Shima Seiki Mfg : Integrated Report 2022（for viewing）

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SHIMA SEIKI MFG., LTD.

Headquarters: 85 Sakata, Wakayama City,

Wakayama 641-8511, Japan

Phone: [phone]

Facsimile: [phone] https://www.shimaseiki.com

WHOLEGARMENT, as well as our other products, are either registered trademarks or trademarks of SHIMA SEIKI MFG., LTD. in Japan and/or other countries. All titles, company names and product names listed in this publication are either registered trademarks or trademarks of their respective owners.

Integrated Repor t

Year Ended March 31, 2022

Introduction

Ever 「世Weの中striveになくtoてはbecomeならない企an業indispensable」になること「世のcompany中になくてはtoな らsocietyない企業through」になることsustainable「世の中になくbusinessてはならなdevelopmentい企業」になるこ. と「We世のdo中にthisなくunderてはならtheないmotto企 業 」にofな"Everるこ企 業Onward"」になるこwithと「 世 の"Love,"中になくて"Creativity,"はなならならなandらな"Passion"らならならなasらなourい企mantra業」にな.こ

Philosophy

Ever Onward -

Limitless

Progress

Onward	Love		Passion
We contribute to society through		We tackle new challenges
our creative craftsmanship,		with passion and chart our
which is friendly to both people		own future course by putting
and the environment. We strive		our all into our products and
to contribute to society through
Creativity	services.
love for our work, people, country,
community and the earth.	We aim to create world's

Contents

About

SHIMA SEIKI

Value Creation

Story

Value Creation

Base

Financial and

Non-financial Data

Introduction

History of Shima Seiki

Business Overview

Topics

Financial and Non-financial

Highlights

Message from Top Management

The Shima Seiki Value Creation Model

Shima Seiki's Materiality

Medium-Term Management Plan "Ever Onward 2023"

Message from Accounting and Finance Director

Interview with Directors R&D Strategy

Shima Seiki's Sustainability Environmental Initiatives

Response to TCFD Recommendations

Interaction with Employees

Interaction with Shareholders and Investors

Interaction with Customers

Interaction with Local Communities

Governance Initiatives

Financial and Non-financial Summary

Company Data and Investor

Information

Key Points

01 We will explain what kind of company

03	SHIMA SEIKI. is to our stakeholders
by introducing the history of our
05
company since its foundation, our

07 current business, and the latest topics.

11

13 This section leads with a "Message from Top Management" from President

19 Mitsuhiro Shima, presents a story of

value creation to solve issues facing

21 our company, our industry, and society as a whole, and introduces our business

23 strategy to become an indispensable company to society.

27

29

33

35 This section describes our ESG

37	initiatives and topics relating to our
goal of becoming an indispensable
39
company to society.
41
43
45
46
47

59 This section includes financial and

61 non-financial data, our company profile, and investor information.

firsts through our finely

honed sensitivity and sense

of creativity.

Editorial Policy	Active feeds on
This Integrated Report was created to provide our stakeholders
with an easy-to-understand description of our future vision and

Communication Tool

▲	Integrated Report

This Integrated Report provides financial information including our business performance and describes our initiatives for ESG (Environment, Social, and Governance) to equip stakeholders with an understanding of the company's medium- to long-term growth and future vision, as well as the value creation process to realize those goals.

▲ AnnualSecurities Report /

Quarterly Securities Report

Integrated Repor t

Year Ended March 31, 2022

▲	Shareholder Newsletters

We provide our shareholders with
semi-annual business reports, our	第61期 営業のご報告
latest news, recent initiatives, etc.
(Only Japanese)

▲	Results Briefing Materials

Presentation slides that outline quarterly financial information

initiatives regarding our medium- to long-term business	Facebook	Instagram	Instagram	Instagram	YouTube
@shimaseiki.official	@wholegarment_official	@virtualsample
strategy and solutions to sustainability issues.

This report contains our quarterly financial information.

(simplified version for 1st and 3rd quarters). Performance information is expressed using diagrams and photographs.

Reporting period: April 1, 2021 to March 31, 2022	Find links to all our social media feeds at the foot of our website.
	https://www.shimaseiki.com

These communication tools are found on the IR page of our website under HOME > IR Library. https://www.shimaseiki.com/ire/library/

01

SHIMA SEIKI Integrated Report 2022

02

History of Shima Seiki

This section introduces the history of our product development that not only responds

t o t h e c h a n g e s i n s o c i a l i s s u e s b u t a l s o

reflects the anticipated needs of the times.

Software	Our computer graphics (CG)
	technologies have been adopted

1967 FAC

Fully automated full fashion

collar knitting machine

Fully automated	Year of Establishment
1964
glove knitting machine
(square fingertip type)

Flat Knitting Machine

Glove and Sock

Developed the world's Knitting Machine first fully automated

glove knitting machine (square fingertip type).

companyHistory

was before

The founder, Masahiro Shima , and the establishment of

SHIMA SEIKI MFG.

Shima learned that accidents were frequently occurring in which workers in dyeing plants and other factories lost their lives when their gloves got caught in machinery. As a

Seam-free knitwear - WHOLEGARMENT®

WHOLEGARMENT® was created from the idea of reversing the top and bottom of the glove so that the wrist is the collar, the index, middle and ring fingers are the body, and the thumb and little finger is the sleeves.

Hardware	in television channels and
	automobile design.

1988 SDS®-480SGXMulti-design system (hyper paint)

Design

Systems

CAD/CAM

SystemsHardware

Business expansion

From hardware including flat

knitting machines, our business

foundedthe

solution, he invented "elastic yarn inserted safety gloves " that could be quickly taken off even if when they did get caught. To get the gloves into widespread use, Shima founded the company with the aim of full automation of glove knitting machine, a technically difficult problem at the time.

Know-how	1988 SES®
	Computerized flat
Software	knitting machine
Hardware

	has expanded with the times to
	cover software, know-how, and
Apparel CAD	solutions for design systems.

Shima Seiki become the first CAD/CAM system manufacturer in Japan, which is essential for high - mix low - volume production.

2022 -

Commemorating the

60th Anniversary of

SHIMA SEIKI MFG.

Automated multi-ply fabric

2012 P-CAM120C	2014 P-CAM181
Multi-ply automated
Automated cutting machine	cutting machine

cutting machine

2000 SDS-ONE®

Apparel design system

Based on the concept of all-in-one, it is now possible to propose new business models using IT in addition to high-performance knit designs.

SWG®

WHOLEGARMENT knitting machine

2002 SIP®100F	2007 SDS-ONE APEX®
Plate-less-type printing system	3D apparel design system

2007 MACH2®X

WHOLEGARMENT flat knitting machine

2020 APEXFiz® Design system subscription service

Equipped with a moveable sinker to create a three-dimensional silhouette. Contributed to the expansion of sales of WHOLEGARMENT flat knitting machines

2015 MACH2XS WHOLEGARMENT flat knitting machine

A software service suited to the times that enables users to use APEX regardless of the place or time.

Solution

Know-how

Software

Hardware

2021 SWG-XR

WHOLEGARMENT flat knitting machine

History of

Shima Seiki

	SHIMA SEIKI MFG.			Developed the SNC
1962	Established		1978	computerized flat knitting machine
With the aim of overcoming the challenge of full		We developed a computerized flat knitting
automation of glove knitting machine, Masahiro		machine in anticipation of fashion becoming
Shima established the company in 1962 and		more individualized and diversified in the
successfully developed a fully automated glove		coming years, with knitwear shifting to an
knitting machine (square fingertip type) in 1964.		era of high-mixlow-volume production.

	Developed the			Completely Seam-free-type			MACH2XS WHOLEGARMENT flat knitting
1981	SDS-1000 design system		1995	Computerized Flat Knitting Machine		2015	machine and SDS-ONE APEX3
By displaying images on a screen using		Shima Seiki developed WHOLEGARMENT flat knitting		Our "Total Fashion System" was exhibited at
computer graphics, we realized a system		machines, in response to the crisis in the knitwear		the International Textile Machinary Exhibition ,
that could create patterns and samples		industry caused by the hollowing out of industry due		ITMA 2015 in Milan to appeal its consistent
quickly and efficiently.		to the relocation of production bases overseas, and		technology provision.
			the rapid increase in imports in the apparel industry.

Social Changes and Challenges

03 SHIMA SEIKI Integrated Report 2022

1960s	Income Doubling Plan		1970s	The First Oil Crisis
The "Income Doubling Plan" initiated by the		The economy fell into recession due to the
Hayato Ikeda Cabinet in late 1960 dramatically		oil crisis and Aggregate Demand-Control
increased consumer spending in Japan.		Policy. Following this, in 1974, the economy
			recorded its first negative growth after the
			war.

1980s Plaza Accord

Rapid appreciation of the yen and a falling dollar on the exchange markets caused a rapid rise in export prices for Japanese goods, resulting in market share being captured by low-wage Asian companies.

The Collapse of

1990s Japan's Bubble Economy

After the collapse of bubble economy, most industries suffered declines in sales and profits due to falling personal consumption, the rising unemployment rate, and the Asian currency crisis, as well as the destabilization of the financial system.

Advancement of Globalization

2000s (Rise of Emerging Countries)

Advancing globalization saw an expansion in trade with East and Southeast Asian countries, who rapidly grew in prominence in the world economy.

04

Overview of the

Year under Review and Outlook for the Next Fiscal Year

Business Overview

The following describes the outline of our business with an overview of the year under review and outlook for the future.

Shima Seiki's core business is the manufacture and sale of computerized

Flat Knitting Machine Segment flat knitting machines, for which the Company boasts industry-leading technological prowess. This segment provides an extensive range of

products developed using proprietary technologies, such as SWG-X R® and MACH2 ® XS WHOLEGARMENT ® flat knitting machines, which produce complete pieces three dimensionally; the N.SRY® and N.SVR®SP, which facilitate unprecedented patterns and designs including inlay knitting and shoe applications, and N.SVR and N.SSR® used for volume zone production in the Asian market, etc.

In Asia, the Chinese market is witnessing a shift from OEM-type production toward the crafting of high value-added products for the domestic clothing market. Combined with notable trends like the expansion of the e-commerce market driving a shortening of lead times and labor-saving pressure in response to rising labor costs and labor shortages, this has led to increased introduction of WHOLEGARMENT flat knitting machines.

In Europe, the Italian market, which specializes in developing high value-added products, has seen increased capital investment with the resumption in economic activity. Accordingly, demand has increased, centered on WHOLEGARMENT flat knitting machines and molded knitting machines capable of producing advanced designs.

In the Turkish market, sales increased mainly for computerized flat knitting machines due to brisk	Net Sales/Operating Income (¥ Million)
capital investment to meet orders from overseas apparel companies in the second half of the year.
In the Japanese domestic market, unit sales of WHOLEGARMENT flat knitting machines, etc.		Net sales	Operating income
increased compared with the previous fiscal year.
Consequently, net sales in the flat knitting machine segment in the fiscal year under review were	30,000	22,877		20,692	15,000
¥20,692 million (up 33.1% year-on-year).
20,000			10,000
Following on from the fiscal year ended March 31, 2022, there has been strong interest from			15,547
customers in Turkey and Bangladesh markets, with sales expected to grow. However, due to	10,000				5,000
recent shortages of parts and materials, some orders have not been recorded because we are	0	348		588	0
unable to confirm delivery dates. In the Chinese market, we have high hopes for the new SWG-XR		-3,281
WHOLEGARMENT flat knitting machine. While we have a favorable sales plan, uncertainties remain			-5,000
over future supply of parts and materials. In view of these circumstances, we plan to achieve net		2020	2021	2022
sales of ¥34,700 million for the fiscal year ending March 31, 2023.				( Years ended March 31)

About SHIMA SEIKI Value Creation Story Value Creation Base Financial and Non-financial Data

Percentage of net sales for each segment

67%		9%	8%	16%			Net sales ¥ 30,998million
(¥20,692 million)		(¥2,869 million)	(¥2,446 million)	(¥4,989 million)	Operating	-¥ 4,296million
										income
											(Year Ended March 31, 2022)
Flat Knitting Machine Segment	Design System Segment		Glove and Sock Knitting Machine Segment		Other Business Segment

This segment provides design systems to support production in apparel and

Design System Segmenta variety of other industries. Our design systems employ high-definition virtual samples and 3D simulations as well as programming for flat knitting

machines, which have enabled diverse designs, while at the same time realized shorter lead times and cost reductions. In addition to the hardware- based SDS-ONE APEX4® design system, we have developed the APEXFiz® subscription-type software for design systems. In the field of automatic cutting machines, we have developed Shima Cutting Solutions, which saves labor before and after the cutting process , and are working to have them penetrate into other industries, including automobile and industrial material fields.

Overview of the	In association with the increase in sales of flat knitting machine segment, the number of units sold of the SDS-
ONE APEX4 apparel design system increased mainly in overseas markets. Furthermore, the number of license
Year under
contracts for APEXFiz, which started in earnest this fiscal year, has increased, focused on Western and Japanese
Review and
fashion brands. Demand for the P-CAM® automatic cutting machine also showed signs of recovery, mainly in
Outlook for the	Japan.
Next Fiscal Year
Consequently, net sales in design systems segment were ¥2,869 million (up 14.4% year-on-year). Sales of the
	APEX series are expected to grow together with the sales growth in
flat knitting machines. The expected increase in the number of APEXFiz and yarnbank
Net Sales/Operating Income (¥ Million)
contracts will lead to stable improvement in profitability. Further recovery in the domestic
market is also expected for automatic cutting machines.
			Net sales	Operating income
In addition to the above, SHIMA Datamall, which entered service in June 2022, enables	4,000			800
3,611
customers to search, browse, and purchase 3D design data. By linking this to our other			732
services, further sales expansion can be expected across Shima Seiki as a whole.
3,000				2,508	2,869	600
Based on the above, sales for the fiscal year ending March 31, 2023 are expected to be
¥3,200 million.		2,000							400
	307
		1,000		113		200
		0					0
		2020	2021		2022
								( Years ended March 31)

Glove and Sock Knitting Machine Segment

In this segment, we manufacture and sell machines for knitting gloves and socks, the origin of our technological development. By advancing finer- gauge products (to enable knitting of finer yarns), we are enhancing our offerings in high-value-added fields such as healthcare and outdoor applications.

Net Sales/Operating Income (¥ Million)

	This segment sells maintenance parts, and provides maintenance repairs
Other Business Segment
services for the Company's knitting machines and systems , and operates a spinning
	business for high-end cashmere yarn at a subsidiary.

Net Sales/Operating Income (¥ Million)

Overview of the

Year under Review and Outlook for the Next Fiscal Year

Net sales were ¥2,446 million (up 24.2% year-on-year) due to steady growth in capital investment by major users in Japan and overseas. We anticipate capital investment by major users, which drove performance until the previous fiscal year, will settle down, resulting in a fall in sales. Net sales for the fiscal year ending March 31, 2023 are expected to reach ¥900 million.

	Net sales	Operating income
3,000			2,446	600
2,000		1,969	400
1,000	1,054			200
0	-48		14	0
		-242	-200
	2020	2021	2022	-400

( Years ended March 31)

Overview of the

Year under Review and Outlook for the Next Fiscal Year

Net sales were ¥4,989 million (up 11.8% year-on-year), including sales of maintenance parts and yarn. Sales of maintenance parts are expected to increase along with the increase of sales in flat knitting machine segment. Accordingly, sales for the fiscal year ending March 31, 2023 are expected to reach ¥5,700 million.

	Net sales	Operating income
6,000	5,663			4,989	600
	4,463
		528 400
4,000	317
2,000					200

0		12		0
2020	2021	2022
			( Years ended March 31)

05

SHIMA SEIKI Integrated Report 2022

06

Announcing SWG-XR, Our Latest WHOLEGARMENT Flat Knitting Machine

New Standard of

WHOLEGARMENT Flat

Knitting Machines

Rather than an upgrade on our existing core models, the SWG - XR ® , the next - generation WHOLEGARMENT ® flat knitting machine, has been produced by reviewing our product development approach for a major reform.

With an aim of returning to the starting point of WHOLEGARMENT flat knitting machine development, we followed the SWG®-X launched in 1999 and made a dramatic step forward. Productivity is improved by fully exploiting the features of our proprietary SlideNeedleTM, combined with the sinker knitting technology that we have cultivated so far. Compatibility with an ever wider range of designs makes for a model capable of producing knitwear for all seasons.

In addition to expanding sales to the world's major WHOLEGARMENT production bases, we wish to establish the SWG-XR as the future standard for timely and optimal-volume local production for local consumption and promote its sales to achieve our goals for strengthening the WHOLEGARMENT business in our medium-term management plan.

Advantages of SWG-XR

1 New Standard of WHOLEGARMENT Flat Knitting Machines

SWG-XR is a WHOLEGARMENT flat knitting machine that combines many of Shima Seiki's technologies. Innovation in our WHOLEGARMENT flat knitting machines has continued for over 25 years. The SWG-X, which was released in 1999, evolved into the MACH2®X with improved productivity. Further steady improvement led to the MACH2XS with an expanded knitting range using spring-type movable sinker system.

In 2022, to return to our starting point, our new flagship machine SWG-XR was launched, succeeding our SWG-X roots. We will continue to provide a full solution with complementary peripherals and services, with the aim of producing a machine that will become the industry standard.

Advantages of WHOLEGARMENT Flat Knitting Machines

2 More than 25% Improvement in Production Efficiency

Zero Cutting Loss,

Zero Sewing Loss

With conventional flat knitting machines, parts of the clothing are knitted respectively and sewn together, resulting in losses due to seam allowances. WHOLEGARMENT flat knitting machine knits a whole clothing, eliminating the need for cutting and sewing. This eliminates raw material waste and reduces environmental burden.

Enabling Shorter Lead Times and Local Production for Local Consumption

By using WHOLEGARMENT flat knitting machines together with our design systems, cutting and sewing processes are not necessary when manufacturing clothing, and lead time can be greatly shortened. This facilitates timely and optimal-volume local production for local consumption.

Enjoying Improved Comfort and Elegant Silhouettes

Elimination of sewing process allows designs and clothing silhouettes precisely as intended. Lighter clothing with no rubbing from sewn seams provides all-day comfort.

SWG-XR employs four needle beds and our proprietary SlideNeedle technology. Incorporating SlideNeedle produces unprecedented knitting possibilities, significantly improving the design and pattern knitting capabilities in WHOLEGARMENT production.

The renewed sinker system uses a compact and lightweight 4-cam carriage and auto yarn carrier. Knitting at a speed that does not put too much strain on the yarn greatly reduces the defect rate. This raises production efficiency by more than 25% compared to conventional machines.

3 Easy Adjustment for Stabilized Knitting

Behind

the SWG-XR

name

The SWG-X WHOLEGARMENT flat knitting machine entered mass production in 1999 as the world's first model with four needle beds. Though praised for its unique ability to produce completely seam-free knitting, the SWG-X was not well received by customers due to the advanced knowledge and skill required to master the machine. In order to be well-accepted by customers, technicians familiar with those times re-examined the concept of product development and endeavored to create a market-orientated product that would respond to our customers' needs.

The name of the SWG-XR came from the strong desire for regeneration of the SWG-X, adding the initial "R" for "Reborn" and "Revolution," key words in our medium-term management plan.

In addition to improved production efficiency, the SWG-XR achieves high-quality and stable knitting of beautiful fabrics and silhouettes that were not previously possible. By increasing the variety of compatible knits and yarns, this represents a dramatic step forward as a model producing knitwear for all seasons. In addition, fewer demands are placed on the knitting operator, enabling whoever operates the machine to knit beautiful products.

The SWG-XR provides a new solution as a sustainable next-generation WHOLEGARMENT flat knitting machine that minimizes waste to the extreme.

07 SHIMA SEIKI Integrated Report 2022

08