Proven in Japan.
Ready for the World.
Annual Report 2012
Fiscal year ended December 31, 2012
For over a century, KOKUYO has evolved as a full-line manu- facturer of stationery and furniture. KOKUYO has continually changed for the better. Our new strategic road map eyes greater expansion worldwide, especially in Asia’s dynamic markets. The goal? To boost our ratio of overseas revenues from some 3% today to fully 30% by 2020, while also
enhancing our governance framework and corporate social responsibility initiatives.
KOKUYO is aiming for sustained growth as an “Asian com- pany” engaged in operations both in Japan and overseas. And realize our corporate philosophy of “Enrich the world through our products and services.”
1 Financial Highlights
2 Message to Our Stakeholders 10 Special Feature: Proven in Japan.
Ready for the World. 16 Review of Operations 19 KOKUYO’s CSR
20 KOKUYO’s CSR Charter 21 ISO 26000 Table 22 Corporate Governance
24 Board of Directors, Audit & Supervisory Board Members, and Corporate Officers 26 Human Rights and Labor Practices 27 Environmental Preservation
28 Fair Business Practices and Consumer Issues 29 Community Involvement and Development 30 Eleven-Year Summary
32 Management’s Discussion and Analysis 38 Consolidated Balance Sheets
40 Consolidated Statements of Operations
41 Consolidated Statements of Comprehensive Income 42 Consolidated Statements of Changes in Net Assets 43 Consolidated Statements of Cash Flows
44 Notes to Consolidated Financial Statements 74 Independent Auditors’ Report
75 Corporate Data
Note: Starting from fiscal 2012 (ended December 31, 2012), segment information is disclosed based on the following three segments: “stationery segment,” “furniture segment,” and “online and catalog sales and retail segment.” Accordingly, the historical figures for fiscal 2011 are reclassified using the new segments.
Cautionary Statement with Respect to Forward-Looking Statements This annual report contains statements about KOKUYO’s future business plans and strategies as well as estimates. Statements regarding the Company’s projected business results are not based on historical facts and are subject to various risks and uncertainties. These risks and uncertainties relate to economic conditions in KOKUYO’s business environment, particularly the state of private-sector and public-sector capital investment, competitive pricing pressures in the marketplace, and KOKUYO’s ability to continue designing and developing products that will be accepted in markets. However, it should be noted that elements affecting performance are not limited to the previously mentioned factors.
Contents
Corporate Philosophy
“Enrich the world through our products and services”
Corporate Vision
Always innovating for your knowledge
Net Sales
(Millions of yen)
Operating Income/
Ratio of Operating Income to Net Sales
(Millions of yen) (%)
300,000
0 100,000 200,000
2012 2011
2010
5,000
0 2,000
1,000 3,000 4,000
2.5
0 1.0
0.5 1.5 2.0
2012 2011
2010 L Operating Income (Left Scale)
L Ratio of Operating Income to Net Sales (Right Scale)
Net Income (Loss)/Return on Equity
(Millions of yen) (%)
Total Assets/Equity Ratio
(Millions of yen) (%)
3,000
-6,000 -3,000 0
2
-4 -2 0
2012 2011
2010
300,000
0 120,000
60,000 180,000 240,000
100
0 40
20 60 80
2012 2011
2010 L Net Income (Loss) (Left Scale)
L Return on Equity (Right Scale)
L Total Assets (Left Scale)
L Equity Ratio (Right Scale) Millions of yen
Thousands of U.S. dollars
2012 2011 2010 2012
For the year:
Net sales ... ¥275,822 ¥260,005 ¥261,874 $3,186,483 Operating income ... 4,853 4,073 3,282 56,065 Net income (loss) ... 2,429 (5,460) 815 28,061
At year-end:
Total assets ... 258,462 252,794 252,880 2,985,929 Net assets ... 150,633 147,270 155,923 1,740,215
Yen U.S. dollars
Per share data:
Basic net income (loss) ... ¥ 20.53 ¥ (46.16) ¥ 6.89 $ 0.24 Cash dividends applicable to the year ... 15.00 15.00 15.00 0.17
Note: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥86.56=U.S.$1.00, the approximate exchange rate prevailing on December 31, 2012.
Financial Highlights
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES The years ended December 31, 2012, 2011 and 2010
Annual Report 2012 1
Message to Our Stakeholders
What We Achieved in 2012:
First Gains in Both Sales
and Income in Five Years
While economic conditions showed gradual recovery in 2012, future trends remained uncertain as corporations continued to cut costs and price competition was intense. In Japan, KOKUYO worked to expand earnings and to position itself as
“company of first choice” among its customers, offering out- standing products and services beyond customer expecta- tions. Performancewise, driven by clear customer recognition of the excellence of its products and services, KOKUYO reported increases in both net sales and net income. Overseas, in emerging markets particularly in Asia, KOKUYO’s initiatives spanned completing M&A of local part- ners, enhancing production facilities, developing products suit- ed to local needs, and expanding its marketing network. Because of these initiatives, KOKUYO made significant prog- ress toward the goal of becoming a truly Asian company, cre- ating a new earnings platform throughout Asia. However, KOKUYO is confronting a range of issues to address. For example, competition with other companies based in Asia is becoming more intense and prices of raw materials are rising. As a result, these operations did not contribute to profitability during the fiscal year under review. Nevertheless, we have identified the causes and have already begun to take the nec- essary measures that will lead to results in fiscal 2013 and later years.
Therefore, in 2012, the KOKUYO Group moved nearer to numerical targets, rebounding from the 20-year net sales low watermark of 2011, achieving the first increases in both sales and income in five years as well as positive net income. Since the so-called “Lehman Shock” of 2008, we have implemented a wide range of business reforms and are pleased to report that in 2012 clear signs of future growth are evident.
Stationery Business:
Our Solid Core Competence
Sales of the stationery business rose 6% over the previous year. This result was partly due to the inclusion overseas of KOKUYO Camlin Ltd. within the scope of consolidation and an increase in domestic sales despite the adverse effects of sluggish demand and structural changes in distribution. Nonetheless, we developed and launched a series of high- value-added products that became hit products, gaining a strongly favorable response from the market. In overseas mar- kets, we moved forward with business reforms at KOKUYO Camlin and the takeover of business activities of HOT ROCKS STATIONERY (Shenzhen) Co., Ltd.
Furniture Business:
Firm Repositioning for the Future
Following the adverse impact of the “Lehman Shock,” our furniture business moved into the black again for the first time in four years. Recognizing that this segment tends to move in synch with the ups and downs of the economic cycle, we suc- cessfully implemented a wide range of countermeasures after the business began to record losses. These included integrat- ing our manufacturing and selling functions, promoting team- work with retail stores, strengthening capabilities for proposing value-added solutions to customers, promoting cost-cutting, and lowering fixed costs. In other words, performance improved not simply because the volume of office space offered on the market increased. In this sense, we regard the return to profitability as a compelling indication of stable growth going forward.
Online and Catalog Sales and Retail Business: Record Achievements
In our online and catalog sales business, our Kaunet catalog service for offices continued to enjoy the support of business customers, as we made improvements in Kaunet catalogs to make it easier for customers to determine product features and sizes at a glance. Our With Kaunet service, which enables customers to order office products in bulk, continued to report favorable sales expansion. Therefore, sales and operating income were at record levels. Even our retail business depart- ments, which sell interior goods and living accessories, contin- ued to develop robustly, opening new ACTUS and THE CONRAN SHOP stores in central urban areas.
President and CEO
Akihiro Kuroda
Annual Report 2012 3
Message to Our Stakeholders
Principal Topics: 2011 to 2013
Corporate Management
• Corporate governance reforms A Introduction of the corporate officer
system
A Appointment of two independent directors
• Aligned businesses into two businesses, the Stationery-Related Business and
the Furniture-Related Business
Corporate Management
• Corporate governance reforms A Increased the number of indepen-
dent directors to a total of three
Overseas
KOKUYO announced a goal of raising over- seas sales to 30% of consolidated net sales by 2020.
• Established KOKUYO Vietnam Trading Co., Ltd. to act as a stationery sales company in Vietnam
• Acquired Camlin Limited in India and changed its corporate name to KOKUYO Camlin Ltd.
• Made investment in Pinghu Tailik Office Automatic & Equipment Co., Ltd., a furniture manufacturer in China
• Concluded an alliance with Practika Co., Ltd., a furniture manufacturer in Thailand
Domestic
• Launched the fifth generation of Campus-brand notebooks, which are KOKUYO’s flagship product and boast sales of more than 100 million units annually
• Introduced Harinacs handy-type staple-less staplers
• Launched CamiAPP, a smart- phone-friendly notebook
Fiscal
2011 Fiscal
2012
Strategy Future Vision:
When We Become a Truly Asian Company The Case for Optimism Today
In the medium-to-long term, even if the Japanese market con- tracts, the other markets of Asia are expected to grow. Just as KOKUYO will focus on the high-growth Asian markets, we will also target the wider use of digital applications in the stationery field, confident new kinds of stationery will emerge one after another. As modern work styles evolve and the kinds of offices that businesses favor undergo fundamental change, many business opportunities will also emerge in the furniture sector. We may have made some nuanced changes in tactics, but our core business strategy remains the same. Simply put, we will generate earnings from our business operations in Japan, invest this cash in our overseas activities, and thereby work to raise our top-line sales and earnings. We have already imple- mented some key initiatives, including M&A and construction of new production facilities. While the results may not yet seem evident from a financial perspective, prospects for future growth have emerged in many of our activities.
Looking ahead, we will work to achieve substantially more growth in our overseas operations, and, while striking a bal- ance with profitability, we will proceed with the implementation of investments and our other business strategies.
Further, we of KOKUYO have seen what happens when we become a more-powerful organization by streamlining our asset base, cutting fixed costs, and implementing other management reform measures. We will continue to work to become a stronger company, but, while we continue to streamline our operations, we will need to make substantial investments for future growth.
Objectives we must keep in mind are creating new markets in Japan and overseas, structuring and strengthening value chains, and creating headquarters operations delivering the cost benefits needed to compete and succeed as a truly Asian company. While we confidently tackle numerous new challeng- es, we are drawing on expertise of our independent directors to provide invaluable advice and counsel.
Stationery Business:
How We See Asia as One Market
Looking ahead, the level of products and services customers in Asian markets expect will increase. To become the No. 1 company in Asia in the fields where we conduct business operations, we are also working to become the No. 1 compa- ny in each of the countries where we do business. First, we will build competitive value chains in each of these countries, including the establishment of world-class manufacturing facilities and distribution networks, creating a backbone of KOKUYO “fans” among retailers and others. To accomplish this, we will take dynamic initiatives and implement focused strategies and measures.
In Japan, we are proactively targeting the development of new products. In 2011, we launched just shy of 200 new items, but, in 2012 and subsequent years, we plan to offer more than 400 new items. Beyond new product development, we are reconfirming our commitment to boosting product value added and profitability. Going digital, we will launch stationery items that connect to smartphones and otherwise expand our lineup of digital items.
In Japan, we are stepping up initiatives to deploy a business model generating stable earnings, which is key to creating a funding platform to finance the necessary investments needed to become an Asian company. Earnings stability means we must create new markets with high-value-added products. For commodity products, we will manufacture best-cost products in our Asian facilities, maintaining the requisite quality and
Domestic
• Reported first increase in sales in five years
• Furniture business became profitable again
• Opened creative office lounge MOV, operated on a member- ship basis
Corporate Management
• Mr. Ayyadurai Srikanth became CEO of KOKUYO Camlin Overseas
• Completed the construction of a notebook plant in Shanghai
• Completed business succession of HOT ROCKS STATIONERY (Shenzhen) Co., Ltd.
• Opened an office furniture show- room in Singapore
• Opened our flagship office furniture showroom in Shanghai
Fiscal
2013
Overseas
• Aired KOKUYO’s first TV commercial over- seas, for Campus notebooks in Vietnam
• Received certification for high product quality in Vietnam (Hang Viet Nam Chat Luong Cao)
• Opened an exhibition dedicated solely to KOKUYO stationery products in China
• Held a meeting to announce Camlin’s first management plan at KOKUYO Camlin
Strategy
Strategy
Domestic
• Opened KOKUYO’s Umeda office and office furniture showroom in front of Osaka station
• Launched Redtech, a new instant adhesive
Pritt stick-shaped glue made from plant-based materials in a limited edition marine blue
The Neo Critz pen case is versatile and can be used as a pen holder or cosmetics bag.
Annual Report 2012 5
Message to Our Stakeholders
The Umeda Live Office opened in Osaka in April 2013.
The HARMONii circular work station
channels to also successfully offer them in Japan. We will pru- dently implement the steps necessary to assure the long-term success of this model.
Overseas, our target is to become the No. 1 stationery sup- plier in India, China, and Vietnam, where we are already build- ing our positions. KOKUYO boasts a level of manufacturing excellence—a combination of product development capabili- ties and production technology—that can win over all comers. In local Asian markets, products born of KOKUYO’s manufac- turing excellence are already winning acclaim and have secured a share of these markets. Going forward, we will develop products that meet the needs of customers in these markets and work to speedily create value chains encompass- ing product development, sales, logistics, and other functions.
Furniture Business:
Why KOKUYO Brand Spells Confidence
In the furniture business, our target market is Japan, first and foremost. We will also invest the necessary time and energy to succeed in the future target markets of China and India. In the short term, our highest-priority issue is to capture the leading market share in Japan. In Japan, we believe the office furniture market still has room for further quantitative and quali- tative change. Evidence for this is the rush to construct new large-scale buildings in the Tokyo metropolitan area, the re - development of the area around Osaka’s central Umeda area, and the construction of large buildings around Nagoya Station. The market today is characterized by the growing sophistica- tion of customer requirements and the expanding demand for proposals for the use of office space, including suggestions for
ways to most effectively work and utilize space. For this rea- son, the need to be close to customers is greater than ever, not only in the sense that we have close ties within the distribu- tion channels for office furniture but also that we can access specific customer requests via showrooms and “Live Offices,” where customers can visit and see KOKUYO products in actual use.
KOKUYO views the markets for furniture for hospitals and educational and other institutional customers, where ease of use and suitability to the work environment are major issues, as markets where KOKUYO can draw even more on its strengths. KOKUYO will, therefore, step up its measures for and approaches to these markets.
As in the stationery business, we have rededicated ourselves to manufacturing excellence, including procuring products on a “best-cost” basis broadly both in Japan and from overseas.
Online and Catalog Sales and Retail Business: Why This Segment Will Be an Ongoing Earnings Generator
KOKUYO’s online and catalog sales and retail business has attracted attention as a new purchasing channel for customers offering convenience and a wide range of products at lower prices. The growth momentum in the office catalog sales sec- tor as a whole has, nonetheless, declined from previous high levels.
On balance, we believe direct-to-consumer business will increase in coming periods. To ensure that customers will continue to choose KOKUYO’s services over competitors in this field, we are devising the best ways to add value to these services and proposing new approaches. In fact, we are com- mitted to ongoing improvement, or “kaizen”, in our catalogs, including further attention to the methods of presentation likely to boost sales. In addition, the business-to-consumer (B-to-C) field is a promising area, and we think it has the potential for generating earnings going forward.
KOKUYO as a Global Corporation
Managing across Borders
Sometimes companies follow the Japanese business model first, and next unsuccessfully try to adapt this model to local practices outside Japan. I believe that the Japanese business model can be applied successfully, if we focus on the size and growth momentum of offshore markets, rather than becoming distracted by differences in culture, business climate, state of infrastructure, and the like. Rather than becoming defeated by preconceptions, I believe it best to view Asian markets as blank canvases. KOKUYO will carry its core business policies to these markets and then give employees recruited in the local markets the chance to succeed. Fundamentally, the strat- egy is just that simple. In this sense, compared with Japan,
overseas markets are not so difficult, but present some of the most-straightforward opportunities anywhere.
This same basic concept holds true for building out value chains. I am convinced it is important to work to make KOKUYO’s basic policies resonate with market participants. These policies are to “strive to create a virtuous cycle in which customers will continue to purchase our products” and “show a sincere and wholehearted determination to provide solutions to the problems our customers face.”
Even if we pay substantial rebates to wholesalers and retail stores to expand sales, this may be successful temporarily, but, in the long term, such shortcuts may only end up as misadventures.
More than perhaps anything, what we have to do is build value chains based on trust and confidence rather than low prices. By that I mean if customers, retail stores, and other participants in the value chain gain confidence that by going with KOKUYO they will prosper, then they will have well- deserved confidence in us. This path is not the easiest one but the concept itself is extremely uncomplicated. At the end of the day, my view is that KOKUYO has straightforward business policies, and will avoid deviating from them.
The Kasumigaseki Live Office was reopened after renovation in December 2012.
Employees of KOKUYO’s notebook plant in Shanghai
Annual Report 2012 7
Message to Our Stakeholders
Making Corporate Governance
Work Well
In 2011, we appointed our first independent members to KOKUYO’s Board of Directors. Currently, fully three of our six directors are independent and two of the four of KOKUYO’s Audit & Supervisory Board members are independent auditors. These members have extensive backgrounds and knowledge of finance, law, and corporate governance and are able to con- tribute “resolute values” based on their proven track records. Going forward, KOKUYO must be able to make well-informed executive judgments as it prepares growth strategies suited to the operating environment and formulates risk management, compliance, and other policies.
KOKUYO is now embarking on the further development of its international operations, where it still has relatively limited experience. We are, therefore, drawing on the knowledge of our independent board members to an increasing degree.
For KOKUYO to continue to grow sustainably as a global enterprise, it must come closer to global standards of manage- ment, including corporate governance practices. We believe that the series of measures we have taken, including the appointment of independent directors, the separation of man- agement oversight and execution through the introduction of the executive officer system, and the establishment of commit- tees to oversee compensation and other matters, have enabled KOKUYO to effectively enhance both corporate governance and management transparency.
Dedicated to Providing Long-Term
Returns to Our Stakeholders
KOKUYO’s policy has consistently been to pay stable divi- dends to its shareholders. In line with investor expectations, it will be important to increase KOKUYO’s dividend payout ratio. In the current operating environment, we need to earmark funds for investment. While the stationery business is stable, we must make changes in our furniture business, and, at the same time, we must expand our businesses to overseas markets offering growth potential. Given the risks involved, we must address the issue of returns to shareholders step by step, while first strengthening our core business platform. We wish to pay higher dividends when the latitude to do so is there. Looking forward, we want to increase the number of shareholders who take a keen interest in our Company. In other words, we want to expand our lineup of products and services that will draw the interest of our shareholders. Recognizing that an organization optimizes value creation by benefiting all stakeholders, I believe we can view stakeholders as full partners in the broadly defined value creation chain.
The AIRFORT office chair featuring lumbar support
The flagship office furniture showroom opened in Shanghai.
President and CEO Akihiro Kuroda My Personal Management Philosophy:
“No Task Too Small for KOKUYO
to Add Unique Value”
KOKUYO’s founder held the view that “Products, no matter how small they may be, will never vanish from the market, pro- vided they are improved and transformed to the point where they are useful to the world. Therefore, if we try and do our best in our work on those products, they will do well enough. But, if we cut corners, we will lose out to competitors and van- ish from the market. If we exert ourselves and add value that other companies are not providing, we can hold our own.” Indeed, these are the fundamental ideas behind the founder’s phrase “Kasu no Shobai” or, in English, making a business of
“Providing underappreciated business necessities.” We some- times think that businesses that generate a quick profit or seem easy are going to be better, but competitors can make large investments in those areas, too. On the other hand, if we choose businesses where we can painstakingly add new value and many employees can contribute their efforts, we will ultimately be doing work that is worthwhile to customers. To make our products even better, we need to make honest efforts. In fact, we want to take on the work that others might consider troublesome or not worth the effort. If we at KOKUYO continue to do just this, I am confident our work will be recognized and valued. Doubtlessly, this sense of making that extra effort is exactly what KOKUYO has been doing for more than 100 years.
The energy to expand our business internationally will come from the same source: Adding value where others might take the easy way out. In this way, I am certain KOKUYO will become an international company contributing to the develop- ment of Asia and meeting its 2020 objective of generating 30% of net sales overseas.
Annual Report 2012 9
Proven in Japan.
KOKUYO’s Growth Strategy
KOKUYO was founded with the aim of being the “Honor of Japan.” With this ambitious goal, KOKUYO has developed along with the growth of Japan, basing its success on high- value-added products and a distribution network that reaches into cities and towns in all parts of Japan. However, as a result of changes in the distribution system and stagnation in the Japanese economy, the domestic market has transitioned from a mature stage to a period of decline. On the other hand, if we examine the stationery and furniture markets in the rest of Asia, we find that relatively low-quality products are the norm, that these industries are fragmented with a multitude of distributors existing alongside small manufacturers and retail shops, and that the markets are relatively undeveloped. However, this means also that there is still considerable room for growth. For this reason, our strategy is and will continue to be to secure earnings in the mature markets in Japan through add- ing more value to our products, and, in parallel with further developing our position in Japan, we will work to expand top-line sales in Asia.
Making a Business
of Adding New Product Value
The origin and essence of KOKUYO as an enterprise was stated by the founder, Zentaro Kuroda, as “Kasu no Shobai” (“Providing underappreciated business necessities”). He meant KOKUYO’s business, at the time of its founding and even to some extent today, is to undertake tasks that others would not consider because they find them “troublesome” or
“bothersome.” KOKUYO, therefore, undertook work on products that others had underestimated and consid- ered not worth their time. However, unlike others, KOKUYO went about man- ufacturing these products with a sincerity and thor- oughness that led eventually to the development of items with new value added. Through this process, KOKUYO raised the value of these products to a level that made it unique among its competi- tors and evolved them into businesses that were valuable to society. Thereafter, KOKUYO has developed its business activities relying on the
spirit expressed by its founder, which might also be expressed in English as “No Task Too Small for KOKUYO to Add Unique Value.”
We will adopt this same approach of adding new product value step by step in the development of our overseas busi- ness activities. Although our businesses are not the kind of activities where income expands rapidly, we will draw on the capabilities that KOKUYO has developed in Japan to grow steadily. Thereafter, we will work to realize our long-term vision, which is to become an enterprise that is not just the “Honor of Japan” but also the “Honor of Asia.” We will also strive to
Special Feature
KOKUYO’s Campus notebooks are best sellers in Japan, and more than 2.5 billion have been sold to date.
The Harinacs Compact stapler does not require staples.
Ready for the World. 30%
increase overseas sales to 30% of KOKUYO’s total consolidated
sales by 2020 and aim to become a world enterprise as
we contribute to the further development of Asia.
KOKUYO’s Markets
KOKUYO’s principal markets are stationery products and fur- niture. The market for stationery products in Japan is on a gradual shrinking trend. The market for furni- ture tends to be strongly influenced by trends in the economy and has been stag- nant since the downturn in 2008 and 2009 that followed the “Lehman Shock.” At present, the likelihood of domestic demand recovering to the level prevailing in 2008 seems to be small.
KOKUYO’s net sales for the year ended December 31, 2011, were ¥260.0 billion, the lowest level in the past 20 years. Factors accounting for this, in addition to the weakness in the Japanese economy, have been the transition taking place in product distribution. In the past, the principal channel for dis- tributing and selling KOKUYO’s products was through retail stationery product stores located in cities, towns, and villages, but, in recent years, the flow of products through online and catalog and other direct-to-consumer channels as well as general merchandise stores and convenience stores has
increased. The position of stationery product wholesalers and retailers, who supported KOKUYO’s growth in the 20th centu- ry, has declined. To find a way out of stagnation, KOKUYO split off its stationery and furniture businesses into separate companies. More recently, KOKUYO has made reforms in its corporate governance framework, and in 2011, decided to realign its two main businesses of stationery and furniture and manage them as a single company.
In today’s business world, where value chains undertaking small-lot production of a wide range of items have become prevalent, supply chains comprising large factories, big ware- houses, and retail distribution systems are no longer a strength. In this era of flexible and nimble value chains, KOKUYO is reforming its own value chain to one where each employee decides on his or her customers and works to cre- ate new customer value. In the stationery business, this has resulted in the development of a number of new products, including staplers for binding sheets of paper together that do not need staples. In the furniture business, KOKUYO has created a wide range of new office layouts and arrangements that increase the productivity of office workers.
At the same time, KOKUYO is proceeding with a strategy for further growth. That is to expand its business activities in the markets in the rest of Asia where rapid growth is continuing.
Participating in the Growth of Asian Markets
In 2011, KOKUYO began the full-scale expansion of its over- seas activities. KOKUYO sees overseas markets as the next stage for its growth. At present, in many countries overseas,
The Madre lobby chair, which is suited for installation in universal design offices, such as those of municipal governments
Annual Report 2012 11
Proven in Japan. Ready for the World.
the quality of stationery products is relatively low, as evidenced by notebooks with pages where the ink shows through on the reverse side. In addition, participants in the supply channels tend to be small manufacturers, wholesalers, and retailers located in regional areas. KOKUYO believes there is ample room for further growth and development overseas.
What Are KOKUYO’s Competitive
Advantages?
KOKUYO’s greatest strengths are its capabilities for product development and manufacturing as well as its value chain, which supports these capabilities. Examples of KOKUYO’s product development capabilities include its notebooks that have dots on the lines to help users write more neatly as well as lobby chairs and other furniture that are easy for both physi- cally challenged and other persons to use. KOKUYO is draw- ing on its ability to add some creativity to product development to create many products like these that are useful both to customers and to society as a whole. These development capabilities are backed by know-how and the technological capabilities of KOKUYO’s factories. The capabilities would be difficult for others to imitate.
In the years ahead, today’s emerging countries are forecast to follow paths to growth and development similar to Japan’s experience in its era of rapid economic growth. KOKUYO believes that the systems and value chains that were the driving forces supporting its growth in the 20th century—including its nationwide sales network and logistics systems as well as sys- tems that link the receipt of customer orders, production, and sales—can be transplanted overseas. Therefore, KOKUYO’s know-how in value chain creation is an important strength. Looking ahead, to further strengthen its value chains in Japan and overseas, KOKUYO is looking to make investments on the order of several billions of yen. Plans call for funding these investments through cash generated in KOKUYO’s domestic business activities.
Next Steps in Overseas Development
KOKUYO is already building its position in India, China, and Vietnam. All of these are growth markets, and the middle- income classes in these countries are seeking high-quality products as their disposable income expands.
In China and Vietnam, KOKUYO will work to develop the notebook market, drawing on its dominant presence as the
leading company in this market in Japan, which is based on its product development and technological capabilities. In the next stages, KOKUYO will strive to increase its market share in the broader stationery market. In India, in 2011, KOKUYO acquired Camlin Limited, which is the No. 3 company in the stationery products market in that country. The first step will be to work to expand market share in KOKUYO Camlin’s strongest area of office products.
In China, KOKUYO is also further developing its furniture and online and catalog sales and retail businesses. Unlike stationery products where the mass market is the target, in its furniture business in China, KOKUYO is aiming to become No. 1 in the high-end and middle high-end market segments.
Strategies by Business Segment
Stationery Business
Strategies in the Stationery Business in 2013 Japan
In 2012, KOKUYO introduced about 400 new, high-value-added products. In 2013, KOKUYO will continue to introduce new prod- ucts that exceed customer expectations. In sales activities, in each sales channel, including three-tiered distribution to retail stores, and online and catalog sales and retail business, KOKUYO will work to substantially increase efficiency through increased use of IT. In parallel with IT initiatives, KOKUYO will take further measures to increase top-line sales by enhancing people- based value added, including proposal-based sales activities.
Overseas
KOKUYO is expanding its business activities overseas, focus- ing on the rest of Asia, especially India, China, and Vietnam.
India
In India, KOKUYO Camlin worked to make improvements in its operations, including the elimination of merchandise stock- outs. However, operating conditions continued to be tough because of the weakness in the economy and the rise in raw material prices. In 2013, KOKUYO will implement a concentra- tion strategy (focusing on the development of products where there is ample room for growth and on sale activities in regions where the scale of growth is substantial and expansion in income is anticipated), with the aim of increasing earnings. Among other activities, KOKUYO Camlin is also sponsoring the Indian animation program “SURAJ The Rising Star,”
Message from Ayyadurai Srikanth, CEO of KOKUYO Camlin Ltd.
KOKUYO Value Chain Extended to India Camlin Limited, based in India, has a history of 82 years in manufacturing and marketing stationery products, principally writing materials, as well as art materials for persons of all skill levels from children to professional artists. Camlin’s strengths include its value chain that spans all stages, from production to sales, and comprises a marketing network covering all of India’s complex market with its vast land area, large population, and multitude of languages. This value chain is one of Camlin’s major advantages, along with its brand, which has virtually 100% recog- nition in India.
KOKUYO’s strength is its comprehensive product line. Working together with KOKUYO, Camlin will be able to enter the market for notebooks and other items that have not been part of its product offer- ings. An overarching strength of KOKUYO and Camlin, as they combine forces, will be the “busi- ness framework,” which will be structured and
systematic as well as make business processes transparent. This framework, which is a strength Camlin will work to acquire, will ensure the reproduc- ibility of the KOKUYO system.
The Indian market today has many highly attrac- tive features for KOKUYO’s businesses, including its population structure. However, the market is quite challenging because of the recent slowdown in economic growth and the entry of new competitors not only other Indian but also foreign companies. Nevertheless, if we of KOKUYO and Camlin can combine our respective strengths, there is every reason to believe we can be successful.
Looking ahead, working together, we will first aim to reach sales of 10 billion rupees and consolidate the position of KOKUYO Camlin Ltd. as a strong company in the stationery products business. KOKUYO Camlin will strive to become an indispens- able company within the KOKUYO Group, and will play a key role in the future as the KOKUYO Group enters new markets in the Middle East, Africa, and South Asia.
KOKUYO Camlin in Outline Established: 1931
Sales: 43,592 (Unit: 100,000 rupees) (as of March 2013) Paid-in capital: 689.2 (Unit: 100,000 rupees)
Principal shareholder: KOKUYO S&T: 50.6% Number of employees: 1,209
Principal products and operations: Manufacturing and mar- keting of art materials and stationery for schools and offices
(Above) Campus notebooks on sale in India (Right) Products offered by KOKUYO Camlin
Annual Report 2012 13
Proven in Japan. Ready for the World.
Shanghai flagship office furniture showroom
reducing inventories by promoting closer teamwork on IT systems with wholesalers, and promoting further measures to make improvements in merchandise stock-outs.
China
Key developments in China included implementing the busi- ness succession of HOT ROCKS STATIONERY (Shenzhen) Co., Ltd. and completing the construction of the Shanghai Plant. In 2013, KOKUYO will strive to increase income through combining its strengths, which are the production capacity and technology of its plant in Shanghai and the strengths of HOT ROCKS STATIONERY, which include its sales network in major cities and its brand. Additional measures that KOKUYO is implementing to further develop its position in the market include strategies suited to the level of market maturity in vari- ous major cities and expanding the number of whole salers handling its products.
Vietnam
Operating conditions in 2012 were difficult because competi- tors began to retaliate, but, in 2013, KOKUYO is working to structure product portfolios well-suited to the features and needs of various regions as well as expand sales areas displaying its products.
Furniture Business
Strategies in the Furniture Business in 2013 Japan
During 2012, KOKUYO was successful in expanding its share in the market for private office furniture in the Tokyo metropolitan
area by aggressively making proposals based on teamwork between manufacturing and sales functions. Plant production levels rose 30% over the previous year, and profit margins increased. KOKUYO also made proposals for new office work- ing styles through its MOV rental office facility in the Shibuya Hikarie commercial complex in Tokyo and through its office and showroom in the Kasumigaseki Building.
In 2013, KOKUYO is working to expand its market share by continuing its proposal-based marketing activities matched to customer needs. Additionally in 2013, in Osaka, where KOKUYO’s Head Office is situated, a number of large office buildings have been completed. In April, KOKUYO opened a new showroom in the newly finished Osaka Kita Yard, located adjacent to JR Osaka Station, with the aim of further strength- ening its leading market share in the Kansai area.
Overseas
In 2012, KOKUYO opened a flagship showroom in Shanghai, China, and it is working to increase the penetration of the KOKUYO brand and conduct an active program of proposal- based sales activities. In 2013 also, with the Shanghai flagship showroom as a base, KOKUYO will continue to develop prod- ucts for the high-end and middle-market segments as well as strengthen its sales promotion activities.
Online and Catalog Sales and Retail Business Strategies in the Online and Catalog Sales and Retail Business in 2013
Online and Catalog Sales Business
In 2012, Kaunet’s catalogs, which make it easy for customers to see the characteristics of products at a glance and are pre- pared in a user-friendly, easy-to-choose format, were and are highly evaluated by customers. Kaunet’s sales and income through this channel reached an all-time high during the year. In 2013, Kaunet will work to further evolve its catalogs and work to expand sales through its With Kaunet and Benrinet Light channels. Kaunet is also planning to make active invest- ments in further developing its B-to-C channels.
Retail Business
In 2013, to expand income, ACTUS will actively open new stores and work to make improvements in its multi- domestic product line and in the operation of THE CONRAN SHOP stores.
KOKUYO’s “Creative Lounge MOV,” a membership office, opened in the Shibuya district of Tokyo
Annual Report 2012 15
Net Sales
KOKUYO aggressively launched new products in the domestic market, but because of reductions in expenditures among customers, sales declined. Overseas sales expanded as KOKUYO Camlin Ltd. and KOKUYO Vietnam Trading Co., Ltd., were includ- ed in the scope of consolidation.
Operating Income
In Japan, operating income decreased, despite KOKUYO’s activities to reduce costs, as a result of the decline in gross profit on sales caused by the rise in raw material prices, the decrease in net sales, and the rise in selling, general and administrative expenses due to higher expenditures on new product develop- ment and TV commercials for Campus notebooks.
Stationery Segment
Share of Total Net Sales
Net Sales
(Millions of yen) 100,000
0 50,000
25,000 75,000
2012 2011
2010
Operating Income
(Millions of yen) 8,000
0 4,000
2,000 6,000
2012 2011
2010
Overseas, operating income declined as selling, general and administrative expenses rose in connection with growth investments in a notebook manufacturing plant in Shanghai and increased competition in Vietnam.
Principal New Products
• Compact-size Harinacs staple-less stapler
• RESARE plastic eraser, premium type
• Aerofit “Super Glueless Type” scis- sors, which glue will not stick to and hold a sharp edge for 20 times longer than previous types
Main Developments
• Shanghai notebook plant completed
• Takeover of business activities of HOT ROCK STATIONERY (Shenzhen) Co., Ltd.
27.3%
Notes: 1. Starting from fiscal 2012 (ended December 31, 2012), segment information is disclosed based on the following three segments: “stationery segment,” “furniture segment,” and “online and catalog sales and retail segment.” Accordingly, the historical figures for fiscal 2011 are reclassified using the new segments.
2. Percentage composition figures in the pie charts in this Review of Operations are based on sales after eliminations
Review of Operations
The Harinacs Compact stapler does not require staples.
RESARE premium-grade plastic eraser
The Airofit “Super Glueless Type” of scissors has blades resistant to paste and lasts 20 times longer than other similar products.
Net Sales
In Japan, sales of office furniture in the Tokyo metropolitan area were strong and KOKUYO’s sales expanded. Especially in 2011 and 2012, a substan- tial number of large buildings were com- pleted in this area, and KOKUYO was able to expand its market share by making aggressive proposals for solutions.
Overseas, business in China was virtually the same as in the previous year, but sales expanded as KOKUYO International (Malaysia) Sdn. Bhd. was newly included within the scope of consolidation.
Operating Income
In Japan, operating income rose along with the rise in gross profit accompany- ing the gain in sales and improvement in profitability at the plant level because of the increase in sales and bringing more production in-house.
Furniture Segment
Share of Total Net Sales
Net Sales
(Millions of yen) 120,000
0 60,000
30,000 90,000
2012 2011
2010
Operating Income (Loss)
(Millions of yen) 1,000
-3,000 -1,000
-2,000 0
2012 2011
2010
Overseas, operating income decreased because of the effects of growth investments in flagship showrooms.
Principal New Products
• The PUNTO office chair that combines designs that harmonize with a diverse range of office spaces and offer com- fortable seating
• High-back brackets sofas that can be combined freely
• WorkSort workstations that can respond speedily to a variety of office layout requirements
Main Developments
• MOV creative office lounge operated on a membership basis and located in Tokyo’s Shibuya district
• Opening of flagship showroom in Shanghai
• KOKUYO’s newly renovated Kasumigaseki office 37.2%
The PUNTO line of office furniture goes with a wide range of office decors and features a high level of sitting comfort. The brackets high-back sofa that can be combined with
other furniture at will
The Kasumigaseki Live Office was reopened after renovation in December 2012.
Annual Report 2012 17
Review of Operations
Net Sales
Net sales expanded because of growth in sales through Kaunet, the office online shopping system, and through With Kaunet to large business estab- lishments. Sales in the retail business also expanded as ACTUS opened new stores and LmD Co., Ltd., which operates THE CONRAN SHOP stores, was included within the scope of consolidation.
Operating Income
Operating income in the online and catalog sales business expanded owing to higher sales through Kaunet and improvement in the gross income
Online and Catalog
Sales and Retail
Segment
Share of Total Net Sales
Net Sales
(Millions of yen) 120,000
0 60,000
30,000 90,000
2012 2011
2010
Operating Income
(Millions of yen) 2,400
0 1,200
600 1,800
2012 2011
2010
ratio. Sales in the retail business also expanded along with expansion in turn- over through ACTUS.
Main Developments
• Kaunet, the online and catalog sales business for offices, prepared a new catalog that makes it easy to compare the features of various products, including sizes, at a glance and select items of choice more easily.
• ACTUS opened a new store in the Aoyama district of Tokyo.
• THE CONRAN SHOP opened THE CONRAN SHOP KITCHEN in Shibuya, a store specializing in items for the kitchen.
35.5%
The Kaunet Internet-based order service catalog is designed to enable users to compare the features and sizes of various products at a glance.
The ACTUS Aoyama Store was opened in July 2012. THE CONRAN SHOP KITCHEN is the first Conran shop focused on items for the kitchen.
Based on the Corporate Philosophy of “Enrich the world through our products and services,” the concept on which KOKUYO was founded, the KOKUYO Group engages in busi- nesses that are necessary for society, while conducting its operations honestly and profitably. By operating in compliance with laws and regulations as well as fulfilling its responsibilities as a corporate citizen, KOKUYO works to win the trust of all its stakeholders and sustain its business activities for the long term.
As KOKUYO has moved forward with the development of its overseas activities, however, maintaining high standards of compliance has become an important management issue. Overseas, the KOKUYO Group comes into contact with a wide range of cultures and values as well as differing interpretations of laws. Therefore, the KOKUYO Group thinks it is necessary to prepare a common code of conduct for its activities that takes account of circumstances in markets around the world. For this reason, the Group reviewed its KOKUYO Corporate Ethics Guidelines, which were originally issued in 2001 and prepared its KOKUYO Group Code of Conduct, which was issued in August 2012 as the common code of conduct for the Group. This code of conduct applies to all man- agement and staff, both in Japan and overseas, and provides basic standards for conduct that Group employees should observe. In addition, the Group has prepared its KOKUYO Standards of Conduct Handbook, which supplements the KOKUYO Group Code of Conduct by providing guidelines that take account of differing customs, rules, and regulations in different countries and regions. At the present time, the Group is applying this handbook step by step to the seven countries and regions outside Japan where it has operations—namely, China, Vietnam, Thailand, Malaysia,
Singapore, Hong Kong, and India—and is holding
meetings for the staff of offices in these countries and regions to explain the content of the handbook.
This section of the KOKUYO Annual Report 2012 is divided into six sections that are linked to the Group’s corporate social responsibilities and to the key CSR themes of Economy, Society, and Governance (ESG). These six sections— Corporate Governance, Human Rights and Labor Practices, Environmental Preservation, Fair Business Practices and Consumer Issues, and the Community Involvement and Development—explain the Group’s basic policies for continuing to develop its business operations and increase its corporate value.
KOKUYO’s CSR
KOKUYO began its business activities in 1905 when founder Zentaro Kuroda opened a small shop selling covers for Japanese-style account ledgers. Since that time, KOKUYO has steadily expanded under its corporate philosophy of “Enrich the world through our products and services.”
Annual Report 2012 19
KOKUYO’s CSR Charter
Grounded in the founding Corporate Philosophy of “Enrich the world through our products and services,” the
KOKUYO Group conducts business that is necessary for society, while remaining profitable and honest in its
business practices.
In addition to complying with laws and regulations, we seek to maintain continuity of our business by acquiring
the trust of all related stakeholders, investors, and, of course, our customers by fulfilling our social responsibilities
as a corporate citizen.
For Our Customers
1. Without being satisfied with the present conditions, we continue to improve the safety and quality of our entire product line and services.
2. Strive to continually innovate society through our business operations by developing new products and services.
For Regional Communities
1. Strive to be a trusted ‘corporate citizen’ on both regional and national levels via proactive interaction and plan- ning with regional communities, while respecting regional culture and customs and encouraging their advance- ment.
For Environmental Conservation
1. Concentrate the wisdom of each of our employees, and align the actions of our entire Company in order to assist in reaching solutions for the common environmental problems facing the world today.
2. By developing Eco Products, we strive to decrease the environmental burden over the life cycle of these products and to introduce new environmental engineering and green procurement techniques.
3. Contribute towards the advancement of a ‘low carbon society’ by proposing revolutionary work styles and environments, and decrease society’s overall burden on the environment.
Corporate Activities
1. Conduct transparent, just, and free competition and business transactions while keeping sound and correct relations with politicians and governmental bodies.
2. In order to become a trusted company, we strive for business partner relations that are consistently fair and built upon a foundation of reciprocal cooperation, allowing for mutual growth.
3. Recognize our responsibility to increase our corporate value for stockholders, and maintain a corporate management style that earns the trust of society through its transparency and virtue.
Respect for Human Rights
1. Respect the human rights of all individuals involved with or affected by all of our corporate activities. We sup- port work environments free from discrimination, and do not approve of child labor or forced labor practices. 2. Strive to accept each and every employee’s individual character and personal values, and become a company
where many different human resources can fully express their abilities and develop themselves.
ISO 26000 Table
The KOKUYO Group uses the ISO 26000 International Standard as a guideline on social responsibility. We have
classified our initiatives according to the main topics under this standard.
ISO Core Subjects Issues KOKUYO Group Initiatives
Organizational governance
Issue 1: Organizational governance • Establish KOKUYO’s CSR philosophy
• Promote corporate governance
• Compliance implementation
• Communicate with stakeholders
• Issued the KOKUYO Group Code of Conduct Human rights Issue 1: Due diligence
Issue 2: Human rights risk situations Issue 3: Avoidance of complicity Issue 4: Resolving grievances
Issue 5: Discrimination and vulnerable groups Issue 6: Civil and political rights
Issue 7: Economic, social, and cultural rights Issue 8: Fundamental principles and rights at work
• Promotion of human rights educational activities
• Promote diversity
• Promote employment of people with disabilities
• The establishment of the KOKUYO hotline for employees
Labor practices Issue 1: Employment and employment relation- ships
Issue 2: Conditions of work and social protection Issue 3: Social dialogue
Issue 4: Health and safety at work
Issue 5: Human development and training in the workplace
• Personnel system
• Human resource development programs
• Promote diversity
• Child-care/family-care and work compatibility support
• Safety at work
• Health care and mental health
• Safety measures regarding employees during disasters
• Strengthening international business training programs to prepare employees for work in KOKUYO’s global organization The environment Issue 1: Prevention of pollution
Issue 2: Sustainable resource use
Issue 3: Climate change mitigation and adaptation Issue 4: Protection of the environment, biodiversity,
and restoration of natural habitats
• Environmental management
• Global warming preventive measures
• Resource saving and recycling measures
• Development of environmentally friendly products and services
• Consideration for biodiversity
• Compliance and pollution prevention
• Promoting environmental communication
• Environmental accounting
• Third-party evaluation Fair operating
practices
Issue 1: Anti-corruption
Issue 2: Responsible political involvement Issue 3: Fair competition
Issue 4: Promoting social responsibility in the value chain
Issue 5: Respect for property rights
• Establish KOKUYO’s CSR philosophy
• Compliance implementation
• KOKUYO Group Basic Procurement Policy
Consumer issues Issue 1: Fair marketing, factual and unbiased information, and fair contractual practices Issue 2: Protecting consumers’ health and safety Issue 3: Sustainable consumption
Issue 4: Consumer service, support, and complaint and dispute resolution
Issue 5: Consumer data protection and privacy Issue 6: Access to essential services
Issue 7: Education and awareness
• Provide products and services that incorporate customers’ perspectives
• Provide safety and reliability to customers
• Promote optimal quality standards for each country and region
• Continuously improve quality
• System for harnessing customer feedback
• Initiative to bond with customers
• Introduction of risk analysis and implementation of quality audits
Community involvement and development
Issue 1: Community involvement Issue 2: Education and culture Issue 3: Employment creation and skills
development
Issue 4: Technology development and access Issue 5: Wealth and income creation Issue 6: Health
Issue 7: Social investment
• Support the recovery from the Great East Japan Earthquake
• India—(KOKUYO Camlin Ltd.) Film competition
• China—Grassroots support activities
• Vietnam—Library donations
• Design awards ceremony in progress
• Provide tours of factories and showrooms
* KOKUYO’s CSR Charter applies in common to all topics.
Annual Report 2012 21
Corporate Governance
Under its corporate philosophy of “Enrich the world through our products and services,” the KOKUYO Group
strives to achieve sustainable growth while maintaining harmonious relations with its shareholders. By creating
and maintaining a structure which ensures replicability and continuity of transparent, apt, and efficient business
administration, the KOKUYO Group will continue to work toward elevating its corporate governance standards.
The KOKUYO Group is a company that has an Audit & Supervisory Board. We have created a corporate
governance system that consists of a Board of Directors that supervises the execution of business, and the Audit
& Supervisory Board that, as an entity independent of the Board of Directors, audits the duties executed by the
directors. As a global company, we strive to build corporate governance that is worthy of our shareholders’ trust.
To realize this goal, we work to enhance our supervisory function, clarify the responsibilities of management at all
levels, and heighten the objectivity and transparency of business administration.
Structure of Corporate Governance Business Execution
The KOKUYO Group’s Board of Directors is comprised of a total of six members, half (three) of whom are independent directors. As part of a system that is able to respond to corpo- rate governance promptly to changes in the business environ- ment, directors are appointed for a term of one year. In attendance at the board meetings, along with the directors, are four Audit & Supervisory Board members, including two out- side statutory Audit & Supervisory Board members. The KOKUYO Group has separated its supervisory and executive functions and, in order to promote faster decision making and
streamlined business execution, adopted a corporate officer system. The Board of Directors, which assumes a supervisory function, makes crucial decisions on such matters as Group- wide management policies and various business plans. Also, as an entity responsible for business execution, it runs the Headquarters Management Board. This board is comprised of four Group Headquarters Operating Officers, the head of which is the President and CEO, and its main functions are to deliberate and make decisions on issues related to the Group Headquarters. Further, issues regarding business execution are discussed and decided upon at the Board of Directors’ meetings held at respective Group operating companies.
Operating Companies
Nominating and Compensation Committee
Audit & Supervisory Board
Investment Council
J-SOX Committee
Disclosure Committee
Compliance Committee
Head Office Divisions Process Development Department HQ Management
Board Board of Directors
Accounting Auditors
General Meeting of Shareholders
Inquiry
Inquiry Advice
Appointment and dismissal Appointment and dismissal
Report Instructions Report
Instructions
Report
Coordination
Internal auditing Approval of important business operational matters
Appointment and dismissal
Coordination Holding Company
Auditing
President & CEO Major Committees
Relating to Internal Controllership
Coordination and report
Accounting audit
Accounting audit Appointment,
dismissal, and supervision
Internal auditing Risk Management
Committee
Advice
Advisory Body for the Board of Directors As an advisory body for our Board of Directors, we have in place a Nominating and Compensation Committee, a majority of which consists of external members or directors. The Nominating and Compensation Committee reviews, appoints, and dismisses candidates for director, Audit & Supervisory Board member, and operating officer (hereinafter collectively referred to as “officers”). It also deliberates on compensation plans, evaluates individual officers, verifies remunerations, and offers reports and recommendations regarding such matters to the Board of Directors.
Audit & Supervisory Board
The KOKUYO Group’s Audit & Supervisory Board is comprised of two full-time internal Audit & Supervisory Board members and two outside Audit & Supervisory Board members who possess a wealth of knowledge and experiences in a wide range of fields. The Audit & Supervisory Board members attend the Board of Directors and other important meetings to audit the legality of the duties executed by the directors. Moreover, to ensure the effectiveness of audits, the Audit & Supervisory Board members exchange opinions regularly with personnel in charge of various duties and functions, as well as have in place a system for working closely with the Internal Audit Division and the Audit & Supervisory Board members of the main subsidiary companies.
Internal Audit Division
The Internal Audit Division has set up the Process
Development Division—the head director of which is appointed by the Board of Directors—and audits the Group Headquarters and affiliated companies. The Process Development Division audits, from a Company-wide standpoint, the appropriateness of risk-management, compliance, and business operations. It also evaluates the efficacy of internal control and reports on the
audits directly to the President and CEO at the Headquarters Management Board. It also reports on its activities to the Board of Directors at appropriate times.
Compliance Implementation
In addition to our domestic activities, the KOKUYO Group has begun education initiatives focused on compliance in foreign countries in order to become a proper business in Asia. Based on the lessons learned from unfortunate events that have occurred since 2008, the KOKUYO Group’s Compliance Initiatives are grounded in the intent and assumption that all employees of the KOKUYO Group act in compliance with laws and regulations so that KOKUYO may be considered as an upstanding and honest corporate citizen.
Since 2009, we have conducted discussion-type compli- ance training, and starting this fiscal year, we will sequentially expand these training initiatives into our overseas locations, starting with China.
Compensation of Directors and Audit & Supervisory Board Members
Position
Applicable directors and Audit & Super- visory Board members
Total compensation (Millions of yen)
Directors (excluding independent
directors) 4 163
Independent directors 3 29
Audit & Supervisory Board members (excluding outside Audit &
Supervisory board members)
3 31
Outside Audit & Supervisory Board
members 3 13
Note: The number of applicable directors and Audit & Supervisory Board members includes one director and two Audit & Supervisory Board members who resigned their posi- tions at the end of the General Meeting of Shareholders held on March 29, 2012.
Building a Highly Transparent Business Management System
2010
No Independent Directors
Internal directors: 6
Independent directors: 0
2011
Recruit Independent Directors
Internal directors: 4 Independent directors: 2
2012
Increase Independent Directors
Internal directors: 3 Independent directors: 3 Note: One-half of KOKUYO’s Board of Directors qualify as independent directors under the stipulations of the Tokyo Stock Exchange.
Independent Directors
Annual Report 2012 23
