OSG REPORTOSG Corporation

OSG REPORT 2023

3-22, Honnogahara, Toyokawa, Aichi Prefecture 442-8543, Japan
URL: https://www.osg.co.jp/en/

Printed in Japan

2023
Fiscal Year Ended November 2023

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Corporate Philosophy & Purpose
CONTENTS
Art Work by Satoshi Inoue

OSG Values

Corporate Philosophy

Corporate Philosophy & Purpose

2

Message from Top Management

3

History

5

Global Presence
As a comprehensive cutting tool manufacturer, we make products that, at afundamental level, contribute to enhancing people s quality of life. Throughcontinuous growth, we have established a production, sales, and technical support
network spanning 32 countries. Our corporate aim is to continue to further

Value Creation Stories
Satoshi Inoue attends Rainbow House, asocial welfare center in Shinshiro City where
he devotes his time to producing works of art.
Satoshi is nonverbal, so he communicateswith those around him through expressions
and gestures. When he picks up a crayon, hegives his undivided attention to ﬁlling in andcovering the white spaces. Finishing his
scratch pattern, he beams with a big smile,signaling the work of art is complete. Satoshi
produces one-of-a-kind works of art that arerich expressions of the excitement anddissatisfaction he feels at the time on a certainday.
▶ P.40 Initiatives for Employing People with Disabilities

expand our operations globally and contribute to the global manufacturing

Message from the President

7

Value Creation Process

11

Accumulated Management Capital

13

Key Strengths Maximizing Value Creation

20

Value Chain Enhancement23

industry in accordance with our Global Presence corporate philosophy.

OSG founder
Hideo Osawa

Fundamental Business Policy■ We are always aware that our corporation is an institution serving society andproviding products our customers appreciate.

■ We place our employees in assignments appropriate for their skills and abilities, andstrive to improve their daily lives.

■ We endeavor to distribute appropriate and stable dividends to our stockholders.
■ We are committed to sound business practices that earn even greater trust from

Value Creation Strategy

society and extend these to our company throughout the world.

Materiality (Key Issues)

25

Medium-Term Management Plan

27

Source of OSG s Strength

Tool Communication
Sustainability
Editorial Policy
The OSG Report is published for the beneﬁt of ourshareholders, investors, and all stakeholders. The OSG
Report 2023 once again takes a look at what makes
OSG unique, including our corporate philosophy, andfocuses on putting into words the unique strengths that
we have developed throughout our history. Along withan update of the growth strategy laid out in our
Medium-Term Management Plan, we have alsopresented some new speciﬁc initiatives. Following on
from last year, we have held roundtable discussions
with employees and outside directors in order toproduce an integrated report that depicts the real OSG.
The International Integrated Reporting Framework
published by the International Financial ReportingStandards Foundation (IFRS) was referenced whencompiling this report. We will continue our efforts toprovide editorial content that meets readers
expectations.

Tag Line

Environment

31

TCFD Compliance

37

Society

39

Roundtable Talk with OSG Employees

45

Corporate Governance1

O S G R EP ORT 2 0 2 3

Action Philosophy

Think while running and run while thinking
Long-Term Vision

Roundtable Talk with OSG Outside Directors

47

Corporate Governance Structure

49

Risk and Compliance53

Corporate Oﬃcers

55

Disclaimer Regarding Forward-Looking Statements
Apart from information based on historical facts, allreferences in this report to plans, strategies, forecasts,
or management initiatives pertaining to OSG s future
performance are forward-looking statements and assuch represent assumptions and judgments based on
currently available information. Actual results may
differ from forecasts included in this report due to avariety of factors, including trends in the economic
environment in which OSG operates, ﬂuctuations in
product demand and prices, development of new
products, sales, raw material costs, and exchange rate
ﬂuctuations.

Shaping Your Dreams

To be an essential player contributing the global manufacturingindustry as we move toward era of carbon neutrality
OSG Group aims to be an essential player contributing to the global manufacturingindustry as we head toward the age of carbon neutrality. This vision expresses our hopeof being an integral part of our customers business. Stage 1 of our Medium-Term
Management Plan Beyond the Limit runs from FY2022 to FY2024 when we will create

Corporate Dataa robust corporate culture. The targets established for this period are a 15% ROA and

Financial and Non-Financial Highlights

57

Key Financial Data for the Past 10 Years

59

Consolidated Financial Statements

61

Corporate Information64¥30 billion in operating income by the ﬁscal year ending November 2024. Grounded in
our Global Presence corporate philosophy, we are intent on contributing to therealization of a sustainable society so that we may grow further.

OS G RE P O RT 2 0 2 32

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Message fromTop Management

Taking up the challenge to build a more prosperous future
and coexist harmoniously with our earth and societyFirst, we wish to express our sincerest condolences to everyone affected by
the 2024 Noto Peninsula Earthquake. Our thoughts and prayers are with thevictims and the communities impacted by this disaster, and we hope for aswift and complete recovery.
During the ﬁscal year ended November 2023, the economy continued its
moderate slowdown due to persistently high inﬂation rates globally,
softening demand as high rates tightened credit, China s stagnant economic
situation, and other factors. While remaining wary of geopolitical risks such as
those involving the situation in Ukraine and the US-China confrontation,businesses are concerned about how such events may negatively affect theeconomy. Despite the steady recovery of demand in the aerospace industry in
the Americas and Europe, prolonged stagnation continues to plague Chineseand Japanese markets, placing OSG in a difﬁcult situation. While Japan s
automotive industry has shown signs of recovery, we have had to adjust
product inventories for general engineering. Even sales of taps, our coreproduct, declined compared to the previous period. So, although the OSG
Group s overall sales reached record highs partly due to the effect of currency
exchange conversions, the decline in tap revenue resulted in increased sales
but decreased proﬁts. This is a time when our ability to adapt to change isbeing put to the test. With that in mind, we will seek to acquire new demand
as we leverage our global network comprising manufacturing, sales, andtechnical support, which we have built up based on OSG Group s Global
Presence corporate philosophy.
During the ﬁscal year ended November 2023 which is also the second yearof our medium-term management plan Beyond the Limit 2024, we
continued our efforts to strengthen our corporate culture, improve operating
income, and enhance capital efﬁciency. This work paid off in bolsteredshareholder returns and increased capital efﬁciency. Although it will be
difﬁcult to achieve our key performance indicators (KPI) for the ﬁscal year
ending November 2024, we estimate the highest operating income level ever
and anticipate that our next generation leaders will produce outstanding
results during their assignments on the many working groups, which werelaunched recently and transcend our traditional organizational divisions.
So that we may realize our long-term vision of being an essential player
contributing to the global manufacturing industry, we have revised ourmateriality from eight key issues to four. In addition to setting priority themesfor each of these issues and strengthening initiatives for realizing each, all
OSG Group employees are working together to enhance corporate value.
This report was prepared with the hope that it will provide the reader with abetter understanding of OSG s operations and activities.

3

O S G R EP ORT 2 0 2 3

Norio Ishikawa

Nobuaki Osawa

Chairman & CEO

President & COO

We look forward to the continuing support and understanding of our
stakeholders.

OS G RE P O RT 2 0 2 34

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

History
1938−

1960−

1980−

2000−

Developed the ﬁrst grinding taps in Japan

Aiming to be Worldwide OSG

Toward establishment of an ultra-high-mix low-volume production system

One agent in each country and M&A expansion

OSG founder Hideo Osawa conceived of the idea of developing
the Osawa-style thread grinder based on his own lathe andsuccessfully produced the ﬁrst grinding tap in Japan. He also
worked to produce a threading die for machining male screws.

OSG started selling end mills in 1970. It was also at about this timethat OSG set about pioneering overseas markets. The move into thisnew area was the driving force that enabled OSG to make a giant leap
forward from OSG operating only in Japan to OSG operating globally.

To meet the needs of the market, OSG worked vigorously to develop anarray of diverse product lines that included drills and carbide end mills.
The company sold many new products in the age of mechatronics when
demand emerged for a variety of tools for automated production lines.

OSG engaged in mergers and acquisitions to extend operations on a
global scale, selling OSG brand products. Currently, the ratio ofoverseas sales to total sales exceeds 60% and OSG has built a global
network meeting the needs of customers in regions everywhere.

Tokyo Olympics spurs increase in color television
sales, which together with the greater popularity of air
conditioners and automobiles and the high-economic
growth drive tool demand. In developed countries,
die machining is in demand for mass production.

Oil crisis triggers energy savings, causing a shift from heavy and unwieldy
products to light and compact products. Decrease in production in theautomotive, mechanical components and die industries affects the toolindustry. Pursuit of low-volume diversiﬁed production lots as well as
high-quality and quick delivery to maintain international competitiveness.

Digitalization advances and people look to lead more convenient andfulﬁlling lives. In contrast to before, a ﬂexible way of thinking andapproaching the world is necessary. Semiconductor manufacturing
equipment and industrial robotics become more widespread, and electronic
devices more and more precise. The range of demand for tools expands.

1961 Toyokawa Factory began operation
1963 Began manufacturing rolling ﬂat dies1980 Began manufacturing carbide end mills
1981 OSG listed on the First Section of the Tokyo

2001 OSG (Shanghai) Co., Ltd. (China) established■ Society

The demand for tools increased with the arrival of
black & white televisions, washers, andrefrigerators as well as postwar recovery due tothe demand for aircraft and ships.
OSG s development

1938 OSG Grinding Co., Ltd. established ❶Began manufacturing taps and dies1942 Began manufacturing screw gauges
1943 Aichi Factory (now OSG Academy)
constructed1956 Began manufacturing rolling dies

Company name changed to OSG Mfg. Company

1967 Oike Factory began operation
1968 OSG Tap and Die, Inc. Illinois(now OSG USA, Inc.) (USA) established ❷1970 Taiho Tool Mfg. Co., Ltd. (Taiwan) established ❸Began manufacturing HSS end mills

1971 Toyohashi Factory began operation
1974 OSG Ferramentas de Precisâo Ltda.

(now OSG Sulamericana de Ferramentas
Ltda.) (Brazil) established

1938
1968

and Nagoya stock exchanges

1982
1984
1985
1987
1988
1990
1992
1993
1995

Shinshiro Factory began operation
Began manufacturing drills
OSG Korea Corporation establishedBegan manufacturing cutter bodies
OSG Canada Ltd. (Canada) establishedYana Factory began operation
Merged with OSG Sales, Inc.
OSG Asia Pte Ltd. (Singapore) established ❹OSG Limited (now OSG Europe Limited) (UK)established1997 Dabao (Dongguan) Molding & Cutting Tool
1970

Co., Ltd. (China) establishedTaiho Tool Mfg. Co., Ltd., ﬁrst production plantoverseas ❸

1997
2020

(now OSG Iberica Tooling S.L.) (Spain)
established2003 OSG GmbH (Germany) established2004 OSG (Shanghai) Precision Tools Co., Ltd.
(China) established2005 OSG System Products Co., Ltd. established2011 TAIHO Coating Service Co., Ltd. (Taiwan)
established2019 OSG EX-CELL-O GmbH (Germany) established
2020 NEO Shinshiro Factory completed ❻Consolidated group companies

1986 Aoyama Seisakusho Co., Ltd.
1994 Herramientas Metalicas de Corte, S.A. de C.V.
1996 Nihon Hard Metal Co., Ltd.

2008 Mac World Trade B.V.

Consolidated group companies

1993

2002 OSG Tooling Iberica, S.L.

2000 Kamiya Seiko Co., Ltd. (now ORS Corporation)
2001 Sanwa Seiki Co., Ltd.
2003 VUMAT S.R.L. (now OSG ITALIA S.R.L.) (Italy)
2004 Sterling Die, Inc. (now OSG USA, Inc.) (USA)2005 NODA Seiko, Inc. (now NODA Precision, Inc.)
2006 Nissin Diamond Seisakusyo Co., Ltd.

OSG Belgium S.A. (now OSG Europe S.A.)(Belgium) established ❺Hideo Osawa, OSG founder ❶OSG Tap and Die, Inc., ﬁrst sales hub
overseas ❷OSG Coating Service Co., Ltd. established(now OSG Royco, S.A. de C.V.) (Mexico)(now Nissin Diamond Co., Ltd.)(now OSG Nederland B.V.) (Netherlands)

2015 DESGRANGES HOLDING S.A.S.
(now NEXAM S.A.S.) (France)

2016 Amamco Tool & Supply Co., Inc.
OSG Asia Pte Ltd., holding company for Asia ❹(USA)
Somta Tools (Pty) Ltd. (South Africa)

2019 OSG BASS Holding GmbHOSG Europe S.A., holding company for Europe❺(now BASS GmbH) (Germany)

NEO Shinshiro Factory ❻

■ OSG

5

s sales over our historyO S G R EP O RT 2 0 2 3

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OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Message from the President

President & COO

Nobuaki Osawa

The automotive industry s recent shift towards Battery Electric Vehicles (BEVs) has led to a decline in
the demand for internal combustion engines, subsequently impacting the demand for our tools.
Conversely, our A-Brand strategy, focused on delivering high-value-added products, is exceeding
expectations, particularly in overseas markets.
Considering these market dynamics, we engaged in a comprehensive discussion with President Osawa
regarding OSG s mid-term management plan, the unique value proposition of our company, and ourcore strengths.

What are the strengths underlying
OSG s corporate philosophy and culture?
Also, what is it that makes OSG unique?
OSG s approach is found in our Global Presence corporate
philosophy, our brand tag line Shaping Your Dreams, Tool
Communication which is one of our strengths, and otherfundamental aspects of our company. As the times change, so also dothe signiﬁcance and manner in which these terms are perceived. In
what way do you feel OSG s uniqueness is reﬂected in its corporate
culture and how the company s corporate philosophy is instilled?
This year, 2024, the OSG Group celebrates 86 years in business. Looking
back to the year when we launched our Global Presence corporate
philosophy, less than 30% of our entire group s sales came fromoverseas. Total sales at that time amounted to one-ﬁfth of what they are
currently. In the 1990s after Japan s economic bubble collapsed, wetouted the slogan Economic Global Presence. What heightened thesense of urgency among management at the time was, I felt, a sense ofcrisis: we believed the OSG Group would not grow unless we found ameans of surviving overseas, in the same way that people in years past
had gone out into the world to ﬁnd work elsewhere. Then, in 1996, inparallel with our Global Presence philosophy, our former chairman,
the late Teruhide Osawa, issued a three-pronged declaration for the
OSG Group: global presence, health consciousness, andeco-friendliness. A culture, one developed based on the three-pronged
declaration that has served as our global standard bolstering thefoundation for managing the OSG Group at a time when the concept of7

O S G R EP O RT 2 0 2 3

ESG management was scarcely if at all applied, has been passed down
and maintained to the present day. Our Tool Communication
approach is also essential for realizing our Global Presence corporate
philosophy and the driving force propelling our globalization.
Communicating with our customers and promoting global sales via themedium of cutting tools is another source of OSG s strength.
In 2014, OSG s current Chairman Ishikawa was a key player incoming up with the tag line Shaping Your Dreams for enhancing ourbrand. This catchword embodies the idea that we must meet ourcustomers face-to-face and live up to their expectations so that we may
shape their dreams.
Each of these approaches is connected to OSG Group s values andvision. The instillation of these approaches in our many employees iswhat creates OSG s uniqueness.
What does it mean to continue to preserve these approaches
unchanged while also effecting other changes that need to bemade with the times?
It is also true that as the years pass after a company is founded, inﬂexible
set notions and ways of thinking become more prevalent within thatcompany. My concern is, if these notions begin to correspond to whatmakes OSG unique, then they will grow into something that might halt
our growth. When we look at what s ahead and consider the changes
demanded, it s important to recognize there are some things that do notchange, these are OSG s strengths, and some things that we need toreﬂect on in areas where we should improve.

Never let stereotypes cause your company to lose its identity.
Game-changing requires a change in the mindset of eachand every employee.

For instance, we have heard many concerns voiced by investors inrecent years about how our business is highly structured toward theautomobile industry. In our Medium-Term Management Plan Beyond
the Limit 2024 which we announced two years ago, we laid out a plan
which we devised to extricate ourselves from that predicament. For me,
Beyond the Limit encompasses the idea that we will think outside thebox, refuse to limit ourselves, and take up the challenge to go beyond
what has ever done before. Unless our company and our employees
take another look at those things we feel to be normal and ordinary
so that we may emerge from that rut, we will not generate the driving
force that produces new ideas and products. To achieve this, welaunched medium-term management plan working groups, set out arange of themes for these groups to consider, and gave the groups the
mandate to deliberate these ideas.
To put this in terms of our corporate culture, I feel that we havealways had a strongly-rooted organizational culture, one in which weare able to talk and tell each other how we feel. Since the time of ourformer chairman the late Teruhide Osawa, we have always said that avertically-structured internal organization is not good and have instilled
an atmosphere where employees do not refer to the president andexecutives by their ofﬁcial titles, but rather as colleagues, addressing
them with the general honoriﬁc san attached to their last names.
Currently, I believe the most important thing is to create a culture where
people are able to say what they want to say, which is the kind oforganization that we should have. Being able to say what you want to
say is a sign of a workplace environment where all employees are able
to freely voice their opinions. For example, with organizations where
personnel are unable to immediately tell their supervisor when aproblem arises in the organization, no matter how small the sparks are
initially, over time as the problem is hidden from view, it has thepotential to develop into a destructive ﬁre. The ideal is to have anorganization with good communication among everyone so thatreports are presented ﬁrst even if something bad might happen.
Considering even the distinguishing features of our humanresources, it is evident values vary greatly from generation to
generation. As OSG heads toward its 100th anniversary, it is our current

employees, the ones who joined our company about ﬁve years ago,that will form the core of our company in a few years. Moving forward
as OSG continues to operate, it is necessary that we create anenvironment where these employees ﬁnd it comfortable to work andtheir standards are properly acknowledged. I feel that, if we treat theambitions of our younger employees as something akin to a spicerather than the substantial ingredient that they are and do not initiatechange but let matters take their own course, then we run the risk of a
new culture forming, one that it will lead to greater employee turnover.

Background behind reassessment of materiality
and linking those results to our vision
Not long ago, OSG conducted a reassessment of the materiality issues
that we as a company face. Could you please explain the backgroundbehind that reassessment and the key points regarding each item?
OSG Group revised the number of materiality issues identiﬁed fromeight to four. The previous materiality included green bond issues toprovide sustainable ﬁnancing for our new Oike Factory, support for
healthcare institutions and facilities that contribute to local
communities, as well as sports promotion initiatives. These had little
relation to changes taking place in the business environment or our
Materiality (Key Issues) ▶ P.25
Materiality
Contributing to the
manufacturing industry
through our business
Developing an environment
where employees arerespected and able to ﬂourish

Priority Themes
Expand the global market share for our core product taps
Optimize our business portfolio
Expand new business and after-sales services
Increase employee engagement
Enhance the capabilities of our human resources
and strategically assign personnel to assignments
Respect diversity

Contributing to asustainable global environment

Realize carbon neutrality

Maintaining and strengthening
our governance structure sothat we may achieve sustainablegrowthMaintain our corporate governance structure

Reduce users environmental footprint
Construct a group governance structure
Thoroughly manage risk and ensure compliance

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OSG Values

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StoriesValue Creation
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Strategy

Corporate GovernanceCorporate
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Message from the President

Medium-Term Management Plan. In addition, such items also included
matters that had already been realized. That is why we went ahead withthis reassessment. With ESG management taking on increasing
importance, we have set out four material challenges, consciously
recognizing how these are linked to our Medium-Term Management
Plan KPIs. They are: (1) contributing to the manufacturing industry
through our business, (2) developing an environment where
employees are respected and able to ﬂourish, (3) contributing to asustainable global environment, and (4) maintaining and strengthening
our governance structure to achieve sustainable growth. We will set
priority themes to address each of these separately as well as bolster ourefforts with KPIs to measure the progress of each speciﬁc initiative.
Which of these four material issues are particularly important when
considering future corporate value? Also, could you please share
more of the speciﬁc measures for realizing these key challenges?
All of these four material challenges are necessary and fundamental
premises for us to realize our long-term vision of being an essential
player contributing to the global manufacturing industry. If pressed to
say which of these we are focusing on the most, I believe that bothcontributing to the manufacturing industry through our business anddeveloping an environment where employees are respected and able
to ﬂourish are key to realizing our long-term vision.
In addressing the material challenge of contributing to the
manufacturing industry through our business, the priority themes,
which we have set, are to expand the global market share for our taps, acore product ever since our founding, as well as to optimize ourbusiness portfolio and expand new
business and after-sales services. Of
these, expanding market share is very
important. One of the targets laid out inour Medium-Term Management Plan is
to secure 40% of the global tap market
share by the ﬁscal year ending
November 2027. During the ﬁscal year
ended November FY2023, however, we
waged an uphill battle in moving toward
this goal with sales targeted mainly
toward distributors in Japan and Greater
China. Despite our efforts, threading tool
sales fell a net 7% after exclusion ofcurrency conversion. Japan sales were
the only region not to rebound to theirpeak prior to the pandemic (FY2019:¥60.1 billion). OSG already controls a large share of the market, but westill initiated initiatives in December 2023 to reform our domestic sales
structure for the ﬁrst time in roughly 60 years so that we may better
adapt to our external environment and rally back to recover our
pre-pandemic sales level and even boost them even higher yet.
At the same time, it is essential, I believe, for us to develop an
environment where employees are respected and able to ﬂourish sothat we are able to contribute to the manufacturing industry throughour business. We will deﬁnitely take action to elevate our vitality
through investment in personnel and lay the groundwork for these
employees to thrive. If we take a look at the entire OSG Group, we seethat overseas sales account for two-thirds of all sales. This reveals how
evident it is that our Japan employees alone will not be able to expand
our global tap share or optimize our business portfolio. So, from thestandpoint of respecting diversity as well, we must not appoint andpromote personnel just because they are employees assigned to ourheadquarters in Japan. I want OSG to adopt a global outlook and strive
to properly place our outstanding personnel in appropriate
assignments.
On the other hand, I feel we face a challenge in some cases where
the level of an employee s enthusiasm for their own careeradvancement does not match our company s expectations. There have9

O S G R E P ORT 2 0 2 3

been cases where employees of both genders have declined to become
managers or leaders when asked. I think one factor in their refusal totake on the responsibilities of a higher position is the very severe way inwhich harassment is dealt with. In addition, as times have changed,
higher and higher hurdles have been erected for managing people.
Therefore, I feel an important issue is whether or not we will be acompany that sustains subordinates with a sense of security so theyknow help is deﬁnitely on the way when they are in trouble. It is vital wecreate such an environment so that subordinates are not placed insituations alone where they have to do everything themselves, but one
where they know to send out a signal early that they are in distress andwhere their supervisors are keeping an eye out to quickly pick up thosesignals. If we are able to imbue that sort of environment as part of ourcorporate culture, then more career options will be available for our
employees.
As I mentioned earlier, I believe realization of the goal of being anessential player contributing to the global manufacturing industry isdependent upon the extent to which we are able to implement ahuman resources strategy that respects diversity.
What sort of management resources are lacking for realizing thesematerial challenges and what sort of speciﬁc efforts are being
made to address those deﬁciencies?
I believe it is more important how we hone the management resourcesthat we currently have rather than consider what resources we lack forrealizing our material challenges. So that we effectively utilize thesemanagement resources, we reorganized three managerial business
units the Human Resources & General Affairs Department, Accounting
Division, and Procurement Department into the Resource Management
Center in December 2023.
Also related to my expectations of the Resource Management
Center is the utilization of our human resources, which I feel is thegreatest challenge that we face. The reason is that the age distributionof our current personnel is out of balance. We anticipate the number of
employees in Japan to drastically decline by 2038, the year of our 100th
anniversary. Currently, we ﬁnd ourselves in a time where recruitment isalready difﬁcult. If this situation continues, then we will inevitably berequired to achieve even greater growth with fewer employees.
Although we have made progress at our plants on labor-saving
initiatives, which have also included preparations for the future andsustainability initiatives, it is very important we initiate work on building
an organization that is more likely to produce results by visualizing
human resources to be accomplished through such efforts as theconstruction of a human resources data platform (by FY2025). For
instance, once we are able to digitalize the characteristics, skills,
experience, and other attributes of our professionals reaching the age ofmandatory retirement for their positions, we will be able to use that
information to appropriately place speciﬁc individuals in business units
where they are needed. This platform will also offer the option of
reskilling employees found to be lacking in certain skills. As we will beable to predict to a certain degree in advance changes that will takeplace in our personnel structure, we should not take the haphazard
approach of thinking about which personnel to assign to which position
only when the time is upon us.
In this way, I see the management challenge which OSG faces to bewhether or not we will be able to change the way in which operate sothat we are looking ahead and changing how we use our current
management resources in a way that produces signiﬁcant results. It is
my expectation the Resource Management Center will adopt such a
new perspective and take the initiative in changing not only the way wethink, but also the way we work.

Medium-Term Management Plan Achievements& Challenges
Under the current Medium-Term Management Plan Beyond theLimit 2024, KPIs have been set for achieving ¥30 billion in

operating income and a 15% ROA for the ﬁscal year ending
November 2024. The business environment has changed and it
might be difﬁcult to achieve these KPIs. Could you please share withus the achievements made so far and the challenges that lie ahead?
OSG Group s long-term vision through FY2030 is divided into threestages with each stage rolled out in a distinct medium-term
management plan. Stage I will end with the current Beyond the Limit
2024. Although performance for the ﬁscal year ended November 2022
got off to a promising start after outbreak of the novel coronavirus,
demand in Greater China hit the brakes once 2023 arrived, andoperating income dropped off in the ﬁscal year ended November 2023.
Ever since we announced the current medium-term management plan,
I have felt the goals of achieving ¥30 billion in operating income and a
15% ROA have been challenging ones. Underlying our setting of thesegoals was the aim of motivating our employees to look towardattaining higher levels of achievement and instilling in them a sense ofcrisis so that they realize we are living in a time of high uncertainty. If the
momentum emerges to reach these high goals, that will propel us toachieve a major breakthrough. In the process of implementing thisMedium-Term Management Plan, the launching of a steeringcommittee and multiple working groups have already beenaccomplished.
The challenge we face in the automotive industry, which is where
our key customers are for our core tap products, is the increase in theratio of battery electric vehicle (BEV) sales in China. Using China slargest BEV manufacturer as an example, there is a tendency, when
expanding local production overseas, for Chinese companies totransplant the entire package of their production system to the overseas
site. So, to succeed, the OSG Group needs to make inroads into China s
supply chains. The number of vehicles to be produced is forecast to
increase in the future and include an increase in PHVs and HVs as well
as BEVs. Therefore, we will focus our energy on penetrating into new
customer demand for micro-precision machining and other needs. The
business environment has changed signiﬁcantly since our current
medium-term management plan was drafted. It appears we will needto redraft concepts in Stage 2 (2025-2027) so that we can change thegame with Beyond the Limit 2027. I also believe it is important for us
to be conscious of changes taking place and identify them. As acompany, we need to make quick decisions using the information that
we gather.
It seems OSG s strategy vis-à-vis China s BEV manufacturers will bea key point in the next medium-term management plan. Could you
please tell us about speciﬁc initiatives the working groups are
addressing, what sort of employees participate in these working
groups, and what role you, as president, will play in these groups?
The working groups are tackling initiatives such as securing a 40% shareof the global tap market, increasing the percentage of micro-precision
machining sales to 30%, raising the ratio of A-Brand products among ourstandard tools to 40%, doubling sales of rolling dies, and expanding our
coating and reconditioning business. Each working group has ﬁve to ten
employees aged from mid-30s to 50, engaging in a wide spectrum ofdeliberations. The employees participating in these working groups are
selected from across a range of departments. Due to the global natureof doubling sales of rolling dies and achieving a 40% share of the global
tap market, employees from overseas are also involved in theseworking groups. I have the opportunity to hear the progress theseworking groups are making at monthly working group report sessions.
Nevertheless, it is quite rare for me to make an appearance at any of theactual working group meetings. The reason is that, ﬁrst of all, I wantthese working groups to be a place where employees are able to freely
express their ideas and abilities as they wish. So, I do not want tointerfere with the activities taking place in these groups. They should bea place that encourages employees to think creatively and express theirideas. We hope this environment will develop our personnel and foster
future potential leaders. So far, we have been able to set up a platform

where employees are able to take up challenges as they wish. In the
future, I would like our employees to use this platform to work towardachieving speciﬁc numerical targets that will lead to results in Stage 2(2025-2027).

Stakeholder Engagement and Corporate Value
Enhancement
Over the medium- and long-term, both dialogue and engagementwith stakeholders are important for improving corporate value andsustainability. Could you please share with us OSG s policies in thisregard and anything particular that you are committed to achieving?
It has become even more imperative for us to accurately convey
through dialogue and engagement with our stakeholders how the OSG
Group will transition from the present to the future. OSG s policy here is
to be fundamentally fair in making decisions. With this in mind, we willcontinue to engage in a dialogue with our stakeholders.
In dialoguing and engaging with employees, we are endeavoring tocreate an environment where our employees are able to ask questions
about things they want to know. OSG has a labor union. Both sides
communicate openly and demonstrate fairness. When communicating
to our employees about initiatives such as the Medium-Term
Management Plan and the direction we aim to take, we convey thisinformation to executives at management meetings and E&M seminars
where each executive ofﬁcer provides policy explanations. For other
employees, there is the opportunity of the president's speech at the
beginning of the ﬁscal year. In the future, the working groups will needto expand their work into small group activities at the working level.
Our customers are the same both in Japan and overseas. I personallyattend a variety of A-Club regular meetings in Japan and several times ayear make arrangements to talk directly with our vendors and agents.
This tradition has continued unbroken since the time of our previous
chairman Teruhide Osawa. A-Club owners have highly appreciated thisclose relationship with OSG. The relationships formed with theseowners are an asset generated out of our efforts to continue dialogue,
and we will continue these efforts in the future. In addition, A-Club
activities are being extended overseas to China, the United States,
Europe, and other regions where we are holding dialogues and eventswith customers in each of these markets.
As president, what sort of efforts are you making to enhance
corporate value, including market capitalization, over the mediumto long-term while being mindful of the company s stock price? In
closing, could you also please share with us how this aligns withyour own mission?
In OSG s dialogue and engagement with shareholders and investors, I
personally make it a point to conduct our ﬁnancial results brieﬁngs andtalk with shareholders and investors as much as possible. I believe
management that is mindful of its share price and seeks to enhancecapital efﬁciency will produce greater corporate value, including market
capitalization, over the medium- and long-term. The Medium-Term
Management Plan launched in FY2022 set out policies emphasizing
operating income and capital efﬁciency rather than sales so that we may
strengthen our corporate structure. We have strived not only to improve
our return on assets (ROA), but also have also been conscious aboutenhancing shareholder equity efﬁciency, which has also raised thereturn on equity (ROE). In December 2023, we made the management
decision to acquire ¥22 billion in treasury stock utilizing the Recap CB
scheme by issuing convertible bonds for recapitalization. We willcontinue to bolster shareholder returns and enhance capital efﬁciency
as we move forward.
The OSG Group will continue to endeavor to establish a brand thatall stakeholders trust as we aim to further increase our corporate value
and contribute to society through our business activities. We sincerely
ask our stakeholders to continue to extend your support andunderstanding as you always have done.

OS G RE P O RT 2 0 2 3 10

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Value Creation Process
Medium-Term Management Plan Stage 1

Medium-Term Management Plan Stage 2

Beyond the Limit 2022-2024 P.27

Medium-Term Management Plan Stage 3

Beyond the Limit 2025-2027

Environmental & Social Initiatives P.31

Manufacturing capital P.13

Manufacturing capital◆ Number of products approx. 39,000◆ Production sites

33 ＊Consolidated only

Value Chains P.23

◆ Capital expenditures

10,580 million yen◆ Number of taps manufactured

Japan 11,608,000

Global 25,631,000

Intellectual capital P.14

＊Full ﬁscal year ended November 2023

Intellectual capital◆ R&D expenditures

1,415 million yen◆ Development engineers◆ Design engineers

108

After-Sales
Service56◆ FY2023 new products released

Procurement◆ A-Brand sales ratio◆ Total assets

P.20◆ Equity ratio

Customer
Services

250,124 million yen
72.6%
28,676 million yen

INPUTS
Human capital P.18
◆ Employees

Innovation

GlobalPresence

Total
Solutions

R&D/Design

Sales/Logistics◆ Interest-bearing debt

29%

15.01 million yen

Employees
Shareholders/investors

OUTPUTS
Human capital

Localcommunities

188
232

◆ Strength current products

Global tap market share 40％（2027）＊Only those qualiﬁcations eligible for incentives◆ Shift customer-speciﬁc portfolios

Social capitalSocial capital P.19
◆ Overseas sites 75

No.1 (est. to exceed 30%)
◆ Japan tap market share 52.0%◆ Global tap market share

Manufacturing/
Quality＊Only consolidated subsidiaries

259 companies

in 12 countries

Natural capital P.19
◆ Energy usage 933,430 [GJ/million yen]
◆ Water intake 118,187m3

Ordering＊Source: Japan Cutting & Wear-Resistant Tool Association◆ Carbide product recycle rate approx.
＊Recycle rate of Japan group companies◆ CO2 emissions

Foundation Supporting Value Creation

42,294t

Materiality(Key Issues)

manufacturing industry

P.25

through our businessContributing to theDeveloping anenvironment where
employees are respected
and able to ﬂourish

Contributing to asustainable global
environment

Maintaining andstrengthening ourgovernance structure toachieve sustainable growth

Ratio of micro-precision machining sales

30％ or higher (2030)◆ Expand premium tool brands

Ratio of A-Brand to standard product sales

40％（2027）

Natural capital

Corporate Governance P.47

11 O S G R EP O RT 2 0 2 3

Suppliers◆ No. receiving qualiﬁcations

Out-of-the-Box
Thinking◆ Training expenditures

313

Financial capital◆ Net sales 147,703 million yen◆ Overseas sales ratio 67.0%◆ Operating income 13.4%◆ ROE 8.3%
◆ ROA 8.3%(Operating income basis)◆ Distance education users

Consolidated 7,563

Customers＊The sales ratio of A-Brand products in the total sales ofstandard products (taps, drills, and end mills)

Source of OSG s Strength
Tool Communication

Financial capital P.15

◆ A-Club members

OUTCOME＊Only standard tools listed in catalogs

30%◆ Raise coating & reconditioning ratio

15％（2027）◆ Empower women

Ratio of female assistantmanagers
7％（2025）30％（2030）
Achieve carbon neutrality（2050）◆ Reduce CO2 Emissions ▲◆ Dividend payout ratio

35.3%（2024）

To be an essential player contributing the global manufacturing industry

ESG Management

Beyond the Limit 2028-2030

OS G RE P O RT 2 0 2 3 12

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Accumulated Management Capital
Manufacturing Capital
Digitalization to Empower Frontline Capabilities
The NEO Shinshiro Factory is our core plant promoting digitaltransformation. In 2021, we set up the DX Promotion Team. The
essential requirement for digital tools used to establish sales andproduction systems is that they must be simple and smart. Thisrequirement is achieved by thoroughly incorporating the comments andviews of those on the front lines of production. This is why the DX
Promotion Team is located close to the production site (inside the NEO
Shinshiro Factory), enabling it to support frontline capabilities throughdigitalization. The team has focused on the use of digital production
management tools suited to production system innovation as well as BI
tools to visualize production status. The team has also promoted
Machinery availability rate monitor
adoption and retention of these tools at the NEO Shinshiro Factory, whileworking to standardize speciﬁcations with a view to the lateral deployment of these tools to other factories in Japan. Moving forward,
we will further promote application of tools promoting digital transformation at production sites overseas as well as group companies
in Japan with manufacturing plants. This will help us realize our ONE Factory Concept.

toward the goal of operating the new carbide end mill factories (Oike Factory and SD Manufacturing Company). As of 2023,
approximately 30% of the old equipment has been disposed of and replaced with compound processing machinery. We are
steadily shifting to labor-saving and unmanned production systems as we reassign personnel (increase multi-process personnel)
and boost production thanks to greater machinery availability. Our policy is to transfer small-lot products and other production
from Oike Factory to group companies in Japan and abroad and have entirely unmanned production at Oike Factory. Furthermore,
we are also promoting compounding that will use machines manufactured in-house, allowing us to forgo relying on machinery
manufactured externally. Consolidating the know-how that we have developed so far makes it possible for us to respond in atimelier manner than ever before to market demand. We hope to make further advances in this direction together with ourcustomers.

Capital Investment
In recent years, the OSG Group has not only updated machinery andrebuilt factories to address seismic resistance issues, but has also
strengthened our production capacity for small-diameter tools aimed at
micro-precision machining, a focus of our basic strategy under our
Medium-Term Management Plan. While balancing future capital
investment with growth investments and shareholder returns, we aim
to actively promote investments towards unmanned production in
anticipation of a future decline in the working population. We will also
make environmentally-friendly investments to contribute to realizing asustainable society.

Capital investment levels(Millions of yen)
20,00017,13915,00011,46410,000

10,580

9,895

9,494

8,600
5,555

5,000

0

2017

2018

2019

2020

2021

2022

1,403

1,374

1,346

2020

2021

2022

2023

[FY]

2023 Initiatives & Future Digital Transformation
There are three generally accepted steps to digital transformation. OSG iscurrently at the second stage, which involves streamlining digitalization
processes. We are making preparations for the third step true digitaltransformation at which we will enhance productivity throughout ourorganization and create customer-oriented value. As of the end of 2022,
we completed most of the digitalization setup and veriﬁcation related to
production system innovation. Then, in 2023, we promoted lateralapplication of these systems to our factories in Japan and group companies
Visualization of process-speciﬁc delivery progress
both in Japan and overseas. The process of digitalization does not end withthe adoption of digital tools. It s important that these tools are increasingly used by personnel and integrated into systems and processes.
For instance, such tools do not just allow for visualization of the progress of production within a manufacturing process, but they can also
determine where delays occur in a process and whether the bottleneck has been resolved, thereby accelerating the identiﬁcation of factors
leading to delivery delays and the speed with which countermeasures are implemented. In addition, as part of a new initiative, we areconverting work procedures, measurement procedures, nonconformance countermeasure examples, and other important information
which used to be managed in paper form to a video platform. This has enhanced the efﬁciency with which new employees and staff fromother factories dispatched to provide support are able to learn the work. We are also looking into making use of this data in multilingual
manuals at times when production procedures are transferred to group companies overseas.

Revamping Oike Factory through Compounding and Transition from Old Equipment
Up until recently, production of a single product, such as a carbide end mill,required different equipment for each manufacturing process, such as
grooves, outer circumference, and bottom cutting edge. The old equipment
required that not only production processes and quality assurance systems
be separate, but also presented difﬁculties in terms of reducing andeliminating labor in production because the know-how needed for linking
processes, such as those that required particular skills of a group specialist
when machining grooves, was held by craftsmen. Moreover, multiple
machines led to longer production processes, longer lead times, and greater
waiting time for processes and setup, as well as many other disadvantages.
When developing new products also, a process bound to multiple processes
hindered the development of attractive products. That is why OSG began tofocus on compounding, a method that uses a single computer numericalcontrol (CNC) tool grinder to perform and complete multiple processes.
Compounding resolves multiple issues, which used to be faced with the oldequipment, and enables OSG to provide a stable supply of high-quality
attractive products with short delivery times. Transition from the current oldequipment to compound processing machinery is progressing smoothly

13 O S G R EP O RT 2 0 2 3Intellectual capital
OSG s R&D System
OSG s research and development activities are principally conducted at the
R&D Center and Design Center at OSG Academy. Long-term basic researchis carried out jointly with university, national and public research institutes.
The Design Center develops and improves products. It is equipped withthe latest machine tools and evaluation instruments of all types speciﬁcallyfor fabricating prototypes so as to develop machining technologies thatmaximize tool performance in addition to providing expedient feedback
for development of products based on cutting tests conducted under avariety of conditions. The R&D Center works on research and developmentof coatings, nitriding, and other surface-modifying technologies,
technologies for developing and improving high-speed steel and die steel
material, as well as heat treatment technologies.

R&D expenditures(Millions of yen)
2,000

1,655

1,610

1,646

1,500

1,415

1,000

500

0

2017

2018

2019

2023

[FY]

OSG Machinery & Equipment Knowhow

Compound machine at Oike Factory

Illustration of the new Oike Factory

At OSG, we develop and manufacture some of our manufacturing
facilities internally. Based on the know-how which we haveaccumulated over many years for grinding and other technologies thatare the lifeblood of precision cutting tool manufacturing, we havecreated proprietary facilities designed to deliver optimal precision,
production efﬁciency, as well as production cost. These manufacturing
facilities, which we have developed in-house and directly reﬂect theinsights of our frontline personnel of production, have signiﬁcantly
contributed to maintaining and enhancing the competitiveness of OSG
products. Proprietary manufacturing facilities have been established not
only at our mother factories in Japan, but also at production sites of ourgroup companies throughout the world. These efforts are the driving
force that makes it possible for us to produce OSG brand precision
cutting tools of the same quality anywhere in the world.

OS G RE P O RT 2 0 2 3 14

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Accumulated Management Capital

Financial CapitalGreen Bond Issue

Basic Policy on Financial Capital
As an essential player contributing to the global manufacturing industry, OSG Group regards it as essential that we bothenhance corporate value and achieve sustainable growth so that we may contribute to society s sustainable development. Ourbasic ﬁnancial policy is to establish a sound and solid ﬁnancial base upon which we may invest in growth areas whileconsistently providing an appropriate return to our shareholders over the long-term. We regard securing and maintaining astable high rating as an important managerial target for ensuring ﬁnancing ﬂexibility and reducing ﬁnancing costs. Each year,
we obtain a long-term issuer rating from an external rating agency. Our long-term issuer rating as of the end of March 2024 is A.

Shareholder Return Policy

On August 10th 2023, the OSG Group became the world s ﬁrst cutting tool manufacturer to issue green bonds. The funds
procured are slated to be allocated to green buildings, R&D funds for eco-friendly products, and other such uses. We will
strive to maximize corporate value generated by linking our growth strategy and ESG initiatives toward realization of OSG
Group's Medium-Term Management Plan "Beyond the Limit 2024."■ Overview
Item

Overview

Name

OSG Group recognizes shareholder distributions as a key management matter. In the ﬁscal year ended November 2022, we raised
the dividend payout ratio pledged on a consolidated basis from 30% to 35%. In the future, our aim is to increase this to 40% while also
monitoring business performance and other trends. In addition, as described below, we are currently acquiring treasury stock. As wemove forward, we will take into consideration our capital situation, performance trends, OSG Group s share price level, growthinvestment opportunities, capital efﬁciency enhancements, and other factors as we ﬂexibly make share repurchase decisions.

OSG Corporation Series 3 Unsecured Straight Bonds

Also known as the OSG(with an inter-bond pari passu clause)(Green Bond)

Beyond the Limit Bond

Maturity

5-year bondIssue amount¥5 billion

Coupon0.514%

Toward Achieving the Medium-Term Management Plan "Beyond the Limit 2024" ▶ P.27

Issue dateThursday, August 10, 2023

In January 2022, the OSG Group announced its Medium-Term Management
Plan "Beyond the Limit 2024" and launched initiatives aimed at reaching new
targets. In Stage 1, we are focusing on reinforcing our business efﬁciency,
improving proﬁtability, and bolstering our corporate culture to stably generate
proﬁts over the three years from the ﬁscal year ended November 2022 to theﬁscal year ending November 2024. In the ﬁscal year ended November 2023,
our proﬁt margin deteriorated due to a decline in sales of our core products inJapan and Asia (particularly in Greater China), which resulted in ROA (on an
operating income basis) of 8.3% (down 1.7% from the previous ﬁscal year).
The ﬁscal year ending November 2024 is the ﬁnal year of Stage 1. While
steadily increasing ROA (on an operating income basis) through improved
proﬁt margins, we have also been acquiring treasury stock and providing
other shareholder returns as we endeavor to improve ROE. We are planning toformulate and present a capital policy that includes a medium- and long-term
ﬁnancial strategy for the three-year Medium-Term Management Plan Stage 2,
starting from the ﬁscal year ending November 2025.

Third-party organization evaluating framework

Japan Credit Rating Agency Ltd. (JCR)

RatingR&I: A

Equity ratio/net assets［%］

Net assets

Equity ratio

80

1,406
67.8

70

60

2019

1,548

1,401

1,768

[Billions of yen]
1,946
2,000

72.0

1,500

72.6

68.6

500

2021

2023

2022

12
10

ROA (Operating income basis)

GBP Category

Eligible Criteria and Projects

Green Building

Building of which environment building certiﬁcation was acquired or renewedprior to 24 months of issuance of the Green Bonds. Or, such building of which
certiﬁcation will be acquired or renewed in the future● CASBEE Construction (New, Existing, Renovated), CASBEE Real Estate Certiﬁcation: Rank B+, A and S● ZEB, Nearly ZEB, ZEB Ready, ZEB Oriented under ZEB Certiﬁcation● BELS: 3 stars, 4 stars and 5 stars● DBJ Green Building Certiﬁcation: 3 stars, 4 stars and 5 stars<Project example>● Costs for Oike Factory renovation (CASBEE Certiﬁcation: Rank B+ (Expected))

10.6%

8

8.0%
4.4%
4.3%

6
4

Energy Efﬁciency inproduct development
process

Costs for introduction and maintenance of systems which realize improvement of energy
efﬁciency by more than 30% current efﬁciency by reducing prototypes.
<Project example>● Cutting simulating using CAE analysis

Eco-efﬁcient
Products

Eco-efﬁcient Products,
Production Technologies,
and Processes

Costs for research and development and introduction of related production equipment
to realize improvement of energy efﬁciency by more than 30% current efﬁciency<Project example>● Environmentally-friendly product which helps saving energy (Drills)● Products which helps saving energy and reduce waste by streamlining manufacturing process (PDZ)

Energyconsumption

Renewable energy

10.7%

10.8%

2019

2020

10.0%

Save Energy

8.3%

7.9%
2021

8.3%

2022

2023

[FY]

Use of procured
funds(Eligible project
categories)

Strengthening Shareholder Returns and Improving Capital Efﬁciency
Prior to issue

Change due to CB issue

Liabilities

Change due to treasury stock acquisition

Liabilities

Liabilities

Increase in liabilities(CB issue)
AssetsCapitalAssetsAssetsCapitalCapital●●Costs to introduce equipment of renewable energy plants
Costs to purchase electric power from renewable sources

For eligible projects, to which proceeds from the Green Bond will be allocated, Finance Department will select candidate projects according to their alignment with the project
eligibility criteria. The Finance and Quality Assurance Department will discuss the matter before Sustainability Committee which the President chairs will make the ﬁnal decision.
● In order to reduce environmental and social risks, all the eligible candidate projects are conﬁrmed to have met conditions as follows:−Complying with environmental-related laws, regulations and rules required in the areas where projects are conducted as well as
carrying out environmental impact assessments if necessary−Providing sufﬁcient explanation to local residents before projects are conducted−Material procurement, prevention of pollution and consideration of working environment and human rights in line with OSG Group s sustainable procurement guidelines●

Cash increase(CB issue proceeds)

Cash decrease Capital decrease(Acquisition of treasury stock) (Acquisition of treasury stock)

Increase in liabilities due to CB issue

Capital reduction due to treasury stock acquisition

Cost of capital reduced through increased debt and decreased capital,
ROE improved through decreased capital, and EPS improved through acquisition of treasury stockA ¥22 billion treasury stock acquisition is estimated to have the effect of improving ROE
by approximately 1.14 times

1. The ﬁnancing is aimed at minimizing interest and ﬁnancing costs as bonds are issued with zero coupon as well as at or above face value.
2. Setting the conversion price above the market price provides the expectation that dilution of earnings per share will be curbed after issuance.
3. Attachment of a conversion restriction clause limits the possibility of conversion to common stock.
4. Attachment of a face value cash settlement clause that allows cash delivery up to the face value of the bonds is a high-debt design thatconsiders existing shareholders by signiﬁcantly minimizing dilution per share after issuance.

15 O S G R EP O RT 2 0 2 3

Category

ROE

Financing through Bond Issues and Acquisition of Treasury StockIn December 2023, we procured
ﬁnancing by issuing Euro-Yen
denominated convertible bonds withstock acquisition rights due 2030 ("CB").
The approximately ¥22 billion inproceeds from the CB issue are set to beallocated to treasury stock acquisition
through November 29, 2024. This CB has
the following features. We believe that, as
we use this CB to acquire treasury stock,
we will enhance shareholder returns andimprove capital efﬁciency, thereby
contributing to the maximization of
corporate value and shareholder value.

■ Framework

0[FY]

ROA (Operating income basis)［%］

Green 1(F) ＊Framework evaluation

1,000

64.6

2020

Notes

Process for
Project
Evaluation and
Selection

Managementof Proceeds

The proceeds will be allocated to eligible projects and managed by the Accounting Department. The Accounting Department will track andmanage the proceeds using Excel so that the same amount of bonds issued based on the framework will be allocated to any of eligible projects.
● The Company will manage the unallocated proceeds in cash or cash equivalent until the full amount of the proceeds will be allocated, andthe proceeds will be fully allocated within ﬁve years from issuing.

Reporting

OSG will report the status of allocation of green bond proceeds to eligible projects and effects on the environment annuallyon OSG s annual report and website.

●

OS G RE P O RT 2 0 2 3 16

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Accumulated Management Capital

Human Capital

Allocation Report (August 2023〜November 2023)
Funds have been allocated as follows.
(Millions of yen)
Funding (amount of bond issue subtracting issue costs)
4,968

Allocated fundsNew: 23 (100%)Reﬁnancing : 0 (0%)
Total
: 23

4,945

(Millions of yen)
Category
Save Energy
Eco-efﬁcient
Products

GBP Category

Project

Allocated amount Unallocated amount Allocation dateRenovation of Oike Factory

0

4,945

Energy Efﬁciency in product development process

Cutting simulation using CAE analysis

100Eco-efﬁcient Products,
Production Technologies,
and Processes

Environmentally-friendly product which helps save energy
Products which help save energy and reduce waste bystreamlining manufacturing process

13

0

23

4,945

Green Building

Total

March 2028

Unallocated funds are managed as cash or cash equivalent.

Impact Report
1.Save Energy■ Renovation of Oike Factory (GBP category: Green building)●

Capital investment progress
Construction to start in May 2024 with completion scheduled for April 2028●

Certiﬁcations acquired (type and rank of certiﬁcations acquired or time of planned acquisition)
CASBEE certiﬁcation: B+ rank scheduled to be acquired in summer of 2025

■ Cutting simulation using CAE analysis (GBP category: Energy efﬁciency in product development process)●Decline in number of prototypes since system introduced

We believe our employees possess unlimited potential and are an indispensable part of ourcompany. Building as such on our human resource development philosophy, we strive to expand
and improve our employees' capabilities basedon the seven human resource criteria. These are
Change in rate of performance feedback given
reﬂected in our performance evaluation items,
［%］
100
97%
and supervisors provide feedback during
biannual evaluations. Recognizing that these92%
91%
feedback sessions are crucial opportunities for
employees to share their strengths, futurechallenges, and goals, which are key toboosting motivation, we strive to ensure 100%
80
[FY]
2022
2023
2021
implementation of these feedback sessions aspart of our awareness-raising efforts.

CO2 emissions reduction effect due to decrease in number of prototypes

Reduction of 768.43kg-CO2 during the period¥10 million was allocated for expenses during the period to improve processing speed and maintain cutting simulation
software that uses CAE analysis. With the use of cutting simulations, it is now possible to reduce the number of prototypesby two-thirds for a single developed product, realizing a reduction in energy usage and raw materials required for
prototyping. Average amount of power required to produce one prototype is 2.5 kWh, which amounts to a reduction in
power consumption of 1,500 kWh during the period.
2.Eco-efﬁcient products■ Development of GREEN TAP forming taps (GBP Category: Eco-efﬁcient Products, Production Technologies, and Processes)¥13 million was allocated for development costs during the period for GREEN TAP forming taps which halve CO2

Leadership

Communi- Innovacation
tion
Followership

Conceptualization

Globality

Performance

Final Comments

Appropriate Placement of Personnel and Development of Human Resources ▶ P.39
OSG employs a career plan declaration system where employees can submit theirown career aspirations. This system allows for the appropriate placement of
personnel. We also encourage reskilling, enabling employees to learn the knowledge
and skills required for their work. In an era of rapid change, it is crucial for companies
to create result-oriented organizations by placing personnel in roles that match theirexperience, abilities, and characteristics. This not only facilitates company growth but
also promotes individual employee development. Moving forward, we aredeveloping a human resource data platform to establish a system that allows our
experienced professional personnel to fully utilize their skills. We are also focusing on
nurturing the leaders and executive leaders who will carry us into the next generation.

Education & training expenditures(Millions of yen)
2,500

Certiﬁcation incentive programs
Distance learning subsidy
Language training subsidy
2,006
1,673

1,500

600
●

Spirit ofchallenge

OSG's Desired Employee Proﬁle: Seven Human Resource Criteria ▶ P.39

Unallocated balance

1,501

1,293
931

500
0

2019

2020

2021

2022

2023

[FY]

Diversity & Inclusion ▶ P.40
OSG strives to maintain a pleasant work environment based on the proposition of promoting diversity and inclusion so as to empower our
diverse workforce to leverage their individual personalities and character as well as demonstrate their abilities to the fullest regardless ofnationality, gender, ethnicity, disability, or other traits. This approach also recognizes that empowering women in the workplace is an
important issue. Our aim is to provide the means for each and every woman to demonstrate her abilities to the utmost in her career as she
continues to work passionately and assuredly. In recent years, OSG s recruitment efforts have focused on practical measures such as offeringinternships so candidates gain experience, hiring information system professionals, and recruiting from overseas with the aim ofstrengthening our efforts to secure and train digital human resources. In addition, so that women may become more familiar with technicalpositions where the ratio of men is still high, we are also holding roundtable discussions which present the working environment andbeneﬁts, and discussions so anyone interested may talk with women employees actually working in engineering positions.

emissions during tool manufacturing compared to the manufacture of conventional products. The GREEN TAP, which
adopts a unique new manufacturing method, emits 0.55 kg-CO2 per tool during manufacture, half the CO2 emissions ofconventional products, so as to realize a reduction in thread processing CO2 emissions. Moreover, as the GREEN TAP is aforming tap, no chips are generated during threading, eliminating machine stoppage to dispose of chips and contributing
to a reduction in power consumed during tool use. The GREENTAP is scheduled to be released in 2024.

Promotion of Safety and Health Management ▶ P.42
In 2023, OSG was certiﬁed as a Safety and Health Superior Enterprise by the Ministry of Health, Labour and Welfare and an Excellent
Health Management Company 2023 - White 500 by the Ministry of Economy, Trade and Industry. OSG is also dedicated to training our
employees and supporting their safety and health through efforts such as providing safety and health training and setting up a healthconsultation service staffed by occupational health physicians, counselors, and healthcare staff. In pursuit of the well-being of ouremployees, we are promoting the creation of an environment where each and every employee is able to bring energy to their work.

Future Human Capital Management
OSG s aim is to effectively utilize our personnel s capabilities and improve their well-being through the development of an environment where
our employees can conﬁdently take up challenges. The future will be a difﬁcult time for securing personnel in a manner proportionate toJapan s population pyramid. So that our company may grow, it is important that we enhance each and every employee s productivity. We alsoneed personnel who are able to continue to take up challenges and grow. Accordingly, we are advancing automation and digital transformationin our manufacturing process as well with the aim of creating an environment and culture that encourages our employees to challenge thestatus quo without fear. We aspire to create a workplace where employees are motivated to continually develop and transform themselves.

17 O S G R EP O RT 2 0 2 3

OS G RE P O RT 2 0 2 3 18

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Key Strengths Maximizing Value Creation

Accumulated Management Capital

Tool Communication

Social capital
Engagement with Stakeholders[No.]

At OSG, we are committed to timely and appropriate disclosure of2019 2020 2021 2022 2023
Activity
information, and through our communication with shareholders andFinancial brieﬁngs
2
2
2
2
2
investors, we strive to provide the necessary corporate information for
Talks
with
institutional
investors
investment decisions. Through constructive dialogues with shareholders
157 154 143 155 154
and securities analysts
and investors, we fulﬁll our accountability to shareholders as well as
Those pertaining to ESG
1
1
2
0
0
maintain and enhance trust earned from the market. We are also working toprovide a correct understanding of our company so that a proper stock priceOverseas investor relations talks
19
18
16
25
21
is formed and corporate value enhanced. Our investor relations department,
management, human resources, and other divisions actively participate in the approximately 150 dialogues that we hold annually with investors andanalysts. The valuable feedback gained during these conversations is shared internally as part of our efforts to further enhance corporate value.

To OSG, there is a close link between tools and communication. Not only is active two-way communication with customers an essential
part of our product development, it is also vital when we assist them in the selection and application of tools, and provide after-sales
service. Thus, communication is key to the success of our operations and to our commitment to develop ever-better products. Moreover,the excellent results brought by the use of high-quality tools help to enhance business relationships.
OSG has a unique business model that seamlessly integrates sales, engineering and manufacturing to effectively communicate customer
needs and know-how to develop products with complete satisfaction.

The power to exceed customer expectation
Our advantage lies in the combination of four strengths grounded in our communication with customers: our innovative technological know-how for
producing high-quality and high-performance products, sincere and devoted service for ﬁnding solutions to our customers needs, as well as our ability tooffer out-of-the-box thinking and total solutions that enable us to anticipate our customers future requirements. We are committed to assisting our customers
in turning their dreams into reality and, by extension, continuously contributing to the advancement of manufacturing industries and a prosperous future.

Connecting to Customers

Out-ofthe-Box
Thinking

Total
Solutions

To Gain Customers Trust in Europe
VOICE
I often tell my colleagues: sales is a reﬂection of how much you are contributing to the local manufacturing industry. I feel the local teamis starting to own this value. It is my belief that sales is the contribution of our products and services, and this relationship completes

Communication
withCustomers

manufacturing. This relationship plays a crucial role in a society. With this shared value, we can offer better solutions to our distributers andend users by asking: How may we help your business?
In order to gain our customers trust, we aim to support the manufacturing industry, not just sell tools. This mind
set is called "Tool Communication," one of OSG's core beliefs. Consistent quality is crucial for trust. Whether it s theﬁrst tap or the hundredth, productivity is warranted with exactly the same tool life. It s not easy to convince end
users of this value. It must be earned. In order to earn end users trust in our products, experience plays a key
role. We meet with our end users on their factory shop ﬂoor as often as we can, but seeing is believing. In

Customer
Services

Germany, like in Japan, we conduct cutting tests at our technical center that emulates end users job.

Innovation

Hideaki (Bobby) Osawa Managing Ofﬁcer in charge of Europe and Africa

Shaping our customers' dreams into reality

Natural Capital

Total Solutions
Collaborative Proposals for Tools and Processing with Machine Tool Manufacturers

OSG Group s Carbide Recycling
Among the raw materials in carbide tools are tungsten, cobalt, and other rare metals. So that we may
always provide carbide tools to our customers indeﬁnitely, we are working to recycle carbide products
throughout the entire OSG Group with the aim of securing resources and reducing raw material costs.
Nihon Hardmetal Co., Ltd. (NHM) collects scraps and sludge from several of our domestic groupcompanies and OSG s mother factories in Japan. Together with those generated by NHM, these recycled
raw materials account for more than 30% of the raw materials used in the production process. Comparedto carbide tool recycling rates of 50% (*NHM estimate) in Europe and the United States, only between 30%
and 35% (*NHM estimate) of these tools are recycled in Japan. The production of ore, which is the raw
material source, is signiﬁcantly dependent upon two countries: China (for tungsten) and Democratic
Republic of the Congo (for cobalt). On the other hand, the production of recycled materials is possible
both domestically and overseas. One of the goals of improving the recycling rate is to minimize theimpact of the situation and export policies of speciﬁc producing countries. In addition, compared to virgin
raw materials, recycled raw materials have the advantage of reducing the environmental impact of ore
mining. If we commission the production of recycled raw materials to domestic reﬁning manufacturers,
we can expect a stable supply within the country. As a future initiative, coordination with afﬁliatedcompanies in each area is a challenge, but we will gradually promote the expansion of carbide recycling
to users both domestically and overseas, aiming for a recycling rate of 40% as the OSG Group. We willcontinue to contribute to environmental considerations and cost reductions for our customers throughresource recycling.

19 O S G R EP O RT 2 0 2 3

VOICE
The Application Sales Division is a newly created interdepartmental business unit comprisedof two groups: the Application Sales Group that primarily collaborates with machine tool
manufacturers and the GIGS* Sales Group which pioneers new markets. The Application Sales
Group has made progress in collaborating with machine tool manufacturers by presenting
them with new tools and processes as well as proposals for bringing out the maximum
potential of machine tools. Ever since these initiatives were initially launched, we have

Scrapsreceived proposals from machine tool manufacturers for equipping machines with somefunction or other, and the number of such suggestions has increased each year. In addition,
the Application Sales Group also has many employees with experience working overseas, so
it is also able to handle consultations from sales outlets overseas.
Highly-experienced sales and technical staff in the GIGS Sales Group
have been assigned to areas throughout Japan. This allows the staff
to quickly and appropriately respond to consultations about processing from customers in untapped industries. New
processing ﬁelds have many specialized processes, and more and more micro-precision machining proposals have been
put forward to handle these. We will continue to comprehensively produce optimal tools and processes for both existingand new processing ﬁelds.

＊GIGS: OSG s abbreviation for Growth Industry for Global Share up

Carbide sludge

Kazunori Kazaoka General Manager Application Sales Division

OS G RE P O RT 2 0 2 3 20

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Key Strengths Maximizing Value Creation

Innovation

Rolling dies

Developing unique products by leveraging OSG sstrengths as a comprehensive cutting-tool manufacturer

7%

OSG's high value-added products are the tools many industries use for their high-precision
machining. High durability is required to achieve even higher machining precision andstability. We have leveraged the know-how and strengths that only a comprehensive cutting
tool manufacturer possesses to transcend the boundaries between products, applying featuresand innovation of one product to others. In this way, we are developing and designing new
products by employing unique concepts generated through out-of-the-box thinking.

19%

Other

Taps

12%

33%

Group Network

Sales byproduct
category

End mills

Drills & othercutting tools

29%
Product sales

Taps

DrillsEnd mills

Taps, our core product ever since OSG was founded, are tools for machining
female screw threads (grooves on the hole interior). These fulﬁll an important rolein high-precision machining of internal threads for automobiles, aircraft, and otherapplications. OSG offers a wide range of world-class quality products from small tolarge diameters. Taps for specialty components to meet customers machining
needs require short delivery times yet optimal combinations of materials, shapes,
coatings, and other speciﬁcations customized for how the tap will be used. OSG sstrengths are found in the innovation and customer service we have honed withspecialty components, which have signiﬁcantly contributed to OSG securing thehighest share of the global market for such products (based on OSG research).
Drills are tools used for cutting holes. Just as with our taps, we have earned
high praise from customers by developing and marketing high-value added
products tailored for the automobile and aerospace industries, both of which
require not only high precision, but also high durability. When a tap is used
to cut a female thread, a pilot hole needs to be drilled beforehand in theworkpiece. In recent years, there has been a greater need for high-precisionand high-efﬁciency machining not only of ordinary workpieces, but also
difﬁcult-to-cut ones as well. We have marketed a succession of
distinctively-shaped new products to meet our customers needs, such as
drills with oil holes that feed machining oil at high pressure from the drill tip
as well as drills shaped to smoothly discharge chips.
End mills cut away metal to create shapes and are used, for example, in the
fabrication of press dies. There is a greater need for carbide end mills withsuperior machining precision and durability to meet the requirements oftoday such as the reduced cost, weight as well as size of machined products.
Moreover, as more and more difﬁcult-to-cut workpieces are produced, end
mill materials and shapes as well as coatings applied to tool surfaces need tobe highly durable in addition to heat and wear resistant to a levelappropriate for such workpieces to be machined. To meet these needs, ourgroup companies have developed a wide variety of coatings suited tovarious workpieces and built up a customer service system that gives us thecapability to respond to customers requests.

Rolling dies

Gauges21 O S G R EP O RT 2 0 2 3

Indexable tools, which are cutting tools with exchangeable blades, are used
to cut metal in the machining of dies and mechanical components. While
end mills are used for ﬁnishing, indexable tools are mainly used forroughing. Solid tools can be reground when the cutting-edge is worn, but
indexable tools offer the ﬂexibility of replacing only the worn cutting-edge.
Because only the blade insert needs to be replaced even on large-diametertools, indexable tools can also reduce the total amount of material required
for tools.
Rolling dies are used to cut the male thread on a bolt (bolt threads). A mirror
image of the thread is formed on a round bar by pressing the rolling die against thebar. Our high-precision and long-life dies, which are produced by applying thegrinding technology and surface treatment technology developed in tap
manufacturing, have been deployed worldwide in specialty products tailored to ourcustomers needs. Rolling dies are heavy and costly to transport, so we are working
to create a production structure where rolling die manufacturing, reconditioning,
and recoating are carried out at OSG Group s overseas sites to the extent feasible.

Gauges are used to verify the precision of threads, holes, and other work. Taps and diesprecision needs to be accurate to a few microns, but gauges must keep any error to within
one micron. OSG makes use of our proprietary grinding technology developed over many
years to design and manufacture high-precision and high-quality gauges that only amanufacturer with comprehensive knowledge about threads can produce. High-precision
gauges are costly to manufacture, so we have recently been taking up the challenge of
implementing new initiatives that improve the production process and make other upgrades.

Since we established our ﬁrst overseas subsidiary in Chicago, USA in 1968, the OSG Group has expanded our manufacturing and sales
bases to 33 countries around the world, building a global network that meets the needs of our customers in various regions. We have set
up bases in a broad range of regions around the world, assigned design and sales personnel possessing a wealth of knowledge about eachspeciﬁc region, and trained local employees. This makes it possible for us to deliver products and services with consistent quality on a
global scale. Since the 1990s in particular, OSG has actively engaged in mergers and acquisitions overseas as we have sought to expand
our sales channels globally and increase market shares in the automobile industry and our next key industry, the aerospace industry.
Thanks to a policy of cross-selling with companies newly joining our group, our mutually complementary sales, manufacturing, andtechnology across regions have produced a beneﬁcial synergy. OSG s high value-added products have also garnered high regard in the
global market. The ratio of overseas sales to total sales rose to 67.0% during the ﬁscal year ended November 2023. The global network that
we have constructed will enable us to continue to contribute to the manufacturing industry in partnership with our customers.

(Millions of yen)
50,374

Japan

Asia

49,05033%

23%

43,23939,89533,671
2019

2020

2021

2022

Regional
sales ratios

2023(Millions of yen)
40,98236,147

Europe/AfricaJapan

42,88635,721
29,484

Incl. theOSG Group

Europe/Africa

18

27 companies

companies＊

Asia

22%

10

companies

Asia

Japan

25%

42%

companies
2019

2020

2021

2022

Americas22%
Americas20

Percentageof employees
by region

2023

Europe/Africa＊Only consolidated subsidiaries

Americas15%18%(Millions of yen)
27,983
26,69026,383Out-of-the-Box Thinking

24,006
21,219Indexable tools

Customer Services

2019

2020

2021

2022

(Millions of yen)
10,052

9,973

10,6162023

11,035Flexible Customization of Specialty Products and Know-How Accumulation
OSG has brought together our engineers who develop and design tools, develop coatings, and conduct
other research and development at one location, the OSG Academy. We have also set up a cutting laboratory
at the Academy. This is where our engineers design more than 1,000 new specialty products (custom-madefor speciﬁc customers) each month. Design engineers visit customers to check on tool performance after
these customized tools have been put to use, and they also evaluate these specialty products together withour customers at the cutting laboratory. This ﬂexibility and person-to-person interaction has helped us gain
our customers trust. OSG s specialty product service has also helped us uncover potential needs and driven
the release of our new A-Brand products as well as other standard products (catalog products).

Product development 25 engineers
Cutting testing

23 engineers

Prototype fabrication

8 engineers

Design engineers

108 engineers

Cutting testing machines

32 units

7,947
2019

2020

2021

2022

2023

1,991

1,968

2022

2023

(Millions of yen)
1,946

2019

1,712

1,747

2020

2021

OS G RE P O RT 2 0 2 3 22

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Value Chain Enhancement
OSG carries out our proprietary business operations on a global scale, comprising everything from the production andprocurement of base materials to the development of production facilities as well as coating, reconditioning, and otherafter-sales services. We have an overwhelming advantage as a comprehensive cutting-tool manufacturer across all six
elements of the value chain.

Procurement

Relevant capital

R&D Design

Relevant capital

Ordering

Relevant capital

Manufacturing
quality

Relevant capital

Sales
Logistics

Relevant capital

Manufacturing capital

Manufacturing capital

Manufacturing capital

Manufacturing capital

Manufacturing capitalSocial capitalIntellectual capitalSocial capital

Natural capitalSocial capital

After-Sales
ServiceRelevant capital

Manufacturing capitalIntellectual capitalSocial capitalSpeciﬁc initiatives

Speciﬁc initiatives

Speciﬁc initiatives

Speciﬁc initiatives

Speciﬁc initiatives

Speciﬁc initiatives

OSG has built good relationships with our
suppliers and promoted purchasing frommultiple companies to make stableprocurement a reality as a hedge against
risk. Furthermore, we are opening up lines
with new suppliers, evaluating alternatives,
all as part of our efforts to increase supply
ﬂexibility. In our procurement activities thegoal of which is to achieve carbon
neutrality, we endeavor to use and increase
the amount of recycled materials as well as
promote substitution with eco-friendly
materials. In addition, we are striving tomaintain and manage appropriate inventory
levels of materials and other items alongwith utilizing our distribution inventory so
as to build an operation capable of ﬂexibly
responding to any changes in the businessenvironment. Amid calls for construction ofsustainable supply chains, we endeavor toascertain and support CSR activities acrossour entire chain and strive to engage in
responsible mineral sourcing.

So that we may promptly handle
comprehensive consultations regarding
machining in addition to those involving asingle tool type, we have centralized thedevelopment and design of all tools that
we carry in one location, the OSG Academy.
The Academy houses departments that
research and develop not only tool shapes,
but also materials and coatings. This makes
it possible to integrate the three elementsof materials, tool shapes, and coatings inour design and development. In addition,
we actively utilize CAE analysis to expedite
product development. This shortens thetime required for development, provides us
with theoretical evidence, and reduces loss
from scrapped prototypes. We haveassigned engineers from OSG Academy toposts all around the world and establishedtechnology centers in seven countries sothat we may maintain a high level oftechnical service wherever our customers
need it.

As a comprehensive cutting-tool
manufacturer, OSG has diversiﬁed our
product series, offering standard products
which include our ﬂagship A-Brand andspecialty products customized tocustomers needs. We also have in place a
supply structure that strengthens ourcapability to receive orders. We maintainhigh market shares in industries producing
a broad range of components globally. As
we move forward, we will need to further
enhance our order receiving system in amanner that accommodates industry
trends as well as establish a sales systemthat makes full use of digital technologies.
Toward our aim of securing over 40% of
the global tap market as set out in our
Medium-Term Management Plan Beyond
the Limit, we will roll out a distribution
strategy to further expand the market
share of our A-Brand products and secure
more new customers in the
micro-precision machining sector.

At our mother factories in Japan, we areenhancing our delivery responsivenessand maximizing output by leveraging BI
tools and other resources for production
management and planning. We areplanning to expand this digitaltransformation from our factories inJapan to our group companies within the
country and to our factories overseas. In
addition, we have advanced a global
quality certiﬁcation system to maintainthe quality of products produced
overseas so that we have the capability
to assure consistent quality based on thesame standards worldwide. We are also
optimizing production at our facilities
overseas so that stable quality is
maintained in our production on a global
scale. Furthermore, in anticipation of
future labor shortages, we areprogressively updating our production
facilities to the latest automated systems
as part of our labor-saving initiatives.

We conduct in-person sales follow-up calls,
proposing optimal machining conditions andspeciﬁcations to our customers, providing
consistent global support that only acomprehensive cutting tool manufacturer
has the capability to offer. In recent years, wehave been promoting sales and marketing
activities that fully leverage digitaltechnologies, and taken an active approachby researching future and new growth
sectors so as to properly adapt to recentchanges in the environment around us. Our
global online ordering system at OSG
enables us to handle orders, provide
estimates, and ship products more efﬁciently.
The system centrally manages data for ourworldwide inventory of approximately
100,000 standard products. This allows us tostreamline inventory at hubs inside andoutside Japan and diversify risk. Data-based
inventory management provides us with thecapability to control production and swiftly
ship customers orders.

Through OSG s global logistics and sales
network, we offer reconditioning andcoating services to customers
worldwide. These high-grade
value-added services contribute to
optimizing customers machining
processes and enhancing theirproductivity. While reconditioning
presents challenges with small-diametertools, deep-hole drilling tools, sinteredtools, and other difﬁcult-to-grind tools,
we continually strive to expand therange of tools we can recondition by
utilizing the latest grinding and surface
treatment technologies. In addition, weare also rolling out services for a diverse
range of industries, such as dies, gears,
medical, dental, machine, and othercomponents so as to establish coating
technologies for items other thancutting tools. As we move forward also,
we will develop the reconditioning andcoating markets on a global scale.

23 O S G R EP O RT 2 0 2 3

OS G RE P O RT 2 0 2 3 24

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Materiality (Key Issues)
Basic Sustainability Policy

Process for Identifying Materiality (Key Issues)

OSG Group aims to be instrumental in the sustainable development of society. We will be an essential player contributing to sustainable
manufacturing industries worldwide by delivering proprietary high value-added products and services.

STEP

The Sustainability Committee deliberates
ESG-related issues, policy and visionconsistency, priority measures, and othermatters, and regularly reports on its activities
to the Board of Directors. Measures forpromoting sustainability are implemented bydepartment heads (ESG ofﬁcers) andfacilitators in each organization based on
decisions made by the President, who chairs
the Sustainability Committee. So thatdepartment facilitators maintain consistency
in their understanding of what sustainability
entails, they regularly provide progress
reports on their activities, exchange views
with colleagues, and promote initiatives forachieving solutions to key issues.

So that OSG may contribute to
the manufacturing industry
through our business and help
resolve environmental and social
challenges in accordance withour corporate philosophy of
Global Presence, we identiﬁed
issues that are highly likely tohave a signiﬁcant impact on
corporate value over the
medium- and long-term. We
analyze previous materiality
issues and applied internationalguidelines, frameworks, andother standards to identify issues.

Board of Directors

Sustainability Committee (meets quarterly)
Chair：President
Members ：Competent directors and department heads
Secretariat：Strategic Planning Division
Agenda ：Deliberate and made decisions onsustainability-related policies, initiatives, etc.,
and issue regular reports on these topics

ChairmanPresident

Department heads (responsible for ESG)

ESG Promotion Ofﬁcers

Planning
Promotion&
implementation

STEP

2

Evaluation & analysis of issue
signiﬁcance

These issues were evaluated andanalyzed along two axes: importanceto stakeholders and importance toOSG. Those issues that have aparticularly high impact on OSG
Group s business were thenprioritized to reassess our materiality.

Importance tostakeholders

Strategic Planning Division (Sustainability administrator)

Reports&
approvals

1

Identifying Issues for
medium- and long-term
enhancement ofcorporate value

STEP

3

Setting materiality,
initiatives & targets

Our evaluation andanalysis of issues in STEP
2 identiﬁed a total of four
new materiality issues
that are key. We also set
priority themes for eachof the materiality issues
as well as targets to be
reﬂected in speciﬁc
activities. Progress madein the initiatives toward
reaching these targets
will be disclosed in atimely manner.

Importance to OSG

STEP

4

Deliberation &approval ofmateriality

The materiality issues
identiﬁed in STEP 3 weredeliberated andapproved by the
Sustainability
Committee. Because
these are also criticalissues and metrics forpromoting ESG
management as toutedin our Medium-Term
Management Plan, they
have been discussed andapproved as challenges
that we must address togrow our business.

OSG Group s Materiality (Key Issues)
Materiality

Contributing to the
manufacturingindustry throughour businessPriority Themes

Initiative

Expand the global market share forour core product taps●

Optimize our business portfolio
Expand new business andafter-sales services

TargetRelevant page(s)Global expansion of high-quality & high-value added product series● Global tap market share of 40% by 2027

P.28

●

Exploration of markets for micro-precision machining● Micro-precision machining sales ratio of 30% by 2030

P.29

●

Global expansion of reconditioning & coating business● Reconditioning & coating sales ratio of 15% by 2027

P.30

●

Advancement of comfortable working environment and systems● Maintain an annual paid leave usage rate of at least 70%● Maintain a female childcare leave usage rate of 100%

Increase employee engagement

Developing anenvironment where
employees arerespected and able
to ﬂourish

Enhance the capabilities of ourhuman resources and strategicallyassign personnel to assignments

Promotion of Safety and Health Management●

Cultivation of next-generation and management leaders● Establish program for developing next generation managers●

Encouragement of professional human resources● Use human resources data platform to effectively utilize personnel●

Promotion of active roles for women and people with disabilities

Maintaining andstrengthening ourgovernance structureso that we mayachieve sustainablegrowth25 O S G R EP O RT 2 0 2 3

Reduce users environmental footprint
Maintain our corporate
governance structure
Construct a group
governance structure
Thoroughly manage risk andensure compliance● Continue to acquire Excellent Health Management Company certiﬁcation by Ministry of Economy, Trade and Industry and Nippon Kenko Kaigi(Japan Health Council)

P.18、39● Ratio of female managers (assistant manager class): 7% by 2025
● Ratio of employees with disabilities: Maintain statutory quota

P.18、40、42

Respect human rights● Provide human rights training in line with the OSG Human Rights Policy and OSG Corporate Code of Ethics, and manage these such risks

Introduction of operation-improvement & energy-saving equipment
Implementation of on-site & off-site PPA/purchase of carbon-free electricity● Achieve 10% carbon neutral by 2024 and 30% by 2030

P.31-34
P.37-38

Development of new eco-friendly products● Eco-products (OSG standard) target: 40 or more annually

P.36

Strengthening of executive oversight functions
Establishment of an effective execution system● Maintain diversity of Board of Directors

Strengthening of OSG Group governance based on relevantbusiness management regulations● Improve reporting and monitoring systems●

Strengthening of information security measures● Eliminate major information security incidents●

Formulation of a business continuity plan & regularly conduct disaster prevention training● Instill the business continuity plan to minimize damage & pursue countermeasures●

Realize carbon neutrality

P.18、41-42● Continue to acquire Excellent Company of Safety and Health certiﬁcation by Ministry of Health, Labour Standards●

Respect diversity

Contributing to asustainable global
environment● Achieve a male childcare leave usage rate of 50% by 2024, 75% by 2027, and 100% by 2030

●
●

●

●
●

●

● Continue to assess Board of Directors effectiveness and provide feedback of assessment results to raise awareness of challenges and resolve them

● Conduct assessments for improving governance

P.49-51
P.49-50

P.53-54

OS G RE P O RT 2 0 2 3 26

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Medium-Term Management PlanIn FY2022, the OSG Group launched our Medium-Term Management Plan Beyond the Limit 2024. Although FY2023
posed challenges as the Greater Chinese market remained stagnate, we continued to work to expand sales of A-Brand
products and tools for micro-precision machining, efforts which have started to yield results.
We will continue to enhance proﬁtability, build a robust corporate culture, and contribute to the global manufacturingindustry as we advance toward the era of carbon neutrality.

Basic Policy■ To transform OSG into an essential player contributing the global manufacturing industry, our long-term vision is divided into three stages.

The ﬁrst three-year period is Beyond the Limit 2024, during which we will strengthen our corporate culture.

■ Over the course of these three stages up to the year 2030, OSG will change the composition of our customer-speciﬁc portfolio so that wemay better accommodate social and environmental changes.

■ As we advance toward the era of carbon neutrality, the entire OSG Group will strive together to enhance corporate value with the aim ofachieving overall optimization.
◆ Stage1

Beyond the Limit 2022-2024
As we move toward era ofcarbon neutrality＊ROA (%)= Operating income ÷ Total assets × 100(Operating ¥21.8 billion¥19.8 billion
income)¥16.1 billion◆ Stage3

Beyond the Limit 2025-2027

Beyond the Limit 2028-2030

To be an essential player contributing the global manufacturing industry
Based on our corporate philosophy of Global Presence, OSG promotes ESG managementwith the aim of sustainably enhancing corporate value.

¥30 billion¥23 billion

15.0%

Medium-term
management targets

Customerportfolio(FY2024)ROA

ROA (Operating income basis)

Share of global tap
marketOperating income

40%

15%

2022

2023

2024

(Projected)

Micro-precision machining

30% or more

The OSG Group regards A-Brand, which is an all-around cutting tool
demonstrating superior performance in a diverse range of machining
conditions as well as with a multitude of workpieces, as acomprehensive premium brand developed by leveraging OSG Group s
cutting-edge technologies. A-Brand products are a key part of our
Medium-Term Management Plan strategy. We have promoted
expansion of the A-Brand series, which are available along with ourstandard cutting tools (catalog items). Ever since A-Brand wasannounced in 2014, we have advanced development not only of taps,
but also A-drills and A-end mills and expanded our product lineup. The
A-tap, which spurred creation of the A-Brand, has contributed
tremendously to boosting our reputation over many years andexpanding tap sales. In addition, A-Brand products are used in a broad
range of industries and have also contributed to increasing sales to themicro-precision machining sector, an area we are focusing on. We willcontinue to steadily expand the A-Brand and earn high regard for theseseries not only in Japan, but globally. In addition, we will also maintainour efforts to market A-Brand products, which satisfy our customers calls
for high-quality and high-performance tools.

Ratio of A-Brand to standard product sales

Target40%

Progress
The OSG Group set a target for Stage 1 (2022〜2024) of our Medium-Term
Management Plan of increasing to 30% the ratio that A-Brand products
account for of total standard tap, drill, and end mill sales. During FY2023,
despite a slight drop in sales in the Greater China region, sales rosesteadily in Japan, Europe, and United States, resulting in the same sales
level as the previous period or 29%. During the ﬁscal year ending
November 2024 which is the last year of Stage 1, we are working toward
the goal of pushing sales to surpass the initial 30% target.

Achievements

29%

2020

2021

2022

2023

Target

30%

2024

2025

2026

2027 [FY]

Be a company
contributing to¥30 billion

7.9%
2021

◆ Stage2

A-Brand Strategy

carbon neutrality

2024(target)TOPICS

Basic Strategy Further enhance business efﬁciency and strengthen OSG s corporate culture so that we stably generate proﬁts.
Stage1（2022-2024）

Stage2（2025-2027）

Stage3（2028-2030）■ Improve proﬁtability and business■ Share of global tap market: 40%■ Increase micro-precision machining

efﬁciency, and create a robust corporate
culture■ Ratio of A-Brand to standard product sales: 30%■ Coating & reconditioning ratio: 10%■ Expand sales in the micro precision

machining and energy industries■ Establish sales and production systems■ Ratio of A-Brand to standard productsales: 40%■ Coating & reconditioning ratio: 15%■ Globally expand digital manufacturing

customers to 30% or more of OSG scustomer portfolio■ Become a company that contributes tocustomers carbon neutrality efforts

and optimize production■ Expand sales for the micro-precision

machining, energy and aircraft industries

fully utilizing digital technology
Generalengineering

20%
Microprecision
processing

20%

27 O S G R EP O RT 2 0 2 3

Automotive

50%
Aircraft &energy10%

Generalengineering

23%
Microprecision
processing

25%

Automotive

40%
Aircraft &energy12%Generalengineering

25%
Microprecision
processing

30%

Automotive

30%
Aircraft &energy15%

Expansion of A-Brand Product Sales Through A-Clubs
As part of the efforts made to expand
A-Brand sales, OSG Group has beenworking to set up A-Clubs incountries around the world.
Currently, 259 distributors in 12
countries are members of A-Clubs,
the primary role of which is topromote global sales of A-Brand
products. We have also arranged
A-Club Japan tours as part of ourinitiatives to build even better
understanding about the A-Brand and
OSG which produces these products.
A-Club Japan tour session
The main purpose of these tours is tohave participants learn more about
A-Brand products and their appeal as they tour factories and attend seminars and workshops. We hope these sessions
generate a virtuous cycle with distributors from the various countries participating, encouraging them to be even bigger
A-Brand fans, and then driving sales of A-Brand products once they return home. This program has been well received byparticipants and contributed signiﬁcantly to the global recognition and expanded sales of A-Brand products. As we move
forward, we will also be focused on building an international network through these A-Clubs and further expanding themarket for A-Brand products.

OS G RE P O RT 2 0 2 3 28

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Medium-Term Management Plan
03
RecoatingMicro-precision machining
A key strategy of our Medium-Term Management Plan has been to increase
the share of taps, drills, and carbide end mills for micro-precision machining. In
the 5G, semiconductor, robotics, automation, mechanical components,
mobility, medical, and other industries where growth is forecast, there isconsiderable component machining which requires precision machining, anddemand has risen in these industries for small-diameter tools. We launched a
new sales organization to promote business development in these sectors, andour sales force has been actively working and successfully securing new users
for our products. These marketing campaigns have not just been rolled out inJapan, but are also actively running globally. The market for micro-precision
machining is anticipated to grow in the future. Our aim is for these sales toreach 30% of total sales by the ﬁscal year ending November 2030, the ﬁnal yearof Stage 3 (2028〜2030) of our Medium-Term Management Plan. Through ourglobal network which is one of the OSG Group s strengths, we will leverage
our ability to turn sales calls into orders, offer outstanding service for
manufacturing that meets our customers deadlines, and provide on-site
technical support, all of which will lead to securing a greater market share.

Coating & Reconditioning

02

Target30%

TargetProgress

Achievements

15%

04

01

Ratio of micro-precision machining sales

25%

Target

The target set for Stage 1 (2022〜2024) of our Medium-Term Management
Plan is to raise the ratio of micro-precision machining sales in our customer
portfolio to 20%. While the global recovery from the pandemic during FY2023
increased sales of large-diameter tools mainly in the aerospace industry, themarket for semiconductors remained sluggish. This resulted in the ratio oftool sales for micro-precision machining to total sales declining to 15%. We
will continue to actively work to secure new business not only in Japan, but
globally with the aim of further pushing up sales during FY2024 to reach 20%.

The OSG Group has expanded our business with the aim of furthering a
recycling-oriented society through our reconditioning and recoating of
cutting tools. We regard expanding sales of our reconditioning and coating
business as one of the key strategies of our Medium-Term Management
Reconditioning
Inspection
Plan. Reconditioning and coating technologies contribute to reducing
expenditures and improving the productivity of our customers as well as
extending tool life, thereby reducing the burden on the environment. When
providing reconditioning and coating services, OSG Group companies use
OSG s proprietary production drawings. These companies also comply withquality assurance manuals and utilize the same inspection equipment as
used in OSG s own inspection processes. This makes it possible torecondition items so cutting-edge speciﬁcations are the same as thosespeciﬁed for new items. Currently, we have reconditioning and recoating
facilities in 14 countries, providing added value to our customers around
Incoming items
Item released,
the world and contributing to the manufacturing industry. In our job
inspected
packaged & shipped
coating business, which we are working on as part of our efforts to pioneer
new markets, we are aiming to expand the products that we service as wellas grow in new sectors as we fully launch our coating consignment
business for products other than our own. We are offering cutting-edge
coating services globally as we actively expand our services to customers in
Cost comparison of new v. reconditioning carbide drills
a variety of different industries handling dies, gears, medical, dental,
Reconditioning
Replacement purchasedecoration, machine parts, and other components.
●ADO-TRS-5D φ10

20%

05

Progress
2020

2021

2022

2023

2024

2025

2027

2028

TOPICS

2030 [FY]

The target set out in our Medium-Term Management Plan Stage 1 (2022〜
2024) is to increase the ratio for which reconditioning and coating accountof total sales to 10%. Last year we set up our third factory in India, which
has earned a good reputation for both quality and delivery. During
FY2023, we focused on expanding this share and increased it to 6.9%. In
the future as well, we plan to further increase this share with initiatives
that will expand our coating business in India, North America, SouthAmerica, Asia, Greater China, and other regions.

New item 1st

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

Initiatives Targeting the Dental Industry
In 2014, OSG launched full-ﬂedged dental-related tool sales. It used to be
standard for dental technicians to handcraft tooth coverings called prostheses.
However, in recent years, CAD, CAM, and other digital technologies have beenutilized as well as tabletop cutters and machine tools to machine prostheses. In
Japan, aesthetic dentistry, which encompasses CAD/CAM crowns that use
dental CAD/CAM systems to make prostheses, started to incrementally becovered under insurance in 2014. Ever since then, demand has quickly
expanded. Today, most dental CAD/CAM milling tools in Japan are
manufactured by OSG. Because these are classiﬁed as medical devices, they areshipped to market not under the OSG brand, but as an original equipment
manufacturer (OEM). Similar dental treatments are performed around theworld, so we have also launched sales in Europe and the United States as partof our global expansion. This effort has roughly quadrupled sales of ourdental-related tools compared to the level in 2014. Biting and chewing are
behaviors essential for us to maintain our health. OSG will actively strive to be
the world s leading dental milling tool manufacturer so that we may support
everyone s health with dental tools.

Yusuke Kubota

Manager

29 O S G R EP O RT 2 0 2 3

Technical Application Support Group

TOPICSThe Expanding Coating Market

Aesthetic dentistry (CAD/CAM crowns)
covered under health insurance

Dental prosthesis being milled
Design Center

OSG has strived to develop coatings that improve the performance, durability, and operating
efﬁciency of our tools. Currently, OSG s coating technologies are not limited to tools, but are
offered in a wide range of ﬁelds. For example, application of a coating that enhances the water
resistance of medical devices and components for electronic devices provides added value sothat such devices will be able to function normally even in environments with high humidity.
The application of coatings that are highly durable, heat resistant, wear resistant, and shock
resistant to molds and dies signiﬁcantly
extends the life of these devices. Ever
since OSG Coating Services wasestablished in 2001, the company has
proceeded to set up coating hubs
globally. We currently have coating
equipment in 16 countries. In the
future as well, we plan to further
increase the number of hubs so that we
maintain a system providing advanced
technological coatings to even morecustomers.

Coating hub in India

Coated mold

OS G RE P O RT 2 0 2 3 30

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

OSG is committed to the creation of a sustainable environment and society

Environment through eco-friendly business activities.

Environmental education / education training system / ISO 14001 certiﬁcation status

Basic Philosophy
Environmental slogan

The OSG Group recognizes protection of the earth s environment
as a key challenge that all mankind faces. Under our Basic
Environmental Philosophy, we are actively committed to efﬁcient
resource use and environmentally-responsible manufacturing. We
strive to supply customers with environment-friendly products
and services in our aim to reduce the environmental footprint andcontribute to development of a recycling-oriented society.

◆ Environmental Education

Eco-friendly company andenvironment-respecting culture

Environmental education is broadly divided into training for
managers and supervisors, and training for all employees. The
training for managers and supervisors helps participants better
understand the ISO14001 management system and develop theskills to serve as an internal auditor for environmental activities.
In addition, so that more people will be involved as internal
auditors, we are striving to increase the number of internal
auditors and raise environmental awareness throughout OSG.

Mid-Term Environmental Plan Targets
OSG drafts mid-term environmental plans every three years.
FY2023 is the second year of our 9th Mid-Term Environmental
Plan, in which we set four management metrics as targets for ouractivities. Our entire company is working together to improve theenvironment and achieve our targets for eco-factories(environmentally-friendly manufacturing), eco-products(environmentally-friendly product development), energy
improvement and reduced usage, and CO2 emission reductions.
CO2 emission reduction is a new metric that we set in FY2022 toaddress to recent carbon neutrality efforts.

Mid-Term Environmental Plan Targets & Performance
Environmental Objectives

No

Item

Description

Education Training System

FY2022

FY2023

FY2024

Achievements

Achievements

TargetAwareness training
Competence training

Internal training
Needs-based training
Partner/vendor training

Environmental
Education

Awareness training
External training

Construction of Environmental Management Systems at Group Afﬁliates
Status of ISO14001 Certiﬁcation

Needs-based training

Nov. 2000

OSG Nine ofﬁces

Oct. 2007

Aoyama Seisakusho Co., Ltd.

Oct. 2004

NODA Seiko, Inc. (now NODA Precision, Inc.)

Oct. 2008

Ohtaka Precision Co., Ltd.

Dec. 2005

Sanwa Seiki Co., Ltd. Shiga Works

Oct. 2008

Taiho Sangyo Corporation

Oct. 2007

Nihon Hard Metal Co., Ltd. Kyushu Plant

Jun. 2014

Nihon Hard Metal Co., Ltd. Head Ofﬁce and Headquarters Plant

Material Balance in Operations

1

Eco-FactoryEco-friendly manufacturing

74 points

74 points

39 points

2

Eco-Products

Develop eco-friendly products

45 points

52 points

36 points

3

Energy improvement
and reduced usage

Energy-saving activities for energy sources(electricity, LP gas)

1.2% reduction

Cumulative 2.5%
reduction

Cumulative 3%
reduction

4

CO2 emissions reduction

Energy-saving activities & renewable energy use

4.0% reduction

Cumulative 16%
reduction

Cumulative 10%
reduction

To contribute to realization of a low-carbon society and creation of a resource-recycling society, OSG ascertains and manages the various environmental impacts of our businessactivities. We continually strive to manage these effects with initiatives, such as reducing energy usage and putting waste from our manufacturing processes to use as recycled material.

＊Standards set by the Japan Cutting & Wear-Resistant Tool Association have been adopted for assessing eco-factories (highest score: 100 pts.)
and eco-products (highest score: 60 pts.).

(Natural resources, energy, etc.)

Resource extraction &raw material production

Commercial ﬁrms

Materials extracted fromenergy resources (smelting)Storage(processing)(Waste, discharges to water bodies, atmosphere, etc.)

EnergyEnvironmental management system

Top Environmental Manager(Director Responsible for Environmental Affairs)

General Environmental Management Ofﬁcer(Deputy Manager for Quality Assurance)

Products

Purchased electricity

94,992,000kwh

LPG/air conditioning

129t

City gas

Headquarters Environment Secretariat(Quality Assurance Group)

Headquarters Environment Committee
Internal Environmental Audit Team

Business Ofﬁce Environmental Management Ofﬁcer(Department heads)

Competence training

108,157m3

Develop eco-friendly products

Service water/tap water

97,731m3

Industrial-use water

16,618m

Energy savings, resource savings (highefﬁciency & long-life), and environmental
impact reduction (dry cutting tools)

Well water

3,838m3

Green procurement

Eco-friendly manufacturing
OSG Academy Site

Honnogahara Site

Head Ofﬁce

Toyokawa Site

Toyohashi Site

Oike Site

Shinshiro Site

Yana Site

Raw materials (metals)(PRTR substances)

202 million yen
Waste

Amount sold933.7t
1,059.6t
2.6t

Total

1995.9t

Discharges into water bodies

Manufacturing

11kL

Reduction in environmental impact

Resources

Packaging

Final landﬁll amount

Entrance controls

Company vehicle gasoline usage 195kL
Diesel

50,914 million yen

Amount recycled
Procurement

3

Paper (A4-size copy paper equivalent) 2.82 million sheets

Business Ofﬁce Secretariat

Design & development

Production

1,579tPackaging

238t

Reduction efforts
Reduction in environmental impact

Oils (cutting and grinding ﬂuids) 489kL

Drainage water volume118,187m3＊Drainage is mostly domestic waste water.
＊OSG has balanced water usage so that the drainage
water volume equals water usage. We estimate that50‒60% of actual drainage is from the use ofwater-soluble coolants, air conditioning evaporation, etc.
Atmospheric emissions
Energy-derived CO²

Sales & services

Customers

Product

Recycle or dispose

Production
Company-owned vehicles

41,814t
480t＊Numerical ﬁgures express those for all OSG environmental secretariats

31 O S G R EP O RT 2 0 2 3

OS G RE P O RT 2 0 2 3 32

Value Creation
Stories

OSG Values

Value Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Environment

Energy usage

Environmental Accounting
OSG's environmental accounting system references theEnvironmental Accounting Guidelines established by the Ministry of
the Environment. This concerns the SDGs, which are global goals
aiming to ensure a sustainable and better world by 2030, and ESG,
which stands for the environmental, social and governanceframework. Our aim is to present an environmental accounting tohelp stakeholders understand the stance and approach of the OSG
Group as we undertake our environmental conservation efforts so
as to further improve our relationship with society.

Costs and Effects over the Past Three Years[1,000 yen]

FY2021

FY2022

1. Positive costs

51,026

68,8278,009

2. Maintenance costs

63,82474,98976,406000

12,10333,431

32,501

3. Environmental damage compensation
4. Environmental conservation loss

[%]

[t]

1,200,000

30

60,0001,061,558
1,000,000

FY2023

Detailed Accounting of Costs and Effects in FY2023

Category

Item

Speciﬁc initiatives

Investments in equipment, etc.

② Global environmental conservation costs

achieving environmental
targets

Updating heat source devices, transformers and air
conditioning units, converting to LED lighting, etc.

8,009

8,009

① Labor costs associated withenvironmental conservation activities

Environmental secretariat expenses,
management operating expenses

13,500② Environmental education and training
material preparation costs

Seminar participation

7,368③ Environmental audit expenses

External review expenses, registration
maintenance expenses

1,369④ Environmental regulation compliance costs

Designated chemical substance measurement, etc.

1,063

⑤ Waste disposal and recycling expenses

Waste disposal expenses

47,773⑥ Circulation measurement expenses

Various environmental measurement and analysis
expenses

4,221⑦ Environmental conservation costs
associated with social activities

Japan Cutting & Wear-Resistant Tool Association
Environment Committee activity expenses

1,112

management system
maintenance costs

Subtotal

3. Compensation costs

Costs for soil remediation, restoration
after destruction of nature, etc.

76,4060for environmental loss

■Effects

Subtotal0

Total

84,415[1,000 yen]
Category

4. Environmental conservation effectItem

Speciﬁc initiatives

Total environmental improvement effect

Energy savings achieved by updating heat source
devices, transformers, and air conditioning units,
as well as converting to LED lighting

Investments in equipment, etc.

32,501

Reduction in CO² Emissions
At all OSG business ofﬁces and sites, we have prioritized activities
that use energy more efﬁciently and switched to energy-saving
equipment so that we may continue to mitigate ourenvironmental footprint. More speciﬁcally, we have updated
heat-source devices, transformers, and air conditioners, optimized
coolant and room temperature parameters, and converted to LED
lighting. All of these efforts have made it possible to improve ourenergy usage per unit of production by 0.8 points more thanduring the preceding ﬁscal year. The decrease in our emissions
factor year-on-year has also had an impact on CO2 emissions per

33 O S G R EP O RT 2 0 2 3

933,430

25

50,00050,282

1.2

1.08
0.93

48,292

1.0
42,29440,8330.90

2040,00015

30,0000.6

400,000

10

20,0000.4

200,000

5

10,0000.2

00600,000

21.7
19.1

2019

LPG

2020

2021

2022

18.3

2023

[FY]

Fuel oil (power generation, air conditioning & heating)

0.87

2019

41,9752020

Total emissions (left axis)

2021

2022

0.83

2023

0.8

0

[FY]

Per unit of production (right axis)

City gas (left axis)

Per unit of production (right axis)

Operational Optimization of Central Tank System

0③ Resource environmental costs
Subtotal

2. Environmental

1,029,755[%]

0① Pollution prevention costs
1. Positive costs for

986,024

18.4

Electricity[1,000 yen]895,64223.8

800,000

0■CostsCO2 Emissions[GJ/million yen]unit of production, which fell by 8% from the level in thepreceding year. Total CO2 emissions decreased by 5,997 tons dueto the lower emissions factor and decreased production volume.
Progress made in our digital transition has enabled advances invisualization, which has made it possible for us to achieve energy
savings commensurate with production status. The effect has
been considerable and led to a decrease in CO2 emissions. In the
future, we will reinforce these activities and strive in a systematicmanner to conserve energy in accordance with our Medium-Term
Environmental Plan.

OSG used to have a separate tank for each grinder, which led
to coolant pumps operating even when the equipment was
shut down. We did two things to optimize this situation. The
ﬁrst was to change out the oil pump motor to anenergy-efﬁcient one and install a ﬁxed discharge pressure
inverter control. The second change was to align the ﬂow rate
control with equipment operation as the ﬁltration system islinked to an operation monitor. These changes reduced CO2

Flow rate control aligned with operation

Inverter
Energy-efﬁcient motor & ﬁxed discharge pressure inverter control
Filtration
unit

Energy-efﬁcient motor

emissions by 202.6t-CO2/year. Our efforts were honored withan Environmental Activity Award presented by the Japan
Cutting & Wear-resistant Tool Association in 2023.

Environmentally-Conscious Product Transport
Our logistics departments replaced the cushioning material, which is used
when products are transported to our customers, with anenvironmentally-friendly material. We found a cushioning material thatwould ensure safe transport and eventually opted for paper packaging forheavy items. After use, the paper packaging can be recycled. Air cushions
made by thin ﬁlm are also used, which do not produce toxic substances
when incinerated. Our customers previously commented that cushioning
material was bulky and difﬁcult to dispose of. The new air-cushioning
material makes it possible to reduce the amount of waste just by letting
the air out. Also, we used to wrap pallet cargo with multiple layers of ﬁlm
to prevent the cargo from dislodging during daily shipments from our
Shinshiro Factory to Logis Tokyo. However, we have eliminated thismethod and adopted a new one, which involves covering the entire palletwith a box assembled from ﬁve panels. These panels can be used
repeatedly, so they reduce waste. As they can also be stacked, additionaltransport trucks no longer need to be dispatched depending on thevolume of cargo. This makes our transport more efﬁcient.

Packaging with paper
cushioning material

Packaging with air packing

Cargo loaded on pallet &protected with panels

Use of panels allows for stacking

OS G RE P O RT 2 0 2 3 34

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Environment
Environmentally Conscious Product Development
Resource Recycling Initiatives

Weight of recycled materials

Recycling rate[%]

FY2020

FY2021

FY2022

FY2023

99.7

99.7

99.8

99.7

99.8

2,500

100

2,000

1,865

51.9

477.1

498.8

Oil sludge (sold and recycled)

211.5

194.1

Waste diatomaceous soil (sold and recycled)

433.1

379.1

Waste grinding wheels (recycled)

41.5

37.0

Waste plastic (recycled)

54.2

46.1

Wood chips (recycled)

83.5

88.6

1,996

80

1,629
1,500

60

45

46

45

44

122,134

120,000
100,000

20

2019

2020

2021

2022

2023

2.4

2.3

1.0

20,000

0.5

[FY]

2019

2020

2021

steel. We anticipate an expansion in the range of rolling tap applications.

2022

1 Special Chamfer Speciﬁcations (PAT.)

0

2023

Adoption of the special chamfer[FY]

speciﬁcations (PAT. in Japan) made it

Per unit of production (right axis)◆ Promotion of Carbide Recycling
RecoveryRecovery Nihon Hard Metal
Co., Ltd.
Carbide alloy
manufacturer
Resources
Product recycler
Recovery

Product

OSG

Resources◆ Reconditioning and Recoating Services
Taps, end mills, drills, and other cutting tools
become worn and dull after repeated use.
Reconditioning these tools restores their sharpness
so they are as good as new. Tools may also berecoated if necessary. OSG Group companies offer
reconditioning and recoating services customized tomeet our customers needs.

Customers
Carbide tool users

Aoyama Seisakusho
Co., Ltd.
ORS

DeliveryRequest

A-XPF

A-XPF M3×0.5 2P

Tapping length 6mm

waveform amplitude decreased, andimprove chamfering.

30

30

20

Cutting speed 15m/min（1,591min-1)

10

Cutting lubricant Water-soluble chlorine-free (5%)

0Machine＊Force acting in the same direction as the machining spindle［N］
40

Work material SCM440 (30HRC)

the tip threads less likely to chip compared

Conventional

A-XPF
［N］
40

20
10

0.5

1

1.5

0

2

0.5

Time (s)Vertical machining center (BT30)

1

1.5

2

Time (s)The graph below is desired as it indicates a lower load. Also, the smaller the waveform amplitude, the better.

2 Special Thread ShapeThe adoption of an asymmetric thread shape* increases rigidity and suppresses
unexpected thread tip chipping.

Back blade＊The green area indicates the new type of asymmetric thread shape which adds thickness to the back blade.

Cutting blade

Back blade

Conventional

Cutting blade

A-XPF

Symmetric relief

New type of relief

3 New Coating Dedicated for Taps (PAT. in Japan)
VI coating, which was developed exclusively for taps, has been adopted for the A-XPF. The coating structure is a chromium-based composite
multilayer ﬁlm. Compared to conventional coatings, VI coating provides greatly enhanced performance in terms of hardness, oxidation

Coating color

Coating
structure

Hardness(GPa)

Oxidation onset
temperature (℃)

Adhesivestrength

Surfaceroughness

Wear
resistance

Welding
resistanceToughnessBlackCr-based composite
multilayer ﬁlm

45

1,100

◎

☆

◎

☆

◎

(Fair) ○→◎→☆ (Best)
Delivery

OCS

RequestOSG＊Case where recoatingis also necessary

Cutting taps

onset temperature, adhesive strength, and wear resistance. This allows it to be used for high-speed machining.

＊Case of reconditioning
RequestTool

Drill hole size φ2.8×9mm (blind)to the conventional shape. These special

OSG Developed Product

OSG Group is striving to create eco-friendly products and provide these to our customers. We are actively working to reduce ourenvironmental footprint by improving reconditioning and recoating operations and developing resource-saving high-speed cutting productsthat are very durable and highly efﬁcient.

Stable machining with reduced thrust

possible to realize speciﬁcations that makespeciﬁcations reduce thrust*, decrease

Reﬁner

Pilot hole drillingchips＊The A-XPF, which eliminates chip issues and achieves high-speed stable machining, offers three key advantages.

Eco-Friendly Products and Services

Rare metals
Resources
Tungsten ore
Scarce resources

Pilot hole drilling
chips＊More chips because the forming tap requires a larger pilot hole than a cutting tap.

＊The drainage water volume was assumed to be the amount of water usage.
(see P.32 Material Balance in Operations )Tungsten, cobalt, and other rare metals are among
the raw materials used in manufacturing carbide
tools. The entire OSG Group has been striving torecycle carbide products. We recover used tools fromour customers and recycle the rare metals so thatthese materials may be reused as part of our efforts
to effectively utilize resources. This also is beneﬁcial
to our customers in facilitating their CSR activities
and achieving zero emissions.

Small

ThrustDrainage water volume (left)

signiﬁcantly reduces the frequency of temporary stops. Although the conventional
has also released products capable of machining S45C carbon steel and SCM alloy

2.0

40,000

Ratio of valuable materials (right)

generates (right diagram). This eliminates problems caused by chips and also

Tap chips

3.0

1.5

0

during tapping, so they are able to signiﬁcantly reduce the amount of chips the tap

2.5

2.6

2.5

118,187

stops that occur and chips that interfere with the machining process. In more andmore cases, rolling taps are being used. Rolling taps do not produce any chips

impression is that rolling taps are exclusively used for aluminum workpieces, OSG

3.5

60,0000in particular, continuous unmanned operation is difﬁcult because of the temporary

Large

ThrustWaste emissions (left)

128,414

119,847

3.2

Illustration of accumulated cutting chips

because a limited space, referred to as a pilot hole, is machined. With cutting taps

4.0

144,173

140,000

High-Performance High-Efﬁciency Forming Tap A-XPF

Tapping uses a tool that is more prone to problems than other cutting tools［%］

160,000

40

47

500
0

54.8
1,993.4t［m3］

80,0001,000

58.8
2,068.5t

Drainage water volume
［%］

2,072

47.2

Waste oil (sold and recycled)

Total resources recycled

［t］

2,064

Cardboard boxes (sold)

Other (recycled)

Waste emissions and ratio of valuable materials

643.0

661.1

Metal scrap (sold)

Product

FY2023

Challenge

FY2019FY2022

Amount of accumulated cutting chips

OSG has been promoting zero emission activities to reduce waste.
We have also developed a system to recycle reusable andrecyclable resources and established a structure to ensure theproper disposal of waste from our operations. These efforts haveenabled us to maintain a recycling rate of over 99% since 2005.

［t］

Resource Recycling Promotion

Customers

Developer’s comments
All sorts of industries are promoting carbon neutral initiatives. In the manufacturing industry, the use of

Deliveryenvironmentally-friendly tools is increasingly required with each passing year. A-XPF is a product demonstrating thecapability to keep up with such changes in the times. We will continue to strive to develop eco-friendly tools and offer
them to our customers, thereby contributing to reducing society s impact on the environment.

OCS
Delivery

Keita Ono Hole Machining R&D Team R&D Group Design Center

Request

Before35 O S G R EP O RT 2 0 2 3

After＊Case of recoating only
OS G RE P O RT 2 0 2 3 36

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

TCFD Compliance
OSG Group recognizes climate change to be an important issue affecting the sustainable growth of our business. Based on therecommendations of the Task Force on Climate-related Financial Disclosures (TCFD) agreed to in October 2021, we have begun analyzing
climate change scenarios and promoting initiatives under the following framework.

1. Governance & Risk Management

3. Metrics and Targets◆ Reduce CO2 Emissions
OSG set the following targets in our Medium-Term Management Plan Beyond the Limit 2024, which was launched in FY2022.

OSG ranks climate change as an important management matterand the president, serving as chair of the Sustainability
Committee, is responsible for monitoring and oversight ofclimate-related issues. The Sustainability Committee deliberates
climate change and consistency in other ESG-related issues,policies and visions, as well as priority measures and other items,
and regularly reports on its activities to the Board of Directors.
Measures for promoting sustainability are implemented bydepartment heads (ESG ofﬁcers) and facilitators based on

decisions made by the President, who chairs the Sustainability
Committee. Based on the impact to our business, the Risk andCompliance Management Committee evaluates the priority ofclimate change and other risks affecting our entire company. The
Sustainability Committee, Risk and Compliance Management
Committee, and Safety and Health Committee operate inconjunction with each other to monitor risks and opportunities
associated with climate change.

・FY2030 target: 30% reduction from FY2019 level
・FY2050 target: Achievement of carbon neutrality
We will be advancing initiatives with an eye toward calculating Scope 3 CO2 emissions and acquiring a score of A from the Carbon Disclosure
Project (CDP).
Carbon Neutral Declaration (Illustration of CO 2 reductions compared to FY2019 to achieve the targets)

2. Strategy and Scenario Analysis

CO2 emissions (t)2023 performance
16% reduction

2027 target
20% reduction

2030 target
30% reduction

2050 target
Achieve carbon neutrality

50,000

Scenarios projecting a 1.5℃ and a 4.0℃ rise in temperature, respectively, were selected and a review conducted, referencing the following scenarios,of the risks, opportunities, and OSG s responses. [Referenced Scenarios] Scenario 1.5℃: IEA NZE2050, etc.; Scenario 4℃: IPCC RCP8.5, etc.

40,000Risks and Countermeasures
Subcategory

Type
Policies &legal
restrictions

Tighter regulations on GHG
emissions

Transition risks

Tighter regulations on fossil
fuel power generation

Risks

Impact30,000

Response

・Set targets for reduction of CO2 emissions
・Introduce CO2-free electricity purchases at factories, Implement off-site PPA, and on-site PPA (planned)
・Promote eco-factories (enhance energy-efficiency of
OSG-manufactured machine tools and improve equipment operation)
・Decrease in demand and increase in development and manufacturing Moderate ・Reassess manufactured items in light of changes in target markets
costs for tools on account of fossil fuel power generation

・Increase in manufacturing, development, production
and procurement costs due to carbon taxes and otherchargesHigh

Dissemination of renewable energy
・Scrutinize renewable energy market trends
Technology
・Increase in development and manufacturing costs Moderate
and energy-saving technologies
・Commit resources for developing cutting tools for which increase in demand is anticipatedMarkets

Transition to eco-friendly products
Expansion of electric & fuel-cell vehicles

Reputation Changes in customer baseand investors

Physical risks

Acute

Chronic

Increased severity of
extreme weather events

Rise in mean temperatures

・Decrease in sales of non-ecofriendly products and services Moderate ・Develop eco-friendly cutting tools
・Decrease in demand for tools for gasoline-powered vehicles High・Commit resources to developing and designing for markets other than gasoline-powered vehicles
・Decline in corporate value and loss of opportunities for securing Moderate ・Proactively disclose information and reply to CDP questions
orders due to insufficient disclosure of non-financial information
Moderate ・Optimize our business portfolio・Contraction of scale of eco-unfriendly business
Moderate ・Adopt ESG/SDGs assessment-based financing
・Increase in financing procurement costs
Moderate ・Review BCPs for all suppliers(ascertain risks affecting suppliers in・Increase in procurement costs due to reassessment of
suppliers
terms of natural disasters, logistics, raw material procurement, etc.)
High ・Diversify suppliers
・Difficulty in procuring materials, production shutdowns,
and production delays due to disasters affecting suppliers
・Damage to production facilities, production shutdowns/delays, Moderate ・Draft and revise BCP, implement concrete facility countermeasures, diversify
discharge of toxic substances due to damage to OSG plants
production sites, and thoroughly control hazardous and other such substances
・Increase in energy for air conditioning
・Deterioration in employee working conditions

Moderate ・Adopt high-efficiency air conditioners
Moderate ・Promote labor savings and automation at factories (automated measuring and packaging),
promote safety and health management, improve thermal environment inside factories
・Production shutdowns due to shortage of electricity or water Moderate ・Introduce in-house power generation facilities and storage batteries, and reduce electricity and water usage at factories and offices

20,000Calculation of Scope 1 and 2

10,000Calculation of Scope 3

0
2019

2023

2027

2030

2050

[FY]

4. Carbon Neutral Measures
Introduction of Renewable Energy

Promotion of Energy Conservation

・O f f-site PPA・Purcha se energ y- e f ﬁcient equipment

・On -site PPA (planned)

・Improve energ y use e f ﬁcienc y・Purcha se CO 2 -f ree elec tr icit y＊Timeline ranging from 2030 to 2050 is assumed.

Opportunities and Responses
Type
Policies &legal restrictions
Technology
Transition risksMarkets

Subcategory

Opportunities

Physical risks

Acute

Response

Investment hurdle lowered due to consolidation of internal carbon pricing (ICP)
Moderate Adopt internal carbon pricing
or the number of years for recouping investments incorporating carbon tax

Dissemination of renewable energy
and energy-saving technologies

Increase in demand for tools for renewable energy and energy-saving technologies Moderate

Expansion of renewableenergyIncrease in demand for energy projects such as development of solar Moderate Develop and increase sales of tools for storage batteries,
renewable energies, and hydrogen-related items
panels and offshore wind power

Transition to eco-friendly
products

Expansion of demand for long-lasting products

Expansion of electric & fuel-cellvehiclesIncrease in demand for precision die machining due to promotion of battery development

High

Increase in demand for EV chargers and storage batteries

High

Accelerate development of tools for EV chargers and storage batteries

Greater demand for small-diameter tools (micro-tools) due to larger

High

Develop, increase investment, and build
sales of small-diameter tools

market for semiconductors, connectors, and electronic components
Reputation

ImpactTighter regulations on
GHG emissions

Develop and increase sales of tools for energy-saving
facilities and renewable energy-related items

Moderate Further enhance quality, develop, and increase sales of long-lasting products
Develop tools that enhance efficiency and shorten processing time
Increase sales in the micro-precision machining sector

Changes in customer base and investors

Proactive information disclosure to improve evaluation by stakeholders Moderate Adopt ESG/SDG assessment-based financing

Increased severity of extreme

Increase in demand for disaster prevention products, services, etc.

weather events

for times when natural disasters strike

Moderate Develop tools for disaster preparedness◆ Future Initiatives

・Reduce customers environmental

・Scope 3 calculation Collaborate with group companies and suppliers

footprint with development of new

Reduce environmental footprint of logistics across the supply chain

eco-friendly products

Ascertain the amount of waste disposed of across the supply chain＊Timeline ranging from 2030 to 2050 is assumed.

37 O S G R EP O RT 2 0 2 3

OS G RE P O RT 2 0 2 3 38

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

OSG Group fulﬁlls our social responsibility to a broad range of stakeholders,Society including customers, partners, employees, communities, and others.

Initiatives for Employing People with Disabilities

OSG Group s Ideal Employee and Human Resource Development

・Global outlook

Supervisors

Advanced specialized occupations[Rank-speciﬁc training & seminars]
Executive Ofﬁcer

Ofﬁce manager●Management theory●Company management

Manager

Sub-section head

9th gradee-Learning courses

General manager●Marketing●Training subordinates, etc.

●Mastery of specialized knowledge &Sub-section head &ofﬁce manager

e-Learning courses●Presentation skills●Instructing subordinates●Coaching●Negotiation skills

proﬁcient skills
policies●Mastery of specialized

knowledge &proﬁcient skills

・Conceptualization ・Communication
・Leadershipteam policies

Management
candidate●Mental health

2nd grade●Independently performing basic duties

New employee orientation training &New employee mid-career hire orientation training●Basic job performance●Stress checks, etc.

・Innovation

General occupations
3rd grade ●Independently performing advanced duties●Harassment prevention

・Followership

4th grade●Directly contributing to●Evaluation & feedback●Communication

5th grade●Directly contributing to sub-section

Team leader(Group training)●Education for new managers●Management training●Special safety training

e-Learning courses

・Spirit of challenge[Rank-speciﬁc skill improvement training]

Abilities & skills

Seven Human Resource Criteria for
OSG employees

Roles, responsibilities, and required abilities

Management skills

With the aim of developing our human resourcesin a way that maximizes corporate value while
also fostering a corporate culture emphasizing
personal development and the spirit of challenge,
the OSG Group revamped our personnel system
in 2013 to reﬂect our belief that our employees
are an asset that possess unlimited potential. Ourhuman resource development philosophy is to
strive to develop and improve the capabilities ofour personnel, and we are training them toperform advanced manufacturing.

Ability to direct & lead

OSG Active, a special subsidiary of parent company OSG, promotes
employment of persons with disabilities and engages in activities which
contribute to our local community. More speciﬁcally, OSG Active holds roughly
10 lectures mostly in eastern Mikawa each year for companies, support
organizations, as well as special needs school students and their parents. We
are also active in creating opportunities for companies and support
organizations to discuss challenges they face as well as observe OSG Active
employees on the job at OSG's factories. In FY2023, we were able to arrange
38 opportunities for participants to observe and exchange views. Moreover,as the only company participating in the Toyokawa City-sponsored Liaison
Council Supporting Employment of Persons with Disabilities, we have
conveyed our approach and ideas from a corporate perspective regarding
employment of persons with disabilities, which has contributed to increasing
the overall employment rate of persons with disabilities in Toyokawa City. The
statutory employment quota is set be raised incrementally from the current
2.3% to 2.5% in 2024, and then to 2.7% in 2026. The OSG Group will continue
to actively contribute to our community and society based on the premise ofachieving and maintaining the statutory employment quota, which is one of
our responsibilities to society.

Percentage of Employees with Disabilities
［%］

3.0
2.5

2.2 2.3

2018

2019

2.5

2.2 2.2

2.3

2020

2021

2.3

2.7

2.6
2.3

2.0
1.5
1.0
0.5
0

Statutory quota

2023 [FY]2022

OSG employment level

Teamwork skills

Employees of all grades (environment, safety, harassment, compliance, leadership training, communication training, distance education, on-the-job training, etc.)

VOICE
Typical jobs performed by OSG Active employees include operating a forklift to dispose of chips, transporting components between processes,◆ New Employee Training Programand inspecting machined drill holes. Such tasks were previously performed by OSG employees. No new tasks have been created for OSG
Active. Special subsidiaries handling jobs to be performed in this way are very rare. OSG Active is an OSG-style special subsidiary. The company

Set out on the theme of creating a starting point for growth in the workplace, OSG Group s new employee training programprovides introductory as well as specialized job-speciﬁc training. We have a curriculum that emphasizes a mindset for new
employees, who just graduated from high school, to help them become mentally prepared and behave as working adults, andto provide new employees just out of university with the mental preparedness and knowledge to produce results in business.
The specialized training is arranged according to department assignment and focuses on trainees acquiring practical skills.

understands each and every person s individuality and entrusts each individual with work that matches his or her characteristics. Recently, theabilities of OSG Active employees are being recognized more and more. We have seen an increase in requests from all sorts of workplaces
asking us to cooperate with their operations. So that our employees feel the joy of thriving, shining, and working, we place a high importanceon actually observing, experiencing, and sensing the characteristics and skills of each and every employee. I believe the most important thingwhich we do is to provide an environment where employees are able to grow and ultimately establish themselves in the workplace.

Hidenori Tanaka President OSG Active Co., Ltd.

Practical Training for New Employees: The Tool Olympics
The Tool Olympics is an event providing new engineering employeeswith an opportunity for practical training. Participants are divided into
teams each using a different tool: taps, drills, end mills, and indexable
tools. Working together, the teams perform cutting tests, measure tools
and workpieces, and analyze OSG and other companies work. At theend of the training, the teams present their results. The aim of the Tool
Olympics is for participants to acquire three skills: personal skills, businessskills, and technical knowledge, during the approximately one-monthtraining. Although it is not possible in such a short period of time to fullyacquire the personal skills necessary for teamwork and communicationor the business skills one uses asa working member of society,
the Tool Olympics does support
new employees in their growth
as they engage with seniorcolleagues and cooperate withpeers as they engage in thepractical exercises. The training
also allows participants to

2.2 2.2

acquire engineering knowledge while operating machining andmeasuring tools. They are able to get a feel for the actual sound andvibration emitted during cutting, compare the chips generated, andanalyze tools close-up. The Tool Olympics is a unique learning experience
where new employees are able to polish the skills they need to performas OSG employees while gaining experience completing tasks by adeadline in cooperation with their teammates and acquiring precious
experience that only hands-on training provides.
Time for acquisition
Short●Cutting tools
Knowledge ●Machining technology●Tool industry, competitors, etc.

Business skills

Personal skills
Long●Research●Analysis●Wrap-up●Presentation●Communication●Teamwork skills●Spirit of challenge●Ability to think

Empowering WomenFY2025 Target◆ Careers Developed by Promoting Sustainability
In line with the theme of promoting diversity and inclusion, OSG aims to provide a workplaceenvironment that enables our employees to achieve even greater success as well as balance theirwork and family life. Our Medium-Term Management Plan calls on us to continue our efforts tocreate concrete programs that embody ESG management. More than half of the members of ourSustainability Promotion Team are women. Through activities that focus mainly on responding to
CDP and other institutions sustainability surveys in addition to analyzing such efforts, we aim to
make use of these activities to help us not only realize what is required of us as a company as wellas our strengths and the challenges that we face, but also advance women s careers from a
broad and objective perspective. In addition to actively recruiting women, we will be ascertaining
the realities and attitudes towards women s advancement, and then disclosing anddisseminating this information within OSG as well as providing training so that each and every
woman can continue to work enthusiastically and assuredly as well as envision a career with OSG.

Ratio of female assistant managers 7%
Ratio of female managers
［%］

5
4
3
2
1
0

2019

2020

Assistant manager

2021

2022

2023 [FY]Manager

VOICE◆ Providing Experience-Based Internships

I am in charge of handling surveys concerning sustainability. It is difﬁcult to respond to questionnaires with questions about ESG as such

As part of our aim to strengthen the development and acquisition of digital human resources, OSG has been providing
experience-based internships to students interested in working in our departments where employees make use of
information skills. Interns gain actual work experience over a two- to four-day assignment to the Production Technology
Division and Global Innovation Technology Department. This experience reduces the gap in understanding vis-à-vis
actual work to be performed after joining the company and provides an opportunity for students to get a feel for theactual workplace atmosphere and environment. In addition, in conjunction with our efforts to empower women, wehold roundtable discussions between female students and female employees to spur students interest in the cutting
tool industry. We are actively working to provide opportunities for female students to take an interest in OSG as well as
gain a better understanding of our company and how it operates during these kinds of forums where our female
employees answer any questions or concerns students have about the working environment and jobs performed.

best by joining forces with other members of the Questionnaire Team. Last year, I was transferred from the Global Sales Department

39 O S G R EP O RT 2 0 2 3

work requires putting together responses while cooperating and communicating with various departments. Even so, I intend to do mywhere I had worked for over 10 years to the Procurement Department s Main Material Team. Such a big change was disorienting, but I
have been able to put to use the knowledge and network of people that I built up in my previous position as I devote myself to my current
work. Being involved in a new ﬁeld also shows me skills that I would like to acquire, so I hope to actively study and absorb what I learn inorder to improve myself. My senior coworkers are role models showing others how to balance a career with raising children. They havebeen very supportive and encouraging. Because a parent s environment also changes as children grow, I want to build my own career as I
make use of OSG s ﬂex-time work and other programs. It is my hope to continue working hard at my job so that I can also be a role modelshowing others who wish to achieve a good work-life balance an illustration of how they can ﬁnd a way to structure their work at OSG.

Ayako Ban Main Material Team Procurement Group Procurement Dept. Resource Management Center
Sustainability Team Strategic Planning Division

OS G RE P O RT 2 0 2 3 40

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

SocietyWork-Life Balance

Safety and Health Management Initiatives◆ Promoting Male Employees' Taking Childcare Leave

Ever since OSG declared we will be a health-conscious company in 1996, we haveadopted many measures and policies to support our employees in getting andstaying physically ﬁt, balancing both work and medical treatment, and addressing
other issues they face so as to create an environment where each and every one of
our employees is able to work in good health. We believe it is important, in terms ofboth safety and health, to pursue the well-being of our employees, their families, ourcustomers, our communities, society, and the earth. So, with that in mind, we havedeclared our pursuit of safety and health management and promote this approach.

After revision of the Child Care and Family Care Leave Act in 2022, the percentage of male employees taking childcare leave reached 44% in FY2023, enabling OSG to achieve our 2025 target ahead ofschedule. We are committed to actively informing our employees about this program and posting information about childcare leave on internal bulletins. In addition, we make sure to conﬁrm the intentionsof our male employees who have welcomed a new baby about whether they would like to take childcare leave, and offer individual consultations to those who so desire. As part of our materiality challenges,
we set a new key metric measuring achievement for our target of increasing the rate of male employees taking childcare leave in
FY2024 and beyond (P. 26). Even though the environment is more and more conducive to male employees taking childcare leave
Ratio of male employees taking childcare leave
as awareness among all employees increases, we feel sufﬁcient information has still not been provided to supervisors and［%］100
workplaces where there are potential childcare leave candidates. It is also evident that we face a challenge in improving
100
workplace understanding for both male and female employees, including about how workloads might be distributed while an75
80
employee is away on childcare leave. In addition, some employees are concerned about a decrease in income and the impact on
60
performance evaluations if they take childcare leave, so we are working to enhance both potential childcare leave participants
44 50
and their supervisors understanding of the program by providing explanations of the performance assessment system as well as
40
salary increase and promotion schedules. We believe these initiatives will help increase the percentage of employees taking
20
childcare leave. We will continue to strive to ascertain the current status and challenges facing those who would like to take0
childcare leave and bolster our commitment to creating an environment where even more employees who wish to avail
2019 2020 2021 2022 2023 2024 2027 2030 [FY]themselves of this program are able to gain the understanding of their workplaces without worrying about such hindrances.

INTERVIEW

Comments from Men Taking Childcare Leave & Their Supervisors

Q Please share with us your experience taking childcare leave and the challenges that OSG s childcare program faces.

Yuta Minami
Material R&D Group
Research & Development
CenterThere weren t any difﬁculties really because I had continually been providing my supervisor with daily reports about my work and built up relationships with mysupervisor and others in the workplace. However, I have heard stories of other workplaces where an employee wanted to take childcare leave but his workload
could not be fully handed over to someone else or the employee was unable to gain the understanding of those around him. It seems to me that your workplaceenvironment and colleagues understanding are what raises or lowers the hurdles you have to surmount to take childcare leave. I thought spending a lot of timewith my child would help me to become aware of my role as a father quicker. Also, I think women should focus on their recovery after they give birth, so I think it sokay to take a year of childcare leave if there are no ﬁnancial or work-related issues hindering that. I think the challenges to taking childcare leave areunderstanding in the workplace and workplace headcount management. Even though my boss willingly approved my childcare leave, but honestly, I felt a bit
guilty. If OSG is going to aim for 100% of its male employees taking childcare leave in the future, then I think that it will be necessary to manage the number ofworkplace personnel taking that into account. Also, having actually been in the position of taking childcare leave, I realized there are still people who think childcare
leave is just like taking a break from work. I hope that people will better understand what childcare leave is for and how difﬁcult it is to take care of a child.

you please candidly share with us your thoughts about the time when your subordinate consulted
Q Could
you about taking childcare leave and the challenges such requests may pose in the future?
Yuta Minami consulted me just after I had heard about a male employee in another workplace taking childcare leave, which left me thinking that we may
receive a similar request in our workplace. I didn t have any negative feelings about his request. One thing that I was concerned about was the duration of theleave. When he told me personally that he wanted to take one month off, I was relieved, to be honest. With him taking one-month s leave, we were able tomanage by preparing in advance and getting other employees to cover for him. However, I don t think we could ve done it if the duration had been six
months or a year. I think the challenges that workplaces face are the understanding of the workplace and the duration of the childcare leave. It is ﬁrst of allimportant to create a conducive atmosphere in the workplace, so employees don t have to hesitate to take leave. I regret that, as a supervisor, I should havebetter understood and been able to recommend the childcare leave system. If an employee would like to take a six-month childcare leave sometime in the
future, then we will need to consider efﬁciency improvement of multiple tasks as well as securing temporary personnel to substitute for the employee taking
leave. To make that happen, I realize we will need to prepare on a daily basis for how to respond to such situations, so we can cover for anyone who is absent.

Kimiya Ishida
Manager
Material R&D Group
Research & Development Center

Q Please share with us your experience taking childcare leave and the challenges that OSG s childcare program faces.

Noriyuki Suzuki
Machine Manufacturing
Division
Shinshiro Factory

I decided to take childcare leave to reduce the burden on my wife and let her rest. Initially, I worried that taking childcare leave would cause problems for
my workplace. However, I talked with everyone at work and they gladly understood. That put my concerns at ease, so I could take leave. This was my ﬁrst
child so everything was new and a struggle, but each day was very fulﬁlling because I was able to enjoy this precious time watching my child grow bigger
and bigger every day. Although the childcare leave program had been in place for quite some time, it was not well-known when I took my leave. Recently,
with revision of the Child Care and Family Care Leave Act, people are gradually ﬁnding out more and more about this program. Also, you are able todecide on the duration of the leave together with your family, so I hope people who can t make up their mind whether to take leave or not for a variety ofreasons will ask for an explanation of the program and maintain a positive attitude about taking childcare leave. One of the challenges you face in taking
childcare leave is that, if people are doing shift work in a factory, they might ﬁnd it difﬁcult to take childcare leave because they worry about burdening
those around them. That s why I think it s increasingly important for OSG to create an environment where there is better sharing of information andworkers are trained so they acquire multiple skills, which will allow workloads to be distributed and operations not dependent upon speciﬁc individuals.

41 O S G R EP O RT 2 0 2 3

Top management
President
Safety & Health Promotion Secretariat
Safety & Health Promotion Team

Workplace

Safety Management Committee
Health Management Committee

OSG Certiﬁed as Excellent Health Management Company-White 500 and Safety & Excellent Company of Safety and HealthIn FY2023, OSG was recognized as a 2023 Health and Productivity Management Organization Recognition Program (Large
Enterprise Category)-White 500, by Ministry of Economy, Trade and Industry and Nippon Kenko Kaigi(Japan HealthCouncil).This Certiﬁcation for a Health and Productivity Management Organization Recognition Program is a system torecognize companies that are actively engaged in health management. Among these, the top 500 companies certiﬁed as
Excellent Corporations for Health Management (Large Corporations category) that practice excellent health management
are recognized as White 500 companies.In addition, OSG also received an award of Excellent Company of Safety and Healthby Ministry of Health, Labour Standards. To receive this award, in addition to basic requirements such as no serious
violations of occupational health and safety laws in the past three years, a company must be actively engaged in a wide
range of areas, including measures to maintain and promote workers' health, mental health, overwork, and safety
management. As part of our health management, OSG conducts annual health checkups and provides advice on healthconditions through our industrial physicians. In terms of health and safety, OSG also implements various initiatives to ensure
the health and safety of our employees, such as training to prevent accidents and maintaining a hygienic work environment.
These efforts to place the highest priority on employee safety and health were recognized and led to this evaluation.

Smoking & metabolic syndrome rates◆ Health Mission 25 Initiatives

［%］

40

OSG has rolled out health and safety management initiatives through our Health Mission 25
program, which provides regular health checkups to achieve our target of lowering both themetabolic syndrome and smoking rates to 25% or less. Each business ofﬁce worked out andimplemented health improvement measures toward the goal of achieving both of these levels
during our FY2023 annual health checkup. Some of the speciﬁc measures included using an
app to encourage walking, hiking, as well as conducting questionnaires about smoking andsecondhand smoke. We will continue to work on initiatives that raise employees awarenessof their health and create an environment conducive to staying healthy.

◆ Safety and Health Initiatives
OSG carries out risk assessment activities, provides health and safety
training, and holds zero-accident meetings so that our employees
maintain a heightened awareness of safety. The safety and healthtraining that we provide includes management training, external training,and hands-on training in collaboration with outside organizations. In
2016, we launched hands-on safety workshops with the aim of raisingparticipants awareness of safety through actual experiences of hazardous
work. This sort of training helps compensate for the lack of experience of
our younger employees and the decline in ability to perceive risks thathas accompanied automation of production processes. These sorts ofproactive initiatives have led to a decrease in job-related accidents.

30
20
10
0

2019

2020

2021

Metabolic syndrome rate2022

2023 [FY]

Smoking rate

No. of occupational accidents
[No.]

30

2001: Risk assessment activities begun

25
20
15
10
5
0

24

2002: Training provided by outside safety instructors begun for all employees
2007: Zero-accident meetings started to respond promptly
21
when an accident happens
16

2016: Safety recognition training launched
14 14
15
15
12
11
11 10
12
9
9
8 8
6
5 6
0 3 1 2 1 0 2 0 0 1 1 0 1 1 0 1 1 0 1 1 0 2 0
12

15 15

11

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 [FY]Non-lost-time accidents

Lost-time accidents

Initiatives Upholding Respect for Human Rights◆ OSG Group Human Rights Policy

you please candidly share with us your thoughts about the time when your subordinate
Q Could
consulted you about taking childcare leave and the challenges such requests may pose in the future?
Honestly, although I knew male employees were also able to take parental leave, no one around me had done so, so when Noriyuki Suzuki talked to me
about it, I was initially surprised. At the same time, I thought it was a good chance for us. I hoped that, if an employee in my workplace took childcare leave,then it might create an atmosphere throughout the factory making it easier for other male employees to request to do the same. I talked with othermembers of the team and asked them to modify the work rotation. There was no signiﬁcant impact on production as it was at a time when our workload
was steady and we had made progress in training our employees to acquire multiple skills. I think it s important to thoroughly disseminate information about
men taking childcare leave to all employees across the company as a challenge. Even now, I don t think all employees, including those who work in factory
production sites, have an adequate understanding of how to take childcare leave. Also, employees might also feel it is difﬁcult to take leave if the productionis under pressure. So, I feel it is necessary that we work out a staff composition which takes into account the fact that men will take childcare leave.

Managerial System Promoting Safety & Health Management

Noriyuki Shoda
LeaderMachine Manufacturing Division
Shinshiro Factory

In March 2022, we established the OSG Group Human Rights Policy.
The OSG Group and all employees shall respect for human rights bothin Japan and abroad and be committed to following the letter as wellas the spirit of all relevant laws, regulations and international rules,
while taking a proactive approach to the creation of a sustainable
society with sound values. We ensure a work environment that will
neither offend nor discriminate by race, belief, skin color, sex, religion,
nationality, language, physical appearance, wealth, or birthplace. To

promote and improve human rights awareness, we raise human rights
issues in our in-house newsletter and make every effort to prevent
such problems from arising in our work environment. In addition, allemployees undergo harassment prevention training so that such
instances may be prevented. A special ofﬁce has been set up to receive
consultations, complaints, and provide other services relating toharassment, and we are striving to further strengthen our consultation
system so that we are able to respond quickly to such instances.
OS G RE P O RT 2 0 2 3 42

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Society

Commitment to Customer Satisfaction

Quality Management System

Even as the OSG Group actively strives to achieve digitalization, weplace a high value on the connections we have formed withcustomers. We not only regularly hold in-person seminars, but also
online as well so that participants can attend no matter where theyare. These online seminars take advantage of the beneﬁts such aplatform offers, including on-demand distribution and multiple
timeslots so that as many of our customers as possible may attend.
In addition, online events and services have spread rapidly since thepandemic, which seems to have diversiﬁed the points of contactthat we have with customers. We are now able to quickly pick up
comments by customers voiced across a variety of platforms andmake use of this precious feedback to improve our services andquality as well as develop new and better products. We will continue
to make use of the advantages that both face-to-face and online
contact offer, and provide our customers with useful information
tailored to their situation. In addition, the inquiries that we receive

through our Communication Dial service range from basic questions
to quite difﬁcult inquiries relating to actual machining processes.
Depending on the nature of the inquiry, it may be necessary tocheck with our design and development divisions or contact thecompetent sales team to arrange a visit to the customer's site.
Whatever it takes, we are committed to providing the best service toeach customer. We also have an FAQ webpage, which we createdand update based on analyses of the more than 100 inquiries andfeedback received daily from customers. We are striving to create anenvironment that will enable us to respond to our customers
diverse needs by promoting digitalization in addition to theCommunication Dial services which we have always provided. With
the pace of change accelerating, we will continue to maintain ourcustomer-ﬁrst approach in supporting our customers so that they
always regard OSG as a company they can consult and rely on tosolve whatever issues they face no matter what problem arises.

VOICE
I am in charge of the seminars with the importance of being close to each and every customer. Even though the seminarmight be the same, the backgrounds and years of experience of the customers participating in the seminar vary. When I am
conducting a seminar, I make it a point to always think about what and how I should convey information so that everyone will
enjoy the seminar. Our seminar questionnaires and the Communication Dial service provide valuable opportunities for us tolearn more about our customers. My aim is to listen to what our customers are saying, respond to their needs, and provide
support that gives them even greater satisfaction.

Mahiro Ishiguro Customer Support Team Global Marketing Department

Supply Chain Management◆ Guideline-Based Sustainable Procurement
The OSG Group has conducted CSR self-assessment surveys based on our OSG Group CSR Procurement Guidelines. The purpose has been to
ascertain the status of CSR initiatives across the supply chain as well as have suppliers develop a better understanding of the OSG Group s CSR
procurement approach and efforts. We are enhancing communication with our suppliers so that we jointly promote CSR activities which will
help us create a sustainable society.

OSG received our ﬁrst ISO 9001 certiﬁcation, an international quality management
standard, in 1998 for our Yana Plant. Since then, we have broadened the scope of
applicability and continued to receive certiﬁcations even today for all processes,

including for our key plants in Japan. Additionally, since 2018, we have continued
to acquire JISQ 9100 certiﬁcation, a quality management standard to which
particular requirements have been added for the aerospace industry.

ISO9001

JISQ9100

Registration no.: JQA-2856
Auditor: Japan Quality Assurance Organization
Scope: Design, development, manufacture, and ancillary services (provision oftechnical documentation, technical instruction, and correction) for cutting tools,
rolling dies, measuring instruments, and coating tools
Acquisition among group companies: 6 group companies in Japan and 12 overseas

Registration no.: JQA-AS0209
Auditor: Japan Quality Assurance Organization
Scope: Manufacture of spacecraft metal components◆ Global Quality Control System
OSG has a proprietary quality assurance system certiﬁcation program in place to ensure consistent quality worldwide, and we have strived tomaintain and improve the level of quality at our group companies both inside and outside Japan. Our audits use a ﬁve-tier evaluation system tocheck and determine whether the quality assurance system passes in categories
deﬁning product quality, quality inspection skills, and quality improvement
capabilities. Product quality is evaluated by randomly sampling mass-produced
products and measuring them to determine whether they are produced according
to the dimensions speciﬁed in drawings as well as ascertaining base materials andgrinding quality.

◆ Assessments Based on the Three Realities Principle
Our evaluation method is based on the Three Realities Principle (going on-site,knowing the situation, and being realistic). Evaluations are conducted by certiﬁed
quality auditors using a method known as the quality system audit that examines
both skills and framework based on evidence provided in communication with theindividuals having overall responsibility, persons in charge on-site, and workers.

VOICE
My main job is to audit quality systems of our domestic and overseas group companies. With production sites around the world,
it is important that we maintain stable quality no matter whether the site is located in Japan or overseas and that consistentquality is assured no matter who produces the item and no matter where. However, this is by no means an easy task. Behind thestable quality lies the diligent accumulation of each and every task. I am always thinking about how we can maintainreproducibility in that process and providing assistance to construct quality assurance mechanisms through these audits of◆ CSR Self-Assessment Survey

quality systems.

A survey was conducted of OSG Group s principal suppliers in Japan to better understand the status of such efforts.

・ Time frame: September〜October 2023

Corporate Governance・ Target: Key suppliers of raw and other materials

Local communities
KPI

TargetSurvey return rate

80% or higher

82%

84%

-

117 companies

139 companies

No. of companies responding-

96 companies

117 companies

The survey was analyzed and evaluated, and feedback provided.
We will continue to improve the survey, giving consideration to expanding
the target range as well as revising survey questions.

100%

80%

Human rights◆ Automation of Inspection & Packaging to Eliminate Human Error

60%

Results for ﬁscal 2022 Results for ﬁscal 2023

No. of companies surveyed

40%
Supply chain

20%

Information security

In January 2024, we issued our Partnership Building Declaration
OSG drafted and announced our Partnership Building Declaration＊ aimed at strengthening partnerships
through the promotion of collaboration, coexistence, and coprosperity with our supply chain partners andentrepreneurs seeking to create value.
＊The Partnership Building Declaration is a program created by the Council on Promoting Partnership Building for Cultivating the Future, whose members
include the Chairman of Keidanren, President of the Japan Chamber of Commerce and Industry, President of Rengo, and competent ministers.

43 O S G R EP O RT 2 0 2 3

Naoya Fujishiro Quality Assurance Group Quality Assurance Department

FY2023 average score

Quality/safety

Labor

Environment

Fair corporate activities

Many of the mistakes and defects in the ﬁnal inspection and packaging process areoften due to human error, so we are striving to enhance the efﬁciency of inspection
and packaging work and utilize equipment with the goal of eliminating
misjudgments and defects. Streamlining packaging materials simpliﬁes the workand enhances its efﬁciency as well as reduces plastic waste and costs associatedwith such materials. In addition, we used to visually check the shipping label afﬁxed
to a package and the enclosed delivery statement. Now, thanks to adoption of acharacter collating system, we have been able to reduce erroneous packaging andshipping. In addition to promoting automation of visual product inspections, wehave implemented initiatives to eliminate irregularities in manual inspection
accuracy and reduce the risk of blade chipping or other accidents occurring during
manual work. Replacement of the previous visual inspections, which wereconducted using a microscope, with image inspections has made it possible toinspect tools in more detail. As these images may be stored, this database alsooffers the beneﬁt of bolstering traceability.

OS G RE P O RT 2 0 2 3 44

OSG Values

Societ yRoundtable Talk with OSG Employees

Realizing Innovation & Challenges
in Business Operations
OSG s aim is to be a company shining brighter than ever before as we strive to implement our Medium-Term Management
Plan Beyond the Limit 2030 and prepare for the year 2038 when we commemorate the 100-year anniversary of OSG sfounding.
In order to achieve that, OSG needs personnel capable of adapting to change and those with the ability to continue to take up
challenges and grow.
We gathered four mid-level employees, who will be the standard bearers of OSG s future, to talk about how they refuse to put
limits on themselves so they may embrace challenges and innovation going beyond anything that has ever been done before.

Roundtable Participants Backgrounds and Jobs
Moriguchi：I joined OSG right after graduating from university in 2016.
I have been working in investor relations since 2018, and have since
moved on to the sustainability team, where I am responsible forpromoting sustainability. I will be moderating today s discussion. To
start off, I would first like to ask everyone to introduce themselves.
Mizutani：I joined OSG as a
mid-career hire in 2003. In my
previous job, I was in charge ofrecruiting and other personnel
matters. At OSG, I have had theexperience of working intechnical support, management
planning, investor relations,marketing, and other areas.
Kanako Mizutani, Manager
Global Engineering Group
Currently, I am leveraging my
Design Center
language and marketing skills tolaunch new businesses and brands with our affiliates overseas anddoing other work involved with strategic businesses that have a direct
bearing on our Medium-Term Management Plan.
Sasahara：I was a mid-career hire in 1998, joining the company towork in sales and marketing. My previous job was also in sales. Then,
when searching around for opportunities to grow, I talked to mysupervisor about changing career paths and was reassigned to the
Machining Technology Group where I have been for roughly sevenyears, learning CAD, machine operation, and processing technology. I
am currently working as a sales engineer assigned to the Growth
Industry for Global Share up (GIGS) Sales Group.
Suzuki：In my previous job, I was involved in the design andmanufacture of dies and molds and the company I worked for was alsoa customer of OSG. In 2006, I joined OSG and was initially assigned to aunit developing products. Later, after working in production
management at Oike Factory, I was put in charge of operations forlaunching the NEO Shinshiro Plant. In my current work, I am always
conscious of delivering products to customers on the proper deadline.
Enomoto：I was hired by OSG mid-career in 1997. This year marks my
26th year with the company. Previously, I was in the service industry,
but found the irregular working hours incompatible and left that job
after one year. At OSG, I have always been in marketing. Despite mystudies in the humanities, I have been involved in launching coresystems and promoting IT. Currently I am involved in digital support
operations on domestic sales.

Embodying Challenge & Innovation
Moriguchi：Could you please share an example of how you haveembraced challenge and innovation in your work?

45 O S G R EP ORT 2 0 2 3

Enomoto：OSG has been promoting digital transformationcompany-wide. My department has been actively working to develop
and introduce our own robotic process automation (RPA). It has
allowed us to completely automate data input and other operations,use data to provide strategic sales tools, visualize demand using
electronic data interchange (EDI) with customers, and achieve other
innovations. This has reduced simple tasks, enhanced operational
efficiency, as well as been useful in making use of extracted data to
support the digital transformation of sales.
Suzuki：In May 2020, I was involved in setting up the NEO Shinshiro
Plant where we tackled thechallenge of introducing an
innovative digital production
management system that would
free us from the analog
production system. We
proceeded to create avisualization platform that linked
ordering, production, equipment,
and all other data aspects. This
Hideaki Suzuki, Manager
Production Management Division
digitalization, which has boosted
Shinshiro Factory
frontline capabilities, has helped
augment production planning and on-time delivery. In addition, I feelthat the improved communication among departments has
strengthened coordination. This is anticipated to improve profitability
as well as optimize production operations and inventory management.
It also appears to have enhanced our connections with theMedium-Term Management Plan numerical targets.
Sasahara：We are taking on a challenge of carrying out GIGS activities
to pioneer new growth markets. Against the backdrop of changes
taking place in the automobile industry, we need to create pillars for
new businesses, so we have been actively developing sectors related
to semiconductors, healthcare, precision dies, and robotics. In order to
identify new customers, it s necessary to develop new strategic
products. That is why we have been facilitating activities that transcend
our organization as we strive to generate demand. In fact, we arestarting to see results in areas where OSG has traditionally not been an
active player, such as hard brittle materials and resin processing.
Mizutani：It gives me a sense of fulfillment when I think about how I
have been entrusted with tasks that start from scratch, and knowingthat these tasks are linked to the realization of our medium-term plan.
One actual example of a challenge is our polycrystalline diamond(PCD) tool business for machining ceramics, quartz glass, and otherhard and brittle materials used in the semiconductor sector. This is partof our strategic operations targeting the micro-precision machining
sector as set out in the Medium-Term Management Plan. The culture ofOSG, which encourages us to take on any challenge and supports
challenges throughout the organization, is propelling this business to
get on track.

Structure & Internal Systems Encouraging Employees
to Take up Challenges
Moriguchi：Does OSG have aninternal system in place thatprovides support for realizing
challenges and innovation?
Please talk about the system andorganizational management that
motivates employees to take onchallenges, taking into accountthe evaluation system andcompensation system.

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Personnel & Training Program Challenges
Moriguchi：How do you consider the challenges and required measuresfor human resources and education systems towards the realization of
Beyond The Limit ?

Tomono Moriguchi

Strategic Planning Division
Sustainability Team

Suzuki：I think there is a substantial support system in place. Whenemployees want to take up a new challenge, they are able to makeuse of the career plan reporting program. Inspiration and new ideas
are required to improve operations and build innovative productionlines. Opportunities to find those hints are readily provided with thecompany s support for attending outside seminars and other learning
opportunities as well as visiting customers production facilities. Such
opportunities also encourage employees to take up new challenges. I
think there is a good support system in place, one that is focused on
creating an environment where
people are able to speak up andhear others ideas as well. OSG
has built an organization thatmakes it easier for employees to
set about trying to do something
new.
Sasahara：When we reach theyear 2038 which is OSG s 100th
anniversary, our younger
Takehiro Sasahara, Manager
GIGS Sales Group
employees, the ones who
Application Sales Division
currently have been with thecompany for less than five years, will form the core of the sales
departments in Japan. When I take a hard look at what OSG will be like10 years from now, I believe the even higher engineering level of oursales staff will provide a significant boost enabling the company togrow further. I hope that telling younger employees the story of myown experience of returning to sales after I gained knowledge bylearning product technology as an engineer even though I came froma sales background will raise the level of the entire sales department
and pique employees desire to take up challenges and not be heldback by fixed ideas.
Mizutani：At OSG, it might be that we naturally acquire the habit of
stepping forward to take up challenges. Looking back on my own
experience when I had only been in charge of my work for a shorttime, I was approached by my supervisor who prompted me to try
new things, saying: What do you think of being the instructor for the
next engineering workshop? and I m going to Tokyo for an investor
relations briefing and want you to come along. I feel the more
opportunities I had to gain a variety of experiences, the more I started
to take the initiative to face up to challenges. Personally experiencing
what is actually happening on the front lines, I feel, generated in me
new ideas and innovations. OSG s philosophy encourages people totake up a challenge.
Enomoto：OSG has a total of 222 e-learning courses. As part of thecompany s self-development program for employees, the entire
tuition is covered if you complete a course within the designated time
period. In addition, the company also offers a certification incentive
payment if you obtain a specific qualification set by the company. So,
I talked to my team members about getting qualified in personal
computer skills last year, and some of them even acquired thosequalifications. It is evident that OSG s active support encourages
employees. In the Digital Promotion Group to which I am assigned,
digital training is provided not only to those who wish to do so within
the same department, but also others within the same office.
Everyone has jumped at the chance to take such courses.

Sasahara：Just as with other companies, OSG has also faced the problemof young employees leaving in recent years. When I was young, we
didn t receive any feedback about our performance evaluations, nor did
we feel that much anxiety or dissatisfaction about it, either. However,times have changed. Now, I m in the position of evaluating others. To
motivate people, I again feel it s important to have a personnel andperformance evaluation system that is fair and transparent. I have heardthat some companies in the same industry have already introduced it,
but I think it would also be effective for the company to introduce a
multifaceted evaluation system, such as a 360-degree evaluation that is
not a one-sided evaluation from the boss, and to conduct appropriate
evaluations according to the results.
Mizutani：Even though OSG s overseas sales account for nearly 70% of all
sales, I feel our daily operations and activities still don t have a sufficient
global tinge. This may be a consequence of the extent to which the
pandemic curbed our activities, but there has also been less exchange with
our overseas group companies and fewer of our younger employees goingoverseas on business trips. Enhancing mutual understanding throughcommunication with people of different nationalities, cultures, and businesscustoms turns out to be an important asset for generating challenges andinnovation in the future. I think OSG needs to expand its programs andopportunities, regardless of department, to encourage employees globallyto take on challenges.
Enomoto：Even before the current
medium-term management plan
was formulated, there were items
to evaluate the challenges of
employees, and I believe that there
is no excess or deficiency in the
personnel evaluation system forthe realization of "Beyond The
Limit." However, it remains a
Naoko Enomoto, Assistant Manager
question whether a proper
Sales Support Teamevaluation is being made in line
Global Marketing Department
with the seven human resource
criteria OSG requires. It might be a challenge for the personnel evaluation
to clarify the evaluation items for each of the seven human resource
criteria, not just for challenges, and to promote the creation of indicatorsthat can challenge without fear of failure. For instance, it might benecessary to strengthen how the personnel evaluation system isadministered by enhancing training for both evaluators and those being
evaluated.
Suzuki：I think it is important for each and every one of our employees toorient themselves toward achieving goals that will accomplish theMedium-Term Management Plan. Nevertheless, I feel there is a gap
between the company s goals for having all employees understand andimbue this target and the reality that we face. I feel we need to instill inall our employees the concept of asking what they should do and how
they should do it, so that we move toward achieving the Medium-Term
Management Plan. Along with taking a step toward having each andevery one of our employees understand the Medium-Term Management
Plan measures, I think we also need to develop a system that facilitatescollaboration among working groups and extends that to small group
activities closer to the front lines so that we may better share the overall
direction of our organization and increase the speed with which werealize our goals.
Moriguchi：Thank you everyone for your valuable comments today. You
allowed us a glimpse into the challenges and innovations generated inyour daily activities. Seeing once again how OSG has established culturethat encourages individuals to take on challenges has made me also
want to continue to tackle challenges not only to realize Beyond theLimit but also for my own growth.
OS G RE P O RT 2 0 2 3 46

OSG Values

Corporate
GovernanceOSG believes it is essential that corporate governance functions be enhanced so that value may be created through appropriate
efforts to address environmental and social challenges as well as effectively utilize capital.
Four outside directors gathered for a candid discussion about the achievements and challenges of OSG s corporate governancereform.

Takahashi：Consolidated operating income is set as a short-term
incentive for determining officers compensation. I believe it
also aligns with the perspective held by shareholders. Somecompanies have also started to add an ESG-related metric toindices for performance-linked compensation. However, there
are also concerns that such a metric may appear to be an
arbitrary indicator used because it is easily attainable for thecompany. So, I believe we should continue to prudently discuss
ways of reflecting non-financial metrics in incentive
compensation.
Hara：I feel that it is somewhat difficult at present to directly link
ESG efforts to management compensation incentives. ESG
management does not necessarily produce results that have a
direct bearing on operating income in the short-term. Also, atthe beginning of the term, numerical targets for each aspect of
ESG management need to be set out and a commitment madeto achieve these targets so that such performance may be linked
to compensation. I believe the Board of Directors needs todiscuss how to translate all ESG management initiatives frompolicy management to target management.

Member, Audit & Supervisory Committee
chairperson, Nomination andCompensation Committee

Member, Audit & Supervisory Committee
vice chairperson, Nomination andCompensation Committee

Kunihiko Hara

Outside Directors Expertise and the Diversity of
Skills & Composition of the Board of Directors
Takahashi：Based on my experience as an attorney and outside
director at other companies, I provide advice and supervision sothat the Board of Directors may address risks and contribute tosustainably enhancing corporate value. Independent outside
directors make up the majority of OSG s directors, and I feel that
we work to reflect external perspectives in decision-making. The
composition of the seven board members provides a foundation
that, I believe, sufficiently ensures a diversity of skills among themembers of the Board of Directors.
Hara：Having served as a director for companies in the
manufacturing industry and a private research institute, I
currently teach at a university. Making use of my experience inboth academia and corporate practice, I believe I am able to playa role in ensuring OSG s management spearheads a robust
boost in corporate performance as well as the fulfillment andhappiness of company employees. I also think the skills
maintained by each of the seven directors work in harmony
without any overlap, enabling fair and impartial
decision-making.
Yamashita：While practicing at an audit firm and accounting firm
where I principally provided consulting services, I discussed
corporate internal controls with many managers and saw
firsthand their limitations. I believe the backgrounds of thecurrent outside directors are effective from the perspective ofcomplying with laws and regulations as well as maintaining
internal controls. However, none of the outside directors is acurrently serving manager. From the perspective of the Board of
Directors diversity, I feel we would be able to have more
extensive discussions about an offensive stance as well as
adopting defensive governance if we had an outside director
who has experience akin to an executive officer, focusing on
corporate management.

47 O S G R EP ORT 2 0 2 3

Value Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Roundtable Talk with Outside Directors of OSG

Realizing an Effective Monitoring Board

Akito Takahashi

Value Creation
Stories

Member, Audit & Supervisory Committee
Member, Nomination andCompensation Committee

Kayoko Yamashita

Member, Audit & Supervisory Committee
Member, Nomination andCompensation Committee

Yoshitsugu Hayashi

Hayashi：At university, my research focused on civil engineeringand transportation systems. I also have an experience serving asan outside director at an electrical equipment manufacturer.
Currently, I am also taking part in activities of the Club of Rome,a private think tank headquartered in Switzerland. I hope myexperience and knowledge contribute to supporting andoverseeing OSG s sustainability management.

Nomination and Compensation Committee s
Functions and Roles
Takahashi：I feel the trust in OSG s founding family and its
unifying force are one of the company s sources of strength. Inthat context, it is by no means easy to stipulate specific criteria
for determining whether there should be a change inmanagement. On the other hand, it is good for the Nomination
and Compensation Committee to present to stakeholders thebasic approach that we are taking. I hope to discuss this issue inmore detail with the other members of the Nomination andCompensation Committee. At the current point in time, I believe
the company s leadership succession plans should first strive toaugment a system capable of raising the level of managerial
personnel, including at overseas businesses, rather thanfocusing on and developing only a small number of specificcandidates.
Hara：It is a plus having the founding family heading up
management not just at OSG but all companies in terms of
maintaining trust with society. In that case, it is important
shareholders and investors are able to see that personnel
decisions are made in a fair and transparent manner. It issignificant that the Nomination and Compensation Committee
engages in discussions to set out its vision and qualities desiredfor senior management worthy of leading OSG, and share theseresults with the management team. Once this information is
widely circulated, then, I think, it will also be positive forprospective executives as it details what sort of qualities theyshould acquire.

Yamashita：Consolidated operating income is a very objective
metric that I recognize as reasonable and easy-to-understand.
Nevertheless, as capital efficiency is called for, it may be worth
considering adding ROE as a metric. I think the question ofwhether to incorporate an ESG-related metric poses the issue of
how objectively and reasonably the metric can be presented. At
this stage, it is too early to incorporate such a metric when theissue is also viewed from the perspective of accountability to
stakeholders.
Hayashi：A transition is steadily taking place as society
transitions from the pursuit of economic efficiency, which isexpressed as the ratio of sales to expenses, to the era of
personal sufficiency, which emphasizes the ratio of well-being
to the burden placed on our earth. Sustainable growth cannot
be said to be achieved if large quantities of greenhouse gases
are emitted, placing a burden on society and the environment,
despite short-term profits being maximized. We probably alsoneed to consider an OSG-specific metric that will measure social
value as it leads to the generation of new corporate value. If we
can objectively show enhancements in the well-being ofstakeholders including employees, then I think such metric will
also be effective as a long-term incentive metric for executive
compensation.

Audit & Supervisory Committee s
Functions and Roles
Yamashita：One non-executive inside director and four outside
directors sit on the Audit & Supervisory Committee. In order toevaluate whether appropriate risks are being taken in overseas
M&A and other transactions, the committee would be able to
make more multi-tiered judgments if the committee included
among its members a non-Japanese individual with knowledge
about global management or currently serving manager as I
mentioned earlier in the discussion. There are also challenges inauditing subsidiaries overseas, so the global audit structureneeds to be enhanced through closer coordination with theinternal audit department.
Takahashi：There might also be aspects that are difficult foroutside directors to directly grasp about the degree of overseas
group companies enthusiasm for internal controls. I feel the
OSG Group needs to first build trusting relationships with local
managers and, at the same time, maintain a system that checks
their functions. Along with improving internal audits, there may
also be room to consider incorporating financial and legal AI
tools that make it possible to detect signs of fraud in addition toemploying external audits.
Hara：As an outside director that is also a member of the Audit &Supervisory Committee, I believe I am able to function fully as
an advisory board member. However, if I limit my role only toadvising the management team, then investors may view that asa sign we have been unable to extricate ourselves from theadvisor mindset. I feel we constantly need to be aware of this.
With regard to audits of overseas group companies, we need tocontinually monitor them so as to uncover any inconvenient
truths and share these not only with the Board of Directors but
also employees. Actively sharing and disclosing potential risk
factors will deter wrongdoing and strengthen internal controls.
Hayashi：We also need to think about appointing a
non-Japanese individual capable of expressing their views froma perspective different from the Japanese way of thinking or aJapanese individual who has been educated outside of Japan toserve as an outside director capable of conducting global audit
work. If AI tools or other devices need to be used to conduct
audits, then that individual would also be required to haveknowledge about IT and AI in addition to auditing expertise.

Capital Efﬁciency and Growth Strategy
Takahashi：While the necessity is fully understood of further
raising awareness about the cost of capital and maximizing
corporate value, I believe that what OSG, a cutting tool
manufacturer, requires first and foremost to continue to steadily
perform its work is to determine daily what customers need andmake several minor refinements that will end up improving our
products. To take off only in pursuit of short-term profits by, forexample, drastically reshuffling the company s businessportfolio or making an extreme change is not something, I think,that would instantly fit within OSG s current culture. Under suchcircumstances, I believe Repurchase of Shares by issuing
Convertible Bonds, which were recently issued, and treasury
stock acquisition are avenues for OSG to respond in a way thatshows we are conscious of the cost of capital.
Hara：PBR, a metric for assessing corporate value, is essentiallyan indicator measuring the tireless efforts of management. ROE
may conversely weaken a company s financial standing if it
exceeds a certain level, so I am wary about feeling optimistic or
pessimistic in response to such figures alone. Basically, I believe
it is important to always focus on creating high-value added
products and services, which is the right path for a company totake. The development team needs to talk with the sales
department to set out a clear R&D policy and, at the same time,
make an active effort to develop new products and services.
Yamashita：The purpose behind issuing Repurchase of Sharesby issuing Convertible Bonds was to improve ROE. But, if that s
all it is, then any effect will naturally diminish after a certain
period of time passes. I believe that, as a manufacturing
company, maintaining overwhelming product appeal andcontinuously supplying the products society demands will resultin sustainably generating value that exceeds the cost of capital. I
am in favor of investing more in researching and developing
new products and services.
Hayashi：ROE is also an important metric that affects PBR. In
addition, the ability to offer solutions to environmental andsocial challenges, which is also required by the TCFD and TNFD
disclosure frameworks, significantly affects corporate value. At atime when the true worth of sustainable corporate activities isbeing called into question, I hope the positive effects that
products and services have on the environment and society will
be actively presented and communicated to shareholders,investors, and all stakeholders as being added value that OSG
Group provides.

OS G RE P O RT 2 0 2 3 48

OSG Values

We will continue to develop a highly
effective corporate governance structureand strive to enhance this framework.

Corporate Governance Structure■Corporate Governance Structure

Basic Philosophy
Based on our corporate philosophy of maintaining a global presence,
we regard compliance with laws, regulations, and social norms as afundamental part of our management policies, together with fairness
and transparency in our business activities. We also believe thesequalities contribute to sustainable corporate development andenhancement of corporate value. Measures to enhance corporate
governance, including the establishment of efﬁcient and transparent
management organizations, are among our most importantmanagement priorities for achieving these objectives. One of the ways
in which we enhance corporate governance is by raising complianceawareness among directors, executive ofﬁcers, and employees of OSG
and our group companies through dissemination of the OSG
Philosophy and OSG Corporate Code of Ethics, which provide speciﬁc
guidelines designed to raise ethical standards within the company.

Appointment, dismissal

Nomination andCompensation Committee

Advice, reports

Appointment, dismissal
Audits, etc.

Board of Directors<Directors (incl. Audit & Supervisory Committee Members)>

Audit & Supervisory Committee<Directors Serving as Audit & Supervisory Committee Members>

Reports
Risk and ComplianceManagement Committee

Appointment,
dismissal

Sustainability Committee

Reports

Audit & Supervisory Committee Ofﬁce

Accounting
Audit

Information
gathering

Collaboration

Accounting Auditors

Representative Director

Directives, supervision

Audit &
Supervisory
Committee
memberKunihiko Hara

Executive
director

Outside/Independent

Outside/Independent

Kayoko Yamashita
Outside/Independent/
Newly Appointed
Yoshitsugu Hayashi

〇

〇

〇

vicechairperson

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

＊The chart above does not list all the knowledge and experienced of eachdirectors, but presents those skills deemed to be representative.

49 O S G R EP O RT 2 0 2 3〇

chairperson

〇

〇

〇

〇

〇

Diversity

Outside/Independent
Akito Takahashi

Full-timeGovernanceInternal directors

Takehiro Tomiyoshi〇

Risk
management〇

Legal affairs

COO
Nobuaki Osawa

International
affairs〇

Finance〇Financialaffairs/accounting

Production &technology

CEO
Norio Ishikawa

Sales/ marketing

Generalmanagement

Outside director

3

Nomination and Compensation Committee

Legal and Tax Advisors

Advice,consultation■Directors Expertise & Areas of Specialization (Skills Matrix)
Nomination
andCompensation
Committee

4

AuditsOperational Executive Division (including subsidiaries)〇

Corporate
Data

Management Audit Section

Directives

Directives,supervision

Board of Directors
Four out of Seven are outside directors

Collaboration

Reports

Executive Ofﬁcer

Audit &
Supervisory
Committee
memberHaving selected to establish an audit and supervisory committee,
OSG s corporate governance structure consists of the Board of
Directors, Audit & Supervisory Committee, and accounting auditors.
The role of the Board of Directors is clearly deﬁned under this structure.
Operational executive functions are performed by executive ofﬁcers,
while the Board of Directors is responsible for decision-making and thesupervision of operational executive actions. To strengthen
decision-making functions, the seven-member Board of Directors
includes two members who are also involved in business operations as
executive ofﬁcers. The remaining ﬁve directors, of whom four areoutside directors, are also members of the Audit & Supervisory
Committee. The outside directors also make up the majority of theBoard of Directors. By creating this structure, we have enhanced thetransparency and independence of the Board of Directors and theeffectiveness of its management supervisory role, while bringing in
outside perspectives. In addition, OSG has adopted an executive ofﬁcer
system to ensure effective responses to changes in the businessenvironment, as well as to clarify the roles and responsibilities of theexecutive organization. The executive ofﬁcers are solely responsible
for the performance of business operations in accordance with policies
determined by the Board of Directors. They strive to makeperformance more expeditious and efﬁcient in a timely manner.

Management Committee

Corporate GovernanceBy adopting our present corporate governance structure, we haveenhanced the ability of the Board of Directors to make decisions about
management decision-making and oversee the performance ofbusiness operations, thereby improving management efﬁciency andensuring that management decisions can be made appropriately andstrategically. The activities of the Audit & Supervisory Committee, of
which four of the ﬁve members are outside directors, include auditing
the company s ﬁnancial position and operations as well as theperformance of duties by the representative director and executiveofﬁcers. All of OSG s four outside directors are independent ofﬁcers as
stipulated in the listing rules. With the ﬁve members of the Audit &Supervisory Committee, including these highly independent outside
directors, also having seats on the Board of Directors, we believe wehave put in place a corporate governance structure that veriﬁes andensures management transparency and appropriateness so as toprovide an environment in which management oversight functions
effectively.

Appointment, dismissal

Overview of Corporate Governance Structure

Value Creation
Sustainability
Strategy

Reasons for Adopting Corporate Governance Structure

General Meeting of Shareholders

Appointment,
dismissal

Value Creation
Stories

〇

〇

〇

〇

〇

〇

OSG has established a Nomination and Compensation Committee toserve as an advisory body to the Board of Directors. Its purpose is tostrengthen the independence, objectivity, and accountability of board
functions through the appropriate involvement of independent
outside directors and the provision of advice in relation to theappointment of directors, executive ofﬁcers, and other corporateofﬁces and their compensation. The Nomination and Compensation
Committee consists of directors who are also members of the Audit &Supervisory Committee. Four of the ﬁve members arehighly-independent outside directors. In addition, an outside director
chairs the committee. Persons deemed suitable to be directors of OSG,
on the basis of their extensive experience, advanced knowledge, andhigh-level specialization, are selected and nominated as candidates formembership of the Board of Directors. The Board of Directors makes
decisions on appointments after seeking and receiving advice from theNomination and Compensation Committee. For details about OSG sprocedures for determining compensation, please refer to proceduresfor determining compensation of company ofﬁcers on pp. 51 and 52.

Name of committee

Nomination and Compensation Committee

Number of members

5Internal directors

1

Outside directors

4Outside experts

0

Chairperson

Outside director

〇

〇

〇

〇

＊As of Feb. 16, 2024

OS G RE P O RT 2 0 2 3 50

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Corporate Governance■Fixed Compensation

Reasons for Appointment of Outside Directors & Concurrently-Held Positions
Audit & Supervisory
Committee member

Reasons for appointment

Positions held concurrently〇

Mr. Takahashi has an extensive experience and advanced knowledge and specialist skills gained
through his career as an attorney. As a legal expert, he was judged to be a person who would
participate in board meetings from an independent perspective and contribute to management
auditing and supervision. In addition, he is not associated with any OSG-afﬁliated company, major
supplier or customer. It was deemed that he presents no risk of conﬂicts of interest with generalshareholders. Therefore, the decision was made to appoint him as an outside director.

●Outside Director,
Oriental Consultants Holdings Co., Ltd.

〇Mr. Hara has an extensive experience in knowledge of corporate management in addition to an
academic career spanning many years. He was judged to be a person who would participate inboard meetings from an independent perspective and contribute to management auditing andsupervision. In addition, he is not associated with any OSG-afﬁliated company, major supplier orcustomer. It was deemed that he presents no risk of conﬂicts of interest with general shareholders.
Therefore, the decision was made to appoint him as an outside director.

●Tokai National Higher Education andResearch System
Nagoya University Graduate School
Future Value Creation Research Center Graduate
School of Informatics Designated Professor

KayokoYamashita〇

Ms. Yamashita an extensive experience, advanced knowledge, and specialized skills gained through her
career as a certiﬁed public accountant. As an expert in accounting and tax affairs, she was judged to be a
person who would participate in board meetings from an independent perspective and contribute tocorporate management auditing and supervision. In addition, she is not associated with any OSG-afﬁliatedcompany, major supplier or customer. It was deemed that she presents no risk of conﬂicts of interest withgeneral shareholders. Therefore, the decision was made to appoint her as an outside director.

●Outside Audit & Supervisory
Board Member, Sotoh Co., Ltd.
●Outside Audit & Supervisory
Board Member, Fuji Corporation

Yoshitsugu
Hayashi〇Mr. Hayashi has an extensive experience and broad knowledge acquired over a long academic career. He
was judged to be someone who would participate in board meetings from an independent perspective andcontribute to corporate management auditing and supervision. In addition, he is not associated with any
OSG-afﬁliated company, major supplier or customer. It was deemed that he presents no risk of conﬂicts ofinterest with general shareholders. Therefore, the decision was made to appoint him as an outside director.

●Distinguished Professor,
Chubu University

Outside directors

Akito
Takahashi

KunihikoHara＊As of Feb. 16, 2024

Evaluation of Effectiveness of the Board of Directors
To enhance the Board of Directors functions, OSG began
conducting analyses and evaluations of the Board s effectiveness in
FY2022. To ensure the FY2023 effectiveness evaluation would beobjective and transparent, the support of an external organization

was secured and the evaluation conducted in September 2023. A
session of the Board of Directors was held in November 2023 to
analyze, discuss, and evaluate the results. An overview of thoseevaluation results is given below.

■Description■Evaluation Results

Targets

All members of the Board of Directors
2 Directors who are not members of the Audit & Supervisory
Committee
5 Directors are members of the Audit & Supervisory
Committee (4 of whom are outside directors) for a total of 7

Evaluation method

Anonymous questionnaire

Time frame

Responses period (Sep. 15〜 Oct. 2, 2023)

Overview ofquestions●Composition of the Board of Directors●Operation of the Board of Directors●Deliberations by the Board of Directors●Monitoring function of the Board of Directors●Performance of Outside Directors(incl. Audit & Supervisory Committee Members)●Support structure for Directors(incl. Audit & Supervisory Committee Members)●Training●Dialogues with shareholders (investors)●Voluntary initiatives●Nomination and Compensation Committee●Summary

Evaluation method

Survey results were consolidated by an external organizationand then analyzed, deliberated, and evaluated by the Boardof Directors.

The survey responses gave a favorable evaluation to the manner in which theBoard of Directors is expected to operate and its response to those
expectations. There is a recognition that the Board of Directors has maintained
its effectiveness overall. On the other hand, more in-depth comments were
provided about further enhancing support systems, coordination with internal
auditing departments, sharing details of dialogues with shareholders andother investors, as well as exchanging views with outside directors. The
results shared an awareness that the Board of Directors faces challenges inencouraging discussion and further improving the functions that it exercises.

Personal Assessment Bonuses

The total amount of ﬁxed compensation is determined within the upper limit deﬁned
by a resolution of the 103rd Ordinary Shareholders Meeting held on February 20,
2016. Compensation is set at ¥396 million per year for directors (excluding directors
who are members of the Audit & Supervisory Committee), and ¥84 million per year
for directors who are also members of the Audit & Supervisory Committee.

・Eligibility: Managing ofﬁcers
・Calculation method: Personal assessment bonuses are paid
according to qualitative assessments of each person s contribution
to business performance.The maximum amount shall be ¥50 million.

■Variable Compensation■Compensation Based on Allocations of Restricted Stock

Starting in the ﬁscal year ended November 2019, the company has provided
variable compensation in the form of proﬁt-linked bonuses in line with thedeﬁnition of proﬁt-linked salaries as provided in Article 34, Paragraph 1 Item
3 of the Corporation Tax Act, as well as personal assessment bonuses.

・Eligibility: Directors (excluding members of the Audit & Supervisory
Committee)
・The amount of compensation is determined within the upper limitof total compensation determined by resolution of the 106th
Ordinary Shareholders Meeting held on February 16, 2019. The
maximum total value of shares allocated to eligible directors(excluding members of the Audit & Supervisory Committee) is set
at ¥200 million per year, and the maximum total number of thecompany s ordinary shares that can be issued or disposed of is100,000 per year. The purpose of this system is to provide an
incentive to achieve continual improvement in the company s
performance and corporate value as well as increase value sharedwith shareholders.

Proﬁt-linked Bonuses
・Eligibility: Managing directors and eligible directors who are serving as executive ofﬁcers
・Calculation method: Amount of proﬁt-linked bonus =Consolidated operating income X Rank-based bonus standard
coefﬁcient (table below)＊Maximum of ¥700 million
Rank-based
bonus ratio

Rank

Percentage

Chairman & Representative Director

0.3645%President & Representative Director

0.4050%Managing Officer

0.1620%◆ Policy for Determining Compensation Packages
The policy for determining the speciﬁcs of compensation and other renumeration for directors is drafted by the Representative Director entrusted withpreparing the company policy by the Board of Directors. The representative director then seeks and receives advice from the Nomination and Compensation
Committee, which is comprised of a majority of independent outside directors. The policy is decided on by resolution of the Board of Directors.

◆ Process for Determining Compensation■Fixed Compensation, Compensation Based on Allocations of Restricted Stock■Variable Compensation

In order to determine the amount of compensation for directors (excluding members of the Audit & Supervisory
Committee), the Board of Directors delegates the Representative Director to prepare proposed compensation
amounts according to standards set by the company. The proposed amounts are then referred to the Nomination
and Compensation Committee. Based on the response from the Nomination and Compensation Committee, theamounts are then ﬁnalized by a resolution of the Board of Directors. The amount of compensation for directors who
are also members of the Audit & Supervisory Committee is determined through consultation among those directors.

Variable compensation is linked to the company s business performance. The Representative Director
is delegated by the Board of Directors to calculate the proposed amounts for proﬁt-linked bonuses
and personal assessment bonuses using the methods outlined above. These proposed amounts arethen submitted to the Nomination and Compensation Committee. Based on the report from theNomination and Compensation Committee, the Board of Directors determines the ﬁnal amounts to be
paid, subject to approval of the total amount by a resolution of the ordinary shareholders meeting.

The company discontinued payment of retirement bonuses for corporate ofﬁcers at the conclusion of the 92nd Ordinary Shareholders Meeting held on February 19, 2005.

Reduction in Cross-Shareholdings■Initiatives for Enhancing EffectivenessOnce the OSG Board of Directors has taken into consideration thiseffectiveness evaluation and conducted a sufﬁcient review of thechallenges faced, it intends to respond promptly as well as to continue
to further initiatives augmenting its functions. There is a substantial
support structure for speciﬁc measures addressing challenges thatstrengthens operational collaboration with executive ofﬁcers and thesecretariat and allows issues to be regularly shared with internal audit
divisions. In addition, pertinent details of dialogues with shareholders
and investors are shared by personnel handling investor relations.

The Board of Directors conducts annual reviews todetermine whether to continue holding cross-shareholdings.
Those for which the Board of Directors deems there to be norationale for their continued holding are gradually sold off.
The criteria for such determinations include the purpose ofsuch holdings, risks, relationship with OSG. The cost of capitalis also taken into account. As for the exercise of voting rights,
the Board of Directors does not make decisions based solely
on the short-term performance and share price of the stockof the company held, but comprehensively considers therelationship with OSG in making such determinations.

[Amount: Millions of yen]
FY2018FY2019FY2020

FY2021

FY2022

Number of stocks sold

0

1(1)

0

0

1(1)

Amount sold

0

583

0

0

118

Book value

0

108

0

0

20

Proﬁt/loss on sale

0

475

0

0

98

4.2%

3.5%

4.3%

3.6%

3.6%

Market value held/shareholder equity (%)

Figures in parentheses indicate number of stock sold off.

Compensation for Company Ofﬁcers

Basic Policy on Dialogue with Shareholders & Investors◆ Compensation Structure

OSG regards the building of long-term relationships of trust withshareholders and investors as an important management matter. OSG
proactively communications strategies relating to enhancement of ourcorporate value over the medium- and long-term as well as our sustainablegrowth as we engage in dialogues during ﬁnancial brieﬁngs (held quarterly

Compensation for directors (excluding directors who are members of the Audit & Supervisory Committee) consists of ﬁxed basic compensation, variable
compensation linked to business performance, and allocations of restricted stock. Since directors who are members of the Audit & Supervisory Committee
are independent from the other directors and not involved in the execution of business operations, their compensation consists solely of ﬁxed compensation.

51 O S G R EP O RT 2 0 2 3with the president speaking on two of these occasions), telephone
conferences, small meetings, and other forums. In addition, comments andviews voiced in these dialogues with shareholders and investors are reported
to the Board of Directors and shared also with relevant business units so they
may be reﬂected in management decisions and investor relations.
OS G RE P O RT 2 0 2 3 52

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Risk and Compliance◆ Information security

Basic Approach to Risk and ComplianceIn addition to measures to improve management transparency andfairness as well as ensure timely information disclosure, OSG has alsoestablished the Risk Management Rules, which are the framework forcreation of risk management structures to maintain managementsoundness and corporate ethics in the OSG Group. We have alsoestablished the Risk and Compliance Management Committee toensure effective and efﬁcient implementation of the Risk
Management Rules. The committee s role is to formulate basic risk
management policies, as well as consider and implement timelycountermeasures after assessing the signiﬁcance and urgency of risks.

◆ Risk Management Policy

Risk Classiﬁcation

OSG Group strives to ensure the smooth operation of our businessby preventing potential risks from arising, responding to risks that
do occur, and establishing a system for risk management. Risks
are divided into those associated with the external environment,risks associated with business processes, and risks associated with
our internal environment. Risks that management recognizes as
likely having a major impact on our ﬁnancial position, businessperformance, and cash ﬂow are listed in the table to the right.

Risk category

Type of risk
Economic conditions and market trends

External risks

Trends affecting procurement of raw materials
Climate change, natural disasters, and pandemics
Stable supply to the market

Business process risks

Safety and health management for employees

Corporate governance and ﬁnancial risk
Retaining and training human resources
Trafﬁc accidents◆ BCP(Business Continuity Plan)OSG Group has formulated a Business Continuity Plan (BCP) in theevent an earthquake strikes along the Nankai trough in the South Sea orSoutheast Sea segment. We have also conducted training and exercises
for implementing the BCP. Moreover, even if a large-scale disasteroccurs, a secure living environment with essentials such as water andfood is always assured and ready for employees at each site until arelief system can be established by the municipal or national
governments. Additionally, when the Covid-19 outbreak initially
erupted in 2020, we launched response teams to track and interpret
information which was changing daily. OSG Group was quick to
respond in Japan as well as overseas. In our workplaces, we haveworked to educate employees on preventing infection as well as
preventing discrimination. We have coordinated with municipalities,
hospitals, and testing centers to quickly respond if someone is infected.
At our production plants, we devised ways to reduce opportunities forcontact by changing to a rotating shift system. We have also

Training based on BCP

Number of Occupational Accidents

Company-wide Safety and Health Committee

implemented measures so that our plant operations will not shut down.
Ordinarily, the Safety and Health Committee, which meets monthly,
identiﬁes hazardous work, locations, and other such risks, and strives tomitigate the impact of a natural disaster or accident on production.

Health Management Committee

Meetings held
regularly

Safety Management Committee

Meetings held when
accident has occurred

15

Zero-Accident Meetings
9
6

Hongu Center

AcademyHonnogahara Center[FY]

Headquarters

2023

Oike Factory

53 O S G R EP O RT 2 0 2 3

Lost-time accidents

2022

Toyokawa FactoryNon-lost-time accidents

2021

Toyohashi Factory

2020

Shinshiro Factory

2019

Yana Factory0

Ofﬁce Safety
and Health Committee

6
5

standards. Business ethics norms are guidelines establishing the basis upon whichbusiness activities should be carried out and how personnel should conduct
themselves in order to ensure the prompt and appropriate implementation of fair
and appropriate practices. Company action standards are a detailed code of
conduct to ensure the implementation of the business ethics norms.

◆ Promotion of Compliance

Compliance Promotion System

Even as we comply with laws, regulations, and other rules, OSG
has appropriately maintained and reassessed the OSG Corporate
Code of Ethics to incorporate training measures when employees
are assigned to design, development, or other compliance-related
units as part of our training as well as professional education for
new employees and others. We have worked to raise our
employees awareness of compliance. Not only do we thoroughlywork to uphold conventions such as compliance, adherence, andrule enhancement, but we also strive through training to imbue asense of pride in our company as well as foster awareness andpromote understanding of compliance in each and every one of
our employees.

Reports & approvals
Board of Directors

ChairmanPresident

Risk and Compliance Management Committee(meets quarterly)
chairperson: President
Members: Exective ofﬁcer anddepartment heads
Secretariat: Legal Affairs Division
Agenda: Deliberation, decisions, and review
of reports pertaining to policies,
initiatives, and other matters related
to risk and compliance

Formulate, promote & implement plans

Responsible foradvancing risk
and compliance◆ Internal Reporting System

20

10The OSG Corporate Code of Ethics was established as a set of values and ethics
that we thoroughly practice to ensure all directors, executives, and employees at
OSG Group companies conduct business activities based on social common senseand comply with laws, regulations, and social standards. The Corporate Code of
Ethics comprises two sections: business ethics norms and company action

Department heads(Responsible for advancing risk
and compliance)

Headquarters Safety and Health Committee

25

10Compliance

Risk and Compliance Management Committee(Risk and Compliance Management Ofﬁcer)

[No.]

15

as raise the level of security literacy among our employees. We haveconducted information system risk evaluations in response to continuallychanging cybercrime techniques, and adopted a series of measures toaddress any elements of risk. The necessary investments have been madewith a view to minimizing the scope of impact in the unfortunate eventthat we do sustain damage as well as to ensure business continuity. As partof our measures to educate employees, OSG has endeavored to educate
our personnel so they are more literate about information security. We
conduct training with exercises using targeted emails and other schemes
so employees are able to recognize recent cybercrime trends and maintaincapabilities commensurate with our advanced information society.

◆ Basic Philosophy

Employee working conditions

Information security

Internal risks

OSG Group has strived to enhance information security. We established the
Basic Information Security Policy to maintain the trust of our customers
and society as well as protect information assets from threats such asaccidents, natural disasters, and criminal activity in today's highly
information-oriented society. This is part of our efforts to continue toprovide products and services that satisfy our customers' needs. To
minimize the risk of an accident or other internal incident occurring, we
thoroughly educate all employees about compliance with legal andcontractual requirements commensurate with the level of secrecy of theinformation assets handled. In preparing for external risks, we continue toassess risks to information systems and develop countermeasures as well

OSG Group has established internal reporting standards, which
provide a mechanism to ensure that reports and consultations areappropriate handled regardless of whether they are received
from within the company or without, as concerns organizational
or individual violations of laws and regulations in any corporate
activity, personal violations of laws and regulations, fraudulent
activities, and actions in violation of the OSG Corporate Code of
Ethics. Upon receipt of a report or consultation from an individual,
an investigation team endeavors to discern the facts. If the resultsof the investigation so dictate, disciplinary provisions in theemployment regulations of the relevant OSG Group company areapplied, and measures taken to prevent any recurrence. After
recurrence prevention measures have been adopted, the director
in charge of internal reporting conﬁrms the adopted measures
are functioning sufﬁciently and contributing to strengthening
corrective compliance management as well as early detection, in
addition to preventing any legal or regulatory violations andprotecting the person who came forward with the notiﬁcation or
consultation.

Internal Reporting System
NotiﬁerInternal contact point (Human Resources& General Affairs Department, Legal Affairs Division,and Management Audit Division)

External contact point (attorney)

Written acknowledgement prepared concerning notiﬁcation/consultation

Director in charge of internal reporting (General Manager, Human Resources & General Affairs Department)

Investigation team formed (to discern facts)

Board of Directors and Audit & Supervisory
Committee of the company in question

Risk and ComplianceManagement Committee
OS G RE P O RT 2 0 2 3 54

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Corporate Ofﬁcers (A s of Februar y 16, 2024)

Director＊Outside Directors

Chairman & Representative Director
Chief Executive Ofﬁcer (CEO)President & Representative Director
Chief Operating Ofﬁcer (COO)

Director (Full-time Member,
Audit & Supervisory Committee)

Director(Audit & Supervisory Committee Member)

Norio Ishikawa

Nobuaki Osawa

Takehiro Tomiyoshi

Akito Takahashi＊

May. 1983

Nov. 1997

Seconded to Norman Taps and Dies

Apr. 1982

Joined Nomura Securities Co., Ltd.

Limited (now OSG UK Limited)

Oct. 2016

Joined OSG Corporation

Seconded to OSG Tap and Die, Inc.
(now OSG USA, Inc.)

Oct. 1995

Vice President, OSG Tap and Die, Inc.

Oct. 2003

Aug. 1999

President, OSG Europe S.A.

Feb. 2001

Director

Feb. 2003

Executive Ofﬁcer

Feb. 2004

Director

Feb. 2010

Managing Director

Feb. 2007

President and Chief Operating

Jan. 2014

Representative Director & Chairman,

Dec. 2004

President & Chief Executive Ofﬁcer

Sep. 2016(CEO)
Feb. 2021

General Manager, New Business

Limited (current position)

Department

Representative Director &Feb. 2017

President, OSG Europe S.A.

Ofﬁcer(COO)
Feb. 2017

Representative Director, OSG UK

Executive Ofﬁcer in charge of New
Business Development

Feb. 2018

Executive Ofﬁcer in charge ofStrategic Planning Ofﬁce

OSG Europe S.A. (current position)

Feb. 2020

New Business Development Ofﬁce

Osawa Scientiﬁc Studies Grants

Feb. 2022

Director (full-time Member, Audit &Foundation (current position)

Supervisory Committee) (current
position)

Chairman & Chief Executive Ofﬁcer

Feb. 2018

Managing Ofﬁcer(CEO)(current position)

Feb. 2019

Director & Senior Managing Ofﬁcer

Feb. 2021

President and Chief Operating

Apr. 2000

Admitted as attorney-at-law in Japan

Apr. 2005

Admitted as attorney-at-law in New

Executive Officer

Managing Ofﬁcer

Managing Ofﬁcer

Managing Ofﬁcer

Jiro Osawa

Hideaki Osawa

Koji Takeo

Senior Executive Ofﬁcer

Senior Executive Ofﬁcer

Senior Executive Ofﬁcer

Mitsuyoshi Hikosaka

Yasutaka Yoneda

Yukinori Chikada

Executive Ofﬁcer

Executive Ofﬁcer

Executive Ofﬁcer

Jeffrey Tennant

Toshihiro Hisadome

Yasushi Suzuki

York State
Sep. 2009

Established Takahashi & Katayama
Law Firm, Partner (current position)

Mar. 2015

Outside Director, Nippon Carbon Co., Ltd.

Dec. 2015

Outside Director, ACK Group, Ltd.
(now Oriental Consultants Holdings
Co., Ltd.) (current position)

Feb. 2018

Director (Audit & Supervisory
Committee Member), OSG
Corporation (current position)

Jun. 2022

Outside Director, Toa Oil Co., Ltd.

Ofﬁcer (COO) (current position)

Director (Audit & Supervisory Committee Member)

Kunihiko Hara＊

Jun. 1998
Jun. 2002
Jun. 2005
Jun. 2007
Jun. 2010
Jul. 2010
Apr. 2016
May. 2018
Jun. 2018
Feb. 2020
Apr. 2020

Director, Denso Corporation
Senior Managing Director, Nippon Soken
Research Institute (now SOKEN, Inc.)
Managing Director, KONPON Research Institute(now Toyota KONPON Research Institute)
Director & Vice President, KONPON ResearchInstitute (now Toyota KONPON Research Institute)
Advisor, KONPON Research Institute(now Toyota KONPON Research Institute)
Specially-Appointed Professor, "Tailor-Made Baton-Zone "Education Promotion Ofﬁce, Toyohashi University of Technology
Vice President, Toyohashi University of Technology(responsible for strengthening research capabilities)
Specially-Appointed Professor, Nagoya
University (Innovation Strategy Ofﬁce)
Professor Emeritus, Toyohashi Universityof Technology (current position)
Director (Audit & Supervisory Committee
Member), OSG Corporation (current position)
Designated Professor, Future Value
Creation Research Center, Nagoya
University, Tokai National Higher Education
and Research System (current position)

55 O S G R EP ORT 2 0 2 3

Director(Audit & Supervisory Committee Member)

Director (Audit & Supervisory Committee
Member) newly appointed

Kayoko Yamashita＊

Yoshitsugu Hayashi＊

Executive Ofﬁcer

Executive Ofﬁcer

Executive Ofﬁcer

Apr. 1996

Admitted as a certiﬁed public

Apr. 1992

Professor, Nagoya University Graduate School

accountant

Jul. 1992

President, World Conference on Transport

Kenya Sugihara

Seungjin Chung

Osamu Ishida

Executive Ofﬁcer

Executive Ofﬁcer (Newly Appointed)

Hitoshi Masuoka

Koji Agata

Apr. 2006

Apr. 2008
Jun. 2015

Research Society (current position)

Established Yamashita Certiﬁed
Public Accounting Firm, Partner

Apr. 2006

Dean, Nagoya University Graduate School of Environmental Studies(current position)

Jul. 2013

Chairman, World Conference on Transport

Admitted as a certiﬁed tax

Research Society (current position)accountant

Jul. 2015

Member, The Club of Rome (current position)

Outside Audit & Supervisory Board

Apr. 2016

Emeritus Professor, Nagoya University

Member, Sotoh Co Ltd.

Professor, Research Institute for Science(current position)

Feb. 2022

and Technology, Chubu University

Outside Audit & Supervisory Board

Jun. 2017

Outside Director, FUJI Electric Co., Ltd.

Member, FUJI Corporation

Mar. 2019

President, Japan Association of The Club of Rome (current position)(current position)

Apr. 2019

Director & Visiting Professor, Joint Institute for Transport

Director (Audit & Supervisory Board
Member) OSG Corporation (current

Studies, Tongji University (China) (current position)
Jun. 2019

position)

Distinguished Guest Professor, Tsinghua
University (China) (current position)

Oct. 2020

Executive Committee Member, The
Club of Rome (current position)

Apr. 2021

Distinguished Professor, Center for Sustainable Development
and Global Smart City, Chubu University (current position)

OS G RE P O RT 2 0 2 3 56

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Financial and Non-Financial Highlights

Financial Highlights

Net sales (millions of yen)

Operating income (millions of yen)
Operating income margin (%)

Record high147,703150,000

30

24,00019,80020,000120,000

25
20

16,00090,000

0

13.4

8,000

30,000

10
5

4,000

2019

2020

2021

2022

0

2023 [FY]35,00030,83850

28,00040

21,00030

14,00020

15

12,00060,000Net income attributable to owners of parent (millions of yen)
Return on equity (ROE) (%)
Return on assets (ROA) (%) (Operating income basis)

EBITDA (millions of yen)
EBITDA margin (%)

2019

2020

2021

2022

2023 [FY]

0

20.9

7,000
0

10

2019

2020

2021

2023 [FY]

2022

0

30

18,00014,307

15,00025

12,000

20

9,000

15

6,000

8.3

10

3,000

8.3

5

0

2019

2020

2021

2022

0

2023 [FY]Operating income (left)

EBITDA (left)

Net income attributable to owners of parent (left)

Operating income margin (right)

EBITDA margin (right)

Return on equity (ROE) (right)
Return on assets (ROA) (Operating income basis) (right)

Free cash ﬂow (millions of yen)
Equity ratio (%)

Total assets (millions of yen)
Total asset turnover rate (multiple)

Earnings per share (EPS) (yen)25,000100

180Dividend per share (yen)Dividend payout ratio (%)
1.2

300,000

149.29250,124

250,000

1.0

20,000

72.6

80

150

15,00014,78760

120

200,000

10,0004090150,000

5,000

20

60

100,000

0.4

0

0

30

50,0000.2-5,000

-20

0

0

2019

2020

2021

2022

2023 [FY]

2019

2020

2021

2022

2023 [FY]

80

100

60

60

75

0.8

0.62

2019

2020

2021

Free cash ﬂow (left)

Total assets

Equity ratio (right)

Total asset turnover rate

2023 [FY]

2022

0.6

0

40

50

40.2
20

0

25

2019

2020

2021

2022

2023 [FY]0

Dividend per share (left)
Dividend payout ratio (right)

Non-Financial Highlights

Waste emissions (t)Recycling rate (%)

CO2 emissions (t)CO2 emissions per unit of production (%)
60,0001.2

50,00042,29440,0000.83

30,000

1.0
0.8

2,500

125

1,996

2,000

100

99.8

1,500

0.4

10,000

0.2

2019

2020

2021

2022

2023 [FY]0Total 7,563

8,000

6,000

1,000

50

500

25

0

2019

2020

Total emissions (left)

Waste emissions (left)
Recycling rate (right)

2021

2022

2023 [FY]

0

2,000

0

4

1,117

3

3,184
2019
Japan

2020

2021

Americas

Europe/Africa

2023 [FY]

2022
Asia

100

5

1,874

1,388

4,000

Per unit of production (right)

57 O S G R EP O RT 2 0 2 3

Number of directors
Composition of outside directors [%]

75

0.6

20,0000

Number of employees by region

4

80

3
57.1

2

40
20

1
0

60

2019

2020

2021

2022

2023 [FY]0

Outside directors (left)
Internal directors (left)
Ratio of outside directors (right)

OS G RE P O RT 2 0 2 3 58

OSG Values

Value Creation
StoriesValue Creation
Sustainability
Strategy

Corporate GovernanceCorporate
Data

Key Financial Data for the Past 10 Years(Millions of yen)

For the year

End of ﬁscal year

Per share

Management indices

Data by product category

Sales to external customers
by segment

59 O S G R EP O RT 2 0 2 3

2014/112015/112016/112017/112018/112019/112020/112021/112022/112023/11Net sales

101,031111,917

105,561

120,198

131,368

126,964

104,388

126,156

142,525

147,703

Cost of sales

58,061

61,86559,17969,711

74,83373,28165,71576,96983,45987,254

Selling, general and administrative expenses

25,55428,45428,13531,34934,01534,12830,27633,081

37,16640,648Operating income

17,415

21,597

18,246

19,13722,52019,554

8,396

16,10521,89819,800Ordinary income

17,56821,51017,813

19,14422,567

19,7108,950

16,141

23,64821,350Net income attributable to owners of the parent

9,989

12,518

10,134

13,993

14,71013,686

5,639

10,98916,53414,307

Cash ﬂows from operating activities

19,68819,58816,333

20,82020,125

19,261

17,03826,982

20,17523,331

Cash ﬂows from investing activities△3,119△16,976△16,843△7,566△13,351△20,314△17,133△6,961△12,170△8,543

Cash ﬂows from ﬁnancing activities△12,813△6,216△778△11,137△4,723

3,465

9,658

△14,264△14,740△3,831

Depreciation and amortization

6,830

7,705

7,885

8,612

9,100

9,522

10,518

10,591

10,498

11,037

EBITDA

24,24629,302

26,132

27,74931,621

29,076

18,915

26,69632,39630,838

Capital expenditures

7,327

12,487

13,394

9,494

11,464

17,139

9,895

5,555

8,600

10,580

Number of employees

5,233

5,569

5,866

6,611

7,020

7,236

7,173

7,489

7,543

7,563

Total assets

142,302

155,129

156,081

166,712

178,020

190,414200,112

209,757

228,852

250,124

Net assets

100,943

113,637

103,059

128,394

138,354

140,658

140,179

154,800

176,838

194,640

Interest-bearing debt

20,00920,19533,506

16,325

15,612

26,782

41,76930,751

25,57028,676

Total equity

91,458102,566

92,216

115,810

125,332

129,078

129,338

143,811

164,659

181,561

Net income (yen)105.20131.78110.59153.70150.47140.06

57.94

112.63171.54149.29Net assets (yen)963.15

1,079.12

1,024.34

1,191.65

1,279.29

1,328.08

1,327.22

1,472.45

1,721.14

1,892.35

Dividends (yen)

34.00

46.00

50.00

46.00

47.00

47.00

22.00

36.00

60.00

60.00

Overseas sales ratio (%)

54.6

57.8

55.3

57.6

58.4

57.3

59.4

61.8

64.9

67.0

Operating income margin (%)

17.2

19.3

17.3

15.9

17.1

15.4

8.0

12.8

15.4

13.4

Return on equity (ROE) (%)

11.7

12.9

10.4

13.5

12.2

10.8

4.4

8.0

10.7

8.3

Return on assets (ROA) (%) (Operating income basis)

12.6

14.5

11.7

11.9

13.1

10.6

4.3

7.9

10.0

8.3

Return on assets (ROA) (%) (Net income basis)

7.2

8.4

6.5

8.7

8.5

7.4

2.9

5.4

7.5

6.0

Asset turnover ratio (times)

0.73

0.75

0.68

0.74

0.76

0.69

0.53

0.62

0.65

0.62

Equity ratio (%)

64.3

66.1

59.1

69.5

70.4

67.8

64.6

68.6

72.0

72.6

EBITDA margin (%)

24.0

26.2

24.8

23.1

24.1

22.9

18.1

21.2

22.7

20.9

Dividend payout ratio (%)

32.3

34.9

45.2

29.9

31.2

33.6

38.0

32.0

35.0

40.2

Taps

34,65538,23933,94838,17541,72939,89533,671

43,23950,37449,050Drills23,60025,743

26,70931,66236,81136,14729,48435,721

40,98242,886

End mills

22,886

26,554

24,83727,09027,917

26,69021,21924,006

26,38327,983

Rolling dies

9,165

9,921

9,443

10,218

10,645

9,973

7,947

10,052

10,616

11,035Gauges

1,419

1,538

1,478

1,625

1,757

1,946

1,712

1,747

1,991

1,968

Other

9,304

9,919

9,143

11,424

12,50812,31010,354

11,387

12,176

14,778

Japan

46,65948,15048,257

51,63955,28754,72542,81648,93550,85849,619Americas18,236

21,75819,47821,413

22,68023,152

18,81821,91527,84532,126

Europe/Africa

9,879

11,382

12,26818,177

22,13420,893

19,396

24,57328,96433,590Asia

26,25630,62625,55628,96831,26628,19323,35630,732

34,85632,367OS G RE P O RT 2 0 2 3 60

OSG Values(Millions of yen)

(Millions of yen)

FY2022

FY2023

FY2022

FY2023(November 30, 2022)(November 30, 2023)(November 30, 2022)(November 30, 2023)

Current liabilities

Cash and deposits

46,697

57,970Notes and accounts payable - trade

Notes and accounts receivable - trade26,88528,645

Short-term loans payable

Consolidated Summary Statement of Income

5,887

6,019

677

672

Net sales

142,525

147,703

Cost of sales

83,45987,254Gross proﬁt

59,06560,448Selling, general and administrative expenses

37,16640,64821,89819,800Interest income

397

829

Dividend income

110

178

Purchase discounts

49

45

Share of proﬁt of entities accounted for using equity method

2-Foreign exchange gains

718

84

Subsidy income

232

263

0

1

Current portion of long-term loans payable

1,019

1,638

Operating income

38,529Accrued expenses

8,894

9,224

Non-operating income

Work in process

8,641

7,544

Income taxes payable

3,105

1,733

Raw materials and supplies

10,146

10,420

Provision for directors bonuses

Other

3,731

4,602

Allowance for doubtful accounts

△374

△197

128,967

147,517

Total current assets

Property, plant and equipment

60,63561,979

Accumulated depreciation △35,923△37,814

Buildings and structures

371

332

Other

3,809

4,932

Total current liabilities

23,76524,552

Bonds payable

5,000

10,000Other

Long-term loans payable

18,873

16,365

Total non-operating income

Deferred tax liabilities

1,799

2,011

Net deﬁned beneﬁt liability

879

990

185

-

Non-current liabilities

Interest expense
Share of loss of entities accounted for using equity method

24,165

Provision for loss on guarantees

Machinery, equipment and vehicles 150,853

162,685

Other

1,511

1,564

Accumulated depreciation △116,113△124,904

Total non-current liabilities

28,24830,931

Ordinary income

52,01455,484Extraordinary gains

34,73937,780Tools, furniture and ﬁxtures

10,497

11,439

Accumulated depreciation△8,386△9,257

Machinery, equipment and vehicles, net

Total liabilities
Net assets
Shareholders equity

2,110

2,181

Capital stock

13,044

13,044Land

16,006

16,343

Capital surplus

13,792

13,330Construction in progress

2,840

3,468

Retained earnings

132,320

140,361

Other

1,666

1,672

Treasury stock△6,388△5,845△1,013△908

Total shareholders equity

152,768

160,891

653

764

Accumulated other comprehensive income

81,062

84,705

Valuation difference on available-for-sale securities

Tools, furniture and ﬁxtures, net

Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets

11,89020,66912,17813,079176,838

194,640

228,852

250,124

5,453

Non-controlling interests
Total net assets

Investment securities

4,800

5,812

Total liabilities and net assets

Investments in capital

1,946

346

562

400

Long-term loans receivable
Deferred tax assets
Retirement beneﬁt asset
Other

3,833

4,041

189

219

2,133

1,976

696

694

23,64821,350Gain on sales of investments in capital of subsidiaries and afﬁliates-

144

Total extraordinary gains-

144

Extraordinary losses
Provision of allowance for doubtful accounts

170

540

Loss from money transfer scam at foreign subsidiary-132

Loss on valuation of shares of subsidiaries and afﬁliates

-

74

100

-

Provision for loss on guarantees
Total extraordinary losses

270

747

Income before income taxes

23,37820,747
6,102

Total accumulated other comprehensive income

1,760

5,799

Total income taxes

6,200

5,936

Net income

17,177

14,811

Net income attributable to non-controlling interests
Net income attributable to owners of parent

Net income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments

△443

△347

13,023

12,44999,885

102,607

Comprehensive income

228,852

250,124(Breakdown)

61 O S G R EP O RT 2 0 2 3503
14,307

17,177

14,811

6450

Other comprehensive income

Total investments and other assets
Total non-current assets

642
16,534

Consolidated Statement of Comprehensive Income

Allowance for doubtful accounts

Total assets

384

△166

-

1,396

Total non-operating expenses

8

410

7,292

19,342

Total intangible assets

Other△1,091

0

Other

302

-

Income taxes - deferred

11,038

3,692

285

Income taxes ‒ current

Foreign currency translation adjustments

4,402

843
2,244

1,326

Deferred gains or losses on hedges

Goodwill

Investments and other assets

852

936
2,446

Non-operating expenses

24,712

Buildings and structures, net

FY2023(Dec. 1, 2022 toNov. 30, 2023)

33,238Non-current assets

Corporate
Data(Dec. 1, 2021 toNov. 30, 2022)

Merchandise and ﬁnished goods

Securities

Corporate Governance(Millions of yen)

FY2022

Liabilities

Current assets

Value Creation
Sustainability
Strategy

Consolidated Statement of Income &Consolidated Statement of Comprehensive Income

Consolidated Summary Balance Sheet

AssetsValue Creation
Stories△3△0

13,364

9,291

△21

△9

13,345

9,732

30,52324,543Comprehensive income attributable to owners of parent

28,972

23,116Comprehensive income attributable to non-controlling interests

1,550

1,427

Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income

OS G RE P O RT 2 0 2 3 62

OSG Values

Consolidated Summary Statement of Cash FlowsFY2022(Millions of yen)

FY2023

FY2022(Dec. 1, 2022 toNov. 30, 2023)

Operating activities(Dec. 1, 2022 toNov. 30, 2023)△7,783△3,524

5,188

6,036

20,747

Payments for time deposits

Depreciation and amortization

10,498

11,037

Proceeds from refund of time deposits

Increase (decrease) in allowancefor doubtful accounts
Increase (decrease) in provision
for directors' bonuses
Increase (decrease) in net
deﬁned beneﬁt liability

903

Purchases of investment securities

△560

△16

151

522

Proceeds from sale/redemptionof investment securities

227

12

80

△44

Acquisitions of property, plant and equipment△8,600△10,580

Proceeds from sales of property, plant and equipment

1,161

537

Purchase of intangible assets

△264

△578

Purchase of shares of subsidiaries△981△1,037

-

552

△558

56

△12,170△8,543

881

△40

84

Increase (decrease) in provision
for loss on guarantees

147

△85

Interest and dividend income△508△1,007

Interest expense
Equity in loss (earnings) ofan associated company

285

302

△2

8

Gain on sales of investments in capitalof subsidiaries and afﬁliates-

Loss from money transfer scam
at foreign subsidiary-

Loss on valuation of shares ofsubsidiaries and afﬁliates

△144
132

-

74
△480

△5,269△2,076

Change in notes and accounts payable

247

△56

Change in accrued expenses

853

77

△1,620692

Other, net
SubtotalInterest and dividend income received

27,61730,688

500

977

△296

△292

-

△132

Income taxes - paid

△7,645△7,909Net cash provided byoperating activities

20,17523,331

Interest expense paid
Payment for loss from money transfer
scam at foreign subsidiary

Other, net
Net cash used in investing activities
Financing activities
Change in short-term borrowings, net△2,205△39

Proceeds from long-term borrowings

146

39

Repayments of long-term borrowings△2,137△1,955

-

5,000

△30

-

Proceeds from issuance of bonds

Change in notes and accounts receivable △1,466
Change in inventories

Proceeds from sales of investments in capital ofsubsidiaries resulting in change in scope of consolidation

Redemption of convertible bond-typebonds with subscription rights to shares
Purchase of shares of subsidiaries
not resulting in change in scope of
consolidation-

Purchase of investments in capital of subsidiaries
not resulting in change in scope of consolidation

-

△381
△112
△3

516

460

△4,357△6,220

Dividends paid to non-controlling interests

△359

△305

Other, net

△359

△312

△14,740△3,831

3,098

1,975

Net increase (decrease) in cash
and cash equivalents△3,637

12,931

Cash and cash equivalents at beginning of year

40,35436,717

Cash and cash equivalents from newly
consolidated subsidiaries-

73

Cash and cash equivalents at end of period

36,71749,722

Proceeds from sales of treasury stock
Dividends paid

Net cash used inﬁnancing activities
Effect of exchange rate change on
cash and cash equivalents

Corporate
Data(As of Nov. 30, 2023)

Company name

OSG Corporation

CapitalHeadquarters

3-22, Honnogahara, Toyokawa,Business activities Manufacture and sales of cutting tools, rolling¥13,044,000,000

Aichi Prefecture 442-8543, Japandies, gauges, machine tools and machine

Date establishedMarch 26, 1938

parts; import and sales of tools

Employees

7,563 (consolidated)

Listed market

TSE Prime & NSE Premier (Securities code 6136)

1,900 (non-consolidated)
Status of Shares(As of Nov. 30, 2023)

Number of shares issuable

200,000,000 shares

Number of shares outstanding

99,182,517 shares

Number of shareholders

10,017

Ownership breakdown(One unit = 100 shares)
Individuals
and others
314,242 units

31.72 ％

Major shareholders
Financial
institutions
318,483 units

32.14 ％

Securities
32,718 units

3.30 ％△5,953Purchase of treasury stock

Corporate Governance

Company ProﬁleInvesting activities

23,378

Amortization of goodwill

FY2023(Dec. 1, 2021 toNov. 30, 2022)

Income before income taxes

Value Creation
Sustainability
Strategy

Corporate Information(Millions of yen)(Dec. 1, 2021 toNov. 30, 2022)

Value Creation
Stories

Overseas
institutions
and others
221,993 units

22.41 ％

Other
corporations
103,357 units

10.43 ％

(Notes) 1. Amounts of less than one unit are not included.
2. Treasury stock is included under Individuals and others.

Name

Number ofshares held
(thousands of shares)

Percent
ownership(%)

12,954

13.50

Custody Bank of Japan, Ltd. (Trust Account)

6,609

6.89

SSBTC CLIENT OMNIBUS ACCOUNT

5,235

5.46

OSG Agent Association

3,504

3.65

OSG Stock Holding Association

2,621

2.73

NORTHERN TRUST CO. (AVFC) RE FIDELITY FUNDS

2,400

2.50

Osawa Scientiﬁc Studies Grants Foundation

2,350

2.45

Sumitomo Mitsui Banking Corporation

2,100

2.19

OSG Employee Stock Ownership Association

1,908

1.99

Nomura Trust and Banking Co., Ltd. (Investment Trust Account)

1,609

1.68

The Master Trust Bank of Japan, Co., Ltd. (Trust Account)(Notes) 1. The number of shares held is rounded down to the nearest thousand.
2. Other than above, there are 3,241 thousand treasury shares.
3. Ownership percentage is calculated after deducting treasury shares.

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To OurStakeholders

OSG s website provides timely access to a variety of information,
including corporate data, product information, industry solutions,news releases, and IR information.

https://www.osg.co.jp/en/
Introduction to the OSG sustainability website
The OSG sustainability website showcases our efforts to achieve sustainablegrowth in our corporate value, including environmental initiatives, social programs,
and corporate governance systems.

https://www.osg.co.jp/en/sustainability/index.html

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