Annual Report 2004 アニュアルレポート｜IRライブラリー｜株主・投資家情報｜コクヨ

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I N T O T H E N E X T G R O W T H S T A G E

We have used our manufacturing expertise to earn a solid reputation for quality and sustain corporate growth for almost a century. However, the diversification of distribution channels and changing customer needs are presenting huge challenges. By restructuring our organization and building new business models, we are moving into the next growth stage.

Annual Report 2004

Y e a r E n d e d M a r c h 3 1 , 2 0 0 4

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Since its establishment in 1905, Kokuyo Co., Ltd., has maintained its fundamental objective of “contributing to society through the provision of superior products and services.” Having originally specialized in stationery goods, the Group has expanded its operational scope to include office furniture. Kokuyo is currently continuing its corporate growth and evolution as Japan’s largest office supply provider.

Kokuyo has been implementing a structural reform plan designed to expedite the reattainment of a high level of profitability. In line with the plan, the Company has made large cost cuts and thoroughgoing expense reductions in addition to introducing other measures to streamline its operations, and these efforts have generated substantial benefits. Kokuyo has also worked to increase the autonomy of its divisions and thereby clarify responsibilities and streamline decision making through such measures as the introduction of an internal company system and the shift of considerable decision-making authority to internal company managers. These moves are designed to improve managers’ capabilities for flexibly responding to changes in the operating environment.

While anticipating that its operating environment will continue to be characterized by rapid change, the Kokuyo Group intends to evolve along with its environment based on its customer-oriented business model, which calls for the Group to listen attentively to its customers and work continually to upgrade and broaden its products and services. Without slackening the pace of its structural reforms, the Group has begun implementing a growth strategy aimed at promoting the steady expansion of its operations and a sustained increase in corporate value.

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 design- ing 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.

Main

Products

Notebooks

PC supplies

Files

Office furniture

Furniture for public facilities

Storefront supplies Wall partitions

Glue

FURNITURE SEGMENT STATIONERY SEGMENT

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Financial Highlights

KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES March 31, 2004 and 2003

Net Sales

(Millions of yen)

1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004 (1,422)

Net Income (Loss)

(Millions of yen) 273,462

0 100,000 200,000 300,000

0 2,000 4,000 6,000 8,000

1,949

0 20 40 60

1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004 0.7 1.1

Net Income (Loss) Per Share

(Yen)

Primar y Diluted

ROE & ROA

(%)

0 1 2 3 4

ROE ROA (11.05)

15.38

(0.4) (0.7)

Thousands of Millions of yen U.S. dollars

2004 2003 2004

For the year:

Net sales ¥273,462 ¥272,199 $2,587,152

Operating income 8,866 4,998 83,879

Net income 1,949 231 18,439

At year-end:

Total assets 289,194 285,789 2,735,989

Total shareholders’ equity 185,141 181,430 1,751,571

Amounts per share (in yen and U.S. dollars):

Basic net income ¥15.38 ¥01.51 $0.15

Diluted net income — — —

Cash dividends applicable to the year 15.00 15.00 0.14

Note: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥105.7=U.S.$1, the approximate exchange rate prevailing at March 31, 2004.

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In July 2004, the Kokuyo Group introduced the new brand message “inspiration, efficiency, and amenity.”

This message is intended to spotlight the way our products and services inspire positive emotions and ideas, enhance work efficiency, and promote mental and physical comfort.

Kokuyo enjoys high name recognition in Japan, and its brand was ranked 16th among all brands in Japan, according to a survey conducted by the major domestic newspaper Nihon Keizai Shimbun. For most of our customers, the Kokuyo brand is a familiar symbol of high quality and reliability. This is attributable to Kokuyo’s out- standing track record; however, the association of the Kokuyo brand with the con- cept “inspiration, efficiency, and amenity” remains weak.

Updating a brand image with a 99-year history is not an easy job. However, we intend to do what it takes to encourage customers to think of Kokuyo products when looking for inspiration in addition to greater efficiency and comfort and convenience.

As Kokuyo aims to be a company that continually provides “inspiration, efficiency, and amenity,” we will do our utmost to increase shareholder value by placing top emphasis on satisfying customers’ needs throughout our operations. We thank our shareholders and other stakeholders and hope for their continued understanding and support.

Shounosuke Kuroda Chairman

Inspiration, Efficiency,

and Amenity

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President’s Overview

A Roadmap to Growth

P.4-5 The Clear, Positive Impact of Structural Reforms

• Emphasized measures to implement structural reforms

• Cost reductions and other reforms enabled increases in revenues and profitability

P.6-7 Structural Reforms——Generating New Growth Models

• Resolutely implemented structural reforms needed for timely new business models

• Reducing costs and expenses and executing such organizational reforms as the introduction of an internal company system

P.8-9 Shift to Holding Company System in October 2004

• Internal company system enabling faster decision making and product development

• Holding company structure will support powerful competitiveness and dynamic growth

P.10-11 Sustaining Growth through the Provision of New Value

• Shifting to more proactive business expansion measures and anticipating sustained sales growth

• Customer-oriented business model consistently giving top priority to customer needs

P.12-13 Implementing New Business Models

• Increasingly difficult to fully meet diverse customer needs with products alone

• Creating new value by fully satisfying customers’ existing and latent needs

P.14-15 Developing New Businesses and Markets

• Anticipating growth in business process outsourcing (BPO)

• Separate division focusing on marketing to government units

• China extremely important as a manufacturing base, offers potentially huge markets

P.16-17 Moving Forward as a Proactively Evolving Enterprise

• Already have solid corporate governance system featuring strong supervision from board of auditors

• Corporate culture emphasizes rigorous legal compliance and high ethical standards

• New business model to sustain corporate growth for the foreseeable future

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During the fiscal year ended March 31, 2004, the Kokuyo Group emphasized steps to implement the structural reform plan it announced in September 2002. The cost reductions and other clear benefits realized through that plan allowed the Company to achieve increases in both consolidated revenues and consolidated profitability for first time in seven years.

Since April 2003, Kokuyo has implemented an internal company system, delegated authority on a broader scale to give employees greater autonomy, increased the dynamism of its overall organizational structure, and accelerat- ed its decision-making processes. With due attention to the special characteristics of each business field, the Company has worked to upgrade its

capabilities for meeting customer needs and to augment cost-competitiveness.

Kokuyo has carried out a range of systematic cost-reduction activities. The Company proceeded to transform its manufacturing systems by consolidating the stationery operations of the core Yao plant at the Kokuyo Shiga plant and the construction materials operations of the Okayama plant at the Shibayama plant. To enhance its capabilities for engaging in more robust marketing programs based on an exceptional understanding of customer requirements, the Company worked to fundamentally streamline its distribution system—in October 2003 it elimi- nated the former structure based on a large number of exclusive sales agents (previously 66) and launched a new

nationwide system based on only 15 distribution and marketing companies. In addition, it began the full-fledged opera- tion of the Kokuyo Tokyo Metropolitan Area Integrated Distribution Center (IDC), one of the largest specialized distribution centers in the office supply business.

The proactive implementation of these policies and programs to enhance results boosted net sales to ¥273.5 billion, up 0.5% year on year. In terms of profitability, the realization of structural reform plans reduced various costs and expenses, leading to a steep, 77.4% rise in operating income, to ¥8.9 billion, and a 742.5% surge in net income, to ¥1.9 billion.

In the stationery segment, sales amounted to ¥137.7 billion, down 0.4%, and operating income totaled

¥5.4 billion, up 106.3%.

Despite the fact that the market for stationery products was impacted by such factors as a general downtrend in prices and a decline in demand, the Company launched additional Universal Design products and continued to

The Clear, Positive Impact of

Structural Reforms

Consolidated Performance (Millions of yen)

FY2004 FY2003 Percent change

Net sales ¥273,462 ¥272,199 0.5%

Operating income 8,866 4,998 77.4%

Net income 1,949 231 742.5%

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broaden its product lineup to stimulate additional demand. In its office supply catalog operations, subsidiary Kaunet Co., Ltd., worked to upgrade related products and services. As a result, Kaunet’s sales jumped 32.9% year on year, to ¥28.7 billion, and the subsidiary was able to attain profitability in only the third year following its establishment.

In the furniture segment, office furniture related demand linked to

redevelopment projects in the Tokyo metropolitan area peaked and competition in this sector intensified. Amid these conditions, Kokuyo focused on increasing sales by promoting products designed to match needs associated with changing office environments and working styles and further expanded its share of the Tokyo redevelopment project related market for office furniture. As a result, segment sales amounted to

¥135.8 billion, up 1.3%, and operating income was ¥3.4 billion, up fully 45.2%.

July 2004

Akihiro Kuroda President

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A Roadmap to Growth

Structural Reforms—

Generating New Growth Models

Akihiro Kuroda President

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Q:

Could you provide an overview of the goals and progress of your structural reform programs?

In the 20th century, Kokuyo achieved strong growth by concentrating on the high-volume, low-cost production of goods for nationwide distribution. However, this approach is not appro- priate for conditions in the 21st century. The recent emergence and expansion in Japan of such retailing modes as mail-order systems, 100-yen shops, and home centers have generated new customer expectations that the former approach is inadequate to quickly respond to. Moreover, the fact that Kokuyo had its own powerful marketing network encouraged a general expec- tation within the Company that it could sell whatever it manufactured, creating a certain measure of complacency that diluted its dynamism as a manufacturer.

To meet 21st century challenges, we have decisively implemented the

structural reform measures that are the prerequisites for the successful realization of timely new business models. The current structural reform program involves setting and attaining goals for reducing costs and expenses as well as transforming the organization by such means as the introduction of an internal company system. Naturally, the structural reform program has entailed difficult decisions regarding personnel curtailments. Importantly, we have given due attention to encouraging transformations in ways of thinking among employees.

In the fiscal year under review, which was the second year of our structural reform program, we cut our operating costs ¥7.3 billion. One cost-cutting strategy was to increase the share of products procured overseas, which rose to 26% in the stationery segment, 8% in the furniture segment, and 16% for the Company as a whole.

In addition, we reduced operating expenses ¥7.8 billion during the fiscal year. While the total number of employees had reached 4,623 in the previous fiscal year owing to the consolidation of additional distribution companies, this number was reduced to 4,191 as of the end of the fiscal year under review.

In the current fiscal year, we are targeting a further ¥8.1 billion in cost cuts and ¥6.2 billion in expense reductions. Overall, the cumulative value of cost cuts and expense reductions during the three years of the structural reform program should amount to ¥21.2 billion and ¥21.3 billion, respectively. (These figures have not been adjusted to elimi- nate the costs and expenses resulting from the consolidation of additional subsidiaries.)

While the current fiscal year is the last year of our current structural reform program, we will continue in our com- mitment to reduce costs and expenses.

Tokyo Metropolitan Area Integrated Distribution Center (IDC)

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Q:

What are the goals of the shift to a holding company system? What will the Company be like after the shift?

Our April 2003 introduction of an internal company system has enabled us to speed up our decision making and more quickly develop products that are highly responsive to new and latent market needs. We have recently launched numerous superbly innovative products—including such Universal Design items as the Kadokeshi eraser and a unique computer mouse—which have made important contributions to Kokuyo’s performance. Our impending shift to a holding company structure in October is designed to further accelerate our decision making and product development operations and position the Company for powerful competitiveness and dynamic growth during the 21st century.

There are three main reasons for adopting the holding company structure. The first is that such a structure will promote the principle of self- responsibility in management. Until recently, Kokuyo’s individual workers and departments displayed only weak

consciousness of self-responsibility, because they had been functioning merely as small parts in a large corporate organization. Smaller organiza- tions, however, are expected to nurture this consciousness of self-responsibility. The second reason is that the holding company structure will facilitate the pursuit of new business opportunities that do not necessarily match the spe- cialties of pre-existing organizational units. We will be able to use more flexi- ble information flows and respond quickly to customer needs when implementing new growth strategies. The third reason is that the holding company structure will speed up management decision making, thereby helping the Kokuyo Group quickly take new initiatives in product development, manufacturing, distribution, and other aspects of operations in response to information on market trends and customer needs. After splitting off its business operations as separate companies, Kokuyo Co., Ltd., will continue to be a listed company while functioning as the Kokuyo Group’s holding company, specializing in strategic planning operations for the Group. Including already

Shift to Holding Company System in October 2004

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Kokuyo S&T Co., Ltd. Kokuyo International Co., Ltd.

Kokuyo Furniture Co., Ltd. Kokuyo Store Creation Co., Ltd. Kokuyo Business Service Co., Ltd.

Kokuyo Logitem Co., Ltd. Kokuyo Office System Co., Ltd.

Kokuyo Engineering Co., Ltd. Kaunet Co., Ltd. Kokuyo Tokyo Sales Co., Ltd. Kokuyo Saitama Sales Co., Ltd. Kokuyo Nishikanto Sales Co., Ltd.

Kokuyo Chubu Sales Co., Ltd. Kokuyo Kinki Sales Co., Ltd. Kokuyo Chugoku Sales Co., Ltd.

Kokuyo Kyushu Sales Co., Ltd. General Meeting of Shareholders

Board of Auditors

Board of Directors

Holding company strategic staff

President R&D staff

Companies to be split off Companies already split off existing subsidiaries, the Group will

have 16 operating companies, each of which will draft and implement its own strategies in line with its emphasis on understanding and responding to customer needs. Because the operating companies’ managers will be relatively close to the front line, they will be well positioned to obtain information on markets and customers and to quickly devise and implement strategies. Each operating company will have autono- mous management capabilities but be

and solutions suggested by its name, which is an abbreviation of “solutions and technology.” Kokuyo Furniture Co., Ltd., will target business in corporate office furnishings and also seek to meet demand from such customers as government units and schools. Kokuyo Store Creation Co., Ltd., will focus on store fixtures, while Kokuyo Internation- al Co., Ltd., will undertake marketing operations overseas, primarily in China. audited and supervised by the holding

company—a highly transparent management structure.

Q:

What are the operating companies that Kokuyo plans to establish?

As I mentioned, the Group will have 16 operating companies. Looking at the biggest of these companies, Kokuyo S&T Co., Ltd., will handle paper products and stationery goods while providing the diverse services

Holding Company System

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Q:

What is Kokuyo’s growth strategy?

Our structural reform program is steadily increasing Kokuyo’s fundamental profit generating capability, but sales have not been rising as quickly as prof- its. This reflects the fact that thus far we have principally been focusing on business restructuring measures. From now on, however, we will be shifting to more proactive business expansion measures, which we anticipate will lead to sustained growth in sales.

Until now, Kokuyo’s business model involved the domestic marketing of stationery goods, furniture, and other products to mainly private-sector customers. This was a fine business model when the Japanese economy was growing, but it falls short when trying to achieve corporate growth in today’s mature domestic markets. As a result of a declining birthrate, Japan’s popu- lation is expected to decrease beginning from 2007, and already the number of domestic office workers has shown a steady decrease for a number of years.

Not merely a supplier of products and services, Kokuyo has a long tradi- tion of consistently providing customers with new value. If the markets for our existing products and services shrink, we must grow by moving in step with the evolution of working styles and continuing to provide customers with new value associated with knowledge work.

Japan’s Ministry of Economy, Trade, and Industry has issued a report speci- fying seven strategic growth industries for the country: fuel cells, IT household electric products, robots, IT content, products and services associated with health and welfare, products and services associated with environmental protection and energy, and business support services. The fields of health and welfare, environmental protection, and business support services all fall within Kokuyo’s business scope, and markets related to those fields can be expected to grow. Among those fields, we will be placing particular emphasis on business support services. We are strengthening our capabilities for providing customers with business support solutions involving both products and services, and we intend to go a step

Sustaining Growth through the Provision of New Value

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further than other companies to meet increasingly diverse customer needs. We have traditionally had only a low share of the government unit market, but we plan to broaden our marketing scope to proactively expand business in government units as well as business overseas, primarily in China.

Q:

What new business models is Kokuyo creating? We expect that our ability to create customer-oriented business models will be a key determinant of the success of our growth strategy. Our definition of a customer-oriented business model is a model in which all employees listen to each customer problem, think deeply about how best to solve the problems, and conduct day-to-day business while consistently giving top priority to customer needs.

When the operating companies are split off, they will have organizational structures more conducive to quick decision making, and the share of their employees who are in touch with customers will increase. We expect these changes to help the operating companies build closer relationships with

customers, constantly gather information on new needs, and create new value in responding to those needs. By concertedly using our design, manufacturing, marketing, and service capabilities, we are confident that we can steadily expand our operations and build a stronger profit base.

Users

Conventional Business Model Customer-Oriented Business Model All corporate units think in a customer-oriented manner, broadening the interface with users

Customer-Oriented Business Model

Retailers Information from Users and Wholesalers

Wholesalers Information from Retailers and Manufacturers

Manufacturers Information from Wholesalers

Broadened Interface with Users

Manufacturers Retailers and Distribution Affiliates Information from Users,

Retailers, Distribution Affiliates, and Manufacturers

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Q:

How do you plan to expand your operations based on a customer-oriented business model? As I have said, customer needs are becoming ever more diverse, and it is becoming increasingly difficult to fully meet those needs through the supply of products alone. Kokuyo is aiming to create new value by fully satisfying the needs that customers are aware of as well as discovering and satisfying additional latent needs.

Kokuyo is currently placing very strong emphasis on solutions businesses. In the stationery field, for example, we are proposing office supply purchasing systems. In the furniture market, we are offering facility management consulting, such as that related to office layout management systems and systems for comprehensively reducing office-related costs. These are exam- ples of innovative new value creation and the comprehensive marketing of new value to customers via business solutions proposals. This approach is an effective way to achieve customer satisfaction, and, given the rapid rise in business process outsourcing in the areas of general affairs, procurement,

and accounting, we expect to be able to greatly expand our business solutions operations.

Q:

How has Kaunet become profitable already?

In the third fiscal year following its launch, Kaunet generated ¥300 million in operating profit. Kaunet has quickly moved into the black, as we anticipated. This success reflects such innovations as a CD- ROM catalog that generates pages that can be leafed through just like a paper catalog, a “Space Director” service that enables customers to plan office layouts over the Internet, and the addition of more products available exclusively through Kaunet. These innovations have increased Kaunet’s added value and boosted customer loyalty. Kaunet operations will benefit from the opening of a second distribution center within the IDC in the greater Tokyo region this autumn, and plans call for Kaunet to provide additional new services, including credit purchasing, special services for medium-sized and large companies, and additional catalogs. These various moves are expected to sustain Kaunet’s growth in the period ahead.

Implementing New Business Models

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Q:

What are the key services that KOKUYO OFFICE SYSTEM offers?

KOKUYO OFFICE SYSTEM Co., Ltd.’s consultations on facility management and systems for comprehensively reducing office-related costs have been highly evaluated by customers. The subsidiary recently restored its profitability after a three-year hiatus, and this improved performance reflects strong demand for furniture associated with office relocations due to urban

Japan, and, for that matter, elsewhere in the world. As a result, KOKUYO OFFICE SYSTEM’s new head office has attracted considerable attention for its position on the leading edge of progress. The company also obtained significant know-how in the course of creating the new office systems, which is helping attract new orders.

The new head office’s initial costs are somewhat higher than the start-up costs of a conventional office, while subsequent operational costs are prov- ing considerably lower. In particular, the cost of changing office layouts at the new head office will be less than 10% of the cost of making such a change at an ordinary offices, which normally includes the cost of rerouting telephone lines and LAN connections. As a result, many companies have sent representa- tives to inspect the new head office, and there is increasingly widespread interest in adopting such all-wireless, non-territorial, open-plan office systems. redevelopment projects, primarily in

the greater Tokyo region, as well as KOKUYO OFFICE SYSTEM’s strong performance in project management associated with such projects as office relocation.

In December 2003, KOKUYO OFFICE SYSTEM opened a new head office, a non-territorial open-plan workplace completely equipped with wireless Internet and telephone systems. The total reliance on wireless connections is quite rare among offices in

KOKUYO OFFICE SYSTEM’s new Kasumigaseki office

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Q:

How is Kokuyo doing in its other new business development initiatives?

We expect to achieve strong growth in the business process outsourcing (BPO) field. We have already begun a six-month project to consider the kinds of BPO services the Kokuyo Group can provide and to initiate the development of such services. There are many prom- ising types of BPO services under con- sideration at this point, including those related to building security and docu- ment filing systems.

We intend to market a large share of our BPO services through distribution affiliates, as these companies have even closer relationships with their customers than other Kokuyo Group units. Over the long term, our plans call for the distribution affiliates to play a cen- tral role in offering customers an increasingly diverse and broad array of BPO services.

As our distribution affiliates have previously focused on product wholesaling operations, they will not immediately account for a large share of Kokuyo’s BPO sales. For the moment, we are working to increase the share of their

sales generated by BPO and other direct marketing business. Within four years, we aim to have improved our distribution affiliates’ sales structures so that the direct marketing, traditional wholesaling, and Internet-based wholesaling businesses each generate approximately one-third of their revenues. The BPO business will thus play an important role in expanding the distribution affiliates’ service menus and the scale of their direct marketing operations.

In the fiscal year ended March 2004, six of seven distribution affiliates within the scope of consolidation were able to achieve increases in both sales and profitability. Our distribution affiliates are still in a period of transition from pure wholesaling agents to distribution companies with capabilities for the proposal-based marketing of diverse products and services. However, the benefits of this progressive transition are already being reflected in their performance.

Developing New Businesses and Markets

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Beijing (April 2004)

Shanghai

Hong Kong Suzhou (May 2004)

Guangdong (May 2004)

Shenzhen

Q:

What new markets is Kokuyo considering developing?

In office furniture, Kokuyo commands the top share of the private-sector market. Admittedly, we have been somewhat complacent about having only the third-largest share of the national and local government markets. To rectify this imbalance, we have established a separate division to focus on marketing to government units, and this division has proactively approached government units in cooperation with distribution affiliates throughout Japan.

In recent years, there has been a major trend of consolidation among Japan’s local governments, with numerous mergers of municipalities. The national government is promoting such mergers, and approximately 500 are expected to take place in the current fiscal year alone. Merged municipalities are authorized to issue special bonds. About ¥25 trillion worth of such bonds are projected to be issued in the near future, and a certain percentage of the revenues generated will be used to relocate municipal facilities and build new facilities. This is a huge market.

year under review were only about

¥100 million, but we are seeking to boost this figure to ¥1.1 billion during the current fiscal year. Through KOKUYO TRADING (SHANGHAI), we can offer companies in China services and afterservices of unrivaled high quality in such fields as office planning and project management. There are really no local competitors in the same league at this point, so we have an extremely strong position. Moreover, beginning this fiscal year, we have broadened our marketing scope to include Chinese companies affiliated with North America– and Europe-based companies and have expanded our marketing scope to include the Beijing and Suzhou regions.

We are confident that the Kokuyo Group can obtain a 30% share of this market by making good use of its nationwide network of distribution affiliates and providing excellent services in line with customer needs.

Q:

Are you focusing on any other critical new markets? China is becoming extremely important to us as a manufacturing base. At the same time, the country offers potentially huge markets.

Annual sales of office furniture in China are estimated to have amounted to approximately ¥900 billion in the fiscal year ended March 2003, and this figure is growing more than 10% each year. In November 2002, we established KOKUYO TRADING (SHANGHAI) CO., LTD. This company has undertaken marketing operations focused on China’s roughly 5,000 Japan-affiliated companies, most of which have their head offices in the Shanghai region. KOKUYO TRADING (SHANGHAI)’s business development was slowed by the impact of the Severe Acute Respiratory Syndrome (SARS) out- break, and its sales during the fiscal

Sales offices in China

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Q:

What changes has Kokuyo undertaken with respect to corporate governance and compli- ance?

We believe we have already built a solid corporate governance system that features a strong supervisory role on the part of the board of auditors. We have a 10-member board of directors, which is a bit smaller than average for our industry, and we feel the relatively small size of the board has helped expedite decision making. Moreover, we have a management committee that includes a university professor who serves as an outside advisor.

Turning to compliance, we drafted the Kokuyo Ethical Principles in April 2003, and have worked to create a corporate culture that emphasizes rigorous compliance with laws and regulations along with very high ethical standards. As we prepare to split off all Kokuyo’s operating companies, we have initiated additional compliance- related measures, including the April 2004 establishment of internal audit departments in each internal company. That same month, we set up the CSR Promotion Department, which is

administering a Groupwide compliance system. We have fostered a compliance-oriented corporate culture through such initiatives as the creation of compliance training programs, a Crisis Management Committee, a Legal Consultation Office, and an internal compliance problem reporting system.

Q:

What are Kokuyo’s per- formance goals for the current fiscal year? After marking the 100th anniversary of Kokuyo’s founding in October 2005, do you have a vision for how the Company will be evolving in its second centu- ry of operations?

We are projecting that consolidated net sales will rise to ¥285.0 billion in the current fiscal year, and we expect that cost and expense reductions achieved through our structural reform program will help boost operating income to

¥12.0 billion.

The shift to a holding company setup is designed to align our organizational structure with our customer- oriented business model. We are confident that, by having each operating company draft and implement its

Moving Forward as a Proactively Evolving Enterprise

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satisfaction, employee satisfaction, and corporate social responsibility. Accordingly, after shifting to the holding company model, we intend to be an exemplary company in living up to our various responsibilities spanning corporate governance, compliance, and environmental sustainability.

After completing its structural reform program and shifting to a holding company structure, Kokuyo will finally be positioned to de-emphasize internal reforms and restructuring and to give top priority to new business expansion initiatives. We are doing our utmost to ensure that we live up to shareholders’ expectations regarding dynamic growth. We are very grateful for our shareholders’ support to date and hope for their continued understanding and encouragement.

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own growth strategy, we will be able realize sustained corporate expansion. We also anticipate that, once split off, the operating companies will be able to succeed at various things that the monolithic company of the past could not. Fundamentally, we see the operating companies as a collection of dynamic and compact “Kokuyos” offering significant upside potential. They will be able to respond more flexibly to changes in their operating

environments and should be less afraid of change and therefore more likely to achieve dynamic, sustained growth.

As we prepare to celebrate the 100th anniversary of our founding, we have created a new business model that should enable us to sustain growth for the foreseeable future. We have also given due attention to other capabilities that contribute to sustainable corporate vitality—such as for strong performance in terms of shareholder value, customer

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Kokuyo’s CSR

Viewing corporate social responsibility (CSR) programs as key to the realization of socioeconomic sustainability and ensuring public trust in the Kokuyo Group, we have drafted the Kokuyo Group CSR Charter. In April 2004, we also established the CSR Promotion Department, which is organizing and expediting CSR activities throughout the Group.

The Kokuyo Group CSR Charter Since its creation, the Kokuyo Group has worked to contribute to society through the provision of superior products. While remaining faithful to this principle, the Group has expanded the scope of its operations, increased its profitability, and striven to provide society with unique value. By rigorously complying with all relevant laws and regulations and otherwise striving to be an exemplary corporate citizen, the Group is doing its utmost to earn the confidence and trust of its customers and shareholders as well as other stakeholders and associates. We are confident that our CSR activities will help support dynamically sustainable operations over the long term.

Corporate Governance Systems Kokuyo has created corporate governance systems designed to promote transparent, speedy, and fair corporate governance activities. The Company has introduced a board of auditors system, and two of its five auditing officers are outside auditors. Moreover, our board of directors has only ten mem- bers, which is less than most other companies in the stationery goods and office furniture industries.

Supply-Chain Management The Kokuyo Group is using supply- chain management to increase efficiency within the Group as well as to improve diverse other supply chains outside the Group, such as those for the procurement and shipping of materials, components, and products and the treatment of waste products.

Environmental Management Systems

Kokuyo has built a comprehensive ISO 14001–certified environmental management system (EMS) covering all the parent company’s facilities and is pro- ceeding with various environmental protection initiatives within the frame- work of that system. As it prepares to split off operating companies, Kokuyo is progressively expanding the scope of its EMS, aiming to have it encompass all consolidated subsidiaries.

Kokuyo’s

CSR Report

Universal Design products

Keshi Piyo correction tape: Has a highly stable, three-point support design that facilitates accurate corrections

Eco products

Flat File All Paper: Binders completely made of paper components

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Report

Kokuyo Group CSR Charter

The Kokuyo Group shall be sincere in its pursuit of business and shall be an enterprise needed by society even as it strives to enhance profitability. This endeavor shall follow the Corporate Philoso- phy that has guided Kokuyo since its founding,

“Contributing to society by providing superior products.” By living up to its legal obligations and fulfilling its social responsibilities as a corporate citizen, Kokuyo shall win the trust of customers, stockholders, and all parties concerned and maintain the sustainability of its business.

Customers

1. Kokuyo shall assure customer satisfaction and earn customer trust by taking the customer’s point of view and by planning and offering products and services accordingly, thereby serving a useful pur- pose in the world.

2. Kokuyo shall be a unique business that continuously offers creativity, efficiency, and comfort as it actively leads the way in the evolution of both customers and itself.

Local Communities

1. Kokuyo understands that it is a member of the com- munity and shall seek to be a good corporate citizen, trusted by society because of the way it interacts with local communities, contributes to society in many ways, and helps to build a rich society.

Environmental Protection

1. Kokuyo recognizes protection of the global environment, such as global warming and deforestation, as

one of the greatest concerns of all humanity, and thus it shall mobilize its employees and use their combined wisdom to solve these issues.

2. Kokuyo recognizes its responsibilities as a provider of products and a consumer of resources, and as such shall have in all its activities a consciousness of the three “R”s: reduce, reuse, recycle.

Business Activities

1. Kokuyo shall compete freely, fairly, and transparent- ly, shall have fair trade with business partners, and shall maintain healthy and proper relationships with governments and authorities.

2. To assure that Kokuyo’s relationships with its suppliers are always fair and that Kokuyo remains a trusted company, Kokuyo shall cooperate with its suppliers and seek to grow with them. 3. Kokuyo recognizes its duty to shareholders to

increase corporate value and shall assure transparent, healthy corporate management that is trusted by society.

Human Rights

1. Kokuyo shall respect the rights of all persons with whom it deals in all aspects of business. It shall strive for a working environment free of discrimination and shall never tolerate child labor or forced labor. 2. Kokuyo shall respect the individuality of each

employee and shall offer a workplace that allows employees to fully express their autonomy and tal- ents. Kokuyo shall aim to be one of Japan’s leading companies in employee satisfaction.

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Environmental

Activities

includes Green Initiative 2010, a medium-to-long-term plan describ- ing concrete environmental protection measures and specific numerical performance goals. Based on this plan and its business management plan and EMS, the entire Group has worked concertedly to help protect the global environment, and an environmental performance evaluation system has been introduced to measure the results of efforts by individual employees and departments.

Kokuyo’s Environmental Performance

쏆Awareness of Global Warming Kokuyo sets the thermostats at all of its offices and factories at 28˚C for the two hottest summer months and encour- ages employees to wear lightweight clothing during that period, thereby decreasing the Company’s annual CO2emissions by 0.5%.

쏆Resource Conservation and Recycling

We are broadening the scope of our zero emissions programs. Among other initiatives, we are promoting the reuse of the used furniture we take posses- sion of when delivering new furniture.

쏆Procurement, Development, and Supply of Eco-Products

The share of eco-product sales within total sales has risen to 51.6%, and plans call for boosting this share to 80% by 2010.

materials and other products, we have completed a shift to materials that emit relatively small amounts of formalde- hyde. We are strictly managing our use of potentially harmful chemicals while seeking to reduce the volume of such chemicals used.

쏆Environmental Performance Evaluation

The environmental performance of the parent company and each consolidated subsidiary is evaluated with regard to global warming countermeasures, resource conservation and recycling, and eco-product sales ratios.

쏆Environmental Labeling

We display environmental labels on our eco-friendly products to explain how such products reduce environmental impact because of the materials they are made from and the way they are used and recycled.

쏆Environmental Communication We create exhibits at environmental- protection-related shows and also supply information through our home page. Moreover, we proactively solicit external evaluations of our environmental protection performance and use this feedback to make additional improvements.

Environmental

Activities

Office furniture using thinned wood Thinned Lumber Desk: Desks with tops made from wood gathered in forest thinning

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Social

Activities

The Kokuyo Corporate Ethics Code provides judgment criteria and concrete guidance for promoting highly rigorous legal compliance and ethical standards with regard to the actions of individual employees. The code also specifies the nature of relations with society, customers, collaborating companies, and employees in diverse business situations in Japan and overseas.

쏆Compliance System

All employees are expected to adhere to consistently strict legal compliance and high ethical standards in accor- dance with the Kokuyo Corporate Ethics Code. In preparation for the splitting off of divisions in October 2004, the Company has established crisis management committees and internal auditing departments within each division to perform risk- management functions. In addition, we have created an office to receive internal reports on compliance problems and established an information security policy.

쏆Employee Relations

Kokuyo’s Safety and Health Committee works to ensure that employees enjoy safe and healthy working environments and otherwise promotes good health among employees. We have established a Human Rights Awareness Promotion Code and Human Rights Awareness Promotion Committee as part of our proactive efforts to ensure that men and women enjoy equal employment opportunities and to promote the hiring of physically challenged people.

쏆Employee Satisfaction Survey This annual survey asks employees about their expectations and satisfaction levels in four elements of their work environments—work content, workplace, company, and manager—and the information from the survey is used to improve employee satisfaction.

쏆Customer Relations

To promote customer trust and loyalty, we have created quality assurance system guidelines. Our repair and maintenance systems and customer consultation offices strive to gather diverse customer feedback that we can use to further boost our customer satisfaction levels.

쏆Societal Relations

Kokuyo engages in numerous activities that help build strong relationships with regional societies, such as activities aimed at protecting forests, using wood generated by tree thinning, and promoting greenification.

쏆Environmental Report

The Kokuyo Group issues a Corporate Social Responsibility Report each year and also provides CSR-related information on its website.

Social

Activities

CSR Report

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Kaunet

In the third year following the establishment of Kaunet office supply catalog operations, Kaunet’s sales surged to

¥28.7 billion and an operating profit of ¥300 million was recorded. Large increases are projected in Kaunet sales and profitability during the current fiscal year. In addition to previous Kaunet initiatives, moves are being taken to enable credit card payment and stimulate demand among the individual employees of corporate customers as well as to step up business targeting medium-sized and large office facilities.

We are also working to expand our line of private-brand products and thereby bolster our overall product lineup.

Kadokeshi

Kadokeshi is a Universal Design eraser with a unique design that is an agglom- eration of 10 small cubes alternating with vacant cube-shaped spaces. It has been a huge hit, with approximately 1 million sold during the year following its May 2003 launch. The product was included in the “Humble Masterpieces” exhibit of the Museum of Modern Art (MoMA) in New York, and it will be sold at the MoMA Museum Shop from November 2004.

Stationery Business

Kaunet catalogs

Kadokeshi erasers

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The Fit Mouse (Te no Takumi) A Universal Design product with a strong emphasis on ergonomics, the Fit Mouse (Te no Takumi) is an optical, wireless mouse that meets a range of user needs. Its revolutionary new shape features an integral wrist rest to support users’ hands, and thus reduce muscle fatigue and repetitive stress injury and prevent callus formation, while also facilitating finer control.

Outlook for the Current Fiscal Year Net sales ¥145.6 billion Operating income ¥7.1 billion

Despite the emergence of some positive signs regarding domestic capital investment and consumption, the operating environment is expected to remain harsh owing to such factors as continued decreases in prices and demand. As in the previous fiscal year, Kokuyo will continue increasing its

capabilities for developing Universal Design products and will work in cooperation

with the newly consolidated subsidiary ARVEL Inc. in developing a steady stream of new products. Regarding distribution, the Company will endeavor to further expand Kaunet office supply catalog marketing operations while moving ahead with the reform of distribution affiliates’ business models. The Fit Mouse (Te no Takumi)

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Furniture Developed in Cooperation with the Frank Lloyd Wright

Foundation

In January 2004, Kokuyo began the marketing in Japan of executive- level furniture products,

the Taliesin Design series, developed in cooperation with the U.S.-based Frank Lloyd Wright

Foundation. Highly functional, the products are also exceptionally attractive, with designs that reflect scrupulous attention to detail while facilitating very comfortable and relax- ing office environments.

Establishment of CW Facilities Solution

CW Facilities Solution Co., Ltd., was established on April 1, 2004. The new company handles the leasing out of offices complete with furniture, IT systems, and other furnishings. CW Facilities Solution is aiming to generate

¥300 million in net sales during the Collaboration with Bene Buromobel

In November 2003, Kokuyo arranged an alliance with Bene Buromobel KG, a leading European furniture company based in Austria. The alliance calls for Kokuyo to market Bene Buromobel products in Japan while Bene Buromobel markets Kokuyo products in Europe. Bene Buromobel is well known as an office furniture manufacturer that boasts excellent product development capabilities as well as consulting units that present customers with optimal office layout proposals. Sales of Bene Buromobel products in Japan are expected to become considerable.

Taliesin Design

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Outlook for the Current Fiscal Year Net sales ¥139.4 billion Operating income ¥4.9 billion

Because demand for office furniture moves in parallel with GDP trends, after a delay of approximately six to twelve months, Kokuyo expects that, if the current trend of economic recovery is sustained, demand for its furniture will recover during the latter half of the current fiscal year. The Company also antici- pates demand during the year to arise in areas adjacent to recently redeveloped dis- tricts in the greater Tokyo region, and it will proactively work to increase its share of the market for supplying products to government units. These factors and the launch of more than 30 new products during the latter half of the fiscal year under review are projected to contribute to a rise in net sales. current fiscal year and ¥3.8 billion in net

sales in the fiscal year ending March 2008. The new company is expected to benefit from the investments and know- how received from leading companies in various different industries—such as ORIX Corporation and Mizuho Trust & Banking Co., Ltd.—and its innovative business model has been highly evaluated by prospective customers and others.

Bene COFFICE

Bene Desksystem

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Thousands of

Millions of yen U.S. dollars

2004 2003 2002 2001 2000 1999 2004

For the year:

Net sales ¥273,462 ¥272,199 ¥276,584 ¥295,310 ¥280,335 ¥291,664 $2,587,152

Cost of sales 181,279 184,800 192,894 206,322 198,190 214,950 1,715,033

Selling, general and

administrative expenses 83,317 82,401 82,911 77,132 67,823 65,284 788,240

Operating income 8,866 4,998 779 11,856 14,322 11,430 83,879

Net income (loss) 1,949 231 (1,422) 7,192 1,192 4,986 18,439

At year-end:

Total assets 289,194 285,789 307,010 329,505 314,039 309,099 2,735,989

Working capital 57,790 54,242 70,860 82,803 89,688 88,874 546,736

Property, plant and equipment, net 97,134 98,482 98,522 102,207 103,342 102,318 918,959

Total liabilities 103,693 103,913 115,925 128,570 120,321 117,244 981,012

Interest-bearing debt 17,777 20,188 20,554 21,861 21,120 19,536 168,184

Total shareholders’ equity 185,141 181,430 190,274 200,442 193,380 190,676 1,751,571

Yen U.S. dollars

Per share data:

Basic net income (loss) ¥0015.38 ¥0001.51 ¥ (11.05) ¥ 55.44 ¥ 9.13 ¥ 38.14 $0,0000.15

Diluted net income — — — 55.39 9.16 38.11 —

Cash dividends applicable

to the year 15.00 15.00 15.00 17.50 17.50 15.00 0.14

Shareholders’ equity 1,438.07 1,483.73 1,498.49 1,544.92 1,490.49 1,458.41 13.60

%

Ratios:

Ratio of operating income to net sales 3.2 1.8 0.3 4.0 5.1 3.9

Return on sales 0.7 0.1 (0.5) 2.4 0.4 1.7

Return on equity 1.1 0.1 (0.7) 3.6 0.6 2.6

Return on assets 0.7 0.1 (0.4) 2.2 0.4 1.6

Equity ratio 64.0 63.5 62.0 60.8 61.6 61.7

Debt-to-equity ratio 9.6 11.1 10.8 10.9 10.9 10.2

Thousands of shares

Common stock:

Number of shares issued 128,742 128,742 129,742 129,742 130,742 130,742 Note: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥105.7=US$1, the approximate

exchange rate prevailing at March 31, 2004.

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Management’s Discussion and Analysis

Overview

During the fiscal year under review, the Japanese economy showed improvements in corporate performance and capital investment, but the effects of the prolonged economic deceleration in Japan prevented the start of a full- scale recovery. Amid these economic conditions, the Kokuyo Group emphasized efforts to implement the structural reform plan it announced on September 27, 2002.

In April 2003, Kokuyo introduced an internal company system that delegates authority on a broader scale to give employees greater autonomy to increase the dynamism of its organizational structure and accelerate its decision- making processes. In addition, with due attention to the special characteristics of operations in each of its business fields, the Company has worked to upgrade its capabilities for meeting customer needs and augment cost-competitiveness.

Kokuyo has undertaken thorough cost-reduction efforts and proceeded with the restructuring of its manufacturing systems by consolidating the stationery operations of the core Yao plant at the Kokuyo Shiga plant and the construction materials operations of the Okayama plant at the Shibayama plant. To increase its capabilities for powerful marketing operations based on an excellent understanding of customer needs, the Company worked to fundamentally restructure its distribution systems by integrating and consolidating its exclusive sales agents (which numbered 41 at the end of the fiscal year), converting them into marketing subsidiaries and affiliates covering relatively large regions. In distribution, the Kokuyo Tokyo Metropolitan Area

Integrated Distribution Center (IDC), one of the largest specialized distribution centers in the office supply business, began full-fledged operations in November 2003.

Kokuyo has established an alliance with Aurora Corporation, which is a highly attractive partner for both marketing and manufacturing operations as it boasts the strongest sales capabilities in office-related markets in the People’s Republic of China. Kokuyo also created an alliance with Bene Buromobel KG, Austria’s largest office furniture maker.

The proactive implementation of these policies and efforts to enhance results boosted net sales to ¥273.5 billion, up 0.5% year on year. Regarding profitability, the implementation of a structural reform plan reduced various costs and expenses, causing a sharp 77.4% rise in operating income, to ¥8.9 billion, and a 742.5% surge in net income, to ¥1.9 billion.

Results of Operations Net Sales

Consolidated net sales advanced 0.5%, to ¥273.5 billion. Of this figure, the stationery segment accounted for 50.4%, down from 50.8% in the previous year, while the furniture segment contributed 49.6%, up from 49.2%. As these two business segments each generate approximately half of its net sales, Kokuyo believes it has a well- balanced sales structure. Regarding operating income, the stationery business accounted for 61.3%, up from 52.7% in the previous year, while the furniture business contributed 38.7%, down from 47.3%.

0 50,000 100,000 150,000 200,000 250,000 300,000

2002 2001 2000*

1999 2003 2004

(1,186)

Net Sales

273,462 (Millions of yen)

Personal Stationery and Household Effects Office Furniture and Fittings Office Paper Products, Stationery, and Equipment

*In fiscal 2000, Kokuyo reclassified its business segments.

Stationery Furniture

(152.2)

Stationery Segment Sales

2002 2001 2000

1999 2003 2004

50.4

0 40,000 80,000 120,000 160,000 200,000

137,691 (%) (Millions of yen)

Segment Sales as a Percentage of Net Sales

0 10 20 30 40 50 60

Stationery Segment Operating Income (Loss)

2001 2000

1999 200220032004 61.3

0 3,000 6,000 9,000 12,000 15,000

Segment Operating Income (Loss) as a Percentage of Consolidated Operating Income

0 20 40 60 80 100

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products: stationery goods and PC supplies.

Annual sales in Japan’s business-to-business market for stationery goods are estimated to be in the range of

¥1.0 trillion to ¥1.1 trillion* and those to individuals around

¥300 billion to ¥400 billion*. In the fiscal year under review, the stationery market was impacted by such factors as a general downtrend in market prices and demand; however, Kokuyo continued working to stimulate additional demand by launching such products as Kadokeshi, a Universal Design eraser, and Power Pritt, a quick-drying, stronger glue stick that uses new synthetic polymer technologies.

The Japanese market for PC supplies is estimated to be worth about ¥100 billion*, and this market is expected to continue growing. New products launched in this field included mimioPersonal, which enables users to write words and draw images on a regular desktop surface that digitizes and inputs the desktop data into a PC in real time, and the Fit Mouse (Te no Takumi), which is an optical, wireless mouse with a highly ergonomic shape that offers superior control.

Annual domestic sales by office supply direct marketers are estimated to amount to roughly ¥300 billion** and are expected to continue expanding. Kokuyo offers a variety of direct-marketing programs tailored to meet the needs of different kinds of customers, including Kaunet, @office, and BenriNet.

Regarding Kaunet office supply catalog marketing operations, Kokuyo strove to enhance customer services and

(distributed from September 2003 and February 2004, respectively) featured additions to the office furniture lineup designed to be suitable for SOHO users, specialized products for medical and retailing facilities, and a greater volume of private-brand offerings. The Company is striving for product lineups that make the most of Kaunet’s unique potential.

As a result, sales in the stationery segment amounted to

¥137.7 billion, down 0.4%.

Furniture Business

Annual sales in Japan’s office furniture market are estimated to be approximately ¥300 billion*. Market trends are closely linked with trends in corporate capital investment and GDP. During the fiscal year under review, the growth in office furniture demand that had accompanied the surge in urban redevelopment in the Tokyo metropolitan area peaked out, causing competition in the office furniture market to intensify. Against this backdrop, Kokuyo worked to promote sales of products that match needs associated with evolving office environments and working styles, such as the new Alios office desk system, the Trenza office chair, and Inthesis low-profile office partitions. At the same time, Kokuyo was able to further expand its share of the Tokyo redevelopment project related market for office furniture.

During the year under review, Kokuyo continued to develop new products and broaden its product lineup. Among noteworthy new products launched during the year

2002 2001 2000

1999 2003 2004

0.7

0 1 2 3 (%)

Return on Sales (ROS)

(0.5)

Furniture Segment Sales

2002 2001 2000

1999 2003 2004

49.6

0 40,000 80,000 120,000 160,000 200,000

Segment Sales as a Percentage of Net Sales

0 10 20 30 40 50

60 252.2

Furniture Segment Operating Income

2001 2002 2003 2000

1999 2004

3,435

0 1,000 2,000 3,000 4,000 5,000 6,000

(%) (Millions of yen)

Segment Operating Income as a Percentage of Consolidated Operating Income

0 20 40 60 240 260

앒 앒

앒

38.7

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were the WORKGATE desk system, which can be config- ured for different applications and features a high ratio of performance to cost; the Colado office chair, which is the first chair of its kind to offer optional arms that can be eas- ily adjusted for user comfort; and the uniflex filing/storage system, an innovative storage system with Universal Design drawer handles and diverse other functional features that promote ease of use.

Moreover, in February 2004, marketing subsidiary KOKUYO OFFICE SYSTEM opened its Kasumigaseki office building, which has 18 floors and 2,722m²of floor space. Equipped with a large-scale wireless LAN and IP mobile phone systems and other leading-edge IT tools, the building maximizes the use of cutting-edge wireless office technologies. Besides serving as KOKUYO OFFICE SYSTEM’s head office, the building is open to inspection by potential customers, thereby promoting new demand associated with the creation of next-generation work styles and office environments.

Annual sales in Japan’s store fixtures market are estimated to be approximately ¥200 billion*. During the fiscal year under review, many distributors and retailers opened new facilities and remodeled existing ones, and the progressive elimination of traditional market boundaries stim- ulated new store openings among companies in other industries. Kokuyo’s dynamic marketing programs aimed at meeting related needs enabled it to record strong sales of store fixture products.

Reflecting these trends, the furniture segment’s sales amounted to ¥135.8 billion, up 1.3%.

* Kokuyo estimates

** Figures for nationwide direct marketing programs only

Costs, Expenses, and Earnings

To enable a speedy recovery in corporate performance, Kokuyo drafted a structural reform plan that calls for the reduction of costs and expenses through such measures as the reorganization of distribution systems and implementation of voluntary early retirement schemes. As part of this plan, an internal company system was introduced during the fiscal year and other measures were taken to further speed up progress in increasing cost-competitiveness and capabilities for responding to customer needs. Other important strategic undertakings designed to realize hefty cost reductions and equip the Company with a solid basis for low-cost operations included steps to boost the share of products procured overseas and to reorganize domestic factories.

Thanks to these strategic measures, the cost of sales was reduced 1.9%, to ¥181.3 billion. The moderate rise in net sales and decrease in cost of sales boosted the gross profit margin 1.6 percentage points, to 33.7%.

Selling, general and administrative (SG&A) expenses increased 1.1%, to ¥83.3 billion, and the ratio of SG&A expenses to net sales edged up 0.2 percentage point, to 30.5%. Although the Company worked to reduce marketing and administration expenses, particularly personnel-related expenses, the success of these efforts was offset by the consolidation of additional subsidiaries, with the effect of boosting SG&A expenses by ¥2.3 billion. If the consolidation of additional subsidiaries were excluded, SG&A expenses would have declined 1.7%, to ¥81.0 billion.

As a result, operating income continued to rise rapidly, surging 77.4%, to ¥8.9 billion, and the ratio of operating income to net sales rose 1.4 percentage points, to 3.2%.

Gross Profit and Ratio of Gross Profit to Net Sales

0 1 2 3 4

1.1 (%)

SG&A Expenses and Ratio of SG&A Expenses to Net Sales

Return on Equity (ROE)

2002 2001 2000

1999 2003 2004

33.7

0 30,000 60,000 90,000 120,000 150,000 180,000

Ratio of Gross Profit to Net Sales Gross Profit

0 10 20 30 40

2002 2001 2000

1999 2003 2004 19992000200120022003 2004

30.5

0 30,000 60,000 90,000 120,000 150,000 180,000

Ratio of SG&A Expenses to Net Sales SG&A Expenses

0 10 20 30 40

(0.7)

Annual Report 2004 アニュアルレポート｜IRライブラリー｜株主・投資家情報｜コクヨ

I N T O T H E N E X T G R O W T H S T A G E