Integrated Report 2024（for viewing）[

Since our founding, SHIMA SEIKI has committed to the advancement

of fashion through technological innovation.

Our will to create is at our core, and it is what makes us who we are.

Our dedication to "make tomorrow better than today" constantly

drives us to advance our products and services. Our reason for

being is to create well-being through such advancements.

Philosophy

Purpose

Mission

Vision

Values

Medium-Term Management Plan

Our reason for being

Well-being for tomorrow

through the power of creativity

What we set out to do

• We continue our challenge to provide solutions for the future of humanity and the earth.
• We create new values that invigorate with emphasis on interconnection.

How we see ourselves

To become an indispensable company to society

What we value

• Respect for one another
• Broad perspective
• Active Challenge
• Time as a limited resource
• Interconnection

CONTENTS

Introduction

• Philosophy

• CONTENTS / Editorial Policy

• History of Shima Seiki
  - Challenge to World Firsts -

• Business Domains

Value Creation

• Message from the President

Governance

51 Corporate Governance

1. Messages from Audit and Supervisory Committee Members
2. Risk Management

61 Directors

Data

Editorial Policy

This Integrated Report was created to provide our stakeholders with an easy-to-understand description of our future vision and initiatives regarding our medium- to long-term business strategy and solutions to sustainability issues.

In this edition, we have particularly focused on enhancing the content based on the concept of emphasizing the "power of creativity," which is our origin and continues to be the foundation of our growth. Now, as we embark on a new start with the formulation of our Medium-Term Management Plan and redefinition of our corporate philosophy, we have once again strived to highlight the "power of creativity" and the strengths that compose it-our development capabilities, production technology capabilities, sales capabilities, and human resources-to help you understand the future potential and social contribution of our business.

Key Points

• To convey the "power of creativity" more persuasively, we have enhanced the content related to our strategies and policies for development capabilities, production technology capabilities, sales capabilities, and human resources.
• We have structured the report to clearly articulate our business strategies and management policies for realizing our purpose, "Well-being for tomorrow through the power of creativity," in a manner that a wide range of stakeholders can understand. Message from the President, Director's Message, Materiality, etc.

Reporting Period

While the report primarily covers FY2023 (April 1, 2023 to March 31, 2024), it also includes information from before and after this period.

Communication Tools

Integrated Report

This Integrated Report provides comprehensive information disclosure to our stakeholders by publishing financial information, such as our business performance, and our ESG (Environmental, Social, and Governance) initiatives to equip them with an understanding of our medium- to long-term growth

1. The Shima Seiki Value Creation Model

1. Source of Value Creation

1. Materiality

Strategy

23 Growth Strategy Director's Message

Integrated Report

Shareholder Newsletters

SHIMA SEIKI MFG., LTD.

and the value creation process necessary to achieve it.

Shareholder Newsletters

We provide our shareholders with semi-annual business reports, our latest news, recent initiatives, etc. (Only in Japanese)

Annual Securities Report / Semi-Annual Securities Report

These reports contain business overviews and financial statements, etc.

Activity Feeds

Instagram Instagram Instagram

@shimaseiki. @wholegarment @virtualsample

official_official

YouTube Facebook

Results Briefing Materials

Presentation slides that outline quarterly financial information (simplified versions for 1st and 3rd quarters). Performance information is expressed using diagrams and photographs.

These communication tools are found on the Investor Relations page of our website under HOME > IR Library.

https://www.shimaseiki.com/ire/library/

Please find links to all our social media feeds in the footer of our website.

https://www.shimaseiki.com/

Performance forecasts and other forward-looking statements contained in this report are based on information available Notes on Forward- at the time of preparation and certain assumptions deemed reasonable, but are subject to uncertainties. Therefore, please

Looking Statements be aware that actual performance, business development, or financial conditions may differ significantly from the forecasts due to various factors, including future economic trends, market demand, and economic, social and political conditions.

History of Shima Seiki- Challenge to World Firsts -

"If it can't be found anywhere, let's create it"

Since its foundation, Shima Seiki has created numerous world-first products and services.

To this day, we have continued to grow by responding to changes in the social environment and the needs of the times.

1962

Foundation

1964 1973

1995

Birth of the WHOLEGARMENT® Flat Knitting Machine

Founded SHIMA SEIKI

MFG. in Tebira,

Wakayama City

On December 25, the Company faced imminent bankruptcy due to an inability to settle a promissory note. However, after receiving a loan from a business owner in Osaka, Masahiro Shima was inspired to continue development tirelessly for a week without sleep. By New Year's Eve, he successfully completed the world's first fully automated glove knitting machine, marking the beginning of Shima Seiki as a manufacturer of fully automated glove knitting machines.

Although financial institutions proposed downsizing due to the oil crisis, instead of reducing personnel, Shima Seiki introduced the latest NC machine tools with an eye toward the coming era. The introduction of machine tools improved processing precision and the employment of electronics engineers led to the development of what later became the "computer-controlled flat knitting machine."

In response to the crisis facing the knitwear industry caused by the high value of the yen, including the hollowing out of production due to the relocation of production bases overseas and a rapid increase in imports in the apparel industry, Shima Seiki developed the "completely seam-free-type flat knitting machine (WHOLEGARMENT® flat knitting machine)" suitable for production in consumption areas. This innovative solution of "eliminating sewing" had a historic impact on the industry.

In response to the diversification of consumer needs and demand for new manufacturing methods, Shima Seiki developed a new design system called "SDS®-ONE" based on the concept of "All in One." By utilizing high-definition virtual samples, the system reduces the time and cost required to create samples, enabling more efficient production.

"P-CAM®" computerized cutting machines, which had previously only been sold to the apparel industry, were expanded to include cutting applications for industrial materials, etc., marking the Company's entry into different sectors. The P-CAM® received high praise at composite materials exhibitions and aerospace exhibitions. Due to the expansion of customer base, this also paved the way for expansion of flat knitting machines into different industries.

The business environment is changing day by day against the backdrop of growing environmental awareness. We are committed to developing and providing products, services and solutions that support our customers' "sustainable manufacturing" efforts, aiming for further growth.

• Founder Masahiro Shima

GloveFlatand SockKnittingKnittingMachines /MachinesDesign Systems CuttingComputerizedMachines Solution-BusinessBased

The world's first

SlideNeedle®-equipped

WHOLEGARMENT® flat knitting machine, "SWG®-FIRST®"

Shimatronic® design system "SDS®-1000"

Computerized multi-ply fabric cutting machine

"P-CAM®"

5

Business Domains

Shima Seiki operates four business segments: "Flat Knitting Machine," "Design System," "Glove and Sock Knitting Machine," and "Other Business." We combine hardware and software to provide solutions tailored to our customers' needs.

Flat Knitting Machine Segment

Shima Seiki's core business is the manufacture and sale of computerized flat knitting machines that boast industry-leading technological prowess. We offer WHOLEGARMENT® flat knitting machines capable of knitting entire garments three-dimensionally, as well as shaping machines capable of producing a wide range of patterns and designs.

In particular, the WHOLEGARMENT® flat knitting machine not only achieves high design quality and comfort but also eliminates the need for sewing processes, resulting in no cutting or sewing losses, significantly reducing lead times compared to traditional methods.

Going forward, we will continue to develop products that contribute to solving social issues while also working on expanding into new markets outside the apparel and fashion industry, such as mobility, healthcare, and industrial materials, aiming for sustainable business growth.

72.1%

(¥25,884 million)

FY2023 Performance

Glove and Sock

Knitting Machine Segment

This segment manufactures and sells glove and sock knitting machines, which are the origin of our technological development.

Through continuous improvements, we have developed technology, durability, and reliable productivity, expanding our user base worldwide. In recent years, we have been advancing functionality and fine gauge capabilities, strengthening our response to high value-added fields such as medical and outdoor applications. We aim to acquire new users and improve our performance further in the future.

FY2023 Performance

1.2%

(¥447 million)

Other Business Segment

17.0%

(¥6,112 million)

This segment handles design systems and computerized cutting machines that support manufacturing in a variety of industries including the fashion industry. Our design systems not only facilitate programming for flat knitting machines but also enable diverse designs through high-definition virtual samples and three- dimensional simulations, contributing to reduced lead times and cost reductions. In addition to our integrated hardware systems, the user base for our software subscription services that allow for a variety of working styles has been steadily increasing in recent years.

For computerized cutting machines, we will focus on the sale of new models with significantly improved cutting accuracy and productivity, and will work to expand our presence in different sectors, such as mobility and industrial materials, while also intensifying our proposal activities in the global market.

FY2023 Performance

This segment sells maintenance parts and provides repair and maintenance services for our knitting machines and system equipment, as well as operates a spinning business for high-end cashmere yarn at a subsidiary.

We will continue to provide customer-oriented technical services and after- sales services to expand our profitability.

FY2023 Performance

Value Creation

Message from the President

Announcement of the new"Ever Onward 2026"Medium-Term Management Plan. Restructuring our corporate culture with the power of creativity and accelerating growth toward a well-being society

Mitsuhiro Shima

President

The "Next Move" is Critical:

The Continuing Tough Business Environment of the Apparel and Fashion Industry

In the current apparel and fashion industry, people have become more positive and the market is expected to be reinvigorated as the industry recovers from the COVID-19 pandemic. However, the global economy, which is becoming increasingly complicated by such factors as soaring raw material and energy prices due to the prolonged Ukraine crisis and monetary tightening in Europe and the U.S. to curb inflation, must be said to be extremely difficult for companies to predict. For example, exchange rate fluctuations, which previously were ¥1 or ¥3, can now fluctuate by as much as ¥10, which poses a major risk for us, given our high ratio of overseas sales.

Soaring logistics costs and the tight schedules of the apparel and fashion industry cannot be ignored either. For apparel and fashion manufacturers, our main customers, even a one-week delay can have a significant impact on sales. Under these circumstances, the industry as a whole has no choice but to take a "defensive" approach to business. It continues to be difficult to figure out how to make the next move or take on new challenges.

Achieving Profitability in the 63rd Fiscal Year for the First Time in Five Years. Restructuring Production System and Company-wide Challenges Lead to Results

Despite this difficult business environment, in FY2023 (the 63rd fiscal year), we achieved profitability for the first time in five years. This was mainly due to a recovery in appetites for capital investment, particularly in China and Southeast Asia, which led to steady sales growth of next-generation WHOLEGARMENT® flat knitting machines and conventional mainstay models. We also revisited the company-wide approach to "manufacturing" that has been cultivated since our founding, and revised from scratch the systems that were taken for granted, such as those for suppliers, manufacturing

processes, and sales activity expenses.

In these revisions, rather than relying on conventional on-demand production, we implemented planned production and procurement, which is one of our measures, to reduce waste while ensuring flexibility, and shifted to a new zero-based manufacturing approach. Through the company-wide challenge, we restructured our production system, which had previously been affected by seasonal fluctuations, and leveled out monthly production throughout the year, leading to cost reductions.

I would like to take this opportunity to once again express sincere gratitude to our suppliers and other stakeholders, for enabling us to overcome this difficult situation.

I believe that the environment surrounding the apparel and fashion industry will continue to change dramatically. However, humans have an innate ability to adapt to changes in the environment. We, too, need to view the business environment from a broader perspective and respond more flexibly and quickly to issues such as exchange rate fluctuations and strict delivery deadlines. I believe that we can achieve further growth by harnessing the power of creativity, which is our corporate DNA.

On a different note, when I was a student, I was a member of a yacht club. I would go out to sea every day to practice my sailing skills. As a business manager, I am reminded of those days when I think about the business environment. Running a business is very similar to sailing a ship. For example, when a storm stirs up waves so huge that you cannot see the other side, you can move forward successfully not by taking the wave head-on, but rather, by taking risks and going at an angle. On the other hand, when there is no wind, there are ways to move forward, but only at a slow pace. Only by skillfully utilizing strong winds and rough waves can we make great progress. It is precisely because we are in the current business environment that I believe we can gain tough impetus for growth by boldly catching the waves and continuing to take on challenges.

ITMA 2023, an international textile machinery exhibition (June 2023)

Formulation of the New Medium-Term

Management Plan.

The Younger Generation Takes the Lead

in Weaving a New Philosophy

This fiscal year, we formulated a new Medium-Term Management Plan covering the three years from FY2024 to FY2026, and announced it in May 2024. In this new Medium-Term Management Plan, we redefined our corporate philosophy, clarifying our philosophy for further expansion and growth.

If a company does not have a clear purpose (reason for being), the direction of the entire organization will also remain unclear. In order to face a business environment that is expected to continue to undergo dramatic changes, it is necessary to reaffirm, share, and unify our reason for being throughout the entire company now. We have set our new purpose as "Well-being for tomorrow through the power of creativity." This signifies our commitment to using our technological capabilities to embody the fundamental human aspiration to "make tomorrow better than today" in our products and services, tackling various social issues, including those in the apparel and fashion industry, and providing new values.

The new Medium-Term Management Plan has been formulated based on our philosophy. Our strength in this is the "power of creativity" we have honed since our founding. With the aim of continuing to provide well-being not only for the apparel and fashion industry, but also for society at large, we have set our ten-year vision of "Work vibrantly with hope and pride and continuously take on challenges." The younger generation who will be responsible for our Company ten years from now took the initiative in formulating the philosophy.

At present, young employees who volunteered are playing an active role as leaders in gaining a deeper understanding of the new philosophy and translating it into concrete action. They have set up opportunities for discussion and communication that go beyond

generations and positions, and while respecting differences of opinion, they are carrying out briefing sessions and other promotional activities to ensure that our philosophy does not become a mere formality. I feel very confident that creating such opportunities is an important first step toward achieving our goals. We intend to continue to share our philosophy with all employees and conduct our business activities based on a solid foundation.

Transforming the Entire Supply Chain with Shima Seiki's Innovative Solutions

Under the new Medium-Term Management Plan, all employees are taking action with a strong determination to "create a well-being future." If our reason for being as a company is clearly defined, concrete business strategies based on that purpose will naturally follow.

In addition to reconstructing our management infrastructure by clarifying our philosophy, we have positioned the following measures as the pillars of our growth strategy: establish a solution-based business centered on our design systems; develop new products and tap into new markets for our mainstay flat knitting machines; expand global sales channels for our computerized cutting machines; and expand sales in different sectors. These measures are not merely an extension of our past growth, but a new challenge to realize a well-being future based on our new philosophy. Every employee will work with a broader perspective to achieve our goals.

We aim to transform the entire supply chain with comprehensive solutions that include our flat knitting machines, design systems, and computerized cutting machines, and we intend to actively take on new ventures in different industries by thinking outside the box.

Exploring the Potential of the Supply Chain with Flexible Thinking

To realize a society that values well-being, a variety of reforms are needed, which in turn requires providing new solutions with flexible thinking. Let's look at store

operations in the apparel and fashion industry for example.

Currently, the mainstream style, both in physical stores and on e-commerce sites, is to display a large number of products to attract consumers' attention and allow them to enjoy browsing items as they shop. However, in order to maintain this system, it is said that approximately 80 billion apparel items are produced worldwide per year. I wonder if such a large number of items are really necessary for a world population of approximately 8 billion people. This mass production and mass consumption style of business produces enormous waste, and the industry faces many challenges, including the environmental burden on the planet and human rights issues for workers. One way to improve this situation is to create a new sales style that minimizes inventory while still allowing consumers to enjoy shopping.

The new sales style I imagine is one in which consumers can specify their favorite designs and colors on an e-commerce site or at a physical store, and products are actually created on the spot. This process eliminates waste and makes it possible to only produce what is needed. On-demand production is the key to achieving this. This is theoretically feasible with our WHOLEGARMENT® flat knitting machines and design systems, significantly streamlining operations. By leveraging our technology, the possibility of a new business model that can balance consumer satisfaction and retailer profits is in sight.

Taking Shima Seiki's Technologies Global by Actively Expanding into Different Sectors such as Mobility and Medical

For 60 years since our founding, we have developed our business as a pioneer of knitting machine technology in the apparel and fashion industry. In recent years, we have accelerated our expansion into different industries through our flat knitting machine business and the computerized cutting machine business.

Our computerized cutting machine business, which we launched in 1991, has grown to capture the top market share in Japan. We have already expanded into different sectors such as mobility, medical, and industrial materials. One of our future growth strategies involves replacing products traditionally manufactured using computerized cutting machines with knitted materials. This is made possible by our proprietary

WHOLEGARMENT® flat knitting machine, a world-first technology uniquely developed by Shima Seiki.

WHOLEGARMENT® flat knitting machines can produce entire knitted products in three dimensions as long as there is yarn, eliminating the need for large inventories and significantly reducing waste. This technology can revolutionize not only product design and functionality but also the manufacturing process itself. Moreover, utilizing knitted materials expands the range of material options. The major advantage of knits lies in their ability to provide flexibility and comfort that conventional materials cannot achieve. By taking advantage of these characteristics, we expect to see further sales growth across a wide range of industries including mobility, medical, and interior design.

We will continue to promote expansion into different sectors and fields through new applications of our knitting technology while accelerating our growth in the global market. As a leading company in flat knitting machines, our mission is to explore the possibilities of knitted materials and provide innovative solutions. We will continue to devote our efforts to R&D, creating new values for the world.

Contributing to the Realization of a Well- being Society through Sustainable Initiatives

As a manufacturing company, our sustainability initiatives can be divided into the manufacturing department and back-office department. The manufacturing department, in particular, consume large amounts of energy in machine tools, motors, and boilers and heaters used in heat treatment. To date, we have been steadily accumulating efforts to reduce energy consumption, such as solar power generation, improving air conditioning efficiency, and using heat- shielding paint on factory walls. Currently, in addition to these efforts, to efficiently control energy consumption in our manufacturing, we are working on reviewing manufacturing processes and implementing planned production and planned procurement to level out energy consumption. By continuing these initiatives, we aim to control energy costs and reduce CO₂ emissions. Alongside our in-house initiatives, we are also focusing on sustainability across the entire supply chain. We recognize the importance of contributing to our customers' energy reduction through our machines, and we are working daily on technological development with the aim of halving the power consumption per unit in the future.

When it comes to developing these technologies, I feel that simply relying on cutting-edge technology is already an outdated approach. We need to consider whether cutting-edge technology truly leads to well-being or if it can be achieved through a combination of legacy technologies, taking into account the overall balance. Furthermore, the sustainable initiative that best expresses our character is to promote the use of flat knitting machines across a wide range of industries, significantly reducing waste by replacing product materials with knitted materials. We intend to expand such initiatives and contribute to sustainability through Shima Seiki's unique approach.

In our vision of a well-being world, Shima Seiki's power of creativity, including our technological innovations, is utilized in many industries and various aspects of society. I believe this vision can be realized if we sincerely address the waste that exists in society and propose and develop businesses that benefit the entire supply chain.

Diversity Means Different Ways of Thinking. Aiming to Be the World's Fastest Growing Group by Uniting Our Employees' Diverse Strengths

The foundation of a company's growth is the "power of its people," and diversity is crucial to support this growth. When we think of diversity, differences in gender, age, or nationality may come to mind, but as a business manager, what I value most is the diversity of individual ways of thinking. Even if life has not gone the way you planned so far, it is important to think about how you can be happy from now on and to maintain a flexible mindset that adapts through exposure to a variety of ideas. In this process, working with others can sometimes lead to better results. To pave the way for the future, it is of paramount importance to respect different perspectives and approaches and unite diverse strengths.

At Shima Seiki, we have been creating an environment where employees can encounter diverse opinions and ideas to maintain and enhance their motivation for growth. As mentioned earlier, the apparel and fashion industry will continue to face intense changes in the business environment. Whether a company grows and evolves amid these changes depends on the creativity honed through exposure to different environments and diverse thoughts, and ideas that are born as a result. I believe that the growth of a company can only be achieved through the united efforts of all employees. However, this "unity" does not imply an image of everyone moving in the same direction as in the Showa era. In the Reiwa era,

what is required is a process of diverse experimentation and trial-and-error, where each individual gains different experiences and grows through repeated course corrections. I hope that our employees will boldly take on challenges, believing that challenges and failures are stepping stones for growth. I believe that this individual growth is what will drive Shima Seiki's powerful growth. While cherishing the power of creativity we have honed over the years, we will incorporate new perspectives and approaches as we strive to become the world's fastest-growing group.

Together with All Stakeholders as Partners, Leading the Industry Toward Progress

We consider our stakeholders to be valuable partners in jointly resolving social issues in the industry and guiding it toward expansion. We recognize

the importance of taking consistent action based on our vision, making flexible adjustments as necessary, and growing together through continuous dialogue with all of you. Through our IR activities, we will continue to strive to deepen our relationships of trust by clearly communicating our vision and strategies. We kindly ask for your understanding of this vision and strategies with regard to the direction we are working toward, and how we will proceed with our business to achieve our goals.

Lastly, I would like to mention that "Ever Onward 2026," our Medium-Term Management Plan, has been launched this fiscal year. We consider it is our mission to demonstrate the power of creativity not only in the apparel and fashion industry, but also across a wide range of industries, continuously taking on challenges to provide solutions for the future of humanity and the planet, and contributing to the realization of a well-being society. We humbly request your continued support as our stakeholders in these endeavors.

The Shima Seiki Value Creation Model

Shima Seiki continues to challenge unknown territories toward the solution of all social issues.

Principal Capital

"Ever Onward 2026"

Medium-Term Management Plan

Reconstruction of Management Infrastructure

Establishment of Solution-Based Business

Apparel

Establishment ofAerospace Fashion

Solution-Based Business

and frameworks for our customers to satisfy consumers.

(Fiscal year ended March 31, 2024)

Revival of Flat Knitting Machine Business Expand Computerized Cutting Machine Business

Materiality

Challenging technological innovation

Realizing a sustainable society

Human resource strategy

Building sturdy corporate governance

Sports

OutdoorsAutomotive

Home furnishings

and interiors

Return to Consumers

Timely and optimal production

Produce the required amount only as needed, and ensure that consumers can get what they want when they want it as well.

Secondary distribution of fashion products

Consumers can feel they are helping the environment and use fashion products more effectively.

A game changer for the industry

Consumers can benefit from the cost advantage of reduced wasteful practices in manufacturing.

Contributing to other industries

Contribute not only to the fashion industry, but also to an affluent society, which in turn enriches consumers' lives.

Social Issues

Solving social

issues

Source of Value Creation

1Development Capabilities

Continuing to Create Innovative Solutions

Shima Seiki's development history began with the "automation of glove knitting machines," and in the 1990s, we successfully developed the completely seam-free-type "WHOLEGARMENT® flat knitting machine," which was praised as "Oriental Magic." Since then, we have continued to develop flat knitting machines, design systems, computerized cutting machines, and other products that anticipate the needs of the times. Currently, we are also focusing on developing samples that use sustainable materials and creating solutions that consistently support the entire supply chain from planning to production and sales, continuing our efforts to promote sustainable manufacturing.

2Production Technology Capabilities

Seamlessly Integrated High-Quality Manufacturing

We have continuously pursued technological innovation to provide our customers with high-quality products that excel in durability and stability. We have centralized all departments, including development, production, manufacturing, and sales, at our headquarters in Wakayama, which allows for smooth collaboration between departments, enabling us to achieve a consistent integrated manufacturing process from start to finish. To improve quality, we regularly hold "QMS (Quality Management System) Committee" meetings to share information on initiatives and discuss solutions and improvements to issues. In doing so, we strive to develop and provide attractive products from the customers' perspective.

In addition, we are working to establish an internal traceability system, and by utilizing an internally linked system to grasp the entire production process through data, we are able to quickly respond to inquiries from customers after shipment, thereby achieving stabilization and improvement of product quality.

3Sales Capabilities

A Global Network of Trust

The ratio of overseas sales accounts for approximately 80% of our product sales. Our products, primarily flat knitting machines, are currently sold in approximately 80 countries, including Italy, known for producing numerous luxury brands; China, the world's largest knitting production center; and emerging production hubs in Southeast Asian such as Bangladesh and Vietnam.

With our local subsidiaries in China, Hong Kong, Vietnam, Italy, the U.K. and the U.S. as the core, we have a built service network across the world, expanding our business and services globally. We constantly collaborate with our overseas agents to enhance our support system, ensuring that customers all around the world can use our products with peace of mind.

4Human Resource Capabilities

Creating an Environment for Diverse Talent to Thrive

To realize our vision of "To become an indispensable company to society," which is set out in the "Ever Onward 2026" Medium-Term Management Plan, we have positioned "human resources" as one of our important capital assets. We are promoting initiatives based on the policies of "reformation of management infrastructure" and "future growth," focusing on creating an environment where employees can enhance their capabilities and maximize their potential. We believe that the chemical reactions born from the mixing of people with different experiences, values, nationalities, and genders, who respect and inspire one another, have a significant impact on organizational development and the creation of new values. Based on this belief, we are actively promoting diversity and linking it to the sustainable enhancement of corporate value.