T O Y O B O R E P O R T 2 0 2 0

Year Ended March 31, 2020

Value Creation Vision & Policy

Realizing a more prosperous society- our unceasing challenge since 1882

TOYOBO has grown together with the changing times throughout our 140-year history, based on the spirit of Jun-Ri-Soku-Yu (adhering to reason leads to prosperity). In order to build a prosperous future, we will continue to create products that benefit society.

Jun-Ri-Soku-Yu - our approach to CSV, handed down from our founder

Jun-Ri-Soku-Yu (adhering to reason leads to prosperity) was a personal maxim of our founder Eiichi Shibusawa (1840-1931), and it contains the idea of making the company grow while creating prosperity for society. This way of thinking can be described as the forerunner of the modern concept of Creating Shared Value (CSV).

01 TOYOBO REPORT 2020

Editorial policy

Since 2019, TOYOBO has issued an "Integrated Report" instead of the "CSR Report" and "Annual Report" we issued previously. This single publication contains an overview of financial and non-financial information, including Environmental, Social, and Governance (ESG) related data. Through this Integrated Report, we aim to deepen understanding of the Company among our wide range of stakeholders, including our shareholders and investors. We introduce our philosophy and business activities, our growth strategy and outlook for the future, along with messages from senior management. Our intention is that this report will be actively employed as a tool for dialogue with our stakeholders, and will enhance the Group's corporate value.

Reference Guidelines, etc. :

  • GRI "Sustainability Reporting Standards"
  • Ministry of the Environment "Environmental Reporting Guidelines" (2018 versions)
  • Ministry of Economy Trade and Industry "Guidance for Collaborative Value Creation" Reporting entity: Unless otherwise stated, the report refers to TOYOBO CO., LTD. (non-consolidated basis), and references to "TOYOBO" or the "Company" mean TOYOBO CO., LTD. Numerical data in financial information is reported on a consolidated basis. Reporting period: April 2019-March 2020 (Partially includes information dated after April 2020)
    Published: August 2020 (next scheduled publication: August 2021)

TOYOBO REPORT 2020 02

Principle

The TOYOBO Group's foundation for growth is contributing to the well-being of society

Principle Principle

Vision

Our Vision

Values

Our Values

CollaborationChallenge

Reliability

03 TOYOBO REPORT 2020

Management Structure Based on the

Corporate Philosophy System

Corporate Philosophy System

Long-term Growth Story

Expanding possibilities Base of Growth Strategy

Medium-Term Management Plan

Charter of Corporate

Employee Code of

Behavior

Conduct

Base of Corporate Activities: Focus on fulfilling our social responsibility (compliance)

Principle Principle

Jun-Ri-Soku-Yu (adhering to reason leads to prosperity)

"Jun-Ri" Do what must be done (positive standpoint)

Don't do what must not be done (defensive standpoint)

"Soku-Yu" Adhering to "Jun-Ri" leads to a prosperous society while also realizing self-growth

This is the founding spirit of our Company and is our belief.

Vision

Our Vision

We will continue to create the solutions needed by people and the earth with materials and science.

Values

Our Values

We welcome change, we enjoy change, and create change.

TOYOBO Spirit

Our 9 Commitments

Challenge

Reliability

Collaboration

Think

Create

Accomplish

Safety

Customer

Factual

Mutual

Diversity

Providing

Ahead

First

Satisfaction

Basis

Communication

Opportunities

TOYOBO REPORT 2020 04

The Path of Value Creation

We have developed our business while responding to the needs and issues of the times through technology

Remaining ever alert to the changing times, TOYOBO Group draws on its advanced technologies to create products and operations that fulfill the expectations of the market and society.

We have worked to develop an optimum portfolio.

Evolution of

Providing comfortable

For clean and

technology

clothing

healthy air

Development into a

Developing and providing

Core technology

manufacturer of highly

systems for efficient

functional textiles, from

adsorption/desorption

cotton and wool to

and re-use of VOCs

synthetic fibers

Establishment of Osaka Boseki. Started

operation as Japan's first large-scale spinning mill

Chemical

fiber

Synthetic

fiber

company in the private sector.

Yarn

Preventing

For effective

environmental pollution

use of seawater

Achievement of liquid waste

Supplying membranes

treatment by breaking down

used in seawater

and eliminating sugars

desalination equipment

using yeast

Market needs and social issues

Japan's industrial development

  • Acceleration of the light industrial sector, including milling and yarn production

1880 1920

Transforming our portfolio

Post-WWII reconstruction and

Stable growth period

high-speed economic growth

- Improving the quality

- Increase in pollution issues resulting from

of food, clothing

- Pursuit of comfort

atmospheric pollution

and housing

- Increase in traffic accidents following motorization

in clothing

1960 1970 1980

1914

TOYOBO is established through the merger of Mie Boseki and Osaka Boseki.

1956

1963

1970

Launched the synthetic fiber

Launched the films business.

Launched the plastics business

business. Starting with acrylic

Subsequently strengthened

based on the synthetic fiber

fiber, introduced polyester fiber

position as a comprehensive

business and high polymer

technology in 1962.

manufacturer of packaging films.

chemical technology.

05 TOYOBO REPORT 2020

Improving

the digital environment

Providing films for

monitor screens that

excel in water resistance and durability

Reducing damage from traffic accidents

Supplying the optimum

airbag materials to protect passengers

Enhancing dialysis patients' QOL

Providing membranes

with outstanding

filtering performance for

artificial kidneys

Current key products

Films

Molding

High-performance fibers

Filtration and separation materials

Processing

Polyester resin

Modification

Engineering plastics

Medical equipment

Biotechnology

Enzymes and

diagnostic reagents

Ongoing shift to information society, internationalization

Rising environmental awareness,

evolution of digital technology

- Increase in lifestyle-related

- Spread of LCD TVs

- Spread of smartphones

- Food loss comes under

diseases

the spotlight

- Water shortages become an issue around the world

1990 2000 2005

1972

1980

Launched the biotechnology

Launched the functional membranes

business. Research into yeast in

business with production of a

the pulp business becomes the

seawater desalination module. Also

foundation. Also subsequently entered

subsequently supplied membranes

the diagnostic reagent market.

for hemodialysis.

2010 2015 2020

Sales Ratio

Specialty business

Others

FY1971

FY1996

FY2020

1.0% 30.0% 77.7%

TOYOBO REPORT 2020 06

Approach to Value Creation

Realizing long-term growth by continually providing value-added solutions

Values &

Focal Points in Value Creation

Philosophy

Social Demands (SDGs, etc.)

Market

Demand for "Products & Experience"

Creating customer value by providing

products, services and solutions

Long-Term Policy

and Strategy

Films and functional materials

p.23-26

Mobility-related products

Corporate Philosophy System

Innovation

Increasing p.29-32 opportunities

Reducing risks

Contribution through our business

Our diverse value creation activities are permeated by the spirit of Jun-Ri-Soku-Yu (adhering to reason leads to prosperity). This can be described as the forerunner of the modern concept of Creating Shared Value (CSV).

Technology

"Manufacturing" for demand

Providing optimal value throughout the value chain, in terms of quality, cost, and lead time

Core Technology

Lifestyle and

environmental products

p.33-36

Life science- related products

p.37-40

Matching stakeholder demands to our management resources

The demands of society and markets have become increasingly diverse and sophisticated in recent years, as can be seen with the Sustainable Development Goals (SDGs). TOYOBO Group has built up a wide range of management resources over many years, and we have especially worked on refining our technology. Selecting the technologies that can address external demands, and extending them through further innovation is our starting point for TOYOBO Group's value creation.

Practicing CSV in four Solutions fields

From fiscal 2021, TOYOBO Group has reorganized its operations into four fields where we can create value to share with society: these are our Solutions divisions. Each division aims to increase the Company's growth opportunities by providing products and services that help resolve issues, and also to control and mitigate risk while taking ESG issues into consideration. We are also strengthening cross-divisional coordination to support the activities of these four divisions.

Please refer to pages 25 to 40 for details

07 TOYOBO REPORT 2020

    • Ability to provide solutions
      • Supply chain management
        • Product life cycle management
  • Achieving the SDGs

Measures for

• Human resource

addressing climate

management

change, environmental

issues, food crisis, etc.

Strengthen group-

Material issues

wide capabilities

• Bolster our ability to

operate businesses

sustainably

• Foster leadership

• Reducing greenhouse

capabilities for

gas emissions

overseeing business

development and

expansion

• Reducing impact on

the environment

    • Data security, privacy
  • Compliance

Identifying material issues

In fiscal 2020, we identified our material issues, which are both important for our stakeholders and have a significant impact for the Company. We also determined the following fundamental items, which are prerequisites to the material issues. We will continue to address materiality while communicating proactively with our stakeholders.

• Corporate governance • Respect for human rights

• Safety, disaster prevention, quality

Please refer to pages 09 to 10 for details

Our Vision

A Group that

continually creates

"the solutions

needed by people and the earth"

Sustainable growth

Consolidated net sales of

¥500 billion in scal 2026

Drawing up a long-term growth scenario using backcasting

TOYOBO Group's stated aim is to continually create "the solutions needed by people and the earth." We have also established net sales targets for fiscal 2026. We are currently considering our long-term growth scenario to 2030 using backcasting, a method of calculating what we need to do now in order to achieve our future vision and targets.

TOYOBO REPORT 2020 08

Materiality

Identifying materiality in order to continue creating "the solutions needed by people and the earth"

Achieving our vision

Companies must help resolve a wide range of issues facing society, from environmental issues such as climate change and plastic waste, to human rights and labor issues.

In fiscal 2021, responding to the demands and expectations of our stakeholders, TOYOBO Group identified CSV- and ESG-related material issues in eight items, to realize our vision of being a Group that continually "creates the solutions needed by people and the earth."

Incorporating external viewpoints

To identify these material issues, firstly we drew up a list of proposed issues reflecting 12 international guidelines including external initiatives and the GRI Standards. From this list, we clarified the positive and negative impacts of each issue through internal surveys and interviews, to select the appropriate material issues.

We then made adjustments, reflecting the views of

Identification Process

Ascertaining and listing social issues on a global scale

UN Global Compact, GRI Standards, SASB Standards, etc.

Internal survey and impact assessment

Officers, employees

Analyzing competitors, hearing views of external consultants, etc.

Determination of the Board of Directors following discussion at management meetings

institutional investors and other external parties, and organized the eight proposed material issues along two lines: importance to stakeholders and importance to TOYOBO Group. Ultimately, the Board of Directors meeting held on May 22, 2020 determined these as the Group's material issues.

Reflecting materiality in management plans

As well as configuring targets (KPIs) for each of the identified material issues, we are drawing up specific measures to achieve these targets and will manage progress. At the same time, we will reflect the material issues in our future medium- and long-term management plans.

We will also regularly review the material issues through communication and engagement with our stakeholders.

Key Future Initiatives

Setting targets (KPIs) based on current status

  1. surveys, drawing up measures to achieve those targets and managing progress
    Reflecting materiality in medium- and
  2. long-termmanagement plans
    Regular (annual) reviews of materiality aligned
  3. with the needs of our stakeholders, receiving consultations from third parties (investors, ESG specialists, experts, etc.)
  4. Holding workshops to further deepen understanding of sustainability issues

09 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

Identified Material Issues

Basic preconditions to materiality

Corporate governance

Respect for human rights

Safety, disaster prevention, quality

Continuing to be a Group that "creates the solutions needed by people and the earth"

Innovation based on responsibility for the future: Realizing clean technology, high QOL, and future mobility

Extremely

important

• Ability to provide solutions

(contribution through our business)

Importance

• Reducing greenhouse gas emissions

• Supply chain management

• Reducing environmental impact

• Product life cycle management

to stakeholders

• Data security, privacy

• Human resource management

• Compliance

Important

Importance to TOYOBO Group

Extremely important

Communication with stakeholders

E Environment

S Social

G Governance

Related ESG

Basic preconditions to materiality

Related SDGs

G

Corporate governance

16

S

Respect for human rights

10

E S G

Safety, disaster prevention, quality

8

Related ESG

Materiality

Related SDGs

E

S

Ability to provide solutions (contribution through our business)

6

12

13

14

E

S

Supply chain management

12

E

S

Product life cycle management

3

12

E

Reducing greenhouse gas emissions

7

13

E

Reducing environmental impact

6

12

14

15

S

Human resource management

5

8

S G

Data security, privacy

17

S G

Compliance

16

S G

Communication with stakeholders

17

TOYOBO REPORT 2020 10

Message from the President

Seiji Narahara

Representative Director,

President and CEO, Co-COO

11 TOYOBO REPORT 2020

The structure of our PVVs corporate philosophy system

Jun-Ri-Soku-Yu sets a clear path to the future

During 2018 and 2019, we reformulated our corporate philosophy of Jun-Ri-Soku-Yu (adhering to reason leads to prosperity). Jun-Ri-Soku-Yu was a personal maxim of our founder Eiichi Shibusawa, and the Company proudly preserves the phrase in his original brushwork from a century ago.

But what does the phrase really mean? After many discussions among our management team, we have all agreed decided that Jun-Ri, adhering to reason, goes beyond avoiding unreasonable acts and encourages us to be proactive to do what is right. In other words, it's a call for active contribution to solving social issues. As for the latter half, Soku-Yu, leads to prosperity, has been understood as meaning that taking action leads to a prosperous society and building on personal growth.

The TOYOBO Group is standing at a major turning point. For decades, we have been restructuring and reconstructing our business portfolio. Now, we are at the stage where we set new goals and strategies for growth. So we returned to our roots, and redefined our new concept of Jun-Ri-Soku-Yu (adhering to reason leads to prosperity) to clearly state our purpose and our path forward. This became the foundation for constructing the TOYOBO Group corporate philosophy system-our Principle, Vision, Values, and Spirit (PVVs).

Revisiting our philosophy reassured me that TOYOBO is a company that has been contributing to solving social issues since its founding. Our purpose has always been to ensure the sustainability of people and the earth. I am not alone in recognizing this. I have heard from many employees that the PVVs corporate philosophy system gave shape to the heart of what we have been doing as well as what we are working for.

With this understanding, TOYOBO Group is currently reforming our organization and management plans for long-term business growth. Our corporate philosophy system has how we approach employee evaluations. It has also induced new activities within the company, such

as bringing employees together to talk about their struggles and experiences and how they relate to the TOYOBO Spirit. We will continue to instill and establish the PVVs corporate philosophy system based on Jun-Ri-Soku-Yu (adhering to reason leads to prosperity) throughout the Group globally.

Fiscal 2020 Results and Fiscal 2021 Outlook

Preparing for the future

The business environment in fiscal 2020 (ended March 31st, 2020) was quite severe with the global economic slowdown triggered by US-China trade friction and the sluggish growth of the automobile industry. The fire incident at the Tsuruga Research and Production Center in fiscal 2019 also impacted our operations. The COVID-19 pandemic in 2020 is also growing concern for its impact on the economies of all nations.

Although the business environment has been quite severe, we were close to meeting our financial targets for the beginning of the term. Sales and profits rose YoY driven by steady sales of our unique set of products, including mold releasing films for MLCC, enzymes for diagnostic

Initiatives That Reflect Our Refined Corporate Philosophy System

Achieving long-term growth through new initiatives driven by our refined PVVs

Business structure

Personnel assessments

Refined

Investment criteria

Long-term planning

TOYOBO REPORT 2020 12

Message from the President

reagents in the healthcare business, machinery with low environmental impact, and COSMOSHINE SRF®, a polarizer protective films for LCDs that has been garnering substantial sales growth in recent years. The work developing these products is laudable as strategies to strengthen our offerings in non-textile fields started about 10 years ago after the structural reforms were completed. The products have grown into performance drivers for the Group even amid severe business conditions.

During the COVID-19 pandemic, we have implemented various measures to protect our workers and halt the spread of the disease starting with establishing a corporate task force, enabling widespread telecommuting, and cancelling or reconsidering meetings, events, and business trips. In the effort to contain the disease, we also mobilized the company's capabilities by increasing production of PCR reagents and SARS-CoV-2 test kits.

We announced our performance plan for fiscal 2021 on August 6, which was later than usual as we took time to evaluate the potential impact from the COVID-19 pandemic. Because the outlook remains very uncertain, we are currently putting together the Overcome Coronavirus 100 action plan to stockpile ¥10 billion in

Financial Results, Forecast, and Targets

(¥ bn)

funds in preparation for a potential worldwide recession after the pandemic fades. When markets are stagnant, we will not hesitate to postpone any spending possible, and when conditions start to improve, we will be ready to quickly revive our business growth. To be fully prepared, we will maintain our current workforce and conduct essential investment in equipment and R&D.

Changing towards a solution-based organization

Rooted in the market and society

In fiscal 2021, the TOYOBO Group reorganized its corporate structure from product-oriented to market-oriented, consisting of four solutions. I had always envisioned a market-oriented structure, but the direct impetus for the reorganization came from the many members who expressed the same idea while we were refining our PVVs corporate philosophy system. The catalyst for revising our organizational structure arose from our discussions that if we intend to continuously contribute to solving social issues in the future, wouldn't it be more apt to

Primary Changes to the Organizational Structure

FY2020

FY2021

FY2022

Results

Forecast

Targets

Net sales

339.6

330.0

375.0

Operating profit

22.8

20.0

30.0

Operating profit

6.7

6.1

8.0

margin (%)

Ordinary profit

18.0

14.0

-

Profit attributable to

13.8

7.0

16.0

owners of parent

Capital expenditure

36.4

26.5

-

Depreciation

17.0

18.8

-

Earnings per share (¥)

155.1

78.8

-

Return on equity (%)

6.7

-

Minimum 8

Debt-to-equity ratio

0.98

-

Below 1.0

1. Expanding the scope of businesses and developing solutions

(Previous)

Product-out Organization

Solution-based departments geared towards the market

  • Films and Functional Materials Solutions Division
  • Mobility Solutions Division
  • Lifestyle and Environmental Solutions Division
  • Life Science Solutions Division

Marketing strategy functions in each solution division

2. Organize staff functions

Strengthen cross-functional capabilities (development, production)

  • Renewable Resources Business Development Department
  • Digital Strategy Department
  • Corporate Sustainability Department

Guide the Company's growth direction

  • Wider application potential for solutions
    (Larger positive impact)
    Mitigating risk
    (Smaller negative impact)

13 TOYOBO REPORT 2020

have a framework that approaches the issues from the perspective of society rather than built around our product-out approach?

The importance of taking that view has been apparent to us from 30 years ago when the Group began its structural reform. However, as is characteristic of a manufacturer with large-scale production facilities and numerous supply chains, setting up an organization for each market was complicated. Nevertheless, all of our directors recognized that we had to break through and create an organization that will enable us to advance toward our vision and realize sustained growth. This was a major step forward, and I believe we were able to do it because we had clarified our corporate philosophy and vision.

  1. solution-orientedorganization has many advantages. For example, bringing together film and adhesives from previously separated departments enables us to offer a total solution for PET bottle packaging. I am looking forward to the new possibilities that our new organization will bring to the market. I also think it is important for us to take the lead in developing and proposing new solutions that our clients have not yet identified.
    The move away from a product-oriented structure may raise new management issues in the Company, but I believe we can respond effectively by placing an executive officer and reinforcing cross-functional management among business divisions. It is essential that all of our employees share and fully support our philosophy of contributing to solving social issues. If we do, I am confident that the new organizational structure will be a great success.

Investment strategy risk management

Evaluation criteria based on our philosophy

Redefining our PVVs corporate philosophy system also greatly clarified our approach to investment strategy. The evaluation criteria for an investment was simplified to "what social issues will this investment help solve?" It is also important to estimate the level of actual contribution

we can provide as we make our decisions.

Our basic approach will be to focus our resources into the fields where we have distinct strengths and the support of our customers, such as our COSMOSHINE SRF® and food packaging films. When making new upfront investments, we will also carefully consider the projection for when we can expect return on investment. Five to six years will be a benchmark target for recouping an investment, and we will also evaluate investments in terms of how much they will contribute to society.

In managing risk that could hinder our corporate growth, we will look at investment opportunities as well as their level of contribution to society. Market conditions and the competitive environment are always changing.

Any product that is highly appreciated by the market or that is generating strong profits can change at any moment. We cannot be complacent even with products like COSMOSHINE SRF®, and must pay close attention to the needs of our customers and the product end-users while we continuously ask ourselves, "is the product truly providing the best solution?"

TOYOBO REPORT 2020 14

Message from the President

Framing our long-term vision

Backcasting from the future

The TOYOBO Group is currently in the midst of promoting

  1. medium-termmanagement plan for fiscal 2022, but we are looking further ahead toward attaining a fiscal 2026 target of ¥500 billion in consolidated net sales. In fiscal 2021, all management will discuss targets for fiscal 2031 as part of our long-term growth story.
    One of the major themes of our discussions is "to change our way of thinking." Management plans covering a one-year period tend to limit our thinking about how to make the best use of our current resources. The same is true for four year plans. The reason is that, three or four years is not enough time for a Group to prepare adequately.
    I believe that starting to look further ahead to 10 years will open the door for ideas that we haven't imagined before. The year 2030 is also the target year for achieving the United Nations' sustainable development goals (SDGs), and thinking about the many ways that TOYOBO could be helping solve social issues gives me a sense that we have the potential to contribute even more. Yet, simply following the growth path we are now on will not get us there. I am creating a roadmap for a long-term

The Long-Term Approach

Backcasting a roadmap

2030 Our Vision

2022-2025

Medium-term

Plan

2018-2021Medium-term

Plan

Where we

are now

Concrete growth from our present position

2020

2021

2025

2030

growth story by starting at a point in the future and backcasting step by step to clarify what we need to do now so we know what management resources we need more of, if we have any missing parts, where we need to lay the foundation for growth, and precisely what order we need to proceed.

This backcasting approach was the behind our decision to acquire Teijin's polyester film business in fiscal 2020. We are working with our new employees in the polyester film business to develop new solutions that will contribute to society five to 10 years in the future.

Building our business foundation

Retaining and cultivating our personnel

In fiscal 2019, we launched a special project, the KAERU Project (kaeru means "to change"), to comprehensively improve our workplace culture. With the aim of making the company an easier place to work, the project is taking a bottom-up approach to workplace reform by collecting employee opinions, taking a multifaceted approach to personnel evaluations, and surveying employees about the Company's good and bad points.

We are also enhancing the training programs provided for employees and managers to leverage the human resources who will lead the Company in the future. I believe exposure to new experiences is the most effective way for employees to develop and grow, and I plan to change the how we approach and implement job rotation. I also believe that our solution-oriented approach will open up many superb opportunities for employees to gain new experiences.

15 TOYOBO REPORT 2020

ESG initiatives

Building a sustainable future during the COVID-19 pandemic

The TOYOBO Group, as a good member of society, has been addressing environmental and social issues underpinned by our Jun-Ri-Soku-Yu (adhering to reason leads to prosperity) corporate philosophy. Our environmental measures include lowering our greenhouse gas emissions form our fiscal 2014 levels by 30% in fiscal 2031 and by 80% in fiscal 2051.

We also stepped up our efforts to attain the new global standards in January 2020 by becoming a signatory of the UN Global Compact and announcing our support for the Task Force on Climate-related Financial Disclosures (TCFD). In addition, based on the recommendations of the United Nations Global Compact, GRI Standards, SASB Standards, and other global standards, we have identified specific issues of materiality that the Group should address. The issues were identified by widely soliciting opinions inside and outside the company, repeated discussions in management meetings, and by the determination at the Board of Directors meeting in May 2020. We plan to set KPIs for each issue of materiality, to actively promote and manage activities that are required globally, and to proactively report the results publicly and throughout the company.

I have always appealed to all of our employees about the importance of taking a Three Part Harmony that encompasses the present, future, and our business foundation. This three-way approach is also proving very useful during the spread of COVID-19. From the perspective of our business foundation, we are maintaining the safety, security, and stability of our business during the pandemic. For the present, we are revising our business structure so we can continue generating earnings during the pandemic. Looking ahead, this means creating new value that will be needed in the post COVID-19 world. By thoroughly considering our operations from each of three perspectives, we will overcome the business threat from the COVID-19 and contribute to ensuring the sustainability of global society.

Closing message to shareholders and investors

Helping society flourish and our Company grow

Returning profit to shareholders is a top management priority of the TOYOBO Group. Our policy is to maintain a stable dividend and to target a total return ratio of 30%. In fiscal 2020, we distributed annual dividends of ¥40 per share. We understand that some shareholders would like the Company to provide greater immediate returns; however, at this time we are continuing to invest for future business growth, which we expect to generate value return for our shareholders.

I always keep in mind that the primary duty of the CEO is to "take responsibility." No one knows what will happen in the future. At the same time, as president, constantly probing our management to see if they really have everything under control would hinder them from taking on new challenges. I believe it is always worthwhile to consider our activities in terms of the Jun-Ri-Soku-Yu (adhering to reason leads to prosperity), and if the project has value and is backed with objective reasoning, then my most important role as president is to provide support by saying, "I take responsibility, so let's do it."

There are no easy solutions to society's problems. The only way we can solve them is to grit our teeth and keep working at it. The TOYOBO Group will continue seeking to grow our business by working to make society better.

Sometimes I wonder what Eiichi Shibusawa would say if he saw the Group as we are today. My hope is that he would say, "That's the way to do it."

To all our stakeholders, I would like to express my appreciation for your understanding and ongoing support for the TOYOBO Group.

Representative Director,

President and CEO. Co-Coo

TOYOBO REPORT 2020 16

Feature1 Dialogue with ESG Investors

TOYOBO President Seiji Narahara sat down with Ken Shibusawa, founder of Commons Asset Management and the great-great-grandson of TOYOBO founder, Eiichi Shibusawa, to talk about sustainability within the TOYOBO Group.

The dialogue took place on May 15th, 2020 via web conferencing system.

Ken Shibusawa

Chairman, ESG Chief Executive

Commons Asset Management, Inc.

Seiji Narahara

Representative Director,

President and CEO, Co-Coo

TOYOBO CO., LTD.

17 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

Using Shibusawa's The Analects and the Abacus as a guide for creating a sustainable modern society

Thoughts on TOYOBO's founder

Continuing the legacy of

Eiichi Shibusawa

Narahara Eiichi Shibusawa is considered the father of capitalism in Japan. He founded TOYOBO and set up 500 other companies with the belief that businesses are social institutions. He left us with the phrase Jun-Ri-Soku-Yu (adhering to reason leads to prosperity), which has always been our guiding philosophy, the core of our management, and the foundation for our business decisions. His words are what has kept our business running for over a 100 years. Shibusawa I'd like to start by saying how wonderful it is to hear how everyone in the TOYOBO Group feels a close tie with my great-great-grandfather. Eiichi Shibusawa dedicated his life to "empowering Japan as a nation." He was born at a time when a person's social standing determined their future. No matter how hard a person may try, a merchant could never be treated like a Samurai class. He understood that to empower a nation, people must be given equal opportunities despite ones social standing. I think this burning passion was behind his drive to help found over 500 companies. Narahara TOYOBO is a company that began with private investment, which was Shibusawa's idea. During his overseas inspection, he saw how private companies were involved in creating industries and national infrastructures. I believe that made him think that Japan should also follow that trail. Shibusawa Since he understood the importance of the private sector as a driver of national empowerment, I would guess that he saw the potential for the spinning industry to be a core industry for Japan.

Principle for business management

currently at a challenging stage of becoming a new TOYOBO. Therefore we wanted to clarify the reasoning behind our motivation to work.

During that process we looked back at the maxim Shibusawa bestowed on our Company-Jun-Ri-Soku-Yu (adhering to reason leads to prosperity). In the past, we had interpreted Jun-Ri to mean "refrain from doing what is wrong," but after rereading his book The Analects and the Abacus*, we began to understand that Ri refers to Confucius' Analects. According to Shibusawa, the most important teaching of the Analects was to help people in need and to enrich society. Today, we might say that we should "use our technology and human resources to resolve issues in society as well as the world and as a result achieve better lives for ourselves. I believe that is the message that Shibusawa put into Jun-Ri-Soku-Yu. Do you agree with this interpretation?

  • Eiichi Shibusawa's The Analects and the Abacus is a book on business management philosophy. It combines the ethics of The Analects of Confucius with the practice of a profitable business, which is "the abacus." Shibusawa asserts that business practices should be ethical and that the profits must be used to achieve a better society.

Shibusawa Yes, I believe so too. I think the theme of The Analects and the Abacus is what we now call "sustainability." The abacus, which represents a focus on generating profits, is a necessity for a company to survive. But a business that solely pursues profit will at some point run into difficulties. At the same time, a narrow approach focused solely on the Analects, or a strict moral path, would not be sustainable in a drastically changing world. In other words, it's not The Analects "or" the Abacus. A car whose wheels were the Analects on one side and the abacus on the other could not drive straight if it were using wheels on just one side. I think Shibusawa understood the importance of the "and" that balances the Analects and the Abacus.

The power of "and" in

The Analects and the Abacus

Narahara The TOYOBO Group has revised its business portfolio by shifting its focus from textiles to specialty businesses, and we are now generating steady profits. However, in fiscal 2019, we redefined our corporate philosophy system to gear it toward further growth. The reason we refined the philosophy was because we are

The Company's purpose

Looking beyond the COVID-19 world

Shibusawa Referring to what you said earlier about knowing the reason, more and more companies are looking at the purpose*1 of their enterprise. The word "mission" that often appears in corporate philosophies tells a company and its employees "what we do" but a purpose tells them "why

TOYOBO REPORT 2020 18

Feature1 Dialogue with ESG Investors

we do it."

Narahara TOYOBO's purpose is contained in Jun-Ri-Soku-Yu (adhering to reason leads to prosperity) and, as you mention, is to help solve the world's problems. That is the reason we have changed our organizational structure. We set up divisions based on solutions because we recognized that if we are going to address society's issues, we needed an organization that was geared to producing solutions.

As we shared the new explanation of the philosophy, within the company we noticed that having a clear understanding of the "why" in our business raised employee motivation to a completely different level compared to being asked to work to increase profits. The refining of the corporate philosophy system created a positive atmosphere among our employees doing their best to find ways to contribute to resolving social problems.

Shibusawa The financial markets are increasingly looking favorably on companies that share that idea. I launched Commons Asset Management to support Japanese companies generating sustainable value creation, and found that the companies doing that were always addressing some kind of social issues.

Narahara As a company that is following Shibusawa's teachings, it is very pleasing to hear that investors are looking for companies that are applying the concepts in The Analects and the Abacus. I believe we can achieve a sustainable society if the world make more effort to recognize and address social issues.

Shibusawa It has been thought that a good company was one that ran their businesses rationally and raised their share price. However, this approach only benefited certain people

and led to disparities in society, raising the question of whether a successful drive for profits is enough create a society that is sustainable overall. The issue gained a further spotlight at this year's World Economic Forum*2 in Davos, Switzerland, which focused on the topic of "stakeholder capitalism"*3.

The outbreak of the COVID-19 pandemic has only brought further attention on the topic. I expect the real value of the SDGs and ESG lies in the world coexisting with the COVID-19 and after COVID-19.

Narahara I think the world will be a very different place after the pandemic. In TOYOBO Group's directly related operations, we have been producing and shipping 20 times more virus test kits than usual for use in coronavirus testing centers in Japan and China. We've also released research reagents that shorten the detection and measurement period.

We are doing everything we can to help. For example, we are testing technology we created to examine how the norovirus spreads in kitchens. We are trying to see how we can use it for the coronavirus. We supply about 40% of the Japanese market for food packaging films, and we believe we can make a major contribution if we can develop films that the virus cannot stick to or survive on.

I think we will also need to change our business operations. New lifestyles will make it increasingly important to introduce workstyle reform and to digitalize our operations. Risk management will also have to be more stringent.

*1 Many companies have been focusing on the purpose behind their management strategies and branding in recent years. They are essentially looking for the basic reason for the existence of their company or organization in society.

*2 The World Economic Forum is an annual international conference founded by the economist Klaus Schwab. Intellectuals, journalists, and political and business leaders convene to discuss important global issues.

*3 Stakeholder capitalism is the idea that companies should not be bound to prioritize the interest of shareholders. Its approach is to fully encompass the interests of the stakeholders, which includes employees, customers, local communities, and the global environment.

Towards sustainable growth

Becoming a global frontrunner

Shibusawa I think the spinning industry is the industry that has continued to change and evolve among the Japanese industries. My hopes are that TOYOBO will be a frontrunner.

19 TOYOBO REPORT 2020

Discussions with you have made me realize that you deeply respect and understand the true nature of Eiichi Shibusawa's philosophy.

There is a need for dialogue not just with investors but with the various stakeholders in society. I also think it is important that the Company communicate both inside and outside the company. In regards to the commitment to SDGs, it is important for the president to reveal his passion as well as the direction very openly.

Narahara I agree. I think it's important to share my thoughts in my own words. I've visited offices and talked directly with many employees, but I was finding it a real challenge to reach out to all of them. As for the company reorganization this April, I presented a video on the company intranet where I spoke about various matters including the direction we are taking the Company. The response from employees was very positive.

Shibusawa New technology is enabling so many new possibilities. Speaking of which, right now I'm talking live with the CEO of a major listed company over the internet.

Narahara If we can't meet to talk with someone in person, we will find other ways to communicate with our stakeholders.

Shibusawa I would like to change our topic to corporate governance, I think it's wonderful that four of your 10 directors are outside directors. I'd like to ask for your opinion regarding the absence of women or non-Japanese voices in the Company's internal directors and executive officers. Narahara In the past five years, about 40% of the new university graduates we've hired were women. We've also been actively hiring midcareer professionals form outside the company. Although it's taking some time, we are assembling a more diversified workforce that will be the source for the Company's future executive officers and directors. Shibusawa In the future, I think society will want companies to clearly demonstrate how they are benefiting society. Narahara Indeed, I think companies will need to disclose quantitative data showing their "social impact." We took a first step in that direction in May 2020 by identifying the material issues (materiality) for the Company. For each materiality, we plan to set KPIs and monitor our progress, which we will report internally and publicly.

Shibusawa Since TOYOBO is a leading maker of materials

company with its roots in textiles, I would also like to see the company active internationally, such by participating in the creation of global standards and guidelines.

Narahara We have started to take steps in that direction. In August 2019, we joined the Circular Economy for Flexible Packaging (CEFLEX), a collaborative initiative of a European consortium of companies. I am looking forward to passing Eiichi Shibusawa's spirit of Jun-Ri-Soku-Yu (adhering to reason leads to prosperity) to future generations as I seek to guide the Company towards sustainable growth.

Thank you very much for this interesting discussion today. Shibusawa Thank you. It was my pleasure.

Ken Shibusawa

Chairman, ESG Chief Executive

Commons Asset Management, Inc.

Mr. Shibusawa joined an international relations association, then obtained an MBA in the United States. He then entered business in the financial industry, working at a foreign-affiliated financial institution, where he traded Japanese government bonds and foreign exchange options, and sold equity derivatives. He was the Japan representative for a major US hedge fund. He left the company in 2001 and established Commons Asset Management, Inc. in 2007. He has been the Chairman of the company since 2008.

TOYOBO REPORT 2020 20

Message from the Chief Financial Officer

Hiroshi Otsuki

Director and Executive Officer,

Controlling Supervisor of Management

and Administration Division

A clear financial strategy

for medium- and long-term growth

Leveraging my experience in accounting, finance, and corporate planning

I was appointed Chief Financial Officer in April 2020. I worked in the accounting and finance department for over

20 years until about six years ago and am eager to bring that experience to my new position. In recent years, the Group's earnings performance plummeted when we were right in the middle of sweeping structural reform. Our financial status deteriorated markedly as ballooning interest-bearing debt nearly quadrupled the debt-to-equity ratio. Under those circumstances, we prioritized short-term improvements, and struggled to secure loans from financial institutions.

After years of drastic improvements, our financial state is at a much stronger financial footing than during those trying times. Revamping our business portfolio has steadily improved our profitability, and the continuous paring down of our interest-bearing debt has brought our debt-to-equity ratio close to 1.0. Shifting our focus to highly profitable specialty businesses has stabilized the operating profit margin in recent years and has brought the Group to a position where we can look ahead to another stage of growth.

As we move forward, our financial strategy is to maintain our financial stability while making investment decisions for growth and cash flow management. Prior to becoming Chief Financial Officer, I spent three years in charge of the Corporate Planning Department formulating

the Group's growth strategies. I will leverage my experience to develop and promote financial strategies towards sustained medium- and long-term growth.

We maintained our sound financial structure in fiscal 2020

The TOYOBO Group recorded increases in consolidated sales and profits in fiscal 2020 with consolidated net sales reaching ¥339.6 billion, operating profit ¥22.8 billion, and profit attributable to owners of parent ¥13.8 billion. Interest-bearing debt increased by ¥10.4 billion from the previous fiscal year to ¥175.1 billion, while the equity ratio edged down by 1.9 percentage point to 36.4%. We maintained a debt-to-equity ratio of 0.98, keeping it below 1.0, which we have set as an indicator for our financial stability. We enter the second year of our four-yearmedium-term management plan well on our way towards fulfilling our financial targets for fiscal 2022.

However, we understand that in order to strengthen our financial structure, we need to increase our business profitability and cash flow. One of the key management indicators is operating profit margin. Current medium-term management plan aims to raising the return on equity to 8.0% in fiscal 2022. With the margin still at just 7.8% in fiscal 2020, will continue to constantly advance our business

21 TOYOBO REPORT 2020

portfolio reforms and improve our profit structure to strengthen our earning power.

Achieving sustainable growth by taking necessary risks

I believe a financial officer's duty is to "take risks that should be taken and avoid risks that should be avoided." The fundamental responsibility in financial management is to "not let the cash run out," which means "keep the company afloat." I have personally come to understand the importance as we struggled to increase borrowings in times of business structure reforms, and even during the financial crunch following the 2008 global financial crisis. As a result, it is true that keeping the Company alive has slightly stagnated our growth or to take on the risk of upfront investment in the medium or long term.

Of course, we cannot achieve growth by continuing like this. We must be constantly looking ahead several years and beyond and take the necessary risks of upfront investment.

Our financial structure is significantly better than it was 10 years ago in terms of both our equity ratio and cash flow. We have been affirmed A-rated for the past few years, making financing easier in the financial markets.

D/E Ratio and Return on Equity: 20-Year Trend

We are finally in a position where we can identify and take necessary risks, as any business needs to do without overstraining our financial balance. We will adamantly avoid taking any unnecessary risks. As a person in charge of capital allocation, I believe that making the right decisions is my utmost mission.

Deciding what we need to reach our objectives

When we form our financial strategy, how will we decide which risks to take and which to avoid? The systemized management philosophy we formulated in fiscal 2019 will play a critical role.

Codifying the management philosophy involved numerous discussions amongst the corporate officers for almost a year. We engaged in a variety of topics such as, what is our purpose? why haven't we been able to grow greatly? what can we provide to society in the years ahead? and what is our vision towards the future? The intense discussions would have been unthinkable in the recent past when we were battling through the structural reform needed for the Company's survival and could only focus on short term perspectives.

The discussions led us to reinterpret and redefine

D/E ratio

Return on Equity (%)

11.54

10.83 10.42

7.95

9.32

7.77

5.79

5.82

5.41

6.45

5.82

7.49

5.39

3.57

2.31 2.06

3.57

3.57

3.86

3.31

1.65

1.45

1.82 2.04

1.16

1.20

1.12

1.05

1.01

0.81

0.93

0.98

1.38

1.60 1.21

1.19

-0.34

-7.71

-10.97

-16.74

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

(FY)

TOYOBO REPORT 2020 22

Message from the Chief Financial Officer

Jun-Ri-Soku-Yu (adhering to reason leads to prosperity). We were able to explain our corporate philosophy system-PVVs-clearly to our Group employees and to the public. The PVVs help set our corporate targets for fiscal 2026, restructure our organization towards a solutions-based business domain, and visualize how we want to develop the solutions for the future.

Our experience in reestablishing our corporate philosophy, medium- and long-term objectives, and business goals have become a common ground for deciding "what must be done and what must not be done." This is my principal guideline as a chief financial officer when deciding which risk to take and which risk to avoid.

Increasing investments to cultivate new businesses

As we execute the management strategy, we have clarified management philosophy and redefined business domains to

provide concrete guidelines for how much and for which projects to invest, while also being aware of the individual investment conditions for each project. The pros and cons of each potential investment project will be considered in relation to our philosophy and goals.

I believe we should actively invest in projects that firmly align with our philosophy as well as projects that can be expected to contribute to fulfilling our objectives in the long term. This is even if the return on the investments may take a while. Conversely, I think any investment project that does not meet the terms of our philosophy and objectives should be rejected, even if it promises a certain degree of return in the short term.

Our policy has been to keep capital expenditure below depreciation while keeping them at a certain proportion to each other on a year-by-year basis. However, I believe we now need to actively invest to develop and expand our businesses for future growth. Our capital investment in fiscal 2020 amounted to ¥36.4 billion, which was a substantial increase from previous years, and I expect our investments will continue to exceed depreciation in the years ahead.

Key risks

Financial risk

Countermeasure

Large forex

Reduce risk using forward exchange contracts

movement

Large rise in

Use derivatives, primarily interest rate swaps

interest rates

Sharp drop in

Board of Directors verifies and continually

assesses shares other than those held purely for

share prices

investment purposes

Other risks ( ): Number of page with related information, e.g. countermeasures

Risks that have occurred or are very likely to occur

• Natural disaster, accident, infectious disease (p.57)

• Further deterioration in political/economic conditions

Medium- to long-term risks

• Purchasing of raw materials

• Product defects, etc.

(p.60)

(p.59)

• Securing human resources

• Legislation and compliance

(p.55)

(p.69)

• Overseas business activities

• Litigation

Basic Capital Management Policy

Increase Corporate Value

Growth Investment Decisions

  • Consistency with the objectives for each business based on the Jun-Ri-Soku-Yu management philosophy
  • Assessment of the certitude of revenue based on WACC

Healthy Financial Discipline

  • Increase cash flow by improving the profitability of each business
  • Maintain the the D/E ratio below 1.0

23 TOYOBO REPORT 2020

Of course, this assumes that we maintain a sound financial position and continue to avoid investments that would cause the debt-to-equity ratio to spike above our 1.0 benchmark.

Investment decisions for each potential project will be rigorously examined for profitability, competitive advantage, and the adequacy of the plan. We will also scrutinize the likelihood of and contingencies for a potential worst-case scenario. The final decision on investing in a project will take into account the degree of revenue certainty and relevance to our business objectives by estimating indicators such as the weighted average cost of capital (WACC) and a comprehensive assessment of how the project fits with the objectives we have for each of our businesses.

Pursuing growth,

preparing for the unexpected

In fiscal 2019, the TOYOBO Group looked beyond the current medium-term management plan and set growth targets for consolidated sales of ¥500 billion and operating profit of ¥50 billion in fiscal 2026. Currently, we are generating about ¥350 billion per year, which means that we will have to boost sales by ¥150 billion to reach the 2025 target. It's clear that organic growth in our existing businesses will not be enough, we will need to conduct upfront investment, in such areas as human resources.

In fiscal 2021, we are formulating new longer-term growth strategies aimed at fiscal 2031 to pursue with our four new solutions divisions. Managing the business operations geared to long-term targets like these will include monitoring short-term performances while also tracking the progress of action plans for growing businesses and optimizing business portfolios.

Risk management will pay close attention to investment risk as well as all areas that can affect their financial status. These include foreign exchange rates, interest rates, credit standings of business partners, market price fluctuations of securities holdings. I always bear in my mind that we should constantly be prepared for the unexpected. Although it's impossible to prevent the unexpected, it is critical to quickly gather information, correctly assess the situation, and take appropriate action when the unexpected occurs to be able.

The spread of COVID-19 was certainly unexpected. Right now we cannot estimate how big it will impact the global economy. Therefore, we have prepared for difficult financial conditions by creating an action plan to generate a fund stockpile of ¥10 billion by reevaluating investment cash-out plans, reducing inventories in all areas, and reconsidering plans for capital investment. The aim of these actions is to ensure the stability of our earnings base and maintain our healthy financial position. We also know that unanticipated incidents can occur in our businesses, such as the fire that occurred in fiscal 2019. Incidents like that are a reminder that we need to be able to limit damage and flexibly execute measures to prevent a negative legacy.

I will dedicate myself to fulfill my commitment as an executive member of TOYOBO to achieve our vision for growth through the next 10 to 30 years.

Director and Executive Officer,

Controlling Supervisor of Management and

Administration Division

TOYOBO REPORT 2020 24

Strategy for each Solutions Division

Films and Functional Materials

Films, functional materials (VYLON®, HARDLEN® / plastics processed products)

Growth Strategy

We focus on creating environmental value added solutions, while expanding existing product sales

Chikao Morishige

Senior Managing Executive Ofcer

Head, Films and Functional Materials Solutions Division

The Films and Functional Materials Solutions Division was created by combining our films, adhesives and coating-related operations.

Food loss is a growing social issue. In the packaging field, we will continue to increase sales of transparent vapor- deposited film ECOSYAR®-a food storage film with excellent performance and cost. In the industrial films field, we intend to strengthen our capacity to supply COSMOSHINE SRF® by introducing offshore OEMs, while aiming to increase our market share from the current 35% to 50%. In mold releasing films for MLCC, we aim to raise our market share from 25% to 30% to meet solid demand, by expanding facilities at the Tsuruga Research and Production Center.

As well as increasing sales of these existing products, we will accelerate new cross-departmental initiatives. The deepening collaboration between the films and functional materials departments is one example of this. We aim to boost sales and realize efficiencies through deeper information sharing between the two departments. We will also tackle the challenge of creating new value and solutions by optimally integrating our assets in various fields.

We will also focus on the development of biomass-derived polymers in cooperation with the new Renewable Resources Business Development Department, as we aim to become a global leader in environmentally sound products and solutions.

25 TOYOBO REPORT 2020

  • No.1 global manufacturer of eco-conscious films
  • Comprehensive provider of resins

Net sales of ¥200 billion

(¥127 billion as of FY2020)

Note: Our business segments were reorganized with effect from FY2021. Sales figures for FY2020 are unaudited and approximate.

Characteristics

S

Weaknesses

O

and SWOT

trengths

pportunities

hreats

for each field

T

Gradual decline of domestic demand due to decreasing population. Number of households and dual-income households is growing, competition in the Japanese market is also maturing. The market remains stable.

• A comprehensive films

manufacturer

• Lineup of environmentally

sound products (recycled

Films

and biobased resins,

laminating films for cans,

and thin shrink film)

• Lineup of polarizer protective

(PET) films

• Integrated production from

film manufacturing to

processing

  • Production is focused in Japan; need to develop overseas production bases
  • Rising awareness of environment, safety and security in relation to the SDGs
  • Growing awareness of the need to reduce food loss
  • Expanding film demand in the IoT field
  • Sales, technology and development synergies through integration of TFS*
  • Risk of not being able to transport products
  • Global problem of microplastics

Functional materials (1)

VYLON®

HARDLEN®

Demand is expected to grow, aligned with the movement to cut CO2 emissions

in automobile coatings, and the spread of 5G in the electrical/electronics field, etc.

• Provision of modification/

• Cost competitiveness

• Transition to 5G, shift to EVs

• Tighter chemical substance

polymerization technologies

and more lightweight vehicles

regulations (restrictions on

and comprehensive technical

• Rising environmental

the use of raw materials)

support

awareness (avoiding solvents)

• Global production bases and

extensive product lineup

Functional

materials (2)

Plastics processed products

Sales of photo-sensitive printing plates for labels, seals, packaging. Exporting to more than 60 countries worldwide

• Water-washable printing

• Production at one plant in

• Expansion of market for

plates (solvent-free)

Japan

water-based systems along

• Unique organic synthesis

with rising environmental

technology

awareness

• Movement away from China

due to environmental

regulations

  • Tighter chemical substance regulations (restrictions on raw materials used)

*Teijin Film Solutions Limited

TOYOBO REPORT 2020 26

Food packaging using ECOSYAR®

Strategy for each Solutions Division

Films and Functional Materials

Value Creation Flow

Process

Procurement

Manufacturing

ESG aspects

Enhancement of positive effects (increasing opportunities)

Mitigation of negative effects (reducing risk)

Resource circulation

Preventing climate change

• Procuring recycled raw materials from PET

• Installation of gas cogeneration facilities, conversion of fuel from coal to gas

bottles

(Films)

Resource circulation

  • Re-useof recycled raw materials: 800 tonnes per annum

(Crisper®, KAMISHINE®, SPACECLEAN®, CYCLE CLEAN®, RESHINE®)

(Films)

  • Re-useof non-conforming products: 2,750 tonnes per annum
    (COSMOSHINE SRF®) (Films)
  • Re-useof HAGIPRO resin* (expected to start in October 2020) (Films)
  • Impurity-freePET made by removing the surface treatment of films that would otherwise reduce recyclability

Major ESG topics in business processes

Resource circulation

We promote resource circulation by collecting offcuts from the manufacturing process and used end products, recycling them and using them as materials. We also help to reduce the volume of resources used by developing high-strength and thin products.

Preventing climate change

We continue to install gas cogeneration facilities, which can efficiently use the waste heat produced from power generation. We are also promoting conversion of fuel from coal to gas. Through these initiatives, we are reducing CO2 emissions.

Value provided through products and services

Films that help reduce food loss

The transparent vapor-deposited film ECOSYAR®, which demonstrates outstanding

gas barrier characteristics, is ideal for long-term food storage and helps to reduce food loss.

As no metals are vapor deposited, the film is also suitable for heating in microwave ovens.

Films that enhance the functionality of LCD displays COSMOSHINE SRF® polarizer protective film for LCDs is a product that eliminates the coloration caused by birefringence seen in conventional polyester films. With the increasing size of LCD TVs, as well as the shift to bezel-less

27 TOYOBO REPORT 2020

Solutions for customer challenges and social issues

  • Saving resources and reducing CO2 emissions by using recycled raw materials and developing thinner products
    Heat-shrinkable polyester film SPACECLEAN® Film of recycled PET resin CYCLE CLEAN® Film of plant-derived raw materials BIOPRANA®
  • Enables long-term food storage, reducing food loss Transparent vapor-deposited film ECOSYAR®
  • Enhances the performance of communications equipment

Polarizer protective films for LCDs COSMOSHINE SRF®

Mold releasing films for MLCC COSMOPEEL®

  • Replaces metals, reducing weight Copolymerized polyester VYLON®
  • Does not use solvents, reducing environmental impact Environmentally conscious printing plates Printight®, Cosmolight®

Resource circulation

  • Collecting and recycling silicon-coated films (Films)
  • indicates a registered trademark in Japan of TOYOBO CO., LTD.

screens and open-cell panels, the product has gained a large market share.

Films that help save resources

TOYOBO develops and provides films for PET bottle labels that help to save resources through the use of recycled raw materials and a thinner product profile. For example, CYCLE CLEAN®, a film of recycled PET resin, has increased the ratio of recycled resin to a world-leading 80% while retaining the properties of conventional products.

Meanwhile, the heat-shrinkable polyester film SPACECLEAN® is the world's thinnest polyester film, at 20 μm. This is at least

50% thinner than conventional products, and helps to significantly save on resources.

Mold releasing films for ceramic capacitors, supporting the shift to IoT

Ceramic capacitors are multipurpose electronic components that adjust electric current and temporarily store electricity. They are used in various types of electronic circuit.

Our mold releasing films for MLCC, including COSMOPEEL®, are essential to the production of ceramic capacitors. TOYOBO is the only manufacturer with an integrated process from production of the raw film to coating of the releasing layer, supporting the spread and development of IoT and AI.

CYCLE CLEAN®

TOYOBO REPORT 2020 28

Strategy for each Solutions Division

Mobility

Engineering plastics, airbag fabrics, etc.

Growth Strategy

We optimize Group synergies to meet social and market expectations, including improving environmental performance and safety

Shigeo Takenaka

Senior Managing Executive Ofcer

Head, Mobility Solutions Division

Against a backdrop of technological innovation in various fields and increasing consumption of lifestyle services, the automotive industry is entering a 1-in-100-year period of great change, with further market expansion anticipated.

In our engineering plastics business, where replacing metal with plastic components helps to realize more lightweight products and reduce CO2 emissions, the Mobility Solutions Division has established systems for rapidly gathering information from our sales bases worldwide and developing/proposing products. This has resulted in a comprehensive lineup of materials, and we are expanding sales through a combination of advanced technology and attentive after-sales support.

In the airbag business, which supplies products that keep passengers safe, we aim to double net sales by

recovering market share in Asia following the establishment of a new fabric plant in Thailand, and by stepping up sales promotion to multinational customers.

In addition, more than 10 business divisions and operating departments within TOYOBO Group provide a variety of automotive materials. Going forward, we aim to create synergies by promoting Group cross-organizational systems and initiatives, including a "Mobility Marketing Strategy Department" and "Mobility Strategy Council." We are aiming to achieve further growth through participation in CASE*1 and MaaS*2 projects, development of composite materials, and initiation of M&A.

*1 Abbreviation of "Connected, Autonomous, Shared, Electric." Refers to the latest technological advances in automobiles.

*2 Abbreviation of "Mobility as a Service." Refers to the provision/use of various forms of transportation as a one-stop service, and the systems for that.

29 TOYOBO REPORT 2020

  • No. 1 global airbag fabric manufacturer
  • Top-tierengineering plastics manufacturer
  • Partnerships with global automakers

Net sales of ¥120 billion

(¥44.5 billion as of FY2020)

Note: Our business segments were reorganized with effect from FY2021. Sales figures for FY2020 are unaudited and approximate.

Characteristics

Strengths

Weaknesses

Opportunities

Threats

and SWOT

for each field

Ongoing technological innovation, adoption of electric vehicles (EVs) and fuel cell vehicles (FCVs), etc.

Engineering

plastics

• Proven track record with

• Sales channels to

Japanese automotive

non-Japanese automotive

manufacturers over many

manufacturers

years

• European production

• Comprehensive product

structure

lineup and wide-ranging sales

achievements

• Supply structure via four

bases worldwide and global

information sharing capability

• Outstanding quality and

technology demanded by

Japanese manufacturers

  • Established infrastructure for global expansion
  • Growing popularity of EVs and FCVs
  • Increased automobile production volumes in Asia
  • Opportunity loss resulting from slow response to CASE/MaaS
  • Long-termdownturn in global automotive market due to COVID-19 pandemic

With the expected future introduction of self-driving technology, safety demands are likely to increase further

• Group production capacity-

• Oligopoly of nylon-66

• Expansion of sales

global No. 1 in airbag fabrics

manufacturers

channels/product lineup

Airbags

• Integrated fabric/yarn supply

through M&A

structure via four bases

• Increased collaboration with

worldwide

strategic global partners

• Proven track record with

• New markets opened up by

Japanese automotive

self-driving vehicles (airbags

manufacturers over many

for pedestrians)

years

  • Rising price pressure from both suppliers and customers due to oligopoly

Realizing our vision

The Mobility Solutions Division aims to create social value through the fusion of materials and technology in areas such as textiles, films, resins and healthcare, cultivated by TOYOBO Group over many years.

Through active collaboration with customers, academic institutions and partnering technology firms, we propose total solutions in areas targeted by the future mobility market, such as improving comfort in the interior space of vehicles, eliminating the painting process and significantly reducing CO2 emissions by shifting to monomaterials, and extending cruising range through improved electric power efficiency.

Manipularer® concept car Based on the concept of "manipulating air," it employs more than 50 TOYOBO materials and technologies

TOYOBO REPORT 2020 30

Strategy for each Solutions Division

Mobility

Value Creation Flow

Process

Procurement

Manufacturing

ESG aspects

Enhancement of positive effects (increasing opportunities)

Mitigation of negative effects (reducing risk)

Management of chemical substances

  • Conducting reviews to ensure compliance with legal regulations and switching to alternative components

Resource circulation

  • Promoting use of recycled resin

Preventing global warming

  • Establishing efficient production methods, promoting energy conservation

Developing human resources

  • Hiring local workers in overseas plants
  • Providing technology support to domestic and overseas Group companies

Worker health & safety

  • Raising awareness of preventive maintenance to prevent accidents

Major ESG topics in business processes

Resource circulation

We are working to recycle resources that were previously discarded, by collecting and utilizing offcuts from the manufacturing process. For example, we collect the fabric offcuts that are produced during airbag manufacturing and recycle them into highly heat-resistant resin. We also re-use certain packaging film offcuts as the raw material for engineering plastics.

Preventing global warming

By combining TOYOBO Group's functional materials (resins, adhesives, films, etc.), we aim to reduce and substitute the processes for vehicle painting lines-said to consume the most energy during automobile production-and help to realize Japan's "Well-to-Wheel Zero Emission" challenge.*

  • A policy set out by Japan's Ministry of Economy, Trade and Industry, which aims to reduce greenhouse gas emissions from energy production and vehicle travel to zero.

Developing human resources

As TOYOBO' s operations become increasingly global, we actively employ local workers to optimize operation of our overseas plants. We also provide technical support to our domestic and overseas Group companies to develop human resources.

31 TOYOBO REPORT 2020

Solutions for customer challenges and social issues

  • Reducing CO2 emissions, enhancing energy efficiency and improving safety in next-generation mobility
  • Helping to realize a pleasant vehicle interior space (safety and comfort) Engineering plastics:
    Polyester resin VYLOPET®
    Thermoplastic polyester elastomer PELPRENE® Polyamide resin GLAMIDE® High-melting-point polyamide VYLOAMIDE® Thermoplastic stampable sheet QuickForm®
    Non-coated and coated fabrics for airbags

Resource circulation

  • Collection and recycling of airbag fabric offcuts
  • Collection and recycling of packaging film offcuts
  • indicates a registered trademark in Japan of TOYOBO CO., LTD.

Value provided through products and services

Engineering plastics contribute to vehicle weight reduction

High-performance polyamide resin GLAMIDE® contains 70% reinforced fibers, far exceeding global standards. This gives it sufficient strength as an alternative to metals, contributing significantly to reducing component weight.

High-melting-point polyamide VYLOAMIDE® is made from biomass, but also has outstanding heat resistance and cuts water absorption-a shortcoming of nylon-toone-third that of previous polyamide resins.

Thermoplastic stampable sheet QuickForm®

demonstrates high strength and high elasticity, as well as outstanding impact resistance, and contributes to lighter component weight. We also anticipate its use in the structural components of automobiles.

Thermoplastic polyester elastomer PELPRENE® has excellent heat and oil resistance, and a lower specific gravity than vulcanized rubber, while its thermoplasticity makes it suitable for re-use. As a result, it has various applications.

Airbag yarn and fabrics, keeping passengers safe

The airbag yarn and fabrics provided by TOYOBO Group are used in 40% of all airbags worldwide.

ECOKURELEAF® is a nylon resin for molding materials, manufactured from the offcuts of fabrics collected during the manufacturing process. It is re-used as a material in engine covers and airbag covers.

Provision of airbags fabrics

TOYOBO REPORT 2020 32

Strategy for each Solutions Division

Lifestyle and Environment

Desalination membranes, wastewater treatment systems, equipment for VOC emissions treatment, high-performance nonwoven fabrics (various applications including automotive components, materials, filters), chemical synthetic fiber, super fibers, textiles

Growth Strategy

We employ our unique technologies to help solve global issues such as climate change and water shortages

Shigeo Nishiyama

Senior Managing Executive Ofcer

Head, Lifestyle and Environment Solutions Division

The Lifestyle and Environmental Solutions Division targets fields that relate to our daily life and the surrounding environment. Previously, each division had an independent strategy, but from now on this Division will gather information and draw up strategies that match growth markets to the technology assets of each division and affiliated company. We will provide in-demand solutions to our customers and society, expand our existing businesses, and accelerate the creation of new business opportunities.

In particular, we will proactively contribute to resolving various global issues with our unique membrane/filter technologies and functional materials-including climate change, air pollution and water shortages, where urgent action is needed.

More specifically, we will be focusing on water-related businesses, in addition to systems and filters that recover VOCs-one of the causes of photochemical smog. With regard to membranes used in desalination plants, our unique RO membranes have been helping to resolve water shortages. In the coming years, we will be actively developing and expanding sales of more energy-efficient forward osmosis (FO) and brine concentration (BC) membranes, which are similarly used in the desalination process (the latter are also effective in purifying industrial wastewater).

Based on the slogan "breaking down conventional barriers," the newly formed Lifestyle and Environmental Solutions Division will work with speed as we combine the technological know-how in our product offerings of each division.

33 TOYOBO REPORT 2020

  • Leading global manufacturer of functional nonwoven fabrics
  • Environmental solutions provider
  • Industrial and consumer materials provider with functional textiles and trading expertise

Net sales of ¥140 billion

(¥128 billion as of FY2020)

Note: Our business segments were reorganized with effect from FY2021. Sales figures for FY2020 are unaudited and approximate.

Characteristics

Strengths

Weaknesses

Opportunities

Threats

and SWOT

for each field

Water : Ongoing expansion of the RO membrane market due to climate change, population growth, etc.

Air: Continued regulation in different countries as environmental pollution becomes an issue

  • Extensive track record for provision of desalination solutions in the Middle East
  • Integrated structure for
    Environment manufacturing/development/

maintenance

  • Leader in state-of-the-art membrane technology (FO and BC membranes)
  • Gas analysis and optimal design technology built up over many years
  • Cost competitiveness
  • Global service capability
  • Increased demand associated with response to global SDGs and tightening of environmental regulations
  • Replacement of existing technologies with energy-saving membrane technologies
  • Expansion of secondary battery market along with global shift to electric vehicles
  • Improved level of overseas competitor products and intensified price competition
  • Reduction in environmental investment due to economic downturns

Operations developed in a wide range of fields including automotive, civil engineering, construction, industrial filters, medical, soundproof absorption, and insulation (heat barrier)

Nonwoven

fabrics

  • A comprehensive nonwoven fabrics manufacturer with six manufacturing methods
  • Proprietary manufacturing technology for high-performance nonwoven fabrics using diverse materials and processes
  • Customer proposal/service capability backed by delivery over many years
  • Global service capability
  • Focus is on BtoB business
  • Rising awareness of environmental and safety issues among customers
  • Engagement with large numbers of users across a wide range of applications
  • Increased demand for disaster recovery/prevention/ mitigation along with rise in natural disasters
  • Sharp fluctuations in raw materials prices
  • Improved quality of overseas competitor products and intensified price competition
  • High transportation costs

With new competition entering the functional textiles market, we focus our business development on Japan, Europe, and the Americas, where the emphasis is on quality rather than cost

Functional

textiles

  • Advanced textile manufacturing technology (biconstituent / hollow fiber / modified cross-section fiber technology)
  • Reliability/quality as a pioneer of reticular textile structure
  • Global leader in super fiber manufacturing technology
  • Product development capability, appeal of product comfort, intellectual property strengths
  • Global reach
  • Cost competitiveness
  • Production capacity
  • Expansion of functional textiles in emerging markets
  • Rising awareness of environmental and safety issues (e.g. recycling, lighter product weight)
  • Rising awareness of lifestyle issues (hygiene-consciousness,sleep-aid market, aging society, etc.)
  • Improved quality of overseas competitor products and intensified price competition
  • Shrinking of domestic market (decrease in population, decline of manufacturing sector)
  • High transportation costs

TOYOBO REPORT 2020 34

Strategy for each Solutions Division

Lifestyle and Environment

Value Creation Flow

ProcessProcurement

ESG aspects

Resource circulation

• Use of renewable plant-derived materials

(Environment, Functional Textiles)

• Use of materials recycled from PET bottles

Enhancement of

(Nonwoven Fabrics, Functional Textiles)

positive effects

(increasing opportunities)

Mitigation of negative

effects (reducing risk)

Manufacturing

Preventing global warming

  • Energy conservation through systems improvement and greater production efficiency (Nonwoven Fabrics)
  • Reduction of transport-related CO2 emissions through local production (Nonwoven Fabrics, Environment, Functional Textiles)

Quality and customer health & safety

  • Regular Quality Assurance meetings with customers to strengthen quality control (Nonwoven Fabrics, Functional Textiles)

Developing human resources

  • Active employment of local workers by Saudi Arabian affiliated company (Environment)
  • Chinese affiliated company has assigned local workers to managerial and sales positions (Nonwoven Fabrics, Functional Textiles)

Major ESG topics in business processes

Resource circulation

We are committed to selecting raw materials with a focus on resource circulation. For example, hollow fiber membranes use renewable plant-derived materials and in 2010, TOYOBO achieved Biomass Mark* Certification. In addition, polyester staple fibers use materials recycled from PET bottles.

*Biomass Mark: A mark awarded to environmental products that use biomass and comply with quality and safety-related legal regulations, criteria and standards.

Preventing global warming

As well as reducing the volume of CO2 emitted in manufacturing processes, we are cutting CO2 emissions during transportation. For example, we manufacture desalination membranes in the Middle East to provide for the desalination plants there.

Developing human resources

We have established local affiliated companies in the Middle East and other regions, and local affiliated companies in China and emerging markets actively hire local workers, contributing to industrial diversification and employment creation.

Value provided through products and services

Activated carbon fiber for recovery of VOCs K-FILTER® is a uniquely activated carbon fiber developed by TOYOBO Group, which we are the first to commercialize in the world. Over 1,500 equipment for VOC emissions treatment using this filter have

been supplied both in Japan and internationally, and are helping to prevent air pollution.

K-FILTER® equipment for

VOC emissions treatment

35 TOYOBO REPORT 2020

RO membrane for seawater desalination

Solutions for customer challenges and social issues

  • Supplying the world with safe water
    Seawater desalination and wastewater treatment systems (RO, BC, FO membranes)
  • Harmful substances are adsorbed, reducing the impact on the environment K-FILTER® equipment for VOC emissions treatment
    Functional nonwoven fabrics (electret air filter Elitolon®, heavy metal ion adsorbent spunbond COSMOFRESH NANO™)
    PPS fibers for bag filters PROCON®
  • High functionality, recyclable, enhanced comfort Three-dimensional cushion material BREATHAIR®
  • Reduces weight and saves resources Super fibers IZANAS®, Tsunooga®, ZYLON®

Resource circulation

  • Hollow fiber membrane materials are biodegradable after disposal
    (Environment)

Health & safety of local residents

  • Prevention of soil contamination, control of poisonous gases during combustion
    (Environment)
  • indicates a registered trademark in Japan of TOYOBO CO., LTD.

Membranes for desalination and wastewater treatment Numerous large-scale desalination plants in the Middle East have adopted TOYOBO Group's RO membranes for desalination, to eliminate water shortages.

We have also developed the BC membranes for wastewater treatment, based on our RO membrane technology. It is more energy-efficient than the existing evaporation method.

Filters that protect the body from harmful substances The electret air filter Elitolon® is used in masks, air purifiers and air conditioning systems, among other applications. It protects the body from dust, tobacco smoke, NOx, SOx, radioactive iodine, PM2.5, viruses, etc.

Nonwoven fabric for preventing soil contamination, etc. Functional PET spunbond nonwoven fabrics, which use recycled polyester materials, have a variety of applications including automotive, construction, civil engineering, packaging, and hygiene products.

They help protect the environment and mitigate companies' environmental impact in various ways, including preventing soil contamination.

Cushion materials with high antibacterial properties The three-dimensional cushion material BREATHAIR®

excels in air permeability, cushioning characteristics, water permeability, and durability. It also includes antibacterial properties, and

is widely used in hospitals and nursing care facilities.

BREATHAIR®

TOYOBO REPORT 2020 36

Strategy for each Solutions Division

Life Science

Bioproducts (research reagents, diagnostic systems, raw materials for diagnostic applications), pharmaceutical products (contract manufacturing of injections, etc.), medical equipment

(nerve regeneration inducing materials, bone regeneration inducing materials, biocompatible polymers), medical membranes (artificial kidney hollow fiber membrane, hollow fiber membrane for blood purification, virus-removing hollow fiber membrane for antibody drug processes)

Growth Strategy

Contributing to the development of healthcare and improvement in QOL with one-of-a-kind products

Yutaka Ouchi

Managing Executive Ofcer

Head, Life Science Solutions Division

The mission of the Life Science Solutions Division is to consistently "create the solutions for people and the earth" in the healthcare and life science field. Based on our bio- and membrane technologies, we strive to find solutions for the issues faced by users and society, through the fusion and synergy of diverse technologies.

In the diagnostic reagent business, we bring our long-standing expertise in research reagents, to contribute in improving public health, with a focus on developing gene testing agents and their associated materials for a variety of infectious diseases. We are also expanding our lineup of highly functional antibodies for immunity testing agent materials.

In the pharmaceuticals business, we specialize in contract manufacturing of sterile injections to meet growing demand, where our strengths lie in compliance

with regulations in Europe, the United States and Japan. In the medical membranes field, we are improving

our manufacturing technology and developing a new business model for active use in areas including hemodialysis, blood purification and antibody drug processes.

In the medical equipment field, we are working hard to expand sales of regenerative medical materials, aiming for standardized treatment. Moreover, we are accelerating research and development by utilizing products from our other businesses as well as employing external expertise.

Through these strategies, we develop and provide "one-of-a-kind" products that our competitors are unable to emulate, thereby contributing to the development of healthcare and improvement in quality of life (QOL).

37 TOYOBO REPORT 2020

  • Top domestic provider of solutions for genetic diagnoses of infectious diseases
  • Global-leadingmedical membrane manufacturer

Net sales of ¥40 billion

(¥25.5 billion as of FY2020)

Note: Our business segments were reorganized with effect from FY2021. Sales figures for FY2020 are unaudited and approximate.

Characteristics

Strengths

Weaknesses

Opportunities

Threats

and SWOT

for each field

Emerging markets are driving growth in the clinical testing market, while China is driving growth in the research reagent market

• Branding and large market

Bioproducts

share in emerging markets

• Technological capability

enabling integrated

development from raw

material to reagent

• World's fastest trace

detection technology

  • Cost competitiveness
  • Strengthening production structure
  • Growing scale of global market in clinical testing agents/research reagents
  • Spread of genetic testing in Japan and internationally
  • Competitors entering the market, product and price competition
  • Paradigm shift in genetic detection technology

Drug manufacturers are outsourcing formulation to focus their resources on drug discovery Development of orphan drugs is also accelerating

• Ability to handle high-mix, low

volume production

Pharmaceuticals

• Ability to comply with

regulations in Europe, the

United States and Japan

• A strong network of

connections with

pharmaceutical

manufacturers

• Upgrading facilities to comply

• Ability to handle high-mix, low

• GMP requirements are

with latest GMP*1

volume production

increasing year on year

• Developing specialist human

• Competitors are expanding

resources

business through M&A

• Strengthening production

• Competitors are also entering

structure

the European/U.S./Japanese

markets

The number of dialysis patients using artificial kidney hollow fiber membranes are increasing markedly in emerging markets, and the worldwide annual growth rate is 6%*2

Medical

membranes

• Stable quality based on solid

• Strengthening production

• Increase in dialysis patients

• Cost competition from entry

sales track record

structure

worldwide (+6% annually)

of new competitors

• Outstanding filtering

• Rising health consciousness:

performance based on

focus on QOL

advanced membrane

• Increase in severe cases due

production technology

to inflammatory response to

• Our hollow fiber membrane

infectious diseases

production technology enables

• Spread of septicemia

entry into blood purification

treatments

treatment for septicemia

Limited growth anticipated in Japanese market due to decreasing population, global market expected to be the main battleground in future

Medical

equipment

  • Development technology for new materials/products (development of biocompatible and safe bioabsorbable materials, etc.) and its effective application to medical equipment

• Lack of means to discover

• Increased focus on

• Intensifying cost competition

product needs

regenerative medicine (Japan)

• Business infrastructure

• National policy to shorten

regulatory approval time for

medical devices

• Preferential treatment of

reimbursement pricing for

products with high novelty

*1 Good Manufacturing Practice:

The manufacturing and quality control standards required of manufacturers (including non-Japanese manufacturers) and marketing authorization holders

*2 TOYOBO estimate

TOYOBO REPORT 2020 38

Strategy for each Solutions Division

Life Science

Value Creation Flow

Process

Procurement

Manufacturing

ESG aspects

Enhancement of positive effects (increasing opportunities)

Mitigation of negative effects (reducing risk)

Quality and customer health & safety

  • Acceptance testing based on GMP (Pharmaceuticals)
  • Ensuring complete traceability of raw materials in products intended for implant

Worker health & safety

  • Conducting prior reviews concerning the safety of chemical substances (Pharmaceuticals)

Quality and customer health & safety

  • Strict controls based on GMP (Pharmaceuticals)

Preventing global warming

  • Promoting energy conservation by upgrading to highly efficient equipment (Medical Membranes)

Resource circulation

  • Collecting offcuts, etc. and providing these to manufacturers that regenerate raw materials (Medical Membranes)
  • Reducing packaging material volumes by simplifying packaging (Medical Equipment)

Major ESG topics in business processes

Resource circulation

In the medical membrane field, we collect offcuts during manufacturing and provide these to manufacturers that regenerate raw materials, realizing resource circulation. In the medical equipment field, wherever possible we simplify packaging at the point of sales to avoid wasting resources, while always ensuring quality.

Health & safety

In the pharmaceuticals field, besides implementing GMP control measures, we carry out product-specific initiatives in each area. For example, in the medical equipment field, we ensure complete traceability of raw materials in products intended for implant. The scientific support group also trains users to prevent incorrect use.

Value provided through products and services

Enzymes and analysis systems supporting diagnostics To contribute to the health of people worldwide, we supply diagnostic-use enzymes to diagnostic reagent manufacturers for use in biochemical diagnosis.

We also provide the fully automated gene analysis system GENECUBE®, which uses our unique high-speed nucleic acid amplification technology to simplify and shorten the process from nucleic acid extraction to amplification and detection. This helps to reduce treatment times and cut drug costs.

Reagents aiding research into SARS-CoV-2

Employing our unique enzymes, SARS-CoV-2 Detection Kit enables the genetic extraction process to be completed in as little as two minutes.

By optimizing the enzyme action through the preparation of a reagent compound, the time taken to amplify the

39 TOYOBO REPORT 2020

Sales/Use

Solutions for customer and social issues

  • Enhancing QOL through our contributions to medical settings Nerve regeneration conduit Nerbridge®
    Artificial kidney hollow fiber membranes
    Fully automated gene analysis system GENECUBE® Sterile injections, etc.

Quality and customer health & safety

  • Formation of scientific support group to prevent incorrect use of products (Medical Equipment)

Disposal/Re-use

Management of chemical substances

  • Selection of specified collection contractors for organic solvents, etc. (Medical Equipment)

Worker health & safety

  • Installation of waste ducts at sites where organic solvents are handled (Medical Equipment)

Health & safety of local residents

  • Outsourcing of waste material processing to specialist operators
    (Medical Equipment)
  • indicates a registered trademark in Japan of TOYOBO CO., LTD.

extracted genes has been cut by more than half. The process from extraction to measurement can be completed in under 60 minutes.

Medical equipment promoting regeneration of peripheral nerves

The nerve regeneration conduit Nerbridge® is a device that promotes the regeneration of peripheral nerves severed or damaged as a result of an injury or related causes. It is the first treatment device to obtain approval in Japan using this technology. There is no need to harvest undamaged nerves, unlike in conventional treatment, which shortens surgery time and helps to reduce the

burden on the patient. After nerve regeneration, the product is dissolved and absorbed safely by the patient's body.

Nerbridge®

Hollow fiber membranes helping to improve dialysis patients' treatment and QOL

TOYOBO provides artificial kidney hollow fiber membranes with the aim of improving treatment results for dialysis patients and their quality of life (QOL). Our membranes boast outstanding filtering performance and stable waste removal performance, with little

degradation over time, while also demonstrating superior biocompatibility.

Dialyzer for artificial kidney using a hollow fiber membrane

TOYOBO REPORT 2020 40

Launch of New Department

Contributing to realization of a circular economy

――Establishment of Renewable Resources Business

Development Department

Aim of establishing a new Department

In recent years, there has been an urgent need to address environmental issues, such as reducing plastic waste and petroleum-based raw materials. Recognizing these issues from the outset, TOYOBO Group has long adopted a broad vision in our continued search for new technologies. One such example is a technology that creates polyester raw materials from wood. Anellotech Inc., a U.S. biochemical venture company is currently developing this technology. TOYOBO Group has joined forces with Anellotech Inc., Suntory Group and many other international companies to initiate a project to develop a 100% biobased PET bottle. We are also collaborating with Dutch chemical technology company Avantium N.V. (See "Key development topics" on the right).

To further accelerate these initiatives and contribute to

creating a sustainable society, in April 2020 we established the Renewable Resources Business Development Department. Based on the slogan "Catalyzing Circular Economy," we will fulfill our responsibility as a plastics manufacturer and contribute to the realization of a circular economy.

Laboratory of Anellotech (New York, U.S.)

Mission

Ensuring the supply of

Developing recycling-related

Expanding business

renewable resources

technologies

To ensure that the materials TOYOBO Group provides are sustainable, we are promoting the use of biobased and recycled materials. As well as in-house development, we will continue to search for related technologies around the world.

While we pursue company-widecross-divisional

cooperation, we will collaborate with external organizations and companies as we commercialize our products.

Participating in initiatives

TOYOBO Group is participating actively in various initiatives. One such example is the Clean Ocean Material Alliance (CLOMA), which we joined in fiscal 2019. CLOMA is an organization established in Japan with the aim of reducing marine plastic waste. Its members include a wide range of companies involved in the manufacturing, processing and use of packaging and other materials. We are also participating in CEFLEX (see pages 53 and 72), Petcore Europe, and Japan BioPlastics Association (JBPA).

Working closely with a variety of companies and organizations, we will help to build a plastics value chain that is appropriate to the era of the circular economy.

41 TOYOBO REPORT 2020

Key development topics in FY2021

Food packaging film made from 100% biobased resin

The high-performance polyester Polyethylene Furanoate (PEF) is created through polymerization of Avantium's biobased raw materials with TOYOBO's unique technology. Compared to conventional PET films, PEF films made from 100% biobased resin have an oxygen barrier efficiency 10 times higher, while water vapor barrier efficiency is twice as high. Drawing on this superior barrier performance, we are expanding into the market, focused on food packaging film.

Establishment of JV company to create used plastic recycling business

Anellotech's technological development has enabled a new technology to efficiently recycle a wide variety of used plastics. Following this, in June 2020 the joint venture company R Plus Japan, Ltd. was established by a group of 12 companies operating in Japan's plastics value chain, which includes TOYOBO. We intend to push forward with development of the used plastic recycling business, utilizing this new technology.

Development of catalyst with enhanced PET recyclability

TOYOBO GS Catalyst®, a polymerization catalyst developed by TOYOBO, is the world's first aluminum catalyst.

The catalyst is more environmentally sound: it does not contain any heavy metals and the obtained PET resin does not deteriorate when melted, making it well suited to recycling.

TOYOBO has already licensed the technology to Thailand's Indorama Ventures Public Company Ltd., the world's largest PET resin manufacturer. With the excellent recyclability of the produced PET resin, we will develop this business worldwide in cooperation with Indorama.

GS Catalyst® (front) has higher transparency than the other catalysts

Press conference of JV company establishment

Conventional Technology

1

2

3

4

Used plastic

Convert to

Convert to

Recycle

oil

raw material

(pyrolysis)

(pyrolysis)

New Technology

Efficient

1

2

3

recycling, as

conversion to oil

Convert

to

not required

Used plastic

raw material

Recycle

(pyrolysis /

catalytic reaction)

Long-term vision

We have drawn up a roadmap to 2030-while also looking towards 2050-based on government policies in Japan and overseas, as well as environmental industry targets. In collaboration with our partners worldwide, we aim to shift to biobased products focused on polyester resin, and to establish technologies related to material and chemical recycling. Working closely with each Solutions division, we will also adapt flexibly to changes in the business environment.

2040-50

Realization of a circular economy

2030

Shift to biobased PET resin and establishment of material and chemical recycling technologies

2020

Launch new department, establish concrete development themes

TOYOBO REPORT 2020 42

Feature2 TOYOBO's Way of Manufacturing

The Tsuruga Research and Production Center-the source of diverse products and solutions, and TOYOBO's largest R&D/manufacturing base

History of the Tsuruga Research and Production Center

1934

1964

1978

1984

Toyo Boseki: Start of operations at

Kureha Boseki: Start of Tsuruga Nylon

Establishment of Tsuruga

Start of Nippon Magphane

the Tsuruga Plant Start of rayon

Plant operations (The current Tsuruga

Enzymes Plant

Tsuruga Plant operations

production (The current Tsuruga

Research and Production Center)

(The current Tsuruga

(The current Tsuruga Films

Plant No. 1)

*1966: Merger of Toyo Boseki and

Biochemicals Plant)

Plant)

Kureha Boseki

Bioproducts

Films

Textiles and polymers

43 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

Invested

¥6billion

¥10billion

in new production

investment

facilities

2010

2014

2018

Full-scale start of production reform

Begin operating world's largest

Establishment of Xenomax - Japan

activities

polyester lm production facilities

Co., Ltd. for production of high

heat-resistant polyimide lm

2019

Launch of manufacturing plant for mold releasing lms for MLCC

Grown to become TOYOBO's core plant, almost 90 years after establishment

The Tsuruga Research and Production Center started life in 1934 with the production of rayon. Since then, it has widened its sphere of operation over many years to include films, biochemicals and high-performance products, meeting the needs of the times. We have developed systems that enable the Tsuruga plant to handle processes from R&D

right through to production, and it plays a fundamental role in "TOYOBO's way of manufacturing."

In recent years, we have continued to implement process control standardization using ICT/IoT, while investing aggressively to bolster the plant's production capacity.

Production reform activities in support of manufacturing

In our production reform activities, we seek to resolve issues by boosting the onsite capability throughout the plant, based on an understanding of the "customer's perspective" and "what is needed the most," which are the most valued aspects of "TOYOBO's way of manufacturing." We have carried out production reform activities at the Tsuruga Research and Production Center continuously for 10 years, and have created a culture in which knowledge is shared across departmental boundaries.

Customer needs are always subject to change. It could be product quality, information and solutions, resilience towards natural disasters and other emergency situations in recent years, onsite capability to respond to customer feedback, and the actual reliability of our onsite operations. Supplying outstanding products that give our customers joy, providing customers with accurate information, and building systems using ICT/IoT, are also key topics in our activities.

In addition, whenever a department is the first to identify or uncover new information, this is shared with the other departments. An important characteristic of the Tsuruga Research and Production Center is the way in which various issues are tackled in an integrated manner-crossfunctionally-to produce synergies.

Approach to TOYOBO's Way of Manufacturing

TOYOBO's way of manufacturing

= Customer-focused solutions

Product reform

Culture of

Process reform

collaboration among

different departments,

Production reform

and onsite capability

TOYOBO REPORT 2020 44

Feature2 TOYOBO's Way of Manufacturing

Process control by artisans, utilizing ICT/IoT

Production reform activities at the Tsuruga Research and Production Center commenced in fiscal 2011. Since then, we have been standardizing our process control to provide safe and stable onsite working conditions. This has been achieved by tackling issues such as complaint handling, cost competitiveness, and technology & skill transfer, all of which are common among many departments.

After 10 years of constant efforts, we have managed to reduce more than 90% of the problems throughout the plant. This has been achieved by identifying potential problems during daily adjustments to manufacturing processes and

voluntary maintenance work, and then making the appropriate improvements. The vast implicit knowledge of the organization, particularly of our most experienced workers, has been useful. Identifying and standardizing their knowledge becomes a major strength. This means that in relation to the elements of process control-monitoring, judgment, and action-the knowledge and expertise gained from past experience can be put into practice by anyone, whether a new employee or an experienced professional. In this sense, our employees become master artisans conducting process control.

MonitoringIdentifying changes

The knowledge and experience of artisans

Our artisans can draw on their experience to quickly and flawlessly identify changes in equipment or processes that may result in product abnormalities.

They can do this because the points and standards they need to check are clearly identified.

Workflow for realizing artisans' process control

Visualizing the artisan's standards

  • Clarifying points and standards
    The following items are surveyed in detail: What do I see, hear and feel? How is it different from the normal state?
  • Documenting and mechanizing points and standards
    These are reflected in standardization manuals and alarms, onsite notices, etc.

Strengthening the monitoring structure

  • Ensuring time for monitoring
    We reduce the time spent on searching and wandering around by reviewing work processes and the placement of people as well as objects.
  • Strengthening patrol inspections
    Security and disaster prevention as well as other items are reviewed and adjusted to the artisan level

Support provided by ICT/IoT

  • Deploying and developing monitoring tools
    Various tools and systems are used for monitoring: position sensors and image analysis are used for visual monitoring, while vibration sensors are used for auditory and touch-based monitoring
  • Developing analysis systems
    Indications of changes are detected, and workers are notified

Judgment Action Quickly and securely restoring normal operation

The knowledge and experience of artisans

Our artisans can quickly and securely restore changes in equipment or processes back to normal operation.

They can do this because they have the logic (in thought and procedures) along with the skills to identify the cause and take action quickly and properly.

Workflow for realizing artisans' process control

Visualizing the artisan's logic

  • Clarifying logic
    We organize the thought and procedures for identifying causes, and the types of action appropriate to each cause
  • Documenting logic
    Standards and Procedure manuals that describe solutions and techniques are created to enable prompt and accurate action

Enhancing knowledge and skills

  • Extending training and drills
    We create systems that facilitate efficient learning of the knowledge, technology and skills required for an understanding of logic and an approach akin to that of an artisan

Support provided by ICT/IoT

  • Developing support systems
    We promptly provide documents detailing the information, logic and methods required from cause identification to action

45 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

Security and disaster prevention initiatives

In September 2018, a major fire occurred at the Tsuruga Research

the following topics: 3S (Sort, Sweep, and Standardize),

and Production Center. In order to learn from this event, we

problem mitigation, training, quality and smart operations.

gathered the direct feedback of those who experienced the fire,

Our customers as well as the people from the

collated the problems raised and shared these within the plant.

surrounding area suffered significant damage, and we

Based on this, we carried out a review of the plant's systems

caused great inconvenience to them. To ensure that such

a

where we conducted inspections and made improvements at

fire never occurs again, the memories and experiences we

each onsite location, installed new equipment for the entire plant,

have collated will be passed down through our production

and improved the firefighting system as well as activities.

reform activities.

The system adopted in our production reform activities has

Moreover, we have incorporated the lessons of the Tsuruga

been useful here. Meetings were held to make decisions for the

plant fire in our company-wide disaster prevention guidelines and

Group, but before that, sectional meetings thoroughly discussed

our investments in disaster prevention equipment.

Key results

Spunbond nonwoven fabric production

Raw material losses 35% reduction

Product defects 75% reduction

BREATHAIR® production

Raw material losses 40% reduction

Product defects 70% reduction

*Initiatives from FY2011 to FY2019

TOYOBO REPORT 2020 46

The Basis of Value Creation

ESG Management

Our Officers' Commitment

Masakatsu Shirai

Director, Executive Officer

Controlling Supervisor of

HR and Sustainability

Planning Division

Since the adoption of the SDGs by the United Nations General Assembly in 2015, there has been an acceleration and expansion of activities around the world to realize a sustainable society. Corporations are expected to strengthen and augment initiatives in a variety of areas, including measures to tackle climate change, contribution to the realization of a circular economy, and respect for human rights.

TOYOBO Group has held firm to its corporate philosophy of Jun-Ri-Soku-Yu (adhering to reason leads to

prosperity)-a personal maxim of our founder Eiichi Shibusawa-and has been a pioneer in implementing CSV. At the same time, we have made a commitment to further promote management aimed at enhancing both economic and social value. With this approach, we are proactively contributing towards a sustainable society, based on the ever growing demands of the times. Reorganizing and enhancing our corporate philosophy system is one example of this approach.

In 2019, we enhanced our corporate philosophy system as Principle, Vision, Values, and TOYOBO Spirit (PVVs). Our Vision states that "we will continue to create the solutions needed by people and the earth with materials and science," thus clarified our commitment to making significant contributions to solving social issues through our business activities.

Furthermore, in January 2020, we became a participant to the UN Global Compact (UNGC), and also expressed our support for the TCFD Recommendations. Then, in April, we established a Corporate Sustainability Department to strengthen our management foundation and support business growth from an ESG perspective, and also identified the Group's material issues (see page 09).

Going forward, the Department will play a central role in further accelerating initiatives in response to global demands and expectations, and will actively communicate this process and the results to our stakeholders.

Approach to Sustainability

Management focused on social sustainability

(Social sustainability is the foundation for our corporate sustainability)

SDGs for 2030

TOYOBO Group Sustainability

Corporate sustainability ≈ ESG

  • Giving back: Raising corporate value by providing value for the environment and society
  • Integrating: An business model integrating management and strategies with environmental and social needs
  • Governance: Thorough risk management

Foundation builders

● Establish a solid

Management

Business axis

management base

● Hedge risks (protect

base axis (ESG)

(CSV)

corporate value)

actively promoted by

for incorporating sustainability

● Foster employee loyalty

the Corporate Sustainability

elements in management plans

Department

and business strategies

Growth drivers

  • Fortify competitiveness (competitive strategies, differentiation strategies)
  • Provide business solutions for social issues
  • Incorporate CSV into medium- and long-term management plans

47 TOYOBO REPORT 2020

In January 2020, TOYOBO CO., LTD. became a signatory to the UN Global Compact (UNGC*), and also joined Global Compact Network Japan, which comprises Japanese companies and organizations that are UNGC signatories. As a responsible corporate citizen, this reflects our endorsement of the goal to resolve global issues and realize sustainable growth. We also gather information through our participation in the subcommittees of Global Compact Network Japan, utilizing this in our day-to-day activities. From fiscal 2021, we are participating in the following subcommittees: ESG, Supply Chain, Environmental Management, Kansai-based regional subcommittee, Reporting Research. TOYOBO will

abide by the ten principles of UNGC and strengthen measures to realize a sustainable society.

Human

Rights

Labour

Environment

Anti- Corruption

Principle 1:

Businesses should support and respect

the protection of internationally

proclaimed human rights; and

p.09-10,

p.58, 60

Principle 2:

make sure that they are not complicit in

human rights abuses.

Principle 3:

Businesses should uphold the freedom of

association and the effective recognition of

the right to collective bargaining;

Principle 4:

the elimination of all forms of forced and

compulsory labour;

p.09-10,

p.56, p.58, 60

Principle 5:

the effective abolition of child labour; and

Principle 6:

the elimination of discrimination in respect

of employment and occupation.

Principle 7:

Businesses should support a precautionary

approach to environmental challenges;

p.09-10,

Principle 8:

undertake initiatives to promote greater

p.25-42,

environmental responsibility; and

p.48, p.50-54

Principle 9:

encourage the development and diffusion

of environmentally friendly technologies.

Principle 10:

p.09-10,

Businesses should work against corruption

in all its forms, including extortion

p.69

and bribery.

Task Force on Climate-related

Financial Disclosures (TCFD)

The TOYOBO Group's Vision is to be a group that continuously creates solutions demanded by people and the global environment through "Materials and Science." As part of its efforts, the group aims to help realize a sustainable society through the provision of products and services.

The TOYOBO Group has expressed its support for recommendations made by the Task Force on Climate-related Financial Disclosures (TCFD) and joined the TCFD Consortium of companies and financial institutions in Japan that agree on the recommendations. The Group will analyze the potential future business risks and opportunities arising from climate change and respond to the risks and opportunities along with its financial information disclosure.

TOYOBO REPORT 2020 48

Response to COVID-19

In our response to COVID-19, TOYOBO Group's top priority has been the safety and wellbeing of our employees and their families, with the primary goal of protecting both society and the Company. We are also making a positive contribution through our products and services.

COVID-19 has sent shock waves through society, and

we are now moving towards a "new normal" in the era of living with COVID-19 and after COVID-19.

We will enhance our crisis resilience and strengthen business continuity, and through our new organizational structure launched in April 2020, we will work proactively to provide superior solutions.

Contribution through our business

• Increased production of reagents for PCR tests

• Developed a SARS-CoV-2 detection kit p.37

  • Increased production of nonwoven fabric and filter materials (including for face masks), materials for medical-use face shields, etc.
  • Participated in medical gown production project
  • Obtained approval for production and sales of SARS-CoV-2 genetic test reagents for use with the fully automated gene analysis system GENECUBE®

GENECUBE®

  • Donated protective clothing to hospitals, made using airbag fabrics
  • Donated face masks to hospitals, care facilities and local governments, etc., both at home and abroad

TOPIC

In collaboration with Toyoda Gosei Co., Ltd. and others, we have developed protective clothing that uses TOYOBO Group's airbag fabrics. The clothing can be washed and re-used, helping to resolve shortages of materials in medical settings.

We have also commenced production and sales of SARS-CoV-2 test reagents for use with our fully automated gene analysis system GENECUBE®. This system automates the process from sample and reagent mixing to viral gene amplification and detection, lightening the workload for testers and helping to reduce the risk of infection.

Produced original fabric face masks and donated these to local governments

Protective clothing developed jointly with Toyoda Gosei Co., Ltd. and others

Ensuring employee safety

  • Encouraged home-based working and staggered working hours p.57
  • Following the government's emergency declaration, kept the ratio of employees attending the office to under 20%, and gradually relaxed this after the state of emergency was lifted, with employee safety the top priority
  • Implemented robust infection prevention and control measures

Maintaining continuity of plants and production activities

  • Operation under BCP procedures
  • Flexible inventory and production adjustments

Finance

  • Securing cash on hand
  • Cash-generatingactivities: Overcome Coronavirus 100

p.13, 24

(As of June 30th, 2020)

49 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

Environmental Policy & Activities

E Long-Term

Countermeasures up to 2050

Long-term global warming countermeasures

In recent years, the impact of climate change associated with global warming has become apparent with an increase of natural disasters such as typhoons and localized torrential rainfall, as well as changes in the ecosystem due to "subtropicalization" of the climate. Against this backdrop, in December 2015 the Paris Agreement was adopted as the international framework of the 21st Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21). In addition, there has been a worldwide increase in ESG investing, in which investors focus on and select those companies that give consideration to Environment, Social and Governance factors.

TOYOBO Group also recognizes the serious risk posed by global warming and climate change to the continuation of business activities, and we are working hard to achieve our emissions reduction targets. In the coming years, we will extend our focus beyond production to our overall business activities, as we endeavor to contribute to environmental sustainability through our product- and technology-based solutions. In this way, we will strive to cut greenhouse gases from an even longer term perspective.

We will seek to reduce emissions of greenhouse gases from our business activities through measures such as switching to natural gas in our factories and enhancing production

efficiency, as well as introducing renewable energies such as solar power.

With regard to the initiatives we are engaged in through our products and solutions, we are developing and increasing sales of engineering plastics, which help to reduce CO2 emissions from automobiles due to their lighter weight and greater fuel economy. We are also developing products and technology that contribute to carbon recycling, by viewing CO2 as a carbon resource and collecting it for re-use as various carbon compounds.

Through these measures, we aim to reduce our greenhouse gas emissions by 30% and 80% in fiscal 2031 and fiscal 2051, respectively, compared with fiscal 2014.

Greenhouse Gas Reduction Targets

30% reduction

80%

reduction

FY2014 result

FY2031

FY2051

(base year)

Key Measures

Reduction of Emissions from Business Activities

Contribution through Products & Solutions

Promotion of conversion

Enhancement of

Introduction of

Contribution to

Contribution to

to alternative fuels

production efficiency,

renewable energy

reduction of

carbon recycling

(post-coal)

energy saving activities

CO2 emissions

TOYOBO REPORT 2020 50

Preventing Climate Change

Basic approach

Climate change poses a significant risk to the continuity of our business. We are therefore endeavoring to cut greenhouse gas emissions throughout our supply chain.

Activities to cut greenhouse gas emissions during production

In fiscal 2020, TOYOBO Group drew up a long-term vision aimed at further cutting greenhouse gas emissions.

This includes the goal of an 80% reduction in emissions by fiscal 2051, compared with the fiscal 2014 level. We have also updated our interim targets to fiscal 2031.

We are now aiming for a 30% reduction (compared with fiscal 2014) replacing the previous 17% reduction target.

CO2 emissions in fiscal 2020 totaled approximately 873,000 tonnes for Scope 11 and Scope 22 combined, 3.4% lower than the previous fiscal year and 28.1% lower than the reference fiscal year (fiscal 2014). We believe this is due to the benefits of gas cogeneration facilities3 and enhanced production efficiency.

Moreover, in fiscal 2020 we constructed the Group's fourth gas cogeneration facility at the Tsuruga Research and Production Center, our largest R&D and production base. Operation is scheduled to commence from fiscal 2021, and we are confident that the facility will help reduce greenhouse gas emissions.

→See "Non-Financial Highlights" on page 75 for emission volumes by year 1 Direct emissions from owned or controlled sources

2 Indirect emissions from the use of purchased electricity/heat/steam

3 An energy recycling system, harnessing waste heat (from clean natural gas-fired electric generation) to produce steam & hot water used in manufacturing processes, supplying of hot water and air-conditioning etc.

Activities to cut greenhouse gas emissions in logistics

Our annual goal is a 1% year-on-year reduction in greenhouse gas emissions in logistics.

To achieve this, we are implementing a modal shift (active use of sea and rail transport due to their lower CO2 emissions), taking measures such as shortening the transportation distance by using the ports closest to our business sites and factories. Moreover we are reducing the number of running vehicles through efficient loading of cargo and bulk transportation.

In fiscal 2020, we implemented port diversification for certain products of industrial film, which had previously been shipped entirely from Kobe port. Products manufactured at the Tsuruga Research and Production Center are now shipped from Tsuruga port, and products manufactured at the Inuyama plant are now shipped from Nagoya port.

Gas cogeneration facilities at Tsuruga Research and Production Center

51 TOYOBO REPORT 2020

Basic approach

TOYBO Group endeavors to manage chemical substances appropriately throughout the product lifecycle (research, development, design, manufacturing, sales, use, and disposal), in order to help conserve the global environment, prevent accidents, ensure workers' health and safety, and ensure product safety.

Chemical substance management structure

For appropriate management of chemical substances, TOYOBO Group has established a management system at each office. Each solutions division supervises the activities of the offices and group companies under their jurisdiction.

In addition, we have created a "TOYOBO Chemical Substance Management Classification" in compliance with laws and regulations-both international and domestic-as well as client requests. This classifies the chemical substances we handle into five levels, and the management procedures are specified for each level or "rank". Use of substances in rank A and B is permitted only when the risks are thoroughly assessed, mitigation measures are taken, and the risk is deemed tolerable. We are continuously making efforts to reduce the overall usage volume of rank A and B substances by optimizing and replacing these substances.

Chemical Substance

Chemical Substance

Management Structure

Management Subcommittee

Secretariat

Solution Divisions

Technological

Environment & Safety,

Quality Assurance

Innovation Department

Department

Operating Departments

Group

Manufacturing

Development

Engineering

Environment & Safety

companies

Divisions

Divisions

Divisions

Office

Management at

Management at Production Center

Group companies

TOYOBO Chemical Substance

Management Classification

Rank

Management Category

Notes (laws and regulations, etc.)

Chemical Substances Control Act1, Industrial

Substances requiring

Safety and Health Act, Poisonous and Deleterious

A

particularly strict

Substances Control Act, Act on the Protection of

management

the Ozone Layer, Act on the Prohibition of

Chemical Weapons, POPs2, PIC3, etc.

B

Substances requiring

Chemical Substances Control Act, PRTR4,

Industrial Safety and Health Act, Poisonous and

strict management

Deleterious Substances Control Act, etc.

Substances requiring

Chemical Substances Control Act, PRTR, Industrial

C

strict exposure

Safety and Health Act, Poisonous and Deleterious

prevention measures

Substances Control Act, Fire Service Act, etc.

Substances requiring

D

exposure prevention

PRTR, Industrial Safety and Health Act, etc.

measures

E

Others

Other than A-D

1 Chemical Substances Control Act: Act on the Evaluation of Chemical Substances and Regulation of Their Manufacture, etc.

2 POPs (treaty): Prevention and reduction of Persistent Organic Pollutants (POPs)

3 PIC (treaty): The Prior Informed Consent Regulation (trade)

4 PRTR: Pollutant Release and Transfer Register

Chemical substance management activities

Supply chain management, which started with the European Union's legislation on chemical substances, has also come to be required in Japan following the Act on the Evaluation of Chemical Substances and Regulation of Their Manufacture, etc. (Chemical Substances Control Act), as well as other regulations relating to the management of chemical substances. Additionally, the Globally Harmonized System of Classification and Labeling of Chemicals (GHS) has been adopted by the United Nations.

In view of this situation, TOYOBO has introduced a chemical substance management system covering procurement to manufacturing and sales. This is to realize green procurement while providing accurate and prompt support to our customers. We employ this system to investigate the use of regulated substances and carry out surveys regarding content in products. The system also supports suppliers in creating safety data sheets (SDS) for chemical substances.

Given the global expansion of TOYOBO Group's operations, we are creating a database of chemical substance-related laws and regulations in Asia, Europe, North and South America. Furthermore, in order to identify and mitigate chemical substance handling risk, we have established rules concerning matters including the replacement/reduction of hazardous chemical substances, proper maintenance of the workplace and environments, and the management of chemical substances in products. In this way, we are striving to ensure proper management.

Reducing emissions of Pollutant Release and Transfer Register (PRTR) substances

TOYOBO Group is assessing and reports the release and transfer volumes of the PRTR substances for each office. We publish and analyze the results annually to reduce our substance waste and transfer volumes.

We are reducing our release volumes through measures including the following: improving and updating manufacturing facilities and systems, improving operating conditions, installing equipment to remove the applicable substances, replacing raw materials and auxiliary raw materials. We will continue to implement activities aimed at reducing release volumes.

Release and Transfer Volumes of

PRTR Substances

(tonnes)

Emissions

Emissions

Landfill

FY

Transfer

Emissions

to public

volume

to air

sewage

to soil

volume

system

2018

1,174

154

20

0

0

2019

1,085

103

12

0

0

2020

1,169

95

19

０

０

TOYOBO REPORT 2020 52

Resource Circulation

Basic approach

In recent years, there have been growing expectations in society for the creation of a "circular economy"; an economic system that recycles and reuses previously discarded products as new resources.

TOYOBO Group has long taken a proactive approach to resource circulation, such as using recycled resin made from PET bottles as the raw material for chemical synthetic fiber and film products. Our current aim is to realize resource circulation on a larger scale, including the use of bio-based raw materials and biodegradable products. We will continue to promote initiatives that help achieve resource circulation throughout the product life cycle, from design, material procurement and production to post-usage, thereby contributing to the realization of a circular economy.

Participation in various initiatives

In August 2019, TOYOBO Group joined the European consortium CEFLEX. Established in 2017, CEFLEX comprises more than 130 companies and organizations involved in the flexible packaging value chain, including leading raw materials manufacturers, converters, printing companies, consumer goods manufacturers, retailers, and recycling companies. CEFLEX's goals include establishing a collection, sorting, and reprocessing infrastructure for used flexible packaging by 2025 in order to promote the realization of a circular economy in the European flexible packaging sector. Joining CEFLEX will allow TOYOBO Group to quickly

acquire the latest information on recovery systems and regulations, and moreover, we will use this in developing and supplying eco-friendly technologies and products.

We have also joined the Japan Clean Ocean Material Alliance (CLOMA), an organization established in Japan to reduce marine plastic waste. Through collaboration with other CLOMA members, which includes manufacturers, processors and users of packaging and other materials, we will work to develop and promote the use of alternative materials.

Waste reduction

TOYOBO Group is working to reduce, re-use, and recycle waste, aiming for a final disposal rate (landfill rate)* of under 1%. We again achieved this target in fiscal 2020, with a final disposal rate of 0.57%. We will continue making efforts to further reduce the final disposal rate through reviews of our sorting and disposal methods. We will also set new recycling rate targets to promote resource circulation.

TOYOBO takes a systematic approach to appropriate disposal of polychlorinated biphenyl (PCB) waste. The disposal rate up to fiscal 2020 was 77% (unit volume basis). With regard to electric facilities containing low-concentration PCBs, which we currently use, we are implementing updated plans

so as to meet the statutory disposal deadlines.

*The volume of landfill waste within total waste

Contributing to Resource Circulation through All Business Processes

Participation in

Procurement Raw materials compatible

initiatives

with circulation

● CEFLEX

● Promote use of recycled materials

● CLOMA

● Promote use of renewable materials

Circulation-conscious

Design

product design

Design that allows for material/chemical recycling, use of renewable materials (e.g. biomass)

Disposal & Recycling

Outsourced processing of

waste from production processes

  • Use in material/chemical recycling
  • Effective use of incinerator ash to reduce landfill

Production

Efficient production processes

● Re-use of offcuts and nonconforming items

● Management in line with ISO14001

Contributing to collection/re-use of environmentally hazardous substances

● Equipment for VOC emissions treatment: VOC collection and re-use

● Dust collection filters: Dust collection Product Use ● Filtration membranes: Water purification and circulation

53 TOYOBO REPORT 2020

Mechanism for certification of eco-conscious products

As clearly stated in our Charter of Corporate Behavior, TOYOBO Group strives to save energy as well as reduce and re-use resources. We also develop products and technologies that help mitigate our impact on the environment. These products and technologies are defined and evaluated under our Eco-Review system. This system evaluates the following aspects at every stage in the product life cycle: "climate change prevention," "reduction of chemical substances," "resource conservation," "reduction in waste," and "other environmental contributions". Products that meet these standards are certified as ECO-PARTNER SYSTEM™ products.

Since the Eco-Review is carried out at every product life cycle-from R&D to commercialization-issues that require improvement from an environmental protection perspective are identified and improved at an early R&D stage prior to the subsequent review. Consequently, we are contributing to the environment as we develop our products and technologies.

Ratio of ECO-PARTNER SYSTEM™ product sales increases to 30.4%

Our goal is to increase the ratio of ECO-PARTNER SYSTEM™ product sales to 30% of total sales by fiscal 2031(the ratio was 25% until fiscal 2016). In fiscal 2020, the ratio

was 30.4%.

Certification of ECO-PARTNER SYSTEM™ products is currently only carried out within the Company. We plan to extend the system to Group companies in the near future.

Biodiversity

Basic approach

Our lives are supported by innumerable chemicals. Textiles, packaging/containers, and pharmaceutical products are just some of the things that are essential to daily life. However, various ecosystems are endangered when the raw chemical substances generated as a byproduct of manufacturing are released into the air, water or the soil. TOYOBO Group's "Fundamental Policy on the Global Environment" calls for the Group to actively protect the environment in the society and community, and to support/participate in activities to preserve biodiversity, as a good citizen. In doing this, we strive to minimize the impact of our business activities on ecosystems.

Contributing through business processes and products

TOYOBO Group utilizes a variety of environmental protection technologies to remove harmful chemical substances from water and gases emitted at our offices and factories. We also strive to improve our manufacturing processes so as to minimize their impact. In addition, we have installed monitoring systems within our business processes to ensure that no harmful chemical substances are released accidentally.

With our eyes fixed firmly on the future, we are working hard to help protect the natural environment throughout the supply chain. This includes developing technologies that allow renewable resources to be used as the raw materials for various types of products, and biodegradable plastics that return to nature after use.

We will continue to provide products and solutions that remove harmful substances from the water and air, thereby contributing to the conservation of the global environment and ecosystems.

TOYOBO REPORT 2020 54

Social Contribution Policy & Activities

S Human Resource Management

Basic approach to developing human resources

TOYOBO Group considers human resources to be our most important asset.

We support the growth of each and every one of our employees, while respecting their diversity. We believe that the continuation and development of the Group as a whole can be achieved by building an environment in which our employees can flourish within the company and realize their own potential.TOYOBO carries out human resource development based on a training program categorized by job level, type and objective, from the newly employed to top management.

Over our long history, we have fostered an approach of valuing "people"-our most important asset-and this is shared throughout the Group.

Now, we are putting our maximum effort into nurturing the next generation of management, who will contribute to our growth strategy. We provide opportunities for selected employees to attend business schools and internal training programs. At the same time, we are actively engaged in diversity and inclusion initiatives to train mid-career hires and promote the participation of women in the workforce. Educational and training activities are also provided for domestic Group companies, while selected employees from overseas are provided with training in Japan as well. Through these initiatives,

Education & Training System

Job

Manager

Specialist

Level

Job Specific-Category Training

Distance Learning / E-Learning

Technical Seminars

Sales Training

Global Training

Role-based Training

Training

Training for

Executive

Management Candidates

Standard

Selectable Seminars

OJT for Work Issues

Training by Level

Career Design Seminar

Education & Training-Related Results

FY2020 Results

Training hours per employee

15hrs

Training investment per employee

¥40,000

Total training attendees

Male

1,265

Female

299

Total training hours

Male

26,968hrs

Female

9,280hrs

we nurture our employees to help put into practice TOYOBO's corporate philosophy of Jun-Ri-Soku-Yu (adhering to reason leads to prosperity); in other words, those who can create shared value.

Nurturing the next generation of management

TOYOBO strives to ensure that our employees acquire a broad knowledge and enhance their skill set through job rotation, including overseas assignments, from an early stage. In addition, we hold annual interviews to identify each individual's career aspirations and use this information to help them develop and ensure that they are assigned to the appropriate position.In this way, personal growth at the individual level leads to the development of the Company.

These initiatives also allow us to single out candidates for the next generation of management at an early stage. By placing them in business operation and management positions, we help our candidates to hone their management skills as we form our succession plan. Around 20 employees are selected for education and training each year, and they acquire the necessary management knowledge at business schools and the like. Additionally, around four employees spend approximately six months practicing skills such as formulating measures to grow the business, debating, and making proposals at simulated management meetings.

Developing global human resources

TOYOBO Group implements "Short-term Overseas Business Training" in which around 10 employees in two separate groups from Japan are sent overseas for training each year (first and second half of the year). This motivates younger and mid-career employees to participate in TOYOBO's global business, and also represents a major opportunity for them to further their careers.

Training for local employees from overseas offices

55 TOYOBO REPORT 2020

In addition, local candidates for management from overseas offices are selected to undergo training in Japan twice each year. This aims to enhance their understanding of TOYOBO and deepen interaction with employees who work in Japan.

Basic approach to diversity

TOYOBO Group believes that personal and organizational growth is achieved through a process of mutual respect among our employees, with their differing work styles, careers, gender, nationality, race, and beliefs, and through cooperation to achieve our shared objectives.

We respect different opinions and a wide range of values, and cooperate to achieve ambitious goals together.

Promotion of work-life balance

TOYOBO has introduced schemes that go above and beyond the legal requirements, including the Childcare Shortened Work Hour Program and Nursing Care Leave, and we also provide a Flextime system. From fiscal 2020, Childcare Leave offers five days of paid leave, and we are also encouraging male employees to take childcare leave.

We are also engaged in work style reform, so that our employees can work with renewed efficiency and achieve a good balance between work and personal life. Initially, we introduced a 15-Minute Shortened Work Hour Program at head and branch offices in fiscal 2018, and at the Research Center in fiscal 2019, and at other offices we implement a program to increase the number of days of leave. In addition, we hold a No Overtime Day at least once a month, so that employees can spend quality personal time together with family and friends, and we also view this as an opportunity to enhance creativity.

In fiscal 2020, we introduced a Teleworking scheme at head and branch offices, which provides for a more flexible work style according to each employee's life stage.

Scheme Usage

(FY)

2016

2017

2018

2019

2020

Women taking childcare leave

23

34

19

25

27

Ratio of women taking

100

100

100

100

100

childcare leave (%)

Men taking childcare leave

0

2

2

1

50

Ratio of men taking

0

2

1

1

46

childcare leave (%)

Employees taking childcare

40

50

65

75

65

shortened work hour program

Annual paid leave

66

65

66

68

73

utilization ratio (%)

Promoting the advancement of women

TOYOBO established the Female Empowerment Promotion Group within the Human Resources Department, and the Group has been engaged in activities to promote the empowerment of women. We have held presentations, seminars for managers, career design seminars, female leader development seminars, etc., on a continuous basis, in order to realize a change of mentality among our employees. With regard to women on the so-called "career track" route, we have continued to actively hire female university graduates, with a target ratio of 40%, and are also focusing on widening the positions in which women work and nurturing female leaders. We have also launched a project to encourage female employees who previously worked in non-career track positions to flourish, and this is increasing motivation and developing human resources. In April 2019, we launched a trial Mentor Program for women, which supports them in developing their career plan.

TOYOBO has introduced a babysitter support system to assist with childcare, which provides the full cost of childcare when an employee is on a business trip. The number of users has steadily increased. Since April 2018, we have provided a nursery inside the Research Center (Otsu City, Shiga Pref.) for employees with children. The nursery not only enables employees to return to work early from childcare leave and make their return to work easier, but also lays the platform for women to feel more comfortable with planning a family.

Educational Activities and Training (FY2020)

Activities/Training

Frequency

Participants

Presentation

21 times

682

Seminar for Managers

6 times

137

Career Design Seminar

2 times

48

Female Leader Development Seminar

2 times

33

Proportion of Female Employees

with Management-Level Qualifications

Total Ratio (%)

4.3

3.7

4.0

3.2

2.8

54

60

48

41

36

2016

2017

2018

2019

2020

(FY)

TOYOBO REPORT 2020 56

Basic approach to health and safety

TOYOBO Group is striving to improve employees' mental and physical wellbeing and achieve zero accidents based on the principles and activities set out in the"TOYOBO Group Basic Policy on Health & Safety."

In fiscal 2020, we embarked on the strategic implementation of health and productivity management, considering health care from a management perspective. Going forward, we will promote initiatives that energize and increase the productivity of the organization, and improve performance through measures such as maintaining and enhancing employees' health and wellbeing. We also aim to obtain certification under the Ministry of Economy, Trade and Industry's Certified Health & Productivity Management Outstanding Organizations Recognition Program.

Safety management system

TOYOBO Group has established a Safety & Security Promotion Committee under the Global Environment and Safety Committee to promote safety and disaster prevention activities. The committee members conduct safety and environment assessment of our offices and plants as well as Group companies, in order to check the status of onsite activities.

Each month management and employees at the Health and Safety Committee jointly investigate and consider matters relating to health and safety, at each business site and plant, and employees are informed of the decisions taken. Affiliated businesses at the same business site are also promoting safety and disaster prevention activities together with our employees.

Health management system

In March 2020, TOYOBO Group formulated a "Health & Productivity Management Declaration" in order to proactively and systematically address health and productivity management, and also established a structure to promote this. Under the supervision of the Chief Health Officer (CHO), the Labor Affairs Department, industrial physicians, occupational health nurses/medical care nurses, and the health insurance union are working together on the following key measures:

  1. raising employees' health awareness (education and training)
  2. improving employees' lifestyle habits (exercise, diet, support for quitting smoking, etc.)
  3. strengthening mental health measures (including improvement measures for high-stress employees and workplaces);
    Additionally, as a countermeasure against COVID-19, we have encouraged working from home and staggered working hours, ensured social distancing when working in the office, provided information about infection prevention, distributed masks, etc.

Mental healthcare

We invite guest lecturers to provide training for managers, to increase their awareness and understanding of mental healthcare. Individual consultations are also given by industrial health staff at each business site. We also provide personalized support to those suffering from high levels of stress, based on the results of a stress checkup. In the near future, we plan to identify and resolve issues in high-stress workplaces based on the results of group analysis.

With regard to mental healthcare in COVID-19 stay at home situations (adopted as a measure to tackle the spread of COVID-19), we have addressed the importance of self-care and so-called "line care" (care provided by managers for the wellbeing of their staff and measures to improve the workplace), issuing information so as to maintain and support our employees' physical and mental wellbeing.

Disaster prevention initiatives

Following the fire at TOYOBO's Tsuruga Research and Production Center, which broke out on September 6th, 2018, we reviewed our security and disaster prevention activities, and the whole Group is making concerted efforts to regain the trust of society.

Using the "Inspection Guidelines for Fire Risk" drawn up based on the advice of a third-party expert, an overall inspection is made of TOYOBO Group's main production plants, and this systematically promotes functional improvements to fire-fighting equipment at our sites of production. We will also continue to revise the content of our training drills so that they are more practical and enable us to protect our workplaces in the event of a fire.

We have designated September 6th each year as TOYOBO Group Disaster Preparedness Day so that the lessons learned from this fire are not forgotten, and since fiscal 2020, disaster prevention rallies have been held at each plant, attended by the President. Disaster prevention seminars are also given by visiting experts so as to improve awareness of disaster prevention.

With regard to training, we have revised the company-wide training system for safety and disaster prevention in order to continually enhance employees' awareness of disaster prevention, and have also enhanced the curriculum relating to disaster prevention.

Disaster prevention seminar

57 TOYOBO REPORT 2020

Basic approach

Respect for human rights is essential if a company hopes to earn the trust of society. Given its importance, TOYOBO Group has included "respect for human rights" among the ten principles that make up our Charter of Corporate Behavior. It is also one of the fundamental prerequisites to materiality.

Structure and main initiatives

Through the "TOYOBO Compliance Manual" distributed to our employees, TOYOBO Group strives to ensure that employees understand the rules and case studies described in the manual relating to respect for human rights, prohibition of discrimination, prohibition of child labor and forced labor, respect for diversity, prohibition of harassment, and protection of personal information. In addition, a Complaint Handling Committee provides consultations and handles human rights-related issues

including harassment, and works to quickly identify and resolve such issues through compliance surveys. We also hold seminars on respect for human rights and presentations on gender and sexual diversity to improve awareness of human rights among employees. In fiscal 2020, we provided training for Group company employees concerning the human rights of overseas workers, and also instructed our various trading partners to do so as well.

With regard to respect for human rights in the supply chain, our "CSR Procurement Guidelines" clearly stipulate the need to consider human rights when selecting trading partners.

Data Security and Privacy

Basic approach

Given the accelerating evolution of the information society, TOYOBO Group has drawn up an "Information Security Policy" to ensure the Group's continued sustainable growth in the future, and strives to manage and utilize all information assets appropriately.

Structure and main initiatives

In fiscal 2019, TOYOBO Group set up a Cyber Security Committee, and most technical and specialist measures were implemented by fiscal 2020. In fiscal 2021, we will continue to improve employee awareness and strengthen our response to incidents, while also training internal experts.

With regard to the European Union's General Data

Protection Regulation (GDPR), we have instructed our Group companies in the EU (in Germany, Spain and Slovakia) to formulate standards and implement training.

TOYOBO Group Information

Security Management Structure

Chief Information Security Officer

Formulating basic policy and plans

Cyber Security Committee

Formation of / instruction on

Mutual

management structure

collaboration

Information Security Officer

Support for activities /

reporting

(Responsible corporate officer,

・Training

・Drills

leader of each Group)

・Measures

・Audits

Policy

dissemination

Departments responsible for

Implementation

Legal Compliance

instructions

charge

charge

charge

Internal Rules

Personal Information Management

Education & Training

Asset

Information Systems Operation

in

in

in

Incident Response

designation

personDept.

personDept.

personDept.

Execution of

measures

Initial incident report

Convening of related parties

Initial response, recovery

Final report

Computer Security Incident Response Team

A virtual team convened according to the severity of the information security incident

TOYOBO REPORT 2020 58

Quality Management

Basic approach

TOYOBO Group's quality management is based on our PVVs corporate philosophy system, which incorporates our corporate philosophy of Jun-Ri-Soku-Yu (adhering to reason leads to prosperity).

We implement quality management activities under the motto "TOYOBO's way of manufacturing," based on the idea of always taking our customer's standpoint, accurately identifying the customer's needs, and providing solutions that satisfy the customer.

Quality Assurance activities

The basis of "TOYOBO's way of manufacturing" is to consistently put ourselves in the customer's position and provide what is needed the most. This includes incidental services and solutions, in addition to our product offerings. In this way, we aim to help customers resolve their challenges/ issues and realize their wishes.

To achieve this, all employees have shared access to the Quality Assurance Manual, which describes the basic approach and code of conduct for all employees when implementing TOYOBO Group's development, production and sales activities. In addition, the Quality Assurance Guidelines provide the basis for developing a system that guarantees quality. A QA system is established for each product and service, so that quality and product safety can always be guaranteed at each stage. Additionally, checks are repeatedly carried out by business supervisors, related internal and external parties, and experts, to ensure that no incidents occur in the market.

Overview of Quality Assurance Activities

System

Market

Plan

Confirmation of Actions

Quality

Customers

and Achievements

information

Customer

Purchase

Needs

QualityTarget

Quality Management

Quality Verification

Sales &

Support

Trends of

Services

Other

Required

Use

Companies

Quality

Customer

Social

Quality

Situation

Evaluation

Progress of Management &

Technology Performance

Verification of

Quality Assessment

Product safety promotion activities

TOYOBO Group has established a "PL/QA Committee" as a standing committee with overall responsibility for Product Liability (PL) and QA. This committee, which comprises persons in charge from each business and persons in charge (executives) from the corporate staff, puts in place systems to ensure product safety in relation to products and technology, and to facilitate appropriate responses to PL or other quality-related incidents. As well as optimizing corporate activity and maintaining/enhancing the Group's standing in society, the committee strives to increase customers' trust and confidence in the TOYOBO Group, while making sure that its activities are in keeping with the times. It also conducts PL/QA assessments to verify and improve Product Safety (PS) activities in each department and group companies.

Moreover, the committee establishes criteria for assessing PS and PL risk, and based on these criteria, it carries out inspections at each stage, from product development to sales. By addressing risk in advance, the committee works to mitigate risks pertaining to customers and employees.

All possible measures are taken to ensure product safety, and training drills are also performed every year at all business divisions based on PL incident scenarios. Product safety remains a crucial theme throughout the whole of TOYOBO Group, and we will continue to mitigate risk as much as possible to fulfill our social responsibility.

PL Response System

TOYOBO Group Basic Policy on Product Safety

Policy

PL/QA Committee

Deliberation/

determination of

product safety measures

PL/QA Promotion Committee

Implementation of

product safety measures

PL/QA Assessment

Review of product safety

Bioethics Review Committee

PS Review Board

PL response drill

PL Response Drill

59 TOYOBO REPORT 2020

Basic approach

TOYOBO Group has established an appropriate trading policy and conducts procurement/logistics responsibly, so as to support the development of a sustainable society.

In October 2018, we revised our CSR Procurement Guidelines in order to achieve the SDGs within the supply chain, including legal compliance, fair trade, respect for human rights (including the prohibition of child labor / forced labor and discrimination based on gender identity including LGBT), and consideration for the environment.

CSR survey

We conduct a questionnaire among our key business partners, based on the CSR Procurement Guidelines. This allows us to verify the status of their CSR activities, while enabling them to deepen their understanding of CSR activities.

Fairness and transparency in trade

We take a rigorous approach to ensuring fairness and transparency, based on sound trading. We do not give or accept gifts or entertainment in order to secure unjust profit or preferential treatment from our business partners, and have strengthened our checking system to ensure that actions that raise suspicion do not occur.

Response to natural disasters, etc.

In recent years, various areas of Japan have experienced significant damage from earthquakes, typhoons and sudden localized rainstorms. We have gained knowledge in the process of responding to these events, and aim to realize even more stable procurement and logistics.

As part of our Business Continuity Plan (BCP), we strive to identify and manage risk throughout the supply chain. For procurement, we are looking to procure raw materials from multiple regions, and for logistics, we are establishing alternative transportation means and routes in collaboration with logistics operators.

The spread of COVID-19 has led to supply uncertainty and logistics delays in some areas. We are endeavoring to quickly gather data on supply chains, and are taking measures including the use of alternative parts and routes in order to minimize damage.

Green procurement

We prioritize procurement of raw materials with a low environmental impact, and work with business partners who take a proactive approach to protecting the environment. Together, we are promoting green procurement to help build a sustainable society. We ask our business partners to provide information about the chemical substances contained in products, as follows.

In fiscal 2019, we revised our "Chemical Content Information Sheet" based on the information sharing scheme "chemSHERPA", developed by Japan's Ministry of Economy, Trade and Industry, and requested our business partners to respond. For general purchased goods, we are promoting green purchasing with the use of environmental labels.

Resolving social issues in logistics

To resolve social issues in logistics, we are pushing forward with initiatives to reduce the environmental impact and reform the work style in logistics. To reduce our impact on the environment, we are shortening the transportation distance by using the ports closest to our business sites, implementing a modal shift, and improving loading efficiency. We are also sharing logistics and storage with other companies (including joint shipment, making use of returning trucks, securing joint storage space), and are encouraging the introduction of systems that enable visualization of the logistics situation.

Additionally, we formulated a voluntary action declaration in support of the "White Logistics Movement"* advocated by Japan's Ministry of Land, Infrastructure, Transport and Tourism, Ministry of Economy, Trade and Industry and Ministry of Agriculture, Forestry and Fisheries, which we submitted to the White Logistics Campaign Office and also published on our website. We disclose our various initiatives, including "Logistics improvement proposals and cooperation," "Utilization of pallets, etc.," "Modal shift to sea and rail transport," "Consideration of compliance with applicable legislation when selecting logistics operators," and "Safety measures for freight handling."

  • A movement in which all the parties involved in logistics cooperate to propose and implement mutually beneficial improvements.

TOYOBO REPORT 2020 60

Governance Policy & Activities

G Management Team

Directors

Seiji Narahara

Representative Director, President and CEO, Co-COO

Jan. 1988 Joined TOYOBO

Apr. 2009 Deputy Director and General Manager,

Finance Department

Apr. 2010 Corporate Officer

Jun. 2011 Director and Corporate Officer

Apr. 2014 Representative Director, President

Chief Operating Officer (current position)

Masaru Watanabe

Representative Director, Co-COO, Controlling Supervisor of Business Units

Apr. 1979 Joined TOYOBO

Oct. 2009 Deputy Director, General Manager of Plastics Operation Planning Office, and General Manager of Plastics Management Office

Apr. 2014 Corporate Officer

Jun. 2016 Director and Corporate Officer

Apr. 2017 Director and Corporate Executive Officer Apr. 2018 Representative Director and Senior

Managing Executive Officer Jun. 2020 Representative Director, Co-Chief

Operating Officer (current position)

Ikuo Takeuchi

Director, Managing Executive Officer, Controlling Supervisor of Corporate Planning Division

Apr. 1985 Joined the Company

Oct. 2014 General Manager of Corporate Planning Office Oct. 2015 Deputy Director, General Manager of

Corporate planning Office

May 2017 Deputy Director, served in Global Business Planning Department and seconded to TOYOBO (SHANGHAI) CO., LTD.,

TOYOBO CHINA CO., LTD.

Apr. 2018 Executive Officer Managing Executive Officer

Apr. 2020 Director and Managing Executive Officer (current position)

Jun. 2020 Director (current position)

Hiroshi Otsuki

Director, Executive Officer, Controlling Supervisor of Management and Administration Division

Nov.1987 Joined the Company

Jun. 2010 General Manager of Finance Department and Senior Coordinator of Corporate Planning Office

Apr. 2014 General Manager of Plastics Planning and Management Office, and Manager of Film Business Management Office

Oct. 2014 Deputy Director, General Manager of Plastics Planning and Management Office, and Manager of Film Business Management Office

Apr. 2017 Executive Officer (current position) Jun. 2020 Director (current position)

Yoshio Araki

Director, Executive Officer, Controlling Supervisor of Production Technology Innovation and Quality Assurance Division

Apr. 1984 Joined the Company

Jan. 2008 General Manager of Polymer Production Technology Department and Manager of Corporate Research Venter Project D

Oct. 2013 Deputy Director, General Manager of Plastics Production Technology Department

Apr. 2018 Executive Officer (current position) Jun. 2020 Director (current position)

Masakatsu Shirai

Director, Executive Officer, Controlling Supervisor of HR and Sustainability Planning Division

Apr. 1985 Joined the Company

Apr. 2012 General Manager of HR Labor Administration Department

Oct. 2016 Deputy Director, General Manager of Human Resources Department

May 2017 Deputy Director, seconded to Toyobo Information System Create Co., Ltd.

Apr. 2018 Executive Officer (current position) Jun. 2020 Director (current position)

Masaru Nakamura

Outside Director

Apr. 1977 Joined Sumitomo Corporation Apr. 2006 Corporate Officer

Apr. 2008 Executive Officer

Apr. 2010 Managing Executive Officer

Apr. 2012 Senior Managing Executive Officer Apr. 2016 Adviser

Jun. 2017 Director of the Company (current position)

61 TOYOBO REPORT 2020

Takafumi Isogai

Outside Director

Jan. 1987 Assistant Professor of Faculty of Liberal Arts, Osaka University Apr. 1996 Assistant Professor of Graduate School of Engineering

Science, Osaka University

Apr. 2002 Professor of Faculty of Mercantile Marine, Kobe University of Mercantile Marine

Oct. 2003 Professor of Faculty of Maritime Sciences, Kobe University Apr. 2013 Professor of School of Commerce,

University of Marketing and Distribution Sciences Apr. 2018 Part Time Lecturer at University of

Marketing and Distribution Sciences Jun. 2018 Director of the Company (current position)

Kimie Sakuragi

Outside Director

Mar. 1981 Joined Fukutake Publishing Co., Ltd. (current Benesse Holdings, Inc.) Apr. 1995 Supervisor of Book Businesses in Publishing Division

Nov.1998 Chief of Business Ethics and Compliance Office Jan. 2003 Manager of Business Ethics and Compliance Office Jun. 2003 Audit and Supervisory Board Member

Apr. 2007 Adjunct Professor of the University of Aizu Graduate School (current position) Jun. 2019 Director of the Company (current position)

Corporate Auditors

Executive Officers

Taneaki Nagata

Takayuki Tabo

Yasuhiro Iizuka

Hiroshi Otsuki

Takeo Kashima

Outside

Yoshio Araki

Ichiro Takai

Corporate Auditors

Kenjiro Ogami

Shiro Takenaka

Masakatsu Shirai

Hiroyuki Sugimoto

Nobuya Fujiwara

Kazuhiko Katayama

Senior Managing

Seiji Yamazoe

Atsuhiko Otsuka

Executive Officers

Shigeo Takenaka

Yoshihiro Nomi

Shigeo Nishiyama

Chikao Morishige

Masaaki Harima

Outside Director

Apr. 1977 Assistant Judge at Osaka District Court

May 1981 Registered as an attorney at law (Osaka Bar Association)

Sep.1987 Founded Harima Law Office (current Fushimimachi Lawyer's Office) Apr. 2010 Chairman of Osaka City Fair Work Committee

Jun. 2011 Outside Corporate Auditor of Ishihara Sangyo Kaisha, Ltd. (current position) Jun. 2014 Independence Committee of the Company

Jun. 2020 Director of the Company (current position)

Managing Executive Officers

Yasuo Ota

Ikuo Takeuchi

Yutaka Ouchi

TOYOBO REPORT 2020 62

Corporate Governance

Basic approach and system overview

To respond to the changing times and continuously enhance corporate value, TOYOBO Group has established the following three policies: (1) Ensure timeliness in decision-making,

  1. Ensure transparency in management, and (3) Prioritize fairness. Based on these principles, we are working to create and strengthen our corporate governance structure.
    TOYOBO is a company with auditors and, under this governance system, has adopted the corporate officer system.

Corporate Governance Structure (as of June 2020)

In the corporate officer system, which is defined in our management regulations, the Board of Directors oversees the business execution of Corporate Officers. Under TOYOBO's governance framework, a clear separation is made between the role of the Board of Directors-which oversees decision-making and performs management oversight-and the Corporate Officers who are in charge of business execution. This system enables rapid decision-making and efficient business execution.

General Shareholders' Meeting

Nomination Committee

The members comprise four outside directors and

two outside corporate auditors

Advisory Board on Compensation

The members comprise three outside directors

Business execution

Election

Election

Election

and dismissal

and dismissal

and dismissal

Accounting auditing

Board of Directors

Accounting Auditor

Reporting

10 directors,

Reporting

including four outside directors (40%)

including one female director (10%)

Board of Corporate Auditors

Business auditing

Four auditors, including two outside corporate

auditors (50%)

Assessing

Decision-making,including zero female directors (0%) the appropriateness supervision,

election, and dismissal

President and

Reporting

Chief Operating Officer

Board of Corporate

Reporting

Corporate Planning

Executive Officers and

Controlling Supervisors

Committee

Financial Management

Board of Corporate Officers

Committee

Cooperation

Cooperation

Global Environment & Safety,

Sustainability Committee

Product Liability Prevention/

Various

Quality Assurance, Compliance,

Committees

Export Reviewing,

Internal Control, Information,

Research & Development,

Intellectual Property

Departments

Internal Audit Departments

subject to audits

Internal auditing

Internal auditing

Business auditing

Group Companies

Each Group Company's

Business auditing

Corporate Auditors

63 TOYOBO REPORT 2020

Board of Directors

The Board of Directors has 10 directors, including four outside directors. A director's term of office is set at one year to ensure a swift response to changes in the business environment and to clarify the responsibilities.

At the General Shareholders' Meeting held in June 2019, one outside director (female) was appointed in order to increase diversity and strengthen the supervisory function. Moreover, at the General Shareholders' Meeting held in June 2020, we adopted a modified system aimed at further separating decision-making and supervision from business execution. For example, the Board is elected from outside directors and corporate officers who oversee departments that are engaged in operations with a company-wide scope. This system makes it easier for corporate officers, who are responsible for specific businesses, to concentrate on their respective businesses and fields.

In fiscal 2020, the Board of Directors made decisions on matters stipulated in laws and the Articles of Incorporation, and on important investment deals including acquisitions. In addition, the Board received reports on each business and conducted appropriate supervision.

In order to further optimize the functions of outside officers (both directors and auditors), important issues are shared beforehand. In addition, TOYOBO periodically holds liaison meetings that consist of representative directors and outside officers, to share their viewpoints and exchange opinions on management issues.

Board of Corporate Auditors

The Board of Corporate Auditors has four members, two of whom are outside corporate auditors. Their responsibilities include attending meetings of the Board of Directors and other important meetings, stating their opinions when necessary, and auditing each department's operation in order to audit directors' execution performance.

KPMG AZSA LLC has been appointed to conduct TOYOBO Group's independent audits required under Japan's Companies Act. The Board of Corporate Auditors receives auditing plans and reports from the independent auditor and meets with the independent auditor periodically to exchange information.

The Internal Audit Department supervises the effectiveness of internal governance. The department reports the results of internal audits to the President and exchanges information with corporate auditors.

Board of Corporate Executive Officers and Controlling Supervisors

There are 20 corporate officers, including some who serve concurrently as directors. The Board of Corporate Executive Officers and Controlling Supervisors deliberates in advance on matters to be resolved by the Board of Directors, and determines matters related to business execution, which has been entrusted by the Board of Directors.

The Corporate Planning Committee and the Financial Management Committee are established under the Board of Corporate Executive Officers and Controlling Supervisors. They deliberate on important investments and new projects, important borrowing, etc. from their respective realms of expertise, thereby managing business risk.

With regard to other initiatives, a working group comprised of directors was established, to discuss issues including the future vision of the TOYOBO Group.

Meetings Convened in FY2020

Number of meetings held

Board of Directors (Ordinary Meetings)

12

Board of Directors

7

(Extraordinary Meetings, incl. quarterly results meetings)

Board of Corporate Auditors

15

Outside Officer Liaison Meeting

7

Board of Corporate Executive Officers and

31

Controlling Supervisors

Corporate Planning Committee

10

Financial Management Committee

20

Attendance record of outside directors (attendance rate)

Taketoshi Oka (Director)

18/19 ( 95％)

Masaru Nakamura (Director)

19/19 (100％)

Takafumi Isogai (Director)

16/19 ( 84％)

Board of

15/15 (100％)

Directors

Kimie Sakuragi (Director)

Shiro Takenaka (Corporate Auditor)

19/19 (100％)

Hiroyuki Sugimoto (Corporate Auditor)

18/19 ( 95％)

Board of

Shiro Takenaka (Corporate Auditor)

15/15 (100％)

Corporate

15/15 (100％)

Auditors

Hiroyuki Sugimoto (Corporate Auditor)

TOYOBO REPORT 2020 64

Director Skill Matrix (as of June 2020)

Within the expertise required by the Company, skills that are particularly beneficial (3 for inside directors and 1 for outside directors)

Independent

Age

Gender

Corporate

Sales/

Finance/

Legal Affairs /

HR/

Production

Overseas

Management/

Talent

R&D

Sustainability Technology &

Business

Strategy

Marketing

Accounting

Ethics

Development

Quality

Experience

Seiji

63

Male

〇

〇

〇

〇

Narahara

Masaru

63

Male

〇

〇

〇

Watanabe

Ikuo

57

Male

〇

〇

〇

〇

Takeuchi

Inside

Hiroshi

59

Male

〇

〇

〇

Otsuki

Yoshio

60

Male

〇

〇

〇

Araki

Masakatsu

57

Male

〇

〇

〇

Shirai

Masaru

〇

66

Male

〇

〇

Nakamura

Takafumi

〇

71

Male

〇

Isogai

Outside

Kimie

〇

61

Female

〇

Sakuragi

Masaaki

〇

69

Male

〇

Harima

Evaluating the effectiveness of the Board of Directors

From January to March 2020, in order to further enhance the functions of the Board of Directors, an overall analysis and evaluation of the effectiveness of the Board in fiscal 2020 was carried out with the support of a third-party organization.

Method of analysis and evaluation of effectiveness

We have conducted a survey on our directors and corporate auditors. As in the previous fiscal year, the responses to this survey were provided directly to the external organization. Analysis and evaluation were carried out by the Board of Directors based on the aggregated survey reported by the external organization.

65 TOYOBO REPORT 2020

Summary of evaluation results

  1. The survey results gave a broadly positive assessment regarding matters including the number of Board members, the ratio of internal and outside officers, its composition including the diversity of members, and management of meetings procedures. This confirms the overall effectiveness of the Board of Directors.
  2. In order to further enhance discussion concerning long-term business strategy, the Board of Directors is promoting initiatives aimed at sustainable growth, which involves reviewing the criteria for selecting items on the agenda and delegating the appropriate authority to subordinate meeting bodies, etc.
  3. As well as continuing last fiscal year's initiatives, the Board aims to further strengthen its Group management functions.

Details of Officer Compensation (FY 2020)

Total

Total compensation by type

(¥ mn)

Number

Position

compensation,

of

etc.

Monthly

Stock

officers

(¥ mn)

compensation

compensation

Directors

340

312

28

6

(excluding outside directors)

Corporate auditors

51

51

―

2

(excluding

outside corporate auditors)

Outside officers

55

55

―

6

Nominating directors and determining compensation In order to ensure transparency and fairness when determining the nomination of directors and their compensation, deliberations are made at the Nomination Committee and the Advisory Board on Compensation, and then reported to the Board of Directors.

The Nomination Committee comprises two representative directors and six outside directors. They are responsible for reporting to the Board of Directors concerning matters including the selection of directors and corporate officers, from the perspectives of fairness and transparency. The Compensation Advisory Board, which is made up of two representative directors and three outside directors, conducts objective and fair deliberation/verification of the compensation system, standards, and calculation methods, while taking into account the surveys by external organizations.

Officer compensation system

TOYOBO's system of officer compensation is designed in line with basic policy, within the monetary amount of officer compensation resolved at the General Shareholders' Meeting. Our basic policy is as follows: (1) provide incentives that lead to TOYOBO Group's sustained growth and enhance corporate value over the longer term; (2) secure highly talented management personnel; (3) set determination procedures that are objective and highly transparent.

Based on the above policy, in fiscal 2020 we reviewed the compensation system for directors, including the introduction of a stock compensation scheme.

Breakdown of directors' compensation (excluding outside directors)

  1. Monthly compensation: Basic compensation according to role and monthly fixed compensation reflecting last fiscal year's performance (company-wide and within their assigned department)
  2. Compensation in the form of restricted stock units

(non-performance-based)

Training programs for officers

For our newly appointed directors and corporate auditors, we provide orientation concerning their roles and duties, as they undergo an external training program upon their appointment, in order to acquire the necessary knowledge.

In addition, newly appointed outside directors and outside corporate auditors also attend orientations regarding the Company's operations, finances and organization, and more. They are also encouraged to continue participating in external training programs and lectures to continuously build on their managerial literacy.

TOYOBO REPORT 2020 66

Progress in system enhancement

Initiatives to Strengthen Corporate Governance

(Year)

Initiative & Objective

1998

2004

2005

Established the Ethics Committee (the current Sustainability Committee)

To promote companywide compliance activities as a key element of management

Appointed one outside director, shortened the term of office for directors to one year

To clarify management accountability by strengthening the supervisory function and shortening the term of office

Established an Advisory Board on Officer Provisions, etc. (the current Advisory Board on Compensation)

To ensure transparency and fairness in procedures for determining officer compensation

Introduced a corporate officer system, reduced the number of directors

To split the decision-making/supervisory and executive functions

Increased number of outside directors to two

To strengthen the supervisory function by multiple appointments

Established an outside officer liaison meeting

2015

To hold regular information exchange meetings to optimize the

functions of outside officers

Established the Nomination Committee

To ensure transparency and fairness in procedures for

nominating/dismissing directors

Made an analysis/evaluation of the overall effectiveness of the

2016

Board of Directors

Will annually identify issues and make improvements

Increased number of outside directors to three, raising their

2018

ratio to one third of all directors

To ensure diversity among members of the Board of Directors,

as well as strengthen governance

Increased number of outside directors to four (adding a female

director)

To further promote diversity among members of the Board of

2019

Directors

Revised the officer compensation system (introduced

compensation in the form of restricted stock units)

To offer longer term incentives and realize greater sharing of

value with shareholders

Implemented further separation between

2020

decision-making/supervision and business execution in regard

to election of directors

67 TOYOBO REPORT 2020

Kimie Sakuragi

Outside Director

Contributing my BtoC experience

"TOYOBO is actually a BtoBtoC (business-to-business-to-consumer) company," President Seiji Narahara told me prior to my appointment as outside director. "Many people view us as a BtoB company, but the materials we provide to our client companies would eventually become products for the general consumers." I had also thought of TOYOBO as a BtoB company and anticipated adding my expertise from working at a BtoC company. However, the insight I gained from that discussion with Mr. Narahara made it crystal clear what TOYOBO needed from me.

In experience serving as a business ethics and compliance officer and Audit & Supervisory Board Member, my general assessment criteria have been to ask, Are the company's actions in line with its philosophy? Is the company meeting the expectations of stakeholders, or are they falling short? and Do the words match with the deeds? After working for a BtoC company, I am also aware of the duty of an outside director to evaluate our operations from the perspectives of the consumer and society.

Reforming corporate governance

Over the past year, the TOYOBO Group made significant progress promoting strategies for medium- and long-term growth, such as reorganizing the corporate philosophy and reforming the corporate structure.

In terms of corporate governance, we further separated business supervision and the execution of duties by shifting more decision-making authority to the people at the business site and reorganizing the board of directors to focus on planning and monitoring of medium to long-term growth initiatives.

Now that we have established a corporate structure for generating steady and stable profit flow, our top priority for the Board of Directors is to set a roadmap towards attaining consolidated sales of ¥500 billion in fiscal 2026.

Promoting the participation and advancement of women in the workplace

I believe, promoting and appointing more women to management positions is major area the management needs to address. Despite initiatives advanced by the Women Empowerment Promotion Group, in fiscal 2020 the percentage of women management was still a low 4.3%.

Soon after I was appointed as outside director, I was given an opportunity to share my own career experiences and meet with a few of the women in management positions. My impression was that they were an exceptionally capable group. I believe that the management would do well to take a moment to reflect on the real benefits that will come from developing and using the full potential and skills of its female workforce.

I would think it is reasonable to believe that in most households, women make most of the purchasing decisions related to consumer goods. TOYOBO is presently reforming its business model and shifting towards a market centric approach. The management would be missing a major opportunity if it does not leverage the significant insight its female managements and employees could bring to identifying market needs creating business and making business decisions. Research shows that the active participation and advancement of women in the workforce is proportionate to corporate performance. I believe TOYOBO needs to do more to develop, promote, and encourage women in the workplace.

TOYOBO in the future

Our future society after the COVID-19 pandemic is uncertain, but I expect there will be a drastic change in people's values in relation to lifestyle and health. TOYOBO has been providing PCR test reagents and detection kits, mask materials, and medical face shield materials to help prevent the spread of the virus. The Company needs to continue to accelerate "creating solutions for people and the earth."

The redefined TOYOBO spirit consists of three values of the PVVs corporate philosophy system-challenge, reliability, and collaboration. TOYOBO is an outstanding company that is credible and dedicated to its purpose. TOYOBO is building customer trust with its advanced technologies and actively communicating with stakeholders. However, I believe more can be done to take on new challenges. The Company needs to change how we interact with customers and the market, be more flexible in generating ideas, and fulfill society's expectations by proactively taking on more challenges to create new values. Right now, I believe that is the greatest priority for the TOYOBO Group.

TOYOBO REPORT 2020 68

Compliance

Basic approach

Our Group's corporate philosophy, Jun-Ri-Soku-Yu (adhering to reason leads to prosperity), forms the basis of our compliance activities. In particular, the idea of "thinking rationally and logically, as well as respect for ethics and morals, the fundamental nature of being human."

Compliance promotion structure

A Compliance Committee is comprised of members from the Board of Corporate Executive Officers and Controlling Supervisors. The goal is to promote Group-wide compliance from a management perspective. A Compliance Promotion Committee has also been established as a sub-committee, which considers and promotes specific initiatives.

In fiscal 2020, the Compliance Committee convened twice, and the Compliance Promotion Committee convened four times. The committees clarified their policy and standards, and debated/finalized various measures related to enhancing the effectiveness of education, training and preventive measures.

Compliance consultation centers

TOYOBO provides an internal reporting service and internal/external compliance consultation centers for all Group employees. This prevents as well as quickly detects workplace legal violations and other instances of wrongdoing.

Number of Consultations

FY2016

FY2017

FY2018

FY2019

FY2020

12

20

15

32

35

Compliance education

We carry out compliance training programs by job level. This applies to management, new employees and newly promoted staff as well. We also provide educational programs for expats, and study sessions / seminars are given on specific key topics such as cyber security and bribery/gifts/entertainment.

Initiatives in fiscal 2020

In fiscal 2020, we developed various activities to enhance awareness of compliance, based on the slogan "Sensitivity and Reporting."

Major activities in fiscal 2020

Clarification of policy and standards

Revision and dissemination of Compliance Manual

The TOYOBO Group Compliance Manual, which is the foundation of the Group's compliance activities, has been revised and distributed to Group employees, who also read through the texts together in each workplace.

Tackling the key issue of bribery/gifts/entertainment

Policies and guidelines have been established to address bribery/gifts/entertainment. Rules concerning gifts and entertainment have also been put in place in order to build fair and healthy relationships with our clients as well as partner companies, and we have introduced a reporting system for the receipt of such gifts and entertainment.

Enhancing the effectiveness of education, training and preventive measures

Hosting seminars

Members of the Compliance Department and IT Department, acting as lecturers, host seminars at nine business sites and 31 affiliated companies on topics such as preventing misconduct and cyber security. Attendees are management-level personnel from the Company and Group companies. Seminars were also given concerning gifts and entertainment, mainly for the upper management.

Issuing case study reports

A "Compliance Mini Study," which educates employees about cases of violation in case study format, is issued monthly, and heads-up reports (occasional publication) are also issued based on cases that occurred within TOYOBO Group.

Compliance Month activities

In the November Compliance Enforcement Month, a compliance survey was carried out to identify issues related to the status of compliance and promotion activities. Improvement measures were then taken.

Seminar on bribery/entertainment

69 TOYOBO REPORT 2020

Basic approach

We are identifying various types of risk that could pose a threat across the entire range of our business activities, and are managing risk appropriately according to the characteristics of each risk.

In an emergency situation, we immediately set up a task force under the instruction of the relevant corporate officer, and bring the crisis under control through a swift response. By putting these systems in place and conducting the aforementioned initiatives, we work hard to earn the trust of our customers, the local community, and our shareholders and other stakeholders.

Business risk

With regard to specific risks in our business activities, we have established the CSR Committee* as the body for overseeing Group-wide risk, headed by the President as chair of the Committee. Under the auspices of this Committee, there are eight sub-committees including global environment and safety

committee, which manage the various types of business risk at the Group level. We have also established the Corporate Planning Committee and Financial Control Committee under the Board of Corporate Executive Officers and Controlling Supervisors. Specialist committee members selected from each department deliberate on proposals for new projects or important investment and borrowing, and control business risk from a multi-faceted perspective.

*Renamed the Sustainability Committee in April 2020

Business continuity planning (BCP)

TOYOBO Group has drawn up a BCP focused on combining both "fulfillment of our responsibility to supply products as a manufacturer" and "coexistence with the global environment and society," and we make continual improvements.

The BCP clarifies the chronological sequence of the roles and functions of each department from when a crisis occurs, through to its resolution. It also contains specific details of preparations during normal times.

Digital Strategy

Basic approach

The development of IT is accelerating the evolution of the digital society. Responding to this change, TOYOBO Group is developing an IT system infrastructure that encompasses the entire value chain, and we are transforming our way of business, making full use of digital technologies. As well as improving business efficiency, we aim to enhance the value we provide to society and our customers.

Promotion structure and initiatives

TOYOBO Group has promoted digitalization by actively incorporating IT in our operations. This includes streamlining sales activities using a variety of IT tools, enhancing manufacturing controls with the aid of IT, and more efficiently managing intellectual property through the use of AI.

In April 2020, we established a dedicated Digital Strategy Department to promote such activities on a company-wide basis. In accordance with our road map to 2024, we will strengthen the Group's internal IT system infrastructure and push forward with digital transformation.

Key Digitalization Measures in the near Future

Field

Measures

Marketing/

● MA (marketing automation)

Sales

● Company-wide rollout of SFA (sales force automation)

R&D/

● Introduction of Materials Informatics

(materials development using AI)

IP Management

● Enhancement of intellectual property management using AI

Manufacturing /

● Company-wide rollout of smart factories

Quality Assurance

● Enhancement of quality controls and quality assurance

Supply Chain

● Building a next-generation procurement system

Management

● Demand forecasting using AI

TOYOBO REPORT 2020 70

Overview of Fiscal 2020

Key Events in Fiscal 2020

TOYOBO made Teijin Film Solutions Limited a wholly-owned subsidiary

In May 2019, TOYOBO entered into a stock purchase agreement with Teijin Limited to make its subsidiaries Teijin Film Solutions Limited and P.T. Indonesia Teijin Film Solutions into wholly-owned subsidiaries. The stock acquisition was completed on October 1st.

Both firms are engaged in the polyester film business. They have strong capabilities in development and manufacturing technologies, and offer a wide lineup of distinctive, high-functionality products, including mold releasing films for MLCC, which has seen rising demand in recent years. The film business is one of TOYOBO Group's growth fields, and the Group aims to further strengthen its development and supply structure for high-performance films through the acquisition. We also aim to further expand our film business by bolstering our overseas production capacity to meet customers' needs on a global basis.

Overview of the new company: Trade name changed upon completion of stock acquisition on October 1st, 2019.

Utsunomiya office

Former trade name

Teijin Film Solutions Limited

New trade name

TOYOBO FILM SOLUTIONS LIMITED (name changed on October 1, 2019)

Address

1-17-10 Kyobashi, Chuo-ku, Tokyo, JAPAN

Representative

President and Representative Director: Yoshihiro Nomi

Capital

JPY 10,510,000,000

Business activity

Production and sale of films

Former trade name

P.T. Indonesia Teijin Film Solutions

New trade name

PT. INDONESIA TOYOBO FILM

SOLUTIONS

(name changed during October 2019)

Address

Jl. M.H. Thamrin, Kel. Panunggangan

Kec. Pinang, Tangerang 15143

Banten, INDONESIA

Representative

President and Director: Yuichi Hanawa

Capital

USD 77,400,000

Business activity

Production and sale of films

Products employing PEN films

Development of BIOPRANA® Oriented Nylon Film (ONY), a new material that uses biomass raw material

TOYOBO has developed and has been the first in the world* to commercialize BIOPRANA® Biaxially Oriented Nylon Film (ONY), a packaging film that uses nylon resin derived partially from biomass (a plant-based material) as one of the raw materials. BIOPRANA® ONY uses nylon resin derived from biomass, but has equivalent performance to conventional products that only use petroleum-based raw materials.

Biaxially Oriented Nylon Film (ONY) has various applications due to its excellent shock resistance, including liquid packaging and sealed heat-resistant pouches. TOYOBO will continue to develop products and technologies that help to reduce the impact on the environment.

*As of October 15, 2019, based on our survey

It has various applications, including liquid packaging, refillable pouches, and retort packaging

(such as sealed pouches of ready-to-eat food).

71 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

Participation in European consortium CEFLEX to help develop a circular economy

Amid rising awareness of environmental issues, TOYOBO is working to reduce the environmental impact and promote recycling of film products.

CEFLEX is a European consortium aiming to further enhance the performance of flexible packaging in the circular economy. Established in 2017, it comprises more than 130 companies and organizations involved in the flexible packaging value chain, including raw materials manufacturers and recycling companies. CEFLEX's goal is to establish a collection, sorting and reprocessing infrastructure for used flexible packaging across the whole of Europe by 2025. Joining CEFLEX will provide TOYOBO Group with the latest information about recovery systems and regulations, and we are committed to developing and supplying eco-friendly technologies and products that will contribute to the realization of a circular economy.

Launch of "MIRAI JINZAI JUKU" Phase 2 for nurturing talent and creating new business

TOYOBO previously launched the "MIRAI JINZAI JUKU" incubator project for nurturing talented human resources of the future. Young staff members, who are selected through an internal recruitment process, plan and develop products by raising funds through the "Makuake" crowdfunding service. Phase 1 launched in November 2018, and this has led to the creation of four products.

Phase 2 commenced in September 2019 with 15 new participants, and new products are currently in preparation for the spring 2020 crowdfunding. We plan to continue this program and nurture human resources who can take on the challenge of creating new businesses, thereby meeting the diverse needs of our customers.

Crowdfunding page for "DRY BLANKET™," a blanket that provides outdoor protection without giving an unpleasant, stuffy feeling

"BizAile®", a multi-function business backpack that's easy on the shoulders

Workshop

TOYOBO REPORT 2020 72

Financial Highlights

Net Sales

(¥ bn)

340.6

349.5

339.0

351.6

351.3

347.8

329.5

331.1

336.7

339.6

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

(FY)

During fiscal 2020, TOYOBO acquired all the shares of two subsidiaries held by Teijin Limited as of October 1st, 2019, and commenced integrated management. As a result, net sales rose by 0.9% year on year to ¥339.6 billion.

Operating Profit and Operating Profit Margin

Operating profit (¥ bn)

7.1

7.2

Operating profit margin (%)

6.7

6.6

6.1

6.0

6.5

5.9

5.2

5.0

23.1

23.1

23.3

23.9

21.7

22.8

20.9

21.0

18.3

17.1

2011

2012

2013

2014

2015

2016

2017

2018

2019 2020

(FY)

In fiscal 2020, performance was affected by production cuts in sectors such as automotive resulting from US-China trade friction, while the spread of the COVID-19 had an impact in 4Q. On the other hand, there was steady sales growth in products offering distinctive features, such as COSMOSHINE SRF®. As a result, operating profit rose by 4.9% year on year to ¥22.8 billion, surpassing our initial target of ¥22.0 billion. The operating profit margin was 6.7%.

Profit (Loss) Attributable to Owners of Parent

Profit (loss) attributable to owners of parent (¥ bn)

Earnings per share (EPS) (yen)

155.1

146.9

13.8

13.0

10.2

9.4

7.6

8.2

8.1

4.2

4.6

5.5

5.2

8.6

9.2

9.1

11.4

10.6

-0.6

2011

2012

2013

2014

2015

2016

2017

2018

2019 2020

(FY)

In fiscal 2019, we recorded a net loss attributable to owners of parent of ¥0.6 billion due to factors including extraordinary losses associated with the fire at the Tsuruga Research and Production Center, while in fiscal 2020, insurance claims payments totaling ¥10.6 billion received in connection with the fire were recorded as an extraordinary profit, leading to a net profit of ¥13.8 billion. EPS was ¥155.1. The EPS increase in 2017 was due to a one-for-ten reverse split of the Company's ordinary shares carried out on October 1st, 2017.

Cash Flow

Cash flows from operating activities (¥ bn)

44.3

Cash flows from investing activities (¥ bn)

Free cash flow (¥ bn)

32.3

26.9

22.4

21.7

21.2

12.7

7.8

5.0

-1.2

-10.6

-14.1

-16.4

-24.3

-39.2

2016

2017

2018

2019

2020

(FY)

In fiscal 2020, cash flows from operating activities rose sharply from a year earlier to an inflow of ¥44.3 billion, due to factors including a recovery in performance and an increase in depreciation and amortization. Cash flows from investing activities rose by ¥14.9 billion year on year to an outflow of ¥39.2 billion, owing to factors including the acquisition of tangible and intangible fixed assets. As a result, there was a substantial recovery in free cash flow, from -¥16.4 billion in the previous fiscal year to an inflow of ¥5.0 billion.

73 TOYOBO REPORT 2020

Interest-Bearing Debt / Shareholder's Equity / Debt-To-Equity Ratio

Interest-bearing debt (¥ bn)

Shareholders' equity (¥ bn)

D/E ratio

180.6

175.1 177.9

165.4

169.2 167.8

176.6

164.8

156.9

145.6

1.05

1.01

0.93

0.98

0.81

2016

2017

2018

2019

2020

(FYE)

Interest-bearing debt rose by ¥10.4 billion year on year to ¥175.1 billion at the close of fiscal 2020, due to factors including the issuance of corporate bonds. Meanwhile, shareholders' equity rose by just ¥1.4 billion year on year to ¥177.9 billion, as although retained earnings grew by a substantial amount, there was a decrease in the valuation difference on available-for-sale securities. This resulted in a D/E ratio of 0.98.

Overview by Region

(Net Sales / Breakdown of Net Sales)

Japan (¥ bn)

Southeast Asia (¥ bn)

Others (¥ bn)

Overseas sales ratio (%)

39.1

39.7

33.5

32.5

36.7

63.5

56.6

62.5

70.2

73.0

29.5

29.2

29.0

30.5

32.3

245.2

233.2

235.1

234.0

229.8

2016

2017

2018

2019

2020

(FY)

In fiscal 2020, the overseas sales ratio was 32.3%, as sales in overseas markets grew in areas including industrial film, enzymes for diagnostic reagents, equipment for VOC emissions treatment and elements.

Capital Expenditure / Depreciation and Amortization

Capital expenditure (¥ bn)

Depreciation and amortization (¥ bn)

36.4

25.5

17.3

18.4

21.3

17.0

15.7

15.8

14.4

14.9

2016

2017

2018

2019

2020

(FY)

In fiscal 2020, capital expenditure totaled ¥36.4 billion due to factors including investment projects in the industrial film business. Depreciation and amortization was ¥17.0 billion.

ROA/ROE

ROA: Return on assets ROE: Return on equity

ROA（%）

ROE（%）

7.5

7.8

6.4

5.8

5.2

5.2

5.4

4.7

4.7

2016

2017

2018

2019

2020

(FY)

ROE was 7.8%, due to an increase in net profit attributable to owners of parent resulting from growth in industrial films and the receipt of insurance claims payments in connection with the fire at the Tsuruga Research and Production Center.

ROA was the same as the previous fiscal year's level, as although operating profit grew, total assets increased due to factors including a rise in fixed assets.

Net Sales / Operating Profit /

Operating Profit Margin by Segment

Films and Functional Polymers (¥ bn)

Industrial Materials (¥ bn)

Healthcare (¥ bn)

Textiles and Trading (¥ bn)

Net Sales

85.5

77.6

68.3

64.6

61.3

27.7

36.4

35.7

34.7

39.4

70.5

63.5

66.5

65.4

59.9

143.4

138.6

148.7

156.2

158.8

2016

2017

2018

2019

2020

(FY)

Operating Profit

2.5

1.1

0.6

0.9

0.6

5.2

5.2

4.7

5.2

5.5

6.3

3.9

4.3

2.6

1.0

12.7

13.7

13.7

16.5

9.9

2016

2017

2018

2019

2020

(FY)

Operating Profit Margin (%)

17.0

14.4 14.514.9 14.1

10.4

8.9

9.2

9.2

8.8

6.9

6.5

6.7

3.9

1.6

1.4

0.9

1.4

0.9

2.9

2016

2017

2018

2019

2020

(FY)

TOYOBO REPORT 2020 74

Non-Financial Highlights

ECO-PARTNER SYSTEMTM Sales Ratio

Total sales of TOYOBO (¥ bn) ECO-PARTNER SYSTEMTM sales (¥ bn) ECO-PARTNER SYSTEMTM sales ratio (%)

26.7

27.8

27.7

30.4

26.2

208.7

196.4

202.9

199.3

199.1

54.6

52.5

56.3

55.2

60.6

2016

2017

2018

2019

2020

(FY)

We have operated the ECO-PARTNER SYSTEMTM since fiscal 2007 as a unified brand of products and technologies that contribute to reducing the Group's environmental impact. To achieve certification under the ECO-PARTNER SYSTEMTM brand, assessments are made for every stage of a product, from raw material through to disposal, and the product is evaluated in terms of its contribution to reducing the Group's environmental footprint from five perspectives including prevention of global warming. Sales in fiscal 2020 totaled ¥60.6 billion, and the ratio to net sales was 30.4%. As we have now achieved our previous target (a ratio to net sales of 30% by fiscal 2031), going forward we will set new targets and further develop the brand.

PRTR Substances Emissions

TOYOBO (tonnes) Group companies (tonnes)

99

95

99

59

60

62

66

74

56

50

2016

2017

2018

2019

2020

(FY)

The Group is actively engaged in managing chemical substances appropriately and reducing environmental emissions, as part of the material issues. The Group's PRTR substances emissions in fiscal 2020 totaled 110 tonnes, a reduction of 4% compared with the previous fiscal year, due to the installation of recovery systems and the like.

GHG Emissions / Reduction Rate vs. FY2014 (%)

Global (thousand t-CO2)

Reduction rate vs. FY2014 (%)

28.1

25.5

20.6

16.7

8.8

1,107

1,011

964

904

873

2016

2017

2018

2019

2020

(FY)

We have set target reductions for greenhouse gas (GHG) emissions of 30% for fiscal 2031 and 80% for fiscal 2051 (both compared with fiscal 2014), and we are promoting reductions in emissions throughout our business activities. In fiscal 2020, CO2 emissions totaled 873,000 tonnes, a 28.1% reduction compared with fiscal 2014, due to the installation of gas cogeneration facilities as well as initiatives to use energy more efficiently.

Environmental Protection Costs

Maintenance costs (¥ bn)

Investment (¥ bn)

2.50

2.34

2.32

1.87

1.50

1.56

1.08

0.72

0.62

0.70

2016

2017

2018

2019

2020

(FY)

As a means of quantitatively evaluating our environmental protection activities, TOYOBO Group implements environmental accounting with reference to the Ministry of the Environment's "Environmental Accounting Guidelines 2005." In fiscal 2020, capital expenditure with the objective of environmental protection totaled ¥1.56 billion. This was mainly due to the installation of gas cogeneration facilities at the Tsuruga Research and Production Center. In addition, maintenance costs totaled ¥2.32 billion. This primarily includes the costs of statutory environmental impact measurements, industrial waste disposal, various inspections, and associated personnel expenses.

75 TOYOBO REPORT 2020

TOYOBO Group

Manufacturing industry average

R&D Expenses (¥ bn)

Ratio of R&D expenses to net sales (%)

1.20

1.20

3.2

3.4

3.3

3.4

1.15

3.1

1.06

1.02

0.75

0.71

0.74

113

111

104

110

117

0.38

0.31

2016

2017

2018

2019

2020

(FY)

2016

2017

2018

2019

2020

(FY)

TOYOBO Group is striving to achieve zero accidents in accordance with the "TOYOBO Group Basic Policy on Health & Safety." We place importance on the frequency rate of lost workday injuries. This was 0.31 in fiscal 2020, inclusive of affiliated businesses at the same business site.

Note: Frequency rate of lost workday injuries refers to the rate of accidents resulting in lost workday injuries per one million hours worked.

We are strengthening our R&D activities in order to generate new value and achieve sustainable growth, and the medium-term management plan incorporates strategic investment in research and development. R&D expenses amounted to ¥11.7 billion in fiscal 2020, and the ratio of R&D expenses to net sales was 3.4%.

Childcare Leave Utilization

No. of women No. of men

50

2

0

1

1

34

27

23

24

19

2016

2017

2018

2019

2020

(FY)

In fiscal 2020, we adopted a new system, offering paid childcare leave for the first five days.

In addition, men who had previously taken little childcare leave were encouraged to do so by their managers, and we also provided information about childcare leave to increase uptake. As a result, utilization of childcare leave among male employees grew significantly to 50 employees.

Number of Directors

No. of inside directors

No. of outside directors

10

10

9

9

9

2

2

3

4

4

7

7

6

6

6

2017

2018

2019

2020

2021

(FY)

Following the Annual General Meeting of Shareholders in June 2019, there were six inside directors and four outside directors (including one female director), and the ratio of outside directors on the Board of Directors was 40%.

TOYOBO REPORT 2020 76

Key Financial Data (FY2010-FY2020)

FY2010

FY2011

FY2012

FY2013

Fiscal year (¥ mn)

Net sales

¥

318,773

¥

340,573

¥

349,505

¥

339,009

Operating profit

11,469

20,890

18,305

17,081

Ordinary profit

7,441

17,043

15,730

15,522

Extraordinary income

365

427

364

2,673

Extraordinary losses

8,061

12,479

5,231

5,420

Profit (loss) attributable to

2,094

4,155

4,587

7,639

owners of parent

Comprehensive profit

-

5,416

9,065

11,097

Assets, liabilities and equity (¥ mn)1

Current assets

¥

157,329

¥

172,001

¥

177,735

¥

184,739

Non-current assets

281,110

271,515

260,105

262,707

Current liabilities

163,554

163,444

162,850

164,831

Non-current liabilities

143,787

130,299

127,267

127,093

Net assets

131,097

149,773

147,724

155,522

Total shareholders' equity

107,095

125,770

130,572

138,024

Total assets

438,439

443,516

437,841

447,445

Interests-bearing debt

170,963

151,804

154,888

159,430

Cash flow (¥ mn)

Cash flows from operating activities

¥

29,024

¥

33,714

¥

14,192

¥

30,354

Cash flows from investing activities

(13,455)

(11,579)

(15,061)

(11,294)

Cash flows from financing activities

(15,832)

(9,915)

(11,531)

(2,636)

Free cash flow

15,547

22,136

(869)

19,060

Cash and cash equivalents at end of period

9,953

21,927

9,481

26,467

Capital expenditure, depreciation and amortization, R&D expenses (¥ mn)

Capital expenditure

¥

15,166

¥

13,931

¥

16,517

¥

18,041

Depreciation

20,419

19,113

19,473

13,246

R&D expenses

10,296

10,634

10,820

9,966

Per share information (¥)2

Net assets per share

¥

143.43

¥

141.85

¥

147.26

¥

155.35

Net profit (loss) per share

2.88

5.49

5.17

8.61

Dividends per share

3.50

3.50

3.50

3.50

Financial indicators

Operating profit to net sales ratio (%)

3.6

6.1

5.2

5.0

Return on equity (%)

2.0

3.6

3.9

5.8

Return on assets (%)

2.6

4.7

4.2

3.8

Price earnings ratio (%)

51.69

21.88

22.81

18.58

Dividend on equity (%)

2.5

2.5

2.4

2.3

Equity ratio (%)

24.4

28.4

29.8

30.8

EBITDA (¥ mn)

31,888

40,003

37,778

30,327

D/E ratio

1.60

1.21

1.19

1.16

Results by business segment (¥ mn)3

Net sales

Films and Functional Polymers

¥

114,928

¥

126,960

¥

138,437

¥

137,394

Industrial Materials

63,157

71,462

71,221

71,891

Healthcare

32,377

31,386

26,580

24,839

Textiles and Trading

88,373

86,832

87,999

79,211

Real Estate and Other Business

19,938

23,933

25,267

25,673

Operating profit

Films and Functional Polymers

6,095

12,528

8,574

7,634

Industrial Materials

2,333

4,911

5,342

5,453

Healthcare

4,023

3,724

4,133

4,170

Textiles and Trading

418

624

1,058

213

Real Estate and Other Business

1,839

2,322

2,478

2,740

Adjustment

(3,239)

(3,219)

(3,280)

(3,128)

77 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

  1. Figures from the year ended March 31st, 2019 onward reflect the application of "Partial Amendments to Accounting Standard for Tax Effect Accounting", and these accounting standards are applied retrospectively to the indicators, etc. for the year ended March 31st, 2018.
  2. By resolution of the 159th Annual General Meeting of Shareholders held on June 28th, 2017, we carried out a one-for-ten reverse split of the Company's ordinary shares, effective October 1st, 2017. In addition, we amended the number of shares constituting one unit from 1,000 to 100, as of the same date.
  3. From the year ended March 31st, 2015, the AP business was moved from Films & Functional Polymers to Industrial Materials. From the year ended March 31st, 2017, the AC business was moved from Industrial Materials to Healthcare, and the AP business was moved from Industrial Materials to Textiles & Trading.

FY2014

FY2015

FY2016

FY2017

FY2018

FY2019

FY2020

¥ 351,577

¥ 351,279

¥

347,763

¥ 329,487

¥ 331,148

¥ 336,698

¥ 339,607

21,006

20,580

23,123

23,332

23,923

21,727

22,794

18,426

16,257

20,393

20,650

20,415

17,788

18,035

595

1,160

702

469

11,492

1,519

11,206

5,151

5,101

4,871

7,179

13,683

19,204

9,525

8,154

8,117

10,150

9,444

13,044

(603)

13,774

12,988

18,182

2,147

13,519

15,611

(467)

4,437

¥ 184,630

¥ 196,607

¥

186,633

¥ 196,293

¥ 186,571

¥ 193,125

¥ 206,416

271,625

269,202

257,954

254,497

258,924

267,922

282,458

160,582

146,250

130,690

136,865

125,110

131,768

122,321

150,558

158,472

153,795

143,016

135,870

148,053

183,916

145,115

161,087

160,101

170,910

184,515

181,226

182,636

142,310

157,988

156,915

167,773

180,561

176,585

177,890

456,256

465,809

444,587

450,790

445,495

461,047

488,874

170,721

177,085

165,358

169,230

145,594

164,769

175,139

¥ 23,927

¥ 20,107

¥

32,337

¥ 26,872

¥ 22,353

¥ 7,838

¥ 44,255

(22,218)

(20,089)

(10,636)

(14,132)

(1,174)

(24,286)

(39,216)

(10,839)

797

(21,384)

(324)

(27,831)

12,608

(1,805)

1,709

17

21,701

12,740

21,178

(16,448)

5,040

19,177

20,389

20,101

32,179

25,857

22,167

25,084

¥ 20,074

¥ 17,491

¥

17,336

¥ 18,360

¥ 21,259

¥ 25,512

¥ 36,445

14,038

14,916

14,434

14,939

15,666

15,823

17,005

10,474

10,819

11,266

11,114

10,402

11,022

11,690

¥ 160.28

¥ 177.95

¥

176.75

¥ 188.98

¥ 2,034.04

¥ 1,989.29

¥ 2,003.01

9.18

9.14

11.43

10.64

146.93

(6.80)

155.12

3.50

3.50

3.50

3.50

40.00

40.00

40.00

6.0

5.9

6.6

7.1

7.2

6.5

6.7

5.8

5.4

6.4

5.8

7.5

(0.3)

7.8

4.6

4.4

5.2

5.2

5.4

4.7

4.7

17.65

17.72

14.78

18.14

14.29

-

7.37

2.2

2.1

2.0

1.9

2.0

2.0

2.0

31.2

33.9

35.3

37.2

40.5

38.3

36.4

35,044

35,496

37,557

38,271

39,589

37,550

39,799

1.20

1.12

1.05

1.01

0.81

0.93

0.98

¥ 148,000

¥ 146,029

¥

143,398

¥ 138,574

¥ 148,667

¥ 156,241

¥ 158,833

71,704

71,520

70,522

59,925

63,454

66,540

65,405

27,344

28,777

27,723

36,423

35,723

34,675

39,412

79,089

85,093

85,486

77,552

68,317

64,585

61,328

25,440

19,860

20,634

17,013

14,987

14,657

14,629

7,794

6,988

9,920

12,747

13,713

13,727

16,541

5,501

6,601

6,288

3,875

4,262

2,620

1,035

5,140

5,042

4,726

5,242

5,179

5,170

5,547

2,952

2,334

2,500

1,066

645

914

561

2,732

2,630

2,841

3,344

2,820

2,233

2,623

(3,113)

(3,016)

(3,152)

(2,941)

(2,694)

(2,936)

(3,512)

TOYOBO REPORT 2020 78

Consolidated Balance Sheets

(¥ mn)

FY2019

FY2020

Assets

Current assets

Cash and deposits

22,318

25,247

Notes and accounts receivable - trade

81,909

85,345

Electronically recorded monetary claims - operating

3,881

8,208

Merchandise and finished goods

45,849

49,150

Work in process

13,704

12,750

Raw materials and supplies

17,247

18,728

Other

8,417

7,141

Allowance for doubtful accounts

(199)

(154)

Total current assets

193,125

206,416

Non-current assets

Property, plant and equipment

Buildings and structures, net

50,166

52,746

Machinery, equipment and vehicles, net

43,163

43,343

Land

98,199

97,055

Construction in progress

11,335

29,876

Other, net

5,613

8,459

Total property, plant and equipment

208,476

231,478

Intangible assets

Other

3,654

4,641

Total intangible assets

3,654

4,641

Investments and other assets

Investment securities

29,745

20,916

Deferred tax assets

17,276

17,977

Other

9,462

8,203

Allowance for doubtful accounts

(691)

(757)

Total investments and other assets

55,792

46,339

Total non-current assets

267,922

282,458

Total assets

461,047

488,874

79 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

(¥ mn)

FY2019

FY2020

Liabilities

Current liabilities

Notes and accounts payable - trade

42,736

41,659

Electronically recorded obligations - operating

2,036

8,357

Short-term borrowings

41,882

32,027

Current portion of bonds payable

10,000

-

Current portion of long-term borrowings

12,433

8,510

Provision for bonuses

4,128

4,366

Other

18,553

27,403

Total current liabilities

131,768

122,321

Non-current liabilities

Bonds payable

30,000

55,000

Long-term borrowings

69,009

75,851

Deferred tax liabilities for land revaluation

21,277

21,277

Provision for retirement benefits for directors (and other officers)

233

247

Provision for environmental measures

419

331

Retirement benefit liability

18,236

21,613

Other

8,879

9,598

Total non-current liabilities

148,053

183,916

Total liabilities

279,821

306,238

Net assets

Shareholders' equity

Share capital

51,730

51,730

Capital surplus

32,206

32,200

Retained earnings

51,858

61,929

Treasury shares

(415)

(350)

Total shareholders' equity

135,378

145,509

Accumulated other comprehensive income

Valuation difference on available-for-sale securities

9,071

4,013

Deferred gains or losses on hedges

(33)

(8)

Revaluation reserve for land

44,483

44,457

Foreign currency translation adjustment

(10,277)

(11,954)

Remeasurements of defined benefit plans

(2,038)

(4,128)

Total accumulated other comprehensive income

41,206

32,381

Non-controlling interests

4,641

4,746

Total net assets

181,226

182,636

Total liabilities and net assets

461,047

488,874

TOYOBO REPORT 2020 80

Consolidated Statements of Income

(¥ mn)

FY2019

FY2020

Net sales

336,698

339,607

Cost of sales

255,634

255,140

Gross profit

81,064

84,467

Selling, general and administrative expenses

59,337

61,673

Operating profit

21,727

22,794

Non-operating income

Dividend income

742

650

Share of profit of entities accounted for using equity method

471

469

Other

1,779

2,211

Total non-operating income

2,992

3,329

Non-operating expenses

Interest expenses

1,305

1,369

Salaries paid to dispatched employees

1,014

859

Loss on suspension of production

1,079

947

Other

3,533

4,914

Total non-operating expenses

6,931

8,089

Ordinary profit

17,788

18,035

Extraordinary income

Gain on sales of investment securities

198

448

Gain on bargain purchase

175

65

Insurance claim income

306

10,647

National subsidies

607

-

Other

233

46

Total extraordinary income

1,519

11,206

Extraordinary losses

Impairment loss

32

2,397

Loss on fire

13,822

3,112

Loss on disposal of non-current assets

1,905

3,979

Loss on tax purpose reduction entry of non-current assets

607

-

Loss on sales of shares of subsidiaries and associates

1,873

-

Other

965

37

Total extraordinary losses

19,204

9,525

Profit before income taxes

102

19,716

Income taxes - current

2,907

5,587

Income taxes - deferred

(1,994)

819

Total income taxes

913

6,406

Profit (loss)

(810)

13,310

Loss attributable to non-controlling interests

(207)

(464)

Profit (loss) attributable to owners of parent

(603)

13,774

81 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

Consolidate Statements of

Comprehensive Income

(¥ mn)

FY2019

FY2020

Profit (loss)

(810)

13,310

Other comprehensive income

Valuation difference on available-for-sale securities

1,035

(5,052)

Deferred gains or losses on hedges

16

25

Revaluation reserve for land

-

-

Foreign currency translation adjustment

(123)

(1,705)

Remeasurements of defined benefit plans, net of tax

(413)

(2,089)

Share of other comprehensive income of entities accounted for using equity method

(171)

(52)

Total other comprehensive income

343

(8,873)

Comprehensive income

(467)

4,437

Comprehensive income attributable to

Comprehensive income attributable to owners of parent

(298)

4,974

Comprehensive income attributable to non-controlling interests

(169)

(538)

TOYOBO REPORT 2020 82

Consolidated Statements of Cash Flows

(¥ mn)

FY2019

FY2020

Cash flows from operating activities

Profit before income taxes

102

19,716

Depreciation

15,823

17,005

Increase (decrease) in allowance for doubtful accounts

101

48

Increase (decrease) in retirement benefit liability

(671)

230

Interest and dividend income

(863)

(791)

Interest expenses

1,305

1,369

Share of loss (profit) of entities accounted for using equity method

(471)

(469)

Impairment loss

32

2,397

Loss (gain) on sales and disposal of property, plant and equipment, net

1,902

3,963

Loss (gain) on sales and valuation of investment securities

(87)

(448)

Loss (gain) on sales of shares of subsidiaries and associates

1,873

-

Insurance claim income

(306)

(10,647)

Loss due to fire

13,822

3,112

Decrease (increase) in trade receivables

(4,562)

(2,005)

Decrease (increase) in inventories

(7,098)

1,678

Increase (decrease) in trade payables

603

3,367

Decrease (increase) in retirement benefit asset

1,452

142

Other, net

(1,116)

552

Subtotal

21,843

39,219

Payments for Loss due to fire

(8,029)

(4,147)

Payments for loss on litigation

(255)

-

Income taxes (paid) refund

(6,027)

(1,464)

Proceeds from insurance income

306

10,647

Net cash provided by (used in) operating activities

7,838

44,255

Cash flows from investing activities

Purchase of property, plant and equipment and intangible assets

(24,235)

(30,858)

Proceeds from sales of property, plant and equipment and intangible assets

529

1,344

Purchase of shares of subsidiaries resulting in change in scope of consolidation

-

(8,797)

Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation

425

-

Proceeds from sales of shares of subsidiaries and associates

475

-

Collection of long-term loans receivable

33

903

Long-term loan advances

(1,940)

(117)

Interest and dividends received

944

810

Other, net

(517)

(2,500)

Net cash provided by (used in) investing activities

(24,286)

(39,216)

83 TOYOBO REPORT 2020

Value Creation

Value Creation

The Basis of

Overview of

Vision & Policy

Strategy

Value Creation

FY2020

(¥ mn)

FY2019

FY2020

Cash flows from financing activities

Net increase (decrease) in short-term borrowings

8,719

(13,498)

Proceeds from long-term borrowings

23,316

14,595

Repayments of long-term borrowings

(24,105)

(12,460)

Proceeds from issuance of bonds

10,000

25,000

Redemption of bonds

-

(10,000)

Purchase of treasury shares

(5)

(3)

Interest paid

(1,307)

(1,376)

Dividends paid

(3,550)

(3,551)

Dividends paid to non-controlling interests

(7)

(25)

Other, net

(453)

(487)

Net cash provided by (used in) financing activities

12,608

(1,805)

Effect of exchange rate change on cash and cash equivalents

(106)

(621)

Net increase (decrease) in cash and cash equivalents

(3,945)

2,613

Cash and cash equivalents at beginning of period

25,857

22,167

Increase (decrease) in cash and cash equivalents resulting from

256

303

change in scope of consolidation

Cash and cash equivalents at end of period

22,167

25,084

TOYOBO REPORT 2020 84

Investor Information

(As of March 31, 2020)

Stock Listing

Tokyo

Stock Code

3101

Transfer Agent

Sumitomo Mitsui Trust Bank, Ltd.

1-4-1, Marunouchi, Chiyoda-ku,

Tokyo 100-8233, Japan

Independent Auditors

KPMG AZSA LLC

3-6-5,Kawara-machi,Chuo-ku,

Osaka 541-0048, Japan

Common Stock

Authorized: 200,000,000 shares

Issued: 89,048,792 shares

Paid-in Capital

¥51,730 million

Number of

Shareholders

59,813

General Shareholders'

Held in June every year

Meeting

Number of Shares

100

Constituting One Unit

Composition of Shareholders

Other domestic

Securities companies

companies

2.81%

5.13%

Overseas companies

and others

21.11%

Number of

Shareholders

Financial

59,813

institutions

40.59%

Individuals and others

30.36%

Major Shareholders

Number of shares held (thousands)

Percentage of voting rights (%)

Japan Trustee Services Bank, Ltd. (Trust Account)

7,610

8.57

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

7,587

8.54

National Mutual Insurance Federation of Agricultural Cooperatives

3,558

4.01

Nippon Life Insurance Company

1,750

1.97

Toyukai (Contractor Share Holding)

1,741

1.96

Japan Trustee Services Bank, Ltd. (Trust Account 9)

1,681

1.89

JP MORGAN CHASE BANK 385151

1,675

1.89

TOYOBO Employees Stockholders' Association

1,669

1.88

Japan Trustee Services Bank, Ltd. (Trust Account 5)

1,585

1.79

DFA INTL SMALL CAP VALUE PORTFOLIO

1,462

1.65

Stock Prices

Highest/lowest stock prices for the past five years

FY

2016

2017

2018

2019

2020

Highest (¥)

216

211

2,249 (218)

2,164

1,684

Lowest (¥)

140

155

1,900 (184)

1,386

903

  1. Stock price quotations are from the Tokyo Stock Exchange (First Section).
  2. The highest and lowest stock prices shown for fiscal 2018 are figures following the share consolidation. Figures in parentheses show pre-share consolidation amounts.

85 TOYOBO REPORT 2020

Corporate Data

(As of March 31, 2020)

Head Office

2-8, Dojima Hama 2-chome,Kita-ku, Osaka 530-8230, Japan

Telephone: +81-6-6348-3111

Established

May 1882

Number of Employees

3,181 (Nonconsolidated) / 10,073 (Consolidated)

Branches

Tokyo Branch

Nagoya Branch

Tsuruga Research and

Toyama Center

Production Center

Inuyama Plant

Tokyo Branch

Tsuruga Research and Production Center

Iwakuni Production Center

Takasago Plant

Nagoya Branch

Iwakuni

Research Center

Toyama Center

Production Center

Head Office

Research Center

Takasago Plant

Inuyama Plant

Overseas

TOYOBO (SHANGHAI) CO., LTD.

TOYOBO U.S.A., INC.

TOYOBO (THAILAND) CO., LTD.

TOYOBO CHEMICALS EUROPE GmbH

TOYOBO DO BRAZIL PARTICIPACOES LTDA.

TOYOBO Group's Business Locations around the Globe

Germany

United States

Spain

China

South Korea

Japan

India

Hong Kong

Taiwan

Mexico

Saudi Arabia

Thailand

El Salvador

Malaysia

Indonesia

Brazil

External Recognition TOYOBO is listed on the following SRI indices, as of March 2020.

  • MSCI Japan Empowering Women Index (WIN)
  • SOMPO Sustainability Index

THE INCLUSION OF TOYOBO CO., LTD. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS,

TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP,

ENDORSEMENT OR PROMOTION OF TOYOBO CO., LTD. BY MSCI OR ANY OF ITS AFFILIATES. THE

MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND

LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

TOYOBO REPORT 2020 86

TOYOBO CO., LTD.

2-8, Dojima Hama 2-chome,Kita-ku, Osaka 530-8230, Japan Telephone: +81-6-6348-3111

URL: https://www.toyobo-global.com/

Corporate Sustainability Department Sustainability Planning Group

Telephone: +81-6-6348-3046

E-mail: sustainability@toyobo.jp

Disclaimer

This report contains statements related to the future performance of the TOYOBO Group. The reader should bear in mind that these statements are not guarantees of future performance, as they assume various risks and uncertainties. Furthermore, the purpose of this report is to provide information, and while such information could be referred to when making investment decisions, the report is not intended to encourage investment in the Company.

TOYOBO REPORT 2020

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Toyobo Co. Ltd. published this content on 01 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 August 2020 15:34:23 UTC