Messages from Independent Directors and Auditors

The OSAKI Group established the Purpose in fiscal 2024, with the stated goal of “We create new value for society.” In line with this, the company revised its Mid-Term Management Plan, switching from a five-year rolling plan to a fixed three-year plan. To ensure the execution of this plan, we also undertook a major organizational transformation for the first time in 24 years, shifting from a function-based organization to a divisional structure, and clarified accountability for profits.

As an independent director, entrusted with fiduciary responsibilities and accountability to shareholders, I acknowledge the importance of achieving the target of 9 billion yen in operating income and a 10% ROE in the final year of the Mid-Term Management Plan, which aligns with the company’s 110th anniversary. This goal represents a critical commitment to our shareholders. Moreover, by enhancing portfolio management, I will provide effective oversight of the management team to ensure the progress of profit structure transformation and will make every effort to realize these objectives.

As chairman of the Nomination and Remuneration Committee, I am actively involved in the formulation and execution of the succession plans for the CEO and COO and intend to contribute to the company’s sustainable growth.

The OSAKI Group has notably revised its approach to the Mid-Term Management Plan, maintaining consistent goals over a three-year period rather than adjusting them annually.

The main emphasis is on meeting the targets for operating income and ROE. To enhance accountability for profit and loss, the company has implemented significant organizational changes, shifting to a divisional structure. In recent years, discussions within the Nomination and Remuneration Committee have also driven reforms in the evaluation and compensation systems for directors and executive officers.

The overseas business companies, which account for 30% of consolidated sales, have made progress in their transformations and have started contributing to profits since last year. The goal for the next three years is to improve cash flow and achieve an operating income margin of 8%.

In Japan, preparations for the development and production of second-generation smart meters are progressing well, but it will take some time for the market to fully launch. Achieving the Mid-Term

Management Plan’s objectives will require prioritizing the establishment of the Solutions Business Unit and expanding the market.

While looking to maximize shareholder profits, I also aim to create an environment where employees can work energetically and grow personally, and in which the Company can contribute to society and achieve sustainable development. I also intend to contribute
to corporate governance as an independent director.

The OSAKI Group’s greatest challenge is improving profitability, as generating sufficient profits is essential for making future investments.

To ensure that invested capital consistently generates returns and to enhance capital efficiency, the company will introduce ROIC in fiscal 2024. Efforts are also underway to build a framework that raises awareness of capital efficiency among all employees in their daily work.

Additionally, the company is reducing non-business assets by selling certain fixed assets and decreasing policy-holding shares. In overseas business, active organizational transformation has been implemented to ensure strategic execution, and positive results are beginning to emerge.

The key to the Group’s sustainable increase in corporate value lies in providing value in the decarbonization and Green Transformation (GX) areas. By launching GX consulting and next-generation energy management services, the Company aims to establish a business foundation that will become the pillar of the next phase of growth. This year, the Company consolidated into two business units, with development, sales, and production working together to focus on the solutions business.

To contribute to a sustainable society, I am committed to enhancing synergies within the Group under the “One OSAKI” approach and helping the Company evolve into one that can further enhance the value provided to customers. I will continue my endeavors to contribute as an independent director.

The OSAKI Group has spent the past year redefining its corporate purpose and clarifying the core values important to all employees in pursuit of sustainable growth. A new Philosophy (Purpose) was established: “We create new value for society through visualization of the invisible.” The Company is fully committed to ensuring the success of the Mid-Term Management Plan, which outlines the concrete strategy for realizing this new value.

As an auditor, along with the Board of Auditors, I believe that in addition to fulfilling our statutory duties of “protection,” it is also essential to contribute to the Company’s sustainable growth by providing management with the necessary insights and opinions based on the information gathered through audits.

As an independent auditor, I will contribute to the group’s sustainable growth and enhancement of corporate value by taking an objective stance, gathering information on management challenges through important meetings such as board meetings, interviews with executive officers, and reports from full-time auditors, and by asking direct questions and providing opinions.

I was appointed as an independent auditor in June 2024. My top priority is to deepen my understanding of the Company’s business and organization, and I have found that there are many opportunities for independent directors and auditors to receive information, such as regular business report meetings, and the environment encourages active participation from independent directors and auditors.

In the Mid-Term Management Plan covering fiscal 2024 to 2026, the Company aims to achieve a 10% ROE by expanding the solutions business, which is centered on smart meters, while also responding to social and environmental changes. The Company will also pursue high added-value strategies, improve profitability, and enhance capital efficiency.

To achieve these goals swiftly, compliance and internal controls, which serve as the brakes, are as important as the accelerator. Under the Philosophy (Purpose), which is “We create new value for society through visualization of the invisible.,” my aim is to contribute to improving the quality of management by enhancing the “brake” function as a member of the board of auditors to ensure the Company’s sustainable growth.