AICHI CORPORATIONBusiness Report(English Translation)

March 31, 2024

1 Current Status of the Corporate Group(1)(i)

Business Conditions for the Consolidated Fiscal Year under Review
Business progress and results
During the consolidated fiscal year under review, the Japanese economy showed a recovery trend,
renewing the Nikkei Stock Average to the record high in 34 years and gradually accelerating thenormalization of economic and social activities, backed by increased inbound tourism demand dueto the removal of movement restrictions for COVID-19 and other factors as well as the favorable
business performance. In addition, with the lifting of the Bank of Japan’s zero interest rate policy,
the economy is entering a transition from deflationary phrase that lasted for a long time toinflationary phrase.
On the other hand, the economic outlook remains uncertain due to the prolonged Ukraine situation,rising geopolitical risks in the Middle East region, increased various costs including logistics andlabor costs resulting from the 2024 issue, and the worsening Chinese economy.
Although the risk of procurement of parts that surfaced since this consolidated fiscal year underreview has largely been eliminated, the Group continued to face a severe management environment
due to the delayed certification of chassis for truck-mounted aerial work platform, our mainstay
product, in the fourth quarter, as well as the continued impact of high raw materials and energy costs.
Under such a business environment, for specially equipped vehicles, sales of small-sized selfpropelled aerial work platform increased from the previous consolidated fiscal year backed by thefavorable construction demand. However, sales of truck-mounted aerial work platform decreased
from the previous consolidated fiscal year due to delay of supply and delay of certification causedby model changes by truck manufacturers, and impact of related orders received. In addition, salesof service business also decreased from the previous consolidated fiscal year due to the similar
impact. As a result, net sales decreased from the previous consolidated fiscal year.
On the profit front, the Group decreased profits from the previous consolidated fiscal year as it
could not cover the impact of the drop in net sales despite various cost reduction activities such as
cutting expenses and manufacturing costs, reducing inefficiency throughout the Group, andstreamlining the operations.
As a result, net sales for the consolidated fiscal year under review declined ¥7,549 million (12%)
to ¥53,129 million. The breakdown of major net sales shows that sales of specially equipped vehicles
declined ¥7,110 million (15%) year on year to ¥40,202 million, and sales of parts and repairs declined¥393 million (3%) year on year to ¥12,316 million.

1

Net sales by business segment are as follows.

Specially equipped
vehiclesCategory

Previous consolidated
fiscal year

Consolidated fiscal year
under review

AmountAmountPercentage

Increase/decrease from theprevious fiscal year

Percentage

AmountPercentage

Million yen%

Million yen%

Million yen%

Digger derricks

2,792

4.6

2,367

4.5

(424)

(15.2)

Aerial work platforms

42,15569.5

35,56866.9(6,587)(15.6)

Other

2,364

3.9

2,266

4.3

(98)

(4.2)

Subtotal

47,31378.0

40,202

75.7(7,110)(15.0)

Parts and repairs

12,70920.912,316

23.2

(393)

(3.1)

656

1.1

610

1.1

(46)

(7.0)

60,678100.0

53,129100.0(7,549)(12.4)

Other
Total

As for profit, operating profit was ¥6,341 million, which is ¥1,009 million (14%) lower than theprevious consolidated fiscal year, and ordinary profit was ¥7,018 million, which is ¥997 million(12%) lower than the previous consolidated fiscal year. Profit attributable to owners of parent was¥5,270 million, decreasing ¥688 million (12%) from the previous consolidated fiscal year.
(ii) Capital expenditures
The total amount of capital investment during the consolidated fiscal year under review was ¥969
million, as detailed below.
Category

Details

AmountMillion yen

Buildings

Buildings of a new service factory at Ageo Office and others

521

Machinery andequipment

Solar power generation and demonstration cars at Niiharu Factory andothers290

Other

Models and jigs of Niiharu Factory and Isesaki Factory and others

157

Total

969

2

(iii) Financing status
In the consolidated fiscal year under review, ordinary working funds and capital investment funds
were covered by the company's own funds, and no funds were procured through a capital increase,
corporate bonds, etc.
(iv) Business transfer, absorption-type company split or incorporation-type company split
There are no applicable items.
(v) Acquisition of businesses of other companies
There are no applicable items.
(vi) Succession of rights and obligations regarding businesses of other corporations, etc. through anabsorption-type merger or absorption-type company split
There are no applicable items.
(vii) Acquisition or disposal of shares or other equity interests, stock options, etc. of other companies
There are no applicable items.

3

(2)

Assets and Profit/Loss(i)

The corporate group’s assets and profit/loss

Category

Fiscal year ended
March 2021

Fiscal year ended
March 2022

Fiscal year ended
March 2023

Fiscal year ended
March 2024 (theconsolidated fiscal
year under review)

Net sales(Million yen)

59,33056,59160,67853,129Ordinary profit(Million yen)

7,708

7,736

8,016

7,018

Profit attributable toowners of parent(Million yen)

5,906

5,644

5,958

5,270

(Yen)

76.84

74.09

79.16

70.26

Total assets(Million yen)

90,86990,55995,69594,921

Net assets(Million yen)

73,321

76,04378,57381,789(Yen)

959.76

1,006.05

1,044.71

1,096.95

Fiscal year ended
March 2021

Fiscal year ended
March 2022

Fiscal year ended
March 2023

Fiscal year ended
March 2024 (thefiscal year underreview)

Profit per share

Net assets per share(ii) The company’s assets and profit/loss

Category
Net sales(Million yen)

59,12956,09959,981

52,956

Ordinary profit(Million yen)

7,247

7,095

8,253

6,452

Profit(Million yen)

5,536

5,068

6,354

4,701

(Yen)

72.02

66.52

84.43

62.68

Total assets(Million yen)

88,256

86,57892,071

89,777

Net assets(Million yen)

70,07871,62074,65076,038(Yen)

917.30947.53992.55

1,019.82

Profit per share

Net assets per share

4

(3)

Material Facts about Parent Company and Subsidiaries(i)

Status of the parent company and matters regarding transactions with the parent company
The company’s parent company is Toyota Industries Corporation, which owns 40,521 thousand
shares (54.3% of the voting rights) of the company.
The company and its parent company engage in transactions such as the sale of specially equipped
vehicles and the sale and purchase of parts.
Surplus funds are deposited under a contract of the cash management service managed by theparent company. However, as a result of comprehensive consideration of future cash needs and theenvironment surrounding the company, the company has transferred the full amount of deposits
paid under CMS to a bank.
Matters regarding transactions with the parent company, etc. are as follows.
(a) Matters to be paid attention to so as not to harm the interests of the company in conducting
the said transactions
For sales transactions, the company determines the price and other terms and conditions at
the same level as for ordinary transactions with third parties. In the same way, interest rates
for deposits of surplus funds are set to be reasonable as the company took into account market
interest rates in order to improve economic rationality.
(b) The Board of Directors’ determination as to whether the said transactions are notprejudicial to the company’s interests and the reasons therefor:
The company has two former officers of the parent company serving as Directors of thecompany and one employee of the parent company serving as a Director (Audit andSupervisory Committee Member) of the company, and manages the Board of Directors incooperation with the parent company, etc. by exchanging management information, etc.
There are no restrictions on the company’s business activities, as the company and its parent
company, etc. ensure segregation of business activities.
The Board of Directors of the company has a Special Committee, compares the terms oftransactions with third parties to those with the parent company, etc. from the perspective of
appropriateness of such transactions, and determines the appropriateness of such transactions
with the parent company, etc. so that the company’s interests will not be harmed. Accordingly,
the company judges that the company’s interests are not harmed.
(c) Opinions of Outside Directors that differ from judgment of the Board of Directors
There are no applicable items.
5

(ii) Material facts about subsidiaries and affiliated company
Company name(Subsidiaries)
Zhejiang AICHI Industrial
Machinery Co., Ltd.
AICHI NZ LIMITED(Affiliated company)
Hangzhou AICHI Engineering
Vehicles Co., Ltd.

Percentage ofvoting rights ownedby the company

CapitalPrincipal business

US$ 15,000 thousand

100.0%

Manufacture and sales of special
machines

NZ$ 2,300 thousand

100.0%

Sales of the company’s products

US$ 10,000 thousand

50.0%

Manufacture and sales of special
vehicles(Note) The company completed liquidation procedures of AICHI AUS PTY LTD as of December 24, 2023, and therefore it
has been excluded from the scope of consolidation.

(iii) Status of specified wholly owned subsidiaries as of the last day of the fiscal year
There are no applicable items.
(4)

Issues to Be Addressed
The outlook for the future is expected to remain uncertain due to a number of concerns including thedeterioration in the economy as a result of shift to inflationary phrase due to the lifting of the Bank ofJapan’s negative interest rate policy, 2024 issue and geopolitical risks coming to light, despite
expectations for recovery trend of economic and social activities to continue, with improved businessperformance backed by the yen depreciation and other factors, rise in the Nikkei Stock Average, and arecovery of inbound tourism demand.
Under these circumstances, our group engages in business activities to contribute to economic
development and a prosperous society based on the basic management policy as a company creating awork environment.
As a medium- to long-term management strategy, we aim to transform ourselves into a highly
profitable company through business restructuring.
Against the backdrop of aggressive investment, we will promote activities under the keywords ofbusiness expansion, earnings structure reform, and strengthening of the management base that supports
medium-term growth, aiming to be the company for which society and customers say, “We would be introuble without AICHI.”
6

In addition, the entire group will strive to expand sales and improve breakthrough productivity togenerate profits.
In order to secure the reliability of the company, it is necessary to develop and operate an internal
control system. Our group will seek further improvement of its internal control functions, and strive toenhance and strengthen its corporate governance.
We look forward to your continued support and cooperation.
(5)

Principal Business (as of March 31, 2024)
The principal business of our group (comprised of the company, two subsidiaries, and one affiliatedcompany) is the manufacture and sales of digger derricks, aerial work platforms, etc. for electric power,
electrical and telecommunication works, and aerial work platforms, etc. for construction and cargohandling, the manufacture and sales of parts, repairs, skid-steer loaders, etc., and training in the operationof aerial work platforms, etc.
In addition, we supply some aerial work platforms to the parent company on an OEM basis.

(6)

Major Offices and Factories (as of March 31, 2024)(i)

The company
Category

Address

Head office1152-10 Ryoke, Ageo-shi, Saitama, Japan

BranchKita-Nihon Branch (in Miyagi), Kanto Branch (in Saitama), Chubu Branch (in Aichi),Kansai Branch (in Osaka), Chushikoku Branch (in Hiroshima), and Kyushu Branch (inFukuoka)

Factory

Niiharu Factory (in Gunma) and Isesaki Factory (in Gunma)

7

(ii) Subsidiaries and affiliated company
Company name

Address(Subsidiaries)
Zhejiang AICHI Industrial
Machinery Co., Ltd.

Hangzhou, Zhejiang, China

AICHI NZ LIMITED

Otago, New Zealand(Affiliated company)
Hangzhou AICHI Engineering
Vehicles Co., Ltd.

Hangzhou, Zhejiang, China(Note) The company completed liquidation procedures of AICHI AUS PTY LTD as of December 24, 2023, and therefore it
has been excluded from the scope of consolidation.

(7)

Status of Employees (as of March 31, 2024)(i)

Status of employees of the corporate group
Increase/decrease from the end of the previous consolidated
fiscal year

Number of employees
1,046

3

(Note) The number of employees is the number of employed workers.

(ii) Status of employees of the company
Number of employees

Increase/decrease from theend of the previous fiscal year

974

4

Average age

Average years of service

43.8 years old(Notes) 1. The number of employees is the number of employed workers.
2. The number of employees excludes three Managing Officers and 148 temporary employees.

(8)

Principal Lenders (as of March 31, 2024)
There are no applicable items.

(9)

Other Important Matters regarding the Corporate Group’s Current Status
There are no applicable items.

8

19.2 years

2 Current Status of the Company(1)

Status of Shares (as of March 31, 2024)(i)

Total number of authorized shares(ii) Total number of issued shares

235,000,000
74,570,000 (including 9,697 treasury shares)(iii) Number of shareholders

10,944(iv) Major shareholders (top 10)
Shareholder name

Number of shares held

Shareholding ratio(Thousand shares)%

Toyota Industries Corporation

40,521

54.3

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

3,984

5.3

Hikari Tsushin, Inc.

2,565

3.4

NDS Co., Ltd.

2,072

2.8

Employee Stock Ownership Plan of Aichi Corporation

1,346

1.8

Isuzu Motors Limited

1,274

1.7

Custody Bank of Japan, Ltd. (Trust Account)

1,059

1.4

AVI JAPAN OPPORTUNITY TRUST PLC

996

1.3

Aikyoukai

873

1.2

Aieikai741

1.0(Note) The shareholding ratio is calculated after deducting the number of treasury shares from the total number of issued
shares.

(2)

Share Acquisition Rights, Etc.
There are no applicable items.

9

(3)

Other Important Matters Regarding Shares(i)

Acquisition of treasury shares
At the meeting of the Board of Directors held on November 29, 2023, the company resolved toacquire treasury shares pursuant to Article 156 of the Companies Act, as applied pursuant to Article
165, paragraph 3 of the same, and acquired treasury shares accordingly.
Class and total number of shares acquired

650,000 common shares

Total cost of acquisition¥598 million

Date of acquisition

November 30, 2023(ii) Cancellation of treasury shares
At the meeting of the Board of Directors held on February 28, 2024, the company resolved to cancel
its treasury shares pursuant to Article 178 of the Companies Act, and cancelled treasury sharesaccordingly.
Class and total number of shares cancelled

641,400 common shares

Date of cancellation

March 22, 2024

10

(4)

Matters Regarding Corporate Officers(i)Directors (as of March 31, 2024)

Positions

Name

President & CEO

Toshiya Yamagishi

Director

Hideo Yamamoto

Director

Koichi Anzai

General Manager of Manufacturing Headquarters

Director

Takuo Sasaki

Outside Director of UMC Electronics Co., Ltd.

Director(Audit and Supervisory Shigehiro Takatsuki
Committee Member)
Director(Audit and Supervisory
Kiyoshi Tojo
Committee Member)
Director(Audit and Supervisory Takuto Kawanishi
Committee Member)
Director
Kenji Aonuma(Audit and Supervisory
Committee Member)

Responsibilities and significant concurrent positions

General Manager of Corporate Headquarters

Partner, Nozomi Sogo Attorneys at Law
Outside Director, Scala, Inc.
Associate Managing Officer, Toyota Industries Corporation
General Manager of the Business Planning Dept., Toyota Material Handling
Company of Toyota Industries Corporation

11

(Notes) 1. Director (Audit and Supervisory Committee Member) Shigehiro Takatsuki, Director (Audit and Supervisory
Committee Member) Kiyoshi Tojo, and Director (Audit and Supervisory Committee Member) Takuto
Kawanishi are Outside Directors.
2. The company does not appoint full-time Audit and Supervisory Committee Members because it is judgedthat it is sufficiently possible to support the functions of the Audit and Supervisory Committee by ensuringthat the Audit Dept. has staff members who support operation of the Audit and Supervisory Committee andalso that the Audit Dept. takes charge of internal audits.
3. Director (Audit and Supervisory Committee Member) Shigehiro Takatsuki, Director (Audit and Supervisory
Committee Member) Kiyoshi Tojo, and Director (Audit and Supervisory Committee Member) Takuto
Kawanishi have been appointed as independent officers pursuant to the provisions of the Tokyo Stock
Exchange and the Nagoya Stock Exchange, and the company has submitted notification to each exchange.
4. Director (Audit and Supervisory Committee Member) Shigehiro Takatsuki has abundant experience as acertified public accountant and extensive knowledge of finance and accounting.
5. Director (Audit and Supervisory Committee Member) Takuto Kawanishi has abundant experience andbroad insight as an attorney and is also familiar with corporate legal affairs and finance-related business.

12

(ii) Outline of limited liability agreements
The company’s Directors (excluding those serving as Executive Directors) have entered into
an agreement limiting their liability under Article 423, paragraph 1 of the Companies Act. The
maximum amount of liability under the agreement is the amount stipulated in Article 425,
paragraph 1 of the Companies Act.
(iii) Total amount of compensation, etc. for Directors

Category

Total amount ofcompensation,etc.

Directors (excluding Audit andSupervisory Committee Members)(Outside Directors)
Directors (Audit and Supervisory
Committee Members)(Outside Directors)

Total amount by type ofcompensation, etc.
PerformanceBasic
linkedcompensationcompensation,etc.

Number of
officers paid

Million yen

Million yen

Million yen

96
(–)

58
(–)

38
(–)

4
(–)

18

18

–

4

(15)

(15)

(–)

(3)

(Notes) 1. The maximum amount of compensation for Directors (excluding Audit and Supervisory Committee
Members) was resolved at the 70th Annual General Meeting of Shareholders held on June 21, 2018 to be no
more than ¥240 million per year. The number of Directors (excluding Audit and Supervisory Committee
Members) at the conclusion of the said Annual General Meeting of Shareholders was three.
2. The maximum amount of compensation for Directors (Audit and Supervisory Committee Members) was
resolved at the 70th Annual General Meeting of Shareholders held on June 21, 2018 to be no more than ¥60
million per year. The number of Directors (Audit and Supervisory Committee Members) at the conclusion of
the said Annual General Meeting of Shareholders was four (three of which were Outside Directors).
3. Bonuses are paid to Directors (excluding Audit and Supervisory Committee Members) as performance-linked
compensation, etc.
Bonuses, which are performance-linked compensation, etc., are determined on the basis of consolidated
operating profit for each fiscal year, which is the profit earned in the principal business, and also determinedby comprehensively taking into account dividends, employee bonus levels, trends of other companies,
medium- to long-term performance, past payment results, etc. The reason for selecting this performanceindicator is to build a system that is linked to the company’s performance and reflects job responsibilities andresults.
Operating profit for the consolidated fiscal year under review was ¥6,341 million.
4. The above amounts include the following.
Provision for bonuses for Directors (and other officers) of ¥38 million for the fiscal year under review (¥38
million for three Directors (Executive Directors)).
13

(iv) Matters regarding the policy for determining the amount and calculation method of compensation
for Directors (excluding Directors who are Audit and Supervisory Committee Members)(a) Method of determining policy on determining the details of compensation, etc. for each
Director at the Board of Directors meeting held on February 24, 2021, the company passed a
resolution on a policy on determining the details of compensation, etc. for each Director (the“Determination Policy”) in order to build a system that is linked to the company’s performanceand reflects job responsibilities and results.
(b) Basic policy
Compensation for the company’s Executive Directors consists of fixed monthly compensationand performance-linked compensation bonuses. The compensation system is linked to thecompany’s performance and reflects job responsibilities and results.
(c) Policy on determining the amount of basic compensation (monetary compensation), etc. foreach Executive Director (including policies on determining the timing and conditions ofcompensation, etc.)
The basic compensation for the company’s Executive Directors is fixed monthly, and isdetermined in comprehensive consideration of factors such as the level of other companies, thecompany’s business performance, and the level of employee salaries according to the position,
job responsibilities, and years of service.
(d) Policy on determining the calculation method of performance-linked compensation, etc.
(including policies on determining the timing and conditions of compensation, etc.)
Bonuses, which are performance-linked compensation, etc., are determined on the basis of
consolidated operating profit for each fiscal year, which is the profit earned in the principal
business, and also determined by comprehensively taking into account dividends, employee
bonus levels, trends of other companies, medium- to long-term performance, past payment
results, etc.
(e) Policy on determining the ratio of the amount of compensation, etc. for each Director including
the amount of monetary compensation and performance-linked compensation, etc.
The Nomination and Compensation Advisory Committee, which is a voluntary advisory bodyto the Board of Directors consisting mainly of Outside Directors, exchanges opinions about
and confirms the details of the ratio of each type of compensation for Executive Directors, andsubmits a report to the Board of Directors for resolution. The President and CEO, delegated by
14

the Board of Directors will determine the details of compensation, etc. for each Director within
the scope indicated in the report, respecting the contents of the report submitted by the
Nomination and Compensation Advisory Committee.
(f) Matters regarding determining the details of compensation, etc. for each Director
The President and CEO is delegated to determine the details of the amount of compensationfor each Director based on the resolution of the Board of Directors, and the President and CEO
is authorized to evaluate and distribute bonuses based on the amount of basic compensation foreach Director and the performance of the business that each Executive Director is in charge of.
The Board of Directors will submit a draft to and receive a report from the Nomination andCompensation Advisory Committee so that the President and CEO will exercise his or her
authority appropriately, and the President and CEO who has been delegated as above shallmake determinations in accordance with the contents of the report.
(g) Reasons why the Board of Directors has determined that the details of compensation, etc. foreach Director for the fiscal year under review are in line with the Determination Policy
The Board of Directors basically respects the report and judges that it conforms to theDetermination Policy, as the Nomination and Compensation Advisory Committee reviews thedraft from various angles including consistency with the Determination Policy in determining
the details of compensation, etc. for each Director.

(v) Matters regarding delegation for determining compensation, etc. for each Director
A resolution was passed at a meeting of the Board of Directors held on May 17, 2023 to entrust
Toshiya Yamagishi, President and CEO, with determining the specific amount of compensationfor each Director for the fiscal year under review. With such entrustment, the President and CEO
is authorized to evaluate and distribute bonuses based on the amount of basic compensation foreach Director and the performance of the business that each Executive Director is in charge of.
The reason for delegating this authority is that the President and CEO is the most suitable person
to evaluate the business that each Executive Director is in charge of while taking a bird’s-eyeview of the overall performance of the company. The Board of Directors submits a draft to andreceives a report from the Nomination and Compensation Advisory Committee so that the
President and CEO will exercise his or her authority appropriately.
15

(vi) Compensation, etc. for Directors who are Audit and Supervisory Committee Members
For the method of determining compensation, etc. for Directors who are Audit and Supervisory
Committee Members, the amount of compensation is determined at a meeting of the Audit andSupervisory Committee through consultation in consideration of business allocation, etc. within
the scope of the total amount of compensation as resolved at the Annual General Meeting of
Shareholders.
(vii) Matters regarding officers’ liability insurance of the company(a) Scope of insured persons
The company has entered into an officers’ liability insurance contract with an insurance company
for Directors, Managing Officers and Associate Managing Officers of the company and all
Directors of the company’s subsidiaries excluding AICHI NZ LIMITED, as provided for in
Article 430-3 of the Companies Act.
(b) Outline of the officers’ liability insurance contract
 The indemnity covers court costs, damages, etc. incurred by insured persons due to company
lawsuits, third-party lawsuits, shareholder lawsuits, etc.
 As a measure to prevent the appropriateness of the execution of duties by the insured persons
from being impaired, a deductible is set and damages that do not reach a certain amount are notcovered by the indemnity.
 The full amount of the insurance premium for this contract is borne by the company.
(viii) Matters regarding outside officers(a) Significant concurrent positions at other corporations, etc. and relationship between thecompany and such corporations, etc.
Takuto Kawanishi, an Outside Director (Audit and Supervisory Committee Member) of thecompany, concurrently serves as Partner of Nozomi Sogo Attorneys at Law and Outside Directorof Scala, Inc. However, there are no special interests between the company and any of thesecompanies he concurrently serves for.

16

(b) Main activities during the fiscal year under review
Name

Status of main activities

Shigehiro Takatsuki, Director(Audit and Supervisory Committee Member)

He attended 12 of the 13 meetings of the Board of Directors and 11 of
the 12 meetings of the Audit and Supervisory Committee that were
held during the fiscal year under review. Based on his expert
knowledge and broad experience in accounting and finance, heprovided advice on overall management from a fair, objective andbroad perspective through his comments at the Board of Directors
meetings and the Audit and Supervisory Committee meetings.

Kiyoshi Tojo, Director(Audit and Supervisory Committee Member)

He attended 12 of the 13 meetings of the Board of Directors and 11 of
the 12 meetings of the Audit and Supervisory Committee that were
held during the fiscal year under review. Based on his abundant
experience and deep insight, he provided advice from an objective andbroad perspective through his comments necessary for deliberations ofproposals at the Board of Directors meetings and the Audit andSupervisory Committee meetings.

Takuto Kawanishi, Director(Audit and Supervisory Committee Member)

He attended 12 of the 13 meetings of the Board of Directors and 11 of
the 12 meetings of the Audit and Supervisory Committee that were
held during the fiscal year under review. He is qualified as an attorney
and has extensive knowledge, experience, etc. in corporate legal affairs
and finance-related business, and he provided advice from an objective
and broad perspective through his comments at the Board of Directors
meetings and the Audit and Supervisory Committee meetings.

(c) Amount of compensation for officers, etc. received from the company’s parent company andsubsidiaries of the parent company
There are no applicable items.

17

(5)

Matters regarding Accounting Auditors(i)Name of the Accounting Auditor PricewaterhouseCoopers Japan LLC(Note) PricewaterhouseCoopers Aarata LLC merged with PricewaterhouseCoopers Kyoto,and changed its name to PricewaterhouseCoopers Japan LLC on December 1, 2023.

(ii) Amount of compensation, etc.
Category

Amount paid
Million yen

Amount of compensation, etc. for the accounting auditor for the fiscal
year under review
Total amount of money or other economic benefits to be paid by the company
and the company’s subsidiaries

49
49(Notes) 1. In the audit agreement between the company and the accounting auditor, the amount of audit fees, etc. foraudits conducted in accordance with the Companies Act and that for audits conducted in accordance with the
Financial Instruments and Exchange Act are not clearly separated or cannot be substantially separated.
Therefore, the total of these amounts is stated as the amount of compensation, etc. for the accounting auditor
for the fiscal year under review.
2. Reasons for the consent of the Audit and Supervisory Committee on the compensation, etc. for theaccounting auditor
The Audit and Supervisory Committee has confirmed and examined the audit plan, execution of duties in theprevious fiscal year, the basis of calculating compensation estimates, etc. of the accounting auditor taking into
account the information collected from the accounting auditor and relevant internal departments based on the“Guidelines for Coordination with Accounting Auditors” published by the Japan Audit & Supervisory Board
Members Association, and as a result, has given consent on the compensation, etc. for the accounting auditor
under Article 399, paragraph 1 of the Companies Act.
3. The company’s overseas subsidiaries have been audited by audit corporations other than the company’s
accounting auditor.

(iii) Policies on determining dismissal or refusal of re-election of accounting auditors
In the event that the Audit and Supervisory Committee decides on a proposal for dismissal or
refusal of re-election of the accounting auditor as the Audit and Supervisory Committee
determines that it is necessary to do so, such as when there is any problem with the accounting
auditor’s execution of duties, the Board of Directors submits such proposal to the Annual
General Meeting of Shareholders based on such decision.
In addition, if the Audit and Supervisory Committee finds that the accounting auditor falls
under any of the items set forth in Article 340, paragraph 1 of the Companies Act, the Audit andSupervisory Committee will dismiss the accounting auditor upon the consent of all Audit and18Supervisory Committee Members.
In this case, the Audit and Supervisory Committee Member selected by the Audit andSupervisory Committee will report the dismissal of the accounting auditor and the reason for thedismissal at the first Annual General Meeting of Shareholders convened after the dismissal.
(iv) Outline of limited liability agreements
There are no applicable items.

19

(6)

Systems to Ensure the Appropriateness of Business Activities
The Board of Directors of the company has adopted the following basic policies as a system toensure the appropriateness of business activities.
(i)

Systems to ensure that Directors and employees execute their duties in compliance with laws
and regulations and the Articles of Incorporation(a) We have established the Code of Conduct as action guidelines and informed all officers andemployees thereof, ensuring all corporate activities are in compliance with laws andregulations.
(b) The company has appointed a Director in charge of compliance, and he or she works underthe Internal Control and Risk Management Subcommittee to develop a company-wide
compliance structure and identify problems.
(c) The Audit Division (an internal audit division) and the Audit and Supervisory Committee
work in constant cooperation to exchange the results of business audits, establish a companywide compliance structure, and identify problems.
(d) The Board of Directors has Outside Directors who have no interests in the company with theaim of ensuring the legality of Directors’ execution of their duties and making decisions
from diverse management perspectives.
(e) The company makes an effort to detect serious compliance issues of Directors, Managing
Officers and employees as early as possible through the Corporate Ethics Consultation Desk
and other systems.

(ii) Matters regarding the storage and management of information pertaining to the execution ofduties by Directors
In accordance with the company’s internal regulations, information pertaining to the
execution of duties by Directors is recorded and preserved in writing or on electromagnetic
media (the “Documents, etc.”). Directors can view these documents at all times.

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(iii) Rules and other systems for management of the risk of loss(a) A Director in charge of supervising risks at the company-wide level is appointed, and theInternal Control and Risk Management Subcommittee is established.
(b) The Internal Control and Risk Management Subcommittee develops procedures andmechanisms to prevent risks arising from business activities. In the event of any emergency,
information must be communicated and an emergency structure must be established in a
prompt and appropriate manner.
(c)Matters discussed at meetings of the Internal Control and Risk Management Subcommittee
are systematically incorporated into the flow of the Internal Control and Risk Management
Subcommittee.

(d) The Audit Division (an internal audit division) conducts business audits and legal
compliance audits of all divisions based on annual plans with regard to the effectiveness ofinternal controls and the actual status of business execution. The results of these audits arereported to the top management and the Audit and Supervisory Committee.
(e)

We make efforts to conduct business activities and execute budgets based on appropriate
fund management and designated authority.

(f)

We make efforts to ensure appropriate financial reporting and disclose information in atimely and appropriate manner.

(iv) Systems to ensure efficient execution of duties by Directors
The following management systems are in place to improve the efficiency of Directors’
execution of duties.
(a) The Board of Directors formulates a medium-term management plan, sets performancetargets and budgets for each division based on the medium-term management plan, andmanages monthly and quarterly performance using IT.
(b) Directors execute their duties based on the division of duties determined at the Board of
Directors, and Managing Officers and Associate Managing Officers efficiently assist
Directors with delegated and directed matters and enable prompt management decisions.

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(v) Systems to ensure the appropriateness of business activities of a corporate group consisting ofa stock company, a parent company and subsidiaries(a) These companies are audited on a regular basis by the parent company’s Internal Audit
Division, receive reports on such audits, and exchange information to identify complianceand efficiency issues.
(b) The internal control systems at the company and each group company include theestablishment of the Internal Control and Risk Management Subcommittee, and efficientconsultation, sharing of information, communication of instructions and requests, etc.
regarding internal controls between the company and each group company.
(c) Audit and Supervisory Committee Members are dispatched to group companies to conduct
audits including business audits, and internal audits of group companies are conducted by
the company’s Audit Division (an internal audit division) to establish a compliance structure
and to detect problems as early as possible.
(d) The Code of Conduct common to our group has been established to raise complianceawareness together with officers and employees of the group companies.
(vi) Matters regarding the system for an employee to assist with performance of the duties of the
Audit and Supervisory Committee in a case where request for appointment of such employee
is made, and matters regarding the independence of such employee from Directors
A dedicated staff member is to be appointed to assist with audit operations, and the consent
of the Audit and Supervisory Committee is required for appointment of such staff member.
(vii) Systems for Directors (excluding those who are Audit and Supervisory Committee Members)
and employees of the company and its group companies to report to the Audit and Supervisory
Committee, and other systems related to reports to the Audit and Supervisory Committee, etc.
At the request of the Audit and Supervisory Committee, the company has established asystem to obtain the attendance of Audit and Supervisory Committee Members at importantinternal meetings. In addition, the company bears the expenses required for the duties of the
Audit and Supervisory Committee as necessary.
22Directors (excluding those who are Audit and Supervisory Committee Members), Managing
Officers and employees must make a prompt report on any of the following matters to the Audit
and Supervisory Committee, and the company ensures that the reporter will not be treateddisadvantageously on the grounds of such reporting.
(a)
(b)
(c)
(d)
(e)
(f)

Matters resolved and reported at important meetings
Matters that may cause significant damage to the company and its group companies
Important matters regarding monthly business conditions
Important matters regarding internal audits and risk management
Serious violations of laws and regulations and the Articles of Incorporation
Other serious compliance issues(viii) Other systems to ensure that audits by the Audit and Supervisory Committee are conductedeffectively
The company guarantees opportunities for the Audit and Supervisory Committee to holdinterviews with Executive Directors, Managing Officers and important employees, and to exchange
opinions with the Representative Director, accounting auditor, etc. on a regular basis.
(ix) Basic approach to elimination of antisocial forces and its implementation status
The company and each of its group companies have established the Code of Conduct as action
guidelines for Directors, Managing Officers and employees, and one of them is how to deal with
antisocial forces. The basic idea is to remain resolute against antisocial forces and keep them awayfrom us.
Specifically, the division responsible for dealing with antisocial forces is clarified, and we takeappropriate measures as necessary by consulting with the police and other relevant administrative
bodies.

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(7)Overview of the Operation of Systems to Ensure the Appropriateness of Business Activities
The company is a company with an audit and supervisory committee. By strengthening thesupervisory function of the Board of Directors, the company aims to further improve managementtransparency and strengthen its corporate governance structure including streamlined decisionmaking. As an overview of the operation of systems to ensure the appropriateness of businessactivities at the company and our group, the company took the following measures based on its basic
policy during the fiscal year under review (from April 1, 2023 to March 31, 2024).
(i)

As for the major meetings held after April 1, 2023, the Board of Directors held 13 meetings, theAudit and Supervisory Committee held 12 meetings, and the Internal Control and Risk Management
Subcommittee held four meetings.
(ii) In accordance with the audit policy and audit plans set by the Audit and Supervisory Committee,
each Audit and Supervisory Committee Member held interviews, etc. on the results of internal auditsof each division through the Audit Division (an internal audit division) and exchanged opinions withthe company’s Representative Director, other Directors and accounting auditor in order to cooperate
in information exchange, etc.
(iii) The Audit Division (an internal audit division) conducted business audits and legal compliance
audits of all divisions of the company based on annual plans, and conducted internal audits of eachgroup company.

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(8)

Policy on Determination of Dividends of Surplus
The company’s dividend policy is based on improving stable shareholder returns from the perspectiveof focusing on shareholders, with a total return ratio of 50% or more of consolidated financial results as
the standard.
At the Board of Directors meeting held on April 23, 2024, the company resolved to pay a fiscal yearend dividend of ¥21 per share for the fiscal year under review, with the effective date of May 30, 2024.
Including interim dividends, dividends for the fiscal year under review will be ¥40 per share, an increaseof ¥4 from the previous fiscal year.
At the Board of Directors meeting held on November 29, 2023, the company resolved to acquire its
own shares, and acquired 650,000 shares at a total cost of ¥598 million through “Off-Auction Own Share
Repurchase Trading (ToSTNeT-3)” on the Tokyo Stock Exchange on November 30, 2023.
As a result, the total return ratio for the fiscal year under review was 68.2%.
Internal reserves will be used for production-related facilities to enhance corporate value, facilityrelated investments to improve services, and investments for new product development and researchand development.

(Note) Amounts and the numbers of shares in this business report are rounded down to the nearest unit, and percentages
are rounded off to the nearest unit.

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