2021

MARUMAE REPORT2141 Onohara, Izumi, Kagoshima 899-0216, Japan
URL: https://www.marumae.com/en/index.html
TEL: 0996-68-1152

Marumae Co., Ltd.

CONTENTS
Management Philosophy
Seek technological perfection
Merely passing down our technologies will not allow us to surpass
our predecessors. By carefully assessing the issues at hand anddeveloping the cognitive abilities of our employees, we will create
new technologies without equal, unbound by existing ones.

Respect competition and collaboration
Having a competitive mindset to outperform colleagues, senior
employees, and rivals is indispensable to technological development.
At the same time, mutual support and cooperation enable us tonavigate difficult challenges that we cannot tackle alone.

Contribute to society as a company focused on technology
Making extensive use of our high-level technological expertise,
we solve problems faced by customers in a variety of fields. We also
promote the development of technological personnel internally andthe expansion of recruitment of such personnel externally.
With a focus on technology, we are committed tocontributing to society in a myriad of ways.

Message from the CEO 

3

Overview of Marumae
Marumae’s Journey 

11

The Course of Our Business and Technologies 

13Marumae of Today 

15

Our Business Model 

17

Strategies for Achieving Sustainable Growth 

19

Overview and Strategies by Sales Sector
Semiconductor Sector 

21

FPD Sector 

22

Other Sectors 

23Management Foundation for Delivering Sustainable Growth
ESG Initiatives 

25

The Environment 

27Communities and Society 

29

Human Resources 

31

Employee Safety 

34Corporate Governance 

35

Directors 

37

Data
Financial Information 

39Company Overview / Stock Information 

41

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

The MARUMAE REPORT has been designed for shareholders, investors, and other stakeholders.
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 forachieving sustainable growth in both financial and non-financial terms, such as our environmental,social, and governance initiatives. In accordance with these objectives, we referenced the approachesof the Ministry of Economy, Trade and Industry’s Guidance for Collaborative Value Creation and theInternational Integrated Reporting Council’s International Integrated Reporting Framework in the
production of this report.
Forward-Looking Statements
The forecasts for Marumae’s future business results within this report reflect the current analysisof the Company based on information available at the time of preparation. Readers are cautionedthat 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 2021 (September 1, 2020 to August 31, 2021)
Non-Financial Information

Financial Information
Integrated Report
Securities Report (PDF) (Japanese only)

Corporate Governance Report (PDF)

https://www.marumae.com/ir_4_1.html

https://www.marumae.com/en/ir/pdf/cg_20220105.pdf

Financial Results Summaries andPresentations (PDF)

ESG Information (website)
https://www.marumae.com/en/com_2.html

https://www.marumae.com/en/ir_4.html

IR Information (website)

https://www.marumae.com/en/ir_4.html

MARUMAE REPORT 2021

2

Message from the CEO

Enhancing
Our Technologies toSolve Customers’ Issues
On Publishing MARUMAE REPORT 2021
We are pleased to publish MARUMAE REPORT 2021, our first integrated report. Our operating
environment is changing at breakneck speed and becoming more uncertain. Under suchcircumstances, gaining the understanding of our existing and potential shareholders andinvestors for both our financial and non-financial initiatives, such as those in relation toenvironmental, social, and governance (ESG) issues, and earning recognition as a company

Toshikazu Maeda

that can realize sustainable growth are becoming increasingly important.

President andRepresentative Director

these goals. I hope MARUMAE REPORT 2021 will enable us to strengthen dialogue with all stake-

This integrated report is intended to serve as an important communication tool for achieving
holders, including shareholders and investors as well as employees and local communities.

Solving Customers’ Issues through Our Technologies
I would like to begin by providing a brief explanation of Marumae’s history and the course of its
growth. Although it was founded as an ironworks in 1965, Marumae’s current business traces
its origins to T’sM’s R&D, a motorcycle parts manufacturer I established in 1992. At that time,
I competed in motorcycle racing while personally engaging in the manufacture of motorcycle
parts for races, such as mufflers and frames, which T’sM’s R&D also made efforts to sell
externally. The company later joined Marumae in 1997 as one of its businesses, with Marumae
drawing on the precision machining technologies cultivated by T’sM’s R&D to begin the manufacture of steam turbine blades for power plants, robotic arms, and other industrial parts, bymeans of cutting. We have since broadened our business sectors to encompass the manufacture of vacuum parts used in the manufacture of semiconductor production equipment,
flat panel display (FPD) production equipment, and solar cell production equipment.
In developing products for a variety of sectors, we have consistently endeavored to solve customers’ issues. To this end, we have continuously refined our technologies. Marumae’sManagement Philosophy calls on it to 1 Seek technological perfection, 2 Respect competitionand collaboration, and 3 Contribute to society as a company focused on technology. We formulated our Management Philosophy in 2001 when we became a joint-stock company and changed
our name from Marumae Kogyo to Marumae Co., Ltd. Despite being a small company with only a3MARUMAE REPORT 2021

MARUMAE REPORT 2021

4

Message from the CEO

few employees in those days, when I looked back on our growth from our founding to that point,

to boom and bust conditions. Nevertheless, in comparison with the manufacture of both FPD

I concluded that the expectations customers had of us were in regard to our technologies andand solar cell production equipment parts, a company can manufacture semiconductor pro-that those technologies were and remain the source of our growth. I remain certain of that

duction equipment parts inexpensively, provided it has the technology, allowing it to respondconclusion. With a focus on our precision machining technologies, which serve as our starting

flexibly to changes in the market environment. Marumae’s decision to pursue management

point, we aim to become a leading parts machining company that underpins general manufactur-emphasizing the strength of its equipment, rather than its technological capabilities, can be

ers in a wide range of sectors through our advanced technologies and supply capabilities.

considered to have exacerbated the impact of the global financial crisis on its business. This
is why, backed by a strong conviction that we must position our technologies—our priority—atthe center of management, we decided to shift our focus to the manufacture of semiconductor
production equipment parts.

Shifting to the Manufacture of Semiconductor Production
Equipment Parts in the Wake of the 2008 Global Financial Crisis
Currently accounting for almost 80% of its net sales, semiconductor production equipment parts
are a major driver of Marumae’s growth. Behind the shift in business model was the 2008 global

While management was not all smooth sailing following that decision, semiconductor
demand rose sharply from around 2015—at a time when we managed to overcome our financial
difficulties—thanks to the global proliferation of smartphones and the increase in cloud servers. In conjunction with these tailwinds, we achieved renewed growth through the implementation of decisive capital investment, which led to our listing on the First Section of the Tokyo
Stock Exchange in 2018.

financial crisis, which was a very bitter experience for me personally.
In 2008, Marumae’s mainstay products were FPD production equipment parts. In anticipationof future market expansion, we invested proactively in the manufacture of solar cell production
equipment parts, net sales of which increased rapidly to the extent that they accounted forapproximately half of our total net sales. However, the impact of the global financial crisis led to a

Three Strengths That Realize High Productivity

significant contraction in both of those markets, prompting a substantial decline in net sales. In
many cases, both FPD and solar cell production equipment parts are large in size, inevitably
necessitating extensive investments in large-scale production equipment. As the burden of depreciation entailed by investments in such equipment rose, we quickly ran into financial difficulties.
To navigate these difficulties, we decided to concentrate our management resources in the
manufacture of semiconductor production equipment parts. It is not possible to accurately
forecast changes in the market environment on the scale of the global financial crisis.

Manufacturingknow-how of ourengineers

Production
capabilities
surpassing thoseof our industry
rivals

One-stop
production
structure that canhandle multiple
processes

Moreover, as the expression “silicon cycle” suggests, the semiconductor sector is also subject

Next, let me discuss Marumae’s current strengths. The first is the manufacturing know-how of
the Company’s engineers. Our technological foundations were primarily laid in the era when we
manufactured motorcycle parts. Motorcycle parts are complex, require a high degree of precision, and must be strong enough to withstand high speeds of up to 300 kilometers per hour.
Bearing the weight of knowing that lives depend on such parts, I have acquired extensive
knowledge of not only machining but also materials. I have communicated such manufacturingknow-how to our engineers, who pass it on ceaselessly to the next generation. Marumae’s

With a focus on our precision machining technologies,
which serve as our starting point, we aim to become aleading parts machining company that underpins generalmanufacturers in a wide range of sectors through ouradvanced technologies and supply capabilities.

technological capabilities have also earned high praise from customers thanks to the efforts ofindividual engineers to repeatedly refine their skills, leading to ongoing business transactions.
Prior to the 2008 global financial crisis, we aimed to maintain multiskilled engineers. Under
this system, a single engineer would carry out all processes, from designing a product to creating a program for manufacturing it, operating machinery, finishing, and performing inspections. However, cultivating a fully capable engineer under such a system requires a hugeamount of time. As a result, we are gradually splitting the roles of engineers and advancing
initiatives that make it easier to pass on our manufacturing know-how to the next generation,such as through the creation of manuals.

5

MARUMAE REPORT 2021

MARUMAE REPORT 2021

6

Message from the CEO

Our second strength lies in our production capabilities surpassing those of our industry

I would now like to explain our initiatives aimed at future growth. In October 2018, Marumae

rivals. Marumae is by no means a large company. That said, almost all of our industry rivals

formulated Innovation 2021, our medium-term business plan, with fiscal 2021 as its final year.

are small to medium-sized companies, compared with which we have greater capital strength.

When we formulated the plan, we set as numerical targets net sales of ¥8.0 billion and operat-

Accordingly, in the event of sudden market growth, for example, we would be able to implementing profit of ¥2.4 billion, increases of approximately 1.7 times and 2.0 times, respectively, com-bold capital investments. Needless to say, the 2008 global financial crisis taught us to pay close

pared with fiscal 2018, given that markets in the semiconductor sector were seeing rapid

and constant attention to the operational status of our facilities. However, our ability to secure

growth and that we anticipated ongoing market expansion. The plan aimed to significantly growthe production capacity needed to meet customer demand by leveraging our capital strength

our top line while further increasing our profit margin. Based on a recognition that further

to flexibly implement capital investments constitutes a major competitive advantage for us.

raising productivity through technological innovation would be indispensable to achieving

Lastly, the Company’s third strength is its one-stop production structure that can handle

these objectives, we used the word innovation in the plan’s title.

multiple processes. The manufacture of semiconductor production equipment parts requires

However, the contraction in the semiconductor sector markets in 2019 led to a significant

numerous multifaceted manufacturing processes, including metal cutting, welding, surface

deviation from our initial expectations. Subsequently, despite signs of a recovery trend in said

treatment, and gun drilling. While many of its industry rivals perform these processes in coop-markets, we determined that attaining the aforementioned numerical targets would be out oferation with other companies, Marumae has brought the elemental technologies for themreach and, in August 2020, extended the period of the plan until fiscal 2022. While the basic

in-house, thus creating a one-stop production structure that can handle multiple processes.

policy of the plan remains unchanged, we have renamed it Innovation 2022 and revised its

This structure facilitates such benefits as reducing the cost and time required to transfer prod-

numerical targets for net sales and operating profit—to ¥7.0 billion and ¥2.0 billion, respec-

ucts from one process to another. We have also organized our methods for enhancing produc-tively. We have, however, maintained our target for shareholder returns comprising a 30% divi-

tivity into the Marumae Manufacturing System (for more information, please refer to page 23).

dend payout ratio and a minimum annual dividend per share of ¥10.00, and we will only revise

Although the effect of improving productivity in each process may be marginal, the combined

these targets in the event of recording a net loss.

effect of these improvements on the manufacturing process as a whole is significant. As such,
I believe there are significant advantages to our one-stop production structure.
Marumae realizes high productivity by utilizing these three strengths, thereby facilitating avirtuous cycle in which it ensures a high profit structure to fund further capital investments.

Implementing Proactive Capital Investmentswith an Eye toward the Future
Aiming for Technological Innovation under Innovation 2022,
Our Medium-Term Business Plan
Medium-Term Business Plan Innovation 2022

Numerical Targets

7.0 billion Operating profit of ¥2.0 billion

Net sales of ¥In fiscal 2021, we posted net sales of ¥5.3 billion, up 22% year on year, and recorded operating
profit of ¥1.2 billion, up 35% year on year. These increases were the result of a rise in orders
received for semiconductor production equipment parts, FPD production equipment parts, andparts for other types of products, with orders for semiconductor production equipment partsseeing significant growth, up 43% year on year. The rise in orders received reflected theextreme bullishness of markets in the semiconductor sector. As Marumae is directing all of its
efforts to cater to that demand, it has had no choice but to put initiatives aimed at market share
expansion on the back burner. Nevertheless, while markets in the semiconductor sector are
subject to expansion and contraction cycles, we expect them to continue growing. Thus, we will
implement proactive capital investments with an eye toward expanding our market shares

ROIC*

Shareholder Returns

ESG

Asset-based ROIC of

18.0% Liability-based ROIC of 14.0%

Dividend payout ratio of

30% or above

Minimum annual dividend per share of ¥MARUMAE REPORT 2021

The full-fledged transition to 5G communications technology has made the era of highspeed, high-capacity communications a reality. With large volumes of data connected throughcommunications technology and stored in the cloud, the utilization of big data storage is pro-

10.0

Promotion of sustainability-focused management
Medium- to long-term initiatives for addressing key issues*A sset-based and liability-based indicators are shown separately as the Company’s policy is to maintain a high level of liquidity on
hand in preparation for M&A and drastic market fluctuations.

7from fiscal 2022.

ceeding, meaning that we can look forward to the creation of a diverse array of services. In thiscase, as the volume of data in circulation is many times greater than before, large volumes ofdata will need to be processed and stored. Based on these circumstances, I expect markets inthe semiconductor sector to continue growing, since they entail both quantitative and qualitative expansion in terms of improvements in the performance of semiconductors. One of thetriggers behind market expansion in recent years has been the significant increase in demandfor 3D NAND memory, which is used in servers. 2D NAND memory, the traditional type of flash
memory, had already reached the limit of its density, making it difficult to increase its capacity

MARUMAE REPORT 2021

8

Message from the CEO

any further. In contrast, 3D NAND memory stacks cells vertically, giving it a memory capacity

2030 (compared with fiscal 2021), to be realized by curbing our electricity consumption throughmany times greater than that of 2D NAND and enabling the storage of large volumes of data.

the use of various types of renewable energy. To this end, we plan to steadily install solar panels.

This development is evidence that the need for high-capacity semiconductors is growing owing

Additionally, in light of our declaration of support in November 2021 for the final recommenda-

to 5G communications technology and other factors.

tions of the Task Force on Climate-related Financial Disclosures, we will gradually improve the

In respect to FPD production equipment parts, another of our pillars of earnings, risingquality and increase the volume of the materials we disclose. In our social initiatives, we aredemand for liquid crystal displays and organic light-emitting diodes due to the promotion ofundertaking research into rehabilitation equipment jointly with Kagoshima University. We also

telework brought about by the COVID-19 pandemic is spurring short-term growth in orders

endeavor to contribute to Izumi City in Kagoshima Prefecture—where Marumae was founded—inreceived. However, given the comparatively high risks involved in this sector, such as market

a number of ways. These include acquiring the naming rights for public facilities and focusing

fluctuations, we had previously held back from implementing proactive capital investments. In

efforts on the recruitment of not only young people but also senior citizens as one facet of ourconsideration of our expanding market shares and our supply responsibility, our policy is now

efforts to promote employment in the region, putting the right people in the right positions.

to meet growing demand from customers while implementing a certain level of capital invest-

Additionally, we are also carefully enacting a host of COVID-19 countermeasures, such as thor-

ments in this sector.

oughly implementing sanitization with alcohol-based disinfectants, installing partitions, andGiven these circumstances, while we are forecasting record-high net sales and operating

having our employees avoid crowded and other settings that increase the risk of infection byprofit of ¥7.2 billion and ¥1.8 billion, respectively, in fiscal 2022, the final year of Innovation 2022,

splitting working times into day and night shifts. Thus far, we have seen no mass infections within

we expect to fall short of the plan’s numerical target for operating profit but meet that for net

our plants or suffered any major disruptions to our business activities.

sales. The reason for this prediction is positive, as it factors in the increase in depreciation

Lastly, turning to governance initiatives, we are aiming to increase the number of outside

resulting from the proactive capital investments that we will implement to expand our market

directors appointed. In fiscal 2022, as part of our efforts in this regard, we achieved our goal ofshares from fiscal 2022. Marumae practices management with an emphasis on return on

ensuring that outside directors account for one-half of all members of the Board of Directors,

invested capital (ROIC) (for more information, please refer to page 20). Although we have

which we had originally sought to achieve by 2025. We are currently examining whether or nottargeted asset-based ROIC of 18% and liability-based ROIC of 14% in Innovation 2022, our policy

to increase the number of Board members by one with the addition of a female director who

is to tolerate a temporary deterioration of ROIC brought about by our capital investments.

has experience in corporate management. Through these efforts, we will improve the effective-

Meanwhile, despite revising conventional human-dependent approaches and proactively
working on such innovations as automation that utilizes machinery and IT, we still have a lot

ness of the Board of Directors by enhancing its diversity and ensuring that its meetings serve
as forums for lively debate.

of work to do in regard to further improving productivity through technological innovation. For
example, we introduced an automated warehouse and an automated production line combining
robots with machine tools, such as lathes and machining centers, for use in the production of
vacuum parts for the semiconductor sector, which primarily sees repeat demand. However,
we must make further improvements as we are not satisfied with their current performance.
Marumae is committed to pursuing further technological innovation to increase productivity
Companywide, such as promoting the visualization of manufacturing conditions using smartphones and the introduction of robotic process automation in administrative departments.

Contributing to Society and Achieving Sustainable Growth
as a Company Focused on Technology
As I highlighted at the beginning of this message, technologies stand at the core of our growth,and only people can drive technological innovation. When I established T’sM’s R&D, I hoped that I
could continue the business on my own. In order to solve customers’ issues, however, I had toincrease the number of my employees, one at a time, as one person alone simply cannot do

Stepping Up Our ESG Initiatives
Interest in ESG-related issues has been increasing in recent years. Marumae promotes sustainability initiatives in an integrated manner, with information thereon disclosed as part of its
management strategies on the Company’s website. In September 2021, we established the ESG
Committee, which identifies material issues, sets key performance indicators (KPIs) and ascertains the degree of their achievement, and reviews plans and reports on their progress to theBoard of Directors in order to address the various challenges related to ESG factors in corporate management.
In respect to environmental initiatives, we will minimize our CO2 emissions by generating a
portion of the electricity we require for production activities, reducing the amount of electricity weeverything. During the process, I shared the technologies I had cultivated while continuously
telling employees that the ultimate technologies are not those you learn from others but thoseyou create yourself and that when you approach a matter, you must fundamentally address it.
This kind of mindset applies to not only engineers but all employees. Technologies cannot be
perfected overnight. I went through a process of trial and error while experiencing multiple failures. I believe that Marumae’s unique technologies have been shaped as a result of a similar
process of trial and error experienced by each and every employee, which has underpinned theCompany’s growth.
Enhancing our technologies to solve customers’ issues, we are committed to realizing sustainable growth by contributing to society as we repeat that process. I would like to ask shareholders, investors, and all other stakeholders for their ongoing support.

purchase from external suppliers. In this way, we aim to lessen our impact on the environment.
We have set forth a target of reducing our CO2 emissions per marginal profit by more than 50% by
		
		

9

MARUMAE REPORT 2021

Toshikazu Maeda
President and Representative Director

MARUMAE REPORT 2021

10

Overview of Marumae

Marumae’s JourneyWith machining facilities that rank among the finest in Japan, Marumae supplies, to equipment­manufacturers in Japan and overseas, precision parts that only it can produce as the only company
with a head office in Kagoshima Prefecture listed on the First Section of the Tokyo Stock Exchange.

2008 global financial crisis

Fiscal 2021

Net sales

The research and development ofmotorcycle parts was our starting point.

Number of employees

Turning Point

11

5.3
160

*As well as 108 temporary employees on average
As of August 31, 2021

*Net sales prior to the fiscal year ended March 31, 2002 include only those for the R&D business division.

1997–

Expansion

2003–

Revitalization

2009–

Renewed Growth

2015–With the establishment of the R&D business division,
Marumae shifted its business from one centered on
welding to one focused on precision cutting.

Marumae accelerated the expansion of its businessscope, starting with the relocation of its main factory in 2003. In 2006, the Company was listed on the
Mothers section of the Tokyo Stock Exchange.

Following the 2008 global financial crisis, Marumae
sought to revitalize its business through alternative
dispute resolution (ADR) procedures while pivoting
its core businesses to the semiconductor sector.

Marumae achieved renewed growth by implementing bold capital investments in line with the rapid rise in semiconductor demand. In 2018, we
became the only company listed on the First Section of the Tokyo Stock
Exchange with a head office in Kagoshima Prefecture.

2001

2006

2011

I mplements ADR procedures for business
revitalization2018

Listed on the Second Section of the Tokyo Stock ExchangeListed on the First Section of the Tokyo Stock Exchange

2015

Concludes a business revitalization plan
through ADR procedures

2019Relocates head office to Onohara, Izumi City,
Kagoshima Prefecture (Izumi Factory)

 hanges name to Marumae Co., Ltd. andCrevises organizational form

MARUMAE REPORT 2021

billionNumber of employees*

Marumae was founded as an ironworks in 1965 by Tsutomu Maeda, thefather of Toshikazu Maeda, its current president.
In 1992, meanwhile, Toshikazu Maeda founded T’sM’s R&D to manufacture motorcycle parts. Marumae later acquired T’sM’s R&D’s business in1997 and established a research and development (R&D) business division.
These moves represent the starting point of Marumae’s business.

Net sales*¥ isted on the Mothers section of the
LTokyo Stock Exchange

MARUMAE REPORT 2021

12

Overview of Marumae

The Course of Our Businessand Technologies
Quest to become
a company that
contributes to society
through its technologies

Throughout its history, Marumae has incorporated the cutting-edge technologies of each era andevolved along with the industries that underpin people’s lifestyles.

01

04

Marumae’s technologicalcapabilities

Focus on semiconductors
and flat panel displays

Racing activities marked
the beginning of ourcurrent business
Marumae’s current businessdates back to the development
and production of frames, mufflers, and various other motorcycle parts by current president Toshikazu Maeda, who is aformer professional motorcycle racer.

Founding

1992–

In 1992, current president Toshikazu
Maeda founded T’sM’s R&D (now a
Marumae business)—which serves as
the basis for Marumae’s business of
today—with the objective of manufacturing motorcycle parts. The subsequent shift to the manufacture of partsfor industrial use laid the foundationsfor Marumae’s current business.

02

Marumae’s technologicalcapabilities

Expansion

Vacuum parts for etch systems,
which are particularly difficult tomanufacture and are an area in the semiconductor sector
with high barriers to entry, were critical to the revitalizationof Marumae’s business in the business revitalization plan.
In the FPD sector, we receive orders for vacuum chambers that
require complex and multi-process machining, such as welding
and gun drilling, many of which cannot be manufactured by othercompanies.

2003–

Marumae entered the FPD sector andbegan the full-fledged manufacture of
vacuum parts. Following the relocationof our main factory in 2003, we havefocused on the manufacture of large
products and expanded our businessscope, such as through entering thesolar cell production equipment sector.

03

Marumae’s technologicalcapabilities

Revitalization2009–

As the 2008 global financial crisis hada significant impact on the solar cell
production equipment and the FPD
sectors, the mainstays of Marumae’sbusiness at the time, the Company
pivoted its core businesses to thesemiconductor sector in pursuit ofrevitalization.

Marumae’s technologicalcapabilities

Transition from motorcycle
parts to industrial parts

Accumulation of expertiseon vacuum parts

Marumae increased its efficiency
and accumulated expertise on
machining complex parts by manufacturing parts for a wide
range of industries, from motorcycle parts to turbine blades
for industrial use, robot parts, and others.

Marumae expanded its businessdomains by utilizing the machining
expertise it had cultivated in the process of manufacturing motorcycle parts to produce a variety of industrial
machinery, including semiconductor production equipment parts.

Marumae has achieved growth by leveraging the strengths of its
original technological capabilities to shorten manufacturing
times and manufacture products involving a high degree oftechnological difficulty.
Going forward, we will strive to expand our prototype manufacturing capabilities and production capacity while innovating in
manufacturing and cutting technologies in a variety of sectors.

Renewed growth

2015–

Marumae concluded its business revitalization
plan ahead of schedule in 2015 thanks to thegrowth of the semiconductor sector. Around thistime, demand for semiconductors began toincrease rapidly due to the global spread ofsmartphones and the increase in cloud servers,
which further accelerated Marumae’s growth.

Going forward

2022–

Marumae aims to be a leading parts machining company that diversifies
and strengthens its cutting-edge technologies in combination with its
supply capabilities, in order to become a company that can underpin
general manufacturers in a wide range of sectors.

Marumae’s target
business domains
Marumae targets business sectors
where the need for advanced production expertise means few competitors
exist, as a result of which these sectors promise high added value andhigh profit margins.

Social Context
Popularization of computers

Widespread adoption of communications devices
such as cell phones
Emergence of high-performance electronic devices
such as liquid crystal televisions

13

MARUMAE REPORT 2021

Rapid growth of semiconductor demand2008 global financial
crisisMARUMAE REPORT 2021

14

Overview of Marumae

Marumae of TodayHarnessing its high productivity as a strength, Marumae underpins society through the manufacture of
vacuum parts, which form the core of semiconductor and flat panel display (FPD) production equipment.

Solving Customers’ Issues through Our Integrated Manufacturing System

Integrated Manufacturing System

Distinctive Features of the Factories Underpinning Our High Productivity

To the extent possible, Marumae has put in place a structure for completing processes that have traditionally been managed separately
by multiple different companies in-house. This structure allows us to help customers in a number of ways, such as by simplifying
adjustments to finishing times for multiple processes and shortening lead times, as well as reducing transportation costs, which isparticularly important for large parts.

High productivity

Transportation
Marumae realizes high productivity through investments
based on extensive industry experience and capital strength.

Manufacturingexpertise

Percentage of programmers* 
Number of manufacturing
instruction manuals issued*2

50,000

1

Reduces numberof processes

Production
capacity

61
46%

Number of programmers

Surfacetreatment

Gun drilling130
3Site area
90,556 m
Operating time* 
24 hours a day
7
Number of production robotsNumber of processing machines
Number of production sites

2

Facilitates
short delivery
times

Electron beam
welding*

Stabilizes
supplyOptimizes
costs

Machining3(as of August 31, 2021)* Equipment used to weld materials by heating and fusing themthrough the application of a beam of high-velocity electrons

Supplying Parts to Production Equipment Manufacturers

Semiconductor sector
FPD sector
Other sectors

Headquarters and Izumi Factory
The Izumi Factory manufactures
products for semiconductor production
equipment. Promoting automation by
utilizing its automated warehouse androbots, the factory operates unmanned
at night and on non-working days tocater to the increasing volume of orders
from the semiconductor sector.

Takaono Factory
At the Takaono Factory, we haveestablished a complete environment for
producing prototypes—the core of ourmanufacturing—and launching new
products. We have also consolidated the
production of large parts and welded partsat the factory, which has an extensive
range of equipment types and sizes.

Kanto Factory
The Kanto Factory specializes in the
production of vacuum parts that form
the core of semiconductor production
equipment. The factory has a high levelof productivity and acts as Marumae’s
sales base.

Mass production(primarily automated production)

Prototypes / mass production / welding

Prototypes / mass production—

Prototypes / mass production / welding—

Underpinning Society with Equipment Parts—

The finished semiconductor chips and liquid crystal display (LCD)
panels produced thanks to the parts we supply to semiconductor,
LCD panel, and other manufacturers underpin today’s IT-based society.

—Prototypes / mass production / welding*1 Percentage of programmers among employees engaged in manufacturing *2 Manuals outlining the product manufacturing process for each production lot*3 24-hour-a-day operation through automation and shift work

15

MARUMAE REPORT 2021

Marumae does business with the world’s leading production
equipment manufacturers, supplying them with parts that form the core of theequipment they manufacture. Among these parts are many that only we can produce.

MARUMAE REPORT 2021

16

Overview of Marumae

Our Business Model
6,000

3,000

S
4,000

Marumae seeks in particular to secure orders frommarkets for vacuum parts, which form the core of semiconductor and FPD production equipment, allowing theCompany to make effective use of its technological capabilities. In recent years, we have leveraged our strengths tocontinuously expand our market shares.

• Shortage of personnel for
manufacturing prototypes
due to high growth• High degree of dependence on
the semiconductor and FPD
sectors• Increase in depreciation resulting from capital investments• High administrative costs
stemming from expenses formaintaining Marumae’s stocklisting• Shortage of sales personnel

2,000

1,000

0

FY2019FY2020

FY20210

Semiconductor and FPD Manufacturing Equipment(Forecast for Japanese Equipment Billing)(Billions of yen)
4,500

W

2,700
1,800

Proactive Strategies

900

S × O
2018

2019

2020

2023
2021
2022
(FY)
(Forecast) (Forecast) (Forecast)

POINT

MarumaeJapan
Company D
Japan
Company A

U.S.
Company B

U.S
Company C

etc.

Cloud- and 5G-driven increase in demand

DeviceManufacturers

U.S.
Company I

TaiwanCompany T

South Korea
Company S

Japan
Company T

T

Marumae engages in businesswith many of the world’s leading
production equipment manufacturers, supplying them the parts
that form the core of the equipment they produce. As many ofthese parts cannot be produced
at companies other than
Marumae, the Company fulfills
its supply responsibilities toequipment manufacturers.

• Increase orders received for semiconductor sector
consumables• Grow market share by leveraging high productivity• Expand market share by undertaking projects fromthe businesses of rivals who have withdrawn fromthe industry• Gain orders for solar cells using expertise in smalldiameter hole drilling• Obtain orders for large parts by leveraging transportation capabilities

Marumae has established return on invested capital (ROIC) as an indicator with the aim of improving overall
productivity, including in regard to investments.
Marumae has set targets for increasing its profit margin and productivity per employee in order to achieve
its ROIC target. The Company’s profit margin has improved every fiscal year over the past decade, risingfrom 0.4% to 26.9% in fiscal 2018. We are aiming for a profit margin of 28.6% in fiscal 2022.

Gradual Measures

Supply of primary equipment parts, vacuum parts, and consumables forsemiconductor and FPD production equipment

Leading Global
Semiconductor and FPD
Production Equipment
Manufacturers• Intensifying competition withindustry rivals in Japan andoverseas• Fluctuations in exchange rates

POINT

The majority of Marumae’s customers are semiconductor and FPD production equipment manufacturers. The suppliers of
those equipment manufacturers are also our customers. In this way, we currently provide indirect support to the semiconductor
market, which is seeing a production crunch.

Marumae• Fluctuations in market
conditions• Decline in the value of orders• Avoidance of Marumae due to its
dominant share amongcustomers

O

Strategies Drawing on SWOT Analysis

Semiconductor
FPD
Source: Market Forecast Report: Semiconductor and FPD Manufacturing Equipment(Fiscal years 2021–2023), published by the Semiconductor Equipment Associationof Japan in January 2022

Commercial Distribution• Rise in demand for consumablesin the semiconductor sector• Renewed expansion of thin-film
solar cells

Aiming to achieve sustainable growth by promoting strategies
drawing on SWOT analysis

3,600

0

• Buoyancy of the semiconductor
equipment market• Expansion of demand for etchsystems• Withdrawal of industry rivals• Increase in demand from China

2,000

Net sales / cutting (semiconductor)
Net sales / cutting (FPD)
Other net sales
Operating profit (right scale)Net sales / cutting (other)Markets• Capabilities for implementing
flexible capital investments• In-house transportation
capabilities• Division of work utilizing partnercompanies and areas of expertise

Opportunities(Millions of yen)

• Expertise in manufacturing
vacuum parts• Capabilities for manufacturing
large precision parts• In-house handling of multiple
processes• Low costs due to highproductivity

Threats

Through the innovative use of digital transformation,
Marumae can machine products with highly precise andcomplex shapes that can also be used for general purposes. Our experience in various sectors also allows us toachieve a higher level of productivity than industry rivals.
Furthermore, in addition to these fundamental technological capabilities, the capital strength gained through ourstock market listing enables us to address volatile demandin markets in the semiconductor and other sectors throughflexible capital investments.

Strengths

Net Sales / Operating Profit

Weaknesses

Marumae’s Strengths

Strength, Weakness, Opportunity, and Threat (SWOT) Analysis

W × O
Differentiation
Strategies

S × T
Defensive Measures

W × T• Increase flexibility of production capacity throughcooperation with partner companies• Establish prototype groups by customer• Improve customer satisfaction by expanding
sales personnel• Increase market share through the improvement of
production management• Enhance organizational capabilities by augmenting
administrative personnel• Secure orders from other sectors by utilizing smalldiameter hole drilling expertise• Reduce transportation costs for large parts by using
Marumae’s own transportation• Handle all stages of the manufacturing process fororders of large parts• Curb fixed costs through the use of outsourcing• Prepare for fluctuations by strengthening orders
received for consumables• Secure orders in new sectors by utilizing large
machinery• Increase prototype production capabilities in aplanned manner• Stabilize business using capital strength• Enhance employee satisfaction through improvements to personnel systems• Expand orders received in pre- and post-processing
sectors through the creation of new technologies

etc.

Companies in these boxes represent Marumae’s customers. Customer names are for illustrative purposes only.

17

MARUMAE REPORT 2021

MARUMAE REPORT 2021

18

Overview of Marumae

Strategies for Achieving
Sustainable Growth

ROIC
With ROIC set as its most important key performance indicator (KPI), Marumae conducts business management emphasizing
high capital efficiency with a focus on the cost of capital. The Company aims to achieve its target for ROIC by realizing a highlevel of operating profit while controlling capital.

Improvement Drivers (Improvement that is not dependent on capital reduction)
Medium-TermBusiness Plan

Innovation
2022

In light of trends in the semiconductor production equipment market that diverged from its
initial expectations, Marumae revised Innovation 2021, its previous medium-term businessplan, and formulated Innovation 2022, extending the period of the revised plan until fiscal
2022. Under this plan, we will aim to become a company with few assets and low fixed costs
that achieves high productivity.

Item

TargetFY2021 Results

FY2022 Forecast

Numerical
Targets

Net sales of ¥7.0 billion
Operating profit of ¥2.0 billion

Net sales of ¥5.3 billion
Operating profit of ¥1.2 billion

Net sales of ¥7.2 billion
Operating profit of ¥1.8 billion

Liability-based ROIC

Fiscal 2021 result 9.7%
Fiscal 2022 plan 14.0%

WACC

8%

Proactively implement capital investments that result in ROIC exceedingweighted average cost of capital (WACC) (excluding ESG investments)

Profit margin
Expansion of profit

Sales growth
Cost rates
Quality
improvementI ncrease orders through strategies tailored to Marumae’s strengths and customer needs
Reduce cost rates for repeat orders of parts
Establish distinctive Marumae quality→ Strengthening of system aimed at addressing complaints and improving defects toenhance quality

POINT
ROIC*

Asset-based ROIC of 18.0%
Liability-based ROIC of 14.0%

Asset-based ROIC of 12.1%
Liability-based ROIC of 9.7%

Aiming to achieve ROIC targets by increasing
profit margin
Asset-based ROIC of 15.3%
Liability-based ROIC of 12.9%

Shareholder
Returns

Dividend payout ratio of 30% or above
Minimum annual dividend per shareof ¥10.0

Dividend payout ratio of 34.0%¥10.0 interim, ¥14.0 year-end, and¥24.0 annual dividend

Dividend payout ratio of 37.0%¥18.0 interim, ¥18.0 year-end, and ¥36.0 annual
dividend

ESG

Promotion of sustainability-focusedmanagement
Medium- to long-term initiatives foraddressing key issues

Installation of additional solar panels undera policy of using renewable energy
generated by the Company to supply theelectricity it consumes

Additional installations of solar panels at the Izumi andKanto factories
Reduction of CO2 emissions per marginal profit of 14%
compared with fiscal 2021

* Asset-based and liability-based indicators are shown separately as the Company’s policy is to maintain a high level of liquidity on hand in preparation for M&A and drastic
market fluctuations.

Capital Turnover
Ratio

Productivity

 ut in place a framework for highlyPefficient production in profitable divisions→ Achieve high operating efficiency andreduce tasks performed by humans
through automationI mprove work efficiency using Marumae’s
IT capabilities→ Create a system for managing the
progress of manufacturing processes
utilizing automation and schedulers

Human resource
development

 evelop engineers and improve theDtechnological capabilities and strengthsof programmers

 nhance internal management systems
Eand strengthen the capabilities ofadministrative divisions

Enhancement ofCapital Efficiency

For more information on our human resource initiatives, please refer to pages 31–33.

Efforts to Increase ROICFor more information on ESG initiatives, please refer to pages 25–38.

Increasing Equipment Productivity by Raising
Production Operating Rates

Expanding Orders for Consumables*1
With regard to vacuum parts, Marumae is focusing inparticular on obtaining orders for consumables, which areexposed to high-temperature and high-voltage plasma*2
inside vacuum chambers. Unlike demand for new equipment,
which fluctuates significantly, demand for consumables
will arise as long as production equipment is in operation.
In this way, such demand contributes to the stabilization of
Marumae’s business.

Marumae has set targets for increasing its profit margin and productivity per employee in order to achieve
its ROIC target. The Company’s profit margin has improved every fiscal year over the past decade, risingfrom 0.4% to 26.9% in fiscal 2018. We are aiming for a profit margin of 28.6% in fiscal 2022.

Semiconductor Sector
Other thanconsumables
29%

Percentage ofnet sales
accounted for by
consumables

FY202171%

FPD Sector
Other thanconsumables
77%

Percentage ofnet sales
accounted for by
consumables

23%

Selecting the right equipment and increasing operating rates areimportant factors for raising the productivity of such equipment,
which are few in number. To this end, in addition to implementing
initiatives that reduce the need for employees to pass products toone another, such as through the introduction of automatic palletchangers developed by Marumae, the Company installs machine
tools and carries out repeated improvements to increase productivity
per hour.

FY2021*1 As Marumae’s definition of consumables includes parts preinstalled in andaccompanying new equipment, not all demand for such consumables arises fromtheir complete wear and tear (the Company expects actual wear and tear toaccount for approximately half of the demand for consumables).
*2 A gas that has been ionized into positive ions and free electrons by being subjected
to a high temperature and strong electromagnetic field, resulting in a highly
activated condition that is used in the etching of metal films and other processes.

M&A
Alongside organic business growth, Marumae proactively explores acquisitions of companies in the same industry or ofcompanies with elemental technologies that it currently lacks.

ROIC

Capital Turnover Ratio

Promoting Digital Transformation
In September 2021, Marumae issued a smartphone to each production
floor employee to facilitate the visualization of the progress andoutcomes of manufacturing processes using a barcode system.
This system allows employees in charge of production management
to understand manufacturing conditions in real time, allowing
processes to be adjusted and organized more quickly and helping
increase productivity. In addition, as the system also enables
supervisors to understand the work circumstances of each
employee, it helps them to assign personnel more efficiently.
In fiscal 2022, we will aim to launch the operation of a system fororganizing process plans. This system will improve the efficiency oforganizing process plans by incorporating order information andmanufacturing instruction manuals from our core system.

Profit margin

Increase machinery
operating rates

Control variable costs

Control capital

Control fixed costs

Improve marginal profit
per employee

Control expenses
Increase machinery
operating rates

19

MARUMAE REPORT 2021

MARUMAE REPORT 2021

20

Overview and Strategies by Sales Sector

Semiconductor
SectorFPD Sector
In the FPD (flat panel display) sector, Marumae manufactures
vacuum parts used in liquid crystal display (LCD) panel andorganic light-emitting diode (OLED) production equipment aswell as in testing equipment.

In the semiconductor sector, Marumae manufactures
vacuum parts used in the semiconductor chip production
process known as front-end wafer processing.

Net Sales

Fiscal 2021¥

4.2

Percentage of Total Net Sales

Distribution of Net Sales for Consumables

Fiscal 2021

78.6

billionConsumables

71%

Others29%

Net Sales

Fiscal 2021¥%

Percentage of Total Net Sales

0.8

Fiscal 2021

15.6

billionEtching*2

Consumables

23%

Others77%%

Primary processes

CVD*1

Distribution of Net Sales for Consumables

Primary processes

Coating*3

Cleaning*1 Chemical vapor deposition (CVD) is a chemical film deposition process in which a precursor gas is fed into a chamber under high atmospheric pressure in a medium-vacuum
state (100-10-1 Pa) and caused to undergo a chemical reaction through the application of energy in the form of heat, plasma, or light, resulting in the formation of a thin film or
small particles of material that are adsorbed or deposited onto the surface of a material or substrate.
*2 Etching is a process in which corrosive chemicals are applied to a material to deform or treat its surface. The parts of the surface that need to be preserved are typicallyprotected with an etch-resistant masking material, such as a photoresist (a light-sensitive organic material), and excess areas are removed from the surface with the corrosive
chemicals through erosion or etching to obtain the desired shape.
*3 Coating is a process in which a photoresist is coated onto a wafer surface and microscopic circuit patterns are transferred and developed onto the substrate using photolithography equipment.

CVD

Sputtering*1

Ashing*2

Coating

Etching

Bonding*1 Sputtering is a process in which a target coating material (a deposition material shaped like a plate) and substrate (its destination) are placed into a vacuum chamber and a
voltage is applied between them. An inert gas (typically argon) is introduced into the vacuum chamber and ionized to create a glow discharge (plasma formed by the passage ofan electric current through a gas). The target material is bombarded by the gas ions at high velocity, causing particles (atoms and molecules) from the target coating material
to escape, travel, and deposit on the substrate as a film.
*2 Ashing is the process of breaking down and removing excess photoresist from an etched wafer by generating a reactive species (a type of unstable molecule that easily reacts
with other molecules) using a plasma source that combines with the photoresist to produce ash.

Operating Environment

Business Prospects

Operating Environment

Business Prospects

 arket conditions are favorable, with minimal impact
M
from COVID-19

 arket conditions are forecast to remain at a high levelM
for the time being

 ngoing lull in demand for small and medium-sized
O
OLEDs for smartphones

Acquire new customers by utilizing EBWs

 lthough there is uncertainty associated with U.S.–
A
China trade friction, demand for logic semiconductors
is a positive factor

 arumae plans to continuously implement proactiveM
capital investments

Demand for Generation 10.5 LCDs* likely to slow

 arumae will expand its market share by strengtheningM
its prototype production capabilities and proactively
implementing capital investments.

In consideration of its acquisition of a process of record(POR*) for semiconductors, Marumae will pursue apolicy of prioritizing the expansion of its market share,taking into account the risk of market stagnation.

 arumae will strengthen orders for one-stop producMtion encompassing front- and back-end processes byutilizing its electron beam welders (EBWs) and transportation capabilities* Glass substrates measuring approximately 3 m×3.4 m in size

 arket share to expand as a result of business withMdrawal by industry rivals
 rders centered on small and medium-sized OLEDs toOremain favorable
 ddress production crunch through augmentation ofA
capabilities while making use of partner companies tothe extent possible* POR: certification for semiconductor manufacturing processes

Strategy Direction
Amid intense market growth, Marumae will aim to maintain and increase its market share by expanding its production
capabilities for existing customers. In conjunction with these efforts, the Company will leverage the technologies in which
it excels to secure new customers.

21

MARUMAE REPORT 2021

Strategy Direction
Marumae will boost orders for vacuum chambers—which are difficult for industry rivals to manufacture—centered on theuse of electron beam welding and cutting. In addition, as our market share expands, we will implement capital investments to fulfill our responsibility to produce products that are difficult for other companies to manufacture.

MARUMAE REPORT 2021

22

Overview and Strategies by Sales Sector

CASE STUDYOther Sectors
Marumae manufactures aluminum and various other metalparts, such as solar cell production equipment, racing motorcycle, optical, and medical equipment parts.

Net Sales

Fiscal 2021¥

0.3

Gaining Satisfaction from Working as One with Employees toPromote Improvements in Today’s Quality-Focused Environment

Percentage of Total Net Sales

Distribution of Applications
 olar cell productionSequipment parts
48.6%
Smartphone coating­production equipment
parts38.1%
Measuring
instrument parts1.5%
Racing motorcycle
parts1.5%
Medical equipment
parts0.2%
Other10.1%

Fiscal 2021

5.8

billion%

PolicyMarumae will work to utilize its excess production capacity in the semiconductor and FPD sectors to contribute to othersectors. Our policy is also to develop new sectors by acquiring new technologies.

Products with Sales Track Records
Solar cell production
equipment
Supplying parts for deposition systems for thin-film
solar panels

Smartphone casings

Motorcycles

Optical sector

Supplying parts used inequipment for coating andpainting the surfaces ofsmartphones

Primarily supplying partsfor racing

Supplying image processing
equipment parts

The manufacture of semiconductor production equipment parts
involves the production of a wide variety of products in small quantities, for which many prototypes must also be supplied. To cater tothese requirements, Marumae has systematized the production
technologies it has cultivated, including its own extrusion manufacturing system, to ensure that it does not rely excessively on thetechnological expertise of certain individuals.
In addition, we have established the Marumae Manufacturing
System, a proprietary system combining these production methods
with factory automation for repetitive manufacturing tasks, otherforms of automation, and laborsaving technologies. Going forward,
we will enhance productivity per employee through the introductionof further automation and laborsaving technologies, thereby shortening delivery times and realizing a highly cost-competitive manufacturing system.

23

MARUMAE REPORT 2021

Marginal Profit per Employee Comparison (Thousands of yen)

Marumae(Fiscal 2021)¥13,868

Deputy Section Manager,
Manufacturing Section,
Takaono Factory

RobotsSupplying robots for
production process
automation

Close Up
The Marumae Manufacturing System—Designed
to Achieve Highly Efficient High-Mix, LowVolume Production and Prototype Production

Takumi Miyahara

As deputy section manager of the Takaono Factory's manufacturing section, myduties center on managing the machining work of my subordinates. In my 12
years since joining Marumae, I have been involved in designing and machining
semiconductor production parts in the manufacturing division.
Initially, I remember having a hard time as I was unable to machine workpieces
in accordance with blueprints. Even when I created a program and ran a simulation that went well on computer software before machining, it often did not workout when I actually used a machine to cut the metal, resulting in missed deadlines
on some occasions. Despite such repeated difficulties, I was very pleased when—with the guidance of senior employees around me—I could cut a workpiece into ashape that ultimately gained the satisfaction of the customer, which helped makemy work more rewarding.
Now that it is my role to provide guidance to subordinates, I work together withthem to consider improvement measures in the event of faults or other issues
with products they have designed, and find solving such issues particularly satisfying. We willcontinue endeavoring to resolve customers’issues by ensuring that products meet
Marumae’s high standard of quality through not
only individual capabilities but also throughteamwork.

Industry
average¥8,194

Source: 2021 TKC Management Indicators (Business Analyses and Statistics by
TKC) (For companies with fiscal years ended between June 30, 2021
and August 31, 2021)

Going beyond Simply Manufacturing according to Blueprints to
Proactively Provide Technologies from the Prototype Stage
Unlike the Izumi and Takaono factories near Marumae’s Kagoshima headquarters,
the Kanto Factory—where I work—manufactures semiconductor production
equipment parts for specific customers.
In the semiconductor sector, parts are normally manufactured according to theblueprints supplied by customers. In our case, however, almost all customers
consult with us from the blueprint preparation stage. While our physical proximity
to customers may be one reason why we receive such consultations, I strongly
believe it reflects the recognition we have received for our track record of
responding sincerely to customer requirements of any kind. At times, we have
solved customers’ issues by proactively making proposals from the prototype
stage, such as manufacturing a special tool for the production of a part in the
shape they require.
Taking care of this corporate culture will be indispensable to further solidifying the relationships oftrust we have built up thus far. As I am currently
involved in employee training as a manager while
also performing machining work on the production
floor, I hope to use these opportunities to convey
Marumae’s corporate culture to other employees.

Ryota Motoyama
Deputy Section Manager,
Manufacturing Section,
Kanto Factory

MARUMAE REPORT 2021

24

Management Foundation for Delivering Sustainable Growth
ESG Initiatives
ESG Policy

Process for Identifying Key ESG Issues

1 ontribute to our information-driven society by supplying parts for semiconductor and flat panel display productionC
equipment

2

Aim to realize a sustainable society

3Build on and improve the workplace environment to enable everyone to actively participate

4Establish a robust management foundation

Marumae’s Approach to Sustainability
A sustainable society is indispensable for ensuring business continuity and establishing a foundation for growth. Marumae
has identified environmental, social, and governance (ESG) issues in relation to its business and is promoting initiatives
pertaining to these issues 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 to corporate value improvement, giving considerable thought
to how these issues affect our corporate value.
While it promotes such initiatives, Marumae expects that as the social climate changes, so too will its operating environment and the issues it faces. Accordingly, the Company will continue to monitor the external environment while remaining
careful not to overlook internal issues. In this way, we will promote initiatives while making improvements to our businessactivities.

The ESG Committee
Identifying material issues in relation to ESG matters from a long-term perspective, the
ESG Committee drafts key performance indicators (KPIs) and plans for solving theseissues while serving as a body for monitoring initiatives. Following consultation fromthe Board of Directors, the committee was established as a subcommittee of the Boardof Directors in September 2021. The committee’s role is to oversee whether initiatives
for addressing ESG issues are leading to an improvement in corporate value and toreport to the Board of Directors as necessary.
Comprising the president and representative director, one inside and one outside
director, and six employees, the committee has in place a system that facilitates thedeep involvement of directors.
The details of discussions at committee meetings are reported to the Board of
Directors, the role of which is to oversee the progress of ESG plans and initiatives.
Opinions offered by directors when such details are reported to the Board of Directors
are shared with ESG Committee members, who conduct discussions at committee
meetings as necessary.

ESG Committee System

In 2021, we began the process for identifying key ESG issues byassessing the degree of importance of the 17 goals and 169
targets of the United Nations Sustainable Development Goals
from four perspectives (see chart 1). We used a formula (chart 2)
to produce ratings for these perspectives and listed items withhigh ratings as important items.
Next, we identified key issues by carrying out repeated discussions referencing the standards of the Sustainability AccountingStandards Board’s evaluation criteria for the semiconductor
industry and the standards of the Global Reporting Initiative.
Going forward, the ESG Committee will oversee initiatives forthese key issues while reviewing them regularly, taking into
account changes in society and the views of stakeholders.

Key ESG Issues

ESG Committee members

President andrepresentative director
Director
Employees

Notice on ESG Data Disclosure
Marumae discloses ESG-related figures on its website to help stakeholders gain a deeper understanding of the Company.
Quantifying ESG elements allows us to understand current conditions quantitatively and to discover and analyze the issues
we face. We link the results of our analysis to long-term corporate value improvement.

SDGs

Rating ofimportance

Relationshipto laws andregulations

Rating of importance

Impact if no action is taken and if action is taken

Chart 2
Relevance to business operations ×(Laws and regulations + Impact) × Effect = Rating

Achievement
TimingTargetDeclare support for the recommendations of the TCFD and implement
information disclosure based on its framework

2030

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

2030

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

2030

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

2030

Improve both prototype production and programming capabilities
Train 100 programmers

2022

Improve ROIC
Achieve asset-based ROIC of 18%
Achieve liability-based ROIC of 14%

Increase inproductivity

2022

Achieve marginal profit per employee of ¥20.0 million by fiscal 2022

Technologicalinnovation

2022

Promote digital transformation
Implement complete operation of schedulers

2025

Establish a team dedicated to developing human resources (create a personnel section)

2025

Prepare and implement a human resource development plan and increase
investment in training per employee

2025

Achieve a rate of parental leave by female employees of more than 75%
Attain a rate of parental leave and parental-related annual paid leave by male
employees of more than 30%

2025

Encourage diversity (recruit minorities, LGBTQ individuals, and other sociallydisadvantaged individuals, foster understanding of diversity, create friendly
work environments, and offer platforms where everyone can thrive)2030

Promote the active participation of women (increase the percentage of female
employees and women in management positions)2023

Achieve a 3% employment ratio of people who have disabilities

2023

Ensure a 100% participation rate in safety training

2023

Promote diversity in the Board of Directors

2022

Boost the ratio of outside directors

2022

Establish a remuneration system for directors that functions as an incentive

2030

Promote research and development related to physical rehabilitationequipment

Product
competitiveness

Development of
human resources

People and theworkplace

For more information on ESG data, please refer to our website (Japanese only).
https://www.marumae.com/com_5.html

MARUMAE REPORT 2021

Rating ofimportanceStartedin 2021

Realization ofa Sustainable
Society

Others25

Expected
effects

Reduce CO2 emissions per marginal profit by 50% or more compared withfiscal 2021 by 2030 by generating renewable energy to curb electricity
consumption

Corporate
governanceWEB

Rating of importance

2030

Consults

Chairperson
Outside director

Relevance to business operations

Key ESG Issues and Achievement Targets

Board of Directors
Reports

Chart 1

SDG Items

MARUMAE REPORT 2021

26

Management Foundation for Delivering Sustainable Growth

The Environment
Marumae’s Environmental Initiatives

Environmental Initiatives

In 2011, Marumae obtained ISO 14001 environmental management system certification, in accordance with which theCompany evaluates and identifies its significant environmental aspects while establishing annual targets for initiatives
aimed at reducing its environmental impact.
In light of the growing awareness of climate change in recent years, the Company has also formulated a plan from a
medium- to long-term perspective for reducing its greenhouse gas emissions from 2020, and is steadily installing equipment
for generating electricity in-house.
Our rationale for choosing to generate electricity in-house is related to the fact that we belong to the manufacturing industry, an industry that consumes a relatively large amount of energy. We have concluded that a system for generating energy
in-house is essential to prepare for the risk of fluctuations in the cost of procuring renewable energy going forward and tocontinue manufacturing activities in a stable manner. In addition, given that climate change is expected to seriously impact
our living environment in the future, we have decided—with a sense of urgency—to work to address this issue directly bygenerating our own electricity.

Marumae’s Significant Environmental Aspects
1Electricity consumption volume4

Reuse of packaging materials

2Waste fluid disposal costs

5Costs arising from remanufacturing due to defects

3

Industrial waste disposal costs

Note: We identified the above five items through environmental impact
assessments in our ISO activities.

Reduction of CO2 Emissions by Generating Electricity
In-House Using Renewable Energy
TargetReduce CO2 emissions per marginal profit by 50% or more comparedwith fiscal 2021 by 2030 by generating renewable energy to curb
electricity consumption

Given its adoption of a growth strategy, Marumae expects its total electricity
consumption to rise as production volumes increase. With this in mind, Marumae
recognizes that reducing CO2 emissions per marginal profit is an important issue for
the Company. To address this issue, we are reducing the ratio of electricity we procure
from external sources and have begun generating our own electricity.
In terms of a specific measure, we are endeavoring to raise the percentage of electricity consumption accounted
for by solar power to over 30%. Consequently, we have targeted reducing CO2 emissions (Scope 1 and Scope 2) per
marginal profit by 50% or more compared with fiscal 2021 (0.855 t-CO2/million yen).
Generation of Our Own Electricity
Rather than buying carbon credits, we aim to reduce CO2 emissions through our own efforts by generating clean
energy ourselves.

Circular Economy Business Aspect

Target for CO2 Emissions Per Marginal Profit

As Marumae’s business entails the cutting of metal to
manufacture products, it produces a low volume ofwaste relative to other businesses in the manufacturingindustry. We sell the aluminum and stainless steel
chips discharged after manufacturing to recycling
companies as valuable materials, which are reusedas materials for metals. As such, we have in place abusiness model with a minimal environmental
impact.

(t-CO2/million yen)

Installations of Solar Panels
Date

Factory

1.0

July 2020

Takaono

72 kW

0.8

June 2021

Takaono259 kW

October 2021

Izumi

221 kW

January 2022

Kanto

90 kW

0.6

Reduce CO2 emissions per
marginal profit by 50% or morecompared with fiscal 2021

0.4
0.2
0

FY2018FY2021

FY2024FY2027

FY2030Panel capacity

Forecast to reduce annual volume of purchased
electricity by 13% on a cumulative basis

Scope 1 and Scope 2 emissions intensity (per marginal profit)
Discharged chips

Information Disclosure in Relation to Climate Change
In November 2021, Marumae declared its support for the final recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD). Accordingly, Marumae will visualize the financial impact of climate change on the Company andprepare for future risks and opportunities.
In the course of conducting information disclosure in relation to climate change, we will strengthen our ability to manage
environmental risk factors while building upon our ability to respond to an uncertain future and our resilience to damage.
These efforts will help minimize the adverse effect of climate change on our business activities.
Prior to our declaration of support, we calculated the volume of greenhouse gas emissions (Scope 1, Scope 2, and Scope 3)
across our entire supply chain for the past four years in order to understand our current situation in numerical terms, theresults of which we have disclosed in the ESG Data section on our website (Japanese only).
At present, the ESG Committee, which includes the president and representative director and two directors among its members,
discusses Marumae’s corporate governance system pertaining to climate change risks and opportunities as well as the Company’srisk management system. As soon as it is approved, the substance of these discussions will be disclosed on our website.

27

MARUMAE REPORT 2021

Further Reduction of Consumables by Revising Reduction Methods
Marumae has been reviewing consumables expenses on a monthly basis since its founding and regularly checks
the details of consumables purchases to ensure that there is no waste. Based on reviews of purchase records anddetails, the Company takes timely action to ensure all employees are fully acquainted with the importance of
reducing consumables. In this way, we make Companywide efforts to reduce consumables.
The reason we focus on consumables expenses in our cost structure lies in the fact that, while we cannot reducematerial expenses since materials are designated by Change Control (CC), we can reduce consumables throughour own efforts.
Despite spending many years working to reduce consumables expenses, we revised our methods to achieve
further reductions in creating our ESG plan. For cutting fluid, we have purchased a variety of equipment, which we
expect to help reduce the volume of waste by extending the service life of the fluid. We also aim to further reducepackaging materials in various ways, including by changing the materials we use.

MARUMAE REPORT 2021

28

Management Foundation for Delivering Sustainable Growth

Communities and Society
Creation of Value through Consolidation in Kagoshima Prefecture
1 Revitalizing the Regional Economy
Marumae’s headquarters are located in Izumi City, Kagoshima Prefecture.
Given the characteristics of the region, it is by no means a prime location fromthe standpoint of economic revitalization. Amid these circumstances, theCompany hopes that its business activities—which relate to semiconductors
used throughout the world—can contribute to the regional economy in somesmall way. For example, the profits earned by Marumae are paid to
employees, who, along with the Company, pay taxes to their local government,
thereby contributing to regional finances. In addition, our continuous capital
investments also help revitalize the regional economy by increasing the­economic activities of business operators in the region.
2 Creating Regional Employment Opportunities
A broad range of employees—both young and old, of all genders—work at
Marumae. In addition to a strong pool from the younger demographic, we also
have employees who have reached the age of 65, the former retirement age,working in positions suited to their physical strength and circumstances.
Marumae will continue to increase employment in Kagoshima andestablish a working environment amenable to a variety of people.

Social Initiatives

Support for the Social Integration of Stroke Patients Using
Rehabilitation Equipment
In collaboration with Kagoshima University, Marumae is developing rehabilitation equipment effective in improving
hemiplegia (total or partial paralysis of one side of the body) that can be used for repetitive facilitative exercise(RFE) therapy in place of a doctor or physical therapist.
Marumae is conducting development while canvassing the views of employees who have symptoms ofhemiplegia, with the aim of enriching the lives of hemiplegia patients through this rehabilitation equipment.
Developing the equipment has increased the Company’s knowledge of and experience with the automated control of robots and of parts design. As Marumae draws on this knowledge and experience in the design and production of its production equipment, it is also useful in enhancing the Company’s productivity.
Repetitive Facilitative Exercise Therapy
12

3

 timulate facilitatedS
stretching to induce
stretch reflex

Rebuild targeted neuralcircuits in hemiplegia
patients by following
steps 1 and 2

 licit voluntaryEmovement throughthe induced stretch
reflexRepeat steps 1
and 2

StretchreflexStrengthen new targetedneural circuits throughrepetitive training

Automation

Marumae is developing
rehabilitationequipment to put thistheory into practice.

Kazuhisa Shimoirisa, who has symptoms ofhemiplegia, works at Marumae. He provides
support for research and development related torehabilitation equipment through data collection
and represents Kagoshima Prefecture in boccia,
which attracted considerable attention at theTokyo 2020 Paralympic Games.

Put forward by Kazumi Kawahira, an honorary professor at Kagoshima
University, RFE therapy is a neuronal net constructive therapy that aims
to rebuild and strengthen the neural circuits required to realize
voluntary movement through repetition using a facilitation technique.
Kazuhisa Shimoirisa using rehabilitation equipment

Spotlight

Contribution to the Region through the Acquisition of Naming Rights

Message from the Employee in Charge of the Medical Equipment Sector

With the hope of contributing to cultural activities in the region, Marumae has
acquired the naming rights of three facilities in Izumi City. The cost of acquiring the rights serves as a new source of funding, which is primarily used tocover the maintenance and management costs incurred by the facilities.
Facilities• Marumae Hall Izumi (Izumi City Culture Hall)

Marumae Will Continue Contributing to Society by Making
Use of Its Technologies and Expertise

Contract period
April 2020–March 2030

• Marumae Concert Hall Izumi (Izumi City Concert Hall)• Marumae Sports Center Izumi (Izumi City General Gymnasium)

Site Agreement with Izumi City
Marumae concluded a site agreement with the government of Izumi City,
Kagoshima Prefecture in 2017. The Company renovated the site of a factoryacquired under this agreement to establish the Izumi Factory. The installationof automated equipment at the factory, which has a vast site, has facilitatedmass production, contributing significantly to the improvement of Marumae’s
productivity. Employment has increased as we have expanded our site andaugmented our manufacturing capabilities at the Izumi Factory, and we­continuously conduct recruitment activities in the region.

29

MARUMAE REPORT 2021

Takashi MorimotoGroup Leader,
Medical Equipment Group,
Development Section,
Development Department,
Manufacturing & Technology
Headquarters

I am in charge of overall R&D related to rehabilitation equipment at theDevelopment Section’s medical equipment group. As the rehabilitationequipment we are currently developing recreates medical techniques
usually performed by doctors, it is required to perform highly intricate
movements. Safety and ease of portability are also vital to enable users
to use the equipment at home or elsewhere. Marumae’s advanced
machining technology and expertise regarding materials has been very
useful in addressing these requirements. For example, when wechanged materials from metal to plastic to improve the safety of rehabilitation equipment and make it lighter and more compact, we refined
the shape of the equipment based on advice from others within the
Company, including the president and representative director, andproduced several different prototypes. I believe such an environment
has enabled us to solve the issues that accompanied the change ofmaterial. Marumae will continue to make a unique contribution tosociety through R&D related to rehabilitation equipment.

MARUMAE REPORT 2021

30

Management Foundation for Delivering Sustainable Growth

Human Resources
Initiatives for Developing Human Resources

People and Corporate Value
Marumae has grown by solving customers’ issues through its technologies. It is people who maintain these technologies and Marumae recognizes that the diverse requirements of customers cannot be satisfied through the technological capabilities of only a select few people. To this end, Marumae believes that the passing on of technologies
within the Company will lead to its corporate growth.
When considering our business continuity from a medium- to long-term perspective, the establishment of anenvironment where employees can work with peace of mind,
unburdened by excessive mental or physical strain, is essential toaddressing rising demand in a sustainable manner. Marumae’s
employees are devoting themselves to their daily manufacturing activities in order to meet the needs of customers. Mindful of their efforts,
Marumae’s policy is to implement measures for reducing the burden
on its employees. Members of the Audit and Supervisory Committee
and the ESG Committee take the lead in monitoring whether or not any
issues pertaining to the working environment need to be tackled,while the Company has also set up a consultation service to help
address any psychological issues faced by employees.

100

A diverse range of employees of all ages—from highly skilled
and experienced experts to young employees who will lead theCompany in the future—work together at Marumae. Employees
who have reached the retirement age may choose a workstylethat suits their own circumstances and wishes. Almost all such
employees continue to work, thereby underpinning Marumae’sbusiness activities.
At Marumae, employees who have disabilities support thedevelopment process at its site for developing medical equipment,
enabling the Company to conduct development while incorporating
perspectives that its developers would not otherwise be aware of.
In addition to those supporting development, other employees
who have disabilities work at Marumae on a continuous basis,
engaged in work suited to their individual characteristics andinterests. None of those recruited since Marumae began
employing people who have disabilities have left the Company.
Age Distribution of Employees (as of August 31, 2021)(%)(Employees)

10

100

8

80

6

60

4

40

2

20
FY2019FY2020Percentage of employees aged 65 or above
Percentage of employees who have disabilities

31

Creation of an Environment Where People of Various
Backgrounds Can Grow

Percentage of Employees Aged 65 or Above /Percentage of Employees Who Have Disabilities

FY2018MARUMAE REPORT 2021

Marumae’s programmers hold the key to solving customers’ issues. This is related to the fact that programmers
devise how to make products; determine input terms to be used for controlling machinery, such as blade type androtation speed; and maintain the technologies to manufacture products in accordance with blueprints. When making
a product for the first time, it is often not possible to manufacture itin accordance with the blueprints. In order to solve issues that haveemerged as we have worked to give shape to products drawn inblueprints, various customers have consulted with us to create
products through a process of trial and error.
The source of Marumae’s competitiveness is its ability to create a
product through trial and error, even when a manufacturing method
has not been established for the product a customer wants to create.
As such, in conjunction with continuous efforts by programmers to
improve their technological capabilities, passing on technologies tocolleagues within the Company and increasing the number ofTarget Number of Programmers for
programmers are key to Marumae’s growth going forward.
Fiscal 2030
To this end, we have drawn up a plan to increase the number oftimes
programmers 1.6 times by fiscal 2030. As frontline experience is vital
FY2030to the development of programmers and young programmers grow
FY2021through interacting with experienced experts, those carrying out
61
training and those engaged in learning both require time. Accordingly,
from a long-term perspective, we plan to increase the number ofprogrammers we employ.

1.6

Marumae’s Diversity0

Programmers Launching New Products Are Central to
Our Technologies

FY2021Developing human resources has long been an issue faced by Marumae. Having grown rapidly from its beginnings as asmall ironworks, human resource development at Marumae has entailed the president and representative director himself taking the lead in training employees, while frontline engineers have trained each other through on-the-job training
at their own initiative, rather than developing human resources in a systematic mannerwith a training system.
In light of the increase in the number of its employees, Marumae believes that the time
is right to strengthen its organizational management system. While retaining the initiative
shown by those on the front lines, we will reduce the burden on them by conducting training as an organization, establishing a specialized department to pass on knowledge andtechnologies in an efficient manner. Giving due consideration to their respective backgrounds, we will also create a system that allows new graduates and mid-career recruits
to understand and adjust smoothly to the workplace, as well as an environment that allows
people of various backgrounds to better demonstrate their capabilities through trainingthat helps managers manage their subordinates more effectively.

Focus on Achievements

0

Up to 29

Male

Female

30s

40s

50s

60s

70s

Marumae pays performance-based bonuses on a quarterly basis. The Company believes that it is essential to havea system that visualizes the achievements of employees, evaluates them fairly, and rewards them accordingly.
Based on this belief, we introduced performance-based bonuses linked to the quarterly marginal profit.
In addition to recognizing achievements objectively, this system fosters a greater focus on achievements andenhances the motivation of employees.

MARUMAE REPORT 2021

32

Management Foundation for Delivering Sustainable Growth

Employee Safety

Human Resources

Safety as the Highest Priority

Initiatives for Creating Employee-Friendly Workplaces

Leave System
While the percentage of paid leave taken by employees
is trending upward, resolving workload imbalances inall divisions to establish an environment conducive toall employees taking paid leave is a task faced by
Marumae. To create a leave system that reflects thewishes of its employees, the Company decides on thesystem after holding discussions on an annual leaveplan, incorporating the views of employees via an
employee-elected representative. In terms of otherspecific measures, we will establish an internal
system for increasing the number of days of paid leave
to be taken going forward.

Percentage of Paid Leave Taken
(%)
80

60

40

20

0

FY2018FY2019FY2020

FY2021

Marumae gives the highest priority to safety. Maintaining
our technologies, business relationships, and contributions
to society would be impossible in the event of a major accident. We use the President’s Newsletter, which is distributed to all employees, as well as morning meetings andother occasions to ensure that employees are fullyacquainted with our aim of giving the highest priority tosafety, and we comply meticulously with various requirements stipulated in laws and regulations.
To enable us to gain a detailed picture of safety, we haveestablished separate committees for health and safety ateach factory. At these committee meetings, members carryout repeated discussions and suggest improvements
regarding any matters that may affect the safety of employees.
Further, Marumae provides safety training to employees
when they join the Company and at least once a year
thereafter.

Efforts to Reduce Overtime Hours
Another key task currently faced by Marumae is the
reduction of overtime hours, which continue to rise.
The rise is mainly a result of the expansion of orders
received outpacing the increase in the personnel
required to handle them. Although we are continuously recruiting, new employees require a certain
period of training after joining the Company, taking up
the time of not only new recruits but also experienced
employees. As a result, we expect that it will take acertain period of time to achieve a reduction in overtime hours. As a specific measure to reduce said
hours, we will promote enhanced operating efficiency
in addition to personnel increases, primarily over the
medium to long term.

Average Overtime Hours per Month

FY2018FY2019FY2020

FY2021

2.24

10.10

12.77

5.28

LTIFR*

0.00

2.02

2.13

0.00

Number of industrial
accidents*3

1

5

6

3

 Number of thoseresulting in lost time

0

1

1

0

2

*1 Total recordable injury frequency rate (TRIFR) = Total number of industrial
accidents ÷ Total number of hours worked × 1,000,000*2 Lost time injury frequency rate (LTIFR) = Deaths or injuries resulting from losttime industrial accidents ÷ Total number of hours worked × 1,000,000*3 Cuts/scratches (one case) and falls (one case) accounted for the industrial
injuries resulting in lost time during the four fiscal years.

Factories (Izumi / Takaono / Kanto)

16

Safety Committee chairperson

Health Committee chairperson

12

8

4

0

FY2018FY2019FY2020

FY2021

Marumae must also take on the tasks of increasing its percentage of female employees and female managers andcreating an internal system to facilitate these increases. The Company promotes various initiatives with the goal of
creating an environment that brings out the potential talent in individuals, rather than allowing said talent to be
thwarted by gaps in career histories resulting from childbirth, child rearing, and other circumstances or by preconceived ideas from a bygone age on gender differences,and of preventing organizational rigidity by incorporating adiverse array of perspectives.
As chairperson of the ESG Committee, the female
outside director appointed in October 2020 is advancing
the recruitment and training of female employees. In
addition, we will conduct recruitment activities based on
the career plans of new employees from a long-term
perspective and increase the opportunities for female
employees to participate in career training.

MARUMAE REPORT 2021

Category
TRIFR*1

Organizational Structure for the Safety and Health Committees(Hours)Promotion of the Active Participation of Women33

We also record all minor injuries that do not result in losttime and implement measures to eliminate their causes. In
this way, we are striving to prevent theoccurrence of industrial accidents.

Safety manager

Committee member

Industrial physician

Committee member

Committee member

Committee member

Health manager

Committee member

Committee member

Committee member

Committee member

Committee member

Management
representatives

Employeerepresentatives

Management
representatives

Employeerepresentatives

Measures in Response to the COVID-19 Pandemic
Marumae has endeavored to prevent the spread of
COVID-19 since its initial outbreak in Japan. These
efforts have focused on prioritizing the health and safetyof its stakeholders, most notably employees and customers, and ensuring that its manufacturing activities
remained unhindered to enable it to fulfill its supply
responsibilities to customers.
As specific measures, we have minimized contact
between individuals, starting with a ban on group gatherings. We have also provided electronic devices and software
to enable smooth communication without the need to meetface-to-face—either inside or outside the Company—and to
avert disruptions to operations. Additionally, giving thought

to our response in the event of a cluster, we have laidout measures for minimizing the spread of infection thatinvolve splitting employees into small groups, setting up
separate work areas for each group, and cutting contact
between the groups.
These measures, as well as thorough implementation of
the wearing of masks, the disinfecting of hands, and otherefforts, have so far enabled the Company to avoid criticalsituations, such as mass infections. We will continue ourefforts to prevent infection while responding
flexibly to developments in relation to COVID-19 and therequests of national and local governments.

MARUMAE REPORT 2021

34

Management Foundation for Delivering Sustainable Growth

Corporate Governance
Basic Stance

Overview of Our Corporate Governance System and Rationale for Its Adoption

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

At the 28th Annual General Shareholders’ Meeting of the Company, held on November 28, 2015, a resolution was passed toamend the Articles of Incorporation of the Company, entailing a transition from being a Company with a Board of Corporate
Auditors to a Company with an Audit and Supervisory Committee as of the same date. The Company made this transition tofurther strengthen the supervisory function of the Board of Directors and to further enhance its corporate governance system byappointing directors (including several outside directors) who are members of the Audit and Supervisory Committee and who
have voting rights at meetings of the Board of Directors—in accordance with the Act for Partial Amendment of the Companies
Act (Act No. 90 of 2014), which came into effect on May 1, 2015—and accordingly adopted the Company with an Audit andSupervisory Committee system as its new organizational form.

Corporate Governance System
General Shareholders’ Meeting
Appointment/Dismissal

Board ofDirectors’Meeting

Appointment/Dismissal

Audit/Supervision

Board of Directors
ReportC

Consultation Report

ESG Committee

B

Instruction

Compliance Committee

A

Audit and Supervisory Committee

Deliberation

Appointment/
Dismissal/
Supervision

D

Management Meeting

Business Execution

Audit

Audit

Instruction

The Audit and Supervisory Committee comprises four
members, three of whom are outside directors. The
committee holds meetings on a monthly basis, in principle,
and extraordinary meetings as necessary. The committee
exchanges information with internal audit personnel andaccounting auditors as needed to enhance the effectivenessand efficiency of audits.
Advisory Committee
The Advisory Committee is composed of the president andrepresentative director and three independent outside directors who are Audit and Supervisory Committee members. The
committee is convened as necessary. As an advisory body to
the Board of Directors, it submits reports from an independentand objective standpoint on the appropriateness of decisionmaking policy and standards regarding the nomination andremuneration of directors.
B

ESG Committee
The ESG Committee consists of the president and representative director, two directors, and six employees. With afocus on pursuing management from a long-term perspective, the committee identifies material issues, sets key
performance indicators (KPIs) and ascertains the degree of
their achievement, and reviews plans and reports on their

Corporate Lawyers
AdviceD

Evaluation of the Effectiveness of the Board of Directors
The Company’s Board of Independent Outside Directors has all directors complete anonymous questionnaires and analyzes
and evaluates the effectiveness of the entire Board of Directors while referencing self-evaluations and other feedback fromsaid questionnaires. The Board of Independent Outside Directors carries out its analysis and evaluation confidentially while
the Secretariat of the Board of Directors (Administration Headquarters) amalgamates the feedback from the questionnaires,
thereby facilitating fairness and transparency. The leading independent outside director reports the results to the Board of
Directors. In this way, the Company strengthens mutual monitoring and supervision among directors. Results of the fiscal
2021 evaluation are provided below.
Additionally, a third-party organization evaluates the effectiveness of the Board of Directors once every three years, basedon the results of which the Company makes refinements and improvements.

Results of the Fiscal 2021 Evaluation

progress to the Board of Directors, in order to address thevarious challenges related to environmental, social, andgovernance (ESG) issues in corporate management.

Composition of theBoard of Directors

The Board of Directors has a structure with strong checks and balances over executive directors, with outside directors accounting for one-third of the Board of
Directors (non-executive directors occupying a majority of the Board of Directors), to ensure a structure that sufficiently fulfills the function of checks and balances over
executive directors. Furthermore, the Company has established the Advisory Committee with a majority of independent outside directors and a Board of Independent
Outside Directors, which comprises all independent outside directors. The establishment of these committees has helped strengthen the supervisory function overbusiness execution.

Operation of theBoard of Directors

In Board of Directors’ meetings, active discussions are held in an atmosphere conducive to easily sharing opinions. In particular, directors who are Audit andSupervisory Committee members readily request explanations or materials on the appropriateness of executive directors’ proposals. In response, executive
directors, led by the president and representative director, respond based on actual business conditions. Such active discussions in Board of Directors’ meetings
contribute to the effective functioning of the Board of Directors. Moreover, the manner in which the president leads proceedings at Board meetings enables outside
directors to freely participate, such as by giving them opportunities to voice their opinions on matters beyond those on the agenda at Board of Directors’ meetings.
As a prerequisite for effective management supervision by outside directors (non-executive directors), all members of the Board of Directors, including outside directors(non-executive directors), effectively discuss the direction of management strategies and other matters, improving the supervisory function of the Board of Directors.

Summary of theBoard of Directors’
Effectiveness

The Board of Directors is functioning adequately, especially in regard to monitoring and overseeing executive directors, ensuring its effectiveness to a considerable extent.

Management Meeting

The Management Meeting is membered by 29 employees
who serve in the position of deputy section manager orabove. At the meeting, which is held monthly in principle,
members share their perspectives and exchange opinions on
business strategy, business operation, and other matters.

Organizational Form

Company with an Audit andSupervisory Committee

Maximum Number of Directors Stipulated in
the Articles of Incorporation

12

Term of Office of Directors (excluding Directors
who are Audit and Supervisory Committee
Members) Stipulated in the Articles ofIncorporation

1 yearTerm of Office of Audit and Supervisory
Committee Members

2 years

Chairperson of the Board

President andRepresentative Director

Number of Directors

8

Appointment Status of Outside Directors

Appointed

Number of Outside Directors

4

Number of Independent Outside Directors

4

For information on the internal control system, please refer to the Company’s Corporate Governance Report:
https://www.marumae.com/en/ir/pdf/cg_20220105.pdf

MARUMAE REPORT 2021

Consultation

Audit

Employees

Audit and Supervisory Committee

Cooperation

Internal Audit Manager
ReportSection Managers

35

Audit

Cooperation

Appointment

President and Representative Director

Instruction

WEB

Accounting Auditor

Consultation

General Managers

C

Cooperation

Advisory Committee

ReportA

Appointment/
Dismissal

Directors’ Remuneration
The remuneration of directors (excluding outside directors and directors who are Audit and Supervisory Committee members)
comprises performance-linked remuneration and restricted stock remuneration. Moreover, the Company has establisheda policy for deciding the amount of remuneration for directors. In accordance with this policy, the Advisory Committee is­consulted and reports on remuneration, which is set within the upper limit approved by a resolution at the Annual General
Shareholders’ Meeting. The Company reflects the committee’s report in deciding remuneration. After this process, theCompany determines remuneration for directors (excluding directors who are Audit and Supervisory Committee members)
at a meeting of the Board of Directors, while remuneration for directors who are Audit and Supervisory Committee members
is decided at a meeting of the Audit and Supervisory Committee following due discussions. The Advisory Committee’s procedures involve the chairperson convening a meeting of the committee based on a consultation from the Board of Directors.
At this meeting, which is attended by a majority of committee members who are entitled to vote on remuneration proposals
for directors, the committee arrives at resolutions based on a majority vote by the members in attendance.
Remuneration Type

Details

Remuneration Plan

Performance-Linked
Remuneration

Performance-linked remuneration consists of a fixed component and a variable component, the latter of which is linked to theCompany’s financial performance. For the variable component, (1) the bonus per employee, (2) the ratio of ordinary income tototal assets, and (3) the ratio of ordinary income to net assets are converted at a predetermined ratio, and the calculation results
are reflected in monthly remuneration. In this way, the Company improves its corporate value by further raising the awarenessof directors of their responsibility to stakeholders.

—

Restricted StockRemuneration Plan

In order to allocate restricted stock to directors, excluding outside directors and directors who are Audit and Supervisory
Committee members, the amount obtained by multiplying an amount determined based on the position of eligible directors by
the performance payment rate is granted as a monetary remuneration claim, with the Company’s fiscal year—which runs from
September 1 to August 31 of the following year—set as the evaluation period. Eligible directors are allowed to wholly use themonetary remuneration claim in the form of invested assets to make an investment in kind in the Company. In this way, theCompany issues or disposes of its common shares to eligible directors and allows them to hold such shares.

¥40 million or less per fiscal year
Common shares: 60,000 sharesor less per fiscal year

MARUMAE REPORT 2021

36

Management Foundation for Delivering Sustainable Growth

Directors (as of November 29, 2021)
Apr. 1987 Joined Marumae Kogyo (private company)
Oct. 1988 Established Marumae Kogyo Ltd. (currently Marumae Co., Ltd.), Director
Apr. 2001 Senior Managing Director, Marumae Co., Ltd.
Aug. 2003 President and Representative Director, Marumae Co., Ltd.
Apr. 2010 	President and Representative Director and General Manager, Manufacturing Department,
Marumae Co., Ltd.
Dec. 2010	President and Representative Director, General Manager, Manufacturing Department,
and General Manager, Administration Department, Marumae Co., Ltd.
Jun. 2011	President and Representative Director and General Manager, Administration Department,
Marumae Co., Ltd.
Jul. 2011 President and Representative Director, Marumae Co., Ltd.
Nov. 2019	President and Representative Director, responsible for Administration Headquarters,
Marumae Co., Ltd. (current position)

Toshikazu Maeda
November 20, 1966

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

Apr. 1993 Joined Iwasaki Giken Corporation
Dec. 1993 Joined Koto Manufacturing Corporation
Aug. 1999 Joined Marumae Kogyo Ltd. (currently Marumae Co., Ltd.)
Apr. 2004 General Manager, Sales Department, Marumae Co., Ltd.
Oct. 2004 Director and General Manager, Sales Department, Marumae Co., Ltd.
Jun. 2005 	Director and General Manager, Precision Machining Department, Marumae Co., Ltd.
Nov. 2008 Director and General Manager, Sales Department, Marumae Co., Ltd.
Apr. 2009 Director, General Manager, Sales Department, and Head, Kanto Factory, Marumae Co., Ltd.
Apr. 2010 Director and General Manager, Sales Engineering Department, Marumae Co., Ltd.
Jun. 2011 Director, General Manager, Sales Department, and Head, Kanto Factory, Marumae Co., Ltd.
Apr. 2018 Director and General Manager, Sales Headquarters, Marumae Co., Ltd. (current position)

Kota Kaizaki
February 18, 1973

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

Dec. 1997 Joined Top Corporation
Oct. 2000 Joined Miyokawa Paints
Sep. 2004 Joined I-Tec Corporation
Jan. 2008 Joined Paramodo Corporation
Mar. 2008 Joined Marumae Co., Ltd.
Nov. 2016 General Manager, Quality Assurance Department, Marumae Co., Ltd.
Apr. 2018	Executive Officer and General Manager, Manufacturing & Technology Headquarters,
Marumae Co., Ltd.
Nov. 2018	Director and General Manager, Manufacturing & Technology Headquarters,
Marumae Co., Ltd. (current position)

Hiroto AndoMay 25, 1979

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

Sep. 1995 Joined KXTV-10 (News10), Television Station, Sacramento, California
Feb. 2006 Joined Fuchigami Printing Corporation
Dec. 2009 Director, Fuchigami Printing Corporation
Dec. 2010 President and CEO, Fuchigami Printing Corporation
Jan. 2011 Representative Director and Vice President, Minami Nippon Shimbun Offset Rinten Co., Ltd.
Sep. 2012	Representative Director and President, Chuo Production Center Corporation(currently CrossMedia Inc.)
Apr. 2014 Director, The Yakushima Environmental and Cultural Foundation (current position)
Apr. 2014 Director, Kagoshima City International Exchange Foundation (current position)
Apr. 2016	Chairperson, Kagoshima Prefecture Women’s Empowerment Promotion Conference (current position)
Sep. 2016 Representative, Go! Kagoshima Corporation (current position)
Nov. 2020 Outside Director, Marumae Co., Ltd. (current position)

Outside Director

Akiko Kadota
August 6, 1968

Director

Skills Matrix of Directors
Audit andSupervisory
Committee

Joined The Kagoshima Bank, Ltd.
Branch Manager, Yokogawa Branch, The Kagoshima Bank, Ltd.
Auditor, Auditing Department, The Kagoshima Bank, Ltd.
Branch Manager, Kanmachi Branch, The Kagoshima Bank, Ltd.
Auditor, Auditing Department, The Kagoshima Bank, Ltd.
Director (Audit and Supervisory Committee member), Marumae Co., Ltd. (current position)

Keiji Hokanishi
May 7, 1964

Director(Audit and Supervisory
Committee Member)

Apr. 1989 Joined The Bank of Tokyo Ltd. (currently MUFG Bank, Ltd.)
Jul. 1992 Temporarily transferred to the Ministry of FinanceMar. 1997 Registered as a Lawyer in New York State
Oct. 2004 Registered as a Lawyer
Oct. 2004 	Joined Terukuni Lawyers Office (currently Terukuni Lawyers Office Law Professional Corporation)
Jun. 2010 Committee Member, the Kagoshima City Board of Education
Jan. 2012 Director, Momokino Law Office (current position)
Nov. 2017 Outside Director (Audit and Supervisory Committee Member), Marumae Co., Ltd. (current position)

Outside Director

Satoshi Momokino
December 14, 1965

Director(Audit and Supervisory
Committee Member)Jan. 1986 Joined Seiko Instruments & Electronics Ltd. (currently Seiko Instruments Inc.)
Apr. 1996 Representative Director and President, SII Mobile Communications Corporation
Oct. 2002 General Manager, System Application Division, Seiko Instruments Inc.
Apr. 2011 Executive Officer, Seiko Instruments Inc.
Jun. 2011 Director, Seiko-Precision Company
Jun. 2012 Representative Director and President, SII Network Systems Inc.
Dec. 2012 President, Seiko Solutions Inc.
Dec. 2013 Director, Seiko Instruments Inc.
Apr. 2017 Chairperson, Seiko Solutions Inc.
Apr. 2018 Advisor, Seiko Solutions Inc. (current position)
Nov. 2018 Executive Director, the Hattori Hokokai Foundation (current position)
Nov. 2019	Outside Director (Audit and Supervisory Committee Member), Marumae Co., Ltd. (current position)

Outside Director

Takaaki Yamamoto
June 15, 1953

Director(Audit and Supervisory
Committee Member)

Apr. 2011 Joined Audit Corporation Kagoshima Accounting Profession
Nov. 2013 Registered as a Certified Public Accountant
Jul. 2016 Joined Miyakawa Certified Public Accountant Office
Sep. 2016 Registered as a Tax Accountant
Mar. 2017 Corporate Auditor, Kagoshima Meat Sales Corporation (current position)
Mar. 2017 Corporate Auditor, Minami Nihon Livestock Corporation (current position)
Mar. 2017 Corporate Auditor, Minami Kyushu Meat Sales Corporation (current position)
Mar. 2017 Corporate Auditor, Minami Kyushu Feed Industry Corporation (current position)
Sep. 2018 Deputy Director, Miyakawa Certified Public Accountant Office (current position)
Nov. 2019	Outside Director (Audit and Supervisory Committee Member), Marumae Co., Ltd. (current position)

Outside Director

Hirotsugu Miyakawa
April 18, 1980

Director(Audit and Supervisory
Committee Member)

Composition of the Board of Directors
Roles

Name

Apr. 1983
Jun. 2012
Dec. 2013
Feb. 2014
May. 2016
Nov. 2020

Advisory
Committee

Expertise and Experience That Are Particularly Beneficial to the Company
Corporate
Risk
Independent Management / Development / Planning /Finance /Global//(Outside)
Business Technology
Sales
Accounting Management
QualityLegal
Affairs Experience
Strategy

The Company is working to strengthen its supervision-oriented Board of Directors, including by increasing the ratio of outside
directors. In the first half of fiscal 2022, we have achieved ahead of schedule our goal of ensuring that outside directors
account for one-half of all members of the Board of Directors, which we originally sought to achieve by 2025. We will continue
to promote diversity in the Board of Directors and further increase its ratio of outside directors.

Toshikazu Maeda
Kota Kaizaki

Category

Hiroto Ando
Akiko Kadota
Keiji Hokanishi
Satoshi Momokino
Takaaki Yamamoto
Hirotsugu Miyakawa

37

MARUMAE REPORT 2021

FY2018FY2019FY2020

FY2021

FY2022

Directors
Percentage of female directors

9
—

10
—

7
—

9
11.1

8
12.5

Outside directors
Percentage of outside directors

4
44.4

4
40.0

3
42.9

4
44.4

4
50.0

Number of Board of Directors’
meetings held

23

25

23

20

—

Targets for 2025
Achieved in FY2022
Realize a Board of
Directors compositionin which outside
directors account forhalf of all members

Increase the numberof members withcorporate
management
experience

Promote diversity inthe Board of Directors

MARUMAE REPORT 2021

38

Data
Financial Information
Marumae Co., Ltd.

(Millions of yen)

FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

1,266

1,103

1,162

1,585

2,124

2,242

3,035

4,588

4,019

4,388

5,369

Operating profit

5

50

126

267

450

488

764

1,234

495

896

1,207

Ordinary profit

(49)

21

128

255

435

458

737

1,211

477

834

1,200

Profit

(389)

(62)

81

302

559

363

538

866

436

690

902

Total assets

2,245

1,775

1,660

1,765

2,188

2,569

5,418

8,088

8,329

8,894

9,742

Total liabilities

2,170

1,764

1,566

1,369

1,473

1,590

2,281

2,955

3,021

3,188

3,415

Net assets

74

11

93

396

715

978

3,137

5,132

5,307

5,706

6,327

Cash flows from operating activities

110

256

164

88

626

556

626

829

1,052

1,190

1,062

Cash flows from investing activities

174

323

(30)

(14)

(185)

(296)

(681)

(2,458)(1,496)

(337)

(809)

Cash flows from financing activities

(406)

(340)

(206)

(239)

(206)

(141)

1,966

1,814

96

(575)

(291)

Cash and cash equivalents at end of period

144

384

326

162

397

513

2,425

2,612

2,263

2,540

2,505

Earnings per share (yen)(35.4)

(6.0)

7.8

28.9

53.2

34.5

50.7

72.0

33.5

53.3

70.5

Net assets per share (yen)(16.4)(22.4)(14.6)

14.3

67.9

92.9

263.4

393.2

406.7

445.7

494.2

Annual dividends per share (yen)

―

―

―

―

6.0

7.5

10.0

20.0

15.0

17.0

24.0

Operating profit to net sales (%)

0.4

4.6

10.9

16.9

21.2

21.8

25.2

26.9

12.3

20.4

22.5

Ordinary profit to total assets (%)

(1.9)

1.1

7.5

14.9

22.0

19.3

18.5

17.9

5.8

9.7

12.9

Return on equity (%)(266.2)(145.7)

155.5

123.6

100.7

42.9

26.2

20.9

8.4

12.5

15.0

Asset-based ROIC (%)

0.1

2.4

6.1

10.8

18.2

16.9

18.8

16.3

5.9

10.0

12.1

Liability-based ROIC (%)

0.1

1.9

5.1

10.3

14.7

14.8

11.2

11.5

4.3

7.7

9.7

Equity ratio (%)

3.3

0.7

5.6

22.4

32.7

38.1

57.9

63.5

63.7

64.2

64.9

Payout ratio (%)

―

―

―

―

11.3

21.7

19.7

27.8

44.8

31.9

34.0

Net sales

Notes
1. Figures are rounded down to the nearest million yen.
2. P
 er 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 takenplace at the beginning of fiscal 2011.

39

MARUMAE REPORT 2021

MARUMAE REPORT 2021

40

Data

Company Overview (as of August 31, 2021)

Stock Information (as of August 31, 2021)

Company Name
Marumae Co., Ltd.

Number of Employees
160 (As well as 108 temporary employees on average)

Securities Code
6264

Representative
Toshikazu Maeda

Scope of Business
Design, manufacture, and processing of high-precision machinery

Stock Exchange ListingFirst Section of the Tokyo Stock Exchange

Headquarters
2141 Onohara, Izumi, Kagoshima 899-0216, Japan
Established
October 1988

Design and manufacture of high-precision machine parts
Design, manufacture, and sale of industrial and medical
equipment
Development and sale of software
Plate working

Fiscal Year-End
August 31

Plumbing

Capital¥1,241,150,000

Real estate leasing

Major Shareholders

Annual Shareholders’ Meeting
November
Total Number of Shares Authorized
52,212,000
Total Number of Shares Outstanding
13,053,000 (of which 250,196 are shares of treasury stock)

Transportation

Number of
Shares Held

Shareholding
Ratio (%)

Toshikazu Maeda

4,819,000

37.6

Misako Maeda

504,000

3.9

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

417,700

3.3

Tadao Kawamoto

219,500

1.7

State Street Bank and Trust Company
505019209,400

1.6

SMBC Nikko Securities Inc.

185,100

1.4

Yoshiko Maeda

180,000

1.4

Custody Bank of Japan, Ltd.
(Trust Account)

172,300

1.3

Koei Igarashi

168,000

1.3

Marumae Kyoeikai

136,400

1.1

Name

Number of Shareholders
9,684
Shareholder Registry Administrator
JAPAN SECURITIES AGENTS, LTD.
1-2-4 Kayabacho, Nihonbashi, Chuo-ku, Tokyo

Notes
1. Although the Company holds 250,196 shares of treasury stock, it is excluded from the above
list of major shareholders.
2. The shareholding ratio is calculated by subtracting treasury stock.

Our Website

Stock Price(Yen)(Shares)

Investor Relations (IR)Information

2,500

10,000,000

2,000

8,000,000

1,500

6,000,000

1,000

4,000,000

500

2,000,000

https://www.marumae.com/en/ir_4.html

Contains a variety of IR information,
including financial results presentations and our integrated report.

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

Contains the latest information on Marumae, its business activities, and employment opportunities.

ESG Information
https://www.marumae.com/en/com_2.html

We have begun introducing our ESG
initiatives on our website. We havealso been disclosing ESG-related
data since October 2021.
ESG Data

09

10 11 12

1

2

3

4

2018
Marumae Co., Ltd. closing price (left scale)

5

6

7

8

9

10 11 1212019
TOPIX closing price (left scale)

2

3

4

5

6

7

8

2020

9

10 11 12

1

2

3

4

5

6

7

8

0

2021

Trading volume (right scale)https://www.marumae.com/com_5.html(Japanese only)

41

MARUMAE REPORT 2021

MARUMAE REPORT 2021

42