Marumae Co., Ltd. Integrated Report 2022

Marumae Co., Ltd. Integrated Report 2022

Fiscal Year ended August 31, 2022

MARUMAEREPORT

2022

Marumae Co., Ltd.
2141 Onohara, Izumi, Kagoshima 899-0216, Japan
TEL: 0996-68-1152

https://www.marumae.com/en/index.html

Marumae Report 2022

Who we are

Other sectors

660¥

Semiconductor sector

6,382

¥

million(7.7%)

Sales ratio
Market share in JapanNet sales for fiscal year
ended August 2022

million(18.0%)

1¥8,585NO.

millionMarumae began as a plateworks engaged mainly intank fabrication and welding in 1965.
Our company name combines the Japanese words
maru, meaning to smooth things over or settle things
peacefully, and mae, meaning ahead or forward,
conveying our founder’s emphasis on pushing ahead
with business peacefully and smoothly.
We have inherited this mindset andattach importance to gaining new friends andallies rather than making enemies.

Marginal profit
per employee(¥10,000)

2,000

1,500

1,030

1,000

Location

1,477

1,349
1,156 1,187

Asaka City,
SaitamaPrefecture

500

2018

Izumi Factory
Takaono Factory

2019 2020 2021 2022
(Fiscal year)

Market Size andMarket Share

Changes in Number of Employees
and Number of Programmers

Market size
Marumae’s net sales
Market share(¥ billion)

100

(%)

(Persons)

10350

Turnover rate of regular
employees

(%)

10.0
324

9.3

2021
Turnover rate in
manufacturing*

300
80

8

273
250

7.1

5.9

60

5.7
40

3.8

4.4

4.6

6

6.3

204

150

168

241

199

188

7.5

4

212

264

100

1.59 2.12 2.24 3.04

4.59 4.02 4.39 5.37

50

8.59
0

2014 2015 2016 2017 2018 2019 2020 2021 2022
* According to our research(Fiscal year)

0

4.67
3.91

2.5

2

9.7%

2.50
0.70

36

41

53

61

60

2018 2019 2020 2021 2022
(Fiscal year)

Data

0

200

240

5.0

4.9

20

01

Non-programmers
Programmers

Turnover rate ofregular employees

Corporate governance* A flat panel display refers to any display appliance that uses a thinpanel design including liquid crystal displays, plasma displays, organic
EL displays, FED (field emission displays) and electronic papera leading manufacturer of vacuumwith cutting-edge technologies
capabilities

Sustainability

We develop and manufacture vacuum
components that serve as the core units ofsemiconductor and flat panel display (FPD*)
production equipment.
With our advanced technologies and supply
capabilities, we supply components to worldclass semiconductor and FPD production
equipment manufacturers.

Kanto Factory

Strategy

Izumi City,
Kagoshima Prefecture0

Aiming to becomponents,and supply

How we create value

Origin of Name

Changes in Marginal Profit
Per Employee

CEO Message

1,542

million(74.3%)

FPD sector¥

Introduction

At a Glance

1.25

02018 2019 2020 2021 2022
* Data obtained from the Ministryof Health, Labour and Welfare(Fiscal year)02

Marumae Report 2022

Long Track Record

2.36

2 Turbine blades for power plants

Special demand forsemiconductors during the
COVID crisis

3 Robotic parts
4 FPD sector
5 Semiconductor sector

Point

The market downturn triggered by
the Global Financial Crisis led tothe cancellation of large orders inthe solar sector and to the loss ofmarket share. Due to the increased
cost of upfront investments anddramatic fluctuations in exchange
rates, we reported losses.

Application for Business
Revitalization ADR

Net sales¥ billion

1.23

To get us out of the financial difficulties
caused by capital expenditure and thefinancial crisis, we applied for the Business
Revitalization ADR (Alternative Dispute
Resolution) procedure. Our new policy was
to carefully select business and not relyon the expansion of plant, equipment andemployees. We implemented a turnaroundplan focused on pivoting towards thesemiconductor sector and developing
technological capabilities.

4.58

4.38

1.20

4.00

4.01
0.89
3.03

2.12

2.00

0.45

0.43

1.26

1.17
0.93

0.49

0.26

1.16
0.12

0.12

0.10

0.005

2004 2005 2006 2007 2008 2009

0.05

0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (Fiscal year)
Plan

-0.04

Changes in
Business Portfolio
Semiconductor sector
FPD sector
Other sectors
Assembly
business*

1.10

0.48

2.00

10% 22%

-0.22

68%

56%

30%

FY20096%18%

8%FY2022

Data

-0.54

8%

Corporate governance

0.08

0.15

0.56

1.07

2.24

Sustainability

1.58

FY2006

03

6.00

0.76

0.93

When we started out in business, we harnessed ourtechnological capabilities to win more orders; however,in the years before the Global Financial Crisis, we wonorders that relied on equipment strength in terms oflarge-scale machinery and we neglected to improve ourtechnological capabilities. After the Global Financial Crisis,technological capabilities were necessary, but we expanded
the semiconductor business where less investment was
required. We also endeavor to make investments thatare commensurate to our capital strength and have also
increased our on-hand liquidity in case of market fluctuation.

1.68

5.36

Point

What we have
kept unchanged

Lessons learned from crisis¥ billion

Strategyof technology
3 Acquisition of new technologies
4 Pursuit of the fundamental
essences of things (approach)5 Differentiation based ontechnological capabilities

OperatingprofitA shift to three dimensional
semiconductor memory devices
resulted in growing demand for vacuum
components in our field of expertise.
Other new trends were high server
demand amid cloud growth and demand
for the replacement of HDD with SSD.

1 Solutions to customers’ problems
2 Pursuit (further development)

8.00

Expansion of demand forsemiconductor memory

Global Financial Crisis

 ince going into business, weShave always kept in mind andheld dear the following.

8.70

The spread of remote work during the
COVID crisis gave a further boost to thesemiconductor sector, which was alreadybooming thanks to server demand.

Point

Changes wehave made8.58

How we create value

1 Motorcycle parts

Point

CEO Message

Since going into business, wehave become involved in a wide
range of operating activities tokeep pace with the times.

There once was a time when we achieved
growth by leveraging our strength in terms ofplant and equipment to capture demand.
However, the management crisis we
experienced as a result of the 2008 Global
Financial Crisis prompted us to change ourbusiness strategy, and we reverted to our policy
at the time of our founding of carefully selecting
business from the viewpoint of profitability andefficiency and not relying on expansion of plant,
equipment and employees.
Believing that we will always have work
provided we have technology, we soughtbusiness growth driven by technologicalcapabilities.

Introduction

Growth Achieved byContinually Taking
on Challenges,
Learning,
and Improving

74%* The assembly business was discontinued with the closure of the Kumamoto Factory04

Marumae Report 2022

Four unique features

Strategically winning orders for consumables to
respond to the silicon cycle

Global Semiconductor
Market (Shipments)

The semiconductor production equipment market is significantly impacted by thesemiconductor demand cycle. We have therefore taken strategic action to win orders
for consumables. Consumables require advanced technologies to meet stringent
customer requirements; however, since demand for replacement parts arises every
3-12 months, we can expect to receive orders in a stable manner, regardless of
production equipment sales.

(¥ trillion)
100
80

Logic
MemoryOthersJapan

2times60(b US$)
140

WLP

120

Other logic
Foundry

100

MPU

80

NAND

60

DRAM

Sales weighting of consumables insemiconductor business (FY2022)

40
20

Semiconductor
1 demand set to
doublemarket is expected to
grow to ¥100 trillion by
2030, which is twice its
size in 2020.

Note: Forecasts are according to Mizuho Securities Co., Ltd
Source: Prepared by equity research division of Mizuho Securities Co.,
Ltd. based on data from SEMI and Gartner, Inc

Equipment demand set to
2 grow as much in the next
10 years as it has in thepast 30 years
To satisfy twice as muchsemiconductor demand, theproduction capacity built up
over the past 30 years willneed to be doubled over the
coming 10 years.

Largest share of Japanesemarket for vacuum components
used in semiconductor
production equipment

66%

Growthstrategy

Marumae’s
Our Core
Message

Four
UniqueFeatures

Integrated manufacturing system
for solving customers’ problems
Under our integrated manufacturing approach,Marumae single handedly carries out multiple individual
production processes which were formerly shared
out among different companies. We make products
according to customer requirements and provide aservice in the form of a factory system.

Four benefits of integrated manufacturing

FY2022

Net sales¥4.3 billion¥5.3 billion¥8.5 billion

Profit¥0.69 billion¥0.90 billion¥1.81 billion

Market share by
net sales

6.3%

7.1%

9.3%

Market share rank

3rd

2nd

1st
* According to our research

1Workers at each production
process can understand eachothers’ processes closely.

3

Shortens transportation lead times

2

Saves the customers a great
deal of trouble, as delivery
adjustments among multiple
processes are unnecessary

4

Marumae also takes care oftransportation where necessary,
reducing the cost of transporting
large components in particular

Why does Marumae acquire new technologies andadopt an integrated manufacturing approach?
Among our many processes, we aim to integrate the key technologies that influence
product strength as much as possible. If we do not possess the key technologies,
management is less stable: our customers may switch to another supplier, for example.
Further, the acquisition of new technologies not only enables integrated manufacturing
but also opens up new business areas and orders for new components. Naturally, thetechnologies involved in each process is highly specialized and it takes time to masterthem. Nonetheless, once technologies are deemed to be key technologies, we adopt a
medium to long term perspective and commit to investing our management resources-funds, people and equipment into the technologies.

Data

FY2021

ManufacturingsystemCorporate governance

FY20204

Sustainability

We boast the largest share of the Japanese market for
vacuum components used in semiconductor production
equipment. The main reason for this is our technicalcapabilities. Our customers ask us to deliver prototypes
in a short time frame. It is our programmers who meettheir needs. We employ 60 highly skilled programmers,
giving us a competitive advantage. To further improve
our prototyping skills, we are employing and training
more programmers and promoting the development ofprototyping environments. We will also aim to further
expand our market share by developing new customers
and establishing deeper ties with existing customers.
Industry share

05

3

Net sales ofconsumables

StrategyMarket
share

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022E
2023E
2024E
2025E
2026E

Forecast

Source: Prepared by Ministry of
Economy, Trade and Industry
based on data from Omdia

Growthopportunities The semiconductor

2

34%

0
2001 2010 2020 2025 2030

How we create value

1

Other products

200

CEO Message

40

Outlook for WFE Market

Introduction

Semiconductor market to grow to¥100 trillion by 2030

06

Marumae Report 2022

Our Products

explained in the semiconductor and FPD production processes
Semiconductors and liquid crystal screens are essential components of electronic devices.
Our products play a very important part in their production process. Here, we highlight our
main products, together with the production processes in which they are used.

Back-end
process

Photomask process

Design of a circuit pattern by
combining various circuits
together according to therequired function

Creation of a photomask
on which the pattern of thecircuit to be transferred to
the wafer is drawn

Exposure/development process

Transfer of the pattern of thecircuit to the surface of thewafer by exposure to lightusing the photomask

A

B
D
E

B
D
E

F

Etching processF

Removal of unwanted layer ofoxides and unwanted resistby etchingA

A vacuum chamber is a container used
to create a vacuum. A vacuum is createdby using a vacuum pump fitted to thevacuum chamber to suck the air out ofthe vacuum chamber. Vacuum chambers
are used in many semiconductor
production processes, such as exposure,film formation, etching and sputtering.

Consumables

Oxidation/Diffusion/CVD/
Ion implantation

Ion implantation and/or
thermal diffusion of the wafer,causing the silicon layer toact as a semiconductor

B

Slicing of the ingot using a
special diamond blade tocreate wafers

Wafer polishing

Wafer oxidation

Resist coating

Planarization

Polishing of the surface of
the wafer after slicing to giveit a mirror-like finish

Production of an oxide layeron the surface of the wafer
in a thermal diffusion furnace
in order to transfer a circuit
pattern to the wafer

Coating of the surface of
the wafer with a photoresist(a light-sensitive chemical)
to make the wafer lightsensitive

Polishing of the surface of
the wafer to make the pattern
flat or planar

07

Exposure

Development

Pattern inspection

Transfer of the circuit patternshape to the photoresist
coated on the substrate by
exposure to light using thephotomask

Development of the substrate
after exposure to light totransfer the circuit pattern in thephotoresist to the substrate

Inspection of the patternformed on the substrate tomeasure open/short of thecircuit pattern and detect any
foreign matter or other defects

Resist coating

Coating of the substrate thinly
and evenly with a photoresist(a light-sensitive chemical)

A
D
E
F

Film formation

Substrate cleaning

Resist stripping

Sputter deposition of metallic
films and deposition of insulating
films through plasma-enhanced
chemical vapor deposition (CVD),
in order to form TFT

Cleaning of the glass
substrate with a brush andchemicals to remove any dirt
and contaminants that mightcause defects

Removal of unwanted
photoresist after dry etching

A
D
E

E

A showerhead is a component that
evenly supplies gas to the wafer/glass
substrate as needed in the semiconductor
production process/FPD production
process. It, therefore, has manyhigh precision pores and a complex
arrangement of gas channels inside it.

F
Dry etching

Removal of film unmasked byresist with plasma etching

Semiconductor showerhead

Heater (for semiconductors and LCDs)

Diverse heaters are used in thesemiconductor production process as
the process requires strict temperature
control. In the CVD process and etchingprocess, film formation and oxide layer
removal take place in high temperatureenvironments and a stage heater is used
to achieve high precision temperature
control of wafers.

Data

Thermal treatment of thinfilms to bring the substrateproperties into play andimprove performance

Photomask fabrication

Creation of a photomask
on which the TFT circuit
pattern or CF circuit pattern
to be transferred to the glass
substrate is drawn

The upper electrode is directly above
the wafer in semiconductor production
equipment and directly above the glass
substrate in FPD production equipment,
and it is the electrode that discharges
gas through the hole and generates
plasma at high frequencies.

Corporate governance

Annealing

Circuit design

Design of a circuit diagram
through the arrangementof pixels and surrounding
circuits according to therequired function

Upper electrodeSustainability

Back-end
process

Arrayprocess(for semiconductors and LCDs)

Sputtering or sputter deposition isa technique to deposit thin films on
substrates by introducing an inert gas toa vacuum chamber, charging negative
voltage into the target material to forma glow discharge, and causing theejection of atoms from the surface of thetarget to form a film on the substrate.
High purity aluminum and titanium areused as sputtering targets.

D

LCD manufacturing
process

Sputtering targets

Strategy

Production of the silicon single
crystals (ingots) that form thebasis of semiconductors

Ingot slicing

Electrostatic chuck

An electrostatic chuck (ESC) is a chuckused in semiconductor production
chambers when shaping, according to
the design, the silicon wafers, which is
to be used as semiconductor substratematerials. The ESC holds the wafers using
an electrostatic force and is an importantcomponent that influences semiconductor
production efficiency.

C
Ingot production process

Vacuum chamber

How we create value

Circuit design

ACore units of production equipment

Electrode formation

Formation of an aluminum
metal layer for electrodewiring on the surface of thewafer with inert-gas plasmas

CEO Message

Frontend process

C

Wafer inspection

Testing of each chip on the wafer
to determine if it is functional or
not and marking of any defects

Processes in which our main products are used

Semiconductor
production process

B

Main products

Introduction

Our main products

A
B

08

Marumae Report 2022

Our Vision

P21

Leading innovation inmachining technologies that are the very origins of Marumae.
capabilities to become a leading company in component machining
in a wide range of areas.

CEO Message

We do not compromise when it comes to the precision
We aim to harness our advanced technologies and supply
that supports comprehensive manufacturers

cutting-edge technology.

Introduction

Our Vision

How we create value

Corporate Philosophy
Strategy
Sustainability

1.Seek technological perfection
2.Respect competition andcollaboration
3.Contribute to society
as a company focusedon technology

CONTENTS

01 Introduction
01

17 How we create value
17

33 Sustainability

Who we are

Value Creation Process

33

Sustainability

47

Directors

03

Long Track Record

19

Stakeholder Engagement

35

Material Issues

49

05

Four unique features

21

Long-Term Vision37

Description of Material Issues

07

Our Products09

Our VisionCorporate Governance
Message from Chairpersonof the Audit and Supervisory
Committee

11 CEO Message
CEO Message

57

Financial statements for
11 years/ESG Data
Balance Sheet

58

Statements of Income

59

Statements of Cash Flows60

Company Overview

55

23

New Medium-term Business Plan

25

Financial Strategy

Editorial Policy

Forward-Looking Statements

27

KPI
Explanation of Strategies/
Semiconductor sector
Explanation of Strategies/
FPD sector, Other sectors

The MARUMAE REPORT has been designed for shareholders, investors, and otherstakeholders. Viewing it as a communication tool for engaging in dialogue with all of our
stakeholders, we have prepared this report with the aim of presenting, in a clear and coherent
manner, our initiatives for achieving sustainable growth in both financial and non-financial
terms, such as our environmental, social, and governance initiatives. In accordance with theseobjectives, we referenced the approaches of the Ministry of Economy, Trade and Industry’s
Guidance for Collaborative Value Creation and the International Integrated Reporting Council’sInternational Integrated Reporting Framework in the production of this report.

The forecasts for Marumae’s future business results within thisreport reflect the current analysis of the Company based on
information available at the time of preparation. Readers are
cautioned that actual business results and other outcomes may
differ from these forecasts due to a variety of factors, including
economic trends and the Company’s operating environment.
Period under Review: Fiscal 2022 (September 1, 2021 toAugust 31, 2022)

29
31

09

54

55 DataData

11

23 Strategy

47 Corporate governanceCorporate governancePhoto: V iew of the inside of Izumi Factory seen from the second floor

10Marumae Report 2022

CEO Message

Introduction

CEO Message
Toshikazu Maeda

How we create value

Leveraging our advanced
technological capabilities
to become a leading company
in component machining

CEO Message

President and Representative Director

Summary of the Previous Medium-term Business Plan

Corporate governanceinvested in plant and equipment for components used insolar cell manufacturing equipment in anticipation of
future market expansion. The Global Financial Crisis
happened just when, faced with a rapidly expanding
solar cell market, we had made investment in plant andequipment which was very significant for us, given ourcapital and financial strength. The favorable market
conditions changed overnight, preventing us fromutilizing the plant and equipment we had actively invested
in and putting us in a very tough management situation.
In light of this experience, we came to strive for“management that does not rely on assets/equipment.”
This means innovating business operations to win orders
for new work by increasing our technological capabilities
rather than relying solely on plant and equipment.
Developing a corporate structure for keeping fixed costs
low through technological advancement and initiatives
such as manufacturing automation using robotics, whilst
at the same time minimizing CAPEX and staff increases
as much as possible, and becoming a truly self-directed,
autonomous organization befitting of a listed company-this is the business innovation we are striving for.
Unfortunately, as things stand, we are not there yet.

Sustainability

In fiscal 2019, we launched our Medium-term Business
Plan “Innovation 2022,” with “business innovation” as
our goal. Originally, it was a three-year plan covering theperiod from fiscal 2019 through fiscal 2021; however,our business environment changed suddenly due to thedramatic slowdown of the semiconductor
manufacturing equipment market. We decided toextend the plan period by one year and to revise ournumerical targets at the same time (revising our net
sales target from ¥8 billion to ¥7 billion and ouroperating profit target from ¥2.4 billion to ¥2.0 billion. In
the end, our results for fiscal 2022 were net sales of¥8.5 billion and operating profit of ¥2.3 billion, partly
thanks to recovery of the business environment fromfiscal 2021 through fiscal 2022. I think that, for the mostpart, we managed to achieve our numerical targets;however, this was largely down to favorable market
conditions and there were still issues to be addressed
when it came to our goal of business innovation.
We had a painful experience in the 2008 Global
Financial Crisis. At the time, Marumae’s core products
were components used in flat panel display
manufacturing equipment; however, we had aggressively

Strategy

Although we achieved our numerical targets,“business innovation” is still a work in progress

Data

11

12

Marumae Report 2022

CEO Message

Launch of New Medium-term Business Plan “Innovation 2025”

Key Numerical Targets under the
Medium-term Business Plan
Innovation 2025

Net sales¥7 billion¥14 billion

Operating profit¥2 billion¥4.2 billion

18%

23%

Assetbased
ROIC
Liabilitybased
Payoutratio

14%
30 %or above

35 %or above¥20** If the bottom line is a loss, the minimum annual dividend per share may be revised

Projections for Capital Expenditure andProduction Capacity*1(¥ billion)

Capital expenditure (forecast) CF basis
Depreciation (current forecast) (Cost of products manufactured)
Semiconductor manufacturing capacity (monthly production)*2
FPD manufacturing capacity (monthly production)*2

2.0

2.0

2.0

1.5
1.07

1.0

0.95

0.75

0.5

1.16

1.2

1.07

0.20

0.25

0.10
0.25

2023/82024/82025/8

0.0(Fiscal year)*1 Forecast as of the end of the fiscal year
*2 P roduction capacity is maximum capacity obtained by adding up themachine capacities and, therefore, differs from actual production. Human
resources must also be secured and trained in order to expand capacity. This
investment includes investments in solar panels and storage batteries forachieving carbon neutrality

Marumae’s Competitive Advantages

Semiconductor market estimated at ¥100 trillion by 2030

Marumae’s technological capabilities underpinning high productivity
Sustainability

will pursue even greater productivity by further
refining and developing these “technologicalcapabilities.”

Corporate governance

Our Position in Relation to Our Competitors(%)

25

Marumae

20
15
10
5

Data

Next, I would like to explain Marumae’s competitive
advantages, which will be key to achieving the new
Medium-term Business Plan. One of Marumae’s
advantages is high productivity. Our operating
profit margin is at least 10% higher than that of ourcompetitors. This high productivity is underpinnedby our technological capabilities. Differences intechnological capabilities are difficult to explain in
writing but I believe that our different experiences
and conditions stemming from our history make ourtechnological capabilities different from those of
our competitors. We have experienced various
types of business, having made motorbike
components, turbine blades and robot
components. Some of these have been mass
produced items and some single items, giving us
experience in various ways of making components.
Many of our competitors on the other hand rely
heavily on specific customers and many are
specialists in semiconductor manufacturing
equipment. Our diverse technologies and the
manufacturing expertise we have gained throughexperience form the basis of Marumae today. We

Net profit (margin)

Meanwhile, in the FPD market, too, we expect tosee continued capital investment in OLED and organic
EL panels for China and also for South Korea, Taiwan
and Japan in the medium to long term. In fiscal 2020,
demand hit a record high due to “stay-at-homedemand;” however, in fiscal 2023, capital investment
for FPDs in China is expected to slow, causing
demand to stagnate temporarily as well.
On the other hand, the recent surge in publicdemand for “sustainable energy” has led to growing
demand for components for solar cell manufacturing
equipment and inquiries have increased. This is a field
to which we can divert our FPD production capacity;
however, given the difficulty of projecting the outlook,
we will take action based on an assessment of ourspare FPD production capacity.
As regards capital expenditure, as long as
demand is growing, we will continue making investment
to meet such demand; however, our intention is to makethe minimum investment necessary to achieve our net
sales target for the final fiscal year (¥14 billion). Under“Innovation 2025,” we plan CAPEX of ¥2 billion in fiscal
2023, which is the first fiscal year of the plan, ¥2 billion

Strategy

Shareholder
returns
Minimum
annualdividend

19%

in fiscal 2024, and ¥1.2 billion in fiscal 2025, which is the
final fiscal year of the plan.
Turning to shareholder returns, our basic policy
on dividends is to maintain a dividend payout ratioof 35% or above (compared with 30% under theprevious Medium-term Business Plan) and to aim fora minimum annual dividend of ¥20 (compared with
¥10 under the previous Medium-term BusinessPlan). As a listed company, we place emphasis on
ensuring profit through the achievement of businessgrowth and returning profit to shareholders in theform of dividends. Our business is in a growth phaseand this is a time to invest in plant and equipment
accordingly; however, we have no intention of
cutting dividends in order to accumulate capital. We
will distribute cash in a way which balances thesecompeting priorities.

How we create value

Innovation 2022

Medium-term Outlook for Market Environment

Currently, Marumae’s main battleground is the market for
semiconductor manufacturing equipment. Demand forsemiconductors is expected to grow significantly in themedium to long term despite short-term swings in the
supply and demand of semiconductors known as thesilicon cycle. Especially between now and 2030, market
forecasters estimate the market will grow to ¥100 trillion,
which is around twice its size in 2020. This means that weare now in a phase when the production capacity ofsemiconductor manufacturing equipment that has been
built up by the market over the past 30 years will be
doubled in the space of 10 years. This presents us, as amanufacturer of components for semiconductor
manufacturing equipment, with a great growth
opportunity. The period between now and the middle of2023 corresponds to a negative phase (when demandworsens) in the aforementioned silicon cycle; however,since we strategically handle consumable parts, which areless sensitive to market conditions, we expect the decline
to be small compared with the slump in new equipment.
Under the new Medium-term Business Plan, we willcontinue leveraging our strengths and endeavoring tostrategically increase the consumable parts we handle.

13

whole. I believe this will result in even greater
productivity and help us to achieve our numericaltargets and I think this will turn us into a company thatis able to withstand dramatic market changes.

CEO Message

We have now formulated the new Medium-term
Business Plan “Innovation 2025” covering the threeyear period from fiscal 2023 through fiscal 2025. The
new plan also includes the issues which still needaddressing from the previous plan. Our numericaltargets under the new plan are net sales of ¥14.0
billion, operating profit of ¥4.2 billion, an OP margin of
30%, asset-based ROIC of 23%, and liability-based
ROIC of 19%. The slogan is still “Innovation”; however,this reflects our determination to achieve the business
innovation goal which was only half achieved under
the previous Medium-term Business Plan. By realizing
business innovation, we aim to become a “robust
company” capable of withstanding dramatic changes
in market conditions on the scale of the Global
Financial Crisis. This is our first aim over the next
three years.
Another aim over the coming three years is toacquire new “key technologies.” Currently, cutting
technology is Marumae’s key technology; however, inorder to move to the next stage, it is important toenhance our technological diversity by acquiring newtechnologies. Meanwhile, for our existing technologies
also, we will increase the number of engineers andraise the skill level of individual engineers to increase
the volume of technology across the company as a

Introduction

Aiming to be a “robust company” capable ofwithstanding rapidly changing market conditions

0
0

2.0

4.0

6.0

8.0

10.0

(%)

Market Share* According to our research in 2022

14

Marumae Report 2022

CEO Message

Capacity to respond to demand spikes essential for
expansion of market share

In recent years, investors and other stakeholders havebecome more and more interested in the ESG
performance of companies. Under such conditions, wefeel we need to actively focus on evolving and improving
to meet ESG criteria more than ever before. The ESG
Committee is an organization for developing andadvancing our ESG initiatives. To ensure the committee
functions effectively and organically, it is chaired by an
Outside Director and features members not only fromadministrative divisions but also from a wide range ofother business units including production control
divisions on the manufacturing frontline. The Board of
Directors has the ESG Committee present the results of
its activities at monthly board meetings and, even on
themes which had previously proven difficult to tackle in
the past such as the reduction of effluent discharged in

our manufacturing processes, positive results havestarted to emerge thanks to the constructive ideas put
forward by people on the frontline and theirimplementation.
Furthermore, we aim to achieve carbon neutrality
by 2050 and our biggest challenge is how to achieve
electricity supply sustainability in our manufacturing
processes (electricity accounts for more than 99% of
the energy used in our business). While one approachis to purchase renewable energy from othercompanies, our policy is to create the electricity we
use ourselves, without relying on other companies
where possible. By installing solar panels and power
storage batteries at our factories, we will first reduce
CO 2 emissions per marginal profit by 50% or morecompared with fiscal 2021 by 2030.

Intention behind formulation of Long-term Vision

Actively investing in people to secure engineers andimprove employee satisfaction

Aiming to be a corporate group which achieves sustainablegrowth, unaffected by the trends of specific markets
range of other business areas and new markets. Thisis another reason why we need to increase new “keytechnologies” and create a foothold in new businessareas. The technologies we have today will all
eventually become obsolete. The constant pursuit ofadvanced technologies and new technologies is key.
We would like to leave behind a company which
provides stable employment for younger generations
not only 10 years from now but for years beyond that.
Our Long-term Vision positioned the period between
now and 2030 as a period for achieving strong
growth driven by the semiconductor business whileat the same time preparing for the years beyond thattime horizon. Working together, we aim to harness
our advanced technological capabilities to be aleading company in component machining that
supports comprehensive manufacturers in a wide
range of areas. Marumae has a promising future
ahead of it.

Data

We recently formulated our first ever Long-term
Vision, with 2030 as the time horizon. Currently, ourbusiness structure is such that our growth is being
driven by the semiconductor market. The flip side ofthis is that we are severely affected by semiconductor
market fluctuations. Significant growth of thesemiconductor market between now and 2030 isregarded as a certainty; however, there is also no
denying that the way semiconductor manufacturing
equipment is made may change or that the vacuums
for semiconductor equipment we specialize in may nolonger be needed and, precisely because the market
is growing now, these possibilities should, in ourview, be regarded as risks. To some degree this is thesense of danger we developed as a result ofexperiencing tough times during the Global Financial
Crisis. We concluded that, whilst striving to expand
the semiconductor business area as much as
possible, we must also prepare ourselves for a wide

Corporate governancedemonstrate their potential and to develop a
performance evaluation system which is acceptable toour employees. The successful implementation of suchmeasures should then also help us secure talented
employees. In September 2022, we granted an
additional 20 days holiday, increasing annual holiday
from 101 days to 121, which in retrospect we somewhat
think that we should have done sooner. As for theevaluation system, we already have performancerelated pay, determining pay based on performance;
however, in the future, we intend to raise the pay levels
themselves. Since “human capital” is our mostimportant form of capital, we are committed to properly
investing in people. In addition to securing humanresources, we intend to work on improving employee
satisfaction by constantly evolving and making
incremental improvements in areas such as theimplementation of training plans, the development ofwork environments and personnel systems.

Sustainability

Human capital underpinning competitive advantage

Marumae’s competitive advantage is underpinned by“human capital.” Above all, the programmers whodevelop the manufacturing methods for products andwrite manufacturing programs are central to ourtechnological capabilities. Mid-career recruitment ofprogrammers with the high level of skills we require isdifficult and we recruit graduates, as a general rule. We
spend about five years training new graduates, having
them take on a range of challenges whilst allowing
failure. Since time for training tends to be limited whenwork is busy, we need to further develop a framework
to allow people to grow even when they are busy.
To realize our new Medium-term Business Plan
and become a corporate group which grows in a moresustainable manner, it is essential that we increase theskills level of individual employees and at the same time
continuously increase the number of talented engineers.
To this end, it is important to create a comfortable work
environment where employees can energetically15

and the various capital procurement options that comewith being a listed company. We also have a great dealof space, taking advantage of our Kagoshima site andcan, therefore, respond to demand spikes more flexibly
than our competitors. Flexibility to meet demand is oneof our advantages.

Aiming to develop our own power generation and power storage
systems, without relying on other companies for renewable energy

Strategy

Our final strength is our “capital strength.” Thesemiconductor market is characterized by demand
spikes and manufacturers cannot increase their market
share unless they have the equipment capacity to meetsuch demand. Many of our competitors are unlistedcompanies; however, Marumae has the credit standing

Striving for carbon neutrality

How we create value

possessed by individuals in teams called R&D Group(now Technology Section). By ensuring that anyone
can use the organization's knowledge in theirproduction activities, we succeeded in establishing amore stable manufacturing approach without
variations in productivity. We have also changed oursales approach to enable us to specialize in repeatpurchase products (consumables) for semiconductor
manufacturing equipment, which require a high levelof technological expertise. By doing this, we willaccumulate new knowledge about advanced
technologies and can enhance the technologicalcapabilities of the company as a whole. We havemade concerted efforts for three or four years tochange our sales approach and manufacturing
approach, resulting in the high productivity seen
today. There is still much room for improvement and
we are ready to evolve further.

CEO Message

Another important factor for increasing productivity isa “knowledge sharing framework.” Prior to the Global
Financial Crisis, Marumae adopted the same
approach as its competitors, putting individual
engineers in charge of entire projects, from productplanning to manufacturing programs, machine
operation and product finishing. However, under thisapproach, productivity varies from person to person.
This is because time to completion differs dependingon the experience and ability of the engineer.
Individuals who took longer to complete tasks also
worked more overtime and were sometimes required
to work through the night. Under this approach,individual engineers are also put under considerable
strain and the development of human resources also
takes an enormous amount of time. To remedy thissituation, we decided to create a “knowledge sharing
framework,” pooling the manufacturing expertise

Introduction“Knowledge sharing” for the elimination of variations in productivity

16

Marumae Report 2022

Value Creation Process

Business
Environment
Analysis

Medium-term Business Plan

Capital Allocation

P33

P26

P19

Number of employees: 324
Programmers: 60
Training Hours: 2,514 hours

 elationships of trust with customers
RBusiness foundations in local
communities
Manufacturing industry in Kagoshima
Prefecture listed on the Prime Market of
the TSE arumae Manufacturing System-AchievementMof both prototyping and mass production at ahigh level
Programming knowhow-Unrivalled andunique manufacturing expertise based on
business experience
R&D expenditure: ¥137.15 million
Number of registered patents: 4
Capital investment: ¥1,744.66 million
Machine tools owned: 168 units (industryleading)
24/7 automated production line
Manufacturing staff: 260(plus 63 temporary employees)
Number of Safety Committee meetings: 36
Raw materials (aluminum, stainless steel, etc.)
Energy consumption: 8,147.4MW/h
Of which, solar power generation:
658.5MW/hInvestment in solar power generation:¥41.14 million
Water usage: 29,941t

Total assets: ¥12,552.94 million
Shareholders’ equity: ¥7,299.08 million
Interest-bearing debt: ¥3,250.31 million

Production process

OutputRefining the very best
technologies to solve
customers’ problems
6

Qualityassurance

Sales ofconsumables

Areas forimprovement
and goals

19.7%

Net sales ofconsumables¥0.3 billion

OthersAntenna cases

Motorbikes

0.8%

1.2%

5.9%
Our unique manufacturing system
which realizes reproducible
prototyping by performing highly
complex prototyping and mass
production of consistent high quality
on the same production lines

Development of programmers
Continuous improvements to create
pleasant work environments

 mployment ratio of peopleE
who have disabilities: 2.94%
Wellbeing of employees andtheir families

 ontinuous improvement ofCthe evaluation system
Provision of welfare benefits
Diversity training

Subcontract expenses: ¥1,305.7 million
Number of subcontractors: 59

 evelopment and strengthening of relationships from a customer perspectiveDQuality improvement measures to improve customer satisfaction
Prevention of release of defective products through inspectionImprovement of marginal profit per employee (¥14.77 million)*3
 ccumulation of know-how and experience
A

Areas forimprovement
and goals

RobotsMarumae Manufacturing System stablishment of HR strategy
Elinked to management strategy
Companywide implementation ofstrategic HR development plan urnover rate of regular employees: 3.91%
T(Average turnover rate in Japan: 13.9%)
Ratio of women: 22.53%
Ratio of women in managerial
positions*2:10.0%

Sales ofconsumables

4

Production
planning

 umber of new hires: 73
N(men: 60, women: 13)
Number of regular
employees who left theirjobs: 7

 umber of customers dealt with during the period: 38
NTax: ¥369.91 million¥4.1 billion

FPD components

3

Areas forimprovement
and goals

65.6%

Net sales ofconsumables

Capitalinvestment

Programmingknow-how

OrdersOther
products
34.4%

Other
products
80.3%

Competitive advantage

2

Semiconductors components

Production

Cutting
Technologies

1 reparation for establishment of HRPdivisionsEstablishment of HR Strategy Committee
Additional 20 days of annual paid leave
Average annual salary: ¥6,158 thousand5

Key technology

Technology
development

Outcome (Fiscal 2022)

Breakdown by
application

Diversification of key technologies

 ewly introduced manufacturing equipment: 38 units
NMonthly production capacity: ¥750 million

Areas forimprovement
and goals

 umber of new prototypes: 254
N
Rework ratio per marginal profit: 1.12%

 evelopment of environment enablingD
concentration on prototypingImprovement of quality through strengtheningof Quality Assurance Department

Safety indicator - TRIFR: 13.07*4

 nowledge sharing through collaboration between factories
KProvision of effective safety training
Work safety analysis and measures

 HG emissions per marginal profit: 0.559 t-CO2 /¥ million *5
GRate of reduction through renewable energy: 7.5%
Waste fluid disposal ratio per marginal profit: 0.02%

Rework ratio per marginal profit: 1.12%
Recycling: 1,144t
CDP score: D

Areas forimprovement
and goals

Improvement of CDP score though environmental-related
disclosures and strengthening of environmental measures

Solar cells

91.7%
By-products
Experience/Technology/
Production knowhow/Chips/Heat/
Mist/GHG (greenhouse gases)

Waste
Wastewater/Industrial waste

Initiatives to achieve carbon neutrality
Analysis of climate-related risks

 et sales: ¥8,585.02 million
NOperating profit: ¥2,361.6 million
Marginal profit per employee: ¥14.77 million*3
Operating margin: 27.5%

Areas forimprovement
and goals

By
FY2025

 PS: 142.58 yen
EAsset-based ROIC: 17.9%
Liability-based ROIC: 15.6%
Total amount of dividends: ¥461.02 million

 et sales: ¥14.0 billion/Operating profit: ¥4.2 billion
N
Marginal profit per employee: ¥20.0 million

Data

Financial
CapitalContinuous and constructive dialogue
Stakeholder engagement

Corporate governance

NaturalCapitalSustainable Strategy

Innovation 2025

Sustainability

Manufacturing
CapitalLeading innovation in cuttingedge technology.

StrategyIntellectual
CapitalLong-Term Vision

How we create value

SocialCapital

Risks

P23

Input (Fiscal 2022)
Human
CapitalEquipment production lags due toparts shortages
Demand fluctuations insemiconductor and FPD markets
Supply chain decoupling
Fierce competition to secure
human resources

CEO Message

Strategies

Opportunities

Semiconductor market estimated at ¥100
trillion by 2030
Construction of semiconductor plants worldwide
Support for semiconductor-related business as
part of national policy
Growing PV*1 demand alongside expansion
in demand for renewable energy

Introduction

Value Creation Process

Asset-based ROIC: 23% or above
Liability-based ROIC: 19% or above*1 PV stands for “Photovoltaics” and refers to solar power generation *2 Ratio in position of Group Manager or higher *3 Includes temporary employees*4 TRIFR is the rate of recordable injuries that occur per million hours worked calculated as follows: total number of occupational accidents ÷ total actual working hours ×1,000,000*5 Scope 1 and Scope 2 emissions

17

18

Marumae Report 2022

Stakeholder engagement

m
to
us
C
ca P
p i r ov
ta id
la e
nd rs
fu of
nd
s
c o Pam r tn
pa e
ni r
es
Em
t h ple i oy
rf e
am es
ili
es
d
ci

et

y

an

 ystem allowing integration of multiple
S
processes

Flexible capital investment

 table supply of high quality products at
Sreasonable prices

Continual improvement activities

Stable growth, rising stock price, and dividends
Sound financial structure
ESG initiatives

Development of new technology

 reparation of medium-term business plansPand other equity plans
Information sharing with financial institutions
Establishment and implementation of ESG plans

Stable orders

Expansion of repeat orders

Maintenance of financial soundness

Maintenance of a certain equity ratio

Maintenance of competitivenessImprovement of technological capabilities

Reasonable prices

Orders for high added value products

Better work-life balanceAdditional holidays

Higher pay

Pay increases and performance-based pay system

Job satisfaction

Improvement of evaluation system

Pleasant workplaces

Improvement of work environments

 reation of employment/Contribution toCdevelopment of local economies
Safe environment
Reduction of environmental impact
Compliance with laws and regulations

Increased employment, payment of taxes, andnaming rights
Enhancement of safety training
Reduction of consumables, and use of renewables
 ncouragement of acquisition of various licenses
Eand permits, and compliance training

Data

Marumae is committed to fulfilling its corporate social
responsibility by paying its taxes and contributing tocultural activities. We also recognize the importance ofbuilding relationships of trust with local communities andcomplying with laws and regulations. Consequently, we
are focusing on social activities such as acquiring namingrights and providing compliance training.

Communication with designers and proposals

Corporate governanceOur business depends on our technological capabilities, inother words, the knowledge and skills of all our divisions.
To steadily accumulate and improve such technologicalcapabilities, we intend to improve our working environment
and evaluation system to increase employee satisfaction,
make it easier to recruit talent, and maintain and improve
our retention rate. To this end, we are engaged in dialogue
with employees and implementing improvements throughthe HR Strategy Committee.

Production capacity to meet spikes in demand

Sustainability

We conduct our business activities in collaboration
with partner companies. To achieve stable supply andhigh quality, we communicate closely with our partnercompanies. Furthermore, in the interests of maintaining
sound corporate governance, we build equitable, fair andtransparent partnerships with them.

High-precision machining of complex shapes

StrategySo

Our business is supported by capital from ourshareholders and loans from financial institutions and,thanks to these funds, we can meet customer demandthrough flexible capital investment. We regularly engage
in dialogue with our investors to ensure we live up to their
expectations and we share information with financial
institutions as appropriate to fulfil our responsibility tokeep them informed.

How we respond

How we create value

19

Marumae has achieved growth by solving the problems
faced by our customers, who are world-class equipment
manufacturers. We always seek to communicate closelywith customers so that we can quickly notice thechallenges they face and propose solutions.

Our stakeholders’ interests

CEO Messageers

Why we engage

Our name “Marumae” conveys our desire to move forward (mae in Japanese) with business smoothly
and peacefully (maruku in Japanese).
Our business has moved forward in the past thanks to the support of our various stakeholders. In the
future, we intend to build win-win relationships with our stakeholders through continued dialogue and tocollaborate with them as we continue advancing forward.

Introduction

Stakeholder Engagement

20Marumae Report 2022

Long-Term Vision(¥ billion)
30.0

15.0

In the past, a medium-term business plan with a timeframeof three or four years has served as the basis for
management; however, we have now formulated a Longterm Vision with 2030 as the target year and are adopting
a more long-term management perspective.
During the plan period, we will achieve growth alongside
the robust growth of the semiconductor market and at thesame time we will prepare for the next great growth phase.
We will aim for technological diversity through the
expansion of key technologies.

Net sales¥
Innovation
2025
Innovation
2022

Sales target¥14.0 billion

Evolution
2018

Sales target¥7.0 billion

Operating profit:¥4.2 billion

Sales target¥4.0 billion

Operating profit:¥2.0 billion

Operating profit:¥1.0 billion

9.0 billion

30%¥

Achieved target of
doubling sales

POINT

FPD
OthersContinue“innovation”

Between now and 2030,
majority of sales will comefrom semiconductor business

Period for preparing for changes insemiconductor production methods from2030 which will cause demand to dry up

Harnessing of key
technologies owned todevelop new business areas

How we create value

Leading innovation in cuttingedge technology.

Semiconductors
7.5

Operating margin

Simultaneous achievement of growth and preparation for next growth period

Achieved
target of
doubling sales

New medium-term business plan
“Innovation 2025” (net sales)

30.0 billion

Operating profit

CEO Message

22.5

Our Vision 2030

Focus on our origins in high-precision machining technology and become a leading
parts manufacturer by using our advanced technologies and supply capacity to support
comprehensive manufacturers in a wide range of areas.

Introduction

Long-Term Vision

0’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

’20

’21

’22 ’23’24’25’30 (Fiscal year)

Forecast

Strategy

Reasoning behind Vision

The global semiconductor market will most likely growsignificantly between now and 2030. Forecasters predict
it will double in size, growing from around ¥50 trillion in2020 to ¥100 trillion by 2030. As a result, the market for
semiconductor production equipment is also sure to
grow considerably.

Although market growth can be expected between now
and 2030, due to changes in manufacturing methods,
there is no guarantee that our vacuum components
and cutting technologies, which are currently in strong
demand, will continue being sought after. Since vacuum
components in particular account for a large proportionof our sales, we need to recognize this as a risk.

Solutions
To address this risk, we will enhance our technology
and diversify our key technologies. Leveraging morediverse key technologies, we will seek to diversify
our operations. We believe this means making moreversatile technologies into our key technologies.
Developing technological capabilities and systems
which will be picked not only by the semiconductor
market but by various markets is key.

VisionBy addressing risks, we will achieve our vision.
Advanced technology will give rise to high added
value and increase productivity. As a result, we will
be capable of generating high profit and achieving
stable growth. Between now and 2030, we will refine
our technological capabilities for the next growthphase, whilst at the same time achieving growth in thesemiconductor production equipment market.

Global semiconductor market (shipments)(¥ trillion)
100
80

Logic
Memory60

OthersJapan

40

2 times

20

2001

2010

2020

2025

2030

(Year)

Forecast

Source: Prepared by Ministry of Economy, Trade and Industry basedon data from Omdia

21

Diversity of operations

Component manufacturer with advanced
technological capabilities

Development of semiconductor equipment
without vacuum components

Diversity of technologies

High production capacity

Market fluctuations in the
FPD business

Expansion of versatile technologies

High productivity

Development of FPD equipment
without vacuum components

Enhancement of key technologies

Manufacturer dealing with a wide
range of business areas

Obsolescence oftechnologies owned

Diversity through M&A

Stable growth

Data

0

Market fluctuations in thesemiconductor businessCorporate governance

IssuesSustainability

Market Situation

22

Marumae Report 2022

New Medium-term Business Plan

KGI
New Medium-term Business Plan

Key Measures

Total over 3 years

Business growth2023-2025

Investment as abasis forInvestment plan

Capital investment

Monitoring the
progress of measures

KPI

Business strategies

Introduction

For achieving(Expansion of manufacturing capacity)

2018 2022 2025

Factories

P29

1 Expand manufacturing capacity
2 Aim to stabilize orders by strengthening

Auxiliary equipment

consumables(¥ billion)

3 Focus on processes where growth canbe expected

0.10

Net sales¥

4.5 billion

8.5 billion

¥

0.19

14.0

0.50

0.03

¥

FPD businessbillion

0.10
0.10

Aiming to create a company that will last forever,
we adopted “innovation” as the policy of our new

high productivity while keeping assets and fixed
costs to a minimum through companywide DX.

panelsOperatingprofit

1.2 billion¥

2.3 billion

¥

¥

4.2
billion

1.58

FY20231.40

1.00

FY2024

created by withdrawal of competitors

Other businesses

FY2025P32

Since the technological capabilities that underpin

1 E xpand orders for solar cell production

our strengths are the aggregation of skills of ourequipment

2 Focus on new areas such as spaceindustry, including satellites

a top priority.
ROIC
Asset-based

16.3%

17.9%

23

Hiring plan%

Human resources strategies

Turnover rate of regular
employees

Number of existing employees

1% or less

Planned number of hires

Japanese market for FPD production equipment (¥ billion)

ROIC
Liability-based

11.5%

15.6%

19

4,742.2
3,923.9

4,136.0

191

179

12

213
11

11

Improve work environments
Introduce new personnel systems
Develop engineers

%
179

179

191

202

3,861.4

Promote diversification
P41

FY2023

FY2024FY20252,847.3

Welfare expenditure per
employee¥120,000 per year
Ratio of female regular
employees

20% or higher
Ratio of female managers

18% or higher
Employment ratio of people
who have disabilities

Sustainabilty

Sustainable investment

Sustainability strategies

3.0%

By 2030
2019

2020

2021

2022

2023

2024
(Fiscal year)

3.7

-6.0

-20

50

Semiconductor
growth rate (%)

44.4

7.0

-5.0

20

Source: M arket Forecast Report Semiconductor and FPD Manufacturing(FY2022 - FY2024) Equipment Released in January 2023 by
Semiconductor Equipment Association of Japan (SEAJ)

23(Compared to FY2021)

By 2050

Achievement ofcarbon neutrality

From August 2023 to August 2025

Solar power
generation equipment

208¥

millionSet aside budget of ¥640 million
for the gradual installation ofsolar panels between now and
FY2030

Solar power
generation atfactories
Reduction of
Scope 3 emissions

Data

FPD growth rate (%)

50% reduction

Corporate governance

FY20222,548.8

202

Sustainability

Market Outlook

Programmers

Develop 100
programmers

Strategy

employees, we will also focus on HR measures asJapanese market for semiconductor production equipment (¥ billion)

Market share

Maintain No.1
share

3 Increase market share in oligopoly

medium-term business plan. To achieve growth ina fluctuating market environment, we will aim for

P31

1 O
 ffer many processes as a one-stop-shop
2 Meet needs for large area organic EL

How we create value

Innovation

Semiconductor business achinery and equipment (includingMequipment other than machine tools)

CEO Message

Innovation 2025

Evolution Innovation Innovation

P42

24

Marumae Report 2022

Financial Strategy

Financial Strategy

Reason for emphasizing ROIC
ROIC Tree

ROIC

Capital turnover ratio

18.2

Control variable costs

Control capital

Control fixed costs
Control expenses
Increase machinery
operating rates

ROIC (Liability-based)

18.8
16.9

17.9
16.3

15
10.8

14.7

12.1

14.8

10

11.2
10.3

15.6

10.0
11.5
5.9

6.1
5.1

2015

2016

2017

2018

2019

2020

2021

2022

+Borrowing

Shareholder returns
Target dividend payout ratio of 35% or more
Our profit distribution policy is to make investmentsfrom a long-term perspective and to aim for profit
distribution based on profitability, taking operating
results and financial conditions into consideration. We
consider the dividend payout ratio when calculating
dividends. Our medium-term business plan “Innovation
2025” states that if the bottom line is a loss, theminimum annual dividend per share may be revised;however, we have set a target dividend payout ratio of
35% or more and a minimum annual dividend of ¥20.
We also implement share buybacks flexibly and in
the event of sudden share price fluctuations that are
not based on fundamentals, we implement sharebuybacks for the signaling effect*1. Most recently, we
implemented share buybacks of ¥161 million in
FY2020 and ¥400 million in FY2022. Share buybacks
improve ROE (Return on Equity), and improve earnings
per share and net assets per share.

Total return ratio(%)

Dividend

75

Treasury stock
59.8

50

44.0

47.4

42.3
27.5

25

15.6

23.4

22.0

31.2

2015

2016

2017

2018

2019

2020

22.0
25.4

18.9

0

2021

2022

Trends in dividends(¥)

Dividend per share*2

75
50

48

25
0

7.7

4.3

2014

M&A

9.7

0

2013

*Our target dividend
payout ratio is 35% ormore. (Newly added)

20
6

7.5

10

2015

2016

2017

2018

15

17

2019

2020

24

2021

2022

*1 T
 he signaling effect is when investors perceive dividend measures, etc. as a signal and try to infer from them the information held by management and management's true intentions*2 D
 ividend per share has been calculated as if stock splits conducted on March 1, 2014 (100-for-1 split), September 1, 2015 (3-for-1 split), and March 1, 2017 (2-for-1 split) had takenplace at the beginning of fiscal 2013

Data

5

Shareholder
returns

Corporate governance

ROIC (Asset-based)

20

Cash flows
from operating
activities

Sustainability

Increase machinery
operating rates

Trend of ROIC(%)

Organic growth(capital
investment)* Ratios are subject to change
depending on the market
environment

Profit margin

Improve marginal
profit per employee

Cash Allocation

Strategy

Aiming to increase capital utilization as much as possible
and achieve greater production efficiency, we haveadopted ROIC as our most important management
indicator. Our policy is to achieve our ROIC target level
not by reducing capital and liabilities but by realizing ahigh level of operating profit while controlling capital.
Since ROIC is operating profit divided by invested capital(interest-bearing liabilities plus equity capital), it can beused to measure profitability relative to the costs ofraising capital from shareholders and creditors and is a
useful indicator for Marumae, which has a high capital
investment to sales ratio.
Based on the assumption of a Weighted Average
Cost of Capital (WACC) of 8%, our policy is to proactively
implement capital investments that result in ROIC
exceeding WACC (excluding ESG investments). Under
our medium-term business plan “Innovation 2025,” weset a liability-based ROIC target of 19.0% and a assetbased ROIC target of 23.0%.

In addition to improving the profitability of businessitself, we will also reliably implement measures toincrease cash flow efficiency, including improving
inventory efficiency and shortening lead times. Ourpolicy when allocating cash flow from operations is to
strike a balance between making capital investment
and returning profits to shareholders. Since a lower
shareholder return ratio leads to the build-up of too
much capital and a lower ROIC, our policy is toincrease capital efficiency by striking a balance
between capital investment and shareholder returns.
Based on this policy, in fiscal 2022, capital
investment amounted to ¥1,740 million (78.3% of cash
flow from operating activities) and total shareholder
return was ¥860 million (38.7% of cash flow fromoperating activities).
Our capital investment policy is to actively makecapital investments on condition that they willcontribute to achievement of the ROIC target and,during recessionary periods, we actively consider
M&A and use on-hand liquidity as funds.

How we create value

Management with emphasis on ROIC

Cash allocation backed by cash generation capabilities

CEO Message

Our basic approach is to adopt financial strategies thatwill allow us to maintain an equity ratio of 50%. It is also
our policy to ensure around ¥3.0 billion in readily
convertible liquid assets (combined total of notes
receivable, electronic receivables, accounts receivableand other operating receivables, and cash anddeposits) in case of economic fluctuation or inreadiness for agile M&A.
Our capital investment policy is to makeinvestments that ensure we do not miss out on

opportunities, provided such investments arefinancially safe. When making capital investments, one
investment criteria is that the investment must
contribute to improvement in ROIC.
If we borrow for capital investment, we make it arule to align the borrowing period with the depreciation
period and fund half of the capital investment
ourselves and the other half with borrowing, thereby
ensuring on-hand liquidity.
In addition, during recessionary periods, we
actively consider M&A and use on-hand liquidity as
funds. Our policy is to make a careful reassessment tobalance our finances when considering M&A.

Introduction

Basic approach

Cash Allocation(Fiscal year)25

26Marumae Report 2022

KPI

Non-financial KPIs

Machine operating rates

Number of programmers

Profit margin

30

Scope 1 and 2 emissions intensity (per marginal profit)

(%)

(%)30

(Persons)(Tons-CO 2 /¥ million)

100

30 30
20

100

1.0

80

0.8

79.1

75.0

80

51.7

60

63.8

56.9

20

22.5
20.4

20 20
10

2019

2020

2021

2022

41

2019

2020

2021

(Fiscal year)

0.777

0.594

0.559

0.4
0.2

0
2018

0.6

0.828
0.712

0

2022

2018

2019

2020

2021

(Fiscal year)

2022

2018

2019

2020

2021

2022

(Fiscal year)(Fiscal year)

The profit margin, which is our KGI, is operating profit
from our main business as a percentage of sales.
Depreciation of equipment is a fixed cost and the higher
the operating time, the lower the cost per machine,which means the product cost is lower and the profit
margin is higher.

We set the number of programmers as an indicatorfor strengthening our future business because
programmers win new orders by thinking about
how to make products and providing customers
with prototypes.

Due to society's growing awareness of climatechange, action on climate change has emerged as arisk factor, prompting us to monitor our monthly CO 2
emissions, with the aim of achieving carbon neutrality
by 2050.

Total operating time

Marginal profit

Wastewater treatment volume/Marginal profit

Ratio of female employees(Hours)(¥ million)(L/¥ million)

300,000

6,000

30.0

277,146

250,000
200,000

4,000

182,012
151,468
126,820

25.0

3,000

142,924

20.0

3,716
3,103
2,596

2,995

2,000

10.0

50,000

1,000

5.0

0
2018

2019

2020

2021

2022

18.4

2019

2020

12.15

13.33

12.68

12.5
11.17

9.0
10.00
6.0

2021

(Fiscal year)

2022

6.98

6.45

5.56

3.0

0
2018

12.0

21.2

Ratio of female managers

15.0

100,000

0

Ratio of female regular employees

15.0

2018

2019

4.0

4.9

2020

2021

3.45
0
2022

2018

2019

2020

2021

2022

(Fiscal year)(Fiscal year)(Fiscal year)

Marginal profit is sales less variable costs (costs thatfluctuate when sales go up and down: material costs,
subcontract costs, consumable costs, etc.) and issimilar to the sum of internally generated added value.
We use total operating time as a leading indicator for
marginal profit.

By reducing the volume of waste water we generate
through promotion of the recycling of cutting fluid usedin cutting and cleaning fluid, we aim to mitigate ourenvironmental impact and cut costs by purchasing less.*1

Believing that a workplace which encourages diversity
is beneficial for everyone, we adopted the ratio of
female employees, who are the biggest minority group,
as an indicator and aim to increase the ratio of female
regular employees to 20% or more and the ratio of
female managers*2 to 18% or more by fiscal 2030.

Labor productivity

Equipment productivity

Employment ratio of people who have disabilities

Rate of childcare leave taken

(%)

200

3.0

1,600

1,477

1,349
1,200

1,030

1,156

1,187

160

171
150

155

176

80

400

40

0

1.0

2.29

2020

2021

2022

100

Female
100

100

Male
100

—

100

75

1.89
50
0.7

25

25

0.5

0
2019

2.5

1.5

800

2018

2.76

2.0

122

120

(%)
2.94

0
2018

2019

2020

2021

2022
(Fiscal year)

We define labor productivity as marginal profit
per employee, calculated based on all employees
including temporary employees. Since our inception,
we have used this marginal profit per employee as our
KPI, and our 2025 target is annual marginal profit per
employee of ¥20 million.

We define equipment productivity as marginal profit
per item of property, plant and equipment excluding
land and buildings. We verify the ratio of marginal
profit generated by property, plant and equipment andreflect this in our medium-term capital investment plan.

2019

2020

2021

2022

0

0

2018

2019

2020

0

0

2021

2022

(Fiscal year)

We encourage the employment of persons withdisabilities, utilizing the specific skills of individuals
and establishing ways in which they can effectively
contribute to our business activities.

(Fiscal year)

We began monitoring the rate of childcare leave taken
to develop a more worker-friendly environment. The rateof childcare leave taken by men has remained at a low
level in the past; however, we are implementing initiatives
to make it easier for those eligible to take leave byconsidering how they feel.

Data(Fiscal year)

02018

Corporate governance

(%)

2,000

Sustainability

Total operating time is the total cutting time of all
machines. The added value of our products comes fromcutting and this cutting time is, therefore, the sourceof added value, and total operating time has a similar
relationship with added value (= marginal profit).

(¥10,000)

Strategy

150,000

5,717

5,000

(%)
29.9

How we create value

We monitor and analyze machine operating rates as a
KPI every week and use these results to achieve efficient
operations in subsequent weeks. Machine operating
rates indicate cutting time per week as a percentage
of target cutting time per week and are used as a leadindicator for the profit margin.

CEO Message

0 0
2018

36

60

20

0

0

53

40

10 10
0

20

61

60

12.3

10

40

27.5

26.9

Introduction

Financial KPIs

*1 In fiscal 2022, our wastewater emissions increased due to wastewater accumulated for reuse; however, wastewater emissions are expected to decrease in the future*2 The number in managerial positions means the number in the position of group leader or higher, excluding chief technician, technician and assistant technician

27

28

Marumae Report 2022

Explanation of Strategies/Semiconductor sector

Businessstrategies

Introduction

Medium-term Business Plan

Innovation 2025

Semiconductor sector
14.0 billion

Sales plan¥

OthersFPD+ Others business+¥750 million
FPD: Invest to increase capacity
Others: Aim for orders for PV* andman-made satellites¥8.3
billionExisting customers(FPD)
New customers(semiconductor)

New customer semiconductor
orders+¥2.0 billion
Aim to expand mass production
orders from already acquired newcustomers
Existing customer semiconductor
orders +¥2.95 billion
Reduce lost opportunities by
expanding investment to increase
capacity.
Also strengthen prototyping
capabilities at the same time
FY8/25* PV is the abbreviation for photovoltaics. It refers to solar power generation

Key Measures 1

Measures to mitigate risks

Fluctuations in themarket environment

Increase orders for
consumables
Develop new businessControl fixed costs

Falling prices forordersEnhanced added value by
acquiring new technologies
Reduce costs through DX andgreater productivity

Insufficient
prototyping
capabilities for thenumber of customers

Increase personnel through thedevelopment of programmers
Establish production system
specializing in prototyping

Fierce competition
to secure humanresources

Establish HR divisions
Improve employee satisfaction

Strategy

FY8/22(At launch of mediumterm business plan)

Existing customers(semiconductor)

The semiconductor market is prone to sudden
fluctuations in supply and demand. We aim to reduce
fixed costs and make losses less likely in the event offluctuations in supply and demand. At the same time, wewill strategically increase orders of consumables which
are always in demand. In addition, we plan to masternew high added value key technologies to increase thescope of orders received and we will offer more added
value and strengthen our price competitiveness.
To strengthen our prototyping capabilities in linewith customer numbers, we will provide training andincrease employees, aiming to form prototyping groups
for different customers and teams capable of getting
multiple products off the ground at the same time.
In measures to secure human resources, we will
strengthen our recruitment capabilities by establishing
HR divisions and we will also focus on developing thework environment, including increasing the number ofholidays, enhancing employee welfare benefits, andencouraging diversity.

Envisaged risks

Expand manufacturing capacity
Izumi Factory and site of planned construction (Izumi City, Kagoshima Prefecture)

Key Measures 2

Key Measures 3¥1,250
million

Focus on processes where
growth can be expectedSustainability

Seek to stabilize orders bystrengthening consumables

Comparison of
manufacturing capacity

Growth rate

Ratio of consumable components
(%)

¥250
million400

FPD sector

Other products

Sales ofconsumables

34.4%

65.6%
Semiconductor
sector¥150
million300

CVD equipment
Other processes

200

FY8/22¥1,000 Semiconductor
million sector

100

¥600
million

0
05

/3

/3

/3
07

03

3

/3
21
20
/3
19
20
/3
17
20
/3
15
20
/3
13
20
/3
11
20
/3
09

20

20

20

20

9/

(Year)

Source: Global Semiconductor Manufacturing Equipment Sales Statistics 2000~
2022 compiled by Semiconductor Equipment Association of Japan (SEAJ)

Out of the semiconductor production processes, we focus
on the etching and CVD processes in particular. This isbecause the growth potential for these processes is greaterthan for other processes due to a structural increase in thenumber of equipment units, reflecting increased demandfor 3D NAND and the popularity of double patterning.

Data

When making capital investments, we takeequipment efficiency and our target ROIC level into
consideration to ensure that each piece of machineryis operating at the optimum level.

/301

To meet the increasing requirements of customers, wedraw up an investment plan every fiscal year and makeinvestment based on an assessment of the market
environment. As the empty space at Izumi Factory
gets filled up, we plan to establish a new factory.

20

End of Aug.
2025

We will aim to stabilize business by maintaining andexpanding orders for the consumable componentsof semiconductor production equipment, which are
replaced regularly every 3~12 months. Consumables
currently account for around 70% of sales. The ratio ofconsumables is relatively low when market conditions
are favorable and orders for new equipment arestrong, and rises when market conditions deteriorate.

919

Source: https://www.marumae.com/en/pdf/ir/presentation_material_for_financial_results_for_the_fiscal_year_ended_august_31_2022.pdf

29

Etching equipment

Corporate governance¥750
millionEnd of Aug.
2022

How we create value

In the semiconductor business, we aim for share
expansion exceeding market growth by expandingorders from existing customers and winning mass
production orders from new customers. In termsof capital investment, we will expand investment toincrease capacity and reduce lost opportunities,
while in terms of equipment operation, we will seek
to improve operating rates through automation. In
addition, as measures to strengthen our prototyping
capabilities, which will lead to growth of orders in thelong term, we will focus on achieving the systematicdevelopment of programmers and on continuously
winning prototyping orders.

Envisaged risks and measures tomitigate them

CEO Message

Demand for semiconductors is growing globally, and we manufacture the vacuum components of thesemiconductor production equipment used in the part of the semiconductor chip production process known assemiconductor wafer processing (the “pre-process”), which includes CVD, etching, coating and cleaning.

30

Marumae Report 2022

Explanation of Strategies/ FPD sector, Other sectors

Businessstrategies

Innovation 2025

FPD business¥1.5 billion

FY8/22> FY2022

FY8/25> FY2025

Key Measures 2

Offer many processes asa one-stop-shop

Other products

Sales ofconsumables

80.3%

19.7%
FY8/22> FY2022

Key Measures 3

Some competitors that manufacture components for
FPD production equipment, are withdrawing from themarket, and we will increase our share of the FPD market
by winning all their orders. Utilizing our large-scalemachining equipment, which is among the largest inJapan, we will strive to increase orders.

FY8/25> FY2025

Key Measures 2

Expand orders forsolar cell production
equipment

Focus on new areas
such as space industry,including satellites

Trend of sales of components for solar cell
production equipment

Development of new technologies and expansion
into new businesses(¥ million)

500

408

400

300

200

100

81
47

28

0
2018

2019

0
2020

2021

2022
(Fiscal year)

Especially in the solar cell production equipment
segment of the renewable energy market, there havebeen significant technological innovations in thin-film
solar cells for large-scale solar power generation plants.
Thin-film solar cells are compatible with our business andwill help improve productivity because the configurationof their production equipment is similar to that of FPD
production equipment.

We have started developing multiple new technologies
which we can use in the semiconductor business andother different businesses between now and 2030. We
plan to use these new technologies as key technologies
to create added value in our existing businesses andexpand into new businesses such as satellites and thespace industry.

Data

Focusing on metal cutting technologies, we will
acquire key technologies such as electronic beam
welding (EBW) and other welding technologies, surface
treatment technologies, and gun drilling technologies,
differentiating ourselves from our competitors which
specialize in a particular technology. In this way, we will
promote the development of a system that allows us tooffer many processes in a one-stop-shop service, andby shortening delivery times and reducing transportation
costs, we will expand our market share.

Increase market sharein oligopoly createdby withdrawal ofcompetitors

800 million

Corporate governance

FPD business¥

Sustainability

From 2023, demand for glass
substrates for organic EL
devices is expected to swing
away from the G5.5 size
(1300×1500mm) used mainly
for smartphone applications
towards the larger G8 size
(2200×2400mm), and we will
look to acquire orders for thelarger panels.

¥730 million

FY8/22> FY2022

Key Measures 1

Meet needs for large
area organic EL panels

Ratio of consumable components

Orders for components used in solar cell (PV)production equipment is increasing, reflecting growing
demand in China. Utilizing the production lines thathave surplus capacity due to weaker demand in the
FPD market for PV components will also have theeffect of improving operating rates at our factories. In
addition, we aim to develop new business, targetingareas such as the space industry, including man-madesatellites, where civilian space flights have begun.

Strategy

Key Measures 1

Sales plan

How we create value

In 2023, the market as a whole is expected tostagnate, with sluggish investment in LCD panels
due to weak demand, mainly reflecting the end ofstay-at-home demand, and with demand for organic
EL (OLED) also falling to half the level a year earlier.
Looking ahead, demand is likely to expand again from2024, on expectation of a resumption of investment
in G10.5 LCD panels in some areas, in addition to
the start of investment in G8 OLED. Despite thecurrent market slump, we will harness our unique
technologies and seek to expand our market share.

2.2 billion¥

In the Others Business segment, renewable energy is attracting increasing attention and the market isexpanding once again. Meanwhile, the space industry, including satellites, is also expected to grow. We
plan to leverage our versatile technologies in growing markets to expand sales of various components.

CEO Message

Sales plan

Other sectors

Businessstrategies

In products related to FPD production equipment, we manufacture mainly vacuum components used inprocesses for manufacturing LCD and organic EL panels such as CVD, sputtering, etching, ashing, coating
and bonding.

31

Introduction

Medium-term Business Plan

32

Marumae Report 2022

Sustainability

A sustainable society is indispensable for ensuring business continuity and establishinga foundation for growth Marumae has identified environmental, social, and governance(ESG) issues in relation to its business and is promoting initiatives pertaining to theseissues with a view to improving its corporate value over the medium to long term. When
identifying ESG issues, we continuously assess whether our actions are leading tocorporate value improvement, giving considerable thought to how these issues affectour corporate value.

3 workplace environment to enable

2 Aim to realize a sustainable society.

4 foundation.

Build on and improve theeveryone to actively participate.

Establish a robust management

STEP 1

STEP 2

STEP 3

STEP 4Extraction ofcandidates

Analysis ofcandidates

Selection ofcandidates

Identificationof candidates

Implementation of review
as appropriate in responseto changes in the external
environment

Aiming to Build a Sustainable Society

Material Issues (Materiality)

Data

2021. The committee’s role is to oversee whether
initiatives for addressing ESG issues are leading to an
improvement in corporate value and to report to theBoard of Directors as necessary.
Comprising the president and representative
director, one inside and one outside director, and nine
employees, the committee has in place a system thatfacilitates the deep involvement of directors.

Corporate governance

Identifying material issues (materiality) in relation to
ESG matters from a long-term perspective, the ESG
Committee drafts key performance indicators (KPIs)
and plans for solving these issues while serving as abody for monitoring initiatives.
Following consultation from the Board of
Directors, the committee was established as a
subcommittee of the Board of Directors in September

Sustainability

The ESG Committee (System for Promoting Sustainability)

The ESG Committee and the Board of Directors play
central roles in relation to material issues (materiality).
The ESG Committee is responsible for identifying
material issues (materiality), establishingcountermeasures, and monitoring progress on targets.
In the process of identifying material issues(materiality), the committee prioritizes issues based onan evaluation of their importance in terms of risks andopportunities. The content of all discussions at ESG
Committee meetings is reported to the Board of
Directors, which provides feedback.
Discussions about materiality (material issues)
began in 2020 and a CSR Plan was established.
Subsequently, the need to integrate ESG considerations
was discussed and we established the ESG Committee
to ensure the effectiveness of ESG activities. The ESG
Committee then took the lead role in reviewing the CSR
Plan and transforming it into an ESG Plan. Material
issues (materiality) and the ESG targets are reviewed
once a year in light of changes in the external environmentand our performance, as well as progress made. The
revisions made in 2022 were based on a review fromthe perspectives of the financial impact on us andsustainable improvement in corporate value, taking
stakeholder needs into consideration. We also tried to
set more effective numerical targets for our ESG
targets. The next two pages show some of the latest
revisions, focusing on critical material issues (materiality).

Strategy

Sustainability

Board of Directors

How we create value

ESG Committee

33

CEO Message

Contribute to our information-driven
society by supplying parts for1 sustainable semiconductor and flat
panel display production equipment.

When identifying material issues (materiality), the ESG
Committee classified “issues (materiality candidates)”
based on consideration of industry-specific issues,
impact on sustainable business growth, and financial
impact, referencing the SASB standards and ESG
evaluation criteria. The extracted issues were givenscores from the perspectives of “impact on our value
creation” and “impact for five main stakeholder
groups” to identify material issues (materiality). The
committee established countermeasures and targets
for each materiality, which were then deliberated andapproved by the Board of Directors.

Introduction

Process for Identifying
Key ESG Issues

Marumae’s Approach to Sustainability

34

Marumae Report 2022

Sustainability

Material Issues

1

Improvementof customer
satisfaction

FY2030Improvement of technological capabilities
Increase in orders
Gain of customer trust

 ecline in technological capabilities
DDecrease in new ordersL aunched programmer development projectBegan training

Capital investment

 chieve asset-based ROIC of 23%
AAchieve liability-based ROIC of 19%
Achieve marginal profit per employee of ¥20.0 million

FY2025

E xpansion of orders

Loss of opportunities to expand
orders chieved asset-based ROIC of 17.9%
AAchieved liability-based ROIC of 15.6%
Achieved marginal profit per employee of¥14.77 million*1

 uality, cost, delivery
Q(QCD) improvements chieve customer satisfaction (overall) score ofA
more than 4.57 out of 5

Every year uilding of customer trust
BIncreased orders and increased sales oss of customer trustLDecreased orders and decreasedsalesNew target

 iring and management ofHhuman resources stablish a team dedicated to developing humanEresources (create a personnel section)
Prepare and implement a human resource
development plan and increase investment in
training per employee

 ecuring and retention of humanS
resourcesL abor shortages

Improvement in technologicalcapabilities

Decline in technological capabilities evelopment of workD
environments chieve rate of parental leave by femaleA
employees of more than 75%
Achieve rate of parental leave and parentalrelated annual paid leave by male employees ofmore than 30%
Reduce turnover rate, achieving a regular
employee turnover rate or less than 1%
Achieve welfare expenditure per employee of¥120,000/year ealization of diversity andRequal opportunity

 chieve a ratio of female regular employees ofA
more than 20%
Achieve a ratio of female managers*2 of morethan 18%
Achieve a 3% employment ratio of people whohave disabilities
Hold meetings for female employees andpromote diversity at manufacturing sites

FY2025 aunched team dedicated to developing humanLresources

 eduction in employee stress/strain
RImprovement of commitment
Enhancement of motivation andperformance ecline in motivation andD
performance
Drain of human resources chieved rate of parental leave taken by femaleA
employees of 100%
Rate of parental leave taken by male employees
was 0%
Engaged in dialogue through HR Strategy Committee
Granted an additional 20 days of annual paid leaveL aunched company canteen projectEngaged in activities to encourage employees
to take parental leave

Demonstration of the skills of
individuals through equal opportunity
Creation of innovation
Elimination of discrimination and exclusion

 ecline in internationalD
competitivenessLoss of reputation

 chieved ratio of female regular employees ofA
11.2%
Achieved ratio of female managers of 10.0%
Employment ratio of people who havedisabilities 2.94%

FY2025

Avoidance of the risk of human rights
violations
Peace of mind stemming fromvisualization of human rights risks
Anticipatory compliance with regulations

 isks associated with human rights
R
violations
Loss of public trust

 pecified human rights policy in code ofS
conduct for us and for our partner companies

FY2050 undraising advantages
FAbility to cope with rising energy
prices isk of incurring carbon taxesRRisk of decline in business withbusiness partners
Business risks stemming fromtighter regulation

 ate of reduction through renewable energy:R
7.5%

 olume of waste fluid was 171,050L
V
The percentage of the marginal profit ratio
accounted for by packaging materials was
0.84%
The percentage of the marginal profit ratio
accounted for by costs arising fromremanufacturing due to defects was 1.12%

FY2025

FY2030(Ratio of female
employees)

FY2023(Employmentof persons withdisabilities)

FY2023(Meetings for female
employees)Implement human rights due diligence, takeaction on human rights, and make human rights
disclosures eduction of GHG
RemissionsUnderstanding of totalenergy consumption

Aim for carbon neutrality
Reduce CO 2 emissions per marginal profit by
50% or more compared with fiscal 2021 by 2030

Reduction of consumables

Reduce the volume of cutting fluid waste by 40%
compared with fiscal 2021
(target level of not more than 11,160L)
Reduce the percentage of the marginal profit ratio
accounted for by packaging materials by 10%
compared with fiscal 2021(target level of 0.394%)
Reduce the percentage of the marginal profit ratio
accounted for by costs arising fromremanufacturing due to defects by 40%
compared with fiscal 2021 (target level of 0.98%)

FY2030 eduction of costsRMitigation of environmental impact

Increased waste disposal costs
Delayed compliance withregulations
Environmental impacts

 ssessment of water riskA
and water stressEffective use of water onduct water risk and water stress assessments,
C
take action on water risk and water stress, andmake water risk and water stress disclosures

FY2026

 roposal of countermeasures in thePevent of drought ecreased production volume inDthe event of droughtNew target
Began monthly monitoring of water usage

Damage to employees’ healthLoss of reputation
Incurrence of penalties due toinfringements and costs forcorrective measures

Achieved a 100% participation rate in safety
training*3

 eduction of occupationalR
accidents
 ppropriate management
Aof chemical substancesEffective safety education

Ensure a 100% participation rate in safety training

FY2023

 afe and secure work environment
S
Compliance with regulations

7

Supply chain
management

Stable procurement andsupplyIdentify supply chain risks and take measures toaddress them

FY2026

Stable supply

Production difficulties
Reputational risks

 xplained code of conduct to partnerE
companies

8

Utilization of digitaltechnologies

Improvement of businessefficiency

Implement complete operation of schedulers
Make 12 DX business improvements

FY2023

 ost reductions through businessC
streamliningDecline in competitivenessIntegrated scheduling in fiscal > December, 2022
Made 19 DX business improvements

Development of effective
risk management system

Develop an effective enterprise risk management
system

FY2025

 reparation for a crisisPImprovement of resilience ulnerability stemming fromVchanges in the environment

New target

9

Robust corporate
governancesystems

Information security
measures stablish an Information Security CommitteeE
and take effective measures to address risks

FY2024

Stable operation
Avoidance of financial losses and lossof trust

 toppage of operations due to theSsuspension of systems
Leakage of information

 stablished Information Security CommitteeE
directly under Board of Directors*1 Includes temporary employees*2 Refers to position of Group Manager or higher*3 The safety training participation rate is the rate of participation as of February 2023 in safety training with April 2022 content. Employees taking a leave of absence are excluded from the calculation.

Data

6

Safe and secure
work environment

Corporate governance nalysis of human rights
Arisks and protection ofhuman rights

Sustainability

35

Progress

Strategy

5

Minimization ofenvironmental
impactRisks if not achieved

How we create value

4

Opportunities if achieved

Train 100 programmers

Human resources
strategies

Action on climatechangeTiming ofachievement

Strengthening of
prototyping capabilities

Human resources
development

3

Targets

CEO Message

2

Increase inproductivity

Themes of Initiatives

Introduction

Material Issues (Materiality)36

Marumae Report 2022

Description of Material Issues

2 satisfaction

Business Strategy

Reason for selection as new theme

It takes between five and ten years to train aprogrammer because programming requires a great
deal of knowledge and production experience. Thismeans we must plan from a long-term perspective and,in FY2022, we put together a team in charge ofprogrammer training, began training up programmers
and are developing a curriculum.

Progress and outlook

Increase the number of programmers to 100 by FY2030
Number of programmers(Persons)
100

100

61

60

53

50

36

Capital investment

41

0FY2018 FY2019 FY2020 FY2021 FY2022

FY2030

Impact of prototyping capabilities on business

Financial Strategy

37

Quality improvement measures

1

Improve production capacity to meet surges in demand2

Train highly skilled programmers to enable
prototyping for multiple products at the same time3

Reduce transportation through integrated production
in house, shortening lead times and lowering costs

4

Further develop work standards (manuals) to ensurestable quality that does not rely on high level of skill

Data

Our prototyping capabilities impact our businessearnings. Prototypes are necessary to win new orders
and prototypes which do not meet customer needs will
not help us win orders. It follows, therefore, that toexpand our earnings we must improve our programming
capabilities and secure the number of programmers
needed to do the volume of work required.

We added capital investment to themes of initiatives thistime because it is extremely important in order tocontinue meeting customer needs and has an enormous
impact on our sustainable business growth. In thegrowing semiconductor market, we need to quickly
supply products in response to sudden market
fluctuations and this requires us to make capital
investment in response to surges in demand. Moreover,the selection of equipment is key to the sustainablegeneration of profit. We predict the manufacturing
processes which are expected to increase in the medium
to long term and make investment decisions from theviewpoint of optimizing machine operations. Then, tomeasure investment efficiency, we use ROIC as amanagement indicator and monitor ROIC in monthly
management meetings. (Please refer to the financial
strategy section for further details of ROIC.)

In fiscal 2022, our customer satisfaction score was 4.20,
which was low compared with our record high of 4.57.
According to our analysis, this was mainly because we
had failed to increase our production capacity inresponse to sudden expansion in customer demand andcould not meet customers’ delivery requirements.
In accordance with our medium-term business planand fiscal year policy, we are implementing the following
improvement measures.

Corporate governance25

Measures to improve customer satisfaction

Sustainability

75

In FY2022, we established the Technology Section,
which is in charge of technology training and prototyping,and launched the programmer training project throughcollaboration between personnel staff and engineering
staff. Experienced engineers are playing a central role inpreparing the training content and are developing acurriculum which combines both lecture-based andpractical training. Training has already begun in some
operations and we are developing a curriculum whichcaters for different levels.

StrategyLong-term targets/indicators

Our business starts with the receipt of a customer orderand our business model consists of providing
technological solutions encompassing QCD (quality,
cost, delivery) and delivering products which meetcustomer requirements. By making continuous
improvements that solve customer problems, we aim to
improve customer satisfaction.
We have adopted the average customer score foroverall satisfaction in the customer satisfaction survey weconduct every year as an indicator for measuring
customer satisfaction and have selected this as a newmaterial issue (materiality).

How we create value

To win new orders, we need to provide many
prototypes to customers in a short timeframe. Since
programmers design and develop the programs used tomake prototypes, programmers play a central role inour manufacturing activities. Consequently, businessexpansion requires both improvement in thetechnological capabilities of programmers and anincrease in the number of programmers and these are
the two most important challenges for our business
continuity and for our business growth.

Quality, cost, delivery (QCD) improvements

CEO Message

Strengthening of prototyping capabilities

Introduction

Improvement of customer

Increase in

1 productivity

P25

38

Marumae Report 2022

Description of Material Issues

Introduction

resources
3 Humanstrategies

Issues to be Addressed
Hiring and management of human resources2

Human resources development

3

Development of work environments

4

Realization of diversity and equal opportunity

5

Analysis of human rights risks and protection ofhuman rights

We will create specialist business units to specialize
in hiring and enhancing hiring capabilities.

Improvement of employee satisfaction

2

To become the company of choice for employees,
we will focus on improving the work environment
and enhancing the evaluation system.

Promotion of diversity3

By developing an environment which allows
diverse human resources to actively participate,
we will develop a pleasant, comfortableenvironment for everyone.

Development of work
environments
The work environment significantly impacts theoutcomes of employees’ day-to-day work, our retention
rate and our hiring capabilities. After a few years, ouremployees become experienced in the technologies we
own and we accumulate more technologies and thedevelopment of a stable environment in which employees
can work for many years is, therefore, also important for
maintaining and passing on technological capabilities.
We have now added a turnover rate of less than 1% andwelfare expenditure per employee of ¥120,000 /year as
indicators of improvement in the work environment.

By FY2030

By FY2023

Ratio of female
full-time
employees

more than

Ratio of female
managers*

more than

Employment ratioof people whohave disabilities

20%
18%

3.0%

*Refers to position of Group Manager or higher

In fiscal 2023, with the aim of developing a comfortableand pleasant work environment for diverse humanresources, we will hold meetings for female employees toimprove the work environment at manufacturing sites.
Meetings for female employees are opportunities forfemale employees at manufacturing sites to propose
improvements to the work environment. Throughhearings, we will implement measures which will not only
make it easier for female employees to work but will also
held reduce the workload of male employees.

Corporate governanceIn fiscal 2022, we established the HR Strategy Committee
on the basis that an opportunity for regular dialogue was
required to improve our employees’ working environment.
Meetings are held at least once a month. The committee iscomposed on an employee representative from eachfactory, the President and Representative Director, internal
Directors, Executive Officers and department General
Managers. In fiscal 2022, talks were held to create aframework for increasing the number of holidays whilst
maintaining productivity.

1

Establishment of personnel divisions

As in the previous year, the development of humanresources is still positioned as a top priority issue and wewill continue taking action to address it.
Over the past year, we established a business unit
in charge of HR, drew up training plans for thedevelopment of engineers and laid the foundations fordeveloping a curriculum. We also provided training to all
employees on how to approach and manage their duties.
We are committed to continuing to train engineers aswell as to strengthening training for all employees in the
future. Further expansion in business scale will increase
the need for managerial skills across the company and we
will, therefore, also put effort into strengthening themanagement skills of those in managerial positions.

Over the past year, in conjunction with study groups andsite visits, we have discussed at great length why
diversity is necessary for us. As a result of these
discussions, we reached the conclusion that anenvironment in which female employees feel comfortableworking is a comfortable environment for everyone. We
concluded that developing an inclusive environment tofully draw out the potential of diverse individuals will help
strengthen our business in the future. We have, therefore,
added a target ratio of female employees to our target
employment ratio for persons with disabilities.

Sustainability

Strengthening dialogue with employees
through the launch of the HR Strategy
Committee

This year we will lay the foundations forthe development of human resources.
Going forward, we aim to strengthen ourmanagement capabilities and provide
company-wide training

Realization of diversity
and equal opportunity

Strategy1

In the interests of stable business continuity, we must
strategically hire and train up human resources and put
the right people in the right places.
The programmers responsible for our corebusiness operations require both knowledge andexperience and are, therefore, trained from acomparatively long-term perspective. Since
programmers will support our growth around five years
after joining the company, we will steadily hire newgraduates every year to lay the foundations for futurebusiness growth. The operators who contribute toproduction, on the other hand, become involved in
manufacturing activities on the production frontlines in ashort space of time and we will, therefore, hire operators
flexibly according the market supply and demand.

Human resources development

How we create value

Since the technological capabilities that underpin
Marumae’s strengths are the aggregation of skills of
our employees, we will focus on HR measures as a
top priority.

Hiring and management of
human resources

CEO Message

Recognition of Issues

Measures
Conduct dialogue with employees through HR Strategy
Committee

2

Improve work environment through hearings on areas for
improvement

3

Reduce workload by increasing business efficiency

Data

39

1

40

Marumae Report 2022

Description of Material Issues

4 Action on climate change

CEO Message

Interview

Reduction of GHG emissions
Climate change is a material issue, both interms of the risk it poses to Marumae andthe costs involved
Ratio of renewable energy used across all factories

Solar power

7.5%

Purchased
power

92.5%
FY8/22For details of carbon neutrality plan:
https://www.marumae.com/sus_5.html (only Japanese)

50%

Solar power

36%

FY8/30(Forecast)

Akiko Kadota

Reduction of
Scope 3 emissions
9

8,147
7.5

6,720

6,000

6

5,875

Reductionof Scope 3
emissions

20%

5,124

3,000

3

40%

2.4
0.3

0

0

0

20

2019

2020

162.5

2021

Energystorage/
Other

658.5

FY8/50(Forecast)

Solar
power

40%

Data

41

safety, human rights of workers and ethics at RBA
members and in their supply chains.
We believe that in addition to continuing to respecthuman rights, we need to increase transparency byfulfilling our responsibility to explain action taken on
human rights. To this end, we will conduct an analysis ofhuman rights risks, implement measures to address
them, and make human rights-related disclosures.

10%

(%)

Electricity(Solar power)
Rate of reduction through use of renewable energy

9,000

Corporate governance(MW/h)

Analysis of human rights risks and protection of human rights

Energystorage/
Other

4%

Rate of reduction through use of renewable energy

Sustainability

Purchased
power

Chair of ESG Committee andOutside Director

Marumae respects the human rights of its own workers
and supply chain workers and prohibits any kind ofactivity which violates human rights. Our policy onhuman rights and our suppliers’ code of conduct clearly
set out standards based on the Responsible Business
Alliance (RBA) Code of Conduct. RBA is a non-profit
coalition of electronics companies dedicated tocorporate social responsibility (CSR) in global supply
chains. It has established standards covering the labor

Strategy

Climate change is now a high priority for investors, thegovernment and business partners, giving rise to fundprocurement risks and legal risks, and the action we takeon climate change is now under scrutiny when it comes tocontinuing to business with business partners. Moreover,given the energy situation in recent years, thedevelopment of an environment for generating our own
energy is also one measure to address energy
procurement risk and the risk of fluctuation in energy
prices. Accordingly, we will use solar panels and power
storage batteries to generate our own electricity and aim
to achieve carbon neutrality by 2050.

How we create value

Making Marumae more inclusive
My parents’ house was a printers and as a child I used toplay in the workshop surrounded by the smells of ink andoil and the noise of machinery. When I grew up and joined
the company, I was told “women don’t work in
manufacturing because it’s the “3Ks” (Kitsui, Kitanai,
Kiken), which mean “Difficult, Dirty, and Dangerous.”
Surely it would be better to make factories where women
also want to work. To keep them clean instead of dirty. To
make them safe instead of dangerous. To come up with
innovations which will make it easy to work there insteadof difficult. Surely the 3Ks are a gold mine for innovation?
Marumae’s policy is to try to support sustainable
development through investment in people based on thetheme of “Innovation.” Human capital is priceless.
Precisely because the future is chaotic, the collective
strength of individuals each bringing diverse skills withthem constitutes our capital.
There is nothing to fear about workplaces whichgive opportunities to all individuals, regardless of theirgender, age, disability, nationality or other characteristics,
provided they have the ambition and ability to masterskills and contribute to the workplace.

Introduction

resources
3 Humanstrategies

02022(Fiscal year)

42Marumae Report 2022

Description of Material Issues

Introduction

Minimization ofenvironmental impact

5

CEO Message

Reduction of consumables
We believe that reducing consumables is important bothin terms of mitigating the environmental impact andreducing costs.
To tackle this issue, we manage budget versus
actual expenditure on consumables each month andcheck for unnecessary purchases and we also call on
employees to reduce consumables where appropriate.
We also expect to make further reductions by reviewing
our reduction methods.

Since our products are mainly machined aluminumcomponents, we can reduce the amount of aluminum
used by reducing defects. We will do this primarily byincreasing the skills of machine operators, reviewing
procedures, and maintaining equipment.

Reducing the percentage of the marginal
profit ratio accounted for by packaging
materials by 10% compared with fiscal 2021

1 materials
2 Reuse of materials

Wastewater treatment volume/Marginal profit
29.9

21.2

Cost of packaging materials/Marginal profit
1.5

1.14

0.95
0.84

1.12

0.98

1.11
0.76

0
FY2018 FY2019 FY2020 FY2021 FY2022

FY2030Assessment of water risk and water stress

0.73

Data

0.5

10

1.69

1.0

Recognizing the high level of interest in our water risks
among stakeholders because we belong to thesemiconductor market, we will implement and disclose
our analysis of water risks and water stress to fulfill our
responsibility of explaining to stakeholders. We use
water mainly for cutting fluid and cleaning and we dilute
the original cutting fluid around 10 to 20 times with water.
Cutting fluid is used to reduce the heat generated during
cutting and as lubrication.

(%)

1.0

18.5

2.0

Use of returnablecontainers

1.27

20

2.40

0.394
4.0

0
FY201843

FY2019FY2020

Corporate governance

3

30

3.0

Changes to

Measures to reducepackaging materials(L/¥ million)(%)

Sustainability

We will aim for reduction in packaging materials mainly
through three measures. Through the adoption of thesemeasures, we will seek not only to reduce the amount of
packaging materials but also to omit certain operations.
However, since changes to packaging materials need tobe approved by customers, we will tackle this issue froma long-term perspective.

Cost of remanufacturing due to defects/Marginal profit

StrategyOver the past year, we stepped up measures to reduce
fluid waste. We established the Equipment Engineering
Section, which is responsible for installing andmaintaining equipment, and are working to increase thelifetime of cutting fluid through the inhouse production ofequipment such as a cutting fluid filter and floating oilcollection system. We will also minimize cutting fluid
corrosion and reduce use of cutting fluid by teachingmachine operators how to use cutting fluid properly.

How we create value

Reducing the volume of cutting fluid
waste by 40% compared with fiscal 2021

Reducing the percentage of the marginal
profit ratio accounted for by costs arisingfrom remanufacturing due to defects by
40% compared with fiscal 2021

5.0

0
FY2021

FY2022*In fiscal 2022, our wastewater emissions were higher than usual due to thedisposal of wastewater accumulated for reuse; however, wastewater emissions are
expected to decrease in the future

FY2018 FY2019 FY2020 FY2021 FY2022

FY2030Cutting fluid being applied all around the tool during cutting

44

Marumae Report 2022

Description of Material Issues

8

FY8/19FY8/20FY8/21

FY8/22*1 Total number of occupational accidents ÷ total actual working
hours ×1,000,000

TRIFR*1

2.24

10.10

12.77

5.28

13.07

*2 Number of casualties due to industrial accidents requiring leaveof absence ÷ actual total number of hours worked × 1,000,000.

LTIFR*2

0.00

2.02

2.13

0.00

1.63

Hours worked

494,976

469,889

567,944

611,982

1

5

6

3

8

Number of casualties
due to industrial
accidents requiring
leave of absence of
one day or more

Person(s)

0

1

1

0

1

Person(s)

0

0

0

0

0

Person(s)

0

0

0

0

0

Number of workrelated fatalities

Hours(Internal)

Number of workrelated fatalities(Suppliers)

Introduced scheduler
We began using a scheduler for more efficient processplanning based on information stored in the core system.
Made 19 DX business improvements
We used technology such as RPA to automate
production frontline management processes.

Robust corporate
9 governance systems

Strategy

446,441

Number of workplace
Accidents
injuries *3Developing an effective enterprise risk management system

7 Supply chain management

Since risks may prevent the attainment of organizational
goals and affect business continuity, we will rebuild our
corporate management systems to make them more
effective. Given that risks are interrelated, we will build asystem for properly managing and addressing as anorganization the material risks that threaten our activities andfor optimizing decision making on how to address risks.

Production management for controlling the supply chain

45

The information systems we use to conduct business areconnected to networks and any network damage or
disruption would be enormously detrimental to ourbusiness. Information security incidents would likely
significantly impact our management, including the riskof reputational damage, the risk of losing customers andfinancial losses, and we consider information security
measures to be a high priority for management. We havetherefore established an Information Security Committee
directly under the Board of Directors to strengthen
oversight. Starting from fiscal 2023, we will identify andassess information security and cyber security-relatedrisks and implement measures to address them.

Information Security Committee
Chairperson (Director Kaizaki)
and Chief Information
Security Officer(CIO)

Board of Directors
Reporting of committee’s decisions
at Board of Directors’ meetings
Chief Information Security Officer(CISO)
Reporting of matters to beshared across divisions
Directors andDepartment General
Managers

Administrative Information
officesystems staff/
Takaono staff

Specified
Personal
Information
Officer

Kanto
Operations
Officer

Additional
members asnecessary(Divisional information
security officers)

Data

Outsourcing business processes to suppliers means that
we are also responsible for suppliers’ deliverables. We
believe we must, therefore, have a management system
for maintaining quality and preventing the occurrence ofenvironmental and social costs. Moreover, any delays inthe supply chain have knock-on effects for our
manufacturing activities and so we must also put in placemeasures to prevent or mitigate risks. To this end, we will
put in place a supply chain risk management system,
analyze risks and take measures to address them.

Corporate governance

Information security measures

Sustainability*3 In fiscal 2018, there was one accident not resulting in lost workdays. The cause of the accident not resulting in lost work days
was cut/abrasion (one accident).
In fiscal 2019, there was one accident requiring a leave ofabsence and four accidents not resulting in lost work days.
The cause of the accident requiring a leave of absence was afall on the same level (one accident), while the causes of theaccidents not resulting in lost work days were cut/abrasion(three accidents) and fall from height (one accident).
In fiscal 2020, there was one accident requiring a leave ofabsence and five accidents not resulting in lost work days. The
cause of the accident requiring a leave of absence was cut/abrasion (one accident), while the causes of the accidents not
resulting in lost work days were cut/abrasion (four accidents)and flying or falling object (one accident).
In fiscal 2021, there were three accidents not resulting in lostwork days. The causes of the accidents not resulting in lostwork days were cut/abrasion (three accidents).
In fiscal 2022, there was one accident requiring a leave ofabsence and seven accidents not resulting in lost work days.
The cause of the accident requiring a leave of absence wasbeing caught in a machine (one accident), while the causes of theaccidents not resulting in lost work days were cut/abrasion (three
accidents), fall from height (two accidents), being caught in amachine (one accident) and fall on the same level (one accident)

Performance in FY8/22

How we create value

FY8/18

Utilizing technologies is essential to improve theefficiency of business processes and strengthen
competitireness. We have our own in-house systemdevelopment operations and develop and modify
information systems to help improve efficiency on thefactory floor.
In fiscal 2022, we began using a scheduler forprocess planning. Real-time production data imported
on smartphones is reflected in the scheduler, allowing
actual progress to be monitored in the system.

CEO Message

our response to all occupational accidents was
discussed. As a result of analysis, we identified that the
primary cause of accidents was a lack of experience due
to an increase in personnel. We will respond to thesefindings by strengthening induction training on joining thecompany and regular safety training. We will then monitor
progress and verify the effectiveness of action taken.

Marumae manages safety through monthly Safety
Committee meetings. We take action whenever ahazardous situation is detected during a patrol. In
addition, any occupational accidents and measurestaken to address them are shared with all employees
during safety training. In fiscal 2022, the number ofoccupational accidents was the highest in 5 years andUnits

Utilization of digitaltechnologies

Embracing DX in production operations andadvancing toward overall optimization

Safety first in everything that we do

Breakdown

Introduction

6

Safe and secure work
environment

Matters the committee
wishes to share acrossdivisions are reported
at a meeting of generalmanagers and sharedacross operations

46

Marumae Report 2022

Directors

Directors (as of November 28, 2022)
Outside Outside Director

New Newly appointed

Introduction
CEO Message

Toshikazu Maeda

Kota Kaizaki

Hiroto Ando

Akiko Kadota

Position

President and Representative
Director (Responsible for overall
coordination/ Administration
Headquarters)

Director
General Manager, Sales
Headquarters (Responsible for
Sales Headquarters)

Director
General Manager,
Manufacturing & Technology
Headquarters(Responsible for Manufacturing
and Technology Headquarters)

Outside Director
Outside Director (Part-time)
Representative, Go! Kagoshima
Corporation

Advisory Committee member

Mr. Hiroto Ando isexperienced in themachining business andvery knowledgeable
about testing and productfinishing. Additionally,
due to his many years of
production management
experience gained throughinvolvement in quality
assurance operations,
Mr. Ando is also currently
serving as General
Manager of Manufacturing& Technology
Headquarters, overseeing
all our manufacturing
operations. He was elected
as Director because he isessential for execution of
the Company's production
operations.

Ms. Akiko Kadota
has profound insights
regarding the promotionof diversity, including theactive participation of
women in the workforce,in addition to her extensive
career and profoundinsights as a manager.
The Company expects her
to use this experience toplay a role in supervising
the execution of business
operations.

Outside Director
Outside Director (Part-time)

Independent (Outside)

Ms. Kumiko Seko has awealth of experience andbroad insights gained
through her involvementin national politics asa member of the Diet
and Parliamentary Vice
-Minister of Education,
Culture, Sports, Scienceand Technology, as wellas profound insights
regarding the promotionof diversity, including theactive participation of
women in the workforce.
The Company expects her
to use this experience toplay a role in supervising
the execution of business
operations.

Out
side

Keiji Hokanishi

Satoshi Momokino

Director
Audit and Supervisory Committee
Member (Full-time)

Outside Director
Audit and Supervisory Committee
Member (Part-time)
Lawyer (Momokino Law Office)

Audit and Supervisory
Committee Member

Mr. Keiji Hokanishi has
professional financial
expertise, and theCompany believes thisknowledge will be usefulfor accounting audits andcooperation with the audit
firm and internal audits.
He also has management
experience, having worked
as branch manager at afinancial institution, andwas elected as Audit andSupervisory Committee
member because he has
the ability to bring theOutside Directors together
and the ability to makeappropriate judgements
on matters such as theexercise of voting rights.

Out
side

Out
Hirotsugu Miyakawa side

Outside Director
Audit and Supervisory Committee
Member (Part-time)
Advisor, Seiko Solutions Inc.

Outside Director
Audit and Supervisory Committee
Member (Part-time)
Certified Public Accountant(Miyakawa Certified Public
Accountant Office)Takaaki Yamamoto

Independent (Outside)

Independent (Outside)

Independent (Outside)

Advisory Committee member

Advisory Committee member

Advisory Committee member

Audit and Supervisory
Committee Member

Audit and Supervisory
Committee Member

Audit and Supervisory
Committee Member

Mr. Satoshi Momokino
has professional expertiseand broad experience
as a lawyer, and theCompany expects him toprovide objective opinions
regarding the operationsof business companies,
and to contribute tostrengthening thecorporate governance of
the Company.

Mr. Takaaki Yamamoto
has abundant experienceand broad insightserving as a manager
for many years. He has
contributed to enhancing
the corporate value of theCompany, by providing
appropriate advice on the
Company’s management
and supervising theexecution of business
operation as an Outside
Director. The Company
expects him to continue
playing such roles.

Mr. Hirotsugu Miyakawa
has professional expertiseand broad experience
as a certified public
accountant. The Company
expects him to supervise
the execution of duties
by the Directors, and toprovide advice from a
professional perspective.

Corporate governanceCorporate management
and management strategy

Mr. Kota Kaizaki has
been involved in thesemiconductor production
equipment market
for many years andknowledgeable about
the industry. In his role incharge of sales, he built
strong relationships oftrust with our business
partners and made a huge
contribution to our entry
to the semiconductorbusiness and the
expansion of orders. He
was, therefore, elected
as Director because
he is essential for theCompany's future growthin the semiconductorbusiness.

Out
New side

Sustainability

Specific knowledge
and experience that
we expect

Mr. Toshikazu Maeda
founded the Company's
business, mastered
our core businesstechnologies, and handed
them down to employees.
Moreover, as a manager,
he steered the company's
management, strategicallychanging our businessportfolio according to
the market environment,
and also overcoming afinancial crisis to achieve
growth. He was elected
as Representative
Director because, inview of his track record,
he is necessary for theCompany's growth.

Kumiko Seko

Strategy

Career profile

Independent (Outside)

Out
side

How we create value

Name

Development, technology
and quality
Planning and sales

Risk management andlegal affairs

Data

Finance and accounting

International experience
Government experience

47

48

Marumae Report 2022

Corporate GovernanceFor details of internal control systems, please see our Corporate Governance Report.
https://www.marumae.com/en/ir/pdf/cg_20230105.pdf

Maximum Number of Directors Stipulated
in the Articles of Incorporation

12

Term of Office of Directors Stipulated in the
Articles of Incorporation

1 yearPresident andRepresentative Director

Chairperson of the Board

Number of Directors

9

Appointment Status of Outside Directors

Appointed

Number of Outside Directors

5

Number of Independent Outside Directors

5

Board of Directors
Number of meetings held in
FY2022:22

Audit & Supervisory Committee
Toshikazu Maeda
President andRepresentative Director

Major
deliberation
themes edium to long term company policies
MCapital investment of more than ¥300 million
D iscussion of important personnel affairs

FY2022:

General Shareholders’ Meeting
Appointment / Dismissal

ReportBoard of Directors

Cooperation

Audit & Supervisory Committee

Consultation
ReportAccounting
Auditor

Deliberation

Management
Meeting

Cooperation

Number of meetings held in
FY2022:

ReportPresident andRepresentative Director
Business Execution

General Managers
Instruction

Section Managers
Instruction

Employees

Cooperation

Internal Audit Manager
ReportAudit

Consultation

Audit

AdviceAudit
Major
deliberation
themesChairperson

Advisory Committee

Corporate
Lawyers

The management meeting consists of the 33 members who
are at the deputy manager position or above. It is held monthly
in principle to share perceptions and exchange opinions on
business strategy and business operation. Among the matters
discussed and resolved at the Board of Directors, those thatare particularly necessary are also discussed at this meeting toenhance the deliberations at the Board of Directors. Directors
who are Audit and Supervisory Committee members also
attend various critical internal meetings, including thismanagement meeting, and express their opinions.
 eporting on the status of management andR
countermeasures to address any issues
Reporting on KPIs and countermeasures to address any issues
Reporting by each arm of operations and countermeasures
to address any issues
Chairperson

Executive Officers’ Meeting

5

Major
deliberation
themesCandidates for Directors (proposal)A mount or remuneration ofindividual Directors
Policies, etc. for determining
officers’ remuneration

Number of meetings held in FY2022:

18

The Executive Officers' Meeting comprises the President and Representative
Director, Executive Directors, Executive Officers, General Managers of
Headquarters and the standing Audit and Supervisory Committee member(who does not have voting rights). Meetings are held on Mondays directly before
regular meetings of the Board of Directors, in principle, to assist the President
and Representative Director and the Board of Directors by deliberating andresolving important management-related matters in accordance with basic
management policies determined by the Board of Directors.

Takeshi Shimomai
General Manager ofthe Administration Headquarters

Major
deliberation
themes eliberation of agenda items to beDsubmitted to the Board of Directors
Deliberation of important capital
investment and other matters basedon approving authority thresholds
Deliberation of revisions to the fiscal
year budgetDetermination of internal regulations

Data

The Advisory Committee comprises the President andRepresentative Director and three Independent Outside Directors
who are Audit and Supervisory Committee members. The
committee is convened when necessary and reports as anadvisory body to the Board of Directors on matters such as thenomination of directors, policies for determining the remunerationof directors and the appropriateness of remuneration levels froman independent and objective perspective.

Satoshi Momokino
Outside Director

Corporate governance

Identification of materiality and setting of KPIs
Monitoring of ESG targets
Deliberation of ESG issues

Appointment

Toshikazu Maeda
President andRepresentative Director

Sustainability

The ESG Committee comprises the President andRepresentative Director, two directors, and nine
employees. The committee identifies material issues(materiality), sets KPIs, checks the status ofachievement, reviews plans, and reports the status ofthese to the Board of Directors in order to deal with thevarious challenges related to ESG in corporate
management from a long-term perspective.

Instruction

12

Strategy12 iscussion of audit reports
DA ppointment and dismissal of accounting auditors
Internal audit reports
Chairperson

Major
deliberation
themesManagement Meeting

Audit

Appointment/
Dismissal/
Supervision

Compliance Committee

Akiko Kadota
Outside Director

Keiji Hokanishi
Audit and Supervisory
Committee Member (Full-time)

The Audit and Supervisory Committee is comprised of four
members, including three outside directors. It meets once aweek, in principle, and extraordinary meetings are held asnecessary. The Committee exchanges information withinternal audit staff and accounting auditors as needed toenhance the effectiveness and efficiency of audits.

Consultation

Executive Officers’ Meeting

Number of meetings held in

14

Advisory Committee

ESG Committee

Number of meetings held in FY2022:

Appointment / Dismissal

Audit/
Supervision

Director

Chairperson

FY2022:

Number of meetings held in

How we create value

The Board of Directors comprises nine directors,
including four directors who are Audit and Supervisory
Committee members, and five of whom are outside
directors. The Company holds regular monthly
meetings of the Board of Directors and strives tofurther enhance the corporate governance system byincluding directors who are Audit and Supervisory
Committee members with voting rights.

Corporate Governance System

CEO Message

Chairperson

Chairperson

Major
deliberation
themes49

Company with an Audit andSupervisory Committee

Organizational Form

Introduction

In order to increase management transparency and make corporate governance work effectively based oncompliance with laws and regulations, the Company acknowledges the importance of establishing andmaintaining not only an organizational structure that responds quickly and accurately to major changes in thebusiness environment but also a sound management system that places importance on shareholders.

ESG Committee

Corporate Governance

Basic Stance50

Marumae Report 2022

Corporate GovernanceOctober 2017, we established the Advisory Committee
for the purpose of strengthening the independence andobjectivity of functions and accountability of the Board of
Directors regarding the nomination, remuneration, etc. of
Directors. Our first female director was appointed in
November 2020 and we increased the number of female
Directors to two in November 2022, thereby increasing
the diversity of the Board not only in terms of knowledge,
experience and skills but also in terms of gender andbreathing new life into discussions. Moreover, in
September 2021, we established the ESG Committee
and sought to further enhance our corporate value byidentifying material issues from a medium to long term
perspective, setting targets and implementing measuresto achieve them.

September 2017

October 2017

September 2021

Shifted to a company with
an Audit and Supervisory
Committee
Established the Audit andSupervisory Committee

Established the Boardof Independent Outside
Directors

Advisory Committee

ESG Committee

We aim for a supervisory Board of Directors, with Outside Directors accounting for almost half of the Board. The
Board delegates some authority to the Executive Officers' Meeting, which hold discussions on matters related tobusiness execution.
Matters concerning the General Shareholders’Meeting
Matters concerning Directors

Matters
resolved by
the Board of
Directors

Matters concerning shares and corporate bonds
Matters concerning financial results
Important matters concerning business
operations
Important matters concerning affiliatedcompanies

Acquisition or forfeiture of assets (including leaseagreements)

Matters to
be resolvedby theExecutive
Officers’Meeting

Establishment of credit limit
Processing of overdue receivables
Testing, research and development
Revision of fiscal year budget
Borrowing (including deposit of collateral)

Matters concerning the Executive Officers’ Meeting

Utilization of securities

Other important matters

Change of accounting policy

Evaluation of EffectivenessInternal
Male

Internal
FemaleOutsideMale

OutsideFemaleFY2020

FY2021

FY2022

FY2023 Nov.

10(5)

7(3)

9(4)

8(4)

9(5)

Directors (persons)analysis and evaluation, with reference to Directors' self
evaluations. The survey results are reported to the Boardof Directors by the lead Independent Outside Director tostrengthen Directors' monitoring and supervision of eachother. Once every three years, we ask an outside
specialist to conduct a survey and carry out interviews
and analyze and evaluate the results.

Strategy

FY2019To make the Board of Directors function more effectively,
we analyze and evaluate the effectiveness of the Boardof Directors every year in accordance with the principlesof the Corporate Governance Code set out by the Tokyo
Stock Exchange. Our Board of Independent Outside
Directors conducts a confidential and anonymous surveyof all Directors and carries out a fair and transparent

How we create value

2015

Roles of Board of Directors and Executive Officers’ Meeting

CEO Message

Marumae shifted to a company with an Audit andSupervisory Committee in 2015 with a view to enhancing
corporate governance. With the establishment of the
Audit and Supervisory Committee, meetings of theBoard of Directors became more effective because
Directors who are Audit and Supervisory Committee
members also have voting rights at Board of Directors'
meetings and deliberate agenda items with a sense of
responsibility. The Board of Independent Outside
Directors was established in September 2017, for theexchange of information and shared recognition
necessary for Independent Outside Directors to actively
contribute to discussions at meetings of the Board of
Directors and for the free discussion of matters related to
the Company's business and corporate governance. In

Introduction

Main Matters Deliberated at Board of Directors’ Meetings andExecutive Officers’ Meetings

Evolution of Governance

The numbers in parentheses
indicate Outside Directors

FY8/22

Ratio of female
employees (%)

11.1%

50.0%

Number of Board of
Directors’ meetings
held (times)

25

42.9%

44.4%

50.0%

22.2%

55.6%

Results ofevaluation
FY8/22

23

20

22

—
Initiatives

51

 stablish the ESG Committee following Board of Directors’ consultation request. Actively holdE
discussions on sustainability initiatives for the purpose of target setting, data disclosure and otherimprovements and step up sustainability initiatives for the enhancement of corporate value.
Seek to enhance corporate value by further stepping up ESG initiatives.
 roperly monitor risk management initiatives and strengthen Directors’ monitoring and supervisionPof each other.
Focus on more strategic discussions such as medium to long term management strategies,
management targets and sustainability, we properly put the monitoring into practise.

Data

FY8/22 onward his year, we asked an outside specialist (Mori Hamada & Matsumoto law firm) to carry out anTanalysis and evaluation.
We were highly rated on all evaluation criteria including the composition and operation of the Boardof Directors, meeting agendas and the systems supporting the Board of Directors, and our Boardof Directors is well-balanced and effective. The Board of Directors is comprised of a majority of
Outside Directors, putting emphasis on keeping executive directors in check and the Board is also
well-balanced in terms of the knowledge, experience and skills of the Outside Directors who play acentral role in supervision.

Corporate governanceRatio of Outside
Directors (%)

12.5%

Sustainability

Initiatives

 stablish the ESG Committee following Board of Directors’ consultation request. Actively holdE
discussions on sustainability initiatives for the purpose of target setting, data disclosure and otherimprovements and step up sustainability initiatives for the enhancement of corporate value.
Fully discuss medium-term management policies and strategies for formulation of the medium-termbusiness plan to be launched in fiscal 2023.
Fully discuss and consider increasing the number of female directors from the viewpoint of
increasing diversity.

52

Marumae Report 2022

Corporate GovernanceAs basic Company policy, the remuneration of theCompany’s directors is linked to shareholders’ profit inorder to function as an incentive for the sustainableimprovement of corporate value, and the Company sets
an appropriate level of remuneration for each director
based on the responsibilities of each position. Morespecifically, the remuneration for executive directors

Maximum amountBase remuneration

Basic remuneration for the Company’s directors is a fixed monthly
payment determined according to their position, responsibilities, andyears of service and is set in a comprehensive manner in considerationof remuneration amounts found at other companies, the Company’sbusiness performance, employee salaries, and other factors.

—

Performance-linked
remuneration

For performance-linked remuneration, (1) the bonus per employee,(2) the ratio of ordinary profit to total assets, and (3) the ratio of
ordinary profit to net assets are converted at a predetermined ratio,
and the calculation results are reflected in the monthly remuneration.
These indicators are used with the goal of (1) improving employee
satisfaction, (2) increasing return on assets (ROA), and (3) improving
return on equity (ROE).

—

Baseremuneration

Representative
Director

40%

40%

20%

Director

50%

30%

20%

The total number of commonshares to be issued or
disposed of by the Company
shall not exceed 60,000
shares per year.

Matters concerning Decisions on the Details ofRemuneration Paid to Individual Directors
Regarding the amount of a director’s individual
remuneration, the Advisory Committee receives an
explanation from the President and Representative
Director on the status of business performance and thedegree of target achievement. The Committee also hears
the President’s remuneration proposal, discusses it,
makes any necessary adjustments to the content, andreports the results to the Board of Directors, which thenpasses a resolution. Furthermore, for stock-based
compensation, the Board of Directors determines thenumber of shares allocated to each director based on
the report from the Advisory Committee.

Aiming to strengthen the supervisory function of theBoard of Directors, Marumae Co., Ltd. transitioned to acompany with an Audit and Supervisory Committee andestablished an Audit and Supervisory Committee in2015. Since then, the company’s internal controls havebeen strengthened and its corporate governance has
evolved further, with the establishment of a Board of
Independent Directors in September 2017 and theestablishment of an Advisory Committee in October
2017. As a result of stronger corporate governance, theBoard of Directors has shifted towards the monitoringmodel, concentrating on decisions about company
management policy and strategic matters andsupervision of managers’ business execution. It is myunderstanding that this evolution of corporate
governance will facilitate growth and enhancement ofcorporate value in the medium to long term.
In the periods covered by medium-term businessplan “Innovation 2022” and “Innovation 2025,” theCompany has relentlessly implemented growth strategies
and optimized capital efficiency and stepped up ESG
initiatives. Especially since the previous medium-term
plan, the company has dedicated itself to socially
responsible management as a global company andincreased its contribution to protection of theenvironment. The importance of ESG management isfrequently discussed as a matter routine and I welcome
the fact that the company is focusing on ESG and has
incorporated ESG targets into its new management
strategy. Moving forward, I believe it is important to focus
on actively promoting women and appointing foreign
nationals as Directors in order to go even further andincorporate diverse perspectives into management.

The company’s highest priority going forward is tointensively invest in the human capital that supportsbusiness growth and is crucial for business continuity.
Marumae doubled its net sales over the past two years,
employees in managerial positions also increased as aresult, and the company has its sights set on growth in themedium to long term. As its business grows in size,
Marumae will need to increase both the number andquality of its employees. The company will need to review
the training methods and the nature of dialogue which
worked when it was smaller and find appropriate ways of
doing things which will work with a larger workforce. As forthe content of training, instead of a one-size-fits-all
approach, the company must take differences in thestandpoints and work of managers, regular employees
and programmers into consideration. Companywide
training and a programmer training project are alreadyunderway but will continue to be kept under scrutiny tosee whether they are functioning as efficient and effective
initiatives from a companywide perspective. As indicatedin Marumae’s management philosophy, the company
wants to seek technological perfection by nurturing in its
employees the ability to investigate and consider thefundamental essences of things rather than simply
learning from others.
Marumae is expected to continue growing in the
future and is committed to continually reviewing, improving
and strengthening its corporate governance. For my part,as the full-time Audit and Supervisory Committee member,
I will continue to exercise supervision to ensure soundcorporate governance that keeps pace with future growth.
I will also offer my full support to help the company
achieve its targets and enhance its corporate value.

Data

Performance- Non-monetary
linkedremuneration,
remuneration
etc.

Position

The total monetary
remuneration claims shall not
exceed 60 million yen per year.

Investing intensively in Marumae’s growthstrategies and human capital

Corporate governance

The Advisory Committee reviews the ratio of
remuneration for each type of executive director basedon the benchmark remuneration levels of companies of asimilar business scale and operating in related industries
and business categories as the Company, with theweight of performance-linked remuneration increasingfor higher positions. The Board of Directors respects theAdvisory Committee report and decides the individual
remuneration of directors within the percentage range of
remuneration types indicated in said report.
The approximate ratio of each type of remuneration
is as follows: (if the Company achieves a consolidated
operating profit ratio of 20%)

Message from Chairperson of the Audit and Supervisory Committee

Sustainability

Policy on Determining the Ratio of the Amountof Monetary Remuneration, Performance-linked
Remuneration, or Non-monetary Remuneration
to the Amount of Individual Remuneration for
Each Director

Message

Strategy

Non-monetary remuneration is restricted stocks, which are paid to
directors (excluding outside directors and directors who are Audit andSupervisory Committee members; hereinafter referred to as “Subject
Directors”). With each fiscal year of the Company being the evaluation
period, the amount obtained by multiplying the amount determinedbased on the position of the Subject Director by the performance
payment rate is granted as a monetary remuneration claim. The
Company issues or disposes of the Company’s common shares for
the Subject Directors and has them hold such shares by having them
contribute all of such monetary remuneration claims to the Company
as contributed assets.

Keiji Hokanishi

How we create value

Details

Chairperson of the Audit
and Supervisory Committee

CEO Message

Remuneration type

Restricted stock53

consists of a basic, fixed remuneration, performancelinked remuneration, and stock-based compensation,
while only basic remuneration is paid, in consideration of
their duties, to directors who are Audit and Supervisory
Committee members responsible for supervisory
functions and outside directors who are not Audit andSupervisory Committee members.

Introduction

Remuneration for Directors

54

DATA

Marumae Report 2022

Financial Information

Financial statements for 11 years
2014/8

2015/8

2016/82017/8

2018/8

2019/82020/82021/82022/8

1,103

1,162

1,585

2,124

2,242

3,035

4,588

4,019

4,388

5,369

8,585

Operating profit

50

126

267

450

488

764

1,234

495

896

1,207

2,361

Ordinary profit

21

128

255

435

458

737

1,211

477

834

1,200

2,366

Profit

(62)

81

302

559

363

538

866

436

690

902

1,817

Total assets

1,775

1,660

1,765

2,188

2,569

5,418

8,088

8,329

8,894

9,742

12,552

Total liabilities

1,764

1,566

1,369

1,473

1,590

2,281

2,955

3,021

3,188

3,415

5,253

Net assets

11

93

396

715

978

3,137

5,132

5,307

5,706

6,327

7,299

Cash flows from operating activities

256

164

88

626

556

626

829

1,052

1,190

1,062

2,227

Cash flows from investing activities

323

(30)

(14)

(185)

(296)

(681)

(2,458)(1,496)

(337)

(809)

(1,744)

Cash flows from financing activities

(340)

(206)

(239)

(206)

(141)

1,966

1,814

96

(575)

(291)

8

Cash and cash equivalents at end of period

384

326

162

397

513

2,425

2,612

2,263

2,540

2,505

3,011

Earnings per share (¥)

(6.0)

7.8

28.9

53.2

34.5

50.7

72.0

33.5

53.3

70.5

142.5

Net assets per share (¥)

Net sales(14.6)

14.3

67.9

92.9

263.4

393.2

406.7

445.7

494.2

578.0

—

—

—

6.0

7.5

10.0

20.0

15.0

17.0

24.0

48.0

Operating profit to net sales (%)

4.6

10.9

16.9

21.2

21.8

25.2

26.9

12.3

20.4

22.5

27.5

Ordinary profit to total assets (%)

1.1

7.5

14.9

22.0

19.3

18.5

17.9

5.8

9.7

12.9

21.2

(145.7)

155.5

123.6

100.7

42.9

26.2

20.9

8.4

12.5

15.0

26.7

Asset-based ROIC (%)

2.4

6.1

10.8

18.2

16.9

18.8

16.3

5.9

10.0

12.1

17.9

Liability-based ROIC (%)

1.9

5.1

10.3

14.7

14.8

11.2

11.5

4.3

7.7

9.7

15.6

Equity ratio (%)

0.7

5.6

22.4

32.7

38.1

57.9

63.5

63.7

64.2

64.9

58.1

Payout ratio (%)

—

—

—

11.3

21.7

19.7

27.8

44.8

31.9

34.0

33.7

Return on equity (%)

Strategy(22.4)

Annual dividends per share (¥)

How we create value

2013/8CEO Message

2012/8Introduction(¥ million)

Notes 1. Figures are rounded down to the nearest million yen.
2. Per share data has been calculated as if stock splits conducted on March 1, 2014 (100-for-1 split), September 1, 2015 (3-for-1 split),and March 1, 2017 (2-for-1 split) had taken place at the beginning of fiscal 2011.

Please refer to our website for the latest ESG data.
https://www.marumae.com/sus_3.html (only Japanese)

2014/8

2015/8

2016/82017/8

2018/8

2019/82020/82021/82022/8Marginal profit (¥ million)

—

—

—

—

—

—

3,103

2,596

2,995

3,716

5,717

Total number of employees (including temporary
employees)

—

—

—

—

—

—

230

252

259

313

387

Marginal profit per employee (productivity indicator)(¥ ten thousand)

—

—

—

—

—

—

1,349

1,030

1,156

1,187

1,477

Scope 1 and 2 emissions Intensity (per marginal
profit) (t-CO2 /¥ million)

—

—

—

—

—

—

0.594

0.712

0.828

0.777

0.559

Number of programmers (person)

—

—

—

—

—

—

36

41

53

61

60

Ratio of female regular employees (%)

—

—

—

—

—

—

12.15

13.33

12.68

12.5

11.17

Turnover rate of regular employees (%)

—

—

—

—

—

—

4.67

2.50

0.70

1.25

3.91

Ratio of Female Directors of the Board of
Directors (%)

—

—

—

—

—

—

0.0

0.0

0.0

11.1

12.5

Ratio of Outside Directors of the Board of
Directors (%)

—

—

—

—

—

—

44.4

40.0

42.9

44.4

50.0

Data

2013/8

Corporate governance2012/8Sustainability

ESG data

Notes 1. The figure for fiscal 2022 is calculated based on the figure for fiscal 2021 as the emission factor since it has yet to be determined.
2. ESG data is limited to published data.

55

56

Marumae Report 2022

DATA

Statements of Income

Balance Sheet(¥ thousands)

2021/8Previous
Fiscal year
fiscal year under review
2022/82021/82022/8Net sales

AssetsTotal investments and other assets

Current assets
Cash and deposits

2,505,018

3,011,795
8,001

729,829

1,284,632

Total assets

Electronically recorded monetaryclaims - operating

940,160

1,200,815

Finished goods

15,41016,152Work in process

570,241

1,027,314

Raw materials and supplies

12,226

19,256

Lease liabilities

Prepaid expenses

24,025

17,074

Others4,342

Allowance for doubtful accounts

Beginning finished goods inventory

9,742,628

12,552,945

Cost of products manufactured

3,562,461

5,445,023

Total

3,568,864

5,460,433

Transfer to other account23,89537,363

Cost of lease revenue

22,721

19,954Ending finished goods inventory

15,41016,152

Cost of sales

3,552,280

5,426,871

Gross profit

1,817,358

3,158,156

Remuneration for directors (and other officers)

98,785

116,340

Salaries and allowances

Current liabilities
331,972

Current portion of long-term borrowings

427,012559,512

679

4,276

Accounts payable - other278,632

353,964

12,102

Accrued expenses

164,489

226,957(3,537)(5,241)

Income taxes payable

219,853

527,417

4,813,526

6,591,903

Advances received

48,067

328,035

Non-current assets

Deposits received

8,462

10,954

Property, plant and equipment

Unearned revenue

143

245

2,417,374

Provision for loss on order received

36,04632,200(558,679)(666,652)

Provision for share-based compensation

16,00016,000

Buildings, net

1,591,688

1,750,722

Others

3,715

113,161

147,582

163,992

1,452,372

2,504,697(69,430)(78,082)

78,152

85,9101,923,694

2,664,182

Structures, net
Machinery and equipment

Non-current liabilities
Long-term borrowings

Selling, general and administrative expenses

167,057

200,470

Retirement benefit expenses

1,704

5,865

Share-based payment expenses

16,00015,991

Depreciation

28,61025,346

Taxes and dues

29,59956,888649

1,704

Provision of allowance for doubtful accounts
Research and development expenses

62,238137,156

Others205,368

236,785

Total selling, general and administrative expenses

Operating profit

610,012796,548

1,207,345

2,361,607

5,629,322

6,986,945

Long-term lease liabilities

2,377

22,342

Accumulated depreciation(3,355,730)(4,015,360)

Provision for retirement benefits

25,251

48,179Interest income

32

49

Machinery and equipment, net

2,273,591

2,971,585

Asset retirement obligations

1,069

1,069

Dividends income

2

1

3,746

22,090—4,151

VehiclesAccumulated depreciation
Vehicles, net

104,453

108,606

Guarantee deposits received

2,700

2,700

Foreign exchange gains(88,536)(97,597)

Others

8,029

10,685

Outsourcing service income

66,177

Accumulated depreciation(44,199)(47,184)

Tools, furniture and fixtures, net

12,77518,993

766,549

766,549

Share capital

4,075

30,006

Capital surplus

Accumulated depreciation(1,018)(3,496)

Legal capital surplus

Lease assets, net

3,056

26,510

Other capital surplus

Land
Leased assets

Construction in progress
Total property, plant and equipment

14,922

126,137

4,756,653

5,757,418

Intangible assets
Software
OthersTotal intangible assets

Long-term prepaid expenses
Deferred tax assets
Others2,749,158

Others

7,081

6,961

5,253,856

Total non-operating income

10,86233,252

Interest expenses

16,232

19,755Compensation expenses

1,825

4,394

1

3,941

Net assets

Non-operating expenses

Shareholders’ equity

Gain on disposal of treasury shares
Total capital surplus

1,241,157

1,241,157

Others
1,125,157

1,125,157

51,77638,814

Legal retained earnings

26

7

Other retained earnings

51,80338,822

Reserve for tax purpose reduction entry
Retained earnings brought forward

7,000

7,000

111

111

2,309

1,155

110,535

155,845690

690

Total retained earnings

813,184825,530

1,938,342

1,950,687

14,112

14,112

11,885

7,923

3,283,609

4,643,567

3,309,607

4,665,603(161,971)(558,359)

Total shareholders’ equity

6,327,134

7,299,089

Total liabilities and net assets

18,05828,091

1,200,149

2,366,768

3,635

—

Subsidy income

18,81466,546

Total extraordinary income

22,44966,546

Loss on retirement of non-current assets

158

418

Total extraordinary losses

158

418

1,222,441

2,432,896

339,845

661,186

Income taxes - deferred(20,106)(45,309)

Total income taxes

319,738

615,876

Profit902,702

1,817,019

Extraordinary income
Gain on sale of non-current assets

Extraordinary losses

Treasury shares

Total net assets

Total non-operating expenses

Ordinary profit

6,327,134

7,299,089

9,742,628

12,552,945

Profit before income taxes
Income taxes - current

Data

Investment in capital

1,963,121
3,415,494

Retained earnings

Investments and other assets
Investment securities

Total non-current liabilities
Total liabilities

Corporate governance

11,008Sustainability

15,91656,974Tools, furniture and fixtures

Non-operating income

Strategy

2,150,367

Accumulated depreciation

Accumulated depreciation

15,410164,801
5,961,042

Liabilities

Total current liabilities

6,402

Cost of sales

120,646249,270

Structures

8,585,027

4,929,102

Accounts payable - trade

Buildings

5,369,639

How we create value

15,807

Accounts receivable - trade

Fiscal year under review(from Sep. 1, 2021 to Aug. 31, 2022)

CEO Message

Notes receivable - trade

Total current assets

57

Total non-current assets

Previous fiscal year
(from Sep. 1, 2020 to Aug. 31, 2021)

Introduction

Previous
Fiscal year
fiscal year under review(¥ thousands)

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DATA

Marumae Report 2022

Statements of Cash Flows(¥ thousands)
Fiscal year under review(from Sep. 1, 2021 to Aug. 31, 2022)

Cash flows from operating activities
2,432,896

640,248

823,698

649

1,704

Increase (decrease) in provision for losses on orders received

16,546(3,846)

Increase (decrease) in provision for share-based compensation

16,00015,991

Increase (decrease) in provision for retirement benefits

6,298

22,927

Depreciation
Increase (decrease) in allowance for doubtful accounts

Interest and dividends income(50)(4,392)(1,969)Interest expenses

16,232

19,755

Foreign exchange losses (gains)(3,746)(15,400)

Gain on sale of non-current assets(3,635)—418(812,218)

Decrease (increase) in inventories(159,404)(464,845)

Increase (decrease) in trade payables

133,572

82,701(253)

253

Increase (decrease) in accrued consumption taxes(183,303)

111,814

Decrease (increase) in other current assets(10,677)

4,290

Increase (decrease) in other current liabilities

51,914404,445

Others

9,578(6,235)

1,438,728

2,616,332

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50(16,291)(20,471)

4,392

1,969

Income taxes paid

(364,685)(369,914)

Net cash provided by (used in) operating activities

1,062,178

2,227,966

Decrease (increase) in consumption taxes refund receivable

SubtotalInterest and dividend income received
Interest paid
Proceeds from insurance income(805,878)(1,735,722)

Proceeds from sale of property, plant and equipment

3,635

—

Purchase of intangible assets(7,644)(8,942)(809,886)(1,744,664)

Net cash provided by (used in) investing activities

2141 Onohara, Izumi, Kagoshima 899-0216,
Japan

Established

October 1988

Fiscal Year-End

August 31

Share capital¥1,241,150,000

Number of
Employees

324 (including 145 contingent workers and 63
temporary employees)

Scope of Business

Design, manufacture, and processing of highprecision machinery
Design and manufacture of high-precision
machine parts
Design, manufacture, and sale of industrial andmedical equipment
Development and sale of software
Plate working
Plumbing
Transportation
Real estate leasing

Stock Information (as of August 31, 2022)
Securities Code6264

Stock Exchange Listing Prime Market of the Tokyo Stock Exchange
Annual Shareholders’MeetingNovember

Total Number of Shares
52,212,000
Authorized
Total Number of Shares 13,053,000 (of which 426,051 are shares oftreasury stock)
Outstanding
Number of Shareholders 12,777
Shareholder Registry
Administrator

JAPAN SECURITIES AGENTS, LTD.
1-2-4 Kayabacho, Nihombashi, Chuo-ku, Tokyo

Number of
Shares Held

Shareholding
Ratio (%)

4,822,015

38.2

The Master Trust Bank of Japan, Ltd.
(Trust Account)772,500

6.1

Misako Maeda

504,000

4.0

Name

Toshikazu Maeda

100,000—

Tadao Kawamoto

212,900

1.7

Repayments of short-term borrowings(100,000)—

Yoshiko Maeda

180,000

1.4

Proceeds from long-term borrowings

400,000

1,400,000

Koei Igarashi

168,000

1.3

Repayments of long-term borrowings(409,512)(527,012)

Marumae Kyoeikai

124,700

1.0

STATE STREET BANK AND TRUSTCOMPANY 505019

120,200

1.0

STATE STREET BANK AND TRUSTCOMPANY FOR STATE STREETBANK INTERNATIONAL GMBH,LUXEMBOURG BRANCH ON
BEHALF OF ITS CLIENTS: CLIENTOMNI OM25

98,2150.8

Nomura Securities Co., Ltd.

78,500

0.6

Purchase of treasury shares
Dividends paid
Repayments of finance lease liabilities
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents—(400,033)(281,209)(462,510)(679)(2,369)(291,400)

8,074

3,746

15,400(35,363)506,776

Cash and cash equivalents at beginning of period

2,540,381

2,505,018

Cash and cash equivalents at end of period

2,505,018

3,011,795

Net increase (decrease) in cash and cash equivalents

Data

Proceeds from short-term borrowings

Corporate governanceCash flows from financing activities

59

Headquarters

Major Shareholders

Cash flows from investing activities
Purchase of property, plant and equipment

Toshikazu Maeda

Sustainability

158(309,464)

Representative

Strategy

Loss on retirement of non-current assets
Decrease (increase) in trade receivables

Marumae Co., Ltd.

How we create value(34)

Insurance claim income

Company Name

CEO Message

1,222,441

Profit before income taxes

Company Overview (as of August 31, 2022)
Introduction

Previous fiscal year
(from Sep. 1, 2020 to Aug. 31, 2021)

Notes 1.A
 lthough the Company holds 426,051 shares of treasury stock, it is excluded
from the above list of major shareholders.
2. The shareholding ratio is calculated by subtracting treasury stock.

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