Making your dreams come true

Ts u m u g uReport 2022

Fiscal 2021 (the year ended March 31, 2022)

Corporate Slogan

Making your dreams
come true
Corporate Philosophy
As members of the global community,
we will work for the betterment of society.
We take pride in being fair and sincere,and in continuing to offer superb service inorder to deliver superior customer satisfaction.

Regarding the Name of the Report
Since its establishment as a raw silk wholesaler in 1861,
Chori has been weaving (“Tsumugu”) a variety of connections andbonds with stakeholders in the same manner as it has been weaving silk over the years.
The report’s name “Tsumugu Report” reflects our corporate stancethat has remained intact since our founding. With a track record spanning more than 160 years,
Chori will continue to remain a company that weaves dreams into reality
by cherishing its relationships with all stakeholders.

1

CHORI CO., LTD.

Contents
Overview of Chori
3 President’s Message
7 Chori’s Strengths
13	Medium-Term Management Plan:
Chori Innovation Plan 2022
17 Financial Strategy

Special Feature: Chori’s
Sustainability-Focused Business
21 BLUE CHAINTM

Editorial Policy
The “Tsumugu Report” was issued to provide all readers, including
shareholders, investors, and all other stakeholders, with information
on Chori’s management vision, corporate philosophy, strengths,
and businesses, in order to broaden their understanding of theCompany. The report also functions as a tool for engaging in new
dialogues with stakeholders. The Tsumugu Report is issued in both

Overview and Strategies
by Business Segment
25 Overview
27	Fibers, Textiles,
and Garments Business
31 Chemicals Business
35 Machinery BusinessJapanese and English, and it is also available for viewing on our
corporate website.

https://www.chori.co.jp/english/

Management Foundation Tailoredto Sustainable Growth
39 Chori’s Sustainability Initiatives
		40

Environment

		41	Information Disclosure Basedon the TCFD Recommendations
Scope of Reporting
CHORI CO., LTD. and its Group companies; however, certain
information applies only to CHORI CO., LTD.
Period of Reporting
The information contained in this report is primarily for fiscal 2021
(April 1, 2021 to March 31, 2022); however, certain sections of
the report contain information on fiscal 2022 and thereafter.

		44	Occupational Safety Management
		45

Business Partners

		47

Human Resources

		49	Local Communities
and Society		50	Promotion of Health andProductivity Management
51 Corporate GovernanceCautionary Notice Regarding Forward-Looking Statements
Performance forecasts and other forward-looking statements
contained in this report are based on Chori’s judgments andinformation available as of the issuance of this report and are
subject to change due to a variety of factors. Accordingly, such

58	Messages from Outside Directors on the
Audit & Supervisory Committee
59	Directors, Audit & Supervisory
Committee Members,
and Executive Officers

forward-looking statements are not guarantees of any achievement of targets or forecasts or future performance. In addition,

Fact Data

the information contained in this report may change without priornotice. For this reason, we hope that readers make their own

61 11-Year Financial Summary

judgment when utilizing the information and materials contained in

63 Chori’s Global Network

this report with the use of other information that may be available.

65 Corporate Information

Chori does not take responsibility for any losses or damages
incurred through the use of this report.

Tsumugu Report 20222

Overview of Chori

President’s Message

Kazuo Sakihama
President, CEO & COO,
President and Executive Officer

3

CHORI CO., LTD.

As it moves forward to a new stage,
Chori will remain committed to its slogan,“Making your dreams come true.”
Leveraging of Chori’s
Strengths toward Further Growth
Chori is a company with a rich history that dates back morethan 160 years. However, we overcame a period of immense
challenges from the 1970s onward, which led to the formulationof our Reborn Management Plan in 2003 and the implementation of sweeping structural reforms. In the sense that it has been
19 years since this plan was unveiled, the Company, as it exists
today, is very young despite its long history. During these perilous times, the Company expanded sales and profits by taking
out loans and increasing the capital of other organizations. Chorihas become what it is today as a result of this experience and a
restructuring process that emphasized improvements to asset
efficiency and return on assets (ROA). Accordingly, at the end of
fiscal 2021, Chori’s ROA (ordinary income basis), which demonstrates a company’s earnings power, was 8.4%, a figure thatparallels that of general trading companies. We aim to maintainthis figure at around 8% going forward. Moreover, as a part ofour rebirth as an organization, we filtered our operations into theFibers, Textiles, and Garments Business; the Chemicals
Business; and the Machinery Business while focusing on nicheareas with the aim of becoming an integrated and specialized
trading company. As we continue to expand our businessaround the world, the COVID-19 pandemic has reminded us of
the fact that these three businesses are expandable as growthindustries, of the strength of our supply chain infrastructure thathas been built over our more than 160 years in business, andof the strength of our overseas transactions that have beendeveloped as a result of this infrastructure.
As a trading company, Chori’s greatest strength is its humanresources. In 2009, I was appointed vice president of CHORI(CHINA) CO., LTD., at a time when I was working as a sales
representative in the Chemicals Business. This allowed me toview Chori from an outsider’s perspective and realize that thisorganization is brimming with exceptionally talented individuals.
Whether it be fluency in a foreign language or expertise inmarket development, Chori is overflowing with highly skilled andknowledgeable employees who are extremely well-suited tothe direction the Company is taking toward global expansion.
I would like to see each and every employee continue to actively
embrace new challenges, hone their skills, and expand theirroles and responsibilities. Chori certainly has employees whoare capable of doing so, and therefore, I look forward to seeing
our young and talented individuals inspire the next generation.

Chori’s Vision for the Future
We expect Asia to continue to grow as a market in the next
10 to 20 years and beyond. In view of this, the approach wetake to expanding Chori’s presence in this market will be critical.
In anticipation of this medium- to long-term growth, we havebeen promoting consolidated management centered on our
global business since the start of our previous medium-term
management plan, and we will continue to do so going forward.
Our new stage at which we will consistently deliver ordinary
income at the ¥10.0 billion level, as set forth in our current mediumterm management plan, is also aimed at building a solid foundation
for the next 10 to 20 years and beyond. Having achieved ordinary
income of ¥10.3 billion in fiscal 2021, we are on a steady course tofirmly solidify this foundation. With this foundation as a springboard,
we will proceed ahead to our next step toward becoming a company that can promote M&As across the globe.
As an initiative that looks forward to the next generation,in April 2022 we launched a Companywide business transformation project to renew our mission-critical system. Having
reached our new stage of consistently delivering ordinary
income at the ¥10.0 billion level in fiscal 2021, and basedon our confidence and determination that we will consistently
achieve this target, we have decided to implement an enterprise resource planning (ERP) system. Although it will take a lotof effort to transition from the conventional system to our new
system, this is an investment we have made toward the continuous growth of Chori, 10 to 20 years in the future andbeyond. While this new system will be utilized solely by Chori

Tsumugu Report 2022

4

Overview of Chori

President’s Message

at this time, we will seek to implement ERP at our consolidated
subsidiaries as soon as possible, thereby enhancing our business management and productivity.

Progress of Chori Innovation Plan 2022 andOur Approach to Fiscal 2022
In fiscal 2021, the second year of Chori Innovation Plan 2022,
our medium-term management plan, we recorded net salesof ¥284.1 billion and ordinary income of ¥10.3 billion, successfully achieving our ordinary income target of ¥10.0 billion.
Although we feel that we would have reached this target a bit
earlier if not for COVID-19, we were able to reaffirm the strengthof Chori’s foundation because of this pandemic and believe that
our strategy of consolidated management centered on global
business, which has been in force since
our previous plan, was the right decision. In fiscal 2021, we
expanded our network of consolidated subsidiaries as well as
our overseas business, which led to record-highs in ordinary
income and net income attributable to owners of the parent.
In terms of business segments, the Fibers, Textiles, andGarments Business is enhancing its efforts to realize sustainability throughout the entire supply chain, from upstream to downstream, based on our new BLUE CHAINTM concept. While thesale of environment-friendly products has amounted to approximately ¥3.0 billion until now, in fiscal 2021 sales amounted toroughly ¥10.0 billion due to the expansion of this area of ourbusiness through a collective effort with business partners.
Going forward, we will work to promote BLUE CHAINTM by leveraging Chori’s strengths as a company that engages in the entire
supply chain. Meanwhile, STX Co., Ltd. (trade name changed
from Sumitex International Company Limited) was forced to shut
down its factory in Vietnam due to the lockdown enforced as aresult of COVID-19. For that reason, we were unable to reachour projected income target for this segment during fiscal 2021;
however, in the meantime we were able to take the measuresnecessary to create synergies between STX and Chori. It isessential that we expand our business in the ASEAN region,
which is drawing interest as a replacement to China for production activities. Although we will continue to face headwinds in theform of the deteriorating Japanese yen in fiscal 2022, we will
work to restore operations of STX with the aim of creating moresynergies together over the next five to 10 years and thereafter.
As for the Chemicals Business, it has been expanding toward
the goal of becoming a business that can independently provide
additional value. In this business, we will leverage our global
network to provide customers with the best possible solutions
through our diverse lineup of products. We have also expanded
and diversified our line of plant-based foods, biodegradable
resin, and other products focused on helping realize a sustainable society. In fact, when supply chains around the world were

5

CHORI CO., LTD.

at risk due to COVID-19, we received a numberof inquiries in regard to how we could address this issue,
and in response we have been utilizing our global network to
propose a variety of new solutions. With regard to the lithiumcompound production project in Chile, which Chori has beena part of since 2017, equipment has begun to arrive from theUnited States, where daily life is returning to normal. We expect
the project to make further progress in fiscal 2022.
In the Machinery Business, we have been working with business partners based in the United Arab Emirates (UAE) since
2018 to expand our business in West Africa, where there istremendous potential for growth. While Africa is a relatively newmarket for Chori, we have been steadily expanding our businessin this region. However, due to a delay in collecting receivablesfrom these business partners based in the UAE, we recorded
provision of allowance for doubtful accounts in the amount of¥739 million in fiscal 2021. Due to the lack of foreign currency
being a factor in this matter, we will proceed with business byincreasing our sensitivity to geopolitical risks and changes in thebusiness environment and continuing to work to recover our
accounts receivable. Meanwhile, we have been expanding the
global operations of the Machinery Business as a market consisting of four regions and India and achieved brisk sales in
Europe and Mexico in fiscal 2021. We will continue to steadily
expand this business globally by promoting its line of products,
which extend beyond those of the automotive business.
During the first two years of Chori Innovation Plan 2022, wehave been exposed to various risks, such as COVID-19, risingcommodity prices, and the deteriorating Japanese yen. In fiscal
2022, the final year of Chori Innovation Plan 2022, we will pay
particular attention to the conflict between Russia and Ukraine
and the zero-COVID policy in China due to the degree of theirpotential impact on supply chain disruptions. The conflict
between Russia and Ukraine has caused a clash and division
between global nations, which has posed significant risks toour business. On the other hand, the potential for further
growth in Asia, Africa, and other regions as a result of population growth is an enormous business opportunity for Chori. In
fiscal 2022, we will focus on these growth regions while continuing to grow as an organization by adapting quickly to thechanges in our business environment.

Chori’s Approach to ESG
In June 2022, we disclosed new information in accordance with
the TCFD recommendations. In this day and age, a businesscannot be operated without paying due consideration to theenvironment. At Chori, in order to fulfill our social responsibility
as an organization, we calculate and disclose our Scope 1 andScope 2 greenhouse gas (GHG) emissions. Although, theimpact of our sales activities on the environment is certainly notsubstantial from a trading company perspective, a matter wemust address going forward is the disclosure of our Scope 3
GHG emissions. Moreover, in regard to our contributions tosociety and the environment, we continue to engage in new
projects aimed at realizing a sustainable society. I believe it isof great significance that each of our businesses is engaging in
new projects, such as the aforementioned BLUE CHAINTM andplant-based foods, by identifying and being aware of the needs
concerning social issues. It is imperative that these social contributions that are made through our business activities are managed throughout the organization by setting numerical targets.
The most important element to Chori’s achievement of sustainable growth is its human resources. Meanwhile, it is also
important that we embrace the diversity of our employees.
The number of non-Japanese employees has increased among
new graduates in recent years, and we also have a wealth of
exceptionally talented individuals working as local staff in our
various regions of operation. In an age characterized by themobilization of human resources, we are assigning individuals
to the most well-suited roles by continuing to hire new graduates and actively recruiting mid-career employees. We will doour utmost to continue to strengthen the abilities of each
employee by allowing our diverse team of personnel to gaina variety of experiences.
In April 2022, Chori transitioned to the Prime Market of theTokyo Stock Exchange, as a result of which, outside directors
now account for one-third of the members on the Board of
Directors. We have also been taking measures to strengthen
our governance, such as through the establishment of our
Governance Committee, the majority of which consists of outside directors, as a voluntary advisory body to the Board of
Directors in March 2020. There is no end in sight to such measures to strengthen governance. Rather, we believe that having
a firm understanding of our issues is critical to the success ofour business. Accordingly, we will value the opinions of ouroutside directors and strive to eliminate the gap between ourcurrent governance and the governance we desire to achieve.
Implementation of the ERP system, which I mentioned earlier,will, I believe, also help strengthen our governance from theview of managing our numerical results and targets and ensuring the visibility of our business activities.

are finally in a position to live up to this slogan by becoming acompany that can take on various challenges. We have continued to help make the dreams of our customers and business
partners come true by creating value through the Fibers, Textiles,
and Garments Business, the Chemicals Business, and theMachinery Business in ways that go beyond the scope of an
ordinary trading company. While keeping in mind the expectationsof business partners for Chori to embrace new challenges andovercome difficult tasks, we will advance toward our next chapter.
In fiscal 2021, we were able to achieve the targets of Chori
Innovation Plan 2022 well ahead of schedule. Riding the waveof this success, we are also working to streamline our businessthrough the implementation of ERP toward our further growthin the next generation. At Chori, we will remain a company thathelps make dreams come true for everyone, and therefore,
we kindly ask for your continued support going forward.

Kazuo Sakihama
President, CEO & COO,
President and Executive Officer

A Trading Company
That Helps Make Dreams Come True
In 2008, Chori announced its corporate slogan, “Making yourdreams come true.” At the time, a number of employees may
have been baffled by the extraordinary nature of this slogan, but
in the more than 10 years since, we have steadily but surely
improved our business results. Having reached our ordinary
income target of ¥10.0 billion in fiscal 2021, we believe that weTsumugu Report 2022

6

Overview of Chori

Chori’s Strengths
Unique Global Network
Diverse product lineup centered on
emerging markets
P.8

Procurement
Capabilities

Network

History

Ability to Developa Global Supply
Chain

Solid business foundation
built over the courseof our history

Responsiveness(Promptness)
P.9–107

CHORI CO., LTD.

Human
Resources
Market development
capabilities as
demonstrated by ourhighly specialized
personnel
P.11–12Diverse product lineup centered on
emerging markets
Chori has been aggressively expanding its business in emerging countries since
the prewar period through efforts including the export of rayon yarn to China, India, and Mexico since the 1930s.
Since then, the Company has expanded its global network to Europe, the United States, the Middle East, Africa,and other parts of the world, and its overseas transactions now account for roughly 70% of its total net sales.

Overseas:

30 business sites*1

Consolidated employees:

1,322

*2

*1 As of September 2022
*2 As of March 2022

Handling of Products with High Import Barriers
Through its more than 60 years of doing business overseas, Chori has established procurement routes for a variety
of products centered on emerging markets. We have expanded the scale of our business by leveraging this product procurement route,
and our years of doing business worldwide have allowed us to also handle an array of products with high import barriers.

Examples of
Products Handled
Lithium Salt
Securing access to lithium salt
is believed to be difficult in the
producing nations of Chile and China.

by Chori

Pharmaceutical Ingredients /Food Additives
Ensuring the stable procurement ofquality raw materials in India andChina is essential to the
production of pharmaceuticalingredients and food additives.

Tsumugu Report 20228

Overview of Chori

Chori’s Strengths

Solid business foundation
built over the course of our history

1861 Founded in the Nishijin District of Kyoto, Japan
Chori was founded as a raw silk wholesaler during a turbulent time when Japan wastransitioning from the Edo Period to the Meiji Era. Moreover, the name “Chori” originatesfrom the combination of the Japanese characters “蝶” (cho), derived from the image of amoth creating raw silk, and “理” (ri), stemming from the first name of Chori’s first president,
Riichiro Ohashi.

1929	Establishes branch office in Fukui Prefecture1956 Launches the Chemicals Business

1934	Establishes branch office in1957	Establishes Chori New York Co., Ltd.

Ishikawa Prefecture1948 CHORI CO., LTD. established1952 Moves head office to Osaka
1953	Commences exclusive sales of woolly
nylon through the establishment of a joint
venture for the manufacture of woolly
nylon with Toyo Rayon Co., Ltd.
(currently TORAY INDUSTRIES, INC.)(currently CHORI AMERICA, INC.),
Chori’s first overseas subsidiary1959	Stock listed on Osaka Securities Exchange

1975	Begins company restructuring with drastic
streamlining and downsizing of management

1961	Stock listed on Tokyo Stock Exchange

1976	Establishes Fukui Chori Committee and	Designated as one of the first friendly
trading companies by China

Kanazawa Chori Committee (currently
Hokuriku Chori Committee) with twisted
yarn manufacturers and other business
partners in the Hokuriku region

1972	Develops a large-scale condominium

1993	Establishes CHORI (SHANGHAI) CO., LTD.
as first subsidiary in China

1995	Establishes PT. CHORI INDONESIA
1996	Secures order for railway project in
Kazakhstan

1997	Establishes joint venture Chongqing Dazu
Red Butterfly Strontium Industry Co., Ltd.

2001	Establishes Chori Middle East FZE
2002	Spins off the Synthetic Resin Business
Division into a separate company

1948–1975

A Period ofGrowthHandling of Synthetic Resin,
Chemical Products, andVarious Types of Machinery

9

CHORI CO., LTD.

Point

 ur Connection with the Hokuriku Region,O
the World’s Largest Textile-Producing Region

Chori has been working together with the Hokuriku region of Japan, one of the world’s largest
producing region for textiles, for more than 90 years. Over the years since establishing the
Hokuriku Branch in the early days of the Showa Period, we have sold synthetic yarn to companies in the region and developed fabrics together that are marketed in both Japan and overseas.
This diverse network we have developed with business partners in the Hokuriku region has
become the foundation of the supply chain of the Fibers, Textiles, and Garments Business,
which handles a wide range of high-performance, high-quality materials.

2004	Becomes a consolidated subsidiary of
TORAY INDUSTRIES, INC.

2005	Establishes CHORI (CHINA) CO., LTD.,
the first Japanese trading company
subsidiary with the rights to sell andtrade in China

2012	Engages in capital participation in
manufacture of electrode foil foraluminum electrolytic capacitors

2013	Makes PTI Japan Limited(currently CHORI GLEX CO., LTD.),a trading company specializing inchemicals, a consolidated subsidiary2014	Relocates Tokyo head office
to Shinagawa
	Establishes subsidiary CHORITRADING INDIA PRIVATE LIMITED2015	Makes Miyako Kagaku Co., Ltd.,a trading company specializing inchemicals, a consolidated subsidiary2016	Holds first annual Hokuriku Yarn Fair

2017	Participates in lithium compound
production project in Chile	Splits off the Machinery Business andestablishes Chori Machinery Co., Ltd.
	Makes ASADA U CO., LTD., a sales
company of automotive interior andpackaging materials, a consolidated
subsidiary2018	Makes KOZAKURA SHOKAI CO., LTD.,a trading company specializing inchemicals, a consolidated subsidiary
Participates in First China–Japan
Forum on Third-Party Market
Cooperation

2019	Establishes joint project with Utsumi
Recycle Systems Inc. for the sale ofrecycled pellets

2021	Makes STX Co., Ltd.
a consolidated subsidiary

2003–2020s

A Period of
2003	Launches the Reborn Management
Plan and undergoes sweeping
structural reforms
	Holds Textiles Exhibition(currently CHORI Exhibition)

BreakthroughResults
Four Consecutive Years ofRecord-High Ordinary Income
Point

Our Supply Chain in China

In 1961, prior to the normalization of Japan–China diplomatic relations, Chori became one of
the first to be designated as a friendly trading company by China, which paved the way for thelaunch of its China business ahead of the competition. Meanwhile, in 2005 we established thefirst Japanese trading company subsidiary with the rights to sell and trade in China, and currently, in 2022 we boast a network consisting of 14 business sites in Greater China.*
Chori has established a robust supply chain in China through the extensive ties it has developed with the country over the years. We continue to expand our operations in the country asa hub for the production, procurement, and domestic sales activities of the Fibers, Textiles, andGarments Business as well as for exports to third-party markets in the Chemicals andMachinery businesses.
* Consisting of China, Taiwan, and Hong Kong

1975–2003

A Period of

Setbacks
Selection and Concentration ofBusinesses Due to Significant Losses

Point

Our Commitment to Niche Markets

In the 1970s, Chori expanded its lifestyle-related business and bolstered its business results.
However, the Company began selecting and concentrating on certain businesses as a result of
incurring significant losses in the finance and real estate segments of its operations. The organizational system was restructured, leading to the establishment of the Fibers, Textiles, andGarments Business; the Chemicals Business; and the Machinery Business as our core businesssegments and of our strategy of focusing on the handling of highly profitable products. As aresult, ROA (ordinary income basis) has grown to 8.4% (as of March 31, 2021). Chori has been
expanding its business in niche markets where it can utilize its knowledge and expertise to thefullest, rather than in products with fiercely competitive prices and overwhelming competition.

Tsumugu Report 2022

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Overview of Chori

Chori’s Strengths

Market development capabilities

as demonstrated by our highly specialized personnel
At Chori, our employees engage in the same line of business for many years and therefore boast a wealthof expert knowledge in everything from product quality and manufacturing know-how to the technological capabilitiesof our suppliers. Drawing on their expertise, these employees are contributing to the creation ofmajor markets for our products in the Fibers, Textiles, and Garments; Chemicals; and Machinery businesses.

Creating new markets
through innovation
as a specialized trading company

1

Establishing a New Supply Chain
and Realizing Cost Benefits

Since joining the Company, I have worked in the Logistics Departmentof the Chemicals Division for many years, and my strengths lie in business development, including the optimization and restructuring of
supply chains. In 2013, we established a facility for inventory storage in
Latvia to increase sales of urethane materials. Prior to establishing thisfacility in Latvia, there were a few other locations we had in mind.
However, after reading through a considerable amount of materials inorder to verify the rules and regulations and chemical products of eachcountry, we decided that Latvia was the best location in terms of costand other factors. Accordingly, we established a framework for creating
cost benefits through the construction of a facility that is geographicallymore convenient than those of our European competitors and by
utilizing nonresident inventory services and having a warehouse in2

Kaai Kadokura
Section Manager, Chemical &Materials Business Department,
Performance Chemicals Department,
Section 1

Chori’s name without establishing a local subsidiary in Latvia. We also
made a number of trips to this region in order to establish a remotely
operated inventory management system. An efficient operation method
was also put in place to enable inventory to be tracked and deliveries tobe managed online and emergency response procedures to be carriedout by our overseas offices.

Optimizing the Supply Chain and Cultivating Markets
While Embracing New Challenges

At our new facility in Latvia, we increased sales volume to as much as roughly 6,000 metric tons per year by expanding our lineup to
three products from the mere one product that was sold at the outset in 2013. We will leverage this experience, in which we wereable to showcase Chori’s overseas presence, to develop new supply chains across the globe in a similar manner.
In 2021, I became the manager of my department after returning to work following the second time I took maternity and childcare
leave. At the present time, my focus is on developing a team that can fulfill its duties and expand profits while gaining a sense ofenjoyment in any environment. I will continue to strive to engage in projects that contribute to the realization of a greener global
environment and better lifestyles for people everywhere while securing stable profits toward the achievement of Chori’s medium- tolong-term growth.

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CHORI CO., LTD.

Leveraging its three strengths(human resources, global network, and history),
Chori will realize its corporate slogan,“Making your dreams come true.”Toshiya Sakaki
Section Manager,
Synthetic Fiber Business
Department,
Section 1

Suguru Hirano
Section Manager,
Inorganic Fine Materials
Department,
Section 1

Sakae Takahashi
Section Manager,
Pharmacovigilance &Quality Assurance Office

When I joined the Company and was
assigned to the Fibers, Textiles, andGarments Business, we mainly handledgeneric products. The challenge wefaced was increasing the sales of ourfunctional intermediates by distinguishing them from those of our competitors.
In light of this situation, I focused on the
sports industry and successfully developed our TEXBRIDTM highly stretchable
yarn, which is comfortable on the skin,while steadily working to verify thefunctionality of various raw materials.
Going forward, we will look to expand
the sales of environment-friendly
products and realize sustainability in the
textile industry.

I engage in the sale of inorganic
chemicals and have experience
working overseas, including in thePhilippines. While our main supplier todate has been China, we are working
to procure materials from a variety ofcountries and open up new markets.
Among these materials are potassium
and boron salts, for which Chori has
expanded its lineup to address theneeds of customers. Going forward,
we will expand our focus to nonferrous
metals in order to provide new value tocustomers through the united efforts ofall employees in Japan and overseas.

I work in the Pharmacovigilance &Quality Assurance Office, where I
engage in the management of imported
pharmaceuticals and other activities.
Whenever a pharmaceutical using an
ingredient imported by Chori or a drugthat Chori has helped produce comesto my attention at drugstores, I takepride in the fact that I play a key rolein supporting the health of patients.
By continuing to draw on my high levelof expertise and making wide contributions, including in the development offamiliar health products and advanced
medical materials, I will work to continue
to help ensure the healthy lives ofevery individual.

Takuro Tamura
Section Manager,
Apparel Department,
Section 1

Shutaro Hamakawa
Section Manager,
Fine Chemicals Department,
Section 1

Wenye Yu
General Manager,
CHORI (DALIAN) TRADING CO., LTD.

Since joining the Company, I have beena part of the Apparel Department, where
I have been planning and proposing
products for manufacturers around theworld. In addition to China, a market inwhich Chori has held a competitiveedge over the years, we are growing ourbusiness in the ASEAN region, where in2018 we commenced production
operations in Vietnam. When developing
new production sites, we are often
perplexed and faced with challenges
such as differences in business customs. However, I find it very rewarding
as I am able to learn many things andthe experience itself is very stimulating.
We will increase our product sales fromASEAN countries, where the potential
for economic growth is particularly high,to Japan and other countries.

We engage in the manufacture ofpharmaceutical and agrochemical intermediates and ingredients by outsourcing
these services to suppliers in India, China,
Eastern Europe, and other regions. Dueto the fact that our pharmaceuticalproducts must be produced by undergoing strict quality control procedures, I get
great satisfaction from being able tocontribute to the healthy lives of people ona daily basis. By continuing to cultivate thegeneric pharmaceutical market in both
Japan and overseas, providing low-cost,high-quality pharmaceuticals, andpursuing biopharmaceuticals and othernew domains, I hope to help save as
many lives as possible around the world.

I work at CHORI (DALIAN) TRADING
CO., LTD., where I engage in the management of production activities. Ten
years ago, when China was the focus ofChori’s production activities, we set oursights on acquiring a large-scale projectthat entailed production based in the
ASEAN region. We dedicated almost an
entire year to making a bid for this project,which involved conducting market
research, selecting business partners,
and negotiating conditions for productionlines, among other tasks, resulting in our
successful acquisition. Chori is a wellknown Japanese company, even in
China. We will continue to weave thenext stage of Chori's history together
with our wide range of business partners.

Tsumugu Report 2022

12

Overview of Chori

Medium-Term Management Plan

Chori Innovation Plan 2022
Under Chori Innovation Plan 2022, our current medium-term management plan covering the period from fiscal 2020 to fiscal
2022, Chori will rigorously enforce risk management and other defensive measures in order to position itself to respond quickly
to the drastic changes taking place in its social and economic environments. We will forge ahead with our basic strategies of“reinforcement of consolidated management structure,” “creation of next-generation business models,” “corporate
governance,” “compliance,” and “strengthening of human resource development structure,” with the aim of realizing sustainablegrowth. By doing so, the Chori Group will become a corporate group that continues to evolve and change on a global scale,underpinned by its exceptional capabilities and expertise, and continue to enhance its corporate value.

356.5	Net sales(target)	Net sales(result, forecast)	Ordinary income(target)	Ordinary income(result, forecast)

330.0 329.4(Billions of yen)

291.6
280.0

260.0
248.4

311.7

300.0
270.9

280.0
7.5

7.5
6.8

6.2

300.0
8.7

8.7
8.5

7.8

7.2

7.0

6.0
5.5
(%)

ROA
(Ordinary Income Basis)

7.3

6.0

7.1

6.9

7.3

7.5

ROE
(Net Income Basis)

10.7

10.2

10.7

9.7

10.7

11.0

FY2014FY2015FY2016FY2017FY2018FY2019Yakushin 2016
Corporatephilosophy

Strengthened the
management base andinitiated M&A strategy

Under Yakushin 2016, our previous medium-term management
plan covering the period from fiscal 2014 to fiscal 2016, we fell
short of our targets due to the decline in overseas trade precipitated by the impact of the appreciating Japanese yen in fiscal
2016. Nonetheless, our results fared well overall thanks to the
execution of large-scale M&A, such as the consolidation of
Miyako Kagaku Co., Ltd. into the Group.
Under Chori Innovation Plan 2019, our previous medium-term
management plan covering the period from fiscal 2017 to fiscal
2019, we reinforced our consolidated management structure bymaking ASADA U CO., LTD. and KOZAKURA SHOKAI CO., LTD.
consolidated subsidiaries. This culminated in the achievement of

13

CHORI CO., LTD.

Chori Innovation Plan 2019

Strengthening
consolidated
management

Converting
business modelby investing

Enlargement ofGroup companies

our highest-ever results for ordinary income and net income
attributable to owners of the parent in fiscal 2018 and of ourmanagement plan targets one year ahead of schedule.
In fiscal 2021, the second year of Chori Innovation Plan
2022, we successfully began our new stage of consistently
delivering ordinary income at the ¥10.0 billion level. We continued to make steady progress, posting our highest-ever resultsfor ordinary income (¥10.3 billion) and net income attributableto owners of the parent (¥6.8 billion). In fiscal 2022, the final
year of Chori Innovation Plan 2022, we aim to bolster ourordinary income to ¥12.0 billion.

Becoming a corporate group that continues to evolve and change on a global scale,underpinned by its exceptional capabilities and expertise
12.0
330.0

AFTER COVID-19

10.3
11.0
284.1

To a new normal

280.0

9.0
216.2

240.0

200.0
7.0

4.7

Take steps to address COVID-19

ROA(Ordinary Income Basis)

4.1

8.4

9.0

ROE
(Net Income Basis)

2.2

11.0

12.0

Respond instantly to a dramatically changing
business environment
Fortify defensive measures

FY2022
Forecast

Numerical Targets

FY2020

FY2021

FY2022(Targets, Forecasts)

Chori Innovation Plan 2022
Lay a solid foundation for a new stage
Consistently deliver ordinary income at the ¥10.0 billion level

Net Sales¥330.0 billion

Ordinary Income¥12.0 billion

Net Income Attributable to
Owners of the Parent¥8.2 billion

ROA (Ordinary Income Basis)

9.0%

ROE (Net Income Basis)

12.0%

Payout Ratio
Enhancing corporate
governance

30% or more

Continuing to implement
CHORI Innovation Activities(Companywide activities)

Awareness of External Business Environment (Fiscal 2021)
Chori will rigorously enforce risk management and other defensive measures and firmly grasp business opportunities in order toposition itself to respond quickly to the drastic changes taking place in its social and economic environments.
Positive Impacts

Negative Impacts

Fibers,Textiles, andGarments
Business• Increased demand for car seats due to recovery inautomobile production• Steady demand for hygienic materials• Increased demand for sports apparel due toincreased health awareness• Decline in demand for apparel due to stay-at-home orders

Chemicals
Business• Strong demand for pharmaceutical intermediates, etc.
• Increased demand for automobile-related materials
due to recovery in automobile production• Decline in demand for cosmetics and food additives due
to reduced store opening hours and people’s refraining
from going outdoors

MachineryBusiness• Recovery of vehicle markets in Europe andSouth and Central America• Stringent supply and demand for vessels,soaring container shipping rates, etc.

Tsumugu Report 2022

14

Overview of Chori

Medium-Term Management Plan

The Basic Strategies
of Chori Innovation Plan 2022
Chori will press ahead with the following five basic strategies in its bid to become a corporate group that continues to
evolve on a global scale, underpinned by its exceptional capabilities and expertise, while addressing the drastically changing
social environment.

1
Reinforcement ofConsolidated
Management
Structure

From the perspective of reinforcing the consolidated management structure, Chori will
increase the consolidated-to-nonconsolidated ordinary income ratio, enhance thecapabilities of core subsidiaries, and promote Group management.

Strengthening of Consolidated-to-Nonconsolidated
Projected toincrease
1.6 times

Ordinary Income Ratio(Billions of yen)12

• Consolidated management
centered on global business• Consolidated management• Portfolio management• Digital management

9
6
3
0

7.0

5.4

2016

7.5 6.0
2017

Consolidated ordinary income2
Creation of
Next-Generation
Business Models• Investment in and development of
new businesses• M&A

15

CHORI CO., LTD.

8.7

6.1

2018

8.7

10.3
6.4

2019

4.7

8.1

11.0
6.8

2.2

2020

2021

2022
(Targets)(FY)

Nonconsolidated ordinary income

We will maintain the Business Investment Committee and proactively invest in growthfields and areas. In particular, we will proceed with the business investments outlined
below centered on the themes of the environment, health, sustainability, and cuttingedge technology.
Focusing on Investment in Growth Fields and Areas
Fibers, Textiles, andGarments Business

Environmental and recycling, health, hygiene,
and materials fields

Chemicals Business

Environmental, 5G-related, electronics and battery materials,
healthcare, and agricultural fields

Machinery Business

Global market development

3

At Chori, we have established the Governance Committee, which mainly consists ofoutside directors and serves as an advisory body to the Board of Directors. Through theenhancement and strengthening of corporate governance, we will pursue further
increases in corporate value, while delivering performance-based dividends of 30% ormore. Meanwhile, our basic dividend policy is to provide performance-based dividends inaccordance with the standards for net income attributable to owners of the parent fromthe perspectives of flexibly returning profits to shareholders and ensuring stable operations
andfinances while securing appropriate funds for investments in growth strategies.
200
800

Corporate
Governance• Establishment ofGovernance Committee• Improvement of dividend policy• Continuation of stock-based
compensation andenhancement thereof• Group governance• Enhancement of
Chori’s brand value• CHORI Innovation Activities(Companywide activities)

Trends in per-Share Dividend (Annual)

Payout ratio of
160
640
Includes(Yen)(Yen)
30% or morecommemorative dividendof ¥10

120
80
40
0

24

33

36

34

Committee
Member Suzuki

Committee
Member Sakihama(Independent Director) (Independent Director) (President, CEO & COO)

4
Compliance• Reinforcement of corporate ethics• Elimination of legal violations• Global risk management• Strengthening of supervisory functions at consolidated subsidiaries

5
Strengthening of
Human Resource
Development
Structure• Nurturing of human resources fornext generation• Promotion of health andproductivity management(Please see page 50 for details)

63

60

480
320

37

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
(Result) (Result) (Result) (Result) (Result) (Result) (Result) (Result) (Result) (Result) (Forecast)

GovernanceCommittee
Chairman Sawano

59

100

84

160

Dividends per year (left scale)Committee

40(FY2020–FY2022)

Outside
director
Director

0(FY)

Net income per share (right scale)Appointment or
dismissal of
directors andexecutive officers
Successor planningand training

Compensation of
directors andexecutive officers
Compensation madeindividually

Assessment oftransactions andother dealings withthe parent
company group

Through the reinforcement of corporate ethics, eliminationof legal violations, and strengthening of supervisory functions at consolidated subsidiaries, we ensure thoroughcompliance throughout our operations. As we continue to
evolve our business globally, we will adhere to the laws,
regulations, and customs of Japan and other countries
and instill such awareness in our employees through internal training sessions and legal compliance manuals for the
purpose of preventing legal violations.

Guided by its vision for human resources, “Utilize people, and be useful to them.
Nurture people, and develop with them. Connect people, and join together with them,”
Chori regards each and every one of its Group employees as its most valuable
management resource and strives to ensure their health and well-being. Further, bypromoting the following measures in line with the key principles of “utilize,” “nurture,”and “connect,” we will cultivate our human resources for the next generation.
Nurturing of Human Resources for Next Generation

Utilize

Nurture ealize diverse workstyles
RStimulate communication
through one-on-one
interviews

Nurture future generationsof human resources
Nurture employees of ouroverseas offices
Promote active roles for
women

Connect
Energize and unify the
Chori Group throughthe mobilization of
employees within theGroup
Tsumugu Report 2022

16

Overview of Chori

Financial Strategy
In our new stage ofconsistently delivering ordinary income
at the ¥10.0 billion level,
we will step up the pace ofour global expansion
and provide greater value to markets.
Tatsuyuki Sakoda
Director,
Managing Executive Officer

Inaugural Message and Reflection on Fiscal 2021 Performance My name is Tatsuyuki Sakoda and I was appointed as a director and managing executive officer in fiscal 2022. Since joining
the Company in 1989, I have served as the president of CHORIAMERICA, INC. and as the president, CEO & COO of Miyako
Kagaku Co., Ltd., in addition to my role as the head of theplanning department of the Fibers, Textiles, and Garments
Business and the Corporate Management Division in Japanand overseas. Our current business environment urges us torespond to a multitude of risks, including COVID-19, the conflict
between Russia and Ukraine, the weakening Japanese yen,and the rising prices of goods and services. However, by drawing on my own experience that I have gained over the years ina range of business settings, I will address these risks from a
medium- to long-term point of view and thereby realize thesustainable growth of our organization.
Fiscal 2021 was a year in which we recorded our highestever results, achieving ordinary income of ¥10.3 billion and net
income attributable to owners of the parent of ¥6.8 billion.
While sales grew in all of our business segments, the Chemicals
Business in particular benefited from a tailwind of rising material
prices, and I commend the business for being able to ride thiswave and improve its performance under its own power.

Meanwhile, the Fibers, Textiles, and Garments Businessachieved results to a certain degree by adapting to the changes
in demand stemming from COVID-19 while overcoming various
obstacles. The Machinery Business recorded provision of allowance for doubtful accounts in the amount of ¥739 million* dueto a delay in collecting receivables from business partners
based in the UAE. This delay was mainly caused by a stagnation in cash flow resulting from the production cutback of oil in
Nigeria and other factors associated with COVID-19. As preparations are underway for the payment of this amount in foreign
currency, Chori will continue with its efforts to collect on its
accounts receivable. For Chori to continue to grow over the
medium to long term, we must establish strategic partnerships
on a global scale. Going forward, we will continue to take themeasures necessary to expand our operations while carefully
monitoring the risks associated with our business without
thinking twice about investing our resources.
* The total amount of receivables from two business partners, PLATINUM
CORPORATION FZE and RELIANCE COMMODITIES DMCC, at risk of collection
delays is ¥739.9 million. Chori has taken out a trade insurance policy with acoverage rate of 90% from Nippon Export and Investment Insurance (NEXI) andhas recorded ¥739 million, which represents 10% of the total amount of thereceivables, as provision of allowance for doubtful accounts (as of March 31, 2022).

Consolidated Financial Results and Rate of Achievement of Medium-Term Management Plan Targets
FY202017

FY2021

Difference(Billions of yen)

FY2021 Plan

Achievement Rate

Net Sales

216.2

284.1

+67.9

240.0

118.4%

Gross Profit

26.4

30.7

+4.3

—

—

Selling, General and Administrative Expenses

22.7

21.3

–1.4

—

—

Operating Income

3.7

9.3

+5.7

8.7

107.2%

Ordinary Income

4.7

10.3

+5.6

9.0

114.2%Net Income Attributable to Owners of the Parent

1.2

6.8

+5.6

5.9

115.4%CHORI CO., LTD.

Toward the Achievement of Our Medium-Term Management Plan We have revised our targets upward for fiscal 2022, the final yearof Chori Innovation Plan 2022. The reason behind this revision is
the surging prices of crude oil. While crude oil prices were on adeclining trend in 2019, right at the time when our current
medium-term management plan was formulated, the recent
price hikes have sparked an increase in profits, particularly in theChemicals Business, driving the growth of the entire Company.
In order to achieve these revised targets, the Fibers, Textiles, andGarments Business must firmly recover the operations of STX
Co., Ltd., which was unable to fully create synergies with Choriin fiscal 2021 due to the effects of COVID-19. We must also
keep a close eye on the depreciating Japanese yen as a risk toour business. This is due to the likelihood of the profit environment deteriorating for products close to end consumers. In
addition, the situation in Ukraine has put the nature of global
businesses in question. The issue of security is becoming
increasingly important in terms of expanding business along the
global supply chain, an area where Chori excels in, and so wewill keep a close eye on this issue going forward.
During the times of hardship up to the early 2000s, we put
our heart and soul into revising our business portfolio. Whattranspired as a result of our selection and concentration ofbusinesses and the significant losses we incurred during those

years was the establishment of the Fibers, Textiles, andGarments; Chemicals; and Machinery businesses that exist
today. Each business is constantly reviewed based on our exit
rule, which designates that we shall withdraw from a businessthat has failed to turn a profit for three consecutive years.
In addition, we verify the effectiveness of new investments andassess the risks involved through the efforts of the Business
Investment and M&A Promotion committees.

Fiscal 2022 Performance Forecast(Billions of yen)

Medium-Term
Management Plan
(Final Year Target)

FY2022(Forecast)
Nat Sales

330.0

280.0

Ordinary Income

12.0

11.0

Net Income Attributable to
Owners of the Parent

8.2

7.3

ROA (Ordinary Income Basis)

9.0%

8% or more

ROE (Net Income Basis)

12.0%

11% or moreFinancial Position 
Total assets as of March 31, 2021 were ¥134.1 billion, an
increase of ¥23.5 billion from the end of the previous fiscal year;
however, ¥13.6 billion of this amount was due to the consolidation of STX. As a result, the equity ratio as of the end of fiscal
2021 was 48.5%. Based on our years of experience in dealing
with challenging business environments, Chori’s goal is tomaintain an equity ratio of around 50%. While this figure may
appear to be high from the perspective of a trading company,
we will continue to expand our business by placing emphasis
on ROA, which is indicative of a company’s asset efficiency,
while focusing on investing in niche areas of the Fibers, Textiles,
and Garments Business; the Chemicals Business; and theMachinery Business, Chori’s core businesses. ROA (ordinary
income basis) at the end of fiscal 2021 was 8.4%, exceeding
the final year target of 8% for Chori Innovation Plan 2022, andROE (net income basis) came to 11.0%.

Financial Soundness(Billions of yen)
150
100

(%)

134.1

110.6 53.2

75

48.5
65.1

58.8

25

50
0

50

(15.5)

(6.9)

– 50

Mar. 31, 2021

Mar. 31, 2022

Total assets

Net interest-bearing debt

Total equity

0

Equity ratio

Profitability / Capital Efficiency
Mar. 31, 2021 Mar. 31, 2022

Difference

ROA(Ordinary Income Basis)

4.1%

8.4%

+4.3%

ROA (Net Income Basis)

1.1%

5.6%

+4.5%

ROE (Net Income Basis)

2.2%

11.0%

+8.8%

Tsumugu Report 2022

18

Overview of Chori

Financial Strategy

Cash Allocation 
In fiscal 2021, net cash used in operating activities came to ¥2.3
billion mainly due to increases in both trade receivables andinventories. In fiscal 2022, we will reduce our stock funds whileclosely monitoring increases in material prices and other factors.
From an investment point of view, we will constantly be on
the lookout for quality projects, but first we must focus on
improving the profitability of STX and other existing businesses
in fiscal 2022. Moreover, in order to achieve organic growth, wehave been directing our attention to our branding activities forthe three core businesses, particularly the Fibers, Textiles, andGarments Business, and enhancing awareness of our new
BLUE CHAINTM concept and original products while carryingout investments in order to protect our intellectual property
rights. With regard to our human resources, in addition toinvesting in training programs and career development support
services, we are actively recruiting highly specialized and experienced individuals in anticipation of Chori’s new growth in anage characterized by the mobilization of human resources.
Meanwhile, we increased our payout ratio to 30% or more infiscal 2020 and paid annual dividends of ¥84 per share in fiscal

2021. Going forward, we will continue to provide performancebased dividends in accordance with the standards for net
income attributable to owners of the parent.
Cash Flows(Billions of yen)

FY2020

FY2021

Difference

Cash Flows
from Operating Activities

5.9

(2.3)

–8.2

Cash Flows
from Investing Activities

(0.4)

0.2

+0.6

Cash Flows
from Financing Activities

(0.9)

(4.0)

–3.1

Effect of Exchange Rate
Changes on Cash andCash Equivalents

(0.0)

0.6

+0.6

Total Cash Flows

4.6

(5.6)

–10.2

Cash and Cash Equivalents at
End of Period

17.6

12.0

–5.6

Our Approach Going Forward In fiscal 2021, we reached the ¥10.0 billion mark for ordinary
income and solidified the foundation for our new stage of consistently delivering ordinary income at the ¥10.0 billion level. In fiscal
2022, we will work to achieve our upwardly revised consolidated
performance targets and will cement this as our standard for the
future. For Chori to achieve further growth in the next 10 to 20
years and beyond, it is essential that we continue to proceed

19

CHORI CO., LTD.

with consolidated management centered on our global business.
In order to steadily grow its businesses, Chori will expand its
global operations, raise the level of its intellectual infrastructure
as a company, and enhance its presence in the market as anintegrated and specialized trading company that has been inbusiness for more than 160 years.

Reference Material
Reasons for Changes in Ordinary Income and Trends in Ordinary Income
Reasons for Changes in Ordinary Income(Billions of yen)

Record-highincome

18

+5.1

(4.0)

+8.3

(3.8)

12

10.3

4.7

6

0

FY2020Effect of increased sales

Decreased profit ratio

Rebound from provisionof allowance for
doubtful accounts*

Increase in selling,
general and administrative
expenses due to M&A, etc.

FY2021* In FY2020, Chori recorded provision of allowance for doubtful accounts of ¥5.1 billion against a Chinese chemical manufacturing company group.

Trends in Ordinary Income(Billions of yen)

FY2020
1Q

2Q

3Q

FY2021
Full-year
total

4Q

1Q

2Q

3Q

Full-year
total

4Q

Net Sales

49.0

53.2

55.2

58.9

216.2

60.7

69.4

75.8

78.3

284.1

Operating Income (Loss)

(0.9)

2.5

2.4

(0.3)

3.7

2.6

2.3

2.6

2.0

9.3

Ordinary Income (Loss)

(0.7)

2.5

2.5

0.3

4.7

2.9

2.4

2.9

2.1

10.3

(Excluding the Provision of Allowance for
Doubtful Accounts)

1.8

2.5

2.5

2.9

9.7

(1.2)

1.4

1.6

(0.6)

1.2

2.3

1.7

1.9

1.0

6.8

Net Income (Loss) Attributable to Owners of
the Parent

Market Trends
Foreign Exchange Rate

Oil Prices(Yen)(Yen)(US$/barrel)(US$/ton)

21

14

17.4
112.7

16.3

16.9

16.5

112.2

106.2

111.0

15.3
108.8

16.8
110.7

19.3

150

120

100

80

100.3

122.4
64.9
50.6
38.3

7

50

40
367.9

0

2016

2017

RMB (left scale)

2018

2019

USD (right scale)Note: A s of March 31
Source: Rate as of the Company’s term-end

2020

2021

2022 （CY） 0

0

2016

470.1

579.1

59.2

60.1

552.9

1,009.2

20.5

594.3

1,500

1,000

500

294.8
2017

2018

New York crude oil (left scale)

2019

2020

2021

2022 (CY) 0

Naphtha (imports) (right scale)Note: New York crude oil is as of March 31;
Naphtha is single-month average for March
Sources: Company research

Tsumugu Report 2022

20

Special Feature: Chori’s Sustainability-Focused BusinessSpecial Feature
Realizing a sustainable supply chain from upstream to downstream

In this section, we will introduce Chori’s initiatives toward realizing sustainability,
centered on its ECO BLUETM concept.

21

CHORI CO., LTD.

Resolving the Issues of the Fiber, Textile, and Garment Industries
The problem of environmental degradation, which has been a focus of attention for

E C O BLU E TM

BLUE CHAINTM at a Glancea variety of industries in recent years, has become a matter of significant concern
in the fiber, textile, and garment industries. The creation of new apparel made in
response to recent trends and consumer needs requires massive volumes of waterand produces substantial amounts of greenhouse gases. It is also true that large
quantities of unsold clothing are discarded unused. To address these issues, Chori
introduced BLUE CHAINTM initiatives to create environment-friendly products byseamlessly linking the vast and complex fiber, textile, and garment industries andintegrating the functions of each company. By teaming up with a number of companies and operating businesses by leveraging economies of scale, we will reducethe costs associated with decarbonization measures. Through BLUE CHAINTM,
we will work together with our business partners to contribute to the transformationof the fiber, textile, and garment industries.

Natur a l D ye

Chori’s unique line ofBLUE CHAINTM products

ECO BLUETMTEXBRIDTM

Recycled polyester fiber made of usedplastic bottles

A highly durable, long-lasting, andstretchable material

MILLENNIUM ORGANICTM

MEDITERRANEAN GIZATM

A material made of ultra-white raw cotton
that eliminates the need for chlorine bleachand excess reducing agents used in chemicaldyeing processes

A material that is made using 100% recycledwater and has reduced the amount of waterused in cultivation processes by 30% to
50% through the extensive use of a drip
irrigation system

CottonNatural Dye
A line of apparel that uses plants and foodresidue as dyes, having less impact on theenvironment than chemical dyes

Tsumugu Report 2022

22

Special Feature: Chori’s Sustainability-Focused BusinessSpecial Feature

01

ECO BLUETM Recycled Polyester Fiber
At Chori, we handle a wide variety of environmentfriendly products. At the core of these products is our
ECO BLUETM recycled polyester fiber made from recycled plastic bottles. ECO BLUETM was introduced in2007 and has continued to evolve over the last 15 years.
While continuing to engage in all areas of the supply
chain, from the handling of yarn to the sale of the final
product, in 2019 Chori partnered with recycled pellet
manufacturer Utsumi Recycle Systems Inc. to tap into
the pellet business—an upstream recycling process—and established its very own recycling facility.
The amount of recycled polyester fiber handled byother companies has also been on the rise in recent
years. However, the strength of ECO BLUETM lies in the
Company’s ability to handle over 200 types of yarn byleveraging the solid relationships it has built with theworld’s leading synthetic fiber manufacturers. Each year,
approximately 520 million plastic bottles are recycled to
produce plastic pellets and yarn. Setting our sights on
continuing to increase corporate value, we will engage
in advanced yarn processing together with processing
plants in the Hokuriku region and other areas.

Recycled pellet extruder
Production process

Consumers

Collect PET bottles

Bale

Sort

Reduces CO2
emissions by approx.
Spin

Pelletize

77 %*Wash and cut* Based on in-house estimates—TOKYO
9th FaW
O
t
a
Y
K
it
O
ib
Exh
LD T
N WOR
FASHIO pril 6—8, 2022)(A

23

CHORI CO., LTD.

Chori was among the approximately
360 companies with an exhibit at FaWTOKYO—FASHION WORLD TOKYO,
Japan’s largest fashion trade show heldat Tokyo Big Sight from April 6 to April 8,
2022. Consisting of six themes, including
Sustainable Fashion Expo and Japan
Fashion Expo, this year’s event marked
our second appearance following ourparticipation in last year’s event held in
October 2021. Our booth, which unveiled
the redesigned logos of BLUE CHAINTM
and ECO BLUETM and featured keynote
speeches detailing these concepts,
proved to be a tremendous success.

02

Development of Quick-Dyeing Yarn with Business Partners
Chori is expanding its lineup of initiatives that infuse its
ECO BLUETM concept into the products of its business
partners. In 2021, we developed WSTM, a quick-dyeing
material, with KOMATSU MATERE Co., Ltd., a chemicalmaterial manufacturer based in Ishikawa Prefecture.
WSTM is an environment-friendly material that significantly reduces the amount of energy and dye required
for the dyeing process by incorporating special yarn
and processing technologies. Ordinary yarn needs tobe dyed at high temperatures due to the inability ofpolymers to move around freely and the many crystalline
regions that are not easy for dyes to permeate.
Meanwhile, WSTM offers less than one-third the numberof crystalline regions as ordinary yarn, enabling polymers
to move around and dyes to permeate easily. As a result,compared with conventional methods, the dyeing
process can be performed at a lower temperature andbe completed in roughly 50% less time, thereby reducing
the amount of CO2 emissions from fabric dyeing processes
by 31.7%.

Although textile recycling has become commonplaceworldwide, WSTM, which reduces greenhouse gas emissions at the manufacturing stage, is attracting a great
deal of interest both in Japan and overseas andis expanding in terms of sales for use in sportswear,
casual wear, and uniforms around the world.

Direction Going Forward
ECO BLUETM and Chori’s other recycled raw materials are
already used in a number of sports and other apparelproducts, and in fiscal 2021 sales of environment-friendly
products grew to approximately ¥10.0 billion. As new
initiatives, we are proposing asystem in which the used plastic bottles we collect are reused
to produce original company
uniforms and developing matsfor riverbeds to prevent flood
damage and sound-absorbing
mats for electric vehicles madeof fiber scraps generated atfactories. Going forward, we will
look to expand our business not
only in Japan but also overseas,targeting the sports and03

outdoors and mid- to high-end apparel markets in Europe.
We will thereby achieve net sales of ¥13.5 billion in fiscal
2022 along the road to ultimately reaching ¥30 billion.
As a company that was founded on its raw silk business,
Chori holds itself accountable for overcoming the challenges facing the fiber, textile, and garment industries andachieving sustainability throughout the supply chain. While
it is important to pursue sustainability at each point along
the supply chain, this alone will not achieve true sustainability. Leveraging the solid relationships it has built withbusiness partners throughout its over 160 years in business, Chori will weave together its sustainability practices
along the supply chain and develop and provide environment-friendly products that pave the way to the futureof the textile industry, which generates large amounts ofwaste, presenting a significant impact on the environment.

Tsumugu Report 2022

24

Overview and Strategies by Business Segment

Overview
Group Structure

CHORI CO., LTD.

Fibers, Textiles, andGarments Business:
13 companies
Chemicals Business:
8 companies

Major Subsidiaries

Main Business

ASADA U CO., LTD.
CHORI MODA CO., LTD
STX Co., Ltd.

Sale of automotive interior and packaging materials
Planning and development of apparel products
Manufacturing and sale of textile-related products (including clothing and fabric materials)

Miyako Kagaku Co., Ltd.
KOZAKURA SHOKAI CO., LTD.

Sale of chemical products, industrial materials, pharmaceuticals, and food-related ingredients
Sale of lubricating oil additives and various other chemicals

(As of March 31, 2022)

CHORI GLEX CO., LTD.

Import sales of chemical products, construction materials, and industrial products

Machinery Business:
1 company

Chori Machinery Co., Ltd

Sale of transportation equipment and other products

Other:
2 companies

Business Anchor Corporation

Outsourcing of administrative work

Overseas subsidiaries:
20 companies

CHORI AMERICA, INC.
CHORI (CHINA) CO., LTD.
THAI CHORI CO., LTD.

Import and export sales, overseas transactions, and domestic sale of various products in the U.S.
Import and export sales, overseas transactions, and domestic sale of various products in China
Import and export sales, overseas transactions, and domestic sale of various products in Thailand

Fiscal 2021 Net Sales by Segment

Net Sales¥284.1 billion

Fibers, Textiles, and Garments ¥115.5 billion (40.7%)

Chemicals ¥164.2 billion (57.8%)

Machinery ¥4.3 billion (1.5%)

Other (incl. corporate adjustments) ¥0.1 billion (0.0%)

Percentage of Net Sales in Fiscal 2021 by Region

Japan (Domestic Sales)

Japan (Imports)

Central and South America

Middle East

1.9%

1.7%

¥5.5 billion¥4.8 billion

Greater China*

Asia

32.3%

27.9%

17.1%

15.9%

¥91.7 billion¥79.2 billion¥48.5 billion¥45.1 billion

Europe,the U.S.,and Others

3.2%¥9.3 billion

Overseas Transactions 67.7%
Domestic sales:
Amount of domestic sales

Import sales: Amount of net sales from overseas to Japan
Export sales: Amount of net sales from Japan to overseas
Overseas sales: Amount of net sales from overseas transactions


25

CHORI CO., LTD.

* Includes China, Taiwan, and Hong Kong

Fibers, Textiles, and Garments Business
Sales in the Fibers, Textiles, and Garments Business increased(Billions of yen)

28.2% from the previous year, to ¥115.5 billion, as a result of the

150

consolidation of STX Co., Ltd. into the Group and other factors.

120

In contrast, ordinary income decreased 23.1% year on year, to ¥3.0
billion, due to the effects of the surging prices of raw materials and

115.5

114.5
90.1

90

stagnant results in the apparel segment stemming from sluggish

6

personal consumption.

3

4.3

0

4.2

4.0

2019

Net sales

3.9

3.5

2020

Operating income

3.0

(FY)

2021

Ordinary income

Chemicals BusinessIn fiscal 2021, the Chemicals Business achieved brisk results overall
as sales climbed 33.1% from the previous year, to ¥164.2 billion,
owing to a particularly strong performance in the organic chemicals,
inorganic chemicals, and fine chemicals segments. From a profit
standpoint, ordinary income came to ¥7.4 billion due to an increasein gross profit by virtue of the higher revenue.

(Billions of yen)
160

164.2

150.6
123.3

120
6.9

8
3.5

3.2

4

7.4

0

(0.7) (0.3)

–4

2019

Net sales

2020

(FY)

2021

Operating income (loss)

Ordinary income (loss)

Machinery BusinessIn the Machinery Business, sales soared 57.4% from the previous(Billions of yen)

year, to ¥4.3 billion, due to the effects of the recovery in demand for80

automobiles in Europe, North America, and other regions.

60

Meanwhile, despite achieving steady results, mainly due to the higher
revenue, the segment posted an operating loss of ¥6 million. This2

accounts of ¥0.7 billion as part of selling, general and administrative

0

receivables from business partners based in the UAE.

4.3

4

loss was due to the recording of provision of allowance for doubtful
expenses at the end of fiscal 2021 as a result of a delay in collecting

64.1

–2

Net sales

2.7
0.5

0.4

0.5

0.7
(0.1) (0.0)

2019

2020

Operating income (loss)

2021

(FY)

Ordinary income (loss)

Tsumugu Report 2022

26

Overview and Strategies by Business Segment

Fibers, Textiles,
and Garments Business
By merging the three divisions of the Fibers,
Textiles, and Garments Business to form asingle division in fiscal 2020, Chori established its Textile Division. Doing so has
eliminated divisional boundaries and united
the divisions to operate as a single entity.
The ability to seamlessly conduct operations as a result of establishing this single
division has allowed the Fibers, Textiles, andGarments Business to conduct crossdivisional projects, share ideas and knowhow, and engage in joint efforts with manufacturers as well as with partners in industry
and academia. The restructuring has also
facilitated the development of unique materials with water-repellent, odor-eliminating,and antibacterial features, in addition to
proposals of optimal solutions at each stageof the material production process.

Synthetic
Fiber Business
Dept.

TextileDivision

Technical
Material &Garments
Business
Dept.

Fiber Raw
Materials Dept.

Automotive Materials
and Fabrics Dept.

Technical
Textiles Dept.

Textile-Fabric
Dept.

Career Apparel &Workwear Dept.

Apparel Dept.

Performance
Apparel Dept.

Material Development Team
Logistics Dept. (Textile)
Business Administration Sec. (Synthetic Fiber)
Business Administration Sec. (Technical Material & Garments)

SWOT Analysis of the Fibers, Textiles, and Garments Business

Weaknesses

Strengths• Two-pronged business model involving manufacturing andcommercial capabilities• Customer base in the Hokuriku region, the largest textile-producing
region in the world• Well-versed team of personnel in Japan and overseas• Operation of OEM business that integrates supply chain processes,
encompassing production to distribution, by leveraging thecapabilities of production overseas• Responsiveness to customer needs by drawing on
global network• Late start to globalization in downstream fields• Digitalization measures• Obsolescence of existing business fields

S

W

O

T

Threats

Opportunities• Growing demand for car seats stemming from recovery
of automotive market• Growing demand for hygienic materials• Increasing demand for sports apparel owing to greater
health awareness• Expansion of textile product market due to a rise in global population

27

CHORI CO., LTD.

• Sluggish consumer sentiment due to rising prices• Global supply chain management disruptions(impact of zero-COVID-19 policy in China)• Coups d’état or conflicts in emerging countries
and disruptions to production and supply systems• Surging raw material and crude oil prices and volatile
foreign exchange rate movements

Road to Achieving
Chori Innovation Plan 2022
We will expedite our
global expansion while responding toeach challenge andopportunity arising from COVID-19.
Hiroshi Yoshida
Managing Executive Officer
General Manager of Textile Division

Overview of Fiscal 2021 Performance of the Fibers, Textiles, and Garments BusinessIn fiscal 2021, sales in the Fibers, Textiles, and Garments Businessincreased from the previous year to ¥115.5 billion while ordinary
income fell to ¥3.0 billion. These results reflect the significant impact
of COVID-19 lockdowns on the Vietnam plant operated by STX Co.,
Ltd., which became a consolidated subsidiary, and the considerable
effects of the surging logistics costs and raw material prices inrecent years on low-price-zone products, an area of strength of
STX. The Synthetic Fiber Business Department, which handles
materials, is on the verge of fully recovering from the effects of
COVID-19 as sales grew 15% year on year, while the TechnicalMaterial & Garments Business Department posted a 2% decline insales due to the sluggish demand for outdoor wear. However, considering the fact that the demand for hygienic materials and otherproducts in fiscal 2020 that arose from the effects of COVID-19 was
virtually nonexistent in fiscal 2021, both departments are making
steady progress without feeling any significant effects of COVID-19.

From a global perspective, the textile, fiber, and garment industries are all growing, and how Chori responds to these trends will
be important going forward. The fact that the recent rise in material
costs has increased the prices of the finished products we handle
is certainly a positive sign, but we still have some ways to go before
we can pass on these price increases to our customers. To encourage customers to purchase our products at higher prices, we must
increase the value of our products to compensate for the price
hike, and we believe that this is where Chori's strengths can beutilized. Chori's Fibers, Textiles, and Garments Business is characterized by its semi-industrial/semi-commercial business model,
which allows us to create added value for our products by not only
trading but also proposing and developing materials with our business partners. We will continue to showcase our presence in thisfield of value-added creation, which will become increasingly
important in the years ahead.



FY2020

FY2021

Difference(Billions of yen)

Ratio

Net Sales

90.1

115.5

+25.4

+28.2%

Ordinary Income (Segment Profits)

3.9

3.0

–0.9

–23.1%

Tsumugu Report 2022

28

Overview and Strategies by Business Segment

Fibers, Textiles, and Garments Business

Road to Achieving
Chori Innovation Plan 2022

Basic Strategies and Progress of Chori Innovation Plan 2022
With respect to the first strategy under Chori Innovation Plan 2022, “Bolster collective strength in thebusiness,” in fiscal 2022 we expect to fully realize the synergies created with STX, which was hit hardin fiscal 2021 by the effects of COVID-19. Through a unified effort between Chori, which specializes insynthetic fibers, and STX, which specializes in natural fibers, we will expand the scope of our productportfolio. Moreover, in fiscal 2020, we integrated the Fibers, Textiles, and Garments Business, thereby
strengthening its semi-industrial/semi-commercial business model. We will continue to expand thebusiness while harnessing the strengths of our global business sites based on the GLOBAL ONE
STOP Operation By CHORI approach. More specifically, we established subcommittees to discuss
the ways in which we will leverage Chori’s comprehensive strengths to create added value for ourcustomers and have steadily captured business opportunities as a result. As our daily lives begin to
get back on track in fiscal 2022, we will look to speed up our measures that draw on these comprehensive strengths of the Fibers, Textiles, and Garments Business.
As for the second strategy, “Enhance global supply chain management,” the Vietnam plant is
expected to contribute to sales on the scale of ¥10.0 billion, as operations will likely be fully
restored during fiscal 2022 and it will serve as an alternative production site to China. In addition,
we will continue to generate sales on the scale of ¥25.0 billion from the integrated operations being
carried out in Thailand, Indonesia, Hong Kong, Taiwan, and Bangladesh.
In terms of the third strategy, “Strengthen global proposals and marketing capabilities for Chori’s
original products,” we are expanding our portfolio of sustainable products throughout the supply
chain based on our new BLUE CHAINTM concept. In addition to its lineup of approximately 200 typesof yarn, Chori is able to develop environment-friendly products featuring high levels of quality andperformance through its engagements with exceptional business partners. In the Fibers, Textiles,
and Garments Business, we aim to achieve sales of ¥50.0 billion from our products, which accommodate needs for the environment, health, and comfort, by the conclusion of our next medium-term
management plan. Going forward, we will continue to proceed with initiatives centered on our BLUECHAINTM concept, which are expected to expand sales by more than 1.5 fold each year.

Basic Strategies of theFibers, Textiles, andGarments Business① Bolster collective strength
in the business② Enhance global supply
chain management③ Strengthen global proposals
and marketing capabilities
for Chori’s original products

Toward the Achievement of Fiscal 2022 Targets
In order to overcome the “late start to globalization in downstream fields,” which was identified as aweakness in Tsumugu Report 2021, MCC Industry COMPANY LIMITED was established in Hong
Kong in 2021. One of the strengths of Chori’s sports apparel is that it is highly recognized by overseas customers. By positioning the company as a sales hub for global apparel, we will further
expand our sports apparel into global markets. As for “digitalization measures,” which was also
recognized as a weakness, we established a project team led by young employees to advanceinitiatives geared to the next generation as well as forging ahead with our transition to the new
mission-critical system.
For the Fibers, Textiles, and Garments Business in fiscal 2022, our target for ordinary income is¥5.1 billion. To achieve this target, we will continue to focus on products in the sports and environmental fields, while drawing on the strengths of our handling of diverse materials and our supply
chain infrastructure in Asia to offer customers value-added proposals and steadily secure profits inthe process. During the first two years of Chori Innovation Plan 2022, we have delegated more
responsibility to our young employees and local staff overseas, which has led to the growth of ourentire workforce. We will strive to achieve the targets of our medium-term management plan bypositioning our human resources, who represent the greatest strength of Chori, as the foundationand continue to grow as an organization as we look ahead to the next generation.

29

CHORI CO., LTD.

Ordinary Income of Fibers,
Textiles, and Garments
Business(Billions of yen)
6

5.1
3.9

4

3.0

2

0

FY2020(Result)

FY2021(Result)

FY2022(Target)Core Initiatives of the Fibers, Textiles, and Garments BusinessInitiative

Creation of Synergies with STX Co., Ltd.

1In June 2021, STX Co., Ltd. became a wholly owned subsidiary of Chori.
As Chori specializes in synthetic fibers and STX specializes in natural fibers,
this partnership involving two companies that specialize in different materials
has enhanced our ability to propose solutions for our customers.
Summit Garment Saigon (SGS), a sewing factory in Vietnam operated
by STX, proved to be the difference in our customer proposals due to thestrong reputation it has built for production capacity. Despite a period inwhich operations were shut down due to the country’s lockdown, in fiscal
2022, SGS has seen an increase in orders from Chori and has been
producing at full capacity. At SGS, approximately 700,000 fabric items
for men’s and women’s apparel in the mid- and high-price zones areproduced annually. Since joining the Group, orders from sports brands,
including golf-related products, and for new high-end brands have also
increased. In light of the country’s ongoing issues of labor shortages andrising labor costs, SGS is taking a variety of measures to enhance productivity with sights set on becoming the largest production plant in the
ASEAN region through the concerted efforts of its employees.

2

Initiative

Proposals of Sportswear Made ofEnvironment-Friendly Materials
Chori produces and supplies fashionable and highly functional sportswear, outdoor wear, and sports casual products in Japan and overseas,
mainly for golf and athletic use for the leading brands of major manufacturers. Many manufacturers are highly conscious of sustainability and areinclined to increase the use of environment-friendly materials. Such manufacturers have therefore transitioned to the use of ECO BLUETM recycled
polyester fiber made from recycled plastic bottles, which are wellregarded as a raw material. The ability to offer a one-stop solution for raw
materials, textiles, and final products is a strength of Chori and its semiindustrial/semi-commercial business model.
MCC Industry COMPANY LIMITED, which was established in Hong Kongin March 2021, engages in sales activities with sportswear manufacturers in
Europe and the United States who are particularly keen on the use of environment-friendly materials. Moreover, as the sales hub for the ASEAN
region, TAIWAN CHORI MERCHANDISE COOPERATION LTD. proposes
products utilizing Chori’s proprietary materials, such as ECO BLUETM.

Tsumugu Report 2022

30

Overview and Strategies by Business Segment

Chemicals Business

Established in 1956, the Chemicals
Business has a track record spanningover 60 years. We have continued to takeadvantage of our global network not onlyin terms of procurement and sales within
China but also through exports andintermediary transactions with Southeast
Asia, India, the Middle East, and otherregions. Through these efforts, coupledwith our ability to meet the needs of ourclients for niche products, we have set
ourselves apart from our competitors andenhanced our market presence.
With an extensive product portfoliothat encompasses the environmental,
electronics and battery materials,
5G-related, personal care and healthcare,
and agricultural fields, Chori caters to thewide-ranging of needs of its customers.

Chemical &Materials
Business Dept.

Chemicals
DivisionLife & Fine
Chemicals
Business Dept.

Performance
Chemicals Dept.

Inorganic Fine
Materials Dept.

Industrial
Chemicals Dept.

Fine Chemicals
Dept.

Life Science Dept.

Logistics Dept. (Chemicals)
Business Administration Sec. (Chemicals)

SWOT Analysis of the Chemicals Business

Strengths• Global network centered on China• Diverse lineup of high-performance materials• Exceptional synergies created with subsidiaries• Product development and product supply capabilities thatdraw on the market-in approach• Highly specialized knowledge

Weaknesses• Lack of brand recognition and smallness ofbusiness scale within business-to-businessmarket relative to major competitors overseas• Length of time needed for new businesses
to contribute to revenue

S

W

Opportunities• Growing demand for automotive-related materials• Increasing demand for products in the fieldof sustainability• Rising interest in environmental products

31

CHORI CO., LTD.

Threats

O

T• Trade conflict between the U.S. and China andboycott of products made in China• Country risk such as Russia’s invasion of Ukraine• Supply–demand imbalance stemming frommarket deterioration• Limited desire among potential customers to switch
to other products due to economic recession

Road to Achieving
Chori Innovation Plan 2022

We will steadily improve ourbusiness results and solidify ourposition in the chemicals industry.

Yoshihiro Teratani
Managing Executive Officer
General Manager of Chemicals Division

Overview of Fiscal 2021 Performance of the Chemicals BusinessIn fiscal 2021, the Chemicals Business posted sales of ¥164.2
billion and ordinary income of ¥7.4 billion, eclipsing the ordinary
income target of ¥5.3 billion set forth for the final year of Chori
Innovation Plan 2022 one year ahead of schedule. These substantial
year-on-year improvements in sales and ordinary income were theresult of both external and internal factors. External factors include
the increase in unit prices of products arising from the soaring costof resources. These higher prices helped drive our sales and ordinary income upward and accounted for approximately 20% of theyear-on-year increase in sales for the Chemicals Business.
Meanwhile, internal factors consisted of self-help efforts, such as
business acquisitions. In fiscal 2021, sales from new businesses in
the Chemicals Business grew ¥6.3 billion from the previous year.
Despite the impact of these external and internal factors, I commend the efforts of each and every employee who played a role inthis exceptional achievement.

More specifically in terms of product type, sales of pharmaceuticals and agrochemicals, which are indispensable to our lifestyles,
grew steadily as they were unaffected by the effects of COVID-19.
Moreover, sales of organic and inorganic chemicals, which contributed to the increase in sales through their higher unit prices, werebrisk and so were sales of electronic materials, owing to risingdemand for computers and televisions as a result of people staying
home due to COVID-19. In contrast, we saw sluggish growth forfood additives. Sales of commercial-use products also floundered
due to store closures and shorter business hours to prevent the
spread of COVID-19. However, with the state of emergency being
lifted throughout Japan in March 2022, we expect demand to
recover in fiscal 2022 through the resumption of store operations.



FY2020Net Sales
Ordinary Income (Loss)(Segment Profits (Loss))

FY2021

Difference(Billions of yen)

Ratio

123.3

164.2

+40.8

+33.1%

(0.3)

7.4

+7.7

—

Tsumugu Report 2022

32

Overview and Strategies by Business Segment

Chemicals Business

Road to Achieving
Chori Innovation Plan 2022
Basic Strategies and Progress of Chori Innovation Plan 2022
While our medium-term management plan has coincidentally overlapped with the COVID-19 pandemic, one positive aspect is the fact that the recent surge in the cost of resources has even raised
the prices of the end products we handle. Meanwhile, the negative aspect is that too much of aprice hike could discourage customers from making purchases. For instance, we are beginning tosee a trend where the amount of additives used in animal feed is being reduced to cut costs andare therefore keeping a close eye on this situation. In regard to the first strategy under Chori
Innovation Plan 2022, “Enhance business investment and promote development of new businesses,” which has been at a standstill since fiscal 2020 due to the limited opportunities to engage
directly with customers as a result of COVID-19, we expect to make progress in fiscal 2022 as weare beginning to gradually interact with customers once again. Among the fields we will focus on
for this strategy are semiconductors and nonferrous metals, where we are expanding our lineupof new products, in addition to healthcare and green businesses.
As for the second strategy, “Accelerate global expansion,” our product development was partially halted in Malaysia and Vietnam due to the absence of Japanese representatives in the wakeof COVID-19. Accordingly, we have established a system that enables us to take appropriate
action in response to new pandemics that may occur in the future, such as dispatching representatives to these regions from Japan.
With respect to the fourth strategy, “Strengthen subsidiaries centered on Miyako Kagaku Co., Ltd.,”
we are seeing positive results from our green business. The seeds that have been sown through ourefforts to reduce sludge at plants using bio-disinfectants and to engage in the sales of biodegradable
resin are beginning to bear fruit and are contributing to increases in year-on-year sales. These projects,
which not only benefit the environment but also provide considerable advantages to customers, suchas cost reductions through disposal, will likely increase in demand going forward.

Basic Strategies of the
Chemicals Business① Enhance business investment
and promote development of
new businesses② Accelerate global expansion③ Transfer business headquarters to optimal location④ Strengthen subsidiaries
centered on
Miyako Kagaku Co., Ltd.
⑤ Expand business domain
through M&A

Toward the Achievement of Fiscal 2022 Targets
In the Chemicals Business, one of our weaknesses is the lack of brand recognition and smallnessof business scale within the business-to-business market relative to major competitors overseas.
While the business is more widely known nowadays relative to when it first emerged as part ofChori back in 1956, the Company’s share of the industry as a whole is still relatively small. On theother hand, there is still room for growth. As we continue to improve sales in this business, which
has been ascending year after year, thereby enhancing the credibility of the Chori brand, we willtake the measures necessary to overcome this weakness. The Company may also be exposedto the threat of country risk due to the conflict between Russia and Ukraine. Although we had oureyes on Russia as a market to potentially replace China, we have discontinued our operations inthis country as a result of the recent events. In fiscal 2022, we will leverage Chori’s distinctive global
network to compensate for the insufficient sales in other regions. Meanwhile, an area of strength at
Chori is the frontline capabilities of its employees. Well-versed in their respective lines of expertise,
Chori’s employees are adept at developing markets on their own without the need for receiving
instructions. Moving ahead, we will work to enhance our organizational strengths while making themost of our individual capabilities and boldly pursue the new projects that have come to a halt asa result of COVID-19.
For the Chemicals Business in fiscal 2022, the final year of Chori Innovation Plan 2022, ourtarget for ordinary income is ¥6.8 billion. Fiscal 2022 will be a year in which our numerical targets
will be achieved by responding appropriately to the demands and desires of our customers andreducing inventories that are exposed to high levels of risk. In general, Chori is known as a
specialized trading company in textiles. However, by continuing to expand sales and profits inthis business in fiscal 2022 and beyond, we will strive to become a company that is recognizedby customers and other stakeholders as a multifaceted specialized trading company that also
engages in chemicals and machinery.

33

CHORI CO., LTD.

Ordinary Income (Loss) of
Chemicals Business(Billions of yen)
8

7.4

6.8

6
4
2
0
–2

(0.3)
FY2020(Result)

FY2021(Result)

FY2022(Target)Core Initiatives of the Chemicals BusinessInitiative

1

Lithium Compound Production Project in Chile
The evaporation method commonly used to extract lithium components from brine water was
associated with concerns over its significant environmental impact. In contrast, Chori has been
participating in a project to produce lithium compounds through the use of a new method thatenables only lithium components to be extracted from brine water, thereby maintaining thewater volume of salt flats. Compared with our conventional approach, this new extraction
method contributes to significant reductions in production time, and because it does not hinge
on weather conditions, the production volume can be adjusted in line with market conditions.
Through such means, Chori will address the needs of the lithium-ion battery market, which we
anticipate will expand even more going forward.

2

Initiative

Biodegradable Resin
At Chori, we have recently been expanding our lineup of biodegradable resin, a raw material
used in seed sheets. Seed sheets serve as a means to prevent the evaporation of soil moisture and are used for weed and pest control. As they are made of biodegradable resin, they
eventually decompose into water and carbon dioxide. Accordingly, they eliminate the need for
disposing waste while reducing the use of plastic, and because the seed sheets do not need
to be collected, they help enhance agricultural productivity.
We are also working to enhance our lineup of biodegradable resin derived from plants suchas cassava and taro, which we are utilizing as raw material for garbage and shopping bags
due to the soft texture they generate.

Initiative3

Promotion of the Use of New Protein Sources
With the global population projected to reach approximately 10 billion by 2050, there areconcerns over the potential imbalance between supply and demand for protein sources suchas beef and pork. At Chori, we have been focusing on soybeans, wheat, and green peas as asource of ingredients; procuring ingredients of the highest quality and safety that comply with
the Non-GMO Project Standard from overseas; and supplying these ingredients to food processing companies in Japan. We are also working to promote the use of sunflower protein,cricket powder, and other new sources of protein throughout the Group. In addition, throughour measures to prevent deforestation for livestock and reduce the use of water and crops,
we strive to help realize a greener and more enriched global environment.

Tsumugu Report 2022

34

Overview and Strategies by Business Segment

Machinery Business

Chori Machinery Co., Ltd., which was spun off in April 2017 to enhance the flexibility of Chori’s business operations, has been
expanding its portfolio of automobiles, machinery, and related materials across the globe.

Operating Company
China

EuropeChori Machinery Co., Ltd.

South
Korea

Wholly owned consolidated
domestic subsidiary
Four-wheeled vehicles, two-wheeledvehicles, and trucks; agricultural
machinery; construction materials;
and marine equipment
Supplier

MarketSupplier and market

MexicoIndia

Africa

Japan

ASEAN

CentralandSouth
AmericaSouth
AfricaLeveraging the Group’s unique global network, which has
expanded over the years, Chori Machinery commercializes
products acquired from China, India, South Africa, and othercountries in markets such as Europe and the ASEAN region.
Most notably, the company engages in a project in which theautomobiles of Chinese automakers are assembled throughsemi-knocked-down production and sold in Mexico.

Recently, the company has been growing its business inAfrica and other emerging markets, in particular. By drawing on
its long-cultivated know-how in global trade and unique traderoutes, Chori Machinery will continue to expand its business inthe years ahead.

SWOT Analysis of the Machinery Business

Strengths• Sophisticated information and global networks• Creation of niche market by leveraging unique customer base• Market-in proposals by employees deeply familiar
with markets• Ability to develop customer relations worldwide bydrawing on individual capabilities

Weaknesses

S

W

O

T

Opportunities• Global recovery of automotive market• Expanding product line in Africa, Southeast Asia,and other thriving emerging markets• Growing business opportunities associated with shift
to environment-friendly vehicles• Expanding product line in non-vehicles businesses

35

CHORI CO., LTD.

• Need for improvements to flexibility andorganizational capabilities that draw on the strengthsof each individual• Timeliness of digital transformation measures

Threats• Country risk and risk of pandemics, coups d’état,and economic crises in emerging countries• Market fluctuations resulting from intense climate change• Global supply chain management disruptions(impact of China’s zero-COVID-19 policy)

Road to Achieving
Chori Innovation Plan 2022

We will steadily address
the individual needs of each country
through our wide range of products andservices that extend beyond
the trade of vehicles.
Jun Hayami
President, CEO & COO
Chori Machinery Co., Ltd.

Overview of Fiscal 2021 Performance of the Machinery Business
While proceeding successfully with our business activities until thethird quarter of fiscal 2021, in the fourth quarter we came to realize
our exposure to country risk. The shortage of foreign currency stemming from the production cutback of oil in Nigeria has had an impact
on our vehicles business in terms of our ability to procure funds, which
led to the delay in collecting receivables from business partners in the
UAE. As a result, while sales in this business increased from theprevious year to ¥4.3 billion in fiscal 2021, we posted an ordinary loss
due to the recording of provision of allowance for doubtful accounts inthe amount of ¥739 million. We will forge ahead to the final year of
Chori Innovation Plan 2022 while reminding ourselves of the possibilityof risks emerging at any time and developing measures that minimize
the impact of such risks.

In addition to being an indispensable means of transportation,
the automobiles we handle are currently in high demand worldwide,
mainly due to the unleashing of pent-up demand accumulated asa result of COVID-19. Moreover, China, a market in which we haveheld a competitive edge over the years, has implemented a national
strategy to funnel efforts into procuring parts that are essential toautomobile production. As a result, we have not had to deal withprocurement delays among our suppliers in this country. Althoughautomobile demand remains brisk, we must keep an eye on our
cash flow due to global inflation and soaring interest rates. Due tothe surging prices of automobiles and other major changes taking
place in the market, we will closely monitor the situation while
continuing to accurately identify the needs of each country.


FY2020

FY2021

Difference(Billions of yen)

Ratio

Net Sales

2.7

4.3

+1.6

+57.4%

Ordinary Income (Loss)(Segment Profits (Loss))

0.7

(0.0)

–0.7

—

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36

Overview and Strategies by Business Segment

Machinery Business

Road to Achieving
Chori Innovation Plan 2022

Basic Strategies and Progress of Chori Innovation Plan 2022
Under the first strategy of Chori Innovation Plan 2022, “Develop markets of four regions and India,”
we are conducting marketing activities based on the cultures and needs of each region of operation while continuing to focus on India due to the substantial size of this market. In regard to thethird strategy, “Promote strategic alliances with global corporations in each region,” our semiknocked-down production and sales of automobiles for Chinese automakers in Mexico, a market
we tapped into in 2018, continues to perform admirably. In the COVID-19 era, what has differentiated the economies of emerging nations is the availability of resources. As Mexico is an oilproducing nation, the market has been thriving. Moreover, in China, a market in which Chori boasts
a competitive edge as a business partner, the supply of automotive parts to Mexico and otherareas of the world is faring well due to the lack of delays in parts procurement as mentioned earlier.
Accordingly, in light of the situation surrounding the shortage of automotive parts in recent years,
we have seen an increasing number of customers switching to vehicles procured and producedby Chori Machinery Co., Ltd., which has boosted awareness of the Chori brand in various markets.
As for the second strategy, “Expand automotive materials through trade and convert to revenue
model,” we are utilizing automobiles as a means of expanding our relevant businesses. Specifically,in addition to the sales of automobiles, we are widening the scope of our non-vehicle products
and services, including dashcams and other peripheral devices and after-sales services. We willcontinue to explore new business opportunities by deploying and utilizing these intangible assets
called “sales methods.”

Basic Strategies of theMachinery Business① Develop markets offour regions and India② Expand product lineups
through vehicles businessand convert to revenue model③ Promote strategic allianceswith global corporations ineach region

Toward the Achievement of Fiscal 2022 Targets
The Machinery Business is anchored by the market-in proposals made by its employees who havea sound knowledge of our various markets and the ability to create niche markets. Chori Machinery
excels in producing vehicles that cater to the cultures and needs of each country through the useof parts made in China. For this reason, sales have remained on a steady upward trend even in
Italy, a market that has high expectations for automobiles. At Chori, we will remain committed inour efforts to continue to achieve success in these areas.
Conversely, to address the need for improving flexibility and organizational capabilities that draw on
the strengths of each individual, which we have identified as a weakness, we have been sharing information and advice on in-house projects and holding study sessions. Moreover, while each employee
is in charge of a different region, the Company is working to strengthen the foundation for promoting
digital transformation (DX) by establishing a universal sales support function in all regions. Meanwhile,
we recognize that country risk and the risk of pandemics, coups d’état, and economic crises inemerging countries as well as global supply chain management disruptions are a threat to our business that will not fade away in the future and instead will enhance the uncertainty of markets. Although
the Machinery Business has not felt the effects of the delays in the procurement of parts triggered by
the conflict between Russia and Ukraine, the flow of funds must be carefully monitored on a global
scale. Going forward, we will continue to diversify risks by enhancing our awareness of risk detection
and staying on track with our strategy of developing the markets of the four regions and India.
For the Machinery Business, in fiscal 2022 our target for ordinary income is ¥0.8 billion.
In order to realize this goal, we will continue working to collect on the receivables that were delayedin fiscal 2021 while expanding our coverage of products beyond the vehicles business to steadily
increase profits. Chori Machinery was established in 2017 through a spin-off of Chori’s internal
machinery business. Our role within the organization is to develop emerging markets by constantly
remaining ahead of the competition. We aim to contribute to the further growth of the Chori Groupby sharing this know-how throughout the organization. Based on this commitment to market
development, we will further expand our business in the next 20 to 30 years and beyond while
taking the appropriate measures to prevent risks in these times of uncertainty.

37

CHORI CO., LTD.

Ordinary Income (Loss)of Machinery Business(Billions of yen)

0.8

0.9

0.7
0.6

0.3

(0.0)
0

FY2020(Result)

FY2021(Result)

FY2022(Target)Core Initiatives of the Machinery BusinessInitiative

1

Semi-Knocked-Down Production in Mexico
In semi-knocked-down production, automobile parts and components are transported to the country of destination, where
they are assembled and the automobile is completed. It differsfrom completely knocked-down production in that the frame,
engine, powertrain, and other main components have alreadybeen assembled by the time they are transported overseas.
Semi-knocked-down production offers a variety of economic
benefits, such as job creation as well as tax benefits for thecountry of destination. As a result, more employment opportunities are available for local residents in not only assembly
processes but also at sales agencies and for after-sales services. In 2017, Mexico’s annual automobile production volume
nearly reached the 4.0 million-unit mark. Moving forward, Chori
Machinery will continue to seek greater business opportunities
centered on Mexico’s mainstream automotive industry.

2

Plant
in Mexico

Benefit from cost due tosemi-knocked-down
production

JointventureChineseautomobile

Assembly

Automotive
retailer in
MexicoUser

Initiative

Enhancement of Our Presence in Italy
and Other Parts of Europe
Chori Machinery has established a partnership with a company based in Italy to develop businesses in the country andother parts of Europe, including Spain, France, and Belgium.
The stylish and environment-friendly vehicles developed by
Chori’s business partner have been well received by theyounger generation and the local markets and continue toincrease in sales.
This joint initiative began with the establishment of ourpresence in Italy, a market on the scale of 1.6 million units.
Since then, in addition to expanding our business in Europe,
we have continued to form partnerships with other companies to examine new business opportunities in Asia andCentral and South America.

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38

Management Foundation Tailored to Sustainable Growth

Sustainability
Chori’s Sustainability Initiatives
Founder Riichiro Ohashi founded Chori as a raw silk wholesaler in 1861 andsteered the business for nearly six decades. The spirit of coexistence andco-prosperity that Ohashi maintained, which is “to develop our business for the
benefit of the world and people and to always strive to grow together with ourcustomers,” and the integrity, dignity, and compassion that has continued tosupport this spirit, have been passed down to this present day.
As a trading company that handles fibers, textiles, and garments, as well as
chemicals and machinery, Chori not only builds relationships with its clients but
also engages in capital investments and production on the strength of its semiindustrial/semi-commercial business scheme. Underscoring the value of its
relationships with various stakeholders around the world, the Company strives
to address poverty, health, resource waste, climate change, water shortages,
and a range of other global concerns. In the face of our radically changing
social and economic environments, we are advancing our business in pursuitof not only the growth of the Company but also the sustainability anddevelopment of the world as a whole.
As declared in our corporate philosophy, at Chori we engage in business withsustainability at the forefront of our minds by developing environment-friendly
products, conducting procurement and export control activities that ensurecompliance, and establishing a system to optimize operations so that we cancontribute to the realization of a better society as global citizens.

Business Environment and Chori’s Countermeasures

ClimatechangeBusiness environment

Chori’s countermeasures• Importance placed on reducing
companies’ financial risk throughmeasures to address climate change• Disclosure of information in accordancewith the recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD)

P.41

Marineplastic
pollution

Escalationof humanrights issues

Changes in
consumerawareness• Need to ensure traceability anddevelop a recycling system• Development and deployment ofBLUE CHAINTM• Expansion of initiatives forbiodegradable resin

P.21 and 34• Global need to improve working
conditions and respect human rights
along the supply chain• Formulation of human rights policy• Emphasis on CSR for
procurement activities

P.45• Increasing ethical consumption• Emphasis on the story behindeach product• Growing demand for environmentfriendly products, including those basedon the BLUE CHAINTM concept andplant-based foods (plant-derived
alternative meat)

P.21 and 34

39

CHORI CO., LTD.

Environment
We understand the importance of respecting the environment when conducting our businessactivities and that it is our responsibility to address environmental issues in a proactive manner.

Basic Principle

Basic Policies

With a view to generating substantive value and helping to realize a moreenriched society, Chori strives to provide accurate information and exceptional
products tailored to the needs of its customers. As the environment continues
to garner global attention, we believe the role we play in contributing to environmental conservation is essential to establishing a solid management foundation.

1. Consideration for the global environment
2. Compliance with environmental laws
and regulations
3. Establishment and continuous improvementof environmental management system

Environmental Management Structure (As of June 16, 2022)
We have established the following structure in pursuit of our environmental initiatives.
President, CEO & COO
Propose EMS* revisions / improvements
Report EMS results
Environmental Management Secretariat

Appoint

Environmental Management Officer
Report internal audit resultsAppoint

Internal Environment Auditors

Textile Division

Chemicals DivisionCorporate Management Division

Division Head

Division Head

Division Head

Division Environmental Manager

Division Environmental Manager

Division Environmental Manager

EMS Facilitator
Synthetic Fiber
Business Dept.

Technical Material &Garments
Business Dept.

EMS Facilitator
Chemical & Materials
Business Dept.

Logistics Dept. (Textile)

EMS Facilitator

Life & Fine Chemicals
Business Dept.

Corporate Management
Dept.

Human Resources &General Affairs Dept.

Information System Dept.

Internal Auditing Dept.

Affiliate Business Dept.

Pharmacovigilance &Quality Assurance Office

Health Insurance Society

Business Anchor
Corporation

Logistics Dept. (Chemicals)* EMS: Environmental management system
Note: EMS facilitators concurrently serve as internal environment auditors and conduct internal audits in other divisions.

Environment-Friendly Business Activities
Since its acquisition of the ISO 14001 international standard
for environmental management systems in 2000, Chori has
continued to conduct and engage in environmental conservation activities. We adopted the 2015 standard in December
2017, acquired ISO 14001 certification for our Hokuriku Branchand Okayama Liaison Office in December 2019, and continue
to engage in Groupwide efforts with Business Anchor
Corporation and other subsidiaries in our aim to help preserve
the environment.

Close Up
In Pursuit of the SDGs
Chori’s initiatives in pursuit of the Sustainable Development
Goals (SDGs) are featured on its official YouTube channel.
The channel offers viewers an illustrated look into Chori’s
involvement in the world of environment-friendly, plant-based
foods and its participation in the lithium compound
production project in Chile.

https://www.youtube.com/watch?v=EfGtYiJVL0E

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40

Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Information Disclosure Based on the TCFD Recommendations
In 2015, the Financial Stability Board (FSB) established the Task Force on Climate-related Financial Disclosures (TCFD) at therequest of the G20. As the world strives to limit the increase in the earth’s average temperature to below 2˚C above pre-industrial
levels as stipulated in the Paris Agreement in 2015, the aim of the TCFD is to encourage companies to disclose climate-related
financial information to enable investors to make appropriate investment decisions. At Chori, we will work to appropriately
disclose information on the recommended disclosure items in accordance with the Recommendations of the Task Force on
Climate-related Financial Disclosures, the final report released by the TCFD in June 2017.

The Board of Directors’ system for monitoring climate-related risks and opportunities andmanagement’s role in assessing and managing such risks and opportunities
Governance

The Company’s response to climate change and other environmental issues is reported twice a year at Board of Directors’
meetings and discussions are held based on the details of these reports. Ultimately, it is the responsibility of the Board of
Directors to assess, respond to, and disclose details of the Company’s risks and opportunities related to climate change.
With the general manager of the Corporate Planning Division, who also serves as a director, in charge and the Corporate
Management Department as the responsible division, the Company manages and promotes organization-wide measuresagainst climate change, including the TCFD recommendations, and other environmental issues as well as compiling importantCompanywide policies and measures, which are reported and proposed to the Board of Directors for discussion at Board meetings.
With regard to business-specific strategies, etc., on climate change and other environmental issues, the general managersof the respective sales departments, in cooperation with the general manager of the Corporate Planning Division and the
Corporate Management Department, report summaries of such strategies, etc., to the Board of Directors, which are thenassessed and discussed at Board meetings.
We will continue to discuss every aspect of our sustainability strategies and initiatives, including the TCFD recommendations, while considering the establishment of an expert committee, etc., as necessary.

Short-, medium-, and long-term climate-related risks and opportunities identified by the organizationand the impact thereof on the organization’s business, strategies, and financial plan
Strategy

In the scenario analyses, climate-related risks and opportunities are analyzed using the following process based on the below
2°C and 4°C scenarios as envisioned by specialized organizations such as the Shared Socioeconomic Pathways of theIntergovernmental Panel on Climate Change and the World Energy Outlook 2020 of the International Energy Agency.
Analysis Process
Establish a governance structure
Assess significance of risk

Establish a governance structure to oversee, assess, and manage climate-related risks and opportunities
Compile a list of risk items, qualify their potential impact on business, and assess their significanceDefine scenario groups

Select scenarios, obtain forward-looking information on parameters (variables), and assemble world views

Assess business impact

Conduct qualitative assessments of the impact of highly significant risks and opportunities on our business foreach scenario

Define countermeasures

Assess the progress of the Company’s response, consider countermeasures, and establish a specific course ofaction and an internal system

The analyses cover the period through to 2030. The world views of the scenarios to limit the increase in average temperature
to below 2°C and 4°C by fiscal 2030 are assumed as follows. Under the Company’s below 2°C scenario, we expect theincrease in physical risk to be moderate and opportunities to develop and expand the sale of environment-friendly products,
such as ECO BLUETM and Natural Dye, to increase. Meanwhile, under the 4°C scenario, we expect an even greater increasein physical risks, including unseasonable weather.

41

CHORI CO., LTD.

World Views of the below 2°C and 4°C Scenarios 
Based on our assumptions and the projected business environment in fiscal 2030, we conducted scenario analyses using thefollowing flowchart, which summarizes the impacts of the identified climate-related risks and opportunities on our businessand our measures in response to these impacts.
Risks andopportunities

Assumptions andprojected businessenvironment in fiscal 2030

2°C
Shifts in consumer
preferences

Establishment of
reduction targets
by localgovernments

Temporary declines
in trading volume
due to reduced
production

Costs associatedwith regulatorycompliance

Increase inpurchasing prices /Transfer to selling
pricesIncreasing
consumerconcerns over CO2
emissions

Reluctance to buy
petrochemical
products

Declining demandfor petrochemical
products

Temporary decline
in trading volume
arising from the shift
to environmentfriendly products

Strengthening of
decarbonization
measures

Shift to lowemission products

Growing demandfor virgin polyester

Increasing demandfor ECO BLUETM
recycled polyester
fiber

Water shortages

Restrictions onelectricity use

Number of days for
restricted use ofelectricity

Temporary declines
in trading volume
due to reduced
production

Large-scale natural
disasters

Frequent
occurrence offloods due totorrential rainfall

Number of days
with torrential
rainfall

Rising sea levels

Flood damage inlow elevation areas

State of flood
damageLonger lead times

Rising averagetemperatures

Less desire topurchase fall andwinter apparel

Reduced demand
for fall and winterapparelReduced trade offall and winterapparelStrengthening ofenvironmental
regulations in China

4°C
Changes inprecipitation
patterns
Frequent
occurrence of
unseasonable
weather

Impact on the
Company’s business

Strengthening of
regulations on the
manufacture ofhigh-energy
consuming
products and on
manufacturers ofhighly contaminated products

2°C
Mandates andregulations on
existing products
and services

Influential factors(parameters)

Rising sea levels
Rising averagetemperatures

Response tobusiness impact
Low impact

Reduced sales

Strengthening of
supply chain

No impact

Low impact

Reduced sales

Expansion of lineup
of environmentfriendly products

Medium impact

Increased sales

Low impact

Reduced sales

Low impact

Temporary declines
in trading volume
arising from supply
chain disruptions

Increases in costs
and selling, generaland administrative
expensesStrengthening of
supply chain

Low impact

Reduced sales

Expansion of lineup
of functional
clothing

While the impact of each risk item on our business was assessed to be very minimal, we will continue to carry out risk assessments to ensure that risks are managed appropriately and seek to increase profits by capitalizing on the higher demand forenvironment-friendly products and other business opportunities.
Moving ahead, we will look into the possibility of conducting scenario analysis based on the world view of the below 1.5°C
scenario and assumptions for 2030 and beyond, as necessary.

The process for identifying, assessing, and managing climate-related risks and the approach to
RiskManagement

integrating this process into the organization’s overall risk management
Formulation of Risk Management Regulations 
At Chori, we have established and operate risk management regulations with the aim of identifying potential risks in our business activities, reducing risks and preventing crises from occurring during the course of normal business conditions, establishing a system for responding to crises that may pose a significant impact on our business activities, and responding promptly
and appropriately to prevent the situation from deteriorating and recover and normalize the situation as swiftly as possible.

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Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Risk Management under Normal Business Conditions 
Under the guidance of the Risk Management Deputy Officer (the president, CEO & COO of the Company), the Risk Management
Promotion Officer (the deputy general manager of the Corporate Planning Division, in charge of the Human Resources & General
Affairs Department) and the Human Resources & General Affairs Department (the organization responsible for risk management)
identify material issues within the organization; formulate various measures to mitigate, prevent, and promptly detect risks that may
exist within the Company; and implement the necessary educational and training programs in a voluntary and systematic manner.
They also follow up on the results of crisis response measures, verify their impact, identify issues, and seek measures toward
improvement. Our risk management regulations define the Company’s risks individually based on the following major classifications.
Risks Related to Our Business
Categories
1. Legal compliance

4. Business continuity plan

2. Management and internal control

5. H
 uman resources and occupational healthand safety

7. Information, communication, and systems

3. E
 xternal business environment, including
society, the economy, and politics

6. Transactions

Climate-related risks are defined as risks that relate to either “3. External business environment, including society, the economy,
and politics” or “4. Business continuity plan” above, and are addressed by the Corporate Management Department in cooperation
with the Risk Management Promotion Officer and the Human Resources & General Affairs Department.
As demonstrated by the results of the aforementioned scenario analyses, ensuring a stable supply chain is extremely
important to the continuation of our business. With respect to risks related to “6. Transactions” above, in order to address
the risk of supply chain disruptions that stem from various supplier-inflicted issues and to fulfill our social responsibilities for
procurement activities in Japan and overseas, the Company has established CSR procurement guidelines and conducts CSR
procurement surveys regularly with its major suppliers to ensure the soundness of its supply chain and to verify risks.
Crisis Response Measures 
In the event of a crisis, placing the highest priority on ensuring the safety and protecting the lives of each individual, the following measures must be taken in accordance with Company regulations: communicate and report details of the crisis based on
the crisis communication system; establish a crisis response headquarters under the direction of the Risk Management Deputy
Officer; and execute tasks, communicate the emergency, report the results of investigations, and implement measures toprevent recurrence through the crisis response headquarters.

Indicators
and Targets

Indicators used to assess climate-related risks and opportunities in accordance with the organization’s
strategies and risk management processes, targets used by the organization to manage these risks
and opportunities, and progress toward the achievement of these targets
In pursuit of reducing its environmental impact, the Chori Group has identified the actual amount of greenhouse gas (GHG)
emissions produced by its business activities in fiscal 2020.
GHG Emissions 
Targets for reducing GHG emissions have not been establishedat this time due to the limited amount of emissions generated inrelation to the Group’s business scale. Aiming to continue to reduce
our GHG emissions, we will regularly monitor the amount of GHG
emissions from our business activities and consider switching to
the use of renewable energy and vehicles that pose minimal impact
on the environment for our Company-owned vehicles.
Moreover, while our Scope 3 emissions only consist of GHG
emissions from the commutes and business trips of the Group’s
employees, we will look into the possibility of calculating the actual
amount of GHG emissions from our entire supply chain in line with
future developments.

43

CHORI CO., LTD.

GHG Emissions in Fiscal 2020
(Consolidated Basis)
Actual Amount
Scope 1385 (t-CO2)

Scope 2956 (t-CO2)

Scope 3(from employee commutes and business trips)

364 (t-CO2)

Total

1,705 (t-CO2)

Scope 1: Direct emissions
Scope 2: Indirect emissions
Scope 3: Supply chain emissions (the actual amountspecified above consists solely of GHG emissions
from employee commutes and business trips)

Occupational Safety Management
At Chori, we understand the significance of minimizing risks in the workplace environment
and ensuring the safety of our employees. With this in mind, we devised a business continuity
plan and instituted a safety management system for our employees overseas.

Ensuring of the Safety of Our Employees Overseas
In the event of a natural disaster or a terrorist attack, whether inJapan or overseas, we must be fully prepared to immediately
identify the whereabouts of our directors and employees, confirm their safety, and respond appropriately in a timely manner.
Chori has in place a proprietary system dubbed Overseas
Business Trip Inquiry (OBTI), which manages the overseas business trips of domestic employees as well as the business tripsof employees dispatched abroad and of the employees ofoverseas offices and helps to identify the location of each
employee at a particular point in time.
Employees dispatched overseas and their families as well as
employees on business trips outside of Japan are also enrolled in
Chori’s overseas healthcare support program, which provides
medical assistance in Japanese in the event of an accident or illness
while abroad. The program helps to minimize employee concerns
regarding healthcare overseas due to its differences from Japan.

Business Continuity Plan
Chori’s business continuity plan has been designed to place theutmost priority on the safety of its directors and employees andto enable the swift recovery of business operations after serious
disasters. We have implemented a safety confirmation system,
which verifies the safety of all directors and employees and theirfamilies in a timely manner, and we examine the system regularly.
A business continuity plan training course is also held once a year,
ensuring that we are fully prepared in the event of an emergency.
Chori’s business continuity plan manual calls for a swift recoveryof business operations by the sales divisions. For the corporate
divisions, we have established a core operations manual to maintainsystems, finances, and other basic business functions. Moreover,
we have established a response headquarters and operational
procedures in preparation for major disasters and pandemics.

Safety and Health Management
Each month, a Safety and Health Committee member visits ourhead offices in Tokyo and Osaka to assess the workplace environment. The committee comprises employees of the Human
Resources & General Affairs Department, nurses of our inhouse health clinics, and representatives from the Chori Labor
Union who regularly monitor the humidity, temperature, andCO2 concentration levels to ensure a safe workplace environment for all of our employees.
In terms of preventive measures for COVID-19, staggered
work hour and telework systems have been established, plexiglass barriers and alcohol disinfectants are available for use, andbody temperatures are measured at the entrance of the reception and office areas of our facilities. Moreover, our Tokyo andOsaka head offices, Hokuriku Branch, and Okayama Liaison
Office operate in compliance with the Building Sanitation Lawof the Ministry of Health, Labour and Welfare, with the facilities
constantly ventilated at a rate of 30 m3/h or more per person.

Crisis Response Headquarters
Incident

Primary Members for
Response Measures

ConvenePrimary Recipientof Information

Employees of Human Resources &General Affairs Dept.

Department Manager of
Human Resources &General Affairs Dept.
Deputy General
Manager of Corporate
Planning Division(Human Resources &General Affairs Dept.)

President, CEO & COO

One

Point

ReportEstablish contact /share information

Cooperate

DivisionsManager of Corporate
Management Dept.

Relevant
Companies

Supervisor ofOverseas Stores

Internal Whistleblower System

Office etiquette has undergone drastic changes in the current
COVID-19 era. Chori has established an internal whistleblower
system called KIITE through which employees can anonymously
report legal or regulatory violations and other matters. Employees
are constantly reminded to wear masks and talk quietly within work
facilities, and through such measures, Chori strives to ensure a
comfortable workplace environment (please see page 56 for details).

Reception area of Tokyo Head Office

Meeting area

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Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Business Partners
Our suppliers are essential partners for our business activities and play a critical role in ourcontributions to society. With this in mind, we put forth every effort to ensure compliance in our
CSR procurement, export management, and other activities.

Supply Chain Management
At Chori, we strive to develop a supply chain that ensures the stable supply of raw materials and products that are of consistently
high quality and deemed essential by customers.


Fibers, Textiles, and Garments Business

Chemicals Business

Machinery BusinessBusiness Environment and Issues to Address• Water and resource shortages arising from climate change• Food shortages stemming from the increasing global population• Conflict between Russia and Ukraine• Country risk associated with coups d’état and economic crises inemerging countries

Specific Measures to Address Issues• Expand portfolio ofenvironment-friendly products• Ensure thoroughrisk management• Strengthen supply chain• Maintain appropriate sales prices• Global supply chain disruptions• Surging prices of raw materials and oil and drastic exchange
rate fluctuations• Prolonged impact of the COVID-19 pandemic

Impact on the Group’s business• Increasing need for a wider lineup of environment-friendly products• Delays in collecting receivables from business partners due to foreign
currency restrictions• Disruptions in production and supply systems and the establishmentof an alternative supply chain• Deteriorating profitability due to increasing raw material costs anddelays in reflecting these higher costs in product prices• Decline in consumer sentiment due to rising prices

Operational Rules Regarding
CSR-Based Procurement
In order to fulfill its social responsibilities for procurement
activities in Japan and overseas, Chori has established its CSR
Procurement Guidelines and promotes procurement activities
that underline the importance of corporate ethics, legal
compliance, safety, disaster prevention, environmental
protection, product safety, quality assurance, human rights, andworking conditions. Within these guidelines, the Company hasprescribed its 11 Guidelines for Corporate Behavior in order toensure that employees are fully aware of its social mission andthe ways in which they must act at all times.

45

CHORI CO., LTD.

CSR-Based Procurement Surveys
In an effort to promote procurement activities that focus on
corporate ethics, legal compliance, safety, disaster prevention,
environmental protection, product safety, quality assurance,
human rights, and working conditions, Chori conducts a CSRbased procurement survey once every two years, in principle, toperiodically check the status of the CSR-based promotion
activities of each supplier. The fiscal 2021 survey consisted of
25 questions in total, including five new questions regarding
preparedness for COVID-19, human rights issues, conflictminerals, and other topics. Of the companies taking part in thesurvey, 9.3% responded that their suppliers were not meeting CSR
procurement standards, and therefore, by working collectively withthe sales departments, we will identify the specific reasons for not
meeting these standards and seek improvements as necessary.

Ensuring of Strict Compliance
Recognizing the importance of complying with laws and social norms when engaging in business activities with our suppliers,
we undertake the following measures to ensure rigorous compliance throughout our operations.
Security Trade Control With the objective of maintaining peace and security around the world, Chori has formulated its Internal Regulations on Compliance withExport-Related Regulations and Regulations on Fair Reporting and Management of Imports and Exports. We undertake strict export controls
to prevent countries in possession of weapons of mass destruction and conventional weapons from getting access to the highly sophisticatedequipment and technology of developed countries.
Export Control Process and Training Once applications for list control and catch-all control are filed by
Chori’s Sales Department, the Corporate Management Department
conducts final approval. In October 2020, we began implementinga system that integrates the management of information on export
products and transactions, ensuring rigorous security trade control
and stronger compliance measures. This system is also designed
to improve work efficiency and eliminate the use of paper.
In addition, Chori encourages its employees to obtain the STC
Associate certificate and holds internal workshops and training
sessions to enhance their understanding of export control. In fiscal
2021, 31 employees acquired the STC Associate certificate.

Chief Export Control Officer President, CEO & COO
Regulatory Trade Control Officer General Manager of Corporate Planning Division
Export Control Officer
Manager of Corporate Management Department(approval of transaction screening)

Export Control Representative
Corporate Management Department(transaction screening / consultation)

Logistics Department (Textile) / Logistics Department (Chemicals)(transaction screening)

Sales Department(application for transaction screening)

Product Safety Initiatives
In accordance with product safety management regulations, Chori establishes a product safety inspection committee whenever a
product is launched, sold, or used externally for the first time.
President, CEO & COO
Report results

ArrangeRequest product safety inspection
and use of company name, etc.

Product Safety Inspection Committee
Chair: D eputy General Manager ofCorporate Planning Division(Human Resources & General Affairs Department
and Information System Department) andinspection committee members
Held: As necessary• Inspect product safety

Product Safety
Management Manager
Managers of business administration sections• Aggregate and analyze issues• Comply with relevant laws andcompile information• Deliberate on important product safety
matters

ReportSecretariat(Human Resources &General Affairs Department)• Secretariat of product safety• Store and manage relevant documents• Cooperate with TORAY INDUSTRIES’affiliated divisions (reports, consultations, etc.)• Provisional point of contact in the event ofaccidents• Product liability insurance coverage• Report to and consult with relevant andsupervising ministries, the National Institute ofTechnology and Evaluation (NITE), etc.

Command

Legal Compliance Committee
Chair:
President, CEO & COO
Members:	
Officers and department
managers of corporate
planning divisions and managers of the business administration sections of sales divisions
Supervisor: Outside directors, Audit &Supervisory Committee

Instruct and provide
information

Departments

Propose productmanagement
procedure
Report accidents
and submit
detailed report

Approve productmanagement
procedure• Prepare product management procedure• Manage product safety• Respond to and resolve accidents• Store and manage relevant documents• Provide advice to and cooperate withsubsidiaries and affiliates

Tsumugu Report 2022

46

Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Human Resources
The Chori Group regards people as its most valuable management resource, founded on its
vision for human resources, “Utilize people, and be useful to them. Nurture people, and develop
with them. Connect people, and join together with them.” We will utilize, nurture, and connect
people to continue to grow as an organization and cultivate our next generation.

Human Resource Development
As globalization continues to spread at a rapid rate, employees will be expected to utilize their full capabilities. We cultivate our
employees to be able to respond quickly to changes, to think and act on their own will with a sense of curiosity and a broad
perspective, and to become an integral part of carrying the Group forward into the future.

Personnel We Seek

1.

2.

3.

4.

5.

Always act responsibly asa member of Chori andkeep the Company
charter close to their heart

Have a spirit ofindependence

Constantly work hard andcome up with creativeideas as results-focused
professionals

Expect the best andprepare for the worst

Respect the values andcultures of people fromaround the world

New Employee Training Upon joining the Company, new employees receive orientation to acquire the basic
knowledge and proper etiquette to become a responsible working adult and attend 30
lecture sessions and take certification exams twice a year. In fiscal 2021, these programs
were held online as a measure to prevent the spread of COVID-19.
Career Development Support 
At Chori, we hold level-specific training for directors and employees, invite instructors fromoutside of the Company, and conduct lectures led by our employees. In fiscal 2021, these
programs were held online as a measure to prevent the spread of COVID-19. Moreover, tospeed up the pace of globalization, we have implemented a system for the dispatch oftrainees overseas while continuing to conduct our in-house training program.

will set the stage for Chori’s future generations throughComment We
the growth of each and every employee.

Satoko Nakayama
Senior Executive Officer

47

CHORI CO., LTD.

Chori is a company that has experienced both times of success and hardship throughout the courseof its over 160 years in business. With respect to human resource development, I believe it is more
important to learn from the past and enable our employees to respond quickly to changes in thetimes and society by openly sharing information on past issues, rather than focusing on examples ofbest practices. Chori offers a range of training programs for all employees, from new graduates who
have just joined the Company to executive officers. In every training program, I convey to theemployees what I would like them to gain the most so that they are able to acquire information andknowledge that are not readily accessible in their day-to-day work.
In addition to compliance and anti-harassment measures, the theme for training in fiscal 2022 isdigital transformation. As digitalization continues to gain momentum worldwide, we will home in on
the development of digital experts, and we plan to formulate a human resource development policy
in line with Chori's vision for a digital future in the new medium-term management plan. Moreover, toensure Chori’s continuous global development, we will resume our executive training program, which
we experimented with at Group headquarters prior to the emergence of COVID-19, and promote theadoption of our human resource development policy at our subsidiaries in Japan and overseas.
The effectiveness of our training programs depends on the level of enthusiasm of the instructors
and participants. While our training programs are now conducted online rather than face to face asa result of COVID-19, we will continue to educate our employees according to their needs with theutmost levels of energy.

Promotion of Diversity
Creating a Comfortable Workplace Environment
We regard people as our most valuable management resource,
and for that reason it is essential that we provide employees withworkplace environments that allow them to work in a healthy
and active manner. We conduct the following initiatives with thisin mind, particularly with the aim of providing employees with ahealthy work–life balance.
Eliminate Long Work Hours In principle, designate one day of the week as a no-overtime day
All staff must leave their workplace by 9 p.m. every dayRestrict the number of overtime hours
Automate work processes with robotic process automation
Improve the efficiency of meetings
Encourage Employees to Take Annual Paid Leave 

FY2019Number of Employees
Taking Childcare Leave

120

CHORI Innovation Activities (“CHOI-Katsu”) We have been working to improve our employees’ operational
efficiency through our Companywide CHORI Innovation Activities(“CHOI-Katsu”), established in fiscal 2013 with the aim of achieving
department- and division-specific goals. Fiscal 2022 marks the10th year of CHOI-Katsu, and to commemorate, we initiated aCompanywide business transformation project for the first time in
25 years.

Four Action Policies
1. Compliance and cleanliness
2. Health and communication
3. Learning
4. Digitalization

10

9

12

106

102
89

80

40

Provide option to relocate to other locations (transfer to otherbranches domestically and regionally)22(9 of whom are
male)

Number of Recipients of Self-Development Subsidy

Eliminate restrictions on the number of times half-day leave can betaken for the purpose of childcare, nursing care, or hospital visits

 onduct one-on-one meetings between employees andCtheir superiors

19(9 of whom aremale)

We support our employees’ self-development by subsidizing
the tuition and fees necessary to acquire Companydesignated certification.

80

Introduce work-at-home system (temporarily) andweb-conferencing system

17

Supporting Self-Development

Encourage employees to take seasonal holidays

Improve flextime system (no core hours)

FY2021(6 of whom
are male)

Number of Employees
Working Shorter Hours Due
to Childcare

Mandatory use of annual paid leave (five days)

Promote Flexible Workstyles 

FY2020

0

2017

2018

2019

78

2020

2021

(FY)

Recruiting Diverse Human Resources
As a part of its action plan based on the Act on Promotion of
Women’s Participation and Advancement in the Workplace,
Chori established the goal of raising the percentage of womenamong new graduates to 20% between fiscal 2016 and fiscal
2020. In addition, we have been making proactive efforts topromote the hiring of people with disabilities.
Number of New Graduates(Number of employees)
30

20

10

0

Male

20

21

9

8

4

13

14

2019

2020

2021

2.9

2.3

2.3

2.2

2.3

2.3

2019

2020

2021

18
11
3

11

8

2017

2018

12
4
8
(FY)

FemaleRatio of People with Disabilities(%)

Supporting the Balance of Work Life and Childcare
Chori has various childcare systems in place to promote thebalance of work and family life. While the period of leave isrelatively short, the number of male employees taking childcare
leave has been on the rise, with nine taking time off in fiscal
2021. We also have a support system in place as a part of ouremployee benefit program that provides employees with financial assistance for childbirth, self-development, and childcare.

3.0

2.7

2.4

2.0

2.0

2017

2018

2.0

1.0

0

Company employment rate

(FY)

Statutory employment rate

Note: Results as of March 31 of each fiscal year

Tsumugu Report 2022

48

Management Foundation Tailored to Sustainable Growth

Chori’s Sustainability Initiatives

Local Communities and Society
For a company to realize sustainability, it must be fully committed to coexisting with local
communities. As a member of these local communities, Chori will continue to engage in various
initiatives in its mission to grow together with society.

Cooperation with the Hokuriku Region
The Hokuriku region (Fukui Prefecture, Ishikawa Prefecture,
and Toyama Prefecture) boasts an extensive track record in the
manufacture of yarn and textiles spanning over 400 years andthrives on the production of synthetic fiber fabric. Since theestablishment of branch offices in Fukui Prefecture in 1929 and
Ishikawa Prefecture in 1934, Chori has worked to develop ayarn and textile business that is deeply rooted in this region.
In cooperation with synthetic fiber manufacturers, Chori began
wholesaling raw yarn to the textile industry (textile manufacturers)
and producing textiles with the industry. After the end of WorldWar II, Chori took sole responsibility for the sale of woolly nylon,
a raw material used in stockings, and grew in step with the
Hokuriku region during a period of high economic growth inJapan. The COVID-19 pandemic has had a major impact on
the yarn and textile industry in recent years. However, we haveseen increasing demand for stretchable fabrics made of false
twist yarn produced in the Hokuriku region, owing to the highlevel of comfort they offer for clothes worn indoors. On thestrength of our high quality and footwork that can only berealized through domestically made products, we will continue
to work with local companies to provide products that fulfill
the needs of each customer and communicate the value of
made-in-Japan quality to the rest of the world.

Activities of the Hokuriku Chori Committee
Chori has been able to maintain its presence in yarn andtextiles in the Hokuriku Region because of the cooperation ofits local business partners. The Fukui Chori Committee andthe Kanazawa Chori Committee were established by thesebusiness partners as support groups for Chori’s business in theregion. These committees were combined and renamed as the
Hokuriku Chori Committee in 2001 and it continues to operate
to this day. Chori works alongside its member companies tohold annual meetings, cross-industrial exchanges, and lectures,
as well as publish newsletters to facilitate member interaction
and share information.

Selection as SDGs Promotion Coordinator
Compliance with various laws and regulations related to industrial
waste disposal and rising costs are major challenges that must
be overcome by companies. Chori is promoting initiatives tocollect fiber scraps and remnants from yarn processing plants
and fabric manufacturers to then utilize them to make products,
rather than disposing them as industrial waste. In addition to
engaging in the supply of raw materials used in reinforced sheet
materials that absorb water along river embankments, we are
currently developing sound-absorbing materials that will be
used on electric vehicles. In recognition of our efforts in these
BLUE CHAINTM recycling schemes, in August 2021, we wereselected as an SDGs Promotion Coordinator by the Fukui Textile
Association. The Company is vigorously working to identify
the issues and needs of textile companies in Fukui Prefecture
and introduce a wider range of environment-friendly products
to the market.

Companywide Charity Walk Event
Until 2019, Chori sponsored WFP Walk the World, a charity walk event organized by theUnited Nations World Food Programme (WFP), in which a number of employees and theirfamily members volunteered each year. The emergence of COVID-19 made it difficult tocontinue holding the event, encouraging us instead to hold our own charity walk eventfrom April 2022 by utilizing an internal walking app, keeping track of the number of steps
taken together by each department and the Group as a whole, and donating funds in theamount equivalent to the number of participants who achieved a certain number of steps
within a specific amount of time. The event, which aims to promote healthier lifestyles for
employees of both Chori and its domestic subsidiaries and contribute to the bettermentof society, attracted a record-high 260 participants in fiscal 2021. Chori will continue toengage in such activities to help realize a better society.

49

CHORI CO., LTD.

Promotion of Health and Productivity Management
Recognizing the importance of the health of our employees and their families to achievingsound corporate management, we formulated our Health Declaration in 2018 to promote
efforts toward health and productivity management.

Health Declaration

February 14, 2018

1. Enhancement of Awareness of the
Health of Employees

2. Approach to Health andProductivity Management

3. Responsibility to Society andthe Future

Chori believes that the health of its employees andtheir families is significant to the success of its
business and that the vitality of its employeestranslates into the vitality of the Company. Basedon this belief, we strive on an ongoing basis toenhance awareness of the health of our employees.

Chori actively supports and promotes initiatives
that help maintain and improve the health of its
employees and their families with the goal of
realizing health and productivity management.

Chori will do what is necessary to ensure the healthof its employees and achieve sound corporate
management. In so doing, we will make a difference to society and realize sustainable growth.

Health and Productivity Management Promotion Structure
We established our Health Promotion Committee in April 2018 andhave since been promoting efforts to realize health and productivity
management. Chaired by the deputy general manager of the
Corporate Planning Division (in charge of the Human Resources &General Affairs Department and the Information System Department),
the Health Promotion Committee consists of industrial physicians
and nurses from Chori’s in-house health clinics as well as theemployees of the Human Resources & General Affairs Department
and members of the Chori Health Insurance Society. Through theinitiatives of the Health Promotion Committee, Chori aims to maintainand improve the health of its employees and their families and fulfill its
Health Declaration. In addition, a debriefing session on White Paper
for Chori’s Health Management is held once a year to assess thecurrent state of health management and to discuss any issues.
President, CEO & COO
Health Declaration

Deputy General Manager of the Corporate Planning Division

Ensuring the Health of Employees
We conduct oral and dental checkups and flu vaccinations on a
yearly basis. As part of the regular health examinations, employees
aged 30 and 35 years and over can undergo a comprehensive
medical checkup once a year at the expense of the Company, while
dependents aged 35 years and over of the insured party are entitled
to receive up to ¥32,000 in subsidies for medical checkups.
We also conduct stress checks to prevent the possibility of
our employees suffering from mental illnesses. Employees who
work over 40 hours of overtime in a month are required toconsult with an industrial physician in the following month. In
these ways, we work to ensure the health of our employees
through the support of medical experts.
Rate of Employees and Family Members Who Undergo
Regular Health Checkups(in charge of the Human Resources & General Affairs Department and the Information System Department)

Health Promotion Committee

CHOI-Katsu

White Paper for Chori’s Health Management(analyze, set targets, and examine effectiveness)(Companywide activities)

Health Management Meeting

Health Promotion Subcommittee

Prevention of serious lifestyle-related diseases
Promotion of health checkups

In-house health clinic

Health seminars, yoga classes, etc.
Specific events and internal education

Health insurance association

FY2019FY2020

FY2021

Employees

100%

100%*

100%

Family Members

72.0%

52.9%

61.5%

* Excludes expatriates who were unable to return to Japan due to COVID-19

Labor union

Comment We offer a health support system that is attuned to changes in lifestyles.

Yuya Fujishima
Supervising physician at Chori’s
in-house health clinic inside Osaka
Headquarters

At Chori, we have internal health clinics in place at both headquarters in Tokyo and Osaka where
employees can receive medical care and health guidance after receiving the results of their medical
checkups. This enables the early prevention and treatment of serious illnesses.
In recent years, we have seen a decline in the percentage of male smokers as well as a reduction inexcessive alcohol consumption due to the effects of COVID-19. However, I have the impression that theconditions of employees with preexisting lifestyle-related diseases, such as diabetes and dyslipidemia, andmental health issues have worsened due to a lack of exercise and fewer opportunities to engage inworkplace communication. In order to address the changes in lifestyles triggered by COVID-19, we must
consider implementing measures that address the health-related needs of each individual. Our clinics willcontinue to do everything possible to help maintain the health of each employee and provide informationand support that contributes to the realization of healthier lives by adapting to changes in our lifestyles.

For more details, please refer to the “Health Promotion Activities” page (in Japanese only) of our corporate website.
https://www.chori.co.jp/sustainability/social/health/activity.html
Tsumugu Report 2022

50

Management Foundation Tailored to Sustainable Growth

Corporate Governance
Chori has established systems to ensure appropriate operations with the aim of achieving sound management and sustainablegrowth. The Company strives to strengthen corporate governance by complying with laws and social norms, conducting operations
efficiently and effectively, and ensuring the credibility of its financial reports, while positioning the Board of Directors as a body for
conducting strategic decision-making and business oversight.

Corporate Governance Structure (As of June 16, 2022)
General Meeting of Shareholders
Election / dismissal

Audit /
supervision

Election / dismissal
Cooperation

Election / dismissal

Board of Directors

Audit & Supervisory Committee

Directors Who Are Not Audit &Supervisory Committee Members

Audit & Supervisory
Committee Members

1 internal director

4 internal directors

Governance Committee

1 internal

director

2 outside directors

1 outside director

Accounting Auditor

Cooperation

2 outside

Inquiry

Cooperation

directors

ReportReport on the status ofimportant businessexecution and other matters

ReportLegal Compliance
Committee

Supervision

Direct control
Supervision
Business
execution

Executive Committee

Internal Auditing
Department

President, CEO & COO

Executive Officers

Business Execution Organization (Business Departments / Administrative Departments) /Group Companies

Internal audit

Accounting
audit

Overview of Corporate Governance Structure and Reasons for Its Adoption
To strengthen the management transparency and oversightfunction of the Board of Directors, Chori has an Audit &Supervisory Committee in place, the majority of which
consists of outside directors.
At the Board of Directors’ meetings, the directors(including those who are Audit & Supervisory Committee
members) engage in lively and sufficient discussions anddeliberations from a free and independent perspective inregard to the supervisory status of decision-making andbusiness execution. The Board also consists of two outside
directors who are Audit & Supervisory Committee membersthat audit the legitimacy and appropriateness of the statusof business execution from an external perspective in an
objective and rational manner. The Company therefore
believes that it is sufficiently fulfilling its management
supervisory function. Moreover, to ensure the prioritization of
results, the Company has set the term of office of directors(excluding those who are Audit & Supervisory Committee
members) and executive officers to one year and has
established a management structure that can respond tochanges in business conditions in a timely manner.

51

CHORI CO., LTD.

Organizational Structure

Company with an Audit andSupervisory Committee

Number of Directors(excluding those who are Audit &Supervisory Committee members)

5(of whom,
1 is an outside director) Term of Office of Directors
According to the Articles ofIncorporation

1 yearNumber of Directors Who Are
Audit & Supervisory Committee
Members3(of whom,
2 are outside directors) Term of Office of Directors Who
Are Audit & Supervisory
Committee Members According
to the Articles of Incorporation

2 years

Number of Independent Officers

3

Executive Officer System

Yes

Performance-Linked
Remuneration System

Yes

Accounting Auditor

Deloitte Touche Tohmatsu
LLC

Composition and Overview of the Board of Directors, Executive Committee,
and Other Principal Committees
Description

Number ofmeetings heldin fiscal 2021

Board ofDirectors

The Board of Directors consists of all directors and has been positioned as the committee
responsible for making strategic decisions and overseeing the Company’s operations.
The Board of Directors meets at least once a month, in principle, to make decisions onimportant management matters and to supervise the directors' execution of duties.

16

97.8%

100%

Executive
Committee

The Executive Committee consists of executive officers and those who were approved by the
Board of Directors and was established as an organization for conducting discussions andexchanging important information and opinions on matters related to business execution.

25

99%

—

Audit &
Supervisory
Committee

The Audit & Supervisory Committee convenes regularly once a month to discuss mattersrelated to management conditions and audit results upon the exchange of information
with outside directors. In addition to attendance at important meetings of the Board of
Directors, directors who are Audit & Supervisory Committee members conduct individual
meetings with those in charge of the Sales Department and Corporate Planning
Divisions to make decisions on important management-related matters (including on
their process) and sufficiently audit and monitor the appropriateness of the executionof duties by each director (excluding those who are Audit & Supervisory Committee
members) and executive officer.

14

100%

100%

GovernanceCommittee

The Governance Committee aims to enhance the Company’s corporate governancestructure in order to strengthen the independence and objectivity of the functions andaccountability of the Board of Directors regarding director nomination, remuneration,etc., and to protect the interests of minority shareholders.

6

100%

100%

Legal
Compliance
Committee

The Legal Compliance Committee is chaired by the president, CEO & COO and consistsof the general manager of the Corporate Planning Division, the heads of corporate
divisions, and other members. The committee deliberates on important compliancerelated issues and reports the results to the Board of Directors and the Executive
Committee as necessary.

6

—

—

Business
Investment
Committee

Chaired by the president, CEO & COO, the Business Investment Committee discusses
and deliberates the appropriateness of risk–return assessments and plans and thefeasibility of important investments and financing.

1

—

—

M&A Promotion
Committee

The M&A Promotion Committee is chaired by the general manager of the Corporate
Planning Division and consists of the general manager of the Sales Department and othermembers. The committee deliberates on and examines matters pertaining to the businessportfolio of Group companies, including M&A and the Group’s medium- to long-term
management plan, from the perspective of improving consolidated management.

2

—

—

Name

Committee Members: Committee chair

Attendance rate of Attendance rate
all directors andof outside
executive officers
directors: Committee member: Nonmember attendee

Fiscal 2022 Committees and Committee Members
Name

Position

Kazuo
Sakihama

President, CEO & COO,
President and Executive Officer

Tatsuyuki
SakodaDirector,
Managing Executive Officer

Kazuhiro
Tohge

Director, Executive Officer

Mitsuo Ohya

Director

Hiroko Noda

Outside Director

Shigemasa
Yabu

Director, Full-Time Audit &Supervisory Committee Member

Masaaki
SawanoOutside Director, Audit &Supervisory Committee Member

Hiromasa
Suzuki

Outside Director, Audit &Supervisory Committee Member

Board ofDirectors

Executive
Committee

Audit &
Legal
GovernanceSupervisory
Compliance
Committee
Committee
Committee

Business
Investment
Committee

M&A
Promotion
Committee

Tsumugu Report 2022

52

Management Foundation Tailored to Sustainable Growth

Corporate GovernanceDiversity of the Board of Directors
The Board of Directors must decide on matters in a transparent, fair, prompt, and decisive manner, and therefore consists of memberswith a diverse range of views, experience, and skills. To strengthen corporate governance by ensuring the objectivity andappropriateness of decisions made by the Board of Directors, at least one-third of the members are independent outside directors.

Directors
Name

Length ofService*1

GenderKazuo Sakihama

9 years

Tatsuyuki Sakoda

Newlyappointed

Kazuhiro Tohge

4 years

Mitsuo Ohya

2 years

Hiroko Noda

Newly
appointed

Area of Expertise and Experience
Independent Director(Outside)

Corporate
Management

Global Business

Finance & Accounting

Legal & Compliance*1 Indicates number of full years of service as of June 30, 2022

Directors Who Are Audit & Supervisory Committee Members
Name

Length ofService*1

GenderShigemasa Yabu*2

Newly
appointed

Masaaki Sawano

4 years

Hiromasa Suzuki*3

Newly
appointed

Area of Expertise and Experience
Independent Director(Outside)

Corporate
Management

Global Business

Finance & Accounting

Legal & Compliance*1 Indicates number of full years of service as of June 30, 2021
*2 Shigemasa Yabu served as a director of the Company for six years prior to concurrently serving as an Audit & Supervisory Committee member.
*3 Hiromasa Suzuki served as a director of the Company for one year prior to concurrently serving as an Audit & Supervisory Committee member.

Reason for Nomination of Outside Directors
The Company’s outside directors were nominated for the reasons outlined below as well as their ability to supervise managementfrom an external point of view, such as through the proactive exchange of opinions and advice at the Board of Directors’ and otherimportant meetings. In June 2022, Ms. Hiroko Noda, who has extensive knowledge and experience as a certified public accountant,
was newly appointed as an outside director.
Name
Hiroko Noda
Newly appointed

Reason for Nomination
She has been appointed as an outside director based on her knowledge, experience, and abilities as a certified public accountant as well as
her sufficient expertise in management gained through her years of experience as an outside director and a management consultant. As an
outside director, she is expected to provide appropriate advice to the Company’s management. In addition, it has been deemed that she has
no material conflict of interest with the Company and that no conflict of interest will arise with general shareholders.

Masaaki Sawano

He has been appointed as an outside director as he is expected to provide appropriate advice regarding the management of the Company and on
the grounds that he is deeply familiar with corporate legal work as a lawyer and has sufficient insight to supervise corporate management. In addition,it has been deemed that he has no material conflict of interest with the Company and that no conflict of interest will arise with general shareholders.

Hiromasa Suzuki

He has been appointed as an outside director based on his many years of involvement in the management of Fujirebio Inc. and his wealth ofexperience in group management as a top executive of a company, which involved orchestrating the establishment of Miraca Holdings Inc. Asan outside director, he is expected to provide appropriate advice regarding the management of the Company. In addition, it has been deemedthat he has no material conflict of interest with the Company and that no conflict of interest will arise with general shareholders.

Executive Remuneration
Executive remuneration consists of three types: monthly basic remuneration, yearly bonuses, and restricted stock compensation.
Remuneration of directors (excluding directors who are Audit & Supervisory Committee members) is based on a compensation
structure that aligns with returns to shareholders to ensure that it functions effectively as an incentive toward the sustainable increaseof corporate value. When determining the remuneration of each director, our basic policy is to provide an appropriate level of

53

CHORI CO., LTD.

compensation based on a consideration of their position within the Company, individual performance, and other factors. Meanwhile,from the perspective of their role and independence, remuneration of directors who are Audit & Supervisory Committee members andoutside directors consists solely of fixed remuneration, determined based on their role within the Company.

Overview of Executive Remuneration System
Fixed remuneration

Variable remuneration55%

10% (medium

35% (single year)

to long term)

Note: Percentages apply in the caseof full achievement of targets

Basic Remuneration

Bonuses

Performance-Linked Stock Compensation

Fixed remuneration

Short-term incentive remuneration
Linked to performance in relevantbusiness year

Medium- to long-term incentive compensation
Linked to degree of achievement of medium-term
management plan

• Directors who are not Audit &Supervisory Committee members• Directors who are not Audit &Supervisory Committee members

Eligible Recipients• Directors who are not Audit &Supervisory Committee members• Directors who are Audit &Supervisory Committee members• Outside directors

Grant Method

Cash

Cash

Restricted stock compensation• Consolidated ordinary
income results• Progress of medium-term
management plan, etc.

• Consolidated ordinary income over three-year period• Progress of medium-term management plan, etc.

Directors who are not Audit &Supervisory Committee members:
No more than ¥300 million annually

Directors who are not Audit &Supervisory Committee members:
No more than ¥300 million annually

Directors who are not Audit &Supervisory Committee members:
No more than ¥100 million annually(However, excludes the portion of employee
salary of directors who concurrently serve
as employees)(However, excludes the portion of employee
salary of directors who concurrently serve
as employees)(However, excludes the portion of employee salary of directors who
concurrently serve as employees)(Resolution passed at the 69th General Meetingof Shareholders held on June 15, 2016)(Resolution passed at the 69th General Meetingof Shareholders held on June 15, 2016)(Resolution passed at the 70th General Meeting of Shareholders
held on June 15, 2017)

Fixed amount paid monthly based on roleand position within the Company• Paid at a certain time of theyear according to position within the
Company• Amount calculated according to theprogress of the medium-term management plan and consolidated ordinary
income in the given business year•L evel of remuneration determined based on position
within the Company

Remuneration Type

Evaluation Index(Variable
Remuneration)

Maximum Amountof Remuneration—

Directors who are Audit & Supervisory
Committee members: No more than¥100 million annually

Grant andCalculation Method• Payment made upon determining the annual base compensation for each position and, in principle, by dividing the amountequivalent to compensation for the execution of director duties
over the same three-year period as the medium-term
management plan by the standard stock price and determining
the number of shares to grant for each position.
Condition subsequent:
Withdrawn in accordance with the degree of achievement of consolidated ordinary income targets under the medium-term management
plan and work performance

Director Remuneration in Fiscal 2021
Total Amount of Remuneration by Type (Millions of Yen)

Classification

Total Amount of
Remuneration(Millions of Yen)

Basic
Remuneration

Restricted Stock
Compensation

Bonuses

Non-Monetary
Remuneration, etc., ofAmounts Shown on the Left

Number of
Directors
Eligible

Directors (Excluding Audit &Supervisory Committee Members)(Excluding Outside Directors)

143

100

17

25

17

6

Directors (Audit & Supervisory
Committee Members)(Excluding Outside Directors)

18

18

—

—

—

1

Outside Directors

23

23

—

—

—

3

Measures to Strengthen Corporate Governance
Chori recognizes that the enhancement of its corporate governance is a matter of priority for management and has taken and willcontinue to take the following measures. We have expanded our profit margin through the introduction of a performance-linked

Tsumugu Report 2022

54

Management Foundation Tailored to Sustainable Growth

Corporate Governanceremuneration system and the efforts of directors to instill the same level of awareness for profits in all shareholders in order tostrengthen the Company’s performance over the medium to long term.
2001

2005

2012

2016

2017

2018

2020

2021

Separation ofManagementand Execution

Promotion ofCompliance

Revision of
Remuneration
SystemStrengtheningof Audit
Function

Revision of
Remuneration
SystemPromotion ofDiversity

Management
Transparency
and Fairness

Strengtheningof GovernanceDiscontinues the
Directors’
Retirement
Benefits System

Transitions to a
Company with
an Audit andSupervisory
Committee

Introduces the
Restricted Stock
Transfer
Remuneration
SystemIntroduces the
Executive Officer
SystemEstablishes theLegal Compliance
Committee, withthe president,
CEO & COO as
the chairman

Effectivenessof the Boardof Directors

Appoints a
female director
and a female
outside director(who is also an
Audit &
Supervisory
Committee
member)Institutes theGovernanceCommittee

Increases theratio of outside
directors on the
Board ofDirectors to morethan one-third

Conducts
questionnaires toevaluate theeffectiveness of
the Board of
Directors

Evaluation of the Effectiveness of the Board of Directors
With the aim of enhancing the effectiveness of the Board of Directors, in fiscal 2021 Chori conducted the evaluation of theeffectiveness of the Board of Directors through a third-party institution for the first time. The Board of Directors is composed of suitably
qualified members that include outside directors, and the Board of Directors’ meetings are held in a free and open environment thatfacilitates constructive discussions and the exchange of opinions. Accordingly, it has been deemed that the Board of Directors is
operating appropriately on the whole and that its effectiveness is ensured.
Respondents

All eight directors (including those who are Audit & Supervisory Committee members) in fiscal 2021 (registered questionnaire)

Method of
Evaluation andAnalysis

Evaluation and analysis conducted by the Governance Committee and the Board of Directors upon aggregation of results by a third-party institution and ensuring confidentiality

Questionnaire
Content

Questions are based on the following nine major themes
Composition of the Board of Directors
Operation of the Board of Directors
Discussions of the Board of Directors
Monitoring function of the Board of Directors Support system for directors (including those who are Audit & Supervisory Committee members)
Training
Dialogue with shareholders (investors)
Individual initiatives
General overview

Overview of
Evaluation Results

Regarding the enhancement of training opportunities for directors, which was identified as an issue in fiscal 2020, it was confirmed that
improvements have been made through participation in web-based training programs.
Meanwhile, opinions were shared in regard to decisions on management strategies and management plans, as a result of which it wasdeemed that further improvements must be made to discussions and deliberations by being observant of profitability, capital efficiency, and otherfactors. Opinions were also shared concerning dialogue with shareholders and investors, through which it was deemed that further improvements
must be made to the feedback provided to the Board of Directors.
We will continue to improve the effectiveness of the Board of Directors by increasing discussions on medium- to long-term policies and plans at
the Board of Directors’ meetings and by improving feedback to the Board of Directors on the status of dialogue with shareholders and investors.

Maintenance of a Certain Level of Independence from Our Parent Company
As of March 31, 2022, Chori’s parent company TORAY
INDUSTRIES, INC. held 52.76% of voting rights in the Company. We
constantly work to strengthen the combination of our ability to selland collect information on textiles and chemicals, which represent
our core business, in Japan and overseas and TORAY INDUSTRIES'
ability to develop materials in order to generate synergies andenhance corporate value for both companies. By operating undera parent company, Chori is able to gain a better understanding ofmarket trends and the business environment, enhance its credibility,and enjoy other benefits that come with being a Group company.

55

CHORI CO., LTD.

With the exception of one director who does not executebusiness, the executives and employees at Chori do not concurrently
serve as executives or employees at the parent company or Group
companies and the Company does not accept employees throughtransfers from other companies. In addition, at Chori we have ourown management plan in place, through the execution of which
we have developed and will continue to develop our business.
Transactions between Chori’s parent company TORAY
INDUSTRIES, INC. and its corporate group are assessedand verified annually by the Governance Committee.

Risk Management
At Chori, we take measures under normal circumstances to
identify potential risks in our business activities so we can mitigate such risks and prevent crises before they occur. We haveestablished a system for taking appropriate measures in theevent of a crisis that could have a significant impact on our business and formulated our Risk Management Rules to enable swift
and accurate responses to such emergencies while maintaining
control of the situation and regaining a state of normalcy as
quickly as possible. Under the direction of the president, CEO &COO, who assumes overall responsibility of the Company’s risk
management activities, measures are taken to identify material
issues pertaining to potential risks, mitigate such risks, and prevent such risks from occurring while formulating various methods
to detect risks in advance and providing the necessary educationand training in a voluntary and systematic manner. In addition,
efforts are made to follow up on the results of our crisis response,
verify its effectiveness, and uncover and improve on any issues.
The management team at Chori has classified the major risks
that are believed to have a significant impact on the financial

position, business results, and cash flow of the consolidated
company according to the risks listed below, each of which will
be assigned a committee or division responsible for preventing
their occurrence.

Business and Other Risks• External business environment / country risk
• Exchange and interest
rate fluctuations• Concentration on specificregions and markets• Risk associated withfluctuations in raw material
prices• Inventory risk

• Business investment risk
• Risk of impairment on
securities• Risk of natural disasters
and contagious diseases• Risk associated withinformation systems andsecurity• Compliance risk
• Risk associated withsecuring of personnel• Bad debt risk

Ensuring of Thorough Compliance
Rules concerning compliance systems, such as the Guidelines
for Corporate Behavior, shall be established to set compliancewith laws and regulations and social ethics as a code of conductof our business. In order to make all directors, executive officers,
and employees of the Group fully aware of the initiatives forcompliance, corporate divisions shall collaborate to hold compliance training and other training programs. The Legal Compliance
Committee, with the president, CEO & COO as the chairman,
shall discuss important matters regarding the compliance of theGroup and report the results to the Board of Directors and the
Executive Committee as necessary. In the event of a significant
legal violation or compliance violation on the part of a management executive, in accordance with the laws and regulations andthe Articles of Incorporation, the Governance Committee shalldeliberate on the dismissal of the management executive inquestion and the Board of Directors shall adequately discussand consider his or her dismissal based on those results.
A system of contact has been established throughout Chori
whereby executives and employees (including contract, temporary, and other employees) can receive consultation and reporton compliance violations and other matters. In this way, we

have established a framework for reporting incidents by ensuring the full confidentiality of whistleblowers, who are able toreceive consultation either in-house or through an external pointof contact depending on the nature of the incident.

Internal Whistleblower System
Consultant
KIITE (Fully confidential)
A system of contact through which whistleblowers can receive consultation
and request warnings to be given to the person being reported while maintaining full confidentiality and without undergoing an in-depth investigation.

Human Resources & General Affairs Department
KOTAETE (Confidentiality possible at the request of the whistleblower)
A system of contact through which requests for consultation and investigation
involving both the whistleblower and the person being reported can be madeand matters such as workplace harassment and serious compliance violations
requiring investigation can be reported.

Legal Compliance
Committee
Internal
hotlineAudit & Supervisory
Committee

Law firm
External
hotline()Advisory office /external firm

Internal Control
Our Basic Policy on Internal Control System was formulated in
May 10, 2006 to serve as a set of fundamental guidelines forthe establishment of a framework for ensuring the appropriate
execution of business toward realizing sound corporate
management and sustainable growth.
Since then, this policy has been amended to reflect changes

in the Group’s business environment and business activities.

For details on our internal control system, please refer to our Corporate Governance Report (in Japanese only).
https://www.chori.co.jp/sustainability/governance/

Tsumugu Report 2022

56

Management Foundation Tailored to Sustainable Growth

Corporate GovernanceInternal Audit
In regard to internal audits, the Company has established theInternal Auditing Department (consisting of seven members)
directly under the president, CEO & COO. The Internal Auditing
Department conducts audits on the appropriateness and efficiency of the Company’s business activities from a fair andindependent point of view. The Internal Auditing Department
also evaluates the status of the implementation and operationof internal controls concerning financial reporting in accordancewith the Financial Instruments and Exchange Act.

Outside directors and the Audit & Supervisory Committee
receive reports regularly on audits conducted by the Internal
Auditing Department and verify the status of business execution of each department and subsidiary. The Audit &Supervisory Committee reports the results of audits to andexchanges opinions with the Internal Auditing Department. The
Audit & Supervisory Committee requests the Internal Auditing
Department to provide information or conduct investigations
when necessary, thereby working closely together to ensurethat audits are carried out efficiently.

Cross-Shareholdings
The Company and its subsidiaries may acquire and hold sharesof listed companies (hereinafter “cross-shareholdings”) in orderto maintain, expand, and sustainably develop their businesses.
In such cases, the Board of Directors and other bodies decideon acquisitions after determining the department in charge ofthe acquisition and considering the business conditions of theinvestees and the profitability of the investment. The Board of
Directors verifies the significance of the cross-shareholdings
each year and considers the sale or reduction of shares that are
deemed to be of no significance. Those shares that are held areverified each year for their economic rationality from the perspectives of the significance of each acquisition and holding,
profitability of the investment, transaction scale, and relevant
profits, and are either held or replaced upon resolution of theBoard of Directors and other bodies.

The Company appropriately exercises the voting rights ofcross-shareholdings from the perspective of whether or not theCompany and the investee company can expect increases intheir corporate value over the medium to long term, while
respecting the management policies of investee companies.
Holding of Shares for Purposes Other than Pure
Investment (Cross-Shareholding)
FY2019FY2020

FY2021

Shares Held

30

30

31

Total Amount (Billions
of Yen)

3.4

4.1

4.6

Note: T he shareholdings of CHORI CO., LTD. for which the largest monetary amountis recognized on the balance sheets in relation to investment in equity securities (the monetary amount of equity securities recognized) have been stated.

Policies Regarding Constructive Dialogues with Shareholders
The Company promotes constructive dialogues with shareholders based on the following five policies.

(1) The executive officer in charge of information handling oversees
matters related to IR and public relations, cooperates with the
Corporate Planning Division and relevant departments, andcommunicates information to shareholders and investors.

• Individual investors
The Company promotes dialogues with its individual shareholders byholding company briefings exclusively for such investors, which areattended by the president, CEO & COO of the Company.

(2) The relevant internal departments proactively cooperate toachieve constructive dialogues with shareholders through the
preparation of disclosure materials and the sharing of important
information while conducting their business activities.

• Institutional investors
The Company holds financial briefings through the attendance ofthe president, CEO & COO and management executives upon the
conclusion of its six-month and full-year financial results announcements. At these financial briefings, the Company reports on thedetails of its financial performance, addresses various questions,and collects the opinions of its shareholders. In addition, the departments in charge of IR and public relations conduct individual visits
and briefings for institutional investors.

(3) Methods of dialogue other than individual meetings• General meeting of shareholders
The Company regards the general meeting of shareholders as anopportunity to fulfill its responsibility of providing explanations toshareholders and works accordingly to carefully address theirquestions and understand the intent of their opinions. In theevent of important announcements regarding management
information, such as the medium-term management plan, theCompany reports on its current status and collects the opinionsof shareholders through such measures as the holding of briefings on the management plan upon the conclusion of the general
meeting of shareholders.

57

CHORI CO., LTD.

(4) Feedback
The Company promotes the sharing and use of information
obtained from dialogues through the reporting of opinions ofshareholders to the respective committees and their disclosure to
the directors, management executives, and relevant departments
as necessary.
(5) The Company takes appropriate measures to ensure thoroughinformation management through compliance with the Insider
Trading Prevention Regulations.

Messages from Outside Directors on the
Audit & Supervisory Committee
While fiscal 2021 was a turbulent year marked by rising raw
material prices, surging logistics costs, and the increasingly
disastrous conflict between Russia and Ukraine, Chori achieved
substantial increases in both revenue and profit as well as its
highest ever results for net income attributable to owners of theparent. Following the success of our steady efforts in each of
our businesses in fiscal 2021, we will strive to further improve
our governance in the final year of our medium-term
management plan and ride this tailwind while working to avoid
risks. It must be noted in particular that fiscal 2022 isalso the year in which our new medium-term
management plan will be formulated. In order torealize sustainable growth, we must not only achieve
our ordinary income target but also take the initiativein fulfilling our social responsibilities as a company.
As a listed company on the Prime Market of theTokyo Stock Exchange, Chori is working to strengthen
its governance through efforts such as the centralizationof consolidated subsidiaries and other organizations incharge of conducting business audits under the Internal
Auditing Department in fiscal 2021. Moreover, theGovernance Committee, which was established in
2020, discusses specific matters, such as the selection
and dismissal of directors and succession planning,based on medium- to long-term projections.
Throughout our years in business, we have earned
a high level of trust in the Hokuriku region and otherareas of the world, particularly through the Fibers, Textiles,
and Garments Business. We have also steadily improved our
performance in the Chemicals Business and the Machinery
Business, firmly establishing a foothold in each market. Goingforward, Chori will look to step up its business expansion in not
only China but also Southeast Asia, the Middle East, Africa, andSouth America. To this end, we will draw on our longstanding
relationships with partner companies to put forward plans toreshape our business in line with the changing times.

Masaaki Sawano
Outside Director,
Audit & Supervisory Committee Member

In fiscal 2021, Chori’s business results exceeded initial forecasts
on the whole, despite the impact of drastic changes in thebusiness environment such as rapid inflation and supply chain
disruptions stemming from COVID-19. This is the result ofChori firmly fulfilling its basic function as a trading company,
which involves understanding customer needs and delivering
products as necessary. Meanwhile, with regard to the recordingof provision of allowance for doubtful accounts for the second
straight year, the Company must reassess the risks of doing
business with overseas companies and establish a framework
to prevent such risks from arising.

It is said that the purpose of corporate governance is to achieve
a company’s sustainable growth and increase corporate value.
As a company with an Audit & Supervisory Committee, Chori has
increased the number of independent outside directors to threemembers, and its Board of Directors is on the verge oftransitioning to the so-called monitoring board. Chori must fully
utilize this structure to quickly make executive decisions and fulfill
its responsibility of assessing and explaining the risks associatedwith its business with a high degree of transparency and thereby
increase corporate value from both offensive and defensive
perspectives. In order to enhance its audit function, in 2021
the Company integrated the Internal Auditing Department andcentralized the audit function for the entire Group,
including its subsidiaries. Going forward, it is imperativethat the Company strengthens the functions of boththe Internal Auditing Department and the Risk
Hiromasa Suzuki
Management Department in a balanced manner.
Outside Director,
Today, society is undergoing rapid changes.
Audit & Supervisory Committee Member
Companies are being called on even more thanever to fulfill their social responsibilities, including
environmental issues and trading regulations related
to geopolitical conflicts, and while actively discussingthese matters, I will bring a fresh new perspective as
an outside director by drawing on my years ofexperience in corporate management.

Tsumugu Report 2022

58

Management Foundation Tailored to Sustainable Growth

Directors, Audit & Supervisory Committee Members,
and Executive Officers (As of June 16, 2022)
Directors

President, CEO & COO,
President and Executive Officer

Director, Managing Executive
Officer

Kazuo Sakihama

Tatsuyuki Sakoda

Number of shares held: 33,917

General Manager of Corporate Planning
Division, Executive Chief Representative
for China of the Company, and General
Manager of Pharmacovigilance & Quality
Assurance OfficeOutside Director*

Director, Full-Time Audit &Supervisory Committee Member

Hiroko Noda

Shigemasa Yabu

Number of shares held: 0

Independent Director

Number of shares held: 8,506

CEO & COO

Number of shares held: 22,793

Significant concurrent positions• Registered as a certified public accountant, Representative of Noda Certified
Public Accountant Office• Established Probity Consulting Co., Ltd.,
Representative Director• Part-time lecturer, Graduate School of
Asian and International Business
Strategy, Asia University• External Director of MODEC, Inc.,• Outside Director (Audit & Supervisory
Committee Member) of Okabe Co., Ltd.
• Outside Director of S.T. CORPORATION

Executive Officers (Excluding Those Who Concurrently Serve as Directors)

Managing Executive Officer

Managing Executive Officer

Hiroshi Yoshida

Yoshihiro Teratani

Number of shares held: 13,391

Number of shares held: 14,010

General Manager of Textile Division,
Senior Manager of Synthetic Fiber
Business Department, General Manager
of Logistics Department (Textile) of theCompany, and General Manager of
Hokuriku Branch

General Manager of Chemicals Division,
Senior Manager of Life & Fine Chemicals
Business Department, and General
Manager of Logistics Department(Chemicals) of the Company

Executive Officer

Executive Officer

Naohiko Ashida

Satoshi Shiragami

Number of shares held: 2,765
Senior Manager of Technical Material &Garments Business Department,
Chairman of CHORI (DALIAN) TRADING
CO., LTD., and Chairman of CHORI(DALIAN) COMMERCIAL IMPORTEXPORT CO., LTD.

59

CHORI CO., LTD.

Number of shares held: 0
Deputy General Manager of the
Corporate Planning Division(Corporate Management Department andAffiliate Business Department)“Number of shares held” indicates the number of CHORI CO., LTD. shares held.

Director, Executive Officer

Director (Part-Time)

Kazuhiro Tohge

Mitsuo Ohya

Number of shares held: 9,351

Number of shares held: 0

Special Appointee of the President(in relation to the Textile Division)

Significant concurrent positions
Executive Vice President andRepresentative Member of the Board of
TORAY INDUSTRIES, INC.

Outside Director,* Audit &Supervisory Committee Member

Outside Director,* Audit &Supervisory Committee Member

Masaaki Sawano

Hiromasa Suzuki

Number of shares held: 0

Independent Director



Significant concurrent positions• Establishment and foundation partner of
CITY-YUWA PARTNERS• Member of Advisory Council on Fundamental
Issues in Corporate Management of Urban
Renaissance Agency• Member of Advisory Council on
Fundamental Issues in Corporate
Management and Rent Council of Urban
Renaissance Agency• Member of Business Evaluation Monitoring
Committee of Urban Renaissance Agency• Outside Auditor of Japan Federation of
Certified Public Tax Accountants’ Associations• Member of Kanto Regional Government
Asset Council, Kanto Local Finance Bureau,
Ministry of Finance• Chairperson of Tokyo Metropolitan Government
Election Administration Commission• Director of Japan Bar Association

Number of shares held: 0

Independent Director

Senior Executive Officer

Executive Officer

Satoko Nakayama

Masao Nakamura

Number of shares held: 14,329

Number of shares held: 2,765

Deputy General Manager of Corporate
Planning Division (Human Resources &General Affairs Department andInformation System Department), andGeneral Manager of CHORI Innovation
Activities of the Company

Senior Manager of Chemical & Materials
Business Department* Outside director as stipulated in Article 2, Item 15 of the Companies Act.

Tsumugu Report 2022

60

Fact Data
11-Year Financial Summary

Medium-Term Management

CHORI CO., LTD. and Group Companies

Plan

Yakushin 2013

FY2011FY2012FY2013

FY2014

Net sales*1

217,825

221,847

244,286

248,396

Gross profit

20,02019,77021,53022,157

Selling, general and administrative expenses

14,103

14,66516,037

16,604

Operating Results:

Operating income

5,916

5,105

5,492

5,552

Ordinary income

6,118

5,466

5,831

5,966

Net income attributable to owners of the parent

3,497

2,944

3,715

4,153

Total assets

67,46571,851

78,221

84,289Net assets

28,69831,38536,417

41,473

Net interest-bearing debt*2(6,650)(7,491)(8,820)(10,703)

Financial Position (As of March 31):

Cash Flows:
Cash flows from operating activities (A)

(263)

5,792

1,716

3,320

Cash flows from investing activities (B)(1,153)(2,980)

(208)

(813)

Free cash flows (A+B)(1,417)

2,812

1,508

2,507

(318)

(1,641)

(506)

(840)

Cash flows from financing activities
Per Share Data*3 (Yen):
Net income per share

145.91117.57151.54169.40Net assets per share

1,131.43

1,275.84

1,481.00

1,688.74

Dividends per share*4

29.00

24.00

33.00

34.00

Ordinary income to net sales

2.8

2.5

2.4

2.4

Return on assets (ROA)*

9.3

7.8

7.8

7.3

Key Indicators (%):

5

Return on equity (ROE)*6

12.9

9.8

11.0

10.7

Equity ratio

42.4

43.5

46.4

49.1

Consolidated dividend payout ratio

19.9

20.4

21.8

20.1

Price earnings ratio

7.0

9.1

7.4

10.9

Price book-value ratio

0.9

0.8

0.8

1.1

Stock price at end of March (yen)*3

1,020

1,066

1,124

1,851

Number of employees (consolidated)

1,084

1,286

1,292

1,091

Number of consolidated subsidiaries

23

26

27

25

Other Data:*1 In the first quarter of fiscal 2020, Chori adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, issued on March 30, 2018).
*2 Net interest-bearing debt = Interest-bearing debt – (Cash and deposits + Deposits paid to subsidiaries and associates)*3 The Company carried out a 1-for-10 reverse stock split of common shares on October 1, 2012. Net income per share and net assets per share were provisionallycalculated at the beginning of fiscal 2011 based on this reverse stock split. Dividends per share and stock price at year-end for fiscal years prior to the reverse stock
split have been retroactively adjusted to reflect its impact.

61

CHORI CO., LTD.

Medium-Term Management Plan
Medium-Term Management

Plan

Medium-Term Management

Yakushin 2016

Chori Innovation Plan
2022

Plan

9

Chori Innovation Plan 201(Millions of yen)
FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

291,578

270,908

311,705

356,537

329,360

216,233

284,096

24,79925,14926,40028,58528,31026,35730,65019,42918,701

19,174

20,53820,091

22,693

21,321

5,369

6,448

7,226

8,047

8,219

3,663

9,328

5,518

6,967

7,499

8,660

8,685

4,656

10,274

4,297

4,780

4,730

5,630

6,101

1,247

6,811

98,736

97,983

119,055

118,499

114,400

110,591

134,12142,882

46,34351,15353,89757,27958,83165,096(8,029)(6,824)(11,134)(10,887)(11,962)(15,547)(6,939)

4,992

625

6,653

3,196

2,857

5,889

(2,330)(4,442)58

821(1,421)

8

(357)

197

550

683

7,474

1,774

2,866

5,532

(2,133)(1,510)(1,363)(2,352)(4,350)(1,899)(887)(4,015)175.31

195.00192.74229.28248.4650.73

276.82

1,746.27

1,887.37

2,079.84

2,191.45

2,328.79

2,390.06

2,643.55

36.00

40.00

59.00

60.00

63.00

37.00

84.00

1.9

2.6

2.4

2.4

2.6

2.2

3.6

6.0

7.1

6.9

7.3

7.5

4.1

8.4

10.2

10.7

9.7

10.7

11.0

2.2

11.0

43.4

47.2

42.9

45.4

50.0

53.2

48.5

20.5

20.5

30.6

26.2

25.4

72.9

30.3

8.3

9.9

10.9

6.8

6.2

33.2

6.4

0.8

1.0

1.0

0.7

0.7

0.7

0.7

1,457

1,939

2,097

1,556

1,537

1,685

1,759

924

939

991

1,023

1,014

969

1,322

27

27

29

29

29

30

33

*4 Dividends per share in fiscal 2017 include a commemorative dividend of ¥10 for the Company’s 70th anniversary.
*5 Return on assets (ROA) = Ordinary income / Total assets (Avg. of beginning and end of fiscal year) x 100*6 Return on equity (ROE) = Net income attributable to owners of the parent / Total equity (Avg. of beginning and end of fiscal year) x 100

Tsumugu Report 2022

62Fact Data

Chori’s Global Network (As of July 1, 2022)
After the end of World War II, Chori recommenced the full-scale development of its overseas business in 1949,
when private foreign trade resumed. Today, Chori boasts a global network consisting of subsidiaries and offices
located in various regions of the world. As we move forward, we will step up the pace of our globalization efforts
while addressing the needs of our customers.

EuropeSubsidiary
Chori Europe GmbH(Neu‐Isenburg)

Middle East
Subsidiary
Chori Middle East FZE (Dubai)
Representative officeJeddahAsia
Subsidiaries
CHORI (CHINA) CO., LTD. (Shanghai)

CHORI KOREA CO., LTD. (Seoul)

CHORI (SHANGHAI) CO., LTD. (Shanghai)

THAI CHORI CO., LTD. (Bangkok)

CHORI (TIANJIN) CO., LTD. (Tianjin)

PT. CHORI INDONESIA (Jakarta)

CHORI (DALIAN) TRADING CO., LTD. (Dalian)

CHORI SINGAPORE PTE LTD (Singapore)

CHORI (DALIAN) COMMERCIAL IMPORT EXPORT CO., LTD. (Dalian)

CHORI TRADING (MALAYSIA) SDN. BHD. (Puchong, Selangor)

CHORI CO., (HONG KONG) LTD. (Hong Kong)

CHORI VIETNAM CO., LTD. (Ho Chi Minh City)TAIWAN CHORI MERCHANDISE COOPERATION LTD. (Taipei)

CHORI TRADING INDIA PRIVATE LIMITED (Mumbai)

Representative offices
Beijing, Qingdao, Nantong, Wuhan, Ruian, Guiyang, Shenzhen; Ho Chi Minh City; Manila; Dhaka

Domestic Offices 63

CHORI CO., LTD.

Tokyo Head OfficeOsaka Head OfficeTower C, Shinagawa Intercity,
2-15-3, Konan, Minato-ku, Tokyo
108-6216, Japan
Tel: +81-3-5781-6200

Nittochi Sakaisuji Bldg.,
1-7-3, Awajimachi, Chuo-ku, Osaka
540-8603, Japan
Tel: +81-6-6228-5000

Major Overseas Subsidiaries
and Affiliates QINGDAO RED BUTTERFLY PRECISION MATERIALS
CO., LTD. (China)

Production and sale of inorganic chemicals

U.S.A. and Central America

Beijing Chostar Equipment Engineering Technology Co., Ltd.
(China)Subsidiary

Import and export of equipment and materials for

CHORI AMERICA, INC. (Jersey City)

chemical plants

CHORI COMERCIAL DE MEXICO, S.A. DE C.V.
(Mexico City)

CHORI Analysis & Technology Service (Suzhou) CO., LTD.
(China)Analysis and research and development of chemicals
M CC Industry COMPANY LIMITED (Hong Kong)
Sale of textile products
MEGACHEM LIMITED (Singapore)

Trading company specializing in chemicals
PT. MATSUOKA INDUSTRIES INDONESIA (Indonesia)

Sewing of textile products

Major Domestic Subsidiaries
and Affiliates South America
Representative officeASADA U CO., LTD.

Santiago

Sale of interior and packaging materials
CHORI MODA CO., LTD.

Planning of fashion apparelSTX Co., Ltd.

Trading company specializing in textiles(apparel, raw materials, etc.)
Miyako Kagaku Co., Ltd.

Trading company specializing in chemicals

Subsidiary

Representative office(Japan: 4 locations Overseas: 30 locations)

CHORI GLEX CO., LTD.

Trading company specializing in chemicals
KOZAKURA SHOKAI CO., LTD.

Trading company specializing in chemicals
Chori Machinery Co., Ltd.

Hokuriku Branch

Okayama Liaison Office

15F Visage Office Zone,
16-1, Showa-machi, Kanazawa
920-8676, Japan
Tel: +81-76-232-3521

10F Okayama
Fukokuseimei-ekimae Bldg.,
1-6, Ekimotomachi,
Kita-ku, Okayama
700-0024, Japan
Tel: +81-86-224-6188

Trading company specializing in transportation equipment
Business Anchor Corporation

Outsourcing of administrative work

Tsumugu Report 2022

64Fact Data

Corporate Information (As of March 31, 2022)
Company Overview
CHORI CO., LTD.

Company NameTokyo Head Office
2-15-3, Konan, Minato-ku, Tokyo
108-6216, Japan
Tel: +81-3-5781-6200

Headquarters

Osaka Head Office (Main Headquarters)
1-7-3, Awajimachi, Chuo-ku, Osaka
540-8603, Japan
Tel: +81-6-6228-5000

Capital¥6.8 billion

Date of Incorporation

September 2, 1948 (Founded in 1861)

Closing Date

March 31

Number of Employees

Consolidated: 1,322
Nonconsolidated: 416(Including 76 employees dispatched to other companies)

Corporate Website

https://www.chori.co.jp/english/
Business Administration Sec.
(Synthetic Fiber)
Business Administration Sec.
(Technical Material & Garments)

Organization (As of June 16, 2022)

Logistics Dept. (Textile)
Fiber Raw Materials Dept.

Textile Division

Synthetic Fiber
Business Dept.

Automotive Materials andFabrics Dept.
Technical Textiles Dept.
Textile-Fabric Dept.

Technical Material& Garments
Business Dept.

Career Apparel &Workwear Dept.
Apparel Dept.
Performance Apparel Dept.
Material Development Team

General Meetingof Shareholders

GovernanceCommittee

Executive
Committee

Board ofDirectors

President,
CEO & COO

Audit &
Supervisory
Committee

Business Administration Sec.
(Chemicals)

ExpertCommittees

Logistics Dept. (Chemicals)

Chemicals
Division

Chemical &Materials
Business Dept.
Life & Fine
Chemicals
Business Dept.

Internal Auditing
Dept.

Performance Chemicals Dept.
Inorganic Fine Materials Dept.
Industrial Chemicals Dept.
Fine Chemicals Dept.
Life Science Dept.
Corporate Management Dept.

Legal Compliance
Committee

Affiliate Business Dept.

Corporate Planning
Division

Human Resources &General Affairs Dept.
Information System Dept.
Pharmacovigilance &Quality Assurance Office
Executive Chief
Representative for China
Hokuriku Branch
Okayama Liaison Office
Overseas Representative
Offices
Overseas Subsidiaries

65

CHORI CO., LTD.

Breakdown of Shareholders by
Investor Type

Investor Information
Securities Code8014 (Prime Market of the Tokyo Stock Exchange)(As of April 4, 2022)

Total Number of Shares
Authorized to Be Issued

55,000,000

Total Number of Shares
Outstanding

25,303,478

Number of Shareholders

5,546

Trading Unit

100

Shareholder Register Agentfor Common Stock

Mizuho Trust & Banking Co., Ltd.

Accounting Auditor

Deloitte Touche Tohmatsu LLC

Brokerages
1.09%

Treasuryshares2.74%

Foreigninstitutions
andindividuals
17.92%

Japanese
corporations
58.42%

25,303,478
sharesFinancial
institutions
10.85%
Individuals
and others
8.98%

Major Shareholders

Number of shares held
Shareholder name

Percentage of shares held(Thousand shares)(%)

TORAY INDUSTRIES, INC.

12,96752.69

BBH FOR FIDELITY PURITAN TR: FIDELITY SR INTRINSIC OPPORTUNITIES FUND

1,566

6.37

The Master Trust Bank of Japan, Ltd. (Trust Account)

1,488

6.05

Hurex Co., Ltd.

735

2.99

Custody Bank of Japan, Ltd. (Trust Account)

588

2.39

Wacoal Corporation

548

2.23

BBH FOR FIDELITY LOW-PRICED STOCK FUND (PRINCIPAL ALL SECTOR SUBPORTFOLIO)

479

1.95

STATE STREET BANK AND TRUST CLIENT OMNIBUS ACCOUNT OM02 505002

325

1.32

MLI FOR CLIENT GENERAL OMNI NON COLLATERAL NON TREATY-PB

296

1.20

HSBC PRIVATE BANK (SUISSE) SA GENEVA, CLIENT ACCOUNT

204

0.83

Notes: 1
 . In addition to the above, the Company owns 694,400 shares (2.74%) of treasury stock.
2. The percentages of shares held exclude the 694,400 shares of treasury stock.
3. All shares held by the Master Trust Bank of Japan, Ltd. (Trust Account) and Custody Bank of Japan, Ltd. (Trust Account) are related to trust services.

Total Shareholder Return(TSR)

Total Shareholder Return (TSR)-Related Data

Stock price at year-end (yen)Dividends per share (yen)Total dividends per share (yen)(from fiscal 2017)
Chori
TSR (%)TOPIX (incl. dividends)

300

FY2016FY2017FY2018FY2019FY2020

FY2021

1,939
40

2,097
59

1,556
60

1,537
63

1,685
37

1,759
84

—

59

119

182

219

303

111.2
115.9

86.4
110.0

88.7
99.6

98.2
141.5

106.3
144.3

* TSR is based on investments carried out at the closing price on March 31, 2017.
200

100

0

2018/4Chori

2019/42020/42021/42022/3

TOPIX Note: Based on closing price on March 31, 2018 as 100

Tsumugu Report 2022

66

CHORI CO., LTD.
Tokyo Head Office
2-15-3, Konan, Minato-ku, Tokyo 108-6216, Japan
Tel: +81-3-5781-6200
Osaka Head Office
1-7-3, Awajimachi, Chuo-ku, Osaka 540-8603, Japan
Tel: +81-6-6228-5000
URL https://www.chori.co.jp/english/

Printed in Japan
Issued in November 2022