Annual Report 2017 Open up. Sense more.

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1 Annual Report 217 Open up. Sense more. 217 Wacom Co., Ltd. Wacom is a trademark of the Wacom Company, Ltd. All rights reserved. All other company names and product names are trademarks or registered trademarks of their respective owners. Certification Authority : BVC Applied Offices : Head Office, Tokyo Branch ISO91 Certification Number : ISO141 Certification Number :

2 To Our Shareholders I am pleased to present Wacom s Annual Report for the fiscal year ended March 31, 217, our 34th fiscal year. Based on our vision of A world alive with creativity, we strive to lead the field of digital expression, ranging from video game design, movie production, industry design and image editing to a new digital stationery for capturing and sharing ideas anywhere. We also aspire to serve the broader realm of human creativity through paperless workflow and security with digital ink and pen technology. Business results in our 34th fiscal year ended March 31, 217 During our 34th fiscal year, we saw rapid changes and the emergence of new business fields such as IoT and VR/AR along with the penetration of mobile products, cloud computing, and social media in the IT industry. Under this environment, we have taken the lead in the pen tablet market for creative users by developing nextgeneration digital pen technology and reinforcing our product lineup. However, in the Brand Business segment, sales declined due to the strong yen, changes in the competitive environment, a decrease in demand during product life cycle transitions, and the partial delay of a new product launch. In the Technology Solution Business segment, business activities were impacted by the recall of the Samsung Galaxy Note 7 smartphone. Overall sales declined due to a decrease in shipments for smartphones and the strong yen although production of the Active ES (Active Electrostatic) pen solution increased alongside expansion in the customer base. Under these circumstances, the consolidated net sales for the fiscal year declined compared to the previous fiscal year. We posted an operating loss mainly due to the sales decrease and the increase in expenses associated with our global IT infrastructure installation. In consideration of our latest growth projections and the difficulty we anticipate in achieving the mediumterm growth goals by the fiscal year ending March 219, we have reviewed the scale and scope of the IT infrastructure investment plan. In light of this, we have posted extraordinary losses including impairment losses of 4,224 million yen for the period, mainly for the associated portion of software in progress in intangible assets. As a result, for the fiscal year, consolidated net sales decreased 8.1% to 71,314 million, and we recorded an operating loss of 1,171 million, an ordinary loss of 87 million, and net loss attributable to owners of the parent company of 5,534 million. Business outlook and new initiatives For our 35th fiscal year ending March 31, 218, we forecast that the global economy will maintain a trend of modest growth. However, we are also cognizant of concerns that trade protectionism, political instability in the EU, and geopolitical risks in the Middle East and Asia may have a negative impact on the global economy, possibly resulting in continued instability in foreign exchange markets. In the IT industry, penetration of mobile products, cloud computing, big data, AI, and social media are expected to lead to the emergence of a new industrial platform. We will respond to these rapid changes, while also taking on new initiatives for future growth. In the core Creative Business of our Brand Business segment, we will leverage fullyear availability of new products launched during the 34th fiscal year. We will build solid relationships with customers and communities and start expanding 3D (VR/AR, CAD, Multimedia, etc.) in the enterprise market. In Consumer Business, we will promote the Bamboo brand in a new category of Digital Stationery by enhancing product lineup targeting a broad range of customers. In Business Solutions, we plan to expand the enterprise sales through increased collaboration with partners by enhancing workflow efficiency and data security through the use of digital signatures. By developing sales in these ways, we expect to restore sales growth in the Brand Business segment. In the Technology Solution Business segment, we will drive the adoption of our EMR(Electro Magnetic Resonance) and Active ES pen technologies as the de facto standard in the digital pen market. We will also develop and expand business oppor tunities in the education market, as well as contribute to the development of the digital stationery market through collaboration with industry partners. In smartphones, Samsung is in transition to its nextgeneration Samsung Galaxy Note model, and we estimate weaker sales due to the absence of shipments of existing models. Based on the above, we expect that sales in the Technology Solution Business segment will remain at the same level as the previous year. In Corporate Functions, we aim to recover profitability through optimization of our global organization and cost structure. Moreover, we established the Digital Stationery Consortium, Inc. in September 216 to promote WILL (Wacom Ink Layer Language) as a digital ink standard regardless of OS and expand the digital stationery market. Based on our outlook and initiatives for the 35th fiscal year, we expect 76,8 million in consolidated net sales, 1,8 million in operating profit, 1,74 million in ordinary profit, and 1,13 million in net profit attributable to shareholders. The assumed average foreign exchange rates are 11 per USD and 118 per euro. MediumTerm Business Plan In April 215, we announced the Strategic Business Plan SBP 219 reflecting changes in IT market trends, our business environment, and our global business model. However, our results in the fiscal year have been well below the growth targets for sales and profits set out in our Strategic Business Plan. Under these circumstances, we have resolved to shift our focus to profitability by prioritizing specific business strategies in line with our business resources, establish a cost structure that is better aligned with revised mediumterm sales growth, and build a more robust organizational structure to improve the quality of management decisionmaking in the context of a changing business environment. With this background, to ensure the mediumterm growth of corporate value, we aim to restore profitability through groupwide measures to optimize productivity and ensure cost structure improvements, as well as by addressing corporate challenges. We aim to build a foundation for sustainable growth by leading the market for advanced digital pen and ink technology. In order to further evolve our business model in growing markets such as IoT, AR, VR, 3D printing, AI, and security, we will form a new management team and develop new growth strategies. Dividend policy Our dividend policy is to ensure appropriate returns to investors while maintaining a solid financial foundation for growth. For the fiscal year ended March 31, 217, we paid a dividend of 6. per share. In the medium term, we plan to maintain a payout ratio of at least 4%. Intuitive user interface for human creativity In a world connected by digital technology, intuitive user interface solutions have become a driver for human creativity. We will strive to further increase our corporate value and management clarity as a global company. Your support and understanding remain an essential factor in our success. On behalf of Wacom teams worldwide, please allow me to express my sincere appreciation for your continued support. Masahiko Yamada President & CEO Our Vision 1 2

3 Wacom Now Our Mission A diverse new product lineup addressing the demanding needs of creative users We have taken on the task of strengthening our product offerings for professional creatives. The new generation Wacom Pro Pen 2 with markedly enhanced performance was adopted for Wacom Cintiq Pro creative displays and Wacom MobileStudio Pro with Windows OS. The Wacom Intuos Pro also adopted the Wacom Pro Pen 2 and its Paper Edition enables users to seamlessly bridge analogbased sketching on paper and digitalbased finishing process on a PC. Wacom Intuos Pro In the Brand Business, we have revamped offerings for creative professionals by launching products featuring the nextgeneration digital pen and 4K liquid crystal displays, changes which contributed to sales in the second half of the previous year. The new digital stationery products for general consumers have been well received, with notable exposure on television and in printed media. In the Technology Solutions Business, EMR digital pen technology expanded its base in the education market and Active ES technology increased in shipment of tablet devices. Wacom also hosted community events across the globe which attracted creative users to try out new products. We gained a wealth of valuable feedback and opinions from guests, making the events even more meaningful for both Wacom and the creative community. Wacom Cintiq Pro Expanding smart digital stationery products to share ideas seamlessly and digitally A consortium to promote WILL and foster growth of the digital stationery market Lenovo YOGA BOOK Wacom MobileStudio Pro As tablet devices for education see increasing demand, Wacom leads the industry with total digital pen solutions Wacom s unique digital stationery Bamboo Smartpad comes in Slate and Folio types, both of which are offered in A4 and A5 sizes. Notes and ideas handwritten on normal paper using the supplied ballpoint pen are immediately digitized, and can be edited, shared on the cloud, and even converted into text or sorted out using the dedicated app. In September 216, the Digital Stationery Consortium, Inc. was established to foster growth of the digital stationery market and promote widespread adoption of WILL digital ink technology. Traditional pens are a central part of everyday life, and combining them with the power of digital technology makes it easier to be creative and improve work and study efficiency. Wacom strives to further develop the digital stationery market in collaboration with business partners and through an open ecosystem, making best use of WILL. Montblanc Augmented Paper SAMSUNG Chromebook Plus Various types of Chrome OSbased tablet devices have been launched amid a growing education market. Lenovo s YogaBook uses Wacom pen technology to immediately convert user drawings on paper into digital representations on screen. Montblanc s digital stationery device Augmented Paper also allows digital handwriting and drawings to be quickly captured on mobile devices. All of these devices have adopted Wacom s proprietary EMR technology. Wacom s another digital pen solution, Wacom Active ES, has also seen increased shipments, being adopted by global IT players around the world such as Toshiba, HP, Dell and Huawei. Bamboo Slate Connected Ink (Las Vegas, USA) 3 4

4 Wacom People & Events In fiscal year 216, Wacom exhibited at major events in the world and promoted Wacom brand awareness, leading to market expansion. In addition, Wacom people enthusiastically engaged in our global operations utilizing their personality and faculty. Wacom hosted Inkathon events of WILL enabled apps development competition, and promoted digital ink. In May 216, Wacom exhibited at CES Asia 216 to spread Wacom brand and promote digital ink. Wacom exhibited new mobile product Wacom MobileStudio Pro at New York Comic Con for creators held in October 216 in New York. Wacom demonstrated new system for embedding brainwave data into digital Ink, and digital ink concept of taking handdrawn images from paper to 3D digital ink onto VR, at South Southwest interactive event held in March 217 in Austin, USA. In September 216, Wacom exhibited and introduced a new digital stationery products at IFA 216 (consumer electronics show) held in Berlin, Germany. Wacom held Connected Ink events in Shanghai (May, 216), Berlin (September, 216), Tokyo (October, 216) and Las Vegas (January, 217), to establish a digital ink standard and promote the spread of digital stationery. Wacom young engineers made presentations of their research and development theme for the future of Wacom at company technological event. Wacom hosted pen tablet new product Wacom Intuos Pro launch events in Germany, USA and Japan. We demonstrated new evolving features and technology for professional creators and media. 5 6

5 Business Lines Brand Business The Brand Business segment covers Wacombranded hardware and software products and solutions, and consists of three business categories based on customer needs and business characteristics: highend graphics; digital stationery products for casual creative activities in everyday life; and electronic document workflow to ensure efficiency and highlevel security. Wacom is developing, manufacturing, and marketing user interface solutions with a view to meeting creative demands in multiple fields. Under the global organization, we organized 6 Business Units by category of users. This flexible global organization is designed for future business growth by addressing different market demands in a more orderly and responsive manner. Creative Business Formats and technology in professional digital imaging are constantly changing from HD to 4K and 2D to 3D and beyond with Virtual Reality (VR). To address the inherent needs associated with this, Wacom has been launching new products with Wacom Cintiq Pro and Wacom MobileStudio lines, utilizing the nextgeneration digital pen with four times more pressure sensitivity (8,192 levels) and enhanced responsiveness. The Wacom Intuos Pro also comes with the nextgeneration digital pen and the Intuos 3D was newly added to complement the pen tablet s entry line. Basic Framework of Global Organization Global Business Units (BU) CORPORATE STRATEGY DRIVER Creative Business Creative Business Engineering Solution Marketing Center BUSINESS DRIVERS Business Units Enabling Functions Design Center Consumer Business Platforms & Applications Engineering & QA Business Solution Technology Solution Operations Brand Business Serves the passion of professional and consumer creativity Wacom Intuos Pro, Intuos, Wacom MobileStudio Pro, Wacom Cintiq Pro Consumer Business Makes daily lives more creative and enjoyable Digital Stationery, Bamboo Folio, Bamboo Slate, Bamboo Stylus Business Solution Serves society by providing innovative solutions STU (Signature Tablet), DT (Display Tablet) series, etc. Technology Solution Business Platforms & Applications Provides technology, apps and platforms WILL, Wacom Cloud, Bamboo Paper, sign pro PDF, etc. Wacom Cintiq Pro Wacom MobileStudio Pro Cintiq 27QHD touch UI technology solutions for mobile systems CORPORATE FUNCTIONS EMR, AES Components & modules (feel TM ) Technology Development, Legal, IP, Internal Audit, Accounting, Treasury, HR, Corporate Communication, Corporate Administration, Investor Relations, etc. Other Business Engineering solution ECAD series Intuos Intuos 3D Wacom Intuos Pro 7 8

6 Consumer Business Technology Solution Business Technology Solution We supply our digital pen (EMR and Active ES technologies) and multitouch solutions to our OEM customers, powering various mobile products running on Android, Windows or Chrome operating systems such as smartphones, tablets, PCs and ebooks, as well as digital stationery and music score devices. Wacom feel IT technologies is Wacom s unique user interface solution to realize handwritten input with digital pen through a natural, intuitive multitouch operation. Bamboo Slate We offer digital stationery solutions under the Wacom brand with Bamboo Smartpads which digitize handwritten ideas, and various types of styli for mobile products. The Wacom Cloud service offers unique digital ink experiences which enable users to capture, edit, send and share digitized ideas via smartphones and tablets. The age of digital stationery is coming our way. Business Solution Bamboo Stylus Bamboo Folio Lenovo ThinkPad P4 Yoga Steadtler Noris digital for Samsung Digital pens are playing increasingly significant roles beyond just operating smartphones and tablets. They are now used to create and manipulate content on mobile devices. Wacom is taking the lead in collaborations with industry partners by providing its extensive expertise in a wide variety of pen and touch technology solutions. Wacom also advocates the Universal Pen Framework initiative to ensure wider digital pen interoperability and has started to supply pen cartridges which enable stationery manufacturers to tap into the digital stationery trend. Steadtler, the traditional German stationery brand, was the first to adopt the pen cartridge by Wacom. The evolution of computers and network infrastructure has advanced paperless operations, accelerating the digitization of documents in numerous fields. Digitization paves the way for a wide range of applications, including corporate document management, product demonstration and credit card signing in stores, contract signing at banks, and electronic chart notation in clinics and hotel checkin kiosks. Highlevel security is indispensable to the appropriate management of digitized documents. Wacom s LCD signature tablets play a key role in connecting customers and computer systems in different business situations. With the Tokyo Olympics and Paralympics taking place in 22, demand from hotels is rising. As electronic commerce spreads further and education infrastructure goes digital, we believe there is huge potential in this business. STU54 DTK1651 DTU1141 Platforms & Applications Wacom established the Digital Stationery Consortium, Inc., to promote the evolution of the digital stationery market in collaboration with partners, and is providing customers with value that transcends hardware through unique apps and services leveraging WILL (Wacom Ink Layer Language), the technology derived from its longstanding expertise in digital ink. Other Business Engineering Solution ECAD is a series of computeraided design (CAD) applications used in factory automation, mechatronics, robotics and industry equipment. ECAD leverages Wacom s 3 years of expertise to support thousands of industry customers in solving their critical design challenges from the design and development stage through to production. ECAD DCX 9 1

7 Wacom Global Our Global Operations Since its foundation, Wacom has extended its global operations to Germany and the United States, followed by China, Korea, Australia, Hong Kong, Singapore, Taiwan, and India. Wacom s mission is to digitize everything now done in pen and ink, and our ability to facilitate and support this movement with useful apps and services is key to its success. In this column, we would like to introduce Faik Karaoglu, Senior Vice President for Platforms & Applications BU. Net Sales by Subsidiaries Unit : Millions of yen Unit : Thousands of USD Unit : Thousands of EURO Unit : Thousands of CNY What is your team s role and how is it organized to fulfill your mission? The Platforms & Applications (P&A) BU s mission is to build Wacom s ecosystem for digital ink, leveraging WILL (Wacom Ink Layer Language) and connecting the ecosystem with partners activities. To facilitate this effort, we have been hosting events like Connected Ink to promote development of the digital stationery Faik Karaoglu Senior Vice President Platforms & Applications BU market and Inkathon (Ink + Hackathon), an app development competition. We also collaborated with partners to establish the Digital Stationery Consortium, Inc., for which Wacom serves as a board member. Our goal is to offer our customers unique value propositions based on hardware, software and services. What is unique about your team s activities, and what challenges do you face? Strong customer relationships and interactions are key to delivering customercentric products and services. All of this is based on our hardware, software and services in combination with our partners which are coming from corporate environments, startup organizations, and developer communities. What is your team motto and how would you characterize your working style? Our motto is certainly: customer first and connecting the dots for an E2E (EndtoEnd) customer experience. I would describe our working style as agile, pragmatic and executionoriented. How do you manage your team and partners? The P&A team and our partners are part of the same ecosystem. Our principles are trust, respect and passion for customers with the goal of growing and learning together. Delivering the best results is a key driver for our team. What does the word innovation mean to you? I would define innovation as thinking out of the box with no limitations, and characterize it as a daily motivator in my job. Innovation is the result of bringing together creativity and the best people in the business. Valuable ideas are coming from within and outside of Wacom. The perfect mix of Wacom s own technology and interaction with partners will be extremely important. Customers, in particular, are an important source of our innovation. In order to keep the innovation going (both internally and with external collaborators), we established the Wacom Innovation Hub in May 217. Inkathon 216 (Israel) 13, ,457 1,USD 15,631 Americas (North and Latin America) Technology Solution Business 26, % 13,88 1,USD 13, % 123,999 1,USD Net Sales by Business 71,314 million 14,532 14,791 1,EURO 14,845 Europe Asia/Oceania Japan (EMEA) 112,154 1,EURO 13,53 Brand Business 43, % 19,349 1,EURO 8,72 3,799 Europe 18.3% 214,126 Americas 19.% 1,CNY 11,24 5,438 Asia/Oceania 15.1% 288,15 1,CNY 1,85 5, ,976 1,CNY The total sales of subsidiaries in Asia/Oceania. The figures of sales in China are shown in () as a part of sales in Asia/Oceania. Net Sales by Subsidiaries 37,49 3,277 35,888 27,974 33,936 26,758 The figures of sales in the Technology Solution Business are shown in () as a part of Sales in Japan. Japan 47.6% (Technology Solution Business 37.5%) 11 12

8 Our Team Corporate Governance Wacom made the transition to a Company with an Audit Committee in June, 215. The new Board of Directors comprises ten directors, three of whom are Audit Committee members. The Board of Directors meetings are held once a month to make prompt, appropriate decisions regarding overall management, including reviewing management policies, examining the progress of business operations, and general business management and supervision. Our group Chief Executive Officer (CEO) has been appointed as President of the Board and new Executive Vice Presidents (EVP) have been introduced to ensure the smooth running of our business in response to changes in the business environment. The group CEO and EVPs attend Executive Committee meetings once a month to pragmatically review the progress of business plans and individual issues and take measures where necessary. In addition to Board meetings, Audit Committee members attend other important meetings to monitor the business execution of directors. The Audit Committee also sets the audit plan and policy for the fiscal year, which is discussed with the group CEO. To ensure a highly transparent and fair management system, we have defined the term of office of nonaudit Committee directors to one year, and further clarified their management responsibilities to shareholders. The Board of Directors and Executive Vice Presidents / Corporate Governance as of June 24, 217 Board of Directors (From the left) Wataru Toyoda (Outside Director, Audit Committee Member) Takashi Kamura (Outside Director, Audit Committee Member) Yukio Usuda (EVP, Corporate Strategy) Toru Ando (EVP, CFO) Shigeki Komiyama (EVP, Business Solution BU and Engineering Solution BU) Masahiko Yamada (President & CEO) Nobutaka Ide (EVP, Technology Solution BU and Platforms & Applications BU) Sadao Yamamoto (CTO) Yasuyuki Fujishima (Outside Director) Haruo Mizuno (Outside Director, Audit Committee Member) Executive Vice President Yuichi Inada (Engineering & QA) Robert Marlinghaus (HR) Tom Lam (China operation) Execution of Operations, Audit, and Internal Control Systems as of June 24, 217 Election/dismissal Election/dismissal Recommendation Nominating Committee 5 Directors (including 4 Outside Directors) Group CEO Human Resource Committee Policy Process and Controls Committee Compliance and Risk Committee Report Wacom Speakup Line Notice Ordinary Shareholders Meeting Board of Directors 1members (including 4 Outside Directors) Audit Committee 3 members(including 3 Outside Directors) Report Employee Assessment Accounting Audit Dismissal Cooperation Report Executive Committee Business Unit Entity Audit Internal Audit Election/dismissal Accounting Auditors Cooperation Notice The Board of Directors Biographies Masahiko Yamada March 31, ,768, Shigeki Komiyama March 28, ,8 Sadao Yamamoto April 13, , Toru Ando November 12, 1965 Nobutaka Ide May 19, 197 Yukio Usuda December 8, , April, 1986 June, 1996 April, 1999 June, 23 April, 24 June, 24 April, 215 March, 24 June, 25 April, 21 April, 215 March, 1987 Joined Wacom Co., Ltd. April, 1998 General Manager of Basic Development of ESD June, 1999 Executive Director June, 24 Executive Director, Chief R&D Officer April, 215 Executive Director, Chief Technology Officer (current position) August, 25 November, 21 September, 211 June, 212 July, 215 August,215 June, 216 April, 1995 August, 213 April, 215 July, 215 April, 217 June, 217 April, 1991 July, 24 January, 25 April, 29 April, 215 April, 217 June, 217 Name / Date of birth / Number of Shares Owned as of June 24, 217 / Brief of Biography Joined Wacom Co., Ltd. Director, Division Manager of Electronic Systems and Devices (ESD) Executive Director, Division Manager of ESD Executive Director, Senior Executive Officer Executive Vice President, Chief Operating Officer President & CEO President & group CEO (current position) Joined Wacom Co., Ltd. as Executive Officer of Global Marketing and Sales Executive Director, Executive Officer of Global Marketing and Sales Executive Director, Executive Officer of AsiaPacific Region Executive Director, EVP, Business Solution Business Unit and Engineering Solution Business Unit (current position) CFO, GE Mortgage Insurance Corporation, Japan Branch CFO, Allianz Fire & Marine Insurance Japan Ltd. Director & CFO, Allianz Fire & Marine Insurance Japan Corporate Officer & CFO, AIU Insurance, Japan Branch Joined Wacom Co., Ltd. EVP & CFO Executive Director, EVP & CFO (current position) Joined Sharp Corporation Joined Wacom Co., Ltd. General Manager, Technology Marketing Department, Component Business Unit Vice President, Technology Solution Business Unit Senior Vice President, Technology Solution Business Unit EVP, Technology Solution Business Unit and Platforms & Applications Business Unit (current position) Executive Director (current position) Joined Toshiba Corporation Joined Matsushita Toshiba Picture Display Co., Ltd. Joined Wacom Co., Ltd. General Manager, Global Marketing and Sales Division, Business Administration Office Vice President, CEO Office EVP, Corporate Strategy (current position) Executive Director (current position) Yasuyuki Fujishima March 25, , Wataru Toyoda March 4, 1952 Haruo Mizuno October 16, 1943 July, 1969 Entered the Ministry of International Trade and Industry July, 1997 Joined the Policy Board of the Bank of Japan and served as a delegate of the Economic Planning Agency July, 1998 Entered the Ministry of Foreign Affairs as Ambassador of the Republic of Panama August, 21 Joined Nissho Iwai Corporation (currently Sojitz Corporation) as Advisor June, 22 Managing Executive Officer, Nissho Iwai Corporation November, 22 Joined Wacom Co., Ltd. as Outside Director (current position) April, 23 Senior Managing Executive Officer, Nissho Iwai Corporation April, 24 Senior Managing Executive Officer, Sojitz Corporation October, 25 Representative Director and Senior Managing Executive Officer, Sojitz Corporation April, 28 Executive Vice President, Sojitz Corporation April, 21 Advisor at Sojitz Corporation August, 21 President & CEO, Mutual Service Aid Guarantee Corporation (current position) June, 216 Outside Director, Nippon Kayaku Co., Ltd (current position) April, 1976 February, 1981 April, 1997 November, 1998 June, 2 December, 21 June, 24 September, 29 June, 212 June, 217 Entered National Tax Administration Agency Finance Officer and Investigator, Tokyo Regional Taxation Bureau Joined AIU Insurance Company, Ltd. Joined Oracle Corporation Japan General Manager, Accounting Department Joined Gateway Japan, Inc., Controller CFO, CYBIRD Co., Ltd. CFO, Administrative Management Division, SAS Institute Japan Ltd. President, Nido Co., Ltd. CFO, Neusoft Japan Co. Ltd. Audit and Supervisory Board Member, JustSystems Corporation Outside Director (Audit Committee Member), Wacom Co., Ltd. (current position) Note: Wacom made the transition to a Company with an Audit Committee in accordance with the resolution on changes to the Articles of Incorporation at the Ordinary Shareholders Meeting on June 26, 215. Mr. Yasuyuki Fujishima, Mr. Wataru Toyoda, Mr. Haruo Mizuho, and Mr. Takashi Kamura are independent outside directors. The term of office of Audit Committee members is two years from the Ordinary Shareholders Meeting on June 23, , Takashi Kamura November 16, 195 April, 1967 Joined Nippon Remington Univac Kaisha, Ltd. (currently Nihon Unisys, Ltd.) April, 1989 General Manager of Documentation Division July, 1999 Director July, 22 Counselor June, 24 Statutory Auditor, Wacom Co., Ltd. June, 215 Outside Director (Audit Committee Member) (current position) April, 1975 April, 1977 April, 1985 April, 2 June, 22 June, 215 Appointed as a legal apprentice Appointed as a judge Registered as an attorneyatlaw Established Kamura Law Office (currently Urbantry Law Office) Lecturer at the Graduate School at Meiji University Joined Wacom Co., Ltd. as Outside Auditor Outside Director (Audit Committee Member) (current position) 13 14

9 Financial Section FiveYear Summary Wacom Co., Ltd. and its subsidiaries Overview of Business Performance Wacom Co., Ltd. And Its Subsidiaries 15 For the fiscal year: Net sales Gross profit Operating profit Profit before profit taxes Net profit Comprehensive profit At fiscal yearend: Cash and deposits Total assets Total net assets Net profit per share: Basic Diluted Equity ratio(%) Return on equity (%) The number of employee(person) 61,68,78 24,235,314 7,915,51 7,545,85 4,77,485 5,87,1 21,596,429 5,124,193 29,211, ,615,39 29,931,13 8,663,92 8,268,645 5,248,762 6,799,72 15,393,939 5,859,157 32,799, ,35 Thousands of yen Years ended March ,557,46 3,5,3 6,142,669 5,16,695 3,473,144 3,821,345 16,686,619 51,456,857 33,858, ,72 77,568,14 3,735,985 3,664,362 3,597,489 2,39,514 1,437,54 14,365,31 51,566,632 31,96, ,55 71,313,987 27,565,77 1,171,194 5,69,859 5,534,484 6,29,66 14,24,928 5,249,583 21,356, ,99 Thousands of U.S. dollars Year ended March $635, ,76 1,439 5,725 49,331 53,74 $126, ,897 19,364 Note 1: The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of the readers outside Japan and has been calculated at the rate of JPY = U.S. dollar 1., the approximate rate of exchange on March 31, 217. Note 2: Net profit from F. Y. is equivalent to Net profit Attributable to Owners of Parent. Note 3: The Company resolved a 4for1 share split on April 3, 213 and implemented the split effective as of June 1, 213. Net profit per share and diluted net profit per share have been calculated assuming that the stock split was conducted at the beginning of the year ended March 31, 213. Net sales (Millions of yen) 8, 7, 61,68 6, 5, 4, 3, 2, 1, 13 78,615 77,568 74,557 71, Gross profit/gross profit margin $.3 Operating profit/operating profit margin (Millions of yen) (%) (Millions of yen) (%) 35, 5 1, 15 29,931 3,5 3,736 7,915 8,663 3, 27,566 8, , 24, , , 11. 2, , , 15, , 4.7 1, 35 1,171 5, 3 2, How did the business environment effect our performance for the fiscal year ended March, 217? In the current fiscal year (from April 1, 216 to March 31, 217), we have seen rapid changes in the business environment surrounding the Wacom Group including developments leading to the emergence of new business fields such as IoT and VR with the penetration of mobile products, cloud computing, and SNS (Social Networking Services) in the IT industry. The yen strengthen rapidly against the dollar and the euro, and even more so against emerging currencies such as the renminbi, due to a trend of global risk aversion originating from the UK s decision to leave the EU in the foreign exchange market. Against this background, Wacom Group has taken the lead in the pen tablet market for creative users by pursuing investment strategies to provide more valueadded products to customers, develop nextgeneration digital pen technology, reinforce our product lineup, and enhance the Group s future business foundation. In the Brand Business segment, to cater to the changing demands of creative professionals and to solidify our global market leadership, we developed and launched new products equipped with nextgeneration digital pen technology and the advanced functions of 3D and color management. However, consolidated net sales declined in all product lineups due to the strong yen, changes in the competitive environment, a decrease in demand during product life cycle transitions, and the partial delay of a new product launch. In the Technology Solution Business segment, business activities were heavily impacted due to the recall of the Samsung Galaxy Note 7 in October, an event resulting from quality control issues. Aside from this, we increased commercial production of our ActiveES pen sensor system to expand our customer base from existing customers to include new customers. Under these circumstance, overall sales for the fiscal year declined, mainly due to a decrease in sales for smartphones and the strong yen. For the past few years, we made a significant capital investment in our global IT infrastructure, and implemented them in order. Corporate expenses significantly exceeded the previous fiscal year, mainly due to an increase in expenses related to depreciation of intangible assets and subcontractor activities for system installation. However, we have since realized that achieving the sales growth set as an initial assumption will be difficult, and have reviewed the scale and scope of the investment plan in consideration of our latest growth projection. We have posted as extraordinary losses for the period impairment losses of 4,224 million yen mainly for the associated portion of software in progress in intangible assets. As a result, consolidated net sales decreased 8.1% to 71,314 million, operating loss increased by 4,835 million to 1,171 million, ordinary loss increased by 4,647 million to 87 million, and net loss attributable to owners of parent increased by 7,844 million to 5,534 million. Net profit per share (basic) (Yen) ROE/ROA (%) (ROA) (ROE) Equity ratio (%)

10 Our results by business segment Brand Business In Creative Business, we launched a new pen tablet model equipped with nextgeneration digital pen technology for professional creative users to reinforce product competitiveness in January. A new model for 3D modeling, which was launched in September to acquire a new customer constituency, positively contributed to sales. Shipments of our emerging market model increased approximately 4% on a unit basis, and contributed to the expansion of a base market of new customers. However, Overall sales for pen tablet products declined due to constraints in parts procurement caused by Kumamoto earthquake and the strong yen. In mobile products, we introduced a new model, which built a strong reputation among customers and contributed to sales recovery toward the end of the fiscal year. Overall sales fell slightly due to changes in the competitive environment and the impact of product life cycle transitions in the first half of the fiscal year. Overall sales for display products declined due to the strong yen, sluggish sales in the U.S. and the delay of launching a new 16inch product into April of the next fiscal year. In Consumer Business, we introduced new smart pad models as the nextgeneration digital stationery to recover sales. However, overall sales fell significantly due to sluggish sales of stylus pen products for the ipad. In Business Solution, overall Business Solution sales fell significantly due to changes in the competitive environment in Europe, prolonged investment projects and the strong yen. As a result, overall sales of the Brand Business segment decreased by 1.3% to 43,874 million and operating profit decreased 29.3% to 5,685 million. Technology Solution Business In pen sensor systems for smartphones, overall sales declined largely due to the strong yen and the discontinuance of production of the Samsung Galaxy Note 7 due to quality control issues. In pen sensor systems for tablets, adoption of our ActiveES pen sensor system expanded, as it gained a good reputation and enjoyed favorable demand from tablet PC manufacturers. Overall sales for tablets significantly exceeded the previous fiscal year, owing to steady shipments to Lenovo, Hewlett Packard, Toshiba, and Dell. We also expanded to a new field of EMR products such as pens tailored for use with the Google Chromebook. In pen sensor systems for notebook PCs, overall sales decreased significantly due to a shift from notebook PCs to tablets. As a result, overall sales in the Technology Solution Business segment decreased 4.3% to 26,758 million, and operating profit decreased 21.9% to 2,443 million. Other Business (Engineering Solution) Engineering Solution Business sales grew slightly owing to the launch of the new ECAD DCX 217 in September. We revised the existing definition of product life cycle, leading to an increase in cost of sales in accounting. As a result, overall sales in the Other Business segment increased 3.% to 682 million, and the operating loss increased by 68 million to 32 million. Net Sales by Business , ,314 Brand Business Sales Operating profit Sales Operating profit Operating profit 8,36 5,685 Technology Solution Business Other Business Sales Technology Solution Business 36.1% Brand Business 63.1% Other Business.8% Technology Solution Business 37.5% Brand Business 61.5% 3,13 2, Other Business 1.% 26,758 (Millions of yen) DOWN 1.3% 48,931 43,874 DOWN 29.3% 27,974 (Millions of yen) DOWN 4.3% DOWN 21.9% (Millions of yen) UP 3.% Consolidated financial position Assets, Liabilities, and Net Assets Total assets as of March 31, 217 decreased by 1,317 million to 5,25 million compared to the end of the previous fiscal year. The main factors contributing to this were an increase of 1,422 million in merchandise and finished goods, an increase of 1,236 million in deferred tax assets, an increase of 899 million in software, and a decrease of 4,718 million in other of intangible assets. Total liabilities as of March 31, 217 increased by 8,422 million to 28,893 million compared to the end of the previous fiscal year. The main factors contributing to this were an increase of 8, million in longterm loans payable, an increase of 1,379 million in notes and accounts payabletrade, and a decrease of 1, million in shortterm loans payable. Total net assets decreased by 9,739 million to 21,357 million compared to the end of the previous fiscal year. The main factors contributing to this were 5,535 million in loss attributable to owners of parent, 2,961 million in the payment of shareholder dividends, and a decrease of 1,414 million in capital surplus mainly due to purchase of treasury stock. As a result, the capital ratio decreased by 17.8 points to 42.2% compared to the end of the previous fiscal year. Cash Flow Consolidated cash and cash equivalents as of March 31, 217 totaled 14,25 million, a 16 million decrease from the end of the previous fiscal year. (A 2,322 million decrease over the same previous fiscal period) Cash flow from operating activities for the fiscal year ended March 31, 217, was 122 million (compared to 2,9 million gained in the previous comparable fiscal period). The main factors contributing to cash inflow were depreciation by 2,573 million, impairment loss by 4,224 million, and an increase of notes and accounts payabletrade by 1,494 million, and others, net by 1,2. The main factors contributing to cash outflow were loss before income taxes by 5,691 million, an increase in notes and accounts receivable trade by 1,471 million, and an increase in inventories by 1,791 million. Cash flow from investing activities for the fiscal year ended March 31, 217, was 3,48 million (compared to 4,878 million used in the previous comparable fiscal period). The main contributing factors were purchase of property, plant and equipment by 1,4 million, and purchase of software for the global IT infrastructure investment by 2,567 million. Cash flow from financing activities during for the fiscal year ended March 31, 217, was 3,299 million (compared to 1,29 million gained in the previous comparable fiscal period). The main contributing factors were an outflow of 1, million in shortterm loans payable, an inflow of 8, in longterm loans payable, payment of 753 million for the purchase of treasury shares, and payment of 2,958 million for shareholder dividends. Cash flows from operating activities (Millions of yen) 7, 6,782 5,895 6, 5, 4, 3, 2, 1, Cash flows from investing activities (Millions of yen) 1, 2, 3, 4, 5, Cash flows from financing activities (Millions of yen) 5, 4, 3, 2, 1, 1, 2, 3, 4, Cash Dividends per Share / Payout Raito Cash Dividends per share(yen) , , ,416 Pay out Raito(%) , ,255 2, ,878 2, ,48 1,29 3,

11 Consolidated Balance Sheet Wacom Co., Ltd. and its subsidiaries Thousands of yen Thousands of U.S. dollars Thousands of yen Thousands of U.S. dollars Assets: Current assets Cash and deposits Notes and accounts receivabletrade Merchandise and finished goods Work in process Raw materials and supplies Deferred tax assets Allowance for doubtful accounts Total current assets Noncurrent assets Property, plant and equipment: Buildings and structures Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles Accumulated depreciation Machinery, equipment and vehicles, net Tools, furniture and fixtures Accumulated depreciation Tools, furniture and fixtures, net Land Total property, plant and equipment Intangible assets: Software Total intangible assets Investments and other assets: Investment securities Deferred tax assets Allowance for doubtful accounts Total investments and other assets Total noncurrent assets March 31 March ,365,31 1,161,958 8,229,212 27,483 1,598,66 1,458,666 1,894,9 (14,672) 37,873,644 3,558,171 (1,785,737) 1,772,434 1,64,58 (467,822) 596,236 4,391,719 (3,44,725) 986,994 1,182,748 4,538,412 2,884,895 5,246,477 8,131, ,167 9, ,19 (77,749) 1,23,24 13,692,988 14,24,928 1,768,466 9,65,738 26,38 1,753,48 438,129 2,539,516 (115,726) 39,499,839 3,48,523 (1,597,518) 1,451,5 83,44 (388,755) 414,649 5,59,977 (3,685,335) 1,374,642 1,63,61 4,33,357 3,784, ,673 4,312, ,579 1,326, ,43 (76,386) 2,133,591 1,749,744 $126,615 95,984 86,21 2,32 15,63 3,95 22,636 (1,32) 352,8 27,173 (14,239) 12,933 7,161 (3,465) 3,696 45,12 (32,849) 12,253 9,476 38,358 33,73 4,712 38,442 1,57 11,822 6,819 (681) 19,18 95,817 Liabilities: Current liabilities Notes and accounts payabletrade Accrued expenses Shortterm loans payable Income taxes payable Provision for bonuses Provision for directors' and statutory corporate auditors' bonuses Total current liabilities Noncurrent liabilities Longterm loans payable Deferred tax liabilities Net defined benefit liability Provision for bonuses Provision for directors' and statutory corporate auditors' bonuses Asset retirement obligations Total noncurrent liabilities Total liabilities Net Assets: Shareholders' equity Capital stock Capital surplus Retained earnings Treasury stock Total shareholders' equity Accumulated other comprehensive income Valuation difference on availableforsale securities Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Subscription rights to shares Total net assets March 31 March ,12,787 2,884,48 4,, 271, ,847 9,787 2,267,964 16,478,632 2,, 545, ,56 7, , ,581 3,991,64 2,47,236 4,23,469 7,513,373 21,629,469 (2,576,159) 3,77,152 4, ,342 (27,392) 188, ,863 31,96,396 7,481,847 3,318,93 3,, 145, ,567 1,534 2,499,751 17,383,825 1,, ,928 4,222 1,195 23, ,782 11,58,861 28,892,686 4,23,469 6,98,918 13,134,374 (1,9,416) 21,536,345 1,97 (294,554) (13,554) (36,21) 126,753 21,356,897 $66,689 29,583 26,74 1,294 8, , ,95 89, , ,56 3,19 12, ,534 37,467 54, ,73 (16,939) 191, (2,625) (121) (2,729) 1,13 19,364 Total assets 51,566,632 5,249,583 $447,897 Total liabilities and net assets 51,566,632 5,249,583 $447,

12 Consolidated Profit & Loss Statement Wacom Co., Ltd. and Its Subsidiaries Consolidated Comprehensive Income Statement Wacom Co., Ltd. and Its Subsidiaries Thousands of yen Thousands of U.S. dollars Thousands of yen Thousands of U.S. dollars Years ended March 31 Year ended March Years ended March 31 Year ended March Net Profit Cost of sales Gross profit Selling, general and administrative expenses Operating income Nonoperating income: Interest income Dividends income Foreign exchange gains Total nonoperating income Nonoperating expenses: Interest expenses Foreign exchange losses Total nonoperating expenses Ordinary income 77,568,14 46,832,29 3,735,985 27,71,623 3,664,362 77,21 34, ,75 245,324 22,176 52,34 58, ,177 3,776,59 71,313,987 43,748,217 27,565,77 28,736,964 (1,171,194) 7,353 48, ,321 61, ,74 33,757 6,351 4,18 (87,228) $635, , ,76 256,146 (1,439) , , (7,757) Income before minority interests Other comprehensive income Valuation difference on availableforsale securities Foreign currency translation adjustment Remeasurements of defined benefit plans, net of tax Total other comprehensive income Comprehensive income (Comprehensive income attributable to) Comprehensive income attributable to owners of the Company Comprehensive income attributable to minority interests 2,39,514 13,61 (893,216) 8,181 (871,974) 1,437,54 1,437,54 ( 5,534,484) (38,524) (469,896) 13,838 (494,582) (6,29,66) (6,29,66) ($49,331) (343) (4,188) 123 (4,48) (53,739) (53,739) Extraordinary income: Gain on sales of property, plant and equipment Gain on reversal of subscription rights to shares Total extraordinary income Extraordinary loss: Impairment loss Loss on sales of property, plant and equipment Loss on sales of investment securities Loss on valuation of investment securities Business structure improvement expenses Total extraordinary losses Income before income taxes 2,1 29,115 31,215 47,933 3,81 22,57 119,739 16,246 21,235 3,597, ,832 17,319 4,223,72 34,689 61, , ,2 4,837,95 (5,69,859) , ,92 2,523 43,123 (5,725) Income taxescurrent Income taxesdeferred Total income taxes 1,249,177 38,798 1,287, ,715 (756,9) (156,375) 5,346 (6,739) (1,394) Income before minority interests Net Profit 2,39,514 2,39,514 (5,534,484) ( 5,534,484) (49,331) ($49,331) 21 22

13 Consolidated Statements of Changes in Net Assets Wacom Co., Ltd. and Its Subsidiaries Thousands of yen Thousands of U.S. dollars Shareholders' equity Shareholders' equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders' equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders' equity Balance at April 1,215 Dividends from surplus Net profit Purchase of treasury stock Disposal of treasury stock Net changes of items other than shareholders' equity Balance at March 31,216 Dividends from surplus Net profit Purchase of treasury stock Disposal of treasury stock Retirement of treasury stock Net changes of items other than shareholders' equity Balance at March 31,217 4,23,469 4,23,469 4,23,469 7,55,743 (37,37) 7,513,373 (12,768) (1,41,687) 6,98,918 22,318,96 (2,998,951) 2,39,514 21,629,469 (2,96,611) (5,534,484) 13,134,374 ( 1,455,137) (1,219,) 97,978 (2,576,159) (752,21) 26,257 1,41,687 ( 1,9,416) 32,617,981 (2,998,951) 2,39,514 (1,219,) 6,68 3,77,152 (2,96,611) (5,534,484) (752,21) 13,489 21,536,345 Balance at March 31,216 Dividends from surplus Net profit Purchase of treasury stock Disposal of treasury stock Retirement of treasury stock Net changes of items other than shareholders' equity Balance at March 31,217 $37,467 $37,467 $66,97 (114) (12,494) $54,362 $192,793 (26,389) (49,331) $117,73 ($22,962) (6,75) ,494 ($16,939) $274,268 (26,389) (49,331) (6,75) 12 $191,963 Accumulated other comprehensive income Accumulated other comprehensive income Valuation difference on availableforsales Securities Foreign currency translation adjustment Remaeasurements of defined benefit plans Total accumulated other comprehensive income Stock acquisition right Total net assets Valuation difference on availableforsales Securities Foreign currency translation adjustment Remaeasurements of defined benefit plans Total accumulated other comprehensive income Stock acquisition right Total net assets Balance at April 1,215 Dividends from surplus Net profit Purchase of treasury stock Disposal of treasury stock Net changes of items other than shareholders' equity Balance at March 31,216 Dividends from surplus Net profit Purchase of treasury stock Disposal of treasury stock Retirement of treasury stock Net changes of items other than shareholders' equity Balance at March 31,217 27,37 13,61 4,431 (38,524) 1,97 1,68,558 (893,216) 175,342 (469,896) ( 294,554) (35,573) 8,181 (27,392) 13,838 ( 13,554) 1,6,355 (871,974) 188,381 (494,582) ( 36,21) 18,634 (42,771) 137,863 (11,11) 126,753 33,858,97 (2,998,951) 2,39,514 (1,219,) 6,68 (914,745) 31,96,396 (2,96,611) (5,534,484) (752,21) 13,489 (55,692) 21,356,897 Balance at March 31,216 Dividends from surplus Net profit Purchase of treasury stock Disposal of treasury stock Retirement of treasury stock Net changes of items other than shareholders' equity Balance at March 31,217 $36 (343) $17 $1,563 (4,188) ($2,625) ($244) 123 ($121) $1,679 (4,48) ($2,729) $1,229 (99) $1,13 $277,176 (26,389) (49,331) (6,75) 12 (4,57) $19,