the period (reversal)

—

(53)

—

(190)

(243)

Effects of foreign currency translation

4

26

—

10

41

¥    39¥    127¥  84¥  123Current liabilities
Non-current liabilities
Total¥    39¥    127¥  12¥    38

—

—

72

85

¥    39¥    127¥  84¥  123

¥
¥

Other

Total

¥   39¥  127¥ 84¥123¥  375

625

—

72

164

862

Decrease during the period (provision used)

(268)

(129)

(27)

(39)

(465)

Decrease during the period (reversal)

—

—

—

—

—

Effects of foreign currency translation

4

1

—

10

17

Balance at the end of the fiscal year¥  400

¥

—

¥129

¥259

¥  789Current liabilities¥  400

¥

—

¥  —

¥239

¥  639—¥  400217
375

TS TECH Integrated Report 2023

—

129

20

150

—

¥129

¥259

¥  789(2) Defined benefit plan(i) Reconciliation of defined benefit obligations (assets) with the net defined benefit liability (asset) recorded in
the consolidated statement of financial position(Unit: Million yen)
FY2022

FY2023(As of March 31, 2022)(As of March 31, 2023)

Ending balance of defined benefit obligations¥ 17,561¥ 16,763

Ending balance of plan assets(20,406)(19,788)

Net amount of defined benefit obligations and assets(2,845)(3,024)

Net defined benefit liability

1,466

1,917

Net defined benefit asset(4,311)(4,941)¥ (2,845)¥ (3,024)

Net amount of liabilities and assets recorded in the consolidated
statement of financial position

94¥

16. POST-EMPLOYMENT BENEFITS(1) Overview of the post-employment benefit plan adopted by the GroupTo prepare for the payment of retirement benefits to its employees, the Company and certain consolidated
subsidiaries have adopted funded and unfunded defined benefit plans and defined contribution plans.
The defined benefit plans consist mainly of a contract-type corporate pension plan which pays out lump-sum
payments and annuities based on a points system.
The contract-type corporate pension plan is managed, pursuant to a defined benefit corporate pension contract
entered into by both labor and management, through the entrustment of the management and administration of plan
assets to an investment institution.
In addition, the contract sets forth mandatory recalculation of premiums every five years, pursuant to the Defined
Benefit Corporate Pension Act, in order to maintain balanced finances into the future.

375

157
¥

Asset retirement
obligations

Non-current liabilities

For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)

Balance at the end of the fiscal year

Provision forseverance
charges

Increase during the period

Balance at the beginning of the fiscal year

Total

15. PROVISIONS
Changes in the amounts of provisions are as follows.

Balance at the beginning of the fiscal year

Provision for
product
warranties

TS TECH Integrated Report 2023

95

(iv) Major breakdown of fair values of plan assets(ii) Reconciliation of present value of defined benefit obligations(Unit: Million yen)
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)¥17,370¥17,561

1,089

999

Interest cost

162

152

Prior service cost

(218)

13

—

105

Actuarial differences (due to changes in financial assumptions)

(382)

(540)

Actuarial differences (due to adjustments)

(73)

455

Benefits paid

(503)

(2,053)

Effects of foreign currency translation

116

70

¥17,561¥16,763

Beginning balance of defined benefit obligations
Service cost

Actuarial differences (due to population statistics)

Ending balance of defined benefit obligations(Unit: Million yen)

Notes: 1. Service cost, interest cost, and prior service cost are included in “Cost of sales” and “Selling, general and administrative
expenses” in the consolidated statement of profit or loss.
2. Actuarial differences are included in “Remeasurements of net defined benefit plans” in the consolidated statement ofcomprehensive income.
3. During the current fiscal year, the Company expanded post-retirement support programs and established supplements forearly retirement. As a result, the number of retirees increased, leading to an increase in benefit payments in comparison
with the previous fiscal year.

FY2023

FY2022(As of March 31, 2023)(As of March 31, 2022)

Assets with quoted
market prices
in active markets

Assets without quoted
market prices
in active markets

Assets with quoted
market prices
in active markets

Equity instruments¥9,807¥    —¥10,266

Debt instruments

—

6,906

—

6,026

General accounts

—

2,401

—

2,372

Other

2

1,288

6

1,116

Total

¥9,810¥10,596¥10,272¥9,515

FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)¥19,297¥20,406

Interest income

142

126

Return on plan assets other than interest

751

54

Contributions from the employer

643

654

Benefits paid

(430)

(1,457)2

2¥20,406¥19,788

Ending balance of plan assets—(Unit: %)FY2022(Unit: Million yen)

Effects of foreign currency translation¥(v) Investment policy of plan assets
With respect to its plan assets, the Group upholds the investment policy of maintaining a well-balanced, diversified
portfolio comprised mainly of conventional assets within the acceptable boundaries of risk and of aiming for longterm, stable revenue levels that will ensure the performance of its payment obligations.
The Group reviews its investment policy as necessary depending on the financial conditions and the investment
environment of the defined benefit plans.
(vi) Significant actuarial assumptions and analysis of sensitivity thereto
Significant actuarial assumptions are as follows.

(iii) Reconciliation of the fair values of plan assets

Beginning balance of plan assets

Assets without quoted
market prices
in active markets

Notes: 1. Interest income is included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated
statement of profit or loss.
2. Return on plan assets other than interest is included in “Remeasurements of net defined benefit plans” in the consolidated
statement of comprehensive income.
3. During the current fiscal year, the Company expanded post-retirement support programs and established supplements forearly retirement. As a result, the number of retirees increased, leading to an increase in benefit payments in comparison
with the previous fiscal year.

FY2023(As of March 31, 2022)(As of March 31, 2023)

0.8%

1.2%

Discount rate

The estimated effects of changes in actuarial assumptions on defined benefit obligations are as follows.
(Unit: Million yen)
Effects on defined benefit obligations

Discount rate

FY2022

FY2023

Changes in assumptions(As of March 31, 2022)(As of March 31, 2023)

Rise by 0.5%¥(1,042)¥(1,070)

Fall by 0.5%

1,154

957

Note: This analysis assumes that all variables other than the discount rate remain fixed.

(vii) Contribution to plan assets in the following fiscal year
The Company plans to contribute ¥679 million to plan assets in the year ending March 31, 2024 (April 1, 2023 toMarch 31, 2024).
(viii) Maturity analysis of defined benefit plans
Maturity analysis of defined benefit plans is as follows.
(Unit: Years)
FY2022

Weighted-average duration

FY2023(As of March 31, 2022)(As of March 31, 2023)

13.5

11.9

(3) Defined contribution plans
Amounts recognized as expenses of the defined contribution plans are as follows.
(Unit: Million yen)
FY2022

Amounts recognized as expenses

96

TS TECH Integrated Report 2023

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

¥626

¥832

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97

17. NET ASSETS AND OTHER COMPONENTS OF EQUITY(1) Management of shareholders’ equity
The Group manages its shareholders’ equity in order to ensure the stable, continuous payout of dividends while atthe same time utilizing it in investments for the development of new technology and the expansion of its business.
The Group uses the equity ratio as the primary indicator in the management of shareholders’ equity, which is
calculated by dividing “Total equity attributable to owners of parent” by “Total liabilities and equity.”(5) Changes in other components of equity
Changes in other components of equity are as follows.
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)
Financial assets
measured at fairvalue through other Remeasurements
comprehensiveof net definedincomebenefit plans(Unit: Million yen)
FY2022(As of March 31, 2022)

FY2023(As of March 31, 2023)

Beginning balance

Shareholders’ equity:
Total equity attributable to owners of parent¥296,855¥298,791

Total liabilities and equity

415,985

416,226

Equity ratio (%)

71.4%

71.8%

Note: The Group is not subject to any material restrictions from third parties regarding its shareholders’ equity.

(2) Details of capital surplus
Details of capital surplus are as follows.
(i) Legal capital surplus
The Companies Act of Japan (hereinafter “the Companies Act”) requires that in the issue of shares, 50% or more of theamount of payment for shares and assets delivered be incorporated into common stock and the remaining amountbe incorporated into legal capital surplus. The Companies Act also provides that legal capital surplus may beincorporated into common stock by resolution of a shareholders’ meeting.
(ii) Other capital surplus
Increases, etc., in equity corresponding to gains (losses) on disposal of treasury stock and share-based payment transactions(3) Details of retained earnings
Details of retained earnings are as follows.
(i) Legal retained earnings
The Companies Act requires that an amount equivalent to 10% of dividends from retained earnings to be paid be
appropriated and set aside as legal capital surplus and legal retained earnings until the total of legal capital surplus andlegal retained earnings amounts to 25% of common stock. Such legal retained earnings may be used to compensate
for capital deficits. Legal retained earnings may also be reversed by resolution of a shareholders’ meeting.
(ii) Other retained earnings
Other retained earnings represent the cumulative amount of profits earned by the Group.
(4) Details of other components of equity
Details of other components of equity are as follows.
(i) Financial assets measured at fair value through other comprehensive income
The difference between the cost of financial assets measured at fair value through other comprehensive income andthe fair value at the reporting date(ii) Remeasurements of net defined benefit plans
Returns on plan assets other than actuarial differences and interest(iii) Differences on translation from foreign operations
Translation differences arising from the translation of financial statements of subsidiaries prepared in functional
currencies other than Japanese yen into Japanese yen

Total¥8,972¥1,184¥ (4,417)¥ 5,738573

877

14,52015,971Other comprehensive income
Other
Ending balance

Differenceson translationfrom foreign
operations

—

—

—

—

¥9,545¥2,061¥10,103¥21,710For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)
Financial assets
measured at fairvalue through other Remeasurements
comprehensiveof net definedincomebenefit plans

Beginning balance

Total¥ 9,545¥2,061¥10,103¥21,710587(5)10,743

11,325

Other comprehensive income

(0)

—

—

(0)

¥10,132¥2,056¥20,846¥33,035

Other
Ending balance

Differenceson translationfrom foreign
operations(6) Total number of shares authorized to be issued and total number of shares issued
The total number of shares authorized to be issued and total number of shares issued were as follows.
(Unit: Number of shares)
FY2022

FY2023(As of March 31, 2022)(As of March 31, 2023)

Total number of shares authorized to be issued

272,000,000

272,000,000

Total number of shares issued

136,000,000

136,000,000

Note: All shares issued by the Company are common stock with no par value and no restrictions on the shareholders’ rights.

(7) Treasury stock
The amount of treasury stock is as follows.
(Unit: Number of shares)
FY2022

Amount of treasury stock at beginning of the fiscal year
Increase by stock split
Purchase of treasury stock by resolution of the Board of Directors
Purchase of stock less than one unit, etc.
Disposal of treasury stock as restricted stock compensation
Treasury stock held by entities accounted for using the equity
method (the Company’s shares) attributable to the Company
Amount of treasury stock at end of the fiscal year

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

875,754

3,162,967

875,754—

1,461,100

5,383,600

1,809

2,280

(51,200)(58,880)

(250)

5,179

3,162,967

8,495,146

Notes: 1. The Company conducted a two-for-one stock split of common shares as of April 1, 2021. For the previous fiscal year, thenumber of treasury stock at the beginning of the fiscal year represents the number of treasury stock before the stock split.
2. For details on restricted stock delivered, see Note 29 “Share-Based Remuneration.”98

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99

18. REVENUE(1) Disaggregation of revenue
The Company positions “Japan,” “The Americas,” “China,” and “Asia and Europe” geographically as its four reportablesegments and presents revenue from these regions.
Additionally, revenue is further disaggregated into the business segments of its motorcycle business, automobile
business (seats and interior products), and other business. The relationship between disaggregated revenues and therevenues from each reportable segment is as follows.
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)
Reportable segments

Motorcycle business
Automobile businessJapan

The Americas

China

Asia
and Europe

Total¥ 4,021¥    481¥     —

¥ 1,165¥  5,669

45,271

138,589

111,177

31,858326,897(Seats)40,852

117,715

105,834

29,079293,481(Interior products)

4,419

20,873

5,343

2,779

33,415

Other business

12,221

5,121

—

49

17,392

Total¥61,515¥144,192¥111,177¥33,074¥349,958

Note: Inter-segment transactions are eliminated by offsetting and only external revenue is presented.

For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)
Reportable segments
Asia
and Europe

Total

—

¥ 3,033¥  7,786

115,985

35,494

382,656

110,618

32,901

344,835Japan

The Americas

Motorcycle business¥ 4,425¥    328¥

Automobile business

45,025

186,152

41,758

159,556(Seats)

China

3,266

26,595

5,366

2,592

37,820

Other business

11,815

6,852

—

88

18,757

Total¥61,266¥193,333¥115,985¥38,616¥409,200(Interior products)

Note: Inter-segment transactions are eliminated by offsetting and only external revenue is presented.

The Group is engaged in manufacturing through its motorcycle business, automobile business (seats and interior
products), and other business.
The performance obligation of revenue from the manufacturers of finished automobiles, who are the major
customers of the Group, is satisfied when the Group delivers the product to the customer, and revenue is recognizedat that point in time.
Revenue is measured as amounts net of discounts and other deductions from compensation agreed upon in thecontract with the customer.
Compensation for the transactions is received mostly within one year from the fulfillment of the performanceobligation and does not include a significant financing component.

(2) Contract balances
Contract balances are as follows.
(Unit: Million yen)

Receivables from contracts with customers
Contract liabilities

As of April 1, 2021

As of March 31, 2022

As of March 31, 2023

¥58,692¥60,635¥69,954

2,053

1,939

2,434

Receivables from contracts with customers are notes and accounts receivable – trade, and contract liabilities areprimarily related to advances received from customers. In the consolidated statement of financial position, receivablesfrom contracts with customers are included in “Trade and other receivables” and contract liabilities are included in“Other current liabilities.”
Of the revenues recognized during the previous fiscal year and the current fiscal year, the amounts included incontract liabilities at the beginning of the fiscal years were ¥1,408 million and ¥1,368 million, respectively. In addition,
during the previous fiscal year and the current fiscal year, the amount of revenue recognized from performanceobligations satisfied in prior periods was not material.
(3) Transaction price allocated to remaining performance obligations
As there are no significant transactions with contracts with initial expected terms exceeding one year, the Group has
applied a practical expedient and does not disclose information on remaining performance obligations. Additionally,among the compensation from contracts with customers, there are no significant amounts not included in thetransaction price.
(4) Assets recognized from the costs incurred for obtaining or fulfilling contracts with customers
For the Group, assets recognized from the costs incurred for obtaining or fulfilling contracts with customers were notmaterial. In addition, the Group has applied a practical expedient and recognized assets with amortization periods of
one year or less, which it would have otherwise recognized, as an expense when incurred.

19. COST OF SALES AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Major expense items included in the breakdown of cost of sales and selling, general and administrative expenses
according to the nature of the cost are as follows.
(Unit: Million yen)
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

Depreciation and amortization¥11,033¥11,879

Employee benefit expenses

72,36983,316FY2022

FY2023

20. OTHER INCOME AND OTHER EXPENSES
The breakdown of other income is as follows.
(Unit: Million yen)
(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

Land and building rent received¥  135¥  133Gain on disposal of non-current assets

1,448

1,325

644

159

Other

1,012

593

Total

¥3,240¥2,212Gain on government grants

Note: The content of the gain on government grants are stated in Note 21 “Government Grants.”

100

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101

The breakdown of other expenses is as follows.
(Unit: Million yen)
FY2022(April 1, 2021–March 31, 2022)

FY2023

23. EARNINGS PER SHARE
Basic earnings per share and the basis for estimation are outlined below.
Latent common stock that has a dilution effect is not included.

(April 1, 2022–March 31, 2023)

Loss on disposal of non-current assets¥ 55¥   10

Impairment losses

143

23

Other

388

1,860

Total

¥587

¥1,893

Note: “Other” in the current fiscal year represents primarily the loss on reversal of foreign currency translation adjustments arisingfrom the dissolution of a subsidiary in the United Kingdom.

(Unit: Million yen)
FY2022(April 1, 2022–March 31, 2023)

Income attributable to owners of parent¥ 12,416¥  5,343

Average number of common shares for the period (Thousand shares)

134,150

129,217

Basic earnings per share (Yen)¥  92.56¥  41.35

24. OTHER COMPREHENSIVE INCOME
The breakdown of each item of other comprehensive income is as follows.

21. GOVERNMENT GRANTS
The breakdown of government grants is as follows.

(Unit: Million yen)
(Unit: Million yen)
FY2022(April 1, 2021–March 31, 2022)

FY2023(April 1, 2022–March 31, 2023)

Deferred income relating to government grants

¥219

¥172

Gain on government grants

644

159

Notes: 1. Deferred income relating to government grants is recognized in “Other current liabilities” and “Other non-current liabilities” in the
consolidated statement of financial position.
2. Gain on government grants is recognized in “Other income” in the consolidated statement of profit or loss.
3. Gain on government grants in the previous fiscal year consists primarily of the grants intended for wage compensation toemployees amid the COVID-19 pandemic. There are no unfulfilled conditions or contingencies.

22. FINANCE INCOME AND FINANCE COSTS
The breakdown of finance income is as follows.
(Unit: Million yen)
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

Interest income¥  966¥1,841Dividend income

626

697

Foreign exchange gains

774

541

Other

—

0

Total

¥2,367¥3,080Notes: 1. Interest income is the interest income generated from financial assets measured at amortized cost.
2. Dividend income is the dividend income generated from financial assets measured through other comprehensive income.

The breakdown of finance costs is as follows.
(Unit: Million yen)
FY2022102

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

Interest expense

¥117

¥131

Total

¥117

¥131

TS TECH Integrated Report 2023

FY2023(April 1, 2021–March 31, 2022)

FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

Gains (losses) during the year

¥ 1,206¥    44

Income tax benefit (expense)

(342)

(33)

Subtotal

864

10

Gains (losses) during the year

771

754

Income tax benefit (expense)

(206)

(212)

Subtotal

564

542

73

37

16,3539,329

Components that will not be reclassified subsequently to net profit
or loss
Remeasurements of net defined benefit plans:

Equity financial assets measured at fair value through othercomprehensive income:

Share of other comprehensive income of affiliates accounted forusing the equity method:
Gains (losses) during the year
Components that may be reclassified subsequently to net profit or loss
Differences on translation from foreign operations:
Gains (losses) during the year
Reclassification adjustment
Income taxes
Subtotal

—

1,274

110

(110)

16,463

10,494

Share of other comprehensive income of affiliates accounted
for using the equity method:
Gains (losses) during the year
Total other comprehensive income (loss), net of tax

895

655

¥18,860¥11,740

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103

26. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIESThe reconciliation of liabilities arising from financing activities is as follows.

25. DIVIDENDS
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(1) Dividends paid

Resolution

Class ofsharesAnnual General Meetingof Shareholders heldon June 25, 2021

CommonsharesBoard of Directors’ meeting
held on November 4, 2021

CommonsharesTotal amountof dividends(Million yen)

For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)

Dividend
per share(Yen)

Record date

¥3,159¥47.00March 31, 2021

June 28, 2021

¥3,497¥26.00

September 30, 2021

November 29, 2021

Notes: 1. Dividends in the consolidated statement of changes in equity are equal to the total amount of dividends minus dividends
related to the Company’s shares held by entities accounted for using the equity method.
2. The Company conducted a two-for-one stock split of common shares as of April 1, 2021.
The amount of dividend per share resolved at the Annual General Meeting of Shareholders held on June 25, 2021 is theamount before the stock split, and the amount of dividend per share resolved at the Board of Directors’ meeting held on
November 4, 2021 is the amount after the stock split.

(2) Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year

Resolution

Annual General Meetingof Shareholders heldon June 24, 2022

Class ofshares

Source ofdividends

Common Retained
sharesearnings(Unit: Million yen)

Effective date

Total amountof dividends(Million yen)

Dividend
per share(Yen)

Record date

Effective date

¥3,725¥28.00March 31, 2022

June 27, 2022

Non-cash transactions
Beginningbalance

Cash
flows

Resolution

Annual General Meetingof Shareholders heldon June 24, 2022

CommonsharesBoard of Directors’ meeting
held on November 11, 2022

CommonsharesLease liabilities¥5,228¥(1,435)¥1,943¥293¥—¥6,030¥5,228¥(1,435)¥1,943¥293¥—¥6,030For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)
Non-cash transactions
Beginningbalance

Cash
flows

Increase

Foreigncurrencytranslation

Other

Endingbalance

Lease liabilities¥6,030¥(1,571)

¥204

¥324

¥(165)¥4,822

Total¥6,030¥(1,571)

¥204

¥324

¥(165)¥4,822

27. NON-CASH TRANSACTIONS
Details of significant non-cash transactions are as follows.
FY2022Acquisition of assets through a lease arrangement

Total amountof dividends(Million yen)

Dividend
per share(Yen)

Record date

Effective date

¥3,725¥28.00March 31, 2022

June 27, 2022

¥3,875¥30.00

September 30, 2022

November 28, 2022(2) Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year

Resolution

Class ofshares

Source ofdividends

Total amountof dividends(Million yen)

Dividend
per share(Yen)

Record date

Effective date

Board of Directors’ meeting
held on May 23, 2023

Common Retained
sharesearnings¥4,214¥33.00March 31, 2023

June 7, 2023

TS TECH Integrated Report 2023

Endingbalance(Unit: Million yen)

Note: Dividends in the consolidated statement of changes in equity are equal to the total amount of dividends minus dividends
related to the Company’s shares held by entities accounted for using the equity method.

104

Other

Total

For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(1) Dividends paid
Class ofsharesIncrease

Foreigncurrencytranslation

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)¥1,943¥204

28. SUBSIDIARIES AND AFFILIATES, ETC.
(1) Composition of the corporate group
The composition of the Group is as stated in “1. Corporate Summary (4) State of Subsidiaries and Affiliates” in the
Company’s annual securities report (in Japanese only).
From the beginning of the current fiscal year, TS TECH (MANDAL) PRIVATE LIMITED, formerly a non-consolidated
subsidiary, was included in the scope of consolidation.
During the current fiscal year, NA SERVICE, S. DE R.L. DE C.V., formerly a consolidated subsidiary, was eliminatedthrough an absorption merger, with TST MANUFACTURING DE MEXICO, S. DE R.L. DE C.V. as the surviving company,
and as such was removed from the scope of consolidation.
From the end of the current fiscal year, TS TECH UK LTD, formerly a consolidated subsidiary, was dissolved, and assuch was removed from the scope of consolidation. As a result, a loss of ¥1,274 million on reversal of foreign currencytranslation adjustments was recorded in the consolidated statement of profit or loss under “Other expenses.”

TS TECH Integrated Report 2023

105

(2) Matters concerning subsidiaries
Information regarding the subsidiaries in which the Company holds significant non-controlling interests is as follows.

WUHAN TS-GSK AUTO PARTS CO., LTD.
(Unit: Million yen)
FY2022GUANGZHOU TS AUTOMOTIVE INTERIOR SYSTEMS CO., LTD.
FY2022

Non-current assets

3,952

4,053

Current liabilities

10,382

8,598

140

363

Equity20,86019,736

Accumulated non-controlling interests¥ 8,326¥ 7,669¥32,354

Non-current assets

7,896

7,530

Current liabilities

21,24620,014146

105

Equity28,51819,764

Accumulated non-controlling interests¥13,791¥ 9,846(Unit: Million yen)
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)(Unit: Million yen)

Revenue¥46,528¥50,802

Net income

5,570

5,155

Other comprehensive income

2,388

108

(April 1, 2022–March 31, 2023)

Revenue¥64,683¥64,175

Net income

8,320

5,566

Other comprehensive income

3,102

6

Comprehensive income

11,423

5,572

Income allocated to non-controlling interests¥ 4,013¥ 2,944

Comprehensive income
Income allocated to non-controlling interests

7,959

5,264

¥ 2,049¥ 1,849(Unit: Million yen)

FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)(Unit: Million yen)

Cash flows from operating activities¥ 5,907¥ 5,473

FY2023

Cash flows from investing activities

(558)

(572)

Cash flows from financing activities(5,827)(6,223)

Effect of exchange rate changes on cash and cash equivalents

1,579

78

Net increase (decrease) in cash and cash equivalents

1,101(1,243)¥(2,300)¥(2,529)(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

Cash flows from operating activities¥ 9,090¥ 6,809

Cash flows from investing activities

(413)

(441)

Cash flows from financing activities(6,784)(14,411)

Effect of exchange rate changes on cash and cash equivalents

1,932

(364)

Net increase (decrease) in cash and cash equivalents

3,825(8,408)¥(3,203)¥ (6,876)

Dividends paid to non-controlling interests

Non-current liabilities

FY2023(April 1, 2021–March 31, 2022)

FY2022¥24,645

FY2023¥42,014

FY2022¥27,430

Current assets(As of March 31, 2023)

Non-current liabilities(As of March 31, 2023)(Unit: Million yen)
(As of March 31, 2022)

Current assets

FY2023(As of March 31, 2022)

Dividends paid to non-controlling interests(3) Matters concerning affiliates
The Group does not have individually significant affiliates. Matters concerning affiliates which are not individuallysignificant are as follows.
(Unit: Million yen)
FY2022Carrying amount of equity interest

FY2023(As of March 31, 2022)(As of March 31, 2023)¥17,257¥17,935

FY2022

FY2023(Unit: Million yen)
(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)¥  590¥  487

968

693

1,559

1,180

The Group’s equity interest in:
Net income
Other comprehensive income
Comprehensive income

106

TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

107

29. SHARE-BASED REMUNERATION(1) Restricted stock compensation scheme for directors and executive officers(i) Overview of the scheme
The Company has introduced a restricted stock compensation scheme (hereinafter the “Scheme”) for its directors(excluding outside directors and directors who are members of the Audit and Supervisory Committee) (hereinafter the“Eligible Directors”) and executive officers who do not concurrently serve as directors of the Company (hereinafter,
collectively with the Eligible Directors, the “Eligible Directors, etc.”), with the aim of providing incentives to continuously
improve the Company’s corporate value and to further share value with shareholders.
Under the Scheme, the Eligible Directors, etc., shall pay all of the monetary compensation claims paid by theCompany as assets contributed in kind, and shall receive shares of the Company’s common stock through issuanceor disposal by the Company.
In addition, in the issuing or disposing of shares of common stock (hereinafter “the Stock”) of the Company under
the Scheme, the Company and the Eligible Directors, etc., enter into a restricted stock allotment agreement underwhich 1) the transfer, creation of a security interest on, or any other disposition of the Stock to a third party is
prohibited during the period until the Eligible Directors, etc., retire or resign due to the expiration of their termsof office, mandatory retirement age, or other justifiable reasons (hereinafter the “transfer restriction period”), and2) on the condition of the occurrence of certain events, the Company shall acquire the Stock for no considerationand the like.

Equity settled type(ii) Number and fair value of the shares allotted during the fiscal year
Number and fair value of the shares allotted during the fiscal year are as follows.

Note: E xpenses relating to the share-based payment are included in “Selling, general and administrative expenses” in the
consolidated statement of profit or loss. Also, an increase in equity corresponding to the recognized expenses is included in“Capital surplus.”

FY2022(April 1, 2022–March 31, 2023)

June 25, 2021

June 24, 2022

Number of shares allotted

51,20058,880Fair value (Yen)¥1,686¥1,399Note: The fair value of the shares is measured based on the closing price of the Company’s common stock on the Prime Market (inthe previous fiscal year, the First Section) of the Tokyo Stock Exchange on the business day preceding the allotment date.

(iii) T he amount of expenses related to the share-based payment recognized in the consolidated statement of
profit or loss
The amount of expenses related to the share-based payment recognized in the consolidated statement of profit orloss is as follows.
(Unit: Million yen)
FY2022Equity settled type

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

¥74

¥81

Note: Expenses relating to the share-based payment are included in “Cost of sales” and “Selling, general and administrative expenses”
in the consolidated statement of profit or loss. Also, an increase in equity corresponding to the recognized expenses is
included in “Capital surplus.”(2) Restricted stock-based incentive scheme for employee shareholding association(i) Overview of the scheme
The Company has introduced a restricted stock-based incentive scheme (hereinafter the “Scheme”) for the TS TECH
Employee Shareholding Association (hereinafter the “Shareholding Association”), commemorating its 60th anniversary,to enhance the benefit package for its employees.
Under the Scheme, the Company delivers monetary compensation claims, as a special incentive (hereinafter the“Special Incentive”), for the allotment of restricted stock to employees who are eligible to join the Shareholding
Association (hereinafter the “Eligible Employees”). The Shareholding Association shall receive shares of the Company’scommon stock through issuance or disposal by the Company, in return for contribution in kind of the Special Incentive
to the Company, which was contributed by the Eligible Employees.
When the Company issues or disposes of shares of its common stock in this way, the Company enters into a
restricted stock allotment agreement with the Shareholding Association that 1) forbids the transfer to third parties,
creation of a security interest on, or disposal by other means of common shares of the Company delivered under108

TS TECH Integrated Report 2023(ii) Number and fair value of the shares allotted during the fiscal year
No shares were allotted during the previous fiscal year or the current fiscal year.
(iii) The amount of expenses related to the share-based payment recognized in the consolidated statement of
profit or loss
The amount of expenses related to the share-based payment recognized in the consolidated statement of profit orloss is as follows.
(Unit: Million yen)
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

¥174

¥61

FY2023(April 1, 2021–March 31, 2022)

Allotment date

this Scheme for a certain period of time (from March 26, 2021 through March 25, 2024) (hereinafter the “Transfer
Restrictions”), 2) where the Eligible Employees have remained members of the Shareholding Association during thetransfer restriction period, the Company shall remove the Transfer Restrictions pertaining to all of the shares allottedto the Eligible Employees, and 3) on the condition of the occurrence of certain events, such as voluntary retirementof the Eligible Employees, the Company shall acquire, for no consideration, part or all of the numbers of sharescorresponding to the stake in the restricted stock held by the Eligible Employees.

30. FINANCIAL INSTRUMENTS(1) Details and the extent of risks arising from financial instruments(i) Policies on the management of financial instruments and risk management
The Group is exposed to various risks arising from financial instruments including credit risk, market risk, and liquidity
risk. To manage the exposures to these risks, the Group conducts risk management according to a certain set of policies.
In terms of investments, the Group primarily uses principal-guaranteed time deposits and similar financial instruments,
while, in terms of funding, the Group raises funds basically with its own financial resources and uses bank loans andsimilar financial instruments as needed.
The Group enters into derivative transactions to minimize the risk of future fluctuations in exchange rates but strictly
adheres to the policy of avoiding such transactions for speculative purposes.
(ii) Credit risk (Risk of a business partner defaulting on its contractual obligations)
Financial assets such as trade and other receivables are exposed to the credit risk of customers, etc.
The Group manages these risks in accordance with its credit management regulations by periodically monitoring
whether any customer has gone over its credit limit, which is set for each customer, while also making efforts to
identify at an early stage concerns for collection due to deterioration of the customer’s financial position and mitigate
said risks.
The majority of the Group’s trade and other receivables, etc., are due from Honda Motor Co., Ltd. and its groupcompanies, whose creditworthiness is high and poses minimal credit risk.
When engaging in derivative transactions, the Group deals exclusively with financial institutions with high credit
ratings in order to mitigate credit risk.
The carrying amounts of financial assets after impairment losses presented in the consolidated statement offinancial position represent the maximum exposure of the Group to credit risk.
(iii) Market risk
(Foreign currency risk)
As the Group conducts its business globally, it engages in foreign currency-denominated transactions and accordingly
its profits and cash flows are exposed to the risk of fluctuating exchange rates.
The Group engages in derivative transactions, namely forward exchange contracts, to mitigate such risks in terms of
its foreign currency-denominated trade receivables and payables.
In the execution and administration of derivative transactions, the funding division obtains the approval of theperson with the decision-making authority in accordance with the internal rules which set forth transaction authority
and other matters.

TS TECH Integrated Report 2023

109

In terms of the financial instruments held by the Group at the end of the previous fiscal year and the current fiscal
year, the impact of a 1% appreciation of Japanese yen against the U.S. dollar and the Chinese yuan on income before
income tax is as follows.
(Unit: Million yen)(ii) C arrying amounts and fair values of financial instruments(Financial instruments measured at fair value on a recurring basis)
For the year ended March 31, 2022 (As of March 31, 2022)(Unit: Million yen)

Impact on income before income tax
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

1% appreciation of Japanese yen against the U.S. dollar

¥(18)

¥(30)

1% appreciation of Japanese yen against the Chinese yuan

(15)

(4)

Note: This analysis assumes that all variables other than the Japanese yen–U.S. dollar/Chinese yuan exchange rates remain fixed.

(Price fluctuation risks of equity instruments)
The Group holds equity instruments that include the stocks of publicly traded companies with which it maintains
business relationships and is thus exposed to the risk of fluctuating market prices of these instruments.
The Group manages such risks by periodically monitoring the fair value of said instruments and the financial
condition of its investment targets as well as conducting ongoing reviews of its status of holdings.
In terms of the equity instruments held by the Group at the end of the previous fiscal year and the current fiscal
year, the impact of a 1% decline in market prices on other comprehensive income is as follows.

Equity instruments

FY2023(April 1, 2022–March 31, 2023)¥(168)¥(175)

1% decline in market prices
Note: This analysis assumes that all variables other than the market prices remain fixed.

(iv) Liquidity risk (Risk of not being able to execute payment on the payment date)
While the Group basically raises necessary funds with its own financial resources, it is exposed to the risk of not being
able to execute payment on payment dates for reasons such as a deteriorated funding environment.
The Group manages said risk by having the Company’s accounting division prepare and update fund management
plans based on the reports of each division in order to mitigate liquidity risk.
(2) Fair value measurement
Fair values are classified into the following three levels according to the extent to which the input information usedin the measurement is observable and the materiality of said input.
Level 1: Quoted prices of similar assets and liabilities in active markets
Level 2: Input other than quoted prices included in Level 1 that is observable either directly or indirectly
Level 3: Input including that not based on observable market data
No transfers occurred between Levels 1, 2, and 3 during the current fiscal year.
(i) Method of measuring fair value(Equity instruments)
Equity instruments mainly consist of stocks of publicly traded companies and its fair values are measured based on
the prices quoted by the stock exchanges.
(Derivative financial assets and derivative financial liabilities)
The fair values of derivative financial assets and derivative financial liabilities are measured at the valuation of forward
exchange contracts calculated under observable inputs such as currency exchange rates.
(Long-term loans receivable)
The fair values of long-term loans receivable are measured at the present value of future cash flows discounted by aninterest rate that reflects an appropriate indicator such as the yield on Japanese government bonds to which a credit spreadhas been added.
(Financial instruments other than those above)
The fair values of financial instruments other than those above are measured at amortized cost but statement thereof
has been omitted as their measured carrying amounts approximate their fair values.
110

TS TECH Integrated Report 2023

Level 1

¥18,411¥16,857

0

108

Level 2

Level 3

Total

¥ —

¥1,554¥18,411

—

0

—

0

—

108

—

108

Financial assets measured at fair value
through net profit or loss:
Derivative assets
Financial liabilities measured at fair value
through net profit or loss:
Derivative liabilities
For the year ended March 31, 2023 (As of March 31, 2023)(Unit: Million yen)
Fair value

Carrying
amountLevel 1

¥19,224¥17,53027

7Impact on other comprehensive income
FY2022Carrying
amountFinancial assets measured at fair value
through other comprehensive income:(Unit: Million yen)

(April 1, 2021–March 31, 2022)

Fair value

Level 2

Level 3

Total¥—

¥1,694¥19,224

—

27

—

27

—

7

—

7

Financial assets measured at fair value
through other comprehensive income:Equity instruments
Financial assets measured at fair value
through net profit or loss:
Derivative assets
Financial liabilities measured at fair value
through net profit or loss:
Derivative liabilities(Financial instruments measured at amortized cost)
For the year ended March 31, 2022 (As of March 31, 2022)(Unit: Million yen)
Fair value

Carrying
amountLevel 1

Level 2

Level 3

Total

¥549

¥—

¥547

¥—

¥547

Financial assets measured at amortized cost:
Long-term loans receivable (including thecurrent portion)

For the year ended March 31, 2023 (As of March 31, 2023)(Unit: Million yen)
Fair value

Carrying
amountLevel 1

Level 2

Level 3

Total

¥529

¥—

¥519

¥—

¥519

Financial assets measured at amortized cost:
Long-term loans receivable (including thecurrent portion)

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111

(3) Offsetting of financial assets and financial liabilities
Information on the offsetting of financial assets and financial liabilities recognized for a single counterparty is as follows.
(Unit: Million yen)
FY2022(As of March 31, 2023)¥251,781¥264,137

9,968

9,407

Amount of financial assets presented inconsolidated statement of financial position¥241,813¥254,729

Gross amount of financial liabilities recognized¥ 83,131¥ 83,947

9,968

9,407

¥ 73,163¥ 74,539

Offset amount

Offset amountAmount of financial liabilities presented inconsolidated statement of financial position(Unit: Million yen)

FY2023(As of March 31, 2022)

Gross amount of financial assets recognized(ii) Right-of-use assets included in the carrying amount of property, plant and equipment
The carrying amount and the amount of increase in right-of-use assets included in the carrying amount of property,
plant and equipment are as follows.
Buildings
andstructures

Machinery,equipment
and vehicles

Tools,
furniture andfixtures

FY2022(As of March 31, 2022)¥3,368¥311

FY2023(As of March 31, 2023)¥2,931

¥302

Land

Total

¥31

¥2,575¥6,286¥100¥2,545¥5,879Note: D uring the previous fiscal year and the current fiscal year, the amount of right-of-use assets increased by ¥750 million and¥235 million, respectively.

(iii) Balance of lease liabilities by the period to maturity
Balance of lease liabilities by the period to maturity is as follows.
31. LEASES(1) Lease transactions as a lessee
The Group leases real estate properties, such as land and buildings, and molds under lease contracts. Each of theGroup’s companies is responsible for managing and negotiating lease contracts on its own, and thus, the terms andconditions of lease contracts can vary substantially from company to company. An option to extend lease periods isincluded in the leases of real estate properties, especially land and buildings. Many lease contracts for real estate
properties provide an option to extend the lease period by one year or the originally agreed-upon lease period,
and an option to cancel the contract earlier with a six-month prior notice in writing. Contracting parties who leaseproperties for business purposes use these options as needed.
(i) Expenses and cash flows associated with lease contracts
Expenses and cash outflows for lease contracts are as follows.
(Unit: Million yen)
FY2022

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)¥  434¥  432

Machinery, equipment and vehicles

30

60

Tools, furniture and fixtures

12

9

Land

68

54

Total depreciation¥  546¥  555

Expenses related to short-term leases or leases of low-value assets¥  897¥  760¥2,446¥2,458Depreciation of right-of-use assets by asset type:
Buildings and structures

Total cash outflow for leases

Notes: 1. Depreciation of right-of-use assets is included in “Cost of sales” and “Selling, general and administrative expenses” in the
consolidated statement of profit or loss.
2. Expenses related to short-term leases or leases of low-value assets are included in “Cost of sales” and “Selling, general andadministrative expenses” in the consolidated statement of profit or loss.

(Unit: Million yen)
FY2022

FY2023(As of March 31, 2022)(As of March 31, 2023)

Within 1 year

¥1,610¥1,159Between 1 and 2 years

1,037

703

Between 2 and 3 years

560

503

Between 3 and 4 years

454

403

Between 4 and 5 years

354

394

More than 5 years

2,013

1,657

Total

¥6,030¥4,822

Note: The balance of lease liabilities is included in “Other financial liabilities” in the consolidated statement of financial position.

(2) Lease transactions as lessor
The Group mainly leases molds under finance lease contracts.
(i) Income from lease contracts
Income from lease contracts is as follows.
(Unit: Million yen)
FY2022Finance leases
Income (loss) from sales

FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

175

1,315

FY2022

FY2023(ii) Balance of lease receivables by the period to maturity
Balance of lease receivables by the period to maturity is as follows.
(Unit: Million yen)
(As of March 31, 2022)(As of March 31, 2023)¥2,009¥3,608Between 1 and 2 years

661

1,336

Between 2 and 3 years

600

1,218

Between 3 and 4 years

566

1,217

Between 4 and 5 years

565

1,217

—

—

¥4,403¥8,599Within 1 year

More than 5 years
Total

Note: The balance of lease receivables is included in “Other financial assets” in the consolidated statement of financial position.

112

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32. RELATED-PARTY DISCLOSURES(1) Transactions between the submitting company and related parties
The balances of transactions and receivables/payables between the submitting company and related parties are as
follows. Transaction amounts exclude parts and raw materials purchased from customers.

For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)Type of related party

Subsidiaries of other affiliates

For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)Type of related party

Name

Other affiliates

Honda MotorCo., Ltd.

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥38,515

Account

Outstandingbalance

Accounts
receivable –trade¥5,742Lease
receivables¥  342

Notes: 1. Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.
2. Lease receivables
For outstanding balances of lease receivables, the prices of molds included in sales of Company products are processed as
finance leases.

For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)Type of related party

Name

Other affiliates

Honda MotorCo., Ltd.

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥39,351

Account

Outstandingbalance

Accounts
receivable –trade¥7,274Lease
receivables¥1,351

Notes: 1. Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.
2. Lease receivables
For outstanding balances of lease receivables, the prices of molds included in sales of Company products are processed as
finance leases.

(2) Transactions between the consolidated subsidiaries of the submitting company and related parties
The balances of transactions and receivables/payables between the consolidated subsidiaries of the submitting
company and related parties are as follows.
Transaction amounts exclude parts and raw materials purchased from customers.
(i) TS TECH USA CORPORATION
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)Type of related party

Subsidiaries of other affiliates

Nature of relatedparty transaction

Transaction
amount

Honda
Sale ofDevelopment and the Company’s
Manufacturing ofproducts
America, LLC¥38,459

Name

Account

Accounts
receivable –trade

Outstandingbalance¥4,342Nature of relatedparty transaction

Transaction
amount

Honda
Sale ofDevelopment and the Company’s
Manufacturing ofproducts
America, LLC¥41,710

Name

Account

Accounts
receivable –trade

Outstandingbalance¥3,762

Note: B usiness terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.

(ii) TS TECH ALABAMA, LLC.
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)Type of related party

Subsidiaries of other affiliates

Nature of relatedparty transaction

Transaction
amount

Honda
Sale ofDevelopment and the Company’s
Manufacturing ofproducts
America, LLC¥22,952

Name

Account

Accounts
receivable –trade

Outstandingbalance¥1,572

Note: B usiness terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.

For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)Type of related party

Subsidiaries of other affiliates

Nature of relatedparty transaction

Transaction
amount

Honda
Sale ofDevelopment and the Company’s
Manufacturing ofproducts
America, LLC¥34,765

Name

Account

Accounts
receivable –trade

Outstandingbalance¥3,163

Note: B usiness terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.

(iii) TS TECH CANADA INC.
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)(Unit: Million yen)Type of related party

Subsidiaries of other affiliates

Name

Honda Canada
Inc.

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥28,007

Account

Accounts
receivable –trade

Outstandingbalance¥2,941

Note: B usiness terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.

Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.

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For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)Type of related party

Subsidiaries of other affiliates

Name

Honda Canada
Inc.

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥37,885

Outstandingbalance

Account

Accounts
receivable –trade(Unit: Million yen)Type of related party

Subsidiaries of other affiliates

Name

Honda
Automobile(Thailand)Co., Ltd.

Sale ofthe Company’s
products¥13,575

Outstandingbalance

Account

FY2022

Employees (Company housing and mortgage loans)(iv) TS TECH THAILAND
For the year ended March 31, 2022 (April 1, 2021 to March 31, 2022)
Transaction
amount(Unit: Million yen)

¥4,854

Note: Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.

Nature of relatedparty transaction

33. CONTINGENT LIABILITIESThe Company provides guarantees to financial institutions on the borrowings by employees. The guarantee amounts
are as follows.

Accounts
receivable –trade¥2,454Lease
receivables¥3,682

Notes: 1. Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.
2. Lease receivables
For outstanding balances of lease receivables, the prices of molds included in sales of Company products are processed as
finance leases.

FY2023(As of March 31, 2022)(As of March 31, 2023)

¥26

¥21

34. SUBSEQUENT EVENTS
Not applicable

OTHER
Quarterly information for the current fiscal year is as follows.
(Unit: Million yen)

Cumulative period

1st quarter2nd quarter3rd quarter

4th quarter

Revenue¥82,045¥196,978¥302,473¥409,200

909

7,460

13,147

18,692

Income (loss) attributable to owners of parent(1,203)

1,364

3,467

5,343

Earnings (loss) per share (Yen)(9.15)

10.45

26.72

41.35

1st quarter2nd quarter3rd quarter

4th quarter¥(9.15)¥19.80¥16.41¥14.71

Income before income tax

Accounting period
Earnings (loss) per share (Yen)For the year ended March 31, 2023 (April 1, 2022 to March 31, 2023)(Unit: Million yen)Type of related party

Subsidiaries of other affiliates

Name

Honda
Automobile(Thailand)Co., Ltd.

Nature of relatedparty transaction

Transaction
amountSale ofthe Company’s
products¥14,259

Outstandingbalance

Account

Accounts
receivable –trade¥3,148

Lease
receivables¥6,994

Notes: 1. Business terms and conditions, and policy for the determination of business terms and conditions
Business terms and conditions for the sale of products are determined upon the submission of individual quotes andprice negotiations.
2. Lease receivables
For outstanding balances of lease receivables, the prices of molds included in sales of Company products are processed as
finance leases.

(3) Remuneration of key management personnel
Remuneration to the directors and Audit and Supervisory Committee members of the Company is as follows.
(Unit: Million yen)
FY2022

Basic remuneration and bonuses
Stock compensation

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FY2023(April 1, 2021–March 31, 2022)(April 1, 2022–March 31, 2023)

¥406

¥488

35

50

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117

Independent Auditor’s Report(TRANSLATION)



Independent Auditor’s Report

To the Board of Directors of TS TECH Co., Ltd.:

June 23, 2023

KPMG AZSA LLC
Tokyo Office, Japan
Shingo Iwamiya
Designated Engagement Partner
Certified Public Accountant
Yukio Kurihara
Designated Engagement Partner
Certified Public Accountant

OpinionWe have audited the accompanying consolidated financial statements of TS TECH Co., Ltd. (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group”) provided in the “Financial Information” section in thecompany’s Annual Report, which comprise the consolidated statement of financial position as at March 31, 2023, andthe consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to theconsolidated financial statements in accordance with Article 193-2(1) of the Financial Instruments and Exchange Act
of Japan.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, theconsolidated financial position of the Group as at March 31, 2023, and its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards
prescribed in Article 93 of “the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial
Statements” (hereinafter referred to as “IFRS”).
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities underthose standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Group in accordance with the ethical requirements thatare relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

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Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements of the current period. These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide aseparate opinion on these matters.
Appropriateness of the Company’s judgment as to whether an impairment loss should be recognized on property,
plant and equipment in Hamamatsu Plant of TS TECH Co., Ltd.
The key audit matter

How the matter was addressed in our audit

Property, plant and equipment of 83,874 million yen
were recognized in the consolidated statement offinancial position of TS TECH Co., Ltd. (hereinafterreferred to as the “Company”) and its consolidated
subsidiaries as of March 31, 2023, accounting for
approximately 20% of total assets in the consolidated
financial statements. Of this amount, property, plant, andequipment related to Hamamatsu Plant of the Company
accounted for 3,770 million yen as described in Note 2,“Basis of preparation of the consolidated financial
statements, (4) Important accounting judgments,
estimates and assumptions” to the consolidated
financial statements.

The primary procedures we performed to assess
whether the Company’s judgment with respect to therecognition of an impairment loss for property, plant andequipment related to Hamamatsu Plant was appropriate,included the following:

As discussed in Note 3, “Important accounting policies,(10) Impairment of non-financial assets” to theconsolidated financial statements, the Company
assesses each asset or cash-generating unit for any
indications of impairment during each reporting period,and if any such indication exists, the Company estimates
the recoverable amount of the asset or cash-generating
unit. The recoverable amount is calculated at the higherof the fair value less costs of disposal and the value in
use of the asset or cash-generating unit. If therecoverable amount of the asset or cash-generating unit
is less than the carrying amount, the difference between
the carrying amount and the recoverable amount isrecognized as an impairment loss.
Regarding Hamamatsu Plant, the Company has
identified an impairment indicator for the property,
plant, and equipment since operating income or loss
after allocating headquarters expenses decreased dueto the production status of customers, the mix of car
models sold, and so forth. Therefore, the Company
assessed whether the recoverable amount of property,
plant, and equipment related to Hamamatsu Plant wasless than the carrying amount, and determined not torecognize an impairment loss since the recoverable
amount exceeded the carrying amount.

(1) Assessment of Internal control
We assessed the design and operating effectiveness ofcertain of the Company’s internal controls relevant todetermining an impairment loss to be recognized.
(2) Assessment of the reasonableness of the estimatedvalue in use• In order to assess whether key assumptions for the
mid-term management plan, which were used as thebasis for the future cash flows, such as the forecast ofincoming orders from customers, were appropriate, we:• inquired of management and compared key
assumptions with the past records;• compared key assumptions with the available external
data such as notification of expected order volume
from customers and forecast of vehicle production
volume from external organizations; and• compared the ratio of raw materials cost to revenue
and the estimated expenses excluding raw materials
cost with the past records.
• We assessed the competence, ability, and objectivity of
external experts used by management for estimating
the fair value of the land at the end of the useful life ofmachinery and equipment which are main assets of theplant. In addition, we inquired of real-estate appraisers
used by the Company and assessed theappropriateness of the assumptions and the valuation
methods applied, involving valuation specialists within
our domestic network firms.
• We involved valuation specialists within our domestic
network firms to assess the appropriateness of themodels and input data for estimating the discount rate.

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119

The Company used the value in use as the recoverable
amount. The future cash flows used for measuring thevalue in use were estimated based on the mid-term
management plan prepared by management.
Therefore, there was a high degree of estimation
uncertainty since the plan included key assumptions
involving management’s judgement, such as theforecast of incoming orders. In addition, a high degreeof expertise in valuation was required to selectappropriate models and others for estimating the fairvalue of the land at the end of the useful life ofmachinery and equipment which are main assets of theplant, and the discount rate.
We, therefore, determined that our assessment of theappropriateness of the Company’s judgment as towhether an impairment loss should be recognized on
property, plant, and equipment related to Hamamatsu
Plant was of most significance in our audit of theconsolidated financial statements for this fiscal year,
and accordingly, a key audit matter.
Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements inaccordance with IFRS, and for such internal control as management determines is necessary to enable the preparationof consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern in accordance with IFRS andusing the going concern basis of accounting unless management either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
The Audit and Supervisory Committee is responsible for overseeing the directors’ performance of their duties withregard to the design, implementation and maintenance of the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes ouropinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with auditing standards generally accepted in Japan will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, while the objective of the audit is not to express an opinion on the effectiveness of
the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on theaudit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause theGroup to cease to continue as a going concern.
• Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with
IFRS, the overall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding, among other matters, the planned scope andtiming of the audit, significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethicalrequirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Audit and Supervisory Committee, we determine those matters that were ofmost significance in the audit of the consolidated financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicatedin our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified
Public Accountants Act of Japan.

Notes to the Reader of Audit Report:
The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as required by
the Financial Instruments and Exchange Act of Japan, excluding the part of Report on the Audit of the Internal Control
Report.

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121

Financial/Non-Financial Information

Financial Highlights

10-Year Financial Summary(Unit: Million yen)Japanese GAAP
Fiscal Year under Review on a Consolidated BasisIFRS

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023

Revenue

457,053

422,317458,732

425,794

479,490412,072

359,682

346,149

349,958

409,200

Cost of sales

385,939352,716

381,258

355,176

399,329

338,031300,307288,671295,716355,790

Selling, general and administrative expenses

31,97933,76839,41435,75537,41836,52133,531

32,58133,89638,471

Operating income

39,13336,04739,27934,55747,346

38,793

26,326

26,742

22,99815,257

Income attributable to owners of parent

23,90022,58523,528

19,622

30,11525,75015,064

20,741

12,416

5,343

Basic earnings per share (Yen)

175.75166.08173.01144.29221.45189.35110.77152.89

92.56

41.35

Operating margin (%)

8.6

8.5

8.6

8.1

9.9

9.4

7.3

7.7

6.6

3.7

Return on equity attributable to owners of parent (ROE) (%)

13.1

12.8

12.1

9.6

13.4

10.5

5.9

7.8

4.3

1.8

Return on assets (ROA) (%)

18.2

14.3

13.6

11.4

14.7

11.7

8.2

9.9

6.4

4.5

Effective statutory tax rate (%)

37.2

34.8

32.3

30.1

30.1

29.9

29.9

29.9

29.9

29.9

Average actual tax rate (%)

28.7

31.2

27.8

29.9

22.7

25.0

29.7

22.5

27.2

42.0

Average exchange rate (USD to Yen)

100.2

109.9

120.1

108.4

110.8

110.9

108.7

106.1

112.4

135.5

Average exchange rate (USD to Yuan)

15.9

17.7

18.9

16.1

16.7

16.5

15.6

15.7

17.5

19.8

19,96019,754

17,064

11,199

8,640

7,412

7,619

6,686

14,466

14,606*

Capital expenditures
Depreciation

8,628

7,860

9,314

9,036

9,676

9,778

10,225

9,616

9,204

10,005R&D expenses

11,635

12,90013,16812,382

11,986

12,70912,374

12,533

11,93014,344

Total at End of Fiscal Year
Total assets

264,635

296,858

303,948

322,202351,944358,265

341,820

390,478

415,985

416,226

Property, plant and equipment

62,25374,34976,33876,57673,532

71,51568,53069,05376,86083,874

Interest-bearing liabilities

2,106

3,960

4,335

3,506

4,187

1,742

4,014

5,228

6,030

4,822

Total equity

170,714

216,502

219,092

230,989

259,924

277,424

274,552

301,450

325,583

323,458

Shareholders’ equity

143,718

170,545

189,497

204,800

229,866

249,904

259,233

271,278

275,144

265,756

Cash flows from operating activities

43,60035,05647,531

34,045

48,40643,80644,19325,151

20,01830,445

Cash flows from investing activities(18,233)(22,771)(25,299)(12,409)(12,742)(18,321)(5,366)(11,709)(17,196)(20,970)

Cash flows from financing activities(8,898)(11,231)(12,319)(14,214)(11,858)(16,390)(12,917)(14,647)(23,638)(18,860)

Free cash flows

25,367

12,28522,232

21,63635,66425,48538,827

13,442

2,822

9,475

Cash Flows

Revenue per Consolidated Segment
Japan104,895

85,89992,071

91,83093,552

92,85675,13478,866

82,69884,943The Americas

214,628

219,534

247,087

213,008

224,867

195,604

176,346

141,924

144,527

194,015China

104,063

91,05796,513

94,990121,266

89,18782,729117,652

115,236

117,800

Asia and Europe

67,81158,72759,257

59,82576,041

66,822

51,96734,021

34,20240,164

Overseas revenue

379,382

362,463395,571

361,980

412,252

342,496

303,544288,303289,660

348,854

83.0

85.8

86.2

85.0

86.0

83.1

84.4

83.3

82.8

85.3

Cash dividends per share* (Yen)

27

30

33

35

40

42

43

45

54

63

Consolidated price to earnings ratio (PER) (Times)

8.9

9.8

7.6

10.4

9.5

8.4

11.5

10.8

14.9

40.6

Consolidated dividends payout ratio (%)

15.4

18.1

19.1

24.3

18.1

22.2

38.8

29.4

58.3

152.4

Overseas revenue ratio (%)
Stock Information

ROE: Income attributable to owners of parent/Total equity attributable to owners of parent (Average)
ROA: Income before income tax/Total assets (Average)*1 The company implemented a two-for-one stock split of its common shares, effective April 1, 2021.

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Non-Financial Highlights

Non-Financial Highlights

Environmental

SocialEnvironmental Accounting

Environmental Conservation Cost (Non-consolidated)
FY2019Main Efforts
Pollution
prevention cost

Prevention of air, water, and soil pollution, etc.

Globalenvironmental
conservation cost*

Prevention of global warming and ozone depletion andother environmental preservation efforts

Resource
circulation cost

Recycling, waste treatment and disposal,
and water-saving efforts

Upstream/downstream cost

Businessarea cost(Unit: Million yen)
FY2020

FY2021

FY2022

FY2023

Investment

Cost

Investment

Cost

Investment

Cost

Investment

Cost

Investment

Cost

46

10

6

11

12

10

21

15

22

27

*1

*2

71

*3

32

In-House Training Sessions and Related Data (Non-consolidated)
FY2019FY2020

FY2021

FY2022

FY2023

8

8

7

8

8

Training time per employee (Hours)

7.6

8.8

11.1

9.8

9.3

Training expenditures (Million yen)

70.0

84.4

21.6*

34.6*

34.3*

40,81449,252

12,456*

19,634*20,060*

Human rights/diversity training (Number of times)

95

208

62

176

43

11

173

7

56

25

71

13

59

1

67

Costs generated from purchasing low environmental
impact products and raw materials

38

13

48

3

5

1

7

3

3

1

Administration cost

Environmental management system (EMS) development& operation costs, environmental measurement costs,
and office interior “greening” and development costs

24

63

62

82

15

60

48

46

46

74

R&D cost

Research and development of new technology with ahigh positive environmental impact, such as reducing
the weight of products, reducing VOCs (not using
paints), and developing recyclable materials— 3,630

9 4,184

10 4,000

2 4,447

14 4,215*1 Seminars held for company employees. We have also held “Risk Assessment Training Regarding Specified Chemical Substances” since fiscal 2017.
*2 Practical training sessions for risk assessment have been canceled in order to prevent the spread of COVID-19. For the same reason, mental health seminars have been held
less often, canceled, or held using a different method, depending on the risk of infection in each workplace.

Social activity cost

Environmental measures such as nature protection,“greening,” and scenery preservation

4

4

—

2

—

1

1

1

—

2

Employment-Related Data (Non-consolidated)

Environmental remediation cost

Remediation of soil pollution, etc.

—

—

—

—

—

—

—

—

—

—

615

738 3,988

Total

339 4,399

Notes
1. The above figures include portions ascertained by estimation, such as apportionment.
2. Materials related to environmental accounting, such as guidelines and guidebooks published by the Ministry of theEnvironment of Japan, were referenced when preparing the table.
3. Costs do not include depreciation costs.

561

596

FY2022

FY2023Practical training sessions for risk assessment*1

42

28

0*2

0*2

0*2

Mental health seminars

80

108

70*2

61*2

73*2

FY2019FY2020

FY2021

FY2022

FY20232.9

2.7*1 Expenses related to construction of the new Head
Office building*2 Expenses related to construction of the new building
at the Hamamatsu Plant*3 Expenses related to solar power generation equipment
at the Saitama, Hamamatsu, and Suzuka plants

Percentage of employees with a disability (%)

2.4

2.6

2.7

2.7

3.0

Percentage of employees who are non-Japanese (%)

0.7

0.5

0.6

0.6

0.6

Number of new graduates hired (Persons)

50

54

47

48

46

Number of employees who leave within three
years of hiring (Persons)

0

5

5

2

5

Turnover rate within three years of hiring (%)

0.0

8.9

9.6

4.0

9.3

Percentage of employees hired mid-career*1 (%)

10.7

18.2

6.0

12.7

22.6

Engagement score*2(31.7)(29.8)(30.4)

42.1

40.9(Unit: Thousand yen)

FY2023Gain on sale of valuables

8,143

4,613

5,073

9,654

13,645

Cost saved by energy conservation

26,69016,073

4,169

3,448

3,975

Total

34,833

20,686

9,242

13,102

17,620*1 The percentage of employees hired mid-career among employees hired for regular employment*2 Parenthetical values for fiscal 2019 to fiscal 2021 show satisfaction survey-based DI values.
As of fiscal 2022, scores are based on Link and Motivation Inc.’s Motivation Cloud.

Major Personnel Data (Non-consolidated)

Material Effects (Non-consolidated)

CO2 emissions

FY2021

2.6

FY2022

1,000 m3

FY20202.3

FY2021

Water consumption

FY2019(Unit: Persons)

1.9

FY2020GJ

In-House Training Sessions: Number of Attendees (Non-consolidated)

Percentage of managers who are women (%)

652 4,642

FY2019Energy consumption* Training expenditures have decreased significantly due to postponement and revised modalities for training sessions as part of efforts to prevent the spread of COVID-19.

682 4,418

243 4,186

Economic Effects (Non-consolidated)(Unit)

Training expenditures per employee (Yen)FY2019FY2020

FY2021

FY2022

FY2023

FY2019FY2020

FY2021

FY2022

FY2023

Male

1,531

1,524

1,551

1,573

1,526

Female

185

191

187

190

184

Total

1,716

1,715

1,738

1,763

1,710

Male

16.3

16.6

17.2

17.8

18.0

Female

15.1

15.0

15.8

16.2

16.2

205,251

166,002

154,488

161,867

164,634

77

81

62

51

54

t-CO2

10,361

8,394

6,671

4,903

2,581

CO2 emissions due to transportation t-CO2

2,108

1,845

1,449

1,467

1,431

Number of employees
by gender*1 (Persons)Average years of service*1(Years)Total waste output

t

1,075

1,062

1,120

1,384

1,495

Overall

16.2

16.5

17.1

17.6

17.9

VOC emissions

t

50

28

16

18

27

All employees

70

71.4

72.3

72.4

71.9

PRTR emissions

t

0

0

0

0

0

Regular workers

78.3

79.2

78.6

77.7

76.5

Part-time andfixed-term contract
workers

60.2

57.4

60.2

64.6

77.3

Gender wage gap forworkers*2 (%)*1 Only for regular workers*2 Ratio of average annual wages of female employees to average annual wages of male employees

124

TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

125

Non-Financial Highlights

Non-Financial Highlights

Maternity, Childcare, and Nursing Care Leave Data (Non-consolidated)

Number of Patents Held

(Unit: Activities)

FY2019FY2020

FY2021

FY2022

FY2023

FY2019FY2020

FY2021

FY2022

FY2023

Percentage of employees taking paid leave (%)

98.3

99.6

96.6

99.4

104.1

Domestic

968

1,180

1,260

1,401

1,565

Percentage of employees using half-day vacations (%)

56.7

58.4

58.4

65.7

66.4

Overseas

543

644

704

800

864

Number of employees using maternity leave(Persons)

8

3

6

11

9

Male

3

4

8

13

27

Female

8

6

6

10

9

Number of employees using
childcare leave (Persons)

Percentage of employees using
childcare leave (%)

Rate of return to work afterchildcare leave (%)

Number of employees using
shorter working hours system forchildren (Persons)

Number of employees using
nursing care leave (Persons)

Total

11

10

14

23

36

Male

4

5

11

19

43

Female

100

100

100

100

90

Total

14

13

18

29

58

Male

100

100

100

100

100

Female

100

100

100

100

88

Total

100

100

100

100

97

Male

1

2

2

2

6

Female

8

17

15

15

18

Total

9

19

17

17

24

Male

0

0

1

1

0

Female

0

0

0

0

0

Total

0

0

1

1

0

Number of Social Contribution Activities Conducted (Consolidated)
FY2019FY2020

FY2021

FY2022

FY2023

277

285

188

155

213*

FY2020

FY2021

FY2022

FY2023

Number of employees affiliated with the labor
union (Persons)

1,491

1,491

1,504

1,504

1,457

Percentage of employees affiliated with the labor
union (%)

98

98

98

96

96

* Calculations exclude managers

Industrial Accident Circumstances (Non-consolidated) [Consolidated]

126(Unit: Activities)Japan

The Americas

China

Asia and Europe

Total

Economic assistance

15

56

7

19

97

Social contribution activities

41

53

10

12

116

Social Contribution Activity Expenditures (Non-consolidated)(Unit: Thousand yen)

FY2019FY2020

FY2021

FY2022

FY202350,01941,82417,303*1

282,063*2

43,440*1 Some social contribution activities have been canceled or postponed as part of efforts to prevent the spread of COVID-19.
*2 Includes facility repair expenses for Konosu Flower Stadium (Saitama Prefecture), the base venue for the activities of the baseball club.

Improvement Initiatives (Consolidated)
FY2019FY2020

FY2021

FY2022

FY2023

489

483

—

334

367

Dialogue with Stockholders and Investors
FY2019FY2020

FY2021

FY2022

General Meeting of Shareholders:Number of attendees

441

12*1

9*1

7*1

18

Events for individual investors:
Number of attendees

88

264

0*2

0*2

0*2

229

168

355

269

290

FY2020

FY2021

FY2022

FY2023

Number of industrial accident deaths (Persons)

0 [0]

0 [0]

0 [0]

0 [0]

0 [0]

IR/SR interviews: Number of companies(Including small meetings and conference calls)

Number of industrial accident injuries(lost worktime accidents) (Persons)

1 [59]

2 [36]

0 [36]

1 [25]

0 [11]*1 To prevent the spread of COVID-19, shareholders were asked to refrain from attending the venue.
*2 Events for individual investors were canceled to prevent the spread of COVID-19.

Frequency rate*1 [Industry average] (%)

0.25 [1.49]

0.52 [0.99]

0.00 [1.03]

0.27 [0.75]

0.00 [0.31]

Severity rate*2 [Industry average] (%)

0.00 [0.02]

0.01 [0.02]

0.00 [0.03]

0.01 [0.01]

0.00 [0.01]

TS TECH Integrated Report 2023

*2

*1 Improvement activities undertaken by small groups. Generally referred to as a “QC (Quality Control) Circle,” the activities are aimed at developing human resources who canuse the QC method to solve problems and manage and improve operations.
*2 Activities were not implemented to prevent the spread of COVID-19.

FY2019*1 Expresses the frequency of accident occurrences as the number of fatalities and injuries due to industrial accidents per million hours worked*2 Expresses the degree of severity of an accident as the number of working days lost per thousand hours worked. However, this is limited to industrial accidents causing one ormore lost working days.

*

Number of Social Contribution Activities Conducted in Fiscal 2023

Number of participating teams

FY2019** Some social contribution activities have been canceled or postponed as part of efforts to prevent the spread of COVID-19.

*1

Labor Union Data (Non-consolidated)(Unit: Activities)

Governance-Related Data

FY2023(Unit: Cases)

FY2019FY2020

FY2021

FY2022

FY2023Fines and penalties for anti-competitive practices(Consolidated)

0

0

0

0

0

Cases recognized as corruption or bribery(Consolidated)

0

0

0

0

0

Number of political donations (Non-consolidated)

0

0

0

0

0

TS TECH Integrated Report 2023

127

Corporate Data
External Recognition and Selection as a Constituent in Indices As of March 31, 2023

Corporate Data As of March 31, 2023
Company NameTS TECH Co., Ltd.
Establishment
December 5, 1960
Head Office
3-7-27 Sakae-cho, Asaka-shi, Saitama 351-0012, Japan
Common Stock
4,700,000,000 yen
Corporate Representative
President
Masanari
Yasuda
The automobile
industry
is in and
theRepresentative
midst ofDirector,a majortransformation.
Lines of Business
Manufacture and sale of seats for automobiles; interior trim and interior components for automobiles; motorcycle seats; andThe conventional conceptof anparts
automobile
motorcycle
and accessories
Number of Employees
15,172 (Consolidated), 1,710 (Non-consolidated)
as a Closing
meansof transportMarchis changing,of Accounts
31
Securities
TradedTokyo
Stock
Exchange(PrimeMarket)requiring new value for the time
spentin thecabin space of vehicles.
Main BanksMUFG Bank, Ltd./Sumitomo Mitsui Banking Corporation/Saitama Resona Bank, Limited
CustomersCo., Ltd./Honda Trading Corporation/Honda Access Corp./Suzuki Motor Corporation/Yamaha Motor Co., Ltd./WhatMaincan
TS TECH do atHonda
suchMotor
a time?
Kawasaki Motors, Ltd./Volkswagen AG/SEAT S.A./Harley-Davidson, Inc./PARAMOUNT BED CO., LTD.
Member Organization
Japan Auto Parts Industries Association

The value of our existence lies in the TS TECH Philosophy,

CDP Climate Change Report 2022, Japan edition
Selected as a company with a “Managementlevel” score of B

Investment in the company

which doesn’t change over time.

Number of
Shareholding
shares held
ratio (%)
(Thousands)

Stock Information As of March 31, 2023

Major Shareholders (As of March 31, 2023)

Total Number of Shares Authorized to Be Issued 272,000,000

Honda Motor Co., Ltd.

30,72024.1

The Master Trust Bank of Japan, Ltd. (Trust account)

15,35812.0

Custody Bank of Japan, Ltd. (Trust account)

6,466

5.1

SMBC Trust Bank Ltd. (Sumitomo Mitsui Banking
Corporation Pension Trust Account)

4,398

3.4

3,880

3.0

Taiyo Life Insurance Company

2,800

2.2

Okamoto Industries, Inc.

2,752

2.2

2,720

2.1

2,638

2.1

2,580

2.0

As “A company dedicated to realizing people’s potential,
a company sincerely appreciated by all,”
Total Number of Shares Issued

136,000,000

Numberalwaysof Shareholders
we havepursued products that18,376

bring a smile to customers’ faces by making

Sumitomo Life Insurance Company

Individuals and others
Treasury stock
the mostof the abilities of each andevery employee.
(Standing proxy: Custody Bank of Japan, Ltd.)

9.8 %

6.1 %

Financial
The value
we create
will always
keep changing
Foreign corporations
Mitsubishi UFJ Trust and Banking Corporation
Ownershipandand others

distribution

institutions(Standing proxy: The Master Trust Bank of Japan, Ltd.)

as wecontinue
to deliver
like%never before to the world,of sharesexcitement
20.5
%
34.1
MUFG Bank, Ltd.

Nippon Life Insurance Company
but the essence of who we are will never change.

(Standing proxy: The Master Trust Bank of Japan, Ltd.)
Other corporations
and others
Securities companies
We will
continue meeting the challengeof endless possibilities

Notes: 1. Number of shares held is rounded down to the nearest thousand.

2. The company, which owns 8,273,377 treasury shares, is excluded from the above list of major
28.3 %
1.2 %shareholders.
to make the mobility of the future freer and more enjoyable.
Also, treasury stock is excluded in calculating the shareholding ratio.

Trend in Stock Price and Trading Volume (April 2020–March 2023)(Yen)(Thousand shares)

Bringing joy tosociety through thepower of people
2,000

Stock price (Left axis)

Stock trading volume (Right axis)

1,600

18,00015,00012,000

1,200

9,000

800

400

0

21/3

22/3

6,000

Selected as a constituent stock for an index in whichweighting is determined by evaluating the levels ofenvironmental information disclosure and carbon
eﬃciency (carbon emissions per unit of sales)

CSR Companies
Rankingby Toyo Keizai Inc.

233

1,702 ﬁrms

Selected as a constituent of the Index, which
was designed to measure the performanceof Japanese companies with high ESG scores

ESG Companies
Ranking by
Toyo Keizai Inc.

170

1,702 ﬁrms

Selected as a constituent stock for the MSCIJapan Empowering Women (WIN)* Select Index
which selects Japanese companies withoutstanding gender diversity from each industry

Note: The inclusion of TS TECH Co., Ltd. in any MSCI index, and the use of MSCI logos, trademarks, service marks, or index names herein do not constitute a sponsorship,endorsement, or promotion of TS TECH Co., Ltd. by MSCI or any of its aﬃliates. The MSCI indices are the exclusive property of MSCI. MSCI and the MSCI index names andlogos are trademarks or service marks of MSCI or its aﬃliates.

On the Publication of TS TECH Integrated Report 2023
We have been publishing an integrated report since ﬁscal 2012 to allow shareholders, investors, and other stakeholders to gain a deeper understanding of how the TS TECH Group creates value over the medium to long term.
In this integrated report, our twelfth, we have provided an introduction to our value creation process forachieving sustainable growth together with society based on our corporate philosophy, “A company dedicated torealizing people’s potential, a company sincerely appreciated by all,” which we have consistently communicatedthroughout each of our previous reports. We have also introduced our initiatives aimed at achieving the 15th
Medium-Term Management Plan, which started in April 2023, and our 2030 Vision.
To continue creating new value and achieve further corporate growth in the automobile industry, which is experiencing a major transformation, we must not only pursue the technologies we have cultivated over the years inareas such as safety, comfort, and attractiveness. Also essential are the power of our people to advance thesetechnologies and deliver them to society, business operations conducted in harmony with the environment andsociety, and a solid corporate foundation with thorough governance. To realize ESG management, the TS TECH
Group is moving forward with various measures while incorporating the opinions of stakeholders, including shareholders, customers, outside directors, employees, and others.
As the Executive General Manager of the Corporate Administration Division with overall responsibility for the
production of the integrated report, I hereby state that the process used to prepare the report is reasonable andthat the information it contains is accurate. We hope that in addition to dialogue with stakeholders in the course of
our business activities, the report will help you to better understand the TS TECH Group. Going forward, we willcontinue to value dialogue with stakeholders. We are committed to enhancing the disclosure of information interms of both quantity and quality, so please feel free to give us your candid opinions.

Shigenobu Ono

Operating Oﬃcer
Corporate Administration Division Executive General Manager,
Oﬃcer in Charge of Public Relations

3,000
0

23/3

Note: The company implemented a two-for-one stock split of its common shares, effective April 1, 2021.
This graph was created on the assumption that the relevant stock split had been implemented at the beginning of fiscal 2021.

128

TS TECH Integrated Report 2023

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129

November 2023
Printed in Japan