KITO CORPORATION

These documents have been translated from Japanese originals for reference purposes only.
In the event of any discrepancy between these translated documents and the Japanese originals, the originals shall prevail. The Company assumes no responsibility
for this translation or for direct, indirect or any other forms of damages arising from the translations.
Securities Code 6409
June 5, 2015
Yoshio Kito
President & CEO
To Shareholders with Voting Rights
KITO CORPORATION
2000, Tsuijiarai, Showa-cho,
Nakakoma-gun, Yamanashi, Japan
Notice of the 71st Ordinary General Meeting of Shareholders
Dear Shareholders,
You are cordially invited to attend the 71st Ordinary General Meeting of Shareholders of KITO CORPORATION (“the
Company”), which is to be held according to the following schedule.
If you are unable to attend the meeting, you may exercise your voting rights in writing. Please indicate your
votes “for” or “against” each of the proposals on the enclosed Voting Rights Exercise Form, after reviewing the
Reference Materials for the General Meeting of Shareholders (described hereinafter), and send back by 5:30 pm
on Monday, June 22, 2015 (JST).
Schedule
1. Date and Time:
At 10:00 am on Tuesday, June 23, 2015 (JST)
2. Venue:
Tower Hall, 49th floor of Roppongi Hills Mori Tower
6-10-1 Roppongi, Minato-ku, Tokyo
3. Agenda of the Meeting
Matters to be Reported:
Matters to be Resolved:
Proposal No. 1
Proposal No. 2
Proposal No. 3
Proposal No. 4
Proposal No. 5
Proposal No. 6
Proposal No. 7
1. The Business Report, the Consolidated Financial Statements and the audit results of the
Consolidated Financial Statements by the Accounting Auditor and Board of Corporate Auditors for
the 71st Term (from April 1, 2014 to March 31, 2015).
2. The Non-consolidated Financial Statements for the 71st Term (from April 1, 2014 to March 31, 2015)
Distribution of Surplus
Partial Amendments to the Articles of Incorporation
Election of One (1) Director
Election of Three (3) Corporate Auditors
Granting of Retirement Benefits to Retiring Director
Granting of Retirement Benefits to Retiring Auditor
Granting of Stock Aquisition Rights as Stock Options to Directors (excluding Outside Directors) and
Executive Officers
1
4. Matters for Determination for this Convocation
(1) Absence of the indication of your approval or disapproval in the Voting Rights Exercise Form will be treated as indication
of approval.
(2) You may exercise your voting right by proxy, by delegating authority to one other shareholder eligible to vote at the
meeting. In such case, please submit a document evidencing the authority of the proxy.
5. Other Matters related to this Notice of Convocation
Under the provisions of relevant laws and regulations and Article 17 of the Company’s Articles of Incorporation, the following
information is published in the Company’s website (http://kito.com/jp/), and not disclosed in this Notice.
(1) Notes to Consolidated Financial Statements (Japanese only)
(2) Notes to Non-consolidated Financial Statements (Japanese only)
The Consolidated Financial Statements and Non-consolidated Financial Statements audited by the corporate auditors and
accounting auditors when they prepared their respective audit reports comprise the information included in the documents
attached to this Notice as well as information published in the Company’s website indicated above.
◎ When attending the Meeting in person, please submit the enclosed Voting Rights Exercise Form at the reception.
All attendants from the Company are to be lightly dressed in the “business casual” style (no necktie or jacket). We appreciate your
understanding, and we ask that you come to the meeting wearing light clothing.
◎ Please note that if there arises by the previous day of the General Meeting of Shareholders, any amendment to the Reference Materials
for the General Meeting of Shareholders, Business Report, Non-consolidated Financial Statements or Consolidated Financial Statements,
such amendment will be notified to you in writing by mail, or posted in the Company’s website (http://kito.com/jp/).
◎ The Company posts English translations and Chinese translations of the Reference Materials for the General Meeting of Shareholders and
parts of the Business Report on its website. Please refer to them together with this notice. Please note that the translated versions are
only for reference purposes. In the event that any error is found in a translation, the Company will promptly correct it. The Company,
however, expressly disclaims any and all liability for such an error.
2
Reference Materials for the General Meeting of Shareholders
Proposals and References
Proposal No. 1:
Distribution of Surplus
The Company believes that it is important to accumulate sufficient retained earnings to reinforce the management basis and provide for
future business development, as well as the adequate profit distribution to shareholders commensurate with the Company’s performance.
Under this policy, the Company is striving to increase the dividend payment, targeting a consolidated payout ratio of 20% or higher,
subject to the overall consideration of its consolidated results and financial position.
The Company hereby proposes its year-end dividend for the year ended March 31, 2015 as follows, in consideration of the performance
for the year as well as the business development in the future.
1 Form of dividend property
Dividends shall be paid in cash.
2 Matters concerning allotment of dividend property and total amount
12.5 yen per share of the Company’s common stock
Total dividend in this case is 327,914,800 yen.
Additionally, the annual dividend for the year ended March 31, 2015 shall be 37.5 yen per share including the previously implemented
interim dividend of 25 yen per share.
Please note that, on October 1, 2014, the Company split its shares of common stock at a ratio of 2 shares per share.
3 Effective date of the distribution of surplus
June 24, 2015
3
Proposal No. 2:
Partial Amendments to the Articles of Incorporation
1. Reason for Proposing the Amendment
Pursuant to the amended Article 427 Paragraph 1 of the Companies Act that came into effect on May 1, 2015, the Company
intends to revise part of the Articles of Incorporation in order to secure valuable personnel suited to supervising the management
of business and to allow them to perform their duties to the best of their ability, by widening the scope of the contracts regarding
liability for damages.
Furthermore, the approval of each of the Corporate Auditors has been obtained for this proposal.
2. Details of the Amendments
The contents of the amendments are as follows.
(Underlined portions indicate amendments)
Current provisions of the Articles of Incorporation
Amended provisions of the Articles of Incorporation
Articles 1 to 39
(Description omitted)
Articles 1 to 39
(Unchanged)
(Partial Exemption of Liability for Damages)
Article 40
The Company may, by a resolution of the Board of Directors,
exempt Directors (including former Directors) and Corporate
Auditors (including former Corporate Auditors) to the extent
provided for by relevant laws and regulations from liability for
damages toward the Company.
2) The Company may conclude agreements with Outside
Directors, Outside Corporate Auditors and Accounting Auditors
regarding liability for damages toward the Company. However,
in all cases the maximum amount of liability shall be determined
by relevant laws and regulations.
(Partial Exemption of Liability for Damages)
Article 40
The Company may, by a resolution of the Board of Directors,
exempt Directors (including former Directors) and Corporate
Auditors (including former Corporate Auditors) to the extent
provided for by relevant laws and regulations from liability for
damages toward the Company.
2) The Company may conclude agreements with Directors
(excluding Executive Directors, Managers and other employees),
Corporate Auditors and Accounting Auditors regarding liability
for damages toward the Company. However, in all cases the
maximum amount of liability shall be determined by relevant
laws and regulations.
Articles 41 to 43
(Description omitted)
Articles 41 to 43
(Unchanged)
4
Proposal No. 3:
Election of One (1) Director
The Company hereby proposes that one (1) Director with specialist knowledge and abundant experience in human resources be elected
in order to strengthen the Corporate Management function and to advance globalization. The candidate for Director is as follows.
■ Personal history, positions, responsibilities and significant concurrent positions
New
Candidate
Name
Date of birth
Number of shares of
the Company held
April 1982
Akihide Miyawaki
Joined Toyota Motor Sales Co., Ltd.
(current Toyota Motor Corporation)
September 1990 Joined Bain & Company Japan, Inc.
June 1994
Director, William M. Mercer Ltd. of Japan
(current Mercer Japan Ltd.)
August 1997
General Manager of Human Resources division, Chrysler
Japan Sales Ltd. and Vice President, Chrysler Asia Pacific
regional headquarters
May 2000
Vice President, SAP Japan Co., Ltd.
June 2003
Vice President, Johnson & Johnson K.K. Medical Company
April 2006
Senior Vice President, Johnson & Johnson K.K. Medical
Company
October 2008
Senior Executive Managing Officer, Square Enix Holdings Co.,
Ltd.
November 2013 Joined the Company
December 2013 Senior Executive Officer (to present)
August 4, 1958
0 share
▌Message to our shareholders
Bringing absolute safety and reassurance to our customers around the world, KITO is a company with an unbroken lineage in the DNA of which
Japan should be most proud: that of advanced quality painstakingly built in at all of its manufacturing sites. These traditions and values run
through all the activities of the companies of the Group, even though they may operate in different countries and markets.
It was this sincere attitude and the potential for expansion that fascinated me and prompted my decision to join the Company in order to
contribute to KITO's further growth. Beginning in Japan's automobile industry, for more than 30 years I have helped in the global development
of many companies. I will use this experience as I strive to aid KITO in its push for further growth.
(Notes) No conflict of interest exists between the Company and the candidate.
5
Proposal No. 4:
Election of Three (3) Corporate Auditors
The terms of office of all three Corporate Auditors will expire at the conclusion of this General Meeting of Shareholders. Accordingly, the
election of three Corporate Auditors is proposed.
The candidates for Corporate Auditor are as follows.
■ Personal history, positions, responsibilities and significant concurrent positions
Candidate Number
April 1984
Registered as lawyer
Joined Nagashima & Ohno (current Nagashima Ohno &
Tsunematsu)
August 1988
Studied abroad at University of Illinois College of Law
October 1991
Returned to Nagashima & Ohno (current Nagashima Ohno &
Tsunematsu)
December 1994 Joined Hatasawa & Wakai (current Hatasawa, Wakai &
Yasunaga) (to present)
February 2007 Corporate Auditor of the Company (to present)
1
■ Significant concurrent positions
Partner, Hatasawa, Wakai & Yasunaga
Name
Date of birth
Number of shares of
the Company held
Masatoshi Yasunaga
April 14, 1952
15,500 shares
Attendance at board
meetings
Attendance at board of
corporate Auditors meetings
13 out of 13 meetings
7 out of 7 meetings
▌Message to our shareholders
I have worked as a lawyer focusing mostly on corporate law for about 30 years. KITO's Board of Directors includes three Outside Directors from
different areas of specialization. Discussions are always lively and the Company has achieved a high degree of management transparency. With
regard to auditing, the Corporate Auditor team consists of a full-time Corporate Auditor and Outside Corporate Auditors who are a certified public
accountant and a lawyer, working closely with the internal audit office to provide a rich audit function. While remaining aware of the duties
expected of an auditor under the Companies Act, I would like to continue to contribute to improved compliance at the Company.
6
■ Personal history, positions, responsibilities and significant concurrent positions
Candidate Number
October 1985
2
April 1989
February 1997
February 1998
April 1998
June 2007
Joined Tohmatsu Awoki & Co. (current Deloitte Touche
Tohmatsu LLC)
Registered as certified public accountant
Left Tohmatsu & Co. (current Deloitte Touche Tohmatsu LLC)
Registered as tax accountant
Established Yotsuba-sogo Accounting Office (to present)
Corporate Auditor of the Company (to present)
■ Significant concurrent positions
Partner, Yotsuba-sogo Accounting Office
Outside Corporate Auditor, GREE, Inc.
Outside Director, ESCRIT Inc.
Outside Corporate Auditor, Medical Data Vision Co., Ltd.
Name
Date of birth
Number of shares of
the Company held
Kiyohito Hamada
November 30, 1957
4,600 shares
Attendance at board
meetings
Attendance at board of
corporate Auditors meetings
13 out of 13 meetings
7 out of 7 meetings
▌Message to our shareholders
In today's society, the external environment for corporations is evolving with astonishing rapidity. In order to deal with these changes, the Company
is continually developing the corporate governance structure so as to facilitate appropriate operation. For the audit function, we have built a very
effective structure that includes on the team a full-time Corporate Auditor with thorough knowledge of internal operations and a specialist in legal
practice.
As I have been involved not only in audit practice at audit firms but also in the taxation and M&A businesses, I would like to use this specialist
knowledge and experience to strive to protect the interests of shareholders.
7
■ Personal history, positions, responsibilities and significant concurrent positions
Candidate Number
April 1981
August 2006
April 2011
April 2015
3
Joined KITO CORPORATION
Manager Internal Audit Office
Senior Manager of HR & GA Department
Senior Manager supporting Corporate Auditor (to present)
New
Candidate
Name
Date of birth
Number of shares of
the Company held
Kentaro Yoneyama
April 14, 1958
10,000 shares
▌Message to our shareholders
I have broad experience in the human resources, manufacturing and sales divisions, and in the Internal Audit Office I have been responsible for
audit operations not only within Japan but also overseas.
Making full use of this experience, my goal as a Corporate Auditor is to carry out the duties, from an independent perspective, by enriching
the audit activities for business operations and accounting, while working with the Outside Corporate Auditor specialists in accounting and law
to implement an effective audit function, meeting the expectations of shareholders and other stakeholders and contributing to the Company's
sustained growth.
8
(Notes) 1. No conflict of interest exists between the Company and any of the candidates.
2. Mr. Masatoshi Yasunaga and Mr. Kiyohito Hamada are both candidates for Outside Corporate Auditor. Moreover, the Company has notified
the Tokyo Stock Exchange that Mr. Masatoshi Yasunaga has been designated independent auditor and if his re-election is approved he is
scheduled to continue as an independent auditor.
3. Reason for proposing the appointment of these candidates for Outside Corporate Auditor.
1) Mr. Masatoshi Yasunaga has extensive experience and specialized expertise as a lawyer, and we expect that he will provide valuable
advice, primarily from the perspective of compliance. Accordingly it is proposed that he be elected. While Mr. Yasunaga does not have
experience directly participating in corporate management, for the above reasons we determined that he will appropriately perform his
duties as an Outside Corporate Auditor.
2) Mr. Kiyohito Hamada has extensive experience and specialized expertise as a certified public accountant, and we expect that he will
provide valuable advice, primarily from the perspectives of finance and accounting. Accordingly, it is proposed that he be elected. While
Mr. Hamada does not have experience directly participating in corporate management, for the above reasons we determined that he will
appropriately perform his duties as an Outside Corporate Auditor.
4. Number of years of service since the candidates were first appointed as Outside Corporate Auditors.
1) Mr. Masatoshi Yasunaga's term of office as an Outside Corporate Auditor, as of the conclusion of this General Meeting of Shareholders, is
8 years and 4 months.
2) Mr. Kiyohito Hamada's term of office as an Outside Corporate Auditor, as of the conclusion of this General Meeting of Shareholders, is 8
years.
5. Liability limitation agreement with the candidates
Pursuant to Article 427, Paragraph 1 of the Companies Act, the Company has concluded agreements with Messrs. Masatoshi Yasunaga and
Kiyohito Hamada, limiting their liability for damages under Article 423, Paragraph 1 of the same Act. The maximum amount of liability under
those Agreements is the total of the amounts specified in each item of Article 425, Paragraph 1 of the Companies Act, and if the re-election
of Messrs. Masatoshi Yasunaga and Kiyohito Hamada is approved, the Company plans to continue those agreements with them.
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Proposal No. 5:
Granting of Retirement Benefits to Retiring Director
It is proposed that retirement benefits be granted to Director Hajime Ito, who is retiring by resignation at the conclusion of this Meeting
to reward his service within the reasonable range according to the standard set out by the Company. For the specific amount, timing and
method of payment of such retirement benefits, shareholders are kindly requested to leave the decision to the Board of Directors.
Personal history of the retiring Director is as follows.
Name
Hajime Ito
Proposal No. 6:
Personal history
June 2010
April 2011
Director
Managing Director (to present)
Granting of Retirement Benefits to Retiring Corporate Auditor
It is proposed that retirement benefits be granted to Corporate Auditor Noboru Sato, who is retiring at the conclusion of this Meeting
coinciding with the expiration of his term of office, to reward his service within the reasonable range according to the standard set out by the
Company. For the specific amount, timing and method of payment of such retirement benefits, shareholders are kindly requested to leave the
decision to the consultation among the Corporate Auditors.
Personal history of the retiring Corporate Auditor is as follows.
Name
Noboru Sato
Personal history
June 2011
Full-time Corporate Auditor (to present)
10
Proposal No. 7:
Granting of Stock Aquisition Rights as Stock Options to Directors (excluding Outside Directors) and Executive Officers
It is proposed that stock aquisition rights be granted as follows, as stock options to Directors (excluding outside directors) and Executive
Officers of the Company, according to the provisions of Articles 236, 238 and 239 of the Companies Act, and that the determination of
matters regarding stock aquisition rights be delegated to the Board of Directors.
1. Reason for need to solicit individuals to receive stock acquisition rights at especially favorable terms:
The purpose is to motivate and give the directors (excluding outside directors) and executive officers an incentive for
improving the Company’s performance and corporate value.
2. Individuals eligible to receive stock acquisition rights:
Directors (excluding outside directors) and executive officers of KITO CORPORATION
3. Details, cap on the number, etc. of stock acquisition rights delegated to determine the subscription requirements
based on the resolution that will be passed at the Shareholders Meeting:
(1) Cap on the number of stock acquisition rights delegated to determine the subscription requirements:
It shall be set at 1,000 units, the details of which are as defined in (3) below.
The total number of stocks to be received by exercise of such stock acquisition rights shall be capped at 200,000
common stocks of KITO CORPORATION, and at the number calculated by multiplying the adjusted number of stocks to be
granted by the number of the above stock acquisition rights in cases where the number of the stocks to be granted (as
defined below) is adjusted in accordance with (3)-(a).
(2) Payment of money is not required for the stock acquisition rights delegated to determine the subscription requirements.
(3) Details of the stock acquisition rights delegated to determine the subscription requirements:
(a) Type and number of stocks underlying the stock acquisition rights:
The type of stocks underlying the stock acquisition rights shall be a common stock of KITO CORPORATION, and the
number of such stocks underlying a single stock warrant (hereinafter referred to as the “Number of the Stocks to be
Granted”) shall be 200 shares.
However, in the event of a split (including allotment of the common stocks of KITO CORPORATION without contribution;
the same applies hereinafter) or reverse split of the common stocks of KITO CORPORATION, the Number of the Stocks
to be Granted shall be adjusted based on the following formula, and a fraction of less than one share resulting from the
adjustment shall be disregarded:
Adjusted Number of the Stocks to be Granted = Number of the Stocks to be Granted before adjustment × Ratio of
stock split or reverse split
In addition to the above, in the event of unavoidable reasons requiring the adjustment of the Number of the Stocks
to be Granted, such Number of the Stocks to be Granted shall be adjusted within the reasonable extent.
(b) Amount of assets to be invested upon exercise of the stock acquisition rights:
It shall be the amount calculated by multiplying the amount paid per one common stock of KITO CORPORATION to
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be received by exercise of the stock acquisition rights (hereinafter referred to as the “Exercise Price”) by the Number of
the Stocks to be Granted.
The Exercise Price shall be the amount calculated by multiplying whichever is the higher of (A) the average of daily
closing price of the common stocks of KITO CORPORATION at the Tokyo Stock Exchange (hereinafter referred to as the
“Closing Price”) for the month (except days when no trades are done) prior to the month that includes the day when the
stock acquisition rights are allotted (hereinafter referred to as the “Day of Allotment”); or (B) the Closing Price for the Day
of Allotment (the Closing Price for the day immediately prior to the Day of Allotment if no trades are done), by 1.05, and
a fraction of less than 1 yen shall be rounded up.
In cases where a split or reverse split of the stocks of KITO CORPORATION takes place after the Day of Allotment, the
Exercise Price shall be adjusted based on the following formula, and a fraction of less than 1 yen resulting from the
adjustment shall be rounded up:
Adjusted Exercise
Price
＝
Exercise Price before
Adjustment
×
1
Ratio of Stock Split or Reverse Split
In cases where KITO CORPORATION issues new stocks or disposes of treasury stocks (except securities acquired by
KITO CORPORATION in exchange for delivery of the common stocks of KITO CORPORATION or securities with put option,
and stocks delivered by exercise of the stock acquisition rights of which the holder can demand delivery of the common
stocks of KITO CORPORATION) at a price lower than the market value after the Day of Allotment, the Exercise Price shall
be adjusted based on the following formula and a fraction of less than 1 yen resulting from the adjustment shall be
rounded up:
Adjusted
Exercise Price
＝
Exercise Price
before Adjustment
×
Number of Stocks
Issued
＋
Number of New
Stocks
×
Amount Paid per
Share
Market Value
Number of Stocks Issued ＋ Number of New Stocks
In the above formula, the “Number of stocks issued” shall be the number calculated by deducting the number of
treasury stocks out of the common stocks of KITO CORPORATION from the total number of common stocks of KITO
CORPORATION that have already been issued, and the “Number of new stocks” shall be deemed to be replaced with the
“number of treasury stocks to be disposed of” in the event of disposition of the treasury stocks.
In addition to the above, in the event of unavoidable reasons requiring adjustment of the Exercise Price (e.g., in cases
where KITO CORPORATION reduces the amount of its stated capital after the Day of Allotment), the Exercise Price shall
be adjusted, in consideration of the terms and conditions of such reduction in the amount of the stated capital, within
the reasonable extent.
(c) Period during which the stock acquisition rights may be exercised:
It shall be a period from the day when two (2) years have elapsed since the day on which the resolution is adopted
to the day when ten (10) years have elapsed and determined by the board of directors of KITO CORPORATION.
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(d) Conditions for exercising the stock acquisition rights:
i) Successors of a holder of the stock acquisition rights may inherit the stock acquisition rights.
ii) Disposition of the stock acquisition rights such as pledges shall not be permitted.
(e) Grounds and requirements for acquiring the stock acquisition rights:
i) In cases where a holder of the stock acquisition rights is discharged on disciplinary grounds or removed from his/
her post as director, executive officer or auditor (except removal due to mandatory retirement and termination of a
term) or resigns for his/her own reasons, all of the stock acquisition rights issued for such a holder may be acquired
with no compensation.
ii) In cases where a holder of the stock acquisition rights finds a position at a company in substantial competition with
KITO CORPORATION or conducts on his/her own business in substantial competition with KITO CORPORATION, all of
the stock acquisition rights issued for such a holder may be acquired with no compensation.
iii) In cases where a holder of the stock acquisition rights violates the terms of the “agreement on allotment of stock
acquisition rights” that is signed between the holders of the stock acquisition rights and KITO CORPORATION, all of
the stock acquisition rights issued for such a holder may be acquired with no compensation.
(f) Restrictions on acquiring the stock acquisition rights through transfers:
In order to acquire the stock acquisition rights through transfers, approval by resolution at the board of directors of
KITO CORPORATION is required.
(g) Matters concerning the stated capital or capital reserve to be increased in cases where stocks are issued by
way of exercise of the stock acquisition rights:
i) The amount of the stated capital to be increased in cases where the stocks are issued by way of exercise of the stock
acquisition rights shall be half of the amount of the maximum increase in the stated capital as calculated pursuant
to Article 17-(1) of the Ordinance on Company Accounting, and a fraction of less than 1 yen resulting from the
calculation shall be rounded up.
ii) The amount of the capital reserve to be increased in cases where the stocks are issued by way of exercise of the
stock acquisition rights shall be the amount calculated by deducting the amount of the stated capital to be increased
as stipulated in the above i) from the amount of the maximum increase in the stated capital as in i).
(h) Handling of the stock acquisition rights in the event of the act of reorganization:
In cases where KITO CORPORATION carries out a merger (only when KITO CORPORATION is extinguished due to the
merger), absorption-type or incorporation-type company split, stock swap, or stock transfer (hereinafter collectively
referred to as the “Act of Reorganization”), KITO CORPORATION shall deliver to the holders of outstanding stock
acquisition rights, as of the effective time of the Act of Reorganization (hereinafter referred to as the “Remaining Stock
Acquisition Rights”), stock acquisition rights of a stock company (hereinafter referred to as the “Reorganized Company”)
as provided in (a) to (e) of (viii) of Article 236-(1) of the Companies Act (hereinafter referred to as the “Reorganized
Company Stock Acquisition Rights”) based on the following terms and conditions.
In this case, the Remaining Stock Acquisition Rights shall be extinguished, and the Reorganized Company shall newly
issue the Reorganized Company Stock Acquisition Rights; provided, however, that in accordance with the terms and
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conditions below this shall apply only to cases where the delivery of the Reorganized Company Stock Acquisition Rights
is stipulated in the agreement on an absorption-type / consolidation-type merger, absorption-type company split or stock
swap, or in the plan on an incorporation-type company split or stock transfer.
i) Number of the Reorganized Company Stock Acquisition Rights to be delivered:
The Reorganized Company Stock Acquisition Rights shall be respectively delivered in the same number of stock
acquisition rights that are owned by a holder of the Remaining stock acquisition rights.
ii) Type and number of the stocks of the Reorganized Company underlying the Reorganized Company Stock Acquisition
Rights:
The type shall be a common stock of the Reorganized Company, and its number shall be determined in consideration
of the terms of conditions of the Act of Reorganization and in accordance with the above (a).
iii) Amount of assets to be invested upon exercise of the Reorganized Company Stock Acquisition Rights:
It shall be, in consideration of the terms and conditions of the Act of Reorganization, the amount calculated by
multiplying the amount paid after the reorganization resulting from the adjustment of the Exercise Price as prescribed
in the above (b) by the number of stocks of the Reorganized Company underlying such Reorganized Company Stock
Acquisition Rights as determined in the above ii).
iv) Period during which the Reorganized Company Stock Acquisition Rights may be exercised:
It shall be from whichever is the later of (A) the first day of the period during which the Stock Acquisition Rights may
be exercised as provided in the above (c); or (B) the effective day of the Act of Reorganization, through the last day
of the period during which the stock acquisition rights may be exercised as provided in the above (c).
v) Conditions for exercising the Reorganized Company Stock Acquisition Rights:
They shall be determined pursuant to the above (d).
vi) Grounds and requirements for acquiring the Reorganized Company Stock Acquisition Rights:
They shall be determined pursuant to the above (e).
vii) Restrictions on acquiring the Reorganized Company Stock Acquisition Rights through transfers:
In order to acquire the Reorganized Company Stock Acquisition Rights through transfers, the approval by resolution
at the board of directors of the Reorganized Company (or “directors” when the Reorganized Company does not have
the board of directors) is required.
viii) Matters concerning the stated capital or capital reserve to be increased in cases where stocks are issued by way of
exercise of the Reorganized Company Stock Acquisition Rights:
They shall be determined pursuant to the above (g).
(i) Rounding-down of fractions resulting from exercise of the stock acquisition rights:
In cases where the stocks to be delivered to the holders of the stock acquisition rights have a fraction of less than 1
share, such a fraction shall be rounded down.
(j) Other details of the stock acquisition rights:
They shall be defined at the board of directors meeting that determines the subscription requirements for the stock
acquisition rights.
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(Appendix)
Business Report (April 1, 2013 - March 31, 2014)
1
Overview of the Company Group
(1) Business Progress and Results
In fiscal 2014, the fiscal year ended March 31, 2015, the
corporate sector in Japan continued to exhibit an appetite for
capital investment by Japanese firms while conditions throughout
North America showed positive signs of recovery in corporate
sector results. Meanwhile, China experienced a persistent
slowdown in its rate of economic growth. As a result, future
economic trends in this part of the world remain shrouded in
uncertainty. Turning to Asia, signs of stagnation began to emerge.
This is expected to dull the momentum of growth.
Under these circumstances, the Kito Group continued to carry
out its Mid-term Management Plan. Throughout the fiscal year
under review, the Kito Group continued to work on (1) expanding
its business in emerging markets, principally Asia; (2)
strengthening its product lineup; (3) promoting the globalization of
production and procurement; and (4) establishing a crane
business structure.
In fiscal 2014, the fourth year of its Mid-term Management
Plan, the KITO Group experienced mixed conditions. The operating
environment in Asia and other emerging markets together with
demand in China exhibited a greater–than–expected downturn.
On the other hand, robust results in the Americas contributed to
an overall positive performance. On August 21, 2014, Kito
Operating income
Net sales
Million yen
49,968
Ordinary income
Million yen
70th Term
71st Term
Million yen
2,361
2,026
3,423
3,395
71st Term
Net income
Million yen
4,094
4,006
41,855
70th Term
acquired all of the shares of its U.S. –based subsidiary, PEERLESS
INDUSTRIAL GROUP, INC. (“PEERLESS”). The company was then
included in the scope of KITO’s consolidation as a wholly owned
subsidiary from the third quarter of the fiscal year under review.
As a result, revenue improved year on year. Against this backdrop,
business in the Americas experienced remarkable growth. Trends
in Japan were also firm and demand remaining solid which were
mainly buoyed by healthy private–sector capital investment.
From a profit perspective, earnings declined compared with
the previous fiscal year. This was largely attributable to the
greater–than–expected downturn in profits in Asia as well as the
incidence of expenses, including temporary measures to account
for inventory valuation at the time of the PEERLESS acquisition
and the reversal of deferred tax assets in line with the decline in
the income tax rate, which were higher than estimated at the time
the Company announced its forecasts of operating results.
Accounting for each of these factors, consolidated net sales
were 49,968 million yen (+19.4% compared with the previous
fiscal year), consolidated operating income was 3,395 million yen
(-15.2% compared with the previous fiscal year), consolidated
ordinary income was 3,423 million yen (-16.4% compared with
the previous fiscal year), and consolidated net income was 2,026
million yen (-14.2% compared with the previous fiscal year).
70th Term
71st Term
70th Term
71st Term
15
The Kito Group conducts business activities on a segment
basis by location in connection with the operations of Kito
Japan:
Corporation and its consolidated subsidiaries. Business results by
segment are as presented as follows.
Net sales
Operating income
Million yen
Net sales climbed 8.6% compared with the previous fiscal
22,577
Million yen
24,514
4,726
4,194
year, to 24,514 million yen. This largely supported the continued
appetite of Japan’s private sector as well as firm demand from
American subsidiaries. Operating income also increased 12.7%
year on year, to 4,726 million yen, owing mainly to the impact of
the weak yen.
70th Term
The Americas:
71st Term
70th Term
Net sales
Operating income
Million yen
Million yen
903
21,967
In the United States, demand remained strong across a wide
744
range of industries and, in particular, the manufacturing sector on
the back of an ongoing recovery in the overall economy. Buoyed
71st Term
13,060
by contributions from PEERLESS, which was included in the scope
of the Company’s consolidation from the third quarter of the fiscal
year under review, net sales across the Americas climbed
substantially, to 21,967 million yen, up 68.2% compared with the
70th Term
71st Term
70th Term
71st Term
previous fiscal year. Strong results in the United States offset the
drop in demand for natural resources, including oil sands in
United States, which undertook the actual purchase. On this basis,
Canada indicating continued robust results across the Americas
operating income came to 744 million yen, down 17.6%
as a whole. The costs associated with the acquisition of
compared with the previous fiscal year.
PEERLESS were borne by the Company’s local subsidiary in the
16
China:
Net sales
Operating income
Million yen
With a persistent slowdown in economic growth, Chinese
8,742
Million yen
8,504
954
71st Term
70th Term
836
economy remains shrouded in uncertainty. Net sales converted to
Japanese yen came to 8,504 million yen, down 2.7% compared
with the previous fiscal year. Operating income for the period
declined 12.4% year on year, to 836 million yen.
70th Term
Asia:
Net sales
71st Term
Operating income
Million yen
Conditions throughout Asia were impacted by a slowdown in the
rate of economic growth in China. As a result, investment demand
was weak in such countries as Thailand and Indonesia where growth
was expected. At the same time, demand by Japanese companies
operating in Thailand was subdued owing mainly to the impact of
prolonged political instability. Taking into consideration each of these
factors, net sales in Asia totaled 5,471 million yen, down 17.7%
compared with the previous fiscal year. On the earnings front, the
Kito Group incurred an operating loss of 374 million yen compared
with operating income of 459 million yen recorded in fiscal 2013.
This substantial deterioration in profit was caused by a variety of
factors, including an increase in fixed expenses following the start of
Europe:
6,649
Million yen
459
5,471
-374
70th Term
71st Term
70th Term
71st Term
operations at a second factory in Thailand last fiscal year and the
downturn in profitability of certain large–scale projects.
Net sales
Operating income
Million yen
Demand was strong and net sales in Europe increased 9.5%
compared with the previous fiscal year, to 1,692 million yen,
1,546
1,692
Million yen
45
operating income declined 79.7% year on year, to 9 million yen.
9
70th Term
71st Term
70th Term
71st Term
17
(2) Capital investment
The total amount of capital investment in the consolidated
fiscal year ended in March 2015 was 1,408 million yen,
comprising primarily the seismic strengthening works and the
renewal of manufacturing facilities.
(3) Financing
In the consolidated fiscal year ended in March 2015, the
Company financed 10,110 million yen in the form of longterm loans payable.
(4) Status of Acquisition or Disposal of the Shares, Other
Interests, or Stock Acquisition Rights of other
Companies
KITO Americas, Inc., a consolidated subsidiary of the
Company, acquired all of the shares of U.S.-based Peerless
Industrial Group, Inc. (“Peerless”) on August 21, 2014. As a
result, Peerless, as well as Peerless subsidiary Peerless Chain
Co., Inc. (“Peerless Chain”) and Peerless Chain subsidiaries,
SCC JAPAN GODO KAISHA and SCC - Security Chain (Europe)
Handels-GmbH, became consolidated subsidiaries of the
Company.
(5) Corporate challenges to be addressed
KITO Group will further strengthen its business operations
in the global market as stated in its Mid-term Management
Plan that carries through to the fiscal year ending in March
31, 2016. The following four points have been identified as
top priorities in order to achieve the level of corporate quality
and size necessary to survive against global competition.
i
Manufacture trustworthy products: Identify and
thoroughly address the causes of non-conforming
products; establish a practice of preventive measures
implementations
We will provide products and services that enhance
the “life-cycle value” of customers (provide long-term
benefits) to ensure that our products and services
stand out from those of other companies. We will
focus on strengthening the quality control and quality
assurance system in order to maintain and improve
the level of quality—even during a period of rapid
sales network expansion.
ii Put forward product strategies and promote regional
business strategies as well as manufacturing
strategies
We will not only expand our capacity to manufacture
cranes at sites where demand is prevalent, but also
strengthen the engineering function and service
system. In this manner, we will improve the skills
necessary to provide solutions. In addition, we will
intensify the development of wire rope hoist products
intended for the global market.
iii Undertake concrete measures in a bid to establish an
optimal global supply chain
We will address the need for production cost
decentralization from the viewpoint of mitigating
currency risks (exchange rate risks). We will add the
Americas and Asia to our existing major production
bases of Japan and China in order to establish a
decentralized four–region production system.
Moreover, we will also work to optimize our
manufacturing structure and systems for chains,
principal components for hoist equipment, centering
on Japan and the United States.
18
iv Strengthen our ability to nurture global business
leaders and establish new global management
approaches
We will unify members with diverse cultural
backgrounds in order to exercise teamwork and
develop human resources that can drive forward
business operations in the global market. In addition,
we will enhance corporate governance in an effort to
establish a sound and efficient business management
system.
We will endeavor to reinforce the Group’s IT
platform and build a robust Group–wide IT
infrastructure with a view to further expanding our
overseas business.
Furthermore, in an environment wherein we are
expanding our regional business affairs in a variety of forms,
we will strive to ensure that the core Kito philosophy will
expand and penetrate into every area and aspect to become
the Group’s common philosophy. We beseech the continued
understanding and support of our shareholders in these
endeavors.
19
(5) Changes in assets and earnings
Net sales
Million yen
49,968
Million yen
4,094
41,855
33,282
Net income
Ordinary income
Million yen
2,361
2,026
3,423
35,501
2,440
1,023
1,572
662
68th Term 69th Term 70th Term 71st Term
68th Term 69th Term 70th Term 71st Term
68th Term 69th Term 70th Term 71st Term
Net income per share
Total assets
Net assets
Yen
Million yen
Million yen
63,183
91.25
25,626
22,003
77.52
41,108
31,510
39.71
34,760
15,878
18,012
25.72
68th Term 69th Term 70th Term 71st Term
68th Term 69th Term 70th Term 71st Term
68th Term 69th Term 70th Term 71st Term
(In millions of yen, except per share amounts)
Item
Net sales
Ordinary income
Net income
Net income per share
Total assets
Net assets
68th Term
69th Term
70th Term
April 1, 2011
through
March 31, 2012
April 1, 2012
through
March 31, 2013
April 1, 2013
through
March 31, 2014
33,282
1,572
662
25.72 yen
31,510
15,878
35,501
2,440
1,023
39.71 yen
34,760
18,012
41,855
4,094
2,361
91.25 yen
41,108
22,003
71st Term
(FY2014)
April 1, 2014
through
March 31, 2015
49,968
3,423
2,026
77.52 yen
63,183
25,626
(Notes) 1. Net income per share is calculated based on the average number of shares outstanding during the period.
2. Amounts less than one million yen, except per share amounts, are rounded down.
3. With the effective date of April 1, 2013, the Company split its shares at a ratio of 100 shares per share of common stock, and the effective date of October
1, 2014, the Company split its shares at a ratio of 2 shares per share of common stock. For this reason, the Company has calculated net income per share
on the assumption that the splitting of its shares occurred at the beginning of the 68th term.
20
(6) Important information on parent company and subsidiaries
1) Parent company
Not applicable
2) Subsidiaries
Company name
Capital
Percentage of
voting rights
Description of principal business
Consolidated subsidiaries
Holding company for the purpose of investing in Harrington Hoists, Inc.
Har Ki, Inc., and PEERLESS INDUSTRIAL GROUP, INC.
KITO Americas, Inc.
(Thousand USD)
20,000
100.0%
Harrington Hoists, Inc.
(Thousand USD)
9,500
*100.0%
Manufacture and sales of the Company’s products
Har Ki, Inc.
(Thousand USD)
1
*100.0%
Managing trademark rights and intellectual property rights concerning the
products of Harrington Hoists, Inc.
PEERLESS INDUSTRIAL GROUP, INC.
(Thousand USD)
20,000
*100.0%
Holding company for the purpose of investing in Peerless Chain Co., Inc.
Peerless Chain Co., Inc.
(Thousand USD)
20,000
*100.0%
Manufacture and sale of chains and chain-related products
KITO CANADA INC.
(Thousand CND)
800
100.0%
Sales of the Company’s products
KITO DO BRASIL COMERCIO DE
TALHAS E GUINDASTES LTDA
(Thousand BRL)
12,971
100.0%
Sales of the Company’s products and cranes
Kito Europe GmbH
(Thousand EUR)
3,000
100.0%
Sales of the Company’s products
SCC–SECURITY CHAIN (EUROPE)
HANDELES–GMBH
(Thousand EUR)
25
*100.0%
Sales of tire chains and other products
SCC JAPAN GODO KAISHA
(Thousand JPY)
10,000
*100.0%
Sales of tire chains and other products
JIANGYIN KITO CRANE CO., LTD
(Thousand USD)
26,000
90.0%
KITO HOISTS & CRANES (SHANGHAI)
CO., LTD.
(Thousand USD)
7,000
*94.0%
KITO TAIWAN CO., LTD.
(Thousand NTD)
76,500
55.0%
4
Manufacture and sales of wire-rope hoist products, etc. and manufacture of
components of the Company’s products
Sales of the Company’s products
Sales of the Company’s products and cranes
21
Company name
Capital
Percentage of
voting rights
Description of principal business
KITO KOREA CO., LTD.
(Thousand KRW)
4,453,080
93.3%
Manufacture and sales of the Company’s products
SIAM KITO CO., LTD.
(Thousand THB)
100,000
*80.0%
Manufacture and sales of the Company’s products
SUKIT BUSINESS CO., LTD.
(Thousand THB)
100
82.8%
KITO PHILIPPINES, INC.
Thousand USD)
13,989
100.0%
Manufacture of components of the Company’s products
PT. KITO INDONESIA
(Thousand IDR)
10,472,480
100.0%
Sales of the Company’s products and cranes
(Thousand SGD)
4,460
100.0%
Holding company for the purpose of investing in SIAM KITO CO., LTD.
(Thousand INR)
13,500
100.0%
Manufacture and sales of cranes and wire rope hoist products, etc.
KITO HOISTS & CRANES ASIA
PTE. LTD.
ARMSEL MHE PVT. LTD.
Holding company for the purpose of investing in SIAM KITO CO., LTD.
(Notes) 1. Harrington Hoists, Inc. is a wholly owned subsidiary of KITO Americas, Inc.
2. Har Ki, Inc. is a wholly owned subsidiary of KITO Americas, Inc.
3. KITO Americas, Inc. acquired all of the shares of U.S.-based PEERLESS INDUSTRIAL GROUP, INC. on August 21, 2004. As a result, it became a consolidated
subsidiary of the Company.
4. Peerless Chain Co., Inc. is a wholly owned subsidiary of PEERLESS INDUSTRIAL GROUP INC.
5. SCC JAPAN GODO KAISHA and SCC - Security Chain (Europe) Handels-GmbH are subsidiaries of Peerless Chain Co., Inc.
6. All shares of KIMA REALTY, INC. were sold on October 28, 2014.
7. Investment ratio with (*) indicate investment by subsidiaries of the Company.
3) Progress and results of the merger
There are 20 subsidiaries included in the scope of consolidation of the Company.
Results of the consolidated fiscal year ended in March 2014 are stated in “1. Overview of the Company Group (1) Business
Progress and Results.”
22
Consolidated financial statements
Consolidated balance sheets
Accounts
Consolidated fiscal year 2014 (As of March 31, 2015)
Amounts
Accounts
Assets
Current assets
Cash and deposits
Million yen
Liabilities
40,478
9,792
Notes and accounts receivable
12,593
Merchandise and finished goods
11,638
Current liabilities
Notes and accounts payable
Short-term loans payable
Corporate bonds redeemable within one year
Current portion of long-term loans payable
Accrued expenses
Work in process
1,798
Raw materials and supplies
1,669
Deferred tax assets
1,334
Provision for product warranties
Other
1,707
Provision for sales returns
Allowance for doubtful receivables
Noncurrent assets
Property, plant and equipment
(55)
22,703
12,161
Buildings and structures
4,901
Machinery, equipment, and vehicles
4,797
Land
1,658
Construction in progress
270
Other
532
Intangible assets
Net defined benefit liabilities
Deferred tax liabilities
Other
Total liabilities
37,557
Net assets
Shareholders’ equity
25,626
Total liabilities and net assets
63,183
38
Other
961
Total assets
Provision for directors' retirement benefits
Total net assets
1,532
532
Bond issuance cost
Long-term loans payable
Minority interests
4,407
Deferred tax assets
Deferred assets
Other
Noncurrent liabilities
1
590
Investment securities
Provision for bonuses
1
4,012
Software
Investments and other assets
Income taxes payable
17,093
6,113
1,689
1,000
2,629
2,750
1,013
328
55
402
1,109
20,464
16,025
181
2,431
1,619
205
22,307
3,976
5,219
13,477
(367)
2,269
1
(56)
2,643
(318)
30
1,020
9,009
Goodwill
Other
Amounts
63,183
Capital stock
Capital surplus
Retained earnings
Treasury stock
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurement of defined benefit plans
Subscription rights to shares
Note: Amount less than one million yen are rounded down.
23
Consolidated statements of income
Consolidated fiscal year 2014 (From April 1, 2014 to March 31, 2015)
Accounts
Million yen
Amounts
Net sales
49,968
Cost of sales
33,143
Gross profit
16,824
Selling, general, and administrative expenses
13,429
Operating income
Non-operating income
Interest income
Dividends income
3,395
371
40
0
Foreign exchange gains
112
Other
217
Non-operating expenses
343
Interest expenses
239
Other
103
Ordinary income
Extraordinary income
Gain on sale of noncurrent assets
3,423
347
347
Extraordinary loss
99
Impairment loss
99
Income before income taxes
3,671
Income taxes – current
1,845
Income taxes – deferred
(232)
Income before minority interests
Minority interests in income
Net income
2,057
31
2,026
Note: Amount less than one million yen are rounded down.
24