TS TECH : Integrated Report 2023

2023

TS TECH

Integrated Report

The automobile industry is in the midst of a major transformation. The conventional concept of an automobile

as a means of transport is changing,

requiring new value for the time spent in the cabin space of vehicles. What can TS TECH do at such a time?

The value of our existence lies in the TS TECH Philosophy, which doesn't change over time.

As "A company dedicated to realizing people's potential, a company sincerely appreciated by all,"

we have always pursued products that bring a smile to customers' faces by making

the most of the abilities of each and every employee.

The value we create will always keep changing

as we continue to deliver excitement like never before to the world, but the essence of who we are will never change.

We will continue meeting the challenge of endless possibilities to make the mobility of the future freer and more enjoyable.

Bringing joy to society through the power of people

TS TECH Integrated Report 2023

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TS TECH Philosophy

Vision Statement

A company dedicated to realizing

people's potential

A company sincerely appreciated by all

Mission Statement

We shall provide comfortable,

high-quality products at competitive prices

to our customers worldwide, always pursuing the infinite possibilities in manufacturing.

Operational Directives

• We should make our workplace a vibrant one, valuing consensus and communication.
• Work should be done in accordance with the circumstances, with importance placed on time and priorities.
• We must always challenge ourselves to create new value by leveraging our passion and know-how.
• Each of us should always persevere to make our individual vision a reality.

INDEX

02	TS TECH Philosophy	ESG Management
03	Index	38	Working to Build a Sustainable World
04	About TS TECH	39	Information Disclosure Based on TCFD
			Recommendations
Our Group's Envisioned Future	42	Environmental Initiatives
06	Message from the President	46	Initiatives for Respecting Human Rights
47	Supply Chain Initiatives
10	2030 Vision
50	Human Resources Strategy
12	Identified Material Issues and 2030 Targets
14	Review of the 14th Medium-Term	52	Corporate Governance
60	Messages from Outside Directors
	Management Plan
16	Outline of the 15th Medium-Term
	Management Plan	Fact Book
18	Financial Strategies	64	Index
Value Creation Story	65	Financial Reporting
122	Financial/Non-Financial Information
22	Value Creation Process
24	Corporate Development and Engineering	128	Corporate Data
	Officer Interview	129	On the Publication of TS TECH Integrated
28	TS TECH's Value Chain
	Report 2023
36	Stakeholder Engagement

Editorial Policy

About the Report's Formats

Scope of the Report

Reference Guidelines

The TS TECH Group has been issuing the "TS TECH Report," an integrated report that includes both financial and non-financial information, since 2012, and changed its name to the "TS TECH Integrated Report" in fiscal 2021. In this report, we will continue to introduce the Group's stance as an enterprise and the efforts it is making to contribute to sustainability in the course of its business in order to be a company sincerely appreciated by all and whose presence is valued by all of its stakeholders.

Integrated Report

2023TS TECH

Integrated Report

TS TECH Website

Non-Financial Information

CSR Activities

Provides qualitative and quantitative information related to environmental, social, and governance (ESG) factors. https://www.tstech.co.jp/english/csr/

Financial Information

IR Information

Provides consolidated financial summaries, results announcements, etc. https://www.tstech.co.jp/english/ir/

While the report is based on the consolidated group (TS TECH Co., Ltd. and its domestic and overseas subsidiaries and affiliates), some data regarding environmental and social initiatives, etc., may pertain to aggregate results for the non-consolidated company in Japan. Cases in which the scope of aggregation differs will be specified in the text.

About the Report's Designations

"TS TECH Group" (the Group) signifies the consolidated group, while "TS TECH" (the company) signifies the non-consolidated company in Japan.

Term Covered

Fiscal 2023 (April 1, 2022-March 31, 2023)

Note: Select activities from before or after this term may be included.

• ISO 26000:2010 standard, International Organization for Standardization (ISO)
• International Integrated Reporting Framework, IFRS Foundation
• Guidance for Collaborative Value Creation 2.0, Ministry of Economy, Trade and Industry (METI) of Japan
• Global Reporting Initiative (GRI) Sustainability Reporting Standards, etc.

Disclaimer

This report contains forward-looking statements from TS TECH Co., Ltd. pertaining to plans, forecasts, strategies, and results. These forward-looking statements are based on currently available information.

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About TS TECH

TS TECH has been developing and producing automotive interior components for over 60 years since the company was established in 1960.

We have continued to grow by leveraging the strength of our technologies and know-how cultivated over many years and our global network spanning 13 countries, supplying a variety of products, mainly automobile seats and door trims.

Major

product

lines

Automobile seats

Revenue					409.2 billion yen (Fiscal 2023)
(Consolidated)
						Motorcycles 1.9%
						Other businesses 4.6%
Interior							Asia and	Japan
components							Europe
9.2%							9.2%	19.4%
							China
Seats			By business	27.0% By segment
84.3%								The Americas
						Automobiles
							44.4%
		93.5%

Chairs for medical use

Motorcycle seats

Door trims

Number of

Employees

(Consolidated) 15,172

Number of

Sites 74

sites operated by 45 companies in 13 countries

1960

Established Tokyo Seat Co., Ltd. Took over the motorcycle seat business from predecessor

1960Teito Fuhaku Kogyo Corporation

1963

Began producing

automobile seats 1970

1977

Expanded operations

to North America1980

1990

	1996
	Expanded operations to South America
	1997
1994	Changed company name to TS TECH Co., Ltd.
1999		2001
Expanded
operations	Expanded		Expanded operations
to Asia		2000
operations to Europe	to China

2007

Stock listed on the

First Section* of the 2010	2020
Tokyo Stock Exchange TS TECH's 50th anniversary
2010

* Shifted to the Prime Market in April 2022

Assuring Quality

Pursuing Comfort

Honda Civic Seat Launched 1995

Establishing a Strong

Creating New Value

The seats for the original Honda Civic could be considered the starting point for TS TECH's manufacture of automobile seats. There were frequent issues such as tearing of seams in the outer upholstery and deformation of seat frames when sat on by people with very large physiques, as they were designed with Japanese people only in mind at the time. The system we established at that time to facilitate the immediate sharing of quality issues among departments and quick improvements is still in place today. We have turned this rough start into a legacy of a strong commitment to the perfection of quality.

Seat for the original Honda Civic Launched 1972

TS TECH continues to pursue comfortable seats that prevent fatigue by translating subjective judgments of comfort and fatigue, which vary by person, into quantifiable figures and conducting repeated research based on ergonomics. This approach is reflected in our unique theory of a comfortable posture.

Honda Odyssey Seat

Launched 2013

The seat bottom tilts upward as the backrest is lowered to close in on the perfect posture for maximum comfort.

The first use of a mechanism seat made it possible for smaller drivers to adjust to a more comfortable driving position.

Profit Structure

As business has expanded, we have been severely impacted by changes in the external environment, including a global financial crisis and natural disasters in different countries.

TS TECH has streamlined development and manufacturing through production line automation and other technologies. This has enabled our company to withstand external changes, laying the foundation for the current highly profitable structure of the TS TECH Group.

Automated welding equipment

As the automotive industry enters a period of major transformation, the functions and value demanded of automobiles are also undergoing great change. Against this backdrop, TS TECH will not simply focus on developing seats and doors as single components but also aim to become an interior system supplier that can coordinate an entire automobile cabin space. We will work to create new value by leveraging corporate partnerships and joint development projects.

Health Care Seat

The seat senses the posture of the occupant and detects the optimal position for each individual.

The built-in air device relaxes the muscles and provides postural support from the pelvis.

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Message from the President

Realizing ESG management by providing new value that delivers excitement to all stakeholders worldwide

Masanari Yasuda

President and Representative Director

Review of the 14th Medium-Term

Management Plan

During the three years of our 14th Medium-Term Management Plan1 (fiscal 2021-2023), we worked on various measures to drive further business growth and build a strong corporate foundation. We focused on two approaches: "evolution for business growth" from a proactive perspective, and "stronger business operations structure to support evolution" from a protective perspective. The 14th Medium-Term Management Plan played an important role as the first medium-term plan on the road to achieving our 2030 Vision.

We found ourselves in an extremely challenging business environment due to the COVID-19 pandemic, which broke out just before we launched the plan. The resulting parts shortages, along with soaring energy and resource prices, created major profitability issues for us. However, rather than being defeated, we maximized the investment of management resources in areas essential for growth and prepared for further growth. To acquire new customers and new commercial rights, we took various initia- tives. These included the establishment of a new car seat production subsidiary in Poland as a key site for expanding sales to European automakers, and the establishment of a new division to oversee all processes from sales to production. These efforts are now leading to steady expansion of commercial rights.

In the next-generation technology field, which will become a future source of earnings for us, we announced "XR Cabin," which will transform vehicle interiors. What has been mainly a space for sitting during transport is being transformed into a next-generation interior space that can generate excitement. XR Cabin is showing more concretely the value that the TS TECH Group is ready to provide for the future of mobility.

At the same time, we have worked to strengthen our business foundation for sustainable growth. This includes governance reforms2 such as transitioning to "a company with an Audit and Supervisory Committee" structure, and improving the diversity of our Board of Directors. It also includes efforts to identify the Group's material issues,3 challenges we will give priority attention.

Looking toward 2030 with the 15th Medium- Term Management Plan

Under the 15th Medium-Term Management Plan4 (fiscal 2024- 2026), we seek to turn our preparations into results, and to further address issues of profitability and achieve a rapid recovery. During the process of drafting this medium-term plan, we started by clarifying the 2030 Vision, which is one of our objec- tives. We have had many discussions about what needs to be accomplished in three years' time in order to achieve this vision, and how we can quickly rebuild profitability, which is the main challenge. As important issues for profitability improvement, we have identified ways to increase not only profits but also capital efficiency.

2030 Vision Statement

Innovative quality company

-Continued creation of new value-

Performance targets for fiscal 2030

Revenue	Operating	Operating	ROE
income	margin
	10.0%
700 billion yen 68 billion yen	9.7%

In order to resolve these issues and solidify the foundation for achieving our growth objectives by 2030, we have established nine priority strategies in the categories of growth, re- gional, and functional under the 15th Medium-Term Management Plan, which is based on the management policy of realizing ESG management. In order to fully implement all of these priority strategies, we have created the Business Strategy Committee. Comprised of all the company's directors, including outside directors, it will manage and oversee implementation progress for the nine priority strategies. Leveraging thorough discussion and timely decision-making, we will steadily promote various measures despite an increasingly uncertain business environ- ment, striving to deliver greater business growth and improved capital efficiency.

Priority Strategies under the 15th Medium-Term Management Plan

Management policy	Realizing ESG management
Growth		Priority strategy (1)			Priority strategy (2)		Priority strategy (3)
	Securing cabin			Further growth in		A higher share of major
strategies
	coordination capacity			new businesses		customers' products
Regional		Priority strategy (4)			Priority strategy (5)		Priority strategy (6)
	V-shaped recovery in North America		Restructuring the China		Strategic growth in
strategies
		business strategy		new businesses in Europe
Functional		Priority strategy (7)			Priority strategy (8)		Priority strategy (9)
	Supply chain restructuring		Enhancing efforts to develop		Building high efficiency
strategies
		environmental technologies		production structures

1	14th Medium-Term Management Plan	pp. 14-15
2	Governance reforms	pp. 52-59
3	Material issues	pp. 12-13
4	15th Medium-Term Management Plan	pp. 16-17

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Message from the President

Promoting further business growth and higher corporate value

Among the priority strategies of the 15th Medium-Term Management Plan, our three growth strategies are particularly import- ant. These are "securing cabin coordination capacity," "further growth in new businesses," and "a higher share of major cus- tomers' products."

For the first growth strategy, "securing cabin coordination capacity," we are working on the creation of new technologies5 by accelerating research into how people will spend their time in next-generation vehicles, a joint development with other industries and start-up companies, and the training of personnel with software expertise who can prepare complex proposals for vehicle interiors. In order to bring our developed technologies to market as quickly as possible, we will work with our customers in the advanced development procedures, so that our technologies can be adopted for new mass-produced vehicles. At the same time, by working on the development of highly efficient mass production technology6 adapted to new construction and materials, we will build a manufacturing system that can provide our new product technologies at competitive prices.

For the second growth strategy, "further growth in new businesses,"7 we are working on sales activities with the goal of ensuring new business sales account for 30% of consolidated revenue by 2030. During the 14th Medium-Term Management Plan period, our seats were adopted in August 2022 for the Spa- cia Base model released by Suzuki Motor Corporation, and we were also able to steadily increase sales to automobile and motorcycle manufacturers in Europe and the United States. In order to increase this momentum under the 15th Medium-Term Management Plan, we will make the most of technologies that have been well received by customers, and aim to acquire commercial rights for variant models of these products. We will also develop strategic sales activities by strengthening cooperation between each segment and functional division, in an effort led by the New Business Management Division.

Seat production plant in Poland for European automakers

Along with these sales expansion measures, we will also pursue the third growth strategy, "a higher share of major

customers' products,"8 with a focus on the Honda Group. Cur- rently, our products are used for approximately 60% of the seats in vehicles sold by Honda, and our goal is to increase this share to over 70% by 2030. To achieve this, we must secure orders for existing commercial rights and expand sales through new commercial rights. We will work to improve customer satisfaction by creating attractive products, create products jointly with customers from the early development stage, and conduct order development activities by ensuring collaboration across our segments and functional divisions and taking advantage of regional characteristics. We will also work to further increase our share of sales by winning more orders for seat components. This will be done by enhancing development of next-generation standard seat frames and other components, and then striving to acquire commercial rights for the seats themselves.

Regional and functional strategies make up the remaining priority strategies. In terms of regional strategies, we will work to improve profitability in North America, China, and Europe to strengthen our corporate competitiveness. With our functional strategies, we will pursue further business growth by working to strengthen the foundations that support our higher-level strat- egies. These include "supply chain restructuring," "enhancing efforts to develop environmental technologies," and "building high efficiency production structures."

Through proactive growth-related investments based on these priority strategies, we will also address the challenge of improving capital efficiency. In addition to increasing profitabili- ty, we will optimize our capital structure through not only growth-related investments but also proactive shareholder returns in order to move to a cash level that is appropriate for our business scale. During the 15th Medium-Term Management Plan period, the shareholder return policy calls for steady distribution of returns regardless of business performance. We plan to return approximately 50 billion yen to shareholders over three years through regular dividend increases and flexible acquisition of treasury stock. The aim is to achieve a dividend on equity ratio (DOE)* of 3.5% or more by the end of the 15th Medium-Term Management Plan period. We aim to enhance corporate value by driving sustainable business growth with growth-related in- vestments, and by optimizing our capital structure9 based on enhanced shareholder returns, in order to reach a price-to-book ratio (PBR) above 1, as soon as possible.

• Dividend on equity ratio (DOE) = Total dividends / Shareholders' equity (Equity attributable to owners of parent)

Remaining "A company sincerely appreciated by all"

In recent years, it has become increasingly important for companies to address social issues in order to help build a sustainable world. Under the TS TECH Philosophy, which requires us to be a company dedicated to realizing people's potential and one that is sincerely appreciated by all, we have been working to

promote growth for both our company and the broader society. Our mission is to engage in corporate activities that also help resolve social issues. Each of the material issues we are addressing is linked to the UN Sustainable Development Goals, and we are accelerating our efforts to help achieve these SDGs.

In particular, as a company that provides components for vehicles that emit CO₂, we see the response to climate change as one of our most important management issues. In order to help achieve carbon neutrality,10 we are working on a variety of measures in each operational area, including production and product development, with the goal of reducing the Group's CO₂ emissions from business activities to net zero by 2050. Further- more, in order to further reduce CO₂ emissions going forward, we need to take initiatives not only internally but across the entire supply chain,11 which means the cooperation of our business partners is essential. While it would be easy to just issue CO₂ emissions reduction requests to suppliers, we believe that this alone would not lead to significant reductions. Instead, it is important for the Group to demonstrate leadership, and to work together with business partners on efforts such as sharing methods for calculating CO₂ emissions along with specific methods for emissions reduction. Accordingly, we will carry out relevant activities that are both effective and appropriate to the size and capabilities of our individual business partners.

To avoid a situation where initiatives to address these social issues become merely token efforts, we understand that employees and executives must fully understand the importance of these initiatives and be able to implement them independently. We believe that the TS TECH Philosophy12 will be the key to deepening this understanding, as it communicates the fundamental reasons why the Group exists, and its value to society.

One of the principles set out in the TS TECH Philosophy is being "A company dedicated to realizing people's potential." This means we must nurture and value employees, who work hard every day for their own sake and for the sake of the company. They are treated not just as human resources, but as valued human beings. Another principle in our philosophy is being "A company sincerely appreciated by all." This means we must share positive outcomes with employees and all other stakeholders affected by the Group's corporate activities and build relationships of trust with them.

Accordingly, we must ensure that we remain a company that is valued and appreciated by everyone. With more than 15,000 employees worldwide, the TS TECH Group understands that it can only become stronger if every person fully understands this corporate philosophy and puts it into practice, without exception. We ask every employee to carefully consider and understand the TS TECH Philosophy, and then put it into prac- tice, so the Group can grow as a result. To make this a reality, I will share my thoughts and promote a corporate culture that encourages challenge-taking.

In fiscal 2022, we launched an employee engagement survey to serve as an indicator of progress in the effort to further develop individual employee strengths and to encourage challenge-taking. We have set this indicator as a material issue KPI and are working on various measures with the aim of achieving the highest rating of AAA by 2030. I believe that building a relationship of trust between the company and its employees and ensuring that everyone works with a sense of purpose will increase the productivity of the TS TECH Group and become a driving force for creating new value. To achieve this goal, we will create human resource development programs along with the necessary workplace environments. This means striving to create workplaces where the human rights of each individual are respected,13 and every employee can demonstrate their individual personality and play an active role.14 This will extend to various areas including personnel evaluation and compensa- tion, employee welfare benefits, training, and workplace envi- ronments.

We will remain "A company sincerely appreciated by all," which includes not only employees but also all other stakehold- ers. In addition to achieving the targets of the 15th Medium-Term Management Plan and the 2030 Vision, the Group will also strive to achieve sustainable growth together with society in the years that follow.

In closing

Given the increasingly uncertain business environment, continuing to operate our business just as we have in the past would mean losing the ability not only to maintain the status quo but also to create new value, even if we still maintained a solid management foundation. Therefore, it is essential to invest the necessary management resources based on timely decision-making, in order to blaze new trails to future business growth. This means departing from established practices and sometimes moving away from the past. During the period of the 15th Medium-Term Management Plan, we will not relax our reform efforts, but instead strive to become a company sincerely appreciated by all our stakeholders. I hope you are looking forward to this bold fu- ture, and I appreciate your continued support.

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Creation of new technologies

pp. 24-27

10

Achieve carbon neutrality

pp. 39-45

6

Development of highly efficient mass production technology

p. 33

11

Initiatives across the entire supply chain

pp. 47-49

7

Further growth in new businesses

p. 31

12

TS TECH Philosophy

p. 2

8

A higher share of major customers' products

p. 30

13

Human rights are respected

p. 46

9

Optimizing capital structure

pp. 18-21

14

Every employee can demonstrate their individual personality and play an

active role

pp. 50-51

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2030 Vision

The TS TECH Group's Vision Statement-"A company dedicated to realizing people's potential, a company sincerely appreciated by all"-underpins all of its business operations. By providing the world with attractive products even in the evolving mobility society, we will not only achieve our 2030 Vision but also help to build a more sustainable world. In doing so, we will continue to serve as a reassuring presence for all our stakeholders and be a company sincerely appreciated by all.

growth	Vision Statement
A company dedicated to realizing

2030 Vision

Innovative quality company

-Continued creation of new value-

Providing innovative, attractive products

in pursuit of safe,

comfortable vehicle interiors in the evolving mobility society

Business	people's potential
A company sincerely appreciated by all
Mission Statement
We shall provide comfortable,
high-quality products at competitive prices
	to our customers worldwide,
	always pursuing the infinite	15th Medium-Term
	possibilities in manufacturing.
		Management Plan

Realizing ESG management

16th Medium-Term Management Plan

Fiscal 2030 targets

Revenue:	700 billion yen
Operating income:	68 billion yen
Operating margin:	9.7%
ROE:	10.0%

13th Medium-Term

Management Plan

Building a foundation for ESG management

Fiscal 2020 results

Revenue: 359.6 billion yen Operating income: 26.3 billion yen

Operating margin:	7.3%
ROE:	5.9%

14th Medium-Term

Management Plan

Corporate evolution through

ESG management

Fiscal 2023 results

Revenue: 409.2 billion yen Operating income: 15.2 billion yen

Operating margin:	3.7%
ROE:	1.8%

Fiscal 2026 targets

Revenue:	480 billion yen
Operating income:	44 billion yen
Operating margin:	9.2%
ROE:	8.5%
DOE*:	3.5%

		15th Medium-Term Management Plan Fiscal 2024-2026	▶ pp. 16-17
Growth		Priority strategy (1)		Priority strategy (2)		Priority strategy (3)
	Securing cabin		Further growth in		A higher share of major
strategies
	coordination capacity		new businesses		customers' products
Regional		Priority strategy (4)		Priority strategy (5)		Priority strategy (6)
			Restructuring the China		Strategic growth in
strategies		V-shaped recovery in North America
		business strategy		new businesses in Europe
Functional		Priority strategy (7)		Priority strategy (8)		Priority strategy (9)
			Enhancing efforts to develop		Building high efficiency
strategies		Supply chain restructuring
		environmental technologies		production structures

Human resources and financial strategies/Earning a reputation as a quality leader/

Promoting and firmly establishing sustainability

ESG management	Identifying material issues	▶ pp. 12-13
Setting KPIs and targets for 2030

2023 2026

* Dividend on equity ratio (DOE) = Total dividends / Shareholders' equity (Equity attributable to owners of parent)

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Achieving KPIs and targets for 2030

20292030

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Identified Material Issues and 2030 Targets

The TS TECH Group has established sustainability targets for 2030 with indices indicating the vision the Group aims to achieve for itself by that year. We will address key material issues (materiality) in a priority manner to help build a sustainable world. Under our 15th Medium-Term Management Plan (fiscal 2024-2026), we will execute our

Procedure for Identifying Material Issues

management policy of "realizing ESG management," moving forward boldly to achieve our targets.

TS TECH Materiality Identification Policy

• Issues that are material to the vision statement under the TS TECH Philosophy: "A company dedicated to realizing people's potential" and "A company sincerely appreciated by all"
• Issues that are highly material to the United Nations Sustainable Development Goals (SDGs)
• Issues that are material to contribute to a sustainable world

Surveys

Identification and organization of issues

Prioritizing of issues

Consultations with outside experts

Selection of materiality

Approval by management

Based on international standards and guidelines such as the GRI Standards and the core subjects of ISO 26000, we studied identification methods.

We identified the risks and opportunities based on the Group's business environment and ultimately identified and organized the relevant issues.

Issues were evaluated and prioritized in terms of their importance to stakeholders and their importance to the TS TECH Group.

We exchanged opinions with outside experts on the issues identified to verify their scope and validity.

Out of 24 items, eight material issues were selected to be addressed by the TS TECH Group.

Following approval by the Executive Committee, the eight material issues were submitted to the Board of Directors for discussion and approved.

Category

Related

Material issues

Vision

Materiality

Materiality KPIs

SDGs

Providing attractive,

• We will create new value that exceeds

Developing attractive,

Innovative technology development

expenses as a percentage of R&D

Society

innovative technologies

innovative new products

the expectations of customers and help

expenses

and technologies that

to build safe, secure, and prosperous

exceed society's

societies by providing attractive,

Improving product

Seat supplier IQS rating*1

expectations

high-quality automobile interiors.

quality

• Aiming for a decarbonized society, we

Responding to

CO₂ emissions reduction rate*2

climate change

will work to contribute to reducing our

environmental impact by pursuing

energy savings and effective use of

Reducing impact

resources, starting with product design

Waste reduction rate*3

and continuing throughout every stage

by practicing

Environment

of the product life cycle.

Recycling and effectively

environmentally friendly

• We will strive to ensure that all of

using resources

Water intake reduction rate and

manufacturing to build

our employees have a high level of

a sustainable world

environmental impact from

environmental awareness, while

wastewater*4

working to protect the environment

and conserve ecosystems based on the

Harmoniously

concept of "giving greenery back to

Establishment of the TS TECH Fund

co-existing

the earth."

(matching gift program)

with nature

Engagement rating*5

• We will respect the human rights of

Respecting human

all stakeholders and offer rewarding

rights

working environments in which each and

Supplier Sustainability Guidelines

Corporate

Respecting diversity

every employee makes the most of their

compliance rate*6

diverse talents.

and developing

foundation

structures to maximize

• We will engage in diversity-positive,

Reforming work styles

individual abilities

highly transparent management to

Percentage of management positions

to make the most of

fulfill our corporate social responsibility

held by diverse human resources*7

diversity

(CSR), achieve sustainable business

growth, and enhance corporate value.

Strengthening

Corporate Governance Code

governance

compliance rate

*1 Rating awarded in the Initial Quality Study (IQS) conducted by J.D. Power Japan, Inc. The study looks at new car buyers and their experiences with any problems and calculates the number of problems indicated per 100 vehicles. The lower the number, the higher the quality.

*2 CO₂ emissions reduction rate (Scope 1 and 2) resulting from the Group's business activities

*3 Rate of reduction of waste (excluding residue, sludge, etc.) resulting from the Group's manufacturing activities

14th Medium-Term		15th Medium-Term		2030 targets			Main measures
Management Plan results		Management Plan targets
vs. FY2021 +2.6%		vs. FY2021 +3%		vs. FY2021 +10%		• Proactively investing in original technologies, including
			biosensing and environmental technologies
						• Enhancing product quality with higher-precision
8.8P		7.0P		2.0P (stable high levels)		verification tools
			• Constructing a framework enabling ongoing cultivation
						of quality human resources worldwide
vs. FY2020 -16%		vs. FY2020 -25%		vs. FY2020 -50%		• Improving development and manufacturing efficiency
						• Developing and promoting products that use plant-based
						raw materials, etc.	pp. 24-27
vs. FY2020 -16%		vs. FY2020 -25%		vs. FY2020 -50%		• Analyzing and responding to risks and opportunities
			based on the recommendations of the TCFD
(Total)
					pp. 39-41
						• Conducting energy management based on ISO 14001/
vs. FY2020 -13%				vs. FY2020 -50%		ISO 50001
	vs. FY2020 -15%			• Installing energy-saving and renewable-energy
(Total)			"0" environmental impact		equipment	pp. 42-43
Program survey		Establishing a TS TECH Group		Establishing a TS TECH Group		• Researching and establishing a matching gift program
Study of plans		donation program		donation program
						• Analyzing survey findings individually by department and
C		BB		AAA		identifying priority issues
			• Enhancing the evaluation system and communication
						opportunities		p. 51
97%		100%		100%		• Preparing to expand surveys to verify circumstances of
(Subject: 126 domestic		(Subject: Domestic and		(Subject: Domestic and
			compliance to locations outside Japan	pp. 47-49
suppliers)		international suppliers)		international suppliers)
						• Supporting career development with rank-specific training
32.5%		33.3%		35%		• Helping personnel balance their work and personal lives
						(childbirth, childcare, nursing care)	p. 50
100%		100%		100%		• Pursuing ongoing efforts to prevent corruption

*4 Reduction rate in water intake (amount used) at the Group's production facilities and environmental impact of wastewater resulting from manufacturing activities

*5 The engagement targets look at the company's employees using Link and Motivation Inc.'s Motivation Cloud. The target "AAA" rating is the highest of the 11 ratings. *6 Rate of compliance with the Supplier Sustainability Guidelines among the Group's suppliers (including overseas suppliers)

*7 Percentage of women, mid-career hires, non-Japanese citizens, older employees, and persons with disabilities in management positions

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Review of the 14th Medium-Term Management Plan Fiscal 2021-2023

The 14th Medium-Term Management Plan set out a management policy of "Corporate evolution through ESG management," and during those years we moved forward with efforts to strengthen our corporate structure in

Financial Trend

14th Medium-Term Management Plan

various ESG-related areas that support business growth. We made progress on priority measures, but the extremely challenging business environment caused by the pandemic and material supply shortages left outstanding issues in terms of profitability. We will implement the 15th Medium-Term Management Plan to ensure that all remaining challenges are addressed, such as achieving as yet unattained commercial rights targets in new business areas and remedying the downturn in capital efficiency.

Progress on Priority Measures

◎: Very good ○: Good △: Average

Measure

Evaluation

Notable initiatives

■ Revenue (Billion yen)

(Fiscal 2021-2023)

■ Operating income (Billion yen)

● Operating margin (%)

7.3

4.9

		• Acceleration of development of sensing and other technologies that lead to
		attractive products
		Announcement of next-generation vehicle interior XR Cabin
Commercialization of	◎	• Active incorporation of joint development and other types of open innovation
Capital and business partnership with Imasen Electric Industrial Co., Ltd.
original technologies
	Business partnership with ALPS ALPINE CO., LTD.
		Investment in teTra aviation corp.
		• Application of advanced processing technology in mass production
		Newly established mold manufacturing and technology development bases
		• Steady receipt of orders from major customers for target commercial rights
		through spec proposals that leverage our strengths and enhanced
Expansion of strategic	△	development collaboration

		Fiscal 2020 results	Fiscal 2024 plan
Revenue (Billion yen)	359.6				410
Operating income (Billion yen)	26.3				20
Operating margin	7.3%				4.9%
ROE		5.9%				3.4%
Average	[USD]	108.7				130.0
exchange
[CNY]	15.6				19.0
rate

Evolution for business growth

commercial rights		• Precise selection of target and strategic order development to acquire new
	customers and new commercial rights
		Although the number of new orders increased, the target for final orders received was
		not achieved
		• Streamlining and increased efficiency through allocation reviews and
		restructuring of business operations both in Japan and overseas based on
Optimization of business	○	reorganization of production
UK and Hungary: Reorganization of production hubs
operations structure
	India: Reorganization of automobile and motorcycle businesses
		Mexico: Establishment of trim cover production company
		Poland: Establishment of seat production company
		• Establishment of the Sustainability Committee
		• Identifying material issues and setting KPIs and targets for 2030
Contribution to a sustainable society	◎	• Stronger global CO₂ emissions reduction activities and related
management to help achieve a low-carbon society
		Endorsement of TCFD recommendations and disclosure response
		• Enhancing resource management to achieve a circular society
		• Enhanced know-how and support from the first production base during
		global rollout of new models
Recognition for top quality	△	• Prevention of defects by strengthening verification in the beginning stages
of development
		• Stronger quality control systems at Group and business partner locations
		Impact on income due to quality-related response costs
		• Establishment of a lowest-cost procurement structure by enhancing our
		global procurement system
Strengthening of continuous		• More efficient administrative and indirect operations through active use

Non-Financial Trend

The TS TECH Group measures its ESG quality using an evaluation method based on the Dow Jones Sustainability Indices (DJSI).1

In the 14th Medium-Term Management Plan, our governance reforms, including becoming "a company with an Audit and Supervisory Committee" structure and enhanced disclosure of non-financial items, were all well re- ceived. This meant that we significantly improved our scores in the domains of corporate governance and social reporting. We will continue to move forward with advanced ESG management, which we highlighted as a challenge in the 13th Medium-Term Management Plan (fiscal 2018-2020), as we strive to build an industry-leading corporate structure and deliver sustainable corporate growth.

1 A sustainability-related index that evaluates companies' sustainability from ESG and economic perspectives, published annually by S&P Dow Jones Indices LLC of the United States

2 Indicates the company's position in the industry, with the highest score being 100

3 New item from fiscal 2021, so no score recorded for the 13th Medium-Term Management Plan

DJSI Evaluation (Indicated as a percentile ranking within the auto parts industry*2)

	Corporate
Occupational health & safety (OHS)	governance	Materiality
Corporate citizenship & philanthropy		Risk & crisis management
14th Medium-Term
Management Plan		Codes of business conduct/
Talent attraction & retention			compliance/anti-corruption
			and bribery
Human capital			Policy influence
development
Human rights		13th Medium-Term	Supply chain
		Management Plan	management
Labor practice			Tax strategy
indicators
Social reporting			Cybersecurity*3
Climate strategy			Innovation management
Product stewardship		Product quality & recall management
Operational eco-efficiency		Environmental reporting
	Environmental policy

& management systems

Stronger business operations structure to support evolution

earnings structure	◎	of IT
		• Studying and formulating financial strategies aimed at medium- to
		long-term growth
		• Establishment of a system to promote advancement of diverse
		human resources
		Introduction of referral and return of former employees recruitment
Maximization of employee and	◎	• Implementation and utilization of employee engagement survey
Rating: C
structural efficiency
	Aiming to achieve highest rating of AAA
		• Evolution of our evaluation system to accommodate various work styles
		• Review of our training system for next-generation human
		resource development

Major Initiatives

1. • Endorsement of TCFD recommendations and disclosure response
2. • Enhancing environmental management and CDP initiatives
   • Implementation of employee engagement survey

1. • Expanded the deployment of Supplier Sustainability Guidelines and the scope of surveys about the guidelines

• Transition to "a company with an Audit and Supervisory Committee" structure
• Establishment of the Nomination and Compensation Committee G • Diversification of the Board of Directors (appointment of female
  directors, etc.)
• Establishment of the Sustainability Committee
• Formulation of material issues and setting of 2030 targets

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TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

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Outline of the 15th Medium-Term Management Plan Fiscal 2024-2026

Under the 15th Medium-Term Management Plan, we are first of all focusing on the challenge of recovering profitability as soon as possible, to achieve further growth and deliver on our 2030 Vision. To do this, the plan sets out nine key strategies, comprising growth, regional and functional strategies. We also aim to help to build a sustainable world, as the ESG management initiatives we have been implementing since the 13th Medium-Term Management Plan culminate, and always seek to be a reassuring presence for our stakeholders and "A company sincerely appreciated by all."

Management policy  Realizing ESG management

Financial targets	14th Medium-Term	15th Medium-Term	2030 targets
Management Plan results	Management Plan targets
Revenue (Billion yen)	409.2	480	700
Operating income (Billion yen)	15.2	44	68
Operating margin	3.7%	9.2%	9.7%
ROE	1.8%	8.5%	10.0%

Shareholder returns

Priority strategies	Notable initiatives
	• Creating attractive cabin products and technologies
	Active co-creation activities with companies in other industries
Securing cabin coordination capacity	Research on how people spend time inside a vehicle, focusing on next-generation vehicles

Basic policy	Implementing sustained, stable returns unaffected by business results
Dividends	Stable increase in dividend payments, targeting DOE of 3.5% or more by the end of the 15th Medium-Term Management Plan
Acquisition of treasury stock	Flexible share buyback during the term of the 15th Medium-Term Management Plan amounting to cumulative total of
20 billion yen and appropriate retirement of treasury stock

Growth strategies

	• Enhancing systems and software development capabilities
	Development of electronic control device components such as seat-integrated ECUs
	Training of advanced engineers
	• Strategic acceptance of orders for target commercial rights
	Securing commercial rights for derivative models that incorporate technologies from existing
	ordered models
Further growth in new businesses	Securing orders for advanced development on future models by proposing next-generation
technologies in advance
	• New customer development
	Enhancing joint efforts between individual regions and the head office, centered on the New
	Business Management Division
	• Receiving orders for seat trading rights through regional coordination
	Securing commercial rights in regions where no seat orders have yet been received
A higher share of major customers' products	Building new partnerships and deploying sales activities leveraging them
• Growing orders received for parts commercial rights
	Steadily receiving orders for next-generation shared frames
	Enhancing development to receive orders for light-vehicle frames
	Growing orders received through enhancing our competitive strengths in parts
	• Achieving a reformed corporate structure capable of adapting to

	Materiality KPIs	pp. 12-13
Society		Innovative technology development expenses
	as a percentage of R&D expenses
		Seat supplier IQS rating
		CO₂ emissions reduction rate
Environment		Waste reduction rate
	Water intake reduction rate and environmental
		impact from wastewater
		Establishment of the TS TECH Fund
		(matching gift program)
		Engagement rating
Corporate foundation	Supplier Sustainability Guidelines compliance
rate

Percentage of management positions held by diverse human resources

Corporate Governance Code compliance rate

14th Medium-Term	15th Medium-Term	2030 targets
Management Plan results	Management Plan targets
vs. FY2021 +2.6%	vs. FY2021 +3%	vs. FY2021 +10%
8.8P	7.0P	2.0P (stable high levels)
vs. FY2020 -16%	vs. FY2020 -25%	vs. FY2020 -50%
vs. FY2020 -16%	vs. FY2020 -25%	vs. FY2020 -50%
(Total)
vs. FY2020 -13%	vs. FY2020 -15%	vs. FY2020 -50%
(Total)	"0" environmental impact
Program survey	Establishing a TS TECH	Establishing a TS TECH
Study of plans	Group donation program	Group donation program
C	BB	AAA
97%	100%	100%
(Subject: 126 domestic	(Subject: Domestic and	(Subject: Domestic and
suppliers)	international suppliers)	international suppliers)
32.5%	33.3%	35%
100%	100%	100%

Regional strategies

	production fluctuations
V-shaped recovery in North America	Thorough automation of production line to keep up with irregular production and cost
	increase pressures
	Strengthening cost competitiveness through optimization of specifications, materials,
	and processes
Restructuring the China business strategy	• New initiatives not bound by existing businesses
Building new partnerships aiming to secure new customers
	Expanding use of local manufacturers to lower costs and reduce procurement risks
	• Further business expansion with European automakers
Strategic growth in new businesses in Europe	Sales development with Poland as a key station
New establishment of a trim cover production company with a view to expanding adoption
	of components
	• Toward a sustainable supply chain

Securing cabin coordination capacity
Snapshot of products for next-generation vehicles
Changes in automobiles brought about through technological inno-
[Vehicle interior products]	[Energy-saving products for EVs]
vation will transform the value required of vehicle interiors. In order
• Sound and vibration HMI seat	• Heated seat with rapid
to seize this business opportunity and translate it into further busi-	• Door HMI stealth switch	warm-up blower
• Affordable air conditioning seat
ness growth, it is imperative to be able to coordinate not only seats	• Long slide rail
• Thin rotating mechanism
but the entire cabin, proposing new value to customers and users.	components	[Environmentally responsible
We will work to create products and technologies that, put together,	• Health Care Seat	products]
• Biosensing	• Sustainable seat, etc.
can deliver attractive cabins, utilizing both our accumulated propri-	Proprietary technologies × Active co-creation with companies in other industries
etary technologies and collaboration with companies in other fields.	Creation of attractive cabin products and technologies

Functional strategies

Foundation

Supply chain restructuring	Balancing stability and profitability through risk visualization and efforts to promote
local procurement
	Working with business partners to reduce supply chain CO₂ emissions volume (Scope 3)
	• Evolution of environmental technologies for early commercial use
Enhancing efforts to develop	Establishment of technologies for product applications for biomass materials and eco-friendly
environmental technologies	steel materials
Resource recycling accomplished by selecting materials and designing structures with recycling
	in mind
	• Building a production structure capable of outperforming competitors
Building high efficiency production structures	Continuous evolution of production lines through introduction of digital transformation and AI,
and automation
	Improvement of production management efficiency through system reviews, etc.

Human resources strategies/Financial strategies	pp. 18-21 /Earning a reputation as a quality leader/Promoting and firmly
establishing sustainability

Targeting further business growth

The TS TECH Group has to date achieved steady business growth, serving as a global partner to Honda Motor Co., Ltd. and its affiliates in the Honda Group. In order to achieve further growth, we aim to achieve our 2030 Vision not by securing a higher share of major customers' (Honda Group) business but also by ensuring further growth in new businesses, for instance by acquiring new customers and commercial rights outside the Honda Group.

2030 targets

• Automobile seat share for the Honda Group above 70%
• New business sales accounting for more than 30% of consolidated revenue

Revenue (Billion yen)			700	Percentage
■ Sales to Honda Group
■ Sales of new businesses				of sales
	Growing new	210	30% of
	Percentage
	of sales	480	business sales		revenue
409.2	10% of
revenue		Expanding sales by improving share
377.2	90% of		490	70% of
		revenue
	revenue
FY2023		FY2026		FY2030

End of 14th		End of 15th		Vision
Medium-Term		Medium-Term
Management Plan		Management Plan

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TS TECH Integrated Report 2023

TS TECH Integrated Report 2023

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