OSG REPORT

2021
Fiscal year ended November 2021

CONTENTS
OSG Values

Value Creation Stories

Message fromTop Management

02

History

04

Foundation for Value Creation

Value Creation Process

06

Opportunities & Risks

08

Value Chain
Enhancement

10

Financial and
Non-Financial Highlights

12

Message fromthe President

14

New Medium-Term
Management Plan

18

Promotion of
ESG Management

20

Climate Change Risks
and Opportunities:
TCFD Compliance

22

Environment

24

Society30

Governance36

Editorial Policy

Financial Section

44

Corporate Information

51

Disclaimer Regarding Forward-Looking Statements

The OSG Report is published for the beneﬁt of our shareholders, investors, and all stakeholders.

Apart from information based on historical facts, all

The OSG Report 2021 is an integrated report comprising a broader scope of information thatreferences in this report to plans, strategies,

includes our New Medium-Term Management Plan and other information about management

forecasts, or management initiatives pertaining tostrategy as well as ESG data, which serves as a foundation for sustainable growth. ThisOSG s future business performance areinformation is provided in addition to OSG s corporate philosophy, history, and ﬁnancial data.

forward-looking statements and as such represent

The International Integrated Reporting Framework published by the International Integrated

assumptions and judgments based on currently

Reporting Council (IIRC) was referenced when compiling this report. The OSG website s

available information. Actual results may differ from

Investor page publishes OSG s latest press releases and ﬁnancial highlights.

those forecasts in this report due to a variety ofIn addition, OSG website s Sustainability page also regularly updates information madeavailable for a range of stakeholders. Please be sure to peruse both this report and the OSG

factors, including trends in the economic
environment in which OSG operates, productwebsite. We will continue our efforts to provide editorial content that meets readersdemand, price trends, development of new

expectations.

products, sales, raw material prices, and exchange

HP URL：https://www.osg.co.jp/en/

rate ﬂuctuations.

PHILOSOPHY
Tool Communication
OSG s products are created through communication with ourcustomers. Communication is indispensable to our ability tosupply products and services that truly meet customers
needs, and to our continuing efforts to develop better
products.

Global Presence
As a comprehensive cutting-tool manufacturer, we makeproducts that at a fundamental level contribute to enhancing
people s quality of life. Through continuous growth, we haveestablished a production, sales, and technical support network
spanning 33 countries. Our corporate aim is to continue toexpand our operations globally and strengthen ourcontribution to the manufacturing industries in the world.

Shaping your dreams
We want to give shape to the aspirations of every customer.
That goal motivates us to continue taking up new challenges
as we work to support manufacturing industries worldwide.

OSG Report 2021 01

M essage f rom T op Management
First of all, we would like to express our heartfelt sympathy to all affectedby Covid-19, and also extend our deepest respect and gratitude to
everyone working on the frontlines to contain the spread of infection.
During the ﬁscal year ending November 30, 2021 as the pandemic
persisted, business activities showed sign of recovery in Japan, South
Korea, and even Southeast Asian countries following the recovery of
demand in China, North America, and Europe. Still, the global
semiconductor shortage, sharp decrease in component producing
operations in Southeast Asian countries, and other factors led to
substantial disruption in manufacturing industry supply chains.
In such a business environment, we leveraged the network, which wehave built up globally based on corporate philosophy Global Presence ,to provide manufacturing, sales and technical support, and we utilized
tools to communicate with our customers and promote sales. Moreover,
we have linked our global manufacturing bases so that we are able tocontinue to maintain a stable supply of products.
In November 2021, we revamped our management structure andcommenced operation with this new structure. The new structure clearlydelineates the roles of both the chairman and president. Group oversighthas been further strengthened with the chairman focusing on enhancing
governance of the entire group and the president responsible formanagement planning and business development.
In January 2022, we announced our new three-year medium-term
management plan Beyond the Limit 2024, which will start in the ﬁscal
year ending November 30, 2022. Our long-term vision directs us toward
being an essential player contributing to the global manufacturingindustry. As we look ahead to 2030 when we will make a full-scaletransition to the carbon-neutral era, we will further enhance our business
efﬁciency and build a robust corporate culture capable of meeting any
changes. The entire OSG Group is dedicated to working together toestablish a brand that can be trusted by our stakeholders and strive
toward sustainably enhancing corporate value. This report was preparedwith the hope that it will provide a better understanding of OSG sactivities.
We look forward to the continuing support and understanding of our
stakeholders.

02 OSG Report 2021

N o r i o I s h i k a wa

Nob ua k i Osa w a

Chairman & CEO

President & COO

OSG Report 2021 03

OSG Values

HISTORY
Since its establish in Tokyo in 1938, OSG has grown in the global cutting tool market with innovative products
derived from the development of a range of proprietary technologies, such as tap grinding with grindstones,
and the pioneering of new sales channels. The OSG spirit of meeting and overcoming any challenge anddifﬁculty, which we have pursued since our founding, has been the driving force behind our unique advanced
technologies, global network spanning 33 countries, and every aspect of our current corporate value. We willcontinue to take up new challenges as we seek to further expand globally.

1968

OSG Tap and Die (USA) (nowOSG USA, Inc.) was established

1974

1988

1971

1981

OSG Ferramentas dePrecisão Ltda. (Brazil)(now OSG Sulamericana
de Ferramentas Ltda.)
was establishedOSG Canada wasestablished

Overseas

1969

Taiho Tool Mfg. Co., Ltd.
(Taiwan) was established

Business

1938

Hideo Osawa establishedOSG Grinding Co., Ltd. in
Tokyo

Japan

1943年

1943

1961

Toyokawa Factory began
operation

OSG was listed on theFirst Section of theTokyo and Nagoyastock exchanges

Toyohashi Factorybegan operation

1963

Changed the company nameto OSG MFG. Company

1967

1982

Oike Factory began operation

Shinshiro Factory began
operation

Established Aichi Plant(now OSG Academy)

1938
Products
04 OSG Report 2021

Began tomanufacturetaps and dies

1942
Began tomanufacturegauges1956

Began to manufacturerolling dies

1970

Began tomanufacture HSS
end mills

1980

Began tomanufacture
carbide end mills

1984

Began tomanufacture
drills［ Net sales］

Overseas

Japan(Billions of yen)

150

126.1

120

90

60

30

0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

1993

OSG Asia Pte Ltd. wasestablished in
Singapore as theholding company for
Asia

1997

OSG Europe S.A.
was established in
Belgium as theholding company
for Europe

2001

OSG (Shanghai) Co., Ltd. (China)
was established2008

OSG Vietnam was establishedOSG Philippines was established2012

OSG Turkey Kesici Takımlar
Sanayi ve Ticaret A.Ş. wasestablished

2003

OSG Italia S.R.L. was establishedOSG GmbH (Germany) was established2005

OSG (India) Pvt, Ltd. was established1990

Yana Factory began operation

1998
Established CS Center at OSG
Headquarters

2000

Nine business sites
in Japan werecertiﬁed under
ISO 14001

2006

Established Global
Technology Center

Global Network

33countries
Manufacturing facilities 17countries
R&D locations
7countries
Sales ofﬁces

2014

Achieved consolidated
net sales of ¥100 billion
in FY20142020

Established NEO
Shinshiro Factory

2018

2004

Celebrated
80th anniversary

Established
Design Center2007

All OSG products
were certiﬁed under
ISO 9001

1987

Began to manufacture
cutter bodies

2013

Launched Salesof A-TAP

2014

Introduced
The A Brand
product brand

OSG Report 2021 05

INPUT

Value Creation Stories

Value Creation Process

Business capital→ P.10-11

Anchored in our corporate philosophy Global Presence ,OSG contributes to sustainable manufacturing industries throughthe provision of proprietary high value-added products andservices around the world.

R&D/Design

Procurement

Total

Business model
drivingvalue creation

the-boxSolutions

Changes inthe external
environment→ P.08-09

Value chain leveraging
our strengths→ P.10-11

Out-ofThinking

Global Presence
We will expand our operations
globally and contributeto manufacturingindustries worldwide

Services

Innovation

After-sales
Service

Sales/
Logistics

Key strengths maximizing value creation
Platform sharing

Excellent corporate culture

Global network

Foundations for value creation
Corporate governance
06 OSG Report 2021

Social and environmental initiatives→

Products → P.10-11■ Taps■ Indexable tools■ Drills■ Gauges■ End mills■ Rolling dies

Local communities
Sustainable improvement of living
standards, industries, and culture

OrdersCustomers
Products and services meetingcustomers needs increase customer
satisfaction

OUTPUTOUTCOME[Value provided to stakeholders]Shareholders・investors
Sustainable proﬁt growth andshareholder returns increase
share value

Manufacturing/
Quality

Financial capital → P.44-45■ Net sales ¥126.1 billion

Suppliers
Building co-creation relationships thatlead to two-way value improvement■ Operating income ¥16.1 billion■ Overseas sales ratio 61.8 %■ Interest-bearing debt ¥30.7 billion

Employees
Enhancing work-life balance■ EBITDA ¥26.6 billion■ ROE 8.0%

P.20〜
OSG Report 2021 07

Value Creation Stories

Opportunities & Risks
Taking into account the increasingly complex business environment, OSG analyzes social changes and issues so
as to recognize and evaluate both opportunities and risks affecting sustainability and growth potential.
We see changing social needs as new business opportunities. We will demonstrate our strengths as we seek
to create opportunities for new growth and realize a sustainable society.

Opportunities & Risks
Opportunities●Decrease in the number of parts due to the shift to EVs●Demand for new parts in the shift to EVs and the rise of new
OEM manufacturers●More advanced processing as vehicles made lighter●Greater demand for automobiles in emerging countries

Markets●Greater supply chain concentration and dynamic shift toemerging countries●Greater need for micro precision processing leading toincrease in demand for small-diameter tools●Progress in medical technologies and wider availability of
renewable energies to spur new demand●Proﬁtability of M&A subsidiaries●Sudden changes in the external environment due to climatechange, natural disasters, coronavirus pandemics, etc.

Environment●Stricter environmental regulation forachieving carbon neutrality●Tighter regulation on hazardous substances●Resource depletion and environmental pollution●Realization of a circular economy●Longer average lifespan and healthy life expectancy●Epidemics and spread of infectious diseases

Society●Difﬁculty in hiring personnel●Human resource diversity●New workstyles and values in life after COVID-19●Respect for human rights●Information security

Governance●Disaster and hazard response●Board and senior management diversity

08 OSG Report 2021

Risks

OSG s Responses & Strengths●Secure survivor s advantage and maintain market share in automotive industry●Capture latest needs by fully utilizing our global information network andcollaborate with machine tool manufacturers●Develop and manufacture high-performance and high-quality tools,
and leverage our in-house production facility development capabilities●Bolster local production structures and develop operations tailored to regional needs●Offer services locally that harness our global network in 33 countries●Stable supply system for small to large size tools utilizing existing technology andproduction facilities●Provide exceptional service for order-made items and offer an extensive product lineup●Strengthen global governance and promote post-merger integration (PMI) withcross-selling policies, etc.

●Improve proﬁtability and operational efﬁciency
based on a management strategy emphasizing operating income●Improve energy efﬁciency in production processes and formulate a concrete roadmap●Reduce hazardous substance usage and emissions, and ﬁnd more alternatives
to hazardous substances●Effectively utilize water resources, reduce plastic product packaging andreplace with items derived from plants●Coating, reconditioning, and material recycling for tools to extend tool service lifeand reduce waste●Introduce mandatory age 65 retirement, re-employ experienced older employees,
and adopt group long-term disability (GLTD) system●Provide vaccinations to employees and their families to prevent against infection●Introduce system encouraging employees to rejoin the company andsupport non-Japanese in speciﬁc skill activities●Maintain a safe and secure workplace, enhance support services,
prepare to establish special afﬁliate companies, and promote women s advancement●Introduce ﬂextime and telework systems, and implement initiatives for sales digital transformation●Enhance human rights education and improve the internal working environment●Improve security literacy through awareness training to identify cybercrime trends, such as
targeted e-mail training●Formulate business continuity plans and hazard maps,
review measures to strengthen response to business interruption risks, and strengthen supply chains●Maintain fair and transparent governance structure, and raise the percentage of women directors

OSG Report 2021 09

Value Creation Stories

Value Chain Enhancement
OSG engages in proprietary business operations on a global scale for everything from materials production
and procurement to production facilities, regrinding, coating, and other after-sales services.
We wield overwhelming strength as a comprehensive cutting-tool manufacturer across all six elements of the value chain.

Procurement

R&D/Design

OrdersOSG has built good relationships with our
suppliers. We promote purchasing fromseveral companies to hedge against risk.
Materials for carbide tools can beproduced and procured by groupcompanies in Japan. We also extend
procurement globally for optimalpurchasing.

So that OSG is able to quickly resolve
customer issues, we have assembled in
one location our engineers who develop
and design tools, develop coatings, andperform other R&D and design functions.
We also train engineers at our major
overseas locations to respond to local
needs and understand global
technological trends.

Our ﬂagship A-brand products have a
supply system of tens of thousands ofstandard products.
In our sales, technology, production, andall departments, we have developed thecapability to receive orders for specialized
items to meet customers speciﬁc needs.
We have a high market share amongcustomers in the global components
industries.

■ OSG Academy integrates
R&D technologies■ Global tap market share over 30%■ Engineers posted at overseas locations■ Solutions capable of meeting a broad
range of needs

INPUTS■ Multiple suppliers■ Good relationships and cooperation
with suppliers■ Base material production andprocurement within OSG Group■ R&D structure utilizes global
resources■ Accumulation of base material
production know-how■ Financial capital maintaining
R&D expenditures■ Globally optimized procurement■ Industry-leading R&D facilities

OUTPUTS■ Diverse product lineup■ Trusting relationships with customers■ Production and sales bases in
33 countries

OSG s reliable technical capability, which supports manufacturing industries worldwide,
has enabled us to realize high-precision and high-efﬁciency machining.
We help our customers solve their problems by furnishing products that combine competitive prices with world-class quality.

TAPS

END MILLS

Taps are used to cut female screw threads
on the inside surfaces of holes, taps fulﬁll avital role in the machining of precision
screws across a wide range of industries.
OSG offers a diverse lineup ranging fromsmall- to large-diameter taps. Taps havebeen one of our core products ever since
our founding and we have strived tomaintain competitive world-class quality.

End mills cut away metal to create shapes. They are used, for example,
to cut and contour molds for plastic parts, such as home appliances, aswell as press dies. Now more than ever before, there is a greater needfor superhard end mills with outstanding machining precision anddurability to meet the requirements of today for reducing the cost andweight of smaller and smaller diameter products. We have put much
effort into developing new products leveraging our proprietary coating
technology.

DRILLS
Drills are hole-cutting tools. We have gained
a high reputation among our clientele forour development of high-precision andhigh-value added products designed forautomobile and aircraft components, forwhich even the slightest error is intolerable
and advanced machining technology
required.

10 OSG Report 2021

ROLLING DIES
Rolling dies are used to form amale thread on round bar bypressing frow both side. OSG
manufactures and sells rolling diesdesigned and built according to ourcustomers purposes.

Manufacturing/Quality

Logistics/Sales

After-Sales Service

At mother factory in Japan, we arepromoting improved ability to meetdelivery deadlines and maximize output
through production management andplanning using digital data. We also
supports production optimized foroverseas markets and promotes global
quality certiﬁcation systems to maintain thequality of all products produced overseas.

OSG s global online ordering system has
allowed us to more efﬁciently handle
orders, provide estimates, and ship
products. In addition, we leverage data incentrally managing our inventory of
100,000 standard items worldwide.
Data-based inventory management
provides us with the capability to control
production and swiftly ship customers
orders.

OSG s global logistics and sales network
offers regriding and coating services to ourcustomers throughout the world.
In addition, our face-to-face sales activities
enable us to propose optimal machining
condition and speciﬁcations to ourcustomers. We provide consistent global
support that only a comprehensive cutting
tool manufacturer can offer.

■ Global production system■ Global inventory of 100,000
standard products■ Global online ordering system■ Inventory centers in key
locations overseas■ Distribution centers with quick accessto international airports and expressways■ Global PSI* management system■ Face-to-face sales follow-up■ Highly-competitive in-houseproduction facilities■ Proprietary heat treatment andgrinding technologies utilized■ Digitally-controlled production system■ Global quality certiﬁcation system*Production, Sales & Inventory■ Global support system in 33 countries■ Quality of regrinding andcoating services maintained
uniformly worldwide■ Proprietary coating development
technologies■ Tool recycling to contribute to
the environment and society

Sales by composition ratio(Period ended November 2021)

INDEXABLE TOOLS
Indexable tools, which are cutting tools with exchangeable blades,
are used to cut metal to produce dies and mechanicalcomponents. While end mills are used for ﬁnishing, indexable tools
are intended for roughing.

Others

10.4%
Rolling dies

8.0%
Drills

28.3%

Micro
precision
processing

16%

Asia

25.3%

Generalindustry

parts,（Precisiondies, etc. ）27%

Europe/Africa19.0%

Aerospace7%

End mills

17.5%

19.0%

GAUGES
Gauges are used to measure the precision of threads,
holes, and other parts. Accuracy inspection has become
an extermely important process becouse of the trend
toward increasing product precision and compliance withinternational standards.

Americas

Automotive
Taps

50%

Products

Japan

38.2%

34.3%

Industry

Regions

OSG Report 2021 11

Value Creation Stories

Financial and Non-Financial Highlights
Financial Highlights
Net sales (millions of yen)

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

150,000

30

24,000126,156

25

20,000120,000

16,10516,00090,00015

12,00060,0008,000

30,000
0

12.8

2018

2019

2020

0

2021

10
5

4,000

2017

20

2017

2018

2019

2020

2021

0

Operating income (left)
Operating income margin (right)

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

Earnings per share (EPS) (yen)100

25,00020,021

20,00016080112.63120
15,00068.6

60

10,000

40

5,000

20

0

0

80

40

-5,000

2017

2018

2019

2020

2021

-20

0

2017

2018

2019

2020

2021

Free cash ﬂow (left)
Equity ratio (right)

Non-Financial Highlights
Energy consumption (GJ)
Energy consumption per unit of production (GJ/million yen)
1,200,000

40

966,386
900,000

CO2 emissions (t)CO2 emissions per unit of production (t/million yen)
60,0003.0

50,0002.5

30

39,62240,000600,000

21.3

300,000

20

30,0001.5

20,000

1.0

10

0.87

10,000
0

2017

2018

Electricity (left)
City gas (left)

12 OSG Report 2021

2019

2020

2021

Fuel oil (power generation) (left)
Per unit of production (right)00

LPG (left)

2.0

2017

2018

2019

2020

Total emissions (left)
Per unit of production (right)

2021

0.5
0

Net income attributable to owners of the parent (millions of yen)
Return on equity (ROE) (%)

EBITDA (millions of yen)
EBITDA margin (%)
35,00026,69628,00021,00014,000

21.2

7,000
0

2017

2018

2019

2020

2021

50

15,00040

12,000

30

9,000

15

20

6,000

10

10

3,000

0

0

EBITDA (left)
EBITDA margin (right)

25

10,989

8.0
2017

2018

2019

2020

2021

20

5
0

Net income attributable to owners of the parent (left)
Return on equity (ROE) (right)

Total assets (millions of yen)
Total equity (millions of yen)

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

250,00050

209,757

200,00040

143,811150,000

100

36.0

80

30

60

100,000

20

40

50,000

10

0

2017

2018

2019

2020

0

2021

Total assets
Total equity

32.0
2017

2018

2019

2020

2021

20
0

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

Waste emissions (t)Valuable resource ratio (%)

Number of employees (consolidated) (persons)
Number of employees (non-consolidated) (persons)

2,500

100

1,863

2,000

80

1,500

60

1,000

40

8,000

7,489

6,000

4,000

44.8

500
0

20

2017

2018

2019

2020

Waste emissions (left)
Valuable resource ratio (right)

2021

0

1,914

2,000

0

2017

2018

2019

2020

2021

Number of employees (consolidated)
Number of employees (non-consolidated)

OSG Report 2021 13

Value Creation Stories

Message from the President

Beyond the Limit
Breaking Through Conventional WisdomNobuaki Osawa President & COO
ProﬁleNobuaki Osawa joined OSG Sales (now OSG) in 1991.
He became the director in charge of European operations in
2006, a Managing Director in 2010, and Senior Managing
Ofﬁcer and Director in 2019. In February 2021, he wasappointed Representative Director, President, and Chief
Operating Ofﬁcer (COO). He is originally from Aichi
Prefecture.

14 OSG Report 2021

Beyond the Limit

Looking Back at the Year Ended November 2021
The second half of the year saw the prolonged pandemic affectseveral macro-economic trends. It decreased capacity utilization rates
of manufacturers across many industries, which led to a shortage ofsemiconductors and other electronic components as well as a spike inraw material and shipping costs. In foreign exchange markets, the yen
remained weaker against major currencies compared to thepreceding term.
For the OSG Group, green shoots began to appear in the second
half of the preceding period and continued throughout this year as
well. Nevertheless, the shortage of semiconductors and other parts
compounded with the emergence of Covid-19 variants and led theautomotive industry to continue adjusting production. In addition,even though the aircraft industry continued to face a severe
landscape, demand stayed strong for semiconductor production
equipment as well as construction equipment, energy, and othersectors.
Despite bullish and bearish trends perceptible in varying industries
and businesses, I feel keenly it has been OSG Group s collective
strength that helped expand our operations in the global market as
the past year demonstrated with tap sales recording their highest
level ever for the entire period and drill sales achieving their highest
level ever in the second and subsequent quarters. The increased
revenue also drove up proﬁts and our operating income margin rose
to 12.8 % from preceding term s 8.0 %.
OSG Group operates globally, utilizing a ﬁve-pillar structure ofJapan, Europe, the Americas, Asia, and the Greater China Region. The
ratio of overseas sales during the year was up 2.4 points year-on-year
to 61.8%. We were able to promote our business in a well-balancedmanner across each of the ﬁve pillars. Underlying this achievement
has been the appropriate functioning of our information network,
which is intimately oriented toward each region. This allowed us to
identify potential demand based upon proper data and further
develop our business.
The effects of the pandemic are likely to continue for the time
being. Even so, I believe this is precisely the time for each of ourgroup companies, rooted in their respective regions, to makedecisions and manage their operations nimbly in accordance withthose decisions so as to demonstrate their strengths. We will
strengthen a structure that assists our diverse clientele extending
worldwide in fulﬁlling their wishes and maintains the capability turn a
proﬁt by doing so, even when producing small lots comprising a wide
variety of items.
Financially, the rise in revenue and proﬁt increased our cash andtime deposits as well as notes and accounts receivable. We were alsoable to repay and reduce debt. This pushed up our equity ratio by four
points year-on-year to 68.6% to ﬁnish the term. Free cash ﬂow, which
ﬁnances investments, ended at ¥20 billion, an increase of ¥20.1
billion year-on-year. This increase was primarily due to higher income
and a reduction in the amount of capital investment on the order ofapproximately ¥4.3 billion year-on-year. We plan to maintain capital

investments for the period ending November 2022 at approximately¥9 billion, which is on par with previous years.

New Medium-Term Management Plan
Beyond the Limit 2024
With this current term ending November 2022, we have launched our
new medium-term management plan Beyond the Limit 2024. Thesewords truly express our determination to change the way we think andnot be bound by preconceived ideas, break out of our shell, and advancebeyond our previous limitations so that we may build a corporate culture
capable of meeting head on any change that arises as we push ahead
toward the age of carbon neutrality, which will profoundly change thestructure of industry as well as our economy and society.
Moreover, our long-term vision, upon which we will proceed fornine full-year periods to end November 2030, has set a goal oftransforming OSG into an essential player contributing to the global
manufacturing industry. In addition to the automotive and aircraft
industries which we have always focused on, we will promote new
business development in precision micro-machining and othersectors forecast to grow, such as semiconductors, 5G, mobility, clean
energy, and healthcare. In addition, we will also continue toconcentrate on constructing a structure principally around a policy of
cross-selling so as to maximize synergies with companies brought
into our group after M&A.
Under the Paris Agreement on climate change adopted in 2015,
the year 2030 is an important one as countries around the world seek
to implement various policies. To achieve the goals set out for
reducing greenhouse gases, society will likely need to directly
confront tremendous changes, including promoting greater use ofelectric vehicles. Moreover, we also need to take into consideration
greater speed of change in the industrial structure so that we mayachieve our goals. To address such changes, I believe everyone
throughout our entire group must signiﬁcantly modify the way they
have been thinking. In that regard, I have put the greatest emphasison group management from the perspective of overall optimization.
Instead of partial optimization where each group company prioritizes
its own interests, I believe we will truly be able to transform thecorporate culture of our group through the construction of a businessfoundation that enables us to achieve overall optimization. We needto envisage management in a way that maximizes group proﬁtability
and operational efﬁciency rather than partial optimization with eachgroup company prioritizing its own interests.

New Opportunities for Micro Precision Processing
We have already begun to develop markets for the precision
micro-machining sector in Japan, Asia, and the Greater China Region.
OSG has been offering small-diameter tools with precision
micro-machining capability, and we plan to further focus our efforts
strategically on this market.

OSG Report 2021 15

Message from the President

Sales attributable to micro precision processing reached 16% thisyear. These products have broader application for 5G,
semiconductors, precision molds, mobility (EV), robots, medical, and avariety of other growth areas. Our daily sales reports include new user
data, and we have been following up utilizing in-house digitaltransformation sales tools to link this data to business with newcustomers and industrial ﬁelds. The market for micro precision
processing is projected to increase, and our target is to boost thesesales to 30% by the period ending November 2030.
To keep pace with future growth in this industry, it is importantthat we also grow into an essential player in global manufacturing.
Currently, Japanese mother plants handle most of production.
However, Taiwan, accumulated considerable experience over many
years, has a mass production system in place. We expect Taiwan toplay a key role as extend those operations and have the region serve abase for production and supply to the China market.

Initiatives for Maximizing Post-M&A Synergy
OSG s basic M&A policy has been to look for companies expected asynergy to develop in technology, sales, or other areas once acquired,
and then consolidate such ﬁrms in each region. In principle, we haveacquired M&A ﬁnancing in each speciﬁc region.
Based on the approach set forth in our corporate philosophy ofmaintaining a global presence, the OSG Group actively engaged inmergers and acquisitions mainly in Europe in the 2010 decade, thephase when we expanded top line. The companies brought into ourgroup pursued optimal management for their respective operations.
This had the consequence of these companies maintaining an
insufﬁcient perspective toward maximizing their value within thegroup, in other words group management achieved through overall
optimization. Reﬂecting on this, we have strengthened group
governance structure and concentrated efforts on constructing abusiness foundation where individual group companies maintain anawareness of the entire group.
Over the course of expanding top line, we engaged in M&A withmultiple companies to strengthen operations targeting the aircraft
industry. Some of these companies were sales companies with robust
sales channels in the industry and other manufacturers producing
locally for local consumption. The pandemic has put them in very
difﬁcult and severe circumstances. Nevertheless, group companies inthe same region have made use of their technology and available
capacity to complement each other s operations. These and othertypes of synergies have been created. I feel a sense of solidarity has

emerged within individual companies that they are part of a group.
Group companies have responded favorably, which has led to better
than anticipated results.
These past few years, the number of OSG group companies has
risen dramatically. We recognize the challenge we face in integrating
individual companies after merger, a process achieved throughpainstaking communication with each individual company. During
the past two years, we have not once been able to directly go and see
the plant run by BASS GmbH, a German Manufacturer brought into
our group just before the pandemic erupted. This Factory is one of
their important organizational resources. For us, thoughtful toolcommunication is the approach we take toward manufacturing andthe way in which we understand and strategically utilize each other s
production sites so as to embody this principle. So, it is very importantthat we actually be at BASS GmbH s production site. I would like us tofacilitate appropriate post-merger integration (PMI) by sharing suchvalues and maintaining a perspective of overall group optimization.

ESG Management Initiatives in
New Medium-Term Management Plan
In 1996, the former chairman Teruhide Osawa made threedeclarations as the company headed toward the 21st century: (1)global presence, (2) health consciousness, and (3) eco-friendliness.
Underlying these declarations has been idea that all benchmarks must
be global standards because our goal is to have a global presence.
When the former chairman stood at the helm of OSG, the term ESG
management was not very widely used. Even so, we were alreadyendeavoring to manage operations with an awareness of the earth,
health, and environment. That spirit continues on today.
For example, the starting point of our efforts in coating andregrinding business, the basic strategies of new medium-term
management plan, goes back to the early 2000s. Four groupcompanies are currently at the core to roll out a business model, torealize material-cycle society for the Earth s limited resources
effectively utilized by conserving natural resources and recycling.
Going forward, we would like to further accelerate this process withproduct development as well, utilizing OSG Group s tools to savelabor and achieve higher efﬁciency at customers manufacturing sites.
This sort of product development cannot be achieved by a tool
manufacturer alone, so we hope to collaborate with machine
manufacturers to deliver products which meet end users needs andare environmentally sound.

Consolidated net sales

Management Targets for the Year Ending November 2022

16 OSG Report 2021

¥135

billionBeyond the Limit

the current year ending in November 2022, we announced to raise
this ratio to 35%. In the future, we will aim for a 40% payout, all thewhile monitoring trends in business performance and grounding
these payouts on an improvement in earning power as mentioned
earlier.
Furthermore, in connection with shareholder return, we will strive
to enhance shareholder value through, among other efforts, share
repurchases. When repurchasing share, we will comprehensively take
into consideration our capital position, performance trends, OSG stock
prices, growth investment opportunities, capital efﬁciency
improvements, and other factors.

In addition, we are promoting concrete initiatives in line with the
key issues selected by the Sustainability Committee, that meetsquarterly. Despite the huge challenge that is presents, we issued ourCarbon Neutral Declaration. This is our roadmap as proceed towards
the year 2030 to reduce (increase energy savings in manufacturing
processes), and then towards the year 2050 to create (utilize clean
energy) and utilize (CO2-free electricity).
Industrial development has brought enriched lifestyles to people.
At the same time, industry has promoted mass production andgenerated large amounts of waste. The increase in CO2 emissions,environmental contamination, labor issues, and opposition to waves
of other corporate activities have created a variety of problems. To
resolve these, I feel strongly needed to contribute to a sustainable
society through our corporate activities.
I believe OSG s business initiatives should be activities that
contribute to the pursuit of a sustainable society.

In Closing
In the trend toward carbon neutrality, the shift to EVs is expected tobring signiﬁcant changes on the structure of the automotive industry
supply chain. Many of the components integrated into automobiles
will likely be modularized, and this will also prompt changes atmanufacturers supplying these components. There is also thepossibility of signiﬁcant change in the manufacturing process itself.
Companies lacking the collective strength will not be able to remainon the playing ﬁeld. We must ﬁrst correctly understand the likelihoodof such changes ourselves. That is the main message I would like toconvey with the words Beyond the Limit.
We operate in a business environment where these sorts of majorchanges are anticipated, but OSG Group companies are deeply rooted
in their local regions throughout the global market. On the
manufacturing frontlines, we have plants capable of handling volume
production, others capable of producing locally for local
consumption, and some capable of producing low volumes with shortdelivery deadlines, as well as a range of other operations that meetthe needs of speciﬁc regions. The goal of the new medium-term
management plan, Beyond the Limit 2024, is to strengthen our
corporate structure by conducting group management that considers
overall optimization and responding to all changes in global demand.
To achieve the goal of the new mid-term plan, OSG group will
work together to implement basic strategies and priority policies. I
sincerely ask all stakeholders to support as we take on the challengeof transforming ourselves to respond to major global changes thatwill come in the medium to long term, while maintaining our DNA asa "Global Presence".

To Our Stakeholders[ROA as KPI for Earning Power]
Quantitative targets in our new medium-term management plan set
our sights on achieving a 15% ROA (based on operating proﬁt) and¥30 billion in operating income by the period ending November 2024.
Speciﬁcally, sales divisions, including those of group companies, will
aim to improve operating margins, and manufacturing division, also
including those of group companies, will aim to improve total asset
turnover rate. We will seek to raise ROA on a consolidated operating
income basis by multiplying the efforts of both of these divisions.
Our productivity improvement project OSG 4.0 will play aparticularly important role in the manufacturing division s drive toimprove total asset turnover rate. Leveraging digital technologies, theproject seeks to shorten lead times and maximize proﬁt for
ultra-high-mix low-volume production as well as utilize automation to
make large-volume production more efﬁcient. A demonstration of the
project is currently being veriﬁed at our NEO Shinshiro factory. Once
we have conﬁrmed the program functions as designed, it will be
expanded to other key factories.
In improving ROA, one milestone we are aiming to reach is topush the total asset turnover rate to 0.75 or higher. The highest levelin the 2010 decade was between 0.76 and 0.77, so we would like toachieve this level.

[Challenge of Achieving a New Dividend Payout Ratio Target]
We previously made a commitment to a 30% dividend payout ratio. In

Operating income¥20.2

billionOperating income margin

15％

Capital expenditure budget¥9

Approx.

billionOSG Report 2021 17

Value Creation Stories

New Medium-Term Management Plan
We have renewed our management structure from ﬁscal year 2021 and started a new medium-term management
plan, Beyond the Limit 2014. The three-year plan runs from the current period ending November 2022 until the term
ending November 2024. Under this new plan, OSG s aim will be to commit ourselves to further enhancing the
efﬁciency of our operations, improve proﬁtability, create a robust corporate culture, and contribute to the global
manufacturing industry as we advance toward the era of carbon neutrality.

Changes of Management Plan

The Next Stage 2014（2014-2016）

Top-line expansion phase

The Next Stage 2017（2017-2020）
Becoming the world's leading holemaking cutting tool
manufacturer

Operating income (billions of yen)
ROA（％）

21

17

14.5

18

12.6
11.7

22

19

13.1

11.9

19

10.6

16

8

7.9
4.3

2014

2015

2016

Basic Policy
Aim to be the leading global hole-cutting
manufacturer, rebuild corporate and productbrands, and accelerate global expansion

Priority Measures① Set up facilities, mainly in growth markets, tobecome a global player② Launch A Brand, OSG s premium
general-purpose product brandLooking Back
The promotion of a two-product basic strategy
propelled growth of both sales and income.
①OSG s distribution expansion strategy, which
launched A Brand, increased market share② Major end-user strategy strengthened OSG scapability to secure orders

18 OSG Report 2021

2017

2018

2019

2020

2021

Basic Policy
Aim to be the leading global hole-cutting manufacturer and spur evolution offrontline to strengthen OSG s capability to secure orders.

Priority Measures
A two-pronged strategy focusing on catalog sales, which are mainly distributed topromote expansion of brand sales, and major end-users, from whom OSG s focus is
to develop the capability to secure orders, seeks to increase OSG s market shareworldwide. OSG will also expand frontline sites to facilitate our global expansion,
promote business development in the aircraft industry ranking next in sales after the
automotive industry, and intensify M&A activity.

Looking BackAn increase in sales was achieved thanks to the two-product basic strategy, global
frontline expansion, and M&A activity. However, the period ending November 2020
was also impacted by the pandemic, and the Next Stage 2017 targets (net sales: ¥150
billion, and operating income: ¥30 billion) were not achieved. Proﬁtability and asset
efﬁciency also fell.

New Medium-Term Management Plan

Beyond the Limit

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, we will strengthen our corporate structure.

● Over the course of these three stages up to the year 2030, OSG will change the composition of customer portfolio for better address socialand environmental changes.

● As we advance toward the carbon neutral era, the entire OSG Group will strive together to enhance corporate value with the aim of achieving

overall optimization.

Beyond the Limit 2022-2024（Stage1）

Beyond the Limit 2025-2027（Stage2）

Beyond the Limit 2028-2030（Stage3）

To become an essential player that contributes to the global manufacturing industry

Toward the carbon neutral era

Based on our corporate philosophy Global Presence, OSG will promote ESG management
as we seek to sustainably enhance corporate value.

30

20

Medium-Term
Management Targets

15.0(Period ending November 2024)

Customerportfolio

ROA (Operating income basis)

Micro precision processing

15%

Operating income

2022 Budget¥30 billion

2022 Target

30% or more
Become a carbon neutral
contributing company*ROA (%) = Operating income ÷ Total assets × 100

Basic Strategy

Further enhance business efﬁciency and strengthen OSG s corporate cultureso that we may stably generate proﬁts.

● Improve proﬁtability and business efﬁciency

to create a strong corporate structure● Achieve 40% share in the global tap market● A Brand sales rate 30%● Coating and tool reconditioning ratio 15%● Coating and tool reconditioning rate 10%● Global expansion of digital● Expand sales in micro precision machining

and energy industry● Increase portfolio composition by customer

to 30% or more in micro precision machining● A Brand sales rate 40%● Become a company that contributes

to the carbon neutrality of customers

manufacturing/optimize local production● Expand sales in micro precision machining,● Establish a sales and production systemenergy and aerospace industries

that makes full use of digital technology

Generalengineering

20％

Automotive

50％

Generalengineering

23％

Automotive

40％

Generalengineering

25％

Automotive

30％

Micro
precision
processing

Aerospace &energyMicroprecision
processing

Aerospace &energyMicroprecision
processing

Aerospace &energy

20％

10％

25％

12％

30％

15％
OSG Report 2021 19

Foundation for Value Creation
ESG
Management

Promotion of ESG Management

OSG Group has designated key issues as material fromthe ESG perspective, in order to realize our medium-term
magement plan, Beyond the Limit 2024.
We aim to maximze the corporate value gererated
by Iinking growth strategies with ESG initiatives.

Basic Sustainability Policy
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.
The Sustainability Committee deliberates

Board ofDirectors

ESG-related issue, policy and visionconsistency, priority measures, and other

Chairmanmatters, and regularly reports on its
activities to the Board of Directors.

Sustainability Committee (meets quarterly)
Chair：President
Members：Directors responsible, Human Resources &General Affairs Department General Manager,
and other department heads
Secretariat：Sustainability Promotion Ofﬁce

President

Measures for promoting sustainability are
implemented by department heads (ESG

Reports&
approval

Agenda：Deliberate and made decisions onsustainability-related policies, initiatives, etc.,
and issue regular reports on these topics

ofﬁcers) and facilitators in each organization
based on decisions made by the President,

Sustainability Promotion Ofﬁce (Sustainability administrator)

who chairs the Sustainability Committee.

Department general
Responsible for ESG promotion
managers (ESG ofﬁcer)

Formulate,
promote&implement
plans

Process for Identifying Material (Important) Issues
As we aim to achieve the SDGs, we have identiﬁed eight material issues the OSG Group will prioritize.

STEP 1

STEP 2

STEP 3

Identify prospective
material issues

Assess and analyze prospective material issues

Management assesses
appropriateness

importance to OSG
and then ranked
according to priority.

20 OSG Report 2021

Very highOf the issues identified in STEP 1, particular areas wereselected that were judged to be very relevant to OSG soperations, after which the prospective issues wereassessed in terms ofimportance. Issues haveIdentiﬁcation
been assessed alongof materiality
two axes: importance(important issues)
to stakeholders andImportance to stakeholders

Environmental, socialand economic issues
were identified withreference to GRIStandards, SDGs, andother internationalframeworks andguidelines.

High

Importanceto OSG

Very highManagement examined
the appropriateness of theprocessing assessing issue
materiality and the analysis
results, and verified theprospective material issues
to be prioritized. The
selected material issues
are approved by the Boardof Directors after
deliberation by management.

STEP 4
Identiﬁcationof materiality
Eight material issues
were identiﬁed.
The process for
identifying material
issues will be
conducted annually toreconsider issues andthen assess andanalyze themappropriately.

OSG Group s Material (Important) Issues

Climate Change Initiatives

Community Sustainable Development ①:
Sports Promotion Initiatives

OSG has expressed support for the TCFD and will strive toadapt to climate change effects on our operations, and wewill endeavor to promote business activities that
contribute to a carbon-free society and reduce greenhousegas emissions.

OSG is a top sponsor of Higashimikawa s professional
basketball team San-en NeoPhoenix and we support otherlocal professional sports. We have held events and invited
guests to watch the games free, which has helped toenergize the community.

Development of a Rewarding Workplace Environment

Community Sustainable Development ②:
Support for Healthcare Institutions & Facilities

OSG will develop and maintain an environment in which
each and every employee can ﬁnd pride and fulﬁllment,leverage diversity, and demonstrate their abilities to theirfull potential.

As part of our support for combating the Covid-19, OSG has
donated protective gear and masks to healthcare workers andcooperated with the administration of workplace vaccination
programs in nearby communities. We contribute to creating aheartwarming community through such activities as regularly
donating furniture and other furnishings tofacilities assisting people with disabilities.

Initiatives for Employing People with Disabilities

Improvement of Corporate Governance

OSG sketched our future vision which is to establish a
special afﬁliate company, and we set up the Special
Afﬁliate Company Preparation Team in June 2021. We aredeveloping an environment attentive to the aptitude ofand conditions faced by people with disabilities so as toenable all of us to work collaboratively.

The Board of Directors is a governing body of which the
majority of seats are held by highly-independent outside
directors and is capable of sufﬁciently exercising its
management oversight functions. Guidelines for conduct
to comply with corporate ethics are shared throughout theentire group to raise awareness as part of oursystems for enhancing corporate governance.

Health & Safety Management

Sustainable Finance

As a health-conscious company, we understand thatkeeping our employees safe and healthy is an importantmanagement concern, and we promote employee healthas well as facilitate the creation of a workplaceenvironment that is both comfortable and safe.

OSG has signed an agreement for ESG Assessment-Type Financing
Procurement in order to monitor the status of KPI achievement anddisclose such information. We are considering adopting
sustainability-linked loans, green bonds, and other forms of sustainableﬁnance when investment ﬁnancing is procured, and we are striving topractice more sophisticated
ESG/SDGs management.

OSG Report 2021 21

Foundation for Value Creation
ESG
Management

Climate Change Risks & Opportunities: TCFD Compliance

OSG Group recognizes climate change as an important issue affecting the sustainable growth of our business.
Based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) agreed in October 2021,
we have started analyzing climate change scenarios and promoted initiatives within the following framework.

1.Governance & Risk Management
OSG ranks climate change as an important management issue and thepresident, serving as chair of the Sustainability Committee, is
responsible for monitoring and oversight of climate-related issues.
The Sustainability Committee deliberates climate change andother ESG-related issue, policy and vision consistency, priority
measures, and other items, and regularly reports on its activities to theBoard of Directors.
Measures for promoting sustainability are implemented bydepartment heads (ESG ofﬁcers) and facilitators in each organization

based on decisions made by the President, who chairs theSustainability Committee.
Based on the impact to our business, the Risk and ComplianceManagement Committee evaluates the priority of climate change andother risks affecting our entire company.
The Sustainability Committee, Risk and Compliance Management
Committee, and Safety and Health Committee operate in conjunction
with each other to monitor risks and opportunities associated withclimate change.

Sustainability Promotion Structure
Reports & approval
Board of Directors

Reports issued

ChairmanSustainability Committee (meets quarterly)

Risk and Compliance Management Committee (meets quarterly)

Chair: President
Members: Directors responsible, Human Resources &General Affairs Department General Manager,
and other department heads
Secretariat: Sustainability Promotion Ofﬁce

Chair: President
Members: Directors responsible, Human Resources & Genera Affairs
Department General Manager, and other department heads
Secretariat: Human Resources & General Affairs Department Legal
Affairs Group

President
Collaboration

Reports issued
Formulate, promote &
implement plans

Sustainability Promotion Ofﬁce(Sustainability administrator)

Safety and Health Committee

Department general managers (ESG ofﬁcer and Risk & Compliance ofﬁcer)
Responsible for advancing ESG as well as risk and compliance matters

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

Risks and Countermeasures
Type
Policies& legalTransition risks

Risks

ImpactResponse

Tighter regulations on GHG
emissions

Subcategory

Increase in manufacturing, development, production andprocurement costs due to carbon taxes and other charges

High

Set targets for reduction of CO2 emissions
At plants, introduce CO2-free purchasing, off-site power purchase agreements, andcarport power purchase agreements
Promote eco-friendly factories and plants (more energy efficient in-house machine
tools, improve facility operation, and greater transparency)
Reassess items manufactured in light of changes in target markets

Physical risks

Tighter regulations on fossil fuelpower generation

Decrease in demand and increase in development andmanufacturing costs of tools for fossil fuel power generation

Moderate

Technology

Dissemination of renewables
and energy-saving technologies

Increase in development and manufacturing costs

Moderate

MarketTransition to environmentally-friendly products
Greater use of electric vehicles
and fuel-cell vehicles

Decrease in sales of eco-unfriendly products and services
Decrease in demand for tools for gasoline-powered vehicles

Reputation

Changes in customer baseand investors

Decline in corporate value and loss of opportunities forsecuring orders due to insufficient information disclosure
Contraction of scale of eco-unfriendly business
Increase in financing procurement costs

Acute

Increased severity of
extreme weather events

Increase in procurement costs due to reassessment of suppliers
Difficulty in procuring materials, production shutdowns, andproduction delays due to disasters affecting suppliers
Damage to production facilities, production shutdowns/delays,discharge of toxic substances due to damage to OSG plants

Chronic

Rise in mean temperatures

Moderate
Moderate
Moderate
High
High
High

Increase in air conditioning energy
Deterioration of working environment

Moderate
Moderate

Production shutdown due to shortage of electricity or water

Moderate*Timeline ranging from 2030 to 2050 is assumed.

22 OSG Report 2021

High
High

Closely watch renewable energy market trends, and commit resources todevelopment of cutting tools whose demand is forecast to increase
Develop environmentally-friendly cutting tools
Commit resources to development and design of non-gasoline-powered vehicles
Proactively disclose information and reply to CDP questions
Consider optimizing business portfolio (small-diameter micro-tools)
Adopt ESG/SDGs financing
Review BCP for all suppliers (understand risks affecting suppliers in terms of natural
disasters, logistics, raw material procurement, etc.)
Diversify suppliers
Draft and revise BCP, implement concrete facility countermeasures, diversify
production sites, and thoroughly control hazardous and other such substances
Adopt high-efficiency air conditioners
Promote labor savings and automation at factories (automated measuring and packaging),
promote safety and health management, improve thermal environment inside factories
Introduce in-house power generation facilities and storage batteries, and reduce electricity
and water usage at factories and offices

Opportunities and Responses
Type

Subcategory

Policies & legal

Transition risks

Technology

MarketReputation

Physical risks

Acute

Tighter regulations on
GHG emissions

Opportunities

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

High

Dissemination of renewables
and energy-saving technologies

Increase in demand for renewable energy and renewable energy
technology-related tools

Expansion of renewable energy
Transition to environmentally-friendly products

Increase in demand for renewable energy projects as development increased ofsolar panels and offshore wind power
Greater demand for long-lasting products

Moderate

Greater use of electric vehicles
and fuel-cell vehicles

Increase in demand for precision die machining due to development and promotion of batteries
Increase in demand for EV chargers and storage batteries

High
High

Moderate

High

Response
Adopt international carbon pricing
Develop and increase sales of tools for renewableenergy facilities and renewable energy-related items
Develop and increase sales of tools for storage batteries,
renewable energies, and hydrogen-related items
Further enhance quality, develop, and increase sales oflong-lasting products
Develop tools that enhance efficiency and shorten
processing time
Increase sales in the precision micro-machining sector
Accelerate development of machining tools for EV
chargers and storage batteries
Develop, increase investment, and build sales ofsmall-diameter tools

Greater demand for small-diameter tools (micro-tools) due to larger market for
semiconductors, connectors, and electronic components

High

Changes in customer base andinvestors

Proactive information disclosure to improve evaluation by stakeholders

High

Adopt ESG/SDGs financing

Increased severity of
extreme weather events

Increase in demand for disaster prevention products, services, etc. for times
when natural disasters strikeHigh

Develop tools for disaster preparedness items*Timeline ranging from 2030 to 2050 is assumed.

3.Metrics and Targets
Reduction of CO2 Emissions
OSG set the following targets in the medium-term management plan Beyond the Limit 2024, which was announced in January 2022.
・FY2030 target: 30% reduction from FY2019 level
・FY2050 target: Achievement of carbon neutrality
In addition, OSG plans to conduct the Scope 3 calculation and evaluation by FY2030, and we are working to reduce CO2 emission across the entire
supply chain.

Carbon Neutral Declaration(Illustration of CO2 reductions made toward achieving target)［t］

CO2 emissions (t)50,000△10％
achieved△20％
achieved

40,000△30％
achieved

30,000△100％
target achieved
20,000

Scope 1・Scope 2・Scope 3
10,0000
2019*Scope 3 calculation and evaluation by FY2030

2021

2024

2027

2030

2050

[FY]

FY2019 CO2 emissions
515t

Scope 1 (company vehicle gasoline usage)
Scope 2 (electricity usage)

49,768t

Scope 1 and 2 total

50,283t

STEP1 Reduce (save energy)

STEP2 Create

STEP3 Utilize

Greater energy savings in manufacturing process

Utilize clean energy

CO2-free electricity

・Install high-efﬁciency equipment and implement initiatives to enhanceenergy efﬁciency during production at in-house factories
・Invest in high-efﬁciency equipment achieving a sufﬁcient level of energy
savings to realize carbon neutrality
・Research and develop new processes for saving energy

・Introduce solar power generation facilities, etc.
・Install facilities and implement initiatives toconvert electricity used during in-house
operations to clean energy

・Purchase electricity sourced fromrenewable energies
・Consider carbon offset platforms

OSG Report 2021 23

Foundation for Value Creation

Environment

ESG
Management

OSG is committed to the creation of a sustainable environment and society through eco-friendly business activities.

Basic Philosophy
OSG Group recognizes that protecting the global environment is a vital priority forhumanity. Under our Environmental Basic Policy, we are actively committed to efficient
resource use and environmentally responsible production. We strive to supply customers
with eco-friendly products and services as part of our efforts to reduce our environmental
footprint and contribute to development of a society based on resource recycling.

■Environmental Slogan

Eco-friendly company andenvironment-respecting culture

Environmental Policy
OSG has established the Headquarters Environment Committee,
developed a company-wide environmental strategy, and actively
endeavored to resolve environmental problems. Within theenvironmental management structure, departments closely affiliatedwith sites having a significant environmental footprint are primarily
responsible for environmental management. The director responsible

Environmental Management Systemfor environmental affairs, who is the highest-ranking executive
overseeing environmental management activities, and the quality
assurance general manager, who serves as the general environmental
management officer, direct this structure and carry out environmental
management activities.

Highest-Ranking Executive
Director Responsible for Environmental Affairs
General Environmental Management Ofﬁcer
Quality Assurance General Manager

Headquarters Environment Secretariat

General Environmental Management Ofﬁcer
Headquarters Environment Committee

Expert Committee

Ofﬁce Environmental Management Ofﬁcer(Ofﬁce Environment Secretariat)

Internal Environmental Audit Team

Ofﬁce Environment Committee

Headquarters Plant

1

FY2021

Environmental Objectives

No

Item

Energy Conservation

Content
Total energy Use Reductionenergy sources:
electricity, fuel oil, and LPG（（

Total usage BM: 95,676 GJ/month

FY2022

TargetResultTarget

1.0% reduction

6.8% reduction

1.0% reduction

874 GJ/year

5,926GJ/year

1,118GJ/year

reduction

reduction

reduction

2

Eco-Products

Develop eco-friendly products

34 points

35 points

34 points*

3

Eco-Factory

Produce in an eco-friendly manner

37 points

70 points

37 points**Numerical scores out of a total 60 points under OSG standard set for improvement of environmental activities

24 OSG Report 2021

Ohtaka Precision Co., Ltd. Ofﬁce

Toei Factory

Honnogahara Center Ofﬁce

Toyokawa Factory Ofﬁce

Sports Square Ofﬁce

Headquarters Ofﬁce

OSG Academy Ofﬁce

Aoyama Seisakusho Co., Ltd.

Oike Factory Ofﬁce

Ohtaka Precision Co., Ltd.
Oike Factory

Toyohashi Factory Ofﬁce

Ohtaka Precision Co., Ltd.
Toyohashi Factory

Shinshiro Factory Ofﬁce

OSG Coating Service Co., Ltd.

Supply Chain Management
Promotion Group
Logistics Shinshiro

Ohtaka Precision Co., Ltd.
Shinshiro Factory

Aoyama Seisakusho Co., Ltd.
Shinshiro Factory

Yana Factory Ofﬁce

FY2021 Environmental Performance and FY2022 Targets

Environmental Education / Education Training System / ISO 14001 Certiﬁcation Status
Environmental Education

Education Training System

OSG provides ISO 14001 internal environmental auditor training for
newly appointed supervisors so that they will develop the skills of aqualified internal auditor for environmental management systems.
We also train the personnel responsible for environmental affairs
at each office to enhance their knowledge and develop their practicalskills through training in environmental laws and regulations so thatthey will acquire a broad basic understanding of these laws andregulations. In addition to the above, emergency response training is
conducted for those responsible for such actions at each office inorder to ensure thorough awareness.

Awareness training
Competence training

Internal training
Needs-based training
Partner/vendor training

Environmental
Education

Awareness training
External training

Competence training
Needs-based training

Status of Environmental Management Systems at Group Afﬁliates
Status of ISO 14001 Certiﬁcation Acquisition
November 2000

Nine ofﬁces of OSG

October 2007

Aoyama Seisakusho Co., Ltd.

October

NODA Precision Inc.

October 2008

Ohtaka Precision Co., Ltd.

December 2005

Sanwa Seiki Co., Ltd. Shiga Seisakusho

October 2008

Taiho Sangyo Corporation

October

Nihon Hard Metal Co., Ltd. Kyushu Plant

June

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

2004

2007

2014

Material Balance in Operations
To contribute to realization of a low-carbon society and creation of a resource-recycling society, OSG is cognizant of and manages the various
environmental impacts of our business activities. We continue to strive to manage these effects by efforts, such as reducing energy use and putting
waste from our manufacturing processes to use as recycled materials.

INPUT(Natural resources, energy, etc.)

Resource extraction &raw material production

Suppliers

Energy resource extraction
Raw material (smelting)Storage(processing)EnergyPurchased
electric power

Fuel oil/power generation

0kL

Fuel oil/air conditioning

0kL

LPG/air conditioning

247t

City gas

94m3

Service water/tap water

103,956m3

Industrial-use water

11,386m3

Well water

4,505m3

Paper (A4 size copy
paper equivalent)

Raw materials (metals)(PRTR substances)
Oils (cutting and grinding ﬂuids)

Production

Design development

Energy saving, resource saving(High-efﬁciency and long-life)
Reduction of environmental footprint(Dry cutting tools)
Procurement
Entrance control
Green procurement

246 million yen

Waste
The amount for re-use

835.1t

The amount of recycling

1,027.6t

The amount of landﬁll

2.6t

Total

1,865.3t
Discharges to water bodies

Manufacturing
Eco-friendly production
Reduction of environmental footprint

1,714tPackaging

226t

Reduction efforts
Reduction of environmental footprint

444kL

45,366 million yen

Packaging supplies

Eco-friendly product development

2.9 million sheets

Resources)

Products

OSG

95,248,000 kWh（

OUTPUT

Waste, discharges to water bodies,
atmosphere, etc.

Drainage

119,847m2*Drainage is mostly domestic sewage.
*OSG has balanced water usage so that thewater drainage volume equals the amount ofwater usage. We estimate that 50‒60% ofactual drainage is from the use of water-soluble
coolants, air conditioning evaporation, etc.
Atmospheric emissions
Energy-derived CO2

Sales & services

Customer waste

Products

Recycling or disposing

Production

39,622t

OSG Report 2021 25

ESG
Management

Environment

Environmental Accounting
OSG's environmental accounting system references
the Environmental Accounting Guidelines establishedby the Ministry of the Environment. Our aim topresent an environmental accounting to facilitate
understanding of our philosophy and environmental
conservation efforts so as to improve our relationshipwith society.

Costs and Effects over the Past Three Years[thousand yen]

FY2019FY2020

FY2021

1. Positive costs

223,52051,026592,238

2. Maintenance costs

66,326

63,82467,9203. Environmental damage compensation

0

0

0

4. Effects of environmental conservation

37,16912,103

101,838

Detailed Accounting of Costs and Effects in FY2021
CategoryItem[thousand yen]
Speciﬁc initiatives

Investments in equipment, etc.
0

① Pollution prevention costs
1. Positive costs forachieving environmental
targets② Global environmental conservation costs

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

592,238③ Resource environmental costs

0
Subtotal① Labor costs associated with environmental
conservation activities② Environmental education andtraining material preparation costs

2. Environmental
management system
maintenance costs

Environmental secretariat expenses,
management operating expenses

13,500Seminar participation, environmental reports

522③ Environmental audit expenses

External review expenses,
registration maintenance expenses④ Environmental regulation compliance costs

Designated chemical substance measurement, etc.

⑤ Waste disposal and recycling expenses

Waste disposal expenses

46,516⑥ Circulation measurement expenses

Various environmental measurement andanalysis expenses

4,808⑦ Environmental conservation costs associatedwith social activities

Activity expenses for activity expenses

1,820
754

Subtotal
3. Compensation costs for

Costs for soil remediation,
restoration of natural destruction, etc.
Subtotal

Total environmental improvement effects

67,9200environmental damage

4. Effects of environmental
conservation

592,2380

Total

660,158

Total

101,838

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

101,838

Reduction in CO 2 Emissions
Society is placing greater demands on companies to realize carbon
neutrality, calling on them to save energy, reduce power
consumption, adopt renewable energies, and engage in a variety ofother activities.
OSG has adopted a companywide theme of reducing our electric
power usage, and we have rolled out activities that promote more
efﬁcient energy use and develop energy-saving equipment
alternatives. More speciﬁcally, we have upgraded thermal source
devices, transformers, and air conditioning equipment so that we now

26 OSG Report 2021

use the leading models. Companywide, we have also promoted aconversion to LED lighting, done away with equipment using fuel oil,and implemented other similar efforts. The result has been thatenergy usage per unit of production has improved 12% year-on-year,
falling from 24.3 to 21.3, and total CO2 emissions were also reduced
by 1%.
We will reinforce these activities and strive in a systematic manner
to reduce CO2 emissions in accordance with our medium-term
environmental plan.

Energy usage

CO2 emissions［%］[GJ/million yen]
1,200,000
1,000,000

994,436

1,027,255

1,061,271

915,000
24.3

966,386

50,00025［%］[t/million yen]
60,00030

51,4840.97

53,001

0.95

1.2

1.07

49,76839,62240,1691.0

20

40,00015

30,0000.6

400,000

10

20,0000.4

200,000

5

10,0000.2

800,000
600,000

0

18.7

2017

18.4

2018

21.3

18.4

2019

2020

2021

Electricity (left)

Fuel oil (power generation & air conditioning) (left)

City gas (left)

Per unit of production (right)

0
[FY]

0

LPG (left)

2017

2018

Total emissions (left)

0.86

0.87

2019

2020

2021

0.8

0
[FY]

Per unit of production (right)

Streamlining Product Cases Reduced Plastic Usageas well as making other efforts to adopt more eco-friendly new casesand switch to ecological packaging ﬁlm.
We launched this effort in 2021 and have steadily made headway,
consolidating (integrating) 20 of the 78 types of packaging. We
anticipate that these efforts will ultimately reduce annual plastic
waste volume by 12 tons.

As we have developed multiple models of taps, end mills, and drills,
the types of cases and packaging have also become much morediverse. Nevertheless, considering that marine microplastic pollution
is now a global problem, we urgently need to reduce the amount ofplastic that we use.
OSG has been working to standardize packaging cases and labels

Energy-Saving Initiatives for Production Processes
The NEO Shinshiro Plant, which started operating in May 2020, iscompletely outﬁtted with environmentally-friendly equipment and efforts
are being made to operate the plant in environmentally-sound manner.
We are working to reuse resources and proactively reduce electricity usage.
Initiatives include converting machinery and plant internal lighting to LED
bulbs, reusing waste oil after cylindrical grinding sludge is treated, andcutting down on electricity usage by equipping machines with functions
that automatically shut down power when automated operation ends.
In addition, it is now also possible not only to use monitors to visualize
uptime, but also to make use of a variety of tools and apps to promote
digitalization that supports the on-site capability to enhance productivity
and use idle standby power consumption in a beneﬁcial manner.

Resource Recycling Initiatives［t］

OSG has been promoting zero emission activities to reduce
waste. We have also developed a system to recycle reusable
and recyclable resources and established a structure to ensure
the proper disposal of waste from our operations. These efforts
have enabled us to maintain a recycling rate of over 99% since2005.

Metal scrap (sold for re-use)

Cardboard boxes (sold for re-use) 48.9
Recycling

Waste emissions and valuable materials ratio
［%］
2,309

2,165

2,000

100
2,064

1,863

80

1,629
1,500
1,000

60
54.0

50.0

45.5

45.5

44.8

40
20

0

0
[FY]

2018

Waste emissions (left)

2019

2020

Waste plastic (recycled)

43.7

384.4

Wood chips (recycled)

86.0

202.3

Others (recycled)

373.7

Total

56.7
1,862.8t［t］［%］

160,000

151,765

152,130

140,000

2021

Valuable materials ratio (right)

144,173

120,000
100,000

2.8

4.0
3.5

122,134
3.2

2.7

80,000500

2017

Waste oil(sold for re-use and recycled)
Oil sludge(sold for re-use and recycled)
Waste diatomaceous soil
(sold for re-use and recycled)

Waste grinders (recycled) 46.1

Efﬂuent volume

［t］
2,500

620.9

119,847
2.6

2.5

3.0
2.5
2.0

60,0001.5

40,0001.0

20,000

0.5

0

2017

2018

Efﬂuent volume (left)

2019

2020

2021

0.0
[FY]

Per unit of production (right)

OSG Report 2021 27

ESG
Management

Environment

Management of chemical substancesPRTR
chemical substances

As part of our efforts to prevent contamination, each of our sites
conducts emergency training and exercises. Our personnel verify
countermeasures to be employed when there is an oil spill orleak.
In conjunction with these initiatives, we have ascertained
those chemical substances handled in our production processes
that are subject to controls under the PRTR system. We have also
identiﬁed the amounts of six controlled chemical substances (seediagram at right):

Manganese 4.3

Nickel 1.4

Vanadium
22.2

Cobalt40.5

Volume174.8 t/year

Chromium
60.3

Molybdenum
46.1

Green Procurement
OSG aims to provide our customers with environmentally-soundproducts in accordance with our Environmental Policy of making ourentire supply chain more environmentally friendly.
For necessary resources, OSG has endeavored to promote green
procurement together with our partner suppliers. We placeappropriate controls on products containing chemical substances andconduct green procurement self-assessments so that materials andproducts having a low impact on people and the environment areprioritized in our procurement and purchasing.

Eco-Friendly Products and Services
OSG is striving to create eco-friendly products and provide these to our customers.
We are actively working to reduce environmental footprint through regrinding services and developing
energy-saving and high-efﬁciency products that enable high speed and long-life.

Customers■Carbide Metal Recycling
Tungsten, cobalt, and other rare metals are among the
raw materials used for manufacturing carbide tools. The
entire OSG Group has been striving to recycle carbide
products.
We recover used tools from our customers and recycle
the rare metals, and make effective use of resources tohelp our customers CSR activities and promote zero
emissions.

RecoveryRare metals
Tungsten etc.

Resources

Carbide toolusers

Nihon Hard Metal
Co., Ltd.
Cemented Carbide
material/manufacturer Recovery
Resources
Produce recycler
RecoveryRefineries andmanufacturers

Resources

Products

OSG
Carbide tool
manufacturer■Reconditioning Service
Taps, end mills, drills, and other cutting tools become
worn and dull after repeated use. Regrinding these tools isable to restore their sharpness so they are as good as new.
OSG Group companies offer reconditioning services
customized to meet our customers needs.

OSG Group Regrinding Plants
Aoyama Seisakusho Co., Ltd.

ORS Corporation Gunma Plant

149 Miyamae, Ichinomiya-cho,
Toyokawa City, Aichi 441-1231, Japan
Tel. 0533-93-2524 Fax. 0533-93-2725

5720-7 Mimuro-cho, Isesaki City,
Gunma 379-2235, Japan
Tel. 0270-75-1333 Fax. 0270-75-1334

SD MFG. Company

Ohtaka Precision Co., Ltd. Headquarters Plant

442-2 Baba, Joso City, Ibaraki
300-2748, Japan
Tel. 0297-43-7181 Fax. 0297-43-7180

1-10 Koden, Arumi, Shinshiro City,
Aichi 441-1317, Japan
Tel. 0536-25-0833 Fax. 0536-25-0835

ORS Corporation

Nissin Diamond Co., Ltd.

1-156 Okusa Ogawa, Higashiura-cho,
Chita-gun, Aichi 470-2102, Japan
Tel. 0562-83-9841 Fax. 0562-83-9053

Before28 OSG Report 2021

After

(reconditions only diamond tools)

1561-7 Imazu, Imazu-cho, Takashima City,
Shiga 520-1621, Japan
Tel. 0740-22-2415 Fax. 0740-22-4178

Environmentally Conscious Product Development

AE-VML
Chipbreaker-type End Mill

Problem
While end mills with a long cutting edges can cut at greater
depths, they also generate longer cutting chips. As shown in thephoto on the right, these long chips quickly accumulate near
the machining area in a short time.
If machining is continued without removing theaccumulated chips, the tool will be chipped by biting into thechips. Therefore, when using end mills with long cutting edges,
it was necessary to stop the machine every time chips
accumulated and remove them.
In addition, machine stoppages caused production activities
to slow down.The standby power of the machine that did notcontribute to production during such stoppages wasapproximately 2 to 3 kWh (equivalent to BT40), which was aburden from the standpoint of environmental efﬁciency.

OSG Developed Product
AE-VML chipbreaker type end mills have notches, called achipbreaker to cut chips into shorter lengths.
This chipbreaker shortens and lightens the chips andsuppresses chip accumulation, enabling continuous operation
without stopping the machine. As a result, production efﬁciency
is improved and standby power consumption is reduced.The
AE-VML is also an environmentally friendly product from thestandpoint of reduced coolant consumption, since it canprocess chips with a smaller amount of coolant.
The AE-VML chipbreaker-type end mill was awarded the
Mechanical and Robotics Parts category of the 2020 Super
Monozukuri Parts Award sponsored by the Monozukuri Nippon
Conference and Nikkan Kogyo Shimbun, Ltd.. This award isgiven to products that can help solve issues facing Japanesemanufacturing, such as the declining birthrate, aging
population, and environmental preservation, and that can serve
as a guidepost for new growth. The AE-VML chipbreaker-type
was highly evaluated for its improved productivity and reduced
power consumption and coolant consumption.
We will continue to promote the development andcommercialization of Eco-friendly products.

Chipbreaker

Without Chipbreaker

With Chipbreaker

OSG Report 2021 29

Our Value Creation Support Infrastructure
ESG
Management

Society

OSG Group extensively fulﬁlls our social responsibility to our customers, partners, employees, communities,
and other stakeholders.

Human Resource Development
indispensable part of our company. Building on our human resource
development philosophy, we strive to expand and improve our employees'
capabilities and help them develop based on the seven qualities required foradvanced manufacturing.

In 2013, we introduced a personnel system intended to enable our employees
to develop in a way that maximizes corporate value while creating a corporate
culture that emphasizes personal development and embracing challenges.
We believe our employees possess unlimited potential and are an

Seven Qualities Required of OSG Employees

Level-based training
Introductory level- ﬁrst term
Latterterm

Company-wide

New employee training
Preparation &company knowledge

Practice with measuring tools andhow to read drawings

Business manners
Communication

Product knowledge &cutting practice
Safety & SCM training

On-the-job training (trainer system)
Follow-up education for new employees
Follow-up educationfor 2nd year employees

Follow-up educationfor 3rd year employees

Education for young employees

ISO management training(quality & environment)
Health & safety training
Quality control &improvement

Self-development &qualiﬁcation acquisition
OSG competency
examination
Correspondence
National competency
courses
examination
Quality control examination
Business career examination
TOEIC

Other
qualiﬁcations &testing

People skills seminarOn-the-job training

Demonstration of independence & self-management

Intermediate Advanced
level
level

■Globality
As the world's leading manufacturer of cutting tools, we must
be constantly aware of our position as a member of a global
society and demonstrate a global sensitivity enabling us toadapt to cultures, languages, and customs around the world.
■Spirit of challenge
We must identify with dreams and aspirations, neverfearing failure as we continue to boldly set and achieve
ambitious targets. As we move forward, we have to thinkon our feet to adapt to changes while generating proﬁt.
■Conceptualization
To contribute to manufacturing industries around the world asa cutting-tool manufacturer, we must be able to perceive theessence of things, formulating advanced concepts and plansthat also align with company policies and management goals.
■Communication
In order to actualize our philosophy of Tool Communication , wemust foster strong relationships based on trust, communicate
intentions and information quickly and accurately, and collaborate
with team members both inside and outside of the company.
■Leadership
Leadership allows us to guide the members of our team in theright direction and demonstrate the boundless potential ofcollective effort. A leader is someone able to gain the complete
trust of their team and demonstrate humanity, sincerity and asense of responsibility as the situation demands.
■Followership
Followership means actively supporting leaders in order todemonstrate the boundless potential of collective effort while
maintaining the awareness and capacity to collaborate with leadersand organizations to achieve the objectives of the workplace.
■Innovation
Innovation allows us to create new value by pursuing thedevelopment of cutting tools to provide products andservices that meet the real needs of our customers.

Human Resource Development System

Education for mid-career employees
Leadership & followership
Education for new managers
Management education

Employee Data

Number of
employees

Number ofNew
employees

FY2017FY2018FY2019FY2020

FY2021

1,941

1,988

2,060

2,047

2,100

Men

1,627

1,664

1,727

1,718

1,755

Women

313

319

326

322

338

55

33

63

45

50

Men

49

29

56

38

41

Women

6

4

7

7

9

* The category of employee includes regular, quasi-regular, ﬁxed-term, experienced elder, temporary, and part-time
employees.

National Skills Competition
OSG participated in the National Skills Competition for 10 years from 2012 through2021. The National Skills Competition is an event for young skilled workers age 23 andyounger, the ones shouldering Japan s future, where they compete against the bestin Japan at their skill level. The competition is held so that these young people
understand the importance of manufacturing. OSG has participated in competitions
for the milling machine trade, in which our young employees wield their skills toachieve optimum performance with OSG s end mills, as well as the mechanicaldrafting trade in which competitors make use of 3D CAD tools, which have supported
manufacturing frontlines in recent years. Eight of our employees entered thesecompetitions. These employees fused their high skills with state-of-the-art technology.
They are now utilizing their honed skills successfully in their respective workplaces.
In addition, as a cutting-tool manufacturer, OSG has helped sponsor national trials
for the CNC milling machine competition of the WorldSkills Competition held every
two years. We have also furnished staff to support running of the competition.
We also participate in Aichi Prefecture's Manufacturing Spirit Awareness (School

30 OSG Report 2021

Visit) Project, which offers hands-on manufacturing experiences and vocationalseminars. We send our WorldSkills Competition participants to elementary and juniorhigh schools to show young people fascinating aspects about manufacturing in aneffort to foster an interest in manufacturing and encourage children to aspire to be
manufacturing technicians.

Milling machine eventat the National Skills Competition

Mechanical drafting eventat the National Skills Competition

Encouragement for Acquiring Skill and Competency Certiﬁcations
OSG encourages our employees to acquire certiﬁcation with national competency/skill tests and obtain other qualiﬁcations toimprove their skills, build their motivation, and raise their awareness of quality. Also, since 2020, OSG has implemented ﬁve of ourown competency examinations, which have been accredited by Aichi Prefecture for competency evaluation. The entire OSG Group
is striving to improve product quality and productivity, facilitate the transmission of advanced proﬁciencies and competencies fromone generation to the next, as well as promote versatile multi-skilled workers. In addition, after employees have been certiﬁed, theyalso contribute to augmenting on-site capabilities in terms of products by taking the next step up to serve as trainers and coaches,
testing assistants, and examiners on testing commissions. OSG also provides support through online learning.

OSG competency examination
for tap certiﬁcation

Work-Style Reform
OSG has been facilitating improvements in the environment in which our employees work as part of our work-style reforms. Our IT Department established apaperless workplace goal early on, and we have done away with designated desks in ofﬁces and converted to unassigned seating. In conjunction with theconstruction (addition) of a new plant, we completely converted ofﬁces to unassigned seating and the dining area to a cafeteria-style facility to achieve our aim offurther enhancing efﬁciency. We are advancing efforts to create a workplace environment that is comfortable for our employees and makes it easier for them toperform their work.
Additionally, OSG has continued to pursue work styles that foster a better work-life balance, modes adapted to the needs of the individual and the requirement
to concentrate during labor input hours. We have enhanced operational efﬁciency with a ﬂextime working system for management departments and other units
indirectly involved in operations as well as recommending our sales department employees go directly from their homes to and from their appointments. A system
for telework, which was trialed during the pandemic, was also established in April 2022 as another workstyle available to employees. In addition, to accurately
manage working hours while employees are at company ofﬁces, we have also started using IC cards to manage attendance records. Based on these attendance
records, we are endeavoring together with labor unions to manage employee working hours and overtime appropriately and shorten overall working time.

IC card for attendance
management

Average Overtime [Hours]
Dec. 2020

Jan. 2021

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Men

7.9

11.9

14.3

15.9

15.0

14.5

16.6

19.0

15.2

19.6

19.5

17.6

Women

6.4

8.6

10.6

12.4

10.9

11.2

11.7

13.0

12.4

14.6

15.1

13.2

Work-Life Balance
A work-life balance initiative that we have implemented is to provide our employeeswith both support for their families and jobs by changing the minimum length ofannual leave units from two hours to one hour. We have also set up a nursing careand childcare leave system that goes beyond what is legally required for our
employees to help with nursing care in our aging society as well as childcare forfamilies where both parents work, the family unit now the mainstream. We continue
to take into consideration sociality as we reassess and modify our systems, including
making it possible for employees to stagger their working hours up to a maximum of
two hours (in 10-minute intervals) for childcare or nursing care reasons. We have set a
goal for both labor unions and management to recommend our employees take atleast 70% of their annual leave each year, and we have been striving to increase thatpercentage. We have set up a system for accumulating annual leave that would lapse
and changed the maximum number of days employees may accumulate from 30 to
40. In addition, we have expanded the conditions upon which this system may beutilized to upgrade and expand the framework so that employees may utilize theirleave to take care of family members as well as non-work-related illness or injury.
The scope of memorial leave (birthday leave) that employees may take has also
been expanded to include up to four weeks after an employee s birthday as well as up
to four weeks before the birthday, making the total period during which memorial
leave may be taken eight weeks so as to make it easier for employees to avail
themselves of such leave. We also introduced a new employee welfare system, thegroup long-term disability insurance or GLTD system. We are constructing anenvironment that allows our employees to work with peace of mind by indemnifying
a portion of their income even if they ﬁnd themselves in a situation where they areunable to work.
Early on, we incorporated a system allowing employees to extend the age ofmandatory retirement to 65 as well as asystem for rehiring retired employees before
they reach the age of 70. We set up a new
system known as the come back system
where we reemploy workers after they havevoluntarily retired for personal reasons before
the age of mandatory retirement. OSG has
endeavored to stabilize employment. We also
Mandatory retirement
preparation seminar
hold retirement preparation seminars every

year to help employees formulate even better life plans for themselves after the ageof 60. With the cooperation of ﬁnancial institutions, we encourage our employees to
put together a life plan based on explanations of matters they will need to deal withafter the age of 60, the procedures necessary at the time of mandatory retirement,
and their retirement beneﬁts (deﬁned contribution pension plan).

Data on Child & Nursing Care
Item
No. of eligible
employees taking leave
Percentage of eligible
employees taking leave
Men
Avg. number ofdays taken
Percentage of employeesChildcare
returning to work
leave
No. of eligible
employees taking leave
Percentage of eligible
employees taking leave
Women
Avg. number ofdays taken
Percentage of employees
returning to work
No. of employees with
Shorter working
shortened hours
hours for childcare
No. of eligible
Nursing care leave employees taking leave

Data on Working Hours

Total annual hours actually worked

FY2019FY2020

FY2021

1

2

3

2

4

5

120

64

60

100

100

100

15

8

14

100

100

100

420

509

426

93

88

100

29

34

39

1

2

1

Actual hours worked
FY2019FY2020

FY2021

103,447.3

102,399.1

102,876.8

7,986.6

7,155.9

8,501.6

Total annual hours actually worked +Annual paid hours

111,433.9

109,554.9

111,378.4

Annual hours worked overtime

14,019.8

3,785.2

10,381.7

Men

73%

73%

69%

Women

77%

75%

70%

Annual paid hours

Percentage of annual
paid leave taken

OSG Report 2021 31

ESG
Management

Society

Health & Safety Management Initiatives: Pursuit of Wellbeing
Since OSG declared in 1996 that we will be a health-conscious company, we
have adopted many measures and policies to support our employees ingetting and staying physically ﬁt, balancing both work and medical treatment,
and other issues they face so as to create an environment where each andevery one of our employees is able to work in good health.
Amid the rapidly changing environment due to the spread of Covid-19
infections, we believe it is important, in terms of both safety and health, towork for the well-being of our employees, their families, our customers, ourcommunities, society, and the earth. So, with that in mind, we declared andhave promoted this year as the ﬁrst year of the era of safety and healthmanagement.

Managerial System Promoting Safety &Health Management
Highest-Ranking
Executive
President &Representative Director

Safety & Health
Promotion Secretariat

Workplace

Safety & Health
Promotion Team

■Safety & Health Management Declaration
Safety Management
Committee

OSG will strive for the well-being of our employees
and contribute to building a prosperous future for our
employees, their families, our customers, ourcommunities, society, and the earth.

Health Management
Committee

Company Initiatives
Safety ―Returning home from work
as healthy as you arrived in the morning―

Health ―Creating an environment where employees may
perform their work in good health both mentally and physically―

Safety recognition training

Special training

Easily-accessible healthconsultation centers

Combatting Covid-19

Trainees experience hazardous situations
to stimulate greater safety awarenessStatutory training required for work

Staffed by occupational health physicians,
counselors, and healthcare personnel

Workplace vaccination program forpeace of mind at work

Trafﬁc safety patrol

New employee safety training

Healthy meals offered

Promoting communication

Trainees are educated about trafﬁc safety
for employees and communities

New employees learn safety basics

Balanced healthy meals offered atcompany cafeterias

Employees and their families take part inwelfare and beneﬁt programs

Transformationin employees
attitudes

Greater safety
awareness
Healthier both mentallyand physically

Optimalworking experience
Pro-health sensitivity

Higher job satisfaction
and more fulfilling life

Sustainable Growth of Employees, OSG, and Society
32 OSG Report 2021

Well-being

Initiatives Upholding Respect for Human Rights
OSG Group and all our employees both in Japan and abroad act withrespect for human rights and are committed to following the letter as well
as spirit of all relevant laws, regulations, and international rules as theywork proactively to create a sustainable society with sound values. We
ensure a healthy work environment where people neither offend nor
discriminate against others on the basis of race, belief, skin color, sex,
religion, nationality, language, physical appearance, wealth, or birthplace.
Some of our principal efforts have been to raise awareness of humanrights during new employee training and outside seminars. We have usedin-house newsletters to address human rights issues as part of ourendeavor to prevent such issues from arising in our working environment.
We have also established a point of contact dedicated to responding toconsultations, complaints, or other inquiries from employees regardingharassment. OSG Group believes it is important for each and every one of
our employees to actively work to promote human rights awareness andfor them to continue to carry out this important work. OSG is also amember of the Industrial Federation for Human Rights in Aichi, and weengage in activities to promote and improve human rights awareness.

Harassment Prevention
employees to seek advice.
In addition to awareness activities to prevent harassment, we areworking to further enhance our consultation system and make it evenmore responsive through means such as increasing the number ofstaff members available to provide advice.

At OSG, we have established regulations to prevent various types ofharassment. We strive to create a workplace in which all employees
can feel comfortable by ensuring that everyone is aware of thecompany's role in preventing harassment, the responsibilities ofpeople in each position, and the contact points available for

Promoting Active Participation by Women
OSG has strived to create a pleasant work environment based on the theme ofpromoting diversity and inclusion so that our diverse human resources are able
to capitalize on their individual personalities and character as well as demonstrate
their abilities to the fullest regardless of their nationality, gender, ethnicity, sex,
disability, or other characteristics so that we may employ a diverse range ofhuman resources. Among these efforts, we recognize that promoting the active
participation of women in the workplace is an important issue. Our aim is toenable each and every woman to demonstrate her abilities to the fullest in her
career by continuing to work passionately and assuredly.
In addition, we have also implemented initiatives from the perspective of

supporting both work and childcare as well as career development. Among these
efforts is the Career Plan Statement System, which creates career paths for
women employees. Personnel rotations are implemented systematically for our
women employees, including overseas postings, in line with this system. Our
medium- and long-term plan is for our women employees to build up experiencethrough interdepartmental personnel assignments where they work at multipleofﬁces and sites as well as perform many operations. We believe this will lead toan increase in managers with the capability to manage a variety of departments
and business units. Also, in 2021, we established the come back system and wehave also developed systems that support ﬂexible work styles for our employees.

Women Employees & Managers
[No.]

[%]

400

2

1.56

1.59

1.59

1.61

1.64

300
200

1.5
314

324

333

329

345

0.5

100
0

1

2017

2018

2019

2020

2021

0
[FY]

No. of women employees (left)
Percentage of managers who are women (right)

Women s empowerment project members holding a meeting

Disability Employment Initiatives
OSG actively promotes initiatives for employing people with disabilities as partof our efforts to achieve the SDGs. Even though the composition of ourpersonnel force exceeds the statutory percentage for employees withdisabilities, we will launch activities in 2022 with the aim of establishing a
special barrier-free subsidiary as part of orienting our company toward further
development and growth.
With the cooperation of the Aichi Labor Bureau, Japan Organization for
Employment of the Elderly, Persons with Disabilities, and Jobseekers, Public
Employment Security Ofﬁce, and many other concerned organizations, OSG
will set up a subsidiary that gives consideration to employing people withdisabilities. So that even one more person with a disability is able to play anactive role in society commensurate with their aptitude and circumstances,
OSG will expand the scope of work and make other improvements so that theentire OSG Group may feel that we are fulﬁlling our corporate social
responsibility.
We will also continue to collaborate with community-based social welfareorganizations as we have been doing to provide off-site and contract work.

We want to offer people who face challenges in pursuing regular employment
opportunities to participate in society and share the joy of working together.

Percentage of Employees with Disabilities
［%］
3.00

Statutory quota

OSG employment level

2.70

2.80
2.60
2.40

2.48
2.29

2.33

2017

2018

2.23

2.20
2.00
1.80

2019

2020

2021

[FY]

(*Highest employment percentage during ﬁscal year)

OSG Report 2021 33

ESG
Management

Society

Commitment to Customer Satisfaction
Online Seminars
seminars in our constant efforts to improve product quality and develop
even better products.
Moving forward as well, we will be conscious of how we mayleverage online advantages and utilize these advantages to hold evenbetter seminars. We will also make preparations for in-person seminars tobring out the beneﬁts available only through that type of experience. We
are making an effort to provide information beneﬁcial to our customers
whether it be digitally or in real time face-to-face or online.

OSG regularly holds online seminars as part of our efforts to further
enhance customer satisfaction. Even as the pandemic made it difﬁcult tohold in-person seminars, we have continued to communicate with ourcustomers by utilizing our online meeting platform to conduct seminars.
Surveying customers who attended any of these seminars, we picked upcomments and found out their degree of satisfaction with these sessions
so that we could make future seminars even more fruitful. We have also
put to use customer comments and needs received through theseCommunication Dial
have to wait for answers to their questions.
We have also developed a system to receive customer queries
through an online chat system. Our aim is to increase customer
satisfaction by allowing customers to easily contact us either byphone or online. Communication Dial will continue to evolve basedon our Customer First spirit and a commitment to building a senseof assurance that OSG's communication dial is always there toanswer any queries should a problem arise.

The Communication Dial answers more than 100 telephone inquiries
from customers every day. These queries range from basic questions
to speciﬁc and highly-technical inquiries relating to actual cutting
process. Depending on the nature, it may be necessary to check withthe design and development divisions or contact the relevant sales
team to arrange a visit to the customer's site. We are committed toproviding the best service tailored to each individual customer. In
addition, we monitor the percentage of inquires handled, and staff
the Communication Dial appropriately so that our customers do not

TOPICS

Super Monozukuri Parts Awards

The award ceremony for the 2021 Super Monozukuri Innovative Components Awards sponsored by
the Monozukuri Nippon Conference and Nikkan Kogyo Shimbun was held at a Tokyo hotel on
November 26, 2021. The AE-VTS-N, AE-TS-N, and AE-TL-N DLC coated carbide end mill models for
nonferrous materials were recognized with the Machine and Robot Components Award.
This award honors products and components that are emblematic of new growth and offer
solutions to challenges faced by Japan s manufacturing industry, such as the declining birthrate andaging population, environmental conservation, maintaining a stable supply of resources and energy,
and intensifying international competition. This was the fourth consecutive year for OSG to receive anaward and the third consecutive year to be recognized in the end mill division. We fully intend to
endeavor to develop products with which we will be able to receive such prestigious awards.

Top down: AE-VTS-N, AE-TS-N, and AE-TL-N end mills

Quality Management System
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 continue to receive
certiﬁcation today for all processes, including for our key plants inJapan. Also, in 2018, we acquired JISQ 9100 certiﬁcation, a quality
management standard to which particular requirements have been
added for the aerospace industry. We will continue our efforts toobtain even more certiﬁcations.

■OSG Quality Slogan■Quality Policy

We put quality ﬁrst and have earned the trust andsatisfaction of our customers through our
exceptional products and services.
In order to maintain this level of performance, we
make continual improvements to the effectivenessof our quality management system.

1. Offering the best quality that satisﬁes our customers and society

34 OSG Report 2021

2. Promoting standardization of operations
3. Preventing progression of faulty products
4. Shipping products on schedule
5. Improving the quality control circle and 5S methodology

OSG Quality Certiﬁcation System
We have established our own quality certiﬁcation system to ensure
consistent quality, and strive to maintain and improve quality at ourgroup companies in Japan and overseas. The quality certiﬁcation system
is a system to certify that quality management from receipt of raw
materials (or components to be reconditioned) to product shipment andafter sales service is equivalent to that of a mother plant managed by
OSG Japan. Evaluations are conducted by certiﬁed quality auditors fromOSG Japan in accordance with the Three Reality Principles ("going onsite," "knowing the situation," and "being realistic"). The systems in place

to ensure that we assess that the quality required of customers is
consistently delivered as well as our employees ability to correctly
evaluate products. This is done through quality audits based on evidence
submitted through communication with those in charge and thosecarrying out work.
We will continue to further expand these activities in order to ensurethat OSG's standards of manufacturing are maintained at our groupcompanies around the world.

QC Circles
OSG promotes QC Circle activities to help each of our employees improve their problem-solving abilities. In
addition to enhancing these abilities, the QC Circle also aims to improve individuals communication abilities
by working as a team. Within the Manufacturing Department, QC activities are held with the aim of enhancing
productivity. In addition, the QC Circle s objectives are also to facilitate interdepartmental activities and rollout
these activities to other departments and business units. A company-wide QC Circle Tournament is also heldon the theme of solving problems as a team where teams present the results of their efforts.
Case presentations by QC Circle promoting
better quality control

Corporate Philanthropy
OSG s Efforts to Foster the Next Generation
Space Parachute Challenge Workshop
Describes Space to Children

Aichi Prefecture's "Spirit of Manufacturing Awareness Project"for Enhancing Local Human Resources

On August 29, 2021, OSG held an online space parachute challenge workshop
for elementary school students and others attendees in Toyohashi City.
This was the fourth such workshop arranged with the objective of
encouraging young people to take up the challenge of trying to do something
difﬁcult and not give up. Even though the program was held online that day,some 50 people participated and together we made parachutes. We invited
Keisuke Iwatani, who conducts research on stratospheric balloons, to serve as
the instructor. He ﬁelded questions from the children and talked about space
as well as manned space travel in the future using balloons. The workshop
provided a very meaningful time for all involved.

OSG personnel have conducted classes on manufacturing atelementary and junior high schools in Aichi Prefecture. The project isadministered by Aichi Prefecture to further children and students
interest in manufacturing and aspiration to be engineers by having
them experience manufacturing skills and what it means to work.
OSG's human resource development team served as instructors
and provided hands-on training to participating students about what
to be aware of in day-to-day work, such as precision measurement,
cutting, efﬁciency, safety, as well as the importance of keeping thingsorganized and communication, in addition to other lessons.

Children participating in the workshop

Scene during class learning about manufacturing

Instructor: Keisuke Iwatani

Contributions to Local Communities
Donating Personal Protective Equipment to Healthcare Workers
In the Higashi-Mikawa district where OSG has many business sites, we donated surgical gowns, facemasks, disinfectant, face shields, and other infection prevention personal protective equipment tohealthcare workers as a show of our gratitude and respect for working day and night performing
medical care services. OSG personnel visited hospitals and city ofﬁces to present personal protective
equipment, and expressed our commitment to stay mindful about infection prevention. They also
stated that we will continue to support everyone on the front lines.

OSG Report 2021 35

Our Value Creation Support Infrastructure
ESG
Management

Governance

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

Basic Philosophy
are among our most important management priorities for achieving theseobjectives.
One of the ways in which we enhance corporate governance is byraising compliance awareness among directors, executive ofﬁcers, andemployees 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.

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 andtransparency in our business activities. We also believe these qualities
contribute to sustainable corporate development and enhancement ofcorporate value. Measures to enhance corporate governance, including
the establishment of efﬁcient and transparent management organizations,

Corporate Governance Structure
Appointment,
dismissal

Appointment, dismissal

Appointment, dismissal

General Meeting of Shareholders

Nomination & Compensation
Committee

Advice, reports

Appointment,
dismissal

Board of Directors(including members of the Audit& Supervisory Committee)

Audits,etc.

Audit & Supervisory Committee(directors who are members of the Audit& Supervisory Committee)

Reporting
Audit & Supervisory
Committee Section

Appointment,
dismissal

Risk and Compliance Management
Committee

Independent
auditsSustainability Committee

Representative director
Directives,supervision
Management Committee

Accounting auditors

Collaboration

Management Audit Section

Executive Ofﬁcer
Directives,supervision

Collaboration

Reporting

ReportingDirectives

Information
gathering

Advice,consultation

Audit

Legal and tax advisors

Operational executive divisions(including subsidiaries)

Overview of Corporate Governance Structure
Having selected to establish an audit and supervisory committee, OSG scorporate governance structure consists of the Board of Directors, Audit &Supervisory Committee, and accounting auditors. The role of the Board of
Directors is clearly deﬁned within this structure. Operational executivefunctions are performed by executive ofﬁcers, while the Board of Directors is
responsible for decision-making and overseeing operational executive
actions. To strengthen decision-making functions, the seven-member Boardof Directors includes two directors who are also involved in business
operations as executive ofﬁcers. The remaining ﬁve directors, of whom fourare outside directors, are also members of the Audit & Supervisory
Committee. The outside directors also constitute a majority on the Board of
Directors. By creating this structure, we have enhanced the transparency andindependence of the Board of Directors as well as the effectiveness of its
management supervisory role, while also bringing in outside perspectives.
In addition, OSG has adopted an executive ofﬁcer system to ensure
effective responses to changes in the business environment, as well as to36 OSG Report 2021

clarify the roles and responsibilities of the executive 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 make performance more expeditious and efﬁcient in a timely
manner.

Board of Directors

Total of 7 directors (4 outside directors)

4

3
Audit &
Supervisory
Committee
memberOutside directors

Internal directors

Executive
director

Reasons for Adopting Corporate Governance Structure
director and executive ofﬁcers. All of OSG s four outside directors are
independent ofﬁcers as stipulated in the listing rules. With the ﬁve membersof 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 and ensuresmanagement transparency and appropriateness so as to provide anenvironment in which management oversight functions effectively.

By adopting our present corporate governance structure, we have enhanced
the ability of the Board of Directors to make decisions about management
decision-making and oversee the performance of business operations,
thereby improving management efﬁciency and ensuring that management
decisions can be made appropriately and strategically. The activities of the
Audit & Supervisory Committee, of which four of the ﬁve members areoutside directors, include auditing the company s ﬁnancial position andoperations as well as the performance of duties by the representative

Nomination and Compensation Committee
highly-independent outside directors.
Persons deemed suitable to be directors of OSG, on the basis of theirextensive experience, advanced knowledge, and high-levelspecialization, 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 fromthe Nomination and Compensation Committee.
For details about OSG s process for determining compensation,please refer to the section with that heading on p.39.

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 &Supervisor Committee. Four of the ﬁve members are
Name of committee

Total members

Internal directors

Outside directors

Outside experts

Chairperson

Nomination andCompensation Committee

5

1

4

0

Outside directors

Directors Expertise & Areas of Specialization (Skills Matrix)

Outside/Independent
Kunihiko Hara
Outside/Independent/
New appointment

〇

〇
〇

Chair

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

Deputy Chair〇

Diversity

Outside/Independent
Akito Takahashi〇〇

GovernanceOutside/Independent
Yoshiyuki Sakaki〇

Statutory〇

Risk
management

New appointment
Takehiro Tomiyoshi

Legal affairs〇

International
affairs

COO
Nobuaki Osawa

Finance〇Financialaffairs &accounting

Production &technology〇

Nomination
andCompensation
Committee

Sales &
marketingGeneralmanagement

CEO
Norio Ishikawa

Audit &
Supervisory
Committee
member

〇

〇

〇

〇

〇

〇

〇

〇

Kayoko Yamashita*As of February 18, 2022

OSG Report 2021 37

ESG
Management

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

Reasons for appointment〇

Mr. Sakaki possesses extensive experience and broad knowledge acquired over a longacademic career. He was judged to be someone who would participate in board meetingsfrom an independent perspective and contribute to corporate management auditing andsupervision. In addition, he is not associated with any OSG-affiliated company, major supplieror 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.

Akito Takahashi〇

Mr. Takahashi has extensive experience, advanced knowledge, and specialized skills acquired
over his long career as an attorney. It was judged that he would participate as a legal expert inboard meetings from an independent perspective and contribute to corporate management
auditing and supervision. In addition, he is not associated with any OSG-affiliated company or
major supplier or customer. It was deemed that he presents no risk of conflicts of interest withgeneral shareholders. Therefore, the decision was made to appoint him as an outside director.

Kunihiko Hara〇

In addition to an academic career spanning many years, Mr. Hara has extensive experience inand knowledge of corporate management. 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 or
major supplier or customer. It was deemed that he presents no risk of conflicts of interest withgeneral shareholders. Therefore, the decision was made to appoint him as an outside director.

〇

Ms. Yamashita has 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 or major supplier or customer. It was deemed that she presents no risk of conflicts of interest
with general shareholders. Therefore, the decision was made to appoint her as an outside director.

Outside directors

Yoshiyuki Sakaki

Kayoko Yamashita

Positions held concurrently●President, Shizuoka Futaba Gakuen●Outside Director, Nippon Carbon Co., Ltd.
●Outside Director,
Oriental Consultants Holdings Co., Ltd.

●Designated Professor
Future Value Creation Research Center
Graduate School of Informatics,
Nagoya University●Outside Audit & Supervisory Board Member,
Sotoh Corporation●Outside Audit & Supervisory Board Member,
Fuji Corporation*As of February 18, 2022

Compensation for Company Officers
Compensation Structure
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.
■Fixed Compensation
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.
■Variable Compensation

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 ratio(Table below)
The maximum amount shall be ¥7 million.

Rank-based bonus ratio
Percentage

Chairman & Representative Director

0.365%

President & Representative Director

0.405%

Managing Officer

0.162%

38 OSG Report 2021

・Eligibility: Managing officers
・Calculation method: Personal assessment bonuses are paid according
to qualitative assessments of each person scontribution to business performance.
The maximum amount shall be ¥50 million.
■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 3of the Corporation Tax Act, as well as personal assessment bonuses.

Rank

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 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.

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 with preparing
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 and Compensation Based on
Allocations of Restricted Stock■Variable Compensation

The Representative Director is delegated by the Board of Directors to prepare
a proposal for the amount of compensation for directors (excluding directors
who are members of the Audit & Supervisor Committee) in accordance withthe standards specified by OSG. The representative director then seeks andreceives advice from the Nomination and Compensation Committee.
The policy is decided on by resolution of the Board of Directors. The amount ofcompensation 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 the Nomination and Compensation Committee, the Board of
Directors determines the final amounts to be paid, subject to approval of thetotal 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.

Basic Policy on Constructive Dialogue with Shareholders
Under the leadership of the Representative Director and President,
the Management Planning Department coordinates the activities of units
involved in IR activities and maintains collaboration among these units on a
day-to-day basis. The Management Planning Department actively responds torequests for IR information, including telephone inquiries from investors andsmall meetings. OSG holds quarterly meetings to present its financial results, aswell as half-yearly financial presentations by top management. If necessary, any

opinions and concerns gathered through shareholder dialogue are fed back to
the Board of Directors and senior management by the unit that carried out the IR
activities concerned. When engaging in dialogue with investors, OSG is mindful ofthe management of insider information and fair disclosure rules by ensuring thatsuch dialogue, whether at financial presentations or small meetings, focuses on
strategies for the achievement of sustainable growth and the enhancement of
OSG s corporate value from a medium- to long-term perspective.

Message from Newly-Appointed Outside Director

The approach I value as an outside director
I believe that to fulfill the duties of an outside director one must
always endeavor to better understand the company, which
includes its businesses, operating environment, internal controls,internal human relations, and other aspects. At the same time,
I always try to make an effort to consider these elements from athird-party perspective. I believe it is important to balance efforts toknow the company well and the position of stepping back to takein a broader perspective.

Addressing changes in listed companies environment
Listed companies face a wide variety of challenges whether it besustainability, diversity, or other initiatives. Unless these companies
actively contribute to the way in which our society andenvironment should be in the future and not just create physicalvalue, it will be difficult for them to continue doing business.
I believe it is important for the company to be ahead of other firms
in proactively addressing challenges, returning those results tosociety, and highlighting achievements.

complement each other in areas where they are lacking, and,within that context, engage in discussions for better understanding.
There is no mistake that diversity has the power to produce
something new. I will not compromise, but remain flexible as
I always endeavor to contribute from my position as an outside
director.

Message to OSG stakeholders
The roles expected of an outside director continue to climb to evenhigher levels, and I keenly feelthe weight of that responsibility.
I have always maintained aposture of continuing to learn.
In fulfilling my duties, I will strive
to sufficiently make use of myknowledg and experience as acertified public accountant aswell as licensed tax accountant.

Approach to diversity
As we say, everyone is different. People look different and havedifferent personalities and ways of thinking. In an organization, it isimperative that individuals recognize each other s good points,

Kayoko Yamashita,
Director and Audit &Supervisory
Committee Member

OSG Report 2021 39

ESG
Management

Risk Compliance

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 to ensure
effective and efficient implementation of the Risk Management Rules.
The committee s role is to formulate basic risk management policies, aswell as consider and implement timely countermeasures after assessing
the significance and urgency of risks.

Risk Management Policy

Risk Classiﬁcation

OSG and OSG Group strive to ensure the smooth operation of ourbusiness by 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 ourinternal environment. Risks that management recognizes as likely having
a major impact on our financial position, business performance, and cash
flow are listed in the table to the right.

Risk category

Type of risk
Economic conditions and market trends
Trends affecting procurement of raw materials

External risks

Climate change, natural disasters, and pandemics
Stable supply to the market

Business process risks

Employee working conditions
Safety and health management for employees
Information security
Corporate governance and ﬁnancial risk

Internal risks

Retaining and training human resources
Trafﬁc accidents

BCP
OSG and OSG Group have formulated our Business Continuity Plan (BCP)in the event an earthquake strikes along the Nankai trough in the SouthSea and Southeast Sea segments. And, we have conducted training andexercises for implementing the BCP. Moreover, even if a large-scaledisaster occurs, a secure living environment with essentials such as waterand food 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 follow and make sense of information
which was changing daily. We were quick to respond in Japan as well as

overseas. In our workplaces, we work to educate employees on
preventing infection as well as preventing discrimination. We coordinatedwith municipalities, hospitals, and testing centers to quickly respond if
someone is infected. At our production actories, we devised ways toreduce opportunities for contact by changing to a rotating shift system.
We have also implemented measures so that our factory 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.

Number of Occupational Accidents

Company-wide Safety and Health Committee

[No.]
25

24

20

15

23

Health Management
Committee

19
16

15
13

15

15
13

12

12

10

14

12
9

Meetings held when
accident has occurred

11

Zero-Accident
Meetings

10

8
6

Hongu Center

AcademyHonnogahara
CenterHeadquarters

Oike factory

Toyokawa factory

Toyohashi factory[FY]

Shinshiro factory

40 OSG Report 2021

Lost-time accidents

Yana factory

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Ofﬁce Safety and
Health Committee

65Non-lost-time accidents

Safety Management
Committee

15
13

6

0

Meetings held
regularly

Headquarters Safety and
Health Committee

Information Security
OSG and OSG Group have 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 fromthreats such as accidents, 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 in compliance with legal and contractual
requirements commensurate with the level of secrecy of the information
assets handled. In preparing for external risks, we continue to assess risks
to information systems and develop countermeasures as well as raise thelevel of security literacy among our employees. We have conducted
information system risk evaluations in response to continually changing
cybercrime techniques, and adopted a series of measures to address any
elements of risk. The necessary investments have been made with a view
to minimizing the scope of impact in the unfortunate event that we dosustain damage as well as to ensure business continuity. As part of ourmeasures to educate employees, OSG has endeavored to educate them sothey 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 maintain capabilities
commensurate with our advanced information society.

Compliance
Basic Philosophy
The OSG Corporate Code of Ethics Policy Statement was established as aset of values and ethics that we thoroughly practice to ensure all
directors, executives, and employees at OSG and OSG Group companies
conduct business activities based on social common sense and comply
with laws, regulations, and social standards. The Corporate Code of Ethics
Policy Statement comprises two sections: business ethics norms andcompany action standards. The former are guidelines establishing thebasis upon which business activities should be carried out by senior
management and employees at OSG and OSG Group companies andhow they should conduct themselves in order to ensure the prompt andappropriate implementation of fair and appropriate practices. The latter isa detailed code of conduct to ensure the implementation of the businessethics norms in business activities carried out by senior management andemployees at OSG and OSG Group companies.

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 Policy Statement to incorporate training measures whenemployees are assigned to design, development, or othercompliance-related units as part of our training and professional
education for new employees and others, and we have worked toraise our employees awareness of compliance. Not only do wethoroughly work to uphold conventions such as compliance,
adherence, and rule enhancement, but we also strive through training
to imbue a sense of pride in our company as well as foster awarenessand promote understanding of compliance in each and every one of
our employees.

Reports & approval
Board of Directors

ChairmanPresident

Risk and Compliance Management Committee(meets quarterly)
Chair:
President
Members: Directors responsible, Human Resources & General
Affairs Department General Manager, and otherdepartment heads
Secretariat: Human Resources & General Affairs Department
Legal Affairs Group
Agenda: Discussions, decisions, and review of reports
pertaining to policies, initiatives, and other mattersrelated to risk and compliance

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

Planning
Promotion & implementation

Department heads(Risk and Compliance Ofﬁcer)

Internal Reporting System
OSG and OSG Group have 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 violationsof laws and regulations in any corporate activity, personal violations oflaws and regulations, fraudulent activities, and actions in violation of the
Corporate Code of Ethics Policy Statement. Upon receipt of a report orconsultation, an investigation team endeavors to discern the facts. If theresults of the investigation so dictate, disciplinary provisions in theemployment regulations of the relevant OSG Group company are applied,
and measures taken to prevent any recurrence. After recurrence
prevention measures have been adopted, the director in charge of internalreporting confirms the adopted measures are functioning sufficiently andcontributing to strengthening corrective compliance management as wellas early detection, in addition to preventing any legal or regulatory
violations and protecting the person who came forward with thenotification or consultation.

Responsible foradvancing risk
and complianceInternal Reporting System
NotiﬁerInternal contact point(Human Resources &General Affairs Department
and Management Audit Section)

External contact point(Attorney)

Written acknowledgement prepared of notiﬁcation/consultation
Director in charge of internal reporting(Human Resources & General Affairs Department General Manager)
Investigation team formed (discern facts)

Audit & Supervisory Committee

Risk and Compliance Management
Committee

OSG Report 2021 41

Corporate Oﬃcers

Directors

Chairman & Representative Director
CEO

President & Representative Director
COO

Director (Statutory Member,
Audit & Supervisory Committee)

Director (Audit & Supervisory
Committee Member)

Director (Audit & Supervisory
Committee Member)

Takehiro Tomiyoshi

Yoshiyuki Sakaki*

Akito Takahashi*

Director (Audit & Supervisory
Committee Member)

Director (Audit & Supervisory
Committee Member)

Kunihiko Hara*

Kayoko Yamashita*

Norio Ishikawa

42 OSG Report 2021

Nobuaki Osawa*Outside Director

Executive Ofﬁcers

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

Executive Ofﬁcer

Jeffrey Tennant

Toshihiro Hisadome

Yasushi Suzuki

Kenya Sugihara

Executive Ofﬁcer

Executive Ofﬁcer

Executive Ofﬁcer

Seungjin Chung

Osamu Ishida

Hitoshi Masuoka
OSG Report 2021 43

Financial Section

Key Data for the Past 10 Years

2012/1184,08388,378101,031

Cost of sales

49,381

52,77758,061

Selling, general and administrative expenses

20,747

22,77425,554

Operating income

13,954

12,827

17,415

Ordinary income

13,695

13,91017,568

7,138

8,619

9,989

Cash ﬂows from operating activities

12,286

16,171

19,688Cash ﬂows from investing activities△19,746△2,972△3,119Cash ﬂows from ﬁnancing activities

8,643△9,423△12,813

5,688

6,716

6,830

EBITDA

19,642

19,54424,246

Capital expenditures

10,284

5,876

7,327

Number of employees

5,117

5,118

5,233

Total assets

121,689

134,503

142,302

Net assets

71,471

87,621

100,943

Interest-bearing debt

34,28429,06320,009Total equity

Depreciation and amortization

End of ﬁscal year

Per share

Management indices64,48280,02491,458Net income (yen)

75.16

90.76

105.20Net assets (yen)679.01842.71

963.15

Dividends (yen)

23.00

30.00

34.00

Overseas sales ratio (%)

48.0

53.5

54.6

Operating income margin (%)

16.6

14.5

17.2

Return on equity (ROE) (%)

11.5

11.9

11.7

Return on assets (ROA) (%)

6.3

6.7

7.2

Equity ratio (%)

53.0

59.5

64.3

EBITDA margin (%)

23.4

22.1

24.0

30.6

33.1

32.3

Taps

29,37928,92434,655

Drills

19,83920,72423,600End mills

18,472

20,85722,886

Rolling dies

7,280

7,681

9,165

Gauges

1,176

1,232

1,419

Others

7,935

8,958

9,304

Japan

44,212

41,922

46,659Americas13,60516,093

18,236

6,491

7,827

9,879

19,774

22,53426,256

Dividend payout ratio (%)

Data by product category

Sales to external customers

Europe/Africa
Asia

44 OSG Report 2021

2014/11Net sales

Net income attributable to owners of parent
For the year

2013/11(Millions of yen)

2015/112016/112017/112018/112019/112020/112021/11

111,917

105,561

120,198

131,368

126,964

104,388

126,156

61,86559,17969,711

74,83373,28165,71576,96928,45428,13531,34934,01534,12830,27633,081

21,597

18,246

19,13722,52019,554

8,396

16,10521,51017,813

19,14422,567

19,7108,950

16,141

12,518

10,134

13,993

14,71013,686

5,639

10,98919,58816,333

20,82020,125

19,261

17,03826,982△16,976△16,843△7,566△13,351△20,314△17,133△6,961△6,216△778△11,137△4,723

3,465

9,658

△14,264

7,705

7,885

8,612

9,100

9,522

10,518

10,591

29,302

26,132

27,74931,621

29,076

18,915

26,696

12,487

13,394

9,494

11,464

17,139

9,895

5,555

5,569

5,866

6,611

7,020

7,236

7,173

7,489

155,129

156,081

166,712

178,054

190,414200,112

209,757

133,637

103,059

128,394

138,354

140,658

140,179

154,800

20,19533,506

16,325

15,612

26,782

41,76930,751

102,566

92,216

115,810

125,332

129,078

129,338

143,811131.78110.59153.70150.47140.06

57.94

112.63

1,079.12

1,024.34

1,191.65

1,279.29

1,328.08

1,327.22

1,472.45

46.00

50.00

46.00

47.00

47.00

22.00

36.00

57.8

55.3

57.6

58.4

57.3

59.4

61.8

19.3

17.3

15.9

17.1

15.4

8.0

12.8

12.9

10.4

13.5

12.2

10.8

4.4

8.0

8.4

6.5

8.7

8.5

7.4

2.9

5.4

66.1

59.1

69.5

70.4

67.8

64.6

68.6

26.2

24.8

23.1

24.1

22.9

18.1

21.2

34.9

45.2

29.9

31.2

33.6

38.0

32.0

38,23933,94838,17541,72939,89533,671

43,23925,743

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

26,554

24,83727,09027,917

26,69021,21924,006

9,921

9,443

10,218

10,645

9,973

7,947

10,052

1,538

1,478

1,625

1,757

1,946

1,712

1,747

9,919

9,143

11,424

12,50812,31010,354

11,387

48,15048,257

51,63955,28754,72542,81648,93521,75819,47821,413

22,68023,152

18,81821,915

11,382

12,26818,177

22,13420,893

19,396

24,57330,62625,55628,96831,26628,19323,35630,732OSG Report 2021 45

Financial Section

Consolidated Balance Sheet(Millions of yen)

FY2020

FY2021

As of Nov 30, 2020

As of Nov 30, 2021

AssetsCurrent assets
Cash and deposits

37,807

46,795

Notes and accounts receivable - trade

19,73323,531

0

101

29,23928,553Work in process

5,464

6,566

Raw materials and supplies

7,321

7,718

Others

3,279

2,669

Securities
Merchandise and ﬁnished goods

△155

△179

102,691

115,757

56,34858,095

Accumulated depreciation△31,662△33,903

Buildings and structures, net

24,68524,191

Machinery, equipment and vehicles

131,545

138,413△97,044△105,813

34,50032,600Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures

Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and ﬁxtures

8,823

9,653

Accumulated depreciation△6,667△7,575

2,155

2,077

14,995

15,950

2,649

2,687

Tools, furniture and ﬁxtures, net
LandConstruction in progress

1,314

1,627

△701

△879

612

748

79,59978,255

Goodwill

4,273

4,638

Others

1,260

1,276

Total intangible assets

5,533

5,915

6,182

4,292

760

970

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

Investments and other assets
Investment securities
Investments in capital
Long-term loans receivable

1,021

484

Deferred tax assets

2,298

2,551

92

108

2,297

1,867

Allowance for doubtful accounts

△366

△445

Total investments and other assets

12,287

9,829

97,42094,000200,112

209,757

Retirement beneﬁt asset
OthersTotal non-current assets
Total

46 OSG Report 2021

(Millions of yen)

FY2020

FY2021

As of Nov 30, 2020

As of Nov 30, 2021

Liabilities and Net Assets
Liabilities
Current liabilities
Notes and accounts payable - trade

4,308

5,244

Short-term loans payable

4,473

2,329

−

1,670

Current portion of long-term loans payable

8,522

1,615

Accrued expenses

6,062

7,593

630

3,156

Current portion of convertible bond-type bonds with share acquisition rights

Income taxes payable
Reserve for directors bonuses
OthersTotal current liabilities

146

282

3,177

3,938

27,32325,830

5,000

5,000

Non-current liabilities
Bonds payable
Convertible bond-type bonds with share acquisition rights
Long-term loans payable
Deferred tax liabilities
Net deﬁned beneﬁt liability
Provision for loss on guarantees

1,670

−

22,103

20,136

1,703

1,630

682

788

38

38

1,412

1,533

32,60929,12659,932

54,957

Capital stock

12,223

12,239

Capital surplus

12,934

12,968111,594

120,192

OthersTotal non-current liabilities
Total liabilities
Net assets
Shareholders equity

Retained earnings
Treasury stock△1,442△1,041

Total shareholders equity

135,309144,359

1,105

778

0

3

Foreign currency translation adjustments△7,076△1,329Total accumulated other comprehensive income△5,970△547

Accumulated other comprehensive income
Unrealized gain on available-for-sale securities
Deferred (loss) gain on hedges

Share acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

13−

10,828

10,988140,179

154,800

200,112

209,757

OSG Report 2021 47

Financial Section

Consolidated Statement of Income &Consolidated Statement of Comprehensive Income

Consolidated Statement of Income(Millions of yen)

FY2020

FY2021(Dec. 1, 2019 toNov. 30, 2020)(Dec. 1, 2020 toNov. 30, 2021)

Net sales

104,388

126,156

Cost of sales

65,71576,969Gross proﬁt

38,67349,186

Selling, general and administrative expenses

30,27633,081

Operating income

8,396

16,105Interest income

263

178

Dividend income

79

63

Purchase discounts

36

38

Share of proﬁt of entities accounted for using equity method

8−

Foreign exchange gains

−

32

1,127

394

Non-operating income

Subsidy income

757

631

2,272

1,338

Interest expense

243

255

Sales discounts

610

706

OthersTotal non-operating income
Non-operating expenses

Share of loss of entities accounted for using equity method
Foreign exchange losses

−

4

416

−

448

335

1,718

1,302

8,950

16,141Gain on sales of non-current assets

208

213

Total extraordinary income

208

213

Loss on valuation of investment securities

90−

Special retirement expenses

171−

Total extraordinary losses

261−

Income before income taxes

8,896

16,354

Income taxes - current

2,281

5,567

Income taxes - deferred

871

△514

OthersTotal non-operating expenses
Ordinary income
Extraordinary income

Extraordinary losses

Total income taxes

3,153

5,052

Net income

5,743

11,302

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

103

312

5,639

10,9895,743

11,302△185△317

Consolidated Statement of Comprehensive Income
Net income
Other comprehensive income
Unrealized gain on available-for-sale securities
Deferred gain (loss) on hedges
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income
Comprehensive income

03△1,360

5,850

2

△7

△1,543

5,528

4,199

16,8304,037

16,357

162

473(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

48 OSG Report 2021

Consolidated Statement of Changes in Equity

FY2020(Dec. 1, 2019 to Nov. 30, 2020)(Millions of yen)

Shareholders equity
Capitalsurplus12,194

13,731 109,428△1,894 133,460

△12

△12

13,731 109,416△1,894 133,447

Cumulative effects of changes
in accounting policies
12,194

Restated balance

Treasury
stock

Share

Unrealized
Deferred (loss)
Foreign
Accumulated acquisition Non-controllingTotal
gain ongain on derivatives currency
otherinterests
shareholders
rightsavailable-for-sale under hedgetranslation comprehensive
equitysecurities
accounting
adjustments
incomeCommonstock

Balance, December 1, 2019

Retainedearnings

Accumulated other comprehensive income

1,281

−

△5,663△4,38113

Totalequity11,567 140,658
△12

1,281

−

△5,663△4,381

13

11,567 140,646

Changes of items during period
Issuance of new shares

28

57

57

△3,435△3,435△3,435

5,639

5,639

5,639

28

Cash dividends
Net income attributable toowners of parent
Purchase of treasury stock

△4

△4

△4

Disposal of treasury stock

455

455

455

△7

△7

△844

△844

−

−

Adjustment of retained earnings
for newly consolidated subsidiaries△7

Purchase of shares of
consolidated subsidiaries△844

Transfer to capital surplus
from retained earnings

18

△18

△796

2,177

△176

0

△1,413△1,589−△738△2,327

1,861

△176

0

△1,413△1,589

−

△738

△466

△1,442 135,309

1,105

0

△7,076△5,97013

10,828 140,179

Net change in the year
Total changes of items during period
Balance, November 30, 202028

12,223

12,934 111,594

451

FY2021(Dec. 1, 2020 to Nov. 30, 2021)(Millions of yen)

Shareholders equity
Commonstock

Capitalsurplus12,223

12,934 111,594

Balance, December 1, 2020

Retainedearnings

Accumulated other comprehensive income

Treasury
stock

Share

Non-controlling
Unrealized
Deferred (loss)
Foreign
Accumulatedacquisition
Total
gain ongain on derivatives currency
otherinterests
shareholders available-for-sale under hedge
rightstranslation comprehensive
equitysecurities
accounting
adjustments
income△1,442 135,309

1,105

0

△7,076△5,97013

Totalequity10,828 140,179

Changes of items during period33

33

Cash dividends△2,454△2,454△2,454

Net income attributableto owners of parent

10,98910,98910,98916

Issuance of new shares

16

Purchase of treasury stock

△5

△5

△5

Disposal of treasury stock

406

406

406

80

80

80

16

△16

−

−

33

8,598

Adjustment of retained earnings
for newly consolidated subsidiaries
Transfer to capital surplus
from retained earnings

△327

3

5,747

5,423

△13

159

5,570

9,049

△327

3

5,747

5,423

△13

159

14,620△1,041 144,359

778

3△1,329△547−

Net change in the year
Total changes of items during period
Balance, November 30, 2021

16

12,23912,968 120,192

400

10,988 154,800

OSG Report 2021 49

Financial Section

Consolidated Statement of Cash Flows(Millions of yen)

FY2020

FY2021(Dec. 1, 2019 toNov. 30, 2020)(Dec. 1, 2020 toNov. 30, 2021)

8,896
10,518
655
△53
△163
39
38
△342
243
△8
△208
90
171
2,832
1,822
△1,555△1,704558
21,829
350
△226
△171
△4,743
17,03816,354
10,591
795
92
127
△16
△0
△242
255
4
△213
−
−
△2,448
1,864
243
1,227
1,081
29,718225△257−△2,703
26,982△5,640
5,056
11
△826
△9,895359△222△2,054△3,266△654△17,133△5,0143,559
0△190△5,555
1,000
△235
△346
−
△180
△6,961

1,244
14,396△948△1,437△1395△3,439
△298
△252
9,658
△88
9,475
23,704120
33,299△2,515
8△9,079−△2397△2,440△323△308△14,264
1,224
6,981
33,29973
40,354

Operating activities:
Income before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for directors' bonuses
Increase (decrease) in net deﬁned beneﬁt liability
Increase (decrease) in provision for loss on guarantees
Interest and dividend income
Interest expense
Equity in loss (earnings) of an associated company
Loss (gain) on sales of non-current assets
Loss (gain) on valuation of investment securities
Special retirement expenses
Change in notes and accounts receivable
Change in inventories
Change in notes and accounts payable
Change in accrued expenses
Others, net
Sub-totalInterest and dividend income received
Interest expense paid
Special retirement expenses - paid
Income taxes - paid
Net cash provided by operating activities
Investing activities:
Payments for time deposits
Proceeds from refund of time deposits
Proceeds from redemption of investment securities
Purchases of investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payment for purchase of subsidiaries' stock
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Others, net
Net cash used in investing activities
Financing activities:
Change in short-term borrowings, net
Proceeds from long-term borrowings
Repayments of long-term borrowings
Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation
Purchase of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Dividends paid to non-controlling interests
Others, net
Net cash (used in) provided by ﬁnancing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents from newly consolidated subsidiaries
Cash and cash equivalents at end of period

50 OSG Report 2021

Corporate Information

Company Proﬁle(As of November 30, 2021)

Company name

OSG Corporation

Capital¥12,239 million

Headquarters

3-22, Honnogahara, Toyokawa,

Employees

7,489 (consolidated)/

Business activities

Manufacture and sale of cutting tools,

Aichi Prefecture 442-8543, Japan
Date established1,914 (non-consolidated)

March 26, 1938

rolling dies, gauges, machine tools andmachine parts, importation and sale of tools

Status of Shares
Number of shares issuable(As of November 30, 2021)

200,000,000 shares

Number of shares outstanding 98,196,724 shares
Number of shareholders

Minimum share purchasing unit 100 shares
Stock listings
Securities code

Breakdown of Holdings by Shareholder(One unit = 100 shares)

Tokyo Stock Exchange
Nagoya Stock Exchange

7,561

6136

Major shareholders
Name

Number ofshares held(Thousands)

Percent
ownership（%）

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

13,039

13.28

Custody Bank of Japan, Ltd. (Trust Account)

5,753

5.86

SSBTC CLIENT OMNIBUS ACCOUNT

4,157

4.23

NORTHERN TRUST CO.(AVFC) RE FIDELITY FUNDS

3,358

3.42

OSG Agent Association

3,219

3.28

OSG Stock Holding Association

2,566

2.61

Osawa Scientiﬁc Studies Grants Foundation

2,350

2.39

Sumitomo Mitsui Banking Corporation

2,100

2.14

THE BANK OF NEW YORK MELLON 140051

2,095

2.13

26.12％

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

1,967

2.00

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

(Notes) 1. The number of shares held is rounded down to the nearest thousand.
2. Other than above, there are 5,000 treasury shares.
3. The ownership percentage is calculated after deducting treasury shares.

Individuals
and others
271,859 units

27.71％

Financial institutions
326,355 units

33.27％

Securities
17,758 units

1.81％

Overseas institutions andothers256,232 units

Other corporations
108,764 units

11.09％

Introduction to the OSG corporate website

To Our Stakeholders

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 achievesustainable growth in our corporate value, including environmental
initiatives, social programs, and corporate governance systems.

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

OSG Report 2021 51

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URL: https://www.osg.co.jp/en/

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