May 26, 2014
To Our Shareholders
Shoei Yamana
Director, President and CEO
Representative Executive Officer
Konica Minolta, Inc.
2-7-2 Marunouchi, Chiyoda-ku, Tokyo
NOTICE OF CONVOCATION OF THE 110TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
KONICA MINOLTA, INC. (“the Company”) respectfully requests your attendance at the 110th Ordinary General Meeting of Shareholders (“the Meeting”), which will be held as detailed below.
If you are unable to attend the Meeting, you may exercise your voting rights in writing or by an electronic method (via the Internet). In this case, please examine the attached Reference Documents for the General Meeting of Shareholders, indicate your approval or disapproval on the enclosed Voting Form and return it so it reaches us by 5.40 p.m., Wednesday, June 18, 2014, or vote on the website for exercising voting rights designated by the Company (http://www.evote.jp/) no later than the above-mentioned deadline.
1. Date and Time: Thursday, June 19, 2014 at 10.00 a.m.
2. Place: Grand Arc Hanzomon, 4F “Fuji-no-ma”
3. Objectives:
Matters to be Reported: 1. Reports on the Business Report, the Consolidated Financial Statements for the 110th Fiscal Year (from April 1, 2013 to March 31, 2014); and Audit Reports by the Accounting Auditor and the Audit Committee on the Consolidated Financial Statements
2. Reports on the Non-consolidated Financial Statements for the 110th Fiscal Year (from April 1, 2013 to March 31, 2014)
Matters to be Resolved:
Agenda Item: Election of Eleven (11) Directors
4. Guide to the Exercise of Voting Rights, etc.
Please refer to “Guide to the Exercise of Voting Rights, etc.”
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◙ In case of any changes to the Reference Documents for the General Meeting of Shareholders, the Business Report, Consolidated Financial Statements or Non-consolidated Financial Statements, the changes will be posted on the Company’s website (http://konicaminolta.jp/about/investors/index.html).
◙ If you plan to attend the Meeting, please submit the enclosed Voting Form to the receptionist at the Meeting.
◙ Shareholders who plan to attend the Meeting are asked to wear light apparel because the temperature setting for air conditioning in the meeting room will be slightly higher than usual in order to conserve electricity.
Guide to the Exercise of Voting Rights, etc.
1. Deadline for exercise of voting rights
As specified in the opening statement of this notice, for those unable to attend the Meeting, the deadline for receipt of votes by mail and the deadline for the exercise of voting rights on the website for exercising voting rights designated by the Company (http://www.evote.jp/) is 5.40 p.m., Wednesday, June 18, 2014.
2. Treatment of votes without indication of approval or disapproval
Any voting right exercised without indicating approval or disapproval for a particular proposal will be counted as a vote for approval of the proposal.
3. Treatment of votes cast more than once by mail
If any voting right is exercised more than once by mail, the latest exercise will be upheld as a valid exercise of the voting right.
4. Diverse exercise of voting rights
Shareholders are respectfully requested to notify the Company in writing of any diverse exercising of voting rights and the reason therefore not later than three days before the Meeting.
Using the Internet to exercise voting rights
1. Treatment of votes cast both by mail and via the Internet
If any voting right is exercised both by mail and by the Internet, the exercise via the Internet will be upheld as valid exercise of the voting right.
2. Treatment of votes cast more than once via the Internet
If any voting right is exercised more than once via the Internet, the latest exercise will be upheld as a valid exercise of the voting right. If any voting right is exercised by personal computer, by smartphone and by cellular phone, the latest exercise will be upheld as a valid exercise of the voting right.
3. Guide to using the Internet to exercise voting rights
If you decide to use the Internet to exercise your voting rights, please read the following in advance. If you intend to attend the Meeting in person, voting in writing or using the Internet is unnecessary.
(1) Site for Exercising Voting Rights
(i) You may only exercise voting rights via the Internet by accessing the website for exercising voting rights designated by the Company (http://www.evote.jp/) through a personal computer, smartphone or cellular phone (i-mode, EZweb or Yahoo! Mobile)*. Please note that you will not be able to access the above URL from 2.00 a.m. to 5.00 a.m. each day during the exercise period.
* (“i-mode” is a trademark or registered trademark of NTT DoCoMo Inc., “EZweb” is a trademark or registered trademark of KDDI Corporation and “Yahoo!” is a trademark or registered trademark of Yahoo! Inc. in the United State)
(ii) With respect to exercising voting rights via the Internet using a personal computer or smartphone, in some network environments (including, but not limited to, the case in which you use firewall, etc. antivirus programs or a Proxy Server for Internet access), you may not be able to exercise voting rights.
(iii) With respect to the exercise of voting rights via the Internet by using a cellular phone, please use the service by i-mode, EZweb or Yahoo! Mobile. For security purposes, the website is only compatible with cellular phones that have functions of an encrypted communication (SSL communication) and transmission of cellular phone information.
(iv) Although the exercise of voting rights via the Internet will be acceptable until 5.40 p.m. on Wednesday, June 18, 2014, we recommend that you exercise your voting rights earlier. If you have any enquiries, please contact the helpdesk shown below.
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(2) Method of Exercising Voting Rights via the Internet
(i) On the website for exercising voting rights (http://www.evote.jp/), please enter your approval or disapproval for the proposals by using your “Login ID” and “Temporary Password” described in the Voting Form and by following the instructions on the screen.
(ii) Please note that if you wish to exercise your voting rights via the internet, you will be asked to change your “Temporary Password” on the website for exercising voting rights in order to prevent unauthorized access (web spoofing) or alteration of the voting by any other person than you.
(iii) The “Login ID” and the “Temporary Password” will be renewed and sent to you for each general meeting of shareholders to be held in the future.
(3) Costs Arising from Access to the Website for Exercising Voting Rights
Any costs arising from access to the website for exercising voting rights (such as the Internet access fees) shall be paid by you. In addition, data transmission or other fees are required when using a cellular phone and you are responsible for these fees, too.
For enquiries with respect to exercising voting rights via the Internet
Mitsubishi UFJ Trust and Banking Corporation
Stock Transfer Agency Department (helpdesk)
Telephone: 0120-173-027
（Operating Hours: 9.00 to 21.00, toll-free number）
（Japanese language only）
To Institutional Investors
As an additional method for exercising your voting rights via the Internet described above, any trust management bank or other nominal shareholders (including standing proxies) may use the electronic voting platform for institutional investors operated by ICJ, Inc. subject to prior request for the use of the platform.
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REFERENCE DOCUMENTS
FOR
THE GENERAL MEETING OF SHAREHOLDERS
Agenda Item Election of Eleven (11) Directors
Upon the close of this Ordinary General Meeting of Shareholders (“the Meeting”) of Konica Minolta, Inc. (“the Company”), the terms of office of all the eleven (11) directors will expire. Accordingly, shareholders are requested to elect eleven (11) directors based on the nominations of the Nominating Committee.
The Nominating Committee has nominated suitable candidates for achieving good corporate governance, i.e. ensuring the transparency, soundness and efficiency of the Company’s operations, in accordance with the director election standards determined by the Nominating Committee. In particular, outside director nominees have been nominated, assessing their professional records and visions, ensuring they have done no material business transaction with the Company and are strictly independent from the Company, and ensuring that they can devote sufficient time to the Board and committee duties.
The candidates for the position of director are as follows.
Director Candidates
No.
Name (Date of birth)
Career history, position and responsibilities at the Company, and important position concurrently held
1
Masatoshi Matsuzaki
(July 21, 1950) Up for re-election
【Number of shares of the Company held】
65,000 shares
April 1976 Joined Konishiroku Photo Industry Co., Ltd.
November 1997 General Manager of Development Group No. 2, Color Business Machines Development Div., Business Machines Headquarters of Konica Corporation
May 1998 General Manager of Development Center No. 1, System Technology Development Div., Business Machines Headquarters of Konica Corporation
October 2003 Director of Konica Minolta Business Technologies, Inc.
April 2005 Executive Officer of the Company, and Representative Director and President of Konica Minolta Technology Center, Inc.
April 2006 Senior Executive Officer of the Company, and Representative Director and President of Konica Minolta Technology Center, Inc.
June 2006 Director and Senior Executive Officer of the Company, and Representative Director and President of Konica Minolta Technology Center, Inc.
April 2009 Director, President and CEO, and Representative Executive Officer of the Company
April 2014 Director and Chairman of the Board of the Company
(positions which he continues to hold)
<Important position concurrently held>
President of Japan Business Machine and Information System Industries Association
5
No.
Name (Date of birth)
Career history, position and responsibilities at the Company, and important position concurrently held
2
Shoei Yamana
(November 18, 1954) Up for re-election
【Number of shares of the Company held】
25,000 shares
April 1977 Joined Minolta Camera Co., Ltd.
July 1996 General Manager of Management Planning Div. of Minolta Co., Ltd.
January 2001 CEO of Minolta QMS Inc.
July 2002 Executive Officer, General Manager of Management Planning Div., Deputy General Manager of Image Information Products General Headquarters, Image Information Products Company of Minolta Co., Ltd.
August 2003 Senior Executive Officer of the Company, and Executive Officer and General Manager of MFP Operations and Deputy General Manager of Image Information Products General Headquarters, Image Information Products Company of Minolta Co., Ltd.
October 2003 Senior Executive Officer of the Company, and Managing Director of Konica Minolta Business Technologies, Inc.
April 2006 Senior Executive Officer of the Company
June 2006 Director and Senior Executive Officer of the Company
April 2011 Director and Senior Executive Officer of the Company, and Representative Director and President of Konica Minolta Business Technologies, Inc.
April 2013 Director and Senior Managing Executive Officer of the Company
April 2014 Director, President and CEO, and Representative Executive Officer of the Company
(positions which he continues to hold)
<Important position concurrently held>
None
6
No.
Name (Date of birth)
Career history, position and responsibilities at the Company, and important position concurrently held
3
Shoji Kondo
(December 6, 1942)
Candidate for outside director
Up for re-election
【 Number of shares of the Company held 】
0 shares
April 1965 Joined Toyota Motor Co., Ltd.
June 1997 Director of Toyota Motor Corporation
June 2001 Senior Executive Director of Toyota Motor Corporation
June 2003 Director and Vice-President of Hino Motors, Ltd.
June 2004 Representative Director and President of Hino Motors, Ltd.
June 2008 Representative Director and Chairman of Hino Motors, Ltd.
June 2011 Senior Corporate Advisor of Hino Motors, Ltd.
(position which he continues to hold)
June 2011 Director of the Company
(position which he continues to hold)
<Important position concurrently held>
Senior Corporate Advisor of Hino Motors, Ltd.
Reasons for selecting the candidate for outside director (Article 2, Paragraph 3, Item 7 of the Regulation for Enforcement of the Company Law) and term of office
Mr. Shoji Kondo has many years of experience in the management of manufacturers at Toyota Motor Corporation and Hino Motors, Ltd. He was involved primarily in production and purchase activities, which are the main components of manufacturing. He has extensive experience and a broad range of knowledge as a corporate executive. In addition, Mr. Kondo has a high degree of independence from the Company.
Following his election as a director in June 2011, Mr. Kondo has performed well as a member of the Board of Directors and other committees. Fiscal 2013 activities are listed in “Primary activities of outside directors” in the business report (page 33). Mr. Kondo attended all meetings of the Board of Directors in the fiscal year.
Therefore, the Company believes that Mr. Kondo can continue contributing to the maintenance and upgrading of corporate governance through the activities of the Board of Directors and the committees, and requests shareholders to elect him as an outside director.
As of the close of the Meeting, Mr. Kondo will have served for three years.
Information concerning independence
Hino Motors, Ltd. and the Company are not major customers of each other because these sales accounted for less than 1% of the consolidated net sales of each company. Furthermore, the two companies are not major shareholders of each other.
Mr. Kondo meets the independence standards for outside directors established by the Company’s Nominating Committee as well as the standards for independence of Tokyo Stock Exchange, Inc. The Company has submitted a notice to this exchange designating Mr. Kondo as an independent director as defined in Rule 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange, Inc.
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No.
Name (Date of birth)
Career history, position and responsibilities at the Company, and important position concurrently held
4
Hirokazu Yoshikawa
(October 25, 1942)
Candidate for outside director
Up for re-election
【 Number of shares of the Company held 】
0 shares
April 1966 Joined Dowa Mining Co., Ltd.
June 1993 Director of Dowa Mining Co., Ltd.
June 1997 Managing Director of Dowa Mining Co., Ltd.
June 1999 Representative Director and Senior Managing Director of Dowa Mining Co., Ltd.
April 2000 Representative Director and Vice-President of Dowa Mining Co., Ltd.
April 2002 Representative Director, President and COO of Dowa Mining Co., Ltd.
April 2003 Representative Director, President and CEO of Dowa Mining Co., Ltd.
October 2006 Representative Director, Chairman and CEO of DOWA HOLDINGS Co., Ltd.
April 2010 Representative Director and Chairman of DOWA HOLDINGS Co., Ltd.
June 2011 Senior Corporate Advisor of DOWA HOLDINGS Co., Ltd.
(position which he continues to hold)
June 2012 Director of the Company
(position which he continues to hold)
<Important position concurrently held>
Senior Corporate Advisor of DOWA HOLDINGS Co., Ltd.
Reasons for selecting the candidate for outside director (Article 2, Paragraph 3, Item 7 of the Regulation for Enforcement of the Company Law) and term of office
Mr. Hirokazu Yoshikawa has many years of experience at DOWA HOLDINGS Co., Ltd. in the management of non-ferrous metal smelting businesses and environmental and recycling businesses while implementing business structural reforms and corporate reforms. In addition, Mr. Yoshikawa had experience in the public sector as a member of advisory bodies of the Ministry of the Environment, Cabinet Office and in other roles. He has extensive experience and a broad range of knowledge as a corporate executive. In addition, Mr. Yoshikawa has a high degree of independence from the Company.
Following his election as a director in June 2012, Mr. Yoshikawa has performed well as a member of the Board of Directors and other committees. Fiscal 2013 activities are listed in “ Primary activities of outside directors ” in the business report (page 33). Mr. Yoshikawa attended all meetings of the Board of Directors in the fiscal year.
Therefore, the Company believes that Mr. Yoshikawa can continue contributing to the maintenance and upgrading of corporate governance through the activities of the Board of Directors and the committees, and requests shareholders to elect him as an outside director.
As of the close of the Meeting, Mr. Yoshikawa will have served for two years.
Information concerning independence
There is a business relationship between DOWA Electronics Materials Co., Ltd., a subsidiary of DOWA HOLDINGS Co., Ltd., and a manufacturing subsidiary of the Company. However, DOWA HOLDINGS Co., Ltd. and the Company are not major customers of each other because these sales accounted for less than 1% of the consolidated net sales of each company. Furthermore, the two companies are not major shareholders of each other.
Mr. Yoshikawa meets the independence standards for outside directors established by the Company’s Nominating Committee as well as the standards for independence of Tokyo Stock Exchange, Inc. The Company has submitted a notice to this exchange designating Mr. Yoshikawa as an independent director as defined in Rule 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange, Inc.
8
No.
Name (Date of birth)
Career history, position and responsibilities at the Company, and important position concurrently held
5
Takashi Enomoto
(January 18, 1953)
Candidate for outside director
Up for re-election
【Number of shares of the Company held】
0 shares
April 1975 Joined Nippon Telegraph and Telephone Public Corporation
June 2003 Director of NTT DATA Corporation
June 2007 Representative Director and Senior Executive Officer of NTT DATA Corporation
June 2008 Representative Director and Vice-President of NTT DATA Corporation
June 2012 Executive Advisor of NTT DATA Corporation
(position which he continues to hold)
June 2013 Director of the Company
(position which he continues to hold)
<Important position concurrently held>
Executive Advisor of NTT DATA Corporation
Reasons for selecting the candidate for outside director (Article 2, Paragraph 3, Item 7 of the Regulation for Enforcement of the Company Law)
Mr. Takashi Enomoto has many years of experience in the management of IT solutions businesses at NTT DATA Corporation. He has extensive experience and a broad range of knowledge as a corporate executive. In addition, Mr. Enomoto has a high degree of independence from the Company. Following his election as a director in June 2013, Mr. Enomoto has performed well as a member of the Board of Directors and other committees. Fiscal 2013 activities are listed in “Primary activities of outside directors” in the business report (page 34). Mr. Enomoto attended all meetings of the Board of Directors held after his election as a director in June 2013.
Therefore, the Company believes that Mr. Enomoto can continue contributing to the maintenance and upgrading of corporate governance through the activities of the Board of Directors and the committees, and requests shareholders to elect him as an outside director.
As of the close of the Meeting, Mr. Enomoto will have served for one year.
Information concerning independence
The Company has a business relationship with NTT DATA Corporation that includes the payment to this company of ERP software licensing fees and maintenance fees. However, NTT DATA Corporation and the Company are not major customers of each other because these sales accounted for less than 1% of the consolidated net sales of each company. Furthermore, the two companies are not major shareholders of each other.
Mr. Enomoto meets the independence standards for outside directors established by the Company’s Nominating Committee as well as the standards for independence of Tokyo Stock Exchange, Inc. The Company has submitted a notice to this exchange designating Mr. Enomoto as an independent director as defined in Rule 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange, Inc.
Information concerning others
In the 2010 fiscal year, when Mr. Enomoto was a director of NTT DATA Corporation, a bribery incident concerning payments by a former employee to a former employee of the Japan Patent Office was discovered. NTT DATA Corporation performed an internal investigation by forming a committee headed by the company president. There was also an investigation by a committee made up of intellectuals from outside NTT DATA Corporation. Reports were subsequently announced and an internal and external compliance declaration was made. For the internal investigation committee, Mr. Enomoto served as the leader of the first investigation task force.
9
No.
Name (Date of birth)
Career history, position and responsibilities at the Company, and important position concurrently held
6
Kazuaki Kama
(December 26,1948)
Candidate for outside director
First-time candidate
【Number of shares of the Company held】
0 shares
July 1971
Joined IHI Corporation
(former Ishikawajima-Harima Heavy Industries Co., Ltd.)
June 2004
Executive officer, and General Manager of Finance & Accounting Division of IHI Corporation
April 2005
Managing Executive Officer of IHI Corporation
June 2005
Director and Managing Executive Officer of IHI Corporation
April 2007
Representative Director and President & Chief Executive Officer of IHI Corporation
April 2012
Representative Director and Chairman of IHI Corporation
(position which he continues to hold)
<Important position concurrently held>
Chairman of the Board of IHI Corporation
Director of Kyokuto Boeki Kaisha, Ltd.
Representative Director of Japanese Aero Engines Corporation
President of Japan Ship Exporters’ Association
President of Financial Accounting Standards Foundation
Reasons for selecting the candidate for outside director (Article 2, Paragraph 3, Item 7 of the Regulation for Enforcement of the Company Law)
At IHI Corporation, Mr. Kama was involved for many years in the management of the heavy machinery manufacturing business, including progress of the focus of resources on strategic business activities. He has extensive experience and a broad range of knowledge as a corporate executive. In addition, Mr. Kama has a high degree of independence from the Company. Therefore, the Company believes that Mr. Kama can contribute to the maintenance and upgrading of corporate governance through the activities of the board of Directors and the committees, and requests shareholders to newly elect him as an outside director.
Information concerning independence
IHI Corporation and the Company are not major customers of each other because these sales accounted for less than 1% of the consolidated net sales of each company. Furthermore, the two companies are not major shareholders of each other.
Mr. Kama meets the independence standards for outside directors established by the Company’s Nominating Committee as well as the standards for independence of Tokyo Stock Exchange, Inc. The Company has submitted a notice to this exchange designating Mr. Kama as an eligible candidate of independent director as defined in Rule 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange, Inc.
10
No.
Name (Date of birth)
Career history, position and responsibilities at the Company, and important position concurrently held
7
Akio Kitani
(August 1, 1948)
Up for re-election
【Number of shares of the Company held】
38,363 shares
April 1972 Joined Minolta Camera Co., Ltd.
June 2001 Executive Officer of Minolta Co., Ltd., and President of Minolta Europe GmbH
October 2003 Director of Konica Minolta Business Technologies, Inc., and President of Konica Minolta Business Solutions Europe GmbH
June 2004 Executive Officer of the Company, and Director of Konica Minolta Business Technologies, Inc., and President of Konica Minolta Business Solutions Europe GmbH
April 2005 Executive Officer of the Company, and Managing Director of Konica Minolta Business Technologies, Inc.
April 2006 Senior Executive Officer of the Company, and Representative Director and President of Konica Minolta Business Technologies, Inc.
June 2006 Director and Senior Executive Officer of the Company, and Representative Director and President of Konica Minolta Business Technologies, Inc.
April 2011 Director of the Company (position which he continues to hold)
<Important position concurrently held>
None
8
Yoshiaki Ando
(November 16, 1951)
Up for re-election
【Number of shares of the Company held】
24,500 shares
April 1975 Joined Konishiroku Photo Industry Co., Ltd.
March 1994 Executive Vice-President and CFO of Konica Business Machines U.S.A., Inc.
June 1998 General Manager of Planning Dept., Business Machines Marketing Div., Business Machines Headquarters of Konica Corporation
October 2002 Director of Konica Business Machines Co., Ltd.
October 2003 Director of Konica Minolta Business Solutions Japan Co., Ltd.
April 2005 General Manager of Corporate Finance Division of the Company
April 2007 Executive Officer and General Manager of Corporate Finance Division of the Company
April 2010 Senior Executive Officer of the Company
June 2010 Director and Senior Executive Officer of the Company
April 2014 Director of the Company (position which he continues to hold)
<Important position concurrently held>
None
11
No.
Name (Date of birth)
Career history, position and responsibilities at the Company, and important position concurrently held
9
Takashi Sugiyama
(November 21, 1950)
Up for re-election
【Number of shares of the Company held】
28,000 shares
April 1974 Joined Minolta Camera Co., Ltd.
July 1997 General Manager of Design Division No.1, Image Information Products Development Headquarters of Minolta Co., Ltd.
April 2001 General Manager of Development Center No.1 of Minolta Co., Ltd.
October 2003 Director of Konica Minolta Business Technologies, Inc.
April 2005 Executive Officer of the Company, and Senior Executive Director of Konica Minolta Business Technologies, Inc.
April 2009 Senior Executive Officer of the Company, and Senior Executive Director of Konica Minolta Business Technologies, Inc.
April 2011 Senior Executive Officer of the Company
June 2011 Director and Managing Executive Officer of the Company
April 2013 Director and Senior Managing Executive Officer of the Company
(positions which he continues to hold)
<Important position concurrently held>
None
10
Ken Osuga
(March 4, 1963) First-time candidate
【Number of shares of the Company held】
7,500 shares
April 1985 Joined Minolta Camera Co., Ltd.
April 2010 General manager of Sales Planning Dept., Sales Headquarters of Konica Minolta Business Technologies, Inc.
April 2011 President of Konica Minolta Business Solutions Europe GmbH
June 2012 Director of Konica Minolta Business Technologies, Inc. and President of Konica Minolta Business Solutions Europe GmbH
April 2013 Executive Officer of the Company and President of Konica Minolta Business Solutions Europe GmbH
April 2014 Senior Executive Officer of the Company
(position which he continues to hold)
<Important position concurrently held>
None
11
Seiji Hatano
(December 17, 1959) First-time candidate
【Number of shares of the Company held】
11,000 shares
April 1982 Joined the Mitsubishi Bank, Ltd.
June 2011 Resigned the Bank of Tokyo-Mitsubishi UFJ, Ltd.
July 2011 Joined the Company
April 2013 Executive Officer and General Manager of Corporate Strategy Division of the Company
April 2014 Senior Executive Officer and General Manager of Corporate Strategy Division of the Company
(position which he continues to hold)
<Important position concurrently held>
None
Notes 1. Mr. Masatoshi Matsuzaki, Mr. Shoei Yamana, Mr. Shoji Kondo, Mr. Hirokazu Yoshikawa, Mr. Takashi Enomoto, Mr. Akio Kitani, Mr. Yoshiaki Ando and Mr. Takashi Sugiyama are currently directors of the Company, and their positions and responsibilities at the Company are as specified in “Names, etc. of directors and executive officers” on p.28~ p.30 of the Business Report.
2. No conflicts of interest exist between the Company and the director candidates.
3. The Company has entered into liability limitation agreements with outside directors Mr. Shoji Kondo, Mr. Hirokazu Yoshikawa and Mr. Takashi Enomoto, the content of which is summarized in “Liability limitation agreements” on p.34 of the Business Report. The Company will enter into similar agreements with them if they are re-elected, and with Mr. Kazuaki Kama, the first-time candidate for outside director, if he is elected.
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[Reference]
1. Regarding standards for the independence of outside directors, the Company’s Nominating Committee selects outside director candidates with a high level of independence, provided that none of the following criteria apply.
(1) Person affiliated with Konica Minolta
Former employee of the Konica Minolta Group
Having a family member (spouse, child, or any blood or marital relative twice removed or less) that has served as a director, executive officer, auditor or top manager in the Konica Minolta Group during the past five years
(2) Person affiliated with a major supplier/client
Currently serving as a managing director, executive officer, or employee of a major supplier/client company/group that receives 2% or more of its consolidated sales from the Konica Minolta Group or vice versa
(3) Specialized service provider (lawyer, accountant, consultant, etc.)
Specialized service provider that received annual compensation of ¥5 million or more from the Konica Minolta Group for the past two years
(4) Other
A shareholder holding more than 10% of the voting rights in the Company (executive director, executive officer, or employee in the case of a corporate body)
A director taking part in a director exchange
A director, executive officer, auditor or equivalent position-holder of a company that competes with the Konica Minolta Group, or a person holding 3% or more of the shares of a competing company
Having some other significant conflict of interest with the Konica Minolta Group
2. If the eleven directors are elected at the Meeting, the members of each of the committees under the company-with-committees-system provided for in Article 2, Item 12 of the Company Law will be appointed as follows from among three inside directors, Mr. Masatoshi Matsuzaki, Mr. Akio Kitani and Mr. Yoshiaki Ando who do not concurrently hold executive officer posts, and the four outside directors.
The Company appoints the Chairman of each committee especially from among outside directors. The Representative Executive Officer and President serves as neither member of the committees. Thus, the Company continues to strive to ensure the transparency of the administration of three committees.
Nominating Committee
Shoji Kondo (Chairman), Hirokazu Yoshikawa,
Kazuaki Kama, Masatoshi Matsuzaki, Akio Kitani
Audit Committee
Takashi Enomoto (Chairman), Shoji Kondo,
Kazuaki Kama, Akio Kitani, Yoshiaki Ando
Compensation Committee
Hirokazu Yoshikawa (Chairman), Takashi Enomoto, Kazuaki Kama, Akio Kitani, Yoshiaki Ando
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[Provided Document]
BUSINESS REPORT
From April 1, 2013 to March 31, 2014
1. Overview of Konica Minolta Group business activities
(1) Konica Minolta Group developments and results of business activities
Looking back on the business environment in the consolidated fiscal year under review, there was a feeling that the economy in Europe bottomed out around summer in 2013, and there were signs that corporate results are on a recovery track. The United States continued to register tones of recovery, characterized in particular by an improvement in the employment environment and an increase in personal consumption. In Japan, results took a favorable turn, especially for exporting companies on the back of persistent yen depreciation, and capital investment increased steadily as well. In contrast, economic growth tapered off in emerging countries such as those in Asia and Latin America as harsh conditions remained.
Looking at the main businesses in the consolidated fiscal year under review, in the Business Technologies Business, sales of core color MFPs (Multi-functional peripherals) for the office were strong, and sales volumes of color MFPs for the fiscal year increased compared with the previous fiscal year in all regions worldwide, including Japan, the United States and Europe. In particular, sales of high-segment models expanded. In the production print field, sales volumes of both color units and monochrome units exceeded the previous fiscal year.
In the Industrial Business, sales volumes of TAC films for LCD polarizers and VA-TAC films for increasing the viewing angle were down from the previous fiscal year in the display materials field due to deterioration in market conditions for notebook PCs, and the impact of inventory adjustments and diversification in components and materials used in TVs. In the sensing field, the continued effect of M&As contributed to expansion in sales and profit. In the optical products field, sales of pickup lenses for Blu-ray DiscsTM were strong. In the Healthcare Business, sales of digital X-ray diagnostic imaging systems such as cassette-type Digital Radiography (DR) systems increased in both Japan and overseas.
In addition, the Company implemented measures aimed at driving sustainable growth during the fiscal year. In the Business Technologies Business, the Company enhanced our proposal-making capabilities to customers through hybrid-type sales models that combine various business solution services with MFPs and worked to expand sales of MFPs and boost high added value. In the Industrial Business, the Company implemented structural reform promoting a shift from business for the supply of components to product domains focused almost exclusively on digital consumer electronics, which are easily impacted by fluctuations in demand, to businesses related to industrial and professional use. In the Healthcare Business, the Company strengthened the sales channel in the DR market, which is expected to grow, and created a business promotion system for ultrasound diagnostic imaging equipment.
As a result, the consolidated net sales for the fiscal year under review of the Konica Minolta Group (the “Group”) amounted to ¥943.7 billion, an increase of 16.1% year on year. In addition to the effect of foreign exchange rates based on persistent yen depreciation, sales growth of core products in the Business Technologies Business, improvement in product composition and the effect of M&As in particular contributed to the increase in sales.
Operating income was ¥58.1 billion, an increase of 43.0% year on year. Although profit was down in the Industrial Business, a significant increase in profit in the Business Technologies Business due primarily to measures to increase sales and reduce costs contributed to the overall increase in profit.
14
Ordinary income amounted to ¥54.6 billion, an increase of 40.4% year on year. Income before income taxes and minority interests was ¥23.5 billion, down 30.5% year on year, due primarily to the recording of loss on business withdrawal from the glass substrates for HDDs business and the recording of impairment loss for structures associated with the termination of the Group’s production for film in the Healthcare Business. Net income totaled ¥21.8 billion, an increase of 44.5% year on year, after factoring in tax effects related to the impact of a review of deferred tax assets in line with reorganization of the Group’s management system implemented in April 2013.
Overview of Business Segments
[Billions of yen]
Segment
Net sales – external
Operating income
Increase (Decrease)
Increase (Decrease)
Business Technologies Business
729.8
148.2
25.5％
63.8
32.2
101.8％
Industrial Business
116.1
(30.6)
-20.9％
15.1
(8.5)
-36.0％
Healthcare Business
82.3
9.6
13.2％
4.5
1.1
34.4％
Business conditions in each segment during the fiscal year under review are as follows.
Business Technologies Business
Office field:
Sales of A3 color MFPs remained strong and sales volumes increased significantly compared with the previous fiscal year in all regions, including Japan, the United States and Europe, while the composition ratio of high-segment models increased, thereby contributing to sales expansion. Sales volumes of A3 monochrome units exceeded the previous year’s result in contracting markets from the second half due in part to the effect of new products, and consequently, sales remained roughly on par with the previous year on a full-year basis. Also, the Company steadily increased customer numbers and expanded business foundations for OPS (Optimized Print Services) as a result of strengthening systems on a global scale, expanding service menu and reinforcing business-creation and proposal-making capabilities. In addition, the Company established hybrid-type sales models that combine various IT business solution services with MFPs for small- and medium-sized companies in Europe and the United States and strengthened our proposal-making capabilities to customers. By doing so, the Company was able to cultivate new customers, expand business scale and boost added value.
Production print field:
Sales volumes of color units and monochrome units exceeded the previous fiscal year. In addition, the Company expanded business for a wide variety of small-volume on-demand print services as well as production and print services for sales promotion materials by utilizing Kinko’s Japan Co., Ltd. and Charterhouse Print Management Limited (headquartered in the UK), which the Company acquired in the previous fiscal year. As a result, the Company is providing a wider selection to meet customers’ printing needs.
In Europe, the Company formed a capital and business alliance with MGI Digital Graphic Technology S.A. (headquartered in France), which has promoted unique business development in growth markets such as plastic card printing with the aim of developing applications for package printing in addition to paper output in the existing commercial printing market.
15
As a result, net sales of the Business Technologies Business to external customers stood at ¥729.8 billion, up 25.5% year on year, and operating income was ¥63.8 billion, up 101.8% year on year. Net sales were up year on year owing to the effect of foreign exchange rates based on persistent yen depreciation, sales growth of core color units, improvement in product composition and the effect of M&As. Operating income increased considerably year on year due to an increase in gross profit following sales expansion and the effect of foreign exchange rates coupled with the year-round effect of measures to reduce production costs that included decreasing fixed costs in the production division by promoting production reform and unit procurement, conducting centralized purchasing of raw materials and digital components, and implementing Value Engineering (VE) activities.
< Information about Kinko’s >
Kinko’s Japan Co., Ltd. and Kinko’s Korea Ltd. operate stores and centralized printing centers and are the leaders in the provision on-demand output services. These companies are meeting the increasing demand for the outsourcing of output operations by opening more stores and conducting sales activities that target companies (proposal-based sales for companies). The two companies offer customers the best possible solutions that utilize the store network and a document output environment at customers’ places of business.
Industrial Business
Display materials field:
Sales volumes of TAC films for LCD polarizers and VA-TAC films for increasing the viewing angle both decreased compared with the previous fiscal year due to deterioration in the market for notebook PCs and in addition to the effect of inventory adjustments and diversification in components and materials used for TVs.
Sensing field:
The acquisition of Instrument Systems GmbH (headquartered in Germany) contributed to net sales and profit growth.
Optical products field:
Although sales of pickup lenses for Blu-ray Discs used in games for the home and lenses for large projectors were strong, lenses for cameras weakened due to a decline in demand.
As a result, net sales of the Industrial Business to external customers stood at ¥116.1 billion, down 20.9% year on year, and operating income was ¥15.1 billion, down 36.0% year on year.
< Light source color measurement solutions >
The Company has supplied high –quality instruments that are the industry standard as the leading manufacturer of color measurement instruments used for light source. Demand for the measurement of LED illumination products has increased rapidly in recent years. To meet this demand, The Company strengthened the lineup of color measurement instruments by acquiring Instrument Systems GmbH which is a leading company in light industry including LEDs and has advantage to technology and sale. This acquisition reinforced the Company’s industry position as a top global supplier of comprehensive color measurement solutions in displays and illumination industry and is expected to yield synergies with next-generation illumination businesses like OLED.
16
Healthcare Business
In the Healthcare Business, sales of the cassette-type Digital Radiography system “AeroDR” remained solid and sales volumes expanded in Japan and the United States while we are steadily increasing introductions of this product at large-scale medical institutions. The Company has gradually increased the number of projects the Company is engaged in based on collaborations with leading sales partners that the Company has been promoting in Europe and the United States. In film products, sales in emerging countries grew, with overall sales surpassing the previous fiscal year.
In addition, the Company established an integrated system from development to production and sales for ultrasound diagnostic imaging equipment, which is positioned as a new growth driver, by maximizing use of the resources gained following the transfer of the business from Panasonic Healthcare Co., Ltd., and pushed ahead with preparations for full-fledged business development.
As a result, net sales of the Healthcare Business to external customers stood at ¥82.3 billion, up 13.2% year on year, and operating income was ¥4.5 billion, up 34.4% year on year.
17
【Dividends and stock repurchases】
The Company plans to pay a fiscal year-end dividend of ¥7.50 per share, which is the same as one year earlier. With the dividend of ¥10 per share at the end of the first half (¥7.50 ordinary dividend and ¥2.50 commemorative dividend), this will result in an annual dividend of ¥17.50 per share.
On January 30, 2014, the Board of Directors approved a resolution as follows for the acquisition of own shares in accordance with Article 156 of the Company Law, which is applied pursuant to Article 165, Paragraph 3 of the Company Law.
(1) Shares to be acquired The Company’s common shares
(2) Number of shares to be acquired Limited to 20 million shares
(3) Total amount of shares to be acquired Limited to ¥20 billion
(4) Acquisition period January 31, 2014 to April 30, 2014
Acquisition of own shares ended on April 14, 2014 as the maximum amount of these purchases was reached.
【The Company included in the Dow Jones Sustainability Index】
The Company has been selected for the second consecutive year for inclusion in the Dow Jones Sustainability World Index (DJSI World), one of the world’s most respected indexes for socially responsible investing. The DJSI World uses the stock parameters of S&P Dow Jones Indices of the U.S. and RobecoSAM AG, a Swiss company that evaluates the sustainability of companies. The sustainability of companies is assessed with regard to the economy, the environment and society. For this year’s index, 2,500 large companies worldwide were assessed and 333 were selected for DJSI World. The 333 companies include 21 companies in Japan, including the Company.
In addition, the Company has been included for the past five consecutive years in the Dow Jones Sustainability Asia Pacific Index, the Asia-Pacific version of the DJSI.
In being included in the two Indices, the Company received the highest evaluation for innovation management, crisis management and other economic activities in the computers, peripherals and office equipment sector. Furthermore, the company earned a high score for environmental initiatives, including the environmental policy, management and other items.
18
(2) Financing, etc.
a. Financing
In the fiscal year that ended in March 2014, there were no sales of stock or bonds or other new fund procurement activities. Internal resources were used for capital expenditures, the repayment of loans (¥28.7 billion), stock repurchases (¥15.8 during the fiscal year) and other activities.
b. Capital expenditure
The capital expenditure of the Group during the fiscal year under review totaled ¥47.3 billion, with the emphasis on expenditure for the construction of research and development facilities mainly in the Business Technologies Business and the Industrial Business. Significant expenditures included the production facilities for MFPs, production printing systems in the Business Technologies Business and the production facilities for functional film in the Industrial Business.
(3) Business results of the last three fiscal years
107th Term
Fiscal Year Ended
March 31, 2011
108th Term
Fiscal Year Ended
March 31, 2012
109th Term
Fiscal Year Ended
March 31, 2013
110th Term
Fiscal Year Ended
March 31, 2014
(Fiscal year
under review)
Net sales
(Millions of yen)
777,953
767,879
813,073
943,759
Operating income
(Millions of yen)
40,022
40,346
40,659
58,144
Ordinary income
(Millions of yen)
33,155
34,758
38,901
54,621
Net income
(Millions of yen)
25,896
20,424
15,124
21,861
Net income per share (yen)
48.84
38.52
28.52
41.38
Total assets
(Millions of yen)
845,453
902,052
940,553
966,060
Net assets
(Millions of yen)
428,987
434,987
466,416
480,055
Net assets per share (yen)
806.53
817.81
876.65
929.04
Dividend per share (yen)
[of which, interim dividend per share]
15
[7.5]
15
[7.5]
15
[7.5]
17.5
[10]
(4) Issues to be handled
The Company has commenced a new three-year medium term business plan called “TRANSFORM 2016” that runs from fiscal 2014 to fiscal 2016.
Under this plan, the Company aims to fully understand its customers and transform into a company that can provide high added value in order to outstrip global competition amid changes in the management environment surrounding the Company. To achieve this, efforts are being made to expand business content by innovating the Company’s business configuration from a customer-oriented perspective with the service solution business as the nucleus aiming to resolve the challenge of shifting from “product to service.” The plan was named “Transform 2016” to reflect these concepts.
The Company has made preparations to mobilize all resources as one company following reorganization of the management system in April 2013. By integrating products, technologies and core competencies in a wide range of fields, the Company seeks to enter deeply into customers’ industry and business, and provide high added value. In addition, efforts will be made to drive sustainable growth by contributing to innovation in society, the environment and customer companies through this kind of business.
19
(i) Management Targets
In “Transform 2016,” the Company has drawn up objectives for fiscal 2018 with a view to realizing our “vision five years from now.” To realize these, the Company is targeting net sales of at least ¥1.1 trillion, operating income of ¥90 billion and an operating income ratio of at least 8% in fiscal 2016, the final year of this plan, through initiatives based on this plan for the next three-year period. In addition, the Company will work to boost capital efficiency and aim to achieve an ROE of at least 10% by streamlining the balance sheet and strengthening shareholder returns.
International Financial Reporting Standards (IFRS)
Medium-term management plan targets
(FY2016)
Vision five Years from now
(FY2018)
Net sales
At least ¥1.1 trillion
At least ¥1.3 trillion
Operating income
¥90 billion
¥130 billion
Operating income ratio
At least 8%
10%
ROE
At least 10%
―
*Assumed exchange rates during the period of the plan (FY2014-FY2016): U.S. dollar = ¥100; euro = ¥135
*The Company will apply International Financial Reporting Standards (IFRS) starting from securities reports released in fiscal 2014 (year ending March 31, 2015).
(ii) Basic Policy
Under “TRANSFORM 2016,” the Company has decided on the following three items as basic strategies to address over the next three years in order to realize our “vision five years from now.”
1. Realize sustainable profit growth
2. Reform to a customer-focused company
3. Establish a strong corporate structure
a. Realize sustainable profit growth
Aiming to realize sustainable profit growth, the Company will promote a growth strategy in each business field based on the following policies.
<Business Technologies Business: Office Services Business Field>
[Business Policy] The Company aims to expand sales and profit in this business by strengthening the ability to provide services and solutions befitting customer attributes and by bolstering relationships of trust with customers through enhancement of customers’ business efficiency.
The Company also seeks to increase the number of its MFPs in the market and color print volume by providing a digital workflow for each company size, region, industry and business type and contributing to improvements in customers’ business efficiency. In OPS, which is being deployed worldwide, efforts are being made to enhance service menu and boost delivery capability with the aim of creating foundations to transform into a services business toward the realization of a print-less society envisioned for the future. With regard to growing markets, the Company will position China, India, ASEAN nations and Brazil in particular as key markets and strengthen the sales system.
<Business Technologies Business: Commercial and Industrial Printing Business Field>
[Business Policy] The Company aims to realize the provision of commercial digital printing solutions from the perspective of the end-customer and expand the number of machines in the market and print volume. To achieve this, the Company will strive to meet all printing needs of major companies that are customers in the commercial printing sector by providing a variety of printing-related services that include our unique marketing print management service and on-demand print service by leveraging Charterhouse Printing Management Limited and Kinko’s Japan Co., Ltd., which have been acquired.
20
In addition, the Company will make use of its core digital electrophotographic and inkjet technologies toward full-fledged expansion into the industrial printing field, including textile printing, labeling and package printing.
<Healthcare Business>
[Business Policy] The Company will provide one-stop solutions that combine high-performance diagnostic instruments such as DR (digital radiography systems) and diagnostic ultrasound systems with medical IT services, and strive to expand sales of diagnostic instruments to small- and medium-sized hospitals and clinics while making these facilities more networked.
In the core cassette-type DR field, the Company will promote sales alliances with outside entities and seek to accelerate the expansion of sales overseas. In Japan, the Company will contribute to increased efficiency and sophistication of medical care through IT services that utilize a strong customer base and by enhancing and expanding regional partnerships. In diagnostic ultrasound systems, the Company aims to be the top of the genre in specific domains such as orthopedic surgery and internal medicine by way of our unique high-resolution technology.
<Industrial Business: Optical Systems for Industrial Use Business Field>
[Business Policy] The Company aims to expand business domain in the growth-potential industrial sector by innovating proposal-making ability accumulated in the sensing business and providing new value that includes equipment and solution/service.
In the sensing field, the Company will leverage synergies with Instrument Systems GmbH, which the Company acquired, to strengthen operations in the smartphone, tablet and automotive domains, and also establish a system that enables swift response to the needs of major customers. In the optical products field, the Company will utilize sensing technology and information processing technology centered around interchangeable lenses for DSLR cameras and projector lenses for digital cinema. At the same time, the Company aims to enter the optical systems field in areas that include non-destructive inspection systems for social infrastructure and safety and security services using monitoring systems for nursing facilities.
<Industrial Business: Performance Materials Business Field>
[Business Policy] The Company aims to establish business foundations that realize growth by anticipating customer needs in growth fields and creating new businesses that originate from our unique technology accumulated in such areas as photo film, TAC film for LCD polarizers and VA-TAC film for increasing the viewing angle and OLED development.
In TAC film, the Company aims to secure sales volumes through the development of new thin-film-type products, an area of comparative advantage. In new businesses, which include OLED light sources and window film that help reduce environmental burden and make life more convenient, the Company seeks to sharpen value and establish mass-production technology together with customers in order to secure top position in growing markets.
b. Reform to a customer-focused company
In order to drive business growth and realize higher added value, the Company will pay close attention to customer intentions and transform business processes with the customer used as the basis for decisions behind all business processes. The Company will strive to fully understand customer needs and workflow and look to maximize the value the Company provides to customers. To achieve this, the Company has established Business Innovation Centers in five cities worldwide for the purposes of business development. By doing so, the Company can expand framework as well as assign authority locally. In addition, the Company will conduct strategic alliances and M&As to complement the Company’s management resources.
Further, the Company will integrate our technologies and core competencies as well as create unique high-value-added solutions in all business domains.
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c. Establish a strong corporate structure
The Company will create a strong corporate structure as a manufacturing business by “creating sturdy production operations” and “conducting corporate reform.” To this end, the Company will develop technology that leads to differentiation and enhances customer value, employ cost management in an integrated manner for development, procurement and production, and strengthen product lifecycle management that maximizes profit by visualizing the profitability of each product throughout the lifecycle. In corporate divisions, the Company will work on enhancing business productivity and reforming functions.
The Company will steadily implement measures set forth in our medium term business plan “TRANSFORM 2016” and strive to realize sustainable growth by transforming our business portfolio while enhancing corporate value.
(5) Main businesses of the Group at the fiscal year end
The main businesses of the Group are as follows.
Business segment
Principal products
Business Technologies Business
MFPs (Multi-functional peripherals), printers, equipment for production print systems and graphic arts, etc.
Industrial Business
Electronic materials, performance materials, optical products and measuring instruments for industrial and healthcare applications, etc.
Healthcare Business
Consumables and equipment for healthcare systems, etc.
(6) Major business offices, plants, etc. of the Group at the fiscal year end
a. Main business offices, plants, etc. of the Group
The Group consists of the Company, 123 subsidiaries and four affiliated companies. The Group has product and technology development, manufacturing, and sales bases worldwide.
a) Offices of the Company
Head Office: Chiyoda-ku, Tokyo
Kansai Office: Osaka City, Osaka
b) Other domestic offices
Other domestic offices are located in Hino City (Tokyo), Hachioji City (Tokyo), Toyokawa City (Aichi Prefecture), Sakai City (Osaka), Osakasayama City (Osaka), Kobe City (Hyogo Prefecture) and other sites.
b. Employees of the Group
Number of employees
Compared with end of
previous fiscal year
40,401
Decrease of 1,443
Note The number of employees indicates the number of employees currently on duty.
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(7) Significant subsidiaries at the fiscal year end
Company name
Capital
Ratio of voting rights held by the Company
Description of principal businesses
Konica Minolta Business Solutions Japan Co., Ltd.
Millions of yen
497
100%
Sale of multi-functional peripherals (MFPs), printers, equipment for production print systems and graphic arts, and related supplies in Japan, and providing related solution services
Konica Minolta Health Care Co., Ltd.
Millions of yen
397
100%
Sale of consumables and equipment for healthcare system in Japan
Konica Minolta Supplies Manufacturing Co., Ltd.
Millions of yen
1,500
100%
Manufacturing and sale of supplies for multi-functional peripherals (MFPs) and printers
Konica Minolta Technoproducts Co., Ltd.
Millions of yen
350
100%
Manufacturing and sale of equipment for healthcare system
Konica Minolta Business
Solutions U.S.A., Inc.
Thousand US dollar
40,000
*100%
Sale of multi-functional peripherals (MFPs), printers and related supplies in the U.S., and providing related solution services
Konica Minolta Business
Solutions Europe GmbH
Thousand euro
88,100
100%
Sale of multi-functional peripherals (MFPs), printers and related supplies in Europe, and providing related solution services
Konica Minolta Business
Solutions Deutschland GmbH
Thousand euro
10,025
*100%
Sale of multi-functional peripherals (MFPs), printers and related supplies in Germany, and providing related solution services
Konica Minolta Business
Solutions France S.A.S.
Thousand euro
26,490
*100%
Sale of multi-functional peripherals (MFPs), printers and related supplies in France, and providing related solution services
Konica Minolta Business
Solutions (UK) Ltd.
Thousand British pound
21,000
100%
Sale of multi-functional peripherals (MFPs), printers and related supplies in the U.K., and providing related solution services
Konica Minolta Business Solutions Australia Pty. Ltd.
Thousand Australian dollar
24,950
100%
Sale of multi-functional peripherals (MFPs), printers and related supplies in Australia, and providing related solution services
Konica Minolta Business
Solutions (CHINA) Co., Ltd.
Thousand RMB
96,958
100%
Sale of multi-functional peripherals (MFPs), printers and related supplies in China, and providing related solution services
Konica Minolta Business
Technologies Manufacturing (HK) Ltd.
Thousand HK dollar
195,800
100%
Manufacturing and sale of multi-functional peripherals (MFPs) , printers, and related supplies
Konica Minolta Business
Technologies (WUXI) Co., Ltd.
Thousand RMB
289,678
*100%
Manufacturing and sale of multi-functional peripherals (MFPs), printers, and related supplies
Konica Minolta Business
Technologies (DONGGUAN) Co., Ltd.
Thousand RMB
141,201
*100%
Manufacturing and sale of multi-functional peripherals (MFPs, printers, and related supplies
Konica Minolta Opto
(DALIAN) Co., Ltd.
Thousand RMB
244,675
100%
Manufacturing and sale of optical products (pickup lenses, etc.)
(Note) The ratio of voting rights marked with * include those held by subsidiaries.
23
(8) Principal lenders and the amount of loans of the Group at the fiscal year end
[Millions of yen]
Lender
Outstanding amount of loan
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
30,535
Sumitomo Mitsui Banking Corporation
13,946
Nippon Life Insurance Company
9,000
Resona Bank, Limited.
7,960
Mizuho Corporate Bank, Ltd.
3,958
(9) Policy on exercise of authority if Articles of Incorporation allow distribution of dividends from retained earnings by the resolution of the Board of Directors (Article 459, Paragraph 1 of the Company Law)
The policy regarding resolutions on the payment of dividends from retained earnings, etc. calls for the basic approach of making a comprehensive evaluation of consolidated performance and funding requirements for promoting strategic investments in growth fields while seeking to sustain shareholder returns. Regarding the specific dividend target, the Company is aiming to sustain a dividend payout ratio of 25% or higher on a consolidated basis over the medium-to-long term. With respect to the acquisition of treasury stock, the Company intends to make appropriate decision regarding treasury stock acquisition as a means of profit distribution while giving due attention to such factors as the Company’s financial condition and stock price trends.
(10) Other significant matters of the Group
The Company merged with the following seven group companies through acquisition and changed its trade name to Konica Minolta, Inc.
Konica Minolta Business Technologies, Inc.
Konica Minolta Advanced Layers, Inc.
Konica Minolta Optics, Inc.
Konica Minolta Medical & Graphic, Inc.
Konica Minolta IJ Technologies, Inc.
Konica Minolta Technology Center, Inc.
Konica Minolta Business Expert, Inc.
24
2. State of shares at the fiscal year end
(1) Total number of shares authorized to be issued ······· 1,200,000,000 shares
(2) Total number of shares issued ····························· 531,664,337 shares
(of which, treasury stock 16,720,688 shares)
(3) Number of shareholders ···································· 26,191
(4) Major shareholders (the top ten shareholders)
Name of shareholder
Number of shares held
(thousand shares)
Ratio of shares held
(%)
Japan Trustee Services Bank, Ltd. (Trust account)
30,054
5.8
The Master Trust Bank of Japan, Ltd. (Trust account)
28,950
5.6
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
13,945
2.7
JPMorgan Chase Bank 385167
11,948
2.3
Japan Trustee Services Bank, Ltd.
(Sumitomo Mitsui Trust Bank, Limited Retrust Portion, Sumitomo Mitsui Banking Corporation Pension Trust Account)
11,875
2.3
Nippon Life Insurance Company
11,409
2.2
The Nomura Trust and Banking Co., Ltd.
(Holder in Retirement Benefit Trust for the Bank of Tokyo-Mitsubishi UFJ, Ltd.)
10,801
2.1
SAJAP
10,730
2.1
DAIDO LIFE INSURANCE COMPANY
9,040
1.8
CMBL S.A. RE MUTUAL FUNDS
7,254
1.4
Note:
1. The list of major shareholders does not include the 16,720,688 shares of treasury stock held by the Company.
2. Ratio of shares held is calculated by deducting treasury stock.
25
3. Stock acquisition rights, etc. of the Company
Summary of stock acquisition rights, etc., issued to/held by directors and officers of the Company as compensation for the execution of duties at the fiscal year end
Starting in fiscal 2005, the Company began issuing stock acquisition rights to directors (excludes outside directors) and executive officers in the form of a compensation-type stock option plan, in accordance with its compensation determination policy.
Upon the exercise of stock acquisition rights, treasury stock owned by the Company will be transferred.
First Series
Fiscal Year Ended
March 31, 2006
Second Series
Fiscal Year Ended
March 31, 2007
Third Series
Fiscal Year Ended
March 31, 2008
Number of stock acquisition rights
389
211
226
Type and number of shares under stock acquisition rights
Common shares
194,500 shares
Common shares
105,500 shares
Common shares
113,000 shares
Amount to be paid upon exercise of the stock acquisition rights
One (1) yen per share
One (1) yen per share
One (1) yen per share
Exercise period of stock acquisition rights
August 23, 2005 –
June 30, 2025
September 2, 2006 –
June 30, 2026
August 23, 2007 –
June 30, 2027
Primary condition for exercise of stock acquisition rights
The Optionee shall exercise stock acquisition rights during the period from one (1) year after the date of retirement from the post of director or executive officer of the Company up until five (5) years from that starting date.
Primary events and conditions for acquisition of stock acquisition rights
The Company may acquire stock acquisition rights without any compensation if the General Meeting of Shareholders approves merger agreement in which the Company becomes the dissolving company, etc.
Holdings of directors and executive officers
Number of holders
8
8
10
Number of rights
115
84
101
Number of shares
57,500 shares
42,000 shares
50,500 shares
26
Fourth Series
Fiscal Year Ended
March 31, 2009
Fifth Series
Fiscal Year Ended
March 31, 2010
Sixth Series
Fiscal Year Ended
March 31, 2011
Number of stock acquisition rights
256
399
376
Type and number of shares under stock acquisition rights
Common shares
128,000 shares
Common shares
199,500 shares
Common shares
188,000 shares
Amount to be paid upon exercise of the stock acquisition rights
One (1) yen per share
One (1) yen per share
One (1) yen per share
Exercise period of stock acquisition rights
August 19, 2008 –
June 30, 2028
August 20, 2009 –
June 30, 2029
August 28, 2010 –
June 30, 2030
Primary condition for exercise of stock acquisition rights
The Optionee shall exercise stock acquisition rights during the period from one (1) year after the date of retirement from the post of director or executive officer of the Company up until five (5) years from that starting date.
Primary events and conditions for acquisition of stock acquisition rights
The Company may acquire stock acquisition rights without any compensation if the General Meeting of Shareholders approves merger agreement in which the Company becomes the dissolving company, etc.
Holdings of directors and executive officers
Number of holders
13
14
16
Number of rights
136
237
270
Number of shares
68,000 shares
118,500 shares
135,000 shares
27
Seventh Series
Fiscal Year Ended
March 31, 2012
Eighth Series
Fiscal Year Ended
March 31, 2013
Ninth Series
Fiscal Year Ended
March 31, 2014
Number of stock acquisition rights
479
571
515
Type and number of shares under stock acquisition rights
Common shares
239,500 shares
Common shares
285,500 shares
Common shares
257,500 shares
Amount to be paid upon exercise of the stock acquisition rights
One (1) yen per share
One (1) yen per share
One (1) yen per share
Exercise period of stock acquisition rights
August 24, 2011 –
June 30, 2031
August 23, 2012 –
June 30, 2032
August 23, 2013 –
June 30, 2043
Primary condition for exercise of stock acquisition rights
The Optionee shall exercise stock acquisition rights during the period from one (1) year after the date of retirement from the post of director or executive officer of the Company up until five (5) years from that starting date.
The Optionee shall exercise stock acquisition rights during the period from one (1) year after the date of retirement from the post of director or executive officer of the Company up until ten (10) years from that starting date.
Primary events and conditions for acquisition of stock acquisition rights
The Company may acquire stock acquisition rights without any compensation if the General Meeting of Shareholders approves merger agreement in which the Company becomes the dissolving company, etc.
Holdings of directors and executive officers
Number of holders
18
23
27
Number of rights
385
529
515
Number of shares
192,500 shares
264,500 shares
257,500 shares
28
4. Status of the Company’s management members
(1) Names, etc. of directors and executive officers
a. Directors
Position
Name
Responsibilities
Important positions concurrently held
Director
Yoshikatsu Ota
Chairman of the Board
Member of Nominating Committee
Director of YAMAHA CORPORATION
Director
Masatoshi Matsuzaki
(President and CEO, and Representative Executive Officer)
Outside Director
Nobuhiko Ito
Member of Compensation Committee
(Chairman)
Member of Nominating Committee
Director of TADANO LTD.
Outside Director
Shoji Kondo
Member of Nominating Committee
(Chairman)
Member of Audit Committee
Senior Corporate Advisor of Hino Motors, Ltd.
Outside Director
Hirokazu Yoshikawa
Member of Audit Committee (Chairman)
Member of Compensation Committee
Senior Corporate Advisor of DOWA HOLDINGS Co., Ltd.
Outside Director
Takashi Enomoto
Member of Nominating Committee
Member of Audit Committee
Member of Compensation Committee
Executive Advisor of NTT DATA Corporation
Director
Yasuo Matsumoto
Member of Nominating Committee
Member of Audit Committee
Member of Compensation Committee
Director
Akio Kitani
Member of Audit Committee
Member of Compensation Committee
Director
Shoei Yamana
(Senior Managing Executive Officer)
Director
Takashi Sugiyama
(Senior Managing Executive Officer)
Director
Yoshiaki Ando
(Senior Executive Officer)
Notes 1. The four directors Mr. Nobuhiko Ito, Mr. Shoji Kondo, Mr. Hirokazu Yoshikawa and Mr. Takashi Enomoto are outside directors, as provided for in Article 2, Item 15 of the Company Law and independent directors, as provided for under Rule 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange, Inc.
2. At the 109th Ordinary General Meeting of Shareholders held on June 19, 2013, the terms of office of all eleven (11) directors expired. The following ten directors were reelected: Mr. Yoshikatsu Ota, Mr. Masatoshi Matsuzaki, Mr. Nobuhiko Ito, Mr. Shoji Kondo, Mr. Hirokazu Yoshikawa, Mr. Yasuo Matsumoto, Mr. Akio Kitani, Mr. Shoei Yamana, Mr. Mr. Takashi Sugiyama and Mr. Yoshiaki Ando; and Mr. Takashi Enomoto was newly elected and assumed office the same day.
3. Upon the close of the 109th Ordinary General Meeting of Shareholders held on June 19, 2013, the term of office of Mr. Yozo Izuhara expired and he retired from the office of director.
4. Audit Committee member Mr. Yasuo Matsumoto had been in charge of the corporate accounting and corporate finance of the Company as the senior executive officer and has considerable knowledge of corporate finance and corporate accounting.
29
b. Executive Officers
Position
Name
Responsibilities and
important positions concurrently held
*
President and CEO, and Representative Executive Officer
Masatoshi Matsuzaki
In charge of Corporate CSR & Communications & Branding Division
*
Senior Managing Executive Officer
Takashi Sugiyama
In charge of Corporate R&D, Corporate IT Planning Division and Corporate Production Operations
*
Senior Managing Executive Officer
Shoei Yamana
In charge of Business Technologies Business
Senior Executive Officer
Takashi Matsumaru
General Manager, Corporate R&D Headquarters
*
Senior Executive Officer
Yoshiaki Ando
In charge of Corporate Business Management Division, Corporate Accounting Division, Corporate Finance Division and Risk Management
Senior Executive Officer
Masaru Kamei
In charge of Corporate Legal Affairs & General Affairs Division, Intellectual Property Center, Compliance and Crisis Management
General Manager of Kansai Headquarters
Senior Executive Officer
Atsushi Kodama
Healthcare Company President
Senior Executive Officer
Nobuyasu Ieuji
In charge of Corporate Social Responsibility Operations and Corporate SCM Center
Senior Executive Officer
Toshihiko Karasaki
Optics Company President
Senior Executive Officer
Yoshitsugu Shiraki
Advanced Layers Company President
Senior Executive Officer
Jun Haraguchi
General Manager, Business Technologies Business Sales
Headquarters
Executive Officer
Masami Akiyama
General Manager, Advanced Layers Company Performance Materials Business
Executive Officer
Kazuyoshi Hata
In charge of Healthcare Company, Responsible for R&D Operations, Product Planning Operations, Healthcare IT Solutions Operations, General Planning Division, and Management Administration Division
Executive Officer
Akiyoshi Ohno
General Manager, Inkjet Business Unit.
Executive Officer
Tsukasa Wakashima
General Manager, Corporate Human Resources Division
Executive Officer
Shingo Asai
General Manager, Business Technologies Business Manufacturing Headquarters
Executive Officer
Kunihiro Koshizuka
General Manager, Corporate R&D Headquarters Technology Strategy Division, Responsible for Technology R&D Center 1&2
Executive Officer
Ken Shiomi
Optics Company, Responsible for Planning & Administration Operations
Executive Officer
Hiroyuki Suzuki
General Manager, Corporate Audit Division
Executive Officer
Tomio Nakamura
Optics Company, General Manager, Hard Disk Business Unit
Responsible for U&C Business
Executive Officer
Toyotsugu Ito
General Manager, Corporate Production Operations
Executive Officer
Ken Osuga
President, Konica Minolta Business Solutions Europe GmbH
Executive Officer
Kenichi Sanada
General Manager, Corporate Intellectual Property Center
Executive Officer
Seiji Hatano
General Manager, Corporate Strategy Division
Notes 1. Executive officers marked with * hold concurrent director positions.
2. The above executive officers were, after the close of the 109th Ordinary General Meeting of Shareholders held on June 19, 2013, elected at the meeting of the board of directors held the same day.
3. Mr. Masatoshi Matsuzaki, Mr. Takashi Matsumaru, Mr. Yoshiaki Ando, Mr. Masaru Kamei, Mr. Atsushi Kodama, Mr. Toshihiko Karasaki and Mr. Masami Akiyama resigned as senior executive officers as of March 31, 2014.
30
4. Mr. Shoei Yamana was promoted to Representative Executive Officer and President and Mr. Ken Osuga, Mr. Kunihiro Koshizuka, Mr. Seiji Hatano and Mr. Tsukasa Wakashima were promoted to senior executive officer as of April 1, 2014. Mr. Akira Tai and Mr. Ikuo Nakagawa newly assumed executive officer posts as of the same date. Executive officers and its responsibilities changed as of April 1, 2014 as follows.
Position
Name
Responsibilities,
important positions concurrently held
President and CEO, and Representative Executive Officer
Shoei Yamana
Senior Managing Executive Officer
Takashi Sugiyama
In charge of Corporate R&D Headquarters, Corporate IT Planning Division and Corporate Production Operations
General Manager of Business Technologies Business Development Headquarters
Senior Executive Officer
Nobuyasu Ieuji
In charge of Corporate Social Responsibility Operations, Corporate SCM Center and Business Technologies Business Quality Assurance Operations
General Manager of Kansai Headquarters
Senior Executive Officer
Yoshitsugu Shiraki
Advanced Layers Company President
Senior Executive Officer
Jun Haraguchi
General Manager of Business Technologies Business Marketing Headquarters
Senior Executive Officer
Ken Osuga
In charge of Corporate Business Management Division, Corporate Accounting Division, Corporate Finance Division and Risk Management and Business Technologies Business, Business Process Transformation Operations
Senior Executive Officer
Kunihiro Koshizuka
General Manager, Corporate R&D Headquaters
Senior Executive Officer
Seiji Hatano
General Manager, Corporate Strategy Division
In charge of Corporate CSR & Communications & Branding Division
Senior Executive Officer
Tsukasa Wakashima
General Manager, Corporate Human Resources Division
Executive Officer
Kazuyoshi Hata
Healthcare Company President
Executive Officer
Akiyoshi Ohno
General Manager, Inkjet Business Unit
Executive Officer
Shingo Asai
General Manager, Business Technologies Business Manufacturing Headquarters
Executive Officer
Ken Shiomi
Optics Company, Responsible for Planning & Administration Operations
Executive Officer
Hiroyuki Suzuki
General Manager, Corporate Audit Division
Executive Officer
Tomio Nakamura
Optics Company President
Executive Officer
Toyotsugu Ito
General Manager, Corporate Production Operations
Executive Officer
Kenichi Sanada
In charge of Intellectual Property Center, Corporate Legal Affairs & General Affairs Division, Compliance and Crisis Management
Executive Officer
Akira Tai
General Manager, Corporate IT Planning Division
Executive Officer
Ikuo Nakagawa
President, Konica Minolta Business Solutions Europe GmbH
31
(2) Total compensation to directors and executive officers
Compensation (Millions of yen)
Total
Base salary
Performance-based cash bonus
Stock compensation-type stock options
Persons
Amount
Persons
Amount
Persons
Amount
directors
Outside
43
5
43
–
–
–
–
Inside
156
3
127
–
–
3
28
Total
199
8
170
–
–
3
28
Executive Officers
926
24
551
24
238
24
136
Notes 1. At the end of the period (March 31, 2014), the Company has four (4) outside directors, three (3) inside directors (not concurrently holding executive officer posts) and twenty-four (24) executive officers.
2. In addition to the three (3) inside directors shown above, the Company has another four (4) inside directors who concurrently hold executive officer posts, and the compensation to these directors is included in compensation to executive officers.
3. Regarding the performance-based cash bonus, the amounts which should be recorded as expense in the period are stated.
4. Regarding the compensation-type stock options, the amounts which should be recorded as expense based on an estimation of the fair value of the stock acquisition rights issued to directors (excluding outside directors) and executive officers as part of their compensation are stated.
5. In addition to the compensation shown in this table, the following payments were made during the fiscal year that ended in March 2014 due to a resolution by the Compensation Committee based on the retirement payment system that was terminated in June 2005.
・Executive Officer (two) 2 million yen (Retired on March 31, 2013)
(3) Summary of policy for determining amount of director or executive officer compensation and the method of calculation
The Company, which has adopted the company-with-committees system, has established a Compensation Committee. Outside directors account for the majority of members of the committee and the committee is chaired by an outside director to ensure transparency and to determine compensation in a fair and appropriate manner.
The Company’s directors’ compensation system is intended to strengthen the motivation of directors and executive officers to strive for the continuous medium-to-long-term improvement of the Group performance in line with management policies to meet shareholder expectations, and to contribute to the optimization of the Group value. The Company aims for a level of compensation that enables it to attract and retain talented people to take responsibility for the Company’s development.
In keeping with these aims, the Compensation Committee has established a policy for determining the individual compensation entitlement of directors and executive officers as set out below, and determines the amount, etc. of individual compensation entitlement of directors and executive officers in line with this policy.
1. Compensation system
(1) Compensation packages for directors (excluding directors who concurrently hold executive officer posts) exclude a short-term performance-based cash bonus because directors have a supervisory role, and consist of a “base salary” component in the form of a base salary and long-term incentives in the form of “compensation-type stock options.” Outside directors receive base salary only.
(2) Executive officer compensation packages consist of “base salary,” “performance-based cash bonus,” which reflects the short-term performance of the Group and the
32
short-term performance of the business of which they are in charge, and “compensation-type stock options” as a long-term incentive.
2. The total amount of individual compensation entitlement and “Base salary” are set at an appropriate level for each position, based upon objective data, evaluation data and other data collected at regular intervals, etc.
3. The amount of the “performance-based cash bonus” is determined according to the level of performance result for the fiscal year (consolidated operating income) and the degree of attainment of annual performance targets. The amount based on the degree of attainment of annual performance targets is determined in the 0 % to 200 % range of the standard amount of compensation. The targets are major consolidated performance indicators (sales, operating income, ROE and others) associated with results of operations.
4. Regarding the “compensation-type stock options,” the Company grants stock acquisition rights to inside directors and executive officers as share-price based incentives from a shareholder perspective. The number of rights granted is determined based on the position.
5. The standard for compensation to executive officers is a 60:25:15 mix of “base salary,” “performance-based cash bonus” and “compensation-type stock options.” For the executive officers ranked in a more senior position, the “base salary” ratio is lowered while the ratio of “performance-based cash bonus” is increased.
6. The Company reviews matters such as the level of compensation and the compensation structure in a timely and appropriate manner in response to changes in the business environment.
Regarding the conventional retirement benefit system abolished in June 2005, the Compensation Committee has determined individual entitlements within reason based upon certain criteria established by the Company, and will pay such entitlement upon the retirement of each director or executive officer in office prior to the abolition of this system.
33
(4) Matters regarding outside directors
a. Persons serving as executive officers at the important positions of other companies, etc.
Not applicable.
b. Persons serving as outside directors at the important positions of other companies, etc.
Name
Name of company, etc.
Position
Nobuhiko Ito
TADANO LTD.
Outside director
There is no material transaction with the Company.
c. Family relationship with an executive officer, etc. of the Company or of a specified related business operator of the Company
Not applicable.
d. Primary activities of outside directors
Outside directors of the Company participate in Board of Directors meetings by making constructive statements on the decision-making and supervision of management, and they are also in charge of duties of the three committees: the Nominating Committee, the Audit Committee and the Compensation Committee, as stated in “(1) Names, etc. of Directors and Executive Officers.” Also, where appropriate, outside directors also observe development, production and marketing and other actual operations as part of their supervision and auditing work, and exchange information with the President, the Chairman and other Directors of the Board on various aspects including the running of Board of Directors meetings. The principal activities of outside directors are as follows.
a) Mr. Nobuhiko Ito
During the fiscal year that ended in March 2014, Mr. Ito attended all 14 meetings of the Board of Directors, six of seven meetings of the Nominations Committee, all three meetings of the Audit Committee that were held when he was a committee member until June 2013, and all five meetings of the Compensation Committee that were held starting in June 2013. As a director, Mr. Ito used his experience as a manager to provide supervision and advice concerning global and M&A strategies, risk management and other subjects for preparation of the medium-term plan. In addition, as the chairman of the Audit Committee, Mr. Ito used his experience and knowledge to make statements as needed at meetings of this committee until June 2013.
b) Mr. Shoji Kondo
During the fiscal year that ended in March 2014, Mr. Kondo attended all 14 meetings of the Board of Directors, all seven meetings of the Nominations Committee, all 10 meetings of the Audit Committee that were held after he was named to this committee in June 2013, and one meeting of the Compensation Committee when he was a member until June 2013. As a director, Mr. Kondo used his experience as a manager to provide supervision and advice concerning manufacturing and procurement strategy, human resources strategy and other subjects for preparation of the medium-term plan. In addition, as a member of the Audit Committee starting in June 2013, Mr. Kondo used his experience and knowledge to make statements as needed.
c) Mr. Hirokazu Yoshikawa
During the fiscal year that ended in March 2014, Mr. Yoshikawa attended all 14 meetings of the Board of Directors, all 13 meetings of the Audit Committee, and five of the six meetings of the Compensation Committee. As a director, Mr.
34
Yoshikawa used his experience as a manager to provide supervision and advice concerning organizational and human resources strategies, brand strategies and other subjects for preparation of the medium-term plan. In addition, as a chairman of the Audit Committee starting in June 2013, Mr. Yoshikawa used his experience and knowledge to make statements as needed.
d) Mr. Takashi Enomoto (elected at the Ordinary General Meeting of Shareholders held June 2013)
He attended all 11 Board of Directors meetings held after his appointment, all seven Nominating Committee meetings, all 10 Audit Committee meetings, and all five Compensation Committee meetings, which were respectively held during the fiscal year. At Board of Directors meetings, when preparing the medium-term plan, he primarily made statements on solution business, strategies of financial and other subjects, as necessary and appropriate, for the supervision of and the advice on management from the perspective of a highly experienced management. At the Audit Committee, he made appropriate and necessary statements with his experienced deep knowledge.
e. Liability limitation agreements
To attract skillful people as outside directors and to enable them to fully demonstrate their expected role, the Company stipulates in its current Articles of Incorporation that the Company may, pursuant to the provisions of Article 427, Paragraph 1 of the Company Law, enter into an agreement with outside directors which limits their liabilities for payment of damages with respect to the acts mentioned in Article 423, Paragraph 1 of the Company Law to the extent permitted by laws and regulations. Based on these stipulations, the four outside directors Mr. Nobuhiko Ito, Mr. Shoji Kondo, Mr. Hirokazu Yoshikawa and Mr. Takashi Enomoto have entered into an agreement with the Company limiting their liabilities for payment of damages, and the content of this agreement is summarized as follows.
The maximum amount of liability of an outside director who, with the best of intentions and without gross negligence, fails to execute his or her duties while in office and causes damage to the Company shall be limited to the aggregate sum of the amounts prescribed in Article 113 of the Company Law Enforcement Regulations multiplied by two (Article 425, Paragraph 1, Item 1 (c) of the Company Law).
35
5. Status of Independent Auditor
(1) Name of Independent Auditor
KPMG AZSA LLC
(2) Compensation to the Independent Auditor
a. Compensation paid by the Company to the Independent Auditor during the fiscal year under review
Compensation for audit certification in accordance with Article 2, Section 1 of the Certified Public Accountants Law
¥177 million
Compensation for services other than those stipulated in Article 2, Section 1 of the Certified Public Accountants Law
¥9 million
Total
¥186 million
Note Compensation is the total of compensation for the Independent Auditor’s audit under the Company Law and audit compensation under the Financial Instruments and Exchange Law, as there is no clear separation between the two.
b. Total amount of other property benefits paid by the Company and its subsidiaries
¥268 million
(3) Details of services other than auditing
The Company paid KPMG AZSA LLC to consign the advisory service about reorganization of the Group management structure and the introduction of International Financial Reporting Standards.
(4) Policy regarding decisions to dismiss or deny reappointment to Independent Auditor
The Audit Committee will examine dismissing or denying reappointment of the Independent Auditor if the Independent Auditor has committed a serious violation or infringement of the Company Law, the Certified Public Accountants Law or other relevant laws or regulations, or if the Independent Auditor is deemed to have committed a serious breach of public order or custom. If, as a result of this examination, it is deemed appropriate to dismiss or deny reappointment, the Audit Committee will request the Board of Directors to submit a proposition calling for the dismissal or denial of reappointment of the Independent Auditor to the General Meeting of Shareholders pursuant to the provisions of Article 339, Paragraph 1 and Article 404, Paragraph 2, Item 2 of the Company Law.
The Audit Committee also examines the status of the performance of the Independent Auditor and decides the reappointment or denial every fiscal year.
36
6. Establishment of system to ensure appropriate business operations
The Board of Directors of the Company adopted resolutions on the matters prescribed by the applicable Ordinance of the Ministry of Justice as those necessary for the execution of the duties of the Audit Committee (Article 416, Paragraph 1, Item 1 (b) of the Company Law), and on the establishment of systems necessary to ensure that the execution of duties by executive officers complies with laws and regulations and the Articles of Incorporation, and other systems prescribed by the applicable Ordinance of the Ministry of Justice as systems necessary to ensure the properness of operations of a Stock Company (Article 416, Paragraph 1, Item 1 (e) of the Company Law). A summary of the resolutions is as follows.
<I. Requirements for the execution of duties by the Audit Committee>
1. The Company set up the Audit Committee Office with a full-time staff to support the Audit Committee, and, besides being the secretariat of the Audit Committee, the Audit Committee Office shall perform its duties in accordance with the instructions of the Audit Committee.
2. To ensure the independence of the above Audit Committee Office from executive officers, personnel matters regarding the Audit Committee Office including appointment, personnel changes and disciplinary action, shall be approved in advance by the Audit Committee.
3. The executive officers in charge of internal control, including the Corporate Audit Division, Risk Management Committee and the Compliance Committee, shall report on the status of operation to the Audit Committee on a regular basis and without delay if an urgent situation that must be reported has arisen or if requested to make a report by the Audit Committee.
4. Audit Committee members elected by the Audit Committee may attend management council meetings and other important meetings if necessary and may request investigations, reports, etc. to the executive officers in charge of internal control, including the Corporate Audit Division, Risk Management Committee and the Compliance Committee.
<II. Systems for ensuring compliance of execution of duties by executive officers with laws, regulations and the Articles of Incorporation and other required systems for ensuring the properness of business operations>
5. Each executive officer shall manage the minutes of management council meetings and other important meetings, documents requesting formal approval and other information concerning the performance of their duties to ensure that documents are preserved in an appropriate manner and made available for inspection in accordance with the provisions of the executive officer document management rules and internal rules concerning the management of other documents.
6. The Company set up the Risk Management Committee which is in charge of managing the various risks that arise in connection with the Group’s business activities, and the executive officer nominated by the Board of Directors shall be responsible for the development of risk management systems including the following, in accordance with the Risk Management Committee Regulations.
(1) With respect to management of the business strategy risks, the executive officer in charge of business strategy shall be responsible, and regarding management of other risks in connection with business activities, each executive officer shall be responsible in accordance with respective assigned area. The Risk Management Committee shall provide support to each executive officer. Further, the Risk Management Committee shall periodically conduct selection,
37
assessment and review of material risks, develop measures, and confirm management status.
(2) The executive officer in charge of risk management nominated by the Board of Directors shall be responsible for establishing the contingency plans and countermeasures to minimize the damages by a crisis which is supposed to adversely affect the corporate value.
(3) Provide support to the development and strengthening of risk management systems at each group company.
7. The Company set up the Compliance Committee which is in charge of establishing and operating the Group’s compliance systems, and the executive officer nominated by the Board of Directors shall be responsible for establishing and operating the compliance systems including the following, in accordance with the Compliance Committee Regulations.
(1) Defining compliance in the Group as the observance of laws and regulations applicable to corporate activities, corporate ethics and internal regulations and policies, and making this known to every individual working for the Group.
(2) Establishing the Konica Minolta Group Charter of Corporate Behavior, familiarizing this through the Group, and enacting compliance conduct guidelines, etc. based on the philosophy of the Charter of Corporate Behavior.
(3) Establishing and operating systems to promote compliance at each group company.
(4) Establishing and operating a whistle blowing system that allows employees to report any compliance violations that are discovered or anticipated.
8. The Company set up a Corporate Audit Division which is in charge of the internal auditing of the Group to evaluate and improve the status of execution of business operations in all business activities from the viewpoint of legality and rationality, and which shall be responsible for establishing and operating internal auditing systems in accordance with the Internal Auditing Regulations.
9. The Company shall be responsible for establishing and operating a system of internal control over financial reporting in the Group and a system for evaluating the efficacy of their operation.
10. The Company established the Corporate Organization Basic Regulations, and shall develop the corporate governance mechanisms of the Company and the Group, including the foregoing systems. The Company shall also work to establish and operate a system for ensuring the appropriateness of business operation through the management council and other meeting bodies, authority regulations and other internal regulations, and shall endeavor to ensure the legality, rationality and efficiency of business execution by reviewing as necessary systems for management and administration across all the business activities of the Group.
*Amounts and numbers of shares shown in this business report are rounded down to the nearest whole unit.
38
Consolidated Balance Sheet
(As of March 31, 2014) [Millions of yen]
Item
Amount
Item
Amount
Assets
Liabilities
Current assets
589,331
Current liabilities
285,220
Cash and deposits
95,490
Notes and account payable – trade
96,240
Notes and accounts receivable-trade
220,120
Short-term loans payable
37,078
Lease receivables and lease investment assets
21,211
Current portion of long-term loans payable
27,003
Securities
92,999
Accounts payable-other
39,824
Inventories
115,275
Accrued expenses
34,509
Deferred tax assets
18,806
Income taxes payable
5,652
Accounts receivable-other
14,636
Provision for bonuses
13,007
Other
16,435
Provision for directors’ bonuses
244
Allowance for doubtful accounts
(5,643)
Provision for product warranties
1,441
Notes payable-facilities
1,185
Asset retirement obligations
256
Other
28,776
Noncurrent assets
376,729
Noncurrent liabilities
200,785
Property, plant and equipment
173,362
Bonds payable
70,000
Buildings and structures, net
61,441
Long-term loans payable
62,042
Machinery, equipment and vehicles, net
23,542
Deferred tax liabilities for land revaluation
3,269
Tools, furniture and fixtures, net
27,058
Net defined benefit liability
53,563
Land
34,310
Provision for directors’ retirement benefits
237
Lease assets, net
521
Asset retirement obligations
1,012
Construction in progress
13,819
Other
10,658
Assets for rent, net
12,668
Total liabilities
486,005
Intangible assets
111,362
Net assets
Goodwill
65,734
Shareholder’s equity
466,797
Other
45,627
Capital stock
37,519
Investments and other assets
92,003
Capital surplus
204,140
Investment securities
29,256
Retained earnings
242,460
Long-term loans receivable
83
Treasury stock
(17,322)
Long-term prepaid expenses
3,230
Accumulated other comprehensive income
11,607
Deferred tax assets
48,040
Valuation difference on available-for-sale securities
5,086
Other
12,277
Deferred gains or losses on hedges
(38)
Allowance for doubtful accounts
(883)
Foreign currency translation adjustment
15,055
Remeasurements of defined benefit plans
(8,497)
Subscription rights to shares
910
Minority interests
740
Total net assets
480,055
Total assets
966,060
Total liabilities and net assets
966,060
39
Consolidated Statement of Income
(From April 1, 2013 to March 31, 2014) [Millions of yen]
Item
Amount
Net sales
943,759
Cost of sales
492,269
Gross profit
451,490
Selling, general and administrative expenses
393,346
Operating income
58,144
Non-operating income
Interest and dividends income
2,122
Other
3,437
5,559
Non-operating expenses
Interest expenses
2,852
Share of loss of entities accounted for using equity method
1,163
Foreign exchange losses
126
Other
4,940
9,083
Ordinary income
54,621
Extraordinary income
Gain on sales of noncurrent assets
639
Gain on sales of investment securities
75
License related income
809
1,524
Extraordinary loss
Loss on sales and retirement of noncurrent assets
2,639
Loss on valuation of investment securities
49
Impairment loss
5,524
Business structure improvement expenses
3,532
Loss on business withdrawal
16,122
Group restructuring expenses
118
Special extra retirement payments
4,655
32,642
Income before income taxes and minority interests
23,503
Income taxes-current
11,624
Income taxes-deferred
(10,060)
1,564
Income before minority interests
21,939
Minority interests in income
77
Net income
21,861
40
Consolidated Statement of Changes in Net Assets
(From April 1, 2013 to March 31, 2014) [Millions of yen]
Shareholder’s Equity
Capital stock
Capital surplus
Retained
earnings
Treasury stock
Total shareholder’s equity
Balance at April 1, 2013
37,519
204,140
229,713
(1,548)
469,825
Changes of items during period
Dividends of surplus
(9,280)
(9,280)
Net income
21,861
21,861
Change of scope of consolidation
176
176
Purchase of treasury stock
(15,806)
(15,806)
Disposal of treasury stock
(11)
32
20
Net changes of items other than shareholders’ equity
Total changes of items during period
－
－
12,746
(15,774)
(3,028)
Balance at March 31, 2014
37,519
204,140
242,460
(17,322)
466,797
Accumulated other comprehensive income
Subscription rights to shares
Minority interests
Total net assets
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Balance at April 1, 2013
3,345
2
(8,268)
－
(4,920)
764
747
466,416
Changes of items during period
Dividends of surplus
(9,280)
Net income
21,861
Change of scope of consolidation
176
Purchase of treasury stock
(15,806)
Disposal of treasury stock
20
Net changes of items other than shareholders’ equity
1,741
(40)
23,324
(8,497)
16,527
145
(6)
16,666
Total changes of items during period
1,741
(40)
23,324
(8,497)
16,527
145
(6)
13,638
Balance at March 31, 2014
5,086
(38)
15,055
(8,497)
11,607
910
740
480,055
41
Notes to Consolidated Financial Statements
＜NOTES TO BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS＞
I．Scope of Consolidation
1. Number of consolidated subsidiaries and names of principal consolidated subsidiaries
Number of consolidated subsidiaries: 109 companies
Names of principal consolidated subsidiaries:
Konica Minolta Business Solutions Japan Co., Ltd.
Konica Minolta Healthcare Co., Ltd.
Konica Minolta Supplies Manufacturing Co., Ltd.
Konica Minolta Technoproducts Co., Ltd.
Konica Minolta Business Solutions U.S.A., Inc.
Konica Minolta Business Solutions Europe GmbH
Konica Minolta Business Solutions Deutschland GmbH
Konica Minolta Business Solutions France S.A.S.
Konica Minolta Business Solutions (UK) Ltd.
Konica Minolta Business Solutions Australia Pty. Ltd.
Konica Minolta Business Solutions (CHINA) Co., Ltd.
Konica Minolta Business Technologies Manufacturing (HK) Ltd.
Konica Minolta Business Technologies (WUXI) Co., Ltd.
Konica Minolta Business Technologies (DONGGUAN) Co., Ltd.
Konica Minolta Opto (DALIAN) Co., Ltd.
Changes in consolidated subsidiaries:
(Increased due to importance)
Konica Minolta With You, Inc.
ECS Buero-und Datentechnik GmbH
Konica Minolta Business Solutions India Private Ltd.
(Increased due to purchase of shares or equity interest)
CopySource Inc.
KnowledgeCentrix Holdings, LLC.
(Increased due to foundation）
Konica Minolta Medical Products Co., Ltd.
(Decreased due to company liquidation)
RGI Süd GmbH
(Decreased due to merger)
Konica Minolta Business Technologies, Inc.
Konica Minolta Advanced Layers, Inc.
Konica Minolta Optics, Inc.
Konica Minolta Medical & Graphic , Inc.
Konica Minolta IJ Technologies, Inc.
Konica Minolta Technology Center, Inc.
Konica Minolta Business Expert, Inc.
R+M Business Software Neu-Ulm GmbH
2. Names of principal unconsolidated subsidiaries
Konica Minolta Business Solutions (Thailand) Co., Ltd.
Unconsolidated subsidiaries have not been included in consolidation because they are relatively small and their total assets, sales, net income and retained earnings (in proportion to scale of equity ownership), etc. do not have a material impact on the consolidated financial statements.
II．Scope of the Use of Equity Accounting
1. Number of affiliated companies accounted for by the equity method and names of principal companies
Number of companies accounted for by the equity method:
2 companies
Principal companies accounted for by the equity method:
Toho Chemical Laboratory Co., Ltd
2. Names of principal unconsolidated subsidiaries and affiliated companies that are not accounted for by the equity method
42
Konica Minolta Business Solutions (Thailand) Co., Ltd.
Companies that are not accounted for by the equity method are excluded from the scope of the equity method because they have an insignificant effect on consolidated net income and consolidated retained earnings and also lack overall materiality.
III．Changes Regarding Consolidated Subsidiaries during the Fiscal Year under Review
Some consolidated subsidiaries have fiscal years ending on December 31, and consolidated financial statements are prepared using the financial statements of those companies as of that fiscal year-end date. Adjustments are made to consolidated accounts to account for important transactions involving those companies that occur between the end of those companies’ fiscal year-end date and the end of the consolidated fiscal year.
(Consolidated Subsidiaries with Fiscal Years Ending on December 31)
Konica Minolta Business Solutions do Brazil Ltda.
Konica Minolta Business Solutions de Mexico SA de CV.
Konica Minolta Business Solutions Russia LLC
Konica Minolta Medical Systems Russia LLC
Consolidated subsidiaries Konica Minolta Business Solutions (Shenzhen) Co., Ltd. and Konica Minolta Business Solutions Romania s.r.l. end their fiscal years on December 31. In prior years, financial statements for this year were used to prepare the fiscal year consolidated financial statements with consolidation adjustments as needed for significant transactions between January 1 and March 31. To provide more suitable consolidated financial information, starting with the fiscal year that ended in March 2014, the fiscal year ends of these two subsidiaries were changed to March 31. Due to this change, the consolidated financial statements include 15 months of operations of these two subsidiaries, covering the period from January 1, 2013 to March 31, 2014.
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IV．Accounting Standards and Methods
1. Valuation Standards and Methods of Assets
(1) Securities
Held to maturity receivables
The amortized cost method (the straight-line method) is used.
Other securities
Securities with fair market value are stated using the mark-to-market method based on the market price at the balance sheet date. (Total net unrealized gains or losses after tax effect adjustments are directly recorded in shareholders’ equity, and the cost of securities sold is computed based on the moving-average method.)
Other securities that do not have fair market values are primarily stated at cost using the moving value average.
(2) Derivatives
Derivatives are stated using the mark-to-market method.
(3) Inventories
Konica Minolta, Inc. (“the Company”) and its domestic consolidated subsidiaries’ inventories are, in the main, recorded at cost as determined by the periodic-average method (method of reducing book value when the contribution of inventories to profitability declines). Overseas consolidated subsidiaries’ inventories are recorded at the lower of cost or market value, with cost determined by the first-in, first-out method.
2. Amortization Method for Noncurrent Assets
(1) Property, plant and equipment (excluding lease assets)
The depreciable assets of the Company and its domestic consolidated subsidiaries are depreciated using the declining-balance method. Overseas consolidated subsidiaries adopt the straight-line method. However, the Company and its domestic consolidated subsidiaries have used the straight-line method for their buildings (excluding annexed structures) acquired since April 1, 1998.
(2) Intangible assets (excluding lease assets)
We have adopted the straight-line method. The software for internal use applies the straight-line method based on an estimated in-house working life of five years.
(3) Lease assets
Lease assets arising from finance lease transactions not involving transfer of ownership Depreciation is computed using the straight-line method based on the assumption that the useful life equals the lease term and the residual value equals zero. Finance lease transactions not involving transfer of ownership commencing on or before March 31, 2008 are accounted for based on methods applicable to ordinary rental transactions.
3. Standards for Allowances
(1) Allowance for doubtful accounts
To prepare for possible losses on uncollectable receivables, for general receivables, an amount is provided according to the historical percentage of uncollectables. For specific receivables for which there is some concern regarding collectability, an estimated amount is recorded by investigating the possibility of collection for each individual account.
(2) Provision for bonuses
To prepare for the payment of employee bonuses, an amount corresponding to the current portion of estimated bonus payments to employees is recorded.
(3) Provision for directors’ bonuses
To prepare for the payment of directors’ and officers’ bonuses, an amount corresponding to the projected value of bonus payments to directors and officers for the fiscal year under review is recorded.
(4) Provision for product warranties
The provisioning of free after-sales service for products is recorded based on past after-sales service expenses as a percentage of net sales.
(5) Provision for directors’ retirement benefits
Consolidated subsidiaries, to provide for the payment of directors’ and officers’ retirement benefits, record provision for benefits for retired directors and officers in an actual amount equal to the need at the end of the fiscal year period under review based on the relevant rules and regulations on directors’ retirement benefits.
4. Accounting method for retirement benefits
To prepare for the payment of retirement benefits to employees, liabilities for these benefits in an amount equal to retirement benefit liabilities less pension plan assets is recognized based on the expected amount of these benefits as of March 31, 2014.
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Past service expenses are recognized as expenses using the straight-line method over a certain number of years (mainly 10 years) that is not more than the average remaining years of service for employees when the expenses occur.
Actuarial gains and losses are recognized as expenses starting in the fiscal year following the occurrence of these gains and losses. The gains and losses are allocated to individual fiscal years by using the straight-line method over a certain number of years (mainly 10 years) that is not more than the average remaining years of service for employees in each fiscal year when the gains and losses occur.
Unrecognized past service expenses and unrecognized actuarial gains and losses are posted as an accumulated adjustment for retirement payments in the accumulated other comprehensive income section of net assets, after adjusting for the effect of taxes.
5. Accounting methods for hedge transactions
(1) Hedge accounting methods
The deferred hedge method is used. Special accounting methods are used for interest rate swaps that meet certain conditions.
(2) Hedge methods and hedge targets
The hedge methods are forward exchange contracts, currency option transactions, currency swaps and interest rate swaps.
The hedge targets are scheduled foreign currency denominated transactions and borrowings.
(3) Hedge policy
The Company and consolidated subsidiaries enter into forward foreign exchange contracts and currency option transactions as hedging instruments only, not for trading purpose to make profits, within the limit of actual foreign transactions to reduce risk arising from future fluctuations of foreign exchange rates.
In addition, the Company and consolidated subsidiaries enter into currency swaps and interest rate swaps to make interest rates on borrowings stable and reduce costs fluctuations for future capital procurement, both as hedging instruments only, not for speculation purpose, within the limit of actual financial or operating transactions.
(4) Methods for evaluating the effectiveness of hedges
Verification is made to ascertain a high correlation between value fluctuations of cash flows and hedging instruments.
6. Consumption tax
The tax-exclusion method is used to account for consumption taxes and local consumption taxes. In addition, asset-related consumption tax that cannot be excluded is accounted for as deferred consumption taxes, etc., in the long-term prepaid expenses item and amortized over a five-year period by the straight-line method.
7. Consolidated tax payment system
The consolidated tax payment system is applied.
8. Amortization of goodwill
Amortization of goodwill is carried out separately for each goodwill item over a rational time period of 20 years or less.
<Note concerning change in accounting method>
(Application of accounting standard for retirement benefits)
Starting with the fiscal year that ended in March 2014, Konica Minolta is using Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan (ASBJ) Statement No. 26, May 17, 2012) and Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012). (However, this excludes the main text of clause 35 of this accounting standard and clause 67 of this guidance.) As a result, Konica Minolta has changed to the method of recording the amount remaining after deducting plan assets from projected benefit obligations as retirement benefit liabilities. Unrecognized actuarial gains and losses and unrecognized past service expenses are recognized as liabilities for retirement payments.
Due to the application of this accounting standard and guidance, based on the handling of retroactive adjustments as prescribed in paragraph 37 of the retirement benefit accounting standard, the monetary effect of this change has been incorporated in the accumulated adjustment for retirement payments in accumulated other comprehensive income.
The result of this change was a net retirement benefit liability of ¥53,563 million as of March 31, 2014. In addition, accumulated other comprehensive income decreased ¥8,497 million.
Information about the effect on per share data is provided in <Notes on Per-Share Information>.
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<Notes to Consolidated Balance Sheet>
1. Assets used for collateral and Secured Obligations
(1) Assets used for collateral
Accounts Receivable-trade ¥12 million
Vehicles ¥3 million
(2) Secured Obligations
Short-term Loans payable ¥13 million
Long-term loans due within one year 0 million
Long-term loans 2 million
2. Accumulated depreciation on tangible noncurrent assets ¥470,778 million
3. Breakdown of inventories
Merchandise and Finished Goods ¥87,807million
Work in Process ¥9,609 million
Raw Materials and Stores ¥17,858 million
4. Balance of guaranteed obligations
Guaranteed obligations (guarantees for bank loans and lease obligations, etc. of unconsolidated companies, etc.) ¥427 million
<Notes to Consolidated Statement of Changes in Shareholders’ Equity>
1. Issued Shares
Type of shares
End of previous fiscal year
Increase
Decrease
End of fiscal year under review
Common shares
shares
531,664,337
shares
–
shares
–
shares
531,664,337
2. Treasury stock
Type of shares
End of previous fiscal year
Increase
Decrease
End of fiscal year under review
Common shares
shares
1,346,048
shares
15,402,953
shares
28,313
shares
16,720,688
(Summary of reasons for change)
The principal reasons for increase were as follows:
Increase in treasury stock based on Board of Directors resolution 15,365,000 shares
Increase related to requests to purchase shares less than full trading units: 37,953shares
Note: On January 30, 2014, the Board of Directors approved a resolution for the repurchase of stock in accordance with Article 156 of the Company Law, which is applied pursuant to Article 165, Paragraph 3 of this act.
The principal reasons for decrease were as follows:
Reduction related to exercise of stock acquisition rights: 27,500 shares
Reduction related to shareholders’ buying to complete full trading units: 813shares
3. Dividends
(1) Dividends paid
Decision
Type of shares
Total dividend value (millions of yen)
Dividend per share (yen)
Record date
Effective date
Board of Directors
May 10, 2013
Common shares
3,977
7.50
March 31, 2013
May 27, 2013
Board of Directors
October 31, 2013
Common shares
5,303
10.00
September 30, 2013
November 27, 2013
Note: On October 31, 2013, the Board of Directors approved a resolution to pay an interim dividend of ¥10 per share, which includes a ¥2.50 commemorative dividend.
(2) Dividends for the record date belonging to the current fiscal period but effective in the next fiscal period
Decision
Type of
shares
Total dividend value (millions of yen)
Dividend
source
Dividend per share (yen)
Record date
Effective date
Board of Directors
May 9,2014
Common shares
3,862
Retained earnings
7.50
March 31, 2014
May 27, 2014
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4. Stock subscription rights
Breakdown of stock subscription rights
Type of shares under stock subscription rights
Number of shares under stock subscription rights
First issue of stock compensation-type stock options for 2005
Common shares
75,000 shares
Second issue of stock compensation-type stock options for 2006
Common shares
54,500 shares
Third issue of stock compensation-type stock options for 2007
Common shares
67,000 shares
Fourth issue of stock compensation-type stock options for 2008
Common shares
81,500 shares
Fifth issue of stock compensation-type stock options for 2009
Common shares
155,000 shares
Sixth issue of stock compensation-type stock options for 2010
Common shares
174,000 shares
Seventh issue of stock compensation-type stock options for 2011
Common shares
228,000 shares
Eighth issue of stock compensation-type stock options for 2012
Common shares
280,500shares
Ninth issue of stock compensation-type stock options for 2013
Common shares
257,500 shares
Total
1,373,000 shares
<Notes to Financial Instruments>
1. Matters relating to the status of financial instruments
The Konica Minolta Group raises short-term working capital mainly with bank borrowings and invests temporary surplus funds in financial instruments with extremely low risk. The Group has decided to engage in derivatives transactions within the scope of actual demand in accordance with its internal regulations.
In principle, the risk of currency fluctuations relating to receivables and payables denominated in foreign currencies are hedged using the forward exchange contract and currency option transactions. With respect to the interest volatility risk relating to some loans payable and costs fluctuations risk for future capital procurement, we try to fix interest expenses using the currency swaps and interest-rate swaps.
Investment securities consist mainly of stocks, and the market values of listed stocks are determined on a quarterly basis.
We try to reduce the credit risk of customers relating to notes and accounts receivable-trade through regular monitoring and the comprehensive management of deadlines and balances.
2. Matters relating to fair market values, etc. of financial instruments
The consolidated balance sheet amount, the fair market value and the difference between the two on March 31, 2014 (the closing date of the consolidated fiscal year under review) are as follows.
[Millions of yen]
Consolidated balance sheet amount
Fair market value
Difference
(1) Cash and deposits
95,490
95,490
－
(2) Notes and accounts receivable-trade
220,120
220,120
－
(3) Securities and investment securities
(i) Held-to-maturity receivables
10
10
－
(ii) Other securities
119,127
119,127
－
(4) Notes and accounts payable-trade
(96,240)
(96,240)
－
(5) Short-term loans payable
(37,078)
(37,078)
－
(6) Current portion of long-term loans payable
(27,003)
(27,008)
(5)
(7) Bonds payable
(70,000)
(71,040)
(1,040)
(8) Long-term loans payable
(62,042)
(60,918)
1,123
(9) Derivatives transactions
(529)
(529)
－
1) Items that are posted in liabilities are enclosed in parentheses.
2) Net receivables and payables generated from derivatives trading are shown. Items generating net payables are enclosed in parentheses.
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(Note 1) Methods of calculating the fair market value of financial instruments and matters relating to securities and derivatives transactions
(1) Cash and deposits and (2) Notes and accounts receivable-trade
As they are settled in a short period and their market values are nearly identical to their book values, the book values are used.
(3) Securities and investment securities
For the fair market values of securities and investment securities, the prices of stocks are based on the value on the relevant stock exchanges and the prices of receivables are based on the value indicated by relationship financial institutions.
(i) As held-to-maturity receivables are entirely school bonds and the creditworthiness of the issuers has not changed materially from the time of acquisition, their book values are used.
(ii) The acquisition cost, consolidated balance sheet amount and difference between them of other securities are as follows.
[Millions of yen]
Type
Acquisition cost
Consolidated balance sheet amount
Difference
Consolidated balance sheet amount exceeding the acquisition cost
Stocks
12,741
21,763
9,021
Others
10
20
9
Consolidated balance sheet amount not exceeding the acquisition cost
Stocks
4,998
4,340
(658)
Receivables
6,000
5,999
(0)
Negotiable deposit
87,000
87,000
－
Others
5
4
(1)
Total
110,757
119,127
8,370
(4) Notes and accounts payable-trade, and (5) Short-term loans payable
As they are settled in a short period and their fair market values are nearly identical to their book values, the book values are used.
(6) Current portion of long-term loans payable, and (8) Long-term loans payable
For the fair market values of long-term loans payable at fixed interest rates, the total amount of the principal and interest is discounted using a rate that is assumed to be applied when a similar loan is newly borrowed.
For the fair market values of long-term loans payable at variable interest rates, as the credit risk of the Company has not changed materially and the market values are nearly identical to their book values, the book values are used.
(7) Bonds payable
The book value of corporate bonds is based on the value indicated by relationship financial institutions.
(9) Derivatives transactions
(i) Those which the hedge accounting does not apply to
The contract amount or the amount equivalent to the principal set forth in the contract for each type of hedged item in derivatives transactions on the consolidated closing date, the fair market value and valuation gains or losses, and the method of calculating fair market value are as follows:
(a) Currency-related derivatives
[Millions of yen]
Category
Type
Contract amount, etc.
Fair market value
Valuation gains or losses
More than one year
Transactions other than market transactions
Forward exchange contracts
20,965
－
(170)
(170)
Currency swap transactions
7,376
－
(299)
(299)
(Note) The fair market values of forward exchange contracts are calculated using forward exchange rates, and the fair market values of currency swap transaction are calculated using prices offered by relationship financial institutions.
(ii) Those which the hedge accounting applies to
The contract amount or the amount equivalent to the principal set forth in the contract, etc. for each method of hedge accounting on the consolidated closing date are as follows:
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(a) Currency-related derivatives
[Millions of yen]
Method of hedge accounting
Type etc. of derivatives transactions
Major hedged items
Contract amount, etc.
Fair market value
More than one year
Fundamental treatment method
Forward exchange contracts
Accounts receivable-trade
9,660
–
(51)
Currency option transactions
Long put・Short call
Accounts receivable-trade
1,278
–
(7)
Designated accounting for currency swaps
Currency swap transactions
Long-term loans payable
4,450
4,450
（＊）
(Note) 1. The fair market values of forward exchange contracts are calculated using forward exchange rates, and the fair market values of currency swap transaction are calculated using prices offered by relationship financial institutions.
2. Aggregate currency option transactions are shown because they are zero-cost options and puts and calls are unified contracts.
(＊) When deferral hedge accounting is used for currency swaps, this treatment is used collectively with long-term loans subject to the hedges. As a result, fair value includes the fair value of the applicable long-term loans (see (8) above).
(b) Interest rate related derivatives
[Millions of yen]
Method of hedge accounting
Type etc. of derivatives transactions
Major hedged items
Contract amount, etc.
Fair market value
More than one year
Specified hedge accounting of interest rate swap
Interest rate swap transactions
long-term loans payable
22,450
22,450
（＊）
(＊) As interest rate swaps subject to the special treatment of interest rate swap are accounted for as a single item with underlying long-term loans, which are hedged items, their market values are included in those of long-term loans (see (8) above).
(Note 2)
As unlisted stocks (consolidated balance sheet amount of ¥ 1,049 million) and shares of affiliates (consolidated balance sheet amount ¥ 2,067 million) do not have market values, it is considered extremely difficult to calculate their fair market values. Therefore, they are not included in “(3) (ii) Other securities.”
<Notes to Real Estates for Rent, etc.>
1. Matters regarding the status of real estates for rent, etc.
The Company and some consolidated subsidiaries have office buildings for rent and idle assets, etc. in Japan and overseas.
2. Matters regarding fair market values, etc. of real estates for rent, etc.
[Millions of yen]
Consolidated balance sheet amount
Fair market value as of the end of the fiscal year under review
4,944
6,234
(Note 1) Consolidated balance sheet amount is calculated by subtracting accumulated depreciation and accumulated impairment losses from acquisition cost.
(Note 2) Fair market value as of the end of the fiscal year under review is recorded as follows:
(1) Amount of primary domestic real estates has been calculated by the Company based on the method similar to real-estate appraisal standards. However, if changes in a performance indicator that is believed to properly reflect the market price have been insignificant, such domestic real estate have been evaluated by real-estate appraisal at the immediate appraisal. Other domestic real estates have been calculated based on a certain appraisal or the criteria which seems to reflect the fair market value correctly.
(2) Overseas real estates have been primarily calculated by real-estate appraisal by local appraisers.
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<Notes on Per-Share Information>
1. Net assets per share ¥929.04
2. EPS ¥41.38
Note: As is explained in <Note concerning change in accounting method>, the retirement benefit accounting method is applied and the transitional treatment prescribed in paragraph 37 of the retirement benefit accounting standard is used. As a result of this change, net assets per share decreased ¥16.50 in the fiscal year.
<Significant Subsequent Events>
None
<Other Notes>
1. The primary component of the asset impairment loss is a ¥3,566 million loss on buildings, etc. located in the cities of Hino and Kofu. The loss is due to the termination of internal film production in the Healthcare Business, which resulted in the write-down of the net sales price of idle assets to a memorandum value because of the difficulty of calculating a sales price. The asset impairment loss due to termination of production of HDD glass substrates is included in the business termination loss in the consolidated profit and loss statement.
2. Business structural improvement expenses are mainly for structural reforms at European and North American sales bases of the Business Technologies Business, a review of manufacturing operations for cell phone lens units in the Industrial Business, and the termination of internal film production in the Healthcare Business.
3. The business termination loss is a loss resulting from stopping manufacturing HDD glass substrates in the Industrial Business. This loss includes an ¥11,899 million asset impairment loss, a loss on the disposal of inventories and other items. The asset impairment loss consists of the following items.
Use
Type
Place
Price
Manufacturing facilities for HDD glass substrates and others
Machinery, buildings and others
Malaysia, Itami City (Hyogo prefecture), Iruma City (Saitama prefecture) and others
11,899 million yen
(*)Asset impairment loss: Machinery, equipment and vehicles ¥6,113 million; buildings and structures ¥5,192 million; tools, furniture and fixtures ¥593 million
(1) Method for asset grouping
Assets are grouped according to product categories and locations of business sites.
(2) Reason for recognition of asset impairment loss
Due to the decision to terminate the production of HDD glass substrates, the book value of the assets in this group was written down to the amount that can be recovered and the resulting reduction was included in the loss on termination of a business.
(3) Method for calculating amount that can be recovered
The amount that can be recovered for the HDD glass substrate asset group was determined by using the net sales price. These assessments used the real estate appraisal standard price for buildings, etc. and reasonable estimates for other assets.
4. Special extra retirement payments are additional payments to individuals who receive additional benefits by participating in the early retirement program.
5. Group reorganization expenses are expenses associated with the reorganization of the group’s management structure on April 1, 2013.
6. The item concerning business combinations, etc. is as follows.
(Reorganization of the group’s management structure)
On April 1, 2013, Konica Minolta merged with Konica Minolta Business Technologies, Inc. and six other group companies.
I. Purpose of business combination
The purpose of the reorganization of the group’s management structure is to raise the speed of measures for increasing corporate value. Goals are to strengthen innovative management capabilities in the Business Technologies Business, utilize group resources in a strategic and agile manner, and establish frameworks for more efficient business operations.
II. Scheme for the business combination
1. Merger method
This was an absorption-type merger in which Konica Minolta was the surviving company. The other seven group companies were terminated.
2. Allotment of shares and other items concerning the merger
No shares, cash or other assets were allotted in relation to the merger because Konica Minolta held all shares of the seven companies that were involved in this merger.
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III. Summary of companies merged (Year ended March 31, 2014, non-consolidated)
(1) Trade name
Konica Minolta Business Technologies, Inc.
Konica Minolta Advanced Layers, Inc.
(2) Description of businesses
Manufacturing and sale of multi-functional peripherals (MFPs), printers, and equipment for production print systems and graphic arts, providing related solution services
Manufacturing and sale of electronic materials (TAC films etc.), lighting source panels, and performance materials (including heat insulation films)
(3) Capital
¥400 million
¥400 million
(4) Net assets
¥140,744 million
¥37,922 million
(5) Total assets
¥203,548 million
¥62,257 million
(1) Trade name
Konica Minolta Optics, Inc.
Konica Minolta Medical & Graphic, Inc.
(2) Description of businesses
Manufacturing and sale of optical products (including pickup lenses) and measuring instruments for industrial and healthcare applications
Manufacturing and sale of consumables and equipment for healthcare systems
(3) Capital
¥400 million
¥400 million
(4) Net assets
¥11,207 million
¥21,726 million
(5) Total assets
¥51,430 million
¥47,653 million
(1) Trade name
Konica Minolta
IJ Technologies, Inc.
Konica Minolta Technology Center, Inc.
Konica Minolta Business Expert, Inc.
(2) Description of businesses
Manufacturing and sale of inkjet printheads, inks and textile printers for industrial use
Provision of services to group companies including R&D, customized product design and management of intellectual property assets
Provision of various shared services for the Group in the field of engineering, environment, safety and others
(3) Capital
¥10 million
¥50 million
¥495 million
(4) Net assets
¥5,582 million
¥2,895 million
¥6,683 million
(5) Total assets
¥9,329 million
¥9,161 million
¥9,498 million
IV. Status after the Merger
1. Trade name: Konica Minolta, Inc.
2. Location of head office: 2-7-2 Marunouchi, Chiyoda-ku, Tokyo
3. Title and name of representative: Masatoshi Matsuzaki, Representative Executive Officer and President
(Shoei Yamana was named president and representative executive officer on April 1, 2014.)
4. Description of businesses
・Development, manufacture, and sales of products including MFPs, printers, equipment for production printing systems, equipment for healthcare systems, measuring instruments for industrial and healthcare applications, inkjet printheads and textile printers for industrial use, and providing related consumables and solution services, etc.
・Development, manufacture, and sales, etc. of electronic materials (TAC films, etc.), lighting source panels, functional films (heat insulation films, etc.), and optical products (lens units, etc.)
5. Capital: ¥37,519 million
V. Summary of accounting treatment
This merger was a common control transaction in accordance with Accounting Standards for Business Combinations (ASBJ Statement No. 21, December 26, 2008) and Revised Guidance on Accounting Standard for Business Combinations (ASBJ Guidance No. 10, December 26, 2008).
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7. Revisions of deferred tax assets and liabilities due to change in corporate income tax rate, etc.
The Act to Partially Amend the Income Tax Act (Law No. 10 of 2014) was announced on March 31, 2014 and ends the special corporate tax for reconstruction beginning with fiscal years that start on April 1, 2014 and afterward. In addition, the Local Corporate Tax Act (Law No. 11 of 2014) was announced on March 31, 2014. This act lowers the corporate residents tax rate and establishes the local corporate tax in an amount equal to this reduction beginning with fiscal years that start on or after October 1, 2014. Due to these two new laws, the statutory tax rate used to calculate deferred tax assets and liabilities has been lowered from 38.01% to 35.64% for temporary differences that are expected to settle in fiscal years starting on or after April 1, 2014. For temporary differences that are expected to settle in fiscal years that start on or after October 1, 2014, the corporate tax portion has been increased from 23.71% to 24.75% and the residents tax portion has been lowered from 4.91% to 3.86%. These changes reduced net deferred tax assets (deferred tax assets minus deferred tax liabilities) by ¥2,139 million and deferred gains or losses on hedges by ¥1 million and as of March 31, 2014 and increased deferred income taxes by ¥2,137 million yen in the fiscal year that ended in March 2014.
8. Figures given in the text have been rounded down to the nearest million.
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Independent Auditor’s Report
May 8, 2014
The Board of Directors
Konica Minolta, Inc.
KPMG AZSA LLC
Yoshihiko Nakamura (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Hiroo Iwaide (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Shinji Someha (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
We have audited the consolidated financial statements, comprising the consolidated balance sheet, the consolidated statement of income, the consolidated statement of changes in shareholder’s equity and the notes to consolidated financial statements of Konica Minolta, Inc. (“the Company”) as at March 31, 2014 and for the year from April 1, 2013 to March 31, 2014 in accordance with Article 444 (4) of the Company Law.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for the establishment and operation of such internal control as management determines is necessary to enable the preparation and fair presentation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit as independent auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected and applied depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation
53
of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position and the results of operations of the Company and its consolidated subsidiaries for the period, for which the consolidated financial statements were prepared, in accordance with accounting principles generally accepted in Japan.
Other Matter
Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountants Law of Japan.
Notes to the Reader of Independent Auditor’s Report:
The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as required by the Company Law
54
Balance Sheet
(As of March 31, 2014) [Millions of yen]
Item
Amount
Item
Amount
Assets
Liabilities
Current assets
Cash and deposits
Notes receivable – trade
Accounts receivable – trade
Securities
Inventories
Prepaid expenses
Deferred tax assets
Short-term loans receivable
Accounts receivable – other
Income taxes refund receivable
Other
Allowance for debt accounts
Noncurrent assets
Property, plant and equipment
Buildings, net
Structures, net
Machinery and equipment, net
Vehicles, net
Tools, furniture and fixtures, net
Land
Lease assets, net
Construction in progress
Intangible assets
Software
Other
Investments and other assets
Investment securities
Stock of affiliated companies Investments-affiliated companies
Long-term prepaid expenses
Deferred tax assets
Other
Allowance for doubtful accounts
334,559
44,405
3,347
90,597
92,999
36,588
1,744
11,337
55,435
6,609
1,516
3,044
(13,066)
345,120
100,973
35,608
1,972
11,393
28
8,482
31,181
376
11,928
13,833
9,673
4,159
230,313
26,140
97,927
75,321
2,544
25,053
3,384
(58)
Current liabilities
Notes payable
Accounts payable – trade
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Unpaid expenses
Accrued expenses
Income taxes payable
Advances received
Provision for bonuses
Provision for directors’ bonuses
Provision for product warranties
Other
Noncurrent liabilities
Bonds payable
Long-term loans payable
Lease obligations
Deferred tax liabilities for land revaluation
Provision for retirement benefits
Asset retirement obligations
Other
159,984
6,812
46,508
34,721
27,001
159
26,182
8,459
998
557
6,511
211
195
1,666
155,521
70,000
58,952
241
4,555
20,246
984
540
Total liabilities
315,506
Net assets
Shareholder’s equity
Capital stock
Capital surplus
Capital reserve
Retained earnings
Other retained earnings
Retained earnings carried forward
Treasury stock
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Land revaluation difference
Subscription rights to shares
349,430
37,519
135,592
135,592
193,641
193,641
193,641
(17,322)
13,832
5,654
(38)
8,216
910
Total net assets
364,173
Total assets
679,679
Total liabilities and shareholders’ equity
679,679
55
Statement of Income
(From April 1, 2013 to March 31, 2014) [Millions of yen]
Item
Amount
Net sales
472,449
Cost of sales
294,572
Gross profit
177,876
Selling, general and administrative expenses
143,331
Operating income
34,545
Non-operating income
Interest and dividends income
6,667
Foreign exchange gains
1,268
Miscellaneous income
2,170
10,106
Non-operating expenses
Interest expenses
1,644
Miscellaneous expense
2,859
4,503
Ordinary income
40,148
Extraordinary income
Gain on sales of non-current assets
300
Gain on sales of investment securities
69
License related income
809
Gain on extinguishment of tie-in shares
115,046
116,225
Extraordinary loss
Loss on sales and retirement of noncurrent assets
1,150
Loss on valuation of investment securities
48
Loss on valuation of shares of subsidiaries and associates
8,561
Provision of allowance for doubtful accounts
11,460
Impairment loss
4,748
Business structure improvement expenses
1,205
Loss on business withdrawal
2,226
Group restructuring expenses
118
Special extra retirement payments
3,018
32,538
Net income before taxes
123,836
Income taxes-current
115
Income taxes-deferred
(12,998)
(12,883)
Net income
136,719
56
Statement of Changes in Net Assets
(From April 1, 2013 to March 31, 2014) [Millions of yen]
Shareholder’s equity
Capital stock
Additional paid-in capital
Retained earnings
Treasury
stock
Total shareholder’s equity
Capital
reserve
Other Capital surplus
Total Additional paid-in capital
Other retained earnings
Total retained earnings
Retained earnings carried forward
Balance at April 1, 2013
37,519
135,592
－
135,592
66,457
66,457
(1,548)
238,021
Changes of items during period
Dividends of surplus
(9,280)
(9,280)
(9,280)
Net income
136,719
136,719
136,719
Purchase of treasury stock
(15,806)
(15,806)
Disposal of treasury stock
(11)
(11)
32
20
Reversal of revaluation reserve for land
(243)
(243)
(243)
Net changes of items other than shareholders’ equity
Total changes of items during period
－
－
－
－
127,183
127,183
(15,774)
111,409
Balance at March 31, 2014
37,519
135,592
－
135,592
193,641
193,641
(17,322)
349,430
Valuation and translation adjustments
Subscription rights to shares
Total net assets
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Land revaluation difference
Total valuation and translation adjustments
Balance at April 1, 2013
3,789
(61)
7,972
11,701
764
250,487
Changes of items during period
Dividends of surplus
(9,280)
Net income
136,719
Purchase of treasury stock
(15,806)
Disposal of treasury stock
20
Reversal of revaluation reserve for land
243
243
－
Net changes of items other than shareholders’ equity
1,865
23
－
1,888
145
2,033
Total changes of items during period
1,865
23
243
2,131
145
113,686
Balance at March 31, 2014
5,654
(38)
8,216
13,832
910
364,173
57
Notes to Financial Statements
<Summary of Significant Accounting Policies>
1. Criteria and methods for evaluating securities
(1) Shares of subsidiaries and affiliates
Shares of subsidiaries and affiliates are stated at cost using the moving-average method.
(2) Other securities
Securities with fair market value are stated using the mark-to-market method based on the market price at the balance sheet date. (Total net unrealized gains or losses after tax effect adjustment are directly recorded in shareholders’ equity, and the cost of securities sold is computed based on the moving-average method.)
Other securities that do not have fair market value are primarily stated at cost using the moving-value average.
2. Criteria and methods for evaluating derivatives
Derivatives are stated using the mark-to-market method.
3. Inventory valuation standard and method
The value of inventories is determined by using the cost method based on the gross-average method (book values are reduced to reflect declines in profitability).
4. Depreciation and amortization of noncurrent assets
(1) Property, plant and equipment (excluding lease assets)
The declining-balance method is used. However, the straight-line method is used for buildings (excluding annexed structures) acquired since April 1, 1998.
(2) Intangible assets
The straight-line method is used. For software for internal use, the straight-line method is adopted based on a licensing period of five years.
(3) Lease assets
Lease assets arising from finance lease transactions not involving transfer of ownership Depreciation is computed using the straight-line method based on the assumption that the useful life equals the lease term and the residual value equals zero. Finance lease transactions not involving transfer of ownership commencing on or before March 31, 2008 are accounted for based on methods applicable to ordinary rental transactions.
5. Standards for Allowances
(1) Allowance for doubtful accounts
To prepare for possible losses on uncollectable receivables, for general receivables, an amount is provided according to the historical percentage of uncollectables. For specific receivables for which there is some concern regarding collectability, an estimated amount is recorded by investigating the possibility of collection for each individual account.
(2) Provision for bonuses
To prepare for the payment of employee bonuses, an amount corresponding to the current portion of estimated bonus payments to employees is recorded.
(3) Provision for directors’ bonuses
To prepare for the payment of directors’ and officers’ bonuses, an amount corresponding to the projected value of bonus payments to directors and officers for the fiscal year under review is recorded.
(4) Provision for product warranties
The provisioning of free after-sales service for products is recorded based on past after-sales service expenses as a percentage of net sales.
(5)Provision for retirement benefits
In order to provide employee retirement benefits, the amount recorded by the Company is based on projected benefit obligations and pension assets at the end of the fiscal year.
Prior service cost is being amortized as incurred by the straight-line method over periods (10 years) which are shorter than the average remaining years of service of the employees.
Actuarial gains and losses are amortized in the year following the year in which the gains or losses are recognized, primarily by the straight-line method over periods (10 years) which are shorter than the average remaining years of service of the employees.
The accounting method for undisposed unrecognized past service expenses and unrecognized actuarial gains and losses is different from the accounting method used for the consolidated financial statements.
58
6. Accounting methods for hedge transactions
(1) Hedge accounting methods
The deferred hedge method is mainly used. Deferral hedge accounting is used for currency swaps that meet the conditions, and special accounting methods are used for interest rate swaps that meet certain conditions, respectively.
(2) Hedging methods and hedging targets
The hedge methods are forward exchange contracts, currency option transactions, currency swaps and interest rate swaps are used as the hedge method.
The hedge targets are scheduled foreign currency denominated transactions, loans and borrowings.
(3) Hedge policy
The Company and consolidated subsidiaries enter into forward foreign exchange contracts and currency option transactions as hedging instruments only, not for trading purpose to make profits, within the limit of actual foreign transactions to reduce risk arising from future fluctuations of foreign exchange rates.
In addition, the Company and consolidated subsidiaries enter into currency swaps and interest rate swaps to make interest rates on borrowings stable, to reduce the risk of cost fluctuations for future capital procurement, or to make interest income from loans stable, not for speculation purpose, within the limit of actual financial or operating transactions.
(4) Methods for evaluating the effectiveness of hedges
Verification is made to ascertain a high correlation between value fluctuations of hedged items, cash flows and hedge instruments.
7. Consumption tax
The tax-exclusion method is used to account for consumption taxes and local consumption taxes. In addition, asset-related consumption tax that cannot be excluded is accounted for as deferred consumption taxes, etc., in the long-term prepaid expenses item and amortized over a five-year period by the straight-line method.
8. Consolidated tax payment system
Consolidated tax payment system is adopted.
(Additional information)
The Company merged with seven group companies on April 1, 2013 and changed from a pure holding company to an operating company. Due to this change, there are significant differences in the financial condition and results of operations between the fiscal years that ended in March 2013 and March 2014.
<Notes to Balance Sheet>
1. Accumulated depreciation of tangible noncurrent assets ¥327,560 million
2. Receivables from affiliated companies and payables to affiliated companies
Short-term receivables ¥121,538 million
Short-term payables ¥70,985 million
Long-term payables ¥3 million
3. Comprehensive income attributable to inventories
Merchandise and finished goods ¥20,207 million
Work in process ¥10,507 million
Raw materials and supplies ¥5,874 million
4. Land revaluation
Land for industrial purposes that had been revaluated based on the Law Concerning Land Revaluation (Law No. 34 implemented on March 31, 1998) was received from Minolta Co., Ltd. on October 1, 2003, at the time of the merger. The amount corresponding to taxes on the amount of the land revaluation is included under the item deferred tax liabilities for land revaluation. An amount equivalent to the amount of the revaluation less the deferred tax liability has been entered in shareholders’ equity as the land revaluation difference.
(1) Method of revaluation
The value of the land has been evaluated according to the value appraisal method for land fronting major roads, as provided for in Article 2−4 of the Enforcement Orders for the Law Concerning Land Revaluation (Enforcement Orders No. 119, implemented on March 31, 1998) and the method for valuation of noncurrent assets provided for in Article 2−3 of the Enforcement Orders.
(2) Date of revaluation March 31, 2002
(3) The difference between the market value of the revalued land at the end of the fiscal year under review and the book value following revaluation ¥(8,041 million)
59
5. Loan commitment
The Company has loan agreements with subsidiaries concerning financial matters for group companies and has established credit lines for 10 of these subsidiaries. The available loan balance at the end of the fiscal year under review under these agreements is as follows.
Total loan limit ¥76,318 million
Disbursed loan balance ¥55,242 million
Available loan balance ¥21,075 million
6. Pension assets in retirement benefit trust
The Company operates with two types of retirement benefit plans: a lump-sum payment plan and a defined benefit pension plan.
Provision for retirement benefits and pension assets in retirement benefit trust at year end by retirement benefit plan are as follows.
[Millions of yen]
Provision for retirement benefits
(before deduction of pension assets in retirement benefit trust)
Pension assets in retirement benefit trust
Provision for retirement benefits
(After deduction of pension assets in retirement benefit trust)
Lump-sum payment plan
9,427
－
9,427
Defined benefit
pension plan
19,076
8,257
10,818
Total
28,503
8,257
20,246
<Notes to Statement of Income>
Transactions with affiliated companies
Operating revenue
¥317,536 million
Operating expense
¥235,515 million
Other operating transactions
¥17,610 million
Other non-operating transactions
¥7,442 million
<Notes to Statement of Changes in Shareholders’ Equity>
Type and number of treasury stock at end of period
Common shares
16,720,688 shares
(Additional information)
On January 30, 2014, the Board of Directors of the Company approved a resolution to authorize the repurchase of stock as prescribed in Article 156 of the Company Law as applied pursuant to Article 165, Paragraph 3 of this act, and repurchased stocks accordingly.
60
<Notes on Tax Effect Accounting>
1. Breakdown by cause of deferred tax assets and liabilities
Deferred tax assets
Net operating tax loss carried forward
¥23,443 million
Loss on valuation of shares of subsidiaries and associates
¥18,122 million
Net defined benefit liability
¥13,386 million
Allowance for doubtful accounts
¥4,786 million
Excess of depreciation and amortization over deductible limit
¥2,495 million
Provision for bonuses
¥2,320 million
Loss on valuation
¥1,374 million
Other
¥5,782 million
Deferred tax assets subtotal
¥71,712 million
Valuation allowance
¥ (28,770) million
Total deferred tax assets
¥ 42,942 million
Deferred tax liabilities
Revaluation difference of marketable securities
¥(2,682) million
Gain on establishment of employee pension trust
¥(2,010) million
Loss (gain) on transfer of business
¥(1,611) million
Other
¥(246) million
Total deferred tax liabilities
¥(6,551) million
Net deferred tax assets
¥36,391 million
2. Deferred tax liabilities related to revaluation
Deferred tax liabilities related to revaluation of land ¥(4,555 million)
3. Revisions of deferred tax assets and liabilities due to change in corporate income tax rate, etc.
The Act to Partially Amend the Income Tax Act (Law No. 10 of 2014) was announced on March 31, 2014 and ends the special corporate tax for reconstruction beginning with fiscal years that start on April 1, 2014 and afterward. In addition, the Local Corporate Tax Act (Law No. 11 of 2014) was announced on March 31, 2014. This act lowers the corporate residents tax rate and establishes the local corporate tax in an amount equal to this reduction beginning with fiscal years that start on or after October 1, 2014. In conformation with these two new laws, the statutory tax rate used to calculate deferred tax assets and liabilities has been lowered from 38.01% to 35.64% for temporary differences that are expected to be amortized in fiscal years starting on or after April 1, 2014. For temporary differences that are expected to be amortized in fiscal years that start on or after October 1, 2014, the corporate tax portion has been increased from 23.71% to 24.75% and the residents tax portion has been lowered from 4.91% to 3.86%. These changes reduced net deferred tax assets (deferred tax assets minus deferred tax liabilities) by ¥1,844 million and deferred gains or losses on hedges by ¥1 million and as of March 31, 2014 and increased deferred income taxes by ¥1,843 million yen in the fiscal year that ended in March 2014.
<Notes on Leased Noncurrent Assets>
In addition to the noncurrent assets recorded on the balance sheet, the Company has other significant noncurrent assets which it uses under lease contracts, notably computer equipment. Finance lease transactions not involving transfer of ownership commencing on or before March 31, 2008 are accounted for based on methods applicable to ordinary rental transactions.
61
<Notes on Related-Party Transactions>
Subsidiaries, etc.
[Millions of yen]
Attribute
Name of company, etc.
Equity ownership percentage
Relationship with the Company
Description
of transactions
Transaction amount
Account
item
Ending balance
Executive posts concurrently held
Business relationship
Subsidiary
Konica Minolta Holdings
U. S. A., Inc.
(Ownership)
Direct
100％
One Executive of the Company
U.S. holding company
Lending of funds
(See Note 1.)
16,966
Short-term loans
16,467
Subsidiary
Konica Minolta
Business Solutions, Inc.
(Ownership)
Direct
100％
―
Sale of multi-functional peripherals (MFPs), printers, equipment for production print systems and graphic arts, and related supplies in Japan, and providing related solution services
Sales of products
(See Note 2)
33,814
Accounts receivable-trade
12,907
Subsidiary
Konica Minolta
Business Solutions Europe GmbH
(Ownership)
Direct
100％
One Executive of the Company
Sale of multi-functional peripherals (MFPs), printers, equipment for production print systems and graphic arts, and related supplies in Europe, and providing related solution services
Lending of funds
(See Note 1.)
58
Short-term loans
21,300
Sales of products
(See Note 2)
113,634
Accounts receivable-trade
13,570
Subsidiary
Konica Minolta
Business Solutions U.S.A., Inc.
(Ownership)
Indirect
100％
One Executive of the Company
Sale of multi-functional peripherals (MFPs), printers, equipment for production print systems and graphic arts, and related supplies in U.S.A., and providing related solution services
Sales of products
(See Note 2)
83,084
Accounts receivable-trade
11,069
Subsidiary
Konica Minolta
Business Technologies Manufacturing (HK) Ltd.
(Ownership)
Direct
100％
―
Manufacturing and sale of multi-functional peripherals (MFPs), printers and supplies for those
Purchases of products
(See Note 2)
47,740
Accounts payable-trade
9,426
Subsidiary
Konica Minolta
Business Technologies (WUXI) Co., Ltd.
(Ownership)
Direct
15％
Indirect
85％
―
Manufacturing and sale of multi-functional peripherals (MFPs), printers and supplies for those
Purchases of products
(See Note 2)
74,672
Accounts payable-trade
8,033
Subsidiary
Konica Minolta
Business Technologies (DONGGUAN) Co., Ltd.
(Ownership)
Indirect 100％
―
Manufacturing and sale of multi-functional peripherals (MFPs), printers and supplies for those
Purchases of products
(See Note 2)
49,151
Accounts payable-trade
8,655
62
Subsidiary
Konica Minolta
Glass Tech Malaysia Sdn. Bhd.
(Ownership)
Direct
100％
―
―
(See Note 3)
Lending of funds
(See Note 3)
6,063
Short-term loans
14,533
The transaction amount does not include consumptions tax. The ending-balance of Accrued income and Unpaid expenses includes consumption tax.
(Notes) Transaction terms and policy for determining transaction terms
1. Regarding the lending of funds, the Company enters into loan agreements concerning group financing with subsidiaries, setting a limit. The interest rate is determined based on market rates.
The transaction amount is the average loan balance over the period under review.
2. Terms for purchases and sales of products and other items are determined by price negotiations in each fiscal year that take into account market prices and the cost of sales.
3. In association with the shutdown of the HDD glass substrate business, Konica Minolta Glass Tech Malaysia Sdn. Bhd. will be dissolved and this company is no longer obligated to pay interest on loans. Furthermore, an addition of ¥10,899 million has been made to the allowance for doubtful accounts for the amount of Konica Minolta Glass Tech Malaysia receivables that the Company does not expect to collect. An addition of ¥10,899 million was made to the allowance for doubtful accounts in the fiscal year that ended on March 31, 2014.
<Notes on Per Share Information>
Net assets per share ¥705.44
Net income per share ¥258.81
<Note concerning significant subsequent event >
None
<Other Notes>
1. The loss on valuation of shares of subsidiaries and associates mainly represents the write-down of stock of Konica Minolta Glass Tech Malaysia in association with shutting down the HDD glass substrate business in the Industrial Business and Business Technologies Business.
2. The provision of the allowance for doubtful accounts was mainly for ¥10,899 million receivable from Konica Minolta Glass Tech Malaysia Sdn. Bhd. that is not expected to be repaid.
3. The primary component of the impairment loss is a ¥3,566 million loss on buildings, etc. located in the cities of Hino and Kofu. The loss is due to the termination of internal film production in the Healthcare Business, which resulted in the write-down of the net sales price of idle assets to a memorandum value because of the difficulty of calculating a sales price.
4. Business structural improvement expenses are mainly for a review of manufacturing operations for cell phone lens units in the Industrial Business, and the termination of internal film production in the Healthcare Business.
5. The loss on business withdrawal is a loss resulting from shutting down manufacturing HDD glass substrates in the Industrial Business. This loss includes an asset impairment loss of 462 million yen, a loss on the disposal of inventories and other items.
6. Special extra retirement payments are additional payments to individuals who receive additional benefits by participating in the early retirement program.
7. Group restructuring expenses are expenses associated with the reorganization of the group’s management structure on April 1, 2013
8. Items concerning business combinations are as follows.
(Reorganization of the group’s management structure)
On April 1, 2013, the Company merged with Konica Minolta Business Technologies, Inc. and six other group companies.
On April 1, 2013, the Company posted an extraordinary gain (gain on cancellation of shares due to absorption of subsidiaries) of ¥115,046 million, which is the difference between assets and liabilities received from the seven merged companies that were subsequently dissolved and the aggregate book values of the stock of these subsidiaries. This extraordinary gain (gain on cancellation of shares due to absorption of subsidiaries) includes a loss on cancellation of shares of subsidiaries of ¥2,656 million.
63
Please see the corresponding item of the notes to consolidated financial statements for more information about the purpose of the business combination, a summary and other details.
9. Figures given in the text have been rounded down to the nearest million.
64
Independent Auditor’s Report
May 8, 2014
The Board of Directors
Konica Minolta, Inc.
KPMG AZSA LLC
Yoshihiko Nakamura (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Hiroo Iwaide (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Shinji Someha (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
We have audited the financial statements, comprising the balance sheet, the statement of income, the statement of changes in shareholder’s equity and the notes to financial statements, and the supporting schedules of Konica Minolta, Inc. (“the Company”) as at March 31, 2014 and for the 110th business year from April 1, 2013 to March 31, 2014 in accordance with Article 436 (2) (i) of the Company Law.
Management’s Responsibility for the Financial Statements and Others
Management is responsible for the preparation and fair presentation of the financial statements and the supporting schedules in accordance with accounting principles generally accepted in Japan, and for the establishment and operation of such internal control as management determines is necessary to enable the preparation and fair presentation of financial statements and the supporting schedules that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements and the supporting schedules based on our audit as independent auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the supporting schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the supporting schedules. The procedures selected and applied depend on our judgement, including the assessment of the risks of material misstatement of the financial statements and the supporting schedules, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation
65
and fair presentation of the financial statements and the supporting schedules in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the supporting schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements and the supporting schedules referred to above present fairly, in all material respects, the financial position and the results of operations of the Company for the period, for which the financial statements and supporting schedules were prepared, in accordance with accounting principles generally accepted in Japan.
Other Matter
Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountants Law of Japan.
Notes to the Reader of Independent Auditor’s Report:
The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as required by the Company Law.
66
[English Translation of the Audit Report Originally Issued in the Japanese Language]
AUDIT REPORT
We, the Audit Committee of Konica Minolta, Inc. (“the Company”), have audited the performance of duties by directors and executive officers during the 110th business year from April 1, 2013 to March 31, 2014. We report the method and results as follows.
1. Method and details of audit
We, the Audit Committee, have received reports from the executive officers and employees on a regularly basis on the details of the board resolutions with respect to items prescribed in Article 416, Paragraph 1, Item 1, b) and e) of the Company Law, and the status of the establishment and operation of the system established based on such board resolutions (internal control system), sought explanations, whenever the necessity arose, and expressed our opinions. Also, in accordance with the audit standards, audit policy, audit plan, assignment of duties, etc. determined by the Audit Committee and in cooperation with the internal audit division and other internal control divisions of the Company and the auditors of subsidiaries, we verified the process and details of the decision-making at the important meetings, etc., the details of the primary decision documents and other important documents, etc. on the performance of business operations, the status of the performance of the duties of directors, executive officers and others, and the status of business operations and assets of the Company.
With respect to subsidiaries, we confirmed the status of their business and management by communicating and exchanging information with directors and corporate auditors of the subsidiaries, visiting and attending important meetings, and inspecting important decision documents, etc., whenever the necessity arose.
Moreover, in addition to monitoring and examining whether the accounting auditor maintained an independent position and performed auditing appropriately, we received reports from the accounting auditor on the performance of its duties and requested explanations when necessary. In addition, we received notice from the accounting auditor that “The systems for ensuring the proper performance of duties” (set forth in each item of Article 131 of the Regulations of Corporate Financial Calculation) are organized in accordance with the “Standards for Quality Control of Audit” (Business Accounting Council, October 28, 2005) and other relevant standards, and sought explanations whenever necessity arose.
Based on the above methods, we examined the business report, financial statements (balance sheet, statement of income, statement of changes in shareholder’s equity, notes to financial statements), supporting schedules, and the consolidated financial statements (consolidated balance sheet, consolidated statement of income, consolidated statement of changes in shareholder’s equity, notes to consolidated financial statements) for the fiscal year under review.
2. Results of audit
(1) Results of audit of business report, etc.
i) In our opinion, the Business Report and accompanying schedules fairly represent the condition of the Company in accordance with the laws, regulations and Articles of Incorporation of the Company.
ii) We have determined that there were no serious occurrences of dishonest or false activity or violations of any laws, regulations or the Company’s Articles of Incorporation by any directors or executive officers in carrying out their duties.
iii) We believe the details of resolutions of the Board of Directors regarding the internal control system are appropriate. We found no matters of note with respect to the execution of duties of executive officers regarding the internal control system.
(2) Results of audit of financial statements and accompanying schedules
In our opinion, the audit method and audit results received from the accounting auditor KPMG AZSA LLC are appropriate.
(3) Results of audit of consolidated financial statements
In our opinion, the audit method and audit results received from the accounting auditor KPMG AZSA LLC are appropriate.
67
May 9, 2014
Audit Committee of Konica Minolta, Inc.
Audit Committee Member Hirokazu Yoshikawa (Seal)
Audit Committee Member Shoji Kondo (Seal)
Audit Committee Member Takashi Enomoto (Seal)
Audit Committee Member Yasuo Matsumoto (Seal)
Audit Committee Member Akio Kitani (Seal)
Note: Mr. Hirokazu Yoshikawa, Mr. Shoji Kondo and Mr. Takashi Enomoto are outside directors as provided for in Article 2, Item 15 and Article 400, Paragraph 3 of the Company Law.
Byron Shaw 