(Translation)

Note: This document has been translated from a part of the Japanese original for reference purposes only. In
the event of any discrepancy between this translated document and the Japanese original, the original shallprevail. The Company assumes no responsibility for this translation or for direct, indirect or any other formsof damages arising from the translation.
Securities Code 5233
June 9, 2020
To Those Stockholders with Voting Rights
Masafumi Fushihara
President and Representative Director
Taiheiyo Cement Corporation
1-1-1, Koishikawa, Bunkyo-ku, TokyoNOTICE OF THE 22nd ORDINARY GENERAL MEETING OF STOCKHOLDERS
You are cordially notified of the 22nd Ordinary General Meeting of Stockholders of Taiheiyo Cement
Corporation (the “Company”). The meeting will be held as stated below.
Considering the circumstances where it is strongly requested to stay at home and from the perspective ofpreventing further spread of the novel coronavirus disease, we firmly urge our stockholders to exercise theirvoting rights by paper ballot or via the Internet and refrain from attending the meeting regardless of theirhealth conditions.
Please review the attached Reference Documents for the General Meeting of Stockholders, and either return
the Voting Rights Exercise Form with your selections towards proposals, or vote via the Internet.
1. Date and Time:

Friday, June 26, 2020 at 10:00 a.m.

2. Place:

Head office of the Company
1-1-1, Koishikawa, Bunkyo-ku, Tokyo(Please note that the venue is different from the previous year.)

3. Agenda of the Meeting:
Matters to be reported: 1. Business Report, Consolidated Financial Statements for the 22nd Fiscal Term(from April 1, 2019 to March 31, 2020) and results of audits by the Accounting
Auditor and the Board of Auditors of the Consolidated Financial Statements
2. Non-Consolidated Financial Statements for the 22nd Fiscal Term (from April 1,
2019 to March 31, 2020)
Proposals to be resolved:
Proposal No. 1: Appropriation of Surplus
Proposal No. 2: Partial Amendments to the Articles of Incorporation
Proposal No. 3: Election of Seven Directors
Proposal No. 4: Election of One Substitute Corporate Auditor
4. Voting Guide
If you are exercising your voting right prior to the Meeting:
Please review the attached Reference Documents for the General Meeting of Stockholders, and exercise yourvoting right by either of the following two methods.

1

(Translation)(i) Exercise of voting rights by postal mail (paper ballot)- Please indicate your vote for or against the Proposals on the Voting Rights Exercise Form and send it
back, making sure that it will arrive by 5:00 p.m. on Thursday, June 25, 2020 (Japan Standard Time).
- If you make no indication on the Voting Rights Exercise Form whether you are voting for or against the
Proposals, you shall be deemed to have voted FOR the Proposals.
(ii) Exercise of voting rights via the Internet, etc.
- Please exercise your voting right via the voting rights exercise site (https://www.web54.net) specified
by the Company before 5:00 p.m. on Thursday, June 25, 2020 (Japan Standard Time).
- If you exercise your voting right via the Internet, etc. more than once, your final vote shall prevail.
If you are attending the Meeting:
Please hand in the enclosed Voting Rights Exercise Form at the front desk when you arrive at the venue.
If another stockholder is attending the Meeting on your behalf, he/she must submit a letter of proxy andyour Voting Rights Exercise Form as well as his/her Voting Rights Exercise Form at the front desk upon
arrival at the venue. (Please be advised that a proxy is limited to one person and must be anotherstockholder with the Company’s voting rights pursuant to the provisions of the Articles ofIncorporation.)
If you vote both by postal mail and via the Internet, etc., the one received later shall prevail. If we receive
both on the same day, your vote cast via the Internet, etc. shall prevail.

Notes:
 Of the documents required to be included in this notice of convocation, “Consolidated Statements of
Changes in Net Assets” and “Notes to the Consolidated Financial Statements” of the Consolidated
Financial Statements, and “Non-consolidated Statements of Changes in Net Assets” and “Notes to the
Non-consolidated Financial Statements” of the Non-consolidated Financial Statements are, pursuant to
the provisions of laws and regulations and the Articles of Incorporation of the Company, posted on the
Company’s website (https://www.taiheiyo-cement.co.jp), and are therefore not contained in the Appendix
attached to this notice of convocation.
The Consolidated Financial Statements and the Non-consolidated Financial Statements audited by
Corporate Auditors and the Accounting Auditor include “Consolidated Statements of Changes in Net
Assets,” “Notes to the Consolidated Financial Statements,” “Non-consolidated Statements of Changes in
Net Assets” and “Notes to the Non-consolidated Financial Statements” which are posted on the
Company’s website, in addition to each document included in the Appendix of this notice of convocation.
 Subsequent amendments to the Reference Documents for the General Meeting of Stockholders, theBusiness Report, the Consolidated and Non-Consolidated Financial Statements (if any) will be listed on
the Company’s website (https://www.taiheiyo-cement.co.jp).
2

(Translation)

Measures against Further Spread of the Novel Coronavirus Disease
We have taken the following measures to prevent further spread of the novel coronavirus disease. We ask
for your understanding and cooperation.
 Requests to our stockholders
In order to prevent further spread of the novel coronavirus disease, we firmly urge our stockholders torefrain from attending the meeting and exercise their voting rights by paper ballot or via the Internet.

Other than the notice of convocation, documents such as summaries of financial results, annual
reports, and CSR reports are also posted on the Company’s website(https://www.taiheiyo-cement.co.jp). Access to a wide variety of information is guaranteed without
attending the meeting.

 Information for our stockholders who will attend the meeting
This year, the General Meeting of Stockholders is operated differently from the past years in order toprevent further spread of the novel coronavirus disease. We ask for your understanding.
If, due to change of conditions up to the date of this General Meeting of Stockholders, there are
significant changes to these measures, details of the changes made will be posted on the Company’s website(https://www.taiheiyo-cement.co.jp).
Please wear a face mask when attending the meeting. You may be denied admission if you are notwearing a face mask. In addition, please cooperate in using the alcohol disinfectant solution, which
will be available at the venue.



We will measure your body temperature at the entrance. If you have a fever or show signs of ill health,
you may not be admitted to the venue.

The Company has cut down a significant number of seats as we must ensure adequate space between
stockholders. There may be a case where you may not be admitted even if you come to the venue.



All Officers attending and staff operating this General Meeting of Stockholders will be wearing a face
mask.



In the perspective of shortening the time duration of this General Meeting of Stockholders, detailed
explanation for the matters to be reported and the proposals will be omitted at the meeting.

3

(Translation)

Reference Documents for the General Meeting of Stockholders
Proposals and References
Proposal No. 1:
Appropriation of Surplus
With respect to the year-end dividend for the term under review, the Company would like to pay out asfollows, in consideration of the business environment and our performance for the term under review, while
maintaining our basic policy of stable dividend payouts.
Matters concerning the year-end dividend(1) Type of Dividend
Cash(2) Matters concerning the distribution of dividends to stockholders and its total amount
30 yen per share of common stock of the Company, for a total amount of 3,681,352,500 yen.
The annual dividend per share for the term under review will amount to 60 yen, which includes aninterim dividend already paid.
(3) Effective Date of Dividends from surplus
June 29, 2020
Proposal No. 2:
Partial Amendments to the Articles of Incorporation
1. Reasons for the amendments(1) The Company proposes to amend Article 15 of the current Articles of Incorporation in order toensure flexibility in the operation of the General Meeting of Stockholders.
(2) To promote speedy decision-making by the Board of Directors and the separation between
supervisory functions and business execution functions of the management, the Company
proposes to amend Article 19 of the current Articles of Incorporation to reduce the number of
Directors from no more than 15 Directors to no more than 10 Directors.
(3) The Company proposes to amend Article 23 of the current Articles of Incorporation to enable theelection of the President not only from among Representative Directors but also from among
Executive Officers in order to facilitate agile formation of an optimal management structure, andto abolish the positions of Senior Managing Director and Managing Director in order to improve
the supervisory functions of the Board of Directors. In line with these amendments, the Company
proposes to add new provisions in relation to Executive Officers so as to clarify election methods
and responsibilities of Executive Officers.
(4) In line with the additions to the articles, other necessary amendments to the number of the articles
shall be made.

4

(Translation)

2. Details of the proposed amendments
Details of the proposed amendments are stated below.
Current Articles of Incorporation(Person with Right to Convene and Chairperson)
Article 15. The President and Director shall convene a
General Meeting of Stockholders and act
as the Chairperson.

(Underlined parts are amended.)
Proposed Amendments(Person with Right to Convene and Chairperson)
Article 15. Director shall convene a General Meetingof Stockholders in accordance with theorder pre-determined by the Board of
Directors.

2. In the case where the President andDirector is unable to act due to an
accident, another Director shall convene
the General Meeting of Stockholders andact as the Chairperson in accordance withthe order pre-determined by the Board of
Directors.

2. The President shall be the Chairperson of
the General Meeting of Stockholders. In
case there are circumstances where thePresident is unable to act, another Directoror Executive Officer shall act as the
Chairperson in accordance with the orderpre-determined by the Board of Directors.

(Number of Directors)
Article 19. The Company shall have no more than 15
Directors.

(Number of Directors)
Article 19. The Company shall have no more than 10
Directors.

(Representative Directors and Directors with Titles)(Representative Directors and Directors with Titles,
etc.)
Article 23.
(unchanged)

Article 23.

(omitted)

2. The Board of Directors may, by its
resolution, elect one President from among
the Directors or the Executive Officers.

(New)

3. The Board of Directors may, by its
resolution, appoint one Chairman and
Director, one Vice Chairman and Director,
and one Vice President and Director.

2. The Board of Directors may, by its
resolution, appoint one Chairman and
Director, one Vice Chairman and Director,
one President and Director, several Vice
President and Directors, several Senior
Managing Directors, and several
Managing Directors.

(Executive Officers)
Article 27. The Board of Directors may, by its
resolution, appoint Executive Officers andassign them to execute businesses of theCompany.

(New)

2. The Board of Directors may, by its
resolution, appoint Vice President andExecutive Officers, Senior Executive
Officers, Managing Executive Officers,
and other Executive Officers with Titles
from among Executive Officers.
Article 27. to Article 37. (omitted)

Article 28. to Article 38. (unchanged)5

(Translation)

Proposal No. 3:

Election of Seven Directors

The term of office of all fourteen Directors will expire at the close of this General Meeting of Stockholders.
Accordingly, to promote speedy decision-making by the Board of Directors and the separation between
supervisory functions and business execution functions of the management, reducing the number of Directors
by seven, the Company would like to propose the election of seven Directors, including two Outside
Directors.
The candidates for Director are as follows.
No.
1
2
3
4
5

6

7

Name
Reappointment
Shuji Fukuda
Reappointment
Masafumi Fushihara
Reappointment
Yuuichi Kitabayashi
Reappointment
Masahiro Karino
Reappointment
Kunihiro Ando
Reappointment
Yoshiko Koizumi
Outside Director
Independent Director
New Candidate
Shinhachiro Emori

Current position at the Company
Chairman and Director
President and Representative Director
Vice President and Representative Director
Director and Senior Executive Officer
Director and Senior Executive Officer

Director

Outside Director
Independent Director6(Translation)

No.

Career summary, position, assignment andsignificant concurrent positions

Name(Date of birth)
April 1974
June 1999
April 2004
April 2006
April 2008

1

Joined Onoda Cement Co., Ltd.
General Manager, Accounting & Finance
Department of Taiheiyo Cement Corporation
General Manager, Accounting & Finance
Department and General Manager, Accounting& Finance Business Operation Center
General Manager, Hokuriku Branch
Executive Officer and General Manager,
Human Resources Department and General
Manager, Personnel Business Operation
CenterExecutive Officer and General Manager,
Human Resources Department
Director, Managing Executive Officer andGeneral Manager, Human Resources
Department
Director and Managing Executive Officer
President and Representative Director
Chairman and Director (to present)

October 2008
Shuji Fukuda
Reappointment
August 2010
(December 20, 1951)
Attended 14 out of 14
meetings of the Board October 2010of Directors (100%) April 2012
and will have served as April 2018
Director for 9 years
and 10 months at close (Significant concurrent positions)
Outside Director, Sapporo Holdings Limitedof this General
Meeting of
Reason for nominating Shuji Fukuda as Director
Stockholders
Since 2010, Mr. Shuji Fukuda has engaged in management of
the Company as Director, and currently serves as Chairman and
Director after serving as President and Representative Director.
He therefore has a wealth of experience, achievements, andknowledge as a manager. The Company has judged that he is anappropriate person to aim to enhance the function of the Boardof Directors as a chairman of the Board meetings, andcontinuously increase corporate value of the Group as he leads
the Group’s management, determines important management
matters, and supervises business execution, etc., and requests
that he continue to be a candidate for Director.

Number ofshares of theCompany held

3,500

Notes:
1. The Company currently has an agreement with Mr. Shuji Fukuda, which limits his liability for damages
in respect of his responsibilities set out under Article 423, Paragraph 1 of the Companies Act, to theminimum limit of liability set out under Article 425, Paragraph 1 of the same provided that he executes
his duties in good faith and without gross negligence. If the election of Mr. Shuji Fukuda is approved,
the Company plans to continue the said agreement with him.
2. Mr. Shuji Fukuda is scheduled to take office as Outside Audit & Supervisory Board Members of TOBURAILWAY CO., LTD. on June 23, 2020
3. No special relationship exists between the Company and Mr. Shuji Fukuda.

7

(Translation)

No.

Career summary, position, assignment andsignificant concurrent positions

Name(Date of birth)
April 1978
April 2007
May 2009

October 2010
April 2012

2

Joined Onoda Cement Co., Ltd.
General Manager, Business Promotion
Department of Environmental BusinessCompany of Taiheiyo Cement Corporation
General Manager, Sales Department ofEnvironmental Business Company
General Manager, Environmental Business
Development Department
Executive Officer and General Manager,
Environmental Business Development
Department
Managing Executive Officer
Director and Managing Executive Officer
Director, Managing Executive Officer andSenior General Manager, Cement Business
Division
Director, Senior Executive Officer and Senior
General Manager, Cement Business Division
President and Representative Director(to present)

Masafumi Fushihara April 2015
June 2015
Reappointment
April 2016
(May 18, 1954)
Attended 14 out of 14
meetings of the Board April 2017of Directors (100%)and will have served as April 2018
Director for 5 years at
close of this General
Meeting of
Reason for nominating Masafumi Fushihara as Director
Stockholders
Since 2015, Mr. Masafumi Fushihara has engaged inmanagement of the Company as Director, and currently serves
as President and Representative Director, after serving as Senior
General Manager of the Cement Business Division. He therefore
has a wealth of experience, achievements, and knowledge as amanager. The Company has judged that he is an appropriate
person to aim to continuously increase corporate value of theGroup as he leads the Group’s management, determines
important management matters, and supervises businessexecution, etc., and requests that he continue to be a candidate
for Director.

Note: No special relationship exists between the Company and Mr. Masafumi Fushihara.

8

Number ofshares of theCompany held

4,600

(Translation)

No.

Career summary, position, assignment andsignificant concurrent positions

Name(Date of birth)
April 1978
May 2009
April 2011
April 2013
June 2013
April 2016

3

Joined Nihon Cement Co., Ltd.
General Manager, Kamiiso Plant of Taiheiyo
Cement Corporation
Executive Officer and General Manager,
Production Department
Managing Executive Officer
Director and Managing Executive Officer
Representative Director and Senior Executive
Officer
Vice President and Representative Director
Overseeing Corporate Planning Department(to present)

Yuuichi Kitabayashi
Reappointment(June 2, 1955)
April 2017
Attended 14 out of 14
meetings of the Boardof Directors (100%)and will have served as Reason for nominating Yuuichi Kitabayashi as Director
Director for 7 years at Since 2013, Mr. Yuuichi Kitabayashi has engaged inclose of this General management of the Company as Director, and since 2016, heMeeting of
has served as Representative Director. He therefore has a wealth
Stockholders
of experience, achievements, and knowledge as a manager. The
Company has judged that he is an appropriate person to aim tocontinuously increase corporate value of the Group as he leads
the Group’s management, determines important management
matters, and supervises business execution, etc., and requests
that he continue to be a candidate for Director.

Note: No special relationship exists between the Company and Mr. Yuuichi Kitabayashi.

9

Number ofshares of theCompany held

5,600

(Translation)

No.

Career summary, position, assignment andsignificant concurrent positions

Name(Date of birth)
April 1980
April 2004
April 2013

4

Number ofshares of theCompany held

Joined Nihon Cement Co., Ltd.
General Manager, Legal Department of
Taiheiyo Cement Corporation
Executive Officer and General Manager, Legal
Department
Managing Executive Officer
Director and Managing Executive Officer
Director and Senior Executive Officer(to present)

Masahiro Karino
April 2016
Reappointment
June 2016(March 23, 1957)
April 2019
Attended 14 out of 14
meetings of the Boardof Directors (100%) Reason for nominating Masahiro Karino as Director
and will have served as Since 2016, Mr. Masahiro Karino has engaged in management
Director for 4 years at of the Company as Director, and has been making significant
close of this General contribution to the development of the Group as an officer
overseeing human resources and legal divisions. The Company
Meeting of
has judged that he is an appropriate person to aim to
Stockholders
continuously increase corporate value of the Group as hedetermines important management matters, and supervises
business execution, etc., and requests that he continue to be a
candidate for Director.

Note: No special relationship exists between the Company and Mr. Masahiro Karino.

10

5,500

(Translation)

No.

Career summary, position, assignment andsignificant concurrent positions

Name(Date of birth)
April 1980
April 2011
April 2013

5

Joined Onoda Cement Co., Ltd.
General Manager, Ofunato Plant of Taiheiyo
Cement Corporation
Executive Officer and General Manager, Oita
Plant
Executive Officer and General Manager,
Mineral Resources Business Department
Managing Executive Officer
Director and Managing Executive Officer
Director and Senior Executive Officer(to present)

April 2015
Kunihiro Ando
Reappointment
April 2016
June 2016(May 4, 1957)
Attended 14 out of 14 April 2020
meetings of the Boardof Directors (100%)and will have served as Reason for nominating Kunihiro Ando as Director
Director for 4 years at Since 2016, Mr. Kunihiro Ando has engaged in management ofclose of this General the Company as Director, and has been making significant
contribution to the development of the Group as an officer
Meeting ofoverseeing the mineral resources business and environmental
Stockholders
business. The Company has judged that he is an appropriate
person to aim to continuously increase corporate value of theGroup as he determines important management matters, andsupervises business execution, etc., and requests that hecontinue to be a candidate for Director.

Note: No special relationship exists between the Company and Mr. Kunihiro Ando.

11

Number ofshares of theCompany held

5,500

(Translation)

No.

Career summary, position, assignment andsignificant concurrent positions

Name(Date of birth)
April 1972

6

Registered as a lawyer (Daini Tokyo Bar
Association)
January 1980
Partner, Masuda and Ejiri Law Office(predecessor of Nishimura & Asahi)
January 2008
Counsel, Nishimura & Asahi
April 2009
Partner, City-Yuwa Partners
June 2015
Outside Director of Taiheiyo Cement
Corporation
Outside Director, Dowa Holdings Co., Ltd.
Partner, City-Yuwa Partners
June 2016
Outside Director of Taiheiyo Cement
Corporation
Outside Director, Dowa Holdings Co., Ltd.
Outside Corporate Auditor, Sumitomo BakeliteCo., Ltd.
Partner, City-Yuwa Partners
September 2017 Outside Director of Taiheiyo Cement
Corporation
Yoshiko Koizumi
Outside Director, Dowa Holdings Co., Ltd.
Candidate for Outside
Outside Corporate Auditor, Sumitomo Bakelite
DirectorCo., Ltd.
Reappointment
Outside Corporate Auditor, Nippon Koei Co.,
(September 25, 1943)
Ltd.
Attended 14 out of 14
Partner, City-Yuwa Partners
meetings of the Board June 2019
Outside Director of Taiheiyo Cementof Directors (100%)
Corporation
and will have served as
Outside Director, Dowa Holdings Co., Ltd.
Director for 5 years at
Outside Corporate Auditor, Nippon Koei Co.,
close of this General
Ltd.
Meeting ofPartner, City-Yuwa Partners
Stockholders(to present)

Number ofshares of theCompany held

1,500

(Significant concurrent positions)
Outside Director, Dowa Holdings Co., Ltd.
Outside Corporate Auditor, Nippon Koei Co., Ltd.
Lawyer, Partner of City-Yuwa Partners
Reason for nominating Yoshiko Koizumi as Outside Director
Although Ms. Yoshiko Koizumi has not engaged in corporate
management in the past, as a lawyer, she has a wealth ofexperience, achievements, and knowledge regarding corporate
law, and provides precise recommendations and advice from an
objective standpoint independent from the management teamthat executes business in the Board of Directors. The Company
has judged that she makes significant contribution to themonitoring and supervision of overall management, andrequests that she continue to be a candidate for Director.
Notes:
1. Ms. Yoshiko Koizumi is nominated as an Outside Director.
2. The Company currently has an agreement with Ms. Yoshiko Koizumi, which limits her liability for12(Translation)

damages in respect of her responsibilities set out under Article 423, Paragraph 1 of the Companies Act,to the minimum limit of liability set out under Article 425, Paragraph 1 of the same provided that she
executes her duties in good faith and without gross negligence. If the election of Ms. Yoshiko Koizumi
is approved, the Company plans to continue the said agreement with her.
3. Ms. Yoshiko Koizumi satisfies the Independence Criteria for Outside Officers defined by the Company,
and the Company has registered Ms. Yoshiko Koizumi as an independent director at Tokyo Stock
Exchange, Inc. and Securities Membership Corporation Fukuoka Stock Exchange. Additionally, theIndependence Criteria for Outside Officers defined by the Company is provided on page 16.
4. The Company receives legal advice as required from lawyers of City-Yuwa Partners other than Ms.
Yoshiko Koizumi, where she serves as a partner, but the Company has not concluded an advisory
agreement with the law firm. The advisory fees paid to the law firm are less than 1% of annual sales foreach of the Company and the law firm, and there is no special interest relationship. Additionally, there
are no special interest relationships between the Company and any of the significant concurrent
positions.
5. No special relationship exists between the Company and Ms. Yoshiko Koizumi.

13

(Translation)

No.

Career summary, position, assignment andsignificant concurrent positions

Name(Date of birth)
April 1975
June 2010
June 2011
June 2012

7

Number ofshares of theCompany
held

Joined Toyo Soda Manufacturing Co., Ltd.
(currently TOSOH CORPORATION)
Director of TOSOH CORPORATIONManaging Director of TOSOH CORPORATION
Representative Managing Director of TOSOHCORPORATION
President and Representative Director of TAIYOVINYL CORPORATION (to present)

June 2015
Shinhachiro Emori
Candidate for Outside
Director
Reason for nominating Shinhachiro Emori as Outside Director
Mr. Shinhachiro Emori has a wealth of experience, achievements,
New Candidate
and insight as a corporate manager. By providing precise(February 2, 1953)
recommendations and advice from an objective standpoint
independent from the management team that executes business in
the Board of Directors, the Company has judged that he will makesignificant contribution to the monitoring and supervision of
overall management, and requests that he be a new candidate for
Director.

0

Notes:
1. Mr. Shinhachiro Emori is nominated as an Outside Director.
2. If the election of Mr. Shinhachiro Emori is approved, the Company plans to enter into an agreementwith him, which limits his liability for damages in respect of his responsibilities set out under Article
423, Paragraph 1 of the Companies Act, to the minimum limit of liability set out under Article 425,
Paragraph 1 of the same provided that he executes his duties in good faith and without gross negligence.
3. Mr. Shinhachiro Emori satisfies the Independence Criteria for Outside Officers defined by the Company,
and in the event that he takes office as an Outside Director, the Company plans to register him as anindependent director at Tokyo Stock Exchange, Inc. and Securities Membership Corporation Fukuoka
Stock Exchange. Additionally, the Independence Criteria for Outside Officers defined by the Company
is provided on page 16.
4. No special relationship exists between the Company and Mr. Shinhachiro Emori.

14

(Translation)

Proposal No. 4:

Election of One Substitute Corporate Auditor

In order to prepare for cases where a vacancy results in a shortfall in the number of Corporate Auditorsprescribed by laws, the Company proposes the election of one Substitute Corporate Auditor, to substitute for
an Outside Corporate Auditor.
The candidate for Substitute Corporate Auditor is as follows.
The Board of Auditors has previously given its approval.
Career summary, position andsignificant concurrent positions

Name(Date of birth)
October 1983
August 1987
July 1999
August 2014

Number ofshares of theCompany held

Joined Tetsuzo Ota & Co. (currently Ernst & Young
ShinNihon LLC)
Registered as a Certified Public Accountant
Partner of Showa Ota & Co. (currently Ernst &Young ShinNihon LLC)
Retired from Ernst & Young ShinNihon LLC(Significant concurrent positions)
Toshihito Aoki
Certified Public Accountant
Candidate for Outside
Corporate Auditor
Reason for nominating Toshihito Aoki as substitute Outside
Corporate Auditor(April 7, 1954)
Although Mr. Toshihito Aoki has not engaged in corporate
management in the past, he has been practicing corporate accounting
for many years, and has a wealth of experience, achievements, andinsight as a Certified Public Accountant. The Company has judged that
he can audit the business execution of Directors from an objective,
independent, and fair standpoint, and requests that he continue to be a
candidate for substitute Outside Corporate Auditor.

0

Notes:
1. Mr. Toshihito Aoki is nominated as a substitute Outside Corporate Auditor.
2. In the event that Mr. Toshihito Aoki takes office as an Outside Corporate Auditor, the Company plans toenter into an agreement with him, which would limit his liability for damages in respect of his
responsibilities set out under Article 423, Paragraph 1 of the Companies Act, to the minimum limit ofliability set out under Article 425, Paragraph 1 of the same provided that he executes his duties in goodfaith and without gross negligence.
3. Mr. Toshihito Aoki satisfies the Independence Criteria for Outside Officers defined by the Company,
and in the event that he takes office as an Outside Corporate Auditor, the Company plans to register
him as an independent corporate auditor at Tokyo Stock Exchange, Inc. and Securities Membership
Corporation Fukuoka Stock Exchange. Additionally, the Independence Criteria for Outside Officers
defined by the Company is provided on page 16.
4. No special relationship exists between the Company and Mr. Toshihito Aoki.

15

(Translation)(Reference)
Independence Criteria for Outside Officers
Outside officers are considered to be sufficiently independent from the Company if they do not fall under
any of the following items:
1. A person who is or was an executive (Note 1) of the Company or any of its subsidiaries;
2. A person who is or has recently been a person falling under any of the (1) through (7) below:(1) A major stockholder (Note 2) of the Company or an executive of a major stockholder of theCompany;(2) A party whose major business partner is the Company (Note 3) or an executive thereof;(3) A major business partner of the Company (Note 4) or an executive thereof;(4) A person belonging to an audit corporation that is the accounting auditor of the Company;(5) A party who receives a significant amount of donation or aid (Note 5) from the Company or an
executive thereof;(6) An individual who receives a significant amount of money (Note 6) or other property from theCompany as a lawyer, certified public accountant, tax accountant, consultant, etc., in addition
to the compensation that he/she receives from the Company as an outside officer; or(7) An executive of a legal entity, etc. that is a law firm, auditing firm, tax accounting firm,
consulting firm, etc., whose major business partner is the Company (Note 7).
3. A person who is a close relative (Note 8) of any of the persons listed in 1. and 2. above.
Notes:
1. An executive is an executive director, corporate officer, executive officer, or an employee who holds
a senior management position.
2. A major stockholder is a stockholder who holds 10% or more of the voting rights of the Company.
3. A party whose major business partner is the Company is a party who has carried out transactions
with the Company for an amount exceeding 2% of the annual consolidated total net sales for thelatest fiscal year of that party.
4. A major business partner of the Company is a party who has carried out transactions with theCompany for an amount exceeding 2% of the annual consolidated total net sales for the latest fiscal
year of the Company or a financial institution that has an outstanding balance of loans to theCompany that exceeds 2% of the consolidated total assets of the Company as of the end of the latest
fiscal year of the Company.
5. If the recipient is an individual, a significant amount of donation or aid means a donation or aid
exceeding an average of 10 million yen per year over the last three fiscal years. If the recipient is alegal entity, a significant amount of donation or aid means a donation or aid of an average of 10
million yen per year over the last three fiscal years or 30% of the total annual expenses of said legal
entity, whichever the greater.
6. A significant amount of money means an amount of money exceeding an average of 10 million yen
per year over the last three fiscal years.
7. A legal entity, etc. whose major business partner is the Company is a legal entity, etc. that has
carried out transactions with the Company for an average amount per year over the last three years
exceeding 2% of the annual consolidated total net sales of said legal entity, etc.
8. A close relative means a spouse or a relative within the second degree of kinship.

16

(Translation)(Appendix)

Business Report(April 1, 2019 - March 31, 2020)

1. Overview of the Company Group
1)

Business Progress and Results
During FY2019, although Japan’s economy continued to undergo a moderate recovery on the backof improvements in employment and earnings, corporate earnings mainly in the manufacturingindustries were weak and the future remained in an unclear condition.
The U.S. economy underwent solid growth, maintaining a low unemployment rate with an
expansion in consumer spending.
China’s economy saw a slowdown in its growth pace owing to the prolongation of trade conflictwith the U.S. In Vietnam, the economy remained solid on the back of strong consumer spending andexports. In the Philippines, the economy continued expanding despite a temporary decrease in public
investment due to midterm elections.
However, the global economy is facing escalating uncertainties due to the a slowdown in the
Chinese economy caused by prolongation of the trade conflict between the U.S. and China as well as by
the U.K. exit from the EU in addition to concerns over the prolongation of serious effects caused by the
pandemic of novel coronavirus disease since the start of 2020.
Under these circumstances, in FY2019, the Group's consolidated sales decreased ¥31,721 million
from the previous year to ¥884,350 million. Consolidated operating income was ¥61,008 million, down
¥5,004 million, while consolidated ordinary income was ¥60,541 million, down ¥3,765 million andprofit attributable to owners of parent decreased ¥4,301 million to ¥39,151 million.
Reviews of operation by each segment are as follows.
Cement Business
Sales¥628,416 million (down 2.7% year-on-year)
Operating Income ¥36,526 million (down 12.5% year-on-year)
Domestic cement demand in both the public and private sector decreased from the previous fiscal
year due to the end for demand related to the Tokyo Olympics and Paralympics and reconstruction
following the Great East Japan Earthquake, in addition to the impact by the prolongation of
construction periods caused by the lack of labor at construction sites nationwide. As a whole,domestic cement demand decreased 3.8% from the previous year to 40.97 million tons, of which,imported cement decreased 75.3% from the previous year to 0.02 million tons. Total exports
increased 1.5% from the previous year to 10.53 million tons.
Under these circumstances, the Taiheiyo Cement Group's domestic cement sales by volume,
including consignment sales, decreased 5.0% from the previous year to 14.47 million tons, whilst
exports increased 10.8% to 3.86 million tons.
Shipment volume served by our U.S. West Coast cement and ready-mixed concrete businesses wasstagnant mainly due to bad weather while prices show signs of an increasing trend. Our cementbusiness in China saw a recovery trend in shipping volume. Our cement business in Vietnam
remained affected by competition with other products, among other factors. For our cement businessin the Philippines, demand and market conditions show a flattening trend due to a decrease in public
investment caused by midterm elections.
As a result of the above, consolidated sales decreased ¥18,060 million from the previous year to¥628,416 million, and consolidated operating income decreased ¥5,216 million to ¥36,526 million.

17

(Translation)

Mineral Resources Business
Sales¥80,147 million (down 4.8% year-on-year)
Operating Income ¥7,179 million (down 12.9% year-on-year)
In the aggregates business, sales by volume in the Kanto region and the Tohoku region decreased
from the previous year due the end in demand related to the Tokyo Olympics and Paralympics andreconstruction following the Great East Japan Earthquake. In the mineral products business,
shipments of limestone for domestic steel corporations were sluggish. In the geo-solutions business,sales of materials for immobilizing heavy metals remained solid.
As a result of the above, consolidated sales decreased ¥4,114 million from the previous year to¥80,147 million, and consolidated operating income decreased ¥1,063 million to ¥7,179 million.
Environmental Business
Sales¥84,422 million (down 8.9% year-on-year)
Operating Income ¥7,707 million (up 16.5% year-on-year)
Although sales of fuels, calcium carbonate used for flue gas desulfurization, and gypsum decreased,
waste processing operations in waste plastics expanded, and sales of biomass fuel increased
following the operation commencement of the Ofunato Power business, etc. Furthermore, efforts
were made in disaster waste processing operations amid the aftermath of Typhoon Hagibis.
As a result, consolidated sales decreased ¥8,271 million from the previous year to ¥84,422 million,
and consolidated operating income increased ¥1,093 million to ¥7,707 million.
Construction Materials Business
Sales¥81,303 million (down 1.0% year-on-year)
Operating Income ¥4,537 million (down 9.2% year-on-year)
Due to the impact of delays in the commencement of ground improvement projects, etc.,
consolidated sales decreased ¥881 million from the previous year to ¥81,303 million, andconsolidated operating income decreased ¥462 million to ¥4,537 million.
Other Business
Sales¥83,031 million (down 3.4% year-on-year)
Operating Income ¥5,327 million (up 14.3% year-on-year)
Although performance in the engineering business and the transportation and warehousingbusiness remained at low levels, due to the operation commencement of biomass power generation in
Ofunato City, Iwate Prefecture, in addition to the real estate business remaining solid, consolidated
sales decreased ¥2,997 million from the previous year to ¥83,031 million, and consolidated operating
income increased ¥669 million to ¥5,327 million.
Sales and Operating Income by Business Segment
Business Segment
CementMineral Resources
Environmental
Construction Materials
Other
Subtotal
Elimination or unallocated amounts
Total

Sales

Year-on-yearincrease (decrease)628,416(18,060)
80,147(4,114)84,422(8,271)81,303(881)
83,031(2,997)
957,321(34,325)(72,971)2,604
884,350(31,721)
18(Unit: Millions of yen)
Operating
Year-on-year
incomeincrease (decrease)36,526(5,216)
7,179(1,063)
7,707
1,093
4,537
(462)
5,327
669
61,279(4,978)(270)(25)
61,008(5,004)

(Translation)

2)

Capital Investments
The total amount of capital investments by the Group in the fiscal year under review increased¥9,880 million from the previous year to ¥77,677 million, consisting of ¥45,709 million in the Cement
Business, ¥10,972 million in the Mineral Resources Business, ¥2,750 million in the Environmental
Business, ¥3,035 million in the Construction Materials Business, ¥13,246 million in the Other Businessand ¥1,963 million in Group wide assets.

3)

Trends in Assets and Income
Item

19th fiscal year
ended
March 31, 2017

20th fiscal year
ended
March 31, 2018

21st fiscal year
ended
March 31, 201922nd fiscal year
ended
March 31, 2020
(Current)

Net sales
798,588871,113916,071884,350(millions of yen)
Ordinary income
59,80264,36664,30660,541(millions of yen)
Profit attributable toowners of parent
47,59738,52543,45239,151(millions of yen)
Net income per share
383.91
311.40351.72319.89(yen)
Total assets
1,015,415
1,020,111
1,034,428
1,032,923(millions of yen)
Net assets
400,034
432,326
450,645473,241(millions of yen)
(Note) The Company, with an effective date of October 1, 2017, conducted a reverse stock split for
its common stock at a ratio of one for 10. As a result, net income per share is calculated
assuming that said share consolidation had been conducted at the beginning of the 19th fiscal year
ended March 31, 2017.
4)

Issues to be Addressed
Looking ahead, the Japanese economy is expected to remain unpredictable in the midst of escalating
uncertainties in the global economy and confusion in international politics such as concerns over the
prolongation of the pandemic of novel coronavirus disease, the impact from trade conflicts between
foreign countries and the U.K. exit from the EU, etc.
Turning our attention to the Group’s business environment, in our core domestic cement business, it
is expected that a certain amount of demand will continue owing to the redevelopment investment inurban areas, disaster prevention and mitigation measures, and upcoming full-fledged construction
related to Linear Chuo Shinkansen.
Meanwhile, there are risks that demand for cement will be pushed down due to concerns thatdemand may be greatly affected by the impact on economic activities owing to the prevalence of thenovel coronavirus disease. In the short term, there are the effects of construction works having been put
on hold or postponed, while in the medium- to long-term there are concerns over possibilities of
oppressed demand in private capital investments and redevelopment investments.
Furthermore, the impact on the construction industry due to the postponement of the Tokyo
Olympics and Paralympics, rising logistics costs, a worsening labor shortage for skilled construction
workers, and the aging of the population must be taken into consideration.
Additionally, the U.S. economy should be monitored closely to grasp how much it will be oppressed
as a consequence of current restricted economic activities due to novel coronavirus disease.
Under these circumstances, the Group is working on the 20 Medium-Term Management Plan which
covers the three-year period until FY2020. As the final fiscal year of the plan, the Group has positioned
FY2020 as a significant year to serve as a bridge to the next Medium-Term Management Plan. While atpresent it is difficult to predict how severe the impacts of the novel coronavirus disease will be, the19(Translation)

Group will strive to grasp the situation and will actively work toward achieving the following
management tasks in the 20 Medium-Term Management Plan.
Basic Policies of 20 Medium-Term Management Plan
In the 20 Medium-Term Management Plan, the Group aims to establish solid business foundationsin accordance with the following basic policies.
(i) The Group will preempt future changes to the business operating environment, attempt
innovation from various perspectives, and establish an enterprise group moving forward todevelopment.
(ii) As a member of the social infrastructure industry, the Group will contribute to establishment ofa safe and secure society by stable supply of high quality products, solutions, and advanced
technology development, in order to build national resilience.
(iii) The Group will strengthen its earnings base in existing businesses, and make further
improvements in its financial structure by exhaustive cost-cutting, as well as active investment
in growth areas that will contribute to sustainable development of the Group.
Business Strategies
1. Enhance earnings base for existing businesses and formulate/implement growth strategies
The Group will boost its earnings base by exhaustive cost-cutting and promotion of process
innovation, etc., and pursue competitive advantages through new value creation and differentiation.
Furthermore, the Group will conduct growth investment in order to grow earnings capacity, andcontribute to resolution of social issues by working steadily toward the achievement of businessstrategies.
2. Support for national projects
The Group will maximize the Group’s strength, muster all of its resources, conduct stable supplyof high-quality products, and provide solutions steadily in order to meet full-fledged restoration andreconstruction demand in Fukushima Prefecture, disaster prevention and mitigation measuresagainst a series of natural disasters, construction related to Linear Chuo Shinkansen, and othernational projects such as major infrastructure projects.
Research & Development Strategies
As an engine of growth supporting each business segment, the Group will work on research anddevelopment contributing to the whole Group’s development. The Group will also focus on researchand development playing a role in resolution of social issues as a member of the social infrastructureindustry, develop technologies needed, and provide them appropriately for national projects.
Strengthen management foundations
The Group will steadily work toward the realization of targets set in the form of CSR Objectives
for 2025. The Group will also endeavor to improve working efficiency and establish a comfortableworking environment through workstyle reform and promotion of health and productivity
management, as well as securing and training global human resources. Furthermore, the Group willseek to strengthen its management foundations by strengthening group governance, enhancing
corporate governance, continuing selection and concentration, and strengthening competitiveness invalue chains.
The Group looks forward to your continued support and cooperation as our stockholder.

20

(Translation)

5)

Material Subsidiaries
Company name
DC Co., Ltd.
Clion Co., Ltd.
Myojyo Cement Co., Ltd.
Taiheiyo Materials
Corporation
CalPortland Company

The Company’s
percentage of equity
Principal businessparticipation
100
Manufacturing and sale of cement
Manufacturing and sale of autoclaved lightweight
97.7
aerated concrete (ALC)
100
Manufacturing and sale of cement
Manufacturing and sale of various construction
100
materials such as admixture and non-shrink grout
Manufacturing and sale of cement, ready-mixed
100
concrete, etc. in the United States

Jiangnan-Onoda Cement Co.,
88.5
Manufacturing and sale of cement in China
Ltd.
Qinhuangdao Asano Cement
71.9
Manufacturing and sale of cement in China
Co., Ltd.
Dalian Onoda Cement Co.,
84.8
Manufacturing and sale of cement in China
Ltd.
Nghi Son Cement
65.0
Manufacturing and sale of cement in Vietnam
Corporation
Taiheiyo Cement Philippines,
Manufacturing and sale of cement in the
100
Inc.
Philippines(Notes) 1. The Company’s percentage of equity participation includes indirect ownership throughsubsidiaries.
2. The Company’s percentage of equity participation in Clion Co., Ltd. is calculated by
excluding treasury stock.
6)

Principal Businesses
Businesses of the Taiheiyo Cement Group are divided into Cement Business Segment, Mineral
Resources Business Segment, Environmental Business Segment, Construction Materials Business
Segment and Other Business Segment, and mainly consist of the following.
(i) Cement Business
Ordinary Portland cement and other various
types of cement, white cement,
construction – material – purpose cement,
ecocement, cement-based solidifying agent,
ready-mixed concrete, admixture, etc.

(iii) Environmental Business
Waste recycling business (recycling into cement raw
materials and fuels), flue gas desulfurization materials,
recycled products, chemicals, water-related business,
etc.
(iv) Construction Materials Business
Concrete products, construction materials, civilengineering and construction work, etc.

(ii) Mineral Resources Business
Aggregates, limestone, white marble, quicklime,
silica, lightweight aggregates and lightweight
fill material, heavy metal immobilizer, surplus
construction soil recycling business, etc.

(v) Other Business
Real estate business, engineering business, dataprocessing business, finance business, transportation
and warehousing business, chemical products
business, sports business, power supply business,
etc.

21

(Translation)

7)

Principal Business Locations(i) The Company’s principal business locations and plants
Head Office:2-3-5, Daiba, Minato-ku, Tokyo, Japan
Central Research Laboratory: Sakura City, Chiba Prefecture, Japan
Branches and Plants
Branches
Name
Location
Hokkaido Branch
Sapporo City, Hokkaido
Prefecture
Tohoku Branch
Sendai City, Miyagi
Prefecture
Tokyo Branch
Minato-ku, Tokyo
Kanto Branch

PlantsName
Kamiiso Plant
Ofunato Plant
Kumagaya Plant

Location
Hokuto City, Hokkaido
Prefecture
Ofunato City, Iwate
Prefecture
Kumagaya City, Saitama
Prefecture
Hidaka City, Saitama
Prefecture
Inabe City, Mie Prefecture

Takasaki City, Gunma
Saitama Plant
Prefecture
Chubu Hokuriku
Nagoya City, Aichi
Fujiwara Plant
BranchPrefecture
Kansai Shikoku
Osaka City, Osaka
Oita Plant
Tsukumi City, Oita
BranchPrefecture
Prefecture
Chugoku Branch
Hiroshima City, Hiroshima
Prefecture
Kyushu Branch
Fukuoka City, Fukuoka
Prefecture(Note) The Company relocated its head office and Tokyo Branch from Minato-ku, Tokyo to
Bunkyo-ku, Tokyo on May 11, 2020.
(ii) Principal business locations of material subsidiaries
Name
Location
DC Co., Ltd.
Kawasaki City, Kanagawa Prefecture
Clion Co., Ltd.
Koto-ku, Tokyo
Myojyo Cement Co., Ltd.
Itoigawa City, Niigata Prefecture
Taiheiyo Materials Corporation
Kita-ku, Tokyo
CalPortland Company
California, USA
Jiangnan-Onoda Cement Co., Ltd.
Jiangsu, China
Qinhuangdao Asano Cement Co., Ltd.
Hebei, China
Dalian Onoda Cement Co., Ltd.
Liaoning, China
Nghi Son Cement Corporation
Tinh Thanh Hoa, Vietnam
Taiheiyo Cement Philippines, Inc.
Cebu, Philippines22

(Translation)

8)

Employees
Business Segment
Number of Employees (persons)Cement8,366
Mineral Resources
948
Environmental
157
Construction Materials
1,204
Other
2,159
Group-wide (common)
285
Total
13,119(Notes) 1. The number of employees refers to the number of persons on the payroll.
2. The above includes the following number of employees of the Company. The number of
employees stated below does not include employees on temporary retirement, seconded
employees, etc. (552 persons).
Number of
Increase or decrease from
Average age
Average length of
employees
previous year
service
1,798 persons
Increase of 38 persons
41.2 years old
19.2 years

23

(Translation)

9)

Major Lenders and Amount of Borrowings

LenderMizuho Bank, Ltd.
Sumitomo Mitsui Banking Corporation

Outstanding borrowings (millions of yen)
38,396
27,766

2. Shares of the Company
1) Total number of shares authorized to be issued

197,730,800 shares2) Total number of shares outstanding

127,140,278 shares(including 4,428,528 shares of treasury stock)3) Number of stockholders

52,477 persons

4) Major stockholders
Stockholder name

Holding

Stockholding ratio(thousand shares)(%)

THE MASTER TRUST BANK OF JAPAN, LTD. (TRUSTACCOUNT)

10,9498.9JAPAN TRUSTEE SERVICES BANK, LTD. (TRUSTACCOUNT)

8,460

6.8

JAPAN TRUSTEE SERVICES BANK, LTD. (TRUSTACCOUNT 9)

3,880

3.1

STATE STREET BANK AND TRUST COMPANY 505001

2,672

2.1

JAPAN TRUSTEE SERVICES BANK, LTD. (TRUSTACCOUNT 5)

2,572

2.0

MIZUHO BANK, LTD.

2,234

1.8

JP MORGAN CHASE BANK 385151

2,105

1.7

GOVERNMENT OF NORWAY

1,910

1.5

BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)

1,807

1.4

STATE STREET BANK WEST CLIENT-TREATY 505234

1,755

1.4

(Notes)1. The Company holds 4,428,528 shares of treasury stock.
2. The stockholding ratio is calculated by excluding treasury stock.

24

(Translation)

3. Company Officers
1)

Name, etc. of Directors and Corporate Auditors
Position

Name

Significant concurrent positions

Chairman and Director

Shuji Fukuda

Outside Director of Sapporo Holdings
LimitedPresident and Representative
Director

Masafumi Fushihara

Vice President and Representative
Director

Yuuichi Kitabayashi

Director

Keiichi Miura

Director

Masahiro Karino

Director

Kunihiro Ando

Director

Katsuhide Fukuhara

Director

Toshiaki Suzuki

Director

Yoshiyuki Uenoyama

Director

Hideaki Asakura

Director

Tetsuya Ohashi

Director

Yoshifumi Taura

Director

Yoshiko Koizumi

Director

Yuzo Arima

Corporate Auditor (Standing)Toshihide Nishimura

Corporate Auditor (Standing)Shigeru Matsushima
Wakako Mitani

Overseeing Corporate Planning
Department

Outside Director of P.S. Mitsubishi
Construction Co., Ltd.

Outside Director of Dowa Holdings Co.,Ltd.
Outside Corporate Auditor of Nippon
Koei Co., Ltd.
Lawyer, Partner of City-Yuwa Partners
Outside Corporate Auditor of NIPPONCONCRETE INDUSTRIES CO., LTD.

Corporate Auditor(Name on family
registration:
Wakako Akamatsu)

Lawyer, Partner of TANABE &PARTNERS

Corporate Auditor

Yoshio Fujima

Certified Public Accountant(Notes)

1.
2.
3.

4.

Directors Yoshiko Koizumi and Yuzo Arima are Outside Directors.
Corporate Auditors Wakako Mitani and Yoshio Fujima are Outside Corporate Auditors.
Directors Yoshiyuki Uenoyama, Hideaki Asakura, Tetsuya Ohashi, Yoshifumi Taura and Corporate
Auditors Shigeru Matsushima and Yoshio Fujima were newly elected at the 21st Ordinary General
Meeting of Stockholders held on June 27, 2019, and took office on the same day.
Directors Shigeru Matsushima, Youichi Funakubo, Ichiro Egami, Tomoya Sakamoto, and Corporate
Auditor Yoshio Narukage retired from office at the close of the 21st Ordinary General Meeting ofStockholders held on June 27, 2019.

25

(Translation)

5.

Corporate Auditor Hidehiko Kasamura resigned from office at the close of the 21st Ordinary General
Meeting of Stockholders held on June 27, 2019.
6. Corporate Auditors Toshihide Nishimura and Shigeru Matsushima have hands-on experience in thebusiness management division of the Company and have considerable financial and accounting
expertise.
7. Corporate Auditor Yoshio Fujima has the qualification of Certified Public Accountant and has
considerable financial and accounting expertise.
8. The Company receives legal advice as required from lawyers of City-Yuwa Partners other than
Director Yoshiko Koizumi, where she holds a significant concurrent position, but the Company has
not concluded an advisory agreement with the law firm. The advisory fees paid to the law firm isless than 1% of net sales for each of the Company and the law firm, and there is no special interest
relationship. Additionally, there are no special interest relationships between the Company and anyof the significant concurrent positions of the other Outside Executives.
9. The Company has registered Directors Yoshiko Koizumi and Yuzo Arima as independent directors
and Corporate Auditors Wakako Mitani and Yoshio Fujima as independent corporate auditors at
Tokyo Stock Exchange, Inc. and Securities Membership Corporation Fukuoka Stock Exchange.
10. Retirements in significant concurrent positions during the fiscal year under review are as follows:
Name
Position
Significant concurrent positions Retirement dateOutside Corporate Auditor ofJune 24, 2019
Yoshiko Koizumi
Director
Sumitomo Bakelite Co., Ltd.
No relationship exists between the Company and Sumitomo Bakelite Co., Ltd.
11. The Company has introduced an executive officer system; executive officers as of April 1, 2020 are
as follows.
Position
Name
Assignment
Overseeing Human Resources Department,
Senior Executive Officer
Masahiro Karino*
Legal Department and Internal Auditing
Department
Overseeing Mining Department, Mineral
Resources Business Department andSenior Executive Officer
Kunihiro Ando*
Environmental Business Development
Department
Overseeing Construction Materials Business
Managing Executive
Katsuhide Fukuhara*
Department and Business Planning &Officer
Administration Department
Overseeing Production Department andManaging Executive
Yoshiyuki Uenoyama*
Officer
Maintenance & Engineering Department
Overseeing General Affairs Department andManaging Executive
Hideaki Asakura*
Officer
Purchasing Department
Overseeing Secretarial Department, Accounting
Managing Executive
Tetsuya Ohashi*& Finance Department and Real Estate
OfficerBusiness Department
Senior General Manager of International
Business Division
Managing Executive
Yoshifumi Taura*
Officer
Chairman of Taiheiyo Cement (China)
Investment Co., Ltd.
Senior General Manager of Cement Business
Managing Executive
Yukimasa Nakano
Officer
DivisionManaging Executive
Officer

Takayoshi Okamura

Executive Officer

Atsuhiro Koike

Executive Officer

Koshiro Hidaka

26

Overseeing Intellectual Property Department andCentral Research Laboratory
General Director of Nghi Son Cement
Corporation
General Manager of Maintenance & Engineering
Department

(Translation)

Executive Officer

Susumu Miyazaki

Executive Officer

Naoyuki Kira

Executive Officer

Masaki Takahashi

Executive Officer

Yasushi Ushiki

Executive Officer

Shinji Fukami

Executive Officer

Tetsuya Suemura

Executive Officer

Hiroaki Matsubara

General Manager of Purchasing Department
General Manager of Sales Department, Cement
Business Division
General Manager of Corporate Planning
Department
General Manager of Production Department
General Manager of Environmental Business
Development Department
General Manager of Internal Auditing Department

General Manager of Tohoku Branch
General Manager of Human Resources
Executive Officer
Hidenobu Makino
Department
General Manager of Mineral Resources
Executive Officer
Akihiko Domoto
Business Department
General Manager of Construction Materials
Executive Officer
Isao Matsui
Business Department
Persons who concurrently serve as Directors are marked with an asterisk (*).

27

(Translation)

2)

Overview of Limited Liability Agreement
The Company has concluded an agreement with each of Directors Shuji Fukuda, Yoshiko Koizumi,
Yuzo Arima and each Corporate Auditor, which limits his/her liability for damages in respect of his/her
responsibilities set out under Article 423, Paragraph 1 of the Companies Act, to the minimum limit ofliability set out under Article 425, Paragraph 1 of the same provided that he/she executes his/her duties
in good faith and without gross negligence.

3)

Total Amount of Compensation, etc. to Directors and Corporate Auditors
Classification
Number of persons paid (persons)Amount paid (millions of yen)
Directors
18853
Corporate Auditors
6
72
Total
24
926
(Notes) 1. The number of persons paid regarding Directors and Corporate Auditors above includes
four Directors and two Corporate Auditor who retired or resigned at the close of the 21st
Ordinary General Meeting of Stockholders held on June 27, 2019.
2. Above compensation, etc. includes compensation, etc. to outside officers totaling ¥51
million. There were five outside officers who received payment.

4)

Outside Officers

Main Activities in Fiscal Year under Review
Attendance at
PositionNamemeetings of Boardof Directors

Attendance atmeetings of Board ofAuditors

Comment status

Made comments as appropriate
at the meetings of the Board of
Directors based on her wealthYoshikoDirector
14 out of 14 meetingsof experience and insight inKoizumicorporate management mainly
as a lawyer.
Made comments as appropriate
at the meetings of the Board of
Directors based on his wealthDirector
Yuzo Arima 14 out of 14meetingsof experience mainly as amanagement executive of amanufacturing company.
Made comments as appropriate
at the meetings of the Board of
Directors and meetings of theBoard of Auditors based on her
Corporate Wakako
14 out of 14meetings
12 out of 12 meetings
wealth of experience andAuditorMitaniinsight
incorporate
management mainly as alawyer.
Made comments as appropriate
at the meetings of the Board of
Directors and meetings of theBoard of Auditors based on his
Corporate Yoshio
10 out of 10 meetings 8 out of 8 meetings
wealth of experience andAuditorFujimainsight in corporate accounting
mainly as a Certified Public
Accountant.
(Notes) 1. During the fiscal year under review, 14 Board of Directors meetings were held. Ten Board of
Directors meetings were held after Corporate Auditor Yoshio Fujima took office.
28

(Translation)

2. In addition to the number of Board of Directors meetings held as stated above, pursuant to theprovisions of Article 370 of the Companies Act and Article 24 of the Articles of Incorporation of
the Company, a written resolution was made, for which the Company deems that the resolution
was made at the Board of Directors meeting.
3. During the fiscal year under review, 12 Board of Auditors meetings were held. Eight Board ofAuditors meetings were held after Corporate Auditor Yoshio Fujima took office.

29

(Translation)

4. Accounting Auditor
1)

Name of the Company’s Accounting Auditor
KPMG AZSA LLC

2)Accounting Auditor’s Compensation, etc. in Fiscal Year under Review¥ 113 million(Notes) 1. Under the audit agreement between the Company and its Accounting Auditor, the amount ofcompensation for audits pursuant to the Companies Act and audits pursuant to the Financial
Instruments and Exchange Act are not distinguished from each other and are indistinguishable
in practice. Therefore, the above amount includes compensation, etc. for audits pursuant to
the Financial Instruments and Exchange Act.
2. The Board of Auditors of the Company, in observance of the “Practical Guidelines for
Cooperation with Accounting Auditors” published by the Japan Audit & Supervisory Board
Members Association, has confirmed the time taken to audit each audit item, trends in audit
fees, and the status of execution of duties of the Accounting Auditor, and upon considering
the appropriateness of the audit plan and appropriateness of audit fees for the fiscal year
under review, agrees to the fees, etc., of the Accounting Auditor under Article 399, Paragraph
1 of the Companies Act.

3)

Policy for Determination of Dismissal or Non-reappointment of Accounting Auditor
1) If the Accounting Auditor is deemed to correspond to any of the matters set forth in the items of
Article 340, Paragraph 1 of the Companies Act, the Board of Auditors will dismiss the Accounting
Auditor subject to the consent of all Corporate Auditors, in which case the Corporate Auditor
selected by the Board of Auditors will report the dismissal and the reason for the dismissal at thefirst Ordinary General Meeting of Stockholders held after the dismissal.
2) The Board of Directors will specify the dismissal or non-reappointment of the Accounting Auditor
as an agenda of the General Meeting of Stockholders based on the Board of Auditors’ resolution incases where severe problems have arisen in the Company’s audit operations and in other suchcases.

4)

Total Amount of Money and Other Property Benefits Payable to Accounting Auditor by theCompany and its Subsidiaries¥ 243 million(Note) Among significant subsidiaries of the Company, CalPortland Company, Jiangnan-Onoda
Cement Co., Ltd., Qinhuangdao Asano Cement Co., Ltd., Dalian Onoda Cement Co., Ltd., Nghi
Son Cement Corporation and Taiheiyo Cement Philippines, Inc. have been audited (limited toaudits under the provisions of the Companies Act or the Financial Instruments and Exchange Act(including laws and ordinances of foreign countries corresponding to said Acts)) by a Certified
Public Accountant or an audit corporation other than the Company’s Accounting Auditor(including those with foreign qualifications equivalent to CPA/auditor qualifications).

30

(Translation)

5.

System to Ensure that Directors Comply with Laws and Ordinances and the Articles ofIncorporation in Executing Their Duties and Other Systems to Ensure Proper Execution of
Operations(1)

Summary of the System to Ensure the Proper Execution of Operations

The Company has systems to ensure the proper execution of operations (so-called internal control
systems) and defines them as shown below.
1)

System to ensure that Directors, Executive Officers and employees comply with laws andordinances and the Articles of Incorporation in executing their duties(i) The Company shall strengthen its system for ensuring that the actions of Directors, Executive
Officers and employees comply with laws and ordinances, the Articles of Incorporation and otherinternal company rules, and conventional wisdom in accordance with the Mission of the Taiheiyo
Cement Group, Business Principles, Basic Compliance Policy and Compliance Rules.
(ii) The CSR Management Committee, an interdepartmental committee under the direct authority of
the Board of Directors, pursues policies to promote compliance awareness among Directors,
Executive Officers and employees in accordance with the CSR Prospectus.
(iii) The Internal Auditing Department conducts audits of the business activities of each place ofbusiness within the Company to determine whether Executive Officers and employees comply withlaws and ordinances, the Articles of Incorporation, etc. in executing their duties, provides advice
and recommendations after identifying items in need of improvement, and reports to the President
about audit results and then notifies Directors and Corporate Auditors.
(iv) The Company employs an internal reporting system that uses a compliance hotline to reach
representatives both inside and outside the Company (law firm) to enable an accurate response
while protecting the informer and ensuring transparency.

2)

System to store and manage information related to the execution of duties by Directors
The Company documents, stores and manages information related to the execution of duties byDirectors in accordance with the Board of Directors Rules, Decision Making Rules and Document
Management Rules. Directors and Corporate Auditors can review these documents at any time.

3)

Rules and other systems related to managing the risk of loss(i) The Company has prepared the Basic Risk Management Policy and Risk Management Rules
covering basic matters and specific responses to prevent and minimize the impact of risk items that
could significantly affect the business of the Taiheiyo Cement Group. The CSR Management
Committee is in charge of pursuing specific measures, and reports to the Board of Directors about
the status of these activities.
(ii) In the event of an emergency, the Company establishes an Emergency Headquarters led by the
President to pool information and exercise top-down leadership in tackling the emergency inaccordance with the provisions of the Risk Management Rules.

4)

System to ensure that Directors execute their duties efficiently(i) The Company delegates to Executive Officers the authority for certain business matters as
stipulated in the Decision Making Rules and elsewhere. Executive Officers, based on a
Management by Objectives, set clear targets for each responsible organization under their control
and execute their duties efficiently.
(ii) The Board of Directors efficiently allocates business resources from the perspective of optimizing
companywide resources and in accordance with the medium-term management plan and annual
management policy (President’s policy), and reviews the targets of Executive Officers and theprogress of policies reported from time to time.

5)

System for ensuring proper execution of operations within the company group, comprising theCompany and its subsidiaries
31

(Translation)

The Company, in accordance with its Group Companies Management Rules, takes the following steps
to provide appropriate management and support to its subsidiaries to enable the adequate functioning of
their management organizations (general meeting of stockholders, board of directors, corporate auditors,
and board of auditors) and the establishment of independent management based on self-responsibility.
(i) The Company assigns, in principle, Directors, Executive Officers and employees to serve as
directors or corporate auditors at its subsidiaries. These corporate auditors conduct audits ofinternal control systems.
(ii) The Internal Auditing Department conducts audits of the business activities according to the size,
nature of business, etc. of subsidiaries to determine whether the directors and employees of thesubsidiaries comply with laws and ordinances, the Articles of Incorporation, etc. in executing theirduties, provides advice and recommendations after identifying items in need of improvement, andreports to the President about audit results and then notifies Directors and Corporate Auditors.
(iii) The Company seeks to understand the business conditions of each subsidiary through performance
reports and other means and endeavors to share information through exchanges of opinions
between the Company and directors at subsidiaries (including directors serving concurrently as
Directors, Executive Officers or employees at the Company) by periodically holding Group
Executive Committee meetings.
(iv) The Company makes its subsidiaries appoint officers responsible for risk management andcompliance as well as risk management and compliance promoters according to their size, natureof business, etc. and strives to prevent and reduce risks in the Taiheiyo Cement Group bycollaborating with each company, and adopts a system for reporting to Directors and Corporate
Auditors of the Company if a crisis occurs or if an event with the risk of developing into a crisis
arises at a company.
6)

System to ensure reliability of financial reporting
The Company develops a system required to properly conduct financial reporting such as consolidated
financial statements.

7)

Matters related to personnel to assist Corporate Auditors and independence of such personnel
from Directors
The Company has established a Corporate Auditor’s Office which assists Corporate Auditors in
performing their duties, and assigns full-time personnel. The Company shall request and respect theopinion of the Board of Auditors in matters related to the transfer and evaluation of such full-time
personnel.

8)

System for reporting to Corporate Auditors by Directors, Executive Officers and employees of theCompany as well as directors, corporate auditors and employees of subsidiaries or persons who
received a report from them and other systems for reporting to Corporate Auditors(i) The Company employs a system in which Corporate Auditors can attend important meetings
related to business matters to receive reports from Directors and other employees about the statusof the execution of their duties.
(ii) The Company adopts a system in which any facts that may inflict serious damage to the Company
are reported to Corporate Auditors by Directors, Executive Officers and employees of theCompany as well as directors, corporate auditors and employees of subsidiaries or persons who
received a report from them.
(iii) The Company prohibits the unfavorable treatment of anyone who has made a report under thepreceding item.

9)

Other systems to ensure effective auditing by Corporate Auditors(i) The Company employs a system in which Corporate Auditors are shown documents related toimportant decisions and can gain access to a variety of information, including management
information, at any time.
(ii) The Company provides a venue for Corporate Auditors to exchange opinions and information with
the Accounting Auditor.
32

(Translation)(iii) When a Corporate Auditor requests the prepayment or payment of expenses required for
performing his/her duties, the Company promptly pays such expenses.
(2)

Summary of the Operational Status of the System to Ensure the Proper Execution of Operations

The Company’s Internal Control System is maintained through systems in line with the basic policy above,and is appropriately managed. Key measures are as follows.
1)

Compliance system(i) Based on the CSR Prospectus, a CSR Management Committee has been established composed of
all Directors with the President as the Chairman, and it is held once per quarter. The CSRManagement Committee formulates a CSR Action Plan for every fiscal year, understands andconfirms its status of progress, and makes evaluations. Additionally, the results are reported to theBoard of Directors.
(ii) Directly under the CSR Management Committee, the Risk Management and Compliance
Committee was established as a subordinate body, and upon formulation of the action plan, it
understands and confirms the status of implementation. Additionally, the status of these measures
is reported to the CSR Management Committee.
(iii) Officers responsible for risk management and compliance as well as risk management andcompliance promoters are selected, these persons engage in promotion of compliance, and theCompany also implements training for these responsible persons and leaders.
(iv) Education regarding compliance is conducted via forms such as training for new employees andtraining depending on job level, distributing action guideline casebooks, and self-checks utilizing
e-learning, all in an effort to thoroughly implement compliance.

2)

Risk management system(i) Based on the Basic Risk Management Policy, Risk Management Rules are defined, and while
promoting measures toward risk management, responses to emergency situations are defined in the
Crisis Management Rules.
(ii) The annual risk countermeasure plan is formulated, and based on a PDCA cycle, measures for risk
management are promoted.
(iii) In preparation for unexpected events such as disasters and accidents, etc., periodic disasterprevention drills and other training programs are implemented. Additionally, exercises such as
initial response simulation training in the event of a large-scale natural disaster are also conducted
to aim to increase awareness of response processes.
(iv) Under the Basic Information Security Policy, an information security management system has been
established, and while aiming for thorough protection of information assets and appropriate
management and handling, information risk countermeasures are promoted via information
security education such as e-learning.

3)

Ensuring proper execution of operations at the Group(i) Based on the Group Companies Management Rules, a system is maintained where groupcompanies and the Company deliberate on important matters, direction and management isconducted as required, and support is provided to management.
(ii) While understanding the management conditions of each group company through periodic
achievement reporting, etc., a Group Executive Committee meeting is held twice per year to
exchange opinions on various themes and share information related to management of the Group.
(iii) Directors and Corporate Auditors of subsidiaries are seconded from the Company to supervise
business execution and implement audits regarding the internal control systems.
(iv) The Internal Auditing Department, upon formulating an audit implementation plan based on theannual audit policy, implements internal audits toward subsidiaries, and provides advice andrecommendations.

33

(Translation)

4)

Execution of business by Directors(i) The Board of Directors is composed of 14 persons, including two Outside Directors, and meetings
were held 14 times during the fiscal year under review, where deliberation and determination wasmade regarding important matters defined by laws and regulations and the Articles ofIncorporation, in addition to supervision of the execution of business by Directors. In addition to
the number of Board of Directors meetings held as stated above, a written resolution was made, forwhich the Company deems that the resolution was made at the Board of Directors meeting,pursuant to the provisions of Article 370 of the Companies Act and Article 24 of the Articles ofIncorporation of the Company.
(ii) For important matters other than those to be deliberated by the Board of Directors, Executive
Committee meetings were held 23 times for deliberation.
(iii) To secure the efficiency of execution of business by Directors, reports on the status of businessexecution are made at the Board of Directors by dividing up duties among the Directors andExecutive Officers.
(iv) Regarding management execution, a certain level of authority is delegated to Executive Officers.
Executive Officers execute business via a Management by Objectives that is in line with theMedium-term Management Plan and the annual management policy (President’s policy), and theBoard of Directors reviews the status of progress.

5)

Execution of business by Corporate Auditors(i) Aside from Board of Directors meetings, Corporate Auditors attend important meetings such as the
Executive Committee to confirm the status of the development and operation of the internal control
system.
(ii) Corporate Auditors receive reports on the internal audits carried out by the Internal Audit
Department, while cooperating with the Internal Audit Department to efficiently carry out audits ofeach business office, subsidiary, etc.
(iii) Periodic meetings are held with the Accounting Auditor to exchange information.
(iv) A Corporate Auditor’s Office has been established to assist Corporate Auditors in performing theirduties, and full-time personnel has been assigned.

Figures stated in this Business Report are rounded down to the nearest unit of presentation (first decimal placein the case of percentages), except for net income per share, which is rounded off to the second decimal place,and average age and average length of service of employees of the Company, which are rounded off to thefirst decimal place.
34

(Translation)

Consolidated Financial Statements(April 1, 2019 - March 31, 2020)

Consolidated Balance Sheets
Account

FY2019(as of March 31, 2020)(Unit: Millions of yen)
(Reference)
FY2018(as of March 31, 2019)

AssetsCurrent assets

318,502341,307

Cash and deposits

51,64156,561

Notes and accounts receivable-trade

159,048

180,535

Electronically recorded monetary claims-operating

13,507

12,998Merchandise and finished goods

30,897

31,138Work in process

2,310

2,268

Raw materials and supplies

45,07543,314

Short-term loans receivable

3,289

3,421

Other

14,035

11,714(1,302)(646)

Noncurrent Assets

Allowance for doubtful accounts

714,420

693,120

Property, plant and equipment

544,553

520,939

Buildings and structures

138,947

135,653

Machinery, equipment and vehicles

162,944

134,649

Land

164,869

157,638

Lease assets

21,941

22,120Construction in progress

30,66548,678Other

25,18422,199Intangible assets

29,81430,875

179

321

Other

29,63430,553

Investments and other assets

140,053

141,306

Investment securities

82,931

83,692Long-term loans receivable

1,880

1,754

Deferred tax assets

21,118

17,109Assets for retirement benefits

11,09017,807

Other

29,35928,374

Allowance for doubtful accounts(6,327)(7,432)

1,032,923

1,034,428

Goodwill

Total Assets

35

(Translation)

Account

Liabilities
Current liabilities
Notes and accounts payable-trade
Electronically recorded obligations-operating
Short-term loans payable
Commercial papers
Current portion of bonds
Income taxes payable
Provision for bonuses
Other provision
Other
Noncurrent liabilities
Bonds payable
Long-term loans payable
Deferred tax liabilities
Liability for retirement benefits
Provision for directors' retirement benefits
Provision for special repairs
Other provision
Lease obligations
Asset retirement obligations
Other
Total liabilities
Net Assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Retirement benefits liability adjustments
Non-controlling interests
Total net assets
Total liabilities and net assets

36

FY2019(as of March 31, 2020)(Reference) FY2018(as of March 31, 2019)313,771
83,4305,330
120,783
12,000
－
6,024
6,158
139
79,906245,91030,000103,332
7,491
24,999521
128
828
17,996
7,341
53,270559,682

349,390
96,275
8,716
135,381
4,000
10,000
8,376
6,046
220
80,373
234,392
30,000100,233
7,630
24,206535
75
757
17,616
7,619
45,718583,783

456,395
86,17460,233
326,086(16,098)(19,716)
6,723
(0)
4,968
(21,413)(9,995)36,563473,241
1,032,923

424,767
86,17460,408294,265(16,081)(10,057)
8,688
(3)
5,019
(20,128)(3,632)35,935
450,645
1,034,428

(Translation)

Consolidated Statements of Income
Account

FY2019(Unit: Millions of yen)
(Reference)
FY2018(April 1, 2019 - March 31, 2020) (April 1, 2018 - March 31, 2019)

Net sales

884,350

916,071

Cost of sales

689,321712,660

195,029

203,411

134,020

137,398

Operating income

61,00866,012Non-operating income

8,075

7,691

Interest and dividends income

1,808

1,860

Equity in earnings of unconsolidated subsidiaries and affiliates

2,427

2,288

Foreign exchange gains

1,035

－

Other

2,803

3,542

Non-operating expenses

8,541

9,397

Interest expenses

3,876

4,068

126

1,126

Other

4,538

4,202

Ordinary income

60,54164,306Extraordinary income

3,838

1,917

Gain on disposal of non-current assets

754

1,149

Gain on sales of investment securities

205

532

2,730

－

147

234

12,602

7,049

Loss on disposal of non-current assets

5,580

4,828

Loss on sales of investment securities

36

133

Loss on valuation of investment securities

222

326

Impairment loss

5,451

1,101

Other

1,311

660

Income before income taxes

51,777

59,174

Income taxes-current

11,223

11,760

Income taxes-deferred

(300)

1,796

Profit

40,85445,616

Profit (loss) attributable to non-controlling interests

1,703

2,164

Profit attributable to owners of parent

39,15143,452Gross profit
Selling, general and administrative expenses

Loss on disposal of inventories

Compensation income
Other
Extraordinary loss37

(Translation)

Non-consolidated Financial Statements(April 1, 2019 - March 31, 2020)

Non-consolidated Balance Sheets
Account

FY2019(as of March 31, 2020)(Unit: Millions of yen)
(Reference)
FY2018(as of March 31, 2019)

AssetsCurrent assets
Cash and deposits
Notes receivable-trade
Electronically recorded monetary claims-operating
Accounts receivable-trade
Merchandise and finished goods
Raw materials and supplies
Prepaid expenses
Other
Allowance for doubtful accounts
Noncurrent Assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Raw materials land
Land
Lease assets
Construction in progress
Intangible assets
Mining rights
Software
Other
Investments and other assets
Investment securities
Shares of subsidiaries and affiliates
Investments in capital
Investments in capital of subsidiaries and affiliates
Long-term loans receivable
Long-term prepaid expenses
Prepaid pension costs
Other
Allowance for doubtful accounts

106,317
4,011
14,7253,289
47,764
8,092
17,537474
10,422(0)471,832
216,01224,65150,70440,935713
1,082
12,81165,782
4,096
15,234
15,236
10,052
694
4,489
240,584
20,536
170,55435
12,15539
10,613
17,43433,804(24,589)

116,123
3,784
23,0104,579
52,017
8,678
18,356
490
5,208
(0)
470,906
210,264
24,37050,591
39,104131
816
12,711
66,0573,910
12,56913,707
10,289491
2,926
246,934
22,225170,28935
13,73542
10,364
16,102
38,718(24,580)

Total Assets

578,149

587,02938

(Translation)
FY2019(as of March 31, 2020)

Account(Reference) FY2018(as of March 31, 2019)

Liabilities
Current liabilities
Electronically recorded obligations-operating
Accounts payable-trade
Short-term loans payable
Commercial papers
Current portion of bonds
Lease obligations
Accounts payable - otherAccrued expenses
Income taxes payable
Advances received
Deposits received
Unearned revenue
Provision for bonuses
Electronically recorded obligations-non-operating
Other
Noncurrent liabilities
Bonds payable
Long-term loans payable
Lease obligations
Deferred tax liabilities
Provision for loss on guarantees
Guarantee deposits received
Asset retirement obligations
Other

148,058
8,861
21,55259,52412,000－958
14,236
12,771
1,283
907
293
1,394
2,082
11,933257
148,003
30,00079,346
3,459
353
2,173
29,5152,552
602

173,044
11,872
29,19365,2594,000
10,0001,039
11,592
19,289
4,572
201
355
1,252
2,124
12,291－
138,71730,00069,108
3,206
2,290
2,144
29,056
2,638
271

Total liabilities

296,061

311,762

Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Retained earnings
Other retained earnings
Reserve for mine prospecting
Reserve for advanced depreciation of non-current assets
Retained earnings brought forward
Treasury stock
Valuation and translation adjustments
Valuation difference on available-for-sale securities

277,613
86,17456,27642,215
14,061
150,798
150,798285
15,823
134,689(15,635)
4,474
4,474

269,648
86,17456,27642,215
14,061
142,811
142,811269
16,161
126,380(15,613)
5,618
5,618

Total net assets

282,088

275,267

Total liabilities and net assets

578,149

587,029

Net Assets

39

(Translation)

Non-consolidated Statements of Income
Account

FY2019(Unit: Millions of yen)
(Reference)
FY2018(April 1, 2019 - March 31, 2020) (April 1, 2018 - March 31, 2019)

Net sales

314,427

329,525

Cost of sales

228,648

237,289

85,77892,23565,47567,298Operating income

20,302

24,937

Non-operating income

8,087

6,877

Dividends income

6,158

5,738

Foreign exchange gains

1,162

－

767

1,139

Non-operating expenses

3,585

4,477

Interest expenses

874

994

8

1,405

Other

2,702

2,076

Ordinary income

24,80427,337Extraordinary income

466

503

Gain on disposal of non-current assets

336

134

Gain on sales of investment securities

120

55

9

313

7,132

5,878

3,844

3,037

Loss on liquidation of subsidiaries and affiliates

063

Loss on valuation of investment securities

32

269

Loss on valuation of shares of subsidiaries and affiliates
Loss on valuation of investments in capital of subsidiaries andaffiliates
Loss on sales of investment securities

235

1,630

1,432

－

0

24

Loss on sales of shares of subsidiaries and associates－

8

Impairment loss

645

843

Compensation expenses

943－

Income before income taxes

18,137

21,963

Income taxes-current

4,220

5,441

Income taxes-deferred(1,432)(135)

Net income

15,34916,656Gross profit
Selling, general and administrative expenses

Other

Provision of allowance for doubtful accounts

Gain on sales of shares of subsidiaries and affiliates
Extraordinary loss
Loss on disposal of non-current assets

40

(Translation)

Independent Auditor’s Report
The Board of Directors of Taiheiyo Cement Corporation:
OpinionWe have audited the consolidated financial statements, which comprise the consolidated balance sheet,the consolidated statement of income, the consolidated statement of changes in net assets and the related
notes of Taiheiyo Cement Corporation (“the Company”) and its consolidated subsidiaries (collectively
referred to as “the Group"), as at March 31, 2020 and for the year from April 1, 2019 to March 31, 2020in accordance with Article 444-4 of the Companies Act.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position and the results of operations of the Group for the period, forwhich the consolidated financial statements were prepared, in accordance with accounting principles
generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Consolidated Financial Statements section of our report. We are independent of the Group inaccordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Responsibilities of Management and Corporate auditors and the board of corporate auditors for
the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’
performance of their duties including the design, implementation and maintenance of the Group’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with auditing standards generally accepted in Japan will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.

41

(Translation)

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an opinion
on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting andbased on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.

Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation, structure
and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.
We communicate with corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company and its
subsidiaries which are required to be disclosed pursuant to the provisions of the Certified Public
Accountants Act of Japan.
Reiji Kobayashi (Seal)
Designated Engagement Partner
Certified Public Accountant
Akihisa Sada (Seal)
Designated Engagement Partner
Certified Public Accountant
Yoshiaki Sekine (Seal)
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Tokyo Office, JapanMay 21, 202042

(Translation)

Independent Auditor’s Report
The Board of Directors of Taiheiyo Cement Corporation:
OpinionWe have audited the financial statements, which comprise the balance sheet, the statement of income,the statement of changes in net assets and the related notes, and the supplementary schedules of Taiheiyo
Cement Corporation (“the Company”) as at March 31, 2020 and for the year from April 1, 2019 to March
31, 2020 in accordance with Article 436-2-1 of the Companies Act.
In our opinion, the financial statements and the supplementary schedules referred to above present fairly,
in all material respects, the financial position and the results of operations of the Company for the period,
for which the financial statements and the supplementary schedules were prepared, in accordance withaccounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Financial Statements and Others section of our report. We are independent of the Company inaccordance with the ethical requirements that are relevant to our audit of the financial statements in Japan,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors for
the Financial Statements and Others
Management is responsible for the preparation and fair presentation of the financial statements and the
supplementary schedules in accordance with accounting principles generally accepted in Japan, and forsuch internal control as management determines is necessary to enable the preparation of financial
statements and the supplementary schedules that are free from material misstatement, whether due tofraud or error.
In preparing the financial statements and the supplementary schedules, management is responsible forassessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern in accordance with accounting principles generally accepted in Japan and using thegoing concern basis of accounting unless management either intends to liquidate the Company or tocease operations, or has no realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’
performance of their duties including the design, implementation and maintenance of the Company’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements and Others
Our objectives are to obtain reasonable assurance about whether the financial statements and the
supplementary schedules as a whole are free from material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally
accepted in Japan will always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements andthe supplementary schedules.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements and the
supplementary schedules, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.

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(Translation)

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an opinion
on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting andbased on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the financial statements and the supplementary schedules or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Company to cease to continue as a going concern.

Evaluate whether the presentation and disclosures in the financial statements and the supplementaryschedules are in accordance with accounting standards generally accepted in Japan, the overall
presentation, structure and content of the financial statements and the supplementary schedules,
including the disclosures, and whether the financial statements and the supplementary schedules
represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company which arerequired to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
Reiji Kobayashi (Seal)
Designated Engagement Partner
Certified Public Accountant
Akihisa Sada (Seal)
Designated Engagement Partner
Certified Public Accountant
Yoshiaki Sekine (Seal)
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Tokyo Office, JapanMay 21, 2020.

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(Translation)
Board of Auditors’ Audit Report (Copy)

Audit Report
The Board of Auditors has prepared this Audit Report following deliberations based on the respective audit
reports prepared by Corporate Auditors in relation to the execution of duties by Directors for the 22nd fiscal termfrom April 1, 2019 to March 31, 2020. The report is as follows.
1. Method and Description of Audit by Corporate Auditors and the Board of Auditors(1) The Board of Auditors determined the audit policy, audit plan, etc., received reports from each Corporate
Auditor on the progress and results of his/her audit, in addition to receiving reports from Directors, etc. and the
Accounting Auditor on the execution status of their duties, and sought explanations as necessary.
(2) Each Corporate Auditor, based on the audit standards for Corporate Auditors established by the Board ofAuditors, followed the audit policy, audit plan, etc., communicated with Directors, the Internal Auditing
Department and other employees, etc., endeavored to collect information and develop an environment for theaudit, and implemented audits via the following methods.
1) We attended the meetings of the Board of Directors and other important meetings, received reports from
Directors, employees, etc. on the execution status of their duties, sought explanations as necessary, reviewed
important approval documents, etc., and investigated the status of operations and assets at the head office andprincipal places of business. With respect to subsidiaries, we verified the status of their management at theCompany’s major meetings, and requested explanation as necessary. We also communicated and exchanged
information with the directors, corporate auditors, etc. of subsidiaries by conducting site audits in accordancewith audit plans and holding regular meetings with the corporate auditors of major subsidiaries.
2) We also monitored and verified the content of the resolution passed by the Board of Directors regarding thedevelopment of a system to ensure that Directors comply with laws, ordinances and the Articles ofIncorporation in executing their duties and other systems stipulated in paragraphs 1 and 3 of Article 100 of theOrdinance for Enforcement of the Companies Act that are required to ensure proper operations of a company
group comprised of a stock company and its subsidiaries, as well as the status of the system developed
pursuant to such resolution (i.e., internal control system). In regards to internal controls over financial
reporting, we received reports from Directors, etc. and KPMG AZSA LLC on the evaluation and audit statusof such internal controls, and sought explanations as necessary.
3) We monitored and verified whether or not the Accounting Auditor had maintained its independence andwhether or not it had conducted its audit properly, received reports from the Accounting Auditor on theexecution status of its duties, and sought explanations as necessary. In addition, we were notified by the
Accounting Auditor that it is equipped with a system for ensuring that duties are performed properly (matterslisted in the items of Article 131 of the Company Accounting Ordinance) in accordance with the Quality
Control Standards for Audits (issued by the Business Accounting Council on October 28, 2005), etc., andsought explanations as necessary.
Based on the above methods, we examined the Business Report and its supplementary schedules,
Non-consolidated Financial Statements (i.e., Non-consolidated Balance Sheets, Non-consolidated Statements ofIncome, Non-consolidated Statements of Changes in Net Assets and Notes to the Non-Consolidated Financial
Statements) and their supplementary schedules as well as the Consolidated Financial Statements (i.e.,
Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Changes in Net
Assets and Notes to the Consolidated Financial Statements) for the fiscal year under review.

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(Translation)
2. Audit Results(1) Results of audit of Business Report, etc.
1. In our opinion, the Business Report and the supplementary schedules are in compliance with laws,
ordinances and the Articles of Incorporation, and fairly represent the Company’s position.
2. No material facts were identified regarding misconduct or violation of any laws, ordinances or the
Articles of Incorporation in relation to the execution of duties by Directors.
3. In our opinion, the Board of Directors’ resolution on the internal control system (including internal
controls over financial reporting) is adequate in content. We found no matters that need to be pointed
out in regards to the content of the records in the Business Report and the execution of duties by Directors
in relation to said internal control system. Of note, we received reports from Directors, etc. and KPMG
AZSA LLC that there are no material inadequacies to be disclosed in relation to internal controls overfinancial reporting as at the time of preparation of this Audit Report.
(2) Results of audit of Non-consolidated Financial Statements and their supplementary schedules
In our opinion, the methods and results of the audit conducted by Accounting Auditor KPMG AZSA LLC arereasonable.
(3) Results of audit of Consolidated Financial Statements
In our opinion, the methods and results of the audit conducted by Accounting Auditor KPMG AZSA LLC arereasonable.
May 25, 2020
Board of Auditors, Taiheiyo Cement Corporation
Corporate Auditor (Standing)Toshihide Nishimura[Seal]

Corporate Auditor (Standing)Shigeru Matsushima[Seal]

Outside Corporate Auditor

Wakako Mitani[Seal]

Outside Corporate Auditor

Yoshio Fujima[Seal]

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