Notice of Convocation
The 114th Ordinary General Meeting of Shareholders
[Disclaimer: Please note that the following purports to be an accurate and complete translation of the original Japanese version prepared for the convenience of our shareholders with voting rights outside Japan for reference. In the case of any discrepancy between the translation and the Japanese original, the latter shall prevail. Please be advised that certain expressions for domestic voting procedures that are not applicable to the aforesaid shareholders are omitted or modified to avoid confusion. Please also be advised that this material will not facilitate your status as a registered shareholder, who is authorized to physically attend the ordinary general meeting of shareholders in person, unless presenting the original Notice of Convocation and the Voting Form in Japanese to the receptionist at the place of the meeting.]
Table of Contents
Page
Notice of Convocation of the 114th Ordinary General Meeting of Shareholders ··· 3
[Attached Documents] Business Report 1. Matters Concerning Shiseido Group ··· 7
2. Matters Concerning Shares Issued by the Company ··· 25
3. Matters Concerning Shares Held by the Company ··· 27
4. Matters Concerning Stock Acquisition Rights ··· 28
5. Matters Concerning Status of Corporate Governance and Directors, Audit & Supervisory Board Members and Corporate Officers of the Company ··· 31
6. Approach toward CSR of the Company ··· 56
Consolidated Accounting Documents Consolidated Balance Sheets ··· 59
Consolidated Statements of Income ··· 60
Consolidated Statement of Changes in Net Assets ··· 62
Notes to Consolidated Financial Statements ··· 63
Accounting Documents Non-Consolidated Balance Sheets ··· 75
Non-Consolidated Statements of Income ··· 76
Non-Consolidated Statement of Changes in Net Assets ··· 77
Notes to Non-Consolidated Financial Statements ··· 79
Accounting Auditors’ Reports Copy of the Accounting Auditors’ Report(Consolidated) ··· 85
Copy of the Accounting Auditors’ Report ··· 87
Copy of the Audit & Supervisory Board’s Report ··· 89
[Reference Document Concerning the General Meeting of Shareholders] 1. Total Number of Voting Rights Held by Shareholders ··· 91
2. Items of Business and Matters for Reference ··· 91
First Item of Business: Dividends of Retained Earnings ··· 91
Second Item of Business: Election of Eight (8) Directors ··· 92
Third Item of Business: Election of One (1) Audit & Supervisory Board Member ··· 105
Fourth Item of Business: Payment of Bonuses to Directors ··· 107
Fifth Item of Business: Determination of Provision of Long-Term Incentive Type Remuneration to Directors ··· 109
Security Code: 4911 June 2, 2014
Notice of Convocation
of
the 114th Ordinary General Meeting of Shareholders
Dear Shareholders:
We express our deep appreciation to each of the shareholders for their extraordinary daily support.
You are cordially invited to attend the 114th ordinary general meeting of shareholders of
Shiseido Company, Limited (the “Company”). The meeting will be held as described on page 4. If you are unable to attend the meeting, you may exercise your voting rights in writing or through website voting. Please examine the accompanying “Reference Document
Concerning the General Meeting of Shareholders” and exercise your voting rights.
Yours very truly,
Shiseido Company, Limited
Shinzo Maeda
Representative Director, Chairman
Registered Head Office:
5-5, Ginza 7-chome, Chuo-ku,
Tokyo
Principal Business Office:
6-2, Higashi-Shimbashi 1-chome,
Minato-ku, Tokyo
(VOTING PROCEDURE FOR REGISTERED SHAREHOLDERS IN JAPAN)1 When you exercise your voting rights via the Internet etc., please access to Proxy Voting Website (http://www.web54.net) and refer to “Notes to the Use of the Exercise of Voting Rights via the Internet” (Omitted).
1
PARTICULARS
1. Date and Time of the Meeting:
Wednesday, June 25, 2014 at 10:00 a.m. 2. Place of the Meeting:
IMPERIAL Hotel, 2F, Kujyaku Room (Main venue of the event) 1-1, Uchisaiwai-cho 1-chome, Chiyoda-ku, Tokyo, Japan
3. Matters to Be Dealt with at the Meeting: Matters for Reporting:
Report on the business report and the consolidated accounting documents,
non-consolidated accounting documents, and the results on the audits of consolidated accounting documents by the accounting auditor and the audit & supervisory board for the fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014).
Matters for Resolution:
First Item of Business: Dividends of Retained Earnings Second Item of Business: Election of Eight (8) Directors
Third Item of Business: Election of One (1) Audit & Supervisory Board Member
Fourth Item of Business: Payment of Bonuses to Directors
Fifth Item of Business: Determination of Provision of Long-term Incentive Type Remuneration to Directors
Contents and details of each item are described in the “Reference Document Concerning the General Meeting of Shareholders” described in and after page 91. 4. Matters Related to Exercise of Voting Rights:
(1) The deadline for the exercise of voting rights via return mail voting form or via website
The exercise of voting rights shall reach or be received by the Company by June 24, 2014 (a day before the ordinary general meeting of shareholders) at 5:15 p.m., the close of business.
(2) Validity of the voting in the event of exercise of voting rights by the same and one shareholder via both return mail and via website
In the event that the same and one shareholder exercises voting rights via both return mail and via website, the Company will consider the exercise of voting rights via website shall be valid.
Moreover, the same and one shareholder exercises voting rights via website several times, the Company will consider the last exercise of voting rights by via website shall be valid.
(3) Requirement for exercise of voting rights through agent
Shareholders may exercise voting rights through an agent who shall be a shareholder of the Company. In this case, the shareholder or the agent shall be required to submit a document certifying the power of representation to the Company at the general meeting of shareholders.
5. Other Matters Related to This Notice of Convocation:
(1) In the Company’s website, the following are voluntarily disclosed by the Company in the column entitled “Home>IR>General Meeting of Shareholders / Corporate Governance>General Meeting of Shareholders>Notice of the Convocation: the 114th Ordinary General Meeting of Shareholders”
(http://www.shiseidogroup.com/ir/shareholder/e1406shm/html/index.html): “The 30 Largest Stock-Holdings of Publicly Listed Companies in the Amount on the Balance Sheet, Which the Company Holds for Purposes Other Than Realizing Direct Investment Gains” relating to “3. Matters Concerning Shares Held by the Company” of the business report.
“Criteria for “Important Concurrent Position” assumed by Company’s directors, audit & supervisory board members and corporate officers” and “Criteria for Stating the Relationship between the Company and the Organizations in Which the
Company’s Directors and Audit & Supervisory Board Members Hold “Important Concurrent Positions”” relating to “5. Matters Concerning Status of Corporate Governance and Directors, Audit & Supervisory Board Members and Corporate Officers of the Company” of the business report.
In addition, “Non-financial Information Report Regarding ESG (FY2013)” is also disclosed therein as reference information relating to the corporate governance and CSR of the Company.
(2) In cases that the attached documents and “Reference Document Concerning the General Meeting of Shareholders” are amended, the Company will announce updated on the Company’s website
(http://www.shiseidogroup.jp/ir/account/shareholder/2014/).
- End -
Information for Notice of Convocation of the Ordinary General Meeting of Shareholders on the Company’s Website
The Company’s Notice of Convocation of the Ordinary General Meeting of Shareholders is posted on the Company’s website on “Home/IR/General Meeting of Shareholders +
Corporate Governance/General Meeting of Shareholders/Notice of the Convocation: the 114th Ordinary General Meeting of Shareholders”
(http://www.shiseidogroup.com/ir/shareholder/e1406shm/html/index.html ). (Japanese and English)
Also the document is posted on the Tokyo Stock Exchange’s website (http://www.tse.or.jp/). (Japanese and English)
About Environment-Friendly General Meeting of Shareholders
At this ordinary general meeting of shareholders, in addition to striving to reduce
emissions of greenhouse gases such as CO2 (carbon dioxide), we will carry out carbon offsets to counterbalance the amount of greenhouse gases emitted through the purchase of credits for reduction or absorption of greenhouse gas emissions achieved elsewhere.
Business Report
(Fiscal Year from April 1, 2013 to March 31, 2014) 1. Matters Concerning Shiseido Group
1.1 Business Overview (1) Progress and Results 1) Overview
Progress and Results in the Fiscal Year Ended March 2014
In the fiscal year ended March 31, 2014, the Japanese economy enjoyed moderate recovery underpinned by government economic measures. The domestic cosmetics market also showed indications of a turnaround. Moreover, there were signs of temporary growth in demand ahead of the consumption tax hike in April 2014. Overseas, however, cosmetics markets are closely linked with economic conditions in their respective countries. In the Americas, the cosmetics market maintained firm growth thanks to ongoing expansion of the local economy. In Europe, where economic growth was weakened by the debt crisis and high unemployment rates, the cosmetics market saw only minimal growth. In Asia, where some nations are impacted by political conditions, the cosmetics market posted moderate overall growth.
In this environment, the Shiseido Group continued implementing its three-year business plan (covering the three-year period from April 2011 to March 2014), designed to help get back on a growth trajectory. Impacted by the prolonged debt crisis in Europe, a worsening business environment in China sparked by the Senkaku Islands issue, and other factors, during fiscal 2012 we changed the course of the plan with an emphasis on “building a high earnings structure capable of delivering steady profit growth even if revenue growth and market growth are on the same level.” We positioned the year under review, the final period of the plan, as a “year of paving the way to sustained growth backed by a rigorous distinction and
concentration strategy aimed at removing obstacles to lay the groundwork for growth.” During the year, we continued implementing cost structural reforms and business structural reforms and began efforts to optimize store-level inventories, while taking actions to enhance the soundness of unprofitable and low-profit businesses. At the same time, we allocated resources to strong, big, and highly profitable fields, both in Japan and overseas. To this end, we focused on reinforcing our strengths in three areas: Japan, China, and Bare Escentuals, Inc. (U.S.).
For the fiscal year ended March 31, 2014, domestic sales increased 1.1 percent and overseas sales were up 26.4 percent from the previous fiscal year. The trend toward yen depreciation in the foreign exchange rate had a positive effect on overseas sales. As a result, consolidated net sales increased 12.4 percent compared with the previous fiscal year, which was the highest ever.
Operating income was up 90.6 percent from the previous fiscal year, despite the negative impact of recovery of market inventory aimed at optimizing store-level inventories, thanks to factors including increased marginal gain stemming from higher sales and the effect of the exchange rate, in addition to continued companywide cost structural reforms and efficient management of expenses, and a decrease in personnel costs such as bonuses and pension costs in Japan.
Despite the posting of an extraordinary loss associated with recovery of store-level inventories, as well as a tax payment based on an expectation that the possibility of an
investigation into transfer pricing is high, the Group returned to profitability for the fiscal year ended March 31, 2014, as a result of a substantial increase in operating income, and the posting of gain on sales of some real estate such as building owned by a sales subsidiary, after the net loss posted in the previous fiscal year due to extraordinary losses including an
impairment loss on goodwill related to Bare Escentuals, Inc.
Looking at various indicators, consolidated operating profitability for the fiscal year ended March 31, 2014 was 6.5 percent, consolidated return on equity (ROE) was 8.4 percent, and the overseas sales ratio was 50.5 percent, marking the first time that overseas sales have surpassed domestic sales at the Shiseido Group.
Consolidated Results
Notes:
1. “-”denotes loss, decrease, etc. or negative value.
2. In an effort to achieve consistency in internal Group accounting treatment, Shiseido Group subsidiaries in the Americas changed, from the 112th Business Term, accounting treatment of samples and promotional items associated with marketing activities of stores, from the method in which they are recognized as assets when acquired and are expensed when shipped to customers, to the method in which they are expensed when acquired. As a result of this change, the Accounting Standard for Accounting Changes and Error Corrections (ASBJ Statement No. 24) was adopted and applied retroactively to the consolidated financial statements for the 111th Business Term.
■Net Sales
Current FY: ¥762,047 million Year-on-year change: +12.4% Sales composition: Overseas 50.5%
Domestic 49.5%
■Operating Income
Current FY: ¥49,644 million Year-on-year change: +90.6%
■Operating Profitability
Current FY: 6.5%
Year-on-year change: +2.7 points
■Ordinary Income
Current FY: ¥51,426 million Year-on-year change: +81.0%
■Net Income (Loss)
Current FY: ¥26,149 million Year-on-year change: –
■Consolidated ROE
Current FY: 8.4%
2) Activities by Business Segment
Domestic Cosmetics Business Segment
Domestic Cosmetics Division
In the cosmetic business, we continued efforts from the previous year reflecting a policy of meticulously selecting only products that can earn a high level of customer support. We also continued nurturing existing mainstay products. As a result, two core lines in the mid-priced range performed well: the ELIXIR skincare and base-makeup line, which offers ultimate bliss in skincare, and the MAQuillAGE comprehensive makeup line. We also stepped up communications activities designed to strengthen our position in the prestige domain. These included airing television commercials for the global brand
SHISEIDO and the top-end brand clé de peau BEAUTÉ. We reported sales growth as a
result, especially in department stores.
One challenge from the previous year is addressing the needs of seniors. To this end, we set up a dedicated site for seniors within the Shiseido watashi+ website, which is a next-generation beauty solutions and services website that brings together the web and existing retail stores. In addition, we set up a dedicated free-dial line for seniors and launched a dedicated tabloid, called Kirameki Ms. Tsushin. We also hosted Kirameki Master Salon seminars to help seniors rediscover their unique qualities and master beauty care techniques.
During the fiscal year ended March 31, 2014, the Shiseido Group began efforts to optimize store-level inventories, with the aim of eliminating problems that obstruct the path to growth. To this end, we sought to build a framework that prevents inventories from accumulation. This will entail implementation in fiscal 2014 of business management reforms that focus on store-level sales. In addition, we worked to streamline store-level inventories, including by recovering finished products and products with high stock rates.
In the Domestic Cosmetics Business segment, sales were up 1.1 percent, to ¥349,718 million. In the domestic cosmetics division, we engaged in efforts focused on expanding over-the-counter sales, particularly on strengthening the prestige market. Despite efforts to recover inventories with a view to optimize store-level inventories, sales were higher than the previous fiscal year, partly reflecting a greater-than-expected surge in the last-minute demand prior to the hike in the consumption tax rate. The healthcare division also saw a year-on-year increase in sales.
Operating income increased 43.5 percent to ¥39,460 million, resulting from an increase in marginal gain due to higher sales, in addition to more efficient management of expenses, and other factors.
Healthcare Division
In the healthcare business, we focused on The Collagen, a mainstay health and beauty food line. Accordingly, we maintained a high share despite continued contraction of the retail sales market for collagen. Moreover, we sought to increase recognition of Chomeiso, a health and beauty food containing button parsnip—grown on a contracted farm in Yonaguni Island that does not use agrochemicals—and expand the number of stores handling this product. During the year, we also launched and began sales in convenience stores, complementing existing sales channels, of Tsuyatsuya Purun Jelly as part of the
KIREI NO SUSUME line of beauty drinks designed to enhance beauty. In these ways, we
strove to increase interaction with customers.
Global Business Segment
Overseas Cosmetics Division
At the prestige end of the cosmetics business, the global brand SHISEIDO and makeup artist brand NARS1 again performed well, especially in the United States. Our designer fragrances business also enjoyed solid growth as we began handling the Ferragamo3 and
BURBERRY4brands, which complemented firm demand for narciso rodriguez2 and other
brands. In the meantime, Bare Escentuals, Inc., which sells Bare Minerals5 and other brands, laid the groundwork for growth in fiscal 2015 and beyond, having positioned fiscal 2013 and 2014 as a period for rebuilding its business foundation.
Conditions are gradually improving in the top-priority Chinese market, where we faced a difficult challenges, including purchasing restraint for our products sparked by the Senkaku Islands issue. However, there was a slight year-on-year sales decline due to adjustments in shipments aimed at optimizing store-level inventories. Thanks to foreign exchange factors, however, sales in yen terms increased year-on-year.
In the Asian masstige6 market, we reinforced Za7and other masstige brands. We also sought to strengthen our Asia-wide masstige marketing activities by translating existing successes—notably amassed self-marketing know-how in Taiwan and sales promotional
Sales in the Global Business segment rose 24.8 percent, to ¥402,213million and grew 1.4 percent on a local-currency basis, partly reflecting the impact of the trend toward yen depreciation in the foreign exchange rate. The overseas cosmetics division continued to post healthy sales growth in the Americas, and even in Europe, where the impact of economic stagnation was felt, certain countries such as Russia performed strongly. Designer fragrances also expanded. Meanwhile, although China is breaking out of a challenging business climate, this did not lead to major sales growth for reasons including the optimization of store-level inventories that was carried out. The professional division posted a year-on-year increase mainly owing to growth in sales in Asia.
The Global Business segment posted an operating income of ¥7,659 million, as a result of factors including the efficient management of expenses and the impact of the exchange rate.
activities in Thailand—laterally across other Asian nations. We achieved sales growth in this market as a result.
The Shiseido Group did not enter new countries or regions among emerging nations8 in the fiscal year ended March 31, 2014. In the previous fiscal year, however, we opened a representative office in India to establish a foundation for full-scale entry into that market, where we have advanced our business via sales agencies since 2001. In the year under review, we established a wholly owned subsidiary. We also strengthened our business foundation in other ways. For example, we established a joint venture company to coordinate our business across seven nations in the Middle East, where we have sold our products in conjunction with sales agencies since 1997. As of December 31, 2013, the global brand SHISEIDO had a presence in 89 countries and regions (including Japan).
Notes:
1. NARS: Comprehensive skincare and makeup brand launched by Mr. François Nars, a French makeup artist.
2. narciso rodriguez: Fragrances sold under license agreement with a fashion designer in the United States Mr. Narciso Rodriguez.
3. Ferragamo: Launched sales as an agent for the Ferragamo brand in specific regions, based on an agency contract with Italian shoe brand Salvatore Ferragamo.
4. BURBERRY: Launched sales as an agent for the BURBERRY brand in specific regions, based on an agency contract with U.K. fashion brand BURBERRY.
5. bareMinerals: Mineral-based skincare and makeup brand of Bare Escentuals, Inc., the company acquired in 2010.
6. Masstige: A word coined from “mass” and “prestige.” Masstige products are positioned as more expensive than mass-produced products, but more moderately priced than prestige products. 7. Za: Comprehensive skincare and makeup brand targeting middle-income earners in Asia. 8. Emerging countries: Countries and regions with a large young population, where
mid-to-long-term economic growth is expected. These include Russia, Brazil, Turkey, India, the Middle East, Mongolia, Vietnam, Indonesia, and the Philippines
Professional Division
In the professional division, we have focused on tapping Asian markets since 2010. In the year under review, this business was driven by growth in South Korea and China. Together with sales in the Americas and Europe, which were mostly unchanged, overall overseas sales in the professional business increased year on year. In Japan, where our priority focus was on the hair-care and hair-color domains, two products performed well:
Adenovital Scalp Essence V, a new product in The Hair Care line; and Salon Solutions, a
system-based product exclusively for salons.
During the fiscal year ended March 31, 2014, we began negotiations to sell the
DECLÉOR and CARITA esthetic skincare brands, sold mainly in Europe, to L’Oréal S.A.,
a French cosmetics company. We subsequently reached an agreement and concluded the contract for sale in February 2014.
Others
The frontier science business posted a year-on-year increase in sales. Here, we enjoyed healthy sales of the 2e and Navision lines of cosmetics for medical institutions derived from our beauty care skin research. Another major contributor was high-speed liquid chromatography-related machinery employing powder surface treatment technology gained through our experience with cosmetics.
Sales from Others increased 6.5 percent, to ¥10,114 million. Results were up year-on-year owing to strong performance in the frontier science business and sales growth in the restaurant business due to favorable performance in both restaurant and retail sales.
Operating income in this segment increased 5.9 percent, to ¥2,081 million, owing to an increase in the marginal gain stemming from higher sales.
Medical cosmetics NAVISION DR Line
Meanwhile, our restaurant business posted a significant year-on-year increase in sales. Shiseido Parlour Co., Ltd., a subsidiary in the restaurant business, reported solid sales at restaurants and at retail outlets, including department stores, railway stations, and airports. The restaurant business was also bolstered by the renewal and reopening of top French restaurant L’Osier in October 2013.
3) Business-wide Initiatives Structural Reforms
Cost Structural Reforms
In the fiscal year ended March 31, 2014, we pressed ahead vigorously with the cost structural reforms begun in the fiscal year ended March 31, 2013. We monitored results each quarter, with the aim of definitely achieving the commitment amounts. As a result, all of the task teams that were put together by topic to address the target domains exceeded the plan.
Business Structural Reforms
Continuing from the fiscal year ended March 31, 2013, three programs, namely reorganization of production and R&D bases, strengthening of management of human resources and personnel costs, and integration of functions on a global scale, were carried out.
Of these, with regard to reorganization of production and R&D bases, we completed the closure of the Research Center Kanazawahakkei and its integration into the Research Center Shin-Yokohama in September 2013 as planned.
With regard to strengthening management of human resources and personnel costs, we are promoting greater employee development and recruiting human resources familiar with new business domains, and are engaging in various efforts with the goal of improving human productivity. In line with this, we revised the early retirement system for managers.
As for integration of functions on a global scale, we pressed ahead with the integration of back office functions, as well as enhancing and integrating logistics infrastructure across all subsidiaries based in the United States that was begun in 2012.
Initiatives to Achieve Sustained Growth R&D for the Creation of New Value
Amid the accelerating diversification of customer opinions and business globalization, the Shiseido Group focuses on research and development guided by survey data about our customers in major cities around the world: their skin, their opinions, actions, tastes, and so on. At the same time, we have engaged in value development based on customer insight (depth psychology that customers themselves are not aware of), on matters such as
psychological attitudes towards cosmetics, and buying motives. Currently, we are working to further expand this customer-oriented value development, by promoting research and
of kotozukuri, creating value that will touch our customers’ hearts. Furthermore, in the interest of balancing safety assurance and animal welfare, we eliminated animal testing in-house and externally for cosmetics and quasi-pharmaceuticals as of the end of March 20139, thanks to the establishment of a new safety assurance system based on alternatives to animal testing.
Furthermore, we dominated the top awards for both oral and poster presentations at the International Federation of Societies of Cosmetic Chemists (IFSCC) Conference 2013, a conference held by the IFSCC every second year, which recognizes the world’s best research in areas including cosmetics and skin. We also have the highest total number of awards (18 top awards, 4 other awards) among cosmetics manufacturers in the world.
Note:
9. Eliminated as of the end of March 2013: The Company decided at the Board of Directors meeting on February 28, 2013, not to conduct animal testing in-house or externally for cosmetics and quasi-pharmaceuticals which go into development from April 2013 onwards, apart from a limited number of exceptions.
Limited number of exceptions refers to the cases where it becomes necessary to explain safety to the public. Specifically, when it becomes necessary to again prove the safety of ingredients in a product on the market, and when the only option for doing so is animal testing, or for those countries where animal testing is essential to assure the safety of cosmetics.
Promoting Diversity in Employees
Employees, who work for the Shiseido Group in various countries and regions
worldwide, have diverse attributes, including nationality, gender, age, employment status and developmental challenges, as well as values and viewpoints, and we are promoting diversity on a global level. Since 90 percent of the Shiseido Group’s customers are women, we focus on providing new products and services based on our understandings of women’s values and current lifestyles. Our female employees, who account for approximately 80 percent of all the employees, must therefore play a central role in management and business activities. Accordingly, Shiseido has introduced a variety of support programs. As of the end of March 2014, the ratios of female employees10 and female leaders11 in the Shiseido Group worldwide were 84.6 percent and 49.2 percent respectively while in Japan 83.3 percent and 26.1 percent respectively.
Notes:
10. Ratio of female employees: Ratio of females in group employees 11. Ratio of female leaders: Ratio of females in managers with subordinates
Life Quality Business / LIFE QUALITY BEAUTY PROGRAM
As an embodiment of the Shiseido Group corporate message, “This moment. This life. Beautifully.” and as a social business that targets ongoing and constructive business development, we have integrated and reorganized the beauty services geared toward the elderly (Cosmetic Therapy Program for the Elderly) and various beauty seminars into the life quality business.
We continued to implement the “SHISEIDO LIFE QUALITY BEAUTY PROGRAM ” an initiative that leverages the results of research on both the material and spiritual aspects of cosmetics and beauty accumulated through our business activities to help each and every customer realize their beauty aspirations and to enrich their hearts as well. The SHISEIDO LIFE QUALITY BEAUTY PROGRAM reopened in the Shiseido Ginza Building that opened in October 2013. In addition to the serious skin conditions it has targeted thus far, such as birth marks, dark spots, white spots (vitiligo), and uneven skin (scars), the center has also launched a makeup advice program to address the beauty-related concerns of cancer patients, including dull skin or loss of eyebrows or eyelashes resulting from the side-effects of cancer treatment.
Environmental Activities
Since its founding, Shiseido has pursued business development while maintaining gratitude for the bounty of the earth. We continue to implement the Shiseido Earth Care Project with the participation of all employees, in order to bring beauty to both people and the earth by engaging in environmental activities at every stage of our mission, from the creation of products to seeing our customers shine. Through the project, Shiseido promotes initiatives such as improving the environmental friendliness of its products, reducing the amount of CO2 emitted at business offices, and working to preserve biodiversity.
During the fiscal year ended March 31, 2014, we engaged in ongoing environmental initiatives such as the camellia-tree planting and conservation volunteer activities that we have conducted annually in Japan since 2009, and the tree-planting activities that we have continued in China since 2008. In addition, we carried out environmental activities through our office building. At the Shiseido Ginza Building, which opened in October 2013, such as we introduced energy-saving air conditioning equipment and lighting, and installed solar energy generation facilities in order to achieve lower CO2 emissions. In addition, with the aim of contributing to the preservation of biodiversity in the Ginza area, we planted greenery on the rooftop using appropriate trees based on the results of an environmental research of the surroundings.
SHISEIDO LIFE QUALITY BEAUTY CENTER Individual consultation rooms offer privacy for users
Rooftop garden of the Shiseido Ginza Building (Shisei Garden)
(2) Capital Expenditures
Investment
(Millions of yen) Purpose of Investment
Property, plant and equipment 19,353 Renovation and renewal of production facilities, upgrades at overseas stores, reconstruction of the Shiseido Ginza Building
Intangible assets 4,065 Development of systems for the Company’s website including watashi+, additional introduction of the SAP core business processing system in the domestic subsidiaries
Long-term prepaid expenses 6,197 Installations of sales counters and fixtures
Total 29,616
(3) Financing
Shiseido did not procure significant funding during the fiscal year ended March 31, 2014.
(4) Summary of Consolidated Income and Assets of the Shiseido Group
(Millions of yen, unless otherwise noted) 111th Business Term (4/1/2010 - 3/31/2011) 112th Business Term (4/1/2011 - 3/31/2012) 113th Business Term (4/1/2012 - 3/31/2013) 114th Business Term (Current term) (4/1/2013 - 3/31/2014) Net Sales 670,701 682,385 677,727 762,047 Operating Income 44,458 39,135 26,045 49,644
Operating Income to Net Sales
(%) 6.6 5.7 3.8 6.5
Ordinary Income 44,480 39,442 28,406 51,426
Net Income (Loss) 12,790 14,515 -14,685 26,149
Net Income (Loss) per Share
(Yen) 32.15 36.47 -36.90 65.65
Return on Equity (%) 3.9 4.9 -5.1 8.4
Comprehensive Income -18,260 5,456 19,985 90,722
Total Assets 739,120 720,707 715,593 801,346
Net Assets 320,127 303,715 303,153 358,707
Net Assets per Share (Yen) 772.14 729.89 721.21 849.42
Equity Ratio (%) 41.6 40.3 40.1 42.2
Price/Earnings Ratio (Times) 44.8 39.2 ― 27.7
Cash Flows from Operating
Activities 67,586 52,599 42,040 84,320
Cash Flows from Investing
Activities -30,303 -20,668 -25,534 -16,799
Cash Flows from Financing
Activities -39,571 -35,482 -24,745 -47,462
Cash and Cash Equivalents at
End of Year 88,592 82,974 80,253 110,163
Notes:
1. In an effort to achieve consistency in internal Group accounting treatment, Shiseido Group subsidiaries in the Americas changed, from the 112th Business Term, accounting treatment of samples and
promotional items associated with marketing activities of stores, from the method in which they are recognized as assets when acquired and are expensed when shipped to customers, to the method in which they are expensed when acquired. As a result of this change, the Accounting Standard for Accounting
Changes and Error Corrections (ASBJ Statement No. 24) was adopted and applied retroactively to the consolidated financial statements for the 111th Business Term.
2. Increase in comprehensive income in the 112th Business Term was due primarily to an increase in foreign currency translation adjustments associated with the fluctuations of exchange rate.
3. Price/Earnings Ratio for the 113th Business Term is not stated as a net loss was recorded for the period due mainly to an impairment loss on goodwill related to the subsidiary acquired.
4. Effective the 114th Business Term, the Company has applied “Employee Benefits” (International Accounting Standard No. 19, amended June 16, 2011), to certain consolidated subsidiaries. This has resulted in a change in recognition of changes in the Company’s net defined benefit liabilities. The change in accounting policy has been applied retroactively and is reflected in the consolidated financial statements for the 113th Business Term.
5. Summary of Non-Consolidated Income and Assets
(Millions of yen) 111th Business Term (4/1/2010 -3/31/2011) 112th Business Term (4/1/2011 -3/31/2012) 113th Business Term (4/1/2012 - 3/31/2013) 114th Business Term (Current term) (4/1/2013 - 3/31/2014) Net Sales 236,742 224,897 220,404 219,219 Operating Income (Loss) 15,243 -2,320 3,280 6,051 Ordinary Income 26,264 11,046 27,080 23,663 Net Income 12,692 8,476 20,119 15,482 Total Assets 596,091 595,417 589,928 603,317 Net Assets 331,395 320,540 322,963 326,061 (5) Income Distribution
(Millions of yen, unless otherwise noted) 111th Business Term (4/1/2010 -3/31/2011) 112th Business Term (4/1/2011 -3/31/2012) 113th Business Term (4/1/2012 - 3/31/2013) 114th Business Term (Current term) (4/1/2013 - 3/31/2014)
Annual cash dividends per share (Yen) 50 50 50 20 (P)
Annual dividends 19,895 19,899 19,900 7,968 (P)
Consolidated payout ratio (%) 155.5 137.1 ― 30.5 (P)
Notes:
1. Annual cash dividends per share and annual dividends for the 114th Business Term (current term) are predicated on the approval of the First Item of Business, Dividends of Retained Earnings, at the ordinary general meeting of shareholders to be held on June 25, 2014.
2. The consolidated payout ratio for the 113th Business Term has not been calculated because a net loss was posted for the same business term.
3. The Company’s target for returns over the medium-term is a consolidated payout ratio of 40 percent. Based on this target, we will prioritize payment of stable dividends while implementing share buybacks in a flexible manner.
(6) Issues to Address
1) Medium- and Long-Term Issues Management Strategies
Toward fulfilling “Our Mission,” which is the corporate philosophy of the Shiseido Group, we are working hard to benefit society by enhancing beauty to customers worldwide and thus achieve sustained increases in corporate value. Positioning the year 2020, when Tokyo hosts the Olympics and Paralympics, as a turning point, we will embrace a management approach emphasizing consolidated ROE and other capital efficiency
strive to become a formidable global marketing company with powerful brands and unparalleled strengths in marketing and innovation.
The Shiseido Group’s core business is the “brand business,” which entails creating attractive brands and conveying the value of those brands to customers. The Group’s brands are its most important assets, so continuous creation of brand value is a crucial factor in its growth potential. In order to continuously create brand value, we must consistently deliver products and services that realize customers’ support. This means making maximum use of our core tangible and intangible assets: financial capital (shareholder capital, etc.),
manufacturing capital (manufacturing facilities, etc.), intellectual capital (expertise, know-how, intellectual property, cultural assets, etc.), human capital (human resources, etc.), social capital (strong relationships of trust with stakeholders, networks, etc.) and natural capital (energy, raw materials, etc.). To achieve this goal, we will harness our Groupwide strengths to pursue integrated marketing based on the core belief that “marketing is the essence of corporate management.”
In the fiscal year ending March 31, 2015, we will focus on preparing for the next stage of growth under a new management structure headed by President Masahiko Uotani, a
marketing professional from outside the Group. Specifically, we will address three major priorities: “strengthening marketing execution and brand attractiveness from the customer’s perspective,” “reforming our organization and corporate culture,” and “reinforcing our operational foundation.” At the same time, we will formulate a new medium-term business plan targeting continuous and powerful growth. We are already implementing relentless structural reforms ahead of the plan, which will start in the fiscal year ending March 31, 2016.
Strengthening Marketing Execution and Brand Attractiveness from the Customer’s Perspectives
With respect to strengthening marketing execution, we will work to improve the organizational functions of all parts of the Group with direct customer interface, including the marketing departments (responsible for brand management), sales departments, and beauty consultants (handling store-level responses). To this end, we will reinforce our creative skills, rigorously embrace a spirit of Omotenashi (hospitality), and significantly strengthen our digital marketing and e-commerce systems.
As for reinforcing brand attractiveness, we will establish a brand portfolio that clearly defines fostered brands and priority investment brands along global regional lines.
Reforming Our Organization and Corporate Culture
In order to become a truly global corporation, we will reassess our organizational structure and human resource allocations in response to our brand strategies and global regional strategies, in order to advance an organization that has flat, simple business execution rules and processes. To embrace a renewed global perspective according to business management directions, we will set up a Global Leadership Committee12 that will involve management of group companies from around the world to engage in
decision-making on business strategies.
Through these initiatives, we will discard organizational hierarchy and reform ourselves as an organization that conducts business as a team that is transparent and focuses on the customer.
From the perspective of gender equality in business participation, we will target a 30 percent female leadership ratio in Japan for the Shiseido Group during fiscal 2016, well ahead of the objective set by the national government (in 2020). Rather than simply achieving numerical targets, however, we wish to appoint talented people to leadership positions. For this reason, we will place importance on nurturing human resources irrespective of gender, with the aim of fostering a corporate culture that will consistently give rise to female leaders.
Note:
12. Global Leadership Committee: Committee that reviews Shiseido Group management strategies, comprised mainly of executives from overseas subsidiaries and including the Company’s directors and corporate officers as members.
Reinforcing Our Operational Foundation
We will continue promoting cost structural reforms and business structural reforms pursued to date and further reinforce our operating foundation. Specifically, we will
strengthen our financial position by enhancing the effectiveness of asset deployment and the efficiency of capital, in addition to improving cash flows, while making market-winning investments.
In addition, we believe it is necessary to have a flexible business decision-making from the global perspective with an overseas sales ratio in excess of 50 percent. To this end, in 2015 we will shift our fiscal year-end from March 31 to December 31, so that all Group companies will have the same fiscal periods. Accordingly, fiscal 2015 will become a nine-month period ending December 31, 2015, and fiscal 2016 will be a one-year period from January to December 2016. This will enable us to accelerate management decisions related to swift allocation of investments and the like, and thus raise the transparency and quality of management by disclosing information in a timely and appropriate manner.
Innovation for Sustainable Growth
Building brand value requires generation of two types of elements: successive innovation and non-successive innovation. Successive innovation means developing solutions based on customer feedback, and providing a united response from the marketing, research and development, and sales teams. By contrast, non-successive innovation means producing innovations based on totally new perspectives, using open innovation
unconstrained by conventional wisdom.
In the past, the Shiseido Group has tended to rely on successive innovation. To achieve sustained growth, however, we will deploy our capabilities in generating non-successive innovation. Our aim is for all departments—product development, research, production, sales and stores—to unite in generating both successive and non-successive innovations. With a view to creating brand value for sustained growth, the Shiseido Group will move ahead with building a foundation that will generate two types of innovation: successive innovation and non-successive innovation.
2) Main Challenges for the Fiscal Year Ending March 31, 2015 Addressing Recoil in Demand after Consumption Tax Hike
In Japan, we expect a recoil in demand during the fiscal year ending March 31, 2015, following the rush in demand ahead of the consumption tax hike. We will take measures to address this market environment.
Stepping Up Brand Strategy Promotion
In order to establish an effective brand portfolio, from the fiscal year ending March 31, 2015 we will highlight the core value of SHISEIDO as a corporate brand and narrow our focus to brands/lines that strongly enhance its appeal while making aggressive investments aimed at achieving high levels of growth.
In Japan, we will strongly enhance the appeal with six such brands/lines: global brand
SHISEIDO, ELIXIR, MAQuillAGE, BENEFIQUE (cosmetics brand exclusively sold in
cosmetics specialty stores), HAKU (special complexion-lightening brand derived from long-term research into skin blemish prevention), and a new line for seniors scheduled for launch in the fiscal year ending March 31, 2015. With respect to three of the
brands—SHISEIDO (global brand), ELIXIR, MAQuillAGE, and BENEFIQUE—we are pursuing innovations under a Marketing Reform Project established in the fiscal year ended March 31, 2014, and we will undertake a renewal of those brands in the fiscal year ending March 31, 2015.
In the global business, we will establish an overwhelming presence in various ways, including renewal of the global brand SHISEIDO and the exclusive Chinese brand
AUPRES13, as well as launching the first liquid foundation in bareMinerals.
Note:
13. AUPRES: China-only comprehensive skincare and makeup brand sold in department stores.
Reinforcing Distribution Strategy and Promoting Over-the-Counter Development
In line with our brand re-launch effort, we will promote new specialty store strategies and collaborations with large-scale retailers, with the aim of reinforcing our sales and distribution strategies.
Pursuing Rigorous Cost Reassessment and Efficiency Enhancement
In addition to cost structural reforms pursued to date, we will emphasize cost
reassessment and efficiency enhancement by carefully scrutinizing each aspect of outlays, including raw materials and other costs, marketing costs, and personnel expenses. We will also initiate a project to address the aforementioned recoil in demand in order to further raise profitability.
Building and Operating a Business Management Cycle
In order to swiftly address changes in market and competitive environments, we will innovate and reinforce a business management cycle based on such factors as reviews of business management in each business, as well as future projections and consideration of action plans. Entrenching such a management cycle will enable us to flexibly shift resources between brands and businesses.
1.2 Outline of the Shiseido Group (As of March 31, 2014) (1) Principal Businesses of the Shiseido Group
Segment Main Business
Domestic Cosmetics Business
Domestic cosmetics division (production and sale of cosmetics, cosmetic accessories, and toiletries, etc.)
Healthcare division (production and sale of health & beauty foods and over-the-counter drugs), etc.
Global Business
Overseas cosmetics division (production and sale of cosmetics, cosmetic accessories, and toiletries)
Overseas and domestic professional division (production and sale of beauty salon products), etc.
Others
Frontier science business (production and sale of cosmetics raw materials, medical-use drugs, medical cosmetics, precision and analytical equipment, etc.)
Restaurant business, etc.
(2) Major Business Hubs
Registered Head Office: 5-5, Ginza 7-chome, Chuo-ku, Tokyo
Principal Business Office (Shiodome Office): 6-2, Higashi-Shimbashi 1-chome, Minato-ku, Tokyo
Factories
Name Location
Kamakura Factory Kamakura-shi, Kanagawa Pref. Kakegawa Factory Kakegawa-shi, Shizuoka Pref.
Osaka Factory Higashi-Yodogawa-ku, Osaka-shi, Osaka Pref. Kuki Factory Kuki-shi, Saitama Pref.
Laboratories
Name Location
Research Center
(Shin-Yokohama) Tsuzuki-ku, Yokohama-shi, Kanagawa Pref. Beauty Creation Research Center Shinagawa-ku, Tokyo
(3) Major Subsidiaries and Affiliated Companies of the Shiseido Group Company Name Location Paid-in Capital
Ownership Percentage of Voting
Rights
Principal Business
Shiseido Sales Co., Ltd. Minato-ku, Tokyo
(million JPY) 100
%
100.0 Sale of cosmetics, etc. Shiseido FITIT Co., Ltd. Chuo-ku,
Tokyo
(million JPY)
10 100.0 Sale of cosmetics, etc. Shiseido International Inc. Chuo-ku,
Tokyo
(million JPY)
30 100.0 Sale of cosmetics, etc. The Ginza Co., Ltd. Chuo-ku,
Tokyo
(million JPY)
100 98.2 Sale of cosmetics, etc. Shiseido Pharmaceutical Co.,
Ltd. Chuo-ku, Tokyo (million JPY) 100 100.0 Sale of over-the-counter drugs, etc.
FT Shiseido Co., Ltd. Chuo-ku, Tokyo
(million JPY)
100 100.0 Sale of toiletries Shiseido Professional Co., Ltd. Chuo-ku,
Tokyo
(million JPY)
250 100.0
Sale of beauty salon products, etc. Shiseido Beauty Salon Co., Ltd. Chuo-ku,
Tokyo
(million JPY)
100 100.0 Operation of beauty salons Shiseido Americas Corporation Delaware,
U.S.A.
(thousand USD) 403,070
100.0 Holding company and sale of cosmetics, etc. in U.S.A. Shiseido America, Inc. New York,
U.S.A.
(thousand USD) 28,000
―
(100.0) Production of cosmetics, etc. Bare Escentuals, Inc. Delaware,
U.S.A.
(USD) 0.01
― (100.0)
Holding company of Bare Escentuals Group Bare Escentuals Beauty, Inc. Delaware,
U.S.A.
(USD) 1.00
―
(100.0) Sales of cosmetics, etc. Zotos International, Inc. Connecticut,
U.S.A. (thousand USD) 25,000 ― (100.0)
Holding company of Zotos Group and production and sale of beauty salon products, etc. Shiseido International Europe
S.A. Paris, France (thousand EUR ) 256,133
100.0 Holding company in Europe Shiseido International France
S.A.S. Paris, France (thousand EUR) 36,295 ―
(100.0) Production of cosmetics, etc. Shiseido Deutschland GmbH Dusseldorf,
Germany
(thousand EUR) 5,200
―
(100.0) Sale of cosmetics, etc. Shiseido Cosmetici (Italia)
S.p.A. Milan, Italy (thousand EUR) 2,400 ―
(100.0) Sale of cosmetics, etc.
Shiseido Europe, S.A.S. Paris, France
(thousand EUR) 9,000
―
(100.0) Sale of cosmetics, etc.
Beauté Prestige International S.A. Paris, France (thousand EUR) 17,760 ― (100.0) Holding company of Beauté Prestige International Group and sale of designer fragrances, etc.
Company Name Location Paid-in Capital Ownership Percentage of Voting Rights Principal Business
Laboratoires Decléor S.A.S. Paris, France (thousand EUR) 19,374 ― (100.0) Holding company of Decléor Group and production and sale of esthetic and spa products, etc.
Shiseido China Co., Ltd. Shanghai, China
(thousand RMB ) 565,093
100.0 Holding company and sale of cosmetics, etc. in China Shanghai Zotos Citic Cosmetics
Co., Ltd. Shanghai, China (thousand RMB) 418,271 26.3
(92.6) Production of cosmetics, etc. Shiseido Liyuan Cosmetics Co.,
Ltd. Beijing, China (thousand RMB) 94,300 32.0 (65.0)
Production and sale of cosmetics, etc. Shiseido Hong Kong Cosmetics
Ltd. Hong Kong, China (thousand HKD) 123,000
100.0 Sale of cosmetics, etc.
Taiwan Shiseido Co., Ltd. Taipei, Taiwan
(thousand TWD) 1,154,588
51.0
Holding company and production and sale of cosmetics, etc. in Taiwan Shiseido Parlour Co., Ltd. Chuo-ku,
Tokyo
(million JPY)
100 99.3 Operation of restaurants, etc. Selan Anonymous Association Chiyoda-ku,
Tokyo
(million JPY) 11,600
― [100.0]
Management of real estate, etc.
Note: Figures in parentheses ( ) in the Ownership Percentage of Voting Rights column include the share of indirect ownership. Those in brackets [ ] indicate share of related or
approved parties.
(4) Matters Concerning Employees of the Group
Business Category Number of Employees Comparison with the Previous Fiscal Year
Domestic Cosmetics Business 12,163 [7,772] -78 [-199]
Overseas Business 20,404 [5,287] -238 [-284]
Others 487 [349] +14 [+2]
Total 33,054 [13,408] -302 [-481]
Note: The numbers of employees shown are full-time employees. Annual average numbers of temporary employees are shown in [ ]. Temporary employees are part-time workers, and dispatched employees are excluded.
(5) Main Supplies of Loans to the Group
Lender Outstanding Balance
Mizuho Bank, Ltd. 34,363 4,680 4,500 million JPY thousand USD million KRW
2. Matters Concerning Shares Issued by the Company (As of March 31, 2014) (1) Total Number of Shares Authorized to Be Issued:
1,200,000,000 shares
(2) Number of Shares Issued and Outstanding:
400,000,000 shares (including 1,422,159 treasury stock) (3) Number of Shareholders:
59,296
(4) Principal Shareholders Shareholders
Investment in the Company Number of Shares
Held
Percentage of Shareholding The Master Trust Bank of Japan, Ltd. (Trust
Account) (thousand shares) 28,275 % 7.09<7.06> Mizuho Bank, Ltd. 23,526 5.90<5.88>
Japan Trustee Services Bank, Ltd. (Trust Account) 13,290 3.33<3.32> MORGAN STANLEY & CO． INTERNATIONAL
PLC 12,436 3.12<3.10>
Association of Shiseido Employees’ Investment in
the Company’s shares 10,046 2.52<2.51>
Nippon Life Insurance Company 6,317 1.58<1.57> NIPPONKOA Insurance Company, Limited 5,934 1.48<1.48> NORTHERN TRUST CO. (AVFC) SUB A/C NON
TREATY 5,764 1.44<1.44>
Mitsui Sumitomo Insurance Company, Limited 5,600 1.40<1.40> MSCO CUSTOMER SECURITIES 5,318 1.33<1.32>
Notes:
1. Calculations of percentage of shareholding, including below Notes are based on the total number of issued and outstanding shares excluding treasury stock. Calculations of percentage of shareholding indicated in < > are based on the total number issued and outstanding shares including treasury stock.
2. All shares held by The Master Trust Bank of Japan, Ltd. (Trust Account) and Japan Trustee Services Bank, Ltd. (Trust Account) are connection with the respective bank’s trust business.
3. The number of shares held by Mizuho Bank, Ltd., 23,526 thousand shares, include their holding of 13,526 thousand shares in its own name and holding by its employee pension trust of 10,000 thousand shares (6,000 thousand shares with voting rights and 4,000 thousand shares without voting rights) under a registered name, Mizuho Trust & Banking Co., Ltd. re-trusted to Trust & Custody Services Bank, Ltd. Employees Pension Trust for Mizuho Bank. A report of amendment to large shareholdings from Mizuho Bank, Ltd. that on July 22, 2013, it held 31,207 thousand shares through joint holdings
(Percentage of shareholding: 7.82%), of which 23,526 thousand shares (5.90%, including 6,000 thousand shares with voting rights and 4,000 thousand shares without voting rights, totaling 10,000 thousand shares held by its employee pension trust) are held by Mizuho Bank, Ltd. has been filed with the
Director-General of the Kanto Finance Bureau and the Company has received its copy.
Also, a report of amendment to large shareholdings from Mizuho Bank, Ltd. that on April 22, 2014, it held 35,524 thousand shares through joint holdings (Percentage of shareholding: 8.91%), of which 23,526 thousand shares (5.90%)
are held by Mizuho Bank, Ltd. has been filed with the Director-General of the Kanto Finance Bureau and the Company has received its copy.
4. A report of amendment to large shareholdings from Mitsubishi UFJ Financial Group, Inc. that on April 18, 2011, it held 26,236 thousand shares through joint holdings (Percentage of shareholding: 6.58%), of which 21,838 thousand shares (5.47%) are held by the Mitsubishi UFJ Trust and Banking Corporation has been filed with the Director-General of the Kanto Finance Bureau and the Company has received its copy. However, the Mitsubishi UFJ Financial Group has been excluded from the above principal shareholders, as the actual number of shares held by the said company has not been confirmed by the Company as of the end of the fiscal year.
5. A report of amendment to large shareholdings from the Sumitomo Mitsui Trust Bank, Ltd., that on January 21, 2014, it held 18,552 thousand shares through joint holdings (Percentage of shareholdings: 4.65%), of which 13,479 thousand shares (3.38%) are held by the Sumitomo Mitsui Trust Bank, Ltd. has been filed with the Director-General of the Kanto Finance Bureau and the Company has received its copy. However, the Sumitomo Mitsui Trust Bank, Ltd. has been excluded from the above principal shareholders, as the actual number of shares held by the said company has not been confirmed by the Company as of the end of the fiscal year.
Also, a report of amendment to large shareholdings from the Sumitomo Mitsui Trust Bank, Ltd., that on May 8, 2014, it held 19,419 thousand shares through joint holdings (Percentage of shareholding: 4.87%), of which 14,133 thousand shares (3.54%) are held by the Sumitomo Mitsui Trust Bank, Ltd. has been filed with the Director-General of the Kanto Finance Bureau and the Company has received its copy.
3. Matters Concerning Shares Held by the Company (As of March 31, 2014)
1) Number of Stock-Holdings in the Amount on the Balance Sheet, Which the Company Holds for Purposes Other Than Realizing Direct Investment Gains:
Number of Companies Amount on Balance Sheet
103 (million yen)
18,013
2) The 10 Largest Stock-Holdings of Publicly Listed Companies in the Amount on the Balance Sheet, Which the Company Holds for Purposes Other Than Realizing Direct Investment Gains
(Including Publicly Listed Companies Which Amounts Reported on the Balance Sheet Exceed One Percent of Capital):
Company Number of Shares Amount on Balance Sheet Main Transaction Purpose for Holding Shares Mizuho Financial Group, Inc.
(thousand shares) 16,625 (million yen) 3,391 Financial transactions with the subsidiaries of the issuer
To further facilitate operations Mitsubishi UFJ Financial Group, Inc. 2,496 1,415
Financial transactions with the subsidiaries of the issuer
TOPPAN PRINTING CO., LTD. 1,628 1,203
Purchase of product packaging and sales promotion materials ONO PHARMACEUTICAL CO., LTD. 117 1,045 Product sales Tokio Marine Holdings, Inc. 300 929
Insurance transactions with the subsidiaries of the issuer
Dai Nippon Printing Co., Ltd. 871 862
Purchase of product packaging and sales promotion materials
Paltac Corporation 600 706 Product sales
Sumitomo Mitsui Trust Holdings, Inc. 1,432 667
Outsourcing
administration business of share register and financial transactions with the subsidiaries of the issuer
NKSJ Holdings, Inc. 221 586
Insurance transactions with the subsidiaries of the issuer
MS&AD Insurance Group Holdings, Inc. 239 566
Insurance transactions with the subsidiaries of the issuer
Notes:
1. The Company does not hold shares for the purpose of realizing direct investment gains.
2. In terms of the top eight companies listed above, the amounts reported in the balance sheet exceed one percent of the amount of capital of the Company.
4. Matters Concerning Stock Acquisition Rights (As of March 31, 2014)
The Company issues stock acquisition rights for directors and corporate officers. These are executive compensation-type stock options offered as a long-term incentive.
Total number of shares that are the object of all stock acquisition rights issued as of March 31, 2014 and the percentage thereof to the total number of shares issued and outstanding as of the same date, excluding treasury stock are as follows:
Total Number of Shares That Are the Object of Stock Acquisition Rights
Percentage of Total Number of Shares Issued and Outstanding (Excluding
Treasury Stock) Shares
1,217,900
% 0.30
These stock acquisition rights were granted as stock options in order to link remuneration of the directors and corporate officers of the Company with an increase in its shareholder value on a long-term basis, while placing emphasis on their sharing interests with its shareholders. These stock options are categorized into two. One is the performance-linked compensation as remuneration to directors and corporate officers since fiscal 2008 and whose amount payable for exercise is set at Yen one (1), and the other is the performance-linked stock option as remuneration to directors and corporate officers having offices by fiscal 2007 and whose amount payable for exercise is set based on the market fair value of the share of the Company at that time.
No stock acquisition rights are allotted to external directors and audit & supervisory board members.
[Stock Acquisition Rights Issued during the Current Fiscal Year] Issue Date of Stock Acquisition Rights Grantees of Stock Acquisition Rights Amount Paid for Stock Acquisition Rights Amount Contributed upon Exercise of Stock Acquisition Rights Exercise Period of Stock Acquisition Rights As of March 31, 2014 Holding Condition
and Position of the Stock Acquisition
Rights
Class and Number of Shares to Be Issued Upon Exercise of Stock Acquisition Rights Stock Acquisition Rights Issued in Consideration of Duty August 29, 2013 Directors and corporate officers of the Company 16 persons 1,434 yen per share 1 yen per share From August 1, 2016 to July 31, 2028 Directors of the Company 6 persons 441 rights
Common stock of the Company
44,100 shares Corporate officers
who do not serve as directors
10 persons 395 rights
39,500 shares Note: The number of allotted stock acquisition rights and allotted person during the current
fiscal year and class and number of shares to be issued upon exercise of the stock acquisition rights are shown on “Holding condition and position of the stock acquisition rights” and “Class and number of shares to be issued upon exercise of stock acquisition rights” as of March 31, 2014.
[Stock Acquisition Rights Issued during in the Past Fiscal Years] Stock Acquisition Rights Issued Free of Charge Issue Date of Stock Acquisition Rights Grantees of Stock Acquisition Rights Amount Paid for Stock Acquisition Rights Amount Contributed upon Exercise of Stock Acquisition Rights Exercise Period of Stock Acquisition Rights As of March 31, 2014 Holding Condition
and Position of the Stock Acquisition
Rights
Class and Number of Shares to Be Issued Upon Exercise of Stock Acquisition Rights July 26, 2004 Directors and corporate officers of the Company 32 persons Gratis issue 1,427 yen per share From July 1, 2006 to June 28, 2014 Directors of the Company 1 person 31 rights Common stock of the Company 31,000 shares Others 6 persons 60 rights 60,000 shares July 28, 2005 Directors and corporate officers of the Company 26 persons Gratis issue 1,481 yen per share From July 1, 2007 to June 28, 2015 Directors of the Company 1 person 30 rights Common stock of the Company 30,000 shares Others 17 persons 137 rights 137,000 shares Stock Acquisition Rights Issued in Consideration of Duty Issue Date of Stock Acquisition Rights Grantees of Stock Acquisition Rights Amount Paid for Stock Acquisition Rights Amount Contributed upon Exercise of Stock Acquisition Rights Exercise Period of Stock Acquisition Rights As of March 31, 2014 Holding Condition
and Position of the Stock Acquisition
Rights
Class and Number of Shares to Be Issued Upon Exercise of Stock Acquisition Rights August 23, 2006 Directors and corporate officers of the Company 23 persons Gratis issue 2,300 yen per share From August 1, 2008 to July 30, 2016 Directors of the Company 1 person 19 rights Common stock of the Company 19,000 shares Audit & supervisory board members of the Company 1 person 4 rights 4,000 shares Others 21 persons 118 rights 118,000 shares August 23, 2007 Directors and corporate officers of the Company 21 persons Gratis issue 2,615 yen per share From August 1, 2009 to July 30, 2017 Directors of the Company 3 persons 48 rights Common stock of the Company 48,000 shares Audit & supervisory board members of the Company 1 person 4 rights 4,000 shares Others 17 persons 107 rights 107,000 shares August 21, 2008 Directors and corporate officers of the Company 19 persons
2,381 yen 1 yen per share
From August 1, 2011 to July 30, 2018 Directors of the Company 1 person 9 rights Common stock of the Company 9,000 shares Audit & supervisory board members of the Company 1 person 3 rights 3,000 shares Corporate officers who do not serve as director 2 persons 6 rights 6,000 shares Others 2 persons 7 rights 7,000 shares
Stock Acquisition Rights Issued in Consideration of Duty Issue Date of Stock Acquisition Rights Grantees of Stock Acquisition Rights Amount Paid for Stock Acquisition Rights Amount Contributed upon Exercise of Stock Acquisition Rights Exercise Period of Stock Acquisition Rights As of March 31, 2014 Holding Condition
and Position of the Stock Acquisition
Rights
Class and Number of Shares to Be Issued Upon Exercise of Stock Acquisition Rights August 28, 2009 Directors and corporate officers of the Company 19 persons
1,468 yen 1 yen per share
From August 1, 2012 to July 31, 2019 Directors of the Company 3 persons 331 rights Common stock of the Company 33,100 shares Audit & supervisory board members of the Company 1 person 47 rights 4,700 shares Corporate officers who do not serve as director 3 persons 141 rights 14,100 shares Others 6 persons 418 rights 41,800 shares August 30, 2010 Directors and corporate officers of the Company 18 persons
1,757 yen 1 yen per share
From August 1, 2013 to July 31, 2020 Directors of the Company 5 persons 463 rights Common stock of the Company 46,300 shares Corporate officers
who do not serve as director 4 persons 156 rights 15,600 shares Others 6 persons 323 rights 32,300 shares August 30, 2011 Directors and corporate officers of the Company 17 persons 1,294 yen 1 yen per share From August 1, 2014 to July 31, 2026 Directors of the Company 6 persons 665 rights Common stock of the Company 66,500 shares Corporate officers
who do not serve as director 4 persons 212 rights 21,200 shares Others 7 persons 667 rights 66,700 shares August 30, 2012 Directors and corporate officers of the Company 19 persons
1,001 yen 1 yen per share
From August 1, 2015 to July 31, 2027 Directors of the Company 6 persons 883 rights Common stock of the Company 88,300 shares Corporate officers
who do not serve as director 8 persons 570 rights 57,000 shares Others 5 persons 637 rights 63,700 shares Note: Holding of the stock acquisition rights as of March 31, 2014 by an audit & supervisory board member of the Company was granted during his term of office as a corporate officer.
5. Matters Concerning Status of Corporate Governance and Directors, Audit & Supervisory Board Members and Corporate Officers of the Company
(1) Corporate Governance Policy
The Company is setting higher standards of corporate governance based on the understanding that maximizing corporate and shareholder value, fulfilling social
responsibilities and achieving sustainable growth and development are the keys to maintaining support as a valuable company from all stakeholders (customers, business partners,
shareholders, employees, society and the Earth).
(2) Outline of the Company’s System for the Management and Execution of Business 1) Corporate Governance Framework of the Company
Corporate governance framework of the Company is as follows.
<Committees Associated with Corporate Officers>
Corporate Executive Officer Committee: Final decision-making body comprising corporate officers in charge of business execution, regarding material matters of business execution
Policy Meeting of Corporate Officers: Committee of corporate officers to deliberate the Company’s
medium-to-long-term strategies and decide the direction of the strategies to take In addition to the above, corporate officers make decisions regarding the execution of business in their respective business divisions and hold Decision-Making Meetings of Corporate Officers to deliberate matters to be proposed to the Board of Directors and the Corporate Executive Officer Committee.
<Advisory Committees to the Board of Directors>
Remuneration Advisory Committee: Makes reports to the Board of Directors regarding the remuneration system for directors as well as evaluation of their performance. Remuneration Advisory Committee had four meetings in the fiscal
