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Kyocera 6-K 2007
Form 6-K
Table of Contents

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of June 2007

Commission File Number: 1-07952

KYOCERA CORPORATION

6 Takeda Tobadono-cho, Fushimi-ku,

Kyoto 612-8501, Japan

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F        X            Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(1):    

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Registration S-T Rule 101(b)(7):    

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes                        No        X    

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b); 82-


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

  KYOCERA CORPORATION
 

/s/ Akihiko Toyotani

  Akihiko Toyotani
  General Manager of Finance Division

Date: June 6, 2007

 


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Information furnished on this form :

EXHIBITS

 

Exhibit

    Number    

 

   
1.  

Notice of the 53rd Ordinary General Meeting of Shareholders

2.   Report for the year ended March 31, 2007 (Accompanying Materials for the 53rd Ordinary General Meeting of Shareholders)


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Notice of the 53rd Ordinary General Meeting of Shareholders

to be held in Kyoto, Japan on June 27, 2007

Kyocera Corporation

6 Takeda Tobadono-cho, Fushimi-ku, Kyoto, Japan

Notice:

 

1. This is an English translation from Japanese language of the Notice of the 53rd Ordinary General Meeting of Shareholders distributed to shareholders in Japan. The translation is prepared solely for reference and convenience of foreign shareholders. In the case of any discrepancy between this translation and the Japanese original, the latter shall prevail.

 

2. The Notice of Resolution for the 53rd Ordinary General Meeting of Shareholders will be available at the following website of Kyocera Corporation within 5 days after the Meeting.

http://global.kyocera.com/ir/s_info.html


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June 6, 2007

To Our Shareholders:

Notice of the 53rd Ordinary General Meeting of Shareholders

This is to inform you that Kyocera Corporation (the “Company”) will hold its 53rd Ordinary General Meeting of Shareholders, as described below, which you are cordially invited to attend.

If you are unable to attend the meeting, please exercise your voting rights in written form or through electronic methods, after examining the attached reference materials for general meeting of shareholders, no later than 5:30 p.m. Tuesday, June 26, 2007, Japan time.

 

1. Time and Date: 10:00 a.m. on Wednesday, June 27, 2007, Japan time

 

2. Place: 20th Floor Event Hall at the head office of the Company,
     6 Takeda Tobadono-cho, Fushimi-ku, Kyoto, Japan

3. Purpose of the Meeting:

Matters to be reported upon:

 

  1. Reporting of the substance of the business report, the consolidated financial statements and the result of audit of consolidated financial statements by the Accounting Auditor and the Board of Corporate Auditors for the year ended March 31, 2007; and

 

  2. Reporting of the substance of the non-consolidated financial statements for the year ended March 31, 2007

Matters to be resolved:

 

Agendum No. 1:    Disposition of Surplus
Agendum No. 2:    Election of twelve (12) Directors
Agendum No. 3:    Election of one (1) Corporate Auditor
Agendum No. 4:    Election of Accounting Auditor
Agendum No. 5:    Bonuses to Directors and Corporate Auditors
Agendum No. 6:    Payment of retirement allowance to a retiring Director

 

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4. Matters relating to the Convocation:

[Treatment in case of multiple exercises of voting rights by a shareholder]

 

  (1) In the event that any shareholder exercises voting rights in written form as well as through electronic methods (the Internet, etc.), the exercise of voting rights through electronic methods shall supersede as the effective exercise of the voting rights.

 

  (2) In the event of multiple exercises of voting rights through electronic methods (the Internet, etc.) by any shareholder, the last exercise of voting rights through electronic methods shall supersede as the effective exercise of the voting rights.

 

Very truly yours,
KYOCERA CORPORATION
Makoto Kawamura
President and Representative Director

Notes:

 

1. If you attend the Meeting, please submit the enclosed form for exercising voting rights to the receptionist.

 

2. In the event that any change is necessary in the reference documents for the General Meeting of Shareholders, the business report, the consolidated financial statements and the non-consolidated financial statements, the Company shall give notice thereof to shareholders by posting it on the Company’s website http://global.kyocera.com/ir/index.html), which can be accessed through the Internet.

 

2


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Reference Materials for General Meeting of Shareholders

Agenda and References are as follows:

Agendum No. 1: Disposition of Surplus

The Company considers that the best way to respond to shareholders’ expectations is to improve the consolidated performance, thus enhancing the corporate value, of the Company into the future.

The Company takes strongly into consideration the linkage between dividend amounts and the consolidated performance of the Company and has implemented a dividend policy aiming for a consolidated dividend ratio of approximately 20% to 25%. In addition, the Company determines dividend amounts based on an overall assessment, taking into consideration various factors including the amount of capital expenditures necessary for the medium to long-term growth of the Company.

Pursuant to this policy and based on performance through the year ended March 31, 2007, the Company proposes a year-end dividend for the year ended March 31, 2007 of 60 yen per share, a 10 yen increase as compared with the year ended March 31, 2006. When aggregated with the interim dividend in the amount of 50 yen, the total annual dividend amount will be 110 yen per share.

The Company also proposes that other general reserve shall be set aside, in order to take into account the necessary reserve amounts for creation of new businesses, development of new markets and new technologies and acquisition of outside management resources needed to achieve stable and sustainable corporate growth of the Company.

The proposed disposition of surplus is as follows:

 

1. Matters relating to Year-end Dividend

 

  (1) Type of assets distributed as dividend: Cash

 

  (2) Matters with respect to allocation to shareholders of assets distributed as dividend and aggregate amount thereof:

60 yen per share of Common Stock of the Company.

The aggregate amount thereof shall be 11,318,945,340 yen.

 

  (3) Effective Date of Distribution of the Surplus: June 28, 2007

 

2. Matters relating to Other General Reserve

 

  (1) Category of surplus to increase and amount thereof:

Other general reserve: 40,000,000,000 yen.

 

  (2) Category of surplus to decrease and amount thereof

Unappropriated retained earnings: 40,000,000,000 yen.

 

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Agendum No. 2: Election of twelve (12) Directors

The terms of office of all thirteen (13) Directors will expire at the close of this General Meeting of Shareholders. Accordingly, it is proposed that twelve (12) Directors be elected.

The candidates for Director are as follows:

 

No

  

Name

(date of birth)

  

Brief Personal History, Title, Status and

Representation of other Companies

  

Shares of the
Company
Owned by
Candidate

               shares
1   

Kensuke Itoh

(Dec. 17, 1937)

   Apr. 1959    Joined the Company   

527,072

      May 1975    Director of the Company   
      Aug. 1979    Managing Director of the Company   
      July 1981    Senior Managing Director of the Company   
      June 1985    Executive Vice President and Representative Director of the Company   
      June 1989    President and Representative Director of the Company   
      June 1999    Chairman of the Board and Representative Director of the Company   
      June 2005    Advisor and Director of the Company [present]   
2   

Noboru Nakamura

(Oct. 6, 1944)

   Mar. 1967    Joined the Company    4,100
      June 1991    Director of the Company   
      June 1995    Managing Director of the Company   
      June 1997    Senior Managing Director and Representative Director of the Company   
      June 1999    Executive Vice President and Representative Director of the Company   
      Aug. 2002    Executive Vice President and Representative Director of Kyocera Chemical Corporation   
      June 2003    Director of the Company   
      June 2005    President and Representative Director of Kyocera Chemical Corporation   
      Sept. 2005    President and Representative Director of Japan Medical Materials Corporation   
      Apr. 2006    Chairman of the Board and Representative Director of the Company [present]   
3   

Masahiro Umemura

(Aug. 8, 1943)

   Mar. 1966    Joined the Company    5,100
      June 1991    Director of the Company   
      June 1993    Managing Director of the Company   
      June 1997    Senior Managing Director and Representative Director of the Company   
      June 1999    Executive Vice President and Representative Director of the Company   
      June 2003    Representative Director and Executive Vice President (Executive Officer) of the Company   
      June 2005    Vice Chairman of the Board and Representative Director and Chief Financial Officer of the Company   
      Apr. 2006   

Vice Chairman of the Board and Representative Director of the Company

(In charge of Finance and Corporate Development) [present]

  

 

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No

  

Name

(date of birth)

  

Brief Personal History, Title, Status and

Representation of other Companies

  

Shares of the
Company
Owned by
Candidate

4   

Yuzo Yamamura

(Dec. 4, 1941)

   Mar. 1965    Joined the Company    82,000
      June 1987    Director of the Company   
      Dec. 1992    President and Representative Director of Kyocera ELCO Corporation [present]   
      June 1993    Retired from office as Director of the Company   
      June 1995    Senior Managing Director and Representative Director of the Company   
      June 1999    Retired from office as Director of the Company   
      June 2003    Director of the Company   
      Apr. 2006    Vice Chairman of the Board and Representative Director of the Company [present]   
      Aug. 2006    General Manager of Corporate Communication Equipment Group [present]   

5

  

Naoyuki Morita

(Apr. 8, 1942)

   Mar. 1967    Joined the Company    5,600
      June 1987    Director of the Company   
      June 1989    Managing Director of the Company   
      June 1995    Senior Managing Director and Representative Director of the Company   
      Sept. 1995    President and Representative Director of Kyocera Communication Systems Co., Ltd.   
      June 1999    Retired from office as Director of the Company   
      June 2003    Director of the Company   
      Apr. 2006    Vice Chairman of the Board and Representative Director of the Company [present]   
      June 2006    Chairman of the Board and President and Representative Director of Kyocera Communication Systems Co., Ltd. [present]   

6

  

Makoto Kawamura

(Aug. 13, 1949)

   Mar. 1973    Joined the Company    3,000
      June 2001    Director of the Company   
      Aug. 2002    General Manager of Corporate Cutting Tool Division of the Company   
      June 2003    Retired from office as Director of the Company   
         Managing Executive Officer of the Company   
      June 2005    President and Representative Director and Chief Operating Officer of the Company   
      Apr. 2006    President and Representative Director and President and Executive Officer of the Company [present]   

 

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No

  

Name

(date of birth)

  

Brief Personal History, Title, Status and

Representation of other Companies

  

Shares of the
Company
Owned by
Candidate

7

  

Koji Seki

(Dec. 8, 1937)

   May 1969    Joined Cybernet Electronics Corporation    2,318
      June 1989    Director of the Company   
      Oct. 1998    Trustee of Mita Industrial Co., Ltd. (Currently Kyocera Mita Corporation)   
      June 1999    Managing Director of the Company   
      Jan. 2000    President and Representative Director of Kyocera Mita Corporation   
      June 2001    Retired from office as Director of the Company   
      June 2003    Director of the Company [present]   
      June 2004    Chairman of the Board and Representative Director of Kyocera Mita Corporation   
      Apr. 2006    Chairman of the Board and President and Representative Director of Kyocera Mita Corporation   
      Apr. 2007    Chairman of the Board and Representative Director of Kyocera Mita Corporation [present]   

8

  

Michihisa Yamamoto

(Nov. 13, 1942)

   Mar. 1970    Joined the Company    9,232
      June 1987    Director of the Company   
      June 1989    Managing Director of the Company   
      June 1992    Senior Managing Director and Representative Director of the Company   
      June 1999    Executive Vice President and Representative Director of the Company   
      June 2003    Representative Director and Executive Vice President (Executive Officer) of the Company   
      Nov. 2004    President and Representative Director of Kyocera Optec Co., Ltd.   
      June 2005    Director of the Company [present]   
      Aug. 2006    Deputy General Manager of Corporate Communication Equipment Group (In charge of Manufacturing) [present]   

9

  

Isao Kishimoto

(Nov. 30, 1943)

   Mar. 1967    Joined the Company    4,100
      June 1993    Director of the Company   
      June 1997    Managing Director of the Company   
      June 2001    Senior Managing Director of the Company   
      June 2002    President and Representative Director of Kinseki, Limited (Currently Kyocera Kinseki Corporation) [present]   
      June 2003    Director of the Company [present]   

 

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No

  

Name

(date of birth)

  

Brief Personal History, Title, Status and

Representation of other Companies

  

Shares of the
Company
Owned by
Candidate

10   

Hisao Hisaki

(July 2, 1946)

   Mar. 1969    Joined the Company    3,171
      June 1991    Director of the Company [present]   
      Apr. 2000    General Manager of Communication Systems Group of the Company   
      Aug. 2002    General Manager of Corporate Communication Systems Sales Division of the Company   
      June 2003    Managing Executive Officer of the Company   
      July 2003    Executive Vice President of Kyocera (Tianjin) Sales & Trading Corporation   
      Apr. 2005    President of Kyocera (Tianjin) Sales & Trading Corporation   
      Mar. 2007    Chairman of the Board and President of Kyocera (Tianjin) Sales & Trading Corporation [present]   
11   

Rodney N. Lanthorne

(Feb. 5, 1945)

   Sept. 1979    Joined Kyocera International, Inc.    (3,562 ADR)
      Jan. 1987    President and Director of the above company [present]   
      June 1989    Director of the Company   
      Mar. 1990    Managing Director of the Company   
      June 1999    Senior Managing Director and Representative Director of the Company   
      June 2003    Director of the Company [present]   
12   

John S. Gilbertson

(Dec. 4, 1943)

   Jan. 1981    Joined AVX Corporation    (17,418 ADR)
      May 1994    Chief Operating Officer of the above company   
      June 1995    Director of the Company   
      June 1997    Director and President and Chief Operating Officer of AVX Corporation   
      June 1999    Managing Director of the Company   
      July 2001    President and Director and Chief Executive Officer of AVX Corporation [present]   
      June 2003    Director of the Company [present]   

Notes:

 

1. Mr. Kensuke Itoh is a Representative Director of Kyoto Purple Sanga Co., Ltd., with which the Company engages in transactions relating to advertisement.

 

2. Mr. Noboru Nakamura is a Representative Director of Japan Medical Material Corporation with which the Company engages in transactions relating to office rental and processing of bioceram parts.

 

3. Mr. Naoyuki Morita is a Representative Director of Kyocera Communication Systems Co., Ltd., with which the Company engages in transactions relating to equipment rental.

 

4. Mr. Makoto Kawamura is a Chairman of the Board of Dongguan Shilong Kyocera Optics Co., Ltd. with which the Company engages in transactions relating to sale and purchase of cutting tools and thin film devices.

 

5. Mr. Hisao Hisaki is a Chairman of the Board and President of Kyocera (Tianjin) Sales & Trading Corporation, with which the Company engages in transactions relating to sale of cutting tools and electronic devices.

 

6. Mr. John S. Gilbertson is a President and Director and Chief Executive Officer of AVX Corporation, with which the Company engages in transactions relating to sale and purchase of electronic devices.

 

7. There are no special interests between the candidates and the Company other than the aforementioned.

 

8. Candidates who beneficially own Ordinary Shares of the Company by way of American Depositary Shares (ADR) are as follows:

Mr. Rodney N. Lanthorne: 3,562 shares of Common Stock of the Company (3,562 ADR)

Mr. John S. Gilbertson: 17,418 shares of Common Stock of the Company (17,418 ADR)

 

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Agendum No. 3: Election of one (1) Corporate Auditor

The term of office of a Corporate Auditor, Mr. Yasuo Akashi, will expire at the close of this General Meeting of Shareholders. Accordingly, it is proposed that one (1) Corporate Auditor be elected.

With respect to this Agendum, consent from the Board of Corporate Auditors has been obtained.

The candidate for Corporate Auditor is as follows:

Name

(date of birth)

  

Brief Personal History, Position, Status
and Representation of other Companies

  

Shares of the Company
Owned by Candidate

Yasuo Akashi

(May 29, 1944)

   Mar. 1967    Joined the Company    6,323 shares
   June 1991    Director of the Company   
   June 1993    Managing Director of the Company   
   June 1997    Senior Managing Director and Representative Director of the Company   
   June 2003    Full-time Corporate Auditor of the Company [present]   

Note: There are no special interests between the candidate and the Company.

 

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Agendum No. 4: Election of Accounting Auditor

The temporary Accounting Auditor of the Company, MISUZU Audit Corporation, will retire from the office of Accounting Auditor as the term of office will expire at the close of this General Meeting of Shareholders. Accordingly, it is proposed to elect Kyoto Audit Corporation as Accounting Auditor.

Kyoto Audit Corporation, the candidate to become the Accounting Auditor, was established in March 2007, as set forth below. It plans to retain accountants of the Kyoto Office of MISUZU Audit Corporation in July 2007, thereby becoming an audit corporation with the sufficient number of accountants to conduct the audit of the Company.

The Company believes that the Kyoto Audit Corporation, which will retain accountants of the Kyoto Office of MISUZU Audit Corporation, is the appropriate choice to become the accounting auditor of the Company for the following reasons:

 

(1) Accountants of the Kyoto Office of MISUZU Audit Corporation have conducted the audit of the Company in an appropriate and stringent manner;

 

(2) Accountants of the Kyoto Office of MISUZU Audit Corporation are very familiar with the business of the Company and its accounting policy; and

 

(3) Continuity of the accounting audit can be secured because of the aforementioned reasons.

With respect to this Agendum, consent from the Board of Corporate Auditors has been obtained.

The candidate for Accounting Auditor is as follows:

 

Name    Kyoto Audit Corporation
Office    8 Naginataboko-cho, Shijo-dori Karasuma-Higashi-iru, Shimogyo-ku, Kyoto-City.
History    Established in March 2007
Outline    Capital amount:    10 million yen.
   Number of employees:    5 certified public accountants

(As of March 31, 2007)

 

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Agendum No. 5: Bonuses to Directors and Corporate Auditors

The Company proposes to pay bonuses to the thirteen (13) Directors and five (5) Corporate Auditors in office as of March 31, 2007 in an aggregate amount of 136,000,000 yen, which includes 125,800,000 yen for Directors and 10,200,000 yen for Corporate Auditors, taking into consideration the performance of the Company during the year ended March 31, 2007.

Agendum No. 6: Payment of Retirement Allowance to a retiring Director

Mr. Yasuo Nishiguchi will retire from the office of Director upon expiration of his term at the close of this General Meeting of Shareholders. The Company proposes to pay a retirement allowance to the Director for service rendered during his term in office, in an amount which is reasonable and in accordance with the standards prescribed by the Company.

It is also proposed that the particular amount, timing and method of payment of such allowance be determined through discussion at the meeting of the Board of Directors.

The brief personal history of the retiring Director is as follows:

 

Name

  

Brief Personal History

Yasuo Nishiguchi    June 1987    Director of the Company
   June 1989    Managing Director of the Company
   June 1992    Senior Managing Director and Representative Director of the Company
   June 1997    Executive Vice President and Representative Director of the Company
   June 1999    President and Representative Director of the Company
   June 2005    Chairman of the Board and Representative Director of the Company
   Apr. 2006    Advisor and Director of the Company [present]

 

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Report for the year ended March 31, 2007

(Accompanying Materials for the 53rd Ordinary General Meeting of Shareholders)

Kyocera Corporation

 

Notice: This is an English translation from Japanese language of the Report for the year ended March 31, 2007 of Kyocera Corporation distributed to shareholders in Japan. The translation is prepared solely for reference and convenience of foreign shareholders. In the case of any discrepancy between this translation and the Japanese original, the latter shall prevail.


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Table of Contents

 

Kyocera Management Philosophy

   1

Greetings

   2
  

Accompanying Materials for the 53rd Ordinary General Meeting of Shareholders are as follows:

  

Business Report

  

1. Current Conditions of Kyocera Corporation and its Consolidated Subsidiaries

   3

2. Shares

   15

3. Stock Acquisition Rights

   16

4. Directors and Corporate Auditors

   17

5. Accounting Auditor

   20

6. System and Policy

   22

Consolidated Balance Sheets

   26

Consolidated Statements of Income

   28

Consolidated Statement of Stockholders’ Equity

   29

Consolidated Cash Flows (For Reference Only)

   30

Notes to Consolidated Financial Statements

   31

Balance Sheets

   34

Statements of Income

   37

Statement of Changes in Net Assets

   38

Notes to Financial Statements

   39

Copy of Audit Report of Accounting Auditors on Consolidated Financial Statements

   43

Copy of Audit Report of Accounting Auditors

   44

Copy of Audit Report of Board of Corporate Auditors

   45


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Kyocera Management Philosophy

Corporate Motto

“Respect the Divine and Love People”

Preserve the spirit to work fairly and honorably,

respecting people, our work, our company and our global community.

Management Rationale

To provide opportunities for the material and intellectual growth of all our

employees, and through our joint effort, contribute to the advancement of

society and humankind.

Management Philosophy

To coexist harmoniously with nature and society.

Harmonious coexistence is the underlying foundation of all our business

activities as we work to create a world of abundance and peace.

Kyocera was built upon a unique foundation: the human spirit

When I founded Kyocera, I didn’t have sufficient funding, let alone decent facilities or equipment. However, I was fortunate enough to have associates with whom I felt a spiritual bond. We shared every joy and pain, just like a family. I therefore decided to run this company with faith in the human spirit. The human spirit is said to be easily changed. Yet, when a deep sense of trust exists, I have found that there is nothing stronger or more reliable than our spiritual ties.

Today, this faith in the human spirit forms the very heart of Kyocera.

Kazuo Inamori

Chairman Emeritus

 

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Greetings

We are pleased to present to you our Report for the year ended March 31, 2007 (fiscal 2007).

During fiscal 2007, we pushed forward with the implementation of Kyocera’s “Amoeba Management,” a unique management technique which has been a driving force for growth since our earliest days. Our objectives here were to revitalize all work areas to bring about “operational excellence” and to boost ability to achieve goals, or “executional excellence.” These efforts enabled us to aggressively launch new products and enhance productivity. As a result, Kyocera achieved significant increases in sales and profits in fiscal 2007.

Going forward, Kyocera aims to be “a creative company that continues to grow” by ensuring sustainable corporate growth amid an ever-changing business environment. We will accomplish this by driving sales expansion and higher profitability in each business, and through the pursuit of synergies within the Group. At the same time, we seek to be respected by society from the perspective of corporate ethics.

We will very much appreciate the ongoing support of our shareholders for the efforts of Kyocera Group.

 

Noboru Nakamura

Chairman of the Board and Representative Director

Makoto Kawamura

President and Representative Director

 

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(Accompanying Materials for the 53rd Ordinary General Meeting of Shareholders)

Business Report (From April 1, 2006 to March 31, 2007)

1. Current Conditions of Kyocera Corporation and its Consolidated Subsidiaries

(1) Business Progress and Results

Despite slow growth in individual consumption, the Japanese economy expanded moderately during the year ended March 31, 2007 (hereafter, “fiscal 2007” refers to the fiscal year ended March 31, 2007, and other fiscal years are referred to in a corresponding manner.) due to increasing capital expenditures on the back of rising corporate earnings supported by strong exports. The U.S. economy continued to expand steadily on account of growth in private capital investment, although signs of a decrease in housing investment began to appear in the second half of fiscal 2007. Increasing capital expenditures and exports drove ongoing growth in the European economy. The Chinese economy remained buoyant due to persistent growth in corporate production activities and exports.

In the digital consumer equipment market, which is the principal market for Kyocera Corporation and its consolidated subsidiaries (“Kyocera” or “Kyocera Group”), a significant year-on-year increase in production of mobile phone handsets and digital TVs coupled with expanded production of new game consoles led to strong demand for components for these electronic devices.

Consolidated Financial Results

During fiscal 2007, efforts were made to strengthen Kyocera’s “Amoeba Management,” which is a unique management control system of Kyocera, in order to revitalize all business segments (“operational excellence”) and to boost ability to achieve goals (“executional excellence”) across Kyocera. Amid a favorable market environment manifesting strong demand for digital consumer equipment throughout fiscal 2007, Kyocera Group worked aggressively to launch new products and to improve productivity with the objective of achieving continuous sales expansion and high profitability. As a result, sales and profits increased in both Components and Equipment Businesses compared with fiscal 2006.

Consolidated net sales for fiscal 2007 amounted to ¥1,283,897 million, an increase of 9.4% compared with fiscal 2006. Sales in all of four reporting segments in Components Business increased over 10% compared with fiscal 2006. Sales also increased in Equipment Business due to higher sales in the Telecommunications Equipment Group and the Information Equipment Group.

All reporting segments in the Components and the Equipment Businesses recorded increases in profits. Profit from operations increased by 35.5% to ¥135,102 million, and income from continuing operations before income taxes and minority interests increased by 33.5% to ¥156,540 million. Net income increased by 52.8% to ¥106,504 million compared with fiscal 2006 due to tax refunds of ¥4,305 million pursuant to the voidance of a portion of the tax assessment relating to transfer pricing adjustment.

Notes:

 

1. The amounts, number of shares and percentages(%) in Business Report are rounded to the nearest number constituting a unit.
2. Graphs in Business Report are for reference only.

 

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Highlights of Consolidated Results

 

LOGO   LOGO
LOGO   LOGO

Note:

Kyocera Corporation sold its shares of Kyocera Leasing Co., Ltd., a subsidiary engaged in financing services. As a result, business results and profit on sale of its shares of Kyocera Leasing Co., Ltd. for fiscal 2007 have been recorded as income from discontinued operations in conformity with accounting principles generally accepted in the U.S. Net sales, profit from operations and income from continuing operations before income taxes and minority interests for fiscal 2004, 2005 and 2006 have been retrospectively reclassified.

Consolidated Financial Results by Reporting Segment

Components Business:

Sales in Components Business increased by 11.9% compared with fiscal 2006 due to rising demand for digital consumer equipment such as mobile phone handsets, digital TVs and new game consoles. Operating profit in the Components Business increased by 34.6% as a result of improved profitability achieved through the effects of sales growth and reinforcement of the “Amoeba Management.”

Consolidated results by reporting segment in the Components Business are as follows:

 

1) Fine Ceramic Parts Group

Net Sales increased by 17.2% compared with fiscal 2006 to ¥81,326 million.

Operating Profit increased by 42.3% compared with fiscal 2006 to ¥15,677 million.

 

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Sales and operating profit in this reporting segment increased compared with fiscal 2006 due primarily to increased demand for ceramic parts for semiconductor fabrication equipment, spurred by strong production activities in the semiconductor industry.

 

LOGO  

LOGO

 

2) Semiconductor Parts Group

Net Sales increased by 12.6% compared with fiscal 2006 to ¥152,292 million.

Operating Profit increased by 25.2% compared with fiscal 2006 to ¥22,210 million.

Sales and operating profit in this reporting segment increased compared with fiscal 2006 due to rising demand for ceramic packages used in mobile phone handsets and digital cameras.

 

LOGO   LOGO

 

3) Applied Ceramic Products Group

Net Sales increased by 11.5% compared with fiscal 2006 to ¥131,103 million.

Operating Profit increased by 2.1% compared with fiscal 2006 to ¥22,334 million.

Sales and operating profit in this reporting segment increased compared with fiscal 2006 due to sales growth of solar energy products, particularly in the European market, combined with increasing sales of medical materials and cutting tools.

 

LOGO   LOGO

 

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4) Electronic Device Group

Net Sales increased by 10.2% compared with fiscal 2006 to ¥286,156 million.

Operating Profit increased by 63.7% compared with fiscal 2006 to ¥44,487 million.

Sales and operating profit increased substantially in this reporting segment increased compared with fiscal 2006. Sales of capacitors, crystal-related components and connectors, etc., expanded due to strong production activity for digital consumer equipment. In addition, AVX Corporation, a U.S. subsidiary, improved its performance.

 

LOGO   LOGO

Equipment Business:

Sales in the Equipment Business increased by 7.8% compared with fiscal 2006 due to increased sales in the Telecommunications Equipment Group and the Information Equipment Group. Through the positive effect of increased sales in the Information Equipment Group, combined with improved profitability in the Telecommunications Equipment Group and the Optical Equipment Group, operating profit for the Equipment Business increased by 71.0% compared with fiscal 2006.

Consolidated results by reporting segment in the Equipment Business are as follows:

 

1) Telecommunications Equipment Group

Net Sales increased by 9.7% compared with fiscal 2006 to ¥251,183 million .

Operating Profit was improved by ¥1,997 million compared with fiscal 2006 to ¥291 million.

Sales in this reporting segment increased compared with fiscal 2006 due to higher sales of new mobile phone handsets in Japan and overseas. Operating profit improved due to the positive effect of increased sales in the domestic mobile phone handset business and a reduction in loss at Kyocera Wireless Corp., a U.S. subsidiary.

 

LOGO   LOGO

 

2) Information Equipment Group

Net Sales increased by 7.8% compared with fiscal 2006 to ¥268,781 million.

Operating Profit increased by 28.6% compared with fiscal 2006 to ¥33,970 million.

 

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Sales in this reporting segment increased compared with fiscal 2006 due to expanded sales of digital multifunctional systems and printers overseas resulting from aggressive introduction of new products and enhanced marketing activities. The positive effect of sales growth, as well as the yen’s depreciation against the Euro and the U.S. dollar, led to an increase in operating profit.

 

LOGO   LOGO

 

3) Optical Equipment Group

Net Sales decreased by 21.7% compared with fiscal 2006 to ¥11,704 million.

Operating Loss was reduced by ¥3,879 million compared with fiscal 2006 to ¥1,895 million.

Sales in this reporting segment decreased compared with fiscal 2006 due mainly to the downsizing of camera business, while operating loss was reduced through decreased expenses for structural reforms.

 

LOGO   LOGO

 

Others:

Net Sales increased by 7.0% compared with fiscal 2006 to ¥125,656 million.

Operating Profit was reduced by 2.3% compared with fiscal 2006 to ¥8,776 million.

Sales in this reporting segment increased compared with fiscal 2006 due mainly to growth in the telecommunications engineering business at Kyocera Communication Systems Co., Ltd. Although profit grew at Kyocera Chemical Corporation, operating profit in this reporting segment slightly declined as a result of impairment of goodwill at a Japanese subsidiary.

 

LOGO   LOGO

 

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Note:

Kyocera Corporation sold its shares of Kyocera Leasing Co., Ltd., a subsidiary engaged in financing services included in “Others.” As a result, business results and profit on sale of its shares of Kyocera Leasing Co., Ltd. for fiscal 2007 have been recorded as income from discontinued operations in conformity with accounting principles generally accepted in the U.S. Net sales and operating profit for fiscal 2004, 2005 and 2006 have been retrospectively reclassified.

Management Measures and Significant Decision implemented during fiscal 2007

 

1) Effective as from April 1, 2006, Kyocera Corporation shifted to a new management system. The executive officer system undertaken by the officers with the titles of Chief Executive Officer, Chief Financial Officer and Chief Operating Officer was abandoned, and a new system in which President and Representative Director has total responsibility for formulation and execution of group management strategies was introduced.

 

2) In July 2006, Kyocera Kinseki Corporation acquired Hertz Technology Inc. as a wholly-owned subsidiary in order to further enhance its crystal products business. Through this move, the Kyocera Group will gain new technology for tuning-fork crystal units, demand for which is expected to grow for mobile phones and mobile music players, and thus expand its business as a total crystal device manufacturer. A wide range of products will be developed in the crystal products business going forward. Hertz Technology Inc. was renamed Kyocera Kinseki Hertz Corporation in October 2006.

 

3) As part of its policy of business selection and concentration, Kyocera Corporation transferred its shares of Kyocera Leasing Co., Ltd., a subsidiary engaged in financing, to Diamond Lease Company Limited in August 2006. In line with this, ¥5,175 million was recorded as income from discontinued operations.

 

4) In the year ended March 31, 2005, Kyocera Corporation recorded ¥12,748 million as additional taxes accompanying the receipt of a tax assessment notice based on transfer pricing adjustments from the Osaka Regional Taxation Bureau. On May 24, 2005, Kyocera filed a notice of complaint in respect of such assessment with the Bureau. On September 25, 2006, Kyocera Corporation received decision letter from the Bureau that voided a portion of the original assessment. In accordance with this decision, ¥4,305 million of tax refunds, including local taxes, was recognized as tax refunds in fiscal 2007. Kyocera Corporation remains in disagreement with the decision concerning the portion of the original assessment that was not voided, and therefore, on October 23, 2006, Kyocera submitted a written claim for examination to the Osaka Board of Tax Appeals. Furthermore, Kyocera Corporation submitted a notice stating mutual agreement with the United States to the National Tax Agency on December 26, 2006 for the purpose of avoiding duplicate taxation within Kyocera Group.

(2) Capital Expenditures

Capital expenditures for fiscal 2007 totaled ¥69,896 million, a decrease by ¥18,964 million or 21.3% compared with fiscal 2006. The main focus were on the construction of the new plants to increase production, the construction of production lines for new products and the streamlining of production processes to improve productivity in the Fine Ceramic Parts Group, the Semiconductor Parts Group, the Applied Ceramic Products Group, the Electronic Device Group and the Information Equipment Group.

Required funds for fiscal 2007 were mainly financed from internal funds.

(3) Management Challenges

To be “a creative company that continues to grow,” Kyocera seeks to continuously expand sales and to attain high profitability in its Components and Equipment Businesses. To accomplish these goals, Kyocera will continue to reinforce the “Amoeba Management” and pursue “creation of new value” in fiscal 2008.

 

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Kyocera plans to strengthen “operational excellence,” which refers to vitality in the workplace, across development, manufacturing, sales and back office divisions. The goal is to boost “executional excellence,” which means the ability to achieve goals, and thus becoming a highly profitable company.

In addition, Kyocera aims to improve its quality, optimize manufacturing locations worldwide and expand production capacity in order to enhance management foundations in the mid to long-term range. Kyocera will create new businesses and markets by pursuing group synergies. Efforts will also be made to strengthen strategic businesses and to improve efficiency in operation of assets.

 

Forward-Looking Statements

Certain of the statements made in this document are forward-looking statements (within the meaning of Section 21E of the U.S. Securities and Exchange Act of 1934), which are based on our current assumptions and beliefs in light of the information currently available to us. These forward-looking statements involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors include, but are not limited to: general economic conditions in our markets, which are primarily Japan, North America, Europe, and Asia, particularly including China; unexpected changes in economic, political and legal conditions in China; our ability to develop, launch and produce innovative products, including meeting quality and delivery standards, and our ability to otherwise meet the advancing technical requirements of our customers, particularly in the highly competitive markets for ceramics, semiconductor parts and electronic components manufacturing delays or defects resulting from outsourcing or internal manufacturing processes which may adversely affect our production yields and operating results; factors that may affect our exports, including a strong yen, political and economic instability, difficulties in collection of accounts receivable, decrease in cost competitiveness of our products, increases in shipping and handling costs, difficulty in staffing and managing international operations, and inadequate protection of our intellectual property; changes in exchange rates, particularly between the yen and the U.S. dollar and euro, respectively, in which we make significant sales; inability to secure skilled employees, particularly engineering and technical personnel; insufficient protection of our trade secrets and patents; holding licenses to continue to manufacture and sell certain of its products, the expense of which may adversely affects its results of operations; laws and regulations relating to the taxation, and to manufacturing and trade; events that may impact negatively on our markets or supply chain, including terrorist acts and outbreaks of diseases; the occurrence of natural disasters, such as earthquakes, in locations where our manufacturing and other key business facilities are located; and fluctuations in the value of, and impairment losses on, securities and other assets held by us, and changes in accounting principles. Such risks, uncertainties and other factors may cause our actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements included in this document.

 

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(4) Four-Year Financial Summary

         For the years ended March 31,
      2004    2005    2006    2007

Net sales

 

(yen in millions)

   1,132,696    1,173,660    1,173,544    1,283,897

Income from continuing operations before income taxes and minority interests

 

(yen in millions)

   110,284    104,013    117,237    156,540

Net income

 

(yen in millions)

   68,086    45,908    69,696    106,504

Basic earnings per share

 

(yen)

   364.79    244.86    371.68    566.03

Total assets

 

(yen in millions)

   1,794,758    1,745,519    1,931,522    2,130,464

Net assets

 

(yen in millions)

   1,150,453    1,174,851    1,289,077    1,514,560

Net assets per share

 

(yen)

   6,136.26    6,266.50    6,865.75    8,028.45

Notes:

 

  1. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.
  2. Basic earnings per share is calculated using the average number of shares in issue during each respective fiscal period, and net assets per share is calculated using the number of shares in issue at the end of each respective fiscal period.
  3. Kyocera Corporation sold its shares of Kyocera Leasing Co., Ltd., a subsidiary engaged in financing services. As a result, business results and profit on sale of its shares of Kyocera Leasing Co., Ltd. for fiscal 2007 have been recorded as income from discontinued operations in conformity with accounting principles generally accepted in the U.S. Figures for fiscal 2004, 2005 and 2006 have been retrospectively reclassified.
  4. In fiscal 2004, consolidated net sales increased compared with fiscal 2003 because of steady growth in sales by the Semiconductor Parts Group and the Electronic Device Group included in the Components Business, supported by an increase in demand in the electronics industries. Consolidated net income increased, in spite of negative aspects such as a write down of inventories at a U.S. subsidiary, mainly due to an increase in profits from the Information Equipment Group including digital multifunctional systems, the Semiconductor Parts Group, the Applied Ceramic Products Group and settlement gains of a substitutional portion of the benefit obligations related to employees pension fund.
  5. In fiscal 2005, consolidated net sales increased compared with fiscal 2004 reflecting increases in sales of the Semiconductor Parts Group and the Electronic Device Group due to burgeoning component demand in the electronics industry in the first half, although sales in the Telecommunications Equipment Group declined mainly due to sluggish sales of mobile phone handsets. Consolidated net income decreased due to a one-time loss related to structural reforms in the Telecommunications Equipment Group and the Optical Equipment Group that aimed at boosting profitability, as well as additional taxes imposed as a result of tax assessment relating to transfer pricing on trade in products in past years between Kyocera Corporation and its overseas subsidiaries.
  6. In fiscal 2006, consolidated net sales remained at the same level as fiscal 2005 due to the decline in sales prices of components and the downsizing of camera business despite the steady increase in sales of the Applied Ceramic Products Group such as solar energy business. Consolidated net income increased as structural reforms came to fruition.
  7. Performance for fiscal 2007 is as described in “(1) Business Progress and Results” above.

 

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(5) Principal Businesses (as of March 31, 2007)

Kyocera manufactures and sells a highly diversified range of products, including components involving fine ceramic technologies and applied ceramic products, telecommunications and information equipment and optical instruments, etc. The principal products are listed below:

 

Reporting Segments

 

Principal Products

Fine Ceramic Parts Group   Information & Telecommunication Components, Sapphire Substrates, Components for Semiconductor Fabrication Equipment, Components for LCD Fabrication Equipment, Automotive Components, ITS related Components, Ceramic Components for General Industrial Equipment
Semiconductor Parts Group   Surface Mount Device (SMD) Ceramic Packages, CCD /CMOS Sensor Ceramic Packages, LSI Ceramic Packages, Wireless Communication Device Packages, Optical Communication Device Packages and Components, Organic Multilayer Packages and Substrates
Applied Ceramic Products Group   Residential and Industrial Solar Power Generating Systems, Solar Cells and Modules, Cutting Tools, Printed Circuit Board Micro Drills, Jewelry, Applied Ceramic Related Products, Dental and Medical Implants
Electronic Device Group   Ceramic Capacitors, Tantalum Capacitors, Timing Devices (Temperature Compensated Crystal Oscillators (TCXOs), Ceramic Resonators, Crystal Units), RF Modules, Surface Acoustic Wave (SAW) filters, Connectors, Thermal Printheads, LED Printheads, Amorphous Silicon Drums, Liquid Crystal Displays
Telecommunications Equipment Group   CDMA Mobile Phone Handsets, Personal Handy Phone System (PHS) Related Products (PHS Mobile Phone Handsets, PHS Base Stations, High Speed Wireless Data Transmission Systems)
Information Equipment Group   Ecosys Printer, Copying Machine, Multifunctional System
Optical Equipment Group   Optical Modules and Lenses
Others   Chemical Materials for Electronic Components, Electrical Insulators, Synthetic Resin Molded Parts, Telecommunication Engineering Business, Information and Communication Technology Business, Management Consulting Business, Hotel Business, Realty Development Business, Insurance Agent and Travel Agent Business

 

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(6) Significant Subsidiaries (as of March 31, 2007)

 

Name of Subsidiary

 

Amount of Capital

(Yen in millions
and others

in thousands)

 

Ownership by
Kyocera
Corporation

(%)

 

Principal Business

Kyocera Communication Systems Co., Ltd.

  ¥2,986   76.30  

Information Technology Services

Kyocera ELCO Corporation

  ¥400   100.00   Manufacture and sale of electronic device related products

Kyocera Mita Corporation

  ¥12,000   100.00   Manufacture and sale of information equipment

Kyocera Chemical Corporation

  ¥10,172   100.00  

Manufacture and sale of chemical materials for electronic components

Kyocera Kinseki Corporation

  ¥16,318   100.00   Manufacture of electronic device related products

Kyocera Solar Corporation

  ¥300   100.00   Sale of solar energy equipment

Kyocera Realty Development Co., Ltd.

  ¥50   100.00  

Real estate services

Kyocera SLC Technologies Corporation

  ¥4,000   100.00   Manufacture and sale of organic multilayer printed circuit board

Japan Medical Materials Corporation

  ¥2,500   77.00   Development, manufacture and sale of medical materials and equipment

Kyocera International, Inc.

  US$34,850   100.00   Investment and management service as a holding company to subsidiaries in North America region

AVX Corporation

  US$1,763   69.06   Manufacture and sale of electronic device related products

Shanghai Kyocera Electronics Co., Ltd.

  ¥14,700   100.00  

Manufacture and sale of ceramic related products and electronic device related products

Dongguan Shilong Kyocera Optics Co., Ltd.

  HK$194,000   90.00  

Manufacture and sale of optical equipment, cutting tools and thin film devices

Kyocera (Tianjin) Sales & Trading Corporation

  US$10,000   90.00  

Sale of fine ceramic related products, electronic device related products and information equipment

Kyocera Asia Pacific Pte. Ltd.

  US$105   100.00   Sale of ceramic related products and electronic device related products

Universal Optical Industries Ltd.

  HK$500   *100.00   Manufacture and sale of optical equipment, cutting tools and thin film devices

Kyocera Fineceramics GmbH

  EURO1,687   100.00   Sale of ceramic related products, solar energy equipment and thin film devices

Note:    The ownership with * represents that of a subsidiary which is 100% owned by Kyocera Corporation.

 

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(7) Principal Business Sites (as of March 31, 2007)

 

Headquarters:      6 Takeda Tobadono-cho, Fushimi-ku, Kyoto Japan

Japan:

 
Kyocera Corporation   Kyocera SLC Technologies Corporation (Shiga)

Hokkaido Kitami Plant

 

Kyocera Solar Corporation (Kyoto)

Fukushima Tanagura Plant

 

Japan Medical Materials Corporation (Osaka)

Nagano Okaya Plant

 

Kyocera Kinseki Corporation (Tokyo)

Mie Ise Plant

 

Kyocera ELCO Corporation (Kanagawa)

Shiga Gamo Plant

 

Kyocera Display Institute Co., Ltd. (Shiga)

Shiga Yokaichi Plant

 

Kyocera Mita Corporation (Osaka)

Kagoshima Sendai Plant

 

Kyocera Mita Japan Corporation (Tokyo)

Kagoshima Kokubu Plant

 

Kyocera Optec Co., Ltd. (Tokyo)

Kagoshima Hayato Plant

 

Kyocera Communication Systems Co., Ltd. (Kyoto)

R&D Center, Yokohama

 

Kyocera Chemical Corporation (Saitama)

R&D Center, Keihanna (Kyoto)

 

Kyocera Realty Development Co., Ltd. (Tokyo)

R&D Center, Kagoshima

 

Hotel Kyocera Co., Ltd. (Kagoshima)

 

Hotel Princess Kyoto Co., Ltd. (Kyoto)

  Kyocera International Co., Ltd. (Kyoto)
Overseas:  
Kyocera International, Inc. (U.S.A.)   Kyocera Wireless (India) Pvt. Ltd. (India)
Kyocera America, Inc. (U.S.A.)   Kyocera Telecommunications Research Corporation (U.S.A.)
Kyocera Industrial Ceramics Corporation (U.S.A.)   Kyocera Mita America, Inc. (U.S.A.)
Kyocera Solar, Inc. (U.S.A.)   Kyocera Mita Office Equipment (Dongguan) Co., Ltd. (China)
Kyocera Tycom Corporation (U.S.A.)  

Kyocera Mexicana, S.A. de C.V. (Mexico)

  Kyocera Mita Europe B.V. (Netherland)

Kyocera Asia Pacific Pte. Ltd. (Singapore)

  Kyocera Mita Deutschland GmbH (Germany)

Shanghai Kyocera Electronics Co., Ltd. (China)

  Kyocera Yashica do Brasil Industria e Comercio Ltda. (Brazil)

Kyocera (Tianjin) Solar Energy Co., Ltd (China)

 

Kyocera (Tianjin) Sales & Trading Corporation (China)

  Kyocera Zhenhua Communication Equipment Co., Ltd. (China)

Kyocera Precision Tools Korea Co., Ltd. (Korea)

  Kyocera Hong Kong Co., Ltd. (China)

Kyocera Fineceramics GmbH (Germany)

  Universal Optical Industries Ltd. (China)

AVX Corporation (U.S.A.)

  Dongguan Shilong Kyocera Optics Co., Ltd. (China)

Kyocera ELCO Korea Co., Ltd. (Korea)

  Piazza Investment Co., Ltd. (China)

Kyocera ELCO Hong Kong Ltd. (China)

  Shanghai Kyocera Reality Development Co., Ltd. (China)
Kyocera Wireless Corp. (U.S.A)  

 

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(8) Employees (as of March 31, 2007)

Consolidated

 

Reporting Segments

   Number of Employees   

Change from the End of Fiscal 2006

Fine Ceramic Parts Group

   2,951    Increase of 311

Semiconductor Parts Group

   10,111    Increase of 421

Applied Ceramic Products Group

   5,852    Increase of 747

Electronic Device Group

   22,490    Increase of 804

Telecommunications Equipment Group

   3,073    Decrease of 172

Information Equipment Group

   12,194    Decrease of 170

Optical Equipment Group

   1,080    Decrease of 462

Others

   4,126    Increase of 515

Headquarters

   1,600    Increase of 15

Total

   63,477    Increase of 2,009

 

    Note:    Number of employees represents the total number of regular employees who work full-time.

Non-consolidated

 

1. Number of Employees

   12,613

2. Change from the End of Fiscal 2006

   Increase of 156

3. Average Age

   38.6

4. Average Years of Service

   15.8

 

    Note:    Number of employees represents the total number of regular employees who work full-time.

 

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2. Shares (as of March 31, 2007)

 

  (1) Total number of shares authorized to be issued:         600,000,000

 

  (2) Total number of shares issued:                                      191,309,290

(Treasury stock of 2,660,201 shares is included in the total number of shares issued.)

 

  (3) Number of shareholders:                                                          65,741

 

  (4) Major shareholders (Top 10)

 

Name

   Number of Shares Owned
(in thousands)
   Shareholding Ratio
(%)

Japan Trustee Services Bank, Ltd. (Trust Account)

   11,074    5.87

The Master Trust Bank of Japan, Ltd. (Trust Account)

   10,900    5.78

State Street Bank and Trust Company

   7,932    4.20

The Bank of Kyoto, Ltd.

   7,218    3.83

Kazuo Inamori

   6,806    3.61

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

   5,076    2.69

The Inamori Foundation

   4,680    2.48

BNP Paribas Securities (Japan) Limited

   3,639    1.93

KI Enterprise Co., Ltd.

   3,550    1.88

Japan Trustee Services Bank, Ltd. (Trust Account 4)

   3,121    1.65

            Note:    The shareholding ratios are calculated after deduction of the treasury stock.

LOGO

 

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3. Stock Acquisition Rights (as of March 31, 2007)

Kyocera Corporation has issued the following stock acquisition rights for the purpose of granting stock options to those set forth below.

 

  (1) 2nd Stock Acquisition Rights

 

  (i) Number of stock acquisition rights currently issued: 2,666
  (ii) Six (6) Directors hold 260 stock acquisition rights in aggregate and one (1) Corporate Auditor holds 30 stock acquisition rights in aggregate out of (i) above.
  (iii) Kind of shares to be issued upon exercise of stock acquisition rights: Common Stock of Kyocera Corporation
  (iv) Number of shares to be issued upon exercise of stock acquisition rights: 266,600 shares (One stock acquisition right will entitle the holder thereof to acquire 100 shares.)
  (v) Issue price of stock acquisition rights: Nil
  (vi) Amount to be paid in upon exercise of stock acquisition rights: ¥7,900
  (vii) Exercise period for stock acquisition rights: From October 1, 2003 to September 30, 2008
  (viii) Permitted grantees: Directors, Corporate Auditors, Executive Officers or employees of Kyocera Corporation or a subsidiary

 

  (2) 3rd Stock Acquisition Rights

 

  (i) Number of stock acquisition rights currently issued: 7,188
  (ii) Eleven (11) Directors hold 565 stock acquisition rights in aggregate and one (1) Corporate Auditor holds 30 stock acquisition rights in aggregate out of (i) above.
  (iii) Kind of shares to be issued upon exercise of stock acquisition rights: Common Stock of Kyocera Corporation
  (iv) Number of shares to be issued upon exercise of stock acquisition rights: 718,800 shares (One stock acquisition right will entitle the holder thereof to acquire 100 shares.)
  (v) Issue price of stock acquisition rights: Nil
  (vi) Amount to be paid in upon exercise of stock acquisition rights: ¥8,725
  (vii) Exercise period for stock acquisition rights: From October 1, 2004 to September 30, 2008
  (viii) Permitted grantees: Directors, Corporate Auditors, Executive Officers or employees of Kyocera Corporation or a subsidiary

 

  (3) 4th Stock Acquisition Rights

 

  (i) Number of stock acquisition rights currently issued: 11,279
  (ii) Nine (9) Directors hold 570 stock acquisition rights in aggregate and one (1) Corporate Auditor holds 30 stock acquisition rights in aggregate out of (i) above.
  (iii) Kind of shares to be issued upon exercise of stock acquisition rights: Common Stock of Kyocera Corporation
  (iv) Number of shares to be issued upon exercise of stock acquisition rights: 1,127,900 shares (One stock acquisition right will entitle the holder thereof to acquire 100 shares.)
  (v) Issue price of stock acquisition rights: Nil
  (vi) Amount to be paid in upon exercise of stock acquisition rights: ¥8,619
  (vii) Exercise period for stock acquisition rights: From October 1, 2005 to September 30, 2008
  (viii) Permitted grantees: Directors, Corporate Auditors, Executive Officers or employees of Kyocera Corporation or a subsidiary

Note:    No stock acquisition right has been granted to any outside Corporate Auditor.

 

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4. Directors and Corporate Auditors

(1) List of Directors and Corporate Auditors (as of March 31, 2007)

 

Position

 

Name

 

Duties, Principal Occupation and

Representation of other Companies

Advisor and Director   Kensuke Itoh  
Advisor and Director   Yasuo Nishiguchi  
Chairman of the Board and Representative Director   Noboru Nakamura  
Vice Chairman of the Board and Representative Director   Masahiro Umemura   In charge of Finance and Corporate Development
Vice Chairman of the Board and Representative Director   Yuzo Yamamura  

General Manager of Corporate Communication Equipment Group,

President and Representative Director of Kyocera ELCO Corporation

Vice Chairman of the Board and Representative Director   Naoyuki Morita   Chairman of the Board and President and Representative Director of Kyocera Communication Systems Co., Ltd.
President and Representative Director   Makoto Kawamura   President and Executive Officer
Director   Koji Seki   Chairman of the Board and President and Representative Director of Kyocera Mita Corporation
Director   Michihisa Yamamoto  

Deputy General Manager of Corporate Communication Equipment Group

(In charge of Manufacturing)

Director   Isao Kishimoto   President and Representative Director of Kyocera Kinseki Corporation
Director   Hisao Hisaki   Chairman of the Board and President of Kyocera (Tianjin) Sales & Trading Corporation
Director   Rodney N. Lanthorne   President and Director of Kyocera International, Inc.
Director   John S. Gilbertson   President and Director and Chief Executive Officer of AVX Corporation
Full-time Corporate Auditor   Yoshihiko Nishikawa  
Full-time Corporate Auditor   Yasuo Akashi  
Corporate Auditor   Osamu Nishieda   Attorney At Law
Corporate Auditor   Shinji Kurihara   Chairman of Takeda Hospital Management Institute, Medical Corporation Koseikai Takeda Hospital
Corporate Auditor   Shigekazu Tamura   Certified Public Accountant

 

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Notes:

 

  1. Other important jobs undertaken by Directors and Corporate Auditors.

 

  (1) Messrs. Kensuke Ito, Advisor and Director, Masahiro Umemura, Vice Chairman of the Board and Representative Director, Yuzo Yamamura, Vice Chairman of the Board and Representative Director, Makoto Kawamura, President and Representative Director and Rodney N. Lanthorne, Director, serve as Directors of AVX Corporation.
  (2) Mr. Noboru Nakamura, Chairman of the Board and Representative Director, has served as an outside Director of KDDI Corporation since June 2006.
  (3) Mr. Yasuo Akashi, Full-time Corporate Auditor, serves as an outside Corporate Auditor of KDDI Corporation.
  (4) Mr. Yasuo Nishiguchi, Advisor and Director, served as an outside Director of KDDI Corporation until June 2006.

 

  2. Messrs. Osamu Nishieda, Shinji Kurihara and Shigekazu Tamura are outside Corporate Auditors as required under Item 16 of Article 2 of the Corporation Act.

 

  3. Mr. Shinji Kurihara, Corporate Auditor, has experience working in a financial institution, and accordingly is knowledgeable about finance and accounting.

 

  4. Mr. Shigekazu Tamura, Corporate Auditor, is a certified public accountant and a licensed tax accountant, and accordingly is an expert in finance and accounting.

 

  5. As of April 1, 2007, the “Duties, Principal Occupation and Representation of other Companies” of Mr. Koji Seki were changed to “Chairman of the Board and Representative Director of Kyocera Mita Corporation.”

(2) Remunerations to Directors and Corporate Auditors

 

    

Number of Directors and

Corporate Auditors

  

Amount of

Remunerations

 

Directors

   13    ¥403 million  

Corporate Auditors

   5    ¥60 million  

(Outside Corporate Auditors out of five (5) Corporate Auditors above)

   (3)    ¥(9 million )

Total

   18    ¥463 million  

        Notes:

 

  1. It should be noted that the above mentioned remuneration to Directors does not include salaries for services as employees or Executive Officers.

 

  2. The above amounts of remuneration include aggregate amount of bonuses to Directors and Corporate Auditors in the amount of ¥136 million, which includes ¥126 million for Directors and ¥10 million for Corporate Auditors, which will become payable upon approval of the agendum of “Bonuses to Directors and Corporate Auditors” at the 53rd Ordinary General Meeting of Shareholders to be held on 27 June, 2007.

 

  3. The above remuneration includes ¥51 million, which was recorded as retirement allowances for directors, corporate auditors and executive officers for fiscal 2007.

(3) Outside Corporate Auditors

 

  (i)  Activities of outside Corporate Auditors during fiscal 2007

 

  (a) Mr. Osamu Nishieda, Corporate Auditor, attended 11 out of 12 meetings of the Board of Directors and all of the 11 meetings of the Board of Corporate Auditors which were held during fiscal 2007 and expressed his views based on his knowledge and experience as an attorney at law.

 

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  (b) Mr. Shinji Kurihara, Corporate Auditor, attended 11 out of 12 meetings of Board of Directors and all of the 11 meetings of the Board of Corporate Auditors which were held during fiscal 2007 and expressed his views based on his knowledge of and experience in corporate management.

 

  (c) Mr. Shigekazu Tamura, Corporate Auditor, attended 11 out of 12 meetings of Board of Directors and all of the 11 meetings of the Board of Corporate Auditors which were held during fiscal 2007 and expressed his views based on his knowledge and experience as a certified public accountant.

 

  (ii) Substance of agreements regarding limitation of liability.

Kyocera Corporation has entered into agreements with outside Corporate Auditors regarding the limitation of their liability for damages due to negligence in their performance of their tasks, in accordance with paragraph 1 of Article 427 of the Corporation Act and Article 36 of the Articles of Incorporation of Kyocera Corporation. The limitations on the amounts of damages to be pursued against them set under such agreements are the smallest amounts permissible under such laws.

 

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5. Accounting Auditor

 

(1) Name of Accounting Auditor

 

   

Name

  

Detail

Accounting Auditor  

ChuoAoyama PricewaterhouseCoopers

(currently Misuzu Audit Corporation)

   Lost qualification on July 1, 2006

Temporary Independent Auditors

  Yamaguchi Audit Corporation   

Appointed on July 26, 2006

Resigned on September 19, 2006

  Misuzu Audit Corporation
(formerly ChuoAoyama PricewaterhouseCoopers)
   Appointed on September 1, 2006

Notes:

 

1. ChuoAoyama PricewaterhouseCoopers (which changed its name to “Misuzu Audit Corporation” on September 1, 2006), which was the accounting auditor of Kyocera Corporation, received an order dated on May 10, 2006 from the Financial Services Agency to suspend its business for a two-month period from July 1, 2006 to August 31, 2006, and, having lost its qualification to act as the Accounting Auditor of Kyocera Corporation, accordingly resigned such office on July 1, 2006.

 

2. In accordance with the provisions set forth in Paragraphs 4 and 6 of Article 346 of the Corporation Act, the Board of Corporate Auditors appointed Yamaguchi Audit Corporation as temporary Independent Auditor through resolution of the Board of Corporate Auditors at its meeting held on July 19, 2006, with such position effective as from the same day. Misuzu Audit Corporation was also appointed in the same capacity through resolution of the Board of Corporate Auditors at its meeting held on August 28, 2006, with such position effective as from September 1, 2006. Yamaguchi Audit Corporation expressed its intention to resign as temporary Independent Auditor on September 19, 2006, and it was accepted on the same day.

 

(2) Remunerations to Accounting Auditor

 

Name

 

(1) Remunerations payable
by Kyocera Corporation

to the Accounting Auditor

for services for fiscal 2007

 

Total amount of cash and
other financial benefits

payable by Kyocera Corporation

and its subsidiaries

to the Accounting Auditor

for services for fiscal 2007

Misuzu Audit Corporation
(formerly ChuoAoyama PricewaterhouseCoopers)

  ¥361 million   ¥691 million

Yamaguchi Audit Corporation

  ¥1 million   ¥1 million

Notes:

 

1. The overseas subsidiaries of Kyocera Corporation are audited by an auditing firm other than that used by Kyocera Corporation as its Accounting Auditor.

 

2. In the audit agreement between Kyocera Corporation and the Accounting Auditor, remunerations are determined without separately indicating amounts payable for auditing under the Corporation Act and for auditing under the Securities and Exchange Law. Accordingly, the amounts shown in (1) in the table above represent aggregate amounts for both of these auditing services.

 

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(3) Details of Non-audit Services

Kyocera Corporation receives advisory services from Misuzu Audit Corporation on the establishment of internal control systems for financial reporting, and pays consideration therefor.

 

(4) Policy Regarding Decision to Terminate or Not to Reappoint Accounting Auditor

In the event that the Board of Corporate Auditors determines that the Accounting Auditor is subject to any of the events as provided by Paragraph 1 of Article 340 of the Corporation Act, the Board of Corporate Auditors is authorized to terminate the office of such Accounting Auditor or to request the Board of Directors to consider proposing to the General Shareholders’ Meeting the termination or non-reappointment of such Accounting Auditor. Should anything occur to negatively impact the qualifications or independence of the Accounting Auditor, making it unlikely that such Accounting Auditor will be able to properly perform an audit, the Board of Directors, subject to prior consent of, or request from, the Board of Corporate Auditors, shall propose to the General Shareholders’ Meeting a resolution to terminate or not to reappoint such Accounting Auditor.

 

(5) Disciplinary Action against Accounting Auditor

 

1. Firm subject to Disciplinary Action: ChuoAoyama PricewaterhouseCoopers (which changed its name to “Misuzu Audit Corporation” on September 1, 2006)

 

2. Details of Disciplinary Action: Suspension of a part of its businesses for two months from July 1, 2006 to August 31, 2006.

[Services suspended]

Statutory audit services required by the Securities and Exchange Law and the Corporation Act (with the exception of certain other audit services).

 

3. Reason for Disciplinary Action: The partners of the firm engaged in the audit of Kanebo Kabushiki Kaisha willfully verified as not containing falsities the falsified financial statements included in Kanebo’s annual securities reports relating to each of its financial years ended March 1999 through March 2003.

 

(6) Accounting Auditor resigned during fiscal 2007

The name of the Accounting Auditor is as set forth in (1) above.

 

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6. System and Policy

The Company has adopted through its Board of Directors the “Kyocera Group Basic Policy for Corporate Governance and Internal Control” as follows:

 

Kyocera Group

Basic Policy for Corporate Governance and Internal Control

Kyocera Group has made “Respect the Divine and Love People” its corporate motto and “to provide opportunities for the material and intellectual growth of all our employees, and through our joint effort, contribute to the advancement of society and humankind.” its management rationale.

Kyocera Group always strives to maintain equity and fairness, and faces all situations with courage and conscience, and it intends to realize transparent systems for corporate governance and internal control.

Under such corporate motto and management rationale, the Board of Directors is implementing a basic policy for corporate governance and internal control as described below.

This statement of basic policy sets forth such basic policy in accordance with Paragraph 5 and item 6 of Paragraph 4 of Article 362 of the Corporation Act, and Paragraphs 1 and 3 of Article 100 of the Execution Rules of the Corporation Act, which require establishment of a system to ensure that conduct of business by the Directors will be in compliance with all applicable laws and regulations and the Articles of Incorporation and to ensure proper conduct of business by Kyocera Corporation (the “Company”) and Kyocera Group, as a whole.

I.            Corporate Governance

1.    Basic Policy for Corporate Governance

The Board of Directors of the Company defines the corporate governance of Kyocera Group to mean “structures to ensure that Directors conducting the business manage the corporations in a fair and correct manner.”

The purpose of corporate governance is to maintain soundness and transparency of management and to achieve fair and efficient corporate management, through which the management rationale of Kyocera Group can be realized.

The Board of Directors shall inculcate the “Kyocera Philosophy,” which is the basis of the management policy of Kyocera Group, into all Directors and employees working in Kyocera Group, and establish a sound corporate culture. The Board of Directors shall establish proper corporate governance through exercise of the Kyocera Philosophy (Note).

 

  Note: The “Kyocera Philosophy” is a corporate philosophy and life philosophy created through integration of the thoughts of the founder of the Company regarding management and life. The “Kyocera Philosophy” incorporates a wide range of matters relating to basic thoughts on management and methods of undertaking day-to-day work, based on the core criterion of “what is the right thing to do as a human being.”

2.    System for Corporate Governance

The Board of Directors of the Company determines, pursuant to the basic policy described in 1 above, the below-outlined system for corporate governance of the Company, which is the core company

 

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within Kyocera Group, to ensure that the conduct of business by the Directors is in compliance with all applicable laws and regulations and the Articles of Incorporation. The Board of Directors will constantly seek the ideal system for corporate governance and always evolve and develop its existing corporate governance system.

(1)  Organs of Corporate Governance

The Board of Directors shall establish a corporate structure in which the Corporate Auditors and the Board of Corporate Auditors will serve as organs of corporate governance pursuant to the provisions of the Articles of Incorporation, as approved by the General Meeting of Shareholders of the Company. Directors of the Company shall strictly observe the following, to ensure effective audit by the Corporate Auditors and the Board of Corporate Auditors:

 

  (i) Matters relating to employees to facilitate the tasks of Corporate Auditors (including matters relating to the independence of such employees from the Directors)

Representative Directors shall establish offices for the Corporate Auditors upon their request, and shall cause certain employees, nominated through prior discussion with the Corporate Auditors, to work in such offices to assist in the tasks of the Corporate Auditors and the Board of Corporate Auditors. Such employees, while still subject to the work rules of the Company, shall be under the instruction and supervision of each of the Corporate Auditors, and transfer, treatment (including evaluation) and disciplinary action relating to them shall be made only following discussion with the Corporate Auditors.

 

  (ii) System for reporting to the Corporate Auditors by Directors and employees and other systems relating to reporting to the Corporate Auditors

In the event that any Director becomes aware of any matter that breaches or may breach any law or regulation or the Articles of Incorporation, or in the event that any Director becomes aware of any matter that may cause substantial damage to Kyocera Group, he or she shall immediately report thereon to the Board of Corporate Auditors. In addition, in the event that any Corporate Auditor or the Board of Corporate Auditors requests a report from any Director pursuant to the Regulations of the Board of Corporate Auditors, such Director shall comply with such request.

Representative Directors shall cause the internal audit department to report regularly the status of the internal audit to the Corporate Auditors. In addition, upon request from the Corporate Auditors, Representative Directors shall cause any specified department(s) to report the status of their conduct of business directly to the Corporate Auditors. Representative Directors shall also maintain a “system for internal complaint reporting to the Board of Corporate Auditors,” established by the Board of Corporate Auditors, under which employees, suppliers and customers of the Company may submit complaints directly to the Board of Corporate Auditors.

 

  (iii) Other systems to ensure effective audit by the Corporate Auditors

In the event that Representative Directors are requested by any Corporate Auditor to effectuate any of the following matters, as necessary to establish a system to ensure effective audit by the Corporate Auditors, Representative Directors shall comply with such request:

 

  a. Attendance at important meetings;

 

  b. Inspection of minutes of important meetings, important approval documents and important agreements, etc.; and

 

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  c. Meetings with Representative Directors to exchange opinions regarding management of the Company in general.

(2) Kyocera Philosophy Education

Representative Directors of the Company shall undertake “Kyocera Philosophy Education” from time to time in order to inculcate the “Kyocera Philosophy” into the Directors (including themselves) and employees of Kyocera Group.

II.   Internal Controls

1.    Basic Policy for Internal Controls

The Board of Directors of the Company defines the internal controls of Kyocera Group to mean “systems to be established within the corporate organization to achieve management policy and master plans in a fair manner, in order for the Directors undertaking management of the Company to effectuate management policy.” The Board of Directors of the Company will establish internal controls through implementation of the “Kyocera Philosophy.”

2.    System for Internal Controls

Under the policy as described in 1 above, the Board of Directors shall cause Representative Directors to establish the systems described below. In addition, the Board of Directors shall constantly evolve and develop such systems, seeking an ideal system of internal controls.

 

  (1) Management and maintenance of information relating to conduct of business by Directors

Representative Directors shall establish the “Kyocera Disclosure Committee” as a system for making timely and appropriate disclosure of information and for properly maintaining information relating to the conduct of business by the Directors in accordance with applicable laws and regulations and the internal rules of the Company.

 

  (2) Internal Rules and systems relating to management of risk of loss, and systems to ensure that conduct of business by employees is in compliance with applicable laws and regulations and the Articles of Incorporation.

Representative Directors shall create a risk management department in order to establish a risk management system for Kyocera Group. Representative Directors shall also establish systems to undertake necessary actions from time to time.

Representative Directors shall establish “employee consultation corners” as an internal complaint reporting system within Kyocera Group, so that employees who become aware of any matter that breaches or may breach laws or regulations or the Articles of Incorporation or other internal rules can report thereon. The employee consultation corners will take appropriate action in respect of reports received thereby, which shall be treated in accordance with the Law for Protection of Reporters in the Public Interest.

 

  (3) Systems to ensure efficient conduct of business by Directors

Representative Directors shall clearly delegate authority and related responsibility by establishing an executive officer system to achieve efficient and effective conduct of business. Representative Directors shall cause the executive officers to report the status of their conduct of business, and, accordingly, a system shall be maintained under which Representative Directors can verify whether business is conducted efficiently.

 

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  (4) System to ensure appropriate conduct of business at Kyocera Group

In addition to the matters described in (1) through (3) above, as a system to ensure the appropriate conduct of business at Kyocera Group, Representative Directors shall establish the Kyocera Group Management Committee. Such Committee shall discuss important matters relating to Kyocera Group and receive reports relating thereto. Representative Directors shall also establish an internal audit department in order to conduct audits regularly to evaluate the appropriateness of conduct of business at Kyocera Group.

 

The current status of systems relating to internal control established is as follows:

 

  (1) The “Kyocera Code of Conduct” was established in June 2000.

 

  (2) The Risk Management Division was established in September 2000 in order to create a thorough system to ensure compliance with laws and regulations and internal rules.

 

  (3) The Kyocera Management Committee was established in January 2001, and was renamed the “Kyocera Group Management Committee” as from August 2002.

 

  (4) The Kyocera Disclosure Committee was established in April 2003.

 

  (5) The Employee Consultation Corners were established in April 2003, and serve as a part of the internal complaint system.

 

  (6) The executive officer system was introduced in June 2003 to improve the management efficiency.

 

  (7) The Global Audit Department was established in May 2005 to undertake internal audits, and it conducts audits of the businesses of the Company and its consolidated subsidiaries regularly, reporting the result of such audits to the Directors and Corporate Auditors of the Company. It also serves as a mechanism for meeting the requirements of the Sarbanes-Oxley Act of the United States of America.

 

  (8) The CSR Committee was established in November 2005.

 

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Consolidated Balance Sheets

 

     Yen in millions  
     March 31,    Increase
(Decrease)
 
     2006    2007   
     Amount          Amount          Amount  

Current assets :

            

Cash and cash equivalents

   ¥ 300,809        ¥ 282,208        ¥ (18,601 )

Short-term investments

     87,942          213,495          125,553  (1)

Trade notes receivables

     24,597          25,033          436  

Trade accounts receivables

     210,393          236,380          25,987  

Short-term finance receivables

     39,505                   (39,505 )(2)

Less allowances for doubtful accounts and sales returns

     (7,425 )        (5,960 )        1,465  

Inventories

     190,564          209,188          18,624  

Deferred income taxes

     40,411          45,390          4,979  

Other current assets

     33,872          40,757          6,885  
                              

Total current assets

     920,668          1,046,491          125,823  
                              

Non-current assets :

            

Investments and advances :

            

Investments in and advances to affiliates and unconsolidated subsidiaries

     7,355          10,093          2,738  

Securities and other investments

     553,377          690,568          137,191  (3)
                              

Total investments and advances

     560,732          700,661          139,929  

Long-term finance receivables

     80,970                   (80,970 )(2)

Property, plant and equipment, at cost :

            

Land

     58,286          56,806          (1,480 )

Buildings

     249,506          261,998          12,492  

Machinery and equipment

     697,383          729,636          32,253  

Construction in progress

     13,473          7,362          (6,111 )

Less accumulated depreciation

     (733,302 )        (774,896 )        (41,594 )
                              

Total property, plant and equipment, at cost

     285,346          280,906          (4,440 )

Goodwill

     31,351          32,894          1,543  

Intangible assets

     31,227          24,657          (6,570 )

Other assets

     21,228          44,855          23,627  
                              

Total non-current assets

     1,010,854          1,083,973          73,119  
                              

Total assets

   ¥ 1,931,522        ¥ 2,130,464        ¥ 198,942  
                              

Comments:

 

(1) Short-term investments increased due primarily to the transfer of funds from cash and cash equivalents to high-yield certificates of deposit.

 

(2) Kyocera included finance receivables of Kyocera Leasing Co., Ltd. both in short-term and long-term finance receivables in fiscal 2006. As Kyocera Leasing Co., Ltd. has been excluded from the scope of consolidation due to the sale of its shares, the amount outstanding has disappeared.

 

(3) Securities and other investments increased due mainly to an increase in the market value of shares of KDDI Corporation.

 

Note: The consolidated balance sheets as of March 31, 2006 and indications of increase (decrease) of amounts as a result of comparison thereof with the consolidated balance sheets as of March 31, 2007 as well as comments relating thereto do not constitute any part of the accompanying materials for the 53rd Ordinary General Meeting of Shareholders. They are presented solely for shareholders’ ease of comparison.

 

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     Yen in millions  
     March 31,       
     2006    2007    Increase
(Decrease)
 
     Amount          Amount          Amount  

Current liabilities :

            

Short-term borrowings

   ¥ 90,865        ¥ 15,250        ¥ (75,615 )(1)

Current portion of long-term debt

     16,347          5,853          (10,494 )

Trade notes and accounts payable

     103,503          100,295          (3,208 )

Other notes and accounts payable

     51,997          49,134          (2,863 )

Accrued payroll and bonus

     37,998          41,680          3,682  

Accrued income taxes

     27,658          36,475          8,817  

Other accrued liabilities

     31,414          33,391          1,977  

Other current liabilities

     18,841          24,110          5,269  
                              

Total current liabilities

     378,623          306,188          (72,435 )
                              

Non-current liabilities :

            

Long-term debt

     33,360          7,283          (26,077 )(1)

Accrued pension and severance liabilities

     27,092          16,297          (10,795 )

Deferred income taxes

     125,686          206,858          81,172  (2)

Other non-current liabilities

     12,742          12,355          (387 )
                              

Total non-current liabilities

     198,880          242,793          43,913  
                              

Total liabilities

     577,503          548,981          (28,522 )
                              

Minority interests in subsidiaries

     64,942          66,923          1,981  

Stockholders’ equity :

            

Common stock

     115,703          115,703          —    

Additional paid-in capital

     161,994          162,363          369  

Retained earnings

     967,576          1,055,293          87,717  

Accumulated other comprehensive income

     72,947          203,056          130,109  (3)

Treasury stock, at cost

     (29,143 )        (21,855 )        7,288  
                              

Total stockholders’ equity

     1,289,077          1,514,560          225,483  
                              

Total liabilities, minority interests and stockholders’ equity

   ¥ 1,931,522        ¥ 2,130,464        ¥ 198,942  
                              

Comments:

 

(1) Both short-term borrwings and long-term debt decreased due primarily to the sale of shares in Kyocera Leasing Co., Ltd., which resulted in the elimination of liabilities previously recorded at Kyocera Leasing Co., Ltd.

 

(2) Income tax liabilities increased in line with an increase in the total market value of shares of KDDI Corporation.

 

(3) Net unrealized gains on securities increased due primarily to an increase in the market value of shares of KDDI Corporation.

 

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Consolidated Statements of Income

 

     Yen in millions and shares in thousands,
except per share amounts
     Years ended March 31,   

Increase

(Decrease)

     2006    2007   
     Amount          Amount          Amount      

Net sales

   ¥ 1,173,544        ¥ 1,283,897        ¥ 110,353    

Cost of sales

     835,042          900,470          65,428    
                                

Gross profit

     338,502          383,427          44,925    

Selling, general and administrative expenses

     238,807          248,325          9,518    
                                

Profit from operations

     99,695          135,102          35,407    

Other income (expenses) :

              

Interest and dividend income

     8,990          15,472          6,482  (1)  

Interest expense

     (1,301 )        (1,647 )        (346 )  

Foreign currency transaction losses, net

     (316 )        (65 )        251    

Equity in (losses) earnings of affiliates and unconsolidated subsidiaries

     (1,216 )        2,621          3,837  (2)  

Gains on sales and maturities of securities, net

     1,472          3,819          2,347    

Gains on exchange for the shares

     5,294          24          (5,270 )(3)  

Gain on sale of investment in an affiliate

     6,931          26          (6,905 )(4)  

Loss on impairment of investment in an affiliate

     (3,492 )                 3,492    

Other, net

     1,180          1,188          8    
                                

Total other income

     17,542          21,438          3,896    
                                

Income from continuing operations before income taxes and minority interests

     117,237          156,540          39,303    

Income taxes

     46,760          48,887          2,127  (5)  
                                

Income from continuing operations before minority interests

     70,477          107,653          37,176    

Minority interests

     (4,389 )        (6,324 )        (1,935 )  
                                

Income from continuing operations

     66,088          101,329          35,241    

Income from discontinued operations

     3,608          5,175          1,567  (6)  
                                

Net income

   ¥ 69,696        ¥ 106,504        ¥ 36,808    
                                

Comments:

 

(1) Dividends from KDDI Corporation and interest income in Kyocera Corporation and a U.S. subsidiary increased.

 

(2) Kyocera recorded equity method income from Willcom, Inc., an affiliate engaged in the PHS business.

 

(3) Kyocera recorded a valuation gain in line with the exchange of shares held in UFJ Holdings, Inc. for shares of Mitsubishi UFJ Financial Group, Inc. in fiscal 2006.

 

(4) Kyocera recorded gain on sale of investment in an affiliate following the sale of shares held in Taito Corporation in fiscal 2006.

 

(5) Income taxes for fiscal 2007 include refunded tax of ¥4.3 billion in line with the retraction of a portion of the punishment relating to transfer pricing taxation.

 

(6) Kyocera sold Kyocera Leasing Co., Ltd. in fiscal 2007 and discontinued operations in the finance business. Accordingly, the sales results and gain on sale of Kyocera Leasing Co., Ltd were recorded as income from discontinued operations.

 

Note: The consolidated statements of income for the year ended March 31, 2006 and indications of increase (decrease) of amounts as a result of comparison thereof with the consolidated statements of income for the year ended March 31, 2007 as well as comments relating thereto do not constitute any part of the accompanying materials for the 53rd Ordinary General Meeting of Shareholders. They are presented solely for shareholders’ ease of comparison.

 

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Consolidated Statement of Stockholders’ Equity

 

    (Yen in millions and shares in thousands)  

(Number of shares of common stock)

  Common
stock
  Additional
paid-in
capital
  Retained
earnings
    Accumulated
other
comprehensive
income
    Treasury
stock
    Comprehensive
income
 

Balance, March 31, 2006 (187,755)

  ¥ 115,703     161,994     967,576       72,947       (29,143 )  

Net income for the year

        106,504         ¥ 106,504  

Net unrealized gains on securities

          102,021         102,021  

Net unrealized gains on derivative financial instruments

          138         138  

Minimum pension liability adjustment

          (82 )       (82 )

Foreign currency translation adjustments

          10,474         10,474  
                 

Total comprehensive income for the year

            ¥ 219,055  
                 

Adjustment for initially applying SAFS No. 158, net of tax

          17,558      

Cash dividends

        (18,787 )      

Purchase of treasury stock (24)

            (251 )  

Reissuance of treasury stock (918)

      127         7,539    

Stock option plan of subsidiaries

      242        
                                     

Balance, March 31, 2007 (188,649)

  ¥ 115,703   ¥ 162,363   ¥ 1,055,293     ¥ 203,056     ¥ (21,855 )  
                                     

 

Note: SFAS No.158 stands for Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.”

 

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Consolidated Cash Flows (For Reference Only)

 

     (Yen in millions)  
     Years Ended March 31,  
     2006     2007  

Cash flow from operating activities

   171,077     149,644  

Cash flow from investing activities

   (165,467 )   (151,703 )

Cash flow from financing activities

   (23,289 )   (20,645 )

Effect of exchange rate changes on cash and cash equivalents

   7,896     4,103  

Net decrease in cash and cash equivalents

   (9,783 )   (18,601 )

Cash and cash equivalents at beginning of year

   310,592     300,809  

Cash and cash equivalents at end of year

   300,809     282,208  

 

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Notes to Consolidated Financial Statements

1. Basis of preparation of Consolidated Financial Statements

(1) Scope of consolidation

Number of consolidated subsidiaries: 167

Regarding significant consolidated subsidiaries, please refer to “Business Report, 1. Current Conditions of Kyocera Corporation and its Consolidated Subsidiaries, (6) Significant Subsidiaries.”

Major non-consolidated subsidiary: Kyoto Purple Sanga Co., Ltd.

Reason for exclusion from scope of consolidation:

This subsidiary is excluded from the scope of consolidation, because assets, sales, net income and retained earnings are not material to the consolidated financial condition and business result.

(2) Scope of application of the equity method

Number of non-consolidated subsidiaries and affiliates accounted for by the equity method: 12

Major affiliates accounted for by the equity method:         Willcom, Inc.

(3) Changes in scope of consolidation

 

Increase by acquisition etc.: 7

   Hertz Technology Inc. (Currently Kyocera Kinseki Hertz Corporation) and others

Decrease by liquidation etc.: 8

   Kyocera Leasing Co., Ltd. and others

(4) Changes in scope of application of the equity method

 

Decrease by sold etc.: 2

   Impact Networking, LLC. and the other

(5) Summary of significant accounting policies

 

   1) Financial statement presentation

 

     The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America pursuant to the provision of paragraph 1 of Article 148 of the Corporate Calculation Rules of Japan. Certain disclosures required under principles generally accepted in the United States of America are omitted pursuant to the same provision.

 

   2) Valuation of inventories

 

   Finished goods and work in process are mainly stated at the lower cost or market, the cost being determined by the average method. Other inventories are mainly stated at the lower cost or market, the cost being determined by the first-in, first-out method.

 

   3) Valuation of securities

 

     Kyocera has adopted Statement of Financial Accounting Standards No.115, “Accounting for Certain Investments in Debt and Equity Securities.”

 

   Held-to-maturity securities are recorded at amortized cost.

 

   Available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from income and recorded in other comprehensive income, net of tax.

 

   4) Depreciation method of Property, Plant and Equipment

 

   Depreciation is computed at rates based on the estimated useful lives of assets using the declining balance method.

 

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Table of Contents
   5) Goodwill and other intangible assets

 

   Kyocera has adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

 

   Goodwill and intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Intangible assets with definite useful lives are amortized over their respective estimate useful lives.

 

   6) Accounting for allowance and accruals

 

   Allowance for doubtful accounts : Kyocera makes provision based on the actual past ratio of losses on bad debts in addition to estimates of uncollectible amounts based on analysis of certain individual receivables.

 

   Accrued pension and severance cost : Kyocera adopts Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions” and Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” Kyocera recognize the overfunded or underfunded status of its defined benefit postretirement plans as an asset or liability in the consolidated balance sheet and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. Prior service cost is amortized by the straight-line method over the average remaining service period of employees. Actuarial gain or loss is recognized by amortizing a portion in excess of 10% of the greater of the projected benefit obligations or the market-related value of plan assets by the straight-line method over the average remaining service period of employees.

 

(6) Change in accounting policies

Kyocera adopted Statement of Financial Accounting Standards No. 158 at March 31, 2007. As a result of this adoption, on the consolidated balance sheet, “Other Assets” increased by ¥23,661 million and “Accumulated Other Comprehensive Income” increased by ¥17,558 million, respectively. This adoption did not have an influence on the consolidated statement of income.

2. Notes to Consolidated Balance Sheets

 

(1) Allowances for doubtful accounts -non-current

   ¥2,111 million

(2) Accumulated other comprehensive income

  

Net unrealized gains on securities

   ¥184,670 million

Net unrealized gains on derivative financial instruments

   ¥63 million

Adjustment for initially applying SFAS. No. 158, net of tax

   ¥15,419 million

Foreign currency translation adjustments

   ¥2,904 million

(3) Assets pledged as collateral

  

Tangible fixed assets

   ¥5,374 million
The assets above are mortgages for ¥2,584 million long-term debts and ¥672 million current portion of long-term debts.

(4) Guarantee obligation

  

Guarantees for debts

   ¥1,030 million

 

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Table of Contents

3. Notes to Consolidated Statement of Stockholders’ Equity

(1) Number of shares issued

    

Shares in thousands

Kind of shares

   March 31, 2006    Increase    Decrease    March 31, 2007

Common stock

   191,309          191,309

(2) Dividends

 

   1) Cash dividends

 

Resolutions

   Kind of
shares
   Aggregate
amount
   Per share
amount
  

Record date

  

Effective

date

Ordinary General Meeting of Shareholders on June 23, 2006    Common
stock
   ¥9,387
million
   ¥50    March 31,
2006
   June 26,
2006
Board of Directors on
October 30, 2006
   Common
stock
   ¥9,400
million
   ¥50    September 30,
2006
   December 5,
2006

 

   2) Dividends due in fiscal 2008 though arising from shares held as of March 31, 2007

 

Resolutions (Plan)

   Kind of
shares
   Source    Aggregate
amount
   Per share
amount
   Record
date
   Effective
date
Ordinary General Meeting of Shareholders on June 27, 2007    Common
stock
   Retained
earnings
   ¥11,319
million
   ¥60    March 31,
2007
   June 28,
2007

 

   3) Stock acquisition rights as of March 31, 2007

 

     Ordinary General
Meeting of Shareholders
June 25, 2003
   Ordinary General
Meeting of Shareholders
June 25, 2004
   Ordinary General
Meeting of Shareholders
June 28, 2005

Kind of shares to be issued

   Common stock    Common stock    Common stock

Number of shares to be issued

   266,600 shares    718,800 shares    1,127,900 shares

Number of stock acquisition rights currently issued

   2,666    7,188    11,279

4. Notes to per share information

 

    (1) Stockholders’ equity per share

      ¥8,028.45

    (2) Earnings per share

   Basic    ¥566.03
   Diluted    ¥564.79

5. Notes to significant subsequent events

    There has not been any significant event since the end of fiscal 2007.

 

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Table of Contents

Balance Sheets

 

     Yen in millions  
     March 31,  
     2006     2007  
     Amount     Amount  

Current assets :

    

Cash and bank deposits

   ¥ 136,870     ¥ 203,301  

Trade notes receivable

     43,325       41,423  

Trade accounts receivable

     90,073       108,685  

Marketable securities

     19,331       22,937  

Finished goods and merchandise

     17,588       17,204  

Raw materials

     14,152       16,560  

Work in process

     17,104       20,541  

Supplies

     751       706  

Advance payments

     2,967       10,100  

Prepaid expenses

     —         443  

Deferred income taxes

     15,375       17,193  

Loans to subsidiaries

     1,316       16,880  

Other accounts receivable

     9,012       8,291  

Other current assets

     434       891  

Allowances for doubtful accounts

     (142 )     (173 )
                

Total current assets

     368,156       484,982  
                

Non-current assets :

    

Tangible fixed assets :

    

Buildings

     36,978       34,921  

Structures

     2,268       2,091  

Machinery and equipment

     44,113       44,896  

Vehicles

     25       21  

Tools, furniture and fixtures

     7,477       8,139  

Land

     33,323       33,372  

Construction in progress

     4,533       900  
                

Total tangible fixed assets

     128,717       124,340  
                

Intangible assets :

    

Patent rights

     13,523       9,518  

Trademark

     143       124  

Software

     623       776  

Other intangible assets

     9       13  
                

Total intangible assets

     14,298       10,431  
                

Investments and other assets :

    

Investments in securities

     536,019       648,538  

Investments in subsidiaries and affiliates

     278,817       260,775  

Investments in subsidiaries and affiliates other than equity securities

     27,033       26,685  

Long-term loans to subsidiaries

     30,428       20,633  

Impaired loans

     256       238  

Long-term prepaid expenses

     3,785       2,458  

Long-term deposits

     —         31,000  

Security deposits

     1,918       1,823  

Other investments

     336       289  

Allowances for doubtful accounts

     (367 )     (301 )
                

Total investments and other assets

     878,225       992,138  
                

Total non-current assets

     1,021,240       1,126,909  
                

Total assets

   ¥ 1,389,396     ¥ 1,611,891  
                

 

Note: The balance sheets as of March 31, 2006 do not constitute any part of the accompanying materials for the 53rd Ordinary General Meeting of Shareholders. It is presented solely for the shareholders’ ease of comparison.

 

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Table of Contents
     Yen in millions
     March 31,
     2006     2007
     Amount     Amount

Current liabilities :

    

Trade accounts payable

   ¥ 49,570     ¥ 55,561

Other payables

     29,659       21,774

Accrued expenses

     7,610       8,356

Income taxes payables

     14,200       12,550

Advance received

     340       532

Deposits received

     2,315       1,916

Unearned income

     4       10

Accrued bonuses

     10,109       11,152

Accrued bonuses for directors and corporate auditors

           136

Warranty reserves

     521       5,045

Allowances for sales returns

     163       114

Other current liabilities

     369       125
              

Total current liabilities

     114,860       117,271
              

Non-current liabilities :

    

Long-term accounts payable

     5,309       2,953

Deferred income taxes

     118,557       191,441

Accrued pension and severance costs

     17,236       12,705

Retirement allowances for directors, corporate auditors and executive officers

     889       1,022

Other non-current liabilities

     284       138
              

Total non-current liabilities

     142,275       208,259
              

Total liabilities

     257,135       325,530
              

Stockholders’ equity

    

Common stock

     115,703      

Capital surplus :

    

Additional paid-in capital

     192,555      

Total capital surplus

     192,555      

Retained earnings :

    

Legal reserves

     17,207      

General reserves

     558,721      

Reserve for special depreciation

     1,584      

Reserve for research and development

     1,000      

Reserve for dividends

     1,000      

Reserve for retirement benefits

     300      

Reserve for overseas investments

     1,000      

Other general reserve

     553,837      

Unappropriated retained earnings

     69,245      
              

Total retained earnings

     645,173      
              

Net unrealized gains on other securities

     207,973      

Treasury stock, at cost

     (29,143 )    
              

Total stockholders’ equity

     1,132,261      
              

Total liabilities and stockholders’ equity

   ¥ 1,389,396      
              

 

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Table of Contents
     Yen in millions  
     March 31,  
     2006    2007  
     Amount    Amount  

Net assets

     

Stockholders’ equity :

     

Common stock

        115,703  

Capital surplus:

     

Additional paid-in capital

        192,555  

Other capital surplus

        127  

Total capital surplus

        192,682  

Retained earnings :

     

Legal reserves

        17,207  

Other retained earnings :

        671,140  

Reserve for special depreciation

        991  

Reserve for research and development

        1,000  

Reserve for dividends

        1,000  

Reserve for retirement benefits

        300  

Reserve for overseas investments

        1,000  

Other general reserve

        603,837  

Unappropriated retained earnings

        63,012  
             

Total retained earnings

        688,347  

Treasury stock, at cost

        (21,855 )

Total stockholders’ equity

        974,877  

Difference of appreciation and conversion

     

Net unrealized gains on other securities

        311,484  
             

Total net assets

        1,286,361  
             

Total liabilities and net assets

      ¥ 1,611,891  
             

 

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Table of Contents

Statements of Income

 

     Yen in millions  
     Years ended March 31,  
     2006    2007  
     Amount    Amount  

Net sales

   ¥ 477,379    ¥ 531,557  

Cost of sales

     367,835      407,121  
               

Gross profit

     109,544      124,436  

Selling, general and administrative expenses

     69,607      75,004  
               

Profit from operations

     39,937      49,432  

Non-operating income :

     

Interest and dividend income

     26,441      25,090  

Foreign currency transaction gains, net

     437      1,021  

Other non-operating income

     6,652      6,730  
               

Total non-operating income

     33,530      32,841  

Non-operating expenses :

     

Interest expense

     14      14  

Loss on disposal of inventories

     2,779      7,235  

Loss on long-term purchase commitment of merchandise

     1,240       

Other non-operating expenses

     1,252      1,295  
               

Total non-operating expenses

     5,285      8,544  
               

Recurring profit

     68,182      73,729  

Non-recurring gain :

     

Gain on sale of tangible fixed assets

     779      327  

Reversal of allowance for doubtful accounts

     3      7  

Reversal of allowance for doubtful accounts for a subsidiary

     4,505       

Liquidation gain on investments in securities

     8       

Gain on sale of investments in a subsidiary and an affiliate

     17,593      9,084  

Reversal of allowance for loss on investment in a subsidiary

     5,950       

Other non-recurring gain

     51      1,987  
               

Total non-recurring gain

     28,889      11,405  

Non-recurring loss :

     

Loss on sale and disposal of tangible fixed assets

     1,189      951  

Loss on transfer of investment securities

     67       

Loss on impairment of investment securities

     282       

Loss on impairment of investments in subsidiaries and affiliates

          3,166  

Loss on impairment of investments in subsidiaries other than equity securities

     4,437       

Other non-recurring loss

     17      344  
               

Total non-recurring loss

     5,992      4,461  
               

Income before income taxes

     91,079      80,673  

Income taxes current

     20,233      23,814  

Refund of income taxes previous years

          (4,305 )

Income taxes deferred

     2,134      (865 )
               

Net income

     68,712    ¥ 62,029  
               

Unappropriated retained earnings carried forward from the previous year

     9,974       

Net realized loss on treasury stock, at cost

     67       

Interim dividends

     9,374       
               

Unappropriated retained earnings at the end of the year

   ¥ 69,245       
               

 

Note: The statements of income for the year ended March 31, 2006 do not constitute any part of the accompanying materials for the 53rd Ordinary General Meeting of Shareholders. It is presented solely for the shareholders’ ease of comparison.

 

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Table of Contents

Statement of Changes in Net Assets

 

    Yen in millions  
    Year ended March 31, 2007  
    Stockholders' equity     Difference of
appreciation and
conversion
     
    Common
stock
  Capital surplus   Retained earnings    

Treasury
stock,

at cost

   

Total
stock-

holders'
equity

   

Net
unrealized
gains

on

other
securities

 

Total
unrealized
gain(loss)

on
appreciation
and
conversion

 

Total

net assets

 
     

Addi-

tional
paid-in
capital

  Other
capital
surplus
  Total
capital
surplus
  Legal
reserve
  Other retained earnings     Total
retained
earnings
           
             

Reserve
for
special
depre-

ciation

   

Reserve
for
research
and
develop-

ment

  Reserve
for
dividends
  Reserve
for
retirement
benefits
 

Reserve
for
overseas
invest-

ments

  Other
general
reserve
 

Unappro-

priated
retained
earnings

             

Balance, March 31, 2006

  ¥ 115,703   192,555   —     192,555   17,207   1,584     1,000   1,000   300   1,000   553,837   69,245     645,173     (29,143 )   924,288     207,973   207,973   ¥ 1,132,261  

Changes in net assets

                                   

Appropriation to reserve for special depreciation*

    —     —     —     —     —     623     —     —     —     —     —     (623 )   —       —       —       —     —       —    

Reversal of reserve for special depreciation*

    —     —     —     —     —     (595 )   —     —     —     —     —     595     —       —       —       —     —       —    

Appropriation to reserve for special depreciation

    —     —     —     —     —     2     —     —     —     —     —     (2 )   —       —       —       —     —       —    

Reversal of reserve for special depreciation

    —     —     —     —     —     (623 )   —     —     —     —     —     623     —       —       —       —     —       —    

Appropriation to general reserve*

    —     —     —     —     —     —       —     —     —     —     50,000   (50,000 )   —       —       —       —     —       —    

Dividends*

    —     —     —     —     —     —       —     —     —     —     —     (9,387 )   (9,387 )   —       (9,387 )   —     —       (9,387 )

Dividends

    —     —     —     —     —     —       —     —     —     —     —     (9,400 )   (9,400 )   —       (9,400 )   —     —       (9,400 )

Bonuses for directors and corporate auditors*

    —     —     —     —     —     —       —     —     —     —     —     (68 )   (68 )   —       (68 )   —     —       (68 )

Net income

    —     —     —     —     —     —       —     —     —     —     —     62,029     62,029     —       62,029     —     —       62,029  

Purchase of treasury stock

    —     —     —     —     —     —       —     —     —     —     —     —       —       (251 )   (251 )   —     —       (251 )

Reissurance of treasury stock

    —     —     127   127   —     —       —     —     —     —     —     —       —       7,539     7,666     —     —       7,666  

Net change in items other than stockholders’ equity

    —     —     —     —     —     —       —     —     —     —     —     —       —       —       —       103,511   103,511     103,511  

Total changes in net assets

    —     —     127   127   —     (593 )   —     —     —     —     50,000   (6,233 )   43,174     7,288     50,589     103,511   103,511     154,100  
                                                                                       

Balance, March 31, 2007

  ¥ 115,703   192,555   127   192,682   17,207   991     1,000   1,000   300   1,000   603,837   63,012     688,347     (21,855 )   974,877     311,484   311,484   ¥ 1,286,361  
                                                                                       

*Appropriation of retained earnings for the Ordinary General Meeting of Shareholders held in June 2006

 

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Table of Contents

Notes to Financial Statements

1. Summary of Significant Accounting Policies

1. Standards and methods for valuation of assets:

Held-to-maturity securities:    Amortized cost method (straight-line method)
Investments in subsidiaries and affiliates:    Cost determined by the moving average method
Other securities:   

Marketable:

  

Based on market price of the balance sheet date

(Unrealized gains and losses on those securities are reported in the stockholders’ equity and cost is determined by the moving average method.)

Non-marketable:

   Cost determined by the moving average method
Derivative financial instruments:    Mark-to-market method
Finished goods, merchandise and work in process:    Finished goods and work in process are stated at the lower of cost or market, the cost being determined by the average method. Merchandise is stated at the lower of cost or market, the cost being determined by the last purchase method.
Raw materials and supplies:   

Raw materials and supplies, except those for telecommunications equipment, are valued at valued at the lower of cost or market, the cost being determined by the last purchase method.

Raw materials for telecommunications equipment are valued at cost, the cost being determined by the first-in, first-out method.

2. Depreciation of non-current assets:

Tangible fixed assets:   

Depreciation is computed at rates based on the estimated useful lives of assets using the declining balance method.

The principal estimated useful lives are as follows:

Buildings and structures: 2 years - 25 years

Machinery and equipment, and Tools, furniture and fixtures: 2 years - 10 years

Intangible fixed assets and long-term prepaid expenses:    Amortization is computed at rates based on the estimated useful lives of assets using the straight-line method.

3. Accounting for allowances and accruals:

Allowances for doubtful accounts:   

Allowances for doubtful accounts are provided at an estimated amount of the past actual ratio of losses on bad debts.

Certain allowances are provided for estimated uncollectible receivables.

Accrued bonuses for employees:    Accrued bonuses are provided based upon the amounts expected to be paid which is determined by actual payment of previous year.
Accrued bonuses for directors and corporate auditors:    Accrued bonuses are provided based upon the amounts expected to be paid.
Warranty reserves:    Warranty reserves are provided for telecommunications equipment and applied ceramic products based upon the amounts expected to be paid which is determined by actual payment of the past.

 

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Table of Contents
Allowances for sales returns:    Allowances for sales returns are provided at an estimated amount of the past actual ratio of losses on sales returns.
Accrued pension and severance costs:    In order to prepare for provision of retirement benefit to the employees, accrued pension and severance costs are recognized based on projected benefit obligation and plan assets at the balance sheet date. Unrecognized prior year service cost is amortized over estimated average remaining service period of employees by using the straight-line method. Actuarial gains or losses are amortized over estimated average remaining service period of employees by using the straight-line method following the year incurred.
Retirement allowances for directors, corporate auditors and executive officers:    Retirement allowances for directors, corporate auditors and executive officers are provided based upon the amounts expected to be paid which is determined by bylaw.

4. Other significant policies

Lease:    Lease transaction is accounted for at cash flow basis as usual rental transaction except for defined as finance lease transaction.
The consumption taxes:    The consumption taxes withheld upon sale and the consumption taxes paid for purchases of goods and services are not included in the amounts of respective revenue and cost or expense items in the accompanying statements of income.

5. Change of accounting policies

 

(1) Accounting standard for presentation of net assets

“Accounting Standard for Presentation of Net Assets” (Accounting Standards Board of Japan (“ASBJ”) Statement No.5 issued on December 9, 2005) and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Statement No.8 issued on December 9, 2005) were adopted in fiscal 2007.

Net assets as of March 31, 2007 is ¥1,286,361 million.

 

(2) Accounting standard for bonuses for directors and corporate auditors

“Accounting Standard for bonuses for directors and corporate auditors” (ASBJ Statement No.4 issued on November 29, 2005) was adopted for fiscal 2007, which caused decreases in profit from operations and income before income taxes by ¥136 million.

2. Notes to Balance Sheets:

 

    1. Accumulated depreciation of tangible fixed assets

   ¥319,639 million

    2. Guarantee

  

    Obligation to affiliates’ financial organization:

  

    Kyocera International Co., Ltd.

   ¥31 million

    Kyoto Broadcasting System Company Limited

   ¥134 million
    
   ¥165 million

    Letters of awareness for management service:

  

    Kyocera Realty Development Co., Ltd.

   ¥2,288 million

    Kyoto Purple Sanga Co., Ltd.

   ¥550 million
    
   ¥2,838 million

    3. Current receivables from and short-term loans to affiliates

   ¥81,727 million

    Long-term finance receivables from affiliates

   ¥21,012 million

    Current payables to affiliates

   ¥19,543 million

 

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Table of Contents

3. Notes to Statements of Income:

 

     Transactions with affiliates:

  

    Operational transactions:

  

    Net sales

   ¥228,351 million

    Purchases

   ¥85,711 million

    Selling, general and administrative expenses

   ¥8,951 million

    Non operational transactions:

  

    Interest and dividend income

   ¥17,912 million

    Miscellaneous income

   ¥4,304 million

    Miscellaneous losses

   ¥891 million

    Purchased amount of assets

   ¥1,351 million

    Selling amount of assets

   ¥1,205 million

4. Notes to Statement of Changes in Stockholders’ Equity

Number and kind of treasury stocks

 

     Shares in thousands
     March 31, 2006    Year ended March 31, 2007    March 31, 2007
          Increase            Decrease       

            Common stock

   3,555    24    919    2,660

        Total

   3,555    24    919    2,660

 

    Increase:

  

    Request to purchase shares by shareholders which do not constitute a transaction unit

   24 thousand shares

    Decrease:

  

    Exercise of stock acquisition rights

   918 thousand shares

    Request to sell shares by shareholders holding shares not constituting a transaction unit

   1 thousand shares

 

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Table of Contents

5. Notes to Accounting for the Effects of Income Taxes

The components of the deferred tax assets and deferred tax liabilities at March 31, 2007 are as follows:

 

     (Yen in millions)  

Current:

  

Deferred tax assets:

  

Loss on revaluation of inventory

   ¥ 2,083  

Accrued bonuses

     4,572  

Loss on revaluation of investment in subsidiaries

     3,980  

Provision for product warranty

     2,069  

Other

     4,801  
        

Total deferred tax assets

     17,505  

Deferred tax liabilities:

  

Reserve for special depreciation

     (312 )
        

Total deferred tax liabilities

     (312 )
        

Deferred tax assets, net

   ¥ 17,193  
        

Non-current:

  

Deferred tax assets:

  

Depreciation of fixed assets

   ¥ 18,096  

Reserve for retirement benefits

     5,209  

Investment in subsidiaries and affiliates by swap of stock

     3,168  

Loss on revaluation of investment in securities

     3,639  

Others

     3,433  
        

Sub-total of deferred tax assets

     33,545  

Valuation allowances

     (8,155 )
        

Total deferred tax assets

     25,390  

Deferred tax liabilities:

  

Reserve for special depreciation

     (376 )

Net unrealized gain on other securities

     (216,455 )
        

Total deferred tax liabilities

     (216,831 )

Deferred tax liabilities, net

   ¥ (191,441 )
        

6. Notes to fixed assets used by finance lease

Some of fixed assets used by finance lease are off balance, which consist mainly of manufacturing equipment and computer.

7. Notes to per share information

 

1. Net assets per share

   ¥6,818.80

2. Earnings per share

   ¥329.66

 

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Independent Auditors’ Report

(English Translation)

May 26, 2007

To the Board of Directors of

Kyocera Corporation

 

   Misuzu Audit Corporation
       Minamoto Nakamura, CPA
       Engagement Partner
       Keiichiro Kagi, CPA
       Engagement Partner

We have audited, pursuant to Article 444, paragraph 4 of the Corporation Law of Japan, the consolidated financial statements, which consist of the consolidated balance sheet, the consolidated statement of income, the consolidated statement of stockholders’ equity and the notes to the consolidated financial statements of Kyocera Corporation (hereinafter referred to as the “Company”) for the fiscal year from April 1, 2006 to March 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kyocera Corporation and its consolidated subsidiaries as of March 31, 2007 and the consolidated result of their operations for the year then ended in conformity with accounting principles generally accepted in the United States of America pursuant to the provision of paragraph 1 of Article 148 of the Corporation Act of Japan. (Refer to Note 1 “Basis of preparation of Consolidated Financial Statements” to the consolidated financial statements.)

We have no interest in or relationship with the Company which is required to be disclosed pursuant to the provisions of the Certified Public Accountant Law of Japan.

 

 

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Table of Contents

Copy of Audit Report of Accounting Auditors

Independent Auditors’ Report

(English Translation)

May 26, 2007

To the Board of Directors of

Kyocera Corporation

 

   Misuzu Audit Corporation
       Minamoto Nakamura, CPA
       Engagement Partner
       Keiichiro Kagi, CPA
       Engagement Partner

We have audited, pursuant to Article 436, paragraph 2-1 of the Corporation Law of Japan, the financial statements, which consist of the balance sheet, the statement of income, the statement of changes in net assets, the notes to the financial statements and the supplementary schedules thereof of Kyocera Corporation (hereinafter referred to as the “Company”) for the 53rd fiscal year from April 1, 2006 to March 31, 2007. These financial statements and supplementary schedules thereof are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and supplementary schedules thereof based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we obtain reasonable assurance about whether the financial statements and supplementary schedules are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and supplementary schedules thereof. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and supplementary schedules thereof referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2007 and the result of its operation for the year then ended in conformity with accounting principles generally accepted in Japan.

We have no interest in or relationship with the Company which is required to be disclosed pursuant to the provisions of the Certified Public Accountant Law of Japan.

 

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Table of Contents

Copy of Audit Report of Board of Corporate Auditors

 

 

Audit Report

The Board of Corporate Auditors, based on audit reports prepared by individual Corporate Auditor related to the execution of duties of Directors during the 53rd fiscal year from April 1, 2006 to March 31, 2007, hereby reports its results of audit, after examination and discussion, as follows:

1. Audit Methods by the individual Corporate Auditors and by the Board of Corporate Auditors

The Board of Corporate Auditors established auditing policies and role sharing for the fiscal year and received audit reports from each Corporate Auditor on the execution of his auditing activities and the result thereof. In addition, it received reports on the execution of duties from Directors and others and from the temporary Independent Auditor, and, when necessary, requested their explanations regarding such reports.

In accordance with the auditing standards for Corporate Auditors set by the Board of Corporate Auditors, each Corporate Auditor communicated with Directors, internal audit division and employees of the Company and endeavored to gather information and create an improved environment for auditing, according to the auditing policies and role sharing for the fiscal year. Corporate Auditors also attended the meetings of the Board of Directors and other important meetings, received reports from Directors and employees of the Company on business execution, and, when necessary, requested their explanations regarding those reports. Corporate Auditors also inspected documents related to important decisions and examined operations and assets at the Company’s head office and major operational establishments. Corporate Auditors also monitored and examined the systems established to ensure that the execution of duties by Directors shall be in compliance with laws and regulations and with the Company’s Articles of Incorporation, and the systems (internal control systems) established under the resolution of the Board of Directors pursuant to Paragraphs 1 and 3 of Article 100 of the Execution Rules of the Corporation Act to ensure that the Company’s operations shall be conducted appropriately. With respect to subsidiaries, Corporate Auditors took steps to facilitate communications with directors, corporate auditors and others of subsidiaries, attended the important meetings and received reports on business, and, when necessary, requested their explanations and expressed opinions, as well as examined their operations and assets. Based on the foregoing methods, Corporate Auditors reviewed the Business Report of the fiscal year and the supplementary schedules.

In addition, Corporate Auditors monitored and examined whether the temporary Independent Auditor maintains their independence and performed their audits in an appropriate manner, and received reports from the temporary Independent Auditor on the execution of their duties and, when necessary, requested their explanations regarding those reports. Corporate Auditors also received notification from the temporary Independent Auditor that they have taken steps to improve the “system for ensuring appropriate execution of their duties” (as enumerated in Article 159 of the Corporate Calculation Rules of Japan) in compliance with the “Quality Control Standards Relating to Auditing” (adopted by the Business Accounting Deliberation Council on October 28, 2005) and, when necessary, requested their explanations regarding such notification. Based on the foregoing methods, Corporate Auditors reviewed the financial statements (balance sheets, statements of income, statement of changes in net assets and notes to financial statements) for the fiscal year and supplementary schedules thereto as well as consolidated financial statements (consolidated balance sheets, consolidated statements of income, consolidated statements of stockholders’ equity and notes to consolidated financial statements).

 

 

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2. Results of Audit

 

(1) Result of the audit of the Business Report

 

  (a) The Business Report and the supplementary schedules thereto fairly present the condition of the Company in accordance with Japanese law and regulations and the Articles of Incorporation of the Company.

 

  (b) There has been neither unfair conduct nor any material violation of Japanese law or regulation or the Articles of Incorporation of the Company in connection with the execution of duties of the Directors.

 

  (c) The content of the resolution by the Board of Directors regarding internal control systems is due and proper. Furthermore, nothing has arisen that requires comment with respect to the Directors’ execution of internal control systems.

 

(2) Result of the audit of financial statements and supplementary schedules thereto
   The methods and results of the audit by the temporary Independent Auditor, Misuzu Audit Corporation are due and proper.

 

(3) Result of the audit of consolidated financial statements
   The methods and results of the audit by the temporary Independent Auditor, Misuzu Audit Corporation are due and proper.

May 29, 2007

Board of Corporate Auditors

Kyocera Corporation

Yoshihiko Nishikawa

Full-time Corporate Auditor

Yasuo Akashi

Full-time Corporate Auditor

Osamu Nishieda

Corporate Auditor

Shinji Kurihara

Corporate Auditor

Shigekazu Tamura

Corporate Auditor

Notes:

 

1. Company’s former Independent Auditor, ChuoAoyama PricewaterhouseCoopers (which changed its name to “Misuzu Audit Corporation” effective September 1, 2006) received an order dated May 10, 2006 from the Financial Services Agency to suspend its business for the two-month period from July 1, 2006 to August 31, 2006. As a result, it has lost its qualification to act as the Independent Auditor of the Company and resigned from office. Therefore, in accordance with the provisions set forth in Paragraphs 4 and 6 of Article 346 of the Corporation Act, the Board of Corporate Auditors elected Yamaguchi Audit Corporation as the temporary Independent Auditor on July 19, 2006 effective from the same date, and also elected Misuzu Audit Corporation as the additional temporary Independent Auditor on August 28, 2006 effective from September 1, 2006. On September 19, 2006 Yamaguchi Audit Corporation submitted its notice of resignation to the Company and the Company accepted it on the same date, and as a result, Misuzu Audit Corporation became the sole temporary Independent Auditor of the Company.
2. Osamu Nishieda, Shinji Kurihara and Shigekazu Tamura are outside Corporate Auditors as required under Item 16 of Article 2 and Paragraph 3 of Article 335 of the Corporation Act.

 

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