CONVOCATION NOTICE OF THE 97TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

Transcription

1 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. JUKI CORPORATION assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translations. Securities code: 6440 March 2, 2012 To All Shareholders: Akira Kiyohara President JUKI CORPORATION , Tsurumaki, Tama-shi, Tokyo, Japan CONVOCATION NOTICE OF THE 97TH ORDINARY GENERAL MEETING OF SHAREHOLDERS Dear Shareholders: We would like to express our sincere sympathy to those people affected by the Great East Japan Earthquake. We hope for the earliest possible recovery of the afflicted areas. You are cordially invited to attend the 97th Ordinary General Meeting of Shareholders (the Meeting ) of JUKI CORPORATION (the Company ) to be held as indicated below. If you are unable to attend the Meeting, you may exercise your voting rights in writing. Please review the enclosed Reference Materials for the Ordinary General Meeting of Shareholders, indicate for or against for each of the proposals in the Voting Right Exercise Form, and return the form to us no later than 6:00 p.m., Tuesday, March 27, 2012 (Japan Standard Time). Thank you very much for your cooperation. 1. Date and Time: March 28, 2012 (Wednesday) at 10:00 a.m. The date of the Meeting does not correspond with the date of the previous Ordinary General Meeting of Shareholders (June 28, 2011) because the Company changed its fiscal year-end from March 31 to December Place: Multi-purpose hall, 3rd floor of the East Tower of the Company s Head Office, , Tsurumaki, Tama-shi, Tokyo, Japan 3. Meeting Agenda: Report matters: 1. The Business Report, the Consolidated Financial Statements for the 97th Fiscal Year (April 1, 2011 to December 31, 2011) and the results of audits of the Consolidated Financial Statements by the Accounting Auditor and the Board of Corporate Auditors 2. Non-consolidated Financial Statements for the 97th Fiscal Year (April 1, 2011 to December 31, 2011) Resolution matters: First proposal: Appropriation of Surplus Second proposal: Election of 7 Directors Third proposal: Election of 2 Corporate Auditors Fourth proposal: Election of 2 Substitute Corporate Auditors If you plan to attend the Meeting, please submit the enclosed Voting Right Exercise Form to the receptionist at the Meeting. - Any amendments to the Reference Materials for the Ordinary General Meeting of Shareholders, Business Report, Non-consolidated Financial Statements, and Consolidated Financial Statements will be posted on the Company s website (URL: 1

2 (Attached materials) Business Report (April 1, 2011 to December 31, 2011) The Company changed its fiscal year-end from March 31 to December 31 by a resolution of the 96th Ordinary General Meeting of Shareholders held on June 28, Owing to this change, the 97th fiscal year became a nine-month period from April 1, 2011 to December 31, Consequently, in the business report for the fiscal year 2011, comparisons with the previous fiscal year regarding results are made on the basis of the nine-month period from April 1, 2010 to December 31, (million yen) Item Same period of the Fiscal year under Change previous fiscal year review April 1, 2010 to April 1, 2011 to Amount Growth rate December 31, 2010 December 31, 2011 Net sales 66,273 65,326 (947) (1.4)% Ordinary income 863 1, % Net income 1, (385) (34.7)% 1. Overview of the JUKI Group (the Group ) (1) Business Progress and Results In fiscal year 2011 ( FY 2011 ), consolidated net sales came to 65,326 million yen (down by 947 million yen, or 1.4%, from the same period of the previous fiscal year), mainly because of the effects of stagnant capital investment demand due to financial restraint in China as well as the appreciation of the yen to record levels, despite being underpinned by robust demand in Asian regions and in the Americas and Europe. Consolidated ordinary income was 1,374 million yen (up by 510 million yen, or 59.2%), thanks mainly to the effects of cost reduction measures and price revisions, as well as cover provided by forward exchange contracts. Furthermore, the Group posted consolidated net income of 726 million yen, mainly reflecting loss on valuation of securities held and the effects of a revision to the corporate tax system (owing to factors including the posting of extraordinary income from the sale of the former head office land and building in the same period of the previous fiscal year, net income was down by 385 million yen, or 34.7%, from the same period of the previous fiscal year). Business results by major segment are as follows: 1) Sewing Machinery Business Consolidated net sales of the Sewing Machinery Business as a whole were 42,460 million yen (down by 2.3% from the same period of the previous fiscal year) because of such factors as the effects of stagnant capital investment demand due to financial restraint in China, despite increased demand in emerging countries in Asia and other regions. 2) Electronic Assembly Systems Business (SMT systems, etc.) Although sales grew in the Americas and Europe, demand was depressed in China. As a result, consolidated net sales of the Electronic Assembly Systems Business as a whole were 17,210 million yen (down by 3.3% from the same period of the previous fiscal year). (2) Capital Investments Capital investment totaling 939 million yen was disbursed in FY 2011, including 653 million yen for machinery, equipment and vehicles and 275 million yen for tools, furniture and fixtures. (3) Financing Financing for FY 2011 was arranged using the Group s own funds and borrowings from financial institutions. 2

3 (4) Issues to Address Last year, the Group established a new mid-term management plan for FY 2011 through FY 2013 (J Number One Plan), aiming to become a strong company which thrives through the 21st century as a global specialist in Monodzukuri (the art of product making). In FY 2012 we will work to achieve this through the following five key initiatives: 1) Strengthening of sales and cost reductions We will strengthen our sales force in countries and regions such as China and Southeast Asia. Especially for our Sewing Machinery Business, we will also strengthen our sales force for the entry markets of Russia and Central and South America, among others. Furthermore, in addition to strengthening our overseas procurement of parts and expanding overseas production, we will push forward with cost reductions by making use of alliances. 2) Expansion of business fields In the Sewing Machinery Business and the Electronic Assembly Systems Business, we will strengthen our sales of solutions and expand business fields. We will also plan and promote new businesses. 3) Promotion of a global production strategy We will push forward with strengthening the capabilities of our overseas plants in China and Vietnam, as well as studies into a new production base in continuation from them. 4) Business operation innovation at the Development Center We will strengthen our development capabilities at overseas development bases in order to respond quickly to our customers needs. We will also introduce new products that match market needs in a timely manner. 5) Business operation innovation at the administrative departments We will strengthen our management support and guidance of group companies, and build a framework that enables group companies to concentrate their efforts on sales and manufacturing. We will address these issues through the concerted efforts of the Group, in order to meet the expectations from our shareholders. We, kindly, ask our shareholders for their further support and encouragement. (5) Changes in Assets and Income (Loss) 1) Changes in Assets and Income (Loss) on a Group basis Item The 94th fiscal year ended March 31, 2009 The 95th fiscal year ended March 31, 2010 (million yen, except for per share amounts) The 96th fiscal year ended March 31, 2011 The 97th fiscal year ended December 31, 2011 Net sales 77,832 56,970 89,596 65,326 Ordinary income (loss) (5,259) (11,102) 1,174 1,374 Net income (loss) (9,347) (11,233) 2, Net income (loss) per share (72.34) (86.93) Total assets 103, , , ,263 Net assets 21,589 10,686 11,549 12,361 Net assets per share (Notes) 1. Net income (loss) per share is calculated using the average number of shares during the fiscal year (excluding treasury shares). Net assets per share is calculated using the number of shares issued as of the end of the fiscal year (excluding treasury shares). 2. The 97th fiscal year (the fiscal year under review) is the nine-month period from April 1, 2011 to December 31, 2011 because of a change in the balance sheet date. 3

4 2) Changes in Assets and Income (Loss) on a Company basis Item The 94th fiscal year ended March 31, 2009 The 95th fiscal year ended March 31, 2010 (million yen, except for per share amounts) The 96th fiscal year ended March 31, 2011 The 97th fiscal year ended December 31, 2011 Net sales 47,593 27,725 60,101 44,015 Ordinary income (loss) (4,578) (10,655) 2,461 2,207 Net income (loss) (8,186) (9,975) 1,684 1,711 Net income (loss) per share (63.36) (77.19) Total assets 79,307 83,591 87,048 94,838 Net assets 25,510 15,545 17,262 18,556 Net assets per share (Notes) 1. Net income (loss) per share is calculated using the average number of shares during the fiscal year (excluding treasury shares). Net assets per share is calculated using the number of shares issued as of the end of the fiscal year (excluding treasury shares). 2. The 97th fiscal year (the fiscal year under review) is the nine-month period from April 1, 2011 to December 31, 2011 because of a change in the balance sheet date. (6) Principal Subsidiaries Company name JUKI MATSUE CORPORATION JUKI DENSHI KOGYO CORPORATION The Company s percentage of Capital equity participation (million yen) Direct Indirect % % JUKI AIZU CORPORATION % JUKI SALES (JAPAN) CORPORATION JUKI (HONG KONG) LTD. HK$148,655 thousand 100% JUKI CENTRAL EUROPE SP.ZO.O. Main business Manufacture and sales of industrial sewing machines and parts Manufacture and sales of SMT systems, etc. Manufacture and sales of precision casting products, etc % Sales of sewing machines in Japan PLN50 thousand 100% JUKI AMERICA, INC. U.S.$26,346 thousand 100% JUKI (CHINA) CO., LTD. RMB358,365 thousand 100% JUKI SINGAPORE PTE. LTD. U.S.$8,079 thousand 100% JUKI XINXING INDUSTRY CO., LTD. JUKI (SHANGHAI) INDUSTRIAL CO., LTD. TOKYO JUKI INTERNATIONAL TRADE (SHANGHAI) CO., LTD. RMB160,000 thousand 89.9% RMB196,148 thousand 27.5% 72.5% Sales of sewing machines in China and East Asian regions Sales of sewing machines in European regions Sales of sewing machines in the Americas Administration of subsidiaries in China and sales of sewing machines Sales of sewing machines in Asian regions Manufacture and sales of industrial sewing machines Manufacture and sales of industrial sewing machines RMB5,001 thousand 100% Sales of SMT systems, etc. in China (7) Principal Business Segment Sewing Machinery Business Electronic Assembly Systems Business Summary of business Manufacture and sales of industrial sewing machines and household sewing machines Manufacture and sales of SMT systems, etc. 4

5 (8) Principal Offices and Plants Company name Office or plant Location JUKI CORPORATION Head Office Ohtawara Plant Tokyo Tochigi JUKI DENSHI KOGYO CORPORATION Head Office and Plant Akita JUKI MATSUE CORPORATION Head Office and Plant Shimane JUKI (SHANGHAI) INDUSTRIAL CO., LTD. Head Office and Plant Shanghai, China JUKI XINXING INDUSTRY CO., LTD. Head Office and Plant Hebei, China JUKI (CHINA) CO., LTD. Head Office Shanghai, China JUKI (HONG KONG) LTD. Head Office Hong Kong JUKI SINGAPORE PTE. LTD. Head Office Singapore TOKYO JUKI INTERNATIONAL TRADE (SHANGHAI) CO., LTD. Head Office Shanghai, China (9) Employees 1) Group (As of December 31, 2011) Segment Number of employees Change from previous fiscal year-end Sewing Machinery Business 4, Electronic Assembly Systems Business 1,131 1 Other business Corporate headquarters (common) Total 6, (Note) The above figures include contract employees and part-timers and exclude dispatched employees. 2) Company (As of December 31, 2011) Number of employees Change from previous fiscal year-end Average age Average years of service 1, years old 18.0 years (Note) The above figures include contract employees and part-timers and exclude dispatched employees. (10) Major Creditors and Balance of Borrowings Creditor (As of December 31, 2011) Balance of borrowings (million yen) Mizuho Bank, Ltd. 20,490 The Sumitomo Trust & Banking Co., Ltd. 10,023 Mizuho Trust & Banking Co., Ltd. 6,828 Mizuho Corporate Bank, Ltd. 5,362 The Hiroshima Bank, Ltd. 5,159 The Joyo Bank, Ltd. 2,899 5

6 2. Status of Shares (As of December 31, 2011) (1) Total number of authorized shares 400,000,000 shares (2) Total number of issued and outstanding shares 129,370,899 shares (including 150,273 treasury shares) (3) Number of shareholders 14,659 persons (4) Major shareholders (Top 10) Shareholder name Number of shares Shareholding ratio thousand shares % Mizuho Bank, Ltd. 4, Nippon Life Insurance Company 4, Asahi Mutual Life Insurance Company 3, Japan Trustee Services Bank, Ltd. (Trust Account) 2, The Dai-ichi Life Insurance Company, Limited 2, Meiji Yasuda Life Insurance Company 2, SOCIETE GENERALE PARIS OMNIBUS BS SGSNP 2, Mizuho Trust & Banking Co., Ltd. 2, JUKI Employee Share Holdings 1, Nomura Securities Co., Ltd. 1, (Note) The shareholding ratio is calculated by means of deducting treasury shares (150,273 shares) from the number of the issued and outstanding shares. 6

7 3. Company Officers (1) Directors and Corporate Auditors Position Name Areas of responsibility within the Company Chairman Kazuyuki Nakamura Representative Director President Akira Kiyohara Representative Director Executive Vice-President Tomohisa Miyake Executive Vice-President Managing Director Shinji Yamaguchi In charge of Business Operation Center (Sewing Machinery Business Unit), Senior Executive Director of Sewing Machinery Business Unit, and General Manager of Customer Support Dept., Sewing Machinery Business Unit Managing Director Hirokazu Nagashima In charge of Business Operation Center (Electronic Assembly Systems Business Unit), In charge of Quality Assurance Dept., and Senior Executive Director of Electronic Assembly Systems Business Unit Managing Director Shuji Yamaoka In charge of Production Center (As of December 31, 2011) Significant concurrent positions Director Toshihiko Ozaki Director and Senior Managing Officer of TPR Co., Ltd. and Director of TPR Trading Co., Ltd. Full-time Corporate Auditor Yoshihiro Otake Corporate Auditor Kousuke Inoue Corporate Auditor Masato Tanaka Attorney (Notes) 1. Director, Mr. Shuji Yamaoka, and Corporate Auditors, Mr. Yoshihiro Otake and Mr. Masato Tanaka, were newly elected to and assumed their respective positions at the 96th Ordinary General Meeting of Shareholders held on June 28, Director, Mr. Toshihiko Ozaki, is an Outside Director as defined in Item 15 of Article 2 of the Companies Act. 3. Director, Mr. Toshihiko Ozaki, is such independent director as specified by the Tokyo Stock Exchange. 4. Corporate Auditors, Mr. Kousuke Inoue and Mr. Masato Tanaka, are Outside Corporate Auditors as defined in Item 16 of Article 2 of the Companies Act. 5. Corporate Auditor, Mr. Kousuke Inoue, has been engaged in corporate management for many years and has sufficient financial and accounting knowledge. 6. Corporate Auditors, Mr. Ryoji Murayama, Mr. Masahiro Watanabe and Ms. Masako Wakana, resigned at the conclusion of the 96th Ordinary General Meeting of Shareholders held on June 28,

8 (2) Amount of Remuneration to Directors and Corporate Auditors for FY 2011, etc. Title Number of payees Amount of remuneration (million yen) Director Corporate Auditor 6 25 Total (Notes) 1. The above number of payees and amount of remuneration include one director and three corporate auditors who retired during FY No bonuses for directors and corporate auditors have been paid and are payable. (3) Outside Officers 1) Significant concurrent positions Significant concurrent positions held by outside officers are as described on page 7. There are no specific transactions between the Company and the organizations where concurrent positions are held. 2) Main activities Title Name Main activities Director Corporate Auditors Toshihiko Ozaki Kousuke Inoue Masato Tanaka Participated in 8 out of 10 Board of Directors meetings held in FY 2011, and provided expert opinions, mainly as an experienced corporate manager, as necessary. Participated in all 10 Board of Directors meetings and in all 9 Board of Corporate Auditors meetings held in FY 2011; provided expert opinions, mainly as an experienced corporate manager, as necessary. Participated in all 7 Board of Directors meetings and in all 6 Board of Corporate Auditors meetings held since he assumed the position on June 28, 2011; provided expert opinions, mainly as an experienced attorney, as necessary. 3) Summary of liability limitation agreement The Company has concluded contracts for limitation of liability with Outside Director, Mr. Toshihiko Ozaki, and Outside Corporate Auditors, Mr. Kousuke Inoue and Mr. Masato Tanaka, to limit their liability as stipulated in Paragraph 1 of Article 423 of the Companies Act up to the total sum stipulated in Paragraph 1 of Article 425 of the Companies Act. 4) Total Amount of Remuneration to Outside Director and Outside Corporate Auditors for FY 2011, etc. Number of payees Amount of remuneration (million yen) Total amount of remuneration 5 16 (Notes) 1. The above number of payees and amount of remuneration include two corporate auditors who retired during FY No bonuses for director and corporate auditors have been paid and are payable. 8

9 (For reference) <Executive Operating Officers> The Company has introduced the executive operating officer system. In addition to the Executive Operating Officer positions concurrently assumed by all of the Directors (excluding Outside Directors), the following persons have been appointed as full-time Executive Operating Officers: Position Senior Executive Operating Officer Senior Executive Operating Officer Senior Executive Operating Officer Executive Operating Officer Executive Operating Officer Executive Operating Officer Executive Operating Officer Executive Operating Officer Executive Operating Officer Executive Operating Officer Executive Operating Officer Executive Operating Officer Executive Operating Officer Name Hiroshi Nakamura Shinsuke Uchinashi Takashi Mizuno Harunobu Ono Kimio Honma Minoru Wada Kiyotaka Kawano Toshimasa Miura Toshinobu Shinozuka Satohiro Hama Naotake Miyashita Hirofumi Gotoh Robert J. Black Jr. Areas of responsibility within the Company In charge of Administration Center (Human Resources Dept. and General Affairs Dept.), In charge of Business Development Center, In charge of Secretariat, In charge of Internal Auditing Dept., General Manager of General Affairs Dept., and In charge of Internal Control and Compliance In charge of Administration Center (Corporate Administration Dept. and Finance & Accounting Dept.) In charge of Development Center Deputy in charge of Development Center General Manager of Corporate Administration Dept. General Manager of Human Resources Dept. Deputy in charge of Production Center and General Manager of Purchase Planning Dept. Deputy Senior Executive Director of Electronic Assembly Systems Business Unit, In charge of China and Asia Sales; stationed in Shenzhen (As of December 31, 2011) Significant concurrent positions President of JUKI AMERICA, INC. President of JUKI SALES (JAPAN) CORPORATION Director and General Manager of JUKI (CHINA) CO., LTD. Director and General Manager of JUKI (CHINA) CO., LTD. President and CEO of JUKI AUTOMATION SYSTEMS INC. 9

10 (Note) The followings are the areas of responsibility and significant concurrent positions for Executive Operating Officers, after the organizational revision on January 1, 2012: Position Executive Operating Officer Executive Operating Officer Executive Operating Officer Name Satohiro Hama Naotake Miyashita Robert J. Black Jr. Areas of responsibility within the Company and significant concurrent positions after revision Areas of responsibility within the Company Deputy Senior Executive Director of Electronic Assembly Systems Business Unit, In charge of China and Southeast Asia Area In charge of Europe, North America and South America Area, Electronic Assembly Systems Business Unit Significant concurrent positions Director and General Manager of TOKYO JUKI INTERNATIONAL TRADE (SHANGHAI) CO., LTD. Director and General Manager of JUKI (CHINA) CO., LTD., Administration Control and Regional Control (East and Central China) President and CEO of JUKI AUTOMATION SYSTEMS INC. Deputy Senior Executive Director of Sewing Machinery Business Unit Executive Operating Katsumi Nihei and General Manager of Sales Officer Dept., Sewing Machinery Business Unit (Note) Mr. Katsumi Nihei assumed the position of Executive Operating Officer as of January 1,

11 4. Accounting Auditor (1) Accounting Auditor s Name Deloitte Touche Tohmatsu LLC (2) Accounting Auditor s Compensation, etc. 1) Compensation to Accounting Auditor as provided in Paragraph 1 of Article 2 of the Certified Public Accountant Act of Japan 2) Total amount of cash and other property benefits payable by the Company and its subsidiaries to the Accounting Auditor 66 million yen 70 million yen (Notes) 1. The audit contract between the Company and the Accounting Auditor does not clearly distinguish between compensation, etc. paid for the audit conducted in accordance with the Companies Act and compensation, etc. paid for the audit conducted in accordance with Financial Instruments and Exchange Act. It is practically impossible to make such a distinction. Accordingly, the amount specified in 1) above is the aggregate amount of compensation, etc. for these two types of audits. 2. Among the principal subsidiaries, JUKI (HONG KONG) LTD., JUKI CENTRAL EUROPE SP.ZO.O., JUKI (CHINA) CO., LTD., JUKI SINGAPORE PTE. LTD., JUKI XINXING INDUSTRY CO., LTD., JUKI (SHANGHAI) INDUSTRIAL CO., LTD., and TOKYO JUKI INTERNATIONAL TRADE (SHANGHAI) CO., LTD. are audited by certified public accountants or audit corporations other than the Company s Accounting Auditor. (3) Non-audit Operation The Company entrusts the Accounting Auditor with Advice and guidance concerning International Financial Reporting Standards (IFRS), and this advisory service corresponds to business not provided in Paragraph 1 of Article 2 of the Certified Public Accountant Act (Non-audit operation). (4) Policy Regarding Determination of Termination or Nonrenewal of Appointment of Accounting Auditors The Company has not established a policy regarding the determination of termination or nonrenewal of the appointment of Accounting Auditors. 11

12 5. Systems to ensure that Directors execute their duties in compliance with relevant laws, regulations, and the Articles of Incorporation and that business is conducted properly The Company adopted a resolution on the Basic policy to construct internal control system at the Board of Directors meeting held on May 17, The details of the resolution, which have been revised by later resolutions based on reviews as needed, are at present as follows: (1) System to ensure that Directors execute their duties in compliance with relevant laws, regulations, and the Articles of Incorporation of the Company 1) The Company shall establish JUKI Corporation s Code of Conduct which shall provide the principles of the JUKI corporate philosophy as the legal entity, in order to makes clear its positive attitude towards compliance. 2) The Company shall establish Code of Conduct for Officers and Employees, a set of specific guidelines for the performance of duties, in order to make officers and employees to proactively acknowledge the importance of compliance with laws and regulations. 3) The group-wide system for compliance and compliance management shall be provided in the Compliance Rules. 4) The Company shall take a resolute attitude toward any antisocial individuals and organizations who adversely influence social order and sound corporate activities. (2) System to store and control information related to Directors execution of duties 1) The Company shall establish Rules for Filing Important Documents, and shall store and control information related to the execution of duties by Directors in accordance with the said Rules. (3) Rules and other systems for managing the risk of loss 1) The Company shall establish Risk Management Rules to manage group-wide risks. 2) The Company shall establish Risk Management Committee to examine significant risks the Company faces, and shall, also, prepare preventive measures against such risks and to manage each division s and each department s preventive measures activities against risks. 3) Crisis-Management Task Force shall take prompt actions against any realized risks. (4) System to ensure that Directors exercise their duties efficiently 1) In order to enable Directors to facilitate the prompt exercise of their duties, the Company shall adopt Executive Operating Officer system under which the Executive Operating Officers may be transferred some of the authorities required for exercising Directors duties. 2) Employees may be transferred some of the authorities required for exercising Directors duties in accordance with Authorization Rules, for the purpose of efficient decision-making. 3) Important decision-making matters shall be discussed at Management Strategy Council and shall be decided by the President after such discussion. 4) Rules for exercising Directors duties shall be provided in Organization Rules, and Directors shall use the efforts to efficiently exercise their duties in accordance with the said Rules. (5) System to ensure that employees perform their duties in compliance with relevant laws, regulations, and the Articles of Incorporation of the Company 1) The Company shall establish JUKI Corporation s Code of Conduct which shall provide the principles of the JUKI corporate philosophy as the legal entity, in order to make clear its positive attitude towards compliance. 12

13 2) The Company shall establish Code of Conduct for Officers and Employees, a set of specific guidelines for the performance of duties, in order to make employees aggressively acknowledge the importance of compliance with laws and regulations to employees. 3) The department in charge of handling legal affairs shall conduct activities to spread compliance education and compliance management for enhanced legal compliance. 4) The position of Executive Operating Officer in charge of Internal Control & Compliance shall be established, and this Officer shall be responsible for legal compliance and shall bear the duties of supervision of relevant organizations and their activities. 5) The group-wide system for compliance system and operation & management of such system shall be provided in Compliance Rules. 6) The Company shall establish a Consultation Window available for direct access by employees, for the purpose of making such Window to respond to such questions related to compliance as raised by such employees. (6) System to ensure the propriety of the business operations of the Company and of the business group consisting of the Company s group companies 1) The Company s Risk Management System and Compliance System shall cover the whole group, including all group companies. 2) The position of Executive Operating Officer in charge of Internal Control & Compliance shall be established, and this Officer shall be responsible for group-wide legal compliance and shall bear the duties of supervision of relevant organizations and their activities. 3) The group-wide system for compliance and compliance management shall be provided in the Compliance Rules. 4) The Company shall stipulate the management control system by functional organization in its Organization Rules and Group companies management rules. 5) The Company shall check and adjust the management policies and management plans of the group companies at its Group Management Conference. 6) Decision-making on the allocation of management resources in group companies shall be provided in the Authorization Rules. 7) The Company s Internal Auditing Department shall conduct internal audits, as needed, on group companies. (7) Matters concerning employees to be assigned at the request of Corporate Auditors for their assistance 1) Corporate Auditors Section directly reporting to the Corporate Auditors shall be established as an organization to assist the Corporate Auditors. (8) Independence from Directors of such employees as specified in the preceding item (7) 1) Employees belonging to the Corporate Auditors Section shall follow the directions and instructions of the Corporate Auditors and collect information necessary for the Corporate Auditors audit. 2) The Corporate Auditors may express opinions on the personnel transfer and performance evaluation of the employees belonging to the Corporate Auditors Section. (9) System for Directors and employees to report to Corporate Auditors, and other relevant systems 1) Full-time Corporate Auditors shall attend the Board of Directors meetings, Management Strategy Council, Group Management Conference, Risk Management Committee, and other important meetings and collect necessary information by themselves. 13

14 2) Directors shall promptly report to the Corporate Auditors on any event likely to cause significant damage to the Company, any sign of fraudulence in the Director s exercise of duties, any serious event in violation of laws, regulations, or the Articles of Incorporation, and other events equivalent thereto. 3) Corporate Auditors may request the relevant departments to directly report to them on any information the Corporate Auditors deem to be necessary. (10) Other systems to ensure that the Corporate Auditors conduct audits effectively 1) In addition to expressing their opinions at the Board of Directors meetings, the Corporate Auditors may exchange opinions with Representative Directors from time to time in order to enhance the effectiveness of the Corporate Auditors audits. 2) Corporate Auditors may conduct the Corporate Auditors audit in cooperation with the Internal Auditing Department, as needed. 3) Corporate Auditors may conduct the Corporate Auditors audit in cooperation with corporate attorneys and certified public accountants, as needed. (11) System to ensure the reliability of financial reporting 1) The Company shall develop and manage systems for effective internal control on financial reporting, in order to ensure reliable financial reporting. 14

15 Consolidated Financial Statements (April 1, December 31, 2011) Consolidated Balance Sheet (As of December 31, 2011) (million yen) Description Amount Description Amount (Assets) (Liabilities) Current assets 73,504 Current liabilities 67,596 Cash and deposits 6,241 Notes and accounts payable-trade 14,427 Notes and accounts receivable-trade 20,978 Short-term loans payable 47,425 Merchandise and finished goods 29,594 Current portion of bonds 40 Work in process 4,668 Lease obligations 274 Raw materials and supplies 7,889 Accrued expenses 2,777 Deferred tax assets 766 Income taxes payable 220 Other 4,526 Provision for bonuses 332 Allowance for doubtful accounts (1,161) Notes payable-facilities 123 Noncurrent assets 40,759 Other 1,972 Property, plant and equipment 29,562 Noncurrent liabilities 34,305 Buildings and structures, net 17,223 Bonds payable 50 Machinery, equipment and vehicles, net 3,181 Long-term loans payable 25,396 Tools, furniture and fixtures, net 875 Lease obligations 643 Land 7,464 Provision for retirement benefits 6,535 Lease assets, net 686 Provision for directors retirement benefits 176 Construction in progress 131 Other 1,504 Intangible assets 1,633 Total liabilities 101,901 Investments and other assets 9,563 (Net assets) Investment securities 1,917 Shareholders equity 19,538 Long-term loans receivable 522 Capital stock 15,950 Long-term prepaid expenses 343 Retained earnings 3,646 Deferred tax assets 6,457 Treasury stock (58) Other 1,110 Accumulated other comprehensive income (7,436) Allowance for doubtful accounts (788) Valuation difference on available-for-sale securities 20 Deferred gains or losses on hedges (78) Foreign currency translation adjustment (7,378) Minority interests 260 Total net assets 12,361 Total assets 114,263 Total liabilities and net assets 114,263 (Note) Figures less than one million yen are rounded down to the nearest million. 15

16 Description Consolidated Statement of Income (April 1, December 31, 2011) Amount (million yen) Net sales 65,326 Cost of sales 48,018 Gross profit 17,307 Selling, general and administrative expenses 16,491 Operating income 815 Non-operating income Interest income 89 Dividends income 131 Foreign exchange gains 1,180 Other 403 1,804 Non-operating expenses Interest expenses 1,119 Other 125 1,245 Ordinary income 1,374 Extraordinary income Gain on sales of noncurrent assets 626 Gain on revision of retirement benefit plan 175 Other Extraordinary loss Loss on sales and retirement of noncurrent assets 38 Loss on valuation of investment securities 307 Loss on revision of retirement benefit plan 378 Other Income before income taxes and minority interests 1,453 Income taxes-current 429 Income taxes-deferred Income before minority interests 756 Minority interests in income 29 Net income 726 (Note) Figures less than one million yen are rounded down to the nearest million. 16

17 Balance at the beginning of current period Changes of items during the period Increase in surplus from change in fiscal year-end Consolidated Statement of Changes in Net Assets (April 1, December 31, 2011) Shareholders equity Capital stock Retained earnings Treasury stock (million yen) Total shareholders equity 15,950 2,604 (58) 18, Dividends from surplus (387) (387) Net income Purchase of treasury stock (0) (0) Net changes of items other than shareholders equity Total changes of items during the period 1,042 (0) 1,042 Balance at the end of current period 15,950 3,646 (58) 19,538 Balance at the beginning of current period Changes of items during the period Increase in surplus from change in fiscal year-end Valuation difference on available-for-sale securities Accumulated other comprehensive income Deferred gains or losses on hedges Foreign currency translation adjustment Total accumulated other comprehensive income Minority interests (million yen) Total net assets 74 (97) (7,173) (7,196) ,549 Dividends from surplus (387) Net income 726 Purchase of treasury stock (0) Net changes of items other than shareholders equity Total changes of items during the period (53) 19 (205) (240) 10 (230) (53) 19 (205) (240) Balance at the end of current period 20 (78) (7,378) (7,436) ,361 (Note) Figures less than one million yen are rounded down to the nearest million

18 Notes to Consolidated Financial Statements 1. Notes to the basis for the preparation of consolidated financial statements (1) Scope of consolidation 1) Number of consolidated subsidiaries: 32 Names of principal subsidiaries: JUKI SINGAPORE PTE. LTD., JUKI (HONG KONG) LTD., JUKI DENSHI KOGYO CORPORATION, JUKI AMERICA, INC., and 28 other subsidiaries. 2) Names of major non-consolidated subsidiaries: Seven non-consolidated subsidiaries, including SHOWA JUKI CO., LTD, are excluded from the scope of consolidation because their exclusion does not preclude reasonable judgment on the Group s financial situation and management results as a whole. (2) Application of equity-method The seven non-consolidated subsidiaries and NISSEN Co., Ltd. and four other affiliates are excluded from application of equity-method because their exclusion does not preclude reasonable judgment on the Group s financial situation and management results as a whole. (3) Change in consolidated balance sheet date The Company s consolidated balance sheet date (the Company s fiscal year-end) was March 31 of every year. However, in order to increase the efficiency of the Group s execution of business, such as budgeting and performance management on a consolidated basis, a partial change to the Articles of Incorporation was resolved at the 96th Ordinary General Meeting of Shareholders held on June 28, 2011 and the consolidated balance sheet date was changed to December 31 of every year. Accordingly, the period comprising the current fiscal year is a transitional period of nine months from April 1, 2011 to December 31, It should be noted that as a result of the change of balance sheet date, there will no longer be a disparity between the balance sheet date of overseas consolidated subsidiaries (JUKI (CHINA) Co., Ltd. and 17 other subsidiaries) and the consolidated balance sheet date, and profits or losses of the overseas consolidated subsidiaries during January 1, 2011 to March 31, 2011 have been directly added to or subtracted from retained earnings. Furthermore, the balance sheet date of domestic consolidated subsidiaries has been changed from March 31 to December 31. (4) Accounting periods of consolidated subsidiaries The year-end balance sheet dates for all consolidated subsidiaries are the same as the consolidated balance sheet date. (5) Accounting standards 1) Standards and methods for valuation of important assets A. Securities Available-for-sale securities with market quotations Stated based on the market price, etc. on the balance sheet date (Unrealized gains and losses are excluded from income and reported in a separate component of net assets. The cost of sale is calculated using the moving-average method.) Available-for-sale securities without market quotations Stated at cost using the moving-average method B. Derivatives Stated mainly at market C. Inventories Stated at the lower of cost Merchandise and finished goods and work in process Raw materials and supplies Mainly by the average method or first-in first-out method Mainly by the average method or last cost method 18

19 2) Depreciation & amortization method for important depreciable assets A. Property, plant and equipment (excluding lease assets) The declining-balance method is applied for the Company and its domestic consolidated subsidiaries. However, the straight-line method is applied for buildings acquired on and after April 1, 1998 (excluding any building fixtures). Overseas consolidated subsidiaries are mainly subject to the straight-line method. The main economic useful lives are as follows: Buildings and structures 3-50 years Machinery, equipment and vehicles 2-15 years Tools, furniture and fixtures 2-20 years B. Intangible assets (excluding lease assets) and long-term prepaid expenses The Company and its domestic consolidated subsidiaries use the straight-line method. However, software bundled with computer hardware is amortized every fiscal year by no less than an equal amount calculated based on effective years (3-5 years), and computer software for internal use is amortized by the straight-line method over the estimated internal useful lives (5 years). Overseas consolidated subsidiaries are subject to the straight-line method. C. Lease assets Lease assets pertaining to finance leases without ownership transfer of the lease assets to the lessee The straight-line method is applied on the assumptions that the useful life equals the lease term and the residual value equals zero; provided, however, that lease assets whose leasing started on or before March 31, 2008 are accounted for by the accounting method used for ordinary lease transactions. 3) Standards for recognition of important reserves A. Allowance for doubtful accounts For loss caused by uncollectible debt to the Company and its domestic consolidated subsidiaries, an allowance for doubtful accounts is provided based on the historical write-off rate for ordinary receivables and the estimated amount of irrecoverable debt based on the recoverability of individual cases for specified receivables such as debt with a possibility of default. For overseas consolidated subsidiaries, the estimated write-off amount is provided. B. Provision for bonuses A provision for bonuses is provided based on the estimated future payment of bonuses to employees. C. Provision for retirement benefits The Company and its major domestic consolidated subsidiaries provide a provision for employees retirement benefits based on the estimated retirement benefit obligation and pension plan assets as of this consolidated fiscal year-end. Some overseas consolidated subsidiaries provide such provision mainly based on the estimated retirement benefit obligation as of this consolidated fiscal year-end. Actuarial calculation differences are amortized on a straight-line basis over a period equal to or less than the average remaining service period for employees at the time such gains or losses are realized (10 years). The amortization of net gains or losses starts from the fiscal year immediately following the year in which such gains or losses are realized. Prior service cost is amortized wholly in the fiscal year in which it is realized. (Additional information) The Company revised its retirement benefit plan effective July 1, With the revision, the Company transferred to a defined-benefit corporate pension plan and lump-sum payment plan from its previous tax-qualified pension plan and lump-sum payment plan, and also changed the scope of employees for whom the calculation of retirement benefits is carried out through a points system. In addition, some domestic consolidated subsidiaries transferred to a defined-benefit corporate pension plan and lump-sum payment plan from the previous tax-qualified pension plan and lump-sum payment plan effective December 1, In accordance with this change, the Company has applied the Guidance on Accounting for Transfers between Retirement Benefit Plans (ASBJ Guidance No.1). As a result, prior service 19

20 costs were realized and charged to income in a lump sum, which was recorded as extraordinary income of 175 million yen and extraordinary loss of 378 million yen. D. Provision for directors retirement benefits The system of directors retirement benefits was abolished with a cut-off date of June 28, The estimated amount payable as of the cut-off date is provided. Eight consolidated subsidiaries provide the provision in an amount that would be required by the internal rule if all the eligible Directors retired at the balance sheet date. 4) Standards for translation of important assets or liabilities in foreign currencies into yen Monetary assets and liabilities in foreign currencies are translated into yen based on the spot exchange-rate in the foreign exchange market on the consolidated balance sheet date, and the foreign exchange gains and losses from the translations are recognized in the income statement. Assets and liabilities of overseas consolidated subsidiaries are translated into yen based on the spot exchange-rate in the foreign exchange market on the consolidated balance sheet date, while revenue and expenses are translated into yen based on the average exchange rate for the fiscal term. The differences resulting from these translations are included in Foreign currency translation adjustment and Minority interests under net assets. 5) Accounting for important hedging activities A. Method Deferral hedge accounting is applied. Designation is applied to forward exchange contracts that qualify for designation, and designated exceptional accounting is applied to interest-rate swaps that qualify for exceptional accounting. B. Means for hedging and hedged item Means for hedging Hedged item Interest-rate swap Long-term loans payable Forward exchange contract Foreign currency receivables C. Hedging policy Hedging is allowed only for practical purposes and for the purpose of avoiding future risks of interest rate and foreign exchange rate fluctuations. D. Method for assessing the effectiveness of hedges At the start of hedging, the Company assesses the effectiveness of offset in interest rate or foreign exchange rate fluctuation. Then, during the period of hedging, the Company uses the predetermined assessment method to assess whether the high effectiveness of offset is maintained at every fiscal year-end. However, this assessment is omitted for interest-rate swaps subject to designated exceptional accounting. 6) Accounting for consumption taxes The tax-exclusion method is applied for consumption tax and local consumption tax. 7) Amortization of goodwill Goodwill is amortized equally over a period of 5 years. 20

21 2. Notes to Consolidated Balance Sheet (1) Assets offered as collateral and collateralized loans (Assets offered as collateral) Buildings and structures Machinery, equipment and vehicles Land Intangible assets Investment securities Total (Collateralized loans) Short-term loans payable Long-term loans payable Total 15,214 million yen 512 million yen 6,197 million yen 190 million yen 1,113 million yen 23,229 million yen 31,140 million yen 22,118 million yen 53,258 million yen (2) Accumulated depreciation of property, plant and equipment 35,479 million yen The accumulated amount of impairment loss is included in the amount of accumulated depreciation. (3) Financial covenants An amount of 24,570 million yen among loans is subject to financial covenants concerning ordinary income. 3. Notes to Consolidated Statement of Changes in Net Assets (1) Total number of issued shares as of this consolidated fiscal year-end Common stock 129,370,899 shares (2) Dividends 1) Dividends paid Resolution Type of stock Source of dividend Total dividends (million yen) Dividend per share (yen) Record date Effective date Ordinary General Meeting of Shareholders on June 28, 2011 Common stock Retained earnings March 31, 2011 June 29, ) Dividends whose record date is during this fiscal year but whose effective date is after the end of this fiscal year The following dividend for common stock is proposed for approval at the Ordinary General Meeting of Shareholders to be held on March 28, Resolution Type of stock Source of dividend Total dividends (million yen) Dividend per share (yen) Record date Effective date Ordinary General Meeting of Shareholders on March 28, 2012 Common stock Retained earnings December 31, 2011 March 29, Notes on Financial Instruments (1) Status of Financial Instruments The Group procures necessary funds mainly by borrowing from financial institutions based on the capital investment plan. A temporary surplus fund is invested in financial assets that are highly secure. 21

22 For customer credit risk concerning trade receivables (notes and accounts receivable-trade), write-off risk is kept lower by the division in charge according to the credit control rules. Investment securities are mainly stocks and the market value of listed stocks is checked quarterly. Borrowed money is used for working funds (mainly short-term) and capital investment funds (long-term). Interest-swap contracts are used against the interest fluctuation risk of some long-term loans payable, in order to fix the amount of interest expenses. Derivative transactions (related to foreign exchange and interest rate) are conducted only in the scope of practical purposes according to the internal control rules. (2) Current Value of Financial Instruments The amounts posted on the consolidated balance sheet, current values, and differences thereof as of December 31, 2011 (consolidated balance sheet date for this fiscal year) are as follows: Consolidated balance sheet amount (*1) Current value (*1) (million yen) Difference (1) Cash and deposits 6,241 6,241 (2) Notes and accounts receivable-trade (*2) 19,832 19,832 (3) Investment securities Other securities 1,527 1,527 (4) Notes and accounts payable-trade [14,427] [14,427] (5) Short-term loans payable (*3) [37,318] [37,318] (6) Long-term loans payable (*3) [35,503] [35,543] 40 (7) Derivative transactions (*1) Amounts for which the net total is payable are shown in [ ]. (*2) Notes and accounts receivable-trade are the net of the allowance for doubtful accounts. (*3) Current portion of long-term loans payable, an item included in short-term loans payable in the consolidated balance sheet, is included in long-term loans payable here. Note 1: Method for calculating the current value of financial instruments (1) Cash and deposits, and (2) Notes and accounts receivable-trade: Since the settlement periods for the foregoing are short, the current values thereof are almost equal to the carrying amount. Therefore, the corresponding carrying amount is used as the current value. (3) Investment securities: The going share price on the exchange is used as the current value. (4) Notes and accounts payable-trade, and (5) Short-term loans payable: Since the settlement periods for the foregoing are short, the current values thereof are almost equal to the carrying amount. Therefore, the corresponding carrying amount is used as the current value. (6) Long-term loans payable: The current value of long-term loans payable is calculated by discounting the total of principal and interest by an interest rate assumed in cases where similar borrowing is to be newly conducted. (7) Derivative transactions: The current value for derivative transactions is calculated based on the prices submitted by financial institutions. Note 2: Non-listed stocks (389 million yen included in the consolidated balance sheet) are not included in (3) Investment securities Other securities, as the identification of the current values is deemed to be extremely difficult because of the absence of market values and the inability to estimate future cash flows. 5. Notes to Per Share Information (1) Net assets per share yen (2) Net income per share 5.62 yen 22